WARREN COUNTY BOARD OF EDUCATION WARRENTON, GEORGIA ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2018 (Including Independent Auditor's Reports) WARREN COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS - SECTION I FINANCIAL INDEPENDENT AUDITOR'S REPORT REQUIRED SUPPLEMENTARY INFORMATION MANAGEMENT'S DISCUSSION AND ANALYSIS EXHIBITS BASIC FINANCIAL STATEMENTS GOVERNMENT-WIDE FINANCIAL STATEMENTS A STATEMENT OF NET POSITION B STATEMENT OF ACTIVITIES FUND FINANCIAL STATEMENTS C BALANCE SHEET GOVERNMENTAL FUNDS D RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET POSITION E STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS F RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES G STATEMENT OF FIDUCIARY NET POSITION FIDUCIARY FUNDS H STATEMENT OF CHANGES IN FIDUCIARY NET POSITION FIDUCIARY FUNDS I NOTES TO THE BASIC FINANCIAL STATEMENTS SCHEDULES REQUIRED SUPPLEMENTARY INFORMATION 1 SCHEDULE OF PROPORTIONATE SHARE OF THE NET PENSION LIABILITY TEACHERS RETIREMENT SYSTEM OF GEORGIA 2 SCHEDULE OF PROPORTIONATE SHARE OF THE NET PENSION LIABILITY PUBLIC SCHOOL EMPLOYEES RETIREMENT SYSTEM OF GEORGIA 3 SCHEDULE OF PROPORTIONATE SHARE OF THE NET OPEB LIABILITY SCHOOL OPEB FUND 4 SCHEDULE OF CONTRIBUTIONS - TEACHERS RETIREMENT SYSTEM OF GEORGIA Page i 1 2 3 4 5 6 7 8 10 33 34 35 36 WARREN COUNTY BOARD OF EDUCATION - TABLE OF CONTENTS - SECTION I FINANCIAL SCHEDULES REQUIRED SUPPLEMENTARY INFORMATION 5 SCHEDULE OF CONTRIBUTIONS - SCHOOL OPEB FUND 6 NOTES TO THE REQUIRED SUPPLEMENTARY INFORMATION 7 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL GENERAL FUND SUPPLEMENTARY INFORMATION 8 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS 9 SCHEDULE OF STATE REVENUE 10 SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS Page 37 38 39 40 41 43 SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY THE UNIFORM GUIDANCE SECTION III AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS SECTION IV FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS . SECTION I FINANCIAL Greg S. Griffin STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400 August 19, 2019 The Honorable Brian P. Kemp, Governor of Georgia Members of the General Assembly of the State of Georgia Members of the State Board of Education and Superintendent and Members of the Warren County Board of Education INDEPENDENT AUDITOR'S REPORT Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of the Warren County Board of Education (School District), as of and for the year ended June 30, 2018, and the related notes to the financial statements, which collectively comprise the School District's basic financial statements 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 opinion(s) on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the of the governmental activities, each major fund, and the aggregate remaining fund information of the School District as of June 30, 2018, and the respective changes in financial position for the year then ended in accordance with accounting principles generally accepted in the United States of America. Emphasis of Matter As described in Note 2 to the financial statements, in 2018, the School District adopted new accounting guidance, Governmental Accounting Standards Board (GASB) Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions, as amended by GASB Statement No. 85, Omnibus 2017. The School District restated beginning net position for the effect of GASB Statement No.75. Our opinions are not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the Management's Discussion and Analysis and 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 August 19, 2019 on our consideration of the School District's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the School District's internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the School District's internal control over financial reporting and compliance. A copy of this report has been filed as a permanent record in the office of the State Auditor and made available to the press of the State, as provided for by Official Code of Georgia Annotated section 50-6-24. Respectfully submitted, Greg S. Griffin State Auditor WARREN COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 The discussion and analysis of the Warren County Board of Education's (School District) financial performance provides an overall review of the School District's financial activities for the fiscal year ended June 30, 2018. The intent of this discussion and analysis is to look at the School District's financial performance as a whole. Readers are encouraged to review the basic financial statements, and the accompanying notes to the basic financial statements to enhance their understanding of the School District's financial performance. FINANCIAL HIGHLIGHTS Key financial highlights for fiscal year 2018 are as follows: Governmental Accounting Standards Board (GASB) Statement No. 75, Accounting and Financial Reporting for Other Postemployment Benefits Other than Pensions, was adopted in fiscal year 2018. This standard directly impacts the Board's liabilities, deferred outflows of resources, deferred inflows of resources, and unrestricted net position only on governmentwide financial statements and resulted in significant changes in how the School District reflects its future responsibilities and liabilities to its employees. For fiscal year 2018, the net OPEB pension liability recorded was $6.2 million. Beginning net position was restated resulting in a decrease of $6.4 million for the implementation of GASB Statement No. 75. See note 14 in the Notes to the Basic Financial Statements for more information about the restatement of net position. In total, net position decreased by $6.6 million, which represents a decrease of 60 percent from 2017. The majority of this decrease was due to the implementation of GASB No. 75. General revenues accounted for $4.1 million. This represents 45 percent of all revenues. Program specific revenues in the form of grants and contributions, and charges for services, accounted for $5.0 million or 55 percent of total revenues. The School District had $9.3 million in expenses related to governmental activities. Program specific grants and contributions, and charges for services of $5.0 million did not cover these expenses. General revenues, primarily property taxes and sales taxes, of $4.1 million provided additional revenue for these programs. Among major funds, the general fund had $8.7 million in revenues and $8.7 million in expenditures. The fund balance for the general fund increased by $144.6 thousand. USING THE BASIC FINANCIAL STATEMENTS This annual report consists of a series of financial statements: the government-wide and fund statements. The government-wide financial statements, the Statement of Net Position and the Statement of Activities, are designed to illustrate the School District as an aggregate of its financial activities and present a longer-term view of its finances. The next level of detail is provided by the fund financial statements. These statements reflect the short-term finances as well as the balances available for future needs. For the Warren County Board of Education, the general fund, capital projects fund and the debt service fund are the most significant funds. i WARREN COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 REPORTING THE SCHOOL DISTRICT AS A WHOLE (GOVERNMENT-WIDE) The Statement of Net Position and the Statement of Activities While this document includes a number of funds used by the School District to provide programs and activities, a view of the School District as a whole requires look at all financial transactions to ask the question "How did we do financially during 2018?" The Statement of Net Position and the Statement of Activities answers this question. These statements include all assets, deferred outflows of resources, liabilities, and deferred inflows of resources using the accrual basis of accounting similar to the accounting used by most private-sector companies. This basis of accounting takes into account all of the current year's revenues and expenses regardless of when cash is received or paid. These two statements report the School District's net position and changes in net position. This change in net position is important because it tells the reader whether, for the School District as a whole, the financial position of the School District has improved or diminished. The causes of this change may be a result of many factors, some financial, some not. Nonfinancial factors include statewide and local political decisions, facility conditions, required educational programs, and other factors. The Statement of Net Position and the Statement of Activities are normally divided into two distinct types of activities, governmental and business type activities. All of the School District's activities are reflected as governmental activities. This includes instruction, pupil services, improvement of instructional services, educational media services, general administration, school administration, business administration, maintenance and operation of plant, student transportation services, other support services, food services, and interest on short-term and long-term debt. REPORTING THE SCHOOL DISTRICT'S MOST SIGNIFICANT FUNDS (FUND FINANCIALS) The fund financial statements provide detailed information about the School District's major funds. The School District's major governmental funds are the general fund, capital projects fund, and the debt service fund. Governmental Funds - Most of the School District's activities are reported in governmental funds, which focus on how money flows into and out of those funds and the balances left at year-end available for spending in future periods. These funds are reported using an accounting method called modified accrual accounting, which measures cash and financial assets that can readily be converted to cash. The governmental fund statements offer a short-term view of the School District's financial activities. A reconciliation of net changes in governmental fund balances to the governmental activities changes in net position illustrate the relationships (or differences) between the governmental activities reported in the Statement of Net Position and the Statement of Activities to the governmental funds presented in the fund financial statements. Fiduciary Funds - The School District is the trustee, or fiduciary, for assets that belong to others, such as scholarships, school clubs, and organizations within the principals' accounts. The School District is responsible for ensuring that the assets reported in these funds are used only for their intended purposes and by those to whom the assets belong. These activities are reported in a separate Statement of Fiduciary Net Position. The School District has excluded these activities from the government-wide financial statements because the School District cannot use these assets to finance its operations. ii WARREN COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 THE SCHOOL DISTRICT AS A WHOLE The Statement of Net Position provides the perspective of the School District as a whole. Table 1 provides a summary of the School District's net position for fiscal year 2018 compared to fiscal year 2017. Table 1 Net Position Assets Current and Other Assets Capital Assets, Net Governmental Activities Fiscal Fiscal Year 2018 Year 2017 (1) $ 3,252,343.68 $ 4,337,131.66 13,660,869.13 13,746,310.59 Total Assets 16,913,212.81 18,083,442.25 Deferred Outflows of Resources 1,372,492.35 1,850,566.71 Liabilities Current and Other Liabilities Long-Term Liabilities Net Pension Liability OPEB Liability 907,854.96 - 6,098,211.00 6,221,603.00 815,401.52 1,240,000.00 6,736,678.00 - Total Liabilities 13,227,668.96 8,792,079.52 Deferred Inflows of Resources 593,270.00 63,299.00 Net Position Investment in Capital Assets Restricted Unrestricted (Deficit) 13,660,869.13 671,944.04 (9,868,046.97) 12,506,310.59 1,935,784.92 (3,363,465.07) Total Net Position $ 4,464,766.20 $ 11,078,630.44 (1) Fiscal year 2017 balances do not reflect the effects of the restatement of net position. See Note 14 in the Notes to the Basic Financial Statements for additional information. Total Net Position decreased $6.6 million in fiscal year 2018. The majority of the decrease was the result of the implementation of GASB No. 75. iii WARREN COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 Table 2 shows the changes in Net Position for fiscal year 2018 compared to the changes in Net Position for fiscal year 2017. Table 2 Change in Net Position Revenues Program Revenues: Charges for Services Operating Grants and Contributions Governmental Activities Fiscal Fiscal Year 2018 Year 2017 (1) $ 28,016.00 $ 5,017,165.95 24,596.50 4,943,553.44 Total Program Revenues 5,045,181.95 4,968,149.94 General Revenues: Taxes Property Taxes Sales Taxes Investment Earnings Miscellaneous Special Item Sale of M.E. Freeman Elementary School 3,344,852.54 527,103.55 4,152.03 261,315.55 (80,109.43) 3,551,042.75 512,091.58 1,521.52 328,065.58 - Total General Revenues and Special Item 4,057,314.24 4,392,721.43 Total Revenues 