SLIDELL INDEPENDENT SCHOOL DISTRICT

Transcription

1 SLIDELL INDEPENDENT SCHOOL DISTRICT ANNUAL FINANCIAL REPORT

2

3 Slidell Independent School District Annual Financial Report For The Year Ended August 31, 2012 TABLE OF CONTENTS Page Exhibit INTRODUCTORY SECTION Certificate of Board... 1 FINANCIAL SECTION Independent Auditor's Report on Financial Statements... 2 Management's Discussion and Analysis (Required Supplementary Information)... 4 Basic Financial Statements Government-wide Financial Statements: Statement of Net Assets A-1 Statement of Activities B-1 Fund Financial Statements: Balance Sheet - Governmental Funds C-1 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Assets C-1R Statement of Revenues, Expenditures, and Changes in Fund Balances - Governmental Funds C-2 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities C-3 Statement of Fiduciary Net Assets - Fiduciary Funds E-1 Notes to the Financial Statements Required Supplementary Information: Budgetary Comparison Schedules: General Fund G-1 OTHER SUPPLEMENTARY INFORMATION SECTION Schedule of Delinquent Taxes Receivable J-1 Budgetary Comparison Schedules Required by the Texas Education Agency: National School Breakfast and Lunch Program J-2 Debt Service Fund J-3 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 Questioned Costs Summary Schedule of Prior Audit Findings Corrective Action Plan Schedule of Required Responses to Selected School First Indicators L-1

4 CERTIFICATE OF BOARD Slidell Independent School District Wise Name of School District County Co.-Dist. Number We, the undersigned, certify that the attached annual financial reports of the above named school district were reviewed and (check one) approved disapproved for the year ended August 31, 2012, at a meeting of the board of trustees of such school district on the day of,. Signature of Board Secretary Signature of Board President If the board of trustees disapproved of the auditor's report, the reason(s) for disapproving it is (are): (attach list as necessary) 1

5 January 23, 2013 Independent Auditor's Report on Financial Statements Board of Trustees Slidell Independent School District P. O. Box 69 Slidell, Texas Members of the Board of Trustees: We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of Slidell Independent School District as of and for the year ended August 31, 2012, which collectively comprise the District's basic financial statements as listed in the table of contents. These financial statements are the responsibility of Slidell Independent School District's management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. 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 the significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that 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, each major fund, and the aggregate remaining fund information of Slidell Independent School District as of August 31, 2012, and the respective changes in financial position, for the year then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued our report dated January 23, 2013, on our consideration of Slidell Independent School District's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on 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. Accounting principles generally accepted in the United States of America require that the management's discussion and analysis and budgetary comparison information identified as Required Supplementary Information in the table of contents be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of 2

6 preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Slidell Independent School District's basic financial statements as a whole. Schedules J-1, J-2 and J-3 listed in the table of contents under the other supplementary information, which is required by the Texas Education Agency, are not a required part of the basic financial statements. This other supplementary information is the responsibility of management and was derived from and related directly to the underlying accounting and other records used to prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the basic financial statements taken as a whole. Respectfully submitted, Stephen G. Gilland, P.C. 3

7 MANAGEMENT DISCUSSION AND ANALYSIS AUGUST 31, 2012 In this section of the Annual Financial and Compliance Report, we, the managers of Slidell Independent School District, discuss and analyze the District's financial performance for the fiscal year ended August 31, Please read it in conjunction with the independent auditor s report on page 2, and the District's Basic Financial Statements which begin on Exhibit A-1. USING THIS ANNUAL REPORT This annual report consists of a series of financial statements. The government-wide financial statements include the Statement of Net Assets and the Statement of Activities (on Exhibits A-1 and B-1). These provide information about the activities of the District as a whole and present a longer-term view of the District's property and debt obligations and other financial matters. They reflect the flow of total economic resources in a manner similar to the financial reports of a business enterprise. Fund financial statements (starting on Exhibit C-1) report the District's operations in more detail than the government-wide statements by providing information about the District's most significant funds. For governmental activities, these statements tell how services were financed in the short term as well as what resources remain for future spending. They reflect the flow of current financial resources, and supply the basis for tax levies and the appropriations budget. The remaining statements, fiduciary statements, provide financial information about activities for which the District acts solely as a trustee or agent for the benefit of those outside of the district. The notes to the financial statements provide narrative explanations or additional data needed for full disclosure in the government-wide statements or the fund financial statements. The section labeled OTHER SUPPLEMENTARY INFORMATION SECTION contains data used by monitoring or regulatory agencies for assurance that the District is using funds supplied in compliance with the terms of grants. Reporting the District as a Whole The Statement of Net Assets and the Statement of Activities The analysis of the District's overall financial condition and operations begins on Exhibit A-1. Its primary purpose is to show whether the District is better off or worse off as a result of the year's activities. The Statement of Net Assets includes all the District's assets and liabilities at the end of the year while the Statement of Activities includes all the revenues and expenses generated by the District's operations during the year. These apply the accrual basis of accounting which is the basis used by private sector companies. All of the current year's revenues and expenses are taken into account regardless of when cash is received or paid. The District's revenues are divided into those provided by outside parties who share the costs of some programs, such as tuition received from students from outside the district and grants provided by the U.S. Department of Education to assist children with disabilities from disadvantaged backgrounds (program revenues), and revenues provided by the taxpayers or by TEA in equalization funding processes (general revenues). All the District's assets are reported whether they serve the current year or future years. Liabilities are considered regardless of whether they must be paid in the current or future years. 4

