Utica Community Schools. Financial Report with Supplemental Information Prepared in Accordance with GASB 34 Fiscal Year Ended June 30, 2002

Transcription

1 Financial Report with Supplemental Information Prepared in Accordance with GASB 34 Fiscal

2 Contents Report Letter 1-2 Management s Discussion and Analysis 3-10 Basic Financial Statements District-wide Financial Statements: Statement of Net Assets 11 Statement of Activities 12 Fund Financial Statements: Governmental Funds: Balance Sheet 13 Reconciliation of Governmental Fund Balances to Governmental Net Assets 14 Statement of Revenue, Expenditures, and Changes in Fund Balances 15 Reconciliation of the Statement of Revenue, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities 16 Proprietary Fund - Internal Service Fund: Statement of Net Assets 17 Statement of Revenues, Expenses, and Changes in Fund Net Assets 18 Statement of Cash Flows 19 Fiduciary Fund - Trust and Agency - Statement of Fiduciary Net Assets 20 Notes to Financial Statements Required Supplemental Information Budgetary Comparison Schedule of Revenue and Expenses - General Fund 38 Schedule of Revenue - Budget and Actual - General Fund Schedule of Expenditures - Budget and Actual - General Fund Combining Balance Sheet - Nonmajor Governmental Funds Combining Statement of Revenue, Expenditures, and Changes in Fund Balances - Nonmajor Governmental Funds 78-79

3 Contents (Continued) (Continued) Schedule of Revenue and Expenditures - Budget and Actual - Nonmajor Fund - Enrichment Fund Schedule of Revenue and Expenditures - Budget and Actual - Nonmajor Fund - Food Service Fund 82 Schedule of Revenue and Expenditures - Budget and Actual - Nonmajor Fund - Athletic Fund 83 Schedule of Revenue, Expenditures, and Changes in Fund Balance - Nonmajor Fund - Student Stores Fund 84 Combining Balance Sheet - Nonmajor Debt Service Funds Combining Statement of Revenues, Expenditures, and Changes in Fund Balances - Nonmajor Debt Service Funds Combining Balance Sheet - Capital Projects Funds Combining Statement of Revenues, Expenditures, and Changes in Fund Balances - Capital Projects Funds Statement of Revenues, Expenditures, and Changes in Fund Balance - Nonmajor Capital Projects Fund Series 1 93 Statement of Revenues, Expenditures, and Changes in Fund Balance - Nonmajor Capital Projects Fund Series 1I 94 Statement of Revenues, Expenditures, and Changes in Fund Balance - Nonmajor Capital Projects Fund Series III 95 Statement of Revenues, Expenditures, and Changes in Fund Balance - Nonmajor Capital Projects Fund Series IV 96 Statement of Revenues, Expenditures, and Changes in Fund Balance - Nonmajor Capital Projects Fund Series V 97 Statement of Revenues, Expenditures, and Changes in Fund Balance - Major Capital Projects Fund Series 1 98

4 Contents (Continued) (Continued) Statement of Revenues, Expenditures, and Changes in Fund Balance - Major Capital Projects Fund Series 1I 99 Statement of Revenues, Expenditures, and Changes in Fund Balance - Nonmajor Capital Projects Fund - Durant/Sites 100 Schedule of Changes in Capital Assets Schedule of Bonded Indebtedness Tax History 113 Federal Awards Supplemental Information Issued Under Separate Cover

5 Independent Auditor s Report To the Honorable Members of the Board of Education Utica Community Schools We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of Utica Community Schools as of and for the year ended June 30, 2002, which collectively comprise the School District s basic financial statements as listed in the table of contents. These financial statements are the responsibility of the Utica Community Schools management. 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 includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of Utica Community Schools as of June 30, 2002 and the respective changes in financial position and cash flows, where applicable, for the year then ended, in conformity with accounting principles generally accepted in the United States of America. As described in Note 1, the School District has implemented a new financial reporting model, as required by the provisions of GASB Statement No. 34, Basic Financial Statements - and Management s Discussion and Analysis - for State and Local Governments, as of July 1, The management s discussion and analysis and budgetary comparison information on pages 3 through 10 and page 38 are not required parts of the basic financial statements but are supplemental information required by the Governmental Accounting Standards Board. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplemental information. However, we did not audit the information and express no opinion on it.

