STANDISH-STERLING COMMUNITY SCHOOLS Arenac, Bay, and Gladwin Counties, Michigan. FINANCIAL REPORT WITH SUPPLEMENTAL INFORMATION June 30, 2012

Transcription

1 STANDISH-STERLING COMMUNITY SCHOOLS Arenac, Bay, and Gladwin Counties, Michigan FINANCIAL REPORT WITH SUPPLEMENTAL INFORMATION June 30, 2012

2 TABLE OF CONTENTS PAGE Report Letter 1 2 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 3-4 Management s Discussion and Analysis 5-10 Basic Financial Statements District-wide Financial Statements: Statement of Net Assets 11 Statement of Activities 12 Fund Financial Statements: Governmental Funds: Balance Sheet 13 Reconciliation of Balance Sheet of Governmental Funds to Net Assets 14 Statement of Revenue, Expenditures, and Changes in Fund Balances 15 Reconciliation of Statement of Revenue, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities 16 Fiduciary Fund - Statement of Fiduciary Net Assets 17 Notes to Financial Statements Required Supplemental Information Budgetary Comparison Schedule - General Fund 27 Budgetary Comparison Schedule Food Service Fund 28 Other Supplemental Information General Fund - Statement of Revenues, Expenditures and Changes in Fund Balance General Fund - Detail of Expenditures Food Service Fund Statement of Revenues, Expenditures, and Changes in Fund Balance Debt Retirement Fund - Statement of Revenues, Expenditures and Changes in Fund Balance 35 Balance Sheet - Nonmajor Governmental Funds 36 Statement of Revenues, Expenditures and Changes in Fund Balances -Nonmajor Governmental Funds 37 Fiduciary Fund -Statement of Cash Receipts, Cash Disbursements and Changes in Due to School Organizations Detail of Bonded Debt 2005 Refunding Bonds 40

3 Quast, Janke and Company, P.C. Certified Public Accountants Timothy J. Quast, C.P.A. Members: Mark G. Janke, C.P.A. David G. Gwizdala, C.P.A. November 8, 2012 To The Board of Education Standish-Sterling Community Schools Standish, Michigan 1010 JOHNSON STREET BAY CITY, MICHIGAN Phone: (989) Fax: (989) American Institute of C.P.A.'s Michigan Association of C.P.A.'s INDEPENDENT AUDITOR S REPORT We have audited the accompanying financial statements of the governmental activities, the business-type activities and each major fund of the Standish-Sterling Community Schools, as of and for the years ended June 30, 2012 and 2011, which collectively comprise the Standish-Sterling Community Schools basic financial statements as listed in the table of contents. These financial statements are the responsibility of the Standish-Sterling Community Schools management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the Unites States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and the significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the Standish-Sterling Community Schools, as of June 30, 2012 and 2011, and the respective changes in financial position, and where applicable, cash flows, thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued our report dated November 8, 2012 on our consideration of the Standish-Sterling Community Schools internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. 1

4 Standish-Sterling Community Schools November 8, 2012 Page 2 Accounting principles general accepted in the United States of America require that the management s discussion and analysis and budgetary comparison information be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Standish-Sterling Community Schools basic financial statements. The combining and individual nonmajor fund financial statements 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 and individual nonmajor fund financial statements 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 financial statements. The 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 financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the basic financial statements as a whole. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Standish-Sterling Community Schools basic financial statements. The introductory and statistical sections are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information has not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on it. QUAST, JANKE AND COMPANY Certified Public Accountants, P.C. 2

5 Quast, Janke and Company, P.C. Certified Public Accountants Timothy J. Quast, C.P.A. Mark G. Janke, C.P.A. David G. Gwizdala, C.P.A N. JOHNSON STREET BAY CITY, MICHIGAN Phone: (989) Fax: (989) Members: American Institute of C.P.A.'s Michigan Association of C.P.A. s REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENT PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS November 8, 2012 To the Board of Education Standish-Sterling Community Schools 3789 West Wyatt Standish, Michigan We have audited the financial statements of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the Standish-Sterling Community Schools, as of and for the years ended June 30, 2012 and 2011, which collectively comprise the Standish-Sterling Community Schools basic financial statements and have issued our report thereon dated November 8, 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. Internal Control Over Financial Reporting In planning and performing our audit, we considered the Standish-Sterling Community Schools internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opi9nion on the effectiveness of the Standish-Sterling Community Schools internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Standish Sterling Community Schools internal control over financial reporting. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity s financial statements will not be prevented, or detected and corrected on a timely basis. Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over financial reporting that might be deficiencies, significant deficiencies, or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined above. 3

6 Board of Education Standish-Sterling Community Schools November 8, 2012 Page 2 Compliance and Other Matters As part of obtaining reasonable assurance about whether the Standish-Sterling Community Schools financial statement s are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. We noted certain other matters that we reported to management of the Standish-Sterling Community Schools in a separate letter dated November 8, This report is intended solely for the information and use of the management, board of education, others within the entity, federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. QUAST, JANKE AND COMPANY Certified Public Accountants, P.C. 4

7 MANAGEMENT S DISCUSSION AND ANALYSIS STANDISH STERLING SCHOOLS Management Discussion and Analysis This section of Standish-Sterling Schools annual financial report presents our discussion and analysis of the School District s financial performance during the years ended June 30, 2012 and Please read it in conjunction with the School District s financial statements, which immediately follows this section. Using this Annual This annual report consists of a series of financial statements and notes to those statements. These statements are organized so the reader can understand Standish-Sterling Schools financially as a whole. The District-wide Financial Statements provide information about the activities of the whole School District, presenting both an aggregate view of the School District s finances and a longer-term view of those finances. The fund financial statements provide the next level of detail. For governmental activities, these statements tell how services were financed in the short-term as well as what remains for future spending. The fund financial statements look at the School District s operations in more detail than the district-wide financial statements by providing information about the School District s most significant funds the General Fund with all other funds presented in one column as non-major funds. The remaining statement, the statement of fiduciary net assets, presents financial information about activities for which the School District acts solely as an agent for the benefit of students and parents. Management s Discussion and Analysis (MD &A) (Required Supplemental Information) Basic Financial Statements District-wide Financial Statements Fund Financial Statements Notes to the Basic Financial Statements (Required Supplemental Information) Budgetary Information for the General Fund Other Supplemental Information Reporting the School District as a Whole District-wide Financial Statements One of the most important questions asked about the School District is, As a whole, what is the School District s financial condition as a result of the year s activities? The statement of net assets and the statement of activities, which appear first in the School District s financial statements, report information on the School District as a whole and its activities in a way that helps you answer this question. We prepare these statements to include all assets and liabilities, using the accrual basis of accounting, which is similar to the accounting used by most privatesector companies. All of the current year s revenue and expenses are taken into account regardless of when cash is received or paid. These two statements report the School District s net assets the difference between assets and liabilities, as reported in the statement of net assets as one way to measure the School District s financial health or financial position. Over time, increases or decreases in the School District s net assets as reported in the statement of activities are indicators of whether its financial health is improving or deteriorating. The relationship between revenues and expenses is 5

8 MANAGEMENT S DISCUSSION AND ANALYSIS the School District s operating results. However, the School District s goal is to provide services to our students, not to generate profits as commercial entities do. One must consider many other nonfinancial factors, such as the quality of the education provided and the safety of the schools, to assess the overall health of the School District. The statements of net assets and statement of activities report the governmental activities for the School District, which encompass all of the School District s services, including instruction, supporting services, community services, athletics, and food services. Property taxes, unrestricted State Aid (foundation allowance revenue), and State and Federal grants finance most of these activities. Reporting the School District s Most Significant Funds Fund Financial Statements The School District s fund financial statements provide detailed information about the most significant funds not the School District as a whole. Some funds are required to be established by State law. However, the School District establishes many other funds to help it control and manage money for particular purposes (the Food Service Fund is an example) or to show that it s meeting legal responsibilities for using certain taxes, grants, and other money. The governmental funds of the School District use the following accounting approach: Governmental funds All of the School District s services are reported in governmental funds. Governmental fund reporting focuses on showing how money flows into and out of funds and the balances left at year end that are available for spending. They 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 operations of the School District and the services it provides. Governmental fund information helps you determine whether there are more or fewer financial resources that can be spent in the near future to finance the School District s programs. We describe the relationship (or differences) between governmental activities (reported in the statement of net assets and the statement of activities) and governmental funds in a reconciliation. The School District as Trustee Reporting the School District s Fiduciary Responsibilities The School District is the trustee, or fiduciary, for its student activity funds. All of the School District s fiduciary activities are reported in separate statements of fiduciary net assets. We exclude these activities from the School District s other financial statements because the School District cannot use these assets to finance its operations. The School District is responsible for ensuring that the assets reported in these funds are used for their intended purposes. The School District as a Whole Recall that the statement of net assets provides the perspective of the School District as a whole. Table 1 provides a summary of the School District s net assets as of June 30, 2012 and 2011: 6

