GASTON SCHOOL DISTRICT #511JT Gaston, Oregon

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1 ANNUAL FINANCIAL REPORT June 30, 2012

2 DISTRICT OFFICIALS June 30, 2012 BOARD OF DIRECTORS Roger Mesenbrink, Chair P.O. Box Cathy Fastabend, Vice Chair SW Fluke Road Christine Riley SW South Road Michael Morey P.O. Box Clinton Nelson P.O. Box ADMINISTRATION David Beasley Superintendent Marie DuRette Business Manager 97119

3 INTRODUCTORY SECTION Title Page District Officials Table of Contents FINANCIAL SECTION GASTON SCHOOL DISTRICT #511JT TABLE OF CONTENTS June 30, 2012 Page Number Independent Auditor's Report Management s Discussion and Analysis Basic Financial Statements Government-Wide Financial Statements Statement of Net Assets Statement of Activities Fund Financial Statements Balance Sheet Governmental Funds Reconciliation of Total Governmental Fund Balances to Net Assets of Governmental Activities 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 Assets Statement of Changes in Fiduciary Net Assets Kaulia Trust Fund Statement of Changes in Fiduciary Net Assets Shukla Family Trust Fund Notes to Basic Financial Statements Required Supplementary Information Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual General Fund Other Supplementary Information Combining and Individual Fund Statements and Schedules Combining Balance Sheet Nonmajor Governmental Funds Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Governmental Funds Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual Bus Replacement Fund SB1149 Fund Construction Excise Tax Fund Special Programs Fund Student Activity Fund Food Service Fund Special Programs Other Grants Fund Debt Service PERS UAL Fund... 48

4 Page Number OTHER FINANCIAL SCHEDULES Revenue Summary All Funds Expenditure Summary General Fund Special Revenue Funds Debt Service Fund Fiduciary Funds Schedule of Property Tax Transactions AUDIT COMMENTS AND DISCLOSURES REQUIRED BY STATE REGULATIONS Independent Auditor s Report Required by Oregon State Regulations Supplemental Information Required by Oregon Department of Education... 57

5 FINANCIAL SECTION

6 INDEPENDENT AUDITOR'S REPORT Board of Directors Gaston School District #511JT We have audited the accompanying financial statements of the governmental activities, the major fund, and the aggregate remaining fund information of Gaston School District #511JT,, as of and for the year ended June 30, 2012, which collectively comprise the District s basic financial statements as listed in the table of contents. These financial statements are the responsibility of Gaston School District #511JT s management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our 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 major fund, and the aggregate remaining fund information of Gaston School District #511JT, as of June 30, 2012, and the respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. Accounting principles generally accepted in the United States of America require that the management s discussion and analysis and budgetary comparison information on pages 3 through 10 and 38, respectively, 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 management s discussion and analysis 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 management s discussion and analysis because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. The budgetary comparison information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.

7 Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise Gaston School District #511JT s basic financial statements as a whole. The combining and individual fund statements and schedules, other financial schedules, and supplemental information required by the Oregon Department of Education are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual fund statements and schedules and other financial schedules 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 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 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 basic financial statements taken as a whole. The supplemental information required by the Oregon Department of Education has 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 it. Koontz, Perdue, Blasquez & Co., P.C. By: Debra L. Blasquez, CPA Albany, Oregon December 20,

8 MANAGEMENT S DISCUSSION AND ANALYSIS

9 MANAGEMENT S DISCUSSION AND ANALYSIS (MD&A) INTRODUCTION As management of Gaston School District #511JT,, we offer readers this narrative overview and analysis of the financial activities of the District for the fiscal year ended June 30, It should be read in conjunction with the District s financial statements, which follow this section. FINANCIAL HIGHLIGHTS At June 30, 2012, total net assets of Gaston School District #511JT amounted to $1,840,383. Of this amount, $1,123,660 was invested in capital assets, net of related debt. The remaining balance included $175,490 restricted for various purposes including capital outlay, and grant programs, and $541,233 of unrestricted net assets. At June 30, 2012, the District s governmental funds reported combined ending fund balances of $950,037. OVERVIEW OF THE FINANCIAL STATEMENTS This discussion and analysis is intended to serve as an introduction to Gaston School District #511JT s basic financial statements. The basic financial statements are comprised of three components: (1) government-wide financial statements, (2) fund financial statements, and (3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. 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 assets presents information on all of the District s assets and liabilities with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of the District is improving or deteriorating. The statement of activities presents information showing how the District s net assets changed during the most recent fiscal year. All changes in net assets 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 (e.g., uncollected taxes and earned but unused vacation leave). The government-wide financial statements can be found on pages 11 through 12 of this report. 3

