INDEPENDENT SCHOOL DISTRICT NO. 15 ST. FRANCIS, MINNESOTA Financial Statements and Supplemental Information Year Ended June 30, 2018
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INDEPENDENT SCHOOL DISTRICT NO. 15 Table of Contents Page INTRODUCTORY SECTION SCHOOL BOARD AND ADMINISTRATION 1 FINANCIAL SECTION INDEPENDENT AUDITOR S REPORT 24 MANAGEMENT S DISCUSSION AND ANALYSIS 516 BASIC FINANCIAL STATEMENTS Government-Wide Financial Statements Statement of Net Position 17 Statement of Activities 18 Fund Financial Statements Governmental Funds Balance Sheet 1920 Reconciliation of the Balance Sheet to the Statement of Net Position 21 Statement of Revenue, Expenditures, and Changes in Fund Balances 2223 Reconciliation of the Statement of Revenue, Expenditures, and Changes in Fund Balances to the Statement of Activities 24 Statement of Revenue, Expenditures, and Changes in Fund Balances Budget and Actual General Fund 25 Proprietary Funds Internal Service Funds Statement of Net Position 26 Statement of Revenue, Expenses, and Changes in Net Position 27 Statement of Cash Flows 28 Fiduciary Funds Statement of Fiduciary Net Position 29 Statement of Changes in Fiduciary Net Position 29 Notes to Basic Financial Statements 3061 REQUIRED SUPPLEMENTARY INFORMATION Public Employees Retirement Association Pension Benefit Plan Schedule of District s and Nonemployer Proportionate Share of Net Pension Liability 62 Schedule of District Contributions 62 Teachers Retirement Association Pension Benefit Plan Schedule of District s and Nonemployer Proportionate Share of Net Pension Liability 63 Schedule of District Contributions 63 Other Post-Employment Benefits Plan Schedule of Changes in the District s Net OPEB Liability and Related Ratios 64 Schedule of Investment Returns 65 Notes to Required Supplementary Information 6668
INDEPENDENT SCHOOL DISTRICT NO. 15 Table of Contents (continued) Page SUPPLEMENTAL INFORMATION Nonmajor Governmental Funds Combining Balance Sheet 69 Combining Statement of Revenue, Expenditures, and Changes in Fund Balances 70 General Fund Comparative Balance Sheet 71 Schedule of Revenue, Expenditures, and Changes in Fund Balances Budget and Actual 7274 Food Service Special Revenue Fund Comparative Balance Sheet 75 Schedule of Revenue, Expenditures, and Changes in Fund Balances Budget and Actual 76 Community Service Special Revenue Fund Comparative Balance Sheet 77 Schedule of Revenue, Expenditures, and Changes in Fund Balances Budget and Actual 78 Capital Projects Building Construction Fund Balance Sheet 79 Schedule of Revenue, Expenditures, and Changes in Fund Balances Budget and Actual 80 Debt Service Fund Comparative Balance Sheet 81 Schedule of Revenue, Expenditures, and Changes in Fund Balances Budget and Actual 82 Employee Benefit Trust Funds Combining Statement of Fiduciary Net Position 83 Combining Statement of Changes in Fiduciary Net Position 83 OTHER DISTRICT INFORMATION (UNAUDITED) Government-Wide Revenue by Type 84 Government-Wide Expenses by Function 8586 General Fund Revenue by Source 87 General Fund Expenditures by Program 8889 School Tax Levies and Tax Rates by Fund 90 Tax Capacities and Market Values 91 Property Tax Levies and Receivables 9293 Student Enrollment 94
INDEPENDENT SCHOOL DISTRICT NO. 15 Table of Contents (continued) Page SINGLE AUDIT AND OTHER REQUIRED REPORTS Schedule of Expenditures of Federal Awards 95 Independent Auditor s Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance With Government Auditing Standards 9697 Independent Auditor s Report on Compliance for Each Major Federal Program and Report on Internal Control Over Compliance Required by the Uniform Guidance 9899 Independent Auditor s Report on Minnesota Legal Compliance 100 Schedule of Findings and Questioned Costs 101102 Uniform Financial Accounting and Reporting Standards Compliance Table 103104
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INTRODUCTORY SECTION
INDEPENDENT SCHOOL DISTRICT NO. 15 School Board and Administration as of June 30, 2018 SCHOOL BOARD Board Position Mike Starr Jill Anderson Sean Sullivan Rob Schoenrock Barbara Jahnke Amy Kelly Marsha Van Denburgh Chairperson Vice Chairperson Clerk Treasurer Director Director Director ADMINISTRATION Troy Ferguson Bernice Humnick Brandon Nelson Tim Finn Lisa Rahn Maria Rens Superintendent Director of Business Services Human Resources Coordinator Director of Special Services Community Education Director Director of Curriculum -1-
FINANCIAL SECTION
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C E R T I F I E D P U B L I C A C C O U N T A N T S PRINCIPALS Thomas A. Karnowski, CPA Paul A. Radosevich, CPA William J. Lauer, CPA James H. Eichten, CPA Aaron J. Nielsen, CPA Victoria L. Holinka, CPA/CMA Jaclyn M. Huegel, CPA INDEPENDENT AUDITOR S REPORT To the School Board and Management of Independent School District No. 15 St. Francis, Minnesota 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 Independent School District No. 15 (the District) as of and for the year ended June 30, 2018, 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 District s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the District s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. -2- (continued) M a l l o y, M o n t a g u e, K a r n o w s k i, R a d o s e v i c h & C o., P. A. 5 3 5 3 Wa y z a t a B o u l e v a r d S u i t e 4 1 0 M i n n e a p o l i s, M N 5 5 4 1 6 P h o n e : 9 5 2-5 4 5-0 4 2 4 Fa x : 9 5 2-5 4 5-0 5 6 9 w w w. m m k r. c o m
