Comprehensive annual financial report, fiscal year ended 2019 June 30

Comprehensive Annual Financial Report
For the Fiscal Year Ended June 30, 2019

Dolvin Elementary Ana Sofia Reid ~ 3rd Grade

Milton High Abby Burnett ~ 10th Grade

River Trail Middle Mahi Shah ~ 7th Grade

Sweet Apple ES Oliver Reed ~ Kindergarten

Hopewell Middle Laylah Scipio ~ 7th Grade

Milton High Lizzie Leaman ~12th Grade

Mimosa Elementary Zariah Saint Peruex ~ 5th Grade

Crabapple Crossing Elementary Gray Tito ~ 2nd Grade
Prepared by: Fulton County Board of Education
Division of Financial Services Marvin L. Dereef, Jr., Chief Financial Officer

Cogburn Woods Elementary Samantha Adrianzqa ~ 5th Grade

Fulton County Board of Education, Georgia Comprehensive Annual Financial Report For The Fiscal Year Ended June 30, 2019
TABLE OF CONTENTS
Introductory Section (Unaudited)
Letter of Transmittal ................................................................................................................. i GFOA Certificate of Achievement for Excellence in Financial Reporting.............................. vi ASBO Certificate of Excellence in Financial Reporting......................................................... vii List of Elected Officials.......................................................................................................... viii Superintendent of Schools ........................................................................................................ ix List of Appointed Principal Officials .........................................................................................x Organizational Chart ................................................................................................................ xi
Financial Section
Independent Auditors' Report .................................................................................................1
Management's Discussion and Analysis (Unaudited) ...................................................... 4-16
Basic Financial Statements:
Government-wide Financial Statements: Statement of Net Position......................................................................................................17 Statement of Activities ..........................................................................................................18
Fund Financial Statements:
Governmental Funds: Balance Sheet ........................................................................................................................19 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position....................................................................................................................20 Statement of Revenues, Expenditures and Changes in Fund Balances ................................21 Reconciliation of the Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances to the Statement of Activities .......................................22 Statement of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual General Fund ..................................................................................................................23
Fiduciary Funds: Statement of Fiduciary Net Position......................................................................................24 Statement of Changes in Fiduciary Net Position...................................................................25
Notes to the Basic Financial Statements: Index to Notes to the Basic Financial Statements .................................................................26 Summary of Significant Accounting Policies .......................................................................27 Stewardship, Compliance and Accountability.......................................................................33 Detailed Notes on All Funds .................................................................................................34 Other Notes............................................................................................................................58

Fulton County Board of Education, Georgia Comprehensive Annual Financial Report For The Fiscal Year Ended June 30, 2019
Required Supplementary Information Fulton County School Employees Pension Plan Schedule of the School System's Proportionate Share of the Net Pension Liability ............60 Schedule of School System's Contributions During Measurement Period ...........................61 Schedule of Changes in the School System's Net Pension Liability and Related Ratios .....62 Schedule of School System's Contributions .........................................................................63 Schedule of the School System's Proportionate Share of the Net OPEB Liability...............64 Schedule of School System's OPEB Contributions During Measurement Period ................65 Notes to the Schedule School OPEB Fund.........................................................................66
Supplementary Information:
Combining and Individual Fund Statements and Schedules:
Governmental Funds:
Nonmajor Governmental Funds Combining Balance Sheet ...................................................................................................67 Combining Statement of Revenues, Expenditures and Changes in Fund Balances .............68
Nonmajor Special Revenue Funds Combining Balance Sheet .............................................................................................. 69-70 Combining Statement of Revenues, Expenditures and Changes in Fund Balances ....... 71-72 All Budgeted Special Revenue Funds Schedule of Revenues, Expenditures and Changes in Fund Balances Budget and Actual (Budgetary Basis) ..............................................................................................................73 Title I Fund Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual .......................................................................................74 Title II Fund Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual ......................................................................................75 Title III Fund Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual .......................................................................................76 Part B Special Education Fund Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual ......................................................................................77 Education for the Homeless Fund Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual .......................................................................................78 School Nutrition Program Fund Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual .......................................................................................79 Lottery Fund Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual ......................................................................................80

Fulton County Board of Education, Georgia Comprehensive Annual Financial Report For The Fiscal Year Ended June 30, 2019
Other Federal Grants Fund Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual ..........................................................................................81
Other Local Grants Fund Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual............................................................................................82
Debt Service Fund Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual............................................................................................83
Agency Funds Combining Statement of Changes in Assets and Liabilities..............................................84
Statistical Section (Unaudited)
Introduction to the Statistical Section......................................................................... 85
Financial Trends Government-wide Net Position By Component ................................................................86 Chart Total Government-wide Net Position.......................................................................87 Changes in Net Position Governmental Activities .............................................................88 Changes in Net Position Governmental Activities Percentage of Total..........................89 Changes in Net Position Government Activities Annual Percentage Change ................90 Fund Balances Governmental Funds............................................................................ 91-92 Chart-Fund Balances-Governmental Funds ..........................................................................93 General Governmental Revenues by Source.........................................................................94 General Governmental Expenditures by Function ................................................................95 General Governmental Expenditures by Function Percentage of Total .............................96 General Governmental Current Expenditures by Function ...................................................97 Summary of Changes in Fund Balances ...............................................................................98 Chart Summary of Net Changes in Fund Balances ............................................................99
Revenue Capacity Taxable Assessed Value and Estimated Actual Value of Property by Type......................100 Chart- Taxable Assessed Value..........................................................................................101 Direct, Overlapping and Underlying Property Tax Rates ..................................................102 Comparison of Metropolitan Atlanta School Districts 2016 Property Tax Rates ...........103 Property Tax Levies and Collections..................................................................................104 Principal Property Taxpayers .............................................................................................105 Direct, Overlapping and Underlying Sales Tax Rates .......................................................106 Sales Taxes by Group ........................................................................................................107
Debt Capacity Ratios of Total Debt Outstanding by Type .........................................................................108 Underlying, Overlapping and Direct Governmental Activities Debt ..................................109 Legal Debt Margin ..............................................................................................................110

Fulton County Board of Education, Georgia Comprehensive Annual Financial Report For The Fiscal Year Ended June 30, 2019
Economic & Demographic Information Demographic and Economic Statistics................................................................................111 Principal Employers ............................................................................................................112
Operating Information Employees by Function.......................................................................................................113 Teachers' Salaries................................................................................................................114 School Building Information ....................................................................................... 115-128 Food Service Operating Statistics .......................................................................................129 Enrollment by Grade Level .................................................................................................130
Special Reports Section
Schedule of Expenditures of Special Purpose Local Option Sales Tax ..............................131 Schedule of Lottery Expenditures By Object.....................................................................132 Schedule of Quality Basic Education Program Earnings
And Expenditures by Program ........................................................................................133
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...........................................134 and 135
Independent Auditor's Report on Compliance for Each Major Federal Program and Report on Internal Control over Compliance Required by Uniform Guidance........................................................................136 and 137
Schedule of Expenditures of Federal Awards...................................................138 and 139
Notes to the Schedule of Expenditures of Federal Awards .......................................... 140
Schedule of Findings and Questioned Costs.......................................................... 141-144
Status of Prior Fiscal Year Audit Findings ................................................................... 145
Management's Corrective Action Plan .................................................................. 146-148

ACKNOWLEDGEMENTS
On behalf of the Fulton County Schools' Board of Education, the Superintendent, and the Financial Services Division, I am pleased to present the 2019 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 12.
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 Fulton County School District's Fine Arts Division Coordinator, Elizabeth Epps, and the art teachers that 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 for contributing to the development and content of this report, including Ms. Greta Tinaglia, Executive Director of Accounting and Retirement Services and her Accounting Services staff.
Yours very truly,

Marvin L. Dereef, Jr. Chief Financial Officer

STUDENT ARTWORK

Renee Alnoubani, 11th Grade Art Teacher, Heather Meyer Riverwood High District 7

Jordan Hood, 12th Grade Art Teacher, Leslie Jackson Westlake High District 6

Vitchae Han, 7th Grade Art Teacher, Ricci Justis River Trail Middle District 5

Roderick Heard, 11th Grade Art Teacher, Shuntia Wallace Creekside High School District 4

Eve Viderman, 5th Grade Art Teacher, Sue Miller Cogburn Woods Elementary District 2

Luna Ramirez, 11th Grade Art Teacher, Heather Meyer Riverwood High District 7

Lauran Walker, 11th Grade Art Teacher, Chris Sandlin Tri-Cities High District 3

Maritoni Thomas, 10th Grade Aadam Sabri Jiffry 1st Grade

Art Teacher, Leslie Jackson Art Teacher, Laura Stowers

Westlake High

Hembree Springs Elementary

District 6

District 1

Introductory Section (Unaudited)
+
River Trail Middle School Vitchae Han 7th Grade

BOARD OF EDUCATION
Linda P. Bryant, President Julia C. Bernath, Vice President Gail Dean Kimberly Dove Linda McCain
Katie Reeves Katha Stuart Mike Looney, Ed.D., Superintendent
December 23, 2019
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, 2019, 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, 2019. 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.
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 CFR200, the Uniform Guidance.
Administrative Center 6201 Powers Ferry Road NW, Atlanta, Georgia 30339 470-254-3600 www.fultonschools.org

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 106 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.
As of June 30, 2019, 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 Masters 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.
ii

LOCAL ECONOMY

The development of the fiscal year 2019 budget, which was approved on June 28, 2018, 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 2019 budget is to provide competitive wages for teachers, manage increasing benefit costs, increase support to schools, provide support for the execution of the Districts strategic plan and support federal programs.

Overall, our General Fund revenues are up approximately 7.2% as our local economy remains strong with steady growth occurring. The District has two primary funding sources, Property Taxes and QBE (state aid) which support our General Fund operations.

Our first major General Fund revenue stream is property taxes which generates 62% of the General Fund revenue. Taxes increased by $67 million due to growth in the Tax Digest. In addition, our 2017 digest was frozen by the State due to certification issues which prevented full billing in 2017. During the fiscal year 2019, the issues were resolved, and the District received additional revenue.

Our second major General Fund revenue stream is State revenue through the "Quality Basic Education" Act which represents 35% of General Fund revenue. In fiscal year 2019, QBE state aid of approximately $372 million was down from fiscal year 2018 by approximately $3 million due to shifting enrollment trends and the increase in our tax digest which offsets QBE Earnings.

It is the goal of FCS to strategically use new revenue to support the School District's strategic plan, to provide compensation increases to employees to manage the expenditure growth associated with rising benefit costs. The revenue increases in fiscal year 2019 were used in part to provide a salary increase to employees 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 School 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; and



Deposit and investment policies.

iii

STRATEGIC INITIATIVES
Our goal is to prepare all students to graduate ready to pursue and succeed on their chosen paths. At the beginning of the 2017-2018 school year, Fulton County Schools rolled out the new Strategic Plan 2022:
At Fulton County Schools, we are dedicated to our mission to educate every student to be a responsible, productive citizen. We are also committed to our vision that all students will learn to their full potential. Our strategic plan provides a focus for our district's work to support that mission and vision by identifying our top priorities for the next five years:
Student Achievement; Community Collaboration; People and Culture; and Fiscal Responsibility .
To support our plan, Fulton County Schools will ensure that all students learn to their fullest potential by developing and investing in a Strategic Support Model. The model will pair resources with flexibility and accountability to empower schools and communities so they can continuously improve outcomes for all children and prepare them to succeed on their chosen paths.
AWARDS
Financial Reporting
The District received a Certificate of Excellence in financial reporting for the fiscal year June 30, 2018 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 11th year that the School District has submitted and received these prestigious awards.
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 we will be submitting our 2019 CAFR to determine its eligibility for these certificates.
Budget Presentation
The School District prepares an official budget document each year which is issued as a separate report. We have 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 ASBO to determine its eligibility for another award.
In 2019, we also received from GFOA the Award for Best Practices in School Budgeting. This award is presented annually to school districts who demonstrate a budget process aligned with GFOA's best practice recommendations. We won this award by using the GFOA's latest criteria which includes the alignment of resources towards student achievement focusing on collaboration, communication, and rigorous development, evaluation, and prioritization of strategies to achieve the School District's goals and objectives.
iv

v

vi

The Certificate of Excellence in Financial Reporting is presented to
Fulton County School District
for its Comprehensive Annual Financial Report (CAFR) for the Fiscal Year Ended June 30, 2018.
The CAFR meets the criteria established for ASBO International's Certificate of Excellence.

Tom Wohlleber, CSRM President

David J. Lewis Executive Director

vii

Elected Officials
Fulton County Board of Education, Georgia

Katha Stuart District 1

Katie Reeves District 2

Gail Dean District 3

Linda Bryant President District 4

Linda McCain Vice President District 5

Kimberly Dove District 6

Julia Bernath District 7

The Fulton County Board of Education includes seven members elected by the District to serve four-year terms. The superintendent serves as an ex-officio member of the Board and acts as secretary-treasurer. Board members elect a president for a two-year term and a vice president for a one-year term.

Duties and Responsibilities
The primary duty of the Board of Education is to enact policy. The superintendent and staff enforce the policies and ensure that each student has an equal opportunity for a quality education.

