BEECHWOOD INDEPENDENT SCHOOL DISTRICT have audited the accompanying financial statements of the...

BEECHWOOD INDEPENDENT SCHOOL DISTRICT June 30, 2016 FINANCIAL STATEMENTS AND INDEPENDENT AUDITORS’ REPORT INCLUDING SUPPLEMENTARY INFORMATION

BEECHWOOD INDEPENDENT SCHOOL DISTRICT TABLE OF CONTENTS

PAGE Independent Auditors' Report Management’s Discussion and Analysis (MD&A) ............................................................................. 1 Basic Financial Statements District-Wide Financial Statements Statement of Net Position .................................................................................................... 6 Statement of Activities .......................................................................................................... 7 Fund Financial Statements Balance Sheet – Governmental Funds ................................................................................ 8 Reconciliation of the Balance Sheet – Governmental Funds to the Statement of Net Position .................................................... 9 Statement of Revenues, Expenditures and Changes in Fund Balance – Governmental Funds ....................................................................................................... 10 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balance – Governmental Funds to the Statement of Activities ..................................................................................................... 11 Statement of Net Position – Proprietary Funds .................................................................. 12 Statement of Revenues, Expenses and Changes in Net Position – Proprietary Funds ............................................................................................................ 13 Statement of Cash Flows – Proprietary Funds ................................................................... 14 Statement of Fiduciary Net Position – Fiduciary Funds ...................................................... 15 Notes to the Financial Statements ............................................................................................. 16

BEECHWOOD INDEPENDENT SCHOOL DISTRICT TABLE OF CONTENTS

(Continued) PAGE

Required Supplementary Information Statement of Revenues, Expenditures and Changes in Fund Balance – Budget and Actual – General Fund ..................................................................................... 38 Statement of Revenues, Expenditures and Changes in Fund Balance – Budget and Actual – Debt Service Fund ............................................................................. 39 Statement of Revenues, Expenditures and Changes in Fund Balance – Budget and Actual – Construction Fund ............................................................................. 40 Schedule of the District’s Proportionate Share of the Net Pension Liability .............................. 41 Schedule of the District’s Contributions ..................................................................................... 42 Other Supplementary Information Combining Balance Sheet – Non-Major Governmental Funds ................................................. 43 Combining Statement of Revenues, Expenditures and Changes in Fund Balance – Non-Major Governmental Funds ........................................... 44 Statement of Receipts, Disbursements and Fund Balance Beechwood Independent Board of Education – School Activity Fund ........................................................................................................................ 45 Independent Auditors’ Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance With Government Auditing Standards ......................................................... 46

Management Letter Comments ................................................................................................. 48

INDEPENDENT AUDITORS' REPORT Kentucky State Committee for School District Audits and Members of the Board of Education Beechwood Independent School District Fort Mitchell, 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 Beechwood Independent School District (the District) as of and for the year ended June 30, 2016, 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 and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States of America, Audits of States, Local Governments, and Non-Profit Organizations, and the audit requirements prescribed by the Kentucky State Committee for School District Audits in the Independent Auditor’s Contract – General Audit Requirements, State Compliance Requirements, Appendix I to the Independent Auditor’s Contract – Audit Extension Request and Appendix II to the Independent Auditor’s Contract – Instructions for Submission of the Audit Report, Audit Acceptance Statement, AFR and Balance Sheet, Statement of Certification, and Audit Report. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

Kentucky State Committee for School District Audits and Members of the Board of Education Beechwood Independent School District

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 Beechwood Independent School District as of June 30, 2016, 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. Emphasis of Matter As discussed in the Note 14 to the financial statements, the previously issued financial statements for the year ended June 30, 2015 have been restated for the correction of a material misstatement. Our opinion is not modified with respect to that matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis on pages 1 - 5, budgetary comparison information on pages 41 – 43, and the pension schedules on pages 44 - 45 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 Beechwood Independent School District’s basic financial statements. The combining and individual nonmajor fund financial statements and other supplementary information are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual nonmajor fund financial statements and other supplementary information are the responsibility of management and were derived from, and relate directly to, the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining and individual nonmajor fund financial statements and other supplementary information are fairly stated, in all material respects, in relation to the basic financial statements as a whole.


Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report, dated November 1, 2016, on our consideration of the Beechwood Independent School District’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Beechwood Independent School District’s internal control over financial reporting and compliance.

VonLehman & Company Inc.

Fort Mitchell, Kentucky November 1, 2016 (except for Note 14, as to which the date is February 23, 2017)

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BEECHWOOD INDEPENDENT SCHOOL DISTRICT MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A)

FOR THE FISCAL YEAR ENDED JUNE 30, 2016 UNAUDITED

As management of the Beechwood Independent School District (the District), we offer readers of the District's financial statements this narrative overview and analysis of the financial activities of the District for the fiscal year ended June 30, 2016. We encourage readers to consider the information presented here in conjunction with additional information found within the body of the audit. Financial Highlights Beechwood Independent Schools served 1,338 enrolled students in a unique K-12 public school district located in Ft. Mitchell, Kentucky. Throughout history, Beechwood schools have been noted for their sense of tradition and academic excellence. The General Fund had $11,500,013 in revenue, which primarily consisted of local real estate and property taxes, the state program (SEEK), on-behalf payments, local out-of-district tuition, utilities tax and motor vehicle taxes. Excluding inter-fund transfers, there was $11,328,743 in General Fund expenditures. In September 2015, the auxiliary gymnasium and renovated school kitchen were completed. Construction began in April of 2016 to renovate the athletic fields, create a new high school office and upgrade the HVAC system. 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) district-wide financial statements; 2) fund financial statements; and 3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. The district-wide financial statements are designed to provide readers 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 difference between the two reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the District is improving or deteriorating. The statement of activities presents information showing how the District's net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods. The district-wide financial statements outline functions of the District that are principally supported by property taxes and intergovernmental revenues (governmental activities). The governmental activities of the District include instruction, support services, operation and maintenance of plant, student transportation and operation of non-instructional services. Fixed assets and related debt are also supported by taxes and intergovernmental revenues. The district-wide financial statements can be found on pages 6 and 7 of this report.

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FOR THE FISCAL YEAR ENDED JUNE 30, 2016 UNAUDITED (Continued)

Fund financial statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. This is a state mandated uniform system and chart of accounts for all Kentucky public school districts utilizing the MUNIS administrative software. The District uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the District can be divided into three categories: governmental funds, proprietary funds and fiduciary funds. Fiduciary funds are trust funds established by benefactors to aid in student education, welfare and teacher support. The proprietary funds of the District include its food service operations. All other activities of the District are included in the governmental funds. The basic governmental fund financial statements can be found on pages 8 through 11 of this report. Notes to the financial statements. The notes to the financial statements provide additional information that is essential to a full understanding of the data provided in the district-wide and fund financial statements. The notes to the financial statements can be found on pages 16 through 40 of this report. District-Wide Financial Analysis Net position may serve over time as a useful indicator of a government's financial position. In the case of the District, assets and deferred outflows exceeded liabilities and deferred inflows by approximately $7.3 million as of June 30, 2016. A large portion of the District's net position reflects its investment in capital assets (e.g., land and improvements, buildings and improvements, vehicles, furniture and equipment and construction in progress) less any related debt used to acquire those assets that are still outstanding. The District uses these capital assets to provide services to its students; consequently, these assets are not available for future spending. Although the District's investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. 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 capital assets. The table on the following page provides a summary of the District’s net position for 2016 compared to 2015 (2015 does not include the effect of the prior period adjustment).

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Net Position for the Periods Ending June 30, 2016 and 2015

2016 2015

Current Assets $ 7,841,399 $ 8,376,380 Noncurrent Assets 27,376,900 22,996,373

Total Assets 35,218,299 31,372,753

Deferred Outflows of Resources 424,924 495,727

Total Assets and Deferred Outflows of Resources 35,643,223 31,868,480

Current Liabilities 3,128,388 1,279,697 Noncurrent Liabilities 25,146,431 23,312,967

Total Liabilities 28,274,819 24,592,664

Deferred Inflows of Resources 111,000 148,000

Total Liabilities and Deferred Inflows of Resources 28,385,819 24,740,664

Investment in Capital Assets (Net of Related Debt) 3,365,379 1,310,028 Restricted 3,153,359 4,128,299 Unrestricted 738,666 1,689,489

Total Net Position $ 7,257,404 $ 7,127,816

June 30,

Comments on Budget Comparisons

• The District's total general fund revenues for the fiscal year ended June 30, 2016, excluding inter-fund transfers, were $11,500,013.

• General Fund budget compared to actual revenue varied slightly from line item to line item with the ending actual balance being $383,150 in excess of budget, or approximately 3.4%. This is partially a result of the District recording more "on behalf" payments made by the state than expected.

• The total cost of all programs and services, excluding inter-fund transfers, in the General Fund, was $11,328,743.

• General fund actual expenditures were less than budgeted expenditures by $1,838,120. This is mainly a result of the District not spending as much in student transportation as expected as well as not using the contingency.

• The District recorded On-Behalf payments as revenues and expenditures during the fiscal year. The On-Behalf revenues and expenditures were included in the budget.

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The following table presents a summary of revenue and expense for the fiscal years ended June 30, 2016 and 2015 (2015 does not include the effect of the prior period adjustment):

2016 2015Revenues

Program RevenuesCharges for Services $ 705,520 $ 686,058 Operating Grants and Contributions 1,375,327 1,266,192 Capital Grants and Contributions 491,789 542,016

Total Program Revenues 2,572,636 2,494,266

General RevenuesTaxes 5,588,830 5,572,284 Federal and State Aid not Restricted to Specific Purposes 6,120,596 7,478,198 Investment Earnings 45,444 29,299 Miscellaneous 192,376 209,335

Total General Revenues 11,947,246 13,289,116

Total Revenues 14,519,882 15,783,382

ExpensesInstructional 8,134,740 7,626,170 Student Support Services 550,590 592,371 Instructional Staff Support Services 464,416 518,343 District Administration 491,764 477,257 School Administration 663,456 727,250 Business Support Services 570,784 602,068 Plant Operation and Maintenance 1,186,951 1,332,482 Student Transportation 90,810 126,180 Food Service Operations 391,049 401,196 Depreciation Expense 687,021 622,526 Pension Expense 320,583 151,590 Interest on Long-Term Debt 790,239 777,060

Total Expenses 14,342,403 13,954,493

Change in Net Position $ 177,479 $ 1,828,889

June 30,

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Capital Assets At the end of fiscal year 2016, the District had a total of approximately $27.4 million in capital assets net of accumulated depreciation, including approximately $26.5 million for governmental activities and approximately $877,000 for business type activities. Current year capital asset additions totaled approximately $5.0 million. Debt At June 30, 2016, the District had approximately $24.0 million in outstanding bonds. There was one new bond issuance in May, 2016 for $3,240,000. Budgetary Implications In Kentucky, the public school fiscal year is July 1-June 30; other programs, i.e. some federal, operate on a different fiscal calendar, but are reflected in the District’s overall budget. By law, the budget must have a minimum 2% contingency. The Board adopted a budget for 2016-2017 with $2.2 million in contingency (16%). The beginning cash balance in the general fund for the fiscal year is $2,183,423. Significant Board action that impacts the finances include step increase for all classified employees and all certified employees, facility repairs, and equipment purchases. Contacting the District's Financial Management Questions regarding this report should be directed to the Superintendent, Dr. Mike Stacy (859) 331-3250 or to Rae Wise, Director of Financial Services (859) 331-3250 or by mail at 50 Beechwood Road, Ft. Mitchell, Kentucky, 41017.

DISTRICT-WIDE FINANCIAL STATEMENTS

See accompanying notes.