8 MANAGEMENT DISCUSSION AND ANALYSIS AUGUST 31, 2012 These two statements report the District's net assets and changes in them. The District's net assets (the difference between assets and liabilities) provide one measure of the District's financial health, or financial position. Over time, increases or decreases in the District's net assets are one indicator of whether its financial health is improving or deteriorating. To fully assess the overall health of the District, however, you should consider non-financial factors as well, such as changes in the District's average daily attendance or its property tax base and the condition of the District's facilities. In the Statement of Net Assets and the Statement of Activities, we report the District s activities: Governmental activities The District's basic services are reported here, including instruction, counseling, co-curricular activities, food services, transportation, maintenance, community services, and general administration. Property taxes, tuition, fees, and state and federal grants finance most of these activities. Reporting the District's Most Significant Funds Fund Financial Statements The fund financial statements on Exhibit C-1 provide detailed information about the most significant funds not the District as a whole. Laws and contracts require the District to establish some funds, such as grants received under the No Child Left Behind Act from the U.S. Department of Education. The District's administration establishes many other funds to help it control and manage money for particular purposes (like campus activities). The District's uses primarily one fund, described as follows: Governmental funds The District's basic services are reported in governmental funds. These use modified accrual accounting (a method that measures the receipt and disbursement of cash and all other financial assets that can be readily converted to cash) and report balances that are available for future spending. The governmental fund statements provide a detailed short-term view of the District's general operations and the basic services it provides. We describe the differences between governmental activities (reported in the Statement of Net Assets and the Statement of Activities) and governmental funds in reconciliation schedules following each of the fund financial statements. The District as Trustee Reporting the District's Fiduciary Responsibilities The District is the trustee, or fiduciary, for money raised by student activities. All of the District's fiduciary activities are reported in separate Statement of Fiduciary Net Assets on Exhibit E-1. We exclude these resources from the District's other financial statements because the District cannot use these assets to finance its operations. The District is only responsible for ensuring that the assets reported in these funds are used for their intended purposes. 5

9 MANAGEMENT DISCUSSION AND ANALYSIS AUGUST 31, 2012 GOVERNMENT-WIDE FINANCIAL ANALYSIS Our analysis focuses on the net assets (Table I) and changes in net assets (Table II) of the District's governmental activities. Net assets of the District's governmental activities decreased from $3.42 million to $3.30 million. 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 was $843 thousand at August 31, This decrease in governmental net assets was the result of the following: First, the District's expenses exceeded revenues by about $124 thousand. Expenditures included capital outlay acquisitions of $455 thousand and debt principal payments of $174 thousand, which are not recognized as expenses on the accrual basis of accounting. Second, the District recorded depreciation not recognized in the fund financial statements in the amount of $163 thousand. Table I NET ASSETS Governmental Activities 2012 Governmental Activities 2011 Current and other assets $ 1,147,215 $ 1,228,507 Capital assets 4,910,800 4,618,876 Total assets 6,058,015 5,847,383 Long-term liabilities 2,615,814 2,298,362 Other liabilities 142, ,683 Total liabilities 2,757,835 2,424,045 Net Assets: Invested in capital assets net of related debt 2,294,986 2,320,514 Restricted 161, ,334 Unrestricted 843, ,490 Total net assets $ 3,300,180 $ 3,423,338 6

