OF LOS ANGELES COUNTY ROSEMEAD, CALIFORNIA AUDIT REPORT
TABLE OF CONTENTS FINANCIAL SECTION Independent Auditor's Report 1 Management's Discussion and Analysis 3 Basic Financial Statements: Government-wide Financial Statements: Statement of Net Position 11 Statement of Activities 12 Fund Financial Statements: Balance Sheet Governmental Funds 14 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position 17 Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds 18 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities 20 Statement of Fiduciary Assets and Liabilities 21 Notes to Basic Financial Statements 23 REQUIRED SUPPLEMENTARY INFORMATION SECTION Budgetary Comparison Schedule General Fund 51 Schedule of Proportionate Share of Net Pension Liability 52 Schedule of Pension Contributions 54 Schedule of Funding Progress for Post-employment Benefits 56 SUPPLEMENTARY INFORMATION SECTION Combining and Individual Fund Financial Statements and Schedules: Combining Balance Sheet Non-major Special Revenue Funds 57 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Non-major Special Revenue Funds 59 Combining Schedule of Revenues, Expenditures, and Changes in Fund Balances Budget and Actual Non-major Special Revenue Funds 60 Balance Sheet Non-major Debt Service Fund 63 Statement of Revenues, Expenditures, and Changes in Fund Balance Non-major Debt Service Fund 64 Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual Non-major Debt Service Fund 65 Combining Balance Sheet Non-major Capital Projects Funds 66 Combining Statement of Revenues, Expenditures, and Changes in Fund Balance Non-major Capital Projects Funds 67 Combining Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual Non-major Capital Projects Funds 68
TABLE OF CONTENTS SUPPLEMENTARY INFORMATION SECTION (Continued) History and Organization 71 Schedule of Average Daily Attendance 72 Schedule of Instructional Time 73 Schedule of Financial Trends and Analysis 74 Schedule of Expenditures of Federal Awards 75 Note to the Schedule of Expenditures of Federal Awards 77 Reconciliation of Unaudited Actual Report with Audited Financial Statements 78 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 80 Independent Auditor's Report on State Compliance 82 Independent Auditor's Report on Compliance for Each Major Program and on Internal Control Over Compliance Required by OMB Circular A-133 85 FINDINGS AND RECOMMENDATIONS SECTION Schedule of Audit Findings and Questioned Costs 87 Summary Schedule of Prior Year Audit Findings 90
FINANCIAL SECTION
1\41) MOSS, LEVY & HARTZHEIM LLP CERTIFIED PUBLIC ACCOUNTANTS PARTNERS RONALD A LEVY, CPA CRAIG A HARTZHEIM, CPA HADLEY Y HUI, CPA ALEXANDER C HOM, CPA ADAM V GUISE, CPA TRAVIS J HOLE, CPA COMMERCIAL ACCOUNTING & TAX SERVICES 433 N. CAMDEN DRIVE, SUITE 730 BEVERLY HILLS, CA 90210 TEL: 310.273.2745 FAX: 310.670.1689 www.mihcpas.com GOVERNMENTAL AUDIT SERVICES 5800 HANNUM AVENUE, SUITE E CULVER CITY, CA 90230 TEL: 310.670.2745 FAX: 310.670.1689 www.m1hcpas.com Board of Trustees Garvey School District Rosemead, California INDEPENDENT AUDITOR'S REPORT 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 for the Garvey School District (District) as of and for the fiscal year ended, 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 and the 2014-2015 Guide for Annual Audits of California K-12 Local Educational Agencies and State Compliance Reporting published by the California Education Audit Appeals Panel. 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 Garvey School District, as of, and the respective changes in financial position for the fiscal year then ended in accordance with accounting principles generally accepted in the United States of America. 1 OFFICES: BEVERLY HILLS CULVER CITY SANTA MARIA MEMBER AMERICAN INSTITUTE OF C.P.A'S. CALIFORNIA SOCIETY OF MUNICIPAL FINANCE OFFICERS CALIFORNIA ASSOCIATION OF SCHOOL BUSINESS OFFICIALS
Emphasis of Matter Changes in Accounting Principles As discussed in note 1 to the basic financial statements, effective July 1, 2014, the Garvey School District adopted Governmental Accounting Standards Board (GASB) Statement No. 68, Accounting and Financial Reporting for Pensions and Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date. Our opinion is not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the Management's Discussion and Analysis on pages 3 through 10, the Budgetary Comparison Schedule General Fund on page 51, the Schedule of Proportionate Share of Net Pension Liability on pages 52 through 53, the Schedule of Pension Contributions on pages 54 through 55, and the Schedule of Funding Progress for Other Post-Employment Benefits Other than Pensions Trend Information on page 56, 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 performed for the purpose of forming opinions on the financial statements that collectively comprise the District's basic financial statements. The accompanying combining and individual fund financial statements and schedules, financial, and statistical information listed in the table of contents are presented for purposes of additional analysis and are not a required part of the basic financial statements of the District. The schedule of expenditures of federal awards is presented for purposes of additional analysis as required by U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, and is also not a required part of the basic financial statements of the District. The combining and individual fund financial statements and schedules and the Schedule of Expenditures of Federal Awards are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole. The financial and statistical information, as listed in the table of contents, has not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide assurance on it. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 8, 2015, on our consideration of the Garvey School District'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 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. "11.44, Moss, Levy & Hartzheim, LLP Culver City, California December 8, 2015 2
MANAGEMENT'S DISCUSSION AND ANALYSIS This discussion and analysis of Garvey School District's financial performance provides an overview of the District's financial activities for the fiscal year ending. Please read it in conjunction with the independent auditor's report, notes to the basic financial statements, and the basic governmental-wide financial statements, which immediately follow this section, in order to enhance the understanding of the District's financial performance. FINANCIAL HIGHLIGHTS Governmental expenses were $66.6 million. Revenues totaled $67.8 million. Grades K-8 average daily attendance (ADA) decreased by 182, or 3.6%. OVERVIEW OF THE FINANCIAL STATEMENTS This annual report consists of three parts management discussion and analysis (this section), the basic financial statements, and required supplementary information. The basic financial statements include two kinds of statements that present different views of the District: The first two statements are district-wide financial statements that provide both short-term and long-term information about the District's overall financial status. The remaining statements are fund financial statements that focus on individual parts of the District, reporting the District's operations in more detail than the district-wide statements. The governmental funds' statements tell how basic services like regular and special education were financed in the short term as well as what remains for future spending. Fiduciary funds' statements provide information about the financial relationships in which the District acts solely as a trustee or agent for the benefit of others to whom the resources belong. 3
MANAGEMENT'S DISCUSSION AND ANALYSIS The financial statements also include notes that explain some of the information in the statements and provide more detailed data. Figure A-1 shows how the various parts of this annual report are arranged and related to one another. Figure A-1. Organization of Garvey School District's Annual Financial Report Management's Discussion and Analysis Basic Financial Information Required Supplementary Information District-Wide Financial Statements Fund Financial Statements: Notes to the Financial Statements SUMMARY DETAIL 4
