MARION COUNTY BOARD OF EDUCATION ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2015 MARION COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS - SECTION I FINANCIAL INDEPENDENT AUDITOR'S REPORT REQUIRED SUPPLEMENTARY INFORMATION MANAGEMENT'S DISCUSSION AND ANALYSIS EXHIBITS BASIC FINANCIAL STATEMENTS DISTRICT-WIDE FINANCIAL STATEMENTS A STATEMENT OF NET POSITION B STATEMENT OF ACTIVITIES FUND FINANCIAL STATEMENTS C BALANCE SHEET GOVERNMENTAL FUNDS D RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET POSITION E STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS F RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES G STATEMENT OF FIDUCIARY NET POSITION FIDUCIARY FUND H NOTES TO THE BASIC FINANCIAL STATEMENTS SCHEDULES REQUIRED SUPPLEMENTARY INFORMATION 1 SCHEDULE OF PROPORTIONATE SHARE OF THE NET PENSION LIABILITY TEACHERS' RETIREMENT SYSTEM OF GEORGIA 2 SCHEDULE OF CONTRIBUTIONS TEACHERS' RETIREMENT SYSTEM OF GEORGIA 3 NOTES TO THE REQUIRED SUPPLEMENTARY INFORMATION 4 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL GENERAL FUND Page i 1 2 3 4 5 6 7 8 34 35 36 37 (This page left intentionally blank) MARION COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS - SECTION I FINANCIAL SCHEDULES SUPPLEMENTARY INFORMATION 5 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS 6 SCHEDULE OF STATE REVENUE 7 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS 8 ALLOTMENTS AND EXPENDITURES GENERAL FUND - QUALITY BASIC EDUCATION PROGRAMS (QBE) BY PROGRAM Page 38 39 40 41 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 IN ACCORDANCE WITH OMB CIRCULAR A-133 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 (This page left intentionally blank) SECTION I FINANCIAL (This page left intentionally blank) 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 24, 2016 Honorable Nathan Deal, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Marion 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 Marion County Board of Education, as of and for the year ended June 30, 2015, and the related notes to the financial statements (Exhibits A through H), which collectively comprise the Board'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 2015ARL-11 (This page left intentionally blank) 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 basic financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the Marion County Board of Education, as of June 30, 2015, and the respective changes in financial position thereof 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 2015, the Marion County Board of Education adopted new accounting guidance, Governmental Accounting Standards Board (GASB) Statement No. 68, Accounting and Financial Reporting for Pensions an amendment of GASB Statement No. 27 and GASB Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date an amendment of GASB Statement No. 68. The School District restated beginning Net Position for the cumulative effect of these accounting changes. Our opinion is not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the Management's Discussion and Analysis, Schedule of Proportionate Share of the Net Pension Liability, Schedule of Contributions to Retirement Systems, the 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 viii and pages 34 through 37 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 regarding 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 Marion County Board of Education's basic financial statements. The accompanying supplementary information, consisting of Schedules 5 through 8, is presented for the 2015ARL-11 (This page left intentionally blank) purposes of additional analysis and is not a required part of the basic financial statements. The Schedule of Expenditures of Federal Awards is presented for purposes of additional analysis as required by U. S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, and is 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 as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated March 24, 2016, on our consideration of the Marion County Board of Education's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Marion County Board of Education'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, GSG:as 2015ARL-11 Greg S. Griffin State Auditor (This page left intentionally blank) MARION COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 The discussion and analysis of the Marion County Board of Education's (the "School District") financial performance provides an overall review of the School District's financial activities for the fiscal year ended June 30, 2015. The intent of this discussion and analysis is to look at the School District's financial performance as a whole; readers should also review the financial statements and the notes to the basic financial statements to enhance their understanding of the School District's financial performance. Financial Highlights Key financial highlights for fiscal year 2015 are as follows: The School District's financial status remained stable during fiscal year 2015. In total, net position decreased $290,676, excluding restatements, which represents a decrease from fiscal year 2014. This total decrease was due to governmental activities since the School District has no businesstype activities. General revenues accounted for $4.7 million or 32.9 percent of all revenues. Program specific revenues in the form of charges for services and sales, grants and contributions accounted for $9.6 million or 67.1 percent of total revenues. Total revenues were $14.3 million. The School District had $14.6 million in expenses related to governmental activities; these expenses were offset by $9.6 million in program specific charges for services, grants or contributions. General revenues and taxes of $4.7 million also provided for these programs. Among major funds, the General Fund had $12.8 million in revenues and $13.3 million in expenditures. The General Fund's fund balance decreased from $3.2 million to $2.6 million. Using the Basic Financial Statements This annual report consists of a series of financial statements and notes to those statements. These statements are organized so the reader can understand Marion County Board of Education as a financial whole, or as an entire operating entity. The Statement of Net Position and Statement of Activities provide information about the activities of the whole School District, presenting both an aggregate view of the School District's finances and a long-term view of those finances. The fund financial statements provide the next level of detail. For governmental funds, these statements tell how services were financed in the short-term as well as what remains for future spending. The fund financial statements also look at the School District's most significant funds with all other non-major funds, if any, presented in total in one column. In the case of the Marion County Board of Education, the general fund is by far the most significant fund. i MARION COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 Reporting the School District as a Whole Statement of Net Position and Statement of Activities While these documents contain the large number of funds used by the School District to provide programs and activities, the view of the School District as a whole looks at all financial transactions and asks the question, "How did we do financially during fiscal year 2015?" The Statement of Net Position and the Statement of Activities answer this question. These statements include all assets and all liabilities using 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. These two statements report the School District's net position and changes in those assets. This change in net position is important because it tells the reader whether, 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 result of many factors, some financial, some not. Non-financial factors include the School District's property tax base, facility conditions, required educational programs and other factors. In the Statement of Net Position and the Statement of Activities, the School District has one distinct type of activity: Governmental Activities - All of the School District's programs and services are reported here including instruction, support services, operation and maintenance of plant, pupil transportation, food service, after school program, school activity accounts and various others. Reporting the School District's Most Significant Funds Fund Financial Statements Fund financial statements provide detailed information about the School District's major funds. The School District uses many funds to account for a multitude of financial transactions. However, these fund financial statements focus on the School District's most significant funds. The School District's major governmental funds are the General Fund, the District-wide Capital Projects Fund and the Debt Service Fund. Governmental Funds All 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 an accounting method called modified accrual accounting, which measures cash and all other financial assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term view of the School District's general government operations and the basic services it provides. Governmental fund information helps you determine whether there are more or fewer financial resources that can be spent in the near future to finance educational programs. The relationship (or differences) between governmental activities (reported in the Statement of Net Position and the Statement of Activities) and governmental funds is reconciled in the financial statements. ii MARION COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 Fiduciary Funds The School District is the trustee, or fiduciary, for assets that belong to others, such as school clubs and organizations within the school activity 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 District-wide financial statements because it cannot use these assets to finance its operations. The School District as a Whole The perspective of the Statement of Net Position is of the School District as a whole. Table 1 provides a summary of the School District's net position for fiscal year 2015, compared to fiscal year 2014. Table 1 Net Position Governmental Activities Fiscal Fiscal Year 2015 Year 2014 Current and Other Assets Capital Assets $ 6,396,755 $ 7,394,713 33,343,205 32,947,583 Total Assets 39,739,960 40,342,296 Deferred Outflows of Resources - Pensions 974,955 - Long-Term Liabilities Outstanding Other Liabilities 24,299,903 1,724,024 15,694,640 1,718,544 Total Liabilities 26,023,927 17,413,184 Deferred Inflows of Resources - Pensions 3,002,062 - Net Position: Net Investment in Capital Assets Restricted Unrestricted 17,654,545 2,230,510 (8,196,129) 17,252,943 2,715,468 2,960,701 Total Net Position $ 11,688,926 $ 22,929,112 Note: Amounts in Table 1 above for 2014 do not reflect the restatement of net position as described in Note 15. After the restatement, ending net position as of June 30, 2014 was decreased by $10,949,510 to $11,979,602. Table 2 shows the changes in net position for fiscal year 2015 compared to fiscal year 2014. The total net position decreased $290,676 for fiscal year 2015, compared to a $305,798 increase for fiscal year 2014. iii MARION COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 Table 2 Change in Net Position Re venues Program Revenues: Charges for Services Operating Grants and Contributions Capital Grants and Contributions T otal Program Revenues General Revenues: T axes Property T axes For