FORESTHILL UNION SCHOOL DISTRICT COUNTY OF PLACER FORESTHILL, CALIFORNIA

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1 COUNTY OF PLACER FORESTHILL, CALIFORNIA FINANCIAL STATEMENTS WITH INDEPENDENT AUDITOR'S REPORT

2 TABLE OF CONTENTS FINANCIAL SECTION PAGE INDEPENDENT AUDITOR'S REPORT 1 MANAGEMENT'S DISCUSSION AND ANALYSIS 4 BASIC FINANCIAL STATEMENTS: Government-wide Financial Statements: Statement of Net Position 11 Statement of Activities 12 Fund Financial Statements: Balance Sheets Governmental Funds 13 Reconciliation of the Governmental Funds Balance Sheets to the Statement of Net Position 14 Statements of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds 15 Reconciliation of the Governmental Funds Statements of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities 16 Statements of Fiduciary Net Position Fiduciary Funds 17 Statement of Changes in Fiduciary Net Position Fiduciary Funds 18 Notes to the Financial Statements 19 REQUIRED SUPPLEMENTARY INFORMATION Schedule of Funding Progress for Other Postemployment Benefits 40 Budgetary Comparison Schedule: General Fund 41 Schedule of District s Proportionate Share of the Net Pension Liability: CalSTRS Plan 42 CalPERS Plan 43 Schedule of District s Contributions: CalSTRS Plan 44 CalPERS Plan 45

3 TABLE OF CONTENTS SUPPLEMENTARY INFORMATION SECTION PAGE Organization 46 Schedule of Average Daily Attendance 47 Schedule of Charter Schools 48 Schedule of Instructional Time 49 Schedule of Financial Trends and Analysis 50 Reconciliation of Annual Financial and Budget Report (Unaudited Actuals) with Audited Fund Financial Statements 51 Notes to Supplementary Information 52 OTHER INDEPENDENT AUDITOR'S REPORTS 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 53 Report on Compliance with Applicable Requirements in Accordance with Guide for Annual Audits of K-12 Local Education Agencies and State Compliance Reporting 55 FINDINGS AND RECOMMENDATIONS SECTION Schedule of Audit Findings and Questioned Costs 58 Status of Prior Year Findings and Questioned Costs 60

4 FINANCIAL SECTION

5 INDEPENDENT AUDITOR'S REPORT SM Relax. We got this. Board of Education Foresthill Union School District Foresthill, California Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of the Foresthill Union School District (the District) as of and for the year ended June 30, 2016, and the related notes to the financial statements, which collectively comprise the District s basic financial statements, as listed in the table of contents. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Audit s Responsibility 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; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the Guide for Annual Audits of K-12 Local Education Agencies and State Compliance Reporting, published by the Education Audit Appeals Panel. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions GATEWAY OAKS DRIVE, SUITE 100, SACRAMENTO, CA PARKSHORE DRIVE, SUITE 100, FOLSOM, CA PHONE: FAX: GilbertCPA.com 1

6 Board of Education Foresthill Union School District Page 2 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 the District, as of June 30, 2016, and the respective changes in financial for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the Management s Discussion and Analysis and the Required Supplementary Information section, as listed 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 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. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the District s basic financial statements. The Supplementary Information section, as listed in the Table of Contents, is presented for purposes of additional analysis and as required by the Guide for Annual Audits of K-12 Local Education Agencies and State Compliance Reporting, published by the Education Audit Appeals Panel, and are not a required part of the basic financial statements. The Supplementary Information section is the responsibility of management and was derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such 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 supplementary information is fairly stated, in all material respects, in relation to the basic financial statements as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 14, 2016, on our consideration of the 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 2

7 Board of Education Foresthill Union School District Page 3 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 in considering District s internal control over financial reporting and compliance. GILBERT ASSOCIATES, INC. Sacramento, California December 14,

