LYONS TOWNSHIP HIGH SCHOOL DISTRICT NO. 204 [La Grange, Illinois] Audited Financial Statements And Supplementary Financial Information.

Transcription

1 LYONS TOWNSHIP HIGH SCHOOL DISTRICT NO. 204 [La Grange, Illinois] Audited Financial Statements And Supplementary Financial Information June 30, 2016

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3 TABLE OF CONTENTS Independent Auditors' Report... 1 Management s Discussion and Analysis... 4 Basic Financial Statements: Government-wide Financial Statements: Statement of Net Position Statement of Activities Fund Financial Statements: Page Balance Sheet Governmental Funds Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position Statement of Revenues, Expenditures and Changes in Fund Balances - Governmental Funds Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities Statement of Fiduciary Net Position Statement of Changes in Fiduciary Net Position Notes to Financial Statements Required Supplementary Information: Schedule of Revenues, Expenditures and Changes in Fund Balances Budget and Actual Budgetary Basis General Fund and Major Special Revenue Funds Schedule of Funding Progress Defined Other Postemployment Benefit Plan... 60

4 TABLE OF CONTENTS Page Schedule of Changes in Net Position Liability and Related Ratios Illinois Municipal Retirement Fund Schedule of Contributions Illinois Municipal Retirement Fund Schedule of District s Proportionate Share of the Net Pension Liability Teachers Retirement System of the State of Illinois Schedule of Contributions Teachers Retirement System of the State of Illinois Notes to Required Supplementary Information...65 Supplementary Financial Information: Combining Statements and Individual Fund Schedules: Major Funds: General Fund: Combining Balance Sheet by Account Combining Statement of Revenues, Expenditures and Changes in Fund Balances by Account Educational Account: Schedule of Revenues, Expenditures and Changes in Fund Balance Budgetary Basis - Budget and Actual Working Cash Account: Schedule of Revenues, Expenditures and Changes in Fund Balance - Budgetary Basis - Budget and Actual Operations and Maintenance Fund: Schedule of Revenues, Expenditures and Changes in Fund Balance - Budgetary Basis - Budget and Actual Transportation Fund: Schedule of Revenues, Expenditures and Changes in Fund Balance - Budgetary Basis - Budget and Actual... 82

5 TABLE OF CONTENTS Page Municipal Retirement/Social Security Fund: Schedule of Revenues, Expenditures and Changes in Fund Balance - Budgetary Basis - Budget and Actual Debt Service Fund: Schedule of Revenues, Expenditures and Changes in Fund Balance - Budgetary Basis - Budget and Actual Capital Projects Fund: Schedule of Revenues, Expenditures and Changes in Fund Balance - Budgetary Basis - Budget and Actual Schedule of Changes in Assets and Liabilities Agency Funds Other Information: Five Year Summary of Assessed Valuations and Tax Extensions Schedule of Operating Cost and Tuition Charge Schedule of Bonded Debt Maturities and Interest Equalized Assessed Valuation and Estimated Actual Value of Taxable Property Last Ten Tax Years Bonded Debt to Equalized Assessed Valuation and Estimated Actual Value of Taxable Property Last Ten Fiscal Years Computation of Legal Debt Margin Demographic and Miscellaneous Statistics Demographic and Miscellaneous Statistics - Number of Full-Time Employees Last Five Fiscal Years Demographic and Miscellaneous Statistics - Instructional Statistics Last Ten Fiscal Years Demographic and Miscellaneous Statistics - Enrollment Data Last Ten Fiscal Years

6 TABLE OF CONTENTS Page New Construction Values Last Ten Calendar Years Calculation of Equalized Assessed Valuation Last Ten Calendar Years District History

7 Board of Education Lyons Township High School District 204 LaGrange, IL Report on the Financial Statements Independent Auditors Report We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of Lyons Township High School District 204 (the District), 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 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. 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 District 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 District 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. 1

8 We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the District as of June 30, 2016, and the respective changes in financial position for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management s discussion and analysis, budgetary comparison schedules and schedules of funding progress for post-employment benefits on pages 4 through 15 and 56 through 67 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the District s basic financial statements. The combining and individual fund schedules and other financial information are presented for purposes of additional analysis and are not a required part of the basic financial statements. The supplementary financial information is the responsibility of management and were 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 supplementary financial information is fairly stated, in all material respects, in relation to the basic financial statements as a whole. 2

