Talbot County Board of Education, Talbotton, Georgia, annual financial report for the fiscal year ended 2018 June 30 (including independent auditor's reports)

TALBOT COUNTY BOARD OF EDUCATION
TALBOTTON, GEORGIA
ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2018
(Including Independent Auditor's Reports)

TALBOT COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I

FINANCIAL

INDEPENDENT AUDITOR'S REPORT

EXHIBITS

GOVERNMENT-WIDE FINANCIAL STATEMENTS

A

STATEMENT OF NET POSITION

B

STATEMENT OF ACTIVITIES

FUND FINANCIAL STATEMENTS

C

BALANCE SHEET

GOVERNMENTAL FUNDS

D

RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET

TO THE STATEMENT OF NET POSITION

E

STATEMENT OF REVENUES, EXPENDITURES AND CHANGES

IN FUND BALANCES

GOVERNMENTAL FUNDS

F

RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT

OF REVENUES, EXPENDITURES AND CHANGES IN FUND

BALANCES TO THE STATEMENT OF ACTIVITIES

G

STATEMENT OF FIDUCIARY NET POSITION

FIDUCIARY FUNDS

H

STATEMENT OF CHANGES IN FIDUCIARY NET POSITION

FIDUCIARY FUNDS

I NOTES TO THE BASIC FINANCIAL STATEMENTS

SCHEDULES

REQUIRED SUPPLEMENTARY INFORMATION

1 SCHEDULE OF PROPORTIONATE SHARE OF THE NET PENSION LIABILITY TEACHERS RETIREMENT SYSTEM OF GEORGIA
2 SCHEDULE OF PROPORTIONATE SHARE OF THE NET PENSION LIABILITY PUBLIC SCHOOL EMPLOYEES RETIREMENT SYSTEM OF GEORGIA
3 SCHEDULE OF PROPORTIONATE SHARE OF THE NET OPEB LIABILITY SCHOOL OPEB FUND
4 SCHEDULE OF CONTRIBUTIONS TEACHERS RETIREMENT SYSTEM OF GEORGIA 5 SCHEDULE OF CONTRIBUTIONS SCHOOL OPEB FUND 6 NOTES TO THE REQUIRED SUPPLEMENTARY INFORMATION

Page
1 2
3 4 5 6 7 8 9
31 32 33 34 35 36

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TALBOT COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS -

SECTION I FINANCIAL
SCHEDULES
REQUIRED SUPPLEMENTARY INFORMATION 7 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES
IN FUND BALANCES - BUDGET AND ACTUAL GENERAL FUND
SUPPLEMENTARY INFORMATION
8 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS 9 SCHEDULE OF STATE REVENUE 10 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS
SECTION II
COMPLIANCE AND INTERNAL CONTROL REPORTS
INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY THE UNIFORM GUIDANCE
SECTION III AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS
SECTION IV FINDINGS AND QUESTIONED COSTS
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
SECTION V
MANAGEMENT'S CORRECTIVE ACTION FOR CURRENT YEAR FINDINGS SCHEDULE OF MANAGEMENT'S CORRECTIVE ACTION

Page
37 38 39 41

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SECTION I FINANCIAL

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 4-101 Atlanta, Georgia 30334-8400
INDEPENDENT AUDITOR'S REPORT

The Honorable Brian P. Kemp, Governor of Georgia Members of the General Assembly of the State of Georgia Members of the State Board of Education
and Superintendent and Members of the Talbot County Board of Education
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 Talbot County Board of Education (School District), as of and for the year ended June 30, 2018, and the related notes to the financial statements. We were unable to opine on the aggregate remaining fund information due to the matters discussed in the Basis for Disclaimer of Opinion paragraph. These financial statements collectively comprise the School District's basic financial statements as listed in the table of contents.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditor's Responsibility
Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. Because of the matter described in the "Basis for Disclaimer of Opinion on the Aggregate Remaining Fund Information" paragraph, however, we were not able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on the aggregate remaining fund information.
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

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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.

Except for the matter described in the "Basis for Disclaimer of Opinion on the Aggregate Remaining Fund Information" paragraph, we believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.
Summary of Opinions

Opinion Unit Governmental Activities General Fund Capital Projects Fund Debt Service Fund Aggregate Remaining Fund Information

Type of Opinion Unmodified Unmodified Unmodified Unmodified Disclaimer

Basis for Disclaimer of Opinion on the Aggregate Remaining Fund Information

Due to lack of adequate documentation supporting the school activity (Principal and Agency) accounts maintained at the schools and recorded in the fiduciary fund and failure to record any current year activity, we were not able to obtain sufficient appropriate audit evidence to substantiate the balances recorded in the financial statements. As a result of these matters, we were unable to determine whether the fiduciary fund was materially correct.
Disclaimer of Opinion

Because of the significance of the matter described in the "Basis for Disclaimer of Opinion on the Aggregate Remaining Fund Information" paragraph, we have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on the financial statements of the aggregate remaining fund information of the School District. Accordingly, we do not express an opinion on these financial statements.
Unmodified Opinions

In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities and each major fund of the School District as of June 30, 2018, and the respective changes in financial position for the year then ended in accordance with accounting principles generally accepted in the United States of America.
Emphasis of Matter

As described in Note 2 to the financial statements, in 2018, the School District adopted new
accounting guidance, Governmental Accounting Standards Board (GASB) Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions, as amended by GASB Statement No. 85, Omnibus 2017. The School District restated beginning net position for
the effect of GASB Statement No. 75. Our opinions are not modified with respect to this matter.

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Other Matters
Required Supplementary Information
Management has omitted the Management's Discussion and Analysis that accounting principles generally accepted in the United States of America require to be presented to supplement the basic financial statements. Such missing 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. Our opinions on the basic financial statements are not affected by this missing information.
Accounting principles generally accepted in the United States of America require that the required supplementary information listed in the table of contents be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.
Other Information
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the School District's basic financial statements. The accompanying supplementary information, as listed in the table of contents, is presented for the purposes of additional analysis and is not a required part of the basic financial statements. The Schedule of Expenditures of Federal Awards is presented for purposes of additional analysis as required by Title 2 U. S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, and is also not a required part of the basic financial statements.
The accompanying supplemental information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, except for the impact of the matter described in the "Basis for Disclaimer of Opinion on the Aggregate Remaining Fund Information" paragraph, the accompanying supplemental information is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole.
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated July 27, 2021 on our consideration of the School District's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to

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provide an opinion on the effectiveness of the School District's internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the School District's internal control over financial reporting and compliance.
A copy of this report has been filed as a permanent record and made available to the press of the State, as provided for by Official Code of Georgia Annotated section 50-6-24.
Respectfully submitted,

July 27, 2021

Greg S. Griffin State Auditor

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TALBOT COUNTY BOARD OF EDUCATION

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TALBOT COUNTY BOARD OF EDUCATION STATEMENT OF NET POSITION JUNE 30, 2018
ASSETS
Cash and Cash Equivalents Investments Receivables, Net
Taxes State Government Federal Government Inventories Capital Assets, Non-Depreciable Capital Assets, Depreciable (Net of Accumulated Depreciation)
Total Assets
DEFERRED OUTFLOWS OF RESOURCES
Related to Defined Benefit Pension Plan Related to OPEB Plan
Total Deferred Outflows of Resources
LIABILITIES
Accounts Payable Salaries and Benefits Payable Payroll Withholdings Payable Interest Payable Contracts Payable Retainages Payable Net Pension Liability Net OPEB Liability Long-Term Liabilities
Due Within One Year Due in More Than One Year
Total Liabilities
DEFERRED INFLOWS OF RESOURCES
Related to Defined Benefit Pension Plan Related to OPEB Plan
Total Deferred Inflows of Resources
NET POSITION
Net Investment in Capital Assets Restricted for
Continuation of Federal Programs Debt Service Capital Projects Unrestricted (Deficit)
Total Net Position

EXHIBIT "A"

GOVERNMENTAL ACTIVITIES

$

6,796,419.91

65,000.00

682,814.95 314,142.93
18,273.75 6,595.06
765,333.44 12,402,336.10

21,050,916.14

997,406.42 448,593.00
1,445,999.42

113,740.98 523,119.84
58,313.69 43,108.67 135,077.55 30,810.50 5,416,502.00 5,421,880.00
762,690.00 3,433,349.00
15,938,592.23

329,414.00 412,863.00
742,277.00

12,327,117.68
249,439.42 485,902.44 1,127,306.83 (8,373,720.04)

$

5,816,046.33

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

- 1 -

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

EXHIBIT "B"

GOVERNMENTAL ACTIVITIES
Instruction Support Services
Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Other Support Services Operations of Non-Instructional Services Food Services Interest on Short-Term and Long-Term Debt
Total Governmental Activities
General Revenues Taxes Property Taxes For Maintenance and Operations Sales Taxes Special Purpose Local Option Sales Tax For Capital Projects Other Sales Tax Investment Earnings Miscellaneous
Transfers
Total General Revenues and Transfers
Change in Net Position
Net Position - Beginning of Year - Restated

EXPENSES

CHARGES FOR SERVICES

PROGRAM REVENUES OPERATING GRANTS AND
CONTRIBUTIONS

CAPITAL GRANTS AND CONTRIBUTIONS

NET (EXPENSES) REVENUES
AND CHANGES IN NET POSITION

$ 3,993,578.77 $
398,897.36 277,675.57
89,034.79 446,023.65 424,604.72 103,927.90 715,425.19 453,747.48
37,211.00
512,080.69 99,467.51
$ 7,551,674.63 $

- $ 2,353,622.88 $

-

61,646.97

-

91,671.24

-

74,716.00

-

371,264.00

-

168,357.00

-

2.69

-

153,898.74

-

162,117.46

-

-

38,745.58 -

495,954.56 -

38,745.58 $ 3,933,251.54 $

- $
77,220.00 -
-
77,220.00

(1,639,955.89)
(337,250.39) (186,004.33)
(14,318.79) (74,759.65) (256,247.72) (103,925.21) (561,526.45) (214,410.02) (37,211.00)
22,619.45 (99,467.51)
(3,502,457.51)

3,474,082.01
529,890.50 20,156.52 47,985.48 10,685.13 (1,398.67)
4,081,400.97
578,943.46
5,237,102.87

Net Position - End of Year

$

5,816,046.33

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

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

EXHIBIT "C"

ASSETS
Cash and Cash Equivalents Investments Receivables, Net
Taxes State Government Federal Government Inventories

GENERAL FUND

CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 1,878,195.03 $ 4,389,213.77 $

65,000.00

-

620,275.17 314,142.93
18,273.75 6,595.06

62,539.78 -

529,011.11 $ 6,796,419.91

-

65,000.00

-

682,814.95

-

314,142.93

-

18,273.75

-

6,595.06

Total Assets
LIABILITIES
Accounts Payable Salaries and Benefits Payable Payroll Withholdings Payable Contracts Payable Retainages Payable
Total Liabilities
DEFERRED INFLOWS OF RESOURCES
Unavailable Revenue - Property Taxes
FUND BALANCES
Nonspendable Restricted Assigned Unassigned
Total Fund Balances
Total Liabilities, Deferred Inflows of Resources, and Fund Balances

$ 2,902,481.94 $ 4,451,753.55 $

529,011.11 $ 7,883,246.60

$

113,740.98 $

- $

523,119.84

-

58,313.69

-

-

135,077.55

-

30,810.50

695,174.51

165,888.05

- $ -
-

113,740.98 523,119.84
58,313.69 135,077.55
30,810.50
861,062.56

571,513.18

-

-

571,513.18

6,595.06 242,844.36
15,654.36 1,370,700.47
1,635,794.25

4,285,865.50
-
4,285,865.50

529,011.11
-
529,011.11

6,595.06 5,057,720.97
15,654.36 1,370,700.47
6,450,670.86

$ 2,902,481.94 $ 4,451,753.55 $

529,011.11 $ 7,883,246.60

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

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

EXHIBIT "D"

Total fund balances - governmental funds (Exhibit "C")
Amounts reported for governmental activities in the Statement of Net Position are different because:
Capital assets used in governmental activities are not financial resources and therefore are not reported in the funds.
Land Construction in progress Buildings and improvements Equipment Land improvements Accumulated depreciation
Some liabilities are not due and payable in the current period and, therefore, are not reported in the funds.
Net pension liability Net OPEB liability
Deferred outflows and inflows of resources related to pensions/OPEB are applicable to future periods and, therefore, are not reported in the funds.
Related to pensions Related to OPEB
Taxes that are not available to pay for current period expenditures are deferred in the funds.
Long-term liabilities, and related accrued interest, are not due and payable in the current period and therefore are not reported in the funds.
Bonds payable Accrued interest payable Unamortized bond premiums

$

6,450,670.86

$

379,857.93

385,475.51

14,060,918.30

2,263,488.01

682,768.02

(4,604,838.23)

13,167,669.54

$

(5,416,502.00)

(5,421,880.00)

(10,838,382.00)

$

667,992.42

35,730.00

703,722.42 571,513.18

$

(3,910,000.00)

(43,108.67)

(286,039.00)

(4,239,147.67)

Net position of governmental activities (Exhibit "A")

$

5,816,046.33

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

- 4 -

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

EXHIBIT "E"

REVENUES
Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous
Total Revenues
EXPENDITURES
Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Other Support Services Food Services Operation
Capital Outlay Debt Services
Principal Interest
Total Expenditures
Revenues over (under) Expenditures
OTHER FINANCING SOURCES (USES)
Transfers In Transfers Out
Total Other Financing Sources (Uses)
Net Change in Fund Balances
Fund Balances - Beginning

GENERAL FUND

CAPITAL PROJECTS
FUND

DEBT SERVICE
FUND

TOTAL

$ 3,043,774.09 $ 20,156.52
2,961,546.95 1,048,903.59
38,745.58 2,016.39
16,195.94
7,131,339.06

- $ 529,890.50
45,861.85 -
575,752.35

- $ 107.24 -
107.24

3,043,774.09 550,047.02
2,961,546.95 1,048,903.59
38,745.58 47,985.48 16,195.94
7,707,198.65

3,876,865.61
399,935.00 278,490.45
88,433.47 446,608.86 424,285.00 103,955.93 686,444.89 650,330.58
37,211.00 524,499.04
-
-
7,517,059.83
(385,720.77)

-
433,195.51
-
433,195.51
142,556.84

-
-
390,000.00 101,715.84
491,715.84
(491,608.60)

