ATHENS INDEPENDENT SCHOOL DISTRICT ANNUAL FINANCIAL REPORT

Transcription

1 ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED JUNE 30, 2005

2 ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED JUNE 30, 2005 TABLE OF CONTENTS Exhibit Page Table of Contents 1 Certificate of Board 3 Independent Auditor s Report 4 Management s Discussion and Analysis 6 Basic Financial Statements: Government Wide Financial Statements: A1 Statement of Net Assets 12 B1 Statement of Activities 13 Governmental Fund Financial Statements: C1 Balance Sheet 14 C2 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Assets 15 C3 Statement of Revenues, Expenditures, and Changes in Fund Balances 16 C4 Reconciliation of the Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances to the Statement of Activities 17 C5 Budgetary Comparison Schedule General Fund 18 Proprietary Fund Financial Statements: D1 Statement of Net Assets N/A D2 Statement of Revenues, Expenses, and Changes in Fund Assets N/A D3 Statement of Cash Flows N/A Fiduciary Fund Financial Statements: E1 Statement of Fiduciary Net Assets 19 E2 Statement of Changes in Fiduciary Net Assets 20 Notes to the Financial Statements 21 Combining Statements: Nonmajor Governmental Funds: H1 Combining Balance Sheet 42 H2 Combining Statement of Revenues, Expenditures and Changes in Fund Balances 45 1

3 TABLE OF CONTENTS, CONTINUED Exhibit Page Required TEA Schedules: J1 Schedule of Delinquent Taxes Receivable 48 J2 Schedule of Expenditures for Computation of Indirect Cost 49 J3 Fund Balance and Cash Flow Calculation Worksheet 50 J4 Budgetary Comparison Schedule Child Nutrition Fund 51 J5 Budgetary Comparison Schedule Debt Service Fund 52 Compliance, Internal Control and Federal Awards: Report on Compliance and on Internal Control Over Financial Reporting Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 53 Report on Compliance with Requirements Applicable to Each Major Program and Internal Control over Compliance in Accordance with OMB Circular A Schedule of Findings and Questioned Costs 57 Schedule of Status of Prior Findings 59 Corrective Action Plan 60 K1 Schedule of Expenditures of Federal Awards 61 Notes to the Schedule of Expenditures of Federal Awards 62 2

4 CERTIFICATE OF BOARD Athens Independent School District Henderson Name of School District County Co. Dist. No. We, the undersigned, certify that the attached annual financial reports of the above named school district were reviewed and approved disapproved for the year ended June 30, 2005 at a meeting of the board of school trustees of such school district on the day of, Signature of Board Secretary Signature of Board President If the board of trustees disapproved of the auditor's report, the reason(s) for disapproving it is(are): (attach list as necessary) 3

5 SMITH, LAMBRIGHT & ASSOCIATES, P.C. CERTIFIED PUBLIC ACCOUNTANTS Marlin R. Smith, CPA P. O. Box 912 J. W. Lambright, CPA 505 E. Tyler Athens, Texas Cheri E. Kirkland, CPA (903) Deborah Adcock, CPA FAX (903) Michael D. Rogers, CPA internet.com UNQUALIFIED OPINION ON BASIC FINANCIAL STATEMENTS ACCOMPANIED BY REQUIRED SUPPLEMENTARY INFORMATION AND OTHER SUPPLEMENTARY INFORMATION INCLUDING THE SUPPLEMENTARY SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS Independent Auditor's Report Board of School Trustees Athens Independent School District 104 Hawn Street Athens, Texas Members of the Board of Trustees: We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of Athens Independent School District (the District ), as of and for the year ended June 30, 2005, which collectively comprise the District s basic financial statements as listed in the table of contents. These financial statements are the responsibility of the District's administrators. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. 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, 2005, and the respective changes in financial position and cash flows, where applicable, thereof and the budgetary comparison for the general fund for the year then ended in conformity with accounting principles generally accepted in the United States of America. Management s Discussion and Analysis and other required supplementary information are not a required part of the basic financial statements but are supplementary information required by accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it. 4

6 In accordance with Government Auditing Standards, we have also issued our report dated August 31, 2005 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, grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. Our audit was conducted for the purpose of forming an opinion on the financial statements that collectively comprise the District s basic financial statements. The combining and individual nonmajor fund financial statements are presented for purposes of additional analysis and are not a required part of the basic financial statements. The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by U.S. Office of Management and Budget Circular A133, Audits of States, Local Governments, and NonProfit Organizations, and is also not a required part of the basic financial statements of the District. The combining and individual nonmajor fund financial statements and the schedule of expenditures of federal awards have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, are fairly stated, in all material respects, in relation to the basic financial statements taken as a whole. The Texas Education Agency requires school districts to include certain information in the Annual Financial and Compliance Report in conformity with laws and regulations of the State of Texas. This information is in Exhibits identified in the Table of Contents as J1 through J5. Except for Exhibit J3 (Fund Balance and Cash Flow Calculation Worksheet) which is marked UNAUDITED and on which we express no opinion, these schedules have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, are fairly stated, in all material respects, in relation to the basic financial statements taken as a whole. Respectfully submitted, SMITH, LAMBRIGHT & ASSOCIATES, P. C. Certified Public Accountants August 31,

