MADISON COUNTY BOARD OF EDUCATION DANIELSVILLE, GEORGIA ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2017 (Including Independent Auditor's Reports) MADISON COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS - Page SECTION I FINANCIAL INDEPENDENT AUDITOR'S REPORT REQUIRED SUPPLEMENTARY INFORMATION MANAGEMENT'S DISCUSSION AND ANALYSIS i EXHIBITS BASIC FINANCIAL STATEMENTS GOVERNMENT-WIDE FINANCIAL STATEMENTS A STATEMENT OF NET POSITION 1 B STATEMENT OF ACTIVITIES 2 FUND FINANCIAL STATEMENTS C BALANCE SHEET GOVERNMENTAL FUNDS 4 D RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET POSITION 5 E STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS 6 F RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES 7 G STATEMENT OF FIDUCIARY NET POSITION FIDUCIARY FUNDS 8 H STATEMENT OF CHANGES IN FIDUCIARY NET POSITION FIDUCIARY FUNDS 9 I NOTES TO THE BASIC FINANCIAL STATEMENTS 11 SCHEDULES REQUIRED SUPPLEMENTARY INFORMATION 1 SCHEDULE OF PROPORTIONATE SHARE OF THE NET PENSION LIABILITY TEACHERS RETIREMENT SYSTEM OF GEORGIA 37 2 SCHEDULE OF PROPORTIONATE SHARE OF THE NET PENSION LIABILITY EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA 38 3 SCHEDULE OF PROPORTIONATE SHARE OF THE NET PENSION LIABILITY PUBLIC SCHOOL EMPLOYEES RETIREMENT SYSTEM OF GEORGIA 39 4 SCHEDULE OF CONTRIBUTIONS TEACHERS RETIREMENT SYSTEM OF GEORGIA 40 5 SCHEDULE OF CONTRIBUTIONS EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA 41 MADISON COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS - SECTION I FINANCIAL SCHEDULES REQUIRED SUPPLEMENTARY INFORMATION 6 NOTES TO THE REQUIRED SUPPLEMENTARY INFORMATION 7 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL GENERAL FUND SUPPLEMENTARY INFORMATION 8 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS 9 SCHEDULE OF STATE REVENUE 10 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS Page 42 43 44 45 47 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 16, 2018 The Honorable Nathan Deal, 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 Madison County Board of Education INDEPENDENT AUDITOR'S REPORT Ladies and Gentlemen: 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 Madison County Board of Education (School District), as of and for the year ended June 30, 2017, 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 of the governmental activities, each major fund, and the aggregate remaining fund information of the School District as of June 30, 2017, 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 2017, the School District adopted new accounting guidance, Governmental Accounting Standards Board (GASB) Statement No. 77, Tax Abatement Disclosures, GASB Statement No. 80, Blending Requirements for Certain Component Units, and GASB Statement No. 82, Pension Issues. Our opinions are not modified with respect to these matters. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the Management's Discussion and Analysis, Schedules of Proportionate Share of the Net Pension Liability, Schedules of Contributions to Retirement Systems, Notes to the Required Supplementary Information and the Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual as presented on pages i through x and pages 37 through 43 respectively, 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 are 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 16, 2018 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 (This page left intentionally blank) MADISON COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2017 INTRODUCTION The Madison County Board of Education's (School District or District) financial statements for the fiscal year ended June 30, 2017 include a series of basic financial statements that report financial information for the School District as a whole, its funds, and its fiduciary responsibilities. The Statement of Net Position and the Statement of Activities provide financial information about all of the School District's activities and present both a short-term and long-term view of the School District's finances on a global basis. The fund financial statements provide information about all of the School District's funds. Information about these funds, such as the School District's general fund, is important in its own right, but will also give insight into the School District's overall soundness as reported in the Statement of Net Position and the Statement of Activities. FINANCIAL HIGHLIGHTS Key financial highlights for fiscal year 2017 are as follows: On the government-wide financial statements: The School District's net position at June 30, 2017 was almost $6.6 million. Net position reflects the difference between all assets and deferred outflows of resources of the District (including capital assets, net of depreciation) and all liabilities, both short-term and long-term, and deferred inflows of resources. The net position at June 30, 2017 of $6.6 million represented a decrease of $14.1 million when compared to the prior year. This decrease occurred because the School District made a significant investment in energy improvement expenditures during fiscal year 2017, most of which did not meet the threshold for being recorded as capital assets. The School District had $70.4 million in expenses relating to governmental activities of which almost $36.7 million of these expenses were offset by program specific charges for services, grants and contributions. General revenues (primarily property and sales taxes) of almost $20.0 million provided additional funding for these programs. However, the School District fell $14.1 million short of funding these governmental activities expenditures on a current year basis. This situation occurred because significant energy conservation expenditures were recorded as expenses in the current period instead of being capitalized as discussed above. As stated above, general revenues accounted for almost $20.0 million or about 35% of all revenues totaling over $56.3 million. Program specific revenues in the form of charges for services, grants, and contributions accounted for the balance of these revenues. (Percentages in table below have been rounded to one decimal place.) Source of Revenues Program Revenues 65.1% General Revenue Property Taxes 19.0% General Revenue Sales Taxes 3.6% General Revenue All Other 12.3% i MADISON COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2017 On the fund financial statements: Among major funds, the capital projects fund had about $26,000 in revenues and almost $20.5 million in expenditures. The capital projects fund balance of $1.1 million at June 30, 2017 decreased by $18.5 million from the prior year. This decrease occurred because resources from a long-term capital lease were recorded in the prior period and expenditures associated with that lease were not recorded until fiscal year 2017. OVERVIEW OF THE FINANCIAL STATEMENTS These financial statements consists of three parts; management's discussion and analysis (this section), the basic financial statements including notes to the financial statements and supplementary information. The basic financial statements include two levels of statements that present different views of the School District. 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 School District's overall financial status. The fund financial statements focus on individual parts of the School District, 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 School District acts solely as a trustee or agent for the benefit of others. In the case of the Madison County School District, the general fund, capital projects fund, and debt service fund are all considered to be major funds. The School District has no funds reported as nonmajor funds as defined by generally accepted accounting principles. 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 Since Madison County School District has no operations that have been classified as "Business-Type Activities", the government-wide financial statements are basically a consolidation of all of the School District's operating funds into one column called governmental activities. In reviewing the government-wide financial statements, a reader might ask the question, are we in a better financial position now than last year? The `Statement of Net Position' and the `Statement of Activities' provides the basis for answering this question. These financial statements include all School District's assets and liabilities and uses the accrual basis of accounting similar to the accounting used by most private-sector companies. This basis of accounting takes into account all of the current year's revenues and expenses regardless of when cash is received or paid. ii MADISON COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2017 These two statements report the School District's net position and any changes in net position. The change in net position is important because it tells the reader that, for the School District as a whole, the financial position of the School District has improved or diminished. The causes of this change may be the results of many factors, including those not under the School District's control, such as the property tax base, facility conditions, required educational programs, student-teacher ratios, and other factors. When analyzing government-wide financial statements, it is important to remember these statements are prepared using an economic resources measurement focus (accrual accounting) and involve the following steps to format the Statement of Net Position: Capitalize current outlays for capital assets Depreciate capital assets Report long-term debt, including pension obligations, as a liability Calculate revenue and expense using the economic resources measurement focus and the accrual basis of accounting Allocate net position as follows: o Net Investment in capital assets o Restricted net position includes amounts with constraints placed on the use by external sources such as creditors, grantors, contributors or laws and regulations. o Unrestricted for no specific use Fund Financial Statements The School District uses many funds or sub-funds to account for a multitude of financial transactions during the fiscal year. The fund financial statements presented in this report provide detail information about the School District's significant or major funds. As discussed previously, the District has no nonmajor funds as defined by generally accepted accounting principles. The School District has two kinds of funds as discussed below: Governmental Funds Most of the School District's activities are reported in governmental funds, which focus on how money flows into and out of those funds and the balances left at year-end available for spending in future periods. These funds are reported using the modified accrual method of accounting which measures cash and all other financial assets that can be readily converted to cash. The governmental fund statements provide a detailed short-term view of the School District's general government operations and the basic services it provides. Governmental fund information helps determine whether there are more or fewer financial resources that can be spent in the near future to finance educational programs. The differences between government activities (reported in the Statement of Net Position and the Statement of Activities) and governmental funds are reconciled in the financial statements. Fiduciary Funds The School District is the trustee, or fiduciary, for assets that belong to scholarships, arrangements for the purchase of library books, medical reimbursements, clubs, organizations and others 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 governmentwide financial statements because it cannot use these assets to finance its operations. iii MADISON COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2017 FINANCIAL ANALYSIS OF THE SCHOOL DISTRICT AS A WHOLE Net position, which is the difference between total assets and deferred outflows of resources, and total liabilities and deferred inflows of resources, is one indicator of the financial condition of the School District. When revenues exceed expenses, the result is an increase in net