EFFINGHAM COUNTY BOARD OF EDUCATION
SPRINGFIELD, GEORGIA
ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2016
(Including Independent Auditor's Reports)
EFFINGHAM COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -
Page
SECTION I
FINANCIAL
INDEPENDENT AUDITOR'S REPORT
REQUIRED SUPPLEMENTARY INFORMATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
i
EXHIBITS
BASIC FINANCIAL STATEMENTS
GOVERNMENT-WIDE FINANCIAL STATEMENTS
A
STATEMENT OF NET POSITION
1
B
STATEMENT OF ACTIVITIES
2
FUND FINANCIAL STATEMENTS
C
BALANCE SHEET
GOVERNMENTAL FUNDS
4
D
RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET
TO THE STATEMENT OF NET POSITION
5
E
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES
IN FUND BALANCES
GOVERNMENTAL FUNDS
6
F
RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT
OF REVENUES, EXPENDITURES AND CHANGES IN FUND
BALANCES TO THE STATEMENT OF ACTIVITIES
7
G
STATEMENT OF FIDUCIARY NET POSITION
FIDUCIARY FUNDS
8
H NOTES TO THE BASIC FINANCIAL STATEMENTS
9
SCHEDULES
REQUIRED SUPPLEMENTARY INFORMATION
1 SCHEDULE OF PROPORTIONATE SHARE OF THE NET PENSION LIABILITY
TEACHERS RETIREMENT SYSTEM OF GEORGIA
31
2 SCHEDULE OF PROPORTIONATE SHARE OF THE NET PENSION LIABILITY
EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA
32
3 SCHEDULE OF PROPORTIONATE SHARE OF THE NET PENSION LIABILITY
PUBLIC SCHOOL EMPLOYEES RETIREMENT SYSTEM OF GEORGIA
33
4 SCHEDULE OF CONTRIBUTIONS TEACHERS RETIREMENT SYSTEM OF GEORGIA
34
5 SCHEDULE OF CONTRIBUTIONS EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA 35
6 NOTES TO THE REQUIRED SUPPLEMENTARY INFORMATION
36
7 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES
IN FUND BALANCES - BUDGET AND ACTUAL
GENERAL FUND
37
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EFFINGHAM COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -
SECTION I
FINANCIAL
SCHEDULES
SUPPLEMENTARY INFORMATION
8 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS 9 SCHEDULE OF STATE REVENUE 10 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS
Page
38 39 41
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 V MANAGEMENT'S CORRECTIVE ACTION FOR CURRENT YEAR FINDINGS SCHEDULE OF MANAGEMENT'S CORRECTIVE ACTION
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SECTION I FINANCIAL
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Greg S. Griffin
STATE AUDITOR
(404) 656-2174
DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
October 17, 2017
Honorable Nathan Deal, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Effingham County Board of Education
INDEPENDENT AUDITOR'S REPORT
Ladies and Gentlemen:
Report on the Financial Statements
We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of the Effingham County Board of Education (School District), as of and for the year ended June 30, 2016, and the related notes to the financial statements, which collectively comprise the School District's basic financial statements as listed in the table of contents.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditor's Responsibility
Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
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effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.
Opinions
In our opinion, the basic financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the School District, as of June 30, 2016, and the respective changes in financial position, and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America.
Emphasis of Matter
As described in Note 2 to the financial statements, in 2016, the School District adopted new accounting guidance, Governmental Accounting Standards Board (GASB) Statement No. 72, Fair Value Measurement and Application, GASB Statement No. 73, Accounting and Financial Reporting for Pensions and Related Assets that are not within the Scope of GASB Statement No. 68, and Amendments to Certain Provisions of GASB Statements No. 67 and 68, and GASB Statement No. 79, Certain External Investment Pools and Pool Participants. Our opinions are not modified with respect to this matter.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the Management's Discussion and Analysis, Schedules of Proportionate Share of the Net Pension Liability, Schedules of Contributions to Retirement Systems, Notes to the Required Supplementary Information and the Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual as presented on pages i through viii and pages 31 through 37 respectively, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management regarding the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.
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Other Information
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the School District's basic financial statements. The accompanying supplementary information, consisting of Schedules 8 through 10, 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 as a whole.
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated October 17, 2017, on our consideration of the School District's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the School District's internal control over financial reporting and compliance.
A copy of this report has been filed as a permanent record in the office of the State Auditor and made available to the press of the State, as provided for by Official Code of Georgia Annotated Section 50-6-24.
Respectfully submitted,
Greg S. Griffin State Auditor
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EFFINGHAM COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2016
INTRODUCTION
The discussion and analysis of the Effingham County Board of Education's (the School District) financial performance provides an overview of the School District's financial activities for the fiscal years ended June 30, 2016 and June 30, 2015. The intent of this discussion and analysis is to look at the School District's financial performance as a whole. Readers should also review the financial statements and the notes to the basic financial statements to enhance their understanding of the School District's financial performance.
FINANCIAL HIGHLIGHTS
Key financial highlights for the fiscal years 2016 and 2015 are as follows:
On the government-wide financial statements, the assets and deferred outflow of resources of the School District exceeded liabilities and deferred inflow of resources by $47,658,260 and $49,185,493, respectively, for the fiscal years ended June 30, 2016 and 2015. Of these amounts, $21,187,012 and $29,885,943, respectively, for fiscal years 2016 and 2015 are available for spending at the School District's discretion.
The School District had $113,389,899 and $105,341,841 in expenses relating to governmental activities for the fiscal years ended June 30, 2016 and June 30, 2015, respectively. Only $67,619,746 and $63,461,783 of the above mentioned expenses for 2016 and 2015 were offset by program specific charges for services, grants and contributions. General revenues (primarily property and sales taxes) of $44,242,919 and $45,388,099, respectively, for 2016 and 2015, were adequate to provide for these programs.
The Effingham County voters passed a one percent sales tax for educational purposes (ESPLOST) for another five years 2017-2022 on November 3, 2015. The voters also approved the issuance of $15,000,000 general obligations bonds, which were issued on January 12, 2017.
OVERVIEW OF THE FINANCIAL STATEMENTS
This annual report consists of three parts; management's discussion and analysis, the basic 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 the Statement of Activities. These statements provide information about the activities of the School District presenting both short-term and long-term information about the overall financial status.
The fund financial statements focus on the individual parts, 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 statement provides information about the financial relationships in which the School District acts solely as a trustee or agent for the benefit of others.
The fund financial statements reflect the School District's most significant funds. For the years ending June 30, 2016 and 2015, the general fund, the capital projects fund, and the debt service fund represent the most significant funds.
i
EFFINGHAM COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2016
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.
Government-Wide Statements
The government-wide statements report information about the School District as a whole using accounting methods similar to those used by private-sector companies. The Statement of Net Position includes all of the School District's assets and liabilities. All of the current fiscal year's revenues and expenses are accounted for in the Statement of Activities regardless of when cash is received or paid.
The two government-wide statements report the School District's net position and how it has changed. Net position, the difference between the School District's assets and deferred outflows of resources, and liabilities and deferred inflows of resources, are one way to measure the School District's overall financial health or position. Over time, increases or decreases in net position are an indication of whether its financial health is improving or deteriorating. Changes may be the result of many factors, including those not under the School District's control, such as the property tax base, facility conditions, required educational programs and other factors.
In the Statement of Net Position and the Statement of Activities, the School District has one distincttype of activity:
Governmental Activities All of the School District's programs and services are reported here including instruction, support services, operation and maintenance of plant, pupil transportation, food service, student activity accounts and various others.
Fund Financial Statements
The School District's fund financial statements provide detailed information about the most significant funds, not the School District as a whole. Some funds are required by State law and some by bond requirements. The School District's major governmental funds are the general fund, the capital projects fund, and the debt service fund.
