Wilcox County Board of Education Notes to Financial Statements September 30, 2024 10 Note 1 - Summary of Significant Accounting Policies The financial statements of the Wilcox County Board of Education (the Board) have been prepared in conformity with generally accepted accounting principles (GAAP) as applied to governmental units. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. The more significant of the government’s accounting policies are described below. Reporting entity - The Board is governed by a separately elected board composed of six members elected by the qualified electors of the County. The Board is responsible for the general administration and supervision of the public schools for the educational interests of the County (with the exception of cities having a city board of education). Generally accepted accounting principles (GAAP) require that the financial reporting entity consist of the primary government and its component units. Accordingly, the accompanying financial statements present the Board (a primary government). Component units are legally separate organizations for which the elected officials of the primary government are financially accountable and other organizations for which the nature and significance of their relationship with the primary government are such that exclusion would cause the reporting entity’s financial statements to be misleading or incomplete. Based on the application of these criteria, there are no component units which should be included as part of the financial reporting entity of the Board. Government-Wide and Fund Financial Statements Government-Wide Financial Statements The Statement of Net Position and the Statement of Activities display information about the Board. These statements include the financial activities of the overall government. Eliminations have been made to minimize the double counting of internal activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange transactions. The Statement of Activities presents a comparison between direct expenses and program revenues for each function of the Board’s governmental activities. Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. The Board does not allocate indirect expenses to the various functions. Program revenues include (a) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or program and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues. Fund Financial Statements The fund financial statements provide information about the Board’s funds. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column. The remaining governmental fund is reported as a nonmajor fund in the Other Governmental Fund column. The Board reports the following major governmental funds: General Fund - The General Fund is the primary operating fund of the Board. It is used to account for all financial resources except those required to be accounted for in another fund. The Board primarily receives revenues from the Education Trust Fund (ETF) and local taxes. Amounts appropriated from the ETF were allocated to the school board on a formula basis.Special Revenue Fund - This fund is used to account for and report the proceeds of specific revenue sources that are restricted or committed to expenditure for specified purposes other than debt service or capital projects. Various federal and local funding sources are included in this fund. Some of the significant federal funding sources include the federal funds that are received for Special Education, Title I, Education Stabilization, and the Child Nutrition Program in addition to various smaller grants, which are required to be spent for the purposes of the applicable federal grants. Also included in this fund are the public and non-public funds received by the local schools which are generally not considered restricted or committed. Capital Projects Fund - This fund is used to account for and report financial resources that are restricted, committed, or assigned to expenditure for capital outlay, including the acquisition or construction of capital facilities and other capital assets. Also included in this fund are Alabama Department of Education appropriations which are restricted to their use. Debt Service Fund - This fund is used to account for and report financial resources that are restricted, committed, or assigned to expenditure for principal and interest and the accumulation of resources for principal and interest payments maturing in future years. Measurement Focus, Basis of Accounting and Financial Statement Presentation - The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of the timing of related cash flows. Nonexchange transactions, in which the Board gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, grants, entitlements, and donations. On an accrual basis, revenue from grants, entitlements, and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied. Revenue from property taxes is recognized in the fiscal year for which the taxes are levied. As a general rule, the effect of interfund activity has been eliminated from the government-wide financial statements. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the Board considers revenues to be available when they are collected within sixty (60) days of the end of the current fiscal year. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt which are recognized as expenditures to the extent they have matured. General capital asset acquisitions are reported as expenditures in governmental funds. General long-term debt issued is reported as other financing sources. Under the terms of grant agreements, the Board funds certain programs by a combination of specific cost-reimbursement grants, categorical block grants, and general revenues. Thus, when program expenses are incurred, there is both restricted and unrestricted net position available to finance the program. It is the Board’s policy to first apply cost-reimbursement grant resources to such programs, followed by categorical block grants and then by general revenues.Deposits and investments - Cash and cash equivalents include cash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition. Statutes authorize the Board to invest in obligations of the United States Treasury, obligations of any state of the United States, general obligations of any Alabama county or city board of education secured by the pledged of the three-mill school tax and certificates of deposit. Receivables - Sales tax receivables are based on the amounts collected within 60 days after year end. Millage rates for property taxes are levied at the first regular meeting of the County Commission in February of the initial year of the levy. Property is assessed for taxation as of October 1 of the preceding year based on the millage rates established by the County Commission. Property taxes are due and payable the following October 1 and are delinquent after December 31. Amounts receivable, net of estimated refunds and estimated uncollectible amounts, are recorded for the property taxes levied in the current year. However, since the amounts are not available to fund current year operations, the revenue is deferred and recognized in the subsequent fiscal year when the taxes are both due and collectible and available to fund operations. Receivables due from other governments include amounts due from grantors for grants issued for specific programs and taxes from local governments. Inventories - Inventories are valued at cost, which approximates market, using the first-in/first-out (FIFO) method. Inventories of governmental funds are recorded as expenditures when consumed rather than when purchased. Capital assets - Capital assets, which include property and equipment, are reported in the government-wide financial statements. Such assets are valued at cost where historical records are available and at an estimated historical cost where no historical records exist. Donated fixed assets are valued at their estimated fair market value on the date received. Additions, improvements, and other capital outlays that significantly extend the useful life of an asset are capitalized. Other costs incurred for repairs and maintenance are expensed as incurred. Major outlays of capital assets and improvements are capitalized as projects are constructed. Depreciation on all assets is provided on the straight-line basis over the assets estimated useful life. Intangible right-to-use lease assets are amortized over the shorter of the lease term or the asset’s estimated useful life, unless the lease contains a purchase option the Board is reasonably certain will be exercised. In those instances, the right-to-use leased asset is amortized over the asset’s estimated useful life. Capitalization thresholds (the dollar values above which asset acquisitions are added to the capital asset accounts) and estimated useful lives of capital assets reported in the government-wide statements are as follows:Deposits and investments - Cash and cash equivalents include cash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition. Statutes authorize