CARTWRIGHT ELEMENTARY SCHOOL DISTRICT NO. 83 Comprehensive Annual Financial Report Fiscal Year Ended June 30, 2015 5220 West Indian School Road Phoenix, Arizona 85031
PHOENIX, ARIZONA COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2015 Issued by: Business Services Department
TABLE OF CONTENTS INTRODUCTORY SECTION Letter of Transmittal ASBO Certificate of Excellence GFOA Certificate of Achievement Organizational Chart List of Principal Officials Page i vi vii viii ix FINANCIAL SECTION INDEPENDENT AUDITOR S REPORT MANAGEMENT S DISCUSSION AND ANALYSIS (MD&A) 1 5 BASIC FINANCIAL STATEMENTS Government-Wide Financial Statements: Statement of Net Position Statement of Activities 18 19 Fund Financial Statements: Balance Sheet Governmental Funds Reconciliation of the Balance Sheet Governmental Funds to the Statement of Net Position Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds to the Statement of Activities 22 25 26 28
TABLE OF CONTENTS FINANCIAL SECTION Page BASIC FINANCIAL STATEMENTS Statement of Assets and Liabilities Fiduciary Funds Notes to Financial Statements 29 30 REQUIRED SUPPLEMENTARY INFORMATION Schedule of Revenues Expenditures and Changes in Fund Balances Budget and Actual: General Fund Food Service Fund Schedule of the Proportionate Share of the Net Pension Liability Schedule of Contributions Notes to Required Supplementary Information 54 55 56 56 57 COMBINING AND INDIVIDUAL FUND FINANCIAL STATEMENTS AND SCHEDULES Governmental Funds: Combining Balance Sheet All Non-Major Governmental Funds By Fund Type Combining Statement of Revenues, Expenditures and Changes in Fund Balances All Non-Major Governmental Funds By Fund Type 62 64 Special Revenue Funds: Combining Balance Sheet Combining Statement of Revenues, Expenditures and Changes in Fund Balances 68 72 Combining Schedule of Revenues, Expenditures and Changes in Fund Balances Budget and Actual 76
TABLE OF CONTENTS FINANCIAL SECTION Page COMBINING AND INDIVIDUAL FUND FINANCIAL STATEMENTS AND SCHEDULES Debt Service Fund: Schedule of Revenues, Expenditures and Changes in Fund Balance Budget and Actual 96 Capital Projects Funds: Combining Balance Sheet Combining Statement of Revenues, Expenditures and Changes in Fund Balances Combining Schedule of Revenues, Expenditures and Changes in Fund Balances Budget and Actual 98 100 102 Agency Funds: Combining Statement of Assets and Liabilities Combining Statement of Changes in Assets and Liabilities 108 109 STATISTICAL SECTION Financial Trends: Net Position by Component Expenses, Program Revenues, and Net (Expense)/Revenue General Revenues and Total Changes in Net Position Fund Balances Governmental Funds Governmental Funds Revenues 113 114 116 118 120 Governmental Funds Expenditures and Debt Service Ratio 122
TABLE OF CONTENTS STATISTICAL SECTION Other Financing Sources and Uses and Net Changes in Fund Balances Governmental Funds Page 124 Revenue Capacity: Primary Assessed Value and Estimated Actual Value of Taxable Property by Class Secondary Assessed Value of Taxable Property by Class Property Tax Assessment Ratios Direct and Overlapping Property Tax Rates Principal Property Taxpayers Property Tax Levies and Collections 125 126 127 128 129 130 Debt Capacity: Outstanding Debt by Type Direct and Overlapping Governmental Activities Debt Direct and Overlapping General Bonded Debt Ratios Legal Debt Margin Information 131 132 132 133 Demographic and Economic Information: County-Wide Demographic and Economic Statistics Principal Employers 134 135 Operating Information: Full-Time Equivalent District Employees by Type Operating Statistics Capital Assets Information 136 138 139
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INTRODUCTORY SECTION
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December 11, 2015 Citizens and Governing Board Cartwright Elementary School District No. 83 5220 W. Indian School Road Phoenix, Arizona 85031 State law mandates that school districts required to undergo an annual single audit publish a complete set of financial statements presented in conformity with accounting principles generally accepted in the United States of America and audited in accordance with auditing standards generally accepted in the United States by a certified public accounting firm licensed in the State of Arizona. Pursuant to that requirement, we hereby issue the comprehensive annual financial report of the Cartwright Elementary School District No. 83 (District) for the fiscal year ended June 30, 2015. This report consists of management s representations concerning the finances of the District. Consequently, management assumes full responsibility for the completeness and reliability of all of the information presented in this report. To provide a reasonable basis for making these representations, management of the District has established a comprehensive internal control framework that is designed both to protect the District s assets from loss, theft, or misuse and to compile sufficient reliable information for the preparation of the District s financial statements in conformity with accounting principles generally accepted in the United States of America. Because the cost of internal controls should not outweigh their benefits, the District s comprehensive framework of internal controls has been designed to