Governmental Funds Most of the School District's activities are reported in governmental funds, which focus on the determination of financial position and change in financial position, not on income determination. These funds are reported using the modified accrual basis of accounting, which measures cash and all other financial assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term view of the School District's general government operations and the basic services it provides. Governmental fund information helps determine whether there are more or fewer financial resources that can be spent in the near future to finance educational programs. The relationship (or differences) between governmental activities (reported in the Statement of Net Position and the Statement of Activities) and governmental funds are reconciled to the financial statements.
ii
EFFINGHAM COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2016
Fiduciary Funds The School District is the trustee, or fiduciary, for assets that belong to others, such as school clubs and organizations 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.
FINANCIAL ANALYSIS OF THE SCHOOL DISTRICT AS A WHOLE
Recall that the Statement of Net Position provides the perspective of the School District as a whole. Table 1 provides a summary of the School District's net position for fiscal years 2016 and 2015.
Assets Current and Other Assets Capital Assets, Net
Total Assets
Table 1 Net Position
Fiscal Year 2016
Governmental Activities Fiscal Year 2015
$
38,416,531 $
108,471,388
146,887,919
43,037,793 $ 108,074,161 151,111,954
Net Change
(4,621,262) 397,227
(4,224,035)
Deferred Outflows of Resources Related to Defined Benefit Pension Plans
Li a b i l i ti e s Current and Other Liabilities Long-Term Liabilities Total Liabilities
Deferred Inflows of Resources Related to Defined Benefit Pension Plans
Net Position
Net Investment in Capital Assets
Restricted
Unrestricted (Deficit)
Total Net Position
$
13,449,863
100,413,792 4,520,129
104,933,921
7,745,601
104,695,720 10,718,313 (67,755,773) 47,658,260 $
13,127,517
322,346
81,686,923 9,493,667
91,180,590
18,726,869 (4,973,538) 13,753,331
23,873,388
(16,127,787)
99,563,507 17,732,462 (68,110,476)
49,185,493 $
5,132,213 (7,014,149)
354,703
(1,527,233)
Total assets and deferred outflows of resources decreased by $3,901,689 which was primarily due to the reduction in current and other assets.
Total liabilities and deferred inflows of resources decreased by $2,374,456. The combination of the decrease in total assets and deferred outflows of resources and the decrease in total liabilities and deferred inflows of resources yielded a decrease in net position of $1,527,233.
This decrease is primarily due to decreases in cash and investments of $4,332,221 and increase of net pension liability by $14,649,201, which is offset by the declines in long-term debt of $4,973,538 and deferred inflows of resources of $16,127,787. All other activity increased by net total of $592,670.
iii
EFFINGHAM COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2016
Table 2 shows the changes in net position for fiscal years ending June 30, 2016 and June 30, 2015.
Table 2 Change in Net Position
Revenues: Program Revenues Charges for Services Operating Grants and Contributions Capital Grants and Contributions
Governmental Activities
Fiscal Year 2016
Fiscal Year 2015
Net Change
$
2,072,682 $ 1,859,395 $ 213,287
65,076,326
61,033,377
4,042,949
470,739
569,011
(98,272)
Total Program Revenues
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
Total General Revenues
67,619,747
63,461,783
4,157,964
28,063,125 732
88,686
27,867,594 1,961
45,780
195,531 (1,229) 42,906
7,433,054 663,512
5,999,705 183,140
1,810,965 44,242,919
7,961,816 535,271
(528,762) 128,241
6,944,866 331,354
1,699,457
45,388,099
(945,161) (148,214) 111,508
(1,145,180)
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 Other Support Services Operations of Non-Instructional Services Community Services Food Services Interest on Short-Term and Long-Term Debt
111,862,666
108,849,882
3,012,784
75,126,804
4,483,915 3,933,790 1,958,599 1,604,182 6,211,846 1,439,672 6,337,579 5,914,296
163,758
45,346 6,060,658
109,454
69,852,598
4,149,556 3,406,051 1,763,826 1,542,413 5,646,467 1,358,704 6,310,563 5,380,066
116,622
37,249 5,636,231
141,495
5,274,206
334,359 527,739 194,773
61,769 565,379
80,968 27,016 534,230 47,136
8,097 424,427 (32,041)
Total Expenses Increase (Decrease) in Net Position
113,389,899
105,341,841
8,048,058
$
(1,527,233) $ 3,508,041 $ (5,035,274)
iv
EFFINGHAM COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2016
Program revenues, in the form of charges for services, operating grants and contributions and capital grants and contributions increased $4,157,964 for governmental activities. This increase is largely due to QBE funding increases.
General revenues decreased by $1,145,180 during fiscal year 2016. The decline is mostly due to reductions in Special Purpose Local Option Sales Tax (SPLOST) receipts of $528,762 and reductions of $945,161 in equalization funding.
Governmental Activities
The Statement of Activities shows the cost of program services and the charges for services and grants offsetting those 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.
Table 3 Governmental Activities
Total Cost of Services
Fiscal Year
Fiscal Year
2016
2015
Net Cost of Services
Fiscal Year
Fiscal Year
2016
2015
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 Other Support Services
Operations of Non-Instructional Services: Community Services Food Services
Interest on Short-Term and Long-Term Debt
Total Expenses
$
75,126,804 $
4,483,915 3,933,790 1,958,599 1,604,182 6,211,846 1,439,672 6,337,579 5,914,296
163,758
45,346 6,060,658
109,454
$ 113,389,899 $
69,852,598 $
4,149,556 3,406,051 1,763,826 1,542,413 5,646,467 1,358,704 6,310,563 5,380,066
116,622
23,995,155 $
3,970,745 2,972,090
529,439 (161,015) 3,522,692 1,420,211 2,874,405 5,534,409
(2,160)
22,063,279
3,690,652 2,711,053
363,929 (160,368) 3,005,069 1,333,212 2,905,473 5,077,424
1,605
37,249 5,636,231
141,495
105,341,841 $
45,346 959,381 109,454
45,770,152 $
37,248 709,987 141,495
41,880,058
Although program revenues make up a majority of the funding, the School District is still dependent upon tax revenues for governmental activities. For 2016, 41.67% of instruction and support activities were supplemented by taxes and other general revenues compared to 41.19% in 2015.
Expenses increased $8,048,058 from the prior year; the net costs of providing services increased $3,890,094. This situation occurred because of increases in salary scales and TRS employer matching increases.
v
EFFINGHAM COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2016
FINANCIAL ANALYSIS OF THE SCHOOL DISTRICT'S FUNDS
The School District's governmental funds are accounted for using the modified accrual basis of accounting. The governmental funds had total revenues and other financing sources of $112,334,379 and total expenses and other financing uses of $120,741,897. There was a decrease in the fund balance totaling $8,407,518 for the governmental funds as a whole. The general fund declined due to the programmed reduction in fund balance. The capital project funds declined due to the cost of the addition on the Effingham College and Career Academy (in fiscal year 2016 is greater than the SPLOST receipts in the same year). The debt service fund was declined due to the payment of the series 2001B Bonds of $4,200,000.
General Fund Budgeting Highlights
The School District's budget is prepared in accordance with Georgia Law. The most significant budgeted fund is the general fund, funded primarily through state revenue and local property tax revenue. During the course of fiscal years 2016 and 2015, the School District amended its general fund budget as needed.
During fiscal year 2016, the general fund had final actual revenues and other financing sources totaling $104,612,356, which represented an increase from the original budgeted amount of $100,608,825 by $4,003,531. This difference (final actual vs. original budget) was due to increased QBE funding and increased property tax collections.
Final actual expenditures during fiscal year 2016 totaling $106,339,224 represented an increase from the original budgeted amount of $102,746,924 by $3,592,300. The increase in actual expenditures versus original budget expenditures was due primarily to increase in staffing and bus purchases beyond the budget.
CAPITAL ASSETS
At the fiscal years ended June 30, 2016 and June 30, 2015, the School District had $108,471,388 and $108,074,161, respectively, invested in capital assets, net of accumulated depreciation. These assets are made up of a broad range of capital assets, including land; buildings; transportation, food service and maintenance equipment. Table 4 reflects a summary of these balances, by class, net of accumulated depreciation.
