ETIWANDA SCHOOL DISTRICT ANNUAL FINANCIAL REPORT 1883 JUNE 30, 2017

Transcription

1 ETIWANDA SCHOOL DISTRICT ANNUAL FINANCIAL REPORT 1883

2 TABLE OF CONTENTS FINANCIAL SECTION Independent Auditor's Report 2 Management's Discussion and Analysis 5 Basic Financial Statements Government-Wide Financial Statements Statement of Net Position 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 Position 17 Governmental Funds - Statement of Revenues, Expenditures, and Changes in Fund 19 Balances Reconciliation of the Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances to the Statement of Activities 20 Proprietary Funds - Statement of Revenues, Expenses, and Changes in Net Position 22 Proprietary Funds - Statement of Cash Flows 23 Fiduciary Funds - Statement of Net Position 24 Notes to Financial Statements 25 REQUIRED SUPPLEMENTARY INFORMATION General Fund - Budgetary Comparison Schedule 68 Schedule of Other Postemployment Benefits (OPEB) Funding Progress 69 Schedule of the District's Proportionate Share of the Net Pension Liability 70 Schedule of District Contributions 71 Note to Required Supplementary Information 72 SUPPLEMENTARY INFORMATION Schedule of Expenditures of Federal Awards 74 Local Education Agency Organization Structure 75 Schedule of Average Daily Attendance 76 Schedule of Instructional Time 77 Reconciliation of Annual Financial and Budget Report With Audited Financial Statements 78 Schedule of Financial Trends and Analysis 79 Combining Statements - Non-Major Governmental Funds Combining Balance Sheet 80 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances 81 Note to Supplementary Information 82 INDEPENDENT AUDITOR'S REPORTS Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance With Government Auditing Standards 85 Report on Compliance for Each Major Program and on Internal Control Over Compliance Required by the Uniform Guidance 87 Report on State Compliance 89

3 TABLE OF CONTENTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS Summary of Auditor's Results 93 Financial Statement Findings 94 Federal Awards Findings and Questioned Costs 95 State Awards Findings and Questioned Costs 96 Summary Schedule of Prior Audit Findings 97 Management Letter 98

4 FINANCIAL SECTION 1

5 INDEPENDENT AUDITOR'S REPORT Governing Board Etiwanda School District Etiwanda, California Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of the Etiwanda School District (the District) as of and for the year ended June 30, 2017, 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; and the Guide for Annual Audits of K-12 Local Education Agencies and State Compliance Reporting, issued by the California Education Audit Appeals Panel as regulations. 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 District'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 District's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions Foothill Blvd., Suite 300, Rancho Cucamonga, CA P F W vtdcpa.com

6 Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the District, as of June 30, 2017, and the respective changes in financial position and cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management's discussion and analysis on pages 5 through 13 and other required supplementary schedules on pages 68 through 71, 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, such as the combining and individual non-major fund financial statements and Schedule of Expenditures of Federal Awards, as required by Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) and the other supplementary information as listed in the table of contents are presented for purposes of additional analysis and are not a required part of the basic financial statements. The accompanying supplementary information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the accompanying supplementary information is fairly stated, in all material respects, in relation to the basic financial statements as a whole. 3

7 Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 5, 2017, 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 solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the District's 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 Etiwanda School District's internal control over financial reporting and compliance. Rancho Cucamonga, California December 5,

8 Shawn Judson, Ed.D. Superintendent Douglas M. Claflin Assistant Superintendent of Business Services Terry Embleton Assistant Superintendent of Personnel Services Charlayne Sprague Assistant Superintendent of Instruction/Pupil Services East Avenue, Etiwanda, California (909) FAX (909) Board of Trustees Brynna Cadman Robert Garcia Dayna Karsch David W. Long Mondi M. Taylor This section of Etiwanda 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, 2017, with comparative information from 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 Etiwanda 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. 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. The Governmental 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 Funds 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 Etiwanda School District. 5