8 MANAGEMENT S DISCUSSION AND ANALYSIS This section of the Foresthill Union School District s (the District) annual financial report presents a discussion and analysis of the District s financial performance during the fiscal year that ended on June 30, It is to be read in conjunction with the District s financial statements, which immediately follow this section. FINANCIAL HIGHLIGHTS The assets and deferred outflow of resources exceeded the liabilities and deferred inflow of resources of the District at June 30, 2016 by $3,087,605 (net position). Net position increased by $531,539 over the previous fiscal year due to increased Local Control Funding Formula (LCFF) and one-time discretionary funds. Government Accounting Standards Board Statement No. 68 (GASB 68), Accounting and Financial Reporting for Pensions an amendment of GASB Statement No. 27 and GASB Statement No. 71 (GASB 71), Pension Transition for Contributions Made Subsequent to the Measurement Date an amendment of GASB Statement No. 68 (collectively, the Statements) was implemented during the fiscal year ended June 30, The primary objective of the Statements is to improve accounting and financial reporting by state and local governments for pensions by establishing standards for measuring and recognizing liabilities, deferred outflows of resources, deferred inflows of resources, and expenses/expenditures. It requires employers to report a net pension liability for the difference between the present value of projected pension benefits for past service and restricted resources held in trust for the payment of benefits. The Statements identify the methods and assumptions that should be used to project benefit payments, discount projected benefit payments to their actuarial present value, and attribute that present value to periods of employee service. The net pension liability as of June 30, 2016 was $2,859,906. The District s reserve Designated for Economic Uncertainties is about 5.4%. This represents 1.4% over and above the State s required minimum level of 4%. Despite continued declining enrollment, the District provides all students with opportunities to develop full academic potential as well as to understand and value themselves. The District experienced a loss of 7 ADA in 2015/2016. Staff Development funds are spent to ensure the District s curriculum is driven by State standards, which have been extended by teachers in each of the content areas. 4

9 MANAGEMENT S DISCUSSION AND ANALYSIS OVERVIEW OF THE FINANCIAL STATEMENTS This annual report consists of three parts management s discussion and analysis (this section), the basic financial statements, and required supplementary information. The three sections together provide a comprehensive overview of the District. The basic financial statements include two kinds of statements that present different views of the District: The first two statements are government-wide financial statements that provide both short-term and long-term information about the District s overall financial status. The remaining statements are fund financial statements that focus on individual parts of the District, reporting the District s operations in more detail than the government-wide statements. The governmental funds statements tell how basic services like regular and special education were financed in the short-term as well as what remains for future spending. Fiduciary funds statements provide information about the financial relationships in which the District acts solely as a trustee or agent for the benefit of others to whom the resources belong. Government-wide Statements The government-wide statements report information about the District as a whole, using accounting methods similar to those used by private-sector companies. The statement of net position 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 statements report the District s net position and how it has changed. Net position the difference between the District s assets and liabilities is one way to measure the District s financial health or position. Over time, increases or decreases in the District s net position are an indicator of whether its financial position is improving or deteriorating. To assess the overall health of the District one needs to consider additional non-financial factors, such as changes to the District s property tax base and the condition of school buildings and other facilities. In the government-wide financial statements, the District s activities are divided into two categories: Governmental activities The District s basic services are included here, such as regular and special education, transportation, and administration. Property taxes and state formula aid finance most of these activities. Business-type activities Programs in which fees are charged to help cover the costs of certain services provided. The District has none, at this time. 5

10 MANAGEMENT S DISCUSSION AND ANALYSIS Fund Financial Statements The fund financial statements provide more detailed information about the District s most significant 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. The District establishes other funds to control and manage money for particular purposes (like scholarships) or to show that it is properly using certain revenues. The District has two types of funds: 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 funds statements provide a detailed short-term view that helps you determine whether there are more or fewer financial resources that can be spent in the near future to finance the District s programs. Because this information does not encompass the additional long-term focus of the government-wide statements, additional information is provided at the bottom of the governmental funds statements that explains the relationship between them. Fiduciary funds The District is the trustee, or fiduciary, for assets that belong to others, such as the scholarship fund and the student body funds. The District is responsible for ensuring that the assets reported in these funds are used only for their intended purposes and by those to whom the assets belong. All of the District s fiduciary activities are reported in a separate statement of fiduciary net assets and a statement of changes in fiduciary net assets. These activities are excluded from the government-wide financial statements because the District cannot use these assets to finance its operations. 6

11 MANAGEMENT S DISCUSSION AND ANALYSIS FINANCIAL ANALYSIS OF THE DISTRICT AS A WHOLE Net Position Table I summarizes the District s combined net position as of June 30, 2016, and shows a comparative analysis of current year district-wide data with prior year. The largest portion of the District s net position is in the investment of capital assets (e.g., land, building and equipment), less any related debt used to acquire those assets that is still outstanding. The District uses these assets to provide educational services; therefore, they are not available for future spending. Table I Net Position 2014/ /2016 Current and Other Assets $ 2,342,929 $ 3,083,217 Capital Assets 3,429,107 3,218,810 Total Assets $ 5,772,036 $ 6,302,027 Deferred Outflow of Resources related to Pensions $ 204,017 $ 297,951 Long-Term Liabilities Outstanding 2,592,399 2,960,125 Other Liabilities 169, ,495 Total Liabilities $ 2,762,039 $ 3,217,620 Deferred Inflow of Resources related to Pensions $ 657,948 $ 294,753 Net Position: Net Investment in Capital Assets 3,410,035 3,218,810 Restricted 158, ,492 Unrestricted (1,012,671) (570,697) Total Net Position $ 2,556,066 $ 3,087,605 7

