COACHELLA VALLEY UNIFIED SCHOOL DISTRICT TABLE OF CONTENTS JUNE 30, 2010

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2 TABLE OF CONTENTS FINANCIAL SECTION Independent Auditors' Report 2 Management's Discussion and Analysis 4 Basic Financial Statements Government-Wide Financial Statements Statement of Net Assets 14 Statement of Activities 15 Fund Financial Statements Governmental Funds - Balance Sheet 16 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Assets 17 Governmental Funds - Statement of Revenues, Expenditures, and Changes in Fund Balance 18 Reconciliation of the Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances to the Statement of Activities 19 Proprietary Funds - Statement of Net Assets 21 Proprietary Funds - Statement of Revenues, Expenses, and Changes in Fund Net Assets 22 Proprietary Funds - Statement of Cash Flows 23 Fiduciary Funds - Statement of Net Assets 24 Notes to Financial Statements 25 REQUIRED SUPPLEMENTARY INFORMATION General Fund - Budgetary Comparison Schedule 62 Schedule of Other Postemployment Benefits (OPEB) Funding Progress 63 SUPPLEMENTARY INFORMATION Schedule of Expenditures of Federal Awards 65 Local Education Agency Organization Structure 68 Schedule of Average Daily Attendance 69 Schedule of Instructional Time 70 Reconciliation of Annual Financial and Budget Report with Audited Financial Statements 71 Schedule of Financial Trends and Analysis 72 Combining Statements - Non-Major Governmental Funds Combining Balance Sheet 73 Combining Statement of Revenues, Expenditures, and Changes in Fund Balance 74 General Fund Selected Financial Information 75 Cafeteria Fund Selected Financial Information 76 Note to Supplementary Information 77 INDEPENDENT AUDITORS' REPORTS Report on Compliance and on Internal Control Over Financial Reporting Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 80 Report on Compliance with Requirements That Could Have a Direct and Material Effect on Each Major Program and on Internal Control over Compliance in Accordance with OMB Circular A Report on State Compliance 84

3 TABLE OF CONTENTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS Summary of Auditors' Results 87 Financial Statement Findings 88 Federal Awards Findings and Questioned Costs 89 State Awards Findings and Questioned Costs 90 Summary Schedule of Prior Audit Findings 91 Management Letter 93

4 FINANCIAL SECTION 1

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7 Coachella Valley Unified School District Office of the Superintendent P.O. Box 847 Thermal, CA Ext. 288 FAX Ricardo Z. Medina Superintendent This section of Coachella Valley Unified School District's (the "District") annual financial report presents our discussion and analysis of the District's financial performance during the fiscal year that ended on June 30, Please read it in conjunction with the District's financial statements, which immediately follow this section. OVERVIEW OF THE FINANCIAL STATEMENTS The Financial Statements The financial statements presented herein include all of the activities of the Coachella Valley Unified School District and its component units using the integrated approach as prescribed by Governmental Accounting Standards Board (GASB) Statement No. 34. The Government-Wide Financial Statements present the financial picture of the District from the economic resources measurement focus using the accrual basis of accounting. They present governmental activities and business-type activities separately. These statements include all assets of the District (including capital assets) as well as all liabilities (including long-term obligations). Additionally, certain eliminations have occurred as prescribed by the statement in regards to interfund activity, payables and receivables. Governmental and the Business-Type Activities are prepared using the economic resources measurement focus and the accrual basis of accounting. The Fund Financial Statements include statements for each of the three categories of activities: governmental, proprietary, and fiduciary. The Governmental Funds are prepared using the current financial resources measurement focus and modified accrual basis of accounting. The Proprietary Funds are prepared using the economic resources measurement focus and the accrual basis of accounting. The Fiduciary Activities are prepared using the economic resources measurement focus and the accrual basis of accounting. Reconciliation of the Fund Financial Statements to the Government-Wide Financial Statements is provided to explain the differences created by the integrated approach. The Primary unit of the government is the Coachella Valley Unified School District. 4

8 MANAGEMENT'S DISCUSSION AND ANALYSIS REPORTING THE DISTRICT AS A WHOLE The Statement of Net Assets and the Statement of Activities The Statement of Net Assets and the Statement of Activities report information about the District as a whole and about its activities. These statements include all assets and liabilities of the District using the accrual basis of accounting, which is similar to the accounting used by most private-sector companies. All of the current year's revenues and expenses are taken into account regardless of when cash is received or paid. These two statements report the District's net assets and changes in them. Net assets are the difference between assets and liabilities, one way to measure the District's financial health, or financial position. Over time, increases or decreases in the District's net assets are one indicator of whether its financial health is improving or deteriorating. Other factors to consider are changes in the District's property tax base and the condition of the District's facilities. The relationship between revenues and expenses is the District's operating results. Since the governing board's responsibility is to provide services to our students and not to generate profit as commercial entities do, one must consider other factors when evaluating the overall health of the District. The quality of the education and the safety of our schools will likely be an important component in this evaluation. In the Statement of Net Assets and the Statement of Activities, we separate the District activities as follows: Governmental activities - Most of the District's services are reported in this category. This includes the education of kindergarten through grade twelve students, adult education students, the operation of child development activities, and the on-going effort to improve and maintain buildings and sites. Property taxes, State income taxes, user fees, interest income, Federal, State and local grants, as well as general obligation bonds, finance these activities. Business-type activities - The District charges fees to help it cover the costs of certain services it provides. The District's food service program is included here. REPORTING THE DISTRICT'S MOST SIGNIFICANT FUNDS Fund Financial Statements The fund financial statements provide detailed information about the most significant funds - not the District as a whole. Some funds are required to be established by State law and by bond covenants. However, management 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 that it receives from the U.S. Department of Education. 5

9 MANAGEMENT'S DISCUSSION AND ANALYSIS Governmental funds - Most of the District's basic services are reported in governmental funds, which focus on how money flows into and out of those funds and the balances left at year-end that are available for spending. These funds 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 District's general government operations and the basic services it provides. Governmental fund information helps determine whether there are more or fewer financial resources that can be spent in the near future to finance the District's programs. The differences of results in the governmental fund financial statements to those in the government-wide financial statements are explained in a reconciliation following each governmental fund financial statement. Proprietary funds - When the District charges users for the services it provides, whether to outside customers or to other departments within the District, these services are generally reported in proprietary funds. Proprietary funds are reported in the same way that all activities are reported in the Statement of Net Assets and the Statement of Revenues, Expenses and Changes in Fund Net Assets. In fact, the District's enterprise funds are the same as the business-type activities we report in the government-wide financial statements but provide more detail and additional information, such as cash flows, for proprietary funds. We use internal service funds (the other component of proprietary funds) to report activities that provide supplies and services for the District's other programs and activities - such as the District's Self-Insurance Fund. The internal service funds are reported with governmental activities in the government-wide financial statements. THE DISTRICT AS TRUSTEE Reporting the District's Fiduciary Responsibilities The District is the trustee, or fiduciary, for funds held on behalf of others, like our funds for associated student body activities, scholarships, employee retiree benefits and pensions. The District's fiduciary activities are reported in the Statements of Fiduciary Net Assets. We exclude these activities from the District's other financial statements because the District cannot use these assets to finance its operations. The District is responsible for ensuring that the assets reported in these funds are used for their intended purposes. 6

10 MANAGEMENT'S DISCUSSION AND ANALYSIS FINANCIAL HIGHLIGHTS OF THE PAST YEAR 1. The District experienced a decrease of approximately $15.3 million in General Fund unrestricted revenues due to reduced State allocations for education resulting from poor economic conditions. 2. The District experienced a decrease in State restricted General Fund expenditures by approximately $1.5 million due to reductions in State allocations from poor economic conditions. 3. Implemented year three of Quality Education Investment Act, reducing class sizes in core classes at six schools. 4. The District used State Fiscal Stimulus Funds and Federal ARRA funding to maintain 21:1 student/teacher ratio in K-3 classrooms. 5. Additional Modular Classroom Buildings were added to Oasis Elementary, and Toro Canyon for QIEA 6. Coachella Valley High School Science Classroom Labs were updated. 7. Portable Classrooms/Restrooms were relocation/installation at Coral Mountain Elementary, Coachella Valley High, Desert Mirage High, Westside and the Valle del Sol Elementary Kindergarten Classroom Building were completed. 8. Purchased 22 acre site for future school in Coachella. 9. Successful 1 st year implementation of Operation Graduation. 10. District-wide implementation of Aeries Gradebook. 11. Implemented Pilot Program for the Parent Portal for four sites. 12. Successful pilot program for new curriculum Read Completed an electronic student report card reporting on English, Language Arts and Math Content Standards. 14. Increased the number of students passing rates in ELA and Math through the establishment of support courses during and after school. 15. Implemented Zonar GPS Tracking Systems in Transportation. 16. District Food Service Department served over 4.5 million meals. As has been the practice of the District, Coachella Valley Unified School District does not reallocate categorical program carryover from the prior year until the financial records for the prior year are closed. Consequently, the original budget does not include revenues or expenditures related to categorical carryover, while the final budget and actual results reflects these carryovers. 7

11 MANAGEMENT'S DISCUSSION AND ANALYSIS THE DISTRICT AS A WHOLE Net Assets The District's net assets were $267.8 million for the fiscal year ended June 30, Of this amount, $21.5 was unrestricted. Restricted net assets are reported separately to show legal constraints from debt covenants grantors, constitutional provisions and enabling legislation that limit the governing board's ability to use those net assets for day-to-day operations. Our analysis below, in summary form, focuses on the net assets (Table 1) and change in net assets (Table 2) of the District's governmental activities. Table 1 (Amounts in millions) Governmental Activities Business-Type Activities School District Activities Current and other assets $ 92.9 $ 78.9 $ 6.4 $ 5.1 $ 99.3 $ 84.0 Capital assets Total Assets Current liabilities Long-term obligations Total Liabilities Net assets Invested in capital assets, net of related debt Restricted Unrestricted Total Net Assets $ $ $ 8.5 $ 7.3 $ $ The $21.5 in unrestricted net assets represents the accumulated results of all past years' operations. The District increased its current assets and liabilities due to the issuance of Series C Bond. 8

12 MANAGEMENT'S DISCUSSION AND ANALYSIS Changes in Net Assets The results of this year's operations for the District as a whole are reported in the Statement of Activities on page 14. Table 2 takes the information from the Statement, rounds off the numbers, and rearranges them slightly so you can see our total revenues for the year. Table 2 (Amounts in millions) Governmental Activities Business-Type Activities School District Activities Revenues Program revenues: Charges for services $ 0.4 $ 1.1 $ 1.1 $ 1.0 $ 1.5 $ 2.1 Operating grants and contributions Capital grants and contributions General revenues: Federal and State aid not restricted Property taxes Other general revenues Total Revenues Expenses Instruction-related Student support services Administration Plant services Other Total Expenses Change in Net Assets $ (14.5) $ 4.9 $ 1.2 $ 0.8 $ (13.3) $ 5.7 Governmental Activities As reported in the Statement of Activities on page 14, the cost of all of our governmental activities this year was $189.7 million. However, the amount that our taxpayers ultimately financed for these activities through local taxes was only $27.6 million because the cost was paid by those who benefited from the programs ($0.4 million) or by other governments and organizations who subsidized certain programs with grants and contributions ($49.2 million). We paid for the remaining "public benefit" portion of our governmental activities with $98.0 million in Federal and State unrestricted funds and with other revenues, such as interest and general entitlements. 9

13 MANAGEMENT'S DISCUSSION AND ANALYSIS In Table 3, we have presented the cost and net cost of each of the District's largest functions - regular and special program instruction, instructional-related activities, home-to-school transportation, other pupil services, general administration, maintenance and operations, facility acquisition and construction, interest on long-term obligations and all other functions. As discussed above, net cost shows the financial burden that was placed on the District's taxpayers by each of these functions. Providing this information allows our citizens to consider the cost of each function in comparison to the benefits they believe are provided by that function. Table 3 (Amounts in millions) Total Cost of Services Net Cost of Services Instruction $ $ $ 80.7 $ 89.9 Instruction-related activities Home-to-school transportation Other pupil services General administration Maintenance and operations Facility acquisition and construction Interest on long-term obligations Other Total $ $ $ $ The overall change in the Total Cost of Services reflects measures the District has taken to reduce costs while economic difficulties persist. 10

14 MANAGEMENT'S DISCUSSION AND ANALYSIS THE DISTRICT'S FUNDS As the District completed this year, our governmental funds reported a combined fund balance of $83.0 million, which is an increase of $14.1 million from last year. Table 4 (Amounts in millions) Fund Balance July 1, 2009 Revenues Expenditures June 30, 2010 General Fund $ 29.1 $ $ $ 21.3 Building Fund Special Reserve Fund For Capital Outlay Projects Adult Education Fund Child Development Fund (0.1) Deferred Maintenance Fund Capital Facilities Fund County School Facilities Fund Capital Project Fund for Blended Component Unit Bond Interest and Redemption Fund Total $ 68.9 $ $ $ 83.0 The primary reasons for these increases are: 1. The decrease in $7.8 million in General Fund primarily reflects less revenues received from the State aid and property taxes and a reduction in state categorical funding. These ongoing revenue reductions from the State have forced the District to utilize all available resources, including one time resources and reserves, creating deficit spending. 2. The increase of $22.0 million in the Building Fund is due to the sale of Series C Bond on May 12, 2010, for $24.9 million. General Fund Budgetary Highlights Over the course of the year, the District revises its budget to deal with changes brought about by anticipated increases or decreases in revenues and expenditures. The final budget revision to the adopted budget (estimated actuals) was adopted on September 9, 2010 (see page 61). 1. Significant revenue revisions made to the budget were due to revisions in the State's education budget. 11

15 MANAGEMENT'S DISCUSSION AND ANALYSIS CAPITAL ASSET AND DEBT ADMINISTRATION Capital Assets At June 30, 2010, the District had $373.5 million in a broad range of capital assets (net of depreciation), including land, buildings, and furniture and equipment. This amount represents a net decrease (including additions, deductions and depreciation) of just under $2.1 million, or 0.6 percent, from last year (Table 5). Table 5 (Amounts in millions) Governmental Activities Business-Type Activities Totals Land and construction in process $ 74.4 $ 72.8 $ - $ - $ 74.4 $ 72.8 Buildings and improvements Furniture and equipment Total $ $ $ 2.1 $ 2.3 $ $ This year's major additions included (in millions): District purchased a future school site at 53rd and Van Buren Ave. $ 1.0 Financing for these capital projects came from general obligation bonds, State construction match funding, certificates of participation, redevelopment revenues, and general funds. Long-Term Obligations At the end of this year, the District had $196.0 million in obligations versus $168.2 million last year, an increase of 16.5 percent. These obligations consisted of: Table 6 (Amounts in millions) Governmental Activities Business-Type Activities Totals General obligation bonds (Financed with property taxes) $ $ $ - $ - $ $ Certificates of participation Capitalized lease obligations Other Total $ $ $ - $ - $ $ The District's general obligation bond rating continues to be "AAA". The State limits the amount of general obligation debt that districts can issue to five percent (5%) of the assessed value of all taxable property within the District's boundaries. The District's outstanding general obligation debt of $127.4 million is significantly below the $423 million statutorily-imposed limit. 12

16 MANAGEMENT'S DISCUSSION AND ANALYSIS Other obligations include compensated absences payable and other long-term obligations. We present more detailed information regarding our long-term obligations in Note 8 of the financial statements. CONTACTING THE DISTRICT'S FINANCIAL MANAGEMENT This financial report is designed to provide our citizens, taxpayers, students, and investors and creditors with a general overview of the District's finances and to show the District's accountability for the money it receives. If you have questions about this report or need any additional financial information, contact Jamie Brown, Assistant Superintendent, Business Services, at Coachella Valley Unified School District, Thermal, California, or at jamie.brown@cvusd.us. 13

