FREMONT-MILLS COMMUNITY SCHOOL DISTRICT

Transcription

1 INDEPENDENT AUDITOR'S REPORTS BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION SCHEDULE OF FINDINGS AND RESPONSES June 30, 2011

2 Table of Contents Page Officials 1 Independent Auditor's Report 2-3 Management's Discussion and Analysis (MD&A) 4-13 Basic Financial Statements: Exhibit Government-wide Financial Statements: Statement of Net Assets A Statement of Activities B Governmental Fund Financial Statements: Balance Sheet C 19 Reconciliation of the Balance Sheet - Governmental Funds to the Statement of Net Assets D 20 Statement of Revenues, Expenditures and Changes in Fund Balances E Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances - Governmental Funds to the Statement of Activities F 23 Proprietary Fund Financial Statements: Statement of Net Assets G 24 Statement of Revenues, Expenses, and Changes in Fund Net Assets H 25 Statement of Cash Flows I 26 Fiduciary Fund Financial Statements: Statement of Fiduciary Net Assets J 27 Statement of Changes in Fiduciary Net Assets K 28 Notes to Financial Statements Required Supplementary Information: Budgetary Comparison Schedule of Revenues, Expenditures/Expenses and Changes in Balances - Budget and Actual - All Governmental Funds and Proprietary Fund 42 Notes to Required Supplementary Information - Budgetary Reporting 43 Schedule of Funding Progress for the Retiree Health Plan 44 Schedule Other Supplementary Information: Nonmajor Governmental Funds: Combining Balance Sheet 1 46 Combining Schedule of Revenues, Expenditures and Changes in Fund Balances 2 47 Capital Project Accounts: Combining Balance Sheet 3 48 Combining Schedule of Revenues, Expenditures and Changes in Fund Balances 4 49 Schedule of Changes in Special Revenue Fund, Student Activity Accounts 5 50 Schedule of Changes in Fiduciary Assets and Liabilities - Agency Fund 6 51 Schedule of Revenues by Source and Expenditures by Function - All Governmental Funds 7 52 Independent Auditor's Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards Schedule of Findings and Responses 55-59

3 Officials Name Title Term Expires Board of Education Matt Lorimor President 2011 Deana Crom Vice President 2013 Keith Barber Board Member 2011 Denise Anderson Board Member 2011 Elizabeth Alexander Board Member 2013 School Officials Christopher Herrick Susan Shepherd Superintendent District Secretary/Treasurer 1

4 BURTON E. TRACY & CO., P.C. Certified Public Accountants Gary E. Horton CPA PO Box 384 Clarion, IA (515) Phone (515) Fax Independent Auditor s Report To the Board of Education of Fremont-Mills Community School District: We have audited the accompanying financial statements of the governmental activities, the business type activities, each major fund and the aggregate remaining fund information of Fremont-Mills Community School District, Tabor, Iowa, as of and for the year ended June 30, 2011, which collectively comprise the District s basic financial statements listed in the table of contents. These financial statements are the responsibility of District officials. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with U.S. generally accepted auditing standards and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe our audit provides a reasonable basis for our opinions. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business type activities, each major fund and the aggregate remaining fund information of Fremont-Mills Community School District at June 30, 2011, and the respective changes in financial position and cash flows, where applicable, for the year then ended in conformity with U.S. generally accepted accounting principles. In accordance with Government Auditing Standards, we have also issued our report dated January 17, 2012, on our consideration of Fremont-Mills Community School District s internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. Management s Discussion and Analysis, Budgetary Comparison Information, and the Schedule of Funding Progress for the Retiree Health Plan on pages 4 through 13 and 42 through 44 are not required parts of the basic financial statements, but are supplementary information required by the Governmental Accounting Standards Board. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. We did not audit the information and express no opinion on it. 2

5 Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise Fremont-Mills Community School District s basic financial statements. We previously audited, in accordance with the standards referred to in the second paragraph of this report, the financial statements for the seven years ended June 30, 2010, (which are not presented herein) and expressed unqualified opinions on those financial statements. Other supplementary information included in Schedules 1 through 7, is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in our audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. January 17, 2012 BURTON E. TRACY & CO., P.C. Certified Public Accountants 3