MANAGEMENT'S DISCUSSION AND ANALYSIS Figure A-2 summarizes the major features of the District's financials statements, including what portion of the District's activities they cover and the types of information they contain. Figure A-2. Major Features of the District-Wide and Fund Financial Statements Type of Statements Scope Required financial statements Accounting basis and measurement focus Type of asset/liability information Type of inflow/outflow information District-Wide Governmental Funds Fiduciary Funds Entire district, except fiduciary activities Statement of Net Position Statement of Activities Accrual accounting and economic resources focus All assets and liabilities, both financial and capital, short-term and long -term All revenues and expenses during year, regardless of when cash is received or paid The activities of the district that are not proprietary or fiduciary, such as special education and building maintenance Balance Sheet Statement of Revenues, Expenditures & Changes in Fund Balance Modified accrual accounting and current financial resources focus Only assets expected to be used up and liabilities that come due during the year or soon thereafter; no capital assets included Revenues for which cash is received during or soon after the end of the year: expenditures when goods or services have been received and payment is due during the year or soon thereafter Instances in which the district administers resources on behalf of someone else, such as scholarship programs and student activities monies Statement of Fiduciary Assets and Liabilities Accrual accounting All assets and liabilities, both short-term and long-term: The district's funds do not currently contain nonfmancial assets, though they can All revenues and expenses during the year, regardless of when cash is received or paid 5
MANAGEMENT'S DISCUSSION AND ANALYSIS The remainder of this overview section of management's discussion and analysis highlights the structure and contents of each of the statements. Government-wide Statements The government-wide statements report information about the District as a whole using accounting methods similar to those used by private-sector companies. The statement of net position includes all of the District's assets and liabilities. All of the current year's revenues and expenses are accounted for in the statement of activities regardless of when cash is received or paid. The two government-wide statements report the District's net position and how they have changed. Net position the difference between the District's assets and liabilities is one way to measure the District's financial health or position. Over time, increases and decreases in the District's net position are an indicator of whether its financial position is improving or deteriorating. To assess the overall health of the District, you need to consider 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 categorized as Governmental Activities. Most of the District's basic services are included here, such as regular and special education, transportation, and administration. Property taxes and state formula aid finance most of these activities. Fund Financial Statements The fund financial statements provide detailed information about the District's most significant funds not the District as a whole. Funds are accounting devices the District uses to keep track of specific sources of funding and spending on particular programs: Some funds are required by State law and by bond covenants. The District establishes other funds to control and manage money for particular purposes (like repaying its long-term debt) or to show that it is properly using certain revenues (like Federal grants). 6
MANAGEMENT'S DISCUSSION AND ANALYSIS The District has two kinds of funds: Governmental funds - Most of 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 funds statements provide a detailed short-term view that helps you determine whether there are more or fewer 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 statements, we provide reconciliation of the governmental funds to the government-wide statements that explains the relationship (or differences) between them. Fiduciary funds - The District is the trustee, or fiduciary, for assets that belong to others, such as the student activities funds. 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 assets and liabilities. We exclude these activities from the government-wide financial statements because the District cannot use these assets to finance its operations. FINANCIAL ANALYSIS OF THE DISTRICT AS A WHOLE Net Position. The District's combined net position on was ($34,775,993). (See Table A-1.) Table A-1. Governmental Activities (In Millions) Variance Increase 2014 2015 (Decrease) Current and other assets $ 23.9 $ 20.0 $ (3.9) Capital assts 49.8 49.1 (0.7) Total assets 73.7 69.1 (4.6) Deferred outflows of resources 0.0 3.0 3.0 Long-term debt oustanding 55.0 92.2 37.2 other liabilities 10.2 5.0 (5.2) Total liabilities 65.2 97.2 32.0 Deferred inflows of resoruces 0.0 9.7 9.7 Net Assets Invested in capital assets, net of related debt 11.3 11.6 0.3 Restricted 7.6 6.2 (1.4) Unrestricted (10.4) (52.6) (42.2) Total net assets $ 8.5 $ (34.8) $ (43.3) 7
MANAGEMENT'S DISCUSSION AND ANALYSIS Changes in net position, governmental activities. The District's total revenues were $61.7 million (See Table A-2). This represents a 10% increase from the previous year. The total cost of all programs and services was $60.1 million. Of this amount, 78% was related to directly educating and caring for students. The purely administrative activities of the District accounted for approximately 7.1% of total costs. Table A-2. Governmental Activities (In Variance Millions) Increase 2014 2015 (Decrease) Total Revenues 56.1 61.7 5.6 Total Expenses 58.7 60.1 (1.4) Increase (decrease) in Net Assets (2.6) 1.6 4.2 FINANCIAL ANALYSIS OF THE DISTRICT'S FUNDS The financial performance of the District as a whole is reflected in its governmental funds as well. As the District completed this fiscal year, its governmental funds reported a combined fund balance of $15.3 million, an increase from last year's ending fund balance of $1.3 million. General Fund Budgetary Highlights While the District's final budget for the General Fund anticipated revenues in excess of expenditures by about $865,160, the actual results for the fiscal year show revenues in excess of expenditures by $1,794,992. Actual revenues were $1,342,902 greater than anticipated and expenditures were $413,070 greater than budgeted. 8
MANAGEMENT'S DISCUSSION AND ANALYSIS CAPITAL ASSET AND DEBT ADMINISTRATION Capital Assets By the end of 2014-15, the District had invested $722 thousand in new capital assets. (Information about capital assets can be found in Note 6 to the financial statements.) Total depreciation expense for the fiscal year exceeded $1.4 million. Table A-3 Capital Assets at Fiscal Year-End, Net of Depreciation Governmental Activities (In Variance Millions) Increase 2014 2015 (Decrease) Land 1.7 1.7 0.0 Site improvements 0.1 0.1 0.0 Buildings 47.4 46.7 (0.7) Machinery & Equipment 0.6 0.6 0.0 Work in progress 0 0 0.0 49.8 49.1 (0.7) The District's fiscal year 2015-16 budget projects spending another $2.3 million for capital projects. Long-Term Debt At year-end, the District had $92.2 million in general obligation bonds, capital leases, compensated absences, net pension liability and other post-employment benefits (OPEB) an increase of 68% from last fiscal year as shown in Table A-4. (More detailed information about the District's long-term liabilities is presented in Note 7 to the financial statements.) The increase is mainly due to include the pension liability in current fiscal year which in previously fiscal years have never been recognized. 9
MANAGEMENT'S DISCUSSION AND ANALYSIS Table A-4 Outstanding Long-Term Debt at Fiscal Year-End Governmental Activities (In Millions) 2014 2015 General obligation bonds $ 37.5 $ 36.2 Original issue premium 1.0 1.4 Accreted interest payable 9.9 11.0 Compensated absences 0.9 0.9 Net pension liability 0.0 36.6 OPEB 5.7 6.1 r $ 55.0 $ 92.2 Variance Increase (Decrease) $ (0.9) 0.4 1.1 0.0 36.6 0.4 $ 37.6 FACTORS BEARING ON THE DISTRICT'S FUTURE The District is currently financially sound, but may face a number of fiscal challenges in the future. Along with many other school districts in Los Angeles County, the District is in a period of declining K-12 enrollment. This decline is attributable to the continued decline of the County's birth rate and other factors, such as housing costs. Losses in enrollment will cause a school district to lose operating revenues without necessarily permitting the district to make timely adjustments to fixed operating costs. In addition to declining enrollment, the District also faces fiscal challenges due to implementing the LCFF for distributing State aid, and the implementation period of 5 more years. The District's fiscal team continuously monitors information, data, and forecasts of the State's economy, revenue, and budgetary proposals. District planners use this information to make decisions that will maintain the financial stability of the District The District's systems of budgeting and internal controls are well-regarded and will be used to meet the District's future financial challenges. CONTACTING THE DISTRICT'S FINANCIAL MANAGEMENT This financial report is designed to provide our citizens, taxpayers, 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 any questions about this report or need additional financial information, contact the District's Business Office at (626) 307-3404. 10