Table 4 Capital Assets (Net of Depreciation)
Governmental Activities
Fiscal Year 2016
Fiscal Year 2015
Net Change
Land Construction in Progress Buildings and Improvements Equipment Land Improvements
$
4,860,202 $
4,860,202 $
-
4,183,396
154,764
4,028,632
93,204,665
96,790,144
(3,585,479)
4,375,567
4,409,006
(33,439)
1,847,558
1,860,045
(12,487)
Total
$
108,471,388 $
108,074,161 $
397,227
vi
EFFINGHAM COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2016
The overall capital assets increased in fiscal year 2016 by $397,227 due to increases in construction in progress and equipment offset by current year depreciation.
Construction in progress increased primarily due to construction of the Effingham College and Career Academy addition.
DEBT ADMINISTRATION
At June 30, 2016, the School District had $4,520,129 in total debt outstanding with $805,640 due within one year. Table 5 summarizes bond debt outstanding at June 30, 2016 and 2015.
Table 5 Long-Term Debt Outstanding
Governmental Activities
Fiscal Year
Fiscal Year
2016
2015
Net Change
Bonds Payable Capital Leases
$ 2,000,000 $ 2,520,129
6,200,000 $ 3,293,667
(4,200,000) (773,538)
Total
CURRENT ISSUES
$ 4,520,129 $ 9,493,667 $ (4,973,538)
In fiscal year 2017, the cost of the employer portion of TRS pension will increase approximately $205,000, and an increase in health insurance premiums for all employees is expected to add another $460,000. In addition, revenues will again be cut as the State of Georgia imposes another QBE Austerity Reduction expected to cost the School District approximately $1.2 million in earned revenue, bringing the grand total of revenue lost since the cuts began in 2003 to more than $62.0 million. In spite of these hardships, the School District plans to add numerous teaching positions to help combat increasing class sizes.
Approximately 90% of general fund expenses, the main operating fund for the School District, were related to salaries and employee benefits for the year ended June 30, 2016. With such personnel heavy expenses, it is difficult to offset mandated expense increases such as TRS and health insurance premium expenses. The School District consistently evaluates how funds can be spent smarter and more effectively to ensure that County students receive a quality education from effective personnel.
The School District's millage rate for fiscal year 2017 will be 15.991. The net digest has continued to increase during fiscal years 2016 and 2017. The net digest for fiscal year 2017 will be $1.616 billion, which will produce approximately $1,616,000 per mill.
The most significant challenge facing the School District is the relative uncertainty regarding how School Districts will be funded moving forward. The General Assembly is in the process of exploring new funding formulas that would likely cement in the austerity reductions received annually and change the way personnel salaries are calculated. It is uncertain at this point what type of financial impact these changes might have on the School District's finances.
vii
EFFINGHAM COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2016
General fund revenues will be positively impacted in fiscal year 2017, receiving $1.8 million in revenues from the newly legislated Title Ad Valorem Tax bill. Despite the negative impact of this legislation on sales tax revenue, the general fund benefited. The School District remains vigilant at controlling costs, and maintained general fund expenditures comparable to fiscal year 2016. Year over year spending increases were attributable to state mandated increases for teacher salaries, increased Special Education costs, and increased health insurance costs due to the full implementation of the Affordable Care Act. As expected, expenditures in fiscal year 2016 exceeded revenues. Through rigorous controls, the amount of the fund balance consumed was limited to $1.7 million. When the fiscal year 2016 millage rate was set by the School District, the amount expected to be provided from fund balance was in excess of $2.4 million. Fiscal year 2016 saw the beginning of the expansion to the Career Academy. The Career Academy students will begin the 2017 school year in the new expanded campus. This project will be fully completed in the fall of 2016. New projects under consideration include the replacement for Rincon Elementary School, and renovation of athletic track and field facilities and HVAC upgrades to Effingham County High School. All are funded from Education Special Purpose Local Option Sales Tax (ESPLOST) revenues not required for debt service. Another matter of concern to the School District is the impact of GASB No. 68 on the financial statements for fiscal year 2016 and beyond. At this time, the actual amount required to be reported is in excess of $83.0 million, which is expected to have a significant impact on net position in future financial statements. 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, contact Ronald Wilson at the Effingham County Board of Education, 405 N Ash Street, Springfield, Georgia 31329. You may also email your questions to rlwilson@effingham.k12.ga.us.
viii
EFFINGHAM COUNTY BOARD OF EDUCATION
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EFFINGHAM COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2016
EXHIBIT "H"
NOTE 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY
REPORTING ENTITY
The Effingham County Board of Education (School District) was established under the laws of the State of Georgia and operates under the guidance of a board elected by the voters and a Superintendent appointed by the Board. The School District is organized as a separate legal entity and has the power to levy taxes and issue bonds. Its budget is not subject to approval by any other entity. Accordingly, the School District is a primary government and consists of all the organizations that compose its legal entity.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statements of the School District have been prepared in conformity with generally accepted accounting principles (GAAP) as prescribed by the Governmental Accounting Standards Board (GASB). GASB is the accepted standard-setting body for governmental accounting and financial reporting principles. The most significant of the School District's accounting policies are described below.
BASIS OF PRESENTATION
The School District's basic financial statements are collectively comprised of the government-wide financial statements, fund financial statements and notes to the basic financial statements. The government-wide statements focus on the School District as a whole, while the fund financial statements focus on major funds. Each presentation provides valuable information that can be analyzed and compared between years and between governments to enhance the information's usefulness.
GOVERNMENT-WIDE STATEMENTS:
The Statement of Net Position and the Statement of Activities display information about the financial activities of the overall School District, except for fiduciary activities. Eliminations have been made to minimize the double counting of internal activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange transactions.
The Statement of Net Position presents the School District's non-fiduciary assets and liabilities, with the difference reported as net position. Net position is reported in three categories as follows:
1. Net investment in capital assets consists of the School District's total investment in capital assets, net of accumulated depreciation, and reduced by outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of net investment in capital assets.
2. Restricted net position consists of resources for which the School District is legally or contractually obligated to spend in accordance with restrictions imposed by external third parties or imposed by law through constitutional provisions or enabling legislation.
3. Unrestricted net position consists of resources not meeting the definition of the two preceding categories. Unrestricted net positon often has constraints on resources imposed by management which can be removed or modified.
The Statement of Activities presents a comparison between direct expenses and program revenues for each function of the School District's governmental activities.
Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Indirect expenses (expenses of the School District related to the administration and support of the School District's programs, such as office and maintenance personnel and accounting) are not allocated to programs.
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EFFINGHAM COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2016
EXHIBIT "H"
Program revenues include (a) charges paid by the recipients of goods or services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues.
FUND FINANCIAL STATEMENTS
The fund financial statements provide information about the School District's funds, including fiduciary funds. Eliminations have been made to minimize the double counting of internal activities. Separate financial statements are presented for governmental and fiduciary funds. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column.
The School District reports the following major governmental funds:
The general fund is the School District's primary operating fund. It accounts for and reports all financial resources not accounted for and reported in another fund.
The capital projects fund accounts for and reports financial resources including Education
Special Purpose Local Option Sales Tax (ESPLOST) and Bond Proceeds that are restricted, committed or assigned for capital outlay expenditures, including the acquisition or construction of capital facilities and other capital assets.
The debt service fund accounts for and reports financial resources that are restricted, committed, or assigned including taxes (property and sales) legally restricted for the payment of general long-term principal and interest.
The School District reports the following fiduciary fund types:
Agency funds are used to report resources held by the School District in a purely custodial capacity (assets equal liabilities) and do not involve measurement of results of operations.
BASIS OF ACCOUNTING
The basis of accounting determines when transactions are reported on the financial statements. The government-wide and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, sales taxes, and grants. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from sales taxes is recognized in the fiscal year in which the underlying transaction (sale) takes place. Revenue from grants is recognized in the fiscal year in which all eligibility requirements have been satisfied.
