SADDLEBACK VALLEY UNIFIED SCHOOL DISTRICT ORANGE COUNTY

Transcription

1 ORANGE COUNTY REPORT ON AUDIT OF FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION INCLUDING REPORTS ON COMPLIANCE

2 AUDIT REPORT CONTENTS Page INDEPENDENT AUDITOR S REPORT MANAGEMENT S DISCUSSION AND ANALYSIS... i-xvi FINANCIAL SECTION Basic Financial Statements: Government-Wide Financial Statements: Statement of Net Assets... 1 Statement of Activities... 2 Fund Financial Statements: Balance Sheet Governmental Funds... 3 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Assets... 4 Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds... 5 Reconciliation of the Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balances to the Statement of Activities... 6 Statement of Fund Net Assets Proprietary Funds... 7 Statement of Revenues, Expenses, and Changes in Fund Net Assets Proprietary Funds... 8 Statement of Cash Flows Proprietary Funds Statement of Fund Net Assets Fiduciary Funds Statement of Changes in Fund Net Assets Fiduciary Funds Notes to Financial Statements REQUIRED SUPPLEMENTARY INFORMATION Schedule of Budgetary Comparison for the General Fund Schedule of Postemployment Healthcare Benefits Funding Progress Notes to Required Supplementary Information... 62

3 AUDIT REPORT CONTENTS Page SUPPLEMENTARY INFORMATION History and Organization Schedule of Average Daily Attendance (ADA) Schedule of Instructional Time Schedule of Expenditures of Federal Awards Schedule of Financial Trends and Analysis Schedule of Charter Schools Reconciliation of Annual Financial and Budget Report With Audited Financial Statements Notes to Supplementary Information OPTIONAL SUPPLEMENTARY INFORMATION Individual and Combining Statements by Fund Types: Combining Statements Major Funds: Major Debt Service Funds Public Financing Authorities Combining Balance Sheet Combining Statement of Revenues, Expenditures and Changes in Fund Balances Major Debt Service Funds Community Facilities Districts Combining Balance Sheet Combining Statement of Revenues, Expenditures and Changes in Fund Balances Major Capital Projects Funds Community Facilities Districts Combining Balance Sheet Combining Statement of Revenues, Expenditures and Changes in Fund Balances Combining Statements Non-Major Fund: Non-Major Debt Service Fund Balance Sheet Statement of Revenues, Expenditures and Changes in Fund Balances Non-Major Special Revenue Funds Combining Balance Sheet Combining Statement of Revenues, Expenditures and Changes in Fund Balances... 84

4 AUDIT REPORT CONTENTS Page Non-Major Capital Projects Funds Combining Balance Sheet Combining Statement of Revenues, Expenditures and Changes in Fund Balances Combining Statements Fiduciary Funds Trust and Agency Funds: Combining Balance Sheet Combining Statement of Revenues, Expenditures and Changes in Fund Balance Combining Statements Fiduciary Funds High School Associated Student Body Funds: Combining Balance Sheet Combining Statement of Revenues, Expenditures and Changes in Fund Balance Combining Statements Fiduciary Funds Intermediate School Associated Student Body Funds: Combining Balance Sheet Combining Statement of Revenues, Expenditures and Changes in Fund Balance Combining Statement Fiduciary Funds Elementary School Associated Student Body Funds: Combining Statement of Changes in Net Assets Notes to Optional Supplementary Information OTHER INDEPENDENT AUDITOR S REPORTS Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards Independent Auditor s Report on Compliance with Requirements That Could Have a Direct and Material Effect on Each Major Program and on Internal Control over Compliance in Accordance with OMB Circular A Independent Auditor s Report on State Compliance FINDINGS AND QUESTIONED COSTS Schedule of Findings and Questioned Costs - Summary of Auditor Results Schedule of Findings and Questioned Costs - Related to Financial Statements Schedule of Findings and Questioned Costs Related to Federal Awards Status of Prior Year Findings and Questioned Costs

5 INDEPENDENT AUDITOR S REPORT Board of Education Saddleback Valley Unified School District Peter A. Hartman Way Mission Viejo, California We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund and the aggregate remaining fund information of the Saddleback Valley Unified School District as of and for the year ended, 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 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 basic financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the Saddleback Valley Unified School District as of, and the respective changes in financial position and, where applicable cash flows thereof for the fiscal year then ended in conformity with accounting principles generally accepted in the United States of America. As described in Note 1 to the financial statements, the Saddleback Valley Unified School District adopted the provisions of GASB Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions, for the year ended. In accordance with Government Auditing Standards, we have also issued our report dated November 29, 2011 on our consideration of the Saddleback Valley Unified School District's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is 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 considered in assessing the results of our audit.

6 Board of Education Saddleback Valley Unified School District Accounting principles generally accepted in the United States of America require that the management s discussion and analysis, budgetary comparison information and schedule of funding progress be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Saddleback Valley Unified School District financial statements as a whole. The supplementary schedules, combining and individual non-major fund financial statements, are presented for purposes of additional analysis and are not a required part of the 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 A-133, Audits of States, Local Governments, and Non- Profit Organizations, and is also not a required part of the financial statements of Saddleback Valley Unified School District. The supplementary section and combining and individual non-major fund financial statements, including the schedule of expenditures of federal awards are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole. November 29, 2011 VICENTI, LLOYD & STUTZMAN LLP

7 ORANGE COUNTY MANAGEMENT S DISCUSSION AND ANALYSIS For the Fiscal Year Ended INTRODUCTION The following discussion and analysis provides an overview of the financial position and activities of the Saddleback Valley Unified School District for the year ended. This discussion has been prepared by management and should be read in conjunction with the financial statements and notes thereto which follow this section. The Saddleback Valley Unified School District's goal is to provide, in an atmosphere of care and concern, an opportunity for every student to recognize and fully develop his/her particular academic, technical, vocational, physical and social skills. Saddleback Valley Unified School District's goal for students is to graduate prepared to succeed in tomorrow's world. The Management s Discussion and Analysis (MD&A) is an element of the reporting model adopted by the Governmental Accounting Standards Board (GASB) in its Statement No. 34 (Basic Financial Statement - and Management's Discussion and Analysis - for the State and Local Governments) issued June Certain comparative information between the current and the prior year is required to be presented in the MD&A. The Saddleback Valley Unified School District is a large urban school district offering instruction to students from kindergarten through twelfth grade including programs for vocational and adult education. During the school year, the district operated twenty-four elementary schools, one early childhood center, one special education high school, four intermediate schools, four high schools, one continuation high school, one independent study high school and one adult education program on the traditional September through June schedule, for the instruction of approximately 31,700 students. USING THE COMPREHENSIVE ANNUAL FINANCIAL REPORT This comprehensive annual financial report consists of a series of financial statements and notes to those statements. The statements are organized so the reader can understand the Saddleback Valley Unified District as a whole, and then proceed to provide an increasingly detailed look at specific financial activities. The Management s Discussion and Analysis Statement is provided to assist our citizens, taxpayers and investors in reviewing the District's finances and to show the District's accountability for the money it receives. -i-

8 ORANGE COUNTY MANAGEMENT S DISCUSSION AND ANALYSIS For the Fiscal Year Ended FINANCIAL HIGHLIGHTS The Saddleback Valley Unified School District's Government-wide Statement of Net Assets illustrates total net assets of $295,802,674 the result of assets of $520,043,154 minus liabilities of $224,240,480. This is a 3% increase in total net assets over the prior year. The General Fund reported a positive fund balance of $40,729,743 with a net increase for the fiscal year of $20,020,430. Expenses and other financing sources/uses for the General Fund were $221,979,568 with revenues for the General Fund at $242,688,881. It is important to note that the increase in fund balance was largely due to the elimination of the prior year $-253/ADA loss of revenue limit funding valued at $8 million, as well as the one-time Federal Jobs Funding for an additional $6 million. The District maintained an unrestricted reserve level of 3% which is sufficient to meet the staterequired minimum Reserve of Economic Uncertainties of General Fund expenditures. STUDENT ENROLLMENT & DEMOGRAPHIC TRENDS The Saddleback Valley Unified School District has K-12 enrollment of approximately 30,900 students for the school year. Given the current political and economic uncertainty, it is difficult to make intelligent projections about school funding. In the fiscal year the COLA was -.39% with a % deficit for school districts in California. In addition, the Saddleback Valley Unified School District has experienced a decrease in K-12 student enrollment since the school year. In addition to tracking enrollment, District planners also watch actual Average Daily Attendance (ADA). The ADA is always lower than a District's enrollment, although the two terms are often (though incorrectly) used interchangeably. The anticipated regular K-12 ADA (including County Special Education students) for the District is 29,979. The ratio of actual attendance to enrollment summarizes the District's changes and efforts to increase attendance. Figure 1 summarizes a historical analysis of the District's enrollment. -ii-

9 ORANGE COUNTY MANAGEMENT S DISCUSSION AND ANALYSIS For the Fiscal Year Ended 38,000 37,000 Enrollment Attendance 36,000 35,000 34,000 33,000 32,000 31,000 30,000 29,000 28,000 00/01 02/03 04/05 06/07 08/09 10/11 Figure 1. Amounts do not include ROP or Adult Education enrollment or ADA. School districts have traditionally placed great importance on the accurate projection of student enrollment for the ensuing budget year, due to the broad range of funding and programs impacted by this number. These impacts range from the very basic funding for California school districts which calculates the number of days attended by the enrolled students times a unique "base revenue limit amount" to how much a particular special program will receive, to the amount of one-time monies a district may receive. In , the Saddleback Valley Unified School District s base revenue limit is projected at $6,542; however due to the State s fiscal crisis the funded revenue after a % deficit is projected at $5,249 per ADA. -iii-

10 ORANGE COUNTY MANAGEMENT S DISCUSSION AND ANALYSIS For the Fiscal Year Ended REPORTING THE DISTRICT AS A WHOLE THE STATEMENT OF NET ASSETS AND STATEMENT OF ACTIVITIES One of the most important questions asked about the District's finances is, "Is the District better off or worse off as a result of the year's activities?" The Statement of Net Assets and the Statement of Activities report information about the District as a whole and about its activities in a manner that helps to answer this question. These statements include all assets and liabilities using the accrual basis of accounting similar to the accounting used by private sector corporations. All of the current year's revenues and expenses are taken into consideration regardless of when cash is received or paid. These two statements report the Saddleback Valley Unified District's net assets and changes in them. The change in net assets provides the reader a tool to assist in determining whether the District's financial health is improving or deteriorating. The reader will need to consider other non-financial factors such as property tax base, current property tax laws, student enrollment, and facility conditions in arriving at their conclusion regarding the overall health of the District. FUND FINANCIAL STATEMENTS The fund financial statements provide detailed information about the most significant funds, not the District as a whole. Funds are accounting formats the district uses to keep track of specific sources of funding and expenditures in particular programs. Some funds are required by bond covenants and by state law and other funds are established by the district to control and manage a variety of activities for particular purposes (such as repaying its long-term debts). Other funds may also address specific accounting requirements for certain revenue and expenditure classifications (such as federal grants). GOVERNMENTAL FUNDS Most of the District's activities are reported in governmental funds, which focus on how money flows into and out of those funds and the balances left at year-end available for spending in future periods. A detailed short-term view is provided by the governmental fund statements. These help determine whether there are more or fewer financial resources that can be spent in the near future for financing the district's programs. Because this information does not encompass the additional long-term focus of the government-wide statements, additional information is provided in the reconciliation provided after the governmental fund statements that explains the differences (or relationships). -iv-

11 ORANGE COUNTY MANAGEMENT S DISCUSSION AND ANALYSIS For the Fiscal Year Ended PROPRIETARY FUNDS The proprietary fund category includes Enterprise and Internal Service Funds. One type of proprietary fund, the enterprise fund, is the same as the business-type activities, but provides more detail and additional information, such as cash flows. The District currently operates one Enterprise Fund-the Recreation and Community Services Program fund. Internal Services funds (the second type of proprietary funds) report activities that provide supplies and services for the other programs and activities of the District. Proprietary funds are reported in the same way as the district-wide statements. The district has an internal service fund used for the employee self-insurance health and welfare fund, workers' compensation fund and the property and liability fund. FIDUCIARY FUNDS Fiduciary funds are used to account for resources held for the benefit of parties outside the governmental entity. Fiduciary funds are not reflected in the government-wide financial statement because the resources of those funds are not available to support the District s own programs. The District uses an agency fund to account for resources held for student activities and groups. These funds include Associated Student Body funds and a Foundation Trust fund for scholarships. The Saddleback Valley Unified School District is the trustee, or fiduciary, for its student activity funds. All of the School District s fiduciary activities are reported in separate Statements of Fiduciary Net Assets. We exclude these activities from the District s other financial statements because the District cannot use these assets to finance its operations. The Saddleback Valley Unified School District is responsible for ensuring that the assets reported in these funds are used for their intended purpose. NOTES TO THE FINANCIAL STATEMENTS The notes provide additional information that is essential for a full understanding of the data provided in the government-wide and fund financial statements. -v-

12 ORANGE COUNTY MANAGEMENT S DISCUSSION AND ANALYSIS For the Fiscal Year Ended The Statement of Net Assets is summarized below: Variance Assets Cash $ 100,040,687 $ 96,555,561 $ 3,485,126 Investments with fiscal agent 5,389,421 5,389,421 - Accounts receivable and prepaid expenditures 33,804,153 23,616,118 10,188,035 Stores inventory 376, ,101 (25,746) Capitalized fees 1,553,034 1,637,681 (84,647) Capital assets, net 378,879, ,112,081 (9,232,577) Total Assets 520,043, ,712,963 4,330,191 Liabilities Accounts payable and other current liabilities 42,819,725 41,407,385 1,412,340 Long-term debt outstanding 181,420, ,694,874 (6,274,119) Total Liabilities 224,240, ,102,259 (4,861,779) Net Assets Invested in capital assets, net of related debt 218,904, ,515, ,654 Restricted 49,421,319 47,080,937 2,340,382 Unrestricted 27,477,132 21,014,198 6,462,934 Total Net Assets $ 295,802,674 $ 286,610,704 $ 9,191,970 Assets overall remained the same with larger variances existing in receivables due to the large amount of state aid deferrals. The decrease in capital assets is largely due to depreciation of buildings. Liabilities were reduced for payments made on long term debt payments for Community Facility District Bonds and the Measure B Bond Building Funds. Restricted net assets increased due to the reclassifying of fund balances under GASB Statement No. 54 which was implemented by the District during the fiscal year. The funds in this classification are restricted for capital projects such as the Building Fund, the Capital Facilities Fund, the Special Reserve for Capital outlay Projects Fund, the County School Facilities Funds, and the Community Facilities District. The unrestricted net assets increased due to salary concessions made by all bargaining groups to reduce the projected deficit multi-year budgets. -vi-

13 ORANGE COUNTY MANAGEMENT S DISCUSSION AND ANALYSIS For the Fiscal Year Ended Government-Wide Net Assets Restricted 17% Unrestricted 9% Investments in Capital Assets 74% Figure 2. Statement of Revenues, Expenses and Changes in Net Assets Changes in total net assets, as presented on the Statement of Net Assets, are based on the activity presented in the Statement of Activities. The purpose of this statement is to present the revenues earned, whether received or not, by the District, and the expenses incurred, whether paid or not, by the District. Thus, this Statement presents the District's results of operations. -vii-

14 ORANGE COUNTY MANAGEMENT S DISCUSSION AND ANALYSIS For the Fiscal Year Ended The Statement of Revenues, Expenses and changes in Net Assets is summarized below: Variance Revenues Program revenues: Charges for services $ 4,767,503 $ 5,281,505 $ (514,002) Operating grants and contributions 51,620,736 46,407,063 5,213,673 Capital grants and contributions 1,288,936 1,041, ,055 General revenues: Property taxes 145,927, ,955,869 (6,028,109) Grants, subsidies and contributions unrestricted 65,229,604 57,737,187 7,492,417 Interest and investment earnings 1,345,237 1,610,050 (264,813) Other 11,085,875 11,341,100 (255,225) Total revenues 281,265, ,374,655 5,890,996 Expenses Instruction 159,159, ,852,844 (12,693,284) Instruction related aervices 18,861,358 20,702,118 (1,840,760) Pupil services 18,442,062 19,739,608 (1,297,546) Ancillary services 1,421,179 1,624,820 (203,641) Community services 7,282,629 7,675,467 (392,838) Enterprise 3,145,297 3,313,719 (168,422) General administration 9,847,129 10,763,270 (916,141) Plant services 22,056,184 24,480,520 (2,424,336) Other outgo and debt service 16,202,140 16,723,187 (521,047) Depreciation (unallocated) 15,656,143 14,353,365 1,302,778 Total expenses 272,073, ,228,918 (19,155,237) Increase in net assets 9,191,970 (15,854,263) 25,046,233 Net assets, beginning of year, before restatement 286,610, ,905,730 (21,295,026) Adjustment for restatement (5,440,763) (5,440,763) Net assets, beginning of year, as restated 286,610, ,464,967 (15,854,263) Net assets, end of year $ 295,802,674 $ 286,610,704 $ 9,191,970 The overall revenues increased due to the receipt of one-time Federal ARRA and Jobs funds. The decrease in expenditures is attributable to the salary and benefit concessions made necessary from the continued decline of the state s fiscal health. -viii-

15 ORANGE COUNTY MANAGEMENT S DISCUSSION AND ANALYSIS For the Fiscal Year Ended The information in the following table shows the District's ten largest functions and each program's net cost (total cost less revenues generated by the activities). This table also provides information on the net cost offset by unrestricted grants, subsidies and contributions to show the remaining financial needs supported by local taxes and other miscellaneous revenues. Governmental Activities Fiscal Year ended Total Cost Net Cost Functions/Programs of Services of Services Governmental activities: Instruction $ 159,159,560 $ 124,191,918 Instruction related services 18,861,358 15,849,510 Pupil services 18,442,062 9,511,016 Ancillary services 1,421,179 1,420,083 Community services 7,282,629 7,175,940 Enterprise 3,145,297 (27,477) General administration 9,847,129 8,290,390 Plant services 22,056,184 20,548,991 Other outgo and debt service 16,202,140 11,779,992 Depreciation (unallocated) 15,656,143 15,656,143 Total governmental activities $ 272,073,681 $ 214,396,506 -ix-

16 ORANGE COUNTY MANAGEMENT S DISCUSSION AND ANALYSIS For the Fiscal Year Ended GOVERNMENTAL FUNDS The District's Governmental funds include the Building Fund, County School Facilities Fund, Community Facilities District Funds, Other Governmental Funds, and most importantly, the General Fund. Figures 3 and 4 summarize the District's governmental funds, revenues and expenditures. Significant changes within the individual funds include a $20.7 million dollar increase to the General fund resulting from one-time federal funds as well as unexpected revenue limit funding cancelling a prior year $-253 per ADA revenue limit adjustment. Other fund balances reflect the slowing of construction relating to Measure B Bond building projects. Revenues Local 13% State 19% Federal 9% Revenue Limit 59% Figure 3. Expenditures Ancillary Svcs. 3% Other Outgo 3% Debt Svc. 8% Gen. Admn. 4% Pupil Svcs. 7% Instr. Related 7% Instruction 58% Plant Svcs. 10% Figure 4. -x-

