davidson county board of education lexington, north ... · 2015 are free of material misstatement....

DAVIDSON COUNTY BOARD OF EDUCATION Lexington, North Carolina

Comprehensive Annual Financial Report

Fiscal Year Ended June 30, 2015

DAVIDSON COUNTY BOARD OF EDUCATION, NORTH CAROLINA Table of Contents

June 30, 2015

INTRODUCTORY SECTION

Page Letter of Transmittal ....................................................................................................................... 1

List of Principal Officials ............................................................................................................... 5

Organizational Chart ....................................................................................................................... 6

FINANCIAL SECTION

Exhibit Independent Auditors’ Report .................................................................................................... 7

Management’s Discussion and Analysis ................................................................................... 10

Basic Financial Statements:

Government-wide Financial Statements:

A Statement of Net Position ...................................................................................................... 16

B Statement of Activities ........................................................................................................... 17

Fund Financial Statements:

C Balance Sheet – Governmental Funds ................................................................................... 19

D Statement of Revenues, Expenditures and Changes in Fund Balances -

Governmental Funds ......................................................................................................... 21

E Statement of Revenues, Expenditures and Changes in Fund Balances – Budget and

Actual – General Fund and Annually Budgeted Major Special Revenue Funds .............. 24

F Statement of Net Position – Proprietary Fund ....................................................................... 28

G Statement of Revenues, Expenses and Changes in Fund Net Position –

Proprietary Fund ............................................................................................................... 29

H Statement of Cash Flows – Proprietary Fund ........................................................................ 30

Notes to the Financial Statements .......................................................................................... 32

Required Supplementary Information:

Schedule of the Proportionate Share of the Net Pension Liability ........................................... 56

Schedule of Contributions ......................................................................................................... 57

DAVIDSON COUNTY BOARD OF EDUCATION, NORTH CAROLINA Table of Contents (Continued)

June 30, 2015

FINANCIAL SECTION (Continued)

Schedule Page Individual Fund Schedules:

1 Schedule of Revenues, Expenditures and Changes in Fund Balance – Budget and

Actual – General Fund ........................................................................................................... 58


Actual – State Public School Fund ........................................................................................ 60


Actual – Federal Grants Fund ............................................................................................... 61


Actual – Other Restricted Fund ............................................................................................. 62


Actual – Capital Outlay Fund ............................................................................................... 63

6 Schedule of Revenues and Expenditures – Budget and Actual (Non-GAAP) –

School Food Service Fund .................................................................................................... 64

STATISTICAL SECTION

Table

1 General Government Expenditures by Function .................................................................... 65

2 General Government Revenues by Source............................................................................. 66

3 Comparative Average Daily Membership .............................................................................. 67

4 Average Daily Membership ................................................................................................... 68

5 Property Tax Levies and Collections For Davidson County ................................................. 69

6 Assessed Value of Taxable Property For Davidson County .................................................. 70

7 Property Tax Rates – Direct and Overlapping Governments For Davidson County ............. 71

8 Assessed Property Values – Direct and Overlapping Governments For Davidson County .. 73

9 Ratio of Net General Bonded Debt To Assessed Value and Bonded Debt Per

Capita For Davidson County ............................................................................................. 75

10 Ratio of Annual Debt Service Expenditures For General Bonded Debt To Total General

Government Expenditures For Davidson County .............................................................. 76

11 Legal Debt Margin Information For Davidson County ......................................................... 77

12 Computation of Direct and Overlapping Governmental Activities Debt For

Davidson County ................................................................................................................ 78

13 Demographic and Economic Statistics For Davidson County ............................................... 79

14 Ratio of Outstanding Debt By Type For Davidson County ................................................... 80

15 Principal Taxpayers For Davidson County ............................................................................ 81

DAVIDSON COUNTY BOARD OF EDUCATION, NORTH CAROLINA Table of Contents (Continued)

June 30, 2015

COMPLIANCE SECTION

Page

Independent Auditors’ 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 ...................................... 82

Independent Auditors’ Report On Compliance With Requirements Applicable To Each

Major Federal Program And Internal Control Over Compliance in Accordance

With OMB Circular A-133 And The State Single Audit Implementation Act ................. 84

Independent Auditors’ Report On Compliance With Requirements Applicable To

Each Major State Program And Internal Control Over Compliance in Accordance

With OMB Circular A-133 And The State Single Audit Implementation Act ................. 86

Schedule of Findings and Questioned Costs ................................................................................ 88

Corrective Action Plan ................................................................................................................. 91

Summary Schedule of Prior Year Audit Findings ........................................................................ 92

Schedule of Expenditures of Federal and State Awards .............................................................. 93

Notes to the Schedule of Expenditures of Federal and State Awards .......................................... 96

This page intentionally left blank.

INTRODUCTORY SECTION

Unaudited

1

LETTER OF TRANSMITTAL

December 30, 2015

TO THE MEMBERS OF THE DAVIDSON COUNTY BOARD OF EDUCATION AND CITIZENS OF DAVIDSON COUNTY, NORTH CAROLINA

State law requires that all general-purpose local governments publish, within six months of the close of each fiscal year, a complete set of financial statements presented in conformity with generally accepted accounting principles (GAAP) and audited in accordance with generally accepted auditing standards by a firm of licensed certified public accountants. Pursuant to that requirement, we hereby issue the Comprehensive Annual Financial Report of the Davidson County Board of Education (the Board) for the fiscal year ended June 30, 2015.

The comprehensive annual financial report is presented in four sections: Introductory, Financial, Statistical, and Compliance. The Introductory section contains the letter of transmittal, a list of the Board members and principal officials, and the organizational chart. The introductory section is unaudited. The Financial section presents the independent auditors’report, management’s discussion and analysis, the basic financial statements, and the individual fund by fund type. The Statistical section contains tables of unaudited data covering a ten year financial history of the Board, as well as, statistical data for Davidson County. The Compliancesection presents information required by the OMB Circular A-133 and the State Single Audit Implementation Act.

This report consists of management’s representations concerning the finances of the Board. Consequently, management assumes full responsibility for the completeness and reliability of all of the information presented in this report. To provide a reasonable basis for making these representations, management of the Board has established a comprehensive internal control framework that is designed both to protect the Board’s assets from loss, theft, or misuse and compile sufficient reliable information for the preparation of the Board’s financial statements in conformity with GAAP.

The Board’s financial statements have been audited by Rives & Associates, LLP, a firm of licensed certified public accountants. The goal of the independent audit was to provide reasonable assurance that the financial statements of the Board for the fiscal year ended June 30, 2015 are free of material misstatement. The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; assessing the accounting principles used and significant estimates made by management; and evaluating the overall financial statement presentation. The auditors’ report can be found in the financial section of this report.

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The independent audit of the financial statements of the Board was part of a broader, federally

mandated “Single Audit” designed to meet the special needs of federal grantor agencies. The

standards governing Single Audit engagements require the independent auditor to report not only

on the fair presentation of the financial statements, but also on the audited Board’s internal

controls and compliance with legal requirements with special emphasis on internal controls and

legal requirements involving the administration of federal awards. These reports are available in

the Board’s separately issued Single Audit Report found in the compliance section of this report.

GAAP requires that management provide a narrative introduction, overview, and analysis to

accompany the basic financial statements in the form of Management’s Discussion and Analysis

(MD&A). This letter of transmittal is designed to complement the MD&A and should be read in

conjunction with it. The Board’s MD&A can be found immediately following the report of the

independent auditors in the financial section of this report.

SCHOOL SYSTEM AND GOVERANCE

The Davidson County School System is the twentieth largest among North Carolina’s 115 public

school systems. It serves 19,459 students in preschool through grade twelve. It extends across 35

campuses that include 18 elementary schools, seven middle schools, seven high schools, one

school for students with special needs, one early college, and one STEM school. Davidson

County Schools has six high school attendance areas comprised of a high school, middle school

and two to four elementary schools. Students attend their neighborhood school.

The Davidson County Schools join Lexington City Schools (student population 3,022),

Thomasville City Schools (student population 2,375) and the Davidson County Community

College as public providers of education in the County. All four education agencies receive

funding from federal, State, local and grant sources.

The Davidson County School System is governed by a nonpartisan Board of Education whose

five school district residents are elected at large and serve overlapping four-year terms. The

Board is responsible for setting educational policies consistent with State and federal laws

governing public education. The Board receives government funding from State, local, and

federal sources. The Board must comply with the established legal requirements of each funding

source. The Board has no taxing authority and is required to maintain accounting records in a

uniform format established by the State’s General Assembly.

GEOGRAPHY, POPULATION and ECONOMICS

Davidson County is located in the Piedmont Triad Area of North Carolina. It is 552.68 square

miles of suburban countryside. It is a neighbor to Winston-Salem in Forsyth County, High Point

and Greensboro in Guilford County, Salisbury in Rowan County and Asheboro in Randolph

County. The county seat is Lexington.

Davidson County Schools is now the largest employer in Davidson County following layoffs and

plant closings of Thomasville Furniture Industries and Lexington Home Brands.

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Davidson County’s population of 164,072 residents is 19.9% non-Caucasian, with the largest

percentages of non-Caucasian located within Lexington and Thomasville city limits. Davidson

County Schools continues to experience a growth in the number of students who speak English

as a second language. Most of the workforce within the County is blue collar, many of whom are

from families who have experienced career-long employment in furniture industries. Furniture

and textiles have provided jobs without requiring post high school training, and in many cases

high school completion. In the last six years 5,500 jobs have been lost in the textile industries

and in furniture manufacturing. Companies have closed or moved overseas. Many workers have

been forced to return to school for retraining and college degrees. Davidson County Community

College has seen enrollment grow. Today, 80.40% of the County’s population over 25 years of

age has a high school diploma or better, but only 17.60% of the same population has a college

degree. Many of the County’s college graduates choose not to return home to work. If they

return, they must travel to neighboring counties and larger cities to find professional jobs.

Closings of the textile and furniture plants have made it difficult for our community. The

unemployment rate is 5.9% which is above the state average of 5.8%. New industries are moving

to Davidson County but it will take time to create jobs equal to those lost due to plant closings.

FINANCIAL CHALLENGES

In 2001, Davidson County commissioners committed to building six new schools over the next

10 years. Brier Creek Elementary, Friendship Elementary, and Tyro Elementary Schools, have

been constructed. Southmont Elementary opened in the fall of 2009. Oak Grove Middle School

opened in the fall of 2012. The construction of a high school in the Oak Grove Area is scheduled

to start next year.

As part of the American Recovery and Reinvestment Act 2009 (ARRA), funds for construction

bonds were available through the Department of Public Instruction. In 2009-2010 the County

government took advantage of the funds and issued a Qualified School Construction Bond

(QSCB). Davidson County Schools received $2,189,907.95 of the bond proceeds. These monies

were to be used to repair roofs at Stoner-Thomas, Midway, and Welcome. Davidson County

Schools will repay the County for the bond’s debt service (principal and interest at .5187%). The

method of repayment was to begin in 2010-2011. The County government has chosen to reduce

the Davidson County School’s capital outlay budget annually for the repayment of the annual

debt service. This method of payback to the County government will occur over a period of 15

years. This annual reduction in the capital outlay budget will delay capital outlay needs by our

older schools.

In 2010-2011 the County issued another ARRA- QSCB in the amount of $12,863,316 to help pay

for Oak Grove Middle School. Davidson County Schools does not have to repay the County debt

service for these bond proceeds.

To offset the State budget cuts we began receiving ARRA funds in 2009-2010. As of June 30,

2015 we have spent all of our ARRA funds in the amount of $24,583,463. With the loss of

ARRA funds, along with the State budget projections next year more cuts are expected causing

greater budget challenges.

BUDGETARY CONTROLS

The North Carolina General Statutes require government units to adopt a balanced budget by JulyI of each year. The Board's annual budget resolution authorizes expenditures by function on themodified accural basis of accounting. The budget is allocated to line item expenditure accounts,for internal management purposes. The budget amounts in this report are presented in conformitywith the legally adopted budget ordinance as amended throughout the fiscal year.

CASH MANAGEMENT

The Board uses a purchase order encumbrance system that records encumbrances against eachexpenditure line item. State and federal outstanding encumbrances are cancelled at year-end.Local and capital outlay (category II & III) encumbrances are carried over into the subsequentyear and the budget amounts are re-appropriated.

Temporarily idle cash is invested in various instruments according to applicable State laws. Theobjective of the investment policy is to minimize market and credit risks while maintaining acompetitive yield on the investment. The Board's deposits were either insured or collateralized inaccordance with the state guidelines as described in the Notes to the Financial Statements sectionIII.A.!.

RISK MANAGEMENT

The Board is exposed to various risks of losses related to torts; theft of, damage to, anddestruction of assets; errors and omissions; injuries to employees; and natural disasters. TheBoard carries various forms of insurance including, but not limited to, general liability, errors andomissions coverage, risk control, risk financing, and property coverage. A detailed description ofour insurance coverage can be found in the Notes to the Financial Statements section III.B.4.

ACKNOWLEGMENTS

The preparation of this report would not have been possible without the dedicated services of thefinance staff and the Board's independent certified public accounting firm Rives & Associates,LLP. We would like to express our appreciation to all the employees who contributed andassisted with the preparation of this report.

In addition, we would like to thank the members of the Board of Education for their support anddedication in planning and conducting the financial matters of the school system in a responsiblemanner. In conclusion, we would like to thank the Board of County Commissioners for theirsupport throughout the fiscal year.

Respectfully submitted,

D~~Dr. Lory D. Morrow

;!Q:~}#-1CP1Pamela W. Sink, CPAChief Finance Officer

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DAVIDSON COUNTY BOARD OF EDUCATION

LIST OF PRINCIPAL OFFICIALS

June 30, 2015

BOARD OF EDUCATION MEMBERS

Brian M. Feezor, Chairman

Alan W. Beck, Vice-Chairman

Phillip W. Craver

Neal N. Motsinger

SUPERINTENDENT OF SCHOOLS

Dr. Lory M. Morrow

FINANCE OFFICER

Pamela W. Sink, CPA

Vicki A. Trial

5

6

DAVIDSON COUNTY BOARD OF EDUCATION

Organizational Chart

4515 Falls of Neuse Road, Suite 450

Raleigh, NC 27609

Phone: 919-832-6848

Fax: 919-832-7288

212 West Center Street

P.O. Box 1991

Lexington, NC 27293

Phone: 336-248-8281

Fax: 336-248-2335

1023 W. Morehead Street, Suite 100

Charlotte, NC 28208

Phone: 704-372-0960

Fax: 704-372-1458

Independent Auditors’ Report

Davidson County Board of Education, North Carolina

Lexington, North Carolina

Report on the Financial Statements

We have audited the accompanying financial statements of the governmental activities, the business-type

activities, each major fund, and the aggregate remaining fund information of the Davidson County Board of

Education, North Carolina, as of and for the year then ended June 30, 2015, and the related notes to the

financial statements, which collectively comprise the Davidson County Board of Education’s basic financial

statements as listed in the table of contents.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in

accordance with accounting principles generally accepted in the United States of America; this includes the

design, implementation, and maintenance of internal control relevant to the preparation and fair presentation

of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ 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.

7

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, business-type activities, each major fund, and the aggregate

remaining fund information of the Davidson County Board of Education, North Carolina as of June 30, 2015,

and the respective changes in financial position and cash flows, where applicable, thereof and the respective

budgetary comparison for the General Fund, State Public School Fund, Federal Grants Fund, and Other

Restricted Fund for the year then ended in accordance with accounting principles generally accepted in the

United States of America.

Emphasis of Matter

Adoption of New Accounting Standards

As described in Note V to the financial statements, for the year ended June 30, 2015, the Davidson County

Board of Education, North Carolina adopted new accounting guidance, Governmental Accounting Standards

Board (GASB) Statement No. 68, Accounting and Financial Reporting for Pensions and GASB Statement

No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date. Our opinion is not

modified with respect to these items.

Other Matters

Required Supplementary Information

Accounting principles generally accepted in the United States of America require that Management’s

Discussion and Analysis on pages 10 through 15 and the Schedule of the Proportionate Share of the Net

Pension Liability and the Schedule of Contributions on pages 56 and 57, respectively be presented to

supplement the basic financial statements. Such information, although not a part of the basic financial

statements, is required by the Governmental Accounting Standards Board who considers it to be an essential

part of financial reporting for placing the basic financial statements in an appropriate operational, economic,

or historical context. We have applied certain limited procedures to the required supplementary information in

accordance with auditing standards generally accepted in the United States of America, which consisted of

inquiries of management about the methods of preparing the information and comparing the information for

consistency with management’s responses to our inquiries, the basic financial statements, and other

knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or

provide any assurance on the information because the limited procedures do not provide us with sufficient

evidence to express an opinion or provide any assurance.

Other Information

Our audit was conducted for the purpose of forming opinions on the financial statements that collectively

comprise the Davidson County Board of Education’s basic financial statements. The individual fund

schedules budget and actual, introductory section, statistical section, as well as the schedule of expenditures

of federal and State awards, as required by U.S. Office of Management and Budget Circular A-133, Audits of

States, Local Governments, and Non-Profit Organizations, are presented for purposes of additional analysis

and are not a required part of the basic financial statements.

8

The individual fund schedules budget and actual, and the accompanying schedule of expenditures of federal

and State 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 individual fund schedules budget and actual, and the

accompanying schedule of expenditures of federal and State awards are fairly stated, in all material respects,

in relation to the basic financial statements taken as a whole.

The introductory and statistical sections have not been subjected to auditing procedures applied in the audit of

the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on

them.

Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, we have also issued our reports dated December 30,

2015 on our consideration of Davidson County Board of Education’s internal control over financial reporting

and our tests of its compliance with certain provisions of laws, regulations, contracts, grant agreements, and

other matters. The purpose of these reports are 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 internal

control over financial reporting or on compliance. These reports are an integral part of an audit performed in

accordance with Government Auditing Standards in considering the Davidson County Board of Education’s

internal control over financial reporting and compliance.


December 30, 2015

9

MANAGEMENT'S DISCUSSION AND ANALYSIS

DAVIDSON COUNTY BOARD OF EDUCATION, NORTH CAROLINA Management’s Discussion and Analysis

June 30, 2015

10

This section of the Davidson County Board of Education’s (the Board) financial report represents our discussion

and analysis of the financial performance of the Board for the year ended June 30, 2015. This information

should be read in conjunction with the audited financial statements included in this report.

Financial Highlights

The Board experienced a decrease in enrollment of 326 students from the previous year.

Construction for the high school in the Oak Grove area is scheduled to start in 2015-16.

Most of the Federal funding received from The American Recovery and Reinvestment Act of 2009 (ARRA)

has been spent. These funds were used in our Title I, Exceptional Children, Technology, Instructional, and

Non-Instructional Support programs.

Overview of the Financial Statements

The audited financial statements of the Davidson County Board of Education consist of four components. They

are as follows:

Independent Auditor’s Report

Management’s Discussion and Analysis (required supplementary information)

Basic Financial Statements

Required supplemental section that presents combining and budgetary statements for governmental and

enterprise funds

The Basic Financial Statements include two types of statements that present different views of the Board’s

finances. The first is the government-wide statements. The government-wide statements are presented on the

full accrual basis of accounting and include the statement of net position and the statement of activities. The

Statement of Net Position includes all of the Board’s assets, deferred outflows of resources, liabilities, and

deferred inflows of resources. Assets and liabilities are classified in order of relative liquidity for assets and due

date for liabilities. This statement provides a summary of the Board’s investment in assets, deferred outflows of

resources, deferred inflows of resources, and obligations to creditors. Liquidity and financial flexibility can be

evaluated using the information contained in this statement. The Statement of Activities summarizes the

Board’s revenues and expenses for the current year. A net (expense) revenue format is used to indicate to what

extent each function is self-sufficient.