6 To the Honorable Members of the Board of Education Utica Community Schools Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Utica Community Schools basic financial statements. The accompanying other supplemental information, as identified in the table of contents, is presented for the purpose of additional analysis and is not a required part of the basic financial statements. The other supplemental information 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. In accordance with Government Auditing Standards, we have also issued a report under separate cover dated August 20, 2002 on our consideration of the School District s internal control over financial reporting and our tests of compliance with certain provisions of laws, regulations, contracts, and grants. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. August 20,

7 Management s Discussion and Analysis This section of Utica Community Schools annual financial report presents our discussion and analysis of the School District s financial performance during the year ended June 30, Please read it in conjunction with the School District s financial statements, which immediately follow this section. Using this Annual Report This annual report consists of a series of financial statements and notes to those statements. These statements are organized so the reader can understand Utica Community Schools financially as a whole. The District-wide Financial Statements provide information about the activities of the whole School District, presenting both an aggregate view of the School District s finances and a longer-term view of those finances. The fund financial statements provide the next level of detail. For governmental activities, these statements tell how services were financed in the short-term as well as what remains for future spending. The fund financial statements look at the School District s operations in more detail than the government-wide financial statements by providing information about the School District s most significant funds - the General Fund, Capital Projects 2001 Fund, and Capital Projects 2002 Fund, with all other funds presented in one column as nonmajor funds. The remaining statements, the Internal Service Fund statement of net assets and the statement of fiduciary net assets, present financial information about activities for which the School District provides services to other funds and acts solely as an agent for the benefit of students and parents, respectively. District-wide Financial Statements Management s Discussion and Analysis (MD&A) (Required Supplemental Information) Basic Financial Statements Notes to the Basic Financial Statements (Required Supplemental Information) Budgetary Information for Major Funds Fund Financial Statements Reporting the School District as a Whole - District-wide Financial Statements One of the most important questions asked about the School District is, As a whole, what is the School District s financial condition as a result of the year s activities? The statement of net assets and the statement of activities, which appear first in the School District s financial statements, report information on the School District as a whole and its activities in a way that helps you answer this question. We prepare these statements to include all assets and liabilities, using the accrual basis of accounting, which is similar to the accounting used by most privatesector companies. All of the current year s revenues and expenses are taken into account regardless of when cash is received or paid. 3

8 Management s Discussion and Analysis These two statements report the School District s net assets - the difference between assets and liabilities, as reported in the statement of net assets - as one way to measure the School District s financial health or financial position. Over time, increases or decreases in the School District s net assets - as reported in the statement of activities - are indicators of whether its financial health is improving or deteriorating. The relationship between revenues and expenses is the School District s operating results. However, the School District s goal is to provide services to our students, not to generate profits as commercial entities do. One must consider many other nonfinancial factors, such as the quality of the education provided and the safety of the schools, to assess the overall health of the School District. The statement of net assets and the statement of activities report the governmental activities for the School District, which encompass all of the School District s services, including instruction, supporting services, community services, athletics, food services, enrichment, student stores, capital projects, debt retirement, and internal service. Property taxes, unrestricted State aid (foundation allowance revenue), and State and federal grants finance most of these activities. Reporting the School District s Most Significant Funds - Fund Financial Statements The School District s fund financial statements provide detailed information about the most significant funds - not the School District as a whole. Some funds are required to be established by State law and by bond covenants. However, the School District establishes many other funds to help it control and manage money for particular purposes (the Food Service and Athletics Funds are examples) or to show that it s meeting legal responsibilities for using certain taxes, grants, and other money (such as bond-funded construction funds used for voter-approved capital projects). The governmental funds of the School District use the following accounting approach: Governmental funds - All of the School District s services are reported in governmental funds. Governmental fund reporting focuses on showing how money flows into and out of funds and the balances left at year end that are available for spending. They are reported using an accounting method called modified accrual accounting, which measures cash and all other financial assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term view of the operations of the School District and the services it provides. Governmental fund information helps you determine whether there are more or fewer financial resources that can be spent in the near future to finance the School District s programs. We describe the relationship (or differences) between governmental activities (reported in the statement of net assets and the statement of activities) and governmental funds in a reconciliation. Proprietary fund - Internal Service Fund - The purpose of the Internal Service Fund is to finance services provided to other funds on a cost-reimbursement basis. The School District maintains this fund for workers compensation, sick leave, accrued vacation, and longevity pay. 4

9 Management s Discussion and Analysis The School District as Trustee - Reporting the School District s Fiduciary Responsibilities The 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 School District s other financial statements because the School District cannot use these assets to finance its operations. The School District is responsible for ensuring that the assets reported in these funds are used for their intended purposes. The School District as a Whole Recall that the statement of net assets provides the perspective of the School District as a whole. Table 1 provides a summary of the School District s net assets as of June 30, 2002: TABLE 1 Governmental Activities (in thousands) Assets Current and other assets $ 158,270 Capital assets 188,701 Total assets 346,971 Liabilities Current liabilities 48,932 Long-term liabilities 131,377 Total liabilities 180,309 Net Assets Invested in property and equipment - Net of related debt 95,997 Restricted 11,349 Unrestricted 59,316 Total net assets $ 166,662 The above analysis focuses on the net assets (see Table 1). The change in net assets (see Table 2) of the School District s governmental activities is discussed below. The School District s net assets were $166.7 million at June 30, Capital assets, net of related debt totaling $96 million, compares the original cost, less depreciation of the School District s capital assets to long-term debt used to finance the acquisition of those assets. Most of the debt will be repaid from voter-approved property taxes collected as the debt service comes due. Restricted net assets are reported separately to show legal constraints from debt covenants and enabling legislation that limit the School District s ability to use those net assets for day-to-day operations. The remaining amount of net assets ($59.3 million) was unrestricted. 5