17 ORANGE COUNTY MANAGEMENT S DISCUSSION AND ANALYSIS For the Fiscal Year Ended GENERAL FUND BUDGET INFORMATION The District's budget is prepared in accordance with California law and is based on the basis of accounting, consistent with generally accepted governmental accounting principles, utilizing cash receipts, disbursements and encumbrances. The most significant budgeted fund is the General Fund. The District begins the budget process in January of each year, to be completed by June 30. After updating of the forecast for changes in revenue and expenditure assumptions, the operating budget begins at the school level. Each school in the District receives a per pupil allocation augmented with resources for special education students. The departments provide input to the Business Office for their budget needs. The site and department budgets are reviewed monthly to ensure management becomes aware of any significant variations during the year. The District's largest operating expenses are primarily for salaries and benefits. The District expended approximately 85% of the total general fund budget on salaries and benefits. Certificated salaries were adjusted for step and column salary adjustments and corresponding salary savings due to attrition and retirements. For the current year, step increases were approximately 1.7% for certificated employees. Due to salary imposed concessions resulting from the lack of an agreement with the CSEA bargaining unit, classified employees did not receive step and column adjustments in Health and Welfare benefits include medical, vision, dental and life insurance paid by the District on behalf of all full time employees. The district offers PPO and HMO plans which are offset by employee contributions. The composite full time equivalent costs of these plans resulted in an 8% increase over and are projected to increase approximately 8% in xi-

18 ORANGE COUNTY MANAGEMENT S DISCUSSION AND ANALYSIS For the Fiscal Year Ended During the fiscal year, the Board of Education authorized revisions to the original budget to accommodate differences from the original budget to the actual expenditures of the District. A budgetary comparison schedule for the general fund is presented on page 60. GENERAL FUND BUDGET VARIATIONS In June of each year, a Budget is adopted by the Saddleback Valley Unified School District's Board of Education, effective July 1 through June 30. The Budget is based on year-ending projections from the previous year's budget along with assumptions based on the Governor s May revise projection for the next fiscal year. As the school year progresses, the Budget is revised and updated, with numerous financial reports made public outlining the revisions. Finally, in August of the following year, the books are closed for the July 1 - June 30 fiscal year, and the results are audited, yielding actual final numbers. Budgets may be adjusted during this time based on more current information resulting from an adopted State Budget. There are several reasons for budget revisions. Most notable are any salary increases granted by the Board of Education for district employees, for the original budget does not presume salary increases. Also, any changes in the number of staff and/or staff utilization of health and welfare benefits that vary from the original projections would also yield budget revisions. For the Saddleback Valley Unified School District and other districts throughout California, the fiscal year once again presented another challenging year in history. The uncertainties of the weak economic indicators along with the State s fiscal health caused districts to continually review and monitor budgetary projections. -xii-

19 ORANGE COUNTY MANAGEMENT S DISCUSSION AND ANALYSIS For the Fiscal Year Ended CAPITAL ASSET AND DEBT ADMINISTRATION Capital Assets The Governmental Accounting Standards Board Statement Number 34 (GASB 34) requires that governmental agencies account for fixed assets in the same way that private and public corporations do. This involves recognizing the value of the District's fixed assets, such as, land, building and equipment in the fixed asset section of the balance sheet. Districts must track annual and accumulated depreciation on major assets. As of the District had $378,631,364 invested in net capital assets for governmental activities, primarily related to school construction and other capital improvements. This is a net of depreciation. Note 11 to the financial statements provide additional information on capital assets. A summary of capital assets, net of depreciation is presented below: Governmental Business Type Type Total Land $ 39,747,053 $ $ 39,747,053 Work in progress 3,148,833 3,148,833 Depreciable assets, net 335,735, , ,983,618 Total capital assets $ 378,631,364 $ 248,140 $ 378,879,504 The net capital assets balance decreased 2.4% from the prior year balance due to normal depreciation of buildings and site improvements. -xiii-

20 ORANGE COUNTY MANAGEMENT S DISCUSSION AND ANALYSIS For the Fiscal Year Ended Debt Note 10 to the financial statements provide additional information on outstanding debt. A summary of the District's outstanding debt at year-end is presented below: Governmental Business Type Type Total Special Assessment Debt with Governmental Commitment $ 755,000 $ $ 755,000 Public Financing Authority Bonds 32,299,918 32,299,918 Compensated Absences 1,989,753 1,989,753 Early Retiree Benefits 7,017,773 7,017,773 Other Postemployment Benefits 8,824,342 8,824,342 General Obligation Bonds 139,114, ,114,214 Net Long Term Debt $ 190,001,000 $ - $ 190,001,000 The long-term debt balance decreased 3% from the prior year. The credit rating for the general obligation bonds for 2004A series and the 2007A series is an A+ rating -xiv-

21 ORANGE COUNTY MANAGEMENT S DISCUSSION AND ANALYSIS For the Fiscal Year Ended ECONOMIC FACTORS THAT MAY AFFECT THE FUTURE Revenue Limit - The District is currently projecting a revenue limit of $5,249 per ADA for A 2.24% COLA has been projected for with a % deficit. A 3.1% COLA has been projected for with a % deficit. Projected Student Average Daily Attendance - District ADA is projected to decrease in the next three years. ADA is projected at 29,979 for including 28,777 for regular student ADA, 312 for County ADA and 890 for Special Education student ADA. Since Saddleback Valley Unified School District is a declining enrollment district, the revenue limit is calculated on prior year ADA. Year P-2 ADA (1) Decline Percent Growth/ (actual) 33, % (actual) 33, % (actual) 34, % (actual) 34, % (actual) 34, % (actual) 33, % (actual) 33, % (actual) 32, % (actual) 32, % (actual) 32, % (actual) 31, % (actual) 30, % (est.) 29, % (1) Including the County instructed students and excluding ROP and Adult Education students. Lottery - Lottery income for years through is based on estimates from the State Department of Education, the Orange County Office of Education, and School Services of California. Projected unrestricted lottery income is $ per ADA for and future years. -xv-

22 ORANGE COUNTY MANAGEMENT S DISCUSSION AND ANALYSIS For the Fiscal Year Ended State Class Size Reduction The February 2010 State Budget package reduced the penalties for classes within the CSR program. Under the new provisions, the maximum penalty of 30% is applied to all classrooms over 25 students, though the reimbursement is limited to 20 students per class. The District budget includes approximately $4.3 million for K-3 revenue from the State. This estimate is based on 8,366 students (Grades K through 3). Kindergarten will be staffed the same as grades 1-3 at 29:1. Special Education - It is estimated that the District will receive funding for Special Education in Based on current estimates, the General Fund contribution in support of various Special Education programs in will be approximately $15 million. Ending Fund Balance Projection - The District's ending fund balance is projected to have sufficient reserves over the 3% contingency requirement. The District's system of budgeting and internal controls is well regarded and it will take all of the District's financial abilities to meet the challenges of the future. CONTACTING THE SCHOOL DISTRICT'S FINANCIAL MANAGEMENT This financial report is designed to provide our citizens, taxpayers, and investors and creditors with a general overview of the School 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: Geri Partida Assistant Superintendent, Business Services Peter A. Hartman Way Mission Viejo, California xvi-

23 FINANCIAL SECTION

24 STATEMENT OF NET ASSETS Governmental Activities Business-type Activities ASSETS Cash in County Treasury $ 88,365,143 $ 533,161 $ 88,898,304 Cash on Hand and in Banks 791,860 2, ,860 Cash in Revolving Fund 120, ,000 Collections Awaiting Deposit 141, , ,230 Cash with Fiscal Agent 9,861,293 9,861,293 Investments 5,389,421 5,389,421 Accounts Receivable: Federal and State Governments 29,227,364 29,227,364 Local Governments 1,112, ,644 1,550,994 Miscellaneous 2,585,906 8,281 2,594,187 Due from Governmental Fund 12,222 12,222 Due from Enterprise Fund 71,535 71,535 Due from Fiduciary Fund 130, ,551 Inventories 376, ,355 Prepaid Expenses 217, ,300 Capitalized Fees 1,553,034 1,553,034 Land 39,747,053 39,747,053 Work in Progress 3,148,833 3,148,833 Depreciable Assets, net 335,735, , ,983,618 TOTAL ASSETS 518,575,339 1,467, ,043,154 Total LIABILITIES Accounts Payable and Other Current Liabilities 20,278, ,015 20,592,107 Deferred Revenue 720, ,828 1,449,549 Estimated Liability for Open Claims and IBNR's 12,114,067 12,114,067 Due to Governmental Fund 71,535 71,535 Due to Enterprise Fund 12,222 12,222 Current Portion of Long-term Liabilities: Special Assessment Debt with Governmental Commitment 755, ,000 Public Financing Authority Bonds 3,405,000 3,405,000 Early Retiree Benefits 1,182,714 1,182,714 General Obligation Bonds 3,237,531 3,237,531 Non-Current Portion of Long-term Liabilities: Public Financing Authority Bonds 28,894,918 28,894,918 Compensated Absences 1,989,753 1,989,753 Early Retiree Benefits 5,835,059 5,835,059 Other Postemployment Benefits 8,824,342 8,824,342 General Obligation Bonds 135,876, ,876,683 TOTAL LIABILITIES 223,126,102 1,114, ,240,480 NET ASSETS Invested in Capital Assets, net of related debt 218,656, , ,904,223 Restricted for: Debt Service 18,956,446 18,956,446 Educational Programs 1,797,149 1,797,149 Restricted for Capital Projects 28,667,724 28,667,724 Unrestricted 27,371, ,297 27,477,132 TOTAL NET ASSETS $ 295,449,237 $ 353,437 $ 295,802,674 See the accompanying notes to the financial statements. -1-

25 STATEMENT OF ACTIVITIES For the Fiscal Year Ended Functions Expenses GOVERNMENTAL ACTIVITIES: Charges for Services Program Revenues Operating Grants and Contributions Capital Grants and Contributions Net (Expense) Revenue and Changes in Net Assets Governmental Activities Business-type Activities Instruction $ 159,159,560 $ 194,012 $ 34,773,630 $ $ (124,191,918) $ $ (124,191,918) Instruction-related Services 18,861,358 15,189 2,996,659 (15,849,510) (15,849,510) Pupil Services 18,442,062 2,743,239 6,187,807 (9,511,016) (9,511,016) Ancillary Services 1,421, ,083 (1,420,083) (1,420,083) Community Services 7,282,629 19,808 86,881 (7,175,940) (7,175,940) General Administration 9,847, ,044 1,444,695 (8,290,390) (8,290,390) Plant Services 22,056,184 37, ,551 1,288,936 (20,548,991) (20,548,991) Other Outgo 8,156, ,723 4,019,425 (3,734,152) (3,734,152) Debt Service - Interest 8,045,840 (8,045,840) (8,045,840) Depreciation (unallocated) 15,656,143 (15,656,143) (15,656,143) TOTAL GOVERNMENTAL ACTIVITIES 268,928,384 3,524,734 49,690,731 1,288,936 (214,423,983) - (214,423,983) Total BUSINESS-TYPE ACTIVITIES Enterprise Activities 3,145,297 1,242,769 1,930,005 27,477 27,477 TOTAL BUSINESS-TYPE ACTIVITIES 3,145,297 1,242,769 1,930, ,477 27,477 TOTAL $ 272,073,681 $ 4,767,503 $ 51,620,736 $ 1,288,936 (214,423,983) 27,477 (214,396,506) GENERAL REVENUES: Property Taxes Levied for: General Purposes 129,129, ,129,621 Debt Service 15,178,150 15,178,150 Other Specific Purposes 1,619,989 1,619,989 Federal and State Aid not Restricted to Specific Purposes 65,229,604 65,229,604 Interest and Investment Earnings 1,342,616 2,621 1,345,237 Miscellaneous 11,085,875 11,085,875 TOTAL GENERAL REVENUES 223,585,855 2, ,588,476 Change in Net Assets 9,161,872 30,098 9,191,970 Net Assets at Beginning of Year 286,287, , ,610,704 Net Assets at End of Year $ 295,449,237 $ 353,437 $ 295,802,674 See the accompanying notes to the financial statements. -2-

26 BALANCE SHEET - GOVERNMENTAL FUNDS ASSETS General Fund Building Fund Special Reserve for Capital Outlay Projects Fund Debt Service Funds-Public Financing Authorities Debt Service Funds- Community Facilities Districts Capital Projects Funds- Community Facilities Districts Other Governmental Funds Total Governmental Funds Cash in County Treasury $ 21,177,761 $ 12,863,015 $ 11,553,801 $ $ $ $ 18,024,472 $ 63,619,049 Cash on Hand and in Banks 2, ,360 4, ,860 Cash in Revolving Fund 120, ,000 Collections Awaiting Deposit 141, ,863 Cash with Fiscal Agent 392,603 6,852, ,339 7,631,293 Investments 4,161,845 1,227,576 5,389,421 Long Term Investments Bond Receivable 34,515,320 34,515,320 Accounts Receivable: Federal and State Governments 28,788, ,995 29,227,364 Local Governments 1,112,350 1,112,350 Miscellaneous 893, ,205 8, , ,942 1,885,818 Due from Other Funds 1,426,415 1, ,687 1,617,738 Inventories 346,441 29, ,355 Prepaid Expenditures 151,330 2,700 63, ,300 TOTAL ASSETS $ 54,017,669 $ 13,600,556 $ 11,562,729 $ 39,069,768 $ 8,079,927 $ 1,301,439 $ 19,013,643 $ 146,645,731 LIABILITIES AND FUND BALANCES LIABILITIES Accounts Payable $ 13,129,819 $ 1,406,705 $ 1,364 $ $ $ 3,126 $ 971,740 $ 15,512,754 Due to Other Funds 63, , ,863 1,428,528 Deferred Revenue 94, , ,721 TOTAL LIABILITIES 13,287,926 1,406,705 1, ,234 2,490,774 17,662,003 FUND BALANCES Nonspendable 617,771 2,700 93, ,655 Restricted 1,797,149 12,191,151 11,561,365 39,069,768 8,079, ,205 10,411,074 83,936,639 Committed 3,347,468 3,347,468 Assigned 2,330,880 2,671,143 5,002,023 Unassigned 35,983,943 35,983,943 TOTAL FUND BALANCES 40,729,743 12,193,851 11,561,365 39,069,768 8,079, ,205 16,522, ,983,728 TOTAL LIABILITIES AND FUND BALANCES $ 54,017,669 $ 13,600,556 $ 11,562,729 $ 39,069,768 $ 8,079,927 $ 1,301,439 $ 19,013,643 $ 146,645,731 See the accompanying notes to the financial statements. -3-

27 RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS Total fund balances-governmental funds $ 128,983,728 Amounts reported for governmental activities in the statement of net assets are different because: Capital assets used for governmental activities are not financial resources and therefore are not reported as assets in governmental funds. These assets consist of: Land $ 39,747,053 Work in progress 3,148,833 Depreciable assets, net 335,735,478 Total capital assets 378,631,364 Long-term liabilities, including bonds payable, are not due and payable in the current period and therefore are not reported as liabilities in the funds. Long-term liabilities at year-end consist of: Special Assessment Debt with Governmental Commitment (755,000) Public Financing Authority Bonds (32,299,918) Compensated absences (1,989,753) Early retiree benefits (7,017,773) Other postemployment benefits (8,824,342) General obligation bonds and premium (139,114,214) (190,001,000) Internal service funds are used by the District s management to charge the cost of the health and welfare, worker s compensation and liability insurance programs to the individual funds. The assets and liabilities of the internal service funds are included with governmental activities. 14,033,014 Interest expense related to special assessment debt and public financing authority bonds payable was incurred but not accrued through (3,235,583) Costs associated with issuing debt are recorded as expenditures in the year incurred and are not capitalized in governmental funds 1,553,034 Bonds receivable are reported as investments in the Public Financing Authority s fund statements but are eliminated on the statement of net assets (34,515,320) Total net assets governmental activities $ 295,449,237 See the accompanying notes to the financial statements. -4-

28 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - GOVERNMENTAL FUNDS For the Fiscal Year Ended REVENUES Revenue Limit Sources: General Fund Building Fund Special Reserve for Capital Outlay Projects Fund Debt Service Funds-Public Financing Authorities Debt Service Funds- Community Facilities Districts Capital Projects Funds- Community Facilities Districts Other Governmental Funds Total Governmental Funds State Apportionments $ 35,158,333 $ $ $ $ $ $ $ 35,158,333 Local Sources 129,129, ,129,621 Total Revenue Limit Sources 164,287, ,287,954 Federal Sources 21,593,591 2,992,561 24,586,152 Other State Sources 51,592,637 3,391,714 54,984,351 Other Local Sources 5,214,699 69,163 1,692,906 2,290,007 5,092, ,431 21,360,264 36,268,158 TOTAL REVENUES 242,688,881 69,163 1,692,906 2,290,007 5,092, ,431 27,744, ,126,615 EXPENDITURES Instruction 154,424, , ,258,374 Instruction-related Services 18,053, ,898 18,405,282 Pupil Services 12,863,512 5,258,249 18,121,761 Ancillary Services 1,386,161 7,282,630 8,668,791 Enterprise 8 8 General Administration 9,351, ,764 9,603,686 Plant Services 17,913,072 7,592,862 16, ,166 1,746,286 28,065,185 Other Outgo 7,261,237 10,366 7,271,603 Debt Service 884,697 4,828,199 6,037,244 9,275,256 21,025,396 TOTAL EXPENDITURES 222,138,915 7,592,862 16,799 4,828,199 6,037, ,166 25,009, ,420,086 Excess (deficiency) of revenues over expenditures 20,549,966 (7,523,699) 1,676,107 (2,538,192) (944,556) (247,735) 2,734,638 13,706,529 OTHER FINANCING SOURCES (USES) Interfund Transfers In 159,347 10,322, ,283 11,173,029 Interfund Transfers Out (691,283) (10,481,746) (11,173,029) TOTAL OTHER FINANCING SOURCES (USES) 159,347 10,322,399 - (691,283) 691,283 - (10,481,746) - Net Changes in Fund Balances 20,709,313 2,798,700 1,676,107 (3,229,475) (253,273) (247,735) (7,747,108) 13,706,529 Fund Balances at Beginning of Year 20,018,246 9,395,151 9,885,258 42,299,243 8,333,200 1,073,940 24,272, ,277,199 Adjustment for Restatement (See Note 18) 2,184 (2,184) - Fund Balances at Beginning of Year, as Restated 20,020,430 9,395,151 9,885,258 42,299,243 8,333,200 1,073,940 24,269, ,277,199 Fund Balances at End of Year $ 40,729,743 $ 12,193,851 $ 11,561,365 $ 39,069,768 $ 8,079,927 $ 826,205 $ 16,522,869 $ 128,983,728 See the accompanying notes to the financial statements. -5-

