Hopkins School Board Workshop Eisenhower Community Center Boardroom 4 p.m. November 20, 2018

Transcription

1 Hopkins School Board Workshop Eisenhower Community Center Boardroom 4 p.m. November 20, :00 I. Financial Literacy N. Lightfoot/Secondary Principals II. Enrollment N. Lightfoot/J. Toop III. Assessment Results R. Mhiripiri-Reed/K. Terhaar IV. Strategic Visioning R. Mhiripiri-Reed 6:15 V. Audit Report J. Toop/S. Johnson/M. Hoffman Excellence. Every School. Every Student. Every Day.

2 Report to the School Board Enrollment Projections Discussion N o v e m b e r 20, N i k L i g h t f o o t, E d. D., J. D., A s s i s t a n t S u p e r i n t e n d e n t J o h n T o o p, D i r e c t o r o f B u s i n e s s S e r v i c e s Overview Each year, the administration develops enrollment projections. The District uses a student projection model to assist with building the financial planning model. The projections inform the budgeting process by generating the estimated amount of pupil units. The financial planning model is built with the assistance of the enrollment projections as the enrollment projections help predict the District s anticipated revenue. In reviewing the present model, the administration is also taking into consideration alternative ways of monitoring and adjusting enrollment projections to ensure accuracy and responsiveness to changing demographic patterns. Primary Issues to Consider The impacts of the changing enrollment. Supporting Documents Enrollment projections and the supporting background worksheets. Excellence. Every School. Every Student. Every

3 Enrollment Projections Based on October 1 November 2018 Actual Proj. NEW Old NEW Old NEW Old NEW Old NEW Diff Diff Diff Diff Diff Grade Enrollment History Enrollment Projections Kindergarten Grade Grade Grade Grade Grade Grade Grade Grade Grade Grade Grade Grade Total K 3 2,029 1,935 1,968 1, ,957 1, ,969 1, ,973 1, ,973 1, ,973 Total 4 6 1,431 1,431 1,467 1, ,483 1, ,445 1, ,450 1, ,448 1, ,468 Total 7 9 1,573 1,605 1,574 1, ,546 1, ,574 1, ,593 1, ,591 1, ,487 Total ,662 1,609 1,610 1, ,575 1, ,604 1, ,561 1, ,526 1, ,553 Total K 12 6,695 6,580 6,619 6, ,561 6, ,592 6, ,577 6, ,538 6, ,481 Total K 6 3,460 3,366 3,435 3, ,440 3, ,414 3, ,423 3, ,421 3, ,441 Total ,235 3,214 3,184 3, ,121 3, ,178 3, ,154 3, ,117 3, ,040 Total K 12 6,695 6,580 6,619 6, ,561 6, ,592 6, ,577 6, ,538 6, ,481 Kindergarten th (Prev. Yr.) K Difference Total 1 6 2,987 2,877 2,935 2, ,940 2, ,914 2, ,923 2, ,921 2, ,941 Total ,235 3,214 3,184 3, ,121 3, ,178 3, ,154 3, ,117 3, ,040 Total ,222 6,091 6,119 5, ,061 5, ,092 5, ,077 5, ,038 5, ,981 Total K 12 6,695 6,580 6,619 6, ,561 6, ,592 6, ,577 6, ,538 6, ,481 Projected Annual Student Decline NEW Projections Enrollment Projections Prepared By: Carman Consulting, LLC 11/3/2018

4 Enrollment Projections - Supporting Data Past Enrollment Trends Past Enrollment Experience: Yr. Chng Fall Seat Count K-12: 7,315 7,269 7,208 7,105 6,954 6,845 6,821 6,811 6,695 6,580 6,619 (226) Annual Change (284) (46) (61) (103) (151) (109) (24) (10) (116) (115) 39 Annual Rate of Change -3.74% -0.63% -0.84% -1.43% -2.13% -1.57% -0.35% -0.15% -1.70% -1.72% 0.59% 12-K Migration: (203) (151) (151) (156) (116) (127) (78) (38) (71) (35) (41) (263) Diff 12-K to Annual Change (81) (35) (45) (80) 80 (43) * 5-Yr. Chng EOY Adjusted ADM: 7, , , , , , , , , , (269.49) Less: Early Childhood (EC) Net EOY Adjusted ADM: 7, , , , , , , , , , Annual Change (239.32) (48.71) (56.04) (125.76) (144.80) (64.00) 8.35 (74.25) (147.25) (16.60) Annual Rate of Change -3.12% -0.66% -0.76% -1.72% -2.01% -0.91% 0.12% -1.06% -2.13% -0.24% * 5-Yr. Chng Increase Fall to EOY ADM: (includes early childhood) *Note: Starting in , EOY Adj. ADM includes Resident W-ALT and Non-Resident W-ALT that it NOT included in the Fall Seat Count Numbers. The increase from Fall to EOY would be if you subtract the Resident and Non-Resident W-ALT. Open Enrollment: Net Open Enroll (Adj. ADM) Annual Change (93) (30) (29) (36) Annual Rate of Change 9.58% 13.23% 13.38% % 6.06% 9.28% % % % Open Enroll - IN (Fall K-12) 1,255 1,310 1,354 1,397 1,482 1,511 1,569 1,607 1,650 1,710 Annual Change Annual Rate of Change 15.35% 4.38% 3.36% 3.18% 6.08% 1.96% 3.84% 2.42% 2.68% 3.64% Note: Net Open Enrollment numbers are not available for , as we do not have information regarding Open Enrollment OUT. The numbers listed above do NOT include charter or tuition students. Kindergarten Enrollment and Corresponding County Births: Kindergarten Annual Change (13) (28) 8 57 (7) 13 (77) Annual Rate of Change -2.50% -5.52% 1.67% 11.70% -1.29% 2.39% % 2.91% 2.33% Birth Year County Births - Hennepin 16,445 16,839 16,894 16,523 16,301 15,904 15,827 16,235 16,509 Annual Change (375) (371) (222) (397) (77) Annual Rate of Change -2.23% 2.40% 0.33% -2.20% -1.34% -2.44% -0.48% 2.58% 1.69% Enrollment Projections Prepared By: Carman Consulting, LLC 11/3/2018

5 Enrollment Projections - Supporting Data Past Enrollment Trends Current Year's ( ) Enrollment Experience: Comparison Projection versus Actual (Fall Seat Count): Actual Proj. Open Enroll - IN Grade Over / (Under) % Diff. Grade % per Grade % Total IN Kindergarten (10) -2.04% Kindergarten % 6.84% Grade (18) -3.76% Grade % 7.08% Grade (25) -5.49% Grade % 7.78% Grade (7) -1.45% Grade % 6.96% Grade (33) -7.35% Grade % 7.95% Grade (11) -2.22% Grade % 8.07% Grade (15) -3.23% Grade % 6.90% Grade (7) -1.41% Grade % 8.83% Grade % Grade % 7.19% Grade (20) -3.82% Grade % 9.42% Grade (5) -0.93% Grade % 8.25% Grade % Grade % 6.96% Grade (2) -0.35% Grade % 7.78% Total K-3 1,968 1,908 (60) -3.14% Total K % 28.65% Total 4-6 1,467 1,408 (59) -4.19% Total % 22.92% Total 7-9 1,574 1,555 (19) -1.22% Total % 25.44% Total ,610 1,607 (3) -0.19% Total % 22.98% Total K-12 6,619 6,478 (141) -2.18% Total K-12 1, % % Total K-6 3,435 3,316 (119) -3.59% Total K % 51.58% Total ,184 3,162 (22) -0.70% Total % 48.42% Total K-12 6,619 6,478 (141) -2.18% Total K-12 1, % % Kindergarten (10) 12th (Prev. Yr.) K Difference (24) (34) (10) Total 1-6 2,935 2,826 (109) -3.86% Total ,184 3,162 (22) -0.70% Total ,119 5,988 (131) -2.19% Total K-12 6,619 6,478 (141) -2.18% Enrollment Projections Prepared By: Carman Consulting, LLC 11/3/2018

6 Summary Data Resident ADM and EOY Total Adjusted ADM Hopkins School District Resident Resident ADM Hopkins Served in District 6, , , , , , , , , , , , From MDE School ADM Report Annual Change (357.48) (279.69) (111.61) (92.36) (211.39) (98.04) (130.17) (64.48) (51.14) (213.57) (103.83) % of Residents Served 87.83% 85.06% 82.56% 81.45% 80.11% 78.26% 76.31% 76.17% 75.32% 74.89% 72.03% 70.25% Served in District / Total Resident Revised Options Elsewhere , , , , , , , Options Elsewhere plus WMEP Tuition (revised 15 16) Adjustment WMEP Tuition From MDE School ADM Report Options Elsewhere , , , , , , From MDE School ADM Report Annual Change % Options Elsewhere 8.34% 10.35% 11.67% 12.79% 13.60% 14.79% 16.70% 17.85% 18.55% 18.94% 20.32% 21.30% Options Elsewhere / Total Resident Charter From MDE School ADM Report Annual Change (2.08) (77.22) (1.82) Tuition NET of WMEP Tuition Minus WMEP (revised 15 16) Adjustment WMEP Tuition Effective in WMEP no longer included in Tuition Tuition From MDE School ADM Report Annual Change (35.54) (23.48) (107.76) (10.94) (6.47) (59.88) 5.83 (27.81) W ALT (Svd in COOP Res Is Fiscal) From MDE School ADM Report (Hopkins Hosting Disrtrict) Annual Change Other From MDE School ADM Report Annual Change (2.20) (2.72) Total Resident 7, , , , , , , , , , , , From MDE School ADM Report Annual Change (174.15) (114.70) (37.38) 5.80 (99.30) (157.73) (5.92) (27.90) (17.89) Cumulative Change Residents (174.15) (288.85) (326.23) (320.43) (419.73) (365.17) (522.90) (528.82) (556.72) (574.61) (545.23) Non Resident Non Resident ADM Hopkins Options 1, , , , , , , , , , , , From MDE School ADM Report Annual Change Tuition From MDE School ADM Report Annual Change (5.60) (0.30) (26.13) (0.46) (0.48) 0.26 (0.09) 0.08 (0.55) W ALT (Svd in COOP this Fiscal) From MDE School ADM Report (Hopkins Hosting District) Annual Change Other From MDE School ADM Report Annual Change Total Non Resident 1, , , , , , , , , , , , Options plus Tuition plus Other Annual Change % Non Resident 13.02% 13.65% 13.99% 14.94% 15.37% 15.69% 16.09% 17.13% 18.01% 18.48% 19.12% 19.96% Total Non Resident divided by Total Res and Non Res Total Res and Non Res 8, , , , , , , , , , , , Total Resident plus Total Non Resident Resident Options Elsewhere plus Resident Charter plus Non Exclusions from Adj. ADM * (765.86) (985.15) (1,115.63) (1,219.99) (1,316.84) (1,360.21) (1,621.47) (1,598.49) (1,644.94) (1,676.46) (1,869.01) (2,007.86) Resident Tuition Total Adjusted ADM 7, , , , , , , , , , , , Total Res and Non Res minus Exclusions from Adj. ADM Annual Change (356.82) (230.43) (53.93) (46.83) (128.11) (156.36) (59.69) (16.15) (146.76) (10.65) * Note: Total Adjustment ADM is equal to the Total Resident and Non Resident less Options Elsewhere, Charter, and and Non Resident Tuition. Private, Parochial, and Home School Students are not included in the above numbers District ADM Summary Report dated 1/23/ District ADM Summary Report dated 10/2/2018 Enrollment Projections Prepared By: Carman Consulting, LLC 11/3/2018

7 Open Enrollment IN and OUT as a % of Hopkins' Total Enrollment and Resident ADM Served as a % of Hopkins Total Resident ADM 15 Year Summary - FY04 to FY % 30.00% 25.00% When one includes OE-OUT to Charter, the ratio between OE-OUT to OE-IN falls belows 1.00 in FY13, which is partly due to the reporting error noted below. However, this error is corrected in FY14 and the ratio is still below The capture rate for Resident ADM Students Served has declined from a 90.73% high in FY02 to an estimated low of 70.25% for FY % 15.00% 10.00% 5.00% 0.00% FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 % Open Enroll - IN % Open Enroll - OUT with Charter Description FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 Hopkins EOY Adj. ADM 8, , , , , , , , , , , , , , , Annual Change (186.52) (14.08) (167.87) (350.80) (236.81) (51.53) (48.68) (133.48) (154.48) (65.32) (67.24) (146.76) (10.65) Open Enroll - IN (Adj. ADM) , , , , , , , , , , , , , , Open Enroll - OUT (Adj. ADM)* , , , , , , Open Enroll - Charter (Adj. ADM) * Open Enroll - NET Ratio - IN to OUT without Charter Ratio - IN to OUT with Charter % Open Enroll - IN 11.30% 12.67% 12.85% 13.79% 14.97% 15.65% 16.89% 17.59% 18.48% 19.61% 20.88% 22.10% 22.94% 24.38% 24.99% % Open Enroll - OUT with Charter 6.15% 7.09% 7.58% 8.24% 11.48% 13.69% 15.11% 16.54% 17.89% 21.97% 21.94% 22.78% 24.20% 27.56% 29.66% Total Resident ADM 7, , , , , , , , , , , , , , , Annual Change (167.62) (118.58) (180.56) (174.15) (114.70) (37.38) 5.80 (99.30) (157.73) (5.92) (27.90) (17.89) Resident ADM Served 7, , , , , , , , , , , , , , , % Resident Served 89.88% 89.58% 89.10% 87.83% 85.06% 82.56% 81.45% 80.11% 78.28% 76.31% 76.17% 75.31% 74.89% 72.03% 70.25% Annual Change (218.67) (130.08) (26.64) (257.29) (357.48) (279.69) (111.61) (92.36) (209.84) (99.59) (130.03) (65.22) (50.54) (213.57) (103.83) * Open Enrollment OUT to Charter schools is reflected separately in OE-Charter. Also, ADM reported in FY13 was overstated due to NASHA SHKOLA incorrectly reporting all of their ADM of their charter school students as residents of the Hopkins School District, while only about 8 students were residents of the Hopkins School District. This was never corrected by MDE for FY13. Note: All values reflected are based upon Adjusted ADM and have been pulled from the School ADM Report from the MDE website. For FY00 to FY04 ADM was calculated using 1.5 ADM as the maximum a student could generate in a given year including extended time. For FY05 and forward the maximum a student could generate was 1.2 ADM, a 20% overall reduction in possible ADM or a 60% reduction in extended time ADM that a student could generate assumping they were a 1.0 initially. Since Districts were paid on the higher number from FY00 to FY04, that number is reflected in the ADM for those years. The open enrollment numbers OUT listed above do NOT include Charter or Tuition students. Charter is listed separately. The FY17 numbers are from the District ADM Summary report dated 1/23/18. The FY18 numbers are from the District ADM Summary report dated 10/2/18. FY18 numbers also include Resident W-ALT and Non-Resident W-ALT. Enrollment Projections Provided By: Carman Consulting, LLC 11/3/2018

8 Hopkins Public Schools - Kindergarten Enrollment Fall Seat Count to Open Enrolled IN Kindergarten Resident Kindergarten Served Actual Kindergarten Enrollment -- Fall Seat Count: Kindergarten Enrollment Open Enrolled IN Kindergarten Resident Kindergarten Served % Kindergarteners - Resident 85.63% 82.69% 82.84% 78.71% 83.98% 75.92% 74.67% 79.82% 74.84% 77.41% 76.60% Kindergarten Open Enrollment IN -- Breakdown by Elementary School Building Alice Smith Eisenhower (XX incl thru 12-13) XinXing Gatewood Glen Lake Meadowbrook Tanglen Total K-6 Open Enrollment IN by Building Building AS IKE GW GL MB TG XX Total Kindergarten Grade Grade Grade Grade Grade Grade Total Min Average Max K County Demographics K Zip Code Demographics Hazel's Projection Range for Kindergarten Pool Method Historical Projections Compared to Actual Nik/Pam Projection for Hazel Projection for Nik/Pam Projection for Hazel Projection for Nik/Pam Projection for Hazel Projection for Min/Low Average Max/High Proj. Actual Enrollment Projections Provided By: Carman Consulting, LLC 11/3/2018

9 CliftonLarsonAllen LLP CLAconnect.com Management Hopkins Public Schools Hopkins, Minnesota In planning and performing our audit of the financial statements of Hopkins Public Schools as of and for the year ended June 30, 2018, in accordance with auditing standards generally accepted in the United States of America, we considered the entity s internal control over financial reporting (internal control) as a basis for designing audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we do not express an opinion on the effectiveness of the entity s internal control. However, during our audit we became aware of deficiencies in internal control other than significant deficiencies and material weaknesses and other matters that are opportunities to strengthen your internal control and improve the efficiency of your operations. Our comments and suggestions regarding those matters are summarized below. A separate communication dated November 14, 2018, contains our written communication of material weaknesses in the entity s internal control. This letter does not affect our report on the financial statements dated November 14, 2018, nor our internal control communication dated November 14, Inventory Valuations During the performance of price testing procedures over the District s food service inventory, we noted several differences between the unit cost per the District s records and that of the supporting invoices reviewed. This was often due to a change in prices based on market fluctuations that was reflected in the vendor s invoices but not adjusted by the District in their system. We recommend the District review its procedures over inventory valuation and make any adjustments necessary to ensure prices are updated as necessary and staff are appropriately trained as to the proper valuation of inventory. User Access During our review of user access rights we noted two employees who no longer worked with the District still had active user profiles. One of these terminated their employment in December of 2017 and the other in April of Access rights were reviewed on August 8, 2018 and it was noted that both of these employees still had active user rights. Neither of these employees had financial access, however we recommend that the District implement procedures to ensure that all employees have their access rights terminated immediately upon the termination of their employment with the District of 201

10 Management Hopkins Public Schools Page 2 Federal Procurement Documentation During our testing of procurement compliance over the special education program, we noted that the District s documentation over procurements above the micro-purchase threshold was inconsistent and not always clear. The District s policy notes that all federal procurements in excess of the micropurchase threshold must be supported by quotes obtained and single source procurements must be support by adequate documentation. Both of these must include clearly documented rationale for why that vendor was selected for that particular procurement. We recommend the District develop a standard form or document to be used in all procurement types to indicate this rationale, which can be supplemented by additional documentation if the type of procurement would make that necessary. Federal Draws During our testing of the special education program as a part of our federal programs audit we noted that the District did not make any draws for the program until after year-end. When draws are not made until after year-end errors or misstatements in federal revenue and expenditures may not be detected timely and the delay of draws may result in the loss of federal funds if the District has carryover funds. We recommend the District implement procedures that to reconcile federal expenditures throughout the year and make corresponding draw requests. We will review the status of these comments during our next audit engagement. We have already discussed this comment and suggestion with various entity personnel, and we will be pleased to discuss them in further detail at your convenience, to perform any additional study of these matters, or to assist you in implementing the recommendations. This communication is intended solely for the information and use of management and others within the entity, and is not intended to be, and should not be, used by anyone other than these specified parties. CliftonLarsonAllen LLP Minneapolis, Minnesota November 14, of 201

11 CliftonLarsonAllen LLP CLAconnect.com November 14, 2018 School Board Independent School District No. 270 Hopkins Public Schools This Executive Audit Summary and Management Report presents information which we believe is important to you as members of the school board. We encourage you to review the sections of this report, the audited financial statements, and the auditors reports. We would be pleased to furnish additional information with respect to these suggestions and discuss this memorandum with you at your convenience. We wish to express our appreciation to the District for the courtesies, cooperation, and assistance extended to us during the course of our work. CliftonLarsonAllen LLP Dennis Hoogeveen, CPA Principal of 201

12 EXECUTIVE AUDIT SUMMARY (EAS) JUNE 30, of 201

13 TABLE OF CONTENTS JUNE 30, 2018 EXECUTIVE AUDIT SUMMARY STATEMENT OF NET POSITION 2 STATEMENT OF ACTIVITIES 3 FINANCIAL RESULTS FUND BALANCES 4 GENERAL FUND OPERATIONS AND FINANCIAL POSITION 6 STUDENTS SERVED FOR AID 8 APPENDIX A FINANCIAL TRENDS OF YOUR DISTRICT 9 APPENDIX B EXPENDITURES PER STUDENT (ADM) SERVED 15 APPENDIX C LEGISLATIVE ACTIVITY 16 APPENDIX D TECHNICAL UPDATE 18 APPENDIX E FORMAL REQUIRED COMMUNICATIONS of 201

14 EXECUTIVE AUDIT SUMMARY (EAS) FOR YEAR ENDED JUNE 30, 2018 We prepared this Executive Audit Summary and Management Report in conjunction with our audit of the District s financial records for the year ended June 30, We appreciated the time that staff took to work with us to complete the engagement especially the efforts of District Staff and John Toop. Audit Opinion The financial statements are fairly stated. We issued what is known as a clean or unmodified audit report. Yellow Book Compliance No compliance issues were reported in our review of laws, regulations, contracts, and grants that could have significant financial implications to the District. Internal Controls No material weaknesses in internal control were reported. Single Audit The District complied with all direct and material requirements of the major federal programs tested (Special Education Cluster and Child Nutrition Cluster). Legal Compliance Three legal compliance matters were reported with regards to our review of the District s compliance with Minnesota Statutes applicable to school districts. Enrollment For fiscal , Hopkins Public Schools had an estimated total adjusted average daily membership of 6, (or 7, adjusted pupil units). For fiscal , the District had a total adjusted average daily membership of 6, (or 7, adjusted pupil units). Fund Balance The School s General Fund unassigned fund balance (UFARS basis) remained nearly unchanged ending at $8,684,400 as of June 30, Total fund balance of the General Fund decreased by $2,526,846, ending at $11,496,878 as of June 30, A total of $2,137,175 was transferred out of the General Fund to other funds however. The ending unassigned fund balance represents 8.97% (last year 9.66%) of General Fund expenditures. A District s fund balance in the General Fund is an important aspect in considering the School s financial well-being since a healthy fund balance represents things such as cash flow, as a cushion against unanticipated expenditures, enrollment declines, funding deficiencies, and aid prorations at the state level and similar problems. Budget to Actual Total revenues in the General Fund were $266,339 (or 0.28%) higher than the final amended budget amount while total expenditures were $807,855 (or 0.83%) less than had been budgeted. The net effect, including other financing sources, was a decrease to total fund balance that was $1,092,056 less than had been reflected in the District s budget, of which $454,649 related to capital outlay items impacted by timing only. As part of any budget update initiated for fiscal , the Board will want to take these and other budget variances into consideration in order to limit future budget differences to every extent possible. We recommend that your goal for budget variances in your environment be limited to no more than 1% on either side of zero to the extent practical which the District has achieved. This general guidance would exclude those items where it is impractical to know the exact timing such as with capital items or federal expenditures or where the amounts not expended may be reappropriated in the following year such as with site carryover. (1) of 201

15 Hopkins Public Schools Executive Audit Summary (EAS) (Continued) Statement of Net Position The Statement of Net Position essentially tells you what your District owns and owes at a given point in time, the last day of the fiscal year. Theoretically, net position represents the resources the District has leftover to use for providing services after its debts are settled. However, those resources are not always in expendable form, or there may be restrictions on how some of those resources can be used. Therefore, the statement divides the net position into three components: net investment in capital assets, restricted net position, and unrestricted net position. Beginning in fiscal 2015, the District was required to implement GASB Statement No. 68, which significantly impacted the District s ending net position as a result of recording the District s estimated share of the respective unfunded liability for the statewide pension plans for TRA and PERA. The ending balance of the Net Pension Liability at June 30, 2018, decreased significantly as a result of GASB requirements related to the actuarial calculations. The following table presents components of the District s net position at year-end, along with a simplified reconciliation of the difference between the governmental fund balances and total net position: As of June 30, Total Fund Balance of Governmental Funds $ 39,957,987 $ 31,518,384 Capital Assets, Less Accumulated Depreciation 165,820, ,192,140 Net Pension Liabilities and Related Deferred Inflows and Outflows (132,470,266) (102,992,339) Other Long-Term Liabilities (193,989,284) (174,500,953) Other - Net 32,421,122 32,401,528 Total Net Position - Governmental Activities $ (88,259,512) $ (55,381,240) Net Position: Net Investment in Capital Assets $ 22,053,140 $ 28,641,741 Restricted 5,905,947 10,098,439 Unrestricted (116,218,599) (94,121,420) Total Net Position - Governmental Activities $ (88,259,512) $ (55,381,240) Most of the District s fund balances translate into restricted net position by virtue of external restrictions (statutory reserves) or by the nature of the fund they are in (e.g. unrestricted food service fund balance can only be spent for food service program costs). The unrestricted net position category consists mainly of the General Fund unreserved fund balances, offset against non-capital long-term obligations such as vacation or severance payable and beginning in fiscal 2015 the District s estimated share of the unfunded portion of statewide pension plans. Consequently, many Minnesota school districts have accumulated deficits in this component of net position. (2) of 201

16 Hopkins Public Schools Executive Audit Summary (EAS) (Continued) Statement of Activities The Statement of Activities tracks the District s yearly revenues and expenses, as well as any other transactions that increase or reduce total net position. These amounts represent the full cost of providing education. This statement provides a more comprehensive measure than just the amount of cash that changed hands, as reflected in the fund-based financial statements. This statement includes the cost of supplies used, depreciation of long-lived capital assets, and other accrual-based expenses. As mentioned previously, the line item for Change in Net Pension Liability Defined Benefit Plans was a new requirement beginning in fiscal The following table presents a simplified reconciliation of the change in the District s governmental fund balances to the change in total net position for fiscal years 2018 and 2017: Year Ended June 30, Net Change in Fund Balance - Total Governmental Funds $ 8,439,603 $ 16,103,302 Capital Asset Purchases 17,799,661 7,710,600 Depreciation (10,169,572) (9,784,365) Debt Proceeds (30,134,294) (18,684,020) Repayment of Debt 9,865,000 9,060,000 Change in Net Pension Liability and Related Deferred Inflows and Outflows - Defined Benefit Plans (25,457,773) (27,400,314) Change in Other Long-Term Liabilities 3,230,819 (938,371) Internal Service Fund Change in Net Position 166,159 1,512,043 Other - Net (3,640) (4,408) Change in Net Position - Governmental Activities $ (26,264,037) $ (22,425,533) (3) of 201

17 FINANCIAL RESULTS Fund Balances AUDITED FUND BALANCES THROUGH JUNE 30, /30/ TRANSFERS TRANSFERS 6/30/2018 AUDITED AUDITED INTO AUDITED OUT OF AUDITED FUND DESCRIPTION BALANCE REVENUES FUNDS EXPENDITURES FUNDS BALANCE GENERAL FUND A. UNASSIGNED - OPERATING $8,684,402 $80,860,726 ($3,089,553) $75,634,000 $2,137,175 $8,684,400 B. NONSPENDABLE FOR PREPAID ITEMS $475,495 $0 $311,728 $163,767 INVENTORY $83,825 $0 $5,704 $78,121 TOTAL NONSPENDABLE $559,320 $0 $0 $317,432 $0 $241,888 C. ASSIGNED FOR TURF FIELDS $750,000 $0 $650,000 $100,000 HEALTH & SAFETY CLOSEOUT $312,132 $0 $0 $312,132 BENEFIT AUDIT $493,650 $0 $493,650 $0 PLAYGROUNDS $55,210 $0 $55,210 $0 BUSES AND BUS SHELTER $27,500 $0 $0 $27,500 BUILDING PURCHASE $0 $500,000 $0 $500,000 Q COMP $29,778 $0 $29,778 $0 STRATEGIC VISIONING 2031 $0 $467,429 $0 $467,429 TRANSITION COSTS $373,540 $0 $373,540 $0 TOTAL ASSIGNED $2,041,810 $967,429 $0 $1,602,178 $0 $1,407,061 D. RESTRICTED FOR MEDICAL ASSISTANCE $413,164 $203,357 $100,846 $515,675 ACHIEVEMENT & INTEGRATION $0 $1,306,652 $35,342 $1,341,994 $0 GIFTED AND TALENTED $0 $96,545 $1,097,429 $1,193,974 $0 CAREER AND TECHNICAL PROGRAMS $0 $175,381 $725,553 $900,934 $0 SAFE SCHOOLS PROGRAMS $0 $409,555 $61,197 $470,752 $0 STAFF DEVELOPMENT $295,204 $919,348 $978,565 $235,987 LEARNING AND DEVELOPMENT $0 $1,469,151 $1,469,151 $0 BASIC SKILLS $0 $3,862,624 $1,170,032 $5,032,656 $0 OPERATING CAPITAL $2,173,244 $3,770,179 $5,220,467 $722,956 LONG-TERM FACILITIES MAINT (LTFM) $0 $1,106,989 $1,106,989 $0 CAPITAL PROJECT LEVY $0 $1,476,246 $1,476,246 $0 HEALTH & SAFETY ($143,420) ($167,669) $0 ($311,089) TOTAL RESTRICTED $2,738,192 $14,628,358 $3,089,553 $19,292,574 $0 $1,163,529 BUDGET $96,172,312 $0 $99,805,711 $0 $10,390,325 TOTAL GENERAL FUND $14,023,724 $96,456,513 $0 $96,846,184 $2,137,175 $11,496,878 DIFFERENCE $284,201 $0 ($822,352) $1,106,553 % VARIANCE 0.30% -0.82% (4) of 201

18 FINANCIAL RESULTS (CONTINUED) Fund Balances (Continued) AUDITED FUND BALANCES THROUGH JUNE 30, /30/ TRANSFERS TRANSFERS 6/30/2018 AUDITED AUDITED INTO AUDITED OUT OF AUDITED FUND DESCRIPTION BALANCE REVENUES FUNDS EXPENDITURES FUNDS BALANCE FOOD SERVICE NONSPENDABLE FOR PREPAID ITEMS $0 $1,180 $0 $0 $1,180 NONSPENDABLE FOR INVENTORY $65,866 $13,204 $0 $79,070 RESTRICTED FOR FOOD SERVICE PROGRAM $656,390 $4,176,131 $4,173,657 $658,864 BUDGET $4,255,949 $4,165,510 $812,695 TOTAL FOOD SERVICE $722,256 $4,190,515 $0 $4,173,657 $0 $739,114 DIFFERENCE ($65,434) $8,147 ($73,581) % VARIANCE -1.54% 0.20% COMMUNITY EDUCATION NONSPENDABLE FOR PREPAID ITEMS $4,047 $0 $4,047 $0 RESTRICTED FOR REGULAR COMMUNITY ED $1,670,241 $7,064,625 $250,000 $7,261,988 $1,722,878 RESTRICTED FOR EARLY CHILDHOOD FAMILY ED $223,074 $554,974 $483,374 $294,674 RESTRICTED FOR SCHOOL READINESS $49,995 $267,284 $311,502 $5,777 RESTRICTED FOR ADULT BASIC EDUCATION $37,790 $1,162,673 $1,147,925 $52,538 RESTRICTED FOR PRESCHOOL SCREENING $33,554 $17,414 $43,200 $7,768 RESTRICTED FOR NONPUBLIC PUPIL AID $108,413 $515,188 $490,655 $132,946 BUDGET $9,620,810 $250,000 $9,566,241 $2,431,683 TOTAL COMMUNITY EDUCATION $2,127,114 $9,582,158 $250,000 $9,742,691 $0 $2,216,581 DIFFERENCE ($38,652) $0 $176,450 ($215,102) % VARIANCE -0.40% 1.84% BUILDING CONSTRUCTION FUND NONSPENDABLE FOR PREPAID ITEMS $210,061 $18,432 $0 $228,493 RESTRICTED FOR LONG-TERM FAC MAINT (LTFM) $7,959,676 $138,983 $6,063,042 $2,035,617 RESTRICTED FOR TURF FIELDS LEASE $3,646,000 $0 $3,646,000 $0 RESTRICTED FOR REFERENDUM PROJECTS $0 $30,270,706 $10,692,680 $19,578,026 RESTRICTED FOR CAPITAL PROJECTS LEVY $2,345,197 $6,788,742 $5,968,212 $3,165,727 RESTRICTED FOR FY17 CAPITAL PROJECTS LEVY SCHOOL NUTRITION KITCHEN IMPROVEMENTS ($2,514,803) $425,053 $0 ($2,089,750) SAFETY AND SECURITY $0 $243,467 $243,467 $0 CONTINGENCY $20,412 $182,982 $224,785 ($21,391) SIGNAGE ($3,312) $25,000 $0 $21,688 SECURITY CAMERAS $3,621 $118,500 $115,766 $6,355 BUDGET $37,396,351 $33,648,124 $15,415,079 TOTAL BUILDING FUND $11,666,852 $38,211,865 $0 $26,953,952 $0 $22,924,765 DIFFERENCE $815,514 ($6,694,172) $7,509,686 % VARIANCE 2.18% % DEBT SERVICE RESTRICTED FOR OPEB DEBT SERVICE $582,698 $4,579,731 $4,414,420 $748,009 RESTRICTED FOR DEBT SERVICE $2,395,740 $10,302,745 $10,865,845 $1,832,640 BUDGET $15,185,857 $15,282,090 $2,882,205 TOTAL DEBT SERVICE $2,978,438 $14,882,476 $0 $15,280,265 $0 $2,580,649 DIFFERENCE ($303,381) ($1,825) ($301,556) % VARIANCE -2.00% -0.01% PROPRIETARY AND TRUST & AGENCY SCHOLARSHIP & OTHER TRUST FUNDS $51,441 $26,153 $26,932 $50,662 INTERNAL SERVICE FUND - OPEB REVOC TRUST $16,937,986 ($25,608) $468,560 $16,443,818 INTERNAL SERVICE FUND - SEVERANCE $12,987,978 $115,727 $1,887,175 $969,184 $14,021,696 INTERNAL SERVICE FUND - SELF-INSURANCE $4,529,035 $9,870,019 $10,243,410 $4,155,644 TOTAL OTHER FUNDS $34,506,440 $9,986,291 $1,887,175 $11,708,086 $0 $34,671,820 (5) of 201

19 FINANCIAL RESULTS (CONTINUED) General Fund Operations and Financial Position The following table presents five years of comparative operating results for the District s General Fund. Year Ended June Revenues $ 83,493,597 $ 89,944,743 $ 91,275,976 $ 93,928,751 $ 96,438,651 Expenditures 82,437,906 86,526,580 89,391,494 89,887,513 96,846,184 Excess of Revenues Over Expenditures 1,055,691 3,418,163 1,884,482 4,041,238 (407,533) Other Financing Sources (Uses): Sale of Equipment Proceeds 3, Sale of Real Property Proceeds 28, Insurance Recovery Proceeds - 1, ,862 Transfers (Out) (1,650,000) (2,273,113) (6,721,373) (3,361,612) (2,137,175) Total Other Financing Sources (Uses) (1,617,714) (2,272,000) (6,720,900) (3,361,612) (2,119,313) Excess (Deficiency) of Revenues and Other Financing Sources Over (Under) Expenditures and Other Financing Uses (562,023) 1,146,163 (4,836,418) 679,626 (2,526,846) Fund Balance: Beginning of Year 17,596,376 17,034,353 18,180,516 13,344,098 14,023,724 End of Year $ 17,034,353 $ 18,180,516 $ 13,344,098 $ 14,023,724 $ 11,496,878 Nonspendable Fund Balance $ 235,209 $ 227,406 $ 300,955 $ 559,320 $ 241,888 Restricted Fund Balance 387, ,198 1,263,154 2,738,192 1,163,529 Committed Fund Balance 6,041,951 5,735,000 2,428, Assigned Fund Balance 1,233,735 1,318, ,960 2,041,810 1,407,061 Unassigned Fund Balance 9,136,232 10,151,542 8,684,402 8,684,402 8,684,400 Total Fund Balance $ 17,034,353 $ 18,180,516 $ 13,344,098 $ 14,023,724 $ 11,496,878 Unassigned Fund Balance as a Percentage of Expenditures 11.08% 11.73% 9.72% 9.66% 8.97% The District s General Fund had an excess of revenues and other financing sources over expenditures and other financing uses of $2,526,846 for fiscal 2018, bringing total fund balance to $11,496,878 at June 30, Total fund balance includes $8,684,400 in unassigned fund balance which represents 8.97% of General Fund expenditures. (6) of 201

20 FINANCIAL RESULTS (CONTINUED) General Fund Operations and Financial Position (Continued) As a percentage of annual expenditures: Fund Balance as a Percent of Expenditures in the General Fund 30.00% 27.50% 25.00% 22.50% 20.00% 17.50% 15.00% 12.50% 10.00% 7.50% 5.00% 2.50% 0.00% -2.50% -5.00% -7.50% % Unassigned Fund Balance 12.36% 12.06% 14.54% 16.47% 10.66% 11.08% 11.73% 9.72% 9.66% 8.97% Total Fund Balance 13.61% 19.02% 26.74% 19.40% 21.74% 20.66% 21.01% 14.93% 15.60% 11.87% Per student served for aid. $2,000 $1,800 $1,600 $1,400 $1,200 $1,000 $800 $600 $400 $200 General Fund Unassigned Fund Balance Per ADM for Aid $ Fund Balance Per ADM $1,505 $1,466 $1,603 $1,833 $1,227 $1,310 $1,452 $1,254 $1,281 $1,283 (7) of 201

21 FINANCIAL RESULTS (CONTINUED) Students Served for Aid Total Residents 7, , , , , Open Enrollment Out (1,191.01) (1,256.61) (1,325.76) (1,421.15) (1,475.69) Charter Schools Out (340.89) (336.40) (349.95) (447.03) (511.47) Net Residents Served 5, , , , , Open Enrollment In 1, , , , , Net ADM Served 6, , , , , Net Pupil Units Served 8, , , , , Student Enrollment for Aid (in ADMs) 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1, Net Residents Served Open Enrollment In Beginning in fiscal 2013 the District had more resident students attend elsewhere, including charter schools, than non-residents opting to attend the District. (8) of 201

22 APPENDIX A FINANCIAL TRENDS OF YOUR DISTRICT Within this report there are a number of areas where condensed financial statement data has been presented. Student Enrollment Student Enrollment (in ADMs) 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1, Pre-K & KH Reg Kindergarten Elementary Secondary Pre-K & KH Reg Kindergarten Elementary 2, , , , , Secondary 3, , , , , Net ADM Served 6, , , , , Percent Change -0.93% 0.30% -0.96% -2.12% -0.13% As noted in the above chart, the District s student count for fiscal was 24 students (or 0.35%) higher than for the prior year. (9) of 201

23 APPENDIX A (CONTINUED) General Fund Revenue The following table and graph summarizes the District s General Fund revenue sources for the last five years. General Fund Revenue Sources $100,000,000 $90,000,000 $80,000,000 $70,000,000 $60,000,000 $50,000,000 $40,000,000 $30,000,000 $20,000,000 $10,000,000 $ Other Local Property Taxes Federal Sources State Sources The table below illustrates the fluctuation that occurs between the taxes and state aid categories based on legislative activity. The Legislature determines what portion of the general education funding formula will be paid by local taxpayers. In addition, when the tax shift percentage changes or the state provides property tax relief, this only impacts the mix between state aids and taxes and does not change total revenue. For example, in fiscal 2014, the Legislature repaid a total of approximately $8.2 million of the property tax shift buydown for the General Fund, which gives the appearance of a significant decrease in taxes for The decrease in taxes was not due to a levy decrease, but the repayment of state aid that had been withheld as part of the tax shift. For this and other reasons, school finance in Minnesota continues to be a very difficult subject to explain to the general public Local Property Taxes $ 11,441,543 $ 23,720,510 $ 23,687,302 $ 25,608,340 $ 27,058,222 State Sources 65,449,897 59,904,963 61,641,459 61,072,518 62,224,846 Federal Sources 2,600,309 2,464,613 2,355,868 2,775,987 2,935,205 Other 4,001,848 3,854,657 3,591,347 4,471,906 4,220,378 Total Revenues $ 83,493,597 $ 89,944,743 $ 91,275,976 $ 93,928,751 $ 96,438, Local Property Taxes 13.7% 26.4% 26.0% 27.3% 28.1% State Sources 78.4% 66.6% 67.5% 65.0% 64.5% Federal Sources 3.1% 2.7% 2.6% 3.0% 3.0% Other 4.8% 4.3% 3.9% 4.8% 4.4% Total Revenues 100.0% 100.0% 100.0% 100.0% 100.0% (10) of 201

24 APPENDIX A (CONTINUED) Expenditures Per Student Expenditures per student (average daily membership) are summarized in the following graph. General Fund Expenditures Per Student (Per ADM) $0 $5,000 $10,000 $15, General Fund - All Expenditures $11,824 $12,374 $12,907 $13, 260 $14, 305 General Fund Expenditures for fiscal 2018 were $96,846,184, which represents an increase of $6,958,671 or 7.74% from fiscal However, of the total increase nearly $3.0 million, representing 3.1% of the total 7.74%, related to capital expenditures and debt service costs. (11) of 201

25 APPENDIX A (CONTINUED) The following schedule shows total expenditures of the General Fund by program type: 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% General Fund % of Expenditures 10% 10% 10% 10% 10% 9% 9% 9% 10% 5% 9% 5% 5% 4% 4% 17% 17% 17% 16% 15% 49% 49% 49% 49% 48% 4% 4% 4% 5% 4% District & school admin District support services Regular instruction Vocational instruction Special education instruction Instructional support services Pupil support services Operations & Maintenance Fixed cost prog & debt service Capital Outlay District and School Admin $ 3,457,551 $ 3,800,920 $ 4,012,660 $ 4,138,586 $ 4,179,572 District Support Services 1,960,920 2,176,186 2,078,586 1,846,598 2,311,373 Regular Instruction 40,454,347 42,182,408 43,614,720 43,862,824 46,274,076 Vocational Instruction 972,508 1,082,007 1,405,443 1,314,391 1,279,959 Special Education Instruction 14,399,228 14,820,763 15,225,594 14,606,775 14,992,720 Instructional Support Services 3,969,721 4,181,973 4,140,524 3,599,280 3,604,288 Pupil Support Services 7,507,772 7,824,549 7,824,324 8,585,842 8,310,271 Operations and Maintenance 8,087,321 8,257,340 8,536,324 8,740,145 9,746,626 Capital Outlay 1,357, ,387 1,487,573 2,197,569 4,756,591 Fixed Cost Prog and Debt Service 271,000 1,221,047 1,065, ,503 1,390,708 Total Expenditures $ 82,437,906 $ 86,526,580 $ 89,391,494 $ 89,887,513 $ 96,846,184 The following chart summarizes District General Fund expenditures by object type Over (Under) Budget Actual Budget % Actual Actual Salaries $ 56,821,370 $ 56,003,918 $ (817,452) (1.4)% $ 55,499,835 $ 54,135,948 Employee Benefits 16,660,291 17,237, , ,985,381 15,749,242 Purchased Services 14,170,958 14,234,921 63, ,027,130 13,184,665 Supplies and Materials 3,376,854 2,902,686 (474,168) (14.0) 1,980,618 1,587,296 Capital Expenditures 5,211,240 4,756,591 (454,649) (8.7) 2,197,569 1,720,371 Other Expenditures 1,413,326 1,710, , ,196, ,058 Total Expenditures $ 97,654,039 $ 96,846,184 $ (807,855) (0.8)% $ 89,887,513 $ 86,526,580 The variances by object dimension are fairly well spread throughout the fund. Note that total expenditures were 0.8% lower than the final amended budget but over half of the variance relates to the timing of capital expenditures. (12) of 201

26 APPENDIX A (CONTINUED) Food Service Fund The following chart reflects the growth of the food service program over the past five years: Year Ended June 30, Revenues $ 4,052,578 $ 4,386,370 $ 4,583,975 $ 4,473,766 $ 4,190,265 Expenditures 4,004,146 4,357,110 4,437,815 4,193,995 4,173,657 Excess of Revenues Over Expenditures 48,432 29, , ,771 16,608 Other Financing Sources: Sale of Equipment Proceeds - 2,986 7,991 1, Excess of Revenues and Other Financing Sources Over Expenditures 48,432 32, , ,771 16,858 Fund Balance Beginning of Year 206, , , , ,256 End of Year $ 255,088 $ 287,334 $ 441,485 $ 722,256 $ 739,114 Total revenues and other financing sources exceeded total expenditures in the District s Food Service Fund by $16,858 for 2018, resulting in an ending fund balance of $739,114 at June 30, Total actual revenue was lower than the budgeted amount by $65,684. Total expenditures were higher than the budgeted amount by $8,147. The net impact of these variances and other financing sources resulted in the fund balance of the Food Service Fund being $73,581 lower than anticipated at yearend. The following chart reflects the number and type of meals served to students over the past five years: MEALS SERVED TO STUDENTS 800, , , , , , , , Reduced Meals 55,171 65,639 59,323 64,054 65,530 Free Meals 268, , , , ,598 Full-Price Meals 322, , , , ,736 Total meals served 645, , , , ,864 Full-Price Meals Free Meals Reduced Meals (13) of 201

27 APPENDIX A (CONTINUED) Community Service Fund The following table presents five years of comparative operating results for the District s Community Service Fund: Year Ended June 30, Revenues $ 9,951,061 $ 9,687,233 $ 9,783,477 $ 9,579,119 $ 9,582,158 Expenditures 10,508,900 9,839,863 10,051,559 9,415,074 9,742,691 Excess (Deficiency) of Revenues Over (Under) Expenditures (557,839) (152,630) (268,082) 164,045 (160,533) Other Financing Sources: Transfers In 450, , , , ,000 Excess (Deficiency) of Revenues and Other Financing Sources Over (Under) Expenditures and Other Financing Uses (107,839) 297, , ,045 89,467 Fund Balance: Beginning of Year 1,266,620 1,158,781 1,456,151 1,713,069 2,127,114 End of Year $ 1,158,781 $ 1,456,151 $ 1,713,069 $ 2,127,114 $ 2,216,581 Fund Balance: Nonspendable for Prepaid Items $ 995 $ 9,886 $ - $ 4,047 $ - Restricted for Community Ed 868,877 1,024,671 1,310,398 1,670,241 1,722,878 Restricted for ECFE 48, , , , ,674 Restricted for School Readiness 4,542 30,038 58,812 49,995 5,777 Restricted for Adult Basic Education 122, ,178 49,165 37,790 52,538 Restricted for Other Purposes 113, , , , ,714 Total Fund Balance $ 1,158,781 $ 1,456,151 $ 1,713,069 $ 2,127,114 $ 2,216,581 The District s Community Service Fund had revenues and other financing sources over expenditures of $89,467 for fiscal 2018, bringing the combined fund balance to $2,216,581 at June 30, The District has done a good job of exercising control over the costs of programs and the fees being charged in order to ensure that programs are self-sustaining. Total revenues of the District s Community Service Fund for 2018 were $211,348 higher than the budgeted amount while total expenditures were over budget by $176,450. The net impact of these variances along with other financing sources resulted in the fund balance of the Community Service Fund being $34,898 higher than anticipated at year-end. (14) of 201

28 APPENDIX B The table below reflects the comparative data available from the Minnesota Department of Education for all expenditures incurred for the benefit of pre-elementary through secondary education, except expendable trust fund activity. Expenditures Per Student (ADM) Served Statewide All Seven-county Enrollment ISD No. 270 Districts Metro Area > than 4,000 Hopkins District and School Admin and Support Services $ 1,049 $ 996 $ 955 $ 869 $ 876 $ 949 Regular Instruction (including Co- & Extra-Curricular) 5,499 5,887 5,726 6,223 6,416 6,766 Vocational Instruction (Career & Technical) Special Education Instruction 2,231 2,334 2,395 2,172 2,137 2,192 Instructional Support Services Pupil Support Services (Including Transportation) 1,076 1,165 1,133 1,116 1,256 1,215 Operations and Maintenance and Other ,370 1,424 1,628 Total Instruction, Support Services, and Operations/Maintenance 11,548 12,170 11,992 12,542 12,827 13,464 Food Service Community Service ,427 1,372 1,412 Capital Expenditure Debt Service 1,382 1,473 1,412 2,104 2,125 2,234 Total Pre-K - 12 Operating Expenditures Before OPEB $ 14,756 $ 15,493 $ 15,223 $ 16,927 $ 17,265 $ 18,428 Percent Change from Prior Year 3.89% 2.00% 6.74% Source of Statewide Data: School District Profiles published by the Dept of Education District and school admin and support services - all costs related to providing administration to the District (school board, superintendent, principals, assistant superintendents, directors of instructional areas, etc.) and all central office administration (business services, human resources, legal, data processing, other district-wide support activities) Regular instruction - includes all activities dealing directly with the teaching of pupils including co-curricular and extra-curricular activities and the interaction between teachers and pupils in the classroom (excluding exceptional, vocational and community education instruction) and includes activities of aides or assistants of any type (paraprofessionals, clerks, graders, etc.) who assist in the educational process, except spec ed aides Vocational instruction - consists of costs related to courses and activities which develop knowledge, skills, attitudes and behavioral characteristics for students seeking career exploration and employability Special education instruction - consists of activities providing learning experiences for pupils of any age, who because of certain atypical characteristics or conditions, have been identified as requiring, or who would benefit by, educational programs differentiated from those provided pupils in regular or vocational instruction Instructional support services - activities for assisting instructional staff with content and process of providing learning experiences for pupils in K-12 (curriculum, staff dev, educ media, libraries and media centers, etc.) Pupil support services - all services to pupils not classified as instructional (counseling and guidance, health services, psychological services, social work, pupil transportation and safety, etc.) Operations and maintenance - activities related to the operation, maintenance, repair and remodeling of all physical plant, facilities and grounds of the District Food service - all costs of the Food Service Fund Community service - all costs of the Community Service Fund Capital expenditures - all capital expenditures charged to operating funds Debt service - all Debt Service Fund costs (principal, interest and fiscal agent costs) (15) of 201

29 APPENDIX C LEGISLATIVE ACTIVITY What follows are some education-related highlights of recent legislative sessions as summarized from information made available by the Minnesota Department of Education, the Minnesota School Boards Association, and the Minnesota House of Representatives. General Education Formula Increase (2017 Legislative Session) The General Education Revenue formula allowance was increased by 2% (by $121 per pupil unit to $6,188) for fiscal year 2018 and by another 2% (by $124 per pupil unit to $6,312) for fiscal year 2019 and later. ECFE Funding (2017 Legislative Session) The ECFE Allowance remains linked to General Ed formula allowance. ECFE allowance was increased from $ to $ for fiscal year 2018 and $ for fiscal year 2019 and later due to formula allowance increase. School Readiness Plus (SR+) (2017 Legislative Session) A new four-year-old program was created to prepare children for kindergarten. Both school districts and charter schools are authorized to contract for the delivery of an SR+ program. The new School Readiness Program was created for fiscal years 2018 and 2019 only ($50 million for each year). All school district applicants meeting program requirements will be rank-ordered based on three criteria: free and reduced lunch concentration of students in kindergarten as of October 1 of the previous fiscal year; proximity of a three-star or four-star Parent Aware rated program; and whether the district has implemented a mixed delivery program. The cap on the Voluntary PreK program was changed from a limit on the state total aid entitlement to a limit on the number of participants. American Indian Tribal Contract Aid (2017 Legislative Session) The maximum aid per pupil unit was continued at the fiscal 2017 level of $3,230 for fiscal years 2018 and 2019 only, instead of allowing it to decrease to $1,500 beginning in fiscal 2018 as provided in current law. The decrease to $1,500 will now occur beginning in fiscal year 2020 unless a change is enacted before that. Lead in School Drinking Water (2017 Legislative Session) The Commissioner of Health and Education is required to develop a model plan to require school districts to test for lead in school drinking water. School boards may adopt the model plan or develop an alternative plan to test water in the schools for lead. The plan requires testing at least every five years, testing must begin by July 1, 2018, and be completed within five years. School districts are allowed to include the costs for lead testing and remediation in their long-term facilities maintenance plan. School districts must make lead test results available to the public and notify parents that this information is available. The remainder of items were the result of the 2018 legislative session. Pension Reform Bill One of the main outcomes of the 2018 legislative session that was passed and signed into law was a pension reform bill. Key provisions impacting the Teacher Retirement Association (TRA) and Public Employees Retirement Association Boards (PERA) were as follows: (16) of 201

30 APPENDIX C (CONTINUED) TRA Increases the TRA employer contribution by 1.25% over six years, beginning July 1, State funding to cover the employer increase through the pension adjustment mechanism. Increases the employee contributions by 0.25% in Reduces the investment assumed rate of return from 8.5% to 7.5%. Eliminates the automatic cost-of-living adjustment (COLA) triggers and reduces the COLA from 2% to 1% for five years and then increases the COLA 0.1% per year for five years until it reaches 1.5%. PERA Makes no changes in employee and employer contributions. Reduces the assumed rate of return from 8% to 7.5%. Replaces the current cost-of-living adjustment (COLA) 1% with increase to 2.5% when plan funding improves with an adjustment based on one-half of the consumer price index, with a maximum of 1.5% and a minimum of 1%. Leaves an estimated contribution sufficiency equal to roughly 1% of salary to buffer against future uncertainty. St. Paul Teacher Retirement Fund Association (SPTRFA) A comprehensive package similar to the TRA is included for the SPTRFA with direct appropriation. The bill reduces SPTRFA s liabilities by nearly $100 million and allows the fund to reach fully funded status over the 30-year amortization period. School Safety Grants This $25,000,000 is the only new money made available for school districts to increase school safety. This grant program will be administered by the Minnesota Department of Education (MDE). Criteria are as follows: maximum grant is $500,000; half of the money must go to school districts outside the 11-county metropolitan area; grants may be used to predesign, design, construct, furnish, and equip school facilities including renovating and expanding existing buildings and facilities; and grants will be awarded on a first-come/first-served basis. Uniform Municipal Contracting Law (Includes School Districts) For contracts to purchase or sell/dispose of goods/services entered into on or after August 1, 2018, the following estimated dollar thresholds have increased: Sealed bids or direct negotiations: If the amount of the contract is estimated to exceed $25,000 but not to exceed $175,000 (previously $100,000), the school district has the option of using either sealed bids or direct negotiation. Sealed bids: If the amount of the contract is estimated to exceed $175,000 (previously $100,000), sealed bids are required. (17) of 201

31 APPENDIX D ACCOUNTING UPDATE GASB Statement No. 75 Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions GASB Statement No. 75 addresses reporting by governments that provide OPEB to their employees and for governments that finance OPEB for employees of other governments. GASB 75 replaces the requirements of GASB Statement No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions, and requires governments to report a liability on the face of the financial statements for the OPEB that they provide: Governments that are responsible only for OPEB liabilities related to their own employees and that provide OPEB through a defined benefit OPEB plan administered through a trust that meets specified criteria will report a net OPEB liability the difference between the total OPEB liability and assets accumulated in the trust and restricted to making benefit payments. Governments that participate in a cost-sharing OPEB plan that is administered through a trust that meets the specified criteria will report a liability equal to their proportionate share of the collective OPEB liability for all entities participating in the cost-sharing plan. Governments that do not provide OPEB through a trust that meets specified criteria will report the total OPEB liability related to their employees. GASB 75 requires governments in all types of OPEB plans to present more extensive note disclosures and required supplementary information (RSI) about their OPEB liabilities. Among the new note disclosures is a description of the effect on the reported OPEB liability of using a discount rate and a healthcare cost trend rate that are one percentage point higher and one percentage point lower than assumed by the government. The new RSI includes a schedule showing the causes of increases and decreases in the OPEB liability and a schedule comparing a government s actual OPEB contributions to its contribution requirements. Some governments are legally responsible to make contributions directly to an OPEB plan or make benefit payments directly as OPEB comes due for employees of other governments. In certain circumstances called special funding situations GASB 75 requires these governments to recognize in their financial statements a share of the other government s net OPEB liability. The provisions in Statement 75 are effective for fiscal years beginning after June 15, GASB Statement No. 85 Omnibus 2017 GASB Statement No. 85 addresses practice issues identified during implementation and application of certain GASB statements related to a variety of topics, including blending component units, goodwill, fair value measurement and application, and postemployment benefits. The statement is effective for reporting periods beginning after June 15, GASB Statement No. 86 Certain Debt Extinguishment Issues GASB Statement No. 86 improves the consistency of reporting for certain in-substance debt defeasance resulting from cash and other monetary assets from existing resources (not from the issuance of refunding debt) that are placed in an irrevocable trust for the sole purpose of extinguishing debt. The statement is effective for reporting periods beginning after June 15, The remaining GASB standards have been issued but are not yet effective. (18) of 201

32 APPENDIX D (CONTINUED) GASB Statement No. 83 Certain Asset Retirement Obligations GASB Statement No. 83 provides accounting and financial reporting requirements for certain asset retirement obligations (AROs). An ARO is a legally enforceable liability associated with the retirement of a tangible capital asset. Examples include: decommissioning of nuclear reactors, removal and disposal of wind turbines in wind farms, dismantling and removal of sewage treatment plants, and removal and disposal of x-ray machines. The statement is effective for financial statements for periods beginning after June 15, GASB Statement No. 84 Fiduciary Activities GASB Statement No. 84 establishes criteria for identifying fiduciary activities for state and local governments, focusing on (1) whether the government is controlling the assets of the fiduciary activity, and (2) the beneficiaries with whom a fiduciary relationship exists. An activity meeting the criteria should be reported in a fiduciary fund in the basic financial statements. Governments with activities meeting the criteria should present a statement of fiduciary net position and a statement of changes in fiduciary net position. An exception is provided for a business-type activity that normally expects to hold custodial assets for three months or less. Different criteria are included for fiduciary component units and postemployment benefit arrangements. The main changes of this statement: 1. Governments may find additional activities that need to be reported as fiduciary that were not reported in the past. 2. Some activities treated as fiduciary may no longer be reported as fiduciary. 3. Agency funds will now be called custodial funds. 4. A statement of changes in fiduciary net position will be required for custodial funds. 5. Liabilities will be reported when an event has occurred that compels the government to disburse fiduciary resources. 6. Single purpose business-type activities will be required to report fiduciary activities unless the above exception applies. The statement is effective for reporting periods beginning after December 15, GASB Statement No. 87 Leases GASB Statement No. 87 requires recognition of certain lease assets and liabilities for leases that were previously classified as operating leases. Specifically, this statement: 1. Establishes a single model for lease accounting based on the foundational principle that leases are financings of the right to use an underlying asset. 2. Defines the lease term and clarifies when lessees and lessors should reassess the lease term due to lease modifications or terminations. 3. Defines and establishes recognition criteria for short-term leases. 4. Amends accounting and financial reporting requirements for contracts with multiple components, contract combinations, subleases, and leaseback transactions. The statement is effective for reporting periods beginning after December 15, Earlier application is encouraged. GASB Statement No. 88 Certain Disclosures Related to Debt, including Direct Borrowings and Direct Placements GASB Statement No. 88 improves the consistency in the information that is disclosed in the notes to government financial statements related to debt, including direct borrowings and direct placements. Requires disclosure of additional essential information about debt. The statement is effective for reporting periods beginning after June 15, (19) of 201

33 CliftonLarsonAllen LLP CLAconnect.com APPENDIX E FORMAL REQUIRED COMMUNICATIONS Board of Education Independent School District No. 270 Hopkins Public Schools Hopkins, Minnesota We have audited the financial statements of the governmental activities, each major fund and the aggregate remaining fund information of Hopkins Public Schools (the School) as of and for the year ended June 30, 2018, and have issued our report thereon dated November 14, We have previously communicated to you information about our responsibilities under auditing standards generally accepted in the United States of America, Government Auditing Standards, and Uniform Guidance, as well as certain information related to the planned scope and timing of our audit. Professional standards also require that we communicate to you the following information related to our audit. Significant audit findings Qualitative aspects of accounting practices Accounting policies Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by the School are described in Note 1 to the financial statements. As described in the Notes, during the fiscal year ended June 30, 2018, the District changed accounting policies related to its accounting for pensions by adopting Statement of Governmental Accounting Standards (GASB) Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other than Pensions. We noted no transactions entered into by the School during the year for which there is a lack of authoritative guidance or consensus. All significant transactions have been recognized in the financial statements in the proper period. (20) of 201

34 Board of Education Independent School District No. 270 Hopkins Public Schools Qualitative aspects of accounting practices (continued) Accounting estimates Accounting estimates are an integral part of the financial statements prepared by management and are based on management s knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly from those expected. The most sensitive estimates affecting the financial statements were: Due from Minnesota Department of Education Due from federal through the Minnesota Department of Education Estimated useful lives of depreciable capital assets Claims Incurred but Not Reported Severance Benefits Payable Other Postemployment Benefits Payable Estimated proportionate share of PERA's and TRA's pension items Management s estimate of the due from Minnesota Department of Education is based on amounts anticipated to be received from the state for various aid entitlements for fiscal The most significant of these is the aid portion of general education revenue. General education revenue and certain other revenues are computed by applying an allowance per student to the number of students served by the school. Student attendance is accumulated in a statewide database, Minnesota Automated Reporting Student System (MARSS). Because of the complexity of student accounting and because of certain enrollment options, student information is input by other school districts and the MARSS data for fiscal year 2018 is not finalized until well into the next fiscal year. MDE calculates amounts owed to the School for special education excess cost tuition billing and adds the amount to the School's special education aid. Because the tuition amounts are based on estimated information, final entitlements are not expected to be known until well into the following fiscal year. Management expects any differences between estimated and actual data will be insignificant. Management s estimate of due from federal through the Minnesota Department of Education is based on amounts anticipated to be received through the state for various federal aid entitlements for fiscal Many federal entitlements require that supporting financial reporting information be provided both in the Uniform Financial Accounting and Reporting Standards (UFARS) accounting system and also the SERVS and EDRS reporting systems. To the extent that these two separate systems are not in agreement and reported in a timely manner, the estimated aid entitlement may be adversely affected. Management expects any differences between estimated and actual data will be insignificant. Management s estimate of the useful lives for depreciable capital assets is based on guidance recommended by the Minnesota Department of Education and other sources. The useful life of a depreciable capital asset determines the amount of depreciation that will be recorded in any given reporting period as well as the amount of accumulated depreciation that is reported at the end of a reporting period. Management s estimate of Claims Incurred but Not Reported in its Self-Insurance Fund is based on data reported to the District by the plan administrator. (21) of 201

35 Board of Education Independent School District No. 270 Hopkins Public Schools Qualitative aspects of accounting practices (continued) Accounting estimates (continued) Management s estimate of Severance Benefits Payable is based on certain assumptions made by the District. As required by GASB Statement No. 16, the District has recorded a liability in long-term debt for accumulated sick leave convertible to early retirement pay for which it is probable the employees will be compensated. The vesting method used by the District to calculate this liability is based on assumptions involving the probability of employees becoming eligible to receive the benefits (vesting), and the potential use of accumulated sick leave prior to termination. Management s estimate of other postemployment benefits payable is based on an actuarially determined calculation, less actual payments incurred on behalf of retirees and an actuarially determined estimate of implicit rate subsidy, which is the estimated increased cost of premiums due to inclusion of retirees in the same plan as the District s active employees. Management s estimates of the District s proportionate share of PERA s and TRA s net pension liability and related deferred inflows and deferred outflows are based on guidance from GASB Statement No. 68 and each plan s respective allocation tables. Each plan s allocation tables allocate a portion of the plan s net pension liability and related deferred inflows and deferred outflows based on the District s prior fiscal year contributions as a percentage of the total contributions received for the related year by the plan. We reviewed and tested management s procedures and underlying supporting documentation in the areas discussed above and evaluated the key factors and assumptions used to develop the estimates noted above in determining that they are reasonable in relation to the financial statements taken as a whole. We concluded that the accounting estimates and management judgments appeared to consider all significant factors and resulted in appropriate accounting recognition. Financial statement disclosures Certain financial statement disclosures are particularly sensitive because of their significance to financial statement users. There were no particularly sensitive financial statement disclosures. The financial statement disclosures are neutral, consistent, and clear. Difficulties encountered in performing the audit We encountered no significant difficulties in dealing with management in performing and completing our audit. Uncorrected misstatements Professional standards require us to accumulate all misstatements identified during the audit, other than those that are clearly trivial, and communicate them to the appropriate level of management. Management has determined that the effects of uncorrected misstatements are immaterial, both individually and in the aggregate, to the financial statements taken as a whole. We noted two uncorrected misstatement related to the Community Service Fund for and adjustment to beginning accounts receivable and fund balance for receivables not booked in the amount of $31,903 and an adjustment to beginning unearned revenue and fund balance for unearned revenue not recorded in the previous year of $110,000. Corrected misstatements None of the misstatements detected as a result of audit procedures and corrected by management were material, either individually or in the aggregate, to the financial statements taken as a whole. We recognize that for management purposes, the District maintains its accounting records primarily using the cash basis during the year. There may be adjustments which we propose while assisting your finance staff in the closing of the year-end accounting records. These types of adjustments, if any, are not considered to be audit adjustments for purposes of this communication. (22) of 201

36 Board of Education Independent School District No. 270 Hopkins Public Schools Disagreements with management For purposes of this letter, a disagreement with management is a financial accounting, reporting, or auditing matter, whether or not resolved to our satisfaction, that could be significant to the financial statements or the auditors report. No such disagreements arose during our audit. Management representations We have requested certain representations from management that are included in the management representation letter dated November 14, Management consultations with other independent accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a second opinion on certain situations. If a consultation involves application of an accounting principle to the School s financial statements or a determination of the type of auditors opinion that may be expressed on those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with other accountants. Significant issues discussed with management prior to engagement We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior to engagement as the School s auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our engagement. Other information in documents containing audited financial statements With respect to the required supplementary information (RSI) accompanying the financial statements, we made certain inquiries of management about the methods of preparing the RSI, including whether the RSI has been measured and presented in accordance with prescribed guidelines, whether the methods of measurement and preparation have been changed from the prior period and the reasons for any such changes, and whether there were any significant assumptions or interpretations underlying the measurement or presentation of the RSI. We compared the RSI for consistency with management s responses to the foregoing inquiries, the basic financial statements, and other knowledge obtained during the audit of the basic financial statements. Because these limited procedures do not provide sufficient evidence, we did not express an opinion or provide any assurance on the RSI. With respect to the schedule of expenditures of federal awards (SEFA) accompanying the financial statements, on which we were engaged to report in relation to the financial statements as a whole, we made certain inquiries of management and evaluated the form, content, and methods of preparing the SEFA to determine that the SEFA complies with the requirements of the Uniform Guidance, the method of preparing it has not changed from the prior period or the reasons for such changes, and the SEFA is appropriate and complete in relation to our audit of the financial statements. We compared and reconciled the SEFA to the underlying accounting records used to prepare the financial statements or to the financial statements themselves. We have issued our report thereon dated November 14, (23) of 201