10 Management s Discussion and Analysis The $59.3 million in unrestricted net assets of governmental activities represents the accumulated results of all past years operations. The operating results of the General Fund will have a significant impact on the change in unrestricted net assets from year to year. The results of this year s operations for the School District as a whole are reported in the statement of activities (see Table 2), which shows the changes in net assets for fiscal year Since this is the first year the School District has prepared financial statements following GASB Statement No. 34, revenue and expense comparison to fiscal year 2001 is not available. TABLE 2 Governmental Activities (in thousands) Revenue Program revenue: Charges for services $ 10,912 Federal grants and entitlements 5,994 State categoricals 9,916 Operating grants 1,793 General revenue: Property taxes 51,020 State foundation allowance 162,987 Other 4,156 Total revenue 246,778 Functions/Program Expenses Instruction 139,045 Support services 77,042 Enrichment 5,689 Food services 4,745 Athletics 2,203 Student Stores 469 Community services 329 Interest on long-term debt 7,303 Depreciation (unallocated) 4,539 Total functions/expenses 241,364 Increase in Net Assets $ 5,414 6

11 Management s Discussion and Analysis As reported in the statement of activities, the cost of all of our governmental activities this year was $241.4 million. Certain activities were partially funded from those who benefited from the programs ($10.9 million) or by other governments and organizations that subsidized certain programs with grants and contributions ($17.7 million). We paid for the remaining public benefit portion of our governmental activities with $51 million in taxes, $163 million in State foundation allowance, and with our other revenues (i.e., interest and general entitlements.) The School District experienced an increase in net assets of $5.4 million. Key reasons for the change in net assets were capital expenditures for land improvements, building construction and improvements, bus acquisitions, and the start of the district-wide fiber project, which is not included as an expenditure on the government-wide statements but is capitalized as a long-term asset. As discussed above, the net cost shows the financial burden that was placed on the State and the School District s taxpayers by each of these functions. Since property taxes for operations and unrestricted State aid constitute the vast majority of district operating revenue sources, the Board of Education and Administration must annually evaluate the needs of the School District and balance those needs with State-prescribed available unrestricted resources. The School District s Funds As we noted earlier, the School District uses funds to help it control and manage money for particular purposes. Looking at funds helps the reader consider whether the School District is being accountable for the resources taxpayers and others provide to it and may provide more insight into the School District s overall financial health. As the School District completed this year, the governmental funds reported a combined fund balance of $116.7 million, which is a decrease of $2.7 million from last year. The primary reasons for the decrease are: In the General Fund, our principal operating fund, the fund balance decreased by $.7 million. The decrease is primarily a result of reduced earnings on investments due to the nation s and state s economy, student enrollment being less than anticipated, and continued capital improvements. The fund balance of the General Fund is available to fund costs related to allowable school operating purposes. The fund balance of our Special Revenue Funds decreased approximately $539,000. The Food Service Fund had increases in the cost of food and supplies, which exceeded revenue growth. The Enrichment Fund s decrease in fund balance is primarily due to its $500,000 contribution to the Capital Projects Fund - Durant/Sites for acquisition of the Training and Development Center and $200,000 to the General Fund for the rental of the Utica Center for Applied Learning building. 7

