Weslaco Independent School District. Board of Trustees

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2 Weslaco Independent School District August 31, 2014 Board of Trustees David L. Fuentes Erasmo López Óscar Caballero Adrián González Andrew González Isidoro Nieto Dr. Richard Rivera President Vice-President Secretary Trustee Trustee Trustee Trustee Administration Dr. Rubén Alejandro Superintendent

3 ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED AUGUST 31, 2014

4 ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED AUGUST 31, 2014 TABLE OF CONTENTS EXHIBIT Page CERTIFICATE OF BOARD 1 Independent Auditors' Report 2,3 Management's Discussion and Analysis 4-10 BASIC FINANCIAL STATEMENTS Government Wide Statements: A-1 Statement of Net Position 11 B-1 Statement of Activities 12 Government Fund Financial Statements: C-1 Balance Sheet 13 C-2 Reconciliation for C-1 14 C-3 Statement of Revenues, Expenditures, and Changes in Fund Balance 15 C-4 Reconciliation for C-3 16 C-5 Budgetary Comparison Schedule - General Fund 17 Proprietary Fund Financial Statements: D-1 Statement of Net Position 18 D-2 Statement of Revenues, Expenses, and Changes in Fund Net Position 19 D-3 Statement of Cash Flows 20 Fiduciary Fund Financial Statements: E-1 Statement of Fiduciary Net Position 21 Notes to Financial Statements Combining Schedules Nonmajor Governmental Funds: H-1 Combining Balance Sheet H-2 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances 50-54

5 TABLE OF CONTENTS (CONTINUED) EXHIBIT Page Required TEA Schedules J-1 Schedule of Delinquent Taxes J-2 Budgetary Comparison Schedule - Child Nutrition Fund 57 J-3 Budgetary Comparison Schedule - Debt Service Fund 58 Federal Awards Section Report on Compliance and Internal Control Over Financial Reporting Based on an audit of Financial Statements Performed in Accordance with Government Auditing Standards 59,60 Report on Compliance with Requirements Applicable to Each Major Program and Internal Control over Compliance in Accordance with OMB Circular A ,62 Schedule of Findings and Questioned Costs 63,64 Schedule of Status of Prior Findings 65 K-1 Schedule of Expenditures of Federal Awards 66,67 K-2 Schedule of Required Responses to Selected School First Indicators 68 Notes of Schedule of Expenditures of Federal Awards 69

6 CERTIFICATE OF BOARD Weslaco Independent School District Hidalgo Name of School District County Co-District Number We, the undersigned, certify that the attached annual financial reports of the abovenamed school district were reviewed and (check one) approved disapproved for the year ended August 31, 2014, at a meeting of the Board of Trustees of such school district on the 8 th day of December, Signature of Board Secretary Signature of Board President If the Board of Trustees disapproved of the auditors report, the reason(s) for disapproving it is (are): (attach list as necessary) 1

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9 MANAGEMENT S DISCUSSION AND ANALYSIS In this section of the Annual Financial and Compliance Report, we, the managers of Weslaco ISD, discuss and analyze the District s financial performance for the fiscal year ended August 31, Please read it in conjunction with the Independent Auditor s Report on page 2, and the District s Basic Financial Statements which begin on page 11. FINANCIAL HIGHLIGHTS The District s net position at August 31, 2014 was $ 116,614,509, an decrease of $ 93,078 as a result of this year s operations. During the year, the District had expenditures that were $ 2,600,987 more than the $ 174,646,259 generated in taxes, state funds, and other revenues for governmental programs. This compares to last year when revenues exceeded expenditures by $ 3,446,724. Total cost of all of the District s programs increased by $ 9.3 million, due to an increase in construction costs and salaries. The General Fund ended the year with a fund balance of $ 34,308,222, representing an increase of $2,966,611 from last year. The resources available for appropriation were $ 500,092 more than budgeted for the General Fund and $10,760,190 more than actual expenditures for the year. USING THIS ANNUAL REPORT This annual report consists of a series of financial statements. The government-wide financial statements include the Statement of Net Position and the Statement of Activities on pages 11 and 12. These provide information about the activities of the District as a whole and present a longer-term view of the District's property and debt obligations and other financial matters. They reflect the flow of total economic resources in a manner similar to the financial reports of a business enterprise. Fund financial statements, starting on page 13, report the District's operations in more detail than the government-wide statements by providing information about the District's most significant funds. For governmental activities, these statements tell how services were financed in the short term as well as what resources remain for future spending. They reflect the flow of current financial resources, and supply the basis for tax levies and the appropriations budget. For proprietary activities, fund financial statements tell how goods or services of the District were sold to departments within the District or to external customers and how the sales revenues covered the expenses of the goods or services. The remaining statements, fiduciary statements, provide financial information about activities for which the District acts solely as a trustee or agent for the benefit of those outside of the district. The notes to the financial statements starting on page 22 provide narrative explanations or additional data needed for full disclosure in the government-wide statements or the fund financial statements. The combining statements for non-major funds contain even more information about the District's individual funds. These are not required by TEA. The sections labeled TEA Required Schedules and Federal Awards Section contain data used by monitoring or regulatory agencies for assurance that the District is using funds supplied in compliance with the terms of grants. 4