10 MANAGEMENT DISCUSSION AND ANALYSIS AUGUST 31, 2012 Table II CHANGES IN NET ASSETS Governmental Activities 2012 Governmental Activities 2011 Revenues: Program Revenues: Charges for services $ 73,613 $ 80,845 Operating grants and contributions 367, ,962 General Revenues: Maintenance and operations taxes 2,173,810 2,057,420 Debt service taxes 209, ,561 Grants and contributions not restricted to specific functions 667, ,441 Investment earnings 23,430 46,953 Miscellaneous 14,944 4,882 Total Revenue 3,530,631 3,530,064 Expenses: Instruction, curriculum and media services 1,773,103 1,959,197 Instructional and school leadership 262, ,618 Student support services 171, ,369 Child nutrition 178, ,827 Co-curricular activities 165, ,665 General administration 177, ,656 Plant maintenance, security & data processing 304, ,898 Debt services 129, ,306 Instructional services between schools 304,771 60,813 Shared services arrangements Other intergovernmental 163,137 22, ,000 21,492 Total Expenses 3,654,170 3,650,841 Increase (Decrease) in net assets before transfers and special items (123,539) (120,777) Special items Change in net assets 381 (123,158) -- (120,777) Net assets at 9/1 3,423,338 3,544,115 Net assets at 8/31 $ 3,300,180 $ 3,423,338 7

11 MANAGEMENT DISCUSSION AND ANALYSIS AUGUST 31, 2012 The District's total revenues increased by less than one percent ($567) from the prior year. This slight increase consisted of increases in local tax revenues and miscellaneous revenue; offset by decreases in program service revenue and investment earnings. The total cost of all programs and services increased by less than one percent ($3 thousand) due mainly to increases in instructional services between schools; offset by decreases in instructional, curriculum, and media services. The cost of all governmental activities this year was $3.65 million. As shown in the Statement of Activities on Exhibit B-1, the amount that our taxpayers ultimately financed for these activities through District taxes was only $2.383 million because some of the costs were paid by those who directly benefited from the programs ($74 thousand) or by other governments and organizations that subsidized certain programs with grants and contributions ($1.036 million). THE DISTRICT'S FUNDS As the District completed the year, its governmental funds (as presented in the balance sheet on Exhibit C- 1) reported a combined fund balance of $809 thousand, which is $198 thousand less than last year's total of $1.007 million. Included in this year's total change in fund balance is a decrease of $197 thousand in the District's General Fund, which primarily resulted from only a slight increase in revenues ($89 thousand); offset by a large increase in total costs ($550 thousand). The increase in cost was due primarily to increases in capital outlay, costs for instructional services between schools, and shared services arrangements; offset by decreases in costs related to instruction, general administration and support services. The District s General Fund fund balance also increased due to the issuance of debt and lease obligations of $369 thousand. The fund balance in the Debt Service Fund decreased $7 thousand. The Debt Service Fund expenditures exceeded revenues by $121 thousand. This deficit was partially offset by retiring existing bonds ($2.2 million) with a refunding bond issue ($2.326 million). Other changes in fund balances should also be noted. Debt principal payments of $174 thousand were made as discussed in Note F to the financial statements. Over the course of the year, the Board of Trustees revised the District's budget several times. These budget amendments included increases in instruction, support services, general administration, plant maintenance, and capital outlay. The District's General Fund fund balance of $662 thousand reported on Exhibit G-1 differs from the General Fund's final budgetary fund balance of $635 thousand due primarily to intergovernmental charges being less than expected and local revenues being less than expected. CAPITAL ASSET AND DEBT ADMINISTRATION Capital Assets At the end of 2012, the District had $4.91 million invested in a broad range of capital assets, including facilities and equipment for instruction, transportation, athletics, administration, and maintenance. The District has a $5,000 threshold for capital expenditures. During the fiscal year ending August 31, 2012, the District had the following capital outlay expenditures: Purchase of land with loan proceeds: $ 399,327 Purchase of office equipment with capital lease obligation: 55,212 Total $ 454,539 The District's fiscal year 2013 capital budget calls for no capital outlay expenditures. More information about the District's capital assets is presented in Note D to the financial statements. 8

