Houston County Board of Education, Perry, Georgia 2018 June 30 audit report

Houston County Board of Education
Perry, Georgia
Fiscal Year 2018 Audit Report
Year Ended June 30, 2018

HOUSTON COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

INDEPENDENT AUDITOR'S REPORT

REQUIRED SUPPLEMENTARY INFORMATION

MANAGEMENT'S DISCUSSION AND ANALYSIS

EXHIBITS

BASIC FINANCIAL STATEMENTS

GOVERNMENT-WIDE FINANCIAL STATEMENTS

A

STATEMENT OF NET POSITION

B

STATEMENT OF ACTIVITIES

FUND FINANCIAL STATEMENTS

C

BALANCE SHEET

GOVERNMENTAL FUNDS

D

RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET

TO THE STATEMENT OF NET POSITION

E

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES

GOVERNMENTAL FUNDS

F

RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT

OF REVENUES, EXPENDITURES AND CHANGES IN FUND

BALANCES TO THE STATEMENT OF ACTIVITIES

G

STATEMENT OF FIDUCIARY NET POSITION

FIDUCIARY FUNDS

H NOTES TO THE BASIC FINANCIAL STATEMENTS

SCHEDULES

REQUIRED SUPPLEMENTARY INFORMATION

1 SCHEDULE OF PROPORTIONATE SHARE OF THE NET PENSION LIABILITY TEACHERS RETIREMENT SYSTEM OF GEORGIA
2 SCHEDULE OF PROPORTIONATE SHARE OF THE NET PENSION LIABILITY EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA
3 SCHEDULE OF PROPORTIONATE SHARE OF THE NET PENSION LIABILITY PUBLIC SCHOOL EMPLOYEES RETIREMENT SYSTEM OF GEORGIA
4 SCHEDULE OF PROPORTIONATE SHARE OF THE NET OPEB LIABILITY SCHOOL OPEB FUND
5 SCHEDULE OF PROPORTIONATE SHARE OF THE NET OPEB ASSET SEAD OPEB
6 SCHEDULE OF CONTRIBUTIONS TEACHERS RETIREMENT SYSTEM OF GEORGIA

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HOUSTON COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I
FINANCIAL
SCHEDULES
REQUIRED SUPPLEMENTARY INFORMATION
7 SCHEDULE OF CONTRIBUTIONS EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA 8 SCHEDULE OF CONTRIBUTIONS SCHOOL OPEB FUND 9 SCHEDULE OF CONTRIBUTIONS SEAD OPEB 10 NOTES TO THE REQUIRED SUPPLEMENTARY INFORMATION 11 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES
IN FUND BALANCES - BUDGET AND ACTUAL GENERAL FUND
SUPPLEMENTARY INFORMATION
12 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS 13 SCHEDULE OF STATE REVENUE 14 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS

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45 46 47 48 49
50 51 53

SECTION II
COMPLIANCE AND INTERNAL CONTROL REPORTS
INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY THE UNIFORM GUIDANCE

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

SECTION IV FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS

SECTION I FINANCIAL

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
March 18, 2019

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

includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.
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 District as of June 30, 2018, and the respective changes in financial position for the year then ended in accordance with accounting principles generally accepted in the United States of America.
Emphasis of Matter
As described in Note 2 to the financial statements, in 2018, the School District adopted new accounting guidance, Governmental Accounting Standards Board (GASB) Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions, as amended by GASB Statement No. 85, Omnibus 2017. The School District restated beginning net position for the effect of GASB Statement No. 75. Our opinions are not modified with respect to this matter.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the Management's Discussion and Analysis and required supplementary information listed in the table of contents be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.
Other Information
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the School District's basic financial statements. The accompanying supplementary information, as listed in the table of contents, is presented for the purposes of additional analysis and is not a required part of the basic financial statements. The Schedule of Expenditures of Federal Awards is presented for purposes of additional analysis as required by Title 2 U. S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, and is also not a required part of the basic financial statements.

The accompanying supplementary information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole.
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated March 18, 2019 on our consideration of the School District's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the School District's internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the School District's internal control over financial reporting and compliance.
A copy of this report has been filed as a permanent record in the office of the State Auditor and made available to the press of the State, as provided for by Official Code of Georgia Annotated section 50-6-24.
Respectfully submitted,
Greg S. Griffin State Auditor

HOUSTON COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2018
INTRODUCTION
The discussion and analysis of Houston County Board of Education's (School District) financial performance provides an overview of the School District's financial activities for the fiscal year ended June 30, 2018. The intent of this discussion and analysis is to look at the School District's financial performance as a whole. Readers should also review the financial statements and the notes to the basic financial statements to enhance their understanding of the School District's financial performance.
FINANCIAL HIGHLIGHTS
Key financial highlights for the fiscal year 2018 are as follows:
On the government-wide financial statements:
On the government-wide financial statements, net position increased $11.2 million which represents a 21.6 percent increase from 2017, after restating the beginning net position for the effect of adopting GASB Statement No.75. This total increase was due to governmental activities since the School District has no business-type activities.
The School District had $320.2 million in expenses related to governmental activities. Revenues totaled $331.3 million. Program specific revenues in the form of charges for services and sales, grants, and contributions accounted for $196.2 million or 59.2 percent of the total revenues and were used to offset these expenditures. General revenues of $135.1 million or 40.8 percent of all revenues were adequate to provide for these programs.
The current ratio, which measures the Board's ability to transform current assets into cash and to pay its short-term liabilities, was 7.22 for the fiscal year ended June 30, 2018. Generally, a ratio greater than 2.0 is considered very financially stable.
During the fiscal year, the School District adopted Governmental Accounting Standards Board (GASB) Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other than Pensions. This statement establishes standards for recognizing and measuring liabilities, deferred outflows, deferred inflows, and expenditures for defined benefit OPEB plans. Implementation of this statement resulted in a restatement to the beginning net position of ($215.1) million. This restatement is based on actuarial estimates and information is not available for the fiscal year 2017 comparative balances. Note 13 in Exhibit "H", Notes to the Basic Financial Statements, provides more information on this restatement.
On the fund financial statements:
Among major funds, the general fund had $306.0 million in revenues and other financing sources, and $300.1 million in expenditures and other financing uses. The general fund's fund balance increased to $84.9 million.
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HOUSTON COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2018
OVERVIEW OF THE FINANCIAL STATEMENTS
This annual report consists of three parts; management's discussion and analysis, the basic financial statements and required supplementary information. The basic financial statements include two levels of statements that present different views of the Houston County Board of Education. 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 District presenting both short-term and long-term information about the overall financial status.
The fund financial statements focus on individual parts, reporting the School District's operation in more detail. The governmental funds statements disclose how basic services are financed in the short-term as well as what remains for future spending. The fiduciary funds statements provide information about the financial relationships in which the Board acts solely as a trustee or agent for the benefit of others.
The fund financial statements reflect the School District's most significant funds. For the year ending June 30, 2018, the general fund, the capital projects fund, and the debt service fund represent the most significant funds.
The financial statements also include notes that explain some of the information in the statements and provide more detailed data. The statements are followed by a section of required supplementary information that further explains and supports the financial statements. Additionally, other supplementary information (not required) is also presented that further supplements understanding of the financial statements.
Government-Wide Statements
The government-wide statements report information about the School District as a whole using accounting methods similar to those used by private-sector companies. The Statement of Net Position includes all of the School District's assets and liabilities. All of the current fiscal year's revenues and expenses are accounted for in the Statement of Activities regardless of when cash is received or paid.
The two government-wide statements report the School District's net position and how it has changed. Net position, the difference between the School District's assets and deferred outflows of resources, and liabilities and deferred inflows of resources, are one way to measure the School District's overall financial health or position. Over time, increases or decreases in net position are an indication of whether its financial health is improving or deteriorating. Changes may be the result of many factors, including those not under the School District's control, such as the property tax base, facility conditions, required educational programs and other factors.
In the Statement of Net Position and the Statement of Activities, the School District has one distinct type of activity:
Governmental Activities All of the School District's programs and services are reported here including instruction, support services, operation and maintenance of plant, pupil transportation, food service, after school program, student and principal accounts, and various others.
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HOUSTON COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2018
Fund Financial Statements
The School District's fund financial statements provide detailed information about the most significant funds, not the School District as a whole. Some funds are required by State law and some by bond requirements. The School District's major governmental funds are the general fund, capital projects fund, and debt service fund. Governmental Funds - Most of the School District's activities are reported in governmental funds, which focus on the determination of financial position and change in financial position, not on income determination. These funds are reported using the modified accrual method of accounting, which measures cash and all other financial assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term view of the School District's general governmental operations and the basic services it provides. Governmental fund information helps determine whether there are more or fewer financial resources that can be spent in the near future to finance educational programs. The relationship (or differences) between governmental activities (reported in the Statement of Net Position and the Statement of Activities) and governmental funds are reconciled in the financial statements. Fiduciary Funds - The School District is the trustee, or fiduciary, for assets that belong to others, such as the employee benefit programs, and school clubs and organizations within the principals' accounts. The School District is responsible for ensuring that the assets reported in these funds are used only for their intended purposes and by those to whom the assets belong. The School District excludes these activities from the government-wide financial statements because it cannot use these assets to finance its operations.
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HOUSTON COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2018

FINANCIAL ANALYSIS OF THE BOARD AS A WHOLE

Recall that the Statement of Net Position provides the perspective of the Board as a whole. Table 1 provides a summary of the Board's net position for 2018 compared to fiscal year 2017.
Table 1 Net Position (In Thousands)

Assets Current and Other Assets Capital Assets, Net

Governmental Activities

Fiscal

Fiscal

Year 2018

Year 2017 (1)

$

152,836 $ 149,380

309,283

308,818

Total Assets

462,119

458,198

Deferred Outflows of Resources

57,036

82,602

Liabilities Current and Other Liabilities Long-Term Liabilities

21,176 504,176

19,790 355,139

Total Liabilities

525,352

374,929

Deferred Inflows of Resources

34,461

2,578

Net Position Net Invested in Capital Assets Restricted Unrestricted (Deficit)

291,862 81,774
(414,294)

307,256 66,339
(210,302)

Total Net Position

$

(40,658) $ 163,293

(1) Fiscal year 2017 balances do not reflect the effect of the Restatement of Net Position. See Note 13 in the Notes to the Basic Financial Statements for additional information.
Total net position decreased ($203.9) million due to the restatement of the beginning net position by ($215.1) million for the adoption of GASB Statement No. 75. However, based strictly on the School District's operations, an increase of $11.2 million was realized as shown on Table 2. The significant changes to the deferred outflows, deferred inflows and long-term liabilities is also attributable to the implementation of the statement.

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HOUSTON COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2018

Table 2 shows the changes in net position for fiscal year 2018 compared to the changes in net position for fiscal year 2017.
Table 2 Changes in Net Position
(In Thousands)

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

Governmental Activities

Fiscal

Fiscal

Year 2018

Year 2017 (1)

$

8,471 $

8,188

187,118

176,367

617

2,294

Total Program Revenues

196,206

186,849

General Revenues: Taxes Property Taxes For Maintenance and Operations Other Property Taxes Sales Taxes Local Option Sales Tax Special Purpose Local Option Sales Tax For Debt Service and Capital Projects Other Sales Tax Grants and Contributions not Restricted Investment Earnings Miscellaneous

51,317 2,460
24,199
24,200 1,325
25,112 1,263 5,266

51,503 2,088
22,267
22,270 1,285
21,207 410
6,161

Total General Revenues

135,142

127,191

Total Revenues

331,348

314,040

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

203,113
14,077 6,283 2,573 4,433 1,695
20,047 2,383
22,163 13,496
4,344 1,803
2,439 1,091 19,890
342

202,381
13,058 8,044
4,424 1,630 19,952 2,778 20,905 12,078 4,102 1,187
2,379 1,054 19,419
(287)

Total Expenses

320,172

313,104

Increase in Net Position

$

11,176 $

936

(1) Fiscal year 2017 balances do not reflect the effect of the Restatement of Net Position. See Note 13 in the Notes to the Basic Financial Statements for additional information.
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HOUSTON COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2018
Figure A shows the funding sources for the revenues. 55.2 percent of the School District's revenues are derived from state grants. Property taxes make up 16.3 percent of the total funding, while an additional 15.0 percent is earned from the School District's sales taxes.
Figure A Sources of Revenue for Fiscal Year 2018

State Funds 55.2%

Federal Funds 8.9%

Charges for Se r vice s 2.6%

M is ce llane ous 1.6%

Sales Taxes 15.0%

Property Taxes 16.3%
Investm ent Ear nings 0.4%

As shown in Figure B, Instruction comprised 63.4 percent of governmental program expenses. Administration and Other Services (3.2 percent) consist of the central office, business and warehouse, and other central operations of the School District.

Figure B Functional Expenses for Fiscal Year 2018

Educational Media 1.4%
Improvement of Instruction and Staff
Trainin g 2.8%
Pupil Services 4.4%
Interest on Debt 0.1%

Instruction 63.4%

Administration and Other Services
3.2%

Enterprise and Community
Services 1.1%

Food Services 6.2%

Student
Transportation
Services 4.2%

School Administration
6.3%
Maintenance and Operation of Plant
6.9%

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HOUSTON COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2018
Governmental Activities

The Statement of Activities shows the cost of program services and the charges for services and grants offsetting those services. Table 3 shows, for governmental activities, the total cost of services and the net cost of services comparing fiscal year 2018 with fiscal year 2017. That is, it identifies the cost of these services supported by tax revenue and unrestricted State entitlements.

Table 3 Governmental Activities
(In Thousands)

Total Cost of Services

Fiscal

Fiscal

Year 2018

Year 2017 (1)

Net Cost of Services

Fiscal

Fiscal

Year 2018

Year 2017 (1)

Instruction Support Services
Pupil Services Improvement of Instructional Services Instructional Staff Training Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations of Non-Instructional Services Enterprise Operations Community Services Food Services Interest on Short-Term and Long-Term Debt

$ 203,113 $ 202,381 $ 66,227 $

14,077 6,283 2,573 4,433 1,695
20,047 2,383
22,163 13,496
4,344 1,803

13,058 8,044
4,424 1,630 19,952 2,778 20,905 12,078 4,102 1,187

6,584 2,911
328 517 1,154 12,518 1,812 13,341 11,250 3,408 1,223

2,439 1,091 19,890
342

2,379 1,054 19,419
(287)

900 1,091
360 342

73,317
5,843 3,137
672 1,086 12,716 2,246 12,185 9,834 3,263
714
830 1,054
(356) (287)

Total Expenses

$ 320,172 $ 313,104 $ 123,966 $ 126,254

(1) Fiscal year 2017 balances do not reflect the effect of the Restatement of Net Position. See Note 13 in the Notes to the Basic Financial Statements for additional information.
Although program revenues make up a majority of the funding, the School District is still dependent upon tax revenues for governmental activities. Approximately 32.6 percent of Instruction activities are supported through taxes and other general revenues, and for all governmental activities general revenue support is 38.7 percent.

