MARK TWAIN UNION ELEMENTARY SCHOOL DISTRICT ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED JUNE 30, 2018

Transcription

1 MARK TWAIN UNION ELEMENTARY SCHOOL DISTRICT ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED

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3 TABLE OF CONTENTS FOR THE YEAR ENDED FINANCIAL SECTION Independent Auditor's Report 2 Management's Discussion and Analysis 5 Basic Financial Statements Government-Wide Financial Statements Statement of Net Position 13 Statement of Activities 14 Fund Financial Statements Governmental Funds - Balance Sheet 15 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position 17 Governmental Funds - Statement of Revenues, Expenditures, and Changes in Fund Balances 18 Reconciliation of the Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances to the Statement of Activities 20 Fiduciary Fund - Statement of Net Position 22 Notes to Financial Statements 23 REQUIRED SUPPLEMENTARY INFORMATION General Fund - Budgetary Comparison Schedule 55 Schedule of Changes in the District's Total OPEB Liability and Related Ratios 56 Schedule of the District's Proportionate Share of the Net Pension Liability 57 Schedule of District Pension Contributions 58 Note to Required Supplementary Information 59 SUPPLEMENTARY INFORMATION Schedule of Expenditures of Federal Awards 61 Local Education Agency Organization Structure 62 Schedule of Average Daily Attendance 63 Schedule of Instructional Time 64 Reconciliation of Annual Financial and Budget Report with Audited Financial Statements 65 Schedule of Financial Trends and Analysis 66 Combining Statements - Non-Major Governmental Funds Combining Balance Sheet 67 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances 68 Note to Supplementary Information 69 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 72 Auditing Standards Report on State Compliance 74 SCHEDULE OF FINDINGS AND QUESTIONED COSTS Summary of Auditor's Results 77 Financial Statement Findings 78 State Awards Findings and Questioned Costs 79 Summary Schedule of Prior Audit Findings 80

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5 FINANCIAL SECTION 1

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7 INDEPENDENT AUDITOR'S REPORT Board of Trustees Mark Twain Union Elementary School District Angels Camp, 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 Mark Twain Union Elementary School District (the District) as of and for the year ended June 30, 2018, 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 entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. 2

8 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 the Mark Twain Union Elementary School District, as of June 30, 2018, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Emphasis of Matter - Change in Accounting Principles As discussed in Note 1 and Note 10 to the financial statements, in 2018, the District adopted new accounting guidance, GASB Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions. Our opinion is not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management's discussion and analysis, budgetary comparison schedule, schedule of changes in the District's total OPEB liability and related ratios, schedule of the District's proportionate share of the net pension liability, and the schedule of District contributions, 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 Mark Twain Union Elementary School 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. 3

9 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. The accompanying unaudited other information has not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on it. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated November 27, 2018, on our consideration of the Mark Twain Union Elementary School 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 Mark Twain Union Elementary School 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 Mark Twain Union Elementary School District's internal control over financial reporting and compliance. Palo Alto, California November 27,

10 MANAGEMENT'S DISCUSSION AND ANALYSIS The discussion and analysis of Mark Twain Union Elementary School District's financial performance provides an overall review of the District's financial activities for the fiscal year ended June 30, The intent of this discussion and analysis is to look at the District's financial performance as a whole. To provide a complete understanding of the District's financial performance, please read it in conjunction with the Independent Auditor's Report on page 2, notes to the basic financial statements and the District's financial statements. The Management's Discussion and Analysis (MD&A) is an element of the reporting model adopted by the Governmental Accounting Standards Board (GASB) in their Statement No. 34 Basic Financial Statements and Management's Discussion and Analysis for State and Local Governments issued June Certain comparative information is required to be presented in the MD&A. FINANCIAL HIGHLIGHTS As the General Fund revenues increased 6.1% from to the expenditures increased 20.7% over the same time period. General Fund expenditures and other use exceeded revenues by $610,621 ending the year with available reserves of $1,669,110 (19%), higher than the State recommended reserve level of 4%. In complying with GASB 34, capital assets were valued at historical cost. The total of the District's capital assets, land, site, buildings, and equipment, valued on an acquisition cost basis was $21.2 million. After depreciation, the June 30, 2018 book value for capital assets totaled $10.6 million. In complying with GASB 68, the District recognized its portion of the unfunded STRS and PERS pension liabilities for the first time in These liabilities are based on the most recent actuarial valuations. The District's portion of the unfunded STRS and PERS pension liability increased annually to $7.7 million in and is reported as long-term liabilities in the Statement of Net Position. 5

