EAST AURORA SCHOOL DISTRICT 131. FINANCIAL STATEMENTS June 30, (With Independent Auditor s Report Therein)

Transcription

1 FINANCIAL STATEMENTS (With Independent Auditor s Report Therein)

2 FINANCIAL STATEMENTS CONTENTS INDEPENDENT AUDITOR S REPORT... 1 BASIC FINANCIAL STATEMENTS Government-Wide Financial Statements: Statement of Net Position... 3 Statement of Activities... 4 Fund Financial Statements: Governmental Funds Balance Sheet... 5 Reconciliation of Governmental Funds Balance Sheet to Statement of Net Position... 6 Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balances... 7 Reconciliation of Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to Statement of Activities... 8 Statement of Fiduciary Assets and Liabilities Agency Fund... 9 Notes to the Financial Statements REQUIRED SUPPLEMENTARY INFORMATION Illinois Municipal Retirement Fund Schedule of Changes in the Net Pension Liability and Related Ratios Illinois Municipal Retirement Fund Schedule of Employer Contributions Teacher s Retirement System Schedule of the District s Proportionate Share of the Net Pension Liability Teacher s Retirement System Schedule of Employer Contributions Other Post-Employment Benefits Schedule of Funding Progress Budgetary Comparison Schedule: General Fund and Major Special Revenue Funds: Schedule of Revenues, Expenditures, and Changes in Fund Balances Budget and Actual Notes to the Required Supplementary Information OTHER SUPPLEMENTARY INFORMATION General Fund Balance Sheet By Account General Fund Statement of Revenues, Expenditures and Changes in Fund Balances By Account... 44

3 FINANCIAL STATEMENTS CONTENTS OTHER SUPPLEMENTARY INFORMATION (CONTINUED) General Fund Educational Account Schedule of Revenues, Expenditures and Changes in Fund Balance Budget and Actual General Fund - Operations and Maintenance Account Schedule of Revenues, Expenditures and Changes in Fund Balance Budget and Actual General Fund - Working Cash Account Schedule of Revenues and Changes in Fund Balance - Budget and Actual Debt Service Fund Schedule of Revenues, Expenditures and Changes in Fund Balance Budget and Actual Capital Projects Fund Schedule of Revenues, Expenditures and Changes in Fund Balance Budget and Actual Transportation Fund Schedule of Revenues, Expenditures and Changes in Fund Balance Budget and Actual Nonmajor Governmental Funds Combining Balance Sheet Combining Statement of Revenues, Expenditures and Changes in Fund Balances Illinois Municipal Retirement/Social Security Fund Schedule of Revenues, Expenditures and Changes in Fund Balance Budget and Actual Fire Prevention and Safety Fund Schedule of Revenues, Expenditures and Changes in Fund Balance Budget and Actual Agency Fund Student Activity Funds Schedule of Changes in Assets and Liabilities SCHEDULES Schedule of Assessed Valuations, Tax Rates, Extensions and Collections Schedule of Debt Service Requirements... 65

4 Cro e Hor ath LLP Independent Member Crowe Horwath International INDEPENDENT AUDITOR S REPORT Board of Education East Aurora School District 131 Aurora, Illinois Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, each major fund and the aggregate remaining fund information of East Aurora School District 131 (the District), as of and for the year ended, and the related notes to the financial statements, which collectively comprise the District s basic financial statements as listed in the table of contents. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. 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 the District, as of, and the respective changes in financial position for the year then ended in accordance with accounting principles generally accepted in the United States of America. 1.

5 Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the Schedule of Changes in the Net Pension Liability and Related Ratios, Schedules of Employer Contributions, Schedule of the District s Proportionate Share of the Net Pension Liability, Schedule of Funding Progress and Budgetary Comparison Schedule as listed in the table of contents 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. Management has omitted the Management s Discussion and Analysis that accounting principles generally accepted in the United States of America require to be presented to supplement the basic financial statements. Such missing information, although not a part of the basic financial statements, is required by 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. Our opinions on the basic financial statements are not affected by this missing information. Supplementary Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the District s basic financial statements. The other supplementary information and schedules as listed in the table of contents is presented for purposes of additional analysis and is not a required part of the basic financial statements. The other supplementary information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the other supplementary information is fairly stated, in all material respects, in relation to the basic financial statements as a whole. The schedules have not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on them. Report on Other Legal and Regulatory Requirements In accordance with Government Auditing Standards, we have also issued our report dated December 14, 2017 on our consideration of the 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 in considering the District s internal control over financial reporting and compliance. Oak Brook, Illinois December 14, 2017 Crowe Horwath LLP 2.