The School District's Funds

The School District's governmental funds are accounted for using the modified accrual basis of accounting. Total governmental funds had revenues and other financing sources of $330.9 million and expenditures and other financing uses of $328.3 million. There was an increase in the fund balance totaling $2.6 million for the governmental funds as a whole. The general fund increased by $5.9 million due mainly to increases in mid-term funding and careful planning of expenditures. The capital projects funds had an increase of $1.5 million and debt service funds had a decrease of ($4.8) million to meet the subsequent year's debt requirements. The capital projects fund increase was due to the increased
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HOUSTON COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 proceeds from the ESPLOST. The decrease in the debt service fund was attributable to the amount of ESPLOST proceeds being needed to meet the interest and principal payments due on the outstanding debt associated with previously issued general obligation bonds in the subsequent year. The increase in the fund balance of the general fund for the year reflects that the School District was able to meet current costs as planned and budgeted.
General Fund Budgeting Highlights
The School District's budget is prepared in accordance with Georgia law. The most significant budgeted fund is the general fund. During the course of fiscal year 2018, the School District amended its general fund budget as needed. The School District uses site-based budgeting. The budgeting systems are designed to tightly control total site budgets but provide flexibility for site management. For the general fund, the final budgeted revenues and other financing sources of $306.4 million was greater than the original budgeted amount of $302.4 million by $4.0 million. The overall difference was mainly due to additional state grant awards of $2.9 million and additional local revenues. The actual revenues and other financing sources of $306.0 million was less than the budgeted amount by $0.4 million due mainly to the elimination of intra-fund transfers and an increase in sales taxes. The final budgeted expenditures and other financing uses of $304.4 million was less than the original budgeted amount of $305.7 million by $1.3 million. This difference was due mainly to adjusting the budget to reflect the revised needs. The actual expenditures and other financing uses of $300.1 million was $4.3 million less than budgeted. The reduced expenditures were mainly a result of an adjustment removing intrafund transfers, reductions of expenditures by the School District, and the requirement to budget for specific federal grants in advance of anticipated and actual need. The differences in the beginning and ending budgeted fund balances to actual is the result of the School District's decision to include the Local Option Sales Taxes that had previously been reported as deferred as current and prior year revenues for report purposes.
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HOUSTON COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2018

Capital Assets and Debt Administration

Capital Assets

At the end of fiscal year 2018, the School District had $309.3 million invested in capital assets, net of depreciation, all in governmental activities. Table 4 shows fiscal year 2018 balances compared with fiscal year 2017 balances.

Table 4 Capital Assets at June 30 (Net of Depreciation, In Thousands)

Governmental Activities

Fiscal

Fiscal

Year 2018

Year 2017

Land Construction In Progress Buildings and Building Improvements Equipment Land Improvements Intangible Assets

$ 11,278 $

11,278

10,381

8,343

272,935

276,825

7,779

6,948

5,544

5,424

1,366

-

Total

$ 309,283 $ 308,818

The overall capital assets increased in fiscal year 2018 by $0.5 million due to the construction and renovation expenses from the 2012 and 2017 ESPLOST capital outlay projects during the current year being offset by the fiscal year 2018 depreciation of $13.4 million.

Debt

At June 30, 2018, the School District had $30.0 million in bonds outstanding with $5.5 million due within one year, $0.9 million in capital leases outstanding with $0.6 million due within one year, $3.1 million in compensated absences earned as of the end of the year, and $3.2 million in unamortized bond premiums with $0.6 million due with one year. In addition, the School District reported long-term liabilities for its proportionate share of the net pension and net OPEB liabilities. Reporting these liabilities is required by GASB Statements No. 68 and No. 75.

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HOUSTON COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2018

Table 5 summarizes the long-term debt outstanding at June 30, 2018, compared to fiscal year 2017 balances.

Table 5 Debt at June 30 (In Thousands)

Governmental Activities

Fiscal

Fiscal

Year 2018

Year 2017

General Obligation Bonds Capital Leases Compensated Absences Unamortized Bond Premiums Net Pension Liability Net OPEB Liability

$

30,000

$

40,305

940

1,583

3,063

3,114

3,182

4,243

258,432

305,894

208,559

-

$

504,176

$ 355,139

At June 30, 2018, the School District's overall legal bonding authority was $381.7 million based on the assessed value of taxable property as of December 31, 2017. The School District's bonds have assigned ratings of Aa1 and AA+. In addition, the State of Georgia limits the amount available to be spent each year on multiyear leases, purchase, or lease purchase contracts to 7.5 percent of the locally generated taxes for the maintenance and operation of the school system. Both the current year payments and subsequently scheduled payments are well below the $5.7 million threshold.

CURRENT ISSUES

The Houston County School District consists of 38 campuses located in Houston County, a fast-growing area with a population of approximately 153,479. Current enrollment is approximately 29,770 students in grades PK-12. Among Georgia's 159 counties, Houston ranks 15th in population, 15th in economics, and 16th in income. The 2017 School District millage ranks 168th out of 180 districts in Georgia.

The State of Georgia experienced serious financial hardship over the past several years, and as a result, more pressure was being placed on the local school systems to prioritize their instructional programs and to fund them with additional locally generated revenues. In fiscal year 2003, the State enacted Austerity Reductions for the State allotments, resulting in a reduction of state revenues to the School District of approximately $2.0 million in 2003 to a high of $23.8 million in 2010. For fiscal year 2018, the reduction was $3.0 million. Since the austerity reductions were enacted, the reductions total $158.4 million and the overall reduction of state funding, including other grants and programs, is approximately $317.6 million. For the first time in sixteen years, the fiscal year 2019 state allotments did not include an austerity reduction. Hopefully this trend will continue in future years. While Houston County's class sizes remain below the state maximum recommendations, any additional reductions in state funding combined with a growing system place a heavier burden on the locally generated taxes to help offset this loss of state funding. Despite these challenges, the Houston County Board of Education is strong financially, and we remain optimistic about the ability of the School District to maximize all of the financial resources to continue to provide a quality education to our students.

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HOUSTON COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 Houston County is home to Robins Air Force Base, Georgia's largest single industry. Robins Air Force Base had an estimated fiscal year 2017 economic impact on the State of Georgia of $2.87 billion, with Houston County being by far the largest beneficiary of that impact. Other large employers located in the County include the Board of Education, Houston County Hospital Authority, Perdue Farms, Frito-Lay Company, Anchor Glass, and Wal-Mart Associates. Of Houston's employed residents, 62.8 percent work in the County. Houston is Georgia's sixty-fifth largest county in total area. As one of the fastest growing counties in Georgia, Houston had a 15 percent population increase from 1980-1990, a 24 percent increase from 1990-2000, and a 26.3 percent increase from 2000-2010. The population as of the 2010 census was 139,900 and was projected to grow to 153,479 in 2017. This growth results in school system enrollment increases between 198 to 487 students for the past five years. Houston County has three municipalities: Centerville with an estimated population of 7,716; Perry with 16,684; and Warner Robins with 74,854. The County also includes the communities of Bonaire, Clinchfield, Elko, Haynesville, Henderson, and Kathleen.
Contacting the School District's Financial Management
This financial report is designed to provide our citizens, taxpayers, investors and creditors with a general overview of the School District's finances and to show the School District's accountability for the money it receives. If you have questions about this report or need additional financial information, contact Stephen J. Thublin, Assistant Superintendent for Finance and Business Operations, at the Houston County Board of Education, P.O. Box 1850, 1100 Main Street, Perry, Georgia 31069. You may also email your questions to Stephen.Thublin@hcbe.net.
xi

HOUSTON COUNTY BOARD OF EDUCATION

HOUSTON COUNTY BOARD OF EDUCATION STATEMENT OF NET POSITION JUNE 30, 2018
ASSETS
Cash and Cash Equivalents Investments Receivables, Net
Taxes State Government Federal Government Other Inventories Capital Assets, Non-Depreciable Capital Assets, Depreciable (Net of Accumulated Depreciation)
Total Assets
DEFERRED OUTFLOWS OF RESOURCES
Related to Defined Benefit Pension Plans Related to OPEB Plans
Total Deferred Outflows of Resources
LIABILITIES
Accounts Payable Salaries and Benefits Payable Interest Payable Claims Incurred but not Reported (IBNR) Retainages Payable Net Pension Liability Net OPEB Liability Long-Term Liabilities
Due Within One Year Due in More Than One Year
Total Liabilities
DEFERRED INFLOWS OF RESOURCES
Related to Defined Benefit Pension Plans Related to OPEB Plans
Total Deferred Inflows of Resources
NET POSITION
Net Investment in Capital Assets Restricted for
Continuation of Federal Programs Capital Projects Debt Service Net OPEB Asset Property Tax Rollback Unrestricted (Deficit)
Total Net Position
The notes to the basic financial statements are an integral part of this statement.

EXHIBIT "A"

GOVERNMENTAL ACTIVITIES

$

115,703,977.05

277,312.87

6,247,585.06 23,464,378.85
2,571,500.12 155,803.43
4,416,098.71 21,659,319.90 287,623,282.58

462,119,258.57

49,309,579.49 7,726,639.00
57,036,218.49

58,123.80 18,459,413.03
473,368.49 1,554,698.12
629,986.82 258,432,338.00 208,559,073.00
6,735,471.28 30,449,547.52
525,352,020.06

16,144,917.00 18,316,305.00
34,461,222.00

291,861,903.28
9,604,437.01 28,950,435.28
5,815,528.33 81,706.00
37,403,443.44 (414,375,218.34)

$

(40,657,765.00)

- 1 -

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

GOVERNMENTAL ACTIVITIES
Instruction Support Services
Pupil Services Improvement of Instructional Services Instructional Staff Training Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations of Non-Instructional Services Enterprise Operations Community Services Food Services Interest on Short-Term and Long-Term Debt
Total Governmental Activities
General Revenues Taxes Property Taxes For Maintenance and Operations Railroad Cars Title Ad Valorem Tax Sales Taxes Special Purpose Local Option Sales Tax For Debt Services For Capital Projects Local Option Sales Tax Intangible Recording Tax Real Estate Transfer Tax Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous
Total General Revenues
Change in Net Position
Net Position - Beginning of Year (Restated)
Net Position - End of Year

EXPENSES

CHARGES FOR SERVICES

$ 203,112,848.75 $
14,076,559.59 6,283,124.94 2,572,505.07 4,433,064.32 1,694,846.96
20,047,377.05 2,382,661.18
22,163,122.77 13,496,225.00
4,343,739.64 1,803,005.39
2,439,446.45 1,090,733.16 19,890,492.83
342,374.47
$ 320,172,127.57 $

2,715,860.36
5,904.73 104,826.50 -
1,539,809.98 -
4,104,509.95 -
8,470,911.52

The notes to the basic financial statements are an integral part of this statement.

- 2 -

EXHIBIT "B"

PROGRAM REVENUES OPERATING GRANTS AND
CONTRIBUTIONS

CAPITAL GRANTS AND CONTRIBUTIONS

NET (EXPENSES) REVENUES
AND CHANGES IN NET POSITION

$ 133,733,645.33 $
7,492,483.37 3,372,263.64 2,244,148.09 3,896,984.00
540,195.18 7,510,297.82
565,939.00 8,809,154.09 2,063,941.26
930,492.26 580,420.44
15,378,452.47 -
$ 187,118,416.95 $

436,122.60 $
87.49 -
19,144.44 746.70
18,960.63 5,166.82 7,026.66
77,319.58 4,843.99
47,827.78 -
617,246.69

(66,227,220.46)
(6,583,988.73) (2,910,861.30)
(328,356.98) (516,935.88) (1,153,905.08) (12,518,118.60) (1,811,555.36) (13,341,037.29) (11,250,137.66) (3,408,403.39) (1,222,584.95)
(899,636.47) (1,090,733.16)
(359,702.63) (342,374.47)
(123,965,552.41)

51,317,368.42 30,188.10
2,429,770.26
6,861,332.94 17,338,343.45 24,198,810.26
991,105.72 333,979.78 25,111,767.20 1,262,991.25 5,266,219.87
135,141,877.25
11,176,324.84
(51,834,089.84)

$

(40,657,765.00)

- 3 -

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

EXHIBIT "C"

ASSETS
Cash and Cash Equivalents Investments Receivables, Net
Taxes State Government Federal Government Other Inventories
Total Assets
LIABILITIES
Accounts Payable Salaries and Benefits Payable Retainages Payable
Total Liabilities
DEFERRED INFLOWS OF RESOURCES
Unavailable Revenue - Property Taxes
FUND BALANCES
Nonspendable Restricted Assigned Unassigned
Total Fund Balances
Total Liabilities, Deferred Inflows of Resources, and Fund Balances

GENERAL FUND

CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 69,056,159.11 $ 40,359,195.54 $

277,038.45

-

4,278,143.44 23,464,378.85
2,571,500.12 155,803.43
4,416,098.71

1,969,441.62 -

6,288,622.40 $ 274.42

115,703,977.05 277,312.87

-

6,247,585.06

-

23,464,378.85

-

2,571,500.12

-

155,803.43

-

4,416,098.71

$ 104,219,122.11 $ 42,328,637.16 $ 6,288,896.82 $ 152,836,656.09

$

58,123.80 $

18,459,413.03

-

18,517,536.83

- $ 629,986.82
629,986.82

- $ -
-

58,123.80 18,459,413.03
629,986.82
19,147,523.65

761,678.73

-

-

761,678.73

4,416,098.71 46,294,249.92
2,376,677.49 31,852,880.43
84,939,906.55

41,578,565.74
120,084.60 -
41,698,650.34

6,288,896.82
-
6,288,896.82

4,416,098.71 94,161,712.48
2,496,762.09 31,852,880.43
132,927,453.71

$ 104,219,122.11 $ 42,328,637.16 $ 6,288,896.82 $ 152,836,656.09

The notes to the basic financial statements are an integral part of this statement.