the Board to invest in obligations of the United States Treasury, obligations of any state of the United States, general obligations of any Alabama county or city board of education secured by the pledged of the three-mill school tax and certificates of deposit. Receivables - Sales tax receivables are based on the amounts collected within 60 days after year end. Millage rates for property taxes are levied at the first regular meeting of the County Commission in February of the initial year of the levy. Property is assessed for taxation as of October 1 of the preceding year based on the millage rates established by the County Commission. Property taxes are due and payable the following October 1 and are delinquent after December 31. Amounts receivable, net of estimated refunds and estimated uncollectible amounts, are recorded for the property taxes levied in the current year. However, since the amounts are not available to fund current year operations, the revenue is deferred and recognized in the subsequent fiscal year when the taxes are both due and collectible and available to fund operations. Receivables due from other governments include amounts due from grantors for grants issued for specific programs and taxes from local governments. Inventories - Inventories are valued at cost, which approximates market, using the first-in/first-out (FIFO) method. Inventories of governmental funds are recorded as expenditures when consumed rather than when purchased. Capital assets - Capital assets, which include property and equipment, are reported in the government-wide financial statements. Such assets are valued at cost where historical records are available and at an estimated historical cost where no historical records exist. Donated fixed assets are valued at their estimated fair market value on the date received. Additions, improvements, and other capital outlays that significantly extend the useful life of an asset are capitalized. Other costs incurred for repairs and maintenance are expensed as incurred. Major outlays of capital assets and improvements are capitalized as projects are constructed. Depreciation on all assets is provided on the straight-line basis over the assets estimated useful life. Intangible right-to-use lease assets are amortized over the shorter of the lease term or the asset’s estimated useful life, unless the lease contains a purchase option the Board is reasonably certain will be exercised. In those instances, the right-to-use leased asset is amortized over the asset’s estimated useful life. Capitalization thresholds (the dollar values above which asset acquisitions are added to the capital asset accounts) and estimated useful lives of capital assets reported in the government-wide statements are as follows:Deferred outflows of resources - Deferred outflows of resources are reported in the Statement of Net Position. Deferred outflows of resources are defined as a consumption of net position by the government that is applicable to a future reporting period. Deferred outflows of resources increase net position, similar to assets. Long-term obligations - In the government-wide financial statements, long-term debt and other long-term obligations are reported as liabilities in the governmental activities’ Statement of Net Position. Bond/Warrant premiums and discounts are deferred and amortized over the life of the bonds. Bonds/Warrants payable are reported net of the applicable premium or discount. Issuance costs are reported as an expense in the period incurred. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. Deferred inflows of resources - Deferred inflows of resources are reported in the government-wide and fund financial statements. Deferred inflows of resources are defined as an acquisition of net position/fund balances by the government that is applicable to a future reporting period. Deferred inflows of resources decrease net position/fund balances, similar to liabilities. Net position/fund balances - Net position is reported on the government-wide financial statements and is required to be classified for accounting and reporting purposes into the following categories: Net investment in capital assets - Capital assets minus accumulated depreciation and outstanding principal balances of debt attributable to the acquisition, construction, or improvement of those assets plus or minus any deferred outflows of resources and deferred inflows of resources that are attributable to those assets or related debt. Any significant unspent related debt proceeds and any deferred outflows or inflows at year-end related to capital assets are not included in this calculation. Restricted - Constraints imposed on net position by external creditors, grantors, contributors, laws or regulations of other governments, or law through constitutional provision or enabling legislation. Unrestricted - The net amount of assets, deferred outflows of resources, liabilities, and deferred inflows of resources that are not included in the determination of net investment in capital assets or the restricted portion of net position. Assignments and commitments of unrestricted net position should not be reported on the face of the Statement of Net Position. Fund balance is reported in governmental funds in the fund financial statements under the following five categories: a) Nonspendable fund balances include amounts that cannot be spent because they are either (a) not in spendable form or (b) legally or contractually required to be maintained intact. Examples of nonspendable fund balance reserves for which fund balance shall not be available for financing general expenditures include inventories, prepaid items, and long-term receivables. b) Restricted fund balances consist of amounts that are subject to externally enforceable legal restrictions imposed by creditors, grantors, contributors, or laws and regulations of other governments; or through constitutional provisions or enabling legislation.c) Committed fund balances consist of amounts that are subject to a purpose constraint imposed by formal action or resolution of the Board, which is the highest level of decision-making authority, before the end of the fiscal year and that require the same level of formal action to remove or modify the constraint. d) Assigned fund balances consist of amounts that are intended to be used by the Board for specific purposes. The Board or designee will make a determination of the assigned amounts of fund balance. Such assignments may not exceed the available (spendable, unrestricted, uncommitted) fund balance in any particular fund. Assigned fund balances require the same level of authority to remove the constraint. e) Unassigned fund balances include all spendable amounts not contained in the other classifications. This portion of the total fund balance in the General Fund is available to finance operating expenditures. When an expenditure is incurred for purposes for which both restricted and unrestricted (committed, assigned, or unassigned) amounts are available, restricted amounts will be reduced first. When an expenditure is incurred for the purposes for which amounts in any of the unrestricted fund balance classifications could be used, committed amounts would be reduced first, followed by assigned amounts and then unassigned amounts. Pensions - For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, the Teachers’ Retirement System of Alabama (the “Plan”) financial statements are prepared using the economic resources measurement focus and accrual basis of accounting. Contributions are recognized as revenues when earned, pursuant to Plan requirements. Benefits and refunds are recognized as revenues when due and payable in accordance with the terms of the Plan. Expenses are recognized when the corresponding liability is incurred, regardless of when the payment is made. Investments are reported at fair value. Financial statements are prepared in accordance with requirements of the Governmental Accounting Standards Board (GASB). Under these requirements, the Plan is considered a component unit of the State of Alabama and is included in the State’s Annual Comprehensive Financial Report. Postemployment Benefits Other Than Pensions (OPEB) - The Alabama Retired Education Employees’ Health Care Trust (the “Trust”) financial statements are prepared by using the economic resources measurement focus and accrual basis of accounting. This includes for purposes of measuring the net OPEB liability, deferred outflows of resources and deferred inflows of resources related to OPEB, and OPEB expense, information about the fiduciary net position of the Trust and additions to/deductions from the Trust’s fiduciary net position. Plan member contributions are recognized in the period in which the contributions are due. Employer contributions are recognized when due pursuant to plan requirements. Benefits are recognized when due and payable in accordance with the terms of the plan. Subsequent events were evaluated by management through the date the financial statements were issued.