provide reasonable rather than absolute assurance that the financial statements will be free of material misstatement. As management, we assert that, to the best of our knowledge and belief, this financial report is complete and reliable in all material respects. The District s financial statements have been audited by Heinfeld, Meech & Co., P.C., a certified public accounting firm. The goal of the independent audit was to provide reasonable assurance that the financial statements of the District for the fiscal year ended June 30, 2015, are free of material misstatement. The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; assessing the accounting principles used and significant estimates made by management; and evaluating the overall financial statement presentation. The independent auditors concluded, based upon the audit, that there was a reasonable basis for rendering an unmodified opinion that the District s financial statements for the fiscal year ended June 30, 2015, are fairly presented in conformity with accounting principles generally accepted in the United States of America. The independent auditor s report is presented as the first component of the financial section of this report. i
The independent audit of the financial statements of the District was part of a broader, federally mandated Single Audit as required by the provisions of the Single Audit Act Amendments of 1996 and U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments and Non-Profit Organizations designed to meet the special needs of federal grantor agencies. The standards governing Single Audit engagements require the independent auditor to report not only on the fair presentation of the financial statements, but also on the District s internal controls and compliance with legal requirements, with special emphasis on internal controls and legal requirements involving the administration of federal awards. These reports are available in a separately issued Single Audit Reporting Package. Accounting principles generally accepted in the United States of America require that management provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of Management s Discussion and Analysis (MD&A). This letter of transmittal is designed to complement the MD&A and should be read in conjunction with it. The District s MD&A can be found immediately following the report of the independent auditors. PROFILE OF THE DISTRICT The Cartwright Elementary School District No. 83 is an independent governmental entity located in central Maricopa County, Arizona, encompassing the western portion of metropolitan Phoenix, Arizona, and employing approximately 2,500 employees. The District was founded in the late 1800 s and has undergone many periods of growth over the past 110 years. As a result, the majority of facilities across the District were built as new structures in the 1950 s with additional facilities added in the past 10 years. The older facilities have been remodeled over the past 5 years. Major renovations of the District Office and Food Services have been completed. The District s student enrollment has declined slightly. Enrollment as of June 2015 was 19,321 which is 75 lower than June 2014. This represents a less than 1% decrease in the student population. The decrease in student population is a result of the opening of two competing charter schools within district boundaries. We anticipate the decrease in enrollment will continue for approximately two more years. Affordable housing and the strength of the Cartwright School District s grade as a B through the Arizona Accountability ranking system serve as a major attraction to families looking to relocate to the West Phoenix area. Once dependent upon an agricultural-based economy, the economic base of the County has become more diversified through the location of service, wholesale and retail trade, high technology industries and construction. Today, the County s economy is based on high technology manufacturing, light manufacturing, and commercial activities (including construction and trade), tourism, government, and agriculture. This report includes the funds of all organizational entities over which the District s Governing Board is financially accountable. The District provides a full range of services. These services include: education, pupil transportation, construction and maintenance of district facilities, food services, as well as activities associated with community and student organizations. Each year an operating budget for expenditures is prepared and adopted by the District for the General, Special Revenue, and Capital Projects Funds. Budgetary control is ultimately exercised at the fund level. Budgetary control is maintained through the use of periodic reports that compare actual expenditures against budgeted amounts. Although an annual budget of revenue is not required to be prepared, revenues are estimated. The expenditure budget can be revised ii