position. When expenses exceed revenues, the result is a decrease in net position. The relationship between revenues and expenses can be thought of as the School District's operating results. The School District's net position, as measured in the Statement of Net Position is one way to measure the School District's financial health, or financial position. Over time, increases or decreases in the School District's net position - as measured in the Statement of Activities - are one indicator of whether its financial health is improving or deteriorating. However, the School District's goal and mission is to provide success for each child's education, not to generate profits as private corporations do. For this reason, many other nonfinancial factors should be considered in assessing the overall health of the School District. In the case of the Madison County School District, assets and deferred outflows of resources exceeded liabilities and deferred inflows of resources by almost $6.6 million at June 30, 2017. To better understand the School District's actual financial position and ability to deliver services in future periods, it is necessary to review the various components of the net position category. For example, of the $6.6 million of net position, almost $4.7 million was restricted for continuation of various State and Federal programs, debt service and ongoing capital projects. Accordingly, these funds were not available to meet the School District's ongoing obligations to citizens and creditors. In addition, the District had $54.9 million (net of related debt) invested in capital assets (e.g., land, buildings, and equipment). The School District uses these capital assets to provide educational services to students within geographic boundaries served by the School District. Because of the very nature and on-going use of the assets being reported in this component of net position, it must be recognized that this portion of the net position is not available for future spending. Because of the restrictions on net position as discussed above, the School District had a deficit of almost $53.0 million at June 30, 2017. This deficit includes pension related charges recorded because of the implementation of GASB No. 68, Accounting and Financial Reporting for Pensions and GASB No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date on Amendment to GASB No. 68. The School District believes it is also meaningful to view the School District's net position in the following manner: Net position associated with pension obligations Non position exclusive of pension obligations $ (39,236,068) 45,834,604 Net position, June 30, 2017 $ 6,598,536 The above analysis reflects, despite pension obligations, the School District's net position is a positive $6.6 million and management believes the School District's financial position is sound. iv MADISON COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2017 Table 1 provides a summary of the School District's net position for this fiscal year as compared to the prior fiscal year. Table 1 Net Position Assets Current and Other Assets Capital Assets, Net Total Assets Deferred Outflows of Resources Total Assets and Deferred Outflow of Resources Liabilities Current and Other Liabilities Long-Term Liabilities Net Pension Liability Total Liabilities Deferred Inflows of Resources Total Liabilities and Deferred Inflows of Resources Net Position Net Investment in Capital Assets Restricted Unrestricted (Deficit) Total Net Position Governmental Activities Fiscal Year 2017 Fiscal Year 2016 $ 19,342,209 $ 36,102,631 75,216,652 73,480,673 94,558,861 109,583,304 13,403,991 107,962,852 4,481,527 114,064,831 8,539,337 40,683,852 50,488,215 99,711,404 1,652,912 101,364,316 6,981,574 43,845,961 37,968,097 88,795,632 4,584,708 93,380,340 54,872,074 4,685,995 (52,959,533) 51,101,809 7,340,246 (37,757,564) $ 6,598,536 $ 20,684,491 v MADISON COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2017 Total net position decreased $14.1 million in fiscal year 2017 from the prior year. This decrease occurred primarily because the School District made a substantial investment in energy improvement expenditures during fiscal year 2017, of which a large majority of these did not meet the School District's capitalization threshold. In connection with deficit shown above, management presents the following additional information: Total unrestricted net position (deficit) Less unrestricted deficit in net position resulting from recognition of net pension obligations $ (52,959,533) 39,236,068 Unrestricted net position (deficit), exclusive of the net pension obligations $ (13,723,465) vi MADISON COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2017 Table 2 provides a summary of the School District's net position for this fiscal year as compared to the prior fiscal year. Table 2 Change in Net Position Revenues Program Revenues: Charges for Services and Sales Operating Grants and Contributions Capital Grants and Contributions Total Program Revenues General Revenues: Property Taxes Sales Taxes Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous Special Items Loss of Disposal of Capital Assets Total General Revenues and Special Items Total Revenues Program Expenses Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Other Support Services Operations of Non-Instructional Services Enterprise Operations Food Services Interest on Short-Term and Long-Term Debt Total Expenses Governmental Activities Fiscal Year 2017 Fiscal Year 2016 $ 1,463,295 $ 35,206,724 1,076 36,671,095 1,414,965 32,881,947 934,633 35,231,545 10,695,229 2,035,999 5,175,820 115,367 1,613,890 19,636,305 56,307,400 10,678,917 2,012,672 5,192,480 90,013 1,663,832 103,358 19,741,272 54,972,817 46,726,349 2,806,766 1,114,830 1,240,259 1,318,633 3,266,947 712,673 3,146,619 3,693,391 206,993 577,136 266,421 4,365,453 950,885 70,393,355 32,895,634 2,327,489 1,213,699 918,662 842,572 2,940,796 506,382 3,166,464 2,360,830 191,343 543,297 404,740 3,197,679 795,744 52,305,331 Increase (Decrease) in Net Position $ (14,085,955) $ 2,667,486 As discussed previously the $14.1 million decrease in net position shown above occurred primarily because the School District made a substantial investment in energy improvement expenditures during fiscal year 2017, of which a large majority of these did not meet the School District's capitalization threshold. vii MADISON COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2017 Cost of Providing Services The Statement of Activities shows the cost of program services and the charges for services and grants offsetting these services. Table 3 shows, for governmental activities, the total cost of services and the net cost of services. Net cost of services can be defined as the total cost less fees generated by the activities and intergovernmental revenue provided for specific programs. The net cost reflects the financial burden on the School District's taxpayers by each activity as compared to the prior fiscal year. Table 3 Governmental Activities Total Cost of Services Fiscal Year 2017 Fiscal Year 2016 Net Cost of Services Fiscal Year 2017 Fiscal Year 2016 Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations of Non-Instructional Services Enterprise Operations Food Services Interest on Short-Term and Long-Term Debt $ 46,726,349 $ 32,895,634 $ 19,464,190 $ 2,806,766 1,114,830 1,240,259 1,318,633 3,266,947 712,673 3,146,619 3,693,391 206,993 577,136 2,327,489 1,213,699 918,662 842,572 2,940,796 506,382 3,166,464 2,360,830 191,343 543,297 2,435,579 543,612 545,646 1,068,579 1,935,991 574,417 1,674,331 2,740,507 178,781 526,783 266,421 4,365,453 950,885 404,740 3,197,679 795,744 34,197 1,048,763 950,885 6,848,360 2,085,848 626,133 279,012 614,701 1,737,189 398,784 1,728,687 1,114,324 162,910 473,083 164,133 44,878 795,744 Total Expenses $ 70,393,355 $ 52,305,331 $ 33,722,261 $ 17,073,786 Overall School District expenses increased about $18.0 million from the prior year, while the net costs of services increased by $16.6 million from the prior year. This situation occurred primarily because the School District invested a substantial sum of money in various energy savings equipment and upgrades through a long term capital lease, most of which was not capitalized as discussed previously in this analysis. FINANCIAL ANALYSIS OF THE SCHOOL DISTRICT'S FUNDS Information about the School District's governmental funds is presented starting on Exhibit "C" of this report. Governmental funds are accounted for using the modified accrual basis of accounting. The governmental funds had total revenues of $56.5 million and total expenditures of $75.0 million in fiscal year 2017. Total governmental fund balances of $10.2 million at June 30, 2017, decreased $18.2 million from the prior year. This decrease occurred because the School District entered into a material capital lease of $19.8 million on June 30, 2016, for both debt reduction and capital outlay purposes. Because of the structure of this lease the proceeds were recorded in fiscal year 2016, however none of the expenses associated with lease were made until fiscal year 2017. viii MADISON COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2017 General Fund Budget Highlights The School District's budget is prepared according to Georgia Law. The most significant budgeted fund is the general fund. During the course of fiscal year 2017, the School District amended its general fund budget as needed. The School District budget is adopted at the aggregate level and maintained at the program, function, object, and site levels to facilitate budgetary control. The budgeting systems are designed to control the total budget, but provide flexibility to meet the ongoing programmatic needs. The budgeting systems are also designed to control total site budgets but provide flexibility for site management as well. For the general fund, the final actual revenues of $54.6 million exceeded the final budgeted revenues by $6.0 million. This variance was primarily due to revenues from State Funds exceeding the final budgeted amount by $1.1 million, revenues from Federal Funds exceeding the budget by almost $3.2 million, and revenues for miscellaneous revenues exceeding the final budget by almost $1.1 million. The primary reason miscellaneous revenues exceeded the budget was because the principal's accounts were not a part of the School District's final budget. The general fund's final actual expenditures of $52.7 million was greater than the final budget amount by $145,488. This small variance indicates the School District did an exceptional job in forecasting general fund expenses. CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets At fiscal year ended June 30, 2017, the School District had $75.2 million invested in capital assets, net of accumulated depreciation, all in governmental activities. These assets are made up of a broad range of items including buildings; land; land improvements; and food service, transportation and maintenance equipment. Table 4 reflects a summary of these balances, net of accumulated depreciation, as compared to the prior fiscal year. Table 4 Capital Assets at June 30 (Net of Depreciation) Governmental Activities Fiscal Year 2017 Fiscal Year 2016 Land Construction in Progress Land Improvements Buildings and Improvements Equipment $ 1,147,402 - 815,121 67,649,573 5,604,556 $ 1,147,402 737,912 397,142 67,997,257 3,200,960 Total $ 75,216,652 $ 73,480,673 Additional information about the School District's capital assets can be found in the Notes to the Basic Financial Statements. ix MADISON COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2017 Long-Term Debt At June 30, 2017, the School District had $40.7 million in total debt outstanding which consisted of $19.9 million in various types of bond debt, $20.1 million in capital lease debt, $544,000 in unamortized bond premiums and $138,000 in compensated absences. Table 5 summarizes the School District's debt as compared to the prior fiscal year. Table 5 Change in Long-Term Debt Governmental Activities Fiscal Year 2017 Fiscal Year 2016 General Obligation Bonds Payable QZAB Bonds Payable Revenue Bonds-Rutland Center Unamortized Bond Premiums Capital Lease Debt Compensated Absences $ 17,690,000 $ 17,380,000 2,000,000 2,000,000 202,275 259,315 544,257 1,399,869 20,109,000 22,670,956 138,320 135,821 Total $ 40,683,852 $ 43,845,961 Additional information about the School District's debt can be found in the Notes to the Basic Financial Statements. FACTORS BEARING ON THE DISTRICT'S FUTURE Currently known circumstances that are expected to have a significant effect on financial position or results of operations in future years are as follows: The School District is financially stable. The School District's operating millage for fiscal year 2017 was 16.99 mills, which produced over $647,000 per mill, which was an increase of $12,000 per mill from the prior year. The School District will construct additional facilities to accommodate the growth at various schools as needed. The School District plans to fund additional capital outlays, in part, with the one percent local sales tax revenue and state capital outlay grants. Although the economy is showing some improvement, general fund revenues only increased about $1.9 million or about 3.7% from the prior year. The general fund had an unassigned fund balance of $3.3 million at June 30, 2017, which was an increase of about $87,000 from the prior year. The School District's costs for providing health insurance to employees increased by $359,000 from the prior year or about 7%. The Board anticipates significant financial challenges going forward due to expected continued higher health insurance and benefit costs for employees. In spite of these challenges, the School District will continue to be a good steward of tax dollars while providing a quality educational opportunity. 