9,102,496.19 9,360,871.37 Program Expenses: Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Other Support Services Operations of Non-Instructional Services Food Services Interest on Short-Term and Long-Term Debt 4,818,111.80 316,019.09 338,690.65 91,854.79 552,281.19 633,278.67 245,948.50 914,758.04 666,471.99 152,106.70 569,734.61 45,258.40 4,652,572.85 226,505.00 373,900.36 108,117.66 538,713.50 625,730.90 231,117.12 683,752.53 606,859.12 104,711.56 521,611.94 62,946.24 Total Expenses 9,344,514.43 8,736,538.78 Increase(Decrease) in Net Position $ (242,018.24) $ 624,332.59 (1) Fiscal year 2017 balances do not reflect the effects of the restatement of net position. See Note 14 in the Notes to the Basic Financial Statements for additional information. iv WARREN COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 The School District is dependent upon operating grants and property taxes to support governmental activities. Instruction comprises 51.5 percent, support services 41.9 percent, operations of noninstructional services operations 6.1 percent, and interest 0.5 percent of government-wide program expenses. The Statement of Activities details the cost of program services and the charges for services and grants offsetting those services. Table 3 shows the total cost of services and the net cost of services for governmental activities comparing fiscal year 2018 with fiscal year 2017. It identifies the cost of these services supported by tax revenue and unrestricted State entitlements. Table 3 Governmental Activities Total Cost of Services Fiscal Fiscal Year 2018 Year 2017 (1) Net Cost of Services Fiscal Fiscal Year 2018 Year 2017 (1) Instruction $ 4,818,111.80 $ 4,652,572.85 $ 2,050,649.55 $ 1,979,338.01 Support Services: Pupil Services 316,019.09 226,505.00 175,312.97 63,119.27 Improvement of Instructional Services 338,690.65 373,900.36 233,048.02 214,102.02 Educational Media Services 91,854.79 108,117.66 11,306.79 32,430.66 General Administration 552,281.19 538,713.50 75,431.15 104,179.87 School Administration 633,278.67 625,730.90 122,221.93 131,015.96 Business Administration 245,948.50 231,117.12 244,894.57 229,882.03 Maintenance and Operation of Plant 914,758.04 683,752.53 735,634.70 504,361.63 Student Transportation Services 666,471.99 606,859.12 469,910.45 434,474.90 Other Support Services 152,106.70 104,711.56 151,010.39 104,425.25 Operations of Non-Instructional Services: Food Services 569,734.61 521,611.94 (15,346.44) (91,887.00) Interest on Short-Term and Long-Term Debt 45,258.40 62,946.24 45,258.40 62,946.24 Total Expenses $ 9,344,514.43 $ 8,736,538.78 $ 4,299,332.48 $ 3,768,388.84 (1) Fiscal year 2017 balances do not reflect the effects of the restatement of net position. See Note 14 in the Notes to the Basic Financial Statements for additional information. Although program revenues make up a majority of the revenues, the School District is still dependent upon tax revenues for governmental activities. THE SCHOOL DISTRICT'S FUNDS The School District's governmental funds are accounted for using the modified accrual basis of accounting. Total governmental funds had revenues of $9.2 million and expenditures of $10.4 million. The general fund reflected an increase of $144.6 thousand, the capital projects fund decreased $19 thousand and the debt service fund decreased $1.3 million. The increase in general fund was primarily due to a reimbursement paid from the debt service fund for capital expenditures. Capital projects fund decrease was due to the funding of capital construction projects. Debt service fund decrease was due to the payoff of the 2005 general obligation bonds. v WARREN COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 GENERAL FUND BUDGET HIGHLIGHTS The School District's budget is prepared according to Georgia law. The most significant budgeted fund is the general fund. The general fund consists of the general operations, special revenue, and school nutrition program. For the general fund, the final budgeted revenues of $9.5 million increased from the original budgeted amount of $8.4 million by $1.1 million. This difference was mainly an increase of $141 thousand in federal revenues and $578 thousand in state revenue due to the awarding of federal and state allocations after the fiscal year budget has been approved. The actual revenue was less than the budgeted amount by $797.8 thousand. The majority of the variance between the final budget and actual revenue in 2018 is due to an overly optimistic projection for state and federal revenue. In addition, all of budgeted tax revenue was not received and school activity accounts were not budgeted. The final budgeted expenditures of $8.7 million increased from the original budget of $8.3 million by $368 thousand. The difference was due to various budget adjustments for state, federal, and local grants decided above. Also, budget adjustments were made for unexpected maintenance and operation expenditures. The actual expenditures were $19.4 thousand more than the final budgeted amount. The majority of the variance between the final budgeted expenditures and actual expenditures is due to school activity accounts which were not budgeted. CAPITAL ASSETS AND DEBT ADMINISTRATION Debt At June 30, 2018, the School District had no general obligation bonds. Table 4 shows fiscal year 2018 balances compared with fiscal year 2017 balances. Table 4 Debt at June 30 Governmental Activities Fiscal Fiscal Year 2018 Year 2017 General Obligation Bonds $ - $ 1,240,000.00 vi WARREN COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 Capital Assets At the end of fiscal year 2018, the School District had capital assets of $13.7 million, net of accumulated depreciation. Table 5 shows fiscal year 2018 balances compared with fiscal year 2017 balances. Table 5 Capital Assets (Net of Depreciation) Governmental Activities Fiscal Fiscal Year 2018 Year 2017 Land $ Construction In Progress Buildings and Building Improvements Equipment Land Improvements 300,869.34 $ 140,000.00 11,998,402.30 388,243.05 833,354.44 305,043.34 - 12,167,916.56 426,624.36 846,726.33 Total $ 13,660,869.13 $ 13,746,310.59 The majority of the decrease in capital assets of $85.4 thousand was due to the sale of the M.E. Freeman Elementary School. CURRENT FINANCIAL ISSUES AND CONCERNS While we have seen some improvements to our nation's economy, Warren County, like many other rural School Districts, continues to operate in an uncertain economy. The School District continues to increase its monitoring of all sources of revenue and continually assess its ability to fund standard operations. A seven-year financial review of Warren County Board of Education reminds us that in fiscal year 2012 the accumulative loss of state funding was quickly depleting the reserve funds of the School District. Through conservative budgeting and spending, attrition, ten furlough days and increased class sizes, the School District has continued to maintain its education programs and financial stability. In fiscal year 2016, furlough days were reduced to five. In fiscal year 2017, the remaining furlough days were restored. The millage rate for the School District for fiscal year 2018 was 17.4 for maintenance and operation and bond millage was removed when the general obligation bonds related to the Warren County School were paid off. The assessed millage for maintenance and operation from the School District has been held constant since fiscal year 2011. The School District is taking every step to refrain from raising taxes. The final payment for the Warren County Middle/High School was made on October 31, 2017. The continuing shift of the financial burden for public schooling from the state to the local taxpayers presents major challenges for small rural systems such as ours and remains as the most significant financial concern for the School District. In addition, the concern of rising cost of the non-certified state health cost remains one of the most serious concerns for the School District. As no state funding is appropriated for the non-certified employee, this burden becomes solely of the local taxpayers. vii WARREN COUNTY BOARD OF EDUCATION MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 Warren County is looking forward to fiscal year 2019. We will continue to look closely into monitoring operating expenses and ensuring that personnel allotments are in line with student enrollment per school. Projected revenues, along with fund balance, are sufficient to cover planned expenses. Contacting the School District's Financial Management This financial report is designed to provide our citizens, taxpayers, investors, and creditors with a general overview of the School District's finances and to reflect the School District's accountability for the monies it receives. For additional financial information, or with questions about this report, please contact Fran Hutcheson, Finance Director, Warren County Board of Education, 115 Gibson Highway Warrenton, Georgia 30828 or email at fhutcheson@warren.k12.ga.us. viii WARREN COUNTY BOARD OF EDUCATION WARREN COUNTY BOARD OF EDUCATION STATEMENT OF NET POSITION JUNE 30, 2018 ASSETS Cash and Cash Equivalents Receivables, Net Interest 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 Deposits and Unearned Revenues Net Pension Liability Net OPEB Liability Total Liabilities DEFERRED INFLOWS OF RESOURCES Related to Defined Benefit Pension Plan Related to OPEB Plan Total Deferred Inflows of Resources NET POSITION Investment in Capital Assets Restricted for Continuation of Federal Programs Debt Service Capital Projects Unrestricted (Deficit) Total Net Position EXHIBIT "A" GOVERNMENTAL ACTIVITIES $ 2,058,234.96 495.82 467,242.54 466,706.02 198,361.87 55,788.75 5,513.72 440,869.34 13,219,999.79 16,913,212.81 1,139,813.35 232,679.00 1,372,492.35 57,277.65 767,186.43 119.25 83,271.63 6,098,211.00 6,221,603.00 13,227,668.96 85,595.00 507,675.00 593,270.00 13,660,869.13 259,290.91 396,349.81 16,303.32 (9,868,046.97) $ 4,464,766.20 The notes to the basic financial statements are an integral part of this statement. - 1 - WARREN COUNTY BOARD OF EDUCATION STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2018 EXHIBIT "B" GOVERNMENTAL ACTIVITIES Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Other Support Services Operations of Non-Instructional Services Food Services Interest on Short-Term and Long-Term Debt Total Governmental Activities General Revenues Taxes Property Taxes For Maintenance and Operations For Debt Services Railroad Cars Other Taxes Sales Taxes Special Purpose Local Option Sales Tax For Debt Services Other Sales Tax Investment Earnings Miscellaneous Special Item Sale of M.E. Freeman Elementary School Total General Revenues and Special Item Change in Net Position Net Position - Beginning of Year (Restated) EXPENSES PROGRAM REVENUES OPERATING CHARGES FOR GRANTS AND SERVICES CONTRIBUTIONS NET (EXPENSES) REVENUES AND CHANGES IN NET POSITION $ 4,818,111.80 $ 316,019.09 338,690.65 91,854.79 552,281.19 633,278.67 245,948.50 914,758.04 666,471.99 152,106.70 569,734.61 45,258.40 $ 9,344,514.43 $ - $ - 28,016.00 - 28,016.00 $ 2,767,462.25 $ 140,706.12 105,642.63 80,548.00 476,850.04 511,056.74 1,053.93 179,123.34 196,561.54 1,096.31 557,065.05 - 5,017,165.95 (2,050,649.55) (175,312.97) (233,048.02) (11,306.79) (75,431.15) (122,221.93) (244,894.57) (735,634.70) (469,910.45) (151,010.39) 15,346.44 (45,258.40) (4,299,332.48) 3,254,540.19 26,555.99 51,931.47 11,824.89 518,718.60 8,384.95 4,152.03 261,315.55 (80,109.43) 4,057,314.24 (242,018.24) 4,706,784.44 Net Position - End of Year $ 4,464,766.20 The notes to the basic financial statements are an integral part of this statement. - 2 - WARREN COUNTY BOARD OF EDUCATION BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2018 EXHIBIT "C" ASSETS Cash and Cash Equivalents Receivables, Net Interest Taxes State Government Federal Government Other Due from Other Funds Inventories GENERAL FUND CAPITAL PROJECTS FUND DEBT SERVICE FUND TOTAL $ 1,718,033.97 $ 385,225.75 466,706.02 198,361.87 55,788.75 - 5,513.72 37,406.07 $ 302,794.92 $ 2,058,234.96 - 495.82 495.82 - 82,016.79 467,242.54 - - 466,706.02 - - 198,361.87 - - 55,788.75 - 22,232.81 22,232.81 - - 5,513.72 Total Assets LIABILITIES Accounts Payable Salaries and Benefits Payable Payroll Withholdings Payable Due to Other Funds Deposits and Unearned Revenue Total Liabilities DEFERRED INFLOWS OF RESOURCES Unavailable Revenue - Property Taxes FUND BALANCES Nonspendable Restricted Assigned Unassigned Total Fund Balances $ 2,829,630.08 $ 37,406.07 $ 407,540.34 $ 3,274,576.49 $ 36,174.90 $ 21,102.75 $ 767,186.43 - 119.25 - 22,232.81 - 83,271.63 - 908,985.02 21,102.75 - $ 57,277.65 - 767,186.43 - 119.25 - 22,232.81 - 83,271.63 - 930,087.77 54,651.66 - 3,281.78 57,933.44 5,513.72 253,777.19 27,747.85 1,578,954.64 1,865,993.40 16,303.32 - 16,303.32 404,258.56 - 404,258.56 5,513.72 674,339.07 27,747.85 1,578,954.64 2,286,555.28 Total Liabilities, Deferred Inflows of Resources, and Fund Balances $ 2,829,630.08 $ 37,406.07 $ 407,540.34 $ 3,274,576.49 The notes to the basic financial statements are an integral part of this statement. - 3 - WARREN COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET POSITION JUNE 30, 2018 EXHIBIT "D" Total fund balances - governmental funds (Exhibit "C") Amounts reported for governmental activities in the Statement of Net Position are different because: Capital assets used in governmental activities are not financial resources and therefore are not reported in the funds. Land Construction in progress Buildings and improvements Equipment Land improvements Accumulated depreciation Some liabilities are not due and payable in the current period and, therefore, are not reported in the funds. Net pension liability Net OPEB liability Deferred outflows and inflows of resources related to pensions and 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. $ 2,286,555.28 $ 300,869.34 140,000.00 14,139,171.30 1,655,986.02 964,651.00 (3,539,808.53) 13,660,869.13 $ (6,098,211.00) (6,221,603.00) (12,319,814.00) $ 1,054,218.35 (274,996.00) 779,222.35 57,933.44 Net position of governmental activities (Exhibit "A") $ 4,464,766.20 The notes to the basic financial statements are an integral part of this statement. - 4 - WARREN COUNTY BOARD OF EDUCATION STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2018 EXHIBIT "E" REVENUES Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous Total Revenues EXPENDITURES Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Other Support Services Food Services Operation Capital Outlay Debt Services Principal Dues and Fees 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 Fund Balances - Ending GENERAL FUND CAPITAL PROJECTS FUND DEBT SERVICE FUND TOTAL $ 3,358,469.01 $ 7,939.89 3,823,367.36 1,192,954.59 28,016.00 16.51 267,546.71 8,678,310.07 - $ 1.00 1.00 34,464.74 $ 519,163.66 4,135.52 - 557,763.92 3,392,933.75 527,103.55 3,823,367.36 1,192,954.59 28,016.00 4,152.03 267,547.71 9,236,074.99 4,501,512.02 311,335.28 335,137.35 82,121.14 510,453.43 621,790.84 245,128.36 757,614.85 611,845.38 149,670.41 562,205.80 - - 8,688,814.86 (10,504.79) - 59.19 290,700.00 100,402.75 - 391,161.94 (391,160.94) - - 1,240,000.00 30,797.52 25,099.67 1,295,897.19 (738,133.27) 4,501,512.02 311,335.28 335,137.35 82,121.14 510,512.62 621,790.84 245,128.36 1,048,314.85 611,845.38 149,670.41 562,205.80 100,402.75 1,240,000.00 30,797.52 25,099.67 10,375,873.99 (1,139,799.00) 155,137.68 - 155,137.68 144,632.89 1,721,360.51 372,159.56 - 372,159.56 (19,001.38) 35,304.70 (527,297.24) (527,297.24) (1,265,430.51) 1,669,689.07 527,297.24 (527,297.24) - (1,139,799.00) 3,426,354.28 $ 1,865,993.40 $ 16,303.32 $ 404,258.56 $ 2,286,555.28 The notes to the basic financial statements are an integral part of this statement. - 5 - WARREN COUNTY BOARD OF EDUCATION RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES JUNE 30, 2018 EXHIBIT "F" Net change in fund balances total governmental funds (Exhibit "E") Amounts reported for governmental activities in the Statement of Activities are different because: Governmental funds report capital outlays as expenditures. However, in the Statement of Activities, the cost of capital assets is allocated over their estimated useful lives as depreciation expense. Capital outlay Depreciation expense The net effect of various miscellaneous transactions involving capital assets (i.e., sales, trade-ins, donations, and disposals) is to decrease net position. Taxes reported in the Statement of Activities that do not provide current financial resources are not reported as revenues in the funds. The issuance of long-term debt provides current financial resources to governmental funds, while the repayment of the principal of long-term debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net position. Also, governmental funds report the effect of premiums, discounts and the difference between the carrying value of refunded debt and the acquisition cost of refunded debt when debt is first issued. These amounts are deferred and amortized in the Statement of Activities. Bond principal retirements District pension contributions are reported as expenditures in the governmental funds when made. However, they are reported as deferred outflows of resources in the Statement of Net Position because the reported net pension/OPEB liability is measured a year before the District's report date. Pension/OPEB expense, which is the change in the net pension/OPEB liability adjusted for changes in deferred outflows and inflows of resources related to pensions/OPEB, is reported in the Statement of Activities. Pension expense OPEB expense Some items reported in the Statement of Activities do not require the use of current financial resources and therefore are not reported as expenditures in governmental funds. Accrued interest on issuance of bonds Change in net position of governmental activities (Exhibit "B") $ (1,139,799.00) $ 239,424.58 (238,524.45) 900.13 (86,341.59) (48,081.21) 1,240,000.00 $ (94,582.36) (124,753.00) (219,335.36) 10,638.79 $ (242,018.24) The notes to the basic financial statements are an integral part of this statement. - 6 - ASSETS Cash and Cash Equivalents Investments Total Assets LIABILITIES Funds Held for Others NET POSITION Held in Trust for Private Purposes WARREN COUNTY BOARD OF EDUCATION STATEMENT OF FIDUCIARY NET POSITION FIDUCIARY FUNDS JUNE 30, 2018 EXHIBIT "G" PRIVATE PURPOSE TRUSTS AGENCY FUNDS $ 124.06 $ 15,180.09 20,000.00 - $ 20,124.06 $ 15,180.09 $ 15,180.09 $ 20,124.06 The notes to the basic financial statements are an integral part of this statement. - 7 - WARREN COUNTY BOARD OF EDUCATION STATEMENT OF CHANGES IN FIDUCIARY NET POSITION FIDUCIARY FUNDS YEAR ENDED JUNE 30, 2018 ADDITIONS Investment Earnings Interest DEDUCTIONS Scholarships Change in Net Position Net Position - Beginning Net Position - Ending EXHIBIT "H" PRIVATE PURPOSE TRUSTS $ 30.01 30.01 20,094.05 $ 20,124.06 The notes to the basic financial statements are an integral part of this statement. - 8 - (This page left intentionally blank) WARREN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018 EXHIBIT "I" NOTE 1: DESCRIPTION OF SCHOOL DISTRICT AND REPORTING ENTITY REPORTING ENTITY The Warren County Board of Education (School District) was established under the laws of the State of Georgia and operates under the guidance of a board elected by the voters and a Superintendent appointed by the Board. The School District is organized as a separate legal entity and has the power to levy taxes and issue bonds. Its budget is not subject to approval by any other entity. Accordingly, the School District is a primary government and consists of all the organizations that compose its legal entity. NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accompanying financial statements of the School District have been prepared in conformity with generally accepted accounting principles (GAAP) as prescribed by the Governmental Accounting Standards Board (GASB). GASB is the accepted standard-setting body for governmental accounting and financial reporting principles. The most significant of the School District's accounting policies are described below. BASIS OF PRESENTATION The School District's basic financial statements are collectively comprised of the government-wide financial statements, fund financial statements and notes to the basic financial statements. The government-wide statements focus on the School District as a whole, while the fund financial statements focus on major funds. Each presentation provides valuable information that can be analyzed and compared between years and between governments to enhance the information's usefulness. GOVERNMENT-WIDE STATEMENTS: The Statement of Net Position and the Statement of Activities display information about the financial activities of the overall School District, except for fiduciary activities. Eliminations have been made to minimize the double counting of internal activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange transactions. The Statement of Net Position presents the School District's non-fiduciary assets and liabilities, with the difference reported as net position. Net position is reported in three categories as follows: 1. Investment in capital assets consists of the School District's total investment in capital assets, net of accumulated depreciation. 2. Restricted net position consists of resources for which the School District is legally or contractually obligated to spend in accordance with restrictions imposed by external third parties or imposed by law through constitutional provisions or enabling legislation. 3. Unrestricted net position consists of resources not meeting the definition of the two preceding categories. Unrestricted net position often has constraints on resources imposed by management which can be removed or modified. The Statement of Activities presents a comparison between direct expenses and program revenues for each function of the School District's governmental activities. Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Indirect expenses (expenses of the School District related to the administration and support of the School District's programs, such as office and maintenance personnel and accounting) are not allocated to programs. - 10 - WARREN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018 EXHIBIT "I" Program revenues include (a) charges paid by the recipients of goods or services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues. FUND FINANCIAL STATEMENTS The fund financial statements provide information about the School District's funds, including fiduciary funds. Eliminations have been made to minimize the double counting of internal activities. Separate financial statements are presented for governmental and fiduciary funds. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column. The School District reports the following major governmental funds: The general fund is the School District's primary operating fund. It accounts for and reports all financial resources not accounted for and reported in another fund. The capital projects fund accounts for and reports financial resources 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 (property and sales) legally restricted for the payment of general long-term principal and interest. The School District reports the following fiduciary fund types: Private purpose trust funds are used to report all trust arrangements, the Otis E. Williams Memorial Scholarship, under which principal and income benefit an eligible student in the Warren County School District. Agency funds are used to report resources held by the School District in a purely custodial capacity (assets equal liabilities) and do not involve measurement of results of operations. BASIS OF ACCOUNTING The basis of accounting determines when transactions are reported on the financial statements. The government-wide and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Nonexchange transactions, in which the School District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, sales taxes and grants. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from sales taxes is recognized in the fiscal year in which the underlying transaction (sale) takes place. Revenue from grants is recognized in the fiscal year in which all eligibility requirements have been satisfied. The School District uses funds to report on its financial position and the results of its operations. Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain governmental functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts. Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Under this method, revenues are recognized when measurable and available. The School District considers all revenues reported in the governmental funds to be available if they are collected within sixty days after year-end. The School District considers all intergovernmental revenues to be available if they are collected within 120 days after year-end. Property taxes, sales taxes and interest are considered to be susceptible to accrual. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long- - 11 - WARREN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018 EXHIBIT "I" 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 are reported as other financing sources. The School District funds certain programs by a combination of specific cost-reimbursement grants, categorical grants, and general revenues. Thus, when program costs are incurred, there are both restricted and unrestricted net assets available to finance the program. It is the School District's policy to first apply grant resources to such programs, followed by cost-reimbursement grants, then general revenues. NEW ACCOUNTING PRONOUNCEMENTS In fiscal year 2018, the School District adopted Governmental Accounting Standards Board (GASB) Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other than Pensions. This statement establishes standards for recognizing and measuring liabilities, deferred outflows of resources, deferred inflows of resources, and expense/expenditures. For defined benefit OPEB, this statement identifies the methods and assumptions that are required to be used to project benefit payments, discount projected benefit payments to their actuarial present value, and attribute that present value to periods of employee service. Note disclosure and required supplementary information requirements about defined benefit OPEB also are addressed. The adoption of this statement has a significant impact on the School District's financial statements. As noted in the Restatement of Net Position note disclosure, the School District restated beginning net position for the cumulative effect of this accounting change. In fiscal year 2018, the School District adopted Governmental Accounting Standards Board (GASB) Statement No. 81, Irrevocable Split-Interest Agreements. This statement requires that a government that receives resources pursuant to an irrevocable split-interest agreement recognize assets, liabilities, and deferred inflows of resources at the inception of the agreement. Furthermore, this statement requires that a government recognize assets representing its beneficial interests in irrevocable split-interest agreements that are administered by a third party, if the government controls the present service capacity of the beneficial interests. This statement requires that a government recognize revenue when the resources become applicable to the reporting period. The adoption of this statement does not have a significant impact on the School District's financial statements. In fiscal year 2018, the School District adopted Governmental Accounting Standards Board (GASB) Statement No. 85, Omnibus 2017. The objective of this statement is to address practice issues that have been identified during implementation and application of certain GASB Statements. This statement addresses a variety of topics including issues related to blending component units, goodwill, fair value measurement and application, and postemployment benefits (pensions and other postemployment benefits [OPEB]). The adoption of this statement does not have a significant impact on the School District's financial statements. In fiscal year 2018, the School District adopted Governmental Accounting Standards Board (GASB) Statement No. 86, Certain Debt Extinguishment Issues. The primary objective of this statement is to improve consistency in accounting and financial reporting for in-substance defeasance of debt by providing guidance for transactions in which cash and other monetary assets acquired with only existing resources--resources other than the proceeds of refunding debt--are placed in an irrevocable trust for the sole purpose of extinguishing debt. This statement also improves accounting and financial reporting for prepaid insurance on debt that is extinguished and notes to financial statements for debt that is defeased in substance. The adoption of this statement does not have a significant impact on the School District's financial statements. CASH AND CASH EQUIVALENTS Cash and cash equivalents consist of cash on hand, demand deposits, investments in the State of Georgia local government investment pool (Georgia Fund 1) and short-term investments with original maturities of three months or less from the date of acquisition in authorized financial institutions. - 12 - WARREN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018 EXHIBIT "I" Official Code of Georgia Annotated (O.C.G.A.) 45-8-14 authorizes the School District to deposit its funds in one or more solvent banks, insured Federal savings and loan associations or insured chartered building and loan associations. INVESTMENTS The School District can invest its funds as permitted by O.C.G.A. 36-83-4. In selecting among options for investment or among institutional bids for deposits, the highest rate of return shall be the objective, given equivalent conditions of safety and liquidity. Investments made by the School District in nonparticipating interest-earning contracts (such as certificates of deposit) and repurchase agreements are reported at cost. Participating interest-earning contracts and money market investments with a maturity at purchase of one year or less are reported at amortized cost. All other investments are reported at fair value. For accounting purposes, certificates of deposit are classified as investments if they have an original maturity greater than three months when acquired. RECEIVABLES Receivables consist of amounts due from property and sales taxes, grant reimbursements due on Federal, State or other grants for expenditures made but not reimbursed and other receivables disclosed from information available. Receivables are recorded when either the asset or revenue recognition criteria has been met. Receivables recorded on the basic financial statements do not include any amounts which would necessitate the need for an allowance for uncollectible receivables. Due to other funds and due from other funds consist of activities between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year. 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. 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. - 13 - WARREN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018 EXHIBIT "I" Capitalization thresholds and estimated useful lives of capital assets reported in the government-wide statements are as follows: Capitalization Policy Estimated Useful Life Land Land Improvements $ Buildings and Improvements $ Equipment $ Intangible Assets $ All 5,000.00 5,000.00 5,000.00 100,000.00 DEFERRED OUTFLOWS/INFLOWS OF RESOURCES N/A 20 to 90 years 50 to 90 years 5 to 50 years 10 to 20 years In addition to assets, the statement of financial position will report a separate section for deferred outflows of resources. This separate financial statement element represents a consumption of resources that applies to a future period(s) and therefore will not be recognized as an outflow of resources (expense/expenditure) until then. In addition to liabilities, the statement of financial position will report a separate section for deferred inflows of resources. This separate financial statement element represents an acquisition of resources that applies to a future period(s) and therefore will not be recognized as an inflow of resources (revenue) until that time. LONG-TERM LIABILITIES AND BOND DISCOUNTS/PREMIUMS In the School District's government-wide financial statements, outstanding debt is reported as liabilities. Bond premiums and discounts and the difference between the reacquisition price and the net carrying value of refunded debt are deferred and amortized over the life of the bonds using the straight-line method. To conform to generally accepted accounting principles, bond premiums and discounts should be amortized using the effective interest method. The effect of this deviation is deemed to be immaterial to the fair presentation of the basic financial statements. Bond issuance costs are recognized as an outflow of resources in the fiscal year in which the bonds are issued. In the governmental fund financial statements, the School District recognizes the proceeds of debt and premiums as other financing sources of the current period. Bond issuance costs are reported as debt service expenditures. PENSIONS For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the pension plan's fiduciary net position and additions to/deductions from the plan's fiduciary net position have been determined on the same basis as they are reported by the plan. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. 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 Postemployment Benefit Fund (School OPEB Fund) and additions to/deductions from School OPEB Fund fiduciary net position have been determined on the same basis as they are reported by School OPEB Fund. For this purpose, benefit payments are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. - 14 - WARREN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018 EXHIBIT "I" FUND BALANCES Fund balance for governmental funds is reported in classifications that comprise a hierarchy based primarily on the extent to which the government is bound to honor constraints on the specific purposes for which amounts in those funds can be spent. The School District's fund balances are classified as follows: Nonspendable consists of resources that cannot be spent either because they are in a nonspendable form or because they are legally or contractually required to be maintained intact. Restricted consists of resources that can be used only for specific purposes pursuant constraints either (1) externally imposed by creditors, grantors, contributors, or laws and regulations of other governments or (2) imposed by law through constitutional provisions or enabling legislation. Committed consists of resources that can be used only for specific purposes pursuant to constraints imposed by formal action of the Board. The Board is the School District's highest level of decisionmaking authority, and the formal action that is required to be taken to establish, modify, or rescind a fund balance commitment is a resolution approved by the Board. Committed fund balance also should incorporate contractual obligations to the extent that existing resources in the fund have been specifically committed for use in satisfying those contractual requirements. Assigned consists of resources constrained by the School District's intent to be used for specific purposes but are neither restricted nor committed. The intent should be expressed by (1) the Board or (2) the budget or finance committee, or the Superintendent, or designee, to assign amounts to be used for specific purposes. Unassigned consists of resources within the general fund not meeting the definition of any aforementioned category. The general fund should be the only fund that reports a positive unassigned fund balance amount. In other governmental funds, it may be necessary to report a negative unassigned fund balance. USE OF ESTIMATES The preparation of the financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates. PROPERTY TAXES The Warren County Board of Commissioners adopted the property tax levy for the 2017 tax digest year (calendar year) on September 26, 2017 (levy date) based on property values as of January 1, 2017. Taxes were due on December 20, 2017 (lien date). Taxes collected within the current fiscal year or within 60 days after year-end on the 2017 tax digest are reported as revenue in the governmental funds for fiscal year 2018. The Warren County Board of Commissioners bills and collects the property taxes for the School District, withholds 2.5% of taxes collected as a fee for tax collection and remits the balance of taxes collected to the School District. Property tax revenues, at the fund reporting level, during the fiscal year ended June 30, 2018, for maintenance and operations amounted to $3,155,530.69 and for school bonds amounted to $16,243.49. The tax millage rate levied for the 2017 tax year (calendar year) for the School District was as follows (a mill equals $1 per thousand dollars of assessed value): School Operations 17.40 mills Additionally, Title Ad Valorem Tax revenues, at the fund reporting level, amounted to $157,403.21 during fiscal year ended June 30, 2018. - 15 - WARREN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018 EXHIBIT "I" SALES TAXES Education Special Purpose Local Option Sales Tax (ESPLOST), at the fund reporting level, during the year amounted to $518,718.60 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, debt service, and capital projects funds. There is no statutory prohibition regarding over expenditure of the budget at any level. The budget for all governmental funds, except the various school activity (principal) accounts, is prepared and adopted by fund, function and object. The legal level of budgetary control was established by the Board at the aggregate fund level. The budget for the general fund was prepared in accordance with accounting principles generally accepted in the United States of America. The budgetary process begins with the School District's administration presenting an initial budget for the Board's review. The administration makes revisions as necessary based on the Board's guidelines, and a tentative budget is approved. After approval of this tentative budget by the Board, such budget is advertised at least once in a newspaper of general circulation in the locality, as well as the School District's website. At the next regularly scheduled meeting of the Board after advertisement, the Board receives comments on the tentative budget, makes revisions as necessary and adopts a final budget. The approved budget is then submitted, in accordance with provisions of 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. 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. - 16 - WARREN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018 EXHIBIT "I" 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. CATEGORIZATION OF DEPOSITS Custodial credit risk is the risk that in the event of a bank failure, the School District's deposits may not be returned to it. The School District does not have a deposit policy for custodial credit risk. At June 30, 2018, the School District had deposits with a carrying amount of $1,792,573.72, and a bank balance of $2,094,654.13. The bank balances insured by Federal depository insurance were $344,040.80 and the bank balances collateralized with securities held by the pledging financial institution or by the pledging financial institution's trust department or agent in the School District's name were $1,750,613.33. 