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

EXHIBIT "D"

Total fund balances - governmental funds (Exhibit "C")
Amounts reported for governmental activities in the Statement of Net Position are different because:
Capital assets used in governmental activities are not financial resources and therefore are not reported in the funds.
Land Construction in progress Land improvements Buildings Equipment Intangible Assets Accumulated depreciation
Some liabilities, including net pension obligations, are not due and payable in the current period, and, therefore, are not reported in the funds.
Net pension liability Net OPEB liability
Deferred outflows and inflows of resources related to pensions are applicable to future periods and, therefore, are not reported in the governmental funds.
Related to pensions Related to OPEB
Taxes that are not available to pay for current period expenditures are deferred in the funds.
Property taxes
Long-term liabilities, including bonds payable, are not due and payable in the current period and therefore are not reported as liabilities in the funds. Long-Term Liabilities at year-end consists of:
Bonds payable Accrued interest payable Capital leases payable Compensated absences payable Unamortized bond premiums Claims and judgments payable

$ 132,927,453.71

$

11,278,291.55

10,381,028.35

9,557,511.85

440,505,502.52

29,441,604.66

1,437,220.47

(193,318,556.92)

309,282,602.48

$ (258,432,338.00) (208,559,073.00)

(466,991,411.00)

$

33,164,662.49

(10,589,666.00)

22,574,996.49

761,678.73

$

(30,000,000.00)

(473,368.49)

(939,586.53)

(3,063,543.82)

(3,181,888.45)

(1,554,698.12)

(39,213,085.41)

Net position of governmental activities (Exhibit "A")

$

(40,657,765.00)

The notes to the basic financial statements are an integral part of this statement.

- 5 -

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

EXHIBIT "E"

REVENUES
Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous
Total Revenues
EXPENDITURES
Current Instruction Support Services Pupil Services Improvement of Instructional Services Instructional Staff Training Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Enterprise Operations Community Services Food Services Operation
Capital Outlay Debt Services
Principal Interest
Total Expenditures
Net Change in Fund Balances
Fund Balances - Beginning

GENERAL FUND

CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$

53,908,089.04 $

25,523,895.76

182,722,128.16

29,542,339.65

8,470,911.52

673,006.15

5,194,169.87

306,034,540.15

- $ 17,338,343.45
512,623.66 72,050.00
17,923,017.11

- $ 6,861,332.94
77,361.44 -

53,908,089.04 49,723,572.15 182,722,128.16 29,542,339.65
8,470,911.52 1,262,991.25 5,266,219.87

6,938,694.38

330,896,251.64

187,757,771.23
13,936,903.97 6,230,142.97 2,572,505.07 3,918,657.59 1,671,794.65
19,402,606.23 2,457,833.60
22,006,720.75 12,392,973.53
3,699,093.35 1,395,488.65 2,439,446.45 1,090,733.16 18,508,162.06
-
643,028.20 22,802.43
300,146,663.89
5,887,876.26
79,052,030.29

2,400,638.72
-
5,620.00 1,455,652.00 583,587.41 12,003,600.16
-
16,449,098.29
1,473,918.82
40,224,731.52

-
-
4,750.00 -
10,305,000.00 1,395,059.38
11,704,809.38
(4,766,115.00)
11,055,011.82

190,158,409.95
13,936,903.97 6,230,142.97 2,572,505.07 3,918,657.59 1,671,794.65
19,402,606.23 2,468,203.60
22,006,720.75 13,848,625.53
4,282,680.76 1,395,488.65 2,439,446.45 1,090,733.16 18,508,162.06 12,003,600.16
10,948,028.20 1,417,861.81
328,300,571.56
2,595,680.08
130,331,773.63

Fund Balances - Ending

$

84,939,906.55 $

41,698,650.34 $

6,288,896.82 $ 132,927,453.71

The notes to the basic financial statements are an integral part of this statement.

- 6 -

HOUSTON COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF
REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES JUNE 30, 2018

EXHIBIT "F"

Net change in fund balances total governmental funds (Exhibit "E")
Amounts reported for governmental activities in the Statement of Activities are different because:
Governmental funds report capital outlays as expenditures. However, in the Statement of Activities, the cost of capital assets is allocated over their estimated useful lives as depreciation expense.
Capital outlay Depreciation expense
The net effect of various miscellaneous transactions involving capital assets (i.e., sales, trade-ins, donations, and disposals) is to decrease net position.
Taxes reported 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, 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. Also, governmental funds report the effect of premiums, discounts and the difference between the carrying value of refunded debt and the acquisition cost of refunded debt when debt is first issued. These amounts are deferred and amortized in the Statement of Activities.
Bond principal retirements Capital lease payments Amortization of bond premiums
District pension contributions are reported as expenditures in the governmental funds when made. However, they are reported as deferred outflows of resources in the Statement of Net Position because the reported net pension/OPEB liability is measured a year before the District's report date. Pension/OPEB expense, which is the change in the net pension/OPEB liability adjusted for changes in deferred outflows and inflows of resources related to pensions/OPEBs, is reported in the Statement of Activities.
Pension expense OPEB expense
Some items 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. These activities consist of:
Accrued interest on issuance of debt Compensated absences Claims and judgments

$

2,595,680.08

$ 13,928,027.08 (13,425,637.63)

502,389.45 (37,698.80) (130,762.26)

$ 10,305,000.00 643,028.20
1,061,643.95

12,009,672.15

$

601,623.91

(4,021,389.00)

(3,419,765.09)

$

13,843.39

50,540.60

(407,574.68)

(343,190.69)

Change in net position of governmental activities (Exhibit "B")

$ 11,176,324.84

The notes to the basic financial statements are an integral part of this statement.

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HOUSTON COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET POSITION
FIDUCIARY FUNDS JUNE 30, 2018
ASSETS Cash and Cash Equivalents Accounts Receivable, Net
Other
Total Assets LIABILITIES Accounts Payable Funds Held for Others
Total Liabilities

EXHIBIT "G"

AGENCY FUNDS

$

1,686,599.88

120,027.11

$

1,806,626.99

$

968,269.65

838,357.34

$

1,806,626.99

The notes to the basic financial statements are an integral part of this statement.

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HOUSTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2018

EXHIBIT "H"

NOTE 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY
REPORTING ENTITY
The Houston County Board of Education (School District) was established under the laws of the State of Georgia and operates under the guidance of a board elected by the voters and a Superintendent appointed by the Board. The School District is organized as a separate legal entity and has the power to levy taxes and issue bonds. Its budget is not subject to approval by any other entity. Accordingly, the School District is a primary government and consists of all the organizations that compose its legal entity.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying financial statements of the School District have been prepared in conformity with generally accepted accounting principles (GAAP) as prescribed by the Governmental Accounting Standards Board (GASB). GASB is the accepted standard-setting body for governmental accounting and financial reporting principles. The most significant of the School District's accounting policies are described below.
BASIS OF PRESENTATION
The School District's basic financial statements are collectively comprised of the government-wide financial statements, fund financial statements and notes to the basic financial statements. The government-wide statements focus on the School District as a whole, while the fund financial statements focus on major funds. Each presentation provides valuable information that can be analyzed and compared between years and between governments to enhance the information's usefulness.
GOVERNMENT-WIDE STATEMENTS:
The Statement of Net Position and the Statement of Activities display information about the financial activities of the overall School District, except for fiduciary activities. Eliminations have been made to minimize the double counting of internal activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange transactions.
The Statement of Net Position presents the School District's non-fiduciary assets and liabilities, with the difference reported as net position. Net position is reported in three categories as follows:
1. Net investment in capital assets consists of the School District's total investment in capital assets, net of accumulated depreciation, and reduced by outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of net investment in capital assets.
2. Restricted net position consists of resources for which the School District is legally or contractually obligated to spend in accordance with restrictions imposed by external third parties or imposed by law through constitutional provisions or enabling legislation.
3. Unrestricted net position consists of resources not meeting the definition of the two preceding categories. Unrestricted net position often has constraints on resources imposed by management which can be removed or modified.
The Statement of Activities presents a comparison between direct expenses and program revenues for each function of the School District's governmental activities.
Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Indirect expenses (expenses of the School District related to the administration and support of the School District's programs, such as office and maintenance personnel and accounting) are not allocated to programs.

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HOUSTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2018

EXHIBIT "H"

Program revenues include (a) charges paid by the recipients of goods or services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues.
FUND FINANCIAL STATEMENTS:
The fund financial statements provide information about the School District's funds, including fiduciary funds. Eliminations have been made to minimize the double counting of internal activities. Separate financial statements are presented for governmental and fiduciary funds. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column.
The School District reports the following major governmental funds:
The general fund is the School District's primary operating fund. It accounts for and reports all financial resources not accounted for and reported in another fund.
The capital projects fund accounts for and reports financial resources including Education Special Purpose Local Option Sales Tax (ESPLOST) and Bond Proceeds that are restricted, committed or assigned for capital outlay expenditures, including the acquisition or construction of capital facilities and other capital assets.
The debt service fund accounts for and reports financial resources that are restricted, committed, or assigned including taxes legally restricted for the payment of general long-term principal and interest.
The School District reports the following fiduciary fund type:
Agency funds are used to report resources held by the School District in a purely custodial capacity (assets equal liabilities) and do not involve measurement of results of operations.
BASIS OF ACCOUNTING
The basis of accounting determines when transactions are reported on the financial statements. The government-wide and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, sales taxes and grants. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from sales taxes is recognized in the fiscal year in which the underlying transaction (sale) takes place. Revenue from grants is recognized in the fiscal year in which all eligibility requirements have been satisfied.
The School District uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts.
Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Under this method, revenues are recognized when measurable and available. The School District considers all revenues reported in the governmental funds to be available if they are collected within sixty days after year-end. The School District considers all intergovernmental revenues to be available if they are collected within 120 days after year-end. Property taxes, sales taxes and interest are considered to be susceptible to accrual. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general longterm debt, claims and judgments, and compensated absences, which are recognized as expenditures

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HOUSTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2018

EXHIBIT "H"

to the extent they have matured. Capital asset acquisitions are reported as expenditures in governmental funds. Proceeds of general long-term liabilities and acquisitions under capital leases are reported as other financing sources.
The School District funds certain programs by a combination of specific cost-reimbursement grants, categorical grants, and general revenues. Thus, when program costs are incurred, there are both restricted and unrestricted net assets available to finance the program. It is the School District's policy to first apply grant resources to such programs, followed by cost-reimbursement grants, then general revenues.
NEW ACCOUNTING PRONOUNCEMENTS
In fiscal year 2018, the School District adopted Governmental Accounting Standards Board (GASB) Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other than Pensions. This statement establishes standards for recognizing and measuring liabilities, deferred outflows of resources, deferred inflows of resources, and expense/expenditures. For defined benefit OPEB, this statement identifies the methods and assumptions that are required to be used to project benefit payments, discount projected benefit payments to their actuarial present value, and attribute that present value to periods of employee service. Note disclosure and required supplementary information requirements about defined benefit OPEB also are addressed. The adoption of this statement has a significant impact on the School District's financial statements. As noted in the Restatement of Net Position note disclosure, the School District restated beginning net position for the cumulative effect of this accounting change.
In fiscal year 2018, the School District adopted Governmental Accounting Standards Board (GASB) Statement No. 81, Irrevocable Split-Interest Agreements. This statement requires that a government that receives resources pursuant to an irrevocable split-interest agreement recognize assets, liabilities, and deferred inflows of resources at the inception of the agreement. Furthermore, this statement requires that a government recognize assets representing its beneficial interests in irrevocable split-interest agreements that are administered by a third party, if the government controls the present service capacity of the beneficial interests. This statement requires that a government recognize revenue when the resources become applicable to the reporting period. The adoption of this statement does not have a significant impact on the School District's financial statements.
In fiscal year 2018, the School District adopted Governmental Accounting Standards Board (GASB) Statement No. 85, Omnibus 2017. The objective of this statement is to address practice issues that have been identified during implementation and application of certain GASB Statements. This statement addresses a variety of topics including issues related to blending component units, goodwill, fair value measurement and application, and postemployment benefits (pensions and other postemployment benefits OPEB). The adoption of this statement does not have a significant impact on the School District's financial statements.
In fiscal year 2018, the School District adopted Governmental Accounting Standards Board (GASB) Statement No. 86, Certain Debt Extinguishment Issues. The primary objective of this statement is to improve consistency in accounting and financial reporting for in-substance defeasance of debt by providing guidance for transactions in which cash and other monetary assets acquired with only existing resources--resources other than the proceeds of refunding debt--are placed in an irrevocable trust for the sole purpose of extinguishing debt. This statement also improves accounting and financial reporting for prepaid insurance on debt that is extinguished and notes to financial statements for debt that is defeased in substance. The adoption of this statement does not have a significant impact on the School District's financial statements.

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HOUSTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2018

EXHIBIT "H"

CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash on hand, demand deposits, investments in the State of Georgia local government investment pool (Georgia Fund 1) and short-term investments with original maturities of three months or less from the date of acquisition in authorized financial institutions. Official Code of Georgia Annotated (O.C.G.A.) 45-8-14 authorizes the School District to deposit its funds in one or more solvent banks, insured Federal savings and loan associations or insured chartered building and loan associations.
INVESTMENTS
The School District can invest its funds as permitted by O.C.G.A. 36-83-4. In selecting among options for investment or among institutional bids for deposits, the highest rate of return shall be the objective, given equivalent conditions of safety and liquidity.
Investments made by the School District in nonparticipating interest-earning contracts (such as certificates of deposit) and repurchase agreements are reported at cost. Participating interest-earning contracts and money market investments with a maturity at purchase of one year or less are reported at amortized cost. All other investments are reported at fair value.
For accounting purposes, certificates of deposit are classified as investments if they have an original maturity greater than three months when acquired.
RECEIVABLES
Receivables consist of amounts due from property and sales taxes, grant reimbursements due on Federal, State or other grants for expenditures made but not reimbursed and other receivables disclosed from information available. Receivables are recorded when either the asset or revenue recognition criteria has been met. Receivables recorded on the basic financial statements do not include any amounts which would necessitate the need for an allowance for uncollectible receivables.
INVENTORIES
Food Inventories
On the basic financial statements, inventories of donated food commodities used in the preparation of meals are reported at their Federally assigned value and purchased foods inventories are reported at cost (calculated on the weighted average basis). The School District uses the consumption method to account for inventories whereby donated food commodities are recorded as an asset and as revenue when received, and expenses/expenditures are recorded as the inventory items are used. Purchased foods are recorded as an asset when purchased and expenses/expenditures are recorded as the inventory items are used.
Supply Inventory
On the basic financial statements, inventories of consumable supplies and materials are reported at cost (weighted average). The School District uses the consumption method to account for inventories of consumable supplies whereby an asset is recorded when supplies are purchased and expenditures are recorded at the time the supplies are consumed.
CAPITAL ASSETS
On the government-wide financial statements, capital assets are recorded at cost where historical records are available and at estimated historical cost based on appraisals or deflated current replacement cost where no historical records exist. Donated capital assets are recorded at the acquisition value on the date donated. The cost of normal maintenance and repairs that do not add to the value of assets or materially extend the useful lives of the assets is not capitalized. The School District does not capitalize book collections or works of art.

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HOUSTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2018

EXHIBIT "H"

Capital acquisition and construction are recorded as expenditures in the governmental fund financial statements at the time of purchase (including ancillary charges), and the related assets are reported as capital assets in the governmental activities column in the government-wide financial statements.

