MINERAL COUNTY SCHOOL DISTRICT HAWTHORNE, NEVADA ANNUAL FINANCIAL REPORT FISCAL YEAR ENDING JUNE 30, 2008

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1 HAWTHORNE, NEVADA ANNUAL FINANCIAL REPORT FISCAL YEAR ENDING JUNE 30, 2008

2 Independent Auditor s Report To the Board of Trustees of Mineral County School District Hawthorne, Nevada We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of Mineral County School District, Nevada, (the District ), as of and for the year ended June 30, 2008, which collectively comprise the District s basic financial statements as listed in the table of contents. These financial statements are the responsibility of the District s management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the District as of June 30, 2008, and the respective changes in financial position and cash flows, where applicable, and the respective budgetary comparison for the General Fund and the State and Federal Grants Fund for the year then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued a report dated October 30, 2007 on our consideration of the District s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and 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 the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. Management s Discussion and Analysis on pages M-1 through M-9 is not a required part of the basic financial statements but is supplementary information required by accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the supplementary information. However, we did not audit the information and express no opinion on it. 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 and schedules, and the Schedule of Expenditures of Federal Awards (as required by U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations) are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual nonmajor fund financial statements and schedules and the Schedule of Expenditures of Federal Awards have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole. Fallon, Nevada January 12, 2009

3 STATEMENT OF NET ASSETS JUNE 30, 2008 GOVERNMENTAL BUSINESS-TYPE ACTIVITIES ACTIVITIES TOTAL ASSETS Current Assets: Cash and investments Unrestricted $ 2,348,599 $ 10,327 $ 2,358,926 Accounts receivable 153, ,395 Due from other governments 60,716-60,716 Total Current Assets 2,562,822 11,215 2,574,037 Noncurrent Assets: Capital assets 16,044,121 15,859 16,059,980 Less: Accumulated depreciation 8,009,956 10,990 8,020,946 Total Noncurrent Assets 8,034,165 4,869 8,039,034 Total Assets 10,596,987 16,084 10,613,071 LIABILITIES Current Liabilities: Accounts payable 42,114 1,661 43,775 Accrued liabilities 683,072 1, ,349 Due to other governments 88,975-88,975 Deferred revenue 133, ,026 Current portion of long-term liabilities 395,173-4,594,602 Total Current Liabilities 1,342,360 2,938 5,544,727 Noncurrent Liabilities: Long-term debt, net of current portion 4,594,602-4,594,602 Total Liabilities 5,936,962 2,938 10,139,329 NET ASSETS Invested in capital assets, net of related debt 3,014,248 4,869 3,014,248 Restricted for: Debt service 728, ,337 Capital projects 328, ,901 Unrestricted 588,408 8, ,685 Total Net Assets $ 4,660,025 $ 13,146 $ 4,673,171 See accompanying notes. 2

4 STATEMENT OF ACTIVITIES PROGRAM REVENUES NET (EXPENSES) REVENUE AND OPERATING CHANGES IN NET ASSETS CHARGES FOR GRANTS AND GOVERNMENTAL BUSINESS-TYPE FUNCTIONS/PROGRAMS EXPENSES SERVICES CONTRIBUTIONS ACTIVITIES ACTIVITIES TOTAL Governmental Activities: Regular instruction $ 3,243,088 $ - $ 431,791 $ (2,811,297) $ - $ (2,811,297) Special instruction 852, ,673 (347,072) - (347,072) Vocational instruction 276,991-26,156 (250,835) - (250,835) Co-curricular and extra-curricular activities 130, (130,380) - (130,380) Adult instruction 49,326-52,280 2,954-2,954 Total Instruction 4,552,530-1,015,900 (3,536,630) - (3,536,630) Undistributed expenditures Support services: Student support 116, (116,823) - (116,823) Instructional support 272, (272,852) - (272,852) General administration 482, (482,360) - (482,360) School administration 563, (563,148) - (563,148) Business administration 14, (14,927) (14,927) Operation and maintenance 1,006, (1,006,138) - (1,006,138) Student transportation 281, (281,606) - (281,606) Central support 363, (363,557) - (363,557) Other support and services 42, (42,960) - (42,960) Facility acquisition and construction services 189, ,088 (25,365) - (25,365) Interest and fiscal charges 212, (212,676) - (212,676) Total Undistributed Expenditures 3,546, ,088 (3,382,412) - (3,382,412) Total Governmental Activities 8,099,030-1,179,988 (6,919,042) - (6,919,042) Business-type Activities: Food service program 207,152 43, ,420 - (20,732) (20,732) Total $ 8,306,182 $ 43,999 $ 1,322,408 (6,919,042) (20,732) (6,939,774) General Revenues: Property taxes, levied for general purposes 597, ,773 Property taxes, levied for debt service 490, ,985 Local school support taxes 466, ,143 Other taxes and fees 297, ,333 Unrestricted investment earnings 71,074-71,074 Other local sources 9,010-9,010 State aid not restricted to specific purposes 4,519,800-4,519,800 Federal aid not restricted to specific purpose 747, ,794 Total General Revenues 7,199,912-7,199,912 Change in Net Assets 280,870 (20,732) 260,138 NET ASSETS, BEGINNING OF YEAR 4,379,155 33,878 4,413,033 NET ASSETS, END OF YEAR $ 4,660,025 $ 13,146 $ 4,673,171 See accompanying notes. 3