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Business-Governmental Type

Activities Activities TotalAssets and Deferred Outflows of Resources Current Assets Cash and Cash Equivalents $ 6,061,830 $ 68,140 $ 6,129,970 Escrow Funds 1,344,221 - 1,344,221 Accounts Receivable 238,696 - 238,696 Inventories - 4,390 4,390 Prepaid Expenses 124,122 - 124,122

Total Current Assets 7,768,869 72,530 7,841,399

Noncurrent Assets Nondepreciable Capital Assets Land 769,584 - 769,584 Construction in Progress 1,784,802 - 1,784,802 Depreciable Capital Assets Land Improvements 1,346,257 - 1,346,257 Buildings and Improvements 28,360,767 497,211 28,857,978 Vehicles 420,252 - 420,252 Technology Equipment 437,472 - 437,472 General Equipment 378,401 651,367 1,029,768 Less Accumulated Depreciation (6,998,022) (271,191) (7,269,213)

Total Noncurrent Assets 26,499,513 877,387 27,376,900

Total Assets 34,268,382 949,917 35,218,299

Deferred Outflows of Resources Deferred Loss on Refunding, Net 64,594 - 64,594 Difference Between Expected and Actual Experience 13,154 1,756 14,910 Net Difference Between Projected and Actual Investment Earnings 14,189 1,894 16,083 Changes of Assumptions 159,618 21,307 180,925 Changes in Proportion and Difference Between Employer Contributions and Proportionate Share 17,002 2,270 19,272 Contributions After Measurement Date 113,933 15,207 129,140

Total Deferred Outflows of Resources 382,490 42,434 424,924

Total Assets and Deferred Outflows of Resources 34,650,872 992,351 35,643,223

Liabilities and Deferred Inflows of Resources Current Liabilities Current Portion of Bonds Payable 712,769 - 712,769 Current Portion of Accrued Sick Leave 30,111 - 30,111 Accounts Payable 1,017,230 40 1,017,270 Accrued Interest 63,734 - 63,734 Funds Received in Excess of Revenues Earned 1,304,504 - 1,304,504

Total Current Liabilities 3,128,348 40 3,128,388

Noncurrent Liabilities Noncurrent Portion of Accrued Sick Leave 53,487 - 53,487 Noncurrent Portion of Bonds Payable 23,298,752 - 23,298,752 Net Pension Liability 1,582,895 211,297 1,794,192

Total Noncurrent Liabilities 24,935,134 211,297 25,146,431

Total Liabilities 28,063,482 211,337 28,274,819

Deferred Inflows of Resources Net Difference Between Projected and Actual Investment Earnings 97,927 13,073 111,000

Total Liabilities and Deferred Inflows of Resources 28,161,409 224,410 28,385,819

Net Position Invested in Capital Assets, Net of Related Debt 2,487,992 877,387 3,365,379 Restricted for Debt Service Fund 76,981 - 76,981 Construction Fund 2,855,732 - 2,855,732 Special Revenue Fund 120,646 - 120,646 Unrestricted 948,112 (109,446) 838,666

Total Net Position $ 6,489,463 $ 767,941 $ 7,257,404

BEECHWOOD INDEPENDENT SCHOOL DISTRICTSTATEMENT OF NET POSITION

JUNE 30, 2016


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Operating Capital Business -Charges for Grants and Grants and Governmental Type

Function/Programs Expenses Services Contributions Contributions Activities Activities Total

Governmental Activities Instructional $ 8,134,740 $ 411,483 $ 1,220,869 $ 100,413 $ (6,401,975) $ - $ (6,401,975) Support Services Student 550,590 - - - (550,590) - (550,590) Instructional Staff 464,416 - - - (464,416) - (464,416) District Administration 491,764 - - - (491,764) - (491,764) School Administration 663,456 - - - (663,456) - (663,456) Business Support Services 570,784 - - - (570,784) - (570,784) Plant Operation and Maintenance 1,186,951 - - - (1,186,951) - (1,186,951) Student Transportation 90,810 10,993 - - (79,817) - (79,817) Depreciation Expense 631,304 - - - (631,304) - (631,304) Building Improvements - - - - - - - Pension Expense 282,828 - - - (282,828) - (282,828) Interest on Long-Term Debt 790,239 - - 391,376 (398,863) - (398,863)

Total Governmental Activities 13,857,882 422,476 1,220,869 491,789 (11,722,748) - (11,722,748)

Business-Type Activities Food Service Operations 391,049 283,044 154,458 - - 46,453 46,453 Depreciation Expense 55,717 - - - - (55,717) (55,717) Pension Expense 37,755 - - - - (37,755) (37,755)

Total Business-Type Activities 484,521 283,044 154,458 - - (47,019) (47,019)

Total School District $ 14,342,403 $ 705,520 $ 1,375,327 $ 491,789 $ (11,722,748) $ (47,019) $ (11,769,767)

General Revenues Taxes $ 5,588,830 $ - $ 5,588,830 Federal and State Aid not Restricted to Specific Purposes 6,120,596 - 6,120,596 Operating Transfers (Out) In (850,000) 850,000 - Investment Earnings 45,248 196 45,444 Miscellaneous 192,236 140 192,376

Total General Revenues 11,096,910 850,336 11,947,246

Change in Net Position (625,838) 803,317 177,479

Net Position July 1, 2015 (As Restated) 7,115,301 (35,376) 7,079,925

Net Position June 30, 2016 $ 6,489,463 $ 767,941 $ 7,257,404

BEECHWOOD INDEPENDENT SCHOOL DISTRICTSTATEMENT OF ACTIVITIESYEAR ENDED JUNE 30, 2016

and Changes in Net PositionNet (Expense) Revenue

Program Revenues

FUND FINANCIAL STATEMENTS


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Debt Other TotalGeneral Service Construction Governmental Governmental

Fund Fund Fund Funds FundsAssets Cash and Cash Equivalents $ 2,183,423 $ - $ 3,814,038 $ 64,369 $ 6,061,830 Escrow Funds - 1,344,221 - - 1,344,221 Accounts Receivable 59,665 - - 179,031 238,696 Due from (to) Other Funds 100,000 (100,000) - Prepaid Expenses 124,122 - - - 124,122

Total Assets $ 2,467,210 $ 1,344,221 $ 3,814,038 $ 143,400 $ 7,768,869

Liabilities Accounts Payable $ 58,874 $ - $ 958,306 $ 50 $ 1,017,230 Unearned Revenues 14,560 1,267,240 - 22,704 1,304,504

Total Liabilities 73,434 1,267,240 958,306 22,754 2,321,734

Fund Balances Nonspendable 124,122 - - - 124,122 Restricted Debt Service Fund - 76,981 - - 76,981 Construction Fund - - 2,855,732 - 2,855,732 Special Revenue Fund - - - 120,646 120,646 Committed Accumulated Sick Leave 48,052 - - - 48,052 Future Construction 200,000 - - - 200,000 Future Bus Acquisition 70,000 - - - 70,000 Unassigned 1,951,602 - - - 1,951,602

Total Fund Balances 2,393,776 76,981 2,855,732 120,646 5,447,135

Total Liabilities and Fund Balances $ 2,467,210 $ 1,344,221 $ 3,814,038 $ 143,400 $ 7,768,869

BEECHWOOD INDEPENDENT SCHOOL DISTRICTBALANCE SHEET

GOVERNMENTAL FUNDSJUNE 30, 2016


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Amounts reported for governmental activities in the statement of net position are different because:

Total Governmental Funds Balance $ 5,447,135

Capital assets used in governmental activities are not financial resources and; therefore, are not reported as assets in governmental funds. Cost of Capital Assets $ 33,497,535 Accumulated Depreciation (6,998,022)

26,499,513

Deferred loss on refunding, net is not a financial resource and therefore are not reported as assets in governmental funds 64,594

Deferred outflows and inflows of resources related to pensions are applicable to future periods and, therefore, are not reported in the funds:

Difference Between Expected and Actual Experience 13,154 Net Difference Between Projected and Actual Investment Earnings 14,189 Changes of Assumptions 159,618 Changes in Proportion and Difference Between Employer Contributions and Proportionate Share 17,002 Contributions After Measurement Date 113,933 Net Difference Between Projected and Actual Investment Earnings on Pension Plan Investments (97,927)

Long-term liabilities, including bonds payable, are not due and payable in the current period and; therefore, are not reported as liabilities in the funds. Long-term liabilities at year end consist of: Bonds Payable 24,185,000 Bond Premiums 5,274 Bond Discounts (178,753) Accrued Interest on Bonds 63,734 Accumulated Sick Leave 83,598 Net Pension Liability 1,582,895

(25,741,748)

Total Net Position - Governmental Activities $ 6,489,463

BEECHWOOD INDEPENDENT SCHOOL DISTRICTRECONCILIATION OF THE BALANCE SHEET - GOVERNMENTAL FUNDS TO

THE STATEMENT OF NET POSITIONJUNE 30, 2016


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Debt Other TotalGeneral Service Construction Governmental Governmental

Fund Fund Fund Funds FundsRevenues Taxes $ 4,952,436 $ - $ - $ 636,394 $ 5,588,830 Tuition and Fees 411,483 - - - 411,483 Earnings on Investments 12,578 32,437 184 49 45,248 State Sources 6,051,528 174,979 - 796,349 7,022,856 Federal Sources - 392,466 - 409,326 801,792 Other Sources 71,988 - 2,884 136,963 211,835

Total Revenues 11,500,013 599,882 3,068 1,979,081 14,082,044

Expenditures Instructional 7,223,759 - - 894,561 8,118,320 Support Services Student 549,980 - - 610 550,590 Instructional Staff 448,534 - - 18,022 466,556 District Administration 495,633 - - - 495,633 School Administration 678,361 - - - 678,361 Business 591,561 - - - 591,561 Plant Operation and Maintenance 1,246,849 - - - 1,246,849 Student Transportation 94,066 - - - 94,066 Building Improvements - - 4,184,949 - 4,184,949 Debt Service Principal - 680,000 - - 680,000 Interest - 781,025 - - 781,025

Total Expenditures 11,328,743 1,461,025 4,184,949 913,193 17,887,910

Excess (Deficit) of Revenues Over Expenditures 171,270 (861,143) (4,181,881) 1,065,888 (3,805,866)

Other Financing Sources (Uses) Proceeds from Bond Issuance - - 3,240,000 - 3,240,000 Bond Issuance Costs - - (32,393) - (32,393) Operating Transfers In - 893,580 1,432,882 77,304 2,403,766 Operating Transfers Out (152,304) - (1,143,227) (1,958,235) (3,253,766)

Total Other Financing (Uses) Sources (152,304) 893,580 3,497,262 (1,880,931) 2,357,607

Net Change in Fund Balance 18,966 32,437 (684,619) (815,043) (1,448,259)

Fund Balance July 1, 2015, As Restated 2,374,810 44,544 3,540,351 935,689 6,895,394

Fund Balance June 30, 2016 $ 2,393,776 $ 76,981 $ 2,855,732 $ 120,646 $ 5,447,135

BEECHWOOD INDEPENDENT SCHOOL DISTRICTSTATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE

GOVERNMENTAL FUNDSYEAR ENDED JUNE 30, 2016


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Net Changes in Total Fund Balances Per Fund Financial Statements $ (1,448,259)

Amounts reported for governmental activities in the statement of activities are different because:

Governmental funds report capital outlays as expenditures because they usecurrent financial resources. However, in the statement of activities, the costof those assets is allocated over their estimated useful lives and reported asdepreciation expense. This is the amount by which capital outlays exceeddepreciation expense for the year.

Depreciation Expense $ (631,304) Capital Outlays 4,216,849

3,585,545

The proceeds from bonds provide current financial resources and are reported inthe fund financial statements but they are presented as liabilities in the statementof net position. (3,240,000)

Deferred losses on refunding are reported in the governmental funds as an otherfinancing source. However, for governmental activities those items are show in the statement of net position and allocated over the term of the bond in the statementof activities. This is the amount of current year amortization of the deferred losses. (5,365)

Premiums on bonds are reported in the governmental funds as an other financingsource. However, for governmental activities those items are shown in thestatement of net position and allocated over the term of the bond in the statement

of activities. This is the amount of premium received net of current year amortization. (5,274)

Discounts on bonds are reported in the governmental funds as an other financingsource. However, for governmental activities those items are shown in thestatement of net position and allocated over the term of the bond in the statementof activities. This is the amount of current year amortization of the discount. (12,497)

Repayment of bond principal is an expenditure in the governmental funds but, itreduces long-term liabilities in the statement of net position and does not affectthe statement of activities. 680,000

In the statement of activities, compensated absences (sick leave) are measuredby the amounts earned during the year. In the governmental funds, however,expenditures for these amounts are measured by the amount of financialresources used (essentially, the amounts actually paid.) The difference in expensesreported in the statement of activities is as a result of the change in accumulatedsick leave. (57,406)

Governmental funds report District pension contributions as expenditures. However,in the statement of activities, the cost of pension benefits earned net of employeecontributions is reported as pension expense.

