PLACENTIA-YORBA LINDA UNIFIED SCHOOL DISTRICT MEASURE A 2008 GENERAL OBLIGATION BONDS AUDIT REPORT JUNE 30, 2012

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1 MEASURE A 2008 GENERAL OBLIGATION BONDS AUDIT REPORT

2 MEASURE A 2008 GENERAL OBLIGATION BONDS FINANCIAL AUDIT

3 TABLE OF CONTENTS FINANCIAL SECTION Independent Auditors' Report 1 Building Fund (Measure A) Balance Sheet 2 Statement of Revenues, Expenditures, and Changes in Fund Balance 3 Notes to Financial Statements 4 SUPPLEMENTARY INFORMATION Budgetary Comparison Schedule 10 Summary of Expenditures by Project 11 Note to Supplementary Information 15 INDEPENDENT AUDITORS' REPORT 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 17 SCHEDULE OF FINDINGS AND QUESTIONED COSTS Financial Statement Findings 20 Summary Schedule of Prior Audit Findings 21

4 Vavrinek, Trine, Day & Co., LLP Certified Public Accountants VALUE THE DIFFERENCE INDEPENDENT AUDITORS' REPORT Governing Board and Citizens' Oversight Committee Placentia-Yorba Linda Unified School District Placentia, California We have audited the accompanying financial statements of the Placentia-Yorba Linda Unified School District (the District) Building Fund (Measure A) as of and for the year ended June 30, 2012, as listed in the table of contents. These financial statements are the responsibility of the District's management. Our responsibility is to express an opinion 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 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 opinion. As discussed in Note 1, the financial statements present only the Building Fund specific to Measure A and are not intended to present fairly the financial position and results of operations of the Placentia-Yorba Linda Unified School District in conformity with accounting principles generally accepted in the United States of America. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Building Fund (Measure A) of the Placentia-Yorba Linda Unified School District as of June 30, 2012, and the results of its operations 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 22, 2013, on our consideration of the District Building Fund's (Measure A) internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. Rancho Cucamonga, California January 22, Aspen Street Rancho Cucamonga, CA Tel: Fax: FRESNO LAGUNA HILLS PALO ALTO PLEASANTON RANCHO CUCAMONGA riverside Sacramento

5 BALANCE SHEET ASSETS Deposits and investments $ 30,644,381 Accounts receivable 11,943 Total Assets $ 30,656,324 LIABILITIES AND FUND BALANCE Liabilities Accounts payable$ 3,188,567 Due to other funds 499 Total Liabilities 3,189,066 Fund Balance Restricted 27,467,258 Total Liabilities and Fund Balance $ 30,656,324 The accompanying notes are an integral part of these financial statements. 2

6 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE FOR THE YEAR ENDED REVENUES Local income Interest income $ 251,458 Total Revenues 251,458 EXPENDITURES Facility acquisition and construction Salaries and benefits 490,949 Supplies Materials and supplies 887,653 Noncapitalized equipment 571,566 Services Rental of buildings and equipment 24,674 Contracted services 62,786 Capital outlay Site construction costs 859,834 Surveys/preliminary tests 49,052 Interim housing 889,110 Other planning costs 56,440 Main building contractor 23,892,787 Construction management 2,943,718 Construction inspections 636,037 Labor compliance 94,194 Architects fees 1,163,555 Plan check fees 75,248 Equipment 646,830 Total Expenditures 33,344,433 DEFICIENCY OF REVENUES OVER EXPENDITURES (33,092,975) Other Financing Uses Transfers out (59,526) NET CHANGE IN FUND BALANCE (33,152,501) FUND BALANCE - BEGINNING 60,619,759 FUND BALANCE - ENDING $ 27,467,258 The accompanying notes are an integral part of these financial statements. 3