12 MANAGEMENT S DISCUSSION AND ANALYSIS Changes in Net Position Property taxes and state formula aid accounted for most of the District s revenue, contributing about 72 cents to every dollar raised. Another 20 % came from state and federal aid for specific programs, and the remainder 8 %, from fees charged for services and miscellaneous sources. The District s expenses are predominantly related to educating and caring for students (84%). The purely administrative activities of the District accounted for just 8% of total costs. Plant services account for another 7%, as well. All other miscellaneous accounts for the remaining 1%. Table II Changes in Net Position 2014/ /16 REVENUES Program Revenues: Charges for Services $ 43,496 $ 58,349 Operating Grants 619, ,819 General Revenues: Property Taxes 1,420,435 1,594,642 Federal and State aid 1,519,966 1,792,509 Other 325, ,944 Total Revenues $ 3,929,591 $ 4,676,263 PROGRAM EXPENSES Instruction $ 2,360,794 $ 2,613,906 Instruction Related Services 277, ,006 Pupil Services 527, ,148 General Administration 293, ,408 Plant Services 301, ,736 Interest 1, Other 36,727 28,280 Total Expenses $ 3,797,965 $ 4,144,724 Increase in Net Position $ 131,626 $ 531,539 Net Position - Beginning, as previously reported 5,283,510 Cumulative effect of change in accounting principles (2,859,070) Net Position - Beginning 2,424,440 2,556,066 Net Position - Ending $ 2,556,066 $ 3,087,605 8

13 MANAGEMENT S DISCUSSION AND ANALYSIS Governmental Activities The continuing positive financial status of the District can be credited to sound fiscal practices by both the administration and the Board of Trustees. General Fund Budgetary Highlights Over the course of the year, the District revised the annual operating budget several times. These budget amendments fall into the following categories: Changes made to anticipated income. Changes made to expense accounts, due to retroactive salary negotiations, budgeting carryovers, unanticipated special education costs, and miscellaneous budget revisions. The District s final budget for all of its funds anticipated and resulted in a surplus. CAPITAL ASSET AND DEBT ADMINISTRATION Capital Assets Table III Capital Assets (net of depreciation) 2014/ /16 Land and Improvement of Sites $ 406,368 $ 390,226 Buildings 2,669,238 2,504,324 Equipment 353, ,260 Total Capital Assets $ 3,429,107 $ 3,218,810 9

14 MANAGEMENT S DISCUSSION AND ANALYSIS Long-Term Debt At year-end the District had $2,997,242 in long-term debt outstanding. The long-term debt for the STRS Golden Handshake resulted in an overall savings to the District. Table IV Long-Term Debt 2014/ /16 Percent Change Net pension liability $ 2,411,551 $ 2,859, % Other postemployment benefits 61,639 54, % Compensated absences 32,121 25, % Capital leases 19, % Other long-term liabilities 68,016 56, % Total Long Term Debt $ 2,592,399 $ 2,997, % FACTORS BEARING ON THE DISTRICT S FUTURE At the time these financial statements were prepared and audited, the District was aware of the following circumstances that could affect its financial health in the future: Declining enrollment The District has experienced declining enrollment since 1996/1997, from 788 to our P2 this year of 371. Looking toward the next few years the District sees this decline stabilizing. Shared Services The District has been sharing business services with Alta-Dutch Flat Union School District since January 1, This was necessary to help with the declining enrollment loss of revenue. This is working well and the savings for both districts is substantial. The District moved two portables from the elementary school site to open a Special Day Class. The project was completed during the summer of 2014, and had exhausted our Developer Fee Fund balance at the time. We are anticipating modernization dollars from the State to help pay for part of the consolidation project, but this may not be for a few years. CONTACTING THE DISTRICT S FINANCIAL MANAGEMENT This report is designed to provide our citizens, taxpayers, 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 any questions about this report or need additional financial information, contact the Business Manager, Foresthill Union School District, Main St. Foresthill, CA,