6 MANAGEMENT S DISCUSSION AND ANALYSIS Fremont-Mills Community School District provides this Management s Discussion and Analysis of its financial statements. This narrative overview and analysis of the financial activities is for the fiscal year ended June 30, We encourage readers to consider this information in conjunction with the District s financial statements, which follow FINANCIAL HIGHLIGHTS General Fund revenues increased from $4,516,305 in fiscal 2010 to $4,872,849 in fiscal 2011, while General Fund expenditures increased from $3,992,315 in fiscal 2010 to $4,022,724 in fiscal The District s General Fund balance shows an increase of 76.42% from $1,112,444 in fiscal 2010 to $1,962,569 in fiscal The increase in General Fund revenues was attributable to an increase in property tax and state grant revenue in fiscal The slight increase in expenditures was due to annual salary adjustments and inflation. USING THIS ANNUAL REPORT The annual report consists of a series of financial statements and other information, as follows: Management s Discussion and Analysis introduces the basic financial statements and provides an analytical overview of the District s financial activities. The Government-wide Financial Statements consist of a Statement of Net Assets and a Statement of Activities. These provide information about the activities of the Fremont-Mills Community School Community School District as a whole and present an overall view of the District s finances. The Fund Financial Statements tell how governmental services were financed in the short term as well as what remains for future spending. Fund financial statements report Fremont-Mills Community School Community School District s operations in more detail than the government-wide statements by providing information about the most significant funds. The remaining statements provide financial information about activities for which Fremont-Mills Community School Community School District acts solely as an agent or custodian for the benefit of those outside of District government. Notes to financial statements provide additional information essential to a full understanding of the data provided in the basic financial statements. Required Supplementary Information further explains and supports the financial statements with a comparison of the District s budget for the year, as well as presenting the Schedule of Funding Progress for the Retiree Health Plan. Other Supplementary Information provides detailed information about the nonmajor Special Revenue Funds. 4

7 Figure A-1 shows how the various parts of this annual report are arranged and relate to one another. Figure A-1 GASB 34 Fremont-Mills Community School District Annual Financial Report Management's Discussion and Analysis Basic Financial Statements Required Supplementary Information Government-wide Financial Statements Fund Financial Statements Notes to the Financial Statements Summary Detail 5

8 Figure A-2 summarizes the major features of the District s financial statements, including the portion of the District s activities they cover and the types of information they contain. Figure A-2 Major Features of the Government-wide and Fund Financial Statements Government-wide Statements Fund Statements Governmental Funds Proprietary Funds Fiduciary Funds Scope Entire District (except fiduciary funds) The activities of the District that are not proprietary or fiduciary, such as special education and building maintenance Activities the District operates similar to private businesses, such as food services and adult education Instances in which the District administers resources on behalf of someone else, such as scholarship programs Required financial statements Statement of net assets Statement of activities Balance sheet Statement of revenues, expenditures and changes in fund balances Statement of net assets Statement of revenues, expenses and changes in fund net assets Statement of fiduciary net assets Statement of changes in fiduciary net assets Statement of cash flows Accounting basis and measurement focus Accrual accounting and economic resources focus Modified accrual accounting and current financial resources focus Accrual accounting and economic resources focus Accrual accounting and economic resources focus Type of asset/ liability information All assets and liabilities, both financial and capital, short-term and long-term Generally, assets expected to be used up and liabilities that come due during the year or soon thereafter; no capital assets or longterm liabilities included All assets and liabilities, both financial and capital, short-term and long-term All assets and liabilities, both shortterm and long-term; funds do not currently contain capital assets, although they can Type of inflow/ outflow information All revenues and expenses during year, regardless of when cash is received or paid Revenues for which cash is received during or soon after the end of the year; expenditures when goods or services have been received and the related liability is due during the year or soon thereafter All revenues and expenses during the year, regardless of when cash is received or paid All additions and deductions during the year, regardless of when cash is received or paid REPORTING THE DISTRICT S FINANCIAL ACTIVITIES Government-wide Financial Statements The government-wide financial statements report information about the District as a whole using accounting methods similar to those used by private-sector companies. The Statement of Net Assets includes all of the District s assets and liabilities. All of the current year s revenues and expenses are accounted for in the Statement of Activities, regardless of when cash is received or paid. The two government-wide financial statements report the District s net assets and how they have changed. Net assets the difference between the District s assets and liabilities are one way to measure the District s financial health or 6

9 financial position. Over time, increases or decreases in the District s net assets are an indicator of whether financial position is improving or deteriorating. To assess the District s overall health, additional non-financial factors, such as changes in the District s property tax base and the condition of school buildings and other facilities, need to be considered. In the government-wide financial statements, the District s activities are divided into two categories: Governmental activities: Most of the District s basic services are included here, such as regular and special education, transportation and administration. Property tax and state aid finance most of these activities. Business type activities: The District charges fees to help cover the costs of certain services it provides. The District s school nutrition program is included here. Fund Financial Statements The fund financial statements provide more detailed information about the District s funds, focusing on its most significant or major funds not the District as a whole. Funds are accounting devices the District uses to keep track of specific sources of funding and spending on particular programs. Some funds are required by state law and by bond covenants. The District establishes other funds to control and manage money for particular purposes, such as accounting for student activity funds, or to show that it is properly using certain revenues, such as federal grants. The District has three kinds of funds: 1) Governmental funds: Most of the District s basic services are included in governmental funds, which generally focus on (1) how cash and other financial assets that can readily be converted to cash flow in and out and (2) the balances left at year-end that are available for spending. Consequently, the governmental fund statements provide a detailed short-term view that helps determine whether there are more or fewer financial resources that can be spent in the near future to finance the District s programs. The District s governmental funds include the General Fund, Special Revenue Funds, Debt Service Fund and Capital Projects Fund. The required financial statements for governmental funds include a balance sheet and a statement of revenues, expenditures and changes in fund balances. 2) Proprietary funds: Services for which the District charges a fee are generally reported in proprietary funds. Proprietary funds are reported in the same way as the government-wide financial statements. The District's Enterprise Funds, one type of proprietary fund, are the same as its business type activities, but provide more detail and additional information, such as cash flows. The District currently has one Enterprise Fund, the School Nutrition Fund. The District uses internal service funds, the other kind of proprietary fund, to report activities that provide supplies and services for its other programs and activities. The District currently has one internal service fund used to account for the District s employee flexible benefit plan. The required financial statements for proprietary funds include a statement of revenues, expenses and changes in fund net assets and a statement of cash flows. 3) Fiduciary funds: The District is the trustee, or fiduciary, for assets that belong to others. These funds include Private- Purpose Trust and Agency Funds. Private-Purpose Trust Fund The District accounts for outside donations for scholarships for individual students in this fund. Agency Funds These are funds through which the District administers and accounts for certain federal and/or state grants on behalf of other Districts and certain revenue collected for District employee purchases of pop and related expenditures. 7

