Comprehensive Annual Financial Report For the Fiscal Year Ended June 30, 2017 Creekside HS Alexandria Jackson ~ 10th Grade Dolvin ES Cao Lillian ~ 1st Grade Sweet Apple ES Caroline Blackwell ~ 1st Grade Sweet Apple ES Oliver Reed ~ Kindergarten Milton HS Emma Rohwer ~ 12th Grade Ison Springs ES Giselle Guzman ~ 4th Grade Woodland MS Jose Cibrian ~ 7th Grade Cliftondale ES Kaden Livsey ~ 5th Grade Prepared by: Fulton County Board of Education Division of Financial Services Robert A. Morales, Chief Financial Officer Riverwood HS Dori Balser ~ 12th Grade ACKNOWLEDGEMENTS On behalf of the Fulton County School Board of Education, the Superintendent, and the Financial Services Division, I am pleased to present the 2017 Comprehensive Annual Financial Report (CAFR). The cover, designed to resemble an art gallery, showcases the work of our extremely talented students in kindergarten through grade twelve. I would like to thank the student artists who allowed us to share their prized and inspirational artwork for our financial report. I also must give special acknowledgement to the District's art teachers who teach and motivate our student artists. Finally, as Chief Financial Officer, I wish to acknowledge my appreciation to the members of the Financial Services Division who contributed to the development and the content of this report including Ms. Greta Tinaglia, Executive Director of Accounting and Retirement Services and her Accounting Services staff and Mr. Marvin Dereef, Deputy Chief Financial Officer for their leadership during the transition this year. Yours very truly, Robert A. Morales Chief Financial Officer Alexandria Jackson, 10th Grade Art Teacher, Shuntia Wallace Creekside High School District 4 Oliver Reed, Kindergarten Art Teacher, Katie Argentina Sweet Apple Elementary School District 1 Jose Cibrian, 7th Grade Art Teacher, Pauline Weisz Woodland Middle School District 3 STUDENT ARTWORK Cao Lillian, 1st Grade Art Teacher, Hope Knight Dolvin Elementary School District 5 Caroline Blackwell, 1st Grade Art Teacher, Katie Argentina Sweet Apple Elementary School District 1 Emma Rohwer - 12th Grade Art Teacher, Heather Meyer Milton High School District 2 Giselle Guzman, 4th Grade Art Teacher, Christine Wu Ison Springs Elementary School District 7 Kaden Livsey, 5th Grade Art Teacher, Elizabeth Minor Cliftondale Elementary School District 4 Dori Balser, 12th Grade Art Teacher, Lana Ensmann Riverwood High School District 3 Fulton County Board of Education, Georgia Comprehensive Annual Financial Report For The Fiscal Year Ended June 30, 2017 TABLE OF CONTENTS Introductory Section (Unaudited) Letter of Transmittal ................................................................................................................. i GFOA Certificate of Achievement for Excellence in Financial Reporting............................ viii ASBO Certificate of Excellence in Financial Reporting .......................................................... ix List of Elected Officials..............................................................................................................x Superintendent of Schools ........................................................................................................ xi List of Appointed Principal Officials ...................................................................................... xii Organizational Chart .............................................................................................................. xiii Financial Section Independent Auditors' Report .................................................................................................1 Management's Discussion and Analysis (Unaudited) ...................................................... 4-14 Basic Financial Statements: Government-wide Financial Statements: Statement of Net Position......................................................................................................15 Statement of Activities ..........................................................................................................16 Fund Financial Statements: Governmental Funds: Balance Sheet ........................................................................................................................17 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position....................................................................................................................18 Statement of Revenues, Expenditures and Changes in Fund Balances ................................19 Reconciliation of the Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances to the Statement of Activities .......................................20 Statement of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual General Fund ..................................................................................................................21 Fiduciary Funds: Statement of Fiduciary Net Position......................................................................................22 Statement of Changes in Fiduciary Net Position...................................................................23 Notes to the Basic Financial Statements ................................................................................24 Index to Notes to the Basic Financial Statements .................................................................25 Summary of Significant Accounting Policies .......................................................................26 Stewardship, Compliance and Accountability.......................................................................33 Detailed Notes on All Funds .................................................................................................33 