7 NOTES TO FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accounting policies of the Placentia-Yorba Linda Unified School District (the District) Building Fund (Measure A) conform to accounting principles generally accepted in the United States of America as prescribed by the Governmental Accounting Standards Board (GASB) and the American Institute of Certified Public Accountants. The Placentia-Yorba Linda Unified School District Building Fund accounts for financial transactions in accordance with the policies and procedures of the California School Accounting Manual. Financial Reporting Entity The financial statements include only the Building Fund of the Placentia-Yorba Linda Unified School District used to account for Measure A projects. This Fund was established to account for the expenditures of general obligation bonds issued under the General Obligation Bonds Election of These financial statements are not intended to present fairly the financial position and results of operations of the Placentia-Yorba Linda Unified School District in compliance with accounting principles generally accepted in the United States of America. Fund Accounting The operations of the Building Fund are accounted for in a separate set of self-balancing accounts that comprise its assets, liabilities, fund balance, revenues, and expenditures. Resources are allocated to and accounted for in the fund based upon the purpose for which they are to be spent and the means by which spending activities are controlled. Basis of Accounting The Building Fund is accounted for using a flow of current financial resources measurement focus and the modified accrual basis of accounting. With this measurement focus, only current assets and current liabilities generally are included on the balance sheet. The statement of revenues, expenditures, and changes in fund balance reports on the sources (revenues and other financing sources) and uses (expenditures and other financing uses) of current financial resources. Budgets and Budgetary Accounting Annual budgets are adopted on a basis consistent with accounting principles generally accepted in the United States of America for all governmental funds. The District's governing board adopts an operating budget no later than July 1 in accordance with State law. A public hearing must be conducted to receive comments prior to adoption. The District's governing board satisfied these requirements. The Board revises this budget during the year to give consideration to unanticipated revenue and expenditures primarily resulting from events unknown at the time of budget adoption. The District employs budget control by minor object and by individual appropriation accounts. Expenditures cannot legally exceed appropriations by major object account. 4

8 NOTES TO FINANCIAL STATEMENTS Encumbrances The District utilizes an encumbrance accounting system under which purchase orders, contracts and other commitments for the expenditure of monies are recorded in order to reserve that portion of the applicable appropriation. Encumbrances are liquidated when the commitments are paid and all outstanding encumbrances are liquidated at June 30 since they do not constitute expenditures or liabilities. Fund Balance - Building Fund As of June 30, 2012, the fund balance of the Building Fund is classified as follows: Restricted - amounts that can be spent only for specific purposes because of constitutional provisions or enabling legislation or because of constraints that are externally imposed by creditors, grantors, contributors, or the laws or regulations of other governments. Spending Order Policy When an expenditure is incurred for purposes 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, as needed, unless the governing board has provided otherwise in its commitment or assignment actions. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenditures/expenses during the reporting period. Actual results could differ from those estimates. NOTE 2 - INVESTMENTS Policies and Practices The District is authorized under California Government Code to make direct investments in local agency bonds, notes, or warrants within the State: U.S. Treasury instrument; registered State warrants or treasury notes: securities of the U.S. Government, or its agencies; bankers acceptances; commercial paper; certificates of deposit placed with commercial banks and/or savings and loan companies; repurchase or reverse repurchase agreement; medium term corporate notes; shares of beneficial interest issued by diversified management companies, certificates of participation, obligations with first priority security, and collateralized mortgage obligations. 5

9 NOTES TO FINANCIAL STATEMENTS Investment in County Treasury The District is considered to be an involuntary participant in an external investment pool as the District is required to deposit all receipts and collections of monies with their County Treasurer (Education Code Section 41001). The fair value of the District's investment in the pool is reported in the accounting financial statement at amounts based upon the District's pro-rata share of the fairly value provided by the County Treasurer for the entire portfolio (in relation to the amortized cost of that portfolio). The balance available for withdrawal is based on the accounting records maintained by the County Treasurer, which is recorded on the amortized cost basis. General Authorizations Limitations as they relate to interest rate risk, credit risk, and concentration of credit risk are indicated in the schedules below: Maximum Maximum Maximum Authorized Remaining Percentage Investment Investment Type Maturity of Portfolio in One Issuer Local Agency Bonds, Notes, Warrants 5 years None None Registered State Bonds, Notes, Warrants 5 years None None U.S. Treasury Obligations 5 years None None U.S. Agency Securities 5 years None None Banker's Acceptance 180 days 40% 30% Commercial Paper 270 days 25% 10% Negotiable Certificates of Deposit 5 years 30% None Repurchase Agreements 1 year None None Reverse Repurchase Agreements 92 days 20% of base None Medium-Term Corporate Notes 5 years 30% None Mutual Funds N/A 20% 10% Money Market Mutual Funds N/A 20% 10% Mortgage Pass-Through Securities 5 years 20% None County Pooled Investment Funds N/A None None Local Agency Investment Fund (LAIF) N/A None None Joint Powers Authority Pools N/A None None Interest Rate Risk Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value is to changes in market interest rates. The District manages its exposure to interest rate risk by investing in the Orange County Investment Pool. The District maintains a building fund investment of $30,644,381 with the Orange County Investment Pool. The fair value of this investment is approximately $30,681,494 with an average maturity of 347 days. 6