3,876,865.61
399,935.00 278,490.45
88,433.47 446,608.86 424,285.00 103,955.93 686,444.89 650,330.58
37,211.00 524,499.04 433,195.51
390,000.00 101,715.84
8,441,971.18
(734,772.53)

(643,077.32)
(643,077.32)
(1,028,798.09)
2,664,592.34

(290,590.59)
(290,590.59)
(148,033.75)
4,433,899.25

932,269.24 -
932,269.24
440,660.64
88,350.47

932,269.24 (933,667.91)
(1,398.67)
(736,171.20)
7,186,842.06

Fund Balances - Ending

$ 1,635,794.25 $ 4,285,865.50 $

529,011.11 $ 6,450,670.86

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

- 5 -

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

EXHIBIT "F"

Net change in fund balances total governmental funds (Exhibit "E")
Amounts reported for governmental activities in the Statement of Activities are different because:
Governmental funds report capital outlays as expenditures. However, in the Statement of Activities, the cost of capital assets is allocated over their estimated useful lives as depreciation expense.
Capital outlay Depreciation expense
The net effect of various miscellaneous transactions involving capital assets (i.e., sales, trade-ins, donations, and disposals) is to increase net position.
Taxes reported in the Statement of Activities that do not provide current financial resources are not reported as revenues in the funds.
The issuance of long-term debt provides current financial resources to governmental funds, while the repayment of the principal of long-term debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net position. Also, governmental funds report the effect of premiums, discounts and the difference between the carrying value of refunded debt and the acquisition cost of refunded debt when debt is first issued. These amounts are deferred and amortized in the Statement of Activities.
Bond principal retirements Amortization of bond premiums
District pension contributions are reported as expenditures in the governmental funds when made. However, they are reported as deferred outflows of resources in the Statement of Net Position because the reported net pension/OPEB liability is measured a year before the District's report date. Pension/OPEB expense, which is the change in the net pension/OPEB liability adjusted for changes in deferred outflows and inflows of resources related to pensions/OPEB, is reported in the Statement of Activities.
Pension expense OPEB expense
Some items reported in the Statement of Activities do not require the use of current financial resources and therefore are not reported as expenditures in governmental funds.
Accrued interest on issuance of bonds

$

(736,171.20)

$

691,068.26

(327,434.57)

363,633.69 160,208.53 430,307.92

$

390,000.00

32,690.00

422,690.00

$

100,581.19

(131,865.00)

(31,283.81)

(30,441.67)

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

$

578,943.46

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

- 6 -

ASSETS Cash and Cash Equivalents Receivables, Net
Other
Total Assets LIABILITIES Cash Overdraft Funds Held for Others
Total Liabilities NET POSITION Held in Trust for Private Purposes

TALBOT COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET POSITION
FIDUCIARY FUNDS JUNE 30, 2018

EXHIBIT "G"

PRIVATE PURPOSE TRUSTS

AGENCY FUNDS

$

2,809.26 $

-

-

11,989.82

$

2,809.26 $

11,989.82

$

1,849.49

10,140.33

$

11,989.82

$

2,809.26

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

- 7 -

TALBOT COUNTY BOARD OF EDUCATION STATEMENT OF CHANGES IN FIDUCIARY NET POSITION
FIDUCIARY FUNDS YEAR ENDED JUNE 30, 2018
ADDITIONS Investment Earnings Interest
DEDUCTIONS None Reported Change in Net Position
Net Position - Beginning
Net Position - Ending

EXHIBIT "H"

PRIVATE PURPOSE TRUSTS

$

13.10

13.10 2,796.16

$

2,809.26

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

- 8 -

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

EXHIBIT "I"

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

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

EXHIBIT "I"

Program revenues include (a) charges paid by the recipients of goods or services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues.
FUND FINANCIAL STATEMENTS
The fund financial statements provide information about the School District's funds, including fiduciary funds. Eliminations have been made to minimize the double counting of internal activities. Separate financial statements are presented for governmental and fiduciary funds. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column.
The School District reports the following major governmental funds:
The general fund is the School District's primary operating fund. It accounts for and reports all financial resources not accounted for and reported in another fund.
The capital projects fund accounts for and reports financial resources including Education Special Purpose Local Option Sales Tax (ESPLOST) and bond proceeds that are restricted, committed or assigned for capital outlay expenditures, including the acquisition or construction of capital facilities and other capital assets.
The debt service fund accounts for and reports financial resources that are restricted, committed, or assigned including taxes (sales) legally restricted for the payment of general long-term principal and interest.
The School District reports the following fiduciary fund types:
Private purpose trust funds are used to report all trust arrangements, other than those properly reported elsewhere, in which principal and income benefit individuals, private organizations or other governments.
Agency funds are used to report resources held by the School District in a purely custodial capacity (assets equal liabilities) and do not involve measurement of results of operations.
BASIS OF ACCOUNTING
The basis of accounting determines when transactions are reported on the financial statements. The government-wide and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, sales taxes and grants. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from sales taxes is recognized in the fiscal year in which the underlying transaction (sale) takes place. Revenue from grants is recognized in the fiscal year in which all eligibility requirements have been satisfied.
The School District uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts.
Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Under this method, revenues are recognized when measurable and available. The School District considers all revenues reported in the governmental funds to be available if they are collected within sixty days after year-end. The School District considers all intergovernmental revenues to be available if they are collected within 120 days after year-end. Property taxes, sales taxes and interest are considered to be susceptible to accrual. Expenditures are
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TALBOT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2018

EXHIBIT "I"

recorded when the related fund liability is incurred, except for principal and interest on general longterm debt, which are recognized as expenditures to the extent they have matured. Capital asset acquisitions are reported as expenditures in governmental funds.
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 resources available to finance the program. It is the School District's policy to first apply grant resources to such programs, followed by cost-reimbursement grants, then general revenues.
NEW ACCOUNTING PRONOUNCEMENTS
In fiscal year 2018, the School District adopted Governmental Accounting Standards Board (GASB) Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other than Pensions. This statement establishes standards for recognizing and measuring liabilities, deferred outflows of resources, deferred inflows of resources, and expense/expenditures. For defined benefit OPEB, this statement identifies the methods and assumptions that are required to be used to project benefit payments, discount projected benefit payments to their actuarial present value, and attribute that present value to periods of employee service. Note disclosure and required supplementary information requirements about defined benefit OPEB also are addressed. The adoption of this statement has a significant impact on the School District's financial statements. As noted in the Restatement of Net Position note disclosure, the School District restated beginning net position for the cumulative effect of this accounting change.
In fiscal year 2018, the School District adopted Governmental Accounting Standards Board (GASB) Statement No. 81, Irrevocable Split-Interest Agreements. This statement requires that a government that receives resources pursuant to an irrevocable split-interest agreement recognize assets, liabilities, and deferred inflows of resources at the inception of the agreement. Furthermore, this statement requires that a government recognize assets representing its beneficial interests in irrevocable split-interest agreements that are administered by a third party, if the government controls the present service capacity of the beneficial interests. This statement requires that a government recognize revenue when the resources become applicable to the reporting period. The adoption of this statement did not have an impact on the School District's financial statements.
In fiscal year 2018, the School District adopted Governmental Accounting Standards Board (GASB) Statement No. 85, Omnibus 2017. The objective of this statement is to address practice issues that have been identified during implementation and application of certain GASB Statements. This statement addresses a variety of topics including issues related to blending component units, goodwill, fair value measurement and application, and postemployment benefits (pensions and other postemployment benefits [OPEB]). The adoption of this statement did not have an impact on the School District's financial statements.
In fiscal year 2018, the School District adopted Governmental Accounting Standards Board (GASB) Statement No. 86, Certain Debt Extinguishment Issues. The primary objective of this statement is to improve consistency in accounting and financial reporting for in-substance defeasance of debt by providing guidance for transactions in which cash and other monetary assets acquired with only existing resources--resources other than the proceeds of refunding debt--are placed in an irrevocable trust for the sole purpose of extinguishing debt. This statement also improves accounting and financial reporting for prepaid insurance on debt that is extinguished and notes to financial statements for debt that is defeased in substance. The adoption of this statement did not have an impact on the School District's financial statements.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash on hand, demand deposits, investments in the State of Georgia local government investment pool (Georgia Fund 1) and short-term investments with original maturities of three months or less from the date of acquisition in authorized financial institutions.
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TALBOT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2018

EXHIBIT "I"

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

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

EXHIBIT "I"

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

Capitalization Policy

Estimated Useful Life

Land

Land Improvements

$

Buildings and Improvements $

Equipment

$

Intangible Assets

$

All 10,000.00 10,000.00 10,000.00 100,000.00

N/A 20 to 70 years up to 70 years
5 to 25 years 15 to 50 years

DEFERRED OUTFLOWS/INFLOWS OF RESOURCES

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

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

In the School District's government-wide financial statements, outstanding debt is reported as liabilities. Bond premiums and discounts and the difference between the reacquisition price and the net carrying value of refunded debt are deferred and amortized over the life of the bonds using the straight-line method. To conform to generally accepted accounting principles, bond premiums and discounts should be amortized using the effective interest method. The effect of this deviation is deemed to be immaterial to the fair presentation of the basic financial statements. Bond issuance costs are recognized as an outflow of resources in the fiscal year in which the bonds are issued.

In the governmental fund financial statements, the School District recognizes the proceeds of debt and premiums as other financing sources of the current period. Bond issuance costs are reported as debt service expenditures.
PENSIONS

For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the pension plan's fiduciary net position and additions to/deductions from the plan's fiduciary net position have been determined on the same basis as they are reported by the plan. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value.
POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS (OPEB)

For purposes of measuring the net OPEB liability, deferred outflows of resources and deferred inflows of resources related to OPEB, and OPEB expense, information about the fiduciary net position of the Georgia School Employees Postemployment Benefit Fund (School OPEB Fund) and additions to/deductions from School OPEB Fund fiduciary net position have been determined on the same basis as they are reported by School OPEB Fund. For this purpose, benefit payments are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value.

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

EXHIBIT "I"

FUND BALANCES

Fund balance for governmental funds is reported in classifications that comprise a hierarchy based primarily on the extent to which the government is bound to honor constraints on the specific purposes for which amounts in those funds can be spent.

The School District's fund balances are classified as follows:

Nonspendable consists of resources that cannot be spent either because they are in a nonspendable form or because they are legally or contractually required to be maintained intact.

Restricted consists of resources that can be used only for specific purposes pursuant constraints either (1) externally imposed by creditors, grantors, contributors, or laws and regulations of other governments or (2) imposed by law through constitutional provisions or enabling legislation.

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

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

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

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

The Talbot County Board of Commissioners adopted the property tax levy for the 2017 tax digest year (calendar year) on August 16, 2017 (levy date) based on property values as of January 1, 2017. Taxes were due on December 20, 2017 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2017 tax digest are reported as revenue in the governmental funds for fiscal year 2018. The Talbot County Tax Commissioner bills and collects the property taxes for the School District, withholds 1.25% of taxes collected as a fee for tax collection and remits the balance of taxes collected to the School District. Property tax revenues, at the fund reporting level, during the fiscal year ended June 30, 2018, for maintenance and operations amounted to $2,869,990.36.

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

School Operations

14.05 mills

Additionally, Title Ad Valorem Tax revenues, at the fund reporting level, amounted to $173,783.73 during fiscal year ended June 30, 2018.

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

EXHIBIT "I"

SALES TAXES
Education Special Purpose Local Option Sales Tax (ESPLOST), at the fund reporting level, during the year amounted to $529,890.50 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.
NOTE 3: BUDGETARY DATA
The budget is a complete financial plan for the School District's fiscal year, and is based upon careful estimates of expenditures together with probable funding sources. The budget is legally adopted each year for the general fund. There is no statutory prohibition regarding over expenditure of the budget at any level. The budget for all governmental funds, except the various school activity (principal) accounts, is prepared and adopted by fund, function and object. The legal level of budgetary control was established by the Board at the aggregate function level. The budget for the general fund was prepared in accordance with accounting principles generally accepted in the United States of America.
The budgetary process begins with the School District's administration presenting an initial budget for the Board's review. The administration makes revisions as necessary based on the Board's guidelines, and a tentative budget is approved. After approval of this tentative budget by the Board, such budget is advertised at least once in a newspaper of general circulation in the locality, as well as the School District's website. At the next regularly scheduled meeting of the Board after advertisement, the Board receives comments on the tentative budget, makes revisions as necessary and adopts a final budget. The approved budget is then submitted, in accordance with provisions of O.C.G.A. 20-2-167(c), to the Georgia Department of Education. The Board may increase or decrease the budget at any time during the year. All unexpended budget authority lapses at fiscal year-end.
The Superintendent is authorized by the Board to approve adjustments of no more than five percent of the amount budgeted for expenditures in any budget function for any fund. The Superintendent shall report any such adjustments to the Board. If expenditure of funds in any budget function for any fund is anticipated to be more than five percent of the budgeted amount, the Superintendent shall request Board approval for the budget amendment. Under no circumstance is the Superintendent or other staff person authorized to spend funds that exceed the total budget without approval by the Board.
See the General Fund Schedule of Revenues, Expenditures and Changes in Fund Balances Budget to Actual in the Supplementary Information Section for a detail of any over/under expenditures during the fiscal year under review.
NOTE 4: DEPOSITS AND CASH EQUIVALENTS
COLLATERALIZATION OF DEPOSITS
O.C.G.A. 45-8-12 provides that there shall not be on deposit at any time in any depository for a time longer than ten days a sum of money which has not been secured by surety bond, by guarantee of insurance, or by collateral. The aggregate of the face value of such surety bond and the market value of securities pledged shall be equal to not less than 110% of the public funds being secured after the deduction of the amount of deposit insurance. If a depository elects the pooled method (O.C.G.A. 45-8-13.1) the aggregate of the market value of the securities pledged to secure a pool of public funds shall be not less than 110% of the daily pool balance.
Acceptable security for deposits consists of any one of or any combination of the following:
(1) Surety bond signed by a surety company duly qualified and authorized to transact business within the State of Georgia,
(2) Insurance on accounts provided by the Federal Deposit Insurance Corporation,
(3) Bonds, bills, notes, certificates of indebtedness or other direct obligations of the United States or of the State of Georgia,
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TALBOT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2018

EXHIBIT "I"

(4) Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia,

(5) Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose,

(6) Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia, and

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

Custodial credit risk is the risk that in the event of a bank failure, the School District's deposits may not be returned to it. The School District does not have a deposit policy for custodial credit risk. At June 30, 2018, the School District had deposits with a carrying amount of $2,998,833.79, which includes $65,000.00 in Certificates of Deposits that are reported as investments, and a bank balance of $3,412,171.70. The bank balances insured by Federal depository insurance were $559,056.04 and the bank balances collateralized with securities held by the pledging financial institution's trust department or agent in the School District's name were $2,853,115.66.