The School District uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts.
Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Under this method, revenues are recognized when measurable and available. The School District considers all revenues reported in the governmental funds to be available if they are collected within sixty days after year-end. The School District considers all intergovernmental revenues to be available if they are collected within 120 days after year-end. Property taxes, sales taxes and interest are considered to be susceptible to accrual. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general longterm debt, which are recognized as expenditures to the extent they have matured. Capital asset acquisitions are reported as expenditures in governmental funds. Proceeds of general long-term liabilities and acquisitions under capital leases are reported as other financing sources.
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EFFINGHAM COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2016
EXHIBIT "H"
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. District first applies grants, then cost-reimbursed grants then general revenues.
NEW ACCOUNTING PRONOUNCEMENTS
In fiscal year 2016, the School District adopted Governmental Accounting Standards Board (GASB) Statement No. 72, Fair Value Measurement and Application. This statement addresses accounting and financial reporting issues related to fair value measurements. The definition of fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. This statement provides guidance for determining a fair value measurement for financial reporting purposes. This statement also provides guidance for applying fair value to certain investments and disclosures related to all fair value measurements. The School District did not have any items that required a reassessment of value for reporting purposes as a result of adoption of this statement.
In fiscal year 2016, the School District adopted Governmental Accounting Standards Board (GASB) Statement No. 73, Accounting and Financial Reporting for Pensions and Related Assets that are not within the Scope of GASB Statement No. 68, and Amendments to Certain Provisions of GASB Statements No. 67 and 68. This statement establishes requirements for defined benefit pensions that are not within the scope of Statement No. 68, Accounting and Financial Reporting for Pensions, as well as for the assets accumulated for purposes of providing those pensions. In addition, it establishes requirements for defined contribution pensions that are not within the scope of Statement No. 68. It also amends certain provisions of Statement No. 67, Financial Reporting for Pension Plans, and Statement No. 68 for pension plans and pensions that are within their respective scopes. The adoption of this statement does not have a significant impact on the School District's financial statements.
In fiscal year 2016, the School District adopted Governmental Accounting Standards Board (GASB) Statement No. 79, Certain External Investment Pools and Pool Participants. This statement addresses accounting and financial reporting for certain external investment pools and pool participants. If an external investment pool meets the criteria in this statement and measures all of its investments at amortized cost, the pool's participants also should measure their investments in that external investment pool at amortized cost for financial reporting purposes. The School District participates in an external investment pool, the State of Georgia local government investment pool (Georgia Fund 1), which does not meet the criteria of this statement. Therefore, the investment in this pool is measured at fair value as provided in paragraph 11 of GASB Statement No. 31, as amended.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash on hand, demand deposits, investments in the State of Georgia local government investment pool (Georgia Fund 1) and short-term investments with original maturities of three months or less from the date of acquisition in authorized financial institutions. Official Code of Georgia Annotated (O.C.G.A.) 45-8-14 authorizes the School District to deposit its funds in one or more solvent banks, insured Federal savings and loan associations or insured chartered building and loan associations.
INVESTMENTS
The School District can invest its funds as permitted by O.C.G.A. 36-83-4. In selecting among options for investment or among institutional bids for deposits, the highest rate of return shall be the objective, given equivalent conditions of safety and liquidity.
Investments made by the School District in nonparticipating interest-earning contracts (such as certificates of deposit) and repurchase agreements are reported at cost. Participating 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.
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EFFINGHAM COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2016
EXHIBIT "H"
For accounting purposes, certificates of deposit are classified as investments if they have an original maturity greater than three months when acquired.
RECEIVABLES
Receivables consist of amounts due from property and sales taxes, grant reimbursements due on Federal, State or other grants for expenditures made but not reimbursed and other receivables disclosed from information available. Receivables are recorded when either the asset or revenue recognition criteria has been met. Receivables recorded on the basic financial statements do not include any amounts which would necessitate the need for an allowance for uncollectible receivables.
INVENTORIES
Food Inventories
On the basic financial statements, inventories of donated food commodities used in the preparation of meals are reported at their Federally assigned value and purchased foods inventories are reported at cost (calculated on the first-in, first-out basis). The School District uses the consumption method to account for inventories whereby donated food commodities are recorded as an asset and as revenue when received, and expenses/expenditures are recorded as the inventory items are used. Purchased foods are recorded as an asset when purchased and expenses/expenditures are recorded as the inventory items are used.
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. Qualified Zone Academy Bond sinking funds.
CAPITAL ASSETS
On the government-wide financial statements, capital assets are recorded at cost where historical records are available and at estimated historical cost based on appraisals or deflated current replacement cost where no historical records exist. Donated capital assets are recorded at acquisition 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
Land Improvements
$
Buildings and Improvements $
Equipment
$
Intangible Assets
$
Any amount 50,000.00 50,000.00 5,000.00
500,000.00
N/A 15 years
20 to 40 years 5 to 10 years
10 to 20 years
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EFFINGHAM COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2016
EXHIBIT "H"
DEFERRED OUTFLOWS/INFLOWS OF RESOURCES
In addition to assets, the statement of financial position will report a separate section for deferred outflows of resources. This separate financial statement element, represents a consumption of resources that applies to a future period(s) and therefore will not be recognized as an outflow of resources (expense/expenditure) until then.
In addition to liabilities, the statement of financial position will report a separate section for deferred inflows of resources. This separate financial statement element represents an acquisition of resources that applies to a future period(s) and therefore will not be recognized as an inflow of resources (revenue) until that time.
LONG-TERM LIABILITIES AND BOND DISCOUNTS/PREMIUMS
In the School District's government-wide financial statements, outstanding debt is reported as liabilities. Bond premiums and discounts and the difference between the reacquisition price and the net carrying value of refunded debt are deferred and amortized over the life of the bonds using the straight-line method. To conform to generally accepted accounting principles, bond premiums and discounts should be amortized using the effective interest method. The effect of this deviation is deemed to be immaterial to the fair presentation of the basic financial statements. Bond issuance costs are recognized as an outflow of resources in the fiscal year in which the bonds are issued.
In the governmental fund financial statements, the School District recognizes the proceeds of debt and premiums as other financing sources of the current period. Bond issuance costs are reported as debt service expenditures.
PENSIONS
For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the pension plan's fiduciary net position and additions to/deductions from the plan's fiduciary net position have been determined on the same basis as they are reported by the plan. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value.
FUND BALANCES
Fund balance for governmental funds is reported in classifications that comprise a hierarchy based primarily on the extent to which the government is bound to honor constraints on the specific purposes for which amounts in those funds can be spent.
The School District's fund balances are classified as follows:
Nonspendable consists of resources that cannot be spent either because they are in a nonspendable form or because they are legally or contractually required to be maintained intact.
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.
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EFFINGHAM COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2016
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 Effingham County Board of Commissioners adopted the property tax levy for the 2015 tax digest year (calendar year) on June 23, 2015 (levy date) based on property values as of January 1, 2015. Taxes were due on November 15, 2015 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2015 tax digest are reported as revenue in the governmental funds for fiscal year 2016. The Effingham County Tax Commissioner bills and collects the property taxes for the School District, withholds 2.5% of taxes collected as a fee for tax collection and remits the balance of taxes collected to the School District. Property tax revenues, at the fund reporting level, during the fiscal year ended June 30, 2016, for maintenance and operations amounted to $26,492,612.10 and for school bonds amounted to $4,349.45.
The tax millage rate levied for the 2015 tax year (calendar year) for the School District was as follows (a mill equals $1 per thousand dollars of assessed value):
School Operations
16.435 mills
Additionally, Title Ad Valorem Tax revenues, at the fund reporting level, amounted to $1,958,685.30 during fiscal year ended June 30, 2016.
