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i pll-iu IPJ3 "dm jiiiiiT-y JOHNSON COUNTY SCHOOL DISTRICT flPIpJ rEi!"iS BASIC FINANCIAL STATEMENTS, SPJrl:r SUPPLEMENTARY INFORMATION. !;lf5iS AND INDEPENDENT AUDITOR'S REPORTS |jrf-]J P11yI For the year ended June 30,2016

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JOHNSON COUNTY SCHOOL DISTRICT

TABLE OF CONTENTS

FOR THE YEAR ENDED JUNE 30. 2016

Independent Auditor's Report ^_2

Management's Discussion and Analysis 3^

Basic Financial Statements:

Government-wide Financial Statements:

Statement ofNet Position y

Statement ofActivities g

Fund Financial Statements:

Balance Sheet- Governmental Funds ; g

Reconciliation of the Governmental FundsBalance Sheet to theStatement ofNet Position 1q

StatementofRevenues, Expenditures and Changes inFund Balances - Governmental Funds -11

Reconciliation of the Statement of Revenues, Expenditures, andChanges in Fund Balances of Governmental Funds to theStatement ofActivities ^2

Statementof Net Position - Proprietary Fund ^3

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

Statement ofCash Flows - Proprietary Funds -15

Statement of Fiduciary NetPosition - Fiduciary Fund -16

Statement of Changes in Fiduciary Net Position- Fiduciary Fund 17

Notes to Basic Financial Statements 18-42


TABLE OF CONTENTS - CONTINUED

FOR THE YEAR ENDED JUNE 30, 2016

Required Supplementary Information:

Statement of Revenues, Expenditures and Changes in FundBalance - Budget and Actual - General Fund 43

Statement of Revenues, Expenditures and Changes in FundBalance - Budget and Actual - Special Revenue Fund 44

Schedule of the District's Proportionate Share of the Pension Liability (CERS) 45

Schedule of District Contributions (CERS) 46

Notes to Required Supplementary Information 47

Combining Statements - Nonmajor Funds:

Combining Balance Sheet - Nonmajor Governmental Funds 48

Combining Statement of Revenues, Expenditures and Changesin Fund Balances - Nonmajor Governmental Funds 49

Other Combining Statements and School Activity Funds:

Combining Statement of Fiduciary Net Position- School Activity Funds (Agency Fund) 50

Combining Statement of Revenues, Expenditures and Changes Due Student Groups -School Activity Funds (Agency Fund) 51

Statement of Receipts, Disbursements Due Student Groups - School Activity FundsJohnson Central High School (Agency Fund) 52

Combining Statement of Revenues, Expenditures and Changes in Fund Balances -Debt Service Funds 53

Schedule of Expenditures of Federal Awards 54-55

Notes to Schedule of Expenditures of Federal Awards 56

Schedule of Findings and Questioned Costs 57

Schedule of Prior Year Audit Findings 58

Independent Auditor's Report on Internal Control Over FinancialReporting and on Compliance and Other Matters Based on anAudit of Financial Statements Performed in Accordance with

Government Auditing Standards 59-60

Independent Auditor's Report on Compliance for EachMajor Program and on Internal Control Over ComplianceRequired by The Uniform Guidance 61-62

Management Letter Comments 63-65

WELLS & COMPANY, RS.C.^f^ccMtnCanfy.

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

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

INDEPENDENT AUDITOR'S REPORT

Members of the Board of EducationJohnson County School DistrictPaintsville, Kentucky

Report on the Financial Statements

We have audited the accompanying financial statements of the governmental activities, the business-typeactivities, each majorfund, and the aggregate remaining fund information of Johnson County School District, as ofand for the year ended June 30, 2016, and the related notes to the financial statements, which collectivelycomprise 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 accordancewith 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 financialstatements that are free from material misstatement, whether due to fraud or error.

Auditor's Responsibility

Our responsibility is to express opinions on these financial statements based on our audit. We conducted ouraudit in accordance with auditing standards generally accepted in the United States of America and the standardsapplicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States; and the audit requirements prescribed by the Kentucky State Committee for school districtaudits in the Independent Auditor's Contract. Those standards require that we plan and perform the audit toobtain 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 thefinancial statements. The procedures selected depend on the auditor's judgment, including the assessment of therisks of material misstatement of the financial statements, whether due to fraud or error. In making those riskassessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of thefinancial statements in order to design audit procedures that are appropriate in the circumstances, but not for thepurpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express nosuch opinion. An audit also includes evaluating the appropriateness of accounting policies used and thereasonableness of significant accounting estimates made by management, as well as evaluating the overallpresentation of the financial statements.

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

Opinions

In our opinion, the financial statements referred to above present fairly, in all material respects, the respectivefinancial position of the governmental activities, the business-type activities, each major fund, and the aggregateremaining fund information of Johnson County School District, as of June 30, 2016, and the respective changes infinancial position, and, where applicable, cash flows thereof for the year then ended in accordance withaccounting principles generally accepted in the United States of America.

Other Matters

Required Supplementary Information

Accounting principles generally accepted in the United States of America require that the management'sdiscussion and analysis, on pages 3-6, budgetary comparison information on pages 43-44, and CERS schedulesand notes on pages 45-47 be presented to supplement the basic financial statements. Such information, althoughnot a part of the basic financial statements, is required by the Governmental Accounting Standards Board, whoconsiders it to be an essential part of financial reporting for placing the basic financial statements in anappropriate operational, economic, or historical context. We have applied certain limited procedures to therequired supplementary information in accordance with auditing standards generally accepted in the UnitedStates of Arnerica, which consisted of inquiries of management about the methods of preparing the informationand comparing the information for consistency with management's responses to our inquiries, the basic financialstatements, and other knowledge we obtained during our audit of the basic financial statements. We do notexpress an opinion orprovide any assurance on the information because the limited procedures do not provide uswith 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 compriseJohnson County School District s basic financial statements. The combining and individual nonmajor fundfinancial statements and the school activity funds, are presented for purposes of additional analysis and are not arequired part of the basic financial statements. The schedule ofexpenditures of federal awards is presented forpurposes of additional analysis as required by Title 2 U.S. Code ofFederal Regulations (CFR) Part 200, UniformAdministrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, and is also not arequired part of the basic financial statements.

The combining and individual nonmajor fund financial statements, school activity funds, and the schedule ofexpenditures offederal awards are the responsibility of management and were derived from and relate directly tothe underlying accounting and other records used to prepare the basic financial statements. Such information hasbeen subjected to the auditing procedures applied in the audit of the basic financial statements and certainadditional procedures, including comparing and reconciling such information directly to the underlying accountingand other records used to prepare the basic financial statements or to thebasic financial statements themselves,and other additional procedures in accordance with auditing standards generally accepted in the United States ofAmerica. In our opinion, the combining and individual nonmajor fund financial statements, school activity funds,and the schedule ofexpenditures of federal awards are fairly stated in all material respects in relation to the basicfinancial statements as a whole.

Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, we have also issued our report dated October 24, 2016, onour consideration of Johnson County School District's internal control over financial reporting and on our test's ofits compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters.The purpose of that report is to describe the scope ofour testing of internal control over financial reporting andcompliance and the results of that testing, and not to provide an opinion on internal control over financial reportingor on compliance. That report is an integral part of an audit performed in accordance with Government AuditingStandards in considering Johnson County School District's internal control over financial reporting andcompliance.

V10

Certified Public Accountants

Paintsville, KentuckyOctober 24 2016

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


As management of the Johnson County School District (District), we offer readers of the District's financialstatements this narrative overview and analysis of the financial activities of the District for the fiscal yearended June 30, 2016. We encourage readers to consider the information presented here in conjunctionwith additional information found within the body of the audit.

FINANCIAL HIGHLIGHTS

• The ending cash balance for the District was $8,812,735 in 2015 and $8,092,702 in 2016. This isa decrease of $720,033. This difference can be explained due to the payoff of a 2005 bond.

• From 2015 to 2016, total General Fund revenue increased by .6%. Revenue from the stateincreased by .3%. Revenues from federal sources decreased by 1.8%. Revenues from otherlocal revenues increased by 6.8%.

• Among majorfunds, the General Fund had $28.8 million in revenue, which primarily consisted oflocal property, utilities, and motor vehicle taxes, federal programs and state funding. Therewere$29.4 million in expenditures.

• A concerted effort was focused on purchasing in the areas ofsupplies, food, and travel resultingin several economies due to changed management strategies.

• Bonds are issued as the District renovates facilities consistent with a long-range facilities planthat is established with community input and in keeping with Kentucky Department of Education's(KDE) stringent compliance regulations. On November 18, 2015, the District issued $2,650,000in School Building Revenue Bonds to finance improvements at various locations. The Districtmade total debt payments of $2,891,158 during the current fiscal year.

• State law requires districts to update a priority list of construction and renovation needs, called alocal facilities plan, every four years. The document guides the allocation of School FacilitiesConstruction Commission dollars. To be eligible to share in that money, the District updated itsfacilities plan in April 2008. With the age and size of our facility, there is a focus on investing inplant management. The District was granted an extension on its current facility plan for four moreyears during 2012. The District is currently updating its plan.

OVERVIEW OF FINANCIAL STATEMENTS

This discussion and analysis is intended to serve as an introduction to the District's basic financialstatements. The District's basic financial statements comprise three components: 1) government-widefinancial statements, 2) fund financial statements, and 3) notes to the financial statements. This report alsocontains other supplementary information in addition to the basic financial statements themselves.

Government-wide financial statements. The government-wide financial statements are designed toprovide readers with a broad overview of the District's finances, in a manner similar to a private-sectorbusiness.

The Statement of Net Position presents information on all of the District's assets and liabilities, with thedifference between the two reported as net position. Over time, increases or decreases in net position mayserve as a useful indicatorofwhether the financial positionof the Districtis improving.

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The Statement of Activities presents information showing how the District's net position changed duringthe most recent fiscal year. All changes in net position are reported as soon as the underlying eventgiving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues andexpenses are reported in this statement for some items that will result in cash flows in future fiscalperiods.

The government-wide financial statements outline functions of the District that are principally supportedby property taxes and intergovernmental revenues (governmental activities). The governmental activitiesof the District include instruction, support services, operation and maintenance of plant, studenttransportation and operation of non-instructional services. Fixed assets and related debt are alsosupported by taxes and intergovernmental revenues.

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

Fund financial statements. A fund is a grouping of related accounts that is used to maintain control overresources that have been segregated for specific activities or objectives. This is a state mandated uniformsystem and chart of accounts for all Kentucky public school districts utilizing the MUNIS administrativesoftware. The District uses fund accounting to ensure and demonstrate compliance with finance-relatedlegal requirements. All of the funds of the District can be divided into three categories: governmental,proprietary funds and fiduciary funds. Fiduciary funds are trust funds established by benefactors to aid instudent education, welfare and teacher support. The Proprietary Fund includes the food service andvending operation. All other activities of the District are included in the governmental funds.

The basicgovernmental fund financial statementscan be found on pages9 through 17ofthis report.

Notes to the financial statements. The notes provide additional information that is essential to a fullunderstanding of the data provided in the government-wide and fund financial statements. The notes to thefinancial statements can be found on pages 18 through 42 of this report.

GOVERNMENT-WIDE FINANCIAL ANALYSIS

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

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

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Net Position for the period ending June 30, 2016 and 2015

This is the fourteenth year that the District is following GASB 34 and comparing assets, liabilities and net position.2016 Government Wide Net Position compared to 2015 are as follows:

Current AssetsNoncurrent AssetsTotal assets

Deferred Outflows of Resources

Current LiabilitiesNoncurrent Liabilities

Total liabilities

Deferred inflows of Resources

Net Position

Net investment in capital assetsRestricted

Unrestricted Fund BalanceTotal net position

2016

$9,521,36226.333.55235.854.914

1.993.938

3,243,98724.349.576

27.593.563

141.776

9,239,6491,403,041

(529.177)$10.113.513

2015

$10,284,30725.931.105

36.215.412

1.003.534

3,872,73221.356.731

25.229.463

720.000

8,635,0871,698,021936.375

$11.269.483

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

The following table presents a fund accounting comparison and summary of revenue and expense forgovernment funds only for the fiscal years 2016 and 2015.

Revenues:

Local revenue sources

State revenue sources

Federal revenueTotal revenues

Expenditures:Instruction

Student support servicesInstructional staff

District administration

School administration

Business supportPlant operationsStudent transportationCentral office supportFacilities acquisition and constructionCommunity supportOther

Total expenses

Excess (deficit) of revenues over expenses

Other Financing Sources (Uses):Bond sale proceedsProceeds from sale of fixed assets

Total other financing sources (uses)

Net change in fund balance

2016

$ 6,218,24826,650,589

3.190.004

36.058.841

23,564,895981,480358,846541,211

2,079,819720,696

3,735,8572,028,091

2,469,930638,646

3.469.335

40.588.806

(4,529,965)

2,607,2035.843

2.613.046

$ (1.916.919)

-5-

2015

$ 5,824,66826,563,679

3.247.142

35.635.489

22,073,8791,034,265

338,113598,127

2,176,007608,208

3,913,8282,516,430

9,048635,356

2.117.640

36.020.901

(385,412)

3.437

3.437

S (381.975)

CAPITAL ASSETS

At the end offiscal 2016, the District had $26,331 million invested in capital assets, including land, buildings,buses, computers and other equipment. This amount represents a net increase (including additions anddeductions) of $.399 million over last year. This increase is primarily due to the construction in progress.Additionally, no buses were purchased in fiscal 2016.