12 Management s Discussion and Analysis Combined, the Debt Service Funds showed a fund balance increase of approximately $83,000. Millage rates are determined annually to ensure that the School District accumulates sufficient resources to pay annual bond issue-related debt service. The millage rate has remained at 3.5 mills since the fiscal year. The fund balance of the Debt Service Funds is reserved since it can only be used to pay debt service obligations. The fund balance of the combined Capital Projects Funds decreased as the School District continued construction related to the 1996 through 2002 bond issues, as well as the Durant/Sites Fund. The construction projects are estimated to be about 67 percent complete at June 30, Capital Projects Fund balances increased as the School District issued $31.4 million in new voter-approved bonds during the current year. These bonds were issued in accordance with State law and will be used for land improvements, building construction and improvements, technology, and furniture and equipment acquisitions. General Fund Budgetary Highlights Over the course of the year, the School District revises its budget as it attempts to deal with unexpected changes in revenues and expenditures. State law requires that the budget be amended to ensure that expenditures do not exceed appropriations. The School District had two budget adjustments during the year. The final amendment to the budget was adopted by the Board of Education on June 24, (A schedule showing the School District s original and final budget amounts compared with amounts actually paid and received is provided in required supplemental information in these financial statements.) There were revisions made to the General Fund original budget. Budgeted revenues were increased $.2 million due to increases in federal funding for the Title I and IDEA programs. This was partially offset by actual student enrollment being less than original estimates and a significant decrease in interest income due to the unfavorable economic conditions. Budgeted expenditures decreased $2.5 million to account for salaries that were lower than projected and a land purchase that did not materialize. The amount of transfers to other funds established in the amended budget was $2.1 million and represents support provided by the General Fund to the Athletics Fund. There were no significant variances between the final budget and actual amounts. Capital Assets and Debt Administration Capital Assets At June 30, 2002, the School District had approximately $261 million invested in a broad range of capital assets, including land, buildings, improvements, buses, vehicles, furniture, and equipment. 8

13 Management s Discussion and Analysis Land $ 16,933,457 $ 16,933,457 Land improvements 18,611,230 16,644,639 Buildings and improvements 194,317, ,897,991 Buses and other vehicles 13,835,284 13,150,390 Furniture and equipment 1,214,427 24,890 Contruction in progress 16,446,916 5,966,859 Total capital assets $ 261,358,700 $ 230,618,226 This year s additions of approximately $31.9 million included technology, building renovations, new school construction, buses, and other vehicles. These additions were paid for with new debt of approximately $31.4 million, existing debt, and General Fund and Special Revenue Fund monies. Several major capital projects are planned for the fiscal year. We anticipate capital additions will be comparable to the fiscal year. We present more detailed information about our capital assets in the notes to the financial statements. Debt At the end of this year, the School District had $140.7 million in General Obligation Bonds outstanding versus $123.3 million in the previous year - an increase of 14.1 percent. The School District s bond rating continues to be AA+. The State limits the amount of general obligation debt that schools can issue to 15 percent of the assessed value of all taxable property within the School District s boundaries. If the School District issues qualified debt, i.e., debt backed by the State of Michigan, such obligations are not subject to this debt limit. The School District s outstanding unqualified general obligation debt of $140.7 million is significantly below this statutorily imposed limit. Other obligations include accrued vacation, sick leave, longevity, and workers compensation. We present more detailed information about our long-term liabilities in the notes to the financial statements. 9

14 Management s Discussion and Analysis Economic Factors and Next Year s Budgets and Rates Our elected officials and administration consider many factors when setting the School District s fiscal year budget. One of the most important factors affecting the budget is our student count. The State foundation revenue is determined by multiplying the blended student count by the foundation allowance per pupil. The blended count for the 2002 fiscal year is 20 percent and 80 percent of the February 2001 and September 2001 student counts, respectively. The budget was adopted in June 2002, based on an estimate of students that will be enrolled in September Approximately 90.8 percent of total General Fund revenue is from the foundation allowance. Under State law, the School District cannot assess additional property tax revenue for general operations. As a result, the School District funding is heavily dependent on the State s ability to fund local school operations. Based on early enrollment data at the start of the school year, we anticipate that the fall student count will be close to the estimates used in creating the budget. Once the final student count and related per pupil funding is validated, State law requires the School District to amend the budget if actual district resources are not sufficient to fund original appropriations. Since the School District s revenue is heavily dependent on State funding and the health of the State s School Aid Fund, the actual revenue received depends on the State s ability to collect revenues to fund its appropriation to school districts. The State periodically holds a revenueestimating conference to estimate revenues. Based on the results of the most recent conference, the State estimates funds are sufficient to fund the $200 foundation increase approved for fiscal year based upon moving the Statewide Education Tax collection for 3 of the 6 mills from winter to summer for 2003 collections, at which time the Statewide Education Tax collection will have a one-time reduction to 5 mills. This creates one-time additional revenue of approximately $450 million in the State s fiscal year to help fund the $200 foundation increase. Subsequently, in fiscal year , this creates a burden upon the State to raise additional revenues to cover the above revenue shift, as well as generate sufficient revenue to allow a foundation increase to schools in fiscal year Currently, the State is indicating that there will not be an increase in the foundation allowance for fiscal year , which will provide a financial constraint on many school districts in the state. 10

