Del Norte County Schools Del Norte County Crescent City, California Report on Audit June 30, 2015

Transcription

1 Del Norte County Crescent City, California Report on Audit June 30, 2015

2 Table of Contents June 30, 2015 FINANCIAL SECTION Independent Auditors Report.. 1 Management s Discussion and Analysis.. 4 Basic Financial Statements: District -Wide Financial Statements Statement of Net Position Statement of Activities. 13 Fund Financial Statements Governmental Funds: Balance Sheet Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position.. 15 Statement of Revenues, Expenditures, and Changes in Fund Balances.. 16 Reconciliation of the Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances to the Statement of Activities. 17 Proprietary Funds: Statement of Fund Net Position Statement of Revenues, Expenditures, and Changes in Fund Net Position. 19 Statement of Cash Flows.. 20 Fiduciary Funds: Statement of Fiduciary Net Position and Changes in Fiduciary Net Position. 21 Notes to Financial Statements.. 22 REQUIRED SUPPLEMENTARY INFORMATION Budgetary Comparison Schedule General Fund Budgetary Comparison Schedule County School Service Fund Schedule of Other Postemployment Benefits (OPEB) Funding Progress 52 Schedule of Proportionate Share of the Net Pension Liability 53 Schedule of Pension Contributions.. 54 SUPPLEMENTARY INFORMATION Local Education Agency Organization Structure. 55 Schedule of Average Daily Attendance: Del Norte County Unified District.. 56 Del Norte County Office of Education 57 Castle Rock Charter School. 58 Schedule of Instructional Time. 59 Schedule of Financial Trends and Analysis: Del Norte County Unified District.. 60 Del Norte County Office of Education 61 Reconciliation of Annual Financial and Budget Report with Audited Financial Statements.. 62

3 Table of Contents June 30, 2015 SUPPLEMENTARY INFORMATION, Continued Combining Statements: Governmental Funds Combining Balance Sheet. 63 Governmental Funds Combining Statement of Revenues, Expenditures, and Changes in Fund Balances.. 64 Proprietary Funds Combining Balance Sheet Proprietary Funds Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Schedule of Charter Schools. 67 Schedule of Expenditures of Federal Awards: Del Norte County Unified District Del Norte County Office of Education 69 Note to Supplementary Information. 70 OTHER INDEPENDENT AUDITORS REPORTS Independent Auditors Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards.. 71 Independent Auditors Report on Compliance for Each Major Federal Program and on Internal Control Over Compliance Required by OMB Circular A Independent Auditors Report on State Compliance 75 SCHEDULE OF FINDINGS AND QUESTIONED COSTS Del Norte County Unified School District Section 1 Summary of Auditors Results.. 77 Section 2 Financial Statement Findings 78 Section 3 Federal Awards Findings and Questioned Costs Section 4 State Awards Findings and Questioned Costs Summary Schedule of Prior Audit Findings. 81 Del Norte County Office of Education Section 1 Summary of Auditors Results.. 82 Section 2 Financial Statement Findings 83 Section 3 Federal Awards Findings and Questioned Costs Section 4 State Awards Findings and Questioned Costs Summary Schedule of Prior Audit Findings. 86

4 FINANCIAL SECTION

5 Paul S. Messner, CPA Cindra J. Hadley, CPA James M. Quinn, CPA, CFE Certified Public Accountants INDEPENDENT AUDITORS REPORT Governing Board Crescent City, California Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the Del Norte County Unified School District, the Del Norte County Office of Education, and the Castle Rock Charter School (hereinafter referred to as Del Norte County Schools ), as of and for the year ended June 30, 2015, and the related notes to the financial statements, which collectively comprise 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. Auditors Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the Guide for Annual Audits of K-12 Local Education Agencies and State Compliance Reporting, issued by the California Education Audit Appeals Panel as regulations. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to 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 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 Silica Drive, Suite 101 * Victorville * California (760) * Fax (760) messnerandhadley.com

6 Governing Board 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 informati on of, as of June 30, 2015, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Emphasis of Matter Change in Accounting Principles As noted in Note 1 to the financial statements, changed its method of accounting for pensions as required by the provisions of GASB Accounting Standards No. 68 and 71. Our opinion is not modified with respect to that matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the required supplementary information, such as management s discussion and analysis on pages 4 through 11, the budgetary comparison information on pages 50 and 51, the Schedule of Other Postemployment Benefits (OPEB) Funding Progress on page 52, the Schedule of Proportionate Share of the Net Pension Liability on page 53, and the Schedule of Del Norte County Schools Pension Contributions on page 54 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 Del Norte County Schools basic financial statements. The accompanying supplementary information such as the Schedule of Expenditures of Federal Awards, as required by Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations and the other supplementary information as listed in the table of contents, are presented for purposes of additional analysis and are not a required part of the basic financial statements. The supplementary information listed in the table of contents is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the accompanying supplementary information is fairly stated, in all material respects, in relation to the basic financial statements as a whole

7 Governing Board Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 4, 2015, on our consideration of internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering internal control over financial reporting and compliance. Messner & Hadley, LLP Certified Public Accountants Victorville, California December 4,

8 DEL NORTE COUNTY OFFICE OF EDUCATION? DEL NORTE COUNTY UNIFIED JEFF HARRIS County and District Superintendent W. Washington Boulevard Crescent City, CA Office: (707) Fax: (707) EDUCATION CENTER 301 W. Washington Boulevard Crescent City, CA Web: (707) Board Members: Don McArthur Angela Greenough Frances Costello Judie Cordts Jamie Forkner Area 1 Area 2 Area 3 Area 4 Area 5 Our discussion and analysis of financial performance provides an overview of the financial activities for the fiscal year ended June 30, This analysis includes information regarding the Del Norte County Office of Education, the Del Norte Unified School District and Castle Rock Charter School. Where the analysis includes all three entities, they will be called. It should be read in conjunction with financial statements, which follow this section. FINANCIAL HIGHLIGHTS OF THE PAST YEAR o Total net position for was $25.2 million at June 30, This was a decrease of approximately $8.75 million over the prior year. o Overall governmental activities expenses were $48.7 million, and total governmenta l activities revenues were $48.8 million. o Beginning net assets were restated lower by $8.8 million to reflect the implementation of GASB No. 68. OVERVIEW OF THE FINANCIAL STATEMENTS This annual report consists of three parts Management s Discussion and Analysis (this section), the basic financial statements, and required supplementary information. The three sections together provide a comprehensive overview of Del Norte County Schools. The basic financial statements are comprised of two kinds of statements that present financial information from different perspectives: o Government -wide financial statements, present the financial picture of from the economic resources measurement focus using the accrual basis of accounting. These statements include all assets (including capital assets) of, as well as all liabilities (including long-term obligations). o Fund financial statements include statements for each of the three categories of activities: governmental, proprietary, and fiduciary. The Governmental Activities are prepared using the current financial resources measurement focus and modified accrual basis of accounting. The Proprietary Activities offer short and long-term financial information about the activities operated like businesses, such as food services. The Fiduciary Activities are prepared using the economic resources measurement focus and the accrual basis of accounting

9 Management s Discussion and Analysis June 30, 2015 The financial statements also include a Notes section that explains some of the information in the statements and provide more detailed data. The basic financial statements include a section of required supplementary information that provides budgetary comparisons. Annual Audit Report Management s Discussion and Analysis Basic Financial Statements Required Supplementary Information Government Wide Financial Statements Fund Financial Statements Reconciliation Financial Statements Notes to Financial Statements GOVERNMENT -WIDE STATEMENTS The government-wide statements report information about as a whole using accounting methods similar to those used by private-sector companies. The statement of net position includes all of the government s assets and liabilities. All of the current year s revenues and expenses are accounted for in the statement of activities, regardless of when cash is received or paid. The two government-wide statements report net position and how they have changed. Net position the difference between assets and deferred outflows of resources and liabilities and deferred inflows of resources is one way to measure financial health or position. Over time, increases or decreases in Del Norte County Schools net position is an indicator of whether its financial health is improving or deteriorating, respectively. For the fiscal year just ended the net position increased by $72,541. To assess the overall health of Del Norte County Schools, one needs to consider additional non-financial factors such as changes in enrollment, changes in the property tax base, changes in program funding by the Federal and State governments, and condition of facilities. Please refer to the financial analysis section later in this report. The government-wide financial statements of include governmental activities. All of Del Norte County Schools basic services are included here, such as regular education, food service, maintenance and general administration. Revenue limit funding and federal and state grants finance most of these activities

10 Management s Discussion and Analysis June 30, 2015 In the government-wide financial statements, activities are divided into two categories: o Governmental Activities Most of the basic services are included here, such as regular and special education, pupil support services, transportation, maintenance, and administration. Revenue limit funding (including local property taxes) and federal and state categorical/grant funds finance most of these activities. o Business -type Activities Fees are charged to help cover the costs of certain services provided. Food Services are the only activity included here. FINANCIAL ANALYSIS OF THE ENTITY AS A WHOLE Net Position combined net position, as of June 30, 2015, was $25,181,768, reflecting a decrease of 25.79% since June 30, Of this amount, ($8,735,147) was unrestricted. Restricted net position is reported separately to show legal constraints from debt covenants and legislation that limit the governing board s ability to use those assets for day-today operations. Governmental Activities Net Change Assets Current and other assets $ 14,788,858 $ 17,036,985 $ (2,248,127) Capital assets 37,570,843 37,033, ,665 Total Assets 52,359,701 54,070,163 (1,710,462) Deferred Outflows of Resources 2,017, ,255 1,690,419 Liabilities Current liabilities 1,811,097 2,728,970 (917,873) Long-term obligations 24,124,619 17,735,786 6,388,833 Total Liabilities 25,935,716 20,464,756 5,470,960 Deferred Inflows of Resources 3,259,891-3,259,891 Net Position Invested in capital assets, net of related debt 28,978,507 29,757,025 (778,518) Restricted 4,938,408 5,252,335 (313,927) Unrestricted (8,735,147) (1,076,698) (7,658,449) Total Net Position $ 25,181,768 $ 33,932,662 $ (8,750,894) - 6 -

11 Management s Discussion and Analysis June 30, 2015 Change in Net Position Governmental Activities total revenues were $48.8 million. The majority of the revenue comes from Local Control Funding Formula revenue and property taxes (75%). Federal and state aid for specific programs accounted for another 22% of total revenues. Miscellaneous local sources accounted for the remaining 3%. The total cost of all programs and services was $48.7 million. expenses are predominately related to educating and caring for students (66%). Pupil Services (including transportation and food) account for 8% of expenses. Administrative activities accounted for just 6% of total costs. Plant Services, which represent the facilities maintenance and operation costs, account for 10% of all costs. The remaining expenses were for ancillary services, community services, transfers between agencies, interest on long-term debt, other outgo, and unallocated depreciation (10%). Governmental Activities Net Change Revenues Program revenues: Charges for services $ 144,258 $ 181,513 $ (37,255) Operating grants and contributions 10,846,850 11,470,197 (623,347) Capital grants and contributions 1,884 1, General revenues: Federal and State aid not restricted 28,273,321 24,839,624 3,433,697 Property taxes 8,079,919 7,433, ,635 Other general revenues 1,456,109 3,234,518 (1,778,409) Total Revenues 48,802,341 47,160,650 1,641,691 Expenses Instruction-related 32,075,493 31,447, ,511 Student support services 3,828,861 3,897,143 (68,282) Administration 3,079,617 2,512, ,434 Maintenance and operations 4,928,172 4,815, ,999 Other 4,817,657 5,852,729 (1,035,072) Total Expenses 48,729,800 48,525, ,590 Change in Net Position 72,541 (1,364,560) 1,437,101 Net Position - Beginning 33,932,662 35,529,993 (1,597,331) Adjustments for restatements (8,823,435) (232,771) (8,590,664) Net Position - Ending $ 25,181,768 $ 33,932,662 $ (8,750,894) - 7 -

12 Management s Discussion and Analysis June 30, 2015 Governmental Activities As reported in the Statement of Activities on page 13, the cost of all of our governmental activities was $48,729,800 and $48,525,210 for June 30, 2015 and June 30, 2014, respectively. However, the amount that our taxpayers ultimately financed for these activities through local taxes was only $37,736,808 and $36,871,986, respectively, because a portion of the cost was paid by those who benefited from the programs ($144,258 and $181,513, respectively) or by other governments and organizations who subsidized certain programs with grants and contributions ($10,848,734 and $11,471,711, respectively). The table below reflects the net cost of each of the District s largest functions instruction, student support, administration, maintenance and operations, and other costs. Included in this table are each program s net cost (total cost less revenues generated by the activities). As discussed above, net cost shows the financial burden placed on the District s taxpayers by each of these functions. Providing this information allows our citizens to consider the cost of each function in comparison to the benefits they believe are provided by that function. Total Cost of Services Net Cost of Services Instruction $ 27,562,551 $ 27,225,411 $ 20,888,957 $ 19,797,548 Instruction related 4,512,942 4,222,571 3,625,485 3,363,270 Pupil services 3,828,861 3,897,143 2,647,971 2,416,773 Administration 3,079,617 2,512,183 2,765,037 2,170,306 Maintenance and operations 4,928,172 4,815,173 4,924,364 4,795,920 Other 2,892,815 4,218,850 2,836,638 4,212,748 Food service 1,848,765 1,565,141 46, ,830 Enterprise services 76,077 68,738 1,920 4,591 Totals $ 48,729,800 $ 48,525,210 $ 37,736,808 $ 36,871,986 FINANCIAL ANALYSIS OF DEL NORTE COUNTY SCHOOLS FUNDS Fund Financial Statements The fund financial statements provide more detailed information about governmental funds, not as a whole. Funds are accounting devices that uses to keep track of specific sources of funding and spending for particular programs. Some funds are required to be established by State law and by bond covenants. The Board of Trustees establishes other funds to control and manage money for particular purposes or to show that is meeting legal responsibilities for using certain revenues. Del Norte County Schools has three types of funds: o Governmental funds All of basic services are included in governmental funds, which generally focus on (1) how cash and other financial assets that can readily be converted to cash flow in and out, and (2) the balances left at year-end that are available for spending. Consequently, the governmental funds statements provide a detailed short-term view that helps you determine whether there are more or fewer financial resources that can be spent in the near future to finance programs. Because this information does not encompass the additional long-term focus of the government wide statements, we provide additional information following the governmental funds statements that explains the relationship (or differences) between them

13 Management s Discussion and Analysis June 30, 2015 o Proprietary funds Services for which fees charged are generally reported in proprietary funds. Proprietary funds are reported in the same way as the government-wide statements. There are two types: The enterprise funds statements are the same as the business-type activities, but provide more detail and additional information, such as cash flows. utilizes an enterprise fund for its Food Services operation. The internal service funds are used to report activities that provide supplies and services for Del Norte County Schools governmental activities. currently has two internal service funds: the Employee Benefits Fund and the County School Supply Fund. o Fiduciary funds is the trustee, or fiduciary, for assets that are held in trust for certain specific uses or users. The Retiree Medical Fund and the Scholarship Fund are fiduciary funds. Del Norte County Schools is responsible for ensuring that the assets reported in these funds are used only for their intended purposes and by those to whom the assets belong. We exclude these activities from the district-wide financial statements because cannot use these assets to finance its operations. The financial performance of as a whole is reflected in its governmental funds as well. As completed the school year, the governmental funds reported a combined fund balance of $12,885,867 which is a decrease of $1,444,113 from last year. General Fund had $249,338 more in expenditures than operating revenues for the year ended June 30, Balances and Activity July 01, 2014 Revenues Expenditures June 30, 2015 General $ 4,782,682 $ 37,159,677 $ 37,409,015 $ 4,533,344 County School Service 547,860 4,553,745 4,286, ,669 Building 7,900,331 34,285 1,773,237 6,161,379 County School Facilities (412,182) 1,884 18,995 (429,293) Other 1,511,289 5,747,012 5,452,533 1,805,768 Totals $ 14,329,980 $ 47,496,603 $ 48,940,716 $ 12,885, GENERAL FUND BUDGETARY HIGHLIGHTS budget is prepared in accordance with California law and is based on the modified accrual basis of accounting. Over the course of the year, revises its budget based on updated financial information. The original budget, approved at the end of June for July 1, is based on May Revise figures and updated 45 days after the State approves its final budget. In addition, revises its budget at First and Second Interim. The original budgets, presented on pages 50 and 51, include only new revenues for

14 Management s Discussion and Analysis June 30, 2015 The following were the major changes between the original and final budget: DISTRICT : Revenues that were received during the year not included in the originally adopted budget LCFF revenues of $205,236, Federal revenues of $417,021, State revenues of $490,592 and Local revenues of $608,443. Expenditures that were appropriated during the year not included in the originally adopted budget Salaries and Benefits of $767,665, Books and Supplies of $631,105, Services and Other Operating Expenditures of $1,048,77 8, and Other Outgo of $112,524. Actual revenues available were $697,04 8 below final budgeted amounts and actual expenditures were $2,533,213 below final budgeted amounts. COUNTY OFFICE: Revenues that were received during the year not included in the originally adopted budget LCFF revenues of $43,075, Federal and State revenues of $180,992, and Local revenues of $238,306. Expenditures that were appropriated during the year not included in the originally adopted budget Books and Supplies of $194,261, and Services and Other Operating Expenditures of $183,172. Actual revenues available were $201,183 above final budgeted amounts and actual expenditures were $262,791 below final budgeted amounts. CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets At June 30, 2015, had invested $37.6 million, net of accumulated depreciation, in a broad range of capital assets, including land, construction in progress, land improvements, buildings and improvements, equipment and vehicles. Governmental Activities Net Change Land and construction in progress $ 1,627,275 $ 1,496,432 $ 130,843 Buildings and improvements 35,229,726 34,660, ,687 Equipment 713, ,707 (162,865) Totals $ 37,570,843 $ 37,033,178 $ 537,665 purchased $130,843 in Construction in Progress, $1,679,549 in Buildings and Improvements, and $49,054 in Furniture and Equipment, and had no disposals of fixed assets. Depreciation expense of $1,321,78 1 was recorded during the year

15 Management s Discussion and Analysis June 30, 2015 Long-Term Debt At year end, had $24.1 million in debt, consisting of general obligation bonds, capital lease payables, early retirement plans, post-employment benefits, net pension liability, and compensated absence accruals. Governmental Activities Net Change General obligation bonds $ 14,753,714 $ 15,176,484 $ (422,770) Accumulated vacation - net 311, ,570 (21,140) SERP 21, ,438 (168,438) Net pension liability 6,943,017 10,905,543 (3,962,526) OPEB 2,095,458 2,037,294 58,164 Totals $ 24,124,619 $ 28,641,329 $ (4,516,710) ECONOMIC FACTORS BEARING ON THE DISTRICT S FUTURE The State s economic situation remains a significant factor impacting future as a majority of total General Fund revenues for were from State sources or formulas. Proposition 30 was passed by the electorate in November 2012 and temporarily increased sales taxes through 2016 and income taxes through The ability of the State to maintain the level of education funding once these taxes expire is of concern. Compliance costs associated with the Affordable Care Act and California s new mandatory sick leave law will continue to be determined and are projected to increase expenditures in the future. The Local Control Funding Formula (LCFF), which replaced Revenue Limits and most state categorical programs, has increased revenues and has allowed to start restoring some programs that were cut during the recession. It is still too early to determine if the LCFF funding will continue to increase funding all the way to the target level, which will bring back to the funding levels of It is anticipated that the increased revenues from the LCFF and the corresponding expenditures directed by the Local Control Accountability Plan (LCAP) will result in increased targeted expenditures in areas of personnel, materials and services. The majority of increased revenue will be supplemental and concentration funding and the expenditures are directed by the LCAP, and not generally considered unrestricted funding. Student enrollment and attendance are primary factors in the computation of most funding formulas for public schools in the State of California. Enrollment is expected to remain steady in fiscal year The future predictions require management to plan carefully and prudently to provide the resources to meet student needs over the next several years. CONTACTING DEL NORTE COUNTY SCHOOLS FINANCIAL MANAGEMENT This financial report is designed to provide our citizens, taxpayers, parents, participants, investors and creditors with a general overview of finances and to demonstrate accountability for the money it receives. If you have any questions about this report, or need additional financial information, contact Jeff Napier, Assistant Superintendent in the Business Office, Del Norte Unified School District, 301 W. Washington Blvd., Crescent City, CA

16 Statement of Net Position June 30, 2015 Governmental Business-Type Activities Activities Total ASSETS Deposits and investments $ 11,232,119 $ - $ 11,232,119 Receivables 3,206, ,533 3,464,440 Prepaid expenses 16,212-16,212 Stores inventories 76,087-76,087 Capital assets not depreciated 1,627,275-1,627,275 Capital assets, net of accumulated depreciation 35,943,568-35,943,568 Total Assets 52,102, ,533 52,359,701 DEFERRED OUTFLOWS OF RESOURCES Pension related deferred outflows 2,017,674-2,017,674 LIABILITIES Overdrafts 292, , ,576 Accounts payable 972,069 3, ,968 Interest payable 226, ,064 Unearned revenue 71,489-71,489 Long-term liabilities: Due within one year 429, ,000 Due in more than one year 23,695,619-23,695,619 Total Liabilities 25,686, ,126 25,935,716 DEFERRED INFLOWS OF RESOURCES Pension related deferred inflows 3,259,891-3,259,891 NET POSITION Invested in capital assets, net of related debt 28,978,507-28,978,507 Restricted for: Debt service 575, ,579 Categorical programs 4,362,829-4,362,829 Other restrictions Unrestricted (8,743,554) 8,407 (8,735,147) Total Net Position $ 25,173,361 $ 8,407 $ 25,181,768 The accompanying notes are an integral part of these financial statements

17 Statement of Activities For the Year Ended June 30, 2015 Governmental Activities: Charges for Operating Capital Services and Grants and Grants and Governmental Business-Type Functions/Programs Expenses Sales Contributions Contributions Activities Activities Total Instruction $ 27,562,550 $ - $ 6,671,709 $ 1,884 $ (20,888,957) $ - $ (20,888,957) Instruction-related activities: Supervision of instruction 2,637, ,083 - (2,091,391) - (2,091,391) Instructional library, media, and technology 273,634-78,992 - (194,642) - (194,642) School site administration 1,601, ,382 - (1,339,452) - (1,339,452) Pupil services: Home-to-school transportation 1,350, (1,350,982) - (1,350,982) Food services 30, (30,764) - (30,764) All other pupil services 2,446,979-1,180,754 - (1,266,225) - (1,266,225) Administration: Data processing 525,601-16,580 - (509,021) - (509,021) All other administration 2,554, ,000 - (2,256,016) - (2,256,016) Plant services 4,928,172-3,808 - (4,924,364) - (4,924,364) Ancillary services 17, (17,401) - (17,401) Community services 12, (12,386) - (12,386) Enterprise services (189,064) , ,064 Interest on long-term obligations 990, (990,181) - (990,181) Other outgo 740,131-56,178 - (683,953) - (683,953) Depreciation (unallocated) 1,321, (1,321,781) - (1,321,781) Total Governmental Activities 46,804,958-9,114,622 1,884 (37,688,452) - (37,688,452) Business-Type Activities Program Revenues Net (Expenses) Revenues and Changes in Net Position Food services 1,848, ,709 1,663,620 - (46,436) (46,436) Enterprise services 76,077 5,549 68,608 - (1,920) (1,920) Total Business-Type Activities 1,924, ,258 1,732,228 - (48,356) (48,356) Total District $ 48,729,800 $ 144,258 $ 10,846,850 $ 1,884 General revenues and subventions: Property taxes, levied for general purposes 6,966,058-6,966,058 Property taxes, levied for debt service 967, ,426 Taxes levied for other specific purposes 146, ,435 Federal and State aid not restricted to specific purposes 28,273,321-28,273,321 Interest and investment earnings 42,550-42,550 Interagency revenues 644, ,892 Miscellaneous 782,784 12, ,519 Internal transfers (67,117) 40,265 (26,852) Subtotal, General Revenues 37,756,349 53,000 37,809,349 Change in Net Position 67,897 4,644 72,541 Net Position - Beginning, as originally reported 33,928,899 3,763 33,932,662 Adjustments for restatements (8,823,435) - (8,823,435) Net Position - Beginning, as restated 25,105,464 3,763 25,109,227 Net Position - Ending $ 25,173,361 $ 8,407 $ 25,181,768 The accompanying notes are an integral part of these financial statements

18 Governmental Funds Balance Sheet June 30, 2015 ASSETS County School County School Non-Major Total General Service Building Facilities Governmental Governmental Fund Fund Fund Fund Funds Funds Deposits and investments $ 2,442,137 $ 701,478 $ 6,161,416 $ - $ 1,829,892 $ 11,134,923 Receivables 2,687, , ,401 3,058,779 Total Assets $ 5,129,797 $ 957,196 $ 6,161,416 $ - $ 1,945,293 $ 14,193,702 LIABILITIES AND FUND BALANCES Liabilities: Overdrafts $ - $ - $ - $ 219,053 $ 73,296 $ 292,349 Accounts payable 560, , ,240 66, ,997 Unearned revenue 35,744 35, ,489 Fund Balances: Total Liabilities 596, , , ,525 1,307,835 Nonspendable: Revolving cash 4, ,000 Restricted 529,873 75,769 6,161, ,643 7,621,664 Assigned 2,204, , ,222 3,594,187 Unassigned 1,795, ,161 - (429,293) (3,097) 1,666,016 Total Fund Balances 4,533, ,669 6,161,379 (429,293) 1,805,768 12,885,867 Total Liabilities and Fund Balances $ 5,129,797 $ 957,196 $ 6,161,416 $ - $ 1,945,293 $ 14,193,702 The accompanying notes are an integral part of these financial statements

19 Governmental Funds Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position June 30, 2015 Total Fund Balance - Governmental Funds $ 12,885,867 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, therefore, are not reported as assets in governmental funds. The cost of capital assets is $ 68,925,244 Accumulated depreciation is (31,354,401) Net Capital Assets 37,570,843 In governmental funds, debt issuance costs are recognized as expenditures in the period they are incurred. In the government-wide statements, debt issuance costs are amortized over the life of the debt. 16,212 Deferred outflows and inflows of resources relating to penions: In governmental funds, deferred outflows and inflows of resources relating to pensions are not reported because they are applicable to future periods. In the statement of net position, deferred outflows and inflows of resources relating to pensions are reported Deferred outflows of resources relating to pensions 2,017,674 Deferred inlows of resources relating to pensions (3,259,891) In governmental funds, unmatured interest on long-term obligations is recognized in the period when it is due. On the government-wide financial statements, unmatured interest on long-term obligations is recognized when it is incurred. (226,063) An internal service fund is used by the ' management to charge the costs of the workers' compensation insurance program to the individual funds. The assets and liabilities of the internal service fund are included with governmental activities. 293,338 Long-term obligations, including bonds payable, are not due and payable in the current period and, therefore, are not reported as liabilities in the funds. Long-term obligations at year-end consist of: General obligation bonds (14,753,714) Compensated absences (vacations) (311,430) Net pension liability (6,943,017) Supplemental early retirement incentive (21,000) Other postemployment benefits (OPEB) (2,095,458) Total Long-Term Obligations (24,124,619) Total Net Position - Governmental Activities $ 25,173,361 The accompanying notes are an integral part of these financial statements

20 Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances For the Year Ended June 30, 2015 REVENUES County School County School Non-Major Total General Service Building Facilities Governmental Governmental Fund Fund Fund Fund Funds Funds LCFF sources $ 25,791,313 $ 3,199,962 $ - $ - $ 3,219,828 $ 32,211,103 Federal sources 4,684, , ,222 6,022,247 Other State sources 3,059, , ,709 4,061,347 Other local sources 3,302, ,956 34,285 1,884 1,039,385 4,645,279 EXPENDITURES Total Revenues 36,838,092 4,468,571 34,285 1,884 5,597,144 46,939,976 Current Instruction 23,146,457 2,047, ,833,756 28,027,390 Instruction-related activities: Supervision of instruction 1,863, , ,344 2,670,379 Instructional library, media and technology 222,542 54, ,048 School site administration 1,322, , ,185 1,621,818 Pupil services: Home-to-school transportation 1,315, ,315,933 Food services 54, ,351 All other pupil services 1,687, , ,438 2,477,507 Administration: Data processing 42, , ,158 All other administration 1,970, , ,851 2,586,828 Plant services 4,960,847 28, ,989,655 Facility acquisition and construction 74,018-1,769,387 16,041-1,859,446 Ancillary services 69, ,521 Community services 12, ,541 Other outgo: Transfers between agencies 171,853 45, , ,865 Debt service-principal , ,000 Debt service-interest and other - - 3, , ,896 Total Expenditures 36,915,325 4,138,433 1,773,237 16,041 5,312,300 48,155,336 Excess (Deficiency) of Revenues Over Expenditures (77,233) 330,138 (1,738,952) (14,157) 284,844 (1,215,360) Other Financing Sources (Uses) Transfers in 321,585 85, , ,627 Transfers out (493,690) (26,854) - - (103,202) (623,746) Other uses - (121,649) - (2,954) (37,031) (161,634) Net Financing Sources (Uses) (172,105) (63,329) - (2,954) 9,635 (228,753) NET CHANGE IN FUND BALANCES (249,338) 266,809 (1,738,952) (17,111) 294,479 (1,444,113) Fund Balance - Beginning 4,782, ,860 7,900,331 (412,182) 1,511,289 14,329,980 Fund Balance - Ending $ 4,533,344 $ 814,669 $ 6,161,379 $ (429,293) 1,805,768 $ 12,885,867 The accompanying notes are an integral part of these financial statements

21 Governmental Funds Reconciliation of the Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances to the Statement of Activities For the Year Ended June 30, 2015 Total Net Change in Fund Balances - Governmental Funds $ (1,444,113) Amounts Reported for Governmental Activities in the Statement of Activities are Different Because: Capital outlays to purchase or build capital assets are reported in governmental funds as expenditures; however, for governmental activities, those costs are shown in the statement of net position and allocated over their estimated useful lives as annual depreciation expense in the statement of activities. This is the amount by which depreciation exceeds capital outlays in the period. Depreciation expense $ (1,321,781) Capital outlays 1,859,446 Net Expense Adjustment 537,665 In the statement of activities, certain operating expenses, such as compensated absences (vacations) and OPEB costs are measured by the amounts earned during the year. In the governmental funds, however, expenditures for these items are measured by the amount of financial resources used (essentially, the amounts actually paid). 131,414 In government funds, pension costs are recognized when employer contributions are made. In the statement of activities, pension costs are recognized on the accrual basis. The difference between the accrual-basis pension costs and actual employer contributions was: 638,201 Some expenses reported in the statement of activities do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds. Amortization of Bond Premiums 7,770 Amortization of bond insurance costs (705) Amortization of prepaid interest (327,255) Payment of principal on long-term obligations is an expenditure in the governmental funds, but it reduces long-term obligations in the statement of net position and does not affect the statement of 415,000 Two internal service funds are used by the ' management to charge the costs of the workers' compensation programs as well as inventoried goods to the individual funds. The net revenue of the internal service funds are reported with the governmental activities. 72,381 Interest on long-term obligations is recorded as an expenditure in the funds when it is due; however, in the statement of activities, interest expense is recognized as the interest accrues, regardless of when it is due. Accrued interest on bonds and other debt decreased by: 37,539 Change in Net Position of Governmental Activities $ 67,897 The accompanying notes are an integral part of these financial statements

22 Proprietary Funds Statement of Fund Net Position June 30, 2015 Business-Type Enterprise Warehouse Governmental Activities Internal Service Funds Cafeteria Revolving Self-Insurance Total ASSETS Current Assets Deposits and investments $ - $ 287 $ 96,909 $ 97,196 Receivables 257, , ,128 Stores inventories - 76,087-76,087 Total Assets 257,533 76, , ,411 LIABILITIES Current Liabilities Overdrafts 245, Accounts payable 3, ,787 28,073 Total Current Liabilities 249, ,787 28,073 NET POSITION Unrestricted 8,408 76, , ,338 Total Net Position $ 8,408 $ 76,088 $ 217,250 $ 293,338 The accompanying notes are an integral part of these financial statements

23 Proprietary Funds Statement of Revenues, Expenditures, and Changes in Fund Net Position For the Year Ended June 30, 2015 Governmental Activities Business-Type Internal Service Funds Enterprise Warehouse Cafeteria Revolving Self-Insurance Total OPERATING REVENUES Local and intermediate sources $ 188,467 $ 187,585 $ 6,059,364 $ 6,246,949 Total Operating Revenues 188, ,585 6,059,364 6,246,949 OPERATING EXPENSES Payroll costs 790,625 70,768-70,768 Supplies and materials 1,002, , ,655 Facility rental Other operating costs 131,029-5,965,051 5,965,051 Total Operating Expenses 1,924, ,423 5,965,051 6,201,474 Operating Income (Loss) (1,736,375) (48,838) 94,313 45,475 NONOPERATING REVENUES (EXPENSES) Interest income Transfers in 40,265 26,854-26,854 Grants 1,700, Total Nonoperating Revenues (Expenses) 1,741,019 26, ,906 Change in Net Position 4,644 (21,984) 94,365 72,381 Total Net Position - Beginning 3,764 98, , ,957 Total Net Position - Ending $ 8,408 $ 76,088 $ 217,250 $ 293,338 The accompanying notes are an integral part of these financial statements

24 Proprietary Funds Statement of Cash Flows For the Year Ended June 30, 2015 Governmental Activities Business-Type Internal Service Funds Enterprise Warehouse Cafeteria Revolving Self-Insurance Total Cash flows from operating activities Cash received from user charges $ 132,804 $ 187,585 $ - $ 187,585 Cash received from assessments made to other funds - - 6,240,303 6,240,303 Cash payments for insurance claims - - (5,937,262) (5,937,262) Cash payments to employees for services (790,625) (70,768) - (70,768) Cash payments to suppliers for goods and services (1,083,198) (156,358) - (156,358) Net cash provided by (used in) operating activities (1,741,019) (39,541) 303, ,500 Cash flows from non-capital financing activities Non-operating grants received 1,700, Interfund transfers 40,265 26,854-26,854 Net cash provided by (used in) non-capital financing activities 1,741,019 26,854-26,854 Cash flows from investing activities Interest received NET INCREASE/(DECREASE) IN CASH - (12,687) 303, ,406 CASH Beginning of year - 12,974 (206,184) (193,210) End of year $ - $ 287 $ 96,909 $ 97,196 Reconciliation of operating loss to cash used in operating activities Operating loss $ (1,736,375) $ (48,838) $ 94,313 $ 45,475 (Increase) decrease in accounts receivable (55,663) - 180, ,939 (Increase) decrease in inventory - 9,077-9,077 Increase (decrease) in accounts payable 1, ,789 28,009 Increase (decrease) in overdrafts 49, Net cash provided by (used in) operating activities $ (1,741,019) $ (39,541) $ 303,041 $ 263,500 The accompanying notes are an integral part of these financial statements

25 Fiduciary Funds Statement of Fiduciary Net Position and Statement of Changes in Fiduciary Net Position June 30, 2015 STATEMENT OF FIDUCIARY NET POSITION Trust Fund Scholarship Agency Funds Fund (ASBs) ASSETS Cash and cash equivalents $ 1,004,074 $ 178,756 Investments 901,348 TOTAL ASSETS $ 1,905,422 LIABILITIES Due to student groups $ 178,756 Restricted Net Position $ 1,905,422 STATEMENT OF CHANGES IN FIDUCIARY NET POSITION Trust Fund Scholarship Fund ADDITIONS Investment Earnings $ 339,802 Total Additions 339,802 DEDUCTIONS Change in value of investments 36,360 Benefits 267,159 Total Deductions 303,519 Change in Net Position 36,283 Net Position - Beginning 1,869,139 Net Position - Ending $ 1,905,422 The accompanying notes are an integral part of these financial statements

26 Notes to Financial Statements June 30, 2015 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Del Norte County Office of Education, the Del Norte County Unified District, and the Castle Rock Charter School (collectively referred to hereinafter as ) accounts for its financial transactions in accordance with policies and procedures of the Department of Education s California School Accounting Manual. The accounting policies of conform to generally accepted accounting principles as prescribed by the Governmental Accounting Standards Board (GASB) and the American Institute of Certified Public Accountants (AICPA). A. Financial Reporting Entity are a public educational agency operating under the applicable laws and regulations of the State of California. It is governed by a five member Board of Trustees (Board) elected by registered voters of Del Norte County Schools, which includes the entirety of Del Norte County. were unified in 1965 and serve students in grades K-12. A reporting entity is comprised of the primary government, component units, and other organizations that are included to ensure the financial statements are not misleading. The primary government of consists of all funds, departments, boards, and agencies that are not legally separate from. For Del Norte County Schools this includes general operations, food service, and student related activities. For the year ended June 30, 2015, implemented the provisions of GASB Statement No. 68, Accounting and Financial Reporting for Pensions, as amended by GASB Statement No. 71, Pension Transition for Contributi ons Made Subsequent to the Measurement Date. GASB Statements Nos. 68 and 71 establish standards for measuring and recognizing net pension liabilities, deferred outflows of resources, deferred inflows of resources, and expenses related to pension benefits provided through defined benefit pensions plans. In addition, Statement No. 68 requires disclosure of information related to pension benefits. B. Component Units evaluated whether any other entity should be included in these financial statements. The criteria for including organizations as component units within reporting entity, as set forth by GASB Statement No. 14, The Financial Reporting Entity, include whether: The organization is legally separate (can sue and be sued in its name) hold the corporate powers of the organization appoint a voting majority of the organization s board is able to impose its will on the organization The organization has the potential to impose a financial benefit/burden on There is fiscal dependency by the organization on also evaluated each legally separate, tax-exempt organization whose resources are used principally to provide support to to determine if its omission from the reporting entity would result in financial statements which are misleading or incomplete. GASB Statement No. 14 requires inclusion of such an organization as a component unit when: 1) The economic resources received or held by the organization are entirely or almost entirely for the direct benefit of, its component units or its constituents; 2) Del Norte County Schools or its component units are entitled to, or has the ability to otherwise access, a majority of the economic resources received or held by the organization; and 3) Such economic resources are significant to