Comprehensive Annual Financial Report

Transcription

1 Rich Township High School District 227 Comprehensive Annual Financial Report fiscal year ending June 30, 2008 RICH TOWNSHIP HIGH SCHOOL DISTRICT Governors Drive, Suite 200 Olympia Fields, IL serving all or part of the communities of CHICAGO HEIGHTS COUNTRY CLUB HILLS MATTESON OLYMPIA FIELDS PARK FOREST RICHTON PARK TINLEY PARK UNIVERSITY PARK

2 RICH TOWNSHIP HIGH SCHOOL DISTRICT NO. 227 OLYMPIA FIELDS, ILLINOIS COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED JUNE 30, 2008 Submitted by: Business Office Ilandus Hampton Director of Fiscal Affairs McGladrey & Pullen, LLP is a member firm of RSM International an affiliation of separate and independent legal entities.

3 Contents Introductory Section Transmittal Letter Organization Chart List of Principal Officials Certificate of Achievement for Excellence in Financial Reporting I - VIII IX X XI Financial Section Independent Auditor's Report 1 2 Required Supplemental Information Management s Discussion and Analysis (MD&A) 3 12 Basic Financial Statements Government-Wide Financial Statements (GWFS) Statement of Net Assets 13 Statement of Activities 14 Fund Financial Statements (FFS) Governmental Funds: Balance Sheet - Governmental Funds 15 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Assets 16 Statement of Revenues, Expenditures and Changes in Fund Balance - Governmental Funds 17 Reconciliation of the Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balance to the Statement of Activities 18 Fiduciary Funds: Statement of Fiduciary Assets and Liabilities - Agency Fund 19 Notes to Financial Statements Required Supplemental Information Schedule of Funding Progress - Illinois Municipal Retirement Fund 37 Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual - Budgetary and GAAP Basis: General Fund 38 IMRF/Social Security Fund 39 Note to Required Supplementary Information Supplemental Information Combining Major Governmental Funds: Combining Balance Sheet - General Fund, By Accounts 42 Combining Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual - Budgetary and GAAP Basis - General Fund, By Accounts 43 44

4 Contents Financial Section (Continued) Combining Nonmajor Governmental Funds: Combining Balance Sheet - By Fund Type - Nonmajor Governmental Funds 45 Combining Statement of Revenues, Expenditures and Changes in Fund Balance - By Fund Type - Nonmajor Governmental Funds 46 Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual - Budgetary and GAAP Basis: Transportation Fund 47 Working Cash Fund 48 Site and Construction Fund 49 Fire Prevention and Life Safety Fund 50 Bond and Interest Fund 51 Schedule of Debt Service Requirements Statistical Section Statistical Section Fly Sheet 54 Financial Trends Information Net Assets by Component 55 Schedule of Changes in Net Assets Schedule of Fund Balance, Governmental Funds 58 Schedule of Changes in Fund Balance, Governmental Funds 59 Revenue Capacity Information Assessed Value and Estimated Actual Value of Taxable Property 60 Property Tax Rates Direct and Overlapping Governments Representative Ten Largest Taxpayers 63 Schedule of Property Tax Rates, Extensions and Collections 64 Debt Capacity Information Outstanding Debt by Type 65 Computation of Direct and Overlapping Bonded Debt 66 Legal Debt Margin Information 67 Demographic and Economic Information Demographic and Economic Statistics 68 Principal Employers 69 Operating Information Full-Time Equivalent District Employees by Type 70 Operating Statistics 71

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16 Independent Auditor's Report President and Members of the Rich Township Trustees of Schools and the Board of Education Rich Township High School District No. 227 Olympia Fields, Illinois We have audited the accompanying financial statements of the governmental activities, each major fund and the aggregate remaining fund information of Rich Township High School District No. 227 as of and for the year ended June 30, 2008, which collectively comprise the District s basic financial statements as listed in the table of contents. These financial statements are the responsibility of the District's management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund and the aggregate remaining fund information of Rich Township High School District No. 227 as of June 30, 2008, and the respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued our report dated 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 and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards, and should be considered in assessing the results of our audit. McGladrey & Pullen, LLP is a member firm of RSM International an affiliation of separate and independent legal entities. 1

17 The accompanying required supplemental information, which includes management s discussion and analysis (pages 3 12, schedule of funding progress (page 37) and budgetary schedules and related note (pages 38 41) are not a required part of the basic financial statements but are supplemental information required by the Governmental Accounting Standards Board. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the District s basic financial statements. The combining and individual fund financial statements and other schedules, listed in the table of contents as supplementary data, are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. The accompanying introductory and statistical sections, as listed in the table of contents, are presented for purposes of additional analysis and are not a required part of the basic financial statements. This information has not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we express no opinion on it. Chicago, Illinois Report Date 2

