CONSOLIDATED SCHOOL DISTRICT 158 ALGONQUIN, ILLINOIS ANNUAL FINANCIAL REPORT JUNE 30, 2012

Transcription

1 CONSOLIDATED SCHOOL DISTRICT 158 ALGONQUIN, ILLINOIS ANNUAL FINANCIAL REPORT JUNE 30, 2012

2 ANNUAL FINANCIAL REPORT JUNE 30, 2012 TABLE OF CONTENTS Exhibits Page(s) Independent Auditors Report 1 Management s Discussion and Analysis 3 Basic Financial Statements: Statement of Net Assets A 16 Statement of Activities B 17 Balance Sheet Governmental Funds C 19 Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds D 22 Statement of Fiduciary Assets and Liabilities Agency Funds Student Activity Funds E 27 Notes to the Basic Financial Statements 28 Required Supplementary Information Illinois Municipal Retirement Fund 47 Schedule of Revenues, Expenditures and Changes in Fund Balances Budget to Actual for the Year Ended June 30, 2012 with Comparative Actual Amounts for the Year Ended June 30, 2011 Schedules Combining Balance Sheet General Fund 1 48 Combining Schedule of Revenues, Expenditures and Changes in Fund Balance General Fund 2 49 Educational Account 3 50 Operations and Maintenance Fund 4 60 Debt Service Fund 5 61 Transportation Fund 6 62 Municipal Retirement/Social Security Fund 7 64 Capital Projects Fund 8 66 Working Cash Account 9 67 Fire Prevention and Life Safety Fund Schedule of Changes in Assets and Liabilities Agency Fund Debt Service Schedule 2005 General Obligation Refunding Bonds Debt Service Schedule 2006B General Obligation Bonds Debt Service Schedule 2000 Capital Appreciation School Building Bonds Debt Service Schedule 2001 Capital Appreciation School Building Bonds Debt Service Schedule 2003 Capital Appreciation School Building Bonds 16 78

3 ANNUAL FINANCIAL REPORT JUNE 30, 2012 TABLE OF CONTENTS Schedules Page(s) Debt Service Schedule 2003A Capital Appreciation School Building Bonds Debt Service Schedule 2004 Capital Appreciation School Building Bonds Debt Service Schedule 2008 Refunding Bonds Debt Service Schedule 2009 Refunding Bonds Debt Service Schedule 2010 General Obligation Refunding Bonds Debt service Schedule 2011A Qualified Energy Conservation Bonds Debt Service Schedule 2011B Refunding DebtCertificates Statement of Revenues, Expenditures and Changes in Fund Balances Operating and Non-Operating Governmental Funds 24 87

4 Independent Auditors Report Board of Education Consolidated School District No. 158 Algonquin, Illinois We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of the Consolidated School District No. 158 as of and for the fiscal year ended June 30, 2012 as listed in the table of contents. These financial statements are the responsibility of the school district s management. 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. The District has elected to omit the disclosures required by Governmental Accounting Standards Board Statement 45 Accounting and Financial Reporting for Post-Employment Benefits Other Than Pensions. The amount by which this disclosure would affect the financial statements is not reasonably determinable. In our opinion, except for effect of the omission described in the preceding paragraph, 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 Consolidated School District No. 158 as of June 30, 2012, and the respective changes in financial position thereof for the year ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued a report dated October 4, 2012, on our consideration of Consolidated School District No. 158 internal control over financial reporting and our tests of its compliance with laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope of 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 and 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. 1

5 The Management s Discussion and Analysis, budgetary comparison schedules and analysis of funding progress 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 supplementary information. However, we did not audit the information and express no opinion on it. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Consolidated School District No. 158 basic financial statements. The introductory section, combining and individual fund financial statements and schedules, and statistical section are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual fund financial statements and 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. The introductory section and statistical section have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we express no opinion on them. October 4, 2012 Rolling Meadows, IL (25) Evans, Marshall & Pease, P.C. Evans, Marshall & Pease, P.C. Certified Public Accountants 2

