ANNUAL FINANCIAL REPORT FISCAL YEAR 2021 Talbot County Board of Education Talbotton, Georgia Including Independent Auditor's Report Greg S. Griffin | State Auditor Talbot County Board of Education Table of Contents Section I Financial Independent Auditor's Report Exhibits Basic Financial Statements Government-Wide Financial Statements A Statement of Net Position 1 B Statement of Activities 2 Fund Financial Statements C Balance Sheet Governmental Funds 3 D Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position 4 E Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds 5 F Reconciliation of the Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balances to the Statement of Activities 6 G Statement of Fiduciary Net Position Fiduciary Funds 7 H Statement of Changes in Fiduciary Net Position Fiduciary Funds 8 I Notes to the Basic Financial Statements 9 Schedules Required Supplementary Information 1 Schedule of Proportionate Share of the Net Pension Liability Teachers Retirement System of Georgia 35 2 Schedule of Contributions Teachers Retirement System of Georgia 36 3 Schedule of Proportionate Share of the Net Pension Liability Public School Employees Retirement System of Georgia 37 4 Schedule of Proportionate Share of the Net OPEB Liability School OPEB Fund 38 Talbot County Board of Education Table of Contents Section I Schedules Required Supplementary Information 5 Schedule of Contributions School OPEB Fund 39 6 Notes to the Required Supplementary Information 40 7 Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual General Fund 41 Supplementary Information 8 Schedule of Expenditures of Federal Awards 42 9 Schedule of State Revenue 44 10 Schedule of Approved Local Option Sales Tax Projects 46 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 Section IV Findings and Questioned Costs Schedule of Findings and Questioned Costs Talbot County Board of Education Table of Contents Section V Management's Corrective Action For Current Year Findings Schedule of Management's Corrective Action Section I Financial Greg S. Griffin State Auditor 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 Dr. James Catrett, 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 fiduciary activities of the Talbot County Board of Education (School District), as of and for the year ended June 30, 2021, and the related notes to the financial statements, which collectively comprise the School District's basic financial statements as listed in the table of contents. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the School District'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 School District's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. 270 Washington Street, SW, Suite 4-101 Atlanta, Georgia 30334 | Phone (404) 656-2180 We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and fiduciary activities of the School District as of June 30, 2021, 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 2021, the School District adopted new accounting guidance, Governmental Accounting Standards Board (GASB) Statement No. 84, Fiduciary Activities. The School District restated beginning balances for the effect of GASB Statement No. 84. Our opinions are not modified with respect to this matter. 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 supplementary information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated January 24, 2023 on our consideration of the School District's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the School District's internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the School District's internal control over financial reporting and compliance. A copy of this report has been filed as a permanent record and made available to the press of the State, as provided for by Official Code of Georgia Annotated section 50-6-24. Respectfully submitted, Greg S. Griffin State Auditor January 24, 2023 Talbot County Board of Education TALBOT COUNTY BOARD OF EDUCATION STATEMENT OF NET POSITION JUNE 30, 2021 ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net Taxes State Government Federal Government Other Inventories Capital Assets, Non-Depreciable Capital Assets, Depreciable (Net of Accumulated Depreciation) Total Assets DEFERRED OUTFLOWS OF RESOURCES Related to Defined Benefit Pension 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 Bus Replacement Continuation of Federal Programs Debt Service Capital Projects Unrestricted (Deficit) Total Net Position EXHIBIT "A" GOVERNMENTAL ACTIVITIES $ 3,194,819.05 65,000.00 401,203.10 316,978.68 106,129.96 11,825.52 20,228.31 5,350,076.59 12,318,390.18 21,784,651.39 1,877,818.43 2,198,075.00 4,075,893.43 54,623.75 561,602.89 469.15 32,316.67 240,469.55 32,153.53 6,809,342.00 6,862,227.00 428,993.35 2,815,410.38 17,837,608.27 189,143.00 1,359,733.00 1,548,876.00 14,569,863.62 65,740.00 153,312.01 11,208.33 624,992.47 (8,951,055.88) $ 6,474,060.55 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, 2021 EXHIBIT "B" EXPENSES CHARGES FOR SERVICES PROGRAM REVENUES OPERATING GRANTS AND CONTRIBUTIONS CAPITAL GRANTS AND CONTRIBUTIONS NET (EXPENSES) REVENUES AND CHANGES IN NET POSITION 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 Enterprise Operations Food Services Interest on Long-Term Debt $ 4,574,348.60 $ 390,457.99 284,239.72 108,076.14 522,520.17 586,016.69 136,607.76 814,507.81 467,929.57 39,891.04 25,039.06 523,949.89 80,025.37 24,517.56 $ 2,873,099.99 $ - 107,858.55 - 101,913.44 - 58,893.60 - 414,974.43 - 182,451.82 - 3,424.79 - 220,015.95 - 198,409.56 - 3,650.79 4,479.70 13,963.00 - 118,052.02 - - $ 154,440.00 - - (1,676,731.05) (282,599.44) (182,326.28) (49,182.54) (107,545.74) (403,564.87) (133,182.97) (594,491.86) (115,080.01) (36,240.25) (20,559.36) (391,934.87) (80,025.37) Total Governmental Activities $ 8,553,609.81 $ 42,960.26 $ 4,282,744.94 $ 154,440.00 (4,073,464.61) General Revenues Taxes Property Taxes For Maintenance and Operations Railroad Cars Sales Taxes Special Purpose Local Option Sales Tax For Debt Services For Capital Projects Other Sales Tax Investment Earnings Miscellaneous Total General Revenues 3,568,084.23 48,107.31 315,623.32 328,125.43 38,119.81 1,783.32 40,026.17 4,339,869.59 Change in Net Position 266,404.98 Net Position - Beginning of Year (Restated) 6,207,655.57 Net Position - End of Year $ 6,474,060.55 The notes to the basic financial statements are an integral part of this statement. - 2 - TALBOT COUNTY BOARD OF EDUCATION BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2021 EXHIBIT "C" ASSETS Cash and Cash Equivalents Investments Accounts Receivable, Net Taxes State Government Federal Government Other Inventories 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 Unavailable Revenue - Grants Total Deferred Inflows of Resources FUND BALANCES Nonspendable Restricted Assigned Unassigned Total Fund Balances Total Liabilities, Deferred Inflows of Resources, and Fund Balances GENERAL FUND CAPITAL PROJECTS FUND DEBT SERVICE FUND TOTAL $ 2,605,991.53 $ 65,000.00 321,513.15 316,978.68 106,129.96 11,825.52 20,228.31 $ 3,447,667.15 $ 588,827.52 $ - 79,689.95 - 668,517.47 $ - $ - - - $ 3,194,819.05 65,000.00 401,203.10 316,978.68 106,129.96 11,825.52 20,228.31 4,116,184.62 $ 54,623.75 $ - $ 561,602.89 - 469.15 - - 240,469.55 - 32,153.53 616,695.79 272,623.08 - $ - - - - - 54,623.75 561,602.89 469.15 240,469.55 32,153.53 889,318.87 204,200.28 - 5,000.00 - 209,200.28 - - 204,200.28 - 5,000.00 - 209,200.28 20,228.31 198,823.70 22,191.17 2,380,527.90 2,621,771.08 395,894.39 395,894.39 - 20,228.31 - 594,718.09 - 22,191.17 - 2,380,527.90 - 3,017,665.47 $ 3,447,667.15 $ 668,517.47 $ - $ 4,116,184.62 The notes to the basic financial statements are an integral part of this statement. - 3 - TALBOT COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET POSITION JUNE 30, 2021 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. Grants 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 Lease liability payable Unamortized bond premiums Net position of governmental activities (Exhibit "A") $ 3,017,665.47 $ 379,857.93 4,970,218.66 14,060,918.30 1,719,297.09 1,411,233.02 (4,873,058.23) 17,668,466.77 $ (6,809,342.00) (6,862,227.00) (13,671,569.00) $ 1,688,675.43 838,342.00 2,527,017.43 204,200.28 5,000.00 $ (2,525,000.00) (32,316.67) (531,434.73) (187,969.00) (3,276,720.40) $ 6,474,060.55 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, 2021 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 Enterprise Operations 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 (Restated) Fund Balances - Ending GENERAL FUND CAPITAL PROJECTS FUND DEBT SERVICE FUND TOTAL $ 3,624,372.10 $ 38,119.81 3,262,122.45 1,166,066.49 42,960.26 1,438.43 40,026.17 8,175,105.71 - $ 328,125.43 - - - 344.89 - 328,470.32 - $ 315,623.32 - - - - - 315,623.32 3,624,372.10 681,868.56 3,262,122.45 1,166,066.49 42,960.26 1,783.32 40,026.17 8,819,199.35 3,796,414.49 353,600.03 262,616.29 98,366.09 505,016.80 535,109.74 88,845.96 744,506.05 516,986.80 39,891.04 25,039.06 487,417.81 - 54,784.63 15,765.37 7,524,360.16 650,745.55 - 65.00 246,612.48 246,677.48 81,792.84 - - 330,000.00 96,950.00 426,950.00 (111,326.68) 3,796,414.49 353,600.03 262,616.29 98,366.09 505,016.80 535,109.74 88,910.96 744,506.05 516,986.80 39,891.04 25,039.06 487,417.81 246,612.48 384,784.63 112,715.37 8,197,987.64 621,211.71 (1,000.00) (1,000.00) 649,745.55 1,972,025.53 $ 2,621,771.08 $ 1,000.00 - 1,000.00 82,792.84 313,101.55 395,894.39 $ - 1,000.00 - (1,000.00) - - (111,326.68) 621,211.71 111,326.68 2,396,453.76 - $ 3,017,665.47 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, 2021 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. Grants reported in the Statement of Activities that do not provide current financial resources are not reported as revenues in the funds. The issuance of long-term debt provides current financial resources to governmental funds, while the repayment of the principal of long-term debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net position. Also, governmental funds report the effect of premiums, discounts and the difference between the carrying value of refunded debt and the acquisition cost of refunded debt when debt is first issued. These amounts are deferred and amortized in the Statement of Activities. Bond principal retirements Capital lease payments Amortization of bond premium District pension/OPEB 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 Change in net position of governmental activities (Exhibit "B") $ 621,211.71 $ 335,312.48 (368,426.20) (33,113.72) 8,907.04 (8,180.56) 5,000.00 $ 330,000.00 54,784.63 32,690.00 417,474.63 $ (412,944.12) (331,950.00) (744,894.12) $ 266,404.98 The notes to the basic financial statements are an integral part of this statement. - 6 - TALBOT COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET POSITION FIDUCIARY FUNDS JUNE 30, 2021 EXHIBIT "G" ASSETS Cash and Cash Equivalents Receivables, Net Other Total Assets LIABILITIES Cash Overdraft Accounts Payable Total Liabilities NET POSITION Restricted Held in Trust for Private Purposes Individuals, Organizations, and Other Governments PRIVATE PURPOSE TRUSTS CUSTODIAL FUNDS $ 2,815.34 $ - - 8,820.25 $ 2,815.34 $ 8,820.25 $ 6,703.42 199.00 6,902.42 $ 2,815.34 $ 1,917.83 The notes to the basic financial statements are an integral part of this statement. - 7 - ADDITIONS Miscellaneous DEDUCTIONS Other Deductions Change in Net Position Net Position - Beginning Net Position - Ending TALBOT COUNTY BOARD OF EDUCATION STATEMENT OF CHANGES IN FIDCUCIARY NET POSITION FIDUCIARY FUNDS YEAR ENDED JUNE 30, 2021 EXHIBIT "H" PRIVATE PURPOSE TRUSTS CUSTODIAL FUNDS $ - $ 47,946.85 - 46,029.02 - 1,917.83 2,815.34 - $ 2,815.34 $ 1,917.83 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, 2021 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, deferred outflows of resources, deferred inflows of resources 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. - 9 - TALBOT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2021 EXHIBIT "I" The Statement of Activities presents a comparison between direct expenses and program revenues for each function of the School District's governmental activities. Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Indirect expenses (expenses of the School District related to the administration and support of the School District's programs, such as office and maintenance personnel and accounting) are not allocated to programs. Program revenues include (a) charges paid by the recipients of goods or services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues. Fund Financial Statements The fund financial statements provide information about the School District's funds, including fiduciary funds. Eliminations have been made to minimize the double counting of internal activities. Separate 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) 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 longterm 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. Custodial funds are used to report resources held by the School District in a purely custodial capacity. 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. - 10 - TALBOT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2021 EXHIBIT "I" 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 certain revenues reported in the governmental funds to be available if they are collected within 60 days after year-end. The School District considers all intergovernmental revenues to be available if they are collected within 120 days after year-end. Property taxes, sales taxes and interest are considered to be susceptible to accrual. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt, which are recognized as expenditures to the extent they have matured. Capital asset acquisitions are reported as expenditures in governmental funds. Proceeds of general long-term liabilities and acquisitions under capital leases are reported as other financing sources. The School District funds certain programs by a combination of specific cost-reimbursement grants, categorical grants, and general revenues. Thus, when program costs are incurred, there are both restricted and unrestricted 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 2021, the School District adopted Governmental Accounting Standards Board (GASB) Statement No. 84, Fiduciary Activities. This statement establishes criteria for identifying fiduciary activities of all state and local governments. The focus of the criteria generally is on (1) whether a government is controlling the assets of the fiduciary activity and (2) the beneficiaries with whom a fiduciary relationship exists. Separate criteria are included to identify fiduciary component units and post-employment benefit arrangements that are fiduciary activities. An activity meeting the criteria should be reported in a fiduciary fund in the basic financial statements. Governments with activities meeting the criteria should present a statement of fiduciary net position and a statement of changes in fiduciary net position. The cumulative effect of the GASB Statement No. 84 is described in the restatement note. In fiscal year 2021, the School District adopted Governmental Accounting Standards Board (GASB) Statement No. 90, Majority Equity Interests. It defines a majority equity interest and specifies that majority equity interest in a legal separate organization should be reported as an investment. A majority equity interest that meets the definition of an investment should be measured using the equity method, unless it is held by a special-purpose government engaged only in fiduciary activities, a fiduciary fund, or an endowment (including permanent and term endowments) or permanent fund. Those governments and funds should measure the majority equity interest at fair value. The adoption of this statement did not have an impact on the School District's financial statements. - 11 - TALBOT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2021 EXHIBIT "I" Cash and Cash Equivalents Cash and cash equivalents consist of cash on hand, demand deposits, investments in the State of Georgia local government investment pool (Georgia Fund 1) and short-term investments with original maturities of three months or less from the date of acquisition in authorized financial institutions. Official Code of Georgia Annotated (O.C.G.A.) 45-8-14 authorizes the School District to deposit its funds in one or more solvent banks, insured Federal savings and loan associations or insured chartered building and loan associations. Investments The School District can invest its funds as permitted by O.C.G.A. 36-83-4. In selecting among options for investment or among institutional bids for deposits, the highest rate of return shall be the objective, given equivalent conditions of safety and liquidity. Investments made by the School District in nonparticipating interest-earning contracts (such as certificates of deposit) and repurchase agreements are reported at cost. Participating interest-earning contracts and money market investments with a maturity at purchase of one year or less are reported at amortized cost. All other investments are reported at fair value. For accounting purposes, certificates of deposit are classified as investments if they have an original maturity greater than three months when acquired. Receivables Receivables consist of amounts due from property and sales taxes, grant reimbursements due on Federal, State or other grants for expenditures made but not reimbursed and other receivables disclosed from information available. Receivables are recorded when either the asset or revenue recognition criteria has been met. Receivables recorded on the basic financial statements do not include any amounts which would necessitate the need for an allowance for uncollectible receivables. Inventories 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 the acquisition value on the date donated. The cost of normal maintenance and repairs that do not add to the value of assets or materially extend the useful lives of the assets is not capitalized. The School District does not capitalize book collections or works of art. - 12 - TALBOT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2021 EXHIBIT "I" Capital acquisition and construction are recorded as expenditures in the governmental fund financial statements at the time of purchase (including ancillary charges), and the related assets are reported as capital assets in the governmental activities column in the government-wide financial statements. Depreciation is computed using the straight-line for all assets, except land, and is used to allocate the actual or estimated historical cost of capital assets over estimated useful lives. Capitalization thresholds and estimated useful lives of capital assets reported in the government-wide statements are as follows: Capitalization Policy Estimated Useful Life Land Land Improvements Buildings and Improvements Equipment Intangible Assets All $ 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 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. - 13 - TALBOT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2021 EXHIBIT "I" 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. Post-Employment 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 Post-Employment 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. 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. - 14 - TALBOT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2021 EXHIBIT "I" Use of Estimates The preparation of the financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates. Property Taxes The Talbot County Board of Commissioners adopted the property tax levy for the 2020 tax digest year (calendar year) on August 26, 2020 (levy date) based on property values as of January 1, 2020. Taxes were due on December 20, 2020 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2020 tax digest are reported as revenue in the governmental funds for fiscal year 2021. 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, 2021, for maintenance and operations amounted to $3,243,423.34. The tax millage rate levied for the 2020 tax digest year (calendar year) for the School District was as follows (a mill equals $1 per thousand dollars of assessed value): School Operations 14.052 mills Additionally, Title Ad Valorem Tax revenues, at the fund reporting level, amounted to $332,841.45 during fiscal year ended June 30, 2021. Sales Taxes Education Special Purpose Local Option Sales Tax (ESPLOST), at the fund reporting level, during the year amounted to $643,748.75 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 - 15 - TALBOT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2021 EXHIBIT "I" 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 5% of the amount budgeted for expenditures in any budget function for any fund. The Superintendent shall report any such adjustments to the Board. If expenditure of funds in any budget function for any fund is anticipated to be more than 5% of the budgeted amount, the Superintendent shall request Board approval for the budget amendment. 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, (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. - 16 - TALBOT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2021 EXHIBIT "I" Categorization of Deposits Custodial credit risk is the risk that in the event of a bank failure, the School District's deposits may not be returned to it. The School District does not have a deposit policy for custodial credit risk. At June 30, 2021, the School District had deposits with a carrying amount of $2,879,897.00, and a bank balance of $3,433,638.39. The bank balances insured by Federal depository insurance were $443,073.04 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 $2,990,565.35. 