OCONEE COUNTY BOARD OF EDUCATION ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2017 OCONEE COUNTY BOARD OF EDUCATION ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2017 TABLE OF CONTENTS I. Financial Section Independent Auditor's Report Management's Discussion and Analysis Basic Financial Statements: Government-wide Financial Statements: Statement of Net Position Statement of Activities Fund Financial Statements: Balance Sheet Governmental Funds Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities General Fund Statement of Revenues, Expenditures, and Changes in Fund Balances Budget and Actual Statement of Fiduciary Assets and Liabilities Agency Fund Notes to the Basic Financial Statements II. Required Supplementary Information Schedule of Proportionate Share of Net Pension Liability Teachers Retirement System of Georgia Schedule of Contributions Teachers Retirement System of Georgia Schedule of Proportionate Share of Net Pension Liability Public Schools Employees Retirement System of Georgia Notes to Required Supplementary Information III. Other Supplementary Information Schedule of Expenditures of Special Purpose Local Option Sales Tax Proceeds IV. Single Audit Section Independent Auditor's Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards Independent Auditor's Report on Compliance For Each Major Federal Program and on Internal Control Over Compliance Required by The Uniform Guidance Schedule of Expenditures of Federal Awards Schedule of Findings and Questioned Costs Schedule of Prior Audit Findings Page 1-3 4-13 14 15 16 17 18 19 20 21 22-50 51 52 53 54 55 56 and 57 58-60 61 and 62 63-65 66 and 67 I. FINANCIAL SECTION INDEPENDENT AUDITOR'S REPORT To the Superintendent and Members of the Oconee County Board of Education Watkinsville, Georgia Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of the Oconee County Board of Education, as of and for the fiscal year ended June 30, 2017, and the related notes to the financial statements, which collectively comprise the Oconee County Board of Education's basic financial statements as listed in the table of contents. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. 200 GALLERIA PARKWAY S.E., SUITE 1700 ATLANTA, GA 30339-5946 770-955-8600 800-277-0080 FAX 770-980-4489 www.mjcpa.com Members of The American Institute of Certified Public Accountants We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the Oconee County Board of Education, as of June 30, 2017, and the respective changes in financial position and the budgetary comparison for the General Fund for the fiscal year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the Management's Discussion and Analysis, the Schedule of Proportionate Share of the Net Pension Liability TRS, the Schedule of Contributions TRS, and the Schedule of Proportionate Share of the Net Pension Liability PSERS, on pages 413, 51, 52, and 53, respectively, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. 2 Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Oconee County Board of Education's basic financial statements. The schedule of expenditures of special purpose local option sales tax proceeds, as required by the Official Code of Georgia 48-8-121, and the schedule of expenditures of federal awards, as required by Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards are presented for purposes of additional analysis and are not a required part of the basic financial statements. The schedule of expenditures of special purpose local option sales tax proceeds and the schedule of expenditures of federal awards (collectively "the supplementary information") are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the supplementary information is fairly stated, in all material respects, in relation to the basic financial statements as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated February 22, 2018 on our consideration of the Oconee 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 solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the Oconee County Board of Education's internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Oconee County Board of Education's internal control over financial reporting and compliance. Atlanta, Georgia February 22, 2018 3 OCONEE BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2017 INTRODUCTION The District's financial statements for the fiscal year ended June 30, 2017 includes a series of basic financial statements that report financial information for the District as a whole, its funds, and its fiduciary responsibilities. The Statement of Net Position and the Statement of Activities provide financial information about all of the District's activities and present both a short term and long term view of the District's finances on a global basis. The fund financial statements provide information about all of the District's funds. Information about these funds, such as the District's General Fund, is important in its own right, but will also give insight into the District's overall soundness as reported in the Statement of Net Position and the Statement of Activities. FINANCIAL HIGHLIGHTS Key financial highlights for FY 2017 are as follows: On the District-wide financial statements: The District's net position at June 30, 2017 was $76.1 million. Net position reflects the difference between all assets and deferred outflows of resources of the District (including capital assets, net of depreciation) and all liabilities, both short term and long term, and deferred inflows of resources. The net position at June 30, 2017 of $76.1 million represented an increase of $7.5 million when compared to the prior year. The School District had approximately $74.4 million in expenses relating to governmental activities; about $44.7 million of these expenses were offset by program specific charges for services, grants and contributions. However, general revenues (primarily property and sales taxes) of $37.2 million were adequate to provide for these programs. As stated above, general revenues accounted for $37.2 million or about 45.4% of all revenues totaling approximately $81.9 million. Program specific revenues in the form of charges for services, grants, and contributions accounted for the balance of these. On the fund financial statements: Among major funds, the General Fund had roughly $73.2 million in revenues and $70.3 in expenditures. The General Fund balance of $18.5 million at June 30, 2017 increased by roughly $2.9 million from the prior year. OVERVIEW OF THE FINANCIAL STATEMENTS These financial statements consist of three parts; management's discussion and analysis (this section), the basic financial statements including notes to the financial statements and required supplementary information. The basic financial statements include two levels of statements that present different views of the School District. These include the district-wide and fund financial statements. 4 OCONEE BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2017 The district-wide financial statements include the `Statement of Net Position' and `Statement of Activities'. These statements provide information about the activities of the School District presenting both short-term and long-term information about the School District's overall financial status. The fund financial statements focus on individual parts of the School District, reporting the School District's operation in more detail. The `Governmental Funds' statements disclose how basic services are financed in the short-term as well as what remains for future spending. The `Fiduciary Funds' statements provide information about the financial relationships in which the School District acts solely as a trustee or agent for the benefit of others. In the case of the Oconee County Board of Education, the General Fund, Capital Projects Funds, and Debt Service Funds are all considered to be major funds. The District has no funds reported as nonmajor funds as defined by generally accepted accounting principles. The financial statements also include notes that explain some of the information in the statements and provide more detailed data. The statements are followed by a section of required supplementary information that further explains and supports the financial statements. Additionally, other supplementary information (not required) is also presented that further supplements understanding of the financial statements. District-Wide Statements Since the Oconee County Board of Education has no operations that have been classified as "Business Activities", the District-Wide financial statements are basically a consolidation of all of the District's operating funds into one column called governmental activities. In reviewing the District-Wide financial statements, a reader might ask the question, are we in a better financial position now than last year? The `Statement of Net Position' and the `Statement of Activities' provides the basis for answering this question. These financial statements include all District's assets, deferred outflows of resources, liabilities, and deferred inflow of resources and uses the accrual basis of accounting similar to the accounting used by most private-sector companies. This basis of accounting takes into account all of the current year's revenues and expenses regardless of when cash is received or paid. These two statements report the School District's net position and any changes in net position. The change in net position is important because it tells the reader that, for the School District as a whole, the financial position of the School District has improved or diminished. The causes of this change may be the results of many factors, including those not under the School District's control, such as the property tax base, facility conditions, required educational programs, studentteacher ratios, and other factors. 5 OCONEE BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2017 When analyzing District-wide financial statements, it is important to remember these statements are prepared using an economic resources measurement focus (accrual accounting) and involve the following steps to format the Statement of Net Position: Capitalize current outlays for capital assets Depreciate capital assets Report long-term debt as a liability Calculate revenue and expense using the economic resources measurement focus and the accrual basis of accounting Allocate net position as follows: o Net Investment in capital assets o Restricted net position is amounts with constraints placed on the use by external sources such as creditors, grantors, contributors or laws and regulations. o Unrestricted for no specific use Fund Financial Statements The School District uses many funds or sub-funds to account for a multitude of financial transactions during the fiscal year. The fund financial statements presented in this report provide detail information about the School District's significant or major funds. As discussed previously, the District has no nonmajor Funds as defined by generally accepted accounting principles. The District has two kinds of funds as discussed below: Governmental Funds Most of the School District's activities are reported in governmental funds, which focus on how money flows into and out of those funds and the balances left at year-end available for spending in future periods. These funds are reported using the modified accrual method of accounting which measures cash and all other financial assets that can be readily converted to cash. The governmental fund statements provide a detailed short-term view of the School District's general government operations and the basic services it provides. Governmental fund information helps determine whether there are more or fewer financial resources that can be spent in the near future to finance educational programs. The differences between government activities (reported in the Statement of Net Position and the Statement of Activities) and governmental funds are reconciled in the financial statements. Fiduciary Funds The School District is the trustee, or fiduciary, for assets that belong to clubs, organizations and others within the principals' accounts. The School District is responsible for ensuring that the assets reported in these funds are used only for their intended purposes and by those to whom the assets belong. The School District excludes these activities from the districtwide financial statements because it cannot use these assets to finance its operations. 6 OCONEE BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2017 FINANCIAL ANALYSIS OF THE SCHOOL DISTRICT AS A WHOLE Net position, which is the difference between total assets and deferred outflows of resources, and total liabilities and deferred inflows of resources, is one indicator of the financial condition of the District. When revenues exceed expenses, the result is an increase in net position. When expenses exceed revenues, the result is a decrease in net position. The relationship between revenues and expenses can be thought of as the District's operating results. The District's net position, as measured in the Statement of Net Position is one way to measure the District's financial health, or financial position. Over time, increases or decreases in the District's net position - as measured in the Statement of Activities - are one indicator of whether its financial health is improving or deteriorating. However, the District's goal and mission is to provide success for each child's education, not to generate profits as private corporations do. For this reason, many other nonfinancial factors should be considered in assessing the overall health of the District. In the case of the Oconee County Board of Education, assets and deferred outflows of resources exceeded liabilities and deferred inflows of resources by $76.1 million at June 30, 2017. To better understand the District's actual financial position and ability to deliver services in future periods, it is necessary to review the various components of the net position category. For example, of the $76.1 million of net position, approximately $4.8 million was restricted for debt service. Accordingly, these funds were not available to meet the District's ongoing obligations to citizens and creditors. In addition, the District had just over $108.8 million (net of related debt) invested in capital assets (e.g., land, buildings, and equipment). The District uses these capital assets to provide educational services to students within geographic boundaries served by the District. Because of the very nature and on-going use of the assets being reported in this component of net position, it must be recognized that this portion of the net position is not available for future spending. The remaining balance of unrestricted net position is a $(37.5) million deficit. The deficit unrestricted net position is due to the adoption of GASB 68 for pension plans. The liability for the District's portion TRS (Teacher Retirement System) pension, including related deferred outflows and inflows of resources, is $(54.3) million. The remaining balance of $16.8 million may be used to meet the District's ongoing obligations to citizens and creditors. 