District Pension Contributions - June 30, 2015 (109,909) District Pension Contributions - June 30, 2016 113,932 Amortization of Deferred Outflows and Inflows of Resources 32,643 Cost of Benefits Earned Net of Employee Contributions (205,564)

(168,898)

Interest on long-term debt in the statement of activities differs from the amountreported in the governmental funds because interest is recorded as an expenditurein the funds when it is due and thus requires the use of current financial resources.In the statement of activities, however, interest expense is recognized as theinterest accrues, regardless of when it is due. The difference in interest expensereported in the statement of activities is as a result of (1) the change in accruedinterest on bonds and (2) refunding losses and gains not expended within the fund statements. 46,316

Change in Net Position of Governmental Activities $ (625,838)

BEECHWOOD INDEPENDENT SCHOOL DISTRICTRECONCILIATION OF THE STATEMENT OF REVENUES,EXPENDITURES AND CHANGES IN FUND BALANCES

GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIESYEAR ENDED JUNE 30, 2016


12

FoodServiceFund

Assets and Deferred Outflows of Resources Current Assets Cash and Cash Equivalents $ 68,140 Inventories for Consumption 4,390

Total Current Assets 72,530

Noncurrent Assets Buildings and Improvements 497,211 Furniture and Equipment 651,367 Less Accumulated Depreciation (271,191)

Total Noncurrent Assets 877,387

Total Assets 949,917

Deferred Outflows of Resources Difference Between Expected and Actual Experience 1,756 Net Difference Between Projected and Actual Investment Earnings 1,894 Changes of Assumptions 21,307 Changes in Proportion and Difference Between Employer Contributions and Proportionate Share 2,270 Contributions After Measurement Date 15,207

Total Deferred Outflows of Resources 42,434

Total Assets and Deferred Outflows of Resources $ 992,351

Liabilities and Deferred Inflows of Resources Current Liabilities Accounts Payable $ 40

Noncurrent Liabilities Net Pension Liability 211,297

Total Liabilities 211,337

Deferred Inflows of Resources Net Difference Between Projected and Actual Investment Earnings 13,073

Total Liabilities and Deferred Inflows of Resources 224,410

Net Position Invested in Capital Assets, Net of Debt 877,387 Unrestricted (109,446)

Total Net Position 767,941

Total Liabilities, Deferred Inflows of Resources and Net Position $ 992,351

BEECHWOOD INDEPENDENT SCHOOL DISTRICTSTATEMENT OF NET POSITION

PROPRIETARY FUNDSJUNE 30, 2016


13

FoodServiceFund

Operating Revenues Lunchroom Sales $ 283,044 Miscellaneous 140

Total Operating Revenues 283,184 Operating Expenses Salaries and Benefits 184,488 Contract Services 2,412 Materials and Supplies 204,149 Depreciation 55,717 Pension Expense 37,755

Total Operating Expenses 484,521

Loss Before Non-Operating Revenues (201,337) Non-Operating Revenues Federal Grants 111,646 State Grants 26,353 Donated Commodities and Other Donations 16,459 Interest Income 196

Total Non-Operating Revenues 154,654

Loss Before Other Financing Sources (46,683)

Other Financing Sources Operating Transfers In 850,000

Change in Net Position 803,317

Net Position July 1, 2015 (As Restated) (35,376)

Net Position June 30, 2016 $ 767,941

BEECHWOOD INDEPENDENT SCHOOL DISTRICTSTATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION

PROPRIETARY FUNDSYEAR ENDED JUNE 30, 2016


14

FoodServiceFund

Cash Flows From Operating Activities Cash Received from Lunchroom Sales $ 283,044 Cash Received from Other Activities 140 Cash Payments to Employees for Services (161,488) Cash Payments to Suppliers for Goods and Services (207,282)

Net Cash Used by Operating Activities (85,586)

Cash Flows From Non Capital Financing Activities Federal and State Grants 116,250

Cash Flows From Investing Activities Interest on Investments 196

Net Increase in Cash and Cash Equivalents 30,860 Cash and Cash Equivalents, Beginning of Year 37,280

Cash and Cash Equivalents, End of Year $ 68,140

Reconciliation of Operating Loss to Net Cash Used by Operating Activities Operating Loss $ (201,337)

Adjustments to Reconcile Operating Loss to Net Cash Used by Operating Activities Depreciation 55,717 Donated Commodities and Other Donations 16,459 State On Behalf Payments 21,749 Change in Assets and Liabilities Increase in Inventories for Consumption (552) Increase in Deferred Outflows of Resources (27,763) Decrease in Accounts Payable (169) Increase in Net Pension Liability 54,667 Decrease in Deferred Inflows of Resources (4,357)

Net Cash Used by Operating Activities $ (85,586)

BEECHWOOD INDEPENDENT SCHOOL DISTRICTSTATEMENT OF CASH FLOWS

PROPRIETARY FUNDSYEAR ENDED JUNE 30, 2016


15

SchoolActivityFunds

Assets Cash and Cash Equivalents $ 244,512

LiabilitiesDue to Student Groups $ 244,512

JUNE 30, 2016FIDUCIARY FUNDS

STATEMENT OF FIDUCIARY NET POSITIONBEECHWOOD INDEPENDENT SCHOOL DISTRICT

16

BEECHWOOD INDEPENDENT SCHOOL DISTRICT NOTES TO THE FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Reporting Entity The Beechwood Independent Board of Education (the Board), a five member group, is the level of government which has oversight responsibilities over all activities related to public elementary and secondary school education within the jurisdiction of the Beechwood Independent School District (the District). The District receives funding from local, state and federal government sources and must comply with the commitment requirements of these funding source entities. However, the District is not included in any other governmental "reporting entity" as defined in Section 2100, Codification of Governmental Accounting and Financial Reporting Standards. Board members are elected by the public and have decision making authority, the power to designate management, the responsibility to develop policies which may influence operations, and primary accountability for fiscal matters. The Board, for financial purposes, includes all of the funds and account groups relevant to the operation of the Beechwood Independent School District. The financial statements presented herein do not include funds of groups and organizations which, although associated with the school system, have not originated within the Board itself such as Band Boosters, Parent-Teacher Associations, etc. The financial statements of the District include those of separately administered organizations that are controlled by, or dependent on the Board. Control or dependence is determined on the basis of budget adoption, funding and appointment of the respective governing board. Based on the foregoing criteria, the financial statements of the following organization are included in the accompanying financial statements:

Beechwood Independent School Board Finance Corporation – In 1990 the Board resolved to authorize the establishment of the Beechwood Independent School Board Finance Corporation (a non-profit, non-stock, public and charitable corporation organized under the School Bond Act and KRS 273 and KRS 58.180) (the “Corporation”) as an agency of the Board for financing the costs of school building facilities. The members of the Board also comprise the Corporation’s Board of Directors.

Basis of Presentation District-Wide Financial Statements - The statement of net position and the statement of activities display information about the District as a whole. These statements include the financial activities of the primary government, except for fiduciary funds. The statements distinguish between those activities of the District that are governmental and those that are considered business-type activities. The district-wide statements are prepared using the economic resources measurement focus. This is the same approach used in the preparation of the proprietary fund financial statements, but differs from the manner in which governmental fund financial statements are prepared. Governmental fund financial statements; therefore, include reconciliations with brief explanations to better identify the relationship between the district-wide statements and the statements for governmental funds.

BEECHWOOD INDEPENDENT SCHOOL DISTRICT

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NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) The district-wide statement of activities presents a comparison between direct expenses and program revenues for each segment of the business-type activities of the District and for each function, or program of the District's governmental activities. Direct expenses are those that are specifically associated with a service, program or department and are; therefore, clearly identifiable to a particular function. Program revenues include charges paid by the recipient of the goods or services offered by the program and grants, and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues are presented as general revenues of the District, with certain limited exceptions. The comparison of direct expenses with program revenues identifies the extent to which each business 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 focus of 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. Non-major funds are aggregated and presented in a single column. Fiduciary funds are reported by fund type. The accounting and reporting treatment applied to a fund is determined by its measurement focus. All governmental fund types are accounted for using a flow of current financial resources measurement focus. The financial statements for governmental funds are a balance sheet, which generally includes only current assets and current liabilities, and a statement of revenues, expenditures and changes in fund balance, which reports on the changes in net total assets. Proprietary funds and fiduciary funds are reported using the economic resources measurement focus. The District has the following funds: I. Governmental Fund Types

(A) The General Fund is the primary operating fund of the District. It accounts for financial

resources used for general types of operations. This is a budgeted fund and any unrestricted fund balances are considered as resources available for use. This is a major fund of the District.

(B) The Debt Service Fund is used to account for the accumulation of resources for, and the payment of, general long-term debt principal and interest and related cost; and, for the payment of interest on general obligation notes payable, as required by Kentucky law. This is a major fund of the District.

(C) The Construction Fund accounts for proceeds from sales of bonds and other revenues to

be used for authorized construction. This is a major fund of the District.

(D) The Special Revenue Fund accounts for proceeds of specific revenue sources (other than expendable trusts or major capital projects) that are legally restricted to disbursements for specified purposes. It includes federal financial programs where unused balances are returned to the grantor at the close of specified project periods, as well as the state grant programs. Project accounting is employed to maintain integrity for the various sources of funds. This is not a major fund of the District.

(E) The Capital Outlay Fund is used to account for financial resources to be used for the acquisition of capital assets. This is not a major fund of the District.

(F) The Building Fund is used to account for financial resources to be used for the acquisition

or construction of major capital facilities and equipment. This is not a major fund of the District.


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NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

II. Proprietary Fund Types (Enterprise Funds)

(A) The School Food Service Fund is used to account for school food service activities, including the National School 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. The Food Service Fund is a major fund of the District.

III. Fiduciary Fund Type (Agency Funds)

(A) The Activity Funds account for activities of student groups and other types of activities

requiring clearing accounts. These funds are accounted for in accordance with the Uniform Program of Accounting for School Activity Funds.

Basis of Accounting The basis of accounting determines when transactions are recorded in the financial records and reported on the financial statements. District-wide financial statements are prepared using the accrual basis of accounting. Governmental Funds use the modified accrual basis of accounting. Proprietary and Fiduciary Funds also use the accrual basis of accounting. Revenues Exchange and Non-Exchange Transactions - Revenues resulting from exchange transactions, in which each party receives essentially equal value, is recorded on the accrual basis when the exchange takes place. On a modified accrual basis, revenues are recorded in the fiscal year in which the resources are measurable and available. Available means that the resources will be collected within the current fiscal year, or are expected to be collected soon enough thereafter to be used to pay liabilities of the current fiscal year. For the District, available means expected to be received within sixty days of the fiscal year end. Non-exchange transactions, in which the District receives value without directly giving equal value in return, include property taxes, grants, entitlements and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from grants, entitlements and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied. Eligibility requirements include timing requirements, which specify the year when the resources are required to be used or the fiscal year when use is first permitted, matching requirements, in which the District must provide local resources to be used for a specified purpose, and expenditure requirements, in which the resources are provided to the District on a reimbursement basis. On a modified accrual basis, revenues from non-exchange transactions must also be available before they can be recognized. Funds Received in Excess of Revenues Earned - Funds received exceeds revenues earned when assets are recognized before revenue recognition criteria have been satisfied. Grants and entitlements received before the eligibility requirements are met are recorded as deferred revenue. Restricted and Unrestricted Resources – When both restricted and unrestricted resources are available for use, it is the District’s policy to use restricted resources first, then unrestricted resources as needed. Expenses/Expenditures - On the accrual basis of accounting, expenses are recognized at the time they are incurred. The fair value of donated commodities used during the year is reported as an expense with a like amount reported as donated commodities revenue.