6 MANAGEMENT DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2012 Overview of the Financial Statements The Annual Financial Report consists of four major parts: Management s Discussion and Analysis (MD&A) which is intended to serve as an introduction to the remaining three parts of the report. Basic Financial Statements which include statements that present different financial perspectives of the District: o o o The first two statements are government-wide financial statements, which include the Statement of Net Assets and the Statement of Activities. These statements provide both short-term and long-term information about the District s overall financial status. The next several statements are fund financial statements that focus on individual parts of the District, reporting the District s balance sheet position and operations in more detail than the government-wide statements. The final statement is a fiduciary funds statement that provides information about financial relationships in which the District acts solely as a trustee or agent for the benefit of others. Notes to the Basic Financial Statements. Required Supplementary Information. Management Discussion and Analysis The Management Discussion and Analysis, a requirement of GASB 34, is the Consolidated School District 158 administration s discussion and analysis of the financial results as well as an overall review of the District s financial activities for the fiscal year ended June 30, The management of the District encourages readers to consider the information presented herein in conjunction with the District s financial statements, which immediately follow this section. Responsibility for both the accuracy of the data and the completeness and fairness of the presentation, including all disclosures, rests with the District. The enclosed data is accurate in all material respects and is reported in a manner designed to present fairly the financial position and results of operations of the various funds of the District. All disclosures necessary to enable the reader to gain an understanding of the District s financial activities have been included. Generally accepted accounting principles (GAAP) according to GASB 34 require the reporting of two types of financial statements: Government Wide Financial Statements and Fund Financial Statements. Government Wide Financial Statements The government wide financial statements are full accrual basis statements. They report all of the District s assets and liabilities, both short and long term, regardless if they are currently available or not. Capital assets and obligations of the District are reported in the Statement of Net Assets of the government wide financial statements. One of the most important questions asked about the District is, As a whole, what is the School District s financial condition as a result of the year s activities? The Statement of Net Assets and the Statement of Activities, which appear first in the District s financial statements, report information on the District as a whole and its activities in a way that helps you answer this question. We prepare these statements to include all assets and liabilities, using the accrual basis of accounting, which is similar to the accounting used by most privatesector companies. All of the current year s revenues and expenses are taken into account regardless of when cash is received or paid. These two statements report the Consolidated School District 158 s net assets the difference between assets and liabilities, as reported in the Statement of Net Assets as one way to measure the District s financial health or financial position. Over time, increases or decreases in the District s net assets as reported in the Statement of Activities are indicators of whether its financial health is improving or deteriorating. The relationship between revenues and expenses is the District s operating results. However, the School District s goal is to provide services to our students, not to generate profits as commercial entities do. One must consider many other nonfinancial factors, such as the quality of the education provided and the safety of the schools, to assess the overall health of the District. 3

7 MANAGEMENT DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2012 The Statement of Net Assets and the Statement of Activities report the governmental activities for the District, which encompasses all of the District s services, including instruction and support services. Property taxes, unrestricted state aid, and state and federal grants finance most of these activities. Fund Financial Statements A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The District, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the District can be divided into two categories: governmental funds and fiduciary funds. Governmental funds All of the School District s services are reported in governmental funds. Governmental fund reporting focuses on showing how money flows into and out of funds and the balances left at year end are available for spending. 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 operations of the School District and the services it provides. Governmental fund information helps you determine whether there are more or fewer financial resources that can be spent in the near future to finance the District s programs. The District maintains individual governmental funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures and changes in fund balances for the General (Educational and Working Cash), Operations and Maintenance, Transportation, Municipal Retirement/Social Security, Debt Service, Capital Projects and Fire Prevention & Life Safety Funds, all of which the District considers to be major funds. Each fund can be placed into one of four major categories: General, Special Revenue, Capital Projects and Debt Service. The following figure lists the individual governmental funds by major category: Educational Fund General Fund Working Cash Fund Operations and Maintenance Fund Transportation Fund Special Revenue Funds Municipal Retirement/Social Security Fund Fire Prevention & Life Safety Fund Capital Projects Funds Capital Projects Fund Debt Service Fund Debt Service Fund 4

8 MANAGEMENT DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2012 The District adopts an annual budget for each of the funds listed above. A budgetary comparison statement has been provided for each fund to demonstrate compliance with this budget. In the fund financial statements, purchased capital assets are reported as expenditures in the year of acquisition. No asset is reported. The issuance of debt is recorded as an Other Financing Source, whereas the current year s payments of principal and interest on long term obligations are recorded as expenditures. Future year s debt obligations are not recorded. Fiduciary funds The District is the trustee, or fiduciary, for assets that belong to others, such as the student activities funds. The District is responsible for ensuring that the assets reported in these funds are used only for their intended purposes and for those to whom the assets belong. The District excludes these activities from the government-wide financial statements because it cannot use these assets to finance its operation. Fiscal Year 2012 District Highlights In fiscal year 2012, as a result of receiving all four categorical payments from the State for fiscal year 2011, the District had the funds in hand to partially address fiscal year 2010 and fiscal year 2011 budget cuts and deferrals. Thus, fiscal year 2012 was a year in which the District was able to partially address the millions of dollars of budget cuts and deferrals from the previous years. Curriculum continued to focus on 21st century tools that are evolving tools that not only change the way we communicate but are changing the way we teach as evidenced by the launching of the blended learning program in fiscal year 2012 as well as a one-to-one initiative in fiscal year Blended learning is in year two, whereby the number of students within the program has grown from approximately 100 students in fiscal year 2012 to approximately 500 students in fiscal year With Technology, the District began the process of updating and maintaining its technological infrastructure, from server upgrades to switch replacement to replacement of hundreds of aging PC s and laptops. Furthermore, in fiscal year 2012, the District was able to set funds aside for Operations & Maintenance to take care of much needed deferred projects, such as starting the repair of Academic Drive, providing a fresh coat of paint at most schools, upgrading the District s security camera system as well as carpet replacement at the High School. Thus, despite our State s current economic climate, our District is poised to continue to deliver relevant and dynamic educational experiences for all of our students. Financial Highlights Operating Results The last several years of economic downturn coupled by the State s financial crisis has challenged the District financially. However, over this period of time, the District has been able to maintain its quality of education while continuing to have minimum impact to the classroom. Over the last several years, the District has budgeted conservatively, and in doing so has had several million dollars in budget cuts and deferrals impacting the operations of the District versus the classroom. As a result of these cuts and deferrals, the District s operating cost per pupil has been able to stay relatively flat during a period of time whereby the District s enrollment is increasing. The District s operating cost per pupil, approximating $8,450 per student in fiscal year 2012 continues to be the lowest in McHenry County for all K-12 districts and significantly below the State s 2011 average operating cost per pupil of $11,664 per student. See chart below. 5

