Hancock County Board of Education, Sparta, Georgia, annual financial report for the fiscal year ended 2018 June 30 (including independent auditor's reports)

HANCOCK COUNTY BOARD OF EDUCATION
ANNUAL FINANCIAL REPORT (Including Independent Auditor's Report)
FOR THE FISCAL YEAR ENDED JUNE 30, 2018

HANCOCK COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

INDEPENDENT AUDITOR'S REPORT

EXHIBITS

BASIC FINANCIAL STATEMENTS

GOVERNMENT-WIDE FINANCIAL STATEMENTS

A

STATEMENT OF NET POSITION

B

STATEMENT OF ACTIVITIES

FUND FINANCIAL STATEMENTS

C

BALANCE SHEET

GOVERNMENTAL FUNDS

D

RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET

TO THE STATEMENT OF NET POSITION

E

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES

GOVERNMENTAL FUNDS

F

RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT

OF REVENUES, EXPENDITURES AND CHANGES IN FUND

BALANCES TO THE STATEMENT OF ACTIVITIES

G NOTES TO THE BASIC FINANCIAL STATEMENTS

SCHEDULES

REQUIRED SUPPLEMENTARY INFORMATION

1 SCHEDULE OF PROPORTIONATE SHARE OF THE NET PENSION LIABILITY TEACHERS RETIREMENT SYSTEM OF GEORGIA
2 SCHEDULE OF CONTRIBUTIONS TEACHERS RETIREMENT SYSTEM OF GEORGIA 3 SCHEDULE OF PROPORTIONATE SHARE OF THE NET PENSION LIABILITY
PUBLIC SCHOOL EMPLOYEES RETIREMENT SYSTEM OF GEORGIA 4 SCHEDULE OF PROPORTIONATE SHARE OF THE NET OPEB LIABILITY
SCHOOL OPEB FUND 5 SCHEDULE OF CONTRIBUTIONS SCHOOL OPEB FUND 6 NOTES TO THE REQUIRED SUPPLEMENTARY INFORMATION 7 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES
IN FUND BALANCES - BUDGET AND ACTUAL GENERAL FUND

Page
1 2
3 4 5 6 8
35 36 37 38 39 40 41

HANCOCK COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I
FINANCIAL
SCHEDULES
SUPPLEMENTARY INFORMATION
8 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS 9 SCHEDULE OF STATE REVENUE 10 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS

Page
42 44 45

SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY THE UNIFORM GUIDANCE
SECTION III AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS
SECTION IV FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS
SECTION V MANAGEMENT'S CORRECTIVE ACTION FOR CURRENT YEAR FINDINGS SCHEDULE OF MANAGEMENT'S CORRECTIVE ACTION

SECTION I FINANCIAL

Greg S. Griffin
STATE AUDITOR
(404) 656-2174

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
November 1, 2019

The Honorable Brian P. Kemp, Governor of Georgia Members of the General Assembly of the State of Georgia Members of the State Board of Education
and Superintendent and Members of the Hancock County Board of Education
INDEPENDENT AUDITOR'S REPORT
Report on the Financial Statements
We have audited the accompanying financial statements of the governmental activities each major fund, and the aggregate remaining fund information (except as described below) of the Hancock County Board of Education (School District), as of and for the year ended June 30, 2018, and the related notes to the financial statements, which collectively comprise the School District's basic financial statements as listed in the table of contents.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditor's Responsibility
Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also

includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.

Summary of Opinions

Opinion Unit Governmental Activities General Fund Capital Projects Fund Aggregate Remaining Fund Information

Type of Opinion Unmodified Unmodified Unmodified Adverse

Basis for Adverse Opinion on Aggregate Remaining Fund Information

Management has not included agency funds related to the fiduciary activities of its school activity (principal) accounts. Accounting principles generally accepted in the United States of America require agency funds to be reported as aggregate remaining fund information. The amount by which this departure would affect the assets and liabilities of the Aggregate Remaining Fund Information has not been determined.
Adverse Opinion

In our opinion, because of the significance of the matter discussed in the "Basis for Adverse Opinion on Aggregate Remaining Fund Information" paragraph, the financial statements referred to previously do not present fairly, the financial position of the aggregate remaining fund information of the School District, as of June 30, 2018, in accordance with accounting principles generally accepted in the United States of America.
Unmodified Opinions

In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities and each major fund of the School District, as of June 30, 2018, and the respective changes in financial position for the year then ended in accordance with accounting principles generally accepted in the United States of America.
Emphasis of Matter

As described in Note 2 to the financial statements, in 2018, the Hancock County Board of Education adopted new accounting guidance, Governmental Accounting Standards Board (GASB) Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions, as amended by GASB Statement No. 85, Omnibus 2017. The School District restated beginning net position for the effect of the GASB Statement No. 75. Our opinions are not modified with respect to this matter.
Other Matters
Required Supplementary Information

Management has omitted the Management's Discussion and Analysis that accounting principles generally accepted in the United States of America require to be presented to supplement the basic financial statements. Such missing 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. Our opinion on the basic financial statements is not affected by this missing information.
Accounting principles generally accepted in the United States of America require that the required supplementary information listed in the table of contents be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.
Other Information
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the School District's basic financial statements. The accompanying supplementary information, as listed in the table of contents, is presented for the purposes of additional analysis and is not a required part of the basic financial statements. The Schedule of Expenditures of Federal Awards is presented for purposes of additional analysis as required by Title 2 U. S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, and is also not a required part of the basic financial statements.
The accompanying supplementary information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole.
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated November 1, 2019 on our consideration of the School District's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the School District's internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the School District's internal control over financial reporting and compliance.

A copy of this report has been filed as a permanent record in the office of the State Auditor and made available to the press of the State, as provided for by Official Code of Georgia Annotated section 50-6-24.
Respectfully submitted,
Greg S. Griffin State Auditor

HANCOCK COUNTY BOARD OF EDUCATION

HANCOCK COUNTY BOARD OF EDUCATION
STATEMENT OF NET POSITION JUNE 30, 2018
ASSETS
Cash and cash equivalents Receivables:
Taxes State Federal
Inventory Prepaid items Capital assets (nondepreciable) Capital assets (net of accumulated depreciation)
Total assets
DEFERRED OUTFLOWS OF RESOURCES
Related to defined benefit OPEB plans Related to defined benefit pension plan
Total deferred outflows
LIABILITIES
Accounts payable Salaries and benefits payable Unearned revenue Net OPEB liability Net pension liability
Total liabilities
DEFERRED INFLOWS OF RESOURCES
Related to defined benefit OPEB plans Related to defined benefit pension plan
Total deferred inflows
NET POSITION
Investment in capital assets Restricted for:
Continuation of federal programs Capital projects Unrestricted (deficit)
Total net position (deficit)

EXHIBIT "A"

Governmental Activities

$

2,187,575

1,523,935 534,521 761,164 6,836 32,715 162,777
7,539,626 12,749,149

647,303 1,731,441
2,378,744

358,201 1,087,436
95,420 13,566,922 10,481,370 25,589,349

1,033,086 1,140,845 2,173,931

7,702,403

148,553

896,129

(21,382,472)

$

(12,635,387)

The accompanying notes are an integral part of these financial statements.

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HANCOCK COUNTY BOARD OF EDUCATION
STATEMENT OF ACTIVITIES FOR THE FISCAL YEAR ENDED JUNE 30, 2018

EXHIBIT "B"

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

Expenses

Program Revenues

Operating

Charges for

Grants and

Services

Contributions

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

$

7,184,776 $ 127,785 $ 4,581,811 $

(2,475,180)

797,146

-

572,748

909,456

-

636,627

80,197

-

109,378

311,113

-

445,636

1,005,597

-

594,296

271,088

-

29,994

1,830,745

-

407,233

1,211,734

-

610,556

401,952

-

1,294

155,767

-

86,287

923,182

45,567

961,252

$

15,082,753 $ 173,352 $ 9,037,112

(224,398) (272,829)
29,181 134,523 (411,301) (241,094) (1,423,512) (601,178) (400,658) (69,480) 83,637 (5,872,289)

General revenues:

Taxes:

Property taxes, levied for maintenance and operations

5,228,283

Sales taxes, for capital projects

469,549

Intangible taxes

32,563

Railroad equipment tax

19,729

Unrestricted investment earnings

5,135

Miscellaneous

121,215

Total general revenues

5,876,474

Change in net position

4,185

Net position (deficit), beginning of year, as restated

(12,639,572)

Net position (deficit), end of year

$

(12,635,387)

The accompanying notes are an integral part of these financial statements.

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HANCOCK COUNTY BOARD OF EDUCATION
BALANCE SHEET GOVERNMENTAL FUNDS
JUNE 30, 2018

EXHIBIT "C"

ASSETS

Cash and cash equivalents Receivables:
Taxes Intergovernmental:
State Federal Due from other funds
Prepaid items Inventory
Total assets

LIABILITIES, DEFERRED INFLOWS AND FUND BALANCES

Accounts payable Salaries and benefits payable Due to other funds Unearned revenue - grants
Total liabilities

LIABILITIES

DEFERRED INFLOWS Unavailable revenue - property taxes

Nonspendable: Inventory Prepaid items
Restricted: Federal programs Capital projects
Assigned: Student activities
Unassigned

FUND BALANCES

Total fund balances

Total liabilities, deferred inflows, and fund balances

General

Capital Projects

Total Governmental
Funds

$

1,672,237 $

515,338 $

2,187,575

1,487,274

36,661

1,523,935

534,521

-

534,521

761,164 -

461,311

761,164 461,311

32,715

-

32,715

6,836

-

6,836

$

4,494,747 $

1,013,310 $

5,508,057

$

241,020 $

1,087,436

461,311

95,420

1,885,187

1,225,213

117,181 $ -
117,181

358,201 1,087,436
461,311 95,420
2,002,368

-

1,225,213

6,836 32,715
141,717 -
647 1,202,432
1,384,347

896,129 -
896,129

6,836 32,715
141,717 896,129
647 1,202,432
2,280,476

$

4,494,747 $

1,013,310 $

5,508,057

The accompanying notes are an integral part of these financial statements.

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HANCOCK COUNTY BOARD OF EDUCATION
RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET POSITION JUNE 30, 2018

EXHIBIT "D"

Total fund balances - governmental funds

$ 2,280,476

Amounts reported for governmental activities in the statement of net position are different because:

Capital assets used in governmental activities are not financial resources and are not reported in the funds.
Cost Less accumulated depreciation

$ 20,125,825 (12,423,422)

7,702,403

Other long-term assets are not available to pay for current-period expenditures and are deferred in the funds.
Property taxes

1,225,213

Long-term liabilities are not due and payable in the current period and, therefore, are not reported in the funds.
Deferred outflows - pension plans Deferred outflows - OPEB plans Deferred inflows - pension plans Deferred inflows - OPEB plans Net pension liability Net OPEB liability

$ 1,731,441 647,303
(1,140,845) (1,033,086) (10,481,370) (13,566,922)

(23,843,479)

Net position of governmental activities

$ (12,635,387)

The accompanying notes are an integral part of these financial statements.

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HANCOCK COUNTY BOARD OF EDUCATION
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS
FOR THE FISCAL YEAR ENDED JUNE 30, 2018

EXHIBIT "E"

REVENUES Property taxes Sales taxes State funds Federal funds Charges for services Investment earnings Miscellaneous Total revenues
EXPENDITURES Current: Instruction Support Services: Pupil services Improvement of instructional services Educational media services General administration School administration Business administration Maintenance and operation of plant Student transportation services Central support services Other support services Food services operation Capital outlay Debt service: Principal retirement Interest and fees Total expenditures
Net change in fund balances
FUND BALANCE, beginning of year
FUND BALANCE, end of year

General

Capital Projects

Total Governmental
Funds

$ 5,345,282 $ 52,292
4,752,647 4,286,301
173,352 2,884
121,215 14,733,973

- $ 469,549 452,620
2,251 924,420

5,345,282 521,841
5,205,267 4,286,301
173,352 5,135
121,215 15,658,393

6,951,018
804,720 933,046
84,938 309,648 1,033,823 274,178 1,801,159 1,180,108 404,442 157,104 902,872
-
11,383 395
14,848,834
(114,861)
1,499,208
$ 1,384,347 $

-
88,067
88,067
836,353
59,776
896,129 $

6,951,018
804,720 933,046
84,938 309,648 1,033,823 274,178 1,801,159 1,180,108 404,442 157,104 902,872
88,067
11,383 395
14,936,901
721,492
1,558,984
2,280,476

The accompanying notes are an integral part of these financial statements.

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HANCOCK COUNTY BOARD OF EDUCATION
RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES
FOR THE FISCAL YEAR ENDED JUNE 30, 2018

EXHIBIT "F"

Amounts reported for governmental activities in the statement of activities are different because:
Net change in fund balances - total governmental funds
Governmental funds report capital outlays as expenditures. However, in the statement of activities, the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. The net effect of the amount by which depreciation exceeded capital outlay is to decrease net position.
Capital outlay Depreciation expense
Revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the funds.
Property taxes State capital outlay grants
Issuance of long-term debt provides current financial resources to governmental funds, while repayment of the principal of long-term debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net position. This amount is the net effect of these differences in the treatment of long-term debt and related items.
Principal payments - capital leases Change in net OPEB liability and deferred inflows
and outflows related to OPEB activity Change in net pension liability and deferred inflows
and outflows related to pension activity
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.
Change in accrued interest
Changes in net position of governmental activities

$ 721,492

$ 158,032 (464,269)

(306,237)

$ (116,999) (452,620)

(569,619)

$ 11,383 (291,553) 438,324

158,154

395

$

4,185

The accompanying notes are an integral part of these financial statements.