18 Required Supplemental Information

19 Management s Discussion And Analysis (MD&A)

20 Management s Discussion and Analysis This section of Rich Township High School District No. 227 s annual financial report presents its discussion and analysis of the District s financial performance during the fiscal year ended June 30, Please read it in conjunction with the District s financial statements. The Management s Discussion and Analysis (MD&A) is an element of the new reporting model adopted by the Governmental Accounting Standards Board (GASB) in their Statement No. 34, Basic Financial Statements and Management s Discussion and Analysis for State and Local Governments, issued June Financial Highlights The assets of the District exceeded its liabilities at the close of the fiscal year by $39.3 million (net assets). Of this amount, $2.8 million is unrestricted, and the remaining balance is invested in capital assets, net of related debt. In total, net assets increased by $0.2 million. The increase is due to revenues increasing at a rate faster than expenses. General revenues were $59.9 million or 84 percent of all revenue. Program specific revenues in the form of charges for services and operating grants and contributions were $11.2 million or 16 percent of total revenues of $71.1 million. In the Fund Financial statements, expenditures exceeded revenues overall by $23.8 million in the Governmental Funds. This was mainly driven by a $23.5 million deficit in the General Fund (Education, Operations and Maintenance accounts), a deficit of $0.5 million in the IMRF/Social Security Fund, a deficit of $0.3 million in the Bond and Interest Fund, and a surplus of $0.5 million in the nonmajor funds (Transportation, Working Cash, Site and Construction, Fire Prevention and Life Safety). The deficit in the General Fund was primarily due to capital spending related to various construction contracts. In total, the District s governmental funds combined fund balance decreased from $74.6 million to $50.8 million in the current year. Of the year-end fund balance in the Fund Financial statements, $50.6 million is available to meet the District s obligations to citizens, vendors and creditors (unreserved fund balance). 3

21 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 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 longterm 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 such as 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. The financial statements also include notes that explain some of the information in the statements and provide more detailed data. The statements are followed by a section of required supplementary information that further explains and supports the financial statements. Figure A-1 shows how the various parts of this annual report are arranged and related to one another. 4

22 Management s Discussion and Analysis Figure A-1 Organization of Rich Township High School District No. 227 Annual Financial Report Management s Discussion and Analysis Basic Financial Statements Required Supplemental Information Government- Wide Financial Statements Fund Financial Statements Notes to the Financial Statements Summary Detail This report also contains other supplemental information in addition to the basic financial statements. 5

23 Management s Discussion and Analysis 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 assets includes all of the District s assets and liabilities. All of the current year s revenues and expenses are accounted for in the statement of activities regardless of when cash is received or paid. The two government-wide statements report the District s net assets and how they have changed. Net assets 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 assets are an indicator of whether its financial position is improving or deteriorating, respectively. To assess the District s overall health, you need to consider additional non-financial factors such as changes in 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 all categorized as governmental activities. All of the District s basic services are included here, such as regular and special education, transportation, and administration. Property taxes and state aid finance most of these activities. Fund Financial Statements Rich Township High School District No. 227 s fund financial statements provide more detailed information about the District s funds, focusing on its most significant or major funds not the District as a whole. Funds are accounting devices the District uses to keep track of specific sources of funding and spending on particular programs: Some funds are required by state law and by bond covenants. The District establishes other funds to control and manage money for particular purposes (such as repaying its long-term debts) or to show that it is properly using certain revenues (such as Working Cash). The District has two categories 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 after each of the governmental funds statements explains the relationship (or differences) between them. Fiduciary funds: The District is the trustee, or fiduciary, for assets that belong to others, such as the student activities 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. The District excludes these activities from the government-wide financial statements because it cannot use these assets to finance its operation. 6

24 Management s Discussion and Analysis Financial Analysis of the District as a Whole Net assets: The District s combined net assets on June 30, 2008 totaled $39.3 million. (See Figure A-2). Figure A-2 Condensed Statement of Net Assets (in millions of dollars) Governmental Activities Current and other assets $ 79.1 $102.0 Capital assets Noncurrent assets Total assets Current and other liabilities Long-term debt outstanding Net assets Invested in capital assets, net of related debt Unrestricted Total net assets $39.3 $39.1 The District s stable financial position is the product of many factors. The Board of Education is determined to maintain a balanced budget. With a limited supply of funding, the Board of Education has had to reallocate existing resources to continue meeting its educational goals. Changes in net assets: For the year ended June 30, 2008, the District s total revenues were $71.1 million (See Figure A-3.) Real estate taxes accounted for most of the District s revenue, contributing about 63.3 cents of every dollar raised. (See Figure A-4.) Another 16.0 cents came from state aid and formula grants and the remainder from fees charged for services and miscellaneous sources. 7

