CHEYENNE COUNTY SCHOOL DISTRICT RE-5 Cheyenne Wells, Colorado. Financial Statements. For the Year Ended June 30, 2017

Transcription

1 Financial Statements For the Year Ended June 30, 2017

2 Table of Contents June 30, 2017 Independent Auditor's Report Management Discussion and Analysis Page a-h Basic Financial Statements Government-wide Financial Statements Statement of Net Position Statement of Activities Fund Financial Statements Governmental Funds Balance Sheet Reconciliation of the Balance Sheet - Governmental Funds to the Statement of Net Position Statement of Revenues, Expenditures and Changes in Fund Balances Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances - Governmental Funds to the Statement of Activities Fiduciary Fund Statement of Net Position Notes to the Financial Statements Required Supplementary Information Budgetary Comparison Schedule General Fund Schedule of District's Proportionate Share of Net Pension Liability Schedule of Contributions and Related Ratios - Last 10 Years Other Information Combining and Individual Fund Statements Combining Balance Sheet - NonMajor Governmental Funds Combining Statement of Revenues, Expenditures, and Changes in Fund Balance NonMajor Governmental Funds General Fund Comparative Balance Sheet Statement of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual Statement of Expenditures - Budget and Actual

3 Table of Contents June 30, 2017 Page Special Revenue Funds Food Services Special Revenue Fund Comparative Balance Sheet Statement of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Student Activity Fund Comparative Balance Sheet Statement of Revenues, Expenditures and Changes in Fund Balance Budget and Actual Bond Redemption Debt Service Fund Comparative Balance Sheet Statement of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual Student Activity Agency Fund Statement of Changes in Assets & Liabilities Budget and Actual Auditor's Integrity Report

4 WINFREY, COUNTY & HAYS, PC Certified Public Accountants th Street Burlington, Colorado Telephone Fax Gerald D. County, CPA Jennifer M. Hays, CPA Kristina L. Lowe, CPA Sarah M. Bailey, CPA Board of Education Cheyenne County School District RE-5 P O Box 577 Cheyenne Wells, CO INDEPENDENT AUDITOR'S REPORT We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of the Cheyenne County School District RE-5, as of and for the year ended June 30, 2017, 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. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, based on our audit, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the Cheyenne County School District RE-5, as of June 30, 2017, and the respective changes in financial position for the year then ended in accordance with accounting principles generally accepted in the United States of America.

5 Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management s discussion and analysis and budgetary comparison information and pension information on pages a-h and 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. For the management discussion & analysis 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 Cheyenne County School District RE-5 s basic financial statements. The combining and individual nonmajor fund financial statements and the Auditor's Integrity Report are presented for purposes of additional analysis and are not a required part of the basic financial statements. The individual nonmajor fund financial statements and the Auditor's Integrity Report are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, based on our audit, the procedures performed as described above, the combining and individual nonmajor fund financial statements are fairly stated, in all material respects, in relation to the basic financial statements as a whole. Z Winfrey, County & Hays, PC Certified Public Accountants October 11, 2017

6 Management Discussion and Analysis Year Ended June 30, 2017 Management of the District offers readers of the basic financial statements this narrative overview and analysis of the financial statements of the District for the fiscal year ended June 30, Financial Highlights The District s net position decreased by $1,608,466 to $4,835,202. At the close of the current fiscal year, the District s governmental funds reported combined ending fund balances of $2,491,857, a decrease of $592,353 from the prior year. General Fund revenues exceeded expenditures by $259,857 for the 2016/2017 school year. The Bond Redemption Fund decreased $848,569, the Student Activity Special Revenue Fund decreased by $767, and the Food Service Special Revenue Fund decreased by $2,873. The District has had adequate resources available for all appropriations. Overview of the Financial Statements This discussion is intended as an introduction to the District s basic financial statements. The basic financial statements comprise three components: 1) government-wide financial statements, 2) fund financial statements, and 3) Notes to the Financial Statements. In addition to the basic financial statements, also provided is other supplementary information. Government-Wide Financial Statements These statements report information about the District as a whole using accounting methods similar to those used by private-sector companies. The statement of net position includes all of the District s assets and liabilities. All of the current year s revenues and expenses are accounted for in the statement of activities regardless of when cash is received or paid. The two government-wide statements report the District s net position and how they have changed. Net position, the difference between the District s assets and liabilities, are one way to measure the District s financial health or position. Over time, increases or decreases in the District s net position are an indication of whether its financial health is improving or deteriorating. The government-wide statements show all of the governmental activities and indicate all of the District s basic services are included here, such as instruction, administration, operation of the buildings and grounds, and pupil transportation. Property taxes and state and federal subsidies and grants finance these activities. a

