ESPARTO UNIFIED SCHOOL DISTRICT COUNTY OF YOLO ESPARTO, CALIFORNIA FINANCIAL STATEMENTS WITH INDEPENDENT AUDITOR'S REPORT JUNE 30, 2014

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1 COUNTY OF YOLO ESPARTO, CALIFORNIA FINANCIAL STATEMENTS WITH INDEPENDENT AUDITOR'S REPORT JUNE 30, 2014

2 TABLE OF CONTENTS PAGE INDEPENDENT AUDITOR'S REPORT 1 MANAGEMENT S DISCUSSION AND ANALYSIS 3 BASIC FINANCIAL STATEMENTS Government-Wide Financial Statements Statement of Net Position 10 Statement of Activities 11 Fund Financial Statements Balance Sheet Governmental Funds 12 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position 13 Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds 14 Reconciliation of the Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances of to the Statement of Activities 15 Statement of Fiduciary Net Position 16 Statement of Changes in Fiduciary Net Position 17 Notes to the Basic Financial Statements 18 REQUIRED SUPPLEMENTARY INFORMATION Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget (Non-GAAP) and Actual - General Fund 34 Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget (Non-GAAP) and Actual Cafeteria Special Revenue Fund 35 SUPPLEMENTARY INFORMATION Combining Balance Sheet All Non-major Funds 36 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances All Non-major Funds 37

3 TABLE OF CONTENTS Combining Statement of Changes in Assets and Liabilities All Agency Funds 38 Organization 39 Schedule of Average Daily Attendance 40 Schedule of Instructional Time 41 Schedule of Charter Schools 42 Schedule of Expenditures of Federal Awards 43 Reconciliation of Annual Financial and Budget Report with Audited Financial Statements 44 Schedule of Financial Trends and Analysis 45 Notes to Supplementary Information 46 OTHER INDEPENDENT AUDITOR S REPORTS Independent Auditor's Report on Compliance with State Laws and Regulations 47 Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 50 Report on Compliance for Each Major Federal Program; Report on Internal Control Over Compliance; and Report on the Schedule of Expenditures of Federal Awards Required by OMB Circular A FINDINGS AND RECOMMENDATIONS SECTION Schedule of Findings and Questioned Costs 54 Schedule of Prior Audit Findings 58

4 James Marta & Company LLP Certified Public Accountants Accounting, Auditing, Consulting, and Tax Board of Education Esparto Unified School District Esparto, CA Report on the Financial Statements INDEPENDENT AUDITOR'S REPORT We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of Esparto Unified School District (the District ), as of and for the year ended June 30, 2014, and the related notes to the financial statements, which collectively comprise the District s basic financial statements as listed in the table of contents. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of Esparto Unified School District as of June 30, 2014, and the respective changes in financial position for the year then ended in accordance with accounting principles generally accepted in the United States of America. 701 Howe Avenue, Suite E3, Sacramento, CA fax jmarta@jpmcpa.com 1

5 Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management s discussion and analysis and budgetary comparison information on pages 3-9 and be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the District s basic financial statements. The accompanying supplementary information as listed in the table of contents, including the schedule of expenditures of federal awards, as required by Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, are presented for purposes of additional analysis and are not a required part of the basic financial statements. The supplementary information as listed in the table of contents, including the schedule of expenditures of federal awards, is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the supplementary information as listed in the table of contents, including the schedule of expenditures of federal awards, is fairly stated, in all material respects, in relation to the basic financial statements as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 5, 2014 on our consideration of the District s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the District s internal control over financial reporting and compliance. James Marta & Company LLP Certified Public Accountants December 5,