SALES TAXES
Education Special Purpose Local Option Sales Tax (ESPLOST), at the fund reporting level, during the year amounted to $7,433,054.48 and is to be used for capital outlay for educational purposes or debt service. This sales tax was authorized by local referendum and the sales tax must be re-authorized at least every five years.
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, function and object. The legal level of budgetary control was established by the Board at the aggregate function level. The budget for the general fund was prepared in accordance with accounting principles generally accepted in the United States of America.
The budgetary process begins with the School District's administration presenting an initial budget for the Board's review. The administration makes revisions as necessary based on the Board's guidelines, and a tentative budget is approved. After approval of this tentative budget by the Board, such budget is advertised at least once in a newspaper of general circulation in the locality, as well as the School
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EFFINGHAM COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2016
EXHIBIT "H"
District's website. At the next regularly scheduled meeting of the Board after advertisement, the Board receives comments on the tentative budget, makes revisions as necessary and adopts a final budget. The approved budget is then submitted, in accordance with provisions of O.C.G.A. 20-2-167(c), to the Georgia Department of Education. The Board may increase or decrease the budget at any time during the year. All unexpended budget authority lapses at fiscal year-end.
See the General Fund Schedule of Revenues, Expenditures and Changes in Fund Balances Budget to Actual in the Supplementary Information Section for a detail of any over/under expenditures during the fiscal year under review.
NOTE 4: DEPOSITS AND CASH EQUIVALENTS
COLLATERALIZATION OF DEPOSITS
O.C.G.A. 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum of money which has not been secured by surety bond, by guarantee of insurance, or by collateral. The aggregate of the face value of such surety bond and the market value of securities pledged shall be equal to not less than 110% of the public funds being secured after the deduction of the amount of deposit insurance. If a depository elects the pooled method (O.C.G.A. 45-8-13.1) the aggregate of the market value of the securities pledged to secure a pool of public funds shall be not less than 110% of the daily pool balance.
Acceptable security for deposits consists of any one of or any combination of the following:
(1) Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia,
(2) Insurance on accounts provided by the Federal Deposit Insurance Corporation,
(3) Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia,
(4) Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia,
(5) Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose,
(6) Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia, and
(7) Bonds, bills, notes, certificates of indebtedness, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest or debt obligations issued by or securities guaranteed by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association.
CATEGORIZATION OF DEPOSITS
Custodial credit risk is the risk that in the event of a bank failure, the School District's deposits may not be returned to it. The School District does not have a deposit policy for custodial credit risk. At June 30, 2016, the School District had deposits with a carrying amount of $15,555,589.87, and a bank balance of $16,148,434.84. The bank balances insured by Federal depository insurance were $501,349.97 and the bank balances collateralized with securities held by the pledging financial institution in the School District's name were $15,647,084.87.
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EFFINGHAM COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2016
EXHIBIT "H"
Reconciliation of cash and cash equivalents balances to carrying value of deposits:
Statement of Net Position Cash and cash equivalents
Statement of Fiduciary Net Position Cash and cash equivalents
$ 25,913,330.32 553,156.88
Total cash and cash equivalents
Less: Investment pools reported as cash and cash equivalents
Georgia Fund 1
26,466,487.20 10,910,897.33
Total carrying value of deposits - June 30, 2016
$ 15,555,589.87
CATEGORIZATION OF CASH EQUIVALENTS
The School District reported cash equivalents of $10,910,897.33 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, 2016, was 42 days.
Georgia Fund 1, administered by the State of Georgia, Office of the State Treasurer, is not required to be categorized since the School District did not own any specific identifiable securities in the pool. The investment policy of the State of Georgia, Office of the State Treasurer for the Georgia Fund 1, does not provide for investment in derivatives or similar investments. Additional information on the Georgia Fund 1 is disclosed in the State of Georgia Comprehensive Annual Financial Report. This audit can be obtained from the Georgia Department of Audits and Accounts at www.audits.ga.gov/SGD/CAFR.html.
CATEGORIZATION OF INVESTMENTS At June 30, 2016, the School District had the following investments:
Investment Type
Fair Value
Investment Maturity Less Than 1 Year
Debt Securities U. S. Agencies Implicitly Guaranteed $
1,639,634.22 $ 1,639,634.22
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.
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EFFINGHAM COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2016
EXHIBIT "H"
The School District has the following recurring fair value measurements as of June 30:
U.S. Agencies of $1,639,634.22 are valued using a matrix pricing model. (Level 2 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 risk.
Credit Quality Risk
Credit quality risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. State law limits investments to those prescribed O.C.G.A. 36-83-4. The School District does not have a formal policy that would further limit its investment choices or one that addresses credit risk.
The investments subject to credit quality risk are reflected below:
Rated Debt Investments
Fair Value
Quality Ratings AAA
Debt Securities U. S. Agencies Implicitly Guaranteed
$ 1,639,634.22 $ 1,639,634.22
Concentration of Credit Risk
Concentration of credit risk is the risk of loss attributed to the magnitude of a government's investment in a single issuer. The School District does not have a formal policy for managing concentration of credit risk. More than 5% of the School District's investment are in U.S. Agencies. This investment is 100% of the School District's total investments.
NOTE 5: RESTRICTED ASSETS
The restricted assets represent the investment balance, totaling $1,639,634.22 for the QZAB Bond Sinking Fund.
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EFFINGHAM COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2016
EXHIBIT "H"
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, 2015
Increases
Decreases
Balances June 30, 2016
Governmental Activities Capital Assets, Not Being Depreciated:
Land Construction in Progress
$
4,860,202.00 $
- $
- $
4,860,202.00
154,764.00
4,084,779.00
56,147.00
4,183,396.00
Total Capital Assets Not Being Depreciated
5,014,966.00
4,084,779.00
56,147.00
9,043,598.00
Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements
Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements
142,889,909.00 16,449,195.00 12,420,320.00
46,099,765.00 12,040,189.00 10,560,275.00
121,274.00 1,001,512.00
197,466.00
3,706,753.00 1,033,576.00
209,953.00
86,369.00
-
143,011,183.00 17,364,338.00 12,617,786.00
84,994.00
-
49,806,518.00 12,988,771.00 10,770,228.00
Total Capital Assets, Being Depreciated, Net
103,059,195.00
(3,630,030.00)
1,375.00
99,427,790.00
Governmental Activity Capital Assets - Net
$ 108,074,161.00 $
454,749.00 $
57,522.00 $ 108,471,388.00
Current year depreciation expense by function is as follows:
Instruction
Support Services
Educational Media Services
$
School Administration
Business Administration
Maintenance and Operation of Plant
Student Transportation Services
Food Services
151,788.00 138,239.00 142,249.00
95,753.00 714,677.00
$ 3,305,187.00
1,242,706.00 402,389.00
$ 4,950,282.00
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EFFINGHAM COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2016
EXHIBIT "H"
NOTE 7: INTERFUND TRANSFERS INTERFUND TRANSFERS Interfund transfers for the year ended June 30, 2016, consisted of the following:
Transfers to
Transfers From
Projects Fund
Debt Service Fund
General fund Debt service fund
$
- $
2,957.93
7,950.00 -
Total
$ 2,957.93 $ 7,950.00
A transfer for $7,950.00 was made to move property tax revenues collected by the debt service fund to the general fund for an old bond issue (no longer outstanding) to service capital lease debt. A transfer for $2,957.93 was made to cover the negative cash balance for an old bond issue (no longer outstanding).
NOTE 8: LONG-TERM LIABILITIES
The changes in long-term liabilities during the fiscal year for governmental activities, were as follows:
Balance July 1, 2015
Additions
Deductions
Balance June 30, 2016
Due Within One Year
Qualified Zone Academy Bonds Capital Leases
$ 6,200,000.00 $ 3,293,667.47
- $ 4,200,000.00 $ 2,000,000.00 $
-
-
773,538.52
2,520,128.95
805,640.26
$ 9,493,667.47 $
- $ 4,973,538.52 $ 4,520,128.95 $ 805,640.26
GENERAL OBLIGATION DEBT OUTSTANDING
Voters have authorized $15,000,000.00 in general obligation debt, which was not issued as of June 30, 2016.