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. 7 OCONEE BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2017 Table 1 Net Position As s e ts Current and Other Assets Capital Assets, Net Total Assets Governmental Activities FY 2017 FY 2016 $ 54,688,300 116,257,423 $ 170,945,723 $ 24,381,634 111,359,861 $ 135,741,495 Deferred Outflows of Resources Total Assets and Deferred Outflows of Resources 17,784,836 188,730,559 5,315,645 141,057,140 Liabilitie s Current and Other Liabilities Long-Term Liabilities Total Liabilities $ 15,625,621 95,793,439 $ 111,419,060 $ 11,450,443 55,006,168 $ 66,456,611 Deferred Inflows of Resources Total Liabilities and Deferred Inflows of Resources 1,176,153 112,595,213 5,968,655 72,425,266 Net Position Net Investment in Capital Assets Restricted Unrestricted Total Net Position $ 108,818,926 4,833,233 (37,516,813) $ 76,135,346 $ 105,720,030 3,775,048 (40,863,204) $ 68,631,874 Table 1 provides a summary of the School District's net position for this fiscal year as compared to the prior fiscal year. Total net position increased $7.5 million in fiscal year 2017 from the prior year due to an increase in total assets of approximately $35.2 million. There was an increase in liabilities and deferred inflows and outflows of resources of approximately $27.7 million primarily due to an increase in bond payable ($22.1), pension liability and related items ($1.6), accounts payable ($1.9) and an increase in construction contracts payable ($1.4). 8 OCONEE BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2017 Table 2 Change in Net Position Revenues Program Revenues: Charges for Services and Sales Operating Grants and Contributions Capital Grants and Contributions Total Program Revenues General Revenues: Property Taxes, Maintenance and Operations Property Taxes, Debt Service Sales Taxes Intangible Recording & Real Estate Transfer Investment Earnings Total General Revenues Total Revenues Program Expenses Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services Federal Grant Administration General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Central Support Services Other Support Services Operations of Non-Instructional Services Miscellaneous non-instructional services Food Services Interest on Short-Term and Long-Term Debt Total Expenses Governmental Activities FY 2017 FY 2016 $ 4,025,716 38,796,336 1,878,998 $ 44,701,050 $ 3,984,779 36,899,988 154,440 $ 41,039,207 $ 29,312,843 110,133 6,756,466 922,818 106,410 $ 37,208,670 $ 81,909,720 $ 27,565,504 107,986 6,761,642 739,187 37,699 $ 35,212,018 $ 76,251,225 $ 48,270,708 2,664,535 1,211,293 1,063,455 108,950 721,240 5,634,706 493,715 5,606,006 4,574,957 608,658 4,209 871,534 2,287,793 284,489 $ 74,406,248 $ 43,780,975 2,473,813 1,409,625 971,878 98,192 804,885 5,106,838 359,398 5,154,219 3,914,196 560,366 1,236 750,674 2,545,162 58,625 $ 67,990,082 Increase in Net Position $ 7,503,472 $ 8,261,143 9 OCONEE BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2017 Cost of Providing Services The Statement of Activities shows the cost of program services and the charges for services and grants offsetting these services. Table 3 shows, for governmental activities, the total cost of services and the net cost of services. Net cost of services can be defined as the total cost less fees generated by the activities and intergovernmental revenue provided for specific programs. The net cost reflects the financial burden on the School District's taxpayers by each activity as compared to the prior fiscal year. Table 3 Cost of Services Total Cost of Services FY 2017 FY 2016 Net Cost of Services FY 2017 FY 2016 Instruction $ 48,270,708 $ 43,780,975 Support Services Pupil Services 2,664,535 2,473,813 Improvement of Instructional Services 1,211,293 1,409,625 Educational Media Services 1,063,455 971,878 Federal Grant Administration 108,950 98,192 General Administration 721,240 804,885 School Administration 5,634,706 5,106,838 Business Administration 493,715 359,398 Maintenance and Operation of Plant 5,606,006 5,154,219 Student Transportation Services 4,574,957 3,914,196 Central Support Services 608,658 560,366 Other Support Services 4,209 1,236 Operations of Non-Instructional Serv. Misc. non-instructional services 871,534 750,674 Food Services 2,287,793 2,545,162 Interest on Debt 284,489 58,625 $ 14,258,290 $ 15,597,864 2,388,109 751,249 101,274 (574,829) 3,675,300 491,049 3,211,129 3,577,714 587,683 4,185 2,098,866 961,268 29,088 (442,903) 3,106,590 352,489 2,839,320 2,993,688 551,794 273 870,875 78,681 284,489 (1,595,405) 399,318 58,625 Total Expenses $ 74,406,248 $ 67,990,082 $ 29,705,198 $ 26,950,875 Expenses increased about $6.4 million from the prior year, while net costs of services increased about $2.8 million from the prior year. The increase in expenses is primarily due to all employees receiving a 3.0% salary improvement, increase in benefit costs, and growth in the student population. The increase in the net cost of services is also primarily due to all employees receiving a 3.0% salary improvement, increase in benefit costs, and growth in the student population. Operating Grants and Contributions Revenue increased approximately $1.9 million due to growth in the student population and reduction of the austerity reduction. Also, Capital Grants and Contributions Revenue increased approximately $1.7 million due to an increase in state capital outlay funding for capital projects. 10 OCONEE BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2017 FINANCIAL ANALYSIS OF THE SCHOOL DISTRICT'S FUNDS Information about the School District's governmental funds is presented starting on Page 16 of this report. Governmental funds are accounted for using the modified accrual basis of accounting. The governmental funds had total revenues of $80.5 million and total expenditures of approximately $80.2 million in fiscal year 2017. Total governmental fund balances of $40.6 million at June 30, 2017, an increase of $25.1 million from the prior year. This increase was primarily caused by the proceeds from the issuance of $22,740,000 Series 2017 General Obligation Bonds. General Fund Budget Highlights The School District's budget is prepared according to Georgia Law. The most significant budgeted fund is the General Fund. During the course of fiscal year 2017, the School District amended its General Fund budget as needed. The School District budget is adopted at the aggregate level and maintained at the program, function, object, and site levels to facilitate budgetary control. The budgeting systems are designed to control the total budget, but provide flexibility to meet the ongoing programmatic needs. The budgeting systems are also designed to control total site budgets but provide flexibility for site management as well. For the General Fund, the final actual revenues of $73.2 million were more than the final budget by approximately $2.6 million. This is attributed to federal grant allotments being received after the General Fund budget is adopted. Additionally, the District did not include revenues in the final budget for school activity accounts (included in miscellaneous and charges for services revenues). Also, more state revenue was received than budgeted due to student growth and growth in tax digest. The General Fund's final actual expenditures of approximately $70.3 million were less than the final budget by $41 thousand. 11 OCONEE BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2017 CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets At fiscal year ended June 30, 2017, the School District had $116.3 million invested in capital assets, net of accumulated depreciation, all in governmental activities. These assets are made up of a broad range of items including buildings; land; land improvements; and food service, transportation and maintenance equipment. Table 4 reflects a summary of these balances, net of accumulated depreciation, as compared to the prior fiscal year. Table 4 Capital Assets at June 30 (Net of Depreciation) Governmental Activities FY 2017 FY 2016 Land Construction in Progress Land Improvements Buildings and Improvements Equipment $ 5,811,126 3,866,668 4,593,837 97,157,409 4,828,383 $ 4,753,482 181,216 4,579,756 98,134,214 3,711,193 Total $ 116,257,423 $ 111,359,861 Additional information about the School District's Capital Assets can be found in Note 6 to the Financial Statements. Long Term Debt At June 30, 2017, the School District had approximately $27.7 million in bond and other debt outstanding. Table 5 summarizes the School District's debt as compared to the prior fiscal year. Table 5 Change in Long Term Debt Governmental Activities FY 2017 FY 2017 General Obligation Bonds Bond Premiums Unamortized Installment Sales Agreeement Total $ 25,515,000 $ 5,425,000 2,074,253 87,689 88,047 112,995 $ 27,677,300 $ 5,625,684 12 OCONEE BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2017 The increase in bonds payable was caused by the issuance of $22,740,000 Series 2017 General Obligation Bonds. Additional information about the School District's debt can be found in Note 10 to the Financial Statements. FACTORS BEARING ON THE DISTRICT'S FUTURE Currently known circumstances that are expected to have a significant effect on financial position or results of operations in future years are as follows: The School District is financially stable. Oconee County School Districts' priority on academic instruction continues to attract new residents into the county due to the school system's focus on quality instructional programs. The District consistently ranks within the top ten (10) achieving school systems in Georgia. Oconee County continues to collect approximately 98% of the assessed taxes. This consistent collection of property taxes has assisted the local school district to meet financial obligations. The School District plans to fund additional capital outlays with the one percent local sales tax revenue and state capital outlay grants. The Oconee County School System will remain optimistic about the ability to maximize all of the financial resources to provide an exceptional educational experience for our students. The challenge will be to balance revenue streams (the state not fully funding education) with occurring increases in expenses (personnel, employer paid health benefits and operational costs). In spite of these challenges, the School District will continue to be a good steward of tax dollars while providing a quality educational opportunity. CONTACTING THE SCHOOL DISTRICT'S FINANCIAL MANAGEMENT This financial report is designed to provide our citizen's taxpayers, investors and creditors with a general overview of the School District's finances and to show the School District's accountability for the money it receives. If you have questions about this report or need additional financial information, contact Saranna Charping, CFO, at the Oconee County Board of Education, P.O. Box 146, 34 School Street, Watkinsville, Georgia 30677. You may also email your questions to scharping@oconeeschools.org. 13 BASIC FINANCIAL STATEMENTS OCONEE COUNTY BOARD OF EDUCATION STATEMENT OF NET POSITION JUNE 30, 2017 ASSETS Cash and cash equivalents Receivables: Taxes Intergovernmental Other Inventory Prepaid items Capital assets (nondepreciable) Capital assets (depreciable, net of accumulated depreciation) Total assets DEFERRED OUTFLOWS OF RESOURCES Pension related items Total deferred outflows of resources LIABILITIES Accounts payable Salaries and benefits payable Accrued interest payable Construction contracts payable Retainage payable Installment sales agreement, due within one year Installment sales agreement, due in more than one year Bonds payable, due within one year Bonds payable, due in more than one year Net pension liability, due in more than one year Compensated absences, within one year Compensated absences, due in more than one year Total liabilities DEFERRED INFLOWS OF RESOURCES Pension related items Total deferred inflows of resources NET POSITION Net investment in capital assets Restricted for: Debt service Unrestricted Total net position The accompanying notes are an integral part of these financial statements. 