OPINIONS In our opinion, the financial statements referred to on the previous page present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the District as of June 30, 2018, and the respective changes in financial position and, where applicable, cash flows thereof, and the budgetary comparison for the General Fund for the year then ended, in accordance with accounting principles generally accepted in the United States of America. OTHER MATTERS Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management s discussion and analysis and the required supplementary information (RSI), 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 RSI 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, supplemental information, and other district information, as listed in the table of contents, are presented for purposes of additional analysis and are not required parts of the basic financial statements. The accompanying Schedule of Expenditures of Federal Awards is presented for purposes of additional analysis as required by Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, and is also not a required part of the basic financial statements of the District. The accompanying Uniform Financial Accounting and Reporting Standards (UFARS) Compliance Table is presented for purposes of additional analysis as required by the Minnesota Department of Education, and is also not a required part of the basic financial statements of the District. The supplemental information, the Schedule of Expenditures of Federal Awards, and the UFARS Compliance Table 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 information is fairly stated, in all material respects, in relation to the basic financial statements as a whole. The introductory and other district information sections 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. -3- (continued)
Prior Year Comparative Information We have previously audited the District s 2017 financial statements, and we expressed unmodified audit opinions on the respective financial statements of the governmental activities, each major fund, and the aggregate remaining fund information in our report dated December 5, 2017. In our opinion, the partial comparative information presented herein as of and for the year ended June 30, 2017 is consistent, in all material respects, with the audited financial statements from which it has been derived. OTHER REPORTING REQUIRED BY GOVERNMENT AUDITING STANDARDS In accordance with Government Auditing Standards, we have also issued our report dated December 17, 2018 on our consideration of the District s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, grant agreements, and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the District s internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the District s internal control over financial reporting and compliance. Minneapolis, Minnesota December 17, 2018-4-
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INDEPENDENT SCHOOL DISTRICT NO. 15 Management s Discussion and Analysis Year Ended June 30, 2018 This section of Independent School District No. 15 s (the District) annual financial statements presents management s narrative overview and analysis of the District s financial performance during the fiscal year ended June 30, 2018. Please read it in conjunction with the other components of the District s annual financial statements. FINANCIAL HIGHLIGHTS The District s liabilities and deferred inflows of resources exceeded its assets and deferred outflows of resources at June 30, 2018 by $32,875,146 (deficit net position). The District s total net position decreased by $13,957,067 during the fiscal year ended June 30, 2018. Government-wide revenues totaled $64,635,176 and were $13,957,067 less than expenses of $78,592,243. The General Fund s total fund balance (under the governmental fund presentation) increased $24,646 from the prior year, compared to a $462,041 decrease planned in the budget. OVERVIEW OF THE FINANCIAL STATEMENTS The financial section of the annual financial statements consists of the following parts: Independent Auditor s Report; Management s discussion and analysis; Basic financial statements, including the government-wide financial statements, fund financial statements, and the notes to basic financial statements; Required supplementary information; and Supplemental information consisting of combining and individual fund statements and schedules. The following explains the two types of statements included in the basic financial statements: GOVERNMENT-WIDE FINANCIAL STATEMENTS The government-wide financial statements (Statement of Net Position and Statement of Activities) 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, deferred outflows of resources, liabilities, and deferred inflows of resources, except for the fiduciary funds. 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. -5-
The two government-wide financial statements report the District s net position and how it has changed. Net position the difference between the District s assets, deferred outflows of resources, liabilities, and deferred inflows of resources is one way to measure the District s financial health or position. Over time, increases or decreases in the District s net position are indicators of whether its financial position is improving or deteriorating, respectively. To assess the overall health of the District requires consideration of additional nonfinancial factors, such as changes in the District s property tax base and the condition of school buildings and other facilities. In the government-wide financial statements the District s activities are all shown in one category titled governmental activities. These activities, including regular and special education instruction, transportation, administration, food services, and community education, are