6 STATEMENT 1 Statement of Net Position Governmental Activities ASSETS AND DEFERRED OUTFLOWS Assets Cash and Investments $ 120,373,705 Receivables (net of allowance for uncollectibles): Interest 1,200,113 Property Taxes 19,771,927 Intergovernmental 22,510,987 Other Current Assets 61 Capital assets: Capital Assets Not Being Depreciated 42,552,209 Capital Assets Being Depreciated, Net 122,947,735 Total Assets 329,356,737 Deferred Outflows Pensions 19,144,874 Unamortized Refunding Loss 2,251,858 Total Deferred Outflows 21,396,732 LIABILITIES, DEFERRED INFLOWS AND NET POSITION Liabilities Accounts Payable 23,176,029 Salaries and Wages Payable 13,783,687 Claims Payable 2,359,570 Other Current Liabilities 1,731,822 Interest Payable 1,241,669 Long-term Liabilities: Long-term Obligations, Due within One Year 6,539,796 Long-term Obligations, Due in more than One Year 180,402,986 Total Liabilities 229,235,559 Deferred Inflows Pensions 14,360,778 Property Taxes 19,042,317 Total Deferred Inflows 33,403,095 Net Position Net Investment in Capital Assets 76,887,971 Restricted for: Debt Service 4,687,283 Transportation 1,091,408 Athletic Purposes 123,864 Unrestricted 5,324,289 Total Net Position $ 88,114,815 See accompanying notes to financial statements. 3.

7 STATEMENT 2 Statement of Activities Year Ended Net (Expense) Revenue and Program Revenues Changes in Operating Grants, Net Position Contributions and Capital Charges for Related Interest Grants and Governmental Functions/Programs Expenses Services Income Contributions Activities Governmental activities: Instruction: Regular Programs $ 63,687,313 $ - $ 11,405,865 $ - $ (52,281,448) Special Programs 16,299, ,299 4,151,166 - (11,890,397) Other Instructional Programs 16,493,383-4,002,514 - (12,490,869) Support Services: Pupils 11,350, (11,350,786) Instructional Staff 5,234,676-2,748,595 - (2,486,081) General Administration 4,755, (4,755,667) School Administration 10,178, (10,178,689) Business 275, , (19,396) Fiscal Services 432, (432,707) Transportation 8,108,590-5,078,627 - (3,029,963) Food Services 7,073,687-8,132,599-1,058,912 Operations and Maintenance 14,226,539 94, (14,131,740) Central 6,086, (6,086,124) Other Supporting Services 555, (555,570) Community Services 1,528, (1,528,215) Payments to Other Districts & Govt. Units 7,668, (7,668,234) On Behalf Contributions 28,923,741-28,923, Interest on debt 6,383,294-1,468,172 - (4,915,122) Total Governmental Activities $ 209,262,576 $ 609,201 $ 65,911,279 $ - (142,742,096) General revenues: Taxes: Property Taxes, Levied for General Purposes 28,377,505 Property Taxes, Levied for Specific Purposes 989,999 Property Taxes, Levied for Debt Service 8,593,955 Personal Property Replacement Taxes 4,134,659 General State Aid 100,477,282 Investment Earnings 546,998 Other General Revenues 1,333,833 Total General Revenues 144,454,231 Change in Net Position 1,712,135 Net Position, July 1, ,402,680 Net Position, $ 88,114,815 See accompanying notes to financial statements. 4.