9 MANAGEMENT DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2012 As a result of budgeting revenue from the State of Illinois conservatively, the District recognized a fiscal year 2012 operating surplus of $1.9 million and a fiscal year 2011 operating surplus of $3.7 million. With this surplus, the District s Operating Fund Balance approximates $26.2 million as of June 30, Operating fund balances increased to $26.2 million from $24.3 million in prior year, which is an increase of $1.9 million. The increase in operating fund balances is primarily driven by the budget favorability in revenues, the result of the District recognizing all four mandated categorical payments from the State of Illinois while only budgeting two payments. The operating surplus of $1.9 million reflects accounts receivable and revenue recognized of $2.7 million from the State of Illinois. Subsequent to year end, the District received these funds from the State. These dollars are recorded as an intergovernmental receivable as of June 30, 2012 for the District. Property Tax Levy Abatements In prior year, the District refunded approximately $6 million of the Series 2001and 2004 bonds with Series 2010 bonds in an effort to reduce the amount of debt being levied to the community. In fiscal year 2011, the District abated $994 thousand in bond debt, reducing the overall tax levy increase to the community from 2.7% (the Consumer Price Index) to 2.1%. Over the last several years, with the downturn in the economy, coupled with cutbacks in the State s revenue to local school districts, the District tightened its belt, implementing significant budget cuts and deferrals. However, in fiscal year 2012 the District received unbudgeted revenue payments from the previous fiscal year, creating an audited surplus for the fiscal year ended in June 2011 allowing for the further abatement of taxes. Accordingly, in fiscal year 2012, the District abated $2.4 million in bond debt, keeping the overall 2011 levy, before new construction, flat with prior year s levy. By taking this action, the District did not receive an increase in tax dollars from the community for the 2011 levy year, other than from new construction. Long-Term Debt During the year, the District refunded approximately $2.1 million of the Series 2007 debt certificates with Series 2011b debt certificates. The portion of the 2007 debt certificates that was refunded was debt incurred for the construction addition to Marlowe Middle School. The original debt was to be paid off utilizing impact fees received. However, with the downturn in the real estate market, the amount of impact fees estimated to be received in fiscal year 2012 was not enough to cover the remaining balloon payment of $2.1 million due in fiscal year Thus, in an effort to match revenues with expenditures, the remaining $2.1 million in debt was refunded in fiscal year The Series 2011b debt certificates will be paid using impact fee revenue. (See Note 7 to the Financial Statements.) 6

10 MANAGEMENT DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2012 During fiscal year 2011, the District entered into a multiyear $3 million Guaranteed Energy Savings contract with a vendor to provide improvements and enhancements to the District s lighting and HVAC systems in order to reduce energy consumption and costs. As a part of the contract, the District s vendor is providing a 10-year annual energy savings guarantee backed by a surety bond which will provide net positive cash flow to the District. The project was started in fiscal year 2011 and was substantially complete by June 30, In fiscal year 2011, with the project partially complete, the District expensed $918 thousand. In fiscal year 2012, the remaining $2.2 million of the project was expensed. The fiscal year 2012 funding of the project included a DCEO State grant of $714 thousand as well as the issuance of the Series 2011A debt certificates of $1.5 million. For this issuance, the District utilized Qualified Energy Conservation Bonds (QECB s). A QECB is a tax credit bond, versus a tax exempt bond which provides lower funding costs by about 1.85%. Including all costs of issuance, the District s net effective borrowing rate was 1.46%. As a result of utilizing QECB s, the District saved approximately $177 thousand in interest over the 10 year term of the loan. The District s legal debt margin, which is the capacity to borrow additional funds, is $101.8 million, up from prior years $96.9 million. The increase is primarily due to the debt payments made in fiscal year (See Note 7 to the Financial Statements.) Excluding the refunding of the 2007 debt certificates as noted above, the District retired $12.8 million of debt in fiscal year (See Note 7 to the Financial Statements.) As part of the refunding of the Series 2007 debt certificates, the District went through a Standard & Poor s (S&P) rating whereby the District received a strong rating of AA-. The S&P AA- rating reflects that an organization demonstrates high standards of quality based on its investment process and management's consistency of performance as compared to organizations with similar objectives. The AA- rating contributed by reducing interest rates and saving the District in interest expense and bond insurance fees. Financial Rating A district's Financial Profile, as measured by the Illinois State Board of Education, is based upon a weighted combination of five ratios: o o o o o Fund Balance to Revenue Ratio Expenditure to Revenue Ratio Days Cash on Hand Percent of Short-Term Borrowing Maximum Remaining Percent of Long-Term Debt Margin Remaining While an estimated profile is identified here, it is an estimation and may change, as the final profile score will be calculated by ISBE. Total profile scores are identified as follows: Score Rating Description Financial Recognition The highest category of financial strength Financial Review The next highest financial health category Financial Early Warning ISBE will be monitoring these districts closely and offering proactive technical assistance Financial Watch ISBE will be monitoring these districts very closely and offering them technical assistance including, but not limited to, financial projections, cash flow analysis, budgeting, personnel inventories, and enrollment projections. Although the District has continued to improve financially, due to the District s fiscally responsible approach to not expending funds until funds are received from the State of Illinois, the District s Expenditure to Revenue ratio declined in fiscal year 2012, resulting in a decreased profile score. The District s Financial Profile Rating is that of Financial Review at Review is the second highest rating of financial strength. Below is a Profile Score History outlining the positive trend the District has made over the past several years. 7

