ALLENDALE COUNTY SCHOOL DISTRICT FAIRFAX, SOUTH CAROLINA FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION FOR THE FISCAL YEAR ENDED JUNE 30, 2016

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1 FAIRFAX, SOUTH CAROLINA FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION FOR THE FISCAL YEAR ENDED JUNE 30, 2016

2 FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION FOR THE FISCAL YEAR ENDED JUNE 30, 2016 FINANCIAL SECTION TABLE OF CONTENTS Exhibit Page Independent Auditor s Report 1-2 Management s Discussion and Analysis 3-10 Basic Financial Statements Government-Wide Financial Statements Statement of Net Position A 11 Statement of Activities B 12 Fund Financial Statements Balance Sheet - Governmental Funds C-1 13 Reconciliation of Total Governmental Fund Balances To Net Position of Governmental Activities C-2 14 Statement of Revenues, Expenditures, and Changes In Fund Balances - Governmental Funds D-1 15 Reconciliation of Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities D-2 16 Statement of Fiduciary Net Position - Agency Fund E 17 Notes to Basic Financial Statements Required Supplementary Information Schedule Page Schedule of the District s Proportionate Share of the Collective Net Pension Liability (SCRS) Schedule of the District s Contributions (SCRS) Budgetary Comparison Schedule - General Fund 2 37 Combining and Individual Fund Schedules General Fund Schedule of Revenues, Expenditures and Changes in Fund Balance - Final Budget and Actual Special Revenue Fund - Special Projects Combining Balance Sheet Combining Schedule of Revenues, Expenditures and Changes in Fund Balance Note to Special Revenue Fund - Special Projects Supplemental Listing of LEA Subfund Codes and Titles Note to Special Revenue Fund - Special Projects Summary Schedule for Designated State Restricted Grants

3 FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION FOR THE FISCAL YEAR ENDED JUNE 30, 2016 TABLE OF CONTENTS - Continued Combining and Individual Fund Schedules Continued Schedule Page Special Revenue Fund Education Improvement Act Schedule of Revenues, Expenditures and Changes in Fund Balance - All Programs Summary Schedule by Program Special Revenue Fund - Food Service Schedule of Revenues, Expenditures and Changes in Fund Balance 6 62 Debt Service Fund Schedule of Revenues, Expenditures and Changes in Fund Balance 7 63 Capital Projects Fund Schedule of Revenues, Expenditures and Changes in Fund Balance 8 64 Pupil Activity Fund Schedule of Receipts and Disbursements and Changes in Due To/From Student Organizations 9 65 Other Schedules Detailed Schedule of Due to S.C. Department of Education/Federal Government Location Reconciliation Schedule COMPLIANCE SECTION Independent Auditor s Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed In Accordance With Government Auditing Standards Independent Auditor s Report on Compliance for Each Major Program and on Internal Control Over Compliance Require By the Uniform Guidance Schedule of Expenditures of Federal Awards Note to Schedule of Expenditures of Federal Awards 74 Summary Schedule of Prior Audit Findings Schedule of Findings and Questioned Costs

4 To the Board of Trustees of Allendale County School District Fairfax, South Carolina 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 Allendale County School District as of and for the year ended June 30, 2016, and the related notes to the financial statements, which collectively comprise Allendale County School District s basic financial statements as listed in the table of contents. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of 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 governmental activities, each major fund, and the aggregate remaining fund information of Allendale County School District as of June 30, 2016, and the respective changes in financial position for the year then ended in conformity with accounting principles generally accepted in the United States of America.

5 To the Board of Trustees of Allendale County School District Page Two Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the Management s Discussion and Analysis, Schedule of the District's Proportionate Share of the Collective Net Pension Liability, Schedule of the District's Contributions, and the Budgetary Comparison Schedule, as 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 Allendale County School District s basic financial statements. The combining and individual fund financial schedules and other schedules required by the South Carolina Department of Education are presented for purposes of additional analysis and are 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 combining and individual fund schedules, other schedules required by the South Carolina Department of Education and the schedule of expenditures of federal awards are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining and individual fund schedules, other schedules and the schedule of expenditures of federal awards are fairly stated in all material respects in relation to the basic financial statements as a whole. Other Reporting Required by Governmental Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated November 30, 2016 on our consideration of Allendale County 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 to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Allendale County School District's internal control over financial reporting and compliance. Spartanburg, South Carolina November 30,