8 STATEMENT 3 Governmental Funds Balance Sheet Major Funds Nonmajor Total General Debt Capital Projects Transportation Governmental Governmental Fund Service Fund Fund Fund Funds Funds ASSETS Cash and Investments $ 84,432,766 $ 4,522,551 $ - $ 751,455 $ 339,435 $ 90,046,207 Restricted Cash and Investments ,631, ,631,106 Receivables (net of allowance for uncollectibles): Property Taxes 12,608,769 4,523,290-1,084,888 1,554,980 19,771,927 Interest 161,609 1,038, ,200,113 Intergovernmental 14,362, ,148,856-22,510,987 Other Current Assets Total Assets $ 111,565,336 $ 10,084,345 $ 36,631,106 $ 9,985,199 $ 1,894,415 $ 170,160,401 LIABILITIES, DEFERRED INFLOWS AND FUND BALANCES Liabilities: Cash Overdraft $ - $ - $ 6,303,608 $ - $ - $ 6,303,608 Accounts Payable 9,264,603-15,031,973 1,239,023-25,535,599 Salaries and Wages Payable 13,421, ,978 13,783,687 Other Current Liabilities 1,731, ,731,822 Total Liabilities 24,418,134-21,335,581 1,239, ,978 47,354,716 Deferred Inflows: Property Taxes 12,141,684 4,358,558-1,044,699 1,497,376 19,042,317 Unavailable Interest Revenue - 1,038, ,038,504 Unavailable Grant Revenues 7,557, ,610,069-14,167,918 Total Deferred Inflows 19,699,533 5,397,062-7,654,768 1,497,376 34,248,739 Fund Balances: Nonspendable Permanent Fund Principal , ,000 Restricted Athletic Purposes ,864 23,864 Transportation ,091,408-1,091,408 Debt Service - 4,687, ,687,283 Capital Projects ,295, ,089 15,395,614 Assigned Capital Projects 13,157, ,157,187 Unassigned 54,290, (188,892) 54,101,590 Total Fund Balances 67,447,669 4,687,283 15,295,525 1,091,408 35,061 88,556,946 Total Liabilities, Deferred Inflows and Fund Balances $ 111,565,336 $ 10,084,345 $ 36,631,106 $ 9,985,199 $ 1,894,415 $ 170,160,401 See accompanying notes to financial statements. 5.

9 STATEMENT 4 Reconciliation of Governmental Funds Balance Sheet To Statement of Net Position Total Fund Balances - Governmental Funds $ 88,556,946 Amounts reported for governmental activities in the statement of net position are different because: Capital assets used in governmental activities are not financial resources and therefore are not reported in the funds: Capital Assets $ 222,624,362 Accumulated Depreciation (57,124,418) Net Capital Assets 165,499,944 Some liabilities reported in the statement of net position do not require the use of current financial resources and therefore are not reported as liabilities in governmental funds. These liabilities consist of : Long Term liabilities payable (186,942,782) Interest Payable (1,241,669) Total Long-term liabilities (188,184,451) When refunding bonds are issued, any refunding loss or gain is recognized in the government-wide statements and amortized. 2,251,858 Certain items related to pension measurements are deferred and recognized in future periods: Deferred Inflows of Resources 19,144,874 Deferred Outflows of Resources (14,360,778) 4,784,096 Some of the revenues will be collected after year-end but are not available soon enough to pay for the current period's expenditures and therefore are unavailable in the funds: Interest Revenue unavailable in funds 1,038,504 State Revenues unavailable in funds 14,167,918 15,206,422 Net Position of Governmental Activities $ 88,114,815 See accompanying notes to financial statements. 6.

10 STATEMENT 5 Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balances Year Ended Major Funds Nonmajor Total General Debt Capital Projects Transportation Governmental Governmental Fund Service Fund Fund Fund Funds Funds Revenues Property Taxes $ 23,293,359 $ 8,593,955 $ - $ 2,089,396 $ 2,994,750 $ 36,971,460 Special Education Levy 989, ,999 Replacement Taxes 4,034, ,000 4,134,659 State Sources 103,031,726-4,750,000 6,539,103 2,000, ,320,829 Federal Sources 21,716, , ,145,688 Interest 314, , ,948 Local Revenues 1,031, ,031,530 Contributions 79, ,352 Payments from Other Districts 383, , ,449 Other 419, ,150 On-behalf Payments from State 26,716, ,716,426 Total Revenues 182,010,585 9,023,654 4,982,287 8,735,164 5,094, ,846,490 Expenditures Current: Instruction: Regular Programs 58,431, ,881 59,381,030 Special Programs 14,333, ,534 14,956,512 Other Instructional Programs 15,372, ,794 15,709,684 Support Services: Pupils 10,875, ,545 11,148,983 Instructional Staff 4,987, ,016 5,147,425 General Administration 4,540, ,977 4,675,141 School Administration 9,461, ,594 9,922,474 Business 247,495-8,485-9, ,701 Fiscal Services 391, , ,510 Transportation ,073,711 1,811 8,075,522 Food Services 6,831, ,860 6,886,482 Operations and Maintenance 12,896, ,323 13,719,405 Central 5,210, ,268 5,508,451 Other Supporting Services 238, ,244-7, ,325 Community Services 1,390, ,670 1,500,320 Payments to Other Districts & Govt. Units 7,668, ,668,234 On-behalf Payments made by State 26,716, ,716,426 Capital Outlay 445,400-36,814, ,260,314 Debt Service - Interest and Charges 23,640 4,276, ,300,577 Debt Service - Principal 389,796 40,930, ,319,796 Total Expenditures 180,453,096 45,206,937 37,131,643 8,073,711 4,277, ,143,312 Excess (deficiency) of Revenues over (under) Expenditures 1,557,489 (36,183,283) (32,149,356) 661, ,875 (65,296,822) Other Financing Sources (Uses) Bond Proceeds - 35,000,000 15,500, ,500,000 Bond Premium (Discount) - 496, ,280 Total Other Financing Sources and Uses - 35,496,280 15,500, ,996,280 Net Change in Fund Balances 1,557,489 (687,003) (16,649,356) 661, ,875 (14,300,542) Fund Balances at Beginning of Year 65,890,180 5,374,286 31,944, ,955 (781,814) 102,857,488 Fund Balances at End of Year $ 67,447,669 $ 4,687,283 $ 15,295,525 $ 1,091,408 $ 35,061 $ 88,556,946 See accompanying notes to financial statements. 7.