7 MANAGEMENT S DISCUSSION AND ANALYSIS

8 MANAGEMENT S DISCUSSION AND ANALYSIS In this section of the Annual Financial and Compliance Report, we, the administrators of Athens Independent School District, discuss and analyze the District s financial performance for the year ended June 30, Please read it in conjunction with our transmittal letter, the independent auditor s report and the District s Basic Financial Statements. FINANCIAL HIGHLIGHTS These financial statements present information for the fiscal year July 1, 2004 through June 30, The District s net assets on a governmentwide basis decreased $230,945 as a result of this period s operations (Exhibit B1). The decrease is reflected in a reduction of net fixed assets due to depreciation expense, a decrease in the amount due from other governments and an increase in various liabilities. During the period, the District had revenues of $21,005,931, representing $62,079 less than the $21,068,010 of expenditures for governmental programs before special items (Exhibit C3). The expenses include approximately $60,000 for the purchase of a portable classroom building and almost $200,000 for financial and student services software. The total cost of all of the District s programs increased with no new programs added this period and no old programs deleted this period. The district experienced an increase in elementary students that necessitated the portable classroom with its related staff, furnishings and equipment. In addition to the portable classroom and software expenditures mentioned above, three new school buses were purchased. The district experienced cost increases related to higher energy costs, an increase in fuel costs for the bus and maintenance fleet and moderate increases in staff compensation. The General Fund ended the year with a fund balance of $5,202,080 (Exhibit C3). The decrease of $99,203 in fund balance represents the effect of operations discussed above plus expenditures to settle a legal claim ($13,333) and the transfer of unexpended donations to a separate fund. The increased costs were offset somewhat by the gain on the sale of attendance credits. The notes to the financial statements provide narrative explanations or additional data needed for full disclosure in the governmentwide statements or the fund financial statements. The sections labeled TEA Required Schedules and Compliance, Internal Control and Federal Awards Section contain data used by monitoring or regulatory agencies for assurance that the District is using funds supplied in compliance with the terms of grants. Reporting the District as A Whole The Statement of Net Assets and the Statement of Activities The primary purpose of the governmentwide financial statements is to show whether the District is better off or worse off as a result of the year s activities. The Statement of Net Assets includes all the District s assets and liabilities at the end of the year while the Statement of Activities includes all the revenues and expenses generated by the District s operations during the year. These apply the accrual basis of accounting which is the basis used by private sector companies. 6

9 All of the current year s revenues and expenses are taken into account regardless of when cash is received or paid. The District s revenues are divided into those provided by outside parties who share the costs of some programs, such as tuition received from students from outside the district and grants provided by the U.S. Department of Education to assist children with disabilities from disadvantaged backgrounds (program revenues), and revenues provided by the taxpayers or by TEA in equalization funding processes (general revenues). All the District s assets are reported whether they serve the current year or future years. Liabilities are considered regardless of whether they must be paid in the current or future years. These two statements report the District s net assets and changes in them. The District s net assets (the difference between assets and liabilities) provide one measure of the District s financial health, or financial position. Over time, increases or decreases in the District s net assets are one indicator of whether its financial health is improving or deteriorating. To fully assess the overall health of the District, however, you should consider nonfinancial factors as well, such as changes in the District s average daily attendance, its property tax base and the conditions of the District s facilities. In the Statement of Net Assets and the Statement of Activities, we combine the District into one kind of activity: Governmental activitiesmost of the District s basic services are reported here, including the instruction, counseling, cocurricular activities, food services, transportation, maintenance, community services, and general administration. Property taxes, tuition, fees, and sate and federal grants finance most of the 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. Laws and contracts require the District to establish some funds, such as grants received under the No Child Left Behind Act from the U.S. Department of Education. The District s administration establishes many other funds to help it control and manage money for particular purposes (like campus activities). Governmental funds Most of the District s basic services are reported in governmental funds. These use modified accrual accounting (a method that measures the receipt and disbursement of cash and all other financial assets that can be readily converted to cash) and report balances that are available for future spending. The governmental fund statements provide a detailed shortterm view of the District s general operations and the basic services it provides. We describe the differences between governmental activities (reported in the Statement of Net Assets and the Statement of Activities) and governmental fund in reconciliation schedules following each of the fund financial statements. The District as Trustee Reporting the District s Fiduciary Responsibilities The District is the trustee, or fiduciary, for money raised by student activities and alumnae scholarship programs. All of the District s fiduciary activities are reported in separate Statements of Fiduciary Net Assets and Changes in Fiduciary Net Assets. We exclude these resources from the District s other financial statements because the District cannot use these assets to finance its operations. The district is only responsible for ensuring that the assets reported in these funds are used for their intended purposes. GOVERNMENTWIDE FINANCIAL ANALYSIS The District is reporting under GASB Statement #34. Our analysis of comparative balances and changes therein appears below. Our analysis focuses on the net assets and changes in net assets of the District s governmental activities. 7

