EAU CLAIRE PUBLIC SCHOOLS FINANCIAL STATEMENTS

Transcription

1 FINANCIAL STATEMENTS June 30, 2017

2 FINANCIAL STATEMENTS June 30, 2017 CONTENTS Page MANAGEMENT DISCUSSION AND ANALYSIS... I-X INDEPENDENT AUDITOR S REPORT BASIC FINANCIAL STATEMENTS District-Wide Financial Statements: Statement of Net Position... 4 Statement of Activities... 5 Fund Financial Statements: Governmental Funds - Balance Sheet... 6 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position... 7 Governmental Funds - Statement of Revenues, Expenditures, and Changes in Fund Balances... 8 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities... 9 Fiduciary Fund: Statement of Net Position Notes to Financial Statements REQUIRED SUPPLEMENTARY INFORMATION: Schedule of the District s Proportionate Share of the Net Pension Liability Schedule of the District s Contributions Notes to Required Supplementary Information General Fund - Budgetary Comparison Schedule OTHER SUPPLEMENTARY INFORMATION Nonmajor Governmental Funds - Combining Balance Sheet Nonmajor Governmental Funds - Combining Statement of Revenues, Expenditures, and Changes in Fund Balances... 31

3 CONTENTS OTHER SUPPLEMENTARY INFORMATION - CONTINUED Page General Fund: Schedule of Revenues - Budget and Actual Schedule of Expenditures - Budget and Actual Debt Service Funds: Combining Balance Sheet Combining Statement of Revenues, Expenditures, and Changes in Fund Balances School Bonds: Schedule of Interest and Principal Payments 2012 School Building and Site Bonds Federal Programs: Independent Auditor s Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards Independent Auditor s Report on Compliance for Each Major Program and on Internal Control Over Compliance Required by the Uniform Guidance Schedule of Expenditures of Federal Awards Notes to the Schedule of Expenditures of Federal Awards Schedule of Findings and Questioned Costs Summary Schedule of Prior Year Audit Findings Corrective Action Plan... 54

4 OFFICE OF THE SUPERINTENDENT 6190 WEST MAIN STREET EAU CLAIRE, MICHIGAN Telephone: (269) Fax: (269) Board of Education Superintendent President - Darrell Ferguson David Gray Vice President - David Krugh Secretary - David Dustin Treasurer - Anita Harner Trustees - Greg Chisek Tom Ferry John Glassman Management s Discussion and Analysis For Fiscal Year Ended June 30, 2017 The Management s Discussion and Analysis, a requirement of GASB 34, is intended to be the Eau Claire Public Schools management s discussion and analysis of the financial results for the fiscal year ended June 30, Generally accepted accounting principles (GAAP) according to GASB 34 require the reporting of two types of financial statements: District-Wide Financial Statements and Fund Financial Statements. Fund Financial Statements: The fund level financial statements are reported on a modified accrual basis. Only those assets that are measurable and currently available are reported. Liabilities are recognized to the extent that they are normally expected to be paid with current financial resources. The fund statements are formatted to comply with the legal requirements of the Michigan Department of Education s Accounting Manual. The District s major instructional support activities are reported in the General Fund. Additional activities are reported in their relevant funds including Debt Funds and the School Service Funds, which are comprised of Food Service and various Activity Accounts. In the fund financial statements, purchased capital assets are reported as expenditures in the year of acquisition. No asset is reported. The issuance of debt is recorded as a financial resource. The current year s payments of principal and interest on long-term obligations are recorded as expenditures. Future years debt obligations are not recorded. District-Wide Financial Statements: The District-wide financial statements are full accrual basis statements. They report all of the District s assets and liabilities, both short and long-term, regardless if they are currently available or not. For example, assets that are restricted for use in the Debt Funds solely for the payment of long-term principal or interest are grouped with unrestricted assets of the General Fund. Capital assets and long-term obligations of the District are reported in the Statement of Net Position of the District-wide financial statements. I Excellence Commitment Pride - Success

5 OFFICE OF THE SUPERINTENDENT 6190 WEST MAIN STREET EAU CLAIRE, MICHIGAN Telephone: (269) Fax: (269) Board of Education Superintendent President - Darrell Ferguson David Gray Vice President - David Krugh Secretary - David Dustin Treasurer - Anita Harner Trustees - Greg Chisek Tom Ferry John Glassman Summary of Net Position: Management s Discussion and Analysis For Fiscal Year Ended June 30, 2017 The following summarizes the net position at fiscal years ended June 30, 2017 and June 30, June 30, 2017 June 30, 2016 Assets Current assets $ 3,905,514 $ 4,435,568 Capital assets: Nondepreciable $ 154,000 $ 154,000 Depreciable, net of accumulated depreciation 7,225,142 7,556,503 Capital assets, net book value $ 7,379,142 $ 7,710,503 Deferred outflows - pension $ 1,730,723 $ 1,739,572 TOTAL ASSETS AND DEFERRED OUTFLOWS $ 13,015,379 $ 13,885,643 Liabilities Current liabilities $ 1,290,606 $ 1,301,111 Long-term liabilities 17,910,476 17,871,959 Total Liabilities $ 19,201,082 $ 19,173,070 Deferred inflows - pension $ 67,347 $ 44,340 Net Position Net investment in capital assets $ 2,949,142 $ 3,000,503 Restricted 1,584,389 1,443,232 Unrestricted (10,786,581) (9,775,502) Total Net Position $ (6,253,050) $ (5,331,767) TOTAL LIABILITIES, DEFERRED INFLOWS, AND NET POSITION $ 13,015,379 $ 13,885,643 II Excellence Commitment Pride - Success

6 OFFICE OF THE SUPERINTENDENT 6190 WEST MAIN STREET EAU CLAIRE, MICHIGAN Telephone: (269) Fax: (269) Board of Education Superintendent President - Darrell Ferguson David Gray Vice President - David Krugh Secretary - David Dustin Treasurer - Anita Harner Trustees - Greg Chisek Tom Ferry John Glassman Analysis of Financial Position: Management s Discussion and Analysis For Fiscal Year Ended June 30, 2017 During fiscal year ended June 30, 2017 the District s net position decreased by $921,283. A few of the significant factors affecting net position during the year are discussed below: A. General Fund Operations The District s revenues from General Fund operations exceeded expenditures by $521,792 for the fiscal year ended June 30, See the section entitled Results of Operations, below, for further discussion of General Fund operations. B. Debt, Principal Payments The District made principal payments on bonded, long-term debt obligations that reduced the amount of the District s long-term liabilities by $280,000. Principal Principal Balance Additions Balance June 30, 2016 (Reductions) June 30, Qualified Zone Academy Bonds $1,500,000 $ - $1,500, Qualified Zone Academy Bonds 700, , Building and Site Bond 2,510,000 (280,000) 2,230,000 Total Long-Term Bond Obligations $ 4,710,000 $ (280,000) $ 4,430,000 III Excellence Commitment Pride - Success

7 OFFICE OF THE SUPERINTENDENT 6190 WEST MAIN STREET EAU CLAIRE, MICHIGAN Telephone: (269) Fax: (269) Board of Education Superintendent President - Darrell Ferguson David Gray Vice President - David Krugh Secretary - David Dustin Treasurer - Anita Harner Trustees - Greg Chisek Tom Ferry John Glassman D. Net Investment in Capital Assets Management s Discussion and Analysis For Fiscal Year Ended June 30, 2017 The District s net investment in capital assets decreased $331,361 during the fiscal year. This can be summarized as follows: Balance Balance June 30, 2016 Additions Deletions June 30, 2017 Capital assets $14,968,267 $ 71,037 $ (19,905) $15,019,399 Less: accumulated depreciation (7,257,764) (402,398) 19,905 (7,640,257) Net Investment Capital Outlay $ 7,710,503 $ (331,361) $ - $ 7,379,142 IV Excellence Commitment Pride - Success

8 OFFICE OF THE SUPERINTENDENT 6190 WEST MAIN STREET EAU CLAIRE, MICHIGAN Telephone: (269) Fax: (269) Board of Education Superintendent President - Darrell Ferguson David Gray Vice President - David Krugh Secretary - David Dustin Treasurer - Anita Harner Trustees - Greg Chisek Tom Ferry John Glassman Management s Discussion and Analysis For Fiscal Year Ended June 30, 2017 Results of Operations: For the fiscal years ended June 30, 2017 and 2016 the District-wide results of operations were: June 30, 2017 June 30, 2016 Revenues: General Revenues: Property taxes levied for general operations $ 483,098 $ 480,827 Property taxes levied for debt service 331, ,155 State of Michigan unrestricted foundation aid 3,173,216 3,144,166 Interest and investment earnings 22,953 20,138 Other general revenues 51,270 20,245 Total General Revenues $ 4,061,810 $ 3,969,531 Operating Grants: Federal $ 1,639,984 $ 1,687,098 State of Michigan 4,083,855 3,884,913 Total Operating Grants $ 5,723,839 $ 5,572,011 Charges for Services $ 39,240 $ 36,642 Total Revenues $ 9,824,889 $ 9,578,184 Expenses: Instruction and instructional support $ 5,992,732 $ 5,564,772 Support services 3,300,170 2,899,544 Athletic services 333, ,234 Food services 632, ,125 Community 33,336 20,362 Interest on long-term debt 51,901 54,899 Depreciation 402, ,159 Total Expenses $ 10,746,172 $ 9,857,095 Decrease in Net Position $ (921,283) $ (278,911) Beginning Net Position (5,331,767) (5,105,045) Prior Period Adjustment - 52,189 Ending Net Position $ (6,253,050) $ (5,331,767) V Excellence Commitment Pride - Success

9 OFFICE OF THE SUPERINTENDENT 6190 WEST MAIN STREET EAU CLAIRE, MICHIGAN Telephone: (269) Fax: (269) Board of Education Superintendent President - Darrell Ferguson David Gray Vice President - David Krugh Secretary - David Dustin Treasurer - Anita Harner Trustees - Greg Chisek Tom Ferry John Glassman 1. State of Michigan Unrestricted Aid (Net State Foundation Grant) The State of Michigan aid, unrestricted, is determined with the following variables: a. State of Michigan State Aid Act per student foundation allowance Management s Discussion and Analysis For Fiscal Year Ended June 30, 2017 b. Student Enrollment - Blended at 90 percent of current year s fall count and 10 percent of prior year s winter count c. The District s non-homestead levy Per Student, Foundation Allowance: Annually, the State of Michigan establishes the per student foundation allowance. The Eau Claire Public Schools foundation allowance was $7,511 per student for the school year. This represents a $120 increase in allowance, as the foundation allowance for the school year was $7,391 per student. Student Enrollment: The District s student full time equivalent (FTE) for the fall count of was students. The following summarizes the FTEs for the past five years: FTE History Change Prior Current Fiscal State Aid From Year's Year's Year Membership Prior Year Winter Count Fall Count (86.40) VI Excellence Commitment Pride - Success

10 OFFICE OF THE SUPERINTENDENT 6190 WEST MAIN STREET EAU CLAIRE, MICHIGAN Telephone: (269) Fax: (269) Board of Education Superintendent President - Darrell Ferguson David Gray Vice President - David Krugh Secretary - David Dustin Treasurer - Anita Harner Trustees - Greg Chisek Tom Ferry John Glassman Management s Discussion and Analysis For Fiscal Year Ended June 30, Property Taxes Levied for General Operations (General Fund Non-Homestead Taxes) The District levied mills of property taxes for operations (General Fund) on Non-Homestead Properties. Under Michigan law, the taxable levy is based on the taxable valuation of properties. Annually, the taxable valuation increase in property values is capped at the rate of the prior year s CPI increase or 5 percent, whichever is less. At the time of sale, a property s taxable valuation is readjusted to the State Equalized Value, which is, theoretically, 50 percent of the market value. The District s non-homestead property revenue for the fiscal year was $483,098. The nonhomestead tax levy increased by.47 percent over the prior year. The following summarizes the District s non-homestead levy the past five years: Fiscal Year Tax Levy Prior Year Property Value $ 483, % $ 26,183, , % 26,320, ,731 (5.22%) 26,541, , % 25,027, ,522 (7.10%) 25,078, , % 25,690,515 Average Lncrease Last 5 Years 0.99% 3. Debt Fund Property and Industrial Facility in Lieu of Taxes The District s debt fund levy, which is used to pay the principal and interest on bond obligations, is based on the taxable valuation of all properties, homestead and non-homestead. For , the District s debt millage levy was 2.75 mills that generated revenue of $331, School Lunch Program The actual revenues from Food Service operations exceeded total expenditures for the year for an increase in fund balance of $14,993. The Food Service Fund balance at the beginning of the year was $127,636 and the ending Food Service Fund balance was $142,629. VII Excellence Commitment Pride - Success

11 OFFICE OF THE SUPERINTENDENT 6190 WEST MAIN STREET EAU CLAIRE, MICHIGAN Telephone: (269) Fax: (269) Board of Education Superintendent President - Darrell Ferguson David Gray Vice President - David Krugh Secretary - David Dustin Treasurer - Anita Harner Trustees - Greg Chisek Tom Ferry John Glassman GENERAL FUND BUDGET & ACTUAL REVENUES & EXPENDITURES General Fund Revenues Budget vs. Actual - 5 Year History Management s Discussion and Analysis For Fiscal Year Ended June 30, 2017 Variance Variance Actual to Actual to Original Final Original Final Fiscal Year Budget Budget Actual Budget Budget $7,662,365 $8,393,896 $7,586,358 (1.00%) (10.64%) ,744,852 8,744,852 8,080,710 (8.22%) (8.22%) ,868,404 9,417,162 9,254, % (1.75%) ,042,638 8,966,796 8,678,344 (4.20%) (3.32%) ,432,043 9,301,483 8,837,248 (4.59%) (5.25%) Five Year Average Over (Under) Budget (0.61%) (5.84%) General Fund Expenditures Budget vs. Actual - 5 Year History Variance Variance Actual to Actual to Original Final Original Final Fiscal Year Budget Budget Actual Budget Budget $7,791,863 $8,745,814 $8,317, % (5.15%) ,874,683 8,874,683 8,580,835 (3.42%) (3.42%) ,863,351 9,537,443 9,294, % (2.61%) ,195,859 9,252,971 8,732,005 (5.31%) (5.97%) ,359,216 9,773,229 9,359,040 (0.00%) (4.43%) Five Year Average Over (Under) Budget 2.60% (4.32%) VIII Excellence Commitment Pride - Success

12 OFFICE OF THE SUPERINTENDENT 6190 WEST MAIN STREET EAU CLAIRE, MICHIGAN Telephone: (269) Fax: (269) Board of Education Superintendent President - Darrell Ferguson David Gray Vice President - David Krugh Secretary - David Dustin Treasurer - Anita Harner Trustees - Greg Chisek Tom Ferry John Glassman Original vs. Final Budget Management s Discussion and Analysis For Fiscal Year Ended June 30, 2017 The Uniform Budget Act of the State of Michigan requires that that local Board of Education approve the original budget for the upcoming fiscal year prior to July 1, the start of the fiscal year. Change from Original to Final Budget: Percent Total Revenues Original Budget $8,432, % Total Revenues Final Budget 9,301, % Increase (decrease) in Budgeted Revenues $ 869, % The District s actual General Fund revenues were $8,837,248 - $464,235 less than final budget, a variance of (5.25) percent. IX Excellence Commitment Pride - Success

13 OFFICE OF THE SUPERINTENDENT 6190 WEST MAIN STREET EAU CLAIRE, MICHIGAN Telephone: (269) Fax: (269) Board of Education Superintendent President - Darrell Ferguson David Gray Vice President - David Krugh Secretary - David Dustin Treasurer - Anita Harner Trustees - Greg Chisek Tom Ferry John Glassman General Fund Expenditures: The District s budget for expenditures changed as follows during the year: Management s Discussion and Analysis For Fiscal Year Ended June 30, 2017 Percent Total Expenditures Original Budget $9,359, % Total Expenditures Final Budget 9,773, % Increase (decrease) in Budgeted Expenditures $ 414, % The District s actual expenditures were $9,359,040 - $414,189 less than the final budget, a variance of (4.43) percent. Contacting the District s Financial Management This financial report is designed to provide our citizens and taxpayers with a general overview of the District s finances. If you have questions about this report or need additional information, contact the Business Office, Eau Claire Public Schools. X Excellence Commitment Pride - Success

14 December 12, 2017 INDEPENDENT AUDITOR S REPORT To the Board of Education Eau Claire Public Schools Eau Claire, Michigan 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 Eau Claire Public Schools, as of and for the year ended June 30, 2017, and the related notes to the financial statements, which collectively comprise the District 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. 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 entity 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 entity 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. 1

15 INDEPENDENT AUDITOR S REPORT - Continued 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 Eau Claire Public Schools as of June 30, 2017, and the respective changes in financial position 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 and budgetary comparison information on pages I through X and 29 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 Eau Claire Public Schools financial statements. The combining and individual nonmajor fund financial statements and supporting schedules 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 Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, and is also not a required part of the basic financial statements. The schedule of expenditures of federal awards 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 schedule of expenditures of federal awards is fairly stated in all material respects in relation to the basic financial statements as a whole. The combining and individual nonmajor fund financial statements and supporting schedules have 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 them. 2

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17 Statement of Net Position June 30, 2017 Governmental Governmental Activities Activities Assets Liabilities and Net Assets Current Assets Current Liabilities Cash and cash equivalents - NOTE 2 $ 2,195,578 Accounts payable $ 124,462 Accounts receivable 810 Due to other governments 15,344 Due from other governments 1,676,722 Accrued salaries and withholding 852,671 Inventory - NOTE 1G 1,753 Accrued interest 8,129 Prepaid expenditures 30,651 Bonds payable, due within one year - NOTE 4 290,000 Total Current Assets $ 3,905,514 Total Current Liabilities $ 1,290,606 Noncurrent Liabilities Bonds payable - NOTE 4 $ 4,140,000 Compensated absences and severance pay - NOTE 4 82,035 Net pension liability - NOTE 7 13,688,441 Noncurrent Assets - NOTE 3 Total Noncurrent Liabilities $ 17,910,476 Capital Assets: Nondepreciable $ 154,000 Total Liabilities $ 19,201,082 Depreciable, net of accumulated depreciation 7,225,142 Deferred Inflow - Pension - NOTE 7 $ 67,347 Total Noncurrent Assets $ 7,379,142 Net Position Net investment in capital assets $ 2,949,142 Deferred Outflow - Pension - NOTE 7 $ 1,730,723 Restricted for debt service 1,358,769 Restricted for food service 142,629 Restricted for capital projects 82,991 Unrestricted (10,786,581) Total Net Position $ (6,253,050) TOTAL ASSETS AND DEFERRED OUTFLOW TOTAL LIABILITIES, DEFERRED INFLOW OF OF RESOURCES $ 13,015,379 RESOURCES, AND NET POSITION $ 13,015,379 The accompanying notes are an integral part of these financial statements. 4

18 Statement of Activities For the Year Ended June 30, 2017 Functions/Programs Governmental Activities: Instruction and instructional support 5,992,732 Governmental Activities Net (Expense) Program Revenues Revenue and Charges for Operating Changes in Net Expenses Services Grants Assets $ $ - $ 5,115,430 $ (877,302) Support services 3,300, (3,300,170) Athletic services 333,387 13,283 - (320,104) Community 33, (33,336) Food services 632,248 25, ,409 2,118 Interest on long-term debt 51, (51,901) Depreciation (unallocated) 402, (402,398) Total Governmental Activities $ 10,746,172 $ 39,240 $ 5,723,839 $ (4,983,093) General Revenues: Taxes: Property taxes, levied for general operations $ 483,098 Property taxes, levied for debt service 331,273 State of Michigan aid, unrestricted 3,173,216 Interest and investment earnings 22,953 Other 51,270 Total General Revenues $ 4,061,810 Change In Net Position $ (921,283) Net Position, Beginning of Year (5,331,767) NET POSITION, END OF YEAR $ (6,253,050) The accompanying notes are an integral part of these financial statements. 5

19 GOVERNMENTAL FUNDS Balance Sheet June 30, 2017 Debt Nonmajor Total General Service Governmental Governmental Fund Funds Funds Funds Assets Cash $ 600,596 $ 1,358,769 $ 236,213 $ 2,195,578 Accounts receivable Due from other funds 35,998-4,237 40,235 Due from other governments 1,647,596-29,126 1,676,722 Inventory - - 1,753 1,753 Prepaid 30, ,651 TOTAL ASSETS $ 2,315,651 $ 1,358,769 $ 271,329 $ 3,945,749 Liabilities and Fund Balances Liabilities: Accounts payable $ 118,193 $ - $ 6,269 $ 124,462 Due to other governments 15, ,344 Salaries payable 535,878-3, ,320 Accrued liabilities 313, ,351 Due to other funds 4,237-35,998 40,235 Total Liabilities $ 987,003 $ - $ 45,709 $ 1,032,712 Fund Balances: Nonspendable: Inventory $ - $ - $ 1,753 $ 1,753 Prepaid 30, ,651 Restricted for: Food service , ,876 Debt service - 1,358,769-1,358,769 Capital projects ,991 82,991 Assigned: Budget appropriation 757, ,355 Unassigned, reported in: General Fund 540, ,642 Total Fund Balances $ 1,328,648 $ 1,358,769 $ 225,620 $ 2,913,037 TOTAL LIABILITIES AND FUND BALANCES $ 2,315,651 $ 1,358,769 $ 271,329 $ 3,945,749 The accompanying notes are an integral part of these financial statements. 6

20 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position June 30, 2017 Total Governmental Fund Balances $ 2,913,037 Amounts reported for governmental activities in the statement of net position are different because: Capital assets used in governmental activities are not financial resources and are not reported in the funds. The cost of the capital assets is $ 15,019,399 Accumulated depreciation is (7,640,257) 7,379,142 Long-term liabilities are not due and payable in the current period and are not reported in the funds. Bonds payable (4,430,000) Compensated absences (82,035) Net pension liability (13,688,441) Pension deferred inflow and outflow of resources are not financial resources and are not reported in the funds. Deferred outflow of resources 1,730,723 Deferred inflow of resources (67,347) Accrued interest payable more than sixty days after the current period is not included as a liability in governmental funds. (8,129) Net Position of Governmental Activities $ (6,253,050) The accompanying notes are an integral part of these financial statements. 7

21 Revenues: Local sources: GOVERNMENTAL FUNDS Statement of Revenues, Expenditures, and Changes in Fund Balances For the Year Ended June 30, 2017 Debt Nonmajor Total General Service Governmental Governmental Fund Funds Funds Funds Property taxes $ 483,098 $ 331,273 $ - $ 814,371 Charges for services 13,283-25,957 39,240 Interest , ,953 Other local revenue 51, ,270 State sources 7,231,299-25,772 7,257,071 Federal sources 1,057, ,637 1,639,984 Total Revenues $ 8,837,248 $ 353,155 $ 634,486 $ 9,824,889 Expenditures: Current: Instruction $ 5,753,583 $ - $ - $ 5,753,583 Support services 3,512,006-2,807 3,514,813 Community 33, ,302 Food service , ,493 Capital outlay 49,840-21,197 71,037 Payments to other governments 10, ,309 Debt service: Debt repayment - 280, ,000 Interest and debt service charges - 52,484-52,484 Total Expenditures $ 9,359,040 $ 332,484 $ 643,497 $ 10,335,021 Excess (Deficiency) of Revenues Over (Under) Expenditures $ (521,792) $ 20,671 $ (9,011) $ (510,132) Other Financing Sources (Uses): Operating transfers in $ - $ 129,497 $ - $ 129,497 Operating transfers out (129,497) - - (129,497) Total Other Financing Sources (Uses) $ (129,497) $ 129,497 $ - $ - Net Change in Fund Balances $ (651,289) $ 150,168 $ (9,011) $ (510,132) Fund Balances, Beginning of Year 1,979,937 1,208, ,631 3,423,169 FUND BALANCES, END OF YEAR $ 1,328,648 $ 1,358,769 $ 225,620 $ 2,913,037 The accompanying notes are an integral part of these financial statements. 8

22 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities Year Ended June 30, 2017 Net Change in Fund Balances - Total Governmental Funds $ (510,132) 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 $ (402,398) Capital outlay 71,037 (331,361) Change in accrued interest recorded in the statement of activities when incurred; it is not reported in governmental funds until paid. 583 Repayments of bond principal are an expenditure in the governmental funds, but not in the statement of activities (where they reduce long-term debt). 280,000 Increases in compensated absences are not reported in the governmental funds. (26,473) Change in net pension liability and deferred inflow and outflow of resources related to the pension plan (333,900) Change in Net Position of Governmental Activities $ (921,283) The accompanying notes are an integral part of these financial statements. 9

23 FIDUCIARY FUND Statement of Net Position June 30, 2017 Agency Fund Assets Cash $ 86,082 Investments - NOTE 2B 87,054 Total Assets $ 173,136 Liabilities Due to student groups $ 173,136 Total Liabilities $ 173,136 The accompanying notes are an integral part of these financial statements. 10

24 Notes to Financial Statements June 30, 2017 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accounting policies of Eau Claire Public Schools (the District ) conform to accounting principles generally accepted in the United States of America, as prescribed by the Governmental Accounting Standards Board (GASB). The following is a summary of the significant accounting policies. A. Reporting Entity: The Eau Claire Public Schools Board of Education (the Board ) is the basic level of government which has oversight responsibility and control over all activities related to the public school education in the area comprised by the District. The Board receives funding from State and Federal government sources and must comply with the concomitant requirements of these funding source entities. However, the Board is not included in any other governmental reporting entity, as defined by Governmental Accounting Standards Board ( GASB ) Statement 14, since Board members are elected by the public and have decision-making authority, the authority to levy taxes, the power to designate management, and the ability to significantly influence operations and primary accountability for fiscal matters. In addition, under the criteria of the GASB pronouncement, student, parent, and teacher organizations are not included, except to the extent that the District holds assets in the capacity of an agent. B. Basic Financial Statements: Government-Wide Statements - The District s basic financial statements include both government-wide (reporting the District as a whole) and fund financial statements (reporting the District s major funds). The government-wide financial statements categorize primary activities as either governmental or business-type. All of the District s activities are classified as governmental activities. In the government-wide Statement of Net Position, the governmental activities column is both (a) presented on a consolidated basis, and (b) reported on a full accrual, economic resource basis, which recognizes all long-term assets and receivables as well as long-term debt and obligations. The District s net position is divided into three components. Net Investment in Capital Assets - consists of net capital assets reduced by outstanding balances of any related debt obligations and deferred inflows of resources attributable to the acquisition, construction, or improvement of those assets and increase by balances of deferred outflows of resources to those assets. Restricted Net Position - Net position is considered restricted if their use is constrained to a particular purpose. Restrictions are imposed by external organizations such as federal or state laws or buyers of the District's bonds. Restricted net position is reduced by liabilities and deferred inflows of resources related to the restricted assets. Unrestricted Net Position - consists of all other net position that does not meet the definition of the above two components and is available for general use by the District. The District first utilizes restricted resources to finance qualifying activities. The government-wide Statement of Activities reports both the gross and net cost of each of the District s functions. The functions are also supported by general government revenues (property taxes, certain intergovernmental revenues, fines, permits and charges, etc.). The Statement of Activities reduces gross expenses (including depreciation) by related program revenues, operating and capital grants. Program revenues must be directly associated with the function. Operating grants include operating-specific and discretionary (either operating or capital) grants. 11

25 Notes to Financial Statements June 30, 2017 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued B. Basic Financial Statements - Continued: The net costs (by function) are normally covered by general revenue (property taxes, State and Federal sources, interest income, etc.). The District does not allocate indirect costs. In creating the government-wide financial statements, the District has eliminated interfund transactions. This government-wide focus is more on the sustainability of the District as an entity and the change in the District s net position resulting from the current year s activities. Fund Statements - The accounts of the District are organized on the basis of funds and account groups, each of which is considered a separate accounting entity. The operations of each fund are accounted for with a separate set of self-balancing accounts that comprise its assets, liabilities, fund balance, revenue, and expenditures. Government resources are allocated to and accounted for in individual funds based upon the purposes for which they are to be spent and the means by which spending activities are controlled. Governmental funds are defined as follows: 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. Special Revenue Funds - Special Revenue Funds are used to account for the proceeds of specific revenue sources that are restricted or committed to expenditures for specified purposes other than debt retirement or capital projects. Debt Service Funds - Debt Service Funds are used to account for and report financial resources that are restricted, committed, or assigned to expenditure for principal and interest. Capital Projects Fund - The Capital Projects Fund is used to account for and report financial resources that are restricted, committed or assigned to expenditure for capital outlays, including the acquisition or construction of capital facilities and other capital assets. Fiduciary funds are defined as follows: Agency Funds - Agency Funds are used to account for assets held by the District as an agent for student activity organizations. Agency Funds are custodial in nature (assets equal liabilities) and do not involve measurement of results of operations. 12

26 Notes to Financial Statements June 30, 2017 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued B. Basic Financial Statements - Continued: Fund balance is comprised of five classifications as follows: Nonspendable Fund Balance - The nonspendable fund balance category represents amounts that are not in a spendable form or are required to be maintained intact. Restricted Fund Balance - The restricted fund balance category represents amounts constrained to specific purposes by their providers, through constitutional provisions, or by enabling legislation. Committed Fund Balance - The committed fund balance category represents amounts constrained to specific purposes by the Board; to be reported as committed, amounts cannot be used for any other purpose unless the Board takes action to remove or change the constraint. Assigned Fund Balance - The assigned fund balance category represents amounts the Board intends to use for a specific purpose; intent can be expressed by the Board or by an official or committee to which the Board delegates the authority. Unassigned Fund Balance - The unassigned fund balance category represents amounts that are available for any purpose; these amounts are reported only in the General Fund. The District applies restricted resources first when expenditures are incurred for purposes for which either restricted (nonspendable) or unrestricted (committed, assigned, and unassigned) amounts are available. Similarly, within unrestricted fund balance, committed amounts are reduced first followed by assigned, and then unassigned amounts when expenditures are incurred for purposes for which any of the unrestricted fund balance classifications could be used. C. Basis of Accounting: Basis of accounting refers to when revenues and expenditures are recognized in the accounts and reported in the financial statements. Basis of accounting relates to the timing of the measurements made, regardless of the measurement focus applied. ACCRUAL Governmental activities in the government-wide financial statements are presented on the accrual basis of accounting. Revenues are recognized when earned and expenses are recognized when incurred. MODIFIED ACCRUAL The governmental funds financial statements are presented on the modified accrual basis of accounting. Under the modified accrual basis of accounting, revenues are recorded when they become measurable and available. Available means collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. Eau Claire Public Schools considers revenues to be available if they are collected within 60 days of the end of the current period. Expenditures are generally recognized under the modified accrual basis of accounting when the related fund liability is incurred, provided the liability normally would be liquidated with expendable available financial resources. 13

27 Notes to Financial Statements June 30, 2017 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued D. Encumbrances: Encumbrance accounting provides for the recording of purchase orders, contracts, and other commitments that have not been performed. The recording facilitates the reservation of the corresponding appropriation. No encumbrances were required to be recorded at June 30, E. Budgets and Budgetary Accounting: The District follows these procedures in establishing the budgetary data reflected in the financial statements: F. Cash and Cash Equivalents: G. Inventory: H. Capital Assets: Prior to June 30, the superintendent of the District submits to the school board a proposed operating budget for the fiscal year commencing July 1 of that year. The operating budget includes proposed expenditures and the means of financing them for the General Fund and Special Revenue Funds. Prior to July 1, the budget is legally enacted through passage of a resolution, and in accordance with Public Act 621 of the State. Formal budgetary integration is employed as a management control device during the year for all budgetary funds. The District is required under Public Act 621 of 1978 and by accounting principles generally accepted in the United States of America to adopt a budget for the General Fund and individual Special Revenue Funds. Budget amounts are reported in the financial statements as originally adopted and as amended by the Board of Education. For the purposes of balance sheet classification, the District considers its investments in highly liquid pooled money funds to be cash equivalents. Inventory is valued at the lower of cost (first-in, first-out) or market. The inventory in the Food Service Fund includes food and expendable supplies. Capital assets are defined by the District as assets with an initial individual cost of more than $5,000 and an estimated useful life in excess of two years. Such assets are recorded at historical cost or estimated historical cost. Donated fixed assets are valued at their estimated fair market value on the date received. 14

28 Notes to Financial Statements June 30, 2017 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued H. Capital Assets - Continued: The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend asset lives are not capitalized. Improvements are capitalized and depreciated over the remaining lives of the related fixed assets. Depreciation on all assets is provided on the straight-line basis over the estimated useful lives as follows: Buildings and additions Buses and other vehicles Furniture and other equipment years 8 years 10 years I. Property Tax Revenue: Property taxes attach as an enforceable lien on property as of December 31, and are levied on the following December 1. Property taxes become available for expenditure and are thus recognized as revenue in the fiscal year they are levied. J. Risk Management: The District carries commercial insurance for risks of loss, including torts; theft of, damage to, and destruction of assets; errors and omissions; workers compensation and employee health and accident insurance. Settled claims resulting from these risks have not exceeded commercial insurance coverage in the past fiscal year. K. Use of Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. L. Deferred Outflows of Resources: The District reports decreases in net assets that relate to future periods as deferred outflows of resources in a separate section of its government-wide Statements of Net Position. The only deferred outflows of resources reported in this year's financial statements are a deferred amount arising from recording pension liability. M. Deferred Inflows of Resources: The District's Statement of Net Position and its Governmental Fund Balance Sheet report a separate section for deferred inflows of resources. This separate financial statement element reflects an increase in net assets that applies to a future period. N. Pension: For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the Michigan Public School Employees' Retirement System (MPSERS) and additions to/deductions from MPSERS fiduciary net position have been determined on the same basis as they are reported by MPSERS. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. 15

29 Notes to Financial Statements June 30, 2017 NOTE 2 - DEPOSITS AND INVESTMENTS A. Cash: Deposits and investments are stated at cost. Various state laws authorize the District to deposit in federally insured banks, credit unions and savings and loan associations, and to invest in various U.S. government, federal agency, and instrumentality obligations. All deposits are held in the name of Eau Claire Public Schools. The District s deposits and investments are in accordance with statutory authority. Custodial Credit Risk - Deposits - Custodial credit risk is the risk that in the event of a bank failure, the District s deposits may not be returned to it. The District does not have a deposit policy for custodial credit risk. As of June 30, 2017, the carrying amount of the District's deposits was $2,281,660 and the respective bank balances totaled $2,557,737. The exposure to custodial credit risk is as follows: Insured by the FDIC $ 250,000 Uninsured and uncollateralized 2,307,737 $ 2,557,737 B. Investments: The District does not have an investment policy, but is in accordance with statutory authority. All highly liquid investments with a maturity of six months or less are defined as cash equivalents. All investments are reported at fair value. Since the common stock investment is part of the fiduciary funds, the District is not subject to credit risk or interest rate risk for the investment. Market Value Fiduciary Funds: Common Stock $ 87,054 16

30 Notes to Financial Statements June 30, 2017 NOTE 3 - CAPITAL ASSETS Capital assets activities for the year ended June 30, 2017 were as follows: Balance Disposals and Balance Governmental Activities July 1, 2016 Additions Adjustments June 30, 2017 Nondepreciable Capital Assets Land $ 154,000 $ - $ - $ 154,000 Total Nondepreciable Capital Assets $ 154,000 $ - $ - $ 154,000 Depreciable Capital Assets Building and site improvements $ 12,575,139 $ 12,597 $ - $ 12,587,736 Buses and other vehicles 941,359 18,907 (19,905) 940,361 Furniture and equipment 1,297,769 39,533-1,337,302 Total Depreciable Capital Assets $ 14,814,267 $ 71,037 $ (19,905) $ 14,865,399 Less Accumulated Depreciation for: Building and site improvements $ (5,936,219) $ (245,131) $ - $ (6,181,350) Buses and other vehicles (580,154) (72,191) 19,905 (632,440) Furniture and equipment (741,391) (85,076) - (826,467) Total Accumulated Depreciation $ (7,257,764) $ (402,398) $ 19,905 $ (7,640,257) Total Depreciable Capital Assets, Net of Accumulated Depreciation $ 7,556,503 $ (331,361) $ - $ 7,225,142 Governmental Activities Total Capital Assets, Net of Accumulated Depreciation $ 7,710,503 $ (331,361) $ - $ 7,379,142 Depreciation for the fiscal year ended June 30, 2017 amounted to $402,398. The District determined that it was impractical to allocate depreciation to the various governmental activities as the assets serve multiple functions. 17

31 Notes to Financial Statements June 30, 2017 NOTE 4 - LONG-TERM DEBT The following is a summary of debt transactions of the District for the year ended June 30, 2017: Long-term debt activity can be summarized as follows: Balance Balance Due Within Governmental Activities July 1, 2016 Additions Reductions June 30, 2017 One Year 2007 Qualified Zone Academy Bonds due in one installment of $1,500,000 on June 18, 2022 with interest at 0%. $ 1,500,000 $ - $ - $ 1,500,000 $ Qualified Zone Academy Bonds due in one installment of $700,000 on July 9, 2024 with interest at 0% School Building and Site Bonds due in annual installments of $105,000 to $340,000 through May 1, 2024; interest rate at 0.90% to 2.70%. 700, ,000-2,510,000 - (280,000) 2,230, ,000 Total Bonds Payable $ 4,710,000 $ - $ (280,000) $ 4,430,000 $ 290,000 Compensated absences and termination benefits. 55,562 26,473-82,035 - Total Governmental Activities $ 4,765,562 $ 26,473 $ (280,000) $ 4,512,035 $ 290,000 The annual requirements to amortize all applicable debt outstanding excluding compensated absences of $82,035 as of June 30, 2017, including interest payments of $218,355 are as follows: Governmental Activities Year Ending June 30, Principal Interest Total 2018 $ 290,000 $ 48,775 $ 338, ,000 44, , ,000 39, , ,000 32, , ,000 25, , ,000 27, ,200 Total $ 2,230,000 $ 218,355 $ 2,448,355 The compensated absences liability attributable to the governmental activities will be liquidated by the fund in which it originates primarily by the General Fund. 18

32 Notes to Financial Statements June 30, 2017 NOTE 5 - INTERFUND RECEIVABLES, PAYABLES, AND TRANSFERS Interfund balances at June 30, 2017, consisted of the following: Due from Due to Food General Service Fund Fund Total General Fund $ - $ 35,998 $ 35, Capital Projects Fund 4,237-4,237 Total $ 4,237 $ 35,998 $ 40,235 The Food Service Fund owes the General Fund $35,998 for general expenditures. The General Fund owes the 2012 Capital Projects Fund $4,237 for general expenditures. Transfer Out Transfer In General Fund QZAB 2007 Debt Retirement $ 82,831 QZAB 2009 Debt Retirement 46,666 Total $ 129,497 During the year the General Fund transferred $129,497 to the QZAB Debt Funds for future payment of debt. NOTE 6 - STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY Expenditures Over Budgets The General Fund incurred expenditures in excess of appropriations in the activities indicated below: Actual Over Budget Actual Budget Instruction: Basic Programs $ 4,331,101 $ 4,460,243 $ (129,142) Support: Pupil 127, ,671 (118,913) Instructional Staff 163, ,671 (153,743) General Administration 278, ,113 (17,626) School Administration 553, ,131 (45,602) Transportation 620, ,213 (86,970) Central Services 145, ,116 (84,171) Other Supporting Services 335, ,934 (15,477) Community Activities 5,107 33,302 (28,195) Payments to Other Governments - 10,309 (10,309) 19

33 NOTE 7 - MICHIGAN PUBLIC SCHOOL EMPLOYEES' RETIREMENT SYSTEM A. ORGANIZATION The System s financial statements are available at B. BENEFITS PROVIDED Benefit provisions of the defined benefit pension plan are established by State statute, which may be amended. Public Act 300 of 1980, as amended, establishes eligibility and benefit provisions for the defined benefit (DB) pension plan. Depending on the plan option selected, member retirement benefits are determined by final average compensation, years of service, and a pension factor ranging from 1.25% to 1.50%. DB members are eligible to receive a monthly benefit when they meet certain age and service requirements. The System also provides disability and survivor benefits to DB plan members. A DB plan member who leaves Michigan public school employment may request a refund of his or her member contributions to the retirement system account if applicable. A refund cancels a former member s rights to future benefits. However, returning members who previously received a refund of their contributions may reinstate their service through repayment of the refund upon satisfaction of certain requirements. C. CONTRIBUTIONS AND FUNDED STATUS Notes to Financial Statements June 30, 2017 The Michigan Public School Employees' Retirement System (System or MPSERS) is a cost-sharing, multiple employer, state-wide, defined benefit public employee retirement plan governed by the State of Michigan (State) originally created under Public Act 136 of 1945, recodified and currently operating under the provisions of Public Act 300 of 1980, as amended. Section 25 of this act establishes the board's authority to promulgate or amend the provisions of the System. The board consists of twelve members - eleven appointed by the Governor and the State Superintendent of Instruction, who serves as an ex-officio member. The System is administered by the Office of Retirement Services (ORS) within the Michigan Department of Technology, Management & Budget. The Department Director appoints the Office Director, with whom the general oversight of the System resides. The State Treasurer serves as the investment officer and custodian for the System. Employers are required by Public Act 300 of 1980, as amended, to contribute amounts necessary to finance the coverage of active and retired members. Contribution provisions are specified by State statute and may be amended only by action of the State Legislature. Employer contributions to the System are determined on an actuarial basis using the entry age normal actuarial cost method. Under this method, the actuarial present value of the projected benefits of each individual included in the actuarial valuation is allocated on a level basis over the service of the individual between entry age and assumed exit age. The portion of this cost allocated to the current valuation year is called the normal cost. The remainder is called the actuarial accrued liability. Normal cost is funded on a current basis. The unfunded (overfunded) actuarial accrued liability as of the September 30, 2016 valuation will be amortized over a 20 year period for the 2016 fiscal year. The schedule below summarizes pension contribution rates in effect for fiscal year Pension Contribution Rates Benefit Structure Member Universities Basic % 22.60% Member Investment Plan % 22.60% Pension Plus % N/A Defined Contribution 0.0% 17.73% Employer Non-Universities 18.95% 18.95% 17.73% 14.56% Required contributions to the pension plan from the District were $1,232,029 for the year ended September 30,

34 Notes to Financial Statements June 30, 2017 NOTE 7 - MICHIGAN PUBLIC SCHOOL EMPLOYEES' RETIREMENT SYSTEM - Continued D. PENSION LIABILITIES, PENSION EXPENSE, AND DEFERRED OUTFLOWS OF RESOURCES AND DEFERRED INFLOWS OF RESOURCES RELATED TO PENSIONS At June 30, 2017, the District reported a liability of $13,688,441 for its proportionate share of the MPSERS net pension liability. The net pension liability was measured as of September 30, 2016, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation rolled forward from September The District s proportion of the net pension liability was determined by dividing each employer s statutorily required pension contributions to the system during the measurement period by the percent of pension contributions required from all applicable employers during the measurement period. At September 30, 2016, the District s proportion was.05486%, which was an increase of.1% from its.05480% measured as of September 30, For the year ended June 30, 2017, Eau Claire Public Schools recognized total pension expense of $1,442,731. At June 30, 2017, Eau Claire Public Schools reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Outflows of Resources Deferred Inflows of Resources Differences between actual and expected experience Changes of assumptions $ 170,594 $ 32, ,008 - Net difference between projected and actual earnings on pension plan investments 227,502 - Changes in proportion and differences between Eau Claire Public Schools' contributions and proportionate share of contributions 403,767 34,905 Employer contributions subsequent to the measurement date 714,852 - Total $ 1,730,723 $ 67,347 Contributions subsequent to the measurement date reported as deferred outflows of resources related to pensions resulting from employer contributions subsequent to the measurement date will recognized as a reduction of the net pension liability in the year ended June 30, Other amounts as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows: Deferred (Inflow) and Deferred Outflow of Resources by Year (to Be Recognized in Future Pension Expenses) Year Ending September 30, Amount 2017 $ 245, , , ,551 21

35 NOTE 7 - MICHIGAN PUBLIC SCHOOL EMPLOYEES' RETIREMENT SYSTEM - Continued E. ACTUARIAL ASSUMPTIONS Notes to Financial Statements June 30, 2017 Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations. Additional information as of the latest actuarial valuation follows: Summary of Actuarial Assumptions Valuation Date: Actuarial Cost Method: Wage Inflation Rate: Investment Rate of Return: - MIP and Basic Plans (Non-Hybrid): - Pension Plus Plan (Hybrid): Projected Salary Increases: Cost-of-Living Pension: September 30, 2015 Entry Age, Normal 3.5% 8.0% 7.0% %, including wage inflation at 3.5% 3% Annual Non-Compounded for MIP Members Mortality: RP-2000 Male and Female Combined Healthy Life Mortality Tables, adjusted for mortality improvements to 2025 using projection scale BB. This assumption was first used for the September 30, 2014 valuation of the System. For retirees, 100% of the table rates were used. For active members, 80% of the table rates were used for males and 70% of the table rates were used for females. Notes: Assumption changes as a result of an experience study for the periods 2007 through 2012 have been adopted by the System for use in the annual pension valuations beginning with the September 30, 2014 valuation. The total pension liability as of September 30, 2016, is based on the results of an actuarial valuation date of September 30, 2015, and rolled forward using generally accepted actuarial procedures, including the experience study. Recognition period for liabilities is the average of the expected remaining service lives of all employees in years ( for non-university employers, for university employers). Recognition period for assets in years is Full actuarial assumptions are available in the 2016 MPSERS Comprehensive Annual Financial Report ( 22

36 NOTE 7 - MICHIGAN PUBLIC SCHOOL EMPLOYEES' RETIREMENT SYSTEM - Continued F. LONG-TERM EXPECTED RETURN ON PLAN ASSETS Long-Term Target Expected Real Asset Class Allocation Rate of Return* Domestic Equity Pools 28.0% 5.9% % Alternative Investment Pools 18.0% 9.2% International Equity 16.0% 7.2% Fixed Income Pools 10.5% 0.9% Real Estate and Infrastructure Pools 10.0% 4.3% Absolute Return Pools 15.5% 6.0% Short-Term Investment Pools 2.0% 0.0% TOTAL 100.0% G. DISCOUNT RATE Notes to Financial Statements June 30, 2017 The long-term expected rate of return on pension plan investments was determined using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the longterm expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. Best estimates of arithmetic real rates of return for each major asset class included in the pension plan s target asset allocation as of September 30, 2016, are summarized in the following table: *Long-term rate of return does not include 2.1% inflation A discount rate of 8.0% was used to measure the total pension liability (7.0% for the Pension Plus Plan, a hybrid plan provided through non-university employees only). This discount rate was based on the long-term expected rate of return on pension plan investments of 8.0% (7.0% for the Pension Plus Plan). The projection of cash flows used to determine this discount rate assumed that plan member contributions will be made at the current contribution rate and that employer contributions will be made at rates equal to the difference between actuarially determined contribution rates and the member rate. Based on these assumptions, the pension plan s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to Sensitivity of the District's proportionate share of the net pension liability to changes in the discount rate The following presents the District s proportionate share of the net pension liability calculated using the discount rate of 8.0% (7.0% for the Hybrid Plan), as well as what the District's proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1 percentage point lower or 1 percentage point higher: 1% Decrease (Non-Hybrid/Hybrid) 7.0% / 6.0% Current Single Discount Rate Assumption (Non-Hybrid/Hybrid) 8.0% / 7.0% 1% Increase (Non-Hybrid/Hybrid) 9.0% / 8.0% $17,627,266 $13,688,441 $10,367,632 23

37 NOTE 7 - MICHIGAN PUBLIC SCHOOL EMPLOYEES' RETIREMENT SYSTEM - Continued H. MICHIGAN PUBLIC SCHOOL EMPLOYEES' RETIREMENT SYSTEM (MPSERS) FIDUCIARY NET POSITION Detailed information about the pension plan s fiduciary net position is available in the separately issued MPSERS CAFR, available at I. PAYABLES TO MICHIGAN PUBLIC SCHOOL EMPLOYEES' RETIREMENT SYSTEM (MPSERS) At June 30, 2017, the District reported a payable of $207,002 for the outstanding amount of contributions to the pension plan required for the year ended June 30, J. OTHER POST-EMPLOYMENT BENEFITS The District's total employer OPEB contributions to the MPSERS plan were $487,724. NOTE 8 - QUALIFIED ZONE ACADEMY BOND (Restricted Investments) NOTE 9 - COMMITMENTS AND CONTINGENCIES Federal Grants: Notes to Financial Statements June 30, 2017 Post-employment benefits for health, dental, and vision are available at retirement through the Michigan Public School Employees' Retirement System (MPSERS). The two healthcare plans are as follows: Premium Subsidy members who first worked before September 4, 2012 may participate in this plan. The members contribute 3% of their compensation to the Retiree Healthcare Fund. If worked before July 1, 2008, members will receive the maximum subsidy allowed by statute when they meet the eligibility requirements. If worked on or after July 1, 2008, but before September 4, 2012, members' insurance premium is graded based on career length. Personal Healthcare Fund members who first worked before September 4, 2012, may participate in this plan. Members who worked on or after September 4, 2012 are automatically enrolled in this plan. Members are automatically enrolled in a 2% employee contribution to a 457 account as of February 1, Members receive a 2% employer contribution match, which will go into a 401k account. The District issued $1,500,000 (General Obligation Limited Tax) Qualified Zone Academy Bonds, Series 2007 Bonds. The District is required to make annual sinking fund deposits with a fiscal agent. The District agrees to deposit fifteen annual sinking fund installments of $82,831. The District will receive an annual payment equal to an investment return of 2% per year on the total amount invested in the sinking fund and the bank shall receive the remaining interest earned on the sinking fund in excess of 2%. These deposits are accounted for in the Debt Service Fund. The annual set aside payments began on June 18, The District issued $700,000 (General Obligation Limited Tax) Qualified Zone Academy Bonds, Series 2009 Bonds. The District is required to make annual sinking fund deposits with a fiscal agent. The District agrees to deposit fifteen annual sinking fund installments of $46,667 beginning twelve months from the closing date into a noninterest bearing account with the bank. The annual set aside payments began during the year ended June 30, In the normal course of operations, the District receives grant funds from various Federal and State agencies. The grant programs are subject to audit by agents of the granting authority, the purpose of which is to insure compliance with conditions precedent to the granting of funds. Any liability for reimbursement which may arise as the results of these audits is not believed to be material. 24

38 Notes to Financial Statements June 30, 2017 NOTE 10 - TAX ABATEMENTS The District receives reduced property tax revenues as a result of Industrial Facilities Tax (IFT) exemptions granted by Pipestone Township and Payment in Lieu of Taxes (PILOT) exemptions, also granted by Pipestone Township. Industrial facility exemptions are intended to promote construction of new industrial facilities or to rehabilitate historical facilities. Payment in Lieu of Taxes (PILOT) are made to compensate a local government for some or all of the tax revenue lost due to tax exempt ownership or use of a particular piece of real property. For the fiscal year ended June 30, 2017, the District's tax abatements received from Pipestone Township were immaterial to the District's property tax revenue under these programs. There are no significant abatements made by the District. NOTE 11 - UPCOMING ACCOUNTING PRONOUNCEMENTS In June 2015, the GASB issued Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions, which addresses reporting by governments that provide postemployment benefits other than penions (OPEB) to their employees and for governments that finance OPEB for employees of other governments. This OPEB standard will require the District to recognize on the face of the financial statements its proportionate share of the net OPEB liability related to its participation in the MPSERS plan. The statement also enhances accountability and transparency through revised note disclosures and required supplementary information (RSI). The District is currently evaluating the impact this standard will have on the financial statements when adopted. The provisions of this statement are effective for the District's financial statements for the year ending June 30, NOTE 12 - SUBSEQUENT EVENTS Management has evaluated subsequent events through December 12, 2017 the date on which the financial statements were available to be issued. There are no material subsequent events. 25

39 Required Supplementary Information Schedule of the District's Proportionate Share of the Net Pension Liability Michigan Public School Employees' Retirement Plan Last 10 Fiscal Years (Amounts were determined as of September 30, 2016) A. Eau Claire Public Schools' proportion of net pension liability (%) % % % B. Eau Claire Public Schools' proportionate share of net pension liability $ 13,688,441 $ 13,386,397 $ 11,443,918 C. Eau Claire Public Schools' covered-employee payroll $ 4,686,959 $ 4,532,949 $ 4,417,360 D. Eau Claire Public Schools' proportionate share of net pension liability as a percentage of its covered-employee payroll (%) 34.24% 33.86% 38.60% E. Plan fiduciary net position as a percentage of total pension liability 63.27% 63.17% 66.20% 26

40 Required Supplementary Information Schedule of the District's Contributions Michigan Public School Employees' Retirement Plan Last 10 Fiscal Years (Amounts were determined as of June 30, 2017) A. Statutorily required contributions $ 1,232,029 $ 1,057,280 $ 990,203 B. Contributions in relation to statutorily required contributions 1,232,029 1,057, ,203 C. Contribution deficiency (excess) $ - $ - $ - D. Eau Claire Public Schools' covered-employee payroll $ 4,686,959 $ 4,532,949 $ 4,593,736 E. Contributions as a percentage of covered-employee payroll 26.29% 23.32% 21.56% 27

41 Notes to Required Supplementary Information For the Year Ended June 30, 2017 Changes in Benefit Terms: Changes of Assumptions: There were no changes of benefit terms. There were no changes of benefit assumptions. 28

42 GENERAL FUND Budgetary Comparison Schedule For the Year Ended June 30, 2017 Actual Variance Amounts Final Budget Budgeted Amounts (Budgetary Positive Original Final Basis) (Negative) Revenues: Local sources $ 521,612 $ 529,878 $ 548,602 $ 18,724 State sources 6,576,625 7,202,397 7,231,299 28,902 Federal sources 1,333,806 1,569,208 1,057,347 (511,861) Total Revenues $ 8,432,043 $ 9,301,483 $ 8,837,248 $ (464,235) Expenditures: Current: Instruction: Basic programs $ 4,354,540 $ 4,331,101 $ 4,460,243 $ (129,142) Added needs 1,835,470 2,335,298 1,293,340 1,041,958 Supporting services: Pupil services 141, , ,671 (118,913) Instructional staff 152, , ,671 (153,743) General administration 274, , ,113 (17,626) School administration 636, , ,131 (45,602) Business services 178, , ,170 2,078 Operation and maintenance services 647, , ,827 60,301 Transportation 624, , ,213 (86,970) Central services 106, , ,116 (84,171) Other supporting services 401, , ,934 (15,477) Community activities 5,107 5,107 33,302 (28,195) Payments to other governments ,309 (10,309) Total Expenditures $ 9,359,216 $ 9,773,229 $ 9,359,040 $ 414,189 Expenditures in Excess of Revenues $ (927,173) $ (471,746) $ (521,792) $ (50,046) Other Financing Sources (Uses): Transfers in - 52,631 - (52,631) Transfers out - payments of debt (133,831) (129,831) (129,497) 334 Net Change in Fund Balance $ (1,061,004) $ (548,946) $ (651,289) $ (102,343) Fund Balance, Beginning of Year 1,979,937 1,979,937 1,979,937 - FUND BALANCE, END OF YEAR $ 918,933 $ 1,430,991 $ 1,328,648 $ (102,343) 29

43 NONMAJOR GOVERNMENTAL FUNDS Combining Balance Sheet June 30, 2017 Total Food 2012 Capital Nonmajor Service Projects Governmental Fund Fund Funds Assets Cash $ 157,459 $ 78,754 $ 236,213 Due from other funds - 4,237 4,237 Due from other governments 29,126-29,126 Inventory 1,753-1,753 TOTAL ASSETS $ 188,338 $ 82,991 $ 271,329 Liabilities and Fund Balances Liabilities: Accounts payable $ 6,269 $ - $ 6,269 Due to other funds 35,998-35,998 Payroll liabilities 3,442-3,442 Total Liabilities $ 45,709 $ - $ 45,709 Fund Balances: Nonspendable $ 1,753 $ - $ 1,753 Restricted for: Food service 140, ,876 Capital projects - 82,991 82,991 Total Fund Balances $ 142,629 $ 82,991 $ 225,620 TOTAL LIABILITIES AND FUND BALANCES $ 188,338 $ 82,991 $ 271,329 30

44 Revenues: Local sources: NONMAJOR GOVERNMENTAL FUNDS Combining Statement of Revenues, Expenditures, and Changes in Fund Balances For the Year Ended June 30, 2017 Total Food 2012 Capital Nonmajor Service Projects Governmental Fund Fund Funds Charges for services $ 25,957 $ - $ 25,957 Interest State sources 25,772-25,772 Federal sources 582, ,637 Total Revenues $ 634,486 $ - $ 634,486 Expenditures: Current: Salaries $ 163,038 $ - $ 163,038 Benefits 73,933-73,933 Purchased services 25,611-25,611 Food 111, ,067 Supplies and materials 245,844 2, ,651 Capital outlay - 21,197 21,197 Total Expenditures $ 619,493 $ 24,004 $ 643,497 Net Change in Fund Balances $ 14,993 $ (24,004) $ (9,011) Fund Balances, Beginning of Year 127, , ,631 FUND BALANCES, END OF YEAR $ 142,629 $ 82,991 $ 225,620 31

45 GENERAL FUND Schedule of Revenues - Budget and Actual For the Year Ended June 30, 2017 With Comparative Totals for the Year Ended June 30, 2016 Variance Positive 2016 Budget Actual (Negative) Actual Local Sources: Property taxes $ 483,098 $ 483,098 $ - $ 480,827 Interest 1, (49) 746 Transportation 6,500 - (6,500) 4,305 Student activities 14,738 13,283 (1,455) 20,705 Other local revenue 24,542 51,270 26,728 20,245 Total Local Sources $ 529,878 $ 548,602 $ 18,724 $ 526,828 State Sources: Prop. A Obligation $ 3,167,272 $ 3,173,216 $ 5,944 $ 3,144,166 At-risk 623, ,016 53, ,775 Discretionary payment 2,266,063 2,528, ,868 2,414,356 Special education ,571 School readiness 111, ,054 73, ,244 State other 1,013, ,179 (367,366) 604,879 State headlee data collection 20,906 20,903 (3) 20,650 Total State Sources $ 7,202,397 $ 7,231,299 $ 28,902 $ 6,990,641 Federal Sources: Title I $ 765,631 $ 423,397 $ (342,234) $ 557,162 Title I - Migrant 633, ,185 (63,346) 552,675 Title IIA 54,005 38,846 (15,159) 34,708 Title III 111,641 13,429 (98,212) 10,470 Medicaid outreach - 2,808 2,808 2,090 Other 4,400 8,682 4,282 3,770 Total Federal Revenue $ 1,569,208 $ 1,057,347 $ (511,861) $ 1,160,875 TOTAL REVENUES $ 9,301,483 $ 8,837,248 $ (464,235) $ 8,678,344 32

46 Instruction Basic Programs Elementary: GENERAL FUND Schedule of Expenditures - Budget and Actual For the Year Ended June 30, 2017 With Comparative Totals for the Year Ended June 30, 2016 Variance Positive 2016 Budget Actual (Negative) Actual Salaries $ 1,100,583 $ 1,042,951 $ 57,632 $ 1,011,409 Benefits 807, ,436 9, ,071 Purchased services 25,700 29,458 (3,758) 22,714 Supplies and materials 42,262 48,681 (6,419) 60,153 Total Elementary $ 1,975,991 $ 1,919,526 $ 56,465 $ 1,886,347 Middle School: Salaries $ 478,472 $ 571,215 $ (92,743) $ 495,867 Benefits 301, ,949 (99,920) 310,553 Purchased services 23,318 24,977 (1,659) 17,765 Supplies and materials 8,195 7, ,519 Other (85) 1,000 Total Middle School $ 811,614 $ 1,005,345 $ (193,731) $ 833,704 High School: Salaries $ 711,381 $ 671,525 $ 39,856 $ 765,605 Benefits 512, , ,259 Purchased services 57,228 59,328 (2,100) 35,982 Supplies and materials 21,484 33,240 (11,756) 15,326 Capital outlay 1,445-1,445 - Payments to other governments 37,114 37,114-35,450 Other 5,928 5,928-1,874 Total High School $ 1,347,344 $ 1,319,253 $ 28,091 $ 1,389,496 Preschool: Salaries $ 110,075 $ 111,290 $ (1,215) $ 100,796 Benefits 67,037 75,908 (8,871) 59,114 Purchased services (33) 126 Supplies and materials 8,828 1,433 7,395 4,892 Capital outlay ,423 Other 8,492-8,492 - Total Preschool $ 196,152 $ 189,584 $ 6,568 $ 190,351 33

47 GENERAL FUND Schedule of Expenditures - Budget and Actual For the Year Ended June 30, 2017 With Comparative Totals for the Year Ended June 30, 2016 Variance Positive 2016 Budget Actual (Negative) Actual Instruction - Continued Basic Programs - Continued Summer School: Salaries $ - $ 26,416 $ (26,416) $ 5,428 Benefits (119) 1,730 Added Needs Total Summer School $ - $ 26,535 $ (26,535) $ 7,158 Total Basic Programs $ 4,331,101 $ 4,460,243 $ (129,142) $ 4,307,056 Special Education: Salaries $ 210,196 $ 152,351 $ 57,845 $ 157,069 Benefits 121, ,434 9,004 93,589 Purchased services 1,385 1,458 (73) 552 Supplies and materials Payments to other governments 8,404 8,404-1,014 Other 4,454-4,454 - Total Special Education $ 346,095 $ 274,865 $ 71,230 $ 252,850 Compensatory Education: Salaries $ 900,655 $ 591,444 $ 309,211 $ 531,536 Benefits 453, , , ,012 Purchased services 159,912 31, ,631 24,959 Supplies and materials 447, , ,789 37,836 Other 27,500-27,500 - Total Compensatory Education $ 1,989,203 $ 1,018,475 $ 970,728 $ 856,343 Total Added Needs $ 2,335,298 $ 1,293,340 $ 1,041,958 $ 1,109,193 Total Instruction $ 6,666,399 $ 5,753,583 $ 912,816 $ 5,416,249 Supporting Services Pupil Services: Salaries $ 80,979 $ 116,191 $ (35,212) $ 135,553 Benefits 44,179 64,234 (20,055) 72,530 Purchased services 2,000 61,956 (59,956) 1,367 Supplies and materials 600 4,290 (3,690) 1,580 Total Pupil Services $ 127,758 $ 246,671 $ (118,913) $ 211,030 34

48 Supporting Services - Continued Instructional Staff: GENERAL FUND Schedule of Expenditures - Budget and Actual For the Year Ended June 30, 2017 With Comparative Totals for the Year Ended June 30, 2016 Variance Positive 2016 Budget Actual (Negative) Actual Salaries $ 67,179 $ 139,453 $ (72,274) $ 222,597 Benefits 44, ,825 (61,339) 110,415 Purchased services ,986 (49,366) 30,323 Supplies and materials 51,643 22,407 29,236 21,249 Capital outlay ,111 Other Total Instructional Staff $ 163,928 $ 317,671 $ (153,743) $ 391,346 General Administration: Salaries $ 150,177 $ 142,491 $ 7,686 $ 140,108 Benefits 30,203 51,182 (20,979) 40,621 Purchased services 7,550 87,498 (79,948) 79,019 Supplies and materials 7,203 7,977 (774) 8,504 Other 83,354 6,965 76,389 1,857 Total General Administration $ 278,487 $ 296,113 $ (17,626) $ 270,109 School Administration: Salaries $ 328,251 $ 348,188 $ (19,937) $ 290,537 Benefits 210, ,508 (22,329) 187,996 Purchased services 8,539 10,471 (1,932) 3,992 Supplies and materials 4,941 6,239 (1,298) 11,177 Capital outlay ,541 Other 1,619 1,725 (106) 1,570 Total School Administration $ 553,529 $ 599,131 $ (45,602) $ 500,813 Business Services: Salaries $ 74,224 $ 72,770 $ 1,454 $ 63,906 Benefits 41,257 46,528 (5,271) 26,102 Purchased services 55,621 49,673 5,948 53,886 Supplies and materials 3,000 2, ,203 Other 9,146 9,249 (103) 6,540 Total Business Services $ 183,248 $ 181,170 $ 2,078 $ 156,637 35

49 Supporting Services - Continued Operations and Maintenance: GENERAL FUND Schedule of Expenditures - Budget and Actual For the Year Ended June 30, 2017 With Comparative Totals for the Year Ended June 30, 2016 Variance Positive 2016 Budget Actual (Negative) Actual Salaries $ 176,526 $ 197,691 $ (21,165) $ 107,413 Benefits 91, ,363 (9,625) 60,260 Purchased services 224, ,019 56, ,409 Supplies and materials 162, ,754 (3,754) 153,060 Capital outlay 38,463-38,463 30,947 Other Transportation: Total Operations and Maintenance $ 693,128 $ 632,827 $ 60,301 $ 608,089 Salaries $ 326,200 $ 352,405 $ (26,205) $ 305,401 Benefits 144, ,731 (29,171) 130,103 Purchased services 64,678 81,794 (17,116) 67,943 Supplies and materials 83,645 97,566 (13,921) 86,302 Other 1,160 1,717 (557) 1,203 Central Services: Total Transportation $ 620,243 $ 707,213 $ (86,970) $ 590,952 Salaries $ 63,874 $ 24,013 $ 39,861 $ 55,569 Benefits 42,968 40,400 2,568 44,955 Purchased services 38, ,085 (74,782) 34,476 Supplies and materials 800 2,778 (1,978) 2,755 Capital outlay - 49,840 (49,840) - Total Central Services $ 145,945 $ 230,116 $ (84,171) $ 137,755 Other Supporting Services: Athletic activities Salaries $ 148,461 $ 153,665 $ (5,204) $ 185,242 Benefits 64,334 60,831 3,503 78,058 Purchased services 65,653 53,404 12,249 51,961 Supplies and materials 53,324 52, ,789 Other 3,685 4,043 (358) 2,360 Total Athletic Activities $ 335,457 $ 324,741 $ 10,716 $ 366,410 36

50 GENERAL FUND Schedule of Expenditures - Budget and Actual For the Year Ended June 30, 2017 With Comparative Totals for the Year Ended June 30, 2016 Variance Positive 2016 Budget Actual (Negative) Actual Supporting Services - Continued Other Supporting Services - Continued: Other support Salaries $ - $ 18,344 $ (18,344) $ 21,112 Benefits - 7,849 (7,849) 7,972 Total Other Support $ - $ 26,193 $ (26,193) $ 29,084 Total Other Supporting Services $ 335,457 $ 350,934 $ (15,477) $ 395,494 Total Supporting Services $ 3,101,723 $ 3,561,846 $ (460,123) $ 3,262,225 Community Activities $ 5,107 $ 33,302 $ (28,195) $ 20,322 Payment to Other Governments $ - $ 10,309 $ (10,309) $ 33,209 TOTAL EXPENDITURES $ 9,773,229 $ 9,359,040 $ 414,189 $ 8,732,005 37

51 DEBT SERVICE FUNDS Combining Balance Sheet June 30, QZAB Debt QZAB Debt Debt Retirement Retirement Retirement Fund Fund Fund Total Assets Cash $ 933,744 $ 373,333 $ 51,692 $ 1,358,769 TOTAL ASSETS $ 933,744 $ 373,333 $ 51,692 $ 1,358,769 Fund Balances Fund Balances: Restricted for: Debt service $ 933,744 $ 373,333 $ 51,692 $ 1,358,769 TOTAL FUND BALANCES $ 933,744 $ 373,333 $ 51,692 $ 1,358,769 38

52 Revenues: Local sources: DEBT SERVICE FUNDS Combining Statement of Revenues, Expenditures, and Changes in Fund Balances For the Year Ended June 30, QZAB Debt QZAB Debt Debt Retirement Retirement Retirement Fund Fund Fund Total Property taxes $ - $ - $ 331,273 $ 331,273 Interest 21, ,882 Total Revenues $ 21,780 $ - $ 331,375 $ 353,155 Expenditures: Principal repayment $ - $ - $ 280,000 $ 280,000 Interest and other costs ,484 52,484 Total Expenditures $ - $ - $ 332,484 $ 332,484 Excess (Deficiency) of Revenues Over (Under) Expenditures $ 21,780 $ - $ (1,109) $ 20,671 Other Financing Sources: Operating transfers in $ 82,831 $ 46,666 $ - $ 129,497 Operating transfers out Total Other Financing Sources $ 82,831 $ 46,666 $ - $ 129,497 Net Change in Fund Balance $ 104,611 $ 46,666 $ (1,109) $ 150,168 Fund Balances, Beginning of Year 829, ,667 52,801 1,208,601 FUND BALANCES, END OF YEAR $ 933,744 $ 373,333 $ 51,692 $ 1,358,769 39

53 Schedule of Interest and Principal Payments 2012 School Building and Site Bonds June 30, 2017 Year Ended Interest Interest Interest Principal Total June 30, Rate November 1 May 1 May 1 Payment % $ 24,388 $ 24,387 $ 290,000 $ 338, % 22,140 22, , , % 19,590 19, , , % 16,490 16, , , % 12,970 12, , , % 9,010 9, , , % 4,590 4, , ,180 $ 109,178 $ 109,177 $ 2,230,000 $ 2,448,355 40

54 December 12, 2017 INDEPENDENT AUDITOR S 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 To the Board of Education Eau Claire Public Schools Eau Claire, Michigan We have audited, in accordance with the 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, the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of Eau Claire Public Schools, as of and for the year ended June 30, 2017, and the related notes to the financial statements, which collectively comprise Eau Claire Public Schools basic financial statements and have issued our report thereon dated December 12, Internal Control over Financial Reporting In planning and performing our audit of the financial statements, we considered Eau Claire Public Schools internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of Eau Claire Public Schools internal control. Accordingly, we do not express an opinion on the effectiveness of Eau Claire Public Schools internal control. Our consideration of internal control was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that were not identified. However, as described in the accompanying schedule of findings and questioned costs, we identified certain deficiencies in internal control that we consider to be material weaknesses and significant deficiencies. 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. We consider the deficiencies described in the accompanying schedule of findings and questioned costs to be material weaknesses, and A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. We consider the deficiencies described in the accompanying schedule of findings and questioned costs to be significant deficiencies,

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56 December 12, 2017 INDEPENDENT AUDITOR S REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY THE UNIFORM GUIDANCE To the Board of Education Eau Claire Public Schools Eau Claire, Michigan Report on Compliance for Each Major Federal Program We have audited Eau Claire Public Schools compliance with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on each of Eau Claire Public Schools major federal programs for the year ended June 30, Eau Claire Public Schools major federal programs are identified in the summary of auditor s results section of the accompanying schedule of findings and questioned costs. Management s Responsibility Management is responsible for compliance with federal statutes, regulations, and the terms and conditions of its federal awards applicable to its federal programs. Auditor s Responsibility Our responsibility is to express an opinion on compliance for each of Eau Claire Public Schools major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Those standards and the Uniform Guidance require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about Eau Claire Public Schools compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of Eau Claire Public Schools compliance. Opinion on Each Major Federal Program In our opinion, Eau Claire Public Schools complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended June 30,

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