11 MANAGEMENT DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2012 Other Financial Highlights Although the housing market has continued to be soft in the past several years, the District's financial position is in a continued growth phase due to increased enrollment. In fiscal year 2012, enrollment increased approximately 2%, primarily the result of the District s senior class graduating and being replaced by a larger kindergarten class. In fiscal year 2008, the District began to directly pay for its employee health care benefits under a self-insurance health plan. To minimize year-to-year fluctuations and resulting financial risks, the District's self-funded health plan is managed by a third party administrator and contains a stop-loss policy. In fiscal year 2012, the stop-loss policy covered catastrophic health care costs above $125 thousand per insured individual. In fiscal year 2012, the District s healthcare costs increased by $.43 million from prior year. The Illinois State Board of Education (ISBE) acknowledged an obligation to fund an additional $1.29 million from the FY 2005 General State Aid claim. This was recorded as a receivable in both financial statement presentations; however, an offsetting liability (deferred revenue) has also been recorded in the fund financial statements due to the timing of the receipt of payment. To date, the District has received $.91 million. During FY 2012, the District received $40 thousand. The remaining receivable and deferred revenue balance approximate $.38 million. New construction within the District s boundaries for the past several levy years is on the decline as follows: 8

12 MANAGEMENT DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2012 Fiscal year 2013 will again challenge the District to preserve excellent programs and services. In this down economy, with the State making no commitments or assurances to pay their bills, the District has not only had to budget conservatively, but has had to defer projects and cut expenditures until funds are received. As a result of budgeting conservatively and the District s receipt of the State s third and fourth quarter fiscal year 2012 mandated categorical payments, the District now has the funds in hand to address prior years budget cuts and deferrals. As a result, the District is currently budgeting a ($1.46) million operating deficit in fiscal year FY 2012 Government-Wide Financial Analysis Figure A-1 Summary Statement of Net Assets June 30 Governmental Activities 2012 Governmental Activities 2011 Increase (Decrease) % Change Current assets $ 76,826,931 $ 76,958,366 $ (131,435) -0.2% Capital assets, net of depreciation 171,068, ,049,141 (3,981,050) -2.3% Total assets 247,895, ,007,507 (4,112,485) -1.6% Long-term liabilities 141,853, ,204,855 (2,351,404) -1.6% Other liabilities 40,282,565 41,827,146 (1,544,581) -3.7% Total liabilities 182,136, ,032,001 (3,895,985) -2.1% Net assets: Invested in capital assets, net of related debt Restricted (for debt service and capital projects) Unrestricted Total net assets 63,552,058 10,916,156 (8,709,208) 65,759,006 65,158,554 11,688,082 (10,871,130) 65,975,506 (1,606,496) (771,926) 2,161,922 (216,500) -2.5% -6.6% -19.9% -0.3% Total liabilities and net assets $ 247,895,022 $ 252,007,507 $ (4,112,485) -1.6% 9