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NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 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 which the related fund liability is incurred, if measurable. Allocations of cost, such as depreciation, are not recognized in Governmental Funds. Taxes Property Tax Revenues - Property taxes are levied each September on the assessed value listed as of the prior January 1, for all real and personal property in the District. The billings are considered due upon receipt by the taxpayer; however, the actual date is based on a period ending 30 days after the tax bill mailing. Property taxes collected are recorded as revenues in the fiscal year for which they were levied. All taxes collected are initially deposited into the General Fund and then transferred to the appropriate fund. Budgetary Process The District’s budget is prepared according to Kentucky law and is based on accounting for certain transactions on a basis of cash receipts, disbursements, and encumbrances. In Kentucky, the public school fiscal year is July 1 through June 30. Some programs relating to federal and state grants operate on a different fiscal year but are nevertheless reflected in the overall budget. Cash and Cash Equivalents The District considers demand deposits, money market funds, and other investments with an original maturity of 90 days or less, to be cash equivalents. Inventories Supplies and materials are charged to expenditures when purchased, except for inventories in the Proprietary Fund, which are capitalized at the lower of cost or market. Capital Assets General capital assets are those assets not specifically related to activities reported in the Proprietary Funds. These assets generally result from expenditures in the Governmental Funds. These assets are reported in the governmental activities column of the district-wide statement of net position, but are not reported in the Fund financial statements. Capital assets utilized by the Proprietary Funds are reported both in the business-type activities column of the district-wide statement of net position and in the respective funds. All capital assets are capitalized at cost (or estimated historical cost) and updated for additions and retirements during the year. Donated fixed assets are recorded at their fair market values as of the date received. The District maintains a capitalization threshold of $1,000 for food services equipment, $5,000 for technology equipment and general equipment, and $10,000 for land and building improvements. Improvements are capitalized; the cost of normal maintenance and repairs that do not add to the value of the asset or materially extend an asset's life are not.


20

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) All reported capital assets are depreciated. Improvements are depreciated over the remaining useful lives of the related capital assets. Depreciation is computed using the straight-line method over the following useful lives for both general capital assets and proprietary fund assets: Buildings and Improvements 25 - 50 Years Land Improvements 20 Years Technology Equipment 5 Years Vehicles 5 - 10 Years Food Service Equipment 10 - 12 Years General Equipment 15 Years Accumulated Unpaid Sick Leave Benefits Upon retirement from the school system, an employee will receive from the District, an amount equal to 30% of the value of accumulated sick leave. Sick leave benefits are accrued as a liability using the termination payment method. An accrual for earned sick leave is made to the extent that it is probable that the benefits will result in termination payments. The liability is based on the District's experience of making termination payments. The entire compensated absence liability is reported on the district-wide financial statements. lnterfund Balances On the Fund financial statements, receivables and payables resulting from short-term interfund loans are classified as "interfund receivables/payables". These amounts are eliminated in the governmental and business-type activities columns of the statement of net position, except for the net residual amounts due between governmental and business-type activities, which are presented as internal balances. Accrued Liabilities and Long-Term Obligations All payables, accrued liabilities and long-term obligations are reported in the district-wide financial statements, and all payables, accrued liabilities and long-term obligations payable from Proprietary Funds are reported on the proprietary fund financial statements. In general, payables and accrued liabilities that will be paid from Governmental Funds are reported on the governmental fund financial statements regardless of whether they will be liquidated with current resources. However, claims and judgments, accumulated sick leave, contractually required pension contributions and special termination benefits that will be paid from Governmental Funds are reported as a liability in the Fund financial statements, only to the extent that they will be paid with current, expendable, available financial resources. In general, payments made within sixty days after year end are considered to have been made with current available financial resources. Bonds and other long-term obligations that will be paid from Governmental Funds are not recognized as a liability in the Fund financial statements until due.


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NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Fund Balance Reserves The following classifications describe the relative strength of the spending constraints placed on the purposes for which resources can be used: • Non-spendable fund balance - amounts that are not in a spendable form (such as inventory) or

are required to be maintained intact.

• Restricted fund balance - amounts constrained to specific purposes by their providers (such as grantors, bondholders and higher levels of government), through constitutional provisions, or by enabling legislation.

• Committed fund balance - amounts constrained to specific purposes by the District itself, using its

decision making authority; to be reported as committed, amounts cannot be used for any other purpose unless the District takes the action to remove or change the constraint.

• Assigned fund balance - amounts the District intends to use for specific purpose (such as

encumbrances); intent can be expressed by the District, or by an official or body, to which the District delegates the authority.

• Unassigned fund balance - amounts that are available for purpose; positive amounts are reported only in the General Fund.

It is the District's practice to liquidate funds when conditions have been met releasing these funds from legal, contractual, District or managerial obligations, using restricted funds first, followed by committed funds, assigned funds, then unassigned funds. Encumbrances Encumbrances are not liabilities and are not recorded as expenditures until receipt of material or service. Encumbrances remaining open at the end of the fiscal year are automatically re-budgeted in the following fiscal year. Encumbrances are considered a managerial assignment of fund balance in the governmental funds balance sheet. Pensions For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the County Employees Retirement System (CERS) and additions to/deductions from CERS’ fiduciary net position have been 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 the benefit terms. Investments are reported at fair value. Net Position Net position represents the difference between assets and liabilities. Net position invested in capital assets, net of related debt, consists of capital assets, net of accumulated depreciation, reduced by the outstanding balances of any borrowings used for the acquisition, construction or improvement of those assets. Net position is reported as restricted when there are limitations imposed on its use either through the enabling legislation adopted by the District, or through external restrictions imposed by creditors, grantors or laws or regulations of other governments.


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NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Operating Revenues and Expenses Operating revenues are those revenues that are generated directly from the primary activity of the Proprietary Funds. For the District, those revenues are primarily charges for meals provided by the various schools. Expenses are primarily payroll, food costs, and supply purchases. lnterfund Activity

Exchange transactions between funds are reported as revenues in the seller funds, and as expenditures/expenses in the purchaser funds. Flows of cash, or goods from one fund to another without a requirement for repayment, are reported as interfund transfers. lnterfund transfers are reported as other financing sources/uses in Governmental Funds and as non-operating revenues/expenses in Proprietary Funds. Repayments from funds responsible for particular expenditures/expenses to the funds that initially paid for them are not presented on the financial statements. Use of Estimates The process of preparing financial statements in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP) requires the use of estimates and assumptions regarding certain types of assets, deferred outflows of resources, liabilities, deferred inflows of resources, revenues, and expenses. Certain estimates relate to unsettled transactions and events as of the date of the financial statements. Other estimates relate to assumptions about the ongoing operations and may impact future periods. Accordingly, upon settlement, actual results may differ from estimated amounts.

NOTE 2 - CASH AND CASH EQUIVALENTS

At year end, the District had on deposit, cash and cash equivalents totaling $9,256,630. Of the total cash balance, $250,000 was covered by the Federal Depository Insurance Corporation (FDIC), with the remainder that needs to be covered by a collateral agreement held by the pledging banks' trust departments in the District's name. Cash and cash equivalents at June 30, 2016, consist of the following:

June 30,2016

Bank Balance $ 7,912,409

Book Balance $ 6,374,482

Funds held in escrow for future debt payments were $1,344,221 and $994,974 for the years ended June 30, 2016 and 2015, respectively. Allocation per financial statements:

Governmental Funds $ 6,061,830 Proprietary Funds 68,140 Fiduciary Funds 244,512

$ 6,374,482


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NOTE 2 - CASH AND CASH EQUIVALENTS (Continued) The District had the following non-cash transactions for the proprietary funds:

June 30,2016

Transfer of Capital Assets $ 850,000

Donated Commodities $ 16,459

On-Behalf Payments $ 21,749

NOTE 3 - CAPITAL ASSETS Capital asset activity for the fiscal year ended June 30, 2016 was as follows:

Beginning Additions / Deductions / EndingBalance Transfers Transfers Balance

Governmental Activities Land $ 769,584 $ - $ - $ 769,584 Construction In Progress 1,143,466 1,784,803 (1,143,467) 1,784,802 Land Improvements 1,362,057 - (15,800) 1,346,257 Buildings & Improvements 24,828,645 3,543,613 (11,491) 28,360,767 Technology Equipment 449,974 - (12,502) 437,472 Vehicles 420,252 - - 420,252 General Equipment 371,697 31,900 (25,196) 378,401

Total at Historical Cost 29,345,675 5,360,316 (1,208,456) 33,497,535

Less Accumulated Depreciation Land Improvements 942,549 29,969 (15,800) 956,718 Buildings & Improvements 4,463,207 545,519 (11,491) 4,997,235 Technology Equipment 424,692 11,404 (12,502) 423,594 Vehicles 336,505 22,184 - 358,689 General Equipment 264,754 22,228 (25,196) 261,786

Total Accumulated Depreciation 6,431,707 631,304 (64,989) 6,998,022

Governmental Activities Capital Assets, Net $ 22,913,968 $ 4,729,012 $ (1,143,467) $ 26,499,513

Business-Type Activities Buildings & Improvements $ 117,211 $ 380,000 $ - $ 497,211 General Equipment 202,629 470,000 (21,262) 651,367

Total at Historic Cost 319,840 850,000 (21,262) 1,148,578

Less Accumulated Depreciation Buildings & Improvements 103,866 15,031 - 118,897 General Equipment 132,870 40,686 (21,262) 152,294

Total Accumulated Depreciation 236,736 55,717 (21,262) 271,191

Business-Type Activities Capital Assets, Net $ 83,104 $ 794,283 $ - $ 877,387

Depreciation expense was not allocated to governmental functions. It appears on the statement of activities as unallocated.


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NOTE 4 - DEBT AND LEASE OBLIGATIONS The amount shown in the accompanying financial statements as bond obligations represents the District's future obligations to make payments relating to the bonds issued by the Beechwood Independent School District Finance Corporation. The following is a summary of the District’s long-term debt transactions for the year ended June 30, 2016.

Amount of AmountsDebt Debt Expected

Outstanding Outstanding to be PaidJuly 1, June 30, Within2015 Additions Reductions 2016 One Year

Governmental Activities General Obligation Bonds $ 21,625,000 $ 3,240,000 $ 680,000 $ 24,185,000 $ 725,000 Unamortized Premium - 5,318 (44) 5,274 266 Unamortized Discount (191,251) - 12,498 (178,753) (12,497)

$ 21,433,749 $ 3,245,318 $ 692,454 $ 24,011,521 $ 712,769

The repayment of general obligation bonds includes the following:

Paid by the District $ 579,587 Paid by the Kentucky School Facility Construction Commission 100,413

$ 680,000

Bonds The District, through the General Fund, (including Facility Support Program of Kentucky Fund (FSPK) and the Support Education Excellence in Kentucky (SEEK) Capital Outlay Fund) is obligated to make payments in amounts sufficient to satisfy debt service requirements on bonds issued by the sponsoring governmental entity to construct school facilities. The District entered into "participation agreements" with the School Facility Construction Commission (the Commission). The Commission was created by the Kentucky General Assembly for the purpose of assisting local school districts in meeting school construction needs. The table below sets forth the amount to be paid by the District and the Commission for each year until maturity of all bond issues. The liability for the total bond amount remains with the District and, as such, the total principal outstanding has been recorded in the financial statements.


