VENTURA COUNTY OFFICE OF EDUCATION ANNUAL FINANCIAL REPORT JUNE 30, 2016

Transcription

1 VENTURA COUNTY OFFICE OF EDUCATION ANNUAL FINANCIAL REPORT

2 TABLE OF CONTENTS FINANCIAL SECTION Independent Auditor's Report 2 Management's Discussion and Analysis 5 Basic Financial Statements Government-Wide Financial Statements Statement of Net Position 14 Statement of Activities 15 Fund Financial Statements Governmental Funds - Balance Sheet 16 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position 17 Governmental Funds - Statement of Revenues, Expenditures, and Changes in Fund Balances 19 Reconciliation of the Government Funds, Changes in Fund Balances to the Statement of Activities 20 Fiduciary Funds - Statement of Net Position 22 Notes to Financial Statements 23 REQUIRED SUPPLEMENTARY INFORMATION County School Service Fund - Budgetary Comparison Schedule 62 Special Education Pass-Through Fund - Budgetary Comparison Schedule 63 Schedule of Other Postemployment Benefits (OPEB) Funding Progress 64 Schedule of the County's Proportionate Share of the Net Pension Liability 65 Schedule of County Contributions 66 Note to Required Supplementary Information 67 SUPPLEMENTARY INFORMATION Schedule of Expenditures of Federal Awards 69 Local Education Agency Organization Structure 71 Schedule of Average Daily Attendance 72 Reconciliation of Annual Financial and Budget Report With Audited Financial Statements 73 Schedule of Financial Trends and Analysis 74 Schedule of Charter Schools 75 Combining Statements - Non-Major Governmental Funds Combining Balance Sheet 76 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances 77 Note to Supplementary Information 78 INDEPENDENT AUDITOR'S REPORTS 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 81 Report on Compliance for Each Major Program on Internal Control Over Compliance Required by Uniform Guidance 83 Report on State Compliance 85

3 TABLE OF CONTENTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS Summary of Auditor's Results 89 Financial Statement Findings 90 Federal Awards Findings and Questioned Costs 91 State Awards Findings and Questioned Costs 92 Summary Schedule of Prior Audit Findings 94

4 FINANCIAL SECTION 1

5 INDEPENDENT AUDITOR'S REPORT Governing Board Ventura County Office of Education Camarillo, California Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of the Ventura County Office of Education (the County) as of and for the year ended June 30, 2016, and the related notes to the financial statements, which collectively comprise the County's basic financial statements as listed in the table of contents. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the Guide for Annual Audits of K-12 Local Education Agencies and State Compliance Reporting, issued by the California Education Audit Appeals Panel as regulations. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the County's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the County's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. 2

6 Opinion 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 Ventura County Office of Education, as of June 30, 2016, 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 on pages 5 through 13, budgetary comparison schedules, schedule of other postemployment benefits funding progress, schedule of the County's proportionate share of net pension liability, and the schedule of County contributions on pages 62 through 66, 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 Ventura County Office of Education's basic financial statements. The accompanying supplementary information such as the combining and individual nonmajor fund financial statements and Schedule of Expenditures of Federal Awards, as required by Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards and the other supplementary information as listed on the table of contents are presented for purposes of additional analysis and are not a required part of the basic financial statements. The accompanying supplementary information is the responsibility of management and was derived from and relates 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 accompanying supplementary information is fairly stated, in all material respects, in relation to the basic financial statements as a whole. 3

7 Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated November 30, 2016, on our consideration of the Ventura County Office of Education'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 in considering Ventura County Office of Education's internal control over financial reporting and compliance. Rancho Cucamonga, California November 30,

8 INTRODUCTION The following discussion and analysis, prepared by management, provides an overview of the financial position and activities of the Ventura County Office of Education (VCOE) for the fiscal year ended June 30, 2016, with comparative information for The intent of this discussion and analysis is to look at the financial performance of the VCOE as a whole. The discussion and analysis should be read in conjunction with the financial statements and notes thereto following this section. Those statements have been prepared in accordance with the requirements of the Governmental Accounting Standards Board (GASB) Statement No. 34, Basic Financial Statements and Management's Discussion and Analysis for State and Local Governments, and related pronouncements. As discussed in Note 1 of the Notes to Basic Financial Statements, the VCOE adopted the provisions of GASB Statement No. 34 and No. 37, Basic Financial Statements - and Management's Discussion and Analysis for State and Local Governments: Omnibus, No. 38, Certain Financial Statement Note Disclosures, and Interpretation, No. 6, Recognition and Measurement of Certain Liabilities and Expenditures in Governmental Fund Statements, effective July 1, Additionally, VCOE adopted the provisions of GASB No. 65, Items Previously Reported as Assets and Liabilities effective July 1, MISSION AND SERVICES PROVIDED BY THE VCOE The VCOE provides quality services and support for life-long learning opportunities in Ventura County. Our goals are as follows: 1. Provide, promote, and support environments that result in world-class learning. 2. Secure and develop resources (human, fiscal, and information) that support and promote our mission. 3. Develop and maintain an organization based on teamwork, trust, communication, collaboration, critical thinking, and creativity. 4. Ensure the highest levels of service and satisfaction. The VCOE provides necessary, desirable, and cost saving services to local school districts. As a service agency, we provide districts efficient support to help them meet the demands of today's students and tomorrow's world. We provide direct services to students where the County Office is the most appropriate agency to operate specialized student programs and coordinate County-wide student events. We directly serve over 8,000 students each year in specialized programs such as Severely Handicapped Special Education, Career Education Program, incarcerated youth, and expelled and at-risk youth. We host County-wide academic competitions such as Academic Decathlon, Mock Trial, and Science Fair. 5

9 MANAGEMENT'S DISCUSSION AND ANALYSIS We provide essential fiscal and administrative services to school districts throughout the County. We are uniquely situated to bring together people, programs, and services within the County and offer 19 school districts (over 210 schools) the benefits of cost containment, economies of scale, and avoidance of duplication of services. We monitor school districts' fiscal health, accounting for over $2.14 billion annually. We audit and print all public education vendor checks (over 8,000 per month) and over 23,000 paychecks per month for school districts through our centralized Information Technology department. We certify credentials for teaching and other specialized educational assignments in all Ventura County school districts and provide "Live-Scan" fingerprinting services to employees of all districts. To maintain and build resources we forge alliances with public and private agencies and businesses. We provide a broad array of professional development opportunities for educational staff throughout the County. Participants take advantage of state-of-the-art learning options including administering educational programs, technology-based office practices, and website development. All courses are customer driven and serve both public and private school employees throughout the region. We coordinate the Teacher of the Year competition and programs designed to spread effective teaching practices throughout Ventura County. REPORTING THE VCOE AS A WHOLE Statement of Net Position and Statement of Activities The Statement of Net Position and Statement of Activities provide government-wide information about the financial activities of the entire VCOE, except fiduciary activities, presenting both an aggregate and a longer-term view of its finances. 6

10 MANAGEMENT'S DISCUSSION AND ANALYSIS The Statement of Net Position (see below) presents all of the VCOE's assets and deferred outflows of resources, and liabilities and deferred inflows of resources, with the difference reported as net position. Increases or decreases in net position may serve as a useful indicator to determine whether the financial position of the VCOE is improving or deteriorating. Statement of Net Position Governmental Activities Assets Current and other assets $ 68,100,118 $ 69,782,173 Capital assets, net 39,645,607 40,182,912 Total Assets 107,745, ,965,085 Deferred Outflows of Resources Deferred charge on refunding 8,415 8,961 Deferred outflows of resources related to pensions 19,494,972 9,827,347 Deferred Outflows of Resources 19,503,387 9,836,308 Liabilities Current liabilities 23,836,195 28,182,721 Long-term obligations 12,266,597 12,322,896 Aggregate pension liability 52,629,227 45,385,882 Total Liabilities 88,732,019 85,891,499 Deferred Inflows of Resources 16,479,644 13,637,832 Net Position Net investment in capital assets 28,476,286 28,851,861 Restricted 15,631,694 15,419,084 Unrestricted (Deficit) (22,070,531) (23,998,883) Total Net Position $ 22,037,449 $ 20,272,062 7

11 MANAGEMENT'S DISCUSSION AND ANALYSIS The Statement of Activities (see below) presents information showing the VCOE's revenues and expenses for the fiscal year. Functional activities are highlighted in this statement, whereby direct and indirect functional costs are shown net of related program revenue. This statement shows the extent to which the various functions depend on general taxes and non-program revenues for support. Statement of Activities Governmental Activities Revenues Program revenues Charges for services $ 28,425,574 $ 19,055,059 Operating grants and contributions 122,174, ,254,157 General revenues: Federal and State aid not restricted 12,917,858 12,930,202 Property taxes 21,326,623 17,612,802 Other general revenues 15,237,192 16,794,680 Total Revenues 200,082, ,646,900 Expenses Instruction-related 65,648,785 59,069,922 Pupil services 20,121,581 20,162,882 Administration 13,167,465 12,636,019 Plant services 4,528,537 3,683,828 Other 94,850,340 95,871,949 Total Expenses 198,316, ,424,600 Change in Net Position $ 1,765,387 $ (3,777,700) The above financial statements report both the net position (Statement of Net Position) remaining at year-end and the financial activities (Statement of Activities) for the year that result in the change to net position. The change in the net position is particularly important, since it tells the reader whether the financial position of the VCOE has improved or deteriorated for as a result of its financial activities for the year. As reported in the Statement of Activities above, the net change for the VCOE in was an increase of $1,765,387. The increase was due to mainly to prudent fiscal planning along with the receipt of some unexpected one-time types of revenue. These government-wide financial statements include all assets and deferred outflows of resources, and liabilities and deferred inflows of resources of the VCOE, including all capital assets, less accumulated depreciation, and long-term obligations, using the economic resources measurement focus and the accrual basis of accounting. This is the accounting basis used by most private-sector companies. This basis of accounting takes into account all of the current year's revenue and expenses regardless of when the cash is collected or paid out. In the Statement of Net Position and the Statement of Activities, all transactions are reported as governmental activities since the VCOE has no business-type (enterprise) activities. 8