5 GOVERNMENTAL FUNDS BALANCE SHEET JUNE 30, 2008 STATE AND DEBT OTHER TOTAL GENERAL FEDERAL SERVICE GOVERNMENTAL GOVERNMENTAL FUND GRANTS FUND FUNDS FUNDS ASSETS Cash and investments $ 941,351 $ 181,347 $ 721,935 $ 503,966 $ 2,348,599 Accounts receivable 76,097-6,533 70, ,507 Due from other governments - 60, ,716 Total Assets $ 1,017,448 $ 242,063 $ 728,468 $ 574,843 $ 2,562,822 LIABILITIES Accounts payable $ 35,277 $ 6,835 $ - $ 2 $ 42,114 Accrued liabilities 452, , , ,072 Due to other governments 88, ,975 Deferred revenue - 133, ,026 Total Liabilities 576, , , ,187 FUND BALANCES Reserved for: Debt service , ,468 Capital projects , ,901 Unreserved reported in: Undesignated 440,472 (23) - 117, ,266 Total Fund Balances 440,472 (23) 728, ,718 1,615,635 Total Liabilities and Fund Balances $ 1,017,448 $ 242,063 $ 728,468 $ 574,843 $ 2,562,822 See accompanying notes. 4

6 RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS JUNE 30, 2008 Total Fund Balances - Governmental Funds $ 1,615,635 Amounts reported for governmental activities in the statement of net assets are different because: Capital assets, net of the related depreciation, used in governmental activities are not financial resources and therefore are not reported in the governmental funds. 8,034,165 Certain liabilities are not reported in the governmental funds because they are not due and payable in the current period: General obligation payable (3,825,000) Installment note payable (993,084) Compensated absences (171,691) Total Net Assets - Governmental Activities $ 4,660,025 See accompanying notes. 5

7 GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES STATE AND DEBT OTHER TOTAL GENERAL FEDERAL SERVICE GOVERNMENTAL GOVERNMENTAL FUND GRANTS FUND FUNDS FUNDS REVENUES Local sources $ 1,350,949 $ - $ 600,203 $ - $ 1,951,152 State sources 4,553, , ,590 5,162,734 Federal sources 678, , ,266,016 Total Revenues 6,583, , , ,590 8,379,902 EXPENDITURES Regular instruction 2,503, , ,794 3,184,542 Special instruction , , ,363 Vocational instruction 253,089 26, ,244 Co-curricular and extra-curricular activities 127, ,502 Adult instruction - 52, ,280 Undistributed: Support services Student support 114, ,244 Instructional staff support 285, ,838 General administration 476, ,385 School administration 582, ,200 Business administration 10, ,597 14,597 Operation and maintenance of plant services 985, , ,515 Student transportation 276, ,774 Central support 355, ,531 Other support and services ,012 42,012 Facility acquisition and construction services Improvement to site , ,981 Debt service: Principal 61, , ,434 Interest 21, , ,676 Total Expenditures 6,054, , ,585 1,362,871 8,776,118 Excess (Deficiency) of Revenues over (under) Expenditures 529,470 (23) 68,618 (994,281) (396,216) OTHER FINANCING SOURCES (USES) Transfers in , ,861 Transfers out (641,560) - (66,301) - (707,861) Total Other Financing Sources (Uses) (641,560) - (66,301) 707,861 - Net Change in Fund Balance (112,090) (23) 2,317 (286,420) (396,216) FUND BALANCE, BEGINNING OF YEAR 552, , ,138 2,011,851 FUND BALANCE, END OF YEAR $ 440,472 $ (23) $ 728,468 $ 446,718 $ 1,615,635 See accompanying notes. 6

8 RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES Net Change in Fund Balances - Governmental Funds $ (396,216) Amounts reported for governmental activities in the statement of activities are different because: Capital outlays to purchase or build capital assets are reported in governmental funds as expenditures. However, for governmental activities those costs are shown in the statement of net assets and allocated over their estimated useful lives as annual depreciation in the statement of activities: Expenditures for capital assets 585,530 Less: Current year depreciation (340,020) The issurance of long-term debt provides current financial resources to governmental funds, while the repayment of the principal consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net assets. Principal payments made in the current year 401,434 Generally expenditures recognized in the fund financial statements are limited to only those that use current financial resources but expenses are recognized in the statement of activities when incurred: Compensated absences 30,142 In the statement of activities, the loss on the disposal of capital assets is reported. In the governmental funds, the loss is not reported. Thus, the change in net assets differs from the change in fund balances by the cost of the assets sold less the balance in accumulated depreciation. - Change in Net Assets - Governmental Activities $ 280,870 See accompanying notes. 7