7 Fund Financial Statements CHEYENNE COUNTY SCHOOL DISTRICT RE-5 Management Discussion and Analysis Year Ended June 30, 2017 (continued) These statements provide detailed information about the most significant funds, not the District as a whole. Some funds are required by state law and bond requirements. Governmental funds - most of the District s activities are reported in governmental funds, which focus on the determination of financial position and change in financial position, not on income determination. They are reported using an accounting method called modified accrual accounting, which measures cash and all other financial assets that can readily be converted into cash. The governmental fund statements provide a detailed short-term view of the District s operations and the services it provides. Governmental fund information helps the reader determine whether there are more or fewer financial resources that can be spent in the near future to finance the District s programs. The relationship (or differences) between governmental activities (reported in the Statement of Net position and the Statement of Activities) and governmental funds is reconciled in the financial statements. b

8 Management Discussion and Analysis Year Ended June 30, 2017 (continued) Financial Analysis of the District as a Whole: The District s total net position was $4,835,202 at June 30, Table 1 Fiscal Year Ended June 30, 2017 Net Position Government Activities 6/30/2017 6/30/2016 Current and other assets 2,742,592 3,276,464 Capital assets 8,440,188 8,657,746 Total assets 11,182,780 11,934,210 Deferred Outflows 3,838, ,737 Current liabilities 250, ,884 Long term liabilities 9,794,077 5,671,287 Total Liabilities 10,044,812 5,861,171 Deferred Inflows 140, ,108 Net Position Invested in capital assets 8,440,188 7,932,746 Restricted For TABOR 100, ,546 For Scholarship 54,165 54,165 For Preschool 0 19,432 For Debt Service 0 848,569 Unrestricted (3,759,252) (2,513,790) Total Net Position 4,835,202 6,443,668 c

9 Management Discussion and Analysis Year Ended June 30, 2017 (continued) As noted earlier, net position may serve over time as a useful indicator of the District s financial position. In the case of the Cheyenne County School District RE-5, assets exceed liabilities by approximately $4,835,202, a decrease of $1,608,466 from Of the District s $11,182,780 in total assets, $8,440,188 (75%) reflects investment in capital assets (e.g. land, buildings, infrastructure, machinery, and equipment). The District uses capital assets to provide services to students; consequently, these assets are not available for future spending. The results of this year s operations as a whole are reported in the Statement of Activities on Page 2. All expenses are reported in the first column. Specific charges, grants, revenues and subsidies that directly relate to specific expense categories are represented to determine the final amount of the District s activities that are supported by other general revenues. The two largest general revenues are the equalization provided by the State of Colorado Department of Education and the property taxes assessed to District taxpayers. d

10 Management Discussion and Analysis Year Ended June 30, 2017 (continued) Table 2 takes the information from that statement, rearranges it slightly, so you can see our total revenues for the year. Table 2 Fiscal Year Ended June 30, 2017 Change in Net Position Government Activities REVENUES 6/30/2017 6/30/2016 Program Revenues Charges for service 103,301 88,410 Operating grants 253, ,697 Capital Grants/Contributions 0 7,000 General Revenues Property taxes 1,253,515 1,943,858 Auto taxes 129, ,681 State Equalization 1,569,556 1,260,230 Other 37,827 63,363 Sale of Assets (35,710) 17,066 Total Revenues 3,311,911 3,831,305 EXPENSES Instruction 2,818,450 1,883,291 Pupil services 128,552 81,534 Instructional services 140,034 68,747 General administration 299, ,624 School administration 435, ,023 Operations & maintenance 530, ,165 Pupil transportation 216, ,325 Central services 79,145 39,423 Debt service 11,629 30,147 Noninstructional 80,591 67,502 Food Services 179, ,181 Total Expenses 4,920,377 3,391,960 Increase (decrease) in net position (1,608,466) 439,345 e