15 Statement of Net Assets June 30, 2002 Governmental Activities Assets Cash and investments (Note 3) $ 56,236,317 Restricted cash and investments (Note 9) 66,730,848 Receivables: Taxes 896,628 Accounts (Note 4) 380,005 Due from other governmental units 32,011,138 Interest 255,143 Inventories (Note 1) 1,406,254 Prepaid expenses 353,340 Capital assets - Less accumulated depreciation of $72,657,943 (Note 5) 188,700,757 Total assets 346,970,430 Liabilities Accounts payable 12,843,959 Accrued payroll and other liabilities 19,401,377 Retainage payable 535,944 Deferred revenue (Note 4) 1,331,583 Long-term liabilities (Note 8): Bonds payable, due within one year 14,305,000 Other obligations, due within one year 514,000 Bonds payable, due in more than one year 126,365,000 Other obligations, due in more than one year 5,012,151 Total liabilities 180,309,014 Net Assets Investment in capital assets - Net of related debt 95,996,859 Restricted for: Debt service 6,859,532 Capital projects 4,488,722 Unrestricted 59,316,303 Total net assets $ 166,661,416 See Notes to Financial Statements. 11

16 Statement of Activities Governmental Program Revenues Activities Expenses Charges for Services Operating Grants/ Contributions Net (Expense) Revenue and Changes in Net Assets Functions/Programs Primary government - Governmental activities: Instruction $ 139,044,638 $ 706,240 $ 10,205,449 $ (128,132,949) Support services 77,042,559-6,369,668 (70,672,891) Enrichment 5,689,129 5,917, , ,992 Food services 4,745,352 3,645, ,017 (102,252) Athletics 2,202, ,219 - (2,083,307) Student stores 469, ,423-53,857 Community services 328,801-25,519 (303,282) Interest on long-term debt 7,302, (7,302,815) Depreciation (unallocated) 4,538, (4,538,552) Total governmental activities $ 241,363,938 $ 10,911,865 $ 17,702,874 (212,749,199) General revenues: Taxes: Property taxes, levied for general purposes 31,197,337 Property taxes, levied for debt services 19,822,920 State aid not restricted to specific purposes 162,987,029 Interest and investment earnings 3,593,812 Other 502,203 Special item - Gain on sale of capital assets 60,408 Total general revenues and special item 218,163,709 Change in Net Assets 5,414,510 Net Assets - Beginning of year 161,246,905 Net Assets - End of year $ 166,661,416 See Notes to Financial Statements. 12

17 Governmental Funds Balance Sheet June 30, 2002 General Capital Projects 2001 Series 1 Capital Projects 2002 Series II Other Nonmajor Governmental Funds Total Assets Cash and investments (Note 3) $ 45,521,386 $ 21,617,026 $ 28,567,041 $ 19,581,709 $ 115,287,162 Receivables: Taxes 727, , ,628 Accounts 367, , ,253 Interest 39,652-80, , ,607 Due from other funds (Note 6) 371, ,696 1,022,453 Due from other governmental units 31,979, ,260 32,011,138 Inventories (Note 1) 1,219, ,766 1,406,254 Prepaid expenses 299, , ,340 Total assets $ 80,527,228 $ 21,617,026 $ 28,647,787 $ 20,792,794 $ 151,584,835 Liabilities and Fund Balances Liabilities Accounts payable $ 8,224,721 $ 1,110,229 $ 2,865,907 $ 1,042,166 $ 13,243,023 Accrued payroll and other liabilities 18,252, ,252,704 Retainage payable - 456,879 2,500 76, ,944 Arbitrage payable - 40, ,621 Due to other funds (Note 6) 502, ,392 30, , ,648 Deferred revenue (Note 4) 1,120, ,330 1,927,143 Total liabilities 28,100,909 1,815,121 2,899,053 2,113,000 34,928,083 Fund Balances Reserved: Inventories 1,219, ,762 1,358,250 Prepaid expenses 299, , ,340 Encumbrances 534,036 9,287,272 12,140,449 2,361,461 24,323,218 Unreserved: Designated for capital projects - 10,514,633 13,608,285 6,653,339 30,776,257 Designated for debt service ,859,532 6,859,532 Designated for subsequent year's expenditures 5,465, ,465,000 Undesignated 44,908, ,612,978 47,521,155 Total fund balances 52,426,319 19,801,905 25,748,734 18,679, ,656,752 Total liabilities and fund balances $ 80,527,228 $ 21,617,026 $ 28,647,787 $ 20,792,794 $ 151,584,835 See Notes to Financial Statements. 13

18 Governmental Funds Reconciliation of Governmental Fund Balances to Governmental Net Assets June 30, 2002 Total Fund Balances - Governmental Funds $ 116,656,752 Amounts reported for governmental activities in the statement of net assets are different because: Capital assets used in governmental activities are not financial resources and are not reported in the funds. The cost of capital assets is 261,358,700 Accumulated depreciation is (72,657,943) Net capital assets 188,700,757 Other assets are not available to pay current period expenditures therefore deferred in the governmental funds 595,560 Long-term liabilities, including bonds payable, are not due and payable in the current period and therefore not reported in the governmental funds (140,670,000) Internal Service Funds assets and liabilities are included in governmental activities in the statement of net assets 2,486,399 Accrued interest payable is not included as a liability in the governmental funds (1,108,052) Total net assets - Governmental activities $ 166,661,416 See Notes to Financial Statements. 14