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

Governmental

Activities

Business-typeActivities Totals

2016 2015 2016 2015 2016 2015

Land $ 1.72 $1.79 $ - $ - $ 1.72 $ 1.79

Buildings & Improvements 21.90 22.95 - - 21.90 22.95

Technology Equipment .17 .22 .001 .002 .171 .222

Vehicles .73 .88 - - .73 .88

General Equipment .04 .06 .02 .03 .06 .09

Construction in Progress 1.75 1.75

Totals $26.31 $25.90 $ .021 $.032 $26,331 $25,932

• On-behalf of amounts are included in revenues and expenses. On-behalf payments as defined by KDEare payments the state makes on behalf of employees to the various agencies for health and lifeinsurance, benefits and administration fees and debt service. Further discussion of these can be foundin Note B. Expenses that increased from 2015 to 2016 include instruction, instructional staff, businesssupport, facilities acquisition and construction, community support, and other.

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

• The majority of revenue in 2016 was derived from state funding (74%) as compared with fiscal year2015 (75%) with federal revenue making up 9% of total revenue in 2016 compared to 9% in 2015.

Comments on Budget Comparisons• The District's General Fund total revenues for the fiscal year ended June 30, 2016, net of interfund

transfers, were $28.8 million.• General Fund budget compared to actual revenue varied slightly from line item to line item with the

ending actual balance being $6.6 million more than budget.• The total cost of all General Fund programs and sen/ices was $29.4 million net of debt service.• General Fund budget expenditures to actual varied significantly in instruction ($2.78 million). This

resulted from the Board recording the on-behalf payments made for the District.

BUDGETARY IMPLICATIONS

In Kentucky the public school fiscal year is July 1 - June 30; other programs, i.e. some federal operate on adifferent fiscal calendar, but are reflected in the District's overall budget. By law the budget must have aminimum 2% contingency. The Districtadopted a budget with $2.7 million incontingency (7%). The GeneralFund beginning cash balance for beginning the fiscal year was $6.23 million.

Questions regarding this report should be directed to the Superintendent or Misty Goble, Director ofFinances or by mail at 253 North MayoTrail, Paintsville, Ky 41240.

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STATEMENT OF NET POSITION

June 30, 2016

Business

Governmental TypeActivities Activities Total

Assets

Current Assets:

Cash and cash equivalents $ 6,651,181 $ 1,120,320 $ 7,771,501Inventory - 65,148 65,148Accounts receivable

Taxes - current 135,717 - 135,717Taxes - delinquent 21,406 - 21,406Accounts receivable 131,391 - 131,391Intergovernmental - state 174,231 - 174,231Intergovernmental - indirect federal 967,784 234,184 1,221,968

Total current assets 8,101,710 1,419,652 9,521,362

Noncurrent Assets:

Capital assets, not being depreciated 3,125,504 - 3,125,504Capital assets, being depreciated, net 23,188,089 19,959 23,208,048

Total noncurrent assets 26,313,593 19,959 26,333,552

Total assets 34,415,303 1,439,611 35,854,914

Deferred Outflows of Resources:

Deferred outflows related to pensions 1,531,926 237,135 1,769,061Debt discount 160,579 - 160,579Refunding of debt 64,298 - 64,298

Total deferred outflows of resources 1,756,803 237,135 1,993,938

Liabilities

Current Liabilities:

Accounts payable 387,764 8,226 395,990Payroll liabilities 180,602 - 180,602Unearned revenue 1,027,121 - 1,027,121Current portion of bond obligations 1,458,722 - 1,458,722Current portion of KSBIT assessment 77,437 - 77,437Interest payable 104,115

- 104,115

Total current liabilities 3,235,761 8,226 3,243,987

Noncurrent Liabilities:

Noncurrent portion of KSBIT assessment 72,645 - 72,645Noncurrent portion of bond obligations 15,755,943 - 15,755,943Noncurrent portion of accrued sick leave 206,414 - 206,414Noncurrent portion of net pension liability 7,316,825 997,749 8,314,574

Total noncurrent liabilities 23,351,827 997,749 24,349,576

Total liabilities 26,587,588 1,005,975 27,593,563

Deferred inflows of Resources:

Change in proportion and differences between employer contributionsand proportionate share of contributions 124,763 17,013 141,776

Total deferred inflows of resources 124,763 17,013 141,776

Net Position:

Net investment in capital assets 9,219,690 19,959 9,239,649

Restricted for;

District activity 15,437 - 15,437

Future construction 274,996 - 274,996

SFCC escrow 272,395 - 272,395

Sick leave 206,414 - 206,414

Inventory - 65,148 65,148

New assets - 568,651 568,651

Unrestricted (529,177) - (529,177)

Total net position $ 9,459,755 $ 653,758 $ 10,113,513

See independent auditor's reportand accompanying notes to financial statements.


STATEMENT OF ACTIVITIES

For the year ended June 30,2016

FUNCTIONS/PROGRAMS

Governmental Activities:

Instruction

Support services:Student

Instructional staff

District administrative

School administrative

Business

Plant operation and maintenanceStudent transportationCentral office

Facilities acquisition and constructionCommunity service activitiesInterest on long-term debtOther

Expenses

Chargesfor

Services

Program Revenues

Operating CapitalGrants and Grants and

Contributions Contributions

$ 24,927,384 $ 167,617 $ 4,405,528 $

981,897363,048

573,3192.081,436

723,7364,252,6562,183,744

719,495638,646604,489

76,897

67,907184,982

15,949

396,7441,654,883

Net (Expense) Revenue andChanges in Net Position

Business-

Governmental TypeActivities Activities Total

$ (20,354,239) $

(913,990)(178,066)(557.370)

(2,081.436)(723.736)

(4.252.656)(2.183.744)

935.388

(241.902)(604,489)

$ (20,354.239)

(913.990)(178.066)(557.370)

(2.081.436)(723.736)

(4.252,656)(2,183,744)

935,388

(241,902)(604,489)

Total governmental activities 38,126,747 167,617 5,071,110 1.654.883 (31,233,137) - (31,233.137)

Business-Type Activities:Foodservice 1,935,120 51,686 2,782,714 899,280 899.280

Total primary government $ 40,061,867 $ 219,303 $ 7,853,824 $ 1,654,883 (31,233,137) 899,280 (30.333,857)

General Revenues:

Taxes:

Properly taxesMotor vehicle taxes

Utility taxesInvestment earningsState and formula grantsGain (loss) on sales of fixed assetsMiscellaneous

3,530.488709,615

1,097,120

52,80323,562,611

5,843

212,594

6,813

3.530,488

709,6151,097,120

59,616

23.562,611

5,843

212,594

Changes in net position (2.062.063) 906,093 (1,155,970)

Net position - beginning 11,521,818 (252,335) 11,269,483

Net position - ending $ 9,459.755 $ 653,758 $ 10,113,513

See independent auditor's reportand accompanying notes to financial statements.-8-


BALANCE SHEET

GOVERNMENTAL FUNDS

June 30, 2016

Assets and Resources:

Cash and cash equivalentsAccounts receivable

Taxes - current

Taxes - delinquentAccounts receivable

Intergovernmental - stateIntergovernmental - indirect federal

Total assets and resources

Liabilities and Fund Balances:

Liabilities

General

Fund

Other Total

Special Construction Governmental GovemmentalRevenue Fund Funds Funds

$ 5,896,747 $ (132,076) $ 598,515 $ 287,995 $6,651,181

135,71721,406

131,391174,231987,784

135,71721,406

131,391174,231987,784

$ 6,185,261 $1,029,939 $ 598,515 $ 287,995 $8,101,710

Accounts payablePayroll liabilitiesUnearned revenue

$ 61,264180,602

$ 2,818

1,027,121

$ 323.519 $ 163 $ 387,764180,602

1,027,121

Total liabilities 241,866 1,029,939 323,519 163 1,595,487

Fund Balances:

Restricted For:

District activityFuture construction

SFCC escrow

Sick leave payableUnassigned:

Undesignated, reported in:General fund

206,414

5,736,981

-

274,99615,437

272,395

15,437274,996

272,395206,414

5,736,981

Total fund balances 5,943,395 274,996 287,832 6,506,223

Total liabilities and fund balances $ 6,185,261 $1,029,939 $ 598,515 $ 287,995 $8,101,710

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


RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TOTHE STATEMENT OF NET POSITION

June 30, 2016

Total fund balance perfund financial statement $ 6,506.223

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

Capital assets are not reported in this fund financial statement becausethey are not current financial resources, but they are reported in theStatement of Net Position. 26,313,593

Debt discount and refunding of debt is reported as part of deferred outflowsof resources and is not reported in this fund financial statement because theyare not available to pay current-period expenditures, but they are reportedin the Statementof NetPosition. 224,877

Pension contributions after measurement date are reported as a deferred outflowsof resources. 786,997

Net pension liability is not due and payable in the current period and, therefore,is not reported in governmental funds. (7,316,825)

Pension related deferred outflows of resources and deferred inflows of resources arenot due and payable in the current year and, therefore are not reported in thegovernmental funds, but they are presented in the statement of net position, as follows:

Deferred pension outflows of resources 744,929Deferred pension inflows of resources (124,763)

Certain liabilities (such as KSBIT assessments, bonds payable, the long-term portionof accrued sick leave, and accrued interest) are not reported in this fund financialstatement because they are not due and payable, but they are presentedin the Statement of Net Position. (17,675.276)

Net position for governmental activities $ 9,459,755



STATEMENT OF REVENUES. EXPENDITURES. AND CHANGES IN FUND BALANCES

GOVERNMENTAL FUNDS

For the year ended June 30, 2016

Other TotalGeneral Special Construction Governmental Governmental

Revenues:Fund Revenue Fund Funds Funds

From local sources

Taxes

Property $ 3.088.609 $ $ $ 441,879 $ 3,530,488Motor vehicle 709,615 - - . 709,615Utilities 1,097.120 - - . 1,097,120

Tuition and fees 167,617 - - . 167,617Earnings on investments 41,651 1,454 6,201 3,497 52,803Other local revenues 144.292 448,011 - 68,302 660,605

Intergovernmental - state 23.470.754 1,618,332 - 1,561,503 26,650,589Intergovernmental - indirect federal 91,857 3.004.767 - 93,380 3,190,004

Total revenues 28,811.515 5.072.564 6,201 2,168,561 36,058,841

Expenditures:Instruction 19.053.997 4.486.281 - 24,617 23,564,895Support services:

Student 913.573 67,907 - - 981,480Instructional staff 173.864 184,982 - - 358,846District administrative 525.262 15,949 - . 541,211School administrative 2,079,819 - . _ 2,079,819Business 720,696 - - _ 720,696Plant operation and maintenance 3.687.780 - - 48,077 3.735,857Student transportation 2.028,091 - - . 2,028,091Central office - - . _

Facilities acquisition and construction - - 2,469,930 . 2,469,930Community service activities 241.902 396,744 - - 638,646Other ^

- - - 3.469.335 3,469,335

Total expenditures 29.424.984 5,151,863 2,469,930 3,542,029 40,588,806

Excess (deficit) of revenues over expenditures (613.469) (79,299) (2,463,729) (1,373,468) (4,529,965)

Other Financing Sources (Uses):Bond proceeds - - - 2,607,203 2,607,203Proceeds from sale of fixed assets 5,843 - - - 5,843Operating transfers in - 79,299 2,573,103 1,450,208 4,102,610Operating transfers out (79.299) - - (4,023,311) (4,102,610)Non operating transfers in - - - 1,453,788 1,453,788Non operating transfers out - - - (1,453,788) (1,453,788)

Total other financing sources (uses) (73.456) 79,299 2,573,103 34,100 2,613,046

Net change in fund balance (686,925) - 109,374 (1,339,368) (1,916,919)

Fund balance, July 1, 2015 6,630,320 - 165,622 1,627,200 8,423,142

Fund balance, June 30, 2016 $ 5,943,395 $ $ 274,996 $ 287,832 $ 6,506,223



RECONCILIATION OF THE STATEMENT OF REVENUES. EXPENDITURES, AND CHANGES INFUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES


Net change In total fund balances per fund financial statements $(1,916,919)

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

Capital outlays are reported as expenditures In this fund financial statement becausethey use current financial resources, but they are presented as assets In the Statement ofActivities and depreciated over their estimated economic lives. The difference Is theamount by which capital outlay exceeds depreciation for the year. 414,938

The Issuance of long-term debt (bonds and financial obligations) provides current financialresources to government funds, while bond and capital lease payments are recognizedas expenditures of current financial resources in the fund financial statement but arereductions of liabilities In the Statement of Net Position. 241,158

In the statement of activities, Interest Is accrued on outstanding long-term debt, whereas Inthe governmental funds Interest Is not reported until due. This amount represents the netchange In accured Interest payable. 17,024

Changes In pension expense are reported only In the statement of activities. (801,834)

Generally, expenditures recognized In this fund financial statement are limited to onlythose that use current financial resources, but expenses are recognized In theStatement of Activities when they are Incurred. (16,430)

Change In net position of governmental activities $(2,062,063)

See Independent auditor's report and accompanying notes to financial statements.-12-


STATEMENT OF NET POSITION

PROPRIETARY FUND

June 30, 2016

Assets

Current Assets:

Cash and cash equivalentsInventoryAccounts receivable

Intergovernmental - indirect federal

Total current assets

Noncurrent Assets:

Capital assetsLess: accumulated depreciation

Total noncurrent assets

Total assets

Deferred Outflows of Resources:

Deferred outflows related to pensions

Total deferred outflows of resources

Liabilities

Current Liabilities:

Accounts payable

Total current liabilities

Noncurrent Liabilities:

Net pension liability

Total noncurrent liabilities

Total liabilities

Deferred Inflows of Resources:

Changes in proportion and differences between employer contributions andproportionate share of contributions

Total deferred inflows of resources

Net Position:

Net investment in capital assetsRestricted For:

New assets

Total net position

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

-13-

Food

Service

Fund

$ 1,120,32065,148

234,184

1,419,652

528,121

508,162

19,959

1,439,611

237,135

237,135

8,226

8,226

997,749

997,749

1,005,975

17,013

17,013

19,959

633,799

$ 653,758


STATEMENT OF REVENUES. EXPENSES, AND CHANGES IN NET POSITION

PROPRIETARY FUND


Operating Revenues:Lunchroom sales

Total operating revenues

Operating Expenses:Employee wages and benefitsMaterials and suppliesDepreciationOther operating expenses