12 MANAGEMENT DISCUSSION AND ANALYSIS AUGUST 31, 2012 Debt At year-end, the District had $2.429 million in long term debt versus $2.298 million last year. The District retired $2.2 million of bonds with a refunding bond issue that yielded $2.326 million. More detailed information about the District's long-term liabilities is presented in Note F to the financial statements. ECONOMIC FACTORS AND NEXT YEAR'S BUDGETS AND RATES The District's elected and appointed officials considered many factors when setting the fiscal year 2013 budget and tax rate. The factors include the following: The District is anticipating that student enrollment will remain stable and that the tax base may show a slight increase. The District s population is expected to remain stable. These indicators were taken into account when adopting the General Fund budget for State foundation revenues are expected to decrease and property tax revenues are expected to increase compared to the actual revenues. These revenues will account for 99% of the 2013 revenues. The District will use its revenues to finance programs we currently offer. Budgeted expenditures are expected to decrease percent to $3.091 million from $3.565 million in 2012 final budget. Decreased costs associated with general administration, shared services, plant maintenance, and cocurricular/extracurricular activities are offset by increases in student transportation and payments on principal of long-term debt. If these estimates are realized, the District's General Fund fund balance is expected to decrease about $64 thousand by the close of CONTACTING THE DISTRICT'S FINANCIAL MANAGEMENT This financial report is designed to provide our citizens, taxpayers, customers, and investors and creditors with a general overview of the District's finances and to show the District's accountability for the money it receives. If you have questions about this report or need additional financial information, contact the District's business office, at Slidell Independent School District, P.O. Box 69, Slidell, Texas

13 STATEMENT OF NET ASSETS AUGUST 31, 2012 EXHIBIT A-1 1 Data Control Governmental Codes Activities ASSETS: 1110 Cash and Cash Equivalents $ 873, Current Investments 6, Property Taxes Receivable (Net) 147, Due from Other Governments 49, Inventories 4, Deferred Expenses 6, Capitalized Bond and Other Debt Issuance Costs 60,000 Capital Assets: 1510 Land 474, Buildings and Improvements, Net 4,145, Furniture and Equipment, Net 237, Capital Lease Assets, Net 53, Total Assets 6,058,015 LIABILITIES: 2110 Accounts Payable 4, Interest Payable 11, Accrued Liabilities 104, Due to Other Governments 21,778 Noncurrent Liabilities: 2501 Due Within One Year 168, Due in More Than One Year 2,447, Total Liabilities 2,757,835 NET ASSETS 3200 Invested in Capital Assets, Net of Related Debt 2,294,986 Restricted For: 3820 State and Federal Programs 24, Debt Service 137, Unrestricted 843, Total Net Assets $ 3,300,180 The accompanying notes are an integral part of this statement. 10

14 STATEMENT OF ACTIVITIES EXHIBIT B-1 Net (Expense) Revenue and Changes in Program Revenues Net Assets Data Operating Control Charges for Grants and Governmental Codes Functions/Programs Expenses Services Contributions Activities Governmental Activities: 11 Instruction $ 1,681,576 $ -- $ 216,826 $ (1,464,750) 12 Instructional Resources and Media Services 90, ,671 (87,138) 13 Curriculum and Staff Development (689) 21 Instructional Leadership 4, , School Leadership 258, ,439 (247,817) 31 Guidance, Counseling, & Evaluation Services 2, (2,680) 33 Health Services 11, (10,996) 34 Student Transportation 157, ,375 (151,333) 35 Food Service 178,642 65,321 77,088 (36,233) 36 Cocurricular/Extracurricular Activities 165,766 5,292 6,701 (153,773) 41 General Administration 177, ,168 (170,152) 51 Plant Maintenance and Operations 292,637 3,000 11,829 (277,808) 53 Data Processing Services 12, (11,855) 72 Interest on Long-term Debt 109, ,221 (107,057) 73 Bond Issuance Costs and Fees 19, (19,981) 91 Contracted Instructional Services between Schools 304, ,320 (292,451) 93 Payments Related to Shared Services Arrangements 163, ,594 (156,543) 99 Other Intergovernmental Charges 22, (21,582) TG Total Governmental Activities 3,654,170 73, ,719 (3,212,838) TP Total Primary Government $ 3,654,170 $ 73,613 $ 367,719 (3,212,838) General Revenues: MT Property Taxes, Levied for General Purposes 2,173,810 DT Property Taxes, Levied for Debt Service 209,150 IE Investment Earnings 23,430 GC Grants and Contributions Not Restricted to Specific Programs 667,965 MI Miscellaneous 14,944 Special and Extraordinary Items: S1 Special Item Inflow 11,535 S2 Special Item Outflow (11,154) TR Total General Revenues 3,089,680 CN Change in Net Assets (123,158) NB Net Assets - Beginning 3,423,338 NE Net Assets - Ending $ 3,300,180 The accompanying notes are an integral part of this statement. 11