29 RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES For the Fiscal Year Ended Net change in fund balances Total government funds $ 13,706,529 Amounts reported for governmental activities in the statement of activities are different because: Governmental funds report capital outlay as expenditures. However, in the statement of activities, the cost of those assets is allocated over their useful lives as depreciation expense. Capital outlay (net of deletions) $ 6,462,350 Depreciation expense (15,656,143) (9,193,793) The net cost of disposed equipment is reported as expense in the governmental funds. However, the cost of the equipment is removed from the capital assets balance in the statement of net assets and offset against the expense resulting in a loss on the assets disposed in the statement of activities. Net cost of equipment (7,190) Repayment of long-term debt is reported as expenditure in governmental funds, but the repayment reduces long-term liabilities in the statement of net assets. General obligation bond principal payments 2,755,000 Special assessment debt principal payments 705,000 Public financing authority bond principal payments 3,135,000 Early retirement plan payments and changes in estimates 1,176,250 7,771,250 Repayment of internal debt between the Community Facilities District and Public Financing Authority is recorded as debt service expense on the fund statements but is eliminated in the statement of activities 3,220,000 Some items reported in the statement of activities do not require the use of current financial resources and therefore are not reported as expenditures in governmental funds. Net decrease in accrued interest 104,471 Net increase in compensated absences (388,841) Amortization of premium of general obligation bonds 227,531 Amortization of issuance costs of general obligation bonds (84,647) Increase in other postemployment benefit obligation (1,917,285) (2,058,771) Internal service funds are used by the District to charge the costs of the health and welfare, worker s compensation and property and liability insurance programs to the individual funds. The net loss of the internal service funds are reported with governmental activities (4,276,153) Change in net assets of governmental activities $ (9,161,872) See the accompanying notes to the financial statements. -6-

30 STATEMENT OF FUND NET ASSETS PROPRIETARY FUNDS ASSETS Governmental Activities Internal Service Fund Business Type Activities Community Recreation Fund Cash in County Treasury $ 24,746,094 $ 533,161 Cash on Hand and in Banks 2,000 Collections Awaiting Deposit 225,367 Cash with Fiscal Agent 2,230,000 Accounts Receivable: Local Governments 438,644 Miscellaneous 700,088 8,281 Due from Other Funds ,222 Depreciable Assets, net 248,140 TOTAL ASSETS 27,676,836 1,467,815 LIABILITIES Accounts Payable 1,529, ,015 Due to Other Funds 71,535 Deferred Revenue 728,828 Estimated Liability for Open Claims and IBNRs 12,114,067 TOTAL LIABILITIES 13,643,822 1,114,378 NET ASSETS Invested in Capital Assets, net of related debt 248,140 Unrestricted 14,033, ,297 TOTAL NET ASSETS $ 14,033,014 $ 353,437 See the accompanying notes to the financial statements. -7-

31 STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET ASSETS PROPRIETARY FUNDS For the Fiscal Year Ended OPERATING REVENUES Governmental Activities Internal Service Fund Business Type Activities Community Recreation Fund Self-Insurance Premiums $ 36,730,565 $ Other Local Sources 328,407 3,172,774 TOTAL OPERATING REVENUES 37,058,972 3,172,774 OPERATING EXPENSES Certificated Salaries 165,126 Classified Salaries 190,865 1,550,420 Employee Benefits 81, ,692 Books and Supplies 9, ,644 Services and Other Operating Expenses 41,226, ,821 Depreciation Expense 31,594 TOTAL OPERATING EXPENSES 41,508,568 3,145,297 Operating (Loss) Income (4,449,596) 27,477 NON-OPERATING REVENUES (EXPENSES) Interest Income 173,443 2,621 TOTAL NON-OPERATING REVENUES (EXPENSES) 173,443 2,621 Change in Net Assets (4,276,153) 30,098 Net Assets at Beginning of Year 18,309, ,339 Net Assets at End of Year $ 14,033,014 $ 353,437 See the accompanying notes to the financial statements. -8-

32 STATEMENT OF CASH FLOWS PROPRIETARY FUNDS For the Fiscal Year Ended Governmental Activities Internal Service Fund Business-type Activities Community Recreation Fund CASH FLOWS FROM OPERATING ACTIVITIES: Cash Received from Premiums $ 36,715,440 $ Cash Received from Rebates 29,332 Cash Received from Other Local Sources 3,597,115 Cash Paid for Claims (39,986,603) Cash Paid to Employees (272,544) (2,075,242) Cash Paid for Operating Expenses (1,889,970) (1,030,211) Net Cash (Used) Provided by Operating Activities (5,404,345) 491,662 CASH FLOWS FROM INVESTING ACTIVITIES: Interest Income 177,788 2,793 Net Cash Provided by Investing Activities 177,788 2,793 Net (Decrease) Increase in Cash (5,226,557) 494,455 Cash - July 1, ,202, ,073 Cash - $ 26,976,094 $ 760,528 See the accompanying notes to the financial statements. -9-

33 STATEMENT OF CASH FLOWS PROPRIETARY FUNDS For the Fiscal Year Ended Governmental Activities Internal Service Fund Business-type Activities Community Recreation Fund ADJUSTMENTS TO RECONCILE OPERATING (LOSS) INCOME TO NET CASH USED BY OPERATING ACTIVITIES OPERATING (LOSS) INCOME $ (4,449,596) $ 27,477 Adjustments to Reconcile Operating (Loss) Income to Net Cash (Used) Provided by Operating Activities: Depreciation Expense 31,594 Changes in Operating Assets and Liabilities: (Increase) Decrease in Accounts Receivable (627,802) 23,811 Decrease in Due From Other Funds 313,601 7,575 Decrease in Prepaid Expense 3,559 Increase in Accounts Payable 38,377 48,941 Decrease in Estimated Liability for Open Claims and IBNR (678,506) Decrease in Due to Other Funds (419) (44,250) Increase in Deferred Revenue 392,955 Total Adjustments (954,749) 464,185 NET CASH (USED) PROVIDED BY OPERATING ACTIVITIES $ (5,404,345) $ 491,662 Cash balances at consisted of the following: Cash in County Treasury $ 24,746,094 $ 533,161 Cash on Hand and in Banks 2,000 Cash Collections Awaiting Deposit 225,367 Cash with Fiscal Agent 2,230,000 Total $ 26,976,094 $ 760,528 See the accompanying notes to the financial statements. -10-

34 STATEMENT OF FUND NET ASSETS - FIDUCIARY FUNDS Trust Fund Associated Student Body Funds ASSETS Cash in County Treasury $ 17,024 $ Cash on Hand and In Banks 3,185,167 Accounts Receivable: Miscellaneous 16 7,883 Stores Inventory 54,394 Prepaid Expenses 153,144 TOTAL ASSETS 17,040 3,400,588 LIABILITIES Accounts Payable 2 290,535 Due to Other Funds 130,551 Deferred Revenue 109,650 Funds Held in Trust 1,853,938 TOTAL LIABILITIES 2 2,384,674 NET ASSETS Unrestricted 17,038 1,015,914 TOTAL NET ASSETS $ 17,038 $ 1,015,914 See the accompanying notes to the financial statements. -11-

35 STATEMENT OF CHANGES IN FUND NET ASSETS - FIDUCIARY FUNDS For the Fiscal Year Ended Trust Fund Associated Student Body Funds ADDITIONS Revenue from Local Sources $ 625 $ 3,882,489 TOTAL ADDITIONS 625 3,882,489 DEDUCTIONS Other Expenses 5,023 3,742,254 TOTAL DEDUCTIONS 5,023 3,742,254 Changes in net assets (4,398) 140,235 Net Assets at Beginning of Year 21, ,679 Net Assets at End of Year $ 17,038 $ 1,015,914 See the accompanying notes to the financial statements. -12-

36 NOTES TO FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: The District accounts for its financial transactions in accordance with the policies and procedures of the Department of Education's California School Accounting Manual, updated to conform to the most current financial and reporting requirements promulgated by the California Department of Education. The accounting policies of the District conform to generally accepted accounting principles (GAAP) as prescribed by the Governmental Accounting Standards Board and the American Institute of Certified Public Accountants. The significant accounting policies applicable to the District are described below. A. BASIS OF PRESENTATION: The accompanying financial statements have been prepared in conformity with GAAP as prescribed by GASB, including Statement No. 34, Basic Financial Statements and Management s Discussion and Analysis for State and Local Governments and Audits of State and Local Governmental Units issued by the American Institute of Certified Public Accountants. The financial statement presentation required by GASB No. 34 provides a comprehensive, entity-wide perspective of the District s financial activities. The entity-wide perspective enhances the fund-group perspective previously required. Fiduciary activities are excluded from the basic financial statements and are reported separately in the fiduciary fund statements. The District s basic financial statements consist of government-wide statements, including a Statement of Net Assets and a Statement of Activities, and fund financial statements. -13-

37 NOTES TO FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (continued) A. BASIS OF PRESENTATION: (continued) 1. Government-wide Financial Statements: The Statement of Net Assets and the Statement of Activities displays information about the District as a whole. These statements include the financial activities of the primary government, including governmental activities of proprietary funds. Enterprise and fiduciary funds are excluded. The Statement of Net Assets presents the financial condition of the governmental and business-type activities of the District at year-end. The Statement of Activities presents a comparison between direct expenses and program revenues for each program or function of the District s governmental and business-type activities. Direct expenses are those that are specifically associated with a service, program or department and therefore clearly identifiable to a particular function. Program revenues include charges paid by the recipient of the goods or services offered by the program, grants and contributions that are restricted to meeting the operational or capital requirements of a particular program and interest earned on grants that is required to be used to support a particular program. Revenues which are not classified as program revenues are presented as general revenues of the District. The comparison of direct expenses with program revenues identifies the extent to which each governmental function is self-financing or draws from the general revenues of the District. Depreciation and interest expense have not been allocated to specific functions. 2. Fund Financial Statements: During the year, the District segregates transactions related to certain District functions or activities in separate funds in order to aid financial management and to demonstrate legal compliance. Fund financial statements are designed to present financial information of the District at this more detailed level. The focus of governmental fund financial statements is on major funds. Each major fund is presented in a separate column. Non-major funds are aggregated and presented in a single column. The fiduciary and proprietary funds are reported by type in separate statements. -14-

38 NOTES TO FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (continued) A. BASIS OF PRESENTATION: (continued) 2. Fund Financial Statements: (continued) The fund financial statement expenditures are presented in a functionoriented format. The following is a brief description of the functions: Instruction includes the activities directly dealing with the interaction between teachers and students. Instruction-related services includes supervision of instruction, instructional library, media and technology, and school site administration. Pupil services includes home to school transportation, food services and other pupil services. Ancillary services includes activities that are generally designed to provide students with experiences outside the regular school day. Community services includes activities that provide services to community participants other than students. General administration includes data processing services and all other general administration services. Plant services includes activities of maintaining the physical plant. This also includes facilities acquisition and construction expenditures. Other outgo includes transfers to other agencies. The proprietary and fiduciary fund expenditures are presented by natural classification. -15-

39 NOTES TO FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (continued) B. FUND ACCOUNTING: To ensure compliance with the California Education Code, the financial resources of the District are divided into separate funds for which separate accounts are maintained for recording cash, other resources and all related liabilities, obligations and equities. The Statement of Revenues, Expenditures and Changes in Fund Balance are statements of financial activities of the particular fund related to the current reporting period. Expenditures of the various funds frequently include amounts for land, buildings, equipment, retirement of indebtedness, transfers to other funds, etc. Consequently, these statements do not purport to present the result of operations or the net income or loss for the period as would a statement of income for a profittype organization. The modified accrual basis of accounting is used for all governmental funds. GOVERNMENTAL FUNDS - MAJOR General Fund - the general operating fund of the District is used to account for all financial resources except those required to be accounted for in another fund. The District operates Gates Charter School pursuant to Education Code Section The financial activities of the Charter School are included in the District s general fund. The Pupil Transportation Equipment Fund has been consolidated with the General Fund due to the implementation of GASB Statement No. 54. See Note 18. Building Fund used to account for the construction projects funded by the proceeds of voter-approved general obligation bonds. Special Reserve for Capital Outlay Projects Fund used to account for the resources received from redevelopment agencies and other funds used for capital facility projects. Public Financing Authority (PFA) used to account for debt service related to the issuance of bonds used to refinance debt from existing Community Facilities Districts. The special tax revenue from the Community Facilities Districts repays the Public Financing Authority bonds. The District maintains three Public Financing Authorities. -16-

40 NOTES TO FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (continued) B. FUND ACCOUNTING: (continued) GOVERNMENTAL FUNDS MAJOR (continued) Community Facilities District (CFD) used to finance the purchase, construction, expansion or rehabilitation of certain real and other tangible properties. The District maintains eight Community Facilities Districts and a Community Facilities District Administrative fund. The Community Facilities District funds are split between debt service and capital project activities. GOVERNMENTAL FUNDS NON-MAJOR Debt Service Fund used to account for the financial resources that are restricted, committed or assigned and the accumulation of resources for, the payment of general long-term debt principal, interest, and related costs. 1. Bond Interest and Redemption Fund - used to account for the accumulation of resources for and redemption of bond principal and interest on general obligation bonds. Special Revenue Funds - used to account for the proceeds of specific revenue sources that are restricted or committed to expenditures for specific purposes other than debt service or capital projects. 1. Adult Education Fund - used to account for resources committed to adult education programs maintained by the District. Due to the flexibility provisions enacted by education trailer bill SBX3 4, this fund no longer meets the definition of a special revenue fund as it is no longer primarily composed of restricted or committed revenue sources. However, because the flexibility is temporary, the restricted revenue source is expected to continue and the District has taken formal action to commit the flexed revenues to this program for the continued operation of the original program, the fund now meets the requirements to be reported as a Special Revenue fund. 2. Child Development Fund - used to account for resources committed to child development programs. -17-

41 NOTES TO FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (continued) B. FUND ACCOUNTING: (continued) GOVERNMENTAL FUNDS NON-MAJOR (continued) 3. Cafeteria Fund - used to account for revenues received and expenditures made to operate the District's cafeterias. 4. Deferred Maintenance Fund - used for the purpose of major repair or replacement of District property. Due to the flexibility provisions enacted by education trailer bill SBX3 4, this fund no longer meets the definition of a special revenue fund as it is no longer primarily composed of restricted or committed revenue sources. However, because the flexibility is temporary, the restricted revenue source is expected to continue and the District has taken formal action to commit the flexed revenues to these programs for the continued operation of the original program, the fund now meets the requirements to be reported as a Special Revenue fund. Capital Projects Funds - used to account for the financial resources that are restricted, committed or assigned for the acquisition and/or construction of major governmental general fixed assets. 1. Capital Facilities Fund - used to account for resources received from residential and commercial developer impact fees. 2. County School Facilities Fund used to account for the School Facility Program grants awarded for modernization and new construction of various school sites. The County School Facilities Fund is a consolidation of two sub-funds. PROPRIETARY FUND GOVERNMENTAL Internal Service Fund - used to account for services rendered on a costreimbursement basis within the District. The Internal Service Fund consists of three sub-funds as follows: 1) Health and Welfare Fund used to account for resources committed to the District s medical insurance program; 2) Workers' Compensation Fund - used to account for resources committed to the District's selfinsurance program for workers' compensation; 3) Property and Liability Fund used to account for contributions to the Southern California Relief JPA and related deductibles. -18-

42 NOTES TO FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (continued) B. FUND ACCOUNTING: (continued) PROPRIETARY FUND - ENTERPRISE Community Recreation Fund used to account for the operations of the District s Recreation Department pursuant to Education Code Section FIDUCIARY FUNDS 1. Trust Fund used to account for investment and disbursement activities for the Peter A. Hartman Memorial Scholarship Fund. 2. Associated Student Body Funds- used to account for raising and expending money to promote the general welfare, morale and educational experiences of the student body. The District operates thirty-five Associated Student Body funds. C. BASIS OF ACCOUNTING: Basis of accounting refers to when revenues and expenditures or expenses are recognized in the accounts and reported in the financial statements. Basis of accounting relates to the timing of measurement made, regardless of the measurement focus applied. Revenues in governmental fund financial statements are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the District considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Government-wide financial statements are prepared using the accrual basis of accounting. Governmental funds use the modified accrual basis of accounting. Proprietary and fiduciary funds use the accrual basis of accounting. Differences in the accrual and the modified accrual basis of accounting arise in the recognition of revenue, the recording of deferred revenue, and in the presentation of expenses versus expenditures. -19-

43 NOTES TO FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (continued) C. BASIS OF ACCOUNTING: (continued) In accordance with GASB Statement No. 20, the District s proprietary funds follow all GASB statements issued prior to November 30, 1989 until subsequently amended, superceded or rescinded. The District also applies all FASB statements issued after November 30, 1989 that are developed for business enterprises, unless those statements conflict with or contradict a GASB statement. 1. Cash and Cash Equivalents The District s cash and cash equivalents are considered to be cash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition. Cash in the County Treasury is recorded at cost, which approximates fair value, in accordance with the requirements of GASB Statement No Receivables Receivables are generally recorded when the amount is earned and can be estimated. All material receivables are considered fully collectible. Per Education Code Section , a local education agency may recognize for budgetary and financial reporting purposes any amount of state appropriations deferred from the current fiscal year and appropriated from the subsequent fiscal year for payment of current year costs as a receivable in the current year. The District has recognized receivables in accordance with this standard, the most notable being for the final P-2 apportionment. 3. Inventories Inventories are presented at the lower of cost or market on an average basis and are expensed when used. Inventory consists of expendable supplies held for consumption. At, the inventory for supplies is $346,441. The inventory for food is $29,

44 NOTES TO FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (continued) C. BASIS OF ACCOUNTING: (continued) 4. Prepaid Expenditures Payments made to vendors for goods or services that will benefit periods beyond, are recorded as prepaid items using the consumption method. A current asset for the prepaid amount is recorded at the time of the purchase and an expenditure/expense is reported in the year in which goods or services are consumed. 5. Capitalized Fees Amounts paid for fees and underwriting costs associated with long-term debt are capitalized and amortized to interest expense in the government-wide statements over the life of the liability. These costs are amortized using the straight-line method. 6. Capital Assets Generally, capital assets result from expenditures in the governmental funds. These assets are reported in the governmental activities column of the Statement of Net Assets, but are not reported in the fund financial statements. Capital assets are capitalized at cost (or estimated historical cost) and updated for additions and retirements during the year. Donated fixed assets are recorded at their fair market values as of the date received. The District maintains a capitalization threshold of $5,000. The District does not own any infrastructure as defined in GASB No. 34. Improvements are capitalized; the costs of normal maintenance and repairs that do not add to the value of the asset or materially extend an asset s life are not capitalized. -21-