10 The District is responsible for ensuring the assets reported in the fiduciary funds are used only for their intended purposes and by those to whom the assets belong. The District excludes these activities from the government-wide financial statements because it cannot use these assets to finance its operations. The required financial statements for fiduciary funds include a statement of fiduciary net assets and a statement of changes in fiduciary net assets. Reconciliations between the government-wide financial statements and the fund financial statements follow the fund financial statements. GOVERNMENT-WIDE FINANCIAL ANALYSIS A-3 below provides a summary of the District s net assets at June 30, 2011 compared to June 30, Condensed Statement of Net Assets Governmental Business-type Total Percentage Activities Activities School District Change $ $ $ $ $ $ Current and other assets 6,459,153 5,099,370 27,840 36,086 6,486,993 5,135, % Capital assets 7,901,295 6,952,817 10,651 14,132 7, ,966, % Total assets 14,360,448 12,052,187 38,491 50,218 14,398,939 12,102, % Long-term liabilities 4,614,557 3,503,147 4,614,557 3,503, % Other liabilities 2,399,831 2,834,808 1,723 2,819 2,401,554 2,837, % Total liabilities 7,014,388 6,337,955 1,723 2,819 7,016,111 6,340, % Net assets: Invested in capital assets net of related debt 4,621,295 3,881,189 10,651 14,132 4,631,946 3,895, % Restricted 1,025, ,636 1,025, , % Unrestricted 1,698, ,407 26,117 33,267 1,724,885 1,015, % TOTAL NET ASSETS 7,346,060 5,714,232 36,768 47,399 7,382,828 5,761, % The District s combined net assets increased by 28.1% or approximately $1,621,197, over the prior year. The largest portion of the District s net assets is the invested in capital assets (e.g., land, infrastructure, buildings and equipment), less the related debt. The debt related to the investment in capital assets is liquidated with sources other than capital assets. Restricted net assets represent resources that are subject to external restrictions, constitutional provisions or enabling legislation on how they can be used. The District s restricted net assets increased by $175,361 over the prior year. The increase was primarily a result of an increase in amounts restricted for state categorical aid and amounts restricted for the physical plant and equipment property tax levy. Unrestricted net assets the part of net assets that can be used to finance day-to-day operations without constraints established by debt covenants, enabling legislation or other legal requirements increased approximately $709,211 or 69.83% This increase in unrestricted net assets was a result of the District's increased revenue and by decreasing expenses by reducing staff. 8

11 Figure A-4 shows the change in net assets for the years ended June 30, 2011 and Figure A-4 Fremont-Mills Community School Changes in Net Assets June 30, 2011 Governmental Business-type Total Percentage Activities Activities School District Change $ $ $ $ $ $ Revenues Program Revenues: Charges for services 427, , , , , ,694 Operating grants & contributions 1,019, , , ,995 1,126,247 1,061,480 Capital grants & contributions 564,821 1,332, ,821 1,332,355 General Revenues Property taxes 2,021,525 1,837,967 2,021,525 1,837,967 Income Surtax 311, , , ,055 Local option sales tax 262, , , ,850 Unrestricted state grants 1,750,859 1,607,472 1,750,859 1,607,472 Unrestricted investment earnings 7,135 18, ,276 19,054 Other revenue 7,352 4,097 7,352 4,097 Total Revenues $6,371,811 $6,679,779 $211,659 $215,245 $6,583,470 $6,895,024-5% Expenses: Instruction 2,791,735 2,656,044 2,791,735 2,656,044 Support services 1,298,350 1,374,706 1,298,350 1,374,706 Non-instructional programs , , , ,568 Other expenditures 649, , , ,046 Total Expenses $4,739,983 $4,536,796 $222,290 $215,568 $4,962,273 $4,752,364 4% CHANGE IN NET ASSETS $1,631,828 $2,142,983 -$10,631 -$323 $1,621,197 $2,142,660-24% Net assets beginning of year 5,714,232 3,571,249 47,399 47,722 5,761,631 3,618,971 59% Net assets end of year $7,346,060 $5,714,232 $36,768 $47,399 $7,382,828 $5,761,631 28% Property tax, income surtax, local option sales taxes and unrestricted state grants account for nearly 66.12% of the total revenue. The District s expenses primarily relate to instruction and support services, which account for 82.42% of the total expenses. 9

