Macomb Intermediate School District. Financial Report with Supplemental Information June 30, 2017

Transcription

1 I Macomb Intermediate School District Financial Report with Supplemental Information June 30, 2017

2 Contents Independent Auditor's Report 1-2 Management's Discussion and Analysis 3-14 Basic Financial Statements Government-wide Financial Statements: Statement of Net Position 15 Statement of Activities Fund Financial Statements: Governmental Funds: Balance Sheet 18 Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position 19 Statement of Revenue, Expenditures, and Changes in Fund Balances 20 Reconciliation of the Statement of Revenue, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities 21 Proprietary Funds: Statement of Net Position 22 Statement of Revenue, Expenses, and Changes in Net Position 23 Statement of Cash Flows 24 Fiduciary Funds - Statement of Assets and Liabilities 25 Notes to Financial Statements Required Supplemental Information 47 Budgetary Comparison Schedule - General Fund 48 Budgetary Comparison Schedule - Special Education Fund 49 Budgetary Comparison Schedule - Medicaid Fund 50 Schedule of Macomb Intermediate School District's Proportionate Share of the Net Pension Liability Michigan Public School Employees' Retirement System Determined as of the Plan Year Ended September Schedule of Macomb Intermediate School District's Contributions Michigan Public School Employees' Retirement System Determined as of the Plan Year Ended June Note to Pension Required Supplemental Information Schedules 53

3 Contents (Continued) Other Supplemental Information 54 Nonmajor Governmental Funds: Combining Balance Sheet 55 Combining Statement of Revenue, Expenditures, and Changes in Fund Balances 56 Collaborative Education Fund: Combining Balance Sheet 57 Combining Statement of Revenue, Expenditures, and Changes in Fund Balance 58 Internal Service Funds: Combining Statement of Net Position 59 Combining Statement of Revenue, Expenses, and Changes in Net Position 60 Combining Statement of Cash Flows 61 Federal Awards Supplemental Information Issued Under Separate Cover

4 Independent Auditor's Report To the Board of Education Macomb Intermediate School District Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of Macomb Intermediate School District (the "Intermediate School District") as of and for the year ended June 30, 2017 and the related notes to the financial statements, which collectively comprise Macomb Intermediate School 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. Auditor s Responsibility 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 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. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of Macomb Intermediate School District as of June 30, 2017 and the respective changes in its financial position and, where applicable, cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. 1

5 To the Board of Education Macomb Intermediate School District Required Supplemental Information Accounting principles generally accepted in the United States of America require that the management's discussion and analysis, the schedule of Macomb Intermediate School District s proportionate share of the net pension liability, the schedule of Macomb Intermediate School District's pension contributions, and the major fund budgetary comparison schedules, as identified 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, which 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 supplemental 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 an opinion on the financial statements that collectively comprise Macomb Intermediate School District's basic financial statements. The other supplemental information, as identified in the table of contents, is presented for the purpose of additional analysis and is not a required part of the basic financial statements. The other supplemental information, as identified in the table of contents, is the responsibility of management and was derived from and relates 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 other supplemental information, as identified in the table of contents, 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 October 10, 2017 on our consideration of Macomb Intermediate School District's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, 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 in considering Macomb Intermediate School District's internal control over financial reporting and compliance. October 10,

6 Management s Discussion and Analysis This section of Macomb Intermediate School District s (the Intermediate School District ) annual financial report presents our discussion and analysis of the Intermediate School District s financial performance during the year ended June 30, Please read it in conjunction with the Intermediate School District s financial statements, which immediately follow this section. Using this Annual Report This annual report consists of a series of financial statements and notes to those statements. These statements are organized so the reader can understand Macomb Intermediate School District financially as a whole. The government-wide financial statements provide information about the activities of the whole School District, presenting both an aggregate view of the Intermediate School District s finances and a longer-term view of those finances. The fund financial statements provide the next level of detail. For governmental activities, these statements tell how services were financed in the short term as well as what remains for future spending. The fund financial statements look at the Intermediate School District s operations in more detail than the government-wide financial statements by providing information about the Intermediate School District s most significant funds - the General Fund, the Special Education Fund, the General Capital Projects Fund, and the Medicaid Fund, with all other funds presented in one column as nonmajor funds. One of the remaining statements - the statement of fiduciary assets and liabilities - presents financial information about activities for which the Intermediate School District acts solely as an agent for the benefit of students and parents. The other remaining statements relate to the Intermediate School District's proprietary funds (internal service funds, including the Co-op Education Fund and Compensated Absence and Self- Insurance Fund, and enterprise funds, including the Student Accounting and Wide Area Network (WAN) Funds). Management s Discussion and Analysis (MD&A) (Required Supplemental Information) Basic Financial Statements Government-wide Financial Statements Fund Financial Statements Notes to the Basic Financial Statements (Required Supplemental Information) Budgetary Information for Major Funds Schedule of Proportionate Share of the Net Pension Liability Schedule of Contributions Other Supplemental Information 3

