Henry County Board of Education, annual financial report for the fiscal year ended 2019 June 30

HENRY COUNTY BOARD OF EDUCATION
ANNUAL FINANCIAL REPORT FOR THE
FISCAL YEAR ENDED JUNE 30, 2019
Prepared by: Finance Department
33 North Zack Hinton Parkway McDonough, Georgia 30253

HENRY COUNTY BOARD OF EDUCATION
ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2019

TABLE OF CONTENTS

Page

FINANCIAL SECTION

Independent Auditor's Report ..............................................................................................................................1 3 Management's Discussion and Analysis...........................................................................................................4 12

Basic Financial Statements: Government-wide Financial Statements: Statement of Net Position ............................................................................................................................13 Statement of Activities .................................................................................................................................14 Fund Financial Statements: Balance Sheet Governmental Funds .......................................................................................................15 Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position......................................................................16 Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds..........................................................................................................17 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities............................................18 General Fund Statement of Revenues, Expenditures and Changes in Fund Balances Budget (Non-GAAP) and Actual ..............................................................................19 Debt Service Fund Statement of Revenues, Expenditures and Changes in Fund Balances Budget and Actual ....................................................................................................20 Special Revenue Fund Statement of Revenues, Expenditures and Changes in Fund Balances Budget (Non-GAAP) and Actual ..............................................................................21 Statement of Fiduciary Assets and Liabilities Agency Fund .................................................................22 Notes to Financial Statements ...................................................................................................................23 61

Required Supplementary Information: Schedule of Proportionate Share of the Net Pension Liability Teachers' Retirement System of Georgia...................................................................................................62 Schedule of Contributions Teachers' Retirement System of Georgia ........................................................63 Notes to Required Supplementary Information Teachers' Retirement System of Georgia...................................................................................................64 Schedule of Proportionate Share of the Net Pension Liability Public School Employees' Retirement System ..........................................................................................65 Notes to Required Supplementary Information Public School Employees' Retirement System ..........................................................................................66

HENRY COUNTY BOARD OF EDUCATION
ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2019

TABLE OF CONTENTS (CONTINUED)

Page

FINANCIAL SECTION (CONTINUED)

Required Supplementary Information (Continued): Schedule of Proportionate Share of the Net Pension Liability Employees' Retirement System...................................................................................................................67 Schedule of Contributions Employees' Retirement System .................................................................68 Notes to Required Supplementary Information Employees' Retirement System ............................................................................................................69 Schedule of Proportionate Share of the Net OPEB Liability School OPEB Fund.................................................................................................................................70 Schedule of Contributions School OPEB Fund .......................................................................................71 Notes to Required Supplementary Information School OPEB Fund ....................................................72
Supplementary Information: Schedule of Expenditures of Special Purpose Local Option Sales Tax Proceeds 2011 Issue ..................................................................................................................................73 Schedule of Expenditures of Special Purpose Local Option Sales Tax Proceeds 2016 Issue ..................................................................................................................................74

COMPLIANCE SECTION

Independent Auditor's Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards.................................................... 75 and 76
Independent Auditor's Report on Compliance for Each Major Program and On Internal Control Over Compliance Required By the Uniform Guidance ..............................................77 79
Schedule of Expenditures of Federal Awards.........................................................................................................80 Notes to Schedule of Expenditures of Federal Awards .........................................................................................81 Schedule of Findings and Questioned Costs ............................................................................................ 82 and 83 Schedule of Prior Year Findings...............................................................................................................................84

FINANCIAL SECTION

INDEPENDENT AUDITOR'S REPORT
To the Superintendent and Members of the Henry County Board of Education
McDonough, Georgia
Report on the Financial Statements
We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of the Henry County Board of Education (the "School System") as of and for the year ended June 30, 2019, and the related notes to the financial statements, which collectively comprise the School System's basic financial statements as listed in the table of contents.
Management's Responsibility for the Financial Statements Management is responsible for the preparation and the 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.
300 MULBERRY STREET, SUITE 300 POST OFFICE BOX 1877 MACON, GEORGIA 31202-1877 478-464-8000 FAX 478-464-8051 www.mjcpa.com MEMBERS OF THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS

Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the School System as of June 30, 2019, and the respective changes in financial position and the budgetary comparison for the General Fund, Special Revenue Fund and Debt Service Fund for the year then ended in accordance with accounting principles generally accepted in the United States of America.
Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the Management's Discussion and Analysis ("MD&A") (on pages 4 through 12), the schedules of proportionate share of the net pension liability, the schedules of pension contributions, the schedule of proportionate share of the net OPEB liability, and the schedule of OPEB contributions on pages 62 through 72 be presented to supplement the basic financial elements. 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 System's 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 not a required part of the basic financial statements. The schedule of expenditures of special purpose local option sales tax proceeds is presented for purposes of additional analysis as required by the Official Code of Georgia Annotated 48-8-121, and is also not a required part of the basic financial statements.
2

The schedule of expenditures of federal awards and the schedule of expenditures of special purpose local option sales tax proceeds (collectively "the supplementary information") are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the supplementary information is fairly stated, in all material respects, in relation to the basic financial statements as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated March 19, 2020, on our consideration of the School System's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Henry County Board of Education's internal control over financial reporting and compliance.
Macon, Georgia March 19, 2020
3

HENRY COUNTY BOARD OF EDUCATION
MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2019 _____________________________________________________________________________ INTRODUCTION
Our management's discussion and analysis ("MD&A") of the Henry County Board of Education's (the "School System") financial performance provides an overview of the School System's financial activities for the fiscal year ended June 30, 2019. The intent of this MD&A is to look at the School System's financial performance as a whole. Readers should also review the notes to the basic financial statements and financial statements to enhance their understanding of the School System's financial performance.
FINANCIAL HIGHLIGHTS
Key financial highlights for fiscal year 2019 are as follows: On the government-wide financial statements, the assets and deferred outflow of resources of the School System exceeded liabilities by $88.6 million. Total revenues for governmental funds increased from $486.1 million in 2018 to $513.9 million in 2019, an increase of $27.8 million. Total expenditures of governmental funds decreased from $594.2 million in 2018 to $572.8 million in 2019, a decrease of $21.4 million. The 2019 total fund balance for the General Fund ($44.8 million) shows a $5.7 million increase from the prior fiscal year amount ($39.1 million).
OVERVIEW OF THE FINANCIAL STATEMENTS
This annual report consists of three parts: MD&A (this section), the basic financial statements and required supplementary information. The basic financial statements include two levels of statements that present different views of the School System. These include the government-wide and fund financial statements. The government-wide financial statements include the Statement of Net Position and Statement of Activities. These statements provide information about the activities of the School System presenting both short-term and long-term information about the School System's overall financial status.
4

MANAGEMENT'S DISCUSSION AND ANALYSIS
____________________________________________________________________________
The fund financial statements focus on individual parts of the School System, reporting the School System's operation in more detail. The Governmental Funds statements disclose how basic services are financed in the short-term as well as what remains for future spending. The `Fiduciary Funds' statements provide information about the financial relationships in which the School System acts solely as a trustee or agent for the benefit of others. In the case of the School System, the General Fund, Capital Projects Fund, Debt Service Fund, and Special Revenue Fund are reported as major funds. The financial statements also include notes that explain some of the information in the statements and provide more detailed data. Additionally, other supplementary information (not required) is also presented that further supplements understanding of the financial statements. Government-Wide Statements The government-wide statements report information about the School System as a whole using accounting methods similar to those used by private-sector companies. The Statement of Net Position includes all of the School System's assets and liabilities. All of the current fiscal year's revenues and expenses are accounted for in the Statement of Activities regardless of when cash is received or paid. The two government-wide statements report the School System's net position and how they have changed. Net position, the difference between the School System's assets, deferred outflows of resources, liabilities, and deferred inflows of resources are one way to measure the School System's financial health or position. Over time, increases or decreases in the School System's net position are an indication of whether its financial health is improving or deteriorating, respectively. To assess the overall health of the School System, additional non-financial factors, such as changes in the property tax base, community support for education and student achievement should be considered. The Statement of Net Position and the Statement of Activities reflects the School System's governmental activities. Fund Financial Statements The School System uses many funds to account for a multitude of financial transactions during the fiscal year. However, the fund financial statements presented in this report provide separate columns of detailed information about only the School System's major funds.
5

MANAGEMENT'S DISCUSSION AND ANALYSIS

____________________________________________________________________________
Governmental Funds Most of the School System's activities are reported in governmental funds, which focus on how money flows into and out of those funds and the balances left at year-end available for spending in future periods. These funds are reported using the modified accrual method of accounting which measures cash and all other financial assets that can be readily converted to cash. The governmental fund statements provide a detailed short-term view of the School System's general government operations and the basic services it provides. Governmental fund information helps determine whether there are more or fewer financial resources that can be spent in the near future to finance educational programs. The differences between government activities (reported in the Statement of Net Position and the Statement of Activities) and governmental funds are reconciled in the financial statements.
Fiduciary Funds The School System is the trustee, or fiduciary, for assets that belong to clubs, organizations and others within the principals' accounts. The School System is responsible for ensuring that the assets reported in these funds are used only for their intended purposes and by those to whom the assets belong. The School System excludes these activities from the government-wide financial statements because it cannot use these assets to finance its operations.
FINANCIAL ANALYSIS OF THE SCHOOL SYSTEM AS A WHOLE

Assets Current and Other Assets Capital Assets, Net Total Assets

Table 1 Net Position

Governmental Activities

Fiscal Year 2019

Fiscal Year 2018

$

308,462,282

893,695,799

$

1,202,158,081

$

241,015,629

812,333,974

$

1,053,349,603

Deferred Outflows of Resources
Liabilities Current and Other Liabilities Long-Term Liabilities Total Liabilities
Deferred Inflows of Resources
Net Position Invested in Capital Assets, Net of Debt Restricted Unrestricted Total Net Position

$

117,595,032

88,403,842

1,069,477,443

$

1,157,881,285

$

73,302,644

$

92,709,861

81,444,691

982,490,990

$

1,063,935,681

$

35,766,785

$

598,809,672

$

505,860,673

167,057,676

36,995,158

(677,298,164)

(496,498,833)

$

88,569,184

$

46,356,998

6

MANAGEMENT'S DISCUSSION AND ANALYSIS

____________________________________________________________________________

Table 2

Changes in Net Position

Revenues Program Revenues: Charges for Services and Sales Operating Grants and Contributions Capital Grants and Contributions Total Program Revenues

Governmental Activities

Fiscal Year 2019

Fiscal Year 2018

$

9,781,937 $

253,245,829

8,436,033

271,463,799

9,482,885 246,182,430
1,777,452 257,442,767

General Revenues: Property Taxes Sales Taxes: Special Purpose Local Option Sales Tax For Debt Service Other Taxes Grants and Contributions not Restricted to Investment Earnings Local School Activity
Total General Revenues

173,432,809
38,146,683 4,336,018
14,904,866 4,665,378 9,559,078
245,044,832

157,001,792
35,564,476 4,171,946
19,858,289 2,659,272 9,614,513
228,870,288

Total Revenues

516,508,631

486,313,055

Program Expenses Instruction Support Services: Pupil Services Improvement of Instructional Services Instructional Staff Training Educational Media Services General Administration School Administration Business services Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations of Non-Instructional Services: Community Services School Nutrition Interest on Short-Term and Long-Term Debt Total Expenses
Increase in Net Position

308,500,000

17,870,947 11,105,559
4,463,182 5,970,969 3,460,028 28,037,512 1,733,493 33,434,825 19,481,336 2,398,360 3,608,246

3,487,793 18,115,970 12,628,225 474,296,445

$

42,212,186 $

320,338,625
16,480,801 10,852,901
3,622,817 6,040,408 3,358,907 28,314,697 1,870,087 33,717,886 20,755,701 2,106,651 3,274,490
3,077,700 17,706,614
9,451,111 480,969,396
5,343,659

7

MANAGEMENT'S DISCUSSION AND ANALYSIS

____________________________________________________________________________

Governmental Activities

The Statement of Activities shows the cost of program services and the charges for services and grants offsetting these services. Table 3 shows, for governmental activities, the total cost of services and the net cost of services. Net cost of services can be defined as the total cost less fees generated by the activities and intergovernmental revenue provided for specific programs. The net cost reflects the financial burden on the School System's taxpayers by each activity as compared to the prior fiscal year.