10 Fund Financial Statements GASTON SCHOOL DISTRICT #511JT MANAGEMENT S DISCUSSION AND ANALYSIS (MD&A) The fund financial statements are designed to demonstrate compliance with finance-related legal requirements overseeing the use of fund accounting. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities and objectives. All of the funds of Gaston School District #511JT can be divided into two categories: governmental funds and fiduciary funds. Governmental 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 nearterm inflows and outflows of available resources, as well as on balances of available resources at the end of the fiscal year. Such information may be useful in evaluating the District s nearterm 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 eight individual governmental funds. Information is presented separately in the governmental funds balance sheet and the governmental funds statement of revenues, expenditures, and changes in fund balances for the General Fund, which is considered to be a major governmental fund. Data from the nonmajor governmental funds are combined into a single, aggregated presentation. Individual fund data for each of these nonmajor governmental funds is provided in the form of combining statements elsewhere in this report. Gaston School District #511JT adopts an annual appropriated budget for all of its governmental funds. A budgetary comparison statement has been provided for each fund individually to demonstrate compliance with their respective budgets. The basic governmental fund financial statements can be found on pages 13 through 16 of this report. Fiduciary Funds Fiduciary funds are used to account for resources held for the benefit of parties outside the District. Fiduciary funds are not reflected in the government-wide financial statements because the resources of those funds are not available to support the District s own programs. The accounting used for fiduciary funds is the same as that used for governmental funds. The fiduciary fund financial statements can be found on pages 17 through 19 of this report. 4

11 Notes to the Basic Financial Statements GASTON SCHOOL DISTRICT #511JT MANAGEMENT S DISCUSSION AND ANALYSIS (MD&A) The notes to the basic financial statements provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the basic financial statements can be found on pages 20 through 37 of this report. Other Information In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information, which includes budgetary comparison information for the General Fund. This required supplementary information can be found on page 38 of this report. The combining statements referred to earlier in connection with the nonmajor governmental funds are presented immediately following the required supplementary information. Combining and individual fund statements and budgetary comparison information can be found on pages 39 through 48 of this report. GOVERNMENT-WIDE FINANCIAL ANALYSIS As noted earlier, net assets may serve over time as a useful indicator of the District s financial position. At June 30, 2012, the District s assets exceeded liabilities by $1,840,383. A large portion of the District s net assets reflects its investment in capital assets (e.g., land, buildings, and equipment) less any related debt used to acquire those assets that is still outstanding. The District uses these capital assets for classrooms and supporting services for providing kindergarten through twelfth grade education; consequently, these assets are not available for future spending. Although the District s investment in capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. District s Net Assets At the end of the current fiscal year, the District was able to report positive balances in all categories of net assets. The District s net assets decreased by $223,523 during the current fiscal year. This decrease is primarily due to a decrease in program revenues. Condensed statement of net assets information is shown on the following page. 5

12 MANAGEMENT S DISCUSSION AND ANALYSIS (MD&A) Governmental Activities Assets Current and other assets $ 4,544,810 $ 4,808,870 Restricted assets 193, ,550 Net capital assets 1,233,660 1,385,318 Total assets 5,971,757 6,407,738 Liabilities Current liabilities 593, ,481 Noncurrent liabilities 3,537,923 3,650,351 Total liabilities 4,131,374 4,343,832 Net assets Invested in capital assets, net of related debt 1,123,660 1,255,318 Restricted for various purposes 175,490 73,322 Unrestricted 541, ,266 Total net assets $ 1,840,383 $ 2,063,906 District s Changes in Net Assets Condensed Statement of Net Assets The condensed statement of activities information shown on the following page explains changes in net assets. 6

13 MANAGEMENT S DISCUSSION AND ANALYSIS (MD&A) Changes in Net Assets Governmental Activities Program revenues Regular programs $ 46,993 $ 190,656 Special programs 384, ,091 Student support services 20,830 17,941 Food services 24,731 26,932 Total program revenues 476, ,620 General revenues Property taxes 1,023, ,747 Construction excise tax 5,378 6,376 State school fund - general support 2,242,250 2,413,022 Common school fund 39,138 41,276 Unrestricted state and local revenue 609, ,171 Unrestricted grants and contributions 115,269 11,455 Investment earnings 9,245 8,068 Gain on sale of capital assets 23,282 - Miscellaneous 469, ,573 Total general revenues 4,536,221 4,177,688 Total revenues 5,012,856 4,865,308 Program expenses Regular programs 2,134,007 2,079,119 Special programs 817, ,673 Student support services 351, ,683 Instructional staff support 95, ,859 General administrative support 156, ,505 School administrative support 333, ,780 Business support 866, ,161 Central activities support 82,600 65,899 Food services 114, ,761 Community services Unallocated depreciation expense 79, ,832 Interest on long-term debt 203, ,718 Total program expenses 5,236,379 5,199,322 Change in net assets (223,523) (334,014) Net assets - beginning of year 2,063,906 2,397,920 Net assets - end of year $ 1,840,383 $ 2,063,906 7