7 Management s Discussion and Analysis (Continued) Reporting the Intermediate School District as a Whole - Government-wide Financial Statements One of the most important questions asked about the Intermediate School District is, As a whole, what is the Intermediate School District s financial condition as a result of the year s activities? The statement of net position and the statement of activities, which appear first in the Intermediate School District s financial statements, report information on the Intermediate School District as a whole and its activities in a way that helps you answer this question. We prepare these statements to include all assets and liabilities, using the accrual basis of accounting, which is similar to the accounting used by most private sector companies. All of the current year s revenue and expenses are taken into account regardless of when cash is received or paid. These two statements report the Intermediate School District s net position - the difference between assets/deferred outflows of resources and liabilities/deferred inflows of resources, as reported in the statement of net position - as one way to measure the Intermediate School District s financial health or financial position. Over time, increases or decreases in the Intermediate School District s net position - as reported in the statement of activities - are indicators of whether its financial health is improving or deteriorating. The relationship between revenue and expenses is the Intermediate School District s operating results. However, the Intermediate School District s goal is to provide services to our students, not to generate profits as commercial entities do. One must consider many other nonfinancial factors, such as the quality of the education provided and the safety of the schools, to assess the overall health of the Intermediate School District. The statement of net position and the statement of activities report the governmental and business-type activities for the Intermediate School District, which encompass all of the Intermediate School District s services, including instruction, support services, community services, and interdistrict payments to local districts. Property taxes, unrestricted state aid (foundation allowance revenue), and state and federal grants finance most of these activities. Reporting the Intermediate School District s Most Significant Funds - Fund Financial Statements The School District s fund financial statements provide detailed information about the most significant funds - not the Intermediate School District as a whole. Some funds are required to be established by state law. However, the Intermediate School District establishes many other funds to help it control and manage money for particular purposes or to show that it is meeting legal responsibilities for using certain taxes, grants, and other money. The funds of the Intermediate School District use the following accounting approach: 4

8 Management s Discussion and Analysis (Continued) Governmental Funds - The majority of the Intermediate School District s services are reported in governmental funds. Governmental fund reporting focuses on showing how money flows into and out of funds and the balances left at year end that are available for spending. They are reported using an accounting method called modified accrual accounting, which measures cash and all other financial assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term view of the operations of the Intermediate School District and the services it provides. Governmental fund information helps you determine whether there are more or fewer financial resources that can be spent in the near future to finance the Intermediate School District s programs. We describe the relationship (or differences) between governmental activities (reported in the statement of net position and the statement of activities) and governmental funds in a reconciliation. Proprietary Funds - Proprietary fund reporting focuses on the economic resources measurement and an accounting method called full accrual accounting. The proprietary fund statements present a long-term view of operations and the services they provide to other funds. The School District as Trustee - Reporting the Intermediate School District s Fiduciary Responsibilities The School District is the trustee, or fiduciary, for its student and other groups' activity funds and tax collections. All of the Intermediate School District s fiduciary activities are reported in a separate statement of fiduciary assets and liabilities. We exclude these activities from the Intermediate School District s other financial statements because the Intermediate School District cannot use these assets to finance its operations. The School District is responsible for ensuring that the assets reported in these funds are used for their intended purposes. 5

9 Management s Discussion and Analysis (Continued) Governmental Activities Recall that the statement of net position provides the perspective of the Intermediate School District as a whole. Table 1 provides a summary of the Intermediate School District s net position for the governmental activities as of June 30, 2017 and 2016: Table 1 Governmental Activities June (in millions) Assets Current and other assets $ 82.1 $ 80.8 Capital assets Total assets Deferred Outflows of Resources Total assets and deferred outflows of resources Liabilities Current liabilities Long-term liabilities Net pension liability Total liabilities Deferred Inflows of Resources Total liabilities and deferred inflows of resources Net Position Net investment in capital assets Restricted Unrestricted - Other Unrestricted - Pension (134.0) (136.3) Total net position $ (64.8) $ (71.1) 6