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HANCOCK COUNTY BOARD OF EDUCATION EXHIBIT "G"
NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018
Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY
Reporting Entity
The Hancock County Board of Education (the "School District") was established under the laws of the State of Georgia and operates under the guidance of a school board elected by the voters and a Superintendent appointed by the Board. The Board is organized as a separate legal entity and has the power to levy taxes and issue bonds. Its budget is not subject to approval by any other entity. Accordingly, the School District is a primary government and consists of all the organizations that compose its legal entity.
Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statements of the School District have been prepared in conformity with generally accepted accounting principles (GAAP) as prescribed by the Governmental Accounting Standards Board (GASB). GASB is the accepted standard-setting body for governmental accounting and financial reporting principles. The most significant of the School District's accounting policies are described below.
BASIS OF PRESENTATION
The School District's basic financial statements are collectively comprised of the government-wide financial statements, fund financial statements and notes to the basic financial statements of the Hancock County Board of Education. The government-wide statements focus on the School District as a whole, while the fund financial statements focus on major funds. Each presentation provides valuable information that can be analyzed and compared between years and between governments to enhance the information's usefulness.
Government-Wide Statements
The Statement of Net Position and the Statement of Activities display information about the financial activities of the overall School District, except for fiduciary activities. Eliminations have been made to minimize the double counting of internal activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange transactions.
The Statement of Net Position presents the School District's non-fiduciary assets and liabilities, with the difference reported as net position. Net position is reported in three categories as follows:
1. Net investment in capital assets consists of the School District's total investment in capital assets, net of accumulated depreciation, and reduced by outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of net investment in capital assets.
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HANCOCK COUNTY BOARD OF EDUCATION EXHIBIT "G"
NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018
Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Government-Wide Statements (Continued)
2. Restricted net position consists of resources for which the School District is legally or contractually obligated to spend in accordance with restrictions imposed by external third parties or imposed by law through constitutional provisions or enabling legislation.
3. Unrestricted net position consists of resources not meeting the definition of the two preceding categories. Unrestricted net position often has constraints on resources imposed by management which can be removed or modified.
The Statement of Activities presents a comparison between direct expenses and program revenues for each function of the School District's governmental activities.
Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Indirect expenses (expenses of the School District related to the administration and support of the School District's programs, such as office and maintenance personnel and accounting) are not allocated to programs.
Program revenues include: a) charges paid by the recipients of goods or services offered by the programs, and b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues.
Fund Financial Statements
The fund financial statements provide information about the School District's funds, including fiduciary funds. Eliminations have been made to minimize the double counting of internal activities. Separate statements are presented for governmental and fiduciary funds. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column.
The School District reports the following major governmental funds:
The General Fund is the School District's primary operating fund. It accounts for and reports all financial resources of the School District, except those resources required to be accounted for in another fund.
The Capital Projects Fund accounts for and reports financial resources including Education Special Purpose Local Option Sales Tax (ESPLOST) and grants from the Georgia State Financing and Investment Commission that are restricted, committed, or assigned to expenditures for capital outlay, including the acquisition or construction of capital facilities and other capital assets.
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HANCOCK COUNTY BOARD OF EDUCATION EXHIBIT "G"
NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018
Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Basis of Accounting
The basis of accounting determines when transactions are reported in the financial statements. The government-wide governmental activities is reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, sales taxes, grants and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from sales taxes is recognized in the fiscal year in which the underlying transaction (sale) takes place. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied.
The School District uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts.
Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Under this method, revenues are recognized when measurable and available. The School District considers all tax revenues reported in the governmental funds to be available if they are collected within 60 days after year-end. All other revenues are considered to be available if they are collected within 120 days after year-end. Property taxes, sales taxes, grants and interest are considered to be susceptible to accrual. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt, which are recognized as expenditures to the extent they have matured. Capital asset acquisitions are reported as expenditures in governmental funds. Proceeds of general long-term liabilities and acquisitions under capital leases are reported as other financing sources.
The School District funds certain programs by a combination of specific cost-reimbursement grants, categorical grants, and general revenues. Thus, when program costs are incurred, there is both restricted and unrestricted net position available to finance the program. It is the School District's policy to first apply grant resources to such programs, followed by cost-reimbursement grants, then general revenues.
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HANCOCK COUNTY BOARD OF EDUCATION EXHIBIT "G"
NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018
Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Basis of Accounting (Continued)
The State of Georgia reimburses the School District 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 12-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 District over the same 12-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 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 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 District recognizes the same QBE as a receivable and revenue, consistent with symmetrical recognition.
New Accounting Pronouncements
In fiscal year 2018, the School District adopted Governmental Accounting Standards Board (GASB) Statement No. 75, Accounting and Financial Reporting for Post-employment Benefits Other than Pensions. This statement establishes standards for recognizing and measuring liabilities, deferred outflows of resources, deferred inflows of resources, and expense/expenditures. For defined benefit OPEB, this statement identifies the methods and assumptions that are required to be used to project benefit payments, discount projected benefit payments to their actuarial present value, and attribute that present value to periods of employee service. Note disclosure and required supplementary information requirements about defined benefit OPEB also are addressed. The adoption of this statement has a significant impact on the School District's financial statements. As noted in the Restatement of Net Position note disclosure, the School District restated beginning net position for the cumulative effect of this accounting change.
In fiscal year 2018, the School District adopted Governmental Accounting Standards Board (GASB) Statement No. 81, Irrevocable Split-Interest Agreements. This statement requires that a government that receives resources pursuant to an irrevocable split-interest agreement recognize assets, liabilities, and deferred inflows of resources at the inception of the agreement. Furthermore, this statement requires that a government recognize assets representing its beneficial interests in irrevocable split-interest agreements that are administered by a third party, if the government controls the present service capacity of the beneficial interests. This statement requires that a government recognize revenue when the resources become applicable to the reporting period. The adoption of this statement does not have a significant impact on the School District's financial statements.
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HANCOCK COUNTY BOARD OF EDUCATION EXHIBIT "G"
NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018
Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
New Accounting Pronouncements (Continued)
In fiscal year 2018, the School District adopted Governmental Accounting Standards Board (GASB) Statement No. 85, Omnibus 2017. The objective of this statement is to address practice issues that have been identified during implementation and application of certain GASB Statements. This statement addresses a variety of topics including issues related to blending component units, goodwill, fair value measurement and application, and post-employment benefits (pensions and other post-employment benefits [OPEB]). The adoption of this statement does not have a significant impact on the School District's financial statements.
In fiscal year 2018, the School District adopted Governmental Accounting Standards Board (GASB) Statement No. 86, Certain Debt Extinguishment Issues. The primary objective of this statement is to improve consistency in accounting and financial reporting for in-substance defeasance of debt by providing guidance for transactions in which cash and other monetary assets acquired with only existing resources resources other than the proceeds of refunding debt are placed in an irrevocable trust for the sole purpose of extinguishing debt. This statement also improves accounting and financial reporting for prepaid insurance on debt that is extinguished and notes to financial statements for debt that is defeased in substance. The adoption of this statement does not have a significant impact on the School District's financial statements.
Cash and Cash Equivalents
Composition of Deposits - Cash and cash equivalents consist of cash on hand, demand deposits, investments in the State of Georgia local government investment pool ("Georgia Fund 1") and short-term investments with original maturities of three months or less from the date of acquisition in authorized financial institutions. Official Code of Georgia Annotated (O.C.G.A.) 45-8-14, authorizes the School District to deposit its funds in one or more solvent banks, insured Federal savings and loan associations, or insured chartered building and loan associations.
Investments
Composition of Investments - The School District can invest its funds as permitted by O.C.G.A. 36-83-4. In selecting among options for investment or among institutional bids for deposits, the highest rate of return shall be the objective, given equivalent conditions of safety and liquidity.
The School District does not have a formal policy regarding investment policies that address credit risks, custodial credit risks, concentration of credit risks, interest rate risks or foreign currency risks.
Investments made by the School District in nonparticipating interest-earning contracts (such as certificates of deposit) and repurchase agreements are reported at cost. Participating interestearning contracts and money market investments with a maturity at purchase of one year or less are reported at amortized cost. All other investments are reported at fair value.
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HANCOCK COUNTY BOARD OF EDUCATION EXHIBIT "G"
NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018
Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Investments (Continued)
For accounting purposes, certificates of deposit are classified as investments if they have an original maturity greater than three months when acquired.
Receivables
Receivables consist of amounts due from property and sales taxes, grant reimbursements due on Federal, State or other grants for expenditures made but not reimbursed, and other receivables disclosed from information available. Receivables are recorded when either the asset or revenue recognition criteria has been met.
Due to other funds and due from other funds consist of activities between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year.
Inventories
Food Inventories On the basic financial statements, inventories of donated food commodities used in the preparation of meals are reported at their Federally assigned value and purchased foods inventories are reported at cost (first-in, first-out). The School District uses the consumption method to account for inventories whereby donated food commodities are recorded as an asset and as revenue when received, and expenses/expenditures are recorded as the inventory items are used. Purchased foods are recorded as an asset when purchased and expenses/expenditures are recorded as the inventory items are used.
Prepaid Items
Payments made to vendors for services that will benefit future accounting periods are recorded as prepaid items, in both the government-wide and governmental fund financial statements.
Capital Assets
On the government-wide financial statements, capital assets are recorded at cost where historical records are available and at estimated historical cost based on appraisals or deflated current replacement cost where no historical records exist. Donated capital assets are recorded at acquisition value on the date donated. The cost of normal maintenance and repairs that do not add to the value of assets or materially extend the useful lives of the assets is not capitalized. The School District does not capitalize book collections or works of art.
Capital acquisition and construction are recorded as expenditures in the governmental fund financial statements at the time of purchase (including ancillary charges), and the related assets are reported as capital assets in the governmental activities column in the government-wide financial statements.
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HANCOCK COUNTY BOARD OF EDUCATION EXHIBIT "G"
NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Capital Assets (Continued)

Depreciation is computed using the straight-line for all assets, except land, and is used to allocate the actual or estimated historical cost of capital assets over estimated useful lives.

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

Land Construction in Progress Land Improvements Buildings and Improvements Equipment Intangibles

Capitalization Policy
All $ 5,000
5,000 5,000 5,000 300,000

Estimated Useful Life
N/A N/A 50 Years 15 to 80 Years 3 to 20 Years 3 to 20 Years

Deferred Outflows/Inflows of Resources
In addition to assets, the statement of net position and/or balance sheet will report a separate section for deferred outflows of resources. This separate financial statement element represents a consumption of resources that applies to future period(s) and, therefore, will not be recognized as an outflow of resources (expense/expenditure) until then.
In addition to liabilities, the statement of net position and/or balance sheet will report a separate section for deferred inflows of resources. This separate financial statement element represents an acquisition of resources that applies to future period(s) and, therefore, will not be recognized as an inflow of resources (revenue) until that time.
Long-Term Liabilities and Bond Discounts/Premiums
In the School District's government-wide financial statements, outstanding debt is reported as liabilities. Bond premiums and discounts and the difference between the reacquisition price and the net carrying value of refunded debt are deferred and amortized over the life of the bonds using the straight-line method. To conform to generally accepted accounting principles, bond premiums and discounts should be amortized using the effective interest method. The effect of this deviation is deemed to be immaterial to the fair presentation of the basic financial statements. Bond issuance costs are recognized as an outflow of resources in the fiscal year in which the bonds are issued.
In the governmental fund financial statements, the School District recognizes the proceeds of debt and premiums as other financing sources of the current period. Bond issuance costs are reported as debt service expenditures.
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HANCOCK COUNTY BOARD OF EDUCATION EXHIBIT "G"
NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018
Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Pensions
For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions and pension expense, information about the pension plan's fiduciary net position and additions to/deductions from the plan's fiduciary net position have been determined on the same basis as they are reported by the plan. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value.
Post-employment Benefits Other Than Pensions (OPEB)
For purposes of measuring the net OPEB liability, deferred outflows of resources and deferred inflows of resources related to OPEB and OPEB expense, information about the fiduciary net position of the Georgia School Employees Post-employment Benefit Fund (the "School OPEB Fund") and additions to/deductions from the School OPEB Fund fiduciary net position have been determined on the same basis as they are reported by the School OPEB Fund. For this purpose, benefit payments are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value.
Fund Balance
Fund balance for governmental funds is reported in classifications that comprise a hierarchy based primarily on the extent to which the government is bound to honor constraints on the specific purposes for which amounts in those funds can be spent.
The School District's fund balances are classified as follows:
Nonspendable Amounts that cannot be spent, either because they are in a nonspendable form or because they are legally or contractually required to be maintained intact.
Restricted Constraints that are placed on the use of resources are either: 1) externally imposed conditions by creditors, grantors, contributors, or laws and regulations of other governments, or 2) imposed by law through constitutional provisions or enabling legislation.
Committed Amounts that can be used only for specific purposes pursuant to constraints imposed by formal action of the Board of Education. The Board of Education is the School District's highest level of decision-making authority; the formal action required to establish, modify, or rescind a fund balance commitment is a resolution approved by the Board. Committed fund balance also should incorporate contractual obligations to the extent that existing resources in the fund have been specifically committed for use in satisfying those contractual requirements.
Assigned Amounts that are constrained by the School District's intent to be used for specific purposes, but are neither restricted nor committed. The intent should be expressed by: 1) the Board of Education, or 2) the budget or finance committee, the Superintendent, or designee, to assign amounts to be used for specific purposes.
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HANCOCK COUNTY BOARD OF EDUCATION EXHIBIT "G"
NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018
Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Fund Balance (Continued)
Unassigned Amounts within the General Fund not meeting the definition of any aforementioned category. The General Fund is the only fund that reports positive unassigned fund balance. In other governmental funds, it may be necessary to report a negative unassigned fund balance.
The responsibility for designating funds to specific classification is as follows:
Committed Fund Balance The Board of Education is the School District's highest level of decision-making authority, and the formal action that is required to be taken to establish, modify, or rescind a fund balance commitment is a resolution approved by the Board. Funds should be committed prior to the end of the fiscal year, although the exact amount may be determined in the subsequent fiscal year.
Assigned Fund Balance The Board of Education has authorized the Superintendent and the Director of Finance as officials authorized to assign fund balance to a specific purpose in accordance with the School District's policy. The accounting records should reflect sufficient documentation to support an assignment of funds by administration.
When multiple categories of fund balances are available for expenditures, the School District will start with the most restricted category and spend those funds first before moving down to the next category with available funds.
Use of Estimates
The preparation of the financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates.
Property Taxes
The Hancock County Board of Commissioners adopted the property tax levy for the 2017 tax digest year (calendar year) on August 31, 2017 (levy date) based on property values as of January 1, 2017. Taxes were due on December 20, 2017 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2017 tax digest are reported as revenue in the governmental funds for fiscal year 2018. The Hancock County Tax Commissioner bills and collects the property taxes for the School District, withholds 2.5% of taxes collected as a fee for tax collection and remits the balance of taxes collected to the School District. Property tax revenues, at the fund reporting level, during the fiscal year ended June 30, 2018, for maintenance and operations amounted to $5,172,345.
-16-