Maintenance and Operations For Debt Service Sales T axes Other Taxes Grants and Contributions not Restricted to Specific Programs Investment Earnings Miscellaneous T otal General Revenues T otal Revenues Program Expenses: In st ruct ion Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Services Maintenance and Operations Student T ransportation Central Support Services Other Support Services Operations of Noninstructional Services School Nutrition Enterprise Operations Interest on Long-T erm Debt T otal Expenses Deficiency before Extraordinary Item Extraordinary Item Increase (Decrease) in Net Position Net Position, Beginning of Year Net Position, End of Year Governmental Activities Fiscal Year Fiscal Year 2015 2014 $ 344,379 $ 391,162 8,443,210 7,919,287 795,194 551,711 9,582,783 8,862,160 3,078,316 361,525 430,785 45,343 425,273 6,008 352,138 4,699,388 14,282,171 3,556,126 353,445 414,950 60,960 383,887 6,205 308,388 5,083,961 13,946,121 7,586,849 7,399,687 370,559 655,710 232,234 411,344 974,154 166,573 1,231,093 894,762 62,385 67,625 396,712 781,476 231,649 518,239 944,324 169,404 1,405,940 991,768 89,300 971,336 921,583 126,124 117,973 822,099 822,075 14,572,847 14,790,130 (290,676) (844,009) - 1,149,807 (290,676) 305,798 11,979,602 22,623,314 $ 11,688,926 $ 22,929,112 iv MARION COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 Note: Amounts in Table 2 for 2014 do not reflect the restatement of net position as described in Note 15. After the restatement, ending net position as of June 30, 2014 was decreased by $10,949,510 to $11,979,602. Governmental Activities Instruction comprises 52.1 percent of governmental program expenses. The Statement of Activities shows the cost of program services and the charges for services and grants offsetting those services. Table 3 shows, for governmental activities, the total cost of services and the net cost of services. That is, it identifies the cost of these services supported by tax revenue and unrestricted state entitlements. Comparative data from fiscal year 2014 is also presented. Table 3 Gove rnme ntal Activities T otal Cost of Services Fiscal Fiscal Year 2015 Year 2014 Net Cost of Services Fiscal Fiscal Year 2015 Year 2014 Inst ruct ion $ Support Services: Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Services Maintenance and Operations Student T ransportation Central Support Services Other Support Services School Nutrition Enterprise Operations Interest on Long-T erm Debt 7,586,849 $ 370,559 655,710 232,234 411,344 974,154 166,573 1,231,093 894,762 62,385 67,625 971,336 126,124 822,099 7,399,687 $ 396,712 781,476 231,649 518,239 944,324 169,404 1,405,940 991,768 89,300 921,583 117,973 822,075 1,510,664 $ 257,895 521,322 63,275 18,280 620,206 165,749 766,122 445,626 60,516 61,809 28,476 126,124 344,000 2,019,225 293,164 532,810 64,672 135,780 585,577 167,643 951,362 542,196 79,506 90,478 117,973 347,584 T otal Expenses $ 14,572,847 $ 14,790,130 $ 4,990,064 $ 5,927,970 Although program revenues make up a majority of the revenues, the School District is still dependent upon tax revenues for governmental activities. Over 19.9 percent of instruction activities are supported through taxes and other general revenues; for all governmental activities general revenue support is 34.2 percent. v MARION COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 The School District's Funds The School District's governmental funds are accounted for using the modified accrual basis of accounting. Total governmental funds had revenues and other financing sources of $14.0 million and expenditures and other financing uses of $15.0 million. There was a decrease in fund balance of approximately $931 thousand in the District-wide Capital Projects Fund and the fund balance of the General Fund had a decrease of approximately $544 thousand due to expenditures for the year being more than the revenue. This is a result of years of budget cuts by State and Federal sources and the steady increase of operation costs. Also, the School District did not receive its 2014 tax reimbursement under the Forest Land Protection Act. There was an increase in fund balance of approximately $460 thousand in the Debt Service Fund. This was because SPLOST III funds are being accumulated for sinking fund payments that began in January 2015. General Fund Budgeting 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 2015, the School District amended its General Fund budget as needed. The School District uses function-based budgeting. The budgeting systems are designed to tightly control total function budgets but provide flexibility for site management. For the General Fund, budgeted revenues increased from $12.16 million to $12.50 million while budgeted expenditures increased from $12.86 million to $12.99 million. Budgeted revenues increased due to the midterm adjustment of the QBE allotment. Budgeted expenditures increased due to increases in employee benefits (property liability and workers comp), maintenance and operations of buildings, and Enterprise Operations (school activity accounts) were not budgeted. The School District is compliant with the state's 65% rule for Minimum Direct Classroom Expenditures through its graduation rate and with a 2% growth in Minimum Direct Classroom Expenditures over 2014. The State's graduation rate is 78.8%. The School District's graduation rate is 90.6%. Capital Assets and Debt Administration Capital Assets At the end of fiscal year 2015, the School District had $33.34 million invested in capital assets, all in governmental activities. Table 4 indicates balances at June 30, 2015. Capital asset comparisons to fiscal year 2014 are also included. vi MARION COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 Table 4 Capital Assets (Net of Depreciation) Governmental Activities Fis cal Fis cal Year 2015 Year 2014 Land $ 581,159 $ Construction In Progress 617,554 Land Improvements 1,061,946 Buildings and Improvements 29,928,340 Equipment 1,154,206 581,159 324,476 890,167 30,033,008 1,118,773 Total $ 33,343,205 $ 32,947,583 Debt Long-Term Liabilities At fiscal year ended June 30, 2015, the School District had $15.69 million in long-term liabilities outstanding. Table 5 summarizes the School District's liabilities as compared to the prior fiscal year. Table 5 Long-Term Liabilities Balance July 1, 2014 Addit io n s Reduct io ns Balance June 30, 2015 Due Within One Year Governmental Activities: Bonds Payable Capital Leases Governmental Activities: Long-T erm Liabilities 15,310,000 $ 384,640 $ 15,694,640 $ - $ 15,310,000 - $ (5,980) 378,660 $ - $ (5,980) $ 15,688,660 $ 5,615 5,615 Current Issues The Marion County Board of Education's current operating millage rate is 14.546 mills. The bond millage rate is 1.690 mills. Management and the Board of Education hope to hold this level for a few years as to not place a hardship on the property owners in Marion County. SPLOST revenues and school bond ad valorem taxes will be used to service debt for the 2010B and 2010C bonds along with Federal subsidy payments. In June 2013, a fire destroyed approximately 17% of the former middle school facility on Burkhalter Avenue. A portion of the insurance settlement was used to add 1500 square feet to the elementary school cafeteria and to restore the auditorium and some classrooms at our Burkhalter Avenue Campus. Marion County has a private school that will start classes for the first time in January 2016. We do not anticipate this to affect our enrollment. vii MARION COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 Subsequent to year end, the School District has entered into an agreement for the lease of two buses and renewed its existing copier leases. 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 information, contact Cathy Wiggins, Director of Finance, 1697 Pineville Road, Buena Vista, Georgia 31803. You may also email your questions to cwiggins@marion.k12.ga.us viii MARION COUNTY BOARD OF EDUCATION (This page left intentionally blank) MARION COUNTY BOARD OF EDUCATION STATEMENT OF NET POSITION JUNE 30, 2015 ASSETS Cash and cash equivalents Investments Receivables, net of allowances: Taxes Intergovernmental: State Federal Inventory Capital assets (nondepreciable) Capital assets (net of accumulated depreciation) Total assets DEFERRED OUTFLOWS OF RESOURCES Related to pension plans LIABILITIES Accounts payable Salaries and benefits payable Contracts payable Accrued interest payable Retainage payable Bonds payable due in more than one year Capital leases due within one year Capital leases due in more than one year Net pension liability, due in more than one year Total liabilities DEFERRED INFLOWS OF RESOURCES Related to pension plans NET POSITION Net investment in capital assets Restricted for: Continuation of federal programs Capital projects Debt service Unrestricted Total net position EXHIBIT 'A" Governmental Activities $ 3,239,299 1,793,916 256,577 804,858 284,578 17,527 1,198,713 32,144,492 39,739,960 974,955 78,473 1,261,225 29,156 338,563 16,607 15,310,000 5,615 373,045 8,611,243 26,023,927 3,002,062 17,654,545 265,439 297,777 1,667,294 (8,196,129) $ 11,688,926 The accompanying notes are an integral part of these financial statements. - 1 - MARION COUNTY BOARD OF EDUCATION STATEMENT OF ACTIVITIES FOR THE FISCAL YEAR ENDED JUNE 30, 2015 EXHIBIT "B" Functions/Programs Governmental activities: Instruction Support services: Pupil services Improvement of instructional services Educational media services General administration School administration Business administration Maintenance and operation of plant Student transportation services Central support services Other support services Enterprise operations Food services operations Interest on long-term debt Total governmental activities Expenses Charges for Services Program Revenues Operating Grants and Contributions Capital Grants and Contributions Net (Expense) Revenue and Changes in Net Position Governmental Activities $ 7,586,849 $ 193,619 $ 5,642,691 $ 239,875 $ (1,510,664) 370,559 2,698 109,966 - (257,895) 655,710 232,234 411,344 974,154 166,573 1,231,093 894,762 62,385 67,625 126,124 971,336 822,099 14,572,847 42,338 105,724 344,379 134,388 168,959 393,064 353,948 824 422,633 371,916 1,869 5,816 837,136 8,443,210 77,220 478,099 795,194 (521,322) (63,275) (18,280) (620,206) (165,749) (766,122) (445,626) (60,516) (61,809) (126,124) (28,476) (344,000) (4,990,064) General revenues: Taxes: Property taxes, levied for maintenance and operations Property taxes, levied for debt service Sales taxes, for debt service Intangible taxes Transfer taxes Railroad equipment tax Grants and contributions not restricted to specific programs Unrestricted investment earnings Miscellaneous Total general revenues Change in net position Net position, beginning of year, as restated Net position, end of year 3,078,316 361,525 430,785 20,011 12,286 13,046 425,273 6,008 352,138 4,699,388 (290,676) 11,979,602 $ 11,688,926 The accompanying notes are an integral part of these financial statements. - 2 - MARION COUNTY BOARD OF EDUCATION BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2015 EXHIBIT "C" ASSETS Cash and cash equivalents Investments Receivables net of allowances: Taxes Intergovernmental: State Federal Inventory Total assets LIABILITIES, DEFERRED INFLOWS, AND FUND BALANCES LIABILITIES Accounts payable Salaries and benefits payable Contracts payable Retainage Payable Total liabilities DEFERRED INFLOWS Unavailable revenue - property taxes FUND BALANCES Nonspendable: inventory Restricted: Federal programs Capital projects