LUBBOCK-COOPER INDEPENDENT SCHOOL DISTRICT ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED JUNE 30, 2010

Transcription

1 ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED JUNE 30, 2010

2 ANNUAL FINANCIAL REPORT For the Year Ended June 30, 2010 TABLE OF CONTENTS Page INTRODUCTORY SECTION Certificate of Board 1 Exhibit FINANCIAL SECTION Independent Auditors Report on Financial Statements 2 Management s Discussion and Analysis (Required Supplementary Information) 4 Basic Financial Statements Government-Wide Financial Statements: Statement of Net Assets 13 A-1 Statement of Activities 14 B-1 Fund Financial Statements: Balance Sheet-Governmental Funds 15 C-1 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Assets 16 C-1R Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds 17 C-2 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities 18 C-3 Statement of Net Assets Internal Service Funds 19 D-1 Statement of Revenues, Expenses, and Changes in Fund Net Assets Internal Service Fund 20 D-2 Statement of Cash Flows Proprietary Funds 21 D-3 Statement of Fiduciary Net Assets 22 E-1 Notes to the Financial Statements 23 REQUIRED SUPPLEMENTARY INFORMATION Budgetary Comparison Schedules: General Fund 46 G-1 Capital Projects Fund 47 H-1 OTHER SUPPLEMENTARY INFORMATION Schedule of Delinquent Taxes Receivable 48 J-1 Indirect Cost Computation Schedule 49 J-2

3 ANNUAL FINANCIAL REPORT For the Year Ended June 30, 2010 TABLE OF CONTENTS (Continued) Page Exhibit Fund Balance and Cash Flow Calculation Worksheet (Unaudited) General Fund 50 J-3 Debt Service Fund Budgetary Comparison 51 J-4 National School Breakfast/Lunch Program Budgetary Comparison 52 J-5 Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 53 Report on Compliance with Requirements Applicable to each Major Program and Internal Control over Compliance in Accordance with OMB Circular A Schedule of Findings and Questioned Costs 57 Summary Schedule of Prior Audit Findings 58 Corrective Action Plan 59 Schedule of Expenditures of Federal Awards 60 K-1 Notes to the Schedule of Expenditures of Federal Awards 61 OTHER TEA REQUIRED SCHEDULES Schools FIRST Questionnaire 62 L-1

4 INTRODUCTORY SECTION

5 -1- CERTIFICATE OF BOARD Lubbock-Cooper I.S.D Lubbock Name of School District County Co.- Dist Number We, the undersigned, certify that the attached annual financial reports of the above named school district were reviewed and approved disapproved (check one) for the year ended June 30, 2010 at a meeting of the Board of Trustees of such school district on the 18 th day of November, Signature of Board Secretary Signature of Board President If the Board of Trustees disapproved of the auditor s report, the reason(s) for disapproving it is (are): (attach list as necessary):

6 FINANCIAL SECTION

7 Terry & King, CPAs, P.C nd P.O. Box Lubbock, TX Telephone - (806) Fax (806) Randel J. Terry, CPA Ryan R. King, CPA Independent Auditors Report on Financial Statements Board of Trustees Lubbock-Cooper Independent School District Loop Members of the Board of Trustees: 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 Lubbock-Cooper Independent School District, as of and for the year ended June 30, 2010, which collectively comprise the District s basic financial statements as listed in the table of contents. These financial statements are the responsibility of Lubbock-Cooper Independent School District s management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit 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 the 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 governmental activities, business-type activities, each major fund, and the aggregate remaining fund information of Lubbock-Cooper Independent School District as of June 30, 2010, and the respective changes in financial position thereof 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 our report dated November 16, 2010, on our consideration of Lubbock-Cooper Independent School 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 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. -2- Members American Institute of Certified Public Accountants and the Texas Society of Certified Public Accountants

8 -3- Independent Auditor s Report Page 2 Accounting principles generally accepted in the United States of America require that the management s discussion and analysis and budgetary comparison information, identified as Required Supplementary Information, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Lubbock-Cooper Independent School District s financial statements as a whole. The information identified as Other Supplementary Information in the table of contents is presented for purposes of additional analysis and is not a required part of the financial statements. The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, and is also not a required part of the financial statements. This information is the responsibility of management and was derived from and relate directly to the underlying accounting and other records used to prepare the financial statements. This information, except for that portion marked unaudited on which we express no opinion, has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, this information is fairly stated in all material respects in relation to the financial statements as a whole. The Fund Balance and Cash Flow Calculation Worksheet- General Fund has not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on it. Respectfully submitted, Terry & King, CPAs, P.C. November 16, 2010

