Report on Compliance for Each Major Federal Program and Report on Internal Control Over Compliance. Schedule of Findings and Questioned Costs

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1 MILFORD, NEW HAMPSHIRE SCHOOL DISTRICT Financial Statements With Schedule of Expenditures of Federal Awards June 30, 2013 and Independent Auditor's Report Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance With Government Auditing Standards Report on Compliance for Each Major Federal Program and Report on Internal Control Over Compliance Schedule of Findings and Questioned Costs

2 MILFORD, NEW HAMPSHIRE SCHOOL DISTRICT FINANCIAL ST A TEMENTS.June 30, 2013 TABLE OF CONTENTS INDEPENDENT AUDITOR'S REPORT MANAGEMENT'S DISCUSSION AND ANALYSIS Page(s) I-VI BASIC FINANCIAL STATEMENTS EXHIBITS: A Statement of Net Position B Statement of Activities 2 C Balance Sheet Governmental Funds D Statement of Revenues, Expenditures and Changes in Fund Balances - Governmental Funds 3 4 E F Statement of Fiduciary Net Position - Fiduciary Funds Statement of Changes in Fiduciary Net Position - Fiduciary Funds 5 6 NOTES TO BASIC FINANCIAL STATEMENTS 7-23 REQUIRED SUPPLEMENT ARY INFORMATION SCHEDULES: Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual (Budgetary Basis) General Fund 2 Schedule of Funding Progress for Other Post-Employment Benefits NOTES TO REQUIRED SUPPLEMENTARY INFORMATION FEDERAL COMPLIANCE SCHEDULE: I Schedule of Expenditures of Federal Awards NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AW ARDS Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance With Government Auditing Standards

3 MILFORD, NEW HAMPSHIRE SCHOOL DISTRICT I?JNANCIAL STATEMENTS.June 30, 2013 TABLE OF CONTENTS (CONTINUED) FEDERAL COMPLIANCE (CONTINUED) Report on Compliance for Each Major Federal Program and Report on Internal Control Over Compliance Schedule of Findings and Questioned Costs Page(s) SUPPLEMENT AL SCHEDULES SCHEDULES: A Combining Balance Sheet - Governmental Funds - All Nonmajor Funds B Combining Statement of Revenues, Expenditures and Changes in Fund Balances - Governmental Funds - All Nonmajor Funds C Combining Statement of Changes in Assets and Liabilities - All Student Activities Agency Funds 39

4 ~VACHON CLUKAY &COMPANYPC CERTIFIED PUBLIC ACCOUNTANTS 608 Chestnut Street Manchester, New Hampshire (603) Fax: (603) INDEPENDENT AUDITOR'S REPORT To the School Board Milford, New Hampshire School District Report on the Financial Statements We have audited the accompanying financial statements of the governmental act1v1ties, each major fund, and the aggregate remaining fund information of the Milford, New Hampshire School District as of and for the year ended June 30, 2013, 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 the 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.

5 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 Milford, New Hampshire School District, as of June 30, 2013, and the respective changes in financial position, thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary h1for111ation Accounting principles generally accepted in the United States of America require that the management's discussion and analysis, budgetary comparison information, and the schedule of funding progress for other post-employment benefits on pages i-vi and 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. Supplementary lnjbrmation Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Milford, New Hampshire School District's basic financial statements. The accompanying schedule of expenditures of federal awards, as required by Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Prrdit Organizations, is presented for purposes of additional analysis and is not a required part of the basic financial statements. Additionally, the combining nonmajor governmental fund financial statements and the combining statement of changes in assets and liabilities are presented for purposes of additional analysis and are not a required part of the basic financial statements. The schedule of expenditures of federal awards, the combining nonmajor governmental fund financial statements, and the combining statement of changes in assets and liabilities are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the 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 schedule of expenditures of federal awards, the combining nonmajor governmental fund financial statements, and the combining statement of changes in assets and liabilities are fairly stated, in all material respects, in relation to the basic financial statements as a whole.