Instruction Support Services
Pupil Services Improvement of Instructional Services Improvement of instructional Staff Training Educational Media Services General Administration School Administration Business Services Maintenance and Operations Student Transportation Central Support Services Other Support Services Operations of Non-Instructional Services Enterprise Operations Community Services School Nutrition Interest on Long-Term Debt
Total Expenses

Table 3 Cost of Services

Total Cost of Services

Fiscal Year 2019

Fiscal Year 2018

Net Cost of Services

Fiscal Year 2019

Fiscal Year 2018

$

308,500,000 $

320,338,625 $

86,710,332 $

108,863,663

17,870,947 11,105,559
4,463,182 5,970,969 3,460,028 28,037,512 1,733,493 33,434,825 19,481,336 2,398,360 3,608,246

16,480,801 10,852,901
3,622,817 6,040,408 3,358,907 28,314,697 1,870,087 33,717,886 20,755,701 2,106,651 3,274,490

15,268,238 10,774,324
344,171 3,977,421 (1,295,936) 28,037,512 1,732,174 22,496,065 17,036,769 2,386,412 3,481,104

13,981,914 10,137,818
487,048 6,040,408 (1,685,854) 28,314,697 1,863,672 22,756,625 18,611,703 2,082,811 3,273,630

3,487,793 18,115,970 12,628,225

3,077,700 17,706,614 9,451,111

(67,278) (663,648)
(13,239) 12,628,225

(169,425) (1,034,957)
551,765 9,451,111

$

474,296,445 $

480,969,396 $

202,832,646 $

223,526,629

8

MANAGEMENT'S DISCUSSION AND ANALYSIS
____________________________________________________________________________
FINANCIAL ANALYSIS OF THE SCHOOL SYSTEM'S FUNDS
The School System's governmental funds are accounted for using the modified accrual basis of accounting. The governmental funds had total revenues of $513.9 million and total expenditures of $572.8 million. Included in the expenditures of $572.8 million were approximately $23 million of debt service expenditures.
Major Funds:
General Fund
The General Fund is the operating fund of the School System. Revenue from state and federal sources accounted for 61% of the School System's revenue. The other 39% is from local sources, primarily ad valorem taxes. In fiscal year 2019, state and federal funding increased by $1 million. Local revenues increased by $10.7 million. This was the result of growth in the property tax digest. The School System's maintenance and operation millage is 20.00 mills.
Capital Projects Fund
The Capital Projects Fund is used to account for school construction and improvement projects.
The Capital Projects Fund expenditures were made with funds from a $214.3 million General Obligation Bond Referendum in 2016 and a $110.7 million General Obligation Bond Referendum in 2018. The School System purchased school buses, improved technology, continued construction on a new middle school and a new high school, renovated, repaired, and improved existing facilities in 2019. Those expenditures totaled $117.6 million.
Debt Service Fund
The Debt Service Fund is used to account for the accumulation of resources and payments of principal and interest for general obligation bond issues of the School System. Special Purpose Local Option Sales Tax ("SPLOST") collections accounted for 60% of the Debt Service Fund revenue. The other 40% is from ad valorem taxes. For fiscal year 2019, the debt service millage rate was 3.628 mills.
General Fund Budgeting Highlights
The School System's budget is prepared according to Georgia Law. The most significant budgeted fund is the General Fund.
The School System budget is adopted at the aggregate level and maintained at the program, function, object, and site levels to facilitate budgetary control. The budgeting systems are designed to control the total budget, but provide flexibility to meet the ongoing programmatic needs. The budgeting systems are also designed to control total site budgets but provide flexibility for site management.
9

MANAGEMENT'S DISCUSSION AND ANALYSIS

____________________________________________________________________________
For the General Fund, actual revenues of $387.7 million were 100.9% of the final budgeted amount of $384.3 million. The final actual expenditures of $383 million were 99.7% of the final budgeted amount of $384.3 million. The School System's actual results for the General Fund for the fiscal year show that revenues exceeded expenditures by $4.7 million. The School System adopted a balanced budget for 2019. However, revenues exceeded projections and expenditures were less than projected.

CAPITAL ASSETS AND DEBT ADMINISTRATION

Capital Assets

At fiscal year ended June 30, 2019, the School System had $893.7 million invested in capital assets, all in governmental activities. Table 4 reflects a summary of these balances net of accumulated depreciation as compared to the prior fiscal year.

Table 4 Capital Assets (Net of Accumulated Depreciation)

Governmental Activities

Fiscal Year 2019

Fiscal Year 2018

Land Construction in Progress Buildings and Improvements Land Improvements Infrastructure Equipment
Total

$

43,256,086 $

43,256,086

177,527,230

85,131,520

628,024,267

643,716,685

17,775,037

9,972,251

2,441,488

2,528,942

24,671,691

27,728,490

$

893,695,799 $

812,333,974

10

MANAGEMENT'S DISCUSSION AND ANALYSIS

____________________________________________________________________________

Debt
At fiscal year ended June 30, 2019, the School System had $1.1 billion in long-term liabilities outstanding. Table 5 summarizes the School System's liabilities as compared to the prior fiscal year.
Table 5 Long-Term Liabilities at June 30,

Bonds Payable Compensated Absences Workers Compensation Claims Payable Net Pension Liability Net OPEB Liability
Total

Governmental Activities

Fiscal Year 2019

Fiscal Year 2018

$

435,410,755 $

329,558,595

1,918,832

1,681,620

2,442,229

2,302,600

356,254,292

350,461,838

273,451,335

$

298,486,337

$

1,069,477,443 $

982,490,990

At June 30, 2019, the School System's assigned bond ratings were `Aa2' and 'AA' as determined by Moody's Investor Services, Inc. and Standard and Poor's Rating Services.
ECONOMIC CONDITIONS AFFECTING THE SCHOOL SYSTEM
The fiscal year 2020 budget was presented to the public and tentatively adopted by the School System on May 13, 2019 with the final adoption on June 10, 2019. The budget represents an investment plan for the School System, its students, employees, and the community as a whole. The budget is tied directly to the strategic vision and direction of the School System.
The budget for the General Fund for FY 2020 is $404.6 million, representing an increase of 5.3% from the FY 2019 General Fund budget.
The state revenue austerity cuts made to the Quality Basic Education ("QBE") funding formula were eliminated in FY 2019. The cuts began in FY 2003 and the cumulative effect of these reductions on the School System over a 16-year period is the loss of approximately $220.9 million. The School System does not expect an austerity reduction in FY 2021.
The millage rate to support the School System's operating budget is projected to remain unchanged from the previous year rate of 20.00 mills. Also, positively affecting revenue estimates is projected growth in the local property tax digest. The value of the ad valorem tax digest increased by 8.72% in FY 2019 and 6.18% in FY 2020. This indicates that existing property values have stabilized and new construction is being added to the digest.

11

MANAGEMENT'S DISCUSSION AND ANALYSIS
____________________________________________________________________________
With property tax revenue stabilizing and continuing to grow, and austerity cuts in state funding declining, the School System was able to continue its efforts in offering a competitive compensation package. The School System and the school communities know supportive, safe and secure learning environments are essential to student achievement. Financial resources are aligned to the School System's core beliefs and commitments.
The School System plans capital improvements as future capital needs arise due to increased student population, facility repair, and maintenance needs. Specific capital expenditure plans are formalized in conjunction with individual general obligation bond issues, collections from Education Special Purpose Local Option Sales Tax ("ESPLOST"), and anticipated annual receipts of capital outlay funds from the State of Georgia Department of Education. The School System regularly monitors anticipated capital outlay needs.
ESPLOST collections in calendar year 2019 were $39.3 million (7.67% increase compared to 2018). On March 1, 2016, the citizens of Henry County approved a referendum to continue collecting the sales tax for education for another five years beginning January 1, 2018 and ending on December 31, 2022.
On March 1, 2016, qualified voters of Henry County approved the School System to issue up to $325,000,000 in aggregate principal amount of General Obligation Bonds. On May 19, 2016, the School System issued $214,255,000 General Obligation Bonds, Series 2016. Collections from the ESPLOST beginning January 1, 2018, and bond millage tax revenue will be used to retire the 15-year bond debt. The funds will be used to construct a new high school, middle school, and performing arts center, renovate and repair existing facilities, improve technology, purchase buses and land. Expenditure of the funds began in FY 2018. On December 11, 2018, the School System issued $110,745,000 General Obligation Bonds, Series 2018, to be used to complete the aforementioned projects.
CONTACTING THE SCHOOL SYSTEM'S FINANCIAL MANAGEMENT
This financial report is designed to provide our citizens, taxpayers, investors and creditors with a general overview of the School System's finances and to show the School System's accountability for the money it receives. If you have questions about this report or need additional financial information, contact Mrs. Christy Willis, Chief Financial Officer, Henry County Board of Education, 33 North Zack Hinton Parkway, McDonough Georgia, 30253. You may also email your questions to Mrs. Willis at christy.willis@henry.k12.ga.us.
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BASIC FINANCIAL STATEMENTS

HENRY COUNTY BOARD OF EDUCATION
STATEMENT OF NET POSITION JUNE 30, 2019

ASSETS Cash and cash equivalents Investments Intergovernmental receivables Inventories Capital assets, nondepreciable Capital assets, depreciable (net of accumulated depreciation)
Total assets
DEFERRED OUTFLOWS OF RESOURCES Pensions Other post-employment benefits Deferred charge on refunding
Total deferred outflows of resources
LIABILITIES Accounts payable Accrued interest Accrued payroll and payroll withholdings Contracts payable Retainage payable Workers' compensation claims payable due within one year Workers' compensation claims payable due in more than one year Compensated absences due within one year Compensated absences due in more than one year Net pension liability, due in more than one year Net other post-employment benefit liability, due in more than one year General obligation bonds due within one year General obligation bonds due in more than one year,
net of unamortized premium
Total liabilities
DEFERRED INFLOWS OF RESOURCES Pensions Other post-employment benefits
Total deferred inflows of resources
NET POSITION Net investment in capital assets Restricted for debt service Restricted for program activities Restricted for capital projects Unrestricted
Total net position
The accompanying notes are an integral part of these financial statements.
13

Governmental Activities

$

32,789,029

228,095,043

47,194,348

383,862

220,783,316

672,912,483

1,202,158,081

90,485,916 26,683,814
425,302
117,595,032

12,550,017 7,988,380
47,972,032 9,857,042
10,036,371 1,887,478 554,751 1,069,035 849,797
356,254,292 273,451,335
33,046,000
402,364,755
1,157,881,285

11,338,213 61,964,431
73,302,644

598,809,672 66,710,538 4,699,323 95,647,815
(677,298,164)

$

88,569,184

HENRY COUNTY BOARD OF EDUCATION
STATEMENT OF ACTIVITIES FOR THE FISCAL YEAR ENDED JUNE 30, 2019

Functions/Programs Governmental activities:
Instruction Pupil services Improvement of
instructional services Instructional staff training Educational media services General administration School administration Business services Maintenance and operations Student transportation Central support services Other support services School nutrition Enterprise operations Community services Interest on long-term debt
Total governmental activities

Expenses

Charges for Services

Program Revenues

Operating

Capital

Grants and

Grants and

Contributions Contributions

Net (Expenses) Revenues and Changes
in Net Position Governmental
Activities

$ 308,500,000 $ 1,655,777 $ 212,187,958 $ 7,945,933 $

17,870,947

-

2,602,709

-

(86,710,332) (15,268,238)

11,105,559 4,463,182 5,970,969 3,460,028
28,037,512 1,733,493
33,434,825 19,481,336
2,398,360 3,608,246 18,115,970
3,487,793 12,628,225 $ 474,296,445 $

-

331,235

-

4,119,011

-

1,993,548

-

4,755,964

-

-

-

1,319

-

10,938,760

-

1,954,467

-

11,948

-

127,142

3,907,441

14,221,768

67,278

-

4,151,441

-

-

-

9,781,937 $ 253,245,829 $

490,100 8,436,033

(10,774,324) (344,171)
(3,977,421) 1,295,936 (28,037,512) (1,732,174) (22,496,065) (17,036,769) (2,386,412) (3,481,104)
13,239 67,278 663,648 (12,628,225) (202,832,646)

General revenues: Property taxes Sales taxes Other taxes Grants and contributions not restricted to specific programs Local school activity Unrestricted investment earnings Total general revenues Change in net position
Net position, beginning of year Net position, end of year

173,432,809

38,146,683

4,336,018

14,904,866

9,559,078

4,665,378

245,044,832

42,212,186

46,356,998

$

88,569,184

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

14

HENRY COUNTY BOARD OF EDUCATION
BALANCE SHEET GOVERNMENTAL FUNDS
JUNE 30, 2019

ASSETS

General

Debt Service

Special Revenue

Capital Projects

Total Governmental
Funds

Cash Investments Due from other governments Due from other funds Inventories

$ 24,725,298 $ 738,995 $ 7,224,040 $

100,696 $ 32,789,029

37,309,964

70,679,861

-

120,105,218

228,095,043

38,945,123

4,016,568

4,232,657

-

47,194,348

848,525

-

-

-

848,525

-

-

383,862

-

383,862

Total assets

$ 101,828,910 $ 75,435,424 $ 11,840,559 $ 120,205,914 $ 309,310,807

LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES

LIABILITIES Accounts payable Contracts payable Retainage payable Due to other funds Accrued payroll and payroll withholdings

$ 7,601,796 $ -
45,036,459

- $ 283,535 $

-

-

-

-

-

848,525

-

2,935,573

4,664,686 $ 9,857,042 10,036,371
-

12,550,017 9,857,042
10,036,371 848,525
47,972,032

Total liabilities

52,638,255

-

4,067,633

24,558,099

81,263,987

DEFERRED INFLOWS OF RESOURCES

Unavailable revenue - property taxes

4,346,094

736,506

-

Total deferred inflows of resources

4,346,094

736,506

-

-

5,082,600

-

5,082,600

FUND BALANCES Fund balances:
Nonspendable for inventories Restricted for:
Program activities Debt service Capital projects Committed to school activity funds Assigned: Program activities Unassigned

-
-
44,844,561

-
74,698,918
-
-

383,862
4,315,461 -
2,833,649
239,954 -

-
95,647,815 -
-

383,862
4,315,461 74,698,918 95,647,815
2,833,649
239,954 44,844,561

Total fund balances
Total liabilities, deferred inflows of resources and fund balances

44,844,561

74,698,918

7,772,926

95,647,815

222,964,220

$ 101,828,910 $ 75,435,424 $ 11,840,559 $ 120,205,914 $ 309,310,807

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

15

HENRY COUNTY BOARD OF EDUCATION
RECONCILIATION OF THE BALANCE SHEET OF GOVERNMENTAL FUNDS TO THE STATEMENT OF NET POSITION JUNE 30, 2019
Amounts reported for governmental activities in the statement of net position are different from amounts reported in the balance sheet of governmental funds due to the following:
Fund balances - total governmental funds
Capital assets Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds. Cost of the assets Accumulated depreciation
Revenues Other long-term assets are not available to pay for current period expenditures and, therefore, are reported as unavailable revenues in the funds.
The issuance of long-term debt provides current financial resources to governmental funds, while the repayment of the principal of long-term debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net position. Long-term liabilities at year-end consist of the following:
Bonds payable Accrued interest payable Unamortized premium Unamortized deferred charge on refunding Compensated absences Workers' compensation claims payable Net pension liability Deferred outflows of resources - pensions Deferred inflows of resources - pensions Net OPEB liability Deferred outflows of resources - OPEB Deferred inflows of resources - OPEB
Net position - governmental activities.
The accompanying notes are an integral part of these financial statements.