6 MANAGEMENT S DISCUSSION AND ANALYSIS

7 MANAGEMENT S DISCUSSION AND ANALYSIS AS OF JUNE 30, 2014 As management of the Esparto Unified School District (District), we offer readers of the District s financial statements this narrative discussion, overview, and analysis of the financial activities of the District for the fiscal year ended June 30, We encourage readers to consider the information presented here, in conjunction with the District s financial statements, which immediately follow this section. Financial Highlights The District s General Fund balance increased by $243,699 from the prior year s level of $3,538,386 at June 30, 2013 to $3,782,085 at June 30, This increase can be attributed to a successful year for the child nutrition program (requiring a smaller general fund contribution to the nutrition fund), a one-time State allocation for Prop 39 CA Clean Energy Jobs Act, and the one-time State Common Core Allocation. The local economy shows the beginning of a flat economy from the decline of the past 5 to 6 years. Consequently, the rate of enrollment has increased just under 2% in the current 14/15 fiscal year. The District s Board of Trustees continues with their goal to maintain a General Fund Reserve for Economic Uncertainties of 10% of General Fund expenditures, transfers out, and other uses. Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction to the District s basic financial statements. The District s basic financial statements are comprised of three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. Government-wide Financial Statements The government-wide financial statements are designed to provide readers with a broad overview of the District s finances, in a manner similar to a private-sector business. The Statement of Net Position presents information on all of the assets and liabilities of the District, with the difference between the two reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the District is improving or deteriorating. The Statement of Activities presents information showing how the net position of the District changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused vacation leave). The government-wide financial statements can be found on pages of this report. Fund Financial Statements A fund is a group of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The District, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the District can be divided into two categories: governmental funds and fiduciary funds. 3

8 Governmental Funds MANAGEMENT S DISCUSSION AND ANALYSIS AS OF JUNE 30, 2014 Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of expendable resources, as well as on balances of expendable resources available at the end of the fiscal year. Such information may be useful in evaluating government s near-term financing requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government s near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The District maintains seven individual governmental funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balances for the General Fund and Cafeteria Fund, which are considered major funds. Data from the other six governmental funds are combined into a single, aggregated presentation. Individual fund data for each of these non-major governmental funds is provided in the form of combining statements elsewhere in this report. The District adopts an annual appropriated budget for its general fund. A budgetary comparison statement has been provided for the general fund to demonstrate compliance with this budget. The basic governmental fund financial statements can be found on pages 12 and 14 of this report. Fiduciary Funds Fiduciary funds are used to account for resources held for the benefit of parties outside the governmental entity. Fiduciary funds are not reflected in the government-wide financial statement because the resources of those funds are not available to support the District s own programs. The District uses trust and agency funds to account for resources held for scholarships and student activities. The basic fiduciary fund financial statements can be found on pages of this report. Notes to the Financial Statements The notes provide additional information that is essential for a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on pages of this report. 4

9 MANAGEMENT S DISCUSSION AND ANALYSIS AS OF JUNE 30, 2014 Financial Analysis of the District s Funds Table 1 summarizes the District s net position as of June 30, 2013 and As noted earlier, net position may serve over time as a useful indicator of a government s financial position. The District s assets exceeded liabilities by $13,782,622 at the close of the most recent fiscal year. Table 1 Net Position Current and Other Assets $ 4,693,190 $ 5,072,665 Capital Assets 12,918,922 12,417,586 Total Assets 17,612,112 17,490,251 Long-Term Liabilities Outstanding 3, ,050,923 Other Liabilities 589, ,077 Total Liabilities 3,808,306 3,701,000 Deferred Inflows of Resources 7,068 6,629 Net Position: Invested in Capital Assets, Net of Related Debt 9,809,794 15,367,321 Restricted 185, ,017 Unrestricted 3,801,452 (1,957,716) Total Net Position $13,796,738 $13,782,622 The largest portion of the District s net position, $15,367,321 reflects its investment in long-term capital assets (e.g., land, buildings and improvements, and furniture and equipment); less any related debt (general obligation bonds payable and obligations under capital leases less unspent bond proceeds) used to acquire those assets that are still outstanding. The District uses these capital assets to provide services to students; consequently, these assets are not available for future spending. Although the District s investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. The second largest portion, $373,017, of the District s net position represents restricted net position and represents resources that are subject to external restrictions on how they may be used. The remaining ($1,957,716) of total net position reflects a swing from excess unrestricted net position to having a negative in our unrestricted net position; which shows we have no excess to help meet ongoing obligations. Included are general obligation bonds for capital construction, receipt of matching state apportionments for capital construction, and locally received developer fee collections. For the first time, the District is unable to report positive balances in all three categories of net position at the end of the current fiscal year; unlike the prior fiscal year, when all three categories were positive. The District s combined fund balances increased by $316,972 and can be contributed to a successful year for the child nutrition program (requiring a smaller general fund contribution to the nutrition fund), a one-time State allocation for Prop 39 CA Clean Energy Jobs Act, and the one-time State Common Core Allocation 5