STATEMENT OF NET POSITION Assets Governmental Activities Cash in County Treasury 17,729,213 Revolving cash fund 30,000 Accounts receivable 2,203,316 Inventories, at cost 60,185 Prepaid items 9,907 Non depreciable: Land 1,711,462 Depreciable: Improvement of sites 2,882,240 Buildings 71,993,665 Equipment 1,115,484 Less accumulated depreciation (28,599,514) Total assets 69,135,958 Deferred Outflows of Resources District's pension contributions subsequent to the measurement date 3,015,048 Deferred loss on refunding 52,382 Total deferred outflow of resources 3,067,430 Liabilities Accounts payable 4,595,377 Interest payable 241,129 Unearned revenue 174,177 Long-term liabilities: Due within one year 1,933,060 Due in more than a year 90,309,003 Total liabilities 97,252,746 Deferred Inflows of Resources Differences between projected and actual earnings on pension plan investments 9,726,635 Net Position Net investment in capital assets 11,639,637 Restricted for: Education programs 1,132,939 Children nutrition program 2,107,470 Child development 2,234 Capital projects 2,947,867 Unrestricted (52,606,140) Total net position (deficit) (34,775,993) See notes to financial statements 11
STATEMENT OF ACTIVITIES For the Fiscal Year Ended Program Revenues Operating Grants and Contributions Charges for Expenses Services Governmental Activities: Instruction $ 34,117,080 $ 745,021 7,813,278 $ Instruction-related services: Supervision of instruction 2,440,620 165,933 1,691,686 Instructional library, media, and technology 440,198 8,938 85,010 School site administration 2,647,138 Pupil services: Home-to-school transportation 633,169 Food services 3,168,665 243,162 3,116,825 All other pupil services 3,506,852 297,422 1,878,906 General administration: Data processing 1,055,776 All other general administration 3,197,221 13,485 412,219 Plant services 5,446,261 24,161 219,797 Interest on long-term debt 1,935,017 Other outgo 61,393 99,657 434,847 Depreciation (unallocated) 1,425,461 Total Governmental Activities $ 60,074,851 $ 1,597,779 $ 15,652,568 $ Capital Grants and Contributions General revenues: Taxes and subventions: Taxes levied for general purposes Taxes levied for debt service Taxes levied for other specific purposes Federal and state aid not restricted to specific purposes Interest and investment earnings Miscellaneous Total general revenues Change in net position Net position beginning of fiscal year Prior period adjustments Net position (deficit) beginning of fiscal year, restated Net position (deficit) end of fiscal year See notes to financial statements 12
Net (Expense) Revenue and Changes in Net Position $ (25,558,781) (583,001) (346,250) (2,647,138) (633,169) 191,322 (1,330,524) (1,055,776) (2,771,517) (5,202,303) (1,935,017) 473,111 (1,425,461) (42,824,504) 3,234,277 2,177,401 33,847 38,149,239 95,778 765,060 44,455,602 1,631,098 8,506,473 (44,913,564) (36,407,091) $ (34,775,993) 13
BALANCE SHEET GOVERNMENTAL FUNDS General Fund County School Facilities Fund Other Governmental Funds Assets Cash in County Treasury $ 11,056,912 $ 2,644,554 $ 4,027,747 Revolving cash fund 30,000 Accounts receivable 1,184,987 23,208 995,121 Inventory, at cost 44,346 15,839 Prepaid items 9,907 Total assets $ 12,326,152 $ 2,667,762 $ 5,038,707 Liabilities and Fund Balances Liabilities: Accounts payable $ 4,099,047 $ 62,876 $ 433,454 Unearned revenue 174,177 Total liabilities 4,273,224 62,876 433,454 Fund balances: Nonspendable Revolving cash 30,000 Stores inventories 44,346 15,839 Prepaid expenditures 9,907 Restricted Medi-Cal billing 541,711 California Clean Energy Jobs Act 62,045 Lottery: instructional material 68,495 Special education: mental health 406,147 Transportation: special education 7,649 Ongoing & Major Maintenance Account 12,268 Other restricted local 34,624 Child development 2,234 Child nutrition program 2,091,631 State school facilities projects 2,604,886 Construction 366,084 Debt service 2,129,465 Assigned Text book adoption 1,250,000 LCAP carryover 1,217,549 Unassigned 4,368,187 Total fund balances 8,052,928 2,604,886 4,605,253 Total liabilities and fund balances $ 12,326,152 $ 2,667,762 $ 5,038,707 See notes to financial statements 14
Total $ 17,729,213 30,000 2,203,316 60,185 9,907 $ 20,032,621 $ 4,595,377 174,177 4,769,554 30,000 60,185 9,907 541,711 62,045 68,495 406,147 7,649 12,268 34,624 2,234 2,091,631 2,604,886 366,084 2,129,465 1,250,000 1,217,549 4,368,187 15,263,067 $ 20,032,621 15
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RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET POSITION Total fund balances - governmental funds $ 15,263,067 In governmental funds, only current assets are reported. In the statement of net position, all assets are reported, including capital assets and accumulated depreciation. Capital assets at historical cost Accumulated depreciation $ 77,702,851 (28,599,514) Net 49,103,337 In governmental funds, interest on long-term debt is not recognized until the period in which it matures and is paid. In the government-wide statement of net position, it is recognized in the period that it is incurred. Deferred losses on refunding, net of accumulated amortization have not been reported in the governmental funds. These are capitalized and amortized over the life of the new debt or old debt whichever is shorter in the statement of net position. In governmental funds, bond premiums are recognized as other financing sources in the period they are incurred. In the government-wide statements, bond premiums are amortized over the life of the debt. (241,129) 52,382 (1,358,799) Long-term liabilities: In governmental funds, only current liabilities are reported. In the statement of net position, all liabilities, including long-term liabilities, are reported. Long-term liabilities relating to governmental activities consist of: Accreted bond interest payable $ (11,034,931) Compensated absences payable (912,704) General obligation bonds payable (36,180,386) Other postemployment benefits (6,169,013) Net pension liability (36,586,230) Total (90,883,264) In governmental funds, deferred outflows and inflows of resources relating to pensions are not reported because they are applicable to future periods. In the statement of net position deferred outflows and inflows of resources relating to pensions are reported. District's pension contributions subsequent to the measurement date 3,015,048 Differences between projected and actual earnings on pension plan investments (9,726,635) Net (6,711,587) Total net position (deficit), governmental activities $ (34,775,993) See notes to financial statements 17
STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS For the Fiscal Year Ended Revenues: LCFF Sources: General Fund County School Facilities Fund Other Governmental Funds State apportionments 28,873,410 $ Education Protection Account Funds 6,892,111 Local sources 3,234,277 Federal 3,906,216 6,606,959 Other state 3,995,313 588,228 Other local 4,588,814 19,756 3,000,865 Total revenues 51,490,141 19,756 10,196,052 Expenditures: Certificated salaries 22,842,427 1,253,541 Classified salaries 6,704,654 2,571,580 Employee benefits 9,668,564 1,531,798 Books and supplies 2,875,266 11,732 1,667,361 Contracted services and other operating expenditures 7,806,075 154,188 838,785 Capital outlay 7,396 626,079 89,264 Other outgo (214,777) 203,865 Debt service 2,015,396 Total expenditures 49,689,605 791,999 10,171,590 Excess of revenues over (under) expenditures 1,800,536 (772,243) 24,462 Other Financing Sources (Uses): Proceeds from long term debt issuance 5,500,000 Bond premiums 636,024 Payment to refunded bond escrow (5,962,457) Transfers in 22,544 Transfers out (5,544) (17,000) Total other financing sources (uses) (5,544) 179,111 Net change in fund balances 1,794,992 (772,243) 203,573 Fund balances, July 1, 2014 6,226,654 3,377,129 4,377,745 Prior period adjustments 31,282 23,935 Fund balances, July 1, 2014, restated 6,257,936 3,377,129 4,401,680 Fund balances, 8,052,928 $ 2,604,886 $ 4,605,253 See notes to financial statements 18
Total $ 28,873,410 6,892,111 3,234,277 10,513,175 4,583,541 7,609,435 61,705,949 24,095,968 9,276,234 11,200,362 4,554,359 8,799,048 722,739 (10,912) 2,015,396 60,653,194 1,052,755 5,500,000 636,024 (5,962,457) 22,544 (22,544) 173,567 1,226,322 13,981,528 55,217 14,036,745 $ 15,263,067 19
RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES For the Fiscal Year Ended Total net change in fund balances - governmental funds $ 1,226,322 Capital outlays are reported in governmental funds as expenditures. However, in the statement of activities, the cost of those assets is allocated over their estimated useful lives as depreciation expense. Capital asset additions $ 722,740 Depreciation expense (1,425,461) In governmental funds, repayments of long-term debt are reported as expenditures. In the govemment-wide statements, repayments of long-term debt are reported as reductions of liabilities. In governmental funds, interest on long-term debt is recognized in the period that it becomes due. In the government-wide statement of activities, it is recognized in the period that it is incurred. Unmatured interest owing at the end of the period, less matured interest paid during the period but owing from the prior period was: In the statement of activities, compensated absences are measured by the amounts earned during the fiscal year. In governmental funds, however, expenditures for these items are measured by the amount of financial resources used (essentially the amounts paid). This fiscal year, the difference between compensated absences paid and compensated absences earned was: In governmental funds, if debt is issued at a premium, the premium is recognized as an other financing source in the period it is incurred. In the government-wide statements, the premium plus a deferred loss from debt refunding, is amortized as interest over the life of the debt. Amortization of the debt issue premium, plus any deferred loss from debt refunding, for the period is: In government funds, amount that was sent to the trustee of the escrow account are recognized as other financing uses. In the government-wide statements, the difference between the amount sent to escrow and the amount of the principal outstanding on the refunded obligations is amortized as an adjustment to interest expense over the remaining life of the refunded bonds. This balance represents the unamortized deferred loss on refunding remaining balance. Amount sent to escrow was: (702,721) 1,134,557 (1,133,429) (16,408) 79,251 5,962,457 In governmental funds, general obligation bond proceeds are reported as other financing sources. In the government-wide statements, proceeds from general obligation bonds are reported as additions to long-term debt, net of issue premium. (6,136,024) In governmental funds, pension costs are recognized when employer contributions are made. In the statement of activities, pension costs are recognized on the accrual basis. This fiscal year, the difference between accrual-basis pension costs and actual employer contributions was: 1,670,964 In the statement of activities, early retirement incentives and other postemployment benefit are measured by the amounts earned during the fiscal year. In governmental funds, expenditures for these items are measured by the amount of financial resources used (essentially the amount paid). Other postemployment benefits (453,871) Changes in net position of governmental activities $ 1,631,098 See notes to financial statements 20
STATEMENT OF FIDUCIARY ASSETS AND LIABILITIES FIDUCIARY FUND Assets Agency Fund Payroll Clearance Fund Cash in County Treasury $ 118,140 Accounts receivable (1,366) Total assets $ 116,774 Liabilities: Accounts payable $ 116,774 Total liabilities $ 116,774 See notes to financial statements 21
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NOTES TO BASIC FINANCIAL STATEMENTS NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Accounting Policies The District accounts for its fmancial transactions in accordance with policies and procedures of the Depai tment of Education's California School Accounting Manual. The accounting policies of the District conform to accounting principles generally accepted in the United States of America as prescribed by the Governmental Accounting Standards Board (GASB) and the American Institute of Certified Public Accountants (AICPA). B. Reporting Entity The reporting entity is the Garvey School District. There are no component units included in this report which meet the reporting entity definition criteria of GASB Statement No. 14, The Financial Reporting Entity, as amended by GASB Statement No. 39 and GASB Statement No. 61. C. Basis of Presentation Government-wide Financial Statements: The government-wide financial statements (i.e., the statement of net position and the statement of activities) report information on all of the nonfiduciary activities of the District. The government-wide statements are prepared using the economic resources measurement focus. Government-wide statements differ from the manner in which governmental fund financial statements are prepared. Governmental fund financial statements, therefore, include reconciliation with brief explanations to better identify the relationship between the government-wide statements and the statements for the governmental funds. Certain eliminations have been made as prescribed by GASB Statement No. 34 in regards to interfund activities, payables, and receivables. All internal balances in the Statement of Net Position and Statement of Activities have been eliminated, including due to/from other funds and transfers in/out. The government-wide statement of activities presents a comparison between direct expenses and program revenues for each function or program of the District's governmental activities. Direct expenses are those that are specifically associated with a service, program, or department and are, therefore, clearly identifiable to a particular function. The District does not allocate indirect expenses to functions in the statement of activities. Program revenues include charges paid by the recipients of goods or services offered by a program, as well as grants and contributions that are restricted to meet the operational or capital requirements of a particular program. Revenues which are not classified as program revenues are presented as general revenues of the District, with certain exceptions. The comparison of direct expenses with program revenues identifies the extent to which each governmental function is self-financing or draws from the general revenues of the District. Fund Financial Statements: Fund financial statements report detailed information about the District. The focus of governmental fund financial statements is on major funds rather than reporting funds by type. Each major governmental fund is presented in a separate column, and all non-major funds are aggregated into one column. Fiduciary funds are reported by fund type. The accounting and fmancial treatment applied to a fund is determined by its measurement focus. All governmental funds are accounted for using a flow of current financial resources measurement focus. With this measurement focus, only current assets and current liabilities are generally included on the balance sheet. The Statement of Revenues, Expenditures, and Changes in Fund Balances for these funds present increases (i.e., revenues and other financing sources) and decreases (i.e., expenditures and other fmancing uses) in net current assets. 23
NOTES TO BASIC FINANCIAL STATEMENTS NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) D. Basis of Accounting Basis of accounting refers to when revenues and expenditures are recognized in the accounts and reported in the financial statements. Government-wide fmancial statements are prepared using the accrual basis of accounting. Governmental funds use the modified accrual basis of accounting. Fiduciary funds use the accrual basis of accounting. Revenues - exchange and non-exchange transactions: Revenue resulting from exchange transactions, in which each party gives and receives essentially equal value, is recorded under the accrual basis when the exchange takes place. On the modified accrual basis, revenue is recorded in the fiscal year in which the resources are measurable and become available. "Available" means the resources will be collected within the current fiscal year or are expected to be collected soon enough thereafter to be used to pay liabilities of the current fiscal year. For the District, "available" means collectible within the current period or within one year after fiscal year end. Non-exchange transactions, in which the District receives value without directly giving equal value in return, include property taxes, grants, and entitlements. Under the accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from grants and entitlements is recognized in the fiscal year in which all eligibility requirements have been satisfied. Eligibility requirements include timing requirements, which specify the fiscal year when the resources are to be used or the fiscal year when use is first permitted; matching requirements, in which the District must provide local resources to be used for a specific purpose; and expenditure requirements, in which the resources are provided to the District on a reimbursement basis. Under the modified accrual basis, revenue from non-exchange transactions must also be available before it can be recognized. Unearned Revenue: Unearned revenue arises when assets are received before revenue recognition criteria have been satisfied. Grants and entitlements received before eligibility requirements are met are recorded as unearned revenue. Pensions: For purposes of measuring the net pension liability and deferred outflows/inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the Garvey School District's California Public Employees' Retirement System (CalPERS) and California State Teachers' Retirement System (CalSTRS) Plans and additions to/deductions from the Plans' fiduciary net position have been determined on the same basis as they are reported by CalPERS and CalSTRS. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported as fair value. Expenses/expenditures: On the accrual basis of accounting, expenses are recognized at the time a liability is incurred. On the modified accrual basis of accounting, expenditures are generally recognized in the accounting period in which the related fund liability is incurred, as under the accrual basis of accounting. However, under the modified accrual basis of accounting, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. Allocation of costs, such as depreciation and amortization, are not recognized in the governmental funds. When both restricted and unrestricted resources are available for use, it is the District's policy to use restricted resources first, then unrestricted resources as they are needed. 24
NOTES TO BASIC FINANCIAL STATEMENTS NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) E. Fund Accounting The accounts of the District are organized on the basis of funds, each of which is considered to be a separate accounting entity. The operations of each fund are accounted for with a separate set of self-balancing accounts that comprise its assets, liabilities, fund equity or retained earnings, revenues, and expenditures or expenses, as appropriate. District resources are allocated to and accounted for in individual funds based upon the purpose for which they are to be spent and the means by which spending activities are controlled. The District's accounts are organized into major, non-major, and fiduciary funds as follows: Major Governmental Funds: The General Fund is the general operating fund of the District. It is used to account for all financial resources except those required to be accounted for in another fund. The County School Facilities Fund is used to account separately for apportionments from the State School Facilities Fund authorized by the State Allocation Board for new school facility construction, modernization projects, and facility hardship grants. Non-major Governmental Funds: Special Revenue Funds are established to account for the proceeds from specific revenue sources (other than trusts, major capital projects, or debt service) that are restricted or committed to the financing of particular activities and that compose a substantial portion of the inflows of the fund. Additional resources that are restricted, committed, or assigned to the purpose of the fund may also be reported in the fund. The District maintains three nonmajor special revenue funds: 1. The Child Development Fund is used to account for resources committed to child development programs maintained by the District. 2. The Cafeteria Fund is used to account for revenues received and expenditures incurred to operate the District's food service operations. 3. The Deferred Maintenance Fund is used for the purpose of major repair or replacement of District property. Debt Service Fund is used to account for the accumulation of resources for, and the payment of, long-term debt principal, interest, and related costs. The District maintains one nonmajor debt service fund. The Bond Interest and Redemption Fund is used to account for the accumulation of resources for, and the repayment of, general obligation bonds, interest, and related costs. Capital Projects Funds are used to account for and report financial resources that are restricted or committed or assigned to expenditure for capital outlays, including the acquisition and/or construction of capital facilities and other capital assets. The District maintains two nonmajor capital project funds: Fiduciary Fund: 1. The Building Fund is used to account for the acquisition and modernization of major governmental capital facilities and buildings from the sale of general obligation bonds. 2. The Capital Facilities Fund is used to account for resources received from developer impact fees assessed under provisions of the California Environmental Quality Act (CEQA). Agency Fund is used to account for assets of others for which the District acts as an agent. The District maintains one agency fund for payroll clearance purposes. 25
NOTES TO BASIC FINANCIAL STATEMENTS NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) F. Budgets and Budgetary Accounting Annual budgets are adopted on a basis consistent with accounting principles generally accepted in the United States of America for all governmental funds. By state law, the District's governing board must adopt a final budget no later than July 1. A public hearing must be conducted to receive comments prior to adoption. The District's governing board satisfied these requirements. These budgets are revised by the District's governing board and District Superintendent during the fiscal year to give consideration to unanticipated income and expenditures. The original and final revised budgets are presented for the General Fund in the financial statements. Formal budgetary integration was employed as a management control device during the fiscal year for all budgeted funds. The District employs budget control by minor object and by individual appropriation accounts. Expenditures cannot legally exceed appropriations by major object account. G. Encumbrances Encumbrance accounting is used in all budgeted funds to reserve portions of applicable appropriations for which commitments have been made. Encumbrances are recorded for purchase orders, contracts, and other commitments when they are written. Encumbrances are liquidated when the commitments are paid. All encumbrances are liquidated at June 30. H. Assets, Deferred Outflows of Resources, Liabilities, Deferred Inflows of Resources, and Net Position or Fund Balance 1. Deposits and Investments Cash balances held in banks and in revolving funds are insured up to $250,000 by the Federal Depository Insurance Corporation. All cash held by the financial institutions is fully insured or collateralized. In accordance with Education Code Section 41001, the District maintains substantially all of its cash in the Los Angeles County Treasury. The County pools these funds with those of other districts in the County and invests the cash. These pooled funds are carried at fair value. Interest earned is deposited quarterly into participating funds. Any investment losses are proportionately shared by all funds in the pool. The County is authorized to deposit cash and invest excess funds by California Government Code Section 53648 et. seq.. The funds maintained by the County are either secured by federal depository insurance or are collateralized, per the California Government Code. Information regarding the amount of dollars invested in derivatives with the Los Angeles County Treasury was not available. 2. Receivables and Payables Transactions between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as interfund receivables/payables. 3. Inventories and Prepaid Items Inventories are recorded using the consumption method, whereby inventory acquisitions are initially recorded in inventory (asset) accounts, and are charged as expenditures when used. Reported inventories are equally offset by a nonspendable fund balance, which indicates that these amounts are not "available for appropriation and expenditure" even though they are a component of net current assets. The District's central warehouse and cafeteria inventory are presented at the lower of cost or market on a first-in, first-out (FIFO) basis and are expensed when used in the government-wide financial statements. The District has the option of reporting expenditures in governmental funds for prepaid items either when purchased or during the benefiting period. The District has chosen to report the expenditures during the period benefited. 26