11 Management Discussion and Analysis Year Ended June 30, 2017 (continued) Table 3 shows the District s nine largest functions and unallocated depreciation expense. It also shows the net costs (total cost less revenues generated by the activities). This table also shows the net costs offset by the other unrestricted grants and subsidies to show the remaining financial needs supported by local taxes and other revenues. Table 3 Fiscal Year Ended June 30, 2017 Government Activities Total Cost Net Cost Functions/Programs of Programs of Services Prior Year Instruction 2,818,450 2,656,794 1,706,310 Pupil services 128, ,552 81,534 Instructional services 140, ,034 68,747 General administration 299, , ,624 School administration 435, , ,023 Operations & maintenance 530, , ,165 Pupil transportation 216, , ,375 Central services 79,145 79,145 39,423 Non Instructional 80,591 29,767 19,444 Food Service 179,859 72,132 26,061 Debt Services 11,629 11,629 30,147 Total Governmental Activities 4,920,377 4,563,244 3,002,853 Less State Equalization 1,569,556 1,260,230 Total needs from local taxes and other revenue 2,993,689 1,742,623 The District Funds At June 30, 2017, the District governmental funds reported a combined fund balance of $2,491,857, which is a decrease of $592,353. The primary reasons for this decrease are: In the General Fund, revenues exceeded the expenditures by $259,857. Revenues decreased $182,716 from 2016, while expenditures increased $288,365, so the excess was up from $659,446 from the prior year. f

12 Management Discussion and Analysis Year Ended June 30, 2017 (continued) Financial Analysis of the District s Funds: Revenues in general fund that decreased were $458,718 from local sources while revenue from state sources increased $258,694. There were sale of assets of $3,402. General Fund expenditures increased by $288,365. Instruction increased by $98,179 and operations and maintenance increased by $227,049. The Bond Fund decreased by $848,569 because the bonds were paid off this year. The Food Service Fund showed a decrease of $2,873. Revenues increased $6,609 and expenditures increased $2,608. The Student Activity Fund showed a decrease of $767. General Fund Budget No revisions were made to the original budget. Capital Assets and Debt Administration At June 30, 2017, the District had $8,440,188 invested in capital assets. This represents a net decrease (including additions and depreciation) of $217,558. Depreciation expense was $389,680. Capital purchases included new carpet for $179,513, floor mixer for $7,785, gas range with oven for $4,835, and a 2015 Nissan Altima for $19,100. June 30, 2017 June 30, 2016 Sites & Improvements 205, ,368 Buildings 10,988,260 10,910,385 Equipment 2,025,942 2,013,321 Transportation 505, ,513 Total capital assets 13,724,593 13,686,587 Accumulated depreciation (5,284,405) (5,028,841) Total capital assets 8,440,188 8,657,746 g

13 Management Discussion and Analysis Year Ended June 30, 2017 (continued) Long-Term Debt At year end, the District had no general obligation bonds outstanding. This is a reduction of $725,000 from the prior year. There was also $20,085 of compensated absences due Bonds Payable 0 725,000 Compensated Absences General Fund 17,790 16,500 Food Services 2,295 2,370 Total 20, ,870 In 2017, the District paid a total of $725,000 in principal toward its outstanding bond obligation. Economic Factors and Next Year s Budget and Rates: Factors that will continue to affect next year s budget are the concerns with the changing economy, the adjustments in school finance funding in regards to the budget stabilization factor, and property taxes due to a drop in oil and gas prices which will affect our assessed valuation, concerns over declining student enrollment, although it is starting to level off, and increased costs in employee insurance premiums. The Board of education approved staff salary increases of a step for certified employees and raised the minimum wage for classified employees.75 cents per hour, approved the purchase of a storage shed, approved the purchase and installation of carpet and tile, cove base and paint for the entire school, approved the purchase of new furniture for the entire school, approved the purchase and installation of new LED lighting for the gym, and purchased a copier for the Ag shop.. The Board of Education will also be putting a bond issue on the ballot in November of 2018 to address deferred maintenance of our school which will include a new roof, HVAC system, and new windows. The school will be 18 years old by the time work would be completed. Some general fund monies will be used to hire consultants for the bond issue and if the bond issue passes, general fund monies will be used to offset some costs for the building project. The prediction is that the current state of the economy will continue to grow and get stronger and continue to impact the farming community and local economics located within the school district. The school district continues to experience a slight decrease in student enrollment. The four year student averaging used to base the funded count by CDE will probably be calculated at a lesser funded count than in Contacting the District Financial Management Our financial report is designed to provide a general overview of the District s finances for all those with an interest in the District s finances. Questions concerning the information provided in this report or requests for additional information should be addressed to the Superintendent of Schools at Cheyenne County School District RE-5, P O Box 577, Cheyenne Wells, CO h