$ 222,964,220
1,166,188,914 (272,493,115) 5,082,600

(394,834,000) (7,988,380)
(40,576,755) 425,302
(1,918,832) (2,442,229) (356,254,292) 90,485,916 (11,338,213) (273,451,335) 26,683,814 (61,964,431)

$

88,569,184

16

HENRY COUNTY BOARD OF EDUCATION
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS
FOR THE FISCAL YEAR ENDED JUNE 30, 2019

REVENUES Local sources State sources Federal sources Interest income Total revenues

General

Debt Service

Special Revenue

Capital Projects

Total Governmental
Funds

$ 151,315,661 $ 63,369,179 $ 17,627,847 $

234,094,102

-

1,378,274

2,178,465

-

31,277,687

1,056,544

980,916

466

388,644,772

64,350,095

50,284,274

7,945,933
2,627,452 10,573,385

$ 232,312,687 243,418,309 33,456,152 4,665,378 513,852,526

EXPENDITURES Current: Instruction Pupil services Improvement of instructional services Instructional staff training Educational media services General administration School administration Business services Maintenance and operations Student transportation Central support services Other support services School nutrition Community service Capital outlay Debt service: Principal retirement Interest and fiscal charges Bond issuance costs and fees Total expenditures

258,020,183 15,620,683 9,011,293 430,682 6,084,627 3,199,476 28,742,000 1,761,348 33,381,651 20,403,426 2,426,240 3,489,963 97,133 -
382,668,705

1,355 -
9,914,000 12,336,769
22,252,124

19,413,628 2,607,345 2,246,892 4,118,510 299,921 92,866 10,261 126,867
17,810,727 3,490,619 -
50,217,636

116,891,972
722,669 117,614,641

277,433,811 18,228,028 11,258,185 4,549,192 6,084,627 3,499,397 28,742,000 1,762,703 33,381,651 20,496,292 2,436,501 3,616,830 17,907,860 3,490,619
116,891,972
9,914,000 12,336,769
722,669 572,753,106

Excess (deficiency) of revenues over (under) expenditures

5,976,067

42,097,971

66,638

(107,041,256)

(58,900,580)

OTHER FINANCING SOURCES (USES) Premium on bonds issued Sale of bond Transfers in Transfers out Total other financing sources (uses)

(252,186) (252,186)

-

-

8,279,672

8,279,672

-

-

110,745,000

110,745,000

-

252,186

-

252,186

-

-

-

(252,186)

-

252,186

119,024,672

119,024,672

Net change in fund balances

5,723,881

42,097,971

318,824

11,983,416

60,124,092

FUND BALANCE, beginning of year

39,120,680

32,600,947

7,454,102

83,664,399

162,840,128

FUND BALANCE, end of year

$ 44,844,561 $ 74,698,918 $ 7,772,926 $ 95,647,815 $ 222,964,220

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

17

HENRY 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, 2019

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. This is the amount by which capital outlay exceeded depreciation in the current period.
Total capital outlay Total depreciation
Revenues in the Statement of Activities that do not provide current financial resources are not reported as revenues in the funds.
The issuance of long-term debt provides current financial resources to governmental funds, and thus contributes to the change in fund balance. In the Statement of Net Position, however, issuing debt increases long-term liabilities and does not affect the Statement of Activities. Similarly, repayment of principal is an expenditure in the governmental funds, but reduces the liability in the Statement of Net Position. The amount of the items that make up these differences in the treatment of long-term debt and related items are as follows:
Issuance of general obligation bonds Principal repayments on general obligation bonds Premium on issuance of bonds
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. Also, governmental funds report the effect of premiums, discounts, and similar items when debt is first issued, whereas these amounts are deferred and amortized in the Statement of Activities. The adjustments for these items are as follows:
Change in compensated absences Change in accrued interest on general obligation bonds Change in workers' compensation claim liability Adjustment to record pension expense and related revenue for pension
special funding situation, net of fund level amounts Change in net pension liability and deferred inflows and outflows related to
pension activity Change in net OPEB liability and deferred inflows and outflows related to
OPEB activity Amortization of premium on general obligation bonds Amortization of deferred loss on refunding
Change in net position - governmental activities.

$

60,124,092

106,848,149 (25,486,324)
3,111,456

(110,745,000) 9,914,000 (8,279,672)

(237,212) (2,748,046)
(139,629)
(455,351)

8,447,373
(1,320,909) 3,258,512
(79,253)

$

42,212,186

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

18

HENRY COUNTY BOARD OF EDUCATION
GENERAL FUND STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET (NON-GAAP) AND ACTUAL
FOR THE FISCAL YEAR ENDED JUNE 30, 2019

REVENUES Local sources State sources Federal sources Interest income Total revenues

Budget

Original

Final

$ 148,239,151 233,290,226 2,388,000 350,000 384,267,377

$ 148,239,151 233,290,226 2,388,000 350,000 384,267,377

EXPENDITURES Current: Instruction Pupil services Improvement of instructional services Instructional staff training Educational media services General administration School administration Business services Maintenance and operations Student transportation Central support services Other support services Total expenditures

260,991,311 15,275,930 9,298,798 496,704 6,075,702 3,354,288 28,907,615 2,044,845 33,493,101 19,865,356 2,253,159 2,210,568
384,267,377

260,991,311 15,275,930 9,298,798 496,704 6,075,702 3,354,288 28,907,615 2,044,845 33,493,101 19,865,356 2,253,159 2,210,568
384,267,377

Excess of revenues over expenditures

-

-

OTHER FINANCING (USES) Transfers out Total other financing (uses)

-

-

-

-

Net change in fund balances

$

- $

-

Actual

Variance With Final Budget

$ 151,315,661 $ 233,147,189 2,178,465 1,056,544 387,697,859

3,076,510 (143,037) (209,535) 706,544
3,430,482

258,666,945 15,659,838 9,011,293 430,682 6,099,879 3,194,733 28,814,046 1,752,204 33,226,202 20,202,523 2,414,546 3,488,058
382,960,949

2,324,366 (383,908) 287,505 66,022 (24,177) 159,555 93,569 292,641 266,899 (337,167) (161,387)
(1,277,490) 1,306,428

4,736,910

4,736,910

(252,186) (252,186)
$ 4,484,724 $

(252,186) (252,186)
4,484,724

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

19

HENRY COUNTY BOARD OF EDUCATION
DEBT SERVICE FUND STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL
FOR THE FISCAL YEAR ENDED JUNE 30, 2019

REVENUES Local sources Interest income Total revenues
EXPENDITURES Current: Business services Debt service: Principal retirement Interest and fiscal charges Total expenditures
Net change in fund balances

Budget

Original

Final

Actual

Variance With Final Budget

$ 60,155,757 $ 60,155,757 $ 63,369,179 $ 3,213,422

-

-

980,916

980,916

60,155,757

60,155,757

64,350,095

4,194,338

-

-

1,355

(1,355)

9,914,000 12,336,769 22,250,769

9,914,000 12,336,769 22,250,769

9,914,000 12,336,769 22,252,124

(1,355)

$ 37,904,988 $ 37,904,988 $ 42,097,971 $ 4,192,983

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

20

HENRY COUNTY BOARD OF EDUCATION
SPECIAL REVENUE FUND STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET (NON-GAAP) AND ACTUAL
FOR THE FISCAL YEAR ENDED JUNE 30, 2019

REVENUES Local sources State sources Federal sources Interest income Total revenues

Budget

Original

Final

Actual

Variance With Final Budget

$ 19,345,000 $ 19,345,000 $ 17,627,847 $

1,150,000

1,150,000

1,378,274

29,317,999

29,317,999

31,277,687

-

-

466

49,812,999

49,812,999

50,284,274

(1,717,153) 228,274
1,959,688 466
471,275

EXPENDITURES Current: Instruction Pupil services Improvement of instructional services Instructional staff training General administration Student transportation Central support services Other support services School nutrition Community service Total expenditures

20,700,710 1,978,533 2,603,357 2,973,924 110,277 111,560 2,638 -
17,400,000 3,992,676
49,873,675

20,700,710 1,978,533 2,603,357 2,973,924 110,277 111,560 2,638 -
17,400,000 3,992,676
49,873,675

19,268,450 2,587,847 2,230,089 4,118,510 299,921 92,866 10,261 126,867
17,677,535 3,490,619
49,902,965

Excess (deficiency) of revenues over (under) expenditures

(60,676)

(60,676)

381,309

OTHER FINANCING SOURCES Transfers in Total other financing sources

-

-

252,186

-

-

252,186

Net change in fund balances

$

(60,676) $

(60,676) $

633,495 $

1,432,260 (609,314) 373,268
(1,144,586) (189,644) 18,694 (7,623) (126,867) (277,535) 502,057 (29,290)
441,985
252,186 252,186
694,171

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

21

HENRY COUNTY BOARD OF EDUCATION
STATEMENT OF FIDUCIARY ASSETS AND LIABILITIES AGENCY FUND JUNE 30, 2019

ASSETS Cash
LIABILITIES Due to others
The accompanying notes are an integral part of these financial statements.

Agency Fund Student Activities

$

480,082

$

480,082

22

HENRY COUNTY BOARD OF EDUCATION
NOTES TO FINANCIAL STATEMENTS JUNE 30, 2019

NOTE 1.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Reporting Entity
The Henry County Board of Education (the "School System") operates under a Board/Superintendent form of government. The five-member Board is elected by the public and the Board appoints the superintendent. These five elected members have decision making authority, the power to designate management, and the ability to significantly influence operations. The Board determines the millage rate at which school taxes are levied and may incur bonded indebtedness with voter approval.
B. Government-wide and Fund Financial Statements
The government-wide financial statements (i.e., the statement of net position and the statement of activities) report information on all of the non-fiduciary activities of the School System. For the most part, the effect of interfund activity has been removed from these statements. Governmental activities are normally supported by taxes and intergovernmental revenues.
The statement of activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include: 1) charges to those who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment, and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues.
Separate financial statements are provided for governmental funds and fiduciary funds, even though the latter are excluded from the government-wide financial statements. Major individual governmental funds are reported as separate columns in the fund financial statements.
C. Measurement Focus, Basis of Accounting and Basis of Presentation
The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Agency funds have no measurement focus; however, they use the accrual basis of accounting to recognize receivables and payables. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of the related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met.

23

NOTES TO FINANCIAL STATEMENTS

NOTE 1.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
C. Measurement Focus, Basis of Accounting and Basis of Presentation (Continued)
Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period. For this purpose, the School System considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due.
Property taxes, sales taxes, intergovernmental grants, and investment income associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. All other revenue items are considered to be measurable and available only when cash is received by the School System.
Revenue from grants and donations is recognized in the year in which all eligibility requirements have been satisfied. Eligibility requirements include timing requirements, which specify the year when the resources are required to be used or the year when use is first permitted; matching requirements, in which the School System must provide local resources to be used for a specified purpose; and expenditure requirements, in which the resources are provided to the School System on a reimbursement basis.
The State of Georgia reimburses the School System for teachers' salaries and operating costs through the Quality Basic Education ("QBE") Formula Earnings program. State of Georgia law defines the formula driven grant that determines the cost of an academic school year and the State of Georgia's share in this cost. Generally, teachers are contracted for the school year (July 1 June 30) and paid over a 12-month contract period, typically, September 1 through August 31. In accordance with the requirements of the enabling legislation of the QBE program, the State of Georgia reimburses the School System over the same 12-month period in which teachers are paid, funding the academic school year expenditures. At June 30th, 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 30th 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 30th, and the School System recognizes the same QBE as a receivable and revenue, consistent with symmetrical recognition.