NOTES TO BASIC FINANCIAL STATEMENTS NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) H. Assets, Deferred Outflows of Resources, Liabilities, Deferred Inflows of Resources, and Net Position or Fund Balance (Continued) 4. Deferred Outflows and Inflows of Resources The District reports deferred outflows and inflows of resources. A deferred outflow of resources is a consumption of net position that is applicable to a future reporting period. A deferred inflow of resources represents an acquisition of net position that is applicable to a future period. Under the modified accrual basis of accounting, it is not enough that revenue has been earned if it is to be recognized as revenue of the current period. Revenue must also be susceptible to accrual; it must be both measurable and available to fmance expenditures of the current fiscal period. If assets are recognized in connection with a transaction, but those assets are not yet available to fmance expenditures of the current fiscal period, then the assets must be offset by a corresponding deferred inflow of resources. This type of deferred inflow is unique to governmental funds, since it is tied to the modified accrual basis of accounting, which is used only in connection with governmental funds. Occasionally, the District refunds some of its existing debt. When this occurs, the difference between the funds required to retire (reacquisition price of) the refunded debt and the net carrying amount of refunded debt results in a deferred amount on refunding. If there is an excess of the reacquisition price of refunded debt over its net carrying amount, it is treated as a deferred outflow of resources (a deferred loss on refunding). If there is an excess net carrying value amount of refunded debt over its reacquisition price, it is treated as a deferred inflow of resources (a deferred gain on refunding). 5. Amortization of Bond Premium and Discounts Bond premiums and discounts are being amortized on the straight line method over the life of the bonds on the government-wide statements. 6. Capital Assets Capital assets are those purchased or acquired with an original cost of $5,000 or more, and are reported at historical cost or estimated historical cost. Contributed assets are reported at fair value as of the date received. Additions, improvements, and other capital outlays that significantly extend the useful life of an asset are capitalized. The costs of normal maintenance and repairs that do not add to the value of the capital assets or materially extend the capital asset's lives are not capitalized, but are expensed as incurred. Depreciation on all capital assets is computed using the straight-line basis over the following estimated useful lives. Description Estimated Lives Buildings and Improvements Furniture and Equipment Vehicles 7. Unearned Revenue 25-50 years 15-20 years 8 years Cash received for federal and state special projects and programs is recognized as revenue to the extent that qualified expenditures have been incurred. Unearned revenue is recorded to the extent cash received on specific projects and programs exceed qualified expenditures. 27
NOTES TO BASIC FINANCIAL STATEMENTS NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) H. Assets, Deferred Outflows of Resources, Liabilities, Deferred Inflows of Resources, and Net Position or Fund Balance (Continued) 8. Compensated Absences All vacation pay plus related payroll taxes is accrued when incurred in the government-wide financial statements. A liability for these amounts is reported in the governmental funds only if they have matured, for example, as a result of employee resignations or retirements. Accumulated sick leave benefits are not recognized as liabilities of the District. The District's policy is to record sick leave as an operating expense in the period taken since such benefits do not vest nor is payment probable. Unused sick leave is added to the creditable service period for calculation of retirement benefits when the employee retires. 9. Long-Term Obligations In the government-wide fmancial statements, long-term debt and other long-term obligations are reported as liabilities in the Statement of Net Position. Bond premiums and discounts are deferred and amortized over the life of the bonds using the straight-line method. Bonds payable is reported net of applicable bond premium or discount. In the fund financial statements, governmental funds recognize bond premiums and discounts during the current period. The face amount of the debt issued, premiums, or discounts is reported as other fmancing sources/uses. 10. Fund Balance As of, fund balances of the governmental funds are classified as follows: Nonspendable amounts that cannot be spent either because they are in nonspendable form or because they are legally or contractually required to be maintained intact. Restricted amounts that can be spent only for specific purposes because of constitutional provisions or enabling legislation or because of constraints that are externally imposed by creditors, grantors, contributors, or the laws or regulations of other governments. Committed amounts that can be used only for specific purposes determined by a formal action of the governing board is the highest level of decision-making authority for the district. Commitments may be established, modified, or rescinded only through ordinances or resolutions approved by the governing board. Assigned amounts that do not meet the criteria to be classified as restricted or committed but that are intended to be used for specific purposes. Under the District's adopted policy, only the governing board or director may assign amounts for specific purposes. Unassigned all other spendable amounts. When an expenditure is incurred for purposes for which both restricted and unrestricted fund balance is available, the district considers restricted funds to have been spent first. When an expenditure is incurred for which committed, assigned, or unassigned fund balance are available, the District considers amounts to have been spent first out of committed funds, then assigned funds, and finally unassigned funds, as needed, unless the governing board has provided otherwise in its commitment or assignment actions. 28
NOTES TO BASIC FINANCIAL STATEMENTS NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) H. Assets, Deferred Outflows of Resources, Liabilities, Deferred Inflows of Resources, and Net Position or Fund Balance (Continued) 11. Net Position I. Property Tax The government-wide statement of net position includes three equity categories entitled net investment in capital assets; restricted net position; and unrestricted net position. The net investment in capital assets category presents the District's equity interest in capital assets less outstanding principal of related debt. The restricted net position category is designed to reflect net position that are subject to restrictions beyond the District's control (externally imposed or imposed by law). The unrestricted net position category equals any remaining balance and can be subdivided into designated and undesignated portions. Designations reflect the District's self-imposed limitations on the use of otherwise available current financial resources. The District had no net position which was restricted by enabling legislation. The County is responsible for assessing, collecting, and apportioning property taxes. Taxes are levied for each fiscal year on taxable real and personal property in the County. The levy is based on the assessed values of the preceding January 1, which is also the lien date. Property taxes on the secured roll are due on November 1 and February 1, and taxes become delinquent after December 10 and April 10, respectively. Property taxes on the unsecured roll are due on the lien date (Januaryl), and become delinquent if unpaid by August 31. Secured property taxes are recorded as revenue when apportioned, in the fiscal year of the levy. The County apportions secured property tax revenue in accordance with the alternate method of distribution prescribed by Section 4705 of the California Revenue and Taxation Code. This alternate method provides for crediting each applicable fund with its total secured taxes upon completion of the secured tax roll approximately October 1 of each fiscal year. The County Auditor reports the amount of the District's allocated property tax revenue to the California Department of Education. Property taxes are recorded as Local Control Funding Formula (LCFF) local sources by the District. J. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenditures/expenses during the reporting period. Actual results could differ from those reported. 29