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 $ 3,194,819.05 (3,888.08) Total cash and cash equivalents 3,190,930.97 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 1 376,033.97 Total carrying value of deposits - June 30, 2021 $ 2,879,897.00 Categorization of Cash Equivalents The School District reported cash equivalents of $376,033.97 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, 2021 was 36 days. Georgia Fund 1, administered by the State of Georgia, Office of the State Treasurer, is not required to be categorized since the School District did not own any specific identifiable securities in the pool. The investment policy of the State of Georgia, Office of the State Treasurer for the Georgia Fund 1, does not provide for investment in derivatives or similar investments. Additional information on the Georgia Fund 1 is disclosed in the State of Georgia Annual Comprehensive Financial Report, which is publicly available at https://sao.georgia.gov/statewide-reporting/acfr. - 17 - TALBOT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2021 EXHIBIT "I" 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, 2020 Increases Decreases Adjustments Balances June 30, 2021 Governmental Activities Capital Assets, Not Being Depreciated: Land Construction in Progress $ 379,857.93 $ - $ 4,723,606.18 246,612.48 - $ - - $ 379,857.93 - 4,970,218.66 Total Capital Assets Not Being Depreciated 5,103,464.11 246,612.48 - - 5,350,076.59 Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements 14,060,918.30 2,423,172.01 1,411,233.02 2,816,926.01 1,937,127.20 552,060.78 88,700.00 - 214,707.12 89,055.39 64,663.69 - - 14,060,918.30 - (792,574.92) 1,719,297.09 - - 1,411,233.02 - (2,467.61) 3,029,165.52 - (799,014.35) 1,227,168.24 - - 616,724.47 Total Capital Assets, Being Depreciated, Net 12,589,209.34 (279,726.20) - 8,907.04 12,318,390.18 Governmental Activities Capital Assets - Net $ 17,692,673.45 $ (33,113.72) $ - $ 8,907.04 $ 17,668,466.77 Current year depreciation expense by function is as follows: Instruction Support Services General Administration $ Maintenance and Operation of Plant Student Transportation Services Food Services $ 245,194.21 347.79 37,294.34 75,715.02 113,357.15 9,874.84 $ 368,426.20 - 18 - TALBOT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2021 NOTE 6: INTERFUND TRANSFERS Interfund transfers for the year ended June 30, 2021, consisted of the following: Transfers to Transfers From General Fund EXHIBIT "I" Capital Projects Fund $ 1,000.00 Transfers are used to move property tax revenues collected by the general fund to capital projects fund as required match or supplemental funding source for capital construction projects. NOTE 7: LONG-TERM LIABILITIES The changes in long-term liabilities during the fiscal year for governmental activities were as follows: Balance July 1, 2020 Governmental Activities Additions Deductions Balance June 30, 2021 Due Within One Year General Obligation (G.O.) Bonds Unamortized Bond Premiums Capital Leases $ 2,855,000.00 $ 220,659.00 586,219.36 - $ 330,000.00 $ 2,525,000.00 $ 340,000.00 - 32,690.00 187,969.00 32,690.00 - 54,784.63 531,434.73 56,303.35 $ 3,661,878.36 $ - $ 417,474.63 $ 3,244,403.73 $ 428,993.35 General Obligation Debt Outstanding The School District's bonded debt consists 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. The School District had no unused line of credit or outstanding notes from direct borrowings and direct placements related to governmental activities as of June 30, 2021. In the event the entity is unable to make the principal and interest payments using proceeds from the Education Special Purpose Local Option Sales Tax (ESPLOST), the debt will be satisfied from a direct annual ad valorem tax levied upon all taxable property within the School District. Additional security is provided by the State of Georgia Intercept Program which allows for state appropriations entitled to the School District to be transferred to the Debt Service Custodian for the payment of debt. General obligation bonds currently outstanding are as follows: Description Interest Rates Issue Date Maturity Date Amount Issued Amount Outstanding General Government - Series 2017 2.00% - 4.00% 6/13/2017 3/1/2028 $ 3,500,000.00 $ 2,525,000.00 - 19 - TALBOT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2021 EXHIBIT "I" 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 2022 2023 2024 2025 2026 2027 - 2028 $ 340,000.00 $ 87,050.00 $ 345,000.00 76,850.00 350,000.00 66,500.00 360,000.00 56,000.00 370,000.00 45,200.00 760,000.00 45,800.00 32,690.00 32,690.00 32,690.00 32,690.00 32,690.00 24,519.00 Total Principal and Interest $ 2,525,000.00 $ 377,400.00 $ 187,969.00 Capital Leases The School District has acquired stadium lighting under the provisions of a long-term lease agreement classified as a capital lease for accounting purposes because it provides for a bargain purchase option or a transfer of ownership by the end of the lease term. The following assets were acquired through capital leases and are reflected in the capital asset note at fiscal year-end: Governmental Activities Land Improvements $ Less: Accumulated Depreciation 728,465.00 54,634.88 $ 673,830.12 The capital lease currently outstanding is as follows: Purpose Interest Rate Issue Date Maturity Date Amount Issued Amount Outstanding Stadium Lighting 2.75% 10/15/2019 10/15/2029 $ 728,465.00 $ 531,434.73 - 20 - TALBOT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2021 The following is a schedule of total capital lease payments: Fiscal Year Ended June 30: Principal Interest EXHIBIT "I" 2022 2023 2024 2025 2026 2027 - 2030 $ 56,303.35 $ 57,864.18 59,468.26 61,116.83 62,811.08 233,871.03 14,246.65 12,685.82 11,081.74 9,433.17 7,738.92 12,653.97 Total Principal and Interest $ 531,434.73 $ 67,840.27 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. 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 2020 $ - $ 1,082.00 $ 1,082.00 $ - 2021 $ - $ 3,423.47 $ 3,423.47 $ - - 21 - TALBOT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2021 EXHIBIT "I" 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 NOTE 9: FUND BALANCE CLASSIFICATION DETAILS The School District's financial statements include the following amounts presented in the aggregate at June 30, 2021: Nonspendable Inventories Restricted Continuation of Federal Programs $ Bus Replacement Capital Projects Debt Service Assigned School Activity Accounts Unassigned $ 133,083.70 65,740.00 352,369.39 43,525.00 20,228.31 594,718.09 22,191.17 2,380,527.90 Fund Balance, June 30, 2021 $ 3,017,665.47 When multiple categories of fund balance are available for an 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 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. - 22 - TALBOT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2021 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 11: OTHER POST-EMPLOYMENT BENEFITS (OPEB) Georgia School Personnel Post-Employment Health Benefit Fund Plan Description: Certified teachers and non-certified public school employees of the School District as defined in 20-2-875 of the Official Code of Georgia Annotated (O.C.G.A.) are provided OPEB through the School OPEB Fund - a cost-sharing multiple-employer defined benefit post-employment 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 $170,660.00 for the year ended June 30, 2021. 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, 2021, the School District reported a liability of $6,862,227.00 for its proportionate share of the net OPEB liability. The net OPEB liability was measured as of June 30, 2020. The total OPEB liability used to calculate the net OPEB liability was based on an actuarial valuation as of June 30, 2019. An expected total OPEB liability as of June 30, 2020 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, 2020. At June 30, 2020, the School District's proportion was 0.046721%, which was an increase of 0.001219% from its proportion measured as of June 30, 2019. - 23 - TALBOT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2021 EXHIBIT "I" For the year ended June 30, 2021, the School District recognized OPEB expense of $502,610.00. At June 30, 2021, 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 $ - $ 749,142.00 Changes of assumptions 1,134,860.00 610,591.00 Net difference between projected and actual earnings on OPEB plan investments 17,886.00 - Changes in proportion and differences between School District contributions and proportionate share of contributions 874,669.00 - School District contributions subsequent to the measurement date 170,660.00 - Total $ 2,198,075.00 $ 1,359,733.00 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, 2022. 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 2022 2023 2024 2025 2026 Thereafter $ 93,635.00 $ 93,155.00 $ 113,380.00 $ 152,298.00 $ 165,335.00 $ 49,879.00 - 24 - TALBOT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2021 EXHIBIT "I" Actuarial Assumptions: The total OPEB liability as of June 30, 2020 was determined by an actuarial valuation as of June 30, 2019 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, 2020: OPEB: Inflation 2.50% Salary increases 3.00% 8.75%, including inflation Long-term expected rate of return 7.30%, compounded annually, net of investment expense, and including inflation Healthcare cost trend rate Pre-Medicare Eligible 7.00% Medicare Eligible 5.25% Ultimate trend rate Pre-Medicare Eligible 4.50% Medicare Eligible 4.50% Year of Ultimate trend rate Pre-Medicare Eligible 2029 Medicare Eligible 2023 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 TRS members: The Pub-2010 Teachers Headcount Weighted Below Median Healthy Retiree Mortality Table projected generationally with MP-2019 projection scale (set forward one year and adjusted 106%) is used for death prior to retirement and for service retirements and beneficiaries. The Pub-2010 Teachers Mortality Table for Disabled Retirees projected generationally with MP-2019 Projection scale (set forward one year and adjusted 106%) is used for disability retirements. For both, rates of improvement were reduced by 20% for all years prior to the ultimate rate. 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. Rates of mortality in active service were based on the RP-2000 Employee Mortality Table projected to 2025 with projection scale BB. There is a margin for future morality improvement in the tables used by the plan. The actuarial assumptions used in the June 30, 2019 valuation were based on the results of an actuarial experience study for the pension systems, which covered the five-year period ending June 30, 2018, with the exception of the assumed annual rate of inflation which was changed from 2.75% to 2.50%, effective with the June 30, 2018 valuation. - 25 - TALBOT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2021 EXHIBIT "I" The remaining actuarial assumptions (e.g., initial per capita costs, health care cost trends, rate of plan participation, rates of plan election, etc.) used in the June 30, 2019 valuation were based on a review of recent plan experience done concurrently with the June 30, 2019 valuation. Projection of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculation. 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* Fixed income Equities Total 30.00% 70.00% 100.00% 0.50% 9.20% *Net of Inflation Discount Rate: In order to measure the total OPEB liability for the School OPEB, a single equivalent interest rate of 2.22% was used as the discount rate, as compared with last year's rate of 3.58%. This is comprised mainly of the yield or index rate for 20 year tax-exempt general obligation bonds with an average rating of AA or higher (2.21% per the Municipal Bond Index Rate). 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 2118. - 26 - TALBOT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2021 EXHIBIT "I" 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 OPB liability calculated using the discount rate of 2.22%, as well as what the School 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 (1.22%) or 1-percentage-point higher (3.22%) than the current discount rate: 1% Decrease (1.22%) Current Discount Rate (2.22%) 1% Increase (3.22%) School District's proportionate share of the Net OPEB liability $ 8,061,984.00 $ 6,862,227.00 $ 5,902,756.00 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 School District's proportionate share of the net OPEB liability would be if it were calculated using healthcare cost trend rates that are 1percentage-point lower or 1-percentage-point higher than the current healthcare cost trend rates: 1% Decrease Current Healthcare Cost Trend Rate 1% Increase School District's proportionate share of the Net OPEB liability $ 5,713,494.00 $ 6,862,227.00 $ 8,349,503.00 OPEB plan fiduciary net position: Detailed information about the OPEB plan's fiduciary net position is available in the Annual Comprehensive Financial Report, which is publicly available at https://sao.georgia.gov/statewide-reporting/acfr. NOTE 12: RETIREMENT PLANS The School District participates in various retirement plans administered by the State of Georgia, as further explained below. Teachers Retirement System of Georgia (TRS) Plan Description: All teachers of the School District as defined in O.C.G.A 47-3-60 and certain other support personnel as defined by O.C.G.A 47-3-63 are provided a pension through the Teachers Retirement System of Georgia (TRS). TRS, a cost-sharing multiple-employer defined benefit pension plan, is administered by the TRS Board of Trustees (TRS Board). Title 47 of the O.C.G.A. assigns the authority to establish and amend the benefit provisions to the State Legislature. The Teachers Retirement System of Georgia issues a publicly available separate financial 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 - 27 - TALBOT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2021 EXHIBIT "I" 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 6.00% of their annual pay during fiscal year 2021. The School District's contractually required contribution rate for the year ended June 30, 2021 was 19.06% of annual School District payroll. For the current fiscal year, employer contributions to the pension plan were $673,411.43 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/financials. 