The second set of statements included in the basic financial statements is the Fund Financial Statements, which

are presented for the Board’s governmental funds and proprietary fund. These statements present the

governmental funds on the modified accrual basis of accounting, measuring the near term inflows and outflows

of the financial resources and what is available at year-end to spend in the next fiscal year. The proprietary fund

is presented on the full accrual basis of accounting. The fund financial statements focus on the Board’s most

significant funds. Because a different basis of accounting is used in the government-wide statements,

reconciliation from the governmental fund financial statements to the government-wide statements is required.

The government-wide statements provide information about the Board as an economic unit while the fund

financial statements provide information on the financial resources of each of the Board’s major funds.

Government-wide Statements

The government-wide statements report information about the unit as a whole using accounting methods similar

to those used by private-sector companies. The Statement of Net Position includes all of the Board’s assets,

deferred outflows of resources, deferred inflows of resources, and liabilities. All of the current year’s revenues

and expenses are accounted for in the Statement of Activities regardless of when cash is received or paid.


June 30, 2015

11

Government-wide Statements (Continued)

The two government-wide statements report the Board’s net position and how it has changed. Net position – the

difference between the Board’s assets, deferred outflows of resources and the total of liabilities and deferred

inflows of resources – is one way to measure the unit’s financial health or position.

Over time, increases or decreases in the Board’s net position are an indicator of whether its financial

position is improving or deteriorating.

To assess the Board’s overall health, one should consider additional non-financial factors such as

changes in the County’s property tax base and the condition of its school buildings and other physical

assets.

The Board’s activities are divided into two categories in the government-wide statements:

Governmental activities: Most of the Board’s basic services are included here, such as regular and

special education, transportation, and administration. County funding and State and federal aid finance

most of these activities.

Business-type activities: The Board charges fees to help cover the cost of certain services it provides.

School food service is included here.

The government-wide statements are Exhibits A and B of this report.

Fund Financial Statements

The fund financial statements provide detailed information about the Board’s funds, focusing on its most

significant or “major” funds. Funds are accounting devices the Board uses to keep track of specific sources of

funding and spending on particular programs.

Some funds are required by State law, such as the State Public School Fund.

The Board established other funds, such as the Federal Grants fund, to control and manage money for a

particular purpose or to show that it is properly using certain revenues.

Davidson County Board of Education has two types of funds:

Governmental funds: Most of the Board’s basic services are included in the governmental funds, which

generally focus on two things – how cash and other assets can readily be converted to cash flow in and out, and

the balances left at year-end that are available for spending. As a result of this focus, the governmental fund

statements provide a detailed short-term view that helps the reader determine whether there are more or fewer

financial resources that can be spent in the coming year to finance the Board’s programs. Because this

information does not encompass the additional long-term focus of the government-wide statements, a

reconciliation following the governmental funds statements, explains the relationship (or differences) between

the government-wide and the fund financial statements. The Board has several governmental funds: the

General Fund, the State Public School Fund, the Individual Schools Fund, the Capital Outlay Fund, and the

Federal Grants Fund.


June 30, 2015

12

Fund Financial Statements (Continued)

The governmental fund statements are Exhibits C, D, and E of this report.

Proprietary funds: Services for which the Board charges a fee are generally reported in the proprietary fund.

The proprietary fund statements are reported on the same full accrual basis of accounting as the government-

wide statements. Davidson County Board of Education has one proprietary fund – an enterprise fund – the

School Food Service Fund.

The proprietary fund statements are shown as Exhibits F, G, and H of this report.

Financial Analysis of the Board as a Whole

Net position is an indicator of the fiscal health of the Board. Assets and deferred outflows of resources

exceeded liabilities and deferred inflows of resources by $143,642,189 as of June 30, 2015. The largest

component of net position is net investment in capital assets of $161,020,139.

The following is a summary of the Statement of Net Position:

6/30/15 6/30/14 6/30/15 6/30/14 6/30/15 6/30/14

Current assets 24,396,601$ 31,169,957$ 2,355,090$ 3,123,499$ 26,751,691$ 34,293,456$

Capital assets 161,258,050 161,957,190 995,532 1,131,375 162,253,582 163,088,565

Total assets 185,654,651 193,127,147 3,350,622 4,254,874 189,005,273 197,382,021

Deferred outflows of

resources 7,901,862 - 211,277 - 8,113,139 -

Current liabilities 13,863,259 13,671,234 179,800 106,009 14,043,059 13,777,243

Long-term liabilities 10,801,290 3,644,329 199,620 - 11,000,910 3,644,329

Total liabilities 24,664,549 17,315,563 379,420 106,009 25,043,969 17,421,572

Deferred inflows of

resources 27,695,232 160,152 737,022 81,227 28,432,254 241,379

Net investment in

capital assets 160,024,607 161,774,229 995,532 1,131,375 161,020,139 162,905,604

Restricted net position 3,080,835 3,857,928 - - 3,080,835 3,857,928

Unrestricted net position (21,908,710) 10,019,275 1,449,925 2,936,263 (20,458,785) 12,955,538

Total net position 141,196,732$ 175,651,432$ 2,445,457$ 4,067,638$ 143,642,189$ 179,719,070$

Governmental Activities Business-type Activities Total Primary Government

Condensed Statement of Net Position

June 30, 2015 and 2014

During the year ended June 30, 2015, the Board adopted Governmental Accounting Standards Board (GASB)

Statement No. 68, Accounting and Financial Reporting for Pensions and related GASB Statement No. 71,

Pension Transition for Contributions Made Subsequent to the Measurement Date. These statements require the

Board to recognize its proportionate share of the net pension asset or liability, deferred outflows and deferred

inflows of resources, and related expenses from its participation in the North Carolina Teachers’ and State

Employees’ Retirement System. The results of these statements include recognizing a net pension liability for

the defined benefit plan and related deferred outflows and deferred inflows of resources.


June 30, 2015

13

Financial Analysis of the Board as a Whole (Continued)

The cumulative effect of implementing these statements resulted in a restatement of beginning net position for

the governmental activities and business-type activities of ($31,993,506) and ($855,428), respectively. The total

decrease in net position, compared to the prior year, is approximate 20% which is largely due to the

implementation of the new GASB statements.

The following table shows the revenues and expenses for the Board for the current fiscal year.

6/30/15 6/30/14 6/30/15 6/30/14 6/30/15 6/30/14

Revenues:

Program revenues:

Charges for services 5,386,728$ 803,565$ 2,586,364$ 2,764,046$ 7,973,092$ 3,567,611$

Operating grants and

contributions 111,457,441 111,151,866 5,385,713 5,378,430 116,843,154 116,530,296

Capital grants and

contributions 955,305 40,427 - - 955,305 40,427

General revenues:

Other revenues 31,749,908 31,793,696 13,181 13,796 31,763,089 31,807,492

Total revenues 149,549,382 143,789,554 7,985,258 8,156,272 157,534,640 151,945,826

Expenses:

Governmental activities:

Instructional services 117,976,579 116,250,031 - - 117,976,579 116,250,031

System-wide support services 27,271,614 24,326,144 - - 27,271,614 24,326,144

Ancillary services 14,030 128,607 - - 14,030 128,607

Non-programmed charges 101,437 3,052,222 - - 101,437 3,052,222

Interest on long-term debt - 2,275 - - - 2,275

Depreciation 6,552,663 7,486,649 - - 6,552,663 7,486,649

Business-type activities:

Food service - - 8,846,264 8,631,028 8,846,264 8,631,028

Total expenses 151,916,323 151,245,928 8,846,264 8,631,028 160,762,587 159,876,956

Transfers in (out) (94,253) (59,677) 94,253 59,677 - -

Decrease in net assets (2,461,194) (7,516,051) (766,753) (415,079) (3,227,947) (7,931,130)

Net position, beginning,

as previously reported 175,651,432 183,167,483 4,067,638 4,482,717 179,719,070 187,650,200

Restatement - GASB 68* (31,993,506) - (855,428) - (32,848,934) -

Net position, beginning,

as restated i 143,657,926 183,167,483 3,212,210 4,482,717 146,870,136 187,650,200

Ending net position 141,196,732$ 175,651,432$ 2,445,457$ 4,067,638$ 143,642,189$ 179,719,070$


Condensed Statement of Activites

For the Years Ended June 30, 2015 and 2014

* It is important to understand that the year to year comparison is skewed by the Board’s required adoption of

GASB 68 in the year ended June 30, 2015. The Board is overfunded on an actuarial basis. As a result, the

contribution accrued by the Board for the Teachers’ and State Employees’ Retirement System, which is

typically expensed under both accounting methods (government-wide and governmental funds) is

recognized as a deferred outflow of resources on the government-wide statement of net position. In essence

it is considered a prepaid item which will be added to the net pension asset/liability in future periods. Total

governmental activities generated revenues of $150 million, while expenses in this category totaled $152

million for the year ended June 30, 2015.


June 30, 2015

14

Financial Analysis of the Board as a Whole (Continued)

Comparatively, revenues were $144 million and expenses totaled $151 million for the year ended June 30, 2014.

After transfers to the business-type activities, the decrease in net position amounted to approximately

$2,461,194 at June 30, 2015, compared to an decrease in net position of $7,516,051 in 2014. Instructional

services expenses comprised 78% of total governmental-type expenses while system-wide support services

made up 18% of those expenses for 2015. County funding comprised 17.8% of total governmental revenue for

2015. In 2014, County funding was 17.5%. Much of the remaining 82.2% of total governmental revenue for

2015 consisted of restricted State and federal money. This revenue represented 82.5% of total revenue in 2014.

Business-type activities generated revenue of $8.0 million and expenses of $8.8 million. Net position decreased

in the business-type activities by $766,753, after transfers from the governmental activities of $94,253.

Financial Analysis of the Board’s Funds

Governmental Funds: The focus of Davidson County Board of Education’s governmental funds is to provide

information on near-term inflows, outflows, and balances of usable resources. Such information is useful in

assessing the Board’s financing requirements.

The Board’s governmental funds reported a combined fund balance of $18,233,686, a $3,249,052 decrease over

last year. Expenditures and other uses exceeded revenues in the amount of $2,767,998 in the General Fund, and

$2,581,140 in the Capital Outlay Fund. The Individual Schools Fund and Other Restricted Fund had revenues

exceeding expenditures, before other financing sources (uses) in the amount of $118,990 and $14,720,

respectively. State funding increased $5,656,131 when compared to 2014. County funding increased by

$1,444,316. Federal funding decreased by $880,666. Expenditures increased by $6,676,519, which included

$6,527,525 in capital outlay.

Proprietary Fund: The School Food Service Fund net position decreased by $1,622,181. Approximately half of

this decreased was a result of implementation of the new GASB standards. Revenue decreased by

approximately $171,000, while expenses increased approximately by $215,000, when compared with the

previous year.

Expenditure analysis: Instructional programs represented 81% of governmental expenditures, excluding capital

outlay. Total governmental expenditures are categorized below:

Categorization of Expenditures for Governmental Funds

(excluding capital outlay)

18%

0% 1%

81%

Instructional Programs

System-Wide Services

Other

Debt Service

Expenditures presented on modified accrual basis of accounting.


June 30, 2015

15

General Fund Budgetary Highlights

Over the course of the year, the Board revised the budget several times to account for changes in revenue

expectations but was able to keep spending below the amended budgeted amounts. Even with the reductions in

revenue, the Board was able to reduce spending and end the year with minimal deficits.

Capital Assets

Capital assets decreased by $834,983 (or 0.51%) from the previous year. This was largely due to depreciation

exceeding capital asset additions. The following is a summary of the capital assets, net of depreciation at year-

end.

6/30/15 6/30/14 6/30/15 6/30/14 6/30/15 6/30/14

Land 2,281,868$ 2,281,868$ -$ -$ 2,281,868$ 2,281,868$

Construction in progress 11,933,811 13,296,880 - - 11,933,811 13,296,880

Buildings 132,753,341 134,674,940 - - 132,753,341 134,674,940

Land Improvements 6,070,766 4,224,597 - - 6,070,766 4,224,597

Equipment and furniture 2,515,335 3,122,252 995,532 1,131,375 3,510,867 4,253,627

Vehicles 5,702,929 4,356,653 - - 5,702,929 4,356,653

161,258,050$ 161,957,190$ 995,532$ 1,131,375$ 162,253,582$ 163,088,565$

Summary of Capital Assets


Economic Factors

The Davidson County Schools’ student population decreased this year. Davidson County has been experiencing

conditions similar to those of other North Carolina counties that have relied on one or two major industries.

Because new industries are expanding within the area, the unemployment rate in Davidson County and

throughout the State is decreasing. Compared to last year, Davidson County’s unemployment rate decreased by

0.8% (6.7% to 5.9%). The State’s unemployment rate decreased 0.4% (6.2% to 5.8%). Additional industries are

needed in our community to expand the tax base in order to provide funding for construction and to provide

adequate funding for the instructional programs.

Requests for Information

This report is intended to provide a summary of the financial condition of Davidson County Board of Education.

Questions or requests for additional information should be addressed to:

Pamela W. Sink, Chief Finance Officer

Davidson County Board of Education

250 County School Road

Lexington, NC 27292

FINANCIAL SECTION

BASIC FINANCIAL STATEMENTS

Exhibit A

Governmental

Activities

Business-type

Activities Total

ASSETS

Cash and cash equivalents 19,217,616$ 1,908,473$ 21,126,089$

Accounts receivable 15,466 604 16,070

Due from other governments 5,116,435 254,074 5,370,509

Internal balances 47,084 (47,084) -

Inventories - 239,023 239,023

24,396,601 2,355,090 26,751,691

Capital assets:

Land 2,281,868 - 2,281,868

Construction in progress 11,933,811 - 11,933,811

Other capital assets, net of depreciation 147,042,371 995,532 148,037,903

Total capital assets 161,258,050 995,532 162,253,582

Total assets 185,654,651 3,350,622 189,005,273

DEFERRED OUTFLOWS OF RESOURCES 7,901,862 211,277 8,113,139

LIABILITIES

Accounts payable 877,164 - 877,164

Due to other governments 35,501 - 35,501

Accrued salaries and wages payable 5,120,043 - 5,120,043 Unearned revenue - 89,068 89,068

Long-term liabilities:

Net pension liability 7,465,903 199,620 7,665,523

Due within one year 7,830,551 90,732 7,921,283

Due in more than one year 3,335,387 - 3,335,387

Total liabilities 24,664,549 379,420 25,043,969

DEFERRED INFLOWS OF RESOURCES 27,695,232 737,022 28,432,254

NET POSITION

Net investment in capital assets 160,024,607 995,532 161,020,139

Restricted for:

Stabilization by State statute 1,072,598 - 1,072,598

Capital outlay 570,284 - 570,284

Individual schools 1,437,953 - 1,437,953

Unrestricted (21,908,710) 1,449,925 (20,458,785)

Total net position 141,196,732$ 2,445,457$ 143,642,189$

Primary Government

DAVIDSON COUNTY BOARD OF EDUCATION, NORTH CAROLINA

Statement of Net Position

June 30, 2015

The accompanying notes to the financial statements are an integral part of these statements.

16

Exhibit B

Functions/Programs Expenses

Charges for

Services

Operating

Grants and

Contributions

Capital Grants

and

Contributions

Governmental

Activities

Business-type

Activities Total

Primary government:


Instructional services:

Regular instructional 71,162,101$ 361,874$ 64,680,318$ -$ (6,119,909)$ -$ (6,119,909)$

Special populations 16,587,287 - 16,098,760 - (488,527) - (488,527)

Alternative programs 6,329,570 - 6,395,412 - 65,842 - 65,842

School leadership 8,582,230 - 5,733,839 - (2,848,391) - (2,848,391)

Co-curricular 836,769 - - - (836,769) - (836,769)

School-based support 14,478,622 4,425,600 7,354,590 - (2,698,432) - (2,698,432)

System-wide support services:

Support and development 740,799 - 182,754 - (558,045) - (558,045)

Special population support and development 296,629 - 290,791 - (5,838) - (5,838)

Alternative programs and services support

and development 331,736 - 329,284 - (2,452) - (2,452)

Technology support 2,858,269 - 242,812 - (2,615,457) - (2,615,457)

Operational support 19,007,157 599,254 8,126,556 955,305 (9,326,042) - (9,326,042)

Financial and human resource 2,314,172 - 847,097 - (1,467,075) - (1,467,075)

Accountability 413,749 - 261,534 - (152,215) - (152,215)

System-wide pupil support 49,687 - - - (49,687) - (49,687)

Policy, leadership and public relations 1,259,416 - 627,014 - (632,402) - (632,402)

Ancillary services 14,030 - 85,703 - 71,673 - 71,673

Non-programmed charges 101,437 - 200,977 - 99,540 - 99,540

Unallocated depreciation expense* 6,552,663 - - - (6,552,663) - (6,552,663)

Total governmental activities 151,916,323 5,386,728 111,457,441 955,305 (34,116,849) - (34,116,849)


School food service 8,846,264 2,586,364 5,385,713 - - (874,187) (874,187)

Total business-type activities 8,846,264 2,586,364 5,385,713 - - (874,187) (874,187)

Total primary government 160,762,587$ 7,973,092$ 116,843,154$ 955,305$ (34,116,849) (874,187) (34,991,036)

* - This amount excludes the depreciation that is included in the direct expenses of various programs.

Primary Government

Net (Expenses) Revenue

and Changes in Net PositionProgram Revenues


Statement of Activities

For the Year Ended June 30, 2015


17

Exhibit B (Continued)

Governmental

Activities

Business-type

Activities Total

General revenues:

Unrestricted County appropriations - operating 22,774,932$ -$ 22,774,932$

Unrestricted County appropriations - capital 3,671,194 - 3,671,194

Unrestricted State grants 3,330,268 - 3,330,268

Unrestricted federal grants 1,032,192 - 1,032,192

Investment earnings, unrestricted 32,494 4,171 36,665

Miscellaneous, unrestricted 908,828 9,010 917,838

Transfers (94,253) 94,253 -

Total general revenues and transfers 31,655,655 107,434 31,763,089

Change in net position (2,461,194) (766,753) (3,227,947)

Beginning net position, as previously stated 175,651,432 4,067,638 179,719,070

Restatement of net position (31,993,506) (855,428) (32,848,934)

Beginning net position, as restated 143,657,926 3,212,210 146,870,136

Ending net position 141,196,732$ 2,445,457$ 143,642,189$

Primary Government


Statement of Activities


Net (Expenses) Revenue

and Changes in Net Position


18

Exhibit C

General

State

Public School

Federal Grants

Fund

Individual

Schools

Other

Restricted

Fund

Capital Outlay

Fund

Total

Governmental

Funds

ASSETS

Cash and cash equivalents 15,932,763$ 35,501$ -$ 1,586,741$ -$ 1,662,611$ 19,217,616$

Accounts receivable 12,116 - - - - 3,350 15,466

Due from other governments 241,875 4,094,463 293,358 - 87,527 399,212 5,116,435

Due from other funds 179,730 - - - 148,788 - 328,518

Total assets 16,366,484$ 4,129,964$ 293,358$ 1,586,741$ 236,315$ 2,065,173$ 24,678,035$

Liabilities:

Accounts payable 511,596$ -$ -$ -$ 2,463$ 363,105$ 877,164$

Due to other governments - 35,501 - - - - 35,501

Due to other funds 6,367 - - 148,788 126,279 - 281,434

Accrued salaries and wages payable 769,576 4,044,697 283,007 - 22,763 - 5,120,043

Total liabilities 1,287,539 4,080,198 283,007 148,788 151,505 363,105 6,314,142

Deferred inflows of resources - 49,766 10,351 - 70,090 - 130,207

Fund balances:

Restricted:

Stabilization by State statute 433,721 - - - 236,315 402,562 1,072,598

Individual schools - - - 1,437,953 - - 1,437,953

Capital outlay - - - - - 570,284 570,284

Assigned:

Subsequent years expenditures 6,000,000 - - - - 729,222 6,729,222

Unassigned 8,645,224 - - - (221,595) - 8,423,629

Total fund balances 15,078,945 - - 1,437,953 14,720 1,702,068 18,233,686

Total liabilities, deferred inflows

of resources, and fund balances 16,366,484$ 4,129,964$ 293,358$ 1,586,741$ 236,315$ 2,065,173$ 24,678,035$

June 30, 2015

Major Funds

LIABILITIES, DEFERRED INFLOWS OF

RESOURCES, AND FUND BALANCES


Balance Sheet

Governmental Funds


19

Exhibit C (Continued)

Total governmental fund balances 18,233,686$

255,157,547$

Less: accumulated depreciation (93,899,497)

Net capital assets 161,258,050

Deferred outflows of resources related to pension:

Contributions made to the pension plan in the current fiscal year 7,901,862

Installment purchase obligations (1,233,443)

Compensated absences (9,932,495)

Net pension liability (7,465,903)

Total long-term liabilities (18,631,841)

Deferred inflows of resources related to pension:

Differences between expected and actual experience (1,740,262)

Difference between projected and actual earnings on plan investments (25,224,557)

(600,206)

Total deferred inflows of resources related to pension (27,565,025)

Total net position - governmental activities 141,196,732$


Balance Sheet

Capital assets used in governmental activities are not financial resources and therefore

are not reported as assets in governmental funds.