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

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

Capitalization Policy

Estimated Useful Life

Land Land Improvements Buildings and Improvements Equipment
a. Vehicles b. Other Machinery and Equipment
Intangible assets Construction In Progress

All All All
All $10,000.00 and any
item necessary for insurance purposes $100,000.00 to $1,000,000.00
All

N/A 8 to 25 Years 10 to 50 Years
5 to 14 Years 5 to 10 Years
up to 20 Years N/A

DEFERRED OUTFLOWS/INFLOWS OF RESOURCES
In addition to assets, the statement of financial position will report a separate section for deferred outflows of resources. This separate financial statement element, represents a consumption of resources that applies to a future period(s) and therefore will not be recognized as an outflow of resources (expense/expenditure) until then.

In addition to liabilities, the statement of financial position will report a separate section for deferred inflows of resources. This separate financial statement element represents an acquisition of resources that applies to a future period(s) and therefore will not be recognized as an inflow of resources (revenue) until that time.

COMPENSATED ABSENCES
Members of the Teachers Retirement System of Georgia (TRS) may apply unused sick leave toward early retirement in excess of sixty days. Employees retiring under the Teachers Retirement System of Georgia are eligible to be paid for up to sixty days of leave at a rate of $22.50 per day, upon retirement. Employees retiring under the Public School Employees Retirement System will be eligible to sell all unused leave up to the one hundred day maximum accumulation, at $22.50 per day. The employee must have a minimum of five consecutive years of employment with the School District, contiguous with retirement.

Public School Employees Retirement System employees who terminate employment may apply to sell unused leave in excess of forty-five days but not to exceed one hundred days at $22.50 per day. The employee must have a minimum of five consecutive years of employment with the School District, contiguous to a voluntary termination.

Accrued vacation leave will be paid to all eligible employees at their daily rate up to a maximum of twenty days. Vacation leave of twelve days is awarded to all full time personnel employed on a twelve month basis. No other employees are eligible to earn vacation leave. Vacation leave not utilized during the fiscal year may be carried over to the next fiscal year, providing such vacation leave does not exceed twenty days.

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HOUSTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2018

EXHIBIT "H"

LONG-TERM LIABILITIES AND BOND DISCOUNTS/PREMIUMS
In the School District's government-wide financial statements, outstanding debt is reported as liabilities. Bond premiums and discounts and the difference between the reacquisition price and the net carrying value of refunded debt are deferred and amortized over the life of the bonds using the effective interest method. Bond issuance costs are recognized as an outflow of resources in the fiscal year in which the bonds are issued.
In the governmental fund financial statements, the School District recognizes the proceeds of debt and premiums as other financing sources of the current period. Bond issuance costs are reported as debt service expenditures.
PENSIONS
For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the pension plan's fiduciary net position and additions to/deductions from the plan's fiduciary net position have been determined on the same basis as they are reported by the plan. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value.
POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS (OPEB)
For purposes of measuring the net OPEB liability, deferred outflows of resources and deferred inflows of resources related to OPEB, and OPEB expense, information about the fiduciary net position of the Georgia School Employees Postemployment Benefit Fund (School OPEB Fund) and additions to/deductions from School OPEB Fund fiduciary net position have been determined on the same basis as they are reported by 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.
POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS (SEAD - 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 State Employees' Assurance Department Retired and Vested Inactive Members Trust Fund (SEADOPEB) plan (the Plan) and additions to/deductions from the SEAD-OPEB's fiduciary net position have been determined on the same basis as they are reported by SEAD-OPEB. For this purpose, death benefits are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value.
FUND BALANCES
Fund balance for governmental funds is reported in classifications that comprise a hierarchy based primarily on the extent to which the government is bound to honor constraints on the specific purposes for which amounts in those funds can be spent.
The School District's fund balances are classified as follows:
Nonspendable consists of resources that cannot be spent either because they are in a nonspendable form or because they are legally or contractually required to be maintained intact.
Restricted consists of resources that can be used only for specific purposes pursuant constraints either (1) externally imposed by creditors, grantors, contributors, or laws and regulations of other governments or (2) imposed by law through constitutional provisions or enabling legislation.

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HOUSTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2018

EXHIBIT "H"

Committed consists of resources that can be used only for specific purposes pursuant to constraints imposed by formal action of the Board. The Board is the School District's highest level of decisionmaking authority, and the formal action that is required to be taken to establish, modify, or rescind a fund balance commitment is a resolution approved by the Board. Committed fund balance also should incorporate contractual obligations to the extent that existing resources in the fund have been specifically committed for use in satisfying those contractual requirements.

Assigned consists of resources constrained by the School District's intent to be used for specific purposes, but are neither restricted nor committed. The intent should be expressed by (1) the Board or (2) the budget or finance committee, or the Superintendent, or designee, to assign amounts to be used for specific purposes.

Unassigned consists of resources within the general fund not meeting the definition of any aforementioned category. The general fund should be the only fund that reports a positive unassigned fund balance amount. In other governmental funds, it may be necessary to report a negative unassigned fund balance.

USE OF ESTIMATES

The preparation of the financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates.

PROPERTY TAXES

The Houston County Board of Commissioners adopted the property tax levy for the 2017 tax digest year (calendar year) on July 18, 2017 (levy date) based on property values as of January 1, 2017. Taxes were due on December 20, 2017 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2017 tax digest are reported as revenue in the governmental funds for fiscal year 2018. The Houston County Tax Commissioner bills and collects the property taxes for the School District, withholds 2.5% of taxes collected as a fee for tax collection and remits the balance of taxes collected to the School District. Property tax revenues, at the fund reporting level, during the fiscal year ended June 30, 2018, for maintenance and operations amounted to $51,448,130.68.

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

School Operations

13.32 mills

Additionally, Title Ad Valorem Tax revenues, at the fund reporting level, amounted to $2,429,770.26 during fiscal year ended June 30, 2018.

SALES TAXES

In 1982, the voters of Houston County approved a local amendment to the Constitution of the State of Georgia which limited the maximum allowable mill rate for ad valorem taxes levied by the School District each year. The maximum allowable mill rate for the School District in each year must be reduced by the mill rate which would yield on the digest for that year an amount equal to the amount received by the School District in the immediately preceding year from the local sales and use tax. Local Option Sales Tax revenue, at the fund reporting level, during the fiscal year amounted to $24,198,810.26 and was recorded in the general fund. Local Option Sales Tax (LOST) is to be used for the maintenance and operation of the School District, and the corresponding millage rate was adjusted accordingly.

- 16 -

HOUSTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2018

EXHIBIT "H"

Education Special Purpose Local Option Sales Tax (ESPLOST), at the fund reporting level, during the year amounted to $24,199,676.39 and is to be used for capital outlay for educational purposes or debt service. This sales tax was authorized by local referendum and the sales tax must be reauthorized at least every five years.
NOTE 3: BUDGETARY DATA
The budget is a complete financial plan for the School District's fiscal year, and is based upon careful estimates of expenditures together with probable funding sources. The budget is legally adopted each year for the general, debt service, and capital projects funds. There is no statutory prohibition regarding over expenditure of the budget at any level. The budget for all governmental funds is prepared and adopted by fund, function and object. The legal level of budgetary control was established by the Board at the aggregate fund level. The budget for the general fund was prepared in accordance with accounting principles generally accepted in the United States of America.
The budgetary process begins with the School District's administration presenting an initial budget for the Board's review. The administration makes revisions as necessary based on the Board's guidelines, and a tentative budget is approved. After approval of this tentative budget by the Board, such budget is advertised at least once in a newspaper of general circulation in the locality, as well as the School District's website. At the next regularly scheduled meeting of the Board after advertisement, the Board receives comments on the tentative budget, makes revisions as necessary and adopts a final budget. The approved budget is then submitted, in accordance with provisions of O.C.G.A. 20-2-167(c), to the Georgia Department of Education. The Board may increase or decrease the budget at any time during the year. All unexpended budget authority lapses at fiscal year-end.
See the General Fund Schedule of Revenues, Expenditures and Changes in Fund Balances Budget to Actual in the Supplementary Information Section for a detail of any over/under expenditures during the fiscal year under review.
NOTE 4: DEPOSITS, CASH EQUIVALENTS AND INVESTMENTS
COLLATERALIZATION OF DEPOSITS
O.C.G.A. 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum of money which has not been secured by surety bond, by guarantee of insurance, or by collateral. The aggregate of the face value of such surety bond and the market value of securities pledged shall be equal to not less than 110% of the public funds being secured after the deduction of the amount of deposit insurance. If a depository elects the pooled method (O.C.G.A. 45-8-13.1) the aggregate of the market value of the securities pledged to secure a pool of public funds shall be not less than 110% of the daily pool balance.
Acceptable security for deposits consists of any one of or any combination of the following:
(1) Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia,
(2) Insurance on accounts provided by the Federal Deposit Insurance Corporation,
(3) Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia,
(4) Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia,
(5) Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose,
(6) Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia, and

- 17 -

HOUSTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2018

EXHIBIT "H"

(7) Bonds, bills, notes, certificates of indebtedness, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest or debt obligations issued by or securities guaranteed by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association.

CATEGORIZATION OF DEPOSITS

Custodial credit risk is the risk that in the event of a bank failure, the School District's deposits may not be returned to it. The School District does not have a deposit policy for custodial credit risk. At June 30, 2018, School District had deposits with a carrying amount of $20,891,057.99, and a bank balance of $33,218,284.58. The bank balances insured by Federal depository insurance were $4,475,064.20 and the bank balances collateralized with securities held by the pledging financial institution or by the pledging financial institution's trust department or agent in the School District's name were $72,756.73.

At June 30, 2018, $28,670,463.65 of the School District's bank balance was exposed to custodial credit risk as follows:

Uninsured with collateral held by the pledging financial institution's trust department or agent but not in the School District's name

$ 28,670,463.65

Reconciliation of cash and cash equivalents balances to carrying value of deposits:

Cash and cash equivalents Statement of Net Position Statement of Fiduciary Net Position

$ 115,703,977.05 1,686,599.88

Total cash and cash equivalents

117,390,576.93

Add: Deposits with original maturity of three months or more reported as investments

277,312.87

Less: Investment pools reported as cash and cash equivalents
Georgia Fund 1

96,776,831.81

Total carrying value of deposits - June 30, 2018

$ 20,891,057.99

CATEGORIZATION OF CASH EQUIVALENTS
The School District reported cash equivalents of $96,776,831.81 in Georgia Fund 1, a local government investment pool, which is included in the cash balances above. Georgia Fund 1 is not registered with the SEC as an investment company and does not operate in a manner consistent with the SEC's Rule 2a-7 of the Investment Company Act of 1940. The investment is valued at the pool's share price, $1.00 per share, which approximates fair value. The pool is an AAAf rated investment pool by Standard and Poor's. The weighted average maturity of Georgia Fund 1 may not exceed 60 days. The weighted average maturity for Georgia Fund 1 on June 30, 2018, was 10 days.
Georgia Fund 1, administered by the State of Georgia, Office of the State Treasurer, is not required to be categorized since the School District did not own any specific identifiable securities in the pool. The investment policy of the State of Georgia, Office of the State Treasurer for the Georgia Fund 1, does not provide for investment in derivatives or similar investments. Additional information on the Georgia Fund 1 is disclosed in the State of Georgia Comprehensive Annual Financial Report. This audit can be obtained from the Georgia Department of Audits and Accounts at www.audits.ga.gov/SGD/CAFR.html.
- 18 -

HOUSTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2018

EXHIBIT "H"

NOTE 5: CAPITAL ASSETS

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

Balances June 30, 2017

Increases

Decreases

Transfers

Balances June 30, 2018

Governmental Activities Capital Assets, Not Being Depreciated:
Land Construction in Progress

$ 11,278,291.55 $

- $

8,343,032.91

12,992,280.29

- $

- $ 11,278,291.55

-

(10,954,284.85)

10,381,028.35

Total Capital Assets Not Being Depreciated

19,621,324.46

12,992,280.29

-

(10,954,284.85)

21,659,319.90

Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements Intangible Assets

433,680,560.30 27,331,306.61 8,938,417.69 -

913,946.79
21,800.00 -

521,450.00 327,226.74
49,800.00 -

7,346,392.22 1,523,578.00
647,094.16 1,437,220.47

440,505,502.52 29,441,604.66 9,557,511.85 1,437,220.47

Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements Intangible Assets

156,856,063.50 20,383,170.46 3,514,463.27 -

11,235,594.10 1,596,305.97 521,876.54 71,861.02

521,450.00 316,917.94
22,410.00 -

-

167,570,207.60

-

21,662,558.49

-

4,013,929.81

-

71,861.02

Total Capital Assets, Being Depreciated, Net

289,196,587.37

(12,489,890.84)

37,698.80

10,954,284.85

287,623,282.58

Governmental Activity Capital Assets - Net

$ 308,817,911.83 $

502,389.45 $

37,698.80 $

- $ 309,282,602.48

Current year depreciation expense by function is as follows:

Instruction Support Services
Pupil Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Food Services

$

2,010.00

439,793.91

17,153.50

435,571.26

118,694.30

161,419.30

1,022,211.25

111,278.03

$ 10,018,786.73
2,308,131.55 1,098,719.35

$ 13,425,637.63

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HOUSTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2018

EXHIBIT "H"

NOTE 6: LONG-TERM LIABILITIES

The changes in long-term liabilities during the fiscal year for governmental activities were as follows:

Balance June 30, 2017

Additions

Governmental Funds Deductions

Balance June 30, 2018

Due Within One Year

G.O. Bonds Unamortized Bond Premiums Capital Leases Compensated Absences (1)

$ 40,305,000.00 $ 4,243,532.40 1,582,614.73 3,114,084.42

- $ 2,258,746.63

10,305,000.00 $ 1,061,643.95 643,028.20 2,309,287.23

30,000,000.00 $ 3,181,888.45 939,586.53 3,063,543.82

5,500,000.00 583,346.22 652,125.06 -

$ 49,245,231.55 $ 2,258,746.63 $ 14,318,959.38 $ 37,185,018.80 $ 6,735,471.28

(1) The portion of Compensated Absences due within one year has been determined to be immaterial to the basic financial statements.

GENERAL OBLIGATION DEBT OUTSTANDING

The School District's bonded debt consists of various issues of general obligation bonds that are generally callable with interest payable semiannually. Bond proceeds primarily pay for acquiring or constructing capital facilities. The School District repays general obligation bonds from voter-approved Education Special Purpose Local Option Sales taxes. General obligation bonds are direct obligations and pledge the full faith and credit of the School District.