14 MANAGEMENT S DISCUSSION AND ANALYSIS (MD&A) Revenues Since the District s mission is to provide a free and appropriate public education for kindergarten through twelfth grade students within its boundaries, the District may not charge for its core services. As expected, therefore, general revenues provide 91% of the funding required for governmental programs. Property taxes and state school funding combined for 72% of general revenues and 66% of total revenues. Charges for services make up less than 1% of total revenues and are composed of the following items for which it is appropriate that the District charge tuition or fees: Food service charges for breakfast and lunch $ 24,731 Various student extracurricular activities 21,112 Total charges for services $ 45,843 Operating grants and contributions represent 8% of total revenues. Included in this category is $385,649 for grants and contributions to support various educational activities. Capital grants and contributions represent less than 1% of total revenue. Included in this category is $45,143 for grants and contributions to support technology upgrades. Expenses Expenses related to governmental activities are presented in several broad functional categories. Costs of direct classroom instruction activities account for 56% of the total expenses of $5,236,379. In addition, approximately 41% of the costs in supporting services relate to students, instructional staff, and school administration. FINANCIAL ANALYSIS OF THE DISTRICT S FUNDS As noted earlier, the District uses fund accounting to ensure and demonstrate compliance with financerelated legal requirements. Governmental Funds The focus of the District s governmental funds is to provide information on near-term inflows, outflows, and balances of expendable resources. Such information is useful in assessing the District s financing requirements. In particular, unassigned fund balance may serve as a useful measurement of the District s net resources available for spending at the end of the fiscal year. At the end of the current fiscal year, the District s governmental funds reported combined fund balances of $950,037. Of this amount, $659,022 constitutes unassigned fund balance, which is available for spending at the District s discretion. 8

15 MANAGEMENT S DISCUSSION AND ANALYSIS (MD&A) The General Fund is the chief operating fund of the District. At the end of the current fiscal year, total fund balance of the General Fund was $659,022. This total amount constitutes unassigned fund balance. BUDGETARY HIGHLIGHTS Budget amounts shown in the financial statements reflect the original budget amounts. CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets The District s investment in capital assets for its governmental activities as of June 30, 2012 amounted to $1,233,660, net of accumulated depreciation. This investment in capital assets includes land, construction in progress, buildings and improvements, and equipment. The total depreciation related to the District s investment in capital assets for the current fiscal year was $79,951. Additional information on the District s capital assets can be found in Note III-B on page 30 of this report. Long-Term Liabilities At the end of the current fiscal year, the District had total long-term liabilities outstanding of $3,652,333. This amount is comprised of two PERS bonds and a certificate of participation. The District s total longterm liabilities decreased by $111,573 during the current fiscal year. Additional information on the District s long-term liabilities can be found in Note III-H on pages 32 through 33 of this report. KEY ECONOMIC FACTORS AND BUDGET INFORMATION FOR THE FUTURE At the time these financial statements were prepared and audited, the District was aware of the following circumstances that could affect its future financial health: State general fund revenue and supplemental Federal revenue will decrease; therefore, the District is planning to use reserves to preserve current programs. The District continues to experience declining in-district enrollment, which equates to a decrease in state school funding; however, efforts to recruit out-of-district students through the State open enrollment law have helped to stabilize overall enrollment. Both of these factors were considered in preparing the District s budget for the fiscal year. The ending unassigned General Fund balance of $659,022 will be available for program resources in the fiscal year. 9

16 REQUESTS FOR INFORMATION GASTON SCHOOL DISTRICT #511JT MANAGEMENT S DISCUSSION AND ANALYSIS (MD&A) This financial report is designed to provide a general overview of the District s finances for all those with an interest. Questions concerning any of the information provided in the report or requests for additional information should be addressed to: Marie DuRette, Business Manager, Gaston School District #511JT, 300 Park Street,