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

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

$ 6,796,419.91 959.77

Total cash and cash equivalents

6,797,379.68

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

65,000.00

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

3,863,545.89

Total carrying value of deposits - June 30, 2018

$ 2,998,833.79

CATEGORIZATION OF CASH EQUIVALENTS
The School District reported cash equivalents of $3,863,545.89 in Georgia Fund 1, a local government investment pool, which is included in the cash balances above. Georgia Fund 1 is not registered with the SEC as an investment company and does not operate in a manner consistent with the SEC's Rule 2a-7 of the Investment Company Act of 1940. The investment is valued at the pool's share price, $1.00 per share, which approximates fair value. The pool is an AAAf rated investment pool by Standard and Poor's. The weighted average maturity of Georgia Fund 1 may not exceed 60 days. The weighted average maturity for Georgia Fund 1 on June 30, 2018 was 10 days.
Georgia Fund 1, administered by the State of Georgia, Office of the State Treasurer, is not required to be categorized since the School District did not own any specific identifiable securities in the pool. The investment policy of the State of Georgia, Office of the State Treasurer for the Georgia Fund 1, does

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

EXHIBIT "I"

not provide for investment in derivatives or similar investments. Additional information on the Georgia Fund 1 is disclosed in the State of Georgia Comprehensive Annual Financial Report, which is publicly available at https://www.sao.georgia.gov/comprehensive-annual-financial-reports.
NOTE 5: CAPITAL ASSETS

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

Balances July 1, 2017

Increases

Decreases

Adjustments

Balances June 30, 2018

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

$ 354,857.93 $ 25,000.00 $

-

385,475.51

- $ -

- $ 379,857.93

-

385,475.51

Total Capital Assets Not Being Depreciated

354,857.93 410,475.51

-

-

765,333.44

Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements
Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements

14,348,890.98 1,982,896.06 713,295.15

280,592.75
-

287,972.17 -
30,527.13

(0.51) (0.80)
-

14,060,918.30 2,263,488.01 682,768.02

2,651,027.34 1,631,825.31
473,260.15

216,114.41 83,079.72 28,240.44

282,461.36 -
30,527.13

(199,636.24) 27,520.77 6,394.82

2,385,044.15 1,742,425.80
477,368.28

Total Capital Assets, Being Depreciated, Net

12,288,969.39

(46,841.82)

5,510.81 165,719.34 12,402,336.10

Governmental Activities Capital Assets - Net $ 12,643,827.32 $ 363,633.69 $ 5,510.81 $ 165,719.34 $ 13,167,669.54

Current year depreciation expense by function is as follows:

Instruction Support Services
General Administration Maintenance and Operation of Plant Student Transportation Services Food Services

$ 347.79 21,341.64 43,508.94

$ 253,835.96
65,198.37 8,400.24

$ 327,434.57

NOTE 6: INTERFUND TRANSFERS INTERFUND TRANFERS

Interfund transfers for the year ended June 30, 2018, consisted of the following:

Transfers to

Transfers From

General Fund

Capital Projects Fund

Debt Service Fund

$

641,678.65 $

290,590.59

Agency Fund

1,398.67

-

$

643,077.32 $

290,590.59

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

EXHIBIT "I"

Transfers are used to move property tax revenues collected by the general fund and sales tax revenue collected by the capital projects fund to the debt service fund to pay debt service according to the approved SPLOST referendum. Also, transfers are used to move funds from student accounts in the general fund to student accounts in the agency fund.
NOTE 7: LONG-TERM LIABILITIES
The changes in long-term liabilities during the fiscal year for governmental activities, were as follows:

Balance July 1, 2017

Governmental Activities

Balance

Additions

Deductions

June 30, 2018

Due Within One Year

General Obligation Bonds Unamortized Bond Premiums

$ 4,300,000.00 $ 318,729.00

- $ 390,000.00 $ 3,910,000.00 $ 730,000.00

-

32,690.00

286,039.00

32,690.00

$ 4,618,729.00 $

- $ 422,690.00 $ 4,196,039.00 $ 762,690.00

GENERAL OBLIGATION DEBT OUTSTANDING

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

General obligation bonds currently outstanding are as follows:

Description

Interest Rates

Issue Date

Maturity Date

Amount Issued

Amount Outstanding

General Government - Series 2003 General Government - Series 2017

3.80% 2.00% - 4.00%

1/14/2003 6/13/2017

8/1/2018 $ 3/1/2028

4,500,000.00 $ 3,500,000.00

410,000.00 3,500,000.00

$ 8,000,000.00 $ 3,910,000.00

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

Fiscal Year Ended June 30:

General Obligation Debt

Principal

Interest

Unamortized Bond Premium

2019 2020 2021 2022 2023 2024 - 2028

$

730,000.00 $ 117,640.00 $

325,000.00

103,450.00

330,000.00

96,950.00

340,000.00

87,050.00

345,000.00

76,850.00

1,840,000.00

213,500.00

32,690.00 32,690.00 32,690.00 32,690.00 32,690.00 122,589.00

Total Principal and Interest

$ 3,910,000.00 $ 695,440.00 $

286,039.00

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

EXHIBIT "I"

NOTE 8: RISK MANAGEMENT INSURANCE Commercial Insurance

The School District is exposed to various risks of loss related to torts; theft of, damage to and destruction of assets; errors or omissions; job related illness or injuries to employees; and natural disasters. Except as described below, the School District carries commercial insurance for these risks. Settled claims resulting from these insured risks have not exceed commercial insurance coverage in any of the past three fiscal years.

The School District has elected to self-insure for losses related to natural disasters. The School District has not experienced any losses related to this risk in the past three years. WORKERS' COMPENSATION Georgia Education Workers' Compensation Trust

The School District participates in the Georgia Education Workers' Compensation Trust (the Trust), a public entity risk pool organized on December 1, 1991, to develop, implement and administer a program of workers' compensation self-insurance for its member organizations. The School District pays an annual premium to the Trust for its general workers' compensation insurance coverage. Specific excess of loss insurance coverage is provided through an agreement by the Trust with the Safety National Casualty Company to provide coverage for potential losses sustained by the Trust in excess of $1.0 million loss per occurrence, up to the statutory limit. Employers' Liability insurance coverage is also provided with limits of $2.0 million. The Trust covers the first $1.0 million of each Employers Liability claim with Safety National providing additional Employers Liability limits up to a $2.0 million per occurrence maximum. Safety National Casualty Company also provides $2.0 million in aggregate coverage to the Trust, attaching at 110% of the loss fund and based on the Fund's annual normal premium.
UNEMPLOYMENT COMPENSATION

The School District is self-insured with regard to unemployment compensation claims. The School District accounts for claims within the general fund with expenses/expenditures and liability being reported when it is probable that a loss has occurred, and the amount of that loss can be reasonably estimated.

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

Beginning of Year Liability

Claims and Changes in Estimates

Claims Paid

End of Year Liability

2017 $

-

$

-

$

-

$

-

2018 $

-

$

3,300.00

$

3,300.00

$

-

SURETY BOND

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

Position Covered

Amount

Superintendent Finance Director Payroll Clerk

$

30,000.00

$

10,000.00

$

10,000.00

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

EXHIBIT "I"

NOTE 9: FUND BALANCE CLASSIFICATION DETAILS

The School District's financial statements include the following amounts presented in the aggregate at June 30, 2018:

Nonspendable Inventories
Restricted Continuation of Federal Programs Capital Projects Debt Service
Assigned School Activity Accounts
Unassigned

$

6,595.06

$ 242,844.36 4,285,865.50 529,011.11

5,057,720.97

15,654.36 1,370,700.47

Fund Balance, June 30, 2018

$ 6,450,670.86

When multiple categories of fund balance are available for expenditure, the School District will start with the most restricted category and spend those funds first before moving down to the next category with available funds.
NOTE 10: SIGNIFICANT COMMITMENTS
COMMITMENTS UNDER CONSTRUCTION CONTRACTS

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

Project

Unearned Executed Contracts (1)

Payments through June 30, 2018 (2)

Athletic Complex

$

3,686,371.25 $

385,475.51

(1) The amounts described are not reflected in the basic financial statements. (2) Payments include contracts and retainages payable at year end.
OPERATING LEASES
The School District leases copiers and a postage meter under the provisions of one or more long-term lease agreements classified as operating leases for accounting purposes. Rental expenditures under the terms of the operating leases totaled $8,162.79 for governmental activities for the year ended June 30, 2018. There were no operating lease payments due as of June 30, 2018. NOTE 11: SIGNIFICANT CONTINGENT LIABILITIES FEDERAL GRANTS
Amounts received or receivable principally from the Federal government are subject to audit and review by grantor agencies. This could result in requests for reimbursement to the grantor agency for any costs which are disallowed under grant terms. Any disallowances resulting from the grantor audit may become a liability of the School District. However, the School District believes that such disallowances, if any, will be immaterial to its overall financial position.

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

EXHIBIT "I"

LITIGATION
The School District is a defendant in various legal proceedings pertaining to matters incidental to the performance of routine School District operations. The ultimate disposition of these proceedings is not presently determinable but is not believed to have a material adverse effect on the financial condition of the School District.
NOTE 12: OTHER POST-EMPLOYMENT BENEFITS (OPEB)
GEORGIA SCHOOL PERSONNEL POST-EMPLOYMENT HEALTH BENEFIT FUND
Plan Description: Certified teachers and non-certified public school employees of the School District as defined in 20-2-875 of the Official Code of Georgia Annotated (O.C.G.A.) are provided OPEB through the School OPEB Fund - a cost-sharing multiple-employer defined benefit postemployment healthcare plan, reported as an employee trust fund and administered by a Board of Community Health (Board). Title 20 of the O.C.G.A. assigns the authority to establish and amend the benefit terms of the group health plan to the Board.
Benefits Provided: The School OPEB Fund provides healthcare benefits for retirees and their dependents due under the group health plan for public school teachers, including librarians, other certified employees of public schools, regional educational service agencies and non-certified public school employees. Retiree medical eligibility is attained when an employee retires and is immediately eligible to draw a retirement annuity from Employees' Retirement System (ERS), Georgia Judicial Retirement System (JRS), Legislative Retirement System (LRS), Teachers Retirement System (TRS) or Public School Employees Retirement System (PSERS). If elected, dependent coverage starts on the same day as retiree coverage. Medicare-eligible retirees are offered Standard and Premium Medicare Advantage plan options. Non-Medicare eligible retiree plan options include Health Reimbursement Arrangement (HRA), Health Maintenance Organization (HMO) and a High Deductible Health Plan (HDHP). The School OPEB Fund also pays for administrative expenses of the fund. By law, no other use of the assets of the School OPEB Fund is permitted.
Contributions: As established by the Board, the School OPEB Fund is substantially funded on a payas-you-go basis; that is, annual cost of providing benefits will be financed in the same year as claims occur. Contributions to the School OPEB Fund from the School District were $223,544.00 for the year ended June 30, 2018. Active employees are not required to contribute to the School OPEB Fund.
OPEB Liabilities, OPEB Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to OPEB
At June 30, 2018, the School District reported a liability of $5,421,880.00 for its proportionate share of the net OPEB liability. The net OPEB liability was measured as of June 30, 2017. The total OPEB liability used to calculate the net OPEB liability was based on an actuarial valuation as of June 30, 2016. An expected total OPEB liability as of June 30, 2017 was determined using standard roll-forward techniques. The School District's proportion of the net OPEB liability was actuarially determined based on employer contributions during the fiscal year ended June 30, 2017. At June 30, 2017, the School District's proportion was 0.038590%, which was an increase of 0.001779% from its proportion measured as of June 30, 2016.

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

EXHIBIT "I"

For the year ended June 30, 2018, the School District recognized OPEB expense of $355,409.00. At June 30, 2018, the School District reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources:

OPEB

Deferred

Deferred

Outflows of

Inflows of

Resources

Resources

Differences between expected and actual

experience

$

- $

-

Changes of assumptions

-

412,863.00

Net difference between projected and actual

earnings on OPEB plan investments

1,586.00

-

Changes in proportion and differences

between School District contributions and

proportionate share of contributions

223,463.00

-

School District contributions subsequent to

the measurement date

223,544.00

-

Total

$ 448,593.00 $ 412,863.00

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

Year Ended June 30:

OPEB

2019 2020 2021 2022 2023 2024

$ (33,668.00) $ (33,668.00) $ (33,668.00) $ (33,668.00) $ (34,065.00) $ (19,077.00)

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

EXHIBIT "I"

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

Inflation

2.75%

Salary increases

ERS

3.25% - 7.00%, including inflation

JRS

4.50%, including inflation

LRS

None

TRS

3.25 -- 9.00%, including inflation

PSERS

N/A

Long-term expected rate of return

3.88%, compounded annually, net of investment expense, and including inflation

Healthcare cost trend rate

Pre-Medicare Eligible

7.75%

Medicare Eligible

5.75%

Ultimate trend rate

Pre-Medicare Eligible Medicare Eligible

5.00% 5.00%

Year of Ultimate trend rate

2022

Mortality rates were based on the RP-2000 Combined Mortality Table for Males or Females, as appropriate, with adjustments for mortality improvements based on Scale BB as follows:

For ERS, JRS and LRS members: The RP-2000 Combined Mortality Table projected to 2025
with projection scale BB and set forward 2 years or both males and females is used for the period after service retirement and for dependent beneficiaries. The RP-2000 Disabled Mortality Table projected to 2025 with projection scale BB and set back 7 years for males and set forward 3 years for females is used for the period after disability retirement.
For TRS members: The RP-2000 White Collar Mortality Table projected to 2025 with projection
scale BB (set forward 1 year for males) is used for death after service retirement and beneficiaries. The RP-2000 Disabled Mortality Table projected to 2025 with projection scale BB (set forward two years for males and four years for females) is used for death after disability retirement.
For PSERS members: The RP-2000 Blue-Collar Mortality Table projected to 2025 with
projection scale BB (set forward 3 years for males and 2 years for females) is used for the period after service retirement and for beneficiaries of deceased members. The RP-2000 Disabled Mortality Table projected to 2025 with projection scale BB (set forward 5 years for both males and females) is used for the period after disability retirement.