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 $15.50, 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 $16,451.00. - 28 - TALBOT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2021 EXHIBIT "I" Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions At June 30, 2021, the School District reported a liability of $6,809,342.00 for its proportionate share of the net pension liability for TRS. The net pension liability for TRS was measured as of June 30, 2020. The total pension liability used to calculate the net pension liability was based on an actuarial valuation as of June 30, 2019. An expected total pension liability as of June 30, 2020 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, 2020. At June 30, 2020, the School District's TRS proportion was 0.028110%, which was a decrease of 0.001228% from its proportion measured as of June 30, 2019. At June 30, 2021, 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 $101,610.00. The PSERS net pension liability was measured as of June 30, 2020. The total pension liability used to calculate the net pension liability was based on an actuarial valuation as of June 30, 2019. An expected total pension liability as of June 30, 2020 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, 2020. For the year ended June 30, 2021, the School District recognized pension expense of $1,080,094.00 for TRS and $20,447.00 for PSERS and revenue of $20,447.00 for PSERS. The revenue is support provided by the State of Georgia. - 29 - TALBOT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2021 EXHIBIT "I" At June 30, 2021, 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 $ 296,549.00 $ - Changes of assumptions 701,370.00 - Net difference between projected and actual earnings on pension plan investments 164,004.00 - Changes in proportion and differences between School District contributions and proportionate share of contributions 42,484.00 189,143.00 School District contributions subsequent to the measurement date 673,411.43 - Total $ 1,877,818.43 $ 189,143.00 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, 2022. 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 2022 2023 2024 2025 $ 213,549.00 $ 338,297.00 $ 341,173.00 $ 122,245.00 - 30 - TALBOT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2021 EXHIBIT "I" Actuarial Assumptions: The total pension liability as of June 30, 2020 was determined by an actuarial valuation as of June 30, 2019, using the following actuarial assumptions, applied to all periods included in the measurement: Teachers Retirement System: Inflation 2.50% Salary increases 3.00% 8.75%, average, including inflation Investment rate of return 7.25%, net of pension plan investment expense, including inflation Post-retirement benefit increases 1.50% semi-annually Post-retirement mortality rates for service retirements and beneficiaries were based on the Pub-2010 Teachers Headcount Weighted Below Median Healthy Retiree mortality table (ages set forward one year and adjusted 106%) with the MP-2019 Projection scale applied generationally. The rates of improvement were reduced by 20% for all years prior to the ultimate rate. Post-retirement mortality rates for disability retirements were based on the Pub-2010 Teachers Mortality Table for Disabled Retirees (ages set forward one year and adjusted 106%) with the MP-2019 Projection scale applied generationally. The rates of improvement were reduced by 20% for all years prior to the ultimate rate. The Pub-2010 Teachers Headcount Weighted Below Median Employee mortality table with ages set forward one year and adjusted 106% as used for death prior to retirement. Future improvement in mortality rates was assumed using the MP-2019 projection scale generationally. These rates of improvement were reduced by 20% for all years prior to the ultimate rate. The actuarial assumptions used in the June 30, 2019 valuation were based on the results of an actuarial experience study for the period July 1, 2013 June 30, 2018. Public School Employees Retirement System: Inflation 2.75% Salary increases N/A Investment rate of return 7.30%, net of pension plan investment expense, including inflation Post-retirement benefit increases 1.50% semi-annually 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. - 31 - TALBOT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2021 EXHIBIT "I" The actuarial assumptions used in the June 30, 2019 valuation were based on the results of an actuarial experience study for the period July 1, 2009 June 30, 2014, with the exception of the assumed investment rate of return. 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 small stocks International developed market stocks International emerging market stocks Alternative Total 30.00% 51.00% 1.50% 12.40% 5.10% - 100.00% 30.00% 46.20% 1.30% 12.40% 5.10% 5.00% 100.00% (0.10)% 8.90% 13.20% 8.90% 10.90% 12.00% * Rates shown are net of the 2.75% assumed rate of inflation with the exception of TRS, which assumed a rate of 2.50% rate of inflation. Discount Rate: The discount rate used to measure the total TRS pension liability was 7.25%. The discount rate used to measure the total PSERS pension liability was 7.30%. 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 plans' fiduciary net position were projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. Sensitivity of the School District's Proportionate Share of the Net Pension Liability to Changes in the Discount Rate: The following presents the School District's proportionate share of the net pension liability calculated using the discount rate of 7.25%, 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 (6.25%) or 1-percentage-point higher (8.25%) than the current rate: Teachers Retirement System: 1% Decrease (6.25%) Current Discount Rate (7.25%) 1% Increase (8.25%) School District's proportionate share of the net pension liability $ 10,797,991.00 $ 6,809,342.00 $ 3,539,794.00 - 32 - TALBOT COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2021 EXHIBIT "I" 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/financials. NOTE 13: RESTATEMENT OF PRIOR YEAR NET POSITION AND FUND BALANCE For fiscal year 2021, the School District made prior period adjustments due to the adoption of GASB Statement No, 84, as described in "New Accounting Pronouncements," which requires the restatement of the June 30, 2020 net position in governmental activities and fund balance in the general fund. These changes are in accordance with generally accepted accounting principles. Net Position, July 1, 2020 as previously reported Prior Period Adjustment - Implementation of GASB No. 84: School Activity Account Reclassification $ 6,199,889.72 7,765.85 Net Position, July 1, 2020, as restated $ 6,207,655.57 Fund Balance (General Fund), July 1, 2020, as previously reported Prior Period Adjustment - Implementation of GASB No. 84: School Activity Account Reclassification $ 1,964,259.68 7,765.85 Fund Balance (General Fund), July 1, 2020, as restated $ 1,972,025.53 Funds held for others of $7,765.85, previously held in fiduciary funds, was reclassified to net position and fund balance (general fund). - 33 - (This page left intentionally blank) TALBOT COUNTY BOARD OF EDUCATION REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF PROPORTIONATE SHARE OF THE NET PENSION LIABILITY TEACHERS RETIREMENT SYSTEM OF GEORGIA SCHEDULE "1" For the Year Ended June 30 School District's proportion of the Net Pension Liability (NPL) School District's proportionate share of the NPL State of Georgia's proportionate share of the NPL associated with the School District Total School District's covered payroll School District's proportionate share of the NPL as a percentage of its covered payroll Plan fiduciary net position as a percentage of the total pension liability 2021 2020 2019 2018 2017 2016 2015 0.028110% $ 6,809,342.00 $ 0.029338% $ 6,308,463.00 $ 0.029212% $ 5,422,373.00 $ 0.029144% $ 5,416,502.00 $ 0.028494% $ 5,878,630.00 $ 0.029732% $ 4,526,402.00 $ 0.030388% $ 3,839,123.00 $ - $ 6,809,342.00 $ 3,653,843.74 - $ 6,308,463.00 $ 3,580,476.69 - $ 5,422,373.00 $ 3,484,577.21 - $ 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 $ 3,100,171.01 186.36% 176.19% 155.61% 161.86% 188.08% 144.23% 123.84% 77.01% 78.56% 80.27% 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. - 35 - TALBOT COUNTY BOARD OF EDUCATION REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF CONTRIBUTIONS TEACHERS RETIREMENT SYSTEM OF GEORGIA SCHEDULE "2" For the Year Ended June 30 Contractually required contribution Contributions in relation to the contractually required contribution Contribution deficiency (excess) School District's covered payroll 2021 $ 2020 $ 2019 $ 2018 $ 2017 $ 2016 $ 2015 $ 2014 $ 2013 $ 2012 $ 673,411.43 $ 772,422.55 $ 748,320.00 $ 585,757.42 $ 477,541.23 $ 446,011.58 $ 412,697.58 $ 380,692.79 $ 383,370.28 $ 386,730.40 $ 673,411.43 $ 772,422.55 $ 748,320.00 $ 585,757.42 $ 477,541.23 $ 446,011.58 $ 412,697.58 $ 380,692.79 $ 383,370.28 $ 386,730.40 $ - $ 3,533,113.55 - $ 3,653,843.74 - $ 3,580,476.69 - $ 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 Contribution as a percentage of covered payroll 19.06% 21.14% 20.90% 16.81% 14.27% 14.27% 13.15% 12.28% 11.41% 10.28% - 36 - TALBOT COUNTY BOARD OF EDUCATION REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF PROPORTIONATE SHARE OF THE NET PENSION LIABILITY PUBLIC SCHOOL EMPLOYEES RETIREMENT SYSTEM OF GEORGIA SCHEDULE "3" For the Year Ended June 30 School District's proportion of the Net Pension Liability (NPL) School District's proportionate share of the NPL State of Georgia's proportionate share of the NPL associated with the School District Total School District's covered payroll School District's proportionate share of the NPL as a percentage of its covered payroll Plan fiduciary net position as a percentage of the total pension liability 2021 2020 2019 2018 0.00% $ 0.00% $ 0.00% $ 0.00% $ - $ 101,610.00 $ 101,610.00 $ 270,543.06 - $ 90,669.00 $ 90,669.00 $ 248,819.98 - $ 85,902.00 $ 85,902.00 $ 214,025.43 - $ 77,602.00 $ 77,602.00 $ 227,137.34 N/A 84.45% N/A 85.02% N/A 85.26% N/A 85.69% This schedule is intended to show information for 10 years. Additional years will be displayed as they become available. - 37 - TALBOT COUNTY BOARD OF EDUCATION REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF PROPORTIONATE SHARE OF THE NET OPEB LIABILITY SCHOOL OPEB FUND SCHEDULE "4" For the Year Ended June 30 School District's proportion of the Net OPEB Liability (NOL) School District's proportionate share of the NOL State of Georgia's proportionate share of the NOL associated with the School District Total School District's coveredemployee payroll School District's proportionate share of the NOL as a percentage of its coveredemployee payroll Plan fiduciary net position as a percentage of the total OPEB liability 2021 2020 2019 2018 0.046721% $ 6,862,227.00 $ 0.045502% $ 5,584,072.00 $ 0.043131% $ 5,481,818.00 $ 0.038590% $ 5,421,880.00 $ - $ 6,862,227.00 $ 3,484,362.83 - $ 5,584,072.00 $ 3,402,237.58 - $ 5,481,818.00 $ 3,374,356.11 - $ 5,421,880.00 $ 3,174,208.92 196.94% 164.13% 162.46% 170.81% 3.99% 4.63% 2.93% 1.61% This schedule is intended to show information for 10 years. Additional years will be displayed as they become available. - 38 - TALBOT COUNTY BOARD OF EDUCATION REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF CONTRIBUTIONS SCHOOL OPEB FUND SCHEDULE "5" For the Year Ended June 30 Contractually required contribution Contributions in relation to the contractually required contribution Contribution deficiency (excess) School District's covered-employee payroll Contribution as a percentage of covered-employee payroll 2021 $ 2020 $ 2019 $ 2018 $ 170,660.00 $ 158,001.00 $ 245,062.00 $ 223,544.00 $ 170,660.00 $ 158,001.00 $ 245,062.00 $ 223,544.00 $ - $ 3,185,925.52 - $ 3,484,362.83 - $ 3,402,237.58 - $ 3,374,356.11 5.36% 4.53% 7.20% 6.62% This schedule is intended to show information for 10 years. Additional years will be displayed as they become available. - 39 - TALBOT COUNTY BOARD OF EDUCATION NOTES TO THE REQUIRED SUPPLEMENTARY INFORMATION FOR THE YEAR ENDED JUNE 30, 2021 SCHEDULE "6" Teachers Retirement System Changes of assumptions: In 2010 and later, the expectation of retired life mortality was changed to the RP2000 Mortality Tables rather than the 1994 Group Annuity Mortality Table, which was used prior to 2010. In 2010, rates of withdrawal, retirement, disability and mortality were adjusted to more closely reflect actual experience. In 2010, assumed rates of salary increase were adjusted to more closely reflect actual and anticipated experience. On November 18, 2015, the Board 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). On May 15, 2019, the Board adopted recommended changes from the smoothed valuation interest rate methodology that has been in effect since June 30, 2009, to a constant interest rate method. In conjunction with the methodology, the long-term assumed rate of return in assets (discount rate) has been changed from 7.50% to 7.25%, and the assumed annual rate of inflation has been reduced from 2.75% to 2.50%. In 2019 and later, the expectation of retired life mortality was changed to the Pub-2010 Teacher Headcount Weighted Below Median Healthy Retiree mortality table from the RP-2000 Mortality Tables. In 2019, rates of withdrawal, retirement, disability and mortality were adjusted to more closely reflect actual experience. Public School Employees Retirement System Changes of benefit terms: The member contribution rate was increased from $4.00 to $10.00 per month for members joining the System on or after July 1, 2012. The monthly benefit accrual rate was increased from $14.75 to $15.00 per year of credible service effective July 1, 2017. The monthly benefit accrual was increased from $15.00 to $15.25 per year of credible service effective July 1, 2018. The monthly benefit accrual was increased from $15.25 to $15.50 per year of credible service effective July 1, 2019. A 2% cost-of-living adjustment (COLA) was granted to certain retirees and beneficiaries effective July 2016, another July 2017, and another July 2018. Two 1.5% COLAs were granted to certain retirees and beneficiaries effective July 2019 and January 2020. Changes of assumptions: In 2010 and later, the expectation of retired life mortality was changed to the RP-2000 Mortality Tables rather than the 1994 Group Annuity Mortality Table, which was used prior to 2010. In 2010, rates of withdrawal, retirement, disability and mortality were adjusted to more closely reflect actual experience. On December 17, 2015, the Board adopted recommended changes to the economic and demographic assumptions utilized by the System. Primary among the changes were the updates to rates of mortality, retirement and withdrawal. The expectation of retired life mortality was changed to the RP-2000 Blue Collar Mortality Table projected to 2025 with projection scale BB (set forward 3 years for males and 2 years for females). On March 15, 2018, the Board adopted a new funding policy. Because of this new funding policy, the assumed investment rate of return was reduced from 7.50% to 7.40% for June 30, 2017 actuarial valuation. In addition, based on the Board's new funding policy, the assumed investment rate of return was further reduced by 0.10% from 7.40% to 7.30% as of the June 30, 2018 measurement date. The assumed investment rate of return remained at 7.30% for the June 30, 2019 valuation. School OPEB Fund Changes of benefit terms: There have been no changes in benefit terms. Changes in assumptions: The June 30, 2017 actuarial valuation was revised, for various factors, including the methodology used to determine how employees and retirees were assigned to each of the OPEB Funds and anticipated participation percentages. Current and former employees of State organizations (including technical colleges, community service boards and public health departments) are now assigned to State OPEB fund based on their last employer payroll location; irrespective of retirement affiliation. The June 30, 2019 decremental valuation were changed to reflect the Teachers Retirement Systems experience study. The discount rate was updated from 3.07% as of June 30, 2016 to 3.58% as of June 30, 2017 to 3.87% as of June 30, 2018, to 3.58% as of June 30, 2019, and to 2.22% as of June 30, 2020. - 40 - TALBOT COUNTY BOARD OF EDUCATION GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL YEAR ENDED JUNE 30, 2021 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 Other Support Services Enterprise Operations Food Services Operation Debt Service Total Expenditures Excess of Revenues over (under) Expenditures OTHER FINANCING USES Other Uses Net Change in Fund Balances Fund Balances - Beginning (Restated) Adjustments Fund Balances - Ending NONAPPROPRIATED BUDGETS ORIGINAL (1) FINAL (1) ACTUAL AMOUNTS VARIANCE OVER/UNDER $ 3,229,870.00 $ 3,229,870.00 $ 4,535.78 4,535.78 2,854,553.72 2,854,553.72 415,070.00 831,174.50 - - 596.00 596.00 75,344.00 75,344.00 6,579,969.50 6,996,074.00 3,624,372.10 $ 38,119.81 3,262,122.45 1,166,066.49 42,960.26 1,438.43 40,026.17 8,175,105.71 394,502.10 33,584.03 407,568.73 334,891.99 42,960.26 842.43 (35,317.83) 1,179,031.71 4,249,127.65 490,022.00 225,855.84 138,374.00 460,840.00 452,733.00 99,439.00 839,803.00 394,837.00 35,250.00 595,000.00 7,981,281.49 (1,401,311.99) 4,719,957.62 548,080.53 373,320.84 145,076.00 475,534.00 568,898.00 104,023.31 1,043,629.69 439,365.97 37,250.00 605,177.03 9,060,312.99 (2,064,238.99) 3,796,414.49 353,600.03 262,616.29 98,366.09 505,016.80 535,109.74 88,845.96 744,506.05 516,986.80 39,891.04 25,039.06 487,417.81 70,550.00 7,524,360.16 650,745.55 923,543.13 194,480.50 110,704.55 46,709.91 (29,482.80) 33,788.26 15,177.35 299,123.64 (77,620.83) (2,641.04) (25,039.06) 117,759.22 (70,550.00) 1,535,952.83 2,714,984.54 - - (1,000.00) (1,000.00) (1,401,311.99) (2,064,238.99) 649,745.55 2,713,984.54 1,709,808.07 1,709,808.07 1,972,025.53 262,217.46 4,823.34 (1,461.04) 1,461.04 $ 313,319.42 $ (355,891.96) $ 2,621,771.08 $ 2,977,663.04 Notes to the Schedule of Revenues, Expenditures and Changes in Fund Balances Budget and Actual (1) Original and Final Budget amounts do not include the budgeted revenues or expenditures of the various principal accounts. The actual revenues and expenditures of the various principal accounts are $47,155.19 and $33,306.13, respectively. The accompanying schedule of revenues, expenditures and changes in fund balances budget and actual is presented on the modified accrual basis of accounting which is the basis of accounting used in the presentation of the fund financial statements. See notes to the basic financial statements. - 41 - TALBOT COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30, 2021 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 Education Stabilization Fund Pass-Through From Georgia Department of Education COVID-19 - Elementary and Secondary School Emergency Relief Fund COVID-19 - Elementary and Secondary School Emergency Relief Fund COVID-19 - American Rescue Plan Elementary and Secondary School Emergency Relief Fund Total Education Stabilization Fund Special Education Cluster Pass-Through From Georgia Department of Education Special Education Grants to States Grants to States Preschool Grants Total Special Education Cluster Other Programs Pass-Through From Georgia Department of Education Career and Technical Education - Basic Grants to States Rural Education Student Support and Academic Enrichment Program Student Support and Academic Enrichment Program Supporting Effective Instruction State Grants Supporting Effective Instruction State Grants 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 Total Expenditures of Federal Awards ASSISTANCE LISTING NUMBER PASSTHROUGH ENTITY ID NUMBER EXPENDITURES IN PERIOD 10.553 10.555 215GA324N1199 $ 215GA324N1199 38,485.26 411,997.57 450,482.83 10.582 215GA324L1603 9,344.55 459,827.38 84.425D 84.425D 84.425U S425D200012 S425D210012 S425U210012 244,166.58 7,713.52 88,262.00 340,142.10 84.027A 84.027A 84.173A H027A190073 H027A200073 H173A200081 63,112.40 38,142.52 15,000.00 116,254.92 84.048A 84.358B 84.424A 84.424A 84.367A 84.367A 84.010A 84.010A V048A200010 S365B190010 S424A190011 S424A200011 S367A190001 S367A200001 S010A190010 S010A200010-20A 7,261.08 2,074.44 11,027.28 13,775.46 27,550.25 5,769.39 104,774.24 225,720.59 397,952.73 854,349.75 12. UNKNOWN 66,135.98 $ 1,380,313.11 - 42 - TALBOT COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30, 2021 SCHEDULE "8" 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, 2021. 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. 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. - 43 - TALBOT COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2021 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 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 Amended Formula Adjustment Categorical Grants Pupil Transportation Regular Bus Replacement Nursing Services Sparsity Other State Programs Computer Science Capacity Grant (CS4GA) Grant Food Services Hygiene Products Pupil Transportation - State Bonds Vocational Education Governor's Office of Student Achievement Connections for Classroom Grant Office of the State Treasurer Public School Employees Retirement SCHEDULE "9" GOVERNMENTAL FUND TYPE GENERAL FUND $ 88,301.40 159,008.00 315,115.00 34,707.00 165,069.00 34,641.00 329,511.00 294,808.00 97,207.00 437,937.00 1,481.00 25,697.00 49,475.00 16,358.00 7,956.00 242.00 280,255.00 128,172.00 97,212.00 (81,302.00) 142,761.00 77,220.00 45,000.00 311,774.00 8,460.78 10,128.00 648.00 77,220.00 15,927.00 74,682.27 16,451.00 $ 3,262,122.45 See notes to the basic financial statements. - 44 - (This page left intentionally blank) TALBOT COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS YEAR ENDED JUNE 30, 2021 SCHEDULE "10" PROJECT (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. ORIGINAL ESTIMATED COST (1) CURRENT ESTIMATED COSTS (2) ESTIMATED COMPLETION DATE $ 2,800,000.00 $ 5,704,015.01 6/30/2022 - 46 - TALBOT COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS YEAR ENDED JUNE 30, 2021 SCHEDULE "10" PROJECT AMOUNT EXPENDED IN CURRENT YEAR (3 AMOUNT EXPENDED IN PRIOR YEARS (3) TOTAL COMPLETION COST EXCESS PROCEEDS NOT EXPENDED (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. $ 343,562.48 $ 4,975,550.01 $ - $ - (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. - 47 - Section II Compliance and Internal Control Reports Greg S. Griffin State Auditor 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 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 Dr. James Catrett, Superintendent and Members of the Talbot County Board of Education We have audited the financial statements of the governmental activities, each major fund, and fiduciary activities of the Talbot County Board of Education (School District), as of and for the year ended June 30, 2021, 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 January 24, 2023. We conducted our audit 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. 