Note 2 - Stewardship, Compliance, and Accountability Budgets - Budgets are adopted on a basis of accounting consistent with accounting principles generally accepted in the United States of America (GAAP) for the General Fund and Special Revenue Fund with the exception of salaries and benefits, which are budgeted only to the extent expected to be paid rather than on the modified accrual basis of accounting. Also, ad valorem taxes and sales taxes in the General Fund are budgeted only to the extent expected to be received rather than on the modified accrual basis of accounting. The Capital Projects Fund adopts project-length budgets. All other governmental funds adopt budgets on the modified accrual basis of accounting. All appropriations lapse at fiscal year-end. On or before October 1 of each year, each county board of education shall prepare and submit to the State Superintendent of Education the annual budget to be adopted by the County Board of Education. The Superintendent or County Board of Education shall not approve any budget for operations of the school for any fiscal year which shall show expenditures in excess of income estimated to be available plus any balances on hand.
Note 3 - Deposits Deposits - The custodial credit risk for deposits is the risk that, in the event of a bank failure, the Board will not be able to cover deposits or will not be able to recover collateral securities that are in the possession of an outside party. The Board's deposits at year-end were entirely covered by federal depository insurance or by the Security for Alabama Funds Enhancement Program (SAFE Program). The SAFE Program was established by the Alabama Legislature and is governed by the provisions contained in the Code of Alabama 1975, Sections 41-14A-1 through 41-14A-14. Under the SAFE Program all public funds are protected through a collateral pool administered by the Alabama State Treasurer’s Office. Under this program, financial institutions holding deposits of public funds must pledge securities as collateral against those deposits. In the event of failure of a financial institution, securities pledged by that financial institution would be liquidated by the State Treasurer to replace the public deposits not covered by the Federal Deposit Insurance Corporation (FDIC). If the securities pledged fail to produce adequate funds, every institution participating in the pool would share the liability for the remaining balance.
At September 30, 2024, receivables for the Board’s individual major funds are as follows:
Capital asset activity for the year ended September 30, 2024, was as follows:
Plan description - The Teachers’ Retirement System of Alabama (TRS), a cost-sharing multiple employer public employee retirement plan, was established as of September 15, 1939, pursuant to the Code of Alabama 1975, Title 16, Chapter 25 (Act 419 of the Legislature of 1939) for the purpose of providing retirement allowances and other specified benefits for qualified persons employed by State-supported educational institutions. The responsibility for the general administration and operation of the TRS is vested in its Board of Control which consists of 15 trustees. The plan is administered by the Retirement Systems of Alabama (RSA). The Code of Alabama 1975, Title 16, Chapter 25 grants the authority to establish and amend the benefit terms to the TRS Board of Control. The Plan issues a publicly available financial report that can be obtained at www.rsa-al.gov. Benefits provided - State law establishes retirement benefits as well as death and disability benefits and any ad hoc increase in postretirement benefits for the TRS. Benefits for TRS members vest after 10 years of creditable service. TRS members who retire after age 60 with 10 years or more of creditable service or with 25 years of service (regardless of age) are entitled to an annual retirement benefit, payable monthly for life. Service and disability retirement benefits are based on a guaranteed minimum or a formula method, with the member receiving payment under the method that yields the highest monthly benefit. Under the formula method, members of the TRS are allowed 2.0125% of their average final compensation (highest 3 of the last 10 years) for each year of service. Act 377 of the Legislature of 2012 established a new tier of benefits (Tier 2) for members hired on or after January 1, 2013. Tier 2 TRS members are eligible for retirement after age 62 with 10 years or more of creditable service and are entitled to an annual retirement benefit, payable monthly for life. Service and disability retirement benefits are based on a formula method. Under the formula method, Tier 2 members of the TRS are allowed 1.65% of their average final compensation (highest 5 of the last 10 years) for each year of service up to 80% of their average final compensation. Act 316 of the Legislature of 2019 established the Partial Lump Sum Option Plan (PLOP) in addition to the annual service retirement benefit payable for life for Tier 1 and Tier 2 members of the TRS and ERS. A member can elect to receive a one-time lump sum distribution at the time that they receive their first monthly retirement benefit payment. The member’s annual retirement benefit is then actuarially reduced based on the amount of the PLOP distribution which is not to exceed the sum of 24 months of the maximum monthly retirement benefit that the member could receive. Members are eligible to receive a PLOP distribution if they are eligible for a service retirement benefit as defined above from the TRS or ERS on or after October 1, 2019. A TRS or ERS member who receives an annual disability retirement benefit or who has participated in the Deferred Retirement Option Plan (DROP) is not eligible to receive a PLOP distribution. Members are eligible for disability retirement if they have 10 years of credible service, are currently in- service, and determined by the RSA Medical Board to be permanently incapacitated from further performance of duty. Preretirement death benefits equal to the annual earnable compensation of the member as reported to the Plan for the preceding year ending June 30 are paid to a qualified beneficiary. Contributions - Covered Tier 1 members of the TRS contributed 5% of earnable compensation to the TRS as required by statute until September 30, 2011. From October 1, 2011, to September 30, 2012, covered members of the TRS were required by statute to contribute 7.25% of earnable compensation. Effective October 1, 2012, covered members of the TRS are required by statute to contribute 7.50% of earnable compensation. Certified law enforcement, correctional officers, and firefighters of the TRS contributed 