primarily financed with state aids and property taxes. FUND FINANCIAL STATEMENTS The fund financial statements provide more detailed information about the District s funds, focusing on its most significant or major funds, rather than the District as a whole. Funds (Food Service Special Revenue and Community Service Special Revenue) that do not meet the threshold to be classified as major funds are called nonmajor funds. Detailed financial information for nonmajor funds can be found in the supplemental information section. Funds are accounting devices the District uses to keep track of specific sources of funding and spending on particular programs. For Minnesota schools, funds are established in accordance with Uniform Financial Accounting and Reporting Standards in accordance with statutory requirements and accounting principles generally accepted in the United States of America. The District maintains the following kinds of funds: Governmental Funds The District s basic services are included in governmental funds, which generally focus on: 1) how cash and other financial assets that can readily be converted to cash flow in and out; and 2) the balances left at year-end that are available for spending. Consequently, the governmental fund financial statements provide a detailed short-term view that helps to determine whether there are more or less financial resources that can be spent in the near future to finance the District s programs. Because this information does not encompass the additional long-term focus of the government-wide financial statements, we provide additional information (reconciliation schedules) immediately following the governmental fund financial statements that explain the relationship (or differences) between these two types of financial statement presentations. Proprietary Funds The District maintains one type of proprietary fund. Internal service funds are used as an accounting device to accumulate and allocate costs internally among the District s various functions. The District uses its internal service fund to account for the self-insurance activities of the District employees dental claims. These services have been included within governmental activities in the government-wide financial statements. Proprietary funds provide the same type of information as the government-wide financial statements, only in more detail. Fiduciary Funds The District is the trustee, or fiduciary, for assets that belong to other organizations. The District is responsible for ensuring that the assets reported in these funds are used only for their intended purposes and by those to whom the assets belong. All of the District s fiduciary activities are reported in a separate Statement of Fiduciary Net Position and a Statement of Changes in Fiduciary Net Position. We exclude these activities from the government-wide financial statements because the District cannot use these assets to finance its operations. -6-
FINANCIAL ANALYSIS OF THE DISTRICT AS A WHOLE Table 1 is a summarized view of the District s Statement of Net Position: Table 1 Summary Statement of Net Position as of June 30, 2018 and 2017 2018 2017 Assets Current and other assets $ 107,254,083 $ 32,426,879 Capital assets, net of depreciation 56,809,481 52,185,271 Total assets $ 164,063,564 $ 84,612,150 Deferred outflows of resources OPEB plan deferments $ 40,723 $ 21,423 Pension plan deferments 56,648,372 76,459,517 Total deferred outflow of resources $ 56,689,095 $ 76,480,940 Liabilities Current and other liabilities $ 9,751,666 $ 8,801,442 Long-term liabilities, including due within one year 212,993,467 157,112,052 Total liabilities $ 222,745,133 $ 165,913,494 Deferred inflows of resources Property taxes levied for subsequent year $ 11,679,759 $ 11,264,005 OPEB plan deferments 109,741 111,942 Pension plan deferments 19,093,172 2,721,728 Total deferred inflows of resources $ 30,882,672 $ 14,097,675 Net position Net investment in capital assets $ 36,577,361 $ 32,806,763 Restricted 2,543,383 3,148,978 Unrestricted (71,995,890) (54,873,820) Total net position $ (32,875,146) $ (18,918,079) The District s financial position is the product of many factors. For example, the determination of the District s net investment in capital assets involves many assumptions and estimates, such as current and accumulated depreciation amounts. A conservative versus liberal approach to depreciation estimates, as well as capitalization policies, will produce a significant difference in the calculated amounts. Another major factor in determining net position as compared to fund balances is the liabilities for long-term severance, pension, and other post-employment benefits (OPEB), which impact the unrestricted portion of net position. Total net position decreased $13,957,067 in 2018 from current year operating results. The District s increase in net investment in capital assets is due mostly to the District repaying debt at a faster rate than the assets are being depreciated. The District s decrease in net position restricted for debt service and food service reduced this portion of net position. Fluctuations in the District s share of state-wide pension plans contributed to the change in deferred outflows, long-term liabilities, deferred inflows, and unrestricted net position. The District reported $81,583,271 in proceeds from bonds and capital leases in the current year, increasing both assets and liabilities in the previous table. -7-