10 Reporting the District as a Whole The Statement of Net Position and the Statement of Activities The analysis of the District's overall financial condition and operations begins on page 11. Its primary purpose is to show whether the District is better off or worse off as a result of the year's activities. The Statement of Net Position includes all the District's assets and liabilities at the end of the year while the Statement of Activities includes all the revenues and expenses generated by the District's operations during the year. These apply the accrual basis of accounting which is the basis used by private sector companies. All of the current year's revenues and expenses are taken into account regardless of when cash is received or paid. The District's revenues are divided into those provided by outside parties who share the costs of some programs, such as tuition received from students from outside the district and grants provided by the U.S. Department of Education to assist children with disabilities or from disadvantaged backgrounds (program revenues), and revenues provided by the taxpayers or by TEA in equalization funding processes (general revenues). All the District's assets are reported whether they serve the current year or future years. Liabilities are considered regardless of whether they must be paid in the current or future years. These two statements report the District's net assets and changes in them. The District's net assets (the difference between assets and liabilities) provide one measure of the District's financial health, or financial position. Over time, increases or decreases in the District s net position are one indicator of whether its financial health is improving or deteriorating. To fully assess the overall health of the District, however, you should consider non-financial factors as well, such as changes in the District's average daily attendance or its property tax base and the condition of the District's facilities. In the Statement of Net Position and the Statement of Activities, the District reports one kind of activity: Governmental activities-most of the District's basic services are reported here, including instruction, staff development, instructional leadership, school leadership, counseling, co-curricular activities, food services, transportation, maintenance, debt service, community services, and general administration. Property taxes, tuition, fees, and state and federal grants finance most of these activities. Reporting the District's Most Significant Funds Fund Financial Statements The Fund Financial statements begin on page 13 and provide detailed information about the most significant funds-not the District as a whole. Laws and contracts require the District to establish some funds, such as grants received under the No Child Left Behind Act from the U.S. Department of Education. The District's administration establishes many other funds to help it control and manage money for particular purposes (like campus activities). The District's two kinds of funds-governmental and proprietary-use different accounting approaches. 5

11 NET POSITION TABLE I Government Government Activities Activities Current and Other Assets $ 79,429,824 $ 67,445,663 Capital Assets 136,946, ,767,281 TOTAL ASSETS $ 216,375,854 $ 205,212,944 Deferred charge on Refunding $ 724,368 $ 790,219 TOTAL DEFERRED OUTFLOWS OF RESOURCES $ 724,368 $ 790,219 Long Term Liabilities 80,043,076 71,575,848 Other Liabilities 20,442,636 18,858,003 TOTAL LIABILITIES $ 100,485,713 $ 90,433,851 Net Position: Invested in capital assets $ 57,955,030 $ 67,109,281 net of related debt Restricted 17,964,766 9,567,330 Unrestricted 40,694,713 38,892,701 TOTAL NET POSITION $ 116,614,509 $ 115,569,312 6

12 CHANGES IN NET POSITION TABLE II Governmental Governmental Activities Activities REVENUES: Program Revenues: Charges for Services $ 3,744,671 $ 3,952,717 Operating grants and 36,330,426 38,414,155 contributions General Revenues: Maintenance and Operating Taxes 21,618,492 21,932,794 Debt Service Taxes 34,993 59,893 State-aid Formula grants & Other 114,534, ,184,686 Grants and Contributions Investment Earnings 70,414 96,168 Miscellaneous 20,741 21,897 TOTAL REVENUES $ 176,354,055 $ 173,662,310 EXPENSES: Instruction, Curriculum, and Media Services $ 95,728,414 $ 91,949,897 Instruction, & School Leadership 6,637,961 6,615,588 Student Support Services 13,174,914 13,197,665 Child Nutrition 11,065,882 11,100,321 Co-Curricular Activities 7,063,184 6,975,634 General Administration 17,115,853 16,482,896 Plant Maintenance, Security & Data Processing 19,662,681 19,342,249 Community Services 2,181,705 2,099,332 Debt Services 3,377,883 3,399,527 Other Activities 438, ,567 TOTAL EXPENSES $ 176,447,134 $ 171,556,677 Increase in Net Position before ( 93,078) 2,105,633 transfers and special items Beginning Net Position 115,569, ,228,902 Prior Period Adjustments 1,138,275 ( 765,223) Ending Net Position $ 116,614,509 $ 115,569,312 7

13 Governmental funds-most of the District's basic services are reported in governmental funds. These use modified accrual accounting (a method that measures the receipt and disbursement of cash and all other financial assets that can be readily converted to cash) and report balances that are available for future spending. The governmental fund statements provide a detailed short-term view of the District's general operations and the basic services it provides. We describe the differences between governmental activities (reported in the Statement of Net Position and the Statement of Activities) and governmental funds in reconciliation schedules following each of the Fund Financial statements. The District adopted Government Accounting Standards Board Statement No. 54 Fund Balance Reporting and Governmental Fund Type Definitions which establishes fund balance classifications that comprise a hierarchy based primarily on the extent to which a government is bound to observe constraints imposed upon the use of the resources reported in governmental funds. Those fund balance classifications are described below. Nonspendable Amounts that cannot be spent because they are either not in a spendable form or are legally or contractually required to be maintained intact. Restricted Amounts that can be spent only for specific purposes because of constraints imposed by external providers, or imposed by constitutional provisions or enabling legislation. Committed Amounts that can be only be used for specific purposes pursuant to approval by formal action by the Board. Assigned - For the General Fund, amounts that are appropriated by the Board or a Board designee that are to be used for specific purposes. For all other governmental funds, any remaining positive amounts not previously classified as nonspendable, restricted or committed. Unassigned Amounts that are available for any purpose; these amounts can be reported only in the District s General Fund. Proprietary funds-the District reports the activities for which it charges users (whether outside customers or other units of the District) in proprietary funds using the same accounting methods employed in the Statement of Net Position and the Statement of Activities. In fact, the District's enterprise funds (one category of proprietary funds) are the business-type activities reported in the government-wide statements but containing more detail and additional information, such as cash flows. The internal service funds (the other category of proprietary funds) report activities that provide supplies and services for the District's other programs and activities-such as the District's self-insurance programs, the print shop, and transportation. The District as Trustee Reporting the District's Fiduciary Responsibilities The District is the trustee, or fiduciary, for monies held on behalf of third parties. All of the District's fiduciary activities are reported in separate Statements of Fiduciary Net Position on page 21. We exclude these resources from the District's other financial statements because the District cannot use these assets to finance its operations. The District is only responsible for ensuring that the assets reported in these funds are used for their intended purposes. 8