9 MANAGEMENT'S DISCUSSION AND ANALYSIS REPORTING THE DISTRICT AS A WHOLE The Statement of Net Position and the Statement of Activities The Statement of Net Position 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 position and changes in them. Net position is the difference between assets and deferred outflows of resources, and liabilities and deferred inflows of resources, which is one way to measure the District's financial health, or financial position. Over time, increases or decreases in the District's net position will serve as a useful indicator of whether the financial position of the District 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 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 Position and the Statement of Activities, we present the District activity as follows: Governmental Activities - All of the District's services are reported in this category. This includes the education of kindergarten through grade eight students 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 finance these activities. 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. 6

10 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 Position and the Statement of Revenues, Expenses, and Changes in Fund Net Position. 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 student fund activities. The District's fiduciary activities are reported in the separate Statements of Fiduciary Net Position. 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. 7

11 MANAGEMENT'S DISCUSSION AND ANALYSIS FINANCIAL HIGHLIGHTS THE DISTRICT AS A WHOLE Net Position The District's net position was $183.6 million for the fiscal year ended June 30, Of this amount, $(58.9) million was unrestricted. Restricted net position are reported separately to show legal constraints from debt covenants, grantors, constitutional provisions, and enabling legislation that limit the School District's ability to use those net position for day-to-day operations. Our analysis below, in summary form, focuses on the net position (Table 1) and change in net position (Table 2) of the District's governmental activities. Table 1 (Amounts in millions) Governmental Activities Assets Current and other assets $ $ Capital assets Total Assets Deferred Outflows of Resources Liabilities Current liabilities Long-term obligations Aggregate net pension liability Total Liabilities Deferred Inflows of Resources Net Position Net investment in capital assets Restricted Unrestricted (58.9) (57.5) Total Net Position $ $ The $(58.9) million in unrestricted net position of governmental activities represents the accumulated results of all past years' operations. 8

12 MANAGEMENT'S DISCUSSION AND ANALYSIS Changes in Net Position The results of this year's operations for the District as a whole are reported in the Statement of Activities on page 15. 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 Revenues Program revenues: Charges for services $ 2.5 $ 4.3 Operating grants Capital grants General revenues: Federal and State aid not restricted Property taxes Other general revenues Total Revenues Expenses Instruction-related Student support services Administration Maintenance and operations Other Total Expenses Change in Net Position $ 0.5 $ 3.6 Governmental Activities As reported in the Statement of Activities on page 15, the cost of all of our governmental activities this year was $147.6 million. However, the amount that our taxpayers ultimately financed for these activities through local taxes was only $19.1 million. In Table 3, we have presented the cost and net cost of each of the District's largest functions instruction, instruction-related activities, home-to-school transportation, food services, all other pupil services, general administration, plant maintenance and operations, and other. 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. 9

13 MANAGEMENT'S DISCUSSION AND ANALYSIS Table 3 (Amounts in millions) Total Cost of Services Net Cost of Services Instruction $ 95.9 $ 92.9 $ 83.1 $ 81.0 Instruction-related activities Home-to-school transportation Food services (0.2) (0.1) All other pupil services General administration Plant maintenance and operations Other Total $ $ $ $ THE DISTRICT'S FUNDS As the District completed this year, our governmental funds reported a combined fund balance of $142.3 million which is an increase of $49.1 million from last year (Table 4). Table 4 (Amounts in millions) Fund Balance June 30, 2017 June 30, 2016 General Fund $ 47.7 $ 36.8 Building Fund County School Facilities Fund Special Reserve Fund for Capital Outlay Projects Cafeteria Fund Capital Facilities Fund Combined Community Facilities District Fund Bond Interest and Redemption Fund Total $ $ 93.2 General Fund Budgetary Highlights Over the course of the year, the District revises its budget as it attempts to deal with unexpected changes in revenues and expenditures. The final amendment to the budget was adopted on September 1, (A schedule showing the District's original and final budget amounts compared with amounts actually paid and received is provided in our annual report on page 68.) 10