Long-term liabilities are not due and payable in the current period and therefore are not

reported as liabilities in the funds. Long-term liabilities at year end consisted of:

Amounts reported for governmental activities in the statement of net position (Exhibit A)

are different because:

Differences between contributions and proportional share of contributions

and changes in proportion

Governmental Funds

June 30, 2015


20

Exhibit D

General

State Public

School

Federal Grants

Fund

Individual

Schools

Other Restricted

Fund

Capital Outlay

Fund

Total

Governmental

Funds

REVENUES:

State of North Carolina -$ 105,570,739$ -$ -$ 890,059$ 924,445$ 107,385,243$

Davidson County 22,268,544 - - - 506,386 3,926,054 26,700,984

U.S. Government 1,019,446 - 7,959,811 - 114,336 - 9,093,593

Other 1,364,585 - - 4,425,600 778,489 20,331 6,589,005

Total revenues 24,652,575 105,570,739 7,959,811 4,425,600 2,289,270 4,870,830 149,768,825

EXPENDITURES:


Regular instructional 7,463,748 63,999,446 622,363 - 744,909 - 72,830,466

Special populations 603,472 12,859,418 3,239,342 - 239,175 - 16,941,407

Alternative programs 31,984 2,499,941 3,084,903 - 826,695 - 6,443,523

School leadership 1,482,360 6,959,959 935 - 320,649 - 8,763,903

Co-curricular 849,202 - - - - - 849,202

School-based support 1,797,234 8,340,401 128,177 4,306,610 49,130 - 14,621,552

Total instructional services 12,228,000 94,659,165 7,075,720 4,306,610 2,180,558 - 120,450,053


Support and development 563,118 174,475 8,279 - - - 745,872

Special population support and development 13,584 173,100 117,691 - - - 304,375

Alternative programs and services

support and development 1,165 50,716 278,568 - - - 330,449

Technology support 2,591,608 242,812 - - - - 2,834,420

Operational support 10,133,501 8,025,631 100,925 - 93,933 - 18,353,990

Financial and human resource 915,368 1,246,914 177,651 - - - 2,339,933

Accountability 137,944 285,209 - - - - 423,153

System-wide pupil support 50,245 - - - - - 50,245

Policy, leadership and public relations 648,220 627,014 - - - - 1,275,234

Total system-wide support services 15,054,753 10,825,871 683,114 - 93,933 - 26,657,671


Statement of Revenues, Expenditures, and Changes in Fund Balances

Governmental Funds


Major Funds


21

Exhibit D (Continued)

General

State Public

School

Federal Grants

Fund

Individual

Schools

Other Restricted

Fund

Capital Outlay

Fund

Total

Governmental

Funds

Ancillary services 17,917$ -$ -$ -$ 59$ -$ 17,976$

Non-programmed charges 119,903 - 200,977 - - - 320,880

Debt service:

Principal - - - - - 924,445 924,445

Capital outlay:

Furniture and equipment - - - - - 332,006 332,006

Buses and motor vehicles - - - - - 2,396,414 2,396,414

Improvements and renovations - - - - - 2,804,069 2,804,069

Computer equimpment - - - - - 967,598 967,598

Supplies and materials - - - - - 27,438 27,438

Total capital outlay - - - - - 6,527,525 6,527,525

Total expenditures 27,420,573 105,485,036 7,959,811 4,306,610 2,274,550 7,451,970 154,898,550

Revenues over (under) expenditures (2,767,998) 85,703 - 118,990 14,720 (2,581,140) (5,129,725)

OTHER FINANCING SOURCES (USES):

Installment purchase obligations issued - - - - - 1,974,926 1,974,926

Transfers from (to) other funds 1,521,513 (85,703) - - (1,622,357) 92,294 (94,253)

Total other financing sources (uses) 1,521,513 (85,703) - - (1,622,357) 2,067,220 1,880,673

Net change in fund balance (1,246,485) - - 118,990 (1,607,637) (513,920) (3,249,052)

FUND BALANCES:

Beginning of year 16,325,430 - - 1,318,963 1,622,357 2,215,988 21,482,738

End of year 15,078,945$ -$ -$ 1,437,953$ 14,720$ 1,702,068$ 18,233,686$

Major Funds



Governmental Funds



22

Exhibit D (Continued)

Net change in fund balances - total governmental funds (3,249,052)$

Expenditures recorded in the fund statements but capitalized as assets on the

statement of activities 7,756,611

Depreciation expense that is recorded on the statement of activities but not in the

fund statements (7,877,908)

New debt issued during the year is recorded as a source of funds on the fund

statements; it has no effect on the statement of activities - it affects only the

government-wide statement of net position. (1,974,926)

Principal payments on debt owed are recorded as a use of funds on the fund

statements but affect only the statement of net position in the government-wide

statements. 924,445

Contributions to the pension plan in the current fiscal year not included on the

statement of activities. 7,903,841

Pension expense (3,037,421)

Compensated absences (2,328,941)

Loss on disposal of assets (577,843)

Total changes in net position of governmental activities (2,461,194)$

Governmental funds report capital outlays as expenditures. However, in the

statement of activities, the cost of these assets is allocated over their estimated

useful lives and reported as depreciation expense.

Expenses reported in the statement of activities do not require the use of financial

resources and, therefore, are not reported as expenditures in governmental funds.



Governmental Funds


Amounts reported for governmental activities in the statement of activities (Exhibit B)

are different because:


23

Actual

Variance with

Final Budget

Positive

Original Final Amounts (Negative)

REVENUES:

State of North Carolina -$ -$ -$ -$

Davidson County 23,961,905 22,268,544 22,268,544 -

U.S. Government - 1,019,446 1,019,446 -

Other 467,932 1,300,304 1,364,585 64,281

Total revenues 24,429,837 24,588,294 24,652,575 64,281

EXPENDITURES:


Regular instructional 5,843,333 7,602,434 7,463,748 138,686

Special populations 618,911 603,915 603,472 443

Alternative programs 30,455 33,137 31,984 1,153

School leadership 1,327,167 1,575,878 1,482,360 93,518

Co-curricular 949,491 897,371 849,202 48,169

School-based support 640,454 1,844,699 1,797,234 47,465


Support and development 816,803 585,732 563,118 22,614

Special population support and development 8,353 14,421 13,584 837

Alternative programs, support and development 3,906 1,165 1,165 -

Technology support 4,962,266 2,790,413 2,591,608 198,805

Operational support 10,928,925 11,104,422 10,133,501 970,921

Financial and human resource 1,338,451 1,001,415 915,368 86,047

Accountability 178,542 156,677 137,944 18,733

System-wide pupil support 31,093 51,895 50,245 1,650

Policy, leadership and public relations 1,183,273 855,225 648,220 207,005

Ancillary services 7,420 17,921 17,917 4

Non-programmed charges 1,872,155 1,621,283 119,903 1,501,380

Total expenditures 30,740,998 30,758,003 27,420,573 3,337,430

Revenues over (under) expenditures (6,311,161) (6,169,709) (2,767,998) 3,401,711


Transfers from (to) other funds - 1,510,983 1,521,513 10,530

Revenues and other sources over (under)

expenditures and other financing sources (6,311,161) (4,658,726) (1,246,485) 3,412,241 `

Appropriated fund balance 6,311,161 4,658,726 - (4,658,726)

Net change in fund balance -$ -$ (1,246,485) (1,246,485)$

FUND BALANCES:

Beginning of year 16,325,430

End of year 15,078,945$

Statement of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual



Budget

General Fund and Annually Budgeted Major Special Revenue Funds

General Fund

The accompanying notes to the financial statements are an intergral part of these statements.

24

Exhibit E

Actual

Variance with

Final Budget

Positive


101,443,793$ 107,392,338$ 105,570,739$ (1,821,599)$

- - - -

- - - -

- - - -

101,443,793 107,392,338 105,570,739 (1,821,599)

62,642,567 65,263,788 63,999,446 1,264,342

12,025,125 12,881,507 12,859,418 22,089

2,328,669 2,965,288 2,499,941 465,347

6,093,545 6,964,150 6,959,959 4,191

- - - -

7,860,613 8,340,503 8,340,401 102

240,802 174,475 174,475 -

171,005 173,100 173,100 -

60,076 50,716 50,716 -

83,485 242,812 242,812 -

7,775,044 8,070,797 8,025,631 45,166

1,322,090 1,246,914 1,246,914 -

248,069 285,209 285,209 -

- - - -

503,090 627,014 627,014 -

- - - -

- - - -

101,354,180 107,286,273 105,485,036 1,801,237

89,613 106,065 85,703 (20,362)

(89,613) (106,065) (85,703) 20,362

- - - -

- - - -

-$ -$ - -$

-

-$

State Public School Fund

Budget

The accompanying notes to the financial statements are an intergral part of these statements.

25

Actual

Variance with

Final Budget

Positive


REVENUES:

State of North Carolina -$ -$ -$ -$

U.S. Government 8,792,598 9,431,421 7,959,811 (1,471,610)

Davidson County - - - -

Other revenues - - - -

Total revenues 8,792,598 9,431,421 7,959,811 (1,471,610)

EXPENDITURES:


Regular instructional 520,327 708,490 622,363 86,127

Special populations 3,339,089 3,684,072 3,239,342 444,730

Alternative programs 3,622,146 3,469,747 3,084,903 384,844

School leadership 5,310 3,925 935 2,990

Co-curricular services - - - -

School-based support 84,492 170,505 128,177 42,328


Support and development 93,350 8,279 8,279 -

Special population support and development 121,592 126,174 117,691 8,483

Alternative programs and services

support and development 350,872 379,724 278,568 101,156

Technology support 5,000 172,086 - 172,086

Operational support 294,973 276,666 100,925 175,741

Financial and human resource 185,749 200,076 177,651 22,425

Policy, leadership and public relations - - - -

Ancillary services - - - -

Non-programmed charges 169,698 231,677 200,977 30,700

Total expenditures 8,792,598 9,431,421 7,959,811 1,471,610

Revenues over (under) expenditures - - - -


Transfers from other funds - - - -

- - - -

Revenues and other sources over (under)

expenditures and other financing sources - - - -

Appropriated fund balance - - - -

Net change in fund balance -$ -$ - -$

FUND BALANCES:

Beginning of year -

End of year -$

Federal Grants Fund

Budget


Statement of Revenues, Expenditures, and Changes in Fund Balances - Budget and Actual

General Fund and Annually Budgeted Major Special Revenue Funds (Continued)



26

Exhibit E (Continued)

Actual

Variance with

Final Budget

Positive


811,116$ 967,408$ 890,059$ (77,349)$

58,495 114,336 114,336 -

- 506,386 506,386 -

1,324,206 783,140 778,489 (4,651)

2,193,817 2,371,270 2,289,270 (82,000)

651,017 839,556 744,909 94,647

244,468 239,431 239,175 256

811,096 826,695 826,695 -

329,466 321,016 320,649 367

3,252 - - -

71,529 49,652 49,130 522

- - - -

- - - -

- - - -

- - - -

82,870 94,861 93,933 928

- - - -

- - - -

119 59 59 -

- - - -

2,193,817 2,371,270 2,274,550 96,720

- - 14,720 14,720

- (1,622,357) (1,622,357) -

- (1,622,357) (1,622,357) -

- (1,622,357) (1,607,637) 14,720

- 1,622,357 - (1,622,357)

-$ -$ (1,607,637) (1,607,637)$

1,622,357

14,720$

Budget

Other Restricted Fund


27

Exhibit F

Major Fund

ASSETS

Current assets:

Cash and cash equivalents 1,908,473$

Accounts receivable 604

Due from other governments 254,074

Due from other funds 6,367

Inventories 239,023

Total current assets 2,408,541

Noncurrent assets:

Capital assets, net of depreciation 995,532

Total assets 3,404,073

DEFERRED OUTFLOWS OF RESOURCES 211,277

LIABILITIES

Current liabilities:

Due to other funds 53,451

Unearned revenue 89,068

Compensated absences, current 90,732

Total current liabilities 233,251

Noncurrent liabilities:

Net pension liability 199,620

Total liabilities 432,871

DEFERRED INFLOW OF RESOURCES 737,022

NET POSITION

Net investment in capital assets 995,532

Unrestricted 1,449,925

Total net position 2,445,457$

School Food

Service Fund


Statement of Net Position

Proprietary Fund

June 30, 2015


28

Exhibit G

Major Fund

School Food

Service Fund

OPERATING REVENUES:

Food sales 2,586,364$

Miscellaneous local operating revenue 9,010

Total operating revenues 2,595,374

OPERATING EXPENSES:

Food cost:

Purchase of food 3,181,031

Donated commodities 318,769

Salaries and benefits 4,136,571

Professional and technical services 18,084

Property services 16,363

Depreciation 161,625

Transportation services 20,161

Communications 5,732

Dues and fees 1,524

Indirect costs 551,772

Supplies and materials 114,506

Repairs and maintenance 41,247

Utilities 33,092

Food processing supplies 245,787

Total operating expenses 8,846,264

Operating loss (6,250,890)

NONOPERATING REVENUES (EXPENSES):

Federal reimbursements 4,913,397

Federal commodities 465,983

State reimbursements 14,245

Interest earned 4,171

Loss on disposal of capital assets (7,912)

Total nonoperating revenues (expenses) 5,389,884

Loss before transfers (861,006)

Transfers from other funds 94,253

Change in net position (766,753)

NET POSITION:

Beginning of year, as previously stated 4,067,638

Restatement (855,428)

Beginning of year, as restated 3,212,210

End of year 2,445,457$


Statement of Revenues, Expenses, and Changes in Fund Net Position

Proprietary Fund



29

Exhibit H

Major Fund

School Food

Service

CASH FLOWS FROM OPERATING ACTIVITIES:

Cash received from customers 2,589,401$

Cash paid for goods and services (3,875,403)

Cash paid to employees for services (4,193,950)

Net cash used by operating activities (5,479,952)

CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES:

Federal reimbursements 4,913,397

State reimbursements 14,245

Net cash provided by noncapital financing

activities 4,927,642

CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITES:

Acquisition of capital assets (33,693)

Transfer from other funds 8,550

Net cash used by capital and related financing

activities (25,143)

CASH FLOWS FROM INVESTING ACTIVITIES:

Interest on investments 4,171

Net cash provided by investing activities 4,171

Net decrease in cash and cash equivalents (573,282)

CASH AND CASH EQUIVALENTS:




Statement of Cash Flows


Proprietary Fund


30

Exhibit H (Continued)

Major Fund

School Food

Service

Reconciliation of operating loss to net cash used by operating activities:

Operating loss (6,250,890)$

Adjustments to reconcile operating loss to net cash used by operating activities:

Depreciation 161,625

Pension expense 81,213

Donated commodities consummed 465,983

Salaries paid by special revenue fund 85,703

Changes in assets, deferred outflows of resources,

liabilites, and deferred inflows of resources:

Decrease in accounts receivable 74

Increase in due from other governments (7,521)

Increase in due from other funds (6,367)

Decrease inventories 155,490

Increase in deferred outflows of resources for

pension plan contirubtions in current fiscal year (211,277)

Decrease in accounts payable (2,259)

Increase in due to other funds 53,451

Increase in uneared revenue 7,841

Decrease in compensated absences (13,018)

Total adjustments 770,938

Net cash used by operating activities (5,479,952)$

Noncash investing, capital, and financing activities:


The State Public School Fund paid salaries and benefits of $85,703 to administration personnel of the School Food

Service Fund during the fiscal year. This payment is reflected by a transfer in the operating expense on Exhibit G.

Statement of Cash Flows


Proprietary Fund

The School Food Service Fund received donated commodities with a value of $465,983 during the fiscal year. The

receipt of the commodities is recognized as a nonoperating revenue on Exhibit G.


31


Notes to the Financial Statements For the Year Ended June 30, 2015

32

I) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accounting policies of Davidson County Board of Education conform to generally accepted accounting principles as applicable to governments. The following is a summary of the more significant accounting policies:

A) Reporting Entity

The Davidson County Board of Education, North Carolina (the Board) is a Local Education Agency empowered by State law [Chapter 115C of the North Carolina General Statues] with the responsibility to oversee and control all activities related to public school education in Davidson County, North Carolina. The Board receives State, local and federal government funding and must adhere to the legal requirements of each funding entity. The Board does not have any component units. Basic funding for public education is provided by State appropriations through the State Public School Fund in each Local Education Agency (LEA). Additional funding is provided by special State and federal grants, appropriations from the county, within which the LEA is located and by miscellaneous revenues. The Board provides public school education to the children of Davidson County living within the boundaries of the Davidson County School System.

B) Basis of Presentation

Government-wide Financial Statements: The statement of net position and the statement of activities display information about the Board. These statements include the financial activities of the overall government. Eliminations have been made to minimize the effect of internal activities upon revenues and expenses. These statements distinguish between the governmental and business-type activities of the Board. Governmental activities generally are financed through intergovernmental revenues, and other non-exchange transactions. Business-type activities are financed in whole or in part by fees charged to external parties. The statement of activities presents a comparison between direct expenses and program revenues for the different business-type activities of the Board and for each function of the Board’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 expense allocations that have been made in the funds have been reversed for the statement of activities. Program revenues include (a) fees and 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 are presented as general revenues. Fund Financial Statements: The fund financial statements provide information about the Board’s funds. Separate statements for each fund category – governmental, and proprietary – are presented. The emphasis of fund financial statements is on major governmental and enterprise funds, each displayed in a separate column. All remaining governmental and enterprise funds are aggregated and reported as non-major funds. Proprietary fund operating revenues, such as charges for services, result from exchange transactions associated with the principal activity of the fund. Exchange transactions are those in which each party receives and gives up essentially equal values. Nonoperating revenues, such as subsidies and investment earnings, result from nonexchange transactions or ancillary activities.