45 NOTES TO FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (continued) C. BASIS OF ACCOUNTING: (continued) 6. Capital Assets (continued) All reported capital assets except for land and construction in progress are depreciated. Improvements are depreciated over the remaining useful lives of the related capital assets. Depreciation is computed using the straight-line method over the following useful lives: Description Site Improvements Building Improvements Machinery, Equipment and Vehicles Estimated Lives 20 years years 5-20 years Depreciation expense reported on the government-wide statement of activities excludes direct depreciation expense recorded to functions where applicable. 7. Deferred Revenue Cash received for federal and state special projects and programs is recognized as revenue to the extent that qualified expenditures have been incurred. Deferred revenue is recorded to the extent cash received on specific projects and programs exceeds qualified expenditures. 8. Compensated Absences In accordance with GASB Statement No. 16, accumulated unpaid employee vacation benefits are recognized as a liability of the District. The entire compensated absences liability is accrued when incurred in the governmentwide financial statements. A liability for these amounts is reported in governmental funds only if they have matured, for example, as a result of employee resignations and retirements. -22-

46 NOTES TO FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (continued) C. BASIS OF ACCOUNTING: (continued) 8. Compensated Absences (continued) Sick leave benefits are accumulated without limit for each employee. The employees do not gain a vested right to accumulated sick leave. Accumulated employee sick leave benefits are not recognized as a liability of the District. The District's policy is to record sick leave as an operating expense in the period taken since such benefits do not vest nor is payment probable; however, unused sick leave is added to the creditable service period for calculation of retirement benefits when the employee retires. 9. Long Term Obligations The District reports long-term debt of governmental funds at face value in the government-wide financial statements. Long-term debt and other obligations financed by proprietary funds are reported as liabilities in the appropriate funds. 10. Fund Balance Classification During the current fiscal year, the District implemented the reporting model required by GASB Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions. Therefore, the governmental fund financial statements present fund balance classifications that comprise a hierarchy based on the extent to which the District is bound to honor constraints on the specific purposes for which amounts can be spent. The classifications used in the governmental fund financial statements are as follows: Nonspendable: This classification includes amounts that cannot be spent because they are either (a) not in spendable form or (b) are legally or contractually required to be maintained intact. -23-

47 NOTES TO FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (continued) C. BASIS OF ACCOUNTING: (continued) 10. Fund Balance Classification (continued) Restricted: Amounts for which constraints have been placed on the use of the resources either (a) externally imposed by creditors, grantors, contributors, or laws or regulations of other governments, or (b) imposed by law through constitutional provisions or enabling legislation. Committed: Amounts that can be used only for specific purposes pursuant to constraints imposed by formal action of the District Board of Education. These amounts cannot be used for any other purpose unless the District Board of Education removes or changes the specified use by taking the same formal action (vote or resolution) that was employed when the funds were initially committed. This classification also includes contractual obligations to the extent that existing resources have been specifically committed for use in satisfying those contractual requirements. Assigned: Amounts that are constrained by the District s intent to be used for a specific purpose but are neither restricted nor committed. The Board of Education, through a formal action has given authority to the Assistant Superintendent of Business Services of the District to assign amounts for a specific purpose that is neither restricted nor committed. Unassigned: The residual fund balance for the General Fund and all other spendable amounts. The following beginning fund balances for the District s governmental funds have been restated to reflect the above classifications: General Fund Pupil Transportation Equipment Fund -24-

48 NOTES TO FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (continued) C. BASIS OF ACCOUNTING: (continued) 10. Fund Balance Classification (continued) When an expenditure is incurred for which committed, assigned, or unassigned fund balances are available, the District s policy considers amounts to have been spent first out of committed funds, then assigned funds, and finally unassigned funds, as needed, unless the Board of Education has provided otherwise in its commitment or assignment functions. Minimum Fund Balance Policy: The District has adopted a minimum fund balance policy in order to protect against revenue shortfalls and unexpected one-time expenditures. The policy requires a Reserve for Economic Uncertainties consisting of unassigned amounts which represent the minimum recommended reserve consistent with the Criteria and Standards for fiscal solvency adopted by the State Board of Education. The minimum recommended reserve for a district this size is 2% of budgeted General Fund expenditures and other financing uses. 11. Net Assets Net assets represent the difference between assets and liabilities. Net assets invested in capital assets, net of related debt consists of capital assets, net of accumulated depreciation, reduced by the outstanding balances of any borrowings used for the acquisition, construction or improvements of those assets. Net assets are reported as restricted when there are limitations imposed on their use through external restrictions imposed by donors, grantors, laws or regulations of other governments or by enabling legislation adopted by the District. The District first applies restricted resources when an expense is incurred for purposes for which both restricted and unrestricted resources are available. -25-

49 NOTES TO FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (continued) C. BASIS OF ACCOUNTING: (continued) 12. State Apportionments Certain current year apportionments from the State are based upon various financial and statistical information of the previous year. Second period to annual corrections for revenue limits and other state apportionments (either positive or negative) are accrued at the end of the fiscal year. 13. Property Taxes Secured property taxes attach as an enforceable lien on property as of March 1. Taxes are payable in two installments on November 15 and March 15. Unsecured property taxes are payable in one installment on or before August 31. Real and personal property tax revenues are reported in the same manner in which the County auditor records and reports actual property tax receipts to the Department of Education. This is generally on a cash basis. A receivable has not been recognized in the General Fund for property taxes due to the fact that any receivable is offset by a payable to the State for revenue limit purposes. Information on property taxes receivable for debt service purposes was not available and has therefore not been accrued in the Government-wide financial statements. 14. On-Behalf Payments GASB Statement No. 24 requires that direct on-behalf payments for fringe benefits and salaries made by one entity to a third party recipient for the employees of another, legally separate entity be recognized as revenue and expenditures by the employer government. The State of California makes direct on-behalf payments for retirement benefits to the State Teachers and Public Employees Retirement Systems on behalf of all school districts in California. However, a fiscal advisory was issued by the California Department of Education instructing districts not to record revenue and expenditures for these on-behalf payments. The amount of on-behalf payments made for the District is estimated at $2,260,000 for STRS. -26-

50 NOTES TO FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (continued) C. BASIS OF ACCOUNTING: (continued) 15. Contributed Services Generally accepted accounting principles require that contributions of donated services that create or enhance non-financial assets or that require specialized skills, are provided by individuals possessing those skills, and would typically need to be purchased if not provided by donation, are to be recorded at fair value in the period received. Although the District receives numerous hours of volunteer time, it is not deemed necessary to record these hours on the books of the District based on the above guidelines. In addition, the District receives donations of immaterial equipment and supplies which are not recorded upon receipt. 16. Classification of Revenues Proprietary Funds Proprietary funds distinguish operating revenues from nonoperating revenues. Operating revenues include activities that have the characteristics of exchange transactions, such as food service sales, Federal and most State and local grants and contracts, and self-insurance premiums. Nonoperating revenues include activities that have the characteristics of nonexchange transactions that are defined as nonoperating revenues by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities that use Proprietary Fund Accounting, and GASB No. 33, Accounting and Financial Reporting for Non-exchange Transactions. 17. Estimates The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates. -27-

51 NOTES TO FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (continued) D. REPORTING ENTITY: The District is the level of government primarily accountable for activities related to public education. The governing authority consists of elected officials who, together, constitute the Board of Education. The District considered its financial and operational relationships with potential component units under the reporting entity definition of GASB Statement No. 14, The Financial Reporting Entity. The basic, but not the only, criterion for including another organization in the District s reporting entity for financial reports is the ability of the District s elected officials to exercise oversight responsibility over such agencies. Oversight responsibility implies that one entity is dependent on another and that the dependent unit should be reported as part of the other. Oversight responsibility is derived from the District s power and includes, but is not limited to: financial interdependency; selection of governing authority; designation of management; ability to significantly influence operations; and accountability for fiscal matters. Based upon the requirements of GASB Statement No. 14, and as amended by GASB Statement No. 39, Determining Whether Certain Organizations are Component Units, certain organizations warrant inclusion as part of the financial reporting entity because of the nature and significance of their relationship with the District, including their ongoing financial support to the District or its other component units. A legally separate, tax-exempt organization should be reported as a component unit of the District if all of the following criteria are met: 1. The economic resources received or held by the separate organization are entirely or almost entirely for the direct benefit of the District, its component units, or its constituents. 2. The District, or its component units, is entitled to, or has the ability to otherwise access, a majority of the economic resources received or held by the separate organization. 3. The economic resources received or held by an individual organization that the District, or its component units, is entitled to, or has the ability to otherwise access, are significant to the District. -28-

52 NOTES TO FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (continued) D. REPORTING ENTITY: (continued) Based upon the application of the criteria listed above, the following potential component units have been included in the District s reporting entity: Community Facilities Districts and Public Financing Authorities The Saddleback Valley Unified School District, the Community Facilities Districts (CFD) No. 86-1, 87-4, 88-1, 88-2, 89-1, 89-2, 89-3, 89-4, and Administrative Fund, and the Public Financing Authorities (PFA) 1995, 1996 and 1998 of the Saddleback Valley Unified School District have a financial and operational relationship which meets the reporting entity definition criteria of GASB Statement No. 14. Accordingly, the financial activities of the CFDs and PFAs have been included in the financial statements of the District. Separate financial statements are not prepared for the CFDs and PFAs. The following potential component units have been excluded from the District s reporting entity: Various PTA, PTO and Booster Clubs Each of these types of organizations at each of the school sites within the District were evaluated using the three criterions listed above. Each entity has been excluded as a component unit because the third criterion was not met in all cases; the economic resources received and held by the PTA, PTO and the Booster Club individually are not significant to the District. -29-

53 NOTES TO FINANCIAL STATEMENTS NOTE 2 - BUDGETS: By State law, the District's Governing Board must approve a budget no later than July 1, using the Single Adoption Budget process. A public hearing must be conducted to receive comments prior to adoption. The District's Governing Board satisfied these requirements. Budgets for all governmental funds were adopted on a basis consistent with GAAP. These budgets are revised by the District's Governing Board during the year to give consideration to unanticipated income and expenditures. The original and final revised budget for the General Fund is presented in a budgetary comparison schedule in the required supplementary section. This schedule also includes budgets for the Pupil Transportation Equipment Fund due to the implementation of GASB Statement No. 54. Formal budgetary integration was employed as a management control device during the year for all budgeted funds. Expenditures cannot legally exceed appropriations by major object account. NOTE 3 - DEPOSITS AND INVESTMENTS: A. Deposits Custodial Credit Risk Custodial credit risk is the risk that in the event of a bank failure, the District s deposits may not be returned to it. The District does not have a deposit policy for custodial risk. As of, $2,377,692 of the District s bank balance of $7,561,137 was exposed to credit risk as follows: Uninsured and collateral held by pledging bank s trust department not in the District s name $2,317,353 Uninsured and uncollateralized 60,339 Total $2,377,692 The District has $7,631,293 Cash with Fiscal Agent related to the Public Financing Authorities and the Community Facilities Districts. These accounts are not exposed to credit risk since they are collateralized in the name of the trustee on behalf of the District. Cash with Fiscal Agent of $2,230,000 in the internal service fund is considered a deposit and is included in custodial credit risk above. -30-

54 NOTES TO FINANCIAL STATEMENTS NOTE 3 - DEPOSITS AND INVESTMENTS: (continued) A. Deposits (continued) Cash in County In accordance with Education Code Section 41001, the District maintains substantially all of its cash in the Orange County Treasury as part of the common investment pool. These pooled funds are carried at unamortized cost which approximates fair value. The fair market value of the District s deposits in this pool as of, as provided by the pool sponsor, was $88,942,890. The County is authorized to deposit cash and invest excess funds by California Government Code Section et. seq. The county is restricted by Government Code Section pursuant to Section to invest in time deposits, U.S. government securities, state registered warrants, notes or bonds, State Treasurer s investment pool, bankers acceptances, commercial paper, negotiable certificates of deposit, and repurchase or reverse repurchase agreements. The funds maintained by the County are either secured by federal depository insurance or are collateralized. The County investment pool is not required to be rated. Interest earned is deposited quarterly into participating funds. Any investment losses are proportionately shared by all funds in the pool. B. Investments Policies As of, the District had the following investments. Except for the investment in the Saddleback Valley Unified School District Building Corporation bonds, all investments are in an internal investment pool. Investment Maturities Fair Value Moody s Rating AIG Matched Funding Corporation 9/1/2020 $1,302,378 Baa1 Bayerische 9/1/2017 1,138,550 A1 Societe Generale 9/1/2020 2,948,493 Aa3 Total $5,389,

55 NOTES TO FINANCIAL STATEMENTS NOTE 3 - DEPOSITS AND INVESTMENTS: (continued) B. Investments (continued) Interest Rate Risk Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment. The District does not have a formal investment policy that limits investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates. Information about the exposure of the District s investments to this risk is on the previous page. Credit Risk Credit risk is the risk that one issuer of an investment will not fulfill its obligations. This is measured by assignment of a rating by a nationally recognized rating organization. U.S. government securities or obligations explicitly guaranteed by the U.S. government are not considered to have credit risk exposure. The District follows Government Code to reduce exposure to investment credit risk. Information about the District s investment ratings is provided on the previous page. Concentration of Credit Risk The District places no limit on the amount that may be invested in any one issuer. More than 5% of the District s investments are in the AIG Matching Funding Corporation, Bayerische and Societe Generale. -32-

56 NOTES TO FINANCIAL STATEMENTS NOTE 3 - DEPOSITS AND INVESTMENTS: (continued) B. Investments (continued) Concentration of Credit Risk (continued) Long Term Investments Bond Receivable The Public Financing Authorities (PFA) refinanced debt from the Community Facilities Districts (CFD). The PFAs hold investments in bonds from the CFDs as follows: Public Financing Authority 95 Investment in Local Obligations from Community Facilities Districts 88-2, 89-1 and 89-4 $ 7,670,000 Public Financing Authority 96 Investment in Local Obligations from Community Facilities Districts 88-1, 89-2 and ,230,320 Public Financing Authority 98 Investment in Local Obligations from Community Facilities Districts 88-1, 89-2, 89-3 and ,615,000 Total $34,515,

57 NOTES TO FINANCIAL STATEMENTS NOTE 4 - INTERFUND TRANSACTIONS: Interfund activity between the governmental funds has been eliminated in the Government-wide statements as required by GASB No. 34. The following balances and transactions are reported in the fund financial statements. A. Interfund Receivables/Payables Individual interfund receivable and payable balances at are temporary loans and are detailed as follows: Governmental Activity Interfund Interfund Fund Receivables Payables General Fund: Due to/from Governmental Funds $1,354,880 $ 51,335 Due from Enterprise Fund 71,535 12,222 Special Revenue Funds: Adult Education Fund 131,960 45,131 Child Development Fund 15, ,215 Cafeteria Fund 238,517 Deferred Maintenance Fund 42,060 Capital Projects Funds: Building Fund 1,636 Community Facilities District Administration Fund 472,108 Proprietary Funds: Internal Service Fund 654 Total Governmental 1,618,392 1,428,

58 NOTES TO FINANCIAL STATEMENTS NOTE 4 - INTERFUND TRANSACTIONS: (continued) A. Interfund Receivables/Payables (continued) Interfund Interfund Fund Receivables Payables Business-Type Activity Enterprise Fund: Due to Governmental Funds 12,222 71,535 Fiduciary Activity Associated Student Body Funds: Due to Governmental Funds 130,551 Totals $1,630,614 $1,630,614 B. Interfund Transfers Interfund transfers consist of operating transfers from funds receiving revenue to funds through which the resources are to be expended. Interfund transfers between governmental funds for the fiscal year are as follows: Transfer from the Child Development Fund to the General Fund to reimburse for building improvements $ 159,347 Transfer from the County School Facilities Fund to the Building Fund to reimburse for state approved capital projects 10,322,399 Transfer from the Debt Service Public Financing Authority (Various) and the Capital Projects Community Facilities District (Various) to the Debt Service Community Facilities District (Various) to transfer surplus earnings to assist with debt service payments 691,283 Total $11,173,

59 NOTES TO FINANCIAL STATEMENTS NOTE 5 - FUND BALANCES: The following amounts were nonspendable, restricted, committed, assigned or unassigned as shown below: General Fund Building Fund Special Reserve for Capital Outlay Fund Debt Service Funds-Public Financing Authorities Debt Service Funds- Community Facilities Districts Capital Projects Funds- Community Facilities Districts Other Governmental Funds Total Governmental Funds Nonspendable Revolving cash $ 120,000 $ $ $ $ $ $ $ 120,000 Inventory 346,441 29, ,355 Prepaid expense 151,330 2,700 63, ,300 Total Nonspendable 617,771 2, , ,655 Restricted Legally restricted programs 1,797,149 1,797,149 Debt service 39,069,768 8,079,927 6,322,071 53,471,766 Capital projects 12,191,151 11,561, ,205 4,089,003 28,667,724 Total Restricted 1,797,149 12,191,151 11,561,365 39,069,768 8,079, ,205 10,411,074 83,936,639 Committed Adult education program 187, ,843 Deferred maintenance program 3,159,625 3,159,625 Total Committed ,347,468 3,347,468 Assigned Cafeteria program 627, ,190 Child development program 2,043,953 2,043,953 Other assignments 2,330,880 2,330,880 Total Assigned 2,330, ,671,143 5,002,023 Unassigned Economic uncertainties 6,663,596 6,663,596 Unassigned 29,320,347 29,320,347 Total Unassigned 35,983, ,983,943 Total fund balances $ 40,729,743 $ 12,193,851 $ 11,561,365 $ 39,069,768 $ 8,079,927 $ 826,205 $ 16,522,869 $ 128,983,

60 NOTES TO FINANCIAL STATEMENTS NOTE 6 - TAX REVENUE ANTICIPATION NOTES: The District issued $37,965,000 of Tax Revenue Anticipation Notes dated July 1, 2010 through the California School Cash Reserve Program Authority ( Series G). The notes matured on June 1, 2011 and yielded 2.00% interest. The notes were sold by the District to supplement its cash flow. Repayment requirements were that $18,982,500 and $19,678,525 principal and interest be deposited with the Trustee, U.S. Bank Trust National Association, in January and April, respectively. The payments were transferred to and set aside in a separate fund of the trustee in a timely manner. The monies were required to remain on deposit until the maturity date of the note, June 1, 2011 at which time they were applied to pay the principal and interest on the notes. All deposits were made with the Trustee on a timely basis and, therefore, the liability is defeased and not shown on the financial statements at. NOTE 7 SPECIAL ASSESSMENT DEBT WITH GOVERNMENTAL COMMITMENT: The CFD debt, except for CFD 86-1, was refinanced in 1995, 1996 and 1998 by issuing Public Financing Authority (PFA) bonds. The CFD debt payments are made to the PFA. The activity between the CFDs and PFAs is shown on the fund statements. This interfund activity is eliminated for the government-wide statements. The outstanding debt incurred through bonds issued in connection with the Community Facilities Districts (CFD) at is as follows: CFD# Amount of Original Issue Outstanding July 1, 2010 Issued Redeemed Outstanding 86-1 $ 9,200,000 $ 1,460,000 $ - $ 705,000 $ 755,