annually, per Arizona Revised Statutes. The District maintains an encumbrance accounting system as one technique of accomplishing budgetary control. Encumbered amounts lapse at yearend. As demonstrated by the statements and schedules included in the financial section of this report, the District continues to meet its responsibility for sound financial management. FACTORS AFFECTING FINANCIAL CONDITION The information presented in the financial statements is perhaps best understood when it is considered from the broader perspective of the specific environment within which the District operates. Local Economy. The Cartwright Elementary School District No. 83 sits in the Maryvale Village and is a bedroom community to the Phoenix Metropolitan area. The Maryvale Village contains many planned neighborhoods built from the beginning of the post war housing boom (1957) onward. The community is home to over 200,000 residences and is characterized by many large industrial parks built along Grand Avenue and the Union Pacific railroad line. The Maryvale Village followed a master plan that was primarily aimed at affordable markets. It includes a commercial center located at the intersection of Indian School Road and 51st Avenue which now includes the relocated Cartwright School District Office and Food Services offices. The core contains a variety of land uses and activities within a square mile located between 75th and 83rd Avenues. It serves as the regional center for much of the West Valley and includes Ak-Chin Pavilion, the Metropolitan area s largest outdoor entertainment facility. The second major land use anchor is Desert Sky Mall. The mall has incorporated a number of local businesses and caters to the Latino demographic. A regional bus station is currently under construction at 79 th Avenue and Thomas Road. The bus station is expected to be one of the busiest in the State. Other major retail centers include a Walmart Supercenter, Target, Lowes Home Improvement and Home Depot. Within the core, 60% of the employment is of the retail variety, while services account for 36% and public uses at 4%. Walmart is the largest employer of the area. Maryvale is also home to a major league baseball spring training stadium. This is a state-of-the-art training complex with a 7,000 seat stadium, 1,800 parking spaces and six adjoining practice fields. In 2013, the metro Phoenix economy finally started to show signs of recovery, which translated into strengthening demand for commercial real estate. The driving force behind the improvement in the commercial real estate sector has been employment growth. Metro Phoenix ranked fourth in the nation in 2012 and 12th in 2013 (year-over-year through October) in terms of jobs added, for all metro areas. The metro Phoenix commercial real estate market posted positive gains in net absorption, rising rental rates, and declining vacancy rates, with the market beginning to reach levels not seen in nearly five years. Long-term Financial Planning. District-wide efforts have been made to reduce utility costs. Drop ceilings and additional insulation were placed in older schools in the District. Energy management systems were installed on all HVAC systems to monitor and control usage and efficiency. With the new HVAC systems implemented and with the energy management controls in place, we have seen increased efficiency from those newer units with increased SEER ratings. Another direct result of the improved HVAC systems and energy management systems along with annual review of all electrical usage is a savings in energy costs of approximately 100,000 annually. Additional efforts have been implemented to reduce energy consumption with the advent of an energy education administrator. The energy educator position instructs all District employees on iii
current energy conservation practices and monitors the use of energy district-wide. As a result, the District has reduced energy consumption by 20% since the inception of the program. In November, 2010, the voters in Cartwright Elementary School District No. 83 approved a bond issue of 27,820,000 for facility improvements and bus fleet enhancements over the next six years. Five major renovations of school sites have been completed as of June 30, 2015. The remodeling of a district owned property for relocation of the District Office and Food Services Department have also been completed. Several sites have received HVAC replacements and replacement school buses were purchased. Given the age of our facilities and coupled with reduced Capital funding from the State, we have applied for several Building Renewal Grant funds in order to maintain a safe and healthy environment conducive to teaching and learning. Cartwright Elementary School District s salaries and fringe benefits represent nearly ninety percent of the operating budget. The beginning certified salary is 35,067, and the top salary is 79,200 with additional performance compensation available up to 2,700 per teacher. The District continues to utilize state purchasing services and cooperative purchasing with other public entities for price advantages on school supplies and equipment. Efforts are also made to make purchases on a seasonal basis when appropriate. The District has signed intergovernmental agreements with other school districts and public entities in order to reduce transaction costs and increase economies of scale. Expansion of warehouse facilities has increased its ability to further reduce costs through both economies of scale and timing of purchases. Major Initiatives During the past several years, the District s primary focus was improving student achievement