25 Management s Discussion and Analysis For the year ended June 30, 2008, the total cost of all programs and services was $70.9 million. The District s expenses are predominantly related to instruction, pupil services, and administration and business (78 percent). (See Figure A-5.) The District s transportation activities accounted for 4.0 percent of total costs. Total revenue exceeded expenditures, increasing net assets by $0.2 million over last year. Figure A-3 Changes in Net Assets from Operating Results (in millions of dollars) Governmental Percentage Governmental Percentage Activities 2008 of Total Activities 2007 of Total Revenues Program revenues Charges for services $ % $ % Operating grants and contributions % % General revenues Taxes % % State aid and formula grants % % Other % % Total revenues $ % $ % Expenses Instruction $ % $ % Pupil and instructional services % % Administration and business % % Maintenance and operations % % Transportation % % Other % % Total expenses $ % $ % Change in net assets $0.2 ($2.5) Net assets: July 1 $39.1 $41.6 June 30 $39.3 $39.1 8

26 Management s Discussion and Analysis Figure A Government-Wide Revenues By Source Other 4.9% State Formula Aid & Formula Grants 16.0% Charges for Services 2.4% Taxes 63.3% Operating Grants & Contributions 13.4% Figure A Government-Wide Expenses Transportation 4.0% Maintenance & Operations 6.2% Other 11.7% Administration & Business 15.0% Instruction 50.6% Pupil & Instructional Services 12.5% 9

27 Management s Discussion and Analysis Governmental Activities Revenues for the District s governmental activities were $71.1 million in 2008 and $58.2 million in Total expenses were $70.9 million and $60.7 million, respectively. Net assets increased by $0.2 million in 2008 and decreased by $2.5 million in The stable health of the District s finances can be credited to both a solid real estate tax base and budgetary controls put in place by the Board of Education. Expected increases in real estate values mitigated the negative impact of increased property tax refunds. The District allocated these refunds to minimize the impact on the Bond and Interest Fund that accumulates the resources to pay off bonded debt and the General Fund that finances the educational program. Figure A-6 presents the cost of six major District activities: instruction, pupil and instructional services, administration and business, maintenance and operations, transportation and other. The table also shows each activity s net cost (total cost less fees generated by the activities and intergovernmental aid provided for specific programs). The net cost shows the financial burden placed on the District s taxpayers by each of these functions. Figure A-6 Net Cost of Governmental Activities (in millions of dollars) Total Cost Net Costs Total Cost Net Costs of Services of Services of Services of Services Instruction $ 35.8 $ 28.1 $ 32.3 $ 26.8 Pupil and instructional services Administration and business Maintenance and operations Transportation Other TOTAL $ 70.9 $ 59.7 $ 60.7 $ 52.0 The cost of all governmental activities was $70.9 million and $60.7 million in 2008 and 2007, respectively. Some of the cost was financed by the users of the District s programs ($1.7 million in 2008 and $1.2 million in 2007). The federal and state governments subsidized certain programs with operating grants and contributions ($9.5 million and $7.5 million in 2008 and 2007, respectively). Most of the District s costs, however, were financed by District taxpayers. 10

28 Management s Discussion and Analysis Financial Analysis of the District s Funds As the District completed the year, its governmental funds reported combined fund balances of $50.8 million. Revenues for the District s governmental activities were $71.1 million, while total expenditures were $94.9 million. The General Fund experienced a current year operation deficit of $23.5 million. This deficit was due to capital outlay expenditures of approximately $31.2 million. The IMRF/Social Security Fund decreased its fund balance by $0.5 million. This decrease in fund balance has been occurring for the past several years and can be attributed to the District s main revenue source, property taxes, not increasing at the same level as employee benefits. The Bond and Interest Fund decreased its fund balance by $0.3 million in the current year. This slight decrease can be attributed to various transactions relating to repayment of debt. General Fund Budgetary Highlights Although the District s final budget for the General Fund anticipated that expenditures would exceed revenues by $34.1 million, the actual deficit was approximately $23.5 million for the year. This was due to less capital outlay expenditures than expected. In addition, actual revenues were approximately $4.1 million higher than budgeted revenues. This is mainly due to the District receiving more revenue for property taxes, state aid, and interest than anticipated. Capital Assets Capital Asset and Debt Administration By the end of 2008, the District had invested $96.5 million (before accumulated depreciation of $46.7 million) in a broad range of capital assets, including land and land improvements, buildings, furniture and equipment, and construction in progress. (See Figure A-7.) (More detailed information about capital assets can be found in Note 4 to the financial statements.) Total depreciation expense for the year exceeded $2.1 million, while additions amounted to $22.9 million. Figure A-7 Capital Assets (net of depreciation) (in millions of dollars) Total Percentage Change Land $ 1.1 $ % Construction in progress % Land improvements (0.3)% Buildings and improvements (5.2)% Furniture and equipment % TOTAL $ 49.8 $