The Board also performs the following:

Evaluates the educational program Adopts courses of study Approves personnel recommendations Approves the budget, financial reports, audits and major expenditures Provides funds for the operation and support of the school system Sets minimum standards for efficient operation and improvement of the system Approves school attendance boundaries Acts as a tribunal at certain employee and student hearings

viii

Fulton County Board of Education, Georgia Comprehensive Annual Financial Report For the Fiscal Year Ended June 30, 2019
Superintendent Profile: Dr. Mike Looney Dr. Mike Looney joins Fulton County Schools after recently serving as superintendent of Williamson County Schools in Tennessee, where he was named 2015 Superintendent of the Year by Tennessee Organization of School Superintendents (TOSS).
He earned his bachelor's degree in business management and master's degree in education from Jacksonville State University in Alabama. Dr. Looney earned his educational specialist degree and doctorate in educational leadership from the University of Alabama.
Dr. Looney's work has been presented for regional and national audiences on a wide range of educational and leadership topics.
He has served on several distinguished panels including former president George W. Bush's National Reading Leadership Panel in Washington D.C.
Dr. Looney also served as superintendent of the Butler County School District in Alabama. Under his leadership, the school district realized significant student achievement gains, improved the graduation rate, and established the district's first magnet school. In recognition of his work there, he was selected as Greenville, Alabama's Citizen of the Year in 2008.
Before arriving at Butler, he was assistant superintendent for curriculum and instruction in Montgomery Public Schools. Under his leadership, the district of 61 schools and 31,000 students received national notoriety for its improvement in reading achievement scores.
Dr. Looney, a public educator since 1994, has also served in the roles of classroom teacher, assistant principal and principal. During his tenure as principal, his school was recognized for closing the achievement gap for underprivileged and minority students. His school was highlighted at both the state and national levels and was named a National Title I Distinguished School.
Prior to entering the field of education, he served as finance manager for a privately-held corporation with fifty employees in Anniston, Alabama. His responsibilities included corporate finance, marketing, and human resource management.
Dr. Looney is a military veteran having served for seven years in the United States Marine Corps before being honorably discharged with a service-related injury. His military service was distinguished by four meritorious promotions, including selection as the Marine of the Year for MCRS Montgomery serving Alabama, Mississippi and Florida. In addition to other medals and ribbons, Dr. Looney was the recipient of the Navy and Marine Corps Achievement Medal. His military duties took him all over the world and included a six-month tour on the USS Raleigh with the 2nd Marine Division, II Marine Amphibious Force. He is the father of four grown children.
ix

Fulton County Board of Education, Georgia Comprehensive Annual Financial Report For the Fiscal Year Ended June 30, 2019
Fulton County Board of Education, Georgia
Appointed Principal Officials
Mike Looney, Superintendent

Patrick Burke Chief Operations Officer

Marvin Dereef, Jr. Chief Financial Officer

Cliff Jones Chief Academic Officer

Brian Noyes Chief Communications Officer

Serena Sacks Chief Information Officer

Ron Wade Chief Talent Officer

Julie Baldwin Director Office of Superintendent and Board Services
x

2018-2019 Organizational Structure

Superintendent

Chief Academics Officer Clifford Jones

Board

Superintendent Jeff Rose

Director Internal Audits Jim Yerich

Director of Superintendent & Board Services
Julie Baldwin

Coordinator Government Affairs/Policy David Goldie

Executive Assistant Sakha Reed

Chief Communications Officer Vacant

Chief Financial Officer Robert Morales

Chief information Officer Serena Sacks

Chief Operations Officer Patrick Burke

Chief Talent Officer Ronnie Wade

xi

Financial Section
Cogburn Woods Elementary School Eve Viderman 5th Grade

INDEPENDENT AUDITOR'S REPORT
To the Superintendent and Members of the Fulton County Board of Education
Atlanta, Georgia
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 Fulton County Board of Education (the "School System") as of and for the fiscal year ended June 30, 2019, and the related notes to the financial statements, which collectively comprise the School System's basic financial statements as listed in the table of contents.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditor's Responsibility
Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.
200 GALLERIA PARKWAY S.E., SUITE 1700 ATLANTA, GA 30339-5946 770-955-8600 800-277-0080 FAX 770-980-4489 www.mjcpa.com Members of The American Institute of Certified Public Accountants

Opinions
In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the Fulton County Board of Education as of June 30, 2019, and the respective changes in financial position and the budgetary comparison for the General Fund, for the fiscal year then ended in accordance with accounting principles generally accepted in the United States of America.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the Management's Discussion and Analysis, the Schedule of Proportionate Share of the Net Pension Liability Teachers Retirement System of Georgia, the Schedule of Contributions Teachers Retirement System of Georgia, the Schedule of Changes in the School System's Net Pension Liability and Related Ratios, the Schedule of Investment Returns Fulton County School Employees' Pension Fund, and the Schedule of Contributions Fulton County School System's Retirement Plan, the Schedule of Proportionate Share of Net OPEB Liability School OPEB Fund, and the Schedule of Contributions School OPEB Fund, as listed in the table of contents, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.
Other Information
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Fulton County Board of Education's basic financial statements. The combining and individual fund statements and schedules, the schedule of expenditures of special purpose local option sales tax proceeds, as required by the Official Code of Georgia 48-8-121, and the schedule of expenditures of federal awards, 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, as well as the introductory, statistical, and special reports sections are presented for purposes of additional analysis and are not a required part of the basic financial statements.
2

Other Matters (continued) Other Information (continued) The combining and individual fund statements and schedules, the schedule of expenditures of special purpose local option sales tax proceeds, and the schedule of expenditures of federal awards are the responsibility of management and were derived from and relate 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 combining and individual fund statements and schedules, the schedule of expenditures of special purpose local option sales tax proceeds, and the schedule of expenditures of federal awards are fairly stated, in all material respects, in relation to the basic financial statements as a whole. The introductory, statistical, and special reports sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them.
Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 23, 2019 on our consideration of the Fulton County Board of Education's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the School System's internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Fulton County Board of Education's internal control over financial reporting and compliance.
Atlanta, Georgia December 23, 2019
3

MANAGEMENT'S DISCUSSION
AND ANALYSIS

Fulton County Board of Education, Georgia Management's Discussion and Analysis (Unaudited)
as of and for the Fiscal Year ended June 30, 2019
MANAGEMENT'S DISCUSSION AND ANALYSIS
Within this section of Fulton County Board of Education, Georgia's (the "School System") Comprehensive Annual Financial Report, the School System's management is pleased to provide this narrative discussion and analysis of the financial activities of the School System for the fiscal year ended June 30, 2019. The School System's financial performance is discussed and analyzed within the context of the accompanying financial statements and disclosures following this section.
Financial Highlights The School System's assets exceeded its liabilities by $791,252,083 (net position) at June 30, 2019.
Total net position is comprised of the following:
Net investment in capital assets, of $1,968,194,997 includes property and equipment, net of accumulated depreciation, and are reduced for outstanding debt related to the purchase or construction of capital assets.
Net position restricted of $213,815,960 by constraints imposed from outside the School System such as debt covenants, grantors, laws, or regulations.
Unrestricted net position deficit of ($1,390,758,874) represents the portion available to maintain the School System's continuing obligations to citizens and creditors.
The School System's governmental funds reported a total ending fund balance of $426,903,868 at the end of the fiscal year. This amount, when compared to the prior fiscal year ending fund balance of $393,394,678, reflects an increase of $32,969,190 during the current fiscal year.
At the end of the current fiscal year, the unassigned fund balance for the general fund was $19,286,967 or 1.86% of total general fund expenditures. The fiscal year 2019 unassigned fund balance shows a $8,347,414 decrease from the prior fiscal year amount.
The above financial highlights are explained in more detail in the Financial Analysis Section of this document.
Overview of the Financial Statements This Management Discussion and Analysis document introduces the School System's basic financial statements. The basic financial statements include: (1) government-wide financial statements, (2) fund financial statements, and (3) notes to the basic financial statements. The School System also includes in this report additional information to supplement the basic financial statements. Comparative data is presented when available.
Government-wide Financial Statements The School System's Comprehensive Annual Financial Report includes two government-wide financial statements. These statements provide both long-term and short-term information about the School System's overall financial status. Financial reporting at this level uses a perspective similar to that found in the private sector; with its basis in accrual accounting and elimination or reclassification of activities between funds.
The first of these government-wide statements is the Statement of Net Position. This is the governmentwide statement of position presenting information that includes all the School System's assets, deferred
4

Fulton County Board of Education, Georgia Management's Discussion and Analysis (Unaudited)
as of and for the Fiscal Year ended June 30, 2019
outflows and inflows of resources, and liabilities, with the difference reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of the financial position of the School System. Evaluation of the overall health of the School System would extend to other nonfinancial factors such as diversification of the taxpayer base, in addition to the financial information provided in this report.
The second government-wide statement is the Statement of Activities, which reports how the School System's net position changed during the current fiscal year. All current fiscal year revenues and expenses are included, regardless of when cash is received or paid. An important purpose of the design of the statement of activities is to show the financial reliance of the School System's distinct activities or functions on revenues provided by the School System's taxpayers.
The government-wide financial statements report governmental activities of the School System that are principally supported by taxes and grants and include regular instruction, specialized instruction, and numerous supporting services such as school administration and the operation and maintenance of the schools.
The government-wide financial statements are presented on pages17 and 18 of this report.
Fund Financial Statements A fund is an accountability unit used to maintain control over resources segregated for specific activities or objectives. The School System uses funds to ensure and demonstrate compliance with finance-related laws and regulations. Within the basic financial statements, fund financial statements focus on the School System's most significant funds rather than the School System as a whole. Major funds are separately reported while all others are combined into a single, aggregated presentation. Individual fund data for nonmajor funds is provided in the form of combining statements in a later section of this report.
The School System has two kinds of funds:
Governmental funds are reported in the fund financial statements and encompass the same functions reported as governmental activities in the government-wide financial statements. However, the focus is very different with fund statements providing a distinctive view of the School System's governmental funds. These statements report short-term fiscal accountability focusing on the use of spendable resources and balances of spendable resources available at the end of the fiscal year. Fund financial statements are useful in evaluating annual financing requirements of governmental programs and the commitment of current spendable resources.
Since the government-wide focus includes the long-term view, comparisons between these two perspectives may provide insight into the long-term impact of short-term financing decisions. Both the Governmental Fund Balance Sheet and the Governmental Fund Operating Statement provide a reconciliation to assist in understanding the differences between these two perspectives.
The basic governmental fund financial statements, including the general fund's budgetary statement are presented on pages 19-23 of this report.
Individual fund information for nonmajor governmental funds is found in combining and individual statements and schedules in a later section of this report.
The other fund type, fiduciary funds, is used to account for the School System's pension trust fund and its school activity accounts. These statements are presented on pages 24-25.
5

Fulton County Board of Education, Georgia Management's Discussion and Analysis (Unaudited)
as of and for the Fiscal Year ended June 30, 2019

Notes to the Basic Financial Statements
The accompanying Notes to the Basic Financial Statements section provides information essential to a full understanding of the government-wide and fund financial statements. The notes to the financial statements begin on page 26 of this report.
As discussed, the School System reports major funds in the basic financial statements.
Required Supplementary Information This section includes some trend information for its pension trust fund and OPEB fund. This information is presented on page 60.
Financial Analysis of the School System as a Whole The School System's net position at fiscal year-end is $791,252,083. The following table provides a summary of the School System's net position (in thousands).

Assets Current assets Noncurrent: Loans Receivable Capital assets

2018 Governmental
Activities
$582,200
2,290 2,017,967

2019 Percentage
of Total
22%
0% 78%

2018

Governmental

Percentage

Activities

of Total

$549,816

22%

2,731

0%

1,940,896

78%

Total assets

2,602,457

100%

2,493,444

100%

Deferred outflows

253,186

220,302

Liabilities:

Current liabilities

196,141

10%

190,991

10%

Long-term liabilities

1,693,527

90%

1,787,391

90%

Total liabilities

1,889,668

100%

1,978,382

100%

Deferred inflows

174,723

87,187

Net position Net investments in capital assets Restricted Unrestricted
Total net position

1,968,195 213,816
(1,390,759)
$791,252

249% 27%
-176%
100%

1,885,954 186,627
(1,424,405)
$648,176

291% 29%
-220%
100%

6

Fulton County Board of Education, Georgia Management's Discussion and Analysis (Unaudited)
as of and for the Fiscal Year ended June 30, 2019
The School System continues to maintain a high current ratio. The current ratio compares current assets to current liabilities and is an indication of the ability to pay current obligations. The current ratio for governmental activities is 3.0 to 1 at June 30, 2019 versus 2.9 to 1 at June 30, 2018. The School System reported a positive balance in net position for its governmental activities. The beginning net position at June 30, 2018 was $648,176,531. As of June 30, 2019, net position increased by $143,075,522. The following chart reports the total net position balances from fiscal year 2008 2019.
This page continued the subsequent page
7

Fulton County Board of Education, Georgia Management's Discussion and Analysis (Unaudited)
as of and for the Fiscal Year ended June 30, 2019
The following table provides a summary of the School System's changes in net position (in thousands):
Summary of Changes in Net Position

Revenues Program Charges for Services Operating Grants Capital Grants General Taxes Others
Total Revenues
Program Expenses: In s tru ctio n Pupil services Improvement of instructional services Educational media services Federal grant administration General administration School administration Business administration Maintenance and operation of plant Student transportation services Central services Other support services Food service operations Interest and fiscal charges
Total Expenses
Change in Net Position
Beginning Net Position
Ending Net Position

2019

2018

$

23,853

471,438

719

839,221 12,138 $ 1,347,369

1.8% $ 35.0% 0.1%
62.3% 0.9% 100.0% $

19,243 462,249
3,782
768,890 11,452 1,265,616

1.5% 36.5% 0.3%
60.8% 0.9% 100.0%

704,490 72,597 56,179 17,154
1,245 8,073 59,164 19,514 111,113 64,449 42,952
71 44,091 3,201

1,204,293 143,076

648,176

$

791,252

58.5% 6.0% 4.7% 1.4% 0.1% 0.7% 4.9% 1.6% 9.2% 5.4% 3.6% 0.0% 3.7% 0.3%
100.0%
$

$761,933 44,054 60,263 17,674 1,260 5,462 60,787 18,859 136,507 59,631 31,193 235 43,886 5,780
1,247,524
18,092
630,084
648,176

