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LAWRENCE COUNTY SCHOOL DISTRICT

BASIC FINANCIAL STATEMENTS,SUPPLEMENTARY INFORMATION.

AND INDEPENDENT AUDITOR'S REPORTS

For the year ended June 30,2019

WELLS & COMPANY, P.S.C.

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865 South Mayo Trail, Suite 7Paintsville, Kentucky 41240-1215

(606) 789-3588

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TABLE OF CONTENTS

FOR THE YEAR ENDED JUNE 30, 2019

Independent Auditor's Report 1-2

Management's Discussion and Analysis 3-6

Basic Financial Statements:

Government-Wide Financial Statements:

Statement of Net Position 7

Statement of Activities 8

Fund Financial Statements:

Balance Sheet - Govemmentai Funds 9

Reconciliation of the Govemmentai

Funds Balance Sheet to the Statement of Net Position 10

Statement of Revenues, Expenditures, and Changes inFund Balances - Govemmentai Funds 11

Reconciliation of the Statement of Revenues, Expenditures, andChanges in Fund Balances of Govemmentai Funds to theStatement of Activities 12

Statement of Net Position - Proprietary Fund 13

Statement of Revenues, Expenses, and Changes in Net Position -Proprietary Fund 14

Statement of Cash Flows - Proprietary Funds 15

Statement of Fiduciary Net Position - Fiduciary Fund 16

Statement of Changes in Fiduciary Net Position - Fiduciary Fund 17

Notes to the Basic Financial Statements 18-44

Required Supplementary Information:

Schedule of Revenues, Expenditures, and Changes in Fund Balance-Budget and Actual - General Fund 45

Schedule of Revenues, Expenditures, and Changes in Fund Balance -Budget and Actual - Special Revenue Fund 46

Schedule of the District's Proportionate Share of the Net Pension Liability (CERS) 47

Schedule of District Contributions (CERS) 48


TABLE OF CONTENTS - CONTINUED

FOR THE YEAR ENDED JUNE 30. 2019

Notes to Required Supplementary Information (CERS) 49

Schedule of the District's Proportionate Share of the Net OPEB Liability (CERS) 50

Schedule of the District's OPEB Contributions (CERS) 51

Notes to Required OPEB Supplementary Information (CERS) 52

Combining Statements - Nonmajor Funds:

Combining Balance Sheet - Nonmajor Govemmental Funds 53

Combining Statement of Revenues, Expenditures, and Changesin Fund Balances - Nonmajor Govemmental Funds 54

Other Combining Statements and School Activity Funds:

Combining Statement of Fiduciary Net Position - School Activity Funds (Agency Fund) 55

Combining Statement of Revenues, Expenditures, and Changes Due toStudent Groups - School Activity Funds (Agency Fund) 56

Statement of Receipts, Disbursements Due Student Groups -School Activity Funds - (Agency Fund) 57

Combining Statement of Revenues, Expenditures, and Changes in Fund Balances -Debt Service Funds 58

Schedule of Expenditures of Federal Awards 59-60

Notes to Schedule of Expenditures of Federal Awards 61

Schedule of Findings and Questioned Costs 62

Scheduie of Prior Year Audit Findings 63

independent Auditor's Report on Internai Control over FinancialReporting and On Compliance and Other Matters Based on anAudit of Financiai Statements Performed in Accordance withGovernment Auditing Standards 64-65

independent Auditor's Report on Compliance forEach Major Program and on Internai Control overCompliance Required by The Uniform Guidance 66-67

Management Letter Comments 68-70

INDEPENDENT AUDITOR'S REPORT



(606) 789-3588

Fax (606) 789-3326

INDEPENDENT AUDITOR'S REPORT

Members of the Board of Education

Lawrence County School DistrictLouisa, Kentucky

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 Lawrence County School District, as of and forthe year ended June 30, 2019, and the related notes to the financial statements, which collectively comprise theDistrict'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 withaccounting principles generally accepted in the United States of America; this includes the design, implementation, andmaintenance of internal control relevant to the preparation and fair presentation of financial statements that are freefrom material misstatement, whether due to fraud or error.

Auditor's Responsibility

Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit inaccordance with auditing standards generally accepted in the United States of America and the standards applicable tofinancial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States;and the audit requirements prescribed by the Kentucky State Committee for school district audits in the IndependentAuditor's Contract. Those standards require that we plan and perform the audit to obtain reasonable assurance aboutwhether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financialstatements. The procedures selected depend on the auditor's judgment, including the assessment of the risks ofmaterial misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, theauditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements inorder to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing anopinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit alsoincludes evaluating the appropriateness of accounting policies used and the reasonableness of significant accountingestimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our auditopinions.

Opinions

In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financialposition of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fundinformation of the Lawrence County School District, as of June 30, 2019, and the respective changes in financialposition, and, where applicable, cash flows thereof for the year then ended in accordance with accounting principlesgenerally accepted in the United States of America.

other Matters

Required Supplementary Information

Accounting principles generally accepted in the United States of America require that the management's discussion andanalysis, on pages 3-6, budgetary comparison information on pages 45-46, and CERS schedules and notes on pages47-52 be presented to supplement the basic financial statements. Such information, although not a part of the basicfinancial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essentialpart of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historicalcontext. We have applied certain limited procedures to the required supplementary information in accordance withauditing standards generally accepted in the United States of America, which consisted of inquiries of managementabout the methods of preparing the information and comparing the information for consistency with management'sresponses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of thebasic financial statements. We do not express an opinion or provide any assurance on the information because thelimited 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 theLawrence County School District's basic financial statements. The combining and individual nonmajor fund financialstatements and the school activity funds, are presented for purposes of additional analysis and are not a required partof the basic financial statements. The schedule of expenditures of federal awards is presented for purposes ofadditional analysis as required by Title 2 U.S. Code of Federal Regulations Part 200, Uniform AdministrativeRequirements, Cost Principles, and Audit Requirements for Federal Awards, and is also not a required part of the basicfinancial statements.

The combining and individual nonmajor fund financial statements, school activity funds, and the schedule ofexpenditures of federal awards are the responsibility of management and were derived from and relate directly to theunderlying accounting and other records used to prepare the basic financial statements. Such information has beensubjected to the auditing procedures applied in the audit of the basic financial statements and certain additionalprocedures, including comparing and reconciling such information directly to the underlying accounting and otherrecords used to prepare the basic financial statements or to the basic financial statements themselves, and otheradditional procedures in accordance with auditing standards generally accepted in the United States of America. In ouropinion, the combining and individual nonmajor fund financial statements, school activity funds, and the schedule ofexpenditures of federal awards are fairly stated in all material respects in relation to the basic financial statements as awhole.

Other Reporting Required by Government Auditing Standards

In accordance with Govemment Auditing Standards, we have also issued our report dated October 21, 2019, on ourconsideration of the Lawrence County School District's internal control over financial reporting and on our tests of itscompliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. Thepurpose of that report is solely to describe the scope of our testing of internal control over financial reporting andcompliance and the results of that testing, and not to provide an opinion on the effectiveness of the Lawrence CountySchool District's internal control over financial reporting or on compliance. That report is an integral part of an auditperformed in accordance with Govemment Auditing Standards in considering the Lawrence County School District'sinternal control over financial reporting and compliance.

UJoJUL) )Certified Public Accountants

Paintsvilie, KentuckyOctober 21, 2019

-2-

LAWRENCE COUNTY SCHOOL DISTRICT - LOUISA, KYMANAGEMENT'S DISCUSSION AND ANALYSIS (MD&A)

FOR THE YEAR ENDED JUNE 30, 2019

As management of the Lawrence County School District (District), we offer readers of the District's financialstatements this narrative overview and analysis of the financial activities of the District for the fiscal year endedJune 30. 2019. We encourage readers to consider the information presented here in conjunction with additionalinformation found within the body of the audit.

FINANCIAL HIGHLIGHTS

• The ending cash balance for the District was $3,500,356 in 2018 and $4,406,146 in 2019. This is anincrease of $905,790. Much of this difference can be explained by the increase in property taxes.

• From 2019 to 2018, total General Fund revenue increased by 5.9%. Revenue from the stateincreased by .8%. Revenues from federal sources decreased by 26.7%. Revenues from other localrevenues increased by 24.2%. Revenues from various taxes increased by 25.1%.

• Among major funds, the General Fund had $22.9 million in revenue, which primarily consisted of localproperty, utilities, and motor vehicle taxes, federal programs and state funding. There were $22.1million in expenditures.

• A concerted effort was focused on purchasing in the areas of supplies, food, and travel resulting inseveral economies due to changed management strategies.

• During the fiscal year, the District purchased two new school buses at a cost of $234,768.

• Bonds are issued as the District renovates facilities consistent with a long-range facilities plan that isestablished with community input and in keeping with Kentucky Department of Education's (KDE)stringent compliance regulations. The District's total debt decreased by $1,245,902 during the currentfiscal year including capital lease principal payments.

• State law requires districts to update a priority list of construction and renovation needs, called a localfacilities plan, every four years. The document guides the allocation of School Facilities ConstructionCommission dollars. To be eligible to share in that money, the District has currently updated itsfacilities plan. With the age and size of our facility, there is a focus on investing in plant management.

OVERVIEW OF FINANCIAL STATEMENTS

This discussion and analysis is intended to serve as an introduction to the District's basic financial statements.The District's basic financial statements comprise three components: 1) govemment-wide financial statements, 2)fund financial statements, and 3) notes to the financial statements. This report also contains other supplementaryinformation in addition to the basic financial statements themselves.

Government-wide financial statements. The govemment-wide financial statements are designed to providereaders with a broad overview of the District's finances, in a manner similar to a private-sector business.

The Statement of Net Position presents information on all of the District's assets and liabilities, with the differencebetween the two reported as net position. Over time, increases or decreases in net position may serve as a usefulindicator of whether the financial position of the District is improving.

The Statement of Activities presents information showing how the District's net position changed during themost recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise tothe change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reportedin this statement for some items that will result in cash flows in future fiscal periods.

-3-

The government-wide financial statements outline functions of the District that are principally supported byproperty taxes and intergovernmental revenues (govemmental activities). The govemmental activities of theDistrict include instruction, support services, operation and maintenance of plant, student transportation andoperation of non-instructional services. Fixed assets and related debt are also supported by taxes andintergovemmental revenues.

The govemment-wide financial statements can be found on pages 7 through 8 of this report.

Fund financial statements. A fund is a grouping of related accounts that is used to maintain control overresources that have been segregated for specific activities or objectives. This is a state mandated uniform systemand chart of accounts for all Kentucky public school districts utilizing the MUNIS administrative software. TheDistrict uses fund accounting to ensure and demonstrate compliance vwth finance-related legal requirements. Allof the funds of the District can be divided into three categories; govemmental, proprietary funds and fiduciaryfunds. Fiduciary funds are trust funds established by benefactors to aid in student education, welfare and teachersupport. The Proprietary Fund includes the food service and vending operation. All other activities of the Districtare included in the govemmental funds.

The basic govemmental fund financial statements can be found on pages 9 through 17 of this report.

Notes to the financial statements. The notes provide additional information that is essential to a fullunderstanding of the data provided in the govemment-wide and fund financial statements. The notes to thefinancial statements can be found on pages 18 through 44 of this report.

GOVERNMENT-WIDE FINANCIAL ANALYSIS

The largest portion of the District's net position reflects its investment in capital assets (e.g., land andimprovements, buildings and improvements, vehicles, fumiture and equipment and general fixed assets), less anyrelated debt used to acquire those assets that is still outstanding. The District uses these capital assets to provideservices to its students; consequently, these assets are not available for future spending.

The District's financial position is the product of several financial transactions including the net results of activities,the acquisition and payment of debt, the acquisition and disposal of capital assets, and the depreciation of capitalassets.

Net Position for the period ending June 30,2019 and 2018

This Is the seventeenth year that the District is followng GASB 34 and comparing assets, liabilities and netposition. 2019 Govemment Wide Net Position compared to 2018 are as follows:

2019 2018

Current Assets $ 4,512,578 $ 3,632,123Noncurrent Assets 27.667.826 28.334.413

Total assets 32.180.404 31.966.536

Deferred Outflows of Resources 2.686.034 3.361.706

Current Liabilities 2,017,465 1,915,521Noncurrent Liabilities 20.339.237 21.539.557

Total liabilities 22.356.702 23.455.078

Deferred inflows of Resources 995.770 847.758

Net Position

Net investment in capital assets 15,915,030 15,376,676Restricted 616,311 571,266Unrestricted Fund Balance f5.017.3751 f4.922.536)

Total net position fiii.si3.9ee fi11.02S.406

There has been no significant change in the financial position of the District since the last auc

The following table presents a fund accounting comparison and summary of revenigovemment funds only for the fiscal years 2019 and 2018.

2019 2018

Revenues:

Local revenue sources $ 6,478,939 $ 5,272,979

State revenue sources 19,377,254 19,216,000

Federal revenue 2.260.132 2.558.462

Total revenues 28.116.325 27.047.441

Expenditures:Instruction 16,141,382 16,387,072

Student support services 713,635 713,469

Instructional support 1,251,256 1,322,265

District administration 489,750 487,200

School administration 1,158,686 1,106,177

Business support 360,617 326,154

Plant operations 2,960,672 2,893,081

Student transportation 2,042,576 1,948,971

Central office support - -

Facilities acquisition and construction - -

Community support 266,841 238,000

Other 1.884.107 1.934.048

Total expenses 27.269.522 27.356.437

Excess (deficit) of revenues over expenses 846,803 (308,996)

Other Financing Sources (Uses):Bond sale proceeds - -

Proceeds from sale of fixed assets - -

Operating transfer in 1,257,620 1,250,482

Operating transfer out f1.169.292) f1.164.139)

Total other financing sources (uses) 88.328 86.343

Net change in fund balance fi 935.131 fi f222.6S3)

-5-

CAPITAL ASSETS

At the end of fiscal 2019, the District had $27.67 milllon invested in capital assets, including land, buildings, buses,computers and other equipment. This amount represents a net decrease (including additions and deductions) of$.68 million over last year. This decrease is primarily due to the depreciation. Additionally, two buses werepurchased in fiscal 2019.

Capital Assets at Year-End(Net of Depreciation, in Millions)

Govemmental Business-typeActivities Activities Totals

2019 2018 2019 2018 2019 2018

Land

OCOC

$ .33 $ - $ - $ .33 $ .33

Buildings & Improvements 19.99 20.90 - - 19.99 20.90

Technology Equipment .01 .01 - - .01 .01

Vehicles 1.31 1.14 - - 1.31 1.14

General Equipment .17 .19 .21 .12 .38 .31

Infrastructure .05 .06 - - .05 .06

Construction in Progress 5.60 5.60 5.60 5.60

Totals $27.46 $28.23 $ .21 $ .12 $27.67 $28.35

• On-behalf amounts are included in revenues and expenses. On-behalf payments as defined by KDE arepayments the state makes on behalf of employees to the various agencies for health and life insurance,benefits and administration fees and debt service. Further discussion of these can be found in Note B.

Expenses that increased from 2018 to 2019 include student support services, district administration, schooladministration, business support, plant operations and maintenance, student transportation, and communitysupport.

The changes in the balances and transactions of individual funds have not been material. Changes in finalbudget when compared to original are not material.

• The majority of revenue in 2019 was derived from state funding (69%) as compared with fiscal year 2018(71%) with federal revenue making up 8% of total revenue in 2019 compared to 10% in 2018.

Comments on Budget Comparisons• The District's General Fund total revenues for the fiscal year ended June 30, 2019, net of interfund

transfers, were $22.9 million.• General Fund budget compared to actual revenue varied slightly from line item to line item with the

ending actual balance being $3,518,922 more than budget.• The total cost of all General Fund programs and services was $22.1 million net of debt service.• General Fund budget expenditures to actual varied significantly in instruction $2,147,334. This resulted

from the Board recording the on-behalf payments made for the District and increase in expenditures.

DEBT SERVICE

At year end, the District had approximately 11.9 million in outstanding debt, compared to 13.1 million last year.The District continues to maintain favorable debt ratings from Mood/s and Standard & Poor's.

FUTURE BUDGETARY IMPLICATIONS

In Kentucky the public school fiscal year is July 1 - June 30; other programs, i.e. some federal operate on adifferent fiscal calendar, but are reflected in the District's overall budget. By law the budget must have a minimum2% contingency. The District adopted a budget with $1.99 million in contingency (6%). The General Fundbeginning cash balance for beginning the fiscal year was $2.18 million.

Questions regarding this report should be directed to the Superintendent or by mail at 50 Bulldog Lane, Louisa,Ky 41230.

