CAVERNA INDEPENDENT SCHOOL DISTRICT

Transcription

1 BASIC FINANCIAL STATEMENTS, SUPPLEMENTARY INFORMATION, AND INDEPENDENT AUDITOR S REPORTS For the Year Ended June 30, 2011

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3 TABLE OF CONTENTS YEAR ENDED JUNE 30, 2011 Pages Independent Auditor's Report 1-2 Management s Discussion and Analysis 3-7 Basic Financial Statements: District-wide Financial Statements: Statement of Net Assets 8 Statement of Activities 9 Fund Financial Statements: Balance Sheet Governmental Funds 10 Reconciliation of the Balance Sheet Governmental Funds to the Statement of Net Assets 11 Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds 12 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities 13 Statement of Net Assets Proprietary Funds 14 Statement of Revenues, Expenses and Changes in Net Assets Proprietary Funds 15 Statement of Cash Flows Proprietary Funds 16 Statement of Fiduciary Net Assets Fiduciary Funds 17

4 TABLE OF CONTENTS - CONTINUED YEAR ENDED JUNE 30, 2011 Notes to Basic Financial Statements Supplementary Information: Statement of Revenues, Expenditures and Changes in Fund Balance Budget and Actual General Fund 37 Statement of Revenues, Expenditures and Changes in Fund Balance Budget and Actual Special Revenue 38 Combining Statements Nonmajor Funds: Combining Balance Sheet Nonmajor Governmental Funds 39 Combining Statement of Revenues, Expenditures and Changes In Fund Balances Nonmajor Governmental Funds 40 Statement of Receipts, Disbursements and Fund Balances - Caverna Independent High School Activity Funds 41 Statement of Receipts, Disbursements and Fund Balances - Caverna Middle School and Caverna Elementary Schools Activity Funds 42 Statement of Receipts, Disbursements and Fund Balance - Family Resource Center 43 Schedule of Expenditures of Federal Awards 44 Notes to the Schedule of Expenditures of Federal Awards 45 Schedule of Findings and Questioned Costs Schedule of Prior Year Audit Findings 48 Report on Internal Control over Financial Reporting and on Compliance and Other Matter Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards Report on Compliance with Requirements Applicable to Each Major Program and Internal Control Compliance in Accordance with OMB Circular A Management Letter 53-54

5 INDEPENDENT AUDITOR S REPORT Members of the Board of Education Caverna Independent School District Horse Cave-Cave City, Kentucky We have audited the accompanying financial statements of the governmental activities, the businesstype activities, each major fund, and the aggregate remaining fund information of Caverna Independent School District, as of and for the year ended June 30, 2011, which collectively comprise the Caverna Independent School District s basic financial statements as listed in the table of contents. These financial statements are the responsibility of Caverna Independent School District s 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; and the audit requirements prescribed by the Kentucky State Committee for the School District Audits in Appendix I of the Independent Auditor s Contract General Audit Requirements, Appendix II of the Independent Auditor s Contract State Audit Requirements, and Appendix III of the Independent Auditor s Contract Instructions for Completion and Electronic Submission of the Audit Contract. 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 the 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, the business-type activities, each major fund, and the aggregate remaining fund information of the Caverna Independent School District, as of June 30, 2011, and the respective changes in financial position, and cash flows, where applicable, thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued our report dated October 12, 2011, on our consideration of the Caverna Independent School District s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. Page 1

6 Accounting principles generally accepted in the United States of America require that the management s discussion and analysis and budgetary comparison information on pages 3 through 7 and pages 37 through 38 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Caverna Independent School District s financial statements as a whole. The combining and individual non-major fund financial statements and the Agency fund financial information on pages 39-43, are presented for purposes of additional analysis and are not a required part of the financial statements. The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, and is also not a required part of the financial statements. The combining and individual nonmajor fund financial statements, the Agency fund financial information and the schedule of expenditures of federal awards are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole. Respectfully submitted, Campbell, Myers & Rutledge, PLLC Certified Public Accountants October 12, 2011 Page 2