6 Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated January 30, 2014 on our consideration of the Milford, New Hampshire School District's internal control over financial reporting and on our tests of its compliance with ce1iain provisions of laws, regulations, contracts, and grant agreements. 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 Milford, New Hampshire School District's internal control over financial reporting and compliance. ~~~g-~pg Manchester, New Hampshire January 30, 2014

7 MANAGEMENT'S DISCUSSJON AND ANALYSIS FISCAL YEAR ENDING JUNE 30, 2013 Presented herewith please find the Management Discussion & Analysis Report for the Milford School District for the fiscal year ending June 30, Responsibility for both the accuracy of the data, and the completeness and fairness of this presentation (including all disclosures) rests with management. To the best of our knowledge and belief, the data contained herein is accurate in all material respects. This data is reported in a manner designed to fairly present the District's financial position, and the result of operations of the various funds of the District. All disclosures necessary to enable the reader to gain an accurate understanding of the District's financial activities have been included. Comparative summary financial information is shown here, as is required and contains meaningful information relating to the District's finances and changes in financial position. The School District Administration is responsible for establishing an accounting and internal control structure designed to ensure that the physical, data, informational, intellectual, and human resource assets of the District are protected from loss, theft, and misuse, and to ensure that adequate accounting information is maintained and reported in conformity with generally accepted accounting principles (GAAP). Management also strives to ensure that these assets are put to good and effective use. The internal control structure is designed to provide reasonable assurances that these objectives are attained. Overview o{the Financial Statements The financial statements presented herein include all of the activities of the Milford School District (MSD) using the integrated approach as prescribed by GASB Statement 34. This discussion and analysis is intended to serve as an introduction to MSD's financial statements. The basic financial statements comprise three components: 1. Government-wide financial statements 2. Fund financial statements 3. Notes to the basic financial statements Government-Wide Financial Statements The government-wide financial statements are designed to provide readers with a broad overview of the District's finances, in a manner similar to most private-sector companies. The statement of net position presents information on all of the District's assets, deferred outflows of resources, liabilities and deferred inflows of resources, with the remaining difference reported as net position. Over time, increases and decreases in net position 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 government's net position changed during the most recent fiscal year. All of the current year's revenue and expenses are taken into account regardless of when cash is received or paid.

8 Fund Financial Statements MANAGEMENT'S DISCUSSION AND ANALYSIS FISCAL YEAR ENDING JUNE 30, 2013 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. The District uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All the funds of the District can be divided into two categories: governmental funds and fiduciary funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on nearterm inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating the District's near-term financing requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government's near-term financing decisions. Both the governmental fund balance sheet and the statement of revenues, expenditures and changes in fund balances provide a reconciliation to facilitate this comparison between the governmental activities statement of net position and statement of activities. The District maintains numerous individual governmental funds. Information is presented separately in the governmental fund balance sheet and the statement of revenues, expenditures and changes in fund balances for the General Fund, Special Funds and Permanent Funds, which are considered major funds. Data from the other governmental funds arc combined into a single, aggregate presentation within the Non-major Governmental Funds. The District adopts an annual appropriation budget for its governmental funds. A budgetary comparison has been provided for the General Fund to demonstrate compliance with this budget. Fiduciary funds arc used to account for resources held for the benefit of parties outside of the District. Fiduciary funds are not reflected in the government-wide financial statements because the resources of those funds are not available to support the District's own programs. Notes to the Basic 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. ii

9 Government-Wide Financial Analysis Statement of Net Position MANAGEMENT'S DISCUSSION AND ANALYSIS FISCAL YEAR ENDING JUNE 30, 2013 The table below provides a summary of the District's net position for the years ended June 30, 2011,2012 and Statement of Net Position: Current and Other Assets: Capital assets - net $ 21,787,256 $ 20,741,459 $ 19,582,367 Other assets 4,496,416 3,667,773 4,052,841 Total Assets 26,283,672 24,409,232 23,635,208 Deferred Outflows of Resources Total Deferred Outflows of Resources Current and Other Liabilities: Noncurrent liabilities 10,634,574 10,570,846 8,792,945 Other liabilities 2,029,932 1,766,082 1,640,359 Total Liabilities 12,664,506 12,336,928 10,433,304 Deferred Inflows of Resources Total Deferred Inflows of Resources Net Position: Net investment in capital assets 12,257,702 12,438,243 12,235,257 Restricted 2,610,826 2,480,547 2,662,864 Unrestricted (deficit) (1,249,362) (1,844,606) (1,696,217) Total Net Position $ 13~619~166 $ 13~074~184 $ 13~201~904 The largest portion of the District's net position reflects its investment in capital assets such as land, buildings, and equipment, less any related outstanding debt used to acquire those assets. Although the District's investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves generally cannot be used to liquidate these liabilities. An additional portion of the District's net position represents resources that are subject to external restrictions on how they may be used. For the Milford School District, those restrictions include those related to endowments and donations/grants received by the District. The deficit in unrestricted net position is a result of unfunded long-term liabilities including the Early Retirement Benefit, Compensated Absences, and Other Post-Employment Benefits. At present, these obligations are funded in each current year budget only. iii