10 Management s Discussion and Analysis (Continued) The above analysis focuses on the net position (see Table 1). The change in net position (see Table 2) of the Intermediate School District s governmental activities is discussed below. The School District s net position of governmental activities was ($64.8) million at June 30, Net investment in capital assets totaling $44.7 million compares the original cost, less depreciation of the Intermediate School District s capital assets. Restricted net position is reported separately to show legal constraints associated with the expenditure of special education funds and enabling legislation that limit the Intermediate School District s ability to use the net position for day-to-day operations. The remaining amount of net position ($109.5 million) was unrestricted. As required by the Government Accounting Standards Board (GASB), the Intermediate School District adopted GASB Statement No. 68 and No. 71. These standards required the inclusion of the Intermediate School District s proportionate share of the Michigan Public School Employees Retirement Plan within the Intermediate School District s financial statements, effective July 1, The effect of the adoption was to decrease the July 1, 2014 beginning net position by approximately $141.2 million and the inclusion of the obligation, and related deferred inflows and outflows, in the June 30, 2015, 2016, and 2017 financial statements. All governments participating in the retirement plan were required to adopt these new standards. While this represents a significant amount, the retirement plan itself is substantially funded and our statutory required contribution is annually budgeted for. In addition, it is our opinion that this unfunded liability should be allocated not just to those entities participating in the retirement plan, but rather any entity receiving state funding, a portion of which is attributable to the retirement plan. The ($109.5) million in unrestricted net position of governmental activities represents the accumulated results of all past years operations of $24.5 million less ($134) million related to the adoption of GASB Statement No. 68 and No. 71. The restricted and unrestricted - other net position balances enable the Intermediate School District to meet working capital and cash flow requirements as well as to provide for future uncertainties. The operating results of the General, Special Education, and General Capital Projects Funds will continue to have a significant impact on the change in the restricted and unrestricted - other net position from year to year. 7

11 Management s Discussion and Analysis (Continued) The results of this year s operations for the governmental activities are reported in the statement of activities (see Table 2), which shows the changes in net position for fiscal years 2017 and Table 2 Governmental Activities Year Ended June (in millions) Revenue Program revenue: Charges for services $ 7.1 $ - Operating grants and contributions General revenue: Property taxes State foundation allowance Other Total revenue Functions/Program Expenses Instruction Support services Food services Community services Payments to public schools and other entities Depreciation (unallocated) Total functions/program expenses Increase (Decrease) in Net Position 6.3 (2.3) Net Position - Beginning of year (71.1) (68.8) Net Position - End of year $ (64.8) $ (71.1) As reported in the statement of activities, the cost of all of our governmental activities this year was $218.3 million. Certain activities were partially funded from those who benefited from the programs or by other governments and organizations that subsidized certain programs with grants and contributions ($130.3) million. We paid for the remaining public benefit portion of our governmental activities with $76.1 million in taxes, $8.0 million in state aid not restricted for specific purposes, $7.1 million in charges for services (see Note 6) and $3.1 million in other revenue, i.e., interest and general entitlements. The governmental activities of the Intermediate School District experienced an increase in net position of $6.3 million, primarily relating to the $7.1 million in charges for services as disclosed in Note 6. 8

12 Management s Discussion and Analysis (Continued) As discussed above, the net cost shows the financial burden that was placed on the State and the Intermediate School District s taxpayers by each of these functions. Since property taxes for operations and unrestricted state aid constitute the vast majority of district operating revenue sources, the Board of Education and administration must annually evaluate the needs of the Intermediate School District and balance those needs with state-prescribed available unrestricted resources. Business-type Activities The following table shows, in a condensed format, the current year s net position and changes in net position of the business-type activities (in millions of dollars): Table 3 Business-type Activities June (in millions) Assets Current and other assets $ 6.5 $ 13.3 Capital assets Total assets Liabilities - Current - - Net Position - Unrestricted $ 6.6 $ 13.4 Year Ended June Revenue/Expense Charges for services - Revenue $ 2.0 $ 2.0 WAN and student database services expense (8.8) (1.6) (Decrease) Increase in Net Position (6.8) 0.4 Net Position - Beginning of year Net Position - End of year $ 6.6 $ 13.4 Unrestricted net position - the part of net position that can be used to finance day-to-day operations - decreased by approximately $6.8 million primarily relating to a transfer of funds (see Note 6). This represents a decrease of approximately 51 percent. The current level of unrestricted net position stands at $6.6 million. 9