19 Governmental Funds Statement of Revenue, Expenditures, and Changes in Fund Balances Other Nonmajor Capital Projects Capital Projects Governmental General 2001 Series Series II Funds Totals Revenue Local sources $ 31,798,914 $ - $ - $ 30,154,072 $ 61,952,986 State sources 172,902, , ,065,534 Federal sources 5,158, ,261 5,993,790 Earnings on investments and other 2,707,531 1,145, , ,065 4,932,111 Total revenue 212,567,752 1,145, ,088 31,969, ,944,421 Expenditures Current: Instruction 131,492, ,492,241 Support services 76,470, ,470,424 Community services 328, ,801 Enrichment ,689,129 5,689,129 Food services ,745,352 4,745,352 Athletics ,202,526 2,202,526 Student stores , ,566 Debt service principal ,045,000 14,045,000 Debt service interest and other ,194,763 6,194,763 Capital outlay 3,173,545 22,637,058 6,466,638 6,556,393 38,833,634 Other 270, ,063 Total expenditures 211,735,074 22,637,058 6,466,638 39,902, ,741,499 Excess (deficiency) of revenue over expenditures 832,678 (21,491,631) (6,204,550) (7,933,575) (34,797,078) Other Financing Sources (Uses) Proceeds from sale of capital assets 185, ,375 Operating transfers in 428, ,656,030 3,084,030 Operating transfers out (2,156,030) - - (928,000) (3,084,030) Long-term debt issued ,435,000-31,435,000 Premium on debt issued , ,284 Total other financing sources (uses) (1,542,655) - 31,953,284 1,728,030 32,138,659 Net Change in Fund Balances (709,977) (21,491,631) 25,748,734 (6,205,545) (2,658,419) Fund Balances - July 1, ,136,296 41,293,536-24,885, ,315,171 Fund Balances - June 30, 2002 $ 52,426,319 $ 19,801,905 $ 25,748,734 $ 18,679,794 $ 116,656,752 See Notes to Financial Statements. 15

20 Governmental Funds Reconciliation of the Statement of Revenue, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities Net Change in Fund Balances - Total Governmental Funds $ (2,658,419) Amounts reported for governmental activities in the statement of activities are different because: Governmental funds report capital outlay as expenditures; in the statement of activities, these costs are allocated over their estimated useful lives as depreciation. Depreciation expense (6,001,750) Capital outlay (capitalized amount only) 31,933,725 Total 25,931,975 The net effect of other transactions involving capital assets (i.e. sales, trade ins, and donations) that decreased net assets (124,967) Revenue reported in the statement of activities that does not provide current financial resources and are not reported as revenue in the governmental funds 595,560 Long-term debt issuance is reported as an other financing source in the governmental funds. Long-term debt is not a revenue in the statement of activities and is reported as a long-term liability in the statement of net assets (31,435,000) Accrued interest is recorded in the statement of activities when incurred; it is not reported in governmental funds until paid (1,108,052) Repayment of bond principal is an expenditure in the governmental funds, but not in the statement of activities (where it reduces long-term debt) 14,045,000 Internal Service Fund activity 168,413 Change in Net Assets of Governmental Activities $ 5,414,510 See Notes to Financial Statements. 16

21 Proprietary Fund - Internal Service Fund Statement of Net Assets June 30, 2002 Assets Cash and investments $ 7,680,003 Accounts receivable 10,752 Interest receivable 16,536 Due from General Fund 305,259 Total assets 8,012,550 Liabilities Workers' compensation 2,233,745 Sick leave and longevity 1,649,376 Vacation 1,389,085 FICA 232,442 Retirement 21,503 Total liabilities 5,526,151 Total Unrestricted Net Assets $ 2,486,399 See Notes to Financial Statements. 17

22 Proprietary Fund - Internal Service Fund Statement of Revenues, Expenses, and Changes in Fund Net Assets Operating Revenues - Charges to other funds Workers' compensation $ 585,000 Longevity and sick leave 95,770 Vacation 1,183,123 Total operating revenues 1,863,893 Operating Expenses Workers' compensation 585,000 Longevity and sick leave 95,770 Vacation 1,183,123 Miscellaneous 9,646 Total operating expenses 1,873,539 Other Income - Interest 178,059 Change in Net Assets 168,413 Net Assets - Beginning of year 2,317,986 Net Assets - End of year $ 2,486,399 See Notes to Financial Statements. 18