Debt service Assigned: Student activities Subsequent years' budget Unassigned Total fund balances Total liabilities, deferred inflows, and fund balances General District - Wide Capital Projects $ 2,017,567 $ 694,938 362,726 $ - 200,378 - 804,858 284,578 17,527 $ 4,019,846 $ - 362,726 $ Debt Service 859,006 1,098,978 Total Governmental Funds $ 3,239,299 1,793,916 56,199 256,577 - 2,014,183 $ 804,858 284,578 17,527 6,396,755 $ 59,287 $ 1,261,225 - - 1,320,512 60,529 60,529 17,527 247,912 - 131,236 271,613 1,970,517 2,638,805 $ 4,019,846 $ 19,186 $ - 29,156 16,607 64,949 - - 297,777 - - 297,777 - $ - 7,101 7,101 - 2,007,082 - 2,007,082 362,726 $ 2,014,183 $ 78,473 1,261,225 29,156 16,607 1,385,461 67,630 67,630 17,527 247,912 297,777 2,007,082 131,236 271,613 1,970,517 4,943,664 6,396,755 The accompanying notes are an integral part of these financial statements. - 3 - MARION COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET POSITION JUNE 30, 2015 EXHIBIT "D" Total fund balances - governmental funds $ Amounts reported for governmental activities in the statement of net position are different because: Capital assets used in governmental activities are not financial resources and are not reported in the funds. Cost 40,355,857 Less accumulated depreciation (7,012,652) Other long-term assets are not available to pay for current-period expenditures and are deferred in the funds. Property taxes Long-term liabilities are not due and payable in the current period and, therefore, are not reported in the funds. Bonds (15,310,000) Capital leases (378,660) Net pension liability (8,611,243) Deferred outflows - pensions 974,955 Deferred inflows - pensions (3,002,062) Accrued interest (338,563) Net position of governmental activities $ 4,943,664 33,343,205 67,630 (26,665,573) 11,688,926 The accompanying notes are an integral part of these financial statements. - 4 - MARION COUNTY BOARD OF EDUCATION STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 EXHIBIT "E" REVENUES Property taxes Sales taxes Other 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 operations Capital outlay Debt service: Principal retirement Interest and fees Total expenditures Net change in fund balances FUND BALANCES, beginning of year FUND BALANCES, end of year General District - Wide Capital Projects Debt Service Total Governmental Funds $ 3,068,511 $ 28,935 13,046 7,079,517 1,877,482 344,378 5,928 352,138 12,769,935 - $ 360,300 $ - 434,146 - - - - - 478,099 - - - 81 - - - 1,272,626 3,428,811 463,081 13,046 7,079,517 2,355,581 344,378 6,009 352,138 14,042,561 7,139,216 381,325 652,800 239,328 408,845 969,852 172,480 1,148,070 964,288 64,520 67,625 126,124 963,597 - 5,980 9,548 13,313,598 (543,663) 3,182,468 $ 2,638,805 $ 17,045 - - - 19,930 - - - - - - - - - 319,448 - - - 1,885 - - - - - - - 572,573 - 930,881 812,551 812,551 (930,881) 460,075 1,228,658 1,547,007 297,777 $ 2,007,082 $ 7,156,261 381,325 672,730 239,328 408,845 969,852 172,480 1,467,518 964,288 66,405 67,625 126,124 963,597 572,573 5,980 822,099 15,057,030 (1,014,469) 5,958,133 4,943,664 The accompanying notes are an integral part of these financial statements. - 5 - MARION COUNTY BOARD OF EDUCATION EXHIBIT "F" RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES FOR THE FISCAL YEAR ENDED JUNE 30, 2015 Amounts reported for governmental activities in the statement of activities are different because: Net change in fund balances - total governmental funds $ (1,014,469) Governmental funds report capital outlays as expenditures. However, in the statement of activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. The net effect of the amount by which capital outlay exceeded depreciation is to increase net position. Capital outlay Depreciation expense 1,036,003 (863,626) 172,377 Net effect of various miscellaneous transactions involving capital assets (sales, trade-ins, donations, etc.) is to increase net position. 223,245 Revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the funds. Property taxes Issuance of long-term debt provides current financial resources to governmental funds, while repayment of the principal of longterm debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net position. This amount is the net effect of these differences in the treatment of long-term debt and related items. Principal payments - capital leases Pension expense 5,980 311,160 11,031 317,140 $ (290,676) The accompanying notes are an integral part of these financial statements. - 6 - Cash Investments Total assets Funds held for others MARION COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET POSITION FIDUCIARY FUND JUNE 30, 2015 ASSETS LIABILITIES EXHIBIT "G" Agency Fund $ 5,735 31,145 $ 36,880 $ 36,880 The accompanying notes are an integral part of these financial statements - 7 - MARION COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2015 EXHIBIT "H" Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY Reporting Entity The Marion County Board of Education (School District) was established under the laws of the State of Georgia and operates under the guidance of a school board elected by the voters and a Superintendent appointed by the Board. The Board is organized as a separate legal entity and has the power to levy taxes and issue bonds. Its budget is not subject to approval by any other entity. Accordingly, the School District is a primary government and consists of all the organizations that compose its legal entity. Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION The School District's basic financial statements are collectively comprised of the District-wide financial statements, fund financial statements and notes to the basic financial statements of the Marion County Board of Education. District-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 Activities presents a comparison between direct expenses and program revenues for each function of the School District's governmental activities. Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Indirect expenses (expenses of the School District related to the administration and support of the School District's programs, such as office and maintenance personnel and accounting) are not allocated to programs. Program revenues include (a) charges paid by the recipients of goods or services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues. Fund Financial Statements The fund financial statements provide information about the School District's funds, including fiduciary funds. Eliminations have been made to minimize the double counting of internal activities. Separate statements for each category (governmental and fiduciary) are presented. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column. - 8 - MARION COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2015 EXHIBIT "H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Fund Financial Statements (Continued) The School District reports the following major governmental funds: The General Fund is the School District's primary operating fund. It accounts for and reports all financial resources of the School District, except those resources required to be accounted for in another fund. The District-wide Capital Projects Fund accounts for and reports financial resources including Special Purpose Local Option Sales Tax (SPLOST) and Bond Proceeds that are restricted, committed, or assigned to the expenditure of capital outlays, 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 (property and sales) legally restricted for the payment of general long-term principal, interest and paying agent's fees. The School District reports the following fiduciary fund type: Agency Funds account for assets held by the School District as an agent for various funds, governments or individuals. Basis of Accounting The basis of accounting determines when transactions are reported in the financial statements. The Districtwide governmental activities 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. - 9 - MARION COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2015 EXHIBIT "H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Basis of Accounting (Continued) 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 60 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 long-term debt, which are recognized as expenditures to the extent they have matured. Capital asset acquisitions are reported as expenditures in governmental funds. Proceeds of general long-term liabilities and acquisitions under capital leases are reported as other financing sources. The School District funds certain programs by a combination of specific cost-reimbursement grants, categorical grants, and general revenues. Thus, when program costs are incurred, there are both restricted and unrestricted net position available to finance the program. It is the School District's policy to first apply grant resources to such programs, followed by cost-reimbursement grants, then general revenues. The State of Georgia reimburses the School System for teachers' salaries and operating costs through the Quality Basic Education (QBE) Formula Earnings program. State of Georgia law defines the formula driven grant that determines the cost of an academic school year and the State of Georgia's share in this cost. Generally, teachers are contracted for the school year (July 1 June 30) and paid over a 12-month contract period, generally September 1 through August 31. In accordance with the requirements of the enabling legislation of the QBE program, the State of Georgia reimburses the School System over the same 12-month period in which teachers are paid, funding the academic school year expenditures. At June 30, the amount of teachers' salaries incurred but not paid until July and August of the subsequent year are accrued as the State of Georgia has only postponed the final payment of their share of the cost until the subsequent appropriations for cash management purposes. By June 30 of each year, the State of Georgia has a signed appropriation that includes this final amount, which represents the State of Georgia's intent to fund this final payment. Based on guidance in Government Accounting Standards Board (GASB) Statement No. 33, paragraph 74, the State of Georgia recognizes its QBE liability for the July and August salaries at June 30, and the School System recognizes the same QBE as a receivable and revenue, consistent with symmetrical recognition. New Accounting Pronouncements In fiscal year 2015, the School District adopted Governmental Accounting Standards Board (GASB) Statement No. 68, Accounting and Financial Reporting for Pensions. The provisions of this Statement establish accounting and financial reporting standards for pensions that are provided to the employees of state and local governmental employers through pension plans that are administered through trusts. Implementation of this statement requires a restatement to beginning net position. The adoption of this statement has a significant impact on the School District's financial statements. As discussed in Note 15 Change in Accounting Principle Prior Period Adjustment, the School District restated beginning net position for the cumulative effect of this accounting change. - 10 - MARION COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2015 EXHIBIT "H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) New Accounting Pronouncements (Continued) In fiscal year 2015, the School District adopted Governmental Accounting Standards Board (GASB) Statement No. 69, Government Combinations and Disposals of Government Operations. This