13 Management s Discussion and Analysis (Continued) The Intermediate School District s Funds As we noted earlier, the Intermediate School District uses funds to help it control and manage money for particular purposes. Looking at funds helps the reader consider whether the Intermediate School District is being accountable for the resources taxpayers and others provide to it and may provide more insight into the Intermediate School District s overall financial health. As the Intermediate School District completed this year, the governmental funds reported an increase in fund balance of approximately $6.7 million in the combined fund balance from last year. The primary reasons for the increase are as follows: In the General Fund, the fund balance increased approximately $0.1 million. The General Fund s fund balance is available to fund costs related to allowable operating purposes and will assist in covering any shortfalls or late payments which may occur in the future based on payments from the State of Michigan. The Special Revenue Funds reported a net decrease in fund balance of approximately $0.2 million. During 2017, the Intermediate School District elected to consolidate the activity of the Medicaid Fund into the Special Education Fund given that both of their revenue sources were for the purpose of serving special education program needs. The purpose of this consolidation was to simplify financial statement reporting. On July 1, 2016, the fund balance was transferred to the Special Education Fund and the Medicaid Fund was closed. The General Capital Projects Fund fund balance increased approximately $6.8 million, primarily a result of transfers of funds into the General Capital Projects fund (see Note 6). General Fund Budgetary Highlights Over the course of the year, the Intermediate School District revises its budget as it attempts to deal with unexpected changes in revenue and expenditures. State law requires that the budget be amended to ensure that expenditures do not exceed appropriations. The final amendment to the budget was actually adopted just before year end. A schedule showing the Intermediate School District s original and final budget amounts compared with amounts actually paid and received is provided as required supplemental information to these financial statements. There were significant revisions made to the General Fund original budget. Budgeted revenue increased approximately $7.6 million primarily due to the addition of certain state and federal grants which were not originally budgeted. Budgeted expenditures also increased approximately $6.7 million to account for the additional expenditures (salaries, support services, and interdistrict transfers) as a result of the increased grant funding. 10

14 Management s Discussion and Analysis (Continued) There were no significant variances between the final budget and actual amounts, other than differences which arose related to grant funds being budgeted at their full amounts (both revenue and expenditures) and the timing differences which arose from the actual grant spending process along with discretionary transfers between funds. Capital Assets and Long-term Obligations Capital Assets As of June 30, 2017, the Intermediate School District had $86.2 million invested in a broad range of capital assets, including land, buildings, vehicles, furniture, and equipment. This amount represents a net increase of approximately $0.4 million Land $ 6,583,741 $ 6,583,741 Land improvements 870, ,087 Construction in progress - - Buildings and building improvements 45,753,703 45,743,328 Buses and other vehicles 16,545,886 16,265,750 Furniture and equipment 16,493,712 16,353,024 Total capital assets $ 86,247,129 $ 85,815,930 The table above represents the assets of the governmental funds. The business-type activities of the Intermediate School District have a net book value of $95,640 at June 30, This year s additions of approximately $2.2 million primarily consisted of technology and buses. No debt was issued for these additions. Long-term Obligations Long-term obligations include accrued severance pay, compensated absences, pension liability, and self-insurance liabilities. We present more detailed information about our long-term liabilities in the notes to the financial statements. 11

15 Management s Discussion and Analysis (Continued) Economic Factors and Next Year s Budgets Our Intermediate School District s revenue is heavily dependent on local property taxes and state categorical funding. Michigan s economic recovery from the current downturn has not kept pace with the recovery experienced by the rest of the nation. As a result of the depressed housing market, taxable values had fallen 24.5 percent since but have now stabilized and are expected to slowly recover in the near term. In dollar terms, this reduction equated to $23.2 million less annually in property tax revenue compared to Furthermore, recent legislation eliminating the Michigan business tax and the personal property tax have further added to our revenue pressures. The actual state categorical revenue we receive will depend on the State s willingness to maintain existing earmarked revenue streams that fund the School Aid Fund and whether the School Aid Fund continues to cover or increases the proportion of funding for community colleges and higher education that have previously been funded by the State s General Fund and whether the State funds Intermediate School Districts similar to local districts for related categoricals. The Intermediate School Districts (ISD) have suffered enormous reductions over the last 13 years. Statewide, the Section 81 discretionary funding had been cut from $95 million to $62 million, or a loss of 35 percent. Our current level of funding is $2.3 million less than our annual level of funding in The board and administration have and continue to currently review all aspects of the operation to address these changes in funding. With that in mind, the fund balances of our major funds are expected to continue declining over the next few years before stabilizing primarily due to the above-mentioned decline in property values and state aid. In addition to the ISD impact, local districts are experiencing similar revenue and expenditure pressures, leading to increased reliance on ISDs for services and support, particularly for special education. The need to service students and provide services to our constituent school districts has expanded significantly in the past few years, particularly in the areas of consultant services, special education, technology, and business services. To provide the additional services and at the same time maintain fiscal responsibility, the following priorities were established and are actively being worked on: 1. Support priority schools 2. Offer credit recovery options and summer camps for students who need help in meeting the state graduation requirements 3. Support a county-wide transition assessment for high school students with special needs 4. Provide career preparation opportunities for students 12