7 Caverna Independent Schools, Horse Cave and Cave City, Kentucky Management s Discussion and Analysis Year Ended June 30, 2011 The financial position of the Caverna Board of Education remains constant and stable. The cash balance increased 20% last year due to excellent costs controls by everyone and not buying a bus along with the state allowing us to spend capital outlay on general fund expenses last year. ADA remained steady at 657 in and 660 in The largest problem with ADA is at the High School with it running at 92% while the Elementary was 95% and the Middle School at 94%. We expect the high school attendance to improve this year with the alternative school being moved to our campus from Glasgow. This should decrease suspensions and increase ADA. Caverna Board of Education continues to make a concerted effort to keep our staffing in line with the state mandated figures. The elementary is within state guidelines, while the middle school is over by 1 teacher. The middle school chose to move band to an afterschool activity, thus freeing up time for Mr. Fudge to teach all students music and humanities. The high school remains over even after the elimination of the Technology/Shop and Consumer and Family Resource Classes. The high school also chose to replace the business classes with Computer Skills and Applications classes. This is more in line with today s technology and creating job readiness. The high school also added a reading intervention teacher through the SIG grant. One teacher at both the high school and middle schools is currently funded by Edujobs funds. These positions will have to be eliminated next year unless new funding is found. We continue to offer all day preschool and have 4 preschool classrooms again for with a current enrollment of 74 students. While this program is only funded for half days by the state, our aim is early intervention. It is expected that early intervention for at risk students will help cut costs in the long run and give our children a better opportunity to succeed. One teacher for is being paid for from Edujobs funds. The first year of the School Improvement Grant (SIG) is complete. The grant was for $499,600 for school year. Most of these funds were spent on the hiring of a Math Intervention teacher, a School Administrative Manager, the Curriculum Specialist and lots of Professional Development for the staff. The SAM and Specialist were recommendations of the grant. The SAM, Stacey Bradbury, works with the facilities and classified staff and other duties to free up the Principal to focus on academics. They also purchased computers, IPADS, and various software programs. 20 teachers attended the Model Schools Conference and most teachers attended Professional Learning Community Meetings 2-3 times each week. Math scores increased to 33%, proficiency and reading to 68%. ACT scores remained the same even with the purchase of the John Baylor test prep. With the focus on ACT scores, a method must be found to better prepare the students for this test. Each student has been assigned a mentor and a volunteer banquet was held in the spring to honor our 43 volunteers. A student brochure and quarterly newsletters are being published. Students were rewarded for reaching goals, for attendance, and behavior with trips to Hot Rods games, shirts, towels and backpacks. Four parent involvement activities were held. The SIG grant continues for 2 more years. This year they have added a reading Intervention teacher. We hope to see test scores continue to increase, while showing a jump in ACT scores and improving student and parental involvement. Our focus in facilities continues to be on new HVAC for all schools. Our current bonding capacity is $3,630,000. We currently have two bonds one of which will be paid off on December 1, The average payments since the 2002 refinancing has been around $125,000. The other bond which was for adding the middle school office and science lab along with new restrooms in all buildings and some sports complex work will remain with us until 2024 with payments running around $130,000 per year. We expect to start looking at the HVAC project in early Page 3

8 Caverna Independent Schools, Horse Cave and Cave City, Kentucky Management s Discussion and Analysis Year Ended June 30, 2011 Interfund transfers were made from the general fund to the technology fund for $16, This amount is required to get the state matching portion of technology funds. Indirect costs were also transferred from Food Service to the General Fund for $19, Indirect costs are the food services portion of utilities, building maintenance and other overhead. OVERVIEW OF FINANCIAL STATEMENTS This discussion and analysis is intended to serve as an introduction to the District s basic financial statements. The District s basic financial statements comprise three components: 1) district-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. District-wide Financial Statements. The district-wide financial statements are designed to provide readers with a broad overview of the District s finances, in a manner similar to a private-sector business. The statement of net assets presents information on all the District s assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of the district is improving or deteriorating. The statement of activities presents information showing how the District s net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in the future fiscal periods. The district-wide financial statements outline functions of the District that are principally supported by property taxes and intergovernmental revenues (governmental activities). The governmental activities of the District include instruction, support services, operation and maintenance of plant, student transportation and operation of non-instructional services. Fixed assets and related debt is also supported by taxes and intergovernmental revenues. The district-wide financial statements can be found on pages 8-9 of this report. Fund Financial Statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. There is a state mandated uniform system and chart of accounts for all Kentucky public school districts utilizing MUNIS administrative software. The district uses fund accounting to ensure compliance with finance-related legal requirements. All of the funds of the District can be divided into three categories: Governmental, proprietary and fiduciary funds. Fiduciary funds are trust funds established by benefactors to aid in student education, welfare, and teacher support. Caverna Board of Education currently has no fiduciary funds. The only proprietary fund is the food service operations. All other activities of the district are included in the governmental funds. The governmental fund financial statements can be found on pages of this report. Notes to the Financial Statements. The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on pages of this report. Page 4