9 GENERAL FUND STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET (GAAP BASIS) AND ACTUAL (Page 1 of 4) VARIANCE BUDGET FINAL ORIGINAL FINAL ACTUAL TO ACTUAL REVENUES Local sources: Ad valorem taxes $ 615,022 $ 615,022 $ 597,773 $ (17,249) Net proceeds mines 30,000 30,000 24,433 (5,567) School support tax 428, , ,143 37,496 Governmental Services Tax 176, , ,864 6,139 Earnings on investments 17,000 25,000 52,283 27,283 Community Service Activities 1,000 1,000 1,000 - Other local revenue 10,000 10,000 26,453 16,453 Total Local Sources 1,278,394 1,286,394 1,350,949 64,555 State sources: Distributive school fund 4,258,205 4,656,046 4,503,800 (152,246) Special appropriation 50,000 50,000 50,000 - Total State Sources 4,308,205 4,706,046 4,553,800 (152,246) Federal sources: Public Law : Forest service 22,000 23,260 23,260 - Impact Aid, (P.L ) 527, , , ,697 Total Federal Sources 549, , , ,697 Total Revenues 6,136,307 6,485,700 6,583,706 98,006 EXPENDITURES Regular programs: Instruction: Salaries 1,717,789 1,781,738 1,776,348 5,390 Benefits 564, , ,047 7,482 Purchased services 29,660 38,692 35,914 2,778 Supplies 123, , ,519 17,079 Property 9,165 4,600 4, ,445,313 2,537,157 2,503,837 33,320 Special programs: Instruction: Purchased services Supplies , Vocational programs: Instruction: Salaries 217, , , Benefits 67,643 58,782 58, Purchased services 1, Supplies 6,010 6,000 4,119 1, , , ,089 2,463 See accompanying notes. 8

10 GENERAL FUND STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET (GAAP BASIS) AND ACTUAL (Page 2 of 4) VARIANCE BUDGET FINAL ORIGINAL FINAL ACTUAL TO ACTUAL Co-curricular and Extra-curricular Activities Co-curricular activities: Instruction: Salaries $ 25,000 $ 14,962 $ 20,442 $ (5,480) Benefits 1, Purchased services 5,917 3,917 3,917 - Supplies Property 1, Other 1, Student Transportation Purchased services ,309 20,075 25,259 (5,184) Athletic activities: Instruction: Salaries 70,975 65,650 67,054 (1,404) Benefits 3,952 3,678 3, Purchased services 18,630 26,669 14,219 12,450 Supplies 6,730 12,455 12, Property Other 1,650 4,237 4,237 - Student Transportation Supplies 1,150 1,339 1, , , ,242 11,786 Total Co-curricular and Extra-Curricular Activities 138, , ,502 6,602 Total Program Expenditures 2,877,516 2,927,215 2,884,802 42,413 Undistributed expenditures: Student support: Salaries 125,646 57,521 57,521 - Benefits 44,147 20,169 19, Purchased services 36,400 36,170 35, Supplies 2, , , , Instructional staff support: Salaries 61, , ,420 1,500 Benefits 23,902 33,340 32, Purchased services 80,900 91,164 86,981 4,183 Supplies 32,603 39,837 38,060 1,777 Property 10,210 27,760 27, Other 1, (450) 210, , ,838 8,183 General administration: Salaries 209, , ,988 9,515 Benefits 65,744 67,013 65,902 1,111 Purchased services 152, , ,025 3,582 Supplies 15,300 15,701 14,539 1,162 Property - 4,675 4,675 - Other 16,500 24,663 25,256 (593) 459, , ,385 14,777 See accompanying notes. 9

11 GENERAL FUND STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET (GAAP BASIS) AND ACTUAL (Page 3 of 4) VARIANCE BUDGET FINAL ORIGINAL FINAL ACTUAL TO ACTUAL School administration: Salaries $ 429,772 $ 420,682 $ 412,470 $ 8,212 Benefits 146, , ,452 2,984 Purchased services 38,960 29,744 28,534 1,210 Supplies 8,382 7,100 6, Property 1,000 1,345 1,345 - Other , , ,200 13,107 Business administration: Purchased services - 10,000 10,000 - O & M plant service: Salaries 404, , ,453 2,646 Benefits 149, , ,374 1,586 Purchased services 166, , ,222 (1,449) Supplies 192, , ,750 30,250 Property 2,000 4,588 4,588 - Other ,160 1,018, ,937 33,033 Student transportation: Salaries 144, , ,004 1,827 Benefits 43,473 44,626 42,607 2,019 Purchased services 22,100 16,777 15, Supplies 61,000 87,500 74,465 13,035 Property 8,500 1,385 1,385 - Other - 2,329 2, , , ,774 17,674 Central support: Benefits 12, , ,531 (1,961) Total Undistributed Expenditures 2,710,851 3,172,202 3,086,908 85,294 See accompanying notes. 10