14 GOVERNMENT-WIDE FINANCIAL ANALYSIS The District has implemented GASB Statement #34. Our analysis focuses on the net position (Table I) and changes in net position Table II) of the District's governmental and business-type activities. Net position of the District's governmental activities increased from $ 115,569,312 to $ 116,614,509. Unrestricted net position - the part of net position that can be used to finance day-to-day operations without constraints established by debt covenants, enabling legislation, or other legal requirements was $40,694,713. In 2014, fund balance of our government-type activities increased by $ 10,131,754 or 28.5 percent. This increase is mostly due to the Public Property Note, Series The District's total revenues increased by 1.9 percent or $3.2 million. The total cost of all programs and services was higher than last year ($9.3 million) due to increases in construction costs and salaries. The cost of all governmental activities this year was $ million compared to $ million last year. However, as shown in the Statement of Activities on page 12, the amount that our taxpayers ultimately financed for these activities through District taxes was only $ 21.6 million because some of the costs were paid by those who directly benefited from the programs or by other governments and organizations that subsidized certain programs with grants and contributions or by State equalization funding. THE DISTRICT'S FUNDS As the District completed the year, its governmental funds as presented in the balance sheet on page 13 reported a combined fund balance of $ 46.8 million, which last year's was total of $ 36.6 million. Included in this year's total change in fund balance was an increase of $ 3.0 million in the District's General Fund. Capital expenditures reduce available fund balances; however, they create new assets for the District as reported in the Statement of Net Position and as discussed in the notes to the financial statements. Over the course of the year, the Board of Trustees revised the District's budget several times. These budget amendments fall into two categories. The first category involved amendments moving funds from programs that did not need all the resources originally appropriated to them to programs with resource needs. The second category involves budgeting for additional state foundation revenues. The District's General Fund balance of $ 34.3 million reported on page 15 differs from the General Fund's budgetary fund balance of $ 23.7 million reported in the budgetary comparison schedule on page 17. This is principally due to cost savings by the District during the year. CAPITAL ASSET AND DEBT ADMINISTRATION Capital Assets At the end of 2014, the District had $ million invested in a broad range of capital assets, including facilities and equipment for instruction, transportation, athletics, administration, and maintenance. This amount represents an increase of just over $ 7.2 million, or 2.7 percent, from last year. 9

15 This year's major additions include: Furniture and Equipment $ 677,255 Energy Conservation Project-District Wide 5,686,106 Roofing-Weslaco High, Warehouse, Margo, and Roosevelt 1,168,777 TOTAL $ 7,532,138 More detailed information about the District's capital assets is presented in Notes to the Financial Statements, Note F, Capital Asset Activity. See page 35 and page 36. DEBT At year-end, the District had $ 79.0 million in bonds and notes outstanding versus $ 70.7 million last year an increase of 11.8 percent. The District's general obligation bond rating has been the highest possible in 2014, according to national rating agencies. Other obligations include accrued vacation pay and sick leave. More detailed information about the District's long-term liabilities is presented in Notes to the Financial Statements, Note G, Bonds Payable and Contractual Obligations. NEXT YEAR'S BUDGETS AND RATES The District's elected and appointed officials considered many factors when setting the fiscal year 2015 budget and tax rates. These indicators were taken into account when adopting the General Fund budget for Amounts available for appropriation in the General Fund budget are $ million, with an increase of 1.7% over the final 2014 budget of $ million. State per capita payments and Food Service revenues account for all of the revenue increase. The District will use its revenues to finance programs we currently offer. Budgeted expenditures are expected to rise nearly 2.2 percent to $ million from $ million original budget in Additional teachers, pay increases, food service cost, utilities, maintenance and operations, and TRS On Behalf expenditures cover most of the increases. The District has added no new major programs or initiatives to the 2015 budget. If these estimates are realized, the District's budgetary General Fund fund balance is expected to decrease by 5.2 million by the close of CONTACTING THE DISTRICT'S FINANCIAL MANAGEMENT This financial report is designed to provide our citizens, taxpayers, customers, investors and creditors with a general overview of the District's finances and to show the District's accountability for the money it receives. If you have questions about this report or need additional financial information, contact the District's business office, at WESLACO ISD, 312 West Fifth Street, Weslaco, Texas. 10

16 STATEMENT OF NET POSITION AUGUST 31, 2014 EXHIBIT A-1 Primary Government Data Control Governmental Codes Activities ASSETS 1110 Cash and Cash Equivalents $ 66,269, Property Taxes Receivable (Delinquent) 4,704, Allowance for Uncollectible Taxes (359,672) 1240 Due from Other Governments 5,497, Other Receivables 422, Inventories - supplies and materials 1,077, Prepayments 1,760, Capital Bond & Other Debt Issuance Costs 58, Land and Land Improvements, net 10,527, Buildings, net 115,734, Furniture and Equipment, net 2,912, Construction in Progress 7,771, TOTAL ASSETS $ 216,375,854 DEFERRED OUTFLOWS OF RESOURCES 1997 Deferred charge on Refunding 724, TOTAL DEFERRED OUTFLOWS OF RESOURCES $ 724,368 LIABILITIES 2110 Accounts Payable 6,160, Interest Payable 270, Payroll Deductions & Withholdings 1,053, Accrued Wages Payable 4,280, Due to Other Governments 4,328, Unearned Revenues 4,349, Current Bonds Payable 5,415, Long Term Bonds Payable 73,576, Premium & Discount on Issuance of Bonds 317, Other Long Term Debt Payable 734, TOTAL LIABILITIES $ 100,485,713 NET POSITION 3200 Invested in capital assets, net of related debt 57,955,030 Restricted for: 3820 Federal and state programs 5,472, Debt service 1,544, Capital projects 10,691, Campus activities 245, Scholarships 9, Unrestricted 40,694, TOTAL NET POSITION $ 116,614,509 The accompanying notes are an integral part of this statement 11