10 Net assets of the District s governmental activities decreased from $18,069,509 to $17,838,564. Unrestricted net assets the part of net assets that can be used to finance daytoday operations without constraints established by debt covenants, enabling legislation, or other legal requirements decreased by $137,968 to $5,943,079 at June 30, This change in governmental net assets was the result of several factors. Specific items to note include: the net current assets increased, the net capital assets decreased due to depreciation, the District s accrued liabilities increased and liabilities related to debt service decreased as principal was paid. TABLE I Athens Independent School District Net Assets June 30, 2005 June 30, 2004 Increase (Decrease) Current and other assets $ 10,815,030 $ 10,248,682 $ 566,348 Capital assets 30,033,413 30,955,328 (921,915) Total Assets 40,848,443 41,204,014 (355,567) Longterm liabilities 19,820,000 20,655,000 (835,000) Other liabilities 3,189,879 2,479, ,378 Total Liabilities 23,009,879 23,134,501 (124,622) Net Assets: Invested in capital assets net of related debt 10,213,413 10,300,328 ( 86,915) Restricted 1,682,072 1,688,134 (6,062) Unrestricted 5,943,079 6,081,047 (137,968) Total Net Assets $ 17,838,564 $ 18,069,509 $ (230,945) 8

11 TABLE II Athens Independent School District Changes In Net Assets Year Ended June 30, 2005 Year Ended June 30, 2004 Increase (Decrease) Revenues Program Revenues Charges for Services 694, ,348 (37,623) Operating grants and contributions 4,613,071 4,330, ,913 General Revenues Maintenance and operations taxes 11,405,433 11,082, ,056 Debt service taxes 944, ,112 91,258 State aid formula grants 7,768,860 8,119, ,704 Grants and Contributions (not restricted) 493, ,475 (89,137) Investment earnings 160,467 87,788 72,679 Miscellaneous 567, , ,604 Transfers In (Out) (23,791) (23,791) Total Revenue 26,623,542 26,155, ,255 Expenses Instruction, curriculum and media services 15,233,717 14,390, ,430 Instructional and school leadership 1,996,436 1,859, ,363 Student support services 2,223,129 2,102, ,727 Child nutrition 1,384,302 1,298,631 85,671 Cocurricular activities 1,055,755 1,225,455 (169,700) General administration 929, ,683 10,229 Plant maintenance, security & data processing 2,951,933 2,638, ,264 Community Services 36,659 36,659 Debt Services 1,042,644 1,092,350 (49,706) Total Expenses 26,854,487 25,526,550 1,327,937 Increase (Decrease) in net assets (230,945) 628,737 (859,682) Net assets at Beginning of Period 18,069,509 17,440, ,737 Net assets at End of Period 17,838,564 18,069,509 $ (230,945) The District s total revenues for the year ended June 30, 2005 increased by approximately 1.8 percent compared to the year ended June 30, The total cost of all programs and services was higher this period than last, due to growth in enrollment, increase in energy costs, major operating software purchase, and purchase of three buses. The cost of all governmental activities this year was $21,546,691. However, as shown in the Statement of Activities (Exhibit B1), the amount that our taxpayers ultimately financed for these activities through District taxes was only $12,349,803. Some of the costs were paid by those who directly benefited from the programs ($694,725) or by other governments and organizations that subsidized certain programs with grants and contributions ($4,613,071) or by State equalization funding ($7,768,860). Investment earnings and other revenues funded the remaining amount. 9

12 THE DISTRICT S FUNDS As the District completed the year, its general fund reported a fund balance of $5,202,080 (Exhibit C3), which is $99,203 lower than last year s general fund balance of $5,301,283. The decrease occurs primarily due to the purchase of major operating software (financial and student services), a portable classroom building, the addition of three buses, and an increase in energy costs. Over the course of the year, the Board of Trustees revised the District s budget several times. These budget amendments fall into several categories. The first category includes amendments and supplemental appropriations that were approved shortly after the beginning of the year and reflect the actual beginning balances (versus the amounts we estimated at the time of budget adoption in June 2004). The second category includes changes that the Board made to recognize donations received and expenditures made possible by those donations. The third category involved amendments moving funds from functions that did not need require all the resources originally appropriated to them to functions with resource needs. The fourth category represents appropriation of fund balance resources to allow acquisition of software, portable classroom building and school buses that were not anticipated in the original budget model. CAPITAL ASSET AND DEBT ADMINISTRATION Capital Assets At the end of 2005, the District had $43.4 million invested in a broad range of capital assets, including facilities and equipment for instruction, transportation, athletics, administration, and maintenance. This amount represents a net increase of approximately $311 thousand, or 0.72 percent, above last year. This year s additions included: purchase and equipping of portable classroom for approximately $60,000, three school buses for $192,639 and other equipment amounting to approximately $58,650. The District s fiscal year 2006 capital budget as originally adopted anticipates $25,000 for technology expenditures. More detailed information about the District s capital assets is presented in Note F to the financial statements. Debt At June 30, 2005, the District had $19.82 million in bonds and maintenance tax notes outstanding. This amount reflects the $835,000 principal payments made August 15, The District s general obligation bond rating with the permanent school fund guaranty remains at AAA, per national rating agencies. On August 15, 2005, the District issued Unlimited Tax Refunding Bonds, Series 2005 to effectively refinance the outstanding bonds originally issued in The refunding bonds received the guarantee of the Permanent School Fund of the State of Texas and are rated AAA by Standard & Poor s. The refinancing reduced the effective interest rate on the outstanding bonds and resulting in an interest savings of approximately $928 thousand over the life of the bonds without extending the maturity. More detailed information about the District s longterm liabilities is presented in notes to the financial statements. 10