12 GENERAL FUND STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET (GAAP BASIS) AND ACTUAL (Page 4 of 4) VARIANCE BUDGET FINAL ORIGINAL FINAL ACTUAL TO ACTUAL Debt service Principal $ 61,434 $ 61,434 $ 61,434 $ - Interest 21,091 21,091 21,091 - Total Debt Service 82,525 82,525 82,525 - Total Expenditures 5,670,892 6,181,942 6,054, ,707 Excess of Revenues Over Expenditures 465, , , ,712 OTHER FINANCING SOURCES (USES) Contingency (108,810) - 108,810 Transfers out (646,809) (644,229) (641,560) 2,669 Total Other Financing Sources (Uses) (646,809) (753,039) (641,560) 111,479 Net Change in Fund Balance (181,394) (449,281) (112,090) 337,191 FUND BALANCE, July 1 195, , ,562 - FUND BALANCE, June 30 $ 13,839 $ 103,281 $ 440,472 $ 337,191 See accompanying notes. 11

13 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET (GAAP BASIS) AND ACTUAL STATE AND FEDERAL GRANTS FUND (PAGE 1 OF 2) VARIANCE BUDGET FINAL ORIGINAL FINAL ACTUAL TO ACTUAL REVENUES State sources $ 361,900 $ 361,900 $ 240,344 $ (121,556) Federal sources 696, , ,059 (109,531) Total Revenues 1,058,490 1,058, ,403 (231,087) EXPENDITURES Instruction Regular instruction Salaries 244, , ,110 (60,221) Benefits 55,311 55,311 90,186 (34,875) Purchased services 57,324 57,324 29,125 28,199 Supplies 64,476 64,476 29,201 35,275 Property 12,000 12,000 1,037 10,963 Other - - 7,252 (7,252) 434, , ,911 (27,911) Special instruction Salaries 123, ,677 95,587 28,090 Benefits 40,776 40,776 31,784 8,992 Purchased services 84,806 84,806 81,063 3,743 Supplies 8,231 8,231 48,135 (39,904) Other ,511 (30,511) 257, , ,080 (29,590) Vocational instruction Purchased services 6,406 6,406 6,598 (192) Supplies 3,894 3,894 11,188 (7,294) Property 5,700 5,700 8,369 (2,669) 16,000 16,000 26,155 (10,155) Adult instruction Salaries 37,186 37,186 38,253 (1,067) Benefits 1,575 1,575 2,047 (472) Purchased services 5,000 5,000 2,634 2,366 Supplies 12,239 12,239 9,346 2,893 56,000 56,000 52,280 3,720 Total Instruction 763, , ,426 (63,936) See accompanying notes. 12

14 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET (GAAP BASIS) AND ACTUAL STATE AND FEDERAL GRANTS FUND (PAGE 2 OF 2) VARIANCE BUDGET FINAL ORIGINAL FINAL ACTUAL TO ACTUAL Undistributed Expenditures Support Services Central support Benefits $ 295,000 $ 295,000 $ - $ 295,000 Total Undistributed Expenditures 295, , ,000 Total Expenditures 1,058,490 1,058, , ,064 Excess (Deficiency) of Revenues over (under) Expenditures - - (23) (23) FUND BALANCE, July FUND BALANCE, June 30 $ - $ - $ (23) $ (23) See accompanying notes. 13

15 PROPRIETARY FUND - FOOD SERVICE ENTERPRISE FUND STATEMENT OF NET ASSETS JUNE 30, 2008 ASSETS Current assets Cash and investments $ 10,327 Accounts Receivable 888 Total Current Assets 11,215 Noncurrent assets Property and equipment 15,859 Less: accumulated depreciation 10,990 Total Noncurrent Assets 4,869 Total Assets 16,084 LIABILITIES Accounts payable 1,661 Accrued liabilities 1,277 Total Liabilities 2,938 NET ASSETS Invested in capital assets 4,869 Unrestricted 8,277 Total Net Assets $ 13,146 See accompanying notes. 14

16 PROPRIETARY FUND - FOOD SERVICE ENTERPRISE FUND STATEMENT OF REVENUE, EXPENSES AND CHANGES IN NET ASSETS OPERATING REVENUES Local sources $ 43,999 OPERATING EXPENSES Salaries 75,724 Employee Benefits 21,983 Purchased services 5,202 Supplies General 8,443 Food 95,800 Depreciation - Total Operating Expenses 207,152 Operating Loss (163,153) NONOPERATING REVENUE (EXPENSE) Federal sources Child nutrition programs 142,420 Income (loss) before other financing sources (uses) (20,733) NET ASSETS, July 1 33,878 NET ASSETS, June 30 $ 13,146 See accompanying notes. 15