The actuarial assumptions used in the June 30, 2016 valuation were based on the results of an actuarial experience study for the pension systems, which covered the five-year period ending June 30, 2014.
Projection of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan
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TALBOT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS
JUNE 30, 2018

EXHIBIT "I"

members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculation.

Additionally, there was a change that affected measurement of the total OPEB liability since the prior measurement date. The methodology used to determine employee and retiree participation in the School OPEB Fund is based on their current or last employer payroll location. Current and former employees of public school districts, libraries, regional educational service agencies and community colleges are allocated to the School OPEB Fund irrespective of retirement system affiliation. In addition, the discount rate increased from 3.07% to 3.58%.
The long-term expected rate of return on OPEB plan investments was determined using a log-normal distribution analysis in which best-estimate ranges of expected future real rates of return (expected nominal returns, net of investment expense and the assumed rate of inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table:

Asset Class

Target Allocation

Long-Term Expected Real Rate of Return *

Local Government Investment Pool

100.00%

1.13%

* Rate shown is net of the 2.75% assumed rate of inflation.
Discount Rate: In order to measure the total OPEB liability for the School OPEB Fund, a single equivalent interest rate of 3.58% was used as the discount rate. This is comprised mainly of the yield or index rate for 20 year tax-exempt general obligation municipal bonds with an average rating of AA or higher (3.56% per the Bond Buyers Index). The projection of cash flows used to determine the discount rate assumed that contributions from members and from the employer will be made at the current level as averaged over the last five years, adjusted for annual projected changes in headcount. Projected future benefit payments for all current plan members were projected through 2115. Based on these assumptions, the OPEB plan's fiduciary net position was projected to be available to make OPEB payments for inactive employees through year 2029. Therefore, the calculated discount rate of 3.58% was applied to all periods of projected benefit payments to determine the total OPEB liability.
Sensitivity of the School District's proportionate share of the net OPEB liability to changes in the discount rate: The following presents the School District's proportionate share of the net OPEB liability calculated using the discount rate of 3.58%, as well as what the District's proportionate share of the net OPEB liability would be if it were calculated using a discount rate that is 1-percentage-point lower (2.58%) or 1 percentage-point higher (4.58%) than the current discount rate:

School District's proportionate share of the Net OPEB Liability

1% Decrease (2.58%)

Current Discount Rate (3.58%)

1% Increase (4.58%)

$ 6,437,511.00 $

5,421,880.00 $ 4,620,341.00

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

EXHIBIT "I"

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

School District's proportionate share of the Net OPEB Liability

1% Decrease

Current Healthcare Cost Trend Rate

1% Increase

$ 4,494,120.00 $

5,421,880.00 $ 6,629,821.00

OPEB plan fiduciary net position: Detailed information about the OPEB plan's fiduciary net position is available in the Comprehensive Annual Financial Report which is publicly available at https://sao.georgia.gov/comprehensive-annual-financial-reports.
NOTE 13: RETIREMENT PLANS

The School District participates in various retirement plans administered by the State of Georgia, as further explained below.
TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS)
Plan Description: All teachers of the School District as defined in O.C.G.A 47-3-60 and certain other support personnel as defined by 47-3-63 are provided a pension through the Teachers Retirement System of Georgia (TRS). TRS, a cost-sharing multiple-employer defined benefit pension plan, is administered by the TRS Board of Trustees (TRS Board). Title 47 of the O.C.G.A. assigns the authority to establish and amend the benefit provisions to the State Legislature. The Teachers Retirement System of Georgia issues a publicly available separate financial report that can be obtained at www.trsga.com/publications.
Benefits 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. Contributions are expected to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. Employees were required to contribute 6% of their annual pay during fiscal year 2018. The School District's contractually required contribution rate for the year ended June 30, 2018 was 16.81% of annual School District payroll. For the current fiscal year, employer contributions to the pension plan were $585,757.42 from the School District.
PUBLIC SCHOOL EMPLOYEES RETIREMENT SYSTEM (PSERS)
Plan Description: PSERS is a cost-sharing multiple-employer defined benefit pension plan established by the Georgia General Assembly in 1969 for the purpose of providing retirement allowances for public school employees who are not eligible for membership in the Teachers Retirement System of Georgia. The ERS Board of Trustees, plus two additional trustees, 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.
- 25 -

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

EXHIBIT "I"

Benefits Provided: A member may retire and elect to receive normal monthly retirement benefits after completion of ten years of creditable service and attainment of age 65. A member may choose to receive reduced benefits after age 60 and upon completion of ten years of service.
Upon retirement, the member will receive a monthly benefit of $14.75, multiplied by the number of years of creditable service. Death and disability benefits are also available through PSERS. Additionally, PSERS may make periodic cost-of-living adjustments to the monthly benefits. Upon termination of employment, member contributions with accumulated interest are refundable upon request by the member. However, if an otherwise vested member terminates and withdraws his/her member contribution, the member forfeits all rights to retirement benefits.
Contributions: The general assembly makes an annual appropriation to cover the employer contribution to PSERS on behalf of local school employees (bus drivers, cafeteria workers, and maintenance staff). The annual employer contribution required by statute is actuarially determined and paid directly to PSERS by the State Treasurer in accordance with O.C.G.A. 47-4-29(a) and 60(b). Contributions are expected to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability.
Individuals who became members prior to July 1, 2012 contribute $4 per month for nine months each fiscal year. Individuals who became members on or after July 1, 2012 contribute $10 per month for nine months each fiscal year. The State of Georgia, although not the employer of PSERS members, is required by statute to make employer contributions actuarially determined and approved and certified by the PSERS Board of Trustees. The current fiscal year contribution was $15,619.00.
Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions
At June 30, 2018, the School District reported a liability of $5,416,502.00 for its proportionate share of the net pension liability for TRS.
The net pension liability for TRS was measured as of June 30, 2017. The total pension liability used to calculate the net pension liability was based on an actuarial valuation as of June 30, 2016. An expected total pension liability as of June 30, 2017 was determined using standard roll-forward techniques. The School District's proportion of the net pension liability was based on contributions to TRS during the fiscal year ended June 30, 2017.
At June 30, 2017, the School District's TRS proportion was 0.029144%, which was an increase of 0.000650% from its proportion measured as of June 30, 2016.
At June 30, 2018, the School District did not have a PSERS liability for a proportionate share of the net pension liability because of a Special Funding Situation with the State of Georgia, which is responsible for the net pension liability of the plan. The amount of the State's proportionate share of the net pension liability associated with the School District is $77,602.00.
The PSERS net pension liability was measured as of June 30, 2017. The total pension liability used to calculate the net pension liability was based on an actuarial valuation as of June 30, 2016. An expected total pension liability as of June 30, 2017 was determined using standard roll-forward techniques. The State's proportion of the net pension liability associated with the School District was based on actuarially determined contributions paid by the State during the fiscal year ended June 30, 2017.
For the year ended June 30, 2018, the School District recognized pension expense of $485,166.00 for TRS and $15,640.00 for PSERS and revenue of $15,640.00 for PSERS. The revenue is support provided by the State of Georgia.

- 26 -

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

EXHIBIT "I"

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

TRS Deferred Outflows of Resources

Deferred Inflows of Resources

Differences between expected and actual experience

$ 202,611.00 $

20,441.00

Changes of assumptions

118,736.00

-

Net difference between projected and actual earnings on pension plan investments

-

37,275.00

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

90,302.00

271,698.00

School District contributions subsequent to the

measurement date

585,757.42

-

Total

$ 997,406.42 $ 329,414.00

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

Year Ended June 30:

TRS

2019 2020

$ (143,280.00) $ 219,463.00

2021

$ 124,870.00

2022 2023

$ (124,297.00) $ 5,479.00

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

Teachers Retirement System:

Inflation

2.75%

Salary increases

3.25% 9.00%, average, including inflation

Investment rate of return

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

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

- 27 -

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

EXHIBIT "I"

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

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

Inflation

2.75%

Salary increases

N/A

Investment rate of return

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

Post-retirement mortality rates were based on the RP-2000 Blue-Collar Mortality Table projected
to 2025 with projection scale BB (set forward 3 years for males and 2 years for females) for the period after service retirements and for dependent beneficiaries. The RP-2000 Disabled Mortality projected
to 2025 with projection scale BB (set forward 5 years for both males and females) was used for death
after disability retirement. There is a margin for future mortality improvement in the tables used by the
System. Based on the results of the most recent experience study adopted by the Board on December 17, 2015, the numbers of expected future deaths are 9-11% less than the actual number of deaths that occurred during the study period for healthy retirees and 9-11% less than expected
under the selected table for disabled retirees. Rates of mortality in active service were based on the RP-2000 Employee Mortality Table projected to 2025 with projection scale BB.

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

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

Asset class

TRS Target allocation

PSERS Target allocation

Long-term expected real rate of return*

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

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

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

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

Total

100.00%

100.00%

* Rates shown are net of the 2.75% assumed rate of inflation
Discount Rate: The discount rate used to measure the total TRS and PSERS pension liability was 7.50%. The projection of cash flows used to determine the discount rate assumed that plan member contributions will be made at the current contribution rate and that employer and nonemployer contributions will be made at rates equal to the difference between actuarially determined contribution rates and the member rate. Based on those assumptions, the TRS and PSERS pension plan's fiduciary net position was projected to be available to make all projected future benefit

- 28 -

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

EXHIBIT "I"

payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability.
Sensitivity of the School District's proportionate share of the net pension liability to changes in the discount rate: The following presents the School District's proportionate share of the net pension liability calculated using the discount rate of 7.50%, as well as what the School District's proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1-percentage-point lower (6.50%) or 1-percentage-point higher (8.50%) than the current rate:

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

1% Decrease (6.50%)

Current Discount Rate
(7.50%)

1% Decrease (8.50%)

$ 8,889,116.00 $ 5,416,502.00 $ 2,555,849.00

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

NOTE 14: RESTATEMENT OF PRIOR YEAR NET POSITION

For fiscal year 2018, the School District made prior period adjustments due to the adoption of GASB Statement No. 75, as described in "New Accounting Pronouncements", which require the restatement of the June 30, 2017, net position in Governmental Activities. The result is a decrease in net position at July 1, 2017 of $5,254,285.00 This change is in accordance with generally accepted accounting procedures.

Net Position, July 1, 2017 as previously reported

$ 10,491,387.87

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

(5,455,495.00)

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

201,210.00

Net Position, July 1, 2017, as restated

$

5,237,102.87

NOTE 15: SUBSEQUENT EVENTS
In December 2019, a strain of coronavirus (COVID-19) began to spread worldwide, resulting in a severe impact on the United States economy in March 2020. The spread of COVID-19 has had a negative impact on virtually all businesses and individuals which comprise the tax base of all levels of government.

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

SCHEDULE "1"

Year Ended

School District's proportion of the net pension liability

School District's proportionate share of the net pension liability

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

Total

School District's covered payroll

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

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

2018 2017 2016 2015

0.029144% $ 0.028494% $ 0.029732% $ 0.030388% $

5,416,502.00 $ 5,878,630.00 $ 4,526,402.00 $ 3,839,123.00 $

-

$ 5,416,502.00 $ 3,346,411.50

-

$ 5,878,630.00 $ 3,125,519.13

-

$ 4,526,402.00 $ 3,138,384.64

-

$ 3,839,123.00 $ 3,100,171.01

161.86% 188.08% 144.23% 123.84%

79.33% 76.06% 81.44% 84.03%

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

- 31 -

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

SCHEDULE "2"

Year Ended

School District's proportion of the net pension liability

School District's proportionate share of the net pension liability

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

2018

0.00% $

-

$

77,602.00 $

Total

School District's covered payroll

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

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

77,602.00 $

227,137.34

N/A

85.69%

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

- 32 -

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

SCHEDULE "3"

Year Ended

School District's proportion of the net OPEB liability

School District's proportionate share of the net OPEB liability
(asset)

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

2018

0.038590% $

5,421,880.00 $

-

Total

School District's covered-employee
payroll

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

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

$ 5,421,880.00 $

3,174,208.92

170.81%

1.61%

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

- 33 -

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

SCHEDULE "4"

Year Ended

Contractually required contribution

Contributions in relation to the contractually required contribution

Contribution deficiency (excess)

2018

$

585,757.42 $

585,757.42 $

-

2017

$

477,541.23 $

477,541.23 $

-

2016

$

446,011.58 $

446,011.58 $

-

2015

$

412,697.58 $

412,697.58 $

-

2014

$

380,692.79 $

380,692.79 $

-

2013

$

383,370.28 $

383,370.28 $

-

2012

$

386,730.40 $

386,730.40 $

-

2011

$

419,130.30 $

419,130.30 $

-

2010

$

444,832.43 $

444,832.43 $

-

2009

$

419,136.12 $

419,136.12 $

-

School District's covered payroll
$ 3,484,577.21 $ 3,346,411.50 $ 3,125,519.13 $ 3,138,384.64 $ 3,100,171.01 $ 3,359,949.87 $ 3,761,968.87 $ 4,077,143.00 $ 4,567,068.07 $ 4,516,553.02

Contribution as a percentage of covered
payroll
16.81% 14.27% 14.27% 13.15% 12.28% 11.41% 10.28% 10.28%
9.74% 9.28%

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

SCHEDULE "5"

Year Ended

Contractually required contribution

Contributions in relation to the contractually required contribution

Contribution deficiency (excess)

2018

$

223,544.00 $

223,544.00 $

-

School District's covered-employee
payroll
$ 3,374,356.11

Contribution as a percentage of covered-
employee payroll
6.62%

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

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

SCHEDULE "6"

Teachers Retirement System
Changes of assumptions: In 2010 and later, the expectation of retired life mortality was changed to the RP 2000 Mortality Tables rather than the 1994 Group Annuity Mortality Table, which was used prior to 2010. In 2010, rates of withdrawal, retirement, disability and mortality were adjusted to more closely reflect actual experience. In 2010, assumed rates of salary increase were adjusted to more closely reflect actual and anticipated experience.
On November 18, 2-015, the Board adopted recommended changes to the economic and demographic assumptions utilized by the System. Primary among the changes were the updates to rates of mortality, retirement, disability, withdrawal and salary increases. The expectation of retired life mortality was changed to RP 2000 White Collar Mortality Table with future mortality improvement projected to 2025 with the Society of Actuaries' projection scale BB (set forward one year for males).
Public School Employees Retirement System
Changes of assumptions: In 2010 and later, the expectation of retired life mortality was changed to the RP 2000 Mortality Tables rather than the 1994 Group Annuity Mortality Table, which was used prior to 2010. In 2010, rates of withdrawal, retirement, disability and mortality were adjusted to more FORVHO\UHIOHFWDFWXDOH[SHULHQFH
On-December 17, 2015, the Board adopted recommended changes to the economic and demographic assumptions utilized by the System. Primary among the changes were the updates to rates of mortality, retirement and withdrawal. The expectation of retired life mortality was changed to the RP 2000 Blue Collar Mortality Table projected to 2025 with projection scale BB (set forward 3 years for males and 2 years for females).
School OPEB Fund
Changes of benefit terms: In June 30, 2010 actuarial valuation, there was a change of benefit terms to require Medicare-eligible recipients to enroll in a Medicare Advantage plan to receive the State subsidy.
Changes in assumptions: In the revised June 30, 2017 actuarial valuation, there was a change relating to employee allocation. Employees were previously allocated based on their Retirement System membership, and currently employees are allocated based on their current employer payroll location.
In the June 30, 2015 actuarial valuation, decremental and underlying inflation assumptions were changed to reflect the Retirement Systems' experience studies.
In the June 30, 2012 actuarial valuation, a data audit was performed and data collection procedures and assumptions were changed.

