WEST IRON COUNTY PUBLIC SCHOOLS. REPORT ON FINANCIAL STATEMENTS (with required supplementary and additional information) YEAR ENDED JUNE 30, 2018

Transcription

1 REPORT ON FINANCIAL STATEMENTS (with required supplementary and additional information) YEAR ENDED JUNE 30, 2018

2 June 30, 2018 ADMINISTRATION Superintendent... Christopher Thomson Junior/Senior High School Principal... Mike Berutti Elementary Principal... Michelle Thomson BOARD OF EDUCATION President... Roy Polich Vice President... Faye Atanasoff Treasurer... Ryan Meske Secretary... Gary Pisoni Trustee... Marla Shamion Trustee... Dennis Tousignant Trustee... Ian Gill

3 TABLE OF CONTENTS Page INDEPENDENT AUDITOR'S REPORT... 6 MANAGEMENT'S DISCUSSION AND ANALYSIS... 8 BASIC FINANCIAL STATEMENTS District-wide Financial Statements: Statement of Net Position Statement of Activities Fund Financial Statements: Governmental Funds: Balance Sheet Reconciliation of the Balance Sheet to the Statement of Net Position Statement of Revenues, Expenditures, and Changes in Fund Balances Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances to the Statement of Activities Fiduciary Funds - Statement of Assets and Liabilities NOTES TO FINANCIAL STATEMENTS REQUIRED SUPPLEMENTARY INFORMATION Budgetary Comparison Schedule - General Fund Pension Requirements Schedule of the District's Proportionate Share of the Net Pension Liability Schedule of the District Contributions OPEB Requirements Schedule of the District's Proportionate Share of Net OPEB Liability Schedule of the District Contributions Notes to the Required Supplementary Information OTHER SUPPLEMENTAL FINANCIAL INFORMATION Major Governmental Fund General Fund - Schedules of Revenues, Expenditures, and Changes in Fund Balances Non-Major Governmental Funds Combining Balance Sheet Combining Statements of Revenues, Expenditures, and Changes in Fund Balances Community Service Fund - Schedules of Revenues, Expenditures, and Changes in Fund Balances School Food Service Fund - Schedules of Revenues, Expenditures, and Changes in Fund Balances Capital Projects Fund - Schedule of Revenues, Expenditures, and Changes in Fund Balances... 53

4 FEDERAL AWARDS PROGRAMS TABLE OF CONTENTS (Continued) Page Independent Auditor s Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit Of Financial Statements Performed in Accordance with Government Auditing Standards Independent Auditor s Report on Compliance for Each Major Program and on Internal Control Over Compliance Required by the Uniform Guidance Schedule of Expenditures of Federal Awards Notes to the Schedule of Expenditures of Federal Awards Schedule of Findings and Questioned Costs COMMUNICATIONS SECTION Communication with Those Charged With Governance

5 RUKKILA I NEGRO AND ASSOCIATES Certified Public Accountants, PC 310 Shelden Avenue, Houghton, Michigan fax To the Board of Education West Iron County Public Schools Iron River, Michigan Report on the Financial Statements INDEPENDENT AUDITOR'S REPORT We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of the West Iron County Public Schools as of and for the year then ended June 30, 2018, and the related notes to the financial statements, which collectively comprise the District s basic financial statements as listed in the table of contents. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of West Iron County Public Schools as of June 30, 2018, and the respective changes in financial position for the year then ended in accordance with accounting principles generally accepted in the United States of America. 6

6 Emphasis of Matter As discussed in Note A to the basic financial statements, the District adopted Governmental Accounting Standards Board statement No. 75, Accounting and Financial Reporting for Postemployment Benefits other than Pensions. Accordingly, beginning net position of governmental activities was restated. 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, budgetary comparison information, and pension requirements on pages 8 through and 41 through 44 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the District s basic financial statements. The combining and individual nonmajor fund financial statements are presented for purposes of additional analysis and not a required part of the basic financial statements. The schedule of expenditures of federal awards is presented for purposes of additional analysis as required by Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, and is also not a required part of the basic financial statements. The combining, individual major, and nonmajor fund financial statements and the schedule of expenditures of federal awards are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining and individual nonmajor fund financial statements and the schedule of federal awards are fairly stated in all material respects in relation to the basic financial statements as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued a report dated October 29, 2018 on our consideration of the West Iron County Public Schools internal control over financial reporting and on our tests of its compliance with certain provisions of laws, 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 West Iron County Public Schools' internal control over financial reporting and compliance. October 29, 2018 Rukkila, Negro and Associates, Certified Public Accountants, PC 7