10 MANAGEMENT'S DISCUSSION AND ANALYSIS FISCAL YEAR ENDING JUNE 30, 2013 Statement of Activities Changes in net position for fiscal years 2011, 2012 and 2013 are as follows: Statement of Activities: Program revenues: Charges for services $ 1,548,706 $ 1,620,419 Operating grants and contributions 3,113,651 2,528,008 Capital grants and contributions 1,685, Total program revenues 6,347, General revenues: Property taxes 21,731,932 22,393,675 State adequacy education grant 8,245,513 8,238,375 Education jobs funding 248,676 Interest and investment earnings 430,188 21,029 Miscellaneous Total general revenues 30,758, ,741,183 Total revenues 37,105,543 35,256,144 Program expenses: Instruction 15,611,009 15,600,646 Supporting services 2,229,034 2,194,972 Instructional staff services 491, ,571 General administration 3,298,890 3,321,080 Other services and benefits 7,929,872 8,671,301 Operation and maintenance of plant 3,374,508 3,396,777 Pupil transportation 898, ,622 Food service 777, ,442 Interest on long-term debt Total program expenses 35, 113,804 35,801, $ 1,692,209 2,322, ,225 4,300,592 23,315,731 8,245, , ,864,584 36,165,176 15,737,452 2,341, ,120 3,144,298 8,805,556 3,432, , , ,037,456 Change in net position (544,982) Net position - beginning of year 11,627,427 13,619,166 Net position - ending of year _$ 11~-619'166 $ 13: _$ ,074, ~fql204 iv

11 MANAGEMENT'S DISCUSSION AND ANALYSIS FISCAL YEAR ENDING JUNE 30, 2013 MILFORD SCHOOL DISTRICT ACTIVITIES As shown in the above statement, there was a change in net position of $127,720. Exhibit Din the Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities explains most of this change. It is primarily because capital (non-current) assets - consisting of buildings and improvements, vehicles, equipment, depreciation expense - are not financial resources and, therefore, are not reported in the fund financial statements. Also, non-current liabilities - consisting of bonds payable, accrued interest on bonds, capital leases, compensated absences, and post employment benefits payable are not due and payable in the current period and therefore are not reported in the fund financial statements. Further explanations of these changes are referenced 111 Statements. See Note 11 for the Restricted Net Position. the Notes to the Basic Financial Financial Summary of the School District's Funds The General Fund shows a fund balance of $916,325. This is an increase of $175,971, which is primarily due to excess revenues over expenditures. The increase in the Special Funds is due primarily to the sale of applied technology assets in which proceeds were put into the Vocational Education Revolving Fund. The increase in the Permanent Funds is due to interest and investment income. Refer to Exhibit D in the Basic Financial Statements. Other non-major governmental funds include the operations of Food Service, Driver Education, and the Expendable Trust Fund. Schedules A and B in the supplemental section of the Financial Statements further clarify these funds. Capital Assets The Milford School District considers a capital asset to be an asset whose costs exceed $5,000 and has a useful life of greater than one (1) year. Assets are depreciated using the straight-line method over the course of their useful life. During the 2013 fiscal year the District purchased Video Production Cameras with zoom and focus controls for the High School Applied Technology Center. The District purchased a 2012 Ford F350 Dump Truck. A similar vehicle was purchased earlier in the year and financed through a note. Special circumstances caused the District to pay off the note and trade it in on the purchase of the 2012 Ford F350. See Note 6 in the Notes to the Basic Financial Statements for a summary of all capital assets. Long-Term Liabilities During fiscal year 2013 the District showed a reduction of Bonds Payable of $845,000 as a result of payments made during the year. The Notes Payable reduction reflects the loan payment of $94,355 for the Jacques Four Classroom Addition. The District showed a net decrease of $6,472 in capital leases as a result of meeting its annual obligations on its vehicles. This included the early pay off on the original Chevy Silverado Dump Truck. Early retirement benefits decreased net of $20,596 due to the limited number of employees participating in the program. v