29 Management s Discussion and Analysis Long Term Debt At June 30, 2008, the District had $60.7 million in general obligation bonds and other long-term debt outstanding as shown in Figure A-8. More detailed information about the District s long-term liabilities is presented in Note 5 to the financial statements. Figure A-8 Outstanding Long-Term Debt (in millions of dollars) Total Percentage Change General obligation bonds $ 60.4 $ % Other (0.2)% TOTAL $ 60.7 $ 64.0 The District continued to stay well below its legal debt margin. The decrease in debt over the prior year was due to the repayment of various general obligation bonds. Factors Bearing on the District s Future At the time that these financial statements were prepared, the District had concluded its contract negotiations with the certified (teaching) staff. Additionally, the District obtained a one-year extension with the classified staff in order that the District might complete the otherwise expiring contract negotiations. Contacting the District s Financial Management This financial report is designed to provide the District s citizens, taxpayers, customers, and investors and creditors with a general overview of the District s finances and to demonstrate the District s accountability for the money it receives. If you have questions about this report or need additional financial information, contact Ilandus Hampton, Director Fiscal Services, Rich Township High School District 227, Olympia Fields, Illinois, (708)

30 Basic Financial Statements

31 Government-Wide Financial Statements (GWFS)

32 Statement of Net Assets June 30, 2008 Assets Governmental Activities Current Assets Cash and investments $ 48,835,824 Property taxes receivable 27,423,918 Due from other governmental units 1,710,079 Due from student activity account 734,757 Prepaid items 350,000 Total current assets 79,054,578 Noncurrent Assets Unamortized bond issuance costs 1,449,214 Capital assets not being depreciated 26,839,992 Capital assets being depreciated, net 22,942,031 Total noncurrent assets 51,231,237 Total assets $ 130,285,815 Liabilities and Net Assets Current Liabilities Accounts payable $ 1,159,549 Accrued liabilities 544,028 Accrued interest 228,385 Unearned revenue 26,421,348 General obligation bonds 3,035,000 Capital leases 15,023 Total current liabilities 31,403,333 Long-term liabilities, net of current maturities Compensated absences 225,175 Unamortized premium on bonds 1,973,953 General obligation bonds 57,375,000 Capital leases 1,579 Total long-term liabilities 59,575,707 Total liabilities 90,979,040 Net Assets Invested in capital assets, net of related debt 36,474,053 Unrestricted 2,832,722 Total net assets 39,306,775 Total liabilities and net assets $ 130,285,815 See Notes to Financial Statements. 13

33 Statement of Activities Year Ended June 30, 2008 Net Expense and Changes in Program Revenues Net Assets Operating Charges for Grants and Governmental Functions/Programs Expenses Services Contributions Activities Governmental activities: Instruction: Regular programs $ 22,865,506 $ 838,012 $ 3,792,657 $ (18,234,837) Special programs 7,826,176-2,605,466 (5,220,710) Other instructional programs 5,183, ,029 (4,598,262) Support services: Pupils 7,473, (7,473,930) Instructional staff 1,317, ,169 (1,074,226) General administration 2,579, (2,579,907) School administration 4,578, (4,578,695) Business 3,462, , ,360 (1,568,696) Transportation 2,760,935 3,402 1,294,306 (1,463,227) Central 1,051, (1,051,834) Operations and maintenance 4,437, (4,437,562) Payments to other governments 4,383, (4,383,346) Interest and charges 3,030, (3,030,019) Total governmental activities $ 70,951,282 $ 1,768,044 $ 9,487,987 (59,695,251) General revenues: Taxes: Property taxes, general purposes 37,692,434 Property taxes, debt service 5,733,251 Corporate personal property replacement taxes 1,585,730 State aid-formula grants 11,348,356 Payments in lieu of taxes 282,975 Interest 3,117,619 Miscellaneous 121,161 Total general revenues 59,881,526 Change in net assets 186,275 Net assets: July 1, ,120,500 June 30, 2008 $ 39,306,775 See Notes to Financial Statements. 14