6% of earnable compensation as required by statute until September 30, 2011. From October 1, 2011, to September 30, 2012, certified law enforcement, correctional officers, and firefighters of the TRS were required by statute to contribute 8.25% of earnable compensation. Effective October 1, 2012, certified law enforcement, correctional officers, and firefighters of the TRS are required by statute to contribute 8.50% of earnable compensation. Effective October 1, 2021, the covered Tier 2 members contribution rate increased from 6.0% to 6.2% of earnable compensation to the TRS as required by statute. Effective October 1, 2021, the covered Tier 2 certified law enforcement, correctional officers, and firefighters’ contribution rate increased from 7.0% to 7.2% of earnable compensation to the TRS as required by statute. There Tier 2 member contribution rate increases were a result of Act 537 of the Legislature of 2021 which allows sick leave conversion for Tier 2 members. Participating employers’ contractually required contribution rate for the fiscal year ended September 30, 2023, was 12.59% of annual pay for Tier 1 members and 11.57% of annual pay for Tier 2 members. These required contribution rates are a percent of annual payroll, actuarially determined as an amount that, when combined with member contributions, is expected to finance the costs of benefits earned by members during the year, with an additional amount to finance any unfunded accrued liability. Total employer contributions to the pension plan from the Board were $1,477,331 for the year ended September 30, 2024. Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions - At September 30, 2024, the Board reported a liability of $22,898,000 for its proportionate share of the collective net pension liability. The collective net pension liability was measured as of September 30, 2023, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of September 30, 2022. The Board’s proportion of the collective net pension liability was based on the employers’ shares of contributions to the pension plan relative to the total employer contributions of all participating TRS employers. At September 30, 2023, the Board’s proportion was 0.143493%, which was an increase of 0.005478% from its proportion measured as of September 30, 2022. For the year ended September 30, 2024, the Board recognized pension expense of $3,517,000. At September 30, 2024, the Board reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:The $1,477,331 reported as deferred outflows of resources related to pensions resulting from Board contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended September 30, 2024. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows: Year Ending September 30 Amount 2025 $ 1,188,000 2026 1,160,000 2027 1,919,000 2028 61,000 2029 - Thereafter - Actuarial assumptions - The total pension liability as of September 30, 2023, was determined by an actuarial valuation as of September 30, 2022, using the following actuarial assumptions, applied to all periods included in the measurement: Inflation 2.50% Projected salary increases 3.25% - 5.00% Investment rate of return * 7.45% * Net of pension plan investment expense. The actuarial assumptions used in the actuarial valuation as of September 30, 2022, were based on the results of an investigation of the economic and demographic experience for the TRS based upon participant data as of September 30, 2020. The Board of Control accepted and approved these changes in September 2021 which became effective at the beginning of fiscal year 2021. Mortality rates for TRS were based on the Pub-2010 Teacher tables with the following adjustments, projected generationally using scale MP-2020 adjusted by 66-2/3% beginning with year 2019: Set Forward (+)/ Group Membership Table Setback (-) Adjustment to Rates Service Retirees Teacher Retiree Below Median Male: +2, Female: +2 Male: 108% ages<63, 96% ages>67; Phasing down 63-67 Female: 112% ages <69, 98%> age 74; Phasing down 69-74 Beneficiaries Contingent Survivor Below Median Male: +2, Female: none None Disabled Retirees Teacher Disability Male: +8, Female: +3 None The long-term expected rate of return on pension plan investments was determined using a log- normal distribution analysis in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The target asset allocation and best estimates of geometric real rates of return for each major asset class are as follows: Asset Class Target Allocation Long-Term Expected Rate of Return * Fixed income 15.0% 2.8% U.S. large stocks 32.0% 8.0% U.S. mid stocks 9.0% 10.0% U.S. small stocks 4.0% 11.0% International developed market stocks 12.0% 9.5% International emerging market stocks 3.0% 11.0% Alternatives 10.0% 9.0% Real estate 10.0% 6.5% Cash 5.0% 1.5% Total 100.0% * Includes assumed rate of inflation of 2.00% Discount rate - The discount rate used to measure the total pension liability was 7.45%. The projection of cash flows used to determine the discount rate assumed that plan member contributions will be made at the current contribution rate and that the employer contributions will be made at rates equal to the difference between actuarially determined contribution rates and the member rate. Based on those assumptions, components of the pension plan’s fiduciary net position were projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. Sensitivity of the Board’s Proportionate Share of the Collective Net Pension Liability to Changes in the Discount Rate - The following table presents the Board’s proportionate share of the net pension liability calculated using the discount rate of 7.45%, as well as what the Board’s proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1-percentage point lower (6.45%) or 1-percentage-point higher (8.45%) than the current rate: 1.00% Decrease Current Discount 1.00% Increase (6.45%) Rate (7.45%) (8.45%) Board’s Proportionate Share of Collective Net Pension Liability $ 29,914,000 $ 22,898,000 $ 16,998,000 Pension plan fiduciary net position - Detailed information about the pension plan’s fiduciary net position is available in the separately issued RSA Annual Comprehensive Financial Report for the fiscal year ended September 30, 2023. The supporting actuarial information is included in the GASB Statement No. 67 Report for the TRS prepared as of September 30, 2023. The auditor’s report on the schedule of employer allocations and pension amounts by employer and accompanying notes detail by employer and in aggregate information needed to comply with GASB 68. The additional financial and actuarial information is available at http://www.rsa-al.gov/index.php/employers/financial-reports/gasb-68-reports/.
