MOUNT VERNON COMMUNITY SCHOOL DISTRICT MOUNT VERNON, IOWA

MOUNT VERNON, IOWA INDEPENDENT AUDITOR S REPORTS BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION SCHEDULE OF FINDINGS JUNE 30, 2018

T A B L E O F C O N T E N T S OFFICIALS 4 INDEPENDENT AUDITOR S REPORT 5-6 MANAGEMENT S DISCUSSION AND ANALYSIS (MD&A) 7-15 BASIC FINANCIAL STATEMENTS: Exhibit Government-Wide Financial Statements: A Statement of Net Position 18-19 B Statement of Activities 20-23 Governmental Fund Financial Statements: C Balance Sheet 24-25 D Reconciliation of the Balance Sheet Governmental Funds to the Statement of Net Position 26 E Statement of Revenues, Expenditures and Changes in Fund Balances 27-28 F Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds to the Statement of Activities 29-30 Proprietary Fund Financial Statements: G Statement of Fund Net Position 31 H Statement of Revenues, Expenses and Changes in Fund Net Position 32 I Statement of Cash Flows 33-34 Fiduciary Fund Financial Statements: J Statement of Fiduciary Assets and Liabilities 35 K Statement of Changes in Fiduciary Net Position 36 Notes to Financial Statements 37-59 REQUIRED SUPPLEMENTARY INFORMATION: Budgetary Comparison Schedule of Revenues, Expenditures/Expenses and Changes in Balances Budget and Actual All Governmental Funds and Proprietary Funds 62 Notes to Required Supplementary Information Budgetary Reporting 63 Schedule of the District s Proportionate Share of the Net Pension Liability 64 Schedule of District s Contributions 66-67 Notes to Required Supplementary Information Pension Liability 68 Schedule of Changes in the District s Total OPEB Liability, Related Ratios and Notes 69 SUPPLEMENTARY INFORMATION: Schedule Nonmajor Governmental Funds: 1 Combining Balance Sheet 72 2 Combining Schedule of Revenues, Expenditures and Changes in Fund Balances 73 Capital Projects Fund Accounts: 3 Combining Balance Sheet 74 4 Combining Schedule of Revenues, Expenditures and Changes in Fund Balances 75 5 Schedule of Changes in Special Revenue Fund, Student Activity Accounts 76-78 6 Schedule of Changes in Fiduciary Assets and Liabilities Agency Fund 79 7 Schedule of Revenues by Source and Expenditures by Function - All Governmental Funds 80-81 Page 2

T A B L E O F C O N T E N T S (continued) INDEPENDENT AUDITOR S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS 82-83 SCHEDULE OF FINDINGS 84-88 Page 3

OFFICIALS Term Name Title Expires Board of Education (Before September 2017 election) Lori Merlak President 2017 Sherry Grunder Vice President 2017 Rick Elliott Board Member 2017 Denise Brannaman Board Member 2019 Nannette Gunn Board Member 2019 John Rhomberg Board Member 2019 Mark Weldon Board Member 2019 (After September 2017 election) Sherry Grunder President 2021 Lori Merlak Vice President 2021 Denise Brannaman Board Member 2019 Nannette Gunn Board Member 2019 John Rhomberg Board Member 2019 Mark Weldon Board Member 2019 Rick Elliott Board Member 2021 School Officials Greg Batenhorst Superintendent 2021 Matt Burke District Secretary/Treasurer and Business Manager 2018 Andrew Bracken Attorney Indefinite Brett Nitzschke Attorney Indefinite 4

INDEPENDENT AUDITOR S REPORT To the Board of Education of Mount Vernon Community School District: Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of Mount Vernon Community School District, Mount Vernon, Iowa, as of and for the year ended June 30, 2018 and the related Notes to Financial Statements, which collectively comprise the District s basic financial statements 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 U.S. generally accepted accounting principles. 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 U.S. generally accepted auditing standards, the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States and Chapter 11 of the Code of Iowa. 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 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, the business-type activities, each major fund and the aggregate remaining fund information of Mount Vernon Community School District as of June 30, 2018, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with U.S. generally accepted accounting principles. 5