12 Governmental Activities Revenues for governmental activities were $6,371,811 and expenses were $4,739,983. In a difficult budget year, the District was able to balance the budget by trimming expenses to match available revenues. The following table presents the total and net cost of the District s major governmental activities: instruction, support services, non-instructional programs and other expenses. Figure A-5 Total and Net Cost of Governmental Activities Total Cost Total Cost Net Cost Net Cost of Services of Services of Services of Services $ $ $ $ Instruction 2,791,735 2,656,044 1,535,950 1,548,345 Support Services 1,298,350 1,374,706 1,295,874 1,373,783 Other Expenses 649, , ,671-1,013,800 TOTAL 4,739,983 4,536,796 2,728,153 1,908,328 The cost financed by users of the District s programs was $427,223. Federal and state governments subsidized certain programs with grants and contributions totaling $1,019,786. The net cost of governmental activities was financed with $2,594,635 in property and other taxes and in $1,750,859 unrestricted state grants. Business Type Activities Revenues for business type activities were $211,659 and expenses were $222,290. The District s business type activities include the School Nutrition Fund. Revenues of these activities were comprised of charges for service, federal and state reimbursements and investment income. The net decrease of $10,631 in the School Nutrition Fund is attributed increased expenditures. The increased meal prices from the previous year was not enough to offset increased expenditures. Meal prices will need to be adjusted in the 2012 fiscal year. INDIVIDUAL FUND ANALYSIS As previously noted, the Fremont-Mills Community School uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. The financial performance of the District as a whole is reflected in its governmental funds, as well. As the District completed the year, its governmental funds reported a combined fund balance of $3,746,635, or 82.08% above last year s ending fund balances of $2,057,742. The primary reason for the increase in combined fund balances is due to sale of refunding bonds, the 2003 issue will be called in

13 Governmental Fund Highlights The General Fund balance increased from $1,112,444 to $1,962,569. The District s improving General Fund financial position is the result of many factors. Growth during the year in tax and grants resulted in an increase in revenues, and reduced expenditures contributed to the increase. Staff reductions allowed the District to keep expenditure growth to less than 1%. The Capital Project Fund includes revenues from sales tax and from the physical plant and equipment property tax levy. It also includes amounts donated for construction projects. These revenue streams and the related expenditures are tracked separately in the District s accounting records, but are combined into one Capital Projects Fund for financial reporting. The Physical Plant and Equipment Levy account balance increased from $69,136 in fiscal 2010 to $112,907 in fiscal Revenues increased slightly while expenditures decreased The Statewide Sales Tax account and construction account balances decreased from $765,654 to $414,896 due to the completion of construction of an elementary gymnasium/wellness center and payments on sales tax revenue bonds. The Debt Service Fund balance increased from $3,586 at the end of fiscal year 2010 to $1,254,851 at June 30, During fiscal year 2011 the District issued $1,295,000 of crossover refunding bonds. The proceeds from these bonds are being held in the District s name until the old bonds can be called and repaid in fiscal year Proprietary Fund Highlights School Nutrition Fund net assets decreased from $47,399 at June 30, 2010 to $36,768 at June 30, 2011, representing a decrease of approximately 22%. For fiscal 2011, the increased meal prices from the previous year was not enough to offset increased expenditures. Prices for meals will be adjusted in the 2012 fiscal year. The Internal Service Fund balance of $2,905 at June 30, 2011 is a decrease in the balance of $4,850 at June 30, 2010 attributable to normal annual fluctuations. BUDGETARY HIGHLIGHTS Over the course of the year, the Fremont-Mills Community School District amended its annual budget once. Budgeted expenditures in the non-instructional programs function were increased $265,000 to correct an error in the original budget and budgeted expenditures in the other expenditures function were increased $927,488 for construction costs. Despite the amendment expenditures in the other expenditures function exceeded the amounts budgeted due to the timing of expenditures at year-end. The District s receipts were $782,920 more than budgeted receipts, a variance of 13.76%. Most of the variance is the result of more revenues being collected from local sources than anticipated. Total expenditures were $1,423,956 less than budgeted, a variance of 18.95%. It is the District s practice to budget expenditures at the maximum authorized spending authority for the all funds. The District then manages or controls spending through its line-item budget. As a result, the District s certified budget should always exceed actual expenditures for the year. 11

