GRANT SCHOOL DISTRICT NO. 3 CANYON CITY, GRANT COUNTY, OREGON

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1 CANYON CITY, GRANT COUNTY, OREGON INDEPENDENT AUDITOR S REPORT, BASIC FINANCIAL STATEMENTS, SUPPLEMENTARY INFORMATION AND SINGLE AUDIT For the Year Ended

2 TABLE OF CONTENTS CONTENTS PAGE INTRODUCTORY SECTION Board of Directors and Officials... 1 FINANCIAL SECTION Independent Auditor s Report Management s Discussion and Analysis Basic Financial Statements Government-Wide Financial Statements Statement of Net Position Statement of Activities Governmental Fund Financial Statements Balance Sheet Reconciliation of the Balance Sheet-Governmental Funds to the Statement of Net Position Statement of Revenues, Expenditures and Changes in Fund Balances Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances - Governmental Funds to the Statement of Activities Notes to the Basic Financial Statements Required Supplementary Information Schedules of Revenues, Expenditures and Changes in Fund Balance - Budget vs. Actual (Budgetary Basis) General Fund Public Law Fund Schedule of Proportionate Share of Net Pension Liability Notes to the Required Supplementary Information Other Supplementary Information Nonmajor Funds Combining Balance Sheet Combining Schedule of Revenues, Expenditures and Changes in Fund Balances Schedule of Revenues, Expenditures and Changes in Fund Balance -Budget vs. Actual (Budgetary Basis) Special Projects Fund Technology and Curriculum Fund Bus Replacement Fund Title I Grant Fund Medicaid Grant Fund Food Service Fund Debt Service Fund Facilities Project Fund Major Debt Service Fund Schedule of Revenues, Expenditures and Changes in Fund Balance -Budget vs. Actual (Budgetary Basis) PERS Debt Service Fund... 54

3 Other Financial Schedules Combining Schedules of Changes in Fiduciary Assets and Liabilities Private Purpose Trust Scholarship Funds Student Activity Accounts-Agency Funds Schedule of Cash, Cash Items and Collateral Security Schedule of County Treasurer's Transactions Oregon Department of Education Required Information Schedule of District Audit Revenue Summary Schedules of Expenditures by object and function General Fund Special Revenue Funds Debt Service Funds REPORTS REQUIRED BY OREGON STATE REGULATIONS Report Required by Oregon State Regulations Continuing Disclosure Requirements for Bonded Debt SINGLE AUDIT Schedule of Expenditures of Federal Awards Notes to the Schedule of Expenditures of Federal Awards Schedule of Findings and Questioned Costs Independent Auditor s Report on Compliance with Requirements Applicable to each Major Program and Internal Control over Compliance in Accordance with OMB Circular A Independent Auditor s Report on Compliance and on Internal Control Over Financial Reporting Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards

4 INTRODUCTORY SECTION

5 BOARD OF DIRECTORS AND OFFICIALS BOARD OF DIRECTORS Name Zone Position Chris Cronin John Day, Oregon 4 Chairperson Zach Williams John Day, Oregon At large Vice-Chairperson Kelly Stokes Mt. Vernon, Oregon 1 Director Gordon Larson Canyon City, Oregon 2 Director Ben Holliday John Day, Oregon 3 Director Amy Stiner Mt. Vernon, Oregon At large Director Tracie Unterwegner John Day, Oregon At large Director OFFICIALS Curt Shelley District Office Superintendent Ryan Gerry Grant Union JR/SR High School Principal Kim Smith Humbolt Elementary School Principal Andrea Combs Seneca Elementary School Head Teacher Karla Averett District Office Business Manager/Deputy Clerk 1

6 FINANCIAL SECTION

7 Professional Group Certified Public Accountants, LLP INDEPENDENT AUDITOR S REPORT George W. Wilber, CPA, CR.FA Kari J. Ott, CPA Cara R. Wilber, CPA Robert M. Armstrong, CPA Jessica A. Knowles, CPA Mitch T. Saul, CPA Amy K. Walker, CPA Anna K. Bass Arlie W. Oster, CPA ( ) Deborah A. Arntz, MBA, EA The Board of Directors Grant School District No. 3 Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of Grant School District No. 3, as of and for the year ended, and the related notes to the financial statements which collectively comprise Grant School District No. 3 s basic financial statements as listed in the table of contents. Management s Responsibility for the Financial Statements Grant School District No. 3 s management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America, and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. 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 involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our (1) unmodified audit opinion on the major funds and the aggregate remaining fund information; and (2) qualified audit opinion on the governmental activities. 77 W Adams, Burns, Oregon Phone (541) FAX (541)