14 Governmental Activities $ 45,915,871 1,161,472 7,303,952 157,157 147,689 2,159 9,677,794 106,579,629 170,945,723 17,784,836 17,784,836 2,590,052 8,195,731 275,586 1,381,331 250,965 26,513 61,534 2,775,000 24,814,253 70,903,159 130,443 14,493 111,419,060 1,176,153 1,176,153 108,818,926 4,833,233 (37,516,813) $ 76,135,346 OCONEE COUNTY BOARD OF EDUCATION STATEMENT OF ACTIVITIES FOR THE FISCAL YEAR ENDED JUNE 30, 2017 Functions/Programs Governmental activities: Instruction $ Support services: Pupil services Improvement of instructional services Educational media services Federal grant administration General administration School administration Business administration Maintenance and operation of facilities Student transportation services Central support services Other support services Operations of non-instructional services: Miscellaneous non-instructional services Food services operation Interest on long-term debt Total governmental activities $ Expenses 48,270,708 2,664,535 1,211,293 1,063,455 108,950 721,240 5,634,706 493,715 5,606,006 4,574,957 608,658 4,209 871,534 2,287,793 284,489 74,406,248 Charges for Services Program Revenues Operating Grants and Contributions Capital Grants and Contributions $ 2,926,671 $ 29,350,647 $ 1,735,100 - 276,426 - - - 31,502 - - 459,805 962,181 108,950 1,295,708 1,958,062 2,666 2,360,319 877,746 5,348 24 239 361 1,344 3,056 119,497 15,627 - - - 659 1,067,543 1,138,454 3,115 - - - $ 4,025,716 $ 38,796,336 $ 1,878,998 Net (Expense) Revenue and Changes in Net Position Governmental Activities $ (14,258,290) (2,388,109) (751,249) (101,274) 574,829 (3,675,300) (491,049) (3,211,129) (3,577,714) (587,683) (4,185) (870,875) (78,681) (284,489) (29,705,198) General revenues: Taxes: Property taxes, levied for general purposes Property taxes, levied for debt service Sales taxes Other taxes Unrestricted investment earnings Total general revenues Change in net position Net position, beginning of year Net position, end of year The accompanying notes are an integral part of these financial statements. 29,312,843 110,133 6,756,466 922,818 106,410 37,208,670 7,503,472 68,631,874 $ 76,135,346 15 OCONEE COUNTY BOARD OF EDUCATION BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2017 ASSETS Cash and cash equivalents Receivables: Taxes Intergovernmental Other Due from other funds Prepaid items Advances to other funds Inventory General District-Wide Capital Projects $ 19,380,552 $ 21,997,384 $ 580,077 5,793,823 157,157 1,941,199 2,159 1,292,144 147,689 10,511 1,510,129 - - Total assets $ LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES LIABILITIES Accounts payable $ Salaries and benefits payable Construction contracts payable Retainage payable Due to other funds Advances from other funds Total liabilities DEFERRED INFLOWS OF RESOURCES Deferred inflow resources - intergovernmental revenues Deferred inflow resources - property taxes Total deferred inflows of resources FUND BALANCES Nonspendable: Inventory Prepaid items Advance to other funds Restricted for: Capital projects Debt service Assigned for: Appropriation for next year's budget Unassigned Total fund balances Total liabilities, deferred inflows of resources and fund balances $ 29,294,800 $ 2,380,412 $ 8,195,731 - 10,576,143 195,753 195,753 147,689 2,159 1,292,144 - 1,545,233 15,535,679 18,522,904 29,294,800 $ 23,518,024 $ 209,640 $ - 1,381,331 250,965 1,941,199 1,292,144 5,075,279 1,510,129 - 1,510,129 16,932,616 16,932,616 23,518,024 $ The accompanying notes are an integral part of these financial statements. Debt Service 4,537,935 570,884 - Total Governmental Funds $ 45,915,871 1,161,472 7,303,952 157,157 1,941,199 2,159 1,292,144 147,689 5,108,819 $ 57,921,643 - $ - - - - 2,590,052 8,195,731 1,381,331 250,965 1,941,199 1,292,144 15,651,422 1,510,129 195,753 1,705,882 - 5,108,819 - 5,108,819 5,108,819 $ 147,689 2,159 1,292,144 16,932,616 5,108,819 1,545,233 15,535,679 40,564,339 57,921,643 16 OCONEE COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET POSITION JUNE 30, 2017 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 current financial resources and, therefore, are not reported in the governmental funds. Cost Less accumulated depreciation $ 147,803,780 (31,546,357) Other long-term assets are not available to pay for current-period expenditures and, therefore, are unavailable in the governmental funds. Property taxes Intergovernmental revenues $ 195,753 1,510,129 The net pension liability are related deferrals are not a financial liability in governmental fund activities and is therefore not reported in governmental funds. Net pension liability Pension related deferred outflows of resources Pension related deferred inflows of resources $ (70,903,159) 17,784,836 (1,176,153) Long-term liabilities and related items are not due and payable in the current period and, therefore, are not reported in the governmental funds. Bonds payable $ (25,515,000) Premium, net of amortization (2,074,253) Accrued interest (275,586) Compensated absences (144,936) Installment sales agreement (88,047) Net position of governmental activities $ The accompanying notes are an integral part of these financial statements. 40,564,339 116,257,423 1,705,882 (54,294,476) (28,097,822) 76,135,346 17 OCONEE COUNTY BOARD OF EDUCATION STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS FOR THE FISCAL YEAR ENDED JUNE 30, 2017 REVENUES Property taxes Sales taxes Other taxes State funds Federal funds Investment income Charges for services Miscellaneous Total revenues EXPENDITURES Current: Instruction Support services: Pupil services Improvement of instructional services Educational media services Federal grant administration General administration School administration Business administration Maintenance and operation of facilities Student transportation services Central support services Other support services Miscellaneous non-instructional services Food services operation Capital Outlay Debt service: Principal retirement Interest and fees Bond issuance costs Total expenditures Excess (deficiency) of revenues over (under) expenditures OTHER FINANCING SOURCES (USES) Transfers in Transfers out Bonds issued Premium on bonds issued Proceeds from sale of capital assets Total other financing sources (uses) Net change in fund balances General $ 29,354,210 $ - 922,818 35,957,616 2,917,248 24,831 1,708,584 2,317,132 73,202,439 District Wide Capital Projects 115,397 $ - 368,869 - 63,741 - 548,007 Debt Service Total Governmental Funds - $ 6,756,466 17,838 6,774,304 29,469,607 6,756,466 922,818 36,326,485 2,917,248 106,410 1,708,584 2,317,132 80,524,750 45,655,363 2,599,369 1,166,361 1,036,815 105,836 689,183 5,456,005 468,480 5,535,668 3,856,218 454,822 4,209 865,836 2,253,803 124,672 24,948 5,134 - 70,302,722 2,899,717 (270) 12,611 12,341 2,912,058 - 1,900 5,375 341,112 6,421,766 337,169 7,107,322 (6,559,315) 2,543,115 - 22,740,000 2,047,795 - 27,330,910 20,771,595 - - 2,650,000 111,400 - 2,761,400 4,012,904 (2,542,845) (2,542,845) 1,470,059 45,655,363 2,599,369 1,166,361 1,036,815 105,836 691,083 5,456,005 473,855 5,535,668 4,197,330 454,822 4,209 865,836 2,253,803 6,546,438 2,674,948 116,534 337,169 80,171,444 353,306 2,543,115 (2,543,115) 22,740,000 2,047,795 12,611 24,800,406 25,153,712 FUND BALANCES, beginning of year 15,610,846 (3,838,979) FUND BALANCES, end of year $ 18,522,904 $ 16,932,616 $ The accompanying notes are an integral part of these financial statements. 18 3,638,760 5,108,819 $ 15,410,627 40,564,339 OCONEE COUNTY BOARD OF EDUCATION RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES FOR THE FISCAL YEAR ENDED JUNE 30, 2017 Amounts reported for governmental activities in the statement of activities are different because: Net change in fund balances - total governmental funds $ Governmental funds report capital outlays as expenditures. However, in the statement of activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. The amount by which capital outlays exceeded depreciation in the current period is as follows: Capital outlay Depreciation expense $ 7,649,555 (2,751,993) Revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the governmental funds. Property taxes Intergovernmental revenue $ (46,631) 1,510,129 In the governmental funds, current year expenditures related to pensions are comprised solely of amounts contributed to the plan for the current year. However, in the statement of activities, expenses related to pensions include amounts that do not require the use of current financial resources. This amount represents the difference in the required accounting treatment of pensions and related items. The issuance of long-term debt provides current financial resources to governmental funds, while the repayment of the principal of long-term debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net position. This amount is the net effect of these differences in the treatment of long-term debt and related items. Bond proceeds Principal payments - bonds Principal payments - installment sales agreement $ (24,787,795) 2,650,000 24,948 Some expenses reported in the statement of activities do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds. Amortization of bond premium Change in compensated absences Change in accrued interest $ 61,231 (144,936) (229,186) Change in net position of governmental activities $ The accompanying notes are an integral part of these financial statements. 25,153,712 4,897,562 1,463,498 (1,585,562) (22,112,847) (312,891) 7,503,472 19 OCONEE COUNTY BOARD OF EDUCATION GENERAL FUND STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL (GAAP BASIS) FOR THE FISCAL YEAR ENDED JUNE 30, 2017 REVENUES Property taxes Other taxes State funds Federal funds Charges for services Investment income Miscellaneous EXPENDITURES Current: Instruction Support services: Pupil services Improvement of instructional services Educational media services Federal grant administration General administration School administration Business administration Maintenance and operation of plant Student transportation services Central support services Other support services Miscellaneous non-instructional services Food services operation Capital outlay Debt service: Principal payments Interest Total expenditures Excess (deficiency) of revenues over (under) expenditures OTHER FINANCING SOURCES (USES) Proceeds from sale of capital assets Transfers out Total other financing sources (uses) Net change in fund balances FUND BALANCES, beginning of year FUND BALANCES, end of year Budget Original Final $ 28,276,885 $ 29,046,885 $ 924,280 802,680 34,288,765 35,333,922 4,340,723 4,918,236 271,667 106,000 25,000 25,000 - 320,000 68,127,320 70,552,723 44,802,809 2,964,562 1,305,254 955,515 104,463 756,155 4,728,540 423,839 4,738,978 3,493,309 927,057 3,657 - 2,854,001 - 30,000 10,000 68,098,139 29,181 45,783,131 3,015,642 1,340,107 975,515 105,607 776,983 4,788,539 473,839 5,188,978 4,073,979 927,057 2,854,001 - 30,000 10,000 70,343,378 209,345 - - - - - - 29,181 209,345 15,610,846 15,610,846 $ 15,640,027 $ 15,820,191 $ The accompanying notes are an integral part of these financial statements. Actual Variance With Final Budget 29,354,210 $ 922,818 35,957,616 2,917,248 1,708,584 24,831 2,317,132 73,202,439 307,325 120,138 623,694 (2,000,988) 1,602,584 (169) 1,997,132 2,649,716 45,655,363 2,599,369 1,166,361 1,036,815 105,836 689,183 5,456,005 468,480 5,535,668 3,856,218 454,822 4,209 865,836 2,253,803 124,672 24,948 5,134 70,302,722 2,899,717 12,611 (270) 12,341 2,912,058 15,610,846 18,522,904 $ 127,768 416,273 173,746 (61,300) (229) 87,800 (667,466) 5,359 (346,690) 217,761 472,235 (4,209) (865,836) 600,198 (124,672) 5,052 4,866 40,656 2,690,372 12,611 (270) 12,341 2,702,713 - 2,702,713 20 OCONEE COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY ASSETS AND LIABILITIES AGENCY FUND JUNE 30, 2017 Cash Total assets Funds held for others Total liabilities ASSETS LIABILITIES The accompanying notes are an integral part of these financial statements. Club and Athletics Fund $ 165,844 $ 165,844 $ 165,844 $ 165,844 21 OCONEE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2017 Note 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY Reporting Entity The Oconee 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 government-wide financial statements, fund financial statements and notes to the basic financial statements of the Oconee County Board of Education. Government-wide Statements: The Statement of Net Position and the Statement of Activities display information about the financial activities of the overall School District, except for fiduciary activities. Eliminations have been made to minimize the double counting of internal activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange transactions. The Statement of 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. In the Statement of Net Position, equity is reported as net position and consists of net investment in capital assets, amounts restricted by outside parties for specific purposes and unrestricted amounts. 22 OCONEE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2017 Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 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. The School District reports the following major governmental funds: General Fund is the School District's primary operating fund. It accounts for all financial resources of the School District, except those resources required to be accounted for in another fund. District-Wide Capital Projects Fund accounts for financial resources including Special Purpose Local Option Sales Tax (SPLOST), Bond Proceeds and grants from Georgia State Financing and Investment Commission to be used for the acquisition, construction or renovation of major capital facilities. Debt Service Fund accounts for taxes (property and sales) legally restricted for the payment of general long-term debt principal, interest and paying agent's fees. The School District also reports the following fund types: Agency Fund accounts for assets held by the School District as an agent for various individual school clubs and activities. Basis of Accounting/Measurement Focus The basis of accounting determines when transactions are reported on the financial statements. The District-wide governmental activities and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Agency funds are custodial in nature and do not present results of operations or have a measurement focus. 