17 STATEMENT OF ACTIVITIES FOR THE YEAR ENDED AUGUST 31, 2014 EXHIBIT B-1 Net (Expenses) Revenue & Changes in Net Assets Program Revenues Data Operating Control Charges for Grants and Governmental Codes Expenses Services Contributions Activities GOVERNMENTAL ACTIVITIES: 11 Instruction $ 86,818,655 $ 209,036 $ 13,435,283 $ (73,174,335) 12 Instruction Resources & Media Services 3,138,683 3,375 1,199,479 (1,935,830) 13 Curriculum & Staff Development 5,771, ,811,240 (2,959,547) 21 Instructional Leadership 1,741, ,671 (1,024,885) 23 School Leadership 4,896, ,264 (4,559,140) 31 Guidance, Counseling & Evaluation Services 5,873,335-1,718,481 (4,154,854) 32 Social Work Services 1,590, ,454 (706,891) 33 Health Services 1,833, ,941 (1,045,656) 34 Student (Pupil) Transportation 3,877, ,794 (3,001,823) 35 Food Services 11,065, ,330 10,680, , Co-curricular/Extracurricular Activities 7,063, , ,969 (6,235,776) 41 General Administration 17,115,853 1,891, ,582 (14,712,134) 51 Plant Maintenance & Operations 15,587,518 93,702 1,030,353 (14,463,463) 52 Security & Monitoring Services 2,058,835-89,280 (1,969,555) 53 Data Processing Services 2,016,328-71,493 (1,944,836) 61 Community Services 2,181, ,343 1,030,863 (978,499) 72 Debt Service - Interest on Long Term Debt 3,118, (3,118,302) 73 Debt Service - Bond Issuance Cost & Fees 259, (259,581) 95 Payments to Juvenile Justice Alternative Ed. Prog. 242, (242,000) 99 Other Intergovernmental Charges 196, (196,658) [TG] Total Government Activities: $ 176,447,134 $ 3,744,671 $ 36,330,426 $ (136,372,037) [TP] TOTAL PRIMARY GOVERNMENT: $ 176,447,134 $ 3,744,671 $ 36,330,426 $ (136,372,037) Data Control Codes General Revenues Taxes MT Property Taxes Levied for General Purposes $ 21,618,492 DT Property Taxes Levied for Debt Service 34,993 GC Grants & Contributions not Restricted 114,534,319 IE Investment Earnings 70,414 MI Miscellaneous Local and Intermediate Revenue 20,741 TR Total General Revenues $ 136,278,958 CN Change in Net Position $ (93,078) NB Net Position - Beginning 115,569,312 PA Prior Period Adjustment 1,138,275 NE Net Position - Ending $ 116,614,509 The accompanying notes are an integral part of this statement. 12

18 BALANCE SHEET GOVERNMENTAL FUNDS AUGUST 31, 2014 EXHIBIT C-1 Data 10 Control Debt 2014 Energy Total Codes General Service Conservation Other Governmental Fund Fund Fund Funds Funds ASSETS 1110 Cash and Cash Equivalents $ 36,432,593 $ 5,743,912 $ 10,398,117 $ 5,245,452 $ 57,820, Property Taxes - Delinquent 4,487, , ,704, Allowance for Uncollectible Taxes (Credit) (343,013) (16,659) - - (359,672) 1240 Due from Other Governments 4,179,874 1,420-1,316,025 5,497, Due from Other Funds 965, , Other Receivables 369, , Inventories 1,077, ,077, Deferred Expenditures 1,760, ,760, Total Assets $ 48,929,847 $ 5,945,273 $ 10,398,117 $ 6,561,803 $ 71,835,041 LIABILITIES Liabilities: 2110 Accounts Payable $ 2,048,252 $ - $ 3,218,144 $ 637,150 $ 5,903, Payroll Deductions & Withholdings Payable 1,053, ,053, Accrued Wages Payable 3,945, ,983 4,280, Due to Other Funds , , Due to Other Governments 7,662 4,245,611-75,664 4,328, Unearned Revenues 3,422, ,425 4,192, Total Liabilities 10,477,017 4,245,611 3,218,144 2,783,877 20,724,649 DEFERRED INFLOWS OF RESOURCES 2601 Unavailable Revenue - Property Taxes 4,144, , ,344, Total Deferred Inflows of Resources 4,144, , ,344,550 Fund Balances: 3410 Nonspendable Inventories $ 938,278 $ - $ - $ - $ 938, Nonspendable Prepaid Items 1,760, ,760, Restricted for Grant Restrictions 4,494, ,668 4,505, Restricted for Capital Acquisitions - - 7,179,974 3,511,762 10,691, Restricted for Retirement of Debt - 1,499, ,499, Other Restrictions of Fund Balance Other Committed Fund Balances , , Other Assigned Fund Balance 11,114, ,584 11,124, Undesignated/Unassigned Fund Balance 16,000, ,000,000 Total Fund Equity $ 34,308,222 $ 1,499,721 $ 7,179,974 3,777,926 46,765, Total Liabilities, Deferred Inflows & Fund Balances $ 48,929,847 $ 5,945,273 $ 10,398,117 6,561,803 $ 71,835,041 The accompanying notes are an integral part of this statement. 13