6 ALLENDALE, SOUTH CAROLINA MANAGEMENT S DISCUSSION AND ANALYSIS YEAR ENDED JUNE 30, 2016 This discussion and analysis of the Allendale County School District, South Carolina (the District ) financial performance provides an overview of the District's financial activities for the fiscal year ended June 30, The intent of this discussion and analysis is to look at the District s financial performance as a whole. Readers should also review the basic financial statements and the notes to the basic financial statements to enhance their understanding of the District s financial performance. FINANCIAL HIGHLIGHTS Key financial highlights for 2016 are as follows: As of June 30, 2016, fund balance for the General Fund remained at $4.64 million. As of June 30, 2016, the District s governmental funds reported combined ending fund balances of $14.73 million, compared to prior year fund balances of $14.36 million. This is an increase of $ 372,204 and is primarily attributable to the fiscal responsibility of the District and reduced spending in 2016 as well as higher than average tax collections. During 2016, the District s governmental fund revenues were $20.1 million, compared to $19.3 million in the prior year. The slight increase reflects Special Revenue- Special Projects revenue increases as well as higher than average tax collections. Also during 2016, the District s governmental fund expenditures were $19.72 million, compared to $21.34 million in the prior year. Lower capital expenditures as well as slightly lower spending on personnel and personnel costs (wage/rate increases net of position reductions) made up most of the decrease. The District s net capital assets decreased in 2016 by $99,790 due to the increase in depreciation expense as compared to the minimal amount of capital assets added during the year. The District s total debt decreased during 2016 by $1.1 million and was $10.5 million at June 30, Total Net Position at June 30, 2016 was $1.70 million compared to $465,184 in the prior year. This increase was due to the reduced spending on a government-wide basis combined with the increased revenues for OVERVIEW OF THE FINANCIAL STATEMENTS This annual report consists of two parts the Financial Section (which includes the management s discussion and analysis, the basic financial statements, required supplementary information, combining and individual fund schedules and other required schedules) and the Compliance Section. Government-Wide Basic Financial Statements - The basic financial statements include two types of statements that present different views of the District. The first two statements are government-wide financial statements that provide a broad overview of the District s overall financial status in a manner similar to a privatesector enterprise. The Statement of Net Position presents information on all of the District s assets, deferred outflows of resources, liabilities, and deferred inflows of resources, with the difference between the four reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the District is improving or deteriorating. The Statement of Activities presents information showing how the government s net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, for some items, revenues and expenses are reported in this statement that will only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused sick leave). 3

7 ALLENDALE, SOUTH CAROLINA MANAGEMENT S DISCUSSION AND ANALYSIS YEAR ENDED JUNE 30, 2016 OVERVIEW OF THE FINANCIAL STATEMENTS (CONTINUED) Fund Basic Financial Statements - The remaining financial statements are basic fund financial statements that focus on individual parts of the District, reporting the District s operations in more detail than the government-wide statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The District, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related requirements. All of the funds of the District can be divided into two categories: governmental funds and fiduciary funds. Governmental Funds - Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide basic financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term uses of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government s near-term financing requirements. Because the focus of governmental funds is narrower than that of the government-wide basic financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide basic financial statements. By doing so, readers may better understand the long-term impact of the government s near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate the comparison between governmental funds and governmental activities. The District maintains six individual governmental funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balances for the General Fund, Special Revenue Fund Special Projects, Special Revenue Fund Education Improvement Act ( EIA ), Special Revenue Fund - Food Service, Debt Service Fund and Capital Projects Fund, all of which are considered to be major funds. The governmental fund basic financial statements can be found as listed in the table of contents. Fiduciary Funds - Fiduciary Funds are used to account for resources held for the benefit of parties outside the government. Fiduciary Funds are not reflected in the government-wide basic financial statements because the resources of those funds are not available to support the District s own programs. The District is the trustee, or fiduciary, for the pupil activity of the schools and accounts for this activity in an Agency Fund. The basic Fiduciary Fund financial statement can be found as listed in the table of contents. Notes to Basic Financial Statements - The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund basic financial statements. The notes to the basic financial statements can be found as listed in the table of contents. Required and Other Supplemental Information - The required supplemental information and other supplemental information can be found as listed in the table of contents. This information includes budget to actual comparisons and other combining and individual fund schedules. 4

8 ALLENDALE, SOUTH CAROLINA MANAGEMENT S DISCUSSION AND ANALYSIS YEAR ENDED JUNE 30, 2016 Figure A-1 Major Features of Allendale County School District Government-Wide and Fund Basic Financial Statements Scope Required Financial Statements Accounting basis and measurement focus Type of asset/liability information Type of inflow/outflow information Government-Wide Basic Financial Statements Entire District government (except fiduciary funds) and the District s component units Statement of Net Position Statement of Activities Accrual accounting and economic resources focus All assets and liabilities, both financial and capital, and shortterm and longterm All revenues and expenses during year, regardless of when cash is received or paid Governmental Funds The activities of the District that are not proprietary or fiduciary Balance Sheet Statement of Revenues, Expenditures, and Changes in Fund Balances Modified accrual accounting and current financial resources focus Only assets expected to be used and liabilities that come due during the year or soon, thereafter; no capital assets included Revenues for which cash is received during or soon after the end of the year; expenditures when goods or services have been received and payment is due during the year or soon thereafter Fund Basic Financial Statements Fiduciary Funds Instances in which the District is the trustee or agent for someone else s resources, such as the Pupil Activity Fund Statement of Fiduciary Assets and Liabilities Statement of Changes in Fiduciary Assets and Liabilities (excluding agency funds) Accrual accounting and economic resources focus All assets and liabilities, both short-term and long-term; the District s funds do not currently contain capital assets, although they can All revenues and expenses during year, regardless of when cash is received or paid 5