34 Fund Financial Statements (FFS)

35 Balance Sheet Governmental Funds June 30, 2008 Assets IMRF/Social Bond and Nonmajor Total General Security Interest Governmental Governmental Fund Fund Fund Funds Funds Cash and investments $ 40,426,012 $ - $ 3,242,273 $ 5,167,539 $ 48,835,824 Property taxes receivable 22,684, ,018 3,540, ,199 27,423,918 Advance to other funds ,285,888 1,285,888 Due from other governmental units 1,375,528 16, ,426 1,710,079 Due from student acctivity account 734, ,757 Prepaid items 350, ,000 Total assets $ 65,570,959 $ 374,143 $ 6,782,312 $ 7,613,052 $ 80,340,466 Liabilities and Fund Balance Liabilities Accounts payable $ 860,958 $ - $ - $ 298,591 $ 1,159,549 Accrued liabilities 544, ,028 Advance from other funds - 1,285, ,285,888 Deferred revenue 21,937, ,929 3,410, ,446 26,503,235 Total liabilities 23,342,224 1,630,817 3,410,622 1,109,037 29,492,700 Fund balance (deficit): Reserved for tort immunity , ,347 Reserved for advances ,285,888 1,285,888 Reserved for prepaid items 350, ,000 Unreserved, reported in: General fund 41,878, ,878,735 Debt service fund - - 3,371,690-3,371,690 Special revenue funds - (1,256,674) - 3,085,406 1,828,732 Capital projects funds ,931,374 1,931,374 Total fund balance 42,228,735 (1,256,674) 3,371,690 6,504,015 50,847,766 Total liabilities and fund balance $ 65,570,959 $ 374,143 $ 6,782,312 $ 7,613,052 $ 80,340,466 See Notes to Financial Statements. 15

36 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Assets June 30, 2008 Total fund balance - governmental funds $ 50,847,766 Amounts reported for governmental activities in the statement of net assets are different because: The cost of capital assets (land, land and improvements, buildings and improvements, and furniture and equipment) purchased or constructed is reported as an expenditure in governmental funds. The statement of net assets includes those capital assets among the assets of the School Board as a whole. Cost of capital assets $ 96,452,713 Accumulated depreciation (46,670,690) 49,782,023 State grant revenues that are deferred in the fund financial statements because they are not available but are recognized as revenue in the government-wide financial statements 81,887 Long-term liabilities applicable to the District's governmental activities are not due and payable in the current period and accordingly are not reported as fund liabilities. All liabilities - both current and long-term - are reported in the statement of net assets General obligation bonds (60,410,000) Capital leases (16,602) Compensated absences (225,175) Accrued interest (228,385) Premiums on bonds that are other financing sources in the fund financial statements are liabilities that are amortized over the life of the bonds in the government-wide financial statements (1,973,953) Bond issuance costs that are an expenditure in the fund financial statements are an asset that is amortized over the life of the bonds in the government-wide financial statements 1,449,214 Net assets of governmental activities $ 39,306,775 See Notes to Financial Statements. 16

37 Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds Year Ended June 30, 2008 IMRF/Social Bond and Nonmajor Total General Security Interest Governmental Governmental Fund Fund Fund Funds Funds Revenues: Property taxes $ 35,037,374 $ 907,580 $ 5,733,251 $ 1,747,480 $ 43,425,685 Corporate personal property replacement taxes 1,574,337 11, ,585,730 Payments in lieu of taxes 243, , ,975 Charges for services 1,764, ,402 1,768,044 Unrestricted state aid 11,348, ,348,356 Restricted state aid 5,807, ,294,306 7,101,694 Restricted federal aid 2,357, ,357,138 Interest 2,929, ,000 3,117,619 Miscellaneous 121, ,161 Total revenues 61,183, ,973 5,733,251 3,273,107 71,108,402 Expenditures: Current: Instruction: Regular programs 19,448, , ,635,542 Special programs 6,306, , ,515,424 Other instructional programs 4,191, , ,315,178 Support services: Pupils 6,017, , ,222,173 Instructional staff 1,069,518 27, ,096,754 General administration 2,095,617 52, ,147,816 School administration 3,669, , ,817,219 Business 2,440, , ,882,745 Transportation ,760,935 2,760,935 Central 811,493 64, ,670 Operations and maintenance 3,694, ,694,346 Payments to other governments 4,383, ,383,346 Debt Service: Principal 118,480-3,190,000-3,308,480 Interest and charges 13,032-2,816,155-2,829,187 Capital outlay 30,380, ,105 30,384,927 Total expenditures 84,641,685 1,456,862 6,006,155 2,765,040 94,869,742 Net change in fund balance (23,458,614) (537,889) (272,904) 508,067 (23,761,340) Fund balance (deficit): July 1, ,687,349 (718,785) 3,644,594 5,995,948 74,609,106 June 30, 2008 $ 42,228,735 $ (1,256,674) $ 3,371,690 $ 6,504,015 $ 50,847,766 See Notes to Financial Statements. 17