9 MANAGEMENT S DISCUSSION AND ANALYSIS This section of Lubbock-Cooper Independent School District s annual financial report presents our discussion and analysis of the District s financial performance during the year ended June 30, Please read it in conjunction with the District s financial statements, which follow this section. FINANCIAL HIGHLIGHTS The District s total combined net assets were $17,365,426 at June 30, During the year ended June 30, 2010, the District s expenses were $2,023,607 more than the $41,043,484 generated in taxes and other revenues for governmental activities. The total costs of the District s programs were $8,847,965 more than the prior fiscal year. The general fund reported a fund balance this year of $8,633,218. OVERVIEW OF THE FINANCIAL STATEMENTS This annual report consists of three parts management s discussion and analysis (this section), the basic financial statements, and required supplementary information. The basic financial statements include two kinds of statements that present different views of the District: Figure A-1F, Required Components of the District s Annual Financial Report The first two statements are government-wide financial statements that provide both long-term and short-term information about the District s overall financial status. The remaining statements are fund financial statements that focus on individual parts of the government, reporting the District s operations in more detail than the government-wide statements. The governmental funds statements tell how general government services were financed in the short term as well as what remains for future spending. Fiduciary fund statements provide information about the financial relationships in which the District acts solely as a trustee or agent for the benefit of others, to whom the resources in question belong. The financial statements also include notes that explain some of the information in the financial statements and provide more detailed data. The statements are followed by a section of required supplementary information that further explains and supports the information in the financial statements. Figure A-1 shows how the required parts of this annual report are arranged and related to one another. 4

10 Figure A-2 summarizes the major features of the District s financial statements, including the portion of the District government they cover and the types of information they contain. The remainder of this overview section of management s discussion and analysis explains the structure and contents of each of the statements. Figure A-2. Major Features of the District's Government-wide and Fund Financial Statements Fund Statements Type of Statements Government-wide Governmental Funds Fiduciary Funds Entire Agency s government Instances in which the The activities of the district (except fiduciary funds) district is the trustee or that are not proprietary or and the Agency's component agent for someone else's Scope units fiduciary resources Required financial statements Accounting basis and measurement focus Type of asset/liability information Statement of net assets Balance sheet Statement of fiduciary net assets Statement of activities Statement of changes Statement of revenues, in fiduciary net assets expenditures & changes in fund balances Accrual accounting and economic resources focus All assets and liabilities, both financial and capital, short-term and long-term Modified accrual accounting and current financial resources focus Only assets expected to be used up and liabilities that come due during the year or soon thereafter; no capital assets included Accrual accounting and economic resources focus All assets and liabilities, both short-term and longterm; the Agency's funds do not currently contain capital assets, although they can Type of inflow/outflow information All revenues and expenses during year, regardless of when cash is received or paid Revenues for which cash is received during or soon after the end of the year; expenditures when goods or services have been received and payment is due during the year or soon thereafter All revenues and expenses during year, regardless of when cash is received or paid Government-wide Statements The government-wide statements report information about the District as a whole using accounting methods similar to those used by private-sector companies. The statement of net assets includes all of the government s assets and liabilities. All of the current year s revenues and expenses are accounted for in the statement of activities regardless of when cash is received or paid. The two government-wide statements report the District s net assets and how they have changed. Net assets the difference between the District s assets and liabilities is one way to measure the District s financial health or position. Over time, increases or decreases in the District s net assets are an indicator of whether its financial health is improving or deteriorating, respectively. To assess the overall health of the District, one needs to consider additional nonfinancial factors such as changes in the District s tax base. The government-wide financial statements of the District include the Governmental activities. Most of the District s basic services are included here, such as instruction, extracurricular activities, curriculum and staff development, health services and general administration. Property taxes and grants finance most of these activities. 5

11 Fund Financial Statements The fund financial statements provide more detailed information about the District s most significant funds not the District as a whole. Funds are accounting devices that the District uses to keep track of specific sources of funding and spending for particular purposes. Some funds are required by State law and by bond covenants. The Board of Trustees establishes other funds to control and manage money for particular purposes or to show that it is properly using certain taxes and grants. The District has the following kinds of funds: Governmental funds Most of the District s basic services are included in governmental funds, which focus on (1) how cash and other financial assets that can readily be converted to cash flow in and out and (2) the balances left at year-end that are available for spending. Consequently, the governmental fund statements provide a detailed short-term view that helps you determine whether there are more or fewer financial resources that can be spent in the near future to finance the District s programs. Because this information does not encompass the additional long-term focus of the government-wide statements, we provide additional information at the bottom of the governmental funds statement, or on the subsequent page, that explain the relationship (or differences) between them. We use internal service funds to report activities that provide supplies and services for the District s other programs and activities. Fiduciary funds The District is the trustee, or fiduciary, for certain funds. It is also responsible for other assets that because of a trust arrangement can be used only for the trust beneficiaries. The District is responsible for ensuring that the assets reported in these funds are used for their intended purposes. All of the District s fiduciary activities are reported in a separate statement of fiduciary net assets and a statement of changes in fiduciary net assets. We exclude these activities from the District s government-wide financial statements because the District cannot use these assets to finance its operations. 6

12 FINANCIAL ANALYSIS OF THE DISTRICT AS A WHOLE Net assets. The District's combined net assets were $17,365,426 at June 30, (See Table A-1). Table A-1 Lubbock-Cooper Independent School District's Net Assets Governmental Activities Percentage June 30, 2010 June 30, 2009 Change Current assets: Cash and cash equivalents 66,578,056 9,355, % Due from other governments 3,743,523 3,512,256 7% Taxes Receivable, net 518, ,852 11% Accrued Interest - 4, % Other Receivables 1,485, % Inventories 65,558 86,327-24% Deferred Expense or Expenditures 1, % Capitalized Bond & Other Issuance Costs 2,277, , % Other Current Assets - 21, % Total current assets: 74,670,623 13,604, % Noncurrent assets: Land 2,166,232 1,732,751 25% Construction in Progress 28,150,795 3,257, % Buildings & Improvements 59,603,713 59,458,559 0% Less accumulated depreciation, buildings & improvements (12,591,346) (10,998,401) 14% Vehicles 3,334,275 2,640,962 26% Less accumulated depreciation, vehicles (1,754,460) (1,564,508) 12% Furniture & Equipment 3,895,633 3,763,824 4% Less accumulated depreciation, furniture & equipment (2,575,766) (1,988,289) 30% Total noncurrent assets 80,229,076 56,302,645 42% Total Assets 154,899,699 69,906, % Current liabilities: Accounts Payable 2,972, , % Bond Interest Payable 3,026,778 1,100, % Accrued Wages Payable 2,228,022 1,061, % Due to Other Governments 181, ,640-22% Accrued Expenditures 205, ,159 43% Deferred Revenue 793,228 61, % Total current liabilities 9,406,948 3,182, % Long-term liabilities: Due within one year 1,115, ,295 26% Due in more than one year 124,051,552 44,985, % Premium on bond issuance 2,960, , % Total Liabilities 137,534,273 49,269, % Net Assets: Invested in capital assets, net of related debt 6,016,673 10,428,983-42% Restricted 1,761,353 1,792,269-2% Unrestricted 9,587,400 8,415,859 14% Total Net Assets 17,365,426 20,637,111-16% $1,761,353 of the District's net assets is restricted for the retirement of bonded debt. The $9,587,400 of unrestricted net assets represents resources available to fund the programs of the District next year. 7

13 Changes in net assets. The District s total revenues for the year ended June 30, 2010 were $41,043,484. A significant portion, 51 percent, of the District s revenue comes from taxes. (See Figure A-3.) 44 percent comes from state aid and federal program grants, while only 2 percent relates to charges for services. The total cost of all programs and services was $43,067,091; 46 percent of these costs are for instruction. Sources of Revenue for the year ended June 30, 2010 Miscellaneous 2% Charges for Services 2% Grants and Contributions Not Restricted 29% Investment Earnings 1% Property Taxes, Levied for Debt Service 16% Operating Grants 15% Property Taxes, Levied for General Purposes 35% Figure A-3 Governmental Activities Property tax rates increased from $1.285 per $100 valuation to $1.499 per $100 valuation. Tax revenues collected during the year ended June 30, 2010 were $20,600,214 compared to $15,842,141 in the fiscal year ended June 30, The increased tax rate along with increasing property values resulted in the tax levy increasing 31% from $15,789,239 in the prior period to $20,680,284 in the current period. 8

14 Table A-2 Changes in Lubbock-Cooper Independent School District's Net Assets Governmental Activities 12 Months Ended 12 Months Ended Percentage June 30, 2010 June 30, 2009 Change Program Revenues: Charges for Services 756, ,009 16% Operating Grants and Contributions 6,235,125 5,003,005 25% General Revenues: Property Taxes, Levied for General Purposes 14,505,919 12,887,195 13% Property Taxes, Levied for Debt Service 6,368,144 3,047, % Grants and Contributions not restricted 11,997,319 12,416,204-3% Investment Earnings 243, ,827-1% Other 937, , % Total Revenues 41,043,484 34,628,837 19% Instruction 19,630,679 17,537,652 12% Instructional Resources and Media Services 1,015, ,622 34% Curriculum Development and Instructional Staff Development 813, ,037 49% Instructional Leadership 751, ,749 1% School Leadership 1,454,556 1,324,218 10% Guidance, Counseling and Evaluation Services 1,355,671 1,307,881 4% Social Work Services - 5, % Health Services 678, ,663 74% Student (Pupil) Transportation 1,159,608 1,026,121 13% Food Services 1,938,336 1,641,821 18% Curricular/Extracurricular Activities 921, ,996 34% General Administration 1,343,866 1,154,965 16% Plant Maintenance & Operation 2,977,395 2,739,734 9% Security & Monitoring Services 326, ,877-6% Data Processing Services 836, ,518 25% Debt Service Interest 7,093,078 2,238, % Bond Issuance Costs and Fees 65,570 13, % Payments to Member Districts of SSA 448, ,149-50% Payments to Juvenile Justice Alternative Ed. Program 17,526 31,464-44% Other Intergovernmental Charges 238, ,319 36% Total Expenses 43,067,091 34,219,126 26% Excess (Deficiency) Before Other Resources, Uses & Transfers (2,023,607) 409, % Other Resources (Uses) - - 0% Transfers In (Out) - - 0% Increase (Decrease) in Net Assets (2,023,607) 409, % Net Assets - Beginning 20,637,111 20,227,400 2% Prior Period Adjustment (1,248,078) % Net Assets - Ending 17,365,426 20,637,111-16% 9

15 Table A-3 presents the cost of each of the District s largest functions as well as each function s net cost (total cost less fees generated by the activities and intergovernmental aid). The net cost reflects what was funded by state revenues as well as local tax dollars. The cost of all governmental activities for the year ended June 30, 2010 was $43,067,091. However, the amount that our taxpayers paid for these activities through property taxes was only $20,874,063. Some of the cost was paid by those who directly benefited from the programs $756,307, or By grants and contributions $18,232,444. Table A-3 Net Cost of Selected District Functions Total Cost of Services Net Cost of Services June 30, June 30, % Change June 30, June 30, % Change Instruction 19,630,679 17,537,652 12% 16,282,060 14,963,659 9% School administration 1,343,866 1,154,965 16% 1,277,802 1,061,844 20% Plant Maintenance & Operations 2,977,395 2,739,734 9% 2,893,393 2,579,709 12% Debt Service Interest & Charges 7,093,078 2,238, % 7,041,007 2,125, % FINANCIAL ANALYSIS OF THE DISTRICT S FUNDS Revenues from governmental fund types totaled $40,126,303 for the year ended June 30, 2010, an increase of 17% over the preceding fiscal year. Local revenues increased 29% or $4,875,917 primarily as a result of the increased tax collections. State revenues increased 1% from $13,916,961 in the prior period to $14,060,008. General Fund Budgetary Highlights Over the course of the year, the District revised its budget 4 times. Due to these adjustments, the District was able to stay within its expense budget in all functional areas. Revenues were $111,564 more than budgeted. 10

16 CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets At June 30, 2010, the District had invested $97,150,648 in a broad range of capital assets, including, land, equipment, buildings, and vehicles. (See Table A-4.) This amount represents a net increase (including additions and deductions) of $26,296,805 or 37 percent over last year. Table A-4 District s Capital Assets Total Governmental Percentage Activities Change Land $ 2,166,232 $ 1,732,751 25% Construction in progress 28,150,795 3,257, % Buildings and improvements 59,603,713 59,458,559 0% Vehicles 3,334,275 2,640,962 26% Equipment 3,895,633 3,763,824 4% Other Totals at historical cost 97,150,648 70,853,843 37% Total accumulated depreciation 16,921,571 14,551,198 16% Net capital assets $ 80,229,077 $ 56,302,645 42% The District will have large capital expenditures for buildings and improvements in FYE The District will use the bond proceeds received for the construction of schools, improvements to existing schools and facilities, and construction of athletic facilities. Debt Adminstration The District issued Unlimited Tax School Building and Refunding Bonds, Series 2006 during the year ended August 31, The bonds totaled $37,309,999 and are issued in part as current interest bonds and in part as premium capital appreciation bonds. The proceeds from the sale of the bonds are being used to construct, renovate and equip school buildings. The current interest bonds are due serially in varying amounts aggregating $190,000 to $3,040,000 through February 15, The effective interest rates range from 4.00% to 5.125%. The District also holds Schoolhouse Bonds-Series Effective interest rates range from 2.25% to 5.64%. The District issued Unlimited Tax School Building and Refunding Bonds, Series 2009 and Series 2010 during the year ended June 30, The bonds totaled $88,439,958 and were issued in part a current interest bonds and in part as premium capital appreciation bonds. The proceeds from the sale of the bonds are being used to construct, renovate and equip school buildings, and to pay off a large portion of the Schoolhouse Bonds-Series During each year while bonds are outstanding, the District is required to levy and collect sufficient ad valorem taxes to provide for the payment of principal and interest as it becomes due. Interest costs of $6,854,603 were paid during the year ended June 30, 2010 on bonded indebtedness. 11

17 The District also holds a capital lease for environmental equipment. The effective interest rate for this lease is 5.85%. Changes in long-term obligations for the year ended June 30, 2010 are as follows: Table A-5 District s Long-Term Debt Governmental Beginning Increases/ Ending Activities: Balance Accretion Decreases Balance Schoolhouse Bonds- Series 2001 $ 9,000,000 - $ 8,715,000 $ 285,000 Unlimited Tax School Building and Refunding Bonds Series ,760, ,000 36,200,000 Unlimited Tax School Building Bonds Series ,180,000-78,180,000 Premium Capital Appreciation Bonds Series , ,552 Unlimited Tax Refunding Bonds Series ,440,000-8,440,000 Unlimited Tax School Building Bonds Series ,500,000-1,500,000 Capital Lease 113,662-63,295 50,367 Total Long-Term Obligations $ 45,873,662 $ 88,631,552 $ 9,338,295 $ 125,166,919 More detailed information about the District s long-term obligations is presented in the notes to the financial statements. ECONOMIC FACTORS AND NEXT YEAR S BUDGETS AND RATES Appraised value used for the 2011 budget preparation is up from General operating fund spending increases in the 2011 budget. The District s 2011 refined average daily attendance is expected to increase. These indicators were taken into account when adopting the general fund budget for Property taxes will increase due to the increasing values. State revenue will increase as the student population grows. The District will use these increases in revenues to finance programs we currently offer. If these estimates are realized, the District s budgetary general fund fund balance is expected to increase slightly by the close of CONTACTING THE DISTRICT S FINANCIAL MANAGEMENT This financial report is designed to provide our citizens, taxpayers, customers, and investors and creditors with a general overview of the District s finances and to demonstrate the District s accountability for the money it receives. If you have questions about this report or need additional financial information, contact the District s Business Services Department. 12

18 BASIC FINANCIAL STATEMENTS

19 -13- EXHIBIT A-1 STATEMENT OF NET ASSETS June 30, Data Control Governmental Codes Activities ASSETS: 1110 Cash and Cash Equivalents $ 66,578, Taxes Receivable, Net 518, Due from Other Governments 3,743, Accrued Interest Other Receivables 1,485, Inventories 65, Deferred Expense or Expenditures 1, Capitalized Bond & Other Issuance Costs 2,277, Other Current Assets - Capital Assets: 1510 Land 2,166, Buildings & Improvements, net 47,012, Furniture & Equipment, net 2,899, Construction in Progress 28,150, TOTAL ASSETS $ 154,899,699 LIABILITIES: Current Liabilities: 2110 Accounts Payable $ 2,972, Bond Interest Payable 3,026, Payroll Withholdings Payable 3, Accrued Wages Payable 2,224, Due to Other Governments 181, Accrued Expenditures 205, Deferred Revenue 793,228 Noncurrent Liabilities: 2501 Due within one year 1,115, Due in more than one year 124,051, Premium on bond issuance 2,960, Total Liabilities 137,534,273 NET ASSETS: 3200 Invested in Net Assets, Net of Related Debt 6,016,673 Restricted for: 3850 Debt Service 1,761, Unrestricted 9,587, TOTAL NET ASSETS $ 17,365,426 The accompanying notes are an integral part of this statement.

20 -14- EXHIBIT B-1 STATEMENT OF ACTIVITIES For the Year Ended June 30, Data Program Revenues Net (Expense) Control Operating Revenue and Charges for Grants and Changes in Codes Functions/Programs Expenses Services Contributions Net Assets Government Activities: 11 Instruction and Instruction-Related Services $ 19,630,679 $ 21,523 $ 3,327,096 $ (16,282,060) 12 Instructional Resources and Media Services 1,015,941-47,821 (968,120) 13 Curriculum Development and Instructional Staff Development 813, ,613 (540,913) 21 Instructional Leadership 751, ,251 (422,115) 23 School Leadership 1,454,556-62,903 (1,391,653) 31 Guidance, Counseling, & Evaluation Services 1,355, ,139 (1,107,532) 33 Health Services 678,660-26,307 (652,353) 34 Student (Pupil) Transportation 1,159, ,143 (1,017,465) 35 Food Services 1,938, , ,738 (276,105) 36 Extracurricular Activities 921,401 42,691 24,448 (854,262) 41 General Administration 1,343,866-66,064 (1,277,802) 51 Plant Maintenance and Operations 2,977, ,402 (2,893,393) 52 Security and Monitoring Services 326,998-55,058 (271,940) 53 Data Processing 836,450-78,823 (757,627) 72 Interest on Long-Term Debt 7,093,078-52,071 (7,041,007) 73 Bond Issuance Costs and Fees 65, (65,570) 93 Payments to Member Districts of SSA 448, , Payments to Juvenile Justice Alternative Ed. Programs 17, (17,526) 99 Other Intergovernmental Charges 238, (238,216) TG Total Government Activities 43,067, ,307 6,235,125 (36,075,659) TP Total Primary Government 43,067, ,307 6,235,125 (36,075,659) General Revenues: MT Property Taxes, Levied for General Purposes 14,505,919 DT Property Taxes, Levied for Debt Service 6,368,144 IE Investment Earnings 243,416 GC Grants and Contributions Not Restricted to Specific Programs 11,997,319 MI Miscellaneous 937,254 TR Total General Revenue 34,052,052 CN Change in Net Assets (2,023,607) NB Net Assets -- Beginning 20,637,111 PA Prior Period Adjustments (1,248,078) NE Net Assets -- Ending $ 17,365,426 The accompanying notes are an integral part of this statement.

21 -15- EXHIBIT C-1 BALANCE SHEET - GOVERNMENTAL FUNDS June 30, Data Debt Capital Other Total Control General Service Projects Governmental Governmental Codes Fund Fund Fund Funds Funds ASSETS: 1110 Cash and Cash Equivalents $ 8,356,495 $ 4,740,611 $ 52,216,116 $ 174,801 $ 65,488, Taxes Receivable, Net 368, , , Due from Other Governments 3,119,395 18, ,404 3,743, Accrued Interest Due from Other Funds 365, , Other Receivables ,844 1,442, ,485, Inventories 6, ,372 65, Deferred Expenditures 1, , Other Current Assets TOTAL ASSETS $ 12,218,450 $ 4,951,933 $ 53,658,126 $ 839,858 $ 71,668,367 LIABILITIES: Current Liabilities: 2110 Accounts Payable $ 160,698 $ - $ 2,703,610 $ 107,874 $ 2,972, Bond Interest Payable - 3,026, ,026, Withholdings Payable 3, , Accrued Wages Payable 2,058, ,045 2,224, Due to Other Funds 27,994 14, , , Due to Other Governments , , Accrued Expenditures 181, , , Deferred Revenue 1,152, ,754-9,283 1,311, Total Liabilities 3,585,232 3,190,580 2,703, ,858 10,319,280 FUND BALANCES: Reserved Fund Balances: 3420 Debt Service - 1,761, ,761, Capital Acquisition Program ,954,516-50,954,516 Designated Fund Balances: 3510 Construction and Land Purchase 3,035, ,035, Capital Expenditures for Equipment 525, , Unreserved 5,073, ,073, Total Fund Balance 8,633,218 1,761,353 50,954,516-61,349, TOTAL LIABILITIES AND FUND EQUITY $ 12,218,450 $ 4,951,933 $ 53,658,126 $ 839,858 $ 71,668,367 The accompanying notes are an integral part of this statement.

22 -16- EXHIBIT C-1R RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS June 30, 2010 Total Fund Balances -- Governmental Funds Balance Sheet $ 61,349,087 Amounts reported for governmental activities in the statement of net assets (A-1) are different because: 1 Capital assets used in governmental activities are not financial resources and therefore are not reported in the funds. 80,229,075 2 Other long-term assets are not available to pay for current-period expenditures and therefore are deferred in the funds. 518,627 3 Some liabilites, including bonds payable, are not due and payable in the current period and therefore are not reported in the funds. (125,166,919) 4 The amount of premium/discount on bonds is required to be recognized in the statement of net assets. (2,960,406) 5 Certain costs related to the sale of bonds are capitalized and amortized over the life of the bond. 2,277,943 6 Internal Service Funds are used by management to charge the costs of certain activites, suchs as insurance and telecommunications, to individual funds. The ending equity is reported in the Unrestricted Net Assets o governmental activites 1,118,019 Net Assets of Governmental Activities -- Statement of Net Assets $ 17,365,426 The accompanying notes are an integral part of this statement.

23 -17- EXHIBIT C-2 STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES-- GOVERNMENTAL FUNDS For the Year Ended June 30, Data Debt Capital Other Total Control General Service Projects Governmental Governmental Codes Fund Fund Fund Funds Funds REVENUES: 5700 Local and Intermediate Sources $ 14,731,949 $ 6,352,712 $ 115,805 $ 693,394 $ 21,893, State Program Revenues 13,266,993 52, ,944 14,060, Federal Program Revenues 92, ,079,971 4,172, Total Revenues 28,091,406 6,404, ,805 5,514,309 40,126,303 EXPENDITURES: Current: 0011 Instruction and Instruction-Related Services 15,791, ,448,068 18,239, Instructional Resources and Media Services 943, , Curriculum Development and Instructional Staff Development 497, , , Instructional Leadership 386, , , School Leadership 1,350, ,350, Guidance, Counseling, & Evaluation Services 1,075, ,248 1,258, Social Work Services Health Services 461, , Student (Pupil) Transportation 1,360, ,126 1,466, Food Services 41, ,758,137 1,799, Cocurricular/Extracurricular Activities 855, , General Administration 1,171, ,776 1,198, Plant Maintenance and Operations 2,762, ,000 2,764, Security and Monitoring Services 311, , , Data Processing Services 770, , , Principal on Long-Term Debt - 9,338, ,338, Interest on Long-Term Debt - 6,860, ,860, Bond Issuance Costs and Fees - 8,989 2,178,275-2,187, Capital Outlay 26,468-25,895,619-25,922, Payments to Member Districts of SSA , , Payments to Juvenile Justice Alternative 17, , Other Intergovernmental Charges 238, , Total Expenditures 28,062,427 16,208,056 28,073,894 5,646,258 77,990, Excess (Deficiency) of Revenues Over (Under) Expenditures 28,979 (9,803,273) (27,958,089) (131,949) (37,864,332) Other Financing Sources and (Uses): 7911 Capital-Related Debt Issued (Regular Bonds) ,439,958-88,439, Operating Transfers In - 9,861, ,949 9,993, Premium or Discount on Issuance of Bonds - - 2,706,095-2,706, Prepaid Interest , , Operating Transfers Out (201,412) - (9,791,905) - (9,993,317) 8949 Payment of Bond Refunding Escrow Agent Total Other Financing Sources and (Uses) (201,412) 9,861,368 81,890, ,949 91,682, Net Change in Fund Balances (172,433) 58,095 53,932,496-53,818, Fund Balances -- Beginning 10,053,729 1,703,258 (2,977,980) - 8,779, Prior Period Adjustment (1,248,078) (1,248,078) 3000 Fund Balances -- Ending $ 8,633,218 $ 1,761,353 $ 50,954,516 $ - $ 61,349,087 The accompanying notes are an integral part of this statement.

24 -18- EXHIBIT C-3 RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES For the Year Ended June 30, 2010 Net Change in Fund Balances -- Total Governmental Funds $ 53,818,158 Amounts reported for governmental activities in the statement of activities ("SOA") are different because: Governmental funds report capital outlays as expenditures. However, in the statement of activities, the cost of those assets is allocated over their useful lives as depreciation expense. This is the amount of capital outlays during the current period. 26,374,265 The depreciation of capital assets is not reported in the funds. This is the amount of current depreciation on these assets. (2,447,831) Certain property tax revenues are deferred in the funds. These are the amounts that have not been collected and are therefore do not provide current financial resources. This is the amount that these accounts changed during the current period. 51,776 Repayment of debt principal is an expenditure in the governmental funds, but is a reduction of long-term debt in the statement of net assets. This amount is the total debt principal repaid for capital leases, loans & bonded indebtedness. 9,338,295 The accretion of interest on capital appreciation bonds is not reported in the funds This is the amount of increase in accrued interest expense for the year. (191,594) Proceeds from the issuance of long-term debt, such as bonds are reported as other resources in the governmental funds. In the statement of net assets these amounts are reflected as an increase to the long-term debt section. (88,967,778) Premiums received from the issuance of bonds is recorded in the governmental funds as an other source of current resources. For the statement of net assets, these premiums are amortized and a portion recognized as revenue over the life of the bonds. (40,712) The cost of issuing bonds is reported as an other use or expense in the governmenta funds, but is amortized as an expense over the life of the bonds in the statement o net assets. (56,582) Internal Service Funds are used by management to charge the costs of certain activites, such as insurance and telecommunications, to individual funds. Th net revenue (expense) of the internal service funds is reported with governmenta activites. 98,396 Net Assets of Governmental Activities -- Statement of Net Assets $ (2,023,607) The accompanying notes are an integral part of this statement.

25 -19- EXHIBIT D-1 STATEMENT OF NET ASSETS INTERNAL SERVICE FUNDS June 30, 2010 Data Control Codes Nonmajor Internal Service Fund ASSETS: Current Assets: 1110 Cash and Cash Equivalents $ 1,090, Due from Other Funds 27,984 Total Assets $ 1,118,016 LIABILITIES: 2170 Due to Other Funds $ Total Liabilities - NET ASSETS: 3900 Unrestricted Net Assets 1,118, Total Net Assets $ 1,118,016 The accompanying notes are an integral part of this statement.

26 -20- EXHIBIT D-2 STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET ASSETS - INTERNAL SERVICE FUND For the Year Ended June 30, 2010 Data Nonmajor Control Internal Service Codes Fund OPERATING REVENUES: 5700 Local and Intermediate Sources $ 12, Total Revenues 12,661 OPERATING EXPENSES: 6200 Professional and Contracted Services 177, Other Operating Costs 57, Total Expenses 234,591 Operating Income (Loss) (221,930) Contributions and Transfers 320, Change in New Assets 98, Total Net Assets - Beginning 1,019, Total Net Assets - Ending $ 1,118,016 The accompanying notes are an integral part of this statement.

27 -21- EXHIBIT D-3 STATEMENT OF CASH FLOWS PROPRIETARY FUNDS For the Year Ended June 30, 2010 Nonmajor Internal Service Fund Cash Flows from Operating Activites: Cash Receipts (Payments) for Quasi-external Operating Transactions with Other Funds $ 320,325 Cash Payments to Other Suppliers for Goods and Services (234,591) Net Cash Provided (Used) by Operating Activites 85,734 Cash Flows from Investing Activities: Repayments of Interfund Borrowing - Interest Earned on Investments 12,661 Net Cash Provided (Used) by Investing Activite 12,661 Net Increase (Decrease) in Cash and Cash Equivalents 98,395 Cash and Cash Equivalents at Beginning of Yea 991,637 Cash and Cash Equivalents at End of Yea $ 1,090,032 Reconciliation of Operating Income to Net Cash Provided by Operating Activities Operating Income (Loss) $ 85,734 Adjustments to Reconcile Operating Income to Net Cash Provided by Operating Activities: Changes in Assets and Liabilities: (Increase) Decrease in Receivables - Increase (Decrease) in Liabilities - Net Cash Provided by (Used for) Operating Activities $ 85,734 The accompanying notes are an integral part of this statement.