9 The other financial information have not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on them. Report of Comparative Other Information We also have previously audited, in accordance with auditing standards generally accepted in the United States of America, the District s basic financial statements for the year ended June 30, 2015, which are not presented with the accompanying financial statements and we expressed unmodified opinions on the respective financial statements of the governmental activities, each major fund, and the aggregate remaining fund information. That audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the District s basic financial statements as a whole. The individual fund financial schedules, for the year ended June 30, 2015, are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the 2015 basic financial statements. The information has been subjected to the auditing procedures applied in the audit of those 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 2015 individual fund financial schedules are fairly stated in all material respects in relation to the basic financial statements from which they have been derived. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated November 23, 2016 on our consideration of the District'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 the District s internal control over financial reporting and compliance. Wheaton, Illinois November 23,

10 Lyons Township High School District 204 Management s Discussion & Analysis (Unaudited) June 30, 2016 The discussion and analysis of the financial performance of Lyons Township High School District 204 provides an overall review of the District s financial activities for the year ended June 30, The management of the District encourages readers to consider the information presented herein, in conjunction with the basic financial statements, to enhance their understanding of the District s financial performance. During the current year, the District implemented Government Accounting Standard Board (GASB) Statement No. 72, Fair Value Measurement and Application, which establishes new requirements on how fair value should be measured, which assets and liabilities should be measured at fair value, and what information about fair value should be disclosed in the notes to financial statements. Financial Highlights In total for all governmental activities, the District s net position decreased $2.5 million, from $76.1 million to $73.6 million. The District s financial status continues to reflect a stable balance of revenues and expenditures in the Operating Funds: the combined General, Operations & Maintenance, Transportation, and Illinois Municipal Retirement/Social Security Funds. The fiscal year balance of revenues over expenditures for the Operating Funds was $0.5 million. Excluding the State of Illinois on-behalf retirement benefit contributions, operating revenues for FY totaled $73.5 million, while expenditures were $73.0 million. Total expenditures for the Operating Funds increased by 2.1%, an increase of $1.5 million from $71.5 million in FY14-15 to $73.0 million in FY The increase in the total expenditures from FY14-15 to FY15-16 is attributable to the following categories: Salaries ($1.3 million), Employee Benefits ($0.2 million), Purchased Services ($1.3 million), Supplies and Materials ($0.5 million), and Other Objects (including tuition) category of ($0.1 million). The increases were then offset by a decrease in Capital Outlay ($1.9 million). Total revenues for the Operating Funds increased by 2.2%, an increase of $1.6 million from $71.9 million in FY14-15 to $73.5 million in FY The increase in the total revenue from FY14-15 to FY15-16 is attributable to an increase in local sources of revenue, including all property taxes and interest income of $1.2 million. Federal revenue increased by $0.3 million and an increase in state revenue of $0.1 million. Property and replacement taxes, totaling $64.4 million, comprised 87.6% of total revenue for Operating Funds of $73.5 million. State and federal aid revenue, totaling $6.0 million, comprised 8.2% of operating revenue. The major sources of non-tax operating local revenues were cafeteria sales, $0.8 million; textbook fees and sales, $0.6 million; earnings on investments, $0.5 million; and a variety of other categories, including driver education fees, athletic event receipts, summer school fees for classes and camps, totaling $1.2 million. Including the Debt Service Fund and the Capital Projects Fund, which is not used for regular operating purposes, revenue from all sources totaled $75.8 million