HANCOCK COUNTY BOARD OF EDUCATION EXHIBIT "G"
NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018

Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Property Taxes (Continued)

The tax millage rate levied for the 2017 tax year (calendar year) for the Hancock County Board of Education was as follows (a mill equals $1 per thousand dollars of assessed value):

School Operations

14.418 mills

Additionally, Title Ad Valorem Tax revenues, at the fund reporting level, amounted to $172,937 during the fiscal year ended June 30, 2018.
Sales Taxes
Education Special Purpose Local Option Sales Tax (ESPLOST), at the fund reporting level, during the year amounted to $469,549 and is to be used for capital outlay for educational purposes or debt service. This sales tax was authorized by local referendum and the sales tax must be reauthorized at least every five years.
Note 3: BUDGETARY DATA
The budget is a complete financial plan for the School District's fiscal year and is based upon careful estimates of expenditures together with probable funding sources. The budget is legally adopted each year for the general and capital projects funds. There is no statutory prohibition regarding over expenditure of the budget at any level. The budget for all governmental funds, except the various school activity (principal) accounts, is prepared and adopted by fund. The legal level of budgetary control was established by the Board at the aggregate fund level. The budget for the General Fund was prepared in accordance with accounting principles generally accepted in the United States of America.
The budgetary process begins with the School District's administration presenting an initial budget for the Board's review. The administration makes revisions as necessary based on the Board's guidelines and a tentative budget is approved. After approval of this tentative budget by the Board, such budget is advertised at least once in a newspaper of general circulation in the locality, as well as the School District's website. At the next regularly scheduled meeting of the Board after advertisement, the Board receives comments on the tentative budget, makes revisions as necessary and adopts a final budget. The approved budget is then submitted, in accordance with provisions of the O.C.G.A. 20-2-167(c), to the Georgia Department of Education. The Board may increase or decrease the budget at any time during the year. All unexpended budget authority lapses at fiscal year-end.
If expenditure of funds in any fund is anticipated to be more than the budgeted amount, the Superintendent shall request Board approval for the budget amendment. Any position or expenditure not previously approved in the annual budget that exceeds $5,000 shall require Board approval unless the Superintendent deems the position or purchase an emergency. In such case, the expenditure shall be reported to the Board at its regularly scheduled meeting. Under no circumstances is the Superintendent or other staff person authorized to spend funds that exceed the total budget without approval by the Board.

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HANCOCK COUNTY BOARD OF EDUCATION EXHIBIT "G"
NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018
Note 3: BUDGETARY DATA (CONTINUED)
See the General Fund Schedule of Revenues, Expenditures and Changes in Fund Balances Budget and Actual in the Supplementary Information Section for a detail of any over/under expenditures during the fiscal year under review.
Note 4: DEPOSITS AND CASH EQUIVALENTS
Collateralization of Deposits O.C.G.A. 45-8-12, provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum of money which has not been secured by surety bond, by guarantee of insurance, or by collateral. The aggregate of the face value of such surety bond and the market value of securities pledged shall be equal to or not less than 110% of the public funds being secured after the deduction of the amount of deposit insurance. If a depository elects the pooled method (O.C.G.A. 45-8-13.1), the aggregate of the market value of the securities pledged to secure a pool of public funds shall be not less than 110% of the daily pool balance.
Acceptable security for deposits consists of any one of or any combination of the following:
(1) Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia,
(2) Insurance on accounts provided by the Federal Deposit Insurance Corporation, (3) Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United
States or of the State of Georgia, (4) Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or
municipalities of the State of Georgia, (5) Bonds of any public authority created by the laws of the State of Georgia, providing that
the statute that created the authority authorized the use of the bonds for this purpose, (6) Industrial revenue bonds and bonds of development authorities created by the laws of the
State of Georgia, and (7) Bonds, bills, notes, certificates of indebtedness, or other obligations of a subsidiary
corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association.
Categorization of Deposits Custodial credit risk is the risk that in the event of bank failure, the School District's deposits may not be returned to it. The School District does not have a deposit policy for custodial credit risk. At June 30, 2018, the School District had deposits with a carrying value of $1,741,635, excluding cash equivalents, and bank balances of $2,369,580. The bank balances were entirely covered by Federal depository insurance or collateralized with securities held by the pledging financial institution's agent in the School District's name.
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HANCOCK COUNTY BOARD OF EDUCATION EXHIBIT "G"
NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018
Note 4: DEPOSITS AND CASH EQUIVALENTS (CONTINUED) Categorization of Cash Equivalents The School District reported cash equivalents of $445,940 in Georgia Fund 1, a local government investment pool, which is included in the cash balances above. Georgia Fund 1 is not registered with the SEC as an investment company and does not operate in a manner consistent with the SEC's Rule 2a-7 of the Investment Company Act of 1940. The investment is valued at the pool's share price, $1.00 per share, which approximates fair value. The pool is an AAAf rated investment pool by Standard and Poor's. The weighted average maturity of Georgia Fund 1 may not exceed 60 days. The weighted average maturity for Georgia Fund 1 on June 30, 2018, was ten days. The Georgia Fund 1, (a local government investment pool), is administered by the State of Georgia, Office of the State Treasurer and is not required to be categorized since the School District did not own any specific identifiable securities in the pool. The investment policy of the State of Georgia, Office of the State Treasurer for the Georgia Fund 1, does not provide for investment in derivatives or similar investments. Additional information on the Georgia Fund 1 is disclosed in the State of Georgia Comprehensive Annual Financial Report. This audit can be obtained from the Georgia Department of Audits and Accounts at www.audits.ga.gov/SGD/CAFR.html. Note 5: NON-MONETARY TRANSACTIONS The School District receives food commodities from the United States Department of Agriculture (USDA) for school breakfast and lunch programs. These commodities are recorded at their federally assigned value. See Note 2 - Inventories
-19-

HANCOCK COUNTY BOARD OF EDUCATION EXHIBIT "G"
NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018

Note 6: CAPITAL ASSETS

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

Beginning Balance

In creas es

Decreas es

Ending Balance

Governmental activities:

Capital assets, not being depreciated:

Land

$

Total

162,777 $ 162,777

- $ -

- $ -

162,777 162,777

Capital assets, being depreciated: Buildings and improvements Equipment Land improvements
Total
Less accumulated depreciation for: Buildings and improvements Equipment Land improvements Total

15,908,597 3,568,690
327,729 19,805,016
(8,780,997) (2,999,287)
(178,869) (11,959,153)

43,050 114,982
158,032
(296,891) (145,529) (21,849) (464,269)

-

15,951,647

-

3,683,672

-

327,729

-

19,963,048

-

(9,077,888)

-

(3,144,816)

-

(200,718)

-

(12,423,422)

Total capital assets, being depreciated, net

7,845,863

(306,237)

-

7,539,626

Governmental activities capital assets, net

$

8,008,640 $ (306,237) $

- $ 7,702,403

Current year depreciation expense by function is as follows:

Instruction Support services
Business administration Maintenance and operations Student transportation Food services

$ 312,166

$ 3,616 18,354 124,823

146,793 5,310

Total depreciation expense

$ 464,269

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HANCOCK COUNTY BOARD OF EDUCATION EXHIBIT "G"
NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018

Note 7: INTERFUND ASSETS AND LIABILITIES

Due to and due from other funds are recorded for interfund receivables and payables which arise from interfund transactions. Interfund balances for the year ended June 30, 2017, consisted of the following:

Due To Capital Projects Fund

Due From General
Fund
$ 461,311

Interfund balances were incurred to repay the capital projects fund for amounts receipted to the general fund in error in the previous year.

There were no interfund transfers reported for the year ended June 30, 2018.

Note 8: RISK MANAGEMENT

The School District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors or omissions; job related illness or injuries to employees, acts of God and unemployment compensation.
The School District has obtained commercial insurance for risks of loss associated with torts, assets, errors or omissions, job related illness or injuries to employees, and acts of God. The School District has neither significantly reduced coverage for these risks nor incurred losses (settlements) which exceeded the School District's insurance coverage in any of the past three years.

The School District is self-insured with regard to unemployment compensation claims. The School District accounts for claims within the general fund with expenses/expenditures and a liability being reported when it is probable that a loss has occurred, and the amount of that loss can be reasonably estimated.

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

Beginning of Year Liability

Claims and Changes in Estimates

Claims Paid

End of Year Liability

2018

$

-

$ 590

$ 590

$

-

2017

$

-

$ 4,688

$ 4,688

$

-

-21-

HANCOCK COUNTY BOARD OF EDUCATION EXHIBIT "G"
NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018

Note 8: RISK MANAGEMENT (CONTINUED)
The School District has purchased surety bonds to provide additional insurance coverage as follows:

Position Covered
Superintendent Finance Director

Amount
$ 100,000 $ 100,000

Note 9: LONG-TERM LIABILITIES

Changes in Long-Term Liabilities

The changes in long-term liabilities during the fiscal year ended June 30, 2018, for governmental activities, were as follows:

Balance June 30, 2017

Additions

Deletions

Balance June 30, 2018

Due Within One Year

Capital Leases

$

11,383 $

- $

(11,383) $

- $

-

Net OPEB Liability

14,164,636

938,856

(1,536,570)

13,566,922

-

Net Pension Liability

11,656,786

1,369,308

(2,544,724)

10,481,370

-

Total

$ 25,832,805 $ 2,308,164 $ (4,092,677) $ 24,048,292 $

-

Note 10: SIGNIFICANT CONTINGENT LIABILITIES
Amounts received or receivable principally from the Federal government are subject to audit and review by grantor agencies. This could result in requests for reimbursement to the grantor agency for any costs which are disallowed under grant terms. Any disallowances resulting from the grantor audit may become a liability of the School District. However, the School District believes that such disallowances, if any, will be immaterial to its overall financial position.
The School District is a defendant in various legal proceedings pertaining to matters incidental to the performance of routine School District operations. The ultimate disposition of these proceedings is not presently determinable, but is not believed to have a material adverse effect on the financial condition of the School District.

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HANCOCK COUNTY BOARD OF EDUCATION EXHIBIT "G"
NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018
Note 11: OTHER POST-EMPLOYMENT BENEFITS
Georgia School Personnel Post-employment Health Benefit Fund
Plan Description. Certified teachers and non-certified public school employees of the School District as defined in O.C.G.A. 20-2-875 are provided OPEB through the School OPEB Fund a cost-sharing multiple-employer defined benefit post-employment healthcare plan, reported as an employee trust fund and administered by a Board of Community Health (the "Board"). Title 20 of the O.C.G.A. assigns the authority to establish and amend the benefit terms of the group health plan to the Board.
Benefits Provided. The School OPEB Fund provides healthcare benefits for retirees and their dependents due under the group health plan for public school teachers, including librarians, other certified employees of public schools, regional educational service agencies and non-certified public school employees. Retiree medical eligibility is attained when an employee retires and is immediately eligible to draw a retirement annuity from the Employees' Retirement System (ERS), Georgia Judicial Retirement System (JRS), Legislative Retirement System (LRS), Teachers Retirement System (TRS) or Public School Employees Retirement System (PSERS). If elected, dependent coverage starts on the same day as retiree coverage. Medicare-eligible retirees are offered Standard and Premium Medicare Advantage plan options. Non-Medicare eligible retiree plan options include Health Reimbursement Arrangement (HRA), Health Maintenance Organization (HMO) and a High Deductible Health Plan (HDHP). The School OPEB Fund also pays for administrative expenses of the fund. By law, no other use of the assets of the School OPEB Fund is permitted.
Contributions. As established by the Board, the School OPEB Fund is substantially funded on a pay-as-you-go basis; that is, annual cost of providing benefits will be financed in the same year as claims occur. Contributions to the School OPEB Fund from the School District were $519,482 for the year ended June 30, 2018. Active employees are not required to contribute to the School OPEB Fund.
OPEB Liabilities, OPEB Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to OPEB
At June 30, 2018, the School District reported a liability of $13,566,922 for its proportionate share of the net OPEB liability. The net OPEB liability was measured as of June 30, 2017. The total OPEB liability used to calculate the net OPEB liability was based on an actuarial valuation as of June 30, 2016. An expected total OPEB liability as of June 30, 2017 was determined using standard roll-forward techniques. The School District's proportion of the net OPEB liability was actuarially determined based on employer contributions during the fiscal year ended June 30, 2017. At June 30, 2017, the School District's proportion was 0.096562%, which was an increase of 0.000986% from its proportion measured as of June 30, 2016.
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HANCOCK COUNTY BOARD OF EDUCATION EXHIBIT "G"
NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018

Note 11: OTHER POST-EMPLOYMENT BENEFITS (CONTINUED)

OPEB Liabilities, OPEB Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to OPEB (Continued)

For the year ended June 30, 2018, the School District recognized OPEB expense of $811,035. At June 30, 2018, the School District reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources:

OPEB

Deferred

Deferred Inflow

Outflow of

of Resources

Changes in assumptions

$

-

$ 1,033,086

Net difference between projected and actual earnings

on pension plan investments

3,968

-

Changes in proportion and differences between

School District contributions and proportionate

share of contributions

123,853

-

School District contributions subsequent to the

measurement date

519,482

-

Total

$

647,303 $ 1,033,086

School District contributions subsequent to the measurement date of $519,482 are reported as deferred outflows of resources and will be recognized as a reduction of the net OPEB liability in the year ending June 30, 2019. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to OPEB will be recognized in OPEB expense as follows:

Fiscal Year Ending June 30
2019 2020 2021 2022 2023 2024

OPEB $ (162,538)
(162,538) (162,538) (162,538) (163,531) (91,582)

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HANCOCK COUNTY BOARD OF EDUCATION EXHIBIT "G"
NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018

Note 11: OTHER POST-EMPLOYMENT BENEFITS (CONTINUED)

OPEB Liabilities, OPEB Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to OPEB (Continued)
Actuarial assumptions. The total OPEB liability as of June 30, 2017 was determined by an actuarial valuation as of June 30, 2016 using the following actuarial assumptions and other inputs, applied to all periods included in the measurement and rolled forward to the measurement date of June 30, 2017:

OPEB: Inflation

2.75%

Salary increases

ERS JRS LRS TRS PSERS Long-term expected rate of return Healthcare cost trend rate Pre-Medicare Eligible Medicare Eligible Ultimate trend rate Pre-Medicare Eligible Medicare Eligible Year of Ultimate trend rate

3.25% 7.00%, average, including inflation 4.50%, including inflation None 3.25% 9.00%, including inflation N/A 3.88%, compounded annually, net of investment expense, and including inflation
7.75% 5.75%
5.00% 5.00% 2022

Mortality rates were based on the RP-2000 Combined Mortality Table for Males or Females, as

appropriate, with adjustments for mortality improvements based on Scale BB as follows:

For ERS, JRS and LRS members: The RP-2000 Combined Mortality Table projected to 2025 with projection scale BB and set forward two years for both males and females is used for the period after service retirement and for dependent beneficiaries. The RP-2000 Disabled Mortality Table projected to 2025 with projection scale BB and set back seven years for males and set forward three years for females is used for the period after disability retirement.