17 PROPRIETARY FUND - FOOD SERVICE ENTERPRISE FUND STATEMENT OF CASH FLOWS CASH FLOWS FROM OPERATING ACTIVITIES: Cash received from food sales $ 45,556 Cash paid for employees services (96,429) Cash paid to vendors for services and supplies (107,782) Net Cash Provided by (Used For) Operating Activities (158,655) CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES: State and federal funds 142,420 Net Cash Provided by (Used For) Noncapital Financing Activities 142,420 Net Decrease in Cash (16,235) CASH AND CASH EQUIVALENTS, July 1 CASH AND CASH EQUIVALENTS, June 30 $ 26,562 10,327 RECONCILIATION OF OPERATING LOSS TO NET CASH PROVIDED BY OPERATING ACTIVITIES: Operating loss $ (163,153) Adjustments to reconcile operating loss to net cash provided by operating activities: Depreciation - Changes in assets and liabilities: (Increase) decrease in: Accounts receivable 1,559 Increase (decrease) in: Accounts payable 1,662 Accounts payable 1,277 Total Adjustments 4,498 Net Cash Provided by (Used For) Operating Activities $ (158,655) See accompanying notes. 16

18 FIDUCIARY FUNDS STATEMENT OF FIDUCIARY NET ASSETS JUNE 30, 2008 AGENCY FUNDS ASSETS Cash $ 95,558 LIABILITIES Due to student groups $ 95,558 See accompanying notes. 17

19 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2008 NOTE 1 Summary of Significant Accounting Policies: The accompanying financial statements of Mineral County School District, Mineral County, Nevada (the District ) have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP), as applied to governmental units. The Governmental Accounting Standards Board (GASB) is the standardsetting body for governmental accounting and financial reporting. The GASB periodically updates its codification of existing Governmental and Financial Reporting Standards which, along with subsequent GASB pronouncements (Statements and Interpretations), constitutes GAAP for governmental units. Reporting Entity: The District is the basic level of government having oversight responsibility and control over all activities related to the public school education in Mineral County, Nevada. The governing board consists of five members elected by the voters in the district for four-year terms and has authority to adopt and administer budgets. The District receives funding from local, state and federal government sources and must comply with the related requirements of these funding source entities. However, the District is not included in any other governmental reporting entity, since Trustees are elected by the public, it is a legally separate government and it is fiscally independent of any other governmental entity. In addition, the District is not financially accountable for any other entity. Basic Financial Statement Government-wide Statements: The basic financial statements include both government-wide (based on the District as a whole) and fund financial statements. The reporting focus is on either the District as a whole or major individual funds and nonmajor funds in the aggregate (within the fund financial statements). The government-wide financial statements (the statement of net assets and the statement of activities) report information on all of the nonfiduciary activities of the District. For the most part, the effect of interfund activity has been removed from these financial statements. Interfund activities relating to services provided and used between functions are not eliminated. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned. In the government-wide statement of net assets, the governmental activities column is presented on a consolidated basis, and is reflected on a full accrual, economic resource basis that recognizes all long-term assets and receivables as well as long-term debt and obligations. The District s net assets are reported in three parts invested in capital assets, net of related debt; restricted net assets; and unrestricted net assets. The District first utilizes restricted resources to finance qualifying activities then unrestricted resources, as they are needed. 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 the general government revenues (ad valorem taxes, school support taxes, distributive school funds, government services tax and interest income not legally restricted for specific programs, etc.). The statement of activities reduces gross expenses (including depreciation) by related program revenues and operating grants. Program revenues include operating grants and contributions and investment earnings legally restricted to support a specific program. Program revenue must be directly associated with the function. Operating grants include operating-specific and discretionary grants. The net costs (by function) are normally covered by general revenue. Basic Financial Statements Fund Financial Statements: The financial transactions of the District are reported in individual funds in the fund financial statements. Each fund is accounted for by providing a separate set of self-balancing accounts that comprise its assets, liabilities, fund equity, revenues and expenditures. District resources are allocated to and accounted for in individual funds based upon the purposes for which they are intended and the means by which spending activities are controlled. Separate financial statements are provided for governmental funds and fiduciary funds, even though the latter are excluded from the government-wide financial statements. The emphasis in the fund financial statements is on the major funds in the governmental type activity category. Nonmajor funds by category are summarized into a single column. GASB Statement No. 34 sets forth criteria for the determination of major funds. District management may electively add funds as major funds when it is determined the funds have specific community or management focus. Major individual governmental funds are reported as separate columns in the fund financial statements. 18