17 STATEMENT OF NET ASSETS Governmental Business-Type Activities Activities Total ASSETS Deposits and investments $ 59,364,812 $ 4,856,511 $ 64,221,323 Receivables 24,377,260 1,635,292 26,012,552 Internal balances 413,201 (413,201) - Prepaid expenses 1,473-1,473 Stores inventories 82, , ,915 Restricted assets - investments 4,907,629-4,907,629 Deferred cost on issuance 3,713,660-3,713,660 Capital assets Land and construction in process 74,371,912-74,371,912 Other capital assets 363,147,902 2,842, ,990,133 Less: Accumulated depreciation (66,089,925) (740,951) (66,830,876) Total Capital Assets 371,429,889 2,101, ,531,169 Total Assets 464,290,049 8,527, ,817,721 LIABILITIES Accounts payable 2,091,246 52,403 2,143,649 Accrued interest payable 3,563,601-3,563,601 Deferred revenue 3,312,069-3,312,069 Long-term obligations Current portion of long-term obligations 10,438,309-10,438,309 Noncurrent portion of long-term obligations 185,583, ,583,901 Total Long-Term Obligations 196,022, ,022,210 Total Liabilities 204,989,126 52, ,041,529 NET ASSETS Invested in capital assets, net of related debt 225,006,515 2,101, ,107,795 Restricted for: Debt service 3,431,319-3,431,319 Capital projects 10,434,978-10,434,978 Educational programs 11,689,742-11,689,742 Other activities 1,599,697-1,599,697 Unrestricted 7,138,672 6,373,989 13,512,661 Total Net Assets $ 259,300,923 $ 8,475,269 $ 267,776,192 The accompanying notes are an integral part of these financial statements. 14

18 STATEMENT OF ACTIVITIES FOR THE YEAR ENDED Program Revenues Charges for Operating Capital Services and Grants and Grants and Functions/Programs Expenses Sales Contributions Contributions Governmental Activities: Instruction $ 113,531,819 $ 114,340 $ 32,192,540 $ 587,335 Instruction-related activities: Supervision of instruction 3,803, ,745,927 - Instructional library, media and technology 260, School site administration 21,204, ,962,894 - Pupil services: Home-to-school transportation 7,860,334-3,177,971 - All other pupil services 6,897, ,831 1,505,362 - General administration: Data processing 1,952, ,976 - All other general administration 6,878,391 6,454 1,242,255 - Plant services 16,967,395 39, ,807 - Facility acquisition and construction 2,403, Interest on long-term obligations 7,100, Other outgo 817, , ,302 - Total Governmental Activities 189,678, ,017 48,556, ,335 Business-Type Activities: Food services 11,048,836 1,055,608 11,113,793 - Total Business-Type Activities 11,048,836 1,055,608 11,113,793 - Total School District $ 200,727,023 $ 1,469,625 $ 59,669,827 $ 587,335 General revenues and subventions: Property taxes, levied for general purposes Property taxes, levied for debt service Taxes levied for other specific purposes Federal and State aid not restricted to specific purposes Interest and investment earnings Miscellaneous Subtotal, General Revenues Change in Net Assets Net Assets - Beginning Net Assets - Ending The accompanying notes are an integral part of these financial statements. 15

19 Net (Expenses) Revenues and Changes in Net Assets Business- Governmental Type Activities Activities Total $ (80,637,604) $ - $ (80,637,604) (1,057,577) - (1,057,577) (260,331) - (260,331) (14,240,809) - (14,240,809) (4,682,363) - (4,682,363) (5,247,352) - (5,247,352) (1,841,150) - (1,841,150) (5,629,682) - (5,629,682) (16,775,255) - (16,775,255) (2,403,696) - (2,403,696) (7,100,790) - (7,100,790) (244,192) - (244,192) (140,120,801) - (140,120,801) - 1,120,565 1,120,565-1,120,565 1,120,565 (140,120,801) 1,120,565 (139,000,236) 18,224,567-18,224,567 6,194,103-6,194,103 3,176,561-3,176,561 86,245,092-86,245, ,247 46, ,429 11,135,916-11,135, ,587,486 46, ,633,668 (14,533,315) 1,166,747 (13,366,568) 273,834,238 7,308, ,142,760 $ 259,300,923 $ 8,475,269 $ 267,776,192 15

20 GOVERNMENTAL FUNDS BALANCE SHEET Special Reserve General Building Fund For Capital Fund Fund Outlay Projects ASSETS Deposits and investments $ 7,871,336 $ 27,890,095 $ 9,416,329 Receivables 23,930,051 33,366 24,433 Due from other funds 1,162,584-5,011,140 Prepaid expenditures 1, Stores inventories 82, Restricted assets, investments - 4,907,629 Total Assets $ 33,047,569 $ 27,923,461 $ 19,359,531 LIABILITIES AND FUND BALANCES Liabilities: Accounts payable $ 1,976,020 $ 12,750 $ 6,267 Due to other funds 6,410, Deferred revenue 3,312, Total Liabilities 11,698,884 12,750 6,267 Fund Balances: Reserved for: Revolving cash 50, Stores inventories 82, Prepaid expenses 1, Restricted programs 11,689, Unreserved: Designated 9,525, Undesignated, reported in: Special revenue funds Debt service funds Capital projects funds - 27,910,711 19,353,264 Total Fund Balance 21,348,685 27,910,711 19,353,264 Total Liabilities and Fund Balances $ 33,047,569 $ 27,923,461 $ 19,359,531 The accompanying notes are an integral part of these financial statements. 16

21 Non-Major Governmental Funds Total Governmental Funds $ 13,425,916 $ 58,603, ,117 24,375,967 1,396,427 7,570,151-1,473-82,125-4,907,629 $ 15,210,460 $ 95,541,021 $ 96,209 $ 2,091, ,871 7,157,666-3,312, ,080 12,560,981-50,000-82,125-1,473-11,689,742-9,525,345 1,599,697 1,599,697 6,994,920 6,994,920 5,772,763 53,036,738 14,367,380 82,980,040 $ 15,210,460 $ 95,541,021 16

22 RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS Total Fund Balance - Governmental Funds $ 82,980,040 Amounts Reported for Governmental Activities in the Statement of Net Assets are Different Because: Capital assets used in governmental activities are not financial resources and, therefore, are not reported as assets in governmental funds. The cost of capital assets is $ 437,519,814 Accumulated depreciation is (66,089,925) Net Capital Assets 371,429,889 Expenditures relating to issuance of debt were recognized in modified accrual basis, but should not be recognized in accrual basis. 3,713,660 In governmental funds, unmatured interest on long-term obligations is recognized in the period when it is due. On the government-wide statements, unmatured interest on long-term obligations is recognized when it is incurred. (3,563,601) An internal service fund is used by the District's management to charge the costs of the dental and vison insurance program to the individual funds. The assets and liabilities of the Internal Service Fund are included with governmental activities. Internal Service Fund net assets are: 376,847 Long-term obligations at year-end consist of: General obligation bonds 115,202,921 Unamortized premium on general obligation bonds 5,989,953 Certificates of participation 51,680,000 Unamortized premium on certificates of participation 1,548,095 Unamortized discount on certificates of participation (81,208) Capital lease obligations 5,038,312 Compensated absences 2,067,591 Supplemental early retirement plan 5,773,494 Other postemployment benefits 2,239,508 In addition, the District has issued "capital appreciation" general obligation bonds. The accretion of interest on the general obligation bonds to date is: 6,177,246 Total Long-Term Obligations (195,635,912) Total Net Assets - Governmental Activities $ 259,300,923 The accompanying notes are an integral part of these financial statements. 17

23 GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE FOR THE YEAR ENDED Special Reserve General Building Fund For Capital Fund Fund Outlay Projects REVENUES Revenue limit sources $ 87,476,524 $ - $ - Federal sources 22,218, Other State sources 41,414, Other local sources 10,185,259 84,109 3,373,448 Total Revenues 161,295,241 84,109 3,373,448 EXPENDITURES Current Instruction 101,813, Instruction-related activities: Supervision of instruction Instructional library, media 3,608, and technology 258, School site administration 16,953, Pupil services: Home-to-school transportation 7,579, All other pupil services 6,501, General administration: Data processing 1,948, All other general administration 6,724, Plant services 16,450, Facility acquisition and construction 3,814,164 2,422,878 1,549,456 Other outgo 657, Debt service Principal 166, ,000 1,265,000 Interest and other 13,054-1,908,715 Total Expenditures 166,487,740 2,613,878 4,723,171 Excess (Deficiency) of Revenues Over Expenditures (5,192,499) (2,529,769) (1,349,723) Other Financing Sources (Uses): Transfers in - 200, ,944 Other sources - 24,990,463 - Other sources - refunding bonds Transfers out (2,534,731) (672,329) - Other uses - payment to refunded bond escrow agent Net Financing Sources (Uses) (2,534,731) 24,518, ,944 NET CHANGE IN FUND BALANCES (7,727,230) 21,988,365 (888,779) Fund Balance - Beginning 29,075,915 5,922,346 20,242,043 Fund Balance - Ending $ 21,348,685 $ 27,910,711 $ 19,353,264 The accompanying notes are an integral part of these financial statements. 18

24 Non-Major Governmental Funds Total Governmental Funds $ - $ 87,476,524 1,214,599 23,433,422 2,009,211 43,423,846 7,159,604 20,802,420 10,383, ,136,212 3,107, ,920, ,700 3,786, , ,268 17,239,659-7,579,416-6,501, ,948, ,436 6,862, ,988 16,676,480 1,412,496 9,198, ,361 2,504,000 4,126,023 6,125,529 8,047,298 13,978, ,803,575 (3,595,372) (12,667,363) 2,746,116 3,407,060 1,724,177 26,714,640 6,560,000 6,560,000 (200,000) (3,407,060) (6,580,404) (6,580,404) 4,249,889 26,694, ,517 14,026,873 13,712,863 68,953,167 $ 14,367,380 $ 82,980,040 18

25 RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED Total Net Change in Fund Balances - Governmental Funds $ 14,026,873 Amounts Reported for Governmental Activities in the Statement of Activities are Different Because: Capital outlays to purchase or build capital assets are reported in governmental funds as expenditures, however, for governmental activities, those costs are shown in the statement of net assets and allocated over their estimated useful lives as annual depreciation expenses in the Statement of Activities. This is the amount by which depreciation exceeds capital outlays in the period. Capital outlays $ 6,795,298 Depreciation expense (8,647,476) Net Expense Adjustment (1,852,178) Contributions for postemployment benefits are recorded as an expense in the governmental funds when paid. However, the difference between the annual required contribution and the actual contribution made, if less, is recorded in the government wide statements as an expense. The actual amount of the contribution was less than the annual required contribution. (1,061,915) In the Statement of Activities, certain operating expenses - compensated absences (vacations) and special termination benefits (supplemental early retirement plan) 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 used (essentially, the amounts actually paid). This year, special termination benefits paid was less than the amount added by $3,855,080. Vacation used was more than the amounts earned by $242,028. (3,613,052) Proceeds received from issuance of debt is a revenue in the governmental funds, but it increases long-term obligations in the Statement of Net Assets and does not affect the Statement of Activities: Sale of general obligation bonds (24,990,463) Refunding general obligation bonds (6,560,000) Governmental funds report the effect of premiums and issuance costs on an issuance and refunding when the debt is first issued, whereas the amounts are deferred and amortized in the Statement of Activities. This amount is the net effect of these related items: Premium on issuance (1,555,848) Premium on issuance (168,329) Cost of issuance 1,555,848 Cost of issuance 147,925 Combined Adjustment (20,404) - The accompanying notes are an integral part of these financial statements. 19

26 RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES, Continued FOR THE YEAR ENDED Repayment of bond principal is an expenditure in the governmental funds, but it reduces long-term obligations in the Statement of Net Assets and does not affect the Statement of Activities: General obligation bonds $ 8,645,000 Certificates of participation 1,265,000 Capital lease obligations 636,023 Under the modified basis of accounting used in the governmental funds, expenditures are not recognized for transactions that are not normally paid with expendable available financial resources. In the Statement of Activities, however, which is presented on the accrual basis, expenses and liabilities are reported regardless of when financial resources are available. This adjustment combines the net changes of the following balances: Amortization of debt premium $ 336,462 Amortization of debt discount (3,138) Amortization of cost of issuance (157,133) Combined Adjustment 176,191 Interest on long-term obligations in the Statement of Activities differs from the amount reported in the governmental funds because interest is recorded as an expenditure in the funds when it is due, and thus requires the use of current financial resources. In the Statement of Activities, however, interest expense is recognized as the interest accrues, regardless of when it is due. The additional interest reported in the Statement of Activities is the result of two factors. First, accrued interest on the general obligation bonds and certificates of participation increased by $199,222, and second, $734,234 of additional accumulated interest was accreted on the District's "capital appreciation" general obligation bonds. (933,456) An internal service fund is used by the District's management to charge the costs of the dental and vision insurance program to the individual funds. The net revenue of the Internal Service Fund is reported with governmental activities. (250,934) Change in Net Assets of Governmental Activities $ (14,533,315) The accompanying notes are an integral part of these financial statements. 20

27 PROPRIETARY FUNDS STATEMENT OF NET ASSETS ASSETS Current Assets Business-Type Activities Governmental Enterprise Funds Activities - Food Internal Service Service Fund Deposits and investments $ 4,856,511 $ 761,136 Receivables 1,635,292 1,293 Due from other funds 7, Stores inventories 347,790 - Total Current Assets 6,847, ,145 Noncurrent Assets Capital assets 2,842,231 - Less: accumulated depreciation (740,951) - Total Noncurrent Assets 2,101,280 - Total Assets 8,948, ,145 LIABILITIES Current Liabilities Accounts payable 52,403 - Due to other funds 420,699 - Current portion of claim liability - 386,298 Total Current Liabilities 473, ,298 NET ASSETS Invested in capital assets, net of related debt 2,101,280 - Unrestricted 6,373, ,847 Total Net Assets $ 8,475,269 $ 376,847 The accompanying notes are an integral part of these financial statements. 21

28 PROPRIETARY FUNDS STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET ASSETS FOR THE YEAR ENDED Business-Type Activities Enterprise Funds Food Service Governmental Activities - Internal Service Fund OPERATING REVENUES Charges for services $ 1,032,917 $ - Charges to other funds and miscellaneous revenues (81,038) 4,260,736 Total Operating Revenues 951,879 4,260,736 OPERATING EXPENSES Payroll costs 5,310,399 81,089 Professional and contract services 93,623 4,436,527 Supplies and materials 4,936,438 - Facility rental 102,250 - Other operating cost 489,579 - Depreciation 116,547 - Total Operating Expenses 11,048,836 4,517,616 Operating Loss (10,096,957) (256,880) NONOPERATING REVENUES Interest income 46,182 5,946 Federal Grants 10,420,435 - State Grants 797,087 - Total Nonoperating Revenues 11,263,704 5,946 Change in Net Assets 1,166,747 (250,934) Total Net Assets - Beginning 7,308, ,781 Total Net Assets - Ending $ 8,475,269 $ 376,847 The accompanying notes are an integral part of these financial statements. 22