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) as a basis for designing audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the basic 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 a certain deficiency in internal control that we consider to be a material weakness and certain deficiencies in internal control that we consider to be 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 a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the School District's financial statements will not be prevented, or detected and corrected, on a timely basis. We consider the deficiency described in the accompanying Schedule of Findings and Questioned Costs in finding FS 2021-004 to be a material weakness. 270 Washington Street, SW, Suite 4-101 Atlanta, Georgia 30334 | Phone (404) 656-2180 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 in findings FS 2021-001, FS 2021-002, and FS 2021-003 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 misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the financial statements. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. 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 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 audit performed in accordance with Government Auditing Standards in considering the School District's internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Respectfully submitted, Greg S. Griffin State Auditor January 24, 2023 Greg S. Griffin State Auditor INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY THE UNIFORM GUIDANCE 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 Dr. James Catrett, Superintendent and Members of the Talbot County Board of Education 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, 2021. 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 qualified opinions on compliance for the major federal programs. However, our audit does not provide a legal determination of the School District's compliance. 270 Washington Street, SW, Suite 4-101 Atlanta, Georgia 30334 | Phone (404) 656-2180 Basis for Qualified Opinion on Education Stabilization Fund (84.425) and Title I Grants to Local Educational Agencies (84.010) As described in the accompanying Schedule of Findings and Questioned Costs, the School District did not comply with requirements regarding the Education Stabilization Fund (84.425) as described in finding FA 2021-001 for Cash Management and Title I Grants to Local Educational Agencies (84.010) as described in findings FA 2021-001 and FA 2021-002 for Cash Management and Reporting. Compliance with such requirements is necessary, in our opinion, for the School District to comply with requirements applicable to those programs. Qualified Opinion on Education Stabilization Fund (84.425) and Title I Grants to Local Educational Agencies (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 types of compliance requirements referred to above that could have a direct and material effect on the Education Stabilization Fund (84.425) and Title I Grants to Local Educational Agencies (84.010) for the year ended June 30, 2021. 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. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that have not been identified. We did identify certain deficiencies in internal control over compliance, described in the accompanying Schedule of Findings and Questioned Costs in findings FA 2021-001 and FA 2021-002 that we consider to be material weaknesses. 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, Greg S. Griffin State Auditor January 24, 2023 Section III Auditee's Response to Prior Year Findings and Questioned Costs TALBOT COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2021 PRIOR YEAR FINANCIAL STATEMENT FINDINGS FS 2020-001 Internal Control Procedures Repeat of Prior Year Finding: FS 2019-001, FS 2018-001, FS 2017-001, FS 2016-001, FS 2015-001, FS 2014-001, FS 7301-13-01 Finding Status: Unresolved The Finance Director will meet with all parties involved to discuss the findings, examine our current procedures, 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. FS 2019-001 Repeat of Prior Year Finding: Internal Control Procedures FS 2018-001, FS 2017-001, FS 2016-001, FS 2015-001, FS 2014-001, FS 7301-13-01 Finding Status: Partially Resolved See response to finding number FS 2020-001. FS 2018-001 Repeat of Prior Year Finding: Internal Control Procedures FS 2017-001, FS 2016-001, FS 2015-001, FS 2014-001, FS 7301-13-01 Finding Status: Partially Resolved See response to finding number FS 2020-001. FS 2017-001 Repeat of Prior Year Finding: Internal Control Procedures FS 2016-001, FS 2015-001, FS 2014-001, FS 7301-13-01 Finding Status: Partially Resolved See response to finding number FS 2020-001. - 1 - TALBOT COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2021 PRIOR YEAR FINANCIAL STATEMENT FINDINGS FS 2016-001 Repeat of Prior Year Finding: Internal Control Procedures FS 2015-001, FS 2014-001, FS 7301-13-01 Finding Status: Partially Resolved See response to finding number FS 2020-001. FS 2015-001 Repeat of Prior Year Finding: Inadequate Internal Control Procedures FS 2014-001, FS 7301-13-01 Finding Status: Partially Resolved See response to finding number FS 2020-001. FS 2014-001 Repeat of Prior Year Finding: Inadequate Internal Control Procedures FS 7301-13-01 Finding Status: Partially Resolved See response to finding number FS 2020-001. FS 7301-13-01 Inadequate Internal Control Procedures Finding Status: Partially Resolved See response to finding number FS 2020-001. FS 2020-002 Internal Controls over Agency Fund Accounts Repeat of Prior Year Finding: Finding Status: FS 2019-002, FS 2018-002, FS 2017-002, FS 2016-002, FS 2015-002, FS 2014-002, FS 7301-13-02 Further Action Not Warranted - 2 - TALBOT COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2021 PRIOR YEAR FINANCIAL STATEMENT FINDINGS FS 2019-002 Repeat of Prior Year Finding: Internal Controls over Agency Fund Accounts FS 2018-002, FS 2017-002, FS 2016-002, FS 2015-002, FS 2014-002, FS 7301-13-02 Finding Status: Further Action Not Warranted FS 2018-002 Repeat of Prior Year Finding: Internal Controls over Agency Fund Accounts FS 2017-002, FS 2016-002, FS 2015-002, FS 2014-002, FS 7301-13-02 Finding Status: Further Action Not Warranted FS 2017-002 Repeat of Prior Year Finding: Internal Controls over School Activity Accounts FS 2016-002, FS 2015-002, FS 2014-002, FS 7301-13-02 Finding Status: Further Action Not Warranted FS 2016-002 Repeat of Prior Year Finding: Finding Status: FS 2015-002 Repeat of Prior Year Finding: Finding Status: FS 2014-002 Repeat of Prior Year Finding: Finding Status: Internal Controls over School Activity Accounts FS 2015-002, FS 2014-002, FS 7301-13-02 Further Action Not Warranted Inadequate Internal Controls over School Activity Accounts FS 2014-002, FS 7301-13-02 Further Action Not Warranted Inadequate Internal Controls over School Activity Accounts FS 7301-13-02 Further Action Not Warranted - 3 - TALBOT COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2021 PRIOR YEAR FINANCIAL STATEMENT FINDINGS FS 7301-13-02 Inadequate Internal Controls over School Activity Accounts Finding Status: Further Action Not Warranted FS 2020-003 Internal Controls at the Central Office Repeat of Prior Year Finding: FS 2019-004, FS 2018-005, FS 2017-005, FS 2016-005 Finding Status: Unresolved The finance officer will review 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 2019-004 Internal Controls at the Central Office Repeat of Prior Year Finding: FS 2018-005, FS 2017-005, FS 2016-005 Finding Status: Partially Resolved See response to finding number FS 2020-003. FS 2018-005 Repeat of Prior Year Finding: Internal Controls at the Central Office FS 2017-005, FS 2016-005 Finding Status: Partially Resolved See response to finding number FS 2020-003. FS 2017-005 Repeat of Prior Year Finding: Internal Controls at the Central Office FS 2016-005 Finding Status: Partially Resolved See response to finding number FS 2020-003. - 4 - TALBOT COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2021 PRIOR YEAR FINANCIAL STATEMENT FINDINGS FS 2016-005 Internal Controls at the Central Office Finding Status: Partially Resolved See response to finding number FS 2020-003. FS 2020-004 Internal Controls over Financial Reporting Repeat of Prior Year Finding: FS 2019-005, FS 2018-006, FS 2017-006, FS 2016-006 Finding Status: Unresolved The finance officer will review 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 2019-005 Repeat of Prior Year Finding: Internal Controls over Financial Reporting FS 2018-006, FS 2017-006, FS 2016-006 Finding Status: Unresolved See response to finding number FS 2020-004. FS 2018-006 Repeat of Prior Year Finding: Internal Controls over Financial Reporting FS 2017-006, FS 2016-006 Finding Status: Unresolved See response to finding number FS 2020-004. FS 2017-006 Repeat of Prior Year Finding: Internal Controls over Financial Reporting FS 2016-006 Finding Status: Unresolved See response to finding number FS 2020-004. - 5 - TALBOT COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2021 PRIOR YEAR FINANCIAL STATEMENT FINDINGS FS 2016-006 Internal Controls over Financial Reporting Finding Status: Unresolved See response to finding number FS 2020-004. PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS FA 2020-001 Improve Controls over Cash Management Federal Awarding Agency: U.S. Department of Education Pass-Through Entity: Georgia Department of Education Repeat of Prior Year Finding: FA 2019-001, FA 2018-001, FA 2017-002, FA 2016-001, FA 2015-002, FA 2014-003 Finding Status: Unresolved Management has implemented procedures to monitor the cash monthly balances for all programs when requesting reimbursement for federal and state programs. FA 2019-001 Federal Awarding Agency: Pass-Through Entity: Repeat of Prior Year Finding: Improve Controls over Cash Management U.S. Department of Education Georgia Department of Education FA 2018-001, FA 2017-002, FA 2016-001, FA 2015-002, FA 2014-003 Finding Status: Unresolved See response to finding number FA 2020-001. FA 2018-001 Federal Awarding Agency: Pass-Through Entity: Repeat of Prior Year Finding: Improve Controls Over Cash Management U.S. Department of Education Georgia Department of Education FA 2017-002, FA 2016-001, FA 2015-002, FA 2014-003 Finding Status: Unresolved See response to finding number FA 2020-001. - 6 - TALBOT COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2021 PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS FA 2017-001 Federal Awarding Agency: Pass-Through Entity: Repeat of Prior Year Finding: Improve Controls Over the Cash Management Process U.S. Department of Education Georgia Department of Education FA 2016-001, FA 2015-002, FA 2014-003 Finding Status: Unresolved See response to finding number FA 2020-001. FA 2016-001 Federal Awarding Agency: Pass-Through Entity: Repeat of Prior Year Finding: Improve Controls over the Cash Management Process U.S. Department of Education Georgia Department of Education FA 2015-002, FA 2014-003 Finding Status: Unresolved See response to finding number FA 2020-001. FA 2015-002 Federal Awarding Agency: Pass-Through Entity: Controls over the Cash Management Process U.S. Department of Education Georgia Department of Education Finding Status: Unresolved See response to finding number FA 2020-001. FA 2014-003 Federal Awarding Agency: Pass-Through Entity: Internal Controls over the Cash Management Process U.S. Department of Education Georgia Department of Education Finding Status: Unresolved See response to finding number FA 2020-001. - 7 - TALBOT COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2021 PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS FA 2019-002 Federal Awarding Agency: Pass-Through Entity: Strengthen Controls over Financial Reporting U.S. Department of Education Georgia Department of Education Finding Status: Unresolved The financial officer will oversee the accounting procedures. The financial officer will monitor monthly/yearly expenditure to ensure the completion reports are both in agreement at the end of each grant period. - 8 - Section IV Findings and Questioned Costs TALBOT COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2021 I SUMMARY OF AUDITOR'S RESULTS Financial Statements Type of auditor's report issued: Governmental Activities, Each Major Fund, and Fiduciary Activities Internal control over financial reporting: Material weakness(es) identified? Significant deficiency(ies) identified? Noncompliance material to financial statements noted: Unmodified Yes Yes No Federal Awards Internal Control over major programs: Material weakness(es) identified? Significant deficiency(ies) identified? Type of auditor's report issued on compliance for major programs: Education Stabilization Fund (84.425) Title I Grants to Local Educational Agencies (84.010) Any audit findings disclosed that are required to be reported in accordance with 2 CFR 200.516(a)? Identification of major programs: Assistance Listing Number Assistance Listing Program or Cluster Title 84.010 84.425 Title I Grants to Local Educational Agencies Education Stabilization Fund Dollar threshold used to distinguish between Type A and Type B programs: Auditee qualified as low-risk auditee? Yes None Reported Qualified Qualified Yes $750,000.00 No - 1 - TALBOT COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2021 II FINANCIAL STATEMENT FINDINGS FS 2021-001 Internal Control Over Cash and Cash Equivalents Internal Control Impact: Compliance Impact: Repeat of Prior Year Finding: Significant Deficiency None FS 2020-001, FS 2019-001, FS 2018-001, FS 2017-001, FS 2016-001, FS 2015-001, FS 2014-001, FS 7301-13-01 Description: The accounting procedures of the School District continue to be insufficient to provide adequate internal controls over the cash and cash equivalents functions. Criteria: The School District management is responsible for designing and maintaining internal controls over cash and cash equivalents. Further, management is responsible for implementing corrective action to findings from previous engagements. 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. One of nine bank reconciliations and bank statements was not provided to the auditors for review. Three of nine bank accounts were not properly reconciled to the June 30, 2021 general ledger balance, totaling $27,321.87. One of nine bank accounts was not clerically accurate. One of nine bank reconciliations had reconciling items that did not agree to supporting detailed listings by $106.00. Two of nine bank reconciliations contained no evidence of a review date. Eight of nine bank reconciliations were not performed and/or reviewed within 45 days. 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 the duties to ensure that the internal controls were sufficient. 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. In addition, failure to implement corrective actions from findings in previous years raises concerns about the School District's management of local, state and federal funds. Given the increased level of risk of misstatement or fraud, the auditors must consider increasing audit procedures. - 2 - TALBOT COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2021 II FINANCIAL STATEMENT FINDINGS 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 preformed accurately and in a timely manner by someone independent of the general ledger. Views of Responsible Officials: We concur with this finding. FS 2021-002 Internal Control over Capital Assets Internal Control Impact: Compliance Impact: Repeat of Prior Year Finding: Significant Deficiency None No Description: The accounting procedures of the School District were insufficient to provide adequate internal controls over capital assets. Criteria: The School District management is responsible for designing and maintaining internal controls over capital assets. 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: A review of the School District's capital asset records revealed the following deficiencies: Evidence of a physical inventory of capital assets performed within the past five years was not provided. Twentythree fully depreciated assets with a cost of $792,574.92 and accumulated depreciation of $792,570.92 were disposed of in prior years; however, they were still maintained on the capital asset listing and the general ledger. An adjustment to the notes to the financial statements was proposed by the auditors and accepted by the School District. Construction in progress was understated by $136,369.95 on the financial statements and capital asset listing due to an unrecorded contract payable for the Athletic Complex project. An adjustment to the financial statements and the notes to the financial statements was proposed by the auditors and accepted by the School District. Accumulated depreciation was overstated by $13,342.04 on the financial statements and capital asset listing due to the School District not consistently applying their depreciation policy. Cause: These issues were a result of the School District's inadequate internal control and review procedures over capital assets. - 3 - TALBOT COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2021 II FINANCIAL STATEMENT FINDINGS Effect: Failure to maintain adequate internal controls over capital assets increases the risk significant misstatements could occur in the financial statements due to error or fraud. In addition, it can lead to inaccurate internal and external reporting, as well as, noncompliance with generally accepted accounting principles. Recommendation: Management should correct the capital asset listing and strengthen internal controls over the capital assets process to ensure that capital assets are properly recorded an maintained in accordance with the School District's approved capital asset policy and generally accepted accounting principles. Views of Responsible Officials: We concur with this finding. FS 2021-003 Internal Controls at the Central Office Internal Control Impact: Compliance Impact: Repeat of Prior Year Finding: Significant Deficiency None FS 2020-003. FS 2019-004, FS 2018-005, FS 2017-005, FS 2016-005 Description: The accounting procedures of the School District continue to be insufficient to 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. Further, management is responsible for implementing reported corrective action to findings from previous engagements. 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. 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 procedure for testing backups to ensure they are working properly. - 4 - TALBOT COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2021 II FINANCIAL STATEMENT FINDINGS 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 The School District was unable to provide an accounts payable listing that agreed to the financial statements. The listing provided did not agree to the general fund or government-wide financial statements by $18,803.67. Employee Compensation The School District was unable to provide a listing supporting salaries and benefits payable in the amount of $561,602.89 which is material to the general fund and government-wide financial statements. General Ledger: Our examination of forty-six journal entries revealed the following deficiencies: Supporting documentation for twenty-five journal entries could not be provided by the School District. Eight of twenty-one journal entries provided by the School District lacked evidence of supervisory review and approval. One journal entry lacked adequate documentation. Cause: In discussing these deficiencies 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. 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. Failure to implement corrective actions from findings in previous years raises concerns about the School District's management of local, state and federal funds. Given the increased level of risk of misstatement or fraud, the auditors must consider increasing audit procedures. 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, employee compensation and journal entries to strengthen the internal controls over the accounting function. Views of Responsible Officials: We concur with this finding. - 5 - TALBOT COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2021 II FINANCIAL STATEMENT FINDINGS FS 2021-004 Strengthen Controls over Financial Reporting Internal Control Impact: Compliance Impact: Repeat of Prior Year Finding: Material Weakness None FS 2020-004, FS 2019-005, FS 2018-006, FS 2017-006, FS 2016-006 Description: The School District continues to 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. 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: Due to posting errors, Special Purpose Local Option Sales Tax (SPLOST) revenues, accounts receivable taxes, and cash and cash equivalents were understated by $176,639.95, $79,689.95, and $96,950.00 respectively, on the government-wide statements and fund statements. These adjustments were material to the capital projects fund. An adjustment was proposed by the auditors and accepted by the School District. Due to posting errors, a misclassification of $421,260.24 between capital assets depreciable and capital assets nondepreciable was noted. An adjustment was proposed by the auditors and accepted by the School District. - 6 - TALBOT COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2021 II FINANCIAL STATEMENT FINDINGS The School District improperly classified accounts receivable federal in the amount of $319,156.56 and accounts receivable- taxes of $104,694.80 as accounts receivable state. These adjustments were material to the general fund. An adjustment was proposed by the auditors and accepted by the School District. Net investment in capital assets net position was understated, and unrestricted net position was overstated by $418,423.66. An adjustment was proposed by the auditors and accepted by the School District. Contracts payable was understated by $240,469.55 and retainages payable was overstated by $164,506.15. This is material to the capital projects fund. An adjustment was proposed by the auditors and accepted by the School District. Accounts receivable taxes, deferred inflows of resources unavailable revenue property taxes and property tax revenue were understated by $238,305.06, $204,200.28 and $34,104.78 respectively. An adjustment was proposed by the auditors and accepted by the School District. Cash was overstated by $48,475.00 in the debt service fund and understated in the capital projects fund. This was material to both the debt service fund and the capital projects fund. An adjustment was proposed by the auditors and accepted by the School District. Due to posting errors, cash was overstated in the amount of $90,900.37 in the general fund and governmental activities. An adjustment was proposed by the auditors and accepted by the School District. During a review of accounts receivable, it was noted there were $224,451.09 of invalid accounts receivable recorded in accounts receivable federal. An adjustment was proposed by the auditors and accepted by the School District. Total expenditures reported on the Schedule of Expenditures of Federal Awards was overstated by $143,537.88. An adjustment was proposed by the auditors and accepted by the School District. Family Connections grant was incorrectly included in the general fund and should have been in custodial funds. This was material to the custodial fund. An adjustment was proposed by the auditors and accepted by the School District. 