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. 23 OCONEE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2017 Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) The School District uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts. Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Under this method, revenues are recognized when measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the School District considers most revenues to be available if they are collected within 60 days of the end of the current fiscal period; however, intergovernmental revenues reported in the governmental funds are considered to be available if they are collected within 120 days after year-end. Property taxes, sales taxes, intergovernmental revenue, 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, claims and judgments and compensated absences, which are recognized as expenditures to the extent they have matured. Capital asset acquisitions are reported as expenditures in governmental funds. Proceeds of general long-term liabilities and capital leases are reported as other financing sources. Revenue from grants and donations is recognized in the year in which all eligibility requirements have been satisfied. Eligibility requirements include timing requirements, which specify the year when the resources are required to be used or the year when use is first permitted, matching requirements, in which the School District must provide local resources to be used for a specified purpose, and expenditure requirements, in which the resources are provided to the School District on a reimbursement basis. The State of Georgia reimburses the School District for teachers' salaries and operating costs through the Quality Basic Education (QBE) Formula Earnings program. State of Georgia law defines the formula driven grant that determines the cost of an academic school year and the State of Georgia's share in this cost. Generally teachers are contracted for the school year (July 1 June 30) and paid over a twelve month contract period, generally September 1 through August 31. In accordance with the requirements of the enabling legislation of the QBE program, the State of Georgia reimburses the School District over the same twelve month period in which teachers are paid, funding the academic school year expenditures. At June 30, the amount of teachers' salaries incurred but not paid until July and August of the subsequent year are accrued as the State of Georgia has only postponed the final payment of their share of the cost until the subsequent appropriations for cash management purposes. By June 30 of each year, the State of Georgia has a signed appropriation that includes this final amount, which represents the State of Georgia's intent to fund this final payment. Based on guidance in Government Accounting Standards Board (GASB) Statement No. 33, paragraph 74, the State of Georgia recognizes its QBE liability for the July and August salaries at June 30, and the School District recognizes the same QBE as a receivable and revenue, consistent with symmetrical recognition. 24 OCONEE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2017 Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 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. Cash and Cash Equivalents COMPOSITION OF DEPOSITS Cash and cash equivalents consist of cash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition in authorized financial institutions. Georgia Laws OCGA 45-8-14 authorizes the School District to deposit its funds in one or more solvent banks or insured Federal savings and loan associations. Investments COMPOSITION OF INVESTMENTS Investments made by the School District in nonparticipating interest-earning contracts (such as certificates of deposit) and repurchase agreements are reported at cost. Participating interest-earning contracts and money market investments with a maturity at purchase of one year or less are reported at amortized cost. 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. 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 banker's acceptances, (6) The Local Government Investment Pool administered by the State Treasurer of the State of Georgia, (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 investments that addresses credit risks, custodial credit risks, concentration of credit risks, interest rate risks or foreign currency risks. 25 OCONEE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2017 Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Receivables and Payables Receivables consist of amounts due from property and sales taxes, grant reimbursements due on federal, state or other grants for expenditures made but not reimbursed and other receivables disclosed from information available. Receivables are recorded when either the asset or revenue recognition criteria has been met. Receivables recorded on the basic financial statements are reported net of an allowance for uncollectible receivables when necessary. Activity between funds that is representative of lending/borrowing arrangements outstanding at the end of the fiscal year as well as all other outstanding balances between funds is reported as "due to/from other funds." Advances between funds, as reported in the fund financial statements, represent long-term borrowing arrangements with established repayment schedules, and are offset by a fund balance account in applicable governmental funds to indicate that they are not available for appropriation and are not expendable available financial resources. Property Taxes The Oconee County Tax Commissioner levied the property tax for the 2016 tax digest year (calendar year) on August 30, 2016 (levy date). Taxes were due on November 15, 2016 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2016 tax digest are reported as revenue in the governmental funds for fiscal year 2017. The Oconee County Tax Commissioner bills and collects the property taxes for the School District, withholds 2.5% of taxes collected as a fee for tax collection and remits the balance of taxes collected to the School District. Property tax revenues, at the fund reporting level, during the fiscal year ended June 30, 2017, for maintenance and operations amounted to $27,607,269 and for debt service (reported in the capital projects fund) amounted to $2,452. The Georgia Constitution, Article VIII, Section VI, Paragraph I requires the board of education of each school system to annually certify to its fiscal authority or authorities a school tax not greater than 20 mills per dollar for the support and maintenance of education. The Oconee County Board of Education is in compliance with this law. Tax millage rates levied for the 2016 tax year (calendar year) for the Oconee County Board of Education were as follows (a mill equals $1 per thousand dollars of assessed value): School Maintenance and Operations 17.0 mills Additionally, Title Ad Valorem Tax revenues, at the fund reporting level, amounted to $1,746,941 for the General Fund and $112,945 for the Capital Projects Fund during the fiscal year ended June 30, 2017. 26 OCONEE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2017 Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Sales Taxes Special Purpose Local Option Sales Tax, at the fund reporting level, during the year amounted to $6,756,466 and is to be used for capital outlay for educational purposes or debt service. This sales tax was authorized by local referendum and the sales tax must be re-authorized at least every five years. Inventories CONSUMABLE SUPPLIES On the basic financial statements, consumable supplies are reported at cost (first-in, first-out). The School District uses the consumption method to account for the consumable supplies inventory whereby an asset is recorded when supplies are purchased and expenses/expenditures are recorded at the time the supplies are consumed. FOOD INVENTORIES On the basic financial statements, inventories of donated food commodities used in the preparation of meals are reported at their federally assigned value and purchased foods inventories are reported at cost (first-in, first-out). The School District uses the consumption method to account for inventories whereby donated food commodities are recorded as an asset and as revenue when received, and expenses/expenditures are recorded as the inventory items are used. Purchased foods are recorded as an asset when purchased and expenses/expenditures are recorded as the inventory items are used. Prepaid Items Payments made to vendors for services that will benefit periods subsequent to June 30, 2017, are recorded as prepaid items using the consumption method. 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 acquisition 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. Depreciation is used to allocate the actual or estimated historical cost of all capital assets over estimated useful lives. 27 OCONEE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2017 Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (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 Land Improvements Buildings and Improvements All Equipment Intangible Assets All N/A $ 25,000 70 years $ 25,000 15 to 70 years $ 5,000 5 to 25 years $ 25,000 15 to 20 years Deferred Outflows/Inflows of Resources In addition to assets, the statement of net position will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period(s) and so will not be recognized as an outflow of resources (expense/expenditure) until then. These items are the deferred outflows of resources related to the reporting of the net pension liability reported in the government-wide statement of net position. The School District reports five (5) deferred outflows of resources related to the reporting of the net pension liability. The Governmental Activities report a deferred outflow of resources for the School District's actual contributions to the pension plan during the fiscal year ended June 30, 2017 which are subsequent to the measurement date of the net pension liability and will be recognized in fiscal year 2018. The Governmental Activities reports a deferred outflow of resources for experience gains or losses related to the pension plan; a deferred outflow of resources for the difference between the School District's actual contributions towards the pension plan and the School District's proportionate share of contributions, as well as the change in the School District's proportionate share; and a deferred outflow of resources for the changes in actuarial assumptions which will be amortized over the remaining service period. The Governmental Activities reports a deferred outflow of resources for the net difference between projected and actual investment earnings on the pension assets, which will be amortized over a five year period. 28 OCONEE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2017 Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) In addition to liabilities, the statement of financial position will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. The School District has one type of deferred inflow 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 intergovernmental revenues and these amounts are deferred and will be recognized as an inflow of resources in the period in which the amounts become available. The School District also has two items that qualify for reporting in this category which occurs only in the governmental activities. The Governmental Activities reports a deferred inflow of resources for experience gains or losses related to the pension plan and a deferred inflow of resources for the difference between the School District's actual contributions towards the pension plan and the School District's proportionate share of contributions, as well as the change in the School District's proportionate share, which will be amortized over the remaining service period. General Obligation Bonds The School District issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities. In addition, general obligation bonds have been issued to refund existing general obligations bonds. Bond issuance costs are recognized in the financial statements during the fiscal year bonds are issued. General obligation bonds are direct obligations and pledge the full faith and credit of the government. In the fund financial statements, the face amount of debt issued and any related premium, is reported as other financing sources. Issuance costs, whether or not withheld from actual proceeds, are reported as debt service expenditures. In the government-wide financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities statement of net position. Bond premiums and discounts are deferred and amortized over the life of the bonds using the effective interest method. Bonds payable are reported net of the applicable bond premium or discount. Bond issuance costs are expensed when incurred. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets, deferred outflows of resources, liabilities and deferred inflows of resources, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 29 OCONEE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2017 Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Compensated Absences All 12 month personnel of Oconee County Board of Education shall earn 15 annual vacation days per year from July 1 through June 30. Annual vacation leave will be credited to 12-month employees at the rate of 1.25 days per month, for a total of 15 days per year between July 1 and June 30. Employees may carryforward a maximum of 7.5 vacation days at July 1 of each year. Accrued vacation compensated absences are shown as long-term liabilities on the statement of net position. A fund liability is accrued only for the matured portion of compensated absences at fiscal year end. 