33

I) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

B) Basis of Presentation (Continued)

The Board reports the following major governmental funds:

General Fund. The General Fund is the general operating fund of the Board. The General Fund accounts for all financial resources except those that are required to be accounted for in another fund. This fund is the “Local Current Expense Fund,” which is mandated by State law [G.S. 115C-426]. State Public School Fund. The State Public School Fund includes appropriations from the Department of Public Instruction for the current operating expenditures of the public school system. Federal Grants Fund. The Federal Grants Fund includes appropriations form various federal funding sources for the current operating expenditures of the various grants awarded to the Board.

Individual Schools Fund. The Individual Schools Fund includes revenues and expenditures of the activity funds of the individual schools. The primary revenue sources include funds held on the behalf of various clubs and organizations, receipts from athletic events, and proceeds from various fundraising activities. The primary expenditures are for athletic teams, club programs, activity buses, and instructional needs. Other Restricted Fund. The Other Restricted Fund includes specific revenues that are legally restricted for certain purposes and not intended for the general K-12 population.

Capital Outlay Fund. The Capital Outlay Fund accounts for financial resources to be used for the acquisition and construction of major capital facilities (other than those financed by proprietary funds and trust funds). It is mandated by State law [G.S.115C-426]. Capital projects are funded by Davidson County appropriations, restricted sales tax revenue, proceeds of Davidson County bonds issued for public school construction, lottery proceeds, as well as certain State assistance.

The Board reports the following major enterprise fund: School Food Service Fund. The School Food Service Fund is used to account for the food service program within the school system.

C) Measurement Focus and Basis of Accounting

Government-wide and Proprietary Fund Financial Statements. The government-wide and proprietary 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. Non-exchange transactions, in which the Board gives (or receives) value without directly receiving (or giving) equal value in exchange, include grants and donations. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied.



34


C) Measurement Focus and Basis of Accounting (Continued)

Governmental Fund Financial Statements. 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 Board considers all revenues reported in the governmental funds to be available if the revenues are collected within sixty days after year-end. These could include federal, State, and County grants, and some charges for services. Expenditures are recorded when the related fund liability is incurred, except for claims and judgments and compensated absences, which are recognized as expenditures to the extent they have matured. General capital asset acquisitions are reported as expenditures in governmental funds. Acquisitions under capital leases are reported as other financing sources.

Under the terms of grant agreements, the Board funds certain programs by a combination of specific cost-reimbursement grants and general revenues. Thus when program expenses are incurred, there are both restricted and unrestricted net position available to finance the program. It is the Board’s policy to first apply cost-reimbursement grant resources to such programs and then general revenues.

D) Budgetary Data

The Board’s budgets are adopted as required by the North Carolina General Statutes. Annual budgets are

adopted for all funds, except for the Individual Schools Fund, as required by North Carolina General

Statutes. No budget is required by State law for individual school funds. All appropriations lapse at the

fiscal year end. All budgets are prepared using the modified accrual basis of accounting. Expenditures

may not legally exceed appropriations at the functional level for all annually budgeted funds. The Board

has authorized the Superintendent to move monies from one function to another within a fund.

Amendments are required for any revisions that alter total expenditures of any fund. All amendments must

be approved by the governing board. During the year, several amendments to the original budget were

necessary. The budget ordinance must be adopted by July 1 of the fiscal year or the governing board must

adopt an interim budget that covers that time until the annual ordinance can be adopted.

E) Assets, Deferred Outflows of Resources, Liabilities, Deferred Inflows of Resources, and Fund Equity

1) Deposits and Investments

All deposits of the Board are made in board-designated official depositories and are secured as required by State law [G.S. 115C-444]. The Board may designate, as an official depository, any bank or savings association whose principal office is located in North Carolina. Also, the Board may establish time deposit accounts such as NOW and SuperNOW accounts, money market accounts, and certificates of deposit. The Board also has money credited in its name with the State Treasurer and may issue State warrants against these funds.

State law [G.S. 115C-443] authorizes the Board to invest in obligations of the United States or obligations

fully guaranteed both as to principal and interest by the United States; obligations of the State of North

Carolina; bonds and notes of any North Carolina local government or public authority; obligations of

certain non-guaranteed federal agencies; certain high quality issues of commercial paper and bankers'

acceptances; the North Carolina Capital Management Trust (NCCMT), an SEC-registered (2a-7) money

market mutual fund; and the North Carolina State Treasurer’s Short Term Investment Fund (STIF).



35


E) Assets, Deferred Outflows, Liabilities, Deferred Inflows of Resources, and Fund Equity (Continued)

1) Deposits and Investments (Continued)

The STIF is managed by the staff of the Department of State Treasurer and operated in accordance with

state laws and regulations. It is not registered with the SEC. It consists of an internal portion and an

external portion in which the Board participates. Investments are restricted to those enumerated in G.S.

147-69.1.

The Board’s investments are reported at fair value as determined by quoted market prices. The STIF

securities are reported at cost and maintain a constant $1 per share value. Under the authority of G.S. 147-

69.3, no unrealized gains or losses of the STIF are distributed to external participants of the fund.

2) Cash and Cash Equivalents

The Board pools money from several funds to facilitate disbursement and investment and to maximize investment income. Therefore, all cash and investments are essentially demand deposits and are considered cash and cash equivalents.

3) Inventories

The inventories of the Board are valued at cost and the Board uses the first-in, first-out (FIFO) flow assumption in determining cost. Proprietary funds inventories consist of food and supplies and are recorded as expenses when consumed.

4) Capital Assets

The Board's capital assets are recorded at original cost. Donated assets are listed at their estimated fair value at the date of donation or forfeiture. Improvements are capitalized and depreciated over the remaining useful lives of the related capital assets.

It is the policy of the Board to capitalize all capital assets costing $5,000 or more with an estimated useful life of two or more years. In addition, other items that are purchased and used in large quantities such as student desks are capitalized. The cost of normal maintenance and repairs that do not add to the value of the asset or materially extend asset lives are not capitalized.

Davidson County holds title to certain properties, which are reflected as capital assets in the financial

statements of the Board. The properties have been deeded to the County to permit installment purchase

financing of acquisition and construction costs and to permit the County to receive refunds of sales tax paid

for construction costs. Agreements between the County and the Board give the school system full use of

the facilities and full responsibility for maintenance of the facilities. Agreements further provide that the

County will convey title of the property back to the Board, once all restrictions of the financing agreements

and all sales tax reimbursement requirements have been met.

Capital assets are depreciated using the straight-line method over the following estimated useful lives:

Buildings and improvements 20-50 years Equipment and furniture 10-20 years Vehicles 6-8 years Computer equipment 3-5 years



36



4) Capital Assets (Continued) Land and construction in progress is not depreciated. Depreciation for buildings and equipment that serve multiple purposes cannot be allocated ratably and is, therefore, reported as “unallocated depreciation” on the statement of activities.

5) Deferred Outflows and Deferred Inflows of Resources

In addition to assets, the statement of financial position will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period and so will not be recognized as an expense or expenditure until then. The Board has one item that meets this criterion - contributions made to the pension plan in the current fiscal year. The statement of financial position also reports a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period and so will not be recognized as revenue until then. The Board has two items that meets this criterion – sales tax refunds receivable, and pension related deferrals.

6) Long-term Obligations

In the government-wide financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities.

7) Compensated Absences

The Board follows the State’s policy for vacation and sick leave. Employees may accumulate up to thirty (30) days earned vacation leave with such leave being fully vested when earned. The Board’s liability for accumulated earned vacation and salary-related payments as of June 30, 2015 is recorded in the government-wide and proprietary fund financial statements on a FIFO basis. An estimate has been made based on prior years’ records, of the current portion of compensated absences. The sick leave policy of the Board provides for an unlimited accumulation of earned sick leave. Sick leave does not vest, but any unused sick leave accumulated at the time of retirement may be used in the determination of length of service for retirement benefit purposes. Since the Board has no obligation for accumulated sick leave until it is actually taken, no accrual for sick leave has been made.

8) Net Position/Fund Balances

Net Position Net position in the government-wide and proprietary fund financial statements is classified as net investment in capital assets, restricted. and unrestricted. Restricted net position represents constraints on resources that are either externally imposed by creditors, grantors, contributors, or the laws or regulations of other governments, or imposed by law through State statute.



37



8) Net Position/Fund Balances (Continued)

Fund Balance In the governmental fund financial statements, reservations or restrictions of fund balance represent amounts that are not appropriable, are legally segregated for a specific purpose, or are restricted by the grant agreement. Designations of fund balance represent tentative management plans that are subject to change.

In the governmental fund financial statements, fund balance is composed of five classifications designated to disclose the hierarchy of constraints placed on how fund balance can be spent.

The governmental fund types classify fund balances as follows:

Nonspendable Fund Balance. This classification includes amounts that cannot be spent because they are either (a) not in spendable form or (b) legally or contractually required to be maintained intact. The Board does not have any nonspendable fund balance at June 30, 2015. Restricted Fund Balance. This classification includes amounts that are restricted to specific purposes externally imposed by creditors or imposed by law.

Restricted for Stabilization by State Statue – Portion of fund balance that is restricted by State Statute [G.S. 115C-425(a)].

Restricted for Capital Outlay – Portion of fund balance that can only be used for School Capital Outlay [G.S. 159-18 through 22].

Restricted for Individual Schools – Revenue restricted for expenditures for the various clubs and organizations, athletic events, and various fund raising activities for which they were collected.

Restricted for Other– Revenues restricted for expenditures for certain grants imposed by the grantors.

Committed Fund Balance. Portion of fund balance that can only be used for a specific purpose imposed by a formal action (resolution) with majority vote by quorum of the Board’s governing body (highest level of decision-making authority). Any changes or removal of specific purpose requires majority action by the governing body that approved the original action. The Board did not have any committed fund balance at June 30, 2015.

Assigned Fund Balance. Portion of fund balance that the Board intends to use for specific purposes.

Subsequent Year’s Expenditures – Portion of fund balance that is appropriated in the next year’s budget that is not already classified in restricted or committed. The governing body approves the appropriation; however the budget ordinance authorizes management to modify the appropriations by resource or appropriation with funds up to $100,000. Special Revenue – Portion of fund balance that represents the residual amount of revenues from certain grants, reimbursements, indirect costs and other financial resources in excess of related expenditures that the Board of Education has assigned to be expended for educational services.



38


E) Assets, Deferred Outflows, Liabilities, Deferred Inflows of Resources, and Fund Equity (Continued) 8) Net Position/Fund Balances (Continued)

Unassigned Fund Balance. Portion of fund balance that has not been restricted, committed, or assigned to specific purposes or other funds.

The Board has a revenue spending policy that provides guidance for programs with multiple revenue sources. The finance officer will use resources in the following hierarchy: bond proceeds, federal funds, State funds, local non-Board of Education funds, Board of Education funds. For purposes of fund balance classification expenditures are to be spent from restricted fund balance first, followed in-order by committed fund balance, assigned fund balance and lastly unassigned fund balance. The finance officer has the authority to deviate from this policy if it is in the best interest of the Board.

9) Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

10) Defined Benefit Pension Plan

For purposes of measuring the net pension asset, deferred outflows of resources and deferred inflows of

resources related to pensions, and pension expense, information about the fiduciary net position of the

Teachers’ and State Employees’ Retirement System (TSERS) and additions to/deductions from TSERS’

fiduciary net position have been determined on the same basis as they are reported by TSERS. For this

purpose, plan member contributions are recognized in the period in which the contributions are due. The

Board’s employer contributions are recognized when due and the Board has a legal requirement to provide

the contributions. Benefits and refunds are recognized when due and payable in accordance with the terms

of TSERS. Investments are reported at fair value.

II) STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY

Significant Violations Finance-Related Legal and Contractual None Contractual Violations None Excess of Expenditures over Appropriations None Deficits in Fund Balance or Net Position of Individual Funds None



39

III) DETAIL NOTES ON ALL FUNDS

A) Assets

1) Deposits

All of the Board's deposits are either insured or collateralized by using one of two methods. Under the dedicated method, all deposits exceeding the federal depository insurance coverage level are collateralized with securities held by the Board's agent in the Board’s name. Under the pooling method, which is a collateral pool, all uninsured deposits are collateralized with securities held by the State Treasurer's agent in the name of the State Treasurer. Since the State Treasurer is acting in a fiduciary capacity for the Board, these deposits are considered to be held by the agent in the Board’s name. The amount of the pledged collateral is based on an approved averaging method for non-interest bearing deposits and the actual current balance for interest-bearing deposits. Depositories using the pooling method report to the State Treasurer the adequacy of their pooled collateral covering uninsured deposits. The State Treasurer does not confirm this information with the Board or with the escrow agent. Because of the inability to measure the exact amount of collateral pledged for the Board under the pooling method, the potential exists for under-collateralization, and this risk may increase in periods of high cash flows. However, the State Treasurer of North Carolina enforces strict standards of financial stability for each depository that collateralizes public deposits under the pooling method. The Board has no policy regarding custodial credit risk for deposits.

At June 30, 2015, the Board had deposits with banks and savings and loans with a carrying amount of $21,084,552 and with the State Treasurer of $35,501. The bank balances with the financial institutions and the State Treasurer were $22,657,500 and $1,213,621 respectively. Of these balances, $1,865,749 was covered by federal depository insurance and $20,915,372 was covered by collateral held by authorized escrow agents in the name of the State Treasurer and covered by collateral held under the pooling method.

2) Investments

At June 30, 2015, the Board of Education had $6,036 invested with the State Treasurer in the Short Term

Investment Fund (STIF).

Interest Rate Risk. The Board does not have a formal investment policy that limits investment maturities

as a means of managing its exposure to fair value losses arising from increasing interest rates. The STIF

had a weighted average maturity of 1.5 years at June 30, 2015.

Credit Risk. The STIF is unrated and is authorized under North Carolina General Statute 147-69.1. The

State Treasurer's STIF is invested in highly liquid fixed income securities consisting primarily of short to

intermediate treasuries and agencies, and money market instruments. The Board has no policy on credit

risk.

Concentration of Credit Risk. The Board places no limit on the amount the Board may invest in any one

issuer. More than five percent of the Board’s investments are in the State Treasurer’s Short Term

Investment Fund. This investment is 100% of the Board’s total investments.



40

III) DETAIL NOTES ON ALL FUNDS (Continued)

A) Assets (Continued)

3) Accounts Receivable

Receivables at the government-wide level at June 30, 2015, were as follows:

Due from

other funds

(Internal

balances)

Due from

other

governments

Other

Total


Other Restricted Fund $ 22,509) $ 87,527 $ - $ 110,036)

State Public School Fund -)) 4,094,463 - 4,094,463)

General Fund 173,363) 241,875 12,116 427,354)

Federal Grants Fund -) 293,358 - 293,358)

Capital Outlay Fund -) 399,212 3,350 402,562)

Individual Schools Fund (148,788) - - (148,788)

Total $ 47,084) $ 5,116,435 $ 15,466 $ 5,178,985)


School Food Service $ (47,084) $ 254,074 $ 604 $ 207,594)

Due from other governments consists of the following:


State Public School Fund $ 4,094,463 Operating funds from State (salary installment)

Federal Grants Fund 293,358 Federal grant funds (salary installment)

Other Restricted Fund 70,000 Grant reimbursements

Other Restricted Fund 7,432 Sales tax refund

Other Restricted Fund 10,095 Other government receivables

General Fund 127,533 Sales tax refund

General Fund 99,759 Fines and forfeitures

General Fund 14,583 Other governments

Capital Outlay Fund 38,748 Sales tax refund

Capital Outlay Fund 360,464 Capital reimbursements

Total $ 5,116,435


School Food Services Fund $ 254,074 Federal reimbursements



41



4) Capital Assets

Capital asset activity for the year ended June 30, 2015 was as follows:

Beginning

Balances

Increases

Decreases

Transfers

Ending

Balances


Capital assets not being depreciated:

Land $ 2,281,868 $ - $ - $ - $ 2,281,868

Construction in progress 13,296,880 2,705,344 - (4,068,413) 11,933,811

15,578,748 2,705,344 - (4,068,413) 14,215,679

Capital assets being depreciated:

Buildings and improvements 199,981,206 590,426 - 3,073,350 203,644,982

Land improvements 8,720,752 1,271,529 - 995,063 10,987,344

Furniture and equipment 7,147,509 523,273 1,201,148 - 6,469,634

Vehicles 18,115,339 2,666,039 941,470 - 19,839,908

Total capital assets being

depreciated 233,964,806 $ 5,051,267 $ 2,142,618 $ 4,068,413 240,941,868

Less accumulated depreciation for:

Buildings and improvements 65,306,266 $ 5,585,375 $ - $ - 70,891,641

Land improvements 4,496,155 420,423 - - 4,916,578

Furniture and equipment 4,025,257 546,865 617,823 - 3,954,299

Vehicles 13,758,686 1,325,245 946,952 - 14,136,979

Total accumulated

depreciation 87,586,364 $ 7,877,908 $ 1,564,775 $ - 93,899,497

Total capital assets being

depreciated, net 146,378,442 147,042,371

Governmental activity capital

assets, net $161,957,190 $ 161,258,050

Depreciation was charged to governmental functions as follows:

Operational support services $ 1,325,245

Unallocated depreciation 6,552,663

$ 7,877,908



42



4) Capital Assets (Continued)

Beginning

Balances

Increases

Decreases

Ending

Balances

Business activities:

School Food Service Fund:

Capital assets being depreciated:

Furniture and office equipment $ 4,034,902 $ 33,694 $ 404,304 $ 3,664,292

Less accumulated depreciation for:

Furniture and office equipment 2,903,527 $ 161,625 $ 396,392 2,668,760

School Food Service capital

assets, net

$ 1,131,375

$ 995,532

Net investment in capital assets is calculated as follows:

Governmental

Activities

Business-type

Activities

Total

Capital assets $ 255,157,547) $ 3,664,292)) $ 258,821,839

Less:

Accumulated depreciation (93,899,497) (2,668,760)) (96,568,257)

Installment purchase obligations (1,233,443) -) (1,233,443)

Total $ 160,024,607) $ 995,532) $ 161,020,139

5) Construction Commitments

The Board had several active construction projects at June 30, 2015. At year end, the commitments with contracts for school construction were as follows:

Project

Spent-to-Date

Remaining

Commitment

Modular classrooms $ 1,205,068 $ 5,061

Athletic facility upgrades 151,322 76,010

Oak Grove Middle 8,368,771 284,708

HVAC replacement 236,248 51,262

Oak Grove high school site work 1,110,708 1,889,292

Backflow preventers 87,650 427,748

Various other capital commitments 774,044 762,574

Total $ 11,933,811 $ 3,496,655



43


B) Liabilities

1) Pension Plan and Other Postemployment Obligations

a) Teachers’ and State Employees’ Retirement System

Plan Description. The Board is a participating employer in the statewide Teachers’ and State Employees’

Retirement System (TSERS), a cost-sharing multiple-employer defined benefit pension plan administered

by the State of North Carolina. TSERS membership is comprised of employees of the State (state agencies

and institutions), universities, community colleges, and certain proprietary component units along with the

employees of Local Education Agencies and charter schools. Article 1 of G.S. Chapter 135 assigns the

authority to establish and amend benefit provisions to the North Carolina General Assembly. Management

of the plan is vested in the TSERS Board of Trustees, which consists of 13 members – nine appointed by

the Governor, one appointed by the State Senate, one appointed by the State House of Representatives, and

the State Treasurer and State Superintendent, who serve as ex-officio members. The Teachers’ and State

Employees’ Retirement System is included in the Comprehensive Annual Financial Report (CAFR) for the

State of North Carolina. The State’s CAFR includes financial statements and required supplementary

information for TSERS. That report may be obtained by writing to the Office of the State Controller, 1410

Mail Service Center, Raleigh, North Carolina 27699-1410, by calling (919) 981-5454, or at

www.osc.nc.gov.