13 MANAGEMENT DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2012 Analysis of the FY 2012 Statement of Net Assets Overall, the District's total net assets at June 30, 2012 decreased to $65.76 million from $65.98 million in FY 2011, a decrease of (0.3%) or approximately ($217) thousand. In FY 2012, the District's total assets decreased ($4.1) million while the District's current assets decreased ($131) thousand. As a result of depreciation, the District's capital assets decreased ($4.0) million in FY The District's total liabilities decreased by ($3.9) million in FY 2012 primarily due to a decrease in deferred liabilities, salaries and wages payable, and accounts payable. Long-term liabilities decreased in FY 2012 by ($2.35) million due to refunding of the 2007 Debt Certificates (see Note 6 in the Notes to the Financial Statements). FY 2012 Statement of Activities Figure A-2 Summary Statement of Activities June 30 Governmental Activities 2012 Governmental Activities 2011 Increase (Decrease) % Change Revenues Program revenues Charges for services $ 6,212,692 $ 4,940,973 $ 1,271, % Operating grants & contributions 19,522,274 18,784, , % Total program revenues 25,734,966 23,724,998 2,009, % General revenues Property taxes/cpprt 61,651,252 61,287, , % State formula aid & formula grants 12,471,280 13,835,511 (1,364,231) -9.9% Other Total general revenues Total revenues 101,024 74,223,556 99,958,522 91,115 75,214,449 98,939,447 9,909 (990,893) 1,019, % -1.3% 1.0% Expenses Instruction 51,738,521 50,768, , % Pupil & instructional services 9,129,143 8,581, , % Administration & business 9,367,750 8,183,621 1,184, % Operations & maintenance 8,159,496 7,260, , % Transportation 5,262,809 5,576,387 (313,578) -5.6% Interest and fees 8,790,533 8,837,150 (46,617) -0.5% Other Total expenses 7,726, ,175,021 7,093,529 96,300, ,240 3,874, % 4.0% Increase (Decrease) in Assets $ (216,499) $ 2,638,550 $ (2,855,049) % Beginning Balance $ 65,975,506 $ 63,336,956 Ending Balance $ 65,759,007 $ 65,975,506 Analysis of the FY 2012 Statement of Activities (216,499) -0.3% In summary, total revenues of all governmental activities during FY 2012 were $99.96 million and the total expenses of all governmental activities were $ million. Some of the costs were financed by users of the District s programs, such as registration fees and sales to pupils for lunch, totaling $6.21 million. Federal and state governmental funds subsidized certain programs with operating grants and contributions in the amount of $19.52 million (Figure A-2). The remaining amount of the District's governmental activities costs, not covered by charges for services and operating grants and contributions (net cost of services), total $74.22 million, primarily from property taxes and the State s general state aid. Overall, total expenditures for governmental activities exceeded total revenues, decreasing net assets by ($216) thousand. 10

14 MANAGEMENT DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2012 The cost of all governmental activities in FY 2012 was $ million. This was an increase of $3.87 million from FY 2011 primarily driven by salaries and benefits, textbook and technology purchases, completion of the performance contract work, and other O&M related projects which had been deferred in recent years (See Figures A-2). The District's expenses predominantly related to instructing, caring for (pupil services), and transporting students represented $66.13 million, reflecting 66% of total expenses. The District's administrative and business activities accounted for $9.4 million, reflecting 9.3% of total expenses. The following is a graphic illustration of the percent of revenue by source: 2012 Percent of Revenue by Source State Formula Aid & Formula Grants, 12.47% Other, 0.10% Charges for Services, 6.21% Property Taxes, 61.67% Operating Grants & Contributions, 19.53% 2011 Percent of Revenue by Source State Formula Aid & Formula Grants, 13.98% Other, 0.11% Charges for Services, 4.99% Property Taxes, 61.94% Operating Grants & Contributions, 18.98% 11

15 MANAGEMENT DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2012 The following is a graphic illustration of the percent of expense by source: 2012 Percent of Expense by Source Administration & Business, 9.35% Operations & Maintenance, 8.14% Instruction, 51.67% Transportation, 5.25% Interest & Fees, 8.77% Other, 7.71% Pupil & Instructional Services, 9.11% 2011 Percent of Expense by Source Administration & Business, 8.49% Operations & Maintenance, 7.53% Instruction, 52.73% Transportation, 5.79% Interest & Fees, 9.18% Other, 7.36% Pupil & Instructional Services, 8.92% 12