QUALIFIED ZONE ACADEMY BONDS (QZAB)
Section 226 of the Taxpayer Relief Act of 1997 (Public Law 105-34) provides for a source of capital at no or at nominal interest rates for costs incurred by School Districts in connection with the establishment of special academic programs, in partnership with the business community. The School District, in agreement with the Georgia School Board Association, has entered into such an arrangement.
This agreement establishes a method of repayment for qualified interest-free debt instrument. The agreement requires the School District to deposit funds annually into a sinking fund account on or before December 31, 2016. The amount on deposit at June 30, 2016 was $1,639,634.22.
Debt currently outstanding under Qualified Zone Academy Bonds is as follows:
Description
Interest Rate Issue Date Maturity Date Amount Issued
Amount Outstanding
General Government - QZAB Series 2006B
0.00% 11/28/2006
12/1/2021 $ 2,000,000.00 $ 2,000,000.00
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EFFINGHAM COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2016
EXHIBIT "H"
The following schedule reports the annual Qualified Zone Academy Bond payments:
Fiscal Year Ended June 30:
Principal
2022
$ 2,000,000.00
CAPITAL LEASES
The School District entered into an agreement dated February 18, 2003, with the Georgia School Board Association for the construction and subsequent lease of various school facilities. Under the terms of the agreement, the School District will make annual payments through August 15, 2018. These lease agreements qualify as capital leases for accounting purposes, and, therefore, have been recorded at the present value of the future minimum lease payments as of the date of their inception.
The following assets were acquired through capital leases and are reflected in the capital asset note at fiscal year-end:
Governmental Activities
Buildings and Improvements Land Less: Accumulated Depreciation
$ 9,728,973.00 275,000.00
2,797,078.93
$ 7,206,894.07
Capital leases currently outstanding are as follows:
Purpose
Interest Rate Issue Date
Maturity Date
Amount Issued
Amount Outstanding
School Facilities
4.13%
2/18/2003
8/15/2018 $ 10,000,000.00 $ 2,520,128.95
The following is a schedule of total capital lease payments:
Fiscal Year Ended June 30:
Principal
2017 2018 2019
$
805,640.26 $
839,664.44
874,824.25
Total Principal and Interest
$
2,520,128.95 $
Interest
88,809.54 54,067.45 18,165.48
161,042.47
- 20 -
EFFINGHAM COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2016
EXHIBIT "H"
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; acts of God and unemployment compensation.
The School District carries commercial insurance for risk of loss associated with torts, assets, errors or omissions, and job related illness or injuries to employees. The School District has elected to selfinsure for all losses related to acts of God. The School District has neither significantly reduced coverage for these risks nor incurred losses (settlements) which exceeded the School District's commercial insurance coverage in any of the past three fiscal years.
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
2015 $
-
$
-
$
-
$
-
2016 $
-
$
761.00
$
761.00
$
-
SURETY BOND The School District purchased a surety bond to provide additional insurance coverage as follows:
Position Covered
Amount
Superintendent
$
100,000.00
- 21 -
EFFINGHAM COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2016
EXHIBIT "H"
NOTE 10: FUND BALANCE CLASSIFICATION DETAILS
The School District's financial statements include the following amounts presented in the aggregate at June 30, 2016:
Nonspendable Inventories
Restricted Continuation of federal programs $ Capital projects Debt service
Assigned School activity accounts
Unassigned
$
1,239,446.54 8,276,482.27 1,643,273.68
102,861.14
11,159,202.49 364,258.22
8,541,866.86
Fund Balance, June 30, 2016
$ 20,168,188.71
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 COMMITMENTS
COMMITMENTS UNDER CONSTRUCTION CONTRACTS The following is an analysis of significant outstanding construction or renovation contracts executed by the School District as of June 30, 2016.
Project
Unearned Executed Contracts (1)
Payments through June 30, 2016 (2)
Effingham College and Career Academy $ 2,205,105.95 $ 5,303,556.06
(1) The amounts described are not reflected in the basic financial statements. (2) Payments include contracts and retainages payable at year-end.
OPERATING LEASES
The School District leases copiers under the provisions of one or more long-term lease agreements classified as operating leases for accounting purposes. Rental expenditures under the terms of the operating leases totaled $85,628.88 for governmental activities for the year ended June 30, 2016. The following future minimum lease payments were required under operating leases at June 30, 2016:
Year Ending
2017 2018
Total
Governmental Funds
$ 85,628.88 85,628.88
$ 171,257.76
- 22 -
EFFINGHAM COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2016
EXHIBIT "H"
NOTE 12: 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.
NOTE 13: POST-EMPLOYMENT BENEFITS
GEORGIA SCHOOL PERSONNEL POST-EMPLOYMENT HEALTH BENEFIT FUND
Plan Description. The Georgia School Personnel Post-Employment Health Benefit Fund (School OPEB Fund) is a cost-sharing multiple-employer defined benefit post-employment healthcare plan that covers eligible former employees of public school systems, libraries and regional educational service agencies. The School OPEB Fund provides health insurance benefits to eligible former employees and their qualified beneficiaries through the State Employees Health Benefit Plan administered by the Department of Community Health. The Official Code of Georgia Annotated (O.C.G.A.) assigns the authority to establish and amend the benefit provisions of the group health plans, including benefits for retirees, to the Board of Community Health (Board). Additional information about the School OPEB Fund is disclosed in the State of Georgia Comprehensive Annual Financial Report. This report can be obtained from the Georgia Department of Audits and Accounts at www.audits.ga.gov/SGD/CAFR.html.
Funding Policy. The contribution requirements of plan members and participating employers are established by the Board in accordance with the current Appropriations Act and may be amended by the Board. Contributions of plan members or beneficiaries receiving benefits vary based on plan election, dependent coverage, and Medicare eligibility and election. For members with fewer than five years of service as of January 1, 2012, contributions also vary based on years of service. On average, members with five years or more of service as of January 1, 2012 pay approximately 25% of the cost of the health insurance coverage. In accordance with the Board resolution dated December 8, 2011, for members with fewer than five years of service as of January 1, 2012, the State provides a premium subsidy in retirement that ranges from 0% for fewer than 10 years of service to 75% (but no greater than the subsidy percentage offered to active employees) for 30 or more years of service. The subsidy for eligible dependents ranges from 0% to 55% (but no greater than the subsidy percentage offered to dependents of active employees minus 20%). No subsidy is available to Medicare eligible members not enrolled in a Medicare Advantage Option. The Board of Community Health sets all member premiums by resolution and in accordance with the law and applicable revenue and expense projections. Any subsidy policy adopted by the Board may be changed at any time by Board resolution and does not constitute a contract or promise of any amount of subsidy.
Participating employers are statutorily required to contribute in accordance with the employer contribution rates established by the Board. The contribution rates are established to fund all benefits due under the health insurance plans for both active and retired employees based on projected "payas-you-go" financing requirements. Contributions are not based on the actuarially calculated annual required contribution (ARC) which represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed thirty years.
- 23 -
EFFINGHAM COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2016
EXHIBIT "H"
The combined active and retiree contribution rates established by the Board for employers participating in the School OPEB Fund were as follows for the fiscal year ended June 30, 2016:
For certificated teachers, librarians and regional educational service agencies and certain other eligible participants:
July 1, 2015 June 30, 2016
$945.00 per member per month
For non-certificated school personnel:
July 1, 2015 December 31, 2015 $596.20 per member per month
January 1, 2016 June 30, 2016 $746.20 per member per month
No additional contribution was required by the Board for fiscal year 2016 nor contributed to the School OPEB Fund to prefund retiree benefits. Such additional contribution amounts are determined annually by the Board in accordance with the School plan for other post-employment benefits and are subject to appropriation.