Benefits Provided. TSERS provides retirement and survivor benefits. Retirement benefits are determined

as 1.82% of the member’s average final compensation times the member’s years of creditable service. A

member’s average final compensation is calculated as the average of a member’s four highest consecutive

years of compensation. General employee plan members are eligible to retire with full retirement benefits

at age 65 with five years of creditable service (or 10 years of creditable service for members joining

TSERS on or after August 1, 2011), at age 60 with 25 years of creditable service, or at any age with 30

years of creditable service. General employee plan members are eligible to retire with partial retirement

benefits at age 50 with 20 years of creditable service or at age 60 with five years of creditable service (or

10 years of creditable service for members joining TSERS on or after August 1, 2011). Survivor benefits

are available to eligible beneficiaries of members who die while in active service or within 180 days of

their last day of service and who have either completed 20 years of creditable service regardless of age or

have completed five years of service and have reached age 60 (10 years for members joining on or after

August 1, 2011). Eligible beneficiaries may elect to receive a monthly Survivor’s Alternate Benefit for life

or a return of the member’s contributions. The plan does not provide for automatic post-retirement benefit

increases. Increases are contingent upon actuarial gains of the plan.

TSERS plan members who are Law Enforcement Officer’s (LEO) are eligible to retire with full retirement

benefits at age 55 with five years of creditable service as an officer (or 10 years of creditable service for

members joining TSERS on or after August 1, 2011), or at any age with 30 years of creditable service.

LEO plan members are eligible to retire with partial retirement benefits at age 50 with 15 years of

creditable service as an officer. Survivor benefits are available to eligible beneficiaries of LEO members

who die while in active service or within 180 days of their last day of service and who also have either

completed 20 years of creditable service regardless of age, or have completed 15 years of service as a LEO

and have reached age 50, or have completed five years of creditable service as a LEO and have reached age

55, or have completed 15 years of creditable service as a LEO if killed in the line of duty. Eligible

beneficiaries may elect to receive a monthly Survivor’s Alternate Benefit for life or a return of the

member’s contributions.

http://www.osc.nc.gov/



44


B) Liabilities (Continued)

1) Pension Plan and Other Postemployment Obligations (Continued)

a) Teachers’ and State Employees’ Retirement System (Continued)

Contributions. Contribution provisions are established by General Statute 135-8 and may be amended

only by the North Carolina General Assembly. Board employees are required to contribute 6% of their

compensation. Employer contributions are actuarially determined and set annually by the TSERS Board of

Trustees. The Board’s contractually required contribution rate for the year ended June 30, 2015, was

9.15% of covered payroll, actuarially determined as an amount that, when combined with employee

contributions, is expected to finance the costs of benefits earned by employees during the year.

Contributions to the pension plan from the Board were $8,113,139 and $7,359,425 for the years ended June

30, 2015 and 2014, respectively.

Refunds of Contributions – Board employees who have terminated service as a contributing member of

TSERS, may file an application for a refund of their contributions. By state law, refunds to members with

at least five years of service include 4% interest. State law requires a 60 day waiting period after service

termination before the refund may be paid. The acceptance of a refund payment cancels the individual’s

right to employer contributions or any other benefit provided by TSERS.

Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of

Resources Related to Pensions

At June 30, 2015, the Board reported a liability of $7,665,523, for its proportionate share of the net pension

liability. The net pension liability was measured as of June 30, 2014. The total pension liability used to

calculate the net pension asset was determined by an actuarial valuation as of December 31, 2013. The

total pension liability was then rolled forward to the measurement date of June 30, 2014 utilizing update

procedures incorporating the actuarial assumptions. The Board’s proportion of the net pension liability

was based on a projection of the Board’s long-term share of future payroll covered by the pension plan,

relative to the projected future payroll covered by the pension plan of all participating TSERS employers,

actuarially determined. At June 30, 2014 and at June 30, 2013, the Board’s proportion was .654% and

.662%, respectively.

For the year ended June 30, 2015, the Board recognized pension expense of $3,118,635 at June 30, 2015,

the Board reported deferred outflows of resources and deferred inflows of resources related to pensions

from the following sources:

Deferred

Outflows of

Resources

Deferred

Inflows of

Resources

Differences between expected and actual experience $ - $ 1,786,792

Net difference between projected and actual earnings on

pension plan investments

-

25,899,000

Changes in proportionate and differences between Board

contributions and proportionate share contributions

-

616,255

Board contributions subsequent to the measurement date 8,113,139 -

Total $ 8,113,139 $ 28,302,047



45





$8,113,139 was reported as deferred outflows of resources related to pensions resulting from Board

contributions subsequent to the measurement date will be recognized as a decrease of the net pension

liability in the year ending June 30, 2016. Other amounts reported as deferred inflows of resources related

to pensions will be recognized in pension expense as follows:

Year ended June 30:

2016 $ (7,108,800)

2017 (7,108,800)

2018 (7,108,800)

2019 (6,975,647)

2020 -

Total $ (28,302,047)

Actuarial Assumptions. The total pension liability in the December 31, 2013 actuarial valuation was

determined using the following actuarial assumptions, applied to all periods included in the measurement:

Inflation 3.0%

Salary increases 4.25% to 9.10%, including inflation and productivity factor

Investment rate of return 7.25%, net of pension plan investment expense, including inflation

The plan currently uses mortality tables that vary by age, gender, employee group (i.e. general, law

enforcement officer) and health status (i.e. disabled and healthy). The current mortality rates are based on

published tables and based on studies that cover significant portions of the U.S. population. The healthy

mortality rates also contain a provision to reflect future mortality improvements.

The actuarial assumptions used in the December 31, 2013 valuation were based on the results of an

actuarial experience study for the period January 1, 2005 through December 31, 2009.

Future ad hoc cost-of-living adjustment (COLA) amounts are not considered to be substantively automatic

and are therefore not included in the measurement.

The projected long-term investment returns and inflation assumptions are developed through review of

current and historical capital markets data, sell-side investment research, consultant whitepapers, and

historical performance of investment strategies. Fixed income return projections reflect current yields

across the U.S. Treasury yield curve and market expectations of forward yields projected and interpolated

for multiple tenors and over multiple year horizons. Global public equity return projections are established

through analysis of the equity risk premium and the fixed income return projections. Other asset categories

and strategies’ return projections reflect the foregoing and historical data analysis. These projections 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.



46





The target allocation and best estimates of arithmetic real rates of return for each major asset class as of

June 30, 2014 are summarized in the following table:

Asset Class

Target

Allocation

Long-Term Expected

Real Rate of Return

Fixed Income

36.0%

2.5%

Global Equity

40.5%

6.1%

Real Estate

8.0%

5.7%

Alternatives

6.5%

10.5%

Credit

4.5%

6.8%

Inflation Protection

4.5%

3.7%

Total

100%

The information above is based on 30 year expectations developed with the consulting actuary for the 2013

asset liability and investment policy study for the North Carolina Retirement Systems, including TSERS.

The long-term nominal rates of return underlying the real rates of return are arithmetic annualized figures.

The real rates of return are calculated from nominal rates by multiplicatively subtracting a long-term

inflation assumption of 3.19%. All rates of return and inflation are annualized.

A new asset allocation policy was finalized during the fiscal year ended June 30, 2014 to be effective

July 1, 2014. The new asset allocation policy utilizes different asset classes, changes in the structure of

certain asset classes, and adopts new benchmarks. Using the asset class categories in the preceding table,

the new long-term expected arithmetic real rates of return are as follows:

Asset Class

Long-Term Expected

Real Rate of Return

Fixed Income

2.2%

Global Equity

5.8%

Real Estate

5.2%

Alternatives

9.8%

Credit

6.8%

Inflation Protection

3.4%



47





Discount rate. The discount rate used to measure the total pension liability was 7.25%. The projection of

cash flows used to determine the discount rate assumed that contributions from plan members will be made

at the current contribution rate and that contributions from employers will be made at statutorily required

rates, actuarially determined. Based on these assumptions, the pension plan’s fiduciary net position was

projected to be available to make all projected future benefit payments of the 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 Board’s proportionate share of the net pension asset to changes in the discount rate.

The following presents the Board’s proportionate share of the net pension liability calculated using the

discount rate of 7.25 percent, as well as what the Board’s proportionate share of the net pension asset or net

pension liability would be if it were calculated using a discount rate that is 1-percentage-point lower (6.25

percent) or 1-percentage-point higher (8.25 percent) than the current rate:

1% Decrease

(6.25%)

Discount

Rate (7.25%)

1% Increase

(8.25%)

Board’s proportionate share of the net

pension liability

$ 55,028,435

$ 7,665,523

$ (32,325,557)

Pension plan fiduciary net position. Detailed information about the pension plan’s fiduciary net position

is available in the separately issued Comprehensive Annual Financial Report (CAFR) for the State of North

Carolina.

b) Other Postemployment Benefits

1) Healthcare Benefits

Plan Description. The postemployment healthcare benefits are provided through a cost-sharing multiple-

employer defined benefit plan administered by the Executive Administrator and the Board of Trustees of

the Comprehensive Major Medical Plan (the Plan). The Executive Administrator and the Board of Trustees

of the Plan establishes premium rates except as may be established by the General Assembly in an

appropriation act. The Plan’s benefit and contribution provisions are established by Chapter 135-7,

Article 1, and Chapter 135, Article 3 of the General Statutes and may be amended only by the North

Carolina General Assembly. By General Statute, the Plan accumulates contributions from employers and

any earnings on those contributions in the Retiree Health Benefit Fund. These assets shall be used to

provide health benefits to retired and disabled employees and their applicable beneficiaries. These

contributions are irrevocable. Also, by law, these assets are not subject to the claims of creditors of the

employers making contributions to the Plan.



48




b) Other Postemployment Benefits (Continued)

1) Healthcare Benefits (Continued)

The State of North Carolina issues a publicly available financial report that includes financial statements

and required supplementary information for the State’s Comprehensive Major Medical Plan (also referred

to as the State Health Plan). An electronic version of this report is available by accessing the North

Carolina Office of the State Controller’s Internet home page http://www.ncosc.net/ and clicking on

“Financial Reports”, or by calling the State Controller’s Financial Reporting Section at (919) 981-5454.

Funding Policy. The Comprehensive Major Medical Plan is administered by the Executive Administrator

and Board of Trustees of the Plan, which establishes premium rates except as, may be established by the

General Assembly in an appropriation act. The healthcare benefits for retired and disabled employees are

the same as for active employees, except that the coverage becomes secondary when former employees

become eligible for Medicare. For employees first hired on and after October 1, 2006, future coverage as

retired employees is subject to the requirement that the future retiree have 20 or more years of retirement

service credit in order to receive coverage on a noncontributory basis. Employees first hired on or after

October 1, 2006 with 10 but less than 20 years of retirement service credit are eligible for coverage on a

partially contributory basis. For such future retirees, the State will pay 50% of the State Health Plan’s total

noncontributory premium. For employees hired before October 1, 2006, healthcare benefits are provided

to retirees (at no charge to the retirees) who have at least five years of contributing retirement membership

prior to disability or retirement. In addition, persons who became surviving spouses of retirees prior to

October 1, 1986, receive the same coverage as retirees at the State’s expense.

Contributions are determined as a percentage of covered monthly payroll. Annually, the monthly

contribution rates to the Plan, which are intended to finance benefits and administrative expenses on a pay-

as-you-go basis, are determined by the General Assembly in the Appropriations Bill. For the fiscal years

ended June 30, 2015, 2014, and 2013, the Board paid all annual required contributions to the Plan for

postemployment healthcare benefits of $4,867,883, $4,827,839, $4,859,092, respectively. These

contributions represented 5.49%, 5.40%, 5.30% of covered payroll, respectively.

2) Disability Benefits

Plan Description. Short-term and long-term disability benefits are provided through the Disability Income Plan of North Carolina (DIPNC), a cost-sharing, multiple-employer defined benefit plan. The DIPNC is administered by the Board of Trustees of the Teachers’ and State Employees’ Retirement System. Long-term disability benefits are payable as an other postemployment benefit from DIPNC after the conclusion of the short-term disability period or after salary continuation payments cease, whichever is later, for as long as an employee is disabled. Benefit and contribution provisions are established by Chapter 135, Article 6, of the General Statutes and may be amended only by the North Carolina General Assembly. The Plan accumulates contributions from employers and any earnings on those contributions in the Disability Income Plan Trust Fund. The Plan does not provide for automatic post-retirement benefit increases.

http://www.ncosc.net/



49





2) Disability Benefits (Continued)

The State of North Carolina issues a publicly available financial report that includes financial statements and required supplementary information for the DIPNC. An electronic version of this report is available by accessing the North Carolina Office of the State Controller’s Internet home page http://www.ncosc.net/ and clicking on “Financial Reports”, or by calling the State Controller’s Financial Reporting Section at (919) 981-5454. Funding Policy. An employee is eligible to receive long-term disability benefits provided the following requirements are met: (1) the employee has five or more years of contributing membership service in the Teachers’ and State Employees’ Retirement System of North Carolina, earned within 96 months prior to the end of the short-term disability period or cessation of salary continuation payments, whichever is later; (2) the employee must make application to receive long-term benefits within 180 days after the conclusion of the short-term disability period or after salary continuation payments cease or after monthly payments for workers’ compensation cease (excluding monthly payments for permanent partial benefits), whichever is later; (3) the employee must be certified by the Medical Board to be mentally or physically disabled for the further performance of his/her usual occupation; (4) the disability must have been continuous, likely to be permanent, and incurred at the time of active employment; (5) the employee must not be eligible to receive an unreduced retirement benefit from the Retirement System; and (6) the employee must terminate employment as a permanent, full-time employee. An employee is eligible to receive an unreduced retirement benefit from the Retirement System after (1) reaching the age of 65 and completing five years of creditable service, or (2) reaching the age of 60 and completing 25 years of creditable service, or (3) completing 30 years of creditable service, at any age.

The monthly long-term disability benefit is equal to 65% of one-twelfth of an employee’s annual base rate of compensation last payable to the participant or beneficiary prior to the beginning of the short-term disability period, plus the like percentage of one twelfth of the annual longevity payment to which the participant or beneficiary would be eligible. The monthly benefits are subject to a maximum of $3,900 per month reduced by any primary Social Security disability benefits and by monthly payments for workers’ compensation to which the participant or beneficiary may be entitled. The monthly benefit shall be further reduced by the amount of any monthly payments from the Department of Veterans Affairs, any other federal agency or any payments made under the provisions of G.S.127A-108, to which the participant or beneficiary may be entitled on account of the same disability. Provided in any event, the benefits payable shall be no less than $10 a month. When an employee qualifies for an unreduced service retirement allowance from the Retirement System, the benefits payable from DIPNC will cease, and the employee will commence retirement under the TSERS. For members who obtain five years of membership service on or after August 1, 2007, the monthly long-term disability benefit is reduced by the primary Social Security retirement benefit to which you might be entitled should you become age 62 during the first 36 months. After 36 months of long-term disability, there will be no further payments from the DIPNC unless the member is approved for and are in receipt of primary Social Security disability benefits. It is payable so long as the member remains disabled and is in receipt of a primary Social Security disability benefit until eligible for an unreduced service retirement benefit. When an employee qualifies for an unreduced service retirement allowance from the Retirement System, the benefits payable from DIPNC will cease, and the employee will commence retirement under the TSERS.

http://www.ncosc.net/



50





2) Disability Benefits (Continued) The Board’s contributions are established in the Appropriations Bill by the General Assembly. Benefit and contribution provisions are established by Chapter 135, Article 6, of the General Statutes and may be amended only by the North Carolina General Assembly. The contributions cannot be separated between the amounts that relate to other postemployment benefits and employment benefits for active employees. Those individuals who are receiving extended short-term disability benefit payments cannot be separated from the number of members currently eligible to receive disability benefits as another postemployment benefit. For the fiscal years ended June 30, 2015, 2014 and 2013, the Board paid all annual required contributions to the DIPNC for disability benefits of $363,540, $393,379, and $403,396, respectively. These contributions represented 0.41%, 0.44%, and 0.44%, of covered payroll, respectively.

3) Life Insurance

Term life insurance in the amount of $5,000 is provided by the Board for all employees. This coverage

combined with coverage provided by the Teacher’s and State Employees’ Retirement System (Death

Benefit Plan) in excess of $50,000 is considered taxable to the employee as a fringe benefit.

2) Accounts Payable

Accounts payable as of June 30, 2015, are as follows:

Vendors

Salaries and

Wages

Total


Other Restricted Fund $ 2,463 $ 22,763 $ 25,226

State Public School Fund - 4,044,697 4,044,697

General Fund 511,596 769,576 1,281,172

Federal Grants Fund - 283,007 283,007

Capital Outlay Fund 363,105 - 363,105

Total governmental activities $ 877,164 $ 5,120,043 $ 5,997,207


School Food Service Fund $ - $ - $ -



51


B) Liabilities (Continued) 3) Deferred Outflows and Inflows of Resources

The balance in deferred outflows and inflows of resources at year-end is composed of the following

elements:

Deferred

Outflows of

Resources

Deferred

Inflows of

Resources


Pension plan:

Differences between expected and actual experience $ - $ 1,740,262

Changes of assumptions - -

Net difference between projected and actual earnings

on pension plan investments

-

25,224,557



-

600,206

Board contributions subsequent to the measurement date 7,901,862 -

Sales tax:

Sales tax refund receivable (State Public School Fund) - 49,766

Sales tax refund receivable (Federal Grants Fund) - 10,351

Sales tax refund receivable (Other Restricted Fund) - 70,090

Total governmental activities 7,901,862 27,695,232


Pension plan:

Differences between expected and actual experience - 46,530

Changes of assumptions - -

Net difference between projected and actual earnings

on pension plan investments

-

674,444



-

16,048

Board contributions subsequent to the measurement date 211,277 -

Total business-type activities 211,277 737,022

Total $ 8,113,139 $ 28,432,254



52



4) Risk Management

The Board is exposed to various risks of losses related to torts; theft of, damage to, and destruction of

assets; errors and omissions; injuries to employees; and natural disasters. The Board maintains, through the

Berkeley Mid-Atlantic Group, LLC Insurance Company, general liability protection of $3 million with a

$1 million per occurrence limit and errors and omissions coverage of $3 million limit with a $1 million

limit per wrongful act. The State of North Carolina provides workers' compensation for employees paid

from State funds. The Board also participates in the Public School Insurance Fund, a voluntary, self-

funded risk control and risk financing fund administered by the North Carolina Department of Public

Instruction. The Fund provides all risk, replacement cost property coverage to protect the building and

contents of Board assets. The Fund purchases re1nsurance to cover catastrophic losses in excess of $10

million. The maximum amount recoverable under the perils of flood or earthquake are $5 million per

occurrence and $15 million per occurrence for all insured locations.

The Board also participates in the Teachers’ and State Employees’ Comprehensive Major Medical Plan a

self-funded risk financing pool of the State administered by Blue Cross and Blue Shield of North Carolina.

Through the Plan, permanent full-time employees of the Board are eligible to receive health care benefits

up to a $5 million lifetime limit. The Board pays the full cost of coverage for employees enrolled in the

Comprehensive Major Medical Plan.

In accordance with G.S. 115C-442, the Board’s employees who have custody of the Board’s monies at any

given time of the Board’s funds are performance bonded through a commercial surety bond. The finance

officer is bonded for $100,000. The remaining employees that have access to funds are bonded under a

blanket bond for $100,000.