11 STATEMENT 6 EAST AURORA SCHOOL DISTRICT 131 Reconciliation of Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to Statement of Activities Year Ended Net Change in Total Fund Balances $ (14,300,542) Amounts reported for governmental activities in the Statement of Activities are different because: Some revenues were not collected for several months after the close of the fiscal year and therefore were not considered to be "available" and are not reported as revenue in the governmental funds. The change from fiscal year 2016 to 2017 consists of: (1,079,094) Governmental funds report purchases of capital assets as expenditures while governmental activities report depreciation expense to allocate those expenditures over the life of the assets. Capital Outlay $ 37,161,166 Loss on Disposal of Capital Asset (164,127) Depreciation (4,121,887) Capital Outlay in excess of depreciation 32,875,152 Repayment of principal and accreted interest payable on long-term debt is an expenditure in the governmental funds, but the repayment reduces long-term liabilities in the statement of net position. Bond principal retirement 40,930,000 Capital leases 517,523 Total retirement of debt 41,447,523 Accreted interest is not accrued in the governmental funds, but is recognized over the life of the debt in the government wide financial statements. (992,605) Issuance of general obligation bonds are reported as other financing sources and uses on the government funds, however, they are recorded as a liability on the government-wide statements. Bond proceeds (50,500,000) Bond premium (496,280) (50,996,280) Some expenses reported in the statement of activities do not require the use of current financial resources and therefore are not reported in the governmental funds. Decrease in long-term compensated absences 566 Increase in OPEB liability (1,176,103) Decrease in net pension liability 10,979,567 Decrease in deferred outflows for pensions (788,403) Increase in deferred inflows for pensions (13,179,040) Increase in accrued interest on debt (797,025) Amortization of loss amount on refunding (463,876) Amortization of bond premiums/discounts 182,295 Total expenses of non-current resources (5,242,019) Change in Net Position of Governmental Activities $ 1,712,135 See accompanying notes to financial statements. 8.

12 STATEMENT 7 Statement of Fiduciary Assets and Liabilities Agency Fund Agency Fund Student Activity Funds ASSETS Cash $ 474,726 Total Assets $ 474,726 LIABILITIES Liabilities Due to Student Groups $ 474,726 Total Liabilities $ 474,726 See accompanying notes to financial statements. 9.