14 CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets At June 30, 2011, the District had invested $7,911,946, net of accumulated depreciation, in a broad range of capital assets, including land, buildings, athletic facilities, and transportation equipment. (See Figure A-6) This represents a net increase of 13.56% from last year. More detailed information about the District s capital assets is presented in Note 4 to the financial statements. Depreciation expense for the year was $264,244. The original cost of the District s capital assets was $10,638,457. Governmental funds account for $10,542,222, with the remainder of $96,235 accounted for in the Proprietary, School Nutrition Fund. During fiscal year 2011 construction of a $4 million gymnasium/wellness center was completed. Figure A-6 Capital Assets (net of depreciation) Governmental Business type Total Percentage Activities Activities School District Change Land 40,000 40, , % Construction in progress 0 2,952,065,0 2,952, % Buildings 7,191,255 3,328,006 7,191,255 3,328, % Improvements 420, , , , % Equipment & Furniture 249, , , , , % 7,901,295 6,952,817 10,651 14,132 7,911,946 6,966, % Long-Term Debt At June 30, 2011, the District had $4,614,557 in general obligation, revenue and other long-term debt outstanding. This represents an increase of approximately 31.73% from last year. (See Figure A-7) Additional information about the District s long-term debt is presented in Note 5 to the financial statements. During fiscal year 2011 the District issued $1,295,000 of crossover refunding bonds. The refunding bond proceeds will be used in fiscal year 2012 to call and repay the bonds issued in May The refunding will reduce the debt service payments over the next eleven years by $118,631. The District s bonds have not been rated. The constitution of the State of Iowa limits the amount of debt school districts can issue to 5% of the assessed value of all taxable property within the district. The District s outstanding bonded and note indebtedness is significantly below its constitutional debt limit of approximately $6 million. 12

15 Figure A-7 Fremont-Mills Community School Outstanding Long-Term Liabilities Total School District Percentage Change General Obligation Bonds 4,505,000 3,330, % Capital Loan Notes 70, , % Termination Benefits 5,382 16, % Net OPEB Liability 34,175 17, % 4,614,557 3,503, % ECONOMIC FACTORS BEARING ON THE DISTRICT S FUTURE At the time these financial statements were prepared and audited, the District was aware of several existing circumstances that could significantly affect its financial health in the future: School financing is highly dependent upon student enrollment. The District s October 2011 enrollment increased by 4 resident students. This increase in enrollment students will slightly increase the District s funding for fiscal year The completion of the Lied Gymnasium and Sports Complex will reduce expenditures for the fiscal year Capital Projects Fund. CONTACTING THE DISTRICT S FINANCIAL MANAGEMENT This financial report is designed to provide the District s citizens, taxpayers, customers, investors and creditors with a general overview of the District s finances and to demonstrate the District s accountability for the money it receives. If you have questions about this report or need additional financial information, contact Susan Shepherd, Board Secretary, Fremont-Mills Community School, 1114 US Hwy 275, Tabor, Iowa 13

16 BASIC FINANCIAL STATEMENTS 14

17 Exhibit A Statement of Net Assets June 30, 2011 Assets Business Governmental Activities Type Activities Total $ $ $ Cash and cash equivalents: 4,051,072 27,002 4,078,074 Receivables: Property tax: Delinquent 27,236-27,236 Succeeding year 1,852,732-1,852,732 Accounts 69,412-69,412 Due from other governments 458, ,701 Inventories Capital assets, net of accumulated depreciation 7,901,295 10,651 7,911,946 Total assets 14,360,448 38,491 14,398,939 Liabilities Accounts payable 180, ,671 Salaries and benefits payable 310, ,804 Accrued interest payable 31,516-31,516 Deferred revenue: Succeeding year property tax 1,852,732-1,852,732 Other 24,112 1,719 25,831 Long-term liabilities: Portion due within one year: General obligation bonds payable 1,350,000-1,350,000 Capital loan notes 70,000-70,000 Termination benefits 5,382-5,382 Portion due after one year: General obligation bonds payable 3,155,000-3,155,000 Net OPEB liability 34,175-34,175 Total liabilities 7,014,388 1,723 7,016,111 See notes to financial statements. 15

18 Exhibit A Statement of Net Assets June 30, 2011 Business Governmental Activities Type Activities Total $ $ $ Net assets Invested in capital assets, net of related debt 4,621,295 10,651 4,631,946 Restricted for: Categorical funding 399, ,166 Management levy 87,430-87,430 Physical plant and equipment levy 215, ,905 Student activities 21,507-21,507 School infrastructure 301, ,989 Unrestricted 1,698,768 26,117 1,724,885 Total net assets 7,346,060 36,768 7,382,828 See notes to financial statements. 16

19 Statement of Activities Year ended June 30, 2011 Program Revenues Operating Functions/Programs Expenses Charges for Services Grants, Contributions and Restricted Interest Capital Grants, Contributions and Restricted Interest $ $ $ $ Governmental activities: Instruction: Regular 1,705, , ,818 - Special 407,907 31,826 48,242 - Other 678, , ,622-2,791, , ,682 - Support services: Student 71, Instructional staff 84, Administration 576, Operation and maintenance of plant 270,641 1,120 1,013 - Transportation 295, ,298,350 1,120 1,356 - Other expenditures: Facilities acquisition 37, ,821 Long-term debt interest 218,348-2,086 - AEA flowthrough 186, , Depreciation (unallocated)* 207, , , ,821 Total governmental activities 4,739, ,223 1,019, ,821 Business type activities: Non-instructional programs: Food service operations 222, , ,461 - Total 4,962, ,280 1,126, ,821 General Revenues: Property taxes levied for: General purposes Debt service Capital outlay Income surtax Statewide sales, services and use tax Unrestricted state grants Unrestricted investment earnings Other Total general revenues Change in net assets Net assets beginning of year Net assets end of year *This amount excludes the depreciation that is included in the direct expenses of the various programs. See notes to financial statements. 17