The Board carries commercial coverage for all other risks of loss. There have been no significant

reductions in insurance coverage in the prior year, and claims have not exceeded coverage in any of the

past three fiscal years.

5) Contingent Liabilities

At June 30, 2015, the Board was a defendant to various lawsuits and claims. In the opinion of the Board’s

management and the Board’s attorney, the ultimate effect of these lawsuits and claims will not have a

material adverse effect on the Board’s financial position.



53



6) Long-Term Obligations

a) Installment Purchases

Installment Purchases – School Buses The Board is authorized to finance the purchase of school buses under G.S 115C-528(a). Session law 2003-284, section 7.25 authorized the State Board of Education to allot monies for the payments on financing contracts entered into pursuant to G.S. 115C-528.

During the year ended June 30, 2015 the State accepted the bid to purchase Blue Bird Buses through a special third party financing arrangement at payments less than the purchase price. During the fiscal year ended June 30, 2015, the Board entered into two installment purchase contracts to finance the purchase of 24 school buses. The contracts required only principal payments annually, through November 1, 2017. The future minimum payments of the installment purchase as of June 30, 2015, are as follows:

b) Long-Term Obligation Activity

The following is a summary of changes in the Board’s long-term obligations for the fiscal year ended June 30, 2015:

Balance Balance Current

Governmental activities: June 30, 2014 Increases Decreases June 30, 2015 Portion

Installment purchases $ 182,962 $ 1,974,926 $ 924,445 $ 1,233,443 $ 493,731

Net pension liability - 7,465,903 - 7,465,903 -

Compensated absences 7,603,554 9,665,761 7,336,820 9,932,495 7,336,820

Total $ 7,786,516 $ 19,106,590 $ 8,261,265 $ 18,631,841 $ 7,830,551


Net pension liability $ - $ 199,620 $ - $ 199,620 $ -

Compensated absences 103,750 211,682 224,700 90,732 90,732

Total $ 103,750 $ 411,302 $ 224,700 $ 290,352 $ 90,732

Compensated absences for governmental activities are typically liquidated by the general and other governmental funds.

Year Ending June 30, Principal

2016 $ 493,731

2017 493,731

2018 245,981

$ 1,233,443



54


C) Interfund Transfers

Transfers to/from other funds at June 30, 2015, consist of the following:

From the State Public School Fund to the School Food Service Fund for administrative costs $ 85,703

From the General Fund to the School Food Service Fund for operating costs $ 8,550

From the Other Restricted Fund to the General Fund Fund for reclassification for unrestricted funds $ 1,622,357

From the General Fund to the Capital Outlay Fund Fund for capital projects $ 92,294

D) Fund Balance

The Board has a revenue spending policy that provides policy for programs with multiple revenue sources.

The finance officer will use resources in the following hierarchy: bond proceeds, federal funds, State funds,

local non-Board of Education funds, Board funds. For purposes of fund balance classification, expenditures

are to be spent from restricted fund balance first, followed in-order by committed fund balance, assigned

fund balance and lastly unassigned fund balance. The finance officer has the authority to deviate from this

policy if it is in the best interest of the Board.

The following schedule provides management and citizens with information on the portion of the General

Fund balance that is available for appropriation.

Total fund balance – General Fund $ 15,078,945

Less:

Stabilization by State statute 433,721

Appropriated fund balance in 2016 budget 6,000,000

Remaining fund balance $ 8,645,224

IV) SUMMARY DISCLOSURE OF SIGNIFICANT CONTINGENCIES

Federal and State Assisted Programs

The Board has received proceeds from several federal and State grants. Periodic audits of these grants are

required and certain costs may be questioned as not being appropriate expenditures under the grant

agreements. Such audits could result in the refund of grant monies to the grantor agencies. Management

believes that any required refunds will be immaterial. No provision has been made in the accompanying

financial statements for the refund of grant monies.



55

V) CHANGE IN ACCOUNTING PRINCIPLES/RESTATEMENT

The Board implemented Governmental Accounting Standards Board (GASB) Statement 68, Accounting

and Financial Reporting for Pensions (an amendment of GASB Statement No. 27), and GASB Statement

No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date. These

statements address accounting and financial reporting for pensions provided to Board employees that is

administered by the North Carolina Teachers’ and State Employees’ Retirement System. The

implementation of the statements required the Board to record beginning net pension liability and the

effects on net position of contributions made by the Board during the measurement period (fiscal year

ending June 30, 2014). As a result, the restated net position for the governmental and business-type

activities decreased by $31,993,506 and $855,428, respectively.

VI) SUBSEQUENT EVENTS

Management has evaluated subsequent events through December 30, 2015 the date of the issuance of these

financial statements, and determined the following event is required for disclosure in the financial

statements.

On November 25, 2015, the Board awarded the contract for construction of the Oak Grove area

high school for approximately $43 million. Davidson County will fund the construction of the

school through a combination of bond issuance and sales tax revenue. The Oak Grove area high

school is scheduled to be completed for the 2017-18 school year.

REQUIRED SUPPLEMENTARY INFORMATION

Schedule of Proportionate Share of the Net Pension Liability

Teachers' and State Employees' Retirement System

Schedule of Contributions


2015 2014

Board's proportion of the net pension liability (asset) 0.654% 0.662%

Board's proportionate share of the net pension liability (asset) 7,665,523$ 40,208,359$

Board's covered-employee payroll 93,448,973$ 89,211,826$

Board's proportionate share of the net pension liability (asset) as a

percentage of its covered-employee payroll 8.20% 45.07%

Plan fiduciary net position as a percentage of the total pension liability* 98.24% 90.60%

* The amounts presented for each fiscal year were determined as of the prior fiscal year ending June 30.


Schedule of the Proportionate Share of the Net Pension Liability


Last Two Fiscal Years*


56

2015 2014

Contractually required contribution 8,113,139$ 7,359,425$

Contributions in relation to the contractually required contribution 8,113,139 7,359,425

Contribution deficiency (excess) -$ -$

Board's covered-employee payroll 93,448,973$ 89,211,826$

Contributions as a percentage of covered-employee payroll 8.68% 8.25%

* The amounts presented for each fiscal year were determined as of the prior fiscal year ending June 30.


Schedule of Contributions


Last Two Fiscal Years*


57

SUPPLEMENTARY INFORMATION

INDIVIDUAL FUND SCHEUDULES

GENERAL FUND

The General Fund accounts for all financial resources except those that are required to

be accounted for in a another fund. The General Fund is a major fund.

Schedule 1

Variance

Final Positive

Budget Actual (Negative)

REVENUES:

Davidson County appropriations 22,268,544$ 22,268,544$ -$

U.S. Government:

Medicaid reimbursement 505,599 505,599 -

Medicaid reimbursement - fees for service 513,847 513,847

Total U.S. Government 1,019,446 1,019,446 -

Other revenues:

Fines and forfeitures 417,973 410,188 (7,785)

Rental of school property 44,107 47,482 3,375

Indirect cost allocated 718,273 771,215 52,942

Interest 30,789 30,547 (242)

E-Rate reimbursement 12,745 12,745 -

Sales taxes 39,285 39,285 -

Miscellaneous revenue 37,132 53,123 15,991

Total other revenues 1,300,304 1,364,585 64,281

Total revenues 24,588,294 24,652,575 64,281

EXPENDITURES:


Regular instructional 7,602,434 7,463,748 138,686

Special populations 603,915 603,472 443

Alternative programs 33,137 31,984 1,153

School leadership 1,575,878 1,482,360 93,518

Co-curricular 897,371 849,202 48,169

School-based support 1,844,699 1,797,234 47,465

Total instructional services 12,557,434 12,228,000 329,434


Support and development 585,732 563,118 22,614

Special population support and development 14,421 13,584 837

Alternative programs and services support and development 1,165 1,165 -

Technology support 2,790,413 2,591,608 198,805

Operational support 11,104,422 10,133,501 970,921

Financial and human resource 1,001,415 915,368 86,047

Accountability services 156,677 137,944 18,733

System-wide pupil support 51,895 50,245 1,650

Policy, leadership and public relations 855,225 648,220 207,005

Total system-wide support services 16,561,365 15,054,753 1,506,612

Ancillary services:

Nutrition services 17,921 17,917 4


Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual

General Fund


58

Schedule 1 (Continued)

Variance

Final Positive


Non-programmed charges:

Payments to charter schools 121,283$ 119,903$ 1,380$

Contingency 1,500,000 - 1,500,000

Total non-programmed charges 1,621,283 119,903 1,501,380

Total expenditures 30,758,003 27,420,573 3,337,430

Revenues under expenditures before

other financing sources (6,169,709) (2,767,998) 3,401,711

OTHER FINANCING SOURCES:

Transfers to other funds (111,374) (100,844) 10,530

Transfers from other funds 1,622,357 1,622,357

Appropriated fund balance 4,658,726 - (4,658,726)

6,169,709 1,521,513 (4,648,196)

Net change in fund balance -$ (1,246,485) (1,246,485)$

FUND BALANCE:


End of year 15,078,945$

General Fund




59

SPECIAL REVENUE FUNDS

Special Revenue Funds are used to account for specific revenues that are legally restricted to

expenditures for particular purposes.

Budgeted Individual Fund Descriptions:

The State Public School Fund is required by State Statue and accounts for funds according to the

provisions of G.S. 115C-438. The State Public School Fund is a major fund.

The Federal Grants Fund accounts for funds received from various federal grant programs and must

also be accounted for according to the provisions of G.S. 115C-438. The Federal Grants Fund is a

major fund.

The Other Restricted Fund included specific revenues that are legally restricted for certain purposes

and not intended for the general K-12 population. The Other Restricted Expnese Fund is a major fund.

Schedule 2

Variance

Final Positive


REVENUES:

State of North Carolina:

Operating allocations 106,735,205$ 105,510,523$ (1,224,682)$

Textbooks 657,133 60,216 (596,917)

Total revenues 107,392,338 105,570,739 (1,821,599)

EXPENDITURES:


Regular instructional 65,263,788 63,999,446 1,264,342

Special populations 12,881,507 12,859,418 22,089

Alternative programs and services 2,965,288 2,499,941 465,347

School leadership 6,964,150 6,959,959 4,191

School-based support 8,340,503 8,340,401 102

Total instructional services 96,415,236 94,659,165 1,756,071


Support and development 174,475 174,475 -

Special population support and development 173,100 173,100 -

Alternative programs and services support and development 50,716 50,716 -

Technology support 242,812 242,812 -

Operational support 8,070,797 8,025,631 45,166

Financial and human resource 1,246,914 1,246,914 -

Accountability services 285,209 285,209 -

Policy, leadership and public relations 627,014 627,014 -

Total system-wide support services 10,871,037 10,825,871 45,166

Ancillary services:

Nutrition services - - -


Revenues over expenditures before

other financing sources 106,065 85,703 20,362


Transfers to other funds (106,065) (85,703) (20,362)

Net change in fund balance -$ - -$

FUND BALANCE:

Beginning of year -

End of year -$





60

Schedule 3

Variance

Final Positive


REVENUES:

U.S. Government 9,431,421$ 7,959,811$ (1,471,610)$

Total revenues 9,431,421 7,959,811 (1,471,610)

EXPENDITURES:


Regular instructional 708,490 622,363 86,127

Special populations 3,684,072 3,239,342 444,730

Alternative programs 3,469,747 3,084,903 384,844

School leadership 3,925 935 2,990

School-based support 170,505 128,177 42,328



Support and development 8,279 8,279 -

Special population support and development 126,174 117,691 8,483

Alternative programs and services support and development 379,724 278,568 101,156

Technology support services 172,086 - 172,086

Operational support 276,666 100,925 175,741

Financial and human resource 200,076 177,651 22,425

Total system-wide support 1,163,005 683,114 479,891

Non-programmed charges:

Payments to other governmental units 231,677 200,977 30,700


Net change in fund balance -$ - -$

FUND BALANCE:

Beginning of year -

End of year -$



Federal Grants Fund


61

Schedule 4

Variance

Final Positive


REVENUES:

U.S. Government:

Reserve Officers' Training Corps (ROTC) 111,491$ 111,491$ -$

Junior Reserve Officers' Training Corps (JROTC) 2,845 2,845 -

114,336 114,336 -


Smart Start 429,791 429,791 -

NC Pre-K 329,564 329,564 -

Truancy program 68,053 56,075 (11,978)

Workforce inovation grants 140,000 74,629 (65,371)

967,408 890,059 (77,349)

Davidson County:

Stoner Thomas appropirations 396,255 396,255 -

Teen parent 110,131 110,131 -

506,386 506,386 -

Other revenues:

Tuition and fees 361,832 361,832 -

Donations and contributions 1,868 1,868 -

Miscellaneous revenue 419,440 414,789 (4,651)

Total other revenues 783,140 778,489 (4,651)

Total revenues 2,371,270 2,289,270 (82,000)

EXPENDITURES:


Regular instructional 839,556 744,909 94,647

Special populations 239,431 239,175 256

Alternative programs 826,695 826,695 -

School leadership 321,016 320,649 367

School-based support 49,652 49,130 522



Operational support servcies 94,861 93,933 928

Ancillary services:

Nutrition services 59 59 -

Total expenditures 2,371,270 2,274,550 96,720

Revenues over expenditures before other financing sources - 14,720 14,720


Transfers to other funds (1,622,357) (1,622,357) -


- (1,622,357) (1,622,357)

Net change in fund balance -$ (1,607,637) (1,607,637)$

FUND BALANCE:


End of year 14,720$



Other Restricted Fund


62

CAPITAL OUTLAY FUND

The Capital Outlay Fund is used to account for acquisition and construction of major

capital facilities other than those financed by the proprietary fund. The Capital Outlay

Fund is a major fund.

Schedule 5

Variance

Final Positive


REVENUES:


State appropriations - buses 924,445$ 924,445$ -$

Davidson County:

Appropriations - operating 1,185,928 1,185,928 -

Sales tax 8,463,587 2,485,266 (5,978,321)

School reimbursment 331,795 254,860 (76,935)

9,981,310 3,926,054 (6,055,256)

Other revenues:

Surplus sale proceeds 20,421 18,384 (2,037)

Interest 2,000 1,947 (53)

Other 500 - (500)

22,921 20,331 (2,590)

Total revenues 10,928,676 4,870,830 (6,057,846)

EXPENDITURES:

Furniture and equipment 462,637 332,006 130,631

Buses and motor vehicles 2,446,391 2,396,414 49,977

Improvements and renovations 8,819,887 2,804,069 6,015,818

Computer equipment 983,039 967,598 15,441

Supplies and materials 29,244 27,438 1,806

Contingency 5,000 - 5,000

Debt service:

Principal 924,445 924,445 -


Operating loss (2,741,967) (2,581,140) 160,827


Transfer from other funds 92,294 92,294 -

Installment purchase obligations 1,974,926 1,974,926 -

Appropriated fund balance 674,747 - (674,747)

2,741,967 2,067,220 (674,747)

Net change in fund balance -$ (513,920) (513,920)$

FUND BALANCE:





Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual

Capital Outlay Fund

63

ENTERPRISE FUND

The Enterprise Fund is used to account for the Board's food services operations. The

Enterprise Fund is a major fund.

Schedule 6

Variance

Final Positive


OPERATING REVENUES:

Food sales 2,841,800$ 2,586,364$ (255,436)$

Miscellaneous local operating revenue - 9,010 9,010

2,841,800 2,595,374 (246,426)

OPERATING EXPENDITURES:

Business support services:

Purchase of food 3,025,541

Donated commodities 318,769

Salaries and benefits 4,279,653

Professional and technical services 18,084

Property services 16,363

Transportation services 20,161

Communications 5,732

Dues and fees 1,524

Indirect costs 551,772

Supplies and materials 114,506

Repairs and maintenance 41,247

Utilities 33,092

Food processing supplies 245,787

Total business support services 9,496,956 8,672,231 824,725

Capital outlay 33,694 33,693 1

Total operating expenditures 9,530,650 8,705,924 824,726

Operating loss (6,688,850) (6,110,550) 578,300

NONOPERATING REVENUES (EXPENSES):

Federal reimbursements 5,507,000 4,913,397 (593,603)

Federal commodities - 465,983 465,983

State reimbursements - 14,245 14,245

Interest earned - 4,171 4,171

Total nonoperating revenues 5,507,000 5,397,796 (109,204)

Revenues under expenditures before other financing sources (1,181,850) (712,754) 469,096


Transfers from other funds 75,000 94,253 19,253


1,181,850 94,253 (1,087,597)

Revenues under expenditures -$ (618,501) (618,501)$

Reconciliation of modified accrual to full accrual basis:

Depreciation (161,625)

Contributions to the pension plan in current fiscal year 211,277

Decrease in inventory (155,490)

Capital outlay 33,693

Book value of disposed capital assets (7,912)

Pension expense (81,213)

Decrease in compensated absences payable 13,018

Change in net position (full accrual basis) (766,753)$


Schedule of Revenues and Expenditures - Budget and Actual (Non-GAAP)

School Food Service Fund


64

STATISTICAL SECTION

Unaudited

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Instructional Programs 92,459,206 98,366,491 115,568,848 120,448,218 114,816,387 117,392,904 115,074,117 118,277,282 114,938,563 120,450,053

Supporting Services 30,072,984 31,324,837 22,379,819 22,398,343 21,869,129 22,684,716 23,396,415 24,530,466 24,879,136 26,657,671

Ancillary Services 132,194 132,148 22,893 76,754 75,382 38,667 83,913 101,063 128,664 17,976

Nonprogram Charges 154,114 147,087 129,055 172,650 340,777 439,622 232,660 212,290 3,217,623 320,880

Capital Projects 6,865,950 6,737,666 17,988,599 26,367,022 10,359,598 11,683,106 19,001,911 9,058,275 5,058,045 7,451,970

Total Expenditures by function 129,684,448 136,708,229 156,089,214 169,462,987 147,461,273 152,284,215 157,789,016 152,179,376 148,222,031 154,898,550

1

10

100

1,000

10,000

100,000

1,000,000

10,000,000

100,000,000

1,000,000,000

Davidson County Board of EducationGeneral Government Expenditures by Function - Last Ten Fiscal Years (Unaudited)

Table 1

65

Table 2

66

0

20,000,000

40,000,000

60,000,000

80,000,000

100,000,000

120,000,000

140,000,000

160,000,000

180,000,000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Interest in Investments 280,722 400,047 467,881 279,418 125,394 97,912 103,778 44,331 34,259 32,494

Fines and Forfeitures 431,821 878,647 694,678 955,251 687,070 468,392 790,783 457,148 646,519 410,188

U. S. Government 6,963,880 7,044,099 7,116,078 8,388,667 15,639,231 17,423,980 15,261,987 11,530,181 9,974,259 9,093,593

Other 4,903,502 5,099,579 4,884,218 4,489,685 4,590,345 4,937,468 6,340,246 6,536,688 6,815,721 6,146,323

Davidson County 24,969,434 25,512,494 37,890,466 45,391,642 32,674,710 28,284,939 40,500,986 28,663,595 25,256,868 26,700,984

State of North Carolina 91,449,923 101,306,177 107,137,208 109,892,525 98,431,155 101,846,010 101,634,227 103,496,668 101,729,112 107,385,243

Total Revenues by Source 128,999,282 140,241,043 158,190,529 169,397,188 152,147,905 153,058,701 164,632,007 150,728,611 144,456,738 149,768,825

Davidson County Board of EducationGeneral Government Revenues by Source - Last Ten Fiscal Years (Unaudited)

Interest in Investments Fines and Forfeitures U. S. Government Other Davidson County State of North Carolina Total Revenues by Source

Table 3

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Elementary Schools 9,352 9,629 9,675 9,605 9,466 9,991 9,365 9,067 9,090 9,016

Middle Schools 4,734 4,642 4,729 4,746 4,842 4,166 4,835 4,906 4,924 4,694

High Schools 5,452 5,687 5,757 5,559 5,714 5,747 5,571 5,576 5,601 5,625

Special Programs 227 299 309 307 300 267 196 282 280 234

-200

500

1,200

1,900

2,600

3,300

4,000

4,700

5,400

6,100

6,800

7,500

8,200

8,900

9,600

10,300

11,000

Davidson County Board of EducationComparative Average Daily Membership - Last Ten Fiscal Years (Unaudited)

67

Table 4

18,000

18,500

19,000

19,500

20,000

20,500

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015Pupils 19,765 20,257 20,470 20,217 20,322 20,171 19,967 19,830 19,890 19,569

Davidson County Board of EducationAverage Daily Membership - Last Ten Fiscal Years (Unaudited)

-54

-

68

Table 5

Collections of Percentage of Total Percentage of Total Accumulated Ratio of Total

Less Current Year's Levy Collected Collections Tax Collections Total Delinquent Taxes

Year Ended Total Discounts and Adjusted Taxes During During Fiscal on Prior to Adjusted Total Delinquent to Current

June 30, Tax Levy Releases Net Levy Fiscal Year (1) Year Year's Taxes Net Levy Collections Taxes Tax Levy

2006 54,246,270$ 698,220$ 53,548,050$ 51,707,602$ 96.56% 1,663,949$ 99.67% 53,371,551$ 3,150,207$ 5.88%

2007 56,280,279 626,687 55,653,592 53,660,278 96.42% 1,458,430 99.04% 55,118,708 3,489,460 6.27%

2008 68,050,734 1,066,954 66,983,780 64,621,474 96.47% 1,808,658 99.17% 66,430,132 3,712,868 5.54%

2009 69,932,159 930,158 69,002,001 65,974,390 95.61% 1,813,347 98.24% 67,787,737 4,285,529 6.21%

2010 70,141,530 800,584 69,340,946 66,247,055 95.54% 2,190,304 98.70% 68,437,359 5,119,416 7.38%

2011 70,236,091 807,936 69,428,155 66,399,133 95.64% 2,109,308 98.68% 68,508,441 6,130,127 8.83%

2012 70,943,189 757,156 70,186,033 67,020,098 95.49% 2,124,036 98.52% 69,144,134 7,086,236 10.10%

2013 71,699,938 783,871 70,916,067 67,863,493 95.70% 2,387,797 99.06% 70,251,290 7,864,374 11.09%

2014 74,395,585 781,957 73,613,628 70,861,962 96.26% 2,171,076 99.21% 73,033,038 7,297,922 9.91%

2015 73,166,179 718,881 72,447,298 70,400,546 97.17% 2,402,737 100.49% 72,803,283 7,465,189 10.30%

(1) Collections do not include interest.