13 NOTES TO THE FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial statements of East Aurora School District 131 (the District) have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP) as applied to government units. The Governmental Accounting Standards Board (GASB) is the accepted standardsetting body for establishing governmental accounting and financial reporting principles. The District s significant accounting policies are described below. Reporting Entity: The District is a public school system governed by an elected board. As required by GAAP, these financial statements present the District (the primary government) and, if applicable, its component units. The definition of a component unit is a legally separate organization for which the District is financially accountable and the other organizations for which the nature and significance of their relationship with the District are such that exclusion would cause the District s financial statements to be misleading or incomplete. The District is financially accountable if it appoints a voting majority of the component unit s governing body and (1) it is able to impose its will on that organization or (2) there is a potential for the component unit to provide specific financial benefits to, or impose specific financial burdens on, the District. The District may also be financially accountable if the component unit is fiscally dependent on the District, regardless of whether the component unit has (1) a separately elected governing board, (2) a governing board appointed by a higher level of government, or (3) a jointly appointed board. There are no component units included in the District s reporting entity. Also, the District is not included as a component unit in any other governmental reporting entity, as defined by GASB pronouncements. Basis of Presentation: The District s basic financial statements consist of government-wide statements, including a statement of net position and a statement of activities, and fund financial statements, which provide a more detailed level of financial information. Government-Wide Financial Statements The statement of net position and the statement of activities display information about the District as a whole. The government-wide statements report the financial information of the District, except for fiduciary activities. The effect of interfund activity has been removed from these statements. The governmental activities column reports activities that are normally supported by taxes and intergovernmental revenues. The government-wide statement of activities demonstrates the degree to which the direct expenses of a given function are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function. Program revenues include (1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function and (2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function. Revenues, which are not classified as program revenues, such as property taxes and general state aid, are presented as general revenues of the District. Fund Financial Statements The accounts of the District in the governmental fund financial statements are organized and operated on the basis of funds. A fund is defined as a fiscal and accounting entity with a self-balancing set of accounts that comprise its assets, net outflows, liabilities, net inflows, reserves, fund balance, revenues, and expenditures. Fund accounting segregates funds according to their intended purpose and is used to aid management in demonstrating compliance with finance-related legal and contractual provisions. The minimum number of funds is maintained consistent with legal and managerial requirements. Separate financial statements are provided for all governmental and fiduciary funds, even though the fiduciary funds are excluded from the government-wide financial statements. (Continued) 10.

14 NOTES TO THE FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Measurement Focus and Basis of Accounting: The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the fiduciary fund financial statements. The economic resources measurement focus means all assets, deferred inflows, deferred outflows and liabilities (whether current or non-current) are included on the statement of net position and the operating statements present increases (revenues) and decreases (expenses) in total net position. Under the accrual basis of accounting, revenues are recognized when earned, if measurable, and expenses are recognized as incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements have been met. The District has reported three categories of program revenues in the statement of activities: (1) charges for services, (2) program-specific operating grants and contributions, and (3) program-specific capital grants and contributions. Program revenues are derived directly from the program itself or from external sources, such as the State of Illinois; they reduce the net cost of each function to be financed from the District s general revenues. For identifying the function to which program revenue pertains, the determining factor for charges for services is which function generates the revenue. For grants and contributions, the determining factor is the function to which the revenues are restricted. Governmental funds are used to account for the District s general government activities. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Under the modified accrual basis of accounting, revenues are recognized when susceptible to accrual, i.e., when they are both measurable and available. Measurable means that the amount of the transaction can be determined and available means collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. The District considers all revenues available if they are collected within 60 days after year end. Expenditures are recorded when the related fund liability is incurred, except for unmatured principal and interest on general long-term debt which is recognized when due, and certain compensated absences, claims, and judgments, which are recognized when the obligations are expected to be liquidated with expendable available financial resources. Also, on-behalf payments (payments made by a third party for the benefit of the District, such as payments made by the state to the Teachers Retirement System) have been recognized in the financial statements. Revenues considered to be susceptible to accrual include property taxes, replacement taxes, certain state and federal aid, and interest income. Amounts have been recognized as receivables for these revenue sources. All other revenue items are considered to be measurable and available when cash is received by the District and are recognized as revenue at that time. Unearned revenue is reported on the governmental fund balance sheet. Unearned revenues arise when potential revenue does not meet both the measurable and available criteria. Unearned revenues also arise when resources are received prior to the government having a legal claim to them. In a subsequent period, when both recognition criteria are met or when the government has a legal claim to the resources, the liability is removed and the revenue recognized. In addition to liabilities, the balance sheet will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. The District has two types of items which arises only under the accrual basis of accounting that qualifies for reporting in this category. The first item, unearned property taxes, is reported in the statement of net position. These amounts are deferred and organized as an inflow of resources in the period that the amounts become available. The District also reports deferred inflows of resources for pension-related reporting due to the related inflows of pension related resources not being considered earned, which is also reported in the statement of net position. (Continued) 11.