19 RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET POSITION FOR THE YEAR ENDED AUGUST 31, 2014 EXHIBIT C-2 Total Fund Balance - Governmental Funds $ 46,765,842 The District uses internal service funds to charge the costs of certain activities, such as self-insurance and printing, to appropriate functions in other funds. The assets and liabilities of the internal service funds are included in governmental activities in the statement of position. The net effect of this consolidation is to increase (decrease) net position. 8,146,815 Capital Assets used in governmental activities are not financial resources and therefore are 67,109,281 not reported in governmental funds. At the beginning of the year, the cost of these assets was $ 263,314,369 and the accumulated depreciation was $125,527,088. In addition, long-term liabilities, including bonds payable, are not due and payable in the current period, and therefore are not reported as liabilities in the funds. The net effect of including the beginning balances for capital assets (net of depreciation) and long-term debt in the governmental activities is to increase (decrease) net position. Current year capital outlays and long-term debt principal payments are expenditures in the fund 12,230,182 financial statement, but they should be shown as increases in capital assets and reductions in long-term debt in the government-wide financial statements. The net effect of including the 2014 capital outlays and debt principal payments is to increase (decrease) net position. The 2014 depreciation expense increases accumulated depreciation. The net effect of the current (8,672,433) year's depreciation is to decrease net position. Various other reclassifications and eliminations are necessary to convert from the modified accrual (8,965,178) basis of accounting to accrual basis of accounting. These include recognizing deferred revenue as revenue, eliminating interfund transactions, reclassifying the proceeds of bond sales as an increase in bonds payable, and recognizing the liabilities associated with maturing long-term debt and interest. The net effect of these reclassifications and recognitions is to increase (decrease) net position. Net Position of Governmental Activities $ 116,614,509 The accompanying notes are an integral part of this statement. 14

20 EXHIBIT C-3 WESLACO INDEPENDENT SCHOOL DISTRICT STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE GOVERNMENTAL FUNDS FOR THE YEAR ENDED AUGUST 31, 2014 Data 10 Debt 2014 Energy Total Control General Service Conservation Other Governmental Codes Fund Fund Fund Funds Funds REVENUES: 5700 Local and Intermediate Sources $ 23,315,439 $ 94,979 $ 3,760 $ 379,616 $ 23,793, State Program Revenues 121,222,647 90,976-1,015, ,328, Federal Program Revenues 12,793, ,730,541 28,523,599 Total Revenues $ 157,331,144 $ 185,955 $ 3,760 $ 17,125,400 $ 174,646,259 EXPENDITURES: Current 0011 Instruction $ 79,497,381 $ - $ - $ 8,568,199 $ 88,065, Instruction Resources & Media Services 2,222, ,061,718 3,283, Curriculum & Staff Development 3,241, ,558,531 5,799, Instructional Leadership 1,201, ,377 1,837, School Leadership 4,956, ,646 5,069, Guidance, Counseling & Evaluation Services 4,632, ,429,712 6,061, Social Work Services 846, ,242 1,659, Health Services 1,211, ,446 1,910, Student (Pupil) Transportation 3,867, ,792 3,910, Food Services 11,379, ,379, Co-curricular/Extracurricular Activities 5,845, ,676 6,102, General Administration 4,059, ,059, Plant Maintenance & Operations 16,273, ,911 16,318, Security & Monitoring Services 2,214, ,209 2,221, Data Processing Services 2,027, ,027, Community Services 1,185, ,966 2,160,887 Debt Service: 0071 Debt Service - Principal on Long Term Debt 1,064,000 3,315, ,379, Debt Service - Interest on Long Term Debt 212,214 2,981, ,193, Debt Service - Bond Issuance Cost & Fees 192,392 1, ,729 Capital Outlay 0081 Facilities Acquisitions and Construction - - 5,686,106 1,487,820 7,173,927 Intergovernmental: 0095 Payments to Juvenile Justice Alternative Ed. Prog. 242, , Other Intergovernmental Charges 196, , Total Expenditures $ 146,570,954 $ 6,297,940 $ 5,686,106 $ 18,692,246 $ 177,247, Excess (Deficiency) of Revenues Over (Under) $ 10,760,190 $ (6,111,985) $ (5,682,346) $ (1,566,845) $ (2,600,987) Expenditures OTHER FINANCING SOURCES (USES) 7912 Sale of Real and Personal Property 20, , Loan Proceeds-Governmental Fund 12,712, ,712, Transfers In - 6,200,000 12,862,320 1,464,000 20,526, Transfers Out (Uses) (20,526,320) (20,526,320) 7080 Total Other Financing Sources (Uses) $ (7,793,579) $ 6,200,000 $ 12,862,320 $ 1,464,000 $ 12,732, Net Change in Fund Balances $ 2,966,611 $ 88,015 $ 7,179,974 $ (102,845) $ 10,131, Fund Balance - September 1 (Beginning) 31,341, ,431-3,880,771 35,495, Prior Period Adjustment - 1,138, ,138, Fund Balance - August 31 (Ending) $ 34,308,222 $ 1,499,721 $ 7,179,974 $ 3,777,926 $ 46,765,842 The accompanying notes are an integral part of this statement. 15