For TRS members: The RP-2000 White Collar Mortality Table projected to 2025 with projection scale BB (set forward one year for males) is used for death after service retirement and beneficiaries. The RP-2000 Disabled Mortality Table projected to 2025 with projection scale BB (set forward two years for males and four years for females) is used for death after disability retirement.

For PSERS members: The RP-2000 Blue-Collar Mortality Table projected to 2025 with projection scale BB (set forward three years for males and two years for females) is used for the period after service retirement and for beneficiaries of deceased members. The RP-2000 Disabled Mortality Table projected to 2025 with projection scale BB (set forward five years for both males and females) is used for the period after disability retirement.

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HANCOCK COUNTY BOARD OF EDUCATION EXHIBIT "G"
NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018

Note 11: OTHER POST-EMPLOYMENT BENEFITS (CONTINUED)
OPEB Liabilities, OPEB Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to OPEB (Continued)
The actuarial assumptions used in the June 30, 2016 valuation were based on the results of an actuarial experience study for the pension systems, which covered the five-year period ended June 30, 2014.
Projection of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculation.
Additionally, there was a change of assumptions that affected measurement of the total OPEB liability since the prior measurement date. The methodology used to determine employee and retiree participation in the School OPEB Fund is based on their current or last employer payroll location. Current and former employees of public school districts, libraries, regional educational service agencies and community colleges are allocated to the School OPEB Fund irrespective of retirement system affiliation. In addition, the discount rate increased from 3.07% to 3.58%.
The long-term expected rate of return on OPEB plan investments was determined using a log- normal distribution analysis in which best-estimate ranges of expected future real rates of return (expected nominal returns, net of investment expense and the assumed rate of inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table:

Asset class Local government investment pool

Target allocation (%)
100.00%

Long-term expected real rate
of return (%)* 1.13%

*Rate shown is net of the 2.75% assumed rate of inflation

-26-

HANCOCK COUNTY BOARD OF EDUCATION EXHIBIT "G"
NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018

Note 11: OTHER POST-EMPLOYMENT BENEFITS (CONTINUED)
OPEB Liabilities, OPEB Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to OPEB (Continued)
Discount rate. In order to measure the total OPEB liability for the School OPEB Fund, a single equivalent interest rate of 3.58% was used as the discount rate. This is comprised mainly of the yield or index rate for 20-year tax-exempt general obligation municipal bonds with an average rating of AA or higher (3.56% per the Bond Buyers Index). The projection of cash flows used to determine the discount rate assumed that contributions from members and from the employer will be made at the current level as averaged over the last five years, adjusted for annual projected changes in headcount. Projected future benefit payments for all current plan members were projected through 2115. Based on these assumptions, the OPEB plan's fiduciary net position was projected to be available to make OPEB payments for inactive employees through year 2029. Therefore, the calculated discount rate of 3.58% was applied to all periods of projected benefit payments to determine the total OPEB liability.
Sensitivity of the District's proportionate share of the net OPEB liability to changes in the discount rate. The following presents the School District's proportionate share of the net OPEB liability calculated using the discount rate of 3.58%, as well as what the District's proportionate share of the net OPEB liability would be if it were calculated using a discount rate that is 1- percentage-point lower (2.58%) or 1-percentage-point higher (4.58%) than the current discount rate:

School OPEB Fund- Discount Rate
School District's proportionate share of the OPEB liablity

1% Decreas e (2.58%)

Current Discount Rate
(3.58%)

1% In creas e (4.58%)

$ 16,108,290 $ 13,566,922 $ 11,561,268

Sensitivity of the District's proportionate share of the net OPEB liability to changes in the
healthcare cost trend rates. The following presents the School District's proportionate share of the net OPEB liability, as well as what the School District's proportionate share of the net OPEB liability would be if it were calculated using healthcare cost trend rates that are 1-percentage-point lower or 1-percentage-point higher than the current healthcare cost trend rates:

School OPEB Fund- Healthcare Cost Trend Rate

1%

Decreas e

School District's proportionate share

of the OPEB liablity

$ 11,245,433

Current Healthcare Cost
Trend Rate

1% In creas e

$ 13,566,922 $ 16,589,498

OPEB plan fiduciary net position. Detailed information about the OPEB plan's fiduciary net position is available in the Comprehensive Annual Financial Report (CAFR) which is publicly available at https://sao.georgia.gov/comprehensive-annual-financial-reports.

-27-

HANCOCK COUNTY BOARD OF EDUCATION EXHIBIT "G"
NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018
Note 12: RETIREMENT PLANS
The School District participates in various retirement plans administered by the State of Georgia as further explained below.
Teachers Retirement System of Georgia (TRS)
Plan Description. All teachers of the School District as defined in O.C.G.A. 47-3-60 and certain other support personnel as defined by O.C.G.A. 47-3-63 are provided a pension through the Teachers Retirement System of Georgia (TRS). TRS, a cost-sharing multiple-employer defined benefit pension plan, is administered by the TRS Board of Trustees (TRS Board). Title 47 of the O.C.G.A. assigns the authority to establish and amend the benefit provisions to the State Legislature. The Teachers Retirement System of Georgia issues a publicly available separate financial audit report that can be obtained at www.trsga.com/publications.
Benefits Provided. TRS provides service retirement, disability retirement, and death benefits. Normal retirement benefits are determined as 2% of the average of the employee's two highest paid consecutive years of service, multiplied by the number of years of creditable service up to 40 years. An employee is eligible for normal service retirement after 30 years of creditable service, regardless of age, or after ten years of service and attainment of age 60. Ten years of service is required for disability and death benefits eligibility. Disability benefits are based on the employee's creditable service and compensation up to the time of disability. Death benefits equal the amount that would be payable to the employee's beneficiary had the employee retired on the date of death. Death benefits are based on the employee's creditable service and compensation up to the date of death.
Contributions. Per Title 47 of the O.C.G.A., contribution requirements of active employees and participating employers, as actuarially determined, are established and may be amended by the TRS Board. Contributions are expected to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. Employees were required to contribute 6% of their annual pay during fiscal year 2018. The School District's contractually required contribution rate for the year ended June 30, 2018, was 16.81% of annual school district payroll. For the current fiscal year, employer contributions to the pension plan were $1,109,608 from the School District.
Public School Employees Retirement System (PSERS)
Plan Description. PSERS is a cost-sharing multiple-employer defined benefit pension plan established by the Georgia General Assembly in 1969 for the purpose of providing retirement allowances for public school employees who are not eligible for membership in the Teachers Retirement System of Georgia. The ERS Board of Trustees, plus two additional trustees, administer PSERS. Title 47 of the O.C.G.A. assigns the authority to establish and amend the benefit provisions to the State Legislature. PSERS issues a publicly available financial report that can be obtained at www.ers.ga.gov/formspubs/formspubs.
-28-

HANCOCK COUNTY BOARD OF EDUCATION EXHIBIT "G"
NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018
Note 12: RETIREMENT PLANS (CONTINUED)
Public School Employees Retirement System (PSERS) (Continued)
Benefits provided. A member may retire and elect to receive normal monthly retirement benefits after completion of ten years of creditable service and attainment of age 65. A member may choose to receive reduced benefits after age 60 and upon completion of ten years of service.
Upon retirement, the member will receive a monthly benefit of $14.75, multiplied by the number of years of creditable service. Death and disability benefits are also available through PSERS. Additionally, PSERS may make periodic cost-of-living adjustments to the monthly benefits. Upon termination of employment, member contributions with accumulated interest are refundable upon request by the member. However, if an otherwise vested member terminates and withdraws his/her member contribution, the member forfeits all rights to retirement benefits.
Contributions. The general assembly makes an annual appropriation to cover the employer contribution to PSERS on behalf of local school employees (bus drivers, cafeteria workers, and maintenance staff). The annual employer contribution required by statute is actuarially determined and paid directly to PSERS by the State Treasurer in accordance with O.C.G.A. 47-4-29(a) and 60(b). Contributions are expected to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability.
Individuals who became members prior to July 1, 2012, contribute $4 per month for nine months each fiscal year. Individuals who became members on or after July 1, 2012, contribute $10 per month for nine months each fiscal year. The State of Georgia, although not the employer of PSERS members, is required by statute to make employer contributions actuarially determined and approved and certified by the PSERS Board of Trustees. The current fiscal year contribution was $42,170.
Pension Liabilities, Pension Expense, Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions
At June 30, 2018, the School District reported a liability of $10,481,370 for its proportionate share of the Net Pension Liability for TRS.
The Net Pension Liability was measured as of June 30, 2017. The total pension liability used to calculate the Net Pension Liability was based on an actuarial valuation as of June 30, 2016. An expected total pension liability as of June 30, 2017, was determined using standard roll-forward techniques. The School District's proportion of the Net Pension Liability was based on contributions to TRS during the fiscal year ended June 30, 2017.
At June 30, 2017, the School District's TRS proportion was 0.056396%, which was a decrease of 0.000105% from its proportion measured as of June 30, 2016.
-29-

HANCOCK COUNTY BOARD OF EDUCATION EXHIBIT "G"
NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018

Note 12: RETIREMENT PLANS (CONTINUED)

Pension Liabilities, Pension Expense, Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions (Continued)

At June 30, 2018, the School District did not have a PSERS liability for a proportionate share of the Net Pension Liability because of a Special Funding Situation with the State of Georgia, which is responsible for the Net Pension Liability of the plan. The amount of the State's proportionate share of the Net Pension Liability associated with the School District is $200,130.

The PSERS Net Pension Liability was measured as of June 30, 2017. The total pension liability used to calculate the Net Pension Liability was based on an actuarial valuation as of June 30, 2016. An expected total pension liability as of June 30, 2017, was determined using standard roll-forward techniques. The State's proportion of the Net Pension Liability associated with the School District was based on actuarially determined contributions paid by the State during the fiscal year ended June 30, 2017.

For the year ended June 30, 2018, the School District recognized pension expense of $671,284 for TRS and $40,334 for PSERS and revenue of $40,334 for PSERS. The revenue is support provided by the State of Georgia.

At June 30, 2018, the School District reported deferred outflows of resources and deferred inflows of resources related to pension from the following sources:

TRS

Deferred

Deferred

Outflows of Inflows of

Resources

Resources

Differences between expected and actual experience $ 392,068 $ 39,556

Changes of assumptions

229,765

-

Net difference between projected and actual earnings on pension plan investments

-

72,129

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

-

1,029,160

School District contributions subsequent to the measurement date
Total

1,109,608

-

$ 1,731,441 $ 1,140,845

-30-

HANCOCK COUNTY BOARD OF EDUCATION EXHIBIT "G"
NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018

Note 12: RETIREMENT PLANS (CONTINUED)

Pension Liabilities, Pension Expense, Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions (Continued)

School District contributions subsequent to the measurement date of $1,109,608 for TRS are reported as deferred outflows of resources and will be recognized as a reduction of the net pension liability in the year ending June 30, 2019. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows:

Fiscal Year

Ending June 30

TRS

2019

$ (546,347)

2020

203,066

2021

117,328

2022

(299,047)

2023

5,988

Actuarial assumptions: The total pension liability as of June 30, 2017 was determined by an actuarial valuation as of June 30, 2016, using the following actuarial assumptions, applied to all periods included in the measurement:

Teachers Retirement System

Inflation Salary increases Investment rate of return

2.75% 3.25 9.00%, average, including inflation 7.50%, net of pension plan investment
expense, including inflation

Post-retirement mortality rates were based on the RP-2000 White Collar Mortality Table with future mortality improvement projected to 2025 with the Society of Actuaries' projection scale BB (set forward one year for males) for service requirements and dependent beneficiaries. The RP2000 Disabled Mortality table with future mortality improvement projected to 2025 with Society of Actuaries' projection scale BB (set forward two years for males and four years for females) was used for the death after disability retirement. Rates of mortality in active service were based on the RP-2000 Employee Mortality Table projected to 2025 with projection scale BB.

The actuarial assumptions used in the June 30, 2016 valuation were based on the results of an actuarial experience study for the period July 1, 2009 June 30, 2014.