9 ALLENDALE, SOUTH CAROLINA MANAGEMENT S DISCUSSION AND ANALYSIS YEAR ENDED JUNE 30, 2016 GOVERNMENT-WIDE FINANCIAL ANALYSIS As noted earlier, net position may serve over time as a useful indicator of a government s financial position. In the case of the District, assets plus deferred outflows exceeded liabilities and deferred inflows of resources by $1.7 million at the close of the most recent fiscal year. The following table provides a summary of the District s net position for 2016 compared to 2015: Table 1 Net Position Governmental Activities Assets Current and Other Assets $ 17,736,148 $ 17,985,658 Capital Assets 15,498,082 15,597,872 Total Assets 33,234,230 33,583,530 Deferred Outflows of Resources Deferred Loss on Advanced Refunding 113, ,453 Pension Related Deferred Outflows 2,488,828 1,488,251 Total Deferred Outflows of Resources 2,602,340 1,645,704 Liabilities Other Liabilities 3,019,846 3,641,883 Long Term Liabilities 29,056,658 29,601,410 Total Liabilities 32,076,504 33,243,293 Deferred Inflows of Resources Pension Related Deferred Inflows 2,063,351 1,520,757 Total Deferred Inflows of Resources 2,063,351 1,520,757 Net Position Net Investment in Capital Assets 4,971,212 4,018,985 Restricted 8,145,893 2,101,439 Unrestricted (11,420,390) (5,655,240) Net Position $ 1,696,715 $ 465,184 Current and other assets decreased by $.25 million, mainly due to bond proceeds held as investments. Capital assets decreased in 2016 by $.1 million primarily due to the increase in construction in progress offset by the increase in depreciation expense. Total liabilities decreased by $1.20 million, due to decrease long-term debt obligations and accounts payable which was slightly offset by the increase to the net pension liability. Total net position of the District was approximately $465,184 in 2015 and $1.7 million in The increase was due to increased revenues and reduced expenditures during

10 ALLENDALE, SOUTH CAROLINA MANAGEMENT S DISCUSSION AND ANALYSIS YEAR ENDED JUNE 30, 2016 GOVERNMENT-WIDE FINANCIAL ANALYSIS (CONTINUED) The following table shows the changes in net position for fiscal year for 2016 compared to 2015: Table 2 Statement of Activities Governmental Activities Revenues: Program Revenues: Charges for Services $ 143,633 $ 294,204 Operating Grants 10,887,978 10,059,096 General Revenues: Taxes 5,439,501 5,149,287 Unrestricted State Grants 3,250,548 3,227,050 Other 372, ,007 Total Revenues 20,094,148 19,312,644 Program Activities: Instruction 8,591,828 9,012,354 Support Services 9,802,430 9,740,516 Community Services 74, ,642 Intergovernmental 32,605 53,382 Interest, amortization and other charges 361, ,384 Total Expenses 18,862,617 19,519,278 Excess/(Deficiency) 1,231,531 (206,634) Change in Net Position 1,231,531 (206,634) During 2016, the District s Operating Grant revenues were higher than prior year primarily due to the increased funding of EIA, Special Projects and other state/federal grants. There was a decrease in spending for the governmental funds of $656,661 during the year due to fiscal responsibility, a decrease in personnel expenditures and lower capital expenditures for the year ended June 30,