61 NOTES TO FINANCIAL STATEMENTS NOTE 7 SPECIAL ASSESSMENT DEBT WITH GOVERNMENTAL COMMITMENT: (continued) CFD Debt Refinanced by PFA Bonds: CFD# Amount of Original Issue Outstanding July 1, 2010 Issued Redeemed Outstanding 88-1(1996) $ 2,365,000 $ 1,815,000 $ $ 95,000 $ 1,720, (1998) 8,635,000 6,505, ,000 6,130, (1995) 3,525,000 1,925, ,000 1,720, (1995) 8,262,260 4,720, ,000 4,255, (1996) 15,686,602 9,591, ,000 8,721, (1998) 3,208,398 2,325, ,000 2,195, (1996) 12,213,718 7,463, ,000 6,788, (1998) 891, ,000 40, , (1995) 4,472,875 2,015, ,000 1,695, (1998) 970, ,000 45, ,000 $ 60,230,135 $ 37,735,320 $ - $ 3,220,000 $ 34,515,320 The annual requirements to amortize the bonds issued in connection with the Community Facilities Districts, outstanding as of are as follows: A. CFD 86-1 (Portola Hills) Year Ended June 30 Principal Interest Payment Total 2012 $ 755,000 $ 27,180 $ 782,180 Total $ 755,000 $ 27,180 $ 782,

62 NOTES TO FINANCIAL STATEMENTS NOTE 7 SPECIAL ASSESSMENT DEBT WITH GOVERNMENTAL COMMITMENT: (continued) B. CFD 88-1 (Rancho Santa Margarita Series 1996) Year Ended June 30 Principal Interest Payment Total 2012 $ 110,000 $ 109,890 $ 219, , , , ,000 93, , ,000 84, , ,000 74, , ,055, ,615 1,241,615 Total $ 1,720,000 $ 652,080 $ 2,372,080 C. CFD 88-1 (Rancho Santa Margarita Series 1998) Year Ended June 30 Principal Interest Payment Total 2012 $ 405,000 $ 340,831 $ 745, , , , , , , , , , , , , ,685, ,219 4,249,219 Total $ 6,130,000 $ 2,000,138 $ 8,130,

63 NOTES TO FINANCIAL STATEMENTS NOTE 7 SPECIAL ASSESSMENT DEBT WITH GOVERNMENTAL COMMITMENT: (continued) D. CFD 88-2 (Rancho Cielo Series 1995) Year Ended June 30 Principal Interest Payment Total 2012 $ 215,000 $ 101,843 $ 316, ,000 88, , ,000 74, , ,000 58, , ,000 43, , ,000 36, ,040 Total $ 1,720,000 $ 402,199 $ 2,122,199 E. CFD 89-1 (Robinson Ranch Series 1995) Year Ended June 30 Principal Interest Payment Total 2012 $ 505,000 $ 234,751 $ 739, , , , , , , , , , ,000 96, , ,240,000 70,449 1,310,449 Total $ 4,255,000 $ 911,568 $ 5,166,

64 NOTES TO FINANCIAL STATEMENTS NOTE 7 SPECIAL ASSESSMENT DEBT WITH GOVERNMENTAL COMMITMENT: (continued) F. CFD 89-2 (Rancho Santa Margarita Series 1996) Year Ended June 30 Principal Interest Payment Total 2012 $ 950,000 $ 423,848 $ 1,373, ,040, ,863 1,400, ,135, ,020 1,427, ,240, ,840 1,456, ,345, ,008 1,480, ,011,602 5,015,030 8,026,632 Total $ 8,721,602 $ 6,443,608 $ 15,165,210 G. CFD 89-2 (Rancho Santa Margarita Series 1998) Year Ended June 30 Principal Interest Payment Total 2012 $ 150,000 $ 121,900 $ 271, , , , , , , ,000 93, , ,000 82, , ,325, ,831 1,527,831 Total $ 2,195,000 $ 716,881 $ 2,911,

65 NOTES TO FINANCIAL STATEMENTS NOTE 7 SPECIAL ASSESSMENT DEBT WITH GOVERNMENTAL COMMITMENT: (continued) H. CFD 89-3 (Rancho Trabuco North Series 1996) Year Ended June 30 Principal Interest Payment Total 2012 $ 740,000 $ 329,603 $ 1,069, , ,575 1,090, , ,958 1,111, , ,435 1,133, ,045, ,858 1,149, ,343,718 3,906,954 6,250,672 Total $ 6,788,718 $ 5,017,383 $ 11,806,100 I. CFD 89-3 (Rancho Trabuco North Series 1998) Year Ended June 30 Principal Interest Payment Total 2012 $ 45,000 $ 33,781 $ 78, ,000 31,338 71, ,000 29,038 69, ,000 26,450 76, ,000 23,288 83, ,000 57, ,069 Totals $ 610,000 $ 200,964 $ 810,

66 NOTES TO FINANCIAL STATEMENTS NOTE 7 SPECIAL ASSESSMENT DEBT WITH GOVERNMENTAL COMMITMENT: (continued) J. CFD 89-4 (Akins Series 1995) Year Ended June 30 Principal Interest Payment Total 2012 $ 355,000 $ 93,108 $ 448, ,000 70, , ,000 46, , ,000 19, , ,000 3,015 93,015 Total $ 1,695,000 $ 232,554 $ 1,927,554 K. CFD 89-4 (Akins Series 1998) Year Ended June 30 Principal Interest Payment Total 2012 $ 45,000 $ 37,478 $ 82, ,000 34,913 79, ,000 32,205 82, ,000 29,213 84, ,000 13, ,823 Total $ 680,000 $ 147,632 $ 827,

67 NOTES TO FINANCIAL STATEMENTS NOTE 8 PUBLIC FINANCING AUTHORITY BONDS: The Public Financing Authorities (PFA) were created to obtain economies of scale by refinancing the Community Facilities District (CFD) debt. PFA 95 refinanced the debt for CFD 88-2, 89-1 and PFA 96 refinanced the debt for CFD 88-1, 89-2 and PFA 98 refinanced the debt for CFD 88-1, 89-2, 89-3 and The outstanding debt incurred through bonds issued in connection with the Public Financing Authorities (PFA) at is as follows: Amount of Original Issue Outstanding July 1, 2010 Issued Redeemed Outstanding PFA 95 $ 16,265,000 $ 8,340,000 $ $ 970,000 $ 7,370,000 PFA 96 29,484,918 17,454,918 1,565,000 15,889,918 PFA 98 13,705,000 9,640, ,000 9,040,000 $ 59,454,918 $ 35,434,918 $ - $ 3,135,000 $ 32,299,918 The annual requirements to amortize the bonds issued in connection with the Public Financing Authorities outstanding as of are as follows: A. Public Financing Authority PFA Principal Interest Payment Total 2012 $ 1,055,000 $ 386,601 $ 1,441, ,150, ,310 1,474, ,230, ,075 1,487, ,325, ,896 1,509, , ,921 1,094, ,635,000 84,044 1,719,044 Total $ 7,370,000 $ 1,356,847 $ 8,726,

68 NOTES TO FINANCIAL STATEMENTS NOTE 8 PUBLIC FINANCING AUTHORITY BONDS: (continued) B. Public Financing Authority PFA Principal Interest Payment Total 2012 $ 1,705,000 $ 712,950 $ 2,417, ,860, ,000 2,466, ,025, ,450 2,514, ,195, ,850 2,557, ,375, ,750 2,600, ,729,918 8,397,332 14,127,250 Total $ 15,889,918 $ 10,794,332 $ 26,684,250 C. Public Financing Authority PFA Principal Interest Payment Total 2012 $ 645,000 $ 411,253 $ 1,056, , ,763 1,061, , ,125 1,079, , ,906 1,107, ,240, ,575 1,504, ,950, ,588 5,570,588 Total $ 9,040,000 $ 2,340,210 $ 11,380,

69 NOTES TO FINANCIAL STATEMENTS NOTE 9 GENERAL OBLIGATION BONDS: In March 2004, the voters approved the issuance of bonds, not to exceed $180 million, for the purpose of paying for the cost of new construction, reconstruction or modernization of some or all of the schools within the District. The outstanding general obligation bonded debt of Saddleback Valley Unified School District at is: Amount Issued Redeemed Date of Interest Maturity of Original Outstanding Current Current Outstanding Issue Rate % Date Issue July 1, 2010 Year Year 8/12/ /1/2029 $100,000,000 $ 87,155,000 $ $ 1,230,000 $ 85,925,000 1/24/ /1/ ,000,000 50,535,000 1,525,000 49,010,000 $160,000,000 $137,690,000 $ - $ 2,755,000 $134,935,000 The annual requirements to amortize 2004 Series A bonds payable, outstanding as of, are as follows: 2004 Series A Year Ended June 30 Principal Interest Total 2012 $ 1,425,000 $ 4,197,613 $ 5,622, ,645,000 4,136,212 5,781, ,880,000 4,068,063 5,948, ,125,000 3,987,656 6,112, ,390,000 3,882,750 6,272, ,920,000 17,178,250 34,098, ,450,000 11,698,750 39,148, ,090,000 3,370,250 35,460,250 Total debt service 85,925,000 $ 52,519,544 $ 138,444,544 Unamortized bond premium 2,589,892 Total $ 88,514,892 Proceeds received in excess of debt are added to the maturity amount and amortized to interest expense over the life of the liability. The bonds issued in August 2004 included a premium/discount of $3,597,075. This amount is amortized using the straight-line method. Amortization of $143,883 was recognized during the year. -46-

70 NOTES TO FINANCIAL STATEMENTS NOTE 9 GENERAL OBLIGATION BONDS: (continued) The annual requirements to amortize 2007 Series A bonds payable, outstanding as of, are as follows: 2007 Series A Year Ended June 30 Principal Interest Total 2012 $ 1,585,000 $ 2,211,956 $ 3,796, ,650,000 2,151,381 3,801, ,710,000 2,088,306 3,798, ,775,000 2,018,606 3,793, ,850,000 1,946,106 3,796, ,470,000 8,439,180 18,909, ,200,000 5,630,978 18,830, ,770,000 1,988,175 18,758,175 Total debt service 49,010,000 $ 26,474,688 $ 75,484,688 Unamortized bond premium 1,589,322 Total $ 50,599,322 Proceeds received in excess of debt are added to the maturity amount and amortized to interest expense over the life of the liability. The bonds issued in January 2007 included a premium of $2,007,562. This amount is amortized using the straight-line method. Amortization of $83,648 was recognized during the year. -47-

71 NOTES TO FINANCIAL STATEMENTS NOTE 10 LONG-TERM DEBT SCHEDULE OF CHANGES: A schedule of changes in long-term debt for the year ended is shown below. Governmental Activities Balance Balance Amount Due July 1, 2010 Additions Deductions in One Year Special Assessment Debt with Governmental Commitment (CFD) CFD 86-1 $ 1,460,000 $ $ 705,000 $ 755,000 $ 755,000 Public Financing Authority Bonds 35,434,918 3,135,000 32,299,918 3,405,000 Compensated Absences 1,600, ,841 1,989,753 Early Retirement 8,194,023 1,176,250 7,017,773 1,182,714 Other Postemployment Benefit Costs (OPEB) 6,907,057 1,917,285 8,824,342 General Obligation Bonds 2004 Series A 87,155,000 1,230,000 85,925,000 1,425, Series A 50,535,000 1,525,000 49,010,000 1,585,000 Unamortized Bond Premium 2004 Series A 2,733, ,883 2,589, , Series A 1,672,970 83,648 1,589,322 83,648 Total Governmental Activities 195,693,655 2,306,126 7,998, ,001,000 8,580,245 Special Assessment Debt with Governmental Commitment (CFD) CFDs Related to PFAs 37,735,320 3,220,000 34,515,320 3,520,000 Total $ 233,428,975 $ 2,306,126 $ 11,218,781 $ 224,516,320 $ 12,100,245 For governmental activities, compensated absences, early retirement and OPEB costs are liquidated by the General Fund. CFD, PFA and General Obligation Bond debt are liquidated through property tax collections as administered by the County. -48-

72 NOTES TO FINANCIAL STATEMENTS NOTE 11 CAPITAL ASSETS AND DEPRECIATION SCHEDULE OF CHANGES: Capital asset activity for the year ended is shown below. A. Governmental Activities Balance Balance July 1, 2010 Additions Deduction Capital assets not being depreciated: Land $ 39,747,053 $ $ $ 39,747,053 Work in progress 6,774,906 2,543,071 6,169,144 3,148,833 Total capital assets not being depreciated: 46,521,959 2,543,071 6,169,144 42,895,886 Capital assets being depreciated: Buildings and site improvements 445,791,873 9,235, ,027,778 Machinery, equipment and vehicles 23,700, , ,274 24,044,573 Total capital assets being depreciated: 469,492,202 10,088, , ,072,351 Less accumulated depreciation for: Building and site improvements 114,173,277 14,233, ,406,766 Machinery, equipment and vehicles 14,008,537 1,422, ,084 14,930,107 Total accumulated depreciation 128,181,814 15,656, , ,336,873 Governmental activities capital assets, net $ 387,832,347 $ (3,024,649) $ 6,176,334 $ 378,631,364 B. Business-type Activities Balance Balance July 1, 2010 Additions Deduction Capital assets being depreciated: Buildings and improvements $ 556,062 $ $ $ 556,062 Machinery, equipment and vehicles 59,020 59,020 Total capital assets being depreciated: 615, ,082 Less accumulated depreciation for: Building and improvements 299,829 27, ,488 Machinery, equipment and vehicles 35,519 3,935 39,454 Total accumulated depreciation 335,348 31, ,942 Business-type activities capital assets, net $ 279,734 $ (31,594) $ - $ 248,

73 NOTES TO FINANCIAL STATEMENTS NOTE 12 - RISK MANAGEMENT: The District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. During fiscal year 2011, the District operated three Internal Service Funds, a Health and Welfare Fund, Workers Compensation Fund, and Property and Liability Fund to account for and finance its uninsured risks of loss. Under these programs, the Internal Service Funds provide coverage for up to a maximum of $300,000 for medical claims, $1,500 for dental and $500 for vision, $350,000 for each worker's compensation claim, $50,000 for each general liability claim and $10,000 for each property damage claim. The District purchases commercial insurance for claims in excess of coverage provided by the fund and for all other risks of loss. Settled claims have not exceeded this commercial coverage in any of the past three fiscal years. All funds of the District participate in the program and make payments to the Internal Service Funds based on actuarial estimates of the amounts needed to pay prior and current year claims and to establish a reserve for catastrophe losses. The claims liability of $3,863,832 reported in the Health and Welfare Fund and $8,250,235 reported in the Workers Compensation Fund at is based on the requirements of Governmental Accounting Standards Board Statement No. 10, which requires that a liability for claims be reported if information prior to the issuance of the financial statements indicates that it is probable that a liability has been incurred at the date of the financial statements and the amount of the loss can be reasonably estimated. Changes in the fund's claims liability amount in were: Beginning Claims and Ending Fiscal Year Changes in Claim Fiscal Year Liability Estimates Payments Liability Health and Welfare Fund $ 6,063,832 $30,968,033 $33,103,033 $ 3,863,832 Workers Compensation Fund 6,728,742 4,467,999 2,946,506 8,250,235 Property and Liability Fund - 1,296,878 1,296,878 - Total $12,792,574 $36,667,910 $37,346,417 $12,114,

74 NOTES TO FINANCIAL STATEMENTS NOTE 13 - EMPLOYEE RETIREMENT PLANS: Qualified employees are covered under multiple-employer defined benefit pension plans maintained by agencies of the State of California. Certificated employees are members of the State Teachers Retirement System (STRS), classified employees are members of the Public Employees Retirement System (PERS). State Teachers Retirement System (STRS) Plan Description The District contributes to the State Teachers Retirement System, a cost-sharing multiple-employer public employee retirement system defined benefit pension plan administered by STRS. The plan provides retirement, disability and survivor benefits to beneficiaries. Benefit provisions are established by State statutes, as legislatively amended, within the State Teachers Retirement Law. STRS issues a separate comprehensive annual financial report that includes financial statements and required supplementary information. Copies of the STRS annual financial report may be obtained from STRS, 7667 Folsom Boulevard, Sacramento, CA Funding Policy Active plan members are required to contribute 8.0% of their salary and the District is required to contribute an actuarially determined rate. The actuarial methods and assumptions used for determining the rate are those adopted by the STRS Teachers Retirement Board. The required employer contribution rate for fiscal year was 8.25% of annual payroll. The contribution requirements of the plan members are established and may be amended by State statute. -51-

75 NOTES TO FINANCIAL STATEMENTS NOTE 13 - EMPLOYEE RETIREMENT PLANS: (continued) Public Employees Retirement System (PERS) Plan Description The District contributes to the School Employer Pool under the California Public Employees Retirement System (CalPERS), a cost-sharing multiple-employer public employee retirement system defined benefit pension plan administered by CalPERS. The plan provides retirement and disability benefits, annual cost-of-living adjustments, and death benefits to plan members and beneficiaries. Benefit provisions are established by State statutes, as legislatively amended, within the Public Employees Retirement Law. CalPERS issues a separate comprehensive annual financial report that includes required supplementary information. Copies of the CalPERS annual financial report may be obtained from the CalPERS Executive Office, 400 P Street, Sacramento, CA Funding Policy Active plan members are required to contribute 7.0% of their salary and the District is required to contribute an actuarially determine rate. The actuarial methods and assumptions used for determining the rate are those adopted by the CalPERS Board of Administration. The required employer contribution rate for fiscal year was % of annual payroll. The contribution requirements of the plan members are established and may be amended by State statute. Contributions to STRS and PERS The District s contributions to STRS and PERS for each of the last three fiscal years is as follows: STRS PERS Year Ended Required Percent Required Percent June 30, Contribution Contributed Contribution Contributed 2009 $11,090, % $3,464, % ,469, % 2,967, % ,233, % 2,863, % -52-