20 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2008 The focus of the governmental funds measurement in the fund statements is upon determination of the financial position and changes in financial position (sources, uses, and balances of financial resources) rather than upon net income. The District s fiduciary funds are presented in the fiduciary fund financial statements by type. Since, by definition, these assets are held for the benefit of a third party and cannot be used to address activities or obligations of the District, these funds are not incorporated into the government-wide statements. The District uses the following funds: 1. Major Funds: Governmental Funds: General Fund The General Fund is the general operating fund of the District and accounts for all revenue and expenditures of the District not encompassed within other funds. All general tax revenues and other receipts that are not allocated by law or contractual agreement to some other fund are accounted for in this fund. General operating expenditures and the capital improvement costs that are not paid through other funds are paid from the General Fund. State and Federal Grants Special Revenue Fund The State and Federal Grants Special Revenue fund is used to account for all transactions of the District funded through State and Federal grants. Debt Service Fund The Debt Service Fund accounts for the resources accumulated and payments made for principal and interest on long-term general obligation debt and other debt of governmental activities. Additionally, the District reports the following fund types: Proprietary Fund: Proprietary Fund Proprietary Funds account for those operations that are financed and operated in a manner similar to private business or where the board has decided that the determination of revenue earned, costs incurred and/or net income is necessary for management accountability. Fiduciary Funds: Agency Funds Agency Funds account for assets held by the District in a trustee capacity or as an agent for individuals, private organizations, other governments, or students. Basis of Accounting/Measurement Focus: Private-sector standards of accounting and financial reporting issued prior to December 1, 1989, generally are followed in both the government-wide and proprietary fund financial statements to the extent that those standards do not conflict with or contradict guidance of the Governmental Accounting Standards Board. Governments also have the option of following subsequent private-sector guidance for their business-type and enterprise funds, subject to this same limitation. The government has elected not to follow subsequent private-sector guidance. The measurement focus describes the types of transactions and events that are reported in a fund s operating statement. Basis of accounting refers to the timing of revenues and how expenditures/expenses are recognized in the accounts and reported in the financial statements. Basis of accounting relates to the timing of the measurements made, regardless of the measurement focus applied. The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. 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. 19

21 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2008 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 sixty days of the end of the current fiscal period. When revenues are due but will not be collected within sixty days after year-end, the receivable is recorded and an offsetting deferred revenue account is established. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures for compensated absences and claims and judgments, are recorded only when payment is due. Most major sources of revenue reported in governmental funds are susceptible to accrual under the modified accrual basis of accounting. Below is a summary of revenue recognition policies for all major revenue sources: TYPE OF REVENUE Ad Valorem Taxes Local School Support Tax Governmental Services Tax Distributive School Fund Interest Grants-in-Aid Miscellaneous Revenue ACCRUED WHEN MEASURABLE AND AVAILABLE X X X X RECOGNIZED WHEN RECEIVED X ACCRUED WHEN EARNED X X Property Taxes: All real property in Mineral County School District is assigned a parcel number in accordance with state law, with each parcel being subject to physical reappraisal every five years. A factoring system is used to adjust the appraised value during the years between physical appraisals. The valuation of the property and its improvements is assessed at 35% of taxable value as defined by statute. The amount of tax levied is developed by multiplying the assessed value by the tax rate applicable to the area in which the property is located. The maximum tax rate was established in the State Constitution at $5.00 per hundred dollars of assessed valuation; however, as a result of the legislative action, the tax rate was further limited to $3.64 per hundred dollars of assessed valuation, except in cases of severe financial emergency as defined in Nevada Revised Statute (NRS) Taxes on real property are a lien on the property and attach on July 1 (the levy date) of the year for which the taxes are levied. Taxes may be paid in four installments payable on the third Monday in August and the first Mondays in October, January, and March to the Treasurer of Mineral County in which the District is located. Penalties are assessed if a taxpayer fails to pay an installment within ten days of the installment due date. After a two-year waiting period, if taxes remain unpaid, a tax deed is issued conveying the property to the County with a lien for back taxes and accumulated charges. Redemption may be made by the owner and such persons as described by statute by paying all back taxes and accumulated penalties, interest, and costs before sale. Secured roll property taxes receivable reflect only those taxes receivable from the last two delinquent roll years. Delinquent taxes from all roll years prior to fiscal year have been written off. Taxes on personal property are collected currently. Personal property declarations are mailed out annually and the tax is computed using percentages of taxable values established by the Department of Taxation and tax rates described above. The major classifications of personal property are commercial and mobile homes. 20