16 Management s Discussion and Analysis (Continued) 5. Respond to Macomb County s expanding diverse population needs 6. Assist local districts in the implementation of the Michigan Standards curriculum 7. Provide alternative pathways for student learning 8. Continue to support county-wide and innovative and collaborative programs such as the International Baccalaureate (IB) and the Early College programs 9. Continue to increase the capacity of the Great Start Readiness Program 10. Expand our use of student data management tools to analyze student achievement and performance 11. Explore the impact on county resources and programs and develop responses to recent legislative changes pertaining to charter and cyber schools 12. Assist local districts with the multitude of compliance, data submissions, and federal and state regulations 13. Support local districts in financial stress 14. Maintain the completed county-wide fiber optic network which provides technology support and access to worldwide educational resources 15. Support and maintain Power School, our county-wide student management system 16. Support and maintain TIENET, the county s special education management system 17. Implement strategies in the MISD School Improvement Plan 18. Renovate three existing MISD schools to better service special education students 19. Explore options to alleviate the growing needs of our autistic population 20. Explore site improvement options at three of our sites 21. Expand Educational Service Center training rooms and workspace to meet the expanding needs of students and management 22. Maintain our financial strength to ensure we do not have billbacks to local schools for special education students attending center programs through the school year 13

17 Management s Discussion and Analysis (Continued) Publication of this financial report, prepared by the business office, concludes the financial reporting program for the fiscal year. It was a challenging and rewarding year for the Intermediate School District and we would like to commend our dedicated staff for their efforts in providing leadership and services to our 21 constituent districts, 17 academies, and the 133,000 public school students throughout the county. Contacting the Intermediate School District s Management This financial report is intended to provide our taxpayers, parents, and investors with a general overview of the Intermediate School District s finances and to show the Intermediate School District s accountability for the money it receives. If you have any questions about this report or need additional information, we welcome you to contact the business office. 14

18 Statement of Net Position June 30, 2017 Primary Government Governmental Activities Business-type Activities Assets Cash and investments (Note 3) $ 56,149,840 $ 6,460,830 Receivables: Accounts receivable 55,995 - Due from other governmental units 23,468,698 - Inventories 59,674 - Prepaid costs and deposits 2,299,514 - Other current assets 11,906 - Capital assets - Net (Note 5) 44,727,837 95,640 Total assets 126,773,464 6,556,470 Deferred Outflows of Resources - Deferred outflows related to pensions (Note 9) 24,287,673 - Total assets and deferred outflows of resources 151,061,137 6,556,470 Liabilities Accounts payable 4,287,241 2,993 Accrued payroll-related liabilities 4,274,286 - Other accrued liabilities 6,852,420 - Due to other governmental units 14,959,570 - Unearned revenue (Note 4) 10,594,500 - Noncurrent liabilities (Note 7): Due within one year 3,636,578 - Due in more than one year 1,274,832 - Net pension liability (Note 9) 164,383,906 - Total liabilities 210,263,333 2,993 Deferred Inflows of Resources (Notes 1 and 9) 5,563,035 - Total liabilities and deferred inflows of resources 215,826,368 2,993 Net Position Net investment in capital assets 44,727,837 - Restricted - Food service 18,760 - Unrestricted (109,511,828) 6,553,477 Total net position $ (64,765,231) $ 6,553,477 The Notes to Financial Statements are an Integral Part of this Statement. 15

19 Expenses Charges for Services Program Revenue Operating Grants and Contributions Functions/Programs Primary government - Governmental activities: Instruction $ 43,053,655 $ - $ 12,100,669 Support services 99,486,287-72,130,166 Food services 460,528 41,490 45,798 Community services 474, Payments to other entities and public schools 72,114,808 7,050,000 46,015,973 Depreciation expense (unallocated) 2,640, Total governmental activities 218,229,941 7,091, ,292,606 Business-type activities - WAN and student database services 8,818,261 1,980,189 - Total primary government $ 227,048,202 $ 9,071,679 $ 130,292,606 General revenue: Taxes: Property taxes, levied for general purposes Property taxes, levied for special education State aid not restricted to specific purposes Federal sources - Unrestricted Interest and investment earnings Gain on the sale of capital assets Other Change in Net Position Total general revenue Net Position - Beginning of year Net Position - End of year The Notes to Financial Statements are an Integral Part of this Statement. 16

20 Statement of Activities Year Ended June 30, 2017 Net (Expense) Revenue and Changes in Net Position Governmental Activities Business-type Activities Total $ (30,952,986) $ - $ (30,952,986) (27,356,121) - (27,356,121) (373,240) - (373,240) (474,209) - (474,209) (19,048,835) - (19,048,835) (2,640,454) - (2,640,454) (80,845,845) - (80,845,845) - (6,838,072) (6,838,072) (80,845,845) (6,838,072) (87,683,917) 5,226,807-5,226,807 70,820,182-70,820,182 8,032,232-8,032, , ,468 70,220-70,220 4,493-4,493 2,241,079-2,241,079 87,217,481-87,217,481 6,371,636 (6,838,072) (466,436) (71,136,867) 13,391,549 (57,745,318) $ (64,765,231) $ 6,553,477 $ (58,211,754) 17