10 MANAGEMENT S DISCUSSION AND ANALYSIS AS OF JUNE 30, 2014 Table 2 shows the changes in net position for fiscal year The District s net position decreased by $14,116 or -0.10% from Table 2 Changes in Net Position Revenues Program Revenues Charges for Services $ 49,890 $ 57,434 Operating Grants 2,053,457 1,735,646 Capital Grants - - General Revenues Property Taxes 2,774,492 2,848,490 Federal and State Aid 3,813,009 4,224,594 Other 320, ,834 Total Revenues 9,011,610 9,171,998 Program Expenses Instruction 4,647,157 4,754,440 Instruction Related Services 774, ,717 Pupil Services 965, ,974 Ancillary Services - - Community Services 1,917 16,478 General Administration 1,079,992 1,294,844 Plant Services 757, ,499 Interest 94, ,274 Other 537, ,888 Total Expenses 8,858,314 9,186,114 Increase (Decrease) in Net Position 153,296 (14,116) Net Position Beginning 13,643,442 13,796,738 Net Position Ending $13,796,738 $13,782,622 Governmental Funds The focus of the District s governmental funds is to provide information on near-term inflows, outflows, and balances of expendable resources. Such information is useful in assessing the District s financing requirements. The unreserved fund balance is divided between designated balances and undesignated balances. The District has designated portions of the unreserved fund balance to earmark resources for certain government-wide liabilities and post-employment obligations that are not recognized in the governmental funds. Undesignated balances in the general fund are required by state law to be appropriated in the following year s budget. 6

11 MANAGEMENT S DISCUSSION AND ANALYSIS AS OF JUNE 30, 2014 General Fund Budgetary Highlights Over the course of the year, the District revised the annual operating budget several times. These budget amendments included revisions to Revenue Limit Sources based on average daily attendance and updates in State and Federal entitlements and grants. The General Fund s final budgeted revenue for the year was higher than the amount originally budgeted due the increases in one-time allocation at the end of the fiscal year. Actual revenues were lower than final budgeted revenue by $895,865. The General Fund s final budget for expenditures was lower than the amount originally budgeted due to unspent revenues in the current fiscal year and planned expenditure decreases. The actual expenditures were $1,190,125 lower than the final budget amounts. The most significant positive variance was carryovers in the unspent supplies budget. Capital Asset and Debt Administration Capital Assets The Capital Projects Fund is used to account for the costs incurred in acquiring and improving sites, constructing and remodeling facilities, and procuring equipment necessary for providing educational programs for all students within the District. Table 3 Capital Assets Percent Change Land and Improvement of Sites $ 3,278,277 $ 3,303, % Buildings 14,554,050 14,561, % Equipment 1,632,352 1,632, % Construction in Progress 23, % Total $ 19,488,129 $ 19,498, % By June 30, 2014, the District had over $19 million in a broad range of capital assets, including land, buildings, buses, and food service and other equipment. The increase in capital assets was primarily due to the installation of a shade structure at the elementary school. Additional information on the District s capital assets can be found in Note 3 to the basic financial statements. 7

12 MANAGEMENT S DISCUSSION AND ANALYSIS AS OF JUNE 30, 2014 Debt Administration At June 30, 2014 the District had $3.05 million in long-term liabilities outstanding. Table 4 shows a total decrease of 1.9% from last year, due mainly from a reduction of General Obligation Bonds. Table 4 Long-term Debt Percent Change General Obligation Bonds $ 2,420,000 $ 2,310, % Capital Lease Obligations 689, , % Early Termination Benefits 46,200 66, % Compensated Absences 63,192 34, % Total $ 3,218,520 $ 3,050, % Economic Factors Facing the District in the Coming Year The new Local Control Funding Formula (LCFF) was voted into law at the November 2012 General Election and new funds are estimated for the District in the coming year. This new funding is intended to provide the District with flexibility to determine how it will demonstrate it has met the requirement to increase or improve services for unduplicated pupils in proportion to the increase in funds apportioned on the basis of the number and concentration of unduplicated pupils. In order to demonstrate the District has met this requirement, the District has established a community-wide and District-wide committee to create a Local Control Accountability Plan (LCAP), which has planned the instructional deliveries and support services necessary to provide for student success in the current fiscal year and beyond. And, although the local economy had experienced record levels of growth in the last five or so years, growth is just beginning to show signs of improvement in the District. As of June, 2014, the District still has a potential of over 300 homes/apartments/condominiums to be built within district boundaries in the next 5 to 10 years (these units were identified through a study of local developers who have County approved tentative sub-division maps). These units have the potential, based upon average student yield factors, of adding students to the District, but growth will be slow and will not be anticipated in the next 3 fiscal years. Number of Residential Permits in the Esparto Unified School District Boundaries Year Number of Permits Issued