11 ALLENDALE, SOUTH CAROLINA MANAGEMENT S DISCUSSION AND ANALYSIS YEAR ENDED JUNE 30, 2016 FINANCIAL ANALYSIS OF THE DISTRICT'S FUNDS As noted earlier, the District uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental Funds The analysis of governmental funds serves the purpose of looking at what resources came into the funds, how they were spent and what is available for future expenditures. Did the government generate enough revenue to pay for current obligations? What is available for spending at the end of the year? The District s Major Governmental Funds include General Fund, Special Revenue Fund Special Projects, Special Revenue Fund EIA, Special Revenue Fund - Food Service, Debt Service Fund, and Capital Projects Fund. The District s Special Revenue Funds (Special Revenue and EIA), generally, are used to account for revenues derived from the State of South Carolina and the Federal Government. Most Special Revenue Funds do not have fund balances as revenues should be expended, deferred, or returned to the grantor. For the year ended June 30, 2016, the District s governmental funds reported a combined fund balance of $14.73 million as compared to $ million for the prior year. The increase is attributable to the increased Special Revenue Funds Special Projects and General Fund revenues along with the reduction in expenditures in The District s fund balance for the General Fund did not change during FY General Fund Budgetary Highlights The District s budget is prepared according to South Carolina law and is based on accounting for certain transactions on a basis of cash receipts, disbursements and encumbrances. The most significant budgeted fund is the General Fund. During the course of FY 2016, transfers were made among the budget line items. CAPITAL ASSET AND DEBT ADMINISTRATION Capital Assets The following table shows the capital asset balances for 2016 and 2015: Governmental Activities June 30, 2016 June 30, 2015 Capital Assets Construction in Progress $ 1,710,316 $ 1,138,463 Land improvements 743, ,869 Buildings and improvements 24,828,067 24,816,145 Furniture and equipment 3,827,119 3,797,482 Vehicles 524, ,388 Less: Accumulated depreciation (16,135,552) (15,379,475) Net Capital Assets $ 15,498,082 $ 15,597,872 8

12 ALLENDALE, SOUTH CAROLINA MANAGEMENT S DISCUSSION AND ANALYSIS YEAR ENDED JUNE 30, 2016 CAPITAL ASSET AND DEBT ADMINISTRATION (CONTINUED) Capital Assets Continued At the end of 2016, the District had approximately $15.50 million invested in capital assets, net of accumulated depreciation. The total decrease in the District s investment in capital assets was approximately $100,000. Capital asset activity during the current fiscal year included: Purchases of equipment/vehicles. Additions to construction in progress of $571,853. Depreciation expense of $756,077 The District is in the middle of a major footprint reduction project involving the entire District. More detailed information about the District's capital assets can be found in Note 3 to the basic financial statements. Long-Term Debt At June 30, 2016, the District had outstanding $10.5 million in long-term obligations. This was comprised of $9.9 million in special obligation bond. Table 4 Governmental Activities Special Obligation Bonds $ 9,905,000 $ 10,555,000 Capital Lease Obligation - 330,347 Total Debt Outstanding 9,905,000 10,885,347 Plus Bond Premiums 606, ,798 Net Long Term Debt $ 10,511,451 $ 11,563,145 The State limits the amount of general obligation debt that Districts can issue to 8% of the assessed value of all taxable property within the District's corporate limits. The District is authorized by state statute to exceed the legal debt margin of 8%, if citizens of the District approve such additional debt through a district-wide referendum. More detailed information about the District's debt and other long-term obligations is presented in Note 5 to the basic financial statements. ECONOMIC FACTORS The District receives a significant amount of its General Fund revenues from property taxes, the state funded Education Finance Act (EFA), and state funded tax reimbursements (Tier 1, 2, and 3 funds). The property tax base in the county is fairly stagnant. In addition, under Act 388, there is a millage cap that is imposed on property taxes. 9

13 ALLENDALE, SOUTH CAROLINA MANAGEMENT S DISCUSSION AND ANALYSIS YEAR ENDED JUNE 30, 2016 ECONOMIC FACTORS (CONTINUED) The District still managed to maintain its fund balances in the General Fund and Capital Projects, as economic uncertainty still exists, especially in the District s area of the state. Slow, steady declines of enrollment have continued over the last several years. While the District has taken steps in the past two years (footprint reduction) to adjust its staffing to reflect the impact of declining enrollments, it will have to continue to exert tight control over costs in all areas in order to operate in a fiscally conservative and prudent manner. In order to significantly reduce its operating expenses, the District is currently in the process of reducing its overall footprint. In order to do this, the District will consolidate its two elementary schools into the middle and high school buildings. This will reduce the footprint from four school facilities to two facilities. The District has also begun to explore new sources of grant revenue through outside sources with the potential to offset the potential loss of State Priority funds should academic performance improve across all schools, ending their eligibility for those PPS funds. FY 17 BUDGETS The District s General Fund original budget for Fiscal Year 2017 is $13.31 million. The District will continue to make use of federal and state grant carryovers and current year funds to help alleviate financial pressure on the General Fund to the extent allowable by law. CONTACTING THE DISTRICT'S FINANCIAL MANAGEMENT This financial report is designed to provide those interested with a general overview of the District's finances and to show the District's accountability for the money it receives. If you have questions about this report or need additional financial information, contact the Finance Department, at the Allendale County School District, P.O. Box 458, Allendale, South Carolina