13 ECONOMIC FACTORS AND NEXT YEAR S BUDGETS AND RATES The District s elected and appointed officials considered many factors when setting the fiscal year budget and tax rates. The District s population continues to experience steady growth averaging about 3 percent between census periods. Enrollment as of the beginning of the 2005 school year is slightly below the previous year. Unemployment for Henderson County was estimated to be 5.1% in September 2005, improved from 6.4% as of May Two major employers within the district have begun operations. Consequently, the budget adopted for fiscal year depicts operations within these anticipated revenue constraints without using fund balance. If actual tax collections and the related state funding effects are better than anticipated, a budget amendment recognizing the additional resources and opportunities will be considered. These indicators were taken into account when adopting the General Fund budget for the fiscal year ending June 30, 2006 and raising the combined tax rate for the 2005 levy to $ from $ per $100 of valuation. Amounts available for appropriation in the General Fund budget are $ million, as compared to the final annual budget of $ million. The District will use its revenues to finance programs we currently offer. Budgeted expenditures are expected to equal the $ million, down from $ million in The change is the net effect of no planned capital expenditures, all regular debt retirement payment dates and moderately increased wages and salaries. The District has added no major new programs or initiatives to the budget. If these estimates are realized, the District s budgetary General Fund balances are expected to remain virtually unchanged at the close of the fiscal year. CONTACTING THE DISTRICT S FINANCIAL MANAGEMENT This financial report is designed to provide our citizens, taxpayers, customers, 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 additional financial information, contact the District s business office, at Athens Independent School District, 104 Hawn Street, Athens, Texas 75751, phone number

14 BASIC FINANCIAL STATEMENTS

15 STATEMENT OF NET ASSETS JUNE 30, 2005 EXHIBIT A1 Data Control Codes Primary Government Governmental Activities ASSETS 1110 Cash and Cash Equivalents $ 1120 Current Investments 1220 Property Taxes Receivable (Delinquent) 1230 Allowance for Uncollectible Taxes 1240 Due from Other Governments 1290 Other Receivables (net) 1300 Inventories 1410 Deferred Expenses 1510 Land 1520 Buildings, net 1530 Furniture and Equipment, net 2,687,495 4,423,234 1,150,132 (23,002) 2,413,020 61,581 17,782 84, ,803 28,190,296 1,014, Total Assets 40,848,443 LIABILITIES 2110 Accounts Payable 2150 Payroll Deductions & Withholdings 2160 Accrued Wages Payable 2180 Due to Other Governments 2200 Accrued Expenses 2300 Deferred Revenues Long Term Liabilities: 2501 Due Within One Year 2502 Due in More Than One Year 83, ,613 1,940,715 14, , , ,000 18,920, Total Liabilities 23,009,879 NET ASSETS 3200 Invested in Capital Assets, Net of Related Debt 3820 Restricted for Federal and State Programs 3850 Restricted for Debt Service 3890 Restricted for Other Purposes 3900 Unrestricted Net Assets 10,213, ,607 1,251, ,740 5,943, Total Net Assets $ 17,838,564 The accompanying notes are an integral part of this statement. 12