37 Board of Education Independent School District No. 270 Hopkins Public Schools Other information in documents containing audited financial statements (continued) With respect to the individual fund financial statements and the Uniform Financial Accounting and Reporting Standards Compliance Table (collectively, the supplementary information) accompanying the financial statements, on which we were engaged to report in relation to the financial statements as a whole, we made certain inquiries of management and evaluated the form, content, and methods of preparing the information to determine that the information complies with accounting principles generally accepted in the United States of America, the method of preparing it has not changed from the prior period or the reasons for such changes, and the information is appropriate and complete in relation to our audit of the financial statements. We compared and reconciled the supplementary information to the underlying accounting records used to prepare the financial statements or to the financial statements themselves. We have issued our report thereon dated November 14, The introductory and statistical sections accompanying the financial statements, which are the responsibility of management, were prepared for purposes of additional analysis and are not a required part of the financial statements. Such information was not subjected to the auditing procedures applied in the audit of the financial statements and, accordingly, we did not express an opinion or provide any assurance on it. Our auditors opinion, the audited financial statements, and the notes to financial statements should only be used in their entirety. Inclusion of the audited financial statements in a document you prepare, such as an annual report, should be done only with our prior approval and review of the document. * * * * * * This information is intended solely for the use of the Board of Education and management of the District, and is not intended to be, and should not be, used by anyone other than these specified parties. CliftonLarsonAllen LLP Minneapolis, Minnesota November 14, 2018 (24) of 201

38 COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2018 a E INDEPENDENT SCHOOL DISTRICT 270 Serving Eden Prairie, Edina, Golden Valley, Hopkins, Minnetonka, Plymouth, and St. Louis Park Educational Services Center 1001 Highway 7 Hopkins, Minnesota of 201

39 COMPREHENSIVE ANNUAL FINANCIAL REPORT OF HOPKINS, MINNESOTA YEAR ENDED JUNE 30, 2018 PREPARED BY THE FINANCE DEPARTMENT JOHN TOOP DIRECTOR OF BUSINESS SERVICES of 201

40 TABLE OF CONTENTS YEAR ENDED JUNE 30, 2018 INTRODUCTORY SECTION (UNAUDITED) TRANSMITTAL LETTER 1 SCHOOL BOARD AND ADMINISTRATION 7 ORGANIZATIONAL STRUCTURE 8 CERTIFICATE OF EXCELLENCE IN FINANCIAL REPORTING 9 FINANCIAL SECTION INDEPENDENT AUDITORS REPORT 10 REQUIRED SUPPLEMENTARY INFORMATION MANAGEMENT S DISCUSSION AND ANALYSIS 13 BASIC FINANCIAL STATEMENTS STATEMENT OF NET POSITION 26 STATEMENT OF ACTIVITIES 27 BALANCE SHEET GOVERNMENTAL FUNDS 28 RECONCILIATION OF THE BALANCE SHEET GOVERNMENTAL FUNDS TO THE STATEMENT OF NET POSITION 29 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE GOVERNMENTAL FUNDS 30 RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE GOVERNMENTAL FUNDS TO STATEMENT OF ACTIVITIES 31 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE BUDGET AND ACTUAL GENERAL FUND 32 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE BUDGET AND ACTUAL MAJOR FOOD SERVICE FUND 33 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE BUDGET AND ACTUAL MAJOR COMMUNITY SERVICE FUND 34 STATEMENT OF NET POSITION PROPRIETARY FUND INTERNAL SERVICE FUND 35 STATEMENT OF REVENUES, EXPENSES, AND CHANGE IN FUND NET POSITION PROPRIETARY FUND INTERNAL SERVICE FUND 36 STATEMENT OF CASH FLOWS PROPRIETARY FUND INTERNAL SERVICE FUND 37 STATEMENT OF FIDUCIARY NET POSITION 38 STATEMENT OF CHANGES IN FIDUCIARY NET POSITION 38 NOTES TO BASIC FINANCIAL STATEMENTS of 201

41 TABLE OF CONTENTS (CONTINUED) YEAR ENDED JUNE 30, 2018 REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF FUNDING PROGRESS FOR OTHER POSTEMPLOYMENT BENEFITS 82 TRA SCHEDULE OF THE DISTRICT S PROPORTIONATE SHARE OF THE NET PENSION LIABILITY 83 PERA SCHEDULE OF THE DISTRICT S PROPORTIONATE SHARE OF THE NET PENSION LIABILITY 84 TRA SCHEDULE OF THE DISTRICT CONTRIBUTIONS 85 PERA SCHEDULE OF THE DISTRICT CONTRIBUTIONS 86 SCHEDULE OF CHANGES IN THE DISTRICT S TOTAL PENSION LIABILITY AND RELATED RATIOS SUPPLEMENTAL PENSION PLAN 87 SUPPLEMENTARY INFORMATION GENERAL FUND BALANCE SHEET 88 SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE BUDGET AND ACTUAL 89 FOOD SERVICE SPECIAL REVENUE FUND BALANCE SHEET 92 SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCES BUDGET AND ACTUAL 93 COMMUNITY SERVICE SPECIAL REVENUE FUND BALANCE SHEET 94 SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCES BUDGET AND ACTUAL 95 CAPITAL PROJECTS FUND BALANCE SHEET 96 SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCES BUDGET AND ACTUAL 97 DEBT SERVICE FUND BALANCE SHEET 98 SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE BUDGET AND ACTUAL 99 INTERNAL SERVICE FUNDS STATEMENT OF NET POSITION 100 STATEMENT OF REVENUES, EXPENSES, AND CHANGE IN NET POSITION of 201

42 TABLE OF CONTENTS (CONTINUED) YEAR ENDED JUNE 30, 2018 STATEMENT OF CASH FLOWS 102 UNIFORM FINANCIAL ACCOUNTING AND REPORTING STANDARDS COMPLIANCE TABLE 103 STATISTICAL SECTION (UNAUDITED) NET POSITION BY COMPONENT 105 CHANGES IN NET POSITION 107 FUND BALANCES, GOVERNMENTAL FUNDS 109 CHANGES IN FUND BALANCES, GOVERNMENTAL FUNDS 111 ASSESSED AND ACTUAL VALUE OF TAXABLE PROPERTY 113 DIRECT AND OVERLAPPING PROPERTY TAX RATES 114 PRINCIPAL PROPERTY TAXPAYERS 116 PROPERTY TAX LEVIES AND COLLECTIONS 117 OUTSTANDING DEBT BY TYPE 119 COMPUTATION OF DIRECT AND OVERLAPPING BONDED DEBT 120 LEGAL DEBT MARGIN INFORMATION 121 DEMOGRAPHIC AND ECONOMIC STATISTICS 123 PRINCIPAL EMPLOYERS 124 FULL-TIME EQUIVALENT DISTRICT LICENSED EMPLOYEES BY TYPE 125 OPERATING STATISTICS 127 SCHOOL BUILDING INFORMATION 128 OPERATING INDICATORS BY FUNCTION STANDARDIZED TESTING AND GRADUATION RATES 130 SUMMARY OF MEALS SERVED 131 SCHEDULE OF INSURANCE COVERAGE of 201

43 INTRODUCTORY SECTION of 201

44 To: Citizens of the School District Board of Education Employees of the School District Date: November 14, 2018 INTRODUCTION The Comprehensive Annual Financial Report (CAFR) of Independent School District No. 270, Hopkins, Minnesota (the District) for the fiscal year ended June 30, 2018 is presented for your information and review. The CAFR is intended to fully disclose the financial position of the District and the results of operations for the fiscal year. The District administration accepts total responsibility for the accuracy, completeness, and fairness in presentation of the enclosed financial reports. Questions and comments are solicited and welcome. REPORT FORMAT This CAFR is presented in three main sections: introductory, financial, and statistical. In addition to the information contained in this letter, the introductory section includes the District s organizational chart, and a list of the District s principal officials. The financial section includes the independent auditors report, Management s Discussion and Analysis (MD&A), basic financial statements, notes to basic financial statements, and detailed combining and individual statements and schedules. The statistical section includes selected financial and general information presented on a multi-year comparative basis. Where possible, historical data is presented for a 10-year period. Accounting principles generally accepted in the United States of America require management to provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of an MD&A. This letter of transmittal is designed to complement the MD&A and should be read in conjunction with it. The MD&A of the District can be found immediately following the report of the independent auditors. DISTRICT ORGANIZATION The Hopkins School District officially organized in 1896 and serves the city of Hopkins, most of Minnetonka, about half of Golden Valley, and portions of Eden Prairie, Edina, Plymouth, and St. Louis Park. The District is guided by its mission that reflects the loftiest goal of the school district. It is a statement of our desired future, and our identity. Serving a community rich in culture and diversity, the Hopkins Public Schools develops in all students the skills, knowledge, and passion for lifelong learning. The District enrolled 6,770 students from a population of over 64,000 citizens residing in a 29.5 square mile area. During the District operated 12 buildings: 1 high school, 2 junior high schools, 6 elementary schools, 2 special services buildings and a bus depot. The District is organized by grade level with elementary schools serving students in kindergarten through Grade 6, junior highs serving Grades 7-9, and the high school serving Grades Serving the communities of: Eden Prairie. Edina. Golden Valley. Hopkins. Minnetonka. Plymouth. St. Louis Park An equal opportunity/affirmative action educator and employer. (1) of 201

45 Citizens of the School District Board of Education Employees of the School District REPORTING ENTITY Independent School District No. 270, also known as Hopkins Public Schools, is an instrumentality of the State of Minnesota established to function as an educational institution. The elected School Board is responsible for legislative and fiscal control of Hopkins Public Schools. A Superintendent is appointed by the Board and is responsible for administrative control of the District. The District s financial statements include all funds, departments, agencies, boards, commissions, and other component units for which the District is considered to be financially accountable. Component units are legally separate entities for which the District (primary government) is financially accountable, or for which the exclusion of the component unit would render the financial statements of the primary government misleading. The criteria used to determine if the primary government is financially accountable for a component unit included whether or not the primary government appoints the voting majority of the potential component unit s governing body, is able to impose its will on the potential component unit, is in a relationship of financial benefit or burden with the potential component unit, or is fiscally depended upon the potential component unit. Based on these criteria, there are no organizations considered to be component units of the District. DISTRICT FISCAL FRAMEWORK The District has been functioning under financial constraints over the past several years as a result of: Slightly declining enrollment; Insufficient increases in state funding; Inflationary pressures on key expenditure areas. The District has been proactively planning for conditions affecting school funding considering: It is facing a continuing, short and mid-term enrollment decline; Present and future outlook for revenue increases is pessimistic; District s cost structure is tied roughly 80% to people, with building operating costs coming next. The District has a Citizen s Financial Advisory Committee (CFAC). The purpose of the CFAC committee is to provide advice, direction, and support to the Hopkins School Board and senior administration in evaluating possible future economic conditions the district may face, developing future budget assumptions, and providing insights, when requested, as to the overall fiscal condition of the district. The committee will review the District s financial planning model and make recommendations to the School Board. This committee is accountable to the Hopkins School Board. (2) of 201