9 MANAGEMENT S DISCUSSION AND ANALYSIS TABLE 1: Governmental Activities June 30, 2012 June 30, 2011 Assets Current and other assets $ 7,742,410 $ 7,845,136 Capital assets Net of accumulated depreciation 27,681,086 28,758,910 Total assets 35,423,496 36,604,046 Liabilities Current liabilities 1,853,605 1,658,530 Long-term liabilities 14,550,118 15,800,452 Total liabilities 16,403,723 17,458,982 Net Assets Invested in property and equipment Net of related debt 13,356,086 13,483,910 Restricted 38, ,198 Unrestricted 5,624,928 5,405,956 Total net assets $ 19,019,773 $ 19,145,064 The above analysis focuses on the net assets (see Table 1). The change in net assets (see Table 2) of the School District s governmental activities is discussed below. The School District s net assets were $19,019,773 at June 30, Capital assets, net of related debt compares the original cost, less depreciation of the School District s capital assets to long-term debt. Restricted net assets are reported separately to show legal constraints from debt covenants and enabling legislation that limit the School District s ability to use those net assets for day-to-day operations. The remaining amount of net assets, $5,614,928 was unrestricted. The $5,614,928 in unrestricted net assets of governmental activities represents the accumulated results of all past years operations. The operating results of the General Fund will have a significant impact on the change in unrestricted net assets from year to year. The results of operations for the School District as a whole are reported in the statement of activities (see Table 2), which shows the changes in net assets for fiscal years 2012 and

10 MANAGEMENT S DISCUSSION AND ANALYSIS TABLE 2: Governmental Activities Year Ended June 30, Revenue Program revenue: Charges for services $ 350,960 $ 302,003 Grants and categorical 2,965,372 3,635,740 General Revenue: Property taxes 3,748,388 3,893,206 State foundation allowance 10,083,638 10,227,075 Other 95, ,494 Total revenue 17,244,078 18,197,518 Function/Program Expenses Instruction 8,856,807 9,246,333 Support services 5,750,413 6,051,221 Community services 118, ,172 Food services 1,038,265 1,045,452 Interest on long-term debt 664, ,619 Depreciation (unallocated) 940,626 1,018,881 Total expenses 17,369,369 18,260,678 Increase (Decrease) in Net Assets $ (125,291) $ (63,160) As reported in the statement of activities, the cost of all of our governmental activities this year was $17,369,369. Certain activities were partially funded from those who benefitted from the program or by other governments and organizations that subsidized certain programs with grants and categoricals. We paid for the remaining public benefit portion of our governmental activities with $3,748,388 in taxes, $10,083,638 in State Foundation Allowance, and with our other revenues, such as interest and general entitlements. The School District experienced a decrease in net assets of $125,291. Key reasons for the change in net assets were decreased revenues. The decrease in net assets differs from the change in fund balance and reconciliation appears on page 16. As discussed above, the net cost shows the financial burden that was placed on the State and the School District s taxpayers by each of these functions. Since property taxes for operations and unrestricted State aid constitute the vast majority of School District operating revenue sources, the Board of Education and Administration must annually evaluate the needs of the School District and balance those needs with State-prescribed available unrestricted resources. The School District s Funds As we noted earlier, the School District uses funds to help it control and manage money for particular purposes. Looking at funds helps the reader consider whether the School District is being accountable for the resources taxpayers and others provide to it and may provide more insight into the School District s overall financial health. 8

11 MANAGEMENT S DISCUSSION AND ANALYSIS As the School District completed this year, the governmental funds reported a combined fund balance of $5,506,591 which is an increase of $34,465 from last year. In the General Fund, our principal operating fund, the balance decreased $170,454 to $4,540,192. The Debt Retirement Fund fund balance increased by $263,103 The Food Service Fund fund balance decreased by $58,184 General Fund Budgetary Highlights Over the course of the year, the School District revises its budget as it attempts to deal with changes in revenue and expenditures. State law requires that the budget be amended to ensure that expenditures do not exceed appropriations. A schedule showing the School District s original and final budget amounts compared with amounts actually paid and received is provided in required supplemental information of these financial statements. Changes to the General Fund original budget were as follows: Budgeted revenues were increased by $538,759 due mainly to additional federal and state funding. Budgeted expenses were decreased by $582,870 to more accurately reflect anticipated expenditures. Capital Asset and Debt Administration Capital Assets At June 30, 2012, the School District had $47,385,624 invested in a broad range of capital assets, including land, buildings, vehicles, and equipment. This amount represents a net increase (including additions and disposals) of $257, Land and improvements $ 2,479,864 $ 2,386,176 Buildings and improvements 38,403,239 38,378,725 Buses and other vehicles 2,042,442 2,030,442 Equipment 4,460,079 4,333,221 Total capital assets 47,385,624 47,128,564 Less accumulated depreciation 19,704,538 18,369,654 Net capital assets $ 27,681,086 $ 28,758,910 This year s additions of $257,060 consisted mainly of technology and donated land. No debt was issued for these additions. 9

12 MANAGEMENT S DISCUSSION AND ANALYSIS Debt At the end of this year, the School District had $14,325,000 in bonds outstanding versus $15,275,000. These bonds consisted of the following: Refunding Bonds $ 14,325,000 $ 15,275,000 The School District s General Obligation Bond rating continues to be equivalent to the State s credit rating. The State limits the amount of general obligation debt that schools can issue to 15% of the assessed value of all taxable property within the School District s boundaries. If the School District issues qualified debt, i.e., debt backed by the State of Michigan, such obligations are not subject to this limit. The School District s outstanding unqualified general obligation debt of $14,325,000 is below the statutorily imposed limit. Other obligations include employee-compensated absences. We present more detailed information about our long-term liabilities in the notes to the financial statements. Economic Factors and Next Year s Budgets and Rates Our elected officials and administration consider many factors when setting the School District s 2013 fiscal year budget. One of the most important factors affecting the budget is our student count. The State foundation revenue is determined by multiplying the blended student count by the foundation allowance per pupil. The blended count for the 2013 fiscal year is 25 percent and 75 percent of the February 2012 and October 2012 student counts, respectively. The 2013 fiscal year budget was adopted in June 2012, based on an estimate of students that will be enrolled in October of Approximately 70 percent of total General Fund revenues is from the foundation allowance. Under State law, the School District cannot access additional property tax revenue for general operations. As a result, District funding is heavily dependent on the State s ability to fund local school operation. Based on early enrollment data at the start of the school year, we anticipate that the fall student count will be slightly less than the estimates used in creating the 2013 fiscal year budget. Once the final student count and related per pupil funding is validated, State law requires the School District to amend the budget if actual District resources are not sufficient to fund original appropriations. Since the School District s revenue is heavily dependent on State funding and the health of the State s School Aid Fund, the actual revenue received depends on the State s ability to collect revenues to fund its appropriation to school districts. The State periodically holds a revenue-estimating conference to estimate revenues. Based on the results of the most recent conference, the State estimates minimal changes in the foundation allowance. Contacting the School District s Financial Management This financial report is designed to provide the School District s citizens, taxpayers, customers, and investors and creditors with a general overview of the School District s finances and to demonstrate the School District s accountability for the money it receives. If you have questions about this report or need additional financial information, contact the Business Department, 3789 West Wyatt, Standish, MI

13 STANDISH-STERLING SCHOOLS STATEMENT OF NET ASSETS June 30, 2012 and 2011 June 30, ASSETS: Cash & equivalents $ 4,675,436 $ 4,402,799 Property taxes receivable 83,108 84,227 Accounts receivable 11, ,865 Due from State of Michigan 2,200,087 2,333,047 Due from other Governmental units 181,823 14,249 Prepaids 57,900 57,900 Inventories 11,685 20,098 Subdivision costs 27, ,100 Deferred bond expenses 694, ,164 Accumulated amortization (200,494) (170,313) Capital assets 47,385,624 47,128,564 Accumulated depreciation (19,704,538) (18,369,654) Total Assets 35,423,496 36,604,046 LIABILITIES: Accounts payable 45,146 55,268 Accrued payroll and other liabilities 1,347,634 1,338,936 Interest payable 100, ,424 Due to other Governmental units 7,039 6,870 Deferred revenue 342, ,086 Compensated absences 236, ,398 Current portion of long term liabilities 955, ,000 Non current portion of long term liabilities 13,370,000 14,325,000 Total Liabilities 16,403,723 17,458,982 NET ASSETS: Investment in capital assets - net of related debt 13,356,086 13,483,910 Restricted for inventories and subdivision costs 38, ,198 Unrestricted 5,624,928 5,405,956 Total Net Assets $ 19,019,773 $ 19,145,064 See Notes to Financial Statements -11-

14 STANDISH-STERLING SCHOOLS STATEMENT OF ACTIVITIES Year Ended June 30, 2012 and 2011 Governmental Activities Program Revenues Net (Expense) Revenue and Changes in Net Assets Operating TOTAL Charges for Grants/ Year Ended June 30, Expenses Services Contributions GOVERNMENTAL ACTIVITIES: Instruction $ 8,856,807 $ 0 $ 1,880,612 $ (6,976,195) $ (6,738,021) Supporting Services 5,750, , ,529 (5,285,528) (5,551,657) Community Services 118, ,686 (116,212) (144,796) Food Services 1,038, , ,545 (70,116) (149,961) Interest on long term debt 664, (664,360) (719,619) Depreciation (Unallocated) 940, (940,626) (1,018,881) Total Governmental Activities $ 17,369,369 $ 350,960 $ 2,965,372 (14,053,037) (14,322,935) GENERAL PURPOSE REVENUES: Property taxes, levied for general purposes 1,895,169 1,856,241 Property taxes, levied for debt retirement 1,853,219 2,036,965 State pilt 0 3,636 State school aid - Unrestricted 10,083,638 10,227,075 Investment earnings 52,617 11,989 Gain (Loss) on sale of assets (13,228) 725 Other 56, ,144 Total General Purpose Revenues 13,927,746 14,259,775 Change in Net Assets (125,291) (63,160) Net Assets - Beginning of Year 19,145,064 19,208,224 Net Assets - End of Year $ 19,019,773 $ 19,145,064 See Notes to Financial Statements -12-

15 STANDISH-STERLING SCHOOLS GOVERNMENTAL FUNDS BALANCE SHEET June 30, 2012 and 2011 OTHER NONMAJOR TOTAL FOOD DEBT GOVERNMENTAL JUNE 30, ASSETS GENERAL SERVICE RETIREMENT FUND Cash $ 3,815,171 $ 31,202 $ 829,062 $ 0 $ 4,675,435 $ 4,402,799 Taxes receivable 34, , ,109 84,226 Accounts receivable 7, , , ,865 Due from State of Michigan 2,200, ,200,087 2,333,048 Due from other governmental agencies 157, , ,823 14,249 Due from other funds 24, ,810 35,724 Deposits 2,900 55, ,900 57,900 Inventory 2,554 9, ,685 20,098 Subdivision construction in progress 27, , ,100 LIABILITIES AND FUND EQUITY $ 6,271,789 $ 95,333 $ 906,428 $ 0 $ 7,273,550 $ 7,357,009 LIABILITIES: Accounts payable $ 36,805 $ 8,340 $ 0 $ 0 $ 45,145 $ 55,267 Salaries payable 928, , ,094 Retirement 227, , ,355 Payroll taxes 71, ,037 73,447 Employee benefits 119,782 1, , ,039 Due to other governmental agencies 6, ,039 6,870 Due to other funds 0 24, ,810 35,724 Deferred revenue 341, , ,087 Total Liabilities 1,731,637 34, ,766,999 1,884,883 Fund Equity: Nonspendable 5,454 64, ,585 20,098 Restricted 0 (3,622) 905, , ,526 Unassigned 4,534, ,534,698 4,706,502 Total Fund Equity 4,540,152 60, , ,506,551 5,472,126 $ 6,271,789 $ 95,333 $ 906,428 $ 0 $ 7,273,550 $ 7,357,009 See Notes to Financial Statements -13-

16 STANDISH-STERLING SCHOOLS GOVERNMENTAL FUNDS RECONCILIATION OF BALANCE SHEET OF GOVERNMENTAL FUNDS TO NET ASSETS June 30, 2012 TOTAL FUND BALANCES - GOVERNMENTAL FUNDS $ 5,506,551 Amounts reported for governmental activities in the statement of net assets are different because - Capital assets used in governmental activities are not financial resources and are not reported in the funds: Capital assets at cost 47,385,624 Accumulated depreciation (19,704,538) Bond issuance costs including discounts reported as an expenditure in governmental funds and are reported as a deferred expense and amortized over the life of the bond issue in the statement of activities Bond Issuance costs and discounts 694,164 Accumulated amortization (200,494) Long term liabilities not due and payable in the current period and therefore not reported in the funds - Bonds payable (14,325,000) Compensated balances (236,047) Accrued interest payable not included as a liability in governmental activities (100,486) Rounding (1) TOTAL NET ASSETS - GOVERNMENTAL ACTIVITIES $ 19,019,773 See Notes to Financial Statements -14-

17 STANDISH-STERLING SCHOOLS GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES Year Ended June 30, 2012 and 2011 OTHER NONMAJOR TOTAL FOOD DEBT GOVERNMENTAL Year Ended June 30, GENERAL SERVICE RETIREMENT FUND REVENUES: Local Sources $ 2,297,270 $ 244,146 $ 1,853,219 $ 0 $ 4,394,635 $ 4,434,995 State Sources - 11,145,750 63, ,142 11,220,760 11,302,415 Federal Sources 714, , ,377,997 2,275,794 Interdistrict and other sources 275, , ,014 Total Revenues 14,432, ,691 1,853,219 11,142 17,268,447 18,230,218 EXPENDITURES: Instruction 8,829, ,829,135 9,376,702 Supporting Services 5,643,193 14, ,657,629 6,108,496 Community Service 117,333 1, , ,507 Food Service 0 1,013, ,013,874 1,017,846 Debt Service - Principal repayment ,000 10, ,152 1,259,712 Interest and fiscal charges , , ,043 Total Expenditures 14,589,661 1,029,875 1,590,116 11,142 17,220,794 18,656,306 OTHER FINANCING SOURCES (USES): Sale of fixed assets Gain (Loss) on sale of subdivision property (13,228) (13,228) 0 Net Other Financing Sources (Uses) (13,228) (13,228) 725 NET CHANGE IN FUND BALANCES (170,494) (58,184) 263, ,425 (425,363) FUND BALANCE - BEGINNING OF YEAR 4,710, , , ,472,126 5,897,489 FUND BALANCE - END OF YEAR $ 4,540,152 $ 60,509 $ 905,890 $ 0 $ 5,506,551 $ 5,472,126 See Notes to Financial Statements -15-

18 STANDISH-STERLING SCHOOLS GOVERNMENTAL FUNDS RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - GOVERNMENTAL FUNDS Year Ended June 30, 2012 NET CHANGE IN FUND BALANCES - GOVERNMENTAL FUNDS $ $ 34,425 Amounts reported for governmental activities in the statement of activities are different because - Governmental funds report capital outlays as expenditures in the statement of activities, these costs are allocated over their estimated useful lives as depreciation: Depreciation expense (1,334,884) Capital outlay 257,060 Net (1,077,824) Accrued interest recorded in the statement of activities when 5,938 incurred and reported in governmental funds when paid Bond principal repayment reported as an expenditure in 950,000 governmental funds and as a reduction of long term debt in the statement of activities Bond issuance costs and discounts reported as expenditures in the (30,181) governmental funds are allocated over the life of the bonds issued as interest expense Increases in compensated absences are reported as expenditures (7,649) when financial resources are used in the governmental funds in accordance with GASB Interpretation No. 6 CHANGE IN NET ASSETS OF GOVERNMENTAL ACTIVITIES $ (125,291) See Notes to Financial Statements -16-

19 STANDISH-STERLING SCHOOLS FIDUCIARY FUND BALANCE SHEET June 30, 2012 and 2011 Student Activities Agency Fund June 30, ASSETS Cash in bank $ 275,359 $ 280,437 Due from General Fund 85 0 $ 275,444 $ 280,437 LIABILITIES Due to school organizations $ 275,444 $ 280,437 See Notes to Financial Statements -17-

20 STANDISH-STERLING COMMUNITY SCHOOLS NOTES TO FINANCIAL STATEMENTS June 30, 2012 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: The accounting policies of the Standish-Sterling Community Schools conform to United States generally accepted accounting principles as applicable to governmental units. Reporting Entity The School District is governed by an elected seven-member Board of Education. The accompanying financial statements have been prepared in accordance with criteria established by the Government Accounting Standards Board for determining the various governmental organizations to be included in the reporting entity. These criteria include significant financial relationships that determine which of the governmental organizations are a part of the School District s reporting entity, and which organizations are legally separate component units of the School District. The School District has no component units. District-wide and Fund Financial Statements The district-wide financial statements (i.e., the statement of net assets and the statement of activities) report information on all of the nonfiduciary activities of the primary government. For the most part, the effect of the interfund activity has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. All of the School District s government-wide activities are considered governmental activities. The statement of activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenues. Direct expenses are those that are clearly identified with a specific function. Program revenue includes (1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges by a given function and (2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function. Taxes, intergovernmental payments, and other items not properly included among program revenues are reported as general revenue. Separate financial statements are provided for governmental funds and fiduciary funds, even though the latter are excluded from the district-wide financial statements. Major individual governmental funds are reported as separate columns in the fund financial statements. Measurement Focus, Basis of Accounting, and Financial Statement Presentation District-wide Statements - The district-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenue is recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenue in the year for which they are levied. Grants, categorical aid, and similar items are recognized as soon as all eligibility requirements imposed by the provider have been met. 18

21 STANDISH-STERLING COMMUNITY SCHOOLS NOTES TO FINANCIAL STATEMENTS June 30, 2012 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued): As a general rule, the effect of interfund activity has been eliminated from the district-wide financial statements. Amounts reported as program revenue include (1) charges to customers or applicants for goods, services, or privileges provided; (2) operating grants and contributions; and (3) capital grants and contributions. Internally dedicated resources are reported as general revenue rather than as program revenue. Likewise, general revenue includes all taxes and unrestricted State aid Fund-based Statements - Governmental funds financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenue is recognized as soon as it is both measurable and available. Revenue is considered to be available if it is collected within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the government considers revenues to be available if they are collected within approximately 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. Fiduciary Fund statements are also reported using the economic resources measurement focus and the modified accrual basis of accounting. The School District reports the following major governmental funds: General Fund - The General Fund is the general operating fund of the District. It is used to account for all financial resources except those required to be accounted for in another fund. Food Service Fund - The Food Service Fund is used to account for the costs of providing breakfasts and lunches to students of the District. Debt Retirement - The Debt Retirement Fund is used to account for the accumulation of financial resources for the payment of principal, interest and related costs of the Bonds paid primarily by taxes levied on taxpayers residing within the School District. The Fund Balance of the Debt Retirement Fund is restricted to signify the amounts due to be exclusively used for debt service expenditures. Assets, Liabilities, and Net Assets or Equity Deposits and Investments - Cash and cash equivalents include cash on hand, demand deposits, and short-term investments with a maturity of three months or less when acquired. Investments are stated at fair value. Receivables and Payables - In general, outstanding balances between funds are reported as due to/from other funds. Activities between funds that are representative of 19

22 STANDISH-STERLING COMMUNITY SCHOOLS NOTES TO FINANCIAL STATEMENTS June 30, 2012 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued): lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as advances to/from other funds. Property taxes are assessed as of December 31 and the related property taxes become a lien on December 1, of the following year. These taxes are due on February 14 with the final collection date of February 28 before they are added to the County tax rolls. Inventories and Prepaid Items - Inventories are valued at cost, on a first-in, first-out basis. Inventories of governmental funds are recorded as expenditures when consumed rather than when purchased. United States Department of Agriculture Commodities inventory received by the Food Service Fund are recorded as inventory and deferred revenue until used. Certain payments to vendors reflect costs applicable to future fiscal years and are recorded as prepaid items in both district-wide and fund financial statements. Capital Assets - Capital assets, which include land, buildings, equipment, and vehicles, are reported in the applicable governmental activities column in the district-wide financial statements. Capital assets are defined by the School District as assets with an individual cost of more than $1,000 and any assets susceptible to theft. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair market value at the date of donation. Costs of normal repair and maintenance that do not add to the value or materially extend asset lives are not capitalized. The School District does not have any infrastructure-type assets. Buildings, equipment, land improvements and vehicles are depreciated using the straightline method over the following useful lives: Buildings and additions Land improvements Buses and other vehicles Furniture and other equipment years years 5-10 years 3-10 years Compensated Absences - The liability for compensated absences reported in the districtwide financial statements consists of unpaid, accumulated annual and sick leave balances. The liability has been calculated using the vesting method, in which leave amounts for both employees who are currently eligible to receive termination payments and other employees who are expected to become eligible in the future to receive such payments upon termination are included. Long term Obligations - In the district-wide financial statements, long-term debt and other long-term obligations are reported as liabilities in the statement of net assets. 20

23 STANDISH-STERLING COMMUNITY SCHOOLS NOTES TO FINANCIAL STATEMENTS June 30, 2012 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued): Fund Equity Beginning with the year ended June 30, 2012 the District implemented GASB Statement 54 Fund Balance Reporting and Governmental Fund Type Definitions. The Statement provided more clearly defined fund balance categories to make the nature and extent of the constraints placed upon a government s fund balance more transparent. The following classifications describe the relative strength of the spending constraints placed on the purposes for which the resources can be used: Nonspendable amounts that are not in a spendable form such as inventory; Restricted amounts constrained to specific purposes by their providers, through constitutional provisions, or by enabling legislation; Committed amounts constrained to specific purposes by a government itself. Assigned amounts a government intends to use for a specific purpose. Unassigned amounts that are available for any purpose, positive amounts are only reported in general fund. NOTE 2. STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY: Budgetary Information - Annual budgets are adopted on a basis consistent with generally accepted accounting principles and State law for the General and Special Revenue Funds. All annual appropriations lapse at fiscal year end. The budget document presents information by fund and function. The legal level of budgetary control adopted by the governing body (i.e., the level at which expenditures may not legally exceed appropriations) is the function level. State law requires the School District to have its budget in place by July 1. Expenditures in excess of amounts budgeted are a violation of Michigan law. State law permits districts to amend their budgets during the year. Excess of Expenditures Over Appropriations in Budgeted Funds - The School District did not have significant expenditure budget variances. Fund Deficits - The School District had no accumulated fund balance deficits. NOTE 3. CASH AND DEPOSITS WITH FINANCIAL INSTITUTIONS: Deposits of the School District are carried at cost and maintained at Independent Bank, a federally insured bank. 21

24 STANDISH-STERLING COMMUNITY SCHOOLS NOTES TO FINANCIAL STATEMENTS June 30, 2012 NOTE 3. CASH AND DEPOSITS WITH FINANCIAL INSTITUTIONS (Continued): State statutes and the School District s investment policy authorize the School District to make deposits in the accounts of federally insured banks, credit unions, and savings and loan associations that have an office in Michigan; the School District is allowed to invest in U.S. Treasury or Agency obligations, U.S. government repurchase agreements, bankers acceptances, commercial paper rated prime at the time of purchase that matures not more than 270 days after the date of purchase, mutual funds, and investment pools that are composed of authorized investment vehicles. The School District s deposits are in accordance with statutory authority. At year end, The School District s deposits and investments were reported in the basic financial statements in the following categories: Governmental Fiduciary Total Primary Activities Funds Government Cash and Investments $ 4,675,426 $ 275,359 $ 4,950,785 The breakdown between deposits and investments for the School District is as follows: Deposits (checking and savings accounts) $ 4,950,785 Investments in securities, mutual funds, and similar vehicles 0 TOTAL $ 4,950,785 The Government Accounting Standards Board Statement No. 3 requires the amount of total bank balances to be classified in one of three categories of credit risk. These categories are: (1) Insured or collateralized with securities held by the entity or by its agent in the entity s name. (2) Collateralized with securities held by the pledging financial institution s trust department or agency in the entity s name. (3) Uncollateralized (This includes any bank balance that is collateralized with securities held by the pledging financial institution, or by its trust department or agent by not in the entity s name). Bank deposits including certificates of deposit: Category 1. $ 1,259,105 Category 2. 0 Category 3. 3,691,680 Total Bank Balances $ 4,950,785 Carrying Amount $ 4,950,785 22

25 NOTE 4. CAPITAL ASSETS: STANDISH-STERLING COMMUNITY SCHOOLS NOTES TO FINANCIAL STATEMENTS June 30, 2012 Capital asset activity of the School District s governmental activities was as follows: Balance Balance July 1, 2011 Additions Disposals June 30, 2012 Land and improvements $ 2,386,176 $ 93,688 $ - $ 2,479,864 Buildings and improvements 38,378,725 24,514-38,403,239 Buses and other vehicles 2,030,442 12,000-2,042,442 Furniture and equipment 4,333, ,858-4,460,079 Total Capital Assets 47,128, ,060-47,385,624 Accumulated Depreciation Land and improvements 919, ,655 1,021,729 Buildings and improvements 12,887, ,079-13,705,942 Buses and other vehicles 1,415, ,424-1,585,407 Furniture and equipment 3,146, ,726-3,391,460 Total Accumulated Depreciation 18,369,654 1,334,884-19,704,538 Net Capital Assets $ 28,758,910 $(1,077,824) $ - $ 27,681,086 Depreciation expense was charged to activities of the School District as follows: Governmental activities: Instruction $ 91,771 Support services 275,146 Food services 27,341 Unallocated 940,626 Total governmental activities $ 1,334,884 NOTE 5. INTERFUND RECEIVABLES, PAYABLES AND TRANSFERS: The amounts of interfund receivables and payables are as follows: FUND INTERFUND PAYABLE FUND INTERFUND RECEIVABLE General $ 24,014 Food Service $ 24,014 Debt Retirement 796 General 796 $ 25,810 $ 25,810 There were no operating transfers out. 23