15 BALANCE SHEET - GOVERNMENTAL FUNDS AUGUST 31, 2012 EXHIBIT C Data Debt Other Total Control General Service Governmental Governmental Codes Fund Fund Funds Funds ASSETS: 1110 Cash and Cash Equivalents $ 725,745 $ 121,918 $ 25,570 $ 873, Current Investments 4,435 2, , Taxes Receivable, Net 134,929 12, , Due from Other Governments 44, ,938 49, Due from Other Funds 1, , Inventories 3, , Deferred Expenditures 6, , Total Assets $ 920,877 $ 137,120 $ 31,203 $ 1,089,200 LIABILITIES: Current Liabilities: 2110 Accounts Payable $ 3,397 $ -- $ 696 $ 4, Payroll Deductions & Withholdings Accrued Wages Payable 85, ,901 91, Due to Other Funds ,985 1, Due to Other Governments 21, , Accrued Expenditures 12, , Deferred Revenue 134,928 12, , Total Liabilities 258,523 12,974 8, ,079 FUND BALANCES: Nonspendable Fund Balances: 3410 Inventories 3, ,092 Restricted Fund Balances: 3450 Federal/State Funds Grant Restrictions ,926 21, Retirement of Long-Term Debt , ,146 Committed Fund Balances: 3510 Construction 485, , Capital Expenditures for Equipment 252, , Unassigned (78,043) (78,043) 3000 Total Fund Balances 662, ,146 22, , Total Liabilities and Fund Balances $ 920,877 $ 137,120 $ 31,203 $ 1,089,200 The accompanying notes are an integral part of this statement. 12

16 RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS AUGUST 31, 2012 EXHIBIT C-1R Total fund balances - governmental funds balance sheet $ 809,121 Amounts reported for governmental activities in the Statement of Net Assets are different because: Capital assets used in governmental activities are not reported in the funds. 4,910,800 Property taxes receivable unavailable to pay for current period expenditures are deferred in the funds. 147,902 Payables for bond principal which are not due in the current period are not reported in the funds. (2,060,000) Payables for capital leases which are not due in the current period are not reported in the funds. (54,673) Payables for bond interest which are not due in the current period are not reported in the funds. (2,952) Payables for note interest which are not due in the current period are not reported in the funds. (8,875) Payables for notes which are not due in the current period are not reported in the funds. (314,494) Unamortized bond premium is not reported in the funds (186,647) Bond issuance costs are capitalized for the SNA but not in the funds. 60,000 Rounding difference (2) Net assets of governmental activities - Statement of Net Assets $ 3,300,180 The accompanying notes are an integral part of this statement. 13

17 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - GOVERNMENTAL FUNDS EXHIBIT C Data Debt Other Total Control General Service Governmental Governmental Codes Fund Fund Funds Funds REVENUES: 5700 Local and Intermediate Sources $ 2,174,697 $ 208,204 $ 65,486 $ 2,448, State Program Revenues 779,186 1,805 5, , Federal Program Revenues 18, , , Total Revenues 2,972, , ,915 3,484,071 EXPENDITURES: Current: 0011 Instruction 1,520, ,339 1,675, Instructional Resources and Media Services 86, , Curriculum and Staff Development Instructional Leadership ,474 4, School Leadership 250, , Guidance, Counseling, & Evaluation Services 2, , Health Services 11, , Student Transportation 122, , Food Service , , Cocurricular/Extracurricular Activities 139, , General Administration 170, , Plant Maintenance and Operations 279, , Data Processing Services 11, , Principal on Long-term Debt 28, , , Interest on Long-term Debt 1, , , Bond Issuance Costs and Fees -- 79, , Capital Outlay 399, ,327 Contracted Instructional Services 0091 Between Public Schools 304, , Payments to Shared Service Arrangements 163, , Other Intergovernmental Charges 22, , Total Expenditures 3,514, , ,924 4,178,455 Excess (Deficiency) of Revenues Over (Under) 1100 Expenditures (542,544) (121,831) (30,009) (694,384) Other Financing Sources and (Uses): 7911 Capital-Related Debt Issued -- 2,135, ,135, Sale of Real or Personal Property 3, , Issuance of Capital Leases 55, , Issuance of Non-Current Debt 314, , Transfers In ,000 35, Premium or Discount on Issuance of Bonds , , Transfers Out (35,000) (35,000) 8949 Other Uses -- (2,211,154) -- (2,211,154) 7080 Total Other Financing Sources and (Uses) 338, ,279 35, ,389 SPECIAL ITEM: 7918 Special Item (Resource) 7, , Net Change in Fund Balances (196,675) (6,552) 4,991 (198,236) 0100 Fund Balances - Beginning 859, ,698 17,630 1,007, Fund Balances - Ending $ 662,354 $ 124,146 $ 22,621 $ 809,121 The accompanying notes are an integral part of this statement. 14