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NOTE 4 - DEBT AND LEASE OBLIGATIONS (Continued) The original amount of each outstanding issue, the issue date, interest rates and outstanding balances at June 30, 2016 are summarized below:

OutstandingOriginal Balance at

Issue Date Amount Interest June 30, 2016

November, 2007 $ 2,125,000 3.30 - 5.65 % $ 890,000 September, 2010 3,860,000 1.00 - 5.00 3,040,000 December, 2011 7,560,000 5.00 7,560,000 July, 2014 5,315,000 1.65 - 3.25 5,095,000 April, 2015 4,475,000 2.00 - 3.10 4,360,000 May, 2016 3,240,000 2.00 - 3.00 3,240,000

Plus: Unamortized Bond Premium 5,274 Less: Unamortized Bond Discounts (178,753)

$ 24,011,521

All issues may be called prior to maturity at dates and redemption premiums specified in each issue. Assuming no bonds are called prior to scheduled maturity, the minimum obligations of the District, including amounts to be paid by the Commission, at June 30, 2016 for debt service (principal and interest) are as follows:

FederalPrincipal Interest Principal Interest Rebate Total

$ 626,357 $ 818,512 $ 98,643 $ 93,197 $ (420,021) $ 1,216,688 639,558 802,043 100,442 89,974 (418,597) 1,213,420 657,726 784,403 102,274 86,513 (416,969) 1,213,947 675,859 766,200 104,141 82,755 (415,077) 1,213,878 693,959 743,686 106,041 78,564 (412,786) 1,209,464 707,024 727,219 107,976 73,949 (410,107) 1,206,061 720,053 710,023 109,947 69,089 (407,218) 1,201,894 737,648 689,401 112,352 63,542 (404,075) 1,198,868 759,656 665,031 115,344 57,203 (400,729) 1,196,505 781,514 639,158 118,486 49,980 (396,648) 1,192,490 803,284 613,940 121,716 42,663 (392,560) 1,189,043 824,893 587,654 125,107 35,823 (389,112) 1,184,365 851,332 559,921 128,668 28,679 (385,529) 1,183,071 876,107 530,098 113,893 21,277 (381,770) 1,159,605 854,390 316,613 7,625,610 13,481 (189,922) 8,620,172 724,437 105,228 65,563 8,322 - 903,550 746,463 83,495 68,537 6,355 - 904,850 769,407 61,101 70,593 4,299 - 905,400 787,289 38,019 72,711 2,181 - 900,200 480,000 14,400 - - - 494,400

$ 14,716,956 $ 10,256,145 $ 9,468,044 $ 907,846 $ (5,841,120) $ 29,507,871

KY School FacilitiesBeechwood Independent School District Construction Commission


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NOTE 5 - ACCUMULATED UNPAID SICK LEAVE BENEFITS

Upon providing proof of qualification as an annuitant from the Kentucky Teachers’ Retirement System, certified and classified employees will receive from the District, an amount equal to 30% of the value of accumulated sick leave. At June 30, 2016, this amount totaled approximately $83,598 for those employees with twenty-seven or more years of experience. Changes in the District’s compensated absences during fiscal year 2016 were as follows:

AmountsExpected

Balance Balance to be PaidJune 30, June 30, Within

2015 Additions Reductions 2016 One Year

Governmental Activities Accumulated Sick Leave $ 26,192 $ 57,406 $ - $ 83,598 $ 30,111

The accumulated sick leave liability will be liquidated by the General Fund.

NOTE 6 - COMMITMENTS UNDER NON-CAPITALIZED LEASES

The District has operating leases for four copiers for sixty to sixty-three months that expire at various dates through December, 2020. Expenditures for the equipment under these operating leases totaled $28,891 for the year ended June 30, 2016. Future minimum rental lease payments under the leases are as follows:

Years EndingJune 30,

2017 $ 30,420 2018 25,610 2019 7,332 2020 6,320 2021 2,123

$ 71,805

The District’s total payroll for the year was $7,508,065. The payroll for employees covered under the following plans totaled $7,283,216.


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NOTE 7 - PENSION PLANS Kentucky Teachers' Retirement System Certified employees participate in the Kentucky Teachers' Retirement System (KTRS), which is a cost sharing, multiple-employer retirement system created by, and operating under, Kentucky law. The Kentucky Teachers' Retirement System covers all regular certified full-time employees of each school district. The plan provides for retirement, disability and death benefits. KTRS issues a publicly available financial report that includes financial statements and required supplementary information. The report may be obtained in writing from the Kentucky Teachers' Retirement System, 479 Versailles Road, Frankfort, Kentucky 40601-3800. Participating employees contribute 12.855% of creditable compensation. Matching contributions are made by the state. These on behalf payments are reflected in the District’s financial records and amounted to $930,864 for 2016. The matching contributions are paid by the federal program for any salaries paid by that program. Such contribution rates are determined by the District of Trustees of Kentucky Retirement Systems. The District contributed 16.105% of the employee's compensation paid by federal programs for the fiscal year ended June 30, 2016. In addition, the District contributed 3.00% of the employee’s compensation to the retiree medical insurance fund for employees who are not in federally funded positions. The District’s required contributions for pension obligations to KTRS for the fiscal years ended June 30, 2016, 2015, and 2014 were $1,018,924 (composed of $216,050 from the District and $802,874 from the employees), $866,241, and $708,916, respectively; 100% has been contributed for fiscal years 2016, 2015, and 2014. County Employees Retirement System General Information about the Pension Plan Plan description: County Employees Retirement System (CERS) consists of two plans, Nonhazardous and Hazardous. Each plan is a cost-sharing multiple-employer defined benefit pension plan administered by the Kentucky Retirement Systems (KRS) under the provision of Kentucky Revised Statute 61.645. The plan covers all regular full-time members employed in nonhazardous and hazardous duty positions of each participating county, city, and any additional eligible local agencies electing to participate in CERS. Benefits provided: These systems provide for retirement, disability, and death benefits to system members. Retirement benefits may be extended to beneficiaries of plan members under certain circumstances.


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NOTE 7 - PENSION PLANS (Continued) Nonhazardous Plan:

Age Years of Service Allowance Reduction

65 4 NoneAny 27 None55 5 6.5% per year for first five years, and 4.5% for next five years before

age 65 or 27 years of service.Any 25 6.5% per year for first five years, and 4.5% for next five years before

age 65 or 27 years of service.


65 5 None57 Rule of 87 None60 10 6.5% per year for first five years, and 4.5% for next five years before

age 65 or Rule of 87 (age plus years of service).


65 5 None57 Rule of 87 None

Retirement Eligibility for Members Whose Participation Began Before 09/01/2008

On or After 09/01/2008 but before 01/01/2014

Retirement Eligibility for Members Whose Participation Began On or After 01/01/2014

Retirement Eligibility for Members Whose Participation Began

Final Compensation X X Years of Service

2.20% if: Member begins participating prior to 08/01/2004.

2.00% if:Member begins participating on or after 08/01/2004 and before

09/01/2008.

Average of the last complete five if

participation began on or after 09/01/2008 but

before 01/01/2014.

Increasing percent based on service at

retirement* plus 2.00% for each year of service

over 30 if:

Member begins participating on or after 09/01/2008.

* Service (and Benefit Factor): 10 years or less (1.10%); 10 - 20 years (1.30%); 20 - 26 years (1.50%); 26 - 30 years (1.75%)

Benefit Formula for Tiers 1 & 2Benefit Factor

Average of the five highest if participation

began before 09/01/2008.

Includes earned service, purchased

service, prior service, and sick

leave service (if the member's employer

participates in an approved sick leave

program).


29

NOTE 7 - PENSION PLANS (Continued) Tier 3 member begins participating on or after 01/01/2014. Each year that a member is an active contributing member to the System, the member and the member’s employer will contribute 5.00% and 4.00% of creditable compensation respectively into a hypothetical account. This hypothetical account will earn interest annually on both the member’s and employer’s contribution at a minimum rate of 4.00%. If the System’s geometric average net investment return for the previous five years exceeds 4.00%, then the hypothetical account will be credited with an additional amount of interest equal to 75% of the amount of the return which exceeds 4.00%. All interest credits will be applied to the hypothetical account balance on June 30 based on the account balance as of June 30 of the previous year. Upon retirement the hypothetical account which includes member contributions, employer contributions, and interest credits can be withdrawn from the System as a lump sum or annuitized into a single life annuity option. Hazardous Plan:








60 5 NoneAny 25 None

Retirement Eligibility for Members Whose Participation Began On or After 01/01/2014

Retirement Eligibility for Members Whose Participation Began Before 09/01/2008

On or After 09/01/2008 but before 01/01/2014Retirement Eligibility for Members Whose Participation Began

Final Compensation X X Years of Service

Average of the three highest if participation

began before 09/01/2008.

2.50% if: Member begins participating before 09/01/2008.

Average of the three highest complete

years if participation began on or after

09/01/2008.

Increasing percent based on service at retirement* if:

Member begins participating on or after 09/01/2008 but before

01/01/2014.

* Service (and Benefit Factor): 10 years or less (1.30%); 10 - 20 years (1.50%); 20 - 25 years (2.25%); 25 + years (2.50%)

Benefit Factor

Includes earned service, purchased

service, prior service, and sick

leave service (if the member's employer

participates in an approved sick leave

program).

Benefit Formula


30

NOTE 7 - PENSION PLANS (Continued) Member begins participating on or after 01/01/2014. Each year that a member is an active contributing member to the System, the member and the member’s employer will contribute 8.00% and 7.50% of creditable compensation respectively into a hypothetical account. This hypothetical account will earn interest annually on both the member’s and employer’s contribution at a minimum rate of 4.00%. If the System’s geometric average net investment return for the previous five years exceeds 4.00%, then the hypothetical account will be credited with an additional amount of interest equal to 75% of the amount of the return which exceeds 4.00%. All interest credits will be applied to the hypothetical account balance on June 30 based on the account balance as of June 30 of the previous year. Upon retirement the hypothetical account which includes member contributions, employer contributions, and interest credits can be withdrawn from the System as a lump sum or annuitized into a single life annuity option. Nonhazardous and Hazardous Plans: For post-retirement death benefits, if the member is receiving a monthly benefit based on at least four (4) years of creditable service, the retirement system will pay a $5,000 death benefit payment to the beneficiary named by the member specifically for this benefit. For disability benefits, members participating before 08/01/2004 may retire on account of disability provided the member has at least 60 months of service credit and is not eligible for an unreduced benefit. Additional service credit may be added for computation of benefits under the benefit formula. Members participating on or after 08/01/2004 but before 01/01/2014 may retire on account of disability provided the member has at least 60 months of service credit. Benefits are computed as the highest of 20% for nonhazardous and 25% for hazardous of Final Rate of Pay or the amount calculated under the Benefit Formula based upon actual service. Members participating on or after 01/01/2014 may retire on account of disability provided the member has at least 60 months of service credit. The hypothetical account which includes member contributions, employer contributions, and interest credits can be withdrawn from the System as a lump sum or an annuity equal to the larger of 20% for nonhazardous and 25% for hazardous of the member’s monthly final rate of pay or the annuitized hypothetical account into a single life annuity option. Members disabled as a result of a single duty-related injury or act of violence related to their job may be eligible for special benefits. For pre-retirement death benefits, the beneficiary of a deceased active member will be eligible for a monthly benefit if the member was: (1) eligible for retirement at the time of death or, (2) under the age of 55 with at least 60 months of service credit and currently working for a participating agency at the time of death or (3) no longer working for a participating agency but at the time of death had at least 144 months of service credit. If the beneficiary of a deceased active member is not eligible for a monthly benefit, the beneficiary will receive a lump sum payment of the member’s contributions and any accumulated interest. Monthly retirement allowances are increased July 1 each year by 1.00% to 1.50%. The Kentucky General Assembly has the authority to increase, suspend, or reduce Cost of Living Adjustments. HB 265 of 2012 eliminated the July 1, 2012 and July 1, 2013 COLAs for all retirees. SB2 of 2013 eliminated all future COLAs unless the State Legislature so authorizes on a biennial basis and either (1) the system is over 100.00% funded or (2) the Legislature appropriates sufficient funds to pay the increased liability for the COLA. Contributions: For the fiscal years ended June 30, 2016 and 2015, plan members who began participating prior to September 1, 2008, were required to contributed 5% nonhazardous and 8% hazardous of their annual creditable compensation. These members were classified in the Tier 1 structure of benefits.