76 NOTES TO FINANCIAL STATEMENTS NOTE 14 - EARLY RETIREES BENEFITS: In the District elected to provide a voluntary early retirement program for qualified employees. The employee must elect to retire between the ages of 55 and 65 and must have served in a credentialed position in the district for a minimum of five years. Total employees receiving benefits under this plan is 54. The employee will receive the difference between the pension paid by STRS and the amount that would have been paid by STRS if retirement were delayed, according to a pre-determined calculation. The amount paid for these benefits in the fiscal year ended was $383,832. The discount used for is 6%. The estimated amount for is $390,566. The discounted present value of expected future benefit payments for retirees at June 30, 2011 is $5,036,728 which is included as a liability in the government-wide statements. In the District elected to provide a voluntary early retirement program for qualified employees. The employee must be 55 years of age and have completed a minimum of ten years of service to the District in a credentialed position as of January 30, 2009 or be 50 years of age and have completed a minimum of thirty years of service to the District in a credentialed position as of June 30, The employee will receive contributions that equal 90% of the employees final base pay. The amount paid for these benefits in the fiscal year ended was $792,418. The estimated amount for is $792,418. The estimated accumulated future contributions to the retirement plan for retirees at is $1,981,045 which is included in the government-wide statements. NOTE 15 POSTEMPLOYMENT HEALTHCARE BENEFITS: Plan Description and Eligibility The District administers a single-employer defined benefit healthcare plan (the Retiree Health Plan). The plan provides health, dental and vision benefits to Certificated employees age 55 and retire with 5 years of service until age 65. Benefits are provided to Classified employees who have reached age 50 and retire with at least 10 years of service until age 65 subject to a maximum of 8 years for less than 15 years of service. The District shall contribute to the cost for providing the employee the same insurance benefits that would be provided if the person were a regular, non-retired employee eligible for benefits at the time of retirement. The Retiree Health Plan does not issue a separate financial report. -53-

77 NOTES TO FINANCIAL STATEMENTS NOTE 15 POSTEMPLOYMENT HEALTHCARE BENEFITS: (continued) Funding Policy The District currently finances benefits on a pay-as-you-go basis. The District contributes approximately 92% of the cost of retiree benefits with the remaining 8% coming from employee payroll deductions and retiree contributions. For fiscal year ended 2011, the District contributed $6,117,318 to the plan. Annual OPEB Cost and Net OPEB Obligation The District s annual other postemployment benefit (OPEB) cost (expense) is calculated based on the annual required contribution of the employer (ARC), an amount actuarially determined in accordance with the parameters of GASB Statement 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed thirty years. The following table shows the components of the District s annual OPEB cost for the year, the amount actually contributed, and changes in the OPEB obligation: Annual required contribution (ARC) $ 7,988,069 Interest on net OPEB obligation 345,353 Adjustment to annual required contribution (298,819) Annual OPEB cost (expense) 8,034,603 Contributions made (6,117,318) Change in net OPEB obligation 1,917,285 Net OPEB obligation - beginning of year 6,907,057 Net OPEB obligation - end of year $ 8,824,

78 NOTES TO FINANCIAL STATEMENTS NOTE 15 POSTEMPLOYMENT HEALTHCARE BENEFITS: (continued) Annual OPEB Cost and Net OPEB Obligation (continued) The District s annual OPEB cost for the year, the percentage of annual OPEB cost contributed, and the net OPEB obligation for each of the last three fiscal years were as follows: Percentage of Fiscal Year Annual Annual OPEB Net OPEB Ended OPEB Cost Cost Contributed Obligation 6/30/2009 $ 6,773, % $ 5,334,102 6/30/2010 6,778, % 6,907,057 6/30/2011 8,034, % 8,824,342 Funding Status and Funding Progress As of May 1, 2011, the most recent actuarial valuation date, the plan was unfunded. The actuarial accrued liability for benefits as well as the unfunded actuarial accrued liability (UAAL) was $69,499,969. The covered payroll (annual payroll of active employees covered by the plan) was $126,318,561, and the ratio of the UAAL to the covered payroll was 55.0%. Actuarial valuations of an ongoing benefit plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The schedule of postemployment healthcare benefits funding progress, presented as required supplementary information following the notes to the financial statements, presents multiyear trend information about whether the actuarial value of plan assets, if any, is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. -55-

79 NOTES TO FINANCIAL STATEMENTS NOTE 15 POSTEMPLOYMENT HEALTHCARE BENEFITS: (continued) Actuarial Methods and Assumptions Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and the plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, if any, consistent with the long-term perspective of the calculations. In the May 1, 2011 actuarial valuation, the entry age normal actuarial cost method was used. The actuarial assumptions included a 5.0 percent investment rate of return (net of administrative expenses) which is a blended rate of the expected long-term investment returns on plan assets and on the employers own investments calculated based on the funded level of the plan at the valuation date, and an annual healthcare cost trend rate of 4.0 percent. Both rates included a 3.0 percent inflation assumption. The actuarial value of assets was determined using techniques that spread the effects of short-term volatility in the market value of investments over a five-year period. The UAAL is amortized using the level percentage of payroll method. The initial UAAL is amortized over a closed 30 year period and the actuarial gains/losses are amortized over an open 30 year period. NOTE 16 - JOINT POWERS AGREEMENTS: The Saddleback Valley Unified School District participates in three joint powers agreement (JPA) entities, Alliance of Schools for Cooperative Insurance Programs (ASCIP), School Excess Liability Fund (SELF) and the Coastline Regional Occupational Program (CROP). ASCIP provides property liability and property coverage to 117 school districts and community colleges in the state of California. SELF is a selfinsurance pool, providing coverage to over 1,250 school districts in California. SELF is a member-owned, statewide partnership of public educational agencies providing pooled programs for excess coverage. The ROP provides occupational training for high school students and adults residing in the District. Each JPA is governed by a board consisting of a representative from each member district. Each governing board controls the operations of its JPA independent of any influence by the Saddleback Valley Unified School District beyond the District's representation on the governing boards. -56-

80 NOTES TO FINANCIAL STATEMENTS NOTE 16 - JOINT POWERS AGREEMENTS: (continued) Each JPA is independently accountable for its fiscal matters. Budgets are not subject to any approval other than that of the respective governing boards. Member districts share surpluses and deficits proportionately to their participation in the JPA. Separate financial statements for each JPA may be obtained from the respective entity. The relationships between the Saddleback Valley Unified School District and the JPAs are such that neither JPA is a component unit of the District for financial reporting purposes. The most current condensed financial information available, is as follows: ASCIP SELF CROP (Unaudited) (Audited) (Unaudited) Total Assets $258,217,310 $174,774,000 $ 8,539,985 Total Liabilities 146,184, ,524,000 2,821,834 Fund Balance $112,032,945 $ 32,250,000 $ 5,718,151 Total Revenues $184,317,132 $ 9,165,000 $ 8,686,937 Total Expenditures 178,238,995 12,425,000 9,325,233 Net Change in Fund Balance $ 6,078,137 $ 3,260,000 $ (638,296) NOTE 17 DEFICIT FUND BALANCES: The Laguna Hills High School Associated Student Body Fund ended the year with a $46,702 deficit fund balance and a $28,648 deficit undesignated balance. The Adult Education Associated Student Body Fund ended the year with a $39,120 deficit undesignated balance. -57-

81 NOTES TO FINANCIAL STATEMENTS NOTE 18 RESTATEMENT TO BEGINNING FUND BALANCE: The beginning fund balance for the General Fund has been restated by $2,184 to include the beginning fund balance from the Pupil Transportation Equipment Fund in accordance with the requirements of GASB Statement No. 54. This fund no longer meets the definition of a special revenue fund, as defined by GASB 54, as it is not primarily composed of a restricted or committed revenue source. NOTE 19 - COMMITMENTS AND CONTINGENCIES: A. Litigation The District is involved in various claims and legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of any such matters will not have a material adverse effect on the District s financial statements. B. State and Federal Allowances, Awards, and Grants The District has received State and Federal funds for specific purposes that are subject to review and audit by the grantor agencies. Although such audits could generate expenditure disallowances under terms of the grants, it is believed that any required reimbursement will not be material. C. County School Facilities Fund The District is currently involved in several construction and modernization projects partially funded through the Office of Public School Construction. These projects are subject to future audits by the State, which may result in adjustments to the fund. D. Purchase Commitments As of, the District was committed under various capital expenditure purchase agreements for construction and modernization projects totaling approximately $4,100,000. Projects will be funded through bond proceeds, State Facilities program grants, State deferred maintenance allocations, capital facilities funds and general funds. -58-

82 NOTES TO FINANCIAL STATEMENTS NOTE 20 - SUBSEQUENT EVENT: Tax Revenue Anticipation Notes The District issued $19,775,000 of Tax Revenue Anticipation Notes dated July 1, 2011 through the California School Cash Reserve Program Authority ( Series G). The notes mature on June 1, 2012 and have a 2.0% interest rate. The notes were sold by the District to supplement its cash flow. The funds will be held with the trustee, unless and until the District needs to draw funds out. Repayment requirements are that principal and interest be deposited with the Trustee in January and April of 2012, respectively. -59-

83 REQUIRED SUPPLEMENTARY INFORMATION

84 SCHEDULE OF BUDGETARY COMPARISON FOR THE GENERAL FUND For the Fiscal Year Ended Budgeted Amounts Variance with Final Budget Favorable (Unfavorable) REVENUES Revenue Limit Sources: Original* Final Actual Final to Actual State Apportionments $ 23,961,498 $ 34,876,171 $ 35,158,333 $ 282,162 Local Sources 131,933, ,705, ,129,621 (575,869) Total Revenue Limit Sources 155,894, ,581, ,287,954 (293,707) Federal Sources 15,591,147 25,252,925 21,593,591 (3,659,334) Other State Sources 51,993,642 52,835,579 51,592,637 (1,242,942) Other Local Sources 4,144,118 5,391,068 5,214,699 (176,369) TOTAL REVENUES 227,623, ,061, ,688,881 (5,372,352) EXPENDITURES Certificated Salaries 112,850, ,590, ,516,635 1,073,967 Classified Salaries 29,189,222 30,671,858 29,799, ,919 Employee Benefits 46,656,037 47,130,486 46,711, ,938 Books and Supplies 9,517,017 10,228,663 5,770,943 4,457,720 Services and Other Operating Expenses 23,234,065 23,751,024 19,931,918 3,819,106 Capital Outlay 227, , ,458 8,105 Outgoing Tuition 2,710,015 1,980,000 2,021,402 (41,402) Other Transfers Out and Debt Service 4,727,271 5,273,227 5,239,835 33,392 Direct Support-Indirect Cost (36,051) (250,533) (251,763) 1,230 TOTAL EXPENDITURES 229,075, ,781, ,138,915 10,642,975 Excess (deficiency) of revenues over expenditures (1,451,734) 15,279,343 20,549,966 5,270,623 OTHER FINANCING SOURCES (USES) Interfund Transfers In 159, ,347 Interfund Transfers Out (1,809,239) (1,724,419) 1,724,419 TOTAL OTHER FINANCING SOURCES (USES) (1,809,239) (1,724,419) 159,347 1,883,766 Net change in fund balances $ (3,260,973) $ 13,554,924 20,709,313 $ 7,154,389 Fund Balance at Beginning of Year 20,018,246 Adjustment for Restatement (See Note 18) 2,184 Fund Balances at Beginning of Year, as Restated 20,020,430 Fund Balance at End of Year $ 40,729,743 * Original budget is the revised budget adopted on September 14, See the accompanying notes to the required supplementary information. -60-

85 SCHEDULE OF POSTEMPLOYMENT HEALTHCARE BENEFITS FUNDING PROGRESS For the Fiscal Year Ended Actuarial Value Actuarial Accrued of Liability Unfunded Actuarial UAAL as a Actuarial Assets (Unit Cost Method) Accrued Liability Funding Covered Percentage of Valuation Date (AVA) (AAL) (UAAL) Ratio Payroll Covered Payroll 5/1/2006 $ - $ 62,122,305 $ 62,122,305 0% $ 155,873, % 5/1/ ,728,650 62,728,650 0% 145,289, % 5/1/ ,499,969 69,499,969 0% 126,318, % See the accompanying notes to the required supplementary information. -61-

86 NOTES TO REQUIRED SUPPLEMENTARY INFORMATION For the Fiscal Year Ended NOTE 1 - PURPOSE OF SCHEDULES: A. Schedule of Budgetary Comparison For The General Fund GASB Statement No. 34 requires a budgetary comparison be presented for the general fund. This schedule presents the budget as originally adopted, the revised budget as of the fiscal year end, actual amounts at fiscal year end and the variance between the final budget and actual amounts. B. Schedule of Postemployment Healthcare Benefits Funding Progress This schedule is prepared in accordance with Statement No. 45 of the Governmental Accounting Standards Board, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions. The schedule is intended to show trends about the funding progress of the District s actuarially determined liability for postemployment benefits other than pensions. NOTE 2 EXCESS OF EXPENDITURES OVER APPROPRIATIONS: Excesses of expenditures over appropriations, by major object accounts, occurred in the following fund: General Fund Outgoing Tuition $ 41,

87 SUPPLEMENTARY INFORMATION

88 HISTORY AND ORGANIZATION The Saddleback Valley Unified School District came into existence on July 1, 1973 as a result of the unification of schools previously a part of the Trabuco Elementary School District, the San Joaquin Elementary School District, and the Tustin High School District. The District currently encompasses an area of approximately 93 square miles in Orange County, covering Laguna Hills, Lake Forest, Mission Viejo, Rancho Santa Margarita and certain other unincorporated areas. For the fiscal year ended, the District maintained twenty-four elementary schools, one early childhood center, four intermediate schools, four high schools, one continuation high school, one independent study high school, one adult education school and one special education high school. The Board of Education and the District Administrators for the fiscal year ended were as follows: BOARD OF EDUCATION Member Office Term Expires Suzie R. Swartz President November 2012 Ginny F. Aitkens Vice President November 2012 Dolores Winchell Clerk November 2014 Dennis Walsh Member November 2014 Don Sedgwick Member November 2012 DISTRICT ADMINISTRATORS Clint Harwick, Ed.D. Margarett Lewis Geri Partida Kathy Dick Superintendent Assistant Superintendent, Personnel Services Assistant Superintendent, Business Services Assistant Superintendent, Instructional Services -63-

89 SCHEDULE OF AVERAGE DAILY ATTENDANCE (ADA) For the Fiscal Year Ended The requirements governing ADA, admission of pupils, types of schools, recording and reporting of pupil attendance, and similar matters are controlled by provisions of the Education Code and by regulations of the California Department of Education. ADA statistics reported to the State for the fiscal year ended are as follows: Revised Second Period Annual Elementary: Kindergarten 1,716 1,716 First through third grade 5,816 5,822 Fourth through eighth grade 10,810 10,804 Opportunity schools 7 8 Home and hospital - temporary physical disabilities 6 7 Special education master plan Special education - nonpublic, nonsectarian schools 5 5 Extended year special education - mandated Extended year programs - nonpublic, nonsectarian schools 1 1 Total Elementary ADA 19,011 19,017 Secondary: Regular classes 10,026 9,964 Continuation education Opportunity schools Home and hospital - temporary physical disabilities Special education master plan Special education - nonpublic, nonsectarian schools Extended year special education - mandated Extended year special education - nonpublic, nonsectarian schools 5 5 Total Secondary ADA 10,641 10,585 Revised Second Period Annual Classroom Classroom Based Total Based Total Kindergarten-Gates Charter School First through third grade-gates Charter School Fourth through sixth grade-gates Charter School Total Charter School ADA Total ADA 30,520 30,470 See the accompanying notes to the supplementary information. -64-

90 SCHEDULE OF INSTRUCTIONAL TIME For the Fiscal Year Ended Number of Days Minutes Minutes Actual Minutes Actual Traditional Grade Level Requirement Reduced Minutes Reduced Minutes Calendar Status Kindergarten 36,000 35,000 31,525 30,649 35, In Compliance Grade 1 50,400 49,000 40,275 39,156 49, In Compliance Grade 2 50,400 49,000 40,275 39,156 49, In Compliance Grade 3 50,400 49,000 42,025 39,156 49, In Compliance Grade 4 54,000 52,500 42,025 40,585 52, In Compliance Grade 5 54,000 52,500 42,025 40,585 52, In Compliance Grade 6 54,000 52,500 42,025 40,585 52, In Compliance Grade 7 54,000 52,500 42,025 40,585 57, In Compliance Grade 8 54,000 52,500 42,025 40,585 57, In Compliance Grade 9 64,800 63,000 42,025 40,585 63, In Compliance Grade 10 64,800 63,000 42,025 40,585 63, In Compliance Grade 11 64,800 63,000 42,025 40,585 63, In Compliance Grade 12 64,800 63,000 42,025 40,585 63, In Compliance See the accompanying notes to the supplementary information. -65-

91 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS For the Fiscal Year Ended Pass-Through Federal Entity Catalog Identifying Total Program Program Name Number Number (1) Expenditures U.S. Department of Agriculture Pass-Through Program From: California Department of Education: Child Nutrition Cluster: U.S. Department of Education Direct Program From: Especially Needy Breakfast Program $ 313,109 Basic Breakfast Program ,519 National School Lunch Program ,427,745 Total: U.S. Department of Agriculture 2,827,373 Teaching American History (1) 237,042 Javits Gate: Gifted and Talented Education ,483 Subtotal: Direct Program 651,525 Pass-Through Programs From: California Department of Education: Title I Cluster: Title I, Grants to Local Educational Agencies ,053,749 American Recovery and Reinvestment Act (ARRA): Title 1, Grants to Local Educational Agencies ,856 Subtotal: Title I Cluster 2,725,605 Title II Enhancing Education Through Technology Cluster: Title II D, Enhancing Education Through Technology ,360 ARRA Title II D, Enhancing Education Through Technology, Competitive ,977 ARRA Title II D, Enhancing Education Through Technology, Formula ,235 Subtotal: Title II Enhancing Education Through Technology Cluster 333,572 Special Education Cluster: IDEA - Basic Local Assistance Entitlement, Part B, Section ,464,539 ARRA: IDEA- Basic Local Assistance Entitlement, Part B, Section ,762,961 IDEA - Local Assistance, Part B, Sec 11, Private School ISPs IDEA - Local Assistance, Part B, Sec 11, Private School ISPs ,531 IDEA - Preschool Local Entitlement, Part B, Sec A ,640 ARRA: IDEA- Preschool Local Entitlement, Part B, Sec ,196 IDEA - Preschool, Part B, Sec ,809 ARRA: IDEA- Preschool Part B, Sec ,601 Preschool Staff Development A Subtotal: Special Education Cluster 7,957,083 Title I, Even Start, Family Literacy Program ,265 Title II A, Improving Teacher Quality ,849 See the accompanying notes to the supplementary information. -66-