in literacy and mathematics. The District successfully implemented a teacher coach/mentor model which has positively impacted student test scores. Curriculum specialists and reading interventionist were added at each school site to further support student achievement goals. Supplemental student assessment software was implemented to assess student achievement in mathematics and literacy. The assessment tool has proved to be useful in identifying students strengths and weaknesses during the school year as the assessments are conducted quarterly and allow for immediate feedback to classroom teachers and site administrators. The District employed teacher mentors to provide guidance, support, and staff development for newly hired teachers. Retention of new teachers is a challenge for the District and the addition of teacher mentors has assisted in providing greater teacher retention. In 2012-13 the District added Success Maker software which has been used for student remediation in common core subject areas. A major goal of the District is to move from a high B to A grade in Arizona accountability framework. During the 2013-14 school year and continuing into the 2014-15 year, the District rolled out and enhanced several initiatives aimed at impacting student achievement namely computerized online testing, Kagan strategies, Thinking Maps and Singapore Math. Towards the end of the school year, began work on the Guaranteed and Viable Curriculum Project. In addition, a Professional Learning Community model was implemented District-wide. The model has taken several years to implement and is now systemically operational throughout the District. The results of the District-wide endeavor are apparent in the continued improvement in students standardized test scores. iv
The District has a large bilingual student population with specific needs in the area of English language development. In order to address this challenge, the District has added a language acquisition specialist at each school site and developed a strong English language development curriculum with assessments conducted throughout the year. In addition, the District has developed a program to provide intensive instruction to English language learners delivered daily during a four hour time period utilizing the existing curriculum. The program was developed in 2006-07 and implemented in 2007-08. The Arizona Department of Education mandated a similar program be implemented state wide in the 2008-09 fiscal year and it is still required today. AWARDS AND ACKNOWLEDGMENT Awards. The Association of School Business Officials International (ASBO) awarded a Certificate of Excellence in Financial Reporting to the District for its comprehensive annual financial report for the fiscal year ended June 30, 2014. In addition, the Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to Cartwright Elementary School District No. 83 for the fiscal year ended June 30, 2014. In order to be awarded these Certificates of Achievement and Excellence, the District published an easily readable and efficiently organized comprehensive annual financial report. This report satisfied both generally accepted accounting principles and applicable legal requirements. The Certificates of Achievement and Excellence are valid for a period of one year only. We believe that our current comprehensive annual financial report continues to meet the Certificates of Achievement and Excellence Program's requirements and we are submitting it to both GFOA and ASBO to determine its eligibility for continuing certificates. Acknowledgments. The preparation of the comprehensive annual financial report on a timely basis was made possible by the dedicated service of the entire staff of the Business Services Department. Each member of the department has our sincere appreciation for the contributions made in the preparation of this report. In closing, without the leadership and support of the Governing Board of the District, preparation of this report would not have been possible. Sincerely, Dr. Jacob A. Chavez Superintendent Zeek Ojeh, CPA Assistant Superintendent for Financial and Auxiliary Services v
Association of School Business Officials International The Certificate of Excellence in Financial Reporting Award is presented to Cartwright Elementary School District No. 83 For Its Comprehensive Annual Financial Report (CAFR) For the Fiscal Year Ended June 30, 2014 The CAFR has been reviewed and met or exceeded ASBO International s Certificate of Excellence standards Mark C. Pepera, MBA, RSBO, SFO President John D. Musso, CAE, RSBA Executive Director vi
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LIST OF PRINCIPAL OFFICIALS GOVERNING BOARD Mr. Pedro Lopez, President Mr. John Gomez, Vice President Mrs. Rosa Cantu, Member Mrs. Lydia Hernandez, Member Ms. Marissa Hernandez, Member ADMINISTRATIVE STAFF Dr. Jacob Chavez, Superintendent Dr. Edward Murphy, Assistant Superintendent Human Resources Dr. Rebecca Osuna, Assistant Superintendent Administrative Services Dr. LeeAnn Lawlor, Assistant Superintendent Educational Services Zeek Ojeh, CPA, Assistant Superintendent Financial and Auxiliary Services ix
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FINANCIAL SECTION