General obligation bonds currently outstanding are as follows:

Description

Interest Rates

Issue Date

Maturity Date

Amount Issued

Amount Outstanding

General Government - Series 2017

4.00% - 5.00%

4/6/2017

9/1/2022 $ 30,000,000.00 $ 30,000,000.00

The following schedule details debt service requirements to maturity for the School District's total general obligation bonds payable:

Fiscal Year Ended June 30:

General Obligation Debt

Principal

Interest

Unamortized Bond Premium

2019 2020 2021 2022 2023

$

5,500,000.00 $ 1,275,550.00 $

583,346.22

5,945,000.00

1,046,650.00

630,544.23

6,050,000.00

776,500.00

641,680.84

6,180,000.00

470,750.00

655,469.02

6,325,000.00

158,125.00

670,848.14

Total Principal and Interest

$ 30,000,000.00 $ 3,727,575.00 $ 3,181,888.45

CAPITAL LEASES
The School District has acquired buses and band equipment under the provisions of various long-term lease agreements classified as capital leases for accounting purposes because they provide for a bargain purchase option or a transfer of ownership by the end of the lease term.

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HOUSTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2018

EXHIBIT "H"

The following assets were acquired through capital leases and are reflected in the capital asset note at fiscal year-end:
Governmental Activities

Equipment Less: Accumulated Depreciation

$ 3,081,846.00 1,247,361.90

$ 1,834,484.10

Capital leases currently outstanding are as follows:

Description

Interest Rates

Issue Date

Maturity Date

Amount Issued

Amount Outstanding

15 School Buses 12 School Buses Band Equipment

1.086% 1.618% 3.500%

6/27/2013 11/11/2014
6/3/2015

8/1/2018 9/1/2019 2/15/2019

$ 1,687,158.00 $ 1,394,688.00 92,662.29

345,150.46 570,312.34
24,123.73

$ 3,174,508.29 $ 939,586.53

The following is a schedule of total capital lease payments:

Fiscal Year Ended June 30:

Capital Leases

Principal

Interest

2019 2020
Total Principal and Interest

$ 652,125.06 $ 287,461.47
$ 939,586.53 $

13,705.56 4,685.79
18,391.35

COMPENSATED ABSENCES
Compensated absences represent obligations of the School District relating to employees' rights to receive compensation for future absences based upon service already rendered. This obligation relates only to vesting accumulating leave in which payment is probable and can be reasonably estimated. Typically, the general fund is the fund used to liquidate this long-term debt. The School District uses the vesting method to compute compensated absences.
NOTE 7: RISK MANAGEMENT
INSURANCE
The School District is exposed to various risks of loss related to torts; theft of, damage to and destruction of assets; errors or omissions; job related illness or injuries to employees; natural disasters and unemployment compensation.
Georgia School Boards Association Risk and Insurance Management System
The School District participates in the Georgia School Boards Association Risk and Insurance Management System (the System), a public entity risk pool organized on July 1, 1994, to develop and administer a plan to reduce risk of loss on account of general liability, motor vehicle liability, or property damage, including safety engineering and other loss prevention and control techniques, and to administer one or more groups of self-insurance funds, including the processing and defense of claims brought against members of the system. The School District pays an annual premium to the System for its general insurance coverage. Additional coverage is provided through agreements by the System
- 21 -

HOUSTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2018

EXHIBIT "H"

with other companies according to their specialty for property, boiler and machinery (including coverage for flood and earthquake), general liability (including coverage for sexual harassment, molestation and abuse), errors and omissions, crime and automobile risks. Payment of excess insurance for the System varies by line of coverage.

WORKERS' COMPENSATION

The School District has established a limited risk management program for workers' compensation claims. The School District accounts for claims within the general fund with expenses/expenditures and liability being reported when it is probable that a loss has occurred, and the amount of that loss can be reasonably estimated. An excess coverage insurance policy covers individual claims in excess of $550,000 loss per occurrence, up to the statutory limit.

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

Beginning of Year Liability

Claims and Changes in Estimates

Claims Paid

End of Year Liability

2017 2018

$ 1,004,296.54 $ 1,147,123.44

$ 809,479.13 $ 1,376,604.88

$ 666,652.23 $ 969,030.20

$ 1,147,123.44 $ 1,554,698.12

UNEMPLOYMENT COMPENSATION

The School District is self-insured with regard to unemployment compensation claims. The School District accounts for claims within the general fund with expenses/expenditures and liability being reported when it is probable that a loss has occurred, and the amount of that loss can be reasonably estimated. The School District had no unemployment compensation claims in the past two years.

SURETY BOND

The School District purchased a surety bond to provide additional insurance coverage as follows:

Position Covered

Amount

Superintendent

$

50,000.00

NOTE 8: FUND BALANCE CLASSIFICATION DETAILS
The School District's financial statements include the following amounts presented in the aggregate at June 30, 2018:

Nonspendable Inventories
Restricted Continuation of Federal Programs Capital Projects Debt Service Property Tax Rollback
Assigned Local Capital Outlay Projects School Activity Accounts
Unassigned

$ 4,416,098.71

$ 8,890,806.48 41,578,565.74 6,288,896.82 37,403,443.44

94,161,712.48

$

120,084.60

2,376,677.49

2,496,762.09 31,852,880.43

Fund Balance, June 30, 2018

$ 132,927,453.71

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HOUSTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2018

EXHIBIT "H"

When multiple categories of fund balance are available for expenditure, the School District will start with the most restricted category and spend those funds first before moving down to the next category with available funds.

It is the goal of the School District to achieve and maintain a committed, assigned, and unassigned fund balance in the general fund at fiscal year-end of not less than 4% of budgeted expenditures, not to exceed 15% of the total budget of the subsequent fiscal year, 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 District shall develop a restoration plan to achieve and maintain the minimum fund balance.

NOTE 9: SIGNIFICANT COMMITMENTS

COMMITMENTS UNDER CONSTRUCTION CONTRACTS

The following is an analysis of significant outstanding construction or renovation contracts executed by the School District as of June 30, 2018, together with funding available:

Project

Unearned Executed Contracts (1)

Payments through June 30, 2018 (2)

Funding Available From State (1)

18-676-021

$

18-676-024

18-676-027

19-676-006

David Perdue Primary Parking Improvements

Eagle Springs Parking Improvements

Kings Chapel Parking Improvements

Northside High New Competition Gym

Old Perry Primary Demolition

Perry High Competition Gym

Perry High Parking Improvements

Perry High Turf,Fieldhouse and Track

Rumble Academy Demolition

$

168,357.27 $ 323,889.42 487,105.65 144,269.53 486,895.00 140,874.00 309,916.00 330,775.00
28,267.28 9,080,056.59
191,794.15 188,099.60 857,253.60
12,737,553.09 $

735,484.73 $ 447,424.58 199,286.35 5,944,419.77
28,648.00 290,589.05 114,729.05
18,387.00 184,022.73 1,560,050.94
3,020.00 1,502,184.83
156,221.33
11,184,468.36 $

616,573.00 452,485.00 454,063.00 606,157.00
-
2,129,278.00

(1) The amounts described are not reflected in the basic financial statements. (2) Payments include retainages payable at year-end.

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

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HOUSTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2018

EXHIBIT "H"

NOTE 11: OTHER POST-EMPLOYMENT BENEFITS (OPEB)
GEORGIA SCHOOL PERSONNEL POST-EMPLOYMENT HEALTH BENEFIT FUND
Plan Description: Certified teachers and non-certified public school employees of the School District as defined in 20-2-875 of the Official Code of Georgia Annotated (O.C.G.A.) are provided OPEB through the School OPEB Fund - a cost-sharing multiple-employer defined benefit postemployment healthcare plan, reported as an employee trust fund and administered by a Board of Community Health (Board). Title 20 of the O.C.G.A. assigns the authority to establish and amend the benefit terms of the group health plan to the Board.
Benefits Provided: The School OPEB Fund provides healthcare benefits for retirees and their dependents due under the group health plan for public school teachers, including librarians, other certified employees of public schools, regional educational service agencies and non-certified public school employees. Retiree medical eligibility is attained when an employee retires and is immediately eligible to draw a retirement annuity from Employees' Retirement System (ERS), Georgia Judicial Retirement System (JRS), Legislative Retirement System (LRS), Teachers Retirement System (TRS) or Public School Employees Retirement System (PSERS). If elected, dependent coverage starts on the same day as retiree coverage. Medicare-eligible retirees are offered Standard and Premium Medicare Advantage plan options. Non-Medicare eligible retiree plan options include Health Reimbursement Arrangement (HRA), Health Maintenance Organization (HMO) and a High Deductible Health Plan (HDHP). The School OPEB Fund also pays for administrative expenses of the fund. By law, no other use of the assets of the School OPEB Fund is permitted.
Contributions: As established by the Board, the School OPEB Fund is substantially funded on a payas-you-go basis; that is, annual cost of providing benefits will be financed in the same year as claims occur. Contributions to the School OPEB Fund from the School District were $7,665,615.00 for the year ended June 30, 2018. Active employees are not required to contribute to the School OPEB Fund.
OPEB Liabilities, OPEB Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to OPEB
At June 30, 2018, the School District reported a liability of $208,640,779.00 for its proportionate share of the net OPEB liability. The net OPEB liability was measured as of June 30, 2017. The total OPEB liability used to calculate the net OPEB liability was based on an actuarial valuation as of June 30, 2016. An expected total OPEB liability as of June 30, 2017 was determined using standard roll-forward techniques. The School District's proportion of the net OPEB liability was actuarially determined based on employer contributions during the fiscal year ended June 30, 2017. At June 30, 2017, the School District's proportion was 1.484992%, which was a decrease of 0.019215% from its proportion measured as of June 30, 2016.

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HOUSTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2018

EXHIBIT "H"

For the year ended June 30, 2018, the School District recognized OPEB expense of $11,695,925.00. At June 30, 2018, the School District reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources:

Deferred Outflow of Resources

OPEB

Deferred Intflow of Resources

Changes of assumptions

$

- $ 15,887,463.00

Net difference between projected and actual earnings on pension plan investments

61,024.00

-

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

-

2,413,614.00

School District contributions subsequent to the measurement date

7,665,615.00

-

Total

$ 7,726,639.00 $ 18,301,077.00

School District contributions subsequent to the measurement date of $7,665,615.00 are reported as deferred outflows of resources and will be recognized as a reduction of the net OPEB liability in the year ended June 30, 2019. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to OPEB will be recognized in OPEB expense as follows:

Year Ended June 30:

OPEB

2019 2020 2021 2022 2023 2024

$ (3,276,304.00) $ (3,276,304.00) $ (3,276,304.00) $ (3,276,304.00) $ (3,291,560.00) $ (1,843,277.00)

Actuarial assumptions: The total OPEB liability as of June 30, 2017 was determined by an actuarial valuation as of June 30, 2016 using the following actuarial assumptions and other inputs, applied to all periods included in the measurement and rolled forward to the measurement date of June 30, 2017:
OPEB:

Inflation

2.75%

Salary increases

ERS

3.25% 7.00%, average, including inflation

JRS

4.50%, including inflation

LRS

None

TRS

3.25 -- 9.00%, including inflation

PSERS

N/A

- 25 -

HOUSTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2018

EXHIBIT "H"

Long-term expected rate of return Healthcare cost trend rate
Pre-Medicare Eligible Medicare Eligible Ultimate trend rate Pre-Medicare Eligible Medicare Eligible Year of Ultimate trend rate

3.88%, compounded annually, net of investment expense, and including inflation
7.75% 5.75%
5.00% 5.00% 2022

Mortality rates were based on the RP-2000 Combined Mortality Table for Males or Females, as appropriate, with adjustments for mortality improvements based on Scale BB as follows:
For ERS, JRS and LRS members: The RP-2000 Combined Mortality Table projected to 2025 with projection scale BB and set forward 2 years or both males and females is used for the period after service retirement and for dependent beneficiaries. The RP-2000 Disabled Mortality Table projected to 2025 with projection scale BB and set back 7 years for males and set forward 3 years for females is used for the period after disability retirement.
For TRS members: The RP-2000 White Collar Mortality Table projected to 2025 with projection scale BB (set forward 1 year for males) is used for death after service retirement and beneficiaries. The RP-2000 Disabled Mortality Table projected to 2025 with projection scale BB (set forward two years for males and four years for females) is used for death after disability retirement.
For PSERS members: The RP-2000 Blue-Collar Mortality Table projected to 2025 with projection scale BB (set forward 3 years for males and 2 years for females) is used for the period after service retirement and for beneficiaries of deceased members. The RP-2000 Disabled Mortality Table projected to 2025 with projection scale BB (set forward 5 years for both males and females) is used for the period after disability retirement.
The actuarial assumptions used in the June 30, 2016 valuation were based on the results of an actuarial experience study for the pension systems, which covered the five-year period ending June 30, 2014.
Projection of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculation.
Additionally, there was a change of assumptions that affected measurement of the total OPEB liability since the prior measurement date. The methodology used to determine employee and retiree participation in the School OPEB Fund is based on their current or last employer payroll location. Current and former employees of public school districts, libraries, regional educational service agencies and community colleges are allocated to the School OPEB Fund irrespective of retirement system affiliation. In addition, the discount rate increased from 3.07% to 3.58%.
The long-term expected rate of return on OPEB plan investments was determined using a log-normal distribution analysis in which best-estimate ranges of expected future real rates of return (expected nominal returns, net of investment expense and the assumed rate of inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by
- 26 -

HOUSTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2018

EXHIBIT "H"

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

Target Allocation

Long-Term Expected Real Rate of Return

Local Government Investment Pool

100.00%

1.13%*

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

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

1% Decrease (2.58%)

Current Discount Rate (3.58%)

1% Increase (4.58%)

Net OPEB Liability

$ 247,723,551.00 $

208,640,779.00 $ 177,796,555.00

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

1% Decrease

Current Healthcare Cost Trend Rate

1% Increase

Net OPEB Liability

$ 172,939,436.00 $

208,640,779.00 $ 255,123,872.00

OPEB plan fiduciary net position: Detailed information about the OPEB plan's fiduciary net position is available in the Comprehensive Annual Financial Report (CAFR) which is publicly available at https://sao.georgia.gov/comprehensive-annual-financial-reports.
POSTEMPLOYEMENT BENEFITS OTHER THAN PENSIONS (SEAD OPEB)
P lan description: SEAD-OPEB was created in 2007 by the Georgia General Assembly to amend Title 47 of the O.C.G.A., relating to retirement, so as to establish a fund for the provision of term life insurance to retired and vested inactive members of the Employees' Retirement System of Georgia (ERS), the Legislative Retirement System (LRS), and the Georgia Judicial Retirement System (GJRS). The plan is a cost-sharing multiple-employer defined benefit other postemployment benefit plan as defined in Governmental Accounting Standards Board (GASB) Statement No. 74, Financial Reporting for Postemployment Benefit Plans other than OPEB Plans. The SEAD-OPEB trust fund accumulates the premiums received from the aforementioned retirement plans, including interest earned on deposits and investments of such payments.
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HOUSTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2018

EXHIBIT "H"

Benefits provided: The amount of insurance for a retiree with creditable service prior to April 1, 1964 is the full amount of insurance in effect on the date of retirement. The amount of insurance for a service retiree with no creditable service prior to April 1, 1964 is 70% of the amount of insurance in effect at age 60 or at termination, if earlier. Life insurance proceeds are paid in a lump sum to the beneficiary upon death of the retiree.