15 NOTES TO THE FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) In addition to assets, the balance sheet will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period and will not be recognized as an outflow of resources (expense) until then. The District has two items which arises only under the accrual basis of accounting that qualifies for reporting in this category. The first item is the deferred charge on refunding reported in the statement of net position. A deferred charge on refunding results from the difference in the carrying value of refunded debt and its reacquisition price. This amount is deferred and amortized over the shorter of the life of the refunded or refunding debt. The District also reports deferred outflows of resources for pension-related reporting due to the related outflows of pension related resources not being considered incurred, which is also reported in the statement of net position Since the governmental fund statements are presented on a different measurement focus and basis of accounting than the government-wide statements governmental information, (due mainly to the inclusion of capital asset and long-term debt activity in the District-wide presentation) a reconciliation is presented on the page following each statement, which briefly explains the adjustments necessary to transform the fund based financial statements into the governmental information of the government-wide presentation. Fund Details: The District reports the following major governmental funds: General Fund The General Fund is the general operating fund of the District. It is used to account for all financial resources except those required to be accounted for in another fund. It consists of four accounts. The Educational account is used for most of the instructional and administrative aspects of the District s operations. The revenue consists primarily of state government aid and local property taxes. The Operations and Maintenance account is used for expenditures made for repair and maintenance of District property. The Working Cash account is for all financial resources held by the District for making temporary interfund loans to other accounts and funds as needed. The Tort account is for all financial resources held for settling tort-related expenditures. Debt Service Fund The Debt Service Fund accounts for the principal and interest payments of the debt. Capital Projects Fund The Capital Projects Fund is used to account for the financial resources to be used for the acquisition or construction of, and/or additions to, major capital facilities. Transportation Fund The Transportation Fund accounts for the revenue sources and related expenditures for transportation purposes. The main revenue sources are property taxes and grants from the Illinois State Board of Education. In addition to the major governmental funds mentioned above, the District uses the following governmental fund types: Special Revenue Funds Special Revenue Funds are used to account for the proceeds of specific revenue sources (other than those accounted for in the Debt Service Fund, Capital Projects Funds, or Fiduciary Funds) that are legally restricted to expenditures for specified purposes. The District s IMRF/Social Security Fund is presented as a Special Revenue Fund. The District s Fire Prevention and Safety Fund is presented as a Capital Projects Fund. Permanent Fund The Davis Trust Fund accounts for the nonspendable fund principal of $100,000, and proceeds are restricted for athletic purposes. Fiduciary Funds (Trust and Agency Funds) Fiduciary Funds (Trust and Agency Funds) are used to account for assets held by the District in a trustee capacity or as an agent for individuals, private organizations, other governments, or other funds. A brief description of the District s Fiduciary Fund is as follows: (Continued) 12.

16 NOTES TO THE FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Agency Fund The Agency Fund includes the Student Activity Funds cash account. These funds are custodial in nature and do not involve the measurement of results of operations. Although the Board of Education has the ultimate responsibility for the Activity Funds, they are not local education agency funds. Student Activity Funds account for assets held by the District which are owned, operated, and managed generally by the student body, under the guidance and direction of adults or a staff member, for educational, recreational, or cultural purposes. Restricted Resources Policy: When expenditure is incurred for purposes for which both restricted and unrestricted resources are available, it is the District s policy to apply restricted resources first and then unassigned resources as needed. Assets, Liabilities, Deferred Inflows and Deferred Outflows and Net Position or Equity: Deposits and Investments State statutes authorize the District to invest in obligations of the U.S. Treasury, certain highly rated commercial paper, corporate bonds, repurchase agreements, and the State Treasurer s Investment Pool (Illinois Funds). Investments are stated at fair value, except for the Illinois Funds. The Illinois Funds is an external investment pool administered by the Illinois State Treasurer that is recorded at amortized cost. Changes in fair value of investments are recorded as investment income. Receivables and Payables Transactions between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year, if any, are referred to as either interfund receivables/payables (i.e., the current portion of interfund loans) or advances to/from other funds (i.e., the non-current portion of interfund loans.) All other outstanding balances between funds are reported as due to/from other funds. These amounts are eliminated in the governmental activities column in the statement of net position. Property Tax Revenues The District must file its tax levy ordinance by the last Tuesday in December of each year. The District s 2016 levy ordinance was approved during the December 19, 2016 board meeting. The District s property tax is levied each year on all taxable real property located in the District and it becomes a lien on the property on January 1 of that year. The owner of real property on January 1 in any year is liable for taxes of that year. The District has a statutory tax rate limit in various operating funds subject to change only by approval of the voters of the District. Also, the District is subject to the Property Tax Extension Limitation Act, which in general limits the increase in the amount of taxes to be extended to the lesser of 5% or the percentage increase in the consumer price index for the year, preceding the levy. Certain bond issue levies and referendum increases are exempt from this limitation. Property taxes are collected by the Kane County Collector/Treasurer, who remits to the District its share of collections. Taxes levied in one year become due and payable in two installments: the first due on June 1 and the second due on the later of September 1. Property taxes are normally collected by the District within 60 days of the respective installment dates. The 2016 property tax levy is recorded as a receivable, net of estimated uncollectible amounts approximating 1%. The District considers that 50% of the 2016 levy is to be used to finance operations in fiscal The District has determined that 50% of the 2016 levy is to be used to finance operations in fiscal 2018 and has deferred the corresponding receivable. (Continued) 13.