9 Caverna Independent Schools, Horse Cave and Cave City, Kentucky Management s Discussion and Analysis Year Ended June 30, 2011 GOVERNMENT-WIDE FINANCIAL ANALYSIS Net assets may serve over time as a useful indicator of a government s financial position. Caverna s assets exceeded liabilities by $3,460,829 as of June 30, The largest portion of the District s net assets reflects its investment in capital assets (e.g., land and improvements, buildings and improvements, vehicles, furniture, and equipment), less any related outstanding debt used to acquire those assets. The District uses these capital assets to provide services to its students; consequently, these assets are not available for future spending. Although the District s investment in its capital asset is reported net of related debt, it should be noted that the resources to repay this debt must be provided from other sources. The District s financial position is the product of several financial transactions including the net results of activities, the acquisition and payment of debt, the acquisition and disposal of capital assets, and the depreciation of capital assets. Net Assets for the period ending June 30, 2011 and June 30, 2010 Net Assets had increased by $91,833 over last year. This is due to an increase in cash at year end and a decrease in restricted assets due to the state allowing us to spend Capital Outlay funds on general expenses for the year. We also have restricted funds to cover any error the state has made by overstating our ADA on the Seek projection we received last January. June 30, 2011 June 30, 2010 Current Assets $ 1,472,923 $ 1,406,208 Noncurrent Assets 4,153,067 4,399,880 Total Assets $ 5,625,990 $ 5,806,088 Current Liabilities 395,032 $ 420,217 Noncurrent Liabilities 1,770,129 2,016,925 Total Liabilities $ 2,165,161 $ 2,437,142 Net Assets Investment in capital assets (net of debt) $ 2,409,139 $ 2,126,034 Restricted 235, ,904 Unreserved Fund Balance 816, ,008 Total Net Assets $ 3,460,829 $ 3,368,946 Page 5

10 Caverna Independent Schools, Horse Cave and Cave City, Kentucky Management s Discussion and Analysis Year Ended June 30, 2011 The following table presents a summary of revenue and expense for the fiscal year ended June 30, 2011 and June 30, June 30, 2011 June 30, 2010 Revenues: Local revenue sources $ 1,961,080 $ 1,857,888 State revenue sources 4,862,224 4,518,454 Federal revenues 1,732,155 1,315,536 Investments 10,413 21,295 Other sources 38, ,103 $ 8,604,720 $ 7,817,276 Expenses: Instruction $ 5,066,133 $ 4,466,281 Student support services 225, ,246 Instructional support 513, ,100 District support 443, ,293 School administration 650, ,043 Business support 43,707 39,984 Plant operations 495, ,043 Student transportation 474, ,226 Facilities acquisition 83, ,783 Community support 100, ,119 Other 416, ,366 Total expenses 8,512,837 7,918,484 Excess (Deficit) of Revenues over Expenses $ 91,883 $ (101,208) COMPARISON OF PRIOR YEAR 2011 was a difficult year with cuts from the state constantly hanging over our heads while local taxes increased along with Federal stimulus funds leading to an increase in total revenues. This is somewhat misleading since some of the AARA Stimulus funds were carried over to to keep from eliminating teachers during However with the some positions had to be eliminated to keep the district fiscally sound. Our foresight to keep our EDUJOBS funds has allowed us to keep three positions for Expenses were up due to the addition of the School Improvement Grant at the high school. Instruction and Instructional Support were up due to the addition of personnel under the SIG grant. These will continue for the next two years. School administration costs increased for the same reason. Plant operations and Transportation expenses are down due to the state allowing us to use Capital Outlay funds of $130,000 for insurance and bus lease costs this year. We also did not purchase a bus during because the hybrid was delayed and then they changed the brand of bus to one we do not have the tools to maintain. This caused us to opt out of the program for the year. A regular bus has been purchased through a KISTA lease in the current year. Page 6

11 Caverna Independent Schools, Horse Cave and Cave City, Kentucky Management s Discussion and Analysis Year Ended June 30, 2011 BUDGET COMPARISONS The total revenues for fiscal year were $8,604,720. Up by $787,444 from last year due largely to the SIG grant of $499,600. We also spent AARA funds during increasing revenues for the year. General Fund actual revenue was up in local and federal revenues compared to budgeted revenue but down in state. We are still looking to add new heating and cooling to the high/middle school in the next couple of years. We have the bonding capacity to tackle this project but are waiting for the economy to clear a bit. The majority of General Fund Revenue was derived from state revenue (SEEK) 56% down from 69% last year, with local funding making up 22% of revenue. Instruction accounts for 69% of expenditures; Central Office and Administration makes up 13%; Maintenance is 6% and Transportation is 6%. LONG TERM DEBT Long-term debt payments in the amount of $103,877 were paid during the year for Renovations to the Elementary School. Interest payments totaling $9,155 were also made during this time. Payments will continue until 2013 for these bonds. Principal payments for the Middle School improvements bond were $53,520 for Interest on the new bond was $46,051. NET ASSETS Current governmental capital assets for were $4,208,771 and $4,153,067 for Current business capital assets, which is food service, totaled $16,570 for and were $14,111 for All these assets are equipment and technology. Page 7