46 Citizens of the School District Board of Education Employees of the School District FINANCIAL STATEMENTS The financial statements contained in this report disclose the financial position of the District as of June 30, 2018, and the financial operations for the fiscal year then ended. The District s financial records and reports are maintained and prepared on a modified or full accrual basis of accounting in accordance with the Uniform Financial Accounting and Reporting System for Minnesota School Districts as well as the standards of the Governmental Accounting Standards Board (GASB) and the American Institute of Certified Public Accountants. These records are audited annually by an independent certified public accountant as required by Minnesota law. The accounting firm of CliftonLarsonAllen LLP performed the audit for the fiscal year. Their report is included in the financial section of this report. The auditor has given an unmodified opinion on the District s financial statements. An unmodified opinion means that, in the judgment of the auditor, the financial statements present fairly, in all material respects, the financial position of the District and the results of its operations for the year then ended, in conformity with accounting principles generally accepted in the United States of America. FEDERAL SINGLE AUDIT AND STATE COMPLIANCE AUDIT The independent audit of the financial statements of the District is part of a broader, federally mandated Single Audit designed to meet the special needs of federal grantor agencies. The standards governing Single Audit engagements require the independent auditor to report not only on the fair presentation of the financial statements, but also on the audited district s internal controls and compliance with legal requirements, with special emphasis on internal controls and legal requirements involving the administration of federal awards. The District is also required to undergo an annual Minnesota State Legal Compliance Audit under Minnesota Statute These reports are available in a separate document. ACCOUNTING AND BUDGETING A major thrust of the District s accounting system is to provide adequate internal accounting controls. These controls are designed to provide reasonable, but not absolute, assurance regarding: (1) the safeguarding of assets against loss from unauthorized use or disposition, and (2) the reliability of financial records for preparing financial statements and maintaining accountability for assets. The concept of reasonable assurance recognizes that the cost of internal controls should not exceed the benefits likely to be derived, and that the evaluation of the cost and benefits requires estimates and judgments by management. All internal control evaluations occur within the above framework. We believe that the District s internal accounting controls adequately safeguard assets and provide reasonable assurance for proper recording of financial transactions. (3) of 201

47 Citizens of the School District Board of Education Employees of the School District The legal level of budgetary control is demonstrated through an annual budget adopted by the School Board for all funds as required by state statutes and School Board policy. The budget process starts with the Citizens' Financial Advisory Committee (comprised of five members of the public) suggesting potential assumptions to be used to develop the budget. The CFAC report is submitted to the Board and the School Board then determines whether to use the CFAC assumptions presented. The School Board directs administration to develop the budget based on the agreed upon parameters. The administration then presents the budget to the School Board for preliminary approval in early spring and final approval in May. The adopted budget serves as the authorizing document for all expenditures, although the School Board approves all checks issued on a monthly basis. The superintendent and director of business services are authorized to make financial commitments within budgetary guidelines up to $50,000. Additional expenditure controls are maintained by the Business Office in accordance with state statutes, i.e., the District cannot incur a negative unassigned balance in the General Fund in excess of 2.5% of the preceding year s expenditures. The budget is published annually in the District s legal newspaper to inform residents of the District s financial position and operating plan for the fiscal year. The School Board receives a monthly report showing the budget to actual balances for revenues and expenditures of the current year and prior year. Program managers receive monthly budget reports via , which indicate the approved budget on a line item basis; the year-to-date expenditures assigned to those line items; and the percent expended to date. Monthly monitoring of revenues and expenditures by the School Board as well as ongoing monitoring by program managers helps to ensure budget integrity and provides an opportunity to detect material budget variances before the end of the fiscal year. The budget is adopted by the School Board in the spring of each year for the following fiscal year beginning July 1. In the winter the budget is revised based upon enrollment changes, effects of negotiated employee contracts, or other new information impacting revenues or expenditures. The revised budget is presented to the School Board for approval. To accurately track and report financial activities with a focus on site-based accounting, approximately 17,000 accounts have been defined in the District s chart of accounts. FINANCIAL PROSPECTS FOR FUTURE YEARS The District s finances are largely dependent on student enrollment. Revenue increases to the per pupil formula allowance are then offset by the fewer numbers of students attending, resulting in even smaller actual gross revenue increases. Hopkins has been experiencing declining enrollment from FY09 to FY18 to the magnitude of 656 students or about a 8.8% decrease over this 10-year period. State funding on average is equal to about $6,000 per student. When enrollment declines, revenue is reduced by the loss of students from the previous year times $6,000 per student. The Hopkins School Board has focused on rebuilding the unassigned fund balance of the General Fund from its FY05 low point of -$4.2 million, or -5.34% to its current level at June 30, 2018 of $8.7 million, or 8.8% of its General Fund expenditures. This is a turnaround of $12.9 million, or about 14.14%, reflecting tough decisions that the School Board and administration have had to make to bring the District back to fiscal health. (4) of 201

48 Citizens of the School District Board of Education Employees of the School District DISTRICT FACILITIES District educational facilities consist of 10 educational buildings originally constructed from 1948 to Each building has had numerous additions over the years. In spite of the age of the facilities, all school buildings are maintained in a state of good repair, with building components modernized and updated on a systematic basis through the district's long term maintenance plan. Because of this continual improvement, all educational facilities should be able to effectively serve the district for a minimum of additional years. The total district square footage, including administrative buildings, is 1,896,495. ECONOMIC FACTORS The District is located in western Hennepin County, which is part of the seven-county metro area of Minneapolis/St. Paul. Residents are typically employed in professional vocations within the metropolitan area. The taxable market value of property within the District continued to grow until Previous growth was due to new construction and valuation increases for existing property. Market values have rebounded from $9,721,507,300 in 2010 to $10,518,327,358 in While the District is essentially fully developed residentially, commercial development and redevelopment is clearly evident throughout the community. MAJOR INITIATIVES XinXing Academy, Hopkins Public Schools Chinese Immersion program, opened at Eisenhower Elementary School in XinXing attracts students from all parts of the Hopkins School District, as well as from other school districts in the Twin Cities area through open enrollment. XinXing currently has two sections each of full-day kindergarten and grades XinXing has continued to add a grade level every year, and will be fully implemented through the 12 th grade in XinXing classrooms have been designated Confucius Classrooms by the Confucius Institute at the University of Minnesota. As part of this designation, XinXing has received grants for the past six years to support Chinese cultural experiences such as dance, art, and Gong Fu. Hopkins will embark on a partnership with the Science Museum of Minnesota and Cargill to bring computational thinking to our elementary schools. This is similar to the support Hopkins received the past five years in the area of engineering through the Engineering is Elementary program that brought rigorous STEM work into our elementary classrooms. Hopkins Juntos secondary Spanish Immersion program now serves students in grades The students participating in the program are a combination of Heritage speakers of Spanish and students that have completed an elementary Spanish immersion program. (5) of 201

49 Citizens of the School District Board of Education Employees of the School District Both Hopkins North and Hopkins West Junior High are International Baccalaureate World Schools through the implementation of the Middle Years Programme. The schools have adjusted course offerings in the past 2 years to better align with the IBMYP. Elementary FLES (Foreign Language in the Elementary Schools) is now articulated through grade six, and administrators are planning for the transition of this program into the traditional world language offerings of the junior high. Beginning this school year, the District has distributed additional technology and student devices at the elementary level as part of the Elementary Ecosystem. This includes 1:1 ipads to elementary grade levels and a cart of Chromebooks for each site. INDEPENDENT AUDIT AND CERTIFICATE OF EXCELLENCE State statutes require an annual audit by independent certified public accountants. The accounting firm of CliftonLarsonAllen LLP was selected by the District Board to conduct the annual audit. This report has been prepared following the guidelines provided by the Association of School Business Officials International (ASBO) for their Certificate of Excellence in Financial Reporting Program. In 2017, the District received recognition from this program by receiving the Certificate of Excellence. Continuing to achieve recognition is a goal of the District s Business Office and provides a clear indication of the District s high standards for financial reporting. The District intends to submit this Comprehensive Annual Financial Report to the ASBO Certificate Program for consideration. ACKNOWLEDGMENTS We acknowledge the efforts of the entire Business Office staff under the leadership of John Toop in providing complete and accurate data for this Comprehensive Annual Financial Report. Sincerely, John Toop Director of Business Services Dr. Rhoda Mhiripiri-Reed Superintendent Suzanne Johnson Controller (6) of 201

50 SCHOOL BOARD AND ADMINISTRATION JUNE 30, 2018 SCHOOL BOARD NAME TERM ON BOARD EXPIRES BOARD POSITION Wendy Donovan Kris Newcomer January 1, 2020 January 1, 2020 Chair Vice Chair Steven Adams January 1, 2020 Treasurer Fartun Ahmed January 1, 2022 Director Jen Bouchard January 1, 2022 Director Dave Larson Chris LaTondresse January 1, 2020 January 1, 2022 Director Director ADMINISTRATION Dr. Rhoda Mhiripiri-Reed John Toop Superintendent Director of Business Services District Offices: Independent School District No. 270 Hopkins Public Schools 1001 Highway 7 Hopkins, MN (952) (7) of 201

51 ORGANIZATIONAL STRUCTURE JUNE 30, 2018 Board of Education Superintendent of Schools Administrative Services Director Business Services Director Community Education Director Special Services Director Teaching, Learning, and Assessment Director Technology, Media, and Information Systems Director Principals Buildings & Grounds Family Partnerships & Volunteer Coordinator Special Education Curriculum Services Team Technical Services Manager Athletics/Activities Fiscal Services Adult Programs Coordinator Title I Assessment, Evaluation & Research Media Coordinator Integration School Nutrition Early Childhood Coordinator Support Services Staff Development & Mentorship District Audio Visual Administrator ALC Transportation Adult Options in Education Coordinator Tuition Programs Challenge Campus Support Electronic Communications, Website Personnel Services Marketing and Communications Coordinator Non-Public Services ELL Secretary - Purshasing & Census Labor Relations Facilities Coordinator 504 Plans MARSS and Enrollment Employee Benefits HCC One Voice Coordinator Interagency Collaborations/ Community Partnerships Education Technology Integration EEOC Youth Programs Coordinator (8) of 201

52 CERTIFICATE OF EXCELLENCE IN FINANCIAL REPORTING JUNE 30, 2018 The Certificate of Excellence in Financial Reporting is presented to Hopkins Public Schools ISD 270 for its Comprehensive Annual Financial Report (CAFR) for the Fiscal Year Ended June 30, The CAFR has been reviewed and met or exceeded ASBO International s Certificate of Excellence standards. Charles E. Peterson, Jr., SFO, RSBA, MBA President John D. Musso, CAE Executive Director (9) of 201