12 MANAGEMENT'S DISCUSSION AND ANALYSIS FISCAL YEAR ENDING JUNE 30, 2013 Compensated Absences decreased by $154, 107 due to a change in the employee benefits which limits the accumulation of vacation time for eligible employees. See Notes 8 and 9 in the Notes to the Basic Financial Statements for a summary of all outstanding long-term obligations. Budgetary Highlights Budgetary information for the General Fund (a major governmental fund) is included in the Required Supplementary Information section, under Schedule 1. Budgetary information in these financial statements has been presented for only one of the District's major governmental funds (the General Fund). The budgetary information is neither practical nor meaningful for the Special Revenues Fund (Federal Projects). Similarly, the Food Service and Driver Education Funds have not been included. Actual revenues exceeded the budgeted amount by $68,516. The District received Special Education Tuition for services provided to other school districts above what was anticipated. The District received less Catastrophic Aid, Vocational Aid, and Medicaid revenue than what was anticipated from the State of NH. The District under expended its budget by $619,659. A return of surplus from the NH School Health Care Coalition accounted for about a third. The remainder was a result of staffing changes, changes in employee benefit participation, and close attention to instructional and curriculum needs, the operation and maintenance of buildings, and technology infrastructure requirements. ECONOMIC FACTORS Given the economic climate, budgetary constraints continue and effort is focused on operating within existing funding levels. Contacting Milford School District's Financial Management This financial report is intended to provide our citizens and creditors with a general overview of the District's finances and accountability for the resources it receives. If you have questions about this report or need to get additional information, contact the Business Administrator at 100 West Street, Milford, NH 03055, telephone vi

13 EXHIBIT A MILFORD, NEW HAMPSHIRE SCHOOL DISTRICT Statement of Net Position June 30, 2013 ASSETS Current Assets: Cash and cash equivalents Accounts receivable Due from other governments Prepaid expenses Total Current Assets Noncurrent Assets: Capital assets: Non-depreciable capital assets Depreciable capital assets, net Total Noncurrent Assets Total Assets Governmental Activities $ 863,149 1,890 3, 174,558 13,244 4,052, ,250 19,256,117 19,582,367 23,635,208 DEFERRED OUTFLOWS OF RESOURCES Total Deferred Outflows of Resources LIABILITIES Current Liabilities: Accounts payable Accrued expenses Current portion of bonds payable Current portion of capital leases payable Current portion of early retirement benefits payable Current portion of compensated absences payable Total Current Liabilities Noncurrent Liabilities: Bonds payable Notes payable Early retirement benefits payable Compensated absences payable Other post-employment benefits payable Total Noncurrent Liabilities Total Liabilities 215, , ,540 6, ,342 7,660 1,640,359 6,403, , , ,081 68_6,259 8,792,945 I 0,433,304 DEFERRED INFLOWS OF RESOURCES Total Deferred Inflows of Resources NET POSITION Net investment in capital assets Restricted Unrestricted (deficit) Total Net Position 12,235,257 2,662,864 ( 1,696,217) $ 13,201,904 See accompanying notes to the basic.financial statements I

14 EXHIBIT B MILFORD, NEW HAMPSHIRE SCHOOL DISTRICT Statement of Activities For the Year Ended June 30, 2013 Functions/Programs Expenses Charges for Services Program Revenues Operating Grants and Contributions Capital Grants and Contributions Net (Expense) Revenue and Changes in in Net Position Governmental Activities: Instruction Supporting services Instructional staff services General administration Other services and benefits Operation and maintenance of plant Pupil transportation Food service Debt service Total governmental activities $ 15,737,452 2,341, ,120 3, 144,298 8,805,556 3,432, , , ,500 $ 36,037,456 $ 1,238, ,976 $ 1,692,209 $ 1,405, ,833 71,524 85,018 5, ,222 $ 2,322, 158 $ 286,225 $ 286,225 $( 13,093,857) ( 1,860,458) (347,596) (3,059,280) (8,805,556) (3,432,354) (965, 182) (72,306) (100,275) (31,736,864) General revenues: Property taxes State adequacy education grant Interest and investment earnings Miscellaneous Total general revenues Change in net position Net position - beginning, as restated Net position - ending 23,315,73 I 8,245,5 I 3 236,252 67,088 3 I,864, ,720 13,074, 184 $ 13,20 I,904 See accompanying notes to the basic.financial statements 2