15 STATEMENT OF NET POSITION JUNE 30, 2016 Governmental Activities ASSETS Cash and cash equivalents $ 2,844,785 Accounts receivable 238,432 Depreciable capital assets, net 2,992,610 Nondepreciable capital assets 226,200 Total assets 6,302,027 DEFERRED OUTFLOW OF RESOURCES Deferred outflows of resources related to pensions 297,951 LIABILITIES Accounts payable 216,281 Unearned revenue 4,097 Long-term liabilities, due within one year 37,117 Long-term liabilities, due in more than one year 2,960,125 Total liabilities 3,217,620 DEFERRED INFLOW OF RESOURCES Deferred inflows of resources related to pensions 294,753 NET POSITION Investment in capital assets 3,218,810 Restricted for: Capital projects 62,586 Educational programs 376,806 Other purposes (expendable) 100 Unrestricted (570,697) Total net position $ 3,087,605 The accompanying notes are an integral part of these financial statements. 11

16 STATEMENT OF ACTIVITIES Net (Expense) Revenue and Changes in Program Revenues Net Position Operating Charges for Grants and Governmental Functions Expenses Services Contributions Activities Governmental Activities: Instruction $ 2,613,906 $ 644,495 $ (1,969,411) Instruction-related services: Instructional library, media and technology 18,741 (18,741) School site administration 294,265 19,297 (274,968) Pupil services: Pupil transportation 327,627 1,346 (326,281) Food services 116,127 68,171 (47,956) Other pupil services 113,394 46,071 (67,323) General administration: Data processing services 10,761 (10,761) Other general administration 310,647 $ 58,349 4,228 (248,070) Plant services 310, ,760 (153,976) Interest on debt 240 (240) Other outgo 28,280 2,451 (25,829) Totals $ 4,144,724 $ 58,349 $ 942,819 (3,143,556) General revenues: Taxes and subventions: Taxes levied for general purposes 1,594,642 Federal and state aid not restricted to specific purposes 1,792,509 Interest and investment earnings 30,538 Miscellaneous revenue 257,406 Total general revenues 3,675,095 Increase in net position 531,539 Net position - beginning of year 2,556,066 Net position - end of year $ 3,087,605 The accompanying notes are an integral part of these financial statements. 12

17 BALANCE SHEETS GOVERNMENTAL FUNDS JUNE 30, 2016 Other Total Governmental Governmental General Fund Funds Funds ASSETS Cash and cash equivalents $ 2,837,966 $ 6,819 $ 2,844,785 Receivables 205,814 32, ,432 Due from other funds 5,597 34,142 39,739 Total assets $ 3,049,377 $ 73,579 $ 3,122,956 LIABILITIES AND FUND BALANCES Liabilities: Accounts payable $ 210,985 $ 5,296 $ 216,281 Due to other funds 34,142 5,597 39,739 Unearned revenue 4,097 4,097 Total liabilities 249,224 10, ,117 Fund balances: Nonspendable for: Revolving cash 2,000 2,000 Restricted for: Educational programs 376, ,806 Capital projects 62,586 62,586 Food services Assigned for: Milestones 56,680 56,680 Lottery 36,511 36,511 Jogathon 1,048 1,048 Outstanding mandate claims 200, ,372 Electives and enrichment 38,733 38,733 Unassigned 2,088,003 2,088,003 Total fund balances 2,800,153 62,686 2,862,839 Total liabilities and fund balances $ 3,049,377 $ 73,579 $ 3,122,956 The accompanying notes are an integral part of these financial statements. 13

18 RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEETS TO THE STATEMENT OF NET POSITION JUNE 30, 2016 Total fund balances, governmental funds $ 2,862,839 Amounts reported for governmental activities in the statement of net position are different because: Capital assets used in governmental activities are not current financial resources and, therefore, are not reported in this fund financial statement. The historical cost of the capital assets is $8,921,640 and the accumulated depreciation is $5,702,830. 3,218,810 Some liabilities are not due and payable in the current period and are not included in the fund financial statement, but are included in the governmental activities in the statement of net position. Long-term liabilities relating to governmental activities consist of: Net pension liability (2,859,906) Net OPEB obligation (54,875) Compensated absences (25,781) Other long-term liabilities (56,680) (2,997,242) In governmental funds, deferred outflows and inflows of resources relating to pensions are not reported because they are applicable to future periods. In the statement of net position, deferred outflow and inflows of resources are reported as follows: Deferred outflow of resources related to pensions 297,951 Deferred inflow of resources related to pensions (294,753) Total net position, governmental activities $ 3,087,605 The accompanying notes are an integral part of these financial statements. 14