92 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS For the Fiscal Year Ended Pass-Through Federal Entity Catalog Identifying Total Program Program Name Number Number (1) Expenditures Title III, Limited English Proficiency ,340 Title III, Immigrant Education Program ,895 Title IV, Safe and Drug Free Schools and Communities ,857 Early Intervention Grants ,858 Adult Education: Institutionalized Adults ,422 Adult Education: Adult Secondary Education ,485 Adult Education: English Literacy and Civics Education A ,020 Adult Education: Adult Basic Education & ESL A ,011 Subtotal: Adult Education 121,938 Carl D. Perkins Career and Technical Education: Adult, Section ,466 Carl D. Perkins Career and Technical Education: Secondary, Section ,931 Education Jobs Fund ,070,926 ARRA: State Fiscal Stabilization Fund ,700,203 Pass-Through Programs From: California Department of Rehabilitation: Transition Partnership Cluster: Transition Partnership A ,789 ARRA: Transition Partnership A ,976 Subtotal: Transition Partnership Cluster 571,765 City of Irvine: Project with Industry S (1) 56,019 Subtotal: Pass-Through Programs 23,755,097 Total: U.S. Department of Education 23,755,097 U.S. Department of Health and Human Services Pass-Through Program From: California Department of Education: Medi-Cal Billing Option ,237 See the accompanying notes to the supplementary information. -67-

93 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS For the Fiscal Year Ended Pass-Through Federal Entity Catalog Identifying Total Program Program Name Number Number (1) Expenditures U.S. Department of Homeland Security Direct Program From: FEMA Public Assistance Funds ,662 U.S. Department of Housing and Urban Development Pass-Through Program From: City of Mission Viejo, Lake Forest & Rancho Santa Margarita Community Development Block Grant (1) 29,286 Total Federal Programs $ 26,719,655 Reconciliation to Federal Revenue Total Federal Programs $ 26,719,655 Revenue in excess of expenditures related to Medi-Cal Billing Option ,165 Expenditures in excess of revenue related to Community Development Block Grant (10,502) Expenditures in excess of revenue related to ARRA: State Fiscal Stabilization Fund (2,193,504) Expenditures in excess of revenue related to FEMA (13,662) Total Federal Program Revenue $ 24,586,152 (1) Pass-Through Entity Identifying Number is either not applicable or not available. This District is the recipient of a federal award program that does not result in cash receipts or disbursements. The District was granted $268,574 of commodities under the National School Lunch Program (CFDA ). See the accompanying notes to the supplementary information. -68-

94 SCHEDULE OF FINANCIAL TRENDS AND ANALYSIS For the Fiscal Year Ended June 30, (Budget) Amount % Amount % Amount % Amount % GENERAL FUND: Revenue Revenue Limit Sources $ 162,410, $ 164,287, $ 158,787, $ 183,603, Federal 13,749, ,593, ,787, ,688, State 48,442, ,592, ,034, ,564, County, Local and Transfers In 2,805, ,373, ,383, ,761, Total Revenue 227,407, ,847, ,993, ,618, Expenditures Certificated Salaries 110,428, ,516, ,870, ,094, Classified Salaries 28,677, ,799, ,276, ,077, Employee Benefits 51,422, ,711, ,995, ,060, Books and Supplies 7,766, ,770, ,956, ,902, Services and Other Operating Expenses 23,118, ,931, ,236, ,783, Capital Outlay 170, , , , Outgoing Tuition 2,274, ,021, ,670, ,853, Other Transfers Out 2,467, ,988, ,145, ,848, Interfund Transfers Out 178, ,315, , Total Expenditures 226,325, ,317, ,726, ,576, Change in Fund Balance $ 1,082, $ 20,530, $ (10,732,927) (4.32) $ 7,041, Ending Fund Balance $ 41,630, $ 40,548, $ 20,018, $ 30,751, Available Reserve $ 38,371, $ 35,802, $ 10,742, $ 5,111, Recommended Reserve Percentage Average Daily Attendance 29,813 30,520 31,112 31,729 Total Long-Term Debt $ 212,019,577 $ 224,516,320 $ 233,428,975 $ 236,830,269 IMPORTANT NOTES: Amounts above are those reported as General Fund in the State accounting software and do not include Special Revenue funds reported in the General Fund according to GASB 54. Available reserves are those amounts reserved for economic uncertainty and any other remaining unassigned fund balances from the General Fund. The 2012 Budget is the revised budget adopted on September 13, All percentages are of total expenditures. Average daily attendance is at Second Period. Attendance includes Charter School average daily attendance and excludes adult education and ROP. See the accompanying notes to the supplementary information. -69-

95 SCHEDULE OF CHARTER SCHOOLS For the Fiscal Year Ended Gates School Charter School Included in District Audit Report Yes See the accompanying notes to the supplementary information. -70-

96 RECONCILIATION OF ANNUAL FINANCIAL AND BUDGET REPORT WITH AUDITED FINANCIAL STATEMENTS For the Fiscal Year Ended Community Recreation Fund Annual Financial and Budget Report Fund Balances $ 321,331 Adjustments and Reclassifications: Increasing the Fund Balance: Accumulated Depreciation 32,106 Net Adjustments and Reclassifications $ 32,106 Audited Financial Statement Fund Balances $ 353,437 NOTE: The financial data for the Community Facilities Districts and Public Financing Authorities presented in the debt service funds and capital projects funds is a component part of these financial statements that is not reported in the District s unaudited actuals; therefore, a reconciliation is not presented. See the accompanying notes to the supplementary information. -71-

97 NOTES TO SUPPLEMENTARY INFORMATION For the Fiscal Year Ended NOTE 1 - PURPOSE OF SCHEDULES: A. Schedule of Average Daily Attendance (ADA) Average daily attendance is a measurement of the number of pupils attending classes of the District. The purpose of attendance accounting from a fiscal standpoint is to provide the basis on which apportionments of state funds are made to school districts. This schedule provides information regarding the attendance of students at various grade levels and in different programs. B. Schedule of Instructional Time The District has received incentive funding for increasing instructional time as provided by the Incentives for Longer Instructional Day. This schedule presents information on the amount of instructional time offered by the District and whether the District complied with the provisions of Education Code Sections through C. Schedule of Expenditures of Federal Awards OMB Circular A-133 requires a disclosure of the financial activities of all federally funded programs. This schedule is presented on the modified accrual basis of accounting. D. Schedule of Financial Trends and Analysis The Standards and Procedures for Audits of California K-12 Local Education Agencies requires that this schedule be prepared showing financial trends of the General Fund over the past three fiscal years as well as the current year budget. This schedule is intended to identify if the District faces potential fiscal problems and if they have met the recommended available reserve percentages. E. Schedule of Charter Schools The Standards and Procedures for Audits of California K-12 Local Education Agencies requires that this schedule list all charter schools chartered by the District and inform the users whether or not the charter school information is included in the District s financial statements. F. Reconciliation of Annual Financial and Budget Report with Audited Financial Statements This schedule provides the information necessary to reconcile the fund balances of all funds as reported on the annual Financial and Budget Report form to the audited financial statements. -72-

98 OPTIONAL SUPPLEMENTARY INFORMATION

99 MAJOR DEBT SERVICE FUNDS - PUBLIC FINANCING AUTHORITIES COMBINING BALANCE SHEET ASSETS Public Financing Authority 95 Public Financing Authority 96 Public Financing Authority 98 Total (Memorandum Only) Cash with Fiscal Agent $ 55,312 $ 248,516 $ 88,775 $ 392,603 Investments 1,138,550 2,063, ,350 4,161,845 Long Term Investments Bond Receivable 7,670,000 17,230,320 9,615,000 34,515,320 TOTAL ASSETS $ 8,863,862 $ 19,542,781 $ 10,663,125 $ 39,069,768 LIABILITIES AND FUND BALANCE FUND BALANCE Restricted for Debt Service $ 8,863,862 $ 19,542,781 $ 10,663,125 $ 39,069,768 TOTAL FUND BALANCE 8,863,862 19,542,781 10,663,125 39,069,768 TOTAL LIABILITIES AND FUND BALANCE $ 8,863,862 $ 19,542,781 $ 10,663,125 $ 39,069,768 See the accompanying notes to the optional supplementary information. -73-

100 MAJOR DEBT SERVICE FUNDS - PUBLIC FINANCING AUTHORITIES COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES For the Fiscal Year Ended Public Financing Authority 95 Public Financing Authority 96 Public Financing Authority 98 Total (Memorandum Only) REVENUES Other Local Sources $ 557,312 $ 1,111,901 $ 620,794 $ 2,290,007 TOTAL REVENUES 557,312 1,111, ,794 2,290,007 EXPENDITURES Debt Service 1,413,807 2,376,050 1,038,342 4,828,199 TOTAL EXPENDITURES 1,413,807 2,376,050 1,038,342 4,828,199 Deficiency of revenues over expenditures (856,495) (1,264,149) (417,548) (2,538,192) OTHER FINANCING USES Interfund Transfers Out (134,910) (380,153) (176,220) (691,283) TOTAL OTHER FINANCING USES (134,910) (380,153) (176,220) (691,283) Net Changes in Fund Balances (991,405) (1,644,302) (593,768) (3,229,475) Fund Balances at Beginning of Year 9,855,267 21,187,083 11,256,893 42,299,243 Fund Balances at End of Year $ 8,863,862 $ 19,542,781 $ 10,663,125 $ 39,069,768 See the accompanying notes to the optional supplementary information. -74-

101 MAJOR DEBT SERVICE FUNDS - COMMUNITY FACILITIES DISTRICTS COMBINING BALANCE SHEET ASSETS Community Facilities District 86-1 Community Facilities District 88-1 Community Facilities District 88-2 Community Facilities District 89-1 Community Facilities District 89-2 Community Facilities District 89-3 Community Facilities District 89-4 Total (Memorandum Only) Cash with Fiscal Agent $ 781,181 $ 1,005,919 $ 441,787 $ 876,247 $ 1,830,520 $ 1,281,568 $ 635,129 $ 6,852,351 Investments 285, , ,315 24,279 1,227,576 TOTAL ASSETS $ 781,181 $ 1,291,223 $ 441,787 $ 876,247 $ 2,369,198 $ 1,660,883 $ 659,408 $ 8,079,927 LIABILITIES AND FUND BALANCE FUND BALANCE Restricted for Debt Service $ 781,181 $ 1,291,223 $ 441,787 $ 876,247 $ 2,369,198 $ 1,660,883 $ 659,408 $ 8,079,927 TOTAL FUND BALANCE 781,181 1,291, , ,247 2,369,198 1,660, ,408 8,079,927 TOTAL LIABILITIES AND FUND BALANCE $ 781,181 $ 1,291,223 $ 441,787 $ 876,247 $ 2,369,198 $ 1,660,883 $ 659,408 $ 8,079,927 See the accompanying notes to the optional supplementary information. -75-

102 MAJOR DEBT SERVICE FUNDS - COMMUNITY FACILITIES DISTRICTS COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES For the Fiscal Year Ended Community Facilities District 86-1 Community Facilities District 88-1 Community Facilities District 88-2 Community Facilities District 89-1 Community Facilities District 89-2 Community Facilities District 89-3 Community Facilities District 89-4 Total (Memorandum Only) REVENUES Other Local Sources $ 232,588 $ 853,957 $ 288,064 $ 702,767 $ 1,486,647 $ 1,040,234 $ 488,431 $ 5,092,688 TOTAL REVENUES 232, , , ,767 1,486,647 1,040, ,431 5,092,688 EXPENDITURES Debt Service 784, , , ,639 1,611,405 1,125, ,737 6,037,244 TOTAL EXPENDITURES 784, , , ,639 1,611,405 1,125, ,737 6,037,244 Deficiency of revenues over expenditures (552,152) (95,954) (31,168) (24,872) (124,758) (85,346) (30,306) (944,556) OTHER FINANCING SOURCES Interfund Transfers In 146,811 36,815 54, , ,622 57, ,283 TOTAL OTHER FINANCING SOURCES - 146,811 36,815 54, , ,622 57, ,283 Net Changes in Fund Balances (552,152) 50,857 5,647 29, ,812 77,276 26,768 (253,273) Fund Balances at Beginning of Year 1,333,333 1,240, , ,728 2,260,386 1,583, ,640 8,333,200 Fund Balances at End of Year $ 781,181 $ 1,291,223 $ 441,787 $ 876,247 $ 2,369,198 $ 1,660,883 $ 659,408 $ 8,079,927 See the accompanying notes to the optional supplementary information. -76-

103 MAJOR CAPITAL PROJECTS FUNDS - COMMUNITY FACILITIES DISTRICTS COMBINING BALANCE SHEET Community Facilities District Administrative Fund Community Facilities District 86-1 Community Facilities District 87-4 Community Facilities District 88-1 Community Facilities District 88-2 ASSETS Cash on Hand and in Banks $ 784,464 $ 132 $ 88 $ 174 $ 13 Cash with Fiscal Agent 167,120 26,879 6,458 Accounts Receivable: Miscellaneous 129,740 TOTAL ASSETS $ 914,204 $ 167,252 $ 88 $ 27,053 $ 6,471 LIABILITIES AND FUND BALANCE LIABILITIES Accounts Payable $ $ 3,126 $ $ $ Due to Other Funds 472,108 TOTAL LIABILITIES 472,108 3, FUND BALANCE Restricted 442, , ,053 6,471 TOTAL FUND BALANCE 442, , ,053 6,471 TOTAL LIABILITIES AND FUND BALANCE $ 914,204 $ 167,252 $ 88 $ 27,053 $ 6,471 See the accompanying notes to the optional supplementary information. -77-

104 MAJOR CAPITAL PROJECTS FUNDS - COMMUNITY FACILITIES DISTRICTS COMBINING BALANCE SHEET Community Facilities District 89-1 Community Facilities District 89-2 Community Facilities District 89-3 Community Facilities District 89-4 Total (Memorandum Only) ASSETS Cash on Hand and in Banks $ 36 $ 18 $ 127 $ 308 $ 785,360 Cash with Fiscal Agent 31,631 23, ,606 20, ,339 Accounts Receivable: Miscellaneous 129,740 TOTAL ASSETS $ 31,667 $ 23,095 $ 110,733 $ 20,876 $ 1,301,439 LIABILITIES AND FUND BALANCE LIABILITIES Accounts Payable $ $ $ $ $ 3,126 Due to Other Funds 472,108 TOTAL LIABILITIES ,234 FUND BALANCE Restricted 31,667 23, ,733 20, ,205 TOTAL FUND BALANCE 31,667 23, ,733 20, ,205 TOTAL LIABILITIES AND FUND BALANCE $ 31,667 $ 23,095 $ 110,733 $ 20,876 $ 1,301,439 See the accompanying notes to the optional supplementary information. -78-

105 MAJOR CAPITAL PROJECTS FUNDS - COMMUNITY FACILITIES DISTRICTS COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES For the Fiscal Year Ended Community Facilities District Administrative Fund Community Facilities District 86-1 Community Facilities District 87-4 Community Facilities District 88-1 Community Facilities District 88-2 REVENUES Other Local Sources $ 548,431 $ $ $ $ TOTAL REVENUES 548, EXPENDITURES Plant Services 568, ,374 TOTAL EXPENDITURES 568, , Net Changes in Fund Balances (20,361) (227,374) Fund Balances at Beginning of Year 462, , ,053 6,471 Fund Balances at End of Year $ 442,096 $ 164,126 $ 88 $ 27,053 $ 6,471 See the accompanying notes to the optional supplementary information. -79-

106 MAJOR CAPITAL PROJECTS FUNDS - COMMUNITY FACILITIES DISTRICTS COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES For the Fiscal Year Ended Community Facilities District 89-1 Community Facilities District 89-2 Community Facilities District 89-3 Community Facilities District 89-4 Total (Memorandum Only) REVENUES Other Local Sources $ $ $ $ $ 548,431 TOTAL REVENUES ,431 EXPENDITURES Plant Services 796,166 TOTAL EXPENDITURES ,166 Net Changes in Fund Balances (247,735) Fund Balances at Beginning of Year 31,667 23, ,733 20,876 1,073,940 Fund Balances at End of Year $ 31,667 $ 23,095 $ 110,733 $ 20,876 $ 826,205 See the accompanying notes to the optional supplementary information. -80-

107 NON-MAJOR DEBT SERVICE FUND BALANCE SHEET Bond Interest and Redemption Fund ASSETS Cash in County Treasury $ 6,322,071 TOTAL ASSETS $ 6,322,071 LIABILITIES AND FUND BALANCE FUND BALANCE Restricted $ 6,322,071 TOTAL FUND BALANCE 6,322,071 TOTAL LIABILITIES AND FUND BALANCE $ 6,322,071 See the accompanying notes to the optional supplementary information. -81-

108 NON-MAJOR DEBT SERVICE FUND STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE For the Fiscal Year Ended REVENUES Bond Interest and Redemption Fund Other State Sources $ 104,886 Other Local Sources 9,531,465 TOTAL REVENUES 9,636,351 EXPENDITURES Debt Service 9,275,256 TOTAL EXPENDITURES 9,275,256 Net Changes in Fund Balance 361,095 Fund Balance at Beginning of Year 5,960,976 Fund Balance at End of Year $ 6,322,071 See the accompanying notes to the optional supplementary information. -82-

109 NON-MAJOR SPECIAL REVENUE FUNDS COMBINING BALANCE SHEET ASSETS Adult Education Fund Child Development Fund Cafeteria Fund Deferred Maintenance Fund Total (Memorandum Only) Cash in County Treasury $ 24,639 $ 3,443,261 $ 927,339 $ 3,147,971 $ 7,543,210 Cash in Banks 500 2,000 2,000 4,500 Collections Awaiting Deposit 141, ,863 Accounts Receivable: Federal and State Governments 137,857 7, , ,995 Miscellaneous ,995 9,660 2, ,721 Due from Other Funds 131,960 15,667 42, ,687 Inventories 29,914 29,914 Prepaid Expenditures 63,270 63,270 TOTAL ASSETS $ 295,498 $ 3,779,049 $ 1,262,058 $ 3,192,555 $ 8,529,160 LIABILITIES AND FUND BALANCES LIABILITIES Accounts Payable $ 62,524 $ 509,983 $ 292,894 $ 32,930 $ 898,331 Due to Other Funds 45, , , ,863 Deferred Revenue 552,628 73, ,171 TOTAL LIABILITIES 107,655 1,671, ,954 32,930 2,417,365 FUND BALANCES Nonspendable 63,270 29,914 93,184 Committed 187,843 3,159,625 3,347,468 Assigned 2,043, ,190 2,671,143 TOTAL FUND BALANCES 187,843 2,107, ,104 3,159,625 6,111,795 TOTAL LIABILITIES AND FUND BALANCES $ 295,498 $ 3,779,049 $ 1,262,058 $ 3,192,555 $ 8,529,160 See the accompanying notes to the optional supplementary information. -83-