14 BASIC FINANCIAL STATEMENTS

15 Statement of Net Position June 30, 2017 Page 1 Governmental Activities ASSETS Current Assets Cash and cash equivalents 1,927,409 Certificates of deposit 766,377 Inventory 8,534 Accrued property taxes receivable 33,137 Accounts receivable 7,135 Total Current Assets 2,742,592 Capital assets, net of accumulated depreciation 8,440,188 Total Assets 11,182,780 DEFERRED OUTFLOWS 3,838,048 LIABILITIES Current Liabilities Accounts payable 45,481 Accrued salaries payable 202,960 Compensated absences 2,295 Total Current Liabilities 250,735 Noncurrent Liabilities Compensated absences due within one year 3,330 Compensated absences due within more than one year 14,460 Net Pension Liability 9,776,287 Total Noncurrent Liabilities 9,794,077 Total Liabilities 10,044,812 DEFERRED INFLOWS 140,814 NET POSITION Invested in capital assets 8,440,188 Reserved for TABOR 100,101 Restricted For Music 54,165 For Preschool 0 Unrestricted (3,759,252) Total Net Position 4,835,202 See auditor s report and notes to the financial statements.

16 CHEYENNE WELLS SCHOOL DISTRICT RE-5 Statement of Activities For the Year Ended June 30, 2017 Page 2 Program Revenues Charges for Operating Grants Capital Grants Expenses Service & Contributions & Contributions Governmental Activities Instructional 2,818,450 10, ,101 Support Services Pupil services 128,552 Instructional services 140,034 General administration 299,267 School administration 435,994 Operations & maintenance 530,008 Pupil transportation 216,848 36,926 Central services 79,145 Non Instructional 80,591 50,824 0 Debt Service 11,629 Food Services 179,859 41,922 65,805 0 Total Governmental Activities 4,920, , ,831 0 General revenues: Taxes Property taxes, levied for general purposes Specific ownership taxes State Equalization Miscellaneous Investment earnings Sale of assets Total General Revenues Change in Net Position Net Position - Beginning Net Position - Ending See auditor s report and notes to the financial statements.

17 Page 2 Net (Expense) Revenue and Changes in Net Position Governmental Activities (2,656,794) (128,552) (140,034) (299,267) (435,994) (530,008) (179,922) (79,145) (29,767) (11,629) (72,132) (4,563,244) 1,253, ,591 1,569,556 31,503 6,324 (35,710) 2,954,778 (1,608,466) 6,443,668 4,835,202 See auditor s report and notes to the financial statements.

18 Balance Sheet Governmental Funds June 30, 2017 Page 3 Total NonMajor Governmental General Funds Funds ASSETS Cash and cash equivalents 1,916,044 11,364 1,927,409 Certificates of deposit 766, ,377 Inventory 0 8,534 8,534 Accrued property taxes receivable 33, ,137 Accounts receivable 445 6,690 7,135 Total Assets 2,716,004 26,588 2,742,592 LIABILITIES AND FUND BALANCES Liabilities Accounts payable 45, ,481 Accrued salaries payable 195,717 7, ,960 Accrued sick leave 0 2,295 2,295 Total Liabilities 241,197 9, ,735 Fund Balances Restricted For TABOR 100, ,101 For Music 54, ,165 Nonspendable 0 8,534 8,534 Assigned 0 8,516 8,516 Unassigned 2,320, ,320,540 Total Fund Balances 2,474,806 17,051 2,491,857 Total Liabilities and Fund Balances 2,716,004 26,588 2,742,592 See auditor s report and notes to the financial statements.

19 Balance Sheet Governmental Funds June 30, 2017 Page 4 Reconciliation of the Balance Sheet - Governmental Funds to the Statement of Net Position Total Governmental Fund Balances 2,491,857 Amounts reported for governmental activities in the statement of net position are different because of the following: Capital assets used in governmental activities are not financial resources and therefore are not reported in the funds 8,440,188 Deferred outflows of resources are not financial resources and thus are not reported as assets in governmental funds 3,838,048 Long-term liabilities are not due and payable in the current period and therefore are not reported as liabilities in the funds. (9,794,077) Deferred inflows of resources are not financial resources and thus are not reported as assets in governmental funds (140,814) Net Position of Governmental Activities 4,835,202 See auditor s report and notes to the financial statements.