Statement provides specific accounting and financial reporting guidance for combinations in the governmental environment. This statement also requires that disclosures be made by governments about combination arrangements in which they engage and for disposals of government operations. The School District did not have any activities of this type during the fiscal year and the adoption of this statement does not have a significant impact on the School District's financial statements. In fiscal year 2015, the School District adopted Governmental Accounting Standards Board (GASB) Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date - an amendment of GASB No. 68. The objective of this statement is to improve accounting and financial reporting by addressing an issue in Statement No. 68, Accounting and Financial Reporting for Pensions, concerning transition provisions related to certain pension contributions made to defined benefit pension plans prior to the implementation of the statement. This statement amends paragraph 137 of Statement No. 68, which limited recognition of pension-related deferred inflows of resources at the transition to circumstances in which it is practical to determine the amounts of all deferred outflows of resources and deferred inflows of resources related to pensions. The adoption of this statement has a significant impact on the School District's financial statements. As noted in Note 15 Change in Accounting Principle Prior Period Adjustment, the School District restated beginning Net Position for the cumulative effect of this accounting change. Cash and Cash Equivalents Composition of Deposits - Cash and cash equivalents consist of cash on hand, demand deposits and shortterm investments with original maturities of three months or less from the date of acquisition in authorized financial institutions. Official Code of Georgia Annotated 45-8-14 authorizes the School District to deposit its funds in one or more solvent banks, insured Federal savings and loan associations, or insured chartered building and loan associations. Investments Composition of Investments - Investments made by the School District in nonparticipating interestearning 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. Both participating interest-earning contracts and money market investments with a maturity at purchase greater than one year are reported at fair value. The Official Code of Georgia Annotated Section 36-83-4 authorizes the School District to invest its funds. 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. - 11 - MARION COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2015 EXHIBIT "H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Investments (Continued) Funds may be invested in the following: (1) Obligations issued by the State of Georgia or by other states, (2) Obligations issued by the United States government, (3) Obligations fully insured or guaranteed by the United States government or a United States government agency, (4) Obligations of any corporation of the United States government, (5) Prime bankers' acceptances, (6) The local government investment pool (Georgia Fund 1) administered by the State of Georgia, Office of the State Treasurer, (7) Repurchase agreements, and (8) Obligations of other political subdivisions of the State of Georgia. The School District does not have a formal policy regarding investment policies that address credit risks, custodial credit risks, concentration of credit risks, interest rate risks or foreign currency risks. 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. Property Taxes The Marion County Board of Commissioners fixed the property tax levy for the 2014 tax digest year (calendar year) on September 22, 2014 (levy date) based on property values as of January 1, 2014. Taxes were due on December 20, 2014 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2014 tax digest are reported as revenue in the governmental funds for fiscal year 2015. The Marion 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, 2015, for maintenance and operations and debt service, amounted to $2,881,267 and $347,233, respectively. - 12 - MARION COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2015 EXHIBIT "H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Property Taxes (Continued) Tax millage rates levied for the 2014 tax year (calendar year) for the Marion County Board of Education were as follows (a mill equals $1 per thousand dollars of assessed value): School Operations School Bonds Total 14.546 mills 1.690 mills 16.236 mills Additionally, Title Ad Valorem Tax revenues, at the fund reporting level, during the fiscal year ended June 30, 2015, for maintenance and operations and debt service, amounted to $187,244 and $13,067, respectively. Sales Taxes Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $430,785 and is to be used for capital outlay for educational purposes or debt service. This sales tax was authorized by local referendum and the sales tax must be reauthorized at least every five years. Inventories Food Inventories - On the basic financial statements, inventories of donated food commodities used in the preparation of meals are reported at their Federally assigned value and purchased foods inventories are reported at cost (first-in, first-out). The School District uses the consumption method to account for inventories whereby donated food commodities are recorded as an asset and as revenue when received, and expenses/expenditures are recorded as the inventory items are used. Purchased foods are recorded as an asset when purchased and expenses/expenditures are recorded as the inventory items are used. Capital Assets Capital assets purchased, including capital outlay costs, are recorded as expenditures in the fund financial statements at the time of purchase (including ancillary charges). On the District-wide financial statements, all purchased capital assets are valued 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 estimated fair market value on the date donated. Disposals are deleted at depreciated recorded cost. 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. Depreciation is computed using the straight-line method. The School District does not capitalize book collections or works of art. During the fiscal year under review, no events or changes in circumstances affecting a capital asset that may indicate impairment were known to the School District. - 13 - MARION COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2015 EXHIBIT "H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Capital Assets (Continued) Capitalization thresholds and estimated useful lives of capital assets reported in the District-wide statements are as follows: Capitalization Estimated Policy Useful Life Land Construction in Progress All N/A All N/A Land Improvements $ 5,000 15 to 80 Years Buildings and Improvements Equipment Intangible Assets 5,000 5,000 100,000 10 to 80 Years 5 to 14 Years 15 to 80 Years Depreciation is used to allocate the actual or estimated historical cost of all capital assets over estimated useful lives. Deferred Outflows / Inflows of Resources In addition to assets, the statement of financial position and/or balance sheet will sometimes report a separate section for deferred outflows of resources. This separate financial statement element represents a consumption of resources that applies to future period(s) and therefore will not be recognized as an outflow of resources (expense/expenditure) until then. Under the full accrual method of accounting, the School District has reported deferred outflows of resources related to a defined benefit pension plan, as discussed in Note 14 Retirement Plans. In addition to liabilities, the statement of financial position and/or balance sheet will sometimes report a separate section for deferred inflows of resources. This separate financial statement element represents an acquisition of resources that applies to future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. Under the full accrual method of accounting, the School District has reported deferred inflows of resources related to a defined benefit pension plan as discussed in Note 14 Retirement Plans. This item is reported only in the District-wide Statement of Net Position. The School District has one other type of item, which arises only under a modified accrual basis of accounting that qualifies for reporting in this category. Accordingly, the item, unavailable revenue, is reported only in the governmental funds balance sheet. The governmental funds report unavailable revenues from property taxes and these amounts are deferred and will be recognized as an inflow of resources in the period in which the amounts become available. - 14 - MARION COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2015 EXHIBIT "H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) General Obligation Bonds The School District issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities. In the District-wide financial statements, bond premiums and discounts are deferred and amortized over the life of the bonds using the straight-line method. Bond issuance costs are recognized as an outflow of resources in the fiscal year in which the bonds are issued. In the fund financial statements, the School District recognizes bond premiums and discounts, as well as bond issuance costs during the fiscal year bonds are issued. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. General obligation bonds are direct obligations and pledge the full faith and credit of the government. The outstanding amount of these bonds is recorded in the Statement of Net Position. Pensions For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions and pension expense, information about the fiduciary net position of the Teachers' Retirement System of Georgia (TRS) and the Public School Employees Retirement System (PSERS) and additions to/deductions from TRS/PSERS fiduciary net position have been determined on the same basis as they are reported by TRS/PSERS. 