14 Exhibit A STATEMENT OF NET POSITION JUNE 30, 2016 ASSETS Governmental Activities Cash $ 978,317 Investments 5,754,462 Taxes receivable 356,182 Accounts receivable 22,031 Due from County Treasurer 9,775,744 Due from State Department of Education 137,092 Due from Federal Government 523,755 Due from other funds - agency fund 132,228 Prepaid expenses 38,081 Inventory - supplies and materials 18,256 17,736,148 Capital Assets: Construction in progress 1,710,316 Land improvements 743,869 Buildings and improvements 24,828,067 Furniture and equipment 3,827,119 Vehicles 524,263 Less: accumulated depreciation (16,135,552) 15,498,082 Total Assets 33,234,230 DEFERRED OUTFLOWS OF RESOURCES Deferred loss on advanced refunding 113,512 Deferred amounts related to pensions 2,488,828 LIABILITIES Total Deferred Outflows of Resources 2,602,340 Accounts payable 313,573 Retainage payable 67,402 Due to State Department of Education 19,026 Due to Federal Government 6,744 Health, life insurance and other deductions 364,671 Accrued salaries 733,111 Accrued interest payable 15,419 Unearned revenue 1,499,900 Noncurrent liabilities: Due within one year 970,000 Due in more than one year 9,541,451 Net pension liability 18,545,207 Total Liabilities 32,076,504 DEFERRED INFLOWS OF RESOURCES Deferred amounts related to pensions 2,063,351 Total Deferred Inflows of Resources 2,063,351 NET POSITION Net investment in capital assets 4,971,212 Restricted for: General - nonexpendable 38,081 Special projects 515,364 Food service - nonexpendable 18,256 Food service - expendable 334,000 Debt service 1,818,067 Capital projects 5,422,125 Unrestricted (11,420,390) Total Net Position $ 1,696,715 The accompanying notes are an integral part of the financial statements. 11

15 Exhibit B TOTAL PRIMARY GOVERNMENT $ 18,862,617 $ 143,633 $ 10,887,978 (7,831,006) Property taxes levied for general purposes 4,668,024 Property taxes levied for debt service 771,477 Unrestricted state grants 3,250,548 Miscellaneous 345,972 Premium on bond sale 7,249 Insurance proceeds 1,707 Rentals 1,700 Unrestricted investment earnings 15,860 Total general revenues 9,062,537 CHANGE IN NET POSITION 1,231,531 NET POSITION - JULY 1, ,184 NET POSITION - JUNE 30, 2016 $ 1,696,715 STATEMENT OF ACTIVITIES FOR THE FISCAL YEAR ENDED JUNE 30, 2016 PROGRAM REVENUES NET (EXPENSE) REVENUE AND CHANGES IN NET POSITION Primary Charges for Operating Government Services Grants and Governmental FUNCTIONS/PROGRAMS Expenses and Sales Contributions Activities PRIMARY GOVERNMENT: Governmental activities: Instruction $ 8,591,828 $ - $ 7,771,618 $ (820,210) Support services 9,802, ,633 3,048,363 (6,610,434) Community services 74,106-67,997 (6,109) Intergovernmental 32, (32,605) Interest, amortization and other charges 361, (361,648) 12 GENERAL REVENUES: The accompanying notes are an integral part of the financial statements.

16 Exhibit C-1 BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2016 ASSETS Special Special Special Revenue Revenue Revenue Fund - Fund - Fund - Debt Capital Total General Special EIA Food Service Projects Governmental Fund Projects Fund Service Fund Fund Funds Cash $ 590,589 $ - $ - $ 387,728 $ - $ - $ 978,317 Investments ,754,462 5,754,462 Taxes receivable 289, , ,182 Accounts receivable 22, ,031 Due from other funds - 828,860 1,112, ,937 1,835,521 4,720,957 Due from county treasurer 8,968, ,520-9,775,744 Due from State Department of Education 137, ,092 Due from Federal Government - 487,703-36, ,755 Prepaid expenses 38, ,081 Inventory - supplies and materials , ,256 Total Assets $ 10,045,589 $ 1,316,563 $ 1,112,639 $ 442,036 $ 1,818,067 $ 7,589,983 $ 22,324, LIABILITES AND FUND BALANCE Liabilities: Accounts payable $ 198,500 $ - $ - $ - $ - $ 115,073 $ 313,573 Retainage payable ,402 67,402 Due to other funds 4,109, ,729-89, ,588,729 Due to State Department of Education - 17,914 1, ,026 Due to Federal Government - 6, ,744 Health, life insurance and other deductions 364, ,671 Accrued salaries 733, ,111 Unearned revenue 1, ,812 1,111, ,499,900 Total Liabilities 5,407, ,199 1,112,639 89, ,475 7,593,156 Fund Balances: Nonspendable: Prepaid expenses 38, ,081 Inventory , ,256 Restricted: Special revenue fund - special projects - 515, ,364 Special revenue fund - food service , ,000 Debt service fund ,818,067-1,818,067 Capital projects fund ,422,125 5,422,125 Assigned: Capital projects fund ,985,383 1,985,383 Unassigned: General fund 4,600, ,600,445 Total Fund Balances $ 4,638, , ,256 1,818,067 7,407,508 14,731,721 Total Liabilites and Fund Balance $ 10,045,589 $ 1,316,563 $ 1,112,639 $ 442,036 $ 1,818,067 $ 7,589,983 22,324,877 The accompanying notes are an integral part of the financial statements.