29 PROPRIETARY FUNDS STATEMENT OF CASH FLOWS FOR THE YEAR ENDED Business-Type Governmental Activities Activities - Enterprise Funds Internal Food Service Service Fund CASH FLOWS FROM OPERATING ACTIVITIES Cash receipts from customers $ 935,690 $ 4,261,843 Cash payments to employees for services (5,285,121) - Cash payments to suppliers for goods and services (4,985,105) - Cash payments for interfund services used, including payments in lieu of taxes that are payments for, and equivalent to, services provided - (4,418,290) Cash payments for facility use (102,250) - Other operating cash payments (489,579) (81,089) Net Cash Used by Operating Activities (9,926,365) (237,536) CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Nonoperating grants received 11,217,522 - CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Loss on disposal of capital assets 103,729 - CASH FLOWS FROM INVESTING ACTIVITIES Interest on investments 46,182 5,946 Net Increase (Decrease) in Cash and Cash Equivalents 1,441,068 (231,590) Cash and Cash Equivalents - Beginning 3,415, ,726 Cash and Cash Equivalents - Ending $ 4,856,511 $ 761,136 RECONCILIATION OF OPERATING LOSS TO NET CASH USED BY OPERATING ACTIVITIES: Operating loss $ (10,096,957) $ (256,880) Adjustments to reconcile operating loss to net cash used by operating activities: Depreciation 116,547 - Changes in assets and liabilities: Receivables (102,557) 1,823 Due from other fund 86,368 (716) Inventories 92,664 - Accounts payable (47,708) (1,243) Due to other fund 25,278 - Claim liabilities - 19,480 NET CASH USED BY OPERATING ACTIVITIES $ (9,926,365) $ (237,536) NONCASH, NONCAPITAL FINANCING ACTIVITIES During the year, the District received $1,137,448 of food commodities from the U.S. Department of Agriculture. The accompanying notes are an integral part of these financial statements. 23

30 FIDUCIARY FUNDS STATEMENT OF NET ASSETS Agency Funds ASSETS Deposits and investments $ 390,791 LIABILITIES Accounts payable $ 9,305 Due to student groups 381,486 Total Liabilities $ 390,791 The accompanying notes are an integral part of these financial statements. 24

31 NOTES TO FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Financial Reporting Entity The Coachella Valley Unified School District (the "District") was organized on July 1, 1973, under the laws of the State of California. The District operates under a locally elected seven-member Board form of government and provides educational services to grades K-12 as mandated by the State and/or Federal agencies. The District operates 14 K-6 schools, three 7-8 schools, one 7-12 high school, two four-year high schools, one continuation high school, and an adult education extension program. The District also operates twelve Headstart programs, five State Preschools, ten child care centers, and teen parenting programs at two four-year high schools. A reporting entity is comprised of the primary government, component units, and other organizations that are included to ensure the financial statements are not misleading. The primary government of the District consists of all funds, departments, boards, and agencies that are not legally separate from the District. For Coachella Valley Unified School District, this includes general operations, food service, and student related activities of the District. Component Units Component units are legally separate organizations for which the District is financially accountable. Component units may include organizations that are fiscally dependent on the District in that the District approves their budget, the issuance of their debt or the levying of their taxes. In addition, component units are other legally separate organizations for which the District is not financially accountable but the nature and significance of the organization's relationship with the District is such that exclusion would cause the District's financial statements to be misleading or incomplete. For financial reporting purposes, the component unit has a financial and operational relationship, which meets the reporting entity definition criteria of the Governmental Accounting Standards Board (GASB) Statement No. 14, The Financial Reporting Entity, and thus is included in the financial statements of the District. The component unit, although a legally separate entity, is reported in the financial statements using the blended presentation method as if it were part of the District's operations because the governing board of the component unit is essentially the same as the governing board of the District and because their purpose is to acquire real property to be used for the benefit of the District. The District has financial and operational relationships with the Coachella Valley Unified School District Property Acquisition Corporation (PAC) which meet the reporting entity definition criteria of GASB Statement No. 14, The Financial Reporting Entity, as component units of the District. Accordingly, the financial activities of the PAC have been included in the Capital Project Fund for Blended Component Units of the District's financial statements. 25

32 NOTES TO FINANCIAL STATEMENTS Basis of Presentation - Fund Accounting The accounting system is organized and operated on a fund basis. A fund is defined as a fiscal and accounting entity with a self-balancing set of accounts, which are segregated for the purpose of carrying on specific activities or attaining certain objectives in accordance with special regulations, restrictions, or limitations. The District's funds are grouped into three broad fund categories: governmental, proprietary, and fiduciary. Governmental Funds Governmental funds are those through which most governmental functions typically are financed. Governmental fund reporting focuses on the sources, uses, and balances of current financial resources. Expendable assets are assigned to the various governmental funds according to the purposes for which they may or must be used. Current liabilities are assigned to the fund from which they will be paid. The difference between governmental fund assets and liabilities is reported as fund balance. The following are the District's major and non-major governmental funds: Major Governmental Funds General Fund The General Fund is the chief operating fund for all Districts. It is used to account for the ordinary operations of a District. All transactions except those required or permitted by law to be in another fund are accounted for in this fund. Building Fund The Building Fund exists primarily to account separately for proceeds from the sale of bonds (Education Code Section 15146) and may not be used for any purposes other than those for which the bonds were issued. Special Reserve Fund for Capital Outlay Projects The Special Reserve Fund for Capital Outlay Projects exists primarily to provide for the accumulation of General Fund monies for capital outlay purposes (Education Code Section 42840). Non-Major Governmental Funds Special Revenue Funds The Special Revenue Funds are established to account for the proceeds from specific revenue sources (other than trusts or for major capital projects) that are restricted to the financing of particular activities: Adult Education Fund The Adult Education Fund is used to account separately for Federal, State, and local revenues for adult education programs and is to be expended for adult education purposes only, except for State revenues which, as a result of Senate Bill 4 of the Third Extraordinary Session (SBX3 4), may be used for any educational purpose. Child Development Fund The Child Development Fund is used to account separately for federal, State, and local revenues to operate child development programs and is to be used only for expenditures for the operation of child development programs. 26

33 NOTES TO FINANCIAL STATEMENTS Deferred Maintenance Fund The Deferred Maintenance Fund is used to account separately for State apportionments and the District's contributions for deferred maintenance purposes (Education Code Sections ) and for items of maintenance approved by the State Allocation Board, except for State apportionments which, as a result of Senate Bill 4 of the Third Extraordinary Session (SBX3 4), may be used for any educational purpose. Capital Project Funds The Capital Project funds are established to account for financial resources to be used for the acquisition or construction of major capital facilities (other than those financed by proprietary funds and trust funds). Capital Facilities Fund The Capital Facilities Fund is used primarily to account separately for monies received from fees levied on developers or other agencies as a condition of approving a development (Education Code Sections Expenditures are restricted to the purposes specified in Government Code Sections or to the items specified in agreements with the developer (Government Code Section 66006). County School Facilities Fund The County School Facilities Fund is established pursuant to Education Code Section to receive apportionments from the 1998 State School Facilities Fund (Proposition la), the 2002 State School Facilities Fund (Proposition 47), or the 2004 State School Facilities Fund (Proposition 55) authorized by the State Allocation Board for new school facility construction, modernization projects, and facility hardship grants, as provided in the Leroy F. Greene School Facilities Act of 1998 (Education Code Section et seq.). Capital Project Fund for Blended Component Units This fund is used to account for the acquisition of real property financed by the Coachella Valley Unified School District Property Acquisition Corporation which is considered a blended component unit of the LEA under Generally Accepted Accounting Principles (GAAP). Debt Service Funds The Debt Service Funds are established to account for the accumulation of resources for and the payment of principal and interest on general long-term debt. Bond Interest and Redemption Fund The Bond Interest and Redemption Fund is used for the repayment of bonds issued for a District (Education Code Sections ). Proprietary Funds Proprietary fund reporting focuses on the determination of operating income, changes in net assets, financial position, and cash flows. The District applies all GASB pronouncements, as well as the Financial Accounting Standards Board pronouncements issued on or before November 30, 1989, unless those pronouncements conflict with or contradict GASB pronouncements. Proprietary funds are classified as enterprise or internal service. The District has the following proprietary funds: Enterprise Fund Enterprise funds may be used to account for any activity for which a fee is charged to external users for goods or services. The only enterprise fund of the District accounts for the financial transactions related to the Cafeteria Fund food service program of the District. 27

34 NOTES TO FINANCIAL STATEMENTS Internal Service Fund Internal service funds may be used to account for any activity for which services are provided to other funds of the District on a cost-reimbursement basis. The District operates a dental and vision program that is accounted for in an internal service fund. Fiduciary Funds Fiduciary fund reporting focuses on net assets and changes in net assets. The fiduciary fund category is split into four classifications: pension trust funds, investment trust funds, private-purpose trust funds, and agency funds. Trust funds are used to account for the assets held by the District under a trust agreement for individuals, private organizations, or other governments and are therefore not available to support the District's own programs. The District has no trust funds. Agency funds are custodial in nature (assets equal liabilities) and do not involve measurement of results of operations. Such funds have no equity accounts since all assets are due to individuals or entities at some future time. The District's agency fund accounts for student body activities (ASB). Basis of Accounting - Measurement Focus Government-Wide Financial Statements The government-wide statements are prepared using the economic resources measurement focus and the accrual basis of accounting. This is the same approach used in the preparation of the proprietary fund financial statements, but differs from the manner in which governmental fund financial statements are prepared. The government-wide statement of activities presents a comparison between direct expenses and program revenues for each segment of the business-type activities of the District and for each governmental program, and excludes fiduciary activity. Direct expenses are those that are specifically associated with a service, program, or department and are therefore clearly identifiable to a particular function. The District does not allocate indirect expenses to functions in the Statement of Activities. Program revenues include charges paid by the recipients of the goods or services offered by the programs and grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues are presented as general revenues. The comparison of program revenues and expenses identifies the extent to which each program or business segment is self-financing or draws from the general revenues of the District. Eliminations have been made to minimize the double counting of internal activities. Net assets should be reported as restricted when constraints placed on net asset use are either externally imposed by creditors (such as through debt covenants), grantors, contributors, or laws or regulations of other governments or imposed by law through constitutional provisions or enabling legislation. Fund Financial Statements Fund financial statements report detailed information about the District. The focus of governmental and proprietary fund financial statements is on major funds rather than reporting funds by type. Each major fund is presented in a separate column. Non-major funds are aggregated and presented in a single column. The internal service fund is presented in a single column on the face of the proprietary fund statements. 28

35 NOTES TO FINANCIAL STATEMENTS Governmental Funds All governmental funds are accounted for using a flow of current financial resources measurement focus and the modified accrual basis of accounting. With this measurement focus, only current assets and current liabilities generally are included on the balance sheet. The Statement of Revenues, Expenditures, and Changes in Fund Balance reports on the sources (revenues and other financing sources) and uses (expenditures and other financing uses) of current financial resources. This approach differs from the manner in which the governmental activities of the government-wide statements are prepared. Governmental fund financial statements therefore include reconciliation with brief explanations to better identify the relationship between the government-wide statements and the statements for the governmental funds on a modified accrual basis of accounting and the current financial resources measurement focus. Under this basis, revenues are recognized in the accounting period in which they become measurable and available. Expenditures are recognized in the accounting period in which the fund liability is incurred, if measurable. Proprietary Funds Proprietary funds are accounted for using a flow of economic resources measurement focus and the accrual basis of accounting. All assets and all liabilities associated with the operation of this fund are included in the statement of net assets. The statement of changes in fund net assets presents increases (revenues) and decreases (expenses) in net total assets. The statement of cash flows provides information about how the District finances and meets the cash flow needs of its proprietary fund. Fiduciary Funds Fiduciary funds are accounted for using the flow of economic resources measurement focus and the accrual basis of accounting. Fiduciary funds are excluded from the government-wide financial statements because they do not represent resources of the District. Revenues Exchange and Non-Exchange Transactions Revenue resulting from exchange transactions, in which each party gives and receives essentially equal value, is recorded on the accrual basis when the exchange takes place. On a modified accrual basis, revenue is recorded in the fiscal year in which the resources are measurable and become available. Available means that the resources will be collected within the current fiscal year or are expected to be collected soon enough thereafter to be used to pay liabilities of the current fiscal year. Generally, available is defined as collectible within 90 days. However, to achieve comparability of reporting among California districts and so as not to distort normal revenue patterns, with specific respect to reimbursement grants and corrections to state-aid apportionments, the California Department of Education has defined available for districts as collectible within one year. The following revenue sources are considered to be both measurable and available at fiscal year-end: State apportionments, interest, certain grants, and other local sources. Non-exchange transactions, in which the District receives value without directly giving equal value in return, include property taxes, certain grants, entitlements, and donations. Revenue from property taxes is recognized in the fiscal year in which the taxes are received. Revenue from certain grants, entitlements, and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied. Eligibility requirements include time and purpose requirements. On a modified accrual basis, revenue from non-exchange transactions must also be available before it can be recognized. Deferred Revenue Deferred revenue arises when potential revenue does not meet both the "measurable" and "available" criteria for recognition in the current period or when resources are received by the District prior to the incurrence of qualifying expenditures. In subsequent periods, when both revenue recognition criteria are met, or when the District has a legal claim to the resources, the liability for deferred revenue is removed from the combined balance sheet and revenue is recognized. 29

36 NOTES TO FINANCIAL STATEMENTS Certain grants received before the eligibility requirements are met, are recorded as deferred revenue. On the governmental fund financial statements, receivables that will not be collected within the available period are also recorded as deferred revenue. Expenses/Expenditures On the accrual basis of accounting, expenses are recognized at the time they are incurred. The measurement focus of governmental fund accounting is on decreases in net financial resources (expenditures) rather than expenses. Expenditures are generally recognized in the accounting period in which the related fund liability is incurred, if measurable, and typically paid within 90 days. Principal and interest on longterm obligations, which has not matured, are recognized when paid in the governmental funds as expenditures. Allocations of costs, such as depreciation and amortization, are not recognized in the governmental funds but are recognized in the entity-wide statements. Cash and Cash Equivalents The District's cash and cash equivalents are considered to be cash on hand, demand deposits, and short-term investments with original maturities of three months or less from the date of acquisition. Cash equivalents also include cash with county treasury balances for purposes of the statement of cash flows. Investments Investments held at June 30, 2010, with original maturities greater than one year are stated at fair value. Fair value is estimated based on quoted market prices at year-end. All investments not required to be reported at fair value are stated at cost or amortized cost. Fair values of investments in county and State investment pools are determined by the program sponsor. Restricted Assets Restricted assets arise when restrictions on their use change the normal understanding of the availability of the asset. Such constraints are either imposed by creditors, contributors, grantors, or laws of other governments or imposed by enabling legislation. Certain proceeds of the District debt obligations, as well as certain resources set aside for their repayment, are classified as restricted assets - investments on the Statement of Net Assets because they are maintained in reserve accounts and their use is limited by applicable debt covenants. Prepaid Expenditures Prepaid expenditures (expenses) represent amounts paid in advance of receiving goods or services. The District has the option of reporting an expenditure in governmental funds for prepaid items either when purchased or during the benefiting period. The District has chosen to report the expenditures when paid. Stores Inventories Inventories consist of expendable food and supplies held for consumption. Inventories are stated at cost, on the weighted average basis. The costs of inventory items are recorded as expenditures in the governmental type funds and expenses in the proprietary type funds when used. 30