12 Assets: Current Assets: CAVERNA INDEPENDENT SCHOOL DISTRICT STATEMENT OF NET ASSETS For the Year Ended June 30, 2011 Business Governmental Type Activities Activities Total Cash and cash equivalents $ 1,441,581 $ 46,672 $ 1,488,253 Inventory - 16,204 16,204 Accounts receivable 17,956-17,956 Prepaid expenses and other assets 13,386-13,386 Total current assets 1,472,923 62,876 1,535,799 Noncurrent Assets: Capital assets 9,047,462 86,091 9,133,553 Less: accumulated depreciation (4,894,395) (71,980) (4,966,375) Total noncurrent assets 4,153,067 14,111 4,167,178 Total assets 5,625,990 76,987 5,702,977 Liabilities: Current Liabilities: Accounts payable 19,065-19,065 Deferred revenue 104, ,122 Current portion of bond obligations 223, ,000 Current portion of capital lease obligations 43,582-43,582 Interest payable 5,263-5,263 Total current liabilities 395, ,032 Noncurrent Liabilities: Noncurrent portion of bond obligations 1,334,000-1,334,000 Noncurrent portion of capital lease obligations 151, ,469 Noncurrent portion of accrued sick leave 284, ,660 Total noncurrent liabilities 1,770,129-1,770,129 Total liabilities 2,165,161-2,165,161 Net Assets: Invested in capital assets, net of related debt 2,409,139 14,111 2,423,250 Restricted for: Capital projects 40,962-40,962 Debt service 94,428-94,428 Other purposes (nonexpendable) 100, ,000 Unrestricted: 816,300 62, ,176 Total net assets $ 3,460,829 $ 76,987 $ 3,537,816 See independent auditor s report and accompanying notes to basic financial statements. Page 8

13 Functions / Programs Governmental Activities: Instruction 5,066,133 CAVERNA INDEPENDENT SCHOOL DISTRICT STATEMENT OF ACTIVITIES For the Year Ended June 30, 2011 Net (Expense) Revenue and Program Revenues Changes in Net Assets Charges Operating Capital Business - for Grants and Grants and Governmental Type Expenses Services Contributions Contributions Activities Activities Total $ $ - $ 2,366,251 $ - $ (2,699,882) $ - $ (2,699,882) Support Services Student 225, (225,878) - (225,878) Instructional staff 513, (513,396) - (513,396) District administrative 443, (443,779) - (443,779) School administrative 650, (650,287) - (650,287) Business 43, (43,707) - (43,707) Plant operations and maintenance 495, (495,924) - (495,924) Student Transportation 474, (474,405) - (474,405) Facilities acquisition and construction 83, (83,090) - (83,090) Community service activities 100, (100,110) - (100,110) Other Interest on long-term debt 71, (71,938) - (71,938) Depreciation (unallocated) 344, (344,190) - (344,190) Total governmental activities 8,512,837-2,366,251 - (6,146,586) - (6,146,586) Business-Type Activities Food Service 574,437 68, , (9,946) (9,946) Total business-type activities 574,437 68, , (9,946) (9,946) Total primary government $ 9,087,274 $ 68,570 $ 2,862,172 $ - (6,146,586) (9,946) (6,156,532) General Revenues: Taxes: Property taxes 1,723,254-1,723,254 Motor vehicle taxes 125, ,583 Other 112, ,243 Investments earnings 10, ,736 State and formula grants 4,228,128-4,228,128 Miscellaneous 38,848 1,316 40,164 Total general revenues 6,238,469 1,639 6,240,108 Change in net assets 91,883 (8,307) 83,576 Net assets - beginning 3,368,946 85,294 3,454,240 Net assets - ending $ 3,460,829 $ 76,987 $ 3,537,816 See independent auditor s report and accompanying notes to basic financial statements. Page 9