31

NOTE 7 - PENSION PLANS (Continued) Plan members who began participating on, or after, September 1, 2008, were required to contribute a total of 6% for nonhazardous and 9% for hazardous of their annual creditable compensation. The 1% was deposited to an account created for the payment of health insurance benefits under 26 USC Section 401(h) in the Pension Fund. These members were classified in the Tier 2 structure of benefits. Interest is paid each June 30 on members’ accounts at a rate of 2.50%. If a member terminates employment and applies to take a refund, the member is entitled to a full refund of contributions and interest; however, the 1% contribution to the 401(h) account is non-refundable and is forfeited. Plan members who began participating on or after January 1, 2014, were required to contribute to the Cash Balance Plan. These members were classified in the tier 3 structure of benefits. The Cash Balance Plan is known as a hybrid plan because it has characteristics of both a defined benefit plan and a defined contribution plan. Members in the plan contribute a set percentage of their salary each month to their own account. Members contribute 5% nonhazardous and 8% hazardous of their annual creditable compensation and 1% to the health insurance fund which is not credited to the member’s account and is not refundable. The employer contribution rate is set annually by the Board based on an actuarial valuation. The employer contributes a set percentage of the member’s salary. Each month, when employer contributions are received, an employer pay credit is deposited to the member’s account. A member’s account is credited with a 4% nonhazardous and 7.5% hazardous employer pay credit. The employer pay credit represents a portion of the employer contribution. Participating employers were required to contribute at an actuarially determined rate for CERS pensions. Per Kentucky Revised Statute Section CERS 78.545, normal contribution and past service contribution rates shall be determined by the Board on the basis of an annual valuation last preceding July 1 of a new biennium. The Board may amend contribution rates as of the first day of July of the second year of a biennium, if it is determined on the basis of a subsequent actuarial valuation that amended contribution rates are necessary to satisfy requirements determined in accordance with actuarial bases adopted by the Board. For the fiscal year ended June 30, 2016, participating employers contributed 17.06% (12.42% pension fund and 4.64% insurance fund) for the nonhazardous system and 32.95% (20.26% pension fund and 12.69% insurance fund) for the hazardous system of each employee’s creditable compensation. The actuarially determined rates, set by the Board for the fiscal years, were a percentage of each employee’s creditable compensation. Contributions to the pension fund excluding the insurance portion from the County were $129,141 for the year ended June 30, 2016. Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions At June 30, 2016, the District reported a liability of $1,794,192 for its proportionate share of the net pension liability. The net pension liability was measured as of June 30, 2015, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. The District’s proportion of the net pension liability was based on the District’s share of contributions to the pension plan relative to the contributions of all participating employers. At June 30, 2016, the District’s proportion for the nonhazardous system was 0.04% and for the hazardous system was 0%, which was approximately the same as its proportion measured as of June 30, 2015. Change of Benefit Terms: The following changes were made by the Kentucky Legislature and reflected in the valuation performed as of June 30, 2015 are listed below:


32

NOTE 7 - PENSION PLANS (Continued) 2009: A new benefit tier for members who first participate on or after September 1, 2008 was introduced which included the following changes:

1) Tiered structure for benefit accrual rates 2) New retirement eligibility requirements 3) Different rules for the computation of final average compensation

2014: A cash balance plan was introduced for members whose participation date is on or after January 1, 2014. For the year ended June 30, 2016, the District recognized pension expense of $320,583. At June 30, 2016, the District reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

Deferred DeferredOutflows of Inflows ofResources Resources

Net Difference Between Projected and Actual Earnings on Pension Plan Investments $ 16,083 $ 111,000

Difference Between Expected and Actual Experience 14,910 -

Changes of Assumptions 180,925 -

Changes in Proportion and Differences Between Employer Contributions and Proportionate Share of Contributions 19,272 -

District Contributions Subsequent to the Measurement Date 129,140 -

Total $ 360,330 $ 111,000

The $129,140 reported as deferred outflows of resources related to pensions resulting from District contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, 2017. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows:

Years EndingJune 30,

2017 $ 52,721 2018 52,721 2019 10,728 2020 4,020

Total $ 120,190


33

NOTE 7 - PENSION PLANS (Continued) Actuarial assumptions: The total pension liability in the June 30, 2015 actuarial valuation was determined using the following actuarial methods and assumptions, applied to all periods included in the measurement:

Valuation Date: June 30, 2015 Experience Study: July 1, 2008 – June 30, 2013 Actuarial Cost Method: Entry Age Normal Amortization Method: Level Percentage of Payroll, Closed Remaining Amortization Period: 28 Years Asset Valuation Method: 5-Year Smoothed Market Inflation: 3.25% Salary Increase: 4.00%, Average, Including Inflation Investment Rate of Return: 7.50% Net of Pension Plan Investment Expense, Including Inflation

The mortality table used for active members is RP-2000 Combined Mortality Table projected with Scale BB to 2013 (multiplied by 50% for males and 30% for females). For health retired members and beneficiaries, the mortality table used is the RP-2000 Combined Mortality Table projected with Scale BB to 2013 (set back 1 year for females). For disabled members, the RP-2000 combined Disabled Mortality Table projected with Scale BB to 2013 (set back 4 years for males) is used for the period after disability retirement. There is some margin in the current mortality tables for possible future improvement in mortality rates and that margin will be reviewed again when the next experience investigation is conducted.

The long-term expected return on plan assets is reviewed as part of the regular experience studies prepared every five year for KRS. The most recent analysis, performed for the period covering fiscal years 2008 through 20013, is outlined in a report dated April 30, 2014. Several factors are considered in evaluating the long-term rate of return assumption including long term historical data, estimates inherent in current market data, at a log-normal distribution analysis in which best-estimate ranges of expected future real rates of return (expected return, net of investment expense, and inflation) were developed by the investment consultant for each major asset class. These ranges were combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and then adding expected inflation. The capital market assumptions developed by the investment consultant are intended for use over a 10-year horizon and may not be useful in setting the long-term rate of return for funding pension plans which covers a longer timeframe. The assumption is intended to be a long term assumption and is not expected to change absent a significant change in the asset allocation, a change in the inflation assumption, or a fundamental change in the market that alters expected returns in future years.

The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table:

Target Long Term ExpectedAsset Class Allocation Nominal Return

Combined Equity 44.00% 5.40%Combined Fixed Income 19.00% 1.50%Real Return (Diversified Inflation Strategies) 10.00% 3.50%Real Estate 5.00% 4.50%Absolute Return (Diversified Hedge Funds) 10.00% 4.25%Private Equity 10.00% 8.50%Cash Equivalent 2.00% -0.25%

Total 100.00%


34

NOTE 7 - PENSION PLANS (Continued) Discount rate: The discount rate used to measure the total pension liability was 7.50%. The projection of cash flows used to determine the discount rate assumed that local employers would contribute the actuarially determined contribution rate of projected compensation over the remaining 28 year amortization period of the unfunded actuarial accrued liability. The actuarial determined contribution rate is adjusted to reflect the phase in of anticipated gains on actuarial value of assets over the first four years of the projection period. The discount rate determination does not use a municipal bond rate. The periods of projected benefit payments for all current plan members were projected through 2117. Sensitivity of the District’s proportionate share of the net pension liability to changes in the discount rate: The following presents the District’s proportionate share of the net pension liability using the discount rate of 7.50%, as well as what the District’s proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1-percentage-point lower (6.50%) or 1-percentage-point higher (8.50%) than the current rate:

1% Decrease Current Discount 1% Increase(6.50%) Rate (7.50%) (8.50%)

Nonhazardous $ 2,290,509 $ 1,794,192 $ 1,369,140

Changes of assumptions: Since the prior measurement date, the demographic and economic assumptions that affect the measurement of the total pension liability have been updated. The changes are noted below.

1) The assumed investment rate of return was decreased from 7.75% to 7.50%.

2) The assumed rate of inflation was reduced from 3.50% to 3.25%.

3) The assumed rate of wage inflation was reduced from 1.00% to 0.75%.

4) Payroll growth assumption was reduced from 4.50% to 4.00%.

5) The mortality table used for active members is RP-2000 Combined Mortality Table projected with Scale BB to 2013 (multiplied by 50% for males and 30% for females).

6) For healthy retired members and beneficiaries, the mortality table used is the RP-2000 Combined Mortality Table projected with Scale BB to 2014 (set back 1 year for females). For disabled members, the RP-2000 Combined Disabled Mortality Table projected with Scale BB to 2013 (set back 3 years for males) is used for the period after disability retirement. There is some margin in the current mortality tables for possible future improvement in mortality rates and that margin will be reviewed again when the next experience investigations is conducted.

7) The assumed rates of Retirement, Withdrawal, and Disability were updated to more accurate reflect experience.

Payables to the pension plan: At June 30, 2016, the District did not have any required contributions payable to the pension plan for the year ended June 30, 2016. Pension plan fiduciary net position: Detailed information about the pension plan’s fiduciary net position is available in the separately issued Kentucky Retirement Systems Comprehensive Annual Financial Report on the KRS website at www.kyret.ky.gov.

http://www.kyret.ky.gov/


35

NOTE 8 - CONTINGENCIES The District receives funding from federal, state and local government agencies as well as private contributions. These funds are to be used for designated purposes only. For government agency grants, if the grantors' review indicates that the funds have not been used for the intended purpose, the grantor may request a refund of monies advanced, or refuse to reimburse the District for its disbursements. The amount of such future refunds and unreimbursed disbursements, if any, is not expected to be significant. Continuation of the District's grant programs is predicated upon the grantors' satisfaction that the funds provided are being spent as intended and the grantors' intent to continue the programs.

NOTE 9 - INSURANCE AND RELATED ACTIVITIES The District is exposed to various forms of loss of assets associated with the risks of fire, personal liability, theft, vehicular accidents, errors and omissions, fiduciary responsibility, etc. Each of these risk areas are covered through the purchase of commercial insurance. The District has purchased certain policies which are retrospectively rated.

NOTE 10 - RISK MANAGEMENT The District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. To obtain insurance for workers' compensation, errors and omissions, and general liability coverage, the District participates in the Kentucky School Districts Insurance Trust Liability Insurance Fund. These public entity risk pools operate as common risk management and insurance programs for all school districts and other tax supported educational agencies of Kentucky who are members of the Kentucky School Districts Association. The District pays an annual premium to each fund for coverage. Contributions to the Workers' Compensation Fund are based on premium rates established by such fund in conjunction with the excess insurance carrier, subject to claims experience modifications and a group discount amount. Dividends may be declared, but are not payable until twenty-four (24) months after the expiration of the self insurance term. The Liability Insurance Fund pays insurance premiums of the participating members established by the insurance carrier. The Trust can terminate coverage if it is unable to obtain acceptable excess general liability coverage, and for any reason, by giving ninety (90) days notice. In the event the Trust terminated coverage, any amount remaining in the Fund (after payment of operational and administrative costs, and claims for which coverage was provided) would be returned to the member on a pro rata basis. The District purchases unemployment insurance through the Kentucky School Districts Insurance Trust Unemployment Compensation Fund; however, risk has not been transferred to such fund. In addition, the District continues to carry commercial insurance for all other risks of loss. Settled claims resulting from these risks have not exceeded commercial insurance coverage in any of the past three fiscal years.


36

NOTE 11 - TRANSFER OF FUNDS The following transfers were made during the year.