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 Ms. Bonnie Knight, Assistant Superintendent, Madison County Board of Education, 800 Madison Street, Danielsville, Georgia 30633. x MADISON COUNTY BOARD OF EDUCATION MADISON COUNTY BOARD OF EDUCATION STATEMENT OF NET POSITION JUNE 30, 2017 ASSETS Cash and Cash Equivalents Accounts Receivable Taxes State Government Federal Government Local Notes Receivable Prepaid Items Inventories Restricted Cash held by Trustee Restricted Investments held by Trustee Capital Assets - Non Depreciable Capital Assets - Depreciable Total Assets DEFERRED OUTFLOWS OF RESOURCES Deferred Charge on Refunding of Debt Deferred Outflow of School District Contributions Deferred Outflow of Resources - Pension Plans LIABILITIES Accounts Payable Interest Payable Salary and Benefits Payable Contracts Payable Proportionate Share of Collective Net Pension Liability Long-Term Debt Due within one Year Due in more than one Year Total Liabilities DEFERRED INFLOWS OF RESOURCES Deferred Inflow of Resources - Pension Plans NET POSITION Net Investment in Capital Assets Restricted Continuation of State and Federal Programs Debt Service Capital Projects Unrestricted (Deficit) Net Position EXHIBIT "A" GOVERNMENTAL ACTIVITIES $ 7,577,203.21 823,660.58 4,249,138.86 732,653.13 62,943.53 537,039.93 53,833.47 64,668.43 3,230,925.17 2,010,142.95 1,147,402.00 74,069,249.65 94,558,860.91 498,932.23 3,946,881.00 8,958,178.00 35,512.38 165,621.21 5,911,236.57 2,426,967.00 50,488,215.00 3,585,512.52 37,098,339.71 99,711,404.39 1,652,912.00 54,872,073.78 916,398.62 3,457,195.45 312,400.44 (52,959,532.54) $ 6,598,535.75 The notes to the basic financial statements are in integral part of this statement. - 1 - MADISION COUNTY BOARD OF EDUCATION STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2017 GOVERNMENTAL ACTIVITIES Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance And Operation Of Plant Services Student Transportation Service Support Services - Central Other Support Services Operations of Non-Instructional Services Enterprise Operations Food Services Interest On Short-Term And Long-Term Debt and Fees Total Governmental Activities General Revenues Taxes Property Taxes For Maintenance and Operations Sales Tax Special Purpose Local Option Sales Tax For Capital Projects/Debt Services Other Sales Taxes Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous Total General Revenues Change in Net Position Net Position - Beginning of Year Net Position - End of Year EXPENSES CHARGES FOR SERVICES $ 46,726,349.35 $ 643,853.91 2,806,765.68 - 1,114,830.40 - 1,240,259.40 - 1,318,632.77 - 3,266,947.05 - 712,673.07 - 3,146,618.72 - 3,693,390.43 - 206,992.78 - 577,136.39 - 266,421.03 4,365,453.07 950,885.29 232,224.46 587,216.18 - $ 70,393,355.43 $ 1,463,294.55 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 $ 26,618,304.96 $ - $ (19,464,190.48) 371,186.73 571,218.32 694,613.17 250,054.25 1,330,956.33 138,255.98 1,472,287.65 951,807.38 28,211.67 50,353.52 - 1,075.90 - (2,435,578.95) (543,612.08) (545,646.23) (1,068,578.52) (1,935,990.72) (574,417.09) (1,674,331.07) (2,740,507.15) (178,781.11) (526,782.87) 2,729,474.19 - - (34,196.57) - (1,048,762.70) - (950,885.29) $ 35,206,724.15 $ 1,075.90 (33,722,260.83) $ 1,824,197.39 211,802.19 10,695,228.62 2,035,999.58 5,175,820.00 115,367.10 1,613,890.16 19,636,305.46 (14,085,955.37) 20,684,491.12 $ 6,598,535.75 - 3 - MADISON COUNTY BOARD OF EDUCATION BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2017 EXHIBIT "C" ASSETS Cash and Cash Equivalents Receivables, Net Taxes State Government Federal Government Local Notes Receivable Inventories Prepaid Items Restricted Cash held by Trustee Restricted Investment held by Trustee GENERAL FUND CAPITAL PROJECTS FUND DEBT SERVICE FUND TOTAL $ 5,838,988.98 $ 218,986.84 $ 1,519,227.39 $ 662,189.84 4,249,138.86 732,653.13 62,943.53 537,039.93 64,668.43 53,833.47 - 3,230,925.17 68,024.42 161,470.74 - 1,942,118.53 7,577,203.21 823,660.58 4,249,138.86 732,653.13 62,943.53 537,039.93 64,668.43 53,833.47 3,230,925.17 2,010,142.95 Total Assets LIABILITIES Accounts Payable Salaries and Benefits Payable Contracts Payable Total Liabilities DEFERRED INFLOWS OF RESOURCES Unavailable Revenue FUND BALANCES Nonspendable Restricted Committed Assigned Unassigned Total Fund Balances $ 12,201,456.17 $ 3,517,936.43 $ 3,622,816.66 $ 19,342,209.26 $ 35,512.38 $ - $ 5,911,236.57 - - 2,426,967.00 5,946,748.95 2,426,967.00 - $ - - 35,512.38 5,911,236.57 2,426,967.00 8,373,715.95 810,539.09 - 463.25 811,002.34 118,501.90 856,991.64 571,391.84 636,260.97 3,261,021.78 5,444,168.13 1,090,969.43 - 1,090,969.43 3,622,353.41 - 3,622,353.41 118,501.90 5,570,314.48 571,391.84 636,260.97 3,261,021.78 10,157,490.97 Total Liabilities, Deferred Inflows of Resources, and Fund Balances $ 12,201,456.17 $ 3,517,936.43 $ 3,622,816.66 $ 19,342,209.26 The notes to the basic financial statements are an integral part of this statement. - 4 - MADISON COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET POSITION JUNE 30, 2017 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 Land improvements Accumulated depreciation on land improvements Buildings and improvements Accumulated depreciation on buildings and improvements Equipment Accumulated depreciation on equipment Certain liabilities, including pension obligations, are not due and payable in the current period, and therefore, are not reported in the governmental funds. Net pension liability Certain revenues will be collected after year-end, but are not available soon enough to pay for the current period expenditures. Unavailable revenues - installment sale of land Unavailable property taxes Deferred outflows and inflows of resources related to pensions are applicable to future periods and, therefore, are not reported in the governmental funds. Deferred outflows of differences between the carrying value of the refunded debt and the resources used to refund it are not reported in the governmental funds. Deferred outflow on refunding of debt Some liabilities reported in the Statement of Activities do not require the use of current financial resources, and therefore are not reported as liabilities in the funds. Long-term liabilities at year-end consist of: Accrued interest on long-term debt Long-term liabilities, including bonds payable, are not due and payable in the current period and therefore are not reported in the funds. Long-term liabilities at year-end consist of: General obligation and Qualified Zone Academy Bonds payable Unamortized bond premiums Capital leases payable Rutland Center revenue bonds Compensated absences payable $ 10,157,490.97 $ 1,147,402.00 1,864,796.00 (1,049,675.00) 84,786,012.27 (17,136,439.62) 9,935,053.00 (4,330,497.00) 75,216,651.65 (50,488,215.00) $ 537,039.93 273,962.41 811,002.34 11,252,147.00 498,932.23 (165,621.21) $ (19,690,000.00) (544,256.80) (20,109,000.23) (202,275.00) (138,320.20) (40,683,852.23) Net position of governmental activities (Exhibit "A") $ 6,598,535.75 The notes to the basic financial statements are an integral part of this statement. - 5 - MADISON COUNTY BOARD OF EDUCATION STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2017 EXHIBIT "E" REVENUES Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous Total Revenues EXPENDITURES Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Enterprise Operations Food Services Operation Capital Outlay Debt Services Principal Dues and Fees Interest Total Expenditures Revenues over (under) Expenditures OTHER FINANCING SOURCES (USES) Proceeds of Capital Lease Proceeds of Refunding Bonds Payment to Bond Refunding Escrow Agent Refunding Bond Issuance Cost Sale or Compensation for Loss Assets Transfers In Transfers Out Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balances - Beginning GENERAL FUND CAPITAL PROJECTS FUND DEBT SERVICE FUND TOTAL $ 10,988,156.08 $ 211,802.19 34,766,974.36 5,604,074.69 1,463,294.55 20,693.42 1,554,503.16 54,609,498.45 - $ 25,560.42 - 25,560.42 5.15 $ 1,824,197.39 69,113.26 - 1,893,315.80 10,988,161.23 2,035,999.58 34,766,974.36 5,604,074.69 1,463,294.55 115,367.10 1,554,503.16 56,528,374.67 33,699,548.87 2,729,951.04 1,079,129.87 917,477.74 823,801.36 2,907,089.53 618,282.07 3,008,697.67 2,506,636.71 205,793.78 578,406.39 405,129.03 3,205,472.07 45,970.00 - 52,731,386.13 1,878,112.32 182,020.22 16,936,270.31 2,898,895.98 3,175.00 444,080.04 20,464,441.55 (20,438,881.13) 279,899.79 - 13,133.04 - (1,789,880.84) (1,496,848.01) 381,264.31 5,062,903.82 1,989,880.84 - 1,989,880.84 (18,449,000.29) 19,539,969.72 - - 1,030,000.00 1,523.75 754,083.84 1,785,607.59 107,708.21 33,881,569.09 2,729,951.04 1,079,129.87 917,477.74 823,801.36 2,907,089.53 618,282.07 3,008,697.67 2,506,636.71 205,793.78 578,406.39 405,129.03 3,205,472.07 16,982,240.31 3,928,895.98 4,698.75 1,198,163.88 74,981,435.27 (18,453,060.60) 9,970,000.00 (9,880,475.00) (89,525.00) - (200,000.00) (200,000.00) (92,291.79) 3,714,645.20 279,899.79 9,970,000.00 (9,880,475.00) (89,525.00) 13,133.04 1,989,880.84 (1,989,880.84) 293,032.83 (18,160,027.77) 28,317,518.74 Fund Balances - Ending $ 5,444,168.13 $ 1,090,969.43 $ 3,622,353.41 $ 10,157,490.97 The notes to the basic financial statements are an integral part of this statement. - 6 - MADISON 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, 2017 EXHIBIT "F" Net change in fund balances total governmental funds (Exhibit "E") Amounts reported for governmental activities are different because: Capital outlays are reported as expenditures in governmental funds. However, in the Statement of Activities, the cost of capital assets is allocated over their estimated useful lives as depreciation expense. In the current period, these amounts are: Capital outlay - net change Depreciation expense In the Statement of Activities, only the gain or loss on the sale or disposal of the capital assets equipment is reported, whereas in the governmental funds, the entire proceeds from the sale increase financial resources. Thus, the change in net assets differs from the change in fund balances by the carrying value of the capital assets sold or disposed of. Proceeds received from the execution of capital leases and bond refundings are reported as liabilities in the Statement of Activities. Whereas in the governmental funds these proceeds are reported as other financing sources. Proceeds from capital leases Proceeds from refunding bond issue In the Statement of Activities, the difference