Other Notes............................................................................................................................53 Fulton County Board of Education, Georgia Comprehensive Annual Financial Report For The Fiscal Year Ended June 30, 2017 Required Supplementary Information ....................................................................................56 Fulton County School Employees Pension Plan Schedule of the School System's Proportionate Share of the Net Pension Liability ............57 Schedule of School System's Contributions During Measurement Period ...........................58 Schedule of Changes in the School System's Net Pension Liability and Related Ratios .....59 Schedule of School System's Contributions .........................................................................60 Supplementary Information: Combining and Individual Fund Statements and Schedules: Governmental Funds: Nonmajor Governmental Funds Combining Balance Sheet ...................................................................................................61 Combining Statement of Revenues, Expenditures and Changes in Fund Balances .............62 Nonmajor Special Revenue Funds Combining Balance Sheet ....................................................................................................63 Combining Statement of Revenues, Expenditures and Changes in Fund Balances .............65 All Budgeted Special Revenue Funds Schedule of Revenues, Expenditures and Changes in Fund Balances Budget and Actual (Budgetary Basis) ..............................................................................................................67 Title I Fund Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual .......................................................................................68 Title II Fund Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual ......................................................................................69 Title III Fund Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual .......................................................................................70 Part B Special Education Fund Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual ......................................................................................71 Education for the Homeless Fund Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual .......................................................................................72 School Nutrition Program Fund Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual .......................................................................................73 Lottery Fund Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual ......................................................................................74 Other Federal Grants Fund Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual ..........................................................................................75 Fulton County Board of Education, Georgia Comprehensive Annual Financial Report For The Fiscal Year Ended June 30, 2017 Other Local Grants Fund Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual............................................................................................76 Debt Service Fund Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual............................................................................................77 Agency Funds Combining Statement of Changes in Assets and Liabilities..............................................78 Statistical Section (Unaudited) Introduction to the Statistical Section.........................................................................79 Financial Trends Government-wide Net Position By Component ................................................................80 Chart Total Government-wide Net Position.......................................................................81 Changes in Net Position Governmental Activities .............................................................82 Changes in Net Position Governmental Activities Percentage of Total..........................83 Changes in Net Position Government Activities Annual Percentage Change ................84 Fund Balances Governmental Funds..................................................................................85 Chart-Fund Balances-Governmental Funds ..........................................................................87 General Governmental Revenues by Source.........................................................................88 General Governmental Expenditures by Function ................................................................89 General Governmental Expenditures by Function Percentage of Total .............................90 General Governmental Current Expenditures by Function...................................................91 Summary of Changes in Fund Balances ...............................................................................92 Chart Summary of Net Changes in Fund Balances ............................................................93 Revenue Capacity Taxable Assessed Value and Estimated Actual Value of Property by Type........................94 Chart- Taxable Assessed Value............................................................................................95 Direct, Overlapping and Underlying Property Tax Rates ....................................................96 Comparison of Metropolitan Atlanta School Districts 2016 Property Tax Rates .............97 Property Tax Levies and Collections ...................................................................................98 Principal Property Taxpayers ...............................................................................................99 Direct, Overlapping and Underlying Sales Tax Rates .......................................................100 Sales Taxes by Group ........................................................................................................101 Debt Capacity Ratios of Total Debt Outstanding by Type .........................................................................102 Underlying, Overlapping and Direct Governmental Activities Debt ..................................103 Legal Debt Margin ..............................................................................................................104 Economic & Demographic Information Demographic and Economic Statistics................................................................................105 Principal Employers ............................................................................................................106 Fulton County Board of Education, Georgia Comprehensive Annual Financial Report For The Fiscal Year Ended June 30, 2017 Operating Information Employees by Function.......................................................................................................107 Teachers' Salaries................................................................................................................108 School Building Information ....................................................................................... 109-116 Food Service Operating Statistics .......................................................................................117 Enrollment by Grade Level .................................................................................................118 Special Reports Section Schedule of Expenditures of Special Purpose Local Option Sales Tax ..............................119 Schedule of Lottery Expenditures By Object.....................................................................120 Schedule of Quality Basic Education Program Earnings And Expenditures by Program ........................................................................................121 Single Audit Section 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...........................................122 and 123 Independent Auditor's Report on Compliance for Each Major Federal Program and Report on Internal Control over Compliance Required by Uniform Guidance............................................................................. 124-125 Schedule of Expenditures of Federal Awards...................................................126 and 127 Notes to the Schedule of Expenditures of Federal Awards .......................................... 128 Schedule of Findings and Questioned Costs.......................................................... 129-130 Status of Prior Fiscal Year Audit Findings ............................................................ 131-132 Introductory Section Ison Springs ES Giselle Guzman ~ 4th Grade BOARD OF EDUCATION Linda P. Bryant, President Linda McCain, Vice Prsident Julia C. Bernath Gail Dean Kimberly Dove Katie Reeves Katha Stuart Jeff Rose, Ed. D., Superintendent December 27, 2017 To the Members of the Fulton County Board of Education, The Citizens of Fulton County, Georgia and the Financial Community: The Comprehensive Annual Financial Report (CAFR) of the Fulton County Board of Education, Georgia (the School District) for the fiscal year ended June 30, 2017, is submitted herewith. This report was prepared by the Financial Services Division and is intended to fulfill the requirements for audit prescribed by Georgia Statutes for local boards of education. Also included in this CAFR is the Uniform Guidance report which is issued to fulfill Single Audit Requirements of Federal and State governments. District management assumes full responsibility for the completeness and reliability of the information contained in this report, based on a comprehensive framework of internal control that it has established for this purpose. Because the cost of internal control should not exceed anticipated benefits, the objective is to provide reasonable, rather than absolute, assurance that the financial statements are free of any material misstatements. The Financial Services Division prepared this report in conformance with standards of the Governmental Accounting Standards Board, the American Institute of Certified Public Accountants, and the Government Finance Officers Association. Mauldin & Jenkins, LLC, have issued an unmodified ("clean") opinion on the Board's financial statements for the fiscal year ended June 30, 2017. The independent auditor's report is located at the front of the financial section of this report. Management's discussion and analysis (MD&A) document immediately follows the independent auditor's report and provides a narrative introduction, overview, and analysis of the basic financial statements. The MD&A complements this letter of transmittal and should be read in conjunction with it. The Comprehensive Annual Financial Report is presented in five sections: 1) Introductory, 2) Financial, 3) Statistical, 4) Special Reports and 5) Single Audit. The Introductory section includes this transmittal letter, a list of principal officials, and an organizational chart. The Financial section includes the basic financial statements as well as the unmodified opinion of independent public accountants on the basic financial statements. i BOARD OF EDUCATION Linda P. Bryant, President Linda McCain, Vice Prsident Julia C. Bernath Gail Dean Kimberly Dove Katie Reeves Katha Stuart Jeff Rose, Ed. D., Superintendent The Statistical section contains selected financial and demographic information, generally