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. See Note 14 - Retirement Plans. Net Position The School District's net position in the District-wide Statements is classified as follows: Net Investment in Capital Assets - This represents the School District's total investment in capital assets, net of 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 invested in capital assets, net of related debt. Restricted Net Position - This represents resources for which the School District is legally or contractually obligated to spend resources for bus replacement, continuation of Federal programs, debt service and capital projects in accordance with restrictions imposed by external third parties. Unrestricted Net Position - Unrestricted net position represents resources derived from property taxes, sales taxes, grants and contributions not restricted to specific programs, charges for services, and miscellaneous revenues. These resources are used for transactions relating to the educational and general operations of the School District, and may be used at the discretion of the Board to meet current expenses for those purposes. Included in the net deficit reported is the School District's Net Pension Liability of $8,611,243, which is required for financial reporting. - 15 - MARION COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2015 EXHIBIT "H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Fund Balance The School District's fund balances are classified as follows: Nonspendable Amounts that are not in spendable form (e.g., inventory and prepaid items) or are legally or contractually required to be maintained intact (e.g., permanent fund principal). Restricted Amounts that can be spent only on specific purposes stipulated by law through constitutional provisions or enabling legislation or by the external providers of those resources (e.g., grants or donations). Committed Amounts that can only be used for the specific purposes determined by a formal action of the Board. Commitments may be changed or lifted only by referring to the formal action of the Board that imposed the constraint originally (e.g., the Board's commitment in connection with future construction projects). Assigned Amounts intended to be used by the government for specific purposes. Intent can be expressed by the Board of Education or by a designee to whom the Board of Education delegates authority. In governmental funds other than the General Fund, assigned fund balance represents the amount that is not restricted or committed. This indicates the resources in other governmental funds are, at a minimum, intended to be used for the purpose of that fund. Unassigned All amounts not contained in other classifications and the residual classification of the General Fund only. Unassigned amounts are available for any legal purpose. The responsibility for designating funds to specific classification is as follows: Committed Fund Balance The Board of Education is the School District's highest level of 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. Funds should be committed prior to the end of the fiscal year, although the exact amount may be determined in the subsequent fiscal year. - 16 - MARION COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2015 EXHIBIT "H" Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Fund Balance (Continued) Assigned Fund Balance The Board of Education has authorized the Superintendent as the official authorized to assign fund balance to a specific purpose in accordance with the School District's policy. When restricted and unrestricted fund balances are both available for expenditure when the expenditure is incurred, the restricted fund balance is considered to be expended first. When an expenditure is incurred for purposes for which amounts in any of the unrestricted fund balance classifications (committed, assigned or unassigned) could be used, the School District considers that committed amounts are to be reduced first, followed by assigned amounts, and then by unassigned amounts. 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. Note 3: BUDGETARY DATA The budget is a complete financial plan for the School District's fiscal year, and is based upon careful estimates of expenditures together with probable funding sources. The budget is legally adopted each year for the general, debt service, and capital projects funds. There is no statutory prohibition regarding over expenditure of the budget at any level. The budget for all governmental funds, except the various school activity (principal) accounts, is prepared and adopted by fund. The legal level of budgetary control was established by the Board at the aggregate fund level. The budget for the General Fund was prepared in accordance with accounting principles generally accepted in the United States of America. The budgetary process begins with the School District's administration presenting an initial budget for the Board's review. The administration makes revisions as necessary based on the Board's guidelines and a tentative budget is approved. After approval of this tentative budget by the Board, such budget is advertised at least once in a newspaper of general circulation in the locality, as well as the School District's website. At the next regularly scheduled meeting of the Board after advertisement, the Board receives comments on the tentative budget, makes revisions as necessary and adopts a final budget. The approved budget is then submitted, in accordance with provisions of Official Code of Georgia Annotated section 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. The Superintendent is authorized by the Board to approve adjustments of no more than five percent 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 fund is anticipated to be more than five percent of the budgeted amount, the Superintendent shall request Board approval for the budget amendment. Under no circumstances is the Superintendent or other staff person authorized to spend funds that exceed the total budget without approval by the Board. - 17 - MARION COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2015 EXHIBIT "H" Note 3: BUDGETARY DATA (CONTINUED) See Schedule 4 General Fund Schedule of Revenues, Expenditures and Changes in Fund Balances Budget to Actual for a detail of any over/under expenditures during the fiscal year under review. Note 4: DEPOSITS Collateralization of Deposits - Official Code of Georgia Annotated (OCGA) Section 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than 10 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 percent of the public funds being secured after the deduction of the amount of deposit insurance. If a depository elects the pooled method (OCGA 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 percent of the daily pool balance. Acceptable security for deposits consists of any one of or any combination of the following: (1) Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia, (2) Insurance on accounts provided by the Federal Deposit Insurance Corporation, (3) Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia, (4) Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia, (5) Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose, (6) Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia, and (7) Bonds, bills, notes, certificates of indebtedness or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association. Categorization of Deposits - Custodial credit risk is the risk that in the event of bank failure, the School District's deposits may not be returned to it. The School District does not have a deposit policy for custodial credit risk. At June 30, 2015, the bank balances were $4,338,374. The amounts exposed to custodial credit risk are classified into three categories as follows: Category 1 Uncollateralized, Category 2 Cash collateralized with securities held by the pledging financial institution, or Category 3 Cash collateralized with securities held by the pledging financial institution's trust Department or agent, but not in the School District's name. - 18 - MARION COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2015 EXHIBIT "H" Note 4: DEPOSITS (CONTINUED) Categorization of Deposits (Continued) The School District's deposits by custodial credit risk category at June 30, 2015 are as follows: Custodial Credit Risk Category Bank Balance 1 2 3 Categorization of Investments At June 30, 2015, the School System had the following investments: Investment Certificate of deposit Certificate of deposit Certificate of deposit Deutsche Bank repurchase Fidelity Institutional Government (money market mutual fund) Maturities May 14, 2016 February 1, 2016 August 27, 2015 January 28, 2027 33 day weighted average $ - - 4,088,374 $ 4,088,374 Rating* N/A N/A N/A N/A AAAm Fair Value $ 31,145 132,222 562,716 511,279 587,699 $ 1,825,061 *Rating as per Standard & Poor's Interest Rate Risk - Interest rate risk is the risk that changes in interest rates of debt investments will adversely affect the fair value of an investment. The School 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. As of June 30, 2015, $1,098,978 of the School District's applicable investments were uninsured, and are held by either the counterparty or the counterparty's trust department or agent in the School District's name. Credit Quality Risk - Credit quality risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The School District does not have a formal policy for managing credit quality risk. - 19 - MARION COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2015 EXHIBIT "H" Note 4: DEPOSITS (CONTINUED) 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 a Fidelity Institutional Government money market mutual fund, the Deutsche Bank repurchase and two Certificates of Deposit. The money market mutual fund represents 32% of the School District's total investments, the repurchase agreement represents 28% of the School District's total investments and the Certificates of Deposit maturing on February 1, 2016 and August 27, 2015 represent 7% and 31% of the School District's total investments, respectively. Note 5: NON-MONETARY TRANSACTIONS The School District receives food commodities from the United States Department of Agriculture (USDA) for school breakfast and lunch programs. These commodities are recorded at their Federally assigned value. See Note 2 Inventories. Note 6: CAPITAL ASSETS The following is a summary of changes in the capital assets during the fiscal year: Beginning Balance Increases Decreases Transfers Ending Balance Governmental activities: Capital assets, not being depreciated: Land $ Construction in progress Total 581,159 $ - $ 324,476 1,023,561 905,635 1,023,561 - $ $ 581,159 (11,655) (718,828) 617,554 (11,655) (718,828) 1,198,713 Capital assets, being depreciated: Buildings and improvements Equipment Land improvements Total 33,785,050 2,970,480 1,440,419 38,195,949 252,317 252,317 (9,950) (9,950) 475,249 - 243,579 718,828 34,260,299 3,212,847 1,683,998 39,157,144 Less accumulated depreciation for: Buildings and improvements Equipment Land improvements Total (3,752,042) (1,851,707) (550,252) (6,154,001) (579,917) (211,909) (71,800) (863,626) 4,975 4,975 (4,331,959) (2,058,641) (622,052) - (7,012,652) Total capital assets, being depreciated, net 32,041,948 (611,309) (4,975) 718,828 32,144,492 Governmental activities capital assets, net $ 32,947,583 $ 412,252 $ (16,630) $ - $ 33,343,205 - 20 - MARION COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2015 EXHIBIT "H" Note 6: CAPITAL ASSETS (CONTINUED) Capital assets being acquired under capital leases as of June 30, 2015 are as follows: Land Improvements Less: Accumulated Depreciation $ 395,820 (11,875) $ 383,945 Current year depreciation expense by function is as follows: Instruction Support Services General Administration School Administration Maintenance and Operations Student Transportation Central Support Services Food Services $ 640,964 1,095 34,609 15,812 125,993 3,700 181,209 41,453 Total Depreciation Expense $ 863,626 Note 7: RISK MANAGEMENT The School District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors or omissions; job related illness or injuries to employees; and acts of God. The School District has obtained commercial insurance for risk of loss associated with torts, assets, errors or omissions, and job related illness or injuries to employees. The School District has neither significantly reduced coverage for these risks nor incurred losses (settlements) which exceeded the School District's insurance coverage in any of the past three years. The School District has elected to self-insure for all potential losses of property related to acts of God. The School District has not experienced any losses related to this risk in the past three years. The School District has purchased additional insurance coverage for all employees and board members in the amount of $250,000 for dishonesty, and $100,000 for forgery, alterations, theft, disappearance, destruction, and robbery. The School District has purchased surety