between the proceeds from a bond refunding issue and the principal of the bonds refunded are amortized over the life of refunding bonds, whereas in the governmental funds this difference is recognized in the fiscal year the refunding is completed. Deferral of loss on refunding bonds Amortization of deferred charge on refunding bonds Governmental funds report pension contributions as expenditures. However, in the Statement of Activities, the cost of pension benefits earned net of employee contributions is reported as pension expense (net). Because some revenues will not be collected for several months after the School District's fiscal year ends, they are not considered "available" revenues. Unavailable revenues Sale of land June 30, 2016 June 30, 2017 Deferred inflows of resources Unavailable property taxes June 30, 2016 June 30, 2017 Some expenses reported in the Statement of Activities do not require the use of current financial resources and, therefore are not reported as expenditures in the governmental funds. Accrued interest expense June 30, 2016 June 30, 2017 Compensated absences June 30, 2016 June 30, 2017 Repayment of long-term debt is reported as expenditures in governmental funds, but the repayment reduces long-term liabilities in the Statement of Net Position. In the current year, these amounts consist of: Amortization of bond premium Payment of capital lease debt Payment of revenue bond debt Redemption on bond principal Total debt repayment $ (18,160,027.77) $ 3,685,591.00 (1,946,672.00) 1,738,919.00 (2,940.00) $ (279,899.79) (9,970,000.00) (10,249,899.79) $ 506,111.11 (7,178.88) 498,932.23 (1,164,790.00) $ (550,857.87) 537,039.93 $ (13,817.94) $ (566,895.02) 273,962.41 (292,932.61) (306,750.55) $ 314,214.50 (165,621.21) $ $ 135,820.72 (138,320.20) 148,593.29 (2,499.48) 146,093.81 $ 855,611.72 2,841,855.98 57,040.00 9,660,000.00 13,414,507.70 Change in net position of governmental activities (Exhibit "B") $ (14,085,955.37) The notes to the basic financial statements are an integral part of this statement. - 7 - ASSETS Cash and Cash Equivalents Investments Total Assets LIABILITIES Funds Held for Others NET POSITION Held in Trust for Private Purposes MADISON COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET POSITION FIDUCIARY FUNDS JUNE 30, 2017 EXHIBIT "G" PRIVATE PURPOSE TRUSTS AGENCY FUNDS $ 39,174.40 $ 194,173.28 2,000.00 - $ 41,174.40 $ 194,173.28 $ 194,173.28 $ 41,174.40 The notes to the basic financial statements are an integral part of this statement. - 8 - MADISON COUNTY BOARD OF EDUCATION STATEMENT OF CHANGES IN FIDUCIARY NET POSITION FIDUCIARY FUNDS YEAR ENDED JUNE 30, 2017 ADDITIONS Contributions Donors DEDUCTIONS Scholarships Administrative Expenses Total Deductions Change in Net Position Net Position - Beginning Net Position - Ending EXHIBIT "H" PRIVATE PURPOSE TRUSTS $ 45,957.34 40,650.00 7,405.78 48,055.78 (2,098.44) 43,272.84 $ 41,174.40 The notes to the basic financial statements are an integral part of this statement. - 9 - (This page left intentionally blank) MADISON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2017 EXHIBIT "I" NOTE 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY REPORTING ENTITY The Madison 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. Additionally, the School District has been granted Charter System Status by the State of Georgia as provided in Georgia Annotated Code Section 20-2-2063.2. This status gives the School District freedom from many State rules and regulations in exchange for the School District's agreement to increase academic achievement by its students. 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. - 11 - MADISON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2017 EXHIBIT "I" Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Indirect expenses (expenses of the School District related to the administration and support of the School District's programs, such as office and maintenance personnel and accounting) are not allocated to programs. Program revenues include (a) charges paid by the recipients of goods or services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues. FUND FINANCIAL STATEMENTS: The fund financial statements provide information about the School District's funds, including fiduciary funds. Eliminations have been made to minimize the double counting of internal activities. Separate 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 had no funds reported as nonmajor funds. 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 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 (sales) legally restricted for the payment of general long-term principal and interest. The School District reports the following fiduciary fund types: Private purpose trust funds are used to report all trust arrangements for scholarships and for the purchase of library books. 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, grants and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from sales taxes is recognized in the fiscal year in which the underlying transaction (sale) takes place. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied. The School District uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts. - 12 - MADISON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2017 EXHIBIT "I" 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 and compensated absences, which are recognized as expenditures to the extent they have matured. Capital asset acquisitions are reported as expenditures in governmental funds. Proceeds of general long-term liabilities and acquisitions under capital leases are reported as other financing sources. The School District funds certain programs by a combination of specific cost-reimbursement grants, categorical grants, and general revenues. Thus, when program costs are incurred, there 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 2017, the School District adopted Governmental Accounting Standards Board (GASB) Statement No. 77, Tax Abatement Disclosures. This statement requires governments that enter into tax abatement agreements to disclose the following information; (1) brief descriptive information, such as the tax being abated, the authority under which tax abatements are provided, eligibility criteria, the mechanism by which taxes are abated, provisions for recapturing abated taxes, and the types of commitments made by tax abatement recipients; (2) the gross dollar amount of taxes abated during the period; and (3) commitments made by a government, other than to abate taxes, as part of a tax abatement agreement. The adoption of this statement does not have a significant impact on the School District's financial statements. In fiscal year 2017, the School District adopted Governmental Accounting Standards Board (GASB) Statement No. 80, Blending Requirements for Certain Component Units an amendment of GASB Statement No. 14. This statement amends the blending requirements for the financial statement presentation of component units of all state and local governments. The additional criterion requires blending of a component unit incorporated as a not-for-profit corporation in which the primary government is the sole corporate member. The additional criterion does apply to component units included in the financial reporting entity pursuant to the provisions of Statement No. 39, Determining Whether Certain Organization Are Component Units. The adoption of this statement does not have an impact on the School District's financial statement. In fiscal year 2017, the School District adopted Governmental Accounting Standards Board (GASB) Statement No. 82, Pension Issues an amendment of GASB Statements No. 67, No. 68 and No. 73. This statement addresses certain issues that have been raised with respect to Statements No. 67, Financial Reporting for Pension Plans, No. 68, Accounting and Financial Reporting for Pensions, and No. 73, Accounting and Financial Reporting for Pensions and Related Assets That Are Not within the Scope of GASB Statement No. 68, and Amendments to Certain Provisions of GASB Statements No. 67 and No. 68. Specifically, this statement addresses issues regarding (1) the presentation of payrollrelated measures in required supplementary information, (2) the selection of assumptions and the treatment of deviations from the guidance in an Actuarial Standard of Practice for financial reporting purposes, and (3) the classification of payments made by employers to satisfy employee (plan member) contribution requirements. The adoption of this statement does not have a significant impact on the School District's financial statement. - 13 - MADISON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2017 EXHIBIT "I" 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 Consumable Supplies Inventory On the basic financial statements, inventories of consumable supplies are reported at weighted average cost. The School District uses the consumption method to account for inventories whereby supplies are recorded as an asset when purchased, and expenses/expenditures are recorded as the inventory items are used 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 first-in, first-out 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. PREPAID ITEMS Payments made to vendors for services that will benefit future accounting periods are recorded as prepaid items, in both the government-wide and governmental fund financial statements. RESTRICTED ASSETS Certain resources set aside for repayment of debt are classified as restricted assets on the Statement of net position because their use is limited by applicable debt statutes, e.g. Qualified Zone Academy Bond sinking funds and Rutland Center Revenue Bonds. - 14 - MADISON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2017 EXHIBIT "I" 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. 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 $ Intangible Assets $ All 20,000.00 100,000.00 10,000.00 100,000.00 N/A 10 to 20 years 20 to 60 years 5 to 20 years Individually determined 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 Compensated absences payable consists of vacation leave employees earned based on services already rendered. Vacation leave of 10 days is awarded on a fiscal year basis 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 20 days. Upon terminating employment, the School District pays all unused and unforfeited vacation benefits to employees. Accordingly, vacation benefits are accrued as a liability in the government-wide financial statements. - 15 - MADISON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2017 EXHIBIT "I" Members of the Teachers Retirement System of Georgia (TRS) may apply unused sick leave toward early retirement. The liability for early retirement will be borne by TRS rather than by the individual School Districts. Otherwise, sick leave does not vest with the employee, and no liability is reported in the School District's financial statements. LONG-TERM LIABILITIES AND BOND DISCOUNTS/PREMIUMS In the School District's government-wide financial statements, outstanding debt is reported as liabilities. Bond premiums and discounts and the difference between the reacquisition price and the net carrying value of refunded debt are deferred and amortized over the life of the bonds using the straight-line method. To conform to generally accepted accounting principles, bond premiums and discounts should be amortized using the effective interest method. The effect of this deviation is deemed to be immaterial to the fair presentation of the basic financial statements. Bond issuance costs are recognized as an outflow of resources in the fiscal year in which the bonds are issued. In the governmental fund financial statements, the School District recognizes the proceeds of debt and premiums as other financing sources of the current period. Bond issuance costs are reported as debt service expenditures. 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. 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. 