17 BASIC FINANCIAL STATEMENTS

18 ASSETS Current assets GASTON SCHOOL DISTRICT #511JT STATEMENT OF NET ASSETS June 30, 2012 Governmental Activities Cash and cash equivalents $ 1,189,004 Undistributed taxes with counties 6,719 Investments 474 Grants receivable 19,569 Property taxes receivable 58,812 Total current assets 1,274,578 Restricted assets Cash and cash equivalents 135,990 Investments 50,000 Grants receivable 7,297 Total restricted assets 193,287 Net pension asset 3,270,232 Capital assets, net of accumulated depreciation 1,233,660 Total assets 5,971,757 LIABILITIES Current liabilities Accrued liabilities 228,477 Compensated absences payable 6,910 Deferred revenue 243,654 Long-term liabilities, current portion 114,410 Total current liabilities 593,451 Noncurrent liabilities Long-term liabilities, less current portion 3,537,923 Total liabilities 4,131,374 NET ASSETS Invested in capital assets, net of related debt 1,123,660 Restricted for various purposes 175,490 Unrestricted 541,233 Total net assets $ 1,840,383 The accompanying notes are an integral part of these financial statements. 11

19 STATEMENT OF ACTIVITIES For the Year Ended June 30, 2012 Net (Expense) Revenue and Changes in Program Revenues Net Assets Operating Capital Charges for Grants and Grants and Governmental Functions/Programs Expenses Services Contributions Contributions Activities Governmental activities Regular programs $ 2,134,007 $ 282 $ 1,568 $ 45,143 $ (2,087,014) Special programs 817, ,081 - (433,775) Student support services 351,805 20, (330,975) Instructional staff support 95, (95,247) General administrative support 156, (156,875) School administrative support 333, (333,477) Business support 866, (866,005) Central activities support 82, (82,600) Food services 114,550 24, (89,819) Community services (40) Unallocated depreciation expense 79, (79,951) Interest on long-term debt 203, (203,966) Total governmental activities $ 5,236,379 $ 45,843 $ 385,649 $ 45,143 (4,759,744) General revenues Property taxes 1,023,037 Construction excise tax 5,378 State school fund - general support 2,242,250 Common school fund 39,138 Unrestricted state and local revenue 609,060 Unrestricted grants and contributions 115,269 Investment earnings 9,245 Gain on disposal of capital assets 23,282 Miscellaneous 469,562 Total general revenues 4,536,221 Change in net assets (223,523) Net assets - beginning 2,063,906 Net assets - ending $ 1,840,383 The accompanying notes are an integral part of these financial statements. 12

20 BALANCE SHEET GOVERNMENTAL FUNDS June 30, 2012 Other Total General Governmental Governmental Fund Funds Funds ASSETS Cash and cash equivalents $ 1,080,776 $ 251,515 $ 1,332,291 Undistributed taxes with counties 6,719-6,719 Investments ,000 50,474 Grants receivable 19,569 7,297 26,866 Property taxes receivable 58,812-58,812 Interfund receivable 10,500-10,500 Total assets $ 1,176,850 $ 308,812 $ 1,485,662 LIABILITIES AND FUND BALANCES Liabilities Book overdraft $ - $ 7,297 $ 7,297 Accrued liabilities 223, ,077 Interfund payable - 10,500 10,500 Deferred revenue 294, ,751 Total liabilities 517,828 17, ,625 Fund balances Restricted - 175, ,490 Assigned - 115, ,525 Unassigned 659, ,022 Total fund balances 659, , ,037 Total liabilities and fund balances $ 1,176,850 $ 308,812 $ 1,485,662 The accompanying notes are an integral part of these financial statements. 13

21 RECONCILIATION OF TOTAL GOVERNMENTAL FUND BALANCES TO NET ASSETS OF GOVERNMENTAL ACTIVITIES June 30, 2012 Total fund balances $ 950,037 Capital assets are not financial resources and are therefore not reported in the governmental funds: Cost 3,267,697 Accumulated depreciation (2,034,037) 1,233,660 Property tax revenue is recognized in the net assets of governmental activities when the taxes are levied; however, in the governmental fund statements, it is recognized when available to be used for current year operations. Taxes not collected within 60 days of the end of the year are not considered available to pay for current year operations and are therefore not reported as revenue in the governmental funds. 51,097 The net pension asset is not available to pay for current period expenditures and is therefore not reported in the governmental funds. 3,270,232 Liabilities not payable in the current year are not reported as governmental fund liabilities. Interest on long-term debt is not accrued in the governmental funds, but rather is recognized as an expenditure when due. These liabilities consist of: Accrued interest payable (5,400) Compensated absences payable (6,910) Bonds payable (3,542,333) Certificate of participation payable (110,000) (3,664,643) Net assets of governmental activities $ 1,840,383 The accompanying notes are an integral part of these financial statements. 14