Total operating expenses

Operating loss

Non-Operating Revenues (Expenses):Federal grantsDonated commodities

State grantsInterest income

Total non-operating revenues

Change in net position

Net Position, July 1, 2015

Net Position, June 30, 2016


Food

Service

Fund

$ 51,686

51,686

621,8351,223,326

12,49177,468

1,935,120

(1,883,434)

2,350,956162,317269,441

6,813

2,789,527

906,093

(252,335)

$ 653,758


STATEMENT OF CASH FLOWS

PROPRIETARY FUNDS


Cash Flows from Operating Activities:Cash received from:

Lunchroom sales

Cash paid to/for:EmployeesMaterial and suppliesOther activities

Net cash provided by (used for) operating activities

Cash Flows from Noncapital Financing Activities:Government grants

Net cash provided by noncapital and related financing activities

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

Net cash used for capital and related financing activities

Cash Flows from Investing Activities:Receipt of Interest Income

Net cash provided by investing activities

Net (decrease) In cash and cash equivalents

Balances, beginning of year

Balances, end of year

Reconciliation of operating Income (loss) to net cash provided(used) by operating activities

Operating (loss)

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

DepreciationDonated commodities

On-behalf paymentsChange In assets and liabilities

InventoryDeferred outflows/Inflows and net pension liabilityAccounts payable

Net cash provided by (used for) operating activities

Schedule of non-cash transactions:

Donated commodities received from federal governmentOn-behalf payments

See Independentauditor's report and accompanying notes to financial statements.-15-

$ 51,686

(887,733)(1,064,802)

(77,468)

(1,978,317)

2,151,372

2,151,372

6,813

6,813

179,868

940,452

$ 1,120,320

$ (1,883,434)

12,491

162,317

241,990

(11,899)(507,888)

8,106

$ (1,978,317)

$ 162,317241,990


STATEMENT OF FIDUCIARY NET POSITION

FIDUCIARY FUND

June 30, 2016

Permanent

Trust

Fund

AgencyFund

Assets;

Cash and cash equivalentsAccounts receivable

$ 64,473 $ 256,7286,638

Total assets $ 64,473 $ 263.366

Liabilities:

Accounts payableDue student groups

$ - $ 7,903

255,463

Total liabilities . 263,366

Net position held in trust $ 64,473 $ -



STATEMENT OF CHANGES IN FIDUCIARY NET POSITION

FIDUCIARY FUNDS

June 30, 2016

Additions:

Other local revenues

Total revenues

Deductions:

Instruction

Support Services:District administrative

Total expenditures

Change in net position




Permanent

Trust

Fund

$ 7,847

7,847

7,156

2,718

9,874

(2.027)

66,500

$ 64,473


NOTES TO BASIC FINANCIAL STATEMENTS


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The financial statements of Johnson County School District have been prepared to conform withAccounting Principles Generally Accepted In the United States of America ("GAAP") as applied togovernmental units. The Governmental Accounting Standards Board ("GASB") Is the accepted standardsetting body for establishing governmental accounting and financial reporting principles. TheSuperintendent of Schools Is responsible for keeping records and accounts of all financial transactions Inthe manner prescribed by the State Board of Education. The following Is a summary of the moresignificant of these policies.

Reporting Entltv

The Johnson County Board of Education ("Board"), a five-member group, Is the level of governmentwhich has oversight responsibilities over all activities related to public elementary and secondary schooleducation within the jurisdiction of Johnson County School District ("District"). The District receivesfunding from local, state and federal government sources and must comply with the commitmentrequirements of these funding source entitles. However, the District Is not Included In any othergovernmental "reporting entity" as defined In Section 2100, Codification of Governmental Accounting andFinancial Reporting Standards. Board members are elected by the public and have decision makingauthority, the power to designate management, the responsibility to develop policies which may Influenceoperations and primary accountability for fiscal matters.

The District, for financial purposes. Includes ail ofthe funds and account groups relevant to the operationof the Johnson County Board of Education. The financial statements presented herein do not Includefunds ofgroups and organizations, which although associated with theschool system, have not originatedwithin the Board Itself such as Band Boosters, Parent-Teacher Associations, etc.

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

Based on the foregoing criteria, the financial statements of the following organization are Included In theaccompanying financial statements:

Johnson County School District Finance Corporation - In a prior year the Board of Education resolved toauthorize the establishment of the Johnson County School District Finance Corporation (a non-profit, nonstock, public and charitable corporation organized under the School Bond Act and KRS 273 and KRSSection 58.180) (the "Corporation") as an agency for the District for financing the costs ofschool buildingfacilities. The members of the Board also comprise the Corporation's Board of Directors.

Basis of Presentation

Government-Wide Financial Statements - The Statement of Net Position and the Statement of Activitiesdisplay Information about the District as a whole. These statements Include the financial activities of theprimary government, except for fiduciary funds. The statements distinguish between those activities of theDistrict that are governmental and those that are considered business-type activities.

The government-wide statements are prepared using the economic resources measurement focus. ThisIs the same approach used In the preparation of the proprietary fund financial statements but differs fromthe manner In which governmental fund financial statements are prepared. Governmental fund financial

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NOTES TO BASIC FINANCIAL STATEMENTS - CONTINUED


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

statements therefore include reconciliation with brief explanations to better identify the relationshipbetween the government-wide statements and the statements for governmental funds. The government-wide Statement of Activities presents a comparison between direct expenses and program revenues foreach segment of the business-type activities of the District and for each function or program of theDistrict's governmental activities. Direct expenses are those that are specifically associated with aservice, program or department and are therefore clearly identifiable to a particular function. Programrevenues include charges paid by the recipient of the goods or services offered by the program andgrants and contributions that are restricted to meeting the operational or capital requirements of aparticular program. Revenues that are not classified as program revenues are presented as generalrevenues of the District, with certain limited exceptions. The comparison of direct expenses with programrevenues identifies the extent to which each business segment or governmental function is self-financingor draws from the general revenues of the District.

Fund Financial Statements - Fund financial statements report detailed information about the District. Thefocus of governmental and enterprise fund financial statements is on major funds rather than reportingfunds by type. Each major fund is presented in a separate column. Nonmajor funds are aggregated andpresented 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. Allgovernmental fund types are accounted for using a flow of current financial resources measurementfocus. The financial statements for governmental funds are a Balance Sheet, which generally includesonly current assets and current liabilities, and a Statement of Revenues, Expenditures and Changes inFund Balances, which reports on the changes in fund balance. Proprietary funds and fiduciary funds arereported using the economic resources measurement focus. Accordingly, the Statement of Revenues,Expenses, and Changes in Net Position for the proprietary fund reports increases and decreases in totaleconomic net worth. The Statement of Cash Flows provides information about how the District financesand meets the cash flow needs of its proprietary activities.

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

Separate financial statements are provided for governmental funds, proprietary funds, and fiduciaryfunds. Major individual governmental funds and major enterprise funds are reported as separate columnsin the financial statements.

The District has the following funds:

I. Governmental Fund Tvpes

(A) The General Fund is the main operating fund of the District. It accounts for financialresources used for general types of operations. This is a budgeted fund, and any fundbalances are considered as resources available for use. This is a major fund of theDistrict.

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(B) The Special Revenue (Grant) Funds account for proceeds ofspecific revenue sources (otherthan expendable trusts or major capital projects) that are legally restricted to disbursementsfor specified purposes. It includes federal financial programs where unused balances arereturned to the grantor at the close of the specified project periods as weil as the state grantprograms. Project accounting is employed to maintain integrity for the various sources offunds. The separate projects of federally-funded grant programs are identified in theSchedule of Expenditures of Federal Awards included in this report. This is a major fund ofthe District.

(C) Capital Project Funds are used to account for financial resources to be used for theacquisition or construction of major capital facilities and equipment (other than those financedby proprietary fund).

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

2. The Facility Support Program of Kentucky (FSPK) accounts for funds generated bythe building tax levy required to participate in the School Facilities ConstructionCommission's construction funding and state matching funds, where applicable.Funds may be used for projects identified in the District's facility plan.

3. The Construction Fund accounts for proceeds from sales of bonds and otherrevenues to be used for authorized construction. This is a major fund of the District.

(D) The Debt Service Fund is used to account for the accumulation of resources for, and thepayment of, general long-term debt principal and interest and related cost; and for thepayment of interest on general obligation notes payable, as required by Kentucky Law.

(E) The District Activity Fund is used to account for financial resources to be used formaintenance and up keep at each individual school. It is funded by monies collected atspecial events at the local school level and to be used for that particular school.

II. Proprietarv Fund Tvoe (Enterprise Fund)

The Food Service Fund is used to account for school food service activities, including theNational School Lunch Program, which is conducted in cooperation with the U.S. Departmentof Agriculture (USDA). Amounts have been recorded for in-kind contribution of commoditiesfrom the USDA. The Food Service Fund is a major fund of the District.

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

III. Fiduciary Fund Type (Aoencv and Private Purpose Trust Funds^

The Agency Fund accounts for activities of student groups and other types of activitiesrequiring clearing accounts. These funds are accounted for in accordance with the UniformProgram of Accounting for School Activity Funds. The permanent trust fund is accounted foras an expendable trust fund on the modified accrual basis.

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Basis of Accounting

Basis of accounting determines when transactions are recorded in the financial records and reported onthe financial statements. Government-wide financial statements are prepared using the accrual basis ofaccounting. Governmental funds use the modified accrual basis of accounting. Proprietary and fiduciaryfunds also use the accrual basis of accounting.

Revenues - Exchange and Non-exchange Transactions - Revenues resulting from exchangetransactions, in which each party receives essentially equal value, is recorded on the accrual basis whenthe exchange takes place. On a modified accrual basis, revenues are recorded in the fiscal year in whichthe 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 liabilitiesof the current fiscal year. For the District, available means expected to be received within sixty days of thefiscal year-end.

Nonexchange transactions, in which the District receives value without directly giving equal value inreturn, include property taxes, grants, entitlements and donations. On an accrual basis, revenue fromproperty 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 beensatisfied. Eligibility requirements include timing requirements, which specify the year when the resourceare required to be used or the fiscal year when use is first permitted, matching requirements, in which theDistrict must provide local resources to be used for a specified purpose, and expenditure requirements, inwhich the resources are provided to the District on a reimbursement basis. On a modified accrual basis,revenues from nonexchange transactions must also be available before It can be recognized.

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

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

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

The measurement focus of governmental fund accounting is on decreases in net financial resources(expenditures) rather than expenses. Expenditures are generally recognized in the accounting period inwhich the related fund liability is incurred, if measurable. Allocations of cost, such as depreciation, are notrecognized in governmental funds.

Property Taxes

Property Tax Revenues - Generally and except as otherwise provided by law, property taxes areassessed as of January 1, levied (mailed) November 1, due at discount November 30, due at face valueDecember 31, delinquent January 1 following the assessment, and subject to sale ninety days followingApril 15. The billings are considered due upon receipt by the taxpayer; however, the actual date is basedon a period ending 30 days after the tax bill mailing. Property taxes collected are recorded as revenues inthe fiscal year for which they were levied. All taxes collected are initially deposited into the General Fundand then transferred to the appropriate fund.

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The property tax rates assessed for the year ended June 30, 2016, to finance the General Fundoperations were $.473 per $100 valuation for real property, $.473 per $100 valuation for businesspersonal property and $.625 per $100 valuation for motor vehicles.

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

Capital Assets

General capital assets are those assets not specifically related to activities reported in the proprietaryfunds. These assets generally result from expenditures In the governmental funds. These assets arereported In the governmental activities column of the govemment-wide Statement of Net Position but arenot reported in the fund financial statements. Capital assets utilized by the proprietary funds are reportedboth in the business-type activities column of the government-wide Statement of Net Position and in therespective funds.

All capital assets are capitalized at cost (or estimated historical cost) and updated for additions andretirements during the year. Donated fixed assets are recorded at their fair market values as of the datereceived. The District maintains a capitalization threshold of one thousand dollars with the exception ofcomputers, digital cameras and real property for which there is no threshold. The District does notpossess any infrastructure. Improvements are capitalized; the cost of, normal maintenance and repairsthat do not add to the value of the asset or materially extend an assets lifeare not.

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

Governmental ActivitiesDescription Estimated Lives

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

Interfund Balances

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

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NOTE A - SUMMARYOF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

Accumulated Unpaid Sick Leave Benefits

Upon retirement from the school system, an employee will receive from the District an amount equal to30% of the value of accumulated sick leave.

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

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

For governmental fund financial statements the current portion of unpaid accrued sick leave is the amountexpected to be paid using expendable available resources. These amounts are recorded In the account"accumulated sick leave payable" in the General Fund. The noncurrent portion of the liability is notreported.

Budoetarv Process

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

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

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

Once the budget is approved, it can be amended. Amendments are presented to the Board at theirregular meetings. Per Board policy, only amendments that aggregate greater than $50,000 require Boardapproval. Such amendments are made before the fact, are reflected in the official minutes of the Board,and are not made after fiscal year-end as dictated by law.

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

The budget for the Special Revenue Fund consists of the sum of each active grant's budget. Largevariances between budgeted and actual activity can occur because grants with little activity during theyear will have their entire budget rolled up into the combined budget forall grants.

Cash and Cash Eouivalents

The District considers demand deposits, money market funds, and other investments with an originalmaturity of 90 days or less, to be cash equivalents.

Inventories

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

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

The pood Service Fund is stated at cost and uses the specific identification method and the General Fundis stated at cost and uses the first-in, first-out method for inventory.

Prepaid Assets

Payments made that will benefit periods beyond June 30, 2016 are recorded as prepaid items using theconsumption method. A current asset for the prepaid amount is recorded at the time of the purchase andan expenditure/expense is reported in the year in which services are consumed.