21 Governmental Funds Balance Sheet June 30, 2017 General Fund Special Education Fund Medicaid Fund General Capital Projects Fund Nomajor Funds Total Governmental Assets Cash and investments (Note 3) $ 13,689,059 $ 23,845,393 $ - $ 14,819,228 $ 2,861,748 $ 55,215,428 Receivables: Accounts receivable 55, ,995 Due from other governmental units 5,239,377 18,204, ,968 23,468,698 Due from other funds (Note 6) 6, , ,428 Inventories 26,431 33, ,674 Prepaid costs and deposits 600,618 1,420, ,543 2,028,841 Total assets $ 19,617,050 $ 43,653,669 $ - $ 14,819,228 $ 2,895,117 $ 80,985,064 Liabilities, Deferred Inflows of Resources, and Fund Balances Liabilities Accounts payable $ 2,216,290 $ 2,022,197 $ - $ - $ 48,754 $ 4,287,241 Accrued payroll-related liabilities 510,062 3,764, ,274,286 Other accrued liabilities 411,897 4,944, ,356,320 Due to other governmental units 2,967,485 11,991, ,959,570 Unearned revenue (Note 4) 1,350,421 9,239, ,830 10,594,500 Due to other funds (Note 6) 8,557, ,000-8,707,908 Total liabilities 16,014,063 31,962, ,000 53,712 48,179,825 Deferred Inflows of Resources - Unavailable revenue (Note 4) 224, ,831 Total liabilities and deferred inflows of resources 16,238,894 31,962, ,000 53,712 48,404,656 Fund Balances Nonspendable: Inventory 26,431 33, ,674 Prepaid costs 600,618 1,420, ,543 2,028,841 Restricted: Special education - 10,237, ,237,696 Food service ,217 11,217 Committed - Cooperative activities ,822,645 2,822,645 Assigned: Capital projects ,669,228-14,669,228 Budgeted use of fund balance in subsequent year 524, ,349 Unassigned 2,226, ,226,758 Total fund balances 3,378,156 11,691,619-14,669,228 2,841,405 32,580,408 Total liabilities, deferred inflows of resources, and fund balances $ 19,617,050 $ 43,653,669 $ - $ 14,819,228 $ 2,895,117 $ 80,985,064 Funds The Notes to Financial Statements are an Integral Part of this Statement. 18

22 Governmental Funds Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position June 30, 2017 Fund Balance Reported in Governmental Funds $ 32,580,408 Amounts reported for governmental activities in the statement of net position are different because: Capital assets used in governmental activities are not financial resources and are not reported in the funds: Cost of capital assets $ 86,247,129 Accumulated depreciation (41,519,292) 44,727,837 Grants and other receivables that are collected after year end, such that they are not available to pay bills outstanding as of year end, are not recognized in the funds 224,831 Deferred outflows related to pension payments made subsequent to the measurement date 13,284,577 Deferred outflow related to pensions 11,003,096 Deferred inflows related to revenue in support of pension contributions made subsequent to measurement date are not reported in the governmental funds (5,077,493) Internal service fund assets and liabilities are included in governmental activities in the statement of net position 3,360,961 Net pension obligations do not present a claim on current financial resources and are not reported as fund liabilities (164,383,906) Deferred inflows related to pensions (485,542) Net Position of Governmental Activities $ (64,765,231) The Notes to Financial Statements are an Integral Part of this Statement. 19