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. - 16 - MADISON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2017 EXHIBIT "I" 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 Madison County Board of Commissioners adopted the property tax levy for the 2016 tax digest year (calendar year) on September 20, 2016 (levy date) based on property values as of January 1, 2016. Taxes were due on December 20, 2016 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2016 tax digest are reported as revenue in the governmental funds for fiscal year 2017. The Madison 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, 2017, for maintenance and operations amounted to $10,070,668.97 and for school bonds amounted to $5.15. The revenue for bond tax was for a levy issued in a prior year. The tax millage rate levied for the 2016 tax year (calendar year) for the School District was as follows (a mill equals $1 per thousand dollars of assessed value): School Operations 16.99 mills Additionally, Title Ad Valorem Tax revenues, at the fund reporting level, amounted to $917,487.11 during fiscal year ended June 30, 2017. SALES TAXES Education Special Purpose Local Option Sales Tax (ESPLOST), at the fund reporting level, during the year amounted to $1,824,197.39 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 re-authorized at least every five years. The most recent authorization expires December 31, 2022. 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 fund. There is no statutory prohibition regarding over expenditure of the budget at any level. The budget for all governmental funds, except the various school activity (principal) accounts, is prepared and adopted by fund, function and object. The legal level of budgetary control was established by the Board at the aggregate function 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. - 17 - MADISON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2017 EXHIBIT "I" The Superintendent is authorized by the Board to approve adjustments of no more than 5% of the amount budgeted for expenditures in any budget function for any fund. The Superintendent shall report any such adjustments to the Board. If expenditure of funds in any budget function for any fund is anticipated to be more than 5% of the budgeted amount, the Superintendent shall request Board approval for the budget amendment. Any position or expenditure not previously approved in the annual budget that exceeds 5% of the budgeted amount at the function level shall require Board approval unless the Superintendent deems the position or purchase an emergency. In such case, the expenditure shall be reported to the Board at its regularly scheduled meeting. Under no circumstance is the Superintendent or other staff person authorized to spend funds that exceed the total budget without approval by the Board. 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 fiscal year 2017. 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. At June 30, 2017, $149,046.26 of deposits were not secured by surety bond, insurance or collateral as specified above. The School District is working with the affected financial institutions to ensure appropriate levels of collateral are maintained for all of the School District's deposits. Acceptable security for deposits consists of any one of or any combination of the following: (1) Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia, (2) Insurance on accounts provided by the Federal Deposit Insurance Corporation, (3) Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia, (4) Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia, (5) Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose, (6) Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia, and (7) Bonds, bills, notes, certificates of indebtedness, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest or debt obligations issued by 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. - 18 - MADISON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2017 EXHIBIT "I" 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, 2017, the School District had deposits (not including funds invested in Georgia Fund 1) with a carrying amount of $11,043,437.14, which included $2,000.00 in Certificates of Deposit that are reported as Investments, and a bank balance of $13,240,074.79. The bank balances insured by Federal depository insurance were $1,970,494.68 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 $8,288,654.94. At June 30, 2017, $2,980,925.17 of the School District's bank balance was exposed to custodial credit risk as follows: Uninsured and Uncollateralized Uninsured with collateral held by the pledging financial institution Uninsured with collateral held by the pledging financial institution's trust department or agent but not in the School District's name $ - - 2,980,925.17 Total $ 2,980,925.17 Reconciliation of cash and cash equivalents balances to carrying value of deposits Statement of Net Position Cash and cash equivalents - unrestricted $ Cash and cash equivalents - restricted Statement of Fiduiary Net Position Cash and cash equivalents 7,577,203.21 3,230,925.17 233,347.68 Total Cash and cash equivalents 11,041,476.06 Add: Deposits with original maturity of 3 months or more reported as investments 2,000.00 Deduct: Cash on Hand 37.52 Investment Pools reported as Cash and cash equivalents Georgia Fund 1 1.40 Total Carrying Value of Deposits- June 30, 2017 $ 11,043,437.14 CATEGORIZATION OF CASH EQUIVALENTS The School District reported cash equivalents of $1.40 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, 2017, was 56 days. - 19 - MADISON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2017 EXHIBIT "I" 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. CATEGORIZATION OF INVESTMENTS At June 30, 2017, the School District had $2,000.00 invested in certificates of deposit, which are included in the categorization of deposits shown above, and $2,010,142.95 in various other types of investments. The various other investments are categorized as follows: Investment Type Fair Value Investment Maturity Less Than 1 Year Debt Securities First American Treasury Obligation Federal National Mortgage Association Bond Mutual Funds $ 711.79 $ 1,941,406.74 68,024.42 711.79 1,941,406.74 68,024.42 Total Investments $ 2,010,142.95 $ 2,010,142.95 Fair Value of Investments The School District measures and records its investments using fair value measurement guidelines established by generally accepted accounting principles. These guidelines recognize a three-tiered fair value hierarchy, as follows: Level 1: Quoted prices for identical investments in active markets; Level 2: Observable inputs other than quoted market prices; and, Level 3: Unobservable inputs. At June 30, 2017,the School District had the following investments by fair value level: Bond Mutual Funds of $68,024.42 and Federal National Mortgage Association (FNMA) Discount Notes of $1,941,406.74 are valued using market observable information for identical or similar instruments in the market. (Level 2 inputs). U.S Treasury Obligations of $711.79 are valued using quoted prices for identical investments in active markets. (Level 1 input). Interest Rate Risk Interest rate risk is the risk that changes in interest rates of debt investment will adversely affect the fair value of an investment. The School District does not have a formal policy for managing interest rate risk. Custodial Credit Risk Custodial credit risk for investments is the risk that, in the event of the failure of the counterparty to a transaction, the School District will not be able to recover the value of the investment or collateral securities that are in the possession of an outside party. The School District does not have a formal policy for managing custodial credit risk. At June 30, 2017, $1,942,118.53 of the School District's applicable investments were held by the investment's counterparty, in the School District's name. Additionally, $68,024.42 of applicable investments were uninsured and unregistered with securities held by the counterparty or by its trust department of agent, but not in the School District's name. - 20 - MADISON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2017 EXHIBIT "I" Credit Quality Risk Credit quality risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. State law limits investments to those prescribed O.C.G.A. 36-83-4. The School District does not have a formal policy that would further limit its investment choices or one that addresses credit risk. As discussed above, $68,024.42 is invested in Bond Mutual Funds, $1,941,406.74 is invested in (FNMA) Discount Notes and $711.79 is invested in U.S. Treasury Obligations, which are rated as AAA for credit quality risks. Concentration of Credit Risk Concentration of credit risk is the risk of loss attributed to the magnitude of a government's investment in a single issuer. The School District does not have a formal policy for managing concentration of credit risk. More than 5% of the School District's investments are in FNMA Discount Notes. This investment is over 96% of the School District's total investments. NOTE 5: RESTRICTED ASSETS The restricted cash balance of $3,230,925.17 from the Capital Lease Financing Agreement is pledged to pay for energy efficiency improvements as outlined in the ABM Building solutions agreement. The restricted investment balances, totaling $2,010,142.95, are restricted for retirement of the QZAB Bonds and the Rutland Revenue Center Bonds as they mature. NOTE 6: CAPITAL ASSETS The following is a summary of changes in the capital assets for governmental activities during the fiscal year: Balances July 1, 2016 Increases Decreases Transfers Balances June 30, 2017 Governmental Activities Capital Assets, Not Being Depreciated: Land Construction in Progress $ 1,147,402.00 $ - $ 737,911.73 365,107.00 - $ - $ 1,147,402.00 - (1,103,018.73) - Total Capital Assets Not Being Depreciated 1,885,313.73 365,107.00 - (1,103,018.73) 1,147,402.00 Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements 83,682,993.54 7,202,619.00 1,394,296.00 2,849,984.00 470,500.00 117,550.00 - 1,103,018.73 - 84,786,012.27 9,935,053.00 1,864,796.00 15,685,736.62 4,001,659.00 997,154.00 1,450,703.00 443,448.00 52,521.00 114,610.00 - - 17,136,439.62 - 4,330,497.00 - 1,049,675.00 Total Capital Assets, Being Depreciated, Net 71,595,358.92 1,373,812.00 2,940.00 1,103,018.73 74,069,249.65 Governmental Activity Capital Assets - Net $ 73,480,672.65 $ 1,738,919.00 $ 2,940.00 $ - $ 75,216,651.65 - 21 - MADISON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2017 EXHIBIT "I" Current year depreciation expense by function is as follows: Instruction Support Services Educational Media Services General Administration School Administration Maintenance and Operation of Plant Student Transportation Services Food Services $ 32,023.00 62,385.00 25,136.00 20,841.00 204,943.00 $ 1,444,690.00 345,328.00 156,654.00 $ 1,946,672.00 NOTE 7: INTERFUND TRANSFERS Interfund transfers for the year ended June 30, 2017, consisted of the following: Transfers to Transfers From General Fund Debt Service Fund Capital Projects Fund $ 1,789,880.84 $ 200,000.00 Transfers were made for the following purposes: 1) A transfer of $1,789,880.84 was made from the general fund to the capital projects fund to provide supplemental funding for the various capital outlay projects. 