11 Lyons Township High School District 204 Management s Discussion & Analysis (Unaudited) June 30, 2016 Property tax refunds continue to be an issue for the district. Settlements from prior tax years as well as the current tax year are charged to current fiscal year tax distributions. Total refunds decreased during FY15-16 from $1.6 million in FY14-15 to $1.2 million in FY15-16 which amounts to a 25% decrease. In a normal year, approximately 70% of the refunds are from court judgments for which no prior notice to the district is given or obtainable. The district will intervene in tax appeal proceedings when notified in a timely manner. The District s cumulative balance of reserves for the Operating Funds decreased during FY15-16, from $42.0 million in FY14-15 to $38.3 million in FY15-16, a decrease of $3.7 million, or 8.8%. The decrease in the Operating Funds is due to a conscious decision by the Board of Education to spend reserve funds for Capital Projects that were completed during the summer of The projects included replacement of air handling units, adding air conditioning to classroom spaces, replacement of the stage rigging in the North Campus Auditorium, replacement of a steam line that supplies heat to the North Campus Main Building and general remodeling including the replacement of domestic water piping and fire alarm cabling. The estimated cost for those projects was $1.9 million from the Operating Funds. School Board Policy states that the District seeks to maintain a minimum of 33% of annual operating expenditures in fund balance. Currently the district has 45.7% of annual operating expenditures in fund balance based on current fund balance and expenditures for FY16. Overview of the Financial Statements This Management s Discussion and Analysis section 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, Fund financial statements, and Notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements. Government-wide financial statements The government-wide financial statements are designed to provide readers with a broad overview of the District s finances, in a manner similar to a private-sector business. The statement of net position presents information on all of the District s assets, deferred outflows of resources, liabilities, and deferred inflows of resources, with the difference reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the District is improving or deteriorating

12 Lyons Township High School District 204 Management s Discussion & Analysis (Unaudited) June 30, 2016 The statement of activities presents information showing how the District s net position changed during the fiscal year being reported. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows; thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods. The government-wide financial statements present the functions of the District that are principally supported by taxes and intergovernmental revenues (governmental activities). The District has no business-type activities; that is, functions that are intended to recover all or a significant portion of their costs through user fees and charges. The District s governmental activities include instructional services (regular education, special education and other), supporting services, operation and maintenance of facilities and transportation services. Fund financial statements A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The District uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the District can be divided into two categories: Governmental Funds and Fiduciary Funds (the District maintains no proprietary funds). Governmental Funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements; however, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a school district s near-term financing requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the District s near-term financing decisions. Both the governmental funds balance sheet and the governmental funds statement of revenues, expenditures and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The District maintains six individual governmental funds. Information is presented separately in the governmental funds balance sheet and in the governmental funds statement of revenues, expenditures and changes in fund balances for the General (Educational and Working Cash Accounts), Operations and Maintenance, Transportation, Municipal Retirement/Social Security, Debt Service Funds and Capital Projects Fund. The District considers all of the funds to be major funds. The District adopts an annual budget for each of the funds listed above. A budgetary comparison schedule has been provided for each fund to demonstrate compliance with this budget. Fiduciary Funds are used to account for resources held for the benefit of parties outside the school district. Fiduciary Funds are not reflected in the government-wide financial statement because the resources of those funds are not available to support the District s own programs. The accounting used for Fiduciary Funds is much like that for the government-wide financial statements

13 Lyons Township High School District 204 Management s Discussion & Analysis (Unaudited) June 30, 2016 Notes to the financial statements The notes to the financial statements provide additional information that is essential for a full understanding of the data provided in the government-wide and fund financial statements. Other information In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information concerning the District s progress in funding its obligation to provide pension benefits to its non-certified employees. District-Wide Financial Analysis The District as a Whole The District s combined net position decreased by 3.3% from $76.1 million to $73.6 million as a result of an unfavorable balance of revenues verses expenses. Table 1 Condensed Statement of Position (In millions of dollars) Percentage Change Current and other assets $76.1 $ % Capital assets % Total assets $136.9 $ % Deferred Outflows of Resources $8.6 $ % Current liabilities $2.9 $ Long-term debt outstanding % Total liabilities $40.0 $ % Deferred inflows of resources % Net position: Net investment in capital assets $42.7 $ % Restricted % Unrestricted % Total net position $73.6 $ % - 7 -

14 Lyons Township High School District 204 Management s Discussion & Analysis (Unaudited) June 30, 2016 Changes in Net Position FY15-16 revenue from governmental activities was $100.7 million, with related expenses of $103.2 million, resulting in net position of $73.6 million (Table 2). Table 2 Changes in Net Position (in millions of dollars) Revenues: Program revenues: Governmental Activities 2016 Governmental Activities 2015 Percentage Change Charges for services $2.4 $ % Operating& capital grants & contributions % General revenues: Property & replacement taxes % General federal and state aid % Other % Total revenues $100.7 $ % Expenses: Instruction $69.4 $ % Pupil & instructional services % Administration & business % Transportation % Operations and maintenance % Other % Total expenses $103.2 $ % Increase (Decrease) in net position ($2.5) $2.4 Net position, beginning of year Net position - ending $73.6 $