Investments

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

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

Accrued Liabilities and Lona-Term Obligations

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

In general, payables and accrued liabilities that will be paid from governmental funds are reported on thegovernmental fund financial statements regardless of whether they will be liquidated with currentresources. However, claims and judgments, accumulated sick leave, contractually required pensioncontributions and special termination benefits that will be paid from governmental funds are reported as aliability 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 60 days after year-end are considered tohave been made with current available financial resources. Bonds and other long-term obligations thatwill be paid from governmental funds are not recognized as a liability in the fund financial statements untildue.

Deferred Outflows/Inflows of Resources

In addition to assets, the Statement of Financial Position includes a separate section for deferred outflowsof resources. This separate financial statement element, deferred outflows of resources, represents aconsumption of net position that applies to a future period(s) and so will not be recognized as an outflowof resources (expense/expenditure) until then. The District has six items that qualifies for reporting in thiscategory. It is the deferred charge on debt discount and on refunding reported in the government-wideStatement of Net Position. A deferred charge on refunding results from the difference in the carryingvalue of refunded debt and its reacquisition price. This amount is deferred and amortized over the shorterof the life of the refunded or refunding debt. The debt discount is deferred and amortized over the life ofthe debt. Also, the other items are the District pension contributions subsequent to measurement date,the difference between expected and actual experience, net difference between projected and actualinvestment earnings on pension plan investments, and change of assumptions.

-24-





In addition to liabilities, the Statement of Financial Position will sometimes report a separate section fordeferred inflows of resources. This separate financial statement element, deferred inflows of resources,represents an acquisition of net position that applies to a future period(s) and so will not be recognized asan inflow of resources (revenue) until that time. The District only has one item that qualifies for reportingin this category. It is the change in proportion and differences between employer contributions andproportionate share of contributions.

Fund Balance Reserves

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

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

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

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

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

level of decision making authority.• Assigned-for all governmental funds, other than general fund, any remaining positive

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

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

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

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

It is policy of the District to spend restricted resources first, when both restricted and unrestrictedresources are available to spend on the activity. Once restricted resources are exhausted, thencommitted, assigned and unassigned resources will be spent in that order on the activity.

Encumbrances, although not reported on the Balance Sheet, are purchase orders that will be fulfilled in asubsequent fiscal period. Although the purchase order or contract creates a legal commitment, thedistrict incurs no liability until performance has occurred on the part of the party with whom the district hasentered into the arrangement. When a government intends to honor outstanding commitments insubsequent periods, such amounts are encumbered. Significant encumbrances at year end are reportedby major funds and non-major funds in the aggregate and included with the commitments andcontingencies note disclosure, ifapplicable.

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Net Position

Net positions represent the difference between assets and deferred outflows of resources, and liabilitiesand deferred inflows of resources on the district-wide financial statements. Net positions are classified inthe following categories:

Net investments in capitai assets - This amount consists of capital assets net of accumulateddepreciation and reduced by outstanding debt that is attributed to the acquisition, construction, orimprovement of the assets.

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

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

Ooeratino Revenues and Exoenses

Operating revenues are those revenues that are generated directly from the primary activity of theproprietary funds. For the School District, those revenues are primarilycharges for meals provided by thevarious schools.

Contributions of Capital

Contributions of capital in proprietary fund financial statements arise from outside contributions of fixedassets, or from grants or outside contributions of resources restricted to capital acquisition andconstruction.

Interfund Activitv

Exchange transactions between funds are reported as revenues in the seller funds and asexpenditures/expenses in the purchaser funds. Flows of cash or goods from one fund to another withouta requirement for repayment are reported as Interfund transfers. Interfund transfers are reported as otherfinancing sources/uses in governmental funds and after nonoperating revenues/expenses in proprietaryfunds. Repayments from funds responsible for particular expenditures/expenses to the funds that initiallypaid for them are not presented on the financial statements.

Pensions

For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows ofresources related to pensions, and pension expense, information about the fiduciary net position of theCounty Employee's Retirement System (CERS) and additions to/deductions from CERS' fiduciary netposition 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 inaccordance with the benefit terms. Investments are reported at fair value.

Recently Issued and Adooted Accounting Pronouncements

The Governmental Accounting Standards Board has issued several new pronouncements that the Districthas reviewed for application to their accounting and reporting.

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GASB Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred inflows ofResources, and Net Position, is effective for periods beginning after December 15, 2011. This standardprovides financial reporting guidance for deferred outflows of resources and deferred inflows ofresources. The District implemented this reporting during 2013. The components of net position wererenamed to reflect the requirements of this statement.

In March 2012, the GASB issued Statement 66, Technical Corrections-2012-an amendment of GASBStatements No. 10 and No. 62. GASB 66 improves accounting and financial reporting for a governmentalfinancial reporting entity by resolving conflicting guidance that resulted from the issuance of twopronouncements. Statements No. 54, Fund Balance Reporting and Governmental Fund Type Definitions,and No. 62, Codification ofAccounting and Financial Reporting Guidance Contained in Pre-November 30,1989 FASB and AlCPA Pronouncements. This Statement is effective for periods beginning afterDecember 15, 2012. The adoption of GASB 66 does not have any impact on the District's financialstatements.

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

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

The guidance contained in these Statements will change how governments calculate and report the costsand obligations associated with pensions in important ways. It is designed to improve the decisionusefulness of reported pension information and to increase the transparency, consistency, andcomparability of pension information across governments. Under the pension standards now in effect,cost-sharing employers have not been required to present actuarial information about pensions. Instead,information has been required to be presented in the pension plan's own financial statements for all of theparticipating governments combined.

Through its research, the GASB concluded that the needs of users of information regarding cost-sharingemployers do not differ significantly from those interested in single and agent employers. Therefore, theGASB believes it is important to give users of the financial statements of cost-sharing employers accessto better, more transparent financial information. Consequently, under the new standards the GASB isrequiring that cost-sharing governments report a net pension liability, pension expense, and pensionrelated deferred inflows and outflows of resources based on their proportionate share of the collectiveamounts for all the governments in the plan.

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

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NOTE 8 - ON-BEHALF PAYMENTS

For the year ended June 30, 2016, on-behalf payments were made on behalf of the District for KTRS$2,454,909, Health insurance $3,677,725, Life insurance $6,511, Administrative fee $47,703,HRA/DentalA/ision $235,463, Federal reimbursement ($303,028), KEN services $69,334, Munis financialmanagement software and services $9,305, McAfee virus protection software and services $3,672, andSFCC debt service $436,250. The overall total payments for on-behalf were $6,637,844. In addition,$93,380 was made from federal sources to satisfy a QZAB Bond payment. These payments wererecognized as on-behalf payments and recorded in the appropriate revenue and expense accounts on theStatement of Activities.

NOTE C - ESTIMATES

The preparation of financial statements in conformity with accounting principles generally accepted in theUnited States of America requires the District's management to make estimates and assumptions thataffect reported amounts of assets, liabilities, fund balances, and disclosure of contingent assets andliabilities at the date of the general purpose financial statements, and the reported amounts of revenuesand expenditures during the reporting period. Actual results could differ from those estimates.

NOTE D - CASH AND CASH EQUIVALENTS

The District's funds are required to be deposited and invested under the terms of a depository contractpursuant to the School Depository Act. The depository bank deposits for safekeeping and trust with theDistrict's third party agent approved pledged securities in an amount sufficient to protect District funds ona day-to-day basis during the period of the contract. The pledge of approved securities is waived only tothe extent of the dollar amount of Federal Deposit Insurance Corporation insurance.

At June 30, 2016, the carrying amount of the District's deposits was $8,092,702 and the bank balancewas $9,352,746. The entire bank balance throughout the year was covered by federal depositoryinsurance or by collateral held by the District's agent in the District's name.

The deposits were deemed collateralized under Kentucky Law during the year. The KentuckyDepartment of Education maintains copies of all safekeeping receipts in the name of the District. Thefollowing is disclosed:

a. Name of bank; Citizens National Bank.

b. Amount of bond and/or security pledged as of the date of the highest combined balance ondeposit was $14,217,497.

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

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

Category 2 Deposits which are collateralized with securities held bythe pledging financialinstitution's trust department or agent in the District's name.

Category 3 Deposits which are not collateralized or insured.

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NOTE D - CASH AND CASH EQUIVALENTS - CONTINUED

As of June 30, 2016, based on these three levels of risk, all of the District's cash deposits are classifiedas Category 2.

Breakdown per financial statements:

Governmental funds

Proprietary fundsPermanent trust funds

Agency funds

$ 6.651,1811,120,320

64,473256.728

$ 8.092.702

NOTE E - INVESTMENTS

At year-end the District had no investment.

NOTE F - CAPITAL ASSETS

Capital asset activity for the fiscal year ended June 30, 2016, was as follows:

Governmental Activities

Balance

Julv 1. 2015 Additions DeductionsBalance

June 30. 2016

Land

Construction work in progressLand improvementsBuildings and improvementsTechnology equipmentGeneral equipmentVehicles

$ 1,375,069

1,444,13137,637,796

3,687,077586,700

4.234.727

$1,750,435

9,500

65.529

$

299.382

$ 1,375,0691,750,4351,444,131

37,637,7963,397,195

586,7004.300.256

Totals at historical cost 48.965.500 1.825.464 299.382 50.491.582

Less: accumulated depreciationLand improvementsBuildings and improvementsTechnology equipmentVehicles

General equipment

1,029,83914,686,221

3,465,4473,354,741

530.597

62,5231,051,171

59,857222,847

14.128

299,382

1,092,36215,737,3923,225,9223,577,588

544.725

Total accumulated depreciation 23.066.845 1.410.526 299.382 24.177.989

Governmental Activities

Capital Assets - Net $25,898,655 $ 414.938 $ $26,313,593

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Forth© year ended June 30, 2016

NOTE F - CAPITAL ASSETS - CONTINUED

Balance BalanceBusiness-Type Activities Julv 1. 2015 Additions Deductions June 30. 2016

General equipment $ 498,818 $ - $ $ 498,818Technology equipment 29.303 - 29.303

Totals at historical cost 528.121 - 528.121

Less: accumulated depreciationGeneral equipment 468,763 10,733 479,496Technology equipment 26.908 1.758 28.666

Total accumulated depreciation 495.671 12.491 508.162

Business-Type ActivitiesCapital Assets - Net $ 32.450 $ n24911 $ S 19.959

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

Instruction $ 647,591Instructional staff 4,202District administrative 15,678School administrative 1,617Plant operation and maintenance 516,799Student transportation 221,182Business support services 3,040Student support services 417Food service 12.491

S1.423.017

NOTE G - BONDED DEBT AND LEASE OBLIGATIONS

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

Interest

Issue Date Amounts Rates

2005 $ 1,730,000 3.250%-4.150%

2007 Refinancing $ 3,695,000 3.400% - 3.700%

2007 $ 990,000 3.700%-4.000%

2009 Refinancing $ 4,505,000 1.500%-3.625%

2010 $ 1,955,000 .750%-4.300%

2011 $ 1,875,000 1.250%-4.250%

2011 Refinancing $ 2,020,000 500% - 3.000%

2012 Refinancing $ 1,755,000 1.050%-2.450%

2013 Refinancing $ 1,605,000 700% - 2.000%

2013 $ 2,790,000 .400%-4.000%

2015 $ 2,650,000 2.000% - 3.250%

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

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

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NOTE G - BONDED DEBT AND LEASE OBLIGATIONS - CONTINUED

On November 18, 2015, the District issued $2,650,000 in School Building Revenue Bonds (Series 2015)with an interest rate ranging from 2.00% to 3.25% to finance improvements at various locations.

On November 26, 2013, the District issued $2,790,000 in School Building Revenue Bonds (Series 2013)with an interest rate ranging from .40% to 4.00% to finance improvements at various locations.

On May 9, 2013, the District refinanced the School Building Revenue Bonds (Series 2005) with acumulative savings of $141,674. The new 2013 bond series was issued for $1,605,000 with an interestrate ranging from .7% to 2.0%.

On March 7, 2012, the District refinanced the School Building Revenue Bonds (Series 2004) with acumulative savings of $140,545. The new 2012 bond series was issued for $1,755,000 with an interestrate ranging from 1.05% to 2.45%.

On July 20, 2011, the District issued $1,875,000 in School Building Revenue Bonds (Series 2011) with aninterest rate ranging from 1.25% to 4.25% to finance roof improvements at various locations.

On July 12, 2011, the District refinanced the School Building Revenue Bonds (Series 2001) with acumulative savings of $185,694. The new 2011 bond series was issued for $2,020,000 with an interestrate ranging from .5% to 3.0%.

On December 6, 2010, the District issued $1,955,000 in School Building Revenue Bonds (Series 2010)with an interest rate ranging from .750% to 4.30% to finance roof improvements at various locations.

On April 1, 2009, the District refinanced the School Building Revenue Bonds (Series 1998 and Series1999) with a cumulative savings of $297,440. The new 2009 bond series was issued for $4,505,000 withan interest rate ranging from 1.5% to 3.625%.

On May 9, 2007, the District issued $990,000 in School Building Revenue Bonds (Series 2007) with anaverage interest rate of 3.85% to finance Johnson Central High School renovations.

On January 23, 2007, the District refinanced the School Building Revenue Bonds (Series 1997) with acumulative savings of $197,676. The new 2007 bond series was issued for $3,695,000 with an interestrate ranging from 3.4% to 3.7%.

On November 1, 2005, the District issued $1,730,000 in School Building Revenue Bonds (Series 2005)with an average interest rate of 3.70% to finance Johnson Central High School swimming poolrenovations.

The District has "participation agreements" with the Kentucky School Facilities Construction Commission.The Commission was created by the Kentucky Legislature for the purpose of assisting local schooldistricts in meeting school construction needs. The following table sets forth the amount to be paid by theDistrict and the Commission for each year until maturity of all bond issues.