14 BALANCE SHEET GOVERNMENTAL FUNDS June 30, 2011 Other Nonmajor Total General Special Governmental Governmental Fund Revenue Funds Funds Assets and resources: Cash and cash equivalents $ 1,201,540 $ 100,668 $ 139,373 $ 1,441,581 Inventories Accounts receivable: Taxes-current Taxes-delinquent Accounts receivable 8,469 9,487-17,956 Intergovernmental-state Intergovernmental - indirect federal Due from other funds Prepaid expenses Interest receivable Investments Total assets and resources $ 1,210,009 $ 110,155 $ 139,373 $ 1,459,537 Liabilities and fund balance: Liabilities: Accounts payable $ 13,032 $ 6,033 $ - $ 19,065 Checks issued in excess of cash Accrued payroll and related expenses Current portion of accumulated sick leave Deferred revenues - 104, ,122 Total liabilities 13, , ,187 Fund balances: Nonspendable: Restricted: Capital Projects ,945 44,945 Debt Service ,428 94,428 Committed: Accrued Sick Leave 40, ,962 Other Contingency 100, ,000 Assigned: Unassigned: 1,056, ,056,015 Total fund balances 1,196, ,373 1,336,350 Total liabilities and fund balances $ 1,210,009 $ 110,155 $ 139,373 $ 1,459,537 See independent auditor s report and accompanying notes to basic financial statements. Page 10

15 RECONCILIATION OF THE BALANCE SHEET GOVERNMENTAL FUNDS TO THE STATEMENT OF NET ASSETS June 30, 2011 Total fund balance per fund financial statements $ 1,336,350 Amounts reported for governmental activities in the statement of net assets are different because: Capital assets are not reported in this fund financial statement because they are not current financial resources, but they are reported in the statement of net assets. 4,153,067 Certain liabilities (such as bonds payable, the long-term portion of accrued sick leave, and accrued interest) are not reported in this fund financial statement because they are not due and payable, but they are presented in the statement of net assets. (2,028,588) Net assets for governmental activities $ 3,460,829 See independent auditor s report and accompanying notes to basic financial statements. Page 11

16 STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS For the Year Ended June 30, 2011 Revenues: From local sources: Taxes: Property 1,574,677 Other Nonmajor Total General Special Governmental Governmental Fund Revenue Funds Funds $ $ - $ 148,577 $ 1,723,254 Motor vehicle 125, ,583 Other 112, ,243 Earnings on investments 10, ,413 Other local revenues 10,370 4,326-14,696 Intergovernmental-state 4,228, , ,985 4,862,224 Intergovernmental-indirect federal - 1,719,798-1,719,798 Intergovernmental-direct federal 12, ,357 Total revenues 6,073,771 2,148, ,562 8,580,568 Expenditures: Instruction 3,407,876 1,732,583-5,140,459 Support services: Student 190,732 35, ,878 Instructional staff 251, , ,396 District administration 443, ,779 School administration 602,706 47, ,287 Business 43, ,707 Plant operations and maintenance 495, ,924 Student transportation 529, ,714 Facilities acquisition and construction ,090 83,090 Community service activities 12,506 87, ,110 Other , ,938 Total expenditures 5,978,584 2,164, ,028 8,511,282 Excess (deficit) of revenues over expenditures 95,187 (16,435) (9,466) 69,286 Other financing sources (uses): Proceeds from sale of fixed assets 4, ,710 Operating transfers in 176,176 16, , ,264 Operating transfers out (46,545) - (365,277) (411,822) Total other financing sources (uses) 134,341 16,435 (126,624) 24,152 Excess (deficit) of revenues and other financing sources over expenditures and other financing uses 229,528 - (136,090) 93,438 Fund balance, July 1, , ,463 1,242,912 Fund balance, June 30, 2011 $ 1,196,977 $ - $ 139,373 $ 1,336,350 See independent auditor s report and accompanying notes to basic financial statements. Page 12

17 RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES For the Year Ended June 30, 2011 Net changes in total fund balances per fund financial statements $ 93,438 Amounts reported for governmental activities in the statement of activities are different because: Capital outlays are reported as expenditures in this fund financial statement because they use current financial resources, but they are presented as assets in the statement of activities and depreciated over their estimated economic lives. The difference is the amount by which depreciation expense exceeds capital outlays for the year. (246,187) Bond and capital lease payments are recognized as expenditures of current financial resources in the fund financial statement but are reductions of liabilities in the statement of net assets. 268,309 Generally, expenditures recognized in this fund financial statement are limited to only those that use current financial resources, but expenses are recognized in the statement of activities when they are incurred. (23,677) Change in net assets of governmental activities $ 91,883 See independent auditor s report and accompanying notes to basic financial statements. Page 13

18 STATEMENT OF NET ASSETS PROPRIETARY FUNDS For the Year Ended June 30, 2011 Food Service Fund Total Assets Current Assets Cash and cash equivalents $ 46,672 $ 46,672 Inventory 16,204 16,204 Total current assets 62,876 62,876 Noncurrent Assets Capital assets 86,091 86,091 Less: accumulated depreciation (71,980) (71,980) Total noncurrent assets 14,111 14,111 Total assets $ 76,987 $ 76,987 Total liabilities - - Net Assets Invested in capital assets net of related debt 14,111 14,111 Unrestricted 62,876 62,876 Total net assets $ 76,987 $ 76,987 See independent auditor s report and accompanying notes to basic financial statements. Page 14