18 RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES EXHIBIT C-3 Net change in fund balances - total governmental funds $ (198,236) Amounts reported for governmental activities in the Statement of Activities ("SOA") are different because: Capital outlays are not reported as expenses in the SOA. 454,539 The depreciation of capital assets used in governmental activities is not reported in the funds. (162,615) The gain or loss on the sale of capital assets is not reported in the funds. 3,777 All proceeds from the sale of capital assets are reported in the funds but not in the SOA. (3,777) Certain property tax revenues are deferred in the funds. This is the change in these amounts this year. 46,560 Repayment of bond principal is an expenditure in the funds but is not an expense in the SOA. 2,345,000 Repayment of loan principal is an expenditure in the funds but is not an expense in the SOA. 28,362 Bond issuance costs and similar items are amortized in the SOA but not in the funds. 60,000 (Increase) decrease in accrued interest from beginning of period to end of period. (5,787) Proceeds of notes do not provide revenue in the SOA, but are reported as current resources in the funds. (314,122) Proceeds of bonds do not provide revenue in the SOA, but are reported as current resources in the funds. (2,135,000) Bond premiums are reported in the funds but not in the SOA. (186,647) Proceeds of leases do not provide revenue in the SOA, but are reported as current resources in the funds. (55,212) Change in net assets of governmental activities - Statement of Activities $ (123,158) The accompanying notes are an integral part of this statement. 15

19 STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS AUGUST 31, 2012 Agency Fund EXHIBIT E-1 Data Student Control Activity Codes Fund ASSETS: 1110 Cash and Cash Equivalents $ 7, Total Assets 7,360 LIABILITIES: Current Liabilities: 2190 Due to Student Groups 7, Total Liabilities 7,360 NET ASSETS 3000 Total Net Assets $ -- The accompanying notes are an integral part of this statement. 16

20 This page is left blank intentionally.

21 NOTES TO THE FINANCIAL STATEMENTS A. Summary of Significant Accounting Policies The basic financial statements of Slidell Independent School District (the "District") have been prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP") applicable to governmental units in conjunction with the Texas Education Agency's Financial Accountability System Resource Guide ("Resource Guide"). The Governmental Accounting Standards Board ("GASB") is the accepted standard setting body for establishing governmental accounting and financial reporting principles. 1. Reporting Entity The Board of School Trustees ("Board"), a seven-member group, has governance responsibilities over all activities related to public elementary and secondary education within the jurisdiction of the District. The Board is elected by the public and has the exclusive power and duty to govern and oversee the management of the public schools of the District. All powers and duties not specifically delegated by statute to the Texas Education Agency ("TEA") or to the State Board of Education are reserved for the Board, and the TEA may not substitute its judgment for the lawful exercise of those powers and duties by the Board. The District receives funding from local, state and federal government sources and must comply with the requirements of those funding entities. However, the District is not included in any other governmental "reporting entity" as defined by the GASB in its Statement No. 14, "The Financial Reporting Entity" and there are no component units included within the reporting entity. 2. Basis of Presentation, Basis of Accounting a. Basis of Presentation Government-wide Financial Statements: The statement of net assets and the statement of activities include the financial activities of the overall government, except for fiduciary activities. 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 District'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 District does not allocate indirect expenses in the statement of activities. Program revenues include (a) fees, fines, and charges paid by the recipients of goods or services offered by the programs 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 District's funds, with separate statements presented for each fund category. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column. All remaining governmental funds are aggregated and reported as nonmajor funds. The District reports the following major governmental funds: General Fund: This is the District's primary operating fund. It accounts for all financial resources of the District except those required to be accounted for in another fund. Debt Service Fund: This is the District's fund that accounts for resources accumulated and payments made for principal and interest on long-term general obligation debt of governmental funds. In addition, the District reports the following fund types: Agency Funds: These funds are used to report student activity funds and other resources held in a purely custodial capacity (assets equal liabilities). Agency funds typically involve only the receipt, temporary investment, and 17