Property Tax Levies and Collections For Davidson County

Last Ten Fiscal Years

69

Table 6

Year Ended Real Individual Business Motor Public Service Total Direct

June 30, Property (1) Personal (2) Personal (1) Vehicles (2) Companies (3) Total Tax Rate

2006 7,839,758,642$ 32,390,958$ 692,190,344$ 1,090,575,185$ 327,172,239$ 9,982,087,368$ 0.54

2007 8,109,938,795 52,953,086 714,352,950 1,160,632,178 338,372,556 10,376,249,565 0.54

2008 10,186,197,400 52,453,186 707,605,727 1,172,035,633 370,205,652 12,488,497,598 0.54

2009 10,539,366,996 54,220,116 736,262,071 1,139,990,926 397,981,937 12,867,822,046 0.54

2010 10,705,278,310 52,874,992 717,998,624 1,066,520,996 388,516,648 12,931,189,570 0.54

2011 10,813,916,630 49,018,736 665,644,277 1,035,675,555 383,598,882 12,947,854,080 0.54

2012 10,907,215,885 49,468,990 671,768,962 1,076,760,000 385,251,952 13,090,465,789 0.54

2013 10,937,949,307 52,243,732 709,448,845 1,140,013,889 388,764,960 13,228,420,733 0.54

2014 11,010,529,658 53,991,982 733,189,369 1,548,177,407 382,637,062 13,728,525,478 0.54

2015 11,075,289,751 56,349,740 748,646,544 1,262,548,519 375,103,408 13,517,937,962 0.54

Notes:

(1)

(2)

(3)

Assessed Value


Assessed Value of Taxable Property For Davidson County


Assessed value of taxable property on registered motor vehicles is shown due to a state law change, as of January 1, 1993, which altered the procedures

for the assessment of property taxes on registered motor vehicles in North Carolina and excluded the assessed value on registered motor vehicles from

individual personal.

Assessed value of taxable property approximates market value except for real property assessed values after the year ended June 30, 2002 which is

based on market value as of January 1, 2007 (the County's last reappraisal). The assessed value of taxable property for business personal on

manufacturers', retailers', and wholesalers' inventories is excluded.

Public service companies' property includes real and personal property of utilities, railroads, telephone and pipeline, etc. These assessments are made

by the North Carolina Department of Revenue with no distinction between real and personal property.

Assessed Value

70

June 30, 2015 2014 2013 2012 2011 2010 2009

County direct rate:

General-operating 0.540$ 0.540$ 0.540$ 0.540$ 0.540$ 0.540$ 0.540$

City of Lexington 0.600 0.600 0.600 0.560 0.560 0.560 0.560

Lexington Special Schools District 0.120 0.120 0.120 0.120 0.120 0.120 0.120

Lexington Main Street District 0.200 0.200 0.200 0.200 0.200 0.200 0.200

City of Thomasville 0.560 0.560 0.560 0.560 0.560 0.560 0.560

Thomasville Special Schools District 0.180 0.180 0.180 0.180 0.180 0.180 0.180

Town of Denton 0.550 0.550 0.550 0.550 0.550 0.550 0.550

City of High Point 0.664 0.675 0.675 0.662 0.633 0.633 0.633

Town of Wallburg 0.050 0.050 0.050 0.050 0.050 0.050 0.050

Town of Midway 0.050 0.050 0.050 0.050 0.050 0.050 0.050

Fire Protection Districts:

Central 0.070 0.070 0.070 0.070 0.070 0.070 0.070

Pilot 0.085 0.085 0.085 0.085 0.085 0.085 0.085

Hasty 0.070 0.070 0.070 0.070 0.070 0.070 0.070

West Lexington 0.100 0.100 0.100 0.100 0.100 0.100 0.100

Wallburg 0.100 0.100 0.080 0.080 0.080 0.080 0.080

Holly Grove 0.080 0.080 0.080 0.080 0.080 0.080 0.080

North Lexington 0.110 0.110 0.110 0.110 0.110 0.110 0.110

Welcome 0.100 0.100 0.100 0.100 0.100 0.100 0.100

Reeds 0.040 0.040 0.040 0.040 0.040 0.040 0.040

Tyro 0.080 0.080 0.080 0.080 0.080 0.080 0.080

Linwood 0.085 0.075 0.075 0.075 0.075 0.075 0.075

Churchland 0.070 0.070 0.070 0.070 0.070 0.070 0.070

Arcadia - Reedy Creek - Hampton 0.080 0.080 0.080 0.080 0.080 0.080 0.080

Healing Springs 0.090 0.090 0.090 0.090 0.090 0.090 0.070

Southmont 0.085 0.085 0.085 0.085 0.085 0.085 0.085

Fairgrove 0.080 0.080 0.075 0.075 0.060 0.060 0.060

South Lexington 0.110 0.110 0.110 0.110 0.110 0.110 0.110

Silver Valley 0.110 0.110 0.110 0.110 0.110 0.110 0.110

Midway 0.100 0.100 0.100 0.100 0.100 0.100 0.100

Gumtree 0.100 0.100 0.085 0.085 0.085 0.085 0.085

South Emmons 0.060 0.050 0.050 0.050 0.050 0.050 0.050

South Davidson 0.100 0.100 0.100 0.100 0.100 0.100 0.100

Horneytown 0.110 0.110 0.100 0.100 0.100 0.100 0.100

Griffith 0.080 0.080 0.080 0.080 0.080 0.080 0.080

Clemmons 0.050 0.050 0.050 0.050 0.050 0.050 0.050

Badin 0.060 0.060 0.060 0.060 0.060 0.060 0.060

Notes: (1) The County's reappraisal was effective as of January 1, 2001.

(2) The County's reappraisal was effective as of January 1, 2007.


Property Tax Rates - Direct and Overlapping Governments For Davidson County

Tax Rates Per $100 Valuation


71

Table 7

2008 (2) 2007 2006

0.540$ 0.540$ 0.540$

0.535 0.545 0.545

0.120 0.130 0.130

0.200 0.200 0.200

0.560 0.570 0.570

0.1725 0.180 0.180

0.550 0.550 0.550

0.633 0.608 0.608

0.050 0.050 0.050

0.050 0.050 -

0.070 0.070 0.070

0.085 0.085 0.085

0.065 0.060 0.060

0.100 0.100 0.100

0.080 0.080 0.080

0.080 0.080 0.080

0.110 0.110 0.110

0.080 0.080 0.080

0.040 0.040 0.040

0.080 0.080 0.080

0.060 0.045 0.045

0.070 0.080 0.080

0.080 0.080 0.080

0.070 0.070 0.070

0.085 0.085 0.085

0.055 0.055 0.055

0.110 0.110 0.110

0.110 0.110 0.110

0.100 0.100 0.100

0.085 0.080 0.080

0.050 0.050 0.050

0.100 0.100 0.100

0.100 0.100 0.100

0.080 0.080 0.080

0.050 0.050 0.050

0.060 0.060 0.060

72

Assessed Value 2015 (1) 2014 (1) 2013 (1) 2012 (1)

Davidson County 13,517,937,962$ 13,728,525,478$ 13,228,420,733$ 13,090,465,789$

City of Lexington 1,546,064,567 1,585,300,795 1,496,604,452 1,473,679,696

Lexington Special Schools District 1,309,372,675 1,334,494,099 1,295,118,808 1,292,605,883

Lexington Main Street District 47,392,525 48,882,615 48,113,685 50,357,620

City of Thomasville 1,684,071,925 1,711,250,293 1,671,545,270 1,663,695,796

Thomasville Special Schools District 778,390,528 814,743,859 773,230,611 773,927,656

Town of Denton 119,736,702 123,396,626 117,688,245 117,615,820

City of High Point 447,912,474 449,696,165 425,268,619 413,762,953

Town of Wallburg 267,107,600 257,510,607 245,439,840 239,976,700

Town of Midway 351,873,300 361,575,547 344,521,320 340,756,920

Fire Protection Districts:

Central 364,672,943 373,291,425 356,960,371 355,625,929

Pilot 329,829,776 338,024,345 326,796,306 324,510,894

Hasty 525,507,229 536,477,107 519,756,357 513,700,371

West Lexington 258,540,720 264,217,938 250,462,040 247,698,160

Wallburg 768,312,280 775,697,517 749,852,763 738,998,888

Holly Grove 280,665,588 286,271,486 273,833,650 273,026,725

North Lexington 204,070,927 209,259,497 201,437,591 198,694,291

Welcome 521,800,530 534,173,466 510,816,790 503,931,220

Reeds 483,364,150 496,052,283 471,817,575 462,550,325

Tyro 416,728,938 423,107,162 391,710,500 404,373,450

Linwood 327,640,059 326,167,791 318,905,680 319,234,533

Churchland 264,800,214 269,204,478 253,605,586 248,386,971

Arcadia - Reedy Creek - Hampton 955,146,963 970,257,096 934,399,200 921,676,300

Healing Springs 321,200,378 326,283,414 320,755,956 318,687,456

Southmont 790,498,106 801,462,631 781,667,729 773,318,059

Fairgrove 422,249,450 430,049,187 415,204,800 409,622,387

South Lexington 190,946,091 205,347,722 188,468,600 187,256,100

Silver Valley 372,798,818 379,019,868 358,643,282 358,041,082

Midway 875,267,840 887,087,782 851,930,200 850,736,980

Gumtree 137,403,470 139,229,328 134,404,871 135,596,165

South Emmons 122,565,233 124,455,412 120,678,440 121,445,840

South Davidson 107,769,840 110,438,096 105,120,620 104,516,700

Horneytown 126,878,155 125,937,244 122,327,410 121,228,920

Griffith 286,821,388 290,192,158 276,750,450 269,479,375

Clemmons 100,312,860 98,636,360 92,097,600 90,971,960

Badin 63,234,217 64,326,069 63,280,767 61,822,133

Notes:

(1) Excludes the assessed value of taxable property for business personal on manufacturers', retailers' and wholesalers'

inventories.

(2) The County's reappraisal was effective as of January 1, 2007.


Assessed Property Values- Direct and Overlapping Governments For Davidson County


73

Table 8

2011 (1) 2010 (1) 2009 (1) 2008 (1)(2) 2007 (1) 2006 (1)

12,947,854,080$ 12,931,189,570$ 12,867,822,046$ 12,488,497,598$ 10,376,249,565$ 9,982,087,368$

1,473,672,255 1,492,980,321 1,510,345,430 1,476,846,553 1,331,336,090 1,302,774,404

1,291,604,908 1,318,384,117 1,318,552,842 1,475,984,017 1,157,741,177 1,138,641,200

51,490,750 47,262,355 50,716,805 49,553,550 40,618,885 40,370,250

1,631,688,204 1,618,601,777 1,651,223,607 1,590,725,830 1,385,704,925 1,260,410,353

749,911,389 751,942,511 759,035,500 755,303,484 675,324,694 713,384,544

116,439,524 117,874,584 114,632,407 113,585,395 91,583,758 88,870,453

409,138,859 405,298,123 405,727,368 40,516,058 37,414,021 30,928,770

246,426,080 249,863,520 246,490,980 239,477,600 190,545,540 183,549,740

341,185,220 329,544,760 327,011,120 318,684,420 251,338,460 -

354,197,100 347,912,214 346,260,400 342,546,200 288,955,357 239,769,929

324,601,176 352,563,753 356,487,859 351,866,894 297,546,906 291,516,235

508,090,571 496,509,986 494,207,271 479,244,615 389,782,000 378,521,950

242,734,750 243,747,980 244,370,920 241,299,190 207,789,840 200,018,670

735,350,700 744,359,763 732,307,363 673,664,713 508,356,650 461,853,338

274,369,675 273,476,238 276,519,900 271,544,000 226,652,563 218,397,150

196,519,718 192,939,864 194,155,345 196,009,618 156,802,400 142,538,891

493,415,430 486,896,450 484,822,890 474,940,238 388,497,963 376,063,500

470,628,225 453,950,875 493,419,325 447,402,275 382,860,700 374,046,700

396,789,138 402,760,913 394,994,875 379,545,063 313,647,750 301,790,113

298,656,427 303,999,253 305,953,947 295,138,350 263,570,756 176,772,267

245,488,343 231,714,814 233,403,514 226,844,457 189,392,650 202,299,075

910,201,613 931,328,850 906,152,638 883,832,775 690,970,238 648,804,975

315,181,767 327,104,044 314,755,143 298,608,871 242,880,200 235,155,243

767,148,376 780,622,706 769,648,788 754,652,800 566,898,412 454,455,129

410,337,817 400,471,167 402,986,883 407,130,545 361,339,636 327,476,436

187,228,109 179,402,182 201,630,964 188,129,018 141,716,009 139,343,136

356,209,473 356,273,891 351,100,527 347,660,791 301,888,300 289,477,091

835,903,950 825,496,830 816,695,080 808,735,050 670,247,130 647,685,460

130,897,882 121,944,282 124,643,459 119,693,400 100,777,850 95,738,150

119,643,580 120,967,140 123,567,640 119,038,240 103,712,640 100,738,860

103,562,980 103,329,050 101,752,810 99,722,040 87,208,920 82,242,140

119,410,440 119,136,710 118,345,310 108,324,730 87,486,990 85,468,080

265,095,663 246,154,450 237,858,425 207,695,988 171,017,688 164,099,338

90,460,020 78,820,120 78,153,500 73,894,780 59,636,040 46,869,220

60,953,283 54,340,017 52,209,250 50,396,050 47,635,760 37,539,367

74

Table 9

Ratio of

Assessed Bonded Bonded Debt

Year Ended Value Debt to Assessed Bonded Debt

June 30, Population (1) (000,000's) (000's) Value Per Capita

2006 154,796 9,982$ 14,200$ 0.14% 92

2007 155,343 10,376 54,595 0.53% 351

2008 156,530 12,488 53,000 0.42% 339

2009 159,865 12,868 80,780 0.63% 505

2010 159,947 12,931 76,425 0.59% 478

2011 162,878 12,948 72,105 0.56% 443

2012 162,697 13,090 67,825 0.52% 417

2013 163,683 13,228 63,585 0.48% 388

2014 163,770 13,729 59,380 0.43% 363

2015 164,454 13,519 55,210 0.41% 363

Sources:

(1) Most recent annual estimates as certified to the North Carolina Department of Revenue by the Office

of State Budget and Management Research Planning Services.


Ratio of Net General Bonded Debt To Assessed Value and

Bonded Debt Per Capita For Davidson County


75

Table 10

Interest Total General

and Fiscal Debt Government

Year Principal Charges Service Expenditures Ratio (1)

2006 1,645,000$ 461,450$ 2,106,450$ 123,971,627$ 1.70%

2007 1,605,000 427,550 2,032,550 127,526,023 1.59%

2008 1,595,000 363,850 1,958,850 158,093,433 1.24%

2009 2,880,000 2,256,800 5,136,800 157,142,431 3.27%

2010 5,965,600 4,197,129 10,162,729 138,724,978 7.33%

2011 6,294,065 4,154,425 10,448,490 140,361,367 7.44%

2012 6,329,065 4,493,390 10,822,455 148,568,706 7.28%

2013 6,136,115 4,070,085 10,206,200 134,679,178 7.58%

2014 6,163,465 3,852,226 10,015,691 135,403,289 7.40%

2015 7,218,465 3,642,924 10,861,389 131,087,712 8.29%

Notes: (1) Includes all General, Special Revenue, and Capital Projects Funds.


Ratio of Annual Debt Service Expenditures For General Bonded Debt


To Total General Government Expenditures For Davidson County

76

Table 11

Ratio of

total net

Total net Legal debt applicable

Year Ended Debt debt applicable Debt to limit to the

June 30, Limit to limit Margin debt limit

2006 798,567$ 40,046$ 758,521$ 5.01%

2007 830,100 78,656 751,444 9.48%

2008 999,080 75,661 923,419 7.57%

2009 1,029,426 111,594 917,831 10.84%

2010 1,034,495 110,481 924,014 10.68%

2011 1,035,828 118,779 917,049 11.47%

2012 1,047,237 111,898 935,339 10.69%

2013 1,058,274 105,688 952,586 9.99%

2014 1,098,282 98,934 999,348 9.01%

2015 1,081,435 91,107 990,328 8.42%

Legal Debt Margin Calculation for Fiscal Year 2015

Assessed value of taxable property 13,517,937,962$

Debt limit - eight percent (8%) of assessed value 1,081,435,036$

Amount of debt applicable to debt limit:

Bonded debt 55,210,000$

Certificates of participation 7,905,000

Limited Obligation Bonds 3,680,000

Qualified School Construction Bonds 16,434,646

Obligations under installment

purchases 7,877,193

Total amount of debt applicable to legal debt limit 91,106,839

Legal debt margin 990,328,197$


Legal Debt Margin Information For Davidson County

Last Ten Fiscal Years (in thousands)

77

Table 12

Percentage Amount

Applicable to Applicable to

Net Debt Davidson Davidson

Outstanding County County

Davidson County 81,004,646$ 100% 81,004,646$

Total direct debt 81,004,646 81,004,646

Town of Midway 508,500 100% 508,500

City of Thomasville 266,667 100% 266,667

City of Lexington 5,143,769 100% 5,143,769

Total overlapping debt 5,918,936 5,918,936

Total direct and overlapping

debt 86,923,582$ 86,923,582$

Note: Overlapping governments are those that coincide, at least in part, with the geographic boundaries

of the county.