20 Exhibit B Net (Expense) Revenue and Changes in Net Assets Business Governmental Activities Type Activities Total $ $ $ (732,960) - (732,960) (327,839) - (327,839) (475,151) - (475,151) (1,535,950) - (1,535,950) (71,171) - (71,171) (84,382) - (84,382) (576,503) - (576,503) (268,508) - (268,508) (295,310) - (295,310) (1,295,874) - (1,295,874) 527, ,433 (216,262) - (216,262) (207,500) - (207,500) 103, ,671 (2,728,153) - (2,728,153) - (10,772) (10,772) (2,728,153) (10,772) (2,738,925) 1,735,504-1,735, , ,166 97,855-97, , , , ,055 1,750,859-1,750,859 7, ,276 7,352-7,352 4,359, ,360,122 1,631,828 (10,631) 1,621,197 5,714,232 47,399 5,761,631 7,346,060 36,768 7,382,828 See notes to financial statements. 18

21 Exhibit C Balance Sheet Governmental Funds June 30, 2011 Assets Capital Debt Nonmajor General Projects Service Governmental $ $ $ $ Total $ Cash and pooled investments 2,305, ,920 1,252, ,465 4,046,422 Receivables: Property tax: Delinquent 22,376 1,319 2,535 1,006 27,236 Succeeding year 1,467, , ,302 75,000 1,852,732 Accounts 68, ,145 Due from other governments 281, , ,701 Total assets 4,145, ,900 1,443, ,726 6,454,236 Liabilities and Fund Balances Liabilities: Accounts payable 142,645 25,603-10, ,655 Salaries and benefits payable 310, ,804 Deferred revenue: Succeeding year property tax 1,467, , ,302 75,000 1,852,732 Income surtax 171, , ,661 Other 90, ,749 Total liabilities 2,182, , ,302 85,407 2,707,601 Fund balances: Restricted for: Categorical funding 399, ,166 Debt service - - 1,254,851-1,254,851 Management levy ,812 92,812 Student activities ,507 21,507 School infrastructure - 301, ,989 Physical plant and equipment - 112, ,907 Unassigned 1,563, ,563,403 Total fund balances 1,962, ,896 1,254, ,319 3,746,635 Total liabilities and fund balances 4,145, ,900 1,443, ,726 6,454,236 See notes to financial statements. 19

22 Exhibit D Reconciliation of the Balance Sheet - Governmental Funds to the Statement of Net Assets June 30, 2011 $ Total fund balances of governmental funds (Exhibit C) 3,746,635 Amounts reported for governmental activities in the Statement of Net Assets are different because: Capital assets used in governmental activities are not financial resources and, therefore, are not reported as assets in the governmental funds. 7,901,295 Other long-term assets are not available to pay current period expenditures and, therefore, are deferred in the governmental funds. 341,298 Accrued interest payable on long-term liabilities is not due and payable in the current period and, therefore, is not reported as a liability in the governmental funds. (31,516) An internal service fund is used by the District's management to charge the costs of the employee flexible benefit program to the individual funds. The assets and liabilities of the internal service fund are included with governmental activities. 2,905 Long-term liabilities, including bonds payable, capital loan notes payable, termination benefits, and other postemployment benefits are not due and payable in the current period and therefore, are not reported as liabilities in the governmental funds. (4,614,557) Net assets of governmental activities (Exhibit A) 7,346,060 See notes to financial statements. 20

23 Exhibit E Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds Year ended June 30, 2011 Capital Nonmajor General Projects Debt Service Governmental Total $ $ $ $ $ Revenues: Local sources: Local tax 1,838, , ,166 74,607 2,550,108 Tuition 232, ,964 Other 52, ,497 2, , ,365 State sources 2,369, ,370,197 Federal sources 379, ,013 Total revenues 4,872,849 1,016, , ,115 6,260,647 Expenditures: Current: Instruction: Regular 1,670, ,400 1,703,792 Special 406, ,650 Other 556, , ,869 2,633, ,730 2,773,311 Support services: Student 70, ,752 Instructional staff 84, ,382 Administration 555,014 8,122-3, ,010 Plant operation and maintenance 232,031 5,382-18, ,639 Transportation 260, , ,190 1,202,481 13,504-33,988 1,249,973 Other expenditures: Facilities acquisition - 1,251, ,251,812 Long-term debt: Principal , ,000 Interest and fiscal charges , ,996 AEA flowthrough 186, , ,662 1,251, ,996-1,843,470 Total expenditures 4,022,724 1,265, , ,718 5,866,754 Excess (deficiency) of revenues over (under) expenditures 850,125 (249,004) (214,625) 7, ,893 See notes to financial statements. 21

24 Exhibit E Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds Year ended June 30, 2011 General Capital Projects Debt Service Nonmajor Governmental Total $ $ $ $ $ Other financing sources (uses): Refunding bonds issued - - 1,295,000-1,295,000 Operating transfers in , ,890 Operating transfers out - (170,890) - - (170,890) Total other financing sources (uses) - (170,890) 1,465,890-1,295,000 Net change in fund balances 850,125 (419,894) 1,251,265 7,397 1,688,893 Fund balances beginning of year, as restated 1,112, ,790 3, ,922 2,057,742 Fund balances end of year 1,962, ,896 1,254, ,319 3,746,635 See notes to financial statements. 22