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3033 N. Central Ave., Suite 300 Phoenix, Arizona 85012 Tel (602) 277-9449 Fax (602) 277-9297 INDEPENDENT AUDITOR S REPORT Governing Board Cartwright Elementary School District No. 83 Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of Cartwright Elementary School District No. 83 (District), as of and for the year ended June 30, 2015, and the related notes to the financial statements, which collectively comprise the District s basic financial statements as listed in the table of contents. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the Cartwright Elementary School District No. 83, as of June 30, 2015, and the respective changes in financial position thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Change in Accounting Principle As described in Note 1, the District implemented the provisions of the Governmental Accounting Standards Board (GASB) Statement No. 68, Accounting and Financial Reporting for Pensions, as amended by GASB Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date, for the year ended June 30, 2015, which represents a change in accounting principle. Our opinion is not modified with respect to this matter. Page 1 TUCSON PHOENIX FLAGSTAFF www.heinfeldmeech.com
Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the Management s Discussion and Analysis, budgetary comparison information, and net pension liability information, as listed in the table of contents, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the District s basic financial statements. The Introductory Section, Combining and Individual Fund Financial Statements and Schedules, and Statistical Section are presented for purposes of additional analysis and are not a required part of the basic financial statements. The Combining and Individual Fund Financial Statements and Schedules 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, the Combining and Individual Fund Financial Statements and Schedules information is fairly stated in all material respects in relation to the basic financial statements as a whole. The Introductory Section and Statistical Section have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 11, 2015, on our consideration of Cartwright Elementary School District No. 83 s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Cartwright Elementary School District No. 83 s internal control over financial reporting and compliance. HEINFELD, MEECH & CO., P.C. CPAs and Business Consultants December 11, 2015 Page 2
Page 3 MANAGEMENT S DISCUSSION AND ANALYSIS (MD&A) (Required Supplementary Information)
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MANAGEMENT S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2015 As management of the Cartwright Elementary School District No. 83 (District), we offer readers of the District s financial statements this narrative overview and analysis of the financial activities of the District for the fiscal year ended June 30, 2015. The management s discussion and analysis is presented as required supplementary information to supplement the basic financial statements. We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in our letter of transmittal, which can be found in the introductory section of this report. FINANCIAL HIGHLIGHTS The District s total net position of governmental activities increased 2.4 million which represents a 31 percent increase from the prior fiscal year as a result of an increase of 2.7 million in property taxes. General revenues accounted for 109.5 million in revenue, or 79 percent of all current fiscal year revenues. Program specific revenue in the form of charges for services and grants and contributions accounted for 29.6 million or 21 percent of total current fiscal year revenues. The District had approximately 136.6 million in expenses related to governmental activities, a decrease of 5 percent from the prior fiscal year. Among major funds, the General Fund had 100.6 million in current fiscal year revenues, which primarily consisted of state aid and property taxes, and 102.0 million in expenditures. The General Fund s fund balance increase from 14.0 million at the prior fiscal year end to 14.7 million at the end of the current fiscal year was primarily due to an increase of 2.6 million in property taxes. OVERVIEW OF FINANCIAL STATEMENTS This discussion and analysis are intended to serve as an introduction to the District s basic financial statements. The District s basic financial statements comprise 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 accrual basis of accounting is used for the government-wide financial statements. Page 5