24

NOTES TO FINANCIAL STATEMENTS

NOTE 1.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
C. Measurement Focus, Basis of Accounting and Basis of Presentation (Continued)
The School System reports the following major governmental funds:
The General Fund is the School System's primary operating fund. It accounts for all financial resources of the School System, except those required to be accounted for in another fund.
The Special Revenue Fund accounts for Federal and State funded programs. These grants are awarded to the School System for the purpose of accomplishing specific educational tasks as defined in the grant agreements. These funds also contain several locally funded programs whose expenditures are limited to specific purposes. School Activity Funds are also reported as special revenue funds. The School Activity Funds are used to account for funds collected primarily through the fund raising efforts of the individual school. Each school's principal is responsible, under the authority of the School System, for collecting, controlling, disbursing, and accounting for his or her school's funds. All resources of the fund, including earnings on invested resources, may be used to support the schools' activities.
The Debt Service Fund is used to account for accumulation of property tax and Special Purpose Local Option Sales Tax ("SPLOST") proceeds for the payment of debt principal and interest on the various bond issuances of the School System.
The Capital Projects Fund accounts for the proceeds of a 1% SPLOST as well as bond proceeds and revenues from local and state sources to be used for land and building acquisitions and construction and renovations of new educational and administrative facilities.
Additionally, the School System reports the following fund type:
The Agency Fund is used to account for student club and class accounts.
Amounts reported as program revenues include: 1) charges for services provided, 2) operating grants and contributions, and 3) capital grants and contributions. Internally dedicated resources are reported as general revenues rather than as program revenues. Likewise, general revenues include all taxes.
When both restricted and unrestricted resources are available for use, it is the School System's policy to use restricted resources first, then unrestricted resources as they are needed.

25

NOTES TO FINANCIAL STATEMENTS

NOTE 1.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
D. Cash and Investments
The School System's cash and cash equivalents are considered to be cash on hand, demand deposits, and short-term investments with original maturities of three months or less from the date of acquisition.
State statutes authorize the School System to invest in: obligations of the United States, the State of Georgia and other political subdivisions of the State of Georgia, and other states; prime bankers' acceptances; repurchase agreements; and the Georgia local government investment pool ("Georgia Fund 1"). The investment in Georgia Fund 1, created by the Official Code of Georgia Annotated ("O.C.G.A.") 36-83-8, represents the School System's portion of a pooled investment account operated by the Office of the State Treasurer. The pool consists of U.S. Treasury obligations, securities issued or guaranteed by the U.S. Government or any of its agencies or instrumentalities, banker's acceptances, overnight and term repurchase agreements with highly rated counterparties, and collateralized bank accounts. The investment in Georgia Fund 1 is valued at fair market value.
E. Receivables and Payables
Activity between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year as well as all other outstanding balances between funds are reported as "due to/from other funds."
F. On-Behalf Payments
The State of Georgia makes certain pension plan payments on behalf of the School System for its employees. The School System records these payments as both a revenue and expenditure in the General Fund. The total of the on-behalf payments for the fiscal year ended June 30, 2019, was $532,115.
G. Inventories
Inventories are stated at cost using the first-in/first-out method ("FIFO"). Donated food commodities are recorded at fair value. The School System utilizes the consumption method to recognize inventory usage. Under the consumption method, inventories are recorded as an expenditure when used rather than when purchased.

26

NOTES TO FINANCIAL STATEMENTS

NOTE 1.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

H. Non-Monetary Transactions

The School System received from the United States Department of Agriculture through the Georgia Department of Education approximately $1,380,022 in donated food commodities for its lunchroom programs. The federally assigned value of these commodities is reflected as a revenue and an expenditure in the financial statements.

I. Capital Assets

Capital assets, which include property, plant and equipment, are reported in the government-wide financial statements. Capital assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at acquisition value. Property, plant and equipment are depreciated using the straight-line method over the estimated useful life of the asset. The cost of normal maintenance and repairs that do not add to the value of the asset or materially extend assets' lives are not capitalized.

Capitalization thresholds and estimated useful lives of capital assets are as follows:

Asset

Capitalization Threshold

Years

Land Infrastructure Land improvements Buildings and improvements Machinery and equipment

All All $ 10,000 $ 100,000 $ 10,000

N/A 50 10 20 20 60 5 25

J. Deferred Outflows/Inflows of Resources

GASB Statements No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position and No. 65, Items Previously Reported as Assets and Liabilities, established accounting and financial reporting for deferred outflows/inflows of resources and the concept of net position as the residual of all other elements presented in a statement of net position.

In addition to assets, the statement of financial position/governmental funds balance sheet will sometimes report a separate section for deferred outflows of resources. This separate financial statement element represents a consumption of resources that applies to a future period(s) and so will not be recognized as an outflow of resources (expense/expenditure) until then. The Governmental Activities report several types of deferred outflows of resources related to the reporting of the net pension liability and net OPEB liability. See also Note 9 Retirement Plans and Note 10 Other Post-Employment Benefits.

27

NOTES TO FINANCIAL STATEMENTS

NOTE 1.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
J. Deferred Outflows/Inflows of Resources (Continued)
In addition to the items related to the changes in the net pension liability and the net OPEB liability, the School System has one other item that qualifies for reporting in this category. That item is the deferred charge on refunding reported in the government-wide statement of net position. A deferred charge on refunding results from the difference in the carrying value of the refunded debt and its reacquisition price. This amount is deferred and amortized over the shorter of the life of the refunded debt or the refunding debt.
In addition to liabilities, the statement of financial position/governmental funds balance sheet reports a separate section for deferred inflows of resources. This separate financial statement element represents an acquisition of resources that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. In addition to the items related to changes in the net pension liability and net OPEB liability as discussed below, the School System has one type of item, which arises only under a modified accrual basis of accounting that qualifies for reporting in this category. Accordingly, the item, unavailable revenue, is reported only in the governmental funds balance sheet. The Governmental Funds report unavailable revenues from two sources: property taxes and grants. These amounts are deferred and will be recognized as an inflow of resources in the period in which the amounts become available. The Governmental Activities report deferred inflows of resources related to the reporting of the net pension liability and net OPEB liability. See also Note 9 Retirement Plans and Note 10 Other Post-Employment Benefits.
K. Pensions
For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions and pension expense; information about the fiduciary net position of the Teachers' Retirement System of Georgia ("TRS"), the Public School Employees' Retirement System ("PSERS"), and the Employees' Retirement System ("ERS"); and additions to/deductions from each plans' fiduciary net position have been determined on the same basis as they are reported by each 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.
L. Long-Term Obligations
In the government-wide financial statements, long-term debt and other long-term obligations are reported as liabilities in the statement of net position. In the fund financial statements, governmental fund types report the face amount of debt issued as other financing sources.

28

NOTES TO FINANCIAL STATEMENTS

NOTE 1.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
L. Long-Term Obligations (Continued)
In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures.
M. Compensated Absences
It is the School System's policy to permit employees to accumulate unused vacation and sick pay benefits. Accumulated unpaid sick leave benefits do not vest and, therefore, are not accrued in any fund, but are recognized as expenditures or expenses when incurred. Accumulated unpaid vacation pay is accrued when incurred in the government-wide financial statements. A liability for these amounts is reported in the governmental funds only if they have matured, for example, as a result of employee resignations or retirements.
N. Other Post-employment Benefits ("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's 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.
O. Fund Equity
Fund equity at the governmental fund financial reporting level is classified as "fund balance". Fund equity for all other reporting is classified as "net position".

29

NOTES TO FINANCIAL STATEMENTS

NOTE 1.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
O. Fund Equity (Continued)
Generally, fund balance represents the difference between current assets and current liabilities. In the fund financial statements, governmental funds report fund balance classifications that comprise a hierarchy based primarily on the extent to which the School System is bound to honor constraints on the specific purposes for which amounts in those funds can be spent. Fund balances are classified as follows:
Nonspendable: Fund balances that are not in spendable form (e.g., inventory) or are legally or contractually required to be maintained intact (e.g., permanent fund principal).
Restricted: Fund balances that can be spent only for the specific purposes stipulated by external parties, either constitutionally or through enabling legislation (e.g., grants or donations).
Committed: Fund balances that can be used only for the specific purposes determined by an approved resolution of the School System. Commitments may be changed or lifted only by referring to formal action that imposed the original constraint on the fund (e.g., the School System's commitment in connection with future construction projects).
Assigned: Fund balances intended to be used by the School System for specific purposes. Intent can be expressed by the School System or by a designee to whom the School System delegates authority. In governmental funds other than the General Fund, assigned fund balance represents the amount that is not restricted or committed. This indicates that resources in other governmental funds are, at a minimum, intended to be used for the purpose of that fund.
Unassigned: Fund balances are reported as unassigned as the residual amount when the balances do not meet any of the above criteria. The School System reports positive unassigned fund balance only in the General Fund. Negative unassigned fund balances may be reported in all funds.
The responsibility for designating funds to specific classifications shall be as follows:
Committed: The Henry County Board of Education is the School System'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.
Assigned: The Henry County Board of Education has authorized the Superintendent and the Assistant Superintendent for Financial Services as officials authorized to assign fund balance to a specific purpose as approved by this fund balance policy.

30

NOTES TO FINANCIAL STATEMENTS

NOTE 1.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
O. Fund Equity (Continued)
It is the goal of the School System to achieve and maintain an unassigned fund balance in the General Fund at fiscal year-end of not less than 5% of budgeted expenditures, not to exceed 15% of the total budget of the subsequent fiscal year, net of any committed balance for capital expenditures, in compliance with O.C.G.A. 20-2-167(a)5. If the unassigned fund balance at fiscal year-end falls below the goal, the School System shall develop a restoration plan to achieve and maintain the minimum fund balance.
When multiple categories of fund balance are available for expenditures (e.g., a project is being funded partly by a grant, funds set aside by the School System, and unassigned fund balance), the School System will start with the most restricted category and spend those funds first before moving down to the next category with available funds.
Net position represents the difference between assets and liabilities in reporting which utilizes the economic resources measurement focus. Net investment in capital assets consists of capital assets, net of accumulated depreciation, reduced by the outstanding balance of any borrowing used (i.e., the amount that the School System has spent) for the acquisition, construction or improvement of those assets. Net position is reported as restricted using the same definition as used for restricted fund balance as described in the section above. All other net position is reported as unrestricted.
P. Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses/expenditures during the reporting period. Actual results could differ from those estimates.
Q. Tax Abatement Agreements
During the year ended June 30, 2017, the School System implemented GASB Statement No. 77, Tax Abatement Disclosures. This statement requires the School System to disclose information for any tax abatement agreements, either entered into by the School System, or agreements entered into by other governments that reduce the School System's tax revenues. As of June 30, 2019, the School System did not have any such agreements, either entered into by the School System or by other governments that exceeded the quantitative threshold for disclosure.

31

NOTES TO FINANCIAL STATEMENTS

NOTE 2.

STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY

The School System adopts annual budgets for its General Fund, Debt Service Fund and Special Revenue Fund. The School System does not employ encumbrance accounting and, accordingly, all appropriations lapse at year-end. After the School System has tentatively adopted a budget, such budget is advertised at least one time in a local newspaper of general circulation. At the next regular meeting of the Board members after the advertisement, the budget is revised as necessary and adopted as the final budget. This final budget is then submitted to the Georgia Department of Education in accordance with provisions of the QBE. The level of budgetary control (the level at which expenditures may not exceed appropriations) is at the function level.

The Statements of Revenues and Expenditures Budget (Non-GAAP) to Actual present actual and budget data for the General Fund, Special Revenue Fund and Debt Service Fund. To facilitate comparison with the budget, adjustments have been made to actual revenues and expenditures to reflect actual amounts on the budget basis. The primary differences between the budget basis and accounting principles generally accepted in the United States of America ("GAAP") are:

a. State QBE revenue is recorded when received (budget) rather than when susceptible to accrual (GAAP).

b. Salaries and employee benefits paid to teachers under contract are recorded when paid (budget) rather than when the liability is incurred (GAAP).

c. Payments made by the State of Georgia for School System employee benefits are recognized as revenues and expenditures under GAAP and are not recognized on the budget basis.

Adjustments necessary to convert the General Fund's net change in fund balance from the GAAP basis to the budgetary basis are as follows:

GAAP basis net change in fund balance

$ 5,723,881

Adjustments for: State QBE revenue Salaries and employee benefits State paid employee benefit revenue State paid employee benefit expenditures
Budget basis net change in fund balance

(414,798) (824,359) (532,115) 532,115
$ 4,484,724

32

NOTES TO FINANCIAL STATEMENTS

NOTE 2.

STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY (CONTINUED)

Adjustments necessary to convert the Special Revenue Fund's net change in fund balance from the GAAP basis to the budgetary basis are as follows:

GAAP basis net change in fund balance Adjustments for salaries and employee benefits
Budget basis net change in fund balance

$

318,824

314,671

$

633,495

NOTE 3.

DEPOSITS AND INVESTMENTS

Credit Risk. State statutes authorize the School System to invest in: obligations of the United States, the State of Georgia and other political subdivisions of the State of Georgia, and other states; prime bankers' acceptances; repurchase agreements; and the Georgia Fund 1. The investment in Georgia Fund 1, created by O.C.G.A. 36-83-8, represents the School System's portion of a pooled investment account operated by the Office of the State Treasurer. The pool consists of U.S. Treasury obligations, securities issued or guaranteed by the U.S. Government or any of its agencies or instrumentalities, bankers' acceptances, overnight and term repurchase agreements with highly rated counterparties, and collateralized bank accounts. The investment in Georgia Fund 1 is valued at fair market value.

At June 30, 2019, the School System had the following investments:

Investment Georgia Fund 1

Maturities 39-day weighted average

Fair Value $ 228,095,043

Interest Rate Risk. The School System does not have a formal investment policy that limits investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates.

Fair Value Measurements. The School System categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure the fair value of the asset. Level 1 inputs are quoted prices in active markets for identical assets; Level 2 inputs are significant other observable inputs; and Level 3 inputs are significant unobservable inputs.

The Georgia Fund 1 is an investment pool which does not meet the criteria of GASB Statement No. 79 and is thus valued at fair value in accordance with GASB Statement No. 31. As a result, the School System does not disclose investment in the Georgia Fund 1 within the fair value hierarchy.