The bonds may be called prior to maturity at dates and redemption premiums specified in each issue.Assuming no issues are called prior to scheduled maturity, the minimum obligations of the funds at June30, 2016 for debt service (principal and interest) are as follows:

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YEAR

JOHNSON COUNTY

SCHOOL DISTRICT

KENTUCKY SCHOOL

FACILITIES CONSTRUCTIONCOMMISSION

TOTAL

REQUIREMENTSFOR YEAR

PRINCIPAL INTEREST PRINCIPAL INTEREST TOTAL

2016-2017 $ 1,027,075 $ 370,352 $ 352,925 $ 116,831 $ 1,867,1832017-2018 1,058,256 335,390 361,744 108,186 1,863,5762018-2019 866,097 301,322 323,903 98,646 1,589,9682019-2020 888,521 277,186 216,479 89,713 1,471,8992020-2021 913,096 254,585 221,904 84,286 1,473,8712021-2022 932,117 230,452 227,883 78,309 1,468,7612022-2023 710,723 209,092 234,277 71,914 1,226,0062023-2024 733,873 190,595 241,127 65,063 1,230,6582024-2025 583,742 170,385 211,258 57,811 1,023,1962025-2026 599,331 153,380 210,669 51,072 1,014,4522026-2027 493,352 136,428 191,648 44,134 865,5622027-2028 444,361 119,363 180,639 36,988 781,3512028-2029 477,602 103,878 187,398 30,230 799,1082029-2030 500,386 86,885 194,614 23,014 804,8992030-2031 515,816 68,188 179,184 15,717 778,9052031-2032 504,187 48,933 90,813 10,560 654,4932032-2033 350,856 33,284 . 94,144 7,228 485,5122033-2034 363,759 20,494 86,241 3,950 474,4442034-2035 210,269 10,463 39,731 1,724 262,1872035-2036 216.804 3.523 33.196 539 254.062

TOTALS $12,390,223 $3,124,178 $3,879,777 $ 995,915 $20.390 093

During the year ended June 30, 2016 the District's debt obligation was as follows:

AMOUNT

OUTSTANDING

6/30/15 ADDITIONS

$16,355,000 $ 2,650,000

QUALIFIED ZONE ACADEMY BONDS

The Johnson County School District Finance Corporation issued $1,825,000 of Qualified Zone AcademyBonds (QZAB), Series 2010, December 1, 2010 under a guaranteed investment contract whereby theJohnson County School District will remit to the low bidder Monticello Banking Company contributions toan escrow account $1,338,275 over an eighteen year period. The federal government will pay directly tothe bank most of the annual interest expense leaving the board a small portion of interest due twice ayear. Funds from the escrow will be used to defease the entire bond upon maturity December 1, 2027.The minimum obligations of the funds at June 30, 2015 for the escrow and interest are as follows:

DEDUCTIONS

$2,735,000

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AMOUNT

OUTSTANDING

6/30/16

$16,270,000

AMOUNTS

DUE WITHIN

ONE YEAR

$1,380,000

JOHNSON COUNTY SCHOO DISTRICT




YearJohnson CountySchool District Federal Rebate

Total

RequirementsFor Year

Escrow Interest Interest Total

2016-2017 $ 78,722 $ 2,007 $ 100,193 $ 180,9222017-2018 78,722 2,008 100,192 180,9222018-2019 78,722 2,007 100,193 180,9222019-2020 78,722 2,008 100,192 180,9222020-2021 78,722 2,007 100,193 180,9222021-2022 78,722 2,008 100,192 180,9222022-2023 78,722 2,007 100,193 180,9222023-2024 78,722 2,008 100,192 180,9222024-2025 78,722 2,007 100,193 180,9222025-2026 78,722 2,008 100,192 180,9222026-2027 78,722 2,007 100,193 180,9222027 78.723 1.003 50.096 129.822

Totals $944,665 $23,085 $1,152,214 $2,119,964

During the year ended June 30, 2016 the District's QZAB debt obligation to the escrow was as follows:

AMOUNT

OUTSTANDING

6/30/15

$1,023,387

ADDITIONS

$

DEDUCTIONS

$78,722

AMOUNT

OUTSTANDING

6/30/16

$944,665

AMOUNTS

DUE WITHIN

ONE YEAR

$78,722

The Johnson County School District Finance Corporation issued $1,223,000 of Qualified Zone AcademyBonds (QZAB), Series 2007, October 9, 2007 under a guaranteed investment contract whereby the JohnsonCounty School District remitted to the low bidder, Citizens National Bank, Paying Agent, $670,000. This initialinvestment was required to defease the entire bond issue due October 8, 2022. This money was put into aguaranteed escrow account that will be used to defease the bond upon maturity.

The District issued a (QZAB), Series 2006, January 12, 2006 where a one time payment of $285,000 wasrequired to defease the entire bond issue due January 25, 2021. This money was put into a guaranteedescrow account that will be used to defease the bond upon maturity.

The private business contribution requirement for Qualified Zone Academy Bonds (QZAB) as set out inSection 1397E of the Internal Revenue Code of 1986, as amended states that the issuer must certify thatwritten assurances from private business contribution be met with respect to such bonds.

The Johnson County School District Educational Assistance Foundation, Inc., a private non-stock, non-profitcharitable and educational corporation having for its corporate purpose the promotion of education andeducational opportunities resolved and executed a written contribution contract with the Johnson CountySchool District as required by the Internal Revenue Code for Qualified Zone Academy Bonds. Thesecontributions for academy bond purposes can be from cash to goods inkind and is schedule as follows:

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FISCAL YEAR

2017

2018

2019

2020

2021

2022

2023

AMOUNT

$ 10,2429,6859,1588,6608,1895,6425.332

$ 56^08

The private business contribution requirement for Qualified Zone Academy Bonds (QZAB) as set out inSection 1397E of the Internal Revenue Code of 1986, was met from private business contributions. Theamount provided was $413,094 with the requirement being $10,831.

NOTE H - COMMITMENTS UNDER NONCAPITALIZED LEASES

The Districthad no commitments under noncapitalized leases at June 30,2016.

NOTE I - KSBIT PAYABLE

The Kentucky School Board Insurance Trust ("KSBIT") notified the District during 2013 that their self-insurance pools for worker's compensation and liability insurance were underfunded. As a result, anassessment will be required under a fair methodology to be approved by the Kentucky Department ofInsurance, of current and past participating members to fund the deficit and the transfer of liability to aqualified insurer/reinsurer. On June 24, 2013, the KSBIT Board voted to submit a plan to the KentuckyDepartment of Insurance using the novation option. A novation transfers all existing KSBIT claims andrisk to a highly rated reinsurer which will continue to make claims payments. Under novation method, theDistrict's liability would be $342,874. Members will have the option of making a lump-sum payment oftheir assessment or to take advantage of bond financing for up to 20 years. The District has voted tofinance this obiigation over a six year period. The minimum obligations of the funds at June 30, 2016 forprincipal only are as follows:

FISCAL YEAR

2017

2018

2019

2020

2021

AMOUNT

$ 77,43718,16218,16118,16118.161

$150.082

During the year ended June 30, 2016 the District's debt obligation was as follows:

AMOUNT

OUTSTANDING6/30/15

$227,518

ADDITIONS DEDUCTIONS

$77,436

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AMOUNT

OUTSTANDING

6/30/16

$150,082

AMOUNTS

DUE WITHIN

ONE YEAR

$77,437




NOTE J - PENSION PLANS

KENTUCKY TEACHERS' RETIREMENT

The Johnson County School District contributes to the Teachers' Retirement System of Kentucky (KTRS),a cost-sharing, multiple employer defined benefit pension plan. KTRS administers retirement anddisability annuities, and death and survivor benefits to employees and beneficiaries of employees of thepublic school systems and other public educational agencies in Kentucky. KTRS requires that membersof KTRS occupy a position requiring either a four (4) year college degree or certification by KentuckyDepartment of Education (KDE). Job classifications that permit experience to substitute for either ofthese requirements do not participate in KTRS.

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

Funding Policy - Contribution rates are established by KRS. Members are required to contribute12.855% of their salaries to KTRS. The Commonwealth of Kentucky is required to contribute 16.105% ofsalaries for members in a state retirement system before July 1, 2008 and 16.105% of salaries formembers who started their account after July 1, 2008. The federal program for any salaries paid by thatprogram pays the matching contributions. The local school districts pay employer matching on allemployees who do not occupy federally funded positions. As part of the Shared Responsibility Plan,beginning July 1, 2010 each employer is required to pay the amount equal to the increase in employeecontributions. Effective July 1, 2015, the current employer match is 3.00% of total gross non-federalsalaries in the district and for individuals employed in federally funded positions the employer-matchingrate is 16.105%.

Medical Insurance Plan

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

To be eligible for medical benefits, the member must have retired either for service or disability. TheKTRS Medical Insurance Fund offers coverage to members under the age of 65 through the KentuckyEmployees Health Plan administered by the Kentucky Department of Employee Insurance, Once retiredmembers and eligible spouses attain age 65 and are Medicare eligible, coverage is obtained through theKTRS Medicare Eligible Health Plan.

Funding policy - In order to fund the post-employment healthcare benefit, active member contributionsare matched by the state at .75% of members' gross salaries. Also, the premiums collected from retireesas described in the plan description and investment interest help meet the medical expenses of the plan.Additionally, under the Shared Responsibility Plan, the local school district employers pay 3.00% ofmembers' salary for the 2015-2016 fiscal year.

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NOTE J - PENSION PLANS - CONTINUED

The Johnson County School District's total payroll for the year was $23,300,235. The payroll foremployees covered under KTRS was $17,194,930. For the year ended June 30, 2016, theCommonwealth contributed $2,993,093 to KTRS for the benefit of participating employees. The Schooldistrict's contributions to KTRS for the year ending June 30, 2016 was $782,667, which represents thoseemployees covered by federal programs.

COUNTY EMPLOYEES' RETIREMENT SYSTEM

Plan Description

Classified employees (substantially all full-time Board employees other than certified employees) arecovered by the County Employees' Retirement System (CERS), a cost-sharing, multiple-employer definedbenefit pension plan administered by the Kentucky Retirement System. CERS provides for retirement,disability, and death benefits to plan members and beneficiaries. Cost of living adjustments are providedat the discretion of the State legislature. Under the provisions of the Kentucky Revised Statute Section61.645, the Board of Trustees of Kentucky Retirement System administers CERS and has the authority toestablish and amend benefit provisions. The County Employees' Retirement System issues a publiclyavailable financial report that includes financial statements and required supplementary information. Thatreport may be obtained by writing to Kentucky Retirement Systems, Perimeter Park West, 1260 LouisvilleRoad, Frankfort, Kentucky 40601.

Benefits Provided

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

Retirement Benefit

CERS is designed to provide three types of benefits: a monthly retirement benefit for life basedon the employee's salary and service (the pension benefit), health insurance benefits afterretirement, and disability/death benefits.

Monthly retirement benefits are based on a formula established by statute which is (finalcompensation x benefit factor x years of service credit). Participants hired before 8/1/04 havetheir monthly benefit calculated at the average of highest five years salary which must contain atleast 48 months of service and includes lump-sum payments for compensatory time times 2.2%benefit factor times years of service credit. Participants hired after 8/1/04 but before 9/1/08 havea reduced benefit factor of 2.0%.

Participants hired after 9/1/08 have their monthly benefit calculated at the average of the fivecomplete fiscal years immediately preceding retirement which must contain 60 months of serviceand does not include lump-sum payments for compensatory time. The benefit factor is 1.10% for10 years or less of service, 1.30% for more than 10 years but no more than 20 years, 1.50% forgreater than 20 years but no more than 26 years, 1.75% for greater than 26 years but no morethan 30 years, and 2.00% for greater than 30 years.

At retirement, a retiree may choose to take a reduced monthly benefit in order to provide amonthly benefit to a beneficiary upon their death, either for a period certain or for the life of thebeneficiary. The system also provides for a statutory 1.5% annual increase to monthly benefitsafter retirement, often referred to as the cost of living adjustment (COLA).

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Medical Insurance

CERS also provides access to group rates on medical insurance for retired members, theirspouse, and dependents. Coverage for retirees not eligible for Medicare is provided through theKentucky Employees Health Plan the same health plan provided tostate employees. Coveragefor Medicare eligible retirees is provided through a plan administered by or contracted through theretirement systems which then coordinates with Medicare for delivery of health benefits.

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

Disability and Death Benefits

Like most defined benefit plans, CERS provides benefits for those employees who becomedisabled or who die prior to retirement. Participants have to have a minimum of 5 years ofservice to apply for disability benefits and approval detemriined by systems under criteriaestablished by state statute. CERS also provides death before retirement and special death inthe line of duty benefits. After retirement, the benefits left to the retiree's beneficiary vary basedupon the payment option selected at retirement. In addition, CERS provides a $5,000 lump sumdeath benefit for members who retire with at least 4 years of service.

Contributions

Plan members are required to contribute 5.00% of their annual salary if hired before September 1, 2008and 6% if hired on or after September 1, 2008 through payroll deductions and the Board is required tocontribute at an actuarially determined rate. The current rate is 17.06% of the employee's total coveredcompensation, actuarially determined as an amount that, when combined with employee contributions, isexpected to finance the costs ofbenefits earned by employees during the year, with an additional amountto finance any unfunded accrued liability. The District's contributions to CERS for the year ended June30, 2016 was $1,031,348, which consisted of $786,997 from the District and $244,351 from theemployees.

Pension Liabiiities, Pension Expense, and Deferred Outfiows of Resources and Deferred infiowsof Resources Reiated to Pensions

KTRS portion ofGASB 68 changes will be reported by theState only and the District will not reflect any ofthose changes in their report but the District will fully comply with all changes of GASB 68 concerningCERS and disclose those changes within the report.