22 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2008 Budgets and Budgetary Accounting: The District follows these procedures to establish the budgetary data reflected in these financial statements: 1. Prior to April 15, the Superintendent submits to the Board of Trustees and to both the Nevada Department of Taxation and the Department of Education a tentative budget for the fiscal year commencing the following July 1. The tentative budget includes proposed expenditures and the means of financing them. 2. Prior to the third Wednesday in May, a minimum of seven days notice of public hearing on the final budget is published in a local newspaper. Public hearings are conducted prior to the adoption of the budget to obtain taxpayer comments. 3. On or before June 8, the budget is legally adopted by a majority vote of the Board of Trustees. 4. On or before January 1, the Board of Trustees adopts an amended final budget reflecting any adjustments necessary as a result of the complete count of students. 5. NRS provides that the Board of Trustees may augment the budget at any time by a majority vote of the Board providing the Board publishes notice of intention to act in a newspaper of general circulation in the county at least three days before the date set for adoption of the resolution. 6. The legal level of budgetary control is at the program level for the General, Special Revenue, and Capital Projects Funds. 7. The Budget Officer and/or the Board of Trustees may transfer appropriations within and between funds if amounts do not exceed the original budget. Augmentations in excess of the original budgetary amounts may be made only with prior approval of the Board of Trustees, following a scheduled and noticed public hearing. 8. Formal budgetary integration in the financial records of all funds is employed to enhance management control during the year. 9. All budgets are adopted on a basis consistent with accounting principles generally accepted in the United States of America for all funds except for the agency funds, which do not require budgets. All budgets presented in the accompanying financial statements reflect the original budget and final budget (which has been adjusted for legally authorized revisions of the annual budgets during the year). Appropriations except unexpended grant appropriations, lapse at the end of each fiscal year. In accordance with state statute, actual expenditures may not exceed budgetary appropriations of the various programs of the individual funds, except for bond repayments, short-term financing repayment and any other long-term contracts expressly authorized by law. Cash and Investments: Cash balances from all funds are combined and, to the extent practicable, invested as permitted by law. The District also voluntarily participates in the State of Nevada Local Government Investment Pool (LGIP). The government s cash and cash equivalents are considered to be cash on hand, demand deposits, and short term investments with three months or less from the date of acquisition. Investments are recorded at fair value based on quoted market prices, net of accrued interest as provided by the pool sponsors. Pursuant to NRS and , the District s money may only be invested in the following types of securities: United States bonds and debentures maturing within ten (10) years from the date of purchase. 21

23 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2008 Certain farm loan bonds. Securities of the United States Treasury, United States Postal Service, or the Federal National Mortgage Association maturing within (10) years from the date of purchase. Negotiable certificates of deposit issued by commercial banks, insured credit unions, or insured savings and loan associations. Certain securities issued by local governments in the State of Nevada. Certain bankers acceptances, commercial paper issued by a corporation organized and operating in the United States, and money market mutual funds. Certain obligations of state and local governments. State of Nevada Local Government Pool Investment Fund. Certain AAA rated mutual funds that invest in federal securities. Other securities expressly provided by other statutes, including repurchase agreements. Capital Assets: Capital assets, which include land, buildings, machinery and equipment, are reported in the government-wide financial statements. The District defines capital assets as assets with an initial, individual cost of more than $500 and an estimated useful life in excess of one year. If purchased or constructed, all capital assets are recorded at historical cost or estimated historical cost. Donated capital assets are valued at their estimated fair value as of 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. Construction period interest is not capitalized as a part of the building costs. Capital assets are depreciated using the straight-line method over the following estimated useful lives: Allowance for Uncollectible Receivables: Expenditures: YEARS Building and improvements Equipment and vehicles 5-15 Food service equipment 15 An allowance for uncollectible taxes receivable has not been established since Nevada law provides for the sale of property where a lien exists for the payment of property taxes. Expenditure data is characterized by major program classifications pursuant to the provisions of the U.S. Department of Education Financial Accounting for Local and State School Systems published by the National Center for Education Statistics and adopted by the Nevada Department of Education. Below is a brief description of these program classifications: Regular instruction programs are activities designed to provide elementary and secondary students with learning experiences to prepare them for activities as citizens, family members, and non-vocational workers. Special instruction programs are activities designed primarily to deal with students having special needs. The special programs include services for the gifted and talented, mentally challenged, physically handicapped, emotionally disturbed, culturally different, learning disabled, bilingual, and special programs for other types of students at all levels. 22

24 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2008 Compensated Absences: Vocational instruction programs are learning experiences to provide individuals with the opportunity to develop the necessary knowledge, skills, and attitudes needed for occupational employment. Other instructional programs are activities that provide elementary and secondary students with learning experiences in the areas of school-sponsored activities, athletics, and summer school. Adult instruction programs are learning experiences designed to develop knowledge and skills to meet intermediate and long-range educational objectives for adults, who having completed or interrupted formal schooling, have accepted adult roles and responsibilities. Undistributed expenditures are charges that are not readily assignable to a specific program. Student and instructional staff support as well as the overall general, administrative, and business costs are classified as undistributed expenditures. Also included in this line item are costs of operating, maintaining, and constructing the physical facilities of the District and providing transportation for students. Teachers and certain hourly employees do not receive vacation leave. For other District employees, vacation leave is earned at rates dependent on length of employment and can be accumulated to a specific maximum days/hours. Employees are allowed to accumulate sick days for future use, not to exceed the contracted number of days worked per year. The District pays limited accumulated sick leave benefits to certain employees upon retirement. The estimated long-term liability for compensated absences is accounted for in the government-wide financial statements. Long-Term Obligations: In the government-wide financial statements, long-term debt and other long-term obligations are reported as liabilities in the governmental activities. Bond premiums and discounts, as well as issuance costs are deferred and amortized over the life of the bonds using the straight-line 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 recognize bond premiums and discounts, as well and 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 issuance are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt expenditures. Fund Balances: In the fund financial statements, reservations of fund balances represent amounts that are not subject to appropriation or are legally segregated for a specific purpose. Designations of fund balances represent tentative management plans that are subject to change. Use of Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the use of estimates based on management s knowledge and experience. Due to their prospective nature, actual results could differ from those estimates. 23