15 Lyons Township High School District 204 Management s Discussion & Analysis (Unaudited) June 30, 2016 Revenues by Source: Property taxes and replacement taxes totaling $66.7 million accounted for 66.2% of total revenues, while operating grants and contributions in the amount of $29.0 million accounted for 28.8%, charges for services in the amount of $2.4 million accounted for 2.4%, general federal and state aid in the amount of $1.8 million accounted for 1.8% and other local revenue in the amount of $0.8 million accounted for 0.8%. Government-Wide Revenues by Source 1.8% 0.8% 2.4% 28.8% 66.2% Charges for services Property and replacement taxes Other local Operating grants & contributions General federal and state aid Government-Wide Expenses by Function 6.6% 10.0% 2.5% 4.1% 9.6% 67.2% Instruction Administration & business Transportation Pupil & instructional services Operations & maintenance Other - 9 -

16 Lyons Township High School District 204 Management s Discussion & Analysis (Unaudited) June 30, 2016 Expenses by Function: The District is self-funded for medical and dental insurance, using a third party administrative agency to pay claims that are discounted by access to provider and hospital networks. Financial results are, therefore, uncertain at the time of the Board s adoption of the budget, and depend upon actual medical claims experienced by staff members. The District is proactive in its efforts to contain health insurance costs. Employees contribute 22% of medical-dental insurance premiums, and other changes in plan designs have made employees more responsible for routine medical expenses. Total medical-dental claims paid in FY15-16 were $8.9 million while in FY14-15 total medical-dental claims paid were $7.6 million. LTHS promotes healthy lifestyle choices to employees, including a $120 rebate of the employees contributions to medical insurance in exchange for participation in an on-site health screening and completion of an on-line, interactive risk assessment. Total benefits for all employees, including health insurance, retirement benefits and federal obligations for FY15-16 totaled $8.7 million. In FY14-15, the total for the same benefits was $8.5 million. The difference of $0.2 million represents an increase of 2.4%. The majority of this increase was due to increased health insurance premiums with an offset of increased claims paid as stated in the prior paragraph. Purchased services costs related to operations and maintenance for FY15-16 totaled $1.5 million. In FY14-15, the total for the costs was $1.0 million. The difference of $0.5 million represents an increase of 50%. The majority of this increase was due to costs for asbestos abatement services, HVAC repairs, and other building repair services that were expensed in FY Tuition costs for out-placed, primarily special education, students increased during the current year. Total costs for FY15-16 were $3.7 million, compared to $3.4 million in FY This is a 8.8% increase over the prior year. This particular cost category is difficult for public school districts to control as the frequency and severity of students with disabilities determines costs for private facility placements. That student population can change both annually as well as during the school year, making it difficult to plan a budget for these costs. Budgetary Highlights: Revenues for the Operating Funds were $0.6 million more than budgeted, and expenditures were $0.2 million more than budgeted. The original and final budget anticipated that revenue would exceed expenditures in total. Several key factors, in particular, account for the majority of the difference in budget to actual expenditures in the operating funds: (1.) employee salaries were $0.3 million less than budgeted, (2.) employee benefits were $0.2 million less than budgeted (3.) purchased services and supplies combined were $0.7 million more than budgeted. The large variance in purchase services is related to the large increase in repair services as explained in a previous paragraph

17 Lyons Township High School District 204 Management s Discussion & Analysis (Unaudited) June 30, 2016 Several key factors also account for the majority of the difference in the budget to actual revenues in the operating funds: (1.) property taxes and local sources were $0.1 million more than budgeted (2.) state and federal sources combined were $0.5 million more than budgeted. The increase to state and federal sources was mainly attributable to timing differences of monies received from prior year budgeted programs. Budgetary variances, combining revenues and expenditures, for all operating funds caused an expected even balance to be increased to $0.3 million. All categories of expenditures combined were unfavorable by 0.27% or $0.2 million over budget on a $72.8 million budget. Variances in major categories were: Salaries, favorable, (0.6%); Benefits, favorable, (2.2%); Purchased Services, unfavorable (4.8%); Supplies and Materials, favorable (1.1%); Capital Outlay, favorable, (25.0%); other expenditures including tuition, unfavorable, (3.4%). The unfavorable variance in purchase services is due to higher than anticipated repair service costs. Capital Assets and Debt Administration Capital assets Table 3 Capital Assets (net of depreciation) (in millions of dollars) Percentage Change Land $1.1 $ % Construction in progress % Buildings, property, equipment, net % Total $60.8 $ % For over ten years, the Board of Education has been committed to improving and renovating the building facilities within the District. The District has an established Facilities Committee, consisting of Board of Education members, District Administration and the District architect, that reviews that condition of all facilities on a regular basis and makes recommendations for approval to the full Board of Education for improvements and renovations that are to be completed on an annual basis. The age of the facilities dictates that this process needs to continue regularly. The School Board and District Administration manage the extent of the year-to-year set of summer facilities improvement projects based upon financial affordability, and as a primary means of mitigating any risk of running an operating deficit. In recent years, capital outlay expenditures have fluctuated with external and internal economic conditions. For purposes of long term financial planning and ensuring balanced budgets each fiscal year, the Board of Education has anticipated being able to increase or decrease appropriations for facilities improvements after reaching a high level of confidence that projected revenues are sufficient to cover all anticipated expenditures

18 Lyons Township High School District 204 Management s Discussion & Analysis (Unaudited) June 30, 2016 During the fiscal year the District began work on several capital projects including replacement of air handling units, adding air conditioning to classroom spaces, replacement of the stage rigging in the North Campus Auditorium, replacement of a steam line that supplies heat to the North Campus Main Building and general remodeling including the replacement of domestic water piping and fire alarm cabling. The estimated cost for those projects was $4.1 million, including architectural fees, asbestos consulting fees and asbestos removal. The projects were completed during September of Currently, the Board of Education is in the process of reviewing potential renovations for the summer of Included in these potential projects are the replacement of the artificial field turf on the football field and several roofing replacement projects. (See Note 3, Capital Assets, for additional information on the District s capital assets.) Long-term debt At year-end, the District had $17.3 million in general obligation bonds outstanding. Table 4 Outstanding Long-Term Debt (in millions of dollars) General obligation bonds 2016 $ $19.0 Percentage Change -8.9% Other % Total $37.1 $ % The Board of Education currently has lawful authority to access a Debt Service Extension Base of $2.3 million annually to repay non-referendum long-term debt. For current debt, the District is utilizing a potential increase to the Debt Service Extension Base that allows for an annual increase by a percentage equal to the Consumer Price Index in December of the prior year. This amount is added to the prior year tax levy for Debt Service. When the District issued bonds in 2003, the bond rating requested of Standard & Poors was for a AAA rating; and the bond rating assigned by S&P was AA+. The most recent rating prior to 2003 was a Moody s rating of A1, equivalent to the Standard & Poors A+ rating. By going through a process of meeting with representatives from Standard & Poors and highlighting the strengths of Lyons Township High School, the rating improved by three levels, A+ to AA- to AA to AA+. Improving the District s bond rating saved a minimum of $150,000 in interest expense over the life of the bond issues, based on comparisons with bond issues rated at the lower A+ rating during the same time period. On June 1, 2010, Standard & Poors upgraded the District to the highest possible rating of AAA, subsequent to completing its annual surveillance reviews. In August, 2013, Standard & Poors affirmed the AAA rating for LTHS. In November, as the District prepared to issue bonds in December, 2013, and January, 2014, Standard & Poors again affirmed its AAA rating for LTHS. The District has no plans to issue debt based on approval by voters in a referendum, and no plans to issue any other forms of long or short-term debt for the near future

19 Lyons Township High School District 204 Management s Discussion & Analysis (Unaudited) June 30, 2016 (See Note 4 Changes in Long-Term Liabilities, for more detailed information on the District s debt.) Factors Bearing on the District s Future Lyons Township High School has historically been in excellent financial condition, based on strong accumulated fund balances and balanced budgets. A large majority of students, mostly collegebound and high-achieving, benefit from excellent educational programs and outstanding, dedicated faculty members. There are no major deficiencies in the school system indicating any risk that the District might need a tax rate increase in order to sustain its tradition of excellence. For the LTHS community, the current state of the District supports confidence in a strong future. The Property Tax Extension Limitation Law (Tax Cap) is effective in Suburban Cook County and throughout the Collar Counties surrounding Chicago. This law defines and maintains a limit on the rate of increase for property tax revenues, based upon the National Consumer Price Index. In recent years, LTHS has benefitted from strong local economic growth. Growth in New Property is included in the Tax Cap formula so that the District may obtain additional revenues to educate additional students. It also allows the District to benefit from newly-taxed commercialindustrial developments, or newly-constructed or renovated homes. Unfortunately, over the past several years, the amount of wealth within the district related to new growth (New Property) has decreased dramatically with the downturn of the economy. This factor has slowed the recent growth of additional annual revenue to the district. The General Assembly of the State of Illinois has recently discussed changing the formula for state funding sources for public school districts. The formula would potentially re-distribute state sources of funding. Preliminary estimates from the State Board of Education suggest that Lyons Township High School may lose as much as $2.0 million of state funding on an annual basis. This concept has not yet passed as state law but naturally we are continuing to monitor this situation as a loss of revenue to the district of this magnitude would potentially create a deficit operating position. The General Assembly of the State of Illinois has also discussed the potential of shifting current and future TRS (Teacher s Retirement System of The State of Illinois) pension costs, paid now by the State of Illinois, to the local school districts. Again, this is not yet law but we are also monitoring this closely. Initial estimates suggest that this new cost to the school districts could be as much as 6% of total pensionable earnings and could be phased in over the course of several years. Six percent of total pensionable earnings amounts to roughly $2.0 million of increased cost to Lyons Township. If enacted, both this legislation along with a re-distribution of state sources of funding could create difficult challenges for long-term financial stability

20 Lyons Township High School District 204 Management s Discussion & Analysis (Unaudited) June 30, 2016 The current Governor of the State of Illinois has, on several occasions, suggested that a property tax freeze for several years be implemented as part of state budget negotiations. If enacted, this legislation could potentially lead to reduced revenues for all taxing bodies, including school districts, not just in the frozen years but also for every future year as existing legislation does not allow taxing bodies to re-capture revenues not claimed in any prior year as part of a tax levy. This type of legislation could harm the financial status of all taxing bodies in the State of Illinois including school districts. In March of 2016, The Illinois Department of Revenue notified all taxing bodies in the State of Illinois that it had distributed $168 million of Personal Property Replacement Taxes in error and those funds needed to be paid back to the Department of Revenue. Lyons Township High School s share of that overpayment is calculated to be roughly $411,000. In order to re-capture those dollars, the Department of Revenue has currently reduced allocations for FY17 to all taxing bodies in an amount equal to $100 million. This roughly equates to a loss of revenue in the current year of $245,000 for Lyons Township High School. We are anticipating that at least one more adjustment will be made during FY18 to recapture the remaining funds. Additionally, for future year revenue projections, Personal Property Replacement Tax estimates have been reduced as the amounts used in prior year projections were based on inflated amounts that included the $168 million. Interest earnings on investments have been reduced dramatically over the last several years. Naturally, the district relies on these earnings as a source of income to be used to fund educational programs. During the current year, interest income accounted for roughly $.6 million of local revenues which is down $.1 million when compared to FY15. It is worth noting that District personnel are not involved in the process of investing the District funds. Lyons Township High School funds are held and invested by the Lyons Township School Treasurer s Office along with the funds of several other area school districts. The District continues to make responsible decisions regarding collectively bargained contracts. During the current fiscal year, a new, 4-year contract was ratified with the ParaEdcuatiors Association. As was the case with the prior contract, raises are tied to a percentage of the Consumer Price Index (CPI), with a floor and ceiling, as it relates to increases in the property tax levy under the Property Tax Extension Limitation Law. This allows for raises to be tied to a number that has a direct correlation to increases in district revenue. While there are several factors such as state funding and the economy that pose potential challenges for funding in future years, one item that has remained a consistent strength of the District is the community that surrounds Lyons Township High School. The community is made up of thriving commercial, industrial and residential properties that are committed to supporting a strong educational program. Property taxes alone support roughly 83.0% of the current annual operating budget and combining strong economic development for local businesses that has been realized in recent years and the fact that LTHS serves an area where homes are likely to maintain comparatively high values, the outlook for the financial future of LTHS remains very positive

21 Lyons Township High School District 204 Management s Discussion & Analysis (Unaudited) June 30, 2016 LTHS remains among the highest quality school districts, which are financially capable of offering students the opportunity to enroll in seven classes during the school day. The District has traditionally provided a genuinely comprehensive curriculum. Beyond the school day, students are able to participate in an extensive variety of co-curricular activities. The District s motto Vita Plena means the full life. The foreseeable economic prospects indicate a strong capability for LTHS to continue building upon its proud 125-year tradition of excellence. Requests for Information This financial report is designed to provide the District s citizens, taxpayers, 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 the Business Office at Lyons Township High School, 100 South Brainard, LaGrange, Illinois 60525, or at (708)

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23 BASIC FINANCIAL STATEMENTS

24 LYONS TOWNSHIP HIGH SCHOOL DISTRICT 204 STATEMENT OF NET POSITION JUNE 30, 2016 Governmental Activities Assets: Cash and investments $ 41,742,161 Receivables: Property taxes 31,062,541 Due from other governments 1,409,880 Inventories 1,844,596 Capital assets: Land and other non-depreciable capital assets 2,392,090 Other capital assets, net of depreciation 58,411,556 Total assets 136,862,824 Deferred outflows of resources: Illinois Municipal Retirement Fund 6,636,388 Teachers' Retirement System 1,973,132 Total deferred outflows of resources 8,609,520 Liabilities: Accounts payable and accrued liabilities 878,966 Salaries and wages payable 147,995 Payroll deductions payable 141,556 Contracts and retainage payable 755,586 Health claims payable 972,803 Accrued interest 24,129 Long-term liabilities: Due within one year 1,942,617 Due in more than one year 35,132,295 Total liabilities 39,995,947 Deferred inflows of resources: Property taxes levied for subsequent years 30,989,784 Teachers' Retirement System 795,403 Total deferred inflows of resources 31,785,187 Net Position: Net investment in capital assets 42,765,337 Restricted for: Capital projects 2,770,200 Debt service 1,037,686 Operations and maintenance 5,823,202 Retirement 1,094,393 Transportation 618,720 Unrestricted 19,581,672 Total net position $ 73,691,210 The notes to the financial statements are an integral part of this statement. 16

25 LYONS TOWNSHIP HIGH SCHOOL DISTRICT 204 STATEMENT OF ACTIVITIES YEAR ENDED JUNE 30, 2016 Net (Expense) Revenue and Changes Program Revenues in Net Position Charges for Operating Grants and Governmental Functions Expenses Services Contributions Activities Governmental activities: Instructional services: Regular programs $ 30,597,620 $ 1,381,250 $ 332,217 $ (28,884,153) Special programs 11,782,198-2,890,401 (8,891,797) Other programs 2,028,006 74,661 - (1,953,345) State retirement contributions 24,950,999-24,950,999 - Supporting services: Students 6,244, (6,244,789) Instructional staff 3,703, (3,703,477) District administration 966, (966,773) School administration 3,662, (3,662,902) Business 2,161, (2,161,108) Operation and maintenance of facilities 10,326, ,144 - (10,151,567) Transportation 2,559, ,155 (1,748,812) Food service 1,092, ,474 18,325 (260,580) Staff 1,100, (1,100,602) Other 601, (601,494) Community services 343, (343,644) Interest on long-term liabilities 356, (356,627) Unallocated depreciation 697, (697,237) Total school district $ 103,176,533 $ 2,444,529 $ 29,003,097 (71,728,907) General revenues: Property taxes levied for: General purposes 48,458,334 Operations and maintenance 9,231,252 Transportation 1,527,869 Retirement 1,953,671 Debt service 2,268,716 Corporate personal property replacement taxes 3,236,660 Federal and state aid not restricted to specific purposes 1,826,342 Earnings on investments 577,090 Miscellaneous 190,367 Total general revenues 69,270,301 Change in net position (2,458,606) Net postion - beginning 76,149,816 Net position - ending $ 73,691,210 The notes to the financial statements are an integral part of this statement. 17

26 LYONS TOWNSHIP HIGH SCHOOL DISTRICT 204 BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2016 Operations and General Maintenance Transportation ASSETS Cash and investments $ 29,268,256 $ 6,086,542 $ 500,577 Receivables: Property taxes 24,006,206 4,093, ,429 Due from other governments 1,207, ,343 Inventories 1,844, TOTAL ASSETS $ 56,326,595 $ 10,180,065 $ 1,514,349 LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES Liabilities: Accounts payable and accrued liabilities $ 643,673 $ 9,125 $ 90,416 Salaries and wages payable 124,211 23,784 - Payroll deductions payable 35,165 21,266 - Contracts and retainage payable Health claims payable 863, ,918 - Total Liabilities 1,666, ,574 90,416 Deferred inflows of resources: Property taxes levied for subsequent years 23,982,488 4,066, ,213 Total deferred inflows of resources 23,982,488 4,066, ,213 Fund Balances: Nonspendable 1,844, Restricted - 5,950, ,720 Unassigned 28,832, Total Fund Balances 30,677,173 5,950, ,720 TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES $ 56,326,595 $ 10,180,065 $ 1,514,349 The notes to the financial statements are an integral part of this statement. 18

27 LYONS TOWNSHIP HIGH SCHOOL DISTRICT 204 BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2016 Municipal Retirement/Social Security Debt Service Capital Projects Total Governmental Funds $ 1,172,395 $ 1,053,334 $ 3,661,057 $ 41,742, ,123 1,157,260-31,062, ,409, ,844,596 $ 2,166,518 $ 2,210,594 $ 3,661,057 $ 76,059,178 $ - $ - $ 135,752 $ 878, ,995 85, , , , ,803 85, ,857 2,896, ,000 1,148,779-30,989, ,000 1,148,779-30,989, ,844,596 1,094,393 1,061,815 2,770,200 11,495, ,832,577 1,094,393 1,061,815 2,770,200 42,172,488 $ 2,166,518 $ 2,210,594 $ 3,661,057 $ 76,059,178 The notes to the financial statements are an integral part of this statement. 19

28 LYONS TOWNSHIP HIGH SCHOOL DISTRICT 204 RECONCILIATION OF THE BALANCE SHEET OF GOVERNMENTAL FUNDS TO THE STATEMENT OF NET POSITION JUNE 30, 2016 Amounts reported for governmental activities in the statement of net position are different because: Total fund balance - governmental funds $ 42,172,488 Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds. The cost of the assets is $108,798,798 and the accumulated depreciation is $47,995, ,803,646 Accrued interest payable was recognized for governmental activities, but is not due and payable from funds available in the current period and therefore is not reported as a liability in the governmental funds. (24,129) Long-term liabilities are not due and payable in the current period and therefore are not reported in the fund financial statements. Bonds payable (17,320,000) Deferred amounts for issuance premium (718,309) Compensated absences payable (187,617) Net other post employment benefits (2,599,637) Net pension liability - Teachers' Retirement System (5,846,123) Net pension liability - Illinois Municipal Retirement Fund (10,403,226) (37,074,912) Deferred outflows and deferred inflows, related to the pensions, represent a consumption of or increase to net position, that apply to future periods and therefore are not reported in the funds. Deferred outflow - Teachers' Retirement System 1,973,132 Deferred outflow - Illinois Municipal Retirement Fund 6,636,388 Deferred inflow - Teachers' Retirement System (795,403) 7,814,117 Total net position - governmental activities $ 73,691,210 The notes to the financial statements are an integral part of this statement. 20

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30 LYONS TOWNSHIP HIGH SCHOOL DISTRICT 204 STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2016 Operations and General Maintenance Transportation REVENUES Property taxes $ 48,458,334 $ 9,231,252 $ 1,527,869 Other local sources 5,644, ,490 7,758 State sources 28,276,645-1,011,086 Federal sources 1,541, Total Revenues 83,920,944 9,488,742 2,546,713 EXPENDITURES Instruction 66,480, Supporting services 17,348,948 8,147,119 2,546,713 Community services 327, Payments to other districts and governmental units 705, Debt service Total Expenditures 84,862,411 8,147,119 2,546,713 Excess (deficiency) of revenues over expenditures (941,467) 1,341,623 - OTHER FINANCING SOURCES (USES) Transfers in Transfers out (3,068,049) (1,081,951) - Total other financing sources (uses) (3,068,049) (1,081,951) - Net changes in fund balances (4,009,516) 259,672 - Fund balance at beginning of year 34,686,689 5,690, ,720 FUND BALANCE AT END OF YEAR $ 30,677,173 $ 5,950,187 $ 618,720 The notes to the financial statements are an integral part of this statement. 21