10 NOTES TO FINANCIAL STATEMENTS NOTE 3 - ACCOUNTS RECEIVABLE Accounts receivable at June 30, 2012, consisted of the following: Interest $ 11,943 NOTE 4 - ACCOUNTS PAYABLE Accounts payable at June 30, 2012, consisted of the following: Salaries and benefits $ 29,266 Capital outlay 3,158,263 Other vendor payables $ 1,038 3,188,567 NOTE 5 - INTERFUND TRANSACTIONS Interfund Receivables/Payables (Due To/Due From) The interfund payable balance at June 30, 2012, was due to the following fund: General Fund - for reimbursement of salaries and benefit related costs paid for end of year payroll. $ 499 Operating Transfers Out The Building Fund transferred $59,526 to the General Fund for reimbursement of project costs. 7

11 NOTES TO FINANCIAL STATEMENTS NOTE 6 - COMMITMENTS AND CONTINGENCIES As of June 30, 2012, the Building Fund (Measure A) had the following commitments with respect to unfinished capital projects: Remaining Expected Construction Date of Capital Projects Commitment Completion Modernization El Camino High School - Campus Modernization $ 1,321,025 12/31/12 El Dorado High School - Performing Arts Center 9,592,500 12/31/13 El Dorado High School - Relocatables Village 98,047 12/31/12 El Dorado High School - Tennis Courts and Parking Lot 122,835 12/31/12 Esperanza High School - HVAC 42,149 12/31/12 Rio Vista Elementary - Portables 192,499 12/31/12 Tynes Elementary School - Lunch Shelter 4,380 12/31/12 Valencia High School - HVAC 34,233 12/31/12 Valencia High School - Restrooms 119,555 12/31/12 $ 11,527,223 Litigation The District is not currently a party to any legal proceedings. 8

12 SUPPLEMENTARY INFORMATION 9

13 BUDGETARY COMPARISON SCHEDULE FOR THE YEAR ENDED Variance Favorable Budget Actual (Unfavorable) REVENUES Local income Interest income $ 285,000 $ 251,458 $ (33,542) Total Revenues 285, ,458 (33,542) EXPENDITURES Facility acquisition and construction Salaries and benefits - 490,949 (490,949) Supplies Materials 1,670, , ,566 Noncapitalized equipment 867, , ,538 Services Rental of buildings 24,768 24, Contracted services 68,129 62,786 5,343 Capital outlay Site construction costs 1,446, , ,020 Surveys/preliminary tests 62,823 49,052 13,771 Interim housing 1,520, , ,667 Other planning costs 1,227,101 56,440 1,170,661 Main building contractor 33,526,775 23,892,787 9,633,988 Construction management 5,329,471 2,943,718 2,385,753 Construction inspections 816, , ,387 Labor compliance 120,648 94,194 26,454 Architects fees 2,253,492 1,163,555 1,089,937 Plan check fees 79,243 75,248 3,995 Equipment 667, ,830 20,455 Total Expenditures 49,681,113 33,344,433 16,336,680 DEFICIENCY OF REVENUES OVER EXPENDITURES (49,396,113) (33,092,975) 16,303,138 Other Financing Uses Transfers out (59,526) (59,526) - Net Financing Uses (59,526) (59,526) - NET CHANGE IN FUND BALANCE (49,455,639) (33,152,501) 16,303,138 FUND BALANCE - BEGINNING 60,619,759 60,619,759 - FUND BALANCE - ENDING $ 11,164,120 $ 27,467,258 $ 16,303,138 See accompanying note to supplementary information. 10

