DOUGLAS COUNTY SCHOOL DISTRICT NO. 10 ELKHORN PUBLIC SCHOOLS ELKHORN, NEBRASKA FINANCIAL STATEMENTS AUGUST 31, 2013

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1 DOUGLAS COUNTY SCHOOL DISTRICT NO. 10 ELKHORN, NEBRASKA FINANCIAL STATEMENTS AUGUST 31, 2013

2 DOUGLAS COUNTY SCHOOL DISTRICT NO. 10 TABLE OF CONTENTS Page INDEPENDENT AUDITORS REPORT 1-3 MANAGEMENT S DISCUSSION AND ANALYSIS 4-12 BASIC FINANCIAL STATEMENTS CASH BASIS: Government-Wide Financial Statements: Statement of Net Position 13 Statement of Activities Fund Financial Statements: Statement of Assets, Liabilities, and Fund Balances Governmental Funds 16 Statement of Receipts, Disbursements, and Changes in Fund Balances Governmental Funds 17 Statement of Net Position Proprietary Fund 18 Statement of Receipts, Disbursements, and Changes in Fund Net Position Proprietary Fund 19 Statement of Net Position Fiduciary Funds 20 Statement of Changes in Net Position Fiduciary Funds 21 Notes to the Basic Financial Statements Cash Basis SUPPLEMENTAL SCHEDULE: Combined Schedule of Cash Receipts, Disbursements and Fund Balances 31 REQUIRED SUPPLEMENTARY INFORMATION: Individual Fund Schedules of Cash Receipts, Disbursements and Fund Balance Budget and Actual SINGLE AUDIT INFORMATION: Supplementary Schedule of Expenditures of Federal Awards 46 Notes to Supplementary Schedule of Expenditures of Federal Awards 47 Independent Auditors Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance Government Auditing Standards Independent Auditors Report on Compliance for Each Major Program and on Internal Control Over Compliance Required by OMB Circular A Schedule of Findings and Questioned Costs 52

3 R&P RITTERBUSH & PIOTROWSKI, L.L.P. Certified Public Accountants Old Mill Road, Suite 1 Omaha, Nebraska Telephone Fax INDEPENDENT AUDITORS REPORT The Board of Education Douglas County School District No. 10 Elkhorn Public Schools Elkhorn, Nebraska We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of Douglas County School District No. 10, Elkhorn Public Schools (the School District ), as of and for the year ended August 31, 2013, and the related notes to the financial statements, which collectively comprise the School District s basic financial statements as listed in the table of contents. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with the cash basis of accounting as described in Note A. This includes determining that the cash basis of accounting is an acceptable basis for the preparation of the financial statements in the circumstances. Management is also responsible for the design, implementation, and maintenance of internal control relevant to the presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. 1

4 We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the respective cash balances of the governmental activities, the business type activities, each major fund and the aggregate remaining fund information of the School District as of August 31, 2013, and the respective receipts and disbursements arising from cash transactions for the year then ended in accordance with the basis of accounting described in Note A. Basis of Accounting As described in Note A, these financial statements were prepared on the basis of cash receipts and disbursements, which is a basis of accounting other than U.S. generally accepted accounting principles. Our opinion is not modified with respect to this matter. Other Matters Required Supplementary information Accounting principles generally accepted in the United States of America require that the management s discussion and analysis on pages 4 through 12 and budgetary comparison information on pages 32 through 45 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with U.S. generally accepted auditing standards, which consists of inquiries of management about methods of preparing the information and comparing the information for consistency with management s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other information Our audit was conducted for purpose of forming opinions on the financial statements that collectively comprise the School District s financial statements as a whole. The combining fund financial statement on page 31 is presented for purposes of additional analysis and is not a required part of the financial statements. The accompanying schedule of expenditures of federal awards on page 46 is presented for purposes of additional analysis as required by U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, and is also not a required part of the financial statements. The combining fund financial statement and the schedule of expenditures of federal awards are the responsibility of management and were derived from and related directly to the underlying accounting and other records used to prepare the financial statements. 2

5 The information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with U.S. generally accepted auditing standards. In our opinion, the information is fairly stated in all material respects in relation to the financial statements taken as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated November 5, 2013 on our consideration of the School District s internal control over financial reporting and our tests of its compliance with certain provisions of law, regulations, contracts, grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the School District s internal control over financial reporting and compliance. Omaha, Nebraska November 5,

6 MANAGEMENT S DISCUSSION AND ANALYSIS This section of the annual report presents the District s discussion and analysis of the financial performance during the fiscal year ending August 31, OVERVIEW OF THE FINANCIAL STATEMENTS This annual report is presented in a format consistent with the requirements of GASB (Governmental Accounting Standards Board) Statement No. 34 Basic Financial Statements - and Management s Discussion and Analysis - for State and Local Governments. This annual report consists of four parts: (1) Management s Discussion and Analysis (this section); (2) the Basic Financial Statements Cash Basis; (3) Supplemental Schedules; and (4) information on the Single Audit (Federal Funds). The accompanying basic financial statements have been prepared on the cash basis of accounting. Under the cash basis of accounting, revenues are recognized when cash is received and expenditures are recognized when cash is disbursed. Accordingly, the financial statements and supplemental schedules are not intended to present financial position and results of operations in conformity with accounting principles generally accepted in the United States of America. The use of the cash basis of accounting is permissible under Title 92, Nebraska Administrative Code, Chapter 2 Uniform System of Accounting for Nebraska Public School Districts. The government-wide financial statements report information on all of the nonfiduciary activities of the primary government. For the most part, the effect of interfund activity has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental receipts, are reported separately for business-type activities, which rely to a large extent on fees and charges. The statement of activities demonstrates the degree to which the direct disbursements of a given function or segment are offset by program receipts. Direct disbursements are those that are clearly identifiable with a specific function or segment. Program receipts include: (1) charges to individuals who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment; and (2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general receipts. Separate financial statements are provided for governmental funds, proprietary funds and fiduciary funds, even though fiduciary funds are excluded from the government-wide financial statements. Major individual funds are reported as separate columns in the fund financial statements. Each of the funds maintained by the District is authorized through the Nebraska State Statutes or Department of Education accounting guidance for school districts. Proprietary funds are used to account for the School District s business-type activities. Proprietary funds distinguish operating receipts and disbursements from nonoperating items. Operating receipts and disbursements generally result from providing services and producing and delivering goods in connection with a proprietary fund s principal ongoing operations. All receipts and disbursements not meeting this definition are reported as nonoperating receipts and disbursements. The School Lunch Fund is considered a proprietary fund. 4

7 Fiduciary funds report assets held in a trustee or agency capacity for others and therefore cannot be used to support the School District s own programs. The Activities Funds and Student Fee Fund are fiduciary funds. The financial statements also include notes that explain some of the information in the financial statements and provide more detailed data about the financial statements and School District commitments, contingencies, and long-term debt obligations that are not reported in the cash basis financial statements. The statements are followed by a section of Required Supplementary Information that further explains and supports the information in the financial statements. FINANCIAL HIGHLIGHTS v As the fiscal year came to a close, the District opened its eighth and ninth elementary schools in August v The General Fund budget increased by $3.3 million (5.96%) in regards to what the District truly anticipated for expenditures. However, due to a change in the statutes regarding unused budget authority the General Fund budget document submitted to the State increased by $5 million (8.57%). The increase in actual anticipated expenditures was largely due to continued student growth and staffing and operational costs that would be needed to finalize preparations for the opening of two new elementary schools in the fall of v The voters approved $ million in bonds in November, The funds were for the purchase of land, construction of a new middle school (the District s 4 th ) and two elementary schools (the District s 8 th and 9 th ), renovations to existing school facilities and providing furniture, equipment and apparatus for such facilities. The first issue of $15 million was issued in fiscal year The second issue of $20 million was issued during the current fiscal year. As the fiscal year was ending, the District was preparing for the third and final issue of bonds in the amount of $ million. v The District s valuation continued to grow at a lower than historic rate. The valuation increased by 4.51%. Prior to , the most recent years actual valuation increases have been 2.89% ( to ) and 4.34% ( to ). Although these rates are lower than what the District had experienced historically, they have been among the highest valuation growth rates for the 11 school districts within the Douglas and Sarpy County Learning Community. v As the fiscal year came to an end, the District was preparing to refinance $3.215 million of bonds issued in The refinancing was being done to take advantage of lower interest rates as well as the reduction in the overall principal amount of the outstanding debt. The bonds that were refinanced carried interest rates ranging from 3 to 4.5%. The portion of the new bonds that were issued to refund these bonds carries interest rates of 3%. v The District began with 400 (6.6%) more students. The following chart reflects prekindergarten through Grade 12 official enrollment since on file with the Nebraska Department of Education. 5

8 FINANCIAL ANALYSIS OF THE DISTRICT AS A WHOLE The following table illustrates the combined net position and changes for the District s government and business-type activities. (General, Building, Bond, Depreciation and School Lunch Funds) Statement of District's Net Position Percentage Change Assets Current Assets $ 37,810,305 $ 40,507, % Total Assets $ 37,810,305 $ 40,507, % Liabilities Payroll Taxes & Withholding Items $ 99,719 $ 102, % Net Position Restricted $ 7,988,466 $ 8,047, % Unrestricted $ 29,722,120 $ 32,357, % Total Net Position $ 37,710,586 $ 40,405, % Total Net Position & Liabilities $ 37,810,305 $ 40,507, % Change in the District's Net Position Percentage Change Receipts Program Receipts Charges for Services $ 2,061,158 $ 2,276, % Operating Grants & Contributions $ 5,827,260 $ 4,713, % General Receipts Taxes (property & other types) $ 41,196,629 $ 39,675, % State Receipts $ 20,955,109 $ 19,624, % Bond Proceeds $ 20,000,000 $ 88,390, % Other (Fines & Licenses, Interest, etc) $ 2,501,654 $ 8,796, % Total Receipts $ 92,541,810 $ 163,477, % 6

9 Disbursements Instruction $ 36,767,810 $ 34,503,760 $ 2,264, % Support Services, Pupils $ 1,843,265 $ 1,795,183 $ 48, % Support Services, Pupil Safety $ 156,809 $ 156,201 $ % Support Services, Staff $ 3,052,314 $ 3,029,643 $ 22, % Support Services, School Improvement $ 19,521 $ 36,132 $ (16,611) -46.0% Support Services, Implementation of Standards $ 50,142 $ 29,452 $ 20, % Support Services, Business $ 25,972,393 $ 14,252,586 $ 11,719, % Support Services, Maint & Operation of Business $ 5,791,530 $ 5,665,477 $ 126, % Pupil Transportation $ 1,004,706 $ 978,598 $ 26, % General Administration $ 873,148 $ 904,708 $ (31,560) -3.5% Office of Principal $ 2,626,312 $ 2,568,824 $ 57, % State Categorical Programs $ 39,933 $ 38,782 $ 1, % Federal Programs $ 1,587,941 $ 1,282,697 $ 305, % Debt Service $ 12,314,932 $ 91,146,856 $ 78,831,924) -86.5% Summer School $ 73,906 $ 98,774 $ (24,868) -25.2% Other $ 263,725 $ 1,077,627 $ (813,902) -75.5% School Lunch & Milk $ 2,641,693 $ 2,555,434 $ 86, % Total Disbursements $ 95,080,080 $ 160,120, % Transfers Out $ (156,388) $ (146,987) 6.4% Change in Net Position $ (2,694,657) $ 3,209, % Beginning Net Position $ 40,405,243 $ 37,195, % Ending Net Position $ 37,710,586 $ 40,405, % The District s combined net position for these funds as of August 31, 2013 was $37,710,586. This was a decrease ($2.7 million or 6.7%) from the prior year. The net position increased in the General and Depreciation Funds and decreased in the Building, Bond and School Lunch Funds. The largest reduction was in the Building Fund. In November of 2011 the voters approved additional construction and renovation via a $ million bond issue. The District issued $15 million of bonds in early calendar year 2012 and another $20 million in November Approximately $5.5 million of the initial $15 million was still on hand on August 31, 2012 as compared with only approximately $1.95 million of the $20 million issue during on hand at August 31, Although the Bond Fund balance was slightly lower (approximately $60,000) the Bond Fund balance remains adequate to address the payment of bond expenditures needed to support the continued student growth and resulting construction needs within the District. The Lunch Fund balance from year to year continues to be impacted by the timing of when invoices are received from the District s food service provider. In September 2012 the District paid the advance (to cover payroll and food supplies) for the year food service program. In August 2013 the District paid the advance for the food service program. Additionally, the number of meals sold in was lower than the year before as a result of changes in the federal nutrition guidelines for school meals. During the early part of the school year the impact of these federal changes was making news across the nation as schools were dealing with student and parent reaction to new requirements. The impact of the reduced meal sales can also be seen in the reduced revenue under Charges for Services in the above chart. The increase in the General Fund balance was a combination of actual receipts being higher than anticipated and actual expenditures being lower than budgeted. General Fund money may be set aside into a Depreciation Fund to assist with future capital outlay purchases. During the Depreciation Fund was used to replace cooling towers and air conditioning at two buildings. During funds were used to upgrade the heating/cooling system at one of the elementary schools and provide air conditioning in a gym. Additional funds were moved into the Depreciation Fund during both years to assist with future capital needs. As a result, the Depreciation Fund balance was higher on August 31,

10 Within the disbursement categories, many areas had increases in expenditures from the prior year. Many of these, such as Instruction; Support Services, Pupil; Support Services, Staff; Support Services, Maintenance & Operation of Business, Pupil Transportation and Office of the Principal reflect the additional expenditures needed to address the educational needs of a growing student body. The increase in Support Services, Implementation of Standards goes hand in hand with the reduction in Support Services, School Improvement. These two areas tend to have very similar types of expenses. As Nebraska refines and updates statewide standards many of the resulting changes that the District makes could fall under either of these two categories. The increase in Support Services, Business is primarily due to construction expenditures. This category reflects General Fund expenditures for business activities such as payroll, accounts payable, human resources, etc. In addition, this category also reflects the construction expenditures that are recorded in the District s Building Fund. Virtually all of the increase was due to the difference in construction expenditures in the two years. In August of 2012 the District learned it would receive a substantial increase in the amount of federal Title I grant funds. The Title I allocation was based on 2010 census data vs census data that had been used for prior allocations. The new census data reflected the growth Elkhorn has experienced during recent years especially in relation to other districts in Nebraska. As a result, the District spent about $215,000 more under Federal Programs for Title I in Additionally, based on the increase in funds to be received, the District did not allocate the Carl Perkins Vocational and Technical Education federal grant to the consortium operated by ESU #3 during as it had done the prior year. Expenditures for Debt Service decreased in In $77.21 million of debt was refunded to take advantage of lower interest rates. In no debt service was refunded. Both years, of course, also reflect payment of principal and interest on existing debt. The issuance of bonds, both new bonds and refunding bonds, also impacts the Other expenditure category. Since no refunding bonds were issued in there were no associated issuance expenses. The only bond issuance expenses incurred in dealt with the $20 million of new bonds issued for the construction of buildings. The area of Summer School also shows lower expenditures in In a new series of reading kits were purchased. Since they are like a textbook adoption that can be used for several years a similar expense was not incurred in Governmental Activities Overall, the fund balances for the four governmental funds (General, Depreciation, Building, and Bond Funds) decreased by approximately $2.5 million. As noted above, the Depreciation Fund is used to set aside funds for future capital outlay. At the end of , funds were set aside to help with future replacement of computers and the artificial turf fields. The Bond Fund balance remained relatively stable which is reflective of the continued construction occurring within the District. The primary funding source for the Bond Fund is tax revenue. However, at the end of both and funds ($750,000 and $850,000 respectively) were transferred from the General Fund to the Bond Fund to allow the District to avoid a tax increase in the Bond Fund for and while still retaining a strong cash position in the General Fund. The decrease in the Building Fund reflects the funds on hand at year end from the issuance of $20 million of bonds approved by the voters in November 2011 the second issuance from that voter approved authority. As noted before, the District opened two new elementary schools in August of 2013 for the school year. The majority of the expenditures within the Building Fund related to the construction and equipping of these two new schools. The District has a new middle school under construction that will open in the fall of

11 Beginning Balance 9/1/2012 Ending Balance 8/31/2013 Receipts & Disbursements Change in Fund Transfers In & Transfers Out Fund Balance General Fund $24,377,074 $57,029,543 $56,202,109 $25,204,508 $827,434 Depreciation Fund $1,611,452 $535,813 $147,250 $2,000,015 $388,563 Bond Fund $8,047,490 $12,256,058 $12,315,082 $7,988,466 ($59,024) Building Fund $5,724,997 $21,647,820 $25,315,884 $2,056,933 ($3,668,064) Total $39,761,013 $91,469,234 $93,980,325 $37,249,922 ($2,511,091) The largest source of receipts for the District is property taxes. The table below lists the assessed valuation and property tax levies by fund for and The General Fund and Building Fund levies are now split into two components. The Learning Community Coordinating Council may levy a common general fund levy of up to $.95 cents on the valuation of all 11 school districts. The proceeds of the common general fund levy are distributed based on each district s needs as calculated within the State Aid formula minus the State Aid to be received minus other actual receipts as determined within the State Aid formula. The Learning Community Coordinating Council may also levy up to two cents for a common building fund levy. The proceeds of this levy are distributed based on the percentage of formula students each district in the learning community has as calculated within the State Aid formula. Each district may levy the difference between the $1.05 levy limit and the common general and building fund levy for its own purposes. The majority of the districts requested that no common building fund levy be levied for or to allow more discretion with the remaining portion of the $1.05 levy limit. Elkhorn Public Schools decided to levy only $.09 for General Fund purposes of the remaining $0.10 to keep the total levy (General and Bond Fund) as low as possible Change % Change Assessed Valuation $3,827,740,195 $4,000,319,980 $172,579, % General Fund Levy District NA NA Common General Fund Levy Learning Community (LC) NA NA Building Fund Levy District NA NA Common Building Fund Levy LC NA NA Bond Fund Levy* NA NA Total District & LC Levies for School Operations NA NA *Note Portions of the District do not pay the full bond levy. The amount paid depends on when a former Class I district (elementary only school district) merged with Elkhorn Public Schools. The following table illustrates changes in key receipts and disbursements within the District s General Fund. The District s reliance on property taxes continues to remain lower than in (70.73% of revenues in that year). Additionally, the percent of revenues provided through property taxes decreased in The District continues to receive General Fund property taxes from a $.95 learning community common general fund levy and a $.09 District only general fund levy. The District continues to receive State Aid as a member of the Douglas and Sarpy County Learning Community. Each district in the Learning Community receives the majority of their State Aid based on the proportion their calculated needs are of the total calculated needs within the Learning Community. Elkhorn s needs were 5.03% of the total needs in the State Aid calculation up from 4.95% the year before. In both years, the Learning Community districts as a whole received approximately 45% of the State Aid distributed statewide. 9

12 In regards to disbursements and transfers, there were no significant percentage changes between the two years. However, both the areas of Instruction and Instructional Support and Grants and Federal Programs which target the classrooms increased in their percentages of the total expenditures while Administration & Business services and Operation & Maintenance decreased in regards to their percentages of the total expenditures. Yr Ended 8/31/12 % Of Total Yr Ended 8/31/13 % Of Total RECEIPTS Property Taxes (includes both District and Learning Community taxes) $25,201, % $25,742, % State Aid (Tax Equity & Educational Opportunities Support Act) $16,896, % $18,077, % Other Local, State, Federal Receipts $11,400, % $13,209, % Total Receipts $53,498,553 $57,029,543 DISBURSEMENTS & TRANSFERS Instruction & Instructional Support $39,724, % $42,038, % Administration & Business Services $4,299, % $4,419, % Operation & Maintenance $6,148, % $6,105, % Transportation (Regular, School Age Special Education & Preschool Special Education) $1,053, % $1,004, % Local, State & Federal Grant Programs funds are focused towards the classroom $1,321, % $1,627, % Debt Service $0 0% $0 0% Transfers $896, % $1,006, % Total Disbursements & Transfers $53,444,310 $56,202,109 Business Type Activities The District maintains one proprietary fund, the School Lunch Fund, which accounts for business-type activities. The fund balance of the School Lunch Fund was lower as of August 31, 2013 than August 31, 2012 by approximately $183,500. The balance from year to year is impacted by a variety of items two of which are: 1) How many days of school there are in August since families tend to make deposits into their lunch accounts just prior to the start of the school year and then draw from those balances for daily meals; and 2) When the District receives the request for funding to cover initial purchases and payments for the school year from the food service provider. In and there were 14 days of school in August. However, it wasn t until September 2012 that the District received and paid the school lunch program advance for the school year. In August 2013 the District received and paid the school lunch program advance for the school year. The revenues of the lunch fund were also impacted by change that took effect as of the beginning of the school year in federal nutritional requirements. As a result of the new, stricter nutritional requirements, changes had to be made to the size and frequency of a number of the items serviced. As was likely the case with many school districts across the nation, the District experienced a reduction in the number of meals sold in

13 GENERAL FUND BUDGETARY HIGHLIGHTS In order to provide for the anticipated growth in students, plan for the opening of two new elementary schools, deal with the increased day-to-day operational costs, the District s General Fund budget reflected anticipated expenditures of $58 million, an increase of $3.3 million (5.96%) over the prior year. However, due to changes in the state laws regarding unused budget authority (an amount the District could have budgeted in prior years but did not) the General Fund budget submitted to the State reflected expenditures of $64.5 million an increase of $5 million (8.57%) over the prior year. School districts are now limited as to how much unused budget authority may be accessed each year. A district may only access unused budget authority to the extent that it equals 2% of the prior year s adjusted general fund budget of expenditures. In the case of Elkhorn Public Schools that is less than $1 million. Given that the District continues to grow, the administration felt it was necessary to put into the actual budget submitted to the State the amount that otherwise would have been added to unused budget authority. This was done in order to keep the District in the best financial situation given the opening of two new elementary schools for and another new middle school for The actual receipts for the year exceeded the budgeted receipts by approximately $1.7 million or 3%. Receipts from local sources, particularly motor vehicle taxes that are difficult to estimate, contribute to actual revenues in excess of budgeted revenues. State funds provided through apportionment continue to exceed the anticipated amount. This receipt is not only affected by the number of children living within the District boundaries between the ages of five and eighteen, but also the amount per child the State has available. The amount to be provided per child is not known until the actual payment is received. The amount of funds that the District will receive from the State for School Age Special Education is also unpredictable. The State distributes funds based on the percentage each districts expenditures were of the statewide expenditures incurred in the prior year. Additionally, the amount of funds available at the state level for increased. The actual expenditures and transfers were approximately $1.8 million or 3% less than what the District planned to spend and $8.3 million or 12.8% less than the budgeted amount submitted to the State of Nebraska. DEBT ADMINISTRATION As of August 31, 2012, the District had $141,895,000 of bonded indebtedness. As of August 31, 2013, the bonded indebtedness increased to $155,925,000. In late July, the national rating firm of Standard and Poor s reaffirmed the District s bond rating of AA-. In Standard and Poor s opinion, this rating reflected, Participation in the diverse Omaha metropolitan area economy; very strong incomes and extremely strong market value per capita; and history of operating surpluses, which has resulted in strong general fund cash balances; rapid enrollment growth. SIGNIFICANT FACTORS THAT MAY IMPACT FINANCIAL FUTURE As of the date of this report, the District has approved the budget and requested the necessary property taxes. Although the District anticipates its actual expenditures to increase by $5 million (8.62%) due to changes in legislation regarding unused budget authority, the General Fund budget submitted to the state increased by $5.2 million (8.05%) over what was submitted for

14 The District s taxable valuation for increased by 5.67% as compared to 4.51% in The District s valuation growth continues to be lower than the most recent 10-year average of roughly 11%. However, the growth percentage did exceed the most recent 5-year average of 4.76%. As noted above and as was the case in and , another transfer from the General Fund to the Bond Fund in late allowed the District to avoid any change in the overall tax rate for the fiscal year. The fall membership of 7,000 includes an increase of 541 students (8.4%) in prekindergarten through grade 12. As noted earlier, the final $ million of bonds approved by the voters in November of 2011 were issued with a closing date of September 13, Prior to the end of the fiscal year it is very likely that the District s Board of Education will take action to present another bond issue to the voters of the District during the fall of District administration continues to monitor local, state, and national activity regarding school finance. At the federal level, staff continues to monitor not only educational issues but general business issues such as the federal health insurance reform and how it will impact future salary and benefit costs. For the school year, adjustments were made to the scheduled work hours for some teacher assistants since they are not offered insurance to make sure that on average they work less than 30 hours per week. CONTACTING THE DISTRICT S FINANCIAL MANAGEMENT This financial report is designed to provide our citizens, taxpayers, students, and bond-buyers with a general overview of the District s finances and to demonstrate the District s accountability for the money with which it is entrusted. If you have questions about this report or need additional financial information, contact the Elkhorn Public Schools District Office, Glenn Street, Elkhorn, NE Our telephone number is (402) , our fax number is (402) , and our website is located at This Management s Discussion and Analysis is submitted this 1 st day of November, Stephen R. Baker Superintendent Pam Roth Executive Director of Business and Finance 12

15 DOUGLAS COUNTY SCHOOL DISTRICT 10 STATEMENT OF NET POSITION - CASH BASIS AUGUST 31, 2013 Primary Government Governmental Business-type Activities Activities Total ASSETS Cash in bank $ 279,121 $ 460,664 $ 739,785 Cash at County Treasurer 1,146,231-1,146,231 Investments 35,924,289-35,924,289 Total assets $ 37,349,641 $ 460,664 $ 37,810,305 LIABILITIES Payroll taxes and withholding items $ 99,719 $ - $ 99,719 Total liabilities 99,719-99,719 NET POSITION Restricted for: Debt service 7,988,466-7,988,466 Unrestricted 29,261, ,664 29,722,120 Total net position 37,249, ,664 37,710,586 Total net position and liabilities $ 37,349,641 $ 460,664 $ 37,810,305 See notes to financial statements. 13

16 DOUGLAS COUNTY SCHOOL DISTRICT 10 STATEMENT OF ACTIVITIES - CASH BASIS FOR THE YEAR ENDED AUGUST 31, 2013 Functions/Programs Net (Disbursement) Receipt Program Receipts and Changes in Net Position Operating Capital Charges for Grants and Grants and Governmental Business-type Disbursements Services Contributions Contributions Activities Activities Totals Primary government: Governmental Activities: Instruction $ 36,767,810 $ - $ 3,656,654 $ - $ (33,111,156) $ - $ (33,111,156) Support Services: Pupils 1,843, (1,843,265) - (1,843,265) Pupil safety 156, (156,809) - (156,809) Staff 3,052, (3,052,314) - (3,052,314) School improvement 19, (19,521) - (19,521) Implementation of standards 50, (50,142) - (50,142) Business 25,972, (25,972,393) - (25,972,393) Maintenance and operation of business 5,791, (5,791,530) - (5,791,530) Pupil transportation 1,004, ,604 - (886,102) - (886,102) General administration 873, (873,148) - (873,148) Office of principal 2,626, (2,626,312) - (2,626,312) State categorical programs 39,933-58,372-18,439-18,439 Federal programs 1,587,941-1,597,064-9,123-9,123 Debt service 12,314, (12,314,932) - (12,314,932) Summer school 73, (73,906) - (73,906) Other 263, (263,725) - (263,725) Total governmental activities $ 92,438,387 $ - $ 5,430,694 $ - $ (87,007,693) $ - $ (87,007,693) See notes to financial statements. 14

17 DOUGLAS COUNTY SCHOOL DISTRICT 10 STATEMENT OF ACTIVITIES - CASH BASIS FOR THE YEAR ENDED AUGUST 31, 2013 Functions/Programs Net (Disbursement) Receipt Program Receipts and Changes in Net Position Operating Capital Charges for Grants and Grants and Governmental Business-type Disbursements Services Contributions Contributions Activities Activities Totals Business-type activities: School lunch and milk $ 2,641,693 $ 2,061,158 $ 396,566 $ - $ - $ (183,969) $ (183,969) Total business-type activities 2,641,693 2,061, , (183,969) (183,969) Total primary government $ 95,080,080 $ 2,061,158 $ 5,827,260 $ - $ (87,007,693) $ (183,969) $ (87,191,662) General receipts: Taxes: Property $ 36,352,745 $ - $ 36,352,745 Motor vehicle 4,104,816-4,104,816 Carline 17,368-17,368 Public power district sales 721, ,700 State receipts 20,955,109-20,955,109 Bond proceeds 20,000,000-20,000,000 Fines and licenses 367, ,370 Interest income 19, ,386 Other 2,113,899-2,113,899 Transfers out (156,388) - (156,388) Total general receipts and transfers 84,496,602 $ 403 $ 84,497,005 Change in net position (2,511,091) (183,566) (2,694,657) Net position - beginning 39,761, ,230 40,405,243 Net position - ending $ 37,249,922 $ 460,664 $ 37,710,586 See notes to financial statements. 15

18 DOUGLAS COUNTY SCHOOL DISTRICT 10 STATEMENT OF ASSETS, LIABILITIES AND FUND BALANCES - CASH BASIS GOVERNMENTAL FUNDS AUGUST 31, 2013 ASSETS Special Total General Building Bond Depreciation Governmental Fund Fund Fund Fund Funds Cash in bank $ 103,353 $ 175,768 $ - $ - $ 279,121 Cash at County Treasurer 583,389 (56) 562,898-1,146,231 Investments 24,617,485 1,881,221 7,425,568 2,000,015 35,924,289 Total assets $ 25,304,227 $ 2,056,933 $ 7,988,466 $ 2,000,015 $ 37,349,641 LIABILITIES Payroll taxes and withholding items $ 99,719 $ - $ - $ - $ 99,719 Total liabilities 99, ,719 FUND BALANCES Restricted Fund Balance: Debt service - - 7,988,466 7,988,466 Unrestricted Fund Balance: Assigned - 2,056,933-2,000,015 4,056,948 Unsassigned 25,204, ,204,508 Total fund balances 25,204,508 2,056,933 7,988,466 2,000,015 37,249,922 Total liabilities and fund balances $ 25,304,227 $ 2,056,933 $ 7,988,466 $ 2,000,015 $ 37,349,641 See notes to financial statements. 16

19 DOUGLAS COUNTY SCHOOL DISTRICT 10 STATEMENT OF RECEIPTS, DISBURSEMENTS, AND CHANGES IN FUND BALANCES - CASH BASIS GOVERNMENTAL FUNDS FOR THE YEAR ENDED AUGUST 31, 2013 Special Total General Building Bond Depreciation Governmental Fund Fund Fund Fund Reclassification Funds RECEIPTS Taxes: Property $ 25,742,035 $ 99 $ 10,610,611 $ - $ - $ 36,352,745 Motor vehicle 4,104, ,104,816 Carline 13,918-3, ,368 Public power district sales 721, ,700 Bond proceeds - 20,000, ,000,000 Fines and licenses 367, ,370 State aid 24,358, , ,788,739 Federal aid 1,597, ,597,064 Interest Income 3,315 16, ,983 Other 120,797 1,631, , ,113,899 Total receipts 57,029,543 21,647,820 11,406, ,083,684 DISBURSEMENTS Instruction 36,767, ,767,810 Support services: Pupils 1,843, ,843,265 Pupil safety 156, ,809 Staff 3,126, (74,350) 3,052,314 School improvement 19, ,521 Implementation of standards 50, ,142 Business 920,084 25,052, ,972,393 Maintenance and operation of business 6,105, ,250 (461,200) 5,791,530 Pupil transportation 1,004, ,004,706 General administration 873, ,148 Office of principal 2,626, ,626,312 State categorical programs 39, ,933 Federal programs 1,587, ,587,941 Debt service ,314, ,314,932 Summer school 73, ,906 Other - 263, ,725 Total disbursements 55,195,721 25,315,884 12,315, ,250 (535,550) 92,438,387 Excess (deficiency) of receipts over (under) disbursements 1,833,822 (3,668,064) (909,024) (146,987) 535,550 (2,354,703) OTHER FINANCING SOURCES (USES) Transfer in/(out) (1,006,388) - 850, ,550 (535,550) (156,388) Total other financing sources and uses (1,006,388) - 850, ,550 (535,550) (156,388) Net change in fund balances 827,434 (3,668,064) (59,024) 388,563 - (2,511,091) Fund balances - beginning 24,377,074 5,724,997 8,047,490 1,611,452-39,761,013 Fund balances - ending $ 25,204,508 $ 2,056,933 $ 7,988,466 $ 2,000,015 $ - $ 37,249,922 See notes to financial statements. 17

20 DOUGLAS COUNTY SCHOOL DISTRICT 10 STATEMENT OF NET POSITION - CASH BASIS PROPRIETARY FUND AUGUST 31, 2013 ASSETS School Lunch Fund Cash in bank $ 460,664 Total assets 460,664 NET POSITION Unrestricted $ 460,664 Total net position $ 460,664 See notes to financial statements. 18

21 DOUGLAS COUNTY SCHOOL DISTRICT 10 STATEMENT OF RECEIPTS, DISBURSEMENTS, AND CHANGES IN FUND NET POSITION - CASH BASIS PROPRIETARY FUND FOR THE YEAR ENDED AUGUST 31, 2013 School Lunch Fund Operating receipts: Charges for sales and services: Lunchroom sales $ 2,061,158 Total operating receipts 2,061,158 Operating disbursements: Cost of sales and services 2,641,693 Total operating disbursements 2,641,693 Operating loss (580,535) Nonoperating receipts: USDA and State subsidy 396,566 Investment income 403 Total nonoperating receipts 396,969 Change in net position (183,566) Total net position - beginning 644,230 Total net position - ending $ 460,664 See notes to financial statements. 19

22 DOUGLAS COUNTY SCHOOL DISTRICT 10 STATEMENT OF NET POSITION - CASH BASIS FIDUCIARY FUNDS AUGUST 31, 2013 ASSETS Student Fee Activities Total Fiduciary Fund Fund Funds Cash in bank $ 33,668 $ 639,588 $ 673,256 Investments Total assets 33, , ,256 NET POSITION $ 33,668 $ 639,588 $ 673,256 See notes to financial statements. 20

23 DOUGLAS COUNTY SCHOOL DISTRICT 10 STATEMENT OF CHANGES IN NET POSITION - CASH BASIS FIDUCIARY FUNDS FOR THE YEAR ENDED AUGUST 31, 2013 ADDITIONS Student Fee Activities Total Fiduciary Fund Fund Funds Activities receipts $ 53,611 $ 1,134,932 $ 1,188,543 Transfers from general fund - 156, ,388 Total additions 53,611 1,291,320 1,344,931 DEDUCTIONS Purchased services 63,247-63,247 Other - 1,353,970 1,353,970 Total deductions 63,247 1,353,970 1,417,217 Change in net position (9,636) (62,650) (72,286) Net position - beginning 43, , ,542 Net position - ending $ 33,668 $ 639,588 $ 673,256 See notes to financial statements. 21

24 DOUGLAS COUNTY SCHOOL DISTRICT NO. 10 NOTES TO FINANCIAL STATEMENTS CASH BASIS YEAR ENDED AUGUST 31, 2013 A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization Douglas County School District No. 10 Elkhorn Public Schools (the School District ) is a tax-exempt political subdivision and a Class 3 school district of the State of Nebraska. Reporting Entity The financial statements of the School District include all significant separately administered organizations for which the School District is financially accountable including its entities for which the School District is considered to be financially accountable. Financial accountability is determined on the basis of selection of governing authority, imposition of will, a financial benefit/burden relationship, and/or fiscal dependency. Basis of Accounting The accompanying statements have been prepared on the cash basis of accounting. Under the cash basis method of accounting, revenues are recognized when collected rather than when earned and expenses are recognized when paid rather than incurred. Accordingly, the financial statements and supplemental schedules are not intended to present financial position and results of operation in conformity with accounting principles generally accepted in the United States of America. Basis of Presentation The School District prepares its financial statements based on the provisions of Statement No. 34 ( Statement 34 ) of the Government Accounting Standards Board Basic Financial Statements and Management s Discussion and Analysis for State and Local Governments Statement 34 established standards for external financial reporting for all state and local government entities, which includes government-wide financial statements, fund financial statements and the classification of net position into three components invested in capital assets, net of related debt; restricted; and unrestricted. Government-wide and fund financial statements The government-wide financial statements report information on all of the nonfiduciary activities of the primary government. For the most part, the effect of interfund activity has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental receipts, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. The District s net position is reported in two parts restricted net position for debt service, and unrestricted net position. Net position is restricted when constraints placed on them are either externally imposed or imposed by law through constitutional provisions or enabling legislatures. Internally imposed designations of resources are not presented as restricted net position. When both restricted and unrestricted resources are available for use, generally, it is the District s policy to use restricted resources first then unrestricted resources, as they are needed. 22

25 Notes, Continued A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) The statement of activities demonstrates the degree to which the direct disbursements of a given function or segment are offset by program receipts. Direct disbursements are those that are clearly identifiable with a specific function or segment. Program receipts include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general receipts. The fund financial statements of the reporting entity are organized into funds, each of which is considered to be a separate accounting entity. Each fund is accounted for by providing a separate set of self-balancing accounts that constitute its assets, liabilities, fund equity, receipts and disbursements. An emphasis is placed on major funds within the governmental category. A fund is considered major if it is the primary operating fund of the School District, meets specific mathematical criteria set forth by GASB or is identified as a major fund by the School District s management. In addition to the School District s funds meeting the required criteria, management has designated that all funds not meeting the required criteria are to be presented as major funds for financial reporting purposes. Separate financial statements are provided for governmental funds, proprietary funds, and fiduciary funds, even though the latter are excluded from the government-wide financial statements. Each individual governmental fund and each individual proprietary fund are reported as separate columns in the fund financial statements. Proprietary funds are used to account for the School District s business type activities. Proprietary funds distinguish operating receipts and disbursements from nonoperating items. Operating receipts and disbursements generally result from providing services and producing and delivering goods in connection with a proprietary fund s principal ongoing operations. All receipts and disbursements not meeting this definition are reported as nonoperating receipts and disbursements. The School Lunch Fund is considered a proprietary fund. Fiduciary funds report assets held in a trustee or agency capacity for others and therefore cannot be used to support the School District s own programs. The Activities Fund and Student Fee Fund are fiduciary funds. 23