- 36 -

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

SCHEDULE "7"

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

NONAPPROPRIATED BUDGETS

ORIGINAL (1)

FINAL (1)

ACTUAL AMOUNTS

VARIANCE OVER/UNDER

$ 3,458,163.33 $ 3,458,163.33 $

2,825.00

2,825.00

2,868,873.86

2,946,093.86

1,390,203.00

1,372,204.00

31,500.00

31,500.00

715.60

715.60

80,456.00

80,456.00

7,832,736.79

7,891,957.79

3,043,774.09 $ 20,156.52
2,961,546.95 1,048,903.59
38,745.58 2,016.39
16,195.94
7,131,339.06

(414,389.24) 17,331.52 15,453.09
(323,300.41) 7,245.58 1,300.79
(64,260.06)
(760,618.73)

4,456,274.46
419,528.20 324,027.00 103,974.00 384,547.13 403,309.00
94,790.00 599,233.00 430,770.00
13,280.00 27,000.00 576,004.00
7,832,736.79
-

4,417,597.37
461,012.20 372,178.00 103,974.00 384,166.78 403,309.00
94,790.00 599,233.00 682,594.00
27,000.00 551,004.00
8,096,858.35
(204,900.56)

3,876,865.61
399,935.00 278,490.45
88,433.47 446,608.86 424,285.00 103,955.93 686,444.89 650,330.58
37,211.00 524,499.04
7,517,059.83
(385,720.77)

540,731.76
61,077.20 93,687.55 15,540.53 (62,442.08) (20,976.00) (9,165.93) (87,211.89) 32,263.42
(10,211.00) 26,504.96
579,798.52
(180,820.21)

-

-

(643,077.32)

(643,077.32)

-

(204,900.56)

(1,028,798.09)

(823,897.53)

-

3,018,165.63

2,664,592.34

(353,573.29)

-

(549.45)

-

549.45

$

- $ 2,812,715.62 $

1,635,794.25 $ (1,176,921.37)

Notes to the Schedule of Revenues, Expenditures and Changes in Fund Balances Budget and Actual
(1) Original and final budget amounts do not include the budgeted revenues or expenditures of the various principal accounts.
The accompanying schedule of revenues, expenditures and changes in fund balances budget and actual is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the fund financial statements.

See notes to the basic financial statements.

- 37 -

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

SCHEDULE "8"

FUNDING AGENCY PROGRAM/GRANT
Agriculture, U. S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food Services School Breakfast Program National School Lunch Program
Total Child Nutrition Cluster
Other Programs Pass-Through From Georgia Department of Education Food Services Fresh Fruit and Vegetable Program
Total U. S. Department of Agriculture
Education, U. S. Department of Special Education Cluster Pass-Through From Georgia Department of Education Special Education Grants to States Grants to States
Total Special Education Cluster
Other Programs Pass-Through From Georgia Department of Education Career and Technical Education - Basic Grants to States Supporting Effective Instruction State Grants Supporting Effective Instruction State Grants Rural Education Student Support and Academic Enrichment Program Title I Grants to Local Educational Agencies Title I Grants to Local Educational Agencies
Total Other Programs
Total U. S. Department of Education
Defense, U. S. Department of Direct Department of the Army R.O.T.C. Program

CFDA NUMBER

PASSTHROUGH
ENTITY ID
NUMBER

EXPENDITURES IN PERIOD

10.553 10.555

18185GA324N1099 $ 18185GA324N1100

152,971.28 343,349.89
496,321.17

10.582

185GA324L1603

11,967.20 508,288.37

84.027 84.027

H027A160073 H027A170073

84.048 84.367 84.367 84.358 84.424A 84.010 84.010

V048A170010 S367A160001 S367A170001 S365B170010 S424A170011 S010A160010 S010A170010

12.UNKNOWN

31,475.79 82,684.06 114,159.85
1,860.19 10,966.85
6,251.91 841.28
3,283.39 111,397.77 252,202.61 386,804.00 500,963.85
72,125.88

Total Expenditures of Federal Awards

$

1,081,378.10

Notes to the Schedule of Expenditures of Federal Awards
Note 1. Basis of Presentation
The accompanying schedule of expenditures of federal awards (the "Schedule") includes the federal award activity of the Talbot County Board of Education (the "Board") under programs of the federal government for the year ended June 30, 2018. The information in this Schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Because the Schedule presents only a selected portion of the operations of the Board, it is not intended to and does not present the financial position or changes in net position of the Board, it is not intended to and does not present the financial position or changes in net position of the School District.
Note 2. Summary of Significant Accounting Policies
Expenditures reported on the Schedule are reported on the modified accrual basis of accounting. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement.
Note 3: Indirect Cost Rate
The Board has elected not to use the 10-percent de minimis indirect cost rate as allowed under the Uniform Guidance.

See notes to the basic financial statements.

- 38 -

TALBOT COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2018
AGENCY/FUNDING
GRANTS Bright From the Start: Georgia Department of Early Care and Learning Pre-Kindergarten Program
Education, Georgia Department of Quality Basic Education Direct Instructional Cost Kindergarten Program Primary Grades (1-3) Program Primary Grades - Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades - Early Intervention (4-5) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Gifted Student - Category VI Remedial Education Program Alternative Education Program Media Center Program 20 Days Additional Instruction Staff and Professional Development Principal Staff and Professional Development Indirect Cost Central Administration School Administration Facility Maintenance and Operations Mid-term Adjustment Hold-Harmless Amended Formula Adjustment Categorical Grants Pupil Transportation Regular Nursing Services Sparsity Other State Programs Food Services Math and Science Supplements Pupil Transportation - State Bonds Vocational Education
Office of the State Treasurer Public School Employees Retirement

SCHEDULE "9"

GOVERNMENTAL FUND TYPE GENERAL FUND

$

78,287.67

146,446.00 329,721.00
35,282.00 149,856.00
48,984.00 259,897.00 233,381.00
68,194.00 420,843.00
(612.00) 49,478.00 18,031.00 46,426.00 14,700.00
7,448.00 215.00
253,890.00 112,429.00
97,337.00 2,678.00
(37,699.00)
149,288.00 45,000.00
294,178.00
12,533.00 3,502.86
77,220.00 28,993.42
15,619.00

$

2,961,546.95

See notes to the basic financial statements.

- 39 -

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

SCHEDULE "10"

PROJECT

ORIGINAL ESTIMATED
COST (1)

(1) Adding to, constructing, renovating,

furnishing, and/or equipping an athletic

complex and related facilities, including

a stadium, a track, softball field and

any related lighting; (2) acquiring

equipment for physical education and

the athletic departments; (3) acquiring

safety, security and/or fire protection

equipment; (4) acquiring buses, vehicles,

and/or transportation equipment: and/or;

(5) acquiring property.

$ 2,800,000.00 $

CURRENT ESTIMATED COSTS (2)

AMOUNT EXPENDED IN CURRENT
YEAR (3)

3,500,000.00 $

433,195.51 $

AMOUNT EXPENDED IN PRIOR YEARS (3)
- $

TOTAL COMPLETION
COST

EXCESS PROCEEDS NOT
EXPENDED

- $

-

ESTIMATED COMPLETION
DATE
3/1/2028

(1) The School District's original cost estimate as specified in the resolution calling for the imposition of the Local Option Sales Tax.
(2) The School District's current estimate of total cost for the projects. Includes all cost from project inception to completion.
(3) The voters of Talbot 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.

See notes to the basic financial statements.

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SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS

(This page left intentionally blank)

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 4-101 Atlanta, Georgia 30334-8400

The Honorable Brian P. Kemp, Governor of Georgia Members of the General Assembly of the State of Georgia Members of the State Board of Education
and Superintendent and Members of the Talbot County Board of Education
INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED
IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of the Talbot County Board of Education (School District), as of and for the year ended June 30, 2018, and the related notes to the financial statements, which collectively comprise the School District's basic financial statements, and have issued our report thereon dated July 27, 2021. We were unable to obtain sufficient appropriate audit evidence to substantiate the balances for the aggregate remaining fund information and, therefore, we did not express an opinion on this information.
Internal Control Over Financial Reporting
In planning and performing our audit of the financial statements, we considered the School District's internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the School District's internal control. Accordingly, we do not express an opinion on the effectiveness of the School District's internal control.
Our consideration of internal control was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that have not been identified. However, as described in the accompanying Schedule of Findings and Questioned Costs, we did identify certain deficiencies in internal control that we consider to be material weaknesses and significant deficiencies.
A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. We consider the deficiencies described in the accompanying Schedule of Findings and Questioned Costs as items FS 2018-001, FS 2018-002, and FS 2018-006 to be material weaknesses.

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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. We consider the deficiencies described in the accompanying Schedule of Findings and Questioned Costs as items FS 2018-003, FS 2018-004, and FS 2018-005 to be significant deficiencies.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the School District's financial statements are free from material misstatements, 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 financial statements. However, providing an opinion on compliance with those provisions was not an objective of our engagement, 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.
School District's Response to Findings
The School District's response to the findings identified in our audit is described in the accompanying Schedule of Findings and Questioned Costs. The School District's response was not subjected to the auditing procedures applied in the engagement to audit of the financial statements and, accordingly, we express no opinion on it.
Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the School District's internal control or on compliance. This report is an integral part of an engagement to perform an audit performed in accordance with Government Auditing Standards in considering the School District's internal control and compliance. Accordingly, this communication is not suitable for any other purpose.
Respectfully submitted,

July 27, 2021

Greg S. Griffin State Auditor

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 4-101 Atlanta, Georgia 30334-8400

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

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Basis for Qualified Opinion on Title I Grants Local Educational Agencies (CFDA 84.010)
As described in the accompanying Schedule of Findings and Questioned Costs, the School District did not comply with requirements regarding Title I Grants to Local Educational Agencies (CFDA 84.010) as described in items FA 2018-001 for Cash Management and FA 2018-004 for Special Tests and Provisions. Compliance with such requirements is necessary, in our opinion, for the School District to comply with requirements applicable to that program.
Qualified Opinion on Title I Grants Local Educational Agencies (CFDA 84.010)
In our opinion, except for the noncompliance described in the Basis for Qualified Opinion paragraph, the School District complied, in all material respects, with the compliance requirements referred to above that could have a direct and material effect on Title I Grants to Local Educational Agencies (CFDA 84.010) for the year ended June 30, 2018.
Unmodified Opinion on the Other Major Program
In our opinion, the School District complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on its other major federal program identified in the Summary of Auditor's Results section of the accompanying Schedule of Findings and Questioned Costs for the year ended June 30, 2018.
Other Matters
The School District's response to the noncompliance findings identified in our audit is described in the accompanying Schedule of Findings and Questioned Costs. The School District's response was not subjected to the auditing procedures applied in the audit of compliance and, accordingly, we express no opinion on the response.
Report on Internal Control over Compliance
Management of the School District is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered the School District's internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the School District's internal control over compliance.
Our consideration of internal control over compliance was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that were not identified. However, as discussed below, we identified certain deficiencies in internal control over compliance that we consider to be material weaknesses and significant deficiencies.
A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such

(This page left intentionally blank)

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. We consider the deficiencies in internal control over compliance described in the accompanying Schedule of Findings and Questioned Costs as items as FA 2018-001 and FA 2018-004 to be material weaknesses.
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. We consider the deficiencies in internal control over compliance described in the accompanying Schedule of Findings and Questioned Costs as items FA 2018-002 and FA 2018-003 to be significant deficiencies.
The School District's response to the internal control over compliance findings identified in our audit is described in the accompanying Schedule of Findings and Questioned Costs. The School District's response was not subjected to the auditing procedures applied in the audit of compliance and, accordingly, we express no opinion on the response.
The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose.
Respectfully submitted,

July 27, 2021

Greg S. Griffin State Auditor

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

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TALBOT COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2018

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FS 7301-13-01 Control Category: Internal Control Impact: Compliance Impact:

Inadequate Internal Controls Procedures Cash and Cash Equivalents Material Weakness None

Finding Status:

Unresolved

FS 2014-001 Control Category: Internal Control Impact: Compliance Impact:

Inadequate Internal Controls Procedures Cash and Cash Equivalents Material Weakness None

Finding Status:

Unresolved

FS 2015-001 Control Category: Internal Control Impact: Compliance Impact:

Inadequate Internal Controls Procedures Cash and Cash Equivalents Material Weakness None

Finding Status:

Unresolved

FS 2016-001 Control Category: Internal Control Impact: Compliance Impact:

Internal Control Procedures Cash and Cash Equivalents Material Weakness None

Finding Status:

Unresolved

FS 2017-001 Control Category: Internal Control Impact: Compliance Impact:

Internal Control Procedures Cash and Cash Equivalents Material Weakness None

Finding Status:

Unresolved

The Finance Director will meet with all parties involved to discuss the findings, examine our current procedure, and seek ways to diminish all the risks. We will make adjustments to procedures as needed. We will meet periodically to share ideas, discuss adjustments to procedures and provide additional training.