14 SUMMARY OF EXPENDITURES BY PROJECT FOR THE YEAR ENDED Site Project Exhibit A Total Measure A Funds Expended FY By Project A - RENOVATE/UPGRADE FACILITIES AS NEEDED TO IMPROVE ACCESS TO COMPUTER TECHNOLOGY AND DIGITAL RESOURCES AT ALL DISTRICT SCHOOLS District Ed Center Network Operations Center Upgrade A $ 925,555 Brookhaven ES Interactive Classrooms A 690 El Camino HS Interactive Classrooms A 19,897 El Dorado HS Interactive Classrooms A 88,190 ESC Interactive Classrooms A (2,200) Esperanza HS Interactive Classrooms A 110,796 George Key ES Interactive Classrooms A 101,610 Golden ES Interactive Classrooms A 49,913 Kraemer MS Interactive Classrooms A 5,180 La Entrada Interactive Classrooms A 24,925 Linda Vista ES Interactive Classrooms A 1,462 Melrose ES Interactive Classrooms A 10,845 Parkview ES Interactive Classrooms A (30) Rio Vista ES Interactive Classrooms A 29,991 Rose Drive ES Interactive Classrooms A 8,684 Valencia HS Interactive Classrooms A 110,829 Van Buren ES Interactive Classrooms A 18,318 Yorba Linda HS Interactive Classrooms A 42,830 Yorba Linda MS Interactive Classrooms A 9,071 Brookhaven ES Computer Lab Modifications A 5,110 Fairmont ES Computer Lab Modifications A 6,449 Glenknoll ES Computer Lab Modifications A 6,202 Glenview ES Computer Lab Modifications A 6,202 Golden ES Computer Lab Modifications A 6,202 Linda Vista ES Computer Lab Modifications A 6,096 Mabel Paine ES Computer Lab Modifications A 6,202 Melrose ES Computer Lab Modifications A 751 Morse ES Computer Lab Modifications A 6,202 Rio Vista ES Computer Lab Modifications A 6,226 Rose Drive ES Computer Lab Modifications A 6,320 Ruby Drive ES Computer Lab Modifications A 6,226 Sierra Vista ES Computer Lab Modifications A 6,202 Topaz ES Computer Lab Modifications A 6,166 Travis Ranch ES Computer Lab Modifications A 14,006 Tynes ES Computer Lab Modifications A 6,202 Van Buren ES Computer Lab Modifications A 6,320 Wagner ES Computer Lab Modifications A 6,202 Woodsboro ES Computer Lab Modifications A 4,125 B - UPGRADE DISTRICT AUDITORIUM AT VALENCIA HIGH SCHOOL WITH HVAC & RESTROOMS Valencia HS Auditorium and Restroom B 416,049 See accompanying note to supplementary information. 11

15 SUMMARY OF EXPENDITURES BY PROJECT (Continued) FOR THE YEAR ENDED Site Project Exhibit A See accompanying note to supplementary information. 12 Total Measure A Funds Expended FY By Project C - RENOVATE STUDENT & STAFF RESTROOMS AT 21 DISTRICT SCHOOLS Bernardo Yorba MS Restrooms in 500 Bldg C $ 2,969 Brookhaven ES Primary & Staff Restrooms C 147,803 Education Service Cntr Restrooms C 48,408 Fairmont ES Restrooms C 283,421 Glenknoll ES Restrooms 300 & 400 Bldgs C 257,675 Glenview ES Entry Security Upgrades & Staff Restroom C & J 167,677 Rio Vista ES 300/600 Restrooms C 801 Ruby Drive ES Staff Restrooms C 25,105 Valencia HS Restrooms in Quad Area C&H 1,083,738 D - UPDATE COMPUTER AND INSTRUCTIONAL TECHNOLOGY AT ALL DISTRICT SCHOOLS El Camino HS Computer Replacement D 10,165 El Dorado HS Computer Replacement D 17,866 Esperanza HS Computer Replacement D 9,802 Valencia HS Computer Replacement D 15,038 Brookhaven ES Interactive Classrooms F&E D 1,596 El Camino HS Interactive Classrooms F&E D 58,334 El Dorado HS Interactive Classrooms F&E D 72,736 Esperanza HS Interactive Classrooms F&E D 116,760 Fairmont ES Interactive Classrooms F&E D 3,812 George Key ES Interactive Classrooms F&E D 20,166 Golden ES Interactive Classrooms F&E D 3,375 Kraemer MS Interactive Classrooms F&E D 5,212 Rio Vista ES Interactive Classrooms F&E D 4,098 Rose Drive ES Interactive Classrooms F&E D 2,049 Valencia HS Interactive Classrooms F&E D 96,601 Van Buren ES Interactive Classrooms F&E D 2,839 Yorba Linds HS Interactive Classrooms F&E D 71,793 Yorba Linda MS Interactive Classrooms F&E D 531 Brookhaven ES Computer Lab Modifications F&E A 997 Bryant Ranch ES Computer Lab Modifications F&E A 997 Fairmont ES Computer Lab Modifications F&E A 997 Glenknoll ES Computer Lab Modifications F&E A 997 Glenview ES Computer Lab Modifications F&E A 997 Golden ES Computer Lab Modifications F&E A 997 Lakeview ES Computer Lab Modifications F&E A 997 Linda Vista ES Computer Lab Modifications F&E A 997 Mabel Paine ES Computer Lab Modifications F&E A 997 Melrose ES Computer Lab Modifications F&E A 997 Morse ES Computer Lab Modifications F&E A 997 Rio Vista ES Computer Lab Modifications F&E A 997 Rose Drive ES Computer Lab Modifications F&E A 997 Ruby Drive ES Computer Lab Modifications F&E A 997 Sierra Vista ES Computer Lab Modifications F&E A 997 Topaz ES Computer Lab Modifications F&E A 997 Travis Ranch ES Computer Lab Modifications F&E A 997