Table 2 presents a summarized version of the District s Statement of Activities: Table 2 Summary Statement of Activities for the Years Ended June 30, 2018 and 2017 2018 2017 Revenues Program revenues Charges for services $ 4,504,071 $ 3,900,482 Operating grants and contributions 11,555,626 11,456,922 General revenues Property taxes 11,844,337 11,425,335 General grants and aids 35,145,903 36,282,534 Other 1,585,239 671,149 Total revenues 64,635,176 63,736,422 Expenses Administration 2,397,968 2,345,904 District support services 1,771,474 2,715,285 Elementary and secondary regular instruction 31,502,278 32,176,437 Vocational education instruction 1,000,305 772,997 Special education instruction 16,348,260 15,688,775 Instructional support services 4,762,451 4,028,601 Pupil support services 5,324,648 4,949,131 Sites and buildings 4,436,395 5,300,160 Fiscal and other fixed cost programs 184,345 186,553 Food service 2,525,575 2,471,603 Community service 3,318,437 2,826,575 Depreciation not included in other functions 2,407,160 2,250,924 Interest and fiscal charges 2,612,947 977,149 Total expenses 78,592,243 76,690,094 Change in net position (13,957,067) (12,953,672) Net position beginning (18,918,079) (5,964,407) Net position ending $ (32,875,146) $ (18,918,079) This table is presented on an accrual basis of accounting, and it includes all of the governmental activities of the District. This statement includes depreciation expense, but excludes capital asset purchase costs, debt proceeds, and the repayment of debt principal. The increase in interest and fiscal charges in the table above includes issue costs, interest paid, and amounts accrued on new bond issues in recent years. -8-
Figure A shows further analysis of these revenue sources: Figure A Sources of Revenues for Fiscal Years 2018 and 2017 The largest share of the District s revenue is received from the state, including the general education aid formula and most of the operating grants. Property taxes are generally the next largest source of funding. The level of revenue property tax sources provides is not only dependent on district taxpayers by way of operating and building referenda, but also by decisions made by the Legislature in the mix of state aid and local effort in a variety of funding formulas. -9-
Figure B shows further analysis of these expense functions: Figure B Expenses for Fiscal Years 2018 and 2017 The District s expenses are predominately related to educating students. Programs (or functions) such as elementary and secondary regular instruction, vocational education instruction, special education instruction, and instructional support services, are directly related to classroom instruction, while the rest of the programs support instruction and other necessary costs to operate the District. -10-
FINANCIAL ANALYSIS OF THE DISTRICT S FUNDS The financial performance of the District as a whole is also reflected in its governmental funds. Table 3 shows the change in total fund balances of each of the District s governmental funds: Table 3 Governmental Fund Balances as of June 30, 2018 and 2017 Increase 2018 2017 (Decrease) Major funds General $ 1,433,736 $ 1,409,090 $ 24,646 Capital Projects Building Construction 82,090,052 7,872,623 74,217,429 Debt Service 1,429,115 987,146 441,969 Nonmajor funds Food Service Special Revenue 853,533 1,006,772 (153,239) Community Service Special Revenue 1,288,999 1,217,292 71,707 Total governmental funds $ 87,095,435 $ 12,492,923 $ 74,602,512 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 a government s net resources available for discretionary use, as they represent the portion of fund balance which has not yet been limited to use for a particular purpose by either an external party, the District itself, or a group or individual that has been delegated authority to assign resources for use for particular purposes by the District s School Board. At June 30, 2018, the District s governmental funds reported combined fund balances of $87,095,435, an increase of $74,602,512 in comparison with the prior year. Approximately 0.4 percent of this amount ($338,366) constitutes unassigned fund balance, which is available for spending at the District s discretion. The remainder of the fund balance is either nonspendable or restricted, to indicate that it is: 1) not in spendable form ($807,473); or 2) restricted for particular purposes ($85,949,596). -11-
ANALYSIS OF THE GENERAL FUND Table 4 summarizes the amendments to the General Fund budget: Table 4 General Fund Budget Increase Original Budget Final Budget (Decrease) Percent Change Revenues and other financing sources $ 50,723,616 $ 51,072,020 $ 348,404 0.7% Expenditures $ 51,196,371 $ 51,534,061 $ 337,690 0.7% The District is required to adopt an operating budget prior to the beginning of its fiscal year, referred to above as the original budget. During the year, the District amended the budget for known significant changes in circumstances such as: updated enrollment estimates; legislative changes; additional funding received from grants or other local sources; staffing changes; employee contract settlements; insurance premium changes; special education tuition changes; or for new debt issued. Table 5 summarizes the operating results of the General Fund: Table 5 General Fund Operating Results Over (Under) Over (Under) Final Budget Prior Year 2018 Actual Amount Percent Amount Percent Revenue $ 52,090,970 $ 1,028,423 2.0% $ 1,676,153 3.3% Expenditures 52,741,157 1,207,096 2.3% (362,905) (0.7%) Excess (deficiency) of revenue over expenditures (650,187) (178,673) 2,039,058 Other financing sources 674,833 665,360 (238,881) Net change in fund balances $ 24,646 $ 486,687 $ 1,800,177 The fund balance of the General Fund increased $24,646, compared to a planned spend down of $462,041 approved in the budget. -12-