17 Exhibit C-2 RECONCILIATION OF TOTAL GOVERNMENTAL FUND BALANCES TO NET POSITION OF GOVERNMENTAL ACTIVITIES JUNE 30, 2016 TOTAL GOVERNMENTAL FUND BALANCE $ 14,731,721 Amounts reported for governmental activities on the statement of net position are different because of the following: Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds. 15,498,082 Deferred outflows of resources: Loss on advanced refunding 113,512 Pension related deferred outflows 2,488,828 2,602,340 Some liabilites are not due and payable in the current period and, therefore, are not reported in the funds: Accrued interest payable (15,419) Bond premium, net of amortization (606,451) Bonds payable (9,905,000) Net pension liability (18,545,207) (29,072,077) Pension related deferred inflows (2,063,351) NET POSITION OF GOVERNMENTAL ACTIVITIES $ 1,696,715 The accompanying notes are an integral part of the financial statements. 14

18 Exhibit D-1 OTHER FINANCING SOURCES (USES) Premium on bond sold ,249-7,249 Operating transfers in 564, ,419, ,617 2,385,521 Operating transfers out (1,386,642) (670,251) (253,398) (75,230) - - (2,385,521) Total Other Financing Sources (Uses) (822,587) (670,251) (253,398) (75,230) 1,427, ,617 7,249 Net Change in Fund Balances - 16,464-41, ,079 (514,661) 372,207 FUND BALANCE - JULY 1, ,638, , , ,988 7,922,169 14,359,514 FUND BALANCE - JUNE 30, 2016 $ 4,638,526 $ 515,364 $ - $ 352,256 $ 1,818,067 $ 7,407,508 $ 14,731,721 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS FOR THE FISCAL YEAR ENDED JUNE 30, $ Special Special Special Revenue Revenue Revenue Fund - Fund - Fund - Debt Capital Total General Special EIA Food Service Projects Governmental Fund Projects Fund Service Fund Fund Funds REVENUES Local property taxes $ 4,668,024 $ - $ - $ - $ 771,477 $ - 5,439,501 Other local 99, , , , ,874 Total local 4,767, , , ,706 1,705 5,948,375 State 7,967,696 1,207,328 1,373, ,548,202 Federal - 2,374,703-1,215, ,590,325 Total Revenue 12,735,082 3,877,312 1,373,086 1,328, ,706 1,705 20,086,902 EXPENDITURES Current: Instruction 5,558,878 1,869, , ,207,597 Support services 6,307,478 1,260, ,057 1,211, ,003 9,569,931 Community services 13,534 60, ,106 Intergovernmental expenditures 32, ,605 Debt Service Principal , ,347 Interest , ,203 Other objects ,175-5,175 Capital Outlay , ,980 Total Expenditures 11,912,495 3,190,597 1,119,688 1,211,456 1,369, ,983 19,721,944 Excess (deficiency) of revenues over expenditures 822, , , ,555 (598,019) (916,278) 364,958 The accompanying notes are an integral part of the financial statements.

19 Exhibit D-2 RECONCILIATION OF STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES FOR THE FISCAL YEAR ENDED JUNE 30, 2016 Total Net Change in Fund Balances - Governmental Funds $ 372,207 Amounts reported for governmental activities in the statements of activities are different because of the following: Interest is reported as an expenditure when due in the governmental funds, but is accrued on outstanding debt on the statement of activities. 323 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. The issuance of long-term debt increases long-term liabilities on the statement of net position and the repayment of principal on long-term debt reduces long-term debt on the statement of net position. Also, governmental funds report the effect of premiums, discounts, and similar items when debt is first issued, whereas these amounts are deferred and amortized over the term of the long-term debt in the statement of activities. Principal payments on long-term debt 980,347 Amortization of premiums 71,347 Amortization of deferred loss on advanced refunding (43,940) Governmental funds report capital outlay as expenditures while governmental activities report depreciation expense to allocate those expenditures over the life of the assets. This is the amount by which depreciation expense of $756,077 exceeded capital outlay of $656,287 in the current year. (99,790) The cost of pension benefits earned net of employee contributions is reported in the Statement of Activities as an element of pension expense. The fund financial statements report pension contributions as expenditures. (48,963) Change in Net position of Governmental Activities $ 1,231,531 The accompanying notes are an integral part of the financial statements. 16

20 Exhibit E STATEMENT OF FIDUCIARY NET POSITION JUNE 30, 2016 Agency Fund ASSETS Cash $ 229,239 Accounts receivable 1,791 Total Assets $ 231,030 LIABILITIES Due to other funds $ 132,228 Due to student organizations 98,802 Total Liabilities $ 231,030 The accompanying notes are an integral part of the financial statements. 17