20 Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds For the Year Ended June 30, 2017 Page 5 NonMajor Total Bond Governmental Governmental General Redemption Funds Funds REVENUES Local Sources Property Taxes 1,255, ,255,160 Specific Ownership Taxes 129, ,591 Interest 8,325 1, ,404 Other 40, , ,481 Intergovernmental State Sources Equalization 1,569, ,569,556 Other 129, , ,354 Federal Sources 58, , ,478 Total Revenues 3,191,393 1, ,551 3,351,023 EXPENDITURES Current Instruction 1,510, ,510,670 Supporting Services Students 79, ,346 Instructional staff services 46, ,464 General administration 236, ,021 School administration 257, ,488 Operations & maintenance 429, ,218 Pupil transportation 143, ,510 Central services 32, ,285 Non Instructional ,591 80,591 Food Service , ,507 Debt Service 0 732, ,250 Capital Outlay 268, ,026 Total Expenditures 3,003, , ,098 3,943,376 See auditor s report and notes to the financial statements.

21 Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds For the Year Ended June 30, 2017 (continued) Page 6 NonMajor Total Bond Governmental Governmental General Redemption Funds Funds Revenues over (under) Expenditures 188,365 (731,171) (49,547) (592,353) Other Financing Sources (Uses) Operating Transfers In (Out) 71,492 (117,398) 45,907 0 Revenues & Other Sources over (under) Expenditures & Other Sources 259,857 (848,569) (3,641) (592,353) Fund Balance - Beginning 2,214, ,569 20,691 3,084,210 Fund Balance - Ending 2,474, ,051 2,491,857 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities Net change in fund balances - total governmental funds (592,353) Capital outlays are reported in governmental funds as expenditures. However, in the statement of activities, the cost of these assets is allocated over their estimated useful lives as depreciation expense. This is the amount by which depreciation exceeds capital outlays in the period. Capital outlays 211,234 Depreciation expense (389,680) (178,446) See auditor s report and notes to the financial statements.

22 For the Year Ended June 30, 2017 Page 7 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities (Continued) Interest on long-term debt in the statement of activities differs from the amount reported in the governmental funds because interest is recognized 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 amount represents the additional interest in the statement of activities Bond accrued interest 14,050 Some expenses reported in the statement of activities do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds. Pension expenses (1,517,885) The issuance of long-term debt (e.g. bonds & leases) provides current financial resources to governmental funds, while the repayment of principal of long-term debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net assets. Sick leave (1,290) Principal on bonds 725,000 Amortized interest expense on defeased bonds (18,429) 705,281 Gain (loss) on disposal of assets is not recognized in governmental funds, but the sale of the assets is recorded as income. Cash received on sale of asset (3,402) Recognized gain (loss) (35,710) (39,112) Change in net position of governmental activities (1,608,466) See auditor s report and notes to the financial statements.

23 Statement of Fiduciary Net Position Student Activity Agency Fund June 30, 2017 Page 8 ASSETS Student Activity Fund Cash in bank 87,467 LIABILITIES Due to Student Activities 87,467 NET POSITION 0 See auditor s report and notes to the financial statements.

24 NOTES TO THE FINANCIAL STATEMENTS

25 Notes to the Financial Statements June 30, 2017 Page 9 Cheyenne County School District RE-5 is an independent governmental entity organized under provisions of the Colorado Revised Statutes. It operates entirely within Cheyenne County but is not part of the County government. There are no component units that should be included in these financial statements. (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial statements of Cheyenne County School District RE-5 have been prepared in conformity with accounting principles generally accepted in the United States of America, as applied to government units. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles and the District is following the Financial Policies and Procedures Handbook. The following is a summary of the significant policies: A. Reporting Entity The Governmental Accounting Standards Board (GASB) Statement No. 14 The Financial Reporting Entity, established the criteria for determining the activities, organizations and functions of government to be included in the financial statements of the reporting entity. In evaluating the school as a reporting entity, management has addressed all potential component units which may or may not fall within the District s financial accountability. The criteria used to evaluate component units for possible inclusion as part of the District s reporting entity are financial accountability and the nature and significance of the relationship. The District is considered to be a primary government because it has a separately elected governing body, it is legally separate, and it is fiscally independent of other state and local governments. It has no component units. Neither is it a component unit of any other entity. This report includes all funds of Cheyenne County School District RE-5. B. Basis of Presentation Government-wide financial statements (i.e. the statement of net position and the statement of activities) report information on all of the nonfiduciary activities of the school district. As a general rule, the effect of interfund activity has been eliminated from these statements. Government activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely, to a significant extent on fees and charges for support. The statement of activities demonstrates the degree to which the direct expenses of given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable within a specific function or segment. Program revenues include charges to customers who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment. In addition, program revenues include grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues. Fund financial statements are also provided in the report for all of the governmental funds, and the fiduciary funds of the district. Major individual governmental funds are reported as separate columns in the fund financial statements. Nonmajor funds are aggregated and presented in a single column. Fiduciary funds are reported by fund type. The District reports the following major governmental funds: The general fund is the district s primary operating fund. It accounts for all financial resources except those required to be in another fund. The bond redemption fund accounts for the collection of property taxes for the payment of the bond issue. Additionally the District reports the Student Activity agency fund which accounts for cash held by the District for related organizations. It is custodial in nature and does not involve measurement of results of operations.