38 Reconciliation of the Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balances to the Statement of Activities Year Ended June 30, 2008 Net change in fund balances total governmental funds $ (23,761,340) Amounts reported for governmental activities in the statement of activities are different because: Capital outlays are reported in governmental funds as expenditures. However, in the statement of activities, the costs of those assets is allocated over their estimated useful lives as depreciation expense. These are the amounts in the current period. Depreciation expense $ (2,145,610) Capital outlays 22,958,077 20,812,467 In the statement of activities, the amount by which the carrying value of capital assets disposed of exceeds the proceed from the sale of those assets is reported as a loss. (8,116) State grant revenues that are deferred in the fund financial statements because they are not available but are recognized as revenue in the government-wide financial statements. 29,155 In the statement of activities, compensated absences are measured by the amounts earned during the year. In the governmental funds, however, expenditures for these items are measured by the amount of financial resources that are used. This year, compensated absences earned were less than the amounts used. 6,461 Repayment of principal on long-term debt is an expenditure in the governmental funds, but the repayment reduces long-term liabilities in the statement of net assets. General obligation bonds 3,190,000 Capital leases 118,480 Accrued interest payable reported in the statement of activities does not require the use of current financial resources and, therefore, is not reported as a liability in governmental funds. (228,385) Premium on bonds is recorded as other financing sources in the fund financial statements, but the premium is recorded as a liability in the statement of net assets and is amortized over the life of the bonds. This is the amount in the current period. Amortization of premium on bonds 122,431 Bond issuance costs are recorded as expenditures in the fund financial statements, but the cost is recorded as an asset in the statement of net assets and is amortized over the life of the bonds. This is the amount in the current period. Amortization of bond issuance costs (94,878) Change in net assets of governmental activities $ 186,275 See Notes to Financial Statements. 18

39 Statement of Fiduciary Assets and Liabilities Agency Fund June 30, 2008 Assets Agency Student Activity Fund Cash and investments $ 1,366,005 Liabilities Due to activity fund organizations 631,248 Due to District educational fund 734,757 Total liabilities 1,366,005 Total net assets See Notes to Financial Statements. $ - 19

40 Notes to Financial Statements Note 1. Summary of Significant Accounting Policies Nature of Activities Rich Township High School District No. 227 operates a public school system under the direction of its Board of Education. In meeting the educational needs of the students within its boundaries, the District also operates a school lunch program and provides student transportation services. The accounting policies of the District conform to accounting principles generally accepted in the United States of America as applicable to governments. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. The following is a summary of the more significant accounting policies: Financial Reporting Entity As defined by generally accepted accounting principles established by the Governmental Accounting Standards Board (GASB), the financial reporting entity consists of the primary government, as well as component units, which are legally separate organizations for which elected officials of the primary government are financially accountable. Financial accountability is defined as: (1) Appointment of a voting majority of the component unit s board, and either (a) the ability to impose will by the primary government, or (b) the possibility that the component unit will provide a financial benefit to, or impose a financial burden on, the primary government; or (2) Fiscal dependency on the primary government. Based upon the application criteria, no component units have been included within the reporting entity. Government-Wide and Fund Financial Statements Government-Wide Financial Statements: The government-wide Statement of Net Assets and Statement of Activities report the overall financial activity of the District. Eliminations have been made to minimize the double counting of internal activities of the District. The financial activities of the district consist of governmental activities, which are primarily supported by taxes and intergovernmental revenues. The Statement of Net Assets presents the District s non-fiduciary assets and liabilities with the difference reported in three categories: Invested in capital assets, net of related debt consists of capital assets, net of accumulated depreciation and reduced by outstanding balances for bonds and other debt that are attributable to the acquisition, construction, or improvement of those assets. Restricted net assets result when constraints placed on net asset use are either externally imposed by creditors, grantors, contributors, and the like, or imposed by law through constitutional provisions or enabling legislation. The District has no restricted net assets at June 30, Unrestricted net assets consist of net assets that do not meet the criteria of the two preceding categories. 20