14 MANAGEMENT'S DISCUSSION AND ANALYSIS CAPITAL ASSET AND DEBT ADMINISTRATION Capital Assets At June 30, 2017, the District had a carrying value of $194.6 million in a broad range of capital assets, including land, buildings, and furniture and equipment. This amount represents a net increase (including additions, deductions, and depreciation) of $14.5 million, or 8.0 percent, from last year. Table 5 (Amounts in millions) Governmental Activities Land and construction in process $ 55.3 $ 37.9 Buildings and improvements Equipment Total $ $ Long-Term Obligations At the end of this year, the District had $61.6 million in long-term obligations outstanding versus $10.0 million last year. Table 6 (Amounts in millions) Governmental Activities General Obligation Bonds Payable $ 50.5 $ - Supplementary Retirement Plan Compensated Absences Net OPEB Obligation Total $ 61.6 $ 10.0 We present more detailed information regarding our long-term obligations in Note 8 of the financial statements. Net Pension Liability (NPL) At year-end, the District had an outstanding pension liability of $112.9 million, as a result of the adoption of GASB Statement No. 68, Accounting and Financial Reporting for Pensions. 11

15 MANAGEMENT'S DISCUSSION AND ANALYSIS SIGNIFICANT ACCOMPLISHMENTS OF FISCAL YEAR ARE NOTED BELOW: The District operated twelve K-5 elementary schools and four 6-8 middle schools for a total of sixteen schools during the year. The District also had in operation the following programs: community day school, preschool, and home school. The District also provides childcare services at sixteen school sites. Voters approved Measure I in November 2017, a $137 million General Obligation Bond for the repair and upgrade of neighborhood schools. Falcon Ridge Elementary (13 th elementary school) opened for the school year. Chromebooks are supplied for all Transitional Kindergarten through 8 th grade classrooms and students. ECONOMIC FACTORS AND NEXT YEAR'S BUDGETS AND RATES In considering the District Budget for the year, the District Board and management used the following criteria: The key assumptions in our revenue projections are: 1. LCFF gap funding at percent. 2. ADA of 13, was used as an estimate for P Lottery revenues were estimated to come in at $1,982,968 per prior year annual ADA. 4. Interest earnings are expected to remain unchanged. 5. Developer fee collections are based on approximate new housing units to be constructed and are remaining flat. Expenditures are based on the following projections: 1. COLA of 1.56 percent for Certificated salary step/column average of 2.5 percent for Historical trends predict three percent increase to supplies/services. 4. Classified salary step average of 2.0 percent for Employee benefit increase. 6. Employee benefits no longer provide for remaining cash back. 12

16 MANAGEMENT'S DISCUSSION AND ANALYSIS 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 Doug Claflin, Assistant Superintendent of Business Services, at Etiwanda School District, 6061 East Avenue, Etiwanda, California 91739, or at doug_claflin@etiwanda.k12.ca.us. 13

17 STATEMENT OF NET POSITION Governmental Activities ASSETS Deposits and investments $ 147,825,330 Receivables 5,310,030 Prepaid expenses 184,773 Stores inventories 115,535 Capital assets: Capital assets not depreciated 55,253,346 Capital assets, net of accumulated depreciation 139,312,520 Total Capital Assets 194,565,866 Total Assets 348,001,534 DEFERRED OUTFLOWS OF RESOURCES Deferred outflows of resources related to pensions 30,091,708 LIABILITIES Accounts payable 11,101,387 Accrued interest 160,600 Long-term obligations: Current portion of long-term obligations other than pensions 600,346 Noncurrent portion of long-term obligations other than pensions 60,959,300 Total Long-Term Obligations 61,559,646 Aggregate net pension liability 112,925,563 Total Liabilities 185,747,196 DEFERRED INFLOWS OF RESOURCES Deferred inflows of resources related to pensions 8,696,250 NET POSITION Net investment in capital assets 189,093,245 Restricted for: Debt service 4,080,463 Capital projects 43,819,282 Educational programs 4,051,222 Other activities 1,506,341 Unrestricted (58,900,757) Total Net Position $ 183,649,796 The accompanying notes are an integral part of these financial statements. 14