61.1% 3.5% 4.8% 1.4% 0.1% 0.4% 4.9% 1.5% 10.9% 4.8% 2.5% 0.0% 3.5% 0.5%
100.0%

8

Fulton County Board of Education, Georgia Management's Discussion and Analysis (Unaudited)
as of and for the Fiscal Year ended June 30, 2019
GOVERNMENTAL REVENUES
The School System's primary revenue sources are property taxes and state aid, primarily the Quality Basic Education aid (QBE). The School System is also reliant on property taxes to support educational operations and capital outlay. Taxes provided 62.3% of the School System's total governmental revenues as compared to 60.8% in fiscal year 2018.
State and federal aid recognized for operating purposes (excluding capital outlay) total 35.0% of total revenue as compared to 36.5% in fiscal year 2018.
In the State of Georgia, the general state funding, known as Quality Basic Education (QBE) funding is classified as program revenue. The QBE funding is distributed based upon enrollments and a certain amount of this funding must be expended in certain expense functions, as well as an amount on salaries and an amount on operations. In fiscal year 2019, the School System recognized QBE of approximately $372.4 million or approximately 27.6% of total revenues as compared to approximately $375.1 million or 29.6% in fiscal year 2018. The reason for this change is explained in the governmental activities financial analysis section presented later in this document.
In addition, the School System earned $7,421,200 in unrestricted investment earnings to support educational activities. Also, note that program revenues cover approximately 41.2% of governmental operating expenses. This means that the School System's taxpayers, through property taxes and sales taxes, fund almost 58.8% of the governmental activities revenues.
The School System recorded over $188 million in Special Purpose Local Option Sales Tax (SPLOST) during the current fiscal year. In May 2016, a new referendum was approved authorizing a 1% special purpose local option sales tax, which commenced July 1, 2017 and expires June 30, 2022. These taxes are used for acquiring school sites, constructing, and equipping new school facilities, and renovating existing facilities.
GOVERNMENTAL FUNCTIONAL EXPENSES
The following table presents the cost of each of the School System's programs, including the net costs (i.e., total cost less revenues generated by the activities). The net costs illustrate the financial burden that was placed on the School System's taxpayers by each of these functions.
The instruction function makes up 58.5% of total expenses or almost $705 million. The School System spends an additional $145.9 million on direct instructional support, including pupil services, improvement of instructional services and educational media services. The administration costs of operating our 106 schools are approximately $88 million. The operation and maintenance of the School System's buildings costs approximately $111 million.
The school nutrition program's gross expenses are over $44 million, and this program lost approximately $2.5 million after meal charges, state, and federal aid. Finally, operating approximately 788 buses costs the School System over $64.4 million.
(This page continued the subsequent page)
9

Fulton County Board of Education, Georgia Management's Discussion and Analysis (Unaudited)
as of and for the Fiscal Year ended June 30, 2019

The following table compares total cost and net cost for the last two fiscal years (in thousands):

Total Cost of Services

2019

2018

Net Cost of Services

2019

2018

In s tru ctio n Pupil services Improvement of instructional services Educational media services Federal grant administration General administration School administration Business administration Maintenance and operation of plant Student transportation services Central services Other support services Enterprise operations Food service operations Facilities acquisition and construction services Interest and fiscal charges
Total Expenses

$704,490 72,597 56,179 17,154 1,245 8,073 59,164 19,514 111,113 64,449 42,952 71 44,091 3,201
$1,204,293

$761,933 44,054 60,263 17,674 1,260 5,462 60,787 18,859 136,507 59,631 31,193 235 43,886 5,780

$369,645 62,369 36,611 4,545 1,245 (3,287) 34,147 19,349 79,904 55,994 42,649 10 (642) 2,543
3,201

$443,238 32,604 35,695 5,429 1,260 (6,602) 35,714 18,668 106,182 54,141 31,023 194 (709) 3,409 (3,775) 5,780

$1,247,524 $708,283 $762,251

Although the instruction function makes up 58.5% of total gross costs in fiscal year 2019, it is 52.2% of net costs. This reduction relates to the QBE funding reported as a program-operating grant and state aid capital grants for school construction.
Financial Analysis of the School System's Funds
Governmental Funds
As discussed, governmental funds are reported in the fund statements with a short-term, inflow and outflow of spendable resources focus. This information is useful in assessing resources available at the end of the fiscal year in comparison with upcoming financing requirements.
Governmental funds reported ending fund balances of $426,903,868. Of this fiscal year-end total, $203,550,495 is legally restricted, $177,524,841 is for capital outlay, $4,205,299 is for debt service, and $17,404,137 is for the school nutrition program, $3,947,587 is for the principal's fund, $468,631 is for other uses, $167,130,904 is committed primarily for safeguards set aside to protect the School System against economic recessions, and $4,730,815 fund balance is non-spendable
Finally, $32,204,687 is assigned which includes $12,708,419 assigned to cover the 2020 projected budget deficit and $19,470,668 assigned for encumbrance rollover. The School System has $19,286,967 in unassigned fund balance which is available for future educational purposes.

10

Fulton County Board of Education, Georgia Management's Discussion and Analysis (Unaudited)
as of and for the Fiscal Year ended June 30, 2019
Major Governmental Funds
General Fund - The general fund is the School System's primary operating fund and the largest source of day-to-day service delivery. The general fund's fund balance increased by $13,292,008 or 6.38%, from the fiscal year 2018 amount.
Our first major General Fund revenue stream is property taxes which generates 62% of the General Fund revenue. Taxes increased by $70 million due to growth in the Tax Digest. In addition, our 2017 digest was frozen by the State due to certification issues which prevented full billing in 2017. During the fiscal year 2019, the issues were resolved, and the District received additional revenue.
Our second major General Fund revenue stream is State revenue through the "Quality Basic Education" Act which represents 35% of General Fund revenue. In fiscal year 2019, QBE state aid of approximately $372 million was down from fiscal year 2018 by approximately $3 million due to shifting enrollment trends and the increase in our tax digest which offsets QBE.
Federal revenues increased by approximately $699,781 from fiscal year 2018. Other 2019 revenues decreased by approximately $2.6 million. Overall, revenues increased approximately $71.9 million or 7.3% over our fiscal year 2018 revenues due to growth in the property tax digest, and an improving interest rate environment for investment earnings.
On the expenditure side, total general fund expenditures, increased $28.7 million or 2.8% in line with salary increases given to employees for fiscal year 2019 and rising benefit costs.
The instruction function decreased by approximately $22.5 million or 3.35%. This reduction was the result of several factors. In fiscal year 2018, there was a major textbook adoption which is not reflected in 2019. Due to increases in State Revenue, the Governor granted a "State Health Payment Holiday" and therefore reduced healthcare expenditures during June of 2019. In addition, school technology specialist were coded in the instruction function in 2018 and moved to central support function in 2019 leading to an increase in the support function of 42.39% or approximately $12.8 million.
The pupil services function experienced a significant increase of $29.1 million or 77.8% as a result of a change in state reporting standards which required the District to report occupational and other therapist roles in pupil serves which had been spread across a variety of other functions. The transportation function increased by 9.23% or $4.7 million for 85 new bus driver positions to accommodate route growth. The general administration function rose $2.1 million or 53.88% as a result of settlement of lawsuits which fluctuate from year to year. All other functions performed in line with 2018.
The general fund's ending unassigned fund balance is approximately $19.3 million representing the equivalent of 1.9% of annual expenditures. The unassigned fund balance was 2.7% of annual expenditures at June 30, 2018. The increase in the percentage is due to strong growth in our tax revenues allowing us to add to fund balance in 2019.
2017 SPLOST Capital Projects Fund On May 24, 2016, the voters approved a special purpose local option sales tax for a period of five years. The District is authorized to use $976.3 million for building construction and renovation and $48.5 million for debt service. During fiscal year 2019, the District expended $144.5 million on construction and technology and approximately $15.3 million in debt service. At year end, fund balance is $135.1 million which will be used for future projects and debt service.
11

Fulton County Board of Education, Georgia Management's Discussion and Analysis (Unaudited)
as of and for the Fiscal Year ended June 30, 2019
General Fund Budgetary Highlights The revenue budget was amended downward by approximately $5.8 million or 0.5% due to property tax collections coming in short due to projections for recovery of 2017 taxes due to the resolution of the digest freeze were not as robust as anticipated. The state revenue budget was amended upward by a total of $4.0 million or 1.1% to account for an increase in state aid due to shifting enrollment patterns above. The expenditure side of the original budget for the general fund was revised upward approximately $46.62 million or 4.4% increase resulting from the rollover of outstanding 2018 purchase orders in the amount of $19.1 million, the de-commitment of $8.0 million in fund balance, and subsequent increase in budget for a textbook adoption, a mid-year step and raise for teachers, an increase of $2.0 million related to risk management reserve and security grants awarded during the year. The total expenditures for direct instruction ended the year less than 5.0% under primarily due to teacher staffing at the lower end of the experience scale versus the mid-point budgeted combined with reduced healthcare expenditures in connection with the State Health Holiday. Improvement of Instructional Services function returned a positive budget variance of 9.2% due to teacher staffing at the lower end of the experience scale versus the mid-point budgeted combined with reduced healthcare expenditures in connection with the State Health Holiday. In addition professional services were not engaged as anticipated during the budget process. Pupil Services returned a positive budget variance of 8.3% due to a reduction in the cost of testing materials. The Transportation function was under budget by one percent. The Maintenance and Operation function returned a positive budget variance in the amount of approximately $19.6 million because of the reduced need for portables due to moderating enrollment, reduced equipment maintenance and contracted services cost and HVAC modification projects completed under budget and utility expense came in under forecast. Finally, the Central Support Function was approximately $5 million over budget due to technology expenditures reclassified during 2019 which were originally intended to be funded from Capital funds. Overall, the School System spent 94.67% of the final expenditure budget as compared to 96.48% in fiscal year 2018.
(This page continued the subsequent page)
12

Fulton County Board of Education, Georgia Management's Discussion and Analysis (Unaudited)
as of and for the Fiscal Year ended June 30, 2019
Capital Assets and Debt Administration
Capital Assets The School System's investment in capital assets for governmental activities as of June 30, 2019, was $2,017,967,261. The total increase was $77,071,210 in the net investment or 4%. See Note 3-D for additional information about changes in capital assets during the current fiscal year and outstanding balances at the end of the fiscal year.
The following table provides a summary of capital asset activity.
Capital Assets Governmental Activities

Nondepreciable Land Construction in Progress

2019

2018

$269,021,154 115,556,490

$265,381,037 19,493,602

2019
70% 30%

2018
93% 7%

Total nondepreciable

384,577,644 284,874,639

100%

100%

Depreciable assets: Buildings and improvements Machinery and equipment

2,383,621,243 130,345,636

2,370,964,971 113,117,718

95%

95%

5%

5%

Total depreciable assets

2,513,966,879 2,484,082,689

100%

100%

Less accumulated depreciation 880,577,262 828,061,277

Book value depreciable assets 1,633,389,617 1,656,021,412

Percentage depreciated

35%

33%

Book Value all assets

$2,017,967,261 $1,940,896,051

At June 30, 2019, the depreciable capital assets for governmental activities were 35% depreciated. This percentage compares as 2.0% higher than the June 30, 2018 percentage. This comparison indicates that the School System is replacing its assets at almost the same rate as they are depreciating which is a positive indicator.

13

Fulton County Board of Education, Georgia Management's Discussion and Analysis (Unaudited)
as of and for the Fiscal Year ended June 30, 2019

The major projects added to the construction in progress account in thousands are as follows:

Construction in Progress

(in thousands)

SCHOOL NEEDS/RENOVATIONS $ 12,427.63

LAKE WINDWARD ES

1,064.98

CENTENNIAL HS

1,212.03

CRABAPPLE MS

1,759.65

FAIRBURN STEM HS

1,773.97

RIVER EVES ES

2,017.87

NEW PROSPECT ES

2,296.49

SWEET APPLE ES

2,543.07

NORTHWOOD ES

2,902.14

ROSWELL HS

3,982.65

CAMPBELL ES

4,121.09

WEBB BRIDGE MS

4,569.04

NORTHWESTERN MS

4,727.58

ALPHARETTA STEM HS

19,479.85

RIVERWOOD HS

26,538.39

Long-term Debt At June 30, 2019, there is one general obligation bond issue outstanding, totaling $22,385,000. The School System retired $10,330,000 or 31.6% of the outstanding bonds in fiscal year 2019.
Pension, OPEB, and Workers' Comp liabilities declined modestly and compensated absences increased.

(This page continued the subsequent page)

14

Fulton County Board of Education, Georgia Management's Discussion and Analysis (Unaudited)
as of and for the Fiscal Year ended June 30, 2019
The following table presents the outstanding long-term debt balances at June 30, 2019 and 2018:
Outstanding Borrowings

Governmental Activities

% Change

1998 general obligation bonds Intergovernmental agreement Workers' Compensation Other Claims and Judgements Total OPEB Liability Net Pension Liability Compensated Absences

2019 $22,385,000
19,005,331 3,582,081
743,614 684,838,555 974,875,304 38,227,097

2018 $32,715,000
21,380,998 3,621,707
640,232 759,529,022 980,974,748 36,547,656

-31.58% -11.11% -1.09% 16.15% -9.83% -0.62%
4.60%

Total

$1,743,656,982 $1,835,409,363

-5.00%

See note 3-H for more information.