7 MANAGEMENT'S DISCUSSION AND ANALYSIS June 30, 2018 This section of West Iron County Public Schools annual financial report presents management s discussion and analysis of the District s financial performance during the year ended June 30, Please read it in conjunction with the District s financial statements, which immediately follows this section. Overview of the Financial Statements The annual report consists of a series of financial statements including other requirements as follows: Management s Discussion and Analysis introduces the basic financial statements and provides an analytical overview of the District s financial activities. The Government-wide Financial Statements consists of a Statement of Net Position and a Statement of Activities. These provide information about the activities of the District as a whole and represent an overall view of the District s finances. Statement of Net Position and the Statement of Activities These statements provide information that help determine how the District is doing financially as a result of the year s activities. The statements are shown using a full accrual basis. The District s net position and the changes in the net position during the year are reported by these two statements. Increases or decreases in the District s net position is one way to determine if the financial position of the District is improving or deteriorating. However, non-financial factors will need to be considered as well to determine the overall financial position of the District. The Statement of Fiduciary Assets and Liabilities, presents financial information about activities for which the District acts solely as an agent for the benefit of students and parents. The District is the trustee, or fiduciary, for its student activity funds. All of the District s fiduciary activities are reported in separate statements of fiduciary assets and liabilities. We exclude these activities 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. Fund Financial Statements tell how governmental services were financed in the short term as well as what remains for future spending. These statements also report the District s operations in more detail than the Government-wide Financial Statements by providing information about the most significant funds. The fund level financial statements are reported on a modified accrual basis. Only those assets that are measurable and currently available are reported. Liabilities are recognized to the extent that they are normally expected to be paid with current financial resources. In the fund financial statements, purchased capital assets are reported as expenditures in the year of acquisition. The issuance of debt is recorded as a financial resource. The current year s payments of principal and interest on long term obligations are recorded as expenditures. Future year s debt obligations are not recorded. The fund statements are formatted to comply with the legal requirements of the Michigan Department of Education s Accounting Manual. In the State of Michigan, the District s major instructional support activities are reported in the General Fund. Additional activities are reported in their relevant funds including the Debt Service Fund, School Service, and Community Service funds. 8

8 MANAGEMENT'S DISCUSSION AND ANALYSIS June 30, 2018 Overview of the Financial Statements (Continued) Major Funds: Under GASB Statement 34, the audit focus has shifted from type of governmental fund to major funds. Major funds are the largest funds in terms of assets, liabilities, revenues or expenses/expenditures. This allows the reader to see more detailed activity of the major funds. For the District the General Fund meet this requirement. Non-major Funds: In the basic financial statements, non-major funds are consolidated into one column. These are smaller funds. Detailed information about non-major funds can be found after the notes to the financial statements. Notes to the financial statements provide additional information that is essential to a full understanding of the data provided in the basic financial statements. Required supplementary information, other than Management s Discussion and Analysis, provides information about the required budgetary comparison information on the General Fund. Other supplementary information provides detailed information about the General, Community Service, School Service, and Capital Projects Funds. Summary of Net Position Assets Current assets 3,765,477 $ 3,355,954 Restricted cash 96,116 - Capital assets - Net 6,744,476 6,786,921 Total assets 10,606,069 10,142,875 Deferred outflows of resources 2,476,389 1,375,016 Liabilities Current liabilities 13,413, ,628 Noncurrent liabilities 292, ,617 Net pension liability 12,403,747 11,887,030 Net OPEB liability 4,222,122 4,453,403 Total liabilities 30,331,929 17,461,678 Deferred inflows of resources 821,436 58,628 Net position Net investment in capital assets 2,522,354 6,875,960 Restricted Community service 17,143 12,823 Food service 200, ,423 Capital projects 180, ,305 Unrestricted (8,587,876) (13,008,611) Total net position $ (5,667,160) $ (5,826,100) 9