16 Data Control Codes Primary Government: STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2005 Program Revenues EXHIBIT B1 Net (Expense) Revenue and Changes in Net Assets Expenses Charges for Services Operating Grants and Contributions Primary Gov. Governmental Activities GOVERNMENTAL ACTIVITIES: 11 Instruction $ 14,851,840 $ 33,713 $ 2,808,626 $ (12,009,501) 12 Instructional Resources & Media Services 335,375 82,155 (253,220) 13 Curriculum and Staff Development 46,502 30,252 (16,250) 21 Instructional Leadership 580, ,679 (404,254) 23 School Leadership 1,415,503 75,278 (1,340,225) 31 Guidance, Counseling & Evaluation Services 963, ,859 (802,323) 33 Health Services 213,935 31,400 (182,535) 34 Student (Pupil) Transportation 1,046,012 46,356 (999,656) 35 Food Services 1,384, , ,626 26, Cocurricular/Extracurricular Activities 1,055, ,767 25,973 (820,015) 41 General Administration 929,912 31,529 (898,383) 51 Plant Maintenance and Operations 2,383,126 7, ,710 (2,267,958) 52 Security and Monitoring Services 133,319 23,247 (110,072) 53 Data Processing Services 435,488 9,722 (425,766) 61 Community Services 36,659 36, Debt Service Interest on Long Term Debt 1,042,162 (1,042,162) 73 Debt Service Bond Issuance Cost & Fees 482 (482) [TP] TOTAL PRIMARY GOVERNMENT: $ 26,854,487 $ 694,725 $ 4,613,071 (21,546,691) Data Control Codes MT DT SF GC IE MI FR TR General Revenues: Taxes: Property Taxes, Levied for General Purposes Property Taxes, Levied for Debt Service State Aid Formula Grants Grants & Contributions not Restricted Investment Earnings Miscellaneous Local and Intermediate Revenue Transfers In (Out): Total General Revenues and Transfers 11,405, ,370 7,768, , , ,069 (23,791) 21,315,746 CN NB Net AssetsBeginning Change in Net Assets (230,945) 18,069,508 NE Net AssetsEnding $ 17,838,563 The accompanying notes are an integral part of this statement. 13

17 BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2005 EXHIBIT C1 Data Control Codes 10 General Fund 50 Debt Service Fund Other Funds Total Governmental Funds ASSETS Cash and Cash Equivalents $ 2,606,002 $ 82,920 $ (1,427) $ 2,687,495 Investments Current 3,319,655 1,103,579 4,423,234 Property Taxes Delinquent 1,024, ,414 1,150,132 Allowance for Uncollectible Taxes (credit) (20,494) (2,508) (23,002) Due from Other Governments 1,658,934 64, ,289 2,413,020 Due from Other Funds Other Receivables 61,581 61,581 Inventories 17,782 17,782 Deferred Expenditures 84,788 84, Total Assets $ 8,735,184 $ 1,374,631 $ 705,644 $ 10,815, LIABILITIES AND FUND BALANCES Liabilities: Accounts Payable $ 61,916 $ $ 21,600 $ 83,516 Payroll Deductions and Withholdings Payable 131,979 20, ,613 Accrued Wages Payable 1,751, ,475 1,940,715 Due to Other Funds Due to Other Governments 14,779 14,779 Deferred Revenues 1,587, ,905 28,810 1,739, Total Liabilities $ 3,533,104 $ 122,905 $ 275,298 $ 3,931, Fund Balances: Reserved For: Retirement of LongTerm Debt $ $ 1,251,725 $ $ 1,251,725 Food Service 200, ,785 Other Purposes 229, ,561 Unreserved and Undesignated: Reported in the General Fund 5,202,080 5,202, Total Fund Balances $ 5,202,080 $ 1,251,725 $ 430,346 $ 6,884, Total Liabilities and Fund Balances $ 8,735,184 $ 1,374,630 $ 705,644 $ 10,815,458 The accompanying notes are an integral part of this statement. 14

18 EXHIBIT C2 RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS June 30, 2005 Total Fund Balances Governmental Funds $ Amounts reported for governmental activities in the statement of net assets are different because: Data Control Codes 1 Capital assets used in governmental activities are not financial resources and therefore are not reported in governmental funds. At the beginning of the year, the cost of these assets was $43,127,013 and the accumulated depreciation was $12,171,685. In addition, longterm liabilities, including bonds payable, are not due and payable in the current period, and, therefore are not reported as liabilities in the funds. The longterm debt was $20,655,000. The net effect of including the beginning balances for capital assets (net of depreciation) and longterm debt in the governmental activities is to increase net assets. 2 Current year capital outlays and longterm debt principal payments are expenditures in the fund financial statements, but they should be shown as increases in capital assets and reductions in longterm debt in the governmentwide financial statements. The net effect of including the 2005 capital outlays and debt principal payments is to increase net assets The 2005 depreciation expense increases accumulated depreciation. The net effect of the current year's depreciation is to decrease net assets. ( ) 4 Various other reclassifications and eliminations are necessary to convert from the modified accrual basis of accounting to accrual basis of accounting. These include recognizing deferred revenue as revenue, eliminating interfund transactions, reclassifying the proceeds of bond sales as an increase in bonds payable, and recognizing the liabilities associated with maturing longterm debt and interest. The net effect of these reclassifications and recognitions is to increase net assets Net Assets of Governmental Activities $ The accompanying notes are an integral part of this statement. 15