22 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS For the Year Ended June 30, 2012 Other Total General Governmental Governmental Fund Funds Funds REVENUES Local revenue $ 1,157,554 $ 432,116 $ 1,589,670 Intermediate revenue 5,771-5,771 State revenue 2,996,657 1,844 2,998,501 Federal revenue 1, , ,805 Total revenues 4,161, ,197 4,977,747 EXPENDITURES Current Instruction 2,495, ,422 2,882,000 Support services 1,816,100 25,825 1,841,925 Community services - 118, ,196 Debt service 27, , ,539 Total expenditures 4,338, ,782 5,157,660 Excess (deficiency) of revenues over (under) expenditures (177,328) (2,585) (179,913) OTHER FINANCING SOURCES (USES) Gain on disposal of capital assets 94,989-94,989 Transfers in ,458 92,958 Transfers out (92,458) (500) (92,958) Total other financing sources (uses) 3,031 91,958 94,989 Net change in fund balance (174,297) 89,373 (84,924) Fund balances - beginning 833, ,642 1,034,961 Fund balances - ending $ 659,022 $ 291,015 $ 950,037 The accompanying notes are an integral part of these financial statements. 15

23 RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES For the Year Ended June 30, 2012 Net change in fund balances Amounts reported for governmental activities in the statement of activities are different because: $ (84,924) Governmental funds report capital outlay as expenditures; however, in the statement of activities, the costs of these assets are allocated over their estimated useful lives and are reported as depreciation expense. This is the amount by which capital outlays exceeded depreciation in the current period: Disposal of capital assets (396,496) Depreciation expense removed in the current year 324,789 Less depreciation expense recorded in the current year (79,951) (151,658) Governmental funds report prepayments on unfunded pension liability as an expenditure; however, in the statement of activities, this payment is capitalized and amortized over the life of the unfunded liability. (110,341) Long-term debt proceeds are reported as other financing sources in the governmental funds. In the statement of net assets, however, issuing longterm debt increases liabilities. Similarly, repayment of principal is an expenditure in the governmental funds, but reduces the liability in the statement of net assets. Debt principal paid 111,573 Property taxes that do not meet the measurable and available criteria are not recognized as revenue in the current year in the governmental funds. In the statement of activities, property taxes are recognized as revenue when levied. 11,827 Change in net assets $ (223,523) The accompanying notes are an integral part of these financial statements. 16

24 STATEMENT OF FIDUCIARY NET ASSETS June 30, 2012 Private Purpose Trust Funds Total Kaulia Shukla Family Fiduciary Trust Trust Funds ASSETS Cash and cash equivalents $ 7,824 $ 1,002 $ 8,826 LIABILITIES NET ASSETS Held in trust for endowments $ 7,824 $ 1,002 $ 8,826 The accompanying notes are an integral part of these financial statements. 17

25 STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS KAULIA TRUST FUND June 30, 2012 Private Purpose Trust Fund Kaulia Trust ADDITIONS Local revenue $ 108 DEDUCTIONS Instruction 348 Change in net assets (240) Net assets - beginning 8,064 Net assets - ending $ 7,824 The accompanying notes are an integral part of these financial statements. 18

26 STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS SHUKLA FAMILY TRUST FUND June 30, 2012 Private Purpose Trust Fund Shukla Family Trust ADDITIONS Local revenue $ 1,002 DEDUCTIONS Community service 1,002 Change in net assets - Net assets - beginning 1,002 Net assets - ending $ 1,002 The accompanying notes are an integral part of these financial statements. 19

27 NOTES TO BASIC FINANCIAL STATEMENTS

28 NOTES TO BASIC FINANCIAL STATEMENTS June 30, 2012 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial statements of Gaston School District #511JT have been prepared in conformity with generally accepted accounting principles (GAAP) as applied to governmental units. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. The more significant of the District's accounting policies are described below. A. Reporting Entity Gaston School District #511JT functions as a local education agency consisting of an elementary school and a junior/senior high school. The District is governed by a five-member board of directors. B. Government-Wide and Fund Financial Statements The government-wide financial statements (i.e., the statement of net assets and the statement of activities) report information on all of the non-fiduciary activities of the District. The statement of activities demonstrates the degree to which the direct expenses of a given function are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function. Program revenues include: (1) charges for goods and services provided by a given function and (2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function. Taxes and other items not properly included among program revenues are reported instead as general revenues. Separate financial statements are provided for the governmental funds and fiduciary funds, even though the latter are excluded from the government-wide financial statements. Major individual governmental funds are reported as separate columns in the fund financial statements. C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the fiduciary fund financial statements. Revenues are recorded when earned and expenses are recorded when incurred, regardless of the timing of the related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the District considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures are generally recorded when a liability is incurred, as under accrual accounting. However, principal and interest on long-term debt, as well as expenditures related to early retirement and compensated absences, are recorded only when payment is due. 20