(This page continued the subsequent page)

15

Fulton County Board of Education, Georgia Management's Discussion and Analysis (Unaudited)
as of and for the Fiscal Year ended June 30, 2019
Economic Conditions Affecting the School System Fiscal Year 2019 Budget The fiscal year 2019 budget was presented to the public on June 12, 2018 and adopted by the Board of Education at the June 28, 2018 meeting. This budget was developed using an open, transparent, and allinclusive process, which solicited input at different stages of the budget development process from budget stakeholders. The 2019 budget increased expenditure levels from the final 2018 budget by $38.8 million or 3.83% to a total of $1.051 billion. The most significant items include:
TRS Benefit increases from 16.81% to 20.90% for a $22 million impact; Increase in Local Fair Share for a $158.3 million impact; Austerity Cuts Eliminated $7.1 million impact; Increase in Class Size $11 million; Employee Furlough Day $3 million; and Salary Increase for all staff $15 million.
On the revenue side, the millage rate was reduced to 17.796 mill to provide tax relief to homeowners. QBE revenues are expected to decrease by 1.59% because of the District's increase in Local Fair Share. Overall, the revenue budget increased $29.87 million or 3.05% from the Fiscal Year 2018 budget.
Fiscal Year 2020 Budget The fiscal year 2020 budget was presented to the public on April 18, 2019 and adopted by the Board of Education at the May 16, 2019. This budget was developed using an open, transparent, and all-inclusive process, which solicited input at different stages of the budget development process from budget stakeholders. The 2020 budget increased expenditure levels from the final 2019 budget by $21.1 million or 1.9% to a total of $1.07 billion. The most significant items include:
TRS Benefit increases from 20.9% to 21.1%; Department Reductions of $9.3 million; School Allotment Change Reduction $7 million; and One time Request to support strategic plan $2.4 million.
On the revenue side, the millage rate remained at 17.796 mill to provide tax relief to homeowners. QBE revenues are expected to decrease by 6.7% because of the District's increase in Local Fair Share and shifting enrollment trends. Overall, the revenue budget increased $15.6 million or 1.5% from the Fiscal Year 2019 budget.
Contacting the School System's Financial Management This financial report is designed to provide a general overview of the School System's finances, comply with finance related laws and regulations, and demonstrate the School System's commitment to public accountability. If you have questions about this report or would like to request additional information, contact the School System's Chief Financial Officer at the Administrative Center, 6201 Powers Ferry Road, NW, Atlanta, GA 30339.
16

BASIC FINANCIAL STATEMENTS

Fulton County Board of Education, Georgia Statement of Net Position June 30, 2019

Assets Current Assets Cash and cash equivalents Receivables (net):
Accounts Property taxes Sales taxes Intergovernmental Loans Prepaid items Inventory
Total Current Assets
Noncurrent Assets Loans receivable Capital assets: Nondepreciable Depreciable, net
Total Noncurrent Assets
Deferred Outflows of Resources
Total Assets and Deferred Outflows of Resources
Liabilities Current Liabilities Accounts payable Accrued salaries and benefits payable Unearned revenue Accrued interest payable Construction contracts payables Retainage payable Payable to external parties Workers' compensation insurance claims payable Other claims and judgments payable Compensated absences payable Intergovernmental agreement payable General obligation bonds payable
Total Current Liabilities
Long-Term Liabilities: (net of current portion) Workers' compensation insurance claims payable Other claims and judgments payable Compensated absences payable Intergovernmental agreement payable General obligation bonds payable Net pension liabilities Net OPEB liability
Total Long-Term Liabilities
Deferred Inflows of Resources
Total Liabilities and Deferred Inflows of Resources
Net Position Net investment in capital assets Restricted for: Capital projects Debt service School nutrition program Permanent fund - nonspendable Program purposes Unrestricted (deficit)
Total Net Position
See accompanying notes to the basic financial statements

Governmental Activities

$

472,915,581

472,688 19,048,740 15,638,404 68,955,760
441,274 4,305,639
421,915

582,200,001

2,289,977 384,577,644 1,633,389,617 2,020,257,238 253,185,893 2,855,643,132

49,414,598 83,469,203
1,029,752 1,458,356 1,107,662 7,274,271 2,256,654 1,791,041
669,253 34,404,387
2,375,667 10,890,000
196,140,844

1,791,040 74,361
3,822,710 16,629,664 11,495,000 974,875,304 684,838,555
1,693,526,634
174,723,571
2,064,391,049

1,968,194,997

186,749,542 4,820,887
17,826,052 3,261
4,416,218 (1,390,758,874)

$

791,252,083

17

Fulton County Board of Education, Georgia Statement of Activities
For the Fiscal Year Ended June 30, 2019

Function Primary Government Governmental Activities Instruction Support services
Pupil services
Improvement of instructional services Educational media services Federal grant administration General administration School administration Business administration Maintenance and operation of plant Student transportation services Central services Other support services Enterprise operations Food service operations Interest and fiscal charges

Expenses

Charges for Services and Sales

Program Revenues Operating Grants,
Contributions and Rest. Interest

Capital Grants Contributions and Rest. Interest

Net (Expense) Revenue and Changes
in Net Position
Governmental Activities

$ 704,489,524 $
72,597,194 56,178,829 17,153,965 1,244,984 8,073,008 59,163,941 19,513,799 111,112,999 64,448,887 42,952,365
70,900 -
44,091,319 3,201,202

9,756,729 $
1,615,056 620,328 11,860,920 -

325,087,408 $
10,228,199 19,567,411 12,608,928
11,359,593 25,016,928
164,926 29,527,459
7,802,833 303,847 61,177 21,513
29,687,369 -

-$
66,925 652,188 -

(369,645,387)
(62,368,995) (36,611,418)
(4,545,037) (1,244,984) 3,286,585 (34,147,013) (19,348,873) (79,903,559) (55,993,866) (42,648,518)
(9,723) 641,841 (2,543,030) (3,201,202)

Total Governmental Activities

$ 1,204,292,916 $

23,853,033 $ 471,437,591 $

719,113

(708,283,179)

General Revenues Property taxes levied for:
General purposes Debt service Sales taxes Unrestricted - investment earnings Miscellaneous
Total General Revenues

650,726,185 1,553
188,493,825 7,421,200 4,715,968
851,358,731

Change in Net Position

143,075,552

Net Position Beginning of Fiscal Year

648,176,531

Net Position End of Fiscal Year

$

791,252,083

See accompanying notes to the basic financial statements

18

Fulton County Board of Education, Georgia Balance Sheet
Governmental Funds June 30, 2019

Assets Cash and cash equivalents Receivables (net):
Accounts Property taxes Sales taxes Intergovernmental Interfund Prepaid items Inventory

General

2017 SPLOST Capital Projects

Nonmajor Governmental
Funds

Total Governmental
Funds

$ 225,995,263 $ 164,967,760 $ 81,952,558 $ 472,915,581

-

276,763

68,871

127,054

472,688

19,048,740

-

-

19,048,740

-

15,638,404

-

15,638,404

55,559,562

-

13,396,198

68,955,760

30,305,458

-

335,168

30,640,626

2,847,283

842,768

615,588

4,305,639

-

-

421,915

421,915

Total Assets

$ 334,033,069 $ 181,517,803 $ 96,848,481 $ 612,399,353

Liabilities, Deferred Inflow of Resources, and Fund Balances

Liabilities Accounts payable Accrued salaries and benefits payable Construction contracts payable Retainage payable Unearned revenue Payable to external parties Interfund payable

$ 16,749,553 $ 29,413,795 $ 3,251,250 $

83,254,302

-

214,901

-

991,437

116,225

-

6,308,120

966,151

-

-

1,029,752

2,256,654

-

-

-

9,713,703

20,926,923

49,414,598 83,469,203
1,107,662 7,274,271 1,029,752 2,256,654 30,640,626

Total Liabilities

102,260,509

46,427,055

26,505,202

175,192,766

Deferred Inflow of Resources

10,302,719

-

-

10,302,719

Total Liabilities and Deferred Inflow of Resources

112,563,228

46,427,055

26,505,202

185,495,485

Fund Balances Nonspendable Restricted Committed Assigned Unassigned

2,847,283 -
167,130,904 32,204,687 19,286,967

842,768 134,247,980
-

1,040,764 69,302,515
-

4,730,815 203,550,495 167,130,904
32,204,687 19,286,967

Total Fund Balances

221,469,841

135,090,748

70,343,279

426,903,868

Total Liabilities, Deferred Inflow of Resources, and Fund Balances

$ 334,033,069 $ 181,517,803 $ 96,848,481 $ 612,399,353

See accompanying notes to the basic financial statements

19

Fulton County Board of Education, Georgia Reconciliation of the Governmental Funds Balance Sheet
to the Government-wide Statement of Net Position June 30, 2019

Total Governmental Fund Balances

$ 426,903,868

Amounts Reported for Governmental Activities in the Government-wide Statement of Net Position is Different Because:

Long-term receivables that are not due and payable in the current period and therefore are not

reported in the governmental funds' balance sheet but are reported on the government-wide

statement of net position.

Loans receivable

$

2,731,251 $

2,731,251

Capital assets used in governmental activities are not current financial resources and therefore

are not reported in the funds, but are reported on the government-wide statement of net

position.

Cost

$

Less accumulated depreciation

2,898,544,523 (880,577,262)

2,017,967,261

Various receivables not collected within 60 days of fiscal year-end are not considered available and are deferred on the governmental funds' balance sheet but are recognized as revenue on the government-wide statement of net position.
Property taxes

10,302,719

Deferred outflows for pensions and OPEB reported on the government-wide statement of position but not reported on the governmental fund balance sheet.

Deferred outflows of resources - cost sharing plan

$

Deferred outflows of resources - single employer local plan

Deferred outflows of resources - OPEB plan

211,645,408 11,615,073 29,925,412

253,185,893

Deferred inflows for pensions and OPEB reported on the government-wide statement of position but not reported on the governmental fund balance sheet.

Deferred inflows of resources - cost sharing plan

$

Deferred inflows of resources - single employer local plan

Deferred inflows of resources - OPEB plan

(37,254,044) (1,579,958) (135,889,569)

(174,723,571)

Interfund receivables and payables between governmental funds are reported on the

governmental funds' balance sheet but are eliminated on the government-wide statement of net

position.

Interfund receivables

$

Interfund payables

Long-term liabilities that are not due and payable in the current period and therefore are not

reported in the governmental funds' balance sheet but are reported on the government-wide

statement of net position.

Bonds payable

$

Accrued interest payable

Intergovernmental agreement payable

Workers' compensation insurance claims payable

Other claims and judgments payable

Net pension liability cost sharing plan

Net pension liability-single employer plan

Net OPEB liability

Compensated absences payable

Net Position of Governmental Activities

(30,640,626)

30,640,626

-

(22,385,000) (1,458,356) (19,005,331) (3,582,081)
(743,614) (892,008,003) (82,867,301) (684,838,555) (38,227,097)

(1,745,115,338)

$ 791,252,083

See accompanying notes to the basic financial statements

20

Fulton County Board of Education, Georgia Statement of Revenues, Expenditures and Changes in Fund Balances
Governmental Funds For the Fiscal Year Ended June 30, 2019

Revenues Property taxes Sales taxes Intergovernmental - state Intergovernmental - federal Investment earnings Charges for services Installment sales Other

General

2017 SPLOST Capital Projects

$ 653,809,908 $

-

-

188,493,825

372,421,316

-

5,143,137

1,577,662

7,139,453

2,897,072

10,830,753

-

382,389

-

1,697,389

304,151

Nonmajor Governmental
Funds

$

1,553

-

9,483,070

80,193,260

1,577,379

13,022,280

-

2,714,428

Total Governmental
Funds
$ 653,811,461 188,493,825 381,904,386 86,914,059 11,613,904 23,853,033 382,389 4,715,968

Total Revenues

1,051,424,345

193,272,710

106,991,970

1,351,689,025

Expenditures Current:
Instruction Support services Pupil services Improvement of instructional services Educational media services Federal grant administration General administration School administration Business administration Maintenance and operation of plant Student transportation services Central support services Other support services Food service operations Capital Outlay Debt Service: Principal retirement Interest and fiscal charges

647,821,636
66,524,610 41,014,834 15,326,674
6,092,593 59,544,268 19,023,012 84,287,002 55,786,467 42,848,186
11,564 -
-

-
144,513,876
2,375,667 1,685,536

34,433,608
6,525,488 15,520,368
134,381 1,279,237 2,038,678
291,399 128,230
2,609,759
241,025 70,045
40,583,784 16,747,978
10,330,000 1,799,740

682,255,244
73,050,098 56,535,202 15,461,055
1,279,237 8,131,271 59,835,667 19,151,242 84,287,002 58,396,226 43,089,211
81,609 40,583,784 161,261,854
12,705,667 3,485,276

Total Expenditures

1,038,280,846

148,575,079

132,733,720

1,319,589,645

Excess (Deficiency) of Revenues Over (Under) Expenditures

13,143,499

44,697,631

(25,741,750)

32,099,380

Other Financing Sources (Uses) Proceeds from the sale of capital assets Insurance proceeds Transfers in Transfers out

640,293 212,546
86,962 (791,292)

(11,229,663)

16,971 -
21,367,627 (9,433,634)

657,264 212,546 21,454,589 (21,454,589)

Total Other Financing Sources (Uses)

148,509

(11,229,663)

11,950,964

869,810

Net Change in Fund Balances

13,292,008

33,467,968

(13,790,786)

32,969,190

Fund Balances Beginning of Fiscal Year

208,177,833

101,622,780

84,134,065

393,934,678

Fund Balances End of Fiscal Year

$ 221,469,841 $ 135,090,748 $ 70,343,279 $ 426,903,868

See accompanying notes to the basic financial statements

21

Fulton County Board of Education, Georgia
Reconciliation of the Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balances to the Government-wide Statement of Activities For the Fiscal Year Ended June 30, 2019

Net Changes In Fund Balances - Total Governmental Funds

$

Amounts Reported for Governmental Activities in the Statement of Activities are Different Because

Governmental funds report capital outlays as expenditures on the governmental fund type operating statement, however, in the government-wide statement of activities, the cost of those assets is allocated over their estimated useful lives as depreciation expense. This is the amount by which capital outlays exceeded depreciation expense in the current period.

Depreciation expense Capital outlay

$ (57,200,766) 137,968,856

The book value of capital assets sold are reported on the government-wide statement of activities but not reported in the governmental funds' operating statement.

32,969,190 80,768,090

Net book value of capital assets sold

Certain property taxes that are reported in the government-wide statement of activities do not provide current financial resources, therefore are not reported as revenues in the governmental funds' operating statement.
Deferred @ 6/30/2019 Deferred @ 6/30/2018

$ 10,302,719 (13,386,442)

Certain state capital outlay grants are reported in the government-wide statement of activities do not provide

current financial resources, therefore, are not reported as revenues in the governmental funds' operating

statement.

Deferred @ 6/30/2019

$

Deferred @ 6/30/2018

(829,825)

Transfers between governmental funds are reported in the governmental funds' operating statement but are eliminated on the government-wide statement of activities:
Transfers in Transfers out

$ (21,454,589) 21,454,589

Some expenses reported in the statement of activities do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds. This is the net change in deferred outflows and inflows of resources related to the cost sharing pension plan and the net pension liability.

(3,696,880) (3,083,723)
(829,825) -
24,449,350

Some expenses reported in the statement of activities do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds. This is the net change in deferred outflows and inflows of resources related to the OPEB plan and net OPEB liability.

905,980

Some expenses reported in the statement of activities do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds. This is the net change in deferred outflows and inflows of resources related to the single employer pension plan and the net pension liability.
Accrued interest is reported in the government-wide statement of activities, but does not require the use of current financial resources and therefore is not reported as an expenditure in governmental funds.