The School District's combined active and retiree contributions to the health insurance plans, which equaled the required contribution, for the current fiscal year and the preceding two fiscal years were as follows:
Fiscal Year
Percentage Contributed
Required Contribution
2016 2015 2014
100% 100% 100%
$ 10,705,133.04
$
9,852,429.04
$
9,740,883.12
NOTE 14: RETIREMENT PLANS
The School District participates in various retirement plans administered by the State of Georgia, as further explained below.
TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS)
Plan Description: All teachers of the School District as defined in O.C.G.A 47-3-60 and certain other support personnel as defined by 47-3-63 are provided a pension through the Teachers Retirement System of Georgia (TRS). TRS, a cost-sharing multiple-employer defined benefit pension plan, is administered by the TRS Board of Trustees (TRS Board). Title 47 of the O.C.G.A. assigns the authority to establish and amend the benefit provisions to the State Legislature. The Teachers Retirement System of Georgia issues a publicly available separate financial audit report that can be obtained at www.trsga.com/publications.
Benefits Provided: TRS provides service retirement, disability retirement, and death benefits. Normal retirement benefits are determined as 2% of the average of the employee's two highest paid consecutive years of service, multiplied by the number of years of creditable service up to 40 years. An employee is eligible for normal service retirement after 30 years of creditable service, regardless of age, or after 10 years of service and attainment of age 60. Ten years of service is required for disability and death benefits eligibility. Disability benefits are based on the employee's creditable service and compensation up to the time of disability. Death benefits equal the amount that would be payable to the employee's beneficiary had the employee retired on the date of death. Death benefits are based on the employee's creditable service and compensation up to the date of death.
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EFFINGHAM COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2016
EXHIBIT "H"
Contributions: Per Title 47 of the O.C.G.A., contribution requirements of active employees and participating employers, as actuarially determined, are established and may be amended by the TRS Board. Pursuant to O.C.G.A. 47-3-63, the employer contributions for certain full-time public school support personnel are funded on behalf of the employer by the State of Georgia. Contributions are expected to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. Employees were required to contribute 6% of their annual pay during fiscal year 2016. The School District's contractually required contribution rate for the year ended June 30, 2016 was 14.27% of annual School District payroll, of which 14.13% of payroll was required from the School District and 0.14% of payroll was required from the State. For the current fiscal year, employer contributions to the pension plan were $8,591,692.20 and $86,051.27 from the School District and the State, respectively.
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 contractually required contribution rate, actuarially determined annually, for the year ended June 30, 2016 was 24.72% of annual covered payroll for old and new plan members and 21.69% for GSEPS members. 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 $31,372.15 for the current fiscal year.
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EFFINGHAM COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2016
EXHIBIT "H"
PUBLIC SCHOOL EMPLOYEES RETIREMENT SYSTEM (PSERS)
P lan 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 $204,247.00.
Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions
At June 30, 2016, the School District reported a liability of $83,184,273.00 for its proportionate share of the net pension liability for TRS ($82,974,492.00) and ERS ($209,781.00).
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
$ 82,974,492.00
State of Georgia's proportionate share of the net pension liability associated with the School District
833,514.00
Total
$ 83,808,006.00
- 26 -
EFFINGHAM COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2016
EXHIBIT "H"
The net pension liability for TRS and ERS was measured as of June 30, 2015. The total pension liability used to calculate the net pension liability was based on an actuarial valuation as of June 30, 2014. An expected total pension liability as of June 30, 2015 was determined using standard roll-forward techniques. The School District's proportion of the net pension liability was based on contributions to TRS and ERS during the fiscal year ended June 30, 2015.
At June 30, 2015, the School District's TRS proportion was 0.545024%, which was an increase of 0.004013% from its proportion measured as of June 30, 2014. At June 30, 2015, the School District's ERS proportion was 0.005178%, which was an increase of 0.000233% from its proportion measured as of June 30, 2014.
At June 30, 2016, the School District did not have a PSERS liability for a proportionate share of the net pension liability because of a Special Funding Situation with the State of Georgia, which is responsible for the net pension liability of the plan. The amount of the State's proportionate share of the net pension liability associated with the School District is $866,916.00.
The PSERS net pension liability was measured as of June 30, 2015. The total pension liability used to calculate the net pension liability was based on an actuarial valuation as of June 30, 2014. An expected total pension liability as of June 30, 2015 was determined using standard 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, 2015.
For the year ended June 30, 2016, the School District recognized pension expense of $6,872,501.00 for TRS, $28,135.00 for ERS and $51,698.00 for PSERS and revenue of $80,899.00 for TRS and $51,698.00 for PSERS. The revenue is support provided by the State of Georgia. For TRS the State of Georgia support is provided only for certain support personnel.
At June 30, 2016, the School District reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:
TRS Deferred Outflows of Resources
Deferred Inflows of Resources
ERS
Deferred
Deferred
Outflows of
Inflows of
Resources
Resources
Differences between expected and actual
experience
$
-
$ 729,803.00 $
-
$
1,676.00
Net difference between projected and actual earnings on pension plan investments
-
6,998,986.00
-
15,136.00
Changes in proportion and differences between School District contributions and proportionate share of contributions
4,812,593.00
-
14,206.00
-
School District contributions subsequent to the measurement date
8,591,692.20
-
31,372.15
-
Total
$ 13,404,285.20 $ 7,728,789.00 $ 45,578.15 $ 16,812.00
- 27 -
EFFINGHAM COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2016
EXHIBIT "H"
The School District contributions subsequent to the measurement date of $8,591,692.20 for TRS and $31,372.15 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, 2017. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows:
Year Ended June 30:
TRS
ERS
2017 2018 2019 2020 2021
$ (2,039,283.00) $
$ (2,039,283.00) $
$ (2,039,288.00) $
$ 3,210,105.00 $
$
(8,447.00) $
4,168.00 (5,131.00) (6,746.00) 5,103.00
-
Actuarial assum ptions: The total pension liability as of June 30, 2015 was determined by an actuarial valuation as of June 30, 2014, using the following actuarial assumptions, applied to all periods included in the measurement:
Teachers Retirement System:
Inflation Salary increases Investment rate of return
3.00%
3.75% 7.00%, average, including inflation
7.50%, net of pension plan investment expense, including inflation
Mortality rates were based on the RP-2000 Combined Mortality Table for Males or Females set back two years for males and set back three years for females.
The actuarial assumptions used in the June 30, 2014 valuation were based on the results of an actuarial experience study for the period July 1, 2004 June 30, 2009.
Employees' Retirement System:
Inflation
3.00%
Salary increases
5.45% 9.25%, average, including inflation
Investment rate of return
7.50%, net of pension plan investment expense, including inflation
Mortality rates were based on the RP-2000 Combined Mortality Table for the periods after service retirement, for dependent beneficiaries, and for deaths in active service, and the RP-2000 Disabled Mortality Table set back eleven years for males for the period after disability retirement.
The actuarial assumptions used in the June 30, 2014 valuation were based on the results of an actuarial experience study for the period July 1, 2004 June 30, 2009.
- 28 -
EFFINGHAM COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2016
EXHIBIT "H"
Public School Employees Retirement System:
Inflation
3.00%
Salary increases
N/A
Investment rate of return
7.50%, net of pension plan investment expense, including inflation
Mortality rates were based on the RP-2000 Combined Mortality Table set forward one year for males for the period after service retirement, for dependent beneficiaries, and for deaths in active service, and the RP-2000 Disabled Mortality Table set back two years for males and set forward one year for females for the period after disability retirement.
The actuarial assumptions used in the June 30, 2014 valuation were based on the results of an actuarial experience study for the period July 1, 2004 June 30, 2009.
The long-term expected rate of return on TRS, ERS and PSERS pension plan investments was determined using a log-normal distribution analysis in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The target asset allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table:
Asset class
Fixed income Domestic large stocks Domestic mid stocks Domestic small stocks International developed market stocks International emerging market stocks
Total
* Rates shown are net of the 3.00% assumed rate of inflation
Target allocation
30.00% 39.70%
3.70% 1.60% 18.90% 6.10%
100.00%
Long-term expected real rate of return*
3.00% 6.50% 10.00% 13.00% 6.50% 11.00%
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 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.