18 STATEMENT OF ACTIVITIES FOR THE YEAR ENDED Net (Expenses) Revenues and Changes in Program Revenues Net Position Charges for Operating Capital Governmental Functions/Programs Expenses Services Grants Grants Activities Governmental Activities: Instruction $ 95,940,955 $ - $ 12,673,625 $ 154,816 $ (83,112,514) Instruction-related activities: Supervision of instruction 3,530,936-1,023,170 - (2,507,766) Instructional library, media, and technology 1,709,628-25,464 - (1,684,164) School site administration 6,943, ,403 - (6,718,724) Pupil services: Home-to-school transportation 4,164, (4,164,692) Food services 3,690,317 1,454,849 2,398, ,626 All other pupil services 8,417,007-1,253,090 - (7,163,917) General administration: Data processing 1,126, (1,126,939) All other general administration 5,067,033 65, ,480 - (4,754,564) Plant services 11,688, , ,542 - (10,987,335) Community services 4,238, (4,238,256) Interest on long-term obligations 160, (160,600) Other outgo 891, , , ,790 Total Governmental Activities $ 147,569,508 $ 2,535,860 $ 18,574,777 $ 154,816 (126,304,055) General Revenues and Subventions: Property taxes, levied for general purposes 14,549,157 Taxes levied for other specific purposes 4,511,792 Federal and State aid not restricted to specific purposes 97,092,178 Interest and investment earnings 561,932 Miscellaneous 10,149,660 Subtotal, General Revenues 126,864,719 Change in Net Position 560,664 Net Position - Beginning 183,089,132 Net Position - Ending $ 183,649,796 The accompanying notes are an integral part of these financial statements. 15

19 GOVERNMENTAL FUNDS BALANCE SHEET County School General Building Facilities Fund Fund Fund ASSETS Deposits and investments $ 54,503,571 $ 45,488,224 $ 6,986,223 Receivables 4,906,961 18,841 35,653 Due from other funds 323,975 1,319 51,229 Prepaid expenditures 184, Stores inventories 33, Total Assets $ 59,952,880 $ 45,508,384 $ 7,073,105 LIABILITIES AND FUND BALANCES Liabilities: Accounts payable $ 8,419, ,543 $ 2,021,041 Due to other funds 3,841,310 91, Total Liabilities 12,260, ,639 2,021,084 Fund Balances: Nonspendable 233, Restricted 4,051,222 44,993,745 5,052,021 Assigned 14,485, Unassigned 28,921, Total Fund Balances 47,691,915 44,993,745 5,052,021 Total Liabilities and Fund Balances $ 59,952,880 $ 45,508,384 $ 7,073,105 The accompanying notes are an integral part of these financial statements. 16

20 Special Reserve Fund for Non-Major Total Capital Outlay Governmental Governmental Projects Funds Funds $ 26,736,949 $ 14,110,363 $ 147,825,330 78, ,957 5,310,030 3,930,150 2,256 4,308, ,773-81, ,535 $ 30,745,717 $ 14,464,511 $ 157,744,597 $ 179,532 57,616 $ 11,101,387 21, ,062 4,308, , ,678 15,410,316-81, ,308 30,544,767 13,969,898 98,611, ,485, ,921,793 30,544,767 14,051, ,334,281 $ 30,745,717 $ 14,464,511 $ 157,744,597 16

21 RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET POSITION Total Fund Balance - Governmental Funds $ 142,334,281 Amounts Reported for Governmental Activities in the Statement of Net Position is 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 $ 274,964,188 Accumulated depreciation is (80,398,322) Total Capital Assets 194,565,866 In governmental funds, unmatured interest on long-term obligations is recognized in the period when it is due. On the government-wide financial statements, unmatured interest on long-term obligations is recognized when it is incurred. (160,600) Deferred outflows of resources related to pensions represent a consumption of net position in a future period and is not reported in the District's funds. Deferred outflows of resources related to pensions at year-end consist of: Pension contributions subsequent to the measurement date 9,892,256 Net change in proportionate share of net pension liability 8,923,721 Difference between projected and actual earnings on pension plan investments 10,442,848 Differences between expected and actual experience in the measurement of the total pension liability 832,883 Total deferred outflows of resources related to pensions 30,091,708 Deferred inflows of resources related to pensions represent an acquisition of net position that applies to a future period and is not reported in the District's funds. Deferred inflows of resources related to pensions at year-end consist of: Net change in proportionate share of net pension liability 5,832,142 Differences between expected and actual experience in the measurement of the total pension liability 2,282,303 Changes in assumptions 581,805 Total deferred inflows of resources related to pensions (8,696,250) Net pension liability is not due and payable in the current period, and is not reported as a liability in the funds. (112,925,563) The accompanying notes are an integral part of these financial statements. 17