8 Basis for Qualified Opinion on Governmental Activities Management has elected not to conduct an actuarial evaluation to determine the extent of the district s liabilities for post employment benefits and to record the liability in its financial statements as prescribed by Government Accounting Standards Board Statement No. 45. The amount by which this departure would affect the assets, deferred outflows, liabilities, deferred inflows and net position of the governmental activities has not been determined. Qualified Opinion on Governmental Activities In our opinion, except for effects, if any of the matter described in the Basis for Qualified Opinion paragraph on the governmental activities, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities of Grant School District No. 3, as of, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. Unmodified Opinion on the Major Funds and Aggregate Remaining Fund Information In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the major funds and aggregate remaining fund information for Grant School District No. 3, as of, and the respective changes in financial position and, where applicable, cash flows thereof for the year ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management s discussion and analysis on pages 5 through 10 and the Schedule of Proportionate Share of Net Pension Liability on page 42 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 this 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. The budgetary comparison information for the General Fund and major special revenue fund on pages 39 through 41 is not a required part of the basic financial statements but is supplementary information required by accounting principles generally accepted in the United States of America. This budgetary information is the responsibility of management and has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Grant School District No. 3 s financial statements as a whole. The combining and individual nonmajor fund financial statements, other supplementary information, other financial schedules and the schedule of expenditures of federal awards, required by the CFR Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), and the introductory section are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual nonmajor fund financial statements, other supplementary information, other financial schedules and the schedule of expenditures of federal awards are the responsibility of management and were derived from 3

9 and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole. The introductory section, as listed in the table of contents, has not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on it. Reporting on Other Legal and Regulatory Requirements Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have issued our report dated December 16, 2016 on our consideration of Grant School District No. 3 s internal control over financial reporting and 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 in considering Grant School District No. 3 s internal control over financial reporting and compliance. Reporting Required by Oregon Revised Statutes In accordance with Oregon Revised Statutes as specified in Oregon Administrative Rules through of the Minimum Standards for Audits of Oregon Municipal Corporations, we have issued our report dated December 16, 2016 on our consideration of Grant School District No. 3 s internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, and other matters including the provisions of Oregon Revised Statutes as specified in Oregon Administrative Rules through of the Minimum Standards for Audits of Oregon Municipal Corporations. 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 Oregon Administrative Rules through of the Minimum Standards for Audits of Oregon Municipal Corporations in considering Grant School District No. 3 s internal control over financial reporting and compliance. Oster Professional Group, CPA s, LLP By Burns, Oregon December 16,

10 Curt Shelley Superintendent MANAGEMENT S DISCUSSION AND ANALYSIS For the Year Ended This discussion and analysis of Grant School District No. 3 s financial performance provides an overall review of financial activities for the fiscal year. The analysis focuses on school district financial performance as a whole. This annual report consists of a series of financial statements and notes to those statements to provide more detailed information. These statements are organized so the reader can understand the district as a financial whole, or as an entire operating entity. The statement of net position and the statement of activities provide information about the activities of the whole district, presenting both an aggregate view of district finances and longer-term view of those finances. Fund financial statements provide the next level of detail. For governmental funds, these statements also look at the district s most significant funds with all other non-major funds presented in total in a single column. The basic financial statements are comprised of (1) government-wide financial statements as required by GASB 34, (2) fund financial statements with notes to the financial statements, (3) supplemental detailed information, and (4) information required by the state of Oregon and the Oregon Department of Education. Required supplemental information is included to support and explain the data in the basic financial statements. FINANCIAL HIGHLIGHTS GRANT SCHOOL DISTRICT # N. Canyon City Blvd. Canyon City, OR Phone: (541) Fax: (541) The district s financial status, as reflected in total net position, is currently $2,193,648. The following tables show comparison to the prior year in the Statement of Net Position and the Changes in Net Position. The overall financial outlook for Grant School District No. 3 as of decreased over the prior year based upon an analysis of change in net position. The district net position decreased mostly due to the increased long-term liability mostly from the District s share of the Public Employees Retirement System s net pension liability. 5