9 MANAGEMENT'S DISCUSSION AND ANALYSIS June 30, 2018 Overview of the Financial Statements (Continued) Results of Operations in Governmental Activities Program Revenues Charges for services $ 180,499 $ 174,335 Operating grants and contributions 2,535,262 2,415,196 General Revenues Taxes 2,998,773 2,812,177 Unrestricted state aid 3,646,241 3,487,030 Interest and investment earnings 12,337 22,822 Incoming transfers - other schools 3,916 - Miscellaneous 137, ,528 Total revenues 9,514,106 9,095,088 Functions/program expenses Instruction 5,765,985 4,738,923 Supporting services 2,728,219 2,197,922 School food service 446, ,238 Athletics 211, ,889 Community services 3,150 8,184 Capital projects 177, Interest expense - 12,800 Outgoing transfers - other schools 21,300 - Other expense - 62,016 Total expenses 9,355,166 7,623,029 Change in net position 158,940 1,472,059 Net position - Beginning, as restated (5,826,100) (7,298,159) Net position - Ending $ (5,667,160) $ (5,826,100) See Note A, new accounting standard, of this report for additional information of the implementation of GASB No. 75 and the corresponding restatement of the beginning net position for the governmental activities. 10

10 MANAGEMENT'S DISCUSSION AND ANALYSIS June 30, 2018 Overview of the Financial Statements (Continued) The following table highlights the District's General Fund activities: 2018 % of total 2017 % of total Revenues Local sources $ 3,017, % $ 3,048, % Intermediate sources 303, , % State sources 4,993, % 4,682, % Federal sources 430, % 432, % Other transfers 30, % 141, % Total revenues $ 8,775, % $ 8,612, % Expenditures Basic program $ 3,885, % $ 3,539, % Added needs 1,829, % 1,832, % Pupil 66, % 140, % Instructional staff 20, % 6, % General administration 246, % 285, % School administration 450, % 419, % Business -fiscal services 310, % 253, % Operations & maintenance 926, % 791, % Pupil transportation 454, % 640, % Technical support 129, % 129, % Other supporting services 27, % - - % Athletics 215, % 201, % Outgoing transfers - other schools 21, % 15, % Total expenditures $ 8,585, % $ 8,256, % Significant Transactions and Changes in Individual Funds The overall financial position of the individual Governmental funds of the District increased by $307,114 from the previous year. A comparison of revenues/transfers, expenditures/transfers and fund balances is as follows: Change General Fund Revenues/Transfers $ 8,775,091 $ 8,471,838 $ 303,253 Expenditures/Transfers $ 8,585,729 $ 8,256,843 $ 328,886 Fund Balance $ 2,453,079 $ 2,263,717 $ 189,362 Community Service Fund Revenues/Transfers $ 13,426 $ 11,410 $ 2,016 Expenditures/Transfers $ 10,977 $ 8,847 $ 2,130 Fund Balance $ 17,143 $ 14,694 $ 2,449 Food Service Fund Revenues/Transfers $ 498,739 $ 504,086 $ (5,347) Expenditures/Transfers $ 432,626 $ 471,795 $ (39,169) Fund Balance $ 200,724 $ 134,611 $ 66,113 Capital Projects Fund Revenues/Transfers $ 226,850 $ 119,694 $ 107,156 Expenditures/Transfers $ 177,660 $ 74,873 $ 102,787 Fund Balance $ 180,495 $ 131,305 $ 49,190 11