MANAGEMENT S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2015 OVERVIEW OF FINANCIAL STATEMENTS The statement of net position presents information on all of the District s assets, liabilities, and deferred inflows/outflows of resources with the difference reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the District is improving or deteriorating. The statement of activities presents information showing how the District s net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused compensated absences). The government-wide financial statements outline functions of the District that are principally supported by property taxes and intergovernmental revenues. The governmental activities of the District include instruction, support services, operation and maintenance of plant services, student transportation services, operation of non-instructional services, and interest on long-term debt. Fund financial statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The District uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the District can be divided into two categories: governmental funds and fiduciary funds. 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 use the modified accrual basis of accounting and focus on near-term inflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating the District s near-term financing requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the District s near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. Page 6
MANAGEMENT S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2015 OVERVIEW OF FINANCIAL STATEMENTS Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures and changes in fund balances for the General and Food Service Funds, both of which are considered to be major funds. Data from the other governmental funds are combined into a single, aggregated presentation. Individual fund data for each of these non-major governmental funds is provided in the form of combining statements and schedules. 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. Due to their custodial nature, the fiduciary funds do not have a measurement focus. Notes to the financial statements. The notes 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 financial statements can be found immediately following the basic financial statements. Other information. In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information concerning the District s budget process. The District adopts an annual expenditure budget for all governmental funds. A schedule of revenues, expenditures and changes in fund balances budget and actual has been provided for the General Fund and major Special Revenue Fund as required supplementary information. GOVERNMENT-WIDE FINANCIAL ANALYSIS Net position may serve over time as a useful indicator of a government s financial position. In the case of the District, assets and deferred outflows exceeded liabilities and deferred inflows by 10.3 million at the current fiscal year end. Page 7
MANAGEMENT S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2015 GOVERNMENT-WIDE FINANCIAL ANALYSIS The largest portion of the District s positive net position reflects its investment in capital assets (e.g., land and improvements, buildings and improvements, vehicles, furniture and equipment and construction in progress), less any related outstanding debt used to acquire those assets. The District uses these capital assets to provide services to its students; consequently, these assets are not available for future spending. Although the District s investment in its capital assets is reported net of related outstanding 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. In addition, a portion of the District s net position represents resources that are subject to external restrictions on how they may be used. The following table presents a summary of the District s net position for the fiscal years ended June 30, 2015 and June 30, 2014. Current and other assets Capital assets, net Total assets As of June 30, 2015 43,201,650 155,679,744 198,881,394 As of June 30, 2014 47,091,698 155,574,692 202,666,390 Deferred outflows 14,168,065 Current and other liabilities Long-term liabilities Total liabilities 19,563,000 158,313,807 177,876,807 24,533,038 33,367,341 57,900,379 Deferred inflows 24,851,098 Net position: Net investment in capital assets Restricted Unrestricted Total net position 129,489,560 7,862,340 (127,030,346) 10,321,554 129,845,293 6,021,561 8,899,157 144,766,011 At the end of the current fiscal year the District reported positive balances in two categories of net position. Unrestricted net position, which is normally used to meet the District s obligations to its citizens and creditors reported a deficit of 127.0 million. The deficit arose because of the implementation of GASB Statement No. 68, which required the District to record a liability for its proportionate share of the state pension plan s unfunded liability. At the end of the prior fiscal year, the District reported positive balances in all three categories of net position. Page 8
MANAGEMENT S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2015 GOVERNMENT-WIDE FINANCIAL ANALYSIS The District s financial position is the product of several financial transactions including the net result of activities, the acquisition and payment of debt, the acquisition and disposal of capital assets, and the depreciation of capital assets. The following are significant current year transactions that had an impact on the Statement of Net Position. The principal retirement of 1.1 million of bonds. The addition of 8.4 million in capital assets through the renovation of schools and District buildings, and purchases of vehicles, furniture and equipment. The issuance of 850,000 in school improvement bonds. The addition of 125.4 million in pension liabilities due to the implementation of new pension reporting standards. Changes in net position. The District s total revenues for the current fiscal year were 139.1 million. The total