19 EXHIBIT C3 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2005 Data Control Codes 10 General Fund 50 Debt Service Fund Other Funds Total Governmental Funds REVENUES: Total Local and Intermediate Sources $ 12,281,087 $ 998,465 $ 563,472 $ 13,843,024 State Program Revenues 8,686, , ,290 9,652,543 Federal Program Revenues 38,480 3,184,246 3,222, Total Revenues 21,005,931 1,449,354 4,263,008 26,718,293 EXPENDITURES: Current: 0011 Instruction 0012 Instructional Resources & Media Services 0013 Curriculum & Instructional Staff Development 0021 Instructional Leadership 0023 School Leadership 0031 Guidance, Counseling & Evaluation Services 0033 Health Services 0034 Student (Pupil) Transportation 0035 Food Services 0036 Cocurrricular/Extracurricular Activities 0041 General Administration 0051 Plant Maintenance and Operations 0052 Security and Monitoring Services 0053 Data Processing Services 0061 Community Services Debt Service: 0071 Debt Service Principal on longterm debt 0072 Debt Service Interest on longterm debt 0073 Debt Service Bond Issuance Cost and Fees Capital Outlay: 0081 Facilities Acquisition and Construction 11,845,998 2,195,257 14,041, ,072 67, ,861 16,310 29,968 46, , , ,365 1,386,005 9,019 1,395, , , , ,621 21, ,751 1,086,942 10,314 1,097,256 1,342,362 1,342, , , , ,057 3, ,223 2,319,166 50,588 2,369, ,689 19, , ,371 1, ,771 36,659 36, , , , , ,725 1,061, ,507 49, Total Expenditures 21,068,010 1,546,207 4,172,215 26,786, Excess (Deficiency) of Revenues Over (Under) Expenditures OTHER FINANCING SOURCES (USES): 8911 Transfers Out (Use) 8949 Other (Uses) (62,079) (96,853) 90,793 (68,139) (23,791) (23,791) (13,333) (13,333) 7080 Total Other Financing Sources (Uses) (37,124) (37,124) 1200 Net Change in Fund Balances (99,203) (96,853) 90,793 (105,263) 0100 Fund Balance July 1 (Beginning) 5,301,283 1,348, ,554 6,989, Fund Balance June 30 (Ending) $ 5,202,080 $ 1,251,725 $ 430,347 $ 6,884,152 The accompanying notes are an integral part of this statement. 16

20 EXHIBIT C4 RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES For The Year Ended June 30, 2005 Total Net Change in Fund Balances Governmental Funds $ ( ) Amounts reported for governmental activities in the statement of net assets are different because: Current year capital outlays and longterm debt principal payments are expenditures in the fund financial statements, but they should be shown as increases in capital assets and reductions in longterm debt in the governmentwide financial statements. The net effect of removing the 2005 capital outlays and debt principal payments is to increase net assets Depreciation is not recognized as an expense in governmental funds since it does not require the use of current financial resources. The net effect of the current year's depreciation is to decrease net assets. Various other reclassifications and eliminations are necessary to convert from the modified accrual basis of accounting to accrual basis of accounting. These include recognizing deferred revenue as revenue, adjusting current year revenue to show the revenue earned from the current year's tax levy, eliminating interfund transactions, reclassifying the proceeds of bond sales, and recognizing the liabilities associated with maturing longterm debt and interest. The net effect of these reclassifications and recognitions is to decrease net assets. ( ) (38 767) Change in Net Assets of Governmental Activities $ ( ) The accompanying notes are an integral part of this statement. 17

21 Data Control Codes EXHIBIT C5 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL GENERAL FUND FOR THE YEAR ENDED JUNE 30, 2005 Original Budgeted Amounts Final Actual Amounts (GAAP BASIS) Variance With Final Budget Positive or (Negative) REVENUES: Total Local and Intermediate Sources $ 11,717,513 $ 11,965,022 $ 12,281,087 $ 316,065 State Program Revenues 8,111,323 8,636,206 8,686,364 50,158 Federal Program Revenues 20,000 38,480 18, Total Revenues 19,828,836 20,621,228 21,005, , EXPENDITURES: Current: Instruction Instructional Resources & Media Services Curriculum & Instructional Staff Development Instructional Leadership School Leadership Guidance, Counseling & Evaluation Services Health Services Student (Pupil) Transportation Cocurrricular/Extracurricular Activities General Administration Plant Maintenance and Operations Security and Monitoring Services Data Processing Services Debt Service Principal on longterm debt Debt Service Interest on longterm debt Facilities Acquisition and Construction 11,361,956 11,898,257 11,845,998 52, , , ,072 70,928 26,835 35,000 16,310 18, , , ,359 4,641 1,334,533 1,391,000 1,386,005 4, , , , , , ,621 5, ,149 1,270,000 1,086, , , , ,553 95, , , ,057 34,943 2,041,665 2,352,623 2,319,166 33, , , ,689 3, , , ,371 16, , , , , , , ,572 49,507 1, Total Expenditures 19,826,216 21,594,250 21,068, , Excess (Deficiency) of Revenues Over (Under) Expenditures OTHER FINANCING SOURCES (USES): Transfers Out (Use) Other (Uses) 2,620 (973,022) (62,079) 910,943 (23,791) (23,791) (15,000) (13,333) 1, Total Other Financing Sources (Uses) (15,000) (37,124) (22,124) 1200 Net Change in Fund Balances 2,620 (988,022) (99,203) 888, Fund Balance July 1 (Beginning) 5,301,283 5,301,283 5,301, Fund Balance June 30 (Ending) $ 5,303,903 $ 4,313,261 $ 5,202,080 $ 888,819 The accompanying notes are an integral part of this statement. 18