13 MANAGEMENT S DISCUSSION AND ANALYSIS AS OF JUNE 30, 2014 Contacting the District s Financial Management This financial report is designed to provide our citizens, taxpayers, parents, investors, and creditors with a general overview of the District s finances and to show the District s accountability for the money it receives. If you have any questions regarding this report or need additional financial information, contact Ms. Debbie Howard, Assistant Superintendent of Business Services, Esparto Unified School District, Plainfield Street, Esparto, CA

14 BASIC FINANCIAL STATEMENTS

15 STATEMENT OF NET POSITION JUNE 30, 2014 ASSETS Governmental Activities Cash and cash equivalents $ 4,189,319 Receivables 881,621 Inventory 1,725 Capital assets, net of accumulated depreciation 12,417,586 Total Assets 17,490,251 LIABILITIES Accounts payable and other current liabilities 571,889 Unearned revenue 78,188 Long-term liabilities: Due within one year 267,880 Due in more than one year 2,783,043 Total Liabilities 3,701,000 DEFERRED INFLOWS OF RESOURCES Deferred bond premium revenue 6,629 NET POSITION Invested in capital assets, net of related debt 15,367,321 Restricted 373,017 Unrestricted (1,957,716) Total Net Position $ 13,782,622 The accompanying notes are an integral part of these financial statements. 10

16 STATEMENT OF ACTIVITIES FOR THE FISCAL YEAR ENDED JUNE 30, 2014 Net (Expense) Revenues and Changes in Program Revenues Net Assets Operating Charges for Grants and Governmental Expenses Services Contributions Activities Governmental Activities Instruction $ 4,754,440 $ 2,732 $ 1,133,826 $ (3,617,882) Instruction - related services: Instructional library, media and technology 115, (115,127) School site administration 562, ,428 (532,765) Pupil Services: Home-to-school transportation 424, ,704 (295,870) Food services 319,907 53, ,286 (7,306) All other pupil services 188,493-55,414 (133,079) General administration: Data processing 117, (117,447) All other general administration 1,177, ,903 (1,144,350) Plant services 807, ,761 (801,892) Community services 16, (16,478) Interest on long-term debt 128, (128,274) Other outgo 62,538-91,324 28,786 Depreciation (unallocated) 511, (511,350) Total governmental activities $ 9,186,114 $ 57,434 $ 1,735,646 (7,393,034) General Revenues Taxes and subventions: Taxes levied for general purposes 2,650,178 Taxes levied for debt service 198,312 Federal and state aid not restricted to specific purposes 4,224,594 Interest and investment earnings 10,509 Interagency revenues 46,181 Miscellaneous 249,144 Total general revenues 7,378,918 Change in net position (14,116) Net Position, July 1, ,796,738 Net Position, June 30, 2014 $ 13,782,622 The accompanying notes are an integral part of these financial statements. 11

17 BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2014 Cafeteria All General Special Revenue Non-Major Fund Fund Funds Totals ASSETS Cash and cash equivalents $ 3,438,488 $ 88,933 $ 661,898 $ 4,189,319 Accounts receivable 830,197 50, ,621 Due from other funds 110,411-11, ,189 Stores Inventory - 1,725-1,725 Total assets $ 4,379,096 $ 141,188 $ 674,570 $ 5,194,854 LIABILITIES AND FUND BALANCES Liabilities Accounts payable $ 523,088 $ 5,113 $ - $ 528,201 Unearned revenue 62,145-16,043 78,188 Due to other funds 11, ,000 3, ,189 Total liabilities 597, ,113 19, ,578 Fund balances Nonspendable 2,000 1,725-3,725 Restricted 342,102 27,350 3, ,017 Committed , ,914 Assigned 533, , ,739 Unassigned 2,904, ,904,881 Total fund balances 3,782,085 29, ,116 4,466,276 Total liabilities and fund balances $ 4,379,096 $ 141,188 $ 674,570 $ 5,194,854 The accompanying notes are an integral part of these financial statements. 12