28 -22- EXHIBIT E-1 STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS June 30, 2010 Data Control Agency Codes Funds ASSETS: 1110 Cash and Cash Equivalents $ 190, Accrued Interest TOTAL ASSETS $ 190,145 LIABILITIES: 2190 Due to Student Groups $ 190, TOTAL LIABILITIES $ 190,145 The accompanying notes are an integral part of this statement.

29 -23- NOTES TO THE FINANCIAL STATEMENTS Year Ended June 30, 2010 A. Summary of Significant Accounting Policies The basic financial statements of Lubbock-Cooper Independent School District (the District ) have been prepared in conformity with accounting principles generally accepted in the United States of America ( GAAP ) applicable to governmental units in conjunction with the Texas Education Agency s Financial Accountability System Resource Guide ( Resource Guide ). The Governmental Accounting Standards Board ( GASB ) is the accepted standard setting body for establishing governmental accounting and financial reporting principles. 1. Reporting Entity The Board of School Trustees ( Board ), a seven member group, has governance responsibilities over all activities related to public elementary and secondary education within the jurisdiction of the District. The Board is elected by the public and has exclusive power and duty to govern and oversee the management of the public schools of the District. All powers and duties not specifically delegated to statue to the Texas Education Agency ( TEA ) or to the State Board of Education are reserved for the Board, and the TEA may not substitute its judgment for the lawful exercise of those powers and duties by the Board. The District receives funding from local, state and federal government sources and must comply with the requirements of those funding entities. However, the District is not included in any other governmental reporting entity as defined by GASB in its Statement No. 14, The Financial Reporting Entity and there are no component units included within the reporting entity. 2. Basis of Presentation, Basis of Accounting a. Basis of Presentation Government-wide Statements: The statement of net assets and the statement of activities include the financial activities of the overall government. Eliminations have been made to minimize the over-reporting of internal activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other non exchange transactions.

30 -24- NOTES TO THE FINANCIAL STATEMENTS, Page 2 Year Ended June 30, 2010 A. Summary of Significant Accounting Policies (Continued) The statement of activities presents a comparison between direct expenses and program revenues for each function of the District s governmental activities. Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. The District does not allocate indirect expenses in the statement of activities. Program revenues include (a) fees, fines, and charges paid by the recipients of goods or services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all of taxes, are presented as general revenues. Fund Financial Statements: The fund financial statements provide information about the District s funds, with separate statements presented for each fund category. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column. All remaining governmental funds are aggregated and reported as nonmajor funds. The District reports the following major governmental funds: General Fund: This is the District s primary operating fund. It accounts for all financial resources of the District except those required to be accounted for in another fund. Debt Service Fund: This is the District s fund for the collection of revenues from property taxes and state grants for the specific purpose of retiring loans and bonded indebtedness. Capital Projects Fund: This fund is used to report the District s construction and investment in physical plant and other capital assets.

31 -25- NOTES TO THE FINANCIAL STATEMENTS, Page 3 Year Ended June 30, 2010 A. Summary of Significant Accounting Policies (Continued) In addition, the District reports the following fund types: Internal Service Funds: These funds are used to account for revenues and expenses related to services provided to parties inside the District. These funds facilitate distribution of support costs to the users of support services on a cost-reimbursement basis. Special Revenue Funds: These funds are used to account for resources restricted to, or designated for, specific purposes by a grantor. Federal financial assistance generally is accounted for in a special revenue fund. Except for the food service fund, any unused balances are returned to the grantor at the close of specified project periods. The food service fund is the only required budgeted special revenue fund and historically operates at a deficit that is funded by an operating transfer from the General Fund. For all other funds in this fund type, project accounting is employed to maintain integrity for the various sources of funds. Agency Funds: These funds are used to report student activity funds and other resources held in a purely custodial capacity (assets equal liabilities). Agency funds involve only the receipt, temporary investment, and remittance of fiduciary resources to individuals, private organizations, or other governments.

32 -26- NOTES TO THE FINANCIAL STATEMENTS, Page 4 Year Ended June 30, 2010 A. Summary of Significant Accounting Policies (Continued) b. Measurement Focus, Basis of Accounting Government-wide Financial Statements: These financial statements are reported using the economic resources measurement focus. They are reported using the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time the liabilities are incurred, regardless of when the related cash flows take place. Nonexchange transactions, in which the District gives (or receives) value without directly receiving (or giving) equal value in exchange, include property taxes, grants, entitlements, and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenues from grants, entitlements, and donations are recognized in the fiscal year in which all eligibility requirements have been satisfied. Governmental Fund Financial Statements: Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Under this method, the revenues are recognized when measurable and available. The District considers all revenues reported in the governmental funds to be available if the revenues are collected within sixty 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. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general longterm debt, claims, and judgments, which are recognized as expenditures to the extent they have matured. General capital assets acquisitions are reported as expenditures in governmental funds. Proceeds from general long-term debt and acquisitions under capital leases are reported as other financing sources.