782,290

Liability @ 6/30/2019 Liability @ 6/30/2018

$ (1,458,356) 1,742,430

284,074

Repayment of loans receivable is reported as revenue in governmental funds, but the repayment reduces long receivable in the government-wide statement of net position.

(435,464)

Repayment of long-term debt principal is reported as an expenditure in governmental funds, but the repayment reduces long-term liabilities in the government-wide statement of net position.

12,705,667

Compensated absences are reported in the government-wide statement of activities, but do not require the use of current financial resources and therefore are not reported as expenditures in governmental funds.

Liability @ 6/30/2019 Liability @ 6/30/2018

$ (38,227,097) 36,547,656

(1,679,441)

Workers compensation claims are reported in the government-wide statement of activities, but do not

require the use of current financial resources and therefore are not reported as expenditures in governmental

funds.

Liability @ 6/30/2019

$ (3,582,081)

Liability @ 6/30/2018

3,621,707

39,626

Claims and judgments are reported in the government-wide statement of activities, but do not require the use of current financial resources and therefore are not reported as expenditures in governmental funds.

Liability @ 6/30/2019 Liability @ 6/30/2018

$ (743,614) 640,232

(103,382)

Change In Net Position of Governmental Activities

$ 143,075,552

See accompanying notes to the basic financial statements

22

Fulton County Board of Education, Georgia General Fund
Statement of Revenues, Expenditures and Changes In Fund Balances - Budget and Actual (GAAP Budgetary Basis)
For the Fiscal Year Ended June 30, 2019

Revenues Intergovernmental - state Intergovernmental - federal Local sources:
Property taxes Investment earnings Charges for services Installment sales Other

Original Budget

$

377,573,724 $

2,925,000

659,793,654 1,990,000 8,190,235 403,000

Total Revenues

1,050,875,613

Expenditures Current:
Instruction Support services
Pupil services Improvement of instructional services Educational media services General administration School administration Business administration Maintenance and operation of plant Student transportation services Central support services Other support services

707,652,679
44,641,340 30,147,614 15,534,064 2,821,666 58,351,420 16,295,755 84,065,336 54,350,095 36,263,584
40,035

Total Expenditures

1,050,163,588

Excess (Deficiency) of Revenues Over (Under) Expenditures

712,025

Other Financing Sources (Uses) Proceeds from the sale of capital assets Insurance proceeds Transfers in Transfers out

249,243 -
(29,805) (858,600)

Total Other Financing Sources (Uses)

(639,162)

Net Change in Fund Balances

$

72,863 $

See accompanying notes to the basic financial statements

2019
Final Budget

Actual

Variance With Final
Budget

381,598,916 $ 372,421,316 $

2,925,000

5,143,137

(9,177,600) 2,218,137

645,916,507 2,690,000 8,490,235 3,492,521

653,809,908 7,139,453 10,830,753 382,389 1,697,389

7,893,401 4,449,453 2,340,518
382,389 (1,795,132)

1,045,113,179

1,051,424,345

6,311,166

680,389,130
72,522,516 45,148,795 16,048,845 3,252,669 61,209,073 20,123,713 103,837,412 56,346,549 37,864,389
40,035
1,096,783,126

647,821,636
66,524,610 41,014,834 15,326,674 6,092,593 59,544,268 19,023,012 84,287,002 55,786,467 42,848,186
11,564
1,038,280,846

32,567,494
5,997,906 4,133,961
722,171 (2,839,924) 1,664,805 1,100,701 19,550,410
560,082 (4,983,797)
28,471
58,502,280

(51,669,947)

13,143,499

64,813,446

968,901 -
(29,805) (858,600)
80,496
(51,589,451) $

640,293 212,546
86,962 (791,292)
148,509
13,292,008 $

(328,608) 212,546 116,767 67,308
68,013
64,881,459

23

Fulton County Board of Education, Georgia Statement of Fiduciary Net Position Fiduciary Funds June 30, 2019

Assets Cash and cash equivalents Investments, at fair value:
Mutual funds invested in domestic equities Mutual funds invested in foreign equities Mutual funds invested in fixed income securities Limited partnerships equities Receivables: Due from plan sponsor Other Prepaid items
Total Assets
Liabilities Accounts payable Due to student organizations
Total Liabilities
Net Position Restricted for Pensions
See accompanying notes to the basic financial statements

Pension Trust

Agency Club and Athletics

$

693,321 $

6,886,179

186,396,453

-

130,661,198

-

94,934,406

-

14,649,783

-

2,256,654 19,805 -

83,283 246,609

429,611,620

7,216,071

584,441 -
584,441 $
$ 429,027,179

71,968 7,144,103
7,216,071

24

Fulton County Board of Education, Georgia Statement of Changes in Fiduciary Net Position
Pension Trust Fund For the Fiscal Year Ended June 30, 2019

Additions Contributions:
Employer Plan members
Total contributions
Investment earnings : Interest and dividends Net increase in the fair value of investments Less investment expense
Net investment earnings
Total Additions
Deductions Benefits Refunds Administrative expenses
Total Deductions
Increase in Net Position
Net Position Restricted for Pensions:
Beginning of Fiscal Year
End of Fiscal Year
See accompanying notes to the basic financial statements.

$ 24,236,000 2,707,928
26,943,928
9,789,507 12,247,507
(732,515) 21,304,499 48,248,427
33,180,643 1,240,217 834,245
35,255,105 12,993,322
416,033,857 $ 429,027,179

25

NOTES TO THE BASIC
FINANCIAL STATEMENTS

Fulton County Board of Education, Georgia Notes to the Basic Financial Statements For the Fiscal Year Ended June 30, 2019
Index
Summary of Significant Accounting Policies ...................................................................................1
Reporting Entity ...............................................................................................................................1-A Basis of Presentation ........................................................................................................................ 1-B Measurement Focus .......................................................................................................................... 1-C Basis of Accounting..........................................................................................................................1-D Assets, Liabilities, and Fund Equity ................................................................................................. 1-E
Cash, Cash Equivalents and Investments.................................................................................. 1-E-1 Receivables ............................................................................................................................... 1-E-2 Interfund Balances ................................................................................................................... 1-E-3 Consumable Inventories ........................................................................................................... 1-E-4 Prepaid Items............................................................................................................................ 1-E-5 Capital Assets........................................................................................................................... 1-E-6 Compensated Absences............................................................................................................ 1-E-7 Accrued Liabilities and Long-term Obligations ....................................................................... 1-E-8 Fund Equity.............................................................................................................................. 1-E-9 Interfund Activity................................................................................................................... 1-E-10 Estimates ................................................................................................................................ 1-E-11
Stewardship, Compliance and Accountability ................................................................................ 2
Budgetary Information .....................................................................................................................2-A Excess of Expenditures over Appropriations.................................................................................... 2-B
Detailed Notes on All Funds............................................................................................................3
Deposits and Investments .................................................................................................................3-A Receivables....................................................................................................................................... 3-B Property Taxes.................................................................................................................................. 3-C Capital Assets ...................................................................................................................................3-D Interfund Balances and Transfers ..................................................................................................... 3-E Deferred Inflows/Outflows of Resources ......................................................................................... 3-F Compensated Absences ....................................................................................................................3-G Long-Term Debt and Obligations.....................................................................................................3-H Pensions ............................................................................................................................................. 3-I Other Postemployment Benefits ....................................................................................................... 3-J Fund Equity ......................................................................................................................................3-K Operating Leases .............................................................................................................................. 3-L On-behalf Payments for Fringe Benefits ......................................................................................... 3-M
Other Notes ....................................................................................................................................4
Risk Management .............................................................................................................................4-A Contingent Liabilities ....................................................................................................................... 4-B Commitments ................................................................................................................................... 4-C Pollution Remediation Obligations ..................................................................................................4-D Tax Abatements ................................................................................................................................ 4-E
26

Fulton County Board of Education, Georgia Notes to the Basic Financial Statements For the Fiscal Year Ended June 30, 2019
The Fulton County Board of Education, Georgia (the "School System") was established under the laws of the State of Georgia and is governed by an elected seven-member board (the "Board"). Board members are elected by the public. The School System provides public education throughout Fulton County, Georgia, excluding the City of Atlanta, Georgia.
Note 1 - Summary of Significant Accounting Policies
The financial statements of the School System have been prepared in conformity with accounting principles generally accepted in the United States (GAAP) as applied to governments. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for governmental accounting and financial reporting.
The most significant of the School System's accounting policies are described below.
1-A. Reporting Entity
The reporting entity is comprised of the primary government, component units and other organizations that are included to ensure that the financial statements are not misleading. The primary government of the School System consists of all funds, departments, boards, and agencies that are not legally separate from the School System. More specifically, the Board has the authority to make decisions, the power to approve selection of management personnel, the ability to significantly influence operations, and the primary accountability for fiscal matters.
Component units are legally separate organizations for which the School System is financially accountable. The School System is financially accountable for an organization if the School System appoints a voting majority of the organization's governing board and (1) the School System is able to significantly influence the programs or services performed or provided by the organizations; or (2) the School System is legally entitled to or can otherwise access the organization's resources; the School System is legally obligated or has otherwise assumed the responsibility to finance the deficits of, or provide financial support to, the organization; or the School System is obligated for the debt of the organization. Component units also may include organizations that are fiscally dependent on the School System in that the School System approves the budget, levies their taxes or issues their debt and also has a financial benefit or burden relationship with the School System.
The School System reports one fiduciary component unit as follows:
Fulton County School Employees' Pension Fund (the "Pension Trust Fund") The pension trust fund is governed by a committee of the Board of Education, known as the "Pension Board." Although the pension trust fund is legally separate from the School System, the pension trust fund is reported as a part of the primary government because its primary purpose is to provide retirement benefits to the employees of the School System and because the pension trust fund is fiscally dependent on the School System. Separate financial statements of the pension trust fund can be obtained at 6201 Powers Ferry Road NW, Atlanta, Georgia 30339.
The School System is not considered a component unit of any other governmental reporting entity.
1-B. Basis of Presentation
The School System's basic financial statements consist of government-wide statements, including a statement of net position and a statement of activities and fund financial statements, which provide a more detailed level of financial information.
Government-wide Financial Statements - The government-wide financial statements include the statement of net position and the statement of activities. These statements report financial information for the School System as a whole. Fiduciary funds are not presented in the government-wide financial statements.
The statement of net position presents the financial position of the governmental activities of the School System.
The statement of activities presents a comparison between direct expenses and program revenues for each function of the School System's governmental activities. Direct expenses are those that are specifically associated with a function and therefore clearly identifiable to that particular function. The School System does not allocate indirect expenses to functions in the statement of activities.
27

Fulton County Board of Education, Georgia Notes to the Basic Financial Statements For the Fiscal Year Ended June 30, 2019
Note 1 - Summary of Significant Accounting Policies (Continued)
The statement of activities reports the expenses of a given function offset by program revenues directly connected with the functional program. A function is an assembly of similar activities and may include portions of a fund or summarize more than one fund to capture the expenses and program revenues associated with a distinct functional activity. Program revenues include: (1) charges for services which report tuition, fees and other charges to users of the School System's services; (2) operating grants and contributions which finance annual operating activities including restricted investment income; and (3) capital grants and contributions which fund the acquisition, construction, or rehabilitation of capital assets. These revenues are subject to externally imposed restrictions to these program uses. For identifying to which function program revenue pertains, the determining factor for charges for services is which function generates the revenue. For grants and contributions, the determining factor is to which function the revenues are restricted.
Other revenue sources not properly included with program revenues are reported as general revenues of the School System. The comparison of direct expenses with program revenues identifies the extent to which each governmental function is selffinancing or draws from the general revenues of the School System.
Fund Financial Statements - During the fiscal year, the School System segregates transactions related to certain School System functions or activities in separate funds in order to aid financial management and to demonstrate legal compliance. Fund financial statements are designed to present financial information of the School System at this more detailed level. Fund financial statements are provided for governmental and fiduciary funds.
Major individual governmental funds are reported in separate columns.
Fund Accounting - The School System uses funds to maintain its financial records during the fiscal year. A fund is a fiscal and accounting entity with a self-balancing set of accounts. The School System uses two categories of funds: governmental and fiduciary.
Governmental Funds - Government funds are those through which most governmental functions typically are financed. Governmental fund reporting focuses on the sources, uses, and balances of current financial resources. Expendable assets are assigned to the various governmental funds according to the purposes for which they may or must be used. Fund liabilities are assigned to the fund from which they will be liquidated. The School System reports the difference between governmental fund assets and liabilities and deferred inflows of resources as fund balance. The School System reports the following major governmental funds:
The General Fund The general fund accounts for all financial resources except those required to be accounted for in another fund. The general fund's fund balance is available to the School System for any purpose provided it is expended or transferred according to the general laws of the State of Georgia.
The 2017 SPLOST Capital Projects Fund This fund accounts for the special purpose local option sales tax as authorized in 2017 and is being used primarily for acquiring school sites, constructing and equipping new school facilities, and renovating existing facilities.
Fiduciary Funds - The School System reports the following fiduciary fund types:
Pension Trust Fund This fund accounts for pension benefits within a defined benefit pension plan, for School System employees not covered by the Teachers Retirement System of Georgia as well as some employees who were employed prior to July 1, 1988, who transferred to the Teachers Retirement System of Georgia, but retained certain benefit guarantees in the local plan.
Agency Funds These funds account for assets held by the School System as an agent for various school clubs or individuals.
28