At June 30, 2016, the District reported a liability of $8,314,574 for its proportionate share of the netpension liability. The net pension liability was measured as of June 30, 2015, and the total pensionliability used to calculate the netpension liability was determined by an actuarial valuation as ofthat date.The District's proportion of the net pension liability was based on a projection of the District's long-termshare of contributions to the pension plan relative to the projected contributions of all participatingemployers, actuarially determined. At June 30, 2015, the District's proportion was 0.193384%, which wasa decrease of .005497% from its proportion measured as of June 30, 2014.

For the year ended June 30, 2016, the District recognized pension expense of$1,102,312. At June 30,2016, the District reported deferred outflows of resources and deferred inflows of resources related topensions from the following sources:

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Deferred Outflows Deferred Inflowsof Resources of Resources

Differences between expected and actualexperience $ 69,097 $

Changes of assumptions 838,434

Net difference between projected and actualinvestment earnings on pension plan investments 74,533

Changes in proportion and differencesbetween employer contributions andproportionate share of contributions - 141,776

District contributions subsequent to themeasurement date 786.997

Total $ 1,769.061 $ 141.776

$786,997 reported as deferred outflows of resources related to pensions resulting from Districtcontributions subsequent to the measurement date will be recognized as a reduction of the net pensionliability in the year ended June 30, 2017. Other amounts reported as deferred outflows of resources anddeferred inflows of resources related to pensions will be recognized in pension expense as follows:

Year ended June 30:

2017 $ 299,756

2018 299,7562019 122,586

2020 118,190

2021

Thereafter -

$ 840.288

Actuarial Methods and Assumptions

A summary of the actuarial methods and assumptions used in determining the total pension liability as ofJune 30, 2015 are as follows:

Valuation Date June 30, 2015Experience Study July 1, 2008 - June 30, 2013Actuarial Cost Method Entry Age NormalAmortization Method Level percentage of payroll, closedRemaining Amortization Period 28 yearsAsset Valuation Method 5-year smoothed marketInflation 3.25%Salary Increase 4.0%, average, including inflationInvestment Rate of Return 7.50%, net of pension plan investment expense. Including inflation

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The mortality table used for active members is RP-2000 Combined Mortality Table projected with ScaleBB to 2013 (multiplied by 50% for males and 30% for females). For healthy retired members andbeneficiaries, the mortality table used is the RP-2000 Combined Mortality Table projected with Scale BBto 2013 (set back 1 year for females). For disabled members, the RP-2000 Combined Disabled MortalityTable projected with Scale BB to 2013 (set back 4 years for males) is used for the period after disabilityretirement.

Projected future benefits for all current plan members were projected through 2117.

The long-term expected return on plan assets is reviewed as part of the regular experience studiesprepared every five years for KRS. The most recent analysis, performed for the period covering fiscalyears 2008 through 2013, is outlined in a report dated April 30, 2014. Several factors are considered inevaluating the long-term rate of return assumption including long term historical data, estimates inherentin current market data, and a log-normal distribution analysis in which best-estimate ranges of expectedfuture real rates of return (expected return, net of investment expense, and inflation) were developed bythe 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 assetallocation percentage and then adding expected inflation. The capital market assumptions developed bythe investment consultant are intended for use over a 10-year horizon and may not be useful in settingthe long-term rate of return for funding pension plans which covers a longer timeframe. The assumptionis intended to be a long term assumption and is not expected to change absent a significant change in theasset allocation, a change in the inflation assumption, or a fundamental change in the market that altersexpected returns in future years. The target allocation and best estimates of arithmetic real rates ofreturn for each major asset class are summarized in the following table:

Long-Term ExpectedAsset Class Target Allocation Real Rate of Return

Combined Equity 44% 5.40%Real Return (Diversified Inflation Strategies) 10% 3.50%Absolute Return (Diversified Hedge Funds) 10% 4.25%Private Equity 10% 8.50%Real Estate 5% 4.50%

Combined Fixed Income 19% 1.50%

Cash 2% (0.25)%Total 100%

Discount Rate

The discount rate used to measure the total pension liability was 7.50%. The projection of cash flowsused to determine the discount rate assumed that local employers would contribute the actuariallydetermined contribution rate of projected compensation over the remaining 28 year amortization period ofthe unfunded actuarial accrued liability. The actuarial determined contribution rate is adjusted to reflectthe phase in of anticipated gains on actuarial value of assets over the first four years of the projectionperiod. The discount rate determination does not use a municipal bond rate.

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Sensitivity of the Empioyer's Proportionate Share of the Net Pension Liabiiity to Changes in theDiscount Rate

The following presents the District's proportionate share of the Net Pension Liability using the discountrate of (7.50%), as well as what the District's proportionate share of the Net Pension Liability would be if itwere calculated using a discount rate that is one percentage-point lower (6.50%) or one percentage-pointhigher (8.50%) than the current rate:

1.0% Decrease Current Discount 1.0% Increasef6.50%l Rate (7.50%) (8.50%l

District's

proportionate share ofthe net pension liability $10,614,613 $8,314,595 $6,344,833

Pension Pian Fiduciary Net Position

Detailed information about the pension plan's fiduciary net position is available in the separately issuedKRS 2014 Comprehensive Annual Financial Report at kyret.ky.gov.

Payable to the Pension Pian

At June 30, 2016, the District reported a payable of $126,912 for the outstanding amount of contributions tothe pension plan required for the year ended June 30, 2016.

NOTE K - CONTINGENCIES

The District receives funding from federal, state and local government agencies and private contributions.These funds are to be used for designated purposes only. For government agency grants, if based upon thegrantor's review, the funds are considered not to have been used for the intended purpose, the grantors mayrequest a refund of monies advanced, or refuse to reimburse the District for its disbursements. The amount ofsuch future refunds and unreimbursed disbursements, if any, is not expected to be significant. Continuationof the District's grant programs is predicated upon the grantors' satisfaction that the funds provided are beingspent as intended and the grantors' intent to continue their programs.

NOTE L - LITIGATION

The District is subject to various other legal actions in various stages of litigation, the outcome of which is notdeterminable at this time. Management of the District and its legal counsel do not anticipate that there will beany material effect on the combined financial statements as a result of the cases presently in progress,except as described elsewhere in this report.

NOTE M - 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 iscovered through the purchase of commercial insurance. The District has purchased certain policies which areretrospectively rated which includes Workers' Compensation insurance.

-40-




NOTE N - RISK MANAGEMENT

The District Is exposed to various risks of loss of torts; theft of, damage to, and destruction of assets; errorsand 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 Boards*Insurance Trust Liability Insurance Fund. These public entity risk pools operate as common riskmanagement and Insurance programs for all school districts and other tax supported educational agencies ofKentucky who are members of the Kentucky School Boards Assoclallon. The District pays an annualpremium to each fund for coverage. Contributions to the Workers' Compensation Fund are based onpremium rates established by such fund In conjunction with the excess Insurance carrier, subject to claimsexperience modificationsand a group discount amount. Dividends may be declared, but are not payable untiltwenty-four (24) months after the expiration of the self-insurance term. The Liability Insurance Fund paysInsurance premiums of the participating members established by the insurance carrier. The Trust canterminate coverage If It Is unable to obtain acceptable excess general liability coverage and for any reason bygiving 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 whichcoverage was provided) would bereturned to the member on a pro rata basis.

The District purchases unemployment Insurance through the Kentucky School Boards Insurance TrustUnemployment Compensation Fund; however, risk has not been transferred to such fund. In addition, theDistrict continues to carry commercial Insurance for all other risks of loss. Settled claims resulting from theserisks have not exceeded commercial Insurance coverage In any of the past three fiscal years.

NOTE O - DEFICIT OPERATING BALANCES

There are no funds of the District that currently have a deficit fund balance. However, the following fundshave operations that resulted In a current year deficit of revenues over expenditures resulting In acorresponding reduction of fund balance;

General Fund

Debt Service Fund

District Activity Fund

$ 686,925$ 1,451,900$ 4,392

NOTE P - COBRA

Under COBRA, employers are mandated to notify terminated employees of available continuing Insurancecoverage. Failure to comply with this requirement may put the school district at risk for a substantial losscontingency.

NOTE Q - TRANSFER OF FUNDS

The following transfers were made during the year:

Tvoe From Fund To Fund

OperatingOperatingOperatingOperatingNon Operating

General

Capital OutlayFSPK

Debt Service

Debt Service

Special RevenueDebt Service

Debt Service

Construction

Debt Service

-41-

Purpose

TechnologyDebt Seivice

Debt Seivice

ConstructionDebt Seivice

Amount

$ 79,299$ 213,484$ 1,236,724$2,573,103$ 1,453,788




NOTE R - INTERFUND RECEIVABLES AND PAYABLES

There were no interfund receivables or payables at June 30,2016.

NOTE S - SUBSEQUENT EVENTS

Managementhas evaluated subsequent events through October24, 2016, the date on which the financialstatements were available to be issued.

-42-

REQUIRED SUPPLEMENTARY INFORMATION


STATEMENT OF REVENUES. EXPENDITURES, AND CHANGES IN FUND BAU\NCE

BUDGET AND ACTUAL

GENERAL FUND


Revenues:

From local sources

Taxes

Budgeted Amounts

Original Final

Actual

(GAAP Basis)

Variance

with Final

BudgetFavorable

(Unfavorable)

Property $ 2,481,000 $ 2,481,000 $ 3,088,609 $ 607,609

Motor vehicle 600,000 600,000 709,615 109,615

Utilities 1,000,000 1.000,000 1,097,120 97,120

Tuition and fees 145,000 145,000 167,617 22,617

Earnings on investments 40,000 40,000 41,651 1,651

Other local revenues 16,000 16,000 144,292 128,292

Intergovernmental - state 17,891,715 17,891,715 23,470,754 5,579,039

Intergovernmental - indirect federal 50,000 50,000 91,857 41,857

Total revenues 22,223.715 22,223,715 28,811,515 6,587,800

Expenditures:Instruction 16,218,497 16,269,984 19,053,997 (2,784,013)

Support services:Student 756,443 756,443 913,573 (157,130)

Instructional staff 190,992 190,992 173,864 17,128

District administrative 3,627,562 3,577,351 525,262 3,052,089

School administrative 1,636,221 1,636,489 2,079,819 (443,330)

Business 421,760 421.761 720,696 (298,935)

Plant operation and maintenance 3,870,394 3,868,639 3,687.780 180,859

Student transportation 2,575,991 2,575,991 2,028,091 547,900

Central office - - - -

Community service activities 255,510 255,720 241.902 13,818

Other 2,550 2,550 - 2,550

Total expenditures 29,555,920 29,555,920 29,424,984 130.936

Excess (deficit) of revenues over expenditures (7,332,205) (7,332,205) (613,469) 6,718,736

Other Financing Sources (Uses):Proceeds from sale of fixed assets - - 5,843 5,843

Operating transfers in - - - -

Operating transfers out - - (79,299) (79,299)

Total other financing sources (uses) (73,456) (73,456)

Net change in fund balance (7,332,205) (7,332,205) (686,925) 6,645,280

Fund balance, July 1, 2015 7,332,205 7,332.205 6,630,320 (701,885)

Fund balance, June 30, 2016 $ $ - $ 5,943,395 $ 5,943,395



STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCEBUDGET AND ACTUAL

SPECIAL REVENUE FUND


Revenues:

Earnings on investmentsOther local revenues

State aid

Federal aid

Total revenues

Expenditures:Current:

Instruction

Support Services:Student

Instructional staff

District administration

School administration

Business

Plant operations and maintenanceStudent transportationCentral office

Community services activitiesOther

Total expenditures

Excess (deficit) of revenues over expenditures

Other Financing Sources (Uses):Transfers in

Transfers out



Fund balance July 1, 2015

Fund balance June 30, 2016

Budgeted Amounts)riainal Final

Actual

Variances

with Final

BudgetFavorable

$

1,754,6892,958,309

$

1,769,6052,920,314

$ 1,454448,011

1,618,3323,004,767

$ 1,454448,011

(151,273)84,453

4,712,998 4,689,919 5,072,564 382,645

4,184,162 4,128,230 4,486,281 (358,051)

95,52133,684

111,70450,354

67,907184,982

15,949

43,797(134,628)

(15,949)

399,631 399,631 396,744 2,887

4,712,998 4,689,919 5,151,863 (461,944)

- - (79,299) (79,299)

- - 79,299 79,299

79,299 79,299

-

$ $ $ $



SCHEDULE OF THE DISTRICT'S PROPORTIONATE SHARE OFTHE NET PENSION LIABILITY (CERS)

JUNE 30. 2016

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

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

District's covered-employee payroll

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

Plan fiduciary net position as a percentage of the totalpension liability

6/30/2015

0.198881%

$ 6,452,000

$ 5,907,751

109.20%

66.80%

6/30/2016

0.193384%

$ 8,314,574

$ 6,105,305

136.19%

59.97%

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

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

-45-


SCHEDULE OF DISTRICT CONTRIBUTIONS (CERS)

JUNE 30, 2016

Contractually required contribution

Contributions in relation to the contractually requiredcontribution

Contribution deficiency (excess)

District's covered-employee payroll

Contributions as a percentage of covered-employee payroll

6/30/2015 6/30/2016

$ 800,026 $ 786,997

800,026 786,997

$ $

$ 5,907,751 $ 6,105,305

13.50% 12.89%

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

-46-


NOTES TO REQUIRED SUPPLEMENTARY INFORMATION (CERS)


NOTE A - CHANGES OF BENEFIT TERMS

The following changes were made by the Kentucky Legislature and reflected in the valuation performedas of June 30 listed below:

2009: A new benefit tier for members who first participate on or after September 1, 2008 was introducedwhich included the following changes:

1. Tiered Structure for benefit accrual rates

2. New retirement eligibility requirements3. Different rules for the computation of final average compensation

2014: A cash balance plan was introduced for members whose participation date is on or afterJanuary 1, 2014.