11 STATEMENT OF NET POSITION Governmental Activities 6/30/2015 6/30/2016 Current and other assets $ 3,933,017 $ 3,349,456 Net capital assets 5,202,888 5,025,884 Total assets 9,135,905 8,375,340 Deferred outflows of resources 361, ,366 Current liabilities 647, ,580 Long-term liabilities 3,979,134 5,756,808 Total liabilities 4,626,462 6,142,388 Deferred inflows of resources 1,658, ,670 Net investment in capital assets 5,120,659 4,970,476 Restricted for debt service 346, ,166 Restricted for special programs 132, ,481 Unrestricted (2,385,635) (4,164,475) Total net position $ 3,213,281 $ 2,193,648 CHANGES IN NET POSITION COMPARED TO PRIOR YEAR Governmental Activities 6/30/2015 6/30/2016 Revenues: Program Revenues: Charges for services $ 88,701 $ 103,099 Operating grants/contrib. 2,790,422 1,833,123 General Revenues: Property taxes 533, ,698 Unrestricted state sources 4,735,763 4,212,787 Unrestricted federal sources 572, ,054 Earnings/loss on investments 12,249 19,973 Miscellaneous 693,336 1,094,729 Total Revenues 9,427,059 8,260,463 Expenses: Governmental Activities: Regular programs 2,727,506 4,558,510 Special programs 865,687 1,267,399 Students 173, ,154 Instructional staff 115,496 85,139 General administration 111, ,451 School administration 352, ,535 Business services 1,825,664 2,135,557 Central activities 58,877 77,352 Enterprises and community services 247, ,086 Facilities acquisition & construction - 26,179 Debt service - interest only 250, ,025 Total Expenses 6,730,036 9,540,387 Increase (decrease) net position 2,697,023 (1,279,861) Net position, July 1, as restated 516,258 3,473,509 Net position, ending $ 3,213,281 $ 2,193,648 6

12 SUMMARY OF REVENUES AND EXPENDITURES The school year for school year started with 32 students more than the previous year ended with. At the end of the school year enrollment was 609 a decline of six students from the beginning of the year. Although enrollment increased the district s enrollment is still 126 students less than it was 10 years which, in today s dollars, equates to nearly $900,000 less in State School Fund dollars annually. The Grant County Road Department budgeted 15% of any Federal Secure Rural Schools and Communities funds they receive with Grant County schools. The Grant County Court subsequently adopted their budget and passed those funds through to schools in November District 3 s portion based on unweighted average daily membership was $306,495. In the District established two reserve accounts one for major purchases of curriculum or technology and the second for unanticipated or major facility needs. The District added $70,000 to these funds from the county s receipts - $20,000 for technology and curriculum and $50,000 for facility issues. These funds that Grant County has passed on to schools have been extremely important as they do not reduce State payments like many other sources of additional funding do. The Secure Rural Schools and Communities act sunset in but, as in the prior years, it is hoped that it will be reauthorized. Personnel costs continue to be the largest expense. Salaries and benefits continue to increase each year as negotiated under the unions collective bargaining agreements. Salaries, benefits and associated payroll costs were over 82% of the general fund budget in Typically the District has reduced payroll costs through attrition as employees retire or resign however going into the District was able to budget for the same number of full-time equivalencies that they had in REVENUE INFORMATION Total revenues for decreased from the previous year by $1,155,150. General Fund revenues decreased by $1,591,533 and Special Revenue funds decreased by $283,816. The decreases and main contributing factors were: GENERAL FUND: $60,116 less in local donations was received in Grants were comprised mostly of funds designated for the elementary Friday Academy and the junior/senior high spaceflight project; Two years worth of excess taxes from Grant Education Service District were recorded in and only one year s worth was received in for a difference in revenues of $607,934 between the two years; $531,603 was deducted in from the State School Fund payments for prior year adjustments; $389,831 in one-time Career Technical Education grants were received in and not in ; and, Federal Forest Fees declined by $90,519. 7