11 MANAGEMENT'S DISCUSSION AND ANALYSIS OVERVIEW OF THE FINANCIAL STATEMENTS This annual report consists of three parts Management's Discussion and Analysis (this section), the Basic Financial Statements, and Required Supplementary Information. These statements are organized so the reader can understand the Mark Twain Union Elementary School District as a financial whole, an entire operating entity. These statements then proceed to provide an increasingly detailed look at specific financial activities. Components of the Financial Section Management's Discussion and Analysis Basic Financial Statements Required Supplementary Information Government-Wide Financial Statements Summary Fund Financial Statements Notes to the Financial Statements Detail The first two statements are Government-Wide Financial Statements, the Statement of Net Position and Statement of Activities. These statements provide information about the activities of the whole School District, presenting both an aggregate view of the District's finances and a longer-term view of these finances. Fund financial statements provide the next level of detail. For governmental funds, these statements tell how services were financed in the short-term as well as what remains for future spending. The fund financial statements also look at the School District's more significant funds with all other non-major funds presented in total in one column. A comparison of the District's general fund budget is included. The Financial Statements also include notes that explain some of the information in the statements and provide more detailed data. The statements are followed by a section of required supplementary information that further explains and supports the financial statements. 6

12 MANAGEMENT'S DISCUSSION AND ANALYSIS Reporting the School District as a Whole Statement of Net Position and the Statement of Activities These two statements provide information about the District as a whole using accounting methods similar to those used by private-sector companies. The statement of net position includes all of the District's assets and liabilities using the accrual basis of accounting. This basis of accounting takes into account all of the current year's revenues and expenses regardless of when cash is received or paid. These statements report information on the district as a whole and its activities in a way that helps answer the question, How did we do financially during ? These two statements report the District's net position and changes in that position. This change in net position is important because it tells the reader, for the District as a whole, the financial position of the District has improved or diminished. The causes of this change may be the result of many factors, some financial, some not. Over time, the increases or decreases in the District's net position, as reported in the Statement of Activities, are one indicator of whether its financial health is improving or deteriorating. The relationship between revenues and expenses indicates the District's operating results. However, the District's goal is to provide services to our students, not to generate profits as commercial entities. One must consider many other non-financial factors, such as the quality of education provided and the safety of the schools to assess the overall health of the District. Increases or decreases in the net position of the District over time are indications of whether its financial position is improving or deteriorating, respectively. Additional non-financial factors such as condition of school buildings and other facilities, and changes to the property tax base of the District need to be considered in assessing the overall health of the District. Reporting the School District's Most Significant Funds Fund Financial Statements The fund financial statements provide more detailed information about the District's most significant funds not the District as a whole. Funds are accounting devices the District uses to keep track of specific sources of funding and spending on particular programs. Some funds are required to be established by State law. However, the District establishes other funds to control and manage money for specific purposes. Governmental Funds Most of the District's activities are reported in governmental funds. The major governmental funds of the District are the General Fund, Building Fund, Capital Facilities Fund and the Special Reserve Fund for Capital Outlay Projects. Governmental funds focus on how money flows into and out of the funds and the balances that remain at the end of the year. They are reported using an accounting method called modified accrual accounting, which measures cash and all other financial assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term view of the District's operations and services that help determine whether there are more or fewer financial resources that can be spent in the near future to finance the District's programs. 7