29 NOTES TO BASIC FINANCIAL STATEMENTS June 30, 2012 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation (Continued) Property taxes, investment earnings, and charges for services associated with the current fiscal period are all considered to be susceptible to accrual and have therefore been recognized as revenues of the current fiscal period. All other revenue items are considered to be measurable and available only when cash is received by the District. The District reports the following major governmental fund: General Fund The General Fund is the District s primary operating fund. It accounts for all financial resources except those required to be accounted for in another fund. The primary sources of revenue are property taxes and state revenues. Additionally, the District reports the following nonmajor governmental funds: Special Revenue Funds Bus Replacement Fund The Bus Replacement Fund accounts for the repayment of a loan used to finance capital purchases. The Bus Replacement Fund was closed during the year. SB1149 Fund The SB1149 Fund accounts for revenues and expenditures for increasing energy efficiency within the District. The primary source of revenue is local grants. Expenditures are primarily for energy efficiency projects. Construction Excise Tax Fund The Construction Excise Tax Fund accounts for the accumulation of funds to be used for improvements to District facilities. The primary source of revenue is local fees. Expenditures are primarily for improvements to District facilities. Special Programs Fund The Special Programs Fund accounts for federally funded education programs. The primary source of revenue is federal grants. Expenditures are primarily for instruction, support services, and community services. Student Activity Fund The Student Activity Fund accounts for assets held by students. The primary sources of revenue are student deposits and income from clubs associated with the District. Expenditures are primarily for clubs and extracurricular activities. Food Service Fund The Food Service Fund accounts for revenue and expenditures of the District s food dispensing programs. The primary sources of revenue are food sales and federal grants. Expenditures are primarily for salaries, benefits, and food purchases. 21

30 NOTES TO BASIC FINANCIAL STATEMENTS June 30, 2012 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation (Continued) Special Revenue Funds (Continued) Special Programs Other Grants Fund The Special Programs Other Grants Fund accounts for the acquisition of equipment, facilities, and additional educational programs. The primary source of revenue is local fees. Expenditures are primarily for instruction and support services. Debt Service Fund Debt Service PERS UAL Fund The Debt Service PERS UAL Fund accounts for the accumulation of resources and payment of principal and interest on limited tax bonds. The primary source of revenue is local fees. The District reports the following fiduciary funds: Private Purpose Trust Funds Kaulia Trust Fund The Kaulia Trust Fund accounts for transactions in the Kaulia Trust. Shukla Family Trust Fund The Shukla Family Trust Fund accounts for transactions in the Shukla Family Trust. As a general rule, the effect of interfund activity has been eliminated from the government-wide financial statements. Amounts reported as program revenues include: (1) charges to customers or applicants for goods, services, or privileges provided, (2) operating grants and contributions, and (3) capital grants and contributions. Internally dedicated resources are reported as general revenues rather than as program revenues. Likewise, general revenues include all taxes. The District reports deferred revenue on the balance sheet of the governmental funds. Deferred revenues arise when potential revenue does not meet both the measurable and available criteria for recognition in the current period. Deferred revenues also arise when resources are received by the District before it has a legal claim to them, as when grant monies are received prior to the incurrence of qualifying expenditures. In subsequent periods, when both recognition criteria are met or when the District has a legal claim to the resources, the liability for deferred revenue is removed from the balance sheet and revenue is recognized. When both restricted and unrestricted resources are available for use, it is the District s policy to use restricted resources first, then unrestricted resources as they are needed. Furthermore, committed fund balances are reduced first, followed by assigned amounts, and then unassigned amounts when expenditures are incurred for purposes for which amounts in any of those unrestricted fund balance classifications can be used. 22