26 Notes to the Financial Statements June 30, 2017 (continued) Page 10 C. Measurement Focus and Basis of Accounting The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting as are the proprietary fund and the fiduciary fund statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of 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. Net position (total assets less total liabilities) are used as a practical measure of economic resources and the operating statement includes all transactions and events that increased or decreased net position. Depreciation is charged as expense against current operations and accumulated depreciation is reported on the statement of net position. The 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. Measurable means the amount of the transaction can be determined and available means collectible with the current period or soon enough thereafter to pay liabilities of the current period. The government considers all revenues available if they are collected within 60 days after year end. Revenues from federal, state, and other grants designated for payment of specific school district expenditures are recognized when the related expenditures are incurred; accordingly, when such funds are received, they are recorded as deferred revenues until earned. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. D. Budgets and Budgetary Accounting All funds must have budgets to be allowed expenditures. Budgets for all funds are adopted on a basis consistent with generally accepted accounting principles. All annual appropriations lapse at year end. Budget Calendar - Submission of a proposed budget to the Board of Education is due by May 31. On June 10 or within ten days after submission of the proposed budget, a notice shall be published stating the proposed budget is on file and available for inspection. The last date for final adoption of the budget and appropriation resolution is June 30. January 31 is last date to change adopted budget. By December 15, the Board of Education certifies to County Commissioners the mill levy against the assessed valuation for the general and bond redemption funds. The legal level of budgetary control is at the individual fund level. E. Encumbrances Encumbrance accounting where purchase orders, contracts and other commitments for the expenditure of resources are recorded to reserve that portion of the applicable appropriation, is not utilized by the District. F. Assets, Liabilities and Fund Balances/Net position or Equity 1. Deposits 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 deposit funds in institutions who are members of the Federal Deposit Insurance Corporation to the extent that the deposit is insured or is secured by pledge of eligible collateral as required by CRS

27 Notes to the Financial Statements June 30, 2017 (continued) Page Receivables and Payables 3. Inventories Activity between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as either due to/due from other funds. Any residual balances outstanding between the government activities and business-type activities are reported in the government-wide statements as internal balances. Accounts receivable and property taxes receivables are shown at gross. Uncollectibles have not been material. The purchase method is used to account for inventories in the governmental funds. Under this method, inventories are recorded as expenditures when purchased. A physical inventory was taken as of June 30, 2017 for the Food Services special revenue fund. The inventory consisted of government donated commodities which were valued at estimated fair market value, and purchased commodities and supplies were both valued at cost using the first-in, first-out (FIFO) method. 4. Capital Assets Capital asset, which include property, plant, and equipment, are reported in the applicable governmental or business-type activities columns in the government-wide financial statements. Capital assets are defined by the school district as assets with an initial, individual cost of more than $5,000 and an estimated useful life in excess of one year. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated fixed assets are recorded at their estimated fair value at the date of donation. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend asset lives are not capitalized. Property, plant and equipment are depreciated in the proprietary funds using the straight line method over the following estimated useful lives: Assets Years Site improvements 30 Buildings Equipment 5-25 Vehicles 7-10 The District does not have any infrastructure assets. 5. Compensated Absences Compensated Absences - The district allows the accumulation of 30 days sick leave per employee with all excess over 30 days paid in cash each year on September 1. The accumulated sick leave is payable to employees at termination, resignation, retirement or death. Salaries and related benefits of certain school-based personnel are paid over a twelve-month period beginning in September, but are earned during a school year of approximately nine months. The salaries and benefits earned, but unpaid, as of June 30, 2017 are: General Fund $ 195,717 Food Service 7,243 Total 202,960