16 MANAGEMENT DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2012 Financial Analysis of the District's Governmental Funds As noted earlier, Consolidated School District 158 uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. The District's operating funds, which are comprised of the Educational Fund, Operations and Maintenance Fund, Transportation Fund, Municipal Retirement/Social Security Fund, and Working Cash Fund had an increase in fund balance during FY 2012 of $1.89 million, resulting in an ending operating fund balance of $26.20 million. The increase in fund balance is primarily driven by budget favorability in revenues of $3.1 million due to the receipt of the State s third and fourth quarter mandated categorical payments as well as budget favorability in expenditures of approximately $400 thousand for health insurance. A financial analysis of District funds is located in Figure A-3. Other refers to Other Financing Sources and Uses which primarily includes proceeds from the sale of bonds of $1.5 million for the energy performance contract as well as financing sources from capital leases. The net change in the Educational Fund was $1.18 million, contributing to a year end fund balance of $18.53 million. The District's non-operating or capital funds are comprised of the Debt Service, Capital Projects, and Fire Prevention and Life Safety Funds which had a decrease in fund balance during FY 2012 of ($772) thousand. This was primarily due to the abatement of debt in FY 2012 resulting in an ending fund balance for the nonoperating funds of $10.40 million. The Capital Projects Fund is used for construction projects and some related debt services, and the Debt Service Fund is designated specifically for debt service. The District's total fund balance, for all funds, in FY 2012 is $36.59 million, an increase of $1.11 million from FY Figure A-3 Fund Educational O & M Transportation IMRF/Social Security Working Cash Debt Service Capital Projects Fire Prevention & Safety Net by Fund Financial Analysis of District Funds June 30, 2012 Revenues Expenditures Other $ 73,037,361 $ 71,949,633 $ 94,762 $ 7,336,728 9,005,411 1,553,284 5,637,269 5,408, ,200 2,338, ,898 9,973,910 1,010,464 2,185,376-11,750,503 82, ,189 (285,306) $ 99,647,677 $ 100,382,542 $ 1,849,129 $ Net Change 1,182,490 (115,399) 352, , ,898 (1,414,404) 642, ,114,264 Total Operating Funds Total Capital Funds $ $ 88,663,232 10,984,445 $ $ 88,549,280 11,833,262 $ 1,772,246 $ 76,883 $ $ 1,886,198 (771,934) Figure A-4 Object Salaries Employee benefits Purchased services Supplies and materials Capital outlay Other Expenditures by Object Analysis of District Expenses by Object June 30, 2012 Operating Capital Funds Funds $ 46,998,969 $ - $ 19,423,637-9,582,336-7,681,134-1,223,866-3,639,338 11,833,262 $ 88,549,280 $ 11,833,262 $ Total % Funds of Total 46,998, % 19,423, % 9,582,336 7,681, % 7.7% 1,223, % 15,472, % 100,382, % 13

17 MANAGEMENT DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2012 Capital Asset and Debt Administration Analysis of the FY 2012 Capital Assets By the end of FY 2012, the District had compiled a broad range of capital assets including land, buildings, computers, furniture, and other equipment. The District recorded $ million in gross assets and $38.45 million in accumulated depreciation, resulting in $ million in net capital assets. During FY 2012, the District placed in service $1.4 million in capital additions. Fiscal year depreciation expense ended the year at $5.18 million, an increase of $.08 million from FY (See Note 4 to the Financial Statements.) Figure A-5 Net Capital Assets June 30 Governmental Governmental Activities 2012 Activities 2011 Increase (Decrease) % Change Land $ 10,899,723 $ 10,899,723 $ - 0.0% Construction in progress - 191,000 (191,000) % Land improvements, net 10,487,112 10,444,770 42, % Buildings, net 147,084, ,958,332 (2,873,708) -1.9% Equipment, net 657, ,836 (214,932) -24.6% Vehicles, net 1,938,728 2,682,480 (743,752) -27.7% Capital assets, net $ 171,068,091 $ 175,049,141 $ (3,981,050) -2.3% Depreciation expense-fiscal year $ 5,182,336 $ 5,100,791 $ 81, % Accumulated Depreciation $ 38,449,774 $ 33,267,438 $ 5,182, % Capital assets $ 209,517,865 $ 208,316,579 $ 1,201, % Analysis of the FY 2012 Long-Term Liabilities As of June 30, 2012, the District has interest payable and long-term debt in the amount of $.62 million and $ million respectively. The decrease in current maturities of long-term debt from June 30, 2011 to June 30, 2012 is driven by the 2007 debt certificates balloon payment due in fiscal year Figure A-6 Outstanding Long-Term Liabilities June 30 Governmental Activities 2012 Governmental Activities 2011 Increase (Decrease) % Change Interest Payable $ 621,371 $ 631,218 $ (9,847) -1.6% Long-term liabilities (due within 1 year) 11,582,070 13,439,842 (1,857,772) -13.8% Long-term liabilities (due after 1 year) 130,271, ,765,013 (493,632) -0.4% Total $ 142,474,822 $ 144,836,073 $ (2,361,251) -1.6% See Capital Assets (Note 4) and Long-Term Liabilities (Note 6) to the Financial Statements for further information. Factors Bearing on the District's Future With the State of Illinois financial crisis, there is a material risk that future Illinois legislation regarding pension reform will impact the District negatively. 14