presented over a multi-year basis. Included with the Statistical section is a Special Report section. Within this Special Report section is the SPLOST expenditures, lottery expenditures, and QBE allotment and expenditures. The Single Audit section contains federal compliance information including schedules and auditor reports required for the District to comply with the Revised Single Audit Act of 1996 and 2 CFR 200, the Uniform Guidance. PROFILE OF THE BOARD The School District's boundaries are coterminous with those of Fulton County, Georgia (the "County") (except the area within the corporate limits of the City of Atlanta, Georgia which constitutes the territory within the Atlanta Independent School System). The School District reports one blended component unit, the "Fulton County School Employees' Pension Fund". The School District serves the entire County area excluding the territory within the Atlanta Independent School System. The School District is currently composed of 108 schools: 59 elementary schools (grades K-5), 19 middle schools (grades 6-8) and 18 high schools (grades 9- 12), 2 open campus high schools, and 10 start-up Charter Schools for a total enrollment of approximately 96,700. The School District is governed by an elected seven-member Board of Education, the official policy-making body of the School District, and administered by an appointed Superintendent. The School District is the fourth largest system in Georgia and the 32nd largest in the United States. The District is governed by a Board of Education consisting of seven members elected by the registered voters of the County from seven education districts within the County. A president and a vice-president are elected from the membership, and serve as such for a term of two years and one year respectively. Day-to-day administration of the School District is the responsibility of the Superintendent, who is appointed by the Board for terms of office which may not be less than one year or greater than three years. The School Superintendent acts as the Secretary of the Board of Education, ex officio. ii BOARD OF EDUCATION Linda P. Bryant, President Linda McCain, Vice Prsident Julia C. Bernath Gail Dean Kimberly Dove Katie Reeves Katha Stuart Jeff Rose, Ed. D., Superintendent As of June 30, 2017, there were more than 7,500 certificated personnel servicing an active enrollment of approximately 96,700 students in the various schools. Services provided by our personnel include: preschool for three and four-year-old special needs students, regular and special education instructional program at the elementary (kindergarten through 5th grade), middle (6th through 8th grade), and secondary (9th through 12th grade) levels. Additional services in community school programs, on-line educational programs and numerous others, which exceed the legal requirements, are also offered in the school system. All teachers in the School System hold Bachelor's degrees, many have Master's degrees, and some have Specialist's and Doctoral degrees. Most have a continuing interest in professional and personal growth through formal study and staff development workshops. The School District has been reaccredited by AdvanceEd, which is comprised of three U.S.-based regional accreditation agencies. The regional accreditation agency that conducts the School District's accreditation activities is the Southern Association of Colleges and Schools Council on Accreditation (SACS CASI). Fulton County has a land area of approximately 529 square miles. The terrain is rolling, and the elevation varies from 900 to 1,050 feet above sea level. The average temperature varies from 41 degrees in January to 79 degrees in July, with an average mean temperature of 61 degrees. Average annual rainfall is 50.77 inches. LOCAL ECONOMY The development of the fiscal year 2017 budget, which was approved on June 7, 2016, was a planned, orderly process, which evaluated the prioritization of available funds for provision of educational services for Fulton County students. The central focus of the approved fiscal year 2017 budget is to provide competitive wages for teachers, increased support to schools, support the Districts strategic plan, support federal programs, and manage increasing benefit costs for all employees Our two primary funding sources have experienced growth this fiscal year as the local economy has seen steady growth. . Our major General Fund revenue stream for operations is property taxes which generates 60% of the General Fund revenue and increased by $12.7 million due to growth in the Tax Digest. iii BOARD OF EDUCATION Linda P. Bryant, President Linda McCain, Vice Prsident Julia C. Bernath Gail Dean Kimberly Dove Katie Reeves Katha Stuart Jeff Rose, Ed. D., Superintendent Our second major General Fund revenue stream is State revenue through the "Quality Basic Education" Act funding, which represents 38% of General Fund revenue. In fiscal year 2017 QBE state aid of approximately $358 million was up from fiscal year 2016 by approximately $15 million due to enrollment growth, an increase in training and experience credit for teachers and a reduction in the state austerity adjustments. Overall, our General Fund revenues are up approximately 4.3%. It is the goal of FCS to strategically use new revenue to support the district's strategic plan, to provide compensation increases to employees to manage the expenditure growth associated with increased enrollment and rising benefit costs. The revenue increases in FY 2017 were used in part to provide a salary increase to teachers of 5% and a 3% increase for noninstructional personnel and to manage rising benefit costs. LONG TERM FINANCIAL PLANNING The School District plans capital improvements