19 STATEMENTS OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS Other Total Governmental Governmental General Fund Funds Funds REVENUES State apportionment $ 1,495,596 $ 1,495,596 Local sources 1,593,814 1,593,814 Total local control funding formula 3,089,410 3,089,410 Federal revenues 321,286 $ 63, ,020 Other state revenues 592,804 4, ,241 Other local revenues 432,251 90, ,683 Total revenues 4,435, ,603 4,594,354 EXPENDITURES Instruction 2,393,308 2,393,308 Instruction-related services: Instructional library, media and tech 14,666 14,666 School site administration 254, ,351 Pupil services: Pupil transportation 319, ,869 Food services 116, ,564 Other pupil services 113, ,974 General administration: Data processing services 10,761 10,761 Other general administration 317, ,756 Plant services 315, ,963 Debt service: Principal 19,072 19,072 Interest Transfers to other agencies 28,280 28,280 Total expenditures 3,788, ,564 3,904,804 Excess of revenues over expenditures 647,511 42, ,550 OTHER FINANCING SOURCES (USES) Interfund transfers out (16,499) (16,499) Interfund transfers in 16,499 16,499 Total other financing sources (uses) (16,499) 16,499 Increase in fund balances 631,012 58, ,550 Fund balances - beginning of year 2,169,141 4,148 2,173,289 Fund balances - end of year $ 2,800,153 $ 62,686 $ 2,862,839 The accompanying notes are an integral part of these financial statements. 15

20 RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENTS OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES Net change in fund balances - total governmental funds $ 689,550 Amounts reported for governmental activities in the statement of activities are different because: Governmental funds report outlays for capital assets as expenditures because such outlays use current financial resources. In contrast, the statement of activities reports only a portion of the outlay as expense. The outlay is allocated over the assets' estimated lives as depreciation expense for the period. This is the amount by which capital outlay ($7,200) was exceeded by depreciation expense ($217,497) in the current period. (210,297) Repayment of the principal of long-term debt is reported as an expenditure in governmental funds. However, the repayment reduces long-term liabilities in the statement of net position. 19,072 Increases/decreases in the liability for compensated absences are not recorded as expenditures in governmental funds because they are not expected to be liquidated with current financial resources. In the statement of activities, compensated absences are recognized as expenses when earned by employees. 6,340 In governmental funds, other postemployment costs are recognized in the period when employer contributions are made. However, in the statement of activities, costs are measured and recognized in relation to the annual required contribution. 6,764 In the government-wide statements, expenses must be accrued in connection with obligations incurred during the period that are not expected to be liquidated with current financial resources. This year, the payments for settlements were: 11,336 In government funds, pension costs are recognized when employer contributions are made. In the statement of activities, pension costs are recognized on the accrual basis. The difference between accrual-basis pension costs and actual employer contributions was: 8,774 Increase in net position, governmental activities $ 531,539 The accompanying notes are an integral part of these financial statements. 16

21 STATEMENTS OF FIDUCIARY NET POSITION FIDUCIARY FUNDS JUNE 30, 2016 Agency Foundation Funds Trust Fund ASSETS Cash and cash equivalents: Warrant Pass-Through Fund $ 37,812 Foundation Trust Fund $ 4,504 Student Body Fund 37,099 Interest receivable 4 Total assets $ 74,911 $ 4,508 LIABILITIES Due to student groups/other agencies $ 74,911 Total liabilities $ 74,911 NET POSITION Held in trust $ 4,508 The accompanying notes are an integral part of these financial statements. 17

22 STATEMENT OF CHANGES IN FIDUCIARY NET POSITION FIDUCIARY FUNDS Trust Fund ADDITIONS Interest $ 48 Total additions 48 Change in net position 48 Net position - beginning of year 4,460 Net position - end of year $ 4,508 The accompanying notes are an integral part of these financial statements. 18