bonds to provide additional insurance coverage as follows: Position Covered Superintendent Board Chair Amount $ 50,000 $ 12,000 - 21 - MARION COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2015 EXHIBIT "H" Note 8: OPERATING LEASES Marion County Board of Education has entered into various leases as lessee for copiers. These leases are considered for accounting purposes to be operating leases. Lease expenditures for the year ended June 30, 2015, for governmental funds amounted to $10,436. Future minimum lease payments for these leases are as follows: Fiscal Year Ended June 30 Governmental Activities 2016 2017 $ 10,436 10,436 $ 20,872 The School District, a lessor, leases excess office space to various private companies and accounts for these leases as operating leases. Lease terms vary and extend through June 30, 2023. Rental revenues under these operating leases during the year ended June 30, 2015 were $39,768. Minimum future rentals to be received under operating leases are as follows: Fiscal Year Ended June 30 2016 2017 2018 2019 2020 2021-2023 Payments $ 35,368 34,968 34,968 34,968 34,968 93,248 $ 268,488 Note 9: LONG-TERM DEBT General Obligation Bonds Outstanding On September 2, 2010, the School District issued General Obligation Bonds Series 2010B (Qualified School Construction Bonds) and Series 2010C (Build America Bonds) in the amounts of $7,595,000 and $7,715,000, respectively. The Series 2010B and Series 2010C Bonds were issued for the purpose of building a new middle/high school. - 22 - MARION COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2015 EXHIBIT "H" Note 9: LONG-TERM DEBT (CONTINUED) General obligation bonds currently outstanding are as follows: Purpose General Government - Series 2010B General Government - Series 2010C Interest Rates 5.05% 5.168% - 5.768% Amount $ 7,595,000 7,715,000 $ 15,310,000 Capital Leases On July 8, 2013, Marion County ("the County") and the Board of Education entered into an agreement to connect the new middle/high school to the County's existing water system. In order to provide sufficient water pressure and volume to the middle/high school, the County has constructed and installed a new elevated water tank to be incorporated into the County's water system. The new water tank was funded by a loan of $783,980. The Board of Education signed an intergovernmental agreement with the County to pay half of the loan payments with an interest rate of 2.5% resulting in a payment of principal and interest of $1,294 per month for 480 months. This lease agreement 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 its inception. Changes in Long-Term Debt The changes in long-term debt during the fiscal year ended June 30, 2015, were as follows: Beginning Balance Increases Decreases Ending Balance Due Within One Year General Obligation Bonds $ 15,310,000 $ - $ - $ 15,310,000 $ Capital Leases 384,640 - (5,980) 378,660 Net Pension Liability 11,803,439 603,879 (3,796,075) 8,611,243 Total $ 27,498,079 $ 603,879 $ (3,802,055) $ 24,299,903 $ 5,615 5,615 - 23 - MARION COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2015 EXHIBIT "H" Note 9: LONG-TERM DEBT (CONTINUED) Scheduled Maturities of Long-Term Debt At June 30, 2015, payments due by fiscal year which includes principal and interest for these items are as follows: Fiscal Year Ended June 30 2016 2017 2018 2019 2020 2021-2025 2026-2030 2031-2035 2036-2040 2041-2045 2046-2050 2051-2053 Total Principal and Interest Capital Leases Principal Interest $ 5,615 $ 6,273 6,432 6,595 6,761 36,460 41,310 46,804 53,029 60,082 68,073 41,226 8,619 9,255 9,096 8,933 8,766 41,180 36,330 30,836 24,611 17,558 9,567 1,476 $ 378,660 $ 206,227 General Obligation Bonds Principal Interest $ - $ - - - - - 9,080,000 2,835,000 3,395,000 - - - 812,551 812,551 812,551 812,551 812,551 4,062,756 2,836,919 1,459,460 601,891 - $ 15,310,000 $ 13,023,781 Note 10: ON-BEHALF PAYMENTS The School District has recognized revenues and costs in the amount of $19,880 for retirement contributions paid on the School District's behalf by the following state agency. Office of the State Treasurer Paid to the Public School Employees' Retirement System For Public School Employees' Retirement System (PSERS) Employer's Cost In the amount of $19,880 Funds paid on behalf of the School District are reported in governmental funds. See Note 14 Retirement Plans, for the State support related to the Net Pension Liability. - 24 - MARION COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2015 EXHIBIT "H" Note 11: SIGNIFICANT CONTINGENT LIABILITIES Amounts received or receivable principally from the Federal government are subject to audit and review by grantor agencies. This could result in requests for reimbursement to the grantor agency for any costs which are disallowed under grant terms. The School District believes that such disallowances, if any, will be immaterial to its overall financial position. Note 12: SIGNIFICANT COMMITMENTS The following is an analysis of significant outstanding construction or renovation contracts executed by the School District as of June 30, 2015. Project Old Marion County Middle School Fire Damage Repair and Renovations Unearned Executed Contracts $ 104,784 Funding Available From Stat Note 13: OTHER POST-EMPLOYMENT BENEFITS Georgia Retiree Health Benefit Fund Plan Description. The Georgia School Personnel Post-employment Health Benefit Fund (School OPEB Fund) is a cost-sharing multiple-employer defined benefit post-employment healthcare plan that covers eligible former employees of public school systems, libraries and regional educational service agencies. The School OPEB Fund provides health insurance benefits to eligible former employees and their qualified beneficiaries through the State Employees Health Insurance Plan administered by the Department of Community Health. The Official Code of Georgia Annotated (OCGA) assigns the authority to establish and amend the benefit provisions of the group health plans, including benefits for retirees, to the Board of Community Health (Board). The Department of Community Health, which includes the School OPEB Fund, issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts. 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 percent 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 is 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 is 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. - 25 - MARION COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2015 EXHIBIT "H" Note 13: OTHER POST EMPLOYMENT BENEFITS (CONTINUED) Georgia Retiree Health Benefit Fund (Continued) 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 "pay-as-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 30 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, 2015: For certificated teachers, librarians and regional educational service agencies: Period July 1, 2014- June 30, 2015 Contribution $945 per member per month For non-certificated school personnel: Period July 1, 2014 - June 30, 2015 Contribution $596.20 per member per month No additional contribution was required by the Board for fiscal year 2015 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 2015 2014 2013 Percentage Contributed 100% 100% 100% Required Contribution $ 1,393,975 1,419,026 1,219,609 - 26 - MARION COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2015 EXHIBIT "H" Note 14: RETIREMENT PLANS Marion County Board of Education 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 47-3-60 of the Official Code of Georgia Annotated (O.C.G.A.) and certain other support personnel as defined by 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. Eligibility for disability and death benefits requires 10 years of service. Disability benefits are based on the employee's creditable service and compensation up to the time of disability. Death benefits equal the amount that would be payable to the employee's beneficiary had the employee retired on the date of death. Death benefits are based on the employee's creditable service and compensation up to the date of death. Contributions. Per Title 47 of the O.C.G.A., contribution requirements of active employees and participating employers, as actuarially determined, are established and may be amended by the TRS Board. Contributions are expected to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. Employees were required to contribute 6% of their annual pay during fiscal year 2015. The School District's contractually required contribution rate for the year ended June 30, 2015 was 13.15% of annual School District payroll. - 27 - MARION COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2015 EXHIBIT "H" Note 14: RETIREMENT PLANS (CONTINUED) Teachers' Retirement System of Georgia (TRS) (Continued) Employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Fiscal Year 2015 2014 2013 Percentage Contributed 100% 100% 100% Required Contribution $ 915,039 855,348 795,803 Public School Employees' Retirement System (PSERS) Plan Description. PSERS is a cost-sharing multiple-employer defined benefit pension plan established by the Georgia General Assembly in 1969 for the purpose of providing retirement allowances for public school employees who are not eligible for membership in the Teachers' Retirement System of Georgia. The ERS Board of Trustees, plus two additional trustees, administer PSERS. Title 47 of the O.C.G.A. assigns the authority to establish and amend the benefit provisions to the State Legislature. PSERS issues a publicly available financial report that can be obtained at www.ers.ga.gov/formspubs/formspubs. Benefits Provided. A member may retire and elect to receive normal monthly retirement benefits after completion of 10 years of creditable service and attainment of age 65. A member may choose to receive reduced benefits after age 60 and upon completion of 10 years of service. Upon retirement, the member will receive a monthly benefit of $14.75, multiplied by the number of years of creditable service. Death and disability benefits are also available through PSERS. Additionally, PSERS may make periodic cost-of-living adjustments to the monthly benefits. Upon termination of employment, member contributions with accumulated interest are refundable upon request by the member. However, if an otherwise vested member terminates and withdraws his/her member contribution, the member forfeits all rights to retirement benefits. Contributions. The general assembly makes an annual appropriation to cover the employer contribution to PSERS on behalf of local school employees (bus drivers, cafeteria workers, and maintenance staff). The annual employer contribution required by statute is actuarially determined and paid directly to PSERS by the State Treasurer in accordance with O.C.G.A. 47-4-29(a) and 60(b). Contributions are expected to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. Individuals who became members prior to July 1, 2012 contribute $4 per month for nine months each fiscal year. Individuals who became members on or after July 1, 2012 contribute $10 per month for nine months each fiscal year. The State of Georgia, although not the employer of PSERS members, is required by statute to make employer contributions actuarially determined and approved and certified by the PSERS Board of Trustees. - 28 - MARION COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2015 EXHIBIT "H" Note 14: RETIREMENT PLANS (CONTINUED) Pension Liabilities, Pension Expense, Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions At June 30, 2015, the School District reported a liability