22 STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS JUNE 30, 2005 EXHIBIT E1 Private Purpose Trust Funds ASSETS Cash and Cash Equivalents $ 103,359 $ Agency Funds 91,553 Total Assets 103,359 $ 91,553 LIABILITIES Accounts Payable $ Due to Student Groups ,345 Total Liabilities $ 91,553 NET ASSETS Restricted for Scholarships Restricted for Other Purposes 37,350 66,009 Total Net Assets $ 103,359 The accompanying notes are an integral part of this statement. 19

23 STATEMENT OF CHANGES IN FIDUCIARY FUND NET ASSETS FIDUCIARY FUNDS FOR THE YEAR ENDED JUNE 30, 2005 EXHIBIT E2 ADDITIONS: Local and Intermediate Sources $ Transfer In DEDUCTIONS: Private Purpose Trust Funds 72,080 23,791 Total Additions 95,871 Supplies and Materials Other Operating Costs 6,524 65,000 Total Deductions 71,524 Change in Net Assets 24,347 Total Net Assets July 1 (Beginning) 79,012 Total Net Assets June 30 (Ending) $ 103,359 The accompanying notes are an integral part of this statement. 20

24 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2005 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Athens Independent School District ( The District ) is a public educational agency operating under the applicable laws and regulations of the State of Texas. It is governed by a seven member Board of Trustees (the Board ) elected by registered voters of the District. The District prepares its basic financial statements in conformity with generally accepted accounting principles promulgated by the Governmental Accounting Standards Board and other authoritative sources identified in Statement on Auditing Standards No. 69 of the American Institute of Certified Public Accountants; and it complies with the requirements of the appropriate version of Texas Education Agency s Financial Accountability System Resource Guide (the Resource Guide ) and the requirements of contracts and grants of agencies from which it receives funds. A. REPORTING ENTITY The Board of Trustees (the Board ) is elected by the public and it has the authority to make decisions, appoint administrators and managers, and significantly influence operations. It also has the primary accountability for fiscal matters. Therefore, the District is a financial reporting entity as defined by the Governmental Accounting Standards Board ( GASB ) in its Statement No. 14, The Financial Reporting Entity. There are no component units included within the reporting entity. B. GOVERNMENTWIDE AND FUND FINANCIAL STATEMENTS The Statement of Net Assets and the Statement of Activities are governmentwide financial statements. They report information on all of the District s nonfiduciary activities with most of the interfund activities removed. Governmental activities include programs supported primarily by taxes, State foundation funds, grants and other intergovernmental revenues. Businesstype activities include operations that rely to a significant extent on fees and charges for support. The Statement of Activities demonstrates how other people or entities that participate in programs the District operates have shared in the payment of the direct costs. The charges for services column includes payments made by parties that purchase, use, or directly benefit from goods or services provided by a given function or segment of the District. Examples includes tuition paid by students not residing in the district, school lunch charges, etc. The grants and contributions column includes amounts paid by organizations outside the District to help meet the operational or capital requirements of a given function. Examples include grants under the Elementary and Secondary Education Act. If a revenue is not a program revenue, it is a general revenue used to support all of the District s functions. Taxes are always general revenues. Interfund activities between governmental funds and between governmental funds and proprietary funds appear as due to/due from on the governmental fund Balance Sheet and proprietary fund Statement of Net Assets and as other resources and other uses on the governmental fund Statement of Revenues, Expenditures and Changes in Fund Balance and on the proprietary fund Statement of Revenues, Expenses and Changes in Fund Net Assets. All interfund transactions between governmental funds and between governmental funds and internal service funds are eliminated on the governmentwide statements. Interfund activities between governmental funds and enterprise funds remain on the governmentwide statements and appear on the governmentwide Statement of Net Assets as internal balances and on the Statement of Activities as interfund transfers. Interfund activities between governmental funds and fiduciary funds remain as due to/due from on the governmentwide Statement of Activities. 21