23 NOTES TO THE FINANCIAL STATEMENTS 1. SIGNIFICANT ACCOUNTING POLICIES A. ACCOUNTING POLICIES The Foresthill Union School District (the District) accounts for its financial transactions in accordance with the policies and procedures of the Department of Education's California School Accounting Manual. The accounting policies of the District 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. B. REPORTING ENTITY The District has reviewed criteria to determine whether other entities with activities that benefit the District should be included within its financial reporting entity. The criteria include, but are not limited to, whether the entity exercises oversight responsibility (which includes financial interdependency, selection of governing authority, designation of management, ability to significantly influence operations and accountability for fiscal matters), the scope of public service and a special financing relationship. The District has determined that no other outside entity meets the above criteria, and therefore, no agency has been included as a component unit in the District s financial statements. In addition, the District is not aware of any entity that would exercise such oversight responsibility that would result in the District being considered a component unit of that entity. C. BASIS OF PRESENTATION Government-wide financial statements The statement of net position and the statement of activities display information about the District as a whole. These statements include the financial activities of the primary government, except for fiduciary funds. The government-wide statements are prepared using the economic resources measurement focus. This is the same approach used in the preparation of proprietary fund financial statements but differs from the manner in which the governmental fund financial statements are prepared. Governmental fund financial statements, therefore, include a reconciliation with brief explanations to better identify the relationship between the government-wide statements and the statements for governmental funds. The government-wide statement of activities presents a comparison between direct expenses and program revenues for each function or program of the District s governmental activities. Direct expenses are those that are specifically associated with a service, program, or department and are therefore clearly identifiable to a particular function. The District does not allocate indirect expenses to functions in the statement of activities. Program revenues include charges paid by the recipients of goods or services offered by a program, as well as grants and contributions that are restricted to meeting the operational requirements of a particular program. Revenues which are not classified as program revenues are presented as general revenues of the District, with certain limited exceptions. The comparison of direct expenses with program revenues identifies the extent to which each governmental function is self-financing or draws from the general revenues of the District. 19

24 NOTES TO THE FINANCIAL STATEMENTS Fund financial statements Fund financial statements report more detailed information about the District. The focus of governmental fund financial statements is on major funds rather than reporting funds by type. Each major fund is presented in a separate column. Non-major funds are aggregated and presented in a single column as other governmental funds. The accounting and financial reporting treatment applied to a fund is determined by its measurement focus. All governmental fund types are accounted for using a flow of current financial resources measurement focus. The financial statements for governmental funds include a Balance Sheet, which generally includes only current assets and current liabilities, and a Statement of Revenues, Expenditures, and Changes in Fund Balances, which reports on the sources (i.e., revenues and other financing sources) and uses (i.e., expenditures and other financing uses) of current financial resources. Fiduciary funds are reported using the economic resources measurement focus. Fiduciary funds are not included in the government-wide financial statements. Fiduciary funds are reported only in the Statement of Fiduciary Net Position and the Statement of Changes in Fiduciary Net Position at the fund financial statement level. D. BASIS OF ACCOUNTING Basis of accounting refers to when transactions are recorded in the financial records and reported in the financial statements. Government-wide financial statements are prepared using the accrual basis of accounting. Governmental fund financial statements use the modified accrual basis of accounting. Fiduciary funds use the accrual basis of accounting. Revenues Exchange and Non-exchange Transactions Revenue resulting from exchange transactions, in which each party gives and receives essentially equal value, is recorded under the accrual basis when the exchange takes place. Under the modified accrual basis, revenue is recorded in the fiscal year in which the resources are measurable and become available. Available means the resources will be collected within the current fiscal year or are expected to be collected soon enough thereafter to be used to pay liabilities of the current fiscal year. For the District, available means collectible within the current period or within 45, 60, or 90 days after year-end, depending on the revenue source. However, to achieve comparability of reporting among California districts and so as not to distort normal revenue patterns, with specific respect to reimbursement grants and corrections to state aid apportionments, the California Department of Education has defined available as collectible within one year. Non-exchange transactions are those in which the District receives value without directly giving equal value in return, including property taxes, grants, and entitlements. Under the accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from grants and entitlements is recognized in the fiscal year in which all eligibility requirements have been satisfied. Eligibility requirements include timing requirements, which specify the year when the resources are to be used or the fiscal year when use is first permitted, matching requirements, under which the District must provide local resources to be used for a specific purpose, and expenditure requirements, in which the resources are provided to the District on a reimbursement basis. Under the modified accrual basis, revenue from non-exchange transactions must also be available before it can be recognized. Receivables associated with nonexchange transactions that will not be collected within the availability period would be offset with unavailable revenue. 20