cost of all programs and services was 136.6 million. The following table presents a summary of the changes in net position for the fiscal years ended June 30, 2015 and June 30, 2014. Fiscal Year Ended Fiscal Year Ended June 30, 2015 June 30, 2014 Revenues: Program revenues: Charges for services 730,639 1,251,263 Operating grants and contributions 28,261,425 26,571,451 Capital grants and contributions 623,568 761,058 General revenues: Property taxes 22,367,878 19,674,197 Investment income 32,884 71,306 Unrestricted county aid 7,841,691 7,344,115 Unrestricted state aid 78,624,923 78,320,193 Unrestricted federal aid 608,400 475,367 Total revenues 139,091,408 134,468,950 Expenses: Instruction 76,735,557 83,740,942 Support services students and staff 17,527,652 17,731,632 Support services administration 12,912,414 12,755,474 Operation and maintenance of plant services 12,078,462 12,094,423 Student transportation services 3,498,900 3,997,612 Operation of non-instructional services 12,724,692 11,950,065 Interest on long-term debt 1,169,524 1,250,829 Total expenses 136,647,201 143,520,977 Changes in net position 2,444,207 (9,052,027) Net position, beginning, as restated 7,877,347 153,818,038 Net position, ending 10,321,554 144,766,011 Page 9
MANAGEMENT S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2015 GOVERNMENT-WIDE FINANCIAL ANALYSIS Expenses Millions 90 80 70 60 50 40 30 20 10 0 FY2014-15 FY2013-14 The following is a significant current year transaction that had an impact on the change in net position. Instruction expenses decreased 7.0 million from the prior year as a result of the closure of the Employee Benefit Trust Fund to the Agency Fund in the prior year. The following table presents the cost of the District s major functional activities. The table also shows each function s net cost (total cost less charges for services generated by the activities and intergovernmental aid provided for specific programs). The net cost shows the financial burden that was placed on the State and District s taxpayers by each of these functions. Page 10
MANAGEMENT S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2015 GOVERNMENT-WIDE FINANCIAL ANALYSIS Year Ended June 30, 2015 Year Ended June 30, 2014 Total Net (Expense)/ Total Net (Expense)/ Expenses Revenue Expenses Revenue Instruction 76,735,557 (68,683,666) 83,740,942 (75,441,036) Support services students and staff 17,527,652 (11,820,232) 17,731,632 (12,625,371) Support services administration 12,912,414 (11,937,976) 12,755,474 (11,868,951) Operation and maintenance of plant services 12,078,462 (11,532,058) 12,094,423 (11,592,153) Student transportation services 3,498,900 (3,498,900) 3,997,612 (3,997,612) Operation of non-instructional services 12,724,692 1,610,787 11,950,065 1,838,747 Interest on long-term debt 1,169,524 (1,169,524) 1,250,829 (1,250,829) Total 136,647,201 (107,031,569) 143,520,977 (114,937,205) The cost of all governmental activities this year was 136.6 million. Federal and State governments and charges for services subsidized certain programs with grants and contributions and other local revenues of 29.6 million. Net cost of governmental activities of 107.0 million was financed by general revenues, which are made up of primarily property taxes of 22.4 million and state and county aid of 86.5 million. FINANCIAL ANALYSIS OF THE DISTRICT S FUNDS As noted earlier, the District uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental funds. The focus of the District s governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the District s financing requirements. In particular, unassigned fund balance may serve as a useful measure of the District s net resources available for spending at the end of the fiscal year. The financial performance of the District as a whole is reflected in its governmental funds. As the District completed the year, its governmental funds reported a combined fund balance of 20.8 million, an increase of 1.1 million due primarily to a decrease in capital outlay expenditures for building improvements and an increase in property tax revenue. Page 11
MANAGEMENT S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2015 FINANCIAL ANALYSIS OF THE DISTRICT S FUNDS The General Fund comprises 71 percent of the total fund balance. Approximately 13.4 million, or 91 percent of the General Fund s fund balance is unassigned. The General Fund is the principal operating fund of the District. The fund balance increased 774,750 to 14.7 million as of fiscal year end. General Fund revenues increased 3.5 million as a result of an increase in property tax revenue. General Fund expenditures increased 1.6 million. The fund balance in the Food Service Fund was 4.3 million as of fiscal year end. The increase in fund balance of 993,999 was the result of a decrease in the indirect cost transfer. BUDGETARY HIGHLIGHTS Over the course of the year, the District revised the General Fund annual expenditure budget for transfer of budget capacity to the Unrestricted Capital Outlay Fund. The difference between the original budget and the final amended budget was a 3.3 million decrease, or 3 percent. Significant variances for the final amended budget and actual revenues resulted from the District not being required by the State of Arizona to prepare a revenue budget. A schedule