GOVERNMENT-WIDE FINANCIAL STATEMENTS


STATEMENT OF NET POSITION

June 30, 2019

Assets

Current Assets:

Cash and cash equivalents

Governmental

Activities

Business

TypeActivities Total

$ 3,601,608 $ 589,916 $ 4,191,524Inventory - 11,115 11,115

Accounts receivable

Taxes - current 37,880 - 37,880

Taxes - delinquent 12,912 - 12,912

Accounts receivable 711 - 711

Intergovemmental - state 10,857 - 10,857

Intergovernmental - indirect federal 104,113 143,466 247,579

Total current assets 3,768,081 744,497 4,512,578

Noncurrent Assets:

Capital assets, not being depreciated 5,934,142 - 5,934,142

Capital assets, being depreciated, net 21,521,187 212,497 21,733,684

Total noncurrent assets 27,455,329 212,497 27,667,826

Total assets 31,223,410 956,994 32,180,404

Deferred Outflows of Resources:

Deferred outflows related to pensions 1,650,342 291,237 1,941,579

Deferred outflows related to ORES 549,961 97,052 647,013

Refunding of debt 97,442 - 97,442

Total deferred outflows of resources 2,297,745 388,289 2,686,034

Liabilities

Current Liabilities:

Accounts payable 43,870 150 44,020

Payroll liabilities 208,199 - 208,199

Unearned revenue 129,676 - 129,676

Current portion of bond obligations 1,398,614 - 1,398,614

Current portion of capital lease 125,321 - 125,321

Interest payable 111,635 - 111,635

Total current liabilities 2,017,315 150 2,017,465

Noncurrent Liabilities:

Noncurrent portion of capital lease 763,130 - 763,130

Noncurrent portion of bond obligations, net of discounts $85,331 9,563,173 - 9,563,173

Noncurrent portion of accrued sick leave 108,426 - 108,426

Noncurrent portion of net pension liability 6,518,575 1,150,337 7,668,912

Noncurrent portion of net OPES liability 1,900,206 335,390 2,235,596

Total noncurrent liabilities 18,853,510 1,485,727 20,339,237

Total liabilities 20,870,825 1,485,877 22,356,702

Deferred Inflows of Resources:

Deferred inflows related to pensions 485,649 85,703 571,352

Deferred inflows related to OPEB 360,755 63,663 424,418

Total deferred inflows of resources 846,404 149,366 995,770

Net Position:

Net investment in capital assets 15,702,533 212,497 15,915,030

Restricted for

SFCC escrow 222,300 - 222,300

Future construction 263,755 - 263,755

Sick leave 108,426 - 108,426

Debt service 2,400 - 2,400

District activity 8,315 - 8,315

Inventory - 11,115 11,115

Unrestricted (4,503,803) (513,572) (5,017,375)

Total net position $ 11,803,926 $ (289,960) $ 11,513,966

See independent auditor's report and accompanying notes to financial statements.


STATEMENT OF ACTIVITIES

For the year ended June 30, 2019

FUNCTIONS/PROGRAMS

Governmental Activities:

Instruction

Support services:Student

Instructional staff

District administrative

School administrative

Business

Plant operation and maintenanceStudent transportationCentral office

Facilities acquisition and constructionCommunity service activitiesInterest on long-term debtOther

Total governmental activities

Business-Type Activities:

Food service

Total primary government

Expenses

1,978,251

Chargesfor

Services

Program Revenues

Operating CapitalGrants and Grants and

Contributions Contributions

$ 17,150,786 $

751,893

1,251,256492,875

1,159,024361,010

3,519,772

1,878,154

266,943

473,802

151,284

27,456,799

$ 2,499,252 $

19,956

478,255

1,437,891

266,841

51,936

3,264,304

1,744,113

1,437,891

$ 29,435,050 $ 51,936 $ 5,008,417 $ 1,437,891

General Revenues:

Taxes:

Net (Expense) Revenue and

Changes in Net Position

Business-

Governmental TypeActivities Activities Total

$ (14,651,534) $

(731,937)(773,001)(492,875)

(1,159,024)(361,010)

(3,519,772)(1,878,154)

1,437,891

(102)

(473,802)

(151,284)

(22,754,604)

(22,754,604)

(182,202)

$ (14,651,534)

(731,937)(773,001)(492,875)

(1,159,024)(361,010)

(3,519,772)(1,878,154)

1,437,891

(102)(473,802)

(151,284)

(22,754,604)

(182,202)

(182,202) (22,936,806)

Property taxes 4,755,058 - 4,755,058

Motor vehicle taxes 393,845 - 393,845

Utility taxes 883,211 - 883,211

Investment earnings 63,507 11,236 74,743

State and formula grants 17,004,754 - 17,004,754

Transfers 88,328 (88,328) -

Miscellaneous 313,755 - 313,755

Changes in net position 747,854 (259,294) 488,560

Net position - beginning 11,056,072 (30,666) 11,025,406

Net position - ending $ 11,803,926 $ (289,960) $ 11,513,966


-8-

FUND FINANCIAL STATEMENTS


BALANCE SHEET

GOVERNMENTAL FUNDS

June 30, 2019

Assets and Resources:

Cash and cash equivalents

Accounts receivable

Taxes - current

Taxes - delinquent

Accounts receivable

Intergovernmental - state

Intergovernmental - indirect federal

Total assets and resources

Liabilities and Fund Balances:

Liabilities

Accounts payable

Payroll liabilitiesUnearned revenue

Total liabilities

Fund Balances:

Restricted For:

SFCC escrow

Future construction

Sick leave payable

Debt service

District activity

Unasslgned:

Undesignated, reported in:General fund

General

Fund

37,880

12,912

711

236,362

108,426

2,781,140

Special

Revenue

Other

Governmental

Funds

10,857

104,113

$ 28,163

208,199

$ 15,707 $

129,676

145,383

222,300

263,755

2,400

8,315

Total

Governmental

Funds

$ 3,074,425 $ 30,413 $ 496,770 $ 3,601,608

37,880

12,912

711

10,857

104,113

$ 3,125,928 $ 145,383 $ 496,770 $ 3,768,081

43,870

208,199

129,676

381,745

222,300

263,755

108,426

2,400

8,315

2,781,140

Total fund balances 2,889,566 496,770 3,386,336

Total liabilities and fund balances $ 3,125,928 $ 145,383 $ 496,770 $ 3,768,081

See independent auditor's report and accompanying notes to financial statements.-9-


RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO

THE STATEMENT OF NET POSITION

June 30, 2019

Total fund balance per fund financial statement $ 3,386,336

Amounts reported for governmental activities in the Statement of Net

Position are different because:

Capital assets are not reported in this fund financial statement becausethey are not current financial resources, but they are reported in theStatement of Net Position. 27,455,329

Refunding of debt is reported as part of deferred outflowsof resources and is not reported in this fund financial statement because theyare not available to pay current-period expenditures, but they are reported inthe Statement of Net Position. 97,442

Pension contributions after measurement date are reported as a deferred outflows of resources. 428,181

OPEB contributions after measurement date are reported as deferred outflows of resources. 169,510

Net pension liability is not due and payable in the current period and, therefore,is not reported in governmental funds. (6,518,575)

Net OPEB liability is not due and payable in the current period and, therefore, is not reportedin governmental funds. (1,900,206)

Pension related deferred outflows of resources and deferred inflows of resources

are not due and payable in the current year and, therefore are not reported in thegovemmental funds, but they are presented in the statement of net position, as follows:

Deferred pension outflows of resouces 1,222,161

Deferred OPEB outflows of resources 380,451

Deferred pension inflows of resources (485,649)

Deferred OPEB inflows of resources (360,755)

Certain liabilities (such as capital leases, bonds payable - net of discount, the long-term portionof accrued sick leave, and accrued interest) are not reported in this fund financialstatement because they are not due and payable, but they are presentedin the Statement of Net Position. (12,070,299)

Net position for govemmental activities _$J1^803^926_



STATEMENT OF REVENUES. EXPENDITURES, AND CHANGES IN FUND BALANCES

GOVERNMENTAL FUNDS


Other Total

General Special Governmental Govemmental

Fund Revenue Funds Funds

Revenues:

From local sources

Taxes

Property $ 4,755,058 $ - $ - $ 4,755,058

Motor vehicle 393,845 - - 393,845

Utilities 394,357 - 488,854 883,211

Tuition and fees - - - -

Earnings on investments 63,507 - - 63,507

Other local revenues 295,505 69,563 18,250 383,318

Intergovernmental - state 16,864,550 1,262,413 1,250,291 19,377,254

Intergovemmental - indirect federal 140,204 1,932,328 187,600 2,260,132

Total revenues 22,907,026 3,264,304 1,944,995 28,116,325

Expenditures:Instruction 13,565,348 2,549,935 26,099 16,141,382

Support services:Student 697,679 15,956 - 713,635

Instructional staff 773,001 478.255 - 1,251,256

District administrative 489,750 - - 489,750

School administrative 1,158,686 - - 1,158,686

Business 360,617 - - 360,617

Plant operation and maintenance 2,960,672 - - 2,960,672

Student transportation 2,042,576 - - 2,042,576

Central office - - - -

Facilities acquisition and construction - - - -

Community service activities - 266,841 - 266,841

Other 67,050 - 1,817,057 1,884,107

Total expenditures 22,115,379 3,310,987 1,843,156 27,269,522

Excess (deficit) of revenues over expenditures 791,647 (46,683) 101,839 846,803

Other Financing Sources (Uses):Bond proceeds - - -

-

Proceeds from sale of fixed assets - - - -

Operating transfers in 88,328 46,683 1,122,609 1,257,620

Operating transfers out (89,089) - (1,080,203) (1,169,292)

Non operating transfers in - - - -

Non operating transfers out - - - -

Total other financing sources (uses) (761) 46,683 42,406 88,328

Net change In fund balance 790,886 - 144,245 935,131

Fund balance, July 1,2018 2,098,680 - 352,525 2,451,205

Fund balance, June 30, 2019 $ 2,889,566 $ - $ 496,770 $ 3,386,336


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RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN

FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES


Net change in total fund balances per fund financial statements $ 935,131

Amounts reported for governmental activities in the Statement of Activitiesare different because:

Capital outlays are reported as expenditures in this fund financial statement becausethey use current financial resources, but they are presented as assets in the Statement ofActivities and depreciated over their estimated economic lives. The difference is theamount by which capital outlay exceeds depreciation for the year. (762,243)

The issuance of long-term debt (bonds and financial obligations) provides current financialresources to government funds, while bond and capital lease payments are recognizedas expenditures of current financial resources in the fund financial statement but arereductions of liabilities in the Statement of Net Position. 1,245,902

In the statement of activities, interest is accrued on outstanding long-term debt, whereasin the governmental funds interest is not reported until due. This amount representsthe net change in accured interest payable. 13,119

Changes in pension and OPEB expense are reported only in the statement of activities. (680,173)

Generally, expenditures recognized in this fund financial statement are limitedto only those that use current financial resources, but expenses are recognized inthe Statement of Activities when they are incurred. (3.882)

Change in net position of governmental activities $ 747,854



STATEMENT OF NET POSITION

PROPRIETARY FUND

June 30, 2019

Assets

Current Assets:

Cash and cash equivalentsInventory

Accounts receivable

Intergrovernmental - Indirect federal

Total current assets

Noncurrent Assets:

Capital assets, net of accumulated depreciation

Total noncurrent assets

Total assets

Deferred Outflows of Resources:

Deferred outflows related to pensions

Deferred outflows related to OPEB

Total deferred outflows of resources

Liabilities

Current Liabilities:

Accounts payable

Total current liabilities

Noncurrent Liabilities:

Net pension liability

Net OPEB liability

Total noncurrent liability

Total liabilities

Deferred Inflows of Resources:

Deferred Inflows related to pensions

Deferred Inflows related to OPEB

Total deferred Inflows of resources

Net Position:

Net Investment In capital assets

Unrestricted

Total net position

Food

Service

Fund

589,916

11,115

143,466

744,497

212,497

212,497

956,994

291,237

97,052

388,289

150

150

1,150,337

335,390

1,485,727

1,485,877

85,703

63,663

149,366

212,497

(502,457)

$ (289,960)

See Independent auditor's report and accompanying notes to financial statements.-13-


STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION

PROPRIETARY FUND


Food

Service

Fund

Operating Revenues:Lunchroom sales $ 51,936

Total operating revenues 51,936

Operating Expenses:Employee wages and benefits 978,796

Materials and supplies 736,353

Depreciation 18,736

Other operating expenses 244,366

Total operating expenses 1,978,251

Operating loss (1,926,315)

Non-Operating Revenues (Expenses):Federal grants 1,460,387

Donated commodities 115,833

State grants 167,893

Interest income 11,236

Transfers out (88,328)

Total non-operating revenues 1,667,021

Change in net position (259,294)

Net Position, July 1,2018 (30,666)

Net Position, June 30,2019 $ (289,960)



STATEMENT OF CASH FLOWS

PROPRIETARY FUNDS


Cash Flows from Operating Activities:

Cash received from:

Lunchroom sales

Cash paid to/for:Employees

Material and supplies

Other activities

Net cash provided by (used for) operating activities

Cash Flows from Noncapital Financing Activities:

Government grantsTransfers out

Net cash provided by noncapitai and reiated financing activities

Cash Fiows from Capital and Related Financing Activities:Purchases of capital assets

Net cash used for capital and related financing activities

Cash Fiows from investing Activities:Receipt of Interest Income

Net cash provided by investing activities

Net (decrease) In cash and cash equivalents

Balances, beginning of year

Baiances, end of year

Reconciiiation of operating income (ioss) to net cash provided(used) by operating activities:

Operating (loss)

Adjustments to reconcile operating income to net cash provided(used) by operating activities:

Depredation

Donated commodities

On-behalf payments

Change In assets and liabilitiesInventory

Deferred outflows/Inflows and net pension liabilityAccounts payable

Net cash provided by (used for) operating activities

Schedule of non-cash transactions:

Donated commodities received from federal government

On-behalf payments


$ 51,936

(610,139)(517,345)

(244,366)

(1,319,914)

1,440,589

(88,328)

1,352,261

(114,392)

(114,392)

11,236

11,236

(70,809)

660,725

$ 589,916

$ (1,926,315)

18,736

115,833

167,893

103,082

200,764

93

$ (1,319,914)

$ 115,833

$ 167,893


STATEMENT OF FIDUCIARY NET POSITION

FIDUCIARY FUND

June 30, 2019Permanent

Trust

Fund

AgencyFund

Assets:

Cash and cash equivalentsAccounts receivable

$ $ 214,622

1,895

Total assets $ $ 216,517

Liabilities:

Accounts payableDue student groups

$ $ 2,660

213,857

Total iiabiilties 216,517

Net position held in trust $ $ -



STATEMENT OF CHANGES IN FIDUCIARY NET POSITION

FIDUCIARY FUNDS

For the year ended June 30, 2019Permanent

Trust

Fund

Additions:

Other local revenues $ 8,200

Total revenues 8,200

Deductions:

Community service activities 8,200

Total expenditures 8,200

Change In net position

NetPosition, July 30,2018

Net Position, July 30, 2019 $


NOTES TO THE BASIC FINANCIAL STATEMENTS


NOTES TO BASIC FINANCIAL STATEMENTS


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The financial statements of Lawrence County School District have been prepared to conform with AccountingPrinciples Generally Accepted in the United States of America ("GAAP") as applied to governmental units. TheGovemmental Accounting Standards Board ("GASB") is the accepted standard setting body for establishinggovemmental accounting and financial reporting principles. The Superintendent of Schools is responsible forkeeping records and accounts of all financial transactions in the manner prescribed by the State Board ofEducation. The following is a summary of the more significant of these policies.

Reporting Entitv

The Lawrence County Board of Education ("Board"), a five-member group, is the level of govemment whichhas oversight responsibilities over all activities related to public elementary and secondary school educationwithin the jurisdiction of Lawrence County School District ("District"). The District receives funding from local,state and federal govemment sources and must comply with the commitment requirements of these fundingsource entities. However, the District is not included in any other govemmental "reporting entity" as defined inSection 2100, Codification of Governmental Accounting and Financial Reporting Standards. Board membersare elected by the public and have decision making authority, the power to designate management, theresponsibility to develop policies which may influence operations and primary accountability for fiscal matters.

The District, for financial purposes, includes all of the funds and account groups relevant to the operation of theLawrence County Board of Education. The financial statements presented herein do not include funds ofgroups and organizations, which although associated with the school system, have not originated within theBoard itself such as Band Boosters, Parent-Teacher Associations, etc.

The financial statements of the District include those of separately administered organizations that arecontrolled by or dependent on the Board. Control or dependence is determined on the basis of budgetadoption, funding and appointment of the respective governing board.