Plan description - The Alabama Retired Education Employees’ Health Care Trust (Trust) is a cost-sharing multiple employer defined benefit postemployment healthcare plan that administers healthcare benefits to the retirees of participating state and local educational institutions. The Trust was established under the Alabama Retiree Health Care Funding Act of 2007 which authorized and directed the Public Education Employees’ Health Insurance Board (Board) to create an irrevocable trust to fund postemployment healthcare benefits to retirees participating in PEEHIP. Active and retiree health insurance benefits are paid through the Public Education Employees’ Health Insurance Plan (PEEHIP). In accordance with GASB, the Trust is considered a component unit of the State of Alabama (State) and is included in the State’s Annual Comprehensive Financial Report. The PEEHIP was established in 1983 pursuant to the provisions of the Code of Alabama 1975, Title 16, Chapter 25A (Act 83-455) to provide a uniform plan of health insurance for active and retired employees of state and local educational institutions which provide instruction at any combination of grades K-14 (collectively, eligible employees), and to provide a method for funding the benefits related to the plan. The four-year universities participate in the plan with respect to their retired employees and are eligible and may elect to participate in the plan with respect to their active employees. Responsibility for the establishment of the health insurance plan and its general administration and operations is vested in the Board. The Board is a corporate body for purposes of management of the health insurance plan. The Code of Alabama 1975, Section 16-25A-4 provides the Board with the authority to amend the benefit provisions in order to provide reasonable assurance of stability in future years for the plan. All assets of the Alabama Retired Education Employees’ Health Care Trust are held in trust for the payment of health insurance benefits. The Teachers’ Retirement System of Alabama (TRS) has been appointed as the administrator of the PEEHIP and, consequently, serves as the administrator of the Trust. Benefits provided - PEEHIP offers a basic hospital medical plan to active members and non-Medicare eligible retirees. Benefits include inpatient hospitalization for a maximum of 365 days without a dollar limit, inpatient rehabilitation, outpatient care, physician services, and prescription drugs. Active employees and non-Medicare eligible retirees who do not have Medicare eligible dependents can enroll in a health maintenance organization (HMO) in lieu of the basic hospital medical plan. The HMO includes hospital medical benefits, dental benefits, vision benefits, and an extensive formulary. However, participants in the HMO are required to receive care from a participating physician in the HMO plan. The PEEHIP offers four optional plans (Hospital Indemnity, Cancer, Dental, and Vision) that may be selected in addition to or in lieu of the basic hospital medical plan or HMO. The Hospital Indemnity Plan provides a per-day benefit for hospital confinement, maternity, intensive care, cancer, and convalescent care. The Cancer Plan covers cancer disease only and benefits are provided regardless of other insurance. Coverage includes a per-day benefit for each hospital confinement related to cancer. The Dental Plan covers diagnostic and preventative services, as well as basic and major dental services. Diagnostic and preventative services include oral examinations, teeth cleaning, x-rays, and emergency office visits. Basic and major services include fillings, general aesthetics, oral surgery not covered under a Group Medical Program, periodontics, endodontics, dentures, bridgework, and crowns. Dental services are subject to a maximum of $1,250 per year for individual coverage and $1,000 per person per year for family coverage. The Vision Plan covers annual eye examinations, eyeglasses, and contact lens prescriptions. PEEHIP members may opt to elect the PEEHIP Supplemental Plan as their hospital medical coverage in lieu of the PEEHIP Hospital Medical Plan. The PEEHIP Supplemental Plan provides secondary benefits to the member’s primary plan provided by another employer. Only active and non-Medicare retired members and covered dependents are eligible to enroll in the PEEHIP Supplemental Medical Plan. There is no premium required for this plan, and the plan covers most out-of-pocket expenses not covered by the primary plan. Members who are enrolled in the PEEHIP Hospital Medical Plan (Group 14000), VIVA Health Plan (offered through PEEHIP), Marketplace (Exchange) Plans, State Employees Insurance Board (SEIB), Local Government Board (LGB), Medicare, Medicaid, ALL Kids, Tricare, or Champus as their primary coverage, or are enrolled in a Health Savings Account (HSA) or Health Reimbursement Arrangement (HRA), are not eligible to enroll in the PEEHIP Supplemental Plan. The plan cannot be used as a supplement to Medicare. Retired members who become eligible for Medicare are eligible to enroll in the PEEHIP Group Medicare Advantage (PPO) Plan or the Optional Coverage Plans. Effective January 1, 2023, United Health Care (UHC) Group replaced the Humana contract for Medicare eligible retirees and Medicare eligible dependents of retirees. The MAPDP plan is fully insured by UHC and members are able to have all of their Medicare Part A, Part B, and Part D (prescription drug coverage) in one convenient plan. With the UHC plan for PEEHIP, retirees can continue to see their same providers with no interruption and see any doctor who accepts Medicare on a national basis. Retirees have the same benefits in and out-of-network and there is no additional retiree cost share if a retiree uses an out-of-network provider and no balance billing from the provider. Contributions - The Code of Alabama 1975, Section 16-25A-8 and the Code of Alabama 1975, Section, 16- 25A-8.1 provide the Board with the authority to set the contribution requirements for plan members and the authority to set the employer contribution requirements for each required class, respectively. Additionally, the Board is required to certify to the Governor and the Legislature, the amount, as a monthly premium per active employee, necessary to fund the coverage of active and retired member benefits for the following fiscal year. The Legislature then sets the premium rate in the annual appropriation bill. For employees who retired after September 30, 2005, but before January 1, 2012, the employer contribution of the health insurance premium set forth by the Board for each retiree class is reduced by 2% for each year of service less than 25 and increased by 2% percent for each year of service over 25 subject to adjustment by the Board for changes in Medicare premium costs required to be paid by a retiree. In no case does the employer contribution of the health insurance premium exceed 100% of the total health insurance premium cost for the retiree. For employees who retired after December 31, 2011, the employer contribution to the health insurance premium set forth by the Board for each retiree class is reduced by 4% for each year of service less than 25 and increased by 2% for each year over 25, subject to adjustment by the Board for changes in Medicare premium costs required to be paid by a retiree. In no case does the employer contribution of the health insurance premium exceed 100% of the total health insurance premium cost for the retiree. For employees who retired after December 31, 2011, who are not covered by Medicare, regardless of years of service, the employer contribution to the health insurance premium set forth by the Board for each retiree class is reduced by a percentage equal to 1% multiplied by the difference between the Medicare entitlement age and the age of the employee at the time of retirement as determined by the Board. This reduction in the employer contribution ceases upon notification to the Board of the attainment of Medicare coverage. OPEB Liabilities, OPEB Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to OPEB - At September 30, 2024, the Board reported a liability of $3,316,765 for its proportionate share of the collective net OPEB liability. The collective net OPEB liability was measured as of September 30, 2022, and the total OPEB liability used to calculate the collective net OPEB liability was determined by an actuarial valuation as of September 30, 