18 MANAGEMENT DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2012 Weak economic performance in Illinois generally means little to no growth in the State foundation level (General State Aid) to K-12 schools. The persistent weakness of the State s economy is a growing concern. With the State prorating General State Aid for the past two years, and each year the proration becoming a little deeper, the State s ability to properly fund education is more questionable now than at any time in recent memory. Cost increases exceeding the general rate of inflation continue to be expected for the District relative to healthcare obligations for fiscal year 2013 and beyond. These costs represent a significant portion of the District s budget and their rate of increase is a concern to Administration. Fiscal year 2013 will again challenge the District to preserve excellent programs and services. In this down economy, with the State making no commitments or assurances to pay their bills, the District has not only had to budget conservatively, but has had to defer projects and cut expenditures until funds are received. As a result of budgeting conservatively and the District s receipt of the State s 3 rd and 4 th quarter fiscal year 2012 mandated categorical payments, the District now has the funds in hand to address prior years budget cuts and deferrals. As a result, the District is currently budgeting a ($1.46) million operating deficit in fiscal year Efforts to enhance revenue and reduce expenditures will be crucial to maintaining the fiscal stability of the District in fiscal year 2013 and beyond. Other statistical information related to the District s EAV and property tax rate history is detailed below in Figure A-7: Figure A-7 Assessed Valuation & Tax Rate History Equalized Total Levy Assessed Percent Tax Year Valuation Increase Rate ,263,876, % ,263,367, % ,434,694, % ,406,256, % ,323,395, % ,191,031, % ,026,815, % ,058, % ,567, % ,491, % ,272, % The District's employment groups are under contract as follows: o o Teaching staff (Huntley Education Association) through fiscal year At this time, the Board of Education and the Huntley Education Association are in communication and continue working together in an effort to conclude the negotiation process. Educational support staff (Huntley Education Support Personnel Association) through fiscal year Contacting the District's Financial Management This financial report is designed to provide the District's citizens, taxpayers, investors, and creditors with a general overview of the District's finances. Questions concerning any of the information provided in this report or requests for additional information should be addressed to: Mark Altmayer, Chief Financial Officer Consolidated School District Academic Drive Algonquin, Illinois

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20 Basic Financial Statements

21 STATEMENT OF NET ASSETS JUNE 30, 2012 EXHIBIT A ASSETS Governmental Activities Cash $ 36,762,045 Investments 2,995,033 Receivables (net of allowance for uncollectibles): Property taxes 30,439,409 Replacement taxes 83,149 Intergovernmental 4,285,490 Other 200,829 Student Activities 16,793 Prepaid items 874,054 Inventories 13,141 Deferred Charges 1,156,988 Capital Assets: Land 10,899,723 Depreciable buildings, property, and equipment, net 160,168,368 Total 247,895,022 LIABILITIES Accounts payable 1,359,372 Salaries and wages payable 5,386,513 Due to other governments 296,456 Health insurance payable 1,294,876 Other current liabilities 20 Interest payable 621,371 Deferred revenue 31,323,957 Deferred credits 13,804,216 Long-term liabilities: Other long-term liabilities - due within one year 11,582,070 Other long-term liabilities - due after one year 116,467,165 Total Liabilities 182,136,016 NET ASSETS Invested in capital assets, net of related debt 63,552,058 Restricted 10,916,156 Unrestricted (8,709,208) Total Net Assets $ 65,759,006 The accompanying notes to the financial statements are an integral part of this statement. 16

22 STATEMENT OF ACTIVITIES YEAR ENDED JUNE 30, 2012 Program Charges for Services Expenses Support Functions/ Programs Disbursed Instruction Services Governmental Activities Instruction: Regular programs $ 40,920,112 $ 3,350,714 $ 343,613 Special programs 7,851, Other instructional programs 2,967, Support Services: Pupils 5,832, Instructional staff 3,296, General administration 1,517, School administration 3,658, Business 4,191,795-2,518,365 Transportation 5,262, Operations and maintenance 8,159, Central 2,777, Other supporting services 1, Community Services: 1, Payments to other districts and governmental units 3,014, Capital Outlay-under threshold 22, Interest and fees 8,790, Unallocated depreciation 1,909, Total Governmental Activities $ 100,175,021 $ 3,350,714 $ 2,861,978 General Revenues: Taxes: Real estate taxes, levied for educational purposes Real estate taxes, levied for specific purposes Real estate taxes, levied for debt service Personal property replacement taxes State aid - formula grants Federal ARRA - General state aid formula grant Investment earnings Total General Revenues Change in net assets Net Assets, Beginning of Year Net Assets, End of Year The accompanying notes to the financial statements are an integral part of this statement. 17

23 EXHIBIT B Excess (Deficiency) of Revenue Over Expenditures and Changes Revenues in Net Assets Operating Grants & Contributions Support Governmental Instruction Services Activities $ 10,188,964 $ - $ (27,036,821) 4,571,246 - (3,279,901) 137,680 - (2,829,582) - 448,508 (5,383,670) - - (3,296,965) - - (1,517,595) - - (3,658,360) - 1,519,744 (153,686) - 2,656,132 (2,606,677) - - (8,159,496) - - (2,777,546) - - (1,211) - - (1,175) - - (3,014,557) - - (22,580) - - (8,790,533) - - (1,909,700) $ 14,897,890 $ 4,624,384 (74,440,055) 39,504,292 11,678,800 10,012, ,881 12,471,280 17,176 83,848 74,223,556 (216,499) 65,975,505 $ 65,759,006 18