Public School Employees Retirement System

Inflation Salary increase Investment rate of return

2.75% N/A 7.50%, net of pension plan investment
expense, including inflation

-31-

HANCOCK COUNTY BOARD OF EDUCATION EXHIBIT "G"
NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018

Note 12: RETIREMENT PLANS (CONTINUED)

Pension Liabilities, Pension Expense, Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions (Continued)
Post-retirement mortality rates were based on the RP-2000 Blue-Collar Mortality Table projected to 2025 with projection scale BB (set forward three years for males and two years for females) for the period after service retirements and for dependent beneficiaries. The RP-2000 Disabled Mortality projected to 2025 with projection scale BB (set forward five years for both males and females) was used for death after disability retirement. There is a margin for future mortality improvement in the tables used by the System. Based on the results of the most recent experience study adopted by the Board on December 17, 2015, the numbers of expected future deaths are 9- 11% less than the actual number of deaths that occurred during the study period for healthy retirees and 9-11% less than expected under the selected table for disabled retirees. Rates of mortality in active service were based on the RP-2000 Employee Mortality Table projected to 2025 with projection scale BB.

The actuarial assumptions used in the June 30, 2016 valuation were based on the results of an actuarial experience study for the period July 1, 2009 June 30, 2014.

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

determined using a log-normal distribution analysis in which best-estimate ranges of expected

future real rates of return (expected returns, net of pension plan investment expense and inflation)

are developed for each major asset class. These ranges are combined to produce the long-term

expected rate of return by weighting the expected future real rates of return by the target asset

allocation percentage and by adding expected inflation. The target asset allocation and best

estimates of arithmetic real rates of return for each major asset class are summarized in the

following table:

TRS

PSERS

Long-term

Target

Target

expected real

Asset class

allocation

allocation

rate of return*

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

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

30.00% 37.20%
3.40% 1.40% 17.80% 5.20% 5.00%

(0.50)% 9.00% 12.00% 13.50% 8.00% 12.00% 10.50%

Total

100.00%

100.00%

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

-32-

HANCOCK COUNTY BOARD OF EDUCATION EXHIBIT "G"
NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018

Note 12: RETIREMENT PLANS (CONTINUED)

Pension Liabilities, Pension Expense, Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions (Continued)

Discount rate. The discount rate used to measure the total TRS and PSERS pension liability was 7.50%. The projection of cash flows used to determine the discount rate assumed that plan member contributions will be made at the current contribution rate and that employer and non-employer contributions will be made at rates equal to the difference between actuarially determined contribution rates and the member rate. Based on those assumptions, the TRS and PSERS pension plan's fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability.

Sensitivity of the School District's proportionate share of the net pension liability to changes in

the discount rate. The following presents the School District's proportionate share of the net

pension liability calculated using the discount rate of 7.50%, as well as what the School District's

proportionate share of the net pension liability would be if it were calculated using a discount rate

that is 1-percentage-point lower (6.50%) or 1-percentage-point higher (8.50%) than the current

rate:

1%

Curre nt

1%

De cre as e

Discount Rate

Incre as e

(6.50%)

(7.50%)

(8.50%)

District's proportionate share of the

net pension liability

$ 17,201,158 $ 10,481,370 $ 4,945,775

Pension plan fiduciary net position. Detailed information about the pension plan's fiduciary net position is available in the separately issued TRS and PSERS financial reports which are publicly available at www.trsga.com/publications and http://www.ers.ga.gov/formspubs/formspubs.html.
Note 13: CHANGE IN ACCOUNTING PRINCIPLE PRIOR PERIOD ADJUSTMENT

In fiscal year 2018, the School District adopted Governmental Accounting Standards Board (GASB) Statement No. 75, Accounting and Financial Reporting for Post-employment Benefits Other than Pensions. The provisions of this statement establish accounting and financial reporting standards for post-employment benefits for retired employees of state and local governmental employers through OPEB plans that are administered through trusts. Implementation of this statement required the School District to record a liability for its proportionate share of the Net OPEB Liability of the School OPEB Fund. The following adjustment was required to net position of governmental activities to record the net OPEB liability as of July 1, 2017:

Net position, governmental activities, previously reported Deferred outflows, contributions subsequent to measurement date Proportionate share of net School OPEB liability Net position, governmental activities, as restated

$ 1,021,580 503,484
(14,164,636) $ (12,639,572)

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HANCOCK COUNTY BOARD OF EDUCATION

SCHEDULE "1"

SCHEDULE OF PROPORTIONATE SHARE OF THE NET PENSION LIABILITY TEACHERS RETIREMENT SYSTEM OF GEORGIA FOR THE FISCAL YEAR ENDED JUNE 30

School District's proportion of the net pension liability School District's proportionate share of the net pension liability School District's covered payroll School District's proportionate share of the net pension liability
as a percentage of its covered payroll Plan fiduciary net position as a percentage of the total pension liability

2018

2017

2016

0.056396%

0.056501%

0.060825%

$ 10,481,370 $ 11,656,786 $ 9,260,002 $

$ 6,486,342 $ 6,204,324 $ 6,418,380 $

2015 0.064599% 8,161,232 6,590,342

161.59% 79.33%

187.88% 76.06%

144.27% 81.44%

123.84% 84.03%

Note: The measurement date for the year ended June 30, 2018 is June 30, 2017. The schedule above is intended to show information for the last ten fiscal years.

Additional years will be displayed as they become available.

- 35 -

HANCOCK COUNTY BOARD OF EDUCATION
SCHEDULE OF CONTRIBUTIONS TEACHERS RETIREMENT SYSTEM OF GEORGIA
FOR THE FISCAL YEAR ENDED JUNE 30

SCHEDULE "2"

Contractually required contribution Contributions in relation to the contractually required contribution Contribution deficiency (excess) School District's covered payroll Contributions as a percentage of covered payroll

2018

2017

2016

$ 1,109,608 $ 925,601 $ 885,357 $

1,109,608

925,601

885,357

$

- $

- $

- $

$ 6,600,880 $ 6,486,342 $ 6,204,324 $

16.81%

14.27%

14.27%

2015 844,017 844,017 -
6,418,380 13.15%

Note: The schedule above is intended to show information for the last ten fiscal years. Additional years will be displayed as they become available.

- 36 -

HANCOCK COUNTY BOARD OF EDUCATION

SCHEDULE "3"

SCHEDULE OF PROPORTIONATE SHARE OF THE NET PENSION LIABILITY PUBLIC SCHOOL EMPLOYEES RETIREMENT SYSTEM OF GEORGIA FOR THE FISCAL YEAR ENDED JUNE 30

School District's proportion of the net pension liability School District's proportionate share of the net pension liability State of Georgia's proportionate share of the net pension liability
associated with the School District Total
School District's covered-employee payroll School District's proportionate share of the net pension liability
as a percentage of its covered-employee payroll Plan fiduciary net position as a percentage of the total pension liability

2018

2017

2016

0.000000%

0.000000%

0.000000%

$

- $

- $

- $

2015 0.000000% -

200,130

275,751

187,254

$ 200,130 $ 275,751 $ 187,254 $

$ 601,630 $ 637,023 $ 667,351 $

170,734 170,734 695,089

0.00% 85.69%

0.00% 81.00%

0.00% 87.00%

0.00% 88.29%

Note: The measurement date for the year ended June 30, 2018 is June 30, 2017. The schedule above is intended to show information

for the last ten fiscal years. Additional years will be displayed as they become available.

- 37 -

HANCOCK COUNTY BOARD OF EDUCATION

SCHEDULE "4"

SCHEDULE OF PROPORTIONATE SHARE OF THE NET OPEB LIABILITY SCHOOL OPEB FUND
FOR THE FISCAL YEAR ENDED JUNE 30

School District's proportion of the net OPEB liability School District's proportionate share of the net OPEB liability State of Georgia's proportionate share of the net OPEB liability
associated with the School District
School District's covered - employee payroll School District's proportionate share of the net OPEB liability
as a percentage of its covered - employee payroll Plan fiduciary net position as a percentage of the total OPEB liability

2018

0.096562%

$

13,566,922

13,566,922

$

6,459,307

210.04% 1.61%

Note: The measurement date for the year ended June 30, 2018 is June 30, 2017. The schedule above is intended to show information for the last ten

fiscal years. Additional years will be displayed as they become available.

- 38 -

HANCOCK COUNTY BOARD OF EDUCATION
SCHEDULE OF CONTRIBUTIONS SCHOOL OPEB FUND
FOR THE FISCAL YEAR ENDED JUNE 30

SCHEDULE "5"

Contractually required contribution Contributions in relation to the contractually required contribution Contribution deficiency (excess) School District's covered-employee payroll Contributions as a percentage of covered-employee payroll

2018

2017

$

519,482

$

503,484

519,482

503,484

$

-

$

-

$ 6,374,147

$

6,459,307

8.15%

7.79%

Note: The schedule above is intended to show information for the last ten fiscal years. Additional years will be displayed as they become available.

- 39 -

HANCOCK COUNTY BOARD OF EDUCATION
NOTES TO THE REQUIRED SUPPLEMENTARY INFORMATION FOR THE FISCAL YEAR ENDED JUNE 30, 2018

SCHEDULE "6"

Teachers Retirement System Changes of assumptions : In 2010 and later, the expectation of retired life mortality was changed to the RP2000 Mortality Tables rather than the 1994 Group Annuity Mortality Table, which was used prior to 2010. In 2010, rates of withdrawal, retirement, disability and mortality were adjusted to more closely reflect actual experience. In 2010, assumed rates of salary increase were adjusted to more closely reflect actual and anticipated experience.
On November 18, 2015, the Board adopted recommended changes to the economic and demographic assumptions utilized by the School District. Primary among the changes were the updates to rates of mortality, retirement, disability, withdrawal and salary increases. The expectation of retired life mortality was changed to 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).
Public School Employees Retirement System Changes of assumptions: In 2010 and later, the expectation of retired life mortality was changed to the RP2000 Mortality Tables rather than the 1994 Group Annuity Mortality Table, which was used prior to 2010. In 2010, rates of withdrawal, retirement, disability and mortality were adjusted to more closely reflect actual experience.
On December 17, 2015, the Board adopted recommended changes to the economic and demographic assumptions utilized by the School District. Primary among the changes were the updates to rates of mortality, retirement, disability and withdrawal. The expectation of retired life mortality was changed to the RP-2000 Blue Collar Mortality Table projected to 2025 with projection scale BB (set forward three years for males and two years for females).
School OPEB Fund
Changes of benefit items: In the June 30, 2010 actuarial valuation, there was a change of benefit terms to require Medicare-eligible recipients to enroll in a Medicare Advantage plan to receive the State subsidy.
Changes of assumptions: In the revised June 30, 2017 actuarial valuation, there was a change relating to employee allocation. Employees were previously allocated based on their Retirement System membership, and currently employees are allocated based on their current employer payroll location. Additionally, there were changes to the discount rate and an increase in the investment rate of return due to a longer term investment strategy.
In the June 30, 2015 actuarial valuation, decremental and underlying inflation assumptions were changed to reflect the Retirement Systems' experience studies.
In the June 30, 2012 actuarial valuation, a data audit was performed and data collection procedures and assumptions were changed.

- 40 -

HANCOCK COUNTY BOARD OF EDUCATION

SCHEDULE "7"

GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
BUDGET AND ACTUAL FOR THE FISCAL YEAR ENDED JUNE 30, 2018

REVENUES Property taxes Sales taxes State funds Federal funds Charges for services Investment earnings Miscellaneous
Total revenues
EXPENDITURES Current: Instruction Support services:
Pupil services Improvement of instructional services Educational media services General administration School administration Business administration Maintenance and operation of plant Student transportation services Central support services Other support services Food services operations Debt service: Principal retirement Interest and fiscal charges Total expenditures
Excess (deficiency) of revenues over (under) expenditures
OTHER FINANCING USES Other uses Total other financing uses
Net change in fund balances

Budget

Original (1)

Final (1)

Actual

Variance With Final Budget

$ 5,113,676 $ 5,113,676 $ 5,345,282 $

20,000

20,000

52,292

5,545,136

5,502,005

4,752,647

3,761,521

3,852,100

4,286,301

-

-

173,352

7,000

7,000

2,884

198,229

200,700

121,215

14,645,562

14,695,481

14,733,973

231,606 32,292
(749,358) 434,201 173,352
(4,116) (79,485) 38,492

7,696,260
726,615 642,647 307,655 507,467 933,885 342,478 1,584,206 1,184,150 385,781 177,047 1,349,998
15,838,189
(1,192,627)
(2,900,600) (2,900,600)
(4,093,227)

7,257,717
783,879 797,972 166,655 566,056 946,185 342,478 1,607,571 1,174,614 385,781 183,214 1,351,798
15,563,920
(868,439)
(1,500,600) (1,500,600)
(2,369,039)

6,951,018
804,720 933,046
84,938 309,648 1,033,823 274,178 1,801,159 1,180,108 404,442 157,104 902,872
11,383 395
14,848,834
(114,861)
-
(114,861)

306,699
(20,841) (135,074)
81,717 256,408 (87,638)
68,300 (193,588)
(5,494) (18,661) 26,110 448,926
(11,383) (395)
715,086
753,578
1,500,600 1,500,600
2,254,178

FUND BALANCE, beginning of year

1,499,208

1,499,208

1,499,208

-

FUND BALANCE, end of year

$ (2,594,019) $ (869,831) $ 1,384,347 $

2,254,178

Note to the Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual
(1) Original and Final Budget amounts do not include budgeted revenues or expenditures of the various principal accounts. The actual revenues and expenditures of the various principal accounts are $127,786 and $164,052, respectively.

The accompanying schedule of revenues, expenditures, and changes in fund balances, budget and actual, is presented on the modified accrual basis of accounting, which is the basis of accounting used in the presentation of the fund financial statements.

The accompanying notes are an integral are an integral part of these financial statements.