NOTES TO BASIC FINANCIAL STATEMENTS NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) K. New Accounting Pronouncements Governmental Accounting Standards Board Statement No. 68 For the fiscal year ended, the District implemented Governmental Accounting Standards Board (GASB) Statement No. 68, "Accounting and Financial Reporting for Pensions." This Statement is effective for periods beginning after June 15, 2014. The objective of this Statement is to improve accounting and fmancial reporting by state and local governments for pensions. This Statement replaces the requirements of Statement No. 27, "Accounting for Pensions by State and Local Governmental Employers" as well as the requirements of Statement No. 50, "Pension Disclosures". This Statement establishes standards for measuring and recognizing liabilities, deferred outflows of resources, deferred inflows of resources, and expense related to pensions. Implementation of the GASB Statement No. 68 did have an impact on the District's financial statements for the fiscal year ended, see Note 11 Pension Plans and Note 12 Restatements. Governmental Accounting Standards Board Statement No. 71 For the fiscal year ended, the District implemented Governmental Accounting Standards Board (GASB) Statement No. 71, "Pension Transition for Contributions Made Subsequent to the Measurement Date." This Statement is effective for periods beginning after June 15, 2014. The objective of this Statement is to address an issue regarding application of the transition of GASB Statement No. 68 "Accounting and Financial Reporting for Pensions." The issue relates to amounts associated with contributions, if any, made by a state or local government employer or nonemployer contributing entity to a defined benefit pension plan after the measurement date of the government's beginning net pension liability. This statement will eliminate the source of potential significant understatement of restated beginning net position and expense in the first year of implementation of GASB Statement No. 68 in the accrual-basis financial statements of employers and nonemployer contributing entities. Implementation of the GASB Statement No. 71 did have an impact on the District's financial statements for the fiscal year ended, see Note 11 Pension Plans and Note 12 Restatements. L. Future Accounting Pronouncements GASB Statements Nos. 72-76 listed below will be implemented in future financial statements: Statement No. 72 "Fair Value Measurement The provisions of this statement are effective for financial and Application" statements for reporting periods beginning after June 15, 2015. Statement No. 73 Statement No. 74 "Accounting and Financial Reporting for Pension and Related Assets That Are Not within the Scope of GASB Statement No. 68, and Amendments to Certain Provisions of GASB Statements No. 67 and No. 68" "Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans" The protisions of this statement are effective for fiscal years beginning after June 15, 2015- except those prnsions that address employers and governmental nonemployer contributing entities for pensions that are not within the scope of GASB Statement No. 68, which are effective for fiscal years beginning after June 15, 2016. The prov4sions of this statement are effective for fiscal years beginning after June 15, 2016. Statement No. 75 "Accounting and Financial Reporting Postemployment Benefit Plans Other Than Pension Plans" The provisions of this statement are effective for fiscal years beginning after June 15, 2016. Statement No. 76 "The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments" The provisions of this statement are effective for fiscal years beginning after June 15, 2015. 30
NOTES TO BASIC FINANCIAL STATEMENTS NOTE 2- CASH AND INVESTMENTS The District's cash and investments, at, consisted of the following: Cash in revolving fund 30,000 Cash and investments with County Treasurer 17,847,353 Total cash and investments $ 17,877,353 Cash and investments are presented on the accompanying basic financial statements, as follows: Cash in County Treasury, statement of net position $ 17,729,213 Cash in revolving fund, statement of net position 30,000 Cash in County Treasury, statement of fiduciary assets and liabilities 118,140 Total cash and investments $ 17,877,353 Cash in County Treasury In accordance with Education Code Section 41001, the District maintains substantially all of its cash in the Los Angeles County Treasury as part of the common investment pool ($17,847,353 as of ). The fair value of this pool as of as provided by the plan sponsor, was $17,847,353. The District is considered to be an involuntary participant in the external pool. Interest is deposited in the participating funds. The County is restricted by Government Code Section 53635, pursuant to Section 53601, to invest in time deposits, U.S. government securities, state registered warrants, notes or bonds, State Treasurer's investment pool, bankers' acceptances, commercial paper, negotiable certificates of deposit, and repurchase or reverse repurchase agreements. Cash on Hand, in Banks, and in Revolving Fund Cash balance in the revolving fund ($30,000) is insured up to $250,000 by the Federal Depository Insurance Corporation. These accounts are held within various fmancial institutions. Investments Authorized by the District's Investment Policy The District's investment policy only authorizes investment in the local government investment pool administered by the County of Los Angeles. The District's investment policy does not contain any specific provisions intended to limit the District's exposure to interest rate risk, credit risk, and concentration of credit risk. Disclosures Relating to Interest Rate Risk Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value to changes in market interest rates. One of the ways that the District manages its exposure to interest rate risk is by purchasing a combination of shorter term and longer term investments and by timing cash flows from maturities so that a portion of the portfolio is maturing or coming close to maturity evenly over time as necessary to provide the cash flow and liquidity needed for operations. 31
NOTES TO BASIC FINANCIAL STATEMENTS NOTE 2- CASH AND INVESTMENTS (Continued) Disclosures Relating to Interest Rate Risk (Continued) Information about the sensitivity of the fair values of the District's investments to market interest rate fluctuations is provided by the following table that shows the distribution of the District's investments by maturity: Investment Type Los Angeles County Investment Pool Total Carrying Amount 12 Months or Less Remaining maturity (in Months) 13 to 24 Months 25 to 60 Months More Than 60 Months $ 17,847,353 $ 17,847,353 $ $ - $ - $ 17,847,353 $ 17,847,353 $ $ - $ - Disclosures Relating to Credit Risk Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. Presented below is the minimum rating required by the California Government Code and the District's investment policy, and the actual rating as of fiscal year end for each investment type. Rating as of Fiscal Year End Exempt Minimum From Investment Type Amount Legal Rating Disclosure AAA AA A Not Rated Los Angeles County Investment Pool $ 17,847,353 N/A $ - $ - $ 17,847,353 Total $ 17,847,353 $ - $ $ 17,847,353 Concentration of Credit Risk The District's investment policy only authorizes investment in the local government investment pool administered by the County of Los Angeles. The District's investment policy does not contain any specific provisions intended to limit the District's exposure to interest rate risk, credit risk, and concentration of credit risk. There are no investments in any one issuer (other than U.S. Treasury securities, mutual funds, and external investment pools) that represent 5% or more of the total District investments. Custodial Credit Risk Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, a government will not be able to recover its deposits or will not be able to recover collateral securities that are in the possession of an outside party. The California Government Code and the District's investment policy do not contain legal or policy requirements that would limit the exposure to custodial credit risk for deposits, other than the following provision for deposits: The California Government Code requires that a financial institution secure deposits made by state or local governmental units by pledging securities in an undivided collateral pool held by a depository regulated under state law (unless so waived by the governmental unit). The fair value of the pledged securities in the collateral pool must equal at least 110% of the total amount deposited by the public agencies. California law also allows fmancial institutions to secure the District's deposits by pledging first trust deed mortgage notes having a value of 150% of the secured public deposits. 32