110 NON-MAJOR SPECIAL REVENUE FUNDS COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES For the Fiscal Year Ended Adult Education Fund Child Development Fund Cafeteria Fund Deferred Maintenance Fund Total (Memorandum Only) REVENUES Federal Sources $ 146,404 $ 18,784 $ 2,827,373 $ $ 2,992,561 Other State Sources 558, ,534 1,240,601 2,055,049 Other Local Sources 384,742 8,280,607 2,784,968 20,935 11,471,252 TOTAL REVENUES 1,090,060 8,299,391 5,867,875 1,261,536 16,518,862 EXPENDITURES Instruction 833, ,444 Instruction-related Services 351, ,898 Pupil Services 5,258,249 5,258,249 Community Services 7,282,630 7,282,630 Enterprise 8 8 General Administration 42, , ,764 Plant Services 40,763 28,562 58,072 1,363,249 1,490,646 TOTAL EXPENDITURES 1,268,762 7,311,192 5,525,436 1,363,249 15,468,639 (Deficiency) Excess of revenues over expenditures (178,702) 988, ,439 (101,713) 1,050,223 OTHER FINANCING SOURCES (USES) Interfund Transfers Out (159,347) (159,347) TOTAL OTHER FINANCING SOURCES (USES) - (159,347) - - (159,347) Net Changes in Fund Balances (178,702) 828, ,439 (101,713) 890,876 Fund Balances at Beginning of Year 366,545 1,278, ,665 3,261,338 5,220,919 Fund Balances at End of Year $ 187,843 $ 2,107,223 $ 657,104 $ 3,159,625 $ 6,111,795 See the accompanying notes to the optional supplementary information. -84-

111 NON-MAJOR CAPITAL PROJECTS FUNDS COMBINING BALANCE SHEET ASSETS Capital Facilities Fund County School Facilities Fund Total (Memorandum Only) Cash in County Treasury $ 1,084,854 $ 3,074,337 $ 4,159,191 Accounts Receivable: Miscellaneous 845 2,376 3,221 TOTAL ASSETS $ 1,085,699 $ 3,076,713 $ 4,162,412 LIABILITIES AND FUND BALANCES LIABILITIES Accounts Payable $ 73,148 $ 261 $ 73,409 TOTAL LIABILITIES 73, ,409 FUND BALANCES Restricted 1,012,551 3,076,452 4,089,003 TOTAL FUND BALANCES 1,012,551 3,076,452 4,089,003 TOTAL LIABILITIES AND FUND BALANCES $ 1,085,699 $ 3,076,713 $ 4,162,412 See the accompanying notes to the optional supplementary information. -85-

112 NON-MAJOR CAPITAL PROJECTS FUNDS COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES For the Fiscal Year Ended Capital Facilities Fund County School Facilities Fund Total (Memorandum Only) REVENUES Other State Sources $ $ 1,231,779 $ 1,231,779 Other Local Sources 300,391 57, ,547 TOTAL REVENUES 300,391 1,288,935 1,589,326 EXPENDITURES Plant Services 254, ,640 Other Outgo 10,366 10,366 TOTAL EXPENDITURES 254,750 11, ,006 Excess of revenues over expenditures 45,641 1,277,679 1,323,320 OTHER FINANCING USE Interfund Transfers Out (10,322,399) (10,322,399) TOTAL OTHER FINANCING USE - (10,322,399) (10,322,399) Net Changes in Fund Balances 45,641 (9,044,720) (8,999,079) Fund Balances at Beginning of Year 966,910 12,121,172 13,088,082 Fund Balances at End of Year $ 1,012,551 $ 3,076,452 $ 4,089,003 See the accompanying notes to the optional supplementary information. -86-

113 FIDUCIARY FUNDS - TRUST AND AGENCY FUNDS COMBINING STATEMENT OF NET ASSETS ASSETS High Schools Intermediate Schools Elementary Schools Total (Memorandum Only) Cash on Hand and in Banks $ 2,240,499 $ 319,410 $ 625,258 $ 3,185,167 Accounts Receivable: Associated Student Body Funds Miscellaneous 6,103 1,780 7,883 Stores Inventory 54,394 54,394 Prepaid Expenditures 148,576 4, ,144 TOTAL ASSETS 2,449, , ,258 3,400,588 LIABILITIES Accounts Payable 242,749 47, ,535 Due to Other Funds 130, ,551 Deferred Revenue 109, ,650 Funds Held in Trust 1,662, ,358 1,853,938 TOTAL LIABILITIES 2,145, ,144-2,384,674 NET ASSETS Unrestricted 304,042 86, ,258 1,015,914 TOTAL NET ASSETS $ 304,042 $ 86,614 $ 625,258 $ 1,015,914 See the accompanying notes to the optional supplementary information. -87-

114 FIDUCIARY FUNDS - TRUST AND AGENCY FUNDS COMBINING STATEMENT OF CHANGES IN NET ASSETS For the Fiscal Year Ended ADDITIONS Revenue from Local Sources High Schools Associated Student Body Funds Intermediate Schools Elementary Schools Total (Memorandum Only) Athletics $ 414,961 $ $ $ 414,961 Student Body Cards 345,522 13, ,176 Student Store/P.E. Clothes 173, ,077 Yearbook 443, ,859 ASB General 144,807 40,186 1,471,528 1,656,521 ASB Dances 264,811 13, ,361 Fundraising 258, ,455 Vending Machines 49,827 49,827 Social Activities 17,288 25,007 42,295 Interest 5, ,831 Other Revenues 157,999 42, ,126 TOTAL ADDITIONS 2,017, ,285 1,471,528 3,882,489 DEDUCTIONS Services and Other Operating Expenses Athletics 419, ,150 Student Body Cards 1,940 1,940 Student Store/P.E. Clothes 142, ,429 Yearbook 347, ,548 ASB General 405,709 68,378 1,452,153 1,926,240 ASB Dances 202,554 13, ,253 Fundraising 153, ,419 Social Activities 115,285 64, ,700 Other Expenses 293,426 62, ,575 TOTAL DEDUCTIONS 1,928, ,060 1,452,153 3,742,254 Changes in Net Assets 89,635 31,225 19, ,235 Net Assets at Beginning of Year 214,407 55, , ,679 Net Assets at End of Year $ 304,042 $ 86,614 $ 625,258 $ 1,015,914 See the accompanying notes to the optional supplementary information. -88-

115 FIDUCIARY FUNDS - HIGH SCHOOL ASSOCIATED STUDENT BODY FUNDS COMBINING STATEMENT OF NET ASSETS El Toro High School Laguna Hills High School Mission Viejo High School Trabuco Hills High School Silverado High School Adult Education Total (Memorandum Only) ASSETS Cash on Hand and in Banks $ 896,593 $ 379,545 $ 434,020 $ 308,220 $ 29,747 $ 192,374 $ 2,240,499 Accounts Receivable: Miscellaneous 1, ,369 3,403 6,103 Stores Inventory 9,594 10,131 11,789 22,880 54,394 Prepaid Expenditures 20,073 42,316 61,709 24, ,576 TOTAL ASSETS 927, , , ,981 29, ,374 2,449,572 LIABILITIES Accounts Payable 167,228 62,280 7,660 5, ,749 Due to Governmental Funds 130, ,551 Deferred Revenue 8,300 13,614 79,236 8, ,650 Funds Held in Trust 616, , , ,580 1,662,580 TOTAL LIABILITIES 792, , , , ,551 2,145,530 NET ASSETS Unrestricted 134,971 (46,702) 82,883 41,320 29,747 61, ,042 TOTAL NET ASSETS $ 134,971 $ (46,702) $ 82,883 $ 41,320 $ 29,747 $ 61,823 $ 304,042 See the accompanying notes to the optional supplementary information. -89-

116 FIDUCIARY FUNDS - HIGH SCHOOL ASSOCIATED STUDENT BODY FUNDS COMBINING STATEMENT OF CHANGES IN NET ASSETS For the Fiscal Year Ended ADDITIONS El Toro High School Laguna Hills High School Mission Viejo High School Trabuco Hills High School Silverado High School Adult Education Total (Memorandum Only) Revenue from Local Sources Athletics $ 154,436 $ 77,390 $ 90,935 $ 92,200 $ $ $ 414,961 Student Body Cards 81,950 55,555 89, , ,522 Student Store/P.E. Clothes 36,522 34,592 17,920 84, ,077 Yearbook 188, , ,859 ASB General 24,766 69,825 50, ,807 ASB Dances 9,394 33,486 48, , ,811 Vending Machines 16,014 17,716 16,097 49,827 Social Activities 6,035 1,827 9,426 17,288 Interest 1,991 2,370 1,164 5,525 Other Revenues 30,631 5,085 40,193 53,429 28, ,999 TOTAL ADDITIONS 361, , , ,337 53,429 28,661 2,017,676 DEDUCTIONS Services and Other Operating Expenses Athletics 146,176 65, ,491 88, ,150 Student Body Cards 1, ,940 Student Store/P.E. Clothes 28,575 38,736 20,917 54, ,429 Yearbook 167, , ,548 ASB General 57, ,902 2, , ,709 ASB Dances 1,935 37,324 33, , ,554 Social Activities 20,826 19,876 49,681 24, ,285 Other Expenses 11,734 54, ,226 39,032 67, ,426 TOTAL DEDUCTIONS 268, , , ,771 39,032 67,781 1,928,041 Changes in Net Assets 93,600 (28,648) 12,840 36,566 14,397 (39,120) 89,635 Net Assets at Beginning of Year 41,371 (18,054) 70,043 4,754 15, , ,407 Net Assets at End of Year $ 134,971 $ (46,702) $ 82,883 $ 41,320 $ 29,747 $ 61,823 $ 304,042 See the accompanying notes to the optional supplementary information. -90-

117 FIDUCIARY FUNDS - INTERMEDIATE SCHOOL ASSOCIATED STUDENT BODY FUNDS COMBINING STATEMENT OF NET ASSETS ASSETS La Paz Intermediate School Los Alisos Intermediate School Rancho Santa Margarita Intermediate School Serrano Intermediate School Total (Memorandum Only) Cash on Hand and in Banks $ 93,511 $ 38,301 $ 103,987 $ 83,611 $ 319,410 Accounts Receivable: Miscellaneous ,780 Prepaid Expenditures 4,568 4,568 TOTAL ASSETS 93,756 38, ,282 84, ,758 LIABILITIES Accounts Payable 12,432 6,761 15,249 13,344 47,786 Funds Held in Trust 55,999 26,377 57,331 51, ,358 TOTAL LIABILITIES 68,431 33,138 72,580 64, ,144 NET ASSETS Unrestricted 25,325 5,163 36,702 19,424 86,614 TOTAL NET ASSETS $ 25,325 $ 5,163 $ 36,702 $ 19,424 $ 86,614 See the accompanying notes to the optional supplementary information. -91-

118 FIDUCIARY FUNDS - INTERMEDIATE SCHOOL ASSOCIATED STUDENT BODY FUNDS COMBINING STATEMENT OF CHANGES IN NET ASSETS For the Fiscal Year Ended ADDITIONS Revenue from Local Sources La Paz Intermediate School Los Alisos Intermediate School Rancho Santa Margarita Intermediate School Serrano Intermediate School Total (Memorandum Only) Student Body Cards $ $ $ 13,461 $ 193 $ 13,654 ASB General 22,406 13,340 4,440 40,186 ASB Dances 5,641 7,909 13,550 Fundraising 36,967 47,423 98,924 75, ,455 Social Activities 25,007 25,007 Interest Other Revenues 19,189 1,598 3,343 17,997 42,127 TOTAL ADDITIONS 78,632 49, , , ,285 DEDUCTIONS Services and Other Operating Expenses ASB General 31,846 18,660 17,872 68,378 ASB Dances 3,945 9,754 13,699 Fundraising 30,715 29,583 46,940 46, ,419 Social Activities 137 6,498 48,139 9,641 64,415 Other Expenditures 4,459 8,081 28,913 20,696 62,149 TOTAL DEDUCTIONS 67,157 44, , , ,060 Changes in Net Assets 11,475 5,016 13,134 1,600 31,225 Net Assets at Beginning of Year 13, ,568 17,824 55,389 Net Assets at End of Year $ 25,325 $ 5,163 $ 36,702 $ 19,424 $ 86,614 See the accompanying notes to the optional supplementary information. -92-

119 FIDUCIARY FUNDS - ELEMENTARY SCHOOL ASSOCIATED STUDENT BODY FUNDS COMBINING STATEMENT OF CHANGES IN NET ASSETS For the Fiscal Year Ended Net Assets Net Assets July 1, 2010 Additions Deductions Aliso $ 14,456 $ 24,169 $ 38,190 $ 435 Cielo Vista 8,602 54,553 55,931 7,224 Cordillera 20,911 71,124 67,507 24,528 Del Cerro 47,840 53,175 54,688 46,327 Del Lago 15,815 44,262 40,961 19,116 De Portola 40,933 60,496 67,530 33,899 Esperanza 13,663 24,620 27,310 10,973 Foothill 55, , ,857 58,159 Gates 44,838 82,922 75,700 52,060 Glen Yermo 14,178 23,134 23,397 13,915 Lake Forest 34,787 94, ,862 25,134 La Madera 19,154 35,112 40,543 13,723 Linda Vista 25,111 36,601 30,353 31,359 Lomarena 16,888 32,336 32,026 17,198 Melinda Heights 25, , ,331 57,956 Montevideo 18,119 40,995 41,835 17,279 Olivewood 22,790 27,681 27,220 23,251 Portola Hills 18, , ,350 26,435 Rancho Canada 21,285 81,956 77,950 25,291 Robinson Ranch 27,962 60,443 63,775 24,630 San Joaquin 20,510 43,268 40,652 23,126 Santiago 5,552 39,738 39,726 5,564 Trabuco 3,209 3,961 4,828 2,342 Trabuca Mesa 33,621 43,412 43,881 33,152 Valencia 36,574 72,358 76,750 32,182 $ 605,883 $ 1,471,528 $ 1,452,153 $ 625,258 See the accompanying notes to the optional supplementary information. -93-

120 NOTES TO OPTIONAL SUPPLEMENTARY INFORMATION For the Fiscal Year Ended NOTE 1 - PURPOSE OF SCHEDULES: Combining and Individual Fund Financial Statements Combining and individual fund balance sheets and statements of revenues, expenditures and changes in fund balance have been presented for the major and non-major funds to provide additional information to the users of these financial statements. These statements have been prepared using the basis of accounting described in the notes to the financial statements. -94-

121 OTHER INDEPENDENT AUDITOR S REPORTS

122 REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Board of Education Saddleback Valley Unified School District Peter A. Hartman Way Mission Viejo, California We have audited the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of Saddleback Valley Unified School District (the District) as of and for the year ended which collectively comprise the District s basic financial statements, and have issued our report thereon dated November 29, 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. Internal Control Over Financial Reporting In planning and performing our audit, we considered the District s internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the District s internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the District s internal control over financial reporting. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect and correct misstatements on a timely basis. A material weakness is a deficiency or a combination of deficiencies in internal control such that there is a reasonable possibility that a material misstatement of the financial statements will not be prevented or detected and corrected on a timely basis. -95-

123 REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over financial reporting that might be deficiencies, significant deficiencies, or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined above. However, we identified certain deficiencies in internal control over financial reporting that we consider to be significant deficiencies in internal control over financial reporting which are described in the accompanying schedule of findings and questioned costs as findings and A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Compliance and Other Matters As part of obtaining reasonable assurance about whether Saddleback Valley Unified School District s financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed an instance of noncompliance or other matters that is required to be reported under Government Auditing Standards and which is described in the accompanying schedule of findings and questioned costs as finding Saddleback Valley Unified School District s responses to the findings identified in our audit are described in the accompanying schedule of findings and questioned costs. We did not audit the District s responses and, accordingly, we express no opinion on them. This report is intended solely for the information and use of management, Board, the Orange County Office of Education, the California Department of Education, the State Controller s Office and Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. November 29, 2011 VICENTI, LLOYD & STUTZMAN LLP -96-

124 INDEPENDENT AUDITOR S REPORT ON COMPLIANCE WITH REQUIREMENTS THAT COULD HAVE A DIRECT AND MATERIAL EFFECT ON EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A-133 Board of Education Saddleback Valley Unified School District Peter A. Hartman Way Mission Viejo, California Compliance We have audited the compliance of Saddleback Valley Unified School District (the District) with the types of compliance requirements described in the U.S. Office of Management and Budget (OMB) Circular A-133 Compliance Supplement that could have a direct and material effect on each of its major federal programs for the year ended. The District s major federal programs are identified in the summary of auditor s results section of the accompanying schedule of findings and questioned costs. Compliance with the requirements of laws, regulations, contracts and grants applicable to each of its major federal programs is the responsibility of the District s management. Our responsibility is to express an opinion on the District s compliance based on our audit. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the District s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination of the District's compliance with those requirements. In our opinion, the District complied, in all material respects, with the requirements referred to above that that could have a direct and material effect on each of its major federal programs for the year ended. -97-

125 INDEPENDENT AUDITOR S REPORT ON COMPLIANCE WITH REQUIREMENTS THAT COULD HAVE A DIRECT AND MATERIAL EFFECT ON EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A-133 Internal Control Over Compliance The management of the District is responsible for establishing and maintaining effective internal control over compliance with requirements of laws, regulations, contracts and grants applicable to federal programs. In planning and performing our audit, we considered the District s internal control over compliance with requirements that could have a direct and material effect on a major federal program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance, and to test and report on internal control over compliance in accordance with OMB Circular A-133, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the District s internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a Federal program will not be prevented, or detected and corrected on a timely basis. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be deficiencies, significant deficiencies, or material weaknesses. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above. This report is intended solely for the information and use of management, Board, the Orange County Office of Education, the California Department of Education, the State Controller s Office and Federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. November 29, 2011 VICENTI, LLOYD & STUTZMAN LLP -98-

126 INDEPENDENT AUDITOR S REPORT ON STATE COMPLIANCE Board of Education Saddleback Valley Unified School District Peter A. Hartman Way Mission Viejo, California We have audited the compliance of the Saddleback Valley Unified School District with the types of compliance requirements described in the Standards and Procedures for Audits of California K-12 Local Educational Agencies, published by the Education Audit Appeals Panel for the year ended June 30, The District s State compliance requirements are identified in the table below. Compliance with the State laws and regulations as identified below is the responsibility of the District s management. Our responsibility is to express an opinion on the District s compliance based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America, the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States, and the Standards and Procedures for Audits of California K-12 Local Educational Agencies, published by the Education Audit Appeals Panel. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the specific areas listed below has occurred. An audit includes examining, on a test basis, evidence about the District s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination of the District s compliance with those requirements. In connection with the audit referred to above, we selected and tested transactions and records to determine the District's compliance with the laws and regulations applicable to the following items: Procedures in Audit Guide Description Attendance accounting: Attendance reporting Kindergarten continuance Continuation education Independent study Instructional time: School Districts County Offices of Education Procedures Performed Yes Yes Yes No1 Yes Not applicable