of $8,611,243 for its proportionate share of the net pension liability for TRS. The net pension liability was measured as of June 30, 2014. The total pension liability used to calculate the net pension liability was based on an actuarial valuation as of June 30, 2013. An expected total pension liability as of June 30, 2014 was determined using standard roll-forward techniques. The School District's proportion of the net pension liability was based on contributions to TRS during the fiscal year ended June 30, 2014. At June 30, 2014, the School District's TRS proportion was 0.068161%, which was an increase of 0.000422% from its proportion measured as of June 30, 2013. At June 30, 2015, 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 $98,846. The PSERS net pension liability was measured as of June 30, 2014. The total pension liability used to calculate the net pension liability was based on an actuarial valuation as of June 30, 2013. An expected total pension liability as of June 30, 2014 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, 2014. For the year ended June 30, 2015, the School District recognized pension expense of $603,879 for TRS, $8,584 for PSERS and revenue of $8,584 for PSERS. The revenue is support provided by the State of Georgia. - 29 - MARION COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2015 EXHIBIT "H" Note 14: RETIREMENT PLANS (CONTINUED) Pension Liabilities, Pension Expense, Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions (Continued) At June 30, 2015, the School District reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Net difference between projected and actual earnings on pension plan investments Changes in proportion and differences between School District contributions and proportionate share of contributions School District contributions subsequent to the measurement date Total TRS Deferred Outflows of Resources Deferred Inflows of Resources $ - $ 3,002,062 59,916 - 915,039 $ 974,955 $ 3,002,062 School District contributions subsequent to the measurement date of June 30, 2014 for TRS 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, 2016. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows: Fiscal Year Ended June 30 2016 2017 2018 2019 2020 Thereafter TRS $ (736,898) (736,898) (736,898) (736,899) 5,447 - - 30 - MARION COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2015 EXHIBIT "H" Note 14: RETIREMENT PLANS (CONTINUED) Pension Liabilities, Pension Expense, Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions (Continued) Actuarial Assumptions: The total pension liability was determined by an actuarial valuation as of June 30, 2013, using the following actuarial assumptions, applied to all periods included in the measurement: Teachers' Retirement System Inflation Salary increases Investment rate of return 3.00% 3.75 7.00%, average, including inflation 7.50%, net of pension plan investment expense, including inflation Mortality rates were based on the RP-2000 Combined Mortality Table for Males or Females set back two years for males and set back three years for females. The actuarial assumptions used in the June 30, 2013 valuation were based on the results of an actuarial experience study for the period July 1, 2004 June 30, 2009. Public School Employees' Retirement System Inflation Salary increase Investment rate of return 3.0% N/A 7.50%, net of pension plan investment expense, including inflation Mortality rates were based on the RP-2000 Combined Mortality Table set forward one year for males for the period after service retirement, for dependent beneficiaries, and for deaths in active service, and the RP-2000 Disabled Mortality Table set back two years for males and set forward one year for females for the period after disability retirement. The actuarial assumptions used in the June 30, 2013 valuation were based on the results of an actuarial experience study for the period July 1, 2004 June 30, 2009. The long-term expected rate of return on pension plan investments was determined using a log-normal distribution analysis in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The target asset allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table: - 31 - MARION COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2015 EXHIBIT "H" Note 14: RETIREMENT PLANS (CONTINUED) Pension Liabilities, Pension Expense, Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions (Continued) Asset class Fixed income Domestic large stocks Domestic mid stocks Domestic small stocks International developed market stocks International emerging market stocks Total * Rates shown are net of the 3.00% assumed rate of inflation Target allocation 30.00% 39.70 3.70 1.60 18.90 6.10 100.00% Long-term expected real rate of return* 3.00% 6.50 10.00 13.00 6.50 11.00 Discount Rate: The discount rate used to measure the total pension liability was 7.50%. The projection of cash flows used to determine the discount rate assumed that plan member contributions will be made at the current contribution rate and that employer and 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 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: School District's proportionate share of the net pension liability $ 1% Decrease (6.50%) Current discount rate (7.50%) 15,869,366 $ 8,611,243 $ 1% Increase (8.50%) 2,634,330 Pension Plan Fiduciary Net Position: Detailed information about the pension plan's fiduciary net position is available in the separately issued TRS financial report which is publicly available at www.trsga.com/publications. - 32 - MARION COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2015 EXHIBIT "H" Note 15: CHANGE IN ACCOUNTING PRINCIPLE PRIOR PERIOD ADJUSTMENT In fiscal year 2015, the School District adopted Governmental Account Standards Board (GASB) Statement No. 68, Accounting and Financial Reporting for Pensions and GASB Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date an amendment of GASB Statement No. 68. The provisions of these Statements establish accounting and financial reporting standards for pensions that are provided to the employees of state and local governmental employers through pension plans that are administered through trusts. Implementation of these statements required the School District to record a liability for its proportionate share of the Net Pension Liability of the Teachers' Retirement System (TRS). The following adjustment was required to net position of governmental activities to record the net pension liability as of July 1, 2014: Net Position, Governmental Activities, previously reported Deferred outflows, contributions subsequent to measurement date Proportionate share of Net TRS pension liability Net Position, Governmental Activities, as restated This change is in accordance with generally accepted accounting principles. $ 22,929,112 853,929 (11,803,439) $ 11,979,602 - 33 - MARION COUNTY BOARD OF EDUCATION SCHEDULE "1" SCHEDULE OF PROPORTIONATE SHARE OF THE NET PENSION LIABILITY TEACHERS' RETIREMENT SYSTEM OF GEORGIA FOR THE FISCAL YEAR ENDED JUNE 30 School District's proportion of the net pension liability School District's proportionate share of the net pension liability School District's covered-employee payroll School District's proportionate share of the net pension liability as a percentage of its covered-employee payroll Plan fiduciary net position as a percentage of the total pension liability 2015 0.068161% $ 8,611,243 $ 6,953,819 123.83% 84.03% Note: The measurement period for the year ended June 30, 2015 is June 30, 2014. The schedule above is intended to show information for the last ten fiscal years. Additional years will be displayed as they become available. The Schedule includes all significant plans and funds administered by Marion County Board of Education. - 34 - MARION COUNTY BOARD OF EDUCATION SCHEDULE OF CONTRIBUTIONS TEACHERS' RETIREMENT SYSTEM OF GEORGIA FOR THE FISCAL YEAR ENDED JUNE 30 Contractually required contribution Contributions in relation to the contractually required contribution Contribution deficiency (excess) School District's covered-employee payroll Contributions as a percentage of covered-employee payroll SCHEDULE "2" 2015 $ 915,039 $ 915,039 $ - $ 6,958,471 13.15% Note: The schedule above is intended to show information for the last ten fiscal years. Additional years will be displayed as they become available. - 35 - MARION COUNTY BOARD OF EDUCATION NOTES TO THE REQUIRED SUPPLEMENTARY INFORMATION TEACHERS' RETIREMENT SYSTEM OF GEORGIA FOR THE FISCAL YEAR ENDED JUNE 30, 2015 SCHEDULE "3" Changes of assumptions: In 2010 and later, the expectation of retired life mortality was changed to the RP2000 Mortality Tables rather than the 1994 Group Annuity Mortality Table, which was used prior to 2010. In 2010, rates of withdrawal, retirement, disability and mortality were adjusted to more closely reflect actual experience. In 2010, assumed rates of salary increase were adjusted to more closely reflect actual and anticipated experience. Method and assumptions used in calculations of actuarially determined contributions: The actuarially determined contribution rates in the schedule of contributions are calculated as of June 30, three years prior to the end of the fiscal year in which contributions are reported. The following actuarial methods and assumptions were used to determine the contractually required contributions for the year ended June 30, 2015 reported in that schedule: Valuation date Actuarial cost method Amortization method Remaining amortization period Asset valuation method Inflation rate Salary increases Investment rate of return June 30, 2012 Entry age Level percentage of payroll, open 30 years Seven-year smoothed market 3.00% 3.75 7.00%, including inflation 7.50%, net of pension plan investment expense, including inflation - 36 - MARION COUNTY BOARD OF EDUCATION GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL FOR THE FISCAL YEAR ENDED JUNE 30, 2015 SCHEDULE "4" REVENUES Property taxes Sales taxes Other 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 operations Debt service: Principal retirement Interest and fiscal charges Total expenditures Deficiency of revenues under expenditures OTHER FINANCING SOURCES (USES) Transfers in Transfers out Total other financing sources (uses) Net change in fund balances FUND BALANCE, beginning of year FUND BALANCE, end of year Budget Original (1) Final (1) $ 3,324,514 $ 3,324,514 $ 24,000 24,000 - - 6,753,680 7,000,108 1,864,047 1,956,464 184,422 184,422 6,200 6,200 3,562 3,562 12,160,425 12,499,270 Actual Variance With Final Budget 3,068,511 $ 28,935 13,046 7,079,517 1,877,482 344,378 5,928 352,138 12,769,935 (256,003) 4,935 13,046 79,409 (78,982) 159,956 (272) 348,576 270,665 6,712,405 365,379 625,565 241,978 508,854 939,212 172,171 1,158,542 1,006,344 41,313 66,630 1,026,457 12,864,850 6,781,341 360,601 626,140 241,978 530,809 939,212 174,079 1,174,331 1,013,770 45,891 67,004 1,029,910 12,985,066 7,139,216 381,325 652,800 239,328 408,845 969,852 172,480 1,148,070 964,288 64,520 67,625 126,124 963,597 5,980 9,548 13,313,598 (704,425) (485,796) (543,663) 3,000 (3,000) - (704,425) 3,000 (3,000) - (485,796) - (543,663) 3,182,468 3,182,468 3,182,468 $ 2,478,043 $ 2,696,672 $ 2,638,805 $ (357,875) (20,724) (26,660) 2,650 121,964 (30,640) 1,599 26,261 49,482 (18,629) (621) (126,124) 66,313 (5,980) (9,548) (328,532) (57,867) (3,000) 3,000 - (57,867) - (57,867) Note to the Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual (1) Original and Final Budget amounts do not include budgeted revenues ($475,509) or expenditures ($453,368) of the various school activity accounts. 