- 1 -

TALBOT COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2018

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FS 7301-13-02 Control Category:
Internal Control Impact: Compliance Impact:

Inadequate Internal Controls over School Activity Accounts Cash and Cash Equivalents Revenues/Receivables/Receipts Expenditures/Liabilities/Disbursements Accounting Controls (Overall) General Ledger Material Weakness None

Finding Status:

Unresolved

FS 2014-002 Control Category:
Internal Control Impact: Compliance Impact:

Inadequate Internal Controls over School Activity Accounts Cash and Cash Equivalents Revenues/Receivables/Receipts Expenditures/Liabilities/Disbursements Accounting Controls (Overall) General Ledger Material Weakness None

Finding Status:

Unresolved

FS 2015-002 Control Category:
Internal Control Impact: Compliance Impact:

Inadequate Internal Controls over School Activity Accounts Cash and Cash Equivalents Revenues/Receivables/Receipts Expenditures/Liabilities/Disbursements Accounting Controls (Overall) General Ledger Material Weakness None

Finding Status:

Unresolved

FS 2016-002 Control Category:
Internal Control Impact: Compliance Impact:

Internal Controls over School Activity Accounts Cash and Cash Equivalents Revenues/Receivables/Receipts Expenditures/Liabilities/Disbursements Accounting Controls (Overall) General Ledger Material Weakness None

Finding Status:

Unresolved

- 2 -

TALBOT COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2018

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FS 2017-002 Control Category:
Internal Control Impact: Compliance Impact:

Internal Controls over School Activity Accounts Cash and Cash Equivalents Revenues/Receivables/Receipts Expenditures/Liabilities/Disbursements Accounting Controls (Overall) General Ledger Material Weakness None

Finding Status:

Unresolved

The School District has hired a new Finance/Business Director that will review the current accounting procedures and ensure that internal controls are in place. In addition, the School District has received quotes in reference to purchasing a new software that will be implemented for school accounting that has features to eliminate issues with school level purchases. The Business/Finance Director will meet periodically to share ideas, discuss adjustments to procedures (if any), and provide additional training, if needed.

FS 7301-13-05 Control Category: Internal Control Impact: Compliance Impact:

Inadequate Internal Controls over Employee Compensation Employee Compensation Significant Deficiency None

Finding Status:

Unresolved

FS 2014-004 Control Category: Internal Control Impact: Compliance Impact:

Inadequate Internal Controls over Employee Compensation Employee Compensation Significant Deficiency None

Finding Status:

Unresolved

FS 2015-004 Control Category: Internal Control Impact: Compliance Impact:

Inadequate Internal Controls over Employee Compensation Employee Compensation Significant Deficiency None

Finding Status:

Unresolved

FS 2016-003 Control Category: Internal Control Impact: Compliance Impact:

Internal Controls over Employee Compensation Employee Compensation Significant Deficiency None

Finding Status:

Unresolved

- 3 -

TALBOT COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2018

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FS 2017-003 Control Category: Internal Control Impact: Compliance Impact:

Internal Controls over Employee Compensation Employee Compensation Significant Deficiency None

Finding Status:

Unresolved

The Board will ensure that internal controls are established, implemented, and functioning at the system level to adequately address controls over employee compensation procedures and ensure that all said employee compensation is properly calculated.

FS 7301-13-06 Control Category: Internal Control Impact: Compliance Impact:

Failure to Adequately Maintain Capital Assets Capital Assets Material Weakness None

Finding Status:

Partially Resolved

FS 2014-005 Control Category: Internal Control Impact: Compliance Impact:

Failure to Adequately Maintain Capital Assets Capital Assets Material Weakness None

Finding Status:

Partially Resolved

FS 2015-005 Control Category: Internal Control Impact: Compliance Impact:

Failure to Adequately Maintain Capital Assets Capital Assets Material Weakness None

Finding Status:

Partially Resolved

FS 2016-004 Control Category: Internal Control Impact: Compliance Impact:

Internal Controls over Capital Assets Capital Assets Material Weakness None

Finding Status:

Partially Resolved

FS 2017-004 Control Category: Internal Control Impact: Compliance Impact:

Internal Controls over Capital Assets Capital Assets Material Weakness None

Finding Status:

Partially Resolved

Additional resources will be committed as well as controls designed and implemented to the capital asset inventory management process to ensure records are properly maintained. Further, the School District is in the process of implementing a better control system to assist with the capital asset activity.

- 4 -

TALBOT COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2018

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FS 2016-005 Control Category:
Internal Control Impact: Compliance Impact:

Internal Controls at the Central Office Accounting Controls (Overall) Expenditures/Liabilities/Disbursements Significant Deficiency None

Finding Status:

Unresolved

FS 2017-005 Control Category:
Internal Control Impact: Compliance Impact:

Internal Controls at the Central Office Accounting Controls (Overall) Expenditures/Liabilities/Disbursements Significant Deficiency None

Finding Status:

Unresolved

The School District has hired a new Chief Financial Officer to oversee the accounting procedures and ensure that internal controls are in place. In addition, the School District will review the current accounting procedures and controls and will implement procedures to help strengthen the internal controls.

FS 2016-006 Control Category: Internal Control Impact: Compliance Impact:

Internal Controls over Financial Reporting Financial Reporting Material Weakness None

Finding Status:

Unresolved

FS 2017-006 Control Category: Internal Control Impact: Compliance Impact:

Internal Controls over Financial Reporting Financial Reporting Material Weakness None

Finding Status:

Unresolved

The School District has hired a new Chief Financial Officer to oversee the accounting procedures and ensure that internal controls are in place. In addition, the School District will review the current accounting procedures and controls and will implement procedures to help strengthen the internal controls.

- 5 -

TALBOT COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2018

PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

FA 2014-003

Inadequate Control Over the Cash Management Process

Compliance Requirement: Cash Management

Internal Control Impact: Material Weakness

Compliance Impact:

Material Noncompliance

Federal Awarding Agency: U.S. Department of Education

Pass-Through Entity:

Georgia Department of Education

CFDA Number and Title: 84.010 Title I Grants to Local Education Agencies

Finding Status:

Unresolved

FA 2015-002

Controls Over the Cash Management Process

Compliance Requirement: Cash Management

Internal Control Impact: Material Weakness

Compliance Impact:

Material Noncompliance

Federal Awarding Agency: U.S. Department of Education

Pass-Through Entity:

Georgia Department of Education

CFDA Number and Title: 84.010 Title I Grants to Local Education Agencies

Finding Status:

Unresolved

FA 2016-001

Improve Controls Over the Cash Management Process

Compliance Requirement: Cash Management

Internal Control Impact: Material Weakness

Compliance Impact:

Material Noncompliance

Federal Awarding Agency: U.S. Department of Education

Pass-Through Entity:

Georgia Department of Education

CFDA Number and Title: 84.010 Title I Grants to Local Education Agencies

Finding Status:

Unresolved

FA 2017-002 Compliance Requirement: Internal Control Impact: Compliance Impact: Federal Awarding Agency: Pass-Through Entity: CFDA Number and Title:

Improve Controls Over the Cash Management Process Cash Management Material Weakness Material Noncompliance U.S. Department of Education Georgia Department of Education 84.010 Title I Grants to Local Education Agencies

Finding Status:

Unresolved

Management has implemented procedures to monitor the cash monthly balances for all programs when requesting reimbursement for federal and state programs.

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TALBOT COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2018

PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

FA 2016-002 Compliance Requirement:
Internal Control Impact: Compliance Impact: Federal Awarding Agency: Pass-Through Entity: CFDA Number and Title:

Controls Over Expenditures Activities Allowed or Unallowed Allowable Costs/Cost Principles Material Weakness Material Noncompliance U.S. Department of Education Georgia Department of Education 84.010 Title I Grants to Local Education Agencies 10.553 and 10.555 Child Nutrition Cluster

Finding Status:

Previously Reported Corrective Action Implemented

FA 2017-001 Compliance Requirement:
Internal Control Impact: Compliance Impact: Federal Awarding Agency: Pass-Through Entity: CFDA Number and Title:

Improve Controls Over Expenditures Activities Allowed or Unallowed Allowable Costs/Cost Principles Period of Performance Material Weakness Material Noncompliance U.S. Department of Education Georgia Department of Education 84.010 Title I Grants to Local Education Agencies 10.553 and 10.555 Child Nutrition Cluster

Finding Status:

Previously Reported Corrective Action Implemented

FA 2016-003 Compliance Requirement: Internal Control Impact: Compliance Impact: Federal Awarding Agency: Pass-Through Entity: CFDA Number and Title:

Improve Controls over Equipment Equipment and Real Property Management Significant Deficiency Nonmaterial Noncompliance U.S. Department of Education Georgia Department of Education 10.553 and 10.555 Child Nutrition Cluster

Finding Status:

Unresolved

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TALBOT COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2018

PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

FA 2017-003 Compliance Requirement: Internal Control Impact: Compliance Impact: Federal Awarding Agency: Pass-Through Entity: CFDA Number and Title:

Improve Controls over Equipment Equipment and Real Property Management Significant Deficiency Nonmaterial Noncompliance U.S. Department of Education Georgia Department of Education 10.553 and 10.555 Child Nutrition Cluster

Finding Status:

Unresolved

Controls will be designed and implemented to ensure complete and accurate tracking of equipment to include physical inventory audits in accordance with federal regulations, 2 CFR 200.313. In addition, the School District will review the current procedure and control to ensure this control is properly maintained and communicate the difficulties (if any) that exist between the responsible parties of purchasing equipment, labeling equipment, performance of annual inventory, and recording equipment items on listings.

FA 2017-004 Compliance Requirement: Internal Control Impact: Compliance Impact: Federal Awarding Agency: Pass-Through Entity: CFDA Number and Title:

Strengthen Controls over Financial Reporting Reporting Material Weakness Material Noncompliance U.S. Department of Education Georgia Department of Education 84.010 Title I Grants to Local Education Agencies

Finding Status:

Previously Reported Corrective Action Implemented

FA 2017-005 Compliance Requirement: Internal Control Impact: Compliance Impact: Federal Awarding Agency: Pass-Through Entity: CFDA Number and Title:

Improve Controls over the Schoolwide Program Special Tests and Provisions Significant Deficiency Nonmaterial Noncompliance U.S. Department of Education Georgia Department of Education 84.010 Title I Grants to Local Education Agencies

Finding Status:

Unresolved

The School District will evaluate and implement their internal control processes regarding operation of a schoolwide program and formation of the schoolwide plan. The School District will then modify or develop procedures to ensure that an annual evaluation of results achieved by the schoolwide program is performed and the schoolwide plan is revised appropriately based upon these results. Management will develop and implement a monitoring process to ensure that these procedures are properly implemented.

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TALBOT COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2018

PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

FA 2017-006 Compliance Requirement: Internal Control Impact: Compliance Impact: Federal Awarding Agency: Pass-Through Entity: CFDA Number and Title:

Strengthen Controls over Consultation with Private School Officials Special Tests and Provisions Material Weakness Material Noncompliance U.S. Department of Education Georgia Department of Education 84.010 Title I Grants to Local Education Agencies

Finding Status:

Unresolved

The School District will review current internal control procedures related to consultation with private school officials. The School District will develop and/or modify its policies and procedures to ensure that timely and meaningful consultation occurs with private school officials and that services are provided to eligible private school children. Management will develop and implement a monitoring process to ensure that controls are operating appropriately.

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SECTION IV FINDINGS AND QUESTIONED COSTS

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

I SUMMARY OF AUDITOR'S RESULTS

Financial Statements

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

Unmodified Disclaimed

Internal control over financial reporting:

Material weaknesses identified?

Yes

Significant deficiencies identified?

Yes

Noncompliance material to financial statements noted:

No

Federal Awards

Internal Control over major programs:

Material weaknesses identified?

Yes

Significant deficiencies identified?

Yes

Type of auditor's report issued on compliance for major programs: Unmodified for all major programs except for Title I Grants to Local Educational Agencies, which was qualified.

Any audit findings disclosed that are required to be reported in

accordance with 2 CFR 200.516(a)?

Yes

Identification of major programs:

CFDA Numbers

Name of Federal Program or Cluster

10.553, 10.555 84.010

Child Nutrition Cluster Title I Grants to Local Educational Agencies

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

$750,000.00

Auditee qualified as low-risk auditee?

No

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

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FS 2018-001

Internal Control Procedures

Control Category:

Cash and Cash Equivalents

Internal Control Impact:

Material Weakness

Compliance Impact:

None

Repeat of Prior Year Finding:

FS 2017-001, FS 2016-001, FS 2015-001, FS 2014-001,

FS 7301-13-01

Description:

The accounting procedures of the School District were insufficient to provide adequate internal

controls over the Cash and Cash Equivalents functions.

Criteria: The School District's management is responsible for designing and maintaining internal controls over Cash and Cash Equivalents.

Condition: The following Cash and Cash Equivalents related deficiencies were noted:
Bank reconciliations were not performed by someone independent of the general ledger function.
Misstatements were noted on Note Disclosure 4 for the carrying amount, the bank balance amount, the amount insured by Federal depository insurance, and the amount collateralized with securities held by the pledging financial institution's trust department or agent in the School District's name.
Two bank accounts were not properly reconciled to the June 30, 2018 general ledger balance. Thirteen reconciliations lacked evidence of timely completion through completion dates for
both the preparer and approver. One reconciliation lacked the preparers and approvers signature.

Cause: In discussing these deficiencies with the School District, they stated that the cause was a direct result of the lack of time and resources to fully separate duties to ensure that internal controls were sufficient.

Effect or Potential Effect: Failure to maintain adequate internal controls over cash activity increases the risk significant misstatements could occur in the financial statements due to error or fraud.

Recommendation: Management should take appropriate steps to ensure the time and resources are made available to implement controls over cash to ensure monthly bank reconciliations are performed accurately and in a timely manner by someone independent of the general ledger function.

Views of Responsible Officials: We concur with this finding.

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

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FS 2018-002 Control Category:
Internal Control Impact: Compliance Impact: Repeat of Prior Year Finding:

Internal Controls over Agency Fund Accounts Cash and Cash Equivalents Revenues/Receivables/Receipts Expenditures/Liabilities/Disbursements Accounting Controls (Overall) General Ledger Material Weakness None FS 2017-002, FS 2016-002, FS 2015-002, FS 2014-002, FS 7301-13-02

Description: The accounting procedures of the School District were not followed resulting in internal control weaknesses over Agency Fund accounts.

Criteria: The School District's management is responsible for designing and maintaining internal controls that provide proper separation of duties and provide reasonable assurance transactions are processed according to established procedures.

Condition: The following deficiencies were noted with the School District's Agency Fund accounts:

Cash and Cash Equivalents The CSS Internal School Funds account was not reconciled to the general ledger nor to the school activity ledger reports at June 30, 2018.