Computation of Direct and Overlapping Governmental Activities Debt

As of June 30, 2015

For Davidson County

78

Table 13

Personal

Income Per Public

Year Ended (thousands Capita School Unemployment

June 30, Population (1) of dollars)(1) Income (1) Enrollment (1) Rate (2)

2006 154,796 4,149,212$ 27,029$ 25,857 5.8%

2007 155,343 4,460,396 28,983 25,998 6.0%

2008 156,530 4,502,585 28,765 26,239 6.7%

2009 159,865 3,593,286 22,477 26,200 12.5%

2010 159,947 3,540,907 22,138 25,953 12.1%

2011 162,878 3,590,157 22,042 25,524 11.3%

2012 162,697 3,622,937 22,268 25,519 10.6%

2013 163,683 3,502,653 21,399 25,555 9.8%

2014 163,770 3,567,402 21,783 25,231 6.7%

2015 164,454 3,582,301 21,783 25,141 5.9%

Sources:

(1) Most recent annual estimates as certified to the North Carolina Department of Commerce

(2) Employment Security Commission


Demographic and Economic Statistics For Davidson County


79

Table 14

Governmental Activities

Qualified

General Qualified School Limited Certificates General Limited Total Percentage

Fiscal Obligation Academy Construction Installment Obligation of Obligation Obligation Installment Primary of Personal Per

Year Bonds Zone Bonds Bonds Purchases Bonds Participation Bonds Bonds Purchases Government Income Capita

2006 14,200,000$ 1,030,000$ -$ 1,316,250$ -$ 23,500,000$ -$ -$ -$ 40,046,250 0.97% 259

2007 54,595,000 1,030,000 - 1,105,650 - 21,925,000 - - - 78,655,650 1.76% 506

2008 53,000,000 1,030,000 - 895,050 - 20,525,000 - - - 75,450,050 1.68% 482

2009 79,720,000 1,030,000 - 684,450 - 19,100,000 1,060,000 - 10,000,000 111,594,450 2.48% 698

2010 75,415,000 1,030,000 5,076,971 473,850 - 17,650,000 1,010,000 - 9,825,172 110,480,993 3.12% 691

2011 71,145,000 1,030,000 17,788,506 263,250 4,915,000 11,210,000 960,000 2,000,000 9,467,932 118,779,688 3.31% 729

2012 66,915,000 1,030,000 17,450,041 52,650 4,255,000 10,320,000 910,000 1,870,000 9,095,201 111,897,892 3.24% 688

2013 62,725,000 1,030,000 17,111,576 - 3,590,000 9,930,000 860,000 1,735,000 8,706,307 105,687,883 3.02% 646

2014 58,570,000 1,030,000 16,773,112 - 2,910,000 8,940,000 810,000 1,600,000 8,300,547 98,933,659 2.77% 604

2015 54,450,000 - 16,434,646 - 2,215,000 7,905,000 760,000 1,465,000 7,877,193 91,106,839 2.54% 554

Note: Details regarding the county's outstanding debt can be found in the notes to the financial statements.


Ratio of Outstanding Debt By Type For Davidson County


Business-type activities

80

Table 15

Percentage Percentage

of Total of Total

Assessed Assessed Assessed Assessed

Taxpayer Valuation Valuation Valuation Valuation

Duke Energy 92,568,487$ 0.68% 65,289,469$ 0.65%

Kimberly-Clark Corporation 83,522,002 0.62% 92,842,162 0.93%

PPG Industries, Inc. 70,683,774 0.52% 76,945,108 0.77%

Unilin Flooring NC LLC 60,152,896 0.44% - -

Yadkin, Inc 53,234,606 0.39% 24,444,123 0.24%

Windstream 50,234,032 0.37% - -

Walmart Stores East LP 30,410,295 0.22% - - Owens-Brockway 26,527,452 0.20% 26,990,904 0.27%

Old Dominion Freight Lines 24,538,827 0.18% - -

Moran Foods 24,477,434 0.18% - -

RCR Enterprises, LLC - - 26,713,181 0.27%

Lexington Furniture Industries - - 37,792,676 0.38%

North State Telephone - - 22,325,756 0.22%

Proctor & Gamble

DBA Duracell USA - - 50,727,771 0.51%

TFI Industries - - 52,292,520 0.52%

516,349,805$ 476,363,670$

Source - Davidson County Tax Department

2015 2006


Principal Taxpayers For Davidson County

Current Year and Nine Years Ago

81

COMPLIANCE SECTION

4515 Falls of Neuse Road, Suite 450

Raleigh, NC 27609

Phone: 919-832-6848

Fax: 919-832-7288

212 West Center Street P.O. Box 1991

Lexington, NC 27293

Phone: 336-248-8281 Fax: 336-248-2335

1023 W. Morehead Street, Suite 100 Charlotte, NC 28208

Phone: 704-372-0960

Fax: 704-372-1458

Independent Auditors’ 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 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, the business-

type activities, each major fund, and the aggregate remaining fund information of the Davidson County Board of

Education, North Carolina, as of and for the year ended June 30, 2015, and the related notes to the financial

statements, which collectively comprise the Davidson County Board of Education, North Carolina’s basic

financial statements, and have issued our report thereon dated December 30, 2015.

Internal Control Over Financial Reporting

In planning and performing our audit of the financial statements, we considered Davidson County Board of

Education, North Carolina’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 Davidson County Board of

Education, North Carolina’s internal control. Accordingly, we do not express an opinion on the effectiveness of

Davidson County Board of Education, North Carolina’s internal control.

A deficiency in internal control exists when the design or operation of a control does not allow management or

employees, in the normal course of performing their assigned functions, to prevent, or detect and correct,

misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in

internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial

statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a

deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet

important enough to merit attention by those charged with governance.

Our consideration of internal control was for the limited purpose described in the first paragraph of this section

and was not designed to identify all deficiencies in internal control that might be material weaknesses or,

significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal

control that we consider to be material weaknesses. However, material weaknesses may exist that have not been

identified.

82

Compliance and Other Matters

As part of obtaining reasonable assurance about whether the Davidson County Board of Education, North

Carolina’s financial statements are free of 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 Davidson County Board of

Education’s internal control or on compliance. This report is an integral part of an audit performed in

accordance with Government Auditing Standards in considering the entity’s internal control and compliance.

Accordingly, this communication is not suitable for any other purpose.


December 30, 2015

83

4515 Falls of Neuse Road, Suite 450 Raleigh, NC 27609

Phone: 919-832-6848

Fax: 919-832-7288


Lexington, NC 27293

Phone: 336-248-8281 Fax: 336-248-2335


Phone: 704-372-0960

Fax: 704-372-1458

Independent Auditors’ Report on Compliance With Requirements Applicable to Each

Major Federal Program and Internal Control Over Compliance in Accordance

With OMB Circular A-133 and the State Single Audit Implementation Act

Davidson County of Education, North Carolina


Report on Compliance for Each Major Federal Program

We have audited the Davidson County Board of Education, North Carolina, compliance with the types of

compliance requirements described in the OMB Circular A-133 Compliance Supplement and the Audit

Manual for Governmental Auditors in North Carolina, issued by the Local Government Commission, that

could have a direct and material effect on each of the Davidson County Board of Education, North Carolina’s

major federal programs for the year ended June 30, 2015. The Davidson County Board of Education, North

Carolina’s major federal programs are identified in the summary of auditors’ results section of the

accompanying schedule of findings and questioned costs.

Management’s Responsibility

Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants

applicable to its federal programs.


Our responsibility is to express an opinion on compliance for each of the Davidson County Board of

Education, North Carolina’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 OMB Circular

A-133, Audits of States, Local Governments, and Non-Profit Organizations, and the State Single Audit

Implementation Act. Those standards, OMB Circular A-133, and the State Single Audit Implementation Act

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 Davidson County

of Education, North Carolina’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 Davidson County Board of

Education, North Carolina’s compliance.

84

Opinion on Each Major Federal Program

In our opinion, the Davidson County of Education, North Carolina complied, in all material respects, with the

types of compliance requirements referred to that could have a direct and material effect on each of its major

federal programs for the year ended June 30, 2015.

Report on Internal Control Over Compliance

Management of the Davidson County Board of Education, North Carolina is responsible for establishing and

maintaining effective internal control over compliance with the types of compliance requirements referred to.

In planning and performing our audit of compliance, we considered the Davidson County Board of Education,

North Carolina’s internal control over compliance with the types of requirements that could have a direct and

material effect on a major federal program to determine the auditing procedures that are appropriate in the

circumstances for the purpose of expressing our opinion on compliance for each major federal program and to

test and report on internal control over compliance in accordance with OMB Circular A-133, 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 Davidson County Board of Education, North Carolina’s

internal control over compliance.

A deficiency in internal control over compliance exists when the design or operation of a control over

compliance does not allow management or employees, in the normal course of performing their assigned

functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal

program on a timely basis. A material weakness in internal control over compliance is a deficiency, or a

combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility

that material noncompliance with a type of compliance requirement of a federal program will not be

prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over

compliance is a deficiency, or 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 significant deficiencies or material weaknesses. 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 OMB Circular A-

133. Accordingly, this report is not suitable for any other purpose.


December 30, 2015

85

4515 Falls of Neuse Road, Suite 450 Raleigh, NC 27609

Phone: 919-832-6848

Fax: 919-832-7288


Lexington, NC 27293

Phone: 336-248-8281 Fax: 336-248-2335


Phone: 704-372-0960

Fax: 704-372-1458

Independent Auditors’ Report On Compliance With Requirements Applicable To Each Major

State Program And Internal Control Over Compliance in Accordance With OMB

Circular A-133 And The State Single Audit Implementation Act



Report on Compliance for Each Major State Program

We have audited the Davidson County Board of Education, North Carolina, compliance with the types of

compliance requirements described in the Audit Manual for Governmental Auditors in North Carolina, issued

by the Local Government Commission, that could have a direct and material effect on each of the Davidson

County Board of Education, North Carolina’s major State programs for the year ended June 30, 2015. The

Davidson County Board of Education, North Carolina’s major State programs are identified in the summary of

auditors’ results section of the accompanying schedule of findings and questioned costs.

Management’s Responsibility

Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants

applicable to its State programs.


Our responsibility is to express an opinion on compliance for each of the Davidson County Board of

Education, North Carolina’s major State 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 and

applicable sections of OMB Circular A-133, Audits of States, Local Governments, and Non-Profit

Organizations, as described in the Audit Manual for Governmental Auditors in North Carolina, and the State

Single Audit Implementation Act. Those standards, OMB Circular A-133, and the State Single Audit

Implementation Act 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 State program occurred. An audit includes examining, on a test basis, evidence

about the Davidson County Board of Education, North Carolina’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 State

program. However, our audit does not provide a legal determination of the Davidson County Board of

Education, North Carolina’s compliance.

86

Opinion on Each Major State Program

In our opinion, the Davidson County Board of Education, North Carolina complied, in all material respects,

with the types of compliance requirements referred to that could have a direct and material effect on each of its

major State programs for the year ended June 30, 2015.

Report on Internal Control Over Compliance

Management of the Davidson County Board of Education, North Carolina is responsible for establishing and

maintaining effective internal control over compliance with the types of compliance requirements referred to.

In planning and performing our audit of compliance, we considered the Davidson County Board of Education,

North Carolina’s internal control over compliance with the types of requirements that could have a direct and

material effect on a major State program to determine the auditing procedures that are appropriate in the

circumstances for the purpose of expressing our opinion on compliance for each major State program and to

test and report on internal control over compliance in accordance with OMB Circular A-133, 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 Davidson County Board of Education, North Carolina’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 State

program on a timely basis. A material weakness in internal control over compliance is a deficiency, or a

combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that

material noncompliance with a type of compliance requirement of a State 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 combination of deficiencies, in internal control over compliance with a type of compliance

requirement of a State 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 significant deficiencies or material weaknesses. 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 OMB Circular A-

133. Accordingly, this report is not suitable for any other purpose.


December 30, 2015

87

Financial Statements

Type of auditors' report issued: Unmodified

Internal control over financial reporting:

Material weaknesses identified? yes P no

Significant deficiency(s) identified that are

not considered to be material weaknesses? yes P none reported

Noncompliance material to financial statements noted yes P no

Federal Awards

Internal control over major federal programs:



not considered to be material weakness(es)? yes P none reported

Type of auditors' report issued on compliance for

major federal programs: Unmodified

Any audit findings disclosed that are required to be

reported in accordance with Section 510(a) of

Circular A-133? yes P no

SECTION I - SUMMARY OF AUDITOR'S RESULTS


Schedule of Findings and Questioned Costs


88

Identification of major federal programs:

CFDA Numbers Names of Federal Program or Cluster

10.553, 10.555

84.367, 84.365 Improving Teacher Quality Cluster

Dollar threshold used to distinguish between Type

A and Type B Programs:

Auditee qualified as low-risk auditee? yes P no

State Awards

Internal control over major State programs:



not considered to be material weakness(es)? yes P none reported

Type of auditors' report issued on compliance for

major State programs:

Any audit findings disclosed that are required to be

reported in accordance with the State Single

Audit Implementation Act yes P no

Identification of major State programs:


School Buses Appropriation

Vocational Education - State Months of Employment

Schedule of Findings and Questioned Costs (Continued)

SECTION I - SUMMARY OF AUDITOR'S RESULTS (Continued)

403,520$


Program Name


Child Nutrition Cluster

Unmodified

89

None reported.

None reported.

None reported.


Schedule of Findings and Questioned Costs (Continued)


SECTION III - FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

SECTION II - FINANCIAL STATEMENT FINDINGS

SECTION IV - STATE AWARD FINDINGS AND QUESTIONED COSTS

90

None reported.

None reported.

None reported.


SECTION III - FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

SECTION IV - STATE AWARD FINDINGS AND QUESTIONED COSTS

Corrective Action Plan


SECTION II - FINANCIAL STATEMENT FINDINGS

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FINDINGS:

Finding: 2014-001 Capital Assets were not Properly Safeguarded.

Status:

Finding: 2014-002 Noncompliance with the Gfeller-Waller Concussion Awareness Act

Status: Corrected.

Corrected.


Summary Schedule of Prior Year Audit Findings


92

State/Pass

Through

Grantor's

Number Expenditures

Federal Awards: Cash and Non-cash Assistance

U.S Department of Agriculture:

Food and Nutrition Service

Passed through the N.C. Department of Public Instruction:

Child Nutrition Cluster:

Non-Cash Assistance (Commodities)

National School Lunch Program 10.555 465,983$

Cash Assistance

School Breakfast Program 10.553 972,021

National School Lunch Program 10.555 3,941,376

Cash Assistance Subtotal 4,913,397

Total Child Nutrition Cluster 5,379,380

Total U.S. Department of Agriculture 5,379,380

U.S. Department of Education:

Office of Elementary and Secondary Education

Passed through the N.C. Department of Public Instruction:

Title 1, Part A Cluster

Grants to Local Education - Basic and Concentration - Title I 84.010 PRC 050 3,483,272

Career and Technical Education:

Capacity Building Grant 84.048 PRC 058 1,001

School Improvement (Title I, Part A) 84.010 PRC 105 70,298

School Improvement Grant Cluster:

ARRA - School Improvement 84.388 PRC 143 1,439

Grantor/Program Title

Grantor/Pass Through


Schedule of Expenditures of Federal and State Awards

For The Year Ended June 30, 2015

Federal

CFDA

93

State/Pass

Through

Grantor's

Number Expenditures

ARRA - Race To The Top (RTTT) 84.395 PRC 156 90,273$

Governor's Teacher Network 84.395 PRC 154 18,989

ARRA - RTTT Science, Technology, Engineering and

Mathematics 84.395 PRC 159 3,904

113,166

Improving Teacher Quality Cluster

Teacher Quality Enhancement 84.367 PRC 103 510,427

Language Acquisition Grant 84.365 PRC 104 62,205

Total Improving Teacher Quality Cluster 572,632

Office of Special Education and Rehabilitative Services

Passed through the N.C. Department of Public Instruction

Special Education Cluster

Individuals with Disabilities Education Act

Education of the Handicapped 84.027 PRC 060 3,308,577

Preschool Handicapped 84.173 PRC 049 99,877

Children with Disabilities - Risk Pool 84.027A PRC 114 103,483

Targeted Assistance for Preschool Federal Grant

84.173A PRC 119 349

Special Needs Targeted Assistance 84.027 PRC 118 6,133

Total Special Education Cluster 3,518,419

Career amd Technical Education - Basic Grants to

States 84.048 PRC 017 199,584

Total U.S. Department of Education 7,959,811

U. S. Department of Defense

Direct Programs:

Air Force/Naval Junior ROTC NONE PRC 301 111,491

Total Expenditures of Federal Assistance 13,450,682




Grantor/Pass Through Federal

CFDAGrantor/Program Title

94

State/Pass

Through

Federal Grantor's

CFDA Number Expenditures

State Awards

Cash Assistance

N.C. Department of Public Instruction

State Public School Fund 98,815,507$

School Technology Fund - SPSF N/A PRC 015 336,169

Vocational Education:

State Months of Employment N/A PRC 013 5,735,380

Program Support Funds N/A PRC 014 278,615

Total N.C. Department of Public Instruction 105,165,671

Office of the Governor

Passed through Davidson County:

Davidson County Truancy Program N/A PRC 414 56,075

N.C. Department of Transportation

Passed through the N.C. Department of Public Instruction

Drivers Training N/A PRC 012 344,852

N.C. Department of Agriculture

State Kindergarten Breakfast Program N/A N/A 14,245

Total Expenditures of State Cash Assistance 105,235,991

Other State Non-cash Assistance

N.C. Department of Public Instruction

School bus appropriation - Noncash N/A PRC 120 924,445

Textbooks N/A PRC 130 60,216

Total N.C. Department of Public Instruction non-cash assistance 984,661

Total Expenditures of State Assistance 106,220,652

Total Expenditures of Federal and State Assistance 119,671,334$



Grantor/Pass Through

Grantor/Program Title


95

NOTE A - BASIS OF PRESENTATION

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


Notes to the Schedule of Expenditures of Federal and State Awards


The accompanying schedule of expenditures of federal and State awards includes the federal and State

grant activity of Davidson County Board of Education, North Carolina and is presented on the modified

accrual basis of accounting. The information in this schedule is presented in accordance with the

requirements of OMB Circular A-133, Audits of States, Local Governments, and Non-Profit

Organizations and the State Single Audit Implementation Act. Therefore, some amounts presented in

this schedule may differ from amounts presented in, or used in the preparation of, the basic financial

statements.

Expenditures reported in the schedule of expenditures of federal and State awards are reported on the

modified accrual basis of accounting. Such expenditures are recognized following the cost principles

contained in OMB Circular A-21, Cost Principles for Educational Institutions or cost principles

contained in Title 2 US Code of Federal Regulations Part 200, Uniform Administrative Requirements,

Cost Principles, and Audit Requirements for Federal Awards, wherein certain types of expenditures are

not allowable or are limited as to reimbursements.

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