From Fund To Fund Purpose Amount

General Construction Construction $ 75,000 General Special Revenue Local Grant to Band $ 48,000 General Special Revenue KETS $ 29,304

Special Revenue Construction Construction $ 337,742 Capital Outlay Construction Construction $ 90,042 Capital Outlay Debt Service Debt Service $ 126,565 Building Fund Construction Construction $ 636,871 Building Fund Debt Service Debt Service $ 767,015 Construction Construction Carryover to New Project $ 293,227 Construction Food Service Cafeteria Remodel $ 850,000

NOTE 12 - ON-BEHALF PAYMENTS

As amounts are paid by various state agencies on-behalf of the District, the amounts are recognized as revenues and expenditures by the District. On the statement of revenues, expenditures and changes in fund balance, the on-behalf payments are included with state revenue and are included in the functional expense classifications. On the statement of activities, the on-behalf payments are included in the functional expense classifications and are included with program operating grants and contributions for the respective functions. A summary of on-behalf payments during 2016 is as follows:

2016

Payments Made by the State for Fringe Benefits of District Employees and Technology Expenses - Included in the Following Expense Classifications:

Instruction $ 1,452,123 Supporting Services

Student 107,120 Instructional Staff 70,773 District Administration 49,433 School Administration 130,163 Business Support Services 148,631 Plant Operation and Maintenance 49,797 Student Transportation 3,997 Food Service Operations 21,749

$ 2,033,786

Payments Made by the KSFCC for its Participation in the District's Bonds Included in Debt Service Expenditures $ 174,979 Included in Deferred Revenue 316,810

Total Payments Made by KSFCC $ 491,789


37

NOTE 13 – PRIOR PERIOD ADJUSTMENT Total capital assets in the prior year were understated for governmental activities by $700. The deferred loss on refunding, net was overstated in the prior year for governmental activities by $234,517. Bond premium proceeds were netted against the bonds payable in the prior year. However, these should be expensed when incurred and a deferred loss on refunding calculated. This resulted in bonds payable for governmental activities being overstated by $61,345. For the year ended June 30, 2015, the District adopted Governmental Accounting Standards Board (GASB) Statement No. 68, Accounting and Financial Reporting for Pensions – an amendment of GASB Statement No. 27, for the County Employee’s Retirement System and Statement No. 71 – Pension Transition for Contributions Made Subsequent to the Measurement Date. The District did not recognize contributions after measurement date totaling $124,581. Therefore, net position was understated by $124,581. Additionally, none of the pension liability, deferred outflows or deferred inflows of resources, nor pension expense was allocated to the business-type activities. As a result, the net position for the governmental activities was understated and the business-type activities was overstated by $174,060. The items noted above had the following effect:

Business-Governmental Type

Activities Activities Total

Net Position, June 30, 2015 $ 7,003,803 $ 124,013 $ 7,127,816 Difference in Capital Assets, Net 700 - 700 Overstatement of Deferred Loss on Refunding, Net (234,517) - (234,517) Reclassification of Bond Premium Proceeds to Interest Expense 61,345 - 61,345 Contributions after Measurement Date 109,910 14,671 124,581 Recognition of GASB 68 and 71

for Business-Type Activities 174,060 (174,060) -

Restated Net Position, June 30, 2015 $ 7,115,301 $ (35,376) $ 7,079,925

NOTE 14 – DUAL DATED AUDITORS’ REPORT

The audit report has been dual dated as of February 23, 2017 due to a subsequent discovered fact that became known after the release of the audit report that existed prior to the original issue date. As of June 30, 2016, a total of $100,000 had been transferred from the General Fund to the Special Revenue Fund for the anticipated future acquisition of a school bus, however $30,000 of the total amount was transferred during the year ended June 30, 2016. The financial statements have been reissued in order to remove the $30,000 transfer between funds, to record a due from (to) other funds of $100,000 and to restate the General Fund balance by an increase of $70,000 and to restate the Special Revenue Fund balance by a decrease of $70,000. No other procedures have been completed from the original issue date of November 1, 2016 through February 23, 2017.

REQUIRED SUPPLEMENTARY INFORMATION

38

Variancewith Final

BudgetFavorable

Original Final Actual (Unfavorable)Revenues Taxes $ 4,667,000 $ 4,797,000 $ 4,952,436 $ 155,436 Tuition 437,000 432,000 411,483 (20,517) Other Local Sources 5,000 5,000 12,578 7,578 State Sources 5,528,102 5,822,563 6,051,528 228,965 Federal Sources 7,000 8,000 - (8,000) Other Sources 51,300 52,300 71,988 19,688

Total Revenues 10,695,402 11,116,863 11,500,013 383,150

Expenditures Instructional 6,952,857 7,234,131 7,223,759 10,372 Support Services Student 536,574 542,585 549,980 (7,395) Instructional Staff 399,751 410,641 448,534 (37,893) District Administration 446,221 499,346 495,633 3,713 School Administration 686,668 693,886 678,361 15,525 Business 609,704 605,565 591,561 14,004 Plant Operation and Maintenance 1,249,170 1,233,207 1,246,849 (13,642) Student Transportation 151,924 151,924 94,066 57,858 Contingency 1,332,533 1,795,578 - 1,795,578

Total Expenditures 12,365,402 13,166,863 11,328,743 1,838,120

(Deficit) Excess of Revenues Over Expenditures (1,670,000) (2,050,000) 171,270 2,221,270

Other Financing Sources (Uses) Operating Transfers In - - - - Operating Transfers Out (30,000) (30,000) (152,304) (122,304)

Total Other Financing Uses (30,000) (30,000) (152,304) (122,304)

Net Change in Fund Balance (1,700,000) (2,080,000) 18,966 2,098,966

Fund Balance July 1, 2015, As Restated 2,374,810 2,374,810 2,374,810 -

Fund Balance June 30, 2016 $ 674,810 $ 294,810 $ 2,393,776 $ 2,098,966


BUDGET AND ACTUAL - GENERAL FUNDYEAR ENDED JUNE 30, 2016

Budgeted Amounts

39

Variancewith Final

BudgetFavorable

Original Final Actual (Unfavorable)Revenues Earnings on Investments $ - $ - $ 32,437 $ 32,437 State Sources 68,348 174,979 174,979 - Federal Sources 375,732 390,475 392,466 1,991

Total Revenues 444,080 565,454 599,882 34,428

ExpendituresDebt Service

Principal 509,228 680,000 680,000 - Interest 658,092 779,148 781,025 (1,877)

Total Expenditures 1,167,320 1,459,148 1,461,025 (1,877)

Deficit of Revenues Over Expenditures (723,240) (893,694) (861,143) 32,551

Other Financing Sources (Uses) Operating Transfers In 723,240 893,694 893,580 (114) Operating Transfers Out - - - -

Total Other Financing Sources (Uses) 723,240 893,694 893,580 (114)

Net Change in Fund Balance - - 32,437 32,437

Fund Balance July 1, 2015 44,544 44,544 44,544 -

Fund Balance June 30, 2016 $ 44,544 $ 44,544 $ 76,981 $ 32,437


BUDGET AND ACTUAL - DEBT SERVICE FUNDYEAR ENDED JUNE 30, 2016

Budgeted Amounts

40

Variancewith Final

BudgetFavorable

Original Final Actual (Unfavorable)Revenues Earnings on Investments $ - $ - $ 184 $ 184 Other Sources - - 2,884 2,884

Total Revenues - - 3,068 3,068

Expenditures Building Improvements - 4,498,576 4,184,949 313,627

Deficit of Revenues Over Expenditures - (4,498,576) (4,181,881) 316,695

Other Financing Sources (Uses) Proceeds from Bond Issuance - 3,240,000 3,240,000 - Bond Issuance Costs - 102,510 (32,393) (134,903) Operating Transfers In - 1,361,086 1,432,882 71,796 Operating Transfers Out - - (1,143,227) (1,143,227)

Total Other Financing Sources (Uses) - 4,703,596 3,497,262 (1,206,334)

Net Change in Fund Balance - 205,020 (684,619) (889,639)

Fund Balance July 1, 2015 3,540,351 3,540,351 3,540,351 -

Fund Balance June 30, 2016 $ 3,540,351 $ 3,745,371 $ 2,855,732 $ (889,639)


BUDGET AND ACTUAL - CONSTRUCTION FUNDYEAR ENDED JUNE 30, 2016

Budgeted Amounts

41

2016 2015

District's Proportion of the Net Pension Liability (Asset) 0.04% 0.04%

District's Proportionate Share of the Net Pension Liability (Asset) $ 1,794,192 $ 1,330,000

District's Covered - Employee Payroll $ 1,037,534 $ 925,405

District's Proportionate Share of the Net Pension Liability (Assets) as a Percentage of Its Covered-Employee Payroll 172.93% 143.72%

Plan Fiduciary Net Position as a Percentage of the Total Pension Liability - Non Hazardous 59.97% 66.80%

JUNE 30,SCHEDULE OF THE DISTRICT'S PROPORTIONATE SHARE OF THE NET PENSION LIABILITY


County Employees Retirement System

42

Nonhazardous 2016 2015

Contractually Required Contribution $ 129,141 $ 124,581

Contributions in Relation to the Contractually Required Contribution (129,141) (124,581)

Contribution Deficiency (Excess) $ - $ -

District's Covered-Employee Payroll $ 1,037,534 $ 925,405

Contributions as a Percentage of Covered-Employee Payroll 12.45% 13.46%

BEECHWOOD INDEPENDENT SCHOOL DISTRICTSCHEDULE OF THE DISTRICT'S CONTRIBUTIONS

JUNE 30,

County Employees Retirement SystemLast 2 Fiscal Years

OTHER SUPPLEMENTARY INFORMATION

43

TotalSpecial Capital Non-Major

Revenue Outlay Building GovernmentalFund Fund Fund Funds

Assets Cash and Cash Equivalents $ 64,369 $ - $ - $ 64,369 Accounts Receivable 179,031 - - 179,031 Due to General Fund (100,000) - - (100,000)

Total Assets $ 143,400 $ - $ - $ 143,400

Liabilities and Fund Balances Liabilities Accounts Payable $ 50 $ - $ - $ 50 Unearned Revenues 22,704 - - 22,704

Total Liabilities 22,754 - - 22,754

Fund Balances Restricted Special Revenue Fund 120,646 - - 120,646

Total Fund Balances 120,646 - - 120,646

Total Liabilities and Fund Balances $ 143,400 $ - $ - $ 143,400

BEECHWOOD INDEPENDENT SCHOOL DISTRICTCOMBINING BALANCE SHEET

NON-MAJOR GOVERNMENTAL FUNDSJUNE 30, 2016

44

TotalSpecial Capital Non-Major

Revenue Outlay Building GovernmentalFund Fund Fund Funds

Revenues Taxes $ - $ - $ 636,394 $ 636,394 Earnings on Investments 49 - - 49 State Sources 364,577 126,565 305,207 796,349 Federal Sources 409,326 - - 409,326 Other Sources 136,963 - - 136,963

Total Revenues 910,915 126,565 941,601 1,979,081

Expenditures Instructional 894,561 - - 894,561 Support Services Students 610 - - 610 Instructional Staff 18,022 - - 18,022

Total Expenditures 913,193 - - 913,193

(Deficit) Excess of Revenues Over Expenditures (2,278) 126,565 941,601 1,065,888

Other Financing Sources (Uses) Operating Transfers In 77,304 - - 77,304 Operating Transfers Out (337,742) (216,607) (1,403,886) (1,958,235)

Total Other Financing (Uses) Sources (260,438) (216,607) (1,403,886) (1,880,931)

Net Change in Fund Balance (262,716) (90,042) (462,285) (815,043) Fund Balance July 1, 2015, as Restated 383,362 90,042 462,285 935,689

Fund Balance June 30, 2016 $ 120,646 $ - $ - $ 120,646

NON-MAJOR GOVERNMENTAL FUNDSYEAR ENDED JUNE 30, 2016

BEECHWOOD INDEPENDENT SCHOOL DISTRICTCOMBINING STATEMENT OF REVENUES, EXPENDITURES AND

CHANGES IN FUND BALANCE

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Cash Cash FundBalances Balances Balances

July 1, Disburs- June 30, Accounts Accounts June 30,Fund Accounts 2015 Receipts ments 2016 Receivable Payable 2016