31 NOTES TO BASIC FINANCIAL STATEMENTS June 30, 2012 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) D. Assets, Liabilities, and Equity 1. Deposits and Investments The District s cash and cash equivalents are considered to be cash on hand, demand deposits, and short-term investments with original maturities of three months or less from the date of acquisition. State statutes authorize the District to invest in legally issued general obligations of the United States, the agencies and instrumentalities of the United States and the states of Oregon, Washington, Idaho, or California, certain interest-bearing bonds, time deposit open accounts, certificates of deposit, and savings accounts in banks, mutual savings banks, and savings and loan associations that maintain a head office or a branch in this state in the capacity of a bank, mutual savings bank, or savings and loan association, and share accounts and savings accounts in credit unions in the name of, or for the benefit of, a member of the credit union pursuant to a plan of deferred compensation. 2. Property Taxes Under state law, county governments are responsible for extending authorized property tax levies, computing tax rates, billing and collecting all property taxes, and making periodic remittances of collection to entities levying taxes. Property taxes are levied and become a lien as of July 1 on property values assessed as of June 30. Property taxes are payable in three installments, which are due on November 15, February 15, and May 15. Uncollected property taxes are shown as assets in the governmental funds. Property taxes collected within approximately 60 days of fiscal year-end are recognized as revenue while the remaining are recorded as deferred revenue because they are not deemed available to finance operations of the current period. 3. Grants Grants are recognized as revenue in the accounting period in which they have become both measurable and available and in which the District has met all eligibility requirements. When expenditure is the prime factor for determining eligibility, the revenue is recognized when the expenditure is made. Cash received from grantor agencies in excess of related grant expenditures is recorded as a liability on the statement of net assets. 4. Capital Assets Capital assets, which include property, plant, and equipment, are reported in the governmentwide financial statements. Capital assets are defined by the District as assets with an initial, individual cost of more than $5,000 and an estimated useful life in excess of three years. Such assets are recorded at historical cost or estimated historical cost where no historical records exist. Donated capital assets are recorded at estimated fair market value at the date of donation. 23

32 NOTES TO BASIC FINANCIAL STATEMENTS June 30, 2012 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) D. Assets, Liabilities, and Equity (Continued) 4. Capital Assets (Continued) The costs of normal maintenance or repairs that do not add to the value of an asset or materially extend its life are charged to expenditures as incurred and are not capitalized. Major capital outlays for capital assets and improvements are capitalized as projects are constructed. Property, plant, and equipment of the District are depreciated using the straight-line method over the following estimated useful lives. Assets Years Equipment 5-15 Buildings and building improvements Compensated Absences Amounts of vested or accumulated vacation leave that are expected to be liquidated with expendable available financial resources are reported as expenditures when paid. Amounts of vested or accumulated vacation leave that are not expected to be liquidated with expendable available financial resources are reported as long-term liabilities on the statement of net assets. In accordance with the provisions of GASB Statement No. 16, Accounting for Compensated Absences, no liability is recorded for non-vesting accumulating rights to receive sick pay benefits. 6. Long-Term Liabilities In the government-wide financial statements, long-term debt and other long-term obligations are reported as liabilities on the statement of net assets. Bond premiums and discounts are deferred and amortized over the lives of the bonds using the effective interest method. Bonds payable are reported net of the applicable bond premiums or discounts. In the fund financial statements, governmental fund types recognize bond premiums, discounts, and issuance costs during the current period. The face amounts of debt issued are reported as other financing sources. Premiums received on debt issuance are reported as other financing sources, while discounts on debt issuance are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. 7. Retirement Plans Most of the District s employees participate in Oregon s Public Employees Retirement System (PERS). Contributions are made on a current basis as required by the plan and are recorded as expenditures. 24

33 NOTES TO BASIC FINANCIAL STATEMENTS June 30, 2012 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) D. Assets, Liabilities, and Equity (Continued) 7. Retirement Plans (Continued) Three employees have taken early retirement offered by the District. As of June 30, 2012, the total amount of early retirement benefits had been paid to participating employees. Benefits include a monthly stipend and portion of health insurance premiums. Amounts vary according to agreed-upon terms at the time of retirement. 8. Fund Equity Beginning with fiscal year 2011, the District implemented GASB Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions. This statement provides more clearly defined fund balance categories to make the nature and extent of the constraints placed on a government s fund balances more transparent. The following classifications describe the relative strength of the spending constraints: Nonspendable fund balance amounts that are in nonspendable form (such as inventory) or are required to be maintained intact. Restricted fund balance amounts constrained to specific purposes by their providers (such as grantors, bondholders, and higher levels of government), through constitutional provisions, or by enabling legislation. Committed fund balance amounts constrained to specific purposes by the District itself, using its highest level of decision-making authority (i.e., board of directors). To be reported as committed, amounts cannot be used for any other purpose unless the District takes the same highest level action to remove or change the constraint. Assigned fund balance amounts the District intends to use for a specific purpose. Intent can be expressed by the board of directors or by an official or body to which the board of directors delegates the authority. Unassigned fund balance amounts that are available for any purpose. Positive amounts are reported only in the General Fund. Commitment of fund balance is accomplished through adoption of a resolution or ordinance by the board of directors. Further, commitments of fund balance may be modified or rescinded only through approval of the board of directors via resolution or ordinance. Authority to assign fund balances has been granted to the superintendent. 25