21 NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Reporting Entity Allendale County School District ( District ) is located in southern South Carolina, bordering the State of Georgia. The district is bordered by the South Carolina counties of Barnwell, Bamberg and Hampton. The District is a Local Education Agency empowered by State law with the responsibility to oversee and control all activities related to public school education in Allendale County, South Carolina. The District receives state, local and federal government funding and must adhere to the legal requirements of each funding entity. The District operates under the direction of an elected five member Board of Trustees, with a superintendent serving as the chief administrative officer. For financial reporting purposes, the District includes all funds that are controlled by or financially dependent upon the District. Control or financial dependence was determined on the basis of obligation of the District to finance deficits, guarantee debt, select governing authority, approval of budget, authority to make a public levy, ownership of assets and scope of public service and special financing relationships where there was only partial or no oversight responsibility. The District s financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP). The Governmental Accounting Standards Board (GASB) is responsible for establishing GAAP for state and local governments through its pronouncements (Statements and Interpretations). The more significant accounting policies established in GAAP and used by the District are discussed below. B. Basic Financial Statements - Government-Wide Financial Statements Government-wide Financial Statements include the statement of net position and the statement of activities, which display information about the District as a whole. These statements include the financial activities of the primary government, except for fiduciary funds. The government-wide financial statements are prepared using the economic resources measurement focus. Governmental fund financial statements therefore include a reconciliation with brief explanations to better identify the relationship between the government-wide statements and the fund financial statements. The government-wide statement of activities presents a comparison between direct expenses and program revenues for each function or program of the governmental activities of the District. Direct expenses are those that are specifically associated with a service, program or department and therefore clearly identifiable to a particular function. Program revenues include amounts paid by the recipient of goods or services offered by the program and grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. All taxes and revenues not classified as program revenues are presented as general revenues of the District. C. Basic Financial Statements - Fund Financial Statements Fund financial statements report detailed information about the District. Their focus is on major funds rather than reporting funds by type. Each major governmental fund is presented in a separate column, and all nonmajor funds are aggregated into one column. Fiduciary funds are reported by fund type. The accounting and financial reporting treatment applied to a fund is determined by its measurement focus. All governmental funds are accounted for using a flow of current financial resources measurement focus. With this measurement focus, only current assets and current liabilities generally are included on the balance sheet. Operating statements of these funds present increases (i.e., revenues and other financing sources) and decreases (i.e., expenditures and other financing uses) in net current assets. 18

22 NOTES TO BASIC FINANCIAL STATEMENTS - CONTINUED JUNE 30, 2016 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED C. Basic Financial Statements - Fund Financial Statements - Continued The District s accounts are maintained on the basis of funds, each of which is considered a separate accounting entity. Fund accounting is designed to demonstrate legal compliance and to aid management by segregating transactions related to specific District functions or activities. The operation of each fund is accounted for within a separate set of self-balancing accounts. Governmental Funds - Governmental fund types are those through which most governmental functions typically are financed. Governmental fund reporting focuses on the sources, uses and balances of current financial resources. Expendable assets are assigned to the various governmental funds according to the purposes for which they may or must be used. Current liabilities are assigned to the fund from which they will be paid. The difference between governmental fund assets and liabilities is reported as fund balance. The following are the District s major governmental fund types: General Fund - The general fund is the District s primary operating fund. It accounts for all activities except those required to be accounted for in other funds. Special Revenue Funds - Special Revenue Funds are used to account for and report the proceeds of specific revenue sources that are restricted or committed to expenditures for specified purposes other than debt service or capital projects. The District has the following special revenue funds: 1) Special Projects Fund - is used to account for financial resources provided by federal and state grants. 2) Education Improvement Act (EIA) Fund - is used to account for the proceeds of the additional one percent sales and use tax revenues that are legally restricted to expenditures for the South Carolina Education Improvement Act of 1984 standards. 3) Food Service Fund - is used to account for cafeteria operations at school locations. The fund is financed by user charges and subsidized by USDA school lunch and breakfast programs. Debt Service Fund - The Debt Service Fund is used to account for the accumulation of resources for, and the payment of, general long-term debt principal, interest, and related costs. Capital Projects Funds The Capital Projects Funds are used to account for financial resources to be used for the acquisition or construction of major capital facilities (other than those financed by proprietary funds and trust funds). Additionally, the District reports the following fund type: Fiduciary Fund - Fiduciary fund reporting focuses on net position and changes in net position. The fiduciary fund category is split into four classifications: pension trust funds, investment trust funds, privatepurpose trust funds and agency funds. The agency fund is custodial in nature (assets equal liabilities) and does not involve measurement of results of operations. The District s fiduciary fund is: 1) Pupil Activity Fund - is used to account for student admissions, organization memberships, bookstore sales and other related receipts and disbursements held by the school in a trustee capacity on behalf of the students and/or District employees. 19