25 Exhibit F Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances - Governmental Funds to the Statement of Activities Year ended June 30, 2011 $ $ Net change in fund balances - total governmental funds (Exhibit E) 1,688,893 Amounts reported for governmental activities in the Statement of Activities are different because: Capital outlays to purchase or build capital assets are reported in governmental funds as expenditures. However, those costs are not reported in the Statement of Activities and are allocated over their estimated useful lives as depreciation expense in the Statement of Activities. Capital outlay expenditures exceeded depreciation expense and loss on disposal of capital assets in the current year, as follows: Expenditures for capital assets 1,214,424 Loss on disposal of capital assets (5,183) Depreciation expense (260,763) 948,478 Income surtaxes and other receivables not collected for several months after the District's fiscal year ends are not considered "available" revenues in the governmental funds and are included as deferred revenues. They are, however, recorded as revenues in the Statement of Activities. 111,164 Repayment of long-term liability principal is an expenditure in the governmental funds, but the repayment reduces long-term liabilities in the Statement of Net Assets. 190,000 Interest on long-term debt in the Statement of Activities differs from the amount reported in the governmental funds because interest is recorded as an expenditure in the funds when due. In the Statement of Activities, interest expense is recognized as the interest accrues, regardless of when it is due. (3,352) Some expenses reported in the Statement of Activities do not require the use of current financial resources and, therefore, are not reported as expenditures in the governmental funds, as follows: Termination benefits 10,765 Other postemployment benfits (17,175) (6,410) Proceeds from issuing long-term liabilities are included in the governmental funds but increase long-term liabilities in the Statement of Net Assets. (1,295,000) An internal service fund is used by the District's management to charge the costs of the employee flexible benefit program to the individual funds. The net revenue (expense) of the internal service fund is reported with governmental activities. (1,945) Changes in net assets of governmental activities (Exhibit B) 1,631,828 See notes to financial statements. 23

26 Exhibit G Statement of Net Assets Proprietary Funds June 30, 2011 Enterprise Fund Nonmajor School Nutrition Governmental Activities - Internal Service Fund $ $ Assets Cash and cash equivalents 27,002 4,650 Accounts receivable Inventories Capital assets, net of accumulated depreciation 10,651 - Total assets 38,491 4,917 Liabilities Accounts payable 4 2,012 Deferred revenue 1,719 - Total Liabilities 1,723 2,012 Net assets Invested in capital assets 10,651 - Unrestricted 26,117 2,905 Total net assets 36,768 2,905 See notes to financial statements 24

27 Exhibit H Statement of Revenues, Expenses, and Changes in Fund Net Assets Proprietary Funds Year ended June 30, 2011 Enterprise Fund Nonmajor School Nutrition $ Governmental Activities - Internal Service Fund $ Operating revenue: Local sources: Charges for service 105,057 11,275 Operating expenses: Non-instructional programs: Salaries 74,564 - Benefits 10,648 13,220 Purchased services 7,938 - Supplies 124,448 - Depreciation 3,481 - Other 1,211 - Total operating expenses 222,290 13,220 Operating income (loss) (117,233) (1,945) Non-operating revenues: State sources 2,045 - Federal sources 104,416 - Interest income Total non-operating revenues 106,602 - Change in net assets (10,631) (1,945) Net assets beginning of year 47,399 4,850 Net assets end of year 36,768 2,905 See notes to financial statements. 25

28 Exhibit I Statement of Cash Flows Proprietary Funds Year ended June 30, 2011 Enterprise Fund Nonmajor School Nutrition $ Governmental Activities - Internal Service Fund $ Cash flows from operating activities: Cash received from sale of lunches and breakfasts 105,279 - Cash received from services provided to other funds - 11,275 Cash payments to employees for services (85,211) (11,208) Cash payments to suppliers for goods or services (128,193) - Net cash (used) provided by operating activities (108,125) 67 Cash flows from non-capital financing activities: State grants received 2,045 - Federal grants received 98,009 - Net cash provided by non-capital financing activities 100,054 - Cash flows from capital and related financing activities - - Cash flows from investing activities: Interest on investments Net increase (decrease) in cash and cash equivalents (7,930) 67 Cash and cash equivalents at beginning of year 34,932 4,583 Cash and cash equivalents at end of year 27,002 4,650 Reconciliation of operating income (loss) to net cash used by operating activities: Operating income (loss) (117,233) (1,945) Adjustments to reconcile operating income (loss) to net cash used by operating activities: Commodities used 6,407 - Depreciation 3,481 - Decrease (increase) in inventories Decrease (increase) in accounts receivable 6 - (Decrease) increase in accounts payable (1,312) 2,012 (Decrease) increase in deferred revenue Net cash (used) provided by operating activities (108,125) 67 Non-cash investing, capital and financing activities: During the year ended June 30, 2011, the District received $6,407 of federal commodities. See notes to financial statements. 26