17 NOTES TO THE FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Personal Property Replacement Taxes Personal property replacement taxes are first allocated to funds where taxes were automatically abated by the county clerk and to the Municipal Retirement/Social Security Fund, with the balance allocated to the remaining funds at the discretion of the District. Capital Assets Capital assets, which include land, land improvements, buildings and improvements, equipment, and construction in progress, are reported in the government-wide financial statements. Capital assets are defined by the District as assets with an initial individual cost of more than $5,000 and an estimated useful life of greater than one year. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated acquisition value at the date of donation. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend asset lives are not capitalized. Depreciation of capital assets is provided using the straight-line method over the following useful lives: Description Buildings and improvements Equipment Land improvements Estimated Lives 50 years 5-20 years 20 years The District does not depreciate land or construction in progress. Long-Term Obligations In the government-wide financial statements, long-term debt and other longterm obligations are reported as liabilities in the statement of net position. Bond premiums and discounts are amortized over the life of the bonds using the effective interest method. Bonds payable are reported net of the applicable bond premium or discount. Bond issuance costs are expensed in the year the bonds are issued. In the fund financial statements, governmental funds recognize bond 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 reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as expenditures. Pensions - For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the Illinois Municipal Retirement Fund (IMRF) and additions to/deductions from IMRF s fiduciary net position have been determined on the same basis as they are reported by IMRF. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the plan net position of the Teachers Retirement System (TRS or the System) and additions to/deductions from TRS plan net position has been determined on the same basis as they are reported by TRS. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. (Continued) 14.

18 NOTES TO THE FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) For the purposes of financial reporting, the State of Illinois and participating employers are considered to be under a special funding situation. A special funding situation is defined as a circumstance in which a non-employer entity is legally responsible for making contributions directly to a pension plan that is used to provide pensions to the employees of another entity or entities and either (1) the amount of the contributions for which the non-employer entity is legally responsible is not dependent upon one or more events unrelated to pensions or (2) the non-employer is the only entity with a legal obligation to make contributions directly to a pension plan. The State of Illinois is considered a non-employer contributing entity. Participating employers are considered employer contributing entities. Restricted Net Position For the government-wide financial statements, net position is reported as restricted when constraints placed on net position use are either: (1) Externally imposed by creditors (such as debt covenants), grantors, contributors, or laws or regulations of other governments; or (2) imposed by law through constitutional provisions or enabling legislation. Eliminations and Reclassifications In the process of aggregating data for the government-wide financial statements, amounts reported as interfund activity and balances were eliminated or reclassified. Use of Estimates Management of the District has made certain estimates and assumptions that affect the reported amounts of assets and liabilities and contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenditures during the period. Actual results could differ from those estimates. NOTE 2 FUND BALANCES The components of fund balance include the following line items: a) Nonspendable fund balance is inherently nonspendable, such as portions of net resources that cannot be spent because of their form and portions of net resources that cannot be spent because they must be maintained intact. b) Restricted fund balance is externally enforceable limitations on use, such as limitations imposed by creditors, grantors, contributors, or laws and regulations of other government as well as limitations imposed by law through constitutional provision or enabling legislation. c) Committed fund balance has self-imposed limitations set in place prior to the end of the period. The limitations are imposed at the highest level of decision making that requires formal action at the same level to remove. For the District, the Board of Education is the highest level of decision making. In order to commit fund balance for a specific purpose, the Board of Education must pass a resolution specifying the commitment. As of, the District does not have any commitments of fund balance. d) Assigned fund balance has limitations resulting from intended use consisting of amounts where the intended use is established by management for that purpose. In the general fund, the intended use is established by an official designated for that purpose. Within the other governmental fund types (special revenue, debt service, capital projects) resources are assigned in accordance with the established fund purpose and approved budget/appropriation. Residual fund balances in these fund types that are not restricted or committed are reported as assigned. (Continued) 15.