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 additions to/deductions from TRS's fiduciary net position have been determined on the same basis as they are reported by TRS. 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. 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 Public School Employees Retirement System of Georgia (PSERS) and additions to/deductions from PSERS's fiduciary net position have been determined on the same basis as they are reported by 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. Fund Equity Fund equity at the governmental fund financial reporting level is classified as "fund balance." Fund equity for all other reporting is classified as "net position." Fund Balance Generally, fund balance represents the difference between the assets, liabilities and deferred inflows of resources under the current financial resources measurement focus of accounting. In the fund financial statements, governmental funds report fund balance classifications that comprise a hierarchy based primarily on the extent to which the School District is bound to honor constraints on the specific purposes for which amounts in those funds can be spent. Fund balances are classified as follows: Nonspendable Fund balances are reported as nonspendable when amounts cannot be spent because they are either (a) not in spendable form (i.e., items that are not expected to be converted to cash) or (b) legally or contractually required to be maintained intact. 30 OCONEE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2017 Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Restricted Fund balances are reported as restricted when there are limitations imposed on their use either through the enabling legislation adopted by the School District or through external restrictions imposed by creditors, grantors or laws or regulations of other governments. Committed Fund balances are reported as committed when they can be used only for specific purposes pursuant to constraints imposed by formal action of the Board of Education through the adoption of a resolution. Only the Board of Education may modify or rescind the commitment, also through a resolution. Assigned Fund balances are reported as assigned when amounts are constrained by the School District's intent to be used for specific purposes, but are neither restricted nor committed. Through resolution, the Board of Education has authorized the Superintendent or his or her designee to assign fund balances. Unassigned Fund balances are reported as unassigned as the residual amount when the balances do not meet any of the above criterion. The School District reports positive unassigned fund balance only in the general fund. Negative unassigned fund balances may be reported in all funds. Flow Assumptions When both restricted and unrestricted amounts of fund balance are available for use for expenditures incurred, it is the School District's policy to use restricted amounts first and then unrestricted amounts as they are needed. For unrestricted amounts of fund balance, it is the School District's policy to use fund balance in the following order: Committed Assigned Unassigned Net Position Net position represents the difference between assets and deferred outflows of resources, and liabilities and deferred inflows of resources in reporting which utilizes the economic resources measurement focus. Net investment in capital assets, consists of capital assets, net of accumulated depreciation, reduced by the outstanding balances of any borrowing used (i.e., the amount that the School District has spent) for the acquisition, construction or improvement of those assets. Net position is reported as restricted using the same definition as used for restricted fund balance as described in the section above. All other net position is reported as unrestricted. The School District applies restricted resources first when an expense is incurred for purposes for which both restricted and unrestricted net position is available. 31 OCONEE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2017 Note 3: STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY The School District adopts an annual budget for the General Fund and Debt Service Fund. The budget is prepared in accordance with provisions of the Quality Basic Education Act, OCGA Section 20-2-167 and in accordance with U.S. generally accepted accounting principles. The legal level of budgetary control was estabilished by the Board and the aggregate function level. After the Board of Education has tentatively adopted the budget, such budget is advertised at least one time in a local newspaper of general circulation. At the next regular meeting of the Board after advertisement, the budget is revised as necessary and adopted as the final budget. The following functions had excesses of actual expenditures over appropriations in the amount shown for the fiscal year ended June 30, 2017: General Fund: Support Services: Educational media services Federal grant administration School administration Maintenance and operation of plant Other support services Miscellaneous non-instructional services Capital outlay $ 61,300 299 667,466 346,690 4,209 865,836 124,672 Note 4: DEPOSITS AND INVESTMENTS INVESTMENTS At June 30, 2017, the School District's investments consist of funds in the amount of $6,847,103 which are on deposit in the Georgia Fund 1, the State of Georgia investment pool created by OCGA 36-83-8, which is a stable asset value investment pool which follows Standard and Poor's criteria for AAAf rated money market funds and is regulated by the Georgia Office of the State Treasurer. The pool is not registered with the SEC as an investment company. The pool's primary objectives are safety of capital, investment income, liquidity and diversification while maintaining principal ($1 per share value). The asset value is calculated weekly to ensure stability. The pool distributes earnings (net of management fees) on a monthly basis and determines participants' shares sold and redeemed based on $1 per share. The pool also adjusts the value of its investments to fair market value as of year-end and the School District's investment in the Georgia Fund 1 is reported at fair value. The School District considers amounts held in Georgia Fund 1 as cash equivalents for financial statement presentation. 32 OCONEE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2017 Note 4: DEPOSITS AND INVESTMENTS (Continued) INVESTMENTS (continued) At June 30, 2017, the School District's investment in the Georgia Fund 1 is rated AAAf and the Georgia Fund 1 has a weighted average maturity of 26 days. . The Georgia Fund 1 is an investment pool which does not meet the criteria of GASB Statement No. 79 and is thus valued at fair value in accordance with GASB Statement No. 31. As a result, the School District does not disclose the investment in the Georgia Fund 1 within the fair value hierarchy. CUSTODIAL CREDIT RISK Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, the School District will not be able to recover deposits or will not be able to recover collateral securities that are in the possession of an outside party. State statutes require all deposits and investments (other than federal or state government instruments) to be collateralized by depository insurance, obligations of the U.S. government, or bonds of public authorities, counties, or municipalities. 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. For the year ended June 30, 2017, the commodities usage is recorded at their federally assigned value of $192,932. 33 OCONEE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2017 Note 6: CAPITAL ASSETS The following is a summary of changes in the capital assets during the fiscal year: Balances June 30, 2016 Increases Decreases Transfers Balances June 30, 2017 Governmental activities: Capital assets, not being depreciated: Land $ Construction in progress Total 4,753,482 $ 181,216 4,934,698 1,057,644 $ 3,866,668 4,924,312 - $ - - $ (181,216) (181,216) 5,811,126 3,866,668 9,677,794 Capital assets, being depreciated: Building improvements Equipment Land improvements Total Less accumulated depreciation for: Building improvements Equipment Land improvements Total 119,744,242 9,897,647 5,878,696 135,520,585 (21,610,028) (6,186,454) (1,298,940) (29,095,422) 855,259 1,771,216 98,768 2,725,243 (301,058) - (301,058) (2,013,280) (654,026) (84,687) (2,751,993) 301,058 - 301,058 181,216 - 181,216 - 120,780,717 11,367,805 5,977,464 138,125,986 (23,623,308) (6,539,422) (1,383,627) (31,546,357) Total capital assets, being depreciated, net 106,425,163 (26,750) - 181,216 106,579,629 Governmental activities capital assets, net $ 111,359,861 $ 4,897,562 $ - $ - $ 116,257,423 34 OCONEE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2017 Note 6: CAPITAL ASSETS (Continued) Depreciation expense was charged to functions as follows: Instruction $ Support services: Improvement of instructional services General administration School Administration Maintenance and operation of facilities Student transportation services Central Support Services Operations of non-instructional services: Food services Other enterprise operations $ 2,175,049 2,070 3,127 11,625 26,437 365,818 135,204 26,965 5,698 2,751,993 Note 7: INTERFUND RECEIVABLES, PAYABLES AND TRANSFERS Interfund receivables/payables as of June 30, 2017, consisted of the following: Interfund Payable District-Wide Capital Projects Interfund Receivable General Fund Total $ 1,941,199 The interfund balance above represents expenditures incurred by the General Fund to prefund certain capital projects, which will be repaid with future collections of sales tax or bond proceeds. Advances to/from other funds are as follows: Payable Fund District-Wide Capital Projects Receivable Fund General Fund Total $ 1,292,144 The interfund advance balance above represents capital expenditures to be reimbursed to the General Fund upon future collections of sales tax or bond proceeds. 35 OCONEE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2017 Note 7: INTERFUND RECEIVABLES, PAYABLES AND TRANSFERS (Continued) Interfund transfers for the year ended June 30, 2017, consisted of the following: Transfers Out General Fund Debt Service Fund Transfers In District-Wide Capital Projects Fund District-Wide Capital Projects Fund Total $ 270 2,542,845 $ 2,543,115 Transfers are used to move SPLOST proceeds from Debt Service Fund to District-Wide Capital Projects Fund to fund SPLOST projects as allowed in the referendum. Note 8: RISK MANAGEMENT The School District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors or omissions; job related illness or injuries to employees; acts of God; and unemployment compensation and vision plan. The School District has obtained commercial insurance for risk of loss associated with torts, assets and errors or omissions. The School District has neither significantly reduced coverage for these risks no incurred losses (settlements) which exceeded the School District's insurance coverage in any of the past four years. The School District has obtained commercial insurance for all losses related to acts of God. The School District has not experienced any losses related to this risk in the past four years. The School District is self-insured with regard to unemployment compensation claims. The School District accounts for claims within the General Fund with expenses/expenditures and liability being reported when it is probable that a loss has occurred, and the amount of that loss can be reasonably estimated. Changes in the unemployment compensation claims liability during the last two fiscal years are as follows: Beginning of Year Claims and Changes in Estimates Claims Paid End of Year 2016 $ - $ 900 $ 900 $ - 2017 - - - - 36 OCONEE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2017 Note 8: RISK MANAGEMENT (Continued) The School District pays an annual premium to the Fund for its general insurance coverage. The School District has purchased surety bonds to provide additional insurance coverage as follows: Position Covered Amount Superintendent Driver Education $100,000 $10,000 Note 9: OPERATING LEASES Oconee County Board of Education is committed under various leases for equipment. These leases are considered for accounting purposes to be operating leases. Lease expenditures for the year totaled approximately $139,490. Future minimum lease payments on these leases are as follows: Year ending June 30, 2018 2019 2020 2021 Total $ 60,138 50,880 26,313 1,734 $ 139,065 Note 10: LONG TERM DEBT INSTALLMENT SALES AGREEMENT The Oconee County Board of Education entered into an agreement dated June 1, 2006, with the Northeast Georgia Regional Educational Service Agency for the construction and subsequent lease of the Rutland Center. Under the terms of the agreement, the School District will make annual payments through June 15, 2020. GENERAL OBLIGATION DEBT OUTSTANDING General Obligation Bonds currently outstanding are as follows: Purpose Interest Rates Outstanding Balance at June 30, 2017 General Government - Series 2012 General Government - Series 2017 1.50% - 4.00% 2.50% - 4.00% $ 2,775,000 $ 22,740,000 37 OCONEE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2017 Note 10: LONG TERM DEBT (Continued) The changes in long-term obligations during the fiscal year ended June 30, 2017, were as follows: Governmental activities: General obligation bonds Unamortized bond premium Compensated absences Installment Sales Agreement Net pension liability Governmental activity Long-term liabilities Beginning Balance Additions Reductions Ending Balance Due Within One Year $ 5,425,000 $ 22,740,000 $ (2,650,000) $ 87,689 2,047,795 (61,231) - 460,907 (315,971) 112,995 - (24,948) 52,055,904 24,226,662 (5,379,407) $ 57,681,588 $ 49,475,364 $ (8,431,557) $ 25,515,000 $ 2,074,253 144,936 88,047 70,903,159 2,775,000 - 130,443 26,513 - 98,725,395 $ 2,931,956 For governmental activities, the net pension liability and compensated absences are being liquidated primarily by the General Fund. In February 2012, the Oconee County School District issued $13,500,000 of General Obligation Bonds Series 2012. The 2012 bonds were issued to (i) finance certain capital outlay projects, (ii) pay all or a portion of the principal and interest on certain general obligation bonds maturing on April 1, 2012, (iii) pay capitalized interest and (iv) pay expenses incident to the issuance of the Bonds. Interest on the Bonds is payable semiannually, on February 1 and August 1 of each year, commencing August 1, 2012. In February 2017, the Oconee County School District issued $22,740,000 of General Obligation Bonds Series 2017. The 2017 bonds were issued to (i) finance certain capital outlay projects, (ii) paying capitalized interest and (iii) paying the cost of issuing the Series 2017 Bonds. Interest on the Bonds is payable semiannually, on March 1 and September 1 of each year, commencing September 1, 2017. 