Based on the foregoing criteria, the financial statements of the following organization are included in theaccompanying financial statements;

Lawrence Countv School District Finance Corporation - In a prior year the Board of Education resolved toauthorize the establishment of the Lawrence County School District Finance Corporation (a non-profit, nonstock, public and charitable corporation organized under the School Bond Act and KRS 273 and KRS Section58.180) (the "Corporation") as an agency for the District for financing the costs of school building facilities. Themembers of the Board also comprise the Corporation's Board of Directors.

Basis of Presentation

Govemment-Wide Financial Statements - The Statement of Net Position and the Statement of Activitiesdisplay information about the District as a whole. These statements include the financial activities of the primarygovemment, except for fiduciary funds. The statements distinguish between those activities of the District thatare governmental and those that are considered business-type activities.

The government-wide statements are prepared using the economic resources measurement focus. This is thesame approach used in the preparation of the proprietary fund financial statements but differs from the mannerin which govemmental fund financial statements are prepared. Govemmental fund financial statementstherefore include reconciliation with brief explanations to better identify the relationship between thegovernment-wide statements and the statements for governmental funds. The government-wideStatement of Activities presents a comparison between direct expenses and program revenues for eachsegment of the business-type activities of the District and for each function or program of the District'sgovemmental activities. Direct expenses are those that are specifically associated with a service, programor department and are therefore clearly identifiable to a particular function. Program revenues include

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NOTES TO BASIC FINANCIAL STATEMENTS - CONTINUED


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

charges paid by the recipient of the goods or services offered by the program and grants and contributions thatare restricted to meeting the operational or capital requirements of a particular program. Revenues that are notclassified as program revenues are presented as general revenues of the District, with certain limitedexceptions. The comparison of direct expenses with program revenues Identifies the extent to which eachbusiness segment or governmental function Is self-financing or draws from the general revenues of the District.

Fund Financial Statements - Fund financial statements report detailed Information about the District. The focusof governmental and enterprise fund financial statements Is on major funds rather than reporting funds by type.Each major fund Is presented In a separate column. Nonmajor funds are aggregated and presented In a singlecolumn. Fiduciary funds are reported by fund type.

The accounting and reporting treatment applied to a fund Is determined by Its measurement focus. Allgovernmental fund types are accounted for using a flow of current financial resources measurement focus. Thefinancial statements for govemmental funds are a Balance Sheet, which generally Includes only current assetsand current liabilities, and a Statement of Revenues, Expenditures and Changes In Fund Balances, whichreports on the changes In fund balance. Proprietary funds and fiduciary funds are reported using the economicresources measurement focus. Accordingly, the Statement of Revenues, Expenses, and Changes In NetPosition for the proprietary fund reports Increases and decreases In total economic net worth. The Statementof Cash Flows provides Information about how the District finances and meets the cash flow needs of Itsproprietary activities.

Funds are characterized as either major or non-major. Major funds are those whose assets, liabilities,revenues, or expenditures/expenses are at least ten percent of the corresponding total (assets, liabilities, etc.)for all funds or type (govemmental or proprietary) and whose total assets, liabilities, revenues, orexpenditures/expenses are at least five percent of the corresponding total for all govemmental and enterprisefunds combined. The district may also designate any fund as major.

Separate financial statements are provided for govemmental funds, proprietary funds, and fiduciary funds.Major Individual governmental funds and major enterprise funds are reported as separate columns In thefinancial statements.

The District has the following funds:

I. Govemmental Fund Tvoes

(A) The General Fund Is the main operating fund of the District. It accounts for financial resourcesused for general types of operations. This Is a budgeted fund, and any fund balances areconsidered as resources available for use. This Is a major fund of the District.

(B) The Special Revenue (Grant) Funds account for proceeds of specific revenue sources (other thanexpendable trusts or major capital projects) that are legally restricted to disbursements forspecified purposes. It Includes federal financial programs where unused balances are returned tothe grantor at the close of the specified project periods as well as the state grant programs. Projectaccounting Is employed to maintain Integrity for the various sources of funds. The separateprojects of federally-funded grant programs are Identified In the Schedule of Expenditures ofFederal Awards Included In this report. This Is a major fund of the District

(C) Capital Project Funds are used to account for financial resources to be used for the acquisition orconstruction of major capital facilities and equipment (other than those financed by proprietaryfund).

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1. The Support Education Excellence in Kentucky (SEEK) Capital Outlay Fund receivesthose funds designated by the state as Capital Outlay Funds and is restricted for use Infinancing projects Identified In the District's facility plan.

2. The Facility Support Program of Kentucky (FSPK) accounts for funds generated by thebuilding tax levy required to participate In the School Facilities Construction Commission'sconstruction funding and state matching funds, where applicable. Funds may be used forprojects Identified In the District's facility plan.

3. The Construction Fund accounts for proceeds from sales of bonds and other revenues tobe used for authorized construction.

(D) The Debt Service Fund Is used to account for the accumulation of resources for, and the paymentof, general long-term debt principal and Interest and related cost; and for the payment of Intereston general obligation notes payable, as required by Kentucky Law.

(E) The District Activity Fund Is used to account for financial resources to be used for maintenanceand up keep at each Individual school. It Is funded by monies collected at special events at thelocal school level and to be used for that particular school.

II. ProDrietarv Fund Tvoe (Enterprise Fund)

The Food Service Fund Is used to account for school food sen/Ice activities, Including the NationalSchool Lunch Program, which Is conducted In cooperation with the U.S. Department of Agriculture(USDA). Amounts have been recorded for In-kind contribution of commodities from the USDA. TheFood Service Fund Is a major fund.

The District applies all GASB pronouncements to proprietary funds as well as the FinancialAccounting Standards Board pronouncements issued on or before November 30, 1989, unlessthose pronouncements conflict with or contradict GASB pronouncements.

III. Fiduciary Fund Tvoe (Acencv and Private Purpose Trust Funds)

The Agency Fund accounts for activities of student groups and other types of activities requiringclearing accounts. These funds are accounted for In accordance with the Uniform Prooram ofAccounting for School Actlvltv Funds. The permanent trust fund Is accounted for as anexpendable trust fund on the modified accrual basis.

Basis of Accounting

Basis of accounting determines when transactions are recorded In the financial records and reported on thefinancial statements. Government-wide financial statements are prepared using the accrual basis ofaccounting. Govemmental funds use the modified accrual basis of accounting. Proprietary and fiduciary fundsalso use the accrual basis of accounting.

Revenues - Exchange and Non-exchange Transactions - Revenues resulting from exchange transactions. Inwhich each party receives essentially equal value. Is recorded on the accrual basis when the exchange takesplace. On a modified accrual basis, revenues are recorded In the fiscal year In which the resources aremeasurable and available. Available means that the resources will be collected within the current fiscal year orare expected to be collected soon enough thereafter to be used to pay liabilities of the current fiscal year. Forthe District, available means expected to be received within sixty days of the fiscal year-end.

-20-





Nonexchange transactions, in which the District receives value without directly giving equal value in return,include property taxes, grants, entitlements and donations. On an accrual basis, revenue from property taxes isrecognized in the fiscal year for which the taxes are levied. Revenue from grants, entitlements and donations isrecognized in the fiscal year in which ail eligibility requirements have been satisfied. Eligibility requirementsinclude timing requirements, which specify the year when the resource are required to be used or the fiscalyear when use is first permitted, matching requirements, in which the District must provide local resources to beused for a specified purpose, and expenditure requirements, in which the resources are provided to the Districton a reimbursement basis. On a modified accrual basis, revenues from nonexchange transactions must also beavailable before it can be recognized.

Deferred Revenue - Deferred revenue arises when assets are recognized before revenue recognition criteriahave been satisfied. Due to GASB 65, this now has been re-characterized as unearned revenue.

Grants and entitlements received before the eligibility requirements are met are recorded as deferred revenue.

Expenses/Expenditures - On the accrual basis of accounting, expenses are recognized at the time they areincurred. The fair value of donated commodities used during the year is reported in the Statement of Revenues,Expenses, and Changes in Net Position as an expense with a like amount reported as donated commoditiesrevenue. Unused donated commodities are reported as unearned revenue.

The measurement focus of governmental fund accounting is on decreases in net financial resources(expenditures) rather than expenses. Expenditures are generally recognized in the accounting period in whichthe related fund liability is incurred, if measurable. Allocations of cost, such as depreciation, are not recognizedin governmental funds.

Prooertv Taxes

Property Tax Revenues - Generally and except as otherwise provided by law, property taxes are assessed asof January 1, levied (mailed) November 1, due at discount November 30, due at face value December 31,delinquent January 1 following the assessment, and subject to sale ninety days following April 15. The billingsare considered due upon receipt by the taxpayer; however, the actual date is based on a period ending 30 daysafter the tax bill mailing. Property taxes collected are recorded as revenues in the fiscal year for which theywere levied. All taxes collected are initially deposited into the General Fund and then transferred to theappropriate fund.

The property tax rates assessed for the year ended June 30, 2019, to finance the General Fund operationswere $.594 per $100 valuation for real property, $.594 per $100 valuation for business personal property and$.35 per $100 valuation for motor vehicles.

The District levies a utility gross receipts license tax in the amount of 3% of the gross receipts derived from thefurnishings, within the county, of telephonic and telegraphic communications services, cablevision services,electric power, water, and natural, artificial and mixed gas.

Capital Assets

General capital assets are those assets not specifically related to activities reported in the proprietary funds.These assets generaily result from expenditures in the govemmental funds. These assets are reported in thegovernmental activities coiumn of the government-wide Statement of Net Position but are not reported in thefund financial statements. Capital assets utilized by the proprietary funds are reported both in the business-typeactivities column of the government-wide Statement of Net Position and in the respective funds.

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NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES • CONTINUED

All capital assets are capitalized at cost (or estimated historical cost) and updated for additions and retirementsduring the year. Donated fixed assets are recorded at their fair market values as of the date received. TheDistrict maintains a capitalization threshold of one thousand dollars with the exception of computers, digitalcameras and real property for which there is no threshold. The District does not possess any infrastructure.Improvements are capitalized; the cost of, normal maintenance and repairs that do not add to the value of theasset or materially extend an assets life are not.

All reported capital assets are depreciated. Improvements are depreciated over the remaining useful lives ofthe related capital assets. Depreciation is computed using the straight-line method over the following usefullives for both general capital assets and proprietary fund assets:

Governmental Activities

Description Estimated Lives

Buildings and improvements 25-50 yearsLand improvements 20 yearsTechnology equipment 5 yearsVehicles 5-10 yearsAudio-visual equipment 15 yearsFood service equipment 10-12 yearsFurniture and fixtures 7 yearsRolling stock 15 yearsOther 10 years

Interfund Balances

On fund financial statements, receivables and payables resulting from short-term interfund loans are classifiedas "interfund receivables/payables". These amounts are eliminated in the governmental and business-typeactivities columns of the Statements of Net Position, except for the net residual amounts due betweengovernmental and business-type activities, which are presented as internal balances.

Accumulated Unpaid Sick Leave Benefits

Upon retirement from the school system, an employee will receive from the District an amount equal to 30% ofthe value of accumulated sick leave.

Sick leave benefits are accrued as a liability using the termination payment method. An accrual for eamed sickleave is made to the extent that it is probable that the benefits will result in termination payments. The liability isbased on the School District's past experience of making termination payments.

The entire compensated absence liability is reported on the government-wide financial statements.

For govemmental fund financial statements the current portion of unpaid accrued sick leave is the amountexpected to be paid using expendable available resources. These amounts are recorded in the account"accumulated sick leave payable" in the General Fund. The noncurrent portion of the liability is not reported.

Budoetarv Process

Budgetary Basis of Accounting: The District's budgetary process accounts for certain transactions on a basisother than Generally Accepted Accounting Principles (GAAP). The major differences between the budgetarybasis and the GAAP basis are:

Revenues are recorded when received in cash (budgetary) as opposed to when susceptible to accrual (GAAP).

-22-





Expenditures are recorded when paid in cash (budgetary) as opposed to when susceptible to accrual (GAAP).

Once the budget is approved, it can be amended. Amendments are presented to the Board at their regularmeetings. Per Board policy, only amendments that aggregate greater than $50,000 require Board approval.Such amendments are made before the fact, are reflected In the official minutes of the Board, and are notmade after fiscal year-end as dictated by law.

Each budget is prepared and controlled by the budget coordinator at the revenue and expenditurefunction/object level. All budget appropriations lapse at year-end.

The budget for the Special Revenue Fund consists of the sum of each active grant's budget. Large variancesbetween budgeted and actual activity can occur because grants with little activity during the year will have theirentire budget rolled up into the combined budget for all grants.

Cash and Cash Equivalents

The District considers demand deposits, money market funds, and other investments with an original maturityof 90 days or iess, to be cash equivalents.

Inventories

On govemment-wide financial statements inventories are stated at cost and are expensed when used.

On fund financial statements Inventories are stated at cost. The cost of inventory items is recorded as anexpenditure in the governmental fund types when purchased.

The Food Service Fund is stated at cost and uses the specific identification method and the General Fund Isstated at cost and uses the first-in, first-out method for Inventory.

Prepaid Assets

Payments made that will benefit periods beyond June 30, 2019 are recorded as prepaid items using theconsumption method. A current asset for the prepaid amount is recorded at the time of the purchase and anexpenditure/expense is reported in the year in which services are consumed.

Investments

The private purpose trust funds record investments at their quoted market prices. All realized gains and lossesand changes in fair value are recorded in the Statement of Changes in Fiduciary Net Position.

The permanent funds record investments at their quoted market value prices for purposes of the Statement ofNet Position. All realized gains and losses and changes In fair value are recorded in the Statement of Activities.Long-term investments are not recorded on the fund financial statements nor are unrealized gains and losses.

Accrued Liabilities and Lono-Term Obliaations

All payables, accrued liabilities and long-term obligations are reported in the govemment-wide financialstatements, and all payables, accrued liabilities and long-term obligations payable from proprietary funds arereported on the proprietary fund financial statements.

In general, payables and accrued liabilities that will be paid from governmental funds are reported on thegovernmental fund financial statements regardless of whether they will be liquidated with current resources.However, claims and judgments, accumulated sick leave, contractually required pension contributions andspecial tennination benefits that will be paid from governmental funds are reported as a liability in the fundfinancial statements only to the extent that they will be paid with current, expendable, available financial

-23-





resources. In general, payments made within 60 days after year-end are considered to have been made withcurrent available financial resources. Bonds and other long-term obligations that will be paid from governmentalfunds are not recognized as a liability in the fund financial statements until due.

Deferred Outflows/Inflows of Resources

In addition to assets, the Statement of Financial Position includes a separate section for deferred outflows ofresources. This separate financial statement element, deferred outflows of resources, represents aconsumption of net position that applies to a future period(s) and so will not be recognized as an outflow ofresources (expense/expenditure) until then. The District has nine items that qualifies for reporting in thiscategory. It is the deferred charge on refunding of debt reported in the government-wide Statement of NetPosition. A deferred charge on refunding results from the difference in the carrying value of refunded debt andits reacquisition price. This amount is deferred and amortized over the shorter of the life of the refunded orrefunding debt. Also, the other Items are the District pension contribution subsequent to measurement date,the difference between expected and actual experience, net difference between projected and actualinvestment eamings on pension plan investments, change of assumptions, and the change in proportion anddifferences between employer contributions and proportionate share of contributions. In addition, we haveOPED contributions subsequent to measurement date change of assumptions, and the change in proportionand differences between employer contributions and proportionate share of contributions.

In addition to liabilities, the Statement of Financial Position will sometimes report a separate section fordeferred inflows of resources. This separate financial statement element, deferred Inflows of resources,represents an acquisition of net position that applies to a future period(s) and so will not be recognized as aninflow of resources (revenue) until that time. The District has seven items that qualifies in this category. Forpensions it is the difference between expected and actual experience, net difference between projected andactual investment eamings on pension plan investments and the change in proportion and differences betweenemployer contributions and proportionate share of contributions. In addition, for OPED it is the differencebetween expected and actual experience, net difference between projected and actual investment earnings onOPEB plan investments, change of assumptions, and the change in proportion and difference betweenemployer contributions and proportionate share of contributions.

Fund Balance Reserves

The District reserves those portions of fund equity which are legally segregated for a specific future use orwhich do not represent available expendable resources and therefore are not available for appropriation orexpenditure. Fund equity reserves have been established for inventories and fixed assets.

In the fund financial statements, the difference between the assets and liabilities of govemmental funds isreported as fund balance. Fund balance Is divided into non-spendable and spendable components, ifapplicable.

Non-spendable includes amounts that must be maintained intact legally or contractually.