34 NOTES TO BASIC FINANCIAL STATEMENTS June 30, 2012 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) D. Assets, Liabilities, and Equity (Continued) 8. Fund Equity (Continued) The District has adopted the following policy regarding minimum fund balance. The board of directors directs the superintendent to manage the currently adopted budget in such a way to ensure an ending fund cash balance in the General Fund of at least three percent of total adopted revenues. In determining an appropriate unreserved fund balance, the board of directors considers a variety of factors with potential impact on the District s budget, including the predictability and volatility of its expenditures; the availability of resources in other funds, as well as the potential drain upon General Fund resources from other funds; liquidity; and designations. Such factors are reviewed annually. E. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results may vary from those estimates. II. STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY A. Budgetary Information The District budgets all funds in accordance with the requirements of state law. Annual appropriated budgets are adopted for the general, special revenue, and debt service funds. All funds are budgeted on the modified accrual basis of accounting. The District begins its budgeting process by appointing budget committee members. The budget officer prepares a budget, which is reviewed by the budget committee. The budget is then published in proposed form and is presented at public hearings to obtain taxpayer comments and approval from the budget committee. The budget is legally adopted by the board of directors by resolution prior to the beginning of the District's fiscal year. The board resolution, authorizing appropriations for each fund, sets the level by which expenditures cannot legally exceed appropriations. Total instruction, support services, community services, debt service, interfund transfers, and operating contingencies are the levels of control for the funds established by the resolution. The detailed budget document, however, is required to contain more specific detailed information for the aforementioned expenditure categories and management may revise the detailed line item budgets within appropriation categories. Unexpected additional resources may be added to the budget through the use of a supplemental budget and appropriation resolution. Supplemental budgets less than 10% of a fund's original budget may be adopted by the board of directors at a regular board meeting. A supplemental budget greater than 10% of a fund's original budget requires hearings before the public, publication in newspapers, and approval by the board of directors. Original and supplemental budgets may be modified by the use of appropriation transfers between the levels of control. Such transfers require approval by the board of directors. During the year, there were no supplemental budgets. The District does not use encumbrances and appropriations lapse at year-end. 26

35 NOTES TO BASIC FINANCIAL STATEMENTS June 30, 2012 II. STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY (Continued) A. Budgetary Information (Continued) Budget amounts shown in the financial statements reflect the original budget amounts. III. DETAILED NOTES ON ALL FUNDS AND ACCOUNT GROUPS A. Deposits and Investments Gaston School District #511JT maintains a cash and cash equivalents pool that is available for use by all funds. Each fund type's portion of this pool is displayed on the fund financial statements as cash and cash equivalents. Additionally, several funds held separate cash accounts. Interest earned on pooled cash and investments is allocated to participating funds based upon their combined cash and investment balances. Investments, including amounts held in pooled cash and investments, are stated at fair value. In accordance with Governmental Accounting Standards Board (GASB) Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools, investments with a remaining maturity of more than one year at the time of purchase are stated at fair value. Fair value is determined at the quoted market price, if available; otherwise, the fair value is estimated based on the amount at which the investment could be exchanged in a current transaction between willing parties, other than a forced liquidation sale. Investments in the State of Oregon Local Government Investment Pool (LGIP) are stated at fair value. The Oregon State Treasury administers the LGIP. The LGIP is an open-ended, no-load, diversified portfolio offered to any agency, political subdivision, or public corporation of the state that by law is made the custodian of, or has control of, any fund. The LGIP is commingled with the State s shortterm funds. To provide regulatory oversight, the Oregon Legislature established the Oregon Short- Term Fund Board and LGIP investments are approved by the Oregon Investment Council. The fair value of the District s position in the LGIP is the same as the value of the pool shares. Credit Risk Oregon statutes authorize the District to invest in obligations of the U.S. Treasury and U.S. agencies, bankers acceptances, repurchase agreements, commercial paper rated A-1 by Standard & Poor s Corporation or P-1 by Moody s Commercial Paper Record, and the Local Government Investment Pool. The District has not adopted an investment policy regarding credit risk; however, investments comply with state statutes. 27