2) A transfer of $200,000.00 was made from the debt service fund to the capital projects fund to provide supplemental funding from sales tax proceeds for various capital outlay projects. NOTE 8: LONG-TERM LIABILITIES The changes in long-term liabilities during the fiscal year for governmental activities were as follows: Balance July 1, 2016 Additions Deductions Balance June 30, 2017 Due Within One Year General Obligation (G.0) Bonds Unamortized Bond Premiums Qualified Zone Academy Bonds Capital Leases Rutland Center Revenue Bonds Compensated Absences(1) $ 17,380,000.00 $ 1,399,868.52 2,000,000.00 22,670,956.42 259,315.00 135,820.72 9,970,000.00 $ - 279,899.79 - 92,722.85 9,660,000.00 $ 855,611.72 - 2,841,855.98 57,040.00 90,223.37 17,690,000.00 $ 544,256.80 2,000,000.00 20,109,000.23 202,275.00 138,320.20 1,259,000.00 46,986.20 2,000,000.00 220,006.32 59,520.00 - $ 43,845,960.66 $ 10,342,622.64 $ 13,504,731.07 $ 40,683,852.23 $ 3,585,512.52 (1) The portion of compensated absences due within one year has been determined to be immaterial to the basic financial statements. - 22 - MADISON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2017 EXHIBIT "I" 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. Bonds have also been issued to advance-refund previously issued bonds. The School District repays general obligation bonds from voter-approved sales and property taxes. General obligation bonds are direct obligations and pledge the full faith and credit of the School District. During fiscal year 2017, the School District issued $9,970,000.00 in general obligation refunding bonds to advance refund $8,630,000.00 of outstanding bonds from the 2011 series. The bond issue of $9,970,000.00 less underwriters and bond issue cost of $89,525.00 provided net proceeds of $9,880,475.00. The total net proceeds were deposited in an irrevocable trust with an escrow agent to provide for future debt service payments on portions of the 2011 bond issue. As a result, portions of the 2011 Series Bonds are considered defeased, and the liability for these portions has been removed from the government-wide Statement of Net Position. The School District refunded the aforementioned bonds to reduce its total debt service payments over the next 12 years beginning subsequent to fiscal year 2017 by $571,102.93 and to obtain an economic gain (difference between the present values of total debt service payments and the old and new debt) of $504,320.91. General obligation bonds currently outstanding are as follows: Description Interest Rates Issue Date Maturity Date Amount Issued Amount Outstanding General Government - Series 2006 General Government - Series 2011 General Government - Refunding - Series 2017 3.74% 3.0259% 2.27% 4/5/2006 10/6/2011 4/26/2017 2/1/2019 $ 9,880,000.00 $ 2/1/2029 16,000,000.00 2/1/2029 9,970,000.00 1,410,000.00 6,310,000.00 9,970,000.00 $ 35,850,000.00 $ 17,690,000.00 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 2018 2019 2020 2021 2022 2023 - 2027 2028 - 2029 $ 1,259,000.00 $ 474,816.57 $ 1,256,000.00 490,529.70 1,299,000.00 448,624.00 1,347,000.00 410,778.20 1,396,000.00 347,714.30 7,549,000.00 1,093,642.40 3,584,000.00 142,816.40 46,986.20 46,986.20 46,986.20 46,986.20 46,986.20 234,930.99 74,394.81 Total Principal and Interest $ 17,690,000.00 $ 3,408,921.57 $ 544,256.80 QUALIFIED ZONE ACADEMY BONDS (QZAB) Section 226 of the Taxpayer Relief Act of 1997 (Public Law 105-34) provides for a source of capital at no or at nominal interest rates for costs incurred by School Districts in connection with the establishment of special academic programs, in partnership with the business community. The School District, in agreement with U.S. Bank, has entered into such an arrangement. This agreement establishes a method of repayment for qualified interest-free debt instrument. The agreement requires the School District to deposit funds annually into a sinking fund account on or before May 21, 2018. The amount on deposit at June 30, 2017 was $1,942,118.53. - 23 - MADISON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2017 EXHIBIT "I" Debt currently outstanding under Qualified Zone Academy Bonds is as follows: Purpose Interest Rate Issue Date Maturity Date Amount Issued Amount Outstanding QZAB - Series 2003B 0.00% 5/21/2003 2/1/2018 $ 2,000,000.00 $ 2,000,000.00 The following schedule reports the annual Qualified Zone Academy Bond payments: Fiscal Year Ended June 30: Principal 2018 $ 2,000,000.00 REVENUE BONDS The School District entered into a contract with the Northeast Georgia Regional Educational Service Agency (RESA), in conjunction with other School Districts to provide funding to build the Rutland Center, located in Athens, Georgia. This facility was built through the sale of bonds, retirement of which was pledged by funds from various local school districts in the area. Under terms of the agreement, the various school districts pledged funds annually to retire the bonds as they become due. The obligation of the School District is absolute and unconditional so long as any of the bonds remain outstanding. Under the contract, the School District will exercise its power of taxation to the extent necessary to pay the amounts required to be paid by the contract. Debt currently outstanding under Revenue Bonds is as follows: Purpose Interest Rate Issue Date Maturity Date Amount Issued Amount Outstanding General Government - Rutland Center Revenue Bonds 4.16% 6/1/2006 8/1/2020 $ 713,000.00 $ 202,275.00 The following is a schedule of total revenue bond payments: Fiscal Year Ended June 30: Principal Interest 2018 2019 2020 2021 $ 59,520.00 $ 8,415.00 62,000.00 5,939.00 64,480.00 3,359.00 16,275.00 677.00 Total Principal and Interest $ 202,275.00 $ 18,390.00 CAPITAL LEASES The School District has acquired various assets 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. - 24 - MADISON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2017 EXHIBIT "I" The following assets were acquired through capital leases and are reflected in the capital asset note at fiscal year-end: Buildings and Improvements Equipment Less: Accumulated Depreciation Governmental Funds $ 3,215,193.00 2,509,363.00 1,385,049.00 $ 4,339,507.00 During the current fiscal year, the School District entered into a lease agreement as lessee for financing the acquisition of various office equipment. This lease qualifies as a capital lease for accounting purposes, and, therefore, has been recorded at the present value of the future minimum lease payments as of the date of inception. Capital leases currently outstanding are as follows: Purpose Interest Rates Issue Date Maturity Date Amount Issued Amount Outstanding Ricoh Lease Citicorp Lease First Security Finance Incorporated 2.92% 3.99% 2.77% 5/25/2017 3/28/2008 6/30/2016 6/30/2021 $ 7/28/2018 2/1/2033 279,899.79 $ 1,297,176.48 19,823,525.48 279,899.79 166,738.89 19,662,361.55 $ 21,400,601.75 $ 20,109,000.23 The following is a schedule of total capital lease payments: Fiscal Year Ended June 30: Principal Interest 2018 2019 2020 2021 2022 2023 - 2027 2028 - 2032 2033 $ 220,006.32 $ 561,180.86 830,285.59 555,002.33 882,662.32 531,632.09 951,661.14 506,460.28 948,060.79 480,560.34 5,930,554.88 1,963,126.79 8,333,185.15 1,008,570.47 2,012,584.04 56,151.09 Total Principal and Interest $ 20,109,000.23 $ 5,662,684.25 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. - 25 - MADISON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2017 EXHIBIT "I" NOTE 9: RISK MANAGEMENT INSURANCE Commercial 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; and natural disasters. Except as described below, the School District carries commercial insurance for these risks. Settled claims resulting from these insured risks have not exceeded commercial insurance coverage in any of the past three fiscal years. 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 the related liability is reported when it is probable that a loss has occurred, and the amount of that loss can be reasonably estimated. Changes in the unemployment compensation claims liability during the last two fiscal years are as follows: Beginning of Year Liability Claims and Changes in Estimates Claims Paid End of Year Liability 2016 $ - $ - $ - $ - 2017 $ - $ 375.00 $ 375.00 $ - SURETY BOND The School District purchased a surety bond to provide additional insurance coverage as follows: Position Covered Amount Superintendent $ 1,000,000.00 - 26 - MADISON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2017 EXHIBIT "I" NOTE 10: FUND BALANCE CLASSIFICATION DETAILS The School District's financial statements include the following amounts presented in the aggregate at June 30, 2017: Nonspendable Inventories - consumable supplies Inventories - food products Prepaid assets Restricted Continuation of Federal programs Continuation of state programs Capital projects Debt service Committed School activity accounts Assigned Local programs Unassigned $ 5,261.45 59,406.98 53,833.47 $ 118,501.90 $ 842,147.69 14,843.95 1,090,969.43 3,622,353.41 5,570,314.48 571,391.84 636,260.97 3,261,021.78 Fund Balance, June 30, 2017 $ 10,157,490.97 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 15% of expenditures. 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 11: 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, 2017: Project Unearned Executed Contracts (1) Payments through June 30, 2017 (2) Energy Efficiency Improvements $ 3,230,925.17 $ 16,567,600.31 (1) The amounts described are not reflected in the basic financial statements. (2) Payments include contracts and retainages payable at year-end. NOTE 12: 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. - 27 - MADISON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2017 EXHIBIT "I" Funding Policy. The contribution requirements of plan members and participating employers are established by the Board in accordance with the current Appropriations Act and may be amended by the Board. Contributions of plan members or beneficiaries receiving benefits vary based on plan election, dependent coverage, and Medicare eligibility and election. For members with fewer than five years of service as of January 1, 2012, contributions also vary based on years of service. On average, members with five years or more of service as of January 1, 2012 pay approximately 25% of the cost of the health insurance coverage. In accordance with the Board resolution dated December 8, 2011, for members with fewer than five years of service as of January 1, 2012, the State provides a premium subsidy in retirement that ranges from 0% for fewer than 10 years of service to 75% (but no greater than the subsidy percentage offered to active employees) for 30 or more years of service. The subsidy for eligible dependents ranges from 0% to 55% (but no greater than the subsidy percentage offered to dependents of active employees minus 20%). No subsidy is available to Medicare eligible members not enrolled in a Medicare Advantage Option. The Board of Community Health sets all member premiums by resolution and in accordance with the law and applicable revenue and expense projections. Any subsidy policy adopted by the Board may be changed at any time by Board resolution and does not constitute a contract or promise of any amount of subsidy. Participating employers are statutorily required to contribute in accordance with the employer contribution rates established by the Board. The contribution rates are established to fund all benefits due under the health insurance plans for both active and retired employees based on projected "payas-you-go" financing requirements. Contributions are not based on the actuarially calculated annual required contribution (ARC) which represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed thirty years. The combined active and retiree contribution rates established by the Board for employers participating in the School OPEB Fund were as follows for the fiscal year ended June 30, 2017: For certificated teachers, librarians and regional educational service agencies and certain other eligible participants: July 1, 2016 June 30, 2017 $945.00 per member per month For non-certificated school personnel: July 1, 2016 December 31, 2016 $746.20 per member per month January 1, 2017 June 30, 2017 $846.20 per member per month No additional contribution was required by the Board for fiscal year 2017 nor contributed to the School OPEB Fund to prefund retiree benefits. Such additional contribution amounts are determined annually by the Board in accordance with the School plan for other post-employment benefits and are subject to appropriation. The School District's combined active and retiree contributions to the health insurance plans, which equaled the required contribution, for the current fiscal year and the preceding two fiscal years were as follows: Fiscal Year Percentage Contributed Required Contribution 2017 2016 2015 100% $ 5,664,102.31 100% $ 5,305,184.15 100% $ 5,051,652.64 - 28 - MADISON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2017 EXHIBIT "I" NOTE 14: RETIREMENT PLANS The School District participates in