General Fund revenues for 2018 increased $1,676,153, or 3.3 percent, compared to the prior year and were $1,028,423, or 2.0 percent, over budget. Increases in property taxes, state sources, and other local funding sources contributed to the change from prior year. Favorable variances in state and other local funding sources were the primary reason for revenues exceeding budget. Total General Fund expenditures for 2018 were $362,905, or 0.7 percent, less than the prior year, with the largest change in capital expenditures, which were down $738,012 in the current year. Current year expenditures of $52,741,157 were $1,207,096, or 2.3 percent, over budget. The expenditure variance was spread across several programs and object categories of the General Fund. Capital spending for buses financed by capital lease proceeds, which were not included in the final budget, caused expenditures to exceed budget by $588,803. COMMENTS ON SIGNIFICANT ACTIVITIES IN OTHER FUNDS Capital Projects Building Construction Fund The Capital Projects Building Construction Fund recognized a fund balance increase of $74,217,429. Bond proceeds and other local sources exceeded capital spending in the current year. The year-end fund balance is restricted for long-term facilities maintenance projects and capital projects as approved in the bond referendum approved by district taxpayers for a variety facility needs. Debt Service Fund The Debt Service Fund is used to account for the accumulation of resources for, and payment of, the District s general obligation debt. Activity of the Debt Service Fund is primarily controlled with each debt issue s financing plan. During the 2018 fiscal year, the Debt Service Fund s equity balance increased by $441,969, to a year-end fund balance total of $1,429,115, which is restricted for future debt service payments. Food Service Special Revenue Fund The Food Service Special Revenue Fund ended the year with expenditures exceeding revenues and other financing sources, decreasing equity by $153,239, compared to a projected budget deficit of $2,455. Community Service Special Revenue Fund The Community Service Special Revenue Fund ended the year with revenues exceeding expenditures, increasing equity by $71,707, compared to a projected budget deficit of $27,155. Internal Service Fund Internal service funds are used to account for the financing of goods and services provided by one department or agency of a government to other departments or agencies on a cost-reimbursement basis. The District utilized one internal service fund during the current year to account for the District s self-insured dental insurance function. The net position balance for the internal service fund as of June 30, 2018 was $115,467, which represents a $27,046 increase from the prior year. -13-
CAPITAL ASSETS AND LONG-TERM LIABILITIES Capital Assets Table 6 shows the District s capital assets, together with changes from the previous year. The table also shows the total depreciation expense for fiscal years ending June 30, 2018 and 2017: Table 6 Capital Assets 2018 2017 Change Land $ 1,090,820 $ 1,090,820 $ Construction in progress 3,715,015 1,798,139 1,916,876 Land improvements 4,323,612 4,241,934 81,678 Buildings 81,922,813 77,677,346 4,245,467 Furniture and equipment 23,355,486 22,182,742 1,172,744 Less accumulated depreciation (57,598,265) (54,805,710) (2,792,555) Total $ 56,809,481 $ 52,185,271 $ 4,624,210 Depreciation expense $ 2,792,555 $ 2,611,307 $ 181,248 By the end of 2018, the District had invested in a broad range of capital assets, including school buildings, athletic facilities, and other equipment for various instructional programs (see Table 6). The changes presented in the table above reflect the ongoing activity and completion of projects at district sites during fiscal year 2018, consistent with the activity of the Capital Projects Building Construction Fund discussed on the previous page. The District defines capital assets as those with an initial, individual cost of $5,000 or more, which benefit more than one fiscal year. Additional details about capital assets can be found in the notes to basic financial statements. -14-
Long-Term Liabilities Table 7 illustrates the components of the District s long-term liabilities with changes from the prior year: Table 7 Outstanding Long-Term Liabilities 2018 2017 Change General obligation bonds $ 94,610,000 $ 22,535,000 $ 72,075,000 Unamortized premium/discount 4,335,254 1,100,071 3,235,183 Capital leases 3,376,918 3,616,060 (239,142) Net pension liability 102,722,913 124,626,488 (21,903,575) Net OPEB liability 3,781,769 1,277,029 2,504,740 Severance benefits 3,996,976 3,795,319 201,657 Compensated absences 169,637 162,085 7,552 Total $ 212,993,467 $ 157,112,052 $ 55,881,415 The increase in general obligation bonds and unamortized premium/discount is due to the issuance of bonds in the current year as previously discussed offset by scheduled payments made in the current year. The difference in the net pension liability reflects the change in the District s proportionate share of the state-wide pension obligations for the Public Employees Retirement Association (PERA) and the Teachers Retirement Association (TRA), as previously discussed. The increase in the net OPEB liability is associated with the change in OPEB obligations, with the updated study in the current year. The state limits the amount of general obligation debt the District can issue to 15 percent of the market value of all taxable property within the District s corporate limits (see Table 8): Table 8 Limitations on Debt District s market value $ 2,795,822,600 Limit rate 15% Legal debt limit $ 419,373,390 Additional details of the District s long-term debt activity can be found in the notes to basic financial statements. -15-