Hunt & Associates, P.C. Mount Vernon Community School District Mount Vernon, Iowa Emphasis of a Matter As discussed in Note 14 to the financial statements, Mount Vernon Community School District adopted new accounting guidance related to Governmental Accounting Standards Board (GASB) Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions. Our opinions are not modified with respect to this matter. Other Required Supplementary Information U.S. generally accepted accounting principles require Management s Discussion and Analysis, the Budgetary Comparison Information, the Schedule of the District s Proportionate Share of the Net Pension Liability, the Schedule of District Contributions and the Schedule of Changes in the District s Total OPEB Liability, Related Ratios and Notes on pages 7 through 15 and 62 through 69 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 which 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 U.S. generally accepted auditing standards, 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. Supplementary Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise Mount Vernon Community School District s basic financial statements. We previously audited, in accordance with the standards referred to in the third paragraph of this report, the financial statements for the nine years ended June 30, 2017 (which are not presented herein) and expressed unmodified opinions on those financial statements. The supplementary information included in Schedules 1 through 7 is presented for purposes of additional analysis and is not a required part of the basic financial statements. The supplementary information is the responsibility of management and was derived from and relates 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 financials statements themselves, and other additional procedures in accordance with U.S. generally accepted auditing standards. In our opinion, the supplementary information is fairly stated in all material respects in relation to the basic financial statements as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 3, 2018 on our consideration of Mount Vernon Community School District s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, and contracts. 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 Mount Vernon Community School District s internal control over financial reporting and compliance. Oskaloosa, Iowa December 3, 2018 6

MANAGEMENT S DISCUSSION AND ANALYSIS Mount Vernon Community School District provides this Management s Discussion and Analysis of its financial statements. This narrative overview and analysis of the financial activities is for the fiscal year ended June 30, 2018. We encourage readers to consider this information in conjunction with the District s financial statements, which follow. 2018 FINANCIAL HIGHLIGHTS General Fund revenues increased from $13,982,989 in fiscal 2017 to $14,440,076 in fiscal 2018, while General Fund expenditures increased from $13,584,835 in fiscal 2017 to $14,370,995 in fiscal 2018. The District s General Fund balance increased from $2,178,925 in fiscal 2017 to $2,265,526 in fiscal 2018. The increase in General Fund expenditures was due primarily to the increase in wages and salaries. School Board policy 1004 has a goal of a solvency ratio of at least 10%. The solvency ratio is the General Fund undesignated and unreserved fund balance divided by General Fund total revenue. For fiscal year 2018 the solvency ratio was 12.8%. The District implemented Governmental Accounting Standards Board Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions, during fiscal year 2018. The beginning net position for governmental activities was restated by $13,874 to retroactively report the increase in the OPEB liability as of July 1, 2017. OPEB expense for fiscal year 2017 and deferred inflows of resources at June 30, 2017 were not restated because the information needed to restate those amounts was not available. USING THIS ANNUAL REPORT The annual report consists of a series of financial statements and other information, as follows: Management s Discussion and Analysis introduces the basic financial statements and provides an analytical overview of the District s financial activities. The Government-wide Financial Statements consist of a Statement of Net Position and a Statement of Activities. These provide information about the activities of Mount Vernon Community School District as a whole and present an overall view of the District s finances. The Fund Financial Statements tell how governmental services were financed in the short term as well as what remains for future spending. Fund financial statements report Mount Vernon Community School District s operations in more detail than the government-wide statements by providing information about the most significant funds. The Fiduciary Fund statements provide financial information about activities for which Mount Vernon Community School District acts solely as an agent or custodian for the benefit of those outside of the District. 7

Notes to financial statements provide additional information essential to a full understanding of the data provided in the basic financial statements. Required Supplementary Information further explains and supports the financial statements with a comparison of the District s budget for the year, the District s proportionate share of the net pension liability and related contributions, as well as presenting the Schedule of Changes in the District s Total OPEB Liability, Related Ratios and Notes. Other Supplementary Information provides detailed information about the nonmajor Special Revenue Funds. Figure A-1 shows how the various parts of this annual report are arranged and relate to one another. Figure A-1 Mount Vernon Community School District Annual Financial Report Management's Discussion and Analysis Basic Financial Statements Required Supplementary Information District-wide Financial Statements Fund Financial Statements Notes to the Financial Statements Summary Detail 8