23 Governmental Funds Statement of Revenue, Expenditures, and Changes in Fund Balances Year Ended June 30, 2017 General Fund Special Education Fund Medicaid Fund General Capital Projects Fund Nonmajor Funds Total Governmental Revenue Local sources $ 6,040,636 $ 82,285,557 $ - $ 7,563,997 $ 431,225 $ 96,321,415 State sources 21,473,816 42,016, ,522 63,493,634 Federal sources 4,714,617 38,941, ,484 44,082,287 Interdistrict sources 974, ,440,593 3,415,156 Total revenue 33,203, ,243,039-7,563,997 3,301, ,312,492 Expenditures - Current Instruction 678,630 40,295, ,079,257 43,053,655 Support services 22,708,991 58,210, , ,825 82,409,893 Food services , ,528 Community services 250, , ,209 Capital outlay 44,088 2,119,117-33,480-2,196,685 Payments to other entities and public schools 14,557,728 57,557, ,114,808 Total expenditures 38,239, ,405, ,480 3,530, ,709,778 Excess of Revenue (Under) Over Expenditures (5,036,163) 4,837,146-7,030,517 (228,786) 6,602,714 Other Financing Sources (Uses) Proceeds from sale of capital assets - 98, ,035 Transfers in 5,995,300 5,092, ,027 11,090,260 Transfers out (850,000) (5,997,327) (3,992,933) (250,000) - (11,090,260) Total other financing sources (uses) 5,145,300 (806,359) (3,992,933) (250,000) 2,027 98,035 Net Change in Fund Balances 109,137 4,030,787 (3,992,933) 6,780,517 (226,759) 6,700,749 Fund Balances - Beginning of year 3,269,019 7,660,832 3,992,933 7,888,711 3,068,164 25,879,659 Fund Balances - End of year $ 3,378,156 $ 11,691,619 $ - $ 14,669,228 $ 2,841,405 $ 32,580,408 Funds The Notes to Financial Statements are an Integral Part of this Statement. 20

24 Governmental Funds Reconciliation of the Statement of Revenue, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities Year Ended June 30, 2017 Net Change in Fund Balances - Total Governmental Funds $ 6,700,749 Amounts reported for governmental activities in the statement of activities are different because: Governmental funds report capital outlays as expenditures; however, in the statement of activities, these costs are allocated over their estimated useful lives as depreciation: Depreciation expense $ (2,640,454) Capitalized capital outlay 2,196,685 (443,769) Governmental funds report proceeds from sale of assets as revenue; in the statement of activities, these are recorded net of carrying value of the disposed assets (93,542) Revenue is reported in the statement of activities when earned; it is not reported in the funds until collected or collectible within 60 days of year end 9,955 Revenue in support of pension contributions made subsequent to measurement date (706,377) Change in pension expense related to deferred items (1,012,627) Internal Service Funds are included as part of governmental activities 1,917,247 Change in Net Position of Governmental Activities $ 6,371,636 The Notes to Financial Statements are an Integral Part of this Statement. 21

25 Nonmajor - Student Accounting Proprietary Funds Statement of Net Position June 30, 2017 Enterprise Funds Nonmajor - WAN Governmental Activities Proprietary - Internal Service Total Assets Current assets: Cash and investments (Note 3) $ 3,744,417 $ 2,716,413 $ 6,460,830 $ 934,412 Due from other funds (Note 6) ,557,908 Prepaid costs and deposits ,673 Other current assets ,478 Total current assets 3,744,417 2,716,413 6,460,830 9,768,471 Noncurrent assets - Capital assets - Net (Note 5) - 95,640 95,640 - Total assets 3,744,417 2,812,053 6,556,470 9,768,471 Liabilities Current liabilities: Accounts payable - 2,993 2,993 - Other accrued liabilities ,496,100 Provision for compensated absences and severance pay (Note 7) ,120,000 Provision for self-insurance (Note 7) ,516,578 Total current liabilities - 2,993 2,993 5,132,678 Noncurrent liabilities - Provision for compensated absences and severance pay (Note 7) ,274,832 Total liabilities - 2,993 2,993 6,407,510 Net Position - Unrestricted $ 3,744,417 $ 2,809,060 $ 6,553,477 $ 3,360,961 The Notes to Financial Statements are an Integral Part of this Statement. 22

26 Proprietary Funds Statement of Revenue, Expenses, and Changes in Net Position Year Ended June 30, 2017 Nonmajor - Student Accounting Enterprise Funds Nonmajor - WAN Total Governmental Activities Proprietary - Internal Service Operating Revenue - Charges for tax collection services, compensated absences, severance pay, self-insurance costs, WAN services, and student database services $ 1,120,021 $ 860,168 $ 1,980,189 $ 17,981,014 Operating Expenses - Salaries and benefits, purchased services, and supplies and materials 7,500,270 1,317,991 8,818,261 16,063,767 Change in Net Position (6,380,249) (457,823) (6,838,072) 1,917,247 Net Position - Beginning of year 10,124,666 3,266,883 13,391,549 1,443,714 Net Position - End of year $ 3,744,417 $ 2,809,060 $ 6,553,477 $ 3,360,961 The Notes to Financial Statements are an Integral Part of this Statement. 23