33

NOTES TO FINANCIAL STATEMENTS

NOTE 3. NOTE 4.

DEPOSITS AND INVESTMENTS (CONTINUED)

Custodial Credit Risk Deposits. Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, a government will not be able to recover deposits or will not be able to recover collateral securities that are in the possession of an outside party. State statutes require all deposits and investments (other than federal and state government instruments) to be collateralized by depository insurance, obligations of the U.S. government, or bonds of public authorities, counties, or municipalities. As of June 30, 2019, all of the School System's deposits were properly collateralized in accordance with state law and applicable GASB pronouncements.

RECEIVABLES

Receivables at June 30, 2019, for the School System's individual major funds, including the applicable allowances for uncollectible accounts are as follows:

Due from other governments Less allowance
for uncollectible
Net total receivable

General

Debt Service

Special Revenue
Fund

Total

$ 39,451,974 $ 4,108,844 $ 4,232,657 $ 47,793,475

(506,851)

(92,276)

-

(599,127)

$ 38,945,123 $ 4,016,568 $ 4,232,657 $ 47,194,348

NOTE 5.

Due from other governments consists of grant reimbursements due primarily from the Georgia Department of Education, sales taxes which are collected by the state on the School System's behalf, and property taxes collected by the Henry County Tax Commissioner on the School System's behalf.
PROPERTY TAXES
Henry County bills and collects property taxes for the School System. Property taxes are levied (assessed) on all taxable real, public utility and personal property (including vehicles) located within the County as of January 1st of each year. State law limits the School System's tax levy for operations to 20 mills (one mill equals $1 per thousand dollars of assessed value). Assessed values for property tax purposes are determined by the Henry County Board of Tax Assessors for all property except public utilities and motor vehicles. Assessed value is set at 40% of market value. The State of Georgia establishes values for public utilities and motor vehicles.
Real property taxes were levied on August 1, 2018, billed on August 21, 2018, and payable on or before November 16, 2018. Henry County may place liens on property once the related tax payments become delinquent. The property tax receivable allowance is equal to 10% of outstanding property taxes at June 30, 2019, net of amounts collected within 60 days of year-end.
34

NOTES TO FINANCIAL STATEMENTS

NOTE 5. PROPERTY TAXES (CONTINUED)

Vehicle personal property taxes are due upon each respective payor's date of birth on an annual basis. Beginning in April 2013, a title ad valorem tax is assessed upon sale of a vehicle, which replaces the personal property tax due annually on the payor's date of birth.

NOTE 6. CAPITAL ASSETS

Capital asset activity for the fiscal year ended June 30, 2019, is as follows:

Governmental activities:
Capital assets, not being depreciated: Land Construction in progress Total
Capital assets, being depreciated: Buildings and improvements Land improvements Infrastructure Machinery and equipment Total
Less accumulated depreciation for: Buildings and improvements Land improvements Infrastructure Machinery and equipment Total
Total capital assets, being depreciated, net
Governmental activities capital assets, net

Beginning Balance

Increases

Decreases

Transfers

Ending Balance

$ 43,256,086 $

- $

85,131,520

103,878,398

128,387,606

103,878,398

- $

- $

-

(11,482,688)

-

(11,482,688)

43,256,086 177,527,230 220,783,316

844,876,245 27,714,468 3,484,220 57,010,484 933,085,417

2,969,751 2,969,751

(879,530)
(1,252,728) (2,132,258)

2,233,501 9,249,187
11,482,688

847,109,746 36,084,125 3,484,220 58,727,507 945,405,598

(201,159,560) (17,742,217)
(955,278) (29,281,994) (249,139,049)

(17,925,919) (1,446,401)
(87,454) (6,026,550) (25,486,324)

879,530
1,252,728 2,132,258

-

(219,085,479)

-

(18,309,088)

-

(1,042,732)

-

(34,055,816)

-

(272,493,115)

683,946,368

(22,516,573)

$ 812,333,974 $ 81,361,825 $

-

11,482,688

672,912,483

- $

- $ 893,695,799

35

NOTES TO FINANCIAL STATEMENTS

NOTE 6.

CAPITAL ASSETS (CONTINUED)

Depreciation expense was charged to functions/programs of the School System as follows:

Governmental activities:
Instruction Educational media services School administration Maintenance and operations Student transportation School nutrition
Total depreciation expense - governmental activities

$ 23,838,103 1,004
103,825 129,459 1,275,183 138,750
$ 25,486,324

NOTE 7.

LONG-TERM DEBT

General Obligation Bonds. The School System issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities. General obligation bonds are direct obligations and pledge the full faith and credit of the School System.

General obligation bonds at June 30, 2019, consisted of the following:

Series
2011 2015 2016 2018

Coupon Rate
2.00% 5.00% 2.34%
3.00% 5.00% 5.00%

Maturities
2013 2024 2017 2025 2024 2034 2020 2034

Balance
$ 56,130,000 13,704,000 214,255,000 110,745,000

$ 394,834,000

Annual debt service requirements to maturity for general obligation bonds are as follows:

Year Ending June 30,
2020 2021 2022 2023 2024 2025 2029 2030 2034
Total

Principal
$ 33,046,000 33,814,000 34,731,000 35,713,000 36,776,000
102,604,000 118,150,000
$ 394,834,000

Interest
$ 17,614,992 15,221,656 13,536,999 11,819,820 10,044,251 35,433,311 12,151,500
$ 115,822,529

Total
$ 50,660,992 49,035,656 48,267,999 47,532,820 46,820,251
138,037,311 130,301,500
$ 510,656,529

36

NOTES TO FINANCIAL STATEMENTS

NOTE 7. LONG-TERM DEBT (CONTINUED)

Changes in long-term debt related to governmental activities for the year ended June 30, 2019, are as follows:

Governmental activities: Bonds payable
Plus unamortized premium Bonds payable, net Workers' compensation
claims payable Compensated absences Net pension liability Net OPEB liability Governmental activities
Long-term liabilities

Beginning Balance

Additions

Reductions

Ending Balance

Due Within One Year

$ 294,003,000 $ 110,745,000 $

35,555,595

8,279,672

329,558,595

119,024,672

(9,914,000) $ (3,258,512) (13,172,512)

394,834,000 $ 40,576,755
435,410,755

33,046,000 6,152,639
39,198,639

2,302,600 1,681,620 350,461,838 298,486,337

1,491,482 1,306,247 53,865,147 12,929,374

(1,351,853) (1,069,035) (48,072,693) (37,964,376)

2,442,229 1,918,832 356,254,292 273,451,335

1,887,478 1,069,035
-

$ 982,490,990 $ 188,616,922 $ (101,630,469) $ 1,069,477,443 $ 42,155,152

NOTE 8.

Restricted fund balance of $74,698,918 is available in the Debt Service Fund to service the general obligation bonds.

Compensated absences, workers' compensation claims payable, the net pension liability, and the net other post-employment benefit liability are liquidated primarily by the General Fund.

INTERFUND RECEIVABLES, PAYABLES, AND TRANSFERS

The composition of interfund balances as of June 30, 2019, is as follows:

Due to/from other funds:

Due To General Fund

Due From Special Revenue
Fund

$

848,525

These balances resulted from the time lag between the dates that: 1) interfund goods and services are provided or reimbursable expenditures occur, 2) transactions are recorded in the accounting system, and 3) payments between funds are made.

37

NOTES TO FINANCIAL STATEMENTS

NOTE 8.

INTERFUND RECEIVABLES, PAYABLES, AND TRANSFERS

Interfund transfers:

Transfers In Special Revenue Fund

Transfers Out
General Fund

$

252,186

NOTE 9.

Transfers are used to: 1) move revenues from the fund that the statute or budget requires to collect them to the fund that the statute or budget requires to expend them, 2) move receipts restricted to debt service from the funds collecting the receipts to the Capital Projects Fund once annual debt service payments are made, and 3) use unrestricted revenues collected in the General Fund to finance various programs accounted for in other funds in accordance with budgetary authorizations.
RETIREMENT PLANS
Teachers' Retirement System ("TRS")
Plan Description
All teachers of the School System as defined in O.C.G.A. 47-3-60 and certain other support personnel as defined by 47-3-63 are provided a pension through the TRS. TRS, a cost-sharing multiple-employer defined benefit pension plan, is administered by the TRS Board of Trustees (the "TRS Board"). Title 47 of the O.C.G.A. assigns the authority to establish and amend the benefit provisions to the State Legislature. TRS issues a publicly available financial report that can be obtained at the web address listed below:
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.

38

NOTES TO FINANCIAL STATEMENTS

NOTE 9.

RETIREMENT PLANS

Teachers' Retirement System ("TRS") (Continued)

Contributions

Per Title 47 of the O.C.G.A., contribution requirements of active employees and participating employers, as actuarially determined, are established and may be amended by the TRS Board. Pursuant to O.C.G.A. 47-3-63, the employer contributions for certain full-time public school support personnel are funded on behalf of the employer by the State of Georgia. Contributions are expected to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. Employees were required to contribute 6.00% of their annual pay during fiscal year 2019.

The School System's contractually required contribution rate for the year ended June 30, 2019 was 20.90% of annual School System payroll. School System contributions to TRS were $47,313,042 for the year ended June 30, 2019.

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

At June 30, 2019, the School System reported a liability for its proportionate share of the net pension liability that reflected a reduction for support provided to the School System by the State of Georgia for certain public school support personnel. The amounts recognized by the School System as its proportionate share of the net pension liability, the related State of Georgia support, and the total portion of the net pension liability that was associated with the School System were as follows:

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

$ 355,970,466
657,842 $ 356,628,308

The net pension liability was measured as of June 30, 2018. The total pension liability used to calculate the net pension liability was based on an actuarial valuation as of June 30, 2017. An expected total pension liability as of June 30, 2018 was determined using standard roll-forward techniques. The School System's proportion of the net pension liability was based on contributions to TRS during the fiscal year ended June 30, 2018. At June 30, 2018, the School System's proportion was 1.917723%, which was an increase of 0.033551% from its proportion measured as of June 30, 2017.

39

NOTES TO FINANCIAL STATEMENTS

NOTE 9.

RETIREMENT PLANS (CONTINUED)

Teachers' Retirement System ("TRS") (Continued)

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

For the year ended June 30, 2019, the School System recognized pension expense of $39,352,506 and revenue of ($518,868) for support provided by the State of Georgia for certain support personnel. At June 30, 2019, the School System reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

Differences between expected and actual experience
Changes of assumptions
Net difference between projected and actual earnings on pension plan investments
Changes in proportion and differences between School System contributions and proportionate share of contributions
School System contributions subsequent to the measurement date
Total

Deferred Outflows of Resources

Deferred Inflows of Resources

$ 23,565,747 $

733,663

5,371,465

-

-

9,732,924

14,164,785

862,054

47,313,042

-

$ 90,415,039 $ 11,328,641

School System contributions subsequent to the measurement date of $47,313,042 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, 2020. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows:

Year ending June 30,
2020 2021 2022 2023 2024

$ 22,296,341 13,838,625 (6,025,097) 1,210,784 452,704

40

NOTES TO FINANCIAL STATEMENTS

NOTE 9.

RETIREMENT PLANS (CONTINUED)

Teachers' Retirement System ("TRS") (Continued)

Actuarial Assumptions

The total pension liability as of June 30, 2018, was determined by an actuarial valuation as of June 30, 2017 using the following actuarial assumptions, applied to all periods included in the measurement:

Inflation Salary increase Investment rate of return

2.75% 3.25% 9.00%, 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 retirements and dependent beneficiaries. The RP-2000 Disabled Mortality Table with future mortality improvement projected to 2025 with Society of Actuaries' projection scale BB (set forward two years for males and four years for females) was used for death after disability retirement. Rates of mortality in active service were based on the RP2000 Employee Mortality Table projected to 2025 with projection scale BB.

The actuarial assumptions used in the June 30, 2017 valuation were based on the results of an actuarial experience study for the period July 1, 2009 June 30, 2014.

The long-term expected rate of return on pension plan investments was determined using a lognormal distribution analysis in which best estimate ranges of expected future real rates of return (expected nominal returns, net of pension plan investment expense and the assumed rate of inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation.

41

NOTES TO FINANCIAL STATEMENTS

NOTE 9.

RETIREMENT PLANS (CONTINUED)

Teachers' Retirement System ("TRS") (Continued)

Actuarial Assumptions

The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table:

Asset class

Target allocation (%)

Fixed income Domestic large equities Domestic mid equities Domestic small equities International developed market equities International emerging market equities
Total

30.00 39.80 3.70 1.50 19.40 5.60 100.00

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

Long-term expected rate of return (%)*
(0.50) 9.00 12.00 13.50 8.00 12.00

Discount Rate

The discount rate used to measure the total 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 State of Georgia contributions will be made at rates equal to the difference between actuarially determined contribution rates and the member rate. Based on those assumptions, the pension plan's fiduciary net position was projected to be available to make all projected future benefit payments of current 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.

42

NOTES TO FINANCIAL STATEMENTS

NOTE 9.