Figure A-2 summarizes the major features of the District s financial statements, including the portion of the District s activities they cover and the types of information they contain. Figure A-2 Major Features of the Government-wide and Fund Financial Statements Government-wide Statements Fund Statements Governmental Funds Proprietary Funds Fiduciary Funds Scope Entire District (except fiduciary funds) The activities of the District that are not proprietary or fiduciary, such as special education and building maintenance Activities the District operates similar to private businesses: food services and day care Instances in which the District administers resources on behalf of someone else, such as scholarship programs Required financial statements Statement of net position Statement of activities Balance sheet Statement of revenues, expenditures and changes in fund balances Statement of net position Statement of revenues, expenses and changes in fund net position Statement of fiduciary net position Statement of changes in fiduciary net position Statement of cash flows Accounting basis and measurement focus Accrual accounting and economic resources focus Modified accrual accounting and current financial resources focus Accrual accounting and economic resources focus Accrual accounting and economic resources focus Type of asset/ liability information All assets and liabilities, both financial and capital, short-term and long-term Generally, assets expected to be used up and liabilities that come due during the year or soon thereafter; no capital assets or long-term liabilities included All assets and liabilities, both financial and capital, short-term and long-term All assets and liabilities, both short-term and longterm; funds do not currently contain capital assets, although they can Type of deferred outflow/ inflow information Consumption/ acquisition of net position that is applicable to a future reporting period Consumption/ acquisition of fund balance that is applicable to a future reporting period Consumption/ acquisition of net position that is applicable to a future reporting period Consumption/ acquisition of net position that is applicable to a future reporting period Type of inflow/ outflow information All revenues and expenses during year, regardless of when cash is received or paid Revenues for which cash is received during or soon after the end of the year; expenditures when goods or services have been received and the related liability is due during the year or soon thereafter All revenues and expenses during the year, regardless of when cash is received or paid All additions and deductions during the year, regardless of when cash is received or paid REPORTING THE DISTRICT S FINANCIAL ACTIVITIES Government-wide Financial Statements The government-wide financial statements report information about the District as a whole using accounting methods similar to those used by private-sector companies. 9

The Statement of Net Position includes all of the District s assets, deferred outflows of resources, liabilities, and deferred inflows of resources. 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 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 financial position. Over time, increases or decreases in the District s net position is an indicator of whether financial position is improving or deteriorating. To assess the District s overall health, additional non-financial factors, such as changes in the District s property tax base and the condition of school buildings and other facilities, need to be considered. In the government-wide financial statements, the District s activities are divided into two categories: Governmental activities: Most of the District s basic services are included here, such as regular and special education, transportation and administration. Property tax and state aid finance most of these activities. Business type activities: The District charges fees to help cover the costs of certain services it provides. The District s school nutrition program is included here. Fund Financial Statements The fund financial statements provide more detailed information about the District s funds, focusing on its most significant or major 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, such as accounting for student activity funds, or to show that it is properly using certain revenues, such as federal grants. The District has three kinds of funds: 1) 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 fund statements provide a detailed short-term view that helps determine whether there are more or fewer financial resources that can be spent in the near future to finance the District s programs. The District s governmental funds include the General Fund, Special Revenue Funds, Debt Service Fund and Capital Projects Fund. The required financial statements for governmental funds include a balance sheet and a statement of revenues, expenditures and changes in fund balances. 2) Proprietary funds: Services for which the District charges a fee are generally reported in proprietary funds. Proprietary funds are reported in the same way as the government-wide financial statements. The District's Enterprise Funds, one type of proprietary fund, are the same as its business type activities, but provide more detail and additional information, such as cash flows. The District currently has two Enterprise Funds, the School Nutrition Fund and the Daycare Fund. The required financial statements for proprietary funds include a statement of net position, a statement of revenues, expenses and changes in fund net position and a statement of cash flows. 10