37 NOTES TO FINANCIAL STATEMENTS Capital Assets and Depreciation The accounting and reporting treatment applied to the capital assets associated with a fund are determined by its measurement focus. General capital assets are long-lived assets of the District. The District maintains a capitalization threshold of $5,000. The District does not possess any infrastructure. Improvements are capitalized; the costs of normal maintenance and repairs that do not add to the value of the asset or materially extend an asset's life are not capitalized, but are expensed as incurred. Interest incurred during the construction of capital assets utilized by the enterprise fund is also capitalized. When purchased, such assets are recorded as expenditures in the governmental funds and capitalized in the government-wide financial statement of net assets. The valuation basis for general capital assets are historical cost, or where historical cost is not available, estimated historical cost based on replacement cost. Donated capital assets are capitalized at estimated fair market value on the date donated. Capital assets in the proprietary funds are capitalized in the fund in which they are utilized. The valuation basis for proprietary fund capital assets are the same as those used for the capital assets of governmental funds. Depreciation of capital assets is computed and recorded by the straight-line method. Estimated useful lives of the various classes of depreciable capital assets are as follows: buildings, 20 to 50 years; improvements/infrastructure, 5 to 50 years; equipment, 2 to 15 years. Interfund Balances On fund financial statements, receivables and payables resulting from short-term interfund loans are classified as "interfund receivables/payables". These amounts are eliminated in the governmental and business-type activities columns of the statement of net assets, except for the net residual amounts due between governmental and business-type activities, which are presented as internal balances. Compensated Absences Compensated absences are accrued as a liability as the benefits are earned. The entire compensated absence liability is reported on the government-wide statement of net assets. For governmental funds, the current portion of unpaid compensated absences is recognized upon the occurrence of relevant events such as employee resignations and retirements that occur prior to year end that have not yet been paid with expendable available financial resources. These amounts are reported in the fund from which the employees who have accumulated leave are paid. Sick leave is accumulated without limit for each employee at the rate of one day for each month worked. Leave with pay is provided when employees are absent for health reasons; however, the employees do not gain a vested right to accumulated sick leave. Employees are never paid for any sick leave balance at termination of employment or any other time. Therefore, the value of accumulated sick leave is not recognized as a liability in the District's financial statements. However, credit for unused sick leave is applicable to all classified school members who retire after January 1, At retirement, each member will receive.004 year of service credit for each day of unused sick leave. Credit for unused sick leave is applicable to all certificated employees and is determined by dividing the number of unused sick days by the number of base service days required to complete the last school year, if employed full-time. 31

38 NOTES TO FINANCIAL STATEMENTS Accrued Liabilities and Long-Term Obligations All payables, accrued liabilities, and long-term obligations are reported in the government-wide and proprietary fund financial statements. Premiums and discounts on issuance of long-term obligations, as well as issuance costs (deferred charges), are deferred and amortized over the life of the related debt using the effective interest method. Long-term obligations payable are reported net of the applicable premium or discount. In general, governmental fund payables and accrued liabilities that, once incurred, are paid in a timely manner and in full from current financial resources are reported as obligations of the funds. However, claims and judgments, compensated absences and special termination benefits that will be paid from governmental funds are reported as a liability in the fund financial statements only to the extent that they are due for payment during the current year. Bonds, certificates of participation and capital leases are recognized as liabilities in the governmental fund financial statements when due. Deferred Issuance Costs, Premiums and Discounts In the government-wide financial statements, long-term obligations are reported as liabilities in the applicable governmental activities or business-type activities fund statement of net assets. Bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds using the straight line method. Fund Balance Reserves and Designations The District reserves those portions of fund balances which are legally segregated for a specific future use or which do not represent available expendable resources and therefore are not available for appropriation or expenditure. Unreserved fund balance indicates that portion of fund equity which is available for appropriation in future periods. Fund equity reserves have been established for revolving cash accounts, prepaid expenditures, stores inventories, and legally restricted grants and entitlements. Designations of fund balances consist of that portion of the fund balance that has been designated (set aside) by the governing board to provide for specific purposes or uses. Fund equity designations have been established for economic uncertainties and other purposes. Net Assets Net assets represent the difference between assets and liabilities. Net assets invested in capital assets, net of related debt consists of capital assets, net of accumulated depreciation, reduced by the outstanding balances of any borrowings used for the acquisition, construction or improvement of those assets. The District has related debt outstanding as of June 30, Net assets are reported as restricted when there are limitations imposed on their use either through the enabling legislation adopted by the District or through external restrictions imposed by creditors, grantors, or laws or regulations of other governments. The District first applies restricted resources when an expense is incurred for purposes for which both restricted and unrestricted net assets are available. Enabling legislation relates to laws passed that create a revenue source to be used for specific purposes. The government-wide financial statements report net assets restricted by enabling legislation of $27,155,

39 NOTES TO FINANCIAL STATEMENTS Operating Revenues and Expenses Operating revenues are those revenues that are generated directly from the primary activity of the proprietary funds. For the District, these revenues are food sales. Operating expenses are necessary costs incurred to provide the good or service that is the primary activity of the fund. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. lnterfund Activity Transfers between governmental and business-type activities in the government-wide financial statements are reported in the same manner as general revenues. Exchange transactions between funds are reported as revenues in the seller funds and as expenditures/expenses in the purchaser funds. Flows of cash or goods from one fund to another without a requirement for repayment are reported as interfund transfers. Interfund transfers are reported as other financing sources/uses in governmental funds and after non-operating revenues/expenses in proprietary funds. Repayments from funds responsible for particular expenditures/expenses to the funds that initially paid for them are not presented on the financial statements. Interfund transfers are eliminated in the governmental and business-type activities columns of the statement of activities, except for the net residual amounts transferred between governmental and business-type activities. Estimates The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates. Budgetary Data The budgetary process is prescribed by provisions of the California Education Code and requires the governing board to hold a public hearing and adopt an operating budget no later than July 1 of each year. The District governing board satisfied these requirements. The adopted budget is subject to amendment throughout the year to give consideration to unanticipated revenue and expenditures primarily resulting from events unknown at the time of budget adoption with the legal restriction that expenditures cannot exceed appropriations by major object account. The amounts reported as the original budgeted amounts in the budgetary statements reflect the amounts when the original appropriations were adopted. The amounts reported as the final budgeted amounts in the budgetary statements reflect the amounts after all budget amendments have been accounted for. For budget purposes, onbehalf payments have not been included as revenue and expenditures as required under generally accepted accounting principles. Property Tax Secured property taxes attach as an enforceable lien on property as of January 1. Taxes are payable in two installments on November 1 and February 1 and become delinquent on December 10 and April 10, respectively. 33

40 NOTES TO FINANCIAL STATEMENTS Unsecured property taxes are payable in one installment on or before August 31. The County of Riverside bills and collects the taxes on behalf of the District. Local property tax revenues are recorded when received. New Accounting Pronouncements In March 2009, the GASB issued GASB Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions. The objective of this Statement is to enhance the usefulness of fund balance information by providing clearer fund balance classifications that can be more consistently applied and by clarifying the existing governmental fund type definitions. This Statement establishes fund balance classifications that comprise a hierarchy based primarily on the extent to which a government is bound to observe constraints imposed upon the use of the resources reported in governmental funds. The requirements of this Statement are effective for the financial statements for periods beginning after June 15, Early implementation is encouraged. NOTE 2 - DEPOSITS AND INVESTMENTS Summary of Deposits and Investments, Including Restricted Assets - Investments Deposits and investments as of June 30, 2010, are classified in the accompanying financial statements as follows: Governmental activities $ 64,272,441 * Business-type activities 4,856,511 Fiduciary funds 390,791 Total Deposits and Investments $ 69,519,743 Deposits and investments as of June 30, 2010, consisted of the following: Cash on hand and in banks $ 650,361 Cash in revolving 51,675 Investments 68,817,707 * Total Deposits and Investments $ 69,519,743 * $4,907,629 of these balances represent Restricted Assets - Investments as reflected on the Statement of Net Assets. 34

41 NOTES TO FINANCIAL STATEMENTS Policies and Practices The District is authorized under California Government Code to make direct investments in local agency bonds, notes, or warrants within the State; U.S. Treasury instruments; registered State warrants or treasury notes; securities of the U.S. Government, or its agencies; bankers acceptances; commercial paper; certificates of deposit placed with commercial banks and/or savings and loan companies; repurchase or reverse repurchase agreements; medium term corporate notes; shares of beneficial interest issued by diversified management companies, certificates of participation, obligations with first priority security; and collateralized mortgage obligations. Investment in County Treasury - The District is considered to be an involuntary participant in an external investment pool as the District is required to deposit all receipts and collections of monies with their County Treasurer (Education Code Section 41001). The fair value of the District's investment in the pool is reported in the accounting financial statements at amounts based upon the District's pro-rata share of the fair value provided by the County Treasurer for the entire portfolio (in relation to the amortized cost of that portfolio). The balance available for withdrawal is based on the accounting records maintained by the County Treasurer, which is recorded on the amortized cost basis. General Authorizations Limitations as they relate to interest rate risk, credit risk, and concentration of credit risk are indicated in the schedules below: Maximum Maximum Maximum Authorized Remaining Percentage Investment Investment Type Maturity of Portfolio in One Issuer Local Agency Bonds, Notes, Warrants 5 years None None Registered State Bonds, Notes, Warrants 5 years None None U.S. Treasury Obligations 5 years None None U.S. Agency Securities 5 years None None Banker's Acceptance 180 days 40% 30% Commercial Paper 270 days 25% 10% Negotiable Certificates of Deposit 5 years 30% None Repurchase Agreements 1 year None None Reverse Repurchase Agreements 92 days 20% of base None Medium-Term Corporate Notes 5 years 30% None Mutual Funds N/A 20% 10% Money Market Mutual Funds N/A 20% 10% Mortgage Pass-Through Securities 5 years 20% None County Pooled Investment Funds N/A None None Local Agency Investment Fund (LAIF) N/A None None Joint Powers Authority Pools N/A None None 35

42 NOTES TO FINANCIAL STATEMENTS Authorized Under Debt Agreements Maximum Maximum Maximum Authorized Remaining Percentage Investment Investment Type Maturity of Portfolio In One Issuer U.S. Treasury Obligations N/A None None State Bonds and Notes N/A None None Federal Housing Administration Debentures (FHA) N/A None None Federal Home Administration Certificates (FmHA) N/A None None Federal Home Loan Mortgage Corporation Obligations (FHLMC or "Freddie Mac") N/A None None Farm Credit Banks Bonds and Notes N/A None None Federal Home Loan Banks Obligations 3 years None None Federal National Mortgage Association Obligations (FNMA or "Fannie Mae") 3 years None None Student Loan Marketing Association Obligations (SLMA or "Sallie Mae") N/A None None Financing Corporation Obligations (FICO) N/A None None Resolution Funding Corporation Obligations (REFCORP) 3 years None None General Housing Administration Certificates N/A None None General Services Administration Certificates N/A None None Government National Mortgage Association N/A None None Small Business Administration Certificates N/A None None U.S. Department of Housing and Urban Development Bonds (HUD) N/A None None U.S. Maritime Administration Financings N/A None None Washington Metropolitan Area Transit Authority Bonds N/A None None Unsecured Certificates of Deposit, Time Deposits, and Bankers' Acceptances 30 days None None Commercial Paper 270 days None None Money Market Mutual Funds N/A None None Repurchase Agreements 270 days None None Investment Agreement N/A None None Pre-Funded Municipal Obligations N/A None None State Sponsered Investment Pools (LAIF) N/A None None Forward Delivery Agreements N/A None None Guaranteed Pool Certificates N/A None None Riverside County Investment Pool N/A None None Export-Import Bank N/A None None Rural Economic Community Development Administration N/A None None 36

43 NOTES TO FINANCIAL STATEMENTS Maximum Maximum Maximum Authorized Remaining Percentage Investment Investment Type Maturity of Portfolio In One Issuer Federal Financing Bank N/A None None Municipal Obligations N/A None None State General Obligations N/A None None Government Money Market Mutual Funds 1 year None None California Asset Management Program (CAMP) N/A None None Deposit accounts, Federal Funds and Bankers' Acceptances with Domestic Commerical Banks 360 days None None Deposits which are fully insured by Federal Deposit Insurance Corporation (FDIC) N/A None None Money Market Funds registered under the Federal Investment Company Act of 1941 N/A None None Secured Certificates of Deposit 1 year None None Federal Funds, Deposit Accounts or Bank Acceptances 1 year None None Senior Debt Obligations of Other Government Sponsored Agencies approved in advanced by the Certificate Insurer 3 years None None Interest Rate Risk Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value to changes in market interest rates. The District manages its exposure to interest rate risk by investing in the county pool and purchasing a combination of shorter term and longer term investments and by timing cash flows from maturities so that a portion of the portfolio is maturing or coming close to maturity evenly over time as necessary to provide the cash flow and liquidity needed for operations. Specific Identification Information about the sensitivity of the fair values of the District's investments to market interest rate fluctuation is provided by the following schedule that shows the distribution of the District's investment by maturity: Average Maturity Amortized Fair in Days/ Investment Type Cost Value Maturity Date Riverside County Investment Pool $ 59,111,504 $ 59,235, First American Treasury Obligations 7,627,270 7,627, FSA Master Capital Management Investment Agreement 2,078,933 2,078,933 8/28/2035 Total $ 68,817,707 $ 68,941,726 37

44 NOTES TO FINANCIAL STATEMENTS Credit Risk Credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. While the District's investment in the Riverside County Investment Pool is not required to be rated, as of year-end it reflected an Aaa rating by Moody's. Likewise, the First American Treasury Obligations Money Market Mutual Funds reflected an Aaa rating by Moody's. The Investment Agreement was not rated. Custodial Credit Risk - Deposits This is the risk that in the event of a bank failure, the District's deposits may not be returned to it. The District does not have a policy for custodial credit risk for deposits. However, the California Government Code requires that a financial institution secure deposits made by State or local governmental units by pledging securities in an undivided collateral pool held by a depository regulated under State law (unless so waived by the governmental unit). The market value of the pledged securities in the collateral pool must equal at least 110 percent of the total amount deposited by the public agency. California law also allows financial institutions to secure public deposits by pledging first trust deed mortgage notes having a value of 150 percent of the secured public deposits and letters of credit issued by the Federal Home Loan Bank of San Francisco having a value of 105 percent of the secured deposits. As of June 30, 2010, the District's bank balance of $819,683 was exposed to custodial credit risk because it was uninsured and collateralized with securities held by the pledging financial institution's trust department or agent, but not in the name of the District. 38

45 NOTES TO FINANCIAL STATEMENTS NOTE 3 - RECEIVABLES Receivables at June 30, 2010, consisted of intergovernmental grants, entitlements, interest and other local sources. All receivables are considered collectible in full. Special Reserve Non-Major General Building Fund For Capital Governmental Fund Fund Outlay Projects Funds Federal Government Categorical aid $ 4,890,957 $ - $ - $ 176,744 State Government Apportionment 13,177, Categorical aid 2,319, ,366 Lottery 551, Special Education 1,854, Local Government Interest 42,797 33,366 24,433 14,322 Other Local Sources 1,092, ,685 Total $ 23,930,051 $ 33,366 $ 24,433 $ 388,117 Internal Total Cafeteria Service Governmental Enterprise Fund Activities Fund Federal Government Categorical aid $ - $ 5,067,701 $ 1,508,459 State Government Apportionment - 13,177,845 - Categorical aid - 2,514, ,533 Lottery - 551,674 - Other state - 1,854,881 - Local Government Interest 1, ,211 11,291 Other Local Sources - 1,094,162 14,009 Total $ 1,293 $ 24,377,260 $ 1,635,292 39

46 NOTES TO FINANCIAL STATEMENTS NOTE 4 - CAPITAL ASSETS Capital asset activity for the fiscal year ended June 30, 2010, was as follows: Balance Balance July 1, 2009 Additions Deductions June 30, 2010 Governmental Activities Capital Assets Not Being Depreciated Land $ 30,639,329 $ 1,562,394 $ - $ 32,201,723 Construction in process 42,165,704 5,426,251 5,421,766 42,170,189 Total Capital Assets Not Being Depreciated 72,805,033 6,988,645 5,421,766 74,371,912 Capital Assets Being Depreciated Land improvements 12,842, ,344-13,439,476 Buildings and improvements 326,270,200 4,399, ,669,908 Furniture and equipment 18,807, ,367-19,038,518 Total Capital Assets Being Depreciated 357,919,483 5,228, ,147,902 Less Accumulated Depreciation Land improvements 3,817, ,224-4,386,362 Buildings and improvements 41,440,045 6,831,865-48,271,910 Furniture and equipment 12,185,266 1,246,387-13,431,653 Total Accumulated Depreciation 57,442,449 8,647,476-66,089,925 Governmental Activities Capital Assets, Net $ 373,282,067 $ 3,569,588 $ 5,421,766 $ 371,429,889 Business-Type Activities Capital Assets Being Depreciated Buildings and improvements $ 1,929,888 $ - $ - $ 1,929,888 Furniture and equipment 1,241, , ,343 Total Capital Assets Being Depreciated 3,171, ,480 2,842,231 Less Accumulated Depreciation Buildings and improvements 212,750 34, ,391 Furniture and equipment 637,405 81, , ,560 Total Accumulated Depreciation 850, , , ,951 Business-Type Activities Capital Assets, Net $ 2,321,556 $ (116,547) $ 103,729 $ 2,101,280 40