13 MANAGEMENT'S DISCUSSION AND ANALYSIS Fiduciary Funds The District is the trustee, or fiduciary, for its student activity funds. The District's fiduciary activities are reported in 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 purpose. THE DISTRICT AS A WHOLE Net Position The District's net position was $1,070,091 for the fiscal year ended June 30, Of this amount, -$5,857,316 was unrestricted. Restricted net position is reported separately to show legal constraints from debt covenants and enabling legislation that limit the governing board's ability to use 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 Percentage Governmental Activities Change Assets and deferred outflows Cash and investments $ 5,037,015 $ 5,517, % Accounts receivable 235,754 89, % Prepaid expenditures 30,324 75, % Stores inventory 8,257 3, % Capital assets, net of accumulated depreciation 10,583,172 10,581, % Deferred charge on refunding 37,185 41, % Current year pension deferrals 2,619,321 1,273, % Current year OPEB deferrals 49,638 - Total Assets and Deferred Outflows 18,600,666 17,582, % Liabilities and deferred inflows Accounts payable 117,119 93, % Interest payable 77,920 84, % Unearned revenue 21,168 2, % Long-term debt (restated due to GASB 75) 16,543,121 15,117, % Deferred outflows related to pensions 771, , % Total Liabilities and Deferred Inflows 17,530,575 16,067, % Net Position Net investment in capital assets 5,228,623 3,519, % Restricted 1,698,784 1,699, % Unrestricted (5,857,316) (3,364,467) 74.1% Total Net Position $ 1,070,091 $ 1,854, % 8

14 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 14. Table 2 takes the information from the Statement, rounds off the numbers, and rearranges them slightly so you can see our total revenues for the year. Table 2 Percentage Governmental Activities Change Revenues Program revenues: Charges for services $ 39,365 $ 42, % Operating grants and contributions 868, , % General revenues: Property taxes 4,380,355 4,165, % Federal and State aid not restricted 3,377,844 3,540, % Other general revenues 843, , % Total Revenues 9,508,793 9,088, % Expenses Instruction-related 6,440,260 5,443, % Pupil services 1,391,534 1,173, % Administration 880, , % Plant Services 594, , % Other 646, , % Total Expenses 9,953,107 8,649, % Change in Net Position $ (444,314) $ 439, % 9

15 MANAGEMENT'S DISCUSSION AND ANALYSIS Governmental Activities The cost of all of our governmental activities this year was $9,953,107. However, the amount that our taxpayers ultimately financed for these activities through taxes was only $4,380,355 because the cost of $39,365 was paid by those who benefited from the programs and cost of $868,117 was paid by other governments and organizations who subsidized certain programs with grants and contributions. We paid for the remaining "public benefit" portion of our governmental activities with $3,377,844 in Federal and State aids, and with other revenues, like interest and general entitlements. Other 9% Charges for Services 0% Federal and State Categorical Revenues 10% Federal and State Aid 40% Property Taxes 46% Maintenance and Operations 6% Administration 9% Other 6% Student Support Services 14% Instruction Related Services 64% 10