22 NOTES TO THE FINANCIAL STATEMENTS remittance of fiduciary resources to individuals, private organizations, or other governments. Fiduciary funds are reported in the fiduciary fund financial statements. However, because their assets are held in a trustee or agent capacity and are therefore not available to support District programs, these funds are not included in the government-wide statements. b. Measurement Focus, Basis of Accounting Government-wide and Fiduciary Fund Financial Statements: These financial statements are reported using the economic resources measurement focus. They are reported using the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Nonexchange transactions, in which the District 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 property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from grants, entitlements, and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied. Governmental Fund Financial Statements: Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Under this method, revenues are recognized when measurable and available. The District does not consider tax revenues collected after its year-end to be available in the current period. Revenues from local sources consist primarily of property taxes. Property tax revenues and revenues received from the State are recognized under the susceptible-to-accrual concept. Miscellaneous revenues are recorded as revenue when received in cash because they are generally not measurable until actually received. Investment earnings are recorded as earned, since they are both measurable and available. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt, claims and judgments, and compensated absences, which are recognized as expenditures to the extent they have matured. General capital asset acquisitions are reported as expenditures in governmental funds. Proceeds of general long-term debt and acquisitions under capital leases are reported as other financing sources. When the District incurs an expenditure or expense for which both restricted and unrestricted resources may be used, it is the District's policy to use restricted resources first, then unrestricted resources. 3. Financial Statement Amounts a. Property Taxes Property taxes are levied by October 1 on the assessed value listed as of the prior January 1 for all real and business personal property in conformity with Subtitle E, Texas Property Tax Code. Taxes are due on receipt of the tax bill and are delinquent if not paid before February 1 of the year following the year in which imposed. On January 1 of each year, a tax lien attaches to property to secure the payment of all taxes, penalties, and interest ultimately imposed. Property tax revenues are considered available when they become due or past due and receivable within the current period. Allowances for uncollectible tax receivables within the General and Debt Service Funds are based upon historical experience in collecting property taxes. Uncollectible personal property taxes are periodically reviewed and written off, but the District is prohibited from writing off real property taxes without specific statutory authority from the Texas Legislature. The balance of allowance for uncollectible tax receivable at August 31, 2012 was $146,389 in the General Fund and $15,778 in the Debt Service Fund. b. Inventories and Prepaid Items The District records purchases of supplies as expenditures, utilizing the purchase method of accounting for inventory in accordance with the Resource Guide. 18

23 NOTES TO THE FINANCIAL STATEMENTS Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as deferred expenditures. c. Capital Assets Purchased or constructed capital assets are reported at cost or estimated historical cost. Donated fixed assets are recorded at their estimated fair value at the date of the donation. The cost of normal maintenance and repairs that do not add to the value of the asset or materially extend assets' lives are not capitalized. A capitalization threshold of $5,000 is used. Capital assets are being depreciated using the straight-line method over the following estimated useful lives: Asset Class Estimated Useful Lives Building and Improvements Equipment 5-10 d. Receivable and Payable Balances The District believes that sufficient detail of receivable and payable balances is provided in the financial statements to avoid the obscuring of significant components by aggregation. Therefore, no disclosure is provided which disaggregates those balances. There are no significant receivables which are not scheduled for collection within one year of year end. e. Interfund Activity Interfund activity results from loans, services provided, reimbursements or transfers between funds. Loans are reported as interfund receivables and payables as appropriate and are subject to elimination upon consolidation. Services provided, deemed to be at market or near market rates, are treated as revenues and expenditures or expenses. Reimbursements occur when one fund incurs a cost, charges the appropriate benefiting fund and reduces its related cost as a reimbursement. All other interfund transactions are treated as transfers. Transfers In and Transfers Out are netted and presented as a single "Transfers" line on the government-wide statement of activities. Similarly, interfund receivables and payables are netted and presented as a single "Internal Balances" line of the government-wide statement of net assets. f. Use of Estimates The preparation of financial statements in conformity with GAAP requires the use of management's estimates. g. Data Control Codes Data Control Codes appear in the rows and above the columns of certain financial statements. The TEA requires the display of these codes in the financial statements filed with TEA in order to insure accuracy in building a statewide database for policy development and funding plans. h. Fund Balances - Governmental Funds Fund balances of the governmental funds are classified as follows: Nonspendable Fund Balance - represents amounts that cannot be spent because they are either not in spendable form (such as inventory or prepaid insurance) or legally required to remain intact (such as notes receivable or principal of a permanent fund). 19