Fulton County Board of Education, Georgia Notes to the Basic Financial Statements For the Fiscal Year Ended June 30, 2019
Note 1 - Summary of Significant Accounting Policies (Continued)
1-C. Measurement Focus
Government-wide Financial Statements - The government-wide financial statements are prepared using the economic resources measurement focus. All assets and all liabilities associated with the operation of the School System are included on the statement of net position. The statement of activities reports revenues and expenses.
Fund Financial Statements - All governmental funds are accounted for using a flow of current financial resources measurement focus. With this measurement focus, only current assets and current liabilities, along with deferred inflow of resources, generally are included on the balance sheet. The statement of revenues, expenditures and changes in fund balances reports the sources (i.e., revenues and other financing sources) and uses (i.e., expenditures and other financing uses) of current financial resources. This approach differs from the manner in which the governmental activities of the governmentwide financial statements are prepared.
Governmental fund financial statements therefore include reconciliation with brief explanations to better identify the relationship between the government-wide statements and the governmental fund statements.
The pension trust fund type is accounted for on a flow of economic resources measurement focus on the fund financial reporting level. All assets and all liabilities associated with the operation of these funds are included on the statements of net position. The statements of changes in fund net position present increases (i.e., additions) and decreases (i.e., deductions) in net total assets. The agency funds are custodial in nature (assets equal liabilities) and do not involve the measurement of results of operations.
1-D. Basis of Accounting
Basis of accounting determines when transactions are recorded in the financial records and reported on the financial statements. Government-wide financial statements are prepared using the accrual basis of accounting. At the fund reporting level, the governmental funds use the modified accrual basis of accounting. Fiduciary funds are reported on the accrual basis at the fund reporting level. Differences in the accrual and the modified accrual basis of accounting arise in the recognition of revenue, the recording of unavailable revenue, and in the presentation of expenses versus expenditures.
Revenues - Exchange Transactions - Revenue resulting from exchange transactions, in which each party gives and receives essentially equal value, is recorded on the accrual basis when the exchange takes place. On the modified accrual basis, revenue is recorded when the exchange takes place and in the fiscal year in which the resources are measurable and become available. Available means that the resources will be collected within the current fiscal year or are expected to be collected soon enough thereafter to be used to pay liabilities of the current fiscal year. For the School System, the phrase "available for exchange transactions" means expected to be collected within 60 days of fiscal year-end.
Revenues - Non-exchange Transactions - Non-exchange transactions in which the School System receives value without directly giving equal value in return, include sales taxes, property taxes, grants and donations. On an accrual basis, revenue from sales taxes is recognized in the period in which the taxable sale takes place. Revenue from property taxes is recognized in the fiscal year for which the taxes are levied (Note 3-C). Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied. Eligibility requirements include timing requirements, which specify the fiscal year when the resources are required to be used or the fiscal year when use is first permitted, matching requirements, in which the School System must provide local resources to be used for a specified purpose, and expenditure requirements, in which the resources are provided to the School System on a reimbursement basis.
29

Fulton County Board of Education, Georgia Notes to the Basic Financial Statements For the Fiscal Year Ended June 30, 2019
Note 1 - Summary of Significant Accounting Policies (Continued)
The State of Georgia reimburses the School System for teachers' salaries and operating costs through the Quality Basic Education (QBE) Formula Earnings program. State of Georgia law defines the formula driven grant that determines the cost of an academic school year and the State of Georgia's share in this cost. Generally teachers are contracted for the school year (July 1 June 30) and paid over a twelve month contract period, generally September 1 through August 31. In accordance with the requirements of the enabling legislation of the QBE program, the State of Georgia reimburses the School System over the same twelve month period in which teachers are paid, funding the academic school year expenditures. At June 30, the amount of teachers' salaries incurred but not paid until July and August of the subsequent fiscal year are accrued as the State of Georgia has only postponed the final payment of their share of the cost until the subsequent appropriations for cash management purposes. By June 30 of each fiscal year, the State of Georgia has a signed appropriation that includes this final amount, which represents the State of Georgia's intent to fund this final payment. Based on guidance in Government Accounting Standards Board (GASB) Statement No. 33, paragraph 74, the State of Georgia recognizes its QBE liability for the July and August salaries at June 30, and the School System recognizes the same QBE as a receivable and revenue, consistent with symmetrical recognition.
On a modified accrual basis, revenue from non-exchange transactions also must be available (i.e., collected within 60 days of fiscal year-end).
Under the modified accrual basis, the following revenue sources are considered to be susceptible to accrual: property taxes, sales taxes, state Quality Basic Education (QBE) revenue, and federal and state grants. All other revenue items are considered to be measurable and available only when the School System receives cash.
Unearned Revenue - Unearned revenue arises when assets are recognized before revenue recognition criteria have been satisfied. As of June 30, 2019, the School System reported unearned revenue in the amount of $1,029,752 in the School Nutrition Fund which represented students' prepaid lunches.
Expenses/Expenditures - On the accrual basis of accounting, expenses are recognized at the time they are incurred. On the modified accrual basis, expenditures generally are recognized in the accounting period in which the related fund liability is incurred and due, if measurable.
1-E. Assets, Liabilities, and Fund Equity
1-E-1 Cash, Cash Equivalents, and Investments
Cash and cash equivalents include amounts in demand deposits as well as short-term investments with a maturity date within three months of the date acquired by the School System. Time deposits are classified as cash and cash equivalent without regard to maturity date. Official Code of Georgia Annotated (OCGA) Section 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.
The local government investment pool, "Georgia Fund 1," created by OCGA 36-83-8, is a stable asset value investment pool, which follows Standard and Poor's criteria for AAAf rated money market funds and is regulated by the Georgia Office of the State Treasurer. The pool is not registered with the SEC as an investment company. The pool's primary objectives are safety of capital, investment income, liquidity and diversification while maintaining principle ($1 per share value). The asset value is calculated weekly to ensure stability. The pool distributes earnings (net of management fees) on a monthly basis and determines participants' shares sold and redeemed based on $1 per share. The pool also adjusts the value of its investments to fair value as of year-end and the School System's investment in the Georgia Fund 1 is reported at fair value. The School System considers amounts held in Georgia Fund 1 as cash equivalents for financial statement presentation. Increases or decreases in fair value during the year are recognized as a component of interest income.
30

Fulton County Board of Education, Georgia Notes to the Basic Financial Statements For the Fiscal Year Ended June 30, 2019
Note 1 - Summary of Significant Accounting Policies (Continued)
The School System operates a cash and investment pool which generally all funds utilize, the principal's account fund and the pension trust fund. The School System pools money from the funds to facilitate disbursement and investment and to maximize investment earnings. Therefore, all cash and investments are essentially demand deposits and are considered cash and cash equivalents.
1-E-2 Receivables
All trade and property tax receivables are reported net of an allowance for uncollectibles, where applicable (Note 3-B).
1-E-3 Interfund Balances
On the fund financial statements, receivables and payables resulting from short-term interfund loans are classified as "interfund receivables/interfund payables." These amounts are eliminated in the governmental activities column of the statement of net position (Note 3-E).
1-E-4 Consumable Inventories
On the government-wide financial statements and at the fund financial reporting level, inventories are presented at cost using the weighted average cost method and are expensed when used (i.e., the consumption method). Donated food commodities are presented at fair value.
1-E-5 Prepaid Items
Payments made to vendors for services that will benefit periods beyond June 30, 2019, are recorded as prepaid items using the consumption method by recording an asset for the prepaid amount and reflecting the expenditure/expense in the fiscal year in which services are consumed. At the fund reporting level, an equal amount of fund balance is reported as nonspendable, as this amount is not available for general appropriation.
1-E-6 Capital Assets
General capital assets are those assets that generally result from expenditures in governmental funds. The School System reports these assets in the governmental activities column of the government-wide statement of net position but does not report these assets in the government fund financial statements.

All capital assets are capitalized at cost (or estimated historical cost) and updated for additions and retirements during the fiscal year. Donated capital assets, donated works of art and similar items, and capital assets received in a service concession arrangement are recorded at acquisition value as of the date received. Improvements to capital assets are capitalized. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend an asset's life are expensed.
All reported capital assets are depreciated except for land and construction in progress. Improvements are depreciated over the remaining useful lives of the related capital assets (Note 3-D).
Depreciation is computed using the straight-line method over the following useful lives:

Asset Class

Governmental Activities
Estimated Lives

Capitalization Threshold

Buildings and improvements

15 - 50 Years

$5,000

Furniture, equipment and vehicles

5 - 15 Years

$5,000

31

Fulton County Board of Education, Georgia Notes to the Basic Financial Statements For the Fiscal Year Ended June 30, 2019
Note 1 - Summary of Significant Accounting Policies (Continued)
At the inception of capital leases at the governmental fund reporting level, expenditures and an "other financing sources" of an equal amount are reported at the net present value of future minimum lease payments.
1-E-7 Compensated Absences
Vacation benefits are accrued as a liability as the benefits are earned if the employees' rights to receive compensation are attributable to services already rendered and it is probable that the employer will compensate the employees for the benefits through paid time off or some other means.
All compensated absence liabilities include salary-related payments, where applicable.
The total compensated absence liability is reported on the government-wide financial statements. Governmental funds report the compensated absence liability at the fund reporting level only "when due."
1-E-8 Accrued Liabilities and Long-term Obligations
All payables, accrued liabilities and long-term obligations are reported in the government-wide financial statements.
In general, governmental fund payables and accrued liabilities that, once incurred, are paid in a timely manner and in full from current financial resources are reported as obligations of these funds. However, compensated absences that will be paid from governmental funds are reported as a liability in the fund financial statements only to the extent that they are "due for payment" during the current fiscal year. General obligation bonds are recognized as a liability in the governmental fund financial statements when due.
1-E-9 Fund Equity (Note 3-K)
Fund equity at the governmental fund financial reporting level is classified as "fund balance." Fund equity at the government-wide financial reporting level is classified as "net position."
Fund Balance Generally, fund balance represents the difference between the current assets and current liabilities and deferred inflows of resources. In the fund financial statements, governmental funds report fund classifications that comprise a hierarchy based primarily on the extent to which the School System is bound to honor constraints on the specific purposes for which amounts in those funds can be spent. Fund balances are classified as follows:
Nonspendable Fund balances are reported as nonspendable when amounts cannot be spent because they are either (a) not in spendable form (i.e., items that are not expected to be converted to cash) or (b) legally or contractually required to be maintained intact.
Restricted Fund balances are reported as restricted when there are limitations imposed on their use either through the enabling legislation adopted by the School System or through external restrictions imposed by creditors, grantors or laws or regulations of other governments.
Committed Fund balances are reported as committed when they can be used only for specific purposes pursuant to constraints imposed by formal action of the School System Board of Education through the approval of a formal motion and passage of a resolution. Only, the School System Board of Education also may modify or rescind the commitment through approval of a resolution.
Assigned Fund balances are reported as assigned when amounts are constrained by the School System's intent to be used for specific purposes, but are neither restricted nor committed. Through resolution, the School System Board of Education has authorized the School System's superintendent or designee to assign fund balances.
32

Fulton County Board of Education, Georgia Notes to the Basic Financial Statements For the Fiscal Year Ended June 30, 2019
Note 1 - Summary of Significant Accounting Policies (Continued)
Unassigned - Fund balances are reported as unassigned as the residual amount when the balances do not meet any of the above criterion. The School System reports positive unassigned fund balance only in the general fund. Negative unassigned fund balances may be reported in all funds.
Flow Assumptions When both restricted and unrestricted amounts of fund balance are available for use for expenditures incurred, it is the School System's policy to use restricted amounts first and then unrestricted amounts as they are needed. For unrestricted amounts of fund balance, it is the School System's policy to use fund balance in the following order:
Committed Assigned Unassigned
Net position - Net position represents the difference between assets and deferred outflows of resources and liabilities and deferred inflows of resources in reporting which utilizes the economic resources measurement focus. Net investment in capital assets consists of capital assets, net of accumulated depreciation, reduced by the outstanding balances of any longterm borrowing used for the acquisition, construction or improvement of those assets. This net position amount also is adjusted by any bond related amounts (such as premiums, discounts, or deferred gains or losses on refundings). Net position is reported as restricted when there are limitations imposed on their use either through the enabling legislation adopted by the School System or through external restrictions imposed by creditors, grantors or laws or regulations of other governments. All other net position is reported as unrestricted.
1-E-10 Interfund Activity
Exchange transactions between funds are reported as revenues in the seller funds and as expenditures in the purchaser funds. Flows of cash or goods from one fund to another without a requirement for repayment are reported as interfund transfers. Interfund transfers are reported as other financing sources/uses in governmental funds. Repayments from funds responsible for particular expenditures to the funds that initially paid for them are not presented on the financial statements (i.e., they are netted) (Note 3-E).
Transfers between funds reported in the governmental activities column are eliminated on the government-wide statement of activities.
1-E-11 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.
Note 2 Stewardship, Compliance and Accountability
2-A. Budgetary Information The School System adopts an annual budget for its general fund, all special revenue funds (excluding the principals' accounts), and the debt service fund. The budget is prepared in accordance with provisions of the Quality Basic Education Act, OCGA Section 20-2-167. The School System adopts a project budget for its capital projects funds. Budgets are adopted on a basis consistent with GAAP.
The legal level of budgetary control (the level at which expenditures may not legally exceed appropriations) for the adopted annual operating budget for the general fund, school nutrition program, special revenue funds and the debt service fund is the function level within fund. For budgeted special revenue funds (excluding the school nutrition program), the legal level of budgetary control is the function level within the aggregate of the total of all special revenue funds with budgets. The School System's management is authorized to transfer appropriations between functions within the same fund totaling less than $100,000. The School Board approves all transfers of appropriations between functions of $100,000 or more and all transfers of appropriations between funds, except as described below.
33

Fulton County Board of Education, Georgia Notes to the Basic Financial Statements For the Fiscal Year Ended June 30, 2019

Note 2 Stewardship, Compliance and Accountability (Continued)

The budget is allocated to schools (i.e., cost centers) and cost center managers may transfer appropriations between functions as long as the transfer to one function can be offset by unused budget dollars in another function.

The original 2019 budget was amended during the fiscal year. All unexpended annual appropriations lapse at fiscal year-end.