various retirement plans administered by the State of Georgia, as further explained below. TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS) Plan Description: All teachers of the School District as defined in O.C.G.A. 47-3-60 and certain other support personnel as defined by O.C.G.A. 47-3-63 are provided a pension through the Teachers Retirement System of Georgia (TRS). TRS, a cost-sharing multiple-employer defined benefit pension plan, is administered by the TRS Board of Trustees (TRS Board). Title 47 of the O.C.G.A. assigns the authority to establish and amend the benefit provisions to the State Legislature. The Teachers Retirement System of Georgia issues a publicly available separate financial audit report that can be obtained at www.trsga.com/publications. Benefits Provided: TRS provides service retirement, disability retirement, and death benefits. Normal retirement benefits are determined as 2% of the average of the employee's two highest paid consecutive years of service, multiplied by the number of years of creditable service up to 40 years. An employee is eligible for normal service retirement after 30 years of creditable service, regardless of age, or after 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 2017. The School District's contractually required contribution rate for the year ended June 30, 2017 was 14.27% of annual School District payroll, of which 14.16% of payroll was required from the School District and 0.11% of payroll was required from the State. For the current fiscal year, employer contributions to the pension plan were $3,929,398.30 and $30,326.66 from the School District and the State, respectively. EMPLOYEES' RETIREMENT SYSTEM Plan 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 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. - 29 - MADISON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2017 EXHIBIT "I" 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 contractually required contribution rate, actuarially determined annually, for the year ended June 30, 2017 was 24.69% of annual covered payroll for old and new plan members and 21.69% for GSEPS members. 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 $17,482.70 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 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. - 30 - MADISON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2017 EXHIBIT "I" 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 by the State of Georgia was $69,158.00. Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions At June 30, 2017, the School District reported a total liability of $50,488,215.00 for its proportionate share of the net pension liability consisting of a liability for TRS of $50,290,200.00 and a liability for ERS of $198,015.00. 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 $ 50,290,200.00 State of Georgia's proportionate share of the net pension liability associated with the School District 493,290.00 Total $ 50,783,490.00 The net pension liability for TRS and ERS was measured as of June 30, 2016. The total pension liability used to calculate the net pension liability was based on an actuarial valuation as of June 30, 2015. An expected total pension liability as of June 30, 2016 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, 2016. At June 30, 2016, the School District's TRS proportion was 0.243759%, which was a decrease of 0.004932% from its proportion measured as of June 30, 2015. At June 30, 2016, the School District's ERS proportion was 0.004186%, which was an increase of 0.001536% from its proportion measured as of June 30, 2015. At June 30, 2017, 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 $421,739.00. The PSERS net pension liability was measured as of June 30, 2016. The total pension liability used to calculate the net pension liability was based on an actuarial valuation as of June 30, 2015. An expected total pension liability as of June 30, 2016 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, 2016. For the year ended June 30, 2017, the School District recognized pension expense of $5,100,651.00 for TRS, $53,037.00 for ERS and $69,139.00 for PSERS and revenue of $42,917.00 for TRS and $69,139.00 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. - 31 - MADISON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2017 EXHIBIT "I" At June 30, 2017, the School District reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: TRS Deferred Outflows of Resources Deferred Inflows of Resources ERS Deferred Outflows of Resources Deferred Inflows of Resources Differences between expected and actual experience $ 749,188.00 $ 248,685.00 $ - $ 457.00 Changes of assumptions 1,303,453.00 - 1,677.00 - Net difference between projected and actual earnings on pension plan investments 6,361,917.00 - 20,133.00 - Changes in proportion and differences between School District contributions and proportionate share of contributions 483,147.00 1,403,770.00 38,663.00 - School District contributions subsequent to the measurement date 3,929,398.30 - 17,482.70 - Total $ 12,827,103.30 $ 1,652,455.00 $ 77,955.70 $ 457.00 The School District contributions subsequent to the measurement date of $3,929,398.30 for TRS and $17,482.70 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, 2018. 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 2018 2019 2020 2021 2022 $ 651,554.00 $ 32,005.00 $ 651,552.00 $ 10,427.00 $ 3,520,775.00 $ 10,854.00 $ 2,355,193.00 $ 6,730.00 $ 66,176.00 $ - Actuarial assum ptions: The total pension liability as of June 30, 2016 was determined by an actuarial valuation as of June 30, 2015, using the following actuarial assumptions, applied to all periods included in the measurement: Teachers Retirement System: Inflation Salary increases Investment rate of return 2.75% 3.25% 9.00%, average, including inflation 7.50%, net of pension plan investment expense, including inflation Post-retirement mortality rates were based on the RP-2000 White Collar Mortality Table with future mortality improvement projected to 2025 with the Society of Actuaries' projection scale BB (set forward one year for males) for service requirements and dependent beneficiaries. The RP-2000 Disabled Mortality table with future mortality improvement projected to 2025 with Society of Actuaries' - 32 - MADISON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2017 EXHIBIT "I" 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, 2015 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, 2015 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, 2015 valuation were based on the results of an actuarial experience study for the period July 1, 2009 June 30, 2014. - 33 - MADISON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2017 EXHIBIT "I" 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 rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table: Asset class Fixed income Domestic large stocks Domestic mid stocks Domestic small stocks International developed market stocks International emerging market stocks Alternative Total * Rates shown are net of the 2.75% assumed rate of inflation TRS Target allocation 30.00% 39.80% 3.70% 1.50% 19.40% 5.60% - 100.00% ERS/PSERS Target allocation 30.00% 37.20% 3.40% 1.40% 17.80% 5.20% 5.00% 100.00% Long-term expected real rate of return* (0.50)% 9.00% 12.00% 13.50% 8.00% 12.00% 10.50% 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: 1% Decrease (6.50%) Current Discount Rate (7.50%) 1% Increase (8.50%) School District's proportionate share of the net pension liability $ 78,277,316.00 $ 50,290,200.00 $ 27,247,422.00 Employees' 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%) $ 268,348.00 $ 198,015.00 $ 138,078.00 Pension 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. - 34 - MADISON COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2017 EXHIBIT "I" DEFINED CONTRIBUTION PLAN The Madison County Board of Education participates in an employer paid 403(b) annuity plan for the group of employees covered under the Public School 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 for this group. The Board has selected Horace Mann, Inc. as the provider of this plan. For each employee covered under PSERS, the Board contributes to the plan, an amount equal to the employees' contribution up to an amount of $25.00 per pay period. The employee becomes vested in the plan with 3 years of experience. Employees who had already achieved 3 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 3 years of service to Madison County Board of Education. If an employee terminates employment prior to achieving 3 years of service, funds paid on behalf of the non-vested employee are credited back to the Board. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Fiscal Year Percentage Contributed Required Contribution 2017 2016 2015 100% $ 100% $ 100% $ 9,975.00 11,425.00 14,225.00 - 35 - (This page left intentionally blank) MADISON 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 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 0.243759% $ 0.248691% $ 0.244083% $ 50,290,200.00 $ 37,860,735.00 $ 30,836,668.00 $ 493,290.00 $ 371,161.00 $ 322,791.00 $ Total School District's covered payroll School District's proportionate share of the net pension liability as a percentage of its covered payroll Plan fiduciary net position as a percentage of the total pension liability 50,783,490.00 $ 27,006,458.77 38,231,896.00 $ 26,509,053.95 31,159,459.00 $ 25,174,644.54 186.22% 142.82% 122.49% 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. - 37 - MADISON 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 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 payroll 0.004186% $ 198,015.00 $ 0.002650% $ 107,362.00 $ 0.002578% $ 96,691.00 $ 97,338.00 60,496.35 60,249.18 School District's proportionate share of the net pension liability as a percentage of covered payroll 203.43% 177.47% 160.49% Plan fiduciary net position as a percentage of total net pension liability 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. - 38 - MADISON 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 2017 2016 2015 School District's proportion of the net pension liability School District's proportionate share of the net pension liability 0.00% $ - 0.00% $ - 0.00% $ - State of Georgia's proportionate share of the net pension liability associated with the School District $ 421,739.00 $ $ 312,089.00 $ $ 290,547.00 $ Total School District's covered payroll School District's proportionate share of the net pension liability as a percentage of its covered payroll Plan fiduciary net position as a percentage of the total pension liability 421,739.00 $ 312,089.00 $ 290,547.00 $ 785,453.18 921,333.18 911,014.07 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. - 39 - MADISON COUNTY BOARD OF EDUCATION REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF CONTRIBUTIONS TEACHERS RETIREMENT SYSTEM OF GEORGIA FOR THE YEAR ENDED JUNE 30 SCHEDULE "4" Year Ended 2017 2016 2015 2014 2013 2012 2011 2010 2009 Contractually required contribution (1) Contributions in relation to the contractually required contribution (1) Contribution deficiency (excess) $ 3,929,398.30 $ 3,929,398.30 $ - $ 3,816,393.00 $ 3,816,393.00 $ - $ 3,452,094.39 $ 3,452,094.39 $ - $ 3,091,446.35 $ 3,091,446.35 $ - $ 2,946,510.09 $ 2,946,510.09 $ - $ 2,631,750.52 $ 2,631,750.52 $ - $ 2,650,270.70 $ 2,650,270.70 $ - $ 2,492,597.02 $ 2,492,597.02 $ - $ 2,419,147.54 $ 2,419,147.54 $ - School District's covered payroll $ 27,748,803.90 $ 27,006,458.77 $ 26,509,053.95 $ 25,174,644.54 $ 25,823,927.17 $ 25,592,822.72 $ 25,780,843.39 $ 25,590,767.86 $ 26,068,393.83 Contribution as a percentage of covered payroll 14.16% 14.13% 13.02% 12.28% 11.41% 10.28% 10.28% 9.74% 9.28% (1) For years 2014 and earlier, the contribution amount includes payments made on-behalf of School District employees by the State of Georgia. This schedule is intended to show information for 10 years. Due to the School District's retention policy, the School District is only able to display 9 years of information. - 40 - MADISON COUNTY BOARD OF EDUCATION REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF CONTRIBUTIONS EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA FOR THE YEAR ENDED JUNE 30 SCHEDULE "5" Year Ended 2017 2016 2015 2014 2013 2012 2011 2010 2009 Contractually required contribution Contributions in relation to the contractually required contribution Contribution deficiency (excess) $ 17,482.70 $ 17,482.70 $ - $ 24,062.00 $ 24,062.00 $ - $ 13,285.00 $ 13,285.00 $ - $ 11,122.25 $ 11,122.25 $ - $ 8,929.88 $ 8,929.88 $ - $ 5,483.46 $ 5,483.46 $ - $ 4,884.49 $ 4,884.49 $ - $ 4,612.57 $ 4,612.57 $ - $ 4,463.14 $ 4,463.14 $ - School District's covered payroll $ 70,467.42 $ 97,338.00 $ 60,496.35 $ 60,249.18 $ 59,932.89 $ 47,145.31 $ 46,916.43 $ 44,313.16 $ 42,872.24 Contribution as a percentage of covered payroll 24.81% 24.72% 21.96% 18.46% 14.90% 11.63% 10.41% 10.41% 10.41% This schedule is intended to show information for 10 years. Due to the School District's retention policy, the School District is only able to display 9 years of information. - 41 - MADISON COUNTY BOARD OF EDUCATION STATEMENT OF NET POSITION JUNE 30, 2017 SCHEDULE "6" 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, 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. 