2022. The Board’s proportion of the collective net OPEB liability was based on the Board’s share of contributions to the OPEB plan relative to the total employer contributions of all participating PEEHIP employers. At September 30, 2023, the Board’s proportion was 0.17255494%, which was a decrease of 0.01427448% from its proportion measured as of September 30, 2022. For the year ended September 30, 2024, the Board recognized OPEB income of $1,833,786, with no special funding situations. At September 30, 2024, the Board reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources: Deferred Outflows of Resources Deferred Inflows of Resources Differences between expected and actual experience $ 64,854 $ 5,233,758 Changes of assumptions 2,794,261 3,281,177 Net difference between projected and actual earnings on OPEB plan investments 113,295 Changes in proportion and differences between employer contributions and proportionate share of contributions 896,942 1,746,791 Employer contributions subsequent to the measurement date 230,758 Total $ 4,100,110 $ 10,261,726 The $230,758 reported as deferred outflows of resources related to OPEB resulting from the Board’s contributions subsequent to the measurement date will be recognized as a reduction of the net OPEB liability in the year ended September 30, 2025. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to OPEB will be recognized in OPEB expense as follows: Year Ending September 30 Amount 2025 $ (2,233,819) 2026 (1,149,207) 2027 (1,011,417) 2028 (1,243,877) 2029 (731,031) Thereafter (23,023) Actuarial assumptions - The total OPEB liability was determined by an actuarial valuation as of September 30, 2022, using the following actuarial assumptions, applied to all periods included in the measurement: Inflation 2.50% Projected Salary Increases (1) 3.25% - 5.00% Long-Term Investment Rate of Return (2) 7.00% Municipal Bond Index Rate at the Measurement Date 4.53% Municipal Bond Index Rate at the Prior Measurement Date 4.40% Projected Year for Fiduciary Net Position (FNP) to be Depleted N/A Single Equivalent Interest Rate the Measurement Date 7.00% Single Equivalent Interest Rate the Prior Measurement Date 7.00% Healthcare Cost Trend Rate Initial Trend Rate Pre-Medicare Eligible 7.00% Medicare Eligible (**) Ultimate Trend Rate Pre-Medicare Eligible 4.50% in 2033 FYE Medicare Eligible 4.50% in 2033 FYE Optional Plans Trend Rate 2.00% (1) Includes 2.75% wage inflation. (2) Compounded annually, net of investment expense, and includes inflation. (**) Initial Medicare claims are set based on scheduled increases through plan year 2025. The rates of mortality are based on the Pub-2010 Public Mortality Plans Mortality Tables, adjusted generationally based on scale MP-2020, with an adjustment of 66-2/3% to the table beginning in year 2019. The mortality rates are adjusted forward and/or back depending on the plan and group covered, as shown in the table below. Group Membership Table Set Forward (+)/ Setback (-) Adjustment to Rates Active Members Teacher Employee - Below Median None 65% Service Retirees Teacher Retiree - Below Median Male: +2, Male: 108% ages<63, 96% ages>67; Female: +2 Phasing down 63-67 Female: 112% ages <69 98%> age 74; Phasing down 69-74 Disabled Retirees Teacher Disability Male: +8, None Female: +3 Beneficiaries Teacher Contingent Survivor Below Median Male: +2, Female: None None The decremental assumptions used in the valuation were selected based on the actuarial experience study prepared as of September 30, 2020, submitted to and adopted by the Teachers’ Retirement System of Alabama Board on September 13, 2021. The remaining actuarial assumptions (e.g., initial per capita costs, health care cost trends, rate of plan participation, rates of plan election, etc.) were based on the September 30, 2022 valuation. The long-term expected return on plan assets is to be reviewed as part of regular experience studies prepared every five years, in conjunction with similar analysis for the Teachers’ Retirement System of Alabama. Several factors should be considered in evaluating the long-term rate of return assumption, including long-term historical data, estimates inherent in current market data, and a log-normal distribution analysis in which best-estimate ranges of expected future real rates of return (expected return, net of investment expense and inflation), as developed for each major asset class. These ranges should be combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and then adding expected inflation. The assumption is intended to be a long-term assumption and is not expected to change absent a significant change in the asset allocation, a change in the inflation assumption, or a fundamental change in the market that alters expected returns in future years. The long-term expected rate of return on the OPEB plan investments is determined based on the allocation of assets by asset class and by the mean and variance of real returns. The target asset allocation and best estimates of expected geometric real rates of return for each major asset class is summarized below: Asset Class Target Allocation Long-Term Expected Real Rate of Return (*) (*) Geometric mean, includes 2.5% inflation. Discount rate - The discount rate (also known as the Single Equivalent Interest Rate (SEIR), as described by GASB 74) used to measure the total OPEB liability was 7.00%. Premiums paid to the Public Education Employees’ Health Insurance Board for active employees shall include an amount to partially fund the cost of coverage for retired employees. The projection of cash flows used to determine the discount rate assumed that plan contributions will be made at the current contribution rates. Each year, the State specifies the monthly employer rate that participating school systems must contribute for each active employee. Currently, the monthly employer rate is $800 per active member for participating employers. Approximately, 11.051% of the employer contributions were used to assist in funding retiree benefit payments in 2023 and it is assumed that the 11.051% will increase or decrease at the same rate as expected benefit payments for the closed group with a cap of 20.00%. It is assumed the $800 rate will remain flat until, based on budgeted projections, it increases to $940 in 2027 and then will increase with inflation at 2.50% starting in 2028. Retiree benefit payments for University members are paid by the Universities and are not included in the cash flow projections. The discount rate determination will use a municipal bond rate to the extent the trust is projected to run out of money before all benefits are paid. Projected future benefit payments for all current plan members are projected through 2121. Sensitivity of the Board’s Proportionate Share of the Collective Net OPEB Liability to Changes in the Healthcare Cost Trend Rates and in the Discount Rates - The following table presents the Board’s proportionate share of the Net OPEB liability of the Trust calculated using the current healthcare trend rate, as well as what the Net OPEB liability would be if calculated using one percentage point lower or one percentage point higher than the current rate: Board’s Proportionate Share of 1% Decrease (6.00% Decreasing to 3.50% for Pre-Medicare, Known Decreasing to 3.50% for Medicare Eligible) Current Healthcare Trend Rate (7.00% Decreasing to 4.50% for Pre-Medicare, Known Decreasing to 4.50% for Medicare Eligible) 1% Increase (8.00% Decreasing to 5.50% for Pre-Medicare, Known Decreasing to 5.50% for Medicare Eligible) the Collective Net OPEB Liability $ 2,514,073 $ 3,316,765 $ 4,291,397 The following table presents the Board’s proportionate share of the Net OPEB liability of the Trust calculated using the discount rate of 7.00%, as well as what the Net OPEB liability would be if calculated using one percentage point lower or one percentage point higher than the current rate: 1% Decrease Current Discount Rate 1% Increase (6.00%) (7.00%) (8.00%) Board’s Proportionate Share of the Collective Net OPEB Liability $ 4,094,540 $ 3,316,765 $ 2,654,778 OPEB Plan Fiduciary Net Position - Detailed information about the OPEB plan’s Fiduciary Net Position is in the Trust’s financial statements for the fiscal year ended September 30, 2024. The supporting actuarial information is included in the GASB Statement No. 74 Report for PEEHIP prepared as of September 30, 2023. Additional financial and actuarial information is available at www.rsa-al.gov.