Contributions: Georgia law provides that employee contributions to the plan shall be in an amount established by the Board of Trustees not to exceed one-half of 1% of the member's earnable
compensation. There were no employer contributions required for the fiscal year ended June 30, 2018.

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

At June 30, 2018, the Employer reported an asset of $81,706.00 for its proportionate share of the net OPEB asset. The net OPEB asset was measured as of June 30, 2017. The total OPEB asset used to calculate the net OPEB asset was based on an actuarial valuation as of June 30, 2016. An expected total OPEB asset as of June 30, 2017 was determined using standard roll-forward techniques. The Employer's proportion of the net OPEB asset was based on actual member salaries reported to the SEAD-OPEB plan during the fiscal year ended June 30, 2017. At June 30 2017, the Employer's proportion was 0.031437%, which was an increase of 0.002097 % from its proportion measured as of June 30, 2016.

For the year ended June 30, 2018, the Employer recognized OPEB income of $8,921.00. At June 30, 2018, the Employer reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources:

SEAD - OPEB

Deferred

Deferred

Outflow of

Intflow of

Resources

Resources

Net difference between projected and

actual earnings on pension plan investments

$

- $

12,485.00

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

-

2,743.00

School District contributions subsequent to the measurement date

-

-

Total

$

- $

15,228.00

Employer contributions subsequent to the measurement date of $0.00 are reported as deferred outflows of resources and will be recognized as a reduction of the net OPEB liability in the year ended June 30, 2019. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to OPEB will be recognized in OPEB expense as follows:

Year Ended June 30:

SEAD-OPEB

2019 2020 2021 2022

$ (4,492.00) $ (4,493.00) $ (3,121.00) $ (3,122.00)

- 28 -

HOUSTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2018

EXHIBIT "H"

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

SEAD OPEB:

Inflation

2.75%

Salary increases:

Includes Inflation

ERS

3.25% 7.00%

GJRS

4.50%

LRS

N/A

Investment rate of return

7.50%, net of OPEB plan investment expense, including inflation

Postretirement 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 and set forward 2 years for both males and females for service retirements and dependent beneficiaries. There is a margin for future mortality improvement in the tables used by the plan.

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

The long-term expected rate of return on 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 plan investment expense and the assumed rate of inflation) are developed for

each major asset class. These ranges are combined to produce the long-term expected rate of return

by weighting the expected future real rates of return by the target asset allocation percentage and by

adding expected inflation. The target asset allocation and estimates of arithmetic real rates of return

for each major asset class are summarized in the following table:

SEAD - OPEB

Long-term

Target

expected real

Asset class

allocation

rate of return*

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

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

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

Total

100.00%

* Rates shown are net of inflation

Discount rate: The discount rate used to measure the total OPEB 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 OPEB 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 OPEB plan investments was applied to all periods of projected benefit payments to determine the total OPEB liability.

- 29 -

HOUSTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2018

EXHIBIT "H"

Sensitivity of the School District's proportionate share of the net OPEB liability to changes in the discount rate: The following presents the Employer's proportionate share of the net OPEB liability calculated using the discount rate of 7.50 %, as well as what the Employer's proportionate share of
the net OPEB liability would be if it were calculated using a discount rate that is 1-percentage-point
lower (6.50 %) or 1- percentage-point higher (8.50 %) than the current rate:

1% Decrease (6.50%)

Current Discount Rate (7.50%)

1% Increase (8.50%)

Net OPEB Asset

$ (44,721.00) $

(81,706.00) $ (112,017.00)

OP EB plan fiduciary net position: Detailed information about the OPEB plan's fiduciary net position is available in the separately issued ERS comprehensive annual financial report which is publically
available at www.ers.ga.gov/financials.

NOTE 12: RETIREMENT PLANS
The School District participates in various retirement plans administered by the State of Georgia, as further explained below.
TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS)
P lan Description: All teachers of the School District as defined in O.C.G.A 47-3-60 and certain other support personnel as defined by O.C.G.A. 47-3-63 are provided a pension through the Teachers Retirement System of Georgia (TRS). TRS, a cost-sharing multiple-employer defined benefit pension plan, is administered by the TRS Board of Trustees (TRS Board). Title 47 of the O.C.G.A. assigns the authority to establish and amend the benefit provisions to the State Legislature. The Teachers Retirement System of Georgia issues a publicly available separate financial report that can be obtained at www.trsga.com/publications.
Benefits P rovided: TRS provides service retirement, disability retirement, and death benefits. Normal retirement benefits are determined as 2% of the average of the employee's two highest paid consecutive years of service, multiplied by the number of years of creditable service up to 40 years. An employee is eligible for normal service retirement after 30 years of creditable service, regardless of age, or after 10 years of service and attainment of age 60. Ten years of service is required for disability and death benefits eligibility. Disability benefits are based on the employee's creditable service and compensation up to the time of disability. Death benefits equal the amount that would be payable to the employee's beneficiary had the employee retired on the date of death. Death benefits are based on the employee's creditable service and compensation up to the date of death.
Contributions: Per Title 47 of the O.C.G.A., contribution requirements of active employees and participating employers, as actuarially determined, are established and may be amended by the TRS Board. Pursuant to O.C.G.A. 47-3-63, the employer contributions for certain full-time public school support personnel are funded on behalf of the employer by the State of Georgia. Contributions are expected to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. Employees were required to contribute 6% of their annual pay during fiscal year 2018. The School District's contractually required contribution rate for the year ended June 30, 2018 was 16.81% of annual School District payroll, of which 16.76% of payroll was required from the School District and 0.05% of payroll was required from the State. For the current fiscal year, employer contributions to the pension plan were $27,288,902.73 and $84,502.08 from the School District and the State, respectively.
EMPLOYEES' RETIREMENT SYSTEM
P lan description: The Employees' Retirement System of Georgia (ERS) is a cost-sharing multiple-employer defined benefit pension plan established by the Georgia General Assembly during the 1949 Legislative Session for the purpose of providing retirement allowances for employees of the State of Georgia and its political subdivisions. ERS is directed by a Board of Trustees. Title 47 of the
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HOUSTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2018

EXHIBIT "H"

O.C.G.A. assigns the authority to establish and amend the benefit provisions to the State Legislature. ERS issues a publicly available financial report that can be obtained at www.ers.ga.gov/formspubs/formspubs.
Benefits provided: The ERS Plan supports three benefit tiers: Old Plan, New Plan, and Georgia State Employees' Pension and Savings Plan (GSEPS). Employees under the old plan started membership prior to July 1, 1982 and are subject to plan provisions in effect prior to July 1, 1982. Members hired on or after July 1, 1982 but prior to January 1, 2009 are new plan members subject to modified plan provisions. Effective January 1, 2009, new state employees and rehired state employees who did not retain membership rights under the Old or New Plans are members of GSEPS. ERS members hired prior to January 1, 2009 also have the option to irrevocably change their membership to GSEPS.
Under the old plan, the new plan, and GSEPS, a member may retire and receive normal retirement benefits after completion of 10 years of creditable service and attainment of age 60 or 30 years of creditable service regardless of age. Additionally, there are some provisions allowing for early retirement after 25 years of creditable service for members under age 60.
Retirement benefits paid to members are based upon the monthly average of the member's highest 24 consecutive calendar months, multiplied by the number of years of creditable service, multiplied by the applicable benefit factor. Annually, postretirement cost-of-living adjustments may also be made to members' benefits, provided the members were hired prior to July 1, 2009. The normal retirement pension is payable monthly for life; however, options are available for distribution of the member's monthly pension, at reduced rates, to a designated beneficiary upon the member's death. Death and disability benefits are also available through ERS.
Contributions: Member contributions under the old plan are 4% of annual compensation, up to $4,200.00, plus 6% of annual compensation in excess of $4,200.00. Under the old plan, the state pays member contributions in excess of 1.25% of annual compensation. Under the old plan, these state contributions are included in the members' accounts for refund purposes and are used in the computation of the members' earnable compensation for the purpose of computing retirement benefits. Member contributions under the new plan and GSEPS are 1.25% of annual compensation. The School District's required contribution rate for the year ended June 30, 2018 was 24.81% of annual covered payroll for old and new plan members and 21.81% for GSEPS members. The rates include the annual actuarially determined employer contributions rate of 24.69% of annual covered payroll for old and new plan members and 21.69% for GSPES members, plus a 0.12% adjustment for the HB 751 one-time benefit adjustment of 3% to retired state employees. Contributions are expected to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. Employer contributions to the pension plan were $109,324.76 for the current fiscal year.
PUBLIC SCHOOL EMPLOYEES RETIREMENT SYSTEM (PSERS)
P lan description: PSERS is a cost-sharing multiple-employer defined benefit pension plan established by the Georgia General Assembly in 1969 for the purpose of providing retirement allowances for public school employees who are not eligible for membership in the Teachers Retirement System of Georgia. The ERS Board of Trustees, plus two additional trustees, administers PSERS. Title 47 of the O.C.G.A. assigns the authority to establish and amend the benefit provisions to the State Legislature. PSERS issues a publicly available financial report that can be obtained at www.ers.ga.gov/formspubs/formspubs.
Benefits provided: A member may retire and elect to receive normal monthly retirement benefits after completion of ten years of creditable service and attainment of age 65. A member may choose to receive reduced benefits after age 60 and upon completion of ten years of service.
Upon retirement, the member will receive a monthly benefit of $14.75, multiplied by the number of years of creditable service. Death and disability benefits are also available through PSERS. Additionally, PSERS may make periodic cost-of-living adjustments to the monthly benefits. Upon
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HOUSTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2018

EXHIBIT "H"

termination of employment, member contributions with accumulated interest are refundable upon request by the member. However, if an otherwise vested member terminates and withdraws his/her member contribution, the member forfeits all rights to retirement benefits.

Contributions: The general assembly makes an annual appropriation to cover the employer contribution to PSERS on behalf of local school employees (bus drivers, cafeteria workers, and maintenance staff). The annual employer contribution required by statute is actuarially determined and paid directly to PSERS by the State Treasurer in accordance with O.C.G.A. 47-4-29(a) and 60(b). Contributions are expected to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability.

Individuals who became members prior to July 1, 2012 contribute $4 per month for nine months each fiscal year. Individuals who became members on or after July 1, 2012 contribute $10 per month for nine months each fiscal year. The State of Georgia, although not the employer of PSERS members, is required by statute to make employer contributions actuarially determined and approved and certified by the PSERS Board of Trustees. The current fiscal year contribution was $ 587,258.00.

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

At June 30, 2018, the School District reported a liability of $258,432,338.00 for its proportionate share of the net pension liability for TRS ($257,674,330.00) and ERS ($758,008.00).

The TRS net pension liability reflected a reduction for support provided to the School District by the State of Georgia for certain public school support personnel. The amount recognized by the School District as its proportionate share of the net pension liability, the related State of Georgia support, and the total portion of the net pension liability that was associated with the School District were as follows:

School District's proportionate share of the net pension liability

$ 257,674,330.00

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

875,182.00

Total

$ 258,549,512.00

The net pension liability for TRS and ERS was measured as of June 30, 2017. The total pension liability used to calculate the net pension liability was based on an actuarial valuation as of June 30, 2016. An expected total pension liability as of June 30, 2017 was determined using standard roll-forward techniques. The School District's proportion of the net pension liability was based on contributions to TRS and ERS during the fiscal year ended June 30, 2017.
At June 30, 2017, the School District's TRS proportion was 1.386441%, which was a decrease of 0.091901% from its proportion measured as of June 30, 2016. At June 30, 2017, the School District's ERS proportion was 0.018664%, which was a decrease of 0.000270% from its proportion measured as of June 30, 2016.
At June 30, 2018, the School District did not have a PSERS liability for a proportionate share of the net pension liability because of a Special Funding Situation with the State of Georgia, which is responsible for the net pension liability of the plan. The amount of the State's proportionate share of the net pension liability associated with the School District is $3,218,420.00.
The PSERS net pension liability was measured as of June 30, 2017. The total pension liability used to calculate the net pension liability was based on an actuarial valuation as of June 30, 2016. An expected total pension liability as of June 30, 2017 was determined using standard roll-forward techniques. The State's proportion of the net pension liability associated with the School District was based on actuarially determined contributions paid by the State during the fiscal year ended June 30, 2017.

- 32 -

HOUSTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2018

EXHIBIT "H"

For the year ended June 30, 2018, the School District recognized pension expense of $26,891,614.00 for TRS, $87,203.00 for ERS and $648,637.00 for PSERS and revenue of $66,159.00 for TRS and $648,637.00 for PSERS. The revenue is support provided by the State of Georgia. For TRS the State of Georgia support is provided only for certain support personnel.

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

Deferred Outflows of Resources

TRS Deferred Inflows of Resources

ERS

Deferred

Deferred

Outflows of

Inflows of

Resources

Resources

Differences between expected and actual experience

$ 9,638,607.00 $

972,436.00 $ 8,306.00 $

6.00

Changes of assumptions

5,648,541.00

-

1,726.00

-

Net difference between projected and actual earnings on pension plan investments

-

1,773,230.00

-

1,887.00

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

6,610,010.00

13,390,346.00

4,162.00

7,012.00

School District contributions subsequent to the measurement date

27,288,902.73

-

109,324.76

-

Total

$ 49,186,060.73 $ 16,136,012.00 $ 123,518.76 $ 8,905.00

The School District contributions subsequent to the measurement date of $27,288,902.73 for TRS and $109,324.76 for ERS are reported as deferred outflows of resources and will be recognized as a reduction of the net pension liability in the year ended June 30, 2019. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows:

Year Ended June 30:

TRS

ERS

2019 2020 2021 2022 2023

$ (3,071,081.00) $ (9,119.00)

$ 12,461,854.00 $ 27,390.00

$ 5,837,695.00 $ 8,509.00

$ (9,311,798.00) $ (21,491.00)

$

(155,524.00) $

-

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

Teachers Retirement System:

Inflation

2.75%

Salary increases

3.25% 9.00%, average, including inflation

Investment rate of return

7.50%, net of pension plan investment expense, including inflation

Post-retirement mortality rates were based on the RP-2000 White Collar Mortality Table with future mortality improvement projected to 2025 with the Society of Actuaries' projection scale BB (set forward one year for males) for service requirements and dependent beneficiaries. The RP-2000

- 33 -

HOUSTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2018

EXHIBIT "H"

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

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

Employees' Retirement System:

Inflation

2.75%

Salary increases

3.25% 7.00%, average, including inflation

Investment rate of return

7.50%, 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 and set forward 2 years for both males and females 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 and set back 7 years for males and set forward 3 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 Board 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, 2016 valuation were based on the results of an actuarial experience study for the period July 1, 2009 June 30, 2014.