16 SUMMARY OF EXPENDITURES BY PROJECT (Continued) FOR THE YEAR ENDED Site Project Exhibit A Total Measure A Funds Expended FY By Project D - UPDATE COMPUTER AND INSTRUCTIONAL TECHNOLOGY AT ALL DISTRICT SCHOOLS, Continued Travis Ranch MS Computer Lab Modifications F&E A $ 1,960 Tynes ES Computer Lab Modifications F&E A 997 Van Buren ES Computer Lab Modifications F&E A 997 Wagner ES Computer Lab Modifications F&E A 997 Woodsboro ES Computer Lab Modifications F&E A 997 E - CONSTRUCT POOL FACILITY AT YORBA LINDA HIGH SCHOOL Yorba Linda HS New Pool E 252,853 F - RENOVATE & EXPAND FACILITIES AND CLASSROOM FOR PERFORMING INSTRUCTION AND PERFORMANCE AT ESPERANZA HIGH SCHOOL Esperanza HS Mod 700 Bldg/Band and Vocal F 2,316,444 G - MODERNIZE CLASSROOM AND SUPPORT FACILITIES AS NEEDED AT FAIRMONT, LINDA VISTA, TRAVIS RANCH, RIO VISTA, SIERRA VISTA, TYNES AND WOODSBORO ELEMENTARY SCHOOLS Rio Vista ES 700/800 Bldg Upgrades G 70,433 Travis Ranch ES Upper Level Food Service/Restroom G 200,620 Tynes ES Mod Main Campus/HVAC/Lunch Shelter G 650,406 H - MODERNIZE CLASSROOM AND SUPPORT FACILITIES AS NEEDED AT DISTRICT SCHOOLS El Camino HS Modernization H 3,346,741 El Dorado HS Modernization Art 800 Bldg & Locker Room H 7,313 Esperanza HS Mod Admin/Kitchen/HVAC/700 Bldg/Quad H 2,211,982 Esperanza HS Mod West Campus H 209,388 Kraemer MS Mod Admin/Band/Lckr Rm/HVAC/Entry/PL/IH H 626,268 Travis Ranch MS Mod Main Campus H 90,112 Tuffree MS Mod 300/400/600 Bldgs/Band Rm Door H 227,200 Tuffree MS Mod Locker Room/Restroom H 898,669 Valencia HS Mod Admin/500/HVAC H 1,113,907 Valencia HS Mod Men's Locker Room H 21,802 Valencia HS Mod QuadArea/Food Service/LS H 1,327,876 Yorba Linda HS Modernization H 2,122,445 I - CONSTRUCT MULTI-PURPOSE GYMNASIUM AT El DORADO AND ESPERANZA HIGH SCHOOLS El Dorado HS New Gymnasium I 529,928 Esperanza HS New Gymnasium I 597,346 J - COMPLETE INFRASTRUCTURE UPGRADES AS NEEDED: CLASSROOM LIGHTING, WATER/SEWER/ELECTRICAL, SIDEWALKS, SECURITY FENCING, SITE DRAINAGE, HAZARDOUS MATERIALS REMOVAL AND HANDICAP ACCESS Brookhaven ES MPR Soundwall J 8,334 Bryant Ranch ES Exterior Lighting and Fencing J 14,527 George Key ES Teacher Walls (Golden Classrooms) J 5,972 Wagner ES Pedestrian & Vehicle Improvements J 15,774 K - CONSTRUCT DISTRICT MUSIC HALL AT El DORADO HIGH SCHOOL El Dorado HS Performing Arts K 4,423,994 See accompanying note to supplementary information. 13

