ANNUAL FINANCIAL REPORT LEMONT TOWNSHIP HIGH SCHOOL DISTRICT NO. 210 LEMONT, ILLINOIS JUNE 30, 2016

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1 ANNUAL FINANCIAL REPORT LEMONT TOWNSHIP HIGH SCHOOL DISTRICT NO. 210 LEMONT, ILLINOIS JUNE 30, 2016

2 TABLE OF CONTENTS JUNE 30, 2016 Exhibit Page Independent Auditors Report 1 Other Information: Management s Discussion and Analysis Unaudited 3 Basic Financial Statements: Government-wide Financial Statements Statement of Net Position Modified Cash Basis A 10 Statement of Activities Modified Cash Basis B 11 Fund Financial Statements Statement of Assets and Liabilities Arising from Cash Transactions Governmental Funds C 12 Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds D 15 Statement of Assets and Liabilities Arising from Cash Transactions Agency Funds E 20 Notes to the Basic Financial Statements 21 Other Information: Schedule of the employer s Proportionate Share of the Net Pension Liability TRS 45 Schedule of Employer Contributions TRS 46 Schedule of Changes in Net Pension Liability and Related Ratios IMRF 47 Schedule of Employer Contributions IMRF 48 Other Post-Employment Benefits 49 Schedule Combining Balance Sheet with Comparative Totals General Fund 1 50 Combining Schedule of Revenues, Expenditures and Changes in Fund Balances Budget and Actual with Comparative Actual Amounts General Fund 2 51

3 TABLE OF CONTENTS JUNE 30, 2016 Schedule Page Schedules of Revenues, Expenditures and Changes in Fund Balances Budget and Actual with Comparative Actual Amounts: Educational Account 3 53 Working Cash Account 4 60 Operations and Maintenance Fund 5 61 Transportation Fund 6 62 Municipal Retirement Fund 7 63 Debt Service Fund 8 64 Tort Fund 9 65 Detailed Schedule of Revenues Received and Expenditures Disbursed Activity Funds Schedule of Assessed Valuation, Tax Rates, Extensions and Collections Schedule of Bonded Debt Maturities and Interest 2012 Series Schedule of Bonded Debt Maturities and Interest 2013 Series Schedule of Bonded Debt Maturities and Interest 2014 Series Schedule of Bonded Debt Maturities and Interest 2015A Series Schedule of Bonded Debt Maturities and Interest 2015B Series Notes to Other Information 74

4 Independent Auditor s Report Board of Education Lemont Township High School District No. 210 Lemont, Illinois We have audited the accompanying financial statements of Lemont Township High School District No. 210, Lemont, Illinois, as of and for the year ended June 30, 2016, 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 the modified cash basis of accounting described in Note 1; this includes determining that the modified cash basis of accounting is an acceptable basis for the preparation of the financial statements in the circumstances. Management is also responsible for 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 error or fraud. Auditor s Responsibility Our responsibility is to express an opinion 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. 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 opinion. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position modified cash basis of the governmental activities, and each major fund information of Lemont Township High School District No. 210, as of June 30, 2016, and the respective changes in financial position modified cash basis, thereof for the year then ended in accordance with the basis of accounting as described in Note 1. 1

5 Basis of Accounting We draw attention to Note 1 of the financial statements, which describes the basis of accounting. The financial statements are prepared on the modified cash basis of accounting, which is a basis of accounting other than accounting principles generally accepted in the United States of America. Our opinion is not modified with respect to that matter. Other Matters Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise Lemont Township High School District No. 210 s financial statements. The Other Information, as described in the Table of Contents, is not a required part of the financial statements of Lemont Township High School District No We have applied certain limited procedures to the other 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 on it. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated October 10, 2016, on our consideration of Lemont Township High School District No. 210 s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Lemont Township High School District No. 210 s internal control over financial reporting and compliance. Evans, Marshall & Pease, P.C. Evans, Marshall and Pease, P.C. Certified Public Accountants Rolling Meadows, Illinois October 10, 2016 (12) 2

6 OTHER INFORMATION Management s Discussion and Analysis Unaudited

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8 MANAGEMENT S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JUNE 30, 2016 The discussion and analysis of Lemont Township High School District No. 210 s (the District) financial performance provides an overall review of the District s financial activities for the year ended June 30, District Description Lemont High School District No. 210 is a one-school, high school district serving an area of more than 31 square miles in the southwest suburban Chicagoland area, approximately 25 miles from downtown Chicago. The District s boundaries include Lemont Township (Cook County) and the south portion of Downers Grove Township (DuPage County). The Village of Lemont is the single municipality contained within the District s boundaries, which also include Argonne National Laboratory. In addition to Lemont, the District also serves portions of Darien, Downers Grove and Woodridge. The Metra-Heritage Corridor train line stops at Lemont, which allows commuters to be in downtown Chicago within 45 minutes. Motorists also can take the Stevenson Expressway (I-55) and arrive in downtown Chicago within 45 minutes. O Hare Airport is within 45 minutes of Lemont, while Midway Airport is approximately 30 minutes away. Lemont High School, which graduated its first students in 1891, is a comprehensive public high school serving students from grades Accredited by the Illinois State Board of Education and the North Central Association of Colleges and Schools, Lemont High School also is a member of the College Board. Student enrollment climbed rapidly in the 2000s, reaching a peak of more than 1,500 students. That growth necessitated two major construction projects within approximately 10 years. The second of those projects was a $29.6 million construction project that was completed in Spring It added a threestory classroom addition; completely renovated the football stadium, which now features artificial turf and expanded seating; increased areas for computer and science labs, as well as for Industrial Technology and Family and Consumer Sciences; and added a new Performing Arts Center. The 360,000-square-foot school now covers 30 acres, but still sits where it was first constructed in the 1920s. Long considered one of the best kept secrets in Chicagoland s southwest suburbs, Lemont High School steadily has strengthened its reputation as one of the top high schools in the State of Illinois, and its success no longer is a secret. For several years, it has ranked among the top public high schools - both in the area and across the state - according to several entities, including the Chicago Tribune, Chicago Sun-Times, Chicago Magazine, and the Illinois State Board of Education. Lemont High School s successes are not limited to the classroom. Its athletic program is a perennial power in the South Suburban Conference, having won the conference s all-sports trophy on multiple occasions. The school is competitive at the state level in a variety of areas, ranging from the state champion cheerleading squad and powerhouse football program, to the highly successful Mathletes squad and drafting program, to the performing arts. Students with varied talents find success at Lemont High School! Financial Highlights The assets of the District exceeded its liabilities at June 30, 2016 by $26,220,557 (net position). The District s total net position decreased by $620,014 Fund balances continue to remain at healthy levels. Fund balances totaled $24,448,137, which is an increase of $47,745 in comparison to the previous year. Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction to the District s basic financial statements. The basic financial statements are comprised of three components: Government-wide financial statements, 3

9 MANAGEMENT S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JUNE 30, 2016 Fund financial statements, and Notes to the financial statements This report also contains other information in addition to the basic financial statements. Included as revenue and expense in the Educational Account (and Total) is the annual on-behalf payment by the State to the Teacher s Retirement System (TRS) discussed elsewhere in this audit report. The District budgets for the on-behalf payment; however, the amount budgeted is far from the actual amount. This contribution by the State must be shown in the audit, but it should be kept in mind that to get a true picture of the District s revenue, expenses and balances, this contribution must be discounted. The major features of the District s financial statements, including the portion of the District s activities they cover and the types of information they contain, are shown in the following table: Major Features of the Government-Wide and Fund Financial Statements Scope Required financial statements Government-Wide Fund Financial Statements Statements Governmental Funds Fiduciary Funds Entire District The activities of the District Instances in which (except fiduciary that are not fiduciary, such District administers funds) as general fund resources on behalf of someone else, such as student activity monies Statement of Balance sheet Statement of fiduciary net position net position Statement of Statement of revenues, Statement of changes activities expenditures, and changes in fiduciary net position in fund balance Accounting Accrual accounting Cash basis accounting Cash basis accounting basis and and economic and current financial and current financial measurement resources focus resources focus resources focus focus Type of asset/liability information Type of inflow/outflow information All assets and Revenues for which cash is All assets and liabilities, liabilities, both received during the year; both short-term and financial and capital, no capital assets or long- long-term; funds may short-term and term liabilities included contain capital long-term assets Revenues for which Revenues for which cash is All additions and cash is received received during the year. deductions during the during the year. expenditures when goods or year Expenditures when services have been paid for. goods and services have been paid for. The remainder of this overview section of management s discussion and analysis highlights the structure and contents of each of the statements. Government-Wide Financial Statements The government-wide financial statements report information about the District as a whole using accounting methods similar to those used by private-sector companies. The statement of net position includes all of the District s assets and liabilities. All the current year s revenues and expenses are accounted for in the statement of activities. 4

10 MANAGEMENT S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JUNE 30, 2016 Unlike a private sector company, the District cannot readily convert fixed assets to liquid assets; the District cannot sell a school building and use the cash. Districts can, and sometimes do, convert fixed assets to cash through the sale of property; however this is a rare event and not easily accomplished. The government-wide financial statements report the District s net position and how they have changed throughout the year. Net position the difference between the District s assets and liabilities is one way to measure the District s financial health or position. Over time, increases or decreases in the District s net position is an indicator of whether its financial position is improving or deteriorating, respectively. To assess the District s overall health, one needs to consider additional non-financial factors, such as changes in the District s property tax base and the condition of school buildings and other facilities. In the government-wide financial statements, the District s activities are presented as follows: Governmental Activities Most of the District s basic services are included here, such as regular and special education, transportation, support services, community programs and administration. Property taxes and state formula aid finance most of these activities. Fund Financial Statements The fund financial statements provide more detailed information about the District s funds, focusing on its most significant or major funds not the District as a whole. Funds are accounting devices the District uses to keep track of specific sources of funding and spending on particular programs and to demonstrate compliance with various regulatory requirements. Some funds are required by state law and by bond covenants. The District establishes other funds to control and manage money for particular purposes (such as repaying its long-term debt) or to show that it is properly using certain revenues (such as working cash). The District has two kinds of funds: Governmental Funds Most of the District s basic services are included in governmental funds, which generally focus on (1) how cash, and other financial assets 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 one determine whether there are more or fewer financial resources that can be spent in the near future to finance the District s programs. Because this information does not encompass the additional long-term focus of the government-wide statements, additional information is included as a separate statement explaining the relationship (or differences) between them. Fiduciary Funds The District serves as a trustee, or fiduciary, for assets that belong to others, such as student activities funds. The District is responsible for ensuring that the assets reported in these funds are used only for their intended purposes and by only those to whom the assets belong. These activities are excluded from the government-wide financial statements because the District cannot use these assets to finance its operations. Notes to the financial statements: The notes to the financial statements provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. 5

11 MANAGEMENT S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JUNE 30, 2016 Other information: In addition to the basic financial statement and accompanying notes, this report also presents certain other information concerning the District s progress in funding its obligation to provide pension benefits to its non-certified employees. Financial Analysis of the District as a Whole Statement of Net Position: The following provides a summary of the District s Statement of Net Position as of June 30, 2016 and 2015: Governmental Activities (Restated) Assets: Current Assets $ 24,454,019 $ 24,459,614 Capital Assets (Less Depreciation) 48,242,804 50,253,007 Total Assets 72,696,823 74,712,621 Liabilities: Current Liabilities 5,882 59,222 Noncurrent Liabilities 46,470,384 47,802,104 Total Liabilities 46,476,266 47,861,326 Net Position: Net investment in capital assets 1,772,420 2,440,179 Restricted 9,957,368 9,907,289 Unrestricted 14,490,769 14,493,103 Total Net Position $ 26,220,557 $ 26,840,571 Total Net Position: Please note that the amounts reported for governmental activities in the audit statement are different from the summary tables above because (1) Capital assets used in governmental activities are not financial resources, as they are in business, and are not reported as assets in governmental funds. (2) Long-term liabilities, including bonds payable and capital leases are not due in the current period and therefore not reported as liabilities in the funds. The result is that the total net position for governmental activities is $26,220,557. Restricted Net Position: A portion of the District s total net position is considered restricted. The District s restricted net position results from portions of governmental funds that are restricted, committed, or assigned, or in any other way, limit the availability of fund resources for future use. The Operations and Maintenance Fund, Transportation Fund, and Illinois Municipal Retirement Funds are special revenue funds; by law, funds held in a special revenue fund are restricted to the purpose of the fund. The Net Position of the Debt Service Fund and Capital Projects Fund are also restricted for expenditures disbursed for specified purposes. The funds have a restricted balance as follows: Operations and Maintenance Fund, $5,906,939; Transportation Fund, $917,150; Municipal Retirement Fund, $514,595; Debt Service Fund, $2,459,107; and the Tort Fund, $159,577. The District s total restricted net position at the end of the fiscal year totaled $9,957,368. There were no significant changes affecting restrictions, commitments, or other limitations to the availability of fund resources for future use. 6

12 MANAGEMENT S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JUNE 30, 2016 The following is a summary of the District s change in net position for the years ending June 30, 2016 and 2015: Revenues: Program Revenues: Charges for services 1,571,791 Governmental Activities (Restated) $ $ 1,468,234 Operating grants 7,278,044 6,581,077 General Revenues: Property taxes 22,168,680 21,767,098 Personal property replacement taxes 375, ,362 State aid - formula grants 527, ,076 Federal impact aid 906, ,714 Premium on bonds 918,422 6,336 Unrestricted investment earnings 59,266 56,602 Total Revenues 33,806,491 31,721,499 Expenses: Instruction 21,304,144 20,614,430 Support services 8,584,309 8,144,838 Community services 1,349 1,457 Payments to other governmental units 682, ,860 Interest on and fees on long-term debt 3,691,553 4,102,828 Depreciation (unallocated) 163, ,070 Total Expenditures 34,426,505 33,849,483 Change in Net Position (620,014) (2,127,984) Net Position - Beginning 26,840,571 28,968,555 Net Position - Ending $ 26,220,557 $ 26,840,571 Changes in Net Position: The District s combined net position decreased by $620,014 to $26,220,557 in fiscal year The District s total revenues were $33,806,491 for governmental activities. Local taxes (predominantly real estate taxes) were $22,544,605 or 66.69% of the total. Charges for services were $1,571,791 or 4.65%. State and federal funding and grants were $7,278,044 or 21.53% of the total. General state aid was $527,715 or 1.56%. Federal Impact Aids were $918,422 or 2.72%. Investments earned $59,266 or 0.18%. Premium on bonds were $918,422 or 2.72%. Total costs for all governmental programs totaled $34,426,505. Expenditures are predominantly related to instruction, instructional support services, and maintenance of the physical plant. Expenditures remained relatively stable in comparison to the prior year. Interest and fees on long-term debt has decreased from the prior year in the amount of $411,275 mostly due to the issuance of a refunding bond (see Debt Administration). Financial Analysis of the District s Funds The financial performance of the District reflects the financial climate of the country as a whole and Illinois in particular. Expenditures and revenues are monitored carefully. Financial updates and projections are shared with the Board of Education regularly. Account balances for all funds are at a healthy level for the year ended June 30, The governmental funds reported combined fund balances of $24,448,137, which is an increase of $47,745 in comparison to the prior year. 7

13 MANAGEMENT S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JUNE 30, 2016 General Fund: Educational Account Fund balance decreased by $16,074, resulting in an ending fund balance of $9,312,512. The District did $21,404 better than the budgeted loss of $37,478. Working Cash Account Fund balance increased by $13,740, resulting in an ending fund balance of $5,178,257. Operations and Maintenance Fund Fund balance increased by $888,941, resulting in an ending fund balance of $5,906,939. The District transferred in monies in the amount of $800,000 from the Debt Service Fund, which resulted in the increase of fund balance. Debt Service Fund Fund balance decreased by $673,759, resulting in an ending fund balance of $2,459,107. The District transferred out monies in the amount of $800,000 to the Operation and Maintenance Fund. The District also issued a refunding bond, which included a payment to the refunded bond escrow agent in the amount of $19,769,831. Other Funds The Transportation, Municipal Retirement, and Tort Funds all had a reasonable fluctuation in net change in fund balance. Combined, these fund balances decreased by $165,103. General Fund Budgetary Highlights As noted earlier, the District uses fund accounting to ensure and demonstrate compliance with finance related legal requirements. The focus of the District s governmental funds is to provide information on near term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the District s financial requirements. In particular, unreserved fund balance may serve as a useful measure of a government s new resources available for spending at the end of the fiscal year. The General Fund over expended its budget by $2,251,757. A major reason of this over-expenditure is due to unexpected higher rates on on-behalf payments made by the state; the District under-budgeted the on-behalf payment by $2,199,700. However, the net change in fund balance for the General Fund was a positive $21,370, compared to the budgeted negative change in fund balance of $23,704. Capital Assets and Debt Administration Long Term Debt: At June 30, 2016, the District had total bonded debt outstanding of $46,355,000. Additionally, the District has capital leases payable of $115,384 still outstanding at the end of the current fiscal year. The District issued refunding bonds in the amount of $18,875,000 to retire the $19,290,000 balance of the principal from the General Obligation School Bonds issued on May 15, 2006, in advance. The economic gain on this bond is $2,274,477. 8

14 MANAGEMENT S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JUNE 30, 2016 Principal, refunding, and payments on long-term debt principal totaled $20,143,765 for fiscal year Balance Type Year June 30, 2016 Refunding Bonds 2012 $ 9,160,000 Refunding Bonds ,770,000 Refunding Bonds ,550,000 Refunding Bonds ,875,000 Capital Leases Various 115,384 Total $ 46,470,384 Revenue is collected by the County Assessor to cover the payments on these bonds. Bond payments are not under the tax cap. The Debt Service Fund has adequate resources accumulated plus real estate collections subsequent to the end of the year to make the fiscal year 2016 principal and interest payments. More detailed information on long-term debt is available in Note 5 in the notes to the financial statements. Capital Assets: Total depreciation expense for the year was $1,958,932, while additions to capital assets amounted to $22,408 which consisted of various pieces of equipment. The District s investment in capital assets for its governmental activities as of June 30, 2016 amounted to $48,242,804 (net of accumulated depreciation) as follows: (Restated) Asset Land $ 5,469,945 $ 5,469,945 Land improvements 573, ,301 Buildings and improvements 43,334,402 41,591,339 Equipment 801, ,219 Total Capital Assets $ 50,179,328 $ 48,242,804 More detailed information on capital assets is available in Note 4 in the notes to the financial statements. Factors Bearing on the District s Financial Future Property Tax Refunds issued by both the Circuit Court and the Property Tax Appeal Board (PTAB) can potentially have a negative impact on the District. Refunds are issued after the tax cap calculations, so they are a direct loss of already capped revenue. Proposed changes to the State of Illinois allocation of General State Aid remain uncertain at this time. The lack of a State Budget only compounds the unclear picture of State funding for Lemont Township High School District No. 210 now and into the future. Contacting the District s Financial Management Team This financial report is designed to provide the District s citizens, taxpayers, customers, investors and creditors with a general overview of the District s finances and to demonstrate the District s accountability for the money it receives. If you have questions about this report or need additional financial information contact Jeff Eagan, the Chief School Business Official, at Lemont Township High School District No. 210, 800 Porter Street, Lemont Illinois

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16 BASIC FINANCIAL STATEMENTS

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18 STATEMENT OF NET POSITION MODIFIED CASH BASIS JUNE 30, 2016 EXHIBIT A Governmental Activities ASSETS Cash $ 24,450,932 Other accounts receivables 3,087 Capital assets not being depreciated: Land 5,469,945 Capital assets, net of accumulated depreciation: Land improvements 516,301 Buildings 41,591,339 Equipment 665,219 Total Assets 72,696,823 LIABILITIES Payroll liabilities 5,882 Noncurrent liabilities: Due within one year 2,643,381 Due in more than one year 43,827,003 Total Liabilities 46,476,266 NET POSITION Net investment in capital assets 1,772,420 Restricted for: Tort immunity 159,577 Debt service 2,459,107 Municipal retirement 514,595 Operations and maintenance 5,906,939 Transportation 917,150 Unrestricted 14,490,769 Total Net Position $ 26,220,557 The accompanying notes to the financial statements are an integral part of this statement. 10

19 STATEMENT OF ACTIVITIES MODIFIED CASH BASIS YEAR ENDED JUNE 30, 2016 EXHIBIT B Net (Expense) Revenue and Changes Program Revenues Received in Net Position Operating Capital Expenses Charges for Grants and Grants and Governmental FUNCTIONS/ PROGRAMS Disbursed Services Contributions Contributions Activities Governmental Activities: Instruction $ 21,304,144 $ 871,828 $ 6,669,310 $ - $ (13,763,006) Support services 8,584, , ,734 - (7,275,612) Community services 1, (1,349) Payments to other districts/ government units 682, (682,080) Debt Service: Interest on long-term debt 2,835, (2,835,901) Other 855, (855,652) Depreciation - unallocated* 163, (163,070) Total Governmental Activities $ 34,426,505 $ 1,571,791 $ 7,278,044 $ - (25,576,670) GENERAL REVENUES: Taxes: Property taxes 22,168,680 Personal property replacement taxes 375,925 State aid - formula grants 527,715 Federal impact aid 906,648 Premium on bonds 918,422 Unrestricted investment earnings 59,266 Total General Revenues Received 24,956,656 CHANGE IN NET POSITION (620,014) NET POSITION - June 30, 2015 as previously reported 26,851,295 PRIOR PERIOD ADJUSTMENT: Correction of a lease set up as capital (10,724) NET POSITION - June 30, 2015 as restated 26,840,571 NET POSITION - June 30, 2016 $ 26,220,557 * This amount excludes the depreciaiton that is included in the direct expenses of the various programs. The accompanying notes to the financial statements are an integral part of this statement. 11

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21 LEMONT TOWNSHIP SCHOOL DISTRICT NO. 210 STATEMENT OF ASSETS AND LIABILITIES ARISING FROM CASH TRANSACTIONS GOVERNMENTAL FUNDS JUNE 30, 2016 Operations and Municipal General Maintenance Transportation Retirement Fund Fund Fund Fund ASSETS Cash $ 14,496,651 $ 5,903,852 $ 917,150 $ 514,595 Other accounts receivable - 3, Total Assets $ 14,496,651 $ 5,906,939 $ 917,150 $ 514,595 LIABILITIES Payroll liabilities and withholdings $ 5,882 $ - $ - $ - Total Liabilities 5, FUND BALANCES Restricted: Tort immunity Debt service Municipal retirement ,595 Operations and maintenance - 5,906, Transportation ,150 - Unassigned 14,490, Total Fund Balances 14,490,769 5,906, , ,595 Total Liabilities and Fund Balances $ 14,496,651 $ 5,906,939 $ 917,150 $ 514,595 The accompanying notes to the financial statements are an integral part of this statement. 12

22 EXHIBIT C Total Debt Service Tort Governmental Fund Fund Funds $ 2,459,107 $ 159,577 $ 24,450, ,087 $ 2,459,107 $ 159,577 $ 24,454,019 $ - $ - $ 5, , , ,577 2,459,107-2,459, , ,906, , ,490,769 2,459, ,577 24,448,137 $ 2,459,107 $ 159,577 $ 24,454, (Continued)

23 EXHIBIT C (Concluded) RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF ASSETS AND LIABILITIES ARISING FROM CASH TRANSACTIONS TO THE STATEMENT OF NET POSITION (CASH BASIS) JUNE 30, 2016 Total fund balances-governmental funds (Exhibit C) $ 24,448,137 Amounts reported for governmental activities in the statement of assets and liabilities arising from cash transactions are different because: When capital assets that are to be used in governmental activities are purchased or constructed, the cost of those assets are reported as expenditures in governmental funds. However, the statement of net position includes those capital assets among the assets of the District as a whole. Cost of capital assets: Land $ 5,469,945 Land improvements 2,001,430 Buildings 71,723,827 Furniture, fixtures and other equipment 2,776,532 Total cost of capital assets 81,971,734 Accumulated depreciation (33,728,930) Net investment in capital assets 48,242,804 Long-term liabilities applicable to the School District's governmental activities are not due and payable in the current period and accordingly are not reported as fund liabilities. All liabilities - both current and long-term - are reported in the Statement of Net Position. Capital leases payable (115,384) Bonds payable (46,355,000) Total long-term liabilities (46,470,384) Total net position of governmental activities (Exhibit A) $ 26,220,557 The accompanying notes to the financial statements are an integral part of this statement. 14

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25 STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2016 REVENUES Local Sources: Operations and Municipal General Maintenance Transportation Retirement Fund Fund Fund Fund General tax levies $ 14,456,540 $ 1,942,735 $ 580,015 $ 673,217 Special education levies 112, Corporate replacement taxes 339, ,810 Pupil activities 729,828 40, Earnings on investments 34,723 11,239 2,959 1,136 Food services 546, Donations 73, Impact fees - 64, Vendor proceeds 6, Rentals - 70, Other local revenues 21,277 18, State Sources Unrestricted: General state aid 527, Restricted: Special education 431, CTE 32, Bilingual education 4, State free lunch and breakfast Drivers education 37, Library grant State on behalf payments 5,767, Transportation ,863 - Federal Sources Unrestricted: Impact aid 906, Restricted: School lunch programs 80, Commodities 10, Title I low income 160, IDEA special education flow through 200, IDEA special education room and board 16, Title II teacher quality 17, Medicaid matching funds 11, Total Revenues 24,526,802 2,148,100 1,088, ,163 15

26 EXHIBIT D Debt Total Service Tort Governmental Fund Fund Funds $ 4,108,057 $ 295,848 $ 22,056, , , ,623 9, , , , , , , , , , , , , ,767, , , , , , , , , ,237 4,117, ,853 32,888, (Continued)

27 STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2016 Operations and Municipal General Maintenance Transportation Retirement Fund Fund Fund Fund EXPENDITURES Instruction $ 19,460,950 $ - $ - $ 265,547 Support services 4,321,611 2,049,074 1,250, ,272 Community services 1, Payments to other LEA's 682, Capital outlay 12,323 10, Debt Service: Interest Principal Other Total Expenditures 24,478,313 2,059,159 1,250, ,819 EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES 48,489 88,941 (161,669) 17,344 OTHER FINANCING SOURCES (USES): Transfers in - 800, Transfers out (50,823) Proceeds of refunding bonds Premium on refunding bond issued Payment to refunded bond escrow agent Total Other Financing Sources (Uses) (50,823) 800, NET CHANGE IN FUND BALANCES (2,334) 888,941 (161,669) 17,344 FUND BALANCES, BEGINNING OF YEAR 14,493,103 5,017,998 1,078, ,251 FUND BALANCES, END OF YEAR $ 14,490,769 $ 5,906,939 $ 917,150 $ 514,595 The accompanying notes to the financial statements are an integral part of this statement. 17

28 EXHIBIT D (Continued) Debt Total Service Tort Governmental Fund Fund Funds $ - $ - $ 19,726, ,631 8,366, , , ,408 2,835,901-2,835, , , , ,822 4,065, ,631 32,863,915 51,827 (20,778) 24,154 50, ,823 (800,000) - (850,823) 18,875,000-18,875, , ,422 (19,769,831) - (19,769,831) (725,586) - 23,591 (673,759) (20,778) 47,745 3,132, ,355 24,400,392 $ 2,459,107 $ 159,577 $ 24,448, (Continued)

29 RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES (CASH BASIS) YEAR ENDED JUNE 30, 2016 EXHIBIT D (Concluded) Total net change in fund balances-governmental funds (Exhibit D) $ 47,745 Capital outlays are reported in governmental funds as expenditures. However, in the statement of activities, the cost of those assets is allocated over their estimated useful lives as depreciation expense. As a result, fund balance decreases by the amount of financial resources expended, whereas net position decreases by the amount of depreciation expense charged for the year. Capital outlays for items below the District's capitalization policy limits and repairs and maintenance are expensed. Also, when these assets are disposed of before they are fully depreciated, the loss is reported on the statement of activities, thereby further decreasing net position. Depreciation expense $ (1,958,932) Capital outlay over capitalization limits 22,408 Depreciation expense in excess of capital outlay (1,936,524) Repayment of debt principal is reported as an expenditure in governmental funds and thus, has the effect of reducing fund balance because current financial resources have been used. For the District as a whole, however, the principal reduces the liabilities in the statement of net position and does not result in an expense in the statement of activities. The District's debt was reduced by principal payments made to bond holders and to an escrow agent for the advance refunding of bonds payable. Advance payment on refunded bond (479,830) Principal on refunding bond sold (18,875,000) Transfer to escrow agent 19,769,830 Principal paid on capital lease 47,310 Principal paid to bond holders 806,455 1,268,765 Change in net position of governmental activities (Exhibit B) $ (620,014) The accompanying notes to the financial statements are an integral part of this statement. 19

30 STATEMENT OF ASSETS AND LIABILITIES ARISING FROM CASH TRANSACTIONS AGENCY FUNDS YEAR ENDED JUNE 30, 2016 EXHIBIT E Total Agency Funds ASSETS Cash $ 367,940 Total Assets $ 367,940 LIABILITIES Due to organizations $ 367,940 Total Liabilities $ 367,940 The accompanying notes to the financial statements are an integral part of this statement. 20

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32 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The District s accounting policies conform to the cash basis of accounting as defined by the Illinois State Board of Education Audit Guide. A summary of the significant accounting policies, consistently applied in the preparation of the accompanying financial statements are as follows: A. Financial Reporting Entity Accounting principles generally accepted in the United States of America require that the financial statements of the reporting entity include: (1) the primary government, (2) organizations for which the primary government is financially accountable, and (3) other organizations for which the nature and significance of their relationship with the primary government are such that exclusion would cause the reporting entity s financial statements to be misleading or incomplete. The criteria provided by the governmental accounting standards have been considered and there are no agencies or entities which should be presented with the District. B. Basis of Presentation Fund Accounting Government-wide Financial Statements The Statement of Net Position and Statement of Activities display information about the District as a whole. They include all funds of the reporting entity except for fiduciary funds. The effect of interfund activity has been removed from these statements. These statements distinguish between governmental and business-type activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange revenues. Business-type activities are financed in whole or in part by fees charged to external parties for goods or services. There are no business-type activities within the District. The statement of activities demonstrates the degree to which the direct expenses of a given function, segment or program are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Indirect expenses not allocated to functions are reported separately. Interest on general long-term debt is considered such an indirect expense. Depreciation expense is specifically identified by function and is included in the direct expenses of each function. Program revenues include 1) tuition and fees and 2) grants and standard revenues that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues. Governmental Funds Financial Statements Fund financial statements of the reporting entity are organized into funds, each of which is considered to be a separate accounting entity. Each fund is accounted for by providing a separate set of selfbalancing accounts that constitute its assets, liabilities, fund equity, revenues, and expenditures. The District maintains individual funds required by the Illinois State Board of Education (ISBE). Funds are organized into three major categories: governmental, proprietary, and fiduciary. In turn, each category is divided into separate fund types. The fund classifications and a description of each existing fund type follow: Governmental Fund Types Governmental fund types are used to account for the District s general government activities, including the collection and disbursement of specific or legally restricted monies, the acquisition or construction of general fixed assets and the servicing of general long-term debt. Governmental fund types include the following: 21

33 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont d) General Fund The General Fund, which consists of the legally mandated Educational Account and Working Cash Account, is the primary operating fund of the District and is always classified as a major fund. It is used to account for the revenues received and expenditures disbursed which are used in providing education in the District. It is used to account for all financial resources except those required to be accounted for in other funds. Special Revenue Funds The Special Revenue Funds, which include the Transportation Fund Tort Fund and the Municipal Retirement Fund, are used to account for revenue received from specific sources (other than those accounted for in the Debt Service and Capital Projects Funds) that are legally restricted to expenditures disbursed for specified purposes. Debt Service Fund The Debt Service Fund accounts for the accumulation of resources for, and the payment of, general long-term debt principal, interest, and related costs. Since there are no legal requirements on bond indentures which mandate that a separate fund be established for each bond issue, the District maintains one Debt Service Fund for all bond issues. Fiduciary Fund Types (not included in government-wide statements) Agency Funds The Agency Funds (Student Activity Funds) account for assets held by the District in trustee capacity or as an agent for student organizations. These funds are custodial in nature (assets equal liabilities) and do not involve measurement of the results of operations. Major and Nonmajor Funds An emphasis is placed on major funds within the governmental and proprietary categories. A fund is considered major if it is the primary operating fund of the District, is considered major by the District or meets the following criteria: 1) Total assets, liabilities, revenues received, or expenditures disbursed of that individual governmental or enterprise fund are at least ten percent of the corresponding total for all funds of that category or type; and 2) Total assets, liabilities, revenues received, or expenditures disbursed of the individual governmental or enterprise fund are at least five percent of the corresponding total for all governmental and enterprise funds combined. The District has classified all funds major, as follows: Major: Educational Account This is part of the general fund and used to account for expenditures related to providing education in the District. Working Cash Account This is part of the general fund and used to account for financial resources held to temporarily loan funds. Operations and Maintenance Fund Transportation Fund This fund is used for expenses paid for repair and maintenance of District property. Revenue consists primarily of local revenues. A Special Revenue Fund to account for activity relating to student transportation to and from school. 22

34 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont d) Municipal Retirement Fund Tort Fund Debt Service Fund A Special Revenue Fund to account for the District s portion of pension contributions to the Illinois Municipal Retirement Fund for noncertified employees. A Special Revenue Fund to account for activity relating to risk management and loss prevention. A Debt Service Fund used to accumulate resources for, and payment of, general long-term debt, principal, interest, and related costs. Under the terms of grant agreements, the District may fund certain programs by a combination of specific cost-reimbursement grants, categorical block grants, and general revenues. Therefore, when program expenses are incurred, both the restricted and unrestricted net position may be available to finance the program. It is the District s policy to first apply cost-reimbursement grant resources to such programs, followed by general revenues. C. Measurement Focus/Basis of Accounting Measurement Focus The basic financial statements focus on the measurement of spending or financial flow and the determination of changes in financial position rather than upon net income determination. This means that only current assets and current liabilities are generally included on their balance sheets. Their reported fund balance (net current position) is considered a measure of available spendable resources. Governmental fund operating statements present increases (revenues received and other financing sources) and decreases (expenditures disbursed and other financing uses) in net current position. Accordingly, they are said to present a summary of sources and uses of available spendable resources during a period. Agency funds are not involved in the measurement of results of operations; therefore, measurement focus is not applicable to them. Basis of Accounting Basis of accounting refers to when revenues received and expenditures disbursed are recognized in the accounts and how they are reported in the basic financial statements. The District maintains its accounting records for all funds on the cash basis of accounting under guidelines prescribed by the Illinois State Board of Education. Accordingly, revenues are recognized and recorded in the accounts when cash is received. In the same manner expenditures are recognized and recorded upon the disbursement of cash. Assets of a fund are only recorded when a right to receive cash exists which arises from a previous cash transaction. Liabilities of a fund, similarly, result from previous cash transactions. Cash basis financial statements omit recognition of receivables and payables and other accrued and deferred items that do not arise from previous cash transactions. D. Equity Classifications/Fund Balance Reporting Government-Wide Reporting Equity is classified as net position and displayed in three components: 23

35 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont d) Net investment in capital assets - Consists of capital assets including restricted capital assets, net of accumulated depreciation and reduced by the outstanding balances of any bonds, mortgages, notes or other borrowings that are attributable to the acquisition, construction, or improvement of those assets less any unspent debt proceeds. Restricted net position Consists of net position with constraints placed on their use either by 1) external groups such as creditors, grantors, contributors, laws or regulations of other governments or 2) law through constitutional provisions or enabling legislation. Unrestricted net position Consists of all other net position that does not meet the definition of restricted or net investment in capital assets. When both restricted and unrestricted resources are available, it is the District s policy to use restricted resources first, and then unrestricted resources as they are needed. Governmental Fund Balance Reporting Fund balances are to be classified into five major classifications; Nonspendable, Restricted, Committed, Assigned, and Unassigned. Nonspendable the nonspendable fund balance classification includes amounts that cannot be spent because they are either (a) not in spendable form or (b) legally or contractually required to be maintained intact. The not in spendable form criterion includes items that are not expected to be converted to cash, for example inventories and prepaid amounts. Due to the cash basis used by the District there is nothing to report for this classification. Restricted the restricted fund balance classification refers to amounts that are subject to outside restrictions, not controlled by the District. Items such as restrictions imposed by creditors (such as debt covenants), grantors, contributors, or laws or regulations of other governments, or imposed by law through constitutional provisions or enabling legislation. Special Revenue Funds are by definition restricted for those specified purposes. The District has several revenue sources received within different funds that also fall into these categories Special Education cash receipts and the related cash disbursements of this restricted tax levy are accounted for in the Educational Account. Expenditures disbursed exceeded revenue received for this purpose, resulting in no restricted fund balance. State Grants proceeds from state grants and the related expenditures have been included in the Educational Account and Transportation Fund. At June 30, 2016, expenditures disbursed exceeded revenue received form state grants, resulting in no restricted balance. Federal Grants proceeds from federal grants and the related expenditures have been included in the Educational Account. At June 30, 2016, expenditures disbursed exceeded revenue received from federal grants, resulting in no restricted balance. Social Security expenditures disbursed and the related cash receipts of this restricted tax levy are accounted for in the Municipal Retirement Fund. Expenditures disbursed exceeded revenue received, resulting in no restricted balance. Tort Immunity Tax Levy - expenditures disbursed and the related cash receipts of this restricted tax levy are accounted for in the Tort Fund. Disbursements made from this fund included: $66,600 for liability insurance, $6,532 for vehicle insurance, $68,420 for unemployment insurance, $16,798 for regular insurance, $27,076 for risk management, and $131,205 for loss prevention in the year ended June 30,