29 Exhibit J Statement of Fiduciary Net Assets Fiduciary Funds June 30, 2011 Private Purpose Trust Scholarship Agency $ $ Assets Cash and pooled investments 37,600 11,497 Accrued interest receivable 18 - Total Assets 37,618 11,497 Liabilities Accounts payable Other payables - 10,998 Total liabilities - 11,497 Net Assets Reserved for scholarships 37,618 - See notes to financial statements. 27

30 Exhibit K Statement of Changes in Fiduciary Net Assets Fiduciary Funds Year ended June 30, 2011 Private Purpose Trust Scholarship $ Additions: Local sources: Gifts and contributions 609 Interest 354 Total additions 963 Deductions Support services: Scholarships awarded 1,990 Change in net assets (1,027) Net assets beginning of year 38,645 Net assets end of year 37,618 See notes to financial statements. 28

31 Notes to Financial Statements June 30, Summary of Significant Accounting Policies Fremont-Mills Community School District is a political subdivision of the State of Iowa and operates public schools for children in grades kindergarten through twelve. The geographic area served includes the Cities of Tabor, Thurman, and Randolph, Iowa and the predominately agricultural territory in a portion of Mills and Fremont Counties. The District is governed by a Board of Education whose members are elected on a non-partisan basis. The District s financial statements are prepared in conformity with U.S. generally accepted accounting principles as prescribed by the Governmental Accounting Standards Board. A. Reporting Entity For financial reporting purposes, Fremont-Mills Community School District has included all funds, organizations, agencies, boards, commissions, and authorities. The District has also considered all potential component units for which it is financially accountable and other organizations for which the nature and significance of their relationship with the District are such that exclusion would cause the District's financial statements to be misleading or incomplete. The Governmental Accounting Standards Board has set forth criteria to be considered in determining financial accountability. These criteria include appointing a voting majority of an organization's governing body and (1) the ability of the District to impose its will on that organization or (2) the potential for the organization to provide specific benefits to or impose specific financial burdens on the District. The Fremont-Mills Community School District has no component units that meet the Governmental Accounting Standards Board criteria. Jointly Governed Organizations - The District participates in a jointly governed organization that provides services to the District but does not meet the criteria of a joint venture since there is no ongoing financial interest or responsibility by the participating governments. The District is a member of the County Assessor's Conference Board. B. Basis of Presentation Government-wide Financial Statements - The Statement of Net Assets and the Statement of Activities report information on all of the nonfiduciary activities of the District. For the most part, the effect of interfund activity has been removed from these statements. Governmental activities, which normally are supported by tax and intergovernmental revenues, are reported separately from business type activities, which rely to a significant extent on fees and charges for service. The Statement of Net Assets presents the District s nonfiduciary assets and liabilities, with the difference reported as net assets. Net assets are reported in three categories: Invested in capital assets, net of related debt consists of capital assets, net of accumulated depreciation and reduced by outstanding balances for bonds, notes, and other debt attributable to the acquisition, construction, or improvement of those assets. Restricted net assets result when constraints placed on net asset use are either externally imposed or imposed by law through constitutional provisions or enabling legislation. 29

32 Unrestricted net assets consist of net assets not meeting the definition of the two preceding categories. Unrestricted net assets often have constraints on resources imposed by management which can be removed or modified. The Statement of Activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenues. Direct expenses are those clearly identifiable with a specific function. Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function and 2) grants, contributions, and interest restricted to meeting the operational or capital requirements of a particular function. Property tax and other items not properly included among program revenues are reported instead as general revenues. Fund Financial Statements Separate financial statements are provided for governmental, proprietary, and fiduciary funds, even though the latter are excluded from the government-wide financial statements. Major individual governmental funds are reported as separate columns in the fund financial statements. All remaining governmental funds are aggregated and reported as nonmajor governmental funds. Combining schedules are also included for the Capital Project Fund accounts. The District reports the following major governmental funds: The General Fund is the general operating fund of the District. All general tax revenues and other revenues not allocated by law or contractual agreement to some other fund are accounted for in this fund. From the fund are paid the general operating expenditures, including instructional, support and other costs. The Capital Projects Fund is used to account for all resources used in the acquisition and construction of capital facilities and other capital assets. The Debt Service Fund is utilized to account for the payment of interest and principal on the District s long-term debt. The District s proprietary fund is the Enterprise, School Nutrition Fund. This fund is used to account for the food service operations of the District. The District s Internal Service Fund is also reported as a proprietary fund. The Internal Service Fund is used to account for the District s employee flexible benefit plan. The District also reports fiduciary funds which focus on net assets and changes in net assets. The District s fiduciary funds include the following: The Private-Purpose Trust Fund is used to account for assets held by the District under trust agreements, which require income earned to be used to benefit individuals through scholarship awards. The Agency Fund is used to account for assets held by the District as an agent for individuals, private organizations, and other governments. The Agency Fund is custodial in nature, assets equal liabilities, and does not involve measurement of results of operations. C. Measurement Focus and Basis of Accounting The government-wide, proprietary and fiduciary fund financial statements are reported using the economic resources measurement focus and accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property tax is recognized as revenue in the year for which it is levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been satisfied. 30