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). - 42 - MADISON COUNTY BOARD OF EDUCATION GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL YEAR ENDED JUNE 30, 2017 SCHEDULE "7" REVENUES Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous Total Revenues EXPENDITURES Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Enterprise Operations Food Services Operation Capital Outlay Total Expenditures Excess of Revenues over (under) Expenditures OTHER FINANCING SOURCES (USES) Sale or Compensation for Loss of Fixed Assets Transfers Out Proceeds from Capital Lease Sale of Capital Assets Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balances - Beginning Adjustments NONAPPROPRIATED BUDGETS ORIGINAL (1) FINAL (1) ACTUAL AMOUNTS VARIANCE OVER/UNDER $ 11,321,720.00 $ 11,321,720.00 $ 10,988,156.08 $ 130,000.00 130,000.00 211,802.19 33,454,601.00 33,643,794.90 34,766,974.36 2,431,609.00 2,431,609.00 5,604,074.69 604,000.00 604,000.00 1,463,294.55 350.00 350.00 20,693.42 471,505.00 492,505.00 1,554,503.16 48,413,785.00 48,623,978.90 54,609,498.45 (333,563.92) 81,802.19 1,123,179.46 3,172,465.69 859,294.55 20,343.42 1,061,998.16 5,985,519.55 31,805,384.05 2,770,753.24 887,042.38 937,220.59 797,638.87 2,971,365.98 661,756.21 3,173,818.01 1,934,586.22 201,184.90 403,930.00 3,112,959.00 59,002.50 49,716,641.95 (1,302,856.95) 33,689,500.85 3,031,709.53 1,214,890.18 915,696.55 877,563.87 2,980,336.01 661,756.21 3,178,818.01 2,181,550.42 201,184.90 480,930.00 3,112,959.00 59,002.50 52,585,898.03 (3,961,919.13) 33,699,548.87 2,729,951.04 1,079,129.87 917,477.74 823,801.36 2,907,089.53 618,282.07 3,008,697.67 2,506,636.71 205,793.78 578,406.39 405,129.03 3,205,472.07 45,970.00 52,731,386.13 1,878,112.32 275,000.00 (1,556,111.00) - (1,281,111.00) (2,583,967.95) 4,860,261.32 (4,728.37) 275,000.00 (1,556,111.00) - (1,281,111.00) (5,243,030.13) 4,859,473.84 1,048.61 (1,789,880.84) 279,899.79 13,133.04 (1,496,848.01) 381,264.31 5,062,903.82 - (10,048.02) 301,758.49 135,760.31 (1,781.19) 53,762.51 73,246.48 43,474.14 170,120.34 (325,086.29) (4,608.88) (97,476.39) (405,129.03) (92,513.07) 13,032.50 (145,488.10) 5,840,031.45 (275,000.00) (233,769.84) 279,899.79 13,133.04 (215,737.01) 5,624,294.44 203,429.98 (1,048.61) Fund Balances - Ending $ 2,271,565.00 $ (382,507.68) $ 5,444,168.13 $ 5,826,675.81 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 budgeted revenues or expenditures of the various principal accounts. The actual revenues and expenditures of the various principal accounts were $1,045,003.00 and $934,404.13, respectively. The accompanying schedule of revenues, expenditures and changes in fund balances budget and actual is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the fund financial statements. See notes to the basic financial statements. - 43 - MADISON COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30, 2017 SCHEDULE "8" 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 Child Nutrition Discretionary Grants Limited Availability Total U. S. Department of Agriculture Education, U. S. Department of Special Education Cluster Pass-Through From Georgia Department of Education Special Education Grants to States Grants to States Preschool Grants Preschool Grants Total Special Education Cluster Other Programs Pass-Through From Georgia Department of Education Career and Technical Education - Basic Grants to States Career and Technical Education - Basic Grants to States Education for Homeless Children and Youth Education for Homeless Children and Youth English Language Acquisition Grants English Language Acquisition Grants Improving Teacher Quality State Grants Improving Teacher Quality State Grants Migrant Education - State Grant Program Migrant Education - State Grant Program Rural Education Rural Education Title I Grants to Local Educational Agencies Title I Grants to Local Educational Agencies Total Other Programs Total U. S. Department of Education CFDA NUMBER PASSTHROUGH ENTITY ID NUMBER EXPENDITURES IN PERIOD 10.553 10.555 17175GA324N1099 $ 17175GA324N1099 643,165.44 2,476,019.75 3,119,185.19 10.579 15155GA350N8103 45,000.00 3,164,185.19 84.027 84.027 84.173 84.173 H027A150073 H027A160073 H173A150081 H173A160081 84.048 84.048 84.196 84.196 84.365 84.365 84.367 84.367 84.011 84.011 84.358 84.358 84.010 84.010 V048A150010 V048A160010 S196A150011 S196A160011 S365A150010 S365A160010 S367A150001 S367A160001 S011A150011 S011A160011 S358B150010 S358B160010 S010A150010 S010A160010 283,825.14 809,047.33 24,070.62 34,168.31 1,151,111.40 2,807.00 37,140.32 4,859.31 30,279.29 10,317.10 23,388.81 72,816.82 94,586.63 20,063.95 21,003.80 30,031.42 63,939.23 192,645.13 934,411.77 1,538,290.58 2,689,401.98 Total Expenditures of Federal Awards $ 5,853,587.17 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 Madison County Board of Education (the "Board") under programs of the federal government for the year ended June 30, 2017. The information in this Schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). 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 assets 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 the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as 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. - 44 - MADISON COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2017 AGENCY/FUNDING GRANTS Bright From the Start: Georgia Department of Early Care and Learning Pre-Kindergarten Program Education, Georgia Department of Quality Basic Education Direct Instructional Cost Kindergarten Program Kindergarten Program - Early Intervention Program Primary Grades (1-3) Program Primary Grades - Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades - Early Intervention (4-5) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities 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 Mid-term Adjustment Hold-Harmless Amended Formula Adjustment Charter System Adjustment Categorical Grants Pupil Transportation Regular Nursing Services Vocational Supervisors Education Equalization Funding Grant Other State Programs Food Services Math and Science Supplements Preschool Disability Services Pupil Transportation - State Bonds Teacher of the Year Teachers Retirement Vocational Education Office of the State Treasurer Public School Employees Retirement CONTRACT Human Resources, Georgia Department of Family Connection SCHEDULE "9" GOVERNMENTAL FUND TYPE GENERAL FUND $ 438,477.89 1,124,052.00 725,320.00 3,582,727.00 1,160,171.00 1,525,977.00 904,156.00 3,219,926.00 2,439,103.00 893,224.00 5,766,710.00 1,454,541.00 258,260.00 217,736.00 348,248.00 584,129.00 166,196.00 105,957.87 1,907.00 726,296.00 1,166,651.00 1,302,267.00 (95,692.00) (318,433.00) 440,531.00 745,036.00 92,405.00 13,306.00 5,175,820.00 74,336.00 46,477.80 189,754.69 1,075.90 507.25 30,326.66 142,984.12 69,158.00 47,348.18 $ 34,766,974.36 See notes to the basic financial statements. - 45 - (This page left intentionally blank) MADISON COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS YEAR ENDED JUNE 30, 2017 SCHEDULE "10" PROJECT Acquiring, construction, equipping and furnishing of new school buildings and facilities, including, but not limited to, a new middle school; the addition, renovation, repair and improvement to existing school buildings and facilities, including but not limited to, the existing middle school, other schools, transportation facilities and administrative offices; the acquisition and purchase of system-wide technology and safety equipment, including, but not limited to, computer hardware and software and security and safety equipment; the acquisition and purchase of school vehicles, including, but not limited to, school buses and maintenance vehicles; and the acquisition and purchase of any property necessary or desirable therefore, both real and personal; capitalized interest on the Bonds through and including August 1, 2008; the cost of issuing the Bonds; paying a portion of the principal and interest on the Bonds; and a portion of the costs of the Projects. Acquiring, constructing and equipping new schools and facilities, including physical education/athletic facilities; adding to, renovating, repairing, improving, and equipping existing school buildings and School System facilities (including physical education/athletic facilities and parking lots), including but not limited to construction and renovation of facilities at Madison County High School and Comer Elementary School; acquiring miscellaneous new equipment, fixtures and furnishings for the School System, including technology equipment and safety and security equipment; acquiring school buses and transportation and maintenance equipment; acquiring textbooks for the School System; acquiring a portion of a psychoeducational facility; paying a portion of the principal and interest due on the School System's Series 2006 G.O. Bonds, the maximum amount not to exceed $3,718,537.00; paying a portion of the debt service on the General Obligation Debt of the School District hereafter described, the maximum amount of such payments not to exceed $10,000,000.00; paying 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 ESTIMATED COMPLETION DATE $ 10,000,000.00 $ 23,094,137.00 $ 187,263.22 $ 21,476,650.99 $ - $ - 6/30/2020 14,300,000.00 31,800,807.00 21,826.00 29,806,759.43 - - 6/30/2030 $ 24,300,000.00 $ 54,894,944.00 $ 209,089.22 $ 51,283,410.42 $ - $ - (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 Madison 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 expense to provide advance funding for the above projects as follows: Prior Years $ 5,407,908.04 Current Year 754,083.84 Total $ 6,161,991.88 See notes to the basic financial statements. - 47 - 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 16, 2018 The Honorable Nathan Deal, 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 Madison 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 Madison County Board of Education (School District), as of and for the year ended June 30, 2017, 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 16, 2018. 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 Madison County Board of Education'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 Madison County Board of Education'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 16, 2018 The Honorable Nathan Deal, 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 Madison 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 Madison County Board of Education (School District) compliance with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on each of its major federal programs for the year ended June 30, 2017. 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, 2017. 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 MADISON COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2017 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 MADISON COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2017 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: $750,000.00 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.