17 SUMMARY OF EXPENDITURES BY PROJECT (Continued) FOR THE YEAR ENDED Site Project Exhibit A Total Measure A Funds Expended FY By Project L - INSTALL SHADE STRUCTURES AT GLENVIEW, LAKEVIEW, MABEL PAINE, ROSE DRIVE, TYNES, WAGNER ELEMENTARY SCHOOLS Glenview ES New Shade Structure L $ 10,899 Mabel Paine ES New Lunch Shelter & MPR Expansion L&P 95,984 Rose Drive ES New Lunch Shelter & MPR Expansion L&P 47,503 Wagner ES Bus Loading Shade Shelter L 49,046 M - RENOVATE BRADFORD STADIUM, RENOVATE AND EQUIP PLAYFIELDS AS NEEDED FOR STUDENT SAFETY El Dorado HS Field Upgrades M 1,805 Esperanza HS Field Upgrades M 132,463 Valencia HS Bradford Stadium Field and Lights M 9,912 Valencia HS Bradford Stadium Facilities Improvements M 1,080,744 O - CONSTRUCT/RENOVATE AND EQUIP VOCATIONAL/CAREER EDUCATION CENTERS AT DISTRICT HIGH SCHOOLS AND MIDDLE SCHOOLS El Dorado HS Digital Media Art Career Tech O 28,780 El Dorado HS Commercial Cabinetry Career Tech O 21,417 P - EXPAND MULTI-PURPOSE ROOMS AT MABEL PAINE, RIO VISTA, ROSE DRIVE AND RUBY DRIVE ELEMENTARY SCHOOLS Ruby Drive ES Parking Lot/MPR Expansion P&J 197,947 Q - CONSTRUCT/UPGRADE LIBRARY/MEDIA CENTERS AT VAN BUREN AND WAGNER ELEMENTARY SCHOOLS AND KRAEMER MIDDLE SCHOOL Kraemer MS New Library/Media Center Q 776,077 Van Buren ES New 8 CR Wing/Library Media Center Q&R 410,150 Wagner ES Modernize Library/Media Center Q 5,128 R - CONSTRUCT NEW PERMANENT CLASSROOMS TO REPLACE AGING PORTABLES AT RIO VISTA, VAN BUREN ELEMENTARY SCHOOLS AND ESPERANZA AND VALENCIA HIGH SCHOOLS Rio Vista ES New Perm (8) CR Wing/MPR Expansion R 412,395 Rio Vista ES Replace Leased Relos R 1,228,519 Valencia HS New Permanent (17) CR Wing R 179,559 Valencia HS New CR Wing (9 of 12) R 1,086,429 S - CONSTRUCT DISTRICT STADIUM AT YORBA LINDA HIGH SCHOOL Yorba Linda HS New Stadium S 378,182 T - REPLACE AGING HVAC UNITS AT GEORGE KEY, GOLDEN, MABEL PAINE, TYNES AND WOODSBORO ELEMENTARY SCHOOLS, KRAEMER AND TUFFREE MIDDLE SCHOOLS AND EL CAMINO HIGH SCHOOL George Key ES HVAC/IH T 1,248,006 Mabel Paine ES HVAC T 28,264 Total County/Admin Costs 41,133 Measure A Bond Expenditures FY Total $ 33,403,959 See accompanying note to supplementary information. 14

18 NOTE TO SUPPLEMENTARY INFORMATION NOTE 1 - PURPOSE OF SCHEDULES Budgetary Comparison Schedule Budget and Actual This schedule provides a comparison of budgeted expenditures to actual expenditures. The amount reported as budget amounts reflects the approved budget amount. Summary of Expenditures by Project This schedule provides a complete list of expenditures by project for the year ended June 30,

19 INDEPENDENT AUDITORS' REPORT 16

20 Vavrinek, Trine, Day & Co., LLP Certified Public Accountants VALUE THE DIFFERENCE INDEPENDENT AUDITORS' REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Governing Board and Citizens' Oversight Committee Placentia-Yorba Linda Unified School District Placentia, California We have audited the accompanying financial statements of the Placentia-Yorba Linda Unified School District (the District) Building Fund (Measure A), as of and for the year ended June 30, 2012, and have issued our report thereon dated January 22, 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. As discussed in Note 1, the financial statements present only the Building Fund specific to Measure A and are not intended to present fairly the financial position and results of operations of the Placentia-Yorba Linda Unified School District in conformity with accounting principles generally accepted in the United States of America. Internal Control Over Financial Reporting Management of the District Building Fund's (Measure A) is responsible for establishing and maintaining effective internal control over financial reporting. In planning and performing our audit, we considered the District Building Fund's (Measure A) internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the District Building Fund's (Measure A) internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the District Building Fund's (Measure A) internal control over financial reporting. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over financial reporting that might be deficiencies, significant deficiencies, or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined previously Aspen Street Rancho Cucamonga, CA Tel: Fax: FRESNO LAGUNA HILLS PALO ALTO PLEASANTON RANCHO CUCAMONGA riverside Sacramento

21 Compliance and Other Matters As part of obtaining reasonable assurance about whether the District Building Fund's (Measure A) financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. This report is intended solely for the information and use of the governing board, management, and the Measure A Citizens' Oversight Committee, and is not intended to be, and should not be used by anyone other than these specified parties. Rancho Cucamonga, California January 22,