15 EXllIBIT C MILFORD, NEW IIAMPSllIRE SCHOOL DISTRICT Balance Sheet Governmental Funds.June 30, 2013 ASSETS Cash and cash equivalents Accounts receivable Due from other governments Due from other funds Prepaid expenses Total Assets $ General Fund 862,754 1,390 17, , ,348,971 Special Funds Permanent Funds $ ,228 $ 2,593, ,728 2,593, 752_ Nonmajor Governmental Funds $ ,528 56, ,591 Total Governmental Funds $ 863,149 1,890 3, 174, , ,161 4,564,042 DEFERRED OUTFLOWS OF RESOURCES Total Deferred Outflows or Resources Total Assets and Deferred Outflows or Resources ~_J_,348_, 971 $ 422,728 $ 2,593,752_ $ 198,591 $ 4,564,042 Accounts payable Accrued expenses Due to other runds Total Liabilities LIJ\BILITIES $ 215, ,073 56, ,646 $ 353, ,616 $ $ 215, , , ,262 DEFERRED INFLOWS OF RESOURCES Total Deferred Inflows or Resources ---- FUND BJ\LJ\NCES Nonspcndablc Restricted Committed Assigned Total Fund Balance Total Liabilities, Deferred Inflows or Resources and Fund Balances 114, , ,325 $ 1,348,971 2,488,524 69, ,228 69,112 2,593,752 $ 422,728 $ 2,593,752 89, , , $ 198,591 2,602, ,340 89, , !\mounts reported ror governmental activities in the statement or net position arc different because: Capital assets used in governmental activities arc not financial resources and, thcrcf'orc, arc not reported in the runds Prepaid expenses for debt service requirements reduce long-term liabilities on the accrual basis in the statement or net position, not the modi lied accrual basis Long-term liabilities arc not due and payable in the current period and, therefore, arc not reported in the funds. Long-term liabilities at year end consist or: Bonds payable Notes payable Capital leases payable Accrued interest on long-term obi igations Early retirement benefits Other post-employment benefits Compensated absences Net position of governmental activities 19,582,367 ( 100,917) (7,178,248) (161,974) (6,888) (165,951) (942,265) (686,259) (915,741) $ 13,201,904 See accompanying notes to the basicfi11ancia/ statements 3

16 EXHIBIT D MILFORD, NEW HAMPSHIRE SCHOOL DISTRICT Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds For the Year Ended June 30, 2013 MILFORD, NEW HAMPSHIRE SCHOOL DISTRICT 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, 2013 Revenues: Taxes Intergovernmental Charges for services Interest and investment income Miscellaneous Total Revenues Expenditures: Current operations: Instruction Supporting services Instructional staff services General administration Other services and benefits Operation and maintenance of plant Pupil transportation Food service Capital outlay Debt service: Principal Interest Total Expenditures Excess revenues over (under) expenditures General Fund Special Funds $23,315,73 I 9,203,274 s 1,376,400 1,163, ,069 18,206 33,721,696 1,394,906!4,950,766 1,853, ,226 3,192,760 8,555,796 2,250, ,604 37, , ,505 33,558, , , , ,524 85,396 3,300 1,392,419 2,487 Permanent Funds s 227, ,638 13,805 13, ,833 Nonmajor Governmental Funds s 274, ,856 8,045 9, ,936 59, , , ,685 (42,749) Total Governmental Funds $23,315,73 I 10,853,896 1,692, ,252 67,088 36, 165,176 15,768,282 2,341, ,120 3,278,156 8,555,796 2,250, , ,131 37, , ,505 35,828, ,761 Change in Fund Balances - Total Governmental Funds Amounts reported for governmental activities in the statement of activities are different because: Governmental funds report capital outlays as expenditures, However, in the statement of activities, the cost of those assets is allocated over their estimated useful lives as depreciation expense, This is the amount by which depreciation expense exceeded capital outlays in the current period, Repayment of bond and capital lease principal is an expenditure in the governmental funds, but the repayment reduces long-tern1 liabilities in the statement of net position, In the statement of activities, interest is accrued on outstanding bonds and capital leases, whereas in governmental funds an interest expenditure is reported when due, Governmental funds only report the disposal of assets to the extent proceeds are received from the sale, In the statement of activities, a gain or loss is reported for each disposal This is the amount of the loss of disposed capital assets reduced by the actual proceeds received from the sale of capital assets, s ( 1, 153,380) ,347 (5,712) Other financing sources (uses): Proceeds from capital leases Transfers in Transfers out Total other financing sources (uses) Net change in fund balances 46,655 34,003 (67,877) 12, ,971 2,487 (34,003) (34,003) 179,830 67,877 67,877 25,128 46, ,880 (101,880) 46, ,416 Proceeds from capital leases are reported as other financing sources in the funds, but a capital lease increases long-term liabilities in the statement of net position, Governmental funds report the effect of bond issuance premiums when debt is first issued, whereas these amounts are unearned and amortized in the statement of activities, (46,655) 10,279 Fund balances at beginning of year, as restated Fund balances at end of year s 740, ,325 s 66,625 69,112 2,413,922 $2,593,752 s 173, ,591 3,394,364 $ 3,777,780 Some expenses reported in the statement of activities, such as compensated absences, early retirement benefits, and other post-employment benefits, do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds_ (75,057) Change in Net Position of Governmental Activities s 127,720 See accompanying notes to the basic financial statements 4