21 EXHIBIT C-4 WESLACO INDEPENDENT SCHOOL DISTRICT RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED AUGUST 31, 2014 Total Net Change in Fund Balance - Governmental Funds $ 10,131,754 The District uses internal service funds to charge the costs of certain activities, such (565,160) self-insurance and printing, to appropriate functions in other funds. The net income (loss) of internal service funds are reported with governmental activities. The net effect of this consolidation is to increase (decrease) net position. Current year capital outlays and long-term principal payments are expenditures in 12,230,182 the fund financial statements, but they should be shown as increases in capital assets and reductions in long-term debt in the government-wide financial statements. The net effect of removing the 2014 capital outlays and debt principal payments is to increase (decrease) net position. Depreciation is not recognized as an expense in governmental funds since it does not (8,672,433) require the use of current financial resources. The net effect of the current year's depreciation is to decrease net position. Various other reclassifications and eliminations are necessary to convert from the (13,217,421) modified accrual basis of accounting to accrual basis of accounting. These include recognizing unavailable revenue from taxes as revenue, adjusting current year revenue to show the revenue earned from the current year's tax levy, eliminating interfund transactions, reclassifying the proceeds of bond sales, and recognizing the liabilities associated with maturing long-term debt and interest. The net effect of these reclassifications and recognitions is to increase (decrease) net position. Change in Net Position of Governmental Activities $ (93,078) The accompanying notes are an integral part of this statement. 16

22 EXHIBIT C-5 WESLACO INDEPENDENT SCHOOL DISTRICT BUDGETARY COMPARISON SCHEDULE GENERAL FUND FOR THE YEAR ENDED AUGUST 31, 2014 Variance With Data Final Budget Control Actual Amounts Positive or Codes Original Final (Negative) REVENUES: 5700 Local and Intermediate Sources $ 22,290,977 $ 22,886,827 $ 23,315,439 $ 428, State Program Revenues 120,095, ,195, ,222,647 27, Federal Program Revenues 12,493,591 12,748,591 12,793,058 44,467 Total Revenues 154,880, ,831, ,331, ,092 EXPENDITURES: Current 0011 Instruction 82,453,564 83,388,182 79,497,381 3,890, Instruction Resources & Media Services 2,243,812 2,323,584 2,222, , Curriculum & Instructional Staff Development 3,097,638 3,303,559 3,241,229 62, Instructional Leadership 1,325,135 1,435,464 1,201, , School Leadership 5,063,560 5,131,670 4,956, , Guidance, Counseling & Evaluation Services 4,824,472 4,938,328 4,632, , Social Work Services 856, , ,948 47, Health Services 1,283,730 1,346,715 1,211, , Student (Pupil) Transportation 3,876,354 4,212,649 3,867, , Food Services 11,491,324 12,581,474 11,379,208 1,202, Co-curricular/Extracurricular Activities 5,764,908 6,337,546 5,845, , General Administration 4,658,829 4,708,829 4,059, , Plant Maintenance & Operations 18,805,859 17,980,689 16,273,065 1,707, Security & Monitoring Services 2,449,997 2,535,825 2,214, , Data Processing Services 2,008,765 2,223,767 2,027, , Community Services 855,852 1,269,717 1,185,921 83, Debt Service - Principal on Long Term Debt 1,064,000 1,064,000 1,064, Debt Service - Interest on Long Term Debt 212, , , Debt Service - Bond Issuance Cost & Fees 5, , ,392 3, Construction & Acquisitions - 30,000-30, Payments to Juvenile Justice Alternative Ed. Prog. 220, , ,000 22, Other Intergovernmental Charges 226, , ,658 44, Total Expenditures 152,787, ,620, ,570,954 10,049, Excess (Deficiency) of Revenues Over (Under) 2,092, ,995 10,760,190 10,549,195 Expenditures OTHER FINANCING SOURCES (USES) 7912 Sale of Real and Personal Property ,741 20, Loan Proceeds-Governmental Fund - 12,712,000 12,712, Transfers In Transfers Out (Uses) (6,200,000) (20,526,320) (20,526,320) Total Other Financing Sources (Uses) (6,200,000) (7,814,320) (7,793,579) 20, Net Change in Fund Balances (4,107,352) (7,603,325) 2,966,611 10,569, Fund Balance - September 1 (Beginning) 31,341,611 31,341,611 31,341, Fund Balance - August 31 (Ending) $ 27,234,259 $ 23,738,286 $ 34,308,222 $ 10,569,936 The accompanying notes are an integral part of this statement 17

23 STATEMENT OF NET POSITION PROPRIETARY FUNDS AUGUST 31, 2014 EXHIBIT D-1 Total Self Insurance Workers Comp Unemployment Internal Fund Fund Fund Service Funds ASSETS Current Assets: Cash and Cash Equivalents $ 4,681,082 $ 3,610,515 $ 157,791 $ 8,449,388 Other Receivables 52, ,989 Prepayments - 58,061-58,061 LIABILITIES Total Assets $ 4,734,072 $ 3,668,576 $ 157,791 $ 8,560,438 Current Liabilities: Account Payables $ 198,543 $ 58,061 $ - $ 256,604 Unearned Revenues 1,015, ,015,413 NET POSITION Total Liabilities $ 1,213,956 $ 58,061 $ - $ 1,272,017 Unrestricted $ 3,520,115 $ 3,610,515 $ 157,791 $ 7,288,421 Total Net Position $ 3,520,115 $ 3,610,515 $ 157,791 $ 7,288,421 The accompanying notes are an integral part of this statement. 18