47 NOTES TO FINANCIAL STATEMENTS Depreciation expense was charged to governmental and business-type functions as follows: Governmental Activities Instruction $ 7,782,727 Home-to-school transportation 259,425 All other pupil services 345,899 Plant services 259,425 Total Depreciation Expenses Governmental Activities 8,647,476 Business-Type Activities Food services 116,547 Total Depreciation Expenses All Activities $ 8,764,023 NOTE 5 - INTERFUND TRANSACTIONS Interfund Receivables/Payables (Due To/Due From) Interfund receivable and payable balances at June 30, 2010, between major funds, non-major governmental funds, and non-major enterprise funds are as follows: Due To Non-Major Cafeteria General Governmental Enterprise Due From Fund Funds Fund Total General Fund $ - $ 741,885 $ 420,699 $ 1,162,584 Special Reserve Fund For Capital Outlay Projects 5,011, ,011,140 Non-Major Governmental Funds 1,396, ,396,427 Cafeteria Enterprise Fund 2,518 4,980-7,498 Internal Service Fund Total $ 6,410,795 $ 746,871 $ 420,699 $ 7,578,365 41

48 NOTES TO FINANCIAL STATEMENTS A balance of $5,000,000 is due to the Special Reserve Fund for Capital Outlay Projects from the General Fund for the repayment of a temporary loan. A balance of $612,655 is due to the Deferred Maintenance Non-Major Governmental Fund from the General Fund for the State revenue received for the Deferred Maintenance Program. A balance of $400,000 is due to the Deferred Maintenance Non-Major Governmental Fund from the General Fund as a contribution. A balance of $374,245 is due to the Adult Education Non-Major Governmental Fund from the General Fund for the revenue limit portion related to the Adult Education program. A balance for $400,000 is due to the General Fund from the Adult Education Non-Major Governmental Fund as a temporary loan. A balance of $200,000 is due to the General Fund from the Child Development Non-Major Governmental Fund as a temporary loan. The balance of $420,699 is due to the General Fund from the Cafeteria Non-Major Enterprise Fund for indirect costs and reimbursment of payroll related costs. Remaining balances resulted from the time lag between the date that (1) interfund goods and services are provided or reimbersable expenditures occur, (2) transactions are recorded in the accounting system, and (3) payments between funds are made. 42

49 NOTES TO FINANCIAL STATEMENTS Operating Transfers Interfund transfers for the year ended June 30, 2010, consisted of the following: Transfer From Non-Major General Building Governmental Transfer To Fund Fund Funds Total Building Fund $ - $ - $ 200,000 $ 200,000 Special Reserve Fund for Capital Outlay Projects 460, ,944 Non-Major Governmental Funds 2,073, ,329-2,746,116 Total $ 2,534,731 $ 672,329 $ 200,000 $ 3,407,060 The General Fund transferred to the following Non-Major Governmental Funds: Adult Education Fund for lottery apportionment. $ 1,051,605 Child Development Fund for reimbursement of cost. 9,527 Deferred Maintenance Fund for the State match and District contribution. 1,012,655 $ 2,073,787 The General Fund transferred to the Special Reserve Fund for Capital Outlay Projects for reimbursement of construction costs. The Building Fund transferred to the Capital Project Fund for Blended Component Units Non-Major Governmental Fund for the payment of interest and principal. The Capital Project Fund for Blended Component Units Non-Major Governmental Fund transferred to the Building Fund for reimbursement of interest and principal. 460, , ,000 Total $ 3,407,060 43

50 NOTES TO FINANCIAL STATEMENTS NOTE 6 - ACCOUNTS PAYABLE Accounts payable at June 30, 2010, consisted of the following: Special Reserve General Building Fund for Capital Fund Fund Outlay Projects Salaries and benefits $ 163,280 $ - $ - Supplies 269, Services 980,779 3,500 - Construction 228,609 9,250 6,267 Due to other districts 316, Other 16, Total $ 1,976,020 $ 12,750 $ 6,267 Non-Major Total Cafeteria Governmental Governmental Enterprise Funds Activities Fund Salaries and benefits $ 1,342 $ 164,622 $ - Supplies 45, ,149 1,642 Services 3, ,260 10,321 Construction 45, ,506 40,440 Due to other districts - 316,991 - Other - 16,718 - Total $ 96,209 $ 2,091,246 $ 52,403 NOTE 7 - DEFERRED REVENUE Deferred revenue at June 30, 2010, consisted of the following: General Fund Federal financial assistance $ 3,050,528 State categorical aid 252,648 Other local 8,893 Total $ 3,312,069 44

51 NOTES TO FINANCIAL STATEMENTS NOTE 8 - LONG-TERM OBLIGATIONS Summary The changes in the District's long-term obligations during the year consisted of the following: Balance Balance Due in July 1, 2009 Additions Deductions June 30, 2010 One Year General obligation bonds $ 97,740,470 $ 32,284,697 $ 8,645,000 $ 121,380,167 $ 2,795,000 Premium on issuance 4,540,161 1,724, ,385 5,989,953 - Certificates of participation 52,945,000-1,265,000 51,680,000 1,360,000 Premium on issuance 1,610,172-62,077 1,548,095 - Discount on issuance (84,346) - (3,138) (81,208) - Capital leases 5,674, ,023 5,038,312 4,378,173 Accumulated vacation - net 2,309, ,028 2,067,591 - Claim liabilities 366,818 19, , ,298 Supplemental Early Retirement Plan (SERP) 1,918,414 4,770, ,900 5,773,494 1,518,838 Other postemployment benefits 1,177,593 2,550,306 1,488,391 2,239,508 - $ 168,198,236 $ 41,349,640 $ 13,525,666 $ 196,022,210 $ 10,438,309 Payments on the General Obligation Bonds are made by the Bond Interest and Redemption Fund with local revenues. Payments for the Certificates of Participation are made by the Special Reserve for Capital Outlay Fund. Payments for capital leases will be paid by the fund for which the lease was entered into. The accrued vacation will be paid by the fund for which the employee worked. Payments for claims liability are made from the Self- Insurance Fund. Payments for the Supplemental Early Retirement Program are made from the General Fund. Other postemployment benefits are generally paid by the General Fund. 45

52 NOTES TO FINANCIAL STATEMENTS General Obligations Bonds The outstanding general obligation bonded debt is as follows: 1997, Bonds Bonds Issue Maturity Interest Original Outstanding Outstanding Date Date Rate Issue July 1, 2009 Issued Accreted Redeemed June 30, 2010 Series A 8/1/97 8/1/ % $ 10,000,000 $ 7,140,000 $ - $ - $ 6,770,000 $ 370, , Series B 8/1/98 8/1/ % 9,999,278 12,842, , ,000 12,874, , Series A 8/19/05 8/1/ % 49,998,180 48,558,117-52,481-48,610, , Series B 2/7/07 8/1/ % 30,000,000 29,200, ,225,000 27,975, , Series C 5/12/10 8/1/ % 24,990,463-24,990, ,990, , Refunding 5/12/10 8/1/ % 6,560,000-6,560, ,560,000 $ 97,740,470 $ 31,550,463 $ 734,234 $ 8,645,000 $ 121,380, General Obligation Bonds, Series A On August 1, 1997, the District issued the 1997 Series A current General Obligation Bonds in the amount of $10,000,000 to fund school construction. The bonds have a maturity date of August 1, 2022, with interest yields varying from 4.80 to 5.15 percent. On May , the District issued 2010 General Obligation Refunding Bonds in the amount of $6,560,000 to advance refund $6,420,000 of the 1997 General Obligation Bonds, Series A. As a result, the refunded portion of the debt obligation has been removed as a long-term obligation from the government-wide statement of net assets. At June 30, 2010, 1997 General Obligation Bonds, Series A, totaling $370,000 were still outstanding General Obligation Bonds, Series B On August 1, 1998, the District issued the 1997 Series B current and capital appreciation General Obligation Bonds in the amount of $9,999,278 (accreting to $22,525,000) to fund school construction. The bonds have a final maturity to occur on August 1, 2023, with interest yields varying from 3.70 to 5.28 percent. At June 30, 2010, 1997 General Obligation Bonds, Series B, totaling $12,874,106 were still outstanding General Obligation Bonds, Series A On August 19, 2005, the District issued the 2005 Series A current and capital appreciation General Obligation Bonds in the amount of $49,998,180 (accreting to $52,140,000) to finance the construction, renovation and repair of District facilities. The bonds have a final maturity to occur on August 1, 2030, with interest yields varying from 3.00 to 5.09 percent. At June 30, 2010, the principal balance outstanding (including accreted interest to date) was $48,610,598 and unamortized premium and issuance costs were $2,706,953 and $618,016, respectively. 46

53 NOTES TO FINANCIAL STATEMENTS 2005 General Obligation Bonds, Series B On February 7, 2007, the District issued the 2005 Series B General Obligation Bonds in the amount of $30,000,000 to finance the construction, renovation and repair of District facilities, to finance a portion of the interest due on the Bonds and to pay issuance costs. The bonds have a final maturity to occur on August 1, 2031, with interest yields varying from 4.00 to 5.00 percent. At June 30, 2010, the principal balance outstanding was $27,975,000 and unamortized premium and issuance costs were $1,619,997 and $406,816, respectively General Obligation Bonds, Series C On May 12, 2010, the District issued the 2005 Series C General Obligation Bonds in the amount of $24,990,463 to finance the construction, renovation and repair of District facilities, to finance a portion of the interest due on the Bonds and to pay issuance costs. The bonds issued were capital appreciation bonds accreting to a maturing principal balance of $143,307,445. The bonds have a final maturity to occur on August 1, 2043, with interest yields varying from 6.82 to percent. At June 30, 2010, the principal balance outstanding was $24,990,463 and unamortized premium and issuance costs were $1,508,701 and $1,508,701, respectively General Obligation Refunding Bonds On May 12, 2010, the District issued the 2010 General Obligation Refunding Bonds in the amount of $6,560,000. The bonds were issued to advance refund $6,420,000 of the outstanding 1997 General Obligation Bonds, Series A. The bonds associated with the issuance were placed in an escrow account with U.S. Bank for the future redemption of Series A bonds to occur on August 1, The difference between the cash flows of the refunded debt and the new issuance was $524,952. The economic gain (the difference between the present value of the refunded debt and new issuance) resulting from the refunding was $410,889. The bonds have a final maturity to occur on August 1, 2022, with interest yields varying from 2.74 to 4.50 percent. At June 30, 2010, the principal balance outstanding was $6,560,000 and unamortized premium and issuance costs were $154,302 and $135,598, respectively. 47

54 NOTES TO FINANCIAL STATEMENTS The bonds mature as follows: Principal Accreted Current Including Accreted Interest to Interest to Fiscal Year Interest to Date Maturity Maturity Total 2011 $ 2,771,758 $ 23,242 $ 3,858,571 $ 6,653, ,338,187 81,813 3,842,856 7,262, ,891, ,023 3,770,613 5,765, ,330, ,362 3,726,113 6,216, ,762, ,974 3,659,044 6,639, ,575,112 2,174,888 16,349,287 39,099, ,070,842 5,179,158 11,686,337 42,936, ,774,675 8,775,325 5,613,750 46,163, ,042,418 28,407, ,500 44,777, ,407,640 42,092,360-50,500, ,414,894 39,592,551-45,007,445 Total $ 121,380,167 $ 126,807,278 $ 52,834,071 $ 301,021,516 Certificates of Participation The outstanding Certificates of Participation debt is as follows: Issue Maturity Interest Original Outstanding Outstanding Date Date Rate Issue July 1, 2009 Redeemed June 30, /3/03 9/1/ % % $ 15,500,000 $ 13,000,000 $ 675,000 $ 12,325,000 11/6/03 9/1/ % % 3,500,000 2,335, ,000 2,110,000 4/11/06 9/1/36 Weekly 14,485,000 14,485, ,000 14,195,000 12/7/06 9/1/ %-5.25% 23,500,000 23,125,000 75,000 23,050,000 $ 56,985,000 $ 52,945,000 $ 1,265,000 $ 51,680, Certificates of Participation (School Financing Project) On April 3, 2003, the District, in conjunction with the Riverside County Schools Financing Corporation, issued $15,500,000 in 2003 Certificates of Participation, with interest rates ranging from 4.00 to 5.00 percent, to finance the construction and renovation of school facilities and to advance refund $5,490,000 of outstanding 1991 Certificates of Participation. The 2003 Certificates have final maturity to occur on September 1, The District received net proceeds of $15,188,780 (including premium of $169,850 and after payment of $481,070 in underwriter fees, insurance, and other issuance costs). At June 30, 2010, the principal balance outstanding was $12,325,000 and unamortized premium and issuance costs were $125,871 and $356,508, respectively. 48

55 NOTES TO FINANCIAL STATEMENTS The certificates mature through 2032 as follows: Year Ending June 30, Principal Interest Total 2011 $ 700,000 $ 566,123 $ 1,266, , ,798 1,291, , ,673 1,308, , , , , , , ,280,000 2,234,255 3,514, ,110,000 1,874,749 3,984, ,020,000 1,113,500 5,133, ,295, ,375 2,415,375 Total $ 12,325,000 $ 7,923,129 $ 20,248, Certificates of Participation (East Coachella School Facilities Project) On November 6, 2003, the District, in conjunction with the Riverside County Schools Financing Corporation, issued $3,500,000 in 2003 Certificates of Participation (East Coachella School Facilities Project), with interest rates ranging from 2.50 to percent, to finance the construction of school facilities, to pay for delivery costs of the Certificates, and to fund a reserve fund for the Certificates. Pursuant to a lease/purchase agreement, the District will lease a school site to the Corporation and will lease the site back from the Corporation. The 2003 Certificates have a final maturity to occur on September 1, The District received net proceeds of $3,469,544 (including a premium of $42,294 and after payment of $72,750 in underwriter fees, insurance, and other issuance costs). At June 30, 2010, the principal balance outstanding was $2,110,000 and unamortized premium and issuance costs were $22,406 and $38,542, respectively. Year Ending June 30, Principal Interest Total 2011 $ 260,000 $ 80,124 $ 340, ,000 70, , ,000 58, , ,000 46, , ,000 39, , ,000 76, ,297 Total $ 2,110,000 $ 371,632 $ 2,481,632 49

56 NOTES TO FINANCIAL STATEMENTS 2006 Certificates of Participation (2006 School Financing Project) On April 11, 2006, the District, in conjunction with the Riverside County Schools Financing Corporation, issued $14,485,000 in 2006 Certificates of Participation (2006 School Financing Project), with variable interest rate (weekly) to finance the construction, reconstruction, modernization, and improvement of existing school facilities, finance the acquisition of real property for a school site, finance a portion of the interest evidenced by the certificates, fund a reserve fund, and pay issuance costs associated with the execution and delivery of the certificates. The 2006 Certificates have a final maturity to occur on September 1, At June 30, 2010, the principal balance outstanding was $14,195,000 and unamortized discount and issuance costs were $81,208 and $281,336, respectively. Year Ending June 30, Principal Interest Total 2011 $ 300,000 $ 421,350 $ 721, , , , , , , , , , , , , ,895,000 1,749,375 3,644, ,250,000 1,439,250 3,689, ,645,000 1,072,875 3,717, ,120, ,400 3,761, ,675,000 99,675 2,774,675 Total $ 14,195,000 $ 7,014,525 $ 21,209,525 50