17 EXHIBIT E MILFORD, NEW HAMPSHIRE SCHOOL DISTRICT Statement of Fiduciary Net Position Fiduciary Funds June 30, 2013 Cash and cash equivalents Due from other governments Total Assets ASSETS Private- Purpose Trusts Agency Funds $ 234,446 $ 628, , ,446 DEFERRED OUTFLOWS OF RESOURCES Total Deferred Outflows of Resources Due to student groups Total Liabilities LIABILITIES 234,446 $ 234,446 DEFERRED INFLOWS OF RESOURCES Total Deferred Inflows of Resources Held in trust Total Net Position NET POSITION 628,540 $ 628,540 See accompanying notes to the basic.financial statements 5

18 EXHIBIT F MILFORD, NEW HAMPSHIRE SCHOOL DISTRICT Statement of Changes in Fiduciary Net Position Fiduciary Funds For the Year Ended June 30, 2013 ADDITIONS: Contributions: Private donations Total Contributions Investment earnings: Interest and investment income Net increase in fair value of investments Total Investment Earnings Total Additions DEDUCTIONS: Scholarship benefits Total Deductions Change in Net Position Net position - beginning of year Net position - end of year Private- Purpose Trusts $ 24,585 24,585 22,264 25,757 48,021 72,606 6,982 6,982 65, ,916 $ 628,540 See accompanying notes to the basic financial statements 6

19 MILFORD, NEW HAMPSHIRE SCHOOL DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS June 30, 2013 NOTE I-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accounting policies of the Milford, New Hampshire School District conform to accounting principles generally accepted in the United States of America for local educational units of government, except as indicated hereinafter. The following is a summary of significant accounting policies. Financial Reporting Entity The Milford, New Hampshire School District (the District) is an independent governmental entity organized under the laws of the State of New Hampshire to provide public education within the borders of the Town of Milford, New Hampshire. The District's legislative body is the annual meeting of registered voters within the District and is governed by an elected School Board. The District has no other separate organizational units, which meet criteria for inclusion in the financial statements as defined by the Governmental Accounting Standards Board (GASB). Basis <d'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. During the fiscal year ended June 30, 2013, the District implemented GASB Statement No. 63, "Financial Reporting of Deferred Outjlows of Resources, Deferred In.flows of Resources, and Net Position". Under Statement 63, the District has segregated previously reported assets and liabilities as deferred outflows of resources and deferred inflows of resources, respectively. This statement also identifies net position as the residual of all other elements presented in the statement of financial position. Net position is the difference between assets and deferred outflows of resources less liabilities and deferred inflows of resources. 1. Government-Wide Financial Statements: The statement of net position and the statement of activities display information about the District as a whole. These statements include the financial activities of the primary government, except for fiduciary funds. The statement of net pos1t1on presents the financial condition of the governmental act1v1t1cs of the District at year end. The statement of activities presents a comparison between direct expenses and program revenues for each program or function of the District's governmental activities. Direct expenses are those that arc specifically associated with a service, program or department and therefore clearly identifiable to a particular function. Program revenues include charges paid by the recipient of the goods or services offered by the program, grants and contributions that are restricted to meeting the operational or capital requirements of a particular program and interest earned on grants that is required to be used to support a particular program. Revenues which are not classified as program revenues are presented as general revenues of the District. The comparison of direct expenses with program revenues identifies the extent to which each governmental function is self-financing or draws from the general revenues of the District. 7