RETIREMENT PLANS (CONTINUED)

Teachers' Retirement System ("TRS") (Continued)

Sensitivity of the School System's Proportionate Share of the Net Pension Liability to Changes in the Discount Rate

The following presents the School System's proportionate share of the net pension liability calculated using the discount rate of 7.50%, as well as what the School System'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:

School System's proportionate share of the net pension liability

1.00% Decrease (6.50%)

Current Discount Rate
(7.50%)

1.00% Increase (8.50%)

$ 594,216,635 $ 355,970,466 $ 159,643,498

Pension Plan Fiduciary Net Position
Detailed information about the pension plan's fiduciary net position is available in the separately issued TRS financial report which is publically available at the web address listed below:
www.trsga.com/publications
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 TRS of Georgia. The ERS Board of Trustees, plus two additional trustees, administers PSERS. Title 47 of the O.C.G.A. assigns the authority to establish and amend the benefit provisions to the State Legislature. PSERS issues a publicly available financial report that can be obtained at the web address listed below:
www.ers.ga.gov/formspubs/ formspubs.html

43

NOTES TO FINANCIAL STATEMENTS

NOTE 9.

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.

Pension Liabilities and Pension Expense

At June 30, 2019, the School System did not have a liability for a proportionate share of the net pension liability because of the related State of Georgia support. The amount of the State's proportionate share of the net pension liability associated with the School System is as follows:

State of Georgia's proportionate share of the Net Pension Liability associated with the School System

$ 2,572,522

44

NOTES TO FINANCIAL STATEMENTS

NOTE 9.

RETIREMENT PLANS (CONTINUED)

Public School Employees' Retirement System ("PSERS") (Continued)

Pension Liabilities and Pension Expense (Continued)

The net pension liability was measured as of June 30, 2018. The total pension liability used to calculate the net pension liability was based on an actuarial valuation as of June 30, 2017. An expected total pension liability as of June 30, 2018 was determined using standard roll-forward techniques. The State's proportion of the net pension liability associated with the School System was based on actuarially determined contributions paid by the State during the fiscal year ended June 30, 2018.

For the year ended June 30, 2019, the School System recognized pension expense and revenue of $595,632 for support provided by the State of Georgia.

Actuarial Assumptions

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

Inflation Salary increase Investment rate of return

2.75% N/A 7.30%, net of pension plan investment
expense, including inflation

Post-retirement mortality rates were based on the RP-2000 Blue-Collar Mortality Table projected to 2025 with projection scale BB (set forward 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 School System. Based on the results of the most recent experience study adopted by the School System 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, 2017 valuation were based on the results of an actuarial experience study for the period July 1, 2009 June 30, 2014.

45

NOTES TO FINANCIAL STATEMENTS

NOTE 9.

RETIREMENT PLANS (CONTINUED)

Public School Employees' Retirement System ("PSERS") (Continued)

Actuarial Assumptions (Continued)

The long-term expected rate of return on pension plan investments was determined using a log-normal distribution analysis in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation.

The target asset allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table:

Asset class

Target allocation (%)

Fixed income Domestic large equities Domestic mid equities Domestic small equities International developed market equities International emerging market equities Alternatives
Total

30.00 37.20 3.40 1.40 17.80 5.20 5.00 100.00

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

Long-term expected real rate of return (%)*
(0.5) 9.00 12.00 13.50 8.00 12.00 10.50

Discount Rate

The discount rate used to measure the total pension liability was 7.30%. 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 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.

46

NOTES TO FINANCIAL STATEMENTS

NOTE 9.

RETIREMENT PLANS (CONTINUED)
Employees' Retirement System ("ERS")
Plan Description
ERS is a cost-sharing multiple-employer defined benefit pension plan established by the Georgia General Assembly during the 1949 Legislative Session for the purpose of providing retirement allowances for employees of the State of Georgia and its political subdivisions. ERS is directed by a Board of Trustees. Title 47 of the O.C.G.A. assigns the authority to establish and amend the benefit provisions to the State Legislature. ERS issues a publicly available financial report that can be obtained at the web address listed below:
www.ers.ga.gov/formspubs/formspubs.html
Benefits Provided
The ERS Plan supports three benefit tiers: Old Plan, New Plan, and Georgia State Employees' Pension and Savings Plan ("GSEPS"). Employees under the Old Plan started membership prior to July 1, 1982 and are subject to plan provisions in effect prior to July 1, 1982. Members hired on or after July 1, 1982 but prior to January 1, 2009 are New Plan members subject to modified plan provisions. Effective January 1, 2009, new state employees and rehired state employees who did not retain membership rights under the Old or New Plans are members of GSEPS. ERS members hired prior to January 1, 2009 also have the option to irrevocably change their membership to GSEPS.
Under the Old Plan, the New Plan, and GSEPS, a member may retire and receive normal retirement benefits after completion of ten years of creditable service and attainment of age 60 or 30 years of creditable service regardless of age. Additionally, there are some provisions allowing for early retirement after 25 years of creditable service for members under age 60.
Retirement benefits paid to members are based upon the monthly average of the member's highest 24 consecutive calendar months, multiplied by the number of years of creditable service, multiplied by the applicable benefit factor. Annually, post-retirement cost-of-living adjustments may also be made to members' benefits, provided the members were hired prior to July 1, 2009. The normal retirement pension is payable monthly for life; however, options are available for distribution of the member's monthly pension, at reduced rates, to a designated beneficiary upon the member's death. Death and disability benefits are also available through ERS.

47

NOTES TO FINANCIAL STATEMENTS

NOTE 9.

RETIREMENT PLANS (CONTINUED)
Employees' Retirement System ("ERS") (Continued)
Contributions
Member contributions under the Old Plan are 4% of annual compensation, up to $4,200, plus 6% of annual compensation in excess of $4,200. Under the Old Plan, the state pays member contributions in excess of 1.25% of annual compensation. Under the Old Plan, these state contributions are included in the members' accounts for refund purposes and are used in the computation of the members' earnable compensation for the purpose of computing retirement benefits. Member contributions under the New Plan and GSEPS are 1.25% of annual compensation. The School System's contractually required contribution rate, actuarially determined annually, for the year ended June 30, 2019, was 24.78% of annual covered payroll for Old and New Plan members and 21.69% for GSEPS members. The School System's contributions to ERS totaled $48,677 for the year ended June 30, 2019. 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.
Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions
At June 30, 2019, the School System reported a liability for its proportionate share of the net pension liability in the amount of $283,826. The net pension liability was measured as of June 30, 2018. The total pension liability used to calculate the net pension liability was based on an actuarial valuation as of June 30, 2017. An expected total pension liability as of June 30, 2018, was determined using standard roll-forward techniques. The School System's proportion of the net pension liability was based on contributions to ERS during the fiscal year ended June 30, 2018. At June 30, 2018, the employer's proportion was 0.006904%, which was a decrease of 0.000056% from its proportion measured as of June 30, 2017.

48

NOTES TO FINANCIAL STATEMENTS

NOTE 9.

RETIREMENT PLANS (CONTINUED)

Employees' Retirement System ("ERS") (Continued)

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

For the year ended June 30, 2019, the School System recognized pension expense of $17,191. At June 30, 2019, the School System reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

Differences between expected and actual experience
Changes of assumptions

Deferred Outflows of Resources

Deferred Inflows of Resources

$

8,828 $

-

13,372

-

Net difference between projected and actual earnings on pension plan investments
Changes in proportion and differences between employer contributions and proportionate share of contributions

-

6,541

-

3,031

School System contributions subsequent to the measurement date

Total

$

48,677 70,877 $

9,572

School System contributions subsequent to the measurement date of $48,677 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, 2020. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows:

Year ending June 30,
2020 2021 2022 2023

$

18,825

7,598

(10,873)

(2,922)

49

NOTES TO FINANCIAL STATEMENTS

NOTE 9.

RETIREMENT PLANS (CONTINUED)

Employees' Retirement System ("ERS") (Continued)

Actuarial Assumptions

The total pension liability as of June 30, 2018, was determined by an actuarial valuation as of June 30, 2017 using the following actuarial assumptions, applied to all periods included in the measurement:

Inflation Salary increase Investment rate of return

2.75% 3.25% 7.00%, including inflation 7.30%, net of pension plan investment
expense, including inflation

Post-retirement mortality rates were based on the RP-2000 Combined Mortality Table with future mortality improvement projected to 2025 with the Society of Actuaries' projection scale BB (set forward two years for both males and females) for service retirements and dependent beneficiaries. The RP-2000 Disabled Mortality with future mortality improvement projected to 2025 with Society of Actuaries' projection scale BB (set back seven years for males and set forward three years for females) was used for death after disability retirement. There is a margin for future mortality improvement in the tables used by the System. Based on the results of the most recent experience study adopted by the School System on December 17, 2015, the numbers of expected future deaths are 9 12% less than the actual number of deaths that occurred during the study period for service retirements and beneficiaries and for disability retirements. Rates of mortality in active service were based on the RP-2000 Employee Mortality Table projected to 2025 with projection scale BB.
The actuarial assumptions used in the June 30, 2017 valuation were based on the results of an actuarial experience study for the period July 1, 2009 June 30, 2014.
The long-term expected rate of return on pension plan investments was determined using a lognormal distribution analysis in which best estimate ranges of expected future real rates of return (expected nominal returns, net of pension plan investment expense and the assumed rate of inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation.

50

NOTES TO FINANCIAL STATEMENTS

NOTE 9.

RETIREMENT PLANS (CONTINUED)

Employees' Retirement System ("ERS") (Continued)

Actuarial Assumptions (Continued)

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
Fixed income Domestic large equities Domestic mid equities Domestic small equities International developed market equities International emerging market equities Alternatives
Total

Target allocation (%)
30.00 37.20 3.40 1.40 17.80 5.20 5.00 100.00

Long-term expected real rate of return (%)*
(0.5) 9.00 12.00 13.50 8.00 12.00 10.50

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

Discount Rate

The discount rate used to measure the total pension liability was 7.30%. 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 State of Georgia contributions will be made at rates equal to the difference between actuarially determined contribution rates and the member rate. Based on those assumptions, the pension plan's fiduciary net position was projected to be available to make all projected future benefit payments of current 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.

51

NOTES TO FINANCIAL STATEMENTS

NOTE 9.

RETIREMENT PLANS (CONTINUED)

Employees' Retirement System ("ERS") (Continued)

Sensitivity of the School System's Proportionate Share of the Net Pension Liability to Changes in the Discount Rate

The following presents the School System's proportionate share of the net pension liability calculated using the discount rate of 7.30%, as well as what the School System's proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1-percentage-point lower (6.30%) or 1-percentage-point higher (8.30%) than the current rate:

School System's proportionate share of net pension liability

1.00% Decrease (6.30%)

Current Discount Rate
(7.30%)

1.00% Increase (8.30%)

$ 403,700 $

283,826 $ 181,689

Detailed information about the pension plan's fiduciary net position is available in the separately issued ERS financial report which is publically available at the web address listed below:
www.ers.ga.gov/formspubs/forms pubs.html
NOTE 10. OTHER POST-EMPLOYMENT BENEFITS
State of Georgia School Employees Post-employment Benefit Fund
Plan Description
The Board participates in the School OPEB Fund which is another OPEB plan administered by the State of Georgia Department of Community Health ("DCH"). Certified teachers and non-certified employees of the School System 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 of the State of Georgia and administered by the Board of Community Health ("DCH 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 DCH Board. The School OPEB Fund is included in the State of Georgia Comprehensive Annual Financial Report which is publicly available and can be obtained at the web address listed below:
https://sao.georgia.gov/comprehensive-annual-financial-reports

52

NOTES TO FINANCIAL STATEMENTS
NOTE 10. OTHER POST-EMPLOYMENT BENEFITS (CONTINUED)
State of Georgia School Employees Post-employment Benefit Fund (Continued)
Benefits
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 ER), Georgia Judicial Retirement System ("JRS"), Legislative Retirement System ("LRS"), TRS or 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 DCH Board, the School OPEB Fund is substantially funded on a pay-as-yougo basis; that is, annual cost of providing benefits will be financed in the same year as claims occur. Contributions required and made to the School OPEB Fund from the School System were $11,325,788 for the year ended June 30, 2019. Active employees are not required to contribute to the School OPEB Fund.
OPEB Liabilities, OPEB Expense, Deferred Outflows of Resources and Deferred Inflows of Resources Related to OPEB
Effective July 1, 2018, the School System implemented the provisions of GASB Statement No. 75, Accounting and Financial Reporting for Post-employment Benefits Other Than Pensions, which significantly changed the School System's accounting for OPEB amounts. The information disclosed in this note is presented in accordance with this new standard.
At June 30, 2019, the School System reported a liability of $273,451,335 for its proportionate share of the net OPEB liability. The net OPEB liability was measured as of June 30, 2018. The total OPEB liability used to calculate the net OPEB liability was based on an actuarial valuation as of June 30, 2017. An expected total OPEB liability as of June 30, 2018 was determined using standard rollforward techniques. The School System's proportion of the net OPEB liability was actuarially determined based on employer contributions to the School OPEB Fund during the fiscal year ended June 30, 2018. At June 30 2018, the School System's proportion was 2.151518%, which was an increase of 0.027054% from its proportion measured as of June 30, 2017.
53

NOTES TO FINANCIAL STATEMENTS

NOTE 10. OTHER POST-EMPLOYMENT BENEFITS (CONTINUED)

State of Georgia School Employees Post-employment Benefit Fund (Continued)

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

For the year ended June 30, 2019, the School System recognized OPEB expense of $12,646,697. At June 30, 2019, the School System reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources:

Deferred Outflows of Resources

Deferred Inflows of Resources

Differences between expected and actual experience Changes of assumptions
Net difference between projected and actual earnings on OPEB plan investments
Changes in proportion and differences between School System contributions and proportionate share of contributions
School System contributions subsequent to the measurement date