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 $ 2,058,234.96 15,304.15 Total cash and cash equivalents 2,073,539.11 Add: Deposits with original maturity of three months or more reported as investments 20,000.00 Less: Investment pools reported as cash and cash equivalents Georgia Fund 1 300,965.39 Total carrying value of deposits - June 30, 2018 $ 1,792,573.72 - 17 - WARREN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018 EXHIBIT "I" CATEGORIZATION OF CASH EQUIVALENTS The School District reported cash equivalents of $300,965.39 in Georgia Fund 1, a local government investment pool, which is included in the cash balances above. Georgia Fund 1 is not registered with the SEC as an investment company and does not operate in a manner consistent with the SEC's Rule 2a-7 of the Investment Company Act of 1940. The investment is valued at the pool's share price, $1.00 per share, which approximates fair value. The pool is an AAAf rated investment pool by Standard and Poor's. The weighted average maturity of Georgia Fund 1 may not exceed 60 days. The weighted average maturity for Georgia Fund 1 on June 30, 2018, was 10 days. Georgia Fund 1, administered by the State of Georgia, Office of the State Treasurer, is not required to be categorized since the School District did not own any specific identifiable securities in the pool. The investment policy of the State of Georgia, Office of the State Treasurer for the Georgia Fund 1, does not provide for investment in derivatives or similar investments. Additional information on the Georgia Fund 1 is disclosed in the State of Georgia Comprehensive Annual Financial Report. This audit can be obtained from the Georgia Department of Audits and Accounts at www.audits.ga.gov/SGD/CAFR.html. NOTE 5: CAPITAL ASSETS The following is a summary of changes in the capital assets for governmental activities during the fiscal year: Balances July 1, 2017 Increases Decreases Balances June 30, 2018 Governmental Activities Capital Assets, Not Being Depreciated: Land Construction in Progress $ 305,043.34 $ - $ 4,174.00 $ 300,869.34 - 140,000.00 - 140,000.00 Total Capital Assets Not Being Depreciated 305,043.34 140,000.00 4,174.00 440,869.34 Capital Assets Being Depreciated Buildings and Improvements Equipment Land Improvements Less Accumulated Depreciation for: Buildings and Improvements Equipment Land Improvements 14,227,657.30 1,776,315.88 964,651.00 68,250.00 31,174.58 - 156,736.00 151,504.44 - 14,139,171.30 1,655,986.02 964,651.00 2,059,740.74 1,349,691.52 117,924.67 157,654.83 67,497.73 13,371.89 76,626.57 149,446.28 - 2,140,769.00 1,267,742.97 131,296.56 Total Capital Assets, Being Depreciated, Net 13,441,267.25 (139,099.87) 82,167.59 13,219,999.79 Governmental Activity Capital Assets - Net $ 13,746,310.59 $ 900.13 $ 86,341.59 $ 13,660,869.13 - 18 - WARREN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018 EXHIBIT "I" Current year depreciation expense by function is as follows: Instruction Support Services Educational Media Services $ General Administration Maintenance and Operation of Plant Student Transportation Services Food Services 5,775.64 30,462.00 3,248.50 41,383.94 $ 144,664.96 80,870.08 12,989.41 $ 238,524.45 NOTE 6: INTERFUND ASSETS, LIABILITIES, AND TRANSFERS INTERFUND ASSETS AND LIABILITIES Due to and due from other funds are recorded for interfund receivables and payables which arise from interfund transactions. Interfund balances at June 30, 2018, consisted of the following: Due From Other Funds Due To Other Funds General Fund Debt Service Fund $ - 22,232.81 $ 22,232.81 - $ 22,232.81 $ 22,232.81 Balances due resulted from excess funds transferred in error from the debt service fund to the general fund to cover capital projects expenditures. INTERFUND TRANSFERS Interfund transfers for the year ended June 30, 2018, consisted of the following: Transfers to Transfers From Debt Service Fund General Fund Capital Projects Fund $ 155,137.68 372,159.56 Total $ 527,297.24 Transfers are used to move sales and property tax revenues collected by the debt service fund to the capital projects fund to fund capital construction projects, and to the general fund to reimburse for capital project expenditures. - 19 - WARREN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018 EXHIBIT "I" NOTE 7: LONG-TERM LIABILITIES The changes in long-term liabilities during the fiscal year for governmental activities were as follows: Balance July 1, 2017 Governmental Activities Additions Deductions Balance June 30, 2018 Due Within One Year General Obligation (G.O.) Bonds $ 1,240,000.00 $ - $ 1,240,000.00 $ - $ - On May 22, 2018, the voters of Warren County authorized $3,150,000.00 in general obligation debt which was not issued prior to the end of the fiscal year. 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 exceeded commercial insurance coverage in any of the past three fiscal years. WORKERS' COMPENSATION Georgia Education Workers' Compensation Trust The School District participates in the Georgia Education Workers' Compensation Trust (the Trust), a public entity risk pool organized on December 1, 1991, to develop, implement and administer a program of workers' compensation self-insurance for its member organizations. The School District pays an annual premium to the Trust for its general workers' compensation insurance coverage. Specific excess of loss insurance coverage is provided through an agreement by the Trust with the Safety National Casualty Company to provide coverage for potential losses sustained by the Trust in excess of $1.0 million loss per occurrence, up to the statutory limit. Employers' Liability insurance coverage is also provided with limits of $2.0 million. The Trust covers the first $1.0 million of each Employers Liability claim with Safety National providing additional Employers Liability limits up to a $2.0 million per occurrence maximum. Safety National Casualty Company also provides $2.0 million in aggregate coverage to the Trust, attaching at 110% of the loss fund and based on the Fund's annual normal premium. UNEMPLOYMENT COMPENSATION The School District is self-insured with regard to unemployment compensation claims. The School District accounts for claims within the general fund with expenses/expenditures and liability being reported when it is probable that a loss has occurred, and the amount of that loss can be reasonably estimated. - 20 - WARREN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018 EXHIBIT "I" Changes in the unemployment compensation claims liability during the last two fiscal years are as follows: Beginning of Year Liability Claims and Changes in Estimates Claims Paid End of Year Liability 2017 $ - $ 4,866.10 $ 4,866.10 $ - 2018 $ - $ - $ - $ - SURETY BOND The School District purchased surety bonds to provide additional insurance coverage as follows: Position Covered Amount Superintendent Principal Security Officer Driver Education $ 100,000.00 $ 10,000.00 $ 8,000.00 $ 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, 2018: Nonspendable Inventories Restricted Continuation of Federal Programs $ Capital Projects Debt Service Assigned School Activity Accounts Unassigned $ 253,777.19 16,303.32 404,258.56 5,513.72 674,339.07 27,747.85 1,578,954.64 Fund Balance, June 30, 2018 $ 2,286,555.28 When multiple categories of fund balance are available for expenditure, the School District will start with the most restricted category and spend those funds first before moving down to the next category with available funds. - 21 - WARREN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018 EXHIBIT "I" NOTE 10: SIGNIFICANT COMMITMENTS COMMITMENTS UNDER CONSTRUCTION CONTRACTS The following is an analysis of significant outstanding construction or renovation contracts executed by the School District as of June 30, 2018. Project Unearned Executed Contracts (1) Payments through June 30, 2018 New Field House $ 46,700.00 $ 140,000.00 (1) The amounts described are not reflected in the basic financial statements. NOTE 11: SIGNIFICANT CONTINGENT LIABILITIES FEDERAL GRANTS Amounts received or receivable principally from the Federal government are subject to audit and review by grantor agencies. This could result in requests for reimbursement to the grantor agency for any costs which are disallowed under grant terms. Any disallowances resulting from the grantor audit may become a liability of the School District. However, the School District believes that such disallowances, if any, will be immaterial to its overall financial position. NOTE 12: OTHER POST-EMPLOYMENT BENEFITS (OPEB) GEORGIA SCHOOL PERSONNEL POST-EMPLOYMENT HEALTH BENEFIT FUND Plan Description: Certified teachers and non-certified public-school employees of the School District as defined in 20-2-875 of the Official Code of Georgia Annotated (O.C.G.A.) are provided OPEB through the School OPEB Fund - a cost-sharing multiple-employer defined benefit postemployment healthcare plan, reported as an employee trust fund and administered by a Board of Community Health (Board). Title 20 of the O.C.G.A. assigns the authority to establish and amend the benefit terms of the group health plan to the Board. Benefits Provided: The School OPEB Fund provides healthcare benefits for retirees and their dependents due under the group health plan for public school teachers, including librarians, other certified employees of public schools, regional educational service agencies and non-certified publicschool 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 $230,860.00 for the year ended June 30, 2018. Active employees are not required to contribute to the School OPEB Fund. - 22 - WARREN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018 EXHIBIT "I" OPEB Liabilities, OPEB Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to OPEB At June 30, 2018, the School District reported a liability of $6,221,603.00 for its proportionate share of the net OPEB liability. The net OPEB liability was measured as of June 30, 2017. The total OPEB liability used to calculate the net OPEB liability was based on an actuarial valuation as of June 30, 2016. An expected total OPEB liability as of June 30, 2017 was determined using standard roll-forward techniques. The School District's proportion of the net OPEB liability was actuarially determined based on employer contributions during the fiscal year ended June 30, 2017. At June 30, 2017, the School District's proportion was 0.044282%, which was a decrease of 0.000270% from its proportion measured as of June 30, 2016. For the year ended June 30, 2018, the School District recognized OPEB expense of $355,613.00. At June 30, 2018, the School District reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources: OPEB Deferred Deferred Outflows of Inflows of Resources Resources Changes of assumptions $ - $ 473,759.00 Net difference between projected and actual earnings on OPEB plan investments 1,819.00 - Changes in proportion and differences between School District contributions and proportionate share of contributions - 33,916.00 School District contributions subsequent to the measurement date 230,860.00 - Total $ 232,679.00 $ 507,675.00 School District contributions subsequent to the measurement date of $230,860.00 are reported as deferred outflows of resources and will be recognized as a reduction of the net OPEB liability in the year ended June 30, 2019. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to OPEB will be recognized in OPEB expense as follows: Year Ended June 30: OPEB 2019 2020 2021 2022 2023 2024 $ (90,853.00) $ (90,853.00) $ (90,853.00) $ (90,853.00) $ (91,308.00) $ (51,136.00) - 23 - WARREN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018 EXHIBIT "I" Actuarial assumptions: The total OPEB liability as of June 30, 2017 was determined by an actuarial valuation as of June 30, 2016 using the following actuarial assumptions and other inputs, applied to all periods included in the measurement and rolled forward to the measurement date of June 30, 2017: OPEB: Inflation 2.75% Salary increases ERS 3.25% - 7.00%, including inflation JRS 4.50%, including inflation LRS None TRS 3.25 -- 9.00%, including inflation PSERS N/A Long-term expected rate of return Healthcare cost trend rate 3.88%, compounded annually, net of investment expense, and including inflation Pre-Medicare Eligible 7.75% Medicare Eligible 5.75% Ultimate trend rate Pre-Medicare Eligible Medicare Eligible 5.00% 5.00% Year of Ultimate trend rate 2022 Mortality rates were based on the RP-2000 Combined Mortality Table for Males or Females, as appropriate, with adjustments for mortality improvements based on Scale BB as follows: For ERS, JRS and LRS members: The RP-2000 Combined Mortality Table projected to 2025 with projection scale BB and set forward 2 years or both males and females is used for the period after service retirement and for dependent beneficiaries. The RP-2000 Disabled Mortality Table projected to 2025 with projection scale BB and set back 7 years for males and set forward 3 years for females is used for the period after disability retirement For TRS members: The RP-2000 White Collar Mortality Table projected to 2025 with projection scale BB (set forward 1 year for males) is used for death after service retirement and beneficiaries. The RP-2000 Disabled Mortality Table projected to 2025 with projection scale BB (set forward two years for males and four years for females) is used for death after disability retirement. For PSERS members: The RP-2000 Blue-Collar Mortality Table projected to 2025 with projection scale BB (set forward 3 years for males and 2 years for females) is used for the period after service retirement and for beneficiaries of deceased members. The RP-2000 Disabled Mortality Table projected to 2025 with projection scale BB (set forward 5 years for both males and females) is used for the period after disability retirement. The actuarial assumptions used in the June 30, 2016 valuation were based on the results of an actuarial experience study for the pension systems, which covered the five-year period ending June 30, 2014. - 24 - WARREN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018 EXHIBIT "I" 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. Additionally, there was a change of assumptions that affected measurement of the total OPEB liability since the prior measurement date. The methodology used to determine employee and retiree participation in the School OPEB Fund is based on their current or last employer payroll location. Current and former employees of public-school districts, libraries, regional educational service agencies and community colleges are allocated to the School OPEB Fund irrespective of retirement system affiliation. In addition, the discount rate increased from 3.07% to 3.58%. The long-term expected rate of return on OPEB plan investments was determined using a log-normal distribution analysis in which best-estimate ranges of expected future real rates of return (expected nominal returns, net of investment expense and the assumed rate of inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table: Asset Class Target Allocation Long-Term Expected Real Rate of Return* Local Government Investment Pool 100.00% 1.13% *Rate shown is net of the 2.75% assumed rate of inflation. Discount rate: In order to measure the total OPEB liability for the School OPEB Fund, a single equivalent interest rate of 3.58% was used as the discount rate. This is comprised mainly of the yield or index rate for 20-year tax-exempt general obligation municipal bonds with an average rating of AA or higher (3.56% per the Bond Buyers Index). The projection of cash flows used to determine the discount rate assumed that contributions from members and from the employer will be made at the current level as averaged over the last five years, adjusted for annual projected changes in headcount. Projected future benefit payments for all current plan members were projected through 2115. Based on these assumptions, the OPEB plan's fiduciary net position was projected to be available to make OPEB payments for inactive employees through year 2029. Therefore, the calculated discount rate of 3.58% was applied to all periods of projected benefit payments to determine the total OPEB liability. Sensitivity of the District's proportionate share of the net OPEB liability to changes in the discount rate: The following presents the School District's proportionate share of the net OPEB liability calculated using the discount rate of 3.58%, as well as what the District's proportionate share of the net OPEB liability would be if it were calculated using a discount rate that is 1-percentage-point lower (2.58%) or 1 percentage-point higher (4.58%) than the current discount rate: 1% Decrease (2.58%) Current Discount Rate (3.58%) 1% Increase (4.58%) Net OPEB Liability (asset) $ 7,387,039.00 $ 6,221,603.00 $ 5,301,838.00 - 25 - WARREN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018 EXHIBIT "I" Sensitivity of the District's proportionate share of the net OPEB liability to changes in the healthcare cost trend rates: The following presents the School District's proportionate share of the net OPEB liability, as well as what the District's proportionate share of the net OPEB liability would be if it were calculated using healthcare cost trend rates that are 1-percentage-point lower or 1-percentage-point higher than the current healthcare cost trend rates: Net OPEB Liability (asset) 1% Decrease (2.58%) Current Discount Rate (3.58%) 1% Increase (4.58%) $ 5,157,000.00 $ 6,221,603.00 $ 7,607,715.00 OPEB plan fiduciary net position: Detailed information about the OPEB plan's fiduciary net position is available in the Comprehensive Annual Financial Report (CAFR) which is publicly available at https://sao.georgia.gov/comprehensive-annual-financial-reports. NOTE 13: RETIREMENT PLANS The School District participates in various retirement plans administered by the State of Georgia, as further explained below. TEACHERS RETIREMENT SYSTEM OF GEORGIA (TRS) Plan Description: All teachers of the School District as defined in O.C.G.A 47-3-60 and certain other support personnel as defined by 47-3-63 are provided a pension through the Teachers Retirement System of Georgia (TRS). TRS, a cost-sharing multiple-employer defined benefit pension plan, is administered by the TRS Board of Trustees (TRS Board). Title 47 of the O.C.G.A. assigns the authority to establish and amend the benefit provisions to the State Legislature. The Teachers Retirement System of Georgia issues a publicly available separate financial report that can be obtained at www.trsga.com/publications. Benefits Provided: TRS provides service retirement, disability retirement, and death benefits. Normal retirement benefits are determined as 2% of the average of the employee's two highest paid consecutive years of service, multiplied by the number of years of creditable service up to 40 years. An employee is eligible for normal service retirement after 30 years of creditable service, regardless of age, or after 10 years of service and attainment of age 60. Ten years of service is required for disability and death benefits eligibility. Disability benefits are based on the employee's creditable service and compensation up to the time of disability. Death benefits equal the amount that would be payable to the employee's beneficiary had the employee retired on the date of death. Death benefits are based on the employee's creditable service and compensation up to the date of death. Contributions: Per Title 47 of the O.C.G.A., contribution requirements of active employees and participating employers, as actuarially determined, are established and may be amended by the TRS Board. Contributions are expected to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. Employees were required to contribute 6% of their annual pay during fiscal year 2018. The School District's contractually required contribution rate for the year ended June 30, 2018 was 16.81% of annual School District payroll. For the current fiscal year, employer contributions to the pension plan were $639,206.35. - 26 - WARREN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018 EXHIBIT "I" PUBLIC SCHOOL EMPLOYEES RETIREMENT SYSTEM (PSERS) Plan description: PSERS is a cost-sharing multiple-employer defined benefit pension plan established by the Georgia General Assembly in 1969 for the purpose of providing retirement allowances for public school employees who are not eligible for membership in the Teachers Retirement System of Georgia. The ERS Board of Trustees, plus two additional trustees, administers PSERS. Title 47 of the O.C.G.A. assigns the authority to establish and amend the benefit provisions to the State Legislature. PSERS issues a publicly available financial report that can be obtained at www.ers.ga.gov/formspubs/formspubs. Benefits provided: A member may retire and elect to receive normal monthly retirement benefits after completion of ten years of creditable service and attainment of age 65. A member may choose to receive reduced benefits after age 60 and upon completion of ten years of service. Upon retirement, the member will receive a monthly benefit of $14.75, multiplied by the number of years of creditable service. Death and disability benefits are also available through PSERS. Additionally, PSERS may make periodic cost-of-living adjustments to the monthly benefits. Upon termination of employment, member contributions with accumulated interest are refundable upon request by the member. However, if an otherwise vested member terminates and withdraws his/her member contribution, the member forfeits all rights to retirement benefits. Contributions: The general assembly makes an annual appropriation to cover the employer contribution to PSERS on behalf of local school employees (bus drivers, cafeteria workers, and maintenance staff). The annual employer contribution required by statute is actuarially determined and paid directly to PSERS by the State Treasurer in accordance with O.C.G.A. 47-4-29(a) and 60(b). Contributions are expected to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. Individuals who became members prior to July 1, 2012 contribute $4 per month for nine months each fiscal year. Individuals who became members on or after July 1, 2012 contribute $10 per month for nine months each fiscal year. The State of Georgia, although not the employer of PSERS members, is required by statute to make employer contributions actuarially determined and approved and certified by the PSERS Board of Trustees. The current fiscal year contribution was $15,619.00. Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions At June 30, 2018, the School District reported a liability of $6,098,211.00 for its proportionate share of the net pension liability for TRS. The net pension liability for TRS was measured as of June 30, 2017. The total pension liability used to calculate the net pension liability was based on an actuarial valuation as of June 30, 2016. An expected total pension liability as of June 30, 2017 was determined using standard roll-forward techniques. The School District's proportion of the net pension liability was based on contributions to TRS during the fiscal year ended June 30, 2017. At June 30, 2017, the School District's TRS proportion was 0.032812%, which was an increase of 0.000159% from its proportion measured as of June 30, 2016. At June 30, 2018, the School District did not have a PSERS liability for a proportionate share of the net pension liability because of a Special Funding Situation with the State of Georgia, which is responsible for the net pension liability of the plan. The amount of the State's proportionate share of the net pension liability associated with the School District is $81,686.00. - 27 - WARREN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018 EXHIBIT "I" The PSERS net pension liability was measured as of June 30, 2017. The total pension liability used to calculate the net pension liability was based on an actuarial valuation as of June 30, 2016. An expected total pension liability as of June 30, 2017 was determined using standard roll-forward techniques. The State's proportion of the net pension liability associated with the School District was based on actuarially determined contributions paid by the State during the fiscal year ended June 30, 2017. For the year ended June 30, 2018, the School District recognized pension expense of $733,360.00 for TRS and $16,463.00 for PSERS and revenue of $16,463.00 for PSERS. At June 30, 2018, the School District reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: TRS Deferred Outflows of Resources Deferred Inflows of Resources Differences between expected and actual experience $ 228,111.00 $ 23,014.00 Changes of assumptions 133,680.00 - Net difference between projected and actual earnings on pension plan investments - 41,966.00 Changes in proportion and differences between School District contributions and proportionate share of contributions 138,816.00 20,615.00 School District contributions subsequent to the measurement date 639,206.35 - Total $ 1,139,813.35 $ 85,595.00 The School District contributions subsequent to the measurement date of $639,206.35 for TRS is reported as deferred outflows of resources and will be recognized as a reduction of the net pension liability in the year ended June 30, 2019. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows: Year Ended June 30: TRS 2019 2020 2021 2022 2023 $ 25,825.00 $ 352,846.00 $ 180,240.00 $ (148,129.00) $ 4,230.00 - 28 - WARREN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018 EXHIBIT "I" Actuarial assumptions: The total pension liability as of June 30, 2017 was determined by an actuarial valuation as of June 30, 2016, using the following actuarial assumptions, applied to all periods included in the measurement: Teachers Retirement System: Inflation 2.75% Salary increases 3.25% 9.00%, average, including inflation Investment rate of return 7.50%, net of pension plan investment expense, including inflation Post-retirement mortality rates were based on the RP-2000 White Collar Mortality Table with future mortality improvement projected to 2025 with the Society of Actuaries' projection scale BB (set forward one year for males) for service requirements and dependent beneficiaries. The RP-2000 Disabled Mortality table with future mortality improvement projected to 2025 with Society of Actuaries' projection scale BB (set forward two years for males and four years for females) was used for the death after disability retirement. Rates of mortality in active service were based on the RP-2000 Employee Mortality Table projected to 2025 with projection scale BB. The actuarial assumptions used in the June 30, 2016 valuation were based on the results of an actuarial experience study for the period July 1, 2009 June 30, 2014. Public School Employees Retirement System: Inflation 2.75% Salary increases N/A Investment rate of return 7.50%, net of pension plan investment expense, including inflation Post-retirement mortality rates were based on the RP-2000 Blue-Collar Mortality Table projected to 2025 with projection scale BB (set forward 3 years for males and 2 years for females) for the period after service retirements and for dependent beneficiaries. The RP-2000 Disabled Mortality projected to 2025 with projection scale BB (set forward 5 years for both males and females) was used for death after disability retirement. There is a margin for future mortality improvement in the tables used by the System. Based on the results of the most recent experience study adopted by the Board on December 17, 2015, the numbers of expected future deaths are 9-11% less than the actual number of deaths that occurred during the study period for healthy retirees and 9-11% less than expected under the selected table for disabled retirees. Rates of mortality in active service were based on the RP-2000 Employee Mortality Table projected to 2025 with projection scale BB. The actuarial assumptions used in the June 30, 2016 valuation were based on the results of an actuarial experience study for the period July 1, 2009 June 30, 2014. - 29 - WARREN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018 EXHIBIT "I" The long-term expected rate of return on TRS and PSERS pension plan investments were determined using a log-normal distribution analysis in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The target asset allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table: Asset class TRS Target allocation PSERS Target allocation Long-term expected real rate of return* Fixed income Domestic large stocks Domestic mid stocks Domestic small stocks International developed market stocks International emerging market stocks Alternative Total 30.00% 39.80% 3.70% 1.50% 19.40% 5.60% - 100.00% 30.00% 37.20% 3.40% 1.40% 17.80% 5.20% 5.00% 100.00% (0.50)% 9.00% 12.00% 13.50% 8.00% 12.00% 10.50% *Rates shown are net of the 2.75% assumed rate of inflation Discount rate: The discount rate used to measure the total TRS and PSERS pension liability was 7.50%. The projection of cash flows used to determine the discount rate assumed that plan member contributions will be made at the current contribution rate and that employer and nonemployer contributions will be made at rates equal to the difference between actuarially determined contribution rates and the member rate. Based on those assumptions, the TRS and PSERS pension plan's fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. Sensitivity of the School District's proportionate share of the net pension liability to changes in the discount rate: The following presents the School District's proportionate share of the net pension liability calculated using the discount rate of 7.50%, as well as what the School District's proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1-percentage-point lower (6.50%) or 1-percentage-point higher (8.50%) than the current rate: Teachers Retirement System: 1% Decrease (6.50%) Current Discount Rate (7.50%) 1% Increase (8.50%) School District's proportionate share of the net pension liability $ 10,007,880.00 $ 6,098,211.00 $ 2,877,523.00 Pension plan fiduciary net position: Detailed information about the pension plan's fiduciary net position is available in the separately issued TRS and PSERS financial report which is publicly available at www.trsga.com/publications and http://www.ers.ga.gov/formspubs/formspubs.html. - 30 - WARREN COUNTY BOARD OF EDUCATION NOTES TO THE BASIC FINANCIAL STATEMENTS JUNE 30, 2018 EXHIBIT "I" NOTE 14: RESTATEMENT OF PRIOR YEAR NET POSITION For fiscal year 2018, the School District made prior period adjustments due to the adoption of GASB Statement No. 75, as described in "New Accounting Pronouncements", which require the restatement of the June 30, 2017, net position in Governmental Activities. The result is a decrease in net position at July 1, 2017 of $6,371,846.00. This change is in accordance with generally accepted accounting procedures. Net Position, July 1, 2017 as previously reported $ 11,078,630.44 Prior Period Adjustment - Implementation of GASB No. 75: Net OPEB Liability (measurement date) (6,602,734.00) Deferred Outflows - School District's Contributions made during fiscal year 2017 230,888.00 Net Position, July 1, 2017, as restated $ 4,706,784.44 NOTE 15: TAX ABATEMENTS Warren County enters into property tax abatement agreements with local businesses for the purpose of attracting or retaining businesses within their jurisdictions. The abatements may be granted to any business located within or promising to relocate to Warren County. For the fiscal year ended June 30, 2018, Warren County abated property taxes due to the School District that were levied on September 26, 2017 and due on December 20, 2017 totaling $53,625.00. This amount abated resulted from a 4-year individual tax abatement agreement with a manufacturing plant. NOTE 16: SPECIAL ITEM On December 4, 2017, the Warren County Board of Education sold the M.E. Freeman Elementary School for amount of $500.00. This sale resulted in a loss of $80,109.43 to the School District. NOTE 17: SUBSEQUENT EVENTS On April 10, 2019, the School District issued $2,300,000.00 of General Obligation Bonds, Series 2019. The proceeds from these bonds will be used for various projects. - 31 - (This page left intentionally blank) WARREN COUNTY BOARD OF EDUCATION REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF PROPORTIONATE SHARE OF THE NET PENSION LIABILITY TEACHERS RETIREMENT SYSTEM OF GEORGIA FOR THE YEAR ENDED JUNE 30 SCHEDULE "1" Year Ended 2018 2017 2016 2015 School District's proportion of the net pension liability School District's proportionate share of the net pension liability State of Georgia's proportionate share of the net pension liability associated with the School District Total 0.032812% $ 6,098,211.00 $ 0.032653% $ 6,736,678.00 $ 0.032294% $ 4,916,441.00 $ 0.032580% $ 4,116,053.00 $ 38,168.00 37,908.00 32,469.00 $ 6,098,211.00 $ 6,774,846.00 $ 4,954,349.00 $ 4,148,522.00 School District's covered payroll $ 3,770,530.42 $ 3,601,972.65 $ 3,435,114.77 $ 3,328,544.95 School District's proportionate share of the net pension liability as a percentage of its payroll Plan fiduciary net position as a percentage of the total pension liability 161.73% 187.03% 143.12% 123.66% 79.33% 76.06% 81.44% 84.03% The schedule is intended to show information for 10 years. Additional years will be displayed as they become available. - 33 - WARREN COUNTY BOARD OF EDUCATION REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF PROPORTIONATE SHARE OF THE NET PENSION LIABILITY PUBLIC SCHOOLS EMPLOYEES RETIREMENT SYSTEM OF GEORGIA FOR THE YEAR ENDED JUNE 30 SCHEDULE "2" Year Ended 2018 2017 2016 2015 School District's proportion of the net pension liability School District's proportionate share of the net pension liability 0.00% $ - 0.00% $ - 0.00% $ - 0.00% $ - State of Georgia's proportionate share of the net pension liability associated with the School District Total School District's covered payroll School District's proportionate share of the net pension liability as a percentage of its covered payroll Plan fiduciary net position as a percentage of the total pension liability $ 81,686.00 $ 81,686.00 $ 222,802.38 $ 102,730.00 $ 102,730.00 $ 179,903.80 $ 69,353.00 $ 69,353.00 $ 202,713.38 $ 77,879.00 $ 77,879.00 $ 292,832.46 N/A 85.69% N/A 81.00% N/A 87.00% N/A 88.29% This schedule is intended to show information for 10 years. Additional years will be displayed as they become available. - 34 - WARREN COUNTY BOARD OF EDUCATION REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF PROPORTIONATE SHARE OF THE OPEB LIABILITY SCHOOL OPEB FUND FOR THE YEAR ENDED JUNE 30 SCHEDULE "3" Year Ended School District's proportion of the net OPEB liability School District's proportionate share of the net OPEB liability State of Georgia's proportionate share of the net OPEB liability associated with the School District 2018 0.044282% $ 6,221,603.00 $ - Total $ 6,221,603.00 School District's covered-employee payroll $ 3,189,616.44 School District's proportionate share of the net OPEB liability as a percentage of its covered- employee payroll Plan fiduciary net position as a percentage of the total OPEB liability 195.06% 1.61% This schedule is intended to show information for 10 years. Additional years will be displayed as they become available. - 35 - WARREN COUNTY BOARD OF EDUCATION REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF CONTRIBUTIONS TEACHERS RETIREMENT SYSTEM OF GEORGIA FOR THE YEAR ENDED JUNE 30 SCHEDULE "4" Year Ended Contractually required contribution Contributions in relation to the contractually required contribution Contribution deficiency (excess) 2018 $ 639,206.35 $ 639,206.35 $ - 2017 $ 538,054.71 $ 538,054.71 $ - 2016 $ 511,111.70 $ 511,111.70 $ - 2015 $ 448,833.69 $ 448,833.69 $ - School District's covered payroll $ 3,802,536.47 $ 3,770,530.42 $ 3,601,972.65 $ 3,435,114.77 Contribution as a percentage of covered payroll 16.81% 14.27% 14.19% 13.07% This schedule is intended to show information for 10 years. Additional years will be displayed as they become available. - 36 - WARREN COUNTY BOARD OF EDUCATION REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF CONTRIBUTIONS SCHOOL OPEB FUND FOR THE YEAR ENDED JUNE 30 SCHEDULE "5" Year Ended Contractually required contribution 2018 $ 2017 $ 230,860.00 230,888.00 Contributions in relation to the contractually required contribution Contribution deficiency School District's covered- (excess) employee payroll $ 230,860.00 $ $ 230,888.00 $ - $ 3,356,918.64 - $ 3,189,616.44 Contribution as a percentage of covered- employee payroll 6.88% 7.24% This schedule is intended to show information for 10 years. Additional years will be displayed as they become available. - 37 - WARREN COUNTY BOARD OF EDUCATION NOTES TO THE REQUIRED SUPPLEMENTARY INFORMATION FOR THE YEAR ENDED JUNE 30, 2018 SCHEDULE "6" Teachers Retirement System Changes of assumptions: In 2010 and later, the expectation of retired life mortality was changed to the 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 RP2000 White Collar Mortality Table with future mortality improvement projected to 2025 with the Society of Actuaries' projection scale BB (set forward one year for males). Public School Employees Retirement System Changes of assumptions: In 2010 and later, the expectation of retired life mortality was changed to the 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. 