25 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2008 NOTE 2 Compliance with Nevada Revised Statutes and Nevada Administrative Code: The District conformed to all significant statutory constraints on its financial administration during the year with the following possible exceptions: Actual expenditures exceeded appropriations by $27,911 in Regular Instruction Program of the State and Federal Grants Fund. Actual expenditures exceeded appropriations by $29,590 in the Special Instruction Program of the State and Federal Grants Fund. Actual expenditures exceeded appropriations by $10,155 in the Vocation Instruction Program of the State and Federal Grants Fund. Actual expenditures exceeded appropriations b $16,000 in the Regular Instruction Program of the Non-major Signing Bonus Special Revenue Fund. The above appears to be a potential violation under NRS NOTE 3 Nevada Plan for Financing Local Education Agencies: The Nevada Plan is the current means used to finance elementary and secondary education in Nevada s public schools. The process is one in which the state provides a guaranteed amount of funding to a local school district. The guarantee is made up of state support paid through the Distributive School Fund and sources collected locally through a 2.25 cent local school support tax and 75 cents of ad valorem tax. Local school districts receive quarterly apportionments based on a count of children enrolled within the district on the last day of the first school month of the year. Each local school district is guaranteed a specific amount per pupil, which is developed through a special formula that considers the demographic and geographic characteristics of the District. Transportation is included in the amount per pupil at the rate of 85 percent of actual historical cost to the District with an increase for inflation based on the Consumer Price Index. A wealth adjustment is made to the support per pupil based on the local school district s ability to generate revenues that are outside of the guaranteed level. Special education is funded on a unit basis at a legislative approved amount per unit. A unit is an organized instructional unit which includes full-time services of certificated personnel providing a program of instruction in accordance with minimum standards prescribed by the State Board of Education. Districts are protected from significant decreases in enrollment through hold harmless statutory provisions, which guarantees a district payment, based on the largest student enrollment count from the current and two previous years. NOTE 4 Cash and Investments: The following schedule summarizes cash and investments for the District at June 30, 2008: Cash and Investment Balances Held By: Governmental Funds Unrestricted $ 2,348,599 Business-Type Funds 10,327 Fiduciary Funds 95,558 Total Cash and Investments $ 2,454,484 24

26 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2008 Balances at Fair Value Classified by: Federal Horizon Credit Union checking Checking $ 761,553 Money Market 895,460 Bank of America Checking 87,298 Local Government Investment Pool 710,173 Total Cash and Investments $ 2,454,484 As of June 30, 2008, the District had the following investments and maturities: Investment Maturity (in years) Investments Fair Value Less than 1 Local Government Investment Pool $ 710,173 $ 710,173 Mutual funds 895, ,460 $ 1,605,633 $ 1,605,633 Nevada Revised Statutes sets forth acceptable investments for Nevada local governments. The District has not adopted a formal investment policy that would further limit its exposure to certain risks as set forth below: Interest Rate Risk. Interest rate risk is the risk of possible reduction in the value of a security, especially a bond, resulting from a rise in interest rates. As noted above, the District does not have a formal investment policy that limits investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates beyond those specified in the statute. Credit Risk. Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligation and is a function of the credit quality ratings of its investments. The State of Nevada Local Government Investment Pool is an unrated investment pool and, as noted above, the District does not have a formal investment policy that specifies minimum acceptable credit ratings. Custodial Credit Risk Deposits. Certain deposits and money market funds are held by a credit union that is insured up to $500,000 per account, $250,000 by American Share Insurance (ASI) and $250,000 by Excess Share Insurance (ESI). At June 30, 2008 deposits and money market funds of $429,103 are uncollateralized. The District is a voluntary participant in the State of Nevada Local Government Investment Pool (LGIP), which has regulatory oversight from the State of Nevada Board of Finance. The District s investment in the pool discussed above is equal to its original investment plus monthly allocation of interest income and realized and unrealized gains and losses, which is the same as the value of pool shares. The District s investment in this pool is reported at fair value. 25

27 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2008 NOTE 5 Interfund Receivable, Payables, and Transfers: Interfund transfers are shown as other financing sources or uses as appropriate in all governmental and fiduciary funds. Transfers between funds during the year ended June 30, 2008 are as follows: Transfers In Transfers Out Governmental Activities: General Fund $ - $ 641,560 Debt Service Fund - 66,301 Nonmajor Governmental Funds - Special Revenue Funds: Class-Size Reduction Fund 16,000 - Special Education 578,560 - Unemployment Compensation Fund 10,000 - Retirement Incentive Fund 37,000 - Capital Projects Fund Capital Improvements 66,301 - Total $ 707,861 $ 707,861 The General Fund transfers funds to the Class-Size Reduction, Special Education, Unemployment Compensation and Retirement Incentive Special Revenue Funds to subsidize programs. The Debt Service Fund transferred governmental services taxes allowed for capital improvements to the Capital Improvement Fund. 26