22 SCHEDULE OF FINDINGS AND QUESTIONED COSTS 19

23 FINANCIAL STATEMENT FINDINGS None reported. 20

24 SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS None reported. 21

25 MEASURE A 2008 GENERAL OBLIGATION BONDS PERFORMANCE AUDIT

26 TABLE OF CONTENTS Independent Auditors' Report on Performance 1 Authority for Issuance 2 Purpose of Issuance 2 Authority for the Audit 2 Objectives of the Audit 3 Scope of the Audit 3 Procedures Performed 3 Conclusion 4 Schedule of Findings and Questioned Costs 5 Summary Schedule of Prior Audit Findings 6

27 Vavrinek, Trine, Day & Co., LLP Certified Public Accountants VALUE THE DIFFERENCE INDEPENDENT AUDITORS' REPORT ON PERFORMANCE Governing Board and Citizens' Oversight Committee Placentia-Yorba Linda Unified School District Placentia, California We were engaged to conduct a performance audit of the Placentia-Yorba Linda Unified School District (the District) Measure A General Obligation Bond funds for the year ended June 30, We conducted this performance audit in accordance with the standards applicable to performance 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 sufficient, appropriate evidence to provide a reasonable basis for our conclusion based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our conclusions based on our audit objectives. Our audit was limited to the objectives listed within the report which includes determining the District's compliance with the performance requirements as referred to in Proposition 39 and outlined in Article XIIIA, Section 1(b)(3)(C) of the California Constitution. Management is responsible for the District's compliance with those requirements. In planning and performing our performance audit, we obtained an understanding of the District's internal control in order to determine if the internal controls were adequate to help ensure the District's compliance with the requirements of Proposition 39 and outlined in Article XIIIA, Section 1(b)(3)(C) of the California Constitution. Accordingly, we do not express an opinion on the effectiveness of the District's internal control. The results of our tests indicated that the District expended Measure A General Obligation Bond funds only for the specific projects approved by the voters, in accordance with Proposition 39 and outlined in Article XIIIA, Section 1(b)(3)(C) of the California Constitution. Rancho Cucamonga, California January 22, Aspen Street Rancho Cucamonga, CA Tel: Fax: FRESNO LAGUNA HILLS PALO ALTO PLEASANTON RANCHO CUCAMONGA riverside Sacramento

28 AUTHORITY FOR ISSUANCE The Measure A General Obligation Bonds are issued pursuant to the Constitution and laws of the State of California (the State), including the provisions of Chapters 1 and 1.5 of Part 10 of the California Education Code, and other applicable provisions of law. The Bonds are authorized to be issued by a resolution adopted by the Board of Supervisors of the County on April 22, 2008 (the Resolution), pursuant to a request of the District made by a resolution adopted by the Board of Education of the District in August 28, The District received authorization at an election held on February 5, 2008, to issue bonds of the District in an aggregate principal amount not to exceed $200,000,000 to finance specific construction and renovation projects approved by eligible voters within the District. The proposition required approval by at least 55 percent of the votes cast by eligible voters within the District (the Authorization). The Bonds represent the first through fifth series of the authorized bonds to be issued under the Authorization. PURPOSE OF ISSUANCE Pursuant to the Authorization, the proceeds of the Bonds will be used to improve school facilities, upgrade technology, and construct additional classroom and student performance facilities. Specifically, to complete the projects listed in the information given to the voters (the "Bond Project List"). The Bond Project List includes various improvements at all District school sites, the construction of a new school facilities, and the acquisition of certain furnishings and equipment. AUTHORITY FOR THE AUDIT On November 7, 2000, California voters approved Proposition 39, the Smaller Classes, Safer Schools and Financial Accountability Act. Proposition 39 amended portions of the California Constitution to provide for the issuance of general obligation bonds by school districts, community college districts, or county offices of education, "for the construction, reconstruction, rehabilitation, or replacement of school facilities, including the furnishing and equipping of school facilities, or the acquisition or lease of rental property for school facilities", upon approval by 55 percent of the electorate. In addition to reducing the approval threshold from two-thirds to 55 percent, Proposition 39 and the enacting legislation (AB 1908 and AB 2659) requires the following accountability measures as codified in Education Code Sections : 1. Requires that the proceeds from the sale of the bonds be used only for the purposes specified in Article XIIIA, Section 1(b)(3)(C) of the California Constitution, and not for any other purpose, including teacher and administrator salaries and other school operating expenses. 2. The school district must list the specific school facilities projects to be funded in the ballot measure, and must certify that the governing board has evaluated safety, class size reduction and information technology needs in developing the project list. 3. Requires the school district to appoint a Citizens' Oversight Committee. 4. Requires the school district to conduct an annual independent financial audit and performance audit in accordance with the Government Auditing Standards issued by the Comptroller General of the United States of the bond proceeds until all of the proceeds have been expended. 2