19 STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN NET ASSETS PROPRIETARY FUNDS For the Year Ended June 30, 2011 Operating Revenues: Food Service Fund Totals Lunchroom sales $ 68,570 $ 68,570 Total operating revenues 68,570 68,570 Operating Expenses: Salaries and wages 286, ,168 Material and supplies 252, ,617 Depreciation 2,459 2,459 Other operating expenses 13,751 13,751 Total operating expenses 554, ,995 Operating loss (486,425) (486,425) Non-Operating Revenues (Expenses) Federal grants 398, ,953 Donated commodities 24,485 24,485 State grants 72,483 72,483 Other income 1,639 1,639 Fund transfers (19,442) (19,442) Total non-operating revenues 478, ,118 Net income (loss) (8,307) (8,307) Net assets, July 1, ,294 85,294 Net assets, June 30, 2011 $ 76,987 $ 76,987 See independent auditor s report and accompanying notes to basic financial statements. Page 15

20 STATEMENT OF CASH FLOWS PROPRIETARY FUNDS For the Year Ended June 30, 2011 Cash Flows From Operating Activities: Cash received from: Lunchroom sales $ 68,570 Government grants 403,832 Other activities 1,489 Cash paid to/for Employees (221,023) Supplies (247,905) Other activities (13,751) Net cash provided (used) by operating activities (8,788) Cash Flows from Capital and Related Financing Activities: Sale of capital assets 150 Net decrease in cash and cash equivalents (8,638) Balances, beginning of year 55,310 Balances, end of year $ 46,672 Reconciliation of operating income (loss) to net cash provided (used) by operating activities Net income (loss) $ (8,307) Adjustments to reconcile operating income to net cash provided (used) by operating activities Depreciation 2,459 Change in assets and liabilities Inventory (2,790) Net cash provided (used) $ (8,638) Schedule of non-cash transactions: Donated commodities received from federal government $ 24,485 On Behalf payments $ 67,604 See independent auditor s report and accompanying notes to basic financial statements. Page 16

21 STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS June 30, 2011 Agency Funds Assets Cash and cash equivalents $ 82,329 Accounts receivable 2,100 Total assets $ 84,429 Liabilities Accounts payable $ 8,683 Due to student groups 75,746 Total liabilities 84,429 Net Assets Held in Trust $ - See independent auditor s report and accompanying notes to basic financial statements. Page 17

22 NOTES TO BASIC FINANCIAL STATEMENTS, CONTINUED June 30, Summary of Significant Accounting Policies and Description of Funds: Reporting Entity: The Caverna Board of Education, a five member group, is the level of government which has oversight responsibilities over all activities related to public elementary and secondary school education within the jurisdiction of the Caverna Independent School District. The District receives funding from Local, State and Federal government sources and must comply with the commitment requirements of these funding source entities. However, the District is not included in any other governmental "reporting entity" as defined in Section 2100, Codification of Governmental Accounting and Financial Reporting Standards as Board members are elected by the public and have decision making authority, the power to designate management, the responsibility to develop policies which may influence operations and primary accountability for fiscal matters. The District, for financial purposes, includes all of the funds and account groups relevant to the operation of the Caverna Independent School District. The financial statements presented herein do not include funds of groups and organizations, which although associated with the school system, have not originated within the District itself such as Band Boosters, Parent-Teacher Associations, etc. The District is not involved in budgeting or managing these organizations, is not responsible for any debt of the organizations, and has no influence over the operation of these organizations. The financial statements of the District include those of separately administered organizations that are controlled by or dependent on the District. Control or dependence is determined on the basis of budget adoption, funding and appointment of the respective governing board. Management has evaluated subsequent events through October 12, 2011, the date which the financial statements were available to be issued. Based on the foregoing criteria, the financial statements of the following organizations are included in the accompanying financial statements: Caverna Independent School District Finance Corporation - On August 30, 1989, the Caverna Board of Education resolved to authorize the establishment of the Caverna Independent School District Finance Corporation (a non-profit, non-stock, public and charitable corporation organized under the School Bond Act and KRS 273 and KRS Section ) as an agency of the District for financing the costs of school building facilities. The Board Members of the Caverna Board of Education also comprise the Corporation's Board of Directors. Basis of Presentation: District-wide Financial Statements The Statement of Net Assets and the Statement of Activities display information about the District as a whole. These statements include the financial activities of the district, except for fiduciary funds. The statements distinguish between those activities of the District that are governmental and those that are considered business-type activities. Business-type activities are financed in whole or in part by fees charged to external parties for goods or services. The district-wide statements are prepared using the economic resources measurement focus. This focus is the same approach used in the preparation of the propriety fund financial statements but differs from the manner in which governmental fund financial statements are prepared. Governmental fund financial statements therefore include a reconciliation with brief explanations to better identify the relationship between the district-wide statements and the statements for governmental funds. The district-wide statement of activities presents a comparison between direct expenses and program revenues for each segment of the business-type activities of the District and for each function Continued Page 18