13 SPECIAL FUNDS: An additional $156,544 was generated from payroll and set aside to meet future obligations of the Public Employee Retiree System s bond payment schedule. The general fund beginning fund balance decreased by $216,211 from the previous year due to anticipated adjustments from the State School Fund for prior year payments. The State continues to fund education substantially lower than the Quality Education Model dictates. We believe there will be a push for Legislators to close that funding gap in their next biennium that begins July GENERAL FUND BUDGET DIFFERENCES General Fund received $361,045 less than budgeted due to the timing of prior year adjustments from the State s School Fund payments. General Fund expended $989,534 less than budgeted. The main, individual factors included the following: 1) $125,502 was budgeted for building improvements which were made at the end of the previous year; 2) Heating fuel was $98,297 less than anticipated for the year; 3) $75,300 was budgeted to transfer to the cafeteria fund and that transfer was not needed; 4) State employment division payments were $47,319 less than anticipated; 5) $20,000 was budgeted for textbook adoption and those were purchased the prior June; and, 6) Payroll and associated payroll costs were less than anticipated. GOVERNMENTAL ACTIVITIES The school year was the first year of a four-year negotiated agreement with the teachers union. While salaries were frozen for and , the District assumed payment of the 6% PERS contribution previously paid by employees beginning July 1, Insurance caps increased by $20 per month during and will increase $50 per month during and $25 per month during both and The school year was the last year of a two-year negotiated agreement with the classified union. For the school year a fifth step was added to their salary schedule reflecting a 3% pay increase for employees that were currently on step four of the pay scale. Salaries for steps one through four were frozen. The District paid insurance cap increased by $10 per month in A two-year contract was settled for and The insurance cap will increase by $20 per month each year of the contract. While salaries were frozen for both years of the agreement, on July 1, 2015 the District will assume payment of the 6% PERS contribution previously paid by employees. CAPITAL ASSETS AND FACILITIES The District was awarded a grant and to retrofit all interior and exterior lights at Grant Union with LED lights. Nearly 90% of the $145,240 project were paid with grant funds and additional rebates from Oregon Trail Electric Cooperative. The project was completed during the summer of

14 During the budget process the District created a Facility Project Fund to address long-term facility improvements and has set-aside $50,000 each year since. The fund balance at the end of the school year was $100,000. The District hopes to leverage these funds to obtain additional grant dollars. During the school year the District spent $227,307 on facility repairs and improvements. TECHNOLOGY & CURRICULUM The district has a technology plan that calls for a continued rotation and upgrade of computers and supporting infrastructure at a cost of approximately $60,000 per year. The challenge has been and will continue to be providing the funding to meet this goal. During the budget process the District created a Technology and Curriculum fund and since that time has set-aside $20,000 each year for those two categories. The fund balance at the end of was $40,000. During the school year the district spent $37,272 on software and software licenses and $38,800 for computer hardware. OTHER FUNDS The district has 10 active funds outside of the general fund Two of these funds are debt service funds. In the district paid $325,215 in interest and principal payments from these two funds of which $228,900 was interest for a bond used to refinance a portion of the PERS unfunded pension liability which actually saved the District money through a reduced PERS rate. Bus Replacement fund is supported through bus depreciation that is received from the state. In $26,298 in bus depreciation was received from the state. These dedicated funds must be used to upgrade the district s transportation fleet. The district has not had to transfer funds from the general fund for bus replacement for the last seven years. The last bus purchased was an 84-passenger in The District anticipates purchasing a bus in The Title Programs fund is supported by grants from the Elementary and Secondary Education Act. The majority of the fund is used for salaries and benefits. Humbolt Elementary is a school-wide Title school and is currently the districts only Title school. The Medicaid fund is supported by Medicaid Administrative Claiming funds. The funds are used to help students with their health-based needs. The Food Service fund revenues increased by 10.8% from the previous year. During $84,731 was generated from the direct sale of meals and $164,637 was received through State and Federal Free and Reduced programs. The District receive $19,798 in commodity foods. Typically, the District transfers funds from the general fund to help support the program however in it was not necessary. The District will transfer $107,944 to IDEA (or PL ) Fund 260 is Federally-funded for special education. These funds can only be used to support the education of students with disabilities. 9