FACTORS BEARING ON THE DISTRICT S FUTURE With the exception of the voter-approved operating referendum, the District is dependent on the state of Minnesota for a majority of its revenue authority. The general education program is the method by which school districts receive the majority of their financial support. This source of funding is primarily state aid and, as such, school districts rely heavily on the state of Minnesota for educational resources. For the 2019 fiscal year, the Legislature added $124, or 2 percent, per pupil to the basic general education funding formula. CONTACTING THE DISTRICT S FINANCIAL MANAGEMENT These financial statements are designed to provide our citizens, taxpayers, customers, investors, and creditors with a general overview of the District s finances and to demonstrate the District s accountability for the money it receives. If you have questions about these statements or need additional financial information, contact the District s Business Office, Independent School District No. 15, 4115 Ambassador Boulevard NW, St. Francis, Minnesota 55070. -16-
BASIC FINANCIAL STATEMENTS
INDEPENDENT SCHOOL DISTRICT NO. 15 Statement of Net Position as of June 30, 2018 (With Partial Comparative Information as of June 30, 2017) Governmental Activities 2018 2017 Assets Cash and temporary investments $ 92,684,374 $ 18,381,890 Receivables Current taxes 7,084,546 6,876,925 Delinquent taxes 177,002 185,422 Accounts and interest 509,941 71,651 Due from other governmental units 5,398,009 6,058,540 Due from fiduciary fund 592,738 642,696 Inventory 176,091 143,546 Prepaid items 631,382 66,209 Capital assets Not depreciated 4,805,835 2,888,959 Depreciated, net of accumulated depreciation 52,003,646 49,296,312 Total capital assets, net of accumulated depreciation 56,809,481 52,185,271 Total assets 164,063,564 84,612,150 Deferred outflows of resources OPEB plan deferments 40,723 21,423 Pension plan deferments 56,648,372 76,459,517 Total deferred outflows of resources 56,689,095 76,480,940 Total assets and deferred outflows of resources $ 220,752,659 $ 161,093,090 Liabilities Salaries payable $ 4,083,284 $ 4,171,443 Accounts and contracts payable 3,726,115 3,833,146 Accrued interest payable 1,511,520 357,512 Due to other governmental units 257,615 141,013 Claims incurred, but not reported 8,095 9,481 Unearned revenue 165,037 288,847 Long-term liabilities Due within one year 4,069,404 6,596,140 Due in more than one year 208,924,063 150,515,912 Total long-term liabilities 212,993,467 157,112,052 Total liabilities 222,745,133 165,913,494 Deferred inflows of resources Property taxes levied for subsequent year 11,679,759 11,264,005 OPEB plan deferments 109,741 111,942 Pension plan deferments 19,093,172 2,721,728 Total deferred inflows of resources 30,882,672 14,097,675 Net position Net investment in capital assets 36,577,361 32,806,763 Restricted for Capital asset acquisition 150,238 135,225 Debt service 49,240 785,265 Food service 853,533 1,006,772 Community service 1,292,829 1,221,716 Other purposes (state and other funding restrictions) 197,543 Unrestricted (71,995,890) (54,873,820) Total net position (32,875,146) (18,918,079) Total liabilities, deferred inflows of resources, and net position $ 220,752,659 $ 161,093,090 See notes to basic financial statements -17-
INDEPENDENT SCHOOL DISTRICT NO. 15 Statement of Activities Year Ended June 30, 2018 (With Partial Comparative Information for the Year Ended June 30, 2017) 2018 2017 Net (Expense) Net (Expense) Revenue and Revenue and Changes in Changes in Program Revenues Net Position Net Position Operating Charges for Grants and Governmental Governmental Functions/Programs Expenses Services Contributions Activities Activities Governmental activities Administration $ 2,397,968 $ $ $ (2,397,968) $ (2,345,904) District support services 1,771,474 (1,771,474) (2,715,259) Elementary and secondary regular instruction 31,502,278 626,057 551,444 (30,324,777) (31,033,279) Vocational education instruction 1,000,305 7,498 41,545 (951,262) (674,978) Special education instruction 16,348,260 443,505 8,642,819 (7,261,936) (7,136,439) Instructional support services 4,762,451 103 (4,762,348) (4,028,483) Pupil support services 5,324,648 23,370 25,955 (5,275,323) (4,917,690) Sites and buildings 4,436,395 44,532 770,005 (3,621,858) (4,564,548) Fiscal and other fixed cost programs 184,345 (184,345) (186,553) Food service 2,525,575 1,213,306 1,046,969 (265,300) (41,465) Community service 3,318,437 2,145,700 476,889 (695,848) (460,019) Depreciation not included in other functions 2,407,160 (2,407,160) (2,250,924) Interest and fiscal charges 2,612,947 (2,612,947) (977,149) Total governmental activities $ 78,592,243 $ 4,504,071 $ 11,555,626 (62,532,546) (61,332,690) General revenues Taxes Property taxes levied for general purposes 5,478,201 4,787,055 Property taxes levied for community service 355,175 355,734 Property taxes levied for debt service 6,010,961 6,282,546 General grants and aids 35,145,903 36,282,534 Other general revenues 929,708 546,045 Investment earnings 655,531 125,104 Total general revenues 48,575,479 48,379,018 Change in net position (13,957,067) (12,953,672) Net position beginning (18,918,079) (5,964,407) Net position ending $ (32,875,146) $ (18,918,079) See notes to basic financial statements -18-