- 41 -

HANCOCK COUNTY BOARD OF EDUCATION
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE FISCAL YEAR ENDED JUNE 30, 2018

SCHEDULE "8"

Funding Agency Program/Grant
Agriculture, U.S. Department of Pass-Through From Georgia Department of Education Child Nutrition Cluster Food Services School Breakfast Program National School Lunch Program Total Child Nutrition Cluster
Other Programs State Administrative Expenses
Total U.S. Department of Agriculture
Education, U.S. Department of Pass-Through From Georgia Department of Education Special Education Cluster Grants to States Preschool Grants
Total Special Education Cluster
Other Programs Title I Grants to Local Education Agencies Title I Grants to Local Education Agencies Supporting Effective Instruction State Grants Supporting Effective Instruction State Grants Rural Education Rural Education Career and Technical Education - Basic Grants to States Total other programs
Total U.S. Department of Education
Health and Human Services, U.S. Department of Direct Head Start Cluster Head Start Total U.S. Department of Health and Human Services
Defense, U.S. Department of Direct Department of the Air Force R.O.T.C. Program
Total Expenditures of Federal Awards
N/A = Not Available

CFDA Number

Pass-Through Entity ID Number

Expenditures In Period

10.553 10.555
10.560

18185GA324N1099

$

18185GA324N1100

16165GA904N2533

306,049 516,276 822,325
1,327 823,652

84.027 84.173
84.010 84.010 84.367 84.367 84.358 84.358 84.048

H027A170073 H173A170081
S010A160010 S010A170010 S367A160001 S367A170001 S358B160010 S358B170010 V048A170010

93.600

04CH4743-04-00

285,465 6,463
291,928
21,761 649,782 27,161 27,931 13,506 10,529 12,918 763,588 1,055,516
2,281,388 2,281,388

12.unknown

N/A

$

66,771

$

4,227,327

The accompanying notes are an integral are an integral part of these financial statements.

- 42 -

HANCOCK COUNTY BOARD OF EDUCATION
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE FISCAL YEAR ENDED JUNE 30, 2018

SCHEDULE "8"

Notes to the Schedule of Expenditures of Federal Awards
The School District did not provide Federal Assistance to any Subrecipient.
The accompanying schedule of expenditures of federal awards (the "Schedule") includes the federal award activity of the Hancock County Board of Education (the "Board") under programs of the federal government for the year ended June 30, 2018. The information in this Schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance).
Expenditures reported on the Schedule are reported on the modified accrual basis of accounting. Such expenditures are recognized following the cost principles in Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, wherein certain types of expenditures are not allowable or are limited as to reimbursement. The Board has elected not to use the 10% de minimis indirect cost rate as allowed under the Uniform Guidance.

The accompanying notes are an integral are an integral part of these financial statements.

- 43 -

HANCOCK COUNTY BOARD OF EDUCATION
SCHEDULE OF STATE REVENUE FOR THE FISCAL YEAR ENDED JUNE 30, 2018

SCHEDULE "9"

Agency/Funding
Grants Bright from the Start: Georgia Department of Early Care and Learning Pre-Kindergarten Program
Education, Georgia Department of Quality Basic Education Direct Instructional Cost Kindergarten Program Kindergarten Program - Early Intervention Program Primary Grades (1-3) Program Primary Grades - Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades Early Intervention (4-5) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Program for Intellectually Gifted Students - Category VI Remedial Education Program Alternative Education Program Media Center Program 20 Days Additional Instruction Staff and Professional Development Indirect Cost Central Administration School Administration Facility Maintenance and Operations Vocational Supervisors Categorical Grants Pupil Transportation Pupil Transportation Sparsity Nursing Services Mid-term Adjustment Hold-Harmless Food Services Amended Formula Adjustment Other State Programs Math and Science Supplements Preschool Handicapped Program Teachers Retirement
Office of the State Treasurer Public School Employees Retirement System
Georgia State Financing and Investment Commission Reimbursement on Construction Projects

Governmental

Fund Types

General

Capital Projects

Fund

Fund

Total

$

214,645 $

- $

214,645

237,616

-

3,141

-

523,797

-

45,606

-

282,991

-

15,216

-

425,851

-

385,870

-

175,008

-

678,325

-

5,743

-

109,572

-

32,317

-

78,422

-

24,725

-

13,579

-

282,699

-

270,166

-

173,030

-

8,252

-

342,356 140,981
45,000 196,916
19,908 (65,561)

13,588 27,890
2,828

42,170

-

$

4,752,647 $

-
-
-
452,620 452,620 $

237,616 3,141
523,797 45,606
282,991
15,216 425,851 385,870 175,008 678,325
5,743 109,572
32,317 78,422 24,725 13,579
282,699 270,166 173,030
8,252
342,356 140,981
45,000 196,916
19,908 (65,561)
13,588 27,890
2,828
42,170
452,620 5,205,267

The accompanying notes are an integral are an integral part of these financial statements.

- 44 -

HANCOCK COUNTY BOARD OF EDUCATION
SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS FOR THE FISCAL YEAR ENDED JUNE 30, 2018

SCHEDULE "10"

Project
Acquiring, adding to, renovating, repairing, reroofing, improving and demolishing, furnishing and equipping existing school buildings and other buildings and facilities useful and desirable in connection therewith, including, but not limited to, agricultural and band buildings, additional classrooms, administrative facilities, gymnasiums and physical education/athletic facilities; (ii) acquiring technology improvements, including safety and security improvements and computer technology; (iii) acquiring new school equipment, including new buses and maintenance vehicles; (iv) acquiring real property; (v) acquiring, constructing, and equipping new school buildings and other facilities; (vi) acquiring any necessary or desirable property, both real and personal, including textbooks and band instruments, the maximum amount of the projects to be paid with sales and use tax proceeds will be $3,000,000; and (vii) payment of expenses incident to accomplishing the foregoing.

Original Estimated Cost (1)

Current Estimated Costs (2)

Amount Expended In Current Year (3) (4)

Amount Expended In Prior Years (3) (4)

Total Completion
Cost

Project #1 Reroofing of Hancock Central High/Middle School
Project #2 Cameras
Project #3 Purchase/Repair of School Buses
Project #4 Purchase of Instructional Technology
Project #5 Textbooks
Project #6 Renovations

$ 1,000,000 $ 620,163 $ 88,067 $ 532,096 $ 620,163

500,000

500,000

-

-

-

600,000

600,000

-

-

-

300,000

300,000

-

-

-

400,000

400,000

-

193,944

193,944

200,000

200,000

$ 3,000,000 $ 2,620,163 $

-

-

88,067 $ 726,040

$ 814,107

(1) The School District's original cost estimate as specified in the resolution calling for the imposition of the Local Option Sales Tax.
(2) The School District's current estimate of total cost for the projects. Includes all cost from project inception to completion.
(3) The voters of Hancock County approved the imposition of a 1% sales tax to fund the above projects. Amounts expended for these projects may include sales tax proceeds, state, local property taxes and/or other funds over the life of the projects. (4) The School District does not have any excess proceeds on hand not yet expended.

Estimated Completion
Date
Complete June 30, 2020 June 30, 2019 June 30, 2021 June 30, 2021 June 30, 2021

The accompanying notes are an integral are an integral part of these financial statements.

- 45 -

SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS

Greg S. Griffin
STATE AUDITOR
(404) 656-2174

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
November 1, 2019

The Honorable Brian P. Kemp, Governor of Georgia Members of the General Assembly of the State of Georgia Members of the State Board of Education
and Superintendent and Members of the Hancock County Board of Education
INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED
IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the governmental activities, each major fund and the aggregate remaining fund information of the Hancock County (School District), as of and for the year ended June 30, 2018, and the related notes to the financial statements, which collectively comprise the School District's basic financial statements, and have issued our report thereon dated November 1, 2019. The report on aggregate remaining fund information was adverse because management did not include agency funds related to the fiduciary activities of its school activity (principal) accounts. Accounting principles generally accepted in the United States of America require agency funds to be reported as aggregate remaining fund information.
Internal Control Over Financial Reporting
In planning and performing our audit of the financial statements, we considered the School District's internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the School District's internal control. Accordingly, we do not express an opinion on the effectiveness of the School District's internal control.
Our consideration of internal control was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that have not been identified. However, as described in the accompanying Schedule of Findings and Questioned Costs, we identified certain deficiencies in internal control that we consider to be material weaknesses and a significant deficiency.
A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or

combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. We consider the deficiencies described in the accompanying Schedule of Findings and Questioned Costs as items FS-2018-001, FS-2018-002 and FS-2018-004 to be material weaknesses.
A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. We consider the deficiency described in the accompanying Schedule of Findings and Questioned Costs as item FS-2018-003 to be a significant deficiency.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the School District's financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed an instance of noncompliance or other matters that are required to be reported under Government Auditing Standards and which is described in the accompanying Schedule of Findings and Questioned Costs as item FS-2018-004.
School District's Response to Findings
The School District's response to the findings identified in our audit is described in the accompanying Schedule of Findings and Questioned Costs. The School District's response was not subjected to the auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on it.
Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the School District's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the School District's internal control and compliance. Accordingly, this communication is not suitable for any other purpose.
Respectfully submitted,
Greg S. Griffin State Auditor

Greg S. Griffin
STATE AUDITOR
(404) 656-2174

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
November 1, 2019

The Honorable Brian P. Kemp, Governor of Georgia Members of the General Assembly of the State of Georgia Members of the State Board of Education
and Superintendent and Members of the Hancock County Board of Education
INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY THE UNIFORM GUIDANCE
Report on Compliance for Each Major Federal Program
We have audited the Hancock County Board of Education (School District) compliance with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on each of its major federal programs for the year ended June 30, 2018. The School District's major federal programs are identified in the Summary of Auditor's Results section of the accompanying Schedule of Findings and Questioned Costs.
Management's Responsibility
Management is responsible for compliance with federal statutes, regulations, and the terms and conditions of its federal awards applicable to its federal programs.
Auditor's Responsibility
Our responsibility is to express an opinion on compliance for each of the School District's major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Those standards and the Uniform Guidance require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the School District's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances.
We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of the School District's compliance.

Opinion on Each Major Federal Program
In our opinion, the School District complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended June 30, 2018.
Report on Internal Control over Compliance
Management of the School District is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered the School District's internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the School District's internal control over compliance.
A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance.
Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that were not identified. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, we identified certain deficiencies in internal control over compliance, as described in the accompanying Schedule of Findings and Questioned Costs as items FA-2018-001, FA-2018-002, FA-2018-003 and FA-2018-004, that we consider to be significant deficiencies.
The School District's responses to the internal controls over compliance findings identified in our audit are described in the accompanying Schedule of Findings and Questioned Costs. The School District's responses were not subjected to the auditing procedures applied in the audit of compliance and, accordingly, we express no opinion on the responses.

The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose.
Respectfully submitted,
Greg S. Griffin State Auditor

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

HANCOCK COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2018

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FS-6701-12-01 Control Category: Internal Control Impact: Compliance Impact:

Inadequate Access Controls Separation of Duties Accounting Controls (Overall) Material Weakness None

Finding Status:

Unresolved

The School District has implemented controls to make sure that employees only have access to the accounting functions that are necessary for the performance of the employee's job duties. This finding is repeated because we don't have enough funds to employ additional help. This finding should be corrected by the end of fiscal year 2019.

FS-6701-12-02 Control Category; Internal Control Impact: Compliance Impact:

Inadequate Internal Controls Procedures Cash and Cash Equivalents Significant Deficiency None

Finding Status:

Further Action Not Warranted (1)

(1) Finding/internal control deficiencies of this nature, that are deemed significant deficiencies or material weaknesses and not require reporting in the audit report in accordance with Statements on Auditing Standards (SAS) or Governmental Auditing Standards (Yellow Book) will be communicated in a management letter.

FS-6701-12-03 Control Category;
Internal Control Impact: Compliance Impact:

Inadequate Internal Controls Over School Activity Accounts Cash and Cash Equivalents Revenues/Receivables/Receipts Expenditures/Liabilities/Disbursements Significant Deficiency None

Finding Status:

Partially Resolved

The School District will make sure that established and approved internal controls are followed and enforced thereby making sure that transactions are processed accurately and documentation is properly maintained. We have updated our internal control manual and implemented the procedures. This finding will be resolved by the end of fiscal year 2019.

FS-6701-12-09 Control Category: Internal Control Impact: Compliance Impact:

Failure to Adequately Maintain Capital Assets Capital Assets Significant Deficiency None

Finding Status:

Partially Resolved

The School District will reassess internal control procedures related to capital assets to ensure that they are in place and operating effectively. An administrative review will be conducted to make sure that the capital assets listing is accurate, and to make sure that the list conforms to generally accepted accounting principles. We are updating and inputting the fixed assets into our accounting system so we can correct this finding. This finding should be resolved by the end of fiscal year 2019.

1

HANCOCK COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2018

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FS-6701-13-01 Control Category: Internal Control Impact: Compliance Impact:

Inadequate Access Controls Separation of Duties Accounting Controls (Overall) Material Weakness None

Finding Status:

Unresolved

The School District will implement controls to make sure that employees only have access to the accounting functions that are necessary for the performance of the employee's job duties. This finding is repeated because we don't have enough funds to employ additional help. This finding should be corrected by the end of fiscal year fiscal year 2019.

FS-6701-13-02 Control Category; Internal Control Impact: Compliance Impact:

Inadequate Internal Controls Procedures Cash and Cash Equivalents Significant Deficiency None

Finding Status:

Further Action Not Warranted (1)

(1) Finding/internal control deficiencies of this nature, that are deemed significant deficiencies or
material weaknesses and not require reporting in the audit report in accordance with Statements on Auditing Standards (SAS) or Governmental Auditing Standards (Yellow Book)
will be communicated in a management letter.

FS 6701-13-03 Control Category:
Internal Control Impact: Compliance Impact:

Inadequate Internal Controls Over School Activity Accounts Cash and Cash Equivalents Expenditures/Liabilities/Disbursements Revenues/Receivables/Receipts Significant Deficiency None

Finding Status:

Partially Resolved

The School District will make sure that established and approved internal controls are followed and enforced thereby making sure that transactions are processed accurately and documentation is properly maintained. We have updated our internal control manual and implemented the procedures. This finding will be resolved by the end of fiscal year 2019.

FS 6701-13-08 Control Category: Internal Control Impact: Compliance Impact:

Failure to Adequately Maintain Capital Assets Capital Assets Significant Deficiency None

Finding Status:

Partially Resolved

The School District will reassess internal control procedures related to capital assets to ensure that they are in place and operating effectively. An administrative review will be conducted to make sure that the capital assets listing is accurate, and to make sure that the list conforms to generally accepted accounting principles. We are updating and inputting the fixed assets into our accounting system so we can correct this finding. This finding should be resolved by the end of fiscal year 2019.