15 During the budget process the District created a Technology and Curriculum fund (Fund 209) and since that time has set-aside $20,000 each year for those two categories. Additionally, the District set aside $50,000 in a Project Fund (Fund 400) to address long-term facility improvements. The District hopes to leverage these funds to obtain additional grant dollars. On June 30 the Technology and Curriculum Fund had a balance of $40,000 and the Project Fund had a balance of $100,000. ECONOMIC FACTORS BEARING ON DISTRICT S FUTURE At the time these financial statements were prepared and audited, the district was aware of several existing circumstances that may significantly affect its financial health in the future. Federal Forest Fees generated by the Federal Secure Rural Schools and Community Self Determination Act (SRSC), has been a significant source of revenue for School District #3. However, while these funds were intended to help communities with a high percentage of federally owned land, the State of Oregon divides these dollars equally among all schools throughout the state thus greatly reducing the amount Grant County students were intended to actually receive. What this means is that the $460,054 in SRSC funds the District received in only approximately $495 was actually realized by the District. Congress renewed the act for one year in Proponents are currently pushing to get the bill reauthorized long term. Enrollment was up by 29 students at the beginning of the year number compared to the number of students at the end of the school year. The major factor for the increase was the fact that the kindergarten class had 15 more students than the graduating class. The District believes enrollment will remain volatile because of the instability in the local economy. State funding generated approximately 63% of revenues in the general fund. A 4.4% decrease in the two-year PERS rate went into effect July 1, However, the District s unfunded PERS pension liability payments increase substantially over the next 12 years so the savings realized will be set aside to stabilize the effects of the increased bond payments on the District s budget. The PERS rates are expected to increased significantly over the State s next three bienniums. CONTACTING THE DISTRICT S FINANCIAL MANAGEMENT This financial report is designed to provide the district s citizens, taxpayers, customers, investors and creditors with a general overview of the district s finances and to demonstrate the district s accountability for the money it receives. If you have questions about this report or need additional financial information, contact: Curt Shelley, Superintendent/Clerk Phone: Grant School District #3 shelleyc@grantesd.k12.or.us 401 N. Canyon City Blvd. Canyon City, OR OR - Karla Averett, Deputy Clerk Grant School District #3 401 N. Canyon City Blvd. Canyon City, OR Phone: x22 averettk@grantesd.k12.or.us 10

16 BASIC FINANCIAL STATEMENTS

17 GOVERNMENT-WIDE FINANCIAL STATEMENTS

18 GRANT COUNTY SCHOOL DISTRICT NO. 3 STATEMENT OF NET POSITION Governmental ASSETS Activities Cash and investments $ 2,249,442 Receivables Taxes 66,441 Accounts 809,829 Restricted cash 165,860 Inventory 57,884 Capital assets Land 330,421 Construction in progress 8,729 Buildings and improvements 9,041,793 Equipment and vehicles 2,289,186 Accumulated depreciation (6,644,245) Total assets 8,375,340 DEFERRED OUTFLOWS OF RESOURCES Deferred outflows related to pension 476,366 Total deferred outflows of resources 476,366 LIABILITIES Accounts payable 254,600 Accrued liabilities Payroll, payroll taxes, insurance 287 Bonds payable due within one year 103,286 Capital lease obligation due within one year 27,407 Long-term liabilities Portion due after one year Bonds payable, net of discounts 3,866,441 Capital lease obligation 28,001 Net pension liability 1,862,366 Total liabilities 6,142,388 DEFERRED INFLOWS OF RESOURCES Deferred inflows related to pension 515,670 Total deferred inflows of resources 515,670 NET POSITION Net investment in capital assets 4,970,476 Restricted for debt service 926,166 Restricted for special programs 461,481 Unrestricted (4,164,475) Total net positon $ 2,193,648 notes to the basic financial statements. 11

19 STATEMENT OF ACTIVITIES For the Year Ended Functions/Programs Program Revenues Net (Expense) Revenue and Changes Operating in Net Position Charges for Grants and Governmental Expenses Services Contributions Activities GOVERNMENTAL ACTIVITIES Regular programs $ 4,558,510 $ 15,300 $ 1,276,176 $ (3,267,034) Special programs 1,267, ,257 (1,123,142) Students 157, (157,154) Instructional staff 85, (85,139) General administration 165, (165,451) School administration 511, (511,535) Business services 2,135, (2,135,557) Central activities 77,352-22,485 (54,867) Enterprise & community services 303,086 87, , ,918 Facilities acquisition & construction 26, (26,179) Debt service-interest only 253, (253,025) Total governmental activities $ 9,540,387 $ 103,099 $ 1,833,123 (7,604,165) GENERAL REVENUES Property taxes for general purposes 536,698 State school fund-general support 4,152,276 Common school fund 60,511 Unrestricted federal funds 460,054 Investment income 19,973 Miscellaneous 1,094,792 Total general revenues 6,324,304 Change in net position (1,279,861) Net position - July 1, ,213,281 Restatement, see note ,228 Net position - July 1, ,473,509 Total net position - $ 2,193,648 See notes to the basic financial statements. 12