Revenues/Receivables/Receipts The deposit preparation function was not separated from the bank reconciliation and general ledger functions for school activity accounts. No supporting receipt documentation was provided for the ten school activity receipts selected for review. No supporting receipt documentation was provided for the three Family Connection grant receipts selected for review.

Expenditures/Liabilities/Disbursements Nine of the ten school activity account expenditures reviewed did not have evidence of review or approval. Four of the ten school activity account expenditures reviewed were not supported by an invoice and/or the invoice did not equal the amount paid. None of the ten school activity account expenditures had evidence of receipt of purchase. No supporting expenditure documentation was provided for the thirteen Family Connection grant expenditures selected for review.

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TALBOT COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2018
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
Accounting Controls (Overall) For school activity accounts, the School District did not have a formal process for documenting agency fund sponsors, purpose of accounts, allowable activities of accounts, source of funds, and final disposition of funds related to individual agency fund accounts.
General Ledger The School District did not record any fiscal year 2018 school activity account transactions on the general ledger or the financial statements. Supporting documentation provided by the School District to record school activity accounts was unreliable and inaccurate; therefore, it was not possible to determine if the balances at June 30, 2018 were materially correct.
Cause: In discussing these deficiencies with the School District, they stated that the internal control deficiencies related to school activity accounts occurred due to a shortage of personnel at the school and a failure of those personnel to follow the established policies and procedures due to lack of understanding. That resulted in necessary information not being recorded and located.
Effect or Potential Effect: The lack of adequate controls increases the risk of theft, fraud, or misuse of School District resources that may result in errors and/or irregularities not being detected in a timely manner. Also, agency funds could be materially misstated.
Recommendation: Management should take appropriate steps to ensure:
The time and resources are made available to ensure proper separation of duties is established,
proper approval process for disbursements is followed, safe keeping of receipt documentation is implemented, accounting processes are adequately monitored, school activity accounts are properly classified, financial statement amounts are reconciled to the schools' general ledger balances and bank
statement balance, standard procedures are implemented over the depositing of funds, amounts reported in consolidation spreadsheet for school activity accounts is accurate, and agency fund accounts are properly documented.
In addition, the School District should ensure that balances are properly reflected in the general ledger and financial statements.
Views of Responsible Officials: We concur with this finding.
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TALBOT COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2018

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FS 2018-003 Control Category: Internal Control Impact: Compliance Impact: Repeat of Prior Year Finding:

Internal Controls over Employee Compensation Employee Compensation Significant Deficiency None FS 2017-003, FS 2016-003, FS 2015-004, FS 2014-004, FS 7301-13-05

Description: The accounting procedures of the School District did not provide adequate internal controls over employee compensation.

Criteria: The School District's management is responsible for designing and maintaining internal controls that provide reasonable assurance employees are paid according to approved salary schedules and documentation is maintained to support the salary payments.

Condition: Based on a review of employees' payroll records, the following deficiencies were noted:
A review of employee compensation revealed instances where salaries and/or hourly payments were not properly supported by Board approved salary schedules.
A review of employee compensation revealed that two employees were overpaid a total of $13,655.42 in comparison to their proper pay rates per Board approved salary scales and/or approved contacts.
Extra pay documentation totaling $7,306.10 for two employees could not be located by School District personnel.

Cause: In discussing these deficiencies with the School District, they indicated that appropriate procedures to ensure salary amounts are supported by adequate documentation had not been implemented.

Effect or Potential Effect: The failure to maintain adequate internal controls over employee compensation increases the risk that misstatements could occur in the financial statements due to error or fraud.

Recommendation: The School District should implement policies and procedures to ensure normal business procedures are followed for all salaries, which includes ensuring salaries are paid according to approved salary schedules and adequate documentation is maintained to support the salary payments.

Views of Responsible Officials: We concur with this finding.

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

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FS 2018-004 Control Category: Internal Control Impact: Compliance Impact: Repeat of Prior Year Finding:

Internal Controls over Capital Assets Capital Assets Significant Deficiency None FS 2017-004, FS 2016-004, FS 2015-005, FS 2014-005, FS 7301-13-06

Description: The School District did not adequately maintain the capital assets records.

Criteria: The School District's management is responsible for designing and maintaining internal controls that provide reasonable assurance that capital assets inventory reports are properly maintained. Chapter IV-7 Implementing a Capital Assets Management System of the Financial Management for Georgia Local Units of Administration provides that School Districts must establish capital asset policies, define system requirements, implement a capital asset system and maintain capital asset inventory reports.

Condition: The School District's capital asset records revealed the following exceptions:
Documentation of a physical inventory of capital assets was not provided. Two items were listed that were below the capitalization threshold requirements in the School
District's policy. A current year demolished building and improvements was not removed from the capital
assets listing. The cost of the building improvements was $318,499.30 and the related accumulated depreciation totaled $312,988.49. An entry was proposed by auditors and accepted by the School District to remove the building and improvements.

Cause: In discussing these deficiencies with the School District, they stated that the cause was a direct result of the lack of time and resources to fully monitor and implement procedures over capital assets which follow Board policy.

Effect or Potential Effect: Failure to maintain adequate internal controls over capital assets can lead to inaccurate internal and external reporting, as well as, noncompliance with generally accepted accounting principles.

Recommendation: Management should take appropriate steps to ensure the time and resources are made available to implement controls over capital assets to ensure records are accurate and conform to the School District's approved capital asset policy.

Views of Responsible Officials: We concur with this finding.

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

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FS 2018-005 Control Category:
Internal Control Impact: Compliance Impact: Repeat of Prior Year Finding:

Internal Controls at the Central Office Accounting Controls (Overall) Expenditures/Liabilities/Disbursements General Ledger Significant Deficiency None FS 2017-005, FS 2016-005

Description: The accounting procedures of the School District did not provide adequate internal controls at the Central Office.

Criteria: The School District's management is responsible for designing and maintaining internal controls that provide reasonable assurance that transactions are processed appropriately.

Condition: Accounting Controls (Overall)
The School District does not have adequate logical access controls in place to ensure only appropriate users have access to significant financial applications and supporting infrastructure. We noted several users with access rights that exceeded their need to complete their assigned job functions. Further, the access granted did not adequately separate the functions of initiating, authorizing, and recording transactions, reconciliations, and maintaining the custody of assets.
Inadequate physical access controls are in place over the server rooms. It was noted that the server room is unlocked during working hours.
Proper anti-virus protection was not in place at the workstation level. For efficiency, IT personnel performs a full memory wipe and restore for any workstation that becomes compromised. This exposes the entity to unnecessary risk from cyber threats.
There are no established written organizational standards or procedures over IT functions and key processes. Considering the School District has only one full time IT personnel, formal written procedures such as back-up policies, job scheduling, and IT risk assessment is crucial.
Backup and recovery procedures for the student information system and school food service point of sale system are not adequate.
There is no formal policy for managing user access to the financial application, student information system, and school food service point of sale system.
The School District did not have adequate password policies over the network, student information system, and school food service point of sale system.

Expenditures/Liabilities/Disbursements Our examination of twenty-five expenditures revealed the following deficiencies:
Supporting documentation for six expenditure transactions selected for review could not be provided by the School District.

General Ledger Our examination of nineteen journal entries revealed the following deficiencies:
Supporting documentation for three journal entries selected for review could not be provided by the School District.
Seven journal entries lacked evidence of supervisory review and approval.

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

II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

Cause: In discussing these deficiencies with School District, they stated that these issues were a result of management's failure to ensure that internal controls were established, implemented, and functioning.

Effect or Potential Effect: Without satisfactory accounting controls and procedures in place, the School District could place itself in a position where potential misappropriation of assets could occur. In addition, the lack of proper controls impacts its reporting and financial position and results of operations.

Recommendation: The School District should implement procedures to ensure that key accounting functions are appropriately separated and/or utilize management oversight for these incompatible activities. In addition, the School District should ensure server rooms are properly safeguarded and monitored, and adequate protection from cyber threats exists on all workstations. The School District should review accounting procedures in place and design and implement procedures relative to expenditures and journal entries to strengthen the internal controls over the accounting function.

Views of Responsible Officials: We concur with this finding.

FS 2018-006 Control Category: Internal Control Impact: Compliance Impact: Repeat of Prior Year Finding:

Internal Controls over Financial Reporting Financial Reporting Material Weakness None FS 2017-006, FS 2016-006

Description: The School District did not have adequate controls in place over the financial statement reporting process to ensure all required activity was correctly included in the financial statement information presented for audit. The original financial statements, as presented for audit, contained numerous material and significant errors and omissions.

Criteria: Management is responsible for having adequate controls over the preparation of financial statements in accordance with generally accepted accounting principles (GAAP). The School District's internal controls over GAAP financial reporting should include adequately trained personnel with the knowledge, skills, and experience to prepare GAAP based financial statements and include all disclosures as required by the Governmental Accounting Standards Board (GASB).
GASB Statement No. 34, Basic Financial Statements Management's Discussion and Analysis for State and Local Governments (Statement), requires governments to present government-wide and fund financial statements as well as summary reconciliation of the (a) total governmental funds balances to the net position of governmental activities in the Statement of Net Position, and (b) total changes in governmental fund balances to the change in the net position of governmental activities in the Statement of Activities. In addition, the statement requires information about the government's major and nonmajor funds in the aggregate, to be provided in the fund financial statements.

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TALBOT COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2018
II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
Chapter II2, Annual Financial Reporting of the Financial Management for Georgia Local Units of Administration provides that School Districts must prepare their financial statements in accordance with generally accepted accounting principles.
Condition: The following errors and omissions were noted in the School District's financial statement presented for audit:
Capital projects fund expenditures, contracts payable, and retainages payable were understated by $148,323.30, $124,678.80, and $23,644.50, respectively. These misstatements were material to the capital projects fund. Adjustments to the financial statements were proposed by auditors and accepted by the School District.
Capital projects fund SPLOST revenue, accounts receivables, and cash were overstated by $99,848.39, $37,308.61, and $62,539.78, respectively, due to posting errors. These misstatements were material to the capital projects fund. Adjustments to the financial statements were proposed by auditors and accepted by the School District.
Agency fund cash and funds held for others were overstated by $11,989.82 due to the Family Connections grant being incorrectly recorded in the general fund. Adjustments to the financial statements were proposed by the auditors and accepted by the School District. These misstatements were material to the agency fund.
Agency fund accounts receivables and funds held for others were understated by $11,989.82 due to an accounts receivable not being recorded. Adjustments to the financial statements were proposed by the auditors and accepted by the School District. These misstatements were material to the agency fund.
A review of federal grant fund balances revealed that several grants were not properly closed out at year-end. Federal programs should be reviewed each year to determine if funds should be refunded to the grantor or if a transfer or receivable is necessary to cover a deficit balance.
Several other audit adjustments and reclassifications were proposed by auditors and accepted by the School District to properly present the financial statement and note disclosures.
Cause: In discussing this deficiency with the School District, they stated that the cause was a direct result of the lack of review of the financial statements and note disclosures as prepared by their consultant.
Effect or Potential Effect: Material and significant misstatements and misclassifications were included in the financial statements presented for audit. Numerous adjustments were necessary for the School District's financial statements to be in conformity with GAAP. The lack of controls and monitoring could impact the reporting of the School District's financial position and results of operations.
Recommendation: The School District should strengthen their internal controls and preparation and review procedures over financial reporting to ensure that the financial statements, including disclosures, presented for audit are complete and accurate. These procedures should be performed by a properly trained individual(s) possessing a thorough understanding of the applicable GAAP, GASB pronouncements and knowledge of the School District's activities and operations. The School District should also consider implementing the use of a review checklist to assist in the review process over the financial statements.
Views of Responsible Officials: We concur with this finding.
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TALBOT COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2018

III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

FA 2018-001

Improve Controls over Cash Management

Compliance Requirement: Cash Management

Internal Control Impact:

Material Weakness

Compliance Impact:

Material Noncompliance

Federal Awarding Agency: U.S. Department of Education

Pass-Through Entity:

Georgia Department of Education

CFDA Number and Title:

84.010 Title I Grants to Local Education Agencies

Federal Award Numbers:

S010A160010, S010A170010

Questioned Costs:

None Identified

Repeat of Prior Year Findings: FA 2017-002, FA 2016-001, FA 2015-002, FA 2014-003

Description: The School District made cash drawdowns in excess of immediate cash needs for the Title I program.

Criteria: 2 CFR 200.305(b) states, "For non-Federal entities other than states, payments methods must minimize the time elapsing between the transfer of funds from the pass-through entity and the disbursement by the non-Federal entity." In addition, 2 CFR 200.302(b)(6) requires that the entity develop written cash management procedures.

Furthermore, 2 CFR 200.303(a) states in part that the "non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award... (c) Evaluate and monitor the non-Federal entity's compliance with statutes, regulations and the terms and conditions of Federal awards.

Condition: Upon review of cash drawdowns and disbursements related to the Title I program, cash balances in excess of Title I program materiality were observed for the entire fiscal year. Additionally, it was noted that the School District did not have appropriate controls in place over the cash drawdown process.

Cause: In discussing the issues with management, they indicated that the lack of review of federal grants resulted in excess cash drawdown requests.

Effect or Potential Effect: The School District is not in compliance with the Uniform Guidance and Georgia Department of Education guidance. In addition, the School District could potentially accrue a Federal interest liability that would be owed to the Federal government.

Recommendation: The School District should develop and implement procedures to accurately forecast the cash needs of the Title I program and minimize the time elapsing between the transfer of funds from the Georgia Department of Education and the disbursement of such funds by the School District. These procedures should be documented in accordance with 2 CFR 200.302(b)(6). In addition, management should develop and implement a monitoring process to ensure that these procedures are followed.

Views of Responsible Officials: We concur with this finding.

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

III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

FA 2018-002

Improve Controls over Equipment

Compliance Requirement: Equipment and Real Property Management

Internal Control Impact:

Significant Deficiency

Compliance Impact:

Nonmaterial Noncompliance

Federal Awarding Agency: U.S. Department of Education

Pass-Through Entity:

Georgia Department of Education

CFDA Numbers and Title:

10.553 and 10.555 Child Nutrition Cluster

Federal Award Numbers:

18185GA324N1099 School Breakfast Program

18185GA324N1100 National School Lunch Program

Questioned Costs:

None Identified

Repeat of Prior Year Findings: FA 2017-003, FA 2016-003

Description: The policies and procedures of the School District were insufficient to provide adequate internal controls over equipment and real property management as it relates to the Child Nutrition Cluster.