41 Notes to Financial Statements Note 1. Summary of Significant Accounting Policies (continued) Government-Wide and Fund Financial Statements (continued) The Statement of Activities demonstrates the degree to which the direct expenses of a given function (i.e., instruction, support services, etc.) are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function. Program revenues include (a) charges paid by the recipients of goods or services offered by the programs (including fines and fees), and (b) grants and contributions that are restricted to meeting the operational requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues. Fiduciary funds are excluded from the government-wide financial statements. Fund Financial Statements: Separate financial statements are provided for governmental funds and fiduciary (agency) funds, even though the latter are excluded from the government-wide financial statements. The fund financial statements provide information about the District s funds. The District has the following governmental funds - General, Special Revenue, Debt Service, and Capital Project. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column. Additionally, the District administers an agency fund that is used to account for assets held by the District in an agency capacity. These funds are held on behalf of the students of the District. The District administers the following major governmental funds: General Fund: This is the District s primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund. IMRF/Social Security Fund: This is a special revenue fund which accounts for the payment of payroll related liabilities of the District. Bond and Interest Fund: This is a debt service fund which accounts for the servicing of the long-term debt of the District. All remaining governmental funds are aggregated and reported as nonmajor governmental funds. Measurement Focus and Basis of Accounting and Financial Statement Presentation The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flow takes place. Nonexchange transactions, in which the District gives (or receives) value without directly receiving (or giving) equal value in exchange, include various taxes, stateshared revenues and various state, federal and local grants. On an accrual basis, revenues from taxes are recognized when the District has a legal claim to the resources. Grants, entitlements, state-shared revenues and similar items are recognized in the fiscal year in which all eligibility requirements imposed by the provider have been met. 21

42 Notes to Financial Statements Note 1. Summary of Significant Accounting Policies (continued) Measurement Focus and Basis of Accounting and Financial Statement Presentation (continued) Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the District considers revenues to be available if they are collected within 60 days of the end of the current fiscal year. Significant revenue sources which are susceptible to accrual include property taxes, other taxes, grants, and interest. All other revenue sources are considered to be measurable and available only when cash is received. Expenditures generally are recorded when the liability is incurred, as under accrual accounting. However, compensated absences are recorded only when payment is due (upon employee retirement or termination). General capital asset acquisitions are reported as expenditures in governmental funds. Private-sector standards of accounting and financial reporting issued prior to December 1, 1989, generally are followed in the government-wide financial statements to the extent that those standards do not conflict with or contradict guidance of the Governmental Accounting Standards Board (GASB), in which case the GASB prevails. Property Taxes Property taxes are levied each year on all taxable real property in the District on or before the last Tuesday in December. The 2007 tax levy was passed by the Board of Education on December 18, 2007, and attached as an enforceable lien on the property as of the preceding January 1. These taxes become due and collectible in March and September 2008 and are collected by the county collector who in turn remits to the District its respective share. The District receives these remittances within one month of the collection dates. For all funds, the District recognizes collections within 60 days after year-end as revenue in the current fiscal year with the remaining portion of the levy to be recognized in the following fiscal year. Accordingly, the second half amount is reflected as deferred revenue in the current year. This methodology conforms to the measurable and available criteria for revenue recognition. A reduction for collection losses, based on historical collection experience, has been provided to reduce the taxes receivable to the estimated amounts to be collected. Assets, Liabilities, and Net Assets or Equity Investments The investments are recorded at fair value. Fair value is determined primarily on the basis of quoted market prices for the same or similar investments. 22

43 Notes to Financial Statements Note 1. Summary of Significant Accounting Policies (continued) Assets, Liabilities, and Net Assets or Equity (continued) Interfund Receivables, Payables, and Activity Loans amounts provided with a requirement for repayment. Interfund loans are reported as due from other funds in lender funds and due to other funds in borrower funds for short-term borrowings and advances to other funds in lender funds and advances from other funds in borrower funds for long-term borrowings. Amounts are eliminated in the government-wide statement of net assets. Transfers flows of assets (such as cash or goods) without equivalent flows of assets in return and without a requirement for repayments. In governmental funds, transfers are reported as other financing uses in the funds making transfers and as other financing sources in the funds receiving transfers. Capital Assets Capital assets which include land, buildings, and other equipment, are reported in the applicable Statement of Net Assets. Capital assets are defined as assets with an initial individual cost of more than $500, and an estimated useful life of greater than one year. Additions or improvements that significantly extend the useful life of an asset, or that significantly increase the capacity of an asset, are capitalized. Expenditures for asset acquisitions and improvements are stated as capital outlay expenditures in the governmental funds. These assets have been valued at historical cost or estimated historical cost if purchased or constructed. Donated assets are recorded at their estimated fair market value at the date of donation. The cost of normal maintenance and repairs that do not add to the value of the asset or materially extend the assets lives are not capitalized. Depreciation of capital assets is recorded in the Statement of Activities with accumulated depreciation reflected in the Statement of Net Assets and is provided on the straight-line basis over the following estimated useful lives: Land improvements Furniture and equipment Building and improvements years 3-5 years 40 years Deferred Revenue The District defers revenue recognition in connection with resources that have been received, but not yet earned. Governmental funds report deferred revenue in connection with receivables for revenues that are not considered to be available to liquidate liabilities of the current period. Compensated Absences Certified employees working less than 12 months a year do not earn vacation days, however, noncertified full-time employees working 12 months a year earn vacation days which accumulate as they accrue. All full-time employees receive 12 sick days and 2 personal days per year and these days may accumulate to a maximum of 200 days for certified employees and 250 days for noncertified employees. All other noncertified employees may receive up to 10 sick days and 1 personal day and may accumulate these days to a maximum of 250 days. These accumulated sick days do not vest; however, certified employees may donate one sick day each year to a sick leave bank. Accumulated sick days can be contributed toward retirement. The General Fund is typically used to liquidate this liability. 23