22 RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET POSITION, CONTINUED Long-term obligations at year-end consist of: Bonds payable $ 45,995,326 Premium on bonds payable 4,471,040 Supplemental retirement plan 1,801,040 Compensated absences 386,241 Other postemployment benefits (OPEB) 8,905,999 Total Long-Term Obligations $ (61,559,646) Total Net Position - Governmental Activities $ 183,649,796 The accompanying notes are an integral part of these financial statements. 18

23 GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES FOR THE YEAR ENDED County School General Building Facilities Fund Fund Fund REVENUES Local Control Funding Formula $ 106,002,762 $ - $ - Federal sources 4,366, Other State sources 12,734, Other local sources 17,326,422 18, ,816 Total Revenues 140,430,168 18, ,816 EXPENDITURES Current Instruction 89,298, Instruction-related activities: Supervision of instruction 3,294, Instructional library, media, and technology 1,582, School site administration 6,494, Pupil services: Home-to-school transportation 3,993, Food services 25, All other pupil services 7,818, General administration: Data processing 1,038, All other general administration 4,594, Plant services 9,532, ,909 - Facility acquisition and construction 923, ,513 18,321,100 Community services 3,978, Other outgo 426, Debt service: Issuance costs - 464,977 - Total Expenditures 133,001,690 1,250,399 18,321,100 Excess (Deficiency) of Revenues Over Expenditures 7,428,478 (1,231,558) (18,166,284) OTHER FINANCING SOURCES (USES) Transfers in 8,693,224-73,160 Other sources - proceeds from bond issuance - 46,225,303 - Transfers out (5,184,276) - - Net Financing Sources (Uses) 3,508,948 46,225,303 73,160 NET CHANGE IN FUND BALANCES 10,937,426 44,993,745 (18,093,124) Fund Balances - Beginning 36,754,489-23,145,145 Fund Balances - Ending $ 47,691,915 $ 44,993,745 $ 5,052,021 The accompanying notes are an integral part of these financial statements. 19

24 Special Reserve Fund for Non-Major Total Capital Outlay Governmental Governmental Projects Funds Funds $ - $ - $ 106,002,762-2,343,484 6,710, ,766 12,881, ,395 4,508,992 22,221, ,395 6,999, ,815, ,298, ,294, ,582, ,494, ,993,746-3,653,790 3,679, ,818, ,038, ,476 4,764, , ,924 10,962, ,119 52,309 20,099, ,978, , , ,651 4,703, ,896,339 (407,256) 2,295,743 (10,080,877) 5,183,325 1,285 13,950,994-4,241,063 50,466,366 (73,160) (334) (5,257,770) 5,110,165 4,242,014 59,159,590 4,702,909 6,537,757 49,078,713 25,841,858 7,514,076 93,255,568 $ 30,544,767 $ 14,051,833 $ 142,334,281 19

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 $ 49,078,713 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 Position and allocated over their estimated useful lives as annual depreciation expenses in the Statement of Activities. This is the amount by which capital outlay exceeds depreciation for the period. Capital outlay $ 19,872,144 Depreciation expense (5,448,652) Net Expense Adjustment 14,423,492 Loss on disposal of capital assets is reported in the government-wide Statement of Net Position, but is not recorded in the governmental funds. (1,000) 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 financial statements as an expense. For this fiscal year the actual amount of the contribution was less than the annual required contribution. (1,712,768) In the Statement of Activities, certain operating expenses, such as compensated absences (vacations) and special termination benefits (early retirement), 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 more than the amounts earned by $600,346. Vacation used was less than the amounts earned by $26, ,599 In the governmental funds, pension costs are based on employer contributions made to pension plans during the year. However, in the Statement of Activities, pension expense is the net effect of all changes in the deferred outflows and net pension liability during the year. (2,500,523) Proceeds received from issuance of debt is a revenue in the governmental funds, but it increases long-term liabilities in the Statement of Net Assets and does not affect the Statement of Activities: Sale of general obligation bonds (45,995,326) The accompanying notes are an integral part of these financial statements. 20