20 MILFORD, NEW HAMPSHIRE SCHOOL DISTRICT NOTES TO BASIC.FINANCIAL STATEMENTS (CONTINUED) June 30, Fund Financial Statements: During the year, the District segregates transactions related to certain District functions or activities in separate funds in order to aid financial management and to demonstrate legal compliance. Fund financial statements are designed to present financial information of the District at this more detailed level. The focus of governmental fund financial statements is on major funds. Each major fund is presented in a separate column. Nonmajor funds are aggregated and presented in a single column. The fiduciary funds are reported by type. Fund Accounting The District uses funds to maintain its financial records during the fiscal year. A fund is defined as a fiscal and accounting entity with a self-balancing set of accounts. The District employs the use of two categories of funds: governmental and fiduciary. I. Governmental Funds: Governmental funds are those through which most governmental functions typically are financed. Governmental fund reporting focuses on the sources, uses and balances of current financial resources. Expendable assets are assigned to the various governmental funds according to the purposes for which they may or must be used. Current liabilities are assigned to the fund from which they will be paid. The difference between governmental fund assets and deferred outflows of resources and liabilities and deferred inflows of resources is reported as fund balance. The following are the District's major governmental funds: The General Fund is the main operating fund of the District and is used to account for all financial resources except those required to be accounted for in another fund. The Special Funds account for the various restricted grants and donations received by the District. The Permanent Funds account for the financial transactions related to resources that are legally restricted to the extent that only earnings and not principal may be used for purposes that support the District's programs. 2. Fiduciary Funds: Fiduciary fund reporting focuses on net pos1t1on and changes in net pos1t1on. The fiduciary fund category is split into two classifications: private purpose trust funds and agency funds. The District maintains ten private purpose trust funds, which account for monies designated to benefit individuals within the District. The District also maintains an agency fund known as the Student Activities Fund. The agency funds were established to account for revenues generated by student managed activities. The District's agency funds are custodial in nature (assets equal liabilities) and do not involve the measurement of results of operations. 8

21 MILFORD, NEW HAMPSHIRE SCHOOL DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2013 Measurement Focus 1. Government-Wide Financial Statements: The government-wide financial statements are prepared using the economic resources measurement focus. All assets, deferred outflows of resources, liabilities, and deferred inflows of resources associated with the operation of the District are included on the Statement of Net Position. 2. Fund Financial Statements: All governmental funds are accounted for using a flow of current financial resources measurement focus. With this measurement focus, only current assets, deferred outflows of resources, current liabilities and deferred inflows of resources generally arc included on the balance sheet. The statement of revenues, expenditures and changes in fund balances reports on the sources (i.e., revenues and other financing sources) and uses (i.e., expenditures and other financing uses) of current financial resources. This approach differs from the manner in which the governmental activities of the government-wide financial statements are prepared. Governmental fund financial statements therefore include a reconciliation with brief explanations to better identify the relationship between the government-wide statements and the statements for governmental funds. Basis <?/'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. Fiduciary funds also use the accrual basis of accounting. Governmental funds use the modified accrual basis of accounting. Differences in the accrual and the modified accrual basis of accounting arise in the recognition of revenue, the recording of unearned revenue, and in the presentation of expenses versus expenditures. I. Revenues - Exchange and Non-exchange Transactions: Revenue resulting from exchange transactions, in which each party gives and receives essentially equal value, is recorded on the accrual basis when the exchange takes place. On a modified accrual basis, revenue is recorded in the fiscal year in which the resources are measurable and become 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 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 (see Note 2). Revenue from grants, entitlements and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied. Eligibility requirements include timing requirements, which specify the year when the resources 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 specified purpose; and expenditure requirements, in which the resources are provided to the District on a reimbursement basis. 9

22 MILFORD, NEW HAMPSHIRE SCHOOL DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2013 On a modified accrual basis, revenue from non-exchange transactions must also be available before it can be recognized. Under the modified accrual basis, the following revenue sources are considered to be both measurable and available at fiscal year end: property taxes available as an advance, interest, tuition, grants, and student fees. 2. Unearned Revenue: Unearned revenue arises when assets are recognized before revenue recognition criteria have been satisfied. Grants and entitlements received before the eligibility requirements are met are recorded as unearned revenue. On governmental fund financial statements, receivables that will not be collected within the available period have also been reported as unearned revenue. 3. Expenses/Expenditures: On the accrual basis of accounting, expenses are recognized at the time they are incurred. 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 and amortization are not recognized in governmental funds. Budgetary Data The District's budget represents functional appropriations as authorized by annual District meetings. The school board may transfer funds between operating categories as they deem necessary. The District adopts its budget under State regulations, which differ somewhat from accounting principles generally accepted in the United States of America in that the focus is on the entire governmental unit rather than on the basis of fund types. State law requires balanced budgets but permits the use of beginning fund balance to reduce the property tax rate. For the year ended June 30, 2013, the District applied $464,864 of its unappropriated fund balance to reduce taxes. Prepaid Expenses Payments made to vendors for services that will benefit periods beyond June 30, 2013 are recorded as prepaid items. Capital Assets General capital assets result from expenditures in the governmental funds. These assets are reported in the governmental activities column of the government-wide statement of net position, but arc not reported in the fund financial statements. IO