2-B. Excess of Expenditures over Appropriations The following functions were overspent in the final 2019 annual budget:

General fund: General administration Central support services

$

2,839,924

4,983,797

All budgeted special revenue funds: Educational media services School administration Central support services Transfers out

$

12,718

205,014

7,272

43,163

Note 3 Detailed Notes on All Funds
3-A. Deposits and Investments
Deposits (Governmental Funds)
The School System's cash and investment policy limits deposits to demand and money market accounts, and time deposits at local banks. The School System's deposits shall be secured by Federal Depositary Insurance Corporation (FDIC) coverage and/or bank pledges. State statutes require all deposits and investments (other than federal or state government instruments) to be covered by depository insurance or pledged securities. Amounts that exceed standard depository insurance limits are required to be collateralized either (1) individually by the financial institutions through pledged obligations of the U.S. Government, obligations backed by the full faith and credit of the U.S. Government, obligations of the State of Georgia or other states, or obligations of counties, municipalities, or public authorities of the State of Georgia, or (2) participation in the State of Georgia Secure Deposit Program. As of June 30, 2019, the financial institutions holding all of the School System's deposits are participants of the State of Georgia Secure Deposit Program, which is administered by the Office of the State Treasurer, and requires participating banks holding deposits of public funds to pledge collateral at varying rates depending on the tier assigned by the state. As of June 30, 2019, all of the School System's bank balances were insured and/or collateralized as defined by GASB and required by state statutes.
Custodial Credit Risk Deposits The custodial credit risk for deposits is the risk that, in the event of a bank failure, the School System's deposits may not be recovered or may not be able to recover collateralized securities that are in the possession of an outside party.
Funds included in the Georgia Fund 1, administered by the Office of the State Treasurer, are not required to be collateralized.

34

Fulton County Board of Education, Georgia Notes to the Basic Financial Statements For the Fiscal Year Ended June 30, 2019

Note 3 Detailed Notes on All Funds (Continued)

The fair value of the School System's position in the pool approximates the value of the School System's pool shares. Credit risk, value, and interest risk at June 30, 2019 are as follows:

Credit Risk AAAf rated

Value $ 468,433,918

Interest Risk 39 day WAM

The Georgia Fund 1 is an investment pool which does not meet the criteria of GASB Statement No. 79 and is thus valued at fair value in accordance with GASB Statement No. 31. As a result, the School System does not disclose its investment in the Georgia Fund 1 within the fair value hierarchy established by GASB Statement No. 72.
Investments (Governmental Funds)
Interest Rate Risk Interest rate risk is the risk that changes in interest rates of debt investments will adversely affect the fair value of an investment. The School System's surplus funds management policy does not formally limit investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates.
Credit Quality Risk Credit quality risk is that an issuer or other counterparty to an investment will not fulfill its obligations. The School System does not have a specific investment policy for investments of its governmental funds.
Custodial Credit Risk Custodial credit risk is the risk that, in the event of a bank failure, the School System's investments
may not be recovered. Because of the collateralization requirements, the School System has no custodial credit risk for its investments.
Concentration of Credit Risk Concentration of credit risk is the risk of loss attributed to the magnitude of the School System's investment in a single issuer. The School System does not have a formally adopted investment policy for managing concentration of credit risk.
The cash and cash equivalents reconciliation follows:

Primary Government - Fund Reporting Level: Governmental Funds - Balance Sheet Statement of Fiduciary Net Position

Cash and Cash Equivalents

Investments

Total

$ 472,915,581 $

- $ 472,915,581

7,579,500

426,641,840

434,221,340

Total

$ 480,495,081 $ 426,641,840 $ 907,136,921

Deposits (Pension Trust Fund)
Custodial Credit Risk Deposits As of June 30, 2019, all of the Pension Trust Fund's deposits were covered either by FDIC coverage or collateralized by the financial institution or a combination of the two.
Investments (Pension Trust Fund)
Pension Trust Fund investments are managed by a separate investment policy adopted by the Pension Trust Fund Board in compliance with State law, particularly O.C.G.A. 47-20-10 and O.C.G.A. 47-20-80. The Pension Trust Fund assets are invested in United States Government securities, domestic common stocks, international stocks, and domestic bonds based on asset allocation ranges and performance benchmarks.

35

Fulton County Board of Education, Georgia Notes to the Basic Financial Statements For the Fiscal Year Ended June 30, 2019

Note 3 Detailed Notes on All Funds (Continued)

Interest Rate Risk -The Pension Trust Fund investment policy adopts the following asset mix to achieve the lowest level of risk for the plan:
Equity Securities between 45% and 75%. Fixed Income Securities between 15% and 48%. Alternative Investments between 0% and 5%.

At June 30, 2019, the Pension Trust Fund had the following investments and maturities:

Inves tment Type
Mutual Funds , Inves ted in Fixed Income Securities Mutual Funds , Inves ted in Domes tic Equities Mutual Funds , Inves ted in International Equities Limited Partners hips
Total

Fair Value
$ 94,934,406 186,396,453 130,661,198 14,649,783
$ 426,641,840

Maturity Range (Time to Maturity)

Low
2.90 n/a n/a n/a

High
7.86 n/a n/a n/a

Credit Quality Risk The Pension Trust Fund policy prohibits investments in direct real estate, and no more than 75% (at cost) of Pension Trust Fund assets shall be invested in equities. It is the Pension Trust Fund's policy to limit investments in common or preferred stock of a corporation to those corporations listed on one or more of the recognized national stock exchanges in the United States, or those traded on the NASDAQ National Market as required by Georgia law. Domestic bonds are limited to those with ratings that meet or exceed Standard and Poor's BBB or Moody's Baa ratings. The policy also limits stock investments to not more than five (5) percent of the cost of any assets of any fund in common or preferred stock of any one issuing corporation and the aggregate investment of any fund in any one issuing corporation shall not exceed three (3) percent of the outstanding capital stock of that corporation.

The Pension Trust Fund's investments at June 30, 2019 are comprised of only mutual funds and limited partnership holdings that are not rated by any of the major ratings agencies.

Concentration of Credit Risk Concentration of credit risk is the risk of loss attributed to the magnitude of the Pension Trust Fund's investment in a single issuer. The only investments in excess of 5% of the School System's investment portfolio are federal securities and mutual funds, both of which are not subject to this risk.

Foreign Currency Risk As of June 30, 2019, $130,661,198 or 30.6% of the Pension Trust Fund's assets had exposure of
foreign currency risk through investments in foreign companies. These investments had the form of US dollars invested in mutual funds with only international equity holdings.

Rate of Return For the fiscal year ended June 30, 2019, the annual money-weighted rate of return on pension plan investments, net of pension plan investment expense, was 5.17%. The money-weighted rate of return expresses investment performance, net of investment expense, adjusted for the changing amounts actually invested.

Long-range Expected Rate of Return The long-term expected rate of return on pension plan investments was determined using a building-block method 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 long-range expected rate of return as of June 30, 2019 is 7%.

36

Fulton County Board of Education, Georgia Notes to the Basic Financial Statements For the Fiscal Year Ended June 30, 2019
Note 3 Detailed Notes on All Funds (Continued)
Fair Value Measurements The Pension Trust Fund categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure the fair value of the asset. Level 1 inputs are quoted prices in active markets for identical assets; Level 2 inputs are significant other observable inputs; and Level 3 inputs are significant unobservable inputs. The Pension Trust Fund has the following recurring fair value measurements as of June 30, 2019:

Inve stme nt

Le ve l 1

Inve stme nts by Fair Value Le ve l Mutual funds invested in:
Domestic equities International equities Fixed income securities

$ 186,396,453 130,661,198 94,934,406

Total investments by fair value level

$ 411,992,057

Inve stme nts Me asure d at Ne t Asse t Value (NAV) Private investment fund (limited partnership)

Total investments measured at NAV
Total investments measured at fair value

Le ve l 2

$

-

-

-

$

-

Le ve l 3

$

-

-

-

$

-

Fair Value
$ 186,396,453 130,661,198 94,934,406 411,992,057
14,649,783 14,649,783
$ 426,641,840

The investments classified in Level 1 of the fair value hierarchy are valued using prices quoted in active markets for those securities. This includes the mutual funds invested in both equity and fixed income securities.
The private investment fund measured at the net asset value invests primarily in venture capital investments, leveraged buyouts (LBOs), and distressed debt and equity. As of June 30, 2019, the fund is invested in complex structures in underlying holdings, alternative investments, and items that fall within Level 3 of the fair value hierarchy. The limited partnership will continue until the dissolution of the last underlying fund or termination at the General Partner's discretion. Withdrawals, redemptions, or transfers are not permitted during the life of the partnership.
3-B. Receivables
Receivables at June 30, 2019, consisted of property taxes, sales taxes, accounts (billings for user charges), installment loans (arising from the sale of the School System's buildings) and intergovernmental receivables arising from grants.
Receivables and payables are recorded on the School System's financial statements to the extent that the amounts are determined to be material and substantiated not only by supporting documentation, but also by a reasonable, systematic method of determining their existence, completeness, valuation, and in the case of receivables, collectability.
On June 19, 2015, the School System sold its 2861 Lakeshore Drive, College Park property to a third party at a sales price of $1,750,000 and executed a promissory note for $1,749,000 at a zero percent interest rate over a 120 month term with monthly payments commencing in June 2015. The loan receivable matures in June 2025. The loan receivable balance due from this third party as of June 30, 2019 is $1,133,000.
On December 18, 2015, the School System sold its 3121 Norman Berry Drive, East Point property to a third party at a sales price of $600,000 and executed a promissory note for $600,000 at a zero percent interest rate over a 60 month term with monthly payments commencing in December 2015. The loan receivable matures in December 2020. The loan receivable balance due from this third party as of June 30, 2019 is $180,000.

37

Fulton County Board of Education, Georgia Notes to the Basic Financial Statements For the Fiscal Year Ended June 30, 2019
Note 3 Detailed Notes on All Funds (Continued)
3-B. Receivables (Continued)
On May 23, 2018, the School System sold its 2626 Hogan Road, East Point property to a third party at a sales price of $1,730,000 and executed a promissory note for $1,555,000 at a 5% interest rate over a 120 month term with monthly payments commencing in June 2018. The loan receivable matures in May 2028. The loan receivable balance due from this third party as of June 30, 2019 is $1,418,251.
Annual installment loan receivable balances due to the System to maturity as of June 30, 2019 for these three (3) promissory notes are as follows:

Fis cal Year Ending

Principal

Interes t

Total

2020 2021 2022 2023 2024 2025-2028

441,274 387,351 333,706 340,354 347,307 881,259

61,115 55,039 48,683 42,035 35,082 64,183

502,389 442,390 382,389 382,389 382,389 945,442

Total

$ 2,731,251 $

306,137 $ 3,037,388

3-C. Property Taxes Property taxes for June 30, 2019 fiscal year were levied and billed in November 2018, based on the property values assessed as of January 1, 2018, and are payable on or before January 15, 2019. An interest penalty of 10% per annum is charged on property taxes not paid within 90 days of the due date. Property taxes become an enforceable lien on January 31, 2019.
The remainder of this page is left blank intentionally

38

Fulton County Board of Education, Georgia Notes to the Basic Financial Statements For the Fiscal Year Ended June 30, 2019
Note 3 Detailed Notes on All Funds (Continued)
3-D. Capital Assets
Capital asset activity for the fiscal year ended June 30, 2019, was as follows:

Governmental activities: Nondepreciable capital assets: Land Construction in progress
Total nondepreciable capital assets
Depreciable capital assets: Buildings and improvements Machinery and equipment Vehicles
Total depreciable capital assets
Total capital assets
Accumulated depreciation: Buildings and improvements Machinery and equipment Vehicles
Total accumulated depreciation
Governmental activities capital assets, net

Balance 6/30/2018

Additions

Deductions

Transfers

Balance 6/30/2019

$ 265,381,037 $ 4,192,575 $ 552,458 $

- $ 269,021,154

19,493,602

114,938,112

-

(18,875,224)

115,556,490

284,874,639

119,130,687

552,458

(18,875,224)

384,577,644

2,370,964,971 37,447,229 75,670,489
2,484,082,689
2,768,957,328

5,698,541 13,139,628
18,838,169
137,968,856

6,218,952 576,641
1,033,610
7,829,203
8,381,661

18,875,224 -
18,875,224
-

2,383,621,243 42,569,129 87,776,507
2,513,966,879
2,898,544,523

767,647,461 22,477,153 37,936,663

50,841,091 2,201,803 4,157,872

3,194,925 546,564 943,292

828,061,277

57,200,766

4,684,781

$ 1,940,896,051 $ 80,768,090 $ 3,696,880 $

-

815,293,627

-

24,132,392

-

41,151,243

-

880,577,262

- $ 2,017,967,261

Governmental activities depreciation expense:
Instruction Pupil services Improvement of instructional services Educational media services General administration School administration Business administration Maintenance and operation of plant Student transportation services Central support services Other support services Food service
Total governmental activities depreciation expense

$ 40,718,031 211,430 868,394
2,072,510 27,524
1,242,665 525,393
1,107,281 6,184,533
514,689 13,766
3,714,550
$ 57,200,766

39

Fulton County Board of Education, Georgia Notes to the Basic Financial Statements For the Fiscal Year Ended June 30, 2019
Note 3 Detailed Notes on All Funds (Continued)
3-E. Interfund Balances and Transfers
Interfund Balances - Interfund receivables and payables relate to cash overdrafts in the cash and investment pool.

Payable from:

Payable from:

Payable to:

Nonmajor governmental
funds

2017 SPLOST Capital Projects
fund

Payable to:

General fund

Nonmajor governmental funds $

335,168 $

-

General fund

20,591,755

9,713,703

$ 20,926,923 $ 9,713,703

Pension trust fund

$ 2,256,654 $ 2,256,654

Interfund Transfers The transfers between the general fund and nonmajor governmental funds are for miscellaneous items.

The transfers between the 2017 SPLOST Fund to the nonmajor governmental funds (specifically the Debt Service Fund)

were for debt service payments on the District's outstanding general obligation bonds in accordance with the SPLOST

Referendum.