INDEPENDENT SCHOOL DISTRICT NO. 15 Balance Sheet Governmental Funds as of June 30, 2018 (With Partial Comparative Information as of June 30, 2017) Capital Projects Building Debt General Fund Construction Fund Service Fund Assets Cash and temporary investments $ 3,211,445 $ 82,496,508 $ 3,855,761 Receivables Current taxes 3,403,656 3,462,958 Delinquent taxes 77,073 94,453 Accounts and interest 88,225 415,730 Due from other governmental units 5,228,569 51,484 Due from other funds 569,816 Inventory 137,620 Prepaid items 609,969 Total assets $ 13,326,373 $ 82,912,238 $ 7,464,656 Liabilities Salaries payable $ 3,834,477 $ $ Accounts and contracts payable 2,493,507 822,186 Due to other governmental units 179,890 Unearned revenue Total liabilities 6,507,874 822,186 Deferred inflows of resources Property taxes levied for subsequent year 5,331,887 5,968,971 Unavailable revenue delinquent taxes 52,876 66,570 Total deferred inflows of resources 5,384,763 6,035,541 Fund balances Nonspendable 747,589 Restricted 347,781 82,090,052 1,429,115 Assigned Unassigned 338,366 Total fund balances 1,433,736 82,090,052 1,429,115 Total liabilities, deferred inflows of resources, and fund balances $ 13,326,373 $ 82,912,238 $ 7,464,656 See notes to basic financial statements -19-
Total Governmental Funds Nonmajor Funds 2018 2017 $ 2,902,401 $ 92,466,115 $ 18,226,309 217,932 7,084,546 6,876,925 5,476 177,002 185,422 5,986 509,941 71,651 117,956 5,398,009 6,058,540 22,922 592,738 642,696 38,471 176,091 143,546 21,413 631,382 66,209 $ 3,332,557 $ 107,035,824 $ 32,271,298 $ 248,807 $ 4,083,284 $ 4,171,443 368,202 3,683,895 3,808,236 77,725 257,615 141,013 112,560 112,560 256,078 807,294 8,137,354 8,376,770 378,901 11,679,759 11,264,005 3,830 123,276 137,600 382,731 11,803,035 11,401,605 59,884 807,473 209,755 2,082,648 85,949,596 11,180,154 472,755 338,366 630,259 2,142,532 87,095,435 12,492,923 $ 3,332,557 $ 107,035,824 $ 32,271,298-20-
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INDEPENDENT SCHOOL DISTRICT NO. 15 Reconciliation of the Balance Sheet to the Statement of Net Position Governmental Funds as of June 30, 2018 (With Partial Comparative Information as of June 30, 2017) 2018 2017 Total fund balances governmental funds $ 87,095,435 $ 12,492,923 Amounts reported for governmental activities in the Statement of Net Position are different because: Capital assets are included in net position, but are excluded from fund balances because they do not represent financial resources. Cost of capital assets 114,407,746 106,990,981 Accumulated depreciation (57,598,265) (54,805,710) Long-term liabilities are included in net position, but are excluded from fund balances until due and payable. Debt issuance premiums and discounts are amortized over the life of the debt for net position, but are recognized upon issuance for fund based statements. General obligation bonds (94,610,000) (22,535,000) Unamortized premium/discount (4,335,254) (1,100,071) Capital leases (3,376,918) (3,616,060) Net pension liability (102,722,913) (124,626,488) Net OPEB liability (3,781,769) (1,277,029) Severance benefits (3,996,976) (3,795,319) Compensated absences (169,637) (162,085) Accrued interest payable is included in net position, but is excluded from fund balances until due and payable. (1,511,520) (357,512) Internal service funds are used by management to charge the costs of certain activities to individual funds. The assets and liabilities of the internal service funds are included in the governmental activities in the Statement of Net Position. 115,467 88,421 The recognition of certain revenues and expenses/expenditures differ between the full accrual governmental activities financial statements and the modified accrual governmental fund financial statements. Deferred outflows OPEB plan deferments 40,723 21,423 Deferred outflows pension plan deferments 56,648,372 76,459,517 Deferred inflows OPEB plan deferments (109,741) (111,942) Deferred inflows pension plan deferments (19,093,172) (2,721,728) Deferred inflows unavailable revenue delinquent taxes 123,276 137,600 Total net position governmental activities $ (32,875,146) $ (18,918,079) See notes to basic financial statements -21-
INDEPENDENT SCHOOL DISTRICT NO. 15 Statement of Revenue, Expenditures, and Changes in Fund Balances Governmental Funds Year Ended June 30, 2018 (With Partial Comparative Information for the Year Ended June 30, 2017) Capital Projects Building Debt General Fund Construction Fund Service Fund Revenue Local sources Property taxes $ 5,482,576 $ $ 6,020,316 Investment earnings 76,428 578,636 Other 1,866,613 122,067 State sources 43,258,430 527,694 Federal sources 1,406,923 Total revenue 52,090,970 700,703 6,548,010 Expenditures Current Administration 1,788,110 District support services 1,764,055 Elementary and secondary regular instruction 21,918,301 Vocational education instruction 901,555 Special education instruction 12,262,587 Instructional support services 3,785,648 Pupil support services 4,487,933 Sites and buildings 4,717,963 Fiscal and other fixed cost programs 184,345 Food service Community service Capital outlay 6,543,274 Debt service Principal 827,945 5,480,000 Interest and fiscal charges 102,715 1,560,509 Total expenditures 52,741,157 6,543,274 7,040,509 Excess (deficiency) of revenue over expenditures (650,187) (5,842,571) (492,499) Other financing sources (uses) Debt issued 77,555,000 Premium on debt issued 2,505,000 934,468 Payment on refunded bonds Capital lease issued 588,803 Sale of capital assets 86,030 Total other financing sources (uses) 674,833 80,060,000 934,468 Net change in fund balances 24,646 74,217,429 441,969 Fund balances Beginning of year 1,409,090 7,872,623 987,146 End of year $ 1,433,736 $ 82,090,052 $ 1,429,115 See notes to basic financial statements -22-