23 NOTES TO BASIC FINANCIAL STATEMENTS - CONTINUED JUNE 30, 2016 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED D. Measurement Focus and Basis of Accounting Basis of accounting refers to when revenues and expenditures or expenses are recognized in the accounts and reported in the financial statements. Government-wide financial statements are prepared using the accrual basis of accounting. The fund financial statements are prepared using either modified accrual for governmental funds or accrual basis for fiduciary funds. Revenues, Exchange and Non-exchange Transactions Revenue resulting from exchange transactions is recorded on the accrual basis when the exchange takes place. On a modified accrual basis, revenues are recognized in the accounting period when they become both measurable and available. Available means collectible within the current period or soon enough thereafter to be used to pay liabilities of the current fiscal year. The available period of the District is sixty days after year end. Nonexchange transactions, in which the District receives value without directly giving equal value in return, include property taxes, grants, entitlements and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied (See Note I). Revenue from grants, entitlements and donations is recognized in the fiscal year in which all eligibility requirements have been met. On the modified accrual basis, revenue from nonexchange transactions must also be available before it can be recognized. In applying the susceptible to accrual concept under the modified accrual basis, the following revenue sources are deemed both measurable and available: property taxes available for advance, investment earnings, tuition, grants and student fees. Unearned Revenue The District reports unearned revenue on its statement of net position and governmental funds balance sheet. In both the government-wide and governmental fund statements, taxes received that are intended to finance a future period are reported as unearned revenue. In subsequent periods, the liability for unearned revenue is removed from the statement of net position and governmental funds balance sheet and revenue is recognized. Expenditures/Expenses On the accrual basis of accounting, expenses are recorded at the time they are incurred. The measurement focus of governmental fund accounting is on flow of current financial resources. Expenditures are generally recognized in the accounting period in which the related fund liability is incurred except for (1) principal and interest on general long-term debt, which is recorded when due, and (2) the costs of accumulated unpaid vacation and sick leave, which are reported as fund liabilities in the period in which they will be liquidated with available financial resources rather than in the period earned by employees. 20

24 NOTES TO BASIC FINANCIAL STATEMENTS - CONTINUED JUNE 30, 2016 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED E. Budget The District adopts an annual budget for General Fund prior to the beginning of each fiscal year. The adopted budget specifies expenditure limits appropriated to each function. All annual appropriations lapse at fiscal year-end. The budget is prepared on a basis consistent with U. S. generally accepted accounting principles, which is consistent with actual financial statement results, including significant accruals to provide meaningful comparisons. Budgeted amounts are as amended. The District reports the annual budget of all funds on the modified accrual basis of accounting. F. Deposits and Investments The District considers all highly liquid investments (including restricted assets) with original maturities of three months or less when purchased to be cash equivalents. Securities with an initial maturity of more than three months (from when initially purchased) are reported as investments. State statutes authorize the District to invest in (1) obligations of the United States and its agencies, (2) general obligations of the State of South Carolina and its subdivisions, (3) savings and loan associations to the extent of federal insurance, (4) certificates of deposit collaterally secured, (5) repurchase agreements secured by the foregoing obligations, and (6) the State Treasurer s Investment Pool. The State Treasurer s Investment Pool is a 2a7-like pool, which is not registered with the Securities and Exchange Commission (SEC), but has a policy that it will operate in a manner consistent with the SEC s Rule 2a7 of the Investment Company Act of The fair value of the District s investments approximated cost. G. Due from (to) County Government (Cash with Fiscal Agent) The Allendale County Treasurer, fiscal agent for the District, receives monies from local, state and federal sources on behalf of the District. The monies held by the County Treasurer are uninsured but collateralized with government investments held by the pledging institution's agent in the name of Allendale County. Market value approximates cost on the investments. These monies are remitted to the District once a claim has been presented to the Allendale County Treasurer. H. Taxes Receivable Taxes receivable represent those delinquent taxes collected by the County and available to the District within sixty days subsequent to year-end. Due to the economic situation of the County, taxes receivable represents only the delinquent collections collected within sixty days. Any delinquent taxes not collected within sixty days are deemed uncollectable and are recorded as revenue if they are collected in future periods. I. Ad Valorem Taxes The District's property taxes (except vehicles) are levied by Allendale County (the County) each fall on the assessed valuation of the property located in the District as of the preceding January 1. The tax books are open for collection September 1, with the first penalty of 3% applied to payments made after January 15, the due date, and before February 15. An additional penalty of 10% is charged for payments made after February 15 and before March 16. After March 16, an additional 15% penalty plus the cost of collections is assessed. Uncollected property taxes as of April 1 are considered delinquent. The levy date for motor vehicle taxes is the first day of the month in which the motor vehicle license expires. These taxes are due by the last day of the month. 21