44 Notes to Financial Statements Note 1. Summary of Significant Accounting Policies (continued) Assets, Liabilities, and Net Assets or Equity (continued) Long-Term Obligations In the government-wide financial statements, long-term debt and other long-term obligations, including compensated absences, are reported as liabilities in the Statement of Net Assets. Items such as premiums, discounts, bond issuance costs and gains or losses on bond sales are capitalized and amortized over the life of the related debt. In the fund financial statements, the face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. Restricted Net Assets For the government-wide Statement of Net Assets, net assets are reported as restricted when constraints placed on net asset use are either: Externally imposed by creditors (such as debt covenants), grantors, contributors or laws or regulations of other governments; Imposed by law through constitutional provisions or enabling legislation. When both restricted and unrestricted resources are available for use, it is the District s policy to use restricted resources first, then unrestricted resources as they are needed. Fund Balance Reserves In the fund financial statements, governmental funds report reservations of fund balance for amounts that are not available for appropriation or are legally restricted by outside parties for use for a specific purpose. Elimination and Reclassification In the process of aggregating data for the government-wide Statement of Activities, some amounts reported as interfund activity and interfund balances in the funds were eliminated or reclassified. Use of Estimates The preparation of financial statements in conformity with the modified cash basis of accounting requires management to make estimates and assumptions that affect the amounts of assets and liabilities and disclosures of contingent liabilities at the date of the financial statements, and the reported amount of revenue and expenditures/expenses during the period. Actual results may differ from those estimates. 24

45 Notes to Financial Statements Note 2. Cash and Investments (a) Deposits State statutes authorize the District to make deposits directly in interest bearing depository accounts in federally insured and/or state chartered banks, savings and loan associations and credit unions. As of June 30, 2008 the District had deposits with federally insured financial institutions of $8,230,294 with bank balances totaling $8,309,142. Custodial credit risk - Deposits - In the case of deposits, this is the risk that in the event of bank failure, the District s deposits may not be returned to it. As of June 30, 2008, all of the District s bank balances were insured or collateralized. (b) Investments As of June 30, 2008, the District had the following investments: Fair Value Weighted Average Investment Maturities (in Years) Pooled cash and investments held by the Bloom Township Treasurer $ 41,971,535 N/A N/A = Not Available. Interest rate risk - The District s investment policy does not limit its investment portfolio to specific maturities. Credit risk - State statutes authorize the District to invest in direct obligations of, or obligations guaranteed by, the United States Treasury or agencies of the United States and short-term obligations of corporations organized in the United States with assets exceeding $500,000,000. This District is also authorized to invest in the Illinois School District Liquid Asset Fund (ISDLAF) and the Illinois Funds, which invests member deposits, on a pooled basis, primarily in short-term certificates of deposit and in high-rated, short-term obligations of major United States corporations and banks. The District has restricted its investments to only these described above. Custodial credit risk - Investments - For an investment, this is the risk that in the event of the failure of the counterparty, the District will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. Pooled cash and investments held by the Bloom Township Trustees are not subject to custodial credit risk. The District s investment policy does not address custodial credit risk for investments. Concentration of credit risk - The District s investment policy required diversified investments to eliminate the risk of loss resulting in over-concentration in a specific issuer or class of securities. The diversification can be by type of investment, number of institutions invested in, and length of maturity. Information related to the interest rate risk, credit risk, custodial credit risk, concentration of credit risk of other cash and investments held by the Bloom Township Trustees can be obtained from the Bloom Township Trustee, which issues a financial report that includes financial statements and required supplementary information. 25