23 Proprietary Fund - Internal Service Fund Statement of Cash Flows Cash Flows from Operating Activities Receipts from other funds $ 1,902,416 Payments for services (1,661,471) Net cash provided by operating activities 240,945 Cash Flows from Investing Activities - Interest 172,269 Net Increase in Cash and Cash Equivalent Investments 413,214 Cash and Cash Equivalent Investments - July 1, ,266,789 Cash and Cash Equivalent Investments - June 30, 2002 $ 7,680,003 Reconciliation of operating loss to net cash provided by operating activities: Operating loss $ (9,646) Adjustments to reconcile operating loss to net cash provided by operating activities - Changes in assets and liabilities: Decrease in due from General Fund 38,523 Increase in accrued liabilities 212,068 Net cash provided by operating activities $ 240,945 See Notes to Financial Statements. 19

24 Fiduciary Fund - Trust and Agency Statement of Fiduciary Net Assets June 30, 2002 Assets Cash and investments $ 3,197,517 Due from other funds 10,356 Interest receivable 12,655 Total assets $ 3,220,528 Liabilities Due to other funds $ 409,420 Due to student groups 2,811,108 Total liabilities $ 3,220,528 See Notes to Financial Statements. 20

25 Notes to Financial Statements June 30, 2002 Note 1 - Summary of Significant Accounting Policies The accounting policies of Utica Community Schools (the School District ) conform to accounting principles generally accepted in the United States of America (GAAP) as applicable to governmental units. The following is a summary of the significant accounting policies used by the School District: Reporting Entity The School District is governed by an elected seven-member Board of Education. The accompanying financial statements have been prepared in accordance with criteria established by the Governmental Accounting Standards Board for determining the various governmental organizations to be included in the reporting entity. These criteria include significant operational financial relationships that determine which of the governmental organizations are a part of the School District s reporting entity, and which organizations are legally separate component units of the School District. Based on application to the criteria, the entity does not contain any component units. District-wide and Fund Financial Statements The district-wide financial statements (i.e., the statement of net assets and the statement of changes in net assets) report information on all of the nonfiduciary activities of the primary government. For the most part, the effect of interfund activity has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. All the School District s government-wide activities are considered governmental activities. 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 that are clearly identifiable with a specific function. Program revenue includes (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 and contributions that are restricted to meeting the operational or capital requirements of a particular function. Taxes, intergovernmental payments, and other items not properly included among program revenues are reported instead as general revenue. 21

26 Notes to Financial Statements June 30, 2002 Note 1 - Summary of Significant Accounting Policies (Continued) Separate financial statements are provided for governmental funds, proprietary funds, 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. Measurement Focus, Basis of Accounting, and Financial Statement Presentation District-wide Statements - The district-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenue is recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenue in the year for which they are levied. Grants, categorical aid, and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. As a general rule, the effect of interfund activity has been eliminated from the government-wide financial statements. Amounts reported as program revenue include (1) charges to customers or applicants for goods, services, or privileges provided; (2) operating grants and contributions; and (3) capital grants and contributions. Internally dedicated resources are reported as general revenue rather than as program revenue. Likewise, general revenue includes all taxes and unrestricted State aid. Fund-based Statements - Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenue is recognized as soon as it is both measurable and available. Revenue is considered to be available if it is collected 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 of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. Property taxes, unrestricted State aid, intergovernmental grants, and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenue of the current fiscal period. All other revenue items are considered to be available only when cash is received by the government. 22

27 Notes to Financial Statements June 30, 2002 Note 1 - Summary of Significant Accounting Policies (Continued) Proprietary fund and fiduciary fund statements also are reported using the economic resources measurement focus and the accrual basis of accounting. Proprietary funds distinguish operating revenue and expenses from nonoperating items. Operating revenue and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund s principal ongoing operations. Fiduciary funds are custodial in nature (assets equal liablities) and do not involve the measurement of results of operations. The School District reports the following major governmental funds: General Fund - The General Fund is the School District s primary operating fund. It accounts for all financial resources of the School District, except those required to be accounted for in another fund. The 2001 Series I Capital Projects Fund - The 2001 Series I Capital Projects Fund is used to record bond proceeds or other revenue and the disbursement of invoices specifically designated for acquiring new school site, buildings, equipment, and for remodeling and repairs. The fund operates until the purpose for which it was created is accomplished. The 2002 Series II Capital Projects Fund - The 2002 Series II Capital Projects Fund is used to record bond proceeds or other revenue and the disbursement of invoices specifically designated for acquiring new school site, buildings, equipment, and for remodeling and repairs. The fund operates until the purpose for which it was created is accomplished. Additionally, the government reports the following fund types: The School District s proprietary fund is the Internal Service Fund. The purpose of the Internal Service Fund is to finance services provided to other funds on a costreimbursement basis. The Internal Service Fund maintained by the School District is for workers compensation, sick leave, accrued vacation, and longevity pay. It is funded through transfers primarily from the General Fund in amounts equal to the normal estimated workers compensation premium, compensated absences, and longevity expense for that fiscal year. The School District s only fiduciary fund is the Trust and Agency Fund. This fund is used to account for assets held by the School District in a trustee capacity or as an agent. 23