27 Proprietary Funds Statement of Cash Flows Year Ended June 30, 2017 Nonmajor - Student Accounting Enterprise Funds Nonmajor - WAN Total Governmental Activities Proprietary - Internal Service Cash Flows from Operating Activities Receipts from customers, interfund services, and reimbursements $ 7,440,401 $ 4,000,808 $ 11,441,209 $ 15,889,714 Salaries, benefits, claims, purchased services, and other amounts paid (7,500,270) (1,284,395) (8,784,665) (15,722,204) Net (Decrease) Increase in Cash and Cash Equivalents - Net cash (used in) provided by operating activities (59,869) 2,716,413 2,656, ,510 Cash and Cash Equivalents - Beginning of year 3,804,286-3,804, ,902 Cash and Cash Equivalents - End of year $ 3,744,417 $ 2,716,413 $ 6,460,830 $ 934,412 Reconciliation of Operating (Loss) Income to Net Cash from Operating Activities Operating (loss) income $ (6,380,249) $ (457,823) $ (6,838,072) $ 1,917,247 Adjustments to reconcile operating (loss) income to net cash from operating activities: Changes in operating activities - Depreciation - 38,256 38,256 - Changes in assets and liabilities: Prepaid and other assets - 14,790 14,790 (203,494) Accounts payable - (4,660) 7,565 - Due to/from other funds 6,320,380 3,125,850 9,446,230 (1,887,806) Provision for compensated absences, severance pay, and self-insurance liability ,539 Accrued and other liabilities ,024 Net cash (used in) provided by operating activities $ (59,869) $ 2,716,413 $ 2,656,544 $ 167,510 The Notes to Financial Statements are an Integral Part of this Statement. 24

28 Fiduciary Funds Statement of Assets and Liabilities June 30, 2017 Activities Fund Tax Collection Fund Total Assets Cash and investments (Note 3) $ 988,457 $ 96,988 $ 1,085,445 Other current assets - 64,259 64,259 Total assets $ 988,457 $ 161,247 $ 1,149,704 Liabilities Accounts payable $ - $ 78,789 $ 78,789 Due to student and other groups 988,457 52,940 1,041,397 Due to other governmental units - 23,090 23,090 Due to other funds (Note 6) - 6,428 6,428 Total liabilities $ 988,457 $ 161,247 $ 1,149,704 The Notes to Financial Statements are an Integral Part of this Statement. 25

29 Notes to Financial Statements June 30, 2017 Note 1 - Nature of Business and Significant Accounting Policies The accounting policies of Macomb Intermediate School District (the School District ) conform to accounting principles generally accepted in the United States of America (GAAP) as applicable to governmental units. The following is a summary of the significant accounting policies used by the School District: Reporting Entity The School District is governed by an elected five-member Board of Education. The accompanying financial statements have been prepared in accordance with criteria established by the Governmental Accounting Standards Board for determining the various governmental organizations to be included in the reporting entity. These criteria include significant operational financial relationships that determine which of the governmental organizations are a part of the School District's reporting entity, and which organizations are legally separate component units of the School District. Based on the application of the criteria, the School District does not contain any component units. Government-wide and Fund Financial Statements The government-wide financial statements (i.e., the statement of net position and the statement of activities) report information on all of the nonfiduciary activities of the primary government. For the most part, the effect of interfund activity has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenue, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. The statement of activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenue. Direct expenses are those that are clearly identifiable with a specific function. Program revenue includes (1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function and (2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function. Taxes, intergovernmental payments, and other items not properly included among program revenue are reported instead as general revenue. Separate financial statements are provided for governmental funds, proprietary funds, and fiduciary funds, even though the latter are excluded from the government-wide financial statements. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements. 26

30 Notes to Financial Statements June 30, 2017 Note 1 - Nature of Business and Significant Accounting Policies (Continued) Measurement Focus, Basis of Accounting, and Financial Statement Presentation Government-wide Financial Statements - The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenue is recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenue in the year for which they are levied. Grants, categorical aid, and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. When an expense is incurred for purposes for which both restricted and unrestricted net position or fund balance are available, the School District's policy is to first apply restricted resources. When an expense is incurred for purposes which amounts in any of the unrestricted fund balance classifications could be used, it is the School District's policy to spend funds in this order: committed, assigned, and unassigned. Amounts reported as program revenue include (1) charges to customers or applicants for goods, services, or privileges provided and (2) operating grants and contributions. Internally dedicated resources are reported as general revenue rather than as program revenue. Likewise, general revenue includes all taxes and unrestricted state aid. Fund Financial Statements - Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenue is recognized as soon as it is both measurable and available. Revenue is considered to be available if it is collected within the current period or soon enough thereafter to pay liabilities of the current period. Revenue not meeting this definition is classified as a deferred inflow of resources. For this purpose, the School District considers revenue to be available if it is collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, expenditures related to compensated absences and claims and judgments are recorded only when payment is due. Property taxes, unrestricted state aid, intergovernmental grants, and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenue of the current fiscal period. All other revenue items are considered to be available only when cash is received by the School District. 27