23 NOTES TO BASIC FINANCIAL STATEMENTS, CONTINUED June 30, Summary of Significant Accounting Policies, Continued: Basis of Presentation, Continued: or program of the District s governmental activities. Direct expenses are those that are specifically associated with service, program or department and are therefore clearly identifiable to a particular function. Program revenues include charges paid by the recipient of the goods or services offered by the program and grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues are presented as general revenues of the District, with certain limited exceptions. The comparison of direct expenses with program revenues identifies the extent to which each business segment or governmental function is self-financing or draws from the general revenues of the District. The district allocates certain indirect costs to be included in the program expenses reported for individual functions and activities in the District-Wide Statement of Activities. In the District-wide Financial Statement of Net Assets and Statement of Activities both governmental and business-like activities are presented using the accrual basis of accounting. Under the accrual basis of accounting, revenues are recognized when earned and expenses are recorded when the liability is incurred or economic asset is used. Revenues, expenses, gains, losses assets, and liabilities resulting from exchange and exchange-like transactions are recognized when the exchange takes place. Fund Financial Statements Fund financial statements report detailed information about the District. The focus of governmental and enterprise fund financial statements is on major funds rather than reporting funds by type. Each major fund is presented in a separate column. Nonmajor funds are aggregated and presented in a single column. Fiduciary funds are reported by fund type. The accounting and reporting treatment applied to a fund is determined by its measurement focus. All governmental fund types are accounted for using a flow of current financial resources measurement focus. The financial statements for governmental funds are a balance sheet, which generally includes only current assets and current liabilities, and a statement of revenues, expenditures and changes in fund balances, which reports on the changes in net total assets. Propriety funds and fiduciary funds are reported using the economic resources measurement focus. The statement of cash flows provides information about how the District finances and meets the cash flow needs of its proprietary activities. The District has the following funds: I. Governmental Fund Types: a. The General Fund is the primary operating fund of the District and is always classified as a major fund. It accounts for financial resources used for general types of operations. This is a budgeted fund, and any unrestricted fund balances are considered as resources available for use. Reservations have been placed on the fund balance for accrued sick leave and other contingencies. b. The Special Revenue (Grant) Funds account for proceeds of specific revenue sources (other than expendable trusts or major capital projects) that are legally restricted to disbursements for specified purposes. It includes federal financial programs where unused balances are returned to the grantor at the close of specified project periods as well as the state grant programs. Project accounting is employed to maintain integrity for the various sources of funds. The separate projects of federally funded grant programs are identified in the Schedule of Expenditures of Federal Awards included in this report. The Kentucky Department of Education has deemed this fund to always be classified as a major fund. Continued Page 19

24 NOTES TO BASIC FINANCIAL STATEMENTS, CONTINUED June 30, Summary of Significant Accounting Policies, Continued: Basis of Presentation, Continued: I. Governmental Fund Types, Continued: c. Capital Project Funds are used to account for financial resources to be used for the acquisition or construction of major capital facilities and equipment (other than those financed by Proprietary Funds). 1. The Support Education Excellence in Kentucky (SEEK) Capital Outlay Fund receives those funds designated by the state as Capital Outlay Funds and is restricted for use in financing projects identified in the District's facility plan. 2. The Facility Support Program of Kentucky Fund (FSPK) accounts for funds generated by the building tax levy required to participate in the School Facilities Construction Commission's construction funding and state matching funds, where applicable. Funds may be used for projects identified in the District's facility plan. 3. The Construction Fund accounts for proceeds from sales of bonds and other revenues to be used for authorized construction. d. Debt Service Fund: The Debt Service Funds are used to account for the accumulation of resources for, and the payment of, general long-term debt principal and interest and related cost; and for the payment of interest on general obligation notes payable, as required by Kentucky Law. II. Proprietary Funds (Enterprise Fund): The School Food Service Fund is used to account for school food service activities, including the National School Lunch Program, which is conducted in cooperation with the U.S. Department of Agriculture (USDA). Amounts have been recorded for in-kind contribution of commodities from the USDA. The Food Service Fund is a major fund. The District applies all GASB pronouncements to proprietary funds as well as the Financial Accounting Standards Board pronouncements issued on or before November 30, 1989, unless those pronouncements conflict with other contradict GASB pronouncements. III. Fiduciary Fund Type (Agency and Private Purpose Trust Funds): The Agency Fund accounts for activities of student groups and other types of activities requiring clearing accounts. These funds are accounted for in accordance with Uniform Program of Accounting for School Activity Funds. Continued Page 20