28 Notes to the Financial Statements June 30, 2017 (continued) Page Long-term Obligations 7. Estimates In the government-wide financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities statement of net position. Bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds using the effective interest method. Bonds issuance costs are reported as deferred charges and amortized over the term of the debt. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. The amounts of unpaid vacation leave accumulated by District employees are accrued as expenses when incurred. Employees are limited in the number of unused vacation hours they may carry forward at year-end. The District records the accrued liability for unpaid vacation leave in the accompanying basic financial statements as liabilities. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure. Actual results could differ from those estimates. 8. Fund Balances and Net Position In the government-wide and proprietary fund financial statements, net position are classified in the following categories; Invested in Capital Assets this category groups all capital assets into one component of net position. Accumulated depreciation and the outstanding debt balances that are attributable to the acquisition, construction or improvement of these assets reduce this category. Restricted Net Position indicates that portion of net position which has been legally segregated for specific purposes or is not available for appropriation. Unrestricted Net Position represents the amount which is not reserved for any purpose and is available for appropriation and expenditures in future periods. When both restricted and unrestricted funds are available, restricted are deemed first spent. In the fund financial statements, fund balances of governmental funds are classified in the following categories; Nonspendable amounts that cannot be spent because they are either in nonspendable form such as inventory and prepaid expenses, or legally or contractually required to be maintained intact such as the corpus of a permanent fund which is required to be retained in perpetuity. It also includes the long-term amount of loans and notes receivable, as well as property acquired for resale. Restricted when constraints placed on the use of resources are either (a) externally imposed by creditors or (b) imposed by law through constitutional provisions or enabling legislation. Committed amounts that can only be used for specific purposes pursuant to constraints imposed by formal action of the Board of Trustees. These amounts cannot be changed except by taking the same type of action employed to previously commit these amounts.

29 Notes to the Financial Statements June 30, 2017 (continued) Page 13 Assigned amounts that are constrained by the government s intent to be used for specific purposes, but are neither restricted nor committed. Intent should be expressed by the governing body itself, or a body the Superintendent who has been delegated the authority to assign amounts to be used for specific purposes. Unassigned the residual for the general fund. The general fund should be the only fund that reports a positive unassigned fund balance amount. When committed, assigned, or unassigned funds are available, committed is first spent, then assigned. At June 30, 2017 the amounts restricted were $100,101 for the TABOR Reserve, and $54,165 for music. (2) STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY A. Colorado voters passed an amendment to the State Constitution, Article X, Section 20, which has several limitations, including revenue raising, spending abilities, and other specific requirements of state and local governments. The Amendment is complex and subject to judicial interpretation. The District believes it is in compliance with the requirements of the amendment. However, the District has made certain interpretations of the amendment s language in order to determine its compliance. In November 1997, voters of the District approved a ballot issue which allows the District to collect, retain, and expend revenues from all sources, without limit. B. The District is in compliance with Financial Policies and Procedures handbook prepared by the Colorado Department of Education. C. The General Fund transferred $29,000 and $16,907, respectively, to the Student Activity Special Revenue Fund and Food Service, for general operating purposes. The bond fund transferred $117,398 to the general fund for operating purposes. D. In November 2013, taxpayers approved a mill levy override of 6.1 mills. E. Expenditures in the Student Activities Special Revenue Fund of $80,591 exceeds the budgeted amount of $80,000. This may be a violation of state budget laws. (3) DETAILED NOTES ON ALL FUNDS AND ACCOUNT GROUPS A. Deposits and Investments - all are in a single financial institution and carried at cost. Deposits are displayed on the balance sheets as "Cash in Bank" and "Certificates of Deposit". The Colorado Public Deposit Protection Act (PDPA) requires that all political subdivisions of the State deposit cash in eligible public depositories. Eligibility is determined by state regulators. Amounts on deposit in excess of federal insurance levels must be collateralized. The eligible collateral is specified under the PDPA. PDPA allows the institution to create a single collateral pool for all public funds. The pool for all the uninsured public deposits as a group is to be maintained by another institution or held in trust. The market value of the collateral must be at least equal to 102% of the aggregate uninsured deposits. The Colorado Division of Banking and Financial Services are required by statute to monitor the naming of eligible depositories and reporting of the uninsured deposits and assets maintained in the collateral pools. Custodial Credit Risk - the risk that, in the event of bank failure, the District s deposits may not be returned to it. The District does not have a written deposit policy for custodial credit risk.