Spendable include the following:• Restricted-amounts constrained for a specific purpose by extemal parties, constitutional

provisions, or enabling legislation.• Committed-amounts constrained for a specific purpose by the district using its highest level of

decision making authority.• Assigned-for all govemmental funds, other than general fund, any remaining positive amounts

not classified as non-spendable, restricted, or committed. For the General Fund, amountsconstrained by intent to be used for a specified purpose by the District or the delegatedcounty committee or official given authority to assign amounts.

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• Unassigned-for the General Fund, amounts not classified as non-spendable, restricted,committed or assigned. For all other governmental funds, amount expended in excess ofresources that are non-spendable, restricted, committed or assigned.

For resources considered committed, the district issues an ordinance or resolution that can only bechanged with another corresponding ordinance or resolution.

For resources considered assigned, the district has designated the board to carry out the intent of the schooldistrict.

It is policy of the District to spend restricted resources first, when both restricted and unrestricted resources areavailable to spend on the activity. Once restricted resources are exhausted, then committed, assigned andunassigned resources will be spent In that order on the activity.

Encumbrances, although not reported on the Balance Sheet, are purchase orders that will be fulfilled in asubsequent fiscal period. Although the purchase order or contract creates a legal commitment, the districtincurs no liability until performance has occurred on the part of the party with whom the district has entered intothe arrangement. When a government intends to honor outstanding commitments in subsequent periods, suchamounts are encumbered. Significant encumbrances at year end are reported by major funds and non-majorfunds in the aggregate and included with the commitments and contingencies note disclosure, if applicable.

Net Position

Net positions represent the difference between assets and deferred outflows of resources, and liabilities anddeferred inflows of resources on the district-wide financial statements. Net positions are classified in thefollowing categories:

Net investments In capital assets - This amount consists of capital assets net of accumulated depreciationand reduced by outstanding debt that is attributed to the acquisition, construction, or improvement of theassets.

Restricted net position - This amount is restricted by creditors, grantors, contributors, or laws orregulations of other govemments.

Unrestricted net position - This amount is the net position that does not meet the definition of "netinvestment in capital assets" or "restricted net position".

Operating Revenues and Expenses

Operating revenues are those revenues that are generated directly from the primary activity of the proprietaryfunds. For the School District, those revenues are primarily charges for meals provided by the various schools.

Contributions of Capital

Contributions of capital in proprietary fund financial statements arise from outside contributions of fixed assets,or from grants or outside contributions of resources restricted to capital acquisition and construction.

Interfund Activitv

Exchange transactions between funds are reported as revenues in the seller funds and asexpenditures/expenses in the purchaser funds. Flows of cash or goods from one fund to another without arequirement for repayment are reported as interfund transfers. Interfund transfers are reported as other

-25-





financing sources/uses in governmental funds and after nonoperating revenues/expenses in proprietary funds.Repayments from funds responsible for particular expenditures/expenses to the funds that initially paid for themare not presented on the financial statements.

Pensions

For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows ofresources related to pensions, and pension expense, information about the fiduciary net position of the CountyEmployee's Retirement System (CERS) and additions to/deductions from CERS' fiduciary net position havebeen determined on the same basis as they are reported by CERS. For this purpose, benefit payments(including refunds of employee contributions) are recognized when due and payable in accordance with thebenefit terms. Investments are reported at fair value.

Recentiv Issued and Adopted Accountino Pronouncements

The Govemmental Accounting Standards Board has issued several new pronouncements that the District hasreviewed for application to their accounting and reporting.

GASB Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows ofResources, and Net Position, Is effective for periods beginning after December 16, 2011. This standardprovides financial reporting guidance for deferred outflows of resources and deferred inflows of resources. TheDistrict implemented this reporting during 2013. The components of net position were renamed to reflect therequirements of this statement.

In March 2012, the GASB Issued Statement 66, Technical Corrections-2012-an amendment of GASBStatements No. 10 and No. 62. GASB 66 improves accounting and financial reporting for a govemmentalfinancial reporting entity by resolving conflicting guidance that resulted from the issuance of twopronouncements. Statements No. 54, Fund Balance Reporting and Govemmentai Fund Type Definitions, andNo. 62, Codification of Accounting and Financiai Reporting Guidance Contained in Pre-November 30, 1989FASB and AiCPA Pronouncements. This Statement is effective for periods beginning after December 15,2012. The adoption of GASB 66 does not have any impact on the District's financial statements.

In March 2012 the GASB issued Statement 65, Items Previously Reported as Assets and Liabilities. GASB 65establishes accounting and financial reporting standards that reclassify, as deferred outflows of resources ordeferred inflows of resources, certain items that were previously reported as assets and liabilities. ThisStatement Is effective for periods beginning after December 15,2012.

in June 2012, the GASB approved a pair of related Statements that reflect substantial changes to theaccounting and financial reporting of state and local government employers and pension plans. Statement No.67, Financial Reporting for Pension Plans, addresses financial reporting for state and local government pensionplans. Statement No. 68, Accounting and Financial Reporting for Pensions, addresses financial reporting forstate and local govemment employers whose employees are provided with pensions through pension plansthat are covered under Statement No. 67.

The guidance contained in these Statements will change how governments calculate and report the costs andobligations associated with pensions in important ways. It is designed to improve the decision usefulness ofreported pension information and to increase the transparency, consistency, and comparability of pensioninformation across governments. Under the pension standards now in effect, cost-sharing employers have notbeen required to present actuarial information about pensions. Instead, information has been required to bepresented in the pension plan's own financial statements for all of the participating govemments combined.

Through its research, the GASB concluded that the needs of users of information regarding cost-sharingemployers do not differ significantly from those interested in single and agent employers. Therefore, the GASB

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believes it is important to give users of the financial statements of cost-sharing employers access to better,more transparent financial information. Consequently, under the new standards the GASB is requiring thatcost-sharing govemments report a net pension liability, pension expense, and pension related deferred inflowsand outflows of resources based on their proportionate share of the collective amounts for all the govemmentsin the plan.

Statement No. 68 is effective for pension plan employers in fiscal years beginning after June 15, 2014, (that is,for years ended June 30,2015, or later).

In June 2015, the GASB issued Statement No. 76, The Hierarchy of Generally Accepted Accounting Principlesfor State and Local Govemments ("GASB 76"). GASB 76 supersedes Statement No. 55, The Hierarchy ofGenerally Accepted Accounting Principles for Sfafe and Local Govemments and reduces the GAAP hierarchyto two categories of authoritative GAAP. The adoption of this standard did not have a material effect on theDistrict's financial statements.

In June 2015, the GASB issued Statement No. 75, Accounting and Financial Reporting for PostemploymentBeneht Plans Other than Pension Plans ("GASB 75"). GASB 75 replaces Statement No. 45, Accounting andFinancial Reporting by Employers for Postemployment Benefits Other than Pensions and No. 57, OPEBMeasurements by Agent Employers and Agent Multiple Employer Plans. It establishes standards forrecognizing and measuring liabilities, deferred outflows of resources, deferred inflows of resources, andexpense/expenditures for other postemployment benefits ("OPEB"). In addition, GASB 75 details therecognition and disclosure requirements for employers with payables to defined benefit OPEB plans that areadministered through trusts that meet the specified criteria and for employers whose employees are providedwith defined contribution OPEB. GASB 75 will be effective for the District beginning with its year ending June30, 2018.

In March 2016, the GASB issued Statement No. 82, Pension Issues ("GASB 82"). GASB 82 addresses issuesregarding (1) the presentation of payroll-related measures in required supplementary information, (2) theselection of assumptions and the treatment of deviations from the guidance in an Actuarial Standard of Practicefor financial reporting purposes, and (3) the classification of payments made by employers to satisfy employee(plan member) contribution requirements that arose during the implementation of GASB Statement No. 68.GASB 82 will be effective for the District beginning with its year ending June 30, 2017.

In January 2017, the GASB issued Statement No. 84, Fiduciary Activities ("GASB 84"). GASB 84 issuesguidance regarding the identification of fiduciary activities for accounting and financial reporting purposes andhow those activities should be reported. This requirement is effective for reporting periods beginning afterDecember 15, 2018. The district is currently implementing this and will be reflected in the audit ending June30, 2020.

NOTE B - ON-BEHALF PAYMENTS

For the year ended June 30, 2019, on-behalf payments were made on behalf of the District for KTRS GASB 68$3,128,702, KTRS GASB 75 $263,590, Health Insurance $2,527,340, Life insurance $4,560, Administrative fee$37,554, HRA/DentalA/ision $188,429, Federal reimbursement ($244,925), KEN services $67,348, AT&TFirewall Services $18,300, Munis financial management software and services $6,686, McAfee virus protectionsoftware and services $2,656, KISTA Capital lease payments $-0-, and SFCC debt service $506,848. Theoverall total payments for on-behalf were $6,507,088. In addition, $187,600 was made from federal sources tosatisfy a QZAB Bond payment. These payments were recognized as on-behalf payments and recorded in theappropriate revenue and expense accounts on the Statement of Activities and the Govemmental FundStatement of Revenue. Expenditures and Changes in Fund Balance.

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NOTE C - ESTIMATES

The preparation of financial statements in conformity with accounting principles generally accepted in the UnitedStates of America requires the District's management to make estimates and assumptions that affect reportedamounts of assets, liabilities, fund balances, and disclosure of contingent assets and liabilities at the date of thegeneral purpose financial statements, and the reported amounts of revenues and expenditures during the reportingperiod. Actual results could differ from those estimates.

NOTE D - CASH AND CASH EQUIVALENTS

The Districts' are required to be deposited and invested under the terms of a depository contract pursuant to theSchool Depository Act. The depository bank deposits for safekeeping and trust with the District's third party agentapproved pledged securities in an amount sufficient to protect District funds on a day-to-day basis during the periodof the contract. The pledge of approved securities is waived only to the extent of the dollar amount of FederalDeposit Insurance Corporation insurance.

At June 30, 2019 the carrying amount of the District's deposits was $4,406,146 and the bank balance was$4,907,731. The entire bank balance throughout the year was covered by federal depository insurance or bycollateral held by the District's agent in the District's name.

The deposits were deemed collateralized under Kentucky Law during the year and the Kentucky Department ofEducation maintains copies of all safekeeping receipts in the name of the District. The following is disclosed:

a. Name of bank: Inez Deposit

b. Amount of bond and/or security pledged as of the date of the highest combined balance on deposit was$7,075,500.

The cash deposits held at financial institutions can be categorized according to three levels of risk. These threelevels of risk are as follows:

Category 1 Deposits which are insured to collateralized with securities held by the District or by itsagent in the District's name.

Category 2 Deposits which are coliateralized with securities held by the pledging financial Institution'strust department or agent In the District's name.

Category 3 Deposits which are not collateralized or insured.

Based on these three levels of risk, all of the District's cash deposits are classified as Category 2.

Breakdown per financial statements:

Govemmental funds $ 3,601,608Proprietary funds 589,916Agency funds 214.622

$ 4.4Q6.146

NOTE E - INVESTMENTS

At year-end the District had no investments.

NOTE F - CAPITAL ASSETS

Capital asset activity for the fiscal year ended June 30, 2019, was as follows:

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NOTE F - CAPITAL ASSETS - CONTINUED

Balance

Governmental Activities July 1.2018 Additions

Land $ 334,650 $Buildings and improvements 36,605,521Technology equipment 2,953,814Vehicles 3,998,336 357,280General equipment 1,352,800 17,397Infrastructure 62,500Construction in progress 5.599.492Totals at historical cost 50.907.113 374.677

Less: accumulated depreciationBuildings and improvements 15,708,840 901,722Technology equipment 2,953,415 182Vehicles 2,857,303 192,859General equipment 1,163,212 39,032Infrastructure 6.771 3.125Total accumulated depreciation 22.689.541 1.136.920

Govemmental Activities

Capital Assets-Net $28.217.572 $ (762.2431

Business-Type Activities

Food service equipment $ 838,519 $ 114,392Food service technology 7.419 -Totals at historical cost 845.938 114.392

Less: accumulated depreciationFood service equipment 721,678 18,736Food service technology 7.419 -

Total accumulated depreciation 729.097 18.736Business-Type ActivitiesCapital Assets - Net $ 116.841 $ 95.656

Deductions

Balance

June 30.2019

$ 334,65036,605,5212,953,8144,355,6161,370,197

62,5005.599.492

51.281.790

16,610,5622,953,5973,050,1621,202,244

9.896

23.826.461

$27.455.329

$ 952,9117.419

960.330

740,4147.419

747.833

$ 212.497

Depreciation expense has been charged to the following functions in the statement of activities:

Instruction

Student support servicesDistrict administrative


Plant operation and maintenanceStudent transportationBusiness support servicesCommunity servicesFood service

$ 325,34938,2583,125338

576,497192,858

393

102

18.736

$1.155.656

NOTE G - BONDED DEBT AND LEASE OBLIGATIONS

The original amount of each Issue, the Issue date, and interest rates are summarized below:

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NOTE G - BONDED DEBT AND LEASE OBLIGATIONS - CONTINUED

Interest

Issue Date Amounts Rates

2008 Refinancing $ 4,285,000 3.350%2009 Refinancing $ 306,631 1.000% - 3.000%2012 Refinancing $2,020,000 0.500% -1.900%2012 Energy Bonds $ 4,265,000 0.800% - 2.650%2012 Revenue $ 1,635,000 0.700% - 3.000%2013 Revenue $ 2,320,000 1.200% - 4.350%2014 Revenue $ 364,207 2.000% - 3.250%

The 2008, 2012R, 2012E, 2012, 2013, and 2014 bond issues were sold at a discount (premium) of $36,422,$2,775, ($4,017), $32,679, $38,457, and $707, respectively. These amounts are being amortized over the lifeof the respective debt.

The District, through the General Fund (including utility taxes and the Support Education Excellence inKentucky (SEEK) Capital Outlay Fund) is obligated to make payments in amounts sufficient to satisfy debtservice requirements on bonds issued by the Lawrence County School District Finance Corporation toconstruct school facilities. The District has an option to purchase the property under lease at any time byretiring the bonds then outstanding.

In connection with the school revenue bonds issued after May 1, 1996, the District entered into "participationagreements" with the School Facility Construction Commission. The Commission was created by the KentuckyGeneral Assembly for the purpose of assisting local school districts in meeting school construction needs. Thetable below sets forth the amount to be paid by the District and the Commission for each year until maturity ofall bond issues. The liability for the total bond amount remains with the District and, as such, the total principaloutstanding has been recorded in the financial statements.

The proceeds from certain refunding issues have been placed in escrow accounts to be used to service therelated debt.

On September 26, 2014, the district issued $364,207 in School Building Revenue Bonds (Series 2014) with aninterest rate ranging from 2% to 3.25% to finance their self-insurance pools for workers compensation and liabilityinsurance (KSBIT).

On September 1, 2013, the district issued $2,320,000 in School Building Revenue Bonds with an interest rateranging from 1.200% to 4.350%. The School Facilities Construction Commission participation in this issue is$793,434 while the district portion is $1,526,566.

On January 1, 2012, the Lawrence County School District issued $2,020,000 in School Building RefundingRevenue Bonds with an interest rate ranging from 0.500% to 1.900% to advance refund $1,870,000 ofoutstanding 2003 Series Revenue Bonds with an average Interest rate of 4.063%. The net proceeds of$1,988,403 (after payment of $31,880 fiscal agency fees and $2,775 of discount on bonds plus $3,058 ofaccrued interest) were used to provide $7,505 to open the Bond and Interest Redemption Fund for the 2012issue, and $1,980,898 to partially refund the 2003 Series Revenue Bond Issue. As a result, $1,870,000 of2003 Series Revenue Bonds are considered to be defeased. The School Facilities Construction Commissionparticipation in this issue is $619,824 while the district portion is $1,400,176.

On January 1, 2012, the District advance refunded the 2003 Series Revenue Bonds to reduce its total debtservice payments over the next 12 (twelve) years by approximately $174,731 and to obtain an economicgrowth (difference between the present values of the debt service payments on the old and new debt) of$152,184.

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On January 1, 2012, the District issued $1,635,000 in School Building Revenue Bonds, (Series 2012) withinterest ranging from .70% to 3.00% with an average interest rate of 2.22% to fund roof projects at BlaineElementary, Fallsburg Elementary, Louisa East Elementary, and Louisa Middle School. This issue is funded100% by SFCC.

On February 1, 2012, the District issued $4,265,000 in Energy Conservation Bonds, (Series 2012) with interestranging from .80% to 2.65% with an average interest rate of 1.725% to fund an energy conservation projectwith Honeywell. Honeywell has guaranteed energy savings of $2,835,000 to be applied to the funding of thisproject. The School Facilities Construction Commission did not participate in this issue.

On March 1, 2008, the District issued $4,285,000 in School Building Refunding Revenue Bonds with an interestrate of 3.350%. This advance refunded $3,915,000 of the outstanding 2000 Series Revenue Bonds to reduceits total debt service payments over the next 13 (thirteen) years by approximately $265,545 and to obtain aneconomic gain (difference between the present values of the debt service payments on the old and new debt)of $213,382.

On December 29, 2009, the District issued $306,631 in bonds with an interest rate ranging from 1% to 3%. TheSchool Facilities Construction Commission advance refunded the Series of 1998 H-1 KISTA SLIP Loan. The

School Facilities Construction Commission will pay 100% of the Debt Service. Following the refinancing, a totalsavings of $34,914 was realized by the Commission and will be available to be applied toward the District'snext Bond Issue.

The bonds may be called prior to maturity and redemption premiums are specified in each issue. Assuming nobonds are called prior to scheduled maturity, the minimum obligations of the District, including amounts to bepaid by the Commission, at June 30,2019 for debt service (principal and interest) are as follows:

KENTUCKY SCHOOL TOTAL

LAWRENCECOUNTY FACILITIES CONSTRUCTION REQUIREMENTS

SCHOOL DISTRICT COMMISSION FOR YEAR

YEAR PRINCIPAL INTEREST PRINCIPAL INTEREST TOTAL

2019-2020 $ 955,285 $ 164,429 $ 280,691 $ 63,299 $ 1,463,704

2020-2021 987,063 138,981 254,853 56,446 1,437,344

2021-2022 621,410 118,509 176,631 51,437 967,987

2022-2023 643,631 104,178 180,568 47,502 975,879

2023-2024 482,208 88,416 118,211 43,388 732,223

2024-2025 495,194 75,979 121,534 40,065 732,772

2025-2026 464,989 63,276 125,011 36,590 689,866

2026-2027 491,415 50,235 128,585 33,014 703,249

2027-2028 117,251 35,526 132,749 28,850 314,376

2028-2029 128,026 31,111 136,974 24,625 320,736

2029-2030 123,591 26,258 146,409 19,959 316,217

2030-2031 128,622 21,056 151,378 14,633 315,689

2031-2032 138,061 15,469 156,939 9,095 319,564

2032-2033 141,957 9,519 58,043 3,214 212,733

2033-2034 149.477 3.251 45.523 990 199.241

TOTALS $6,068,180 $ 946,194 $2,214,099 $ 473,107 $ 9,701,580

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During the year ended June 30, 2019 the District's debt obligation was as follows:

Less:

Discount on bonds

BALANCE

6/30/18

$ 9,477,489

f58.725^

$ 9.418.764

ADDITIONS

$

$

REDUCTIONS

$1,195,210

(6.394)

$1-188.816

BALANCE

6/30/19

$ 8,282,279

(52.331)

$ 8.229.948

DUE WITHIN

ONE YEAR

$1,235,976

$1.235.976

QUALIFIED ZONE ACADEMY BONDS

The Lawrence County School District Finance Corporation issued $5,000,000 of Qualified Zone Academy Bonds(QZAB), Series 2012, December 1, 2012 under a guaranteed investment contract. The Kentucky School FacilityConstruction Commission is to make equal annual sinking fund payments to The Bank of New York Mellon TrustCompany, an escrow agent, in the amount of $162,638 commencing December 1, 2013 and such amount shall beheld and invested by the escrow agent for payment of $5,000,000 at the bonds maturity on December 1, 2035.The interest subsidy will be paid by the United States Treasury directly to the issuer or its designee paying agentand applied only to the payment of interest due on bonds or reimbursement to the issuer for such payment. Thelocal board will be responsible for any amount the Unites States Treasury doesn't pay. The 2012 QZAB soid at adiscount of $46,000. This amount is being amortized over the iife of the respective debt. The minimumobligations of the funds at June 30, 2019 for the escrow and interest are as foliows:

Year

Kentucky SchoolFacilities Construction

Commission Federal Rebate

Total

RequirementsFor Year

Escrow Interest Total

2019-2020 $ 162,638 $ 200,000 $ 362,638

2020-2021 162,638 200,000 362,638

2021-2022 162,638 200,000 362,638

2022-2023 162,638 200,000 362,638

2023-2024 162,638 200,000 362,638

2024-2025 162,638 200,000 362,638

2025-2026 162,638 200,000 362,638

2026-2027 162,638 200,000 362,638

2027-2028 162,638 200,000 362,638

2028-2029 162,638 200,000 362,638

2029-2030 162,637 200,000 362,637

2030-2031 162,637 200,000 362,637

2031-2032 162,637 200,000 362,637

2032-2033 162,637 200,000 362,637

2033-2034 162,637 200,000 362,637

2034-2035 162,637 200,000 362,637

2035-2036 162.637 100.000 362.637

Totais $2,764,839 $3300.000 $6,064,839

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During the year ended June 30, 2019 the District's QZAB debt obligation to the escrow was as follows:

Less:

Discount on bonds

BALANCE

6/30/18

$2,927,477

(35.000)

5i7RQ7A77

ADDITIONS

$

S

REDUCTIONS

$162,638

(2.000)

$160.638

BALANCE

6/30/19

$2,764,839

(33.000)

$2.731.839

DUE WITHIN

ONE YEAR

$162,638

$162.638

The District is required by GASB 68 and GASB 75 to account for net pension liability and net OPEB liability on thestatement of net position. The district is not required to make any payments toward these liabilities.

During the year ended June 30, 2019, the District's changes in long term obligations for pensions and OPEB areas follows:

Govemmental Activities


Net OPEB liability

Total govemmental activities

Balance

6/30/18

$6,303,631

2.165.007

$8.468.638

Additions

$214,944

$214.944

Reductions

$

(264.801)

$(264.801)

Balance

6/30/19

$6,518,575

1.900.206

$8.418.781

Due Within

One Year

$ -

Business - Tvoe Activities


Net OPEB liability

Total business - type activities

Balance

6/30/18

$1,026,173

352.444

Additions

$124,164

$1.378.617 $124.164

Reductions

$ -

(17.054)

$ (17.054)

Balance

6/30/19

$1,150,337

335.390

$1.485.727

Due Within

One Year

$ -

NOTE H - CAPITAL LEASE PAYABLE

On March 6,2019, the Kentucky Interlocal School Transportation Association (KISTA) entered into an equipmentlease and security agreement with the Lawrence County School District. The District received $234,768transportation equipment (two school buses) and is required to make payments over a ten year period with aninterest rate of 3%.

On March 21, 2018, the Kentucky Interlocal School Transportation Association (KISTA) entered into an equipmentlease and security agreement with the Lawrence County School District. The District received $247,578 intransportation equipment (two school buses) and Is required to make payments over a ten year period with aninterest rate ranging from 2% to 3%.

On March 1, 2016, the Kentucky Interlocal School Transportation Association (KISTA) entered into an equipmentlease and security agreement with the Lawrence County School District. The District received $339,135 intransportation equipment (three school buses) and is required to make payments over a ten year period with aninterest rate ranging from 2.00% to 2.625%.

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NOTE H - CAPITAL LEASE PAYABLE - CONTINUED

On March 1, 2014, the Kentucky Interlocal School Transportation Association (KISTA) entered into anequipment lease and security agreement with the Lawrence County School District The District received$406,263 in transportation equipment (four school buses) and is required to make payments over a ten yearperiod with an interest rate ranging from 2% to 3%.

On January 1, 2009, the Kentucky Interlocal School Transportation Association (KISTA) entered into anequipment lease and security agreement with the Lawrence County School District. The District received$340,914 in transportation equipment (four school buses) and is required to make payments over a ten yearperiod with an interest rate ranging from 2.0% to 3.9%.

The following is a schedule of equipment lease payments, by years of the future minimum lease payments

Year Princioal Interest

Total

Reouirements

2019-20 $ 125,321 $ 23,406 $ 148,7272020-21 123,717 20,748 144,4652021-22 123,008 17,735 140,7412022-23 119,103 14,601 133,7042023-24 122,577 11,381 133,9582024-25 80,757 7,972 88,7292025-26 83,116 5,702 88,8182026-27 48,399 3,326 51,7252027-28 42,503 1,873 44,3762028-29 19.952 599 20.551

TOTALS S 888,451 S 107,343 $ 995,794

During the year ended June 30,2019 the District's capital lease obligation was as follows:

BALANCE

6/30/18 ADDITIONS

$234,768$784,899

NOTE I - NONCAPITALIZED LEASES

REDUCTIONS

$131,216

BALANCE

6/30/19

$888,451

DUE WITHIN

ONE YEAR

$125,321

The District entered into a lease on October 1, 2017 for one acre of property located behind the FallsburgElementary School. The term of the lease is for five years with an annual lease amount of $4,320 with nointerest. The District has the option to renew at the end of the lease for an additional five-year term.

Commitments under operating lease agreements provide the minimum future rental payments as of June 30,2019 as follows:

Year ending June 30: 2020

Total minimum payments

$4.320

$4.320

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NOTE J - PENSION PLANS

KENTUCKY TEACHERS' RETIREMENT

The Lawrence County School District contributes to the Teachers' Retirement System of Kentucky (KTRS), acost-sharing, multiple employer defined benefit pension plan. KTRS administers retirement and disabilityannuities, and death and survivor benefits to employees and beneficiaries of employees of the public schoolsystems and other public educational agencies in Kentucky. KTRS requires that members of KTRS occupy aposition requiring either a four (4) year college degree or certification by Kentucky Department of Education(KDE). Job classifications that permit experience to substitute for either of these requirements do notparticipate in KTRS.

KTRS was created by the 1938 General Assembly and is governed by Chapter 161 Section 220 throughChapter 161 Section 990 of the Kentucky Revised Statues (KRS). KTRS issues a publicly available financialreport that includes financial statements and required supplementary information for the defined benefitpension plan. That report can be obtained by writing to Kentucky Teachers' Retirement System, 479 VersaillesRoad, Frankfort, Ky 40601 or from the KTRS web site at httD://www.ktrs.kv.aov/.

Funding Policy - Contribution rates are established by KRS. Members are required to contribute 12.855% oftheir salaries to KTRS. The Commonwealth of Kentucky is required to contribute 13.105% of salaries formembers in a state retirement system before July 1, 2008 and 14.105% of salaries for members who startedtheir account after June 30, 2008. The federal program for any salaries paid by that program pays thematching contributions. The local school districts pay employer matching on all employees who do not occupyfederally funded positions. As part of the Shared Responsibility Plan, beginning July 1, 2010 each employer isrequired to pay the amount equal to the increase in employee contributions. Effective July 1, 2015, the currentemployer match is 3.00% of total gross non-federal salaries in the district and for individuals employed infederally funded positions the employer-matching rate is 16.105%.

Medical Insurance Plan

Plan description - In addition to the pension benefits described above, Kentucky Revised Statue 161.675requires KTRS to provide access to post-employment healthcare benefits to eligible members and dependents.The KTRS Medical Insurance benefit is a cost-sharing multiple employer defined benefit plan. Changes madeto the medical plan may be made by the KTRS Board of Trustees, the Kentucky Department of EmployeeInsurance and the General Assembly.

To be eligible for medical benefits, the member must have retired either for service or disability. The KTRSMedical Insurance Fund offers coverage to members under the age of 65 through the Kentucky EmployeesHealth Plan administered by the Kentucky Department of Employee Insurance. Once retired members andeligible spouses attain age 65 and are Medicare eligible, coverage is obtained through the KTRS MedicareEligible Health Plan.

Funding policy - In order to fund the post-employment healthcare benefit, active member contributions arematched by the state at .75% of members' gross salaries. Also, the premiums collected from retirees asdescribed in the plan description and Investment interest help meet the medical expenses of the plan.Additionally, under the Shared Responsibility Plan, the local school district employers pay 3.00% of members'salary for the 2018-2019 fiscal year.

The Lawrence County School District's total payroll for the year was $15,571,461. The payroll for employeescovered under KTRS was $10,979,086. For the year ended June 30. 2019, the Commonwealth contributed$1,878,206 to KTRS for the benefit of participating employees. The School District's contributions to KTRS forthe year ending June 30,2019 was $467,589, which represents those employees covered by federal programs.

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NOTE J - PENSION PLANS - CONTINUED

COUNTY EMPLOYEES' RETIREMENT SYSTEM

Plan Description

Classified employees (substantially all full-time Board employees other than certified employees) are covered bythe County Employees* Retirement System (CERS), a cost-sharing, multiple-employer defined benefit pensionplan administered by the Kentucky Retirement System. CERS provides for retirement, disability, and deathbenefits to plan members and beneficiaries. Cost of living adjustments are provided at the discretion of the Statelegislature. Under the provisions of the Kentucky Revised Statue Section 61.645, the Board of Trustees ofKentucky Retirement System administers CERS and has the authority to establish and amend benefit provisions.The County Employees' Retirement System issues a publicly available financial report that includes financialstatements and required supplementary information. That report may be obtained by writing to KentuckyRetirement Systems, Perimeter Park West, 1260 Louisville Road, Frankfort, Kentucky 40601.

Benefits Provided

The following is a description of the plan and its benefits and is provided for general information purposes only.Participants should refer to the appropriate statutes for more complete information.

Retirement Benefit

CERS is designed to provide three types of benefits: a monthly retirement benefit for life based on theemployee's salary and service (the pension benefit), health insurance benefits after retirement, anddisability/death benefits.

Monthly retirement benefits are based on a formula established by statute which is (final compensation xbenefit factor x years of service credit). Participants hired before 8/1/04 have their monthly benefitcalculated at the average of highest five years salary which must contain at least 48 months of serviceand includes lump-sum payments for compensatory time times 2.2% benefit factor times years of servicecredit. Participants hired after 8/1/04 but before 9/1/08 have a reduced benefit factor of 2.0%.

Participants hired after 9/1/08 have their monthly benefit calculated at the average of the five completefiscal years immediately preceding retirement which must contain 60 months of service and does notinclude lump-sum payments for compensatory time. The benefit factor is 1.10% for 10 years or less ofservice, 1.30% for more than 10 years but no more than 20 years, 1.50% for greater than 20 years but nomore than 26 years, 1.75% for greater than 26 years but no more than 30 years, and 2.00% for greaterthan 30 years.

At retirement, a retiree may choose to take a reduced monthly benefit in order to provide a monthlybenefit to a beneficiary upon their death, either for a period certain or for the life of the beneficiary. Thesystem also provides for a statutory 1.5% annual increase to monthly benefits after retirement, oftenreferred to as the cost of living adjustment (COLA).

Medical Insurance

CERS also provides access to group rates on medical insurance for retired members, their spouse, anddependents. Coverage for retirees not eligible for Medicare is provided through the Kentucky EmployeesHealth Plan the same health plan provided to state employees. Coverage for Medicare eligible retirees isMedicare for delivery of health benefits.

As provided by state statute, CERS also subsidizes medical coverage for the retiree. In general,employees participating prior to 7/1/03 receive a percentage of the premium paid based upon servicecredit, while employees who begin participating after that date receive a set dollar amount for each year ofservice credit.

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Disability and Death Benefits

Like most defined benefit plans, CERS provides benefits for those employees who become disabled orwho die prior to retirement. Participants have to have a minimum of 5 years of service to apply fordisability benefits and approval determined by systems under criteria established by state statute. CERSalso provides death before retirement and special death in the line of duty benefits. After retirement, thebenefits left to the retiree's beneficiary vary based upon the payment option selected at retirement. Inaddition, CERS provides a $5,000 lump sum death benefit for members who retire with at least 4 years ofservice.

Contributions

Plan members are required to contribute 5.00% of their annual salary if hired before September 1, 2008 and 6% ifhired on or after September 1, 2008 through payroll deductions and the Board is required to contribute at anactuarially determined rate. The current rate is 16.22% of the employee's total covered compensation, actuarialiydetermined as an amount that, when combined with employee contributions, is expected to finance the costs ofbenefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability.The District's contributions to CERS for the year ended June 30,2019 was $672,017, which consisted of $503,742from the District and $168,275 from the employees.

Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred inflows ofResources Related to Pensions

KTRS portion of GASB 68 changes will be reported by the State only and the District will not reflect any of thosechanges in their report but the District will fully comply with all changes of GASB 68 conceming CERS anddisclose those changes within the report.

At June 30, 2019, the District reported a liability of $7,668,912 for its proportionate share of the net pensionliability. The net pension liability was measured as of June 30, 2018, and the total pension liability used tocalculate the net pension liability was determined by an actuarial valuation as of that date. The District'sproportion of the net pension liability was based on a projection of the District's long-term share of contributions tothe pension plan relative to the projected contributions of all participating employers, actuarially determined. AtJune 30, 2018, the District's proportion was 0.125920%, which was an increase of 0.000695% from its proportionmeasured as of June 30.2017.

For the year ended June 30, 2019, the District recognized pension expense of $1,245,578. At June 30, 2019, theDistrict reported deferred outflows of resources and deferred inflows of resources related to pensions from thefollowing sources;

Deferred Outflows Deferred inflows

of Resources of Resources

Differences between expected and actualexperience $ 250,138 $ 112,257

Changes of assumptions 749,476

Net difference between projected and actualinvestment eamings on pension plan investments 356,610 448,565

Changes in proportion and differencesbetween employer contributions andproportionate share of contributions 81,613 10,530

District contributions subsequent to themeasurement date 503,742 1—

Total S 1.941.579 ^ .571352

-37-





$503,742 reported as deferred outflows of resources related to pensions resulting from District contributionssubsequent to the measurement date will be recognized as a reduction of the net pension liability in the yearended June 30, 2020. Other amounts reported as deferred outflows of resources and deferred inflows ofresources related to pensions will be recognized in pension expense as follows;

Year ended June 30:

2020

2021

2022

2023

2024

Thereafter

655,270

336,786

(84,409)

(41,161)

$ 866.486

Actuarial Methods and Assumptions

A summary of the actuarial methods and assumptions used in determining the total pension liability as of June 30,2018 are as follows:

Valuation Date

Experience StudyActuarial Cost Method

Amortization Method

Remaining Amortization PeriodAsset Valuation Method

Inflation

Salary IncreaseInvestment Rate of Return

June 30, 2016July 1,2008-June 30, 2013Entry Age NormalLevel percentage of payroll27 years, closed20®^ of the difference between the market value of assets and theexpected actuarial value of assets is recognized.3.25«/o

4.0®/o, average7.5®/o

The mortality table used for active members is RP-2000 Combined Mortality Table projected with Scale 88 to2013 (multiplied by 50®/o for males and 30®/o for females). For healthy retired members and beneficiaries, themortality table used is the RP-2000 Combined Mortality Table projected with Scale 88 to 2013 (set back 1 year forfemales). For disabled members, the RP-2000 Combined Disabled Mortality Table projected with Scale 88 to2013 (set back 4 years for males) is used for the period after disability retirement.

Projected future benefits for all current plan members were projected through 2017.

The long-term expected rate of retum was determined by using a building-block method in which best-estimateranges of expected future real rate of returns are developed for each asset class. The ranges are combined byweighting the expected future real rate of retum by the target asset allocation percentage. The target allocationand best estimates of arithmetic real rate of return for each major asset class are summarized in the followingtable:

Asset Class

US Large Cap EquityUS Mid Cap

Target Allocation

5.00®/o

6.00®/o

Long-Term ExpectedReal Rate of Return

4.50®/o

4.50®/o

-38-





Long-Term ExpectedAsset Class Taraet Allocation Real Rate of R<

US Small Cap 6.50% 5.50%

Intemational Developed Equity 12.50% 6.50%

Emerging Markets Equity 5.00% 7.25%

Global Bonds 4.00% 3.00%

Global IG Credit 2.00% 3.75%

High Yield 7.00% 5.50%

EMD 5.00% 6.00%

Illiquid Private 10.00% 8.50%

Private Equity 10.00% 6.50%

Real Estate 5.00% 9.00%

Absolute Return 10.00% 5.00%

Real Return 10.00% 7.00%

Cash 2.00% 1.50%

Total 100.00% 6.09%

Discount Rate

The projection of cash flows used to determine the discount rate of 6.25% for CERS Non-hazardous assumed thatlocal employers would contribute the actuarially determined contribution rate of projected compensation over theremaining 25 years (closed) amortization period of the unfunded actuarial accrued liability. The discount ratedetermination does not use a municipal bond rate.

Sensitivity of the Empioyer's Proportionate Share of the Net Pension Liability to Changes in the DiscountRate

The following presents the District's proportionate share of the Net Pension Liability using the discount rate of6.25%, as well as what the District's proportionate share of the Net Pension Liability would be if it were calculatedusing a discount rate that is one percentage-point lower (5.25%) or one percentage-point higher (7.25%) than thecurrent rate:

1.0% Decrease Current Discount 1.0% IncreaseiS.2S%) Rate f6.25%> (7.25%)

District's

proportionate share ofthe net pension liability $9,654,366 $7,668,912 $6,005,449

Pension Plan Fiduciary Net Position

Detailed information about the pension plan's fiduciary net position is available in the separately Issued KRS 2018Comprehensive Annual Financial Report at kyret.ky.gov.

Payable to the Pension Plan

At June 30 2019, the District reported a payable of $97,882 for the outstanding amount of contributions to thepension plan required for the year ended June 30, 2019. The payable includes both the pension and insurancecontribution allocation.

-39-




NOTEK-OPEB PLAN

General Information about the OPEB plan

Plan Description and Benefits Provided

The Lawrence County School District participates in the County Employees Retirement System (CERS) InsuranceFund, a multiple-employer defined benefit Other Post-Employment Benefits (OPEB) plan for members that cover allregular full-time members employed by the District. The plan provides for health insurance benefits to plan members.OPEB may be extended to beneficiaries of plan members under certain circumstances.

Contributions

The District's contractually required contribution rate for the year ended June 30, 2019, was 5.26 percent of coveredpayroll. Contributions to the OPEB plan from the District were $199,424 for the year ended June 30,2019.

OPEB Liabilities, OPEB Expense, and Deferred Outflows of Resources and Deferred Inflows of ResourcesRelated to OPEB

At June 30,2019, the District reported a liability of $2,235,596 for its proportionate share of the net OPEB liability. Thenet OPEB liability was measured as of June 30, 2018, and the total OPEB liability used to calculate the net OPEBliability was determined by an actuarial valuation as of that date. The District's proportion of the net OPEB liability wasdetermined by an actuarial valuation as of that date. The District's proportion of the net OPEB liability was based onthe District's share of covered payroll in the OPEB plan relative to the covered payroll of all participating OPEBemployers. At June 30, 2018, the District's proportion was 0.125915%, which was an increase of 0.000690% from itsproportion measured as of June 30,2017.

For the year ended June 30,2019, the District recognized OPEB expense of $284,312. At June 30, 2019, the Districtreported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources:

Deferred Outflows of Deferred Inflows of

Resources Resources

Differences between expectedAnd actual experience $ - $ 260,529

Changes of assumptions 446,482 5,165

Net difference between

projected and actual eamingsOn OPEB plan investments - 153,989

Changes in proportion anddifferences between District

contributions and proportionateshare of contributions 1,107 4,735

District contributions subsequentto the measurement date 199.424

Total $ 647.013 $ 424.418

-40-




NOTE K - OPEB PLAN - CONTINUED

$199,424 reported as deferred outflows of resources related to OPEB resulting from District contributionssubsequent to the measurement date will be recognized as a reduction of the net OPEB liability in the year endedJune 30, 2020.

Other amounts reported as deferred outflows of resources and deferred inflows of resources related to OPEBs willbe recognized in OPEB expense as follows;

Year ended June 30:

2020 $ 7,0592021 7,0592022 7,0592023 36,9662024 (20,320)Thereafter M4.6541

$23.169

Actuarial Methods and Assumptions

A summary of the actuarial methods and assumptions used in determining the total OPEB liability as of June 30,2018 are as follows:

Inflation 2.30%

Payroll Growth Rate 2.0% for CERS non-hazardousSalary Increase 3.05%, averageInvestment Rate of Return 6.25%

Healthcare Trend Rates

Pre - 65 Initial trend starting at 7.00% at January 1, 2020, and graduallydecreasing to an ultimate trend rate of 4.05% over a period of 12 years.

Post - 65 Initial trend starting at 5.00% at January 1, 2020, and graduallydecreasing to an ultimate trend rate of 4.05% over a period of 10 years.

The mortality table used for active members is RP-2000 Combined Mortality Table projected with Scale BB to2013 (multiplied by 50% for males and 30% for females). For healthy retired members and beneficiaries, themortality table used is the RP-2000 Combined Mortality Table projected with Scale BB to 2013 (set-back for oneyear for females). For disabled members, the RP-2000 Combined Disabled Mortality Table projected with ScaleBB to 2013 (set back four years for males) is used for the period after disability retirement.

The long-term expected rate of return was determined by using a building-block method in which best-estimateranges of expected future real rate of retums are developed for each asset class. The ranges are combined byweighting the expected future real rate of return by the target asset allocation percentage. The target ailocationand best estimates of arithmetic real rate of retum for each major asset class are summarized in the followingtable:

Long-Term ExpectedAsset Class Target Allocation Real Rate of Return

US Large Cap Equity 5.00% 4.50%US Mid Cap 6.00% 4.50%US Small Cap 6.50% 5.50%International Developed Equity 12.50% 6.50%Emerging Markets Equity 5.00% 7.25%

-41-





Long-Term ExpectedAsset Class Target Allocation Real Rate of Return

Global Bonds 4.00% 3.00%

Global IG Credit 2.00% 3.75%

High Yield 7.00% 5.50%

EMD 5.00% 6.00%

Illiquid Private 10.00% 8.50%

Private Equity 10.00% 6.50%Real Estate 5.00% 9.00%

Absolute Return 10.00% 5.00%

Real Return 10.00% 7.00%

Cash 2.00% 1.50%

Total 100.00% 6.09%

Sensitivity of the Empioyer's Proportionate Share of the Net OPEB Liabiiity to Changes in Uie HeaithcareCost Trend

Current Healthcare Cost

1.0% Decrease Trend Rate 1.0% IncreaseDistrict's

proportionate share ofthe net OPEB liability $1,664,423 $2,235,596 $2,908,844

Discount Rate

The projection of cash flows used to determine the discount rate of 5.85% for CERS Non-hazardous assumed thatlocal employers would contribute the actuarially determined contribution rate of projected compensation over theremaining 25 years (closed) amortization period of the unfunded actuarial accrued liability. The discount ratedetermination used an expected rate of retum of 6.25%, and a municipal bond rate of 3.62%, as reported inFidelity Index's "20 - Year Municipal GO AA Index" as of June 30, 2018. However, the cost associated with theimplicit employer subsidy was not included in the calculation of the System's actuarial determined contributions,and any cost associated with the implicit subsidy will not be paid out of the System's trusts. Therefore, themunicipal bond rate was applied to future expected benefit payments associated with the implicit subsidy.

Sensitivity of the Employer's Proportionate Share of the Net OPEB Liabiiity to Changes in the DiscountRate

The following presents the District's proportionate share of the Net OPEB Liability using the discount rate of5.85%, as well as what the District's proportionate share of the Net OPEB Liability would be if it were calculatedusing a discount rate that is one percentage-point lower (4.85%) or one percentage-point higher (6.85%) than thecurrent rate:

1.0% Decrease Current Discount 1.0% Increase(A.BS%) Rate (5.85%i (6.85%)

District's

proportionate share ofthe net OPEB liability $2,903,681 $2,235,596 $1,666,510

-42-





OPEB Plan Fiduciary Net Position

Detailed Information about the OPEB plan's fiduciary net position Is available In the separately Issued KRS 2018Comprehensive Annual Financial Report at kyret.ky.gov

NOTE L - CONTINGENCIES

The District receives funding from federal, state and local government agencies and private contributions. These fundsare to be used for designated purposes only. For govemment agency grants. If based upon the grantor's review, thefunds are considered not to have been used for the Intended purpose, the grantors may request a refund of moniesadvanced, or refuse to reimburse the District for Its disbursements. The amount of such future refunds andunrelmbursed disbursements. If any, Is not expected to be significant. Continuation of the District's grant programs Ispredicated upon the grantors' satisfaction that the funds provided are being spent as Intended and the grantors' Intentto continue their programs.

NOTE M-LITIGATION

The District Is subject to various other legal actions In various stages of litigation, the outcome of which Is notdetermlnable at this time. Management of the District and Its legal counsel do not anticipate that there will be anymaterial effect on the combined financial statements as a result of the cases presently In progress, except asdescribed elsewhere In this report.

NOTE N - INSURANCE AND RELATED ACTIVITIES

The District Is exposed to various forms of loss of assets associated wnth the risks of fire, personal liability, theft,vehicular accidents, errors and omissions, fiduciary responsibility, etc. Each of these risk areas Is covered through thepurchase of commercial Insurance. The District has purchased certain policies which are retrospectively rated whichIncludes Workers' Compensation Insurance.

NOTE O - RISK MANAGEMENT

The District Is exposed to various risks of loss of torts; theft of, damage to, and destruction of assets; errors andomissions; Injuries to employees; and natural disasters. To obtain Insurance for workers' compensation, errors andomissions, and general liability coverage, the District participates In the Kentucky School Boards' Insurance TrustLiability Insurance Fund. These public entity risk pools operate as common risk management and Insurance programsfor all school districts and other tax supported educational agencies of Kentucky who are members of the KentuckySchool Boards Association. The District pays an annual premium to each fund for coverage. Contributions to theWorkers' Compensation Fund are based on premium rates established by such fund In conjunction with the excessInsurance carrier, subject to claims experience modifications and a group discount amount. Dividends may bedeclared, but are not payable until twenty-four (24) months after the expiration of the self-Insurance term. The LiabilityInsurance Fund pays Insurance premiums of the partldpating members established by the Insurance cam'er. TheTrust can terminate coverage If It Is unable to obtain acceptable excess general liability coverage and for any reasonby giving ninety (90) days notice. In the event the Trust terminated coverage, any amount remaining In the Fund (afterpayment of operational and administrative costs and claims for which coverage was provided) would be returned to themember on a pro rata basis.

The District purchases unemployment Insurance through the Kentucky School Boards Insurance Trust UnemploymentCompensation Fund; however, risk has not been transferred to such fund. In addition, the District continues to carrycommercial Insurance for all other risks of loss. Settled claims resulting from these risks have not exceededcommercial Insurance coverage In any of the past three fiscal years.

-43-




NOTE P - DEFICIT OPERATING BALANCES

The Business-Type Activities (Proprietary Fund) had a deficit net position of $289,960 during the current year due tothe recording of GASB 68 pensions and GASB 75 OPEB. There are no funds of the District that currently have adeficit fund balance. However, the following fund had operations that resulted in a current year deficit of revenues overexpenditures resulting in a corresponding reduction of fund balance;

District Activity $ 7,849

NOTE Q-COBRA

Under COBRA, employers are mandated to notify terminated employees of available continuing insurance coverage.Failure to comply with this requirement may put the school district at nsk for a substantial loss contingency.

NOTE R - TRANSFER OF FUNDS

The following transfers were made during the yean

Type

OperatingOperatingOperatingOperatingOperating

From Fund To Fund Puraose Amount

General Debt Service Debt Service $ 42,406

General Special Revenue Technology $ 46,683

Capital Outlay Debt Service Debt Service $ 153,231

FSPK Debt Service Debt Service $ 926,972

Food Sen/ice General Cost Recovery $ 88,328

NOTE S - INTERFUND RECEIVABLES AND PAYABLES

There were no interfund receivables or payables at June 30,2019.

NOTE T - SUBSEQUENT EVENTS

Management has evaluated subsequent events through October 21, 2019, the date on which the financialstatements were available to be issued.

REQUIRED SUPPLEMENTARY INFORMATION


SCHEDULE OF REVENUES. EXPENDITURES, AND CHANGES IN FUND BALANCE -BUDGET AND ACTUAL

GENERAL FUND


Budgeted Amounts

Original Final

Revenues:

From local sources

Taxes

Actual

(GAAR Basis)

Variance

with Final

BudgetFavorable

(Unfavorable)

Property $ 3,985,482 $ 3,985,482 $ 4,755,058 $ 769,576

Motor vehicle 335,545 335,545 393,845 58,300

Utilities 400,000 400,000 394,357 (5.643)

Tuition and fees 5,000 5,000 - (5,000)

Earnings on investments 3,500 3,500 63,507 60,007

Other local revenues 17,500 17,500 295,505 278,005

Intergovemmental - state 14,044,443 14,566,077 16,864,550 2,298,473

Intergovernmental - indirect federal 75,000 75,000 140,204 65,204

Total revenues 18,866,470 19,388,104 22,907,026 3,518,922

Expenditures:Instruction 11,238,960 11,418,014 13,565,348 (2,147,334)

Support services:Student 934,661 827,995 697,679 130,316

Instructional staff 781,967 787,502 773,001 14,501

District administrative 555,668 555,668 489,750 65,918

School administrative 855,948 898,446 1,158,686 (260,240)

Business 404,174 404,174 360,617 43,557

Plant operation and maintenance 3,487,067 3,598,157 2,960,672 637,485

Student transportation 2,411,669 2,418,382 2,042,576 375,806

Central office - - - -

Community service activities - - - -

Other 1,406,752 1,690,163 67,050 1,623,113

Total expenditures 22,076,866 22,598,501 22,115,379 483,122

Excess (deficit) of revenues over expenditures (3,210,396) (3,210,397) 791,647 4,002,044

Other Financing Sources (Uses):Proceeds from sale of fixed assets - - - -

Operating transfers in - - 88,328 88,328

Operating transfers out (52,550) (52,550) (89,089) (36,539)

Total other financing sources (uses) (52,550) (52,550) (761) 51,789

Net change in fund balance (3,262,946) (3,262,947) 790,886 4,053,833

Fund balance, July 1,2018 3,262,946 3,262,947 2,098,680 (1,164,267)

Fund balance, June 30, 2019 $ $ $ 2,889,566 $ 2,889,566



SCHEDULE OF REVENUES. EXPENDITURES AND CHANGES IN FUND BALANCE -BUDGET AND ACTUAL

SPECIAL REVENUE FUND


Revenues:

Earnings on InvestmentsOther local revenues

State aid

Federal aid

Total revenues

Expenditures:Current:

Instruction

Support Services:Student

Instructional staff

District administration

School administration

Business

Plant operations and maintenanceStudent transportationCentral office

Community services activitiesOther

Total expenditures

Excess (deficit) of revenues over expenditures

Other Financing Sources (Uses):Transfers in

Transfers out

Total other financing sources (uses)

Net change in fund balance

Fund balance July 1, 2018

Fund balance June 30, 2019

Variances

with Final

BudgetBudoeted Amounts Actual Favorable

Original Final (GAAP Basis)(Unfavorable)

$ $ $ $

69,669 83,380 69,563 (13,817)1,177,957 1,309,860 1,262,413 (47,447)

2,128,378 2,204,926 1,932,328 (272,598)

3.376,004 3,598,166 3,264,304 (333,862)

2,516,560 2,743,914 2,549,935 193,979

87,964 11,453 15,956 (4.503)

567,377 627,820 478,255 149,565

256,652 262,312 266,841 (4.529)

3,428,553 3,645,499 3,310,987 334,512

(52,549) (47,333) (46,683) 650

52,549 46,683 46,683 -

52,549 46,683 46,683

- (650) - 650

$ $ (650) $ $ 650


-46-


SCHEDULE OF THE DISTRICrS PROPORTIONATE SHARE OF

THE NET PENSION LIABILITY (CERS)

JUNE 30, 2019

District's proportion of the net pension liability (asset)

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

District's covered-employee payroll

District's proportionate share of the net pension liability (asset)as a percentage of its covered-employee payroll

Plan fiduciary net position as a percentage of the totalpension liability

6/30/2015

0.125270%

$ 4,064,000

$ 2,973,282

136.68%

66.80%

6/30/2016

0.124539%

$ 5,354,598

6/30/2017

0.122230%

$ 6,018,121

6/30/2018 6/30/2019

0.125225% 0.125920%

$ 7,329,804 $ 7,668,912

$ 2,985,152 $ 3,082,813 $ 3,168,685 $ 3,105,685

179.37%

60.00%

195.22%

55.50%

231.32%

53.30%

246.93%

53.54%

Schedule is intended to show information for 10 years. Additional years will be displayed as they becomeavailable.

The amounts presented have a measurement date of the previous fiscal year end.

-47-


SCHEDULE OF DISTRICT CONTRIBUTIONS (CERS)

JUNE 30, 2019

Contractually required contribution

Contributions in relation to the contractually requiredcontribution

Contribution deficiency (excess)

6/30/2015 6/30/2016 6/30/2017 6/30/2018

379,093

6/30/2019

$ 379,093 $ 370,756 $ 430,052 $ 458,826 $ 503,742

370.756 $ 430,052 $ 458.826 $ 503,742


Contributions as a percentage of covered-employee payroll

$ 2,973,282 $ 2,985,152 $ 3,082,813 $ 3,168,685 $ 3,105,685

12.75% 12.72% 13.95% 14.48% 16.22%


-48-


NOTES TO REQUIRED SUPPLEMENTARY INFORMATION (CERS)


NOTE A - CHANGES OF BENEFIT TERMS

During the 2018 legislative session, House Bill 185 was enacted, which updated the benefit provisions foractive members who die in the line of duty. Benefits paid to the spouses of deceased members have beenincreased from 25% of the member's final rate of pay to 75% of the member's average pay. If the memberdoes not have a surviving spouse, benefits paid to surviving dependent children have been increased from10% of the member's final pay rate to 50% of average pay for one child, 65% of average pay for two children,or 75% of average pay for three children. The Total Pension Liability as of June 30. 2018 is determined usingthese updated benefit provisions.

NOTE B - CHANGES OF ASSUMPTIONS

There have been no changes in actuarial assumptions since June 30, 2017. The total pension liability, netpension liability, and sensitivity information as of June 30, 2018 were based on an actuarial valuation date ofJune 30, 2017. The total pension liability was rolled-fonward from the valuation date (June 30, 2017) to theplan's fiscal year ending June 30, 2018, using generally accepted actuarial principles.

Actuarial Methods and Assumptions used to determine the Actuarial Determined Contribution for theFiscal Year 2018

The following actuarial methods and assumptions were used to determine the actuarially determinedcontributions effective for fiscal year ending June 30, 2018:

Valuation Date


Amortization Method

Remaining Amortization PeriodPayroll Growth RateAsset Valuation Method

Inflation

Salary IncreaseInvestment Rate of Retum

June 30, 2016July 1,2008-June 30, 2013Entry Age NormalLevel percentage of pay27 years, closed4.00%

20% of the difference between the market value of assets and theexpected actuarial value of assets is recognized3.25%

4.0%, average7.50®yi for CERS non-hazardous

-49-


SCHEDULE OF THE DISTRICT'S PROPORTIONATE SHARE OF

THE NET OPEB LIABILITY (CERS)JUNE 30, 2019

6/30/2018 6/30/2019

District's proportion of the net OPEB liability (asset)

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


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

Plan fiduciary net position as a percentage of the totalOPEB liability

0.125225%

$ 2,517,451

$ 3,168,685

79.45%

52.40%

0.125915%

$ 2,235,596

$ 3,105,685

71.98%

57.62%


-50-


SCHEDULE OF DISTRICT OPEB CONTRIBUTIONS (CERS)JUNE 30, 2019

Contractually required contribution

Contributions in relation to the contractually requiredcontribution

Contribution deficiency (excess)

6/30/2018 6/30/2019

$ 179,696 $ 199,424

179,696 199,424

$ $


Contributions as a percentage of covered-employee payroll

$ 3,168,685 $ 3,105,685

5.67% 6.42%


-51-


NOTES TO REQUIRED OPEB SUPPLEMENTARY INFORMATION (CERS)


NOTE A - CHANGES OF BENEFIT TERMS

During the 2018 legislative session, House Bill 185 was enacted, which updated the benefit provisions for activemembers who die in the line of duty. The system shall now pay 100% of the insurance premium for spouses andchildren of all active members who die in the line of duty. The total OPEB liability as of June 30, 2018, isdetermined using these updated benefit provisions.

NOTE B - CHANGES OF ASSUMPTIONS

The total OPEB liability, net OPEB liability, and sensitivity information as of June 30, 2018, were based on anactuarial valuation date of June 30, 2017. The total OPEB liability was rolled-fonward from the valuation date(June 30, 2017) to the plan's fiscal year ending June 30, 2018, using generally accepted actuarial principles.There have been no changes in actuarial assumptions since June 30, 2017 (other than the blended discount rateused to calculate the total OPEB liability).

Actuarial Methods and Assumptions used to determine the Actuarial Determined Contribution for theFiscal Year 2018

The following actuarial methods and assumptions, for actuarially determined contributions effective for fiscal yearending June 30, 2018:

Valuation Date


Amortization Method

Remaining Amortization PeriodPayroll Growth RateAsset Valuation Method

Inflation

Salary IncreaseInvestment Rate of Retum

Healthcare Trend Rates

Pre-65

Post - 65

June 30, 2016July 1,2008-June 30, 2013Entry Age NormalLevel percentage of pay27 years, closed4.00%

20% of the difference between the market value of assets and the

expected actuarial value of assets is recognized3.25%

4.0%, average7.50%

Initial trend starting at 7.50% and gradually decreasing to anultimate trend rate of 5.00% over a period of 5 years.Initial trend starting at 5.50% and gradually decreasing to anultimate trend rate of 5.00% over a period of 2 years

-52-

COMBINING STATEMENTS - NONMAJOR FUNDS


COMBINING BALANCE SHEET - NONMAJOR GOVERNMENTAL FUNDS

June 30,2019

District

ActivityFund

FSPK

Fund

Seek

CapitalOutlayFund

Constuctlon

Fund

Debt

Service

Fund

Total

NonmajorGovernmental

Funds

Assets and Resources:

Cash and cash equivalentsAccounts receivables

$ 8,315 $ 83,370 $138,930 $263,755 $ 2,400 $ 496,770

Total assets and resources $ 8,315 $ 83,370 $138,930 $263,755 $ 2,400 $ 498,770


Liabilities

Accounts payable

Total liabilities

$ - $ - $ $ $ $

- - - - - -

Fund Balances:

Restricted For:

Future Construction

SFCC escrow

Debt service

District activity

Total fund balances

8,315

83,370 138,930

263,755

2,400

263,755

222,3002,400

8,315

8,315 83,370 138,930 263,755 2,400 496,770

Total liabilities and fund balances $ 8,315 $ 83,370 $138,930 $263,755 $ 2,400 $ 496,770



COMBINING STATEMENT OF REVENUES. EXPENDITURES. AND CHANGES IN FUND BALANCES - NONMAJOR GOVERNMENTAL FUNDS

For the year ended June 30. 2019

Revenues:

From local sources

Taxes:

UtilityEarnings on InvestmentsOther local revenues

Intergovemmental - stateIntergovemmental - indirect federal

Total revenues

Expenditures:Instruction

Support services:Student

Instructional staff

Direct administrative


Business

Plant operation and maintenanceStudent transportationCentral office

Facilities and construction

Community service activitiesOther

Total expenditures

Excess (deficit) of revenues over expenditures

Other Financing Sources (Uses):Bond proceedsOperating transfers inOperating transfers out

Total other financing sources (uses)


Fund balance, July 1,2018

Fund balance, June 3D, 2019

District

ActivityFund

FSPK

Fund

SEEK

CapitalOutlayFund

Construction

Fund

Debt

Service

Fund

18.250

18.250

26.099

488,854

521.148

1.010.002

222.295

222,295

506,848

187,600

694,448

Total

NonmajorGovernmental

Funds

$ 488,854

18,250

1,250,291187,600

1,944,995

26,099

- - - - 1,817,057 1,817,057

26,099 . - - 1,817,057 1,843,156

(7.849) 1,010,002 222,295 -(1,122,609) 101,839

•

(926,972) (153,231)

- 1,122,609 1,122,609(1,080,203)

(926,972) (153,231) . 1,122,609 42,406

(7,849) 83,030 69,064 - - 144,245

16,164 340 69,866 263,755 2,400 352,525

$ 8,315 $ 83,370 $ 138,930 $ 263,755 $ 2,400 $ 496,770


-54-

OTHER COMBINING STATEMENTS AND SCHOOL ACTIVITY FUNDS


COMBINING STATEMENT OF FIDUCIARY NET POSITION

SCHOOL ACTIVITY FUNDS (AGENCY FUND)


Assets:

Cash

Accounts receivable

Total assets


Accounts payableDue to student groups

Total liabilities

Lawrence

CountyHigh

Louisa

Middle

School

Louisa

Elementary

East

Louisa

ElementaryWest

Blaine FallsburgTotals

$ 68,028 $ 57,613 $ 33,269 $ 27,849 $ 20,972 $ 6,891 $ 214,622- - 100 1,500 - 295 1,895

$ 68,028 $ 57,613 $ 33,369 $ 29,349 $ 20,972 $ 7,186 $ 216,517

$ 142 $ 250 $ $ 893 $ $ 1,375 $ 2,660

67,886 57,363 33,369 28,456 20,972 5,811 213,857

$ 68,028 $ 57,613 $ 33,369 $ 29,349 $ 20,972 $ 7,186 $ 216,517


-55-


COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES DUE STUDENT GROUPS

SCHOOL ACTIVITY FUNDS (AGENCY FUND)


Lawrence

CountyHigh

School

Louisa

Middle

School

Louisa

ElementaryEast

Louisa

ElementaryWest

Blaine

Elementary

FallsburgElementary Totals

Revenues:

School activities and projects fundsAthletic fund

$ 125,006

144,411

$ 121,028

27,595

$ 118,400 $ 19,651 $ 38,783

2,590

$ 54,987

2,492$ 477,855

177,088

Total revenues 269,417 148,623 118,400 19,651 41,373 57,479 654,943

Expenditures:School activities and projects fundsAthletic fund

126,762

132,214

119,472

27,762

116,856 16,415 35,471

2,236

58,313

2,245

473,289

164,457

Total expenditures 258,976 147,234 116,856 16,415 37,707 60,558 637,746

Excess (deficiency) of revenuesover expenditures 10,441 1,389 1,544 3,236 3,666 (3,079) 17,197

Due Student Groups, July 1, 2018 57,445 55,974 31,825 25,220 17,306 8,890 196,660

Due Student Groups, June 30, 2019 $ 67,886 $ 57,363 $ 33,369 $ 28,456 $ 20,972 $ 5,811 $ 213,857


-66-


STATEMENT OF RECEIPTS. DISBURSEMENTS DUE STUDENT GROUPS

SCHOOL ACTIVITY FUNDS - LAWRENCE COUNTY HIGH SCHOOL (AGENCY FUND)


Cash

Balances

Name of Activity: July 1, 2018 Receipts Disbursements

Cash

Balances

June 30, 2019

Accounts

Receivable

June 30, 2019

Accounts

PayableJune 30, 2019

Fund

Balances

June 30, 2019

Academic Team $ 99 $ 961 $ 799 $ 261 $ $ $ 261

Art 867 998 309 1,556 - - 1,556

Athletics 29,887 144,593 135,535 38,945 - - 38,945

Band 5,897 13,896 16,079 3,714 - - 3,714

Bass Fishing Club 1 3,000 2,701 300 - - 300

Beta Club 135 635 575 195 - - 195

Bio Med Club 2,354 4,231 4,760 1,825 - - 1,825

Boys Basketball 504 - 504 - - - -

Carpentry 95 - - 95 - - 95

Class of 2019 2,370 12,040 14,410 - - - -

Class of 2020 1 12,988 12,600 389 - - 389

Class of 2021 276 180 220 236 - - 236

Class of 2022 - 320 184 136 - - 136

Coke (Student) 2,725 1,640 232 4,133 - -4,133

Coke (Teacher) 253 966 931 288 - - 288

Culinary 18 - - 18 - - 18

Drama Club 640 - - 640 - - 640

EF Tours 134 - - 134 - -134

FCA 395 - 80 315 - - 315

FCCLA 381 700 661 420 - - 420

FFA 2,112 8,134 10,162 84 - - 84

HOSA 760 1,256 1,938 78 - - 78

Interact Club 170 194 185 179 - - 179

KYA 200 6,754 6,713 241 - - 241

L C Youth Bball 900 2,880 2,579 1,201 - - 1,201

Library 1,972 600 1,827 745 - - 745

Miscellaneous 2,814 9,185 5,849 6,150 - -6,150

Miscellaneous-Calculators 46 - 46 - - - -

Music 2,177 3,711 3,734 2,154 - - 2,154

Palooza - 1,450 1,247 203 - - 203

Pep Club - 3,217 2,506 711 - - 711

ROTC - 11,739 11,739 - - 142 (142)

Skills USA 425 - - 425 - - 425

Student Fees - 15,484 15,484 - - - -

Vending Machine 6 - 6 - - - -

World Language Club 39 155 155 39 - - 39

YClub 70 138 138 70 - - 70

YSC 28 1,100 930 198 - - 198

Yearbook 1,562 6,725 6,337 1,950 - - 1,950

Totals $ 60,313 $ 269,870 $ 262,155 $ 68,028 $ $ 142 $ 67,886


-57-


COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES

DEBT SERVICE FUNDS



Fund balance, July 1, 2018

Fund balance, June 30,2019

Issue

of

2008

Issue

of

2012

Issue

of 2012

Issue

of 2012

QZAB

Series

2012

Issue

of 2013

Issue

of

2014

Total

Debt

Service

Funds

2,400

$ 2,400 $

Revenues:

Earning on investments

Intergovernmental - stateIntergovernmental - federal

$

116,142

$

107,969

$

66,469

$ $

162,638

187,600

$ - $

53,630

- $

506,848

187,600

Total revenues 116,142 107,969 66,469 -350,238 53,630 - 694,448

Expenditures:

Current:

Bond paymentsBond interest

530,000

45,058

75,000

32,969

225,000

23,706

290,000

72,631

162,638

200,000

40,000

77,649

35,210

7,196

1,357,848

459,209

Total expenditures 575,058 107,969 248,706 362,631 362,638 117,649 42,406 1,817,057

Excess (deficit) of revenues over

expenditures (458,916) (182,237) (362,631) (12,400) (64,019) (42,406) (1,122,609)

Other Financing Sources (Uses):Bond proceeds

Operating transfers inNon operating transfers inNon operating transfers out

458,916

-

182,237 362,631 12,400 64,019 42,406 1,122,609

Total other financing sources(uses) 458,916 182,237 362,631 12,400 64,019 42,406 1,122,609

2,400

$ 2,400



SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS


FEDERAL GRANTOR/

PASS - THROUGH GRANTOR/

PROGRAM OR CLUSTER TITLE

U.S. DEPT. OF AGRICULTURE

Federal

CFDA

Number

Pass-

ThroughGrantor's

Number

Federal

Expenditures

CHILD NUTRITION CLUSTER

National School Lunch Program

Passed Through State Dept. of Agriculture:Food Donation (In-Kind Commodities)

School Breakfast Program

Fresh Fruit and Vegetable Program

TOTAL U.S. DEPT. OF AGRICULTURE

U.S. DEPT. OF DEFENSE

Passed Through State Dept. of Defense:Reserve Officer Training Corp

TOTAL U.S. DEPT. OF DEFENSE

U.S. DEPT. OF LABOR

Passed Through Kentucky Educational Development Cooperative:Youthbuild

TOTAL U.S. DEPT OF LABOR

U.S. DEPT. OF EDUCATION

Passed Through State Dept. of Education:

Title I - Grants to Local Educational Agencies

10.555

10.555

10.553

10.582

12.000

17.274

84.010

Rural Education

Supporting Effective Instruction - State Grant

84.358

84.367

7750002 18

7750002 19

1006

776000518

7760005 19

7720012 18

7720012 19

Proj 504C

Proj 566C

3100002 16

3100002 17

3100002 18

3140002 17

3140002 18

3230002 16

3230002 17

3230002 18

302,347

641,965

944,312

115,833

1,060,145

140,084

301,869441,953

1,502,098

11,370

29,829

41,199

1,543,297

62,045

62,045

65,000

65,000

4,140

233,769

697,385

935,294

5,627

31,480

37,107

461

29,334

72,683

102,478

Career and Technical Education - Basic Grants to States 84.048

Student Support and Academic Enrichment Program 84.424

3710002 16

3710002 17

3710002 18

340002 17

1,904

20,789

19,669

42,362

20,647

1,137,888

The accompanying notes are an integral part of this schedule.(Continued next page)

-59-


SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS - CONTINUED


FEDERAL GRANTOR/

PASS-THROUGH GRANTOR/

PROGRAM OR CLUSTER TITLE

Passed Through State Dept. of Vocational Rehab:Rehabilitation Sen/ices - Vocational Rehabilitation Grants to States

Federal

CFDA

Number

84.126

Through

Grantor's

Number

Proj 376C

Federal

Expenditures

34,427

SPECIAL EDUCATION CLUSTER flDEAl

Special Education - Grants to States

Special Education - Preschool Grants

TOTAL U.S. DEPT. OF EDUCATION

U.S. DEPT. OF HEALTH AND HUMAN SERVICES

Passed Through State Dept of Education:Cooperative Agreement to Promote Adolescent Health through SchoolBased HIV/STD Prevention and School - Based Surveillance

TOTAL U.S. DEPT OF HEALTH AND HUMAN SERVICES

TOTAL FEDERAL FINANCIAL ASSISTANCE

84.027

84.173

93.079

3810002 17

3810002 18

3800002 18

2100001 18

18,918

566,736

585,654

13,971

599,625

1,771,940

400

400

3,442,682

The accompanying notes are an integral part of this schedule.-60-


NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS


NOTE A - BASIS OF PRESENTATION

The accompanying schedule of expenditures of federal awards (the Schedule) includes the federal awardactivity of the Lawrence County School District under programs of the federal government for the year endedJune 30, 2019. The information in this Schedule is presented In accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principals, and AuditRequirements for Federal Awards (Uniform Guidance). Because the Schedule presents only a selected portionof the operations of the Lawrence County School District, it is not intended to and does not present the financialposition, changes in net position, or cash flows of the Lawrence County School District.

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Expenditures reported on the Schedule are reported on the accrual basis of accounting. Such expendituresare recognized following the cost principles contained in the Uniform Guidance, wherein certain types ofexpenditures are not allowable or are limited as to reimbursement. Lawrence County School District haselected not to use the 10-percent de minimis indirect cost rate allowed under the Uniform Guidance.

NOTE C - FOOD DISTRIBUTION

Nonmonetary assistance is reported in the schedule at the fair value of the commodities received anddisbursed. At June 30, 2019, the District had no food commodities in inventory.

NOTE D - TYPE A PROGRAMS

Type A programs for the Lawrence County School District is any program for which total expenditures offederal awards exceeded $750,000 for fiscal year 2019. The District had the following programs and clustersthat met the Type A program definition for fiscal year 2019:

CFDA# PROGRAM TITLE EXPENDITURES

Child Nutrition Cluster:

10.555 Food Donation (In-Kind Commodities) $ 115,83310.555 National School Lunch Program 944,31210.553 School Breakfast Program 441.953

1.502.098

84.010 Title I - Grants to Local Educational Agencies 935.294

Total Type A Programs $ 2.437.392

-61-

SCHEDULE OF FINDINGS AND QUESTIONED COSTS


Schedule of Findings and Questioned Costs


SECTION I - SUMMARY OF AUDITOR'S RESULTS

Financial Statements

Type of auditor's report issued unmodified:

Internal control over financial reporting:

• Material weakness(es) identified?• Significant deficiency(ies) identified?

Noncompllance material to financial statements noted?

Federal Awards

Intemal control over major programs:

• Material weakness(es) Identified?• Significant deficiency(ies) identified?

Type of auditor's report issued on compliance for major programs unmodified:

Any audit findings disclosed that are required to be reported in accordancewith 2 CFR 200.516(a)?

yes X noyes X none reported

X ves no

yes X noyes X none reported

yes X no

Identification of major programs:

CFDA NumberfslName of Federal Prooram or Cluster

84.010 Title I - Grants to Local Educational Agencies

Dollar threshold used to distinguish between type A and type B programs: $ 750.000

Auditee qualified as low-risk auditee? X ves ^no

SECTION II - FINDINGS-FINANCIAL STATEMENTS AUDIT

2019 - 001 Accounting Errors - (A Non Repeat Finding)

Condition: Several audit adjustments had to be made to correct the annual financial report. In addition, Fund 2budget did not zero out on the AFR.

Criteria: The District should have some checks and balances in place to catch these errors.

Cause of Condition: Lack of checks and balances.

Effect: The annual financial report is inaccurate.

Recommendation: The Finance Officer needs to review all accounts and reconcile back to known checkbalances.

Views of Responsible Officials and Planned Corrective Actions: We will review all accounts and make surethey reconcile back to known balances effective October 21,2019.

SECTION III - FINDINGS AND QUESTIONED COSTS FOR FEDERAL AWARDS

No matters were reported.

-62-


SCHEDULE OF PRIOR YEAR AUDIT FINDINGS

June 30, 2019

All prior year comments were addressed by the District. Corrections were initiated and improvements made inthe documentation that was recommended.

2018-001 Annual/Monthly Report Not Properly Prepared

-63-

INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTINGAND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF

FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITHGOVERNMENT AUDITING STANDARDS



(606) 789-3588Fax (606) 789-3326

INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON

COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN

ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS



We have audited, in accordance with the auditing standards generally accepted In the United States of America and thestandards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller Generalof the United States and the requirements prescribed by the Kentucky State Committee for School District Audits in theIndependent Auditor's Contract, the financial statements of the governmental activities, the business-type activities,each major fund, and the aggregate remaining fund information of the Lawrence County School District, as of and forthe year ended June 30, 2019, and the related notes to the financial statements, which collectively comprise LawrenceCounty School District's basic financial statements and have issued our report thereon dated October 21, 2019.

Internal Control over Financial Reporting

In planning and performing our audit of the financial statements, we considered Lawrence County School District'sinternal control over financial reporting (internal control) to determine the audit procedures that are appropriate in thecircumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose ofexpressing an opinion on the effectiveness of the Lawrence County School District's internal control. Accordingly, we donot express an opinion on the effectiveness of the Lawrence County School District's internal control.

A deficiency in intemal control exists when the design or operation of a control does not allow management oremployees, 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 internalcontrol such that there is a reasonable possibility that a material misstatement of the entity's financial statements will notbe prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination ofdeficiencies, in Internal control that is less severe than a material weakness, yet important enough to merit attention bythose charged with governance.

Our consideration of internal control was for the limited purpose described in the first paragraph of this section and wasnot 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 bematerial weaknesses. However, material weaknesses may exist that have not been identified.

Compliance and Other Matters

As part of obtaining reasonable assurance about whether Lawrence County School District's financial statements arefree from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations,contracts, and grant agreements, noncompliance with which could have a direct and material effect on thedetermination of financial statement amounts. However, providing an opinion on compliance with those provisions wasnot an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed aninstance of noncompliance or other matters that is required to be reported under Government Auditing Standards andwhich is described in the accompanying schedule of findings and questioned costs as item 2019-001.

In addition, the results of our tests disclosed no instances of material noncompliance of specific state statues orregulation identified in Appendix li of the Independent Auditor's Contract - State Audit Requirements.

We noted certain matters that we reported to management of Lawrence County School District, in a separate letterdated October 21, 2019.

Lawrence County School District's Response to Findings

Lawrence County School District's response to the findings identified in our audit is described in the accompanyingschedule of findings and questioned costs. Lawrence County School District's response was not subjected to theauditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on it.

Purpose of this Report

The purpose of this report is solely to describe the scope of our testing of internal control and compliance and theresults of that testing, and not to provide an opinion on the effectiveness of the entity's internal control or on compliance.This report is an integral part of an audit performed in accordance with Government Auditing Standards in consideringthe entity's internal control and compliance. Accordingly, this communication is not suitable for any other purpose.

^ . P-T CCertified Public Accountants

Paintsville, KentuckyOctober 21, 2019

-66-

INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM ANDON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY

THE UNIFORM GUIDANCE



(606) 789-3588Fax (606) 789-3326

INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM

AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY THE UNIFORM GUIDANCE



Report on Compliance for Each Major Federal Program

We have audited Lawrence County School District's compliance with the types of compliance requirements describedIn the 0MB Compliance Supplement that could have a direct and material effect on each of the Lawrence CountySchool District's major federal programs for the year ended June 30, 2019. Lawrence County School District's majorfederal programs are identified in the summary of auditor's results section of the accompanying schedule of findingsand questioned costs.

Management's Responsibility

Management is responsible for compliance with federal statutes, regulations, and the terms and conditions of its federalawards applicable to its federal programs.

Auditor's Responsibility

Our responsibility is to express an opinion on compliance for each of the Lawrence County School District's majorfederal programs based on our audit of the types of compliance requirements referred to above. We conducted ouraudit of compliance in accordance with auditing standards generally accepted in the United States of America; thestandards applicable to financial audits contained in Govemment Auditing Standards, issued by the ComptrollerGeneral of the United States; and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, UniformAdministrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Thosestandards and the Uniform Guidance require that we plan and perform the audit to obtain reasonable assurance aboutwhether noncompliance with the types of compliance requirements referred to above that could have a direct andmaterial effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about theLawrence County School District's compliance with those requirements and performing such other procedures as weconsidered 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 Lawrence County School District's compliance.

Opinion on Each Major Federal Program

In our opinion, the Lawrence County School District, complied, in all material respects, with the types of compliancerequirements referred to above that could have a direct and material effect on each of its major federal programs for theyear ended June 30, 2019.

Report on Internal Control over Compliance

Management of the Lawrence County School District, is responsible for establishing and maintaining effective internalcontrol over compliance with the types of compliance requirements referred to above. In planning and performing ouraudit of compliance, we considered the Lawrence County School District's internal control over compliance with thetypes of requirements that could have a direct and material effect on each major federal program to determine theauditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on

compliance for each major federal program and to test and report on internal control over compliance in accordancewith the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of intemal control overcompliance. Accordingly, we do not express an opinion on the effectiveness of the Lawrence County School District'sinternal control over compliance.

A deficiency in intemal contmi over compliance exists when the design or operation of a control over compliance doesnot allow management or employees, in the normal course of performing their assigned functions, to prevent, or detectand correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A materialweakness in intemal contmi over compliance is a deficiency, or combination of deficiencies, in intemal control overcompliance, such that there is a reasonable possibility that material noncompliance with a type of compliancerequirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significantdeficiency in intemal contmi over compliance is a deficiency, or a combination of deficiencies, in internal control overcompliance with a type of compliance requirement of a federal program that is less severe than a material weakness inintemal control over compliance, yet important enough to merit attention by those charged with govemance.

Our consideration of intemal control over compliance was for the limited purpose described in the first paragraph of thissection and was not designed to identify all deficiencies in intemal control over compliance that might be materialweaknesses or significant deficiencies. We did not identify any deficiencies in intemal control over compliance that weconsider 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 internalcontrol over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly,this report is not suitable for any other purpose.

Certified Public Accountants

Paintsville, KentuckyOctober 21, 2019

-67-

MANAGEMENT LETTER COMMENTS

WELLS & COMPANY, RS.C.

'fZ/xoffnArnA


(606) 789-3588Fax (606) 789-3326

Kentucky State Committee for School District AuditsMembers of the Board of Education


In planning and performing our audit of the financial statements of Lawrence County School District (the "District")as of and for the year ended June 30,2019, in accordance with auditing standards generally accepted in the UnitedStates of America, we considered the District's intemal control over financial reporting (intemal control) as a basisfor designing our auditing procedures for the purpose of expressing our opinions on the financial statements, butnot for the purpose of expressing an opinion on the effectiveness of the District's intemal control. Accordingly, wedo not express an opinion on the effectiveness of the District's intemal control.

However, during our audit, we became aware of matters that are opportunities for strengthening intemal controlsand operating efficiency. The memorandum that accompanies this letter summarizes our comments andsuggestions regarding these matters. This letter does not affect our report dated October 21, 2019, on the financialstatements of the District.

We will review the status of these comments during our next audit engagement. We have already discussed thesecomments and suggestions with various District personnel, and we will be pleased to discuss them in further detailat your convenience, to perform any additional study of these matters, or to assist you in implementing therecommendations.

Respectfully,

Pre.

Certified Public Accountants

Paintsville, KentuckyOctober 21,2019

-68-


MANAGEMENT LETTER COMMENTS

June 30, 2019

PRIOR YEAR COMMENTS

Prior year comments have been addressed and the District Is taking corrective action. All corrections wereInitiated and Improvements made In the documentation that was recommended.

-69-


MANAGEMENT LETTER COMMENTS - CONTINUED

June 30, 2019

CURRENT YEAR COMMENTS

Activity Fund 19-1 Account Ended In Red

Condition: Annual report's ROTC at Lawrence County High School ended in the red after considering accountspayable.

Criteria: No funds should end in the red.

Cause of Condition: Bookkeeper failed to consider accounts payable when making year end transfers.

Effect: The account ended in the red.

Recommendation: Bookkeeper needs to review all unpaid bills at year end and determine if any accounts maygo in the red after considering accounts payable. Transfers from other funds should be made to cover anyshortages.

Views of Responsible Officials and Planned Corrective Actions: Bookkeepers will be asked to monitor thismore closely effective immediately.

Activity Fund 19-2 District Paid Sales Tax

Condition: Found where Lawrence County High School and Fallsburg Elementary paid sales tax.

Criteria: The District is a 501 (c)3 nonprofit organization that is exempt from paying sales tax.

Cause of Condition: Principals and bookkeepers are relaxed when making sure they don't pay sales tax.

Effect: The District loses money every time it pays an expense it shouldn't.

Recommendation: We recommend that every time a purchase is made that the district's tax exempt certificatebe given to the vendor before the purchase is made. If the district pays sales tax by error then the bookkeeperneeds to request this money back from the vendor by providing them with their tax exempt certificate.

Views of Responsible Officials and Planned Corrective Actions: We will start having all employees take our taxexempt certificate with them before making a purchase effective immediately.

-70-

rt:= tlt i

Documents