Public School Employees Retirement System:

Inflation

2.75%

Salary increases

N/A

Investment rate of return

7.50%, 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 3 years for males and 2 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 5 years for both males and females) was used for death after disability retirement. There is a margin for future mortality improvement in the tables used by the System. Based on the results of the most recent experience study adopted by the Board on December 17, 2015, the numbers of expected future deaths are 9-11% less than the actual number of deaths that occurred during the study period for healthy retirees and 9-11% less than expected under the selected table for disabled retirees. Rates of mortality in active service were based on the RP-2000 Employee Mortality Table projected to 2025 with projection scale BB.
The actuarial assumptions used in the June 30, 2016 valuation were based on the results of an actuarial experience study for the period July 1, 2009 June 30, 2014.
The long-term expected rate of return on TRS, ERS and PSERS pension plan investments was determined using a log-normal distribution analysis in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected
- 34 -

HOUSTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2018

EXHIBIT "H"

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:

TRS

ERS/PSERS

Long-term

Target

Target

expected real

Asset class

allocation

allocation

rate of return*

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

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

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

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

Total

100.00%

100.00%

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

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

Sensitivity of the School District's proportionate share of the net pension liability to changes in the discount rate: The following presents the School District's proportionate share of the net pension liability calculated using the discount rate of 7.50%, as well as what the School District's
proportionate share of the net pension liability would be if it were calculated using a discount rate that
is 1-percentage-point lower (6.50%) or 1-percentage-point higher (8.50%) than the current rate:

Teachers' Retirement System
School District's proportionate share of the net pension liability

1% Decrease (6.50%)

Current Discount Rate
(7.50%)

1% Increase (8.50%)

$ 422,873,808.00 $ 257,674,330.00 $ 121,587,091.00

Employees' Retirement System
School District's proportionate share of the net pension liability

1% Decrease (6.50%)

Current Discount Rate
(7.50%)

$ 1,069,890.00 $

758,008.00 $

1% Increase (8.50%)
491,962.00

P ension plan fiduciary net position: Detailed information about the pension plan's fiduciary net position is available in the separately issued TRS, ERS and PSERS financial report which is publically
available at www.trsga.com/publications and www.ers.ga.gov/formspubs/formspubs.html.

DEFINED CONTRIBUTION PLAN
In July 1999, the School District began an employer paid 403(b) annuity plan for the group of employees covered under the Public School Employees Retirement System (PSERS). Recognizing that PSERS was a limited defined contribution and defined benefit plan which did not provide for an adequate retirement for this group of employees, it was the Board's desire to supplement the retirement of this group.
- 35 -

HOUSTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2018

EXHIBIT "H"

The School District selected AIG Valic as the provider of this plan. For each employee covered under PSERS, the Board began matching 100% of employee's contributions up to 5.0% of the employee's base pay.
The employee becomes vested in the plan with 5 years of experience. Employees who had already achieved 5 years of experience at the time the plan was implemented were vested upon enrollment.

Funds accumulated in the employer paid accounts are only available to the employee upon termination of employment and 5 years of service to Houston County School District. If an employee terminates employment prior to achieving 5 years of service, funds paid on behalf of the non-vested employee are credited back to the School District.

Employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Required Contribution

2018 2017 2016

100% 100% 100%

$

199,262.27

$

167,113.99

$

163,288.54

NOTE 13: RESTATEMENT OF PRIOR YEAR NET POSITION
For fiscal year 2018, the School District made prior period adjustments due to the adoption of GASB Statement No. 75, as described in "New Accounting Pronouncements", which require the restatement of the June 30, 2017, net position in Governmental Activities. The result is a decrease in net position at July 1, 2017 of $215,127,350.00. This change is in accordance with generally accepted accounting procedures.

Net Position, July 1, 2017 as previously reported

$ 163,293,260.16

Prior Period Adjustment - Implementation of GASB No. 75: Net OPEB Liability (measurement date)

(222,870,219.00)

Deferred Outflows - School District's Contributions made during fiscal year 2017

7,742,869.00

Net Position, July 1, 2017, as restated

$ (51,834,089.84)

- 36 -

HOUSTON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2018

EXHIBIT "H"

NOTE 14: TAX ABATEMENTS
The School District property tax revenues were reduced by $774,592.78 under agreements entered into by the Houston County Development Authority (Development Authority). The Development Authority issued revenue bonds to provide capital financing for several local businesses.
Included in the amount abated, the following are individual tax abatement agreements that each exceeded 10 percent of the total amount abated:
A manufacturing plant expansion. The abatement amounted to $106,591.75. A manufacturing plant expansion. The abatement amounted to $101,305.11. A manufacturing plant expansion. The abatement amounted to $135,083.74. A manufacturing plant expansion. The abatement amounted to $156,467.94.

- 37 -

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HOUSTON 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

SCHEDULE "1"

Year Ended
2018 2017 2016 2015

School District's proportion of the
net pension liability

School District's proportionate share of the net pension liability

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

1.386441% $ 257,674,330.00 $ 1.478342% $ 304,998,438.00 $ 1.418023% $ 215,879,921.00 $ 1.412022% $ 178,390,355.00 $

875,182.00 1,090,354.00
852,392.00 719,867.00

Total
$ 258,549,512.00 $ 306,088,792.00 $ 216,732,313.00 $ 179,110,222.00

School District's employee payroll

School District's proportionate share of the net pension liability as a percentage of its employee
payroll

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

$ 158,922,980.04 $ 162,747,774.99 $ 150,299,368.59 $ 144,097,581.27

162.14% 187.41% 143.63% 123.80%

79.33% 76.06% 81.44% 84.03%

This schedule is intended to show information for 10 years. Additional years will be displayed as they become available.

- 39 -

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

SCHEDULE "2"

Year Ended
2018 2017 2016 2015

School District's proportion of the net pension liability

School District's proportionate share of the net pension liability

School District's covered employee
payroll

0.018664% $ 758,008.00 $ 0.018934% $ 895,658.00 $ 0.018205% $ 737,557.00 $ 0.017996% $ 674,961.00 $

457,801.02 440,233.56 416,239.34 405,211.66

School District's proportionate share of the net pension liability
as a percentage of covered payroll
165.58% 203.45% 177.20% 166.57%

Plan fiduciary net position as a
percentage of total net pension liability
76.33% 72.34% 76.20% 77.99%

This schedule is intended to show information for 10 years. Additional years will be displayed as they become available.

- 40 -

HOUSTON COUNTY BOARD OF EDUCATION REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF PROPORTIONATE SHARE OF THE NET PENSION LIABILITY PUBLIC SCHOOLS EMPLOYEES RETIREMENT SYSTEM OF GEORGIA
FOR THE YEAR ENDED JUNE 30

SCHEDULE "3"

Year Ended
2018 2017 2016 2015

School District's proportion of the
net pension liability

School District's proportionate share of
the net pension liability

State of Georgia's proprotionate share of the
net pension liaibility associated with the School
District

0.00% $ 0.00% $ 0.00% $ 0.00% $

-

$

-

$

-

$

-

$

3,218,420.00 $ 4,098,431.00 $ 2,607,682.00 $ 2,303,408.00 $

Total
3,218,420.00 4,098,431.00 2,607,682.00 2,303,408.00

School District's employee payroll

$

11,060,129.01

$

10,489,156.64

$

10,330,432.81

$

10,016,811.88

School District's proportionate share of the net pension liability as a percentage of its
employee payroll

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

N/A

85.69%

N/A

81.00%

N/A

87.00%

N/A

88.29%

This schedule is intended to show information for 10 years. Additional years will be displayed as they become available.

- 41 -

HOUSTON 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

SCHEDULE "4"

Year Ended

School District's proportion of the net OPEB liability

School Distict's proportionate share of the net OPEB liability

State of Georgia proportionate share of the net OPEB liability
associated with the School District

Total

School District's covered-employee
payroll

School District's proportionate share of the net OPEB liability as
a percentage of its covered-employee
payroll

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

2018 2017

1.484992% $ 208,640,779.00 $ 1.504207% $ 222,927,776.00 $

-

$ 208,640,779.00 $ 121,721,036.65

-

$ 222,927,776.00 $ 117,333,618.48

171.41% 189.99%

1.61% 0.64%

This schedule is intended to show information for 10 years. Additional years will be displayed as they become available.

- 42 -

HOUSTON COUNTY BOARD OF EDUCATION REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF PROPORTIONATE SHARE OF THE NET OPEB LIABILITY (ASSET)
SEAD - OPEB FOR THE YEAR ENDED JUNE 30

SCHEDULE "5"

Year Ended 2018

School District's proportion of the net OPEB asset

School District's proportionate share
of the net OPEB asset

School District's covered-employee
payroll

School District's proportionate share of the net OPEB liability as a percentage of its covered-
employee payroll

0.031437% $ (81,706.00) $

457,801.02

(17.85)%

Plan fiduciary net position as a
percentage of the total OPEB liability
130.17%

This schedule is intended to show information for 10 years. Additional years will be displayed as they become available.

- 43 -

HOUSTON COUNTY BOARD OF EDUCATION REQUIRED SUPPLEMENTARY INFORMATION
SCHEDULE OF CONTRIBUTIONS TEACHERS RETIREMENT SYSTEM OF GEORGIA
FOR THE YEAR ENDED JUNE 30

SCHEDULE "6"

Year Ended

Contractually required contribution

Contributions in relation to the contractually required contribution

Contribution deficiency (excess)

2018

$

27,288,902.73 $

27,288,902.73 $

-

2017

$

22,601,157.09 $

22,601,157.09 $

-

2016

$

23,141,378.51 $

23,141,378.51 $

-

2015

$

19,687,721.71 $

19,687,721.71 $

-

2014

$

17,625,185.67 $

17,625,185.67 $

-

2013

$

16,298,602.09 $

16,298,602.09 $

-

2012

$

14,377,512.24 $

14,377,512.24 $

-

2011

$

13,884,720.11 $

13,884,720.11 $

-

2010

$

13,544,690.10 $

13,544,690.10 $

-

2009

$

13,467,356.63 $

13,467,356.63 $

-

School District's covered payroll
$ 162,856,788.80 $ 158,922,980.04 $ 162,747,774.99 $ 150,299,368.59 $ 144,097,581.27 $ 143,401,483.17 $ 140,498,203.02 $ 135,846,018.48 $ 139,920,328.55 $ 145,452,439.94

Contribution as a percentage of covered
payroll
16.76% 14.22% 14.22% 13.10% 12.23% 11.37% 10.23% 10.22%
9.68% 9.26%

- 44 -

HOUSTON COUNTY BOARD OF EDUCATION REQUIRED SUPPLEMENTARY INFORMATION
SCHEDULE OF CONTRIBUTIONS EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA
FOR THE YEAR ENDED JUNE 30

SCHEDULE "7"

Year Ended
2018 2017 2016 2015 2014 2013 2012 2011 2010 2009

Contractually required contribution

Contributions in relation to the contractually required
contribution

Contribution deficiency (excess)

$

109,324.76 $

109,324.76 $

-

$

113,580.49 $

113,580.49 $

-

$

108,825.61 $

108,825.61 $

-

$

91,406.16 $

91,406.16 $

-

$

74,802.06 $

74,802.06 $

-

$

53,504.66 $

53,504.66 $

-

$

35,683.88 $

35,683.88 $

-

$

29,845.78 $

29,845.78 $

-

$

29,313.50 $

29,313.50 $

-

$

27,150.80 $

27,150.80 $

-

School District's covered payroll

$

440,647.76

$

457,801.02

$

440,233.56

$

416,239.34

$

405,211.66

$

359,091.68

$

306,826.14

$

286,702.98

$

281,589.82

$

260,814.60

Contribution as a percentage of covered
payroll
24.81% 24.69% 24.72% 21.96% 18.46% 14.90% 11.63% 10.41% 10.41% 10.41%

- 45 -

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

SCHEDULE "8"

Contractually required

Year Ended

contribution

Contributions in relations to the contractually required
contribution

Contribution deficiency (excess)

School District's coveredemployee payroll

Contributions as a percentage of
covered-employee payroll

2018 2017

$

7,665,615.00 $

$

7,742,869.00 $

7,665,615.00 $ 7,742,869.00 $

-

$ 123,412,244.61

-

$ 121,721,036.65

6.21% 6.36%

This schedule is intended to show information for 10 years. Additional years will be displayed as they become available.

- 46 -

HOUSTON COUNTY BOARD OF EDUCATION REQUIRED SUPPLEMENTARY INFORMATION
SCHEDULE OF CONTRIBUTIONS SEAD - OPEB
FOR THE YEAR ENDED JUNE 30

SCHEDULE "9"

Year Ended

Contractually required contribution

Contributions in relation to the contractually required contribution

Contribution deficiency (excess)

School District's coveredemployee payroll

Contributions as a percentage of
covered-employee payroll

2018

$

2017

$

2016

$

2015

$

2014

$

2013

$

2012

$

2011

$

2010

$

2009

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

440,647.76 457,801.02 440,233.56 416,239.34 405,211.66 359,091.68 306,826.14 286,702.98 281,589.82 260,814.60

0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%

This schedule is intended to show information for 10 years. Additional years will be displayed as they become available.

- 47 -

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

SCHEDULE "10"

Teachers Retirement System
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 increase were adjusted to more closely reflect actual and anticipated experience.
On November 18, 2-015, the Board adopted recommended changes to the economic and demographic assumptions utilized by the System. Primary among the changes were the updates to rates of mortality, retirement, disability, withdrawal and salary increases. The expectation of retired life mortality was changed to 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).
Employees' Retirement System
Changes of assumptions: On December 17, 2015, the Board adopted recommended changes to the economic and demographic assumptions utilized by the System. Primary among the changes were the updates to rates of mortality, retirement, disability, withdrawal and salary increases.
Public School Employees Retirement System
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.
On-December 17, 2015, the Board adopted recommended changes to the economic and demographic assumptions utilized by the System. Primary among the changes were the updates to rates of mortality, retirement and withdrawal. The expectation of retired life mortality was changed to the RP 2000 Blue Collar Mortality Table projected to 2025 with projection scale BB (set forward 3 years for males and 2 years for females).
School OPEB Fund
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 in assumptions: In the revised June 30, 2017 actuarial valuation, there was a change relating to employee allocation. Employees were previously allocated based on their Retirement System membership, and currently employees are allocated based on their current employer payroll location. Additionally, there were changes to the discount rate and an increase in the investment rate of return due to a longer-term investment strategy.
In the June 30, 2015 actuarial valuation, decremental and underlying inflation assumptions were changed to reflect the Retirement Systems' experience studies.
In the June 30, 2012 actuarial valuation, a data audit was performed and data collection procedures and assumptions were changed.
SEAD-OPEB Employer
Changes of assumptions: On December 17, 2015, the Board of Trustees adopted recommended changes to the economic and demographic assumptions utilized by the Plan. Primary among the changes were the updates to rates of mortality, retirement, disability, withdrawal and salary increases.