2

HANCOCK COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2018

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FS 2014-001 Control Category: Internal Control Impact: Compliance Impact:

Inadequate Access Controls Separation of Duties Accounting Controls (Overall) Material Weakness None

Finding Status:

Unresolved

The School District will implement controls to make sure that employees only have access to the accounting functions that are necessary for the performance of the employee's job duties. This finding is repeated because we don't have enough funds to employ additional help. This finding should be corrected by the end of fiscal year fiscal year 2019.

FS 2014-002 Control Category;
Internal Control Impact: Compliance Impact:

Inadequate Internal Controls Procedures Cash and Cash Equivalents Investments Material Weakness None

Finding Status:

Further Action Not Warranted (1)

(1) Finding/internal control deficiencies of this nature, that are deemed significant deficiencies or
material weaknesses and not require reporting in the audit report in accordance with Statements on Auditing Standards (SAS) or Governmental Auditing Standards (Yellow Book)
will be communicated in a management letter.

FS 2014-003 Control Category:
Internal Control Impact: Compliance Impact:

Inadequate Internal Controls Over School Activity Accounts Cash and Cash Equivalents Expenditures/Liabilities/Disbursements Revenues/Receivables/Receipts Significant Deficiency None

Finding Status:

Partially Resolved

The School District will make sure that established and approved internal controls are followed and enforced thereby making sure that transactions are processed accurately and documentation is properly maintained. We have updated our internal control manual and implemented the procedures. This finding will be resolved by the end of fiscal year 2019.

3

HANCOCK COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2018

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FS 2014-008 Control Category: Internal Control Impact: Compliance Impact:

Inadequate Internal Controls over Capital Assets Capital Assets Significant Deficiency None

Finding Status:

Partially Resolved

The School District will reassess internal control procedures related to capital assets to ensure that they are in place and operating effectively. An administrative review will be conducted to make sure that the capital assets listing is accurate, and to make sure that the list conforms to generally accepted accounting principles. We are updating and inputting the fixed assets into our accounting system so we can correct this finding. This finding should be resolved by the end of fiscal year 2019.

FS 2015-001 Control Category: Internal Control Impact: Compliance Impact:

Inadequate Separation of Duties Accounting Controls (Overall) Material Weakness None

Finding Status:

Unresolved

The School District will implement controls to make sure that employees only have access to the accounting functions that are necessary for the performance of the employee's job duties. This finding is repeated because we don't have enough funds to employ additional help. This finding should be corrected by the end of fiscal year 2019.

FS-6701-2015-02 Control Category; Internal Control Impact: Compliance Impact:

Inadequate Internal Controls Procedures Cash and Cash Equivalents Significant Deficiency None

Finding Status:

Further Action Not Warranted (1)

(1) Finding/internal control deficiencies of this nature, that are deemed significant deficiencies or
material weaknesses and not require reporting in the audit report in accordance with Statements on Auditing Standards (SAS) or Governmental Auditing Standards (Yellow Book)
will be communicated in a management letter.

FS 2015-003 Control Category;
Internal Control Impact: Compliance Impact:

Inadequate Internal Controls Over School Activity Accounts Cash and Cash Equivalents Expenditures/Liabilities/Disbursements Revenues/Receivables/Receipts Material Weakness None

Finding Status:

Partially Resolved

The School District will make sure that established and approved internal controls are followed and enforced thereby making sure that transactions are processed accurately and documentation is properly maintained. We have updated our internal control manual and implemented the procedures. This finding will be resolved by the end of fiscal year 2019.

4

HANCOCK COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2018

FS 2015-005 Control Category; Internal Control Impact: Compliance Impact:

Inadequate Internal Controls over Capital Assets Capital Assets Significant Deficiency None

Finding Status:

Partially Resolved

The School District will reassess internal control procedures related to capital assets to ensure that they are in place and operating effectively. An administrative review will be conducted to make sure that the capital assets listing is accurate, and to make sure that the list conforms to generally accepted accounting principles. We are updating and inputting the fixed assets into our accounting system so we can correct this finding. This finding should be resolved by the end of fiscal year 2019.

FS 2016-001 Control Category: Internal Control Impact: Compliance Impact:

Inadequate Separation of Duties Accounting Controls (Overall) Material Weakness None

Finding Status:

Unresolved

The School District will implement controls to make sure that employees only have access to the accounting functions that are necessary for the performance of the employee's job duties. This finding is repeated because we don't have enough funds to employ additional help. This finding should be resolved by the end of fiscal year 2019.

FS 2016-002 Control Category: Internal Control Impact: Compliance Impact:

Inadequate Internal Controls over Cash and Cash Equivalents Cash and Cash Equivalents Significant Deficiency None

Finding Status:

Further Action Not Warranted (1)

(1) Finding/internal control deficiencies of this nature, that are deemed significant deficiencies or material weaknesses and not require reporting in the audit report in accordance with Statements on Auditing Standards (SAS) or Governmental Auditing Standards (Yellow Book) will be communicated in a management letter.

FS 2016-003 Control Category:
Internal Control Impact: Compliance Impact:

Inadequate Internal Controls over School Activity Accounts Cash and Cash Equivalents Revenues/Receivables/Receipts Expenditures/Liabilities/Disbursements General Ledger Material Weakness None

Finding Status:

Partially Resolved

The School District will make sure that established and approved internal controls are followed and enforced thereby making sure that transactions are processed accurately and documentation is properly maintained. We have updated our internal control manual and implemented the procedures. This finding will be resolved by the end of fiscal year 2019.

5

HANCOCK COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2018

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FS 2016-004 Control Category; Internal Control Impact: Compliance Impact:

Inadequate Internal Controls over Financial Reporting Financial Reporting Material Weakness None

Finding Status:

Previously Reported Corrective Action Implemented

FS 2016-005 Control Category; Internal Control Impact: Compliance Impact:

Inadequate Internal Controls over Capital Assets Capital Assets Significant Deficiency None

Finding Status:

Partially Resolved

The School District will reassess internal control procedures related to capital assets to ensure that they are in place and operating effectively. An administrative review will be conducted to make sure that the capital assets listing is accurate, and to make sure that the list conforms to generally accepted accounting principles. We are updating and inputting the fixed assets into our accounting system so we can correct this finding. This finding should be resolved by the end of fiscal year 2019.

FS 2016-006
Control Category; Internal Control Impact: Compliance Impact:

Inadequate Internal Controls over Budget Preparation/Execution Budget Preparation/Execution Significant Deficiency Non-Material Noncompliance

Finding Status:

Partially Resolved

The School District will establish appropriate procedures to ensure that the adopted budget for each budgeted fund is balanced as required. This finding should be resolved by the end of fiscal year 2019.

FS 2017-001 Control Category: Internal Control Impact: Compliance Impact:

Inadequate Separation of Duties Accounting Controls (Overall) Material Weakness None

Finding Status:

Unresolved

The School District will implement controls to make sure that employees only have access to the accounting functions that are necessary for the performance of the employee's job duties. This finding is repeated because we don't have enough funds to employ additional help. This finding should be resolved by the end of fiscal year 2019.

6

HANCOCK COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2018

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FS 2017-002 Control Category: Internal Control Impact: Compliance Impact:

Inadequate Internal Controls over Cash and Cash Equivalents Cash and Cash Equivalents Significant Deficiency None

Finding Status:

Further Action Not Warranted (1)

(1) Finding/internal control deficiencies of this nature, that are deemed significant deficiencies or material weaknesses and not require reporting in the audit report in accordance with Statements on Auditing Standards (SAS) or Governmental Auditing Standards (Yellow Book) will be communicated in a management letter.

FS 2017-003 Control Category:
Internal Control Impact: Compliance Impact:

Inadequate Internal Controls over School Activity Accounts Cash and Cash Equivalents Revenues/Receivables/Receipts Expenditures/Liabilities/Disbursements General Ledger Material Weakness None

Finding Status:

Partially Resolved

The School District will make sure that established and approved internal controls are followed and enforced thereby making sure that transactions are processed accurately and documentation is properly maintained. We have updated our internal control manual and implemented the procedures. This finding will be resolved by the end of fiscal year 2019.

FS 2017-004 Control Category; Internal Control Impact: Compliance Impact:

Inadequate Internal Controls over Financial Reporting Financial Reporting Material Weakness None

Finding Status:

Previously Reported Corrective Action Implemented

FS 2017-005 Control Category; Internal Control Impact: Compliance Impact:

Inadequate Accounting Procedures General Ledger Significant Deficiency None

Finding Status:

Unresolved

The School District will review current internal control procedures and ensure journal entries are approved in a timely manner This finding will be resolved by the end of fiscal year 2019.

FS 2017-006 Control Category; Internal Control Impact: Compliance Impact:

Inadequate Internal Controls over Capital Assets Capital Assets Significant Deficiency None

Finding Status:

Partially Resolved

7

HANCOCK COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2018

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

The School District will reassess internal control procedures related to capital assets to ensure that they are in place and operating effectively. An administrative review will be conducted to make sure that the capital assets listing is accurate, and to make sure that the list conforms to generally accepted accounting principles. We are updating and inputting the fixed assets into our accounting system so we can correct this finding. This finding should be resolved by the end of fiscal year 2019.

FS 2017-007
Control Category; Internal Control Impact: Compliance Impact:

Inadequate Internal Controls over Budget Preparation/Execution Budget Preparation/Execution Significant Deficiency Non-Material Noncompliance

Finding Status:

Unresolved

The School District will establish appropriate procedures to ensure that the adopted budget for each budgeted fund is balanced as required. This finding should be resolved by the end of fiscal year 2019.

PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported.

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SECTION IV FINDINGS AND QUESTIONED COSTS

HANCOCK BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2018

I SUMMARY OF AUDITOR'S RESULTS

Financial Statements
Type of auditor's report issue: Governmental Activities; General Fund; Capital Projects Fund Aggregate Remaining Fund Information

Internal control over financial reporting: Material weaknesses identified? Significant deficiencies identified?

Noncompliance material to financial statements noted:

Federal Awards

Internal Control over major programs: Material weakness identified? Significant deficiency identified?

Type of auditor's report issued on compliance for major programs: All major programs

Any audit findings disclosed that are required to be reported in accordance with 2 CFR 200.516(a)?

Identification of major programs: CFDA Numbers

Name of Federal Program or Cluster

10.553, 10.555 93.600

Child Nutrition Cluster Head Start Cluster

Dollar threshold used to distinguish between Type A and Type B programs: Auditee qualified as low-risk auditee?

Unmodified Adverse Yes Yes No
No Yes Unmodified No
$750,000.00 No

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HANCOCK BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2018

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FS 2018-001 Control Category: Internal Control Impact: Compliance Impact: Repeat of Prior Year Finding:

Accounting Controls (Overall) Financial Reporting Material Weakness None FS 2017-001, FS 2016-001, FS 2015-001, FS 2014-001, FS-6701-13-01 and FS-6701-12-01

Description: The accounting procedures of the School District were insufficiently designed to provide for adequate internal controls over general and application access controls related to the School District's significant financial applications and the approval of journal entries.

Criteria: The School District's management is responsible for designing and maintaining internal controls. Such internal controls would limit any one individual's access to both physical assets and the related accounting records.

Condition: A review of access to the School District's financial system revealed several users were granted access that allowed the user to perform conflicting significant duties, which could have an effect on data that is used in the preparation of the financial statements. Physical access to the server room was not limited to technology personnel only. No process in place to review user access appropriateness at a predefined frequency. There is a lack of review when journal entries are recorded on the general ledger. A review of sixty journal entries revealed twenty-two that were not approved in a timely manner or no approval date was noted, and one had no approval.

Questioned Costs: N/A

Cause: In discussing this deficiency with the School District, they stated that the cause was a direct result of the lack of personnel at the School District to ensure internal controls were operating effectively.

Effect or Potential Effect: The lack of adequate controls over the logical access to the School District's financial system and journal review process may result in errors and/or irregularities not being detected in a timely manner.

Recommendation: Application access controls in the accounting information system should complement the system of internal control by limiting an employee's access to only the accounting functions necessary for the performance of that employee's duties. Management should ensure that only technology personnel have access to the service room and periodic reviews are being performed to review the appropriateness of user access. In the case when management determines separation of duties is not cost beneficial, management should implement compensating controls that assist in assuring that financial transactions are properly processed and reported. Management should review internal control procedures to ensure that all journal entries are approved and in a timely manner.

Views of Responsible Officials: We concur with this finding.
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HANCOCK BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2018

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FS 2018-002 Control Category:
Internal Control Impact: Compliance Impact: Repeat of Prior Year Finding:

Internal Controls over School Activity Accounts Cash and Cash Equivalents Revenues/Receivables/Receipts Expenditures/Liabilities/Disbursements General Ledger Material Weakness None FS 2017-003, FS 2016-003, FS 2015-003, FS 2014-003, FS-6701-13-03 and FS-6701-12-03

Description: The accounting procedures of the School District were insufficient to provide adequate internal controls over school activity accounts.

Criteria: The School District's management is responsible for designing and maintaining internal controls that provide proper separation of duties and reasonable assurance that transactions are accurately processed according to established procedures.

Condition: We observed several areas where control deficiencies existed related to school activity accounts.

Cash and Cash Equivalents The School District did not establish adequate separation of duties for the key accounting functions of cash receipting , deposit preparation, and custody of cash.

Revenues/Receivables/Receipts A review of ten receipts revealed the following deficiencies:
Two receipts were not provided for review.

Expenditures/Liabilities/Disbursements A review of ten vouchers revealed the following deficiencies:
Four of the vouchers provided were not supported by an invoice. Two of the vouchers provided did not contain evidence of receipt of goods.

General Ledger Student activity fund transactions were commingled into two governmental funds (general and athletics). No analysis was performed to determine the correct classification of account activity balances between governmental and agency funds; therefore, it is not possible to determine the balance, if any, of funds held for others.

Questioned Costs: N/A

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HANCOCK BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2018

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
Cause: In discussing this deficiency with the School District, they stated that the cause was a direct result of the lack of resources to properly separate duties and time to train board personnel responsible for school activity account functions. The commingling of governmental and agency fund accounts was an attempt to clean up the accounts from previous years and ensure going forward that disbursements and receipts were recorded within in the correct club/organization; however, after consolidating all of the funds into two governmental accounts (general and athletics), the board failed to begin recording the receipts and disbursements to the applicable activity accounts.
Effect or Potential Effect: The lack of adequate controls increases the risk of theft, fraud, or misuse of School District resources that may result in errors and/or irregularities not being detected in a timely manner. Also, agency funds could be materially misstated.
Recommendation: While we acknowledge the size of the staff may make it difficult to fully separate duties, we recommend that the School District make every effort to provide for a proper separation of duties between the cash receipting function, deposit preparation and cash custody. In the case when management determines separation of duties is not cost beneficial, management should implement compensating controls that reduce vulnerabilities in ineffectively separated functions and the risk of errors and fraud. Management should implement procedures to ensure that disbursements and receipts of funds are adequately documented. The School District should ensure that accounts are properly classified and balances are properly reflected in the general ledger.
Views of Responsible Officials: We concur with this finding.

FS-2018-003 Control Category: Internal Control Impact: Compliance Impact: Repeat of Prior Year Finding:

Internal Controls over Capital Assets Capital Assets Significant Deficiency None FS 2017-006, 2016-005, FS 2015-005, FS 2014-008, FS-6701-13-08 and FS-6701-12-09

Description: The School District did not adequately maintain the capital assets records.

Criteria: Chapter IV-7 Implementing a Capital Asset Management System of the Financial Management for
Georgia Local Units of Administration indicates that School Districts must establish fixed asset policies,
define system requirements, implement a fixed asset system, and maintain fixed asset records.

Condition: A review of the School District's capital asset records revealed deficiencies as discussed below:

The capital asset listing, as presented, included adjustments for $22,740 which no assets were mentioned or explanations given.
The capital asset listing as presented, failed to provide elements of information as required such as asset identifiers and location for all assets.
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HANCOCK BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2018

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
Depreciation expense was not calculated using the straight-line method in accordance with the capital asset policy. The School District calculated depreciation using the half-year convention method.
Documentation of a physical inventory of capital assets was not provided. The School District did not adhere to its capital asset policy regarding reviewing assets for
impairments. There were several assets with a net book value of $43,645 that appeared to be impaired in accordance with GASB No. 42 and the capital asset policy. Three unrecorded capital asset purchases totaling $31,955 were noted during our testing of expenditures.
Questioned Costs: N/A
Cause: In discussing this deficiency with the School District, they stated that the cause was a direct result of the lack of time and resources to ensure adequate procedures are in place to process, record and report capital assets.
Effect or Potential Effect: The failure of the School District to maintain a complete and accurate capital asset listing can lead to inaccurate internal and external reporting as well as noncompliance with generally accepted accounting principles.
Recommendation: The School District should strengthen internal control procedures over capital assets to ensure that capital assets are recorded in accordance with the board's policy, all required elements are included on listing and adjustments are properly documented. Procedures should be implemented requiring properly documented inventory counts and review of expenses made during the year to verify the completeness of capital assets.
Views of Responsible Officials: We concur with this finding.

FS-2018-004 Control Category: Internal Control Impact: Compliance Impact: Repeat of Prior Year Finding:

Budget Deficit Budget Preparation/Execution Material Weakness Material Noncompliance FS-2017-007, FS-2016-006

Description: The School District did not adopt a balanced general fund budget for fiscal year 2018.

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HANCOCK BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2018

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
Criteria: Chapter IV-2 Preparing Operating Budgets of the Financial Management for the Georgia Local Units of Administration states in part: "The budget must be balanced for all budgeted funds. Total anticipated revenues should equal total estimated expenditures. In the event anticipated revenues are insufficient to fund anticipated essential expenditures, a portion of unassigned fund balance from previous years must be used to fund the short fall. In the event there is insufficient unassigned fund balance from previous years to fund anticipated expenditures, then such expenditures must be reduced to equal anticipated revenues plus available unassigned fund balance."
Condition: The School District's original and final budget for the general fund were not balanced. Total anticipated revenues and beginning fund balance were less than total estimated expenditures resulting in an original budget deficit of $2,594,019 and a final budget deficit of $869,831, respectively.
Cause: In discussing this issue with management, they stated they included the reimbursement of salaries to the general fund from the school nutrition and head start programs as other financing use for the federal programs.
Effect or Potential Effect: Ineffective budgeting techniques in the original and final budget resulted in a budget deficit of $2,594,019 and $869,831, respectively, and noncompliance with Chapter IV-2 of the Financial Management for Georgia Local Units of Administration.
Recommendation: The School District should strengthen controls over the budget process to ensure that both anticipated revenues and estimated expenditures for each program are included and that the adopted budget for each budgeted fund is balanced as required.
Views of Responsible Officials: We concur with this finding.

III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

FA 2018-001 Compliance Requirement:
Internal Control Impact: Compliance Impact: Federal Awarding Agency: Pass-Through Entity: CFDA Number and Title: Federal Award Number: Questioned Costs:

Improve Controls over Expenditures Activities Allowed or Unallowed Allowable Costs/Cost Principles Significant Deficiency Nonmaterial Noncompliance U.S. Department of Health and Human Services Direct 93.600 Head Start 04CH4743-04-00 $9,274.97

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HANCOCK BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2018
III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
Description: A review of expenditures charged to the Head Start program revealed that the School District did not implement internal control procedures to ensure that expenditures were recorded appropriately and were adequately documented.
Criteria: 2 CFR 200.403 prescribes the factors affecting allowability of costs and states in part that "costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles... (c) Be consistent with policies and procedures that apply uniformly to both federallyfinanced and other activities of the non-Federal entity... (g) Be adequately documented..."
In addition, 2 CFR 200.303(a) states in part that "non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the nonFederal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award... (c) Evaluate and monitor the non-Federal entity's compliance with statutes, regulations and the terms and conditions of Federal awards."
Condition: A sample of 40 expenditures were selected for testing using a non-statistical sampling approach. These expenditures were reviewed to determine if appropriate internal controls were implemented and applicable compliance requirements were met. The following deficiencies were noted:
Adequate supporting documentation was not maintained for one expenditure. For three expenditures, the amount recorded on the general ledger did not agree to supporting
documentation. For one expenditure, sales tax was incorrectly charged per review of the invoice and paid by
the School District.
Questioned Cost: Questioned costs of $9,274.97 with likely questioned costs of $32,628.42 were identified for undocumented and/or unallowable expenditures.
Cause: In discussing these deficiencies with the School District, they indicated that internal control procedures related to Head Start program expenditures were not adequately designed to ensure that documentation is properly maintained and expenditures were allowable. In addition, corrections were not made to the general ledger to appropriately reflect differences in check amounts and actual purchase amounts related to in-store purchases made in several instances.
Effect or Potential Effect: Failure to ensure that expenditures are documented appropriately, allowable, and recorded correctly on the general ledger exposes the School District to unnecessary risk of error and misuse of Federal funds. Additionally, the School District is not in compliance with the Uniform Guidance.
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HANCOCK BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2018

III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
Recommendation: The School District should review current internal control procedures related to Head Start program expenditures. Where vulnerable, the School District should develop and/or modify its policies and procedures to ensure that all expenditures are reviewed for appropriate documentation, allowability, and proper presentation on the general ledger. Furthermore, management should develop and implement a monitoring process to ensure that controls are properly implemented.
Views of Responsible Officials: We concur with this finding.

FA 2018-002 Compliance Requirement: Internal Control Impact: Compliance Impact: Federal Awarding Agency: Pass-Through Entity: CFDA Number and Title: Federal Award Number:
Questioned Costs:

Strengthen Controls over Employee Compensation Allowable Costs/Cost Principles Significant Deficiency Nonmaterial Noncompliance U.S. Department of Agriculture Georgia Department of Education Child Nutrition Cluster (CFDA 10.553 and 10.555) 18185GA324N1099 - School Breakfast Program 18185GA324N1100 - National School Lunch Program $31,362.00

Description: The policies and procedures of the School District were insufficient to provide adequate internal controls over the employee compensation process as it relates to the Child Nutrition Cluster.

Criteria: 2 CFR section 200.430(i) states in part that "Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity..."

In addition, 2 CFR 200.303(a) states in part that the "non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award... (c) Evaluate and monitor the non-Federal entity's compliance with statutes, regulations and the terms and conditions of Federal awards."

Condition: A random sample of five employees were selected for testing using a non-statistical sampling approach. These employees were reviewed to determine if internal controls were properly functioning and applicable compliance requirements were met. The following deficiencies were noted:

For two of the employees tested, documentation could not be provided to support the salary payments.
Questioned Cost: Questioned costs of $31,362.00, with likely questioned costs of $83,335.00, were identified for unsupported salary payments.

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HANCOCK BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2018

III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
Cause: In discussing these issues with the School District, they stated that a lack of resources and inadequate policies and procedures over the maintenance of documentation associated with Child Nutrition Cluster salaries contributed to the issues noted.
Effect or Potential Effect: Failure to pay employees of the Child Nutrition Cluster the appropriate amount and/or maintain documentation supporting these payments could result in the expenditure of funds for unallowable purposes. This may also expose the School District to unnecessary financial strains and shortages within the Child Nutrition Cluster fund. Additionally, the School District is not in compliance with the Uniform Guidance and Georgia Department of Education guidance.
Recommendation: The School District should evaluate their internal control processes regarding the retention of documentation to support employee compensation payments to ensure that Child Nutrition Cluster employees are paid appropriately. Furthermore, management should develop and implement a monitoring process to ensure that these procedures are properly implemented.
Views of Responsible Officials: We concur with this finding.

FA 2018-003 Compliance Requirement: Internal Control Impact: Compliance Impact: Federal Awarding Agency: Pass-Through Entity: CFDA Number and Title: Federal Award Number:
Questioned Costs:

Improve Controls over Equipment Equipment and Real Property Management Significant Deficiency Nonmaterial Noncompliance U.S. Department of Agriculture Georgia Department of Education Child Nutrition Cluster (CFDA 10.553 and 10.555) 18185GA324N1099 - School Breakfast Program 18185GA324N1100 - National School Lunch Program None Identified

Description: The policies and procedures of the School District did not provide adequate internal controls over equipment and real property management as it relates to the Child Nutrition Cluster.

Criteria: 2 CFR 200.313(d)(1) states, "Property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property (including the FAIN), who holds title, the acquisition date, and cost of the property, percentage of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property." In addition, 2 CFR 200.313(d)(2) states, "A physical inventory of the property must be taken and the results reconciled with the property records at least once every two years."

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HANCOCK BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2018

III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
Condition: The following deficiencies were noted when reviewing the Child Nutrition Cluster equipment listing:
Property records did not include the following required components: (1) A serial number of other identification number, (2) the source of funding for the property (including the FAIN), (3) percentage of Federal participation in the project costs for the Federal award under which the property was acquired, and (4) use and condition of property.
There was no evidence that a physical inventory has been performed in either the current year or the previous year.
Two of the four equipment items physically located by auditors did not have legible serial numbers or other identification numbers.
Cause: In discussing this deficiency with the School District, they stated that a physical inventory was performed, but the proper documentation was not completed to document the review. In addition, a lack of resources and inadequate policies and procedures over equipment maintenance contributed to the issues noted.
Effect or Potential Effect: Failure to maintain a complete and accurate equipment listing and reconcile results of the physical inventory performed to the property records exposes the School District to unnecessary risk of error and misuse of equipment and/or Federal funds. Additionally, the School District is not in compliance with the Uniform Guidance and Georgia Department of Education guidance.
Recommendation: The School District should develop and maintain an equipment listing that reflects all required information, including a description, an identifying number, the source of funding, the title holder, the acquisition date, the cost, the percentage of Federal participation in the project costs, the location, the use and condition, and any ultimate disposal data for each piece of equipment. In addition, management should implement controls to ensure that a complete physical inventory of equipment is performed at least once every two years.
Views of Responsible Officials: We concur with this finding.

FA 2018-004 Compliance Requirement: Internal Control Impact: Compliance Impact: Federal Awarding Agency: Pass-Through Entity: CFDA Number and Title: Federal Award Number: Questioned Costs:

Strengthen Controls over Matching Requirements Matching, Level of Effort, Earmarking Significant Deficiency Nonmaterial Noncompliance U.S. Department of Health and Human Services Direct 93.600 Head Start 04CH4743-04-00 None Identified

Description: The policies and procedures of the School District did not provide adequate internal controls over the matching requirements associated with the Head Start program.

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HANCOCK BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2018
III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Criteria: 45 CFR 1302.14(b)(1) states, "A program must ensure at least 10 percent of its total funded enrollment is filled by children eligible from services under IDEA [Individuals with Disabilities Act], unless the responsible HHS official grants a waiver." Condition: Our review of the targeted earmarking requirement revealed that the proper number of children eligible for service under the Individuals with Disabilities Act were not enrolled in the Head Start program. The School District was required to enroll a minimum of 19 children with disabilities in the Head Start program to be in compliance with Federal regulations. However, only 13 of these children were enrolled in the program. Cause: In discussing this deficiency with the School District, they indicated that a waiver for the requirement to enroll the minimum number of children with disabilities was not obtained appropriately. Effect or Potential Effect: Failure to ensure that matching requirements are met appropriately may lead to a reduction in funding for the Head Start program in future years and could result in unnecessary financial strains and shortages within the Head Start program fund. Additionally, the School District is not in compliance with Federal regulations specific to the Head Start program. Recommendation: The School District should review current internal control procedures related to Head Start program matching requirements and ensure that the appropriate number of children eligible for service under the Individuals with Disabilities Act are enrolled in the program or a waiver is obtained in the future. Furthermore, management should develop and implement a monitoring process to ensure that controls are properly implemented. Views of Responsible Officials: We concur with this finding.
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SECTION V MANAGEMENT'S CORRECTIVE ACTION