18 RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET POSITION JUNE 30, 2014 Total fund balances - governmental funds $ 4,466,276 Amounts reported for assets and liabilities for governmental activities in the statement of net position are different from amounts reported in governmental funds because: Capital assets: In governmental funds, only current assets are reported. In the statement of net position, all assets are reported, including capital assets and accumulated depreciation. Capital assets at historical cost: $ 19,498,143 Accumulated depreciation: (7,080,557) Net: 12,417,586 Unmatured interest on long-term debt: In governmental funds, interest on long-term debt is not recognized until the period in which it matures and is paid. In the government-wide statement of activities, it is recognized in the period that it is incurred. The additional liability for unmatured interest owing at the end of the period was: (43,688) Long-term liabilities: In governmental funds, only current liabilities are reported. In the statement of net position, all liabilities, including longterm liabilities, are reported. Long-term liabilities relating to governmental activities consist of: General obligation bonds payable 2,310,000 Obligation for early retirement incentives 66,550 Compensated absences payable 34,638 Capital leases payable 639,735 Deferred gain or loss on debt refunding 6,629 (3,057,552) Total net position, governmental activities $ 13,782,622 The accompanying notes are an integral part of these financial statements. 13

19 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS FOR THE FISCAL YEAR ENDED JUNE 30, 2014 REVENUES Cafeteria All General Special Revenue Non-Major Fund Fund Funds Totals Local Control Funding Formula $ 6,709,460 $ - $ - $ 6,709,460 Federal revenue 432, , ,612 Other state revenues 726,474 16,458 70, ,672 Other local revenues 596,602 58, , ,253 Total revenues 8,465, , ,170 9,171,997 EXPENDITURES Certificated salaries 3,534,251-5,435 3,539,686 Classified salaries 1,453, ,822 48,180 1,634,550 Employee benefits 1,366,758 38,786 10,935 1,416,479 Books and supplies 416, ,098 2, ,017 Services and other operating expenditures 1,319,188 30, ,349,752 Capital outlay 21, ,686 Other outgo 59,016-3,411 62,427 Debt service expenditures 40, , ,878 Total expenditures 8,211, , ,152 8,854,475 (Deficiency) excess of revenues (under)over expenditures 253,699 (5,195) 69, ,522 OTHER FINANCING SOURCES (USES) Operating transfers in - 10,000-10,000 Operating transfers out (10,000) - - (10,000) Other financing uses - - (550) (550) Total other financing sources(uses) (10,000) 10,000 (550) (550) Net change in fund balances 243,699 4,805 68, ,972 Fund balances, July 1, ,538,386 24, ,648 4,149,304 Fund balances, June 30, 2014 $ 3,782,085 $ 29,075 $ 655,116 $ 4,466,276 The accompanying notes are an integral part of these financial statements. 14