20 GOVERNMENTAL FUND FINANCIAL STATEMENTS

21 BALANCE SHEET GOVERNMENTAL FUNDS PERS Nonmajor Public Law Debt Governmental ASSETS AND DEFERRED OUTFLOWS General Service Funds Total Assets Cash and investments $ 814,449 $ - $ 761,127 $ 673,866 $ 2,249,442 Receivables Property taxes 66, ,441 Other 730,027 61,156-18, ,829 Interfund loan receivable 50, ,525 Restricted cash , ,860 Total assets 1,661,442 61, , ,372 3,342,097 Deferred outflows of resources Total assets and deferred outflows $ 1,661,442 $ 61,156 $ 761,127 $ 858,372 $ 3,342,097 LIABILITIES, DEFERRED INFLOWS AND FUND BALANCES Liabilities Accounts payable $ 223,916 $ 6,483 $ - $ 24,201 $ 254,600 Accrued liabilities Interfund loan payable - 50, ,525 Total liabilities 223,916 57,008-24, ,412 Deferred inflows of resources Unavailable property taxes 55, ,834 Total deferred inflows 55, ,834 Fund balances Nonspendable 50, ,525 Spendable Restricted - 4, , ,372 1,387,647 Committed , ,512 Unassigned 1,331, ,331,167 Total fund balances 1,381,692 4, , ,884 2,980,851 Total liabilities, deferred inflows and fund balances $ 1,661,442 $ 61,156 $ 761,127 $ 858,372 $ 3,342,097 See notes to the basic financial statements. 13

22 RECONCILIATION OF GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET POSITION Total fund balances $ 2,980,851 Capital assets are not financial resources and, therefore, are not reported in the governmental funds. Cost $ 11,670,129 Accumulated depreciation (6,644,245) 5,025,884 Certain delinquent property tax not collected for several months after year end is not considered available revenue and is deferred in the governmental funds. 55,834 Long-term liabilities not payable in the current year are not reported as governmental fund liabilities. Interest in long-term debt is not accrued in the governmental funds, but rather is recognized as an expenditure when due. Bonds payable (3,969,727) Capital lease obligations (55,408) (4,025,135) Inventory is expensed when used on the Statement of Activities. In the fund financial statements, it is expensed when paid. 57,884 Net pension liability is not a financial resource and therefore, is not reported in governmental funds. Current year PERS contributions are deferred outflows of resources that will be recognized as an expense in the subsequent period. District's proportionate share of difference between employer contributions and proportionate share of contributions that will be amortized over the next five years. District's proportionate share of net differences between projected and actual earnings on investments that will be amortized over the next five years. (1,862,366) 343, ,963 (515,670) Total net position $ 2,193,648 See notes to the basic financial statements. 14

23 STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS For the Year Ended PERS Nonmajor Public Law Debt Governmental General Service Funds Total Revenues Taxes $ 546,376 $ - $ - $ - $ 546,376 Local sources 195, , ,869 1,217,866 Intermediate sources 989, ,860 State sources 4,392, ,672 4,426,930 Federal sources 482, , ,365 1,089,172 Total revenues 6,606, , , ,906 8,270,204 Expenditures Current Instruction Regular programs 3,401, ,401,485 Special programs 713, , ,431 1,396,969 Support services Students 102, , ,435 Instructional staff 76, ,550 General administration 139, ,954 School administration 424, ,606 Business services 205, , ,063 Operation and maintenance 675, ,562 Transportation services 761, ,954 Technology services 74, ,944 Food services , ,318 Facilities acquisition and construction 88, ,098 92,173 Debt service Principal ,190-72,190 Interest ,900 24, ,025 Total expenditures 6,664, , , ,940 8,013,228 Excess of revenues over (under) expenditures (58,252) 1, ,712 1, ,976 Other financing sources (uses) Transfers in (out) - governmental funds (157,959) ,959 - Total other financing sources (uses) (157,959) ,959 - Net change in fund balances (216,211) 1, , , ,976 Available fund balances, July 1, before restatement 1,597,903 2, , ,731 2,463,647 Restatements, see note , ,228 Available fund balances, July 1, after restatement 1,597,903 2, , ,959 2,723,875 Available fund balances, June 30 $ 1,381,692 $ 4,148 $ 761,127 $ 833,884 $ 2,980,851 See notes to the basic financial statements. 15

