Financial Section. Independent Auditor s Opinion. Management s Discussions and Analysis. Government-Wide Financial Statements

Transcription

1 Financial Section Building the Future Independent Auditor s Opinion Management s Discussions and Analysis Government-Wide Financial Statements Governmental Fund Financial Statements Fiduciary Fund Financial Statements Notes to the Financial Statements Required Supplementary Information Supplemental Data

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3 MANAGEMENT S DISCUSSION AND ANALYSIS As management of Auburn School District No. 408, we offer readers of the district s comprehensive annual financial report (CAFR) this narrative overview and analysis of the financial activities of the district for the fiscal year ended August 31, This is the first reporting year in which the district has implemented the provision of Governmental Accounting Standards Board Statement 34 (GASB 34) with the enclosed financial statements. FINANCIAL HIGHLIGHTS The district s net assets of governmental activities as of August 31, 2003 were $109.8 million. During the year, the district had revenues that were $6.87 million higher than the $103.8 million in expenses incurred for all governmental activities, resulting in a corresponding increase in the district s net assets. The general fund revenues exceeded expenditures by $1.29 million. On February 4, 2003, voters overwhelmingly approved a $54 million bond issue by 68.3%. In May 2003, the district sold $36 million of those bonds to begin construction of a new high school. The district advance refunded the 1997 series bonds on January 26, The total net savings were $1.5 million. Auburn voters approved the educational programs levies for 2005 and 2006 by 63.84% and the bus levies by 64.53%. The levies for calendar year 2005 will be $18.2 million and $760,000 and for 2006, $19.1 million and $1,340,000 respectively. OVERVIEW OF THE FINANCIAL STATEMENTS This report consists of three parts: an introductory section, a financial section, and a statistical section. The financial section includes the independent auditor s report, management s discussion and analysis, the basic financial statements and related notes to the financial statements. The basic financial statements consist of a series of statements that present different financial views of the district: The first two statements are district-wide financial statements that provide both shortterm and long-term information about the district s overall financial status and activities. For district activities, these statements tell how these services were financed in the short term as well as what remains for future spending. All of the remaining statements are fund financial statements that report district operations in more detail by providing information about the district s most significant funds. Information is also provided about activities for which the district acts solely as a trustee for the benefit of those outside of the government

4 DISTRICT-WIDE FINANCIAL STATEMENTS The district-wide financial statements are designed to provide a broad overview of district finances, similar to a private-sector business. The statement of net assets presents information on all of the assets and liabilities of the district. The difference between the two is reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of the district is improving or deteriorating. The statement of activities presents information showing how the district s net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying financial event takes place, regardless of when the cash is actually received or disbursed. Thus, revenues and expenses are reported in this statement for some items that will result in cash receipts or disbursements in future fiscal periods. Earned but unused vacation leave and uncollected taxes are examples of these types of items. FUND FINANCIAL STATEMENTS A fund is a group of related accounts used to maintain control over resources segregated for specific activities or objectives. The district uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All district funds can be divided into two categories: governmental funds and fiduciary funds. GOVERNMENTAL FUNDS Governmental funds account for essentially the same functions reported as governmental activities in the district-wide financial statements. However, unlike these statements, governmental fund financial statements focus on how money flows into and out of the funds and the balances left at year-end that are available to spend. These funds use an accounting method called modified accrual accounting which measures cash and all other financial assets that can easily be converted to cash. Such information may be useful in evaluating the district s ability to finance the district s educational programs and support operations in the near future. Because the focus of governmental funds is narrower than that of the district-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the district-wide financial statements. By doing so, readers may better understand the long-term impact of the district s near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The District maintains five individual governmental funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures and changes in fund balance for the General Fund, Associated Student Body (ASB) Fund, Capital Projects Fund, Transportation Vehicle Fund and the Debt Service Fund, all of which are considered major funds. FIDUCIARY FUNDS The district is the trustee or fiduciary, for individuals, private organizations and other governments for scholarships and other specific purposes. All of the district's fiduciary activities

5 are reported in a separate statement of fiduciary net assets and changes in fiduciary net assets under the fiduciary financial statement section. These activities are excluded from the district's other financial statements because the district cannot use these assets to finance its operations. The district is responsible for ensuring that the assets reported in these funds are used for their intended purposes. DISTRICT-WIDE FINANCIAL ANALYSIS STATEMENT OF NET ASSETS Net assets may serve as a useful indicator of the district s financial position. Auburn School District s assets exceed liabilities by $109,794,914 at the end of the fiscal year, August 31, A large portion (47.4%) of net assets is the investment in capital assets such as land, buildings and equipment less any related outstanding debt used to acquire those assets. The district continues to build and modernize various schools to meet student needs. These assets are not available for future spending. Resources to repay this debt come from property tax levies. Another 47.6% of the net assets are subject to restrictions on how they may be used. The balance of net assets can be used to finance normal district operations without constraints established by debt practices, enabling legislation, or other legal requirements. Condensed Statement of Net Assets as of August 31, 2003 Governmental Activities Current and Other assets $ 78,528,346 Capital Assets 155,336,253 Total assets 233,864,599 Other liabilities 6,956,187 Long-term debt outstanding 117,113,498 Total liabilities 124,069,685 Net assets Invested in capital assets, net of related debt 52,051,597 Restricted 52,293,388 Unrestricted 5,449,929 Total Net Assets $ 109,794,914 STATEMENT OF ACTIVITIES Governmental activities improved the district s overall financial position, increasing the district s net assets by $ 6,869,891. As this is the district s first year of reporting a Statement of Activities under the new GASB reporting requirements, there are no comparisons with activity in previous years

6 Revenues Changes in Net Assets Governmental Activities For the Fiscal Year Ended August 31, 2003 Program Revenues Charges for services $ 4,179,036 Operating grants and contributions 19,228,885 Capital grants and contributions 1,961,995 General revenues Property texes for levies for educational programs 17,119,687 Property texes for levies for debt service 12,357,961 Property texes for levies for technology equipment 2,498,520 Unallocated state apportionment and other 52,493,877 Interest and investment earnings 808,068 Total revenues 110,648,029 Expenses Regular instruction 56,468,409 Special instruction 6,758,195 Vocational instruction 5,376,015 Compensatory Education 7,827,551 Other instructional programs 1,030,121 Community services 279,390 Support services 11,611,994 Child nutrition services 3,017,129 Pupil transportation services 4,196,284 Extracurricular activities (ASB) 1,791,093 Interest on long-term debt 5,421,957 Total Expenses 103,778,138 Increase (decrease) in Net Assets 6,869,891 Beginning Net Assets 102,925,023 Ending Net Assets $ 109,794,914 FINANCIAL ANALYSIS OF THE DISTRICT S FUNDS GOVERNMENTAL FUNDS The focus of the district s governmental funds is to provide information on short-term cash inflows, outflows, and balances of spendable resources. Such information is useful in assessing the district s financing requirements. GENERAL FUND The General Fund is the major operating fund of the district, providing the majority of the resources for educational programs and support operations

7 REVENUES Revenues for the General Fund totaled $ 90,629,257 in the fiscal year ending August 31, 2003, This was $3,924,006 or 4.33% more than the prior year. GENERAL FUND Revenue Source Increase Amount Increase Percent Local Taxes & Non-taxes $ 19,474,912 $ 18,533,547 $ 941, % State Revenues 63,780,148 61,954,856 1,825, % Federal Revenues 6,691,303 5,614,950 1,076, % Other 682, ,898 80, % Totals $ 90,629,257 $ 86,705,251 $ 3,924, % The increase of $941,365 in local taxes and other local sources was primarily due to the increase in the special property tax levies approved by the voters. Calendar year 2003 levy was $16,805,887 compared to the 2002 levy of $15,700,000 and the 2001 levy of $15,200,000. Larger state revenues of $1,825,292 were the result of increased allocations by the state legislature for a 3.7% salary increase for all state educational programs as well increased funding for special education, I 728 student achievement programs, and transportation. In addition, the district was the South Puget Sound fiscal agent for an innovative state program to provide alternative routes to teacher certification for special education teachers. Total grant funds for this program were $731,700. Federal No Child Left Behind (NCLB) legislation provided $654,718 new dollars to improve student achievement. The balance of the $1,076,353 increase in this revenue source was increased funding for special education, Title 1 and limited English proficiency assistance. In addition, the district received a three year grant of $487,089 from the Department of Education to improve the education of Native American students. During the current year, the district received $160,920 of these funds. Other revenues increased 11.86% or $80,996 primarily due to the payment for additional students from Dieringer School District, a neighboring school district that sends high school students to Auburn. Dieringer does not have a high school. Revenue Sources 7% 1% 21% 70% Local State Federal Miscellaneous

8 EXPENDITURES Expenditures in the General Fund totaled $89,337,590 for the fiscal year. This represents an increase of $3,887,581 or 4.35% over the prior year. The primary increase was due to a salary increase of 3.7%. GENERAL FUND Expenditures Increase (Decrease) Amount Increase (Decrease) Percent CURRENT Regular Instruction $ 50,738,718 $ 49,559,455 $ 1,179, % Special Education 6,415,923 6,128, , % Vocational Instruction 4,952,534 4,800, , % Compensatory Education 7,401,506 5,306,957 2,094, % Other Instructional Programs 988,683 1,522,509 (533,826) % Community Services 275, ,951 25, % Support Services 11,412,385 10,909, , % Child Nutrition Services 2,800,516 2,654, , % Pupil Transportation Services 3,701,198 3,432, , % CAPITAL OUTLAY Equipment 650, ,892 (233,506) % Totals $ 89,337,590 $ 85,450,009 $ 3,887, % The largest increase of 28.3% or $2,094,549 occurred in compensatory education programs reflecting the increased federal and state funding for these programs. At the federal level these funds were provided by NCLB legislation and at the state level, from Initiative 728. The largest decrease of 53.99% in other instructional programs was primarily due to the reclassification of NCLB programs from targeted other instructional program grants from the prior year. Expenditure Uses 3% 4% 0% 13% 1% 79% Instruction Capital Outlay Support Services Child Nutrition Pupil Transportation Community Services SPECIAL REVENUE FUND The Special Revenue Fund, like the General Fund, is considered a major fund for fiscal year reporting purposes. Special Revenue Funds account for the proceeds of specific revenue sources that are legally restricted to expenditures for specified purposes. In the state of Washington, the only fund designated as a special revenue fund is the Associated Student Body (ASB). This fund is financed, in part, by the establishment and collection of fees from students and non-students as a condition of their attendance at any optional noncredit extracurricular event of the district

9 Special Revenue Fund (ASB) Increase (Decrease) Beginning Fund Balance $ 1,074,014 $ 1,060,911 $ 13,103 Revenues 1,786,305 1,845,782 (59,477) Expenditures (1,786,376) (1,832,679) 46,303 Ending Fund Balance $ 1,073,943 $ 1,074,014 $ (71) DEBT SERVICE FUND Also a major fund for fiscal year , the Debt Service Fund is used to account for the payment of principal, interest, and related expenditures related to the redemption of outstanding bonds. The Debt Service Fund is financed from voter-approved levies sufficient to meet the annual payments of principal, interest and other expenditures related to the redemption of the bonds. The district s fiscal agent, the Bank of New York, makes principal and interest payments on behalf of the district Increase (Decrease) Beginning Fund Balance $ 4,973,019 $ 4,071,920 $ 901,099 Revenue 12,459,303 11,691, ,658 Expenditure (12,200,086) (10,790,546) (1,409,540) Bond Premium 1,945,125-1,945,125 Ending Fund Balance $ 7,177,361 $ 4,973,019 $ 2,204,342 CAPITAL PROJECTS FUND The Capital Projects Fund is also a major fund for the fiscal reporting period. Capital projects funds account for financial resources to be used for the acquisition or construction of major capital facilities Increase (Decrease) Beginning Fund Balance $ 6,385,042 $ 8,067,767 $ (1,682,725) Revenues 4,506,732 3,913, ,864 Expenditures (5,699,329) (5,596,593) (102,736) Sale of Bonds 36,000,000-36,000,000 Ending Fund Balance $ 41,192,445 $ 6,385,042 $ 34,807,403 During the fiscal year, Capital Projects Fund expenditures of $3,569,947 for the new high school were financed primarily from the sale of $36 million in voted unlimited general obligation bonds. This was part of the $54 million bond issue approved by the voters in February, 2003 for this construction project. Capital Projects Fund expenditures of $277,497 for new portables to alleviate overcrowding at district high schools were financed from impact fees from developers. Other expenditures for new computers and other instructional technology equipment of $1,274,037 were financed by the fourth and fifth years of a six year special tax levy approved by the voters in The remaining revenues were from the lease of surplus real property and investment earnings

10 TRANSPORTATION VEHICLE FUND The Transportation Vehicle Fund is also a major fund for fiscal reporting purposes. The Transportation Vehicle Fund is used to account for the state reimbursement for depreciation of approved pupil transportation equipment and for the purchase and major repair of such equipment. In addition to state funds, the Transportation Vehicle Fund can be financed from the proceeds of special tax levies and interest earnings Increase (Decrease) Beginning Fund Balance $ 78,514 $ 115,226 $ (36,712) Revenues 494, , ,835 Expenditures (549,531) (260,921) (288,610) Sale of Surplus Buses - 1,388 (1,388) Ending Fund Balance $ 23,639 $ 78,514 $ (54,875) FIDUCIARY FUNDS Fiduciary funds are not reported in the district-wide financial statements. Fiduciary funds are reported in the Fiduciary Statement of Net Assets and Statement of Changes in Fiduciary Net Assets. These activities are excluded from the district s other financial statements because the district cannot use these assets to finance its operations. Trust and agency funds account for assets held by a governmental unit in a trustee capacity or as an agent for individuals, private organizations, other governmental units, and/or other funds. These include Private Purpose Trust Funds. PRIVATE PURPOSE TRUST FUND The Private Purpose Trust Fund was created to act as a custodian for funds, such as scholarships, held for the benefit of private individuals and organizations. These funds are not used for the benefit of the district. The district does not budget for the Private Purpose Trust Fund. During the fiscal reporting period, the Private-Purpose Trust Fund received donations of $118,681, earned $14,534 on investments and incurred disbursements of $100,390. Net assets at the end of the year totaled $430,697. MAJOR FUND BUDGETARY HIGHLIGHTS Appropriations are a prerequisite to expenditures in the governmental funds. Appropriations lapse at the end of the fiscal year. The original fiscal year budget adopted by the Board of Directors for the district totaled $124,191,220, including General Fund appropriations of $94,406,618, Special Revenue Fund (ASB) appropriations of $2,054,689, Debt Service Fund appropriations of $12,202,913, Capital Projects Fund appropriations of $11,000,000, and Transportation Vehicle Fund appropriations totaling $485,000.. The Board may adopt a revised or supplemental budget appropriation after a public hearing anytime during the fiscal year. During the year, the Board adopted a revised General Fund budget increasing appropriations by $93,950 to $94,500,568 and a revised Transportation Vehicle Fund budget increasing appropriations by $88,000 to $573,000. General Fund expenditures were increased to accommodate an increase in enrollment larger than projected. Transportation Vehicle Fund was adjusted to expend a greater than anticipated allocation from the state for replacing buses

11 CAPITAL ASSETS AND DEBT ADMINISTRATION CAPITAL ASSETS The District s investment in capital assets for its governmental type activities as of August 31, 2003 amounted to $155,336,253 (net of accumulated depreciation of $60,181,016). This investment in capital assets includes land, buildings, improvements, furniture and equipment. Major capital asset additions during the current fiscal year included $878,863 spent for building improvements and portables to alleviate overcrowding at some schools. Equipment additions included $1,456,104 primarily for school buses, computers and other instructional technology. Construction in progress increased by $5,699,329 as work on the new high school began in May. See Note 4, Changes in Capital Assets, for more information. CAPITAL ASSETS Capital Assets Accumulated Depreciation Net Land $ 12,034,296 $ - $ 12,034,296 Building & Improvements 173,910,776 (51,095,418) 122,815,358 Equipment 12,991,316 (9,085,598) 3,905,718 Construction In Progress 16,580,881-16,580,881 Total $ 215,517,269 $ (60,181,016) $ 155,336,253 DEBT ADMINISTRATION At the end of the current fiscal year, the district had $115,910,000 in unlimited general obligation bonds outstanding. This debt is secured by a pledge of the full faith and credit of the district. $8,515,000 of that debt is due within the next twelve months. Additionally, the district had $18,000,000 general obligation debt that remained unissued. The Washington State Constitution and the Revised Code of Washington and limit the amount of general obligation (GO) debt that may be issued. With a vote of the people, debt cannot be incurred in excess of 5% of the value of the taxable property of the district, provided the indebtedness in excess of 2.5% is for capital outlay. For the fiscal year ended August 31, 2003, the maximum GO debt authorized by statutory limit was $298 million. The district had $108.7 million of debt outstanding at August 31, 2003, that was subject to that limitation leaving a legal debt margin of $189.3 million. The District s bond rating from Moody s Investor Service has been A1 since Standard and Poor s rating is A+. Additional information on the district s bonded debt obligations is presented in Note 7. ECONOMIC FACTORS AND NEXT YEAR S BUDGETS AND RATES The appropriations for governmental funds of the district were approved at $159,900,719. For calendar year 2003, the total property tax rate for special levies is $5.36 per thousand dollars of assessed property value. The projected rate for 2004 is $ Total assessed value grew by 6.85% from $ 5,579,922,545 to $5,961,873,765 during For 2004, the projected increase is 6.2% to $6,333,191,

12 The district serves the City of Auburn as well as the City of Pacific, the City of Algona and portions of unincorporated King and Pierce Counties. The local economy began to recover in the third quarter of 2002 and is expected to continue recovering slowly. Revenue forecasts reflect fairly static growth in General Fund revenues. Employment is expected to show signs of improvement comparable to projected national growth rates. The Boeing Company is the largest single employer in the City of Auburn. Other major employers include the Auburn School District, the Muckleshoot Tribal Casino, Auburn Regional Medical Center, Green River Community College, Emerald Downs Racetrack, the Social Security Administration, the Federal Aviation Administration and the Auburn Supermall. In 1990, Boeing accounted for 71% of all jobs in the City of Auburn. Today, Boeing jobs account for only 41% of the employment base in Auburn as the local economy continues to diversify. Although the projected future shape of the Boeing Company includes the Auburn Fabrication plant, Boeing will continue to shrink its Auburn footprint. Boeing plans to shed about 400 Auburn jobs, mostly through attrition, by the end of As Boeing surpluses buildings, regional distribution centers step in to take advantage of Auburn s location in the Puget Sound transportation corridor. Location was the primary reason, Safeway purchased 115 acres of surplus Boeing land for a distribution center. The Safeway complex will include two warehouse buildings, a 766,000 square foot grocery and dry goods warehouse, a 514,000 square foot refrigerated warehouse for perishables, a truck shop, recycle center and administrative offices. Eight Boeing Company buildings that have been empty for years have been demolished to make way for the warehouse complex, which will be developed in three phases between 2003 and The distribution center is expected to employ about 850 people. Another 800 or so jobs such as contractors and suppliers will also be created. These 1,600 new workers are expected to take home around $47 million over the next decade. Over the last decade, Auburn s location has enabled it to diversify from primarily aircraft manufacturing to becoming a regional hub for wholesale distribution centers, entertainment complexes, medical centers, a large shopping mall, a commuter rail center and federal government administration centers. Auburn should continue to reap economic benefits from its location far into the future. REQUESTS FOR INFORMATION This financial report is designed to provide the district s citizens, taxpayers, customers, investors and creditors with a general overview of the district s finances and to demonstrate the district s accountability for the money it receives. If you have questions about this report or need additional financial information, contact Toni Lally, Director of Business Auburn School District No th Street NE Auburn, WA Or visit the district s website at

13 Government-Wide Financial Statements Building the Future The government-wide financial statements consist of the Statement of Net Assets and the Statement of Activities. These statements report all financial and capital resources of the primary government as a whole, except for the fiduciary funds of the primary government. The Statement of Net Assets displays assets less liabilities equal net assets format. The Statement of Activities presents governmental activities by function, at the level of detail required in the governmental fund statement of revenues, expenditures, and changes in fund balances. The government-wide financial statements were prepared using the economic resources measurement focus and the accrual basis of accounting.

14 Schedule 1 AUBURN SCHOOL DISTRICT NO. 408 STATEMENT OF NET ASSETS August 31, 2003 Note # Primary Government Governmental Activities ASSETS Cash and Cash Equivalents 1.E.1 and 2 $ 58,325,956 Property Tax Receivable 1.E.2 15,383,411 Receivables, Net 1.E.3 194,930 Due from Other Governments 1.E.4 2,560,075 Inventories 1.E.6 1,166,249 Capital Assets, not being depreciated Land 4 $ 12,034,296 Construction-in-progress 5 16,580,881 Total capital assets, not being depreciated 28,615,177 Capital Assets, being depreciated - Buildings & Improvements 4 173,910,776 Equipment 4 12,991,316 Total capital assets, being depreciated 186,902,092 Less accumulated depreciation 4 (60,181,016) Total capital assets, net of accumulated depreciation 126,721,076 Capital assets, net of accumulated depreciation 155,336,253 Unamortized Bond Issuance Costs 7.B 897,725 TOTAL ASSETS 233,864,599 LIABILITIES Accounts Payable 4,003,815 Accrued Wages & Benefits Payable 222,312 Accrued Interest 1,676,429 Deferred Revenue 1.E.9 277,766 Long-Term Liabilities Due within one year 7.A 8,258,090 Due in more than one year 109,631,273 TOTAL LIABILITIES 124,069,685 NET ASSETS Invested in capital assets, net of related debt 52,051,597 Restricted for: Capital Projects 41,192,445 Debt Service 7,177,361 Other Purposes 2,849,639 Other Activities 1,073,943 Unrestricted 5,449,929 TOTAL NET ASSETS $ 109,794,914 The notes to the financial statements are an integral part of this statement. -19-

15 Schedule 2 AUBURN SCHOOL DISTRICT NO. 408 STATEMENT OF ACTIVITIES For the Year Ended August 31, 2003 Functions/Programs Expenses Charges for Service PROGRAM REVENUES Operating Grants and Contributions Capital Grants and Contributions NET (EXPENSE) REVENUE AND CHANGES IN NET ASSETS PRIMARY GOVERNMENT Governmental Activities Primary Government: Governmental Activities: Regular Instruction $ 56,468,409 $ 297,318 $ 6,469 $ 1,961,995 $ (54,202,627) Special Instruction 6,758,195-6,535,878 (222,317) Vocational Instruction 5,376, , ,640 (4,786,864) Compensatory Education 7,827,551-7,679,780 (147,771) Other Instructional Programs 1,030,121 89,867 1,036,843 96,589 Community Services 279, ,212 2,250 (110,928) Support Services 11,611,994 92, ,273 (11,297,114) Child Nutrition Services 3,017,129 1,222,224 1,789,613 (5,292) Pupil Transportation Services 4,196,284 35,992 1,855,139 (2,305,153) Extracurricular Activities (ASB) 1,791,093 1,786,305 (4,788) Interest Expense on Long-Term Debt 5,421, (5,421,957) Total Governmental Activities $ 103,778,138 $ 4,179,036 $ 19,228,885 $ 1,961,995 $ (78,408,222) General Revenues: Taxes: Property taxes, levies for educational programs 17,119,687 Property taxes, levies for debt service 12,357,961 Property taxes, levies for technology equipment 2,498,520 Unallocated State Apportionment & Others 52,493,877 Interest and Investment earnings 808,068 Total General Revenues and Special Items 85,278,113 Changes in Net Assets 6,869,891 Net Assets - Beginning 102,925,023 Net Assets - Ending $ 109,794,914 The notes to the financial statements are an integral part of this statement. -20-

16 Governmental Fund Financial Statements Building the Future The governmental fund financial statements consist of major governmental funds: 1. General Fund 2. Special Revenue Fund (Associated Student Body) 3. Debt Service Fund 4. Capital Projects Fund 5. Transportation Vehicle Fund The governmental funds focus primarily on the sources, uses, and balances of current financial resources and the modified accrual basis of accounting.

17 Schedule 3 AUBURN SCHOOL DISTRICT NO. 408 FUND BALANCE SHEETS - GOVERNMENTAL FUNDS August 31, 2003 GENERAL FUND SPECIAL REVENUE FUND (ASB) DEBT SERVICE FUND CAPITAL PROJECT FUND TRANSPORT- ATION VEHICLE FUND TOTAL GOVERNMENTAL FUNDS ASSETS: Cash and Cash Equivalents $ 7,304,017 $ 1,075,948 $ 7,194,163 $ 42,363,096 $ 388,732 $ 58,325,956 Property Tax Receivable 8,478,097-6,254,248 1,247, ,979,534 Accounts Receivable, Net 56, ,125 Interest Receivable 19,736 2,458 16,434 97,916 1, ,805 Due From Other Funds 23, ,274 2,377 62, ,028 Due From Other Government Units 998, ,561,590-2,560,075 Inventories at Cost 1,151,161 15, ,166,249 TOTAL ASSETS 18,031,767 1,359,529 13,467,222 45,332, ,024 78,580,772 LIABILITIES: Accounts Payable 734,825 27,079-2,870, ,354 3,998,478 Accrued Liabilities 186,699-35, ,312 Due To Other Funds 335,459 1,499-22, ,365 Deferred Revenue 8,498, ,008 6,254,248 1,247, ,257,300 TOTAL LIABILITIES 9,755, ,586 6,289,861 4,139, ,385 20,837,455 FUND BALANCES Unreserved: Designated for Opening New School 2,200, ,200,000 Designated for Inventory Replacement 326, ,000 Designated for Self Insurance 300, ,000 Designated for School Construction and Equipment ,192,445-41,192,445 Undesignated 5,449,929 1,073,943 7,177,361-23,639 13,724,872 TOTAL FUND BALANCES 8,275,929 1,073,943 7,177,361 41,192,445 23,639 57,743,317 TOTAL LIABILITIES AND FUND BALANCES $ 18,031,767 $ 1,359,529 $ 13,467,222 $ 45,332,230 $ 390,024 $ 78,580,772 The notes to the financial statements are an integral part of this statement. -21-

18 AUBURN SCHOOL DISTRICT NO. 408 RECONCILIATION BALANCE SHEET/STATEMENT OF NET ASSETS August 31, 2003 Schedule 3A Total Governmental Funds Long-Term Assets, Liabilities * Reclassifications and Eliminations* Statement of Net Assets Totals ASSETS Cash and Cash Equivalents $ 58,325,956 $ - $ - $ 58,325,956 Property Tax Receivable 15,979,534 (596,123) - 15,383,411 Receivables, Net 57,125-57,125 Interest Receivable 137, ,805 Due from Other Funds 354,028 - (354,028) - Due from Other Governments 2,560, ,560,075 Inventories 1,166, ,166,249 Capital Assets, Net 155,336, ,336,253 Unamortized Bond Issue Costs 897, ,725 TOTAL ASSETS 78,580, ,637,855 (354,028) 233,864,599 LIABILITIES Accounts Payable 3,998,478-5,337 4,003,815 Accrued Liabilities 222, ,312 Due to Other Funds 359,365 - (359,365) - Accrued Interest 1,676,429 1,676,429 Deferred Revenue 16,257,300 (15,979,534) - 277,766 Long-Term Liabilities 117,889, ,889,363 TOTAL LIABILITIES 20,837, ,586,258 (354,028) 124,069,685 FUND BALANCES/NET ASSETS Total Fund Balances/Net Assets 57,743,317 52,051, ,794,914 TOTAL LIABILITIES AND FUND BALANCES/NET ASSETS $ 78,580,772 $ 155,637,855 $ (354,028) $ 233,864,599 The notes to the financial statements are an integral part of this statement. * See Note 10A -22-

19 AUBURN SCHOOL DISTRICT NO. 408 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS - FOR THE FISCAL YEAR ENDED AUGUST 31, 2003 Schedule 4 GENERAL FUND SPECIAL REVENUE FUND (ASB) DEBT SERVICE FUND CAPITAL PROJECTS FUND TRANSPORTATION VEHICLE FUND TOTAL GOVERNMENTAL FUNDS REVENUES Local Taxes $ 16,356,842 $ - $ 12,357,961 $ 2,498,520 $ 15,714 $ 31,229,037 Local Non-Tax 3,118,070 1,786, ,342 2,001,317-7,007,034 State, General Purpose 51,662,408 - $ - 6,895-51,669,303 State, Special Purpose 12,117, ,942 12,596,682 Federal, General Purpose 129, ,369 Federal, Special Purpose 6,561, ,561,934 Revenues From Other Sources 682, ,894 TOTAL REVENUES 90,629,257 1,786,305 12,459,303 4,506, , ,876,253 EXPENDITURES Current Operating: Regular Instruction 50,738, ,738,718 Special Instruction 6,415, ,415,923 Vocational Instruction 4,952, ,952,534 Compensatory Education 7,401, ,401,506 Other Educational Programs 988, ,683 Community Services 275, ,741 Support Services 11,412, ,412,385 Child Nutrition Services 2,800, ,800,516 Pupil Transportation Services 3,701, ,701,198 Extracurricular Activities (ASB) - 1,714, ,714,839 Debt Service: Principal - - 7,700, ,700,000 Interest and Other Charges - - 4,500, ,500,086 Capital Outlay: Sites ,001-44,001 Buildings and Bond Issuance Expenditures ,381,291-4,381,291 Equipment 650,386 71,537-1,274, ,531 2,545,491 TOTAL EXPENDITURES 89,337,590 1,786,376 12,200,086 5,699, , ,572,912 Excess of Revenues Over (Under) Expenditures 1,291,667 (71) 259,217 (1,192,597) (54,875) 303,341 OTHER FINANCING SOURCES (USES) Sale of Equipment 8, ,931 Sale of Bonds - - 1,945,125 36,000,000-37,945,125 TOTAL OTHER FINANCING SOURCES (USES) 8,931-1,945,125 36,000,000-37,954,056 NET CHANGE IN FUND BALANCE 1,300,598 (71) 2,204,342 34,807,403 (54,875) 38,257,397 Fund Balances - September 1 6,975,331 1,074,014 4,973,019 6,385,042 78,514 19,485,920 Fund Balances - August 31 $ 8,275,929 $ 1,073,943 $ 7,177,361 $ 41,192,445 $ 23,639 $ 57,743,317 The notes to the financial statements are an integral part of this statement. -23-

20 AUBURN SCHOOL DISTRICT NO. 408 RECONCILIATION STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE STATEMENT OF ACTIVITIES August 31, 2003 Schedule 4A Total Governmental Funds Long-Term Revenue, Expenses * Capital Related items * Long-Term Debt Transactions * Statement of Activities Totals REVENUES AND OTHER SOURCES Property Taxes 31,229,037 $ 762,845 $ - $ - $ 31,991,882 Local Non-Taxes 7,007, ,007,034 State, General Purpose 51,669,303 8, ,678,234 State, Special Purpose 12,596, ,596,682 Federal, General Purpose 129, ,369 Federal, Special Purpose 6,561, ,561,934 Revenues From Other Sources 682, ,894 TOTAL 109,876, , ,648,029 EXPENDITURES/EXPENSES Current: Regular Instruction 50,738,718 62,726 5,666,965-56,468,409 Special Instruction 6,415,923 8, ,673-6,758,195 Vocational Instruction 4,952,534 (14,287) 437,768-5,376,015 Compensatory Education 7,401,506 8, ,669-7,827,551 Other Instructional Programs 988,683 (27,630) 69,068-1,030,121 Community Services 275,741 (1,076) 4, ,390 Support Services 11,412,385 29, ,844-11,611,994 Child Nutrition Services 2,800,516 1, ,372-3,017,129 Pupil Transportation Services 3,701,198 6, ,146-4,196,284 Extracurricular Activities (ASB) 1,714,839-76,254-1,791,093 Debt Service: Principal 7,700, (7,700,000) - Interest and Other Charges 4,500, ,871 5,421,957 Capital Outlay: Sites 44,001 - (44,001) - - Buildings 4,381,291 - (4,381,291) - - Equipment 2,545,491 - (2,545,491) - - TOTAL EXPENDITURES/EXPENSES 109,572,912 74, ,701 (6,778,129) 103,778,138 EXCESS OF REVENUES OVER UNDER EXPENDITURES 303, ,122 (908,701) 6,778,129 6,869,891 OTHER FINANCING SOURCES (USES) Sale of Equipment 8,931 - (8,931) - - Sale of Bonds 37,945, (37,945,125) - TOTAL OTHER FINANCING SOURCES (USES) 37,954,056 - (8,931) (37,945,125) - NET CHANGE FOR THE YEAR $ 38,257,397 $ 697,122 $ (917,632) $ (31,166,996) $ 6,869,891 The notes to the financial statements are an integral part of this statement. * See Note 10B -24-

21 Fiduciary Funds Financial Statements Building the Future The fiduciary funds financial statements consist of the Private-Purpose Trust Fund. The fiduciary funds financial statements focus on net assets and changes in net assets. The Private-Purpose Trust Fund reports all trust arrangements under which principal and income benefit individuals, private organizations, or other governments.

22 AUBURN SCHOOL DISTRICT NO. 408 FIDUCIARY FUNDS STATEMENT OF NET ASSETS August 31, 2003 Schedule 5 Private-Purpose Trusts ASSETS Cash and Cash Equivalents $ 424,274 Interest Receivable 1,086 Due from Other Funds 5,337 TOTAL ASSETS 430,697 LIABILITIES - TOTAL LIABILITIES - NET ASSETS Held in Trusts for Scholarships and Student Aid 430,697 TOTAL NET ASSETS $ 430,697 The notes to the financial statements are an integral part of this statement. -25-

23 Schedule 6 AUBURN SCHOOL DISTRICT NO. 408 FIDUCIARY FUNDS STATEMENT OF CHANGES IN NET ASSETS For the Year Ended August 31, 2003 Private-Purpose Trusts ADDITIONS Donations $ 118,681 Investment Earnings 14,534 Total Additions 133,215 DEDUCTIONS Scholarships 86,427 Student Aid 13,963 Total Deductions 100,390 Change in Net Assets 32,825 Net Assets, Beginning of the year 397,872 Net Assets, End of the year $ 430,697 The notes to the financial statements are an integral part of this statement. -26-

24 Notes to the Financial Statements Building the Future

25 AUBURN SCHOOL DISTRICT NO. 409 NOTES TO FINANCIAL STATEMENTS AUGUST 31, 2003 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial statements of the Auburn School District have been prepared in conformity with generally accepted accounting principles (GAAP) as applied to governmental units. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principals. The more significant accounting policies of the District are described below: A. REPORTING ENTITY The Auburn School District is a municipal corporation organized pursuant to Title 28A Revised Code of Washington (RCW) for the purpose of providing public school services to students in grades K-12. Auburn School District operates under an independently elected board of directors. Management of the district is appointed by and is accountable to the board of directors. Fiscal responsibility, including budget authority, the power to set fees, levy property taxes and issue debt consistent with provisions of state statutes, also rests with the board of directors. Based on the criteria specified in GASB Statement No. 14, The Financial Reporting Entity, the district has no component units. The district s Comprehensive Annual Financial Report includes all funds that are controlled by or dependent on the district s board of directors. Control by or dependence on the district was determined on the basis of budget adoption, taxing authority, outstanding debt secured by the general credit of the district, obligation of the district to finance any deficits that may occur, or receipt of significant subsidies from the district. B. BASIS OF PRESENTATION The accounts of the district are organized on the basis of funds in governmental fund financial statements, each of which is considered a separate accounting entity. The operations of each fund are accounted for with a separate set of self-balancing accounts that comprise its assets, liabilities, fund equity, revenues, and expenditures or expenses, as appropriate. Government resources are allocated to and accounted for in individual funds based upon the purposes for which they are to be spent and the means by which spending activities are controlled. The district s basic financial statements in this report consist of: 1). Government Wide Financial Statements Overall governmental activities are reported here without displaying individual funds or fund types and display information about the district as a whole. The Government-Wide financial statements do not include Fiduciary Funds. The government-wide financial statements consist of the following: a. Statement of Net Assets The Statement of Net Assets reports all financial and capital resources. Capital assets (land, land improvements, building, building improvements, vehicles, and equipment) are reported at historical cost, net of accumulated depreciation

26 b. Statement of Activities The operations of the district are presented net of the applicable program revenues. General revenues are divided into property taxes, interest and investment earnings, and special and extraordinary items. The expenses and revenues are reported as follows: I). Expenses - Expenses are reported by function/program that includes direct and indirect expenses. Depreciation expenses are allocated to direct expenses if they can be specifically identified with a function or program. Interest expenses may be considered direct expenses when borrowing is essential to the creation or continuing existence of a program. Otherwise, interest on long-term liabilities is considered and indirect expense. II). Revenues Revenues are divided into program revenues and general revenues. Program revenues are derived directly from the program itself or from parties outside the district s taxpayers, as a whole. These revenues reduce the net cost of the function to be financed from the district s general revenue. Program-specific grants and contributions include revenues arising from mandatory and voluntary non-exchange transactions with federal or state governments, organizations, or individuals. These revenues are restricted for use in a particular program. General revenues are revenues that are not required to be reported as program revenues, such as property tax levies for a specific purpose and all non-tax revenue such as interest and investment earnings. 2). Fund Financial Statements a. Governmental Funds Governmental fund reporting focuses primarily on the sources, uses, and balances of current financial resources and often has a budgetary orientation. It includes general fund, special revenue fund (Associated Student Body fund), capital projects fund, transportation vehicle fund, and debt service fund. The district considers all governmental funds to be major funds. I). General Fund - This fund is the general operating fund of the district. It accounts for all financial resources of the district, except those required to be accounted for in another fund. In keeping with the principle of as few funds as necessary, child nutrition, maintenance, information services, printing and pupil transportation activities are included in the fund. II). Special Revenue Fund (Associated Student Body Fund) - This fund is used to account for the extracurricular fees and resources collected in fund-raising events for students. Disbursements require the joint approval of the appropriate student body organization and the district's board of directors. This fund is accounted for as a special revenue fund since the financial resources legally belong to the district. III). Debt Service Fund - This fund is used to account for the accumulation of resources for the payment of general long-term debt principal, interest and related expenditures. All of the district's issues are serial bonds rather than term bonds and do not require sinking funds for each issue. Therefore, the district maintains one debt service fund for all bond issues. Also, there are no legal requirements that mandate a separate fund for each bond issue

27 IV). Capital Projects Fund This fund is used to account for the financial resources to be used for the construction or acquisition of major capital assets. This fund must be used when projects are financed wholly or in part by bond issues, intergovernmental resources, major private donations or insurance recoveries. This fund is also used to account for energy capital improvements. V). Transportation Vehicle Fund This fund is used to account for the purchase, major repair, rebuilding and debt service expenditures related to pupil transportation equipment. The major sources of revenue in this fund include the state reimbursement for pupil transportation equipment and special levies. b. Fiduciary Funds Fiduciary fund reporting focuses on net assets and changes in net assets. Fiduciary Funds such as private-purpose trust and agency funds are used by a district in its fiduciary capacity as trustee or agent for assets held for individuals, private organizations, and other governments. Auburn School District has only one of these funds, the private-purpose trust fund. All of the income and principal in this private-purpose trust may be disbursed in the course of its operation. It includes money for scholarships donated by community supporters and funds for student aid provided by the Saul Haas Foundation. C. MEASUREMENT FOCUS AND BASIS OF ACCOUNTING The government-wide financial statements measure and report all financial and capital assets, liabilities, revenues, expenses, gains and losses using the economic resources measurement focus and accrual basis of accounting. The accounting objectives of this measurement focus are the determination of operating income, changes in net assets or cost recovery, and financial position. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. This year the district has implemented Governmental Accounting Standards Board Statements 34, 37 and 38. This is the first year the district has reported under these GASB promulgations. Governmental fund financial statements include the General Fund, Special Revenue Fund, Debt Service Fund, Capital Projects Fund and Transportation Vehicle Fund. They are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the district considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. Property taxes and interest associated with the current fiscal period are considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. Private-purpose trust funds are reported on the accrual basis of accounting. Agency funds are reported on the modified accrual basis. Agency funds are custodial in nature and do not involve measurement of results of operation

28 1). Encumbrances Encumbrance accounting, under which purchase orders, contracts, and other commitments for the expenditure of resources are recorded to reserve that portion of the applicable appropriation, is utilized in the governmental funds. Encumbrances are liquidated at the end of the year; therefore, there are no outstanding encumbrances at year-end. 2). Eliminations and Reclassifications In the process of aggregating data for the government-wide statements of net assets and the statement of activities, the inter-fund receivables and payables within governmental funds, except those with fiduciary funds, were eliminated. D. BUDGETS AND BUDGETARY ACCOUNTING 1). General Budget Policies The Auburn School District budgets its funds in accordance with the Revised Code of Washington Chapter 28A.505 and Chapter of the Washington Administrative Code (WAC). The School District Board adopts the budget after a public hearing. An appropriation is a prerequisite to expenditure. Appropriations lapse at the end of the fiscal period. Annual appropriated budgets are adopted at the fund level. Each governmental fund s total expenditures cannot, by law, exceed its formal fund appropriation. Management is authorized to modify specific accounts within the overall fund appropriation. However, only the Board has the authority to increase or decrease a given fund's annual budget. The Board may adopt a revised or supplemental budget appropriation after a public hearing at anytime during the fiscal year. During the fiscal year, the General Fund budget was amended to increase appropriations by $ 93,950 to adjust for a greater increase in enrollment in certain grade levels than was projected. In addition, the Transportation Vehicle fund budget was also amended to increase expenditures by $ 88,000 in order to expend unexpected additional state revenues. 2). Budgetary Basis of Accounting For budget purposes, revenues and expenditures are accounted for on a modified accrual basis of accounting as prescribed in law for all governmental funds. Beginning fund balance is budgeted as available resource and, pursuant to law, the budgeted ending fund balance cannot be negative. Formal budgetary accounting is employed as a management control for all governmental funds. Budgets are adopted on the same basis of accounting used to reflect actual revenues and expenditures on a generally accepted accounting principles basis. E. ASSETS, LIABILITIES AND NET ASSETS/RESERVES/DESIGNATIONS 1). Cash and Cash Equivalents The district's cash and cash equivalents consist of cash balances, net of warrants outstanding, and cash equivalents with original maturities of three months or less. At August 31, 2003, cash deposits were $53,171, petty cash and lunchroom change funds were $4,664, the fair value of cash equivalents were $61,349,534 and warrants outstanding were $2,657,139. In accordance with authorized investment laws, the district s cash equivalents are deposited in the King County Investment Pool. The Pool invests in U.S. Agency mortgage-backed securities to enhance yield