38 OCONEE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2017 Note 10: LONG TERM DEBT (Continued) At June 30, 2017, payments due by fiscal year, which includes principal and interest, for these items are as follows: Fiscal Year Ending June 30 Installment Sales Agreement Principal Interest Total 2018 $ 2019 2020 Total $ 26,513 $ 27,606 33,928 88,047 $ 2,894 $ 1,768 597 5,259 $ 29,407 29,374 34,525 93,306 Fiscal Year Ending June 30 Principal General Obligation Bonds Interest 2018 $ 2019 2020 2021 2022 2023 Total $ 2,775,000 $ - 5,365,000 5,575,000 5,800,000 6,000,000 25,515,000 $ 987,512 $ 882,975 882,975 668,375 445,375 240,000 4,107,212 $ Total 3,762,512 882,975 6,247,975 6,243,375 6,245,375 6,240,000 29,622,212 Note 11: SIGNIFICANT COMMITMENTS The following is an analysis of significant outstanding construction or renovation contracts executed by the District as of June 30, 2017: Project Dove Creek Elementary School Malcom Bridge Elementary School Malcom Bridge Middle School Oconee County Middle School Amount $ 12,107,755 121,851 206,684 333,409 $ 12,769,699 The amounts described in this note are not reflected in the basic financial statements. 39 OCONEE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2017 Note 12: ON-BEHALF PAYMENTS The School District has recognized revenues and costs in the amount of $180,632 for retirement contributions paid on the School District's behalf by the following State Agencies. Georgia Department of Education Paid to the Teachers Retirement District for Teachers Retirement (TRS) in the amount of $51,052 State Treasurer of the State of Georgia Paid to the Public School Employees Retirement System for Public School Employees Retirement (PSERS) Employer's Cost in the amount of $129,580 Note 13: 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. The School District is a defendant in various legal proceedings pertaining to matters incidental to the performance of routine School District operations. The ultimate disposition of these proceedings is not presently determinable, but is not believed to be material to the basic financial statements. Note 14: RETIREMENT PLANS GENERAL INFORMATION ABOUT THE TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS) Plan description: All teachers of the 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. TRS issues a publicly available financial report that can be obtained at www.trsga.com/publications. 40 OCONEE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2017 Note 14: RETIREMENT PLANS (Continued) Benefits provided: TRS provides service retirement, disability retirement, and death benefits. Normal retirement benefits are determined as 2% of the average of the employee's two highest paid consecutive years of service, multiplied by the number of years of creditable service up to 40 years. An employee is eligible for normal service retirement after 30 years of creditable service, regardless of age, or after 10 years of service and attainment of age 60. Ten years of service is required for disability and death benefits eligibility. Disability benefits are based on the employee's creditable service and compensation up to the time of disability. Death benefits equal the amount that would be payable to the employee's beneficiary had the employee retired on the date of death. Death benefits are based on the employee's creditable service and compensation up to the date of death. Contributions: Per Title 47 of the O.C.G.A., contribution requirements of active employees and participating employers, as actuarially determined, are established and may be amended by the TRS Board. Pursuant to O.C.G.A. 47-3-63, the employer contributions for certain full-time public school support personnel are funded on behalf of the employer by the State of Georgia. Contributions are expected to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. Employees were required to contribute 6.00 % of their annual pay during fiscal year 2017. The School District's contractually required contribution rate for the year ended June 30, 2017 was 14.27% of annual school district payroll. District contributions to TRS were $5,687,700 for the year ended June 30, 2017. PENSION LIABILITIES, PENSION EXPENSE, AND DEFERRED OUTFLOWS OF RESOURCES AND DEFERRED INFLOWS OF RESOURCES RELATED TO PENSIONS At June 30, 2017, the District reported a liability for its proportionate share of the net pension liability that reflected a reduction for support attributable to those personnel funded on behalf of the District by the State of Georgia. The amount recognized by the District as its proportionate share of the net pension liability, the related State of Georgia funding, and the total portion of the net pension liability that was associated with the District were as follows: District's proportionate share of the net pension liability State of Georgia's proportionate share of the net pension liability associated with the District Total $ 70,903,159 944,492 $ 71,847,651 The net pension liability was measured as of June 30, 2016. The total pension liability used to calculate the net pension liability was based on an actuarial valuation as of June 30, 2015. An expected total pension liability as of June 30, 2016 was determined using standard roll-forward techniques. The District's proportion of the net pension liability was based on contributions to TRS during the fiscal year ended June 30, 2016. At June 30, 2016, the District's proportion was 0.343671%, which was an increase of 0.001738% from its proportion measured as of June 30, 2015. 41 OCONEE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2017 Note 14: RETIREMENT PLANS (Continued) PENSION LIABILITIES, PENSION EXPENSE, AND DEFERRED OUTFLOWS OF RESOURCES AND DEFERRED INFLOWS OF RESOURCES RELATED TO PENSIONS (Continued) For the year ended June 30, 2017, the District recognized pension expense of $7,479,780 and revenue of $142,756 for support provided by the State of Georgia for certain support personnel. At June 30, 2017, the District reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Differences between expected and actual experience Changes in assumption Deferred Outflows of Resources $ 1,056,266 1,837,712 Deferred Inflows of Resources $ 350,617 - Net difference between projected and actual earnings on pension plan investments Changes in proportion and differences between District contributions and proportionate share of contributions District contributions subsequent to the measurement date Total 8,969,542 - 233,616 825,536 5,687,700 - $ 17,784,836 $ 1,176,153 42 OCONEE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2017 Note 14: RETIREMENT PLANS (Continued) PENSION LIABILITIES, PENSION EXPENSE, AND DEFERRED OUTFLOWS OF RESOURCES AND DEFERRED INFLOWS OF RESOURCES RELATED TO PENSIONS (Continued) District contributions subsequent to the measurement date of $5,687,700 are reported as deferred outflows of resources and will be recognized as a reduction of the net pension liability in the year ending June 30, 2018. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows: Year ending June 30: 2018 2019 2020 2021 2022 Total $ 1,124,820 1,124,817 4,996,100 3,526,317 148,929 $ 10,920,983 Actuarial assumptions: The total pension liability as of June 30, 2016 was determined by an actuarial valuation as of June 30, 2015 using the following actuarial assumptions, applied to all periods included in the measurement: Inflation Salary increases Investment rate of return 2.75% 3.75 9.00%, average, including inflation 7.50%, net of pension plan investment expense, including inflation Postretirement mortality rates were based on the RP-2000 White Collar Mortality Table with future mortality improvement projected to 2025 with the Society of Actuaries' projection scale BB (set forward one year for males) for service requirements and dependent beneficiaries. The RP-2000 Disabled Mortality table with future mortality improvement projected to 2025 with Society of Actuaries' projection scale BB (set forward two years for males and four years for females) was used for the death after disability retirement. There is a margin for future mortality improvement in the tables used by the System. Based on the results of the most recent experience study adopted by the Board on November 18, 2015, the numbers of expected future deaths are 8-11% less than the actual number of deaths that occurred during the study period for healthy retirees and 9-11% less than expected under the selected table for disabled retirees. Rates of mortality in active service were based on the RP-2000 Employee Mortality Table projected to 2025 with projection scale BB. The actuarial assumptions used in the June 30, 2015 valuation were based on the results of an actuarial experience study for the period July 1, 2009 June 30, 2014. 43 OCONEE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2017 Note 14: RETIREMENT PLANS (Continued) PENSION LIABILITIES, PENSION EXPENSE, AND DEFERRED OUTFLOWS OF RESOURCES AND DEFERRED INFLOWS OF RESOURCES RELATED TO PENSIONS (Continued) The long-term expected rate of return on pension plan investments was determined using a lognormal distribution analysis in which best-estimate ranges of expected future real rates of return (expected nominal returns, net of pension plan investment expense and the assumed rate of inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table: Asset class Fixed income Domestic large equities Domestic mid equities Domestic small equities International developed market equities International emerging market equities Total * Rates shown are net of the 2.75% assumed rate of inflation Target allocation 30.00% 39.80 3.70 1.50 19.40 5.60 100.00% Long-term expected real rate of return* (.50)% 9.00 12.00 13.50 8.00 12.00 Discount rate: The discount rate used to measure the total pension liability was 7.50%. The projection of cash flows used to determine the discount rate assumed that Plan member contributions will be made at the current contribution rate and that employer and State of Georgia contributions will be made at rates equal to the difference between actuarially determined contribution rates and the member rate. Based on those assumptions, the pension plan's fiduciary net position was projected to be available to make all projected future benefit payments of current Plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. 44 OCONEE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2017 Note 14: RETIREMENT PLANS (Continued) PENSION LIABILITIES, PENSION EXPENSE, AND DEFERRED OUTFLOWS OF RESOURCES AND DEFERRED INFLOWS OF RESOURCES RELATED TO PENSIONS (Continued) Sensitivity of the District's proportionate share of the net pension liability to changes in the discount rate: The following presents the District's proportionate share of the net pension liability calculated using the discount rate of 7.50%, as well as what the 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: District's proportionate share of the net pension liability 1% Decrease (6.50%) $ 110,361,642 Current discount rate (7.50%) $ 70,903,159 1% Increase (8.50%) $ 38,415,603 Pension plan fiduciary net position: Detailed information about the pension plan's fiduciary net position is available in the separately issued TRS financial report which is publically available at www.trsga.com/publications. GENERAL INFORMATION ABOUT THE PUBLIC SCHOOLS 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, administers PSERS. Title 47 of the O.C.G.A. assigns the authority to establish and amend the benefit provisions to the State Legislature. PSERS issues a publicly available financial report that can be obtained at www.ers.ga.gov/formspubs/formspubs. Benefits provided: A member may retire and elect to receive normal monthly retirement benefits after completion of ten years of creditable service and attainment of age 65. A member may choose to receive reduced benefits after age 60 and upon completion of ten years of service. Upon retirement, the member will receive a monthly benefit of $14.75, multiplied by the number of years of creditable service. Death and disability benefits are also available through PSERS. Additionally, PSERS may make periodic cost-of-living adjustments to the monthly benefits. Upon termination of employment, member contributions with accumulated interest are refundable upon request by the member. However, if an otherwise vested member terminates and withdraws his/her member contribution, the member forfeits all rights to retirement benefits. 