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 RP2000 Blue Collar Mortality Table projected to 2025 with projection scale BB (set forward 3 years for males and 2 years for females). School OPEB Fund Changes of benefit terms: In June 30, 2010 actuarial valuation, there was a change of benefit terms to require Medicare-eligible recipients to enroll in a Medicare Advantage plan to receive the State subsidy. Changes in assumptions: In the revised June 30, 2017 actuarial valuation, there was a change relating to employee allocation. Employees were previously allocated based on their Retirement System membership, and currently employees are allocated based on their current employer payroll location. Additionally, there were changes to the discount rate and an increase in the investment rate of return due to a longer term investment strategy. In the June 30, 2015 actuarial valuation, decremental and underlying inflation assumptions were changed to reflect the Retirement Systems' experience studies. In the June 30, 2012 actuarial valuation, a data audit was performed and data collection procedures and assumptions were changed. - 38 - WARREN COUNTY BOARD OF EDUCATION GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL YEAR ENDED JUNE 30, 2018 SCHEDULE "7" REVENUES Property Taxes Sales Taxes State Funds Federal Funds Charges for Services Investment Earnings Miscellaneous Total Revenues EXPENDITURES Current Instruction Support Services Pupil Services Improvement of Instructional Services Educational Media Services General Administration School Administration Business Administration Maintenance and Operation of Plant Student Transportation Services Other Support Services Food Services Operation Total Expenditures Excess of Revenues over (under) Expenditures OTHER FINANCING SOURCES (USES) Other Sources Other Uses Total Other Financing Sources (Uses) Net Change in Fund Balances Fund Balances - Beginning Adjustments NONAPPROPRIATED BUDGETS ORIGINAL (1) FINAL (1) ACTUAL AMOUNTS VARIANCE OVER/UNDER $ 3,427,431.07 $ 3,731,537.79 $ 3,358,469.01 $ (373,068.78) - 9,038.42 7,939.89 (1,098.53) 3,611,180.96 4,189,219.16 3,823,367.36 (365,851.80) 1,255,880.52 1,396,941.46 1,192,954.59 (203,986.87) - 28,016.00 28,016.00 - - 16.51 16.51 - 109,680.00 121,384.95 267,546.71 146,161.76 8,404,172.55 9,476,154.29 8,678,310.07 (797,844.22) 4,860,560.13 90,863.82 309,742.82 110,837.44 487,506.16 426,142.40 193,297.66 700,764.94 507,897.44 72,175.10 541,526.52 8,301,314.43 102,858.12 - - 102,858.12 1,736,340.83 1,880.99 4,564,060.14 357,024.05 338,734.88 83,517.11 526,311.66 496,113.53 246,597.66 693,472.64 607,116.44 148,867.23 607,594.09 8,669,409.43 806,744.86 4,501,512.02 311,335.28 335,137.35 82,121.14 510,453.43 621,790.84 245,128.36 757,614.85 611,845.38 149,670.41 562,205.80 8,688,814.86 (10,504.79) 217,849.30 (40,478.81) 177,370.49 984,115.35 1,736,340.83 (1,469.98) 155,137.68 - 155,137.68 144,632.89 1,721,360.51 - 62,548.12 45,688.77 3,597.53 1,395.97 15,858.23 (125,677.31) 1,469.30 (64,142.21) (4,728.94) (803.18) 45,388.29 (19,405.43) (817,249.65) (62,711.62) 40,478.81 (22,232.81) (839,482.46) (14,980.32) 1,469.98 Fund Balances - Ending $ 1,841,079.94 $ 2,718,986.20 $ 1,865,993.40 $ (852,992.80) 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 $125,010.86 and $127,687.86, 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. - 39 - WARREN COUNTY BOARD OF EDUCATION SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30, 2018 SCHEDULE "8" FUNDING AGENCY PROGRAM/GRANT Agriculture, U. S. Department of Child Nutrition Cluster Pass-Through From Georgia Department of Education Food Services School Breakfast Program National School Lunch Program Total Child Nutrition Cluster Other Programs Pass-Through From Georgia Department of Education Food Services Child Nutrition Discretionary Grants Limited Availability Fresh Fruit and Vegetable Program Total Other Programs Total U. S. Department of Agriculture Education, U. S. Department of Special Education Cluster Pass-Through From Georgia Department of Education Special Education Grants to States Grants to States Preschool Grants Preschool Grants Total Special Education Cluster Other Programs Pass-Through From Georgia Department of Education Career and Technical Education - Basic Grants to States Supporting Effective Instruction State Grants Supporting Effective Instruction State Grants Rural Education Rural Education Student Support and Academic Enrichment Program Title I Grants to Local Educational Agencies Title I Grants to Local Educational Agencies Total Other Programs Total U. S. Department of Education CFDA NUMBER PASSTHROUGH ENTITY ID NUMBER EXPENDITURES IN PERIOD 10.553 10.555 18185GA324N1099 $ 18185GA324N1100 171,668.42 364,184.72 535,853.14 10.579 10.582 185GA350N8103 185GA324L1603 11,415.00 7,069.18 18,484.18 554,337.32 84.027 84.027 84.173 84.173 H027A160073 H027A170073 H173A160081 H173A170081 84.048 84.367 84.367 84.358 84.358 84.424A 84.010 84.010 V048A170010 S367A160001 S367A170001 S358B160010 S365B170010 S424A170011 S010A160010 S010A170010 43,280.00 108,417.52 7,191.00 21,907.87 180,796.39 10,634.43 3,163.00 36,544.64 357.00 10,924.00 10,653.88 29,777.00 369,587.31 471,641.26 652,437.65 Total Expenditures of Federal Awards $ 1,206,774.97 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 Warren County Board of Education (the "Board") under programs of the federal government for the year ended June 30, 2018. The information in this Schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Because the Schedule presents only a selected portion of the operations of the Board, it is not intended to and does not present the financial position or changes in net position of the Board. Note 2. Summary of Significant Accounting Policies Expenditures reported on the Schedule are reported on the modified accrual basis of accounting. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. The Board has elected not to use the 10-percent de minimis indirect cost rate as allowed under the Uniform Guidance. See notes to the basic financial statements. - 40 - WARREN COUNTY BOARD OF EDUCATION SCHEDULE OF STATE REVENUE YEAR ENDED JUNE 30, 2018 AGENCY/FUNDING GRANTS Bright From the Start: Georgia Department of Early Care and Learning Pre-Kindergarten Program Education, Georgia Department of Quality Basic Education Direct Instructional Cost Kindergarten Program Kindergarten Program - Early Intervention Program Primary Grades (1-3) Program Primary Grades - Early Intervention (1-3) Program Upper Elementary Grades (4-5) Program Upper Elementary Grades - Early Intervention (4-5) Program Middle School (6-8) Program High School General Education (9-12) Program Vocational Laboratory (9-12) Program Students with Disabilities Gifted Student - Category VI Remedial Education Program Alternative Education Program Media Center Program 20 Days Additional Instruction Staff and Professional Development Principal Staff and Professional Development Indirect Cost Central Administration School Administration Facility Maintenance and Operations Mid-term Adjustment Hold-Harmless Amended Formula Adjustment Charter System Adjustment Categorical Grants Pupil Transportation Regular Nursing Services Sparsity Vocational Supervisor Other State Programs Middle School Computer Programming Grant Food Services Math and Science Supplements Preschool Handicapped Program Georgia Student Finance Authority Move on When Ready Governor's Office of Student Achievement Connections for Classrooms Grant Office of the State Treasurer Public School Employees Retirement See notes to the basic financial statements. SCHEDULE "9" GOVERNMENTAL FUND TYPE GENERAL FUND $ 73,124.75 193,013.00 25,906.00 386,958.00 170,634.00 214,557.00 95,573.00 367,478.00 277,356.00 97,632.00 443,043.00 4,054.00 24,143.00 23,397.00 63,777.00 19,879.00 10,459.00 722.00 280,427.00 262,432.00 138,394.00 7,540.00 (51,280.00) 55,629.00 165,722.00 45,000.00 243,860.00 8,252.00 25,000.00 12,558.00 16,512.11 38,058.00 23,658.00 44,280.50 15,619.00 $ 3,823,367.36 - 41 - (This page left intentionally blank) WARREN COUNTY BOARD OF EDUCATION SCHEDULE OF APPROVED LOCAL OPTION SALES TAX PROJECTS YEAR ENDED JUNE 30, 2018 SCHEDULE "10" PROJECT ORIGINAL ESTIMATED COST (1) CURRENT ESTIMATED COSTS (2) AMOUNT EXPENDED IN CURRENT YEAR (3) (4) AMOUNT EXPENDED IN PRIOR YEARS(3) (4) TOTAL COMPLETION COST EXCESS PROCEEDS NOT EXPENDED (i) For the purposes of retiring the remaining principal and interest on the School District's previously issued Series 2005 Bonds and, to extent Special 1% Tax proceeds are available after the payment of the principal of and interest on the series 2005 Bonds. $ 3,000,000.00 $ 3,631,138.17 $ 1,265,099.67 $ 2,366,038.50 $ 3,631,138.17 $ - (ii) funding the cost of constructing new School District facilities, and rehabilitating, repairing, renovating, extending, equipping, and improving existing School District facilities. - 546,300.00 546,299.62 - - - ESTIMATED COMPLETION DATE Completed April 1,2019 $ 3,000,000.00 $ 4,177,438.17 $ 1,811,399.29 $ 2,366,038.50 $ 3,631,138.17 $ - (1) The School District's original cost estimate as specified in the resolution calling for the imposition of the Local Option Sales Tax. (2) The School District's current estimate of total cost for the project. Includes all cost from project inception to completion. (3) The voters of Warren County approved the imposition of a 1% sales tax to fund the above project and retire associated debt. Amounts expended for this project may include sales tax proceeds, state, local property taxes and/or other funds over the life of the projects. (4) During fiscal year 2005, the Warren County Board of Education issued General Obligation Refunding Bond Issue 2005 to refund portions of the 1999 Bond Issue. The amount expended in the Current Year includes debt service on the replacement refunding issues. See notes to the basic financial statements. - 43 - SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS Greg S. Griffin STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400 August 19, 2019 The Honorable Brian P. Kemp, Governor of Georgia Members of the General Assembly of the State of Georgia Members of the State Board of Education and Superintendent and Members of the Warren County Board of Education INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of the Warren County Board of Education (School District), as of and for the year ended June 30, 2018, and the related notes to the financial statements, which collectively comprise the School District's basic financial statements, and have issued our report thereon dated August 19, 2019. Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the School District's internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the School District's internal control. Accordingly, we do not express an opinion on the effectiveness of the School District's internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. Compliance and Other Matters As part of obtaining reasonable assurance about whether the School District's financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the School District's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the School District's internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Respectfully submitted, Greg S. Griffin State Auditor Greg S. Griffin STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400 August 19, 2019 The Honorable Brian P. Kemp, Governor of Georgia Members of the General Assembly of the State of Georgia Members of the State Board of Education and Superintendent and Members of the Warren County Board of Education INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY THE UNIFORM GUIDANCE Report on Compliance for Each Major Federal Program We have audited the Warren County Board of Education (School District) compliance with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on each of its major federal programs for the year ended June 30, 2018. The School District's major federal programs are identified in the Summary of Auditor's Results section of the accompanying Schedule of Findings and Questioned Costs. Management's Responsibility Management is responsible for compliance with federal statutes, regulations, and the terms and conditions of its federal awards applicable to its federal programs. Auditor's Responsibility Our responsibility is to express an opinion on compliance for each of the School District's major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Those standards and the Uniform Guidance require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the School District's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of the School District's compliance. Opinion on Each Major Federal Program In our opinion, the School District complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended June 30, 2018. Report on Internal Control over Compliance Management of the School District is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered the School District's internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the School District's internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose. Respectfully submitted, Greg S. Griffin State Auditor SECTION III AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS WARREN COUNTY BOARD OF EDUCATION AUDITEE'S RESPONSE SUMMARY SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2018 PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS No matters were reported. PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported. SECTION IV FINDINGS AND QUESTIONED COSTS \ WARREN COUNTY BOARD OF EDUCATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2018 I SUMMARY OF AUDITOR'S RESULTS Financial Statements Type of auditor's report issue: Governmental Activities; General Fund; Capital Projects Fund; Debt Service Fund; Aggregate Remaining Fund Information Unmodified Internal control over financial reporting: Material weakness identified? Significant deficiencies identified? No None Reported Noncompliance material to financial statements noted: No Federal Awards Internal Control over major programs: Material weakness identified? Significant deficiencies identified? No None Reported Type of auditor's report issued on compliance for major programs: All major programs Unmodified Any audit findings disclosed that are required to be reported in accordance with 2 CFR 200.516(a)? No Identification of major programs: CFDA Numbers Name of Federal Program or Cluster 10.553, 10.555 Child Nutrition Cluster Dollar threshold used to distinguish between Type A and Type B programs: $750,000.00 Auditee qualified as low-risk auditee? No II FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS No matters were reported. III FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported.