CARTER COUNTY SCHOOL DISTRICT FINANCIAL STATEMENTS AND SUPPLEMENTAL INFORMATION FOR THE FISCAL YEAR ENDED JUNE 30, 2019 CARTER COUNTY SCHOOL DISTRICT TABLE OF CONTENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2019 Page Independent Auditors' Report 1 Management’s Discussion and Analysis 4 Basic Financial Statements: Statement of Net Position 9 Statement of Activities 10 Balance Sheet – Governmental Funds 11 Reconciliation of the Balance Sheet – Governmental Funds to 12 the Statement of Net Position Statement of Revenues, Expenditures, and Changes in Fund 13 Balance – Governmental Funds Reconciliation of the Statement of Revenues, Expenditures, and Changes 14 in Fund Balance of Governmental Funds to the Statement of Activities Statement of Net Position – Proprietary Funds 15 Statement of Revenues, Expenditures, and Changes in Net 16 Position – Proprietary Funds Statement of Cash Flows – Proprietary Funds 17 Statement of Net Position – Fiduciary Funds 18 Statement of Changes in Fiduciary Net Position – Fiduciary Funds 19 Notes to the Basic Financial Statements 20 Required Supplementary Information: Statement of Revenues, Expenditures, and Changes in Fund Balances – Budget 56 and Actual – (Non-GAAP Budgetary Basis) – General Fund Statement of Revenues, Expenditures, and Changes in Fund Balances – Budget 57 and Actual – (Non-GAAP Budgetary Basis) – Special Revenue Fund Schedule of District's Proportionate Share of the Net Pension Liability 58 Schedule of Pension Contributions 59 CARTER COUNTY SCHOOL DISTRICT TABLE OF CONTENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2019 Notes to Pension Required Supplementary Information 60 Schedule of District’s Proportionate Share of the Net OPEB Liability 61 Schedule of OPEB Contributions 63 Notes to OPEB Required Supplementary Information 65 Other Information: Combining Balance Sheet – Non-Major Governmental Funds 68 Combining Statement of Revenues, Expenditures, and Changes in 69 Fund Balances – Non-Major Governmental Funds Statement of Changes in Assets and Liabilities – School Activity and 70 Trust Funds Statement of Changes in Assets and Liabilities – School Activity Funds 71 East Carter County High School Statement of Changes in Assets and Liabilities – School Activity Funds 72 West Carter County High School Schedule of Expenditures of Federal Awards 73 Notes to the Schedule of Expenditures of Federal Awards 74 Independent Auditors’ Report on Internal Control Over Financial Reporting 76 and on Compliance and Other Matters Based on An Audit of Financial Statements Performed in Accordance with Government Auditing Standards Independent Auditors’ Report on Compliance for Each Major Fund Program and 78 On Internal Control Over Compliance Required By The Uniform Guidance Schedule of Findings and Questioned Costs 81 Schedule of Prior Year Audit Findings 82 Corrective Action Plan 83 Independent Auditors' Transmittal Letter for Management Letter Points 84 Management Letter Points 85 INDEPENDENT AUDITORS' REPORT Kentucky State Committee for School District Audits Members of the Board of Education Carter County School District Grayson, 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 Carter County School District as of and for the year ended June 30, 2019, and the related notes to the financial statements, which collectively comprise the District’s basic financial statements as listed in the table of contents. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors’ Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America, the standards applicable to financial 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 "Auditor Responsibilities" Section of the Kentucky Public School Districts’ Audit Contract and Requirements. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s 1 internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the Carter County School District, as of June 30, 2019, and the respective changes in financial position, and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally 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 and analysis, budgetary comparison information, and pension and OPEB information on pages 4 through 8 and 56 through 63 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Carter County School District’s basic financial statements. The combining and individual nonmajor fund financial statements are presented for purposes of additional analysis and are not a required part of the basic financial statements. The statements of changes in assets and liabilities – school activity funds are presented for purposes of additional analysis and are not a required part of the basic financial statements. The schedule of expenditures of federal awards is presented for purposes of additional analysis as required Title 2 U.S. Code of Federal Regulation Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). 2 These statements and schedule are management’s responsibility, and derive from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. We subjected these statements and schedules to the auditing procedures we applied to the basic financial statements. We also applied certain additional procedures, including comparing and reconciling schedules directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves in accordance with auditing standards generally accepted in the United States of America. In our opinion, these statements and schedules are fairly stated in all material respects in relation to the basic financial statements taken as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated November 13, 2019, on our consideration of the District's internal control over financial reporting and our testing