- 29 -
EFFINGHAM COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2016
EXHIBIT "H"
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
$ 142,585,391.00 $
82,974,492.00 $ 33,840,927.00
Employees' 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
$
297,373.00 $
209,781.00 $
135,106.00
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 publically
available at www.trsga.com/publications and http://www.ers.ga.gov/formspubs/formspubs.html.
DEFINED CONTRIBUTION PLAN
In March of 1999, Effingham County Board of Education began an employer paid 403(b) annuity plan for the group of employees covered under the Public School Employees Retirement System (PSERS). Recognizing that PSERS was a limited defined contribution and defined benefit plan which did not provide for an adequate retirement for this group of employees, it was the Board's desire to supplement the retirement of this group.
The Board selected Valic as the provider of this plan. For each employee covered under PSERS, the Board began contributing to the plan an amount equal to 3.00% of the employee's base pay.
The employee becomes vested in the plan with 5 years of experience. Employees who had already achieved 5 years of experience at the time the plan was implemented were vested upon enrollment.
Funds accumulated in the employer paid accounts are only available to the employee upon termination of employment and 5 years of service to Effingham County Board of Education. If an employee terminates employment prior to achieving 5 years of service, funds paid on behalf of the non-vested employee are credited back to the Board.
Employer contributions for the current fiscal year and the preceding two fiscal years are as follows:
Fiscal Year
Percentage Contributed
Required Contribution
2016 2015 2014
100% 100% 100%
$ 46,376.35 $ 47,469.24 $ 49,518.49
NOTE 15: SUBSEQUENT EVENTS
The School District issued $15,000,000.00 of general obligation bonds that were authorized during the current fiscal year.
- 30 -
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SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS
(This page left intentionally blank)
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
October 17, 2017
Honorable Nathan Deal, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Effingham County Board of Education
REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH
GOVERNMENT AUDITING STANDARDS
INDEPENDENT AUDITOR'S REPORT
Ladies and Gentlemen:
We have audited, in accordance with 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 Effingham County Board of Education (School District) as of and for the year ended June 30, 2016, and the related notes to the financial statements, which collectively comprise the School District's basic financial statements, and have issued our report thereon dated October 17, 2017.
Internal Control Over Financial Reporting
In planning and performing our audit of the financial statements, we considered the School District's internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the School District's internal control. Accordingly, we do not express an opinion on the effectiveness of the School District's internal control.
A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.
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Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that were not identified. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. We did identify a certain deficiency in internal control, described in the accompanying Schedule of Findings and Questioned Costs as item FS 2016-001, that we consider to be a significant deficiency.
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.
School District's Response to Findings
The School District's response to the finding identified in our audit is described in the accompanying Schedule of Findings and Questioned Costs. The School District's response was not subjected to the auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on it.
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
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Greg S. Griffin
STATE AUDITOR
(404) 656-2174
DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
October 17, 2017
Honorable Nathan Deal, Governor Members of the General Assembly Members of the State Board of Education
and Superintendent and Members of the Effingham County Board of Education
REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY THE UNIFORM GUIDANCE
INDEPENDENT AUDITOR'S REPORT
Ladies and Gentlemen:
Report on Compliance for Each Major Federal Program
We have audited Effingham County Board of Education's (School District) compliance with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on each of its major federal programs for the year ended June 30, 2016. The School District's major federal programs are identified in the Summary of Auditor's Results section of the accompanying Schedule of Findings and Questioned Costs.
Management's Responsibility
Management is responsible for compliance with federal statutes, regulations, and the terms and conditions of its federal awards applicable to its federal programs.
Auditor's Responsibility
Our responsibility is to express an opinion on compliance for 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.
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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, 2016.
Report on Internal Control over Compliance
Management of the School District is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered the School District's internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the School District's internal control over compliance.
A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance.
Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.
The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose.
Respectfully submitted,
Greg S. Griffin State Auditor
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SECTION III AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS
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EFFINGHAM COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2016
PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
No matters were reported.
PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
No matters were reported.
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SECTION IV FINDINGS AND QUESTIONED COSTS
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EFFINGHAM COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2016
I SUMMARY OF AUDITOR'S RESULTS
Financial Statements
Type of auditor's report issue: Governmental Activities; General Fund; Capital Projects Fund; Debt Service Fund; Aggregate Remaining Fund Information
Unmodified
Internal control over financial reporting:
Material weakness identified?
No
Significant deficiency identified?
Yes
Noncompliance material to financial statements noted:
No
Federal Awards
Internal Control over major programs: Material weakness identified? Significant deficiency identified?
No None Reported
Type of auditor's report issued on compliance for major programs: All major programs
Unmodified
Any audit findings disclosed that are required to be reported in
accordance with 2 CFR 200.516(a)?
No
Identification of major programs:
CFDA Numbers
Name of Federal Program or Cluster
10.553, 10.555
Child Nutrition Cluster
Dollar threshold used to distinguish between Type A and Type B programs:
$750,000.00
Auditee qualified as low-risk auditee?
No
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EFFINGHAM COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2016
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
FS 2016-001 Control Category: Internal Control Impact: Compliance Impact: Repeat of Prior Year Finding:
Maintenance of Capital Assets Capital Assets Significant Deficiency None None
Description: Adequate policies and procedures are not in place to ensure capital assets inventory records are properly maintained.
Criteria: The School District's management is responsible for designing and maintaining internal controls that provide reasonable assurance that capital asset inventory records are properly maintained. Chapter 37 Implementing a Capital Assets Management System of the Financial Management for Georgia Local Units of Administration provides that School Districts must establish capital asset policies, define system requirements, implement a capital asset system and maintain capital asset inventory reports.
Condition: A review of the School District's capital assets policies and procedures and the related capital assets records revealed the following exceptions:
The School District did not capitalize contracts and retainage payables in the amount of $1,901,408.51.
Procedures were not in place to periodically reconcile capital outlay expenditures to capital asset additions. This procedure not being in place could result in assets being added that were not placed in the proper category. It also could result in assets meeting the capitalization threshold not being recorded.
Cause: In discussing these deficiencies with School District, management indicated that a proper review was not performed and that they failed to properly maintain capital assets records in accordance with the School District's approved capital assets policy and requirements set forth in Chapter 37 Implementing a Capital Asset Management System of the Financial Management for Georgia Local Units of Administration.
Effect or Potential Effect: The failure of the School District to maintain a complete and accurate capital assets listing can lead to inaccurate internal and external reporting, as well as noncompliance with generally accepted accounting principles.
Recommendation: The School District's management should review its capital assets records and make appropriate adjustments to ensure that the capital assets are properly maintained and reported according to its approved capital asset policy.
Views of Responsible Officials: We concur with this finding.
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EFFINGHAM COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2016 III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported.
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SECTION V MANAGEMENT'S CORRECTIVE ACTION
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EFFINGHAM COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SCHEDULE OF MANAGEMENT'S CORRECTIVE ACTION YEAR ENDED JUNE 30, 2016
CORRECTIVE ACTION PLANS - FINANCIAL STATEMENT FINDINGS
FS-2016-001 Control Category: Internal Control Impact: Compliance Impact: Repeat of Prior Year Finding:
Maintenance of Capital Assets Capital Assets Significant Deficiency None None
Adequate policies and procedures are not in place to ensure capital assets inventory records are properly maintained.
Corrective Action Plans: In the future, construction in progress amounts will include retainage payable and contracts payable on projects not yet completed in addition to cash payments on the projects.
Estimated Completion Date: June 2017
Contact Person: Ron Wilson, Finance Director
Telephone:
(912) 754-5885
Fax:
(912) 754-3489
E-mail:
rlwilson@effingham.k12.ga.us
CORRECTIVE ACTION PLANS - FEDERAL AWARD FINDINGS
No matters were reported.