25 NOTES TO BASIC FINANCIAL STATEMENTS, CONTINUED June 30, Summary of Significant Accounting Policies, Continued: Basis of Presentation, Continued District-Wide Financial Statements Equity is classified as net assets and displayed in three components: Invested in capital assets, net of related debt- Consists of capital assets net of accumulated depreciation and reduced by the outstanding balances of any bonds, notes, or other borrowings that are attributable to the acquisition, construction, or improvement of those assets. Restricted Net Assets- Consists of net assets with constraints placed on the use either by 1) external groups such as creditors, grantors, or laws or regulations, or 2) law through constitutional provisions or enabling legislation. Unrestricted Net Assets- All other net assets that do not meet the definition of restricted or invested in capital assets, net of related debt. Fund Financial Statements The Board adopted GASB Statement No. 54 in the current reporting period. This statement substantially changes the terminology used to describe different components of fund balance. Reclassifications of governmental fund balances occurred retroactively with the adoption of this standard by restating fund balances for all periods presented. Under this statement, fund balance is separated into five categories, as follows: Nonspendable-Permanently nonspendable by decree of the donor, such as endowment, or items which may not be used for another purpose, such as amounts used to prepay future expenses or already purchased inventory on hand. Restricted-Legally restricted under federal or state law, bond authority, or grantor contract Committed-Commitments passed by the Board Assigned-Funds assigned to management priority including issued encumbrances Unassigned-Funds available for future operations It is the Board s practice to liquidate funds when conditions have been met releasing these funds from legal, contractual, Board, or managerial obligations, using restricted funds first, followed by committed funds, assigned funds, then unassigned funds. Continued Page 21

26 NOTES TO BASIC FINANCIAL STATEMENTS, CONTINUED June 30, Summary of Significant Accounting Policies, Continued: Basis of Accounting Basis of accounting determines when transactions are recorded in the financial records and reported on the financial statements. Government-wide financial statements are prepared using the accrual basis of accounting. Governmental funds use the modified accrual basis of accounting. Proprietary and fiduciary funds also use the accrual basis of accounting. Revenues Exchange and Non-exchange Transactions Revenues resulting from exchange transactions, in which each party receives essentially equal value, is recorded on the accrual basis when the exchange takes place. On a modified accrual basis, revenues are recorded in the fiscal year in which the resources are measurable and available. Available means that the resources will be collected within the current fiscal year or are expected to be collected soon enough thereafter to be used to pay liabilities of the current fiscal year. For the District, available means expected to be received within sixty days of the fiscal year-end. Non-exchange transactions, in which the District receives value without directly giving equal value in return, include property taxes, grants, entitlements and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from grants, entitlements and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied. Eligibility requirements include timing reports, which specify the year when the resource are required to be used or the fiscal year when use is first permitted, matching requirements, in which the District must provide local resources to be used for a specific purpose, and expenditure requirements, in which the resources are provided to the District on a reimbursement basis. On modified accrual basis, revenues from non-exchange transactions must also be available before it can be recognized. Deferred Revenue Deferred revenue arises when assets are recognized before revenue recognition criteria have been satisfied. In order to present the Special Revenue Fund on the accrual basis of accounting, and because the awards are not yet available as assets, cash awards received in advance for the school year have been classified as deferred revenues. Likewise, all awards requested as a result of the expenditures have been classified as receivables. Revenues of the Special Revenue Fund are considered earned when reimbursable expenditures are made or obligations are incurred, and of an equal amount. Grants and entitlements received before the eligibility requirements are met are recognized as deferred revenue. Expenses/Expenditures On the accrual basis of accounting, expenses are recognized at the time they are incurred. The fair value of donated commodities used during the year is reported in the statement of revenues, expenses, and changes in net assets as an expense with a like amount reported as donated commodities revenue. The measurement focus of governmental fund accounting is on decreases in net financial resources (expenditures) rather than expenses. Expenditures are generally recognized in the accounting period in which the related fund liability is incurred, if measurable. Allocations of cost, such as depreciation, are not recognized in government funds. Continued Page 22