24 GRANT COUNTY SCHOOL DISTRICT NO. 3 RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES For the Year Ended Net change in fund balances $ 256,976 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 estimated useful lives and reported as depreciation expense. This is the amount by which capital outlays exceeded depreciation in the current period. Expenditures for capital assets $ 125,867 Less current year depreciation (302,871) (177,004) Certain delinquent property tax not collected for several months after year end is not considered available revenue and is deferred in the governmental funds. The change in deferred revenue is not reflected in the governmental funds, but is in the Statement of Activities as a change in revenues. (9,678) Long-term debt proceeds are reported as other financing sources in governmental funds. In the Statement of Net Position however, issuing long-term debt increases liabilities. Similarly, repayment of principal is an expenditure in the governmental funds but reduces the liability in the Statement of Net Position. This is the amount by which proceeds exceeded repayments. Capital lease payments 26,822 Debt principal repaid 72,190 99,012 Inventory is expensed when used on the Statement of Activities. In the fund financial statements, it is expensed when paid. Purchased inventory 15,604 Change in net pension liability, the related changes in the deferred outflows and deferred inflows of resources are not recognized as expenses in the governmental funds. (1,464,771) Change in net position $ (1,279,861) See notes to the basic financial statements. 16

25 NOTES TO THE BASIC FINANCIAL STATEMENTS

26 NOTES TO THE BASIC FINANCIAL STATEMENTS Note 1. Summary of Significant Accounting Policies School districts in the state of Oregon are created by legislative action. Grant School District No. 3 was organized in 1958 under authority of Chapter 619, Oregon Laws The administration of Grant School District No. 3 is vested in a seven-member board of directors, principals at each school location, a superintendent at the district office in John Day and a deputy clerk also at the district office. The accounting policies of Grant School District No. 3 conform to accounting principles generally accepted in the United States of America, as applicable to governmental units. The following is a summary of significant accounting policies used by Grant School District No. 3 in the preparation of the accompanying financial statements. A. Reporting Entity A seven-member board of directors exercises governance responsibilities over all entities related to public elementary and secondary school education within the jurisdiction of Grant School District No. 3 as set by the state of Oregon. The board receives funding from local, state, and federal sources. However, Grant School District No. 3 is not included in any other governmental reporting entity as defined in Section 2100, Codification of Governmental Accounting and Financial Reporting Standards. Board members are elected by the public and have decision making authority, the power to designate management, the responsibility to significantly influence operations, and primary accountability for fiscal matters. In evaluating how to define the district for financial reporting purposes, management has considered all potential component units. The decision to include a potential component unit in the reporting entity was made by applying the criteria set forth in accounting principles generally accepted in the United States of America. The basic, but not the only, criterion for including a potential component unit within the reporting entity is the primary government s financial accountability. The criteria used to determine financial accountability include whether the primary government appoints a voting majority, the primary government can impose its will on the component unit, whether there is financial benefit or burden on the primary government, and if the component unit has a fiscal dependency on the primary government. The other criterion used to evaluate potential component units for inclusion or exclusion from the reporting entity is the existence of special financing relationships, regardless of whether the district is financially accountable. No other entities met requirements for inclusion in Grant School District No. 3. B. Basis of Presentation Government-Wide Financial Statements The Statement of Net Position and the Statement of Activities report information on all of the nonfiduciary activities of the district. For the most part, the effect of interfund activity has been removed from these statements. Governmental activities, which normally are supported by tax and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for service. 17

27 NOTES TO THE BASIC FINANCIAL STATEMENTS The Statement of Net Position presents the district s nonfiduciary assets, deferred outflows, deferred inflows and liabilities, with the difference reported as net position. Net position is reported in three categories: Net investment in capital assets consists of capital assets, net of accumulated depreciation and reduced by outstanding balances for bonds, notes and other debt attributable to the acquisition, construction or improvement of those assets. Restricted net position result when constraints placed on net position use are either externally imposed or imposed by law through constitutional provisions or enabling legislation. Unrestricted net position consists of net position that does not meet the definition of the two preceding categories. Unrestricted net position often has constraints on resources imposed by management which can be removed or modified. The Statement of Activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenues. Direct expenses are those clearly identifiable with a specific function. Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function and 2) grants, contributions and interest restricted to meeting the operational or capital requirements of a particular function. Property tax and other items not properly included among program revenues are reported instead as general revenues. Fund Financial Statements Separate financial statements are provided for governmental and fiduciary funds, even though the latter are excluded from the government-wide financial statements. Major individual governmental funds are reported as separate columns in the fund financial statements. All remaining governmental funds are aggregated and reported as nonmajor governmental funds. The district reports the following major governmental funds: General Fund - The General Fund is the general operating fund of Grant School District No. 3 and accounts for all revenues and expenditures of Grant School District No. 3 not encompassed within other funds. All general tax revenue and other receipts that are not allocated by law or contractual agreement to another fund are accounted for in this fund. Public Law Fund 260 The Public Law Fund is a federal fund. Funds are designated to serve the needs of special education children with disabilities. PERS Debt Service Fund The PERS Debt Service Fund is used exclusively to service the PERS Bond debt. The district also reports on the following fund types: Special Revenue Funds - Special revenue funds are used to account for the proceeds of specific revenue sources (other than major capital projects) that are legally restricted to expenditures for specified purposes. 18