16 MANAGEMENT'S DISCUSSION AND ANALYSIS FINANCIAL ANALYSIS OF THE FUND STATEMENTS The fund financial statements focus on individual parts of the District's operations in more detail than the government-wide statements. The District's individual fund statements provide information on inflows and outflows and balances of spendable resources. The District's Governmental Funds reported a combined balance of $5.2 million, a decrease of $417 thousand from the previous fiscal year's combined ending balance. General Fund Budgetary Highlights Over the course of the year, the District revised the annual operating budget monthly. The significant budget adjustments fell into the following categories: Budget revisions to the adopted budget required after approval of the State budget. Budget revisions to update revenues to actual enrollment information and to update expenditures for staffing adjustments related to actual enrollments. Other budget revisions are routine in nature, including adjustments to categorical revenues and expenditures based on final awards, and adjustments between expenditure categories for school and department budgets. The final revised budget for the General Fund reflected a net decrease to the ending balance of $456 thousand. The actual activities reflected a net decrease of 355 thousand of which $1.7 million is reserved for economic uncertainties and unassigned. The State recommends an ending reserve for economic uncertainties of 4% of total expenditures. The District's ending reserve was 19%, meeting this requirement. CAPITAL ASSET AND DEBT ADMINISTRATION Capital Assets By the end of the fiscal year, the District had invested $21,188,809 in a broad range of capital assets, including school buildings, site improvements, and equipment. During fiscal year, the District had $609 thousand in capital asset additions. The additions were site improvements and equipment purchases. The capital assets net of depreciation were $10,583,172 at June 30, 2018, including current year depreciation expense of $607 thousand. Total Percentage Governmental Activities Change Land $ 1,164,332 $ 1,164, % Site improvements 4,302,826 7,995, % Buildings 14,030,367 10,035, % Machinery and equipment 1,681,309 1,384, % Work in progress 9, % Total Capital Assets 21,188,809 20,580, % Accumulated depreciation (10,605,637) (9,998,608) 6.1% Net Capital Assets $ 10,583,172 $ 10,581, % 11

17 MANAGEMENT'S DISCUSSION AND ANALYSIS Long-Term Debt At June 30, 2018 the District had $16,543,121 in long-term debt outstanding. Total Percentage Governmental Activities Change General obligation bonds $ 6,617,778 $ 7,065, % General obligation accretion 1,532,067 1,354, % Capital lease obligations 196,572 92, % Compensated absences 24,401 21, % Other post-employment benefits (restated) 495, , % Net pension liability 7,677,143 6,087, % Total Long-Term Debt $ 16,543,121 $ 15,117, % FACTORS BEARING ON THE DISTRICT'S FUTURE The Local Control Funding Formula (LCFF) is aimed at correcting historical inequities while decreasing previous constraints on restricted program expenses. The formula is intended to make funding more transparent and simple. With the new flexibility also come new requirements for accountability. The Local Control Accountability Plan (LCAP) is mandated and must be aligned and adopted with the District's budget. The LCAP is expected to describe how the District intends to meet annual goals for all pupils, with specific activities to address state and local priorities identified during the LCAP development process. The LCFF is the largest unknown for the District. The new funding structure has no statutory cost of living allowance built into it and relies solely on the annual budget process at the legislative level. Planning for the out years will be much more difficult and volatile under the LCFF funding formula. The eight years necessary to bring the District to their target funding could be unpredictable and unstable, thereby creating a need for a larger reserve than past years. The ongoing unpredictability of the District's supplemental and concentration funding under the LCFF will also create unstable budgets even after the district's target has been met in Future predictions and uncertainties with the changes to the State funding formula, enrollment and aging District facilities require management to plan carefully and prudently to provide the necessary resources to meet student's needs and continue to keep pace with inflation increases over the next several years. 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 questions about this report or need additional financial information, please contact Mark Twain Union Elementary School District, P.O. Box 1359, Angels Camp, CA

18 STATEMENT OF NET POSITION Governmental ASSETS Activities Deposits and investments $ 5,037,015 Receivables 235,754 Prepaid expenses 30,324 Stores inventories 8,257 Capital assets not being depreciated 1,174,307 Capital assets being depreciated 20,014,502 Less: Accumulated depreciation (10,605,637) Total Assets 15,894,522 DEFERRED OUTFLOWS OF RESOURCES Deferred charge on refunding 37,185 Deferred outflows of resources related to OPEB 49,638 Deferred outflows of resources related to pensions 2,619,321 Total Deferred Outflows of Resources 2,706,144 LIABILITIES Accounts payable 117,119 Interest payable 77,920 Unearned revenue 21,168 Long-term obligations other than pensions and OPEB: Current portion 558,606 Noncurrent portion 7,812,212 Total other postemployment benefits (OPEB) liability 495,160 Aggregate net pension liability 7,677,143 Total Liabilities 16,759,328 DEFFERED INFLOWS OF RESOURCES Deferred inflows of resources related to pensions 771,247 NET POSITION Net investment in capital assets 5,228,623 Restricted for: Capital projects 1,608,419 Educational programs 36,589 Food program 53,776 Unrestricted (5,857,316) Total Net Position $ 1,070,091 The accompanying notes are an integral part of these financial statements. 13