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. - 37 - MARION COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 SCHEDULE "5" 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 U.S. Department of Agriculture CFDA Number PassThrough Entity ID Number Expenditures In Period 10.553 10.555 N/A $ N/A - (1) 939,476 (2) 939,476 Education, U. S. Department of Special Education Cluster Pass-Through From Georgia Department of Education Special Education Grants to States Preschool Grants Total Special Education Cluster Other Programs Pass-Through From Georgia Department of Education Improving Teacher Quality State Grants Rural Education Title I Grants to Local Educational Agencies ARRA - Race to the Top Career and Technical Education - Basic Grants to States Pass-Through From Southwest Georgia Regional Educational Services Agency Title III - Limited English Proficient Total U. S. Department of Education Total Expenditures of Federal Awards 84.027 N/A 84.173 N/A 265,436 6,049 271,485 84.367 84.358 * 84.010 84.395 84.048 84.365 N/A 85,838 N/A 26,316 N/A 636,618 N/A 14,250 N/A 25,551 N/A 2,449 791,022 1,062,507 $ 2,001,983 N/A = Not Available Notes to the Schedule of Expenditures of Federal Awards (1) Expenditures for the funds earned on the School Breakfast Program ($245,474) were not maintained separately and are included in the National School Lunch Program. (2) Includes the Federally assigned value of donated commodities for the Food Donation Program in the amount of $42,173. Major Programs are identified by an asterisk (*) in front of the CFDA number. The School District did not provide Federal Assistance to any Subrecipient. The accompanying schedule of expenditures of Federal awards includes the Federal grant activity of the Marion County Board of Education and is presented on the modified accrual basis of accounting used in the presentation of the fund financial statements. See Notes to the Basic Financial Statements. - 38 - MARION COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE FOR THE FISCAL YEAR ENDED JUNE 30, 2015 Agency/Funding Grants Bright From the Start: Georgia Department of Early Care and Learning Pre-Kindergarten Program Education, Georgia Department of Quality Basic Education Direct Instructional Cost Kindergarten Program Kindergarten Program - Early Intervention Program Primary Grades (1-3) Program Primary Grades - Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades - Early Intervention (4-5) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Program for Intellectually Gifted Students - Category VI Remedial Education Program Alternative Education Program Media Center Program 20 Days Additional Instruction Staff and Professional Development Principal, Staff and Professional Development Indirect Cost Central Administration School Administration Facility Maintenance and Operations Categorical Grants Pupil Transportation Pupil Transportation State Bonds Sparsity Nursing Services Vocational Supervisors Education Equalization Funding Grant Food Services Vocational Education Amended Formula Adjustment Math and Science Supplements Total Grants from Georgia Department of Education Office of the State Treasurer Public School Employees' Retirement SCHEDULE "6" Governmental Fund Type General Fund $ 254,854 532,630 48,004 1,011,165 108,865 397,255 42,286 926,461 864,707 190,450 752,844 120,641 67,259 65,154 146,214 46,878 25,117 577 318,534 299,864 360,497 359,379 77,220 54,762 45,000 6,534 425,273 20,668 37,807 (553,272) 6,010 6,804,783 19,880 $ 7,079,517 See Notes to the Basic Financial Statements. - 39 - MARION COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS FOR THE FISCAL YEAR ENDED JUNE 30, 2015 SCHEDULE "7" Project Improving school facilities, purchasing school buses, school equipment, and acquiring safety and security equipment Making system-wide technology improvements, including, but not limited to, the acquisition and installation of instruction technology, security, and information systems hardware and associated software and accessories, and infrastructure at all schools and selected other facilities To retire a portion of the principal and interest on the school district's previously incurred general obligation Series 2010B and 2010C Bonds coming due in the years 2013 through 2018 Original Estimated Cost (1) Current Estimated Costs (2) Expended In Current Year (3) (4) Expended In Prior Years (3) (4) Total Completion Cost Estimated Completion Date 750,000 750,000 - - - December 2017 400,000 400,000 - - - December 2017 2,250,000 2,250,000 185,924 $ 3,400,000 $ 3,400,000 $ 185,924 $ - 185,924 - $ 185,924 December 2017 (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 Marion County approved the imposition of a 1% sales tax to fund the above projects and retire associated debt. (4) Expenditures in the District-wide Capital Projects Fund included $930,881 not related to the Special Purpose Local Option Sales Tax. (5) $812,551 Interest paid on bonds in FY2015; $478,099 from Federal Subsidy; $148,528 from property taxes and $185,924 from sales tax. (6) Sales Tax is being accumulated to make Sinking Fund Payments which started in January 2015. $511,279 was paid in January 2015. See Notes to the Basic Financial Statements. - 40 - MARION COUNTY BOARD OF EDUCATION SCHEDULE OF QUALITY BASIC EDUCATION PROGRAM (QBE) ALLOTMENTS AND EXPENDITURES BY PROGRAM GENERAL FUND FOR THE FISCAL YEAR ENDED JUNE 30, 2015 SCHEDULE "8" Description Direct Instructional Funds: 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 Category I Category II Category III Category IV Gifted Student - Category VI Remedial Education Program Alternative Education Program TOTAL DIRECT INSTRUCTIONAL PROGRAMS Media Center Program Staff and Professional Development Allotments From Georgia Department of Education (1) & (2) Eligible QBE Program Costs Salaries Operations Total $ 606,320 $ 60,371 1,158,336 129,906 452,334 55,535 1,085,962 990,018 223,947 867,847 - - - - 140,464 77,582 75,860 474,619 $ 59,680 725,174 392,629 603,673 74,532 941,400 921,340 381,840 97,026 176,058 306,432 62,319 25,049 37,687 67,531 5,924,482 5,346,989 168,745 29,068 216,272 1,442 6,732 $ - 26,130 - 8,734 - 10,245 40,100 14,758 14,412 2,271 - 481,351 59,680 751,304 392,629 612,407 74,532 951,645 961,440 396,598 97,026 176,058 320,844 62,319 27,320 37,687 67,531 123,382 5,470,371 10,431 15,604 226,703 17,046 TOTAL QBE FORMULA FUNDS $ 6,122,295 $ 5,564,703 $ 149,417 $ 5,714,120 (1) Comprised of State Funds plus Local Five Mill Share. (2) Allotments do not include the impact of the state amended budget adjustment. See Notes to the Basic Financial Statements. - 41 - (This page left intentionally blank) SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS (This page left intentionally blank) 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 24, 2016 Honorable Nathan Deal, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Marion 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 Ladies and Gentlemen: 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 Marion County Board of Education as of and for the year ended June 30, 2015, and the related notes to the financial statements, which collectively comprise Marion County Board of Education's basic financial statements and have issued our report thereon dated March 24, 2016. Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered Marion County Board of Education'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 Marion County Board of Education's internal control. Accordingly, we do not express an opinion on the effectiveness of the Marion 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. 2015YB-10 (This page left intentionally blank) 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 Marion County Board of Education'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. We noted certain matters that we have reported to management of Marion County Board of Education in a separate letter dated March 24, 2016. 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, not to provide an opinion on the effectiveness of the Marion County Board of Education'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 Marion County Board of Education's internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Respectfully submitted, GSG:as 2015YB-10 Greg S. Griffin State Auditor (This page left intentionally blank) 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 24, 2016 Honorable Nathan Deal, Governor Members of the General Assembly Members of the State Board of Education and Superintendent and Members of the Marion County Board of Education INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY OMB CIRCULAR A-133 Ladies and Gentlemen: Report on Compliance for Each Major Federal Program We have audited Marion County Board of Education's compliance with the types of compliance requirements described in the OMB Circular A-133 Compliance Supplement that could have a direct and material effect on each of its major federal programs for the year ended June 30, 2015. Marion County Board of Education's major federal programs are identified in the Summary of Auditor's Results section of the accompanying Schedule of Findings and Questioned Costs. Management's Responsibility Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants applicable to its federal programs. Auditor's Responsibility Our responsibility is to express an opinion on compliance for each of Marion County Board of Education'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 OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133 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 Marion County Board of Education'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 Marion County Board of Education's compliance. 2015SA-10 (This page left intentionally blank) Opinion on Each Major Federal Program In our opinion, the Marion County Board of Education 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, 2015. Report on Internal Control over Compliance Management of Marion County Board of Education 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 Marion County Board of Education'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 OMB Circular A-133, 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 Marion County Board of Education'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 OMB Circular A-133. Accordingly, this report is not suitable for any other purpose. Respectfully submitted, GSG:as 2015SA-10 Greg S. Griffin State Auditor (This page left intentionally blank) SECTION III AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS (This page left intentionally blank) MARION COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2015 PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS No matters were reported. PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported. (This page left intentionally blank) SECTION IV FINDINGS AND QUESTIONED COSTS (This page left intentionally blank) MARION COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2015 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 the major program: Unmodified Any audit findings disclosed that are required to be reported in accordance with OMB Circular A-133, Section 510(a)? No Identification of major program: CFDA Number Name of Federal Program or Cluster 84.010 Title I Grants to Local Educational Agencies Dollar threshold used to distinguish between Type A and Type B programs: $300,000 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.