23 MILI~ORD, NEW HAMPSHIRE SCHOOL DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June30,2013 All capital assets are capitalized at cost (or estimated historical cost) and updated for additions and retirements during the year. Donated capital assets are recorded at their estimated fair values as of the date received. The District maintains a capitalization threshold of $5,000. The District does not possess any infrastructure or intangible assets. Improvements are capitalized; the costs of normal maintenance and repairs that do not add to the value of the asset or materially extend an asset's life are not capitalized. All reported capital assets except for land and construction in progress are depreciated. Improvements are depreciated over the remaining useful lives of the related capital assets. Depreciation is computed using the straight-line method over the following useful lives: Description Buildings and improvements Vehicles Machinery, equipment and other Years Bond Premium Bond premiums are amortized as a component of interest expense over the life of the related bond using the effective interest rate method. Bonds payable are reported in the accompanying financial statements gross of any applicable unamortized bond premium. The balance of the unamortized bond premium as of June 30, 2013 is $73,248. Compensated Absences District employees earn vacation and sick leave as they provide services. Pursuant to District personnel policy and certain collective bargaining agreements, employees may accumulate (subject to certain limitations) unused sick and vacation pay earned and, upon retirement, resignation, or death may be compensated for such amounts at current rates of pay or at a rate agreed to in the collective bargaining agreement. In accordance with certain District collective bargaining agreements, employees are entitled to severance benefits after meeting minimum years of service requirements. For governmental fund financial statements, compensated absences are reported as liabilities and expenditures as payments come due each period upon the occurrence of employee death or retirement. The entire compensated absence liability is reported on the government-wide financial statements. Early Retirement Benefits Any full time teacher in the District who is a member of the collective bargaining unit, at least 55 years old and who has a minimum of 20 years of service as an educator, of which 15 have been with the District, is eligible for early retirement. Benefits will be paid up to a maximum of 7 years. A similar plan is available for administrators. In the governmental fund financial statements, these benefits are reported as liabilities and expenditures as payments come due each period. The entire early retirement benefit liability is reported on the government-wide financial statements. 11

24 MILPORD, NEW HAMPSHIRE SCHOOL DISTRICT NOTES TO BASIC PINANCIAL STATEMENTS (CONTINUED) June 30, 2013 Accrued Liabilities and Long-Term Obligations All payables, accrued liabilities, and long-term obligations are reported in the government-wide financial statements. In general, governmental fund payables and accrued liabilities that, once incurred, are paid in a timely manner and in full from current resources are reported as obligations of the funds. However, compensated absences that will be paid from governmental funds are reported as liabilities in the fund financial statements only to the extent that they are due for payment during the current fiscal year. General obligation bonds, capital leases and other long-term obligations that will be paid from governmental funds are recognized as a liability in the fund financial statements when due. Net Position Net position represents the difference between assets and deferred outflows of resources, and liabilities and deferred inflows of resources. Net investment in capital assets consists of capital assets, net of accumulated depreciation, reduced by the outstanding balances on any borrowings used for the acquisition, construction or improvement of those assets. Net position is reported as restricted when there are limitations imposed on their use either through the enabling legislation adopted by the District or through external restrictions imposed by creditors, grantors or laws or regulations of other governments. Unrestricted net position is the net amount of the assets, deferred outflows of resources, liabilities and deferred inflows of resources that are not included in the determination of net investment in capital assets or the restricted components of net position. The District's policy is to first apply restricted resources when an expense is incurred for purposes for which both restricted and unrestricted net position are available. Fund Balance Policy As of June 30, 2013, the District has not established a Fund Balance Policy. GASB Statement 54, Fund Balance Reporting and Governmental Fund Type Definitions, established new fund balance classifications and changed the definition of the governmental fund types. Under Statement 54, the District has segregated fund balance into five classifications: Nonspendable, Restricted, Committed, Assigned, and Unassigned. These components of fund balance are defined as follows: Nonspendable Fund Balance: Amounts that are not in a spendable form or are required to be maintained intact. Restricted Fund Balance: Amounts constrained to specific purposes stipulated by external resource providers or through enabling legislation. Restrictions may be changed or lifted only with the consent of the resource providers or by the enabling legislation. Committed Fund Balance: Amounts constrained to specific purposes by a government itself using its highest level of decision-making authority. To be reported as committed, amounts cannot be used for any other purpose unless the government takes the same highest-level action to remove or change the constraint. Assigned Fund Balance: Amounts a government intends to use for a specific purpose; intent can be expressed by the governing body or by an official or body to which the governing body delegates the authority. 12