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 Governmental funds report the effect of premiums when the debt is first issued, whereas the amounts are deferred and amortized in the Statement of Activities. $ (4,471,040) 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. (160,600) An internal service fund is used by the District's management to charge the costs of the unemployment compensation insurance program to the individual funds. The net revenue of the internal service fund is reported with governmental activities. (8,673,883) Change in Net Position of Governmental Activities $ 560,664 The accompanying notes are an integral part of these financial statements. 21

27 PROPRIETARY FUNDS STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET POSITION FOR THE YEAR ENDED Internal Service Fund OPERATING REVENUES Charges to other funds and miscellaneous revenues $ 15,546 OPERATING EXPENSES Payroll costs 11,664 Professional and contract services 16,120 Total Operating Expenses 27,784 Operating Loss (12,238) NONOPERATING REVENUES Interest income 31,579 Income Before Transfers 19,341 Transfers out (8,693,224) Change in Net Position (8,673,883) Net Position - Beginning 8,673,883 Net Position - Ending $ - The accompanying notes are an integral part of these financial statements. 22

28 PROPRIETARY FUNDS STATEMENT OF CASH FLOWS FOR THE YEAR ENDED Internal Service Fund CASH FLOWS FROM OPERATING ACTIVITIES Cash received from user charges $ 15,546 Other operating expenses (27,784) Net Cash Used in Operating Activities (12,238) CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Transfers to other funds (8,693,224) CASH FLOWS FROM INVESTING ACTIVITIES Interest on investments 48,260 Net decrease in cash and cash equivalents (8,657,202) Cash and cash equivalents - Beginning 8,657,202 Cash and cash equivalents - Ending $ - RECONCILIATION OF OPERATING LOSS TO NET CASH USED FROM OPERATING ACTIVITIES: Operating loss $ (12,238) NET CASH USED IN OPERATING ACTIVITIES $ (12,238) The accompanying notes are an integral part of these financial statements. 23

29 FIDUCIARY FUNDS STATEMENT OF NET POSITION Agency Funds ASSETS Deposits and investments $ 57,911,459 Receivables 68,129 Total Assets $ 57,979,588 LIABILITIES Due to student groups $ 310,321 Due to bondholders 57,669,267 Total Liabilities $ 57,979,588 The accompanying notes are an integral part of these financial statements. 24

30 NOTES TO FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Financial Reporting Entity The Etiwanda School District (the District) was organized in 1883 under the laws of the State of California. The District is an elementary school district comprised of an area of approximately 48 square miles located in San Bernardino County. The District operates under a locally-elected five-member Board form of government and provides educational services to preschool and grades K-8 as mandated by the State and Federal agencies. The District maintained twelve elementary and four intermediate schools during the year. 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 Etiwanda 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 also 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 units discussed below have 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 are included in the financial statements of the District. The component units, although (a) legally separate entities are reported in the financial statements using the blended presentation method as if they were part of the District's operations because the governing board of the component units is essentially the same as the governing board of the District and because their purpose is to finance the construction of facilities to be used for the direct benefit of the District. Pursuant to the Mello-Roos Community Facilities Act of 1982, the District established the Community Facilities Districts (CFDs) #1, #5, #6, #9, and #10, Henderson Creek CFD , Coyote Canyon CFD IA1, Coyote Canyon CFD IA2, and Victoria Gardens CFD , legally constituted governmental entities, for the purpose of financing special capital projects. In addition, the Etiwanda School District Public Financing Authority (the Authority) was established to include the Rancho Etiwanda CFD No. 1, CFD No , (CDFs) #2, #3, #4, #7, and #8. The Community Facilities Districts and Authority, were authorized, at special elections, to incur indebtedness and subsequently sold bonds for the purpose of providing educational facilities within the District boundaries. The repayment of the bonds are not a general or special obligation of the Community Facilities Districts and Authority, but rather are limited obligations payable solely from the proceeds of special taxes levied on property within the Community Facilities Districts and Authority. For financial presentation purposes, the Community Facilities Districts' and Authority's, financial activity has been blended, or combined with the financial data of the District. The financial statements present the contributions from property owners within the Combined Community Facilities District Fund. The repayment of the non-obligatory debt associated with the financing activities of the component unit is presented in an agency fund. 25