- 48 -

HOUSTON COUNTY BOARD OF EDUCATION GENERAL FUND
SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL
YEAR ENDED JUNE 30, 2018

SCHEDULE "11"

REVENUES
Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous
Total Revenues
EXPENDITURES
Current Instruction Support Services Pupil Services Improvement of Instructional Services
Instructional Staff Training
Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Enterprise Operations Community Services Food Services Operation Debt Service
Total Expenditures
Excess of Revenues over (under) Expenditures
OTHER FINANCING SOURCES (USES)
Other Sources Other Uses
Total Other Financing Sources (Uses)
Net Change in Fund Balances
Fund Balances - Beginning
Fund Balances - Ending

NONAPPROPRIATED BUDGETS

ORIGINAL (1)

FINAL (1)

ACTUAL AMOUNTS

VARIANCE OVER/UNDER

$

53,300,000.00 $

53,950,000.00 $

53,908,089.04 $

23,371,027.00

23,546,027.00

25,523,895.76

179,245,030.14

182,117,052.22

182,722,128.16

28,835,073.00

29,655,916.00

29,542,339.65

8,231,238.00

8,231,238.00

8,470,911.52

253,725.00

618,725.00

673,006.15

6,050,096.00

5,172,691.00

5,194,169.87

299,286,189.14

303,291,649.22

306,034,540.15

(41,910.96) 1,977,868.76
605,075.94 (113,576.35) 239,673.52
54,281.15 21,478.87
2,742,890.93

191,264,565.14
13,295,025.00 8,069,647.00 15,500.00 3,940,303.00 1,894,138.00
19,441,510.00 2,572,612.00
21,236,160.00 12,818,366.00
3,776,636.00 1,364,314.00 2,357,297.00 1,035,000.00 19,418,090.00
-
302,499,163.14
(3,212,974.00)

187,388,368.32
14,109,369.39 6,306,951.90 2,761,900.81 3,915,303.00 1,832,032.99
19,551,510.00 2,466,296.21
21,804,294.76 13,046,355.54
3,683,564.00 1,411,509.09 2,357,297.00 1,035,000.00 19,483,699.28
-
301,153,452.29
2,138,196.93

187,757,771.23
13,936,903.97 6,230,142.97 2,572,505.07 3,918,657.59 1,671,794.65
19,402,606.23 2,457,833.60
22,006,720.75 12,392,973.53
3,699,093.35 1,395,488.65 2,439,446.45 1,090,733.16 18,508,162.06
665,830.63
300,146,663.89
5,887,876.26

(369,402.91)
172,465.42 76,808.93
189,395.74 (3,354.59)
160,238.34 148,903.77
8,462.61 (202,425.99) 653,382.01
(15,529.35) 16,020.44 (82,149.45) (55,733.16) 975,537.22 (665,830.63)
1,006,788.40
3,749,679.33

3,098,873.00 (3,225,762.00)
(126,889.00) (3,339,863.00) 44,100,273.74

3,098,873.00 (3,225,762.00)
(126,889.00) 2,011,307.93 43,706,370.53

5,887,876.26 79,052,030.29

(3,098,873.00) 3,225,762.00
126,889.00 3,876,568.33 35,345,659.76

$

40,760,410.74 $

45,717,678.46 $

84,939,906.55 $

39,222,228.09

Notes to the Schedule of Revenues, Expenditures and Changes in Fund Balances Budget and Actual
(1) Original and Final Budget amounts do not include the Restricted Other - Property Tax Rollback fund balance in the beginning or ending fund balances.
The accompanying schedule of revenues, expenditures and changes in fund balances budget and actual is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the fund financial statements.

See notes to the basic financial statements.

- 49 -

HOUSTON COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
YEAR ENDED JUNE 30, 2018

SCHEDULE "12"

FUNDING AGENCY PROGRAM/GRANT
Agriculture, U. S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food Services School Breakfast Program National School Lunch Program
Total Child Nutrition Cluster
Other Programs Pass-Through From Georgia Department of Education Food Services Fresh Fruit and Vegetable Program
Total U. S. Department of Agriculture
Education, U. S. Department of Impact Aid Cluster Direct Impact Aid
Special Education Cluster Pass-Through From Georgia Department of Education Special Education Grants to States Preschool Grants
Total Special Education Cluster
Other Programs Pass-Through From Georgia Department of Education Career and Technical Education - Basic Grants to States Education for Homeless Children and Youth English Language Acquisition Grants Supporting Effective Instruction State Grants Mathematics and Science Partnerships Migrant Education - State Grant Program Student Support and Academic Enrichment Program Title I Grants to Local Educational Agencies
Total Other Programs
Total U. S. Department of Education
Defense, U. S. Department of the Air Force Direct Department of the Air Force R.O.T.C. Program
Federal Emergency Management Agency Pass-Through From Georgia Emergency Management Agency Disaster Relief
Total Expenditures of Federal Awards

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

10.553 10.555

18185GA324N1099 $ 18185GA324N1100

4,131,949.21 13,676,546.08
17,808,495.29

10.582

185GA324L1603

138,184.26 17,946,679.55

84.041

1,131,037.20

84.027 84.173

H027A170073 H173A170081

4,951,978.00 139,711.00
5,091,689.00

84.048 84.196 84.365 84.367 84.366 84.011 84.424A 84.010

V048A170010 S196A170011 S365A170010 S367A170001 S366B170011 S011A170011 S424A170011 S010A170010

234,016.00 45,238.79
122,990.66 784,317.57 110,217.09
40,777.54 149,150.59 6,540,732.05
8,027,440.29
14,250,166.49

12.UNKNOWN 97.036

361,868.25

13,243.14

$

32,571,957.43

Notes to the Schedule of Expenditures of Federal Awards
Note 1. Basis of Presentation
The accompanying schedule of expenditures of federal awards (the "Schedule") includes the Federal award activity of the Houston County Board of Education (the "Board") under programs of the federal government for the year ended June 30, 2018. The information in this Schedule is presented under 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). Because the Schedule presents only a selected portion of the operations of the Board, it is not intended to and does not present the financial position or changes in net position of the Board.
Note 2. Summary of Significant Accounting Policies
Expenditures reported on the Schedule are reported on the modified accrual basis of accounting. Such expenditures are recognized following, as applicable, either the cost principles in OMB Circular A-87, Cost Principles for State, Local, and Indian Tribal Government, or the cost principles in Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, wherein certain types of expenditures are not allowable or are limited to reimbursement. The Board has elected not to use the 10-percent de minimis indirect cost rate as allowed under the Uniform Guidance.

See notes to the basic financial statements.

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HOUSTON COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2018
AGENCY/FUNDING
GRANTS Bright From the Start: Georgia Department of Early Care and Learning Pre-Kindergarten Program
Education, Georgia Department of Quality Basic Education Direct Instructional Cost Kindergarten Program Kindergarten Program - Early Intervention Program Primary Grades (1-3) Program Primary Grades - Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades - Early Intervention (4-5) Program Middle Grades (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Gifted Student - Category VI Remedial Education Program Alternative Education Program English Speakers of Other Languages (ESOL) Media Center Program 20 Days Additional Instruction Staff and Professional Development Principal Staff and Professional Development Indirect Cost Central Administration School Administration Facility Maintenance and Operations Amended Formula Adjustment Categorical Grants Pupil Transportation Regular Nursing Services Vocational Supervisors Migrant Education Education Equalization Funding Grant Other State Programs Food Services Math and Science Supplements Military Counselors Preschool Handicapped Program Pupil Transportation - State Bonds Teacher of the Year Teachers Retirement Vocational Education
Georgia Emergency Management Agency Disaster Relief
Governor's Office of Student Achievement Connections for Classroom Grant
Office of the State Treasurer Public School Employees Retirement
See notes to the basic financial statements.

SCHEDULE "13"

GOVERNMENTAL FUND TYPE GENERAL FUND

$

4,229,867.72

9,912,336.00 521,881.00
23,478,540.00 1,404,045.00
11,818,304.00 1,041,130.00
19,571,707.00 16,007,739.00
5,277,238.00 23,752,041.00 12,933,200.00
665,309.00 1,362,055.00 1,496,316.00 3,463,106.00 1,017,167.00
574,340.00 10,042.00
3,733,792.00 6,623,650.00 7,578,771.00 (2,504,000.00)
1,538,269.00 571,906.00 33,006.00
23,980,730.00
449,530.00 284,792.14
40,468.00 476,041.00
77,319.58 507.25
84,502.08 571,476.00
934.81
56,811.58
587,258.00

$

182,722,128.16

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HOUSTON COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS
YEAR ENDED JUNE 30, 2018

SCHEDULE "14"

PROJECT
2012 SPLOST (1) Acquiring instructional and administrative technology equipment (2) Acquiring safety and security equipment (3) Adding to, renovating, repairing, improving, and equipping existing school buildings and other buildings and facilities (4) Acquiring, constructing, and equipping two replacement elementary schools (5) Acquiring, constructing, and equipping a central transportation (bus) facility (6) Acquiring, constructing, and equipping stadium and tennis facilities (7) Acquiring any necessary property, both real and personal (8) Paying (Legal and Administrative) expenses incident to accomplishing the foregoing

ORIGINAL ESTIMATED
COST (1)

CURRENT ESTIMATED COSTS (2)

AMOUNT EXPENDED IN CURRENT YEAR (3) (4)

AMOUNT EXPENDED IN PRIOR YEARS (3) (4)

TOTAL COMPLETION
COST

EXCESS PROCEEDS
NOT EXPENDED

PROJECT STATUS

ESTIMATED COMPLETION
DATE

$

- $ 20,448,779.00 $

9,813.78 $ 20,438,964.86 $ 20,448,778.64 $

-

1,659,729.00

102,100.03

1,557,627.99

1,659,728.02

-

44,899,971.00

-

26,508,184.00

-

6,506,311.00

-

13,563,653.00

-

1,222,146.00

-

472,924.00

$ 125,000,000.00 $ 115,281,697.00 $

419,586.63

43,154,745.74

-

-

26,508,183.93

26,508,183.93

267,117.72

6,239,192.45

6,506,310.17

-

12,063,652.92

-

-

1,222,145.37

1,222,145.37

-

472,923.22

472,923.22

798,618.16 $ 111,657,436.48 $ 56,818,069.35 $

-

Completed

October 30, 2017

-

Completed

September 30, 2017

-

Ongoing

December 31, 2018

-

Completed

November 30, 2014

-

Completed

July 31, 2017

-

Ongoing

June 30, 2019

-

Completed

June 30, 2017

-

Completed

November 30, 2016

-

2017 SPLOST

(1) Acquiring instructional and administrative technology

equipment and materials

$

(2) Acquiring safety, security, and fire protection equipment

(3) Adding to, renovating, repairing, improving, furnishing

and equipping existing school buildings, and physical

education and other buildings and facilities, including any

necessary demolition

(4) Adding to, constructing, renovating, furnishing, and

equipping gymnasiums and athletic facilities

(5) Renovations, additions,and improvements to parking and

traffic access facilities, including any necessary sitework

(6) Acquiring, constructing, furnishing, and equipping one

new elementary school

(7) Acquiring buses, vehicles, and transportation equipment

(8) Acquiring any necessary property, both real and

personal

(9) Paying expenses incident to accomplishing the foregoing

- $ 20,000,000.00 $ 2,912,422.35 $

-

1,913,015.00

262,525.23

619,513.85 $ 84,103.75

3,531,936.20 $ 346,628.98

-

32,120,021.00

7,456,434.65

-

49,082,540.00

3,098,682.77

-

3,834,403.00

466,363.25

-

15,680,000.00

-

-

5,000,000.00

1,442,452.00

-

2,000,000.00

-

404,612.00

3,900.00 5,620.00

551,695.05
-
-
91,464.00
374,612.16

8,008,129.70
3,098,682.77
466,363.25
1,533,916.00
3,900.00 380,232.16

-

Ongoing

-

Ongoing

June 30, 2022 June 30, 2022

-

Ongoing

June 30, 2022

-

Ongoing

June 30, 2022

-

Ongoing

September 30, 2021

-

Ongoing

-

Ongoing

August 31, 2020 August 31, 2021

-

Ongoing

June 30, 2022

-

Ongoing

November 30, 2021

$ 135,000,000.00 $ 130,034,591.00 $ 15,648,400.25 $

1,721,388.81 $ 17,369,789.06 $

-

(1) The School District's original cost estimate as specified in the resolution calling for the imposition of the Local Option Sales Tax.

(2) The School District's current estimate of total cost for the projects. Includes all cost from project inception to completion.

(3) The voters of Houston County approved the imposition of a 1% sales tax to fund the above projects and retire associated debt. Amounts expended for these projects may include sales tax proceeds, state, local property taxes and/or other funds over the life of the projects.

(4) In addition to the expenditures shown above, the School District has incurred interest to provide advance funding for the above projects as follows:

Prior Years Current Year

$ 5,731,954.59 1,395,059.38

Total

$ 7,127,013.97

See notes to the basic financial statements.

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SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
March 18, 2019

The Honorable Brian P. Kemp, Governor of Georgia Members of the General Assembly of the State of Georgia Members of the State Board of Education
and Superintendent and Members of the Houston County Board of Education
INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED
IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of the Houston County Board of Education (School District), as of and for the year ended June 30, 2018, and the related notes to the financial statements, which collectively comprise the School District's basic financial statements, and have issued our report thereon dated March 18, 2019.
Internal Control Over Financial Reporting
In planning and performing our audit of the financial statements, we considered the School District's internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the School District's internal control. Accordingly, we do not express an opinion on the effectiveness of the School District's internal control.
A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.
Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. 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.

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

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
March 18, 2019

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

Opinion on Each Major Federal Program
In our opinion, the School District complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended June 30, 2018.
Report on Internal Control over Compliance
Management of the School District is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered the School District's internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the School District's internal control over compliance.
A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance.
Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.
The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose.
Respectfully submitted,
Greg S. Griffin State Auditor

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

HOUSTON COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2018
PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
No matters were reported.
PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
No matters were reported.

SECTION IV FINDINGS AND QUESTIONED COSTS

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

I SUMMARY OF AUDITOR'S RESULTS

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

Unmodified

Internal control over financial reporting: Material weakness identified? Significant deficiency identified?

No None Reported

Noncompliance material to financial statements noted:

No

Federal Awards

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

No None Reported

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

Unmodified

Any audit findings disclosed that are required to be reported in

accordance with 2 CFR 200.516(a)?

No

Identification of major programs: CFDA Numbers

Name of Federal Program or Cluster

10.553, 10.555

Child Nutrition Cluster

Dollar threshold used to distinguish between Type A and Type B programs:

$977,159.26

Auditee qualified as low-risk auditee?

Yes

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

No matters were reported.

III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported.