BLUE VALLEY UNIFIED SCHOOL DISTRICT NO Financial Statements and Schedule of Expenditures of Federal Awards

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1 Financial Statements and Schedule of Expenditures of Federal Awards For the Fiscal Year Ended June 30, 2017

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3 Financial Statements and Schedule of Expenditures of Federal Awards Year ended June 30, 2017 TABLE OF CONTENTS Page Independent Auditor s Report 1-2 Management s Discussion and Analysis 3-11 Basic Financial Statements: Government-wide Financial Statements Statement of Net Position 12 Statement of Activities 13 Fund Financial Statements Balance Sheet - Governmental Funds Reconciliation of the Total Governmental Fund Balance Sheet to Net Position of Governmental Activities 16 Statement of Revenues, Expenditures, and Changes in Fund Balances - Governmental Funds Reconciliation of the Governmental Funds Statement of Revenues, Expenditures And Changes in Fund Balances with the Government - Wide Statement of Activities 19 Statement of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual (Non-GAAP Basis) General Fund 20 Supplemental General Fund 21 Special Education Fund 22 KPERS Fund 23 Capital Outlay Fund 24 Statement of Fiduciary Net Position 25 Notes to the Basic Financial Statements Required Supplementary Information: Other Post-Employment Benefits Schedule of Changes in the District s Total OPEB Liability and Related Ratios 49 KPERS Pension Plan Schedule of District s Proportionate Share of the Net Pension Liability 50 Schedule of District Contributions 50

4 Financial Statements and Schedule of Expenditures of Federal Awards Year ended June 30, 2017 TABLE OF CONTENTS - CONTINUED Combining Statements and Individual Fund Schedules Combining Statements - Nonmajor Funds Page Fund Descriptions Combining Balance Sheet - Nonmajor Special Revenue Funds Combining Statement of Revenues, Expenditures and Changes in Fund Balances - Nonmajor Special Revenue Funds Individual Fund Schedules of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual (Non-GAAP Basis): Vocational Education Fund 61 At Risk (K-12) Fund 62 Driver Training Fund 63 Professional Development Fund 64 Special Assessment Fund 65 Food Service Fund 66 Bilingual Education Fund 67 Virtual Education Fund 68 Summer School Fund 69 Parent Education Program Fund 70 Extraordinary School Program Fund 71 Federal Funds Gifts and Grants Funds Special Liability Fund 76 Debt Service Fund 77 Combining Statement of Net Position - Agency Funds 78 Statement of Changes in Assets and Liabilities 79 Schedule of Expenditures of Federal Awards 80 Notes to Schedule of Expenditures of Federal Awards 81 Schedule of Findings and Questioned Costs Independent Auditor s Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards Independent Auditor s Report on Compliance for Each Major Program And on Internal Control over Compliance Required by the Uniform Guidance 86-87

5 INDEPENDENT AUDITOR S REPORT Board of Education Blue Valley Unified School District No. 229 We have audited the accompanying financial statements of the governmental activities, the aggregate discretely presented component unit, each major fund, budgetary comparison information, and the aggregate remaining fund information of the Blue Valley Unified School District No. 229 (the District), as of and for the year ended June 30, 2017, and the related notes to the financial statements, which collectively comprise the District s basic financial statements as listed in the table of contents. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America, the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States and the Kansas Municipal Accounting and Audit Guide. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit 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. Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the aggregate discretely presented component unit, each major fund, budgetary comparison information, and the aggregate remaining fund information of the District as of June 30, 2017, and the respective changes in financial position, thereof and the respective budgetary comparison for the General, Supplemental General, Special Education, KPERS, and Capital Outlay Funds for the year then ended in accordance with accounting principles generally accepted in the United States of America. mhco@mizehouser.com 534 S Kansas Ave, Suite 700 Topeka, KS p f 534 S Kansas Ave, Suite 400 Topeka, KS p f 7101 College Blvd, Suite 900 Overland Park, KS p f 211 E Eighth Suite A Lawrence, KS p f 1

6 Emphasis of Matter Prior Period Restatement As discussed in Note 3 to the financial statements, certain errors resulting in amounts previously reported as expenses and capital assets as of June 30, 2016, were discovered by management of the District during the current year. Accordingly, these amounts have been restated in the June 30, 2017, financial statements now presented, and adjustments have been made to net position to correct the error. Our opinion is not modified with respect to these matters. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management's discussion and analysis on pages 3 through 11, the schedule of changes in the District s total OPEB liability and related ratios on page 49, the schedule of the District s proportionate share of the net pension liability on page 50, and the schedule of District contributions on page 50 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 financial statements as a whole. The combining and individual nonmajor fund financial statements and schedules, as listed in the table of contents are presented for purposes of additional analysis and are not a required part of the basic financial statements. The schedule of expenditures of federal awards is presented for purposes of additional analysis as required by Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, and is also not a required part of the basic financial statements. The combining and individual nonmajor fund financial statements, budgetary comparison schedules, and the schedule of expenditures of federal awards are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying account and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated September 20, 2017, on our consideration of the District s internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts, and grants agreements and other matters. The purpose of that report is solely 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 the effectiveness of the District s 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. Certified Public Accountants Lawrence, KS September 20,

7 Blue Valley Unified School District No. 229 Management s Discussion and Analysis For the Fiscal Year Ended June 30, 2017 This section of the Blue Valley School District s annual financial report presents its discussion and analysis of the district s financial performance during the fiscal year ended June 30, Please read it in conjunction with the District s financial statements, which immediately follow this section. FINANCIAL HIGHLIGHTS Total net position increased by $53.1 million and overall revenues were $331.7 million. The District s current assets decreased by $32.1 million which is primarily attributable to a $31 million decrease in investments. Investments decreased due largely to construction expenditures paid during the fiscal year from bond proceeds that were authorized under the 2012 and 2005 referendums. The District s total outstanding non-current liabilities decreased by $37.6 million during fiscal year A reduction of the long-term general obligation bonds of $39.6 million was the key factor in this decrease. In accordance with GASB Statements No. 74 & 75 Accounting and Financial Reporting for Post-Employment Benefits Other Than Pensions implemented during the prior year, the District had an actuarial evaluation completed as of June 30, 2016 to determine their obligation for other post-employment benefits. As a result of that evaluation, the District recorded a Total Other Post-Employment Benefits (OPEB) Liability of $17.2 million as of June 30, 2017, which is an increase of $1.2 million from the Total OPEB Liability of $16 million recorded as of June 30, OVERVIEW OF THE FINANCIAL STATEMENTS This annual report consists of three parts: management s discussion and analysis (this section), the basic financial statements and required supplementary information. These statements are organized so the reader can understand the District as a whole. The basic financial statements include two types of statements that present different views of the district. The first are the government-wide financial statements and the second are the fund financial statements. Government-Wide Financial Statements The government-wide financial statements include all assets and liabilities of the district using the accrual basis of accounting. This method of accounting is similar to how private sector companies report the results of their operations. These statements take into account all of the current year s revenues and expenses regardless of when cash is received or paid. The first of the government-wide statements is the Statement of Net Position. The Statement of Net Position presents balance information for the entire district operations at a given point in time (June 30, 2017). The assets include all cash and investments, receivables including interest and taxes assessed that remain uncollected, materials inventory, bond issuance costs and capital assets reduced by accumulated depreciation. Liabilities include accounts payable, accrued payroll earnings not yet paid, accrued interest payable, retainage payable, unearned revenue, compensated absences, net OPEB obligation, net pension liability and outstanding general obligation debt. Deferred Inflows of Resources recognize the pension differences between projected and actual investment earnings as well as expected and actual experience as of June 30, This results in a statement that encompasses the entire operations of the Blue Valley School District. Although the Statement of Net Position reports total net position of $194.6 million, the district has restrictions over the use of these funds. The investment in facilities and equipment is necessary to carry out the mission of the district. Kansas state law segregates funds and places restrictions on spending. This should be considered when reviewing the report. The second of the government-wide financial statements is the Statement of Activities. This statement shows the results of operations that caused the net position to change from the prior year amount reported to the amount reported on the Statement of Net Position as of June 30, This statement answers the question, How did we do financially during fiscal year 2017? This change in net position is important because it tells the reader that, for the school district as a whole, the financial position has improved or diminished. The causes of this change may be the result of many factors. Most notably, the results are influenced by: The property tax base, Funding at local, state and federal levels 3

8 Blue Valley Unified School District No. 229 Management s Discussion and Analysis For the Fiscal Year Ended June 30, 2017 Operating expenditure limits imposed by Kansas law, Building improvements, Number of students served, Staffing levels, and Changes in debt levels The Statement of Activities classifies expenses by functional area. The report also shows corresponding charges for services and restricted grants for each function that helps support the expenses. The resulting Net [Expenses] Revenue and Changes in Net Position shows the remaining expenses not supported by charges for services and restricted grants. General revenues are then applied to the remaining expenses resulting in the total change in net position for the year. Fund Financial Statements Financial reports by fund follow the government-wide statements. The major funds are listed separately with all smaller funds aggregated in the column labeled Other Governmental Funds. As shown on the reconciliations on pages 16 and 19, the fund statements differ from the government-wide statements (Statement of Net Position and Statement of Activities) by including due to/due from adjustments and excluding the following: Bond issuance costs, bonds payable and related accrued interest, Cost of capital assets less accumulated depreciation, Compensated absences, Net other post-employment benefit obligations, and Net pension liability These reports provide more detail about the school district according to the various funds established under Kansas law. Due to the large number of funds, the major funds are listed separately with the remaining funds aggregated into the column labeled Other Governmental Funds. The district has two kinds of funds: governmental and fiduciary funds. Governmental Funds Most of the district s activities are reported in the governmental funds, which focus on 1) how cash and other financial assets, that can be readily converted to cash, flow in and out, and 2) the balances left at year end that are available for spending. The statements show revenue, expenditures and fund balances for each listed fund. The fund classifications provide additional information about the entity. The general, supplemental general, special education and other governmental funds encompass the major operating funds. The capital outlay fund is used primarily to repair and remodel district buildings and for equipment and technology purchases. The debt service fund is used to pay outstanding general obligation bonds and related interest charges as they become due. The capital projects fund is the primary source for the purchase of sites, buildings and building improvements and technology projects. Fiduciary Funds The District s fiduciary funds are agency funds. Agency funds are used to account for assets held in a trustee capacity or as an agent for individuals, private organizations and/or other funds. Agency funds include student organization monies at the various schools. The district accounts for these funds and students approve all of the expenditures. Also included is the Gift fund, which accounts for gifts from outside donors. Additionally, the Extraordinary Growth fund is included and this fund is used to account for collections of local taxes necessary to cover the additional costs of opening new facilities. These funds are then sent to the state as a reimbursement for the increased operating authority. Finally, the fiduciary funds include the Cost of Living fund which provides for a legal vehicle to levy taxes attributable to the weighting factor provided to school districts with high housing costs. This fund is used to channel the local tax revenues back to the state to offset the increased operating authority for districts which have residences that are higher than the statewide average value. The District s agency funds are reported on the Combining Statement of Net Position - Agency Funds. 4

9 Blue Valley Unified School District No. 229 Management s Discussion and Analysis For the Fiscal Year Ended June 30, 2017 FINANCIAL ANALYSIS OF THE DISTRICT AS A WHOLE The district s net position was more on June 30, 2017 than it was the year before, increasing by $53.1 million to $194.6 million. The following are the major components of the district s net position. Due to rounding, the numbers provided below may vary slightly from the amounts presented in the basic financial statements. Condensed Statement of Net Position Balance As Of Prior Period Balance, Restated Balance As Of June 30, 2016 Adjustment June 30, 2016 June 30, 2017 Statement Classifications Current assets $251,261,586 $ - $251,261,586 $219,178,816 Non-current assets Capital assets 576,934, , ,182, ,240,199 Total assets $828,195,601 $ 248,600 $828,444,201 $801,419,015 Pension $ 22,392,712 $ - $ 22,392,712 $ 46,186,883 Total deferred outflows $ 22,392,712 $ - $ 22,392,712 $ 46,186,883 Current Liabilities $ 84,172,415 - $ 84,172,415 $ 70,846,104 Non-current liabilities 596,442, ,442, ,825,724 Total liabilities $680,615,134 $ - $680,615,134 $629,671,828 Pension $28,764,227 $ - $28,764,227 $23,367,410 Total deferred inflows $28,764,227 $ - $28,764,227 $23,367,410 Net position Invested in capital assets, net of related debt $181,338,106 $ 248,600 $181,586,706 $217,858,989 Restricted 54,682,350-54,682,350 56,343,026 Unrestricted (94,811,504) - (94,811,504) (79,635,355) Total net position $141,208,952 $ 248,600 $141,457,552 $194,566,660 The increase of $53.1 million in total net position is due to several factors. It includes a decrease in current assets of $32.1 million and an increase in capital assets of $5.1 million. It also includes a decrease in current liabilities of $13.3 million and a decrease in non-current liabilities of $37.6 million. In addition, deferred outflows increased $23.8 million and deferred inflows decreased $5.4 million. Net position includes $217.9 million invested in capital assets, $56.3 million restricted for debt service and $(79.6) million unrestricted. The total costs of all programs and services amounted to $278.5 million. breakdown of total costs by functional area: The following table shows the Percentage Expense Function of Total Instruction 55% Student support services 6% Instructional support staff 4% General administration 1% School administration 4% Central Services 1% Operations and maintenance 16% 5

10 Blue Valley Unified School District No. 229 Management s Discussion and Analysis For the Fiscal Year Ended June 30, 2017 Student transportation services 3% Food service operations 3% Other support services 3% Interest on long-term debt 4% The table below details the district s change in net position for the last two years. Changes in Net Position from Operating Results (In millions of dollars) Totals For The Totals For The Year Ended Year Ended Revenues June 30, 2016 June 30, 2017 Program revenues Charges for services $13.4 $13.2 Operating grants and contributions General revenues Property taxes Grants and entitlements* Investment earnings Miscellaneous Total revenues *not restricted to specific programs Expenses Instruction Student support services Instructional support staff General administration School administration Central services Operations and maintenance Student transportation services Food service operations Other support services Interest on long term debt Total Expenses Increase [decrease] in net position $ 20.1 $ 53.2 Total revenues exceeded expenses during the fiscal year by $53.2 million and the district s total revenues increased overall by $35 million. The increase was attributable to one primary factor and many other smaller factors. The primary factor was an increase in operating grants and contributions of $28.3 million, due largely to $31.7 million recorded for a grant from the State for bonds issued to fund KPERS. Expenses increased by $1.9 million as a result of various increases and decreases in all functional areas. 6

11 Blue Valley Unified School District No. 229 Management s Discussion and Analysis For the Fiscal Year Ended June 30, 2017 The table presented below presents the cost of eleven major district activities. The table also shows each activity s net cost (total cost less fees generated by the activities and intergovernmental aid provided for specific programs). The net cost shows the financial burden placed on the district s taxpayers by each of these functions. Net Cost of Governmental Activities (In millions of dollars) Total Cost Net Cost Expense Functions of Services of Services Instruction $153.6 $92.4 Student support services Instructional support staff General administration School administration Central services Operations and maintenance Student transportation services Food service operations 9.5 (0.2) Other support services Interest on long-term debt Total $278.5 $193.2 Costs of $13.2 million were financed by users of the district s programs. Federal and state governments subsidized certain programs with grants and contributions totaling $72.2 million. Most of the district s net cost of services of $193.2 million was financed by district and state taxpayers. This portion of governmental activities was financed with $131.1 million in property taxes, $108.7 million of grants and entitlements not restricted to specific programs, $1.5 million in investment earnings and $5 million in miscellaneous sources. FINANCIAL ANALYSIS OF THE DISTRICT S FUNDS As the district completed the year, its governmental funds reported combined fund balances of $192 million; a decrease of $22.2 million from last year s ending fund balance. Expenditures of $322.1 million exceeded revenues of $299.9 million by $22.2 million. The reason for this decrease in fund balance is detailed in the section below. The general, supplemental general, special education and debt service funds are the primary source of revenues for the district. These funds account for $230.6 million or 76.9% of the total revenues. Capital Outlay represents approximately 8.8% of the total and the KPERS fund represents approximately 3.9% of the total. The 2005 and 2012 Capital Projects funds represent less than 0.1% of the total with the remaining approximately 10.3% in other governmental funds. 7

12 Blue Valley Unified School District No. 229 Management s Discussion and Analysis For the Fiscal Year Ended June 30, 2017 Kansas State laws require the use of a multitude of funds. Many of these funds do not have sufficient resources to pay the expenditures in the funds and therefore transfers must be made from other funds. Typically these transfers are made from the general and supplemental general funds. The following table categorizes the funds to simplify the analysis: Governmental Funds Revenues, Expenditures, Transfers and Fund Balance (In millions of dollars) Beginning Other Ending Fund Sources/ Fund Fund Balance Revenues Expenditures Transfers Balance Basic Education General $ 0.5 $ $ $ 0.8 Supplemental general Special education Vocational education At Risk (K-12) Professional development Bilingual Virtual education Gate receipts Student projects Instructional materials Contingency reserve Special workers comp reserve Special healthcare reserve Special liability KPERS Federal and state grants* Total Basic Education Expanded Education Driver training (0.2) - Summer school Parent education program Extraordinary school program Total Expanded Education (0.2) 1.3 Capital Capital outlay Debt service Capital projects (2005) Capital projects (2012) Special assessment Total Capital Food Service Total $214.2 $299.9 $322.1 $ - $192.0 * Federal and state grants include the following funds: DAC Grant, Title I, Blue Valley Foundation Grant, Community Grants, Title II-A, Title III and other Federal Grants. 8

13 Blue Valley Unified School District No. 229 Management s Discussion and Analysis For the Fiscal Year Ended June 30, 2017 Overall, total expenditures exceeded revenue plus other sources (issuance of bonds), leaving an ending fund balance of $192 million. An analysis of the above table s categories follows: Basic Education expenditures exceeded revenues by $2.3 million. The general and supplemental general funds are subject to an expenditure limit. Under the Block Grant, the Legislature froze funding for school districts at 2014/15 levels for fiscal years 2015/16 and 2016/17 with minimal adjustments allowed for miscellaneous revenues. The school district has no ability to increase the resources in the general and supplemental general funds to cover inflationary increases in costs without annual changes in the statute. The textbook, student projects, student materials and gate receipts funds can be increased with school board approval, but are only a small part of the basic education group of funds. Any balances remaining in the general and supplemental general funds are used to support the subsequent year limit. Therefore, remaining balances in these funds should not be considered as additional resources available to the district in excess of the expenditure limits. The general and supplemental general funds ending fund balances represent $4.5 million (9.4%) of the basic education balance of $47.9 million. Kansas statutes allows school districts to carry a balance in the Special Education fund, the Vocational Education fund, the Professional Development fund, the Bilingual fund, the Contingency Reserve fund, the Special Reserve fund, the Special Liability fund and all other Special Revenue funds. During the school year, the Special Education fund expenditures exceeded revenues by $2.6 million. The Special Reserve fund has historically been used to protect the district from insurable losses that are not otherwise insured. The district has been self-funding their workmen s compensation coverage from this fund. The district began self-insuring their health insurance plan on January 1, 2011 and all revenues and expenditures related to this plan are tracked in the Special Healthcare Reserve fund. The Special Liability fund is used to pay the cost of providing for the school district s defense pursuant to the Kansas tort claims act. Expanded Education expenditures exceeded revenues by $0.1 million for the fiscal year. This group of funds had an ending fund balance of $1.3 million at June 30, Tuition for the summer school program and driver s education program is collected prior to June 30 th, but most of the expenditures are paid in July and August. The district can adjust revenue in the drivers education, extraordinary schools and summer school programs as these are fee based programs supported by the users of the programs. Capital funds expenditures exceeded revenues and other sources by $19.5 million, with ending fund balances totaling $140.2 million. Construction funds accounted for $19.4 million of the total ending fund balance. As of June 30, 2017 there were bond proceeds available for expenditure in the 2005 Capital Project fund. In October, 2015 the District sold the final installment of bonds of $20.2 million approved in the 2005 referendum of $ million. In addition, the District also sold $72 million in bonds from the 2012 referendum. This was the third sale from the $ referendum. The capital outlay fund has a balance of $64 million. The fund balance includes budgeted amounts for projects that are only partially completed and paid at June 30. The mill rate on this fund is currently at 8 mills which is the statutory limit. The debt service balance of $56.4 million is available to pay the bond and interest payment in October, The current mill rate is sufficient to pay the remaining bonds and interest as they become due. Food service expenditures exceeded revenues by $0.3 million leaving an ending fund balance of $2.6 million. Although transfers from other tax supported funds are allowed under Kansas law, Blue Valley s food service program operates without this support. The school board has the authority to adjust meal prices as necessary. General Fund Budgetary Highlights The following table summarizes the general fund budget variances (In millions of dollars): 9

14 Blue Valley Unified School District No. 229 Management s Discussion and Analysis For the Fiscal Year Ended June 30, 2017 Original Final Increase/ Actual Over/[Under] Revenue Budget Budget [Decrease] Amounts Final Budget Intergovernmental [5.9] Other Revenue Total Revenue [5.7] Expenditures Instruction [2.1] Student Support Instructional Support [0.4] General Admin [0.2] School Administration [0.2] Operations/Maint [0.1] Other Support Serv [1.0] Transportation [0.2] Capital Outlay Transfers Out [5.7] Total Expenditures $149.3 $143.6 $[5.7] $143.6 $ - The final general fund expenditures budget decreased $5.7 million from the original budget. The final general fund budget is based on Block Grant limits which are at 2014/15 funding levels. Capital Asset and Debt Administration Capital Assets By the end of 2017, the district had invested $857 million in a broad range of capital assets, including school buildings, athletic facilities, computer equipment, and administrative offices. The accumulated depreciation on the capital assets amounted to $275 million, resulting in capital assets, net of depreciation of $582 million. This amount represents an increase of $5 million from last year. The value of additions in comparison to previous years was higher due largely to the construction of a new elementary school. Capital Assets (Net of depreciation, in millions of dollars) Assets As Of Prior Period Balance, Restated Assets As Of % June 30, 2016 Adjustment June 30, 2016 June 30, 2017 Depreciated Land $32.2 $ - $32.2 $32.6 n/a Construction in progress n/a Buildings and improvements % Site improvements % Infrastructure % Furniture % Technology % Vehicles % Food Service % Equipment % Total $576.8 $ 0.2 $577.0 $ % More information regarding the district s capital assets can be found in the notes to the financial statements (Note 4-C). 10

15 Blue Valley Unified School District No. 229 Management s Discussion and Analysis For the Fiscal Year Ended June 30, 2017 Long-Term Debt Moody s Investors Services and Standard & Poor s have rated the Blue Valley School District at Aaa and AA+, respectively. Kansas law limits the amount of outstanding indebtedness. The current limit for the district is at approximately $398 million, but when necessary districts may be given permission to exceed the limit by the State of Kansas. As of June 30, 2017, the district has $366.5 million of outstanding debt. The district continued to pay down its debt, retiring approximately $42.6 million of outstanding bonds. The district has a high debt per capita because of its continued growth. Building expansion has been funded with debt, and district management does not feel that the amount of debt is a burden to taxpayers. More information regarding the district s long-term debt can be found in the notes to the financial statements (Note 4-D). Contacting the District s Financial Management This financial report is designed to provide the district s citizens, taxpayers, customers and 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 the Business and Finance Department, Blue Valley School District, Metcalf, Overland Park, Kansas

16 STATEMENT OF NET POSITION June 30, 2017 Primary Government Total Governmental Activities ASSETS AND DEFERRED OUTFLOWS OF RESOURCES: Current assets: Cash and investments 204,655,907 Component Unit Total Governmental Activities $ $ 7,876,407 Receivables Interest 329,940 - Other 13,802,363 1,588 Material and supplies inventory 390,606 - Total current assets 219,178,816 7,877,995 Noncurrent assets: Capital assets Nondepreciable capital assets 68,987,952 56,525 Depreciable capital assets 788,060,168 55,996,186 Less: Accumulated depreciation [274,807,921] [11,884,317] Total noncurrent assets 582,240,199 44,168,394 Total assets 801,419,015 52,046,389 Deferred outflow of resources Pension - changes in proportion 14,638,693 - Pension - net difference between projected and actual earnings on pension plan investments 19,272,126 - Pension contributions subsequent to the measurement date 12,276,064 - Total deferred outflows of resources 46,186,883 - Total assets and deferred outflows of resources $ 847,605,898 $ 52,046,389 LIABILITIES AND DEFERRED INFLOWS OF RESOURCES Current liabilities: Accounts payable $ 7,085,914 $ 3,992 Accrued compensation, payroll withholdings and taxes 14,910, ,216 Current portion compensated absences 401,098 - Accrued interest payable 3,581, ,018 Retainage payable 3,013,509 - Unearned revenue 2,207, ,077 Long-term liabilities General obligation bonds due within one year 39,647,354 - Certificates of participation due within one year - 1,779,846 Total current liabilities 70,846,104 3,125,149 Noncurrent liabilities: Compensated absences 1,377,191 - Net other post employment benefit obligation 17,246,113 - Net pension liability 213,374,529 - Long-term liabilities General obligation bonds due in more than one year 326,827,891 - Certificates of participation due in more than one year - 27,576,082 Total noncurrent liabilities 558,825,724 27,576,082 Total liabilities 629,671,828 30,701,231 Deferred Inflows of Resources Pension - differences between expected and actual experience 10,073,725 - Pension - changes of assumptions 385,806 - Pension - changes in proportion 12,907,879 - Total deferred inflows of resources 23,367,410 - Total liabilities and deferred inflows of resources $ 653,039,238 $ 30,701,231 NET POSITION Net investment in capital assets $ 217,858,989 $ 15,159,752 Restricted for: Debt service 56,343,026 - Unrestricted [79,635,355] 6,185,406 Total net position $ 194,566,660 $ 21,345,158 The notes to the basic financial statements are an integral part of this statement. 12

17 STATEMENT OF ACTIVITIES For the Year Ended June 30, 2017 Governmental activities: Net [Expenses] Revenue and Changes in Net Position Primary Government Component Unit Operating Total Total Charges for Grants and Governmental Governmental Expenses Services Contributions Activities Activities Instruction $ 153,626,889 $ 5,985,359 $ 55,225,865 $ [92,415,665] $ - Student support services 15,129,219-3,609,112 [11,520,107] - Instructional support staff 11,388,524-2,583,821 [8,804,703] - General administration 2,219, ,099 [1,824,330] - School administration 12,099,831-2,467,921 [9,631,910] - Central services 2,581, [2,581,667] - Operations and maintenance 44,242,526-3,325,682 [40,916,844] - Student transportation services 8,071,060-12,577 [8,058,483] - Food service operations 9,528,742 7,187,588 2,522, ,646 - Other support services 7,537,513-2,062,805 [5,474,708] - Interest on long-term debt 12,121, [12,121,977] - Total primary government $ 278,547,377 $ 13,172,947 $ 72,205,682 [193,168,748] - Component unit: Program Revenues Blue Valley Recreation Commission Culture and recreation $ 11,667,191 $ 5,405,102 $ - - [6,262,089] Total component unit $ 11,667,191 $ 5,405,102 $ - - [6,262,089] General Revenues: Property taxes levied for General purposes 49,748,967 6,977,211 Debt service 55,917,059 - Capital outlay 25,476,747 - Grants and entitlements not restricted to specific programs 108,644,305 - Investments earnings 1,471,266 31,693 Miscellaneous 5,019,512 56,978 Subtotal general revenues 246,277,856 7,065,882 Change in net position 53,109, ,793 Net position - beginning 141,208,952 20,541,365 Prior period adjustment 248,600 - Net position - beginning, restated 141,457,552 20,541,365 Net position - ending $ 194,566,660 $ 21,345,158 The notes to the basic financial statements are an integral part of this statement. 13

18 BALANCE SHEET - GOVERNMENTAL FUNDS June 30, 2017 Supplemental Special Capital General General Education KPERS Outlay ASSETS Cash and investments $ 6,806,064 $ 3,748,516 $ 6,808,100 $ - $ 64,138,893 Receivables Interest 307, Other 9,541, ,144,844 - Due from other funds 89, Material and supplies inventory 239, Total assets $ 16,983,450 $ 3,748,516 $ 6,809,048 $ 4,144,844 $ 64,138,893 LIABILITIES AND FUND BALANCES Liabilities: Accounts payable $ 1,002,299 $ - $ 93,819 $ 4,144,844 $ 179,804 Accrued liabilities 14,909, Due to other funds Retainage payable Unearned revenue 251,960-24, Total liabilities 16,164, ,184 4,144, ,804 Fund balance: Nonspendable 239, Restricted - - 6,595,779-60,701,453 Assigned 579,863-95,085-3,257,636 Unassigned - 3,748, Total fund balances 819,277 3,748,516 6,690,864-63,959,089 Total liabilities and fund balances $ 16,983,450 $ 3,748,516 $ 6,809,048 $ 4,144,844 $ 64,138,893 The notes to the basic financial statements are an integral part of this statement. 14

19 Other Total Debt Capital Capital Governmental Governmental Service Projects Projects Funds Funds $ 56,343,026 $ 4,435,468 $ 19,002,579 $ 43,373,261 $ 204,655, , , ,264 13,802, , , ,606 $ 56,343,026 $ 4,435,468 $ 19,025,032 $ 43,639,717 $ 219,267,994 $ - $ 125,338 $ 1,067,011 $ 472,799 $ 7,085, ,910, ,178 89,178-2,216, ,414-3,013, ,930,898 2,207,076-2,341,433 1,864,425 2,492,875 27,305, , ,606 56,343,026 1,356,183 5,373,267 27,356, ,726, ,852 11,787,340 13,638,838 30,096, ,748,516 56,343,026 2,094,035 17,160,607 41,146, ,962,256 $ 56,343,026 $ 4,435,468 $ 19,025,032 $ 43,639,717 $ 219,267,994 The notes to the basic financial statements are an integral part of this statement. 15

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21 RECONCILIATION OF THE TOTAL GOVERNMENTAL FUND BALANCE SHEET TO NET POSITION OF GOVERNMENTAL ACTIVITIES June 30, 2017 Total Governmental Fund Balances $ 191,962,256 Amounts reported for governmental activities in the statement of net position are different because Capital assets used in governmental activities are not financial resources and therefore are not reported in the funds The cost of capital assets is 857,048,120 Accumulated depreciation is 274,807, ,240,199 Pension contributions are reported as an expense in the funds and as a deferred outflow of resources in the governmental activities in the statement of net position. 46,186,883 Pension fundings are reported as a revenue in the funds and as a deferred inflow of resources in the governmental activities in the statement of net position. [236,741,939] The following liabilities, including bonds payable, are not due and payable in the current period and therefore are not reported as liabilities in the funds. These liabilities at year end consist of: Bonds payable [366,475,245] Accrued compensation [1,778,289] Net other post employment benefit obligation [17,246,113] Accrued interest on the bonds [3,581,092] [389,080,739] Net Position of Governmental Activities $ 194,566,660 The notes to the basic financial statements are an integral part of this statement. 16

22 STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - GOVERNMENTAL FUNDS For the Year Ended June 30, 2017 Supplemental Special Capital General General Education KPERS Outlay REVENUES: Taxes $ - $ 32,243,585 $ 5,634,034 $ - $ 25,476,747 Intergovernmental 99,488,965-33,865,371 11,804,180 - Charges for services 79, Use of money and property 519, , ,246 Miscellaneous 1,302, Other local sources , ,094 Total revenues 101,389,999 32,243,585 40,172,794 11,804,180 26,276,087 EXPENDITURES: Current Instruction 50,709,099 26,959,767 28,606,583 7,993,079 2,656,433 Student support services 5,370,245 1,611,010 6,605, ,216 - Instructional support staff 7,215, , , ,365 13,157 General administration 1,030, , ,088 15,325 School administration 8,099,100 2,511, , ,907 - Central services ,658 Operations and maintenance 17,934, ,933 8, ,274 4,180,458 Student transportation services 1,465,038-5,996, ,169 Food service operations ,147 - Other support services 9,357, , ,233 Capital outlay 60, ,502,761 Debt service Principal retirement Interest and other charges Total expenditures 101,243,015 32,178,194 42,740,558 11,804,180 12,845,194 Excess [deficiency] of revenues over [under] expenditures 146,984 65,391 [2,567,764] - 13,430,893 OTHER FINANCING SOURCES [USES] Transfers in 174, Transfers [out] [2,938] Total other financing sources [uses] 171, Net change in fund balances 318,473 65,391 [2,567,764] - 13,430,893 Fund balance - Beginning of year 500,804 3,683,125 9,258,628-50,528,196 Fund balance - End of year $ 819,277 $ 3,748,516 $ 6,690,864 $ - $ 63,959,089 The notes to the basic financial statements are an integral part of this statement. 17

23 Other Total Debt Capital Capital Governmental Governmental Service Projects Projects Funds Funds $ 55,917,059 $ - $ - $ 11,871,348 $ 131,142, , ,084, ,102, ,093,503 13,172,947-55, , ,139 1,471, ,302, ,781,849 3,717,278 56,777,155 55, ,858 30,936, ,909, ,447, ,372, ,406 14,671, ,022,225 11,142, ,077, ,421 11,806, , ,586 23,407, ,517 8,025, ,191,395 9,416, ,626 10,613,636-11,434,362 23,258, ,507 39,749,637 39,990, ,990,000 15,126, ,126,479 55,116,479 11,434,362 23,258,455 31,499, ,119,604 1,660,676 [11,378,748] [23,004,597] [563,103] [22,210,268] , , [174,427] [177,365] [171,489] - 1,660,676 [11,378,748] [23,004,597] [734,592] [22,210,268] 54,682,350 13,472,783 40,165,204 41,881, ,172,524 $ 56,343,026 $ 2,094,035 $ 17,160,607 $ 41,146,842 $ 191,962,256 The notes to the basic financial statements are an integral part of this statement. 18

24 RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES WITH THE GOVERNMENT - WIDE STATEMENT OF ACTIVITIES For the Year Ended June 30, 2017 Total Net Change In Fund Balances - Governmental Funds $ [22,210,268] Amounts reported for governmental activities in the statement of activities are different because Capital outlays to purchase or build assets are reported in governmental funds as expenditures. However, for governmental activities those costs are shown in the statement of net position and allocated over their estimated useful lives as annual depreciation expenses in the statement of activities. This is the amount by which capitalizable capital outlays exceeds depreciation in the period. Loss on sale of assets [177,464] Capital outlays 27,590,294 Depreciation expense [22,355,245] 5,057,585 Interest on long-term debt in the statement of activities differs from the amount reported in the governmental funds because interest is recorded as an expenditure in the funds when it is due, and thus requires the use of current financial resources. In the statement of activities, however, interest expense is recognized as the interest accrues, regardless of when it is due. This is the amount by which interest increased. 401,055 In the statement of activities, certain operating expenses - compensated absences and other post employment benefits - are measured by the amounts earned during the year. In the governmental funds, however, expenditures for these items are measured by the amount of financial resources used. This year, other post employment benefits paid were less than the amounts earned by $1,277,305. Compensated absences used were less than the amounts earned by $94,926. [1,372,231] Pension payments are reported as expenditures in the governmental funds and do not affect the statement of net activities [3,107,628] Revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the funds. 2,603,445 Pension funding grant revenue in the statement of activities that do not provide current financial resources are not reported as revenues in the funds. 31,747,150 Repayment of debt principal is an expenditure in the governmental funds, but it reduces long-term liabilities in the statement of net position and does not affect the statement of activities. 39,990,000 Changes In Net Position of Governmental Activities $ 53,109,108 The notes to the basic financial statements are an integral part of this statement. 19

25 STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL (NON - GAAP BASIS) GENERAL FUND For the Year Ended June 30, 2017 Variance with Adjustments Final Budget GAAP to Budgetary Budgetary Budgeted Amounts Positive Basis Basis Basis Original Final [Negative] REVENUES: Intergovernmental: State and local $ 99,488,965 $ 9,155,340 $ 108,644,305 $ 108,914,327 $ 108,914,327 $ [270,022] Special education aid - 21,220,859 21,220,859 22,066,614 22,066,614 [845,755] KPERS aid - 11,804,180 11,804,180 16,639,583 16,639,583 [4,835,403] Total intergovernmental 99,488,965 42,180, ,669, ,620, ,620,524 [5,951,180] Use of money and property 519, , , , ,640 Miscellaneous 1,302,235-1,302,235 1,400,000 1,400,000 [97,765] Fees and charges 79,444-79,444 75,294 75,294 4,150 Total revenues 101,389,999 42,180, ,570, ,326, ,326,533 [5,756,155] EXPENDITURES: Instruction 50,709,099 [194,768] 50,514,331 52,595,594 52,595,594 2,081,263 Student support services 5,370, ,370,584 5,400,475 5,400,475 29,891 Instructional support staff 7,215,504 18,634 7,234,138 7,591,928 7,591, ,790 General administration 1,030,925 11,471 1,042,396 1,176,361 1,176, ,965 School administration 8,099,100 8,643 8,107,743 8,264,019 8,264, ,276 Operations and maintenance 17,934,879 47,180 17,982,059 18,132,614 18,132, ,555 Other support services 9,357, ,309 9,538,982 10,511,995 10,511, ,013 Transportation 1,465,038-1,465,038 1,731,436 1,731, ,398 Capital outlay 60,552-60, [60,552] Total expenditures 101,243,015 72, ,315, ,404, ,404,422 4,088,599 Excess [deficiency] of revenues over [under] expenditures 146,984 42,107,571 42,254,555 43,922,111 43,922,111 [1,667,556] OTHER FINANCING SOURCES [USES]: Transfers in 174, , , ,321 23,106 Transfers [out] [2,938] [42,426,045] [42,428,983] [44,073,432] [44,073,432] 1,644,449 Adjustments for legal max ,733,048 [5,733,048] Total other financing sources [uses] 171,489 [42,426,045] [42,254,556] [43,922,111] [38,189,063] [4,065,493] Excess [deficiency] of revenues and other sources over [under] expenditures and other [uses] 318,473 [318,474] [1] $ - $ 5,733,048 $ [5,733,049] FUND BALANCE - Beginning of year 500,804 [500,803] 1 FUND BALANCE - End of year $ 819,277 $ [819,277] $ - The notes to the basic financial statements are an integral part of this statement. 20