25 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2005 The fund financial statements provide reports on the financial condition and results of operations for three fund categories governmental, proprietary, and fiduciary. Since the resources in the fiduciary funds cannot be used for District operations, they are not included in the governmentwide statements. The District considers some governmental and enterprise funds major and reports their financial condition and results of operations in a separate column. Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses result from providing services and producing and delivering goods in connection with a proprietary fund s principal ongoing operations. All other revenues and expenses are nonoperating. C. MEASUREMENT FOCUS, BASIS OF ACCOUNTING, AND FINANCIAL STATEMENT PRESENTATION The governmentwide financial statements use the economic resources measurement focus and the accrual basis of accounting, as do the proprietary fund and fiduciary fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of the related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. Governmental fund financial statements use the current financial resources measurement focus and the modified accrual basis of accounting. With this measurement focus, only current assets, current liabilities and fund balances are included on the balance sheet. Operating statements of these funds present net increases and decreases in current assets (i.e., revenues and other financing sources and expenditures and other financing uses). The modified accrual basis of accounting recognizes revenues in the accounting period in which they become both measurable and available, and it recognizes expenditures in the accounting period in which the fund liability is incurred, if measurable, except for unmatured interest and principal on longterm debt, which is recognized when due. The expenditures related to certain compensated absences and claims and judgments are recognized when the obligations are expected to be liquidated with expendable available financial resources. The District considers all revenues available if they are collectible within 60 days after year end. Revenues from local sources consist primarily of property taxes. Property tax revenues and revenues received from the State are recognized under the susceptibletoaccrual concept. Miscellaneous revenues are recorded as revenue when received in cash because they are generally not measurable until actually received. Investment earnings are recorded as earned, since they are both measurable and available. Grant funds are considered to be earned to the extent of expenditures made under the provisions of the grant. Accordingly, when such funds are received, they are recorded as deferred revenues until related and authorized expenditures have been made. If balances have not been expended by the end of the project period, grantors sometimes require the District to refund all or part of the unused amount. The proprietary fund types and fiduciary fund types are accounted for on a flow of economic resources measurement focus and utilize the accrual basis of accounting. This basis of accounting recognizes revenues in the accounting period in which they are earned and become measurable and expenses in the accounting period in which they are incurred and become measurable. The District applies all GASB pronouncements as well as the Financial Accounting Standards Board pronouncements issued on or before November 30, 1989, unless these pronouncements conflict or contradict GASB pronouncements. With this measurement focus, all assets and all liabilities associated with operation of these funds are included on the fund Statement of Net Assets. The fund equity is segregated into invested in capital assets net of related debt, restricted net assets, and unrestricted net assets. 22

26 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2005 D. FUND ACCOUNTING The District reports the following fund types: Governmental Funds: 1. General Fund The general fund is the District s primary operating fund and is always reported as a major fund. It accounts for all financial resources expect those required to be accounted for in another fund. 2. Special Revenue Funds The District accounts for resources restricted to, or designated for specific purposes by the District or a grantor in a special revenue fund. Most Federal and some State financial assistance is accounted for in a Special Revenue Fund, and sometimes unused balances must be returned to the grantor at the close of specified project periods. 3. Debt Service Fund The District accounts for resources accumulated and payments made for principal and interest on longterm general obligation debt of governmental funds in a debt service fund. Fiduciary Funds: 4. Private Purpose Trust Funds The District accounts for donations for which the donor has stipulated that both the principal and the income may be used for purposes that benefit parties outside the District. The District s Private Purpose Trust Funds are a scholarship fund and specified donation funds. 5. Agency Funds The District accounts for resources held for others in a custodial capacity in agency funds. The District s Agency Fund is the student activity fund. E. CASH AND CASH EQUIVALENTS For the purposes of the statement of cash flows for proprietary and similar fundtypes, the District considers highly liquid investments to be cash equivalents if they have a maturity of three months or less when purchased. F. INVENTORIES The District records purchases of supplies as expenditures. Inventory on the balance sheet is recorded at cost and represents supplies and materials purchased for the subsequent school year. Food service commodities are recorded at fair market value as supplied by the Texas Department of Human Services. 23

27 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2005 G. CAPITAL ASSETS Capital assets, which include land, buildings, furniture and equipment are reported in the governmental column in the governmentwide financial statements. Capital assets are defined by the District as assets with an initial, individual cost of more than $5,000 and an estimated useful life in excess of two years. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair market value at the date of donation. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized. Major outlays for capital assets and improvements are capitalized as projects are constructed. Buildings, furniture and equipment of the District are depreciated using the straight line method over the following estimated useful lives: Assets Years Buildings 40 Building Improvements 20 Vehicles 510 Furniture and Equipment 510 H. LONG TERM DEBT In the governmentwide financial statements, and proprietary fund types in the fund financial statements, longterm debt and other longterm obligations are reported as liabilities in the applicable governmental activities, businesstype activities, or proprietary fund type statement of net assets. Bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds using the effective interest method. Bonds payable are reported net of the applicable bond premium or discount. Bond issuance costs are reported as deferred charges and amortized over the term of the related debt. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. I. RESERVED AND/OR DESIGNATED FUND BALANCES In the fund financial statements, governmental funds report reservations of fund balance for amounts that are not available for appropriation or are legally restricted by outside parties for use for a specific purpose. Designations of fund balance represent tentative management plans that are subject to change. 24