20 RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVTIES FOR THE FISCAL YEAR ENDED JUNE 30, 2014 Total net change in fund balances - governmental funds $ 316,972 Amounts reported for governmental activities in the statement of activities are different from amounts reported in governmental funds because: Capital outlay: In governmental funds, the costs of capital assets are reported as expenditures in the period when the assets are acquired. In the statement of activities, costs of capital assets are capitalized and depreciated over their estimated useful lives. The difference between capital outlay expenditures and depreciation expense for the period is: Expenditures for capital outlay: $ 10,014 Depreciation expense: (511,350) (501,336) Debt service: In governmental funds, repayments of long-term debt are reported as expenditures. In the government-wide statements, repayments of long-term debt are reported as reductions of liabilities. Expenditures for repayment of the principal portion of long-term debt were: 159,393 Unmaturedinterest on long-termdebt: Ingovernmentalfunds, interest on long-term debt is recognized in the period that it becomes due. In the government-wide statement of activities, it is recognized in the period that it is incurred. Unmatured interest owing at the end of the period, less matured interest paid during the period but owing from the prior period was: Compensated absences: In governmental funds, compensated absences are measured by the amounts paid during the period. In the statement of activities, compensated absences are measured by the amounts earned. The difference between compensated absences paid and compensated absences earned was: Postemployment benefits other than pensions (OPEB): In governmental funds, OPEB costs are recognized when employer contributions are made. In the statement of activities, OPEB costs are recognized on the accrual basis. This year, the difference between OPEB costs and actual employer contributions was: Amortization of debt issue premium or discount: In governmental funds, if debt is issued at a premium or at a discount, the premium or discount is recognized as an Other Financing Source or an Other Financing Use in the period it is incurred. In the government-wide statements, the premium or discount is amortized as interest over the life of the debt. Amortization of premium for the period is: 2,212 28,554 (20,350) 439 Total change in net position - governmental activities $ (14,116) The accompanying notes are an integral part of these financial statements. 15

21 STATEMENT OF FIDUCIARY NET POSITION TRUST AND AGENCY FUNDS JUNE 30, 2014 Trust Fund Agency Fund Total Student Haswell Trust Body Memorial Naismith Funds Funds Total Assets Cash Cash in county treasury $ - $ 6,655 $ 6,655 $ - $ 6,655 Cash on hand and in banks 8,555-8,555 76,688 85,243 Accounts receivable Total assets $ 8,555 $ 6,659 $ 15,214 $ 76,688 $ 91,902 Liabilities Due to student groups $ - $ - $ - $ 76,688 $ 76,688 Total liabilities ,688 76,688 Net Position Restricted 8,555 6,659 15,214-15,214 Total liabilities and net position $ 8,555 $ 6,659 $ 15,214 $ 76,688 $ 91,902 The accompanying notes are an integral part of these financial statements. 16

22 STATEMENT OF CHANGES IN FIDUCIARY NET POSITION FIDUCIARY FUNDS FOR THE FISCAL YEAR ENDED JUNE 30, 2014 Haswell Memorial Naismith Total Revenues Other local sources $ 8 $ 3,509 $ 3,517 Expenditures Operating expenditures - (1,000) (1,000) Change in net position 8 2,509 2,517 Net position, July 1, ,547 4,150 12,697 Net position, June 30, 2014 $ 8,555 $ 6,659 $ 15,214 The accompanying notes are an integral part of these financial statements. 17

23 NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Esparto Unified School District (the District ) accounts for its financial transactions in accordance with the policies and procedures of the California Department of Education s California School Accounting Manual. The accounting policies of the District conform to accounting principles generally accepted in the United States of America as prescribed by the Governmental Accounting Standards Board (GASB) and the American Institute of Certified Public Accountants. The following is a summary of the more significant policies. A. REPORTING ENTITY Esparto Unified School District has reviewed criteria to determine whether other entities with activities that benefit the District should be included within its financial reporting entity. The criteria include, but are not limited to, whether the entity exercises oversight responsibility (which includes financial interdependency, selection of governing authority, designation of management, ability to significantly influence operations, and accountability for fiscal matters), the scope of public service, and a special financing relationship. The District has determined that no other outside entity meets the above criteria, and therefore, no agency has been included as a component unit in the District's financial statements. In addition, the District is not aware of any entity that would exercise such oversight responsibility that would result in the District being considered a component unit of that entity. B. BASIS OF PRESENTATION Government-Wide Financial Statements The statement of net position and the statement of activities display information about the District. These statements include the financial activities of the overall government, except for fiduciary activities. Eliminations have been made to minimize the double counting of internal activities. The government-wide statement of net position presents information on all of the District s assets and liabilities, with the difference between the two presented as net position. Net position is reported as one of three categories: invested in capital assets, net of related debt; restricted; or unrestricted. Restricted net position is further classified as either net position restricted by enabling legislation or net position that is otherwise restricted. The government-wide statement of activities presents a comparison between direct expenses and program revenues for each function or program of the District s governmental activities. Direct expenses are those that are specifically associated with a service, program, or department and are, therefore, clearly identifiable to a particular function. The District does not allocate indirect expenses to functions in the statement of activities. Program revenues include charges paid by the recipients of goods or services offered by a program, as well as grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues, which are not classified as program revenues, are presented as general revenues of the District, with certain exceptions. The comparison of direct expenses with program revenues identifies the extent to which each governmental function is self-financing or draws from the general revenues of the District. 18