28 Notes to Financial Statements June 30, 2002 Note 1 - Summary of Significant Accounting Policies (Continued) Assets, Liabilities, and Net Assets or Equity Deposits and Investments - Cash and cash equivalents include cash on hand, demand deposits, and short-term investments with a maturity of three months or less when acquired. Investments are stated at fair value. Pooled investment income from the General Fund and various Debt Service Funds is generally allocated to each fund based on an allocation of the tax mills levied. Receivables and Payables - In general, outstanding balances between funds are reported as due to/from other funds. Activities between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as advances to/from other funds. Property tax and other trade receivables are shown net of an allowance for uncollectible amounts. The School District considers all accounts receivable to be fully collectible; accordingly, no allowance for uncollectibles is recorded. Properties are assessed as of December 31 and the related property taxes are levied and become a lien on July 1 for approximately 50 percent of the taxes that are due September 14 and December 1 for the remainder of the property taxes that are due on February 14. The final collection date is February 28, after which they are added to the county tax rolls. Prepaid Expenses and Inventories - Certain payments to vendors reflect costs applicable to future fiscal years and are recorded as prepaid items in both government-wide and fund financial statements. Inventories are valued at cost, on a first-in, first-out basis. Inventories of governmental funds are recorded as expenditures when consumed rather than when purchased. United States Department of Agriculture Commodities inventory received by the Food Service Fund are recorded as inventory and deferred revenue until used. Inventory balances as of June 30, 2002 are as follows: 24

29 Notes to Financial Statements June 30, 2002 Note 1 - Summary of Significant Accounting Policies (Continued) General Fund: Maintenance $ 316,645 Warehouse 619,732 Transportation 283,111 Total General Fund 1,219,488 Other nonmajor governmental funds: Food Service 142,030 Student Stores 44,736 Total other nonmajor governmental funds 186,766 Total - All Funds/Governmental Activities $ 1,406,254 Restricted Assets - The unspent bond proceeds of the Capital Projects Funds require amounts to be set aside for construction. The property taxes levied in the Debt Service Funds are required to be set aside for future principal and interest payments on bonded debt. These amounts have been classified as restricted assets. Capital Assets - Capital assets, which include land, buildings, equipment, and vehicles, are reported in the applicable governmental or business-type activities column in the government-wide financial statements. Capital assets are defined by the government as assets with an initial individual cost of more than $5,000 and an estimated useful life in excess of one year. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair market value at the date of donation. Costs of improvement to sites or buildings in excess of $20,000 and that extend the useful life of the capital asset at least five years will be capitalized. Costs of normal repair and maintenance that do not add to the value or materially extended asset life are not capitalized. The School District does not have infrastructure-type assets (i.e., roads, sewers, bridges, etc.). Buildings, equipment, and vehicles are depreciated using the straight-line method over the following useful lives: Buildings and additions Buses and other vehicles Furniture and other equipment years 5-10 years 5-20 years 25

30 Notes to Financial Statements June 30, 2002 Note 1 - Summary of Significant Accounting Policies (Continued) Compensated Absences - The liability for compensated absences reported in the government-wide and propriety fund statements consists of unpaid, accumulated annual balances for employee excess sick leave days, accrued vacation, workers compensation, and longevity. The liability has been calculated using the vesting method, in which leave amounts for both employees who are currently eligible to receive termination payments and other employees who are expected to become eligible in the future to receive such payments upon termination are included. Long-term Obligations - In the government-wide financial statements and proprietary fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the statement of net assets. In the fund financial statements, governmental fund types recognize bond proceeds, premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are also reported as other financing sources. Issuance costs are reported as debt service expenditures. Fund Equity - In the fund financial statements, governmental funds report reservations of fund balance for amounts that are not available for appropriation or are legally restricted by outside parties for use for a specific purpose. Designations of fund balance represent tentative management plans that are subject to change. Comparative Data - Comparative data is not included in the School District s financial statements. Accounting Change - Effective July 1, 2001, the School District implemented the provisions of Governmental Accounting Standards Board Statement No. 34, Basic Financial Statements - and Management s Discussion and Analysis - for State and Local Governments (GASB No. 34). Changes to the School District s financial statements as a result of GASB No. 34 are as follows: A Management s Discussion and Analysis (MD&A) section providing analysis of the School District s overall financial position and results of operations has been included. District-wide financial statements (statement of net assets and statement of activities) prepared using full accrual accounting for all of the School District s activities have been provided. 26