$

-

-

369,979

14,988,047 11,325,788

$ 6,219,941 46,323,971 -
9,420,519 -

Total

$ 26,683,814 $ 61,964,431

54

NOTES TO FINANCIAL STATEMENTS

NOTE 10. OTHER POST-EMPLOYMENT BENEFITS (CONTINUED)
State of Georgia School Employees Post-employment Benefit Fund (Continued)

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

School System contributions subsequent to the measurement date of $11,325,788 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, 2020. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to OPEB will be recognized in OPEB expense as follows:

Year ending June 30,
2020 2021 2022 2023 2024 2025

$ (9,042,042) (9,042,042) (9,042,042) (9,064,145) (7,521,510) (2,894,624)

Actuarial Assumptions

The total OPEB liability as of June 30, 2018 was determined by an actuarial valuation as of June 30, 2017 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, 2018:

Inflation Salary increases 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: Pre-Medicare Eligible Medicare Eligible

2.75% 3.25 9.00%, including inflation 7.30%, compounded annually, net of investment expense, and including inflation
7.50% 5.50%
4.75% 4.75%
2028 2022

55

NOTES TO FINANCIAL STATEMENTS
NOTE 10. OTHER POST-EMPLOYMENT BENEFITS (CONTINUED)
State of Georgia School Employees Post-employment Benefit Fund (Continued)
Actuarial Assumptions (Continued)
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 TRS Members: The RP-2000 White Collar Mortality Table projected to 2025 with projection scale BB (set forward one year for males) was 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) was 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) was used for the period after service retirement and for beneficiaries of deceased members. The RP2000 Disabled Mortality Table projected to 2025 with projection scale BB (set forward five years for both males and females) was used for the period after disability retirement.
The actuarial assumptions used in the June 30, 2017 valuation were based on the results of an actuarial experience study for the pension system, 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 School System 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 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.
56

NOTES TO FINANCIAL STATEMENTS

NOTE 10. OTHER POST-EMPLOYMENT BENEFITS (CONTINUED)

State of Georgia School Employees Post-employment Benefit Fund (Continued)

Actuarial Assumptions (Continued)

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
Fixed income Domestic large equities Domestic mid equities Domestic small equities International developed market equities International emerging market equities Alternatives
Total

Target allocation (%)
30.00 37.20 3.40 1.40 17.80 5.20 5.00 100.00

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

Long-term expected real rate of return (%)*
(0.5) 9.00 12.00 13.50 8.00 12.00 10.50

Discount rate

The discount rate has changed since the prior measurement date, from 3.58% to 3.87%. In order to measure the total OPEB liability for the School OPEB Fund, a single equivalent interest rate of 3.87% 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 (3.87% per the Bond Buyer Index). The projection of cash flows used to determine the discount rate assumed that the current sharing of costs between the employer and the member will continue and that contributions from the employer will be made at the current level as averaged over the last five years, adjusted for annual projected changes in headcount.

57

NOTES TO FINANCIAL STATEMENTS

NOTE 10. OTHER POST-EMPLOYMENT BENEFITS (CONTINUED)

State of Georgia School Employees Post-employment Benefit Fund (Continued)

Discount rate (Continued)

Projected future benefit payments for all current plan members were projected through 2118. 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 2018. Therefore, the long-term expected rate of return on OPEB plan investments was applied to discount projected benefit payments until 2018. The discount rate of 3.87% was the single rate which, when applied to all projected benefit payments, resulted in the same present value of benefit payments when the above discussed calculations are combined. The calculated discount rate of 3.87% was applied to all periods of projected benefit payments to determine the total OPEB liability.

Sensitivity of the School System's Proportionate Share of the Net OPEB Liability to Changes in the Discount Rate

The following presents the School System's proportionate share of the net OPEB liability calculated using the discount rate of 3.87%, as well as what the School System's proportionate share of the net OPEB liability would be if it were calculated using a discount rate that is 1-percentage-point lower (2.87%) or 1-percentage-point higher (4.87%) than the current rate:

School System's proportionate share of the net OPEB liability

Decrease (2.87%)

Discount Rate (3.87%)

Increase (4.87%)

$ 319,305,419 $ 273,451,335 $ 236,474,814

58

NOTES TO FINANCIAL STATEMENTS

NOTE 10. OTHER POST-EMPLOYMENT BENEFITS (CONTINUED)

State of Georgia School Employees Post-employment Benefit Fund (Continued)

Sensitivity of the School System's Proportionate Share of the Net OPEB Liability to Changes in the Healthcare Cost Trend Rate

The following presents the School System's proportionate share of the net OPEB liability calculated using the healthcare cost trend rates of 4.75% to 7.50%, as well as what the School System'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 (3.75% to 6.50%) or 1-percentage-point higher (5.75% to 8.50%) than the current rates:

School System's proportionate share of the net OPEB liability

1% Decrease (3.75% to 6.50%)

Current Discount Rate (4.75% to 7.50%)

1% Increase (5.75% to 8.50%)

$ 229,892,739 $ 273,451,335 $ 329,117,616

NOTE 11. RISK MANAGEMENT

The School System is exposed to various risks of loss for claims associated with torts; theft of, damage to and destruction of assets; errors and omissions; natural disaster; workers' compensation; unemployment compensation; and dental benefits. The School System is self-insured for workers' compensation and unemployment compensation. The School System purchases commercial insurance for all other risks of loss. The School System has not experienced any significant reduction in insurance coverage from the previous year nor has it paid any settlements in excess of insurance coverage in the past four years.

Workers' Compensation

The School System is partially self-insured for workers' compensation claims of its employees. Claims exceeding $450,000 per occurrence are covered through a private insurance carrier. The School System is liable for any other claims filed. The School System has entered into a contract with a third-party to administer the program. Activity is accounted for in the General Fund.

59

NOTES TO FINANCIAL STATEMENTS

NOTE 11. RISK MANAGEMENT (CONTINUED)

Unemployment Compensation

The School System is self-insured for unemployment compensation claims of its employees. Activity is accounted for in the General Fund.

Changes in the balances of claims liabilities for the years ended June 30, 2018 and June 30, 2019 for which the School System is self-insured are as follows:

Workers' Compensation
Unpaid claims, beginning of fiscal year Incurred claims (including IBNRs) Claim payments and changes in estimates
Unpaid claims, end of fiscal year

June 30, 2019

June 30, 2018

$ 2,302,600 $ 1,563,128

1,491,482

1,891,508

(1,351,853)

(1,152,036)

$ 2,442,229 $ 2,302,600

Unemployment Compensation
Unpaid claims, beginning of fiscal year Incurred claims (including IBNRs) Claim payments and changes in estimates
Unpaid claims, end of fiscal year

June 30, 2019

June 30, 2018

$

- $

-

(23,932)

(20,834)

23,932

20,834

$

- $

-

NOTE 12. COMMITMENTS AND CONTINGENCIES
In addition to the liabilities enumerated in the balance, at June 30, 2019, the School System has contractual commitments on uncompleted contracts of approximately $23,137,180.
The School System is involved in a number of legal matters which either have or could result in litigation. Although the outcome of these lawsuits is not presently determinable, in the opinion of the School System's legal counsel, the resolution of these matters will not have a material adverse effect on the financial condition of the School System.

60

NOTES TO FINANCIAL STATEMENTS NOTE 12. COMMITMENTS AND CONTINGENCIES (CONTINUED)
The School System participates in numerous state and federal grant programs, which are governed by various rules and regulations of the grantor agencies. Costs charged to the respective grant programs are subject to audit and adjustment by the grantor agencies; therefore, to the extent that the School System has not complied with the rules and regulations governing grants, refunds of any money received may be required and the collectability of any related receivable at June 30, 2019, may be impaired. In the opinion of the School System, there are no significant contingent liabilities relating to compliance with the rules and regulations governing the respective grants; therefore, no provision has been recorded in the accompanying financial statements for such contingencies.
61

REQUIRED SUPPLEMENTARY INFORMATION

HENRY COUNTY BOARD OF EDUCATION
REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF PROPORTIONATE SHARE OF THE NET PENSION LIABILITY
TEACHERS' RETIREMENT SYSTEM OF GEORGIA FOR THE YEAR ENDED JUNE 30, 2019

2019

2018

2017

2016

2015

School System's proportion of the net pension liability

1.917723%

1.884172%

1.824504%

1.782816%

1.777907%

School System's proportionate share of the net pension liability

$ 355,970,466 $ 350,179,169 $ 376,415,518 $ 271,416,033 $ 224,615,099

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

657,842

1,689,404

2,663,064

2,226,359

2,054,616

Total School System's covered payroll

$ 356,628,308 $ 351,868,573 $ 379,078,582 $ 273,642,392 $ 226,669,715 $ 228,406,692 $ 217,402,172 $ 201,773,455 $ 188,247,437 $ 181,381,743

School System's proportionate share of the net pension liability as a percentage of its covered payroll

155.85%

161.07%

186.55%

144.18%

123.84%

Plan fiduciary net position as a percentage of the total pension liability

80.27%

79.33%

76.06%

81.44%

84.03%

Note: Schedule is intended to show information for the last 10 fiscal years. Additional years will be displayed as they become available.

62

HENRY COUNTY BOARD OF EDUCATION
REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF CONTRIBUTIONS
TEACHERS' RETIREMENT SYSTEM OF GEORGIA FOR THE YEAR ENDED JUNE 30, 2019

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

2019 $ 47,313,042

2018 $ 38,395,165

2017 $ 31,023,290

2016 $ 28,793,072

2015 $ 24,754,538

47,313,042

38,395,165

31,023,290

28,793,072

24,754,538

$

-$

-$

-$

-$

-

$ 226,378,191 $ 228,406,692 $ 217,402,172 $ 201,773,455 $ 188,247,437

20.90%

16.81%

14.27%

14.27%

13.15%

Note: Schedule is intended to show information for the last 10 fiscal years. Additional years will be displayed as they become available.

63

HENRY COUNTY BOARD OF EDUCATION
REQUIRED SUPPLEMENTARY INFORMATION NOTES TO REQUIRED SUPPLEMENTARY INFORMATION
TEACHERS' RETIREMENT SYSTEM OF GEORGIA FOR THE YEAR ENDED JUNE 30, 2019
Changes of assumptions In 2010 and later, the expectation of retired life mortality was changed to the RP-2000 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 increases 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 System. Primary among the changes were the updates to the 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).
64

HENRY COUNTY BOARD OF EDUCATION
REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF PROPORTIONATE SHARE OF THE NET PENSION LIABILITY
PUBLIC SCHOOL EMPLOYEES' RETIREMENT SYSTEM FOR THE YEAR ENDED JUNE 30, 2019

2019

2018

2017

2016

2015

School System's proportion of the net pension liability

0.00%

0.00%

0.00%

0.00%

0.00%

School System's proportionate share

of the net pension liability

$

-$

-$

-$

-$

-

State of Georgia's proportionate share of the net position liability associated with the School System

2,572,522

2,385,224

3,119,781

2,035,518

1,788,211

Total School System's covered payroll

$ 2,572,522 $ 9,443,354

$ 2,385,224 $ 9,265,258

$ 3,119,781 $ 8,366,835

$ 2,035,518 $ 7,608,424

$ 1,788,211 $ 7,272,459

School System's proportionate share of the net pension liability as a percentage of its covered payroll

N/A

N/A

N/A

N/A

N/A

Plan fiduciary net position as a percentage of the total pension liability

85.26%

85.69%

81.00%

87.00%

88.29%

Note: Schedule is intended to show information for the last 10 fiscal years. Additional years will be displayed as they become available.

65

HENRY COUNTY BOARD OF EDUCATION
REQUIRED SUPPLEMENTARY INFORMATION NOTES TO REQUIRED SUPPLEMENTARY INFORMATION
PUBLIC SCHOOL EMPLOYEES RETIREMENT SYSTEM FOR THE YEAR ENDED JUNE 30, 2019
Changes of assumptions In 2010 and later, the expectation of retired life mortality was changed to the RP-2000 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 increases 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 System. Primary among the changes were the updates to the rates of mortality, retirement, and withdrawal. The expectation of retired life mortality was changed to the RP-2000 Blue Collar Mortality Table with future mortality improvement projected to 2025 with the Society of Actuaries' projection scale BB (set forward three years for males and two years for females). On March 15, 2018, the Board adopted a new funding policy. Because of this new funding policy, the assumed investment rate of return was reduced from 7.50% to 7.40% for the June 30, 2017 actuarial valuation. In addition, based on the School System's new funding policy, the assumed investment rate of return was further reduced by 0.10% from 7.40% to 7.30% as of the June 30, 2018 measurement date.
66

HENRY COUNTY BOARD OF EDUCATION
REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF PROPORTIONATE SHARE OF THE NET PENSION LIABILITY
EMPLOYEES' RETIREMENT SYSTEM FOR THE YEAR ENDED JUNE 30, 2019

School System's proportion of the net pension liability
School System's proportionate share of the net pension liability
School System's covered payroll

2019 0.006904%

2018 0.006960%

2017 0.007129%

2016 0.009524%

2015 0.011874%

$ 283,826 $ 176,946

$ 282,669 $ 337,232 $ 385,855 $ 445,348 $ 162,649 $ 165,761 $ 233,297 $ 267,378

School System'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

160.40% 76.68%

173.79%

203.45%

165.39%

166.56%

76.33%

72.34%

76.20%

77.99%

Note: Schedule is intended to show information for the last 10 fiscal years. Additional years will be displayed as they become available.