24 NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2014 Government-Wide Financial Statements (Continued) Except for depreciation expense, reports all direct expenses by function in the Statement of Activities. Direct expenses are those that are clearly identifiable with a function. Interest on longterm liabilities is considered an indirect expense and is reported separately in the Statement of Activities. Fund Financial Statements Fund financial statements report detailed information about the District. The focus of governmental fund financial statements is on major funds rather than reporting funds by type. Each major governmental fund is presented in a separate column, and all non-major funds are aggregated into one column. Fiduciary funds are reported by fund type. C. MEASUREMENT FOCUS AND BASIS OF ACCOUNTING Government-Wide Financial Statements The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements are met. Expenses are recorded when liabilities are incurred. Governmental Fund Financial Statements Governmental fund financial statements (i.e., balance sheet and statement of revenues, expenditures, and changes in fund balances) are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenue resulting from exchange transactions, in which each party gives and receives essentially equal value, is recorded under the accrual basis when the exchange takes place. On a modified accrual basis, revenue is recorded in the fiscal year in which the resources are measurable and become available. Available means the resources will be collected within the current fiscal year or are expected to be collected soon enough thereafter to be used to pay liabilities of the current fiscal year. For the District, available means collectible within the current period or within 60 days after year-end. Non-exchange transactions, in which the District receives value without directly giving equal value in return, include property taxes, grants, and entitlements. Under the accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from grants and entitlements is recognized in the fiscal year in which all eligibility requirements have been satisfied. Eligibility requirements include timing requirements, which specify the year when the resources are to be used, or the fiscal year when use is first permitted; matching requirements, in which the District must provide local resources to be used for a specified purpose; and expenditure requirements, in which the resources are provided to the District on a reimbursement basis. Under the modified accrual basis, revenue from non-exchange transactions must also be available before it can be recognized. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. 19

25 NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2014 D. FUND ACCOUNTING The accounts of the District are organized on the basis of funds or account groups, each of which is considered to be a separate accounting entity. The operations of each fund are accounted for with a separate set of self-balancing accounts that comprise its assets, liabilities, fund balance, revenues, and expenditures or expenses, as appropriate. District resources are allocated to and accounted for in individual funds based upon the purpose for which they are to be spent and the means by which spending activities are controlled. The District funds and account groups are as follows: Governmental Funds The General Fund is the general operating fund of the District and accounts for all revenues and expenditures of the District, not encompassed within other funds. All general tax revenues and other receipts that are not allocated by law or contractual agreement to some other fund are accounted for in this fund. General operating expenditures and the capital improvement costs that are not paid through other funds are paid from the General Fund. The Special Revenue Funds are used to account for the proceeds of specific revenue sources that are legally restricted to expenditures for specified purposes. This classification includes Cafeteria, Deferred Maintenance, and Child Development Funds. 1. The Cafeteria Fund is used to account separately for federal, state, and local resources to operate the food service program. 2. The Child Development Fund is used to account for federal, state and local revenues to operate child development programs. The Capital Projects Funds are used to account for resources used for the acquisition or construction of major capital facilities and equipment. This classification includes the County School Facilities, Building, and Capital Facilities Funds. 1. This Building Fund is used 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. 2. The Capital Facilities Fund is used primarily to account separately for moneys received from fees levied on developers or other agencies as a condition of approving a development (Education Code sections ). The Debt Service Funds are used to account for the accumulation of resources for, and the payment of, general long-term debt principal, interest, and related costs. This classification includes the Bond Interest and Redemption and Tax Override Funds. 1. The Bond Interest and Redemption Fund is maintained by the County Treasurer and is used to account for the accumulation of resources for, and the repayment of, District bonds, interest, and related costs. 2. The Tax Override Fund is used for the repayment of voted indebtedness (other than Bond Interest and Redemption Fund repayments) to be financed from ad valorem tax levies. 20