29 5. Requires the school district to conduct an annual independent performance audit to ensure that the funds have been expended only on the specific projects listed. OBJECTIVES OF THE AUDIT 1. Determine whether expenditures charged to the Building Fund have been made in accordance with the bond project list approved by the voters through the approval of Measure A. 2. Determine whether salary transactions, charged to the Building Fund were in support of Measure A and not for District general administration or operations. SCOPE OF THE AUDIT The scope of our performance audit covered the period of July 1, 2011 to June 30, The population of expenditures tested included all object and project codes associated with the bond projects. The propriety of expenditures for capital projects and maintenance projects funded through other State or local funding sources, other than proceeds of the bonds, were not included within the scope of the audit as expenditures from other State or local funding sources are not referred to in Proposition 39 and as outlined in Article XIIIA, Section 1(b)(3)(C). Expenditures incurred subsequent to June 30, 2012 were not reviewed or included within the scope of our audit or in this report. PROCEDURES PERFORMED We obtained the general ledger and the project expenditure reports prepared by the District for the fiscal year ended June 30, 2012 for the Building Fund (Measure A). Within the fiscal year audited, we obtained the actual invoices and other supporting documentation for a sample of expenditures to ensure compliance with the requirements of Article XIIIA, Section 1(b)(3)(C) of the California Constitution and Measure A as to the approved bond projects list. We performed the following procedures: 1. We selected a sample of expenditures for the period starting July 1, 2011 and ending June 30, 2012, and reviewed supporting documentation to ensure that such funds were properly expended on the specific projects listed in the ballot text. 2. Our sample included 65 transactions totaling $13,474,324. This represents 40 percent of the total expenditures of $33,403,959, including expenditures related to transferred funds. 3. Based on the testing performed, we verified that funds from the Building Fund (Measure A) were expended for the construction, renovation, furnishing and equipping of District facilities constituting authorized bond projects. In addition, we verified that funds held in the Building Fund (Measure A) were used for salaries of administrators only to the extent they perform administrative oversight work on construction projects as allowable per Opinion issued on November 9, 2004, by the State of California Attorney General. 3

30 We conducted various interviews with District personnel regarding the method of allocating administrative costs to each project. We analyzed the relevant documents and determined the majority of the administrative costs are related to the construction management firms utilized by the District for current Measure A, Election of 2008, General Obligation Bond projects. In addition, we noted the District allocated a small portion of District employees' salaries involved with Measure A, Election 2008, General Obligation Bond projects. The District provided a Budget-to-Actual schedule (as shown below) showing the percentage of District employee salaries paid with Measure A, Election of 2008, General Obligation Bonds. The budget portion was determined at the beginning of each year based on prior year figures and anticipated employee time contributions to Measure A, Election of 2008, General Obligation Bond projects. The actual amounts were calculated throughout the year using time surveys. On a quarterly basis, District employees involved with Measure A, Election of 2008, General Obligation Bond projects were required to complete time surveys identifying the number of hours per day spent on Measure A, Election of 2008, General Obligation Bond activities. We selected a sample of time surveys to review and verify the appropriateness of the final calculation for actual time reported. Position Actual Budgeted Actual Budgeted Director of Facilities and Planning 82% 0% 0% 0% Director of Maintenance and Facilities 0% 75% 77% 78% Director of Construction 88% 0% 0% 0% Director of Purchasing/Stores 44% 35% 26% 0% Buyer/Project Specialist 86% 85% 82% 0% Buyer 71% 70% 44% 25% Director of Technology 53% 0% 32% 25% Assistant Director of Technology 64% 30% 43% 0% Facilities Staff 0% 0% 25% 25% Secretary (Technology Department) 51% 0% 30% 10% Senior Account Clerk Construction 85% 100% 88% 50% Accounting Technician 32% 25% 23% 25% CONCLUSION The results of our tests indicated that, in all significant respects, the Placentia-Yorba Linda Unified School District has properly accounted for the expenditures held in the Building Fund (Measure A) and that such expenditures were made for authorized Bond projects. Further, it was noted that funds held in the Building Fund (Measure A), and expended by the District, were used for salaries of administrators only to the extent they perform administrative oversight work on construction projects as allowable per Opinion issued on November 9, 2004, by the State of California Attorney General. 4

31 SCHEDULE OF FINDINGS AND QUESTIONED COSTS None reported. 5

32 SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS None reported. 6