31 NOTES TO FINANCIAL STATEMENTS The following are those aspects of the relationship between the District and the Community Facilities Districts, which satisfy Statement Three criteria. 1. Manifestations of Oversight a. The Community Facilities Districts and the District have common boards. b. The Community Facilities Districts have no employees. The District's Superintendent functions as an agent of the Community Facilities District. c. The District exercises significant influence over operations of the Community Facilities Districts as all projects of the Community Facilities Districts involve the Etiwanda School District. 2. Accountability for Fiscal Matters The District is responsible for preparation of the annual budgets for the Community Facilities Districts. 3. Scope of Public Service The Community Facilities Districts were created specifically to finance capital improvements for the Etiwanda School District. 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 the District. All transactions except those accounted for in another fund are accounted for in this fund. Two funds currently defined as a special revenue funds in the California State Accounting Manual (CSAM) do not meet the GASB Statement No. 54 special revenue fund definition. Specifically, Fund 17, Special Reserve Fund for Other Than Capital Outlay Projects and Fund 20, Special Reserve for Postemployment Benefits, are not substantially composed of restricted or committed revenue sources. While these funds are authorized by statute and will remain open for internal reporting purposes, these fund functions effectively as an extension of the General Fund, and accordingly have been combined with the General Fund for presentation in these audited financial statements. 26

32 NOTES TO FINANCIAL STATEMENTS As a result, the General Fund reflects an increase in assets, fund balance and revenues of $19,207,767, $19,207,767, and $123,246, respectively. 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. 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), the 2004 State School Facilities Fund (Proposition 55) or the 2006 State Schools Facilities Fund (Proposition 1D) 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.). 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 used to account for the proceeds from specific revenue sources (other than trusts, major capital projects, or debt service) that are restricted or committed to expenditures for specified purposes and that compose a substantial portion of the inflows of the fund. Additional resources that are restricted, committed, or assigned to the purpose of the fund may also be reported in the fund. Cafeteria Fund The Cafeteria Fund is used to account separately for Federal, State, and local resources to operate the food service program (Education Code Sections ) and is used only for those expenditures authorized by the governing board as necessary for the operation of the District's food service program (Education Code Sections and 38100). Capital Project Funds The Capital Project funds are used to account for financial resources that are restricted, committed, or assigned to the acquisition or construction of major capital facilities and other capital assets (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). Combined Community Facilities District (CFD) Fund The Combined CFD Fund is used to account for capital projects financed by Mello-Roos Community Facilities Districts and similar entities that are considered blended component units of the District under generally accepted accounting principles (GAAP). 27

33 NOTES TO FINANCIAL STATEMENTS Debt Service Funds The Debt Service funds are used to account for the accumulation of restricted, committed, or assigned resources for, and the payment of, principal and interest on general long-term obligations. Bond Interest and Redemption Fund The Bond Interest and Redemption Fund is used for the repayment of bonds issued for a district (Education Code ). Proprietary Funds Proprietary funds are used to account for activities that are more business-like than government-like in nature. Business-type activities include those for which a fee is charged to external users or to other organizational units of the local education agency, normally on a full cost-recovery basis. Proprietary funds are generally intended to be self-supporting and are classified as enterprise or internal service. The District has the following proprietary fund: Internal Service Fund Internal Service funds may be used to account for any activity for which goods or services are provided to other funds of the District in return for a fee to cover the cost of operations. The District operates a retiree benefit program that is accounted for in an internal service fund. During the , the District's internal service fund was closed and all assets were transferred to the General Fund. Fiduciary Funds Fiduciary funds are used to account for assets held in trustee or agent capacity for others that cannot be used to support the District's own programs. The fiduciary fund category is split into four classifications: pension trust funds, investment trust funds, private-purpose trust funds, and agency funds. 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. 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. Agency funds are custodial in nature (assets equal liabilities) and do not involve measurement of results of operations. The District's agency funds include: Debt Service Special Tax Bonds this is an Agency fund used to account for the resources accumulated for the repayment of special assessment debt of the component unit described under financial reporting entity. Student Funds are Agency funds used to account for student fund activities. Basis of Accounting - Measurement Focus Government-Wide Financial Statements The government-wide financial 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. 28