as future capital needs arise due to increased student population and facility repair and maintenance needs. Specific capital expenditure plans are formalized in conjunction with enrollment forecasts, current facility assessments, and anticipated annual receipts of capital outlay funds from the State of Georgia Department of Education. The School District regularly monitors anticipated capital outlay needs. The District has adopted financial policies that provide us with an infrastructure for our future financial management decisions. The topics addressed in these policies include: Operating budgets and equity reserve policies; Capital improvement program policies; Debt issuance and management policies (adopted in fiscal year 2010); Revenue administration policies Accounting, auditing, and financial reporting policies; Deposit and investment policies. iv BOARD OF EDUCATION Linda P. Bryant, President Linda McCain, Vice Prsident Julia C. Bernath Gail Dean Kimberly Dove Katie Reeves Katha Stuart Jeff Rose, Ed. D., Superintendent STRATEGIC INITIATIVES During the 2012- 2013 school year Fulton County Schools began the implementation of Strategic Plan 2017: Building Our Future, a five-year roadmap to dramatically improve student achievement for all students. We have organized the path forward around these five areas of focus where the district must improve: Advancing Instruction; Enhancing People; Integrating Technology; Ensuring Effective Schools; Managing Resources. Our status as Georgia's largest Charter System presents an unprecedented level of flexibility to think differently about how we operate and consider new ways to meet the needs of a diverse and wide-reaching school district. Our theory of action is that empowering principals and school- based governance councils will lead to improved outcomes for students throughout Fulton County. Focused and intentional work guided by the District's strategic plan has led to Fulton improving its four-year cohort graduation rate over 15 percentage points resulting in both the highest graduation rate in Metro Atlanta as well as the fastest rate of improvement over the same period. AWARDS Financial Reporting The District received a Certificate of Excellence in financial reporting for the fiscal year June 30, 2016 CAFR from Government Finance Officers Association of the United States and Canada (GFOA) and the Association of School Business Officials International (ASBO). This was the 9th year that the School District has submitted and received these prestigious awards. v BOARD OF EDUCATION Linda P. Bryant, President Linda McCain, Vice Prsident Julia C. Bernath Gail Dean Kimberly Dove Katie Reeves Katha Stuart Jeff Rose, Ed. D., Superintendent In order to receive these awards, a government must publish an easily readable and efficiently organized comprehensive annual financial report. This report must satisfy both generally accepted accounting principles and applicable legal requirements. These awards are valid for a period of one year only. We believe that our current CAFR continues to meet GFOA and ASBO requirements, and will be submitting our 2017 CAFR to determine its eligibility for these certificates. Budget Presentation The District prepares an official budget document each year which is issued as a separate report. Since 2010, the District has received the Distinguished Budget Presentation Award from GFOA. In order to receive this award, the District must publish a budget document that meets program criteria as a policy document, a financial plan, an operations guide, and as a communications device. The award is valid for a period of one year only. We have also received the Meritorious Budget Award from ASBO every year since 2010. The criteria required by ASBO includes an introductory, organizational, financial and information section. We believe the most recent budget continues to conform to program requirements, and we have submitted it to GFOA and ASBO to determine its eligibility for another award. CLOSING In closing, we want to thank the members of the Fulton County Board of Education for their unfailing support for maintaining the highest standards of professionalism in the management of the School District's finances. To the citizens of the Fulton County School District, please accept our gratitude for your support of our successful School District. vi BOARD OF EDUCATION Linda P. Bryant, President Linda McCain, Vice Prsident Julia C. Bernath Gail Dean Kimberly Dove Katie Reeves Katha Stuart Jeff Rose, Ed. D., Superintendent ACKNOWLEDGEMENTS The preparation of this report could not have been accomplished without the dedicated services of the entire professional staff of the Financial Services Division. Each member has our sincere appreciation for his/her timely closing of the School District's financial records and the preparation of this report. A special recognition is made to Ms. Greta Tinaglia, Executive Director of Accounting Services, for leading the comprehensive annual financial report development. We also express our thanks to all department of the School District for their help in collecting and assimilating data. We especially like to recognize the students of our District for the beautiful artwork found throughout this document. Respectfully Submitted, Robert A. Morales Chief Financial Officer vii Government Finance Officers Association Certificate of Achievement for Excellence in Financial Reporting Presented to Fulton County Text38: Board of Education Text53: Georgia For its Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2016 Executive Director/CEO viii 7KH&HUWLILFDWHRI([FHOOHQFHLQ)LQDQFLDO5HSRUWLQJ LVSUHVHQWHGWR Fulton County School District IRULWV&RPSUHKHQVLYH$QQXDO)LQDQFLDO5HSRUW&$)5 IRUWKH)LVFDO