19 STATEMENT OF ACTIVITIES FOR THE YEAR ENDED Net (Expenses) Program Revenues Revenues Charges for Operating Services and Grants and Governmental Functions/Programs Expenses Sales Contributions Activities Governmental activities: Instruction $ 5,678,798 $ - $ 491,582 $ (5,187,216) Instruction related activities: Supervision of instruction 13, (13,569) Instructional library, media and technology 259, (259,294) School site administration 487,797-10,816 (476,981) Pupil services: Home-to-school transportation 630, (630,171) Food services 400,001 39, ,722 (51,914) All other pupil services 361,362-15,858 (345,504) General administration: Data processing 65, (65,355) All other general administration 814,821-24,358 (790,463) Plant services 594,692-2,751 (591,941) Ancillary services 29,732-1,139 (28,593) Enterprise services 15,421-12,089 (3,332) Interest on long-term debt 348, (348,985) Other outgo 123,669 - (123,669) Total governmental-type activities $ 9,953,107 $ 39,365 $ 868,117 (9,045,625) General revenues: Property taxes, levied for general purposes 3,809,800 Property taxes, levied for debt service 570,555 Federal and State aid not restricted to specific purposes 3,377,844 Interest and investment earnings 59,167 Miscellaneous 783,945 Subtotal, general revenues 8,601,311 Change in Net Position (444,314) Net Position - beginning (restated) 1,514,405 Net Position - ending $ 1,070,091 The accompanying notes are an integral part of these financial statements. 14

20 GOVERNMENTAL FUNDS BALANCE SHEET Capital General Building Facilities Fund Fund Fund ASSETS Deposits and investments $ 1,887,934 $ 1,422,616 $ 1,505,797 Receivables 133, Due from other funds Prepaid expenses 30, Stores inventories Total assets $ 2,052,025 $ 1,422,616 $ 1,505,797 LIABILITIES AND FUND BALANCES Liabilities: Accounts payable $ 113,285 $ - $ - Due to other funds 15, Unearned revenue 21, Total liabilities 149, Fund Balances: Nonspendable 27, Restricted 36,589 1,422,616 1,505,797 Assigned 168, Unassigned 1,669, Total fund balances 1,902,411 1,422,616 1,505,797 Total Liabilities and Fund Balances $ 2,052,025 $ 1,422,616 $ 1,505,797 The accompanying notes are an integral part of these financial statements. 15

21 Non-Major Governmental Funds Total Governmental Funds $ 220,668 $ 5,037, , ,754 15,161 15,161-30,324 8,257 8,257 $ 346,073 $ 5,326,511 $ 3,834 $ 117,119-15,161-21,168 3, ,448 10,758 38, ,481 3,296, ,776-1,669, ,239 5,173,063 $ 346,073 $ 5,326,511 16