30 Notes to the Financial Statements June 30, 2017 Page 14 At June 30, 2017, the District s cash deposits had a bank balance and carrying balance as follows: Bank Carrying Balance Balance Insured (FDIC) $ 500,000 $ 500,000 Deposits collateralized in a single institution pool 2,103,490 2,280,692 Cash on hand Total Deposits 2,603,490 2,781,252 Shown as Certificates of Deposits (766,377) In Agency Fund (87,467) Cash 1,927,409 As presented above, deposits with a bank balance of $2,103,490 and a carrying balance of $2,280,692 as of June 30, 2017, are uninsured, are exposed to custodial credit risk, and are collateralized with securities held by the pledging financial institution. B. Accrued Property Taxes Receivable - the amount budgeted for the current year, not yet collected. Property Tax Calendar - taxes are levied by December 15, tax bills are mailed January 1 of the following year, creating an enforceable lien on the property. If paid by installments of one-half each, the first is due February 28, the second June 15. If paid in one payment, the due date is April 30. Taxes are delinquent if not paid by those dates. Notice of delinquencies are mailed in September, and tax sales scheduled for November. C. Changes in General Fixed Assets Capital asset activity for the year ended June 30, 2017, was as follows: Beginning Ending Balance Increases Decreases Balance Governmental Activities Land 174, ,600 Site Improvements 30, ,768 Buildings 10,910, , ,639 10,988,259 Equipment 2,013,321 12, ,025,941 Transportation 557,513 19,100 71, ,024 Total 13,686, , ,228 13,724,593 Less Accumulated Depreciation Site Improvements 7,265 1, ,290 Buildings 3,344, ,166 62,527 3,506,874 Equipment 1,239, , ,373,433 Transportation 438,009 29,388 71, ,808 Total 5,028, , ,116 5,284,405 Governmental Activities Capital Assets, Net 8,657,746 (178,446) 39,112 8,440,188 Depreciation expense for the governmental activities was allocated $359,661 to instruction, $29,388 to transportation and $631 to food service.

31 Notes to the Financial Statements June 30, 2017 (continued) Page 15 D. Changes in Long-Term Debt Balance July 1 Additions Reductions Balance June 30 Compensated Absences General Fund 16,500 1,290-17,790 Food Service 2, ,295 Bonds Payable 725, , ,870 1, ,075 20,085 General Obligation Bonds Payable. On November 6, 2001, the taxpayers passed at election to issue bonds up to $10,000,000. The money was to be used to build a pre K-8 school facility, renovate the existing high school and acquire furniture and equipment for the school. The contract for the construction was $9,491,820. The construction was complete by June 30, The net effective interest rate is 3.90%. On August 18, 2011, the District issues $4,125,000 of refunding general obligation bonds with average rate of 2.5% to advance refund $4,070,000 of the 2001 series bonds. The net proceeds of $4,164,779 (after receiving a premium of $113,668 and payment of $73,889 issue costs) were deposited in escrow to purchase U S government securities. As a result, all of the 2001 series bonds are considered to be defeased and the liability for those bonds has been removed from the governmentwide statement of net position. The advanced refunding resulted in a difference between the acquisition price and the net carrying amount of the old debt of $94,779. The difference, reported in the accompanying financial statements as a deduction from bonds payable, is being charge to operations through the year 2016 using the effective interest method. The District completed the advance refunding to reduce its total debt service payments over the next 5 years by $291,242 and to obtain an economic gain (difference between the present values of the old and new debt service payments) of $282,101. There are no scheduled payments for the 2011 refunding bonds. These bonds were paid off during the June 30, 2017 year end. E. Deferred Outflows of Resources Balance Balance July 1 Additions Reductions June 30 Defeased Bonds 18, ,428 0 (4) OTHER INFORMATION A. Risk Management - The District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The District has joined Colorado School District Self Insurance Pool, a public entity risk pool currently operating as a common risk management and insurance program for members. The District pays an annual premium to CSDSI for its property and casualty and workers compensation insurance coverage. The intergovernmental agreement of formation of CSDSI provides that the Pool will be financially self-sustaining through member contributions and additional assessments, if necessary, and the Pool will purchase excess insurance through commercial companies for members' claims in excess of a specified selfinsured retention, which is determined each policy year.