11 MANAGEMENT'S DISCUSSION AND ANALYSIS June 30, 2018 Significant Transactions and Changes in Individual Funds (Continued) General Fund: Overall, there wasn't a significant change in revenue. Some things to highlight is that Federal Title monies increased by about $27,000 and At Risk funding increased by $51,000. Special education monies decreased by $25,000. Expenses increased from prior year by over $328,886. Finally, increases in salaries and benefits were about 5%, resulting in an increase in salaries and benefits by approximately $450,000. Community Service Fund: The services remain consistent with prior year. Food Service Fund: Revenue decreased from last year due mainly to decreased sales in school meals and a decrease in the USDA commodity revenue. The decrease in expenditures was due to staff changes, resulting in salary and benefit decreases. New lunch tables were purchased in the prior year. Capital Projects Fund: This year the sinking funds received covered the Stambaugh Elementary Roof, door lock systems, parking lot patching, new playground equipment, replacement of carpet with new tile floor in middle and high schools General Fund Budgetary Highlights The Uniform Budget Act of the State of Michigan requires that the local Board of Education approve the annual budget prior to the start of the fiscal year on July 1. Any amendments to the original budget must be approved by the Board prior to the close of the fiscal year on June 30. For the fiscal year ended June 30, 2018, the original budget was adopted in June of Since the original budget is adopted two months before school is in session, we often have many unknowns such as the number of students we will have for the year. Since much of the District s revenue is determined based on the number of students enrolled, this unknown could have a significant impact on the budget. Often there are a number of unforeseen events that occur throughout the year that impact the budget and/or cause budget variances. Budgeted Amounts Variance Final Original Final Actual to Actual % Variance Revenues $ 8,209,749 $ 8,930,078 $ 8,744,533 $ (185,545) (2.1)% Expenditures Instruction $ 5,484,248 $ 5,922,223 $ 5,715,164 $ 207, % Supporting services 2,554,651 2,694,479 2,634,013 60, % Athletics 219, , ,252 2, % Total expenditures $ 8,258,277 $ 8,834,756 $ 8,564,429 $ 270, % Other financing sources (uses) $ 11,087 $ 8,124 $ 9,258 $ 1, % Instruction services expenses were $207,059 lower than budgeted, because the full amount of the At-Risk grant was budgeted to use and wasn't spent. Supporting services expenses were $60,466 lower than budgeted, because there were expenses that came in lower than expected. 12

12 MANAGEMENT'S DISCUSSION AND ANALYSIS June 30, 2018 Capital Assets Capital Assets Depreciation was $442,866, with total purchases of $400,420. The District purchased a bus, fork lift truck, playground equipment, snow plow, intercom system for the elementary school, installation of door lock system, roof repairs at the elementary school, Nelson field drain work, bus garage concrete apron, and floor coverage replacement at the high school and middle schools. Additional information on the District s capital assets can be found on page 29 of this report. Known Facts, Decisions, or Conditions Having Significant Affect on Future Operations The table below depicts an increase of 8 in the number of students enrolled from the previous year, using the State Aid Membership Count. Year Student Total Change (10) (12) (12) (11) (8) State revenues received by Michigan school Districts are approved annually in a State Aid Act. This Act, approved by the State Legislature, provides a foundation amount (amount per student) of $4,392 for the school year. Contacting the District s Financial Management This financial report is designed to provide our citizens and taxpayers with a general overview of the District s finances. If you have questions about this report or need additional information, contact the West Iron County Public Schools Business Office, 601 Garfield Avenue, Iron River, Michigan 49935, (906) , cthomson@westiron.org. 13

13 STATEMENT OF NET POSITION June 30, 2018 Assets Cash and cash equivalents $ 2,806,477 Accounts receivable 6,361 Due from governmental units 905,654 Prepaid expenses 32,603 Inventories 14,382 Restricted cash 96,116 Capital assets - Net 6,744,476 Total assets 10,606,069 Deferred outflows of resources Pension 2,236,995 OPEB 239,394 Total outflows of resources 2,476,389 Liabilities Accounts payable 132,185 Accrued expenses 721,550 Other current liabilities 600 Due to student groups 135 Unearned revenue 155,682 Compensated absences 292,161 Net pension liability 12,403,747 Net OPEB liability 4,222,122 Total liabilities 17,928,182 Deferred inflows of resources Pension 678,698 OPEB 142,738 Total deferred inflows of resources 821,436 Net position Net investment in capital assets 2,522,354 Restricted Community service 17,143 Food service 200,724 Capital projects 180,495 Unrestricted (8,587,876) Total net position $ (5,667,160) The accompanying notes to the financial statements are an integral part of this statement. 14

14 STATEMENT OF ACTIVITIES Year Ended June 30, 2018 Governmental Program Revenues Activities Net (Expense) Expenses Charges for Services Operating Grants and Contributions Revenue and Changes in Net Position Functions/Programs Government Activities Instruction and instructional support $ 5,765,985 $ - $ 2,090,226 $ (3,675,759) Support services 2,728, (2,728,219) School food service 446,953 80, ,036 78,218 Athletics 211,899 87,017 - (124,882) Community services 3,150 13,347-10,197 Capital Projects 177, (177,660) Total governmental activities $ 9,333,866 $ 180,499 $ 2,535,262 (6,618,105) General revenues: Taxes, levied for general operations 2,645,742 Taxes, levied for capital projects 222,860 Other taxes 130,171 Unrestricted state aid 3,646,241 Interest and investment earnings 12,337 Miscellaneous 137,078 Other transfers 3,916 Outgoing transfers - other schools (21,300) Total general revenues, transfers, and other 6,777,045 Change in net position 158,940 Net position - Beginning of year, as restated (5,826,100) Net position - End of year $ (5,667,160) The accompanying notes to the financial statements are an integral part of this statement. 15

15 GOVERNMENTAL FUNDS BALANCE SHEET June 30, 2018 Non-Major Funds Total Governmental Funds General Fund Assets Cash and cash equivalents $ 2,724,502 $ 81,975 $ 2,806,477 Receivables 1,326 5,035 6,361 Due from governmental units 899,530 6, ,654 Due from other funds - 217, ,739 Prepaid expenses 32,603-32,603 Inventories 4,900 9,482 14,382 Restricted cash - 96,116 96,116 Total assets $ 3,662,861 $ 416,471 $ 4,079,332 Liabilities Accounts payable $ 114,176 $ 18,009 $ 132,185 Accrued expenses 721, ,550 Due to other funds 217, ,739 Due to student groups Unearned revenue 155, ,682 Other current liabilities Total liabilities 1,209,782 18,109 1,227,891 Fund balances Non-spendable Prepaid expenses 32,603-32,603 Inventories 4,900 9,482 14,382 Restricted Community service - 16,503 16,503 Food service - 191, ,882 Capital projects - 180, ,495 Assigned 232, ,500 Unassigned 2,215,679-2,215,679 Total fund balances 2,453, ,362 2,851,441 Total liabilities and fund balances $ 3,662,861 $ 416,471 $ 4,079,332 The accompanying notes to the financial statements are an integral part of this statement. 16

16 GOVERNMENTAL FUNDS RECONCILIATION OF THE BALANCE SHEET TO THE STATEMENT OF NET POSITION (Continued) June 30, 2018 Fund Balance Reported in Governmental Funds $ 2,851,441 Amounts reported for governmental activities in the statement of net position are different because: Capital assets, net of accumulated depreciation, used in governmental activities are not financial resources and therefore are not reported in the funds 6,744,476 Net pension liability (12,403,747) Deferred outflows from the difference between pension changes of assumptions and contributions subsequent to the measurement date 2,236,995 OPEB obligation 4,222,122 Deferred outflows from the difference between OPEB changes of assumptions and contributions subsequent to the measurement date 239,394 Deferred inflows from the difference between projected and actual investment earnings of the OPEB plan 142,738 Long-term liabilities are not due and payable in the current period and therefore are not reported in the funds 12,111,586 Net position of governmental activities $ 16,145,005 The accompanying notes to the financial statements are an integral part of this statement. 17

17 GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES Year Ended June 30, 2018 General Fund Non-Major Funds Total Revenues Local sources $ 3,017,619 $ 320,621 $ 3,338,240 Intermediate sources 303, ,077 State sources 4,993,333 19,726 5,013,059 Federal sources 430, , ,814 Total revenues 8,744, ,657 9,510,190 Expenditures Instruction 5,715,164-5,715,164 Supporting services 2,634,013-2,634,013 Athletics 215, ,252 School food service - 435, ,154 Community services - 10,977 10,977 Capital Projects - 175, ,132 Total expenditures 8,564, ,263 9,185,692 Excess (deficiency) of revenues over expenditures 180, , ,498 Other financing sources (uses) Other transfers 30,558 (26,642) 3,916 Outgoing transfers - other schools (21,300) - (21,300) Total other financing sources (uses) 9,258 (26,642) (17,384) Net change in fund balances 189, , ,114 Fund balances - Beginning of year 2,263, ,610 2,544,327 Fund balances - End of year $ 2,453,079 $ 398,362 $ 2,851,441 The accompanying notes to the financial statements are an integral part of this statement. 18

18 GOVERNMENTAL FUNDS RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES Year Ended June 30, 2018 Net Change in Fund Balances - Total Governmental Funds Amounts reported for governmental activities in the statement of activities are different because: $ 307,114 Governmental funds do not record depreciation and report capital outlays as expenditures; in the statement of activities, these costs are capitalized and allocated over their estimated useful lives as depreciation (42,445) Accrued expenses are recorded in the statement of activities when incurred; they are not reported in governmental funds until paid 17,456 The change in net pension liability amounts does not require the use of current resources and is not reported in the governmental funds (274,808) The change in OPEB obligation does not require the use of current resources and is not reported in the governmental funds 151,623 Change in net position of governmental activities $ 158,940 The accompanying notes to the financial statements are an integral part of this statement. 19

19 FIDUCIARY FUNDS STATEMENT OF ASSETS AND LIABILITIES June 30, 2018 Student Activities Fund Scholarship Fund Total Assets Restricted cash $ 160,114 $ 83,954 $ 244,068 Due from other funds Restricted investments - 2,363,572 2,363,572 Total assets $ 160,249 $ 2,447,526 $ 2,607,775 Liabilities Due to student groups $ 160,249 $ - $ 160,249 Scholarship funds - 2,447,526 2,447,526 Total liabilities $ 160,249 $ 2,447,526 $ 2,607,775 The accompanying notes to the financial statements are an integral part of this statement. 20

20 NOTES TO FINANCIAL STATEMENTS - June 30, 2018 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The basic financial statements of the West Iron County Public Schools have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP) as applied to government units. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. The more significant district accounting policies are described below. REPORTING ENTITY The West Iron County Public Schools (the District ) is governed by the West Iron County Public Schools Board of Education (the Board ), which has responsibility and control over all activities related to public school education within the District. The District receives funding from local, state and federal government sources and must comply with all the requirements of these funding source entities. However, the District is not included in any other governmental reporting entity as defined by the accounting principles generally accepted in the United State of America. Board members are elected by the public and have decision-making authority, the power to designated management, the ability to significantly influence operations, and the primary accountability for fiscal matters. In addition, the District s reporting entity does not contain any component units as defined in Governmental Accounting Standards Board Statement Numbers 14 and 39. GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS The government-wide financial statements (i.e., the statement of net position and the statement of activities) report information on all of the non-fiduciary activities of the District. For the most part, the effect of inter-fund activity has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. All of the District s government-wide activities are considered governmental activities. The statement of activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function. Program revenue includes (1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function and (2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. State Foundation Aid, certain revenue from the intermediate school District and other unrestricted items are not included as program revenues and are reported as general revenues. In the government-wide statement of net position, the governmental activities column is presented on a consolidated basis and is reported on a full accrual, economic resource basis, which recognizes all long-term and receivables as well as long-term debt and obligations. The District s net position is reported in three parts invested in capital assets, net of related debt; restricted; and unrestricted net position. The government-wide statement of activities reports both the gross and net cost of each of the District s functions. The functions are also supported by general government revenues (property taxes, certain intergovernmental revenues and other revenues). The statement of activities reduces gross expenses by related program revenues and operating grants. Program revenue must be directly associated with the function. Operating grants include operating-specific and discretionary (either operating or capital) grants. The District does allocate indirect costs. The government-wide focus is more on the sustainability of the District as an entity and the change in the District s net position resulting from the current year s activities. 21

21 NOTES TO FINANCIAL STATEMENTS - June 30, 2018 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Separate financial statements are provided for governmental funds and fiduciary funds, even though the latter are excluded from the government-wide financial statements. Major individual governmental funds are reported as separate columns in the fund financial statements. Governmental Funds Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenue is recognized as soon as it is both measurable and available. Revenue is considered to be available if it is collected within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the government 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, unrestricted State aid, intergovernmental grants, and interest income associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenue of the current fiscal period. All other revenue items are considered to be available only when cash is received by the government unit. The District reports the following major governmental fund: General Fund - The General Fund is the general operating fund and accordingly, it is used to account for all financial resources except those required to be accounted for in another fund. Other Non-Major funds: Special Revenue Funds - Special Revenue Funds are used to account for the activities of specific school service revenue sources such as the Community Service Fund, the School Food Service Fund, and the Capital Project Fund activities. Fiduciary Funds Fiduciary fund statements are also reported using the economic resources measurement focus and the accrual basis of accounting. Fiduciary funds are not included in the government-wide statements. The Student Activities Fund is used to account for assets held by the District in a trustee capacity or as an agent for individuals, private organizations, other governments, and/or other funds. Agency funds are custodial in nature (assets equal liabilities) and do not involve measurement of results of operations. This fund is used to account for assets that the District holds for others in an agency capacity (primary student activities). The Scholarship Fund is used to account for assets held by the District in a trustee capacity or as an agent for individuals or private organizations designated for scholarship purposes. The Fund distributes the assets according to scholarship requirements. Accrual Method The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the fiduciary fund financial statements. 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. 22

22 NOTES TO FINANCIAL STATEMENTS - June 30, 2018 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) MEASUREMENT FOCUS, BASIS OF ACCOUNTING AND BASIS OF PRESENTATION Modified Accrual Method Governmental fund financial statements 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 done. Property taxes, state and federal aid and interest associated with the current fiscal period are all considered to susceptible to accrual and so have been recognized as revenues of the current fiscal period. All other revenue items are considered to be measurable and available only when cash is received by the District. State Revenue - The State of Michigan utilizes a foundation grant approach which provides for a specific annual amount of revenue per pupil based on a statewide formula. The Foundation is funded from state and local sources. Revenues from state sources are primarily governed by the School Aid Act and the School Code of Michigan. The Michigan Department of Education administers the allocation of state funds to school districts based on information supplied by the districts and the local county treasurer. The State revenue is recognized during the foundation period and is funded through payments from October 2017 to August Thus, the unpaid portion at June 30 is reported as due from other governmental units. The state portion of the foundation is provided primarily by a state education property tax millage of 6 mills and an allocated portion of state sales and other taxes. The local portion of the foundation is funded primarily by nonhomestead property taxes which may be levied at a rate of up to 18 mills. The State revenue is recognized during the foundation period and is funded through payments from October 2017 to August Thus, the unpaid portion at June 30 is reported as due from other governmental units. Foundation $ 7, Less Local Support: Assumed Local Revenue $ 2,656, Divided by General Education k-12 membership Calculated Local Support (3,239.27) Foundation Grant Allowance Per Pupil $ 4, The District also receives revenue from the state to administer certain categorical education programs. State rules require that revenues earmarked for these programs be used for its specific purpose. Certain governmental funds require an accounting to the state of the expenditures incurred. For categorical funds meeting this requirement, funds received, which are not expended by the close of the fiscal year are recorded as deferred revenue. Other categorical funding is recognized when the appropriation is received. 23

23 NOTES TO FINANCIAL STATEMENTS - June 30, 2018 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Other Accounting Policies Cash and Cash Equivalents Cash and cash equivalents include cash on hand, demand deposits, and short-term investments with a maturity of three months or less when acquired. Investments are stated at fair value. Pooled investment income is generally allocated to each fund using a weighted average of balance for the principal. Property Taxes Property taxes levied by the District are collected by the Cities of Caspian, Gaastra, and Iron River, and the Townships of Bates, Iron River, and Stambaugh and periodically remitted to the District. The taxes are levied and become a lien as of July 1 and December 1 and are due upon receipt of the billing by the taxpayer and becomes a lien on the first day of the levy year. For the year ended June 30, 2018, the District levied the following amounts per $1,000 of assessed valuation: Fund Mills General fund - Non-homestead Sinking Fund - Homestead and non-homestead Receivables and Payables Activity between funds are reported as due to/from other funds. All receivables, including property taxes receivable, are shown net of allowance for uncollectibles. Inventory The District utilizes the consumption method of recording inventories of materials and food supplies. Under the consumption method, inventories are recorded as expenditures when they are used. Inventory is valued at lower of cost or market. Capital Assets Capital assets, which include land, buildings, equipment, site improvements, and vehicles are reported in the applicable governmental activities column in the government-wide financial statements. Fixed assets are defined by the government as assets with an initial individual cost of more than $5,000. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair market value at the date of donation. Costs of normal repair & maintenance that do not add to the value or materially extend asset lives are not capitalized. Buildings, equipment, and vehicles are depreciated using the straight-line method over the following useful lives: Buildings Buildings improvements Site improvements Buses Vehicles Furniture and equipment years 7-50 years years 5-8 years 7-15 years 3-20 years 24