Total Governmental Funds Nonmajor Funds 2018 2017 $ 355,769 $ 11,858,661 $ 11,433,022 467 655,531 125,104 3,359,006 5,347,686 4,446,527 613,980 44,400,104 43,632,844 909,878 2,316,801 2,679,985 5,239,100 64,578,783 62,317,482 1,788,110 1,845,913 1,764,055 2,919,087 21,918,301 22,839,428 901,555 561,665 12,262,587 11,743,827 3,785,648 2,773,806 4,487,933 4,582,175 4,717,963 4,615,197 184,345 186,553 2,372,387 2,372,387 2,364,168 2,893,514 2,893,514 2,491,805 54,794 6,598,068 3,930,255 6,307,945 7,036,701 1,663,224 1,263,840 5,320,695 71,645,635 69,154,420 (81,595) (7,066,852) (6,836,938) 77,555,000 10,935,000 3,439,468 891,742 (5,980,000) 588,803 801,220 63 86,093 113,642 63 81,669,364 6,761,604 (81,532) 74,602,512 (75,334) 2,224,064 12,492,923 12,568,257 $ 2,142,532 $ 87,095,435 $ 12,492,923-23-
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INDEPENDENT SCHOOL DISTRICT NO. 15 Reconciliation of the Statement of Revenue, Expenditures, and Changes in Fund Balances to the Statement of Activities Governmental Funds Year Ended June 30, 2018 (With Partial Comparative Information for the Year Ended June 30, 2017) 2018 2017 Total net change in fund balances governmental funds $ 74,602,512 $ (75,334) Amounts reported for governmental activities in the Statement of Activities are different because: Capital outlays are recorded as net position and the cost is allocated over their estimated useful lives as depreciation expense. However, fund balances are reduced for the full cost of capital outlays at the time of purchase. Capital outlays 7,416,765 4,378,719 Depreciation expense (2,792,555) (2,611,307) A gain or loss on the disposal of capital assets, including the difference between the carrying value and any related sale proceeds, is included in the change in net position. However, only the sale proceeds are included in the change in fund balances. (23,004) The amount of debt issued is reported in the governmental funds as a source of financing. Debt obligations are not revenues in the Statement of Activities, but rather constitute long-term liabilities. (78,143,803) (11,736,220) Repayment of long-term debt does not affect the change in net position. However, it reduces fund balances. General obligation bonds 5,480,000 12,085,000 Capital leases 827,945 931,701 Interest on long-term debt is included in the change in net position as it accrues, regardless of when payment is due. However, it is included in the change in fund balances when due. (1,154,008) 55,120 Debt issuance premiums and discounts are included in the change in net position as they are amortized over the life of the debt. However, they are included in the change in fund balances upon issuance as other financing sources and uses. (3,235,183) (660,171) Certain expenses are included in the change in net position, but do not require the use of current funds, and are not included in the change in fund balances. Net pension liability 21,903,575 (86,526,501) Net OPEB liability (2,504,740) (170,043) Severance benefits (201,657) (93,118) Compensated absences (7,552) 5,620 Internal service funds are used by management to charge the costs of certain activities to individual funds. The change in net position of the internal service funds is included in the governmental activities in the Statement of Activities. 27,046 40,026 The recognition of certain revenues and expenses/expenditures differ between the full accrual governmental activities financial statements and the modified accrual governmental fund financial statements. Deferred outflows OPEB plan deferments 19,300 21,423 Deferred outflows pension plan deferments (19,811,145) 69,335,128 Deferred inflows OPEB plan deferments 2,201 (111,942) Deferred inflows pension plan deferments (16,371,444) 2,208,918 Deferred inflows unavailable revenue delinquent taxes (14,324) (7,687) Change in net position governmental activities $ (13,957,067) $ (12,953,672) See notes to basic financial statements -24-
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INDEPENDENT SCHOOL DISTRICT NO. 15 Statement of Revenue, Expenditures, and Changes in Fund Balances Budget and Actual General Fund Year Ended June 30, 2018 Budgeted Amounts Over (Under) Original Final Actual Final Budget Revenue Local sources Property taxes $ 5,467,577 $ 5,467,577 $ 5,482,576 $ 14,999 Investment earnings 20,326 36,289 76,428 40,139 Other 1,234,933 1,413,726 1,866,613 452,887 State sources 42,545,008 42,576,228 43,258,430 682,202 Federal sources 1,446,299 1,568,727 1,406,923 (161,804) Total revenue 50,714,143 51,062,547 52,090,970 1,028,423 Expenditures Current Administration 1,682,702 1,687,789 1,788,110 100,321 District support services 1,533,946 1,808,542 1,764,055 (44,487) Elementary and secondary regular instruction 21,235,459 20,929,749 21,918,301 988,552 Vocational education instruction 678,005 840,546 901,555 61,009 Special education instruction 12,427,731 12,614,437 12,262,587 (351,850) Instructional support services 3,799,915 3,596,777 3,785,648 188,871 Pupil support services 4,107,951 4,698,271 4,487,933 (210,338) Sites and buildings 4,599,360 4,243,534 4,717,963 474,429 Fiscal and other fixed cost programs 200,636 183,750 184,345 595 Debt service Principal 827,947 827,947 827,945 (2) Interest and fiscal charges 102,719 102,719 102,715 (4) Total expenditures 51,196,371 51,534,061 52,741,157 1,207,096 Excess (deficiency) of revenue over expenditures (482,228) (471,514) (650,187) (178,673) Other financing sources Capital lease issued 588,803 588,803 Sale of capital assets 9,473 9,473 86,030 76,557 Total other financing sources 9,473 9,473 674,833 665,360 Net change in fund balances $ (472,755) $ (462,041) 24,646 $ 486,687 Fund balances Beginning of year 1,409,090 End of year $ 1,433,736 See notes to basic financial statements -25-