NOTE B - CHANGES OF ASSUMPTIONS

The following changes were made by the Kentucky Legislature and reflected in the valuation performedas of June 30 listed below:

2015

• The assumed investment rate of return was decreased from 7.75% to 7.50%.• The assumed rate of inflation was reduced from 3.50% to 3.25%.• The assumed rate of wage inflation was reduced from 1.00% to 0.75%.• Payroll growth assumption was reduced from 4.50% to 4.00%.• The mortality table used for active members is RP-2000 Combined Mortality Table projected

with Scale 88 to 2013 (multiplied by 50% for males and 30% for females).• For healthy retired members and beneficiaries, the mortality table used is the RP-2000

Combined Mortality Table projectedwith Scale 88 to 2013 (set back 1 year forfemales).For disabled members, the RP-2000 Combined Disabled Mortality Table projected with Scale88 to 2013 (set back 4 years for males) is used for the period after disability retirement. Thereis some margin in the current mortality tables for possible future improvement in mortality ratesand that margin will be reviewed again when the next experience investigation is conducted.

• The assumed rates of Retirement, Withdrawal and Disability were updated to more accuratelyreflect experience.

Method and assumptions used in calcuiations of actuariaiiy determined contributions

The actuariaiiy determined contribution rates are determined on a biennial basis beginning with the fiscalyears ended 2016 and 2017, determined as of July 1, 2015. The amortization period of the unfundedliability has been reset as ofJuly 1, 2013 to a closed 30-year period. The following actuarial methods andassumptions were used to determine contribution rates reported in thatschedule:

Actuarial cost methodAmortization method

Remaining amortization periodAsset valuation methodInflation

Salary increaseInvestment rate of return

Entry ageLevel percentage of payroll, closed28 years5-year smoothed market3.25 percent4.00, average, including inflation7.50 percent, net of pension plan investment expense,including inflation

-47-

COMBINING STATEMENTS - NONMAJOR FUNDS


COMBINING BALANCE SHEET - NONMAJOR GOVERNMENTAL FUNDS

June 30, 2016

FSPK

Debt

Service

Total

NonmajorGovernmental

District

Activity

Seek

CapitalOutlay

Fund Fund Fund Fund Funds

Assets and Resources:

Cash and cash equivalentsAccounts receivables

$ 15,600 $ - $272,395 $ $ 287,995

Total assets and resources $ 15,600 $ - $272,395 $ $ 287,995


Liabilities

Accounts payable

Total liabilities

$ 163 $ - $ $ $ 163

163 -- -

163

Fund Balances:

Restricted For:

District activitySFCC escrow

15,437 -

272,395

-15,437

272,395

Total fund balances 15,437 272,395 287,832

Total liabilities and fund balances $ 15,600 $ - $272,395 $ $ 287,995

See independentauditor's report and accompanying notes to financial statements.-48-


COMBINING STATEMENTOF REVENUES, EXPENDITURES. AND CHANGES IN FUND BALANCES - NONMAJOR GOVERNMENTAL FUNDS


Revenues:

From local sources

Taxes:

PropertyEarnings on investmentsOther local revenues

Intergovernmental - stateIntergovernmental- indirect federal

Total revenues

Expenditures:Instruction

Support services:Student

Instructional staff

Direct administrative

School administrative

Business

Plant operation and maintenanceStudent transportationCentral office

Facilities and construction

Community service activitiesOther

Total expenditures

Excess (deficit) of revenues over expenditures

Other Financing Sources (Uses):Bonds proceedsOperating transfers inOperating transfers outNon operating transfers inNon operating transfers out



Fund balance, July 1,2015

Fund balance, June 30, 2016

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

District

SEEK

Capital Debt

Total

Nonmajor

Activity FSPK Outlay Service Governmental

Fund Fund Fund Fund Funds

$ $ 441,879 $ $ $ 441,879- - - 3,497 3,497

68,302 - - - 68,302. 794,845 330,408 436,250 1,561,503- - - 93,380 93,380

68,302 1.236,724 330,408 533,127 2,168,561

24,617

- - -

24,617

48,077

-

-

-

48,077

- - -

3,469,335 3,469,335

72,694 . 3,469,335 3,542,029

(4,392) 1,236,724 330,408 (2,936,208) (1,373,468)

2,607,203 2,607,203- - - 1,450,208 1,450,208- (1,236,724) (213,484) (2,573,103) (4,023,311)- - - 1,453,788 1,453,788- - - (1,453,788) (1,453,788)

. (1,236,724) (213,484) 1,484,308 34.100

(4.392) - 116,924 (1,451,900) (1,339,368)

19.829 - 155,471 1,451,900 1,627,200

$ 15,437 $ $ 272,395 $ $ 287,832

OTHER COMBINING STATEMENTS AND SCHOOL ACTIVITY FUNDS


COMBINING STATEMENT OF FIDUCIARY NET POSITION

SCHOOL ACTIVITY FUNDS (AGENCY FUND)

For the year ended June 30,2016

Assets:

Cash

Accounts receivable

Total assets


Accounts payableDue to student groups

Total liabilities

Johnson

CountyElementary

Athletic

Johnson

Central

High Central

Flat

Gap

Meade

Memorial Highlands Porter

W.R.

Castle

Memorial

Johnson

CountyAlternative

School

Johnson

CountyMiddle

School Totals

$ 860 $ 85,497 $ 10,168 $ 14,331 $ 22,365 $ 51,167 $ 23,264 $ 11,228 $ 265 $ 37,783 $ 256,728

6,097 . - - 401 - - -140 6,638

$ 660 $ 91,594 $ 10,168 $ 14,331 $ 22,365 $ 51,568 $ 23,264 $ 11,228 $ 265 $ 37,923 $ 263,366

$ $ 7,755 $ $ $ $ 148 $ $ $ $ 7,903

660 83,839 10,168 14,331 22,365 51,568 23,116 11,228 265 37,923 255,463

$ 660 $ 91,594 $ 10,168 $ 14,331 $ 22,365 $ 51,568 $ 23,264 $ 11,228 $ 265 $ 37,923 $ 263,366

See Independent auditor's report and accompanying notes to financial statements. .50-


COMBINING STATEMENT OF REVENUES. EXPENDITURES AND CHANGES DUE STUDENT GROUPS

SCHOOL ACTIVITY FUNDS (AGENCY FUND)

Fortheyearended June 30.2016

Johnson

County

Athletic

Association

Johnson

Central

High

School

Central

Elementary

Flat Meade

Gap Memorial Highlands PorterElementary Elementary Elementary Elementary

W. R.

Castle

Memorial

Elementary

Johnson

CountyAlternative

School

34,183

$ 781,866 $ 50,958 $ 42,851 $ 23,037709,923 12,965 28,652 6,800

$ 54,070 $ 68,327 $ 29,977 $22,425 16,983 13,445

31

34,183 1,491,789

34,069

34,069

114

546

729,305

702,160

1,431,465

60,324

23,515

63,923

47,725

14,657

62,382

1,541

8,627

71,503

39,384

27,265

66,649

4,854

9,477

29,837

17,597

9,737

27,334

2,503

19,862

76,495

50,449

16,815

67,264

9,231

42,337

85,310

64,743

16,753

81,496

3,814

19,302

43,422

35,793

19,360

55,153

(11.731)

22,959

31

44

44

(13)

278

Johnson

CountyMiddle

School

$ 172,621

57,911

230,532

130,948

95,531

226,479

4,053

33,870

Totals

$ 1,223,738903,287

2,127,025

1,115,988936,347

2,052,335

74,690

180,773

Revenues:

School activitiesand projects fundsAthletic fund

Total revenues

Expenditures:School activities and projects fundsAthletic fund

Total expenditures

Excess (deficiency) of revenuesover expenditures

Due Student Groups, July 1,2015

Due Student Groups, June 30,2016 $ 660 $ 83,839 $ 10,168 $ 14,331 $ 22,365 $ 51,568 $23^1^ =4=—liL: ^ 37.923 $ 255,463

See independent auditor's report and accompanying notes tofinancial statements. _g.j_


STATEMENT OF RECEIPTS. DISBURSEMENTS DUE STUDENT GROUPS

SCHOOL ACTIVITYFUNDS - JOHNSON CENTRAL HIGH SCHOOL (AGENCY FUND)


Cash Cash Accounts Accounts Fund

Balances Balances Receivable Payable Balances

Name of Activity: July 1,2015 Receipts Disbursements June 30, 2016 June 30,2016 June 30, 2016 June 30,2016

Academic $ $ 17,582 $ 14,542 $ 3,040 $ $ 3,040 $

Academic Team Scholarship - 2,500 1,000 1,500 --

1,500

All CTE Programs 896 6,110 5,357 1,649 - -1,649

Americorp/YSC 458 9,738 3,082 7,114 - -7,114

Art - 460 460 - - - -

ASL - 210 - 210 - -210

Athletics 6,557 706,565 698,802 14,320 5,540 -19,860

Athletic Training - 177 - 177 --

177

Band - 936 936 - - - -

Bass Fishing Club 1,836 13,139 9,014 5,961 - 1,000 4,961

Beta Club - 540 - 540 - -540

Carpentry - Skills USA - 2,990 2,899 91 - -91

Choir - 2,285 2,137 148 --

148

Cooking Lab - 1,195 1,195 -- - -

District Activity - 9,935 7,178 2,757 - -2,757

FBLA Fund - 2,750 2,670 80 - -80

FCA Fund - 2,995 686 2,309 - 500 1,809

FCCLA National - 13,012 8,895 4,117 557 -4,674

FFA Fund - 3,204 2,377 827 --

827

HOSA - 24,467 23,910 557 -506 51

HOSA Cap - 1,440 1,440 -- - -

Interact Club - 1.217 749 468 - - 468

JC Dance 1,419 10,655 11,628 446 - -446

JCHS Barbell Club - 179 - 179 - -179

JCHS Spike Club - 14,858 14,664 194 - -194

Junior Class - 24,626 24,626 - - - -

Key Club - 3,210 3,210 -- - -

KYA/KUNA - 5,341 4,769 572 - -572

Musical Theater - 11,305 6,383 4,922 -1,617 3,305

Project Prom - 9,553 9,285 268 - - 268

Project Prom Scholarship - 16,065 6,750 9,315 - -9,315

Scholarship Program - 14,998 10,002 4,996 - 500 4,496

Senior Class - 5,760 5,525 235 - -235

Skills USA Scholarship - 18,279 16,769 1,510 -- 1,510

Store Fund 7,579 473,118 472,066 8,631 - 127 8,504

Student Council Fund - 30,309 30,269 40 -40 -

Teachers Discretionary 999 5,029 5,978 50 --

50

Television Station - 1,474 620 854-

-854

Vo-Ag Greenhouse 2,000 12,751 12,657 2,094 -425 1,669

Yearbook - 5,875 549 5,326 --

5,326

YSC Tee Shirt Fund - 5,952 5,952 - - - -

Totals $ 21,744 $ 1,492,784 $ 1,429,031 $ 85,497 $ 6,097 $ 7,755 $ 83,839



COMBININGSTATEMENT OF REVENUES.

DEBT SERVICE FUNDS

For the year ended June 30.2016

Revenues:

Earning on investmentsIntergovernmental - stateIntergovernmental - federal

Total revenues

Expenditures:Current:

Bond paymentsBond interest

Bond costs

Total expenditures

Excess (deficit) of revenues overexpenditures

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

Total other financing sources(uses)


Fund balance, July 1,2015

Fund balance, June 30,2016

EXPENDITURES AND CHANGES IN FUND BALANCES

Total

Issue

of

2005

Issue

of 2007

Refunding

Issue

of

2007

Issue

of 2009

Refunding

QZAB

Series

2010

Issue

of 2010

Issue

of 2011

Refunding

Issue

of 2011

Issue

of 2012

Refunding

Issue

of 2013

Refunding

Issue

of 2013

Issue

of 2015

Debt

Service

Funds

$22.494

$ $ -

18,156

$

163,795$ -

93,380

$ -116,254

$ $ - $ -37,123

$ 1,888

10,791

$59,917

$ 1,609

7,720

$ 3,497436,250

93,380

22,494 -18,156 163,795 93,380 116,254 - -

37,123 12,679 59,917 9,329 533,127

1,460,00029,444

470,000

34,310

30,000

30,903

505,000

70,156

78,722

102,201

75,000

59,892

65,000

46,450

10,000

65,950

55,000

31,843

25,000

21,938

40,000

92,220 36,208

34,100

2,813,722

621,513

34,100

1,489,444 504,310 60,903 575,156 180,923 134,892 111,450 75,950 86,843 46,938 132,220 70,305 3,469,335

(1,466,950) (504,310) (42,747) (411.361) (87,543) (18,638) (111,450) (75,950) (49,720) (34,259) (72,303) (60,977) (2,936,208)

2,607,203 2,607,203

13,162

1,453,788

504,310 42,747 411,361 87,543 18,638 111,450 75,950 49,720 36,147

(1,453,788)

72,303 26,877

(2,573,103)1,450,208

(2,573,103)1,453,788

(1,453,788)

1,466,950 504,310 42,747 411,361 87,543 18,638 111,450 75,950 49,720 (1.417,641)

(1,451,900)

1,451,900

72,303 60,977 1,484,308

(1,451,900)

1,451,900

$ $ $ - $ $ - $ - $ $ - $ - $ $- $

See Independent auditor's report and accompanying notes to financial statements.-53-


SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS


FEDERAL GRANTOR/

PASS - THROUGH GRANTOR/

PROGRAM OR CLUSTER TITLE

U.S. DEPT. OF AGRICULTURE

Passed Through State Dept. of Education:

CHILD NUTRITION CLUSTER

National School Lunch Program

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

School Breakfast Program

Summer Food Service Program for Children

State Administration Expenses for Child Nutrition

TOTAL U.S. DEPT. OF AGRICULTURE

U.S. DEPT. OF EDUCATION

Passed Through State Dept. of Education:

Title I - Grants to Local Educational Agencies

Rural Education

Investing in Innovation Fund

Supporting Effective Instruction - State Grant

Career and Technical Education - Basic Grants to States

Race to the Top - District Grants

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

-54-

Federal

CFDA

Number

10.555

10.555

10.553

10.559

10.560

84.010

84.358

84.41 IB

84.367

84.048

84.416A

Pass-

ThroughGrantor's

Number

7750002 15

7750002 16

1007

7760005 15

7760005 16

769002415

7740023 15

770000115

3100002 14

3100002 15

3140002 14

3140002 15

492B

3230002 14

3230002 15

3710002 14

371000215

371000615

436A

Federal

Expenditures

401,216984.399

1.385,615

162,317

1.547,932

211,293514,860726,153

1,13611,017

12,1532,286,238

5,442

2,291,680

296,667

892,950

1,189,617

26,032

71,964

97,996

8.572

116,68042,930

159,610

19,060

21,035

102

40,197

155,782

1,651,774


SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS - CONTINUED


FEDERAL GRANTOR/

PASS-THROUGH GRANTOR/

PROGRAM OR CLUSTER TITLE

SPECIAL EDUCATION CLUSTER (IDEA)

Special Education - Grants to States

Special Education - Preschool Grants

TOTAL U.S. DEPT. OF EDUCATION

U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICESPassed Through State Dept. of Education:

Cooperative Agreements to Provide Adolescent Health ThroughSchool-Based HV/STD Prevention and School-Based Sun/elllance

Passed Through Big Sandy Area Community Action Program, Inc.:Head Start

TOTAL U.S. DEPARTMENT OF HEALTH ANDHUMAN SERVICES

TOTAL FEDEFIAL FINANCIAL ASSISTANCE

The accompanying notes are an Integral part of this schedule.-55-

Federal

CFDA

Number

84.027

84.173

93.079

93.600

ThroughGrantor's

Number

3810002 14

3810002 15

3800002 14

3800002 15

2100001 15

04CH0712 49

04CH0712 50

Federal

Expenditures

400,046283.306683,352

14,022

19,114

33,136

716,488

2.368,262

1,000

165.073402,580

567,653

568,653

$ 5,228,595


NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS


NOTE A - BASIS OF PRESENTATION

The accompanying schedule of expenditures of federal awards (the Schedule) includes the federal awardactivity of the Johnson County School District under programs of the federal government for the yearended June 30, 2016. The information in this Schedule is presented in accordance with the requirementsof Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, CostPrincipals, and Audit Requirements for Federal Awards (Uniform Guidance). Because the Schedulepresents only a selected portion of the operations of the Johnson County School District, it is not intendedto and does not present the financial position, changes in net position, or cash flows of the JohnsonCounty School District.

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Expenditures reported on the Schedule are reported on the accrual basis of accounting. Suchexpenditures are recognized following the cost principles contained in the Uniform Guidance, whereincertain types of expenditures are not allowable or are limited as to reimbursement. Johnson CountySchool District has elected not to use the 10-percent de minimis indirect cost rate allowed under theUniform Guidance.

NOTE C - FOOD DISTRIBUTION

Nonmonetary assistance is reported in the schedule at the fair value of the commodities received anddisbursed. At June 30, 2016, the District had no food commodities in inventory.

NOTE D - TYPE A PROGRAMS

Type Aprograms for the Johnson County School District is any program for which total expenditures offederal awards exceeded $750,000 for fiscal year 2016. The District had the following programs andclusters that met the Type A program definition for fiscai year 2016:

CFDA# PROGRAM TITLE EXPENDITURES

Child Nutrition Cluster:10.555 Food Donation (In-Kind Commodities) $ 162,31710.555 National School Lunch Program 1,385,61510.553 School Breakfast Program 726,15310 559 Summer Food Service Program for Children 12.153

2.286.238

84.010 Title I - Grants to Local Educational Agencies 1.189.617

Total Type A Programs $ 3.475.855

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SCHEDULE OF FINDINGS AND QUESTIONED COSTS


Schedule of Findings and Questioned Costs


SECTION I - SUMMARY OF AUDITOR'S RESULTS

Financial Statements

Type of auditor's report issued unmodified:

Internal control over financial reporting:

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

Noncompliance material to financial statements noted?

Federal Awards

Internal control over major programs:

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

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

Any audit findings disclosed that are required to be reported in accordancewith2 CFR 200.516(a)?

Identification of major programs:

CFDA Number(s)Name of Federal Program or Cluster

_yes

yes

J(_yes

yes

yes

.yes

X no

X none reported

no

X no

X none reported

X no

84.010 Title I - Grants to Local Educational Agencies

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

Auditee qualified as low-risk auditee? X ves no

SECTION II - FINDINGS-FINANCIAL STATEMENTS AUDIT

2016-001 Accounting Errors

Condition: Several audit adjustments had to be made to correct the annual financial report and meals were being paid forthe first day of travel.

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

Cause of Condition: Lack of checks and balances.

Effect: The annual financial report is inaccurate and some employees were reimbursed for more travel than allowed bypolicy.

Recommendation: The Finance Officer needs to review all accounts and reconcile back to known check balances andtravel vouchers need to be checked more closely by each employee's supervisor.

Views of Responsible Officials and Planned Corrective Actions: We will review all accounts and make sure they reconcileback to known balances and monitor travel vouchers closer before payment is made.

SECTION 111 - FINDINGS AND QUESTIONED COSTS RELATED TO FEDERAL AWARDS

The audit did not disclose any audit findings.

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SCHEDULE OF PRIOR YEAR AUDIT FINDINGS

June 30, 2016

All prior year comments were addressed by the District. Corrections were initiated and improvementsmade in the documentation that was recommended.

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

FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH

GOVERNMENT AUDITING STANDARDS

WELLS & COMPANlf, P.S.C.tjfiuMic ,s/i4scotmCan/:i

865 South Mayo Trail, Suite 7Paintsville, Kerrtucky41240-1215

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

INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ONCOMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN

ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS

Members of the Board of Education

Johnson County School DistrictPaintsville, Kentucky

We have audited, in accordance with the auditing standards generally accepted in the United States of Americaand the standards applicable to financial audits contained in Government Auditing Standards issued by theComptroller General of the United States and the requirements prescribed by the Kentucky State Committee forSchool District Audits in the Independent Auditor's Contract, the financial statements of the governmentalactivities, the business-type activities, each major fund, and the aggregate remaining fund information of JohnsonCounty School District, as of and for the year ended June 30, 2016, and the related notes to the financialstatements, which collectively comprise Johnson County School District's basic financial statements and haveissued our report thereon dated October 24, 2016.

Internal Control over Financial Reporting

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

A deficiency in internal control exists when the design or operation of a control does not allow management oremployees, in the normal course of performing their assigned functions, to prevent, or detect and correct,misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internalcontrol such that there is a reasonable possibility that a material misstatement of the entity's financial statementswill not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or acombination of deficiencies, in internal control that is less severe than a material weakness, yet important enoughto merit attention by those charged with governance.

Our consideration of internal control was for the limited purpose described in the first paragraph of this sectionand was not designed to identify all deficiencies in internal control that might be material weaknesses orsignificant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internalcontrol that we consider to be material weaknesses. However, material weaknesses may exist that have notbeen identified.

Compliance and Other Matters

As part of obtaining reasonable assurance about whether Johnson County School District's financial statementsare free from material misstatement, we performed tests of its compliance with certain provisions of laws,regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effecton the determination of financial statement amounts. However, providing an opinion on compliance with thoseprovisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results ofour tests disclosed an instance of noncompliance or other matters that is required to be reported underGovernment Auditing Standards and which is described in the accompanying schedule of findings and questionedcosts as item 2016-001.

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

We noted certain matters that we reported to management of Johnson County School District, in a separate letterdated October 24, 2016.

Johnson County School District's Response to Findings

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

Purpose of this Report

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


Paintsville, KentuckyOctober 24, 2016

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

THE UNIFORM GUIDANCE

WELLS & COMPANY, P.S.C.&*u4/dc tS^ccfHtnt'd'nfi

865 South Mayo Trail, Suite7Paintsville, Kentucky 41240-1215

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

INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAMAND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY THE UNIFORM GUIDANCE

Members of the Board of EducationJohnson County School DistrictPaintsville, Kentucky

Report on Compliance for Each Major Federal Program

We have audited Johnson County School District's compliance with the types of compliance requirementsdescribed in the 0MB Compliance Supplement that could have a direct and material effect on each of JohnsonCounty School District's major federal programs for the year ended June 30, 2016. Johnson County SchoolDistrict's major federal programs are identified in the summary of auditor's results section of the accompanyingschedule of findings and questioned costs.

Management's Responsibility

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

Auditor's Responsibility

Our responsibility is to express an opinion on compliance for each of Johnson County School District's majorfederal programs based on our audit of the types of compliance requirements referred to above. We conductedour audit of compliance in accordance with auditing standards generally accepted in the United States of America;the standards applicable to financial audits contained in Government Auditing Standards, issued by theComptroller General of the United States; and the audit requirements of Title 2 U.S. Code of Federal RegulationsPart 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards(Uniform Guidance). Those standards and the Uniform Guidance require that we plan and perform the audit toobtain reasonable assurance about whether noncompliance with the types ofcompliance requirements referred toabove that could have a direct and material effect on a major federal program occurred. An audit includesexamining, on a test basis, evidence about Johnson County School District's compliance with those requirementsand performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion on compliance for each major federalprogram. However, bur audit does not provide a legal determination of Johnson County School District'scompliance.

Opinion on Each Major Federal Program

In our opinion, Johnson County School District, complied, in all material respects, with the types of compliancerequirements referred to above that could have a direct and material effect on each of its major federal programsfor the year ended June 30, 2016.

Report on Internal Control over Compliance

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

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compliance for each major federal program and to test and report on Internal control over compliance inaccordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness ofinternal control over compliance. Accordingly, we do not express an opinion on the effectiveness of JohnsonCounty School District's internal control over compliance.

A deficiency in internal control over compliance exists when the design oroperation of a control over compliancedoes not allow management or employees, in the normalcourse of performing their assigned functions, to prevent,or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timelybasis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, ininternal control over compliance, such that there is a reasonable possibility that material noncompliance with atype of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timelybasis. A significant deficiency in internal control over compliance is a deficiency, or a combinationof deficiencies,in internal control over compliance with a type of compliance requirement ofa federal program that is less severethan a material weakness in internal control over compliance, yet important enough to merit attention by thosecharged with governance.

Our consideration of internal control over compliance was for the limited purpose described in the first paragraphof this section and was not designed to identify all deficiencies in internalcontrol over compliance that might bematerial weaknesses or significant deficiencies. We did not identify any deficiencies in internal control overcompliance that we consider to be material weaknesses. However, materialweaknesses may exist that have notbeen identified.

The purpose of this report on internal control over compliance is solely to describe the scope of our testing ofinternal control over compliance and the results of that testing based on the requirements of the UniformGuidance. Accordingly, this report is not suitable for any other purpose.

Certified Public AccountantsPaintsville, KentuckyOctober 24, 2016

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MANAGEMENT LETTER COMMENTS

WELLS & COMPANY, P.S.C..stUxMinianf^

865 South MayoTrail,Suite 7Paintsville, Kentucky 41240'1215

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

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

Johnson County School DistrictPaintsville, Kentucky

In planning and performing our audit of the financial statements of Johnson County School District (the"District") as of and for the year ended June 30, 2016, in accordance with auditing standards generallyaccepted in the United States of America, we considered the District's internal control over financial reporting(internal control) as a basis for designing our auditing procedures for the purpose of expressing our opinionson the financial statements, but not for the purpose of expressing an opinion on the effectiveness of theDistrict's internal control. Accordingly, we do not express an opinion on the effectiveness of the District'sinternal control.

However, during our audit, we became aware of matters that are opportunities for strengthening internalcontrols and operating efficiency. The memorandum that accompanies this letter summarizes our commentsand suggestions regarding these matters. This letter does not affect our report dated October 24. 2016, onthe financial statements of the District.

We will review the status of these comments during our next audit engagement. We have already discussedthese comments and suggestions with various District personnel, and we will be pleased to discuss them infurther detail at your convenience, to perform any additional study of these matters, or to assist you inImplementing the recommendations,

Respectfully,


Paintsville, KentuckyOctober 24. 2016


MANAGEMENT LETTER COMMENTS

June 30, 2016

PRIOR YEAR COMMENTS

All prior year comments were addressed and corrected by the District. Corrections were initiated andimprovements made in the documentation that was recommended.

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MANAGEMENT LETTER COMMENTS - CONTINUED

June 30, 2016

CURRENT YEAR COMMENTS

Activity Fund 16-1 Student Break Inventorv Is Coming Up Short

Condition: Student break inventory forms have large shortages of pop inventoryat the high school.

Criteria: Anytime you have a material shortage in inventory then an explanation must be documented onthe inventory form as to what happened.

Cause of Condition: Snack inventory at the high school is either being stolen or being used at events withno documentation.

Effect: This school could be losing money due to possible theft and no documentation is being shownthat someone is noticing.

Recommendation: All large and material variances on the inventory form must have a reason as to why itis short. Also, all inventory at the high school should be moved to a location where only the person incharge has a key. If any inventory is used at events then the amount taken out must be documented andsigned for by the event sponsor.

Views of Responsible Officials and Planned Corrective Actions: We will concur and take all necessaryactions to prevent future shortages with inventory and document a reason for any future variances as towhat happened.

Activity Fund 16-2 Fundraiser Worksheets Not Completed

Condition: We discovered that fundraiser worksheets are not being completed with each fundraiser atJohnson County Middle School and Flat Gap Elementary.

Criteria: Fundraiser worksheets help determine profit/loss and ending inventory.

Cause of Condition: Principals failed to enforce teachers to use the fundraiser worksheets with eachfundraiser.

Effect: Profits and ending inventory are not being monitored.

Recommendation: We recommend that all schools use this worksheet with each fundraiser.

Views of Responsible Officials and Planned Corrective Actions: Principals will be made aware of thisform and will be required to use them on all fundraisers.

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