45 OCONEE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2017 Note 14: RETIREMENT PLANS (Continued) GENERAL INFORMATION ABOUT THE PUBLIC SCHOOLS EMPLOYEES RETIREMENT SYSTEM (PSERS) (Continued) Contributions: The general assembly makes an annual appropriation to cover the employer contribution to PSERS on behalf of local school employees (bus drivers, cafeteria workers, and maintenance staff). The annual employer contribution required by statute is actuarially determined and paid directly to PSERS by the State Treasurer in accordance with O.C.G.A. 47-4-29(a) and 60(b). Contributions are expected to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. Individuals who became members prior to July 1, 2012 contribute $4 per month for nine months each fiscal year. Individuals who became members on or after July 1, 2012 contribute $10 per month for nine months each fiscal year. The State of Georgia, although not the employer of PSERS members, is required by statute to make employer contributions actuarially determined and approved and certified by the PSERS Board of Trustees. Pension Liabilities and Pension Expense At June 30, 2017, the District did not have a liability for a proportionate share of the net pension liability because of the related State of Georgia support. The amount of the State's proportionate share of the net pension liability associated with the District is as follows: State of Georgia's proportionate share of the Net Pension Liability associated with the District $ 946,208 The net pension liability was measured as of June 30, 2016. The total pension liability used to calculate the net pension liability was based on an actuarial valuation as of June 30, 2015. An expected total pension liability as of June 30, 2016 was determined using standard roll-forward techniques. The State's proportion of the net pension liability associated with the District was based on actuarially determined contributions paid by the State during the fiscal year ended June 30, 2016. For the year ended June 30, 2017, the District recognized pension expense of $155,119 and revenue of $155,119 for support provided by the State of Georgia. 46 OCONEE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2017 Note 14: RETIREMENT PLANS (Continued) GENERAL INFORMATION ABOUT THE PUBLIC SCHOOLS EMPLOYEES RETIREMENT SYSTEM (PSERS) (Continued) Actuarial assumptions: The total pension liability was determined by an actuarial valuation as of June 30, 2015, using the following actuarial assumptions, applied to all periods included in the measurement: Inflation Salary increase Investment rate of return 2.75% N/A 7.50%, net of pension plan investment expense, including inflation Postretirement mortality rates were based on the RP-2000 Blue-Collar Mortality Table projected to 2025 with projection scale BB (set forward 3 years for males and 2 years for females) for the period after service retirements and for dependent beneficiaries. The RP-2000 Disabled Mortality projected to 2025 with projection scale BB (set forward 5 years for both males and females) was used for death after disability retirement. There is a margin for future mortality improvement in the tables used by the System. Based on the results of the most recent experience study adopted by the Board on December 17, 2015, the numbers of expected future deaths are 9-11% less than the actual number of deaths that occurred during the study period for healthy retirees and 9-11% less than expected under the selected table for disabled retirees. Rates of mortality in active service were based on the RP-2000 Employee Mortality Table projected to 2025 with projection scale BB. The actuarial assumptions used in the June 30, 2015 valuation were based on the results of an actuarial experience study for the period July 1, 2009 June 30, 2014. 47 OCONEE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2017 Note 14: RETIREMENT PLANS (Continued) GENERAL INFORMATION ABOUT THE PUBLIC SCHOOLS EMPLOYEES RETIREMENT SYSTEM (PSERS) (Continued) The long-term expected rate of return on pension plan investments was determined using a log-normal distribution analysis in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The target asset allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table: Asset class Fixed income Domestic large stocks Domestic mid stocks Domestic small stocks International developed market stocks International emerging market stocks Alternatives Total Target allocation 30.00% 37.20 3.40 1.40 17.80 5.20 5.00 100.00% Long-term expected real rate of return* (.50)% 9.00 12.00 13.50 8.00 12.00 10.50 * Rates shown are net of the 2.75% assumed rate of inflation Discount rate: The discount rate used to measure the total pension liability was 7.50%. The projection of cash flows used to determine the discount rate assumed that Plan member contributions will be made at the current contribution rate and that employer and State of Georgia contributions will be made at rates equal to the difference between actuarially determined contribution rates and the member rate. Based on those assumptions, the pension plan's fiduciary net position was projected to be available to make all projected future benefit payments of current Plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. 48 OCONEE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2017 Note 15: POSTEMPLOYMENT BENEFITS GEORGIA SCHOOL PERSONNEL POSTEMPLOYMENT HEALTH BENEFIT FUND Plan Description. The Georgia School Personnel Postemployment Health Benefit Fund (School OPEB Fund) is a cost-sharing multiple-employer defined benefit postemployment 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 Benefit Plan administered by the Department of Community Health. The Official Code of Georgia Annotated (O.C.G.A.) 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). Additional information about the School OPEB Fund is disclosed in the State of Georgia Comprehensive Annual Financial Report. This report can be obtained from the Georgia Department of Audits and Accounts at www.audits.ga.gov/SGD/CAFR.html. 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 no greater than the subsidy percentage offered to active employees) for 30 or more years of service. The subsidy for eligible dependents ranges from 0% to 55% (but no greater than the subsidy percentage offered to dependents of active employees minus 20%). No subsidy is available to Medicare eligible members not enrolled in a Medicare Advantage Option. The Board of Community Health sets all member premiums by resolution and in accordance with the law and applicable revenue and expense projections. Any subsidy policy adopted by the Board may be changed at any time by Board resolution and does not constitute a contract or promise of any amount of subsidy. Participating employers are statutorily required to contribute in accordance with the employer contribution rates established by the Board. The contribution rates are established to fund all benefits due under the health insurance plans for both active and retired employees based on projected "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 thirty years. 49 OCONEE COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2017 Note 15: POSTEMPLOYMENT BENEFITS (Continued) The combined active and retiree contribution rates established by the Board for employers participating in the School OPEB Fund were as follows for the fiscal year ended June 30, 2017: For certificated teachers, librarians and regional educational service agencies and certain other eligible participants: July 1, 2016 June 30, 2017 $945.00 per member per month For non-certificated school personnel: July 1, 2016 December 2016 January 1, 2017-June 30, 2017 $746.20 per member per month $846.20 per member per month No additional contribution was required by the Board for fiscal year 2017 nor contributed to the School OPEB Fund to prefund retiree benefits. Such additional contribution amounts are determined annually by the Board in accordance with the School plan for other postemployment 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 2017 2016 2015 Percentage Contributed 100% 100% 100% Required Contribution $ 7,330,229 $ 6,906,166 $ 6,224,168 Note 16: TAX ABATEMENTS For the year ended June 30, 2017, School District property tax revenues were reduced by $600,850 under agreements entered into by Oconee County Industrial Development Authority. Under the agreements, taxes on both real property and personal property are reduced based on jobs created and investments made by the corporation to whom the incentives were offered as long as the corporation meets certain investment targets. 50 II. REQUIRED SUPPLEMENTARY INFORMATION OCONEE COUNTY BOARD OF EDUCATION REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF PROPORTIONATE SHARE OF NET PENSION LIABLITY TEACHERS RETIREMENT SYSTEM OF GEORGIA FOR THE FISCAL YEAR ENDED JUNE 30 District's proportion of the net pension liability District's proportionate share of the net pension liability $ State of Georgia's proportionate share of the net pension liability associated with the District Total $ District's covered-employee payroll $ District's proportionate share of the net pension liability as a percentage of its coveredemployee payroll Plan fiduciary net position as a percentage of the total pension liability 2017 0.343671% 70,903,159 944,492 71,847,651 37,697,316 188.09% 76.06% 2016 0.341933% $ 52,055,904 610,787 $ 52,666,691 $ 36,092,996 144.23% 81.44% 2015 0.346482% $ 43,773,431 470,099 $ 44,243,530 $ 35,348,046 123.84% 84.03% Note: Schedule is intended to show information for the last 10 fiscal years. Additional years will be displayed as they become available. 51 OCONEE COUNTY BOARD OF EDUCATION REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF CONTRIBUTIONS TEACHERS RETIREMENT SYSTEM OF GEORGIA FOR THE FISCAL YEAR ENDED JUNE 30 Contractually required contributions $ Contributions in relation to the contractually required contributions Contribution deficiency (excess) $ District's covered-employee payroll Contributions as a percentage of covered-employee payroll 2017 5,687,700 $ 5,687,700 - $ 39,857,744 14.27% 2016 5,379,407 $ 5,379,407 - $ 37,697,316 14.27% 2015 4,746,229 $ 2014 4,340,740 4,746,229 - $ 36,092,996 4,340,740 - 35,348,046 13.15% 12.28% Note: Schedule is intended to show information for the last 10 fiscal years. Additional years will be displayed as they become available. 52 OCONEE COUNTY BOARD OF EDUCATION REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF PROPORTIONATE SHARE OF NET PENSION LIABLITY PUBLIC SCHOOLS EMPLOYEES RETIREMENT SYSTEM OF GEORGIA FOR THE FISCAL YEAR ENDED JUNE 30 District's proportion of the net pension liability 2017 0.000000% 2016 0.000000% 2015 0.000000% District's proportionate share of the net pension liability $ - $ - $ - State of Georgia's proportionate share of the net pension liability associated with the District 946,208 606,841 530,173 Total $ 946,208 $ 606,841 $ 530,173 District's covered-employee payroll $ 2,274,156 $ 1,747,927 $ 1,677,933 District's proportionate share of the net pension liability as a percentage of its covered- employee payroll N/A N/A N/A Plan fiduciary net position as a percentage of the total pension liability 81.00% 87.00% 88.29% Note: Schedule is intended to show information for the last 10 fiscal years. Additional years will be displayed as they become available. 53 OCONEE COUNTY BOARD OF EDUCATION NOTES TO REQUIRED SUPPLEMENTARY INFORMATION FOR THE FISCAL YEAR ENDED JUNE 30, 2017 Teachers Retirement System of Georgia: Changes of assumptions : In 2010 and later, the expectation of retired life mortality was changed to the RP2000 Mortality Tables rather than the 1994 Group Annuity Mortality Table, which was used prior to 2010. In 2010, rates of withdrawal, retirement, disability and mortality were adjusted to more closely reflect actual experience. In 2010, assumed rates of salary increase were adjusted to more closely reflect actual and anticipated experience. On November 18, 2015, the Board of TRS adopted recommended changes to the economic and demographic assumptions utilized by the Plan. Primary among the changes were the updates to rates of mortality, retirement, disability, withdrawal and salary increases. The expectation of retired life mortality was changed to RP-2000 White Collar Mortality Table with future mortality improvement projected to 2025 with the Society of Actuaries' projection scale BB (set forward one year for males). Public Schools Employees Retirement System of Georgia: Changes of assumptions : In 2010 and later, the expectation of retired life mortality was changed to the RP-2000 Mortality Tables rather than the 1994 Group Annuity Mortality Table, which was used prior to 2010. In 2010, rates of withdrawal, retirement, disability and mortality were adjusted to more closely reflect actual experience. On December 17, 2015, the Board adopted recommended changes to the economic and demographic assumptions utilized by the System. Primary among the changes were the updates to rates of mortality, retirement and withdrawal. The expectation of retired life mortality was changed to the RP-2000 Blue Collar Mortality Table projected to 2025 with projection scale BB (set forward 3 years for males and 2 years for females). 