24 NOTES TO FINANCIAL STATEMENTS - June 30, 2018 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Accrued Benefits The liabilities for compensated absences reported in the District-wide statements in the amount of $307,114 consisted of accrued sick leave and paid to employees upon retirement and accrued for only employees that qualify for retirement. The various employment contracts and agreements covering the School District s personnel allow for the accumulation of sick leave as defined. The master agreement between the West Iron County Public School District s Board of Education and the West Iron County Education Association provides that teachers receive 14 days of paid sick leave per year. At retirement, teachers shall receive payment of accumulated sick leave at the rate of $70 per day to a maximum of 205 days. To be eligible for payment at retirement, a teacher must have been an employee of the District for at least 10 consecutive years and must be eligible for retirement as stipulated by the Michigan Public School Employee s Retirement Act, which requires at least 15 years of service. The current agreement between the West Iron Public School District s Board of Education and the West Iron County Educational Support Personnel Association MEA contains the following provisions: All employees are credited with 1 sick leave day per month in which at least 25% of the month was worked. Sick days can accumulate up to a maximum of 180 days. At termination, accumulated sick leave is paid at the rate of $60 for full-time support staff and $70 per day for fulltime instructional staff, prorated for part-time employees at the time of retirement. To be eligible for such payment, the employee must have been an employee of the District for at least 10 consecutive years prior to retirement, and must be eligible for retirement as stipulated by the Michigan Public Employee s Retirement Act. This act requires a minimum of 15 years of service. Long-term Obligations In the government-wide financial statements, long-term debt and other long-term obligations are reported as liabilities in the statement of net position. Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates. New Accounting Standard - In the current year, the District adopted the provisions of Governmental Accounting Standards Board (GASB) No. 75, Accounting and Financial Reporting for Postemployment Benefits other than Pensions. The objective of this statement is to improve accounting and financial reporting by state and local governmental for postemployment benefits other than pensions (OPEB). As a result of implementing this statement the beginning net position of governmental activities was restated to a deficit of $7,067,173 (a reduction of $4,277,089). 25

25 NOTES TO FINANCIAL STATEMENTS - June 30, 2018 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position - Deferred outflows are reported in a separate section following assets, and deferred inflows are reported in a separate section following liabilities. The statement of net position then arrives at net position which includes the net effects of assets, deferred outflows of resources, liabilities, and deferred inflows of resources. Pension - For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the Michigan Public Employees Retirement System (MPSERS) and additions to/deductions from MPSERS fiduciary net position have been determined on the same basis as they are reported by MPSERS. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. Postemployment Benefits Other Than Pensions - For purposes of measuring the net OPEB liability, deferred outflows of resources and deferred inflows of resources related to OPEB, and OPEB expense, information about the fiduciary net position of the Michigan Public School Employees Retirement System (MPSERS) and additions to/deductions from MPSERS fiduciary net position have been determined on the same basis as they are reported by MPSERS. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. Fund Balance - Governmental funds report nonspendable fund balance for amounts that cannot be spent because they are either a.) Not in spendable form, or b.) Legally or contractually required to be maintained intact. Restricted fund balance is reported when externally imposed constraints are placed on the use of the resources by grantors, contributors, laws or regulations of other governments. Committed fund balance, if any, is reported from amounts that can be used for specific purposes pursuant to constraints imposed by formal action by the government s highest level of decision making authority, the Board of Education. A formal resolution of the Board of Education is required to establish, modify or rescind a fund balance commitment. The District reports assigned fund balance for amounts that are constrained by the government s intent to be used for specific purposes, but are neither restricted nor committed. Unassigned fund balance is the residual classification for the general fund. When the District incurs an expenditure for purposes for which various fund balance classifications can be used, it is the District s policy to use restricted fund balance first, then committed fund balance, assigned fund balance, and finally unassigned balance. NOTE B - STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY The District follows these procedures in establishing the budgetary data reflected in the financial statements. 1. The Superintendent submits to the School Board a proposed operating budget for the fiscal year commencing July 1. The operating budget includes proposed expenditures and means of financing them. The level of control for the budgets is at the functional level as set forth and presented as required supplementary information. 2. A public hearing is held to obtain taxpayer comments. 3. Prior to July 1, the budget is legally adopted by School Board resolution pursuant to the Uniform Budgeting and Accounting Act (P.A. 621 of 1978) enacted at a regular meeting by School Board approval. The Act provides that a local unit shall not incur expenditures in excess of the amount appropriated. 4. During the year the budget is monitored, and amendments to the budget resolution are made when deemed necessary. 5. Budget appropriations lapse at the end of the fiscal year. 26