22 RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET POSITION Total Fund Balance - Governmental Funds $ 5,173,063 Amounts reported for governmental activities in the statement of net position are different because: Capital assets used in governmental activities are not financial resources and, therefore, are not reported as assets in governmental funds. The cost of capital assets is $ 21,188,809 Accumulated depreciation is (10,605,637) Total Capital Assets 10,583,172 Deferred outflows related to pension activities are not recorded in the governmental funds because they are not current resources. 2,619,321 Expenditures relating to refunding of debt are expensed as paid in the governmental funds, but they are capitalized in the statement of net position and amortized to operations in the statement of activities over the life of the related debt. 37,185 In the governmental funds, interest on long-term debt is recognized in the period when it is paid. On the government-wide statements, interest on long-term debt is recognized as it accrues. (77,920) Deferred inflows from pension activities are not recorded on the governmental funds but are deferred on the government-wide statement of net position. (771,247) Deferred outflows of resources related to OPEB 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 OPEB at year-end consist of OPEB contributions subsequent to measurement date. 49,638 Certain liabilities are not due and payable in the current period and, therefore, are not reported as liabilities in the governmental funds. These liabilities consist of: Bonds payable and premium 8,149,845 Capital lease 196,572 Compensated absences (vacations) 24,401 Net other postemployment benefits (OPEB) liability 495,160 Net pension liability 7,677,143 Total Long-Term Liabilities (16,543,121) Total Net Position - Governmental Activities $ 1,070,091 The accompanying notes are an integral part of these financial statements. 17

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24 GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES FOR THE YEAR ENDED Capital General Building Facilities Fund Fund Fund REVENUES Local control funding formula $ 6,904,060 $ - $ - Federal sources 206, Other state sources 584, Other local sources 488,370 15, ,372 Total Revenues 8,182,809 15, ,372 EXPENDITURES Current Instruction 5,168, Instruction related activities: Supervision of instruction 12, Instructional library, media and technology 236, School site administration 443, Pupil services: Home-to school transportation 571, Food services All other pupil services 327, General administration: Data processing 59, All other general administration 738, Plant services 699, Ancillary services 27, Other outgo 123, Enterprise services 14, Capital outlays 297,222-9,130 Debt service Principal 24, Interest and other 3, Total Expenditures 8,748, ,130 Excess (deficiency) of revenues over expenditures (565,460) 14, ,242 Other Financing Sources (Uses): Transfers in Transfers out (45,161) - - Net Financing Sources (Uses) (45,161) - - NET CHANGE IN FUND BALANCES (610,621) 14, ,242 Fund Balance - Beginning 2,513,032 1,408,402 1,288,555 Fund Balance - Ending $ 1,902,411 $ 1,422,616 $ 1,505,797 The accompanying notes are an integral part of these financial statements. 18

25 Non-Major Governmental Funds Total Governmental Funds $ - $ 6,904, , ,504 22, , ,509 1,444,315 1,023,147 9,447,392-5,168,230-12, , , , , , ,949-59, , ,219-27, ,669-14, , , , , , ,318 1,106,022 9,864,271 (82,875) (416,879) 45,161 45,161 - (45,161) 45,161 - (37,714) (416,879) 379,953 5,589,942 $ 342,239 $ 5,173,063 19

26 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 $ (416,879) Amounts reported for governmental activities in the statement of activities are Different Because: Capital outlay 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 exceeded depreciation in the period. Depreciation expense $ (607,029) Capital outlay 608,613 Total 1,584 Repayment of bond principal is an expenditure in the governmental funds, but it reduces long-term liabilities in the statement of net position and does not affect the statement of activities. 438,000 Amortization of bond premiums are revenue sources in the statement of activities, but are not recognized in the governmental funds. 9,356 Accretion of interest on capital appreciation bonds is recorded as an expense in the government-wide statement of activities, but is not recorded in the governmental funds. (177,644) Compensated absences are measured by amounts earned during the year in the statement of activities. In the governmental funds, these items are measured by the amounts actually paid. Vacation amounts earned exceeded amounts used during the year. (2,527) Some of the capital assets acquired were financed with capital leases. The amount financed by the leases is reported in the governmental funds as a source of financing. On the other hand, the capital leases are not revenues in the Statement of Activities, but rather constitute long-term obligations in the Statement of Net Position. (104,097) The accompanying notes are an integral part of these financial statements. 20