24 BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2012 WITH COMPARATIVE TOTALS FOR JUNE 30, 2011 Operations and Debt General Maintenance Service Transportation Fund Fund Fund Fund ASSETS Cash $ 19,721,006 $ 64,979 $ 9,740,515 $ 3,113,533 Restricted Assets: Cash, restricted for compensating balance 3,000, Investments 2,995, Receivables (net of allowance for uncollectibles): Property taxes 19,938,557 3,122,198 4,785,592 1,467,699 Replacement taxes 83, Intergovernmental 2,183, ,721-1,388,742 Other 181,800 19, Due from activity funds 16, Inventories 13, Prepaid items 269,331 18, ,840 91,253 Total Assets $ 48,401,837 $ 3,938,798 $ 14,937,947 $ 6,061,227 LIABILITIES AND FUND BALANCE Accounts payable $ 983,093 $ 297,914 $ - $ 28,705 Salaries and wages payable 5,375,392 7,428-3,693 Due to other governments 184, Health insurance payable 1,162,799 29, ,295 Other current liabilities Deferred revenue 20,440,185 3,062,504 4,694,097 1,441,232 Total Liabilities 28,145,596 3,397,628 4,694,097 1,575,925 FUND BALANCE Non-spendable 282,472 18, ,840 91,253 Restricted 3,000, ,299 9,832,010 4,394,049 Unassigned 16,973, Total Fund Balance 20,256, ,170 10,243,850 4,485,302 Total Liabilities and Fund Balance $ 48,401,837 $ 3,938,798 $ 14,937,947 $ 6,061,227 The accompanying notes to the financial statements are an integral part of this statement. 19

25 EXHIBIT C Fire Municipal Capital Prevention Total Retirement/Social Projects and Life Security Fund Fund Safety Fund $ 1,003,485 $ 88,628 $ 29,899 $ 33,762,045 $ 35,313, ,000,000 3,000, ,995, , ,125, ,439,409 30,924, ,149 60, ,285,490 4,329, , , ,793 22, ,141 16,921-82, , ,672 $ 2,128,848 $ 171,387 $ 29,899 $ 75,669,943 $ 75,779,568 $ - $ 49,660 $ - $ 1,359,372 $ 1,957, ,386,513 5,626, , , , ,294,876 1,266, ,697 1,103, ,741,864 31,021,842 1,216,195 49,660-39,079,101 40,302,990-82, , , ,653 38,968 29,899 18,729,878 19,714, ,973,769 14,796, , ,727 29,899 36,590,842 35,476,578 $ 2,128,848 $ 171,387 $ 29,899 $ 75,669,943 $ 75,779,568 20

26 RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS JUNE 30, 2012 EXHIBIT C (CONT'D) Total fund balances - governmental funds $ 36,590,842 Amounts reported for governmental activities in the Statement of Net Assets are different because: Net capital assets used in governmental activities and included in the Statement of Net Assets do not require the expenditure of financial resources and, therefore, are not reported in the governmental funds balance sheet. Capital Assets $ 209,517,865 Less: Accumulated Depreciation (38,449,774) 171,068,091 Certain revenues receivable by the District and recognized in the governmental funds balance sheet do not provide current financial resources and are deferred in the Statement of Net Assets, as follows: Property tax revenues (582,093) Long-term liabilities included in the Statement of Net Assets are not due and payable in the current period and, therefore, are not reported in the governmental funds balance sheet. (128,049,235) Deferred charges included in the Statement of Net Assets are not available to pay for current period expenditures and, therefore, are not included in the governmental funds balance sheet. Unamortized Bond Issuance Costs 1,156,988 Unamortized Bond Premium/Discount (13,804,216) (12,647,228) Interest on long-term liabilities accrued in the Statement of Net Assets will not be paid with current financial resources and, therefore, is not recognized in the governmental funds balance sheet. (621,371) Net assets of governmental activities $ 65,759,006 The accompanying notes to the financial statements are an integral part of this statement. 21

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28 STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2012 WITH COMPARATIVE TOTALS FOR THE YEAR ENDED JUNE 30, 2011 Operations and Debt General Maintenance Service Transportation Fund Fund Funds Fund REVENUES Property taxes $ 39,619,108 $ 6,180,144 $ 9,952,188 $ 2,905,202 Corporate personal property replacement taxes 346, Interest income 52,243 1,853 21,722 6,216 Contributions and donations from private sources 149, Other local sources 4,541, ,011-69,719 State sources 16,480, ,720-2,656,132 Federal sources 2,513, On behalf revenue 9,646, Total Revenues 73,350,259 7,336,728 9,973,910 5,637,269 EXPENDITURES Current: Instruction: Regular programs 28,589, Regular programs - Pre-K 1,080, Special programs 7,380, Special programs-pre-k 6, Remedial and supplemental programs 10, Other instructional programs 2,528, Support Services: Pupils 5,608, Instructional staff 3,199, General administration 1,474, School administration 3,264, Business 3,313, Transportation ,252,259 Operations and maintenance - 7,970, Central 2,650, Other supporting services 1, Community Service 1, Payments to Other Districts & Governmental Units 3,014, Debt Service: Principal - 145,000 10,636, ,520 Interest and other - 81,960 1,109,397 78,362 Services charges, etc ,684 - Capital outlay 178, , ,719 On behalf expenditure 9,646, Total Expenditures 71,949,633 9,005,411 11,750,503 5,408,860 The accompanying notes to the financial statements are an integral part of this statement. 22