NOTES TO BASIC FINANCIAL STATEMENTS NOTE 2- CASH AND INVESTMENTS (Continued) Custodial Credit Risk (Continued) As of, none of the District's deposits with financial institutions in excess of federal depository insurance limits were held in uncollateralized accounts. The custodial credit risk for investments is the risk that, in the event of the failure of the counterparty (e.g., broker-dealer) to a transaction, a government will not be able to recover the value of its investment or collateral securities that are in the possession of another party. The California Government Code and the District's investment policy do not contain legal or policy requirements that would limit the exposure to custodial credit risk for investments. With respect to investments, custodial credit risk generally applies only to direct investments in marketable securities. Custodial credit risk does not apply to a local government's indirect investment in securities through the use of mutual funds or government investment pools (such as Los Angeles County Investment Pool). NOTE 3- EXCESS OF EXPENDITURES OVER APPROPRIATIONS The District's expenditures exceeded appropriations in individual funds as follows: Fund Major Governmental Fund General Fund Employee benefits Non-major Governmental Fund Bond Interest and Redemption Fund Contracted services and other operating expenditures Debt service Excess Expenditures $ 1,189,233 173,567 19,490 NOTE 4- ACCOUNTS RECEIVABLE Receivables at, consist of the following: Other General Fund County School Facilities Fund Governmental Funds Totals Federal Government Categorical Aid Programs 369,223 $ $ 446,299 $ 815,522 State Government Categorical Aid Programs 185,190 208,347 393,537 Lottery 396,696 396,696 Local Sources Interest 25,626 8,545 8,045 42,216 Miscellaneous 208,252 14,663 332,430 555,345 Total Accounts Receivable 1,184,987 $ 23,208 $ 995,121 $ 2,203,316 33
NOTES TO BASIC FINANCIAL STATEMENTS NOTE 5- INTERFUND TRANSACTIONS Interfund transactions are reported as loans, services provided, reimbursements, or transfers. Loans are reported as interfund receivables and payables, as appropriate, and are subject to elimination upon consolidation. Services provided, deemed to be at market or near market rates, are treated as revenues and expenditures/expenses. Reimbursements occur when one fund incurs a cost, charges the appropriate benefiting fund, and reduces its related cost as a reimbursement. All other interfund transactions are treated as transfers. Transfers among governmental funds are netted as part of the reconciliation to the government-wide fmancial statements. Interfund Transfers Interfund transfers consist of transfers from funds receiving revenue to funds through which the resources are to be expended. Interfund transfers for the 2014-2015 fiscal year, are as follows: Funds Transfers In Transfers Out Major Governmental Fund: General Fund $ $ 5,544 Non-major Governmental Funds: Child Development Fund 5,544 Deferred Maintenance Fund 17,000 Capital Facilities Fund 17,000 Totals $ 22,544 $ 22,544 34
NOTES TO BASIC FINANCIAL STATEMENTS NOTE 6- CAPITAL ASSETS AND DEPRECIATION Capital asset activity for the fiscal year ended, is shown below: Balance July 1,2014 Additions Deletions Balance Capital assets, not being depreciated: Land $ 1,711,462 $ $ $ 1,711,462 Total capital assets, not being depreciated 1,711,462 1,711,462 Capital assets being depreciated: Improvement of sites 2,794,300 87,940 2,882,240 Buildings 71,421,930 571,735 71,993,665 Equipment 1,052,419 63,065 1,115,484 Total capital assets being depreciated 75,268,649 722,740 75,991,389 Accumulated depreciation for: Improvement of sites (2,778,983) (13,160) (2,792,143) Buildings (23,956,933) (1,372,734) (25,329,667) Equipment (438,137) (39,567) (477,704) Total accumulated depreciation (27,174,053) (1,425,461) (28,599,514) Total capital assets, being depreciated, net 48,094,596 (702,721) 47,391,875 Governmental activity capital assets, net $ 49,806,058 $ (702,721) $ 49,103,337 Depreciation expense was charged to governmental activities as follows: Depreciation unallocated Total depreciation expense $ 1,425,461 $ 1,425,461 NOTE 7 - LONG-TERM DEBT A schedule of changes in long-term debt for the fiscal year ended, is shown below: Balance July 1, 2014 Prior Period Adjustments Additions Deductions Balance June 30,2015 Amounts Due Within One Year General obligation bonds $37,554,943 $ $ 5,500,000 $ (6,874,557) $ 36,180,386 $ 1,690,000 Original issue premium 972,101 636,024 (249,326) 1,358,799 106,155 Accreted interest payable 9,883,853 1,501,521 (350,443) 11,034,931 Compensated absences 896,296 150,852 (134,444) 912,704 136,905 Net pension liability 47,673,599 15,730,449 (26,817,818) 36,586,230 OPEB 5,715,142 1,518,716 (1,064,845) 6,169,013 Totals $55,022,335 $ 47,673,599 $25,037,562 $ (35,491,433) $ 92,242,063 $ 1,933,060 35
NOTES TO BASIC FINANCIAL STATEMENTS NOTE 7- LONG-TERM DEBT (Continued) A. General Obligation Bonds Election of 2000 On November 7, 2000, an election was held, at which more than two-thirds of the persons voting on the proposition voted to authorize the issuance and sale of $15 million of general obligation bonds. The county has the power and is obligated to annually levy ad valorem taxes upon all property subject to taxation by the District, for the payment of principal and interest on the bonds. On April 19, 2001, the District issued a General Obligation Bond in the amount of $7,999,903. The bonds were issued to repair and construct school facilities within the District. The bonds consist of: a) Current Interest Serial Bonds of $5,530,000 with interest rates ranging from 3.30% to 5.10% and fully maturing August 1, 2022, b) Current Interest Term Bonds of $1,940,000 with a stated interest rate of 5.25% due on August 1, 2025, and c) Capital Appreciation Bonds of $529,903 with yields to maturity ranging between 4.95% and 5.22% and fully maturing on August 1, 2014. At, there was no principal outstanding balance, and there was no accreted interest on capital appreciation bonds balance. On March 12, 2004, the District issued Series B of the election of 2000 General Obligation Bonds in the amount of $6,999,519. The bonds were issued to fund the repair of school facilities. The bonds consist of Current Interest Serial Bonds of $2,655,000 with interest rates ranging from 2.5% to 3.875% and fully maturing on August 1, 2020, and Capital Appreciation Bonds of $4,344,519 with yields to maturity ranging between 4.73% to 5.11% and fully maturing on August 1, 2033. On December 17, 2013, the District refunded the Current Interest Series Bonds portion and it has been called on December 18, 2013. For fmancial reporting purposes, the debt has been considered defeased and therefore removed from the District's financial statements At, the Capital Appreciation Bonds principal balance outstanding was $4,344,519, and $74,715 of unamortized original premium. The accreted interest on capital appreciation bonds balance was $3,460,210. Election of 2004 On November 2, 2004, an election was held, at which more than fifty-five percent of the persons voting on the proposition voted to authorize the issuance and sale of $30 million of general obligation bonds. The bonds are general obligations of the District, and the County is obligated to annually levy ad valorem taxes for the payment of the interest on, and the principal of the bonds. Bond proceeds will be used for the purpose of financing the addition and modernization of school facilities. On June 10, 2005, the District issued Series 2005, in the amount of $9,998,736. The issue consisted of: a) Current Interest Bonds of $9,450,000 with stated interest rates ranging from 3.0% to 4.25% and fully maturing on August 1, 2025, and b) Capital Appreciation Bonds of $548,736 with yields to maturity ranging from 4.84% to 4.94% and fully maturing on August 1, 2029. At, the outstanding balance on the bonds was $1,053,736 and $9,413 of unamortized bond issue premium. The accreted interest on the capital appreciation bonds balance was $557,798. On December 21, 2006, the District issued Series 2006, in the amount of $10,999,898. The issue consisted of: a) Current Interest Bonds of $2,785,000 with stated interest rates ranging from 4.00% to 4.50% and fully maturing on August 1, 2020, and b) Capital Appreciation Bonds of $8,214,898 with yields to maturity ranging from 3.65% to 6.22% and fully maturing on August 1, 2031. At, the outstanding balance on the bonds was $9,479,167 and $223,571 of unamortized bond issue premium. The accreted interest on the capital appreciation bonds balance was $3,447,471. On June 4, 2008, the District issued Series 2008, in the amount of $8,997,964. The issue consisted of: a) Current Interest Bonds of $680,000 with stated interest rates ranging from 3.00% to 4.00% and fully maturing on August 1, 2018, and b) Capital Appreciation Bonds of $8,317,964 with yields to maturity ranging from 4.25% to 5.38% and fully maturing on August 1, 2042. At, the outstanding balance on the bonds was $8,812,964, and $294,726 of unamortized bond issue premium. The accreted interest on the capital appreciation bonds balance was $3,569,452. 36