57 NOTES TO FINANCIAL STATEMENTS 2006B Certificates of Participation (School Financing Project) On December 7, 2006, the District, in conjunction with the Riverside County Schools Financing Corporation, issued $23,500,000 in 2006B Certificates of Participation (School Financing Project), with interest yields varying from 4.00 to 5.25 percent to finance the construction, reconstruction, expansion, modernization, and improvement of existing school facilities, fund a reserve fund, and pay issuance costs associated with the execution and delivery of the certificates. The 2006B Certificates have final maturity to occur on September 1, At June 30, 2010, the principal balance outstanding was $23,050,000 and unamortized premium and issuance costs were $1,399,818 and $368,143, respectively. Year Ending June 30, Principal Interest Total 2011 $ 100,000 $ 1,149,325 $ 1,249, ,000 1,144,262 1,269, ,000 1,138,450 1,288, ,000 1,131,750 1,316, ,128,050 1,128, ,025,000 5,585,144 6,610, ,150,000 4,890,082 9,040, ,680,000 3,801,500 8,481, ,110,000 1,962,000 11,072, ,525, ,375 3,754,375 Total $ 23,050,000 $ 22,159,938 $ 45,209,938 Capital Leases The District's liability on lease agreements with options to purchase are summarized below: Balance, July 1, 2009 $ 6,190,551 Payments 920,665 Balance, June 30, 2010 $ 5,269,886 The capital leases have minimum lease payments as follows: Year Ending Lease June 30, Payments 2011 $ 4,576, , ,000 Total 5,269,886 Less: Amount Representing Interest 231,574 Present Value of Minimum Lease Payments $ 5,038,312 51

58 NOTES TO FINANCIAL STATEMENTS Accumulated Unpaid Employee Vacation The long-term portion of accumulated unpaid employee vacation for the District at June 30, 2010, amounted to $2,067,591. Claims Liability Liabilities associated with health and welfare claims are reported when it is probable that a loss has occurred and the amount of the loss can be reasonably estimated. Liabilities include an amount for claims that have been incurred but not reported (IBNR). Claim liabilities are based upon estimated ultimate cost of settling the claims, considering recent claim settlement trends including the frequency and amount of payouts and other economic and social factors. The liability for health and welfare claims is reported in the Internal Service Fund. The outstanding claims liability at June 30, 2010, amounted to $386,298. Supplemental Early Retirement Plans (SERP) The District has offered supplemental early retirement plans (SERP) to its certificated and classified employees as part of the union contracts since Eligible employees who meet specific criteria for participation in SERP are provided an annuity to supplement the retirement benefits they are entitled to, through their respective retirement systems. The annuities offered to the employees are paid over a five-year period. Currently, 121 employees who have retired after 2003 have elected to receive these annuities, as purchased from United of Omaha and Principal Life Insurance. Sixty-seven of these employees retired during the fiscal period. Future annuity payments are as follows: Year Ending Total June 30, Payments 2011 $ 1,518, ,173, ,173, , ,196 Total $ 5,773,494 Other Postemployment Benefit (OPEB) Obligation The District's annual required contribution for the year ended June 30, 2010, was $2,543,586 and contributions made by the District during the year were $1,488,391. Interest on the net OPEB obligation and adjustments to the annual required contribution were $58,879 and $(52,159), respectively, which resulted in an increase to the net OPEB obligation of $1,061,915. As of June 30, 2010, the net OPEB obligation was $2,239,808. See Note 10 for additional information regarding the OPEB obligation and the postemployment benefit plan. 52

59 NOTES TO FINANCIAL STATEMENTS NOTE 9 - FUND BALANCES Fund balances are composed of the following elements: Special Reserve Non-Major General Building Fund For Capital Governmental Fund Fund Outlay Projects Funds Total Reserved Revolving cash $ 50,000 $ - $ - $ - $ 50,000 Stores inventory 82, ,125 Prepaid expenditures 1, ,473 Restricted programs 11,689, ,689,742 Total Reserved 11,823, ,823,340 Unreserved Designated Economic uncertainties 4,950, ,950,136 Tier III carryover 547, ,208 School site carryover 475, ,580 Projected carryover in adoption 3,552, ,552,421 Total Designated 9,525, ,525,345 Undesignated Special revenue funds ,599,697 1,599,697 Debt service funds ,994,920 6,994,920 Capital project funds - 27,910,711 19,353,264 5,772,763 53,036,738 Total Undesignated - 27,910,711 19,353,264 14,367,380 61,631,355 Total Unreserved 9,525,345 27,910,711 19,353,264 14,367,380 71,156,700 Total $ 21,348,685 $ 27,910,711 $ 19,353,264 $ 14,367,380 $ 82,980,040 NOTE 10 - POSTEMPLOYMENT HEALTH CARE PLAN AND OTHER POSTEMPLOYMENT BENEFITS (OPEB) OBLIGATION Plan Description The Postemployment Benefit Plan (the "Plan") is a single-employer defined benefit healthcare plan administered by the Coachella Valley Unified School District. The Plan provides medical and dental insurance benefits to eligible retirees and their spouses. Membership of the Plan consists of 79 retirees and beneficiaries currently receiving benefits, and 1,664 active plan members. 53

60 NOTES TO FINANCIAL STATEMENTS Contribution Information The contribution requirements of plan members and the District are established and may be amended by the District and the Coachella Valley Teachers Association (CTA), the local California Service Employees Association (CSEA), and unrepresented groups. The required contribution is based on projected pay-as-you-go financing requirements. For fiscal year , the District contributed $1,488,391 to the Plan, all of which was used for current premiums. Annual OPEB Cost and Net OPEB Obligation The District's annual OPEB cost (expense) is calculated based on the annual required contribution of the employer (ARC), an amount actuarially determined in accordance with the parameters of GASB Statement No. 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial accrued liabilities (UAAL) (or funding excess) over a period not to exceed 30 years. The following table shows the components of the District's annual OPEB cost for the year, the amount actually contributed to the Plan, and changes in the District's net OPEB obligation to the Plan: Annual required contribution $ 2,543,586 Interest on net OPEB obligation 58,879 Adjustment to annual required contribution (52,159) Annual OPEB cost (expense) 2,550,306 Contributions made (1,488,391) Increase in net OPEB obligation 1,061,915 Net OPEB obligation, beginning of year 1,177,593 Net OPEB obligation, end of year $ 2,239,508 Trend Information Trend information for annual OPEB cost, the percentage of annual OPEB cost contributed to the Plan, and the net OPEB obligation is as follows: Year Ended Annual OPEB Actual Employer Percentage Net OPEB June 30, Cost Contribution Contributed Obligation 2009 $ 2,543,586 $ 1,365,993 54% $ 1,177, ,550,306 1,488,391 58% 2,239,508 54

61 NOTES TO FINANCIAL STATEMENTS Funded Status and Funding Progress A schedule of funding progress as of the most recent actuarial valuation is as follows: Actuarial Accrued Liability Unfunded UAAL as a Actuarial (AAL) - AAL Percentage of Valuation Actuarial Value Unprojected (UAAL) Funded Ratio Covered Covered Payroll Date of Assets (a) Unit Credit (b) (b - a) (a / b) Payroll (c) ([b - a] / c) May 1, 2008 $ - $ 19,915,917 $ 19,915,917 0% $ 105,367,190 19% Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, investment returns, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the Plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progress, presented as required supplementary information following the notes to the financial statements, presents multiyear trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. Actuarial Methods and Assumptions Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and the plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations. In the May 1, 2008, actuarial valuation, the entry age normal method was used. Currently, the District does not set aside assets in an irrevocable employee benefit trust. The assumptions include a five percent discount rate based on employer assets that are not restricted for other purposes and are expected to be used to finance benefit payments. Healthcare cost trend rates reflected an ultimate rate of four percent. The UAAL is being amortized at a level dollar method. The remaining amortization period at June 30, 2010, was 28 years. 55

62 NOTES TO FINANCIAL STATEMENTS NOTE 11 - RISK MANAGEMENT Property and Liability The District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; and natural disasters. During the fiscal year ending June 30, 2010, the District participated in the Riverside Schools' Insurance Authority (RSIA) public entity risk pool for property and liability insurance coverage. Settled claims have not exceeded the insured coverage in any of the past three years. There has not been a significant reduction in coverage from the prior year. Workers' Compensation For fiscal year 2010, the District participated in the Riverside Schools Risk Management Authority (RSRMA) public entity risk pool. The intent of RSRMA is to achieve the benefit of a reduced premium for the District by virtue of its grouping and representation with other participants in RSRMA. The workers' compensation experience of the participating districts is calculated and applied to a common premium rate. Participation in RSRMA is limited to local educational agencies that can meet RSRMA selection criteria. Employee Medical Benefits The District purchases medical insurance from commercial insurance companies. Dental and vision benefits are self-insured by the District and accounted for in a separate internal service fund for self-insurance. Claims Liabilities The District records an estimated liability for dental and vision claims against the District. Claims liabilities are based on estimates of the ultimate cost of reported claims (including future claim adjustment expenses) and an estimate for claims incurred, but not reported based on historical experience. 56

63 NOTES TO FINANCIAL STATEMENTS Unpaid Claims Liabilities The fund establishes a liability for both reported and unreported events, which includes estimates of both future payments of losses and related claim adjustment expenses. The following represent the changes in approximate aggregate liabilities for the District from July 1, 2008 to June 30, 2010: Dental and Vision Liability Balance, June 30, 2007 $ 301,080 Claims and changes in estimates 2,805,625 Claims payments (2,739,887) Liability Balance, June 30, ,818 Claims and changes in estimates 3,109,856 Claims payments (3,090,376) Liability Balance, June 30, 2010 $ 386,298 Assets available to pay claims at June 30, 2010 $ 763,145 NOTE 12 - EMPLOYEE RETIREMENT SYSTEMS Qualified employees are covered under multiple-employer retirement plans maintained by agencies of the State of California. Certificated employees are members of the California State Teachers' Retirement System (CalSTRS) and classified employees are members of the California Public Employees' Retirement System (CalPERS). CalSTRS Plan Description The District contributes to CalSTRS; a cost-sharing multiple-employer public employee retirement system defined benefit pension plan administered by CalSTRS. The plan provides retirement and disability benefits, annual cost-of-living adjustments, and survivor benefits to beneficiaries. Benefit provisions are established by State statutes, as legislatively amended, within the State Teachers' Retirement Law. CalSTRS issues a separate comprehensive annual financial report that includes financial statements and required supplementary information. Copies of the CalSTRS annual financial report may be obtained from CalSTRS, 7919 Folsom Blvd., Sacramento, CA Funding Policy Active plan members are required to contribute 8.0 percent of their salary and the District is required to contribute an actuarially determined rate. The actuarial methods and assumptions used for determining the rate are those adopted by CalSTRS Teachers' Retirement Board. The required employer contribution rate for fiscal year was 8.25 percent of annual payroll. The contribution requirements of the plan members are established by State statute. The District's contributions to CalSTRS for the fiscal years ending June 30, 2010, 2009, and 2008, were $6,318,603, $6,525,218, and $6,324,361, respectively, and equal 100 percent of the required contributions for each year. 57

64 NOTES TO FINANCIAL STATEMENTS CalPERS Plan Description The District contributes to the School Employer Pool under CalPERS; a cost-sharing multiple-employer public employee retirement system defined benefit pension plan administered by CalPERS. The plan provides retirement and disability benefits, annual cost-of-living adjustments, and survivor benefits to plan members and beneficiaries. Benefit provisions are established by State statutes, as legislatively amended, within the Public Employees' Retirement Laws. CalPERS issues a separate comprehensive annual financial report that includes financial statements and required supplementary information. Copies of the CalPERS' annual financial report may be obtained from the CalPERS Executive Office, 400 P Street, Sacramento, CA Funding Policy Active plan members are required to contribute 7.0 percent of their salary and the District is required to contribute an actuarially determined rate. The actuarial methods and assumptions used for determining the rate are those adopted by the CalPERS Board of Administration. The required employer contribution rate for fiscal year was percent of covered payroll. The contribution requirements of the plan members are established by State statute. The District's contributions to CalPERS for the fiscal years ending June 30, 2010, 2009, and 2008, were $2,798,650, $2,742,745, and $2,799,099, respectively, and equal 100 percent of the required contributions for each year. Alternative Retirement Program The District also contributes to the Accumulation Program for Part-time and Limited Service Employees (APPLE), which is a defined contribution pension plan. A defined contribution pension plan provides pension benefits in return for services rendered, provides an individual account for each participant, and specifies how contributions to the individual's account are to be determined instead of specifying the amount of benefits the individual is to receive. Under a defined contribution pension plan, the benefits a participant will receive depend solely on the amount contributed to the participant's account, the returns earned on investments of those contributions, and forfeitures of other participants' benefits that may be allocated to such participant's account. As established by Federal law, all public sector employees who are not members of their employer's existing retirement system (CalSTRS or CalPERS) must be covered by social security or an alternative plan. The District has elected to use APPLE as its alternative plan. Contributions made by the District and an employee vest immediately. The District contributes 3.75 percent of an employee's gross earnings. An employee is required to contribute 3.75 percent of his or her gross earnings to the pension plan. During the year, the District's required and actual contributions amounted to $68,048, which was 3.75 percent of its current year covered payroll. Employees required and actual contributions amounted to $68,048, which was 3.75 percent of the covered payroll. 58

65 NOTES TO FINANCIAL STATEMENTS On Behalf Payments The State of California makes contributions to CalSTRS and CalPERS on behalf of the District. These payments consist of State General Fund contributions to CalSTRS in the amount of $3,266,043 (4.267 percent of annual payroll). Under accounting principles generally accepted in the United States of America, these amounts are to be reported as revenues and expenditures. Accordingly, these amounts have been recorded in these financial statements. On behalf payments have been excluded from the calculation of available reserves, and have not been included in the budget amounts reported in the General Fund Budgetary Schedule. NOTE 13 - COMMITMENTS AND CONTINGENCIES Grants The District received financial assistance from Federal and State agencies in the form of grants. The disbursement of funds received under these programs generally requires compliance with terms and conditions specified in the grant agreements and are subject to audit by the grantor agencies. Any disallowed claims resulting from such audits could become a liability of the General Fund or other applicable funds. However, in the opinion of management, any such disallowed claims will not have a material adverse effect on the overall financial position of the District at June 30, Litigation The District is involved in various litigation arising from the normal course of business. In the opinion of management and legal counsel, the disposition of all litigation pending is not expected to have a material adverse effect on the overall financial position of the District at June 30, Construction Commitments As of June 30, 2010, the District had the following commitments with respect to the unfinished capital projects: Remaining Expected Construction Date of CAPITAL PROJECT Commitment Completion Sea View Elementary Expansion $ 466,940 Undetermined at this time Avenue 49 High School #3 316,164 Undetermined at this time Coachella Vally High School Modernization 74,936 June 2011 Oasis Reconstruction Elementary #5 1,733,775 June 2011 Aquatic Center 108,122 June 2011 North Shore Elementary #6 802,434 June 2013 $ 3,502,371 59

