BURLINGAME SCHOOL DISTRICT June 30, 2014 Table of Contents

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2 June 30, 2014 Table of Contents FINANCIAL SECTION Page(s) Independent Auditors Report 1 3 Management s Discussion and Analysis (Required Supplementary Information) 4 14 Basic Financial Statements Government-wide Financial Statements Statement of Net Position 15 Statement of Activities 16 Fund Financial Statements Governmental Funds Balance Sheet 17 Reconciliation of Governmental Funds Balance Sheet to the Government-wide Statement of Net Position Governmental Activities 18 Statement of Revenues, Expenditures, and Changes in Fund Balances 19 Reconciliation of Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances to the Government-wide Statement of Activities Governmental Activities 20 Fiduciary Funds Statement of Net Position 21 Statement of Changes in Net Position 22 Notes to the Basic Financial Statements Required Supplementary Information (other than MD&A) Schedule of Revenues, Expenditures, and Changes in Fund Balances Budget and Actual General Fund 47 Schedule of Funding Progress 48 Combining Fund Statements Nonmajor Governmental Funds Combining Balance Sheet 49 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances (By Object) 50 Nonmajor Special Revenue Funds Combining Balance Sheet 51 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances (By Object) 52 Nonmajor Capital Projects Funds Combining Balance Sheet 53 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances (By Object) 54

3 June 30, 2014 Table of Contents SUPPLEMENTARY INFORMATION SECTION Page(s) Organization 55 Schedule of Average Daily Attendance 56 Schedule of Instructional Time 57 Schedule of Charter Schools 58 Schedule of Financial Trends and Analysis 59 Schedule of Expenditures of Federal Awards 60 Reconciliation of Annual Financial and Budget Report (SACS) with Audited Basic Financial Statements 61 OTHER INDEPENDENT AUDITORS REPORT SECTION Independent Auditors Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance With Government Auditing Standards Independent Auditors Report on Compliance For Each Major Program and on Internal Control Over Compliance Required by OMB Circular A Independent Auditors Report on State Compliance FINDINGS AND RECOMMENDATIONS SECTION Schedule of Audit Findings and Questioned Costs Summary Schedule of Prior Audit Findings 70

4 Financial Section

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6 Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the Burlingame School District, as of June 30, 2014, and the respective changes in financial position thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management s discussion and analysis; schedule of revenues, expenditures, and changes in fund balances - budget and actual - general fund; and schedule of funding progress on pages 4-14; 47; and 48 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Burlingame School District s basic financial statements. The combining fund statements and supplementary information are presented for purposes of additional analysis and are not a required part of the basic financial statements. The schedule of expenditures of federal awards is presented for purposes of additional analysis as required by 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 basic financial statements. The combining fund statements, supplementary information, and the schedule of expenditures of federal awards are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining fund statements, supplementary information, and the schedule of expenditures of federal awards are fairly stated in all material respects in relation to the basic financial statements as a whole. 2

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8 Management s Discussion and Analysis (MD&A) - Required Supplementary Information

9 Management s Discussion and Analysis An overview of the Burlingame School District s (the District ) financial activities for the fiscal year ended June 30, 2014 is provided in this discussion and analysis of the District s financial performance. This Management Discussion and Analysis (MD&A) should be read in conjunction with the District s financial statements (including notes and supplementary information). USING THIS ANNUAL REPORT This annual report consists of a series of financial statements. The Statements of Net Position and the Statement of Activities provide information about the activities of the District as a whole and present a longer-term of the District s finances. Fund financial statements, for governmental activities, tell how these services were financed in the short term as well as what remains for future spending. Fund financial statements also report he District s operations in more detail than the government-wide statements by providing information about the District s most significant funds. The remaining statements provide financial information about activities for which the District acts solely as trustee or agent for the benefit of those outside of the District. Reporting the District as a Whole One of the most important questions asked about the District s finances is, Is the District as a whole better off or worse as a result of the year s activities? The Statement of Net Position and the Statement of Activities report information about the District as a whole and about its activities in a way that helps answer this question. These statements include all assets and liabilities using the accrual basis of accounting, which is similar to the accounting used by most private-sector companies. All of the current year s revenues and expenses are taken into account regardless of when cash is received or paid. FINANCIAL HIGHLIGHTS The District s financial status decreased for fiscal year There was $2,937,007 decrease in total net position. This is mostly attributable to bond accreted interest. Expenses of $38,159,499 were more than revenues of $35,222,492. This is due to the interest on long-term debt (bond accreted interest). Enrollment increased by 6.6%. The net position of the District at the close of the fiscal year is $1,303,612. Of this amount, $18,407,310 (unrestricted net position) may be used to meet ongoing obligations to citizens and creditors, $8,817,667 is legally restricted, and a negative $25,921,365 is net investment in capital assets. 4

10 Management s Discussion and Analysis As of June 30, 2014 the District s governmental funds reported combined ending fund balances of $30,026,064, a decrease of $14,440,480 in comparison with the prior year. Approximately 29.4% of the combined fund balances or $8,817,667 is legally restricted, 60.8% or $18,247,332 is assigned, 9.8% or $2,942,326 is unassigned, and 0.1% or $18,739 is nonspendable. At the end of the fiscal year, unassigned fund balance for the general fund was $2,942,326 or 11.7% of total general fund expenditures. The District s total long-term debt increased by $2,335,133 in comparison with the prior year primarily due to bond accreted interest. OVERVIEW OF THE FINANCIAL STATEMENTS The full annual financial report is a product of three separate parts: the basic financial statements, supplementary information, and this section, Management Discussion and Analysis. The three sections together provide a comprehensive overview of the District. The basic financials are comprised of two kinds of statements that present financial information from different perspectives, government-wide and funds. Government-wide financial statements, which comprise the first two statements, the statement of net position and the statement of activities, provide both short term and long-term information about the District s overall financial position. Individual parts of the District, which are reported as fund financial statements, focus on reporting the District s operations in more detail. These fund financial statements comprise the remaining statements. o o o Basic services funding (i.e., regular and special education) is described in the governmental funds statements. These statements include short-term financing and balance remaining for future spending. Normally, short and long-term financial information about the activities of the District that operate like businesses (such as food service or self-insurance funds) are provided in the proprietary funds statements. The District has no proprietary funds. Financial relationships, for which the District acts solely as an agent or trustee, for the benefit of others to whom the resources belong, are presented in the fiduciary fund statements. Notes to the financials, which are included in the financial statements, provide more detailed data and explain some of the information in the statements. The required supplementary information section provides further explanations and provides additional support for the financial statements. A comparison of the District s general fund s budget for the year is included. The combining fund statements are presented to show the individual fund data for each nonmajor governmental. 5

11 Management s Discussion and Analysis Management s Discussion and Basic Financial Statements Required Supplementary Government-wide Financial Statements Fund Financial Statements Notes to the Basic Financial Statements Government-wide Financial Statements The District as a whole is reported in the government-wide statements and uses accounting methods similar to those used by companies in the private sector. All of the District s assets, deferred outflows/inflows of resources, and liabilities are included in the Statement of Net Position. The Statement of Activities reports all of the current year s revenues and expenses regardless of when cash is received or paid. The District s financial health or position (net position) can be measured by the difference between the District s assets, deferred outflows/inflows of resources, and liabilities. Increases or decreases in the net position of the District over time are indicators of whether its financial position is improving or deteriorating, respectively. Additional non-financial factors such as condition of school buildings and other facilities, and changes in the property tax base of the District, need to be considered in assessing the overall health of the District. The Statement of Net Position and the Statement of Activities are normally divided into two kinds of activities: Governmental activities: The basic services provided by the District, such as regular and special education, administration, and transportation are included here. Property taxes and state formula aid finance most of these activities. Business-type activities: Business-type activities would charge fees to help cover the costs of certain services it provides. There are no business-type activities for the District. Fund Financial Statements More detailed information about the District s most significant funds not the District as a whole is provided in the fund financial statements. Funds are accounting devices the District uses to keep track of specific sources of funding and spending on particular programs: 6

12 Management s Discussion and Analysis Some funds are required by bond covenants and by state law. Other funds are established by the District to control and manage money for particular purposes (such as repaying its long-term debts). Other funds may also show proper usage of certain revenues (such as federal grants). There are three kinds of funds: governmental, proprietary and fiduciary funds. The District maintains two kinds of funds, the governmental and fiduciary funds: Governmental funds: Most of the District s basic services are included in governmental funds, which generally focus on: 1. How cash and other financial assets can readily be converted to cash flow (in and out). 2. The balances left at year-end that are available for spending. A detailed short-term view is provided by the governmental fund statements. These help determine whether there are more or fewer financial resources that can be spent in the near future for financing the District s programs. Because this information does not encompass the additional long-term focus of the government-wide statements, additional information is provided at the bottom of the governmental fund statements that explain the differences (or relationships) between them. The District maintains several individual governmental funds organized according to their type (general, special revenue, capital projects, and debt service). Information is presented separately in the governmental funds balance sheet and in the governmental funds statement of revenues, expenditures, and changes in fund balances for the general, bond interest and redemption, and building funds, which are considered to be the major funds. Data from the remaining governmental funds are combined into a single, aggregated presentation. Individual fund data for each of the nonmajor governmental funds is provided in the form of combining statements elsewhere in this report. The District adopts an annual appropriated budget. The budget is a compilation of operating budgets from individual functional units within the general, special revenue, debt service, and capital projects fund. Budgets are adopted for all funds. A budgetary comparison schedule has been provided for the general fund to demonstrate compliance with the budget. Proprietary funds: The District has no proprietary funds. 7

13 Management s Discussion and Analysis Fiduciary funds: For assets that belong to others, such as the retiree benefits fund, the District acts as the trustee, or fiduciary. The District is responsible for ensuring that the assets reported in these funds are used only for their intended purposes and by those to whom the assets belong. A separate statement of fiduciary net position and a statement of changes in fiduciary net position reports the District s fiduciary activities. These activities are excluded from the government-wide financial statements, as the assets cannot be used by the District to finance its operations. GOVERNMENT-WIDE FINANCIAL ANALYSIS Net Position Table 1: Net Position Governmental Activities Percentage Change Current and other assets Cash $ 28,288,090 $ 43,745,114 (35.3) Receivables 5,178,625 4,691, Prepaid expenses 16,239 33,217 (51.1) Subtotal of current and other assets 33,482,954 48,470,006 (30.9) Capital assets, net 67,077,083 52,984, Total assets 100,560, ,454,300 ( 1.0) Accounts payable and other current liabilities 5,062,093 5,354,482 (5.5) Long-term debt outstanding 94,194,332 91,859, Total liabilities 99,256,425 97,213, Net position Net investment in capital assets ( 25,921,365) ( 37,876,711) 31.6 Restricted 8,817,667 6,567, Unrestricted 18,407,310 35,549,346 (48.2) Total net position $1,303,612 $4,240,619 (69.3) The District s net position decreased by $2,937,007 or 69.3% from the year before. Reasons for the decrease in financial position: Decrease in cash was due to usage of capital facility funds for ongoing construction. Increase in receivable was due to deferrals from state and federal entitlements and grants. Increase in capital assets was due to Bond program expenses. Increase in long-term debt was due to bond accreted interest. 8

14 Management s Discussion and Analysis Changes in Net Position The District s total revenues were $35,222,492 which decreased 14.9% from the prior year (see table 2). This change is mainly due to decrease in capital grants and contributions. The total cost of all programs and services is $38,159,499. The District s expenses are predominantly related to educating and caring for students of $23,016,821 or 60.3%. (see Table 4). Other expenses accounted for 23.5%, purely administrative activities for 4.8%, and plant services for 11.4% of the District s total costs. Table 2: Changes in Net Position Governmental Activities Percentage Change Revenues Program revenues Operating grants and contributions $ 5,229,726 $ 6,249,348 (16.3) Capital grants and contributions - 9,723,416 (100.0) Charges for services 24, General revenues Taxes 10,252,241 7,602, Federal & state aid 18,352,119 17,186, Interest and investment earnings 560, , Miscellaneous 802, , Total revenues 35,222,492 41,410,383 (14.9) Expenses Instruction-related 23,016,821 21,656, General administration 1,818,552 1,914,095 (5.0) Plant services 4,360,480 2,760, Others 8,963,646 7,341, Total expenses 38,159,499 33,672, Change in net position excluding prior period adjustment ($2,937,007) $7,737,992 (138.0) Governmental Activities Revenues for the District s governmental activities are $35,222,492, while total expenses are $38,159,499. Total net position decreased by $2,937,007. The recent changes of the District s finances can be credited to: Operating grants and contribution decreased $1,019,622 or 16.3% due to decrease in source expended for payment of bond interest and principal. Capital grants and contribution decreased $9,723,416 or 100% due to the receipt of state matching funds for construction in the prior year. Taxes increased $2,649,866 or 34.9% due to State Aid. Federal and state aid increased $1,165,144 or 6.8% due to increase sources of components entitlements, unduplicated eligible pupil counts as well as ADA. Miscellaneous revenues increased $400,884 or 99.8% due to receipt of construction settlement funds and an increase in developer fees. 9

15 Management s Discussion and Analysis Instruction-related increased $1,360,695 or 6.3% due to new language aids adoption. Plant services increased $1,600,136 or 58.0% due to completion of bond projects. Other expenses increased $1,621,820 or 22.1% due to interest on long-term debt (bond accreted interest). Table 3: Summary of Revenues for Governmental Functions FYE 2014 Amount 10 Percent of Total Increase (Decrease) from FYE 2013 Percent Increase (Decrease) Revenues Program revenues Operating grants and contributions $ 5,229, ($1,019,622) ( 16.3) Capital grants and contributions - - 9,723,416 (100.0) Charges for services 24, ,884 - General revenues Taxes 10,252, ,649, Federal & state aid 18,352, ,165, Interest and investment earnings 560, , Miscellaneous 802, , Total revenues $35,222, $6,187,891 (14.9) Table 4: Summary of Expenses FYE 2014 Amount Percent of Total Increase (Decrease) from FYE 2013 Percent Increase (Decrease) Expenses Instruction-related $23,016, $1,360, General administration 1,818, (95,543) (5.0) Plant services 4,360, ,600, Other 8,963, ,621, Total expenses $38,159, $4,487, Table 5: Governmental Activities Total Cost of Services Percentage Change Net Cost of Services Percentage Change Instruction $18,764,386 $17,748, ($16,893,200) ($5,818,531) (190.3) Instruction-related 2,591,343 2,403, ( 2,458,265) ( 2,444,392) (1.0) Pupil services 1,661,092 1,504, ( 985,621) ( 697,329) (41.3) General administration 1,818,552 1,914,095 (5.0) ( 1,778,708) ( 1,866,482) 4.7 Plant services 4,360,480 2,760, ( 4,359,290) ( 2,758,923) (58.0) Other outgo 374, ,492 (27.0) 2,158,997 2,514,364 (14.1) Interest on long-term debt 7,052,384 5,257, ( 7,052,384) ( 5,257,915) (34.1) Depreciation 1,536,418 1,570,419 (2.2) ( 1,536,418) ( 1,570,419) 2.2 Total $38,159,499 $33,672, ($32,904,889) ($17,699,627) (85.9)

16 Management s Discussion and Analysis General Governmental Functions FINANCIAL ANALYSIS OF THE DISTRICT S FUNDS The District s governmental funds reported a combined fund balance of $30,026,064, which is less than last year s total of $44,466,544. Below is an analysis of the District s fund balances and the total change in fund balance from the prior year. Table 6: District s Fund Balances Fund Balance Increase (Decrease)% Major funds: General $ 3,467,349 $ 2,946, Bond Interest & Redemption 8,258,337 6,461, Building 17,690,978 34,785,570 (49.1) Nonmajor funds: Special Revenue: Cafeteria 48,181 58,154 (17.1) Burlingame Community for Education 4,994 33,877 (85.3) Deferred Maintenance 100, Capital Project: Capital Facilities 283, , Special Reserve 172, Total $30,026,064 $44,466,544 (32.5) The change in fund balance in General fund is primarily due to increase in enrollment. The change in fund balance in the Bond Interest & Redemption fund is primarily due to principal and interest payment. The change in fund balance in the Building fund is primarily is due to ongoing expenditures for construction. The change in fund balance in the Deferred Maintenance fund is primarily is due to transfer of funds from the General Fund for deferred maintenance. The change in fund balance in Capital Facilities fund is due to increase collections of developer fees. The change in fund balance in Special Reserve fund is primarily due to transfer of funds from General Fund for a future preschool. 11

17 Management s Discussion and Analysis GENERAL FUND BUDGETARY HIGHLIGHTS During the year, actual revenues were more than budgetary estimates by $1,054,926. The positive variance is mainly due to LCFF sources of $1,854,499 and in other local revenue of $600,650 due to local donations that are not recognized until received (i.e., PTA donations). Actual expenditures were more than budgetary estimates by $74,399. This negative variance is mainly in: over-utilization of salary and benefit expenditures of $176,622 attributed to classified employees; and $496,790 in services and other operating expenditures due to additional ongoing expenses. The net effect of over-realization of revenues and over-utilization of expenditures resulted in a positive variance of $980,527 (excluding other financing sources and uses). Capital Assets CAPITAL ASSET AND DEBT ADMINISTRATION The District s capital assets amounts to $67,077,083 (net of accumulated depreciation). This investment includes mainly land, buildings, improvements, equipment, and work in progress. The District s cost of capital assets increased $14,092,789 from the prior year. This increase is due mainly to capital projects. Major capital asset events during the current fiscal year included the following: Franklin Classroom Modernization McKinley classroom and facade modernization Lincoln classroom modernization. Hoover Elementary School contraction For government-wide financial statement presentation, all depreciable capital assets were depreciated from acquisition date to the end of the current fiscal year. Fund financial statements record capital asset purchases as expenditures. 12

18 Management s Discussion and Analysis Capital assets for the governmental activities are presented below to illustrate changes from the prior year: Table 7: Capital Assets Governmental Activities Percent Change Land $ 3,634,087 $ 3,634, Buildings 32,748,088 32,741, Improvements 2,432,711 2,394, Equipment 917, , Work in progress 50,241,257 35,088, Total cost $89,973,193 $74,343, Long-Term Debt The decreased in long-term debt is mainly due to payment of principal. Table 8: Outstanding Long-term Debt District Total Percent Change General obligation bonds (including premium & accreted interest) $92,998,448 $90,861, Compensated absences 91,539 77, Net OPEB obligation 1,104, , Total $94,194,332 $91,859, FACTORS BEARING ON THE DISTRICT S FUTURE The State s economic prospect is a major factor affecting the District s future. The financial well being of the District is tied in large measure to the State funding formula. The introduction of the new State Local Control Formula is uncertain and has the potential to be adjusted downward resulting in less revenues for BSD. 13

19 Management s Discussion and Analysis The District continued to receive support from the community through the parcel tax, Burlingame Community for Education (BCE) and the various parent organizations, such as PTA and Dads Club. Their generosity for the children of Burlingame has been instrumental in the District s ability to reach its financial and academic goals. The District s revenues have increased and are projected to continue increasing over the next couple of years due to the new Local Control Funding Formula (LCFF) and growing enrollment. However, the volatility of the economy and uncertainty in the ongoing increase in LCFF revenues makes it prudent to develop plans for potential reductions in revenue from the State. In addition, increasing expenses in retirement funding will add to the always increasing expenditures of the District. The District has an excellent track record in meeting the challenges in what has proven to be a cycle of lean and prosperous years for education finances. CONTACTING THE DISTRICT S FINANCIAL MANAGEMENT This financial report is designed to provide our citizens, taxpayers, parents, investors, and creditors with a general overview of the District s finances and to show the District s accountability for the money it receives. If you have questions regarding this report or need additional financial information, contact Dr. Margaret MacIsaac, Superintendent, or Ms. Gaby Hellier, Assistant Superintendent/Chief Business Official, Burlingame Elementary School District, 1825 Trousdale Dr., Burlingame, CA

20 Basic Financial Statements - Government-wide Financial Statements

21 Statement of Net Position June 30, 2014 Governmental Activities Assets Cash in county treasury $ 28,279,584 Cash on hand and in bank 2,500 Cash in revolving fund 2,500 Cash in fiscal agent 3,506 Accounts receivable 5,178,625 Prepaid expenses 16,239 Land 3,634,087 Improvements 2,432,711 Buildings 32,748,088 Equipment 917,050 Work in progress 50,241,257 Less accumulated depreciation (22,896,110) Total Assets 100,560,037 Liabilities Accounts payable 3,319,209 Accrued interest payable 1,605,203 Unearned Revenue 137,681 Long-term debt Due within one year General obligation bonds payable 1,338,276 Compensated absences 91,539 Total due within one year 1,429,815 Due beyond one year General obligation bonds payable 91,660,172 Net OPEB obligation 1,104,345 Total due beyond one year 92,764,517 Total Liabilities 99,256,425 Net Position Net investment in capital assets (25,921,365) Restricted Legally restricted 8,817,667 Unrestricted 18,407,310 Total Net Position $ 1,303,612 The notes to the basic financial statements are an integral part of this statement. 15

22 Statement of Activities Net (Expenses) Revenues and Program Revenues Changes in Net Position Operating Charges for Grants and Governmental Expenses Services Contributions Activities Functions/Programs Governmental Activities Instruction $ 18,764,386 $ 24,884 $ 1,846,302 $ (16,893,200) Instruction-related services 2,591, ,078 (2,458,265) Pupil services 1,661, ,471 (985,621) General administration 1,818,552-39,844 (1,778,708) Plant services 4,360,480-1,190 (4,359,290) Other outgo 374,844-2,533,841 2,158,997 Interest on long-term debt 7,052, (7,052,384) Depreciation - unallocated 1,536, (1,536,418) Total Governmental Activities $ 38,159,499 $ 24,884 $ 5,229,726 $ (32,904,889) General Revenues Taxes and subventions Taxes levied for general purposes 2,196,570 Taxes levied for debt service 5,922,575 Taxes levied for other specific purposes 2,133,096 Federal and state aid not restricted for specific purposes 18,352,119 Interest and investment earnings 560,863 Miscellaneous 802,659 Total General Revenues 29,967,882 Change in Net Position (2,937,007) Net Position, Beginning 4,240,619 Net Position, Ending $ 1,303,612 The notes to the basic financial statements are an integral part of this statement. 16

23 Basic Financial Statements - Fund Financial Statements

24 Balance Sheet Governmental Funds June 30, 2014 Bond Interest and Nonmajor General Redemption Building Governmental Fund Fund Fund Funds Total Assets Cash in county treasury $ 2,796,777 $ 8,247,057 $ 16,682,978 $ 552,772 $ 28,279,584 Cash on hand and in bank ,500 2,500 Cash in revolving fund 2, ,500 Cash in fiscal agent 3, ,506 Accounts receivable 4,758,091 11, ,672 94,582 5,178,625 Due from other funds 21,713-1,250,000-1,271,713 Prepaid expenses ,239 16,239 Total Assets $ 7,582,587 $ 8,258,337 $ 18,247,650 $ 666,093 $ 34,754,667 Liabilities and Fund Balances Liabilities Accounts payable $ 2,727,557 $ - $ 554,566 $ 37,086 $ 3,319,209 Due to other funds 1,250,000-2,106 19,607 1,271,713 Unearned revenue 137, ,681 Total Liabilities 4,115, ,672 56,693 4,728,603 Fund Balances Nonspendable Revolving fund 2, ,500 Prepaid expenses ,239 16,239 Restricted Legally Restricted Balance 522,523 8,258,337-36,807 8,817,667 Assigned - 17,690, ,354 18,247,332 Unassigned 2,942, ,942,326 Total Fund Balances 3,467,349 8,258,337 17,690, ,400 30,026,064 Total Liabilities and Fund Balances $ 7,582,587 $ 8,258,337 $ 18,247,650 $ 666,093 $ 34,754,667 The notes to the basic financial statements are an integral part of this statement. 17

25 Reconciliation of the Governmental Funds Balance Sheet to the Government-wide Statement of Net Position - Governmental Activities June 30, 2014 Total fund balances - governmental funds $ 30,026,064 Capital assets used in governmental activities are not financial resources and, therefore, are not reported as assets in governmental funds. Cost $ 89,973,193 Accumulated depreciation (22,896,110) 67,077,083 To recognize accrued interest at year end. (1,605,203) Long-term liabilities are not due and payable in the current period and therefore are not reported as liabilities in the funds. Long-term liabilities, at year-end consist of: General obligation bonds payable 92,998,448 Compensated absences 91,539 Net OPEB obligation 1,104,345 (94,194,332) Total net position - governmental activities $ 1,303,612 The notes to the basic financial statements are an integral part of this statement. 18

26 Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds Bond Interest and Nonmajor General Redemption Building Governmental Fund Fund Fund Funds Total Revenues LCFF sources State apportionments $ 18,724,527 $ - $ - $ - $ 18,724,527 Revenue limit transfers 1,327, ,327,905 Total LCFF sources 20,052, ,052,432 Federal 871, ,039 1,049,687 Other state 1,251,815 23, ,021 1,408,646 Other local 3,544,471 6,438, ,038 1,973,756 12,683,835 Total Revenues 25,720,366 6,462, ,038 2,284,816 35,194,600 Expenditures Instruction 17,688, ,047 18,682,453 Instruction-related services 2,391, ,548 2,580,028 Pupil services 898, ,095 1,653,839 General administration 1,810, ,810,611 Plant services 1,965,167-17,853,872 81,400 19,900,439 Other outgo 374, ,844 Debt service: Principal - 1,120, ,120,000 Interest - 3,540, ,540,758 Total Expenditures 25,129,252 4,660,758 17,853,872 2,019,090 49,662,972 Excess (Deficiency) of Revenues Over (Under) Expenditures 591,114 1,801,622 (17,126,834) 265,726 (14,468,372) Other Financing Sources (Uses) Operating transfers in 150, , ,652 Operating transfers out (220,652) - - (150,000) (370,652) Other sources (uses) - (4,350) 32,242-27,892 Total Other Financing Sources (Uses) (70,652) (4,350) 32,242 70,652 27,892 Net change in Fund Balance 520,462 1,797,272 (17,094,592) 336,378 (14,440,480) Fund Balances, Beginning 2,946,887 6,461,065 34,785, ,022 44,466,544 Fund Balances, Ending $ 3,467,349 $ 8,258,337 $ 17,690,978 $ 609,400 $ 30,026,064 The notes to the basic financial statements are an integral part of this statement. 19

27 Reconciliation of the Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances to the Government-wide Statement of Activities - Governmental Activities Total net change in fund balances - governmental funds $ (14,440,480) Capital outlays are reported in governmental funds as expenditures. However, in the statement of activities, the cost of those assets is allocated over their estimated useful lives as depreciation expense. This is the amount by which additions to capital outlay exceeds depreciation expense in the period: Capital outlay $ 15,629,207 Depreciation expense (1,536,418) 14,092,789 The governmental funds report bond proceeds as an other financing source, while repayment of bond principal is reported as an expenditure. Also, governmental funds report the effect of premium when bond is first issued, whereas, this amounts are and amortized in the statement of activities. Issue costs are expensed the year the debt is issued. Interest is recognized as an expenditures in the governmental funds when it is due. The net effect of these differences in the treatment of general obligation bonds and related items is as follows: Payment of bonds payable 1,120,000 Amortization of bond premium (discount) 138,276 Accretion of Capital Appreciation Bonds (3,395,719) (2,137,443) In the statement of activities, compensated absences are measured by the amounts earned during the year. In governmental funds, however, expenditures for these items are measured by the amount of financial resources used (essentially the amounts paid). This year vacation earned exceeded the amounts used by: (14,132) Some expenses reported in the statement of activities do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds: Change in net OPEB obligation: (183,558) Interest in long-term debt in the statement of activities differs from the amount reported in the governmental funds because interest is recognized as an expenditure in the funds when it is due, and thus requires the use of current financial resources. In the statement of activities, however, interest expense is recognized as the interest accrues, regardless of when it is due. The difference between accrued interest at year end and prior year's is: (254,183) Total change in net position - governmental activities $ (2,937,007) The notes to the basic financial statements are an integral part of this statement. 20

28 Statement of Net Position Fiduciary Funds June 30, 2014 Expendable Trust Bob Osberg Henderson College Trust Scholarship Agency Funds Funds Funds Total Assets Cash in county treasury $ - $ 18,326 $ - $ 18,326 Cash on hand and in bank 10,286-17,798 28,084 Accounts receivable Total assets 10,286 18,354 17,798 46,438 Liabilities Due to student group ,798 17,798 Total Liabilities ,798 17,798 Net Position Held in trust for trust beneficiaries 10,286 18,354-28,640 Total Net Position $ 10,286 $ 18,354 $ - $ 28,640 The notes to the basic financial statements are an integral part of this statement. 21

29 Statement of Changes in Net Position Fiduciary Funds - Expendable Trust Bob Osberg Henderson College Trust Scholarship Funds Funds Total Additions Interest income $ 4 $ 122 $ 126 Deductions Financial assistance to students - 2,000 2,000 Change in Net Position 4 (1,878) (1,874) Net Position, Beginning 10,282 20,232 30,514 Net Position, Ending $ 10,286 $ 18,354 $ 28,640 The notes to the basic financial statement are an integral part of this statement. 22

30 Basic Financial Statements - Notes to the Basic Financial Statements

31 Notes to the Basic Financial Statements NOTE 1. SIGNIFICANT ACCOUNTING POLICIES A. Accounting Policies The Burlingame School District (the District ) accounts for its financial transactions in accordance with the policies and procedures of the Department of Education s California School Accounting Manual. The accounting policies of the District conform to the accounting principles generally accepted in the United States of America (GAAP) as applied to local governmental units. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial principles. The District also applies Financial Accounting Standards board (FASB) Statements and interpretations issued on or before November 30, 1989, to its governmental activities provided they do not conflict with or contradict GASB pronouncements. B. Reporting Entity The District includes all funds that are controlled by or dependent on the District s governing board for financial reporting purposes. The District has considered all potential component units in determining hoe to define the reporting entity, using criteria set forth in generally accepted accounting principles. The District determined that there are no potential component units that meet the criteria for inclusion within the reporting entity. C. Basis of Presentation Government-wide Financial Statements: The government-wide financial statements (i.e., the statement of net assets and the statement of changes in net assets) report information on all of the activities of the District. The government-wide statements are prepared using the economic resources measurement focus. This is the same approach used in the preparation of proprietary fund and fiduciary fund financial statements but differs from the manner in which governmental fund financial statements are prepared. Governmental fund financial statements, therefore, includes a reconciliation with brief explanations to better identify the relationship between the government-wide statements and the statements for the governmental funds. 23

32 Notes to the Basic Financial Statements NOTE 1. SIGNIFICANT ACCOUNTING POLICIES - Continued The government-wide statement of activities presents a comparison between direct expenses and program revenues for each function or program of the District s governmental activities. Direct expenses are those that are specifically associated with a service, program, or department and are therefore clearly identifiable to a particular function. The District does not allocate indirect expenses to functions in the statement of activities. Program revenues include charges paid by the recipients of goods or services offered by a program, as well as grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues which are not classified as program revenues are presented as general revenues of the District, with certain exceptions. The comparison of direct expenses with program revenues identifies the extent to which each governmental function is self-financing or draws from the general revenues of the District. Fund Financial Statements: Fund financial statements report detailed information about the District. The focus of governmental fund financial statements is on major funds rather than reporting funds by type. Each major governmental fund is presented in a separate column, and all nonmajor funds are aggregated into one column. Fiduciary funds are reported by fund type. The accounting and financial treatment applied to a fund is determined by its measurement focus. All governmental funds are accounted for using a flow of current financial resources measurement focus. With this measurement focus, only current assets and current liabilities are generally included on the balance sheet. The Statement of Revenues, Expenditures, and Changes in Fund Balances for these funds present increases (i.e., revenues and other financing sources) and decreases (i.e., expenditures and other financing uses) in net current assets. All proprietary fund types are accounted for on a flow of economic resources measurement focus. With this measurement focus, all assets and all liabilities associated with the operation of these funds are included on the proprietary fund s statement of fund net assets. The statement of revenues, expenses, and changes in fund net position for proprietary funds presents increases (i.e., revenues) and decreases (i.e., expenditures) in net total assets. The statement of cash flows provides information about how the district finances and meets the cash flow needs of its proprietary activities. Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund s principal ongoing operations. The District has no proprietary funds. Fiduciary funds are reported using the economic resources measurement focus. 24

33 Notes to the Basic Financial Statements NOTE 1. SIGNIFICANT ACCOUNTING POLICIES - Continued D. Basis of Accounting Basis of accounting refers to when revenues and expenditures are recognized in the accounts and reported in the financial statements. Government-wide financial statements are prepared using the accrual basis of accounting. Governmental funds use modified accrual basis of accounting. Proprietary and fiduciary funds use the accrual basis of accounting. Revenues exchange and non-exchange transactions: Revenue resulting from exchange transactions, in which each party gives and receives essentially equal value, is recorded under the accrual basis when the exchange takes place. On a modified accrual basis, revenue is recorded in the fiscal year in which the resources are measurable and become available. Available means the resources will be collected within the current fiscal year or are expected to be collected soon enough thereafter to be used to pay liabilities of the current fiscal year. For the District, available means collectible within the current period or within 60 days after the yearend. Non-exchange transactions, in which the District receives value without directly giving equal value in return, include property taxes, grants, and entitlements. Under the accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from grants and entitlements is recognized in the fiscal year in which all eligibility requirements have been satisfied. Eligibility requirements include timing requirements, which specify the year when resources are to be used or the fiscal year when use is first permitted; matching requirements, in which the District must provide local resources to be used for a specific purpose; and expenditures requirements, in which the resources are provided to the District on a reimbursement basis. Under the modified accrual basis, revenue from non-exchange transactions must also be available before it can be recognized. Unearned revenue: Unearned revenue arises when assets are received before revenue recognition criteria have been satisfied. Grants and entitlements received before eligibility requirements are met are recorded as unearned revenue. On governmental fund financial statements, receivables associated with non-exchange transactions that will not be collected within the availability period have also been recorded as unearned revenue. 25

34 Notes to the Basic Financial Statements NOTE 1. SIGNIFICANT ACCOUNTING POLICIES - Continued Expenses/expenditures: On the accrual basis of accounting, expenses are recognized at the time a liability is incurred. On the modified accrual basis of accounting, expenditures are generally recognized in the accounting period in which related fund liability is incurred, as under the accrual basis of accounting. However, under the modified accrual basis of accounting, debt service requirements, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. Allocations of cost, such as depreciation and amortization, are not recognized in the governmental funds. When both restricted and unrestricted resources are available for use, it is the District s policy to use restricted resources first, then unrestricted resources as they are needed. E. Fund Accounting The accounts of the District are organized on the basis of funds, each of which is considered to be a separate accounting entity. The operations of each fund are accounted for with a separate set of self-balancing accounts that comprise its assets, liabilities, fund equity or retained earnings, revenues, and expenditures or expenses, as appropriate. District resources are allocated to and accounted for in individual funds based upon the purpose for which they are to be spent and the means by which spending activities are controlled. The District s accounts are organized into major, nonmajor, and fiduciary funds as follows: Major Governmental Funds: The General Fund is the general operating fund of the District. It is used to account for all financial resources except for those required to be accounted for in another fund. The Bond Interest and Redemption Fund is used to account for District taxes received and expended to pay for bond interest and redeem bond principal and related costs on the district s bond obligations. The Building Fund is used to account for the proceeds of funds generated by the sale of the bond obligations. Expenditures are made from this fund for the purpose of financing school facility alterations, additions or improvements. 26

35 Notes to the Basic Financial Statements NOTE 1. SIGNIFICANT ACCOUNTING POLICIES Continued Nonmajor Governmental Funds: Special Revenue Funds are used to account for the proceeds of specific revenue sources that are legally restricted to expenditures for specific purposes. The District maintains the following nonmajor special revenue funds: The Cafeteria Fund is used to account for revenues received and expenditures made to operate the District s cafeteria program. The Burlingame Community for Education Fund is used to account for contributions from the Burlingame Foundation to be used for specific program expenditures. The Deferred Maintenance Fund is used for the purpose of major repair or replacement of district property. Capital Projects Funds are used to account for the acquisition and construction of all major governmental general fixed assets. The District maintains the following nonmajor capital projects funds: The Capital Facilities Fund is used to account for resources received from developer impact fees assessed under provisions of the California Environmental Quality Act (CEQA). The Special Reserve Fund for Capital Outlay Projects is used to account for the proceeds from sale of property and for major maintenance expenditures and capital outlay. Fiduciary Funds: Expendable Trust Funds are used to account for assets held by the District as Trustee. The District maintains the following expendable trust funds: The Henderson Trust is used to accumulate money donated to the District to provide bus passes for needy students of the District. The Bob Osberg College Scholarship Fund is used to provide college assistance to 8 th grade Burlingame Intermediate School students. 27

36 Notes to the Basic Financial Statements NOTE 1. SIGNIFICANT ACCOUNTING POLICIES - Continued Agency Funds are used to account for assets of others for which the District acts as an agent. The District maintains student body funds, which are used to account for the raising and expending of money to promote the general welfare, morale, and educational experience of the student body. The District maintains six agency funds, one for each Student Body account. The amounts reported for student body funds represent the combined totals of all schools within the District. F. Budgets and Budgetary Accounting Annual budgets are adopted on a basis consistent with generally accepted accounting principles for all governmental funds. By state law, the District s governing body must adopt a final budget no later than July 1. A public hearing must be conducted to receive comments prior to adoption. The District s governing board satisfied these requirements. These budgets are revised by the District s governing board and District superintendent during the year to give consideration to unanticipated income and expenditures. The original and final revised budgets are presented for the General Fund and Major Special Revenue Fund as required supplementary information in the financial statements. The District employs budget control by minor object and by individual appropriation accounts. Expenditures cannot legally exceed appropriations by major object account. G. Accounting Estimates The presentation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates. H. Encumbrances Encumbrance accounting is used in all budgeted funds to reserve portions of applicable appropriations for which commitments have been made. Encumbrances are recorded for purchase orders, contracts, and other commitments when they are written. Encumbrances are liquidated when the commitments are paid. All encumbrances are liquidated as of June 30. I. Subsequent Events Management had evaluated the subsequent events through October 9,