24 NOTES TO THE FINANCIAL STATEMENTS Restricted Fund Balance - represents amounts that are constrained by external parties, constitutional provisions or enabling legislation. Committed Fund Balance - represents amounts that can only be used for a specific purpose because of a formal action by the District's governing board. Committed amounts cannot be used for any other purpose unless the governing board removes those constraints by taking the same type of formal action. Committed fund balance amounts may be used for other purposes with appropriate due process by the District. Commitments are typically done through adoption and amendment of the budget. Committed fund balance amounts differ from restricted balances in that the constraints on their use do not come from outside parties, constitutional provisions, or enabling legislation. Assigned Fund Balance - represents amounts which the District intends to use for a specific purpose, but that do not meet the criteria to be classified as restricted or committed. Intent may be stipulated by the governing board or by an official or body to which the governing board delegates the authority. Specific amounts that are not restricted or committed in a special revenue, capital projects, debt service or permanent fund are assigned for purposes in accordance with the nature of their fund type or the fund's primary purpose. Assignments within the general fund conveys that the intended use of those amounts is for a specific purpose that is narrower than the general purposes of the District itself. Unassigned Fund Balance - represents amounts which are unconstrained in that they may be spent for any purpose. Only the general fund reports a positive unassigned fund balance. Other governmental funds might report a negative balance in this classification because of overspending for specific purposes for which amounts had been restricted, committed or assigned. When an expenditure is incurred for a purpose for which both restricted and unrestricted fund balance is available, the District considers restricted funds to have been spent first. When an expenditure is incurred for which committed, assigned, or unassigned fund balances are available, the District considers amounts to have been spent first out of committed funds, then assigned funds, and finally unassigned funds. By a majority vote in a scheduled meeting the Board of Trustees may commit fund balances and it may modify or rescind commitments. The Board may also delegate authority to persons or parties to assign fund balances in specific circumstances or funds. B. Compliance and Accountability 1. Finance-Related Legal and Contractual Provisions In accordance with GASB Statement No. 38, "Certain Financial Statement Note Disclosures," violations of finance related legal and contractual provisions, if any, are reported below, along with actions taken to address such violations: Violation None reported Action Taken Not applicable 2. Deficit Fund Balance or Fund Net Assets of Individual Funds Following are funds having deficit fund balances or fund net assets at year end, if any, along with remarks which address such deficits: Deficit Fund Name Amount Remarks None reported Not applicable Not applicable 20

25 NOTES TO THE FINANCIAL STATEMENTS C. Deposits and Investments The District's funds are required to be deposited and invested under the terms of a depository contract. The depository bank deposits for safekeeping and trust with the District's agent bank approved pledged securities in an amount sufficient to protect District funds on a day-to-day basis during the period of the contract. The pledge of approved securities is waived only to the extent of the depository bank's dollar amount of Federal Deposit Insurance Corporation ("FDIC") insurance. 1. Cash Deposits: At August 31, 2012, the carrying amount of the District's governmental and fiduciary deposits (cash, certificates of deposit, and interest-bearing savings accounts included in temporary investments) was $879,469 and the bank balance was $924,385 respectively. The District's cash deposits at August 31, 2012 were entirely covered by FDIC insurance or by pledged collateral held by the District's agent bank in the District's name. 2. Investments: The District is required by Government Code Chapter 2256, The Public Funds Investment Act, to adopt, implement, and publicize an investment policy. That policy must address the following areas: (1) safety of principal and liquidity, (2) portfolio diversification, (3) allowable investments, (4) acceptable risk levels, (5) expected rates of return, (6) maximum allowable stated maturity of portfolio investments, (7) maximum average dollar-weighted maturity allowed based on the stated maturity date for the portfolio, (8) investment staff quality and capabilities, and (9) bid solicitation preferences for certificates of deposit. The Public Funds Investment Act ("Act") requires an annual audit of investment practices. Audit procedures in this area conducted as a part of the audit of the basic financial statements disclosed that in the areas of investment practices, management reports and establishment of appropriate policies, the District adhered to the requirements of the Act. Additionally, investment practices of the District were in accordance with local policies. The Act determines the types of investments which are allowable for the District. These include, with certain restrictions, 1) obligations of the U.S. Treasury, U.S. agencies, and the State of Texas, 2) certificates of deposit, 3) certain municipal securities, 4) securities lending program, 5) repurchase agreements, 6) bankers acceptances, 7) mutual funds, 8) investment pools, 9) guaranteed investment contracts, and 10) commercial paper. The District's investments at August 31, 2012 are shown below. Investment or Investment Type Maturity Fair Value Tex Pool N/A $ 6,664 Total Investments $ 6, Analysis of Specific Deposit and Investment Risks GASB Statement No. 40 requires a determination as to whether the District was exposed to the following specific investment risks at year end and if so, the reporting of certain related disclosures: a. Credit Risk Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The ratings of securities by nationally recognized rating agencies are designed to give an indication of credit risk. 21