24 STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET POSITION PROPRIETARY FUNDS FOR THE YEAR ENDED AUGUST 31, 2014 EXHIBIT D-2 Total Self Insurance Workers Comp Unemployment Internal Fund Fund Fund Service Funds OPERATING REVENUES: Charges for Services $ 12,265,589 $ 324,498 $ 98,892 $ 12,688,979 Total Operating Revenues 12,265, ,498 98,892 12,688,979 OPERATING EXPENSES: Operating Income 12,265, ,498 98,892 12,688,979 Fees 2,280, ,546 29,283 2,572,971 Insurance Claims and Expenses 10,067, ,350-10,689,180 Total Operating Expenses 12,347, ,896 29,283 13,262,151 Operating Income (Loss) (82,383) (560,398) 69,609 (573,172) NON-OPERATING REVENUES (EXPENSES) Interest and Investment Revenue 5,715 5,521-11,236 Total Non-Operating Revenue (Expenses) 5,715 5,521-11,236 (Income (Loss) before Contributions and Transfers (76,668) (554,877) 69,609 (561,936) Transfers In Change in Net Position (76,668) (554,877) 69,609 (561,936) Total Net Position-September 1, (Beginning) 3,596,783 4,165,392 88,181 7,850,357 Total Net Position - August 31, (Ending) $ 3,520,115 $ 3,610,515 $ 157,791 $ 7,288,421 The accompanying notes are an integral part of this statement. 19

25 STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE YEAR ENDED AUGUST 31, 2014 EXHIBIT D-3 Total Self Insurance Workers Comp Unemployment Internal Fund Fund Fund Service Funds CASH FLOWS FROM OPERATING ACTIVITIES Receipts from interfund services provided $ 10,534,560 $ 324,498 $ 98,892 $ 10,957,951 Receipts from employees 1,874, ,874,307 Receipts from other participants 10, ,516 Receipts from reimbursements and refunds 196,193 6, ,849 Payments for benefit claims (10,067,829) (628,006) - (10,695,836) Payments for administration (2,545,488) (263,546) (29,283) (2,838,317) Net cash provided in operating activities 2,259 (560,398) 69,609 (488,530) CASH FLOWS FROM INVESTING ACTIVITIES Interest received 5,715 5,521-11,236 Net cash provided from investing activities 5,715 5,521-11,236 Net increase in cash and cash equivalents 7,974 (554,877) 69,609 (477,294) Cash and Cash equivalents-beginning 4,673,108 4,165,392 88,181 8,926,682 Cash and Cash equivalents-ending $ 4,681,082 $ 3,610,515 $ 157,791 $ 8,449,388 Reconciliation of operating income to net cash provided by operating activities Operating income/(loss) $ (82,383) $ (560,398) 69,609 (573,172) Adjustments to reconcile operating loss to net cash provided: (Increase) decrease in miscellaneous receivables (52,989) - - (52,989) (Increase) decrease in other current assets - 12,025-12,025 Increase (Decrease) in account payables (16,164) (12,025) - (28,189) Increase (Decrease) in deferred revenues 153, ,795 Total adjustments 84, ,642 Net cash provided by operating activities $ 2,259 $ (560,398) $ 69,609 $ (488,530) The accompanying notes are an integral part of this statement 20

26 STATEMENT OF FIDUCIARY NET POSITION FIDUCIARY FUNDS AUGUST 31, 2014 EXHIBIT E-1 Agency Funds ASSETS Cash and Cash Equivalents $ 542,458 Total Assets $ 542,458 LIABILITIES Due to Student Groups $ 542,458 Total Liabilities $ 542,458 The accompanying notes are an integral part of this statement 21

27 NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED AUGUST 31, 2014 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Weslaco Independent School District (the "District") is a public educational agency operating under the applicable laws and regulations of the State of Texas. It is governed by a seven member Board of Trustees (the "Board") elected by registered voters of the District. The District prepares its basic financial statements in conformity with generally accepted accounting principles promulgated by the Governmental Accounting Standards Board and other authoritative sources identified in Statement on Auditing Standards No. 69 of the American Institute of Certified Public Accountants; and it complies with the requirements of the appropriate version of Texas Education Agency's Financial Accountability System Resource Guide (the "Resource Guide") and the requirements of contracts and grants of agencies from which it receives funds. A. REPORTING ENTITY The Board of Trustees (the "Board") is elected by the public and it has the authority to make decisions, appoint administrators and managers, and significantly influence operations. It also has the primary accountability for fiscal matters. Therefore, the District is a financial reporting entity as defined by the Governmental Accounting Standards Board ("GASB") in its Statement No. 14, "The Financial Reporting Entity." There are no component units included within the reporting entity. B. GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS The Statement of Net Position and the Statement of Activities are government-wide financial statements. They report information on all of the Weslaco Independent School District non-fiduciary activities with most of the interfund activities removed. Governmental activities include programs supported primarily by taxes, State foundation funds, grants and other intergovernmental revenues. The Statement of Activities demonstrates how other people or entities that participate in programs the District operates have shared in the payment of the direct costs. The "charges for services" column includes payments made by parties that purchase, use, or directly benefit from goods or services provided by a given function or segment of the District. Examples include tuition paid by students not residing in the district, school lunch charges, etc. The "grants and contributions" column includes amounts paid by organizations outside the District to help meet the operational or capital requirements of a given function. Examples include grants under the Elementary and Secondary Education Act. If revenue is not a program revenue, it is a general revenue used to support all of the District's functions. Taxes are always general revenues. Inter-fund activities between governmental funds appear as due to/due from on the Governmental Fund Balance Sheet and as other resources and other uses on the governmental fund Statement of Revenues, Expenditures and Changes in Fund Balance. All inter-fund transactions between governmental funds are eliminated on the government-wide statements. Inter-fund activities between governmental funds remain on the government-wide statements and appear on the government-wide Statement of Net Position as internal balances and on the Statement of Activities as inter-fund transfers. Inter-fund activities between governmental funds and fiduciary funds remain as due to/due from on the government-wide Statement of Activities. The fund financial statements provide reports on the financial conditions and results of operations for two fund categories governmental and fiduciary. Since the resources in the fiduciary funds cannot be used for District Operations, they are not included in the governmentwide statements. The District considers some governmental funds major and reports their financial conditions and results of operations in a separate column. 22