19 NOTES TO THE FINANCIAL STATEMENTS NOTE 2 FUND BALANCES (Continued) e) Unassigned fund balance is the total fund balance in the general fund in excess of nonspendable, restricted, committed, and assigned fund balance. In addition, negative fund balance in the other funds is reported as unassigned. If there is an expenditure incurred for purposes for which both restricted and unrestricted fund balance is available, the District will consider restricted fund balance to have been spent before unrestricted fund balance. Further, if there is an expenditure incurred for purposes for which committed, assigned, or unassigned fund balance classifications could be used, then the District will consider committed fund balance to be spent before assigned fund balance, and consider assigned fund balance to be spent before unassigned fund balance. The General Fund includes the Working Cash stabilization account. Under the State of Illinois School Code (School Code), the District is authorized to incur indebtedness and issue bonds and to levy a tax annually on all taxable property of the District in order to enable the District to have in its treasury at all time sufficient money to meet demands thereon. These funds may be lent to other District governmental funds in need, but may only be expended for other purposes upon the passage of a resolution by the Board of Education to abolish or abate the fund. At, the District had working cash stabilization fund balances of $21,594,032 that have been classified as unassigned fund balances in the General Fund. NOTE 3 INTERFUNDS AND TRANSFERS During the fiscal year, no transfers were made among funds. NOTE 4 - DEPOSITS AND INVESTMENTS Deposits: The carrying amount of cash was $64,149,905 at, while the bank balances were $65,757,466. All account balances at banks were either insured by the Federal Deposit Insurance Corporation (FDIC) for $250,000, or collateralized with securities of the U.S. government or purchased through a commercial insurance company. Investments: As of, the District had the following investments: Investment Maturities (in Years) Fair Market Less Greater Investment Type Value Than Than 10 U.S. Treasury Notes $ 4,974 $ 4,974 $ - $ - $ - Federal Home Loan Bank 11,588,553-10,079,276 1,509,277 - Federal Home Loan Mortgage Corp. 10,035,395-9,537, ,414 - Federal National Mortgage Assoc. 4,723, ,245 4,204, ,664 Federal Farm Credit Backed Bonds 2,470,649-2,470, Local Government Bonds 8,233,609 2,315,886 5,084, ,078 - Certificates of Deposit 18,359,545 16,211,386 2,148, Government Money Market Funds 1,282,317 1,282, Total $ 56,698,526 $ 20,214,808 $ 33,525,285 $ 2,839,769 $ 118,664 (Continued) 16.

20 NOTES TO THE FINANCIAL STATEMENTS NOTE 4 - DEPOSITS AND INVESTMENTS (Continued) Fair Value Measurement and Application The District categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation of inputs used to measure the fair value of the asset. Level 1 inputs are quoted prices in active markets for identical assets; Level 2 inputs are significant other observable inputs; Level 3 inputs are significant unobservable inputs. As of, the U.S. Treasury Notes are valued using an exchange pricing model (Level 1 inputs). The Federal Home Loan Bank, Federal Home Loan Mortgage Corporation, Federal National Mortgage Association, Federal Farm Credit Backed Bonds, and Local Government Bonds are valued using a matrix pricing model (Level 2 inputs). Interest Rate Risk The District s investment policy does not limit the District s investment portfolio to specific maturities. Credit Risk State statutes authorize the District to invest in direct obligations of, or obligations guaranteed by, the United States Treasury or agencies of the United States, and short-term obligations of corporations organized in the United States with assets exceeding $500,000,000. The District is also authorized to invest in the Illinois School District Liquid Asset Fund Plus and the Illinois Funds. The District restricted its investments to only those investments described above. The Federal Home Loan Bank, Federal Home Loan Mortgage Corporation, and Federal National Mortgage Association investments are rated AA+ by Standard and Poor s and Aaa by Moody s Investors Services. The local government bonds were rated A AA+ by Standard and Poor s or A3 Aa1 by Moody s Investors Services. The money market funds are not rated. The U.S. Treasury Notes and Certificates of Deposit are not subject to credit risk. Concentration of Credit Risk The District s investment policy does not restrict the amount of investment in any one issuer. At, no one investment exceeded 5% of total investments. The Treasury Notes and Government Money Market Funds are not subject to concentration of credit risk. Custodial Credit Risk Investments For an investment, this is the risk that, in the event of the failure of the counterparty, the District will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. All of the District s investments are held by a counterparty in the District s name and are not subject to custodial credit risk. The District s investment policy does not address custodial credit risk for investments. Reconciliation: Notes Cash book value of District deposits per note above $ 64,149,905 Investments per note above 56,698,526 Total $ 120,848,431 Financial Statements Cash and Investments per statement of net position $ 120,373,705 Cash per statement of fiduciary assets and liabilities 474,726 Total $ 120,848,431 (Continued) 17.