showing the original and final budget amounts compared to the District s actual financial activity for the General Fund is provided in this report as required supplementary information. The significant expenditure variance is summarized as follows: The favorable variance of 2.3 million in instruction was a result of unfilled positions and vacancy savings. CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets. At year end, the District had invested 281.9 million in capital assets, including school buildings, athletic facilities, buses and other vehicles, computers, and other equipment. This amount represents a net increase prior to depreciation of 7.8 million from the prior fiscal year, primarily due to the renovation of the District office and school buildings. Total depreciation expense for the current fiscal year was 8.2 million. Page 12
MANAGEMENT S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2015 CAPITAL ASSETS AND DEBT ADMINISTRATION The following schedule presents a summary of capital asset balances for the fiscal years ended June 30, 2015 and June 30, 2014. As of As of June 30, 2015 June 30, 2014 Capital assets non-depreciable 9,944,165 18,326,135 Capital assets depreciable, net 145,735,579 137,248,557 Total 155,679,744 155,574,692 The estimated cost to complete current construction projects is 33,172. Additional information on the District s capital assets can be found in Note 6. Debt Administration. At year end, the District had 26.3 million in long-term debt outstanding, 1.1 million due within one year. Long-term debt decreased by 198,693 due to the retirement of outstanding debt combined with the issuance of debt. The District s general obligation bonds are subject to two limits; the Constitutional debt limit (total debt limit) on all general obligation bonds (up to 15 percent of the total secondary assessed valuation) and the statutory debt limit on Class B bonds (the greater of 10 percent of the secondary assessed valuation or 1,500 per student). The current total debt limitation for the District is 33.0 million and the Class B debt limit is 26.8 million, which are more than the District s total outstanding general obligation and Class B debt, respectively. Additional information on the District s long-term debt can be found in Notes 8 through 10. ECONOMIC FACTORS AND NEXT YEAR S BUDGET AND RATES Many factors were considered by the District s administration during the process of developing the fiscal year 2015-16 budget. Among them: Fiscal year 2014-15 budget balance carry forward (estimated 3.2 million). District student population (estimated 19,206). Also considered in the development of the budget is the local economy and inflation of the surrounding area. Budgeted expenditures in the General Fund increased five percent to 100.5 million in fiscal year 2015-16. Transfer of budget capacity from the Unrestricted Capital Outlay Fund is the primary reason for the increase. State aid and property taxes are expected to be the primary funding sources. No new programs were added to the 2015-16 budget. Page 13
MANAGEMENT S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2015 CONTACTING THE DISTRICT S FINANCIAL MANAGEMENT This financial report is designed to provide our citizens, taxpayers, and investors and creditors with a general overview of the District s finances and to demonstrate the District s accountability for the resources it receives. If you have questions about this report or need additional information, contact Cartwright Elementary School District No. 83 Administration Center, Office of Business Services, 5220 West Indian School Road, Phoenix, Arizona 85031. Page 14
Page 15 BASIC FINANCIAL STATEMENTS
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Page 17 GOVERNMENT-WIDE FINANCIAL STATEMENTS
STATEMENT OF NET POSITION JUNE 30, 2015 Governmental Activities ASSETS Current assets: Cash and investments 11,092,798 Property taxes receivable 2,116,389 Accounts receivable 30,000 Due from governmental entities 28,564,479 Inventory 1,397,984 Total current assets 43,201,650 Noncurrent assets: Capital assets not being depreciated 9,944,165 Capital assets, net of accumulated depreciation 145,735,579 Total noncurrent assets 155,679,744 Total assets 198,881,394 DEFERRED OUTFLOWS OF RESOURCES Pension plan items 14,168,065 LIABILITIES Current liabilities: Accounts payable 1,758,334 Construction contracts payable 210,711 Credit line payable 16,204,000 Accrued payroll and employee benefits 751,833 Compensated absences payable 850,000 Accrued interest payable 591,679 Unearned revenues 46,443 Obligations under capital leases 20,094 Bonds payable 1,075,000 Total current liabilities 21,508,094 Noncurrent liabilities: Non-current portion of long-term obligations 156,368,713 Total noncurrent liabilities 156,368,713 Total liabilities 177,876,807 DEFERRED INFLOWS OF RESOURCES Pension plan items 24,851,098 NET POSITION Net investment in capital assets 129,489,560 Restricted for: Voter approved initiatives 243,234 Federal and state projects 246,785 Food service 4,116,540 Civic center 1,008,927 Other local initiatives 460,322 Debt service 159,097 Capital outlay 1,627,435 Unrestricted (127,030,346) Total net position 10,321,554 Page 18 The notes to the basic financial statements are an integral part of this statement.