67

HENRY COUNTY BOARD OF EDUCATION
REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF CONTRIBUTIONS
EMPLOYEES' RETIREMENT SYSTEM FOR THE YEAR ENDED JUNE 30, 2019

2019

2018

2017

2016

2015

Contractually required contributions $

48,677

$

43,688 $

40,158 $

40,976 $

51,232

Contributions in relation to the contractually required contribution

48,677

43,688

40,158

40,976

51,232

Contribution deficiency (excess) School System's covered payroll
Contributions as a percentage of covered payroll

$

-

$ 196,437

$

-$

-$

-$

-

$ 176,946 $ 162,649 $ 165,761 $ 233,297

24.78%

24.69%

24.69%

24.72%

21.96%

Note: Schedule is intended to show information for the last 10 fiscal years. Additional years will be displayed as they become available.

68

HENRY COUNTY BOARD OF EDUCATION
REQUIRED SUPPLEMENTARY INFORMATION NOTES TO REQUIRED SUPPLEMENTARY INFORMATION
EMPLOYEES' RETIREMENT SYSTEM FOR THE YEAR ENDED JUNE 30, 2019
Changes of assumptions On December 17, 2015, the Board adopted recommended changes to the economic and demographic assumptions used by the School System. Primary among the changes were the updates to the rates of mortality, retirement, withdrawal, and salary increases. On March 15, 2018, the Board adopted a new funding policy. Because of this new funding policy, the assumed investment rate of return was reduced from 7.50% to 7.40% for the June 30, 2017 actuarial valuation. In addition, based on the Board's new funding policy, the assumed investment rate of return was further reduced by 0.10% from 7.40% to 7.30% as of the June 30, 2018 measurement date.
69

HENRY COUNTY BOARD OF EDUCATION
REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF PROPORTIONATE SHARE OF THE NET OPEB LIABILITY
SCHOOL OPEB FUND FOR THE YEAR ENDED JUNE 30, 2019

School System's proportion of the net OPEB liability School System's proportionate share of the net OPEB liability School System's covered-employee payroll School System'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

2019

2.151518%

$

273,451,335

192,254,828

2018

2.124464%

$

298,486,337

181,077,474

142.23% 2.93%

164.84% 1.61%

Note: Schedule is intended to show information for the last 10 fiscal years. Additional years will be displayed as they become available.

70

HENRY COUNTY BOARD OF EDUCATION
REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF CONTRIBUTIONS SCHOOL OPEB FUND
FOR THE YEAR ENDED JUNE 30, 2019

Contractually required contribution Contributions in relation to the contractually required contribution Contribution deficiency (excess)

2019 $ 11,325,788

11,325,788

$

-

2018 $ 11,151,110

11,151,110

$

-

2017 $ 11,077,122

11,077,122

$

-

School System's covered-employee payroll Contributions as a percentage of covered-employee payroll

$ 194,074,030 $ 192,254,828 $ 181,077,474

5.84%

5.80%

6.12%

Note: Schedule is intended to show information for the last 10 fiscal years. Additional years will be displayed as they become available.

71

HENRY COUNTY BOARD OF EDUCATION
REQUIRED SUPPLEMENTARY INFORMATION NOTES TO REQUIRED SUPPLEMENTARY INFORMATION
SCHOOL OPEB FUND FOR THE YEAR ENDED JUNE 30, 2019
Changes of Benefit Terms 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. 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.
72

HENRY COUNTY BOARD OF EDUCATION
SUPPLEMENTARY INFORMATION SCHEDULE OF EXPENDITURES OF SPECIAL PURPOSE LOCAL OPTION SALES TAX PROCEEDS - 2011 ISSUE FOR THE FISCAL YEAR ENDED JUNE 30, 2019

Original Estimated
Cost

Current Estimated
Cost

Prior Years1

Current Year

Acquisition, construction, and equipping of a new Hampton High School; acquiring school buses and related transportation equipment and acquiring instructional and administrative technology improvements; adding to, renovating, replacing, repairing, improving, and equipping existing school buildings and other buildings and facilities useful or desirable in connection therewith; and acquiring any necessary property therefor, both real and personal, and to the extent funds are available, acquiring, constructing, and equipping one new elementary school and one replacement middle school and acquiring any necessary property therefor, both real and personal; all at a maximum cost of $225,000,000.
Retirement of a portion of the Series 2007A Bonds by paying or making provision for the payment of principal of and interest on such bonds coming due April 1, 2012, in the maximum amount of $14,000,000.

$ 225,000,000 $ 225,000,000 $ 185,634,286 $

14,000,000

14,000,000

14,000,000

$ 239,000,000 $ 239,000,000 $ 199,634,286 $

5,789,812 $
5,789,812 $

Total
191,424,098 14,000,000
205,424,098

1 Included in the expenditures shown above are expenditures which were funded by grant funds in the amount of $8,119,794 in 2015, $3,925,503 in 2016, and $2,150,809 in 2017.
Note: Amounts above for prior years have been restated.

73

HENRY COUNTY BOARD OF EDUCATION
SCHEDULE OF EXPENDITURES OF SPECIAL PURPOSE LOCAL OPTION SALES TAX PROCEEDS - 2016 ISSUE
FOR THE FISCAL YEAR ENDED JUNE 30, 2019

Original Estimated
Cost

Current Estimated
Cost

Prior Years1,2

Current Year1,2

Total

The cost of acquiring, constructing, and equipping a new McDonough High School, a new McDonough Middle School, a new multipurpose facility at each existing high school, a new performing arts center in the northern region of Henry County, and a new distribution center; adding to, renovating, repairing, improving and equipping existing athletic facilities, including turf fields at existing high schools and athletic field lighting at three existing middle schools; acquiring instructional and administrative technology improvements including necessary software, land for future schools, and school buses and related transportation equipment; acquiring and constructing an access connector between Southern Crescent Technical College and the School District's Academy for Advanced Studies; adding to, renovating, repairing, improving, and equipping existing school buildings, transportation and maintenance buildings, and other buildings and facilities useful or desirable in connection therewith; and acquiring any necessary property therefor, both real and personal; to the extent funds are available, to pay the cost of acquiring, constructing, and equipping one new elementary school and a new central office facility and acquiring any necessary property therefor, both real and personal; to pay capitalized interest incident thereto; and to pay expenses incident to accomplishing the foregoing.

$ 325,000,000 $ 365,000,000 $ 188,557,413 $ 111,824,829 $

$ 325,000,000 $ 365,000,000 $ 188,557,413 $ 111,824,829 $

1 Included in the expenditures shown above are expenditures which were funded by grant funds in the amount of $3,629,614 in 2017, and $1,622,813 in 2018 .
2 Included in the expenditures shown above, the School System has incurred interest to provide advanced funding for the above projects. Prior year interest amounts to $15,576,930.

Note: Amounts above for prior years have been restated.

Total expenditures, 2011 Issue $ Total expenditures, 2016 Issue Total expenditures Capital Projects Fund $

300,382,242 300,382,242
5,789,812 111,824,829 117,614,641

74

COMPLIANCE SECTION

INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS
BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
To the Superintendent and Members of the Henry County Board of Education
McDonough, Georgia
We have audited, in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of the Henry County Board of Education (the "School System") as of and for the year ended June 30, 2019, and the related notes to the financial statements, which collectively comprise the School System's basic financial statements and have issued our report thereon dated March 19, 2020.
Internal Control Over Financial Reporting
In planning and performing our audit of the financial statements, we considered the School System'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 System's internal control. Accordingly, we do not express an opinion on the effectiveness of the School System's internal control.
A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.
Our consideration of the internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit, we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.
300 MULBERRY STREET, SUITE 300 POST OFFICE BOX 1877 MACON, GEORGIA 31202-1877 478-464-8000 FAX 478-464-8051 www.mjcpa.com MEMBERS OF THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS

Compliance and Other Matters As part of obtaining reasonable assurance about whether the School System's financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity'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 entity's internal control and compliance. Accordingly, this communication is not suitable for any other purpose.
Macon, Georgia March 19, 2020
76

INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY THE UNIFORM GUIDANCE
To the Superintendent and Members of the Henry County Board of Education
McDonough, Georgia
Report on Compliance for Each Major Federal Program
We have audited the Henry County Board of Education's (the "School System") compliance with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on each of the School System's major federal programs for the year ended June 30, 2019. The School System'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 the 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 System'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 System'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 System's compliance.
300 MULBERRY STREET, SUITE 300 POST OFFICE BOX 1877 MACON, GEORGIA 31202-1877 478-464-8000 FAX 478-464-8051 www.mjcpa.com MEMBERS OF THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS

Opinion on Each Major Federal Program In our opinion, the School System complied, in all material respects, with the 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, 2019.
Report on Internal Control Over Compliance
Management of the School System 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 System'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 System'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 the internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.
78

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. Macon, Georgia March 19, 2020
79

HENRY COUNTY BOARD OF EDUCATION
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE FISCAL YEAR ENDED JUNE 30, 2019

Federal Grantor/Pass-Through Grantor/Program Title
U.S. DEPARTMENT OF AGRICULTURE: Passed through Georgia Department of Education: Child Nutrition Cluster: School Breakfast Program National School Lunch Program Total Child Nutrition Cluster
State Administrative Expenses
Total U.S. Department of Agriculture
U.S. DEPARTMENT OF DEFENSE: Direct Federal Award Junior ROTC
U.S. DEPARTMENT OF EDUCATION: Passed through Georgia Department of Education: Title I Grants to Local Educational Agencies Title I Grants to Local Educational Agencies

Federal CFDA Number
10.553 10.555 10.560
12.unknown
84.010 84.010

Title II, Part A - Supporting Effective Instruction State Grants Title II, Part A - Supporting Effective Instruction State Grants

84.367 84.367

Title III - Limited English Proficient Title III - Limited English Proficient

84.365 84.365

Special Education Cluster: High Cost Fund Pool IDEA Flowthrough IDEA Preschool Total Special Education Cluster
Vocational Education - Basic Grants to States
Education for Homeless Children and Youth Cluster
Title IV - Student Support & Academic Enrichment Title IV - Student Support & Academic Enrichment

84.027 84.027 84.173
84.048
84.196
84.424 84.424

Total U.S. Department of Education Total Expenditures of Federal Awards

Pass-Through Award
ID Number

Total Expenditures

195GA324N1099 195GA324N1099
185GA904N2533

$

3,081,828

10,648,931

13,730,759

25,073 13,755,832

N/A

672,998

S010A170010 S010A180010
S367A170001 S367A180001
S365A170010 S365A180010
H027A180073 H027A180073 H173A170081
V048A180010 S196A180011 S424A170011 S424A180011

1,274,092 6,194,519 7,468,611
208,272 977,752 1,186,024
37,914 15,649 53,563
213,853 7,784,340
183,483 8,181,676
307,355
53,977
42,018 228,633 270,651
17,521,857 $ 31,950,687

80

HENRY COUNTY BOARD OF EDUCATION
NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE FISCAL YEAR ENDED JUNE 30, 2019

NOTE 1.
NOTE 2. NOTE 3. NOTE 4.

BASIS OF PRESENTATION
The Schedule of Expenditures of Federal Awards includes the federal grant activity of the Henry County Board of Education (the "School System") and is presented on the accrual basis of accounting.
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). Therefore, some amounts presented in this schedule may differ from amounts presented in or used in the preparation of the financial statements.
DE MINIMIS COST RATE
The School System elected not to use the 10% de minimis cost rate for the year ended June 30, 2019.
NON-CASH AWARDS
The School System received non-cash awards under the National School Lunch Program, CFDA 10.555, in the amount of $1,380,022 for the year ended June 30, 2019.
SUBRECIPIENTS
The School System did not pass through any funds to subrecipients for the year ended June 30, 2019.

81

HENRY COUNTY BOARD OF EDUCATION
SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE FISCAL YEAR ENDED JUNE 30, 2019

A. SUMMARY OF AUDIT RESULTS
Financial Statements Type of auditor's report issued
Internal control over financial reporting: Material weaknesses identified?
Significant deficiencies identified not considered to be material weaknesses?
Noncompliance material to financial statements noted?
Federal Awards Internal Control over major programs: Material weaknesses identified?
Significant deficiencies identified not considered to be material weaknesses?
Type of auditor's report issued on compliance for major programs
Any audit findings disclosed that are required to be reported in accordance with the Uniform Guidance?
Identification of major programs:
CFDA Number
10.553 10.555
84.367
Dollar threshold used to distinguish between Type A and Type B programs:
Auditee qualified as low-risk auditee?
82

Unmodified
Yes X No
Yes X None Reported Yes X No
Yes X No
Yes X None Reported
Unmodified
Yes X No
Name of Federal Program or Cluster U.S. Department of Education: School Nutrition Cluster:
School Breakfast Program National School Lunch Program Title II, Part A - Supporting Effective Instruction State Grants
$958,521 Yes X No

HENRY COUNTY BOARD OF EDUCATION
SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE FISCAL YEAR ENDED JUNE 30, 2019
B. FINDINGS: FINANCIAL STATEMENT AUDIT
None reported.
C. FINDINGS: FEDERAL PROGRAMS AUDIT
None reported.
83

HENRY COUNTY BOARD OF EDUCATION
SCHEDULE OF PRIOR YEAR FINDINGS FOR THE FISCAL YEAR ENDED JUNE 30, 2019
No prior year findings.
84