26 NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2014 Fiduciary Funds Fiduciary funds are used to account for resources held for the benefit of other parties in a trustee or agent capacity. Fiduciary funds are not reflected in the government-wide financial statements because the resources of those funds are not available to support the District s own programs. Fiduciary funds are presented on an economic resources measurement focus and the accrual basis of accounting, similar to the government-wide financial statements. The key distinction between trust and agency funds is that trust funds are subject to a trust agreement that affects the degree of management involvement and the length of time that the resources are held. 1. The Trust Funds are used to account separately for gifts or bequests that benefit individuals, private organizations, or other governments and under which neither principal nor income may be used for purposes that support the District s own programs. This classification consists of the Haswell Memorial and Naismith Trust Funds. 2. The Agency Fund is used to account for assets of others for which the District has an agency relationship. This classification consists of the Student Body Funds. E. BUDGETS AND BUDGETARY ACCOUNTING Annual budgets are adopted on a basis consistent with generally accepted accounting principles for all governmental funds. By state law, the District's governing board must adopt a final budget no later than July 1. A public hearing must be conducted to receive comments prior to adoption. The District's governing board satisfied these requirements. Formal budgetary integration was employed as a management control device during the year for all budgeted funds. The District employs budget control by minor object and by individual appropriation accounts. Expenditures cannot legally exceed appropriations by major object account. During the year, budget revisions by the District's governing board and district superintendent give consideration to unanticipated revenue and expenditures. The final revised budgets are presented in the financial statements. F. ENCUMBRANCES Encumbrance accounting is used in all budgeted funds to reserve portions of applicable appropriations for which commitments have been made. Encumbrances are recorded for purchase orders, contracts, and other commitments when they are written. Encumbrances are liquidated when the commitments are paid. All encumbrances are liquidated at June 30. G. INVESTMENT VALUATION AND INCOME RECOGNITION In accordance with Education Code Section 41001, the District maintains substantially all its cash in the Yolo County Treasury. The county pools these funds with those of other districts in the county and invests the cash. These pooled funds are carried at cost, which approximates market value. Interest earned is credited to each fund. Any investment losses are proportionately shared by all funds in the pool. 21

27 NOTES TO THE BASIC FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2014 H. INVENTORY Inventory in the Cafeteria fund consists mainly of consumable supplies held for future use and are valued at average cost. Inventories are recorded as expenditures at the time individual inventory items are transferred from the warehouse to schools. Maintenance and other supplies held for physical plant repair, transportation supplies, and operating supplies are not included in inventories; rather, these amounts are recorded as expenditures when purchased. The cafeteria fund records supplies expense which includes a handling charge for the delivery of government surplus food commodities. The state does not require the Cafeteria Fund to record the fair market value of these commodities. The supplies expenditures would have been greater had the District paid fair market value for the government surplus commodities. I. CAPITAL ASSETS Capital assets are those purchased or acquired with an original cost of $5,000 or more and are reported at historical cost or estimated historical cost. Contributed assets are reported at fair market value as of the date received. Additions, improvements, and other capital outlays that significantly extend the useful life of an asset are capitalized. The costs of normal maintenance and repairs that do not add to the value of the assets or materially extend the asset s lives are not capitalized, but are expensed as incurred. Depreciation on all capital assets is computed using the straight-line method over 2 50 years depending on asset types. J. COMPENSATED ABSENCES All vacation pay is accrued when incurred in the government-wide financial statements. Accumulated sick leave benefits are not recognized as liabilities of the District. The District's policy is to record sick leave as an operating expense in the period taken, since such benefits do not vest, nor is payment probable; however, unused sick leave is added to the creditable service period for calculation of retirement benefits when the employee retires. K. UNEARNED REVENUES Cash received for federal and state special projects and programs is recognized as revenue to the extent that the qualified expenditures have been incurred. Unearned revenue is recorded to the extent cash received on specific projects and programs exceed qualified expenditures. L. LONG-TERM OBLIGATIONS Long-term debt and other long-term obligations are reported as liabilities in the government-wide statements. Bond premiums, discounts and issuance costs are deferred and amortized over the life of the bonds using the straight line method which is not materially different from the effective interest method. Bonds payable are reported net of the applicable premiums and discounts. Issuance costs are reported as prepaid expenses. 22