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. Numerous other audit adjustments and reclassifications were proposed by auditors and accepted by the School District to properly present the financial statements and note disclosures. Cause: In discussing these deficiencies 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: 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. Failure to implement corrective actions from findings in previous years raises concerns about the School District's management of local, state and federal funds. Given the increased level of risk of misstatement or fraud, the auditors must consider increasing audit procedures. - 7 - TALBOT COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2021 II FINANCIAL STATEMENT FINDINGS 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. Ill FEDERAL AWARD FINDINGS AND QUESTIONED COSTS FA 2021-001 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 Assistance Listing Number and Title: Title I Grants to Local Educational Agencies (84.010A) Federal Award Numbers: S010A190010 (Year: 2020), S010A200010 (Year: 2021) Questioned Costs: None Identified Federal Awarding Agency: U.S. Department of Education Pass-Through Entity: Georgia Department of Education Assistance Listing Numbers and Titles: COVID-19 Elementary and Secondary School Emergency Relief Fund (84.425D) COVID-19 American Rescue Plan Elementary and Secondary School Emergency Relief Fund (84.425U) Federal Award Numbers: S425D200012 (Year: 2020), S4250210012 (Year: 2021), S425U210012 (Year: 2021) Questioned Costs: None Identified Repeat of Prior Year Findings: FA 2020-001, FA 2019-001, FA 2018-001, 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 Grants to Local Educational Agencies and Elementary and Secondary School Emergency Relief Fund programs. - 8 - TALBOT COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2021 Ill FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Background Information: The School District may request Title I Grants to Local Educational Agencies (Title I) and Elementary and Secondary Emergency Relief (ESSER) Fund program funds from the Georgia Department of Education (GaDOE) once per month. GaDOE requires the School District to submit DE-0147 Requests for Reimbursement of Monthly Cash Disbursements through the Grants Accounting Online Reporting System to receive program funds. When a DE-0147 request is submitted and approved, the funds are typically disbursed to the School District through an electronic payment process the next week. The School District submitted DE-0147 requests to receive a total of $338,645 in Title I program funds and a total of $320,954 in ESSER funds from GaDOE during the fiscal year under review. Criteria: As a recipient of federal awards, the Institution is required to establish and maintain effective internal control over federal awards that provides reasonable assurance of managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards pursuant to Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), Section 200.303 Internal Controls. Provisions included in the Uniform Guidance Section 200.305(b) state that for "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, the Uniform Guidance Section 200.302(b)(6) requires that the entity develop written cash management procedures. Further, as noted in the Uniform Guidance Section 200.511, management is responsible for implementing reported corrective action to findings from previous audits. Condition: A review of all cash drawdowns and disbursements related to the Title I and ESSER programs was performed to determine if any excessive cash balances were maintained during the fiscal year under review. Cash balances in excess of program materiality were maintained for the Title I program for 354 days and the ESSER program for 140 days. Additionally, it was noted that the School District did not have appropriate internal controls in place over the cash drawdown process. Cause: In discussing this issue with the School District, they indicated that the lack of review of federal grants resulted in excess cash drawdown requests. Effect: The School District was not in compliance with the Uniform Guidance and Georgia Department of Education guidance. In addition, the School District could potentially accrue an interest liability that would be owed to the federal government. Furthermore, when the School District cannot meet the requirement to minimize the time elapsing between the transfer of funds and disbursement of those funds, provisions included in the Uniform Guidance allow GaDOE to change the method by which the School District is transferred funds and delay the School District's receipt of these funds. This may include a requirement by GaDOE to submit invoices prior to being reimbursed for program expenditures. - 9 - TALBOT COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2021 Ill FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Recommendation: The School District should establish procedures to accurately forecast the cash needs of the Title I and ESSER programs and minimize the time elapsing between the transfer of funds from GaDOE and the disbursement of such funds by the School District. In addition, these procedures should be documented in writing in accordance with the Uniform Guidance Section 200.302(b)(6). Furthermore, management should develop and implement a monitoring process to ensure that these procedures are followed. Views of Responsible Officials: We concur with this finding. FA 2021-002 Strengthen Controls over Financial Reporting Compliance Requirement: Reporting Internal Control Impact: Material Weakness Compliance Impact: Material Noncompliance Federal Awarding Agency: U.S. Department of Education Pass-Through Entity: Georgia Department of Education Assistance Listing Number and Title: Title I Grants to Local Educational Agencies (84.010A) Federal Award Numbers: S010A190010 (Year: 2020), S010A200010 (Year: 2021) Questioned Costs: $117,962 Repeat of Prior Year Finding: FA 2019-002 Description: The School District did not file accurate completion reports for the Title I Grants to Local Educational Agencies program. Background Information: The Georgia Department of Education (GaDOE) requires the School District to submit a completion report by October 30 after the 15-month period of performance associated with the Title I Grants to Local Educational Agencies (Title I) program ends. These completion reports are filed through the Grants Application section of the MyGaDOE webportal and reflect budgeted and actual expenditure information for the Title I program for the reporting period. If the total expenditures reflected on the completion report are more than the Title I program funds received by the School District for the grant period, a DE-0147 Request for Reimbursement of Monthly Cash Disbursements will be automatically generated and the additional funds due to the School District will be disbursed appropriately. Conversely, if the total funds received for the grant period exceed the total expenditures reflected on the completion report, the Grants Application will prompt the School District to enter a check number for the required refund of excess funds drawn down. Therefore, it is imperative that completion reports are filed by the School District in an accurate and timely manner. - 10 - TALBOT COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2021 Ill FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Criteria: As a recipient of federal awards, the Institution is required to establish and maintain effective internal control over federal awards that provides reasonable assurance of managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards pursuant to Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), Section 200.303 Internal Controls. Provisions included in the Uniform Guidance Section 200.302(a) state in part that "the non-Federal entity's financial management systems must... be sufficient to permit the preparation of reports required by general and program-specific terms and conditions." In addition, Provisions included in the Uniform Guidance Section 200.302(b)(2) state in part that the non-Federal entity's financial management systems must provide for "accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements." Further, as noted in the Uniform Guidance Section 200.511, management is responsible for implementing reported corrective action to findings from previous audits. Condition: A review of the School District's accounting records and the completion reports related to the Title I program revealed the following deficiencies: 1. The Title I-A, Improving Academic Achievement completion report for the period ending September 30, 2021 was over reported by $110,991. 2. The Title I-A, School Improvement completion report for the period ending September 30, 2021 was over reported by $6,971. Questioned Costs: Questioned costs of $117,962 were identified for cash drawdowns in excess of reimbursable expenditures. Cause: In discussing this deficiency with the School District, they stated these issues were a result of turnover within the Central Office. Effect: The School District was not in compliance with the Uniform Guidance and GaDOE guidance. Failure to accurately report federal award expenditures through the completion report process could lead to the filing of DE-0147 reimbursement requests with GaDOE that do not support actual expenditures. Therefore, the School District obtained more federal funding than they were eligible to receive. Additionally, this funding must be returned to GaDOE. - 11 - TALBOT COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2021 Ill FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Recommendation: The School District should establish internal control procedures to ensure that completion reports submitted to the Georgia Department of Education are supported by the accounting records and DE0147 reimbursement requests are prepared based upon actual expenditures incurred. In addition, management should develop and implement a monitoring process to ensure that control procedures are being followed Views of Responsible Officials: We concur with this finding. - 12 - Section V Management's Corrective Action