25 NOTES TO THE FINANCIAL STATEMENTS Unearned Revenue Unearned revenue arises when assets are received before revenue recognition criteria have been satisfied. Grants and entitlements received before eligibility requirements are met are recorded as unearned revenue. Expenses/Expenditures Under the accrual basis of accounting, expenses are recognized at the time they are incurred. However, the measurement focus of governmental fund accounting is on decreases in the net financial resources (expenditures) rather than expenses. Expenditures are generally recognized in the accounting period in which the related fund liability is incurred, if measurable. Allocations of cost, such as depreciation, are not recognized on governmental fund financial statements. When both restricted and unrestricted resources are available for use, it is the District s policy to first apply the expenditure toward restricted fund balance and then to other, less restrictive classifications assigned, and then unassigned fund balances. E. FUND ACCOUNTING The accounts of the District are organized on the basis of funds, each of which is considered to be a separate accounting entity. The operations of each fund are accounted for with a separate set of self-balancing accounts that comprise its assets, liabilities, fund equity, revenues, and expenditures or expenses, as appropriate. District resources are allocated to and accounted for in individual funds based upon the purpose for which they are to be spent and the means by which spending activities are controlled. The District s accounts are organized into the major, non-major, and fiduciary funds as follows: Major Governmental Funds The General Fund is the primary operating fund of the District. It is used to account for all financial resources except those required to be accounted for in another fund. Non-Major Governmental Funds Special Revenue Funds are used to account for the proceeds of specific revenue sources that are legally restricted to expenditures for specific purposes. The District maintains the following special revenue funds: The Cafeteria Fund is used to account for revenues received and expenditures made to operate the District's cafeterias. The Capital Projects Funds are used to account for resources used for the acquisition or construction of major capital facilities and equipment. The District maintains the following nonmajor capital projects fund: The Capital Facilities Fund is the primary fund used for acquisition and/or construction of all major governmental general fixed assets. Fiduciary Funds Fiduciary funds account for assets held by the District in a trustee capacity or as an agent on behalf of others. 21

26 NOTES TO THE FINANCIAL STATEMENTS Agency Funds are used to account for assets of others for which the District acts as an agent. The District maintains a student body fund, which are used to account for the raising and expending of money to promote the general welfare, morale, and educational experience of the student body and a warrant pass-through fund, which are used to account separately for amounts collected for employees for federal taxes, state taxes, transfers to credit unions, and other contributions. Trust Funds are used for assets held by the District under the terms of a formal trust agreement. The District maintains one expendable trust fund, the Foundation Fund, which is used to provide financial assistance to students of the District. F. 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. By state law, the District's governing board must adopt a final budget no later than July 1. A public hearing must be conducted to receive comments prior to adoption. These budgets are revised by the District's governing board and superintendent during the year to give consideration to unanticipated income and expenditures. The original and final revised budgets for the General Fund are presented as required supplementary information in these financial statements. Formal budgetary integration was employed as a management control device during the year for all budgeted funds. The District employs budget control by minor object and by individual appropriation accounts. Expenditures cannot legally exceed appropriations by major object account. G. CASH AND CASH EQUIVALENTS The District considers all highly liquid investments with a maturity of three months or less at the time of purchase to be cash equivalents. H. CAPITAL ASSETS Capital assets are those purchased or acquired with an original cost of $5,000 or more and are reported at historical cost or estimated historical cost. Contributed assets are reported at fair market value as of the date received. Additions, improvements, and other capital outlays that significantly extend the useful life of an asset are capitalized. Other costs incurred for repairs and maintenance are expensed as incurred. Depreciation on all assets is provided on a straight-line basis over the following estimated useful lives: Asset Class Years Improvement of Sites 25 Buildings 50 Machinery and Equipment

27 NOTES TO THE FINANCIAL STATEMENTS I. COMPENSATED ABSENCES Accumulated unpaid employee vacation benefits are recognized as liabilities of the District on the government-wide financial statements. Compensated absences are generally liquidated by the General Fund. Accumulated sick leave benefits are not recognized as liabilities of the District. The District's policy is to record sick leave as an operating expenditure in the period taken, since such benefits do not vest nor is payment probable; however, unused sick leave is added to the creditable service period for calculation of retirement benefits when the employee retires. J. PENSIONS Qualified employees are covered under multiple-employer defined benefit pension plans maintained by agencies of the State of California. Certificated employees are members of the State Teachers Retirement Plan (the CalSTRS Plan), and classified employees are members of the Schools Pool (the CalPERS Plan), collectively referred to as the Plans. For purposes of measuring the net pension liability, pension expense, and deferred outflows/inflows of resources related to pensions, information about the fiduciary net position of the District s portions of the Plans and additions to/deductions from the Plans fiduciary net position have been determined on the same basis as they are reported by the Plans. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. K. DEFERRED OUTFLOWS/DEFERRED INFLOWS OF RESOURCES In addition to assets, the balance sheet reports separate sections for deferred outflows of resources and deferred inflows of resources. Deferred outflows of resources represent a consumption of resources that applies to a future period(s) and will not be recognized as an outflow of resources (expense) until then. Conversely, deferred inflows of resources represent an acquisition of resources that applies to a future period(s) and will not be recognized as an inflow of resources (revenue) until that time. Contributions made to the District s pension plan(s) after the measurement date but before the fiscal year-end are recorded as a deferred outflow of resources and will reduce the net pension liability in the next fiscal year. Additional factors involved in the calculation of the District s pension expense and net pension liability include the differences between expected and actual experience, changes in assumptions, differences between projected and actual investment earnings, changes in proportion, and differences between the District s contributions and proportionate share of contributions. These factors are recorded as deferred outflows and inflows of resources and amortized over various periods. See Note 7 for further details related to these pension deferred outflows and inflows. L. FUND BALANCES In the governmental fund financial statements fund balances are classified as follows: Non-spendable Funds that cannot be spent due to their form or funds that legally or contractually must be maintained intact. 23

28 NOTES TO THE FINANCIAL STATEMENTS Restricted Funds that are mandated for specific purposes because the amounts are subject to externally imposed or legally enforceable constraints. Assigned Funds that are constrained by the District s intent to be used for specific purposes, but are neither restricted nor committed. Resolution No delegates the authority to assign amounts to be used for specific purposes to the Superintendent or Business Manager, for the purpose of reporting these amounts in the financial statements. Assigned funds cannot cause a deficit in unassigned fund balance. Unassigned The residual balance of the general fund that has not been assigned to other funds and that is not restricted or assigned to a specific purpose. Consistent with the Criteria and Standards for fiscal solvency adopted by the State Board of Education, the District maintains a Reserve for Economic Uncertainties to safeguard the District s financial stability. The responsibility to operate the District to maintain financial stability resides with the elected Board of Education. The minimum recommended reserve for a District of this size is a minimum of 4% of budgeted general fund expenditures and other financing uses. The District s standard policy is to maintain the reserve at 6%. As of June 30, 2016, the District had a Reserve for Economic Uncertainty of $225,000 in the General Fund s unassigned fund balance which represents 5.4% of budgeted general fund expenditures and other financing uses. M. PROPERTY TAXES Secured property taxes attach as an enforceable lien on property as of January 1, and are payable in two installments on November 15 and March 15. Unsecured property taxes are payable in one installment on or before August 31. The County of Placer bills and collects the taxes for the District. N. LONG-TERM OBLIGATIONS The District reports long-term obligations of governmental funds at face value in the governmentwide financial statements. O. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, deferred outflow, liabilities and deferred inflows and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenditures during the reporting period. Actual amounts could differ from those estimates. P. FUTURE GASB IMPLEMENTATION In June of 2015, the GASB issued GASB Statement 75 (GASB 75), Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions, with requires implementation for the District during the year ended June 30, The primary objective of the Statement is to improve accounting and financial reporting by state and local governments for other postemployment benefits (OPEB) by establishing standards for measuring and recognizing liabilities, deferred 24

29 NOTES TO THE FINANCIAL STATEMENTS outflows of resources, deferred inflows of resources, and expenses/expenditures. It will require employers to report a net OPEB liability for the difference between the present value of projected pension benefits for past service and restricted resources held in trust for the payment of benefits. The Statement identifies the methods and assumptions that should be used to project benefit payments, discount projected benefit payments to their actuarial present value, and attribute that present value to periods of employee service. The Statement is required to be implemented retroactively and will require a restatement of beginning net position. 2. CASH AND CASH EQUIVALENTS Cash and cash equivalents as of June 30, 2016, are classified in the accompanying financial statements as follows: Statement of net position: Cash and cash equivalents $ 2,844,785 Fiduciary funds: Cash and cash equivalents 79,415 Total cash and cash equivalents $ 2,924,200 Cash and cash equivalents as of June 30, 2016 consist of the following: Cash and cash equivalents in Placer County Treasury $ 2,884,903 Deposits with financial institutions 39,297 Total Cash and cash equivalents $ 2,924,200 Cash in County Treasury In accordance with Education Code Section 41001, the District maintains substantially all of its cash in the Placer County Treasury (the County Treasury). The County Treasury pools these funds with those of other districts in the county and invests the cash. The share of each fund in the pooled cash account is separately accounted for and interest earned is apportioned quarterly to funds that are legally required to receive interest based on the relationship of a fund s daily balance to the total of pooled cash and investments. Participants equity in the investment pool is determined by the dollar amount of the participant deposits, adjusted for withdrawals and distributed income. This method differs from the fair value method used to value equivalents in these financial statements in that unrealized gains or losses are not distributed to pool participants. The County Treasury is authorized to deposit cash and invest excess funds by California Government Code Section et seq. The funds maintained by the County Treasury are either secured by federal depository insurance or are collateralized. 25