Interest-Undistributed $ 35 $ 371 $ - $ 406 $ - $ - $ 406 Yearbook Account 18,785 15,016 12,478 21,323 - - 21,323 Science Club 39 925 948 16 - - 16 OM 856 20,050 20,735 171 - - 171 Chess Club - - (29) 29 - - 29 Summer Camps - 100 - 100 - - 100 Little Siblings 966 830 804 992 - - 992 Honor Choir 168 1,727 1,816 79 - - 79 National Honor Society 2,192 20,278 18,341 4,129 - - 4,129 National Junior Honor Society 875 4,894 5,181 588 - - 588 High School Play 8,580 9,541 7,426 10,695 - - 10,695 Special Theater Account 12,174 7,430 15,875 3,729 - - 3,729 Student Council 10,562 9,045 14,425 5,182 - - 5,182 Elementary Fundraisers A-N 22,825 31,817 37,414 17,228 - - 17,228 Athletic Fundraisers 50,011 99,528 100,685 48,854 - - 48,854 High School Fundraisers A-J 3,526 43,118 44,091 2,553 - - 2,553 Athletic Account 59,703 138,507 123,603 74,607 - - 74,607 Scholarships 2,070 - 450 1,620 - - 1,620 Edgar McNabb Scholarship 2,080 - 400 1,680 - - 1,680 High School Clubs 6,982 25,774 23,986 8,770 - - 8,770 Class Of 2018 - 500 - 500 - - 500 Class Of 2017 - 14,080 13,195 885 - - 885 Class Of 2016 2,125 9,578 6,272 5,431 - - 5,431 Class Of 2015 5,528 - 5,528 - - - - Elementary Grades Account 5,300 10,793 11,273 4,820 - - 4,820 Bus Fees- Field Trips - 10,993 10,993 - - - - Junior Class Trip 730 - - 730 - - 730 HS Student Recognition 4,663 1,245 613 5,295 - - 5,295 HS Field Trips & Misc. Studies 17,362 12,610 17,967 12,005 - - 12,005 Junior Achievement 219 - - 219 - - 219 College Boot Camp 3,286 9,875 8,191 4,970 - - 4,970 Parking Passes - 1,365 (200) 1,565 - - 1,565 Student Fees 12,343 71,002 78,004 5,341 - - 5,341

Subtotal 253,985 570,992 580,465 244,512 - - 244,512

Interfund Transfers - 39,540 39,540 - - - -

Total $ 253,985 $ 531,452 $ 540,925 $ 244,512 $ - $ - $ 244,512

STATEMENT OF RECEIPTS, DISBURSEMENTS AND FUND BALANCEBEECHWOOD INDEPENDENT BOARD OF EDUCATION

YEAR ENDED JUNE 30, 2016


SCHOOL ACTIVITY FUND

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INDEPENDENT AUDITORS’ REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS

BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS

Kentucky State Committee for School District Audits and Members of the Board of Education Beechwood Independent School District Fort Mitchell, Kentucky We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, and the audit requirements prescribed by the Kentucky State Committee for School District Audits in the Independent Auditor’s Contract – General Audit Requirements, State Compliance Requirements, Appendix I to the Independent Auditor’s Contract – Audit Extension Request and Appendix II to the Independent Auditor’s Contract – Instructions for Submission of the Audit Report, Audit Acceptance Statement, AFR and Balance Sheet, Statement of Certification, and Audit Report the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of Beechwood Independent School District as of and for the year ended June 30, 2016, and the related notes to the financial statements, which collectively comprise Beechwood Independent School District’s basic financial statements, and have issued our report thereon dated November 1, 2016 (except for Note 14, as to which the date is February 23, 2017). Internal Control over Financial Reporting In planning and performing our audit of the financial statements, we considered Beechwood Independent School District’s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of Beechwood Independent School District’s internal control. Accordingly, we do not express an opinion on the effectiveness of Beechwood Independent School District’s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or, significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.


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Compliance and Other Matters As part of obtaining reasonable assurance about whether the Beechwood Independent School District’s financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that is required to be reported under Government Auditing Standards. We did however note certain matters that we reported to management beginning on page 51. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.

VonLehman & Company Inc. Fort Mitchell, Kentucky November 1, 2016 (except for Note 14, as to which the date is February 23, 2017)

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BEECHWOOD INDEPENDENT SCHOOL DISTRICT MANAGEMENT LETTER COMMENTS

FOR THE FISCAL YEAR ENDED JUNE 30, 2016

Kentucky State Committee for School District Audits and Members of the Board of Education Beechwood Independent School District Fort Mitchell, Kentucky In planning and performing our audit of the financial statements of the Beechwood Independent School District (the District) for the year ended June 30, 2016, we considered the District’s internal controls in order to determine the audit procedures that are appropriate for the purpose of expressing an opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the District’s internal controls. During the course of our audit we also selected samples of school activity funds for our auditing tests. Through these procedures we became aware of a few matters that are opportunities for strengthening internal controls and operating efficiency. The following summarizes our comments and suggestions regarding these matters. We previously reported on the District’s internal controls in our report dated November 1, 2016 (except for Note 14, as to which the date is February 23, 2017). This letter does not affect our report dated November 1, 2016 (except for Note 14, as to which the date is February 23, 2017) on the financial statements of the Beechwood Independent School District. Our findings are presented below: ITEM 2016-001 – ACTIVITY FUNDS

General Findings for All Schools

• The activity funds for Beechwood Elementary School and Beechwood High School are combined into one general activity fund. We recommend these funds be split into a separate activity fund for the Elementary School as well as the High School. This will allow the schools to better track their individual funds as well as assist the principals with administrating these funds as required by the Redbook.

• The Annual Financial Report includes the activity funds for Beechwood Elementary School and Beechwood High School. However, only one principal is currently reviewing and signing the report. We recommend, as noted above, the activity funds be split into a separate activity fund for the Elementary School as well as the High School. Then when the Annual Financial Report for each activity fund is created, the corresponding principal reviews and signs off on their respective report.

• During review of the Annual Financial Report, it was noted that senior accounts, Class of 2016 for example, were not being closed out when the seniors graduated. Instead, they are remaining open until the beginning of the next year. We recommend these accounts be closed out once the seniors graduate. The sponsor and principal shall sign the Transfer Form (F-SA-10) to distribute the remaining funds of the inactive account. If the student organization did not designate in writing how the unobligated remaining funds shall be disposed, then the funds shall be transferred to the school activity general account and used for the general benefit of all students.

• The school treasurer is receiving the bank statements and then sending them to the principals to review and sign. We recommend the bank statements be e-mailed directly (if electronically) or opened (if mailed or picked up) by the principal prior to the treasurer having access to it.

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FOR THE YEAR ENDED JUNE 30, 2016 (CONTINUED)

• As the general activity fund includes the activity funds for Beechwood Elementary School and

Beechwood High School, both principals should be receiving the bank statement for review and signing and dating the front page after review. However, we noted that both principals are not signing and dating the front page indicating their review. We recommend both principals receive the bank statement to review, sign, and date. Once the activity funds are split into two, as recommended above, we recommend each principal receive their respective bank statement to review, sign, and date.

• Multiple Receipt Forms (Form F-SA-6) are not currently being signed by students third grade and above when money is being collected. We recommend any student above third grade sign the form as they are turning in money to a teacher or sponsor.

• Multiple Receipt Forms (Form F-SA-6) are not always being signed and dated by the person remitting the funds to the treasurer. We recommend when the Multiple Receipt Form is being turned in to the treasurer, the form be signed and dated by the person remitting the money.

• Multiple Receipt Forms (Form F-SA-6) are not always being signed and dated by the treasurer when receiving the form. We recommend the Multiple Receipt Form be signed and dated when the treasurer receives the form.

• There were instances where deposits greater than $100 were being held for a few days before being taken to the bank for deposit. We recommend all monies collected shall be deposited on a daily basis except if the deposit amount is less than $100. However, at a minimum, deposits should be made on a weekly basis event if the deposit amount is less than $100.

• There were instances noted when a Multiple Receipt Form (Form F-SA-6) was not properly completed. We recommend the teacher or sponsor review the form prior to turning in to the treasurer to ensure all items on the form are properly completed.

• There were instances noted where the invoice did not include the check number and the date paid. As per the Redbook, we recommend the check number and date paid be noted on all invoices.

• There were instances noted where the invoice was not being marked “Paid”. We recommend each invoice be marked “Paid” once they are paid to reduce the possibility of duplicate payments.

• There were instances noted where the purchase order was completed after the purchase was initiated. We recommend purchase orders be prepared and approved by the sponsor and principal before initiating the purchase and payment is obligated for all purchases, including for independent contractors and reimbursements to district employees.

• There were instances noted where the invoice was not being matched with the purchase order. We recommend the treasurer match up the purchase order, shipping document (if applicable), and vendor invoice and verify all items ordered have been received, services have been satisfactorily performed, all amounts agree, and that all necessary approvals and signatures have been obtained. Any problems or discrepancies should be resolved before a check is written.

• There were instances noted where the person receiving the goods did not sign the invoice. We recommend the vendor invoice have a confirmation signature of the person receiving the goods or services before the payment process continues.

• There were instances noted where the sponsor did not sign the transfer form. We recommend the sponsor of the remitting (paying) activity account and the principal both sign the transfer form indicating their review and approval.

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ITEM 2016-002 – CASH ACCOUNTS

• Currently, FEBCO funds for substitute teachers is included in the general fund checking account. However, these funds are not the District’s funds and should not be commingled. We recommend the District put these funds into a separate bank account or try to locate the substitute teachers these funds belong to and pay them the balance owed to them or to submit the balances to the state unclaimed funds as soon as possible.

ITEM 2016-003 – CASH DISBURSEMENTS

• During testing of cash disbursements, we noted instances where invoices were not properly signed or noted as approved to pay. We recommend the vendor invoice have a confirmation signature of the person receiving the goods or services before the payment process continues.

• During testing of cash disbursements, we noted instances where invoices are being paid late as a result of a delay in receiving the invoices from the person receiving the goods or services. We recommend the person receiving the goods or services complete their review and submit the invoice to the treasurer as soon as the invoice is received. This will help ensure vendors are being paid timely and avoid late charges.

ITEM 2016-004 – ACCOUNTS PAYABLE AND EXPENDITURES

• During our review of internal control procedures, we noted several items where internal controls could be improved.

o Checks submitted to the superintendent for signature should in every case be accompanied by the supporting invoices or Munis check register for review to ensure the check amount and payee agreed to the invoice as well as the expenditure is approved for payment. The review by the superintendent should be documented.

o Checks should not be returned to the person preparing the checks to be mailed. Instead, we recommend the checks be given to someone without access to the general ledger or ability to prepare checks for mailing.

o The superintendent should periodically review the Vendor Change report to ensure all vendors added or changed are properly approved and accurate.

ITEM 2016-005 – PAYROLL

• The Finance Officer has access to make changes to payroll. We recommend someone outside of payroll, such as the Superintendent, review the W-2s to ensure amounts paid are for authorized amounts only. Additionally, this person could obtain an edit report detailing any changes made to the payroll master file. This report would then be compared to all authorized changes to ensure they were properly made.

ITEM 2016-006 – PROCUREMENT

• The District adopted Kentucky Model Procurement Code, KRS 45A.345 – KRS 45A.460. Per the Model Procurement Code, purchases for any contract for which a determination is made that the aggregate amount of the contract exceeds $20,000, the District will not be able to use Small Purchasing Procedures and must use another form of Procurement such as Competitive Sealed Bidding, Competitive Negotiation, etc. There was an instance where a contract amount exceeded $20,000 and Small Purchasing Procedures were used. We recommend the District follow the Kentucky Model Procurement Code for all purchases.

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STATUS OF PRIOR RECOMMENDATIONS The following section is presented for the purposes of providing an update on the status of the previous auditor’s management letter points presented as of and for the year ended June 30, 2015. The recommendations and current status of those recommendations are as follows:

ITEM 2015-01- MULTIPLE RECEIPT FORM • The “Redbook” requires teachers, sponsors, and students to use Form F-SA-6 Multiple Receipt

Form when collecting money. The form is to be used to log all receipts and is signed by the student and teacher/sponsor. Our testing noted several instances where (1) the form was not being used or only partially completed, (2) the student did not sign the form, and/or (3) the teacher/sponsor did not sign the form.

Current Status: Repeat recommendation for 2016 as a General Finding for All Schools.

ITEM 2015-02- REQUISITION AND REPORT OF TICKET SALES • The “Redbook” requires Form F-SA-1, The Requisition and Report of Ticket Sales, be used to

report and reconcile the number of tickets sold and funds collected. Our testing noted instances of the form not being used.

Current Status: Issue resolved.

ITEM 03- PURCHASE ORDERS • Board policy 04.31 requires all purchase to have the Superintendent’s prior approval. There were

several instances during the school year where the invoice date preceded the purchase order and requisition date. In addition, there is no evidence that bidding and small purchase procedures were followed. Most instances were isolated to the maintenance area.

Current Status: Repeat recommendation for 2016 as a General Finding for All Schools.

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