At September 30, 2024, payables for the Board’s individual major funds are as follows: Payables General Fund Special Revenue Fund Capital Projects Fund Totals Accounts payable $ 486,413 $ 335,041 $ 879,380 $ 1,700,834 Intergovernmental 3,377 3,971 7,348 Other 1,433 518,865 520,298 Total payables $ 491,223 $ 857,877 $ 879,380 $ 2,228,480
Short-Term Debt During the year, the Board approved a short-term loan to cover a settlement payment made during the year as a result of litigation. The loan was fully repaid as of June 2024. Short-term debt activity for the year ended September 30, 2024 was as follows: Beginning Ending Balance Proceeds Repaid Balance Short-term loan $ - $ 234,738 $ 234,738 $ - Long-Term Debt Warrants Payable On July 5, 2011, the Board issued the Capital Outlay School Warrants, Series 2011 in the amount of $1,117,000. These warrants were issued for the purpose of refunding and retiring the principal indebtedness evidenced by the Board’s Warrant Anticipation Note which was issued to finance a portion of the costs of acquiring a multipurpose building and constructing various improvements. In the event of default the holders of the warrants are empowered (1) to sue on such warrant, (2) by mandamus, suit or other proceeding, to enforce all agreements of the Board contained in the warrant, including proper segregation of the proceeds of the pledged revenue, (3) by action or suit in equity, to require the Board to account as if it were the trustee of any express trust for the holders of the warrants, and (4) by action or suit in equity, to enjoin any act or things which may be unlawful or a violation of the rights of the holders of the warrants. On December 1, 2015, the Board issued the Capital Outlay Tax Anticipation Warrants, Series 2015 in the amount of $6,035,000, to currently refund and redeem the Capital Outlay Tax Anticipation Warrants, Series 2005, and to also provide funds for capital improvements to the Board’s public school infrastructure. On January 1, 2016, the Board issued the Capital Outlay Tax Anticipation Warrants, Series 2016 in the amount of $9,375,000, to currently refund and redeem the Capital Outlay Tax Anticipation Warrants, Series 2006, and to also provide funds for capital improvements to the Board’s public school infrastructure. On September 1, 2017, the Board entered into an agreement with the United States Department of Agriculture (USDA) in the amount of $683,500 to provide funding for construction improvements for the high school’s natatorium. Notes from Direct Borrowing The Board has an outstanding note from direct borrowing, originally issued at $522,651 with an interest rate of 2.63% and is secured by six 2016 school buses. If a scheduled payment is not paid when due and remains unpaid for 10 days that the Board shall pay the lender the amount due with interest from the due date at an overdue rate of 5%. The Board has an outstanding note from direct borrowing, originally issued at $349,316 with an interest rate of 3.75% and is secured by four 2019 school buses. The Board has an outstanding note from direct borrowing, originally issued at $349,316 with an interest rate of 2.77% and is secured by four 2020 school buses. In the event of default, the lender may (1) terminate the agreement and all rights of the Board to use the equipment, (2) take possession of and sell the equipment, (3) declare the unpaid balance due and payable at the default rate of 5%, and/or (4) exercise any other right, remedy, or recourse available under law. The Board has an outstanding note from direct borrowing, originally issued at $306,945 with an interest rate of 4.86% and is secured by five 2024 school buses. In the event of default, the lender may (1) terminate the agreement and all rights of the Board to use the equipment, (2) take possession of and sell the equipment, (3) declare the unpaid balance due and payable and/or (4) exercise any other right, remedy, or recourse available under law. The following is a summary of long-term obligations for the Board for the year ended September 30, 2024: Debt Debt Amounts Outstanding Issued/ Repaid/ Outstanding Due Within 10/1/2023 Increased Decreased 9/30/2024 One Year Governmental Activities Warrants Payable Capital Outlay Refunding School Warrants, Series 2011 $ 409,000 $ 76,000 $ 333,000 $ 78,000 Capital Outlay Tax Anticipation Warrants, Series 2015 4,245,000 280,000 3,965,000 285,000 Capital Outlay Tax Anticipation Warrants, Series 2016 7,045,000 395,000 6,650,000 420,000 USDA Capital Outlay Tax Anticipation Warrant, Series 2017 593,500 17,000 576,500 17,000 Less unamortized discount (24,801) (1,908) (22,893) (1,908) Unamortized premium 209,725 16,133 193,592 16,133 Total Warrants Payable, net 12,477,424 782,225 11,695,199 814,225 Other Liabilities Notes from Direct Borrowing (Buses) 1,011,544 146,287 865,257 151,110 Subtotal Notes from Direct Borrowing 1,011,544 146,287 865,257 151,110 Net Pension Liability 21,449,000 $ 1,449,000 22,898,000 Net OPEB Liability 3,255,407 61,358 3,316,765 Total Other Liabilities 24,704,407 1,510,358 26,214,765 Total Governmental Activities Long-Term Liabilities $ 38,193,375 $ 1,510,358 $ 928,512 $ 38,775,221 $ 965,335 Payment on the warrants are made using Public School funds received from the Alabama Department of Education and with ad valorem and sales taxes. Payments on the notes from direct borrowing are made using the Fleet Renewal Funds’ allocation from the Alabama Department of Education. The following is a schedule of debt service requirements to maturity: Notes from Direct Warrant Payable Borrowing (Buses) Total Principal and Interest Requirements Fiscal Year Ending September 30 Principal Interest Principal Interest to Maturity 2025 $ 800,000 $ 366,545 $ 151,110 $ 31,487 $ 1,349,142 2026 825,000 342,579 156,102 26,495 1,350,176 2027 868,000 313,151 161,269 21,328 1,363,748 2028 902,000 282,011 106,499 15,978 1,306,488 2029 865,000 248,946 110,456 12,022 1,236,424 2030-2034 4,798,000 772,066 179,821 18,544 5,768,431 2035-2039 2,217,000 118,671 2,335,671 2040-2044 150,000 31,119 181,119 2045-2049 99,500 6,549 106,049 Totals $ 11,524,500 $ 2,481,637 $ 865,257 $ 125,854 $ 14,997,248 Pledged Revenues The Board has pledged a portion of the future special ad valorem tax revenues to repay $970,000 in Capital Outlay Refunding School Warrants, Series 2011, issued in July 2011. The warrant is payable solely from a share of the proceeds of a special ad valorem tax that is levied and collected in Wilcox County which totaled $642,296 in fiscal year 2024. Total principal and interest remaining on the debt at September 30, 2024, is $366,960, payable through fiscal year 2028. For the current year, principal and interest paid was $92,360, which represents 14% of pledged revenues received. The Board has pledged a portion of the future special ad valorem tax and the future sales tax revenues to repay $6,035,000 in Capital Outlay Tax Anticipation Warrants, Series 2015, issued on December 1, 2015, as well as to repay $9,375,000 in Capital Outlay Tax Anticipation Warrants, Series 2016 issued on January 1, 2016. The warrants are payable solely from (a) seven (7) mills of the Board’s special ad valorem tax and (b) the special privilege or license tax that is levied and collected in Wilcox County which totaled $3,121,288 in fiscal year 2024. Total principal and interest remaining on the 2015 and 2016 debt at September 30, 2024, is $4,737,019 and $8,074,970, respectively, payable through fiscal year 2036 for both warrant issues. For the current year, principal and interest payments of $398,968 and $625,590 was paid on the 2015 and 2016 debt, respectively, which represented 33% of pledged revenues received.