66 NOTES TO FINANCIAL STATEMENTS NOTE 14 - PARTICIPATION IN PUBLIC ENTITY RISK POOLS The District is a member of the Riverside Schools Insurance Authority (RSIA) and the Riverside Schools Risk Management Authority (RSRMA) public entity risk pools. The District pays an annual premium to each entity for its workers' compensation, and property liability coverage. The relationships between the District and the pools are such that they are not component units of the District for financial reporting purposes. These entities have budgeting and financial reporting requirements independent of member units and their financial statements are not presented in these financial statements; however, fund transactions between the entities and the District are included in these statements. Audited financial statements are available from the respective entities. During the year ended June 30, 2010, the District made payments of $896,423 and $2,732,158 to RSIA and RSRMA, respectively, for services received. NOTE 15 - FISCAL ISSUES RELATING TO BUDGET REDUCTIONS The State of California continues to suffer the effects of a recessionary economy. California school districts are reliant on the State of California to appropriate the funding necessary to continue the level of educational services expected by the State constituency. With the implementation of education trailer bill Senate Bill 16 of the Fourth Extraordinary Session (SBX4 16) (Chapter 23, Statutes of 2009), approximately 25 percent of current year appropriations have now been deferred to a subsequent period, creating significant cash flow management issues for districts in addition to requiring substantial budget reductions, ultimately impacting the ability of California school districts to meet their goals for educational services. NOTE 16 - SUBSEQUENT EVENT On August 19, 2010, the District amended the promissory note dated May 8, 2008, with Belk Holdings, LLC regarding the purchase of land. The schedule of the principal and interest payments was amended from being paid from July 13, 2008, and having a final maturity to occur on May 13, 2011, to having a final maturity to occur on December 13,

67 REQUIRED SUPPLEMENTARY INFORMATION 61

68 GENERAL FUND BUDGETARY COMPARISON SCHEDULE FOR THE YEAR ENDED Variances - Positive Budgeted Amounts (Negative) (GAAP Basis) Actual Final Original Final (GAAP Basis) to Actual REVENUES Revenue limit sources $ 92,272,248 $ 87,436,854 $ 87,476,524 $ 39,670 Federal sources 25,175,049 31,396,425 22,218,823 (9,177,602) Other State sources 33,420,047 36,426,457 41,414,635 4,988,178 Other local sources 9,179,801 10,252,780 10,185,259 (67,521) Total Revenues 1 160,047, ,512, ,295,241 (4,217,275) EXPENDITURES Current Certificated salaries 74,102,985 79,576,636 76,789,951 2,786,685 Classified salaries 25,476,742 26,326,961 25,346, ,710 Employee benefits 35,386,946 37,164,378 38,467,324 (1,302,946) Books and supplies 11,199,703 13,294,573 6,767,218 6,527,355 Services and operating expenditures 15,317,534 19,247,510 14,956,216 4,291,294 Capital outlay 2,830,724 4,160,374 3,883, ,731 Other outgo (77,253) 149,517 98,060 51,457 Debt service Principal 166, , ,023 (3,999) Interest 13,054 16,319 13,054 3,265 Total Expenditures 1 164,416, ,098, ,487,740 13,610,552 Excess (Deficiency) of Revenues Over Expenditures (4,369,314) (14,585,776) (5,192,499) 9,393,277 Other Financing Sources (Uses): Transfers out (2,764,181) (2,779,901) (2,534,731) 245,170 NET CHANGE IN FUND BALANCES (7,133,495) (17,365,677) (7,727,230) 9,638,447 Fund Balance - Beginning 29,075,915 29,075,915 29,075,915 - Fund Balance - Ending $ 21,942,420 $ 11,710,238 $ 21,348,685 $ 9,638,447 1 On behalf payments of $3,266,043 are included in the actual revenues and expenditures, but have not been included in the budgeted amounts. 62

69 SCHEDULE OF OTHER POSTEMPLOYMENT BENEFITS (OPEB) FUNDING PROGRESS FOR THE YEAR ENDED Schedule of Funding Progress Actuarial Accrued Liability Unfunded UAAL as a Actuarial (AAL) - AAL Percentage of Valuation Actuarial Value Unprojected (UAAL) Funded Ratio Covered Covered Payroll Date of Assets (a) Unit Credit (b) (b - a) (a / b) Payroll (c) ([b - a] / c) May 1, 2008 $ - $ 19,915,917 $ 19,915,917 0% $ 105,367,190 19% 63

70 SUPPLEMENTARY INFORMATION 64

71 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED Pass-Through Federal Entity Federal Grantor/Pass-Through CFDA Identifying Program Grantor/Program or Cluster Title Number Number Expenditures U.S. DEPARTMENT OF EDUCATION Direct Awards: Indian Education A [1] $ 15,880 Impact Aid [1] 655,508 Readiness and Emergency Management for Schools E [1] 146,009 Passed through California Department of Education (CDE): Adult Education Grants Adult Basic Education - ESL A ,596 Adult Basic Education - Adult Secondary Education A ,813 Adult Basic Education - English Literacy and Civics Education A ,976 No Child Left Behind Act (NCLB): Title I, Part A Cluster Title I, Part A - Basic Grants, Low Income and Neglected ,046,706 ARRA Title I, Part A - Basic Grants, Low Income and Neglected ,520,325 Title I, Part A - Program Improvement LEA Corrective Action, Extensive Performance Problems ,568 Subtotal for Title I, Part A Cluster 7,498,599 Title I - School Improvement Grant for Quality Education Investment Act (QEIA) Schools ,642 Title I, Part G - Advanced Placement Test Fee ,626 Title II, Part A - Improving Teacher Quality ,102,896 Title II, Part A - Principal Training ,579 Title II, Part B - CA Mathematics and Science Partnership ,822 Title II, Part D - Enhancing Education Through Technology Formula Grant ,107 Title III - Limited English Proficiency ,426 Title IV, Part A - Safe and Drug-Free Schools ,509 Title IV, Part B - 21st Century Community Learning Centers , 14535, 14603, ,076,995 Title V, Part A - Innovation Education Strategies A ,399 ARRA State Fiscal Stabilization Fund , ,813,634 Vocational Education Grants Applied Technology - Secondary Education ,706 Passed through Riverside County Office of Education: Title I, Part C - Migrant Education ,622 Title I, Part C - Migrant Education Summer Program ,073 [1] Direct Award See accompanying note to supplementary information. 65

72 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS, Continued FOR THE YEAR ENDED Pass-Through Federal Entity Federal Grantor/Pass-Through CFDA Identifying Program Grantor/Program or Cluster Title Number Number Expenditures U.S. DEPARTMENT OF EDUCATION, continued Passed through Riverside County SELPA: Special Education Cluster (IDEA) Federal Preschool $ 37,316 ARRA Federal Preschool ,362 Local Assistance ,437,688 ARRA Local Assistance ,312,292 Preschool Local Assistance A ,369 Preschool Staff Development A Subtotal for Special Education Cluster (IDEA) 4,880,373 Subtotal for U.S. Department of Education 23,877,790 U.S. DEPARTMENT OF AGRICULTURE Passed through CDE: Child Nutrition Cluster Especially Needy Breakfast ,159,523 National School Lunch Program , ,226,409 Meal Supplements ,303 Food Distribution , ,137,448 Summer Food Program ,914 Subtotal for Child Nutrition Cluster 9,930,597 Child and Adult Care Food Program ,838 Subtotal for U.S. Department of Agriculture 10,420,435 U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES Passed through California Department of Health and Human Services: Medicaid Cluster Medi-Cal Billing Option ,503 Medical Administrative Activities Program ,348 Subtotal for Medicaid Cluster 344,851 Passed through Riverside County Office of Education [2]: Headstart Cluster Head Start ,390,178 ARRA Head Start ,037 Early Head Start ,260 ARRA Early Head Start ,720 Subtotal for Headstart Cluster 3,062,195 [2] Does not include District in-kind contributions of $772,986 to meet Federal matching requirements. See accompanying note to supplementary information. 66

73 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS, Continued FOR THE YEAR ENDED Pass-Through Federal Entity Federal Grantor/Pass-Through CFDA Identifying Program Grantor/Program or Cluster Title Number Number Expenditures Child Care Development Fund (CCDF) Cluster Passed through CDE: Child Development - Federal Child Care, Center Based $ 929,511 Child Development - Instructional Materials ,673 Subtotal for CCDF Cluster 951,184 Subtotal for U.S. Department of Health and Human Services 4,358,230 U.S. DEPARTMENT OF LABOR Passed through County of Riverside: ARRA WIA Adult Program ,029 Subtotal for U.S. Department of Labor 15,029 Total Expenditures of Federal Awards $ 38,671,484 See accompanying note to supplementary information. 67

74 LOCAL EDUCATION AGENCY ORGANIZATION STRUCTURE ORGANIZATION The Coachella Valley Unified School District was established in 1973 and consists of an area comprising approximately 1,200 square miles. The District operates 14 K-6 schools, three 7-8 schools, one 7-12 high school, two four-year high schools, one continuation high school, an adult education extension program, 12 Headstart programs, five State Preschools, ten childcare centers, and teen parenting programs at two four-year high schools. There were no boundary changes during the year. GOVERNING BOARD MEMBER OFFICE TERM EXPIRES Elizabeth R. Toledo President 2010 Maria G. Machuca Vice President 2012 Gloria Maldonado Clerk 2010 Joe Murillo Member 2012 Juanita D. Duarte Member 2010 Manuel Jarvis Martinez Member 2012 Shirley Palmer Member 2010 ADMINISTRATION Ricardo Z. Medina Richard Alvarez Jamie Brown Superintendent Assistant Superintendent, Educational Services Assistant Superintendent, Business Services See accompanying note to supplementary information. 68

75 SCHEDULE OF AVERAGE DAILY ATTENDANCE FOR THE YEAR ENDED Final Report Second Period Annual Report Report ELEMENTARY Kindergarten 1,468 1,477 First through third 4,426 4,444 Fourth through sixth 3,949 3,960 Seventh and eighth 2,501 2,501 Home and hospital 8 9 Special education Total Elementary 12,794 12,843 SECONDARY Regular classes 4,359 4,252 Continuation education Home and hospital 7 8 Special education Total Secondary 4,661 4,544 Total K-12 17,455 17,387 See accompanying note to supplementary information. 69

76 SCHEDULE OF INSTRUCTIONAL TIME FOR THE YEAR ENDED Reduced Reduced Number of Days Actual Actual Minutes Minutes Actual Time Goal Average of Traditional Multitrack Grade Level Minutes Minutes Requirement Requirement Minutes Average Actual Time Calendar Calendar Status Kindergarten 31,500 30,625 36,000 35,000 56,035 N/A N/A Complied Grades ,560 47,211 50,400 49,000 Grade 1 55,970 53,050 55, [1] Grade 2 55,970 53,050 55, [1] Grade 3 55,970 53,050 55, [1] Grades ,730 57,099 54,000 52,500 Grade 4 55,970 53,050 55, [1] Grade 5 55,970 53,050 55, [1] Grade 6 55,970 53,050 55, [1] Grade 7 61,536 N/A N/A Complied Grade 8 61,536 N/A N/A Complied Grades ,730 57,099 64,800 63,000 Grade 9 65,148 N/A N/A Complied Grade 10 65,148 N/A N/A Complied Grade 11 65,148 N/A N/A Complied Grade 12 65,148 N/A N/A Complied [1] The District used the weighted average method to meet the compliance requirements of the longer day by averaging the actual minutes for in grades 1 through 6. See accompanying note to supplementary information. 70

77 RECONCILIATION OF ANNUAL FINANCIAL AND BUDGET REPORT WITH AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED There were no adjustments to the unaudited actual financial report which required reconciliation to the audited financial statements at June 30, See accompanying note to supplementary information. 71

78 SCHEDULE OF FINANCIAL TRENDS AND ANALYSIS FOR THE YEAR ENDED (Budget) GENERAL FUND Revenues $ 152,922,415 $ 161,295,241 $ 179,928,381 $ 182,234,975 Other sources , ,916 Total Revenues and Other Sources 152,922, ,295, ,323, ,950,891 Expenditures 161,547, ,487, ,379, ,213,277 Other uses and transfers out 2,556,029 2,534,731 4,502,794 8,298,856 Total Expenditures and Other Uses 164,103, ,022, ,882, ,512,133 INCREASE (DECREASE) IN FUND BALANCE $ (11,180,628) $ (7,727,230) $ 4,441,260 $ (561,242) ENDING FUND BALANCE $ 10,168,057 $ 21,348,685 $ 29,075,915 $ 24,634,655 AVAILABLE RESERVES 2 $ 4,923,092 $ 4,950,136 $ 5,182,028 $ 6,913,347 AVAILABLE RESERVES AS A PERCENTAGE OF TOTAL OUTGO % 2.99% 3.01% 3.84% LONG-TERM OBLIGATIONS N/A $ 196,022,210 $ 168,198,236 $ 169,714,204 K-12 AVERAGE DAILY ATTENDANCE AT P ,303 17,455 17,464 17,446 The General Fund balance has decreased by $3,285,970 over the past two years. The fiscal year budget projects a further decrease of $11,180,628 (52.4 percent). For a district this size, the State recommends available reserves of at least three percent of total General Fund expenditures, transfers out, and other uses (total outgo). The District has incurred operating deficits in two of the past three years and anticipates incurring an operating deficit during the fiscal year. Total long-term debt has increased by $26,308,006 over the past two years. Average daily attendance has increased by nine over the past two years. A decrease of 152 ADA is anticipated during fiscal year Budget 2011 is included for analytical purposes only and has not been subjected to audit. 2 Available reserves consist of all undesignated fund balances and all funds designated for economic uncertainty contained within the General Fund. 3 On-behalf payments of $3,266,043, $3,572,643, and $3,462,679 have been excluded from the calculation of available reserves for fiscal years ending June 30, 2010, 2009, and 2008, respectively. 4 Excludes Adult Education ADA. See accompanying note to supplementary information. 72

79 NON-MAJOR GOVERNMENTAL FUNDS COMBINING BALANCE SHEET Adult Child Deferred Education Development Maintenance Fund Fund Fund ASSETS Deposits and investments $ 113,091 $ 60,500 $ 487,727 Receivables 148, ,067 1,401 Due from other funds 374,245 9,527 1,012,655 Total Assets $ 635,649 $ 295,094 $ 1,501,783 LIABILITIES AND FUND BALANCES Liabilities: Accounts payable $ 45,719 $ 1,342 $ 38,897 Due to other funds 453, ,752 - Total Liabilities 498, ,094 38,897 Fund Balances: Unreserved: Undesignated, reported in: Special revenue funds 136,811-1,462,886 Debt service funds Capital projects funds Total Fund Balances 136,811-1,462,886 Total Liabilities and Fund Balances $ 635,649 $ 295,094 $ 1,501,783 See accompanying note to supplementary information. 73

80 Capital County School Capital Project Bond Interest Total Non-Major Facilities Facilities Fund for Blended and Redemption Governmental Fund Fund Component Units Fund Funds $ 2,182,986 $ 3,529,188 $ 57,504 $ 6,994,920 $ 13,425,916 6,717 6, , ,396,427 $ 2,189,703 $ 3,535,807 $ 57,504 $ 6,994,920 $ 15,210,460 $ 3,901 $ 6,350 $ - $ - $ 96, ,871 3,901 6, , ,599, ,994,920 6,994,920 2,185,802 3,529,457 57,504-5,772,763 2,185,802 3,529,457 57,504 6,994,920 14,367,380 $ 2,189,703 $ 3,535,807 $ 57,504 $ 6,994,920 $ 15,210,460 73

81 NON-MAJOR GOVERNMENTAL FUNDS COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE FOR THE YEAR ENDED Adult Child Deferred Education Development Maintenance Fund Fund Fund REVENUES Federal sources $ 263,414 $ 951,185 $ - Other State sources - 1,424,763 - Other local sources 58, ,117 2,466 Total Revenues 321,487 2,484,065 2,466 EXPENDITURES Current Instruction 894,654 2,212,515 - Instruction-related activities: Supervision of instruction 165,561 13,139 - School site administration 238,076 48,192 - General administration: All other general administration 49,678 88,758 - Plant services 20,060 11,800 - Facility acquisition and construction - 15, ,459 Other outgo Debt service Principal Interest and other Total Expenditures 1,368,029 2,389, ,459 Excess (Deficiency) of Revenues Over Expenditures (1,046,542) 94,083 (272,993) Other Financing Sources (Uses): Transfers in 1,051,605 9,527 1,012,655 Other sources Other sources - refunding bonds Transfers out Other uses - payment to refunded bond escrow agent Net Financing Sources (Uses) 1,051,605 9,527 1,012,655 NET CHANGE IN FUND BALANCES 5, , ,662 Fund Balance - Beginning 131,748 (103,610) 723,224 Fund Balance - Ending $ 136,811 $ - $ 1,462,886 See accompanying note to supplementary information. 74