Criteria: 2 CFR 200.313(d)(1) states, "Property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property (including the FAIN), who holds title, the acquisition date, and cost of the property, percentage of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property." In addition, 2 CFR 200.313(d)(2) states, "A physical inventory of the property must be taken and the results reconciled with the property records at least once every two years."

Condition: The following deficiencies were noted when reviewing the Child Nutrition Cluster equipment listing:

Property records did not include the following required components for all/most items: (1) Percentage of Federal participation in the project costs for the Federal award under which the property was acquired, (2) who holds the title, and (3) condition of property.
The equipment listing appeared to be incomplete because equipment that is currently in storage was not included.
There was no evidence that a physical inventory has been performed in either the current year or the previous year.

Cause: The internal control process by which equipment items get aggregated and reported does not appear fully effective. In discussing the deficiency with management, they state that communication difficulties exist between the responsible parties of purchasing equipment, labeling equipment, performance of the annual inventory, and recording equipment items on the listings.

Effect or Potential Effect: Failure to maintain a complete and accurate equipment listing and reconcile results of the physical inventory performed to the property records exposes the School District to unnecessary risk of error and misuse of equipment and/or Federal funds. Additionally, the School District is not in compliance with the Uniform Guidance and Georgia Department of Education Guidance.

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

III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

Recommendation: The School District should strengthen controls over Child Nutrition Cluster equipment to ensure that the equipment records are complete and accurate. Management should update the equipment listing to reflect all required information, including a description, an identifying number, the source of funding, the title holder, the acquisition date, the cost, the percentage of federal participation in the project costs, the location, the use and condition, and any ultimate disposal data for each piece of equipment. Management should perform a physical inventory of equipment at least once every two years and reconcile the results of the physical inventory to the Child Nutrition Cluster equipment listing.

Views of Responsible Officials: We concur with this finding.

FA 2018-003 Compliance Requirements: Internal Control Impact: Compliance Impact: Federal Awarding Agency: Pass-Through Entity: CFDA Number and Title: Federal Award Numbers: Questioned Costs:

Strengthen Controls over Maintenance of Effort Requirements Matching, Level of Effort, Earmarking Significant Deficiency Nonmaterial Noncompliance U.S. Department of Education Georgia Department of Education 84.010 Title I Grants to Local Educational Agencies S010A160010, S010A170010 None Identified

Description: The School District did not meet maintenance of effort requirements associated with the Title I Grants to Local Educational Agencies program.

Criteria: 34 CFR 299.5(a) states in part that "an LEA receiving funds under an applicable program... may receive its full allocation of funds only if the SEA finds that either the combined fiscal effort per student or the aggregate expenditures of State and local funds with respect to the provision of free public education in the LEA for the preceding fiscal year was not less than 90 percent of the combined fiscal effort per student or the aggregate expenditures for the second preceding fiscal year."

In addition, 2 CFR 200.303(a) states in part that the "non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award... (c) Evaluate and monitor the non-Federal entity's compliance with statutes, regulations and the terms and conditions of Federal awards."

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TALBOT COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2018
III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
Condition: Our review of the maintenance of effort calculation performed by the Georgia Department of Education revealed that the School District did not meet maintenance of effort requirements associated with the Title I Grants to Local Educational Agencies program. The School District was required to meet either the aggregate expenditure maintenance of effort requirement or the average per pupil expenditure maintenance of effort requirement. Neither of these requirements were met, and the following deficiencies were noted:
State and local expenditures totaled $5,422,540.00 in fiscal year 2015. The School District was required to spend at least 90% of this total using State and local funds in fiscal year 2016. However, the School District only expended $4,446,565.00 using State and local funds, which was $433,721.00 less than the required spending level of $4,880,286.00.
Based upon a 2015 Full-Time Equivalent (FTE) enrollment total of 504, the School District should have expended $9,683.11 per student using State and local funds in fiscal year 2016. However, the School District only expended $8,964.85 per student using State and local funds, which was $718.26 less per student than the required spending level based upon a 2016 FTE enrollment total of 496.
Cause: In discussing this deficiency with the School District, they stated that these issues were a result of management's failure to ensure that internal controls were established, implemented, and functioning over maintenance of effort requirements.
Effect or Potential Effect: Due to the amendments made to the Elementary and Secondary Education Act of 1965 by the, Every Student Succeeds Act, no reduction in the allocation of Federal funds is required for the fiscal year under review. However, failure to ensure that maintenance of effort requirements are met going forward may lead to a reduction in funding for the Title I Grants to Local Educational Agencies program in future years and could result in unnecessary financial strains and shortages within the Title I program fund. Additionally, the School District is not in compliance with Federal regulations specific to the Title I program.
Recommendation: The School District should strengthen procedures to ensure that the proper amount of State and local funds is expended each year to meet maintenance of effort requirements associated with the Title I Grants to Local Educational Agencies program. Furthermore, management should develop and implement a monitoring process to ensure that controls are operating appropriately.
Views of Responsible Officials: We concur with this finding.
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TALBOT COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2018

III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

FA 2018-004 Compliance Requirement: Internal Control Impact: Compliance Impact: Federal Awarding Agency: Pass-Through Entity: CFDA Number and Title: Federal Award Numbers: Questioned Costs: Repeat of Prior Year Finding:

Strengthen Controls over Consultation with Private School Officials Special Tests and Provisions Material Weakness Material Noncompliance U.S. Department of Education Georgia Department of Education 84.010 Title I Grants to Local Educational Agencies S010A160010, S010A170010 None Identified FA 2017-006

Description: The policies and procedures of the School District were insufficient to provide adequate internal controls over consulting private school officials regarding the participation of private school children in the Title I Grants to Local Educational Agencies program.

Criteria: 34 CFR 200.55(a) states in part that "After timely and meaningful consultation with appropriate officials of private schools, an LEA must (1) ... provide special educational services or other benefits... on an equitable basis and in a timely manner, to eligible children who are enrolled in private elementary and secondary schools."

In addition, 34 CFR 200.56(a) states in part that "in order to have timely and meaningful consultation, an LEA must consult with the appropriate officials of private schools during the design and development of the LEA's program for eligible private school children." More specifically, 34 CFR 200.56(c)(1) states in part that "consultation by the LEA must (i) include meetings of the LEA and appropriate officials of the private schools; and (ii) occur before the LEA makes any decision that affects the opportunity of eligible private school children to participate in Title I programs."

Condition: The School District did not conduct timely and meaningful consultation with private school officials regarding private school children's participation in the Title I Grants to Local Educational Agencies program. The School District was unable to locate any evidence that private school officials were contacted about involvement in the Title I Grants to Local Educational Agencies program for the fiscal year under review. Therefore, Title I program services were not offered to eligible private school children appropriately.

Cause: In discussing deficiency with the School District, they stated that the cause was direct result of lack of time and resources to fully monitor and implement procedures to ensure letters were sent out.

Effect or Potential Effect: Failure to conduct appropriate consultations with private school officials regarding participation in the Title I program could lead to the School District's failure to set aside appropriate Title I funding to provide services to eligible private school children. Additionally, the School District is not in compliance with U.S. Department of Education and Georgia Department of Education guidance.

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TALBOT COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2018 III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Recommendation: The School District should review current internal control procedures related to consultation with private school officials. Where vulnerable, the School District should develop and/or modify its policies and procedures to ensure that timely and meaningful consultation occurs with private school officials and that services are provided to eligible private school children, as necessary. Furthermore, management should develop and implement a monitoring process to ensure that controls are operating appropriately. Views of Responsible Officials: We concur with this finding.
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SECTION V MANAGEMENT'S CORRECTIVE ACTION

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Cynthia Epps Assistant Superintendent & Director of Curriculum

Talbot County Board of Education
Dr. James Catrett, Superintendent

Board Members Anton Turner, District 1
James Steverson, Vice Chairperson, District 2 Sharleta Hall, Chairman District 3 Carlton Mahone, District 4 Mildred Biggs, District 5

CORRECTIVE ACTION PLAN: FINANCIAL AND FEDERAL AUDIT FINDINGS

Finding: FS 2018-001

Internal Control Procedures

Control Category:

Cash and Cash Equivalents

Internal Control Impact: Material Weakness

Compliance Impact:

None

Repeat of Prior Year Finding: FS 2017-001, FS 2016-001, FS 2015-001, FS 2014-001, FS-7301-13-01

Response: The Finance Director will meet with all parties involved to discuss the findings, examine our current procedure and seek ways to diminish the risks. We will make adjustments to procedures as needed. We will meet periodically to share ideas, discuss adjustments to procedures and provide additional training.

FS 2018-002

Internal Controls over Agency Accounts

Control Category:

Cash and Cash Equivalents

Revenues/Receivables/Receipts

Expenditures/Liabilities/Disbursements

Accounting Controls (Overall)

General Ledger

Internal Control Impact: Material Weakness

Compliance Impact:

None

Repeat of Prior Year Finding: FS 2017-002, FS 2016-002, FS 2015-002, FS 2014-002, FS-7301-13-02

Response: The school district has hired a new Finance/Business Director that will review the current accounting procedure and ensure that internal controls are in place. In addition, the school district has received quotes in reference to purchasing a new software that will be implemented for school accounting that has features to eliminate issues with school level purchases. The Business/Finance Director will meeting periodically to share ideas, discuss adjustments to procedures (if any), and provide additional training, if needed.

FS 2018-003

Internal Controls over Employee Compensation

Control Category:

Employee Compensation

Internal Control Impact: Significant Deficiency

Compliance Impact:

None

Repeat of Prior Year Finding: FS 2017-003, FS 2016-003, FS 2015-004, FS 2014-004, FS-7301-13-05

945 N. Washington Avenue

P. O. Box 515 Determined to Achieve; Dedicated to Succeed

Talbotton, GA 31827

Response: The Board will ensure that internal controls are establish, implemented and functioning at the system level to adequately address controls over employee compensation procedures and ensure that all said employee compensation is properly calculated.

FS 2018-004

Internal Controls over Capital Assets

Control Category:

Capital Assets

Internal Control Impact: Significant Deficiency

Compliance Impact:

None

Repeat of Prior Year Finding: FS 2017-004, FS 2016-004, FS 2015-005, FS 2014-005, FS-7301-13-06

Response: Management concurs with this finding; Additional resources will be committed as well as controls designed and implemented to the capital asset inventory management process to ensure records are properly maintained. Further, the school district is in the process of implementing a better control system to assist with the capital asset activity.

FS 2018-005

Internal Controls at the Central Office

Control Category:

Accounting Controls (Overall)

Expenditures/Liabilities/Disbursements

General Ledger

Internal Control Impact: Significant Deficiency

Compliance Impact:

None

Repeat of Prior Year Finding: FS 2017-005, FS 2016-005

Response: The school district has hired a new Chief Financial Officer to oversee the accounting procedures and ensure that internal controls are in place. In addition, the school district will review the current accounting procedures and controls and will implement procedures to help strengthen the internal controls.

FS 2018-006

Internal Controls over Financial Reporting

Control Category:

Financial Reporting

Internal Control Impact: Material Weakness

Compliance Impact:

None

Repeat of Prior Year Finding: FS 2017-006, FS 2016-006

Response: The school district has hired a new Chief Financial Officer to oversee the accounting procedures and ensure that internal controls are in place. In addition, the school district will review the current accounting procedures and controls and will implement procedures to help strengthen the internal controls.

FA 2018-001

Improve Controls over Cash Management

Compliance Requirement: Cash Management

Internal Control Impact: Material Weakness

Compliance Impact:

Material Noncompliance

Federal Awarding Agency: U.S. Department of Education

Pass-Through Entity:

Georgia Department of Education

CFDA Number and Title: 84.010 Title I Grants to Local Education Agencies

Federal Award Numbers: S010A160010, S010A170010

Questioned Costs:

None Identified

Repeat of Prior Year Finding: FA 2017-002, FA 2016-001, FA 2015-002, FA 2014-003

945 N. Washington Avenue

P. O. Box 515 Determined to Achieve; Dedicated to Succeed

Talbotton, GA 31827

Response: Management has implemented procedures to monitor the cash monthly balances for all programs when requesting reimbursement for federal and state programs.

FA 2018-002

Improve Controls over Equipment

Compliance Requirement: Equipment and Real Property Management

Internal Control Impact: Significant Deficiency

Compliance Impact:

Nonmaterial Noncompliance

Federal Awarding Agency: U.S. Department of Education

Pass-Through Entity:

Georgia Department of Education

CFDA Number and Title: 10.553 & 10.555 Child Nutrition Cluster

Federal Award Number: 18185GA324N1099-School Breakfast Program

18185GA324N1100-National School Lunch Program

Questioned Costs:

None Identified

Repeat of Prior Year Finding: FA 2017-003, FA 2016-003

Response: Controls will be designed and implemented to ensure complete and accurate tracking of equipment to include physical inventory audits in accordance with federal regulations, 2 CFR 200.313. In addition, the school district will review the current procedure and control to ensure this control is properly maintained and communicate the difficulties (if any) that exists between the responsible parties of purchasing equipment, labeling equipment, performance of annual inventory, and recording equipment items on listings.

FA 2018-003 Compliance Requirement: Internal Control Impact: Compliance Impact: Federal Awarding Agency: Pass-Through Entity: CFDA Number and Title: Federal Award Numbers: Questioned Costs:

Strengthen Controls over Maintenance of Effort Requirements Matching, Level of Effort, Earmarking Significant Deficiency Nonmaterial Noncompliance U.S. Department of Education Georgia Department of Education 84.010 Title I Grants to Local Educational Agencies S010A160010, S010A170010 None Identified

Response: The school district and Finance Director will review the current procedures related to strengthening the controls over the Maintenance of Efforts requirement. We will develop policies and procedures to ensure we are in compliance with the requirements of earmarking, matching, and expending according to Federal Grants measures.

FA 2018-004 Compliance Requirement: Internal Control Impact: Compliance Impact: Federal Awarding Agency: Pass-Through Entity: CFDA Number and Title: Federal Award Numbers:

Strengthen Controls over Consultation with Private School Officials Special Tests and Provisions Material Weakness Material Noncompliance U. S. Department of Education Georgia Department of Education 84.010 Title I Grants to Local Educational Agencies S010A160010, S010A170010

945 N. Washington Avenue

P. O. Box 515 Determined to Achieve; Dedicated to Succeed

Talbotton, GA 31827