The Board is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The Board has insurance for its buildings and contents through the State Insurance Fund (SIF) part of the State of Alabama, Department of Finance, Division of Risk Management, which operates as a common risk management and insurance program for state owned properties and county boards of education. The Board pays an annual premium based on the amount of coverage requested. The SIF is self-insured up to $3.5 million per occurrence and purchases commercial insurance for claims in excess of $3.5 million. Errors and omissions insurance is purchased from the Alabama Trust for Boards of Education (ATBE), a public entity risk pool. The ATBE collects the premiums and purchases excess insurance for any amount of coverage requested by pool participants in excess of the coverage provided by the pool. Employee health insurance is provided through the Public Education Employees' Health Insurance Fund (PEEHIF), administered by the Public Education Employees' Health Insurance Board (PEEHIB). The Fund was established to provide a uniform plan of health insurance for current and retired employees of state educational institutions and is self- sustaining. Monthly premiums for employee and dependent coverage are determined annually by the plan's actuary and are based on anticipated claims in the upcoming year, considering any remaining fund balance on hand available for claims. The Board contributes a specified amount monthly to the PEEHIF for each employee of state educational institutions. The Board’s contribution is applied against the employees' premiums for the coverage selected and the employee pays any remaining premium. Settled claims resulting from these risks have not exceeded the Board's coverage in any of the past three fiscal years. Board employees who are injured while on the job are entitled to salary and fringe benefits of up to ninety working days in accordance with the Code of Alabama 1975, Section 16-1-18.1(d). Any unreimbursed medical expenses and costs which the employee incurs as a result of an on-the-job injury may be filed for reimbursement with the State Board of Adjustment.
Interfund receivables and payables - The interfund receivables and payables at September 30, 2024, were as follows: Interfund Receivables In Interfund transfers - The amounts of interfund transfers during the fiscal year ended September 30, 2024, were as follows: Transfers Out T The Board typically used transfers to fund ongoing operating subsidies, to recoup certain expenditures paid on-behalf of the local schools.
GASB Statement No. 101, Compensated Absences, has a primary objective to align recognition and measurement guidance for all types of compensated absences under a unified model. It also requires that a liability for specific types of compensated absences not be recognized until the leave is used. Additionally, it establishes guidance for measuring a liability for leave that has not been used, generally using an employee’s pay rate as of the date of the financial statements. Additionally, the Statement provides an alternative to the existing requirement to disclose the gross annual increases and decreases in long-term liability for compensated absences, allowing governments to disclose only the net annual change in the liability as long as it is identified as such; and removes the disclosure of the government funds used to liquidate the liability for compensated absences. The requirements of this Statement are effective for fiscal years beginning after December 15, 2023. GASB 102, Certain Risk Disclosures. This Statement requires governments to disclose information about certain risks. Governments are required to disclose information about their exposure to some risks, such as interest and credit risk associated with investments. However, essential information about certain other risks that are prevalent among state and local governments is not routinely disclosed because it is not explicitly required. The Statement will provide financial statement users with information about certain risks when circumstances make a government vulnerable to a heightened possibility of loss or harm. The Statement requires governments to disclose essential information about risks related to a government’s current vulnerabilities due to certain concentrations and constraints common in the governmental environment. Requirements for this Statement will take effect for financial statements whose fiscal year begins after June 15, 2024. GASB Statement No. 103, Financial Reporting Model Improvements, has a primary objective to improve key components of the financial reporting model by enhancing the effectiveness of governmental financial reports in providing information essential for decision making and assessing a government’s accountability and addressing certain application issues. The requirements of this Statement are effective for fiscal years beginning after June 15, 2025. GASB Statement No. 104, Disclosure of Certain Capital Assets, establishes requirements for certain types of capital assets to be disclosed separately for purposes of note disclosures and establishes requirements for capital assets held for sale and requires additional disclosures for those capital assets. This is designed to allow users to make informed decisions about these assets and to evaluate accountability. The requirements of this Statement are effective for fiscal years beginning after June 15, 2025.
The Board has evaluated subsequent events through August 28, 2025, the date which the financial statements were available to be issued. All subsequent events requiring recognition or disclosure as of September 30, 2024 has been incorporated into these financial statements.
The Board is in the process of upgrading the HVAC and lighting in its facilities. Construction costs to date, which have been capitalized as construction in progress, are $7,651,022 as of September 30, 2024. The Board expects the additional costs to complete the project will be approximately $1,454,000. The Board is in the process of repairing damages sustained in a fire to J.E. Hobbs Elementary School. Construction costs to date, which have been capitalized as construction in progress, are $2,270,706 as of September 30, 2024. The Board expects the additional costs to complete the project will be approximately $682,000.
Effective for the fiscal year ended September 30, 2024, the Board determined that the Debt Service Fund, which had previously been reported as a nonmajor governmental fund, met the criteria to be reported as a major governmental fund due to changes in financial activity and significance to the financial statements. In accordance with GASB Statement No. 100, this represents a change in the reporting entity. The financial statement presentation for the current period includes the Debt Service Fund as a major fund. This change had no impact on beginning net position/fund balance. This change did not result from an error or correction but reflects the Board’s reassessment of fund classification based on current year financial data and GASB reporting criteria.