Transfers from:

Nonmajor

General

governmental

2017

Transfers to:

fund

fund

SPLOST fund

Total

General fund Nonmajor governmental funds

$

-$

86,962 $

-$

86,962

791,292

9,346,672

11,229,663

21,367,627

Total

$ 791,292 $ 9,433,634 $ 11,229,663 $ 21,454,589

3-F. Deferred Inflows/Outflows of Resources
Fund Financial Reporting Level - In addition to liabilities, the Statement of Net Position and the governmental funds balance sheet report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflow of resources, represents an acquisition of net position that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. The School System reports one of these items, unavailable revenue, only in the governmental funds balance sheet. The governmental funds report unavailable revenues for property taxes ($10,302,719). This amount is deferred and recognized as an inflow of resources in the period that the amount becomes available.
Government-wide Financial Reporting Level - The School System also has deferred inflows of resources and deferred outflows of resources related to the recording of changes in its net pension liability and net other postemployment benefits (OPEB) liability. Certain changes in the net pension liability and net OPEB liability are recognized as pension and OPEB expenses over time instead of all being recognized in the year of occurrence. Experience gains or losses result from periodic studies by the School System's actuary which adjust the net pension liability and net OPEB liability for actual experience for certain trend information that was previously assumed, for example the assumed dates of retirement of Plan members. These experience gains or losses are recorded as deferred outflows of resources or deferred inflows of resources and are amortized into pension and OPEB expenses over the expected remaining service lives of Plan members.

40

Fulton County Board of Education, Georgia Notes to the Basic Financial Statements For the Fiscal Year Ended June 30, 2019

Note 3 - Detailed Notes on All Funds (Continued)

3-F. Deferred Inflows/Outflows of Resources (Continued)

Changes in actuarial assumptions, changes in proportion, and the difference between School System contributions and the proportionate share of contributions, which adjust the net pension liability and net OPEB liability, are also recorded as deferred outflows of resources or deferred inflows of resources and are amortized into pension and OPEB expense over the expected remaining service lives of Plan members. The difference between projected investment return on pension investments and actual return on those investments is also deferred and amortized against pension and OPEB expense over a five-year period. Additionally, any contributions made by the School System to the pension and OPEB plans before fiscal year end but subsequent to the measurement date of the School System's net pension liability and net OPEB liability are reported as deferred outflows of resources.

3-G. Compensated Absences

School System employees can earn annual vacation leave based on length of service, up to a maximum of 20 days after 10 years of service. Annual vacation leave may be accumulated up to a maximum of 60 days. Sick and personal leave is accrued at 1.25 to 2 days per month, and may be accumulated, up to 20 days per year, with a maximum accumulation of 120 days. If an employee retires from the School System with a minimum of 10 years of service, the School System will pay the employee for one-half of their accumulated sick and personal leave, up to 40 days (a total of 80 days of accumulated leave).

3-H. Long-term Debt and Obligations

Governmental Activities The School System has the following long-term debt obligations at June 30, 2019.

1998 Series General Obligation Bonds On June 15, 1998, the School System issued $135,150,000 of general obligation refunding bonds, Series 1998, with interest payments due semiannually on January 1 and July 1 and principal payments due on January 1 of each fiscal year. Interest rates vary from 4.0% to 5.5%. This debt refunded general obligation bonds, Series 1993 in the amount of $160,710,000. The estimated amount of refunded debt related to this issue still outstanding at June 30, 2019 is $22,385,000.

Annual debt service requirements to maturity as of June 30, 2019 are as follows:

Fiscal Year Ending

Principal

Interest

Total

2020 2021
Total

$ 10,890,000 $ 1,231,175 $ 12,121,175

11,495,000

632,225

12,127,225

$ 22,385,000 $ 1,863,400 $ 24,248,400

2011 Intergovernmental Agreement City of Union City, Georgia On August 1, 2011, the School System entered into an intergovernmental agreement with the City of Union City, Georgia to pay the City installments sufficient for the City to pay their debt service on bonds. The bonds, issued in the amount of $35,635,000, are special limited obligation revenue term bonds (federally taxable qualified school construction bonds direct payment) of the City. The bonds carry an interest rate of 4.730% and are due January 1, 2027. Under the agreement, the School System will pay the City installment payments sufficient to pay the debt service on the bonds. The School System's obligation to make payments is absolute and unconditional. The bonds are being issued for the purpose of paying a portion of the cost of constructing and equipping a replacement high school for the existing Banneker High School.
The School System is subject to the laws of the State of Georgia, which limits the amount of net bonded debt the School System may have outstanding to 10% of the assessed valuation of taxable property within Fulton county. At fiscal year-end, general obligation bonds and contractual obligation debt outstanding ($41,390,331), net of amounts available in the Debt Service Fund ($4,205,299), totaled $37,185,032. The statutory limit as of June 30, 2019 was $3,337,314,271, providing a debt margin of $3,330,129,239.
41

Fulton County Board of Education, Georgia Notes to the Basic Financial Statements For the Fiscal Year Ended June 30, 2019
Note 3 Detailed Notes on All Funds (Continued)
Annual debt service requirements to maturity as of June 30, 2019 are as follows:

Fis cal Year Ending

Principal

Interes t

Total

2020

$

2021

2022

2023

2024

2025- 2027

2,375,667 $ 2,375,667 2,375,667 2,375,667 2,375,667 7,126,996

1,685,536 $ 1,685,536 1,685,536 1,685,535 1,685,535 5,056,606

4,061,203 4,061,203 4,061,203 4,061,202 4,061,202 12,183,602

Total

$ 19,005,331 $ 13,484,284 $ 32,489,615

Changes in Long-term Debt and Obligations Changes in the School System's long-term debt and obligations consisted of the following for the fiscal year ended June 30, 2019:

Governmental Activities 1998 general obligation bonds 2011 intergovernmental agreement Workers' compensation insurance claims Other claims and judgments Net OPEB liabilities Net pension liabilities Compensated absences

Outstanding 6/30/2018

$

32,715,000

21,380,998

3,621,707 640,232
759,529,022 980,974,748 36,547,656

Additions

$

-

-

5,273,889 532,870
28,797,282 169,049,775 34,890,941

Reductions
$ 10,330,000 2,375,667
5,313,515 429,488
103,487,749 175,149,219 33,211,500

Outstanding 6/30/2019
$ 22,385,000 19,005,331
3,582,081 743,614
684,838,555 974,875,304 38,227,097

Amounts Due in One Year
$ 10,890,000 2,375,667
1,791,041 669,253 -
34,404,387

Total Governmental Activities

$ 1,835,409,363 $ 238,544,757 $ 330,297,138 $ 1,743,656,982 $ 50,130,348

The debt service fund retires the general obligation bonds. The 2012 and 2017 SPLOST capital projects funds will retire the intergovernmental agreement. If future special purpose local option sales taxes are not approved, the general fund will retire this obligation. Primarily the general fund retires the workers' compensation insurance claims, other claims and judgments and compensated absences and is used to liquidate pension and OPEB liabilities.

42

Fulton County Board of Education, Georgia Notes to the Basic Financial Statements For the Fiscal Year Ended June 30, 2019

Note 3 Detailed Notes on All Funds (Continued)

3-I. Pensions

The School System's employees either belong to the Teachers' Retirement System of Georgia (TRS), which is a cost-sharing multiple employer public employees' retirement system or the Fulton County School Employees Pension Plan (Local Plan), a single employer defined benefit pension plan. The net pension liability, total pension liability and related deferred outflows of resources and deferred inflows of resources for the TRS pension plan and the Local Plan are summarized as follows:

Net Pension Liability

$

Total Pension Liability

Deferred outflows of resources related to pensions

Deferred inflows of resources related to pensions

Pension expense

TRS 892,008,003
211,645,408
37,254,044 96,540,898

Local Plan $ 82,867,301
511,894,480 11,615,073 1,579,958 23,453,710

Total $ 974,875,304
511,894,480 223,260,481
38,834,002 119,994,608

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 fiduciary net position of the Teachers Retirement System of Georgia (TRS) and the Fulton County School Employees Pension Plan and additions to/deductions from these plans fiduciary net position have been determined on the same basis as they are reported by these plans. 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.

Teachers' Retirement System of Georgia (TRS)

Plan Description - Substantially all teachers, administrators, and clerical personnel employed by the School System are members of TRS. TRS provides retirement and disability benefits, and death benefits to plan members and beneficiaries. Title 47, Chapter 3 of the Official Code of Georgia Annotated, assigns the authority to establish and amend benefit provisions to the TRS Board of Trustees. TRS, is a cost-sharing multiple-employer defined benefit pension plan, and is administered by the TRS Board of Trustees (TRS Board). Title 47 of the O.C.G.A. which assigns the authority to establish and amend the benefit provisions to the State Legislature. TRS issues a publicly available financial report that can be obtained at www.trsga.com/publications.

Plan Benefits - A member is eligible for retirement after 30 years of creditable service, regardless of age, or after 10 years of creditable service and attainment of age 60. A member is eligible for early retirement after 25 years of creditable service. If an employee retires under this provision, the benefit will be permanently reduced by the lesser of one-twelfth of 7% for each month below age 60, or 7% for each year or fraction of a year less than 30 years of creditable service. Retirement benefits paid to members are equal to 2% of the average of the member's two consecutive highest paid years of service multiplied by the number of years of creditable service up to 40 years. The normal retirement pension is payable monthly for life. Options are available for distribution of the member's monthly pension at a reduced rate to a designated beneficiary on the member's death.

Retirement benefits also include death and disability benefits whereby the disabled member or surviving spouse is entitled to receive annually an amount equal to the member's service retirement benefit or disability retirement, whichever is greater. The benefit is based on the member's creditable service (minimum of 10 years) and compensation up to the date of death.

Members become fully vested after ten years of service. If a member is terminated with less than ten years of service, no vesting of employer contributions occurs, but the member's contribution is refunded with interest.

Funding Policy - 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 6.00% of their annual pay during fiscal year 2019. The School District's contractually required contribution rate for the fiscal year ended June 30, 2019 was 20.90% of annual School District payroll. District contributions to TRS were $120,990,248 for the fiscal year ended June 30, 2019.
43

Fulton County Board of Education, Georgia Notes to the Basic Financial Statements For the Fiscal Year Ended June 30, 2019
Note 3 - Detailed Notes on All Funds (Continued)
Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions - At June 30, 2019, the School System reported a liability for its proportionate share of the net pension liability that reflected a reduction for support provided to the School System by the State of Georgia for certain public school support personnel.
The amount recognized by the School System 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:

District's proportionate share of the net pension liability

$ 892,008,003

State of Georgia's proportionate share of the net pension liability associated with the Schoool System

594,731

Total

$ 892,602,734

The net pension liability was measured as of June 30, 2018. The total pension liability used to calculate the net pension liability was based on an actuarial valuation as of June 30, 2017. An expected total pension liability as of June 30, 2018 was determined using standard roll-forward techniques. The District's proportion of the net pension liability was based on contributions to TRS during the fiscal year ended June 30, 2018. At June 30, 2018, the District's proportion was 4.805523%, which was an increase of 0.004599% from its proportion measured as of June 30, 2017.
For the fiscal year ended June 30, 2019, the District recognized total pension expense of $119,994,608 ($96,540,898 for the TRS Plan and $23,453,710 for the Local Pension Plan) and revenue of $24,620 (pertaining to the TRS Plan) for support provided by the State of Georgia for certain support personnel . At June 30, 2019, the District reported deferred outflows of resources and deferred inflows of resources related to pensions (TRS) from the following sources:

Deferred Outflows of Res ources

Deferred Inflows of Res ources

Changes in proportion and differences between School System

contributions and proportionate share of contributions

$

18,142,893 $

11,026,364

Differences between expected and actual experience

59,052,189

1,838,449

Changes of assumptions

13,460,078

-

Contributions made by the School System subsequent to the

measurement date

120,990,248

-

Net difference betweeen projected and actual earnings on pension plan investments

-

24,389,231

Total

$ 211,645,408 $ 37,254,044

District contributions subsequent to the measurement date are reported as deferred outflows of resources and will be recognized as a reduction of the net pension liability in the next fiscal year. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows:

44

Fulton County Board of Education, Georgia Notes to the Basic Financial Statements For the Fiscal Year Ended June 30, 2019
Note 3 - Detailed Notes on All Funds (Continued)

Fis cal Year Ending June 30,

Amount

2020 2021 2022 2023 2024

Total

$ 49,816,274 23,173,216 (20,616,802) 169,549 858,879
$ 53,401,116

Actuarial assumptions: The total pension liability as of June 30, 2018 (measurement date) was determined by an actuarial valuation as of June 30, 2017 using the following actuarial assumptions, applied to all periods included in the measurement:
Inflation 2.75% Salary increases 3.25 9.00% Investment rate of return 7.50%, net of pension plan investment expense, including inflation
Postretirement mortality rates were based on the RP-2000 White Collar Mortality Table with future mortality improvement projected to 2025 with the Society of Actuaries' projection scale BB (set forward one year for males) for service requirements and dependent beneficiaries. The RP-2000 Disabled Mortality table with future mortality improvement projected to 2025 with Society of Actuaries' projection scale BB (set forward two years for males and four years for females) was used for the death after disability retirement. Rates of mortality in active service were based on the RP-2000 Employee Mortality Table projected to 2025 with projection scale BB. There is a margin for future mortality improvements in the tables used by the School System. Based on the results of the most recent experience study adopted by the Board on November 18, 2015, the numbers of expected future deaths are 8-11% less than the actual number of deaths that occurred during the study period for healthy retirees and 9-11% less than expected under the selected table for disabled retirees.
The actuarial assumptions used in the June 30, 2017 valuation were based on the results of an actuarial experience study for the period July 1, 2009 June 30, 2014.
The long-term expected rate of return on pension plan investments was determined using a log-normal distribution analysis in which best-estimate ranges of expected future real rates of return (expected nominal returns, net of pension plan investment expense and the assumed rate of inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table:

45

Fulton County Board of Education, Georgia Notes to the Basic Financial Statements For the Fiscal Year Ended June 30, 2019
Note 3 - Detailed Notes on All Funds (Continued)

Asset Class

Target Allocation

Expected Real Rated of Return*

Fixed Income Domestic large equities Domestic mid equities Domestic small equities International developed market equities International emerging market equities

30.00% 39.80%
3.70% 1.50% 19.40% 5.60%

-0.50% 9.00% 12.00% 13.50% 8.00% 12.00%

Total

100.00%

*Rates are reported net of the 2.75% assumed rate of inflation

Discount Rate The discount rate used to measure the total pension liability was 7%. The projection of cash flows used to determine the discount rate assumed that employee contributions will be made at the current contribution rate and that the School System's contributions will be made at rates equal to the difference between actuarially determined contribution rates and the employee rate. Based on those assumptions, the pension plan's fiduciary net position was projected to be available to make all projected future benefit payments of current active an