82 Capital County School Capital Project Bond Interest Total Non-Major Facilities Facilities Fund for Blended and Redemption Governmental Fund Fund Component Units Fund Funds $ - $ - $ - $ - $ 1,214, ,475-32,973 2,009, ,551 35,861 16,075 6,259,461 7,159, , ,336 16,075 6,292,434 10,383, ,107, , , , , , , , ,000-1,412, , ,000 2,225,000 2,504, ,617 5,849,912 6,125,529 1,157, , ,817 8,074,912 13,978,786 (477,787) 450,087 (559,742) (1,782,478) (3,595,372) ,329-2,746, ,724,177 1,724, ,560,000 6,560, (200,000) - (200,000) (6,580,404) (6,580,404) ,329 1,703,773 4,249,889 (477,787) 450,087 (87,413) (78,705) 654,517 2,663,589 3,079, ,917 7,073,625 13,712,863 $ 2,185,802 $ 3,529,457 $ 57,504 $ 6,994,920 $ 14,367,380 74

83 GENERAL FUND SELECTED FINANCIAL INFORMATION THREE-YEAR SUMMARY OF REVENUES, EXPENDITURES AND CHANGES OF FUND BALANCE FOR THE YEAR ENDED (Dollar amounts in thousands) Actual Results for the Years Percent Percent Percent of of of Amount Revenue Amount Revenue Amount Revenue REVENUES Federal revenue $ 22, $ 28, $ 20, State and local revenue included in revenue limit 87, , , Other State revenue 41, , , Other local revenue 10, , , Total Revenues 161, , , EXPENDITURES Salaries and Benefits Certificated salaries 76, , , Classified salaries 25, , , Employee benefits 38, , , Total Salaries and Benefits 140, , , Books and supplies 6, , , Contracts and operating expenses 14, , , Capital outlay 3, , Other outgo , Total Expenditures 166, , , EXCESS OF REVENUES OVER (UNDER) EXPENDITURES (5,192) (3.2) 8, , OTHER FINANCING SOURCES (USES) Net transfers (2,535) (1.6) (4,108) (2.3) (7,583) (4.1) INCREASE (DECREASE) IN FUND BALANCE (7,727) (4.8) 4, (561) (0.3) FUND BALANCE, BEGINNING 29,076 24,635 25,196 FUND BALANCE, ENDING $ 21,349 $ 29,076 $ 24,635 See accompanying note to supplementary information. 75

84 CAFETERIA FUND SELECTED FINANCIAL INFORMATION THREE-YEAR SUMMARY OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE FOR THE YEAR ENDED (Dollar amounts in thousands) Actual Results for the Years Percent Percent Percent of of of Amount Revenue Amount Revenue Amount Revenue REVENUES Federal - NSLP $ 10, $ 9, $ 8, State meal program Food sales 1, , , Other Total Revenues 12, , , EXPENDITURES Salaries and employee benefits 5, , , Food 4, , , Supplies Other Total Expenditures 11, , , INCREASE IN FUND BALANCE 1, FUND BALANCE, BEGINNING 7,309 6,540 5,620 FUND BALANCE, ENDING $ 8,475 $ 7,309 $ 6,540 * * * * * * * * * * * * * * * * * * * * * * * * * * TYPE 'A' LUNCH/BREAKFAST PARTICIPATION Amount Percent Amount Percent Amount Percent TYPE 'A' LUNCHES Paid 204, , , Reduced price 314, , , Free 2,003, ,982, ,953, Total Lunches 2,522, ,519, ,496, BREAKFAST Paid 89, , , Reduced price 142, , , Free 1,412, ,392, , Total Breakfast 1,644, ,607, ,119, See accompanying note to supplementary information. 76

85 NOTE TO SUPPLEMENTARY INFORMATION NOTE 1 - PURPOSE OF SCHEDULES Schedule of Expenditures of Federal Awards The accompanying Schedule of Expenditures of Federal Awards includes the Federal grant activity of the District and is presented on the modified accrual basis of accounting. The information in this schedule is presented in accordance with the requirements of the United States Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Therefore, some amounts presented in this schedule may differ from amounts presented in, or used in the preparation of, the financial statements. The following schedule provides reconciliation between revenues reported on the Statement of Revenues, Expenditures, and Changes in Fund Balance and Net Assets, and in Business-Type Activities and the related expenditures reported on the Schedule of Expenditures of Federal Awards. The reconciling amounts consist primarily of ARRA - State Fiscal Stabilization Funds that in the previous period were recorded as revenues but were unspent. These unspent balances have been expended in the current period. In addition, Medi-Cal Billing Option funds have been recorded in the current period as revenues that have not been expended as of June 30, The unspent balances are reported as legally restricted ending balances within the General Fund. CFDA Number Amount Total Federal Revenues from the Statement of Revenues, Expenditures, and Changes in Fund Balance and Business-Type Activities: $ 33,853,857 ARRA - State Fiscal Stabilization Funds ,834,384 Medi-Cal Billing Option (16,757) Total Schedule of Expenditures of Federal Awards $ 38,671,484 Local Education Agency Organization Structure This schedule provides information about the District's boundaries and schools operated, members of the governing board, and members of the administration. Schedule of Average Daily Attendance (ADA) Average daily attendance (ADA) is a measurement of the number of pupils attending classes of the District. The purpose of attendance accounting from a fiscal standpoint is to provide the basis on which apportionments of State funds are made to school districts. This schedule provides information regarding the attendance of students at various grade levels and in different programs. 77

86 NOTE TO SUPPLEMENTARY INFORMATION Schedule of Instructional Time The District has received incentive funding for increasing instructional time as provided by the Incentives for Longer Instructional Day. This schedule presents information on the amount of instructional time offered by the District and whether the District complied with the provisions of Education Code Sections through Districts must maintain their instructional minutes at either the actual minutes or the requirement, whichever is greater, as required by Education Code Section Senate Bill 2 of the Fourth Extraordinary Session (SBX4 2) allows for an equivalent five-day reduction to the required number of instructional minutes for the fiscal years through Reconciliation of Annual Financial and Budget Report With Audited Financial Statements This schedule provides the information necessary to reconcile the fund balance of all funds reported on the Unaudited Actual Financial Report to the audited financial statements. Schedule of Financial Trends and Analysis This schedule discloses the District's financial trends by displaying past years' data along with current year budget information. These financial trend disclosures are used to evaluate the District's ability to continue as a going concern for a reasonable period of time. Non-Major Governmental Funds - Balance Sheet and Statement of Revenues, Expenditures, and Changes in Fund Balance The Non-Major Governmental Funds Combining Balance Sheet and Combining Statement of Revenues, Expenditures, and Changes in Fund Balance is included to provide information regarding the individual funds that have been included in the Non-Major Governmental Funds column on the Governmental Funds Balance Sheet and Statement of Revenues, Expenditures, and Changes in Fund Balance. General Fund Selected Financial Information This schedule provides a comparison of revenues and expenditures as a percentage of total revenue for the General Fund for the past three years. Cafeteria Fund Selected Financial Information This schedule provides a comparison of revenues and expenditures as a percentage of total revenue for the cafeteria fund for the past three years. 78

87 INDEPENDENT AUDITORS' REPORTS 79

88

89

90

91

92

93

94 SCHEDULE OF FINDINGS AND QUESTIONED COSTS 86

95 SUMMARY OF AUDITORS' RESULTS FOR THE YEAR ENDED FINANCIAL STATEMENTS Type of auditors' report issued: Internal control over financial reporting: Material weakness(es) identified? Significant deficiency(ies) identified? Noncompliance material to financial statements noted? FEDERAL AWARDS Internal control over major programs: Material weakness(es) identified? Significant deficiency(ies) identified? Type of auditors' report issued on compliance for major programs: Any audit findings disclosed that are required to be reported in accordance with Section.510(a) of Circular A-133 Identification of major programs: Unqualified No None reported No No None reported Unqualified No CFDA Numbers Name of Federal Program or Cluster , (ARRA) Title I, Part A Cluster (includes ARRA) ARRA State Fiscal Stabilization Fund A, , , A, (ARRA), (ARRA) Special Education Cluster (IDEA) - (includes ARRA) , (ARRA), (ARRA) Head Start Cluster (includes ARRA) Dollar threshold used to distinguish between Type A and Type B programs: Auditee qualified as low-risk auditee? $ 1,160,145 Yes STATE AWARDS Internal control over State programs: Material weakness(es) identified? Significant deficiency(ies) identified? Type of auditors' report issued on compliance for State programs: No None reported Unqualified 87

96 FINANCIAL STATEMENT FINDINGS FOR THE YEAR ENDED None reported. 88

97 FEDERAL AWARDS FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED None reported. 89

98 STATE AWARDS FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED None reported. 90

99 SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS FOR THE YEAR ENDED Except as specified in previous sections of this report, summarized below is the current status of all audit findings reported in the prior year's schedule of financial statement findings. Financial Statement Findings None reported. Federal Awards Findings None reported. State Awards Findings After School Education and Safety Program Attendance and Reporting Criteria or Specific Requirements According to Education Code Section 8483(a)(2), elementary school pupils are to participate in the full day of the program every day during which pupils participate. In addition, compliance requirements mandate that schools maintain adequate source documents supporting the number of students served by the program as reported semiannually to the California Department of Education. Condition For the period tested, it appears there was inadequate documentation indicating actual student participation. The District uses a combination of scantrons, sign in/out sheets and meal counts to quantify attendance. As a result, source documentation used to track student attendance at the site level does not always reconcile to the summarized attendance data reported to the State. Furthermore, the use of meal counts may not be a reliable representation of actual attendance. Questioned Costs There is no questioned cost component to the condition identified. Context The condition identified was determined through a review of attendance records for the month of November 2008 for two selected sites that operate the after school program. The auditor attempted to recalculate the total students served using source documentation provided by the sites and compared the recalculated students served numbers to the summarized attendance data submitted to the State. Attendance scantrons, manual sign in/out sheets and meal counts were tallied and compared to the attendance summary. In addition, the auditor compared the summarized attendance data to the reported number of attendance submitted to the State. 91

100 SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS FOR THE YEAR ENDED Effect During our review of the site prepared attendance summaries for the selected sites, it was determined that the total students served for the selected reporting period was 6,951 students. However, the number of students served as reported to the State was equal to 7,080 students, resulting in a difference of 129 students. Cause It appears that the condition identified is due to manual attendance procedures and the use of an unsubstantiated source of attendance count. The meal count is an inventory count taken at the beginning of the site program, recounted at the end, with the variance used to support the number of meals served. This count is then used to record student attendance under the assumption that meals served equate students served. This methodology is not a reliable source of students served since it may not correlate to actual student attendance for the program. Recommendation The District should consider revising procedures used to take attendance. Revised procedures should incorporate standardized procedures that are necessary to record and report attendance related to the After School Education and Safety Program. Additionally, the District needs to place a strong emphasis in retaining auditable records related to the program. Current Status Implemented. 92

101

102 Governing Board Coachella Valley Unified School District 2. The site lacks a procedure to reconcile cash deposits for ASB activities to the originating source of the receipt. Typically, teachers will make a deposit to the ASB bookkeeper without supporting documentation such as a log or the receipts documenting the original amount of the monies received. As a result, the ASB bookkeeper is unable to verify that the deposit is complete. 3. All fundraisers follow an approval process; however, there is lack of procedures to account for cash receipts, disbursements and inventory from the event. The teacher overseeing the fundraiser is not required to maintain subsidiary logs of inventory issued and monies collected. Furthermore, since revenue potential forms are not completed, the ASB does not have a medium through which it can associate fundraising cost to revenue generated. 4. The site has a vending machine that is controlled and stocked by a club advisor. A perpetual inventory of the merchandise purchased, sold, and on hand is not maintained. Consequently, there is no reconciliation between the items sold and monies collected. Recommendations 1. All expenditures, prior to the items being purchased, should be approved by the student council to ensure that the proper funding is available. This will ensure that deficit spending is not performed, and that items being purchased are student approved items. 2. When cash is brought to the ASB for deposit, it should be accompanied by supporting documentation. Supporting documentation should reconcile to the actual cash deposit. Any discrepancies should be noted and explained. In addition, the cash receipt numbers should be in sequential order and be noted on the deposit summary form. 3. All cash collected from an ASB sponsored event should be clearly documented using a log or receipts. All sales should be clearly reflected on the log or receipts. The fundraiser sponsor should have records of all available inventories at the beginning of the fundraiser, and subsequently maintain a log of any changes in inventory. For example, the log should include student names and quantity issued, quantity of items damaged, units sold, and remaining inventory. Upon completion of the event, the log or receipts should be examined and agreed to the cash on hand, with any variances explained. The revenue potential form should be completed to document the actual cash collections, as identified on the log or receipts, and reconciled to the total deposit prepared. A profitability analysis should be performed to ensure all receipts and disbursements were accounted for adequately for the fundraiser. 4. A vending machine sales analysis should be completed by whoever has the responsibility for collecting the money from the machine and stocking it. This form should be forwarded to the bookkeeper along with the cash deposit given to the bookkeeper from the machine. The form should track the merchandise purchases to stock the machine, the item counts each time the machine is restocked, and the potential revenue that should have been collected from the machine based on the number of items sold for the period and the price of the items. La Familia Continuation Observation While local educational agencies are not allowed to sell snacks with a low nutritional value during school hours, the auditor noted regular chips are being sold by the student store. 94

103 Governing Board Coachella Valley Unified School District Recommendation The District should review the nutritional contents of the items sold by the student store to ensure compliance with the nutritional guidelines established. Toro Canyon Middle School Observations During our review of ASB procedures, the following issues were noted: 1. 2 of the 8 disbursements reviewed did not have proper ASB approval prior to the purchase. 2. Revenue potential forms are not completed at the end of the fundraising event. An analysis on the profit and loss of the fundraising event was not performed. 3. The site does not have a procedure to reconcile cash collected to items sold. Cash amounts are brought to the ASB bookkeeper without supporting documentation such as a log or the receipts documenting the original amount of the monies received. Recommendations 1. All expenditures, prior to the items being purchased, should be approved by the student council to ensure that the proper funding is available. This will ensure that deficit spending is not performed, and that items being purchased are student approved items. 2. Revenue potential Forms must be completely filled out at the end of each fundraiser. The revenue potentials form is important because it shows whether or not all the monies that should have been raised and turned in actually were based on the price of the item and number sold. The form is also used to document overages and shortages or losses of merchandise. An explanation of any overages and shortages must be documented on the form. The site administrator should ensure that these forms are completed and turned into the bookkeeper at the conclusion of the fundraiser. 3. When cash is brought to the ASB for deposit, it should be accompanied by supporting documentation. Supporting documentation should reconcile to the actual cash deposit. Any discrepancies should be noted and explained. Valley View Elementary School Observations During our interim ASB internal control audit, the following control weakness was noted: 1. Only one deposit was made for the month of October The deposit totaled $2,049 and consisted of revenue from the sales of spirit shirts. The number of days between the cash collection and deposit dates range from 7 to 40 days. 2. Receipts are not issued when monies are collected from the teachers. In addition, the site does not have a procedure to reconcile cash collected to items sold. Cash amounts are brought to the ASB bookkeeper without supporting documentation such as a log or the receipts documenting the original amount of the monies received. 95

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