27 RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES (Continued) FOR THE YEAR ENDED Some of the capital assets acquired were financed with capital leases. The amount financed by the leases is reported in the governmental funds as a source of financing. On the other hand, the capital leases are not revenues in the Statement of Activities, but rather constitute long-term obligations in the Statement of Net Position. (104,097) 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, deferred inflows and net pension liability during the year. (244,245) In the governmental funds, OPEB costs are based on employer contributions made to OPEB plans during the year. However, in the Statement of Activities, OPEB expense is the net effect of all changes in the deferred outflows, deferred inflows, and total OPEB liability during the year. 50,517 In the governmental funds, deferral of the loss on advance debt refunding was expended. However, it is capitalized and amortized in the statement of activities as deferred outflows related to debt refunding. (4,648) Interest on long-term debt in the statement of activities differs from the amount reported in the governmental funds because interest is recorded as an expenditure in the governmental funds when paid, 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. 6,269 Change in Net Position of Governmental Activities $ (444,314) The accompanying notes are an integral part of these financial statements. 21

28 FIDUCIARY FUND STATEMENT OF NET POSITION FOR THE YEAR ENDED Agency Fund ASSETS Deposits and investments $ 62,185 Total assets $ 62,185 LIABILITIES Due to student groups $ 62,185 Total liabilities $ 62,185 The accompanying notes are an integral part of these financial statements. 22

29 NOTES TO FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Financial Reporting Entity The Mark Twain Union Elementary School District (District) operates under a locally-elected five-member Board form of government and provides educational services to grades K-8 as mandated by the State and Federal agencies. The District operates two elementary schools. A reporting entity is comprised of the primary government, component units and other organizations that are included to ensure the financial statements are not misleading. The primary government of the District consists of all funds, departments, boards and agencies that are not legally separate from the District. For Mark Twain Union Elementary School District, this includes general operations, food service and student related activities of the District. The District has considered all potential component units in determining how to define the reporting entity, using criteria set forth in generally accepted accounting principles. The District determined that there are no potential component units that meet the criteria for inclusion within the reporting entity. 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 two broad fund categories: governmental 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 governmental funds: Major Governmental Funds General Fund The General Fund is the chief operating fund for the District. 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. Deferred Maintenance Fund currently defined as special revenue funds in the California State Accounting Manual (CSAM) do not meet the GASB Statement No. 54 special revenue fund definition. While these funds are authorized by statute and will remain open for internal reporting purposes, these funds function effectively as extensions of the General Fund, and accordingly have been combined with the General Fund for presentation in these audited financial statements. 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. 23

30 NOTES TO FINANCIAL STATEMENTS 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). Non-Major Governmental Funds Special Revenue Funds The Special Revenue funds are established to account for the proceeds from specific revenue sources (other than trusts, major capital projects, or debt service) that are restricted or committed to the financing of particular activities, that compose a substantial portion of the inflows of the fund, and that are reasonably expected to continue. 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). 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). Debt Service Funds The Debt Service funds are used to account for the accumulation of 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 Sections ). 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. The District has only an agency fund. Agency Fund Agency funds are custodial in nature (assets equal liabilities) and do not involve measurement of results of operations. Such funds have no equity accounts since all assets are due to individuals or entities at some future time. The District's agency fund accounts for student body activities (ASB). 24