54 III. OTHER SUPPLEMENTARY INFORMATION OCONEE COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF SPECIAL PURPOSE LOCAL OPTION SALES TAX PROCEEDS FOR THE FISCAL YEAR ENDED JUNE 30, 2017 Project 2012 Referendum - ESPLOST IV Projects: Original Estimated Cost(1) Current Estimated Cost(2) Expended In Current Year (3) Expended In Prior Years (3) Total Completion Cost Project Status Adding to, renovating, repairing, improving and equipping existing educational buildings, properties and facilities of the School District, including, without limitation, athletic facilities, concession areas, road improvements, heating and air systems, classrooms and technology infrastructure and equipment; $ 27,353,853 $ Retiring that portion of the School District's series 2006 general obligation bonds maturing April 1, 2012, at a maximum cost of $3,000,000; 3,000,000 Paying expenses incidental thereto (including capitalized interest); 711,892 27,500,000 $ 1,800,000 268,945 1,394,535 $ - 24,972,516 $ 1,800,000 268,945 26,367,051 Ongoing 1,800,000 Complete 268,945 Complete And, to the extent there are funds available, acquiring real property (improved or unimproved) for future school sites; constructing additional new schools and administrative facilities and purchasing school buses and equipment for the Maintenance Department; Paying up to $1,000,000 in debt service due July 1, 2013 and January 1, 2014 on the School District's 2004 general obligation bonds. Total ESPLOST IV expenditures $ - 1,000,000 32,065,745 $ 985,000 425,000 30,978,945 $ 341,112 1,735,647 $ 639,196 425,000 28,105,657 $ 980,308 Ongoing 425,000 Complete 29,841,304 2017 Referendum - ESPLOST V Projects: Acquiring, constructing and equipping new schools, administrative and service facilities and or additions to, renovations of, repairs to, improvements to, and equipment for existing edcational, administrative and services buildings, properties, and facilities of the School District, including, without limitation, athletic facilities, transportation facilities, and educational faciliteis; heating and air systems; technology infrastructure; $ 40,000,000 $ Acquiring real and personal property for future school or administrative and services facility sites and school buses; 4,500,000 Paying expenses incidental thereto; 500,000 40,000,000 $ 4,500,000 500,000 3,155,508 $ 337,169 - $ - Total ESPLOST V expenditures $ 45,000,000 $ 45,000,000 $ 3,492,677 $ - $ Total ESPLOST expenditures $ 77,065,745 $ 75,978,945 $ 5,228,324 $ 28,105,657 $ Note: Included in the expenditures above, the School District has incurred interest to provide advance funding for the above projects as follows: ELOST IV: Prior fiscal years Current fiscal year $ 1,007,440 111,360 $ 1,118,800 (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 project(s). Includes all cost from project inception to completion. (3) The voters of Oconee County approved the imposition of a 1% sales tax to fund the above projects and retire associated debt. Amounts expended for these projects may include sales tax proceeds, state, local property taxes and/or other funds over the life of the projects. 3,155,508 Ongoing 337,169 Ongoing Ongoing 3,492,677 33,333,981 55 IV. SINGLE AUDIT SECTION INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS To the Superintendent and Members of the Oconee County Board of Education Watkinsville, Georgia We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of the Oconee County Board of Education (the "District") as of and for the fiscal year ended June 30, 2017, and the related notes to the financial statements, which collectively comprise the District's basic financial statements, and have issued our report thereon dated February 22, 2018. Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the District's internal control over financial reporting ("internal control") to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the District's internal control. Accordingly, we do not express an opinion on the effectiveness of the District's internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of 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. 200 GALLERIA PARKWAY S.E., SUITE 1700 ATLANTA, GA 30339-5946 770-955-8600 800-277-0080 FAX 770-980-4489 www.mjcpa.com Members of The American Institute of Certified Public Accountants Compliance and Other Matters As part of obtaining reasonable assurance about whether the District's financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity's internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Atlanta, Georgia February 22, 2018 57 INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM AND REPORT ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY THE UNIFORM GUIDANCE To the Superintendent and Members of the Oconee County Board of Education Watkinsville, Georgia Report on Compliance for Each Major Federal Program We have audited the Oconee County Board of Education (the "District") compliance with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on each of the District's major federal programs for the year ended June 30, 2017. The District's major federal programs are identified in the summary of auditor's results section of the accompanying schedule of findings and questioned costs. Management's Responsibility Management is responsible for compliance with federal statutes, regulations, and the terms and conditions of its federal awards applicable to its federal programs. Auditor's Responsibility Our responsibility is to express an opinion on compliance for each of the District's major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Those standards and the Uniform Guidance require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the District's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of the District's compliance. 200 GALLERIA PARKWAY S.E., SUITE 1700 ATLANTA, GA 30339-5946 770-955-8600 800-277-0080 FAX 770-980-4489 www.mjcpa.com Members of The American Institute of Certified Public Accountants Opinion on Each Major Federal Program In our opinion, the District complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended June 30, 2017. Report on Internal Control Over Compliance Management of the District is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered the District's internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the District's internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or a 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. 59 The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose. Atlanta, Georgia February 22, 2018 60 OCONEE COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE FISCAL YEAR ENDED JUNE 30, 2017 Federal Grantor/Pass-Through Grantor/Program Title U. S. DEPARTMENT OF AGRICULTURE: Passed through Georgia Department of Education: Child Nutrition Cluster School Breakfast Program - Cash Assistance National School Lunch Program: Non-Cash Assistance - Commodities (1) Cash Assistance Total Child Nutrition Cluster Total U. S. Department of Agriculture U. S. DEPARTMENT OF EDUCATION Passed through the Georgia Department of Education: Title I, Part A Title I Programs - Reward Districts Award Title I Programs - Improving Academic Achievement of the Disadvantaged Title I Programs - Improving Academic Achievement of the Disadvantaged Total Title I, Part A Passed through Georgia Department of Education (continued): Title II-A - Improving Teacher Quality Title II-A - Improving Teacher Quality Title II-A - Advance Placement Grant Subtotal Special Education Cluster (IDEA) Title VI-B High Cost Fund Pool Title VI-B Preschool Title VI-B Flowthrough Title VI-B Flowthrough Total Special Education Cluster (IDEA) Title I, Part C Federal CFDA Number Pass Through Entity Identifying Number Total Expenditures 10.553 10.555 10.555 17175GA324N1099 $ 17175GA324N1100 17175GA324N1100 154,328 192,932 694,881 1,042,141 1,042,141 84.010 84.010 84.010 S010A160010 S010A150010 S010A160010 25,000 46,482 400,531 472,013 84.367 84.367 84.367 84.173 84.173 84.027 84.027 84.011 S367A150001 S367A160001 S367A160001 4,827 94,558 3,300 102,685 H173A160081 H173A160081 H027A150073 H027A160073 S011A160011 21,028 38,332 233,039 919,789 1,212,188 39 (Continued) 61 OCONEE COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE FISCAL YEAR ENDED JUNE 30, 2017 Federal Grantor/Pass-Through Grantor/Program Title U. S. DEPARTMENT OF EDUCATION (Continued): Title III - Immigrant Title III - Immigrant Title III - Limited English Proficient Title III - Limited English Proficient Federal CFDA Number Pass Through Entity Identifying Number 84.365 84.365 84.365 84.365 S365A160010 S365A160010 S365A150010 S365A160010 Vocational Education - Perkins IV - Reserve - Perkins Carryover Vocational Education - Perkins Plus Reserve Vocational Education - Perkins IV - Program Improvement Total Vocational Education 84.048 84.048 84.048 V048A160010 V048A160010 V048A160010 Total Expenditures 109 1,504 4,513 16,392 22,518 2,284 5,179 30,636 38,099 Total Passed Through Georgia Department of Education 1,847,542 Total U. S. Department of Education 1,847,542 Total Expenditures of Federal Awards $ 2,889,683 Notes to the Schedule of Expenditures of Federal Awards: (1) The amounts shown for the Food Distribution Program represents the federally assigned value of nonmonetary assistance for donated commodities received and/or consumed by the system during the current fiscal year. (2) The Schedule of Expenditures of Federal Awards includes the federal grant activity of the Oconee County Board of Education and is presented on the modified accrual basis of accounting. (3) The School District did not utilize the 10% de minimis indirect cost rate. (4) The information in this schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards . Therefore, some amounts presented in this schedule may differ from amounts presented in, or used in the preparation of the financial statements. 62 OCONEE COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED JUNE 30, 2017 SECTION I SUMMARY OF AUDITOR'S RESULTS Financial Statements Type of report the auditor issued on whether the financial statements audited were prepared in accordance with GAAP: Unmodified Internal control over financial reporting: Material weaknesses identified? yes X no Significant deficiencies identified? yes X none reported Noncompliance material to financial statements noted? yes X no Federal Awards Internal Control over major federal programs: Material weakness(es) identified? yes X no Significant deficiency(ies) identified? yes X none reported Type of auditor's report issued on compliance for major federal programs Unmodified Any audit findings disclosed that are required to be reported in accordance with 2 CFR 200.516(a)? yes X no Identification of major federal programs: CFDA Number 10.553, 10.555 84.027, 84.173 Name of Federal Program or Cluster Child Nutrition Cluster Special Education Cluster (IDEA) Dollar threshold used to distinguish between Type A and Type B programs: $750,000 Auditee qualified as low-risk auditee? yes X no 63 OCONEE COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED JUNE 30, 2017 None reported. SECTION II FINANCIAL STATEMENT FINDINGS AND RESPONSES 64 OCONEE COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED JUNE 30, 2017 None reported. SECTION III FEDERAL AWARDS FINDINGS AND QUESTIONED COSTS 65 OCONEE COUNTY BOARD OF EDUCATION SCHEDULE OF PRIOR AUDIT FINDINGS FOR THE YEAR ENDED JUNE 30, 2017 2016-001 STATUS OF PRIOR YEAR FINDINGS Cash Management Program Information: CFDA #84.027 & 84.173 Special Education Cluster Criteria: The grant agreements for this program require the School District to request cash drawdowns on a reimbursement basis. Federal requirements also require Federal grant recipients establish an effective internal control structure which would ensure compliance with direct and material compliance requirements of Federal programs. Condition: During our testing of the Special Education program, the School District's internal controls over the cash management process were not consistently being followed. The process calls for preparation of the drawdown request by one individual and review and approval of the drawdown by a separate individual. Of the fourteen (14) drawdowns prepared by the School District for this grant during the fiscal year, we noted that all fourteen of the drawdowns were prepared, approved, and submitted by the same individual without review by a separate individual. Status: Finding was resolved during the current fiscal year. 2016-002 Cash Management Program Information: CFDA #10.553 and 10.555 Child Nutrition Cluster Criteria: The grant agreements for this program require the School District to report the number of meals served at each school to claim reimbursement. Federal requirements also require Federal grant recipients establish an effective internal control structure which would ensure compliance with direct and material compliance requirements of Federal programs. Condition: During our testing of the Child Nutrition Cluster, the School District's internal controls over the cash management process were not consistently being followed. The process calls for preparation of the drawdown request by one individual and review and approval of the drawdown by a separate individual. We tested four (4) of the twelve (12) monthly drawdowns prepared by the School District for this grant during the fiscal year and noted that three of the drawdowns did not properly report the meal counts for several schools. Status: Finding was resolved during the current fiscal year. 66 OCONEE COUNTY BOARD OF EDUCATION SCHEDULE OF PRIOR AUDIT FINDINGS FOR THE YEAR ENDED JUNE 30, 2017 STATUS OF PRIOR YEAR FINDINGS (CONTINUED) 2016-003 Paid Lunch Equity Special Test Program Information: CFDA #10.553 and 10.555 Child Nutrition Cluster Criteria: Grant requirements state a School Food Authority (SFA) participating in the National School Lunch Program (NSLP) is required to ensure that sufficient funds are provided to its nonprofit school food service accounts from lunches served to students not eligible for free or reduced price meals. A SFA currently charging less for a paid lunch than the difference between the Federal reimbursement rate for such a lunch and that for a free lunch is required to comply. Condition: During testing of the paid lunch equity calculations prepared by the School District, we noted the School District did not raise meal prices in the 2015 2016 school year to meet the required minimum weighted average meal price in accordance with the Price Adjustment Calculator provided by the US Department of Agriculture. Internal controls were not sufficient to prevent this error. Status: Finding was resolved during the current fiscal year. 67