28 NOTES TO THE BASIC FINANCIAL STATEMENTS Debt Service Funds - Debt service funds are used to account for the servicing of general long-term debt not being financed by proprietary or nonexpendable trust funds. Fiduciary Fund Types Trust Funds - The expendable trust funds are accounted for in essentially the same manner as governmental fund types, using the same measurement focus and basis of accounting. Expendable trust funds account for assets of which both principal and interest may be spent. Agency Funds - Agency funds are custodial in nature and do not present results of operations or have a measurement focus. These funds are used to account for assets that the district holds for others in an agency capacity. The student body funds are the only agency funds of Grant School District No. 3. These funds account for the receipts and disbursements of monies from student activity organizations. These organizations exist with the explicit approval of and are subject to revocation by Grant School District No. 3's board of directors. This accounting reflects Grant School District No. 3's agency relationship with the student activity organizations. C. Measurement Focus and Basis of Accounting The government-wide and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property tax is recognized as revenue in the year for which it is levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been satisfied. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues 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 government considers revenues to be available if they are collected within 60 days after year end. Revenues from local sources consist primarily of property taxes. Property tax revenues and revenues from the state of Oregon are recognized when susceptible to accrual. This typically means that property taxes in the possession of intermediary collecting governments within sixty days of year end are recognized as revenue at that time. Miscellaneous revenues are recorded as revenue when received in cash because; they are generally not measurable until actually received. Investment earnings are recorded as earned since they are measurable and available. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, principal and interest on long-term debt, claims and judgments and compensated absences are recognized as expenditures only when payment is due. Capital asset acquisitions are reported as expenditures in governmental funds. Proceeds of general long-term debt and acquisitions under capital leases are reported as other financing sources. 19

29 NOTES TO THE BASIC FINANCIAL STATEMENTS Under the terms of grant agreements, the district funds certain programs by a combination of specific cost-reimbursement grant resources to such programs, and then general revenues. Thus, when program expenses are incurred, there are both restricted and unrestricted net position available to finance the program. It is the district s policy to first apply cost-reimbursement grant resources to such programs, and then general revenues. When both restricted and unrestricted resources are available for use, it is the district s policy to use restricted sources first, then unrestricted as they are needed. D. Capital Assets Capital assets, which include property, buildings, furniture and equipment, are reported in the applicable governmental and business-type activities column in the government-wide Statement of Net Position. Capital assets are recorded at historical or estimated original cost. Donated capital assets are recorded at their estimated fair market value on the date of donation. The costs of normal maintenance and repair that do not add to the value of the asset or materially extend asset lives are not capitalized. The district defines capital assets as assets with an initial cost of more than $5,000 and an estimated life in excess of one reporting period. Capital assets are depreciated using the straight-line method over the following estimated useful lives: Building and improvements Equipment 15 to 60 years 5 to 30 years E. Budgets and Budgetary Accounting The budgetary comparison and related disclosures are reported as Required Supplementary Information. The district had no budget violations for the year ended. A budget is prepared for each district fund in accordance with the modified accrual basis of accounting and legal requirements set forth in the Oregon local budget law. The resolution authorizing appropriations for each fund sets the level by which expenditures cannot legally exceed appropriations. Total instruction, support services, community services, interagency/fund transactions, contingencies and debt service by fund is the level of control. The detail budget document, however, is required to contain more specific, detailed information for the abovementioned expenditure categories. Appropriations lapse at June 30. Unexpected additional resources may be added to the budget using a supplemental budget and appropriations resolution. A supplemental budget may require hearings before the public, publications in newspapers and approval by the board of directors. Original and supplemental budgets may be modified by the use of appropriations transfers between the levels of control. Such transfers require approval by the board of directors. F. Cash Pooled Investments and Cash Equivalents Grant School District No. 3's cash and cash equivalents are considered cash on hand, demand deposits, and short-term investments with original maturities of three months or less from the date of acquisition. All short-term cash surpluses are maintained in savings accounts and the Oregon State 20