12 MANAGEMENT'S DISCUSSION AND ANALYSIS Local Control Funding Formula California has taken steps down a historic path that fundamentally alters how its public schools are financed, education decisions are made, and traditionally underserved students' needs are met. The Local Control Funding Formula (LCFF), passed with bipartisan legislative support and was signed into law by Governor Jerry Brown on July 1, 2013, and represents the most comprehensive transformation of California's school funding system in 40 years. The LCFF significantly loosens the reins of state control over education. It all but eliminates categorical funding streams, substituting a base of funding for all districts and County Offices of Education (COE's) and adding dollars for low-income students, English language learners, and foster youth. The new system empowers school districts and COE's to determine how to allocate their dollars to best meet the needs of their students. Finally, by requiring all districts and COE's to engage parents and other education stakeholders in decisions about how to spend newly flexible funds, the LCFF represents a remarkable experiment in local democracy. The funding basis with LCFF shifts from a primarily Average Daily Attendance (ADA) driven model to one that places emphasis on the student population/demographics as well as ADA. Full implementation of LCFF for school districts is anticipated in , while COE's were fully implemented in The impact of the LCFF to the VCOE is that it simplifies and reduces the different types of funding we receive and it renders most of it "unrestricted". Per student funding for Court and Community Schools along with many former "categorical" programs (e.g. ROP, Deferred Maintenance, Instructional Materials, Bilingual Teacher Training, Teacher Credentialing Block Grant, etc.) are all combined in one funding pot to be used as the VCOE sees fit to best suit its student population as well as its customer districts. Along with this funding change, the State has maintained the level of funding to ensure Local Educational Agencies (LEAs) receive at least the same amount in state aid as received in , adjusted for changes in ADA and property taxes. This is commonly known as being "held harmless". While most districts benefited from this new funding mechanism in the form of increased revenues, the new formula did not produce a target revenue amount greater than the combined amount of revenue limit and categorical funding VCOE received in As a result of the "hold harmless" provision in the LCFF, VCOE received LCFF funding in on par with the total level of revenue limit and categorical funding from , and it appears that VCOE can expect to be flat-funded with regards to the LCFF for the foreseeable future. For VCOE, this means dealing with the realities of increasing expenditures in the face of flat-lined revenues for programs that have traditionally been funded by the revenue limit or categorical funding. In particular, certain programs are looking to transition towards relying on local streams of revenue, which will free up LCFF revenue for other programs. VCOE will continue to adapt its budget strategy with the goal of serving its students and customers in the best way possible. 9

13 MANAGEMENT'S DISCUSSION AND ANALYSIS Enrollment For , total ADA for VCOE operated programs (Court and Community Schools and Special Education) increased by 12 ADA or 1.6 percent. Average Daily Attendance Served by County Programs Average Daily Attendance est Fiscal Year Court School ADA decreased by 23 ADA - primarily due to policy instituted by Ventura County Probation and Community School ADA increased by 16. Special Education ADA increased by 19 ADA - primarily due to the addition of seven classrooms in County-Wide Other Purpose ADA Average Daily Attendance 146, , , , , , , , , , , , , , est Fiscal Year 10

14 MANAGEMENT'S DISCUSSION AND ANALYSIS Fixed Assets and Debt Administration The GASB Statement No. 34 requires that governmental agencies account for fixed assets in the same way that private and public corporations do. This involves recognizing the value of the agency's fixed assets such as buildings, land, and equipment in the fixed assets section of the balance sheet. Districts must now track annual and accumulated depreciation on major assets. The VCOE reports four major categories of fixed assets: land and work in progress, buildings, improvement of sites, and equipment (including licensed vehicles). As of June 30, 2016, the VCOE owned $62,757,335 of fixed assets with a total accumulated depreciation of $23,111,728 for a net book value of $39,645,607. Fixed Asset Valuations $62,757,339 Improvements of Sites 4% Equipment 15% Land and Work in Progress 10% Buildings and Building Improvements 71% Long-term obligations include Certificates of Participation of $ Other obligations include compensated absences payable in the amount of $1,088,861 and capital leases payable of $508,947. Solvency The VCOE is required to maintain a two percent reserve for economic uncertainties on all County School Service Fund expenditures excluding special education funds that are passed through to school districts. The office ended the fiscal year with $2,320,000 in reserves for economic uncertainty, and $39,236,917 in legally restricted and assigned balances. Total reserves, restricted and assigned balances equal approximately 38 percent of total County School Service Fund expenditures. These reserves, restricted and assigned balances will help to maintain the VCOE's solvency in future years. 11

15 MANAGEMENT'S DISCUSSION AND ANALYSIS Comparison of Revised Budget to Actuals The variance between the revenues in the revised budget and the actuals amounted to two percent (with actual revenues being less than budget). The primary difference was due to Special Education Excess Cost (revenue) due from districts being less than originally budgeted. The variance between the expenditures in the revised budget and the actuals amounted to approximately 11.7 percent (with actual expenditures being less than budget). This was primarily due to some planned one-time expenditures in the Ventura County SELPA not being completed by the June 30, 2016 fiscal year end, and Special Education costs totaling less than budgeted. REPORTING ON THE VCOE'S MOST SIGNIFICANT FUNDS Fund Based Financial Statements The VCOE's fund based financial statements provide detailed information about County Offices' most significant funds. Some funds are required to be established by State law and by bond covenants. However, management establishes other funds to help it control and manage money for particular purposes or to show that it is meeting legal responsibilities for using certain taxes, grants, and other money that it receives from the U.S. Department of Education. Governmental Funds Most of the VCOE's basic services are reported in governmental funds which focus on how money flows into and out of those funds and the balances left at year-end that are available for spending. These funds are reported using an accounting method called modified accrual accounting which measures cash and all other financial assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term view of the VCOE's general government operations and the basic services it provides. Governmental fund information helps determine whether there are more or fewer financial resources that can be spent in the near future to finance VCOE programs. The difference of results in the governmental fund financial statements to those in the government-wide financial statements is explained in a reconciliation following each governmental fund financial statement. SUMMARY AND OUTLOOK In considering the adopted VCOE budget for the year, we used the following criteria for calculating revenue: Programs funded through the Local Control Funding Formula (LCFF) are flat funded (0.00 percent increase). State revenue will increase due to the new Career Technical Education Incentive Grant, which amounts to nearly $6 million. 12

16 MANAGEMENT'S DISCUSSION AND ANALYSIS For calculating expenditures, we used the following criteria: No salary Cost of Living Adjustments (COLA), but step and longevity increases were included. A 10 percent increase in employee Health benefits (ranging from $12,933 to $23,031per employee). PERS and STRS rates increased to percent and percent respectively (up from percent and percent respectively). The overall financial condition of the VCOE is strong due to the wise management of its resources and internal controls. However, because of the way the Local Control Funding Formula (LCFF) works for county offices of education, the VCOE will most likely be "held harmless" or receive approximately the same level of funding as received in for the foreseeable future. That being said, the VCOE will remain fiscally solvent due to strong reserve levels and plans to consistently monitor the finances and make adjustments when needed. Contacting the VCOE's Financial Management This report is designed to provide our citizens, taxpayers, customers, investors and creditors with a general overview of the Ventura County Office of Education's finances and to demonstrate the VCOE's accountability for the money it receives. If you have questions about this report or need additional financial information, contact the Associate Superintendent, Fiscal and Administrative Services Branch, at (805) or Ventura County Office of Education, Fiscal and Administrative Services Branch, 5189 Verdugo Way, Camarillo, California

17 STATEMENT OF NET POSITION Governmental Activities ASSETS Deposits and investments $ 31,879,416 Receivables 33,476,266 Prepaid expenses 152,645 Net OPEB asset 2,591,791 Capital assets Land and construction in progress 6,304,099 Other capital assets 56,453,236 Less: Accumulated depreciation (23,111,728) Capital assets, net of accumulated depreciation 39,645,607 TOTAL ASSETS 107,745,725 DEFERRED OUTFLOWS OF RESOURCES Deferred charge on refunding 8,415 Deferred outflows of resources related to pensions 19,494,972 Total Deferred Outflows of Resources 19,503,387 LIABILITIES Accounts payable 18,783,228 Accrued interest payable 39,429 Unearned revenue 5,013,538 Long-term obligations Current portion of long-term obligations other than pensions 385,000 Noncurrent portion of long-term obligations other than pensions 11,881,597 Total Long-Term Obligations 12,266,597 Aggregate net pension liability 52,629,227 TOTAL LIABILITIES 88,732,019 DEFERRED INFLOWS OF RESOURCES Deferred inflows of resources related to pensions 16,479,644 NET POSITION Net investment in capital assets 28,476,286 Restricted for: Capital projects 2,151,236 Educational programs 13,480,458 Unrestricted (Deficit) (22,070,531) TOTAL NET POSITION $ 22,037,449 The accompanying notes are an integral part of these financial statements. 14

18 STATEMENT OF ACTIVITIES FOR THE YEAR ENDED Net Expenses and Changes in Program Revenues Net Position Charges for Operating Services and Grants and Governmental Functions/Programs Expenses Sales Contributions Activities Governmental Activities: Instruction $ 41,220,314 $ 7,544,555 $ 22,980,325 $ (10,695,434) Instruction-related activities: Supervision of instruction 19,278,962 1,449,719 11,013,912 (6,815,331) Instructional library, media, and technology 151, (151,525) School site administration 4,997,984 1,165,251 1,711,512 (2,121,221) Pupil services: Home-to-school transportation 5,030, (5,030,651) Food services 54,344 4,080 11,068 (39,196) All other pupil services 15,036,586 1,072,861 11,505,854 (2,457,871) Administration: Data processing 4,767,133-8,680 (4,758,453) All other administration 8,400, ,073 2,894,879 (4,728,380) Plant services 4,528, , ,870 (3,310,016) Ancillary services 761,407 25, ,614 (318,066) Interest on long-term obligations 472, (472,391) Other outgo 93,616,542 16,126,657 70,672,134 (6,817,751) Total Governmental Activities $ 198,316,708 $ 28,425,574 $ 122,174,848 (47,716,286) General revenues and subventions: Property taxes, levied for general purposes 20,915,974 Taxes levied for other specific purposes 410,649 Federal and State aid not restricted to specific purposes 12,917,858 Interest and investment earnings 155,588 Transfers between agencies 9,585,271 Miscellaneous 5,496,333 Subtotal, General Revenues 49,481,673 Change in Net Position 1,765,387 Net Position - Beginning 20,272,062 Net Position - Ending $ 22,037,449 The accompanying notes are an integral part of these financial statements. 15

19 GOVERNMENTAL FUNDS BALANCE SHEET County Special Education Non-Major Total School Service Pass-Through Governmental Governmental Fund Fund Funds Funds ASSETS Deposits and investments $ 23,303,556 $ 4,237,248 $ 4,338,612 $ 31,879,416 Receivables 26,305,362 6,976, ,557 33,476,266 Due from other funds 4,783, , ,465 6,190,121 Prepaid expenditures 150,301-2, ,645 Total Assets $ 54,543,135 $ 11,930,335 $ 5,224,978 $ 71,698,448 LIABILITIES AND FUND BALANCES LIABILITIES Accounts payable $ 10,258,815 $ 8,342,535 $ 181,878 $ 18,783,228 Due to other funds 1,406,205 3,587,800 1,196,116 6,190,121 Unearned revenue 4,637, ,940 5,013,538 Total Liabilities 16,302,618 11,930,335 1,753,934 29,986,887 FUND BALANCES Nonspendable 152,301-2, ,644 Restricted 13,480,458-2,151,236 15,631,694 Assigned 22,287,758-1,317,465 23,605,223 Unassigned 2,320, ,320,000 Total Fund Balances 38,240,517-3,471,044 41,711,561 Total Liabilities and Fund Balances $ 54,543,135 $ 11,930,335 $ 5,224,978 $ 71,698,448 The accompanying notes are an integral part of these financial statements. 16

20 RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET POSITION Amounts Reported for Governmental Activities in the Statement of Net Position are Different Because: Total Fund Balance - Governmental Funds $ 41,711,561 Capital assets used in governmental activities are not financial resources and, therefore, are not reported as assets in governmental funds. The cost of capital assets is as follows: $ 62,757,335 Accumulated depreciation is as follows: (23,111,728) Total Capital Assets 39,645,607 Expenditures relating to contributions made to pension plans were recognized on the modified accrual basis, but are not recognized on the accrual basis. 4,778,311 The net change in proportionate share of net pension liability as of the measurement date is not recognized an expenditure under the modified basis of accounting, but is recognized on the accrual basis over the expected remaining service life of members receiving pension benefits. 1,833,155 Deferred amounts or charges relating to refunding of debt of a prior fiscal year were recognized on the modified accrual basis in that year, but are recognized over the life of the debt on the accrual basis in the government-wide financial statements. 8,415 In governmental funds, postemployment benefit costs are recognized as expenditures in the period they are paid. In the government-wide statements postemployment benefit costs are recognized in the period that they are incurred. The other postemployment benefit net asset is a result of accumulated contributions in excess of the annual OPEB cost. 2,591,791 In governmental funds, unmatured interest on long-term obligations is recognized in the period when it is due. On the government-wide financial statements, unmatured interest on long-term obligations is recognized when it is incurred. (39,429) The difference between projected and actual earnings on pension plan investments are not recognized on the modified accrual basis, but are recognized on the accrual basis as an adjustment to pension expense. (3,044,034) The differences between expected and actual experience in the measurement of the total pension liability are not recognized on the modified accrual basis, but are recognized on the accrual basis over the expected average remaining service life of members receiving pension benefits. 1,067,428 The accompanying notes are an integral part of these financial statements. 17

21 RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET POSITION (CONTINUED) The changes of assumptions is not recognized as an expenditure under the modified accrual basis, but is recognized on the accrual basis over the expected average remaining service life of members receiving pension benefits. $ (1,619,532) Net pension liability is not due and payable in the current period, and is not reported as a liability in the funds. (52,629,227) Long-term obligations are not due and payable in the current period and, therefore, are not reported as liabilities in the funds. Long-term obligations at year-end consist of the following: Certificates of participation $ 10,425,000 Unamortized premium on issuance 243,789 Capital lease obligations 508,947 Compensated absences 1,088,861 Total Long-Term Obligations (12,266,597) Total Net Position - Governmental Activities $ 22,037,449 The accompanying notes are an integral part of these financial statements. 18

22 GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES FOR THE YEAR ENDED County Special Education Non-Major Total School Service Pass-Through Governmental Governmental Fund Fund Funds Funds REVENUES Local Control Funding Formula $ 31,922,444 $ - $ - $ 31,922,444 Federal sources 8,979,429 26,486, ,671 35,688,491 Other State sources 17,559,611 66,929,947 2,368,428 86,857,986 Other local sources 44,378, ,815 44,541,803 Total Revenues 102,840,472 93,416,338 2,753, ,010,724 EXPENDITURES Current Instruction 39,681, ,681,354 Instruction-related activities: Supervision of instruction 16,213,479-2,639,737 18,853,216 Instructional library, media 148, ,616 School site administration 4,920, ,920,359 Pupil services: Home-to-school transportation 5,025, ,025,834 Food services 54, ,344 All other pupil services 14,865, ,865,770 Administration: Data processing 5,270, ,270,523 All other administration 7,648,088-95,898 7,743,986 Plant services 4,469, ,469,000 Facility acquisition and construction 657,526-35, ,098 Ancillary services 746, ,400 Other outgo 168,015 93,416,338 32,189 93,616,542 Debt service Principal 593, ,056 Interest and other 488, ,583 Total Expenditures 100,950,947 93,416,338 2,803, ,170,681 Excess (Deficiency) of Revenues Over Expenditures 1,889,525 - (49,482) 1,840,043 Other Financing Sources (Uses) Transfers in 419, ,219 1,195,072 Other sources - capital leases 462, ,406 Transfers out (775,218) - (419,854) (1,195,072) Net Financing Sources (Uses) 107, , ,406 NET CHANGE IN FUND BALANCES 1,996, ,883 2,302,449 Fund Balances - Beginning 36,243,951-3,165,161 39,409,112 Fund Balances - Ending $ 38,240,517 $ - $ 3,471,044 $ 41,711,561 The accompanying notes are an integral part of these financial statements. 19

23 RECONCILIATION OF THE GOVERNMENTAL FUNDS, CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED Total Net Change in Fund Balances - Governmental Funds $ 2,302,449 Amounts Reported for Governmental Activities in the Statement of Activities are Different Because: Capital outlays to purchase or build capital assets are reported in governmental funds as expenditures. However, for governmental activities, those costs are shown in the Statement of Net Position and allocated over their estimated useful lives as annual depreciation expenses in the Statement of Activities. This is the amount by which capital outlays exceed depreciation in the period. Capital outlays $ 1,376,081 Depreciation expense (1,908,481) (532,400) Loss on disposal of capital assets is reported in the government-wide Statement of Net Position, but is not recorded in the governmental funds. (4,905) Some of the capital assets acquired this year were financed with capital leases. The amount financed by the leases is reported in the governmental funds as a source of financing. On the other hand, the capital leases are not revenues in the Statement of Activities, but rather constitute long-term obligations in the Statement of Net Position. (462,406) In the Statement of Activities, certain operating expenses - compensated absences (vacations) and special termination benefits (early retirement) are measured by the amounts earned during the year. In the governmental funds, however, expenditures for these items are measured by the amount of financial resources used (essentially, the amounts actually paid). This year, there are no special termination benefits. Vacation earned was more than the amounts used by $90,164. (90,164) In the governmental funds, pension costs are based on employer contributions made to pension plans during the year. However, in the Statement of Activities, pension expense is the net effect of all changes in the deferred outflows, deferred inflows and net pension liability during the year. (417,532) Contribution for postemployment benefits are recorded as an expense in the governmental funds when paid. However, the difference between the annual OPEB cost and the actual contribution made, if less, is recorded in the government-wide statements as an expense. The actual amount of the contribution was more than the OPEB cost in the current year by $361, ,097 The accompanying notes are an integral part of these financial statements. 20

24 RECONCILIATION OF THE GOVERNMENTAL FUNDS, CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES (CONTINUED) FOR THE YEAR ENDED Repayment of long-term obligations is an expenditure in the governmental funds, but it reduces long-term obligations in the Statement of Net Position and does not affect the Statement of Activities: Certificates of participation $ 370,000 Capital lease obligations 223,056 Under the modified accrual basis of accounting used in the governmental funds, expenditures are not recognized for transactions that are not normally paid with expendable available financial resources. In the Statement of Activities, however, which is presented on the accrual basis, expenses and liabilities are reported regardless of when financial resources are available. This adjustment combines the net changes of the following balances: Premium on issuance $ 15,813 Deferred amount on refunding (546) Combined Adjustment 15,267 Interest on long-term obligations in the Statement of Activities differs from the amount reported in the governmental funds because interest is recorded 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. Accrued interest on certificates of participation decreased by $ Change in Net Position of Governmental Activities $ 1,765,387 The accompanying notes are an integral part of these financial statements. 21

25 FIDUCIARY FUNDS STATEMENT OF NET POSITION FOR THE YEAR ENDED Agency Funds ASSETS Deposits and investments $ 15,801,014 Receivables 36 Total Assets $ 15,801,050 LIABILITIES Accounts payable $ 15,779,925 Due to student groups 21,125 Total Liabilities $ 15,801,050 The accompanying notes are an integral part of these financial statements. 22

26 NOTES TO FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Financial Reporting Entity The Ventura County Office of Education (the County) was organized under the laws of the State of California. The County is governed by an elected Superintendent of Schools and a five-member Board and provides educational services to grades K-12 as mandated by the State and/or Federal agencies. The County operates juvenile court and community schools and a regional occupational program. The County also provides special education programs at various locations. A reporting entity is comprised of the primary government, component units, and other organizations that are included to ensure the financial statements are not misleading. The primary government of the County consists of all funds, departments, boards, and agencies that are not legally separate from the County. For the Ventura County Office of Education, this includes general operations and student related activities of the County. Component Units Component units are legally separate organizations for which the County is financially accountable. Component units may include organizations that are fiscally dependent on the County in that the County approves their budget, the issuance of their debt or the levying of their taxes. In addition, component units are other legally separate organizations for which the County is not financially accountable but the nature and significance of the organization s relationship with the County is such that exclusion would cause the County s financial statements to be misleading or incomplete. For financial reporting purposes, the component units have a financial and operational relationship, which meets the reporting entity definition criteria of the Governmental Accounting Standards Board (GASB) Statement No. 14, The Financial Reporting Entity, and thus are included in the financial statements of the County. The component units, although legally separate entities, are reported in the financial statements using the blended presentation method as if it were part of the County's operations because the governing board of the component units is essentially the same as the governing board of the County and because their purpose is to finance the construction of facilities to be used for the benefit of the County. The Ventura County Schools Public Facilities Financing Corporation s (the Corporation) financial activity is presented in the financial statements within the County School Services Fund. Certificates of participation issued by the Corporation are included as long-term liabilities in the government-wide financial statements. Individually prepared financial statements are not prepared for the Ventura County Schools Public Facilities Financing Corporation. Basis of Presentation - Fund Accounting The accounting system is organized and operated on a fund basis. A fund is defined as a fiscal and accounting entity with a self-balancing set of accounts, which are segregated for the purpose of carrying on specific activities or attaining certain objectives in accordance with special regulations, restrictions, or limitations. The County's funds are grouped into two broad fund categories: governmental and fiduciary. 23

27 NOTES TO FINANCIAL STATEMENTS Governmental Funds Governmental funds are those through which most governmental functions typically are financed. Governmental fund reporting focuses on the sources, uses, and balances of current financial resources. Expendable assets are assigned to the various governmental funds according to the purposes for which they may or must be used. Current liabilities are assigned to the fund from which they will be paid. The difference between governmental fund assets and liabilities is reported as fund balance. The County School Service Fund and the Special Education Pass-Through Fund are the County's only major funds. Major Governmental Fund County School Service Fund The County School Service Fund is the chief operating fund for all county offices of education. It is used to account for and report all financial resources not accounted for and reported in another fund. One fund currently defined as a special revenue fund in the California State Accounting Manual (CSAM) does not meet the GASB Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions Special Revenue Fund definition. Specifically, Fund 17, Special Reserve Fund for Other Than Capital Outlay Projects, is not substantially composed of restricted or committed revenue sources. While this fund is authorized by statute and will remain open for internal reporting purposes, this fund functions effectively as an extension of the County School Service Fund, and accordingly has been combined with the County School Service Fund for presentation in these audited financial statements. As a result, the County School Service Fund reflects an increase in assets and fund balance of $5,206,740, as of June 30, Special Education Pass-Through Fund The Special Education Pass-Through Fund is used by the Administrative Unit of a multi-district Special Education Local Plan Area (SELPA) to account for Special Education revenue passed through to other member districts. Non-Major Governmental Funds Special Revenue Funds The Special Revenue funds are used to account for the proceeds from specific revenue sources (other than trusts, major capital projects, or debt service) that are restricted or committed to expenditures for specified purposes and that compose a substantial portion of the inflows of the fund. Additional resources that are restricted, committed, or assigned to the purpose of the fund may also be reported in the fund. Child Development Fund The Child Development Fund is used to account separately for Federal, State, and local revenues to operate child development programs and is to be used only for expenditures for the operation of child development programs. Deferred Maintenance Fund The Deferred Maintenance Fund is used to account separately for State apportionments and the County's contributions for deferred maintenance purposes (Education Code Sections ) and for items of maintenance approved by the State Allocation Board. Forest Reserve Fund The Forest Reserve Fund exists to account separately for Federal forest reserve funds received by offices of county superintendents for distribution to school districts and community college districts (Education Code Section 2300; Government Code Section 29484). 24

28 NOTES TO FINANCIAL STATEMENTS Capital Project Funds The Capital Project funds are used to account for financial resources that are restricted, committed, or assigned to the acquisition or construction of capital facilities and other capital assets (other than those financed by proprietary funds and trust funds). County School Facilities Fund The County School Facilities Fund is established pursuant to Education Code Section to receive apportionments from the 1998 State School Facilities Fund (Proposition 1A), the 2002 State School Facilities Fund (Proposition 47), the 2004 State School Facilities Fund (Proposition 55), or the 2006 State Schools Facilities Fund (Proposition 1D) authorized by the State Allocation Board for new school facility construction, modernization projects, and facility hardship grants, as provided in the Leroy F. Greene School Facilities Act of 1998 (Education Code Section et seq.). Special Reserve Fund for Capital Outlay Projects The Special Reserve Fund for Capital Outlay Projects exists primarily to provide for the accumulation of General Fund monies for capital outlay purposes (Education Code Section 42840). Fiduciary Funds Fiduciary funds are used to account for assets held in trustee or agent capacity for others that cannot be used to support the County's own programs. The fiduciary fund category is split into four classifications: pension trust funds, investment trust funds, private-purpose trust funds, and agency funds. The key distinction between trust and agency funds is that trust funds are subject to a trust agreement that affects the degree of management involvement and the length of time that the resources are held. Trust funds are used to account for the assets held by the County under a trust agreement for individuals, private organizations, or other governments and are therefore not available to support the County's own programs. The County has no trust funds. Agency funds are custodial in nature (assets equal liabilities) and do not involve measurement of results of operations. The County's agency fund accounts for retirement plan payments for districts throughout the County and student body activities (ASB). Basis of Accounting - Measurement Focus Government - Wide Financial Statements The government-wide financial statements are prepared using the economic resources measurement focus and the accrual basis of accounting. This is the same approach used in the preparation of the proprietary fund financial statements, but differs from the manner in which governmental fund financial statements are prepared. The government-wide statement of activities presents a comparison between direct expenses and program revenues for each governmental function, and excludes fiduciary activity. Direct expenses are those that are specifically associated with a service, program, or department and are therefore clearly identifiable to a particular function. The County does not allocate indirect expenses to functions in the Statement of Activities, except for depreciation. Program revenues include charges paid by the recipients of the goods or services offered by the programs and 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 are presented as general revenues. The comparison of program revenues and expenses identifies the extent to which each program is self-financing or draws from the general revenues of the County. Eliminations have been made to minimize the double counting of internal activities. 25