31 NOTES TO FINANCIAL STATEMENTS 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. The government-wide Statement of Activities presents a comparison between expenses, both direct and indirect, and program revenues for each governmental function, and excludes fiduciary activity. Direct expenses are those that are specifically associated with a service, program, or department and are therefore clearly identifiable to a particular function. The District does not allocate indirect expenses to functions in the Statement of Activities. Program revenues include charges paid by the recipients of the goods or services offered by the programs and grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues are presented as general revenues. The comparison of program revenues and expenses identifies the extent to which each function is self-financing or draws from the general revenues of the District. Eliminations have been made to minimize the double counting of internal 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 fund is presented in a separate column. Non-major funds are aggregated and presented in a single column. The internal service fund is presented in a single column on the face of the proprietary fund statements. Governmental Funds All governmental funds are accounted for using a flow of current financial resources measurement focus and the modified accrual basis of accounting. With this measurement focus, only current assets and current liabilities generally are included on the Balance Sheet. The Statement of Revenues, Expenditures, and Changes in Fund Balances reports on the sources (revenues and other financing sources) and uses (expenditures and other financing uses) of current financial resources. This approach differs from the manner in which the governmental activities of the government-wide statements are prepared. Governmental fund financial statements therefore include reconciliations with brief explanations to better identify the relationship between the government-wide statements prepared on the accrual basis of accounting, using the economic resources measurement focus and the statements for the governmental funds prepared on a modified accrual basis of accounting using the current financial resources measurement focus. Under this basis, revenues are recognized in the accounting period in which they become measurable and available. Expenditures are recognized in the accounting period in which the fund liability is incurred, if measurable. Fiduciary Funds Fiduciary funds are accounted for using the flow of economic resources measurement focus and the accrual basis of accounting. Revenues - Exchange and Non-Exchange Transactions Revenue resulting from exchange transactions, in which each party gives and receives essentially equal value, is recorded on the accrual basis when the exchange takes place. On a modified accrual basis, revenue is recorded in the fiscal year in which the resources are measurable and become available. Available means that the resources will be collected within the current fiscal year, or are expected to be collected soon enough thereafter, to be used to pay liabilities of the current fiscal year. 25

32 NOTES TO FINANCIAL STATEMENTS Non-exchange transactions, in which the District receives value without directly giving equal value in return, include property taxes, certain grants, entitlements, and donations. Revenue from property taxes is recognized in the fiscal year in which the taxes are received. Revenue from certain grants, entitlements, and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied. Eligibility requirements include time and purpose restrictions. On a modified accrual basis, revenue from non-exchange transactions must also be available before it can be recognized. Unearned Revenue Unearned revenue arises when potential revenue does not meet both the "measurable" and "available" criteria for recognition in the current period or when resources are received by the District prior to the incurrence of qualifying expenditures. In subsequent periods, when both revenue recognition criteria are met, or when the District has a legal claim to the resources, the liability for unearned revenue is removed from the balance sheet and revenue is recognized. Certain grants received before the eligibility requirements are met are recorded as unearned revenue. On the governmental fund financial statements, receivables that will not be collected within the available period are also recorded as unearned revenue. Expenses/Expenditures On the accrual basis of accounting, expenses are recognized at the time they are incurred. The measurement focus of governmental fund accounting is on decreases in net financial resources (expenditures) rather than expenses. Expenditures are generally recognized in the accounting period in which the related fund liability is incurred. Principal and interest on long-term obligations, which have not matured, are recognized when paid in the governmental funds as expenditures. Allocations of costs, such as depreciation and amortization, are not recognized in the governmental funds but are recognized in the government-wide statements. Deposits and Investments Investments held at June 30, 2018, with original maturities greater than one year are stated at fair value. Fair value is estimated based on quoted market prices at year-end. All investments not required to be reported at fair value are stated at cost or amortized cost. Fair values of investments in state or county investment pools are determined by the program sponsor. Prepaid Expenditures (Expenses) Prepaid expenditures (expenses) represent amounts paid in advance of receiving goods or services. The District has the option of reporting expenditure in governmental funds for prepaid items either when purchased or during the benefiting period. The District has chosen to report the expenditures over the benefiting period. Stores Inventories Inventories consist of expendable food and supplies held for consumption and unused donated commodities. Inventories are stated at cost, on the weighted average cost basis. The costs of inventory items are recorded as expenditures in the governmental type funds when used. 26