28 NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED AUGUST 31, 2014 C. MEASUREMENT FOCUS, BASIS OF ACCOUNTING, AND FINANCIAL STATEMENT PRESENTATION The government-wide financial statements use the economic resources measurement focus and the accrual basis of accounting, and fiduciary fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of the 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. Governmental fund financial statements use the current financial resources measurement focus and the modified accrual basis of accounting. With this measurement focus, only current assets, current liabilities and fund balances are included on the balance sheet. Operating statements of these funds present net increases and decreases in current assets (i.e., revenues and other financing sources and expenditures and other financing uses). The modified accrual basis of accounting recognizes revenues in the accounting period in which they become both measurable and available and it recognizes expenditures in the accounting period in which the fund liability is incurred, if measurable, except for un-matured interest and principal on long-term debt, which is recognized when due. The expenditures related to certain compensated absences and claims and judgments are recognized when the obligations are expected to be liquidated with expendable available financial resources. The District considers all revenues available if they are collectible within 60 days after year end. Revenues from local sources consist primarily of property taxes. Property tax revenues and revenues received from the State are recognized under the susceptible to accrual concept. Miscellaneous revenues are recorded as revenue when received in cash because they are generally not measurable until actually received. Investment earnings are recorded as earned, since they are both measurable and available. Grant funds are considered to be earned to the extent of expenditures made under the provisions of the grant. Accordingly, when such funds are received, they are recorded as deferred revenues until related and authorized expenditures have been made. If balances have not been expended by the end of the project period, grantors sometimes require the District to refund all or part of the unused amount. The Proprietary Fund Types and Fiduciary Funds are accounted for on a flow of economic resources measurement focus and utilize the accrual basis of accounting. This basis of accounting recognizes revenues in the accounting period in which they are earned and become measurable and expenses in the accounting period in which they are incurred and become measurable. The District applies all GASB pronouncements as well as the Financial Accounting Standards Board pronouncements issued on or before November 30, 1989, unless these pronouncements conflict or contradict GASB pronouncements. With this measurement focus, all assets and all liabilities associated with the operation of these funds are included on the fund Statement of Net Assets. The fund equity is segregated into invested in capital assets net of related debt, restricted net assets, and unrestricted net assets. 23

29 NOTES TO THE FINANCIAL STATEMENTS D. FUND ACCOUNTING YEAR ENDED AUGUST 31, 2014 The District reports the following major governmental funds: 1. The General Fund The general fund is the District's primary operating fund. It accounts for all financial resources except those required to be accounted for in another fund. 2. Debt Service Funds The District accounts for resources accumulated and payments made for principal and interest on long-term general obligation debt of governmental funds in a debt service fund. 3. The Capital Projects Fund - The proceeds from long-term debt financing and revenues and expenditures related to authorized construction and other capital assets acquisitions are accounted for in a capital project fund. Additionally, the District reports the following fund type(s): Governmental Funds: 1. Special Revenue Funds The District accounts for resources restricted to, or designated for, specific purposes by the District or a grantor in a special revenue fund. Most Federal and some State financial assistance is accounted for in a Special Revenue Funds and sometimes unused balances must be returned to the grantor at the close of specified project periods. 2. The Capital Projects Fund - The proceeds from long-term debt financing and revenues and expenditures related to authorized construction and other capital assets acquisitions are accounted for in a capital project fund. Proprietary Funds: 3. Internal Service Funds Revenues and expenses related to services provided to organizations inside the District on a cost reimbursement basis are accounted for in an internal service fund. Fiduciary Funds: 4. Agency Funds The District accounts for resources held for others in a custodial capacity in agency funds. The District's Agency Funds are. Textbooks Funds Campus Activity Funds Faculty Funds 24

30 NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED AUGUST 31, 2014 E. OTHER ACCOUNTING POLICIES 1. For purposes of the statement of cash flows for proprietary and similar fund-types, the District considers highly liquid investments to be cash equivalents if they have a maturity of three months or less when purchased. 2. The District reports inventories of supplies at cost including consumable maintenance, instructional, office, athletic, and transportation items. Supplies are recorded as expenditures when they are consumed. Inventories of food commodities are recorded at market values supplied by the Texas Department of Human Services. Although commodities are received at no cost, their fair market value is supplied by the Texas Department of Human Services and recorded as inventory and deferred revenue when received. When requisitioned, inventory and deferred revenue are relieved, expenditures are charged, and revenue is recognized for an equal amount. 3. In the government-wide financial statements in the fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities. Bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds using the effective interest method. Bonds payable are reported net of the applicable bond premium or discount. Bond issuance costs are reported as deferred charges and amortized over the term of the related debt. In the fund financial statements, governmental fund types recognized bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures.. 4. It is the District's policy to permit employees to accumulate state sick leave and local leave shall be non-cumulative. There is a liability for unpaid accumulated state sick leave. The District has a policy to pay professional $ 60 per day and Paraprofessional $ 40 per day when employees retire from service with the District. A liability for these amounts is reported in governmental funds only if they have matured, for example, as a result of employee resignations and retirements. 5. Capital assets, which include land, buildings, furniture and equipment, are reported in the applicable governmental columns in the government-wide financial statements. Capital assets are defined by the District as assets with an initial, individual cost of more than $5,000 and an estimated useful life in excess of two years. 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. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized. Major outlays for capital assets and improvements are capitalized as projects are constructed. Buildings, furniture and equipment of the District are depreciated using the straight line method over the following estimated useful lives: 25