3) Fiduciary funds: The District is the trustee, or fiduciary, for assets that belong to others. These funds include Private-Purpose Trust and Agency Funds. Private-Purpose Trust Fund The District accounts for outside donations for scholarships for individual students in this fund. Agency Funds These are funds through which the District administers and accounts for employee wellness program funds. The District is responsible for ensuring the assets reported in the fiduciary funds are used only for their intended purposes and by those to whom the assets belong. The District excludes these activities from the government-wide financial statements because it cannot use these assets to finance its operations. The required financial statements for fiduciary funds includes a statement of fiduciary net position and a statement of changes in fiduciary net position. Reconciliations between the government-wide financial statements and the fund financial statements follow the fund financial statements. GOVERNMENT-WIDE FINANCIAL ANALYSIS Figure A-3 below provides a summary of the District s net position at June 30, 2018 as compared to June 30, 2017. Figure A-3 Condensed Statement of Net Position (Expressed in Thousands) Governmental Business Type Total Total Activities Activities District Change June 30, June 30, June 30, June 30, 2018 2017 2018 2017 2018 2017 2017-2018 (Not restated) (Not restated) (Not restated) Current and other assets $12,371 $12,345 $271 $215 $12,642 $12,560 $82 Capital assets 22,342 22,264 33 57 22,375 22,321 54 Total assets 34,713 34,609 304 272 35,017 34,881 136 Deferred outflows of resources 2,662 2,332 105 92 2,767 2,424 343 Long-term liabilities 18,230 18,298 334 311 18,564 18,609-45 Other liabilities 1,897 1,827 47 47 1,944 1,874 70 Total liabilities 20,127 20,125 381 358 20,508 20,483 25 Deferred inflows of resources 5,844 5,609 8 6 5,852 5,615 237 Net position: Net investment in capital assets 13,116 12,004 33 57 13,149 12,061 1,088 Restricted 2,493 2,615 - - 2,493 2,615-122 Unrestricted -4,205-3,412-13 -57-4,218-3,469-749 Total net position $11,404 $11,207 $20 $- $11,424 $11,207 $217 The largest portion of the District s net position is the invested in capital assets (e.g., land, infrastructure, buildings and equipment), less the related debt. The debt related to the investment in capital assets is liquidated with sources other than capital assets. 11

Restricted net position represents resources that are subject to external restrictions, constitutional provisions or enabling legislation on how they can be used. Unrestricted net position represents the part of net position that can be used to finance day-today operations without constraints established by debt covenants, enabling legislation or other legal requirements. This reduction in unrestricted net position was primarily a result of the increase in the District s net pension liability. Figure A-4 shows the change in net position for the year ended June 30, 2018 as compared to June 30, 2017. Figure A-4 Changes in Net Position (Expressed in Thousands) Governmental Business type Total Total Activities Activities District Change June 30, June 30, June 30, June 30, 2018 2017 2018 2017 2018 2017 2017-2018 Revenues: (Not restated) (Not restated) (Not restated) Program revenues: Charges for service $3,060 $2,775 $753 $703 $3,813 $3,478 9.6% Operating grants, contributions 2,159 1,976 206 190 2,365 2,166 9.2% and restricted interest Capital grants, contributions 7 40-10 7 50-86.0% General revenues and transfers: Property tax 5,979 5,772 - - 5,979 5,772 3.6% Statewide sales & services tax 1,047 1,057 - - 1,047 1,057-0.9% Unrestricted state grants 5,425 5,414 - - 5,425 5,414 0.2% Unrestricted investment earnings 46 25 3-49 25 96.0% Other 182 108-17 1 165 109 51.4% Total revenues 17,905 17,167 945 904 18,850 18,071 4.3% Program expenses: Governmental activities: Instruction 10,987 10,433 - - 10,987 10,433 5.3% Support services 4,850 4,320-4,850 4,320 12.3% Non-instructional programs - - 925 923 925 923 0.2% Other expenses 1,857 1,617 - - 1,857 1,617 14.8% Total expenses 17,694 16,370 925 923 18,619 17,293 7.7% Change in net position $211 $797 $20 $-19 $231 $778-70.3% Property tax and unrestricted state grants account for 64% of the total governmental activities revenue. The District s expenses primarily relate to instruction and support services, which account for 90% of the total governmental activities expenses. Overall net position increased $231,121 for the current year. Governmental Activities Revenues for governmental activities were $17,905,486 and expenses were $17,694,082. 12

The following table presents the total and net cost of the District s major governmental activities: instruction, support services, non-instructional programs and other expenses. Figure A-5 Total and Net Cost of Governmental Activities (Expressed in Thousands) Total Cost of Services Net Cost of Services 2017 2018 2017 2018 Instruction $10,433 $10,987 $6,377 $6,992 Support services 4,320 4,850 4,034 4,141 Non-instructional programs - - - - Other expenses 1,617 1,857 1,168 1,335 Totals $16,370 $17,694 $11,579 $12,468 The cost financed by users of the District s programs was $3,060,377. Federal and state governments subsidized certain programs with grants and contributions totaling $2,165,438. The net cost of governmental activities was financed with $7,025,514 in property and other taxes and $5,425,675 in unrestricted state grants. Business Type Activities Revenues for business type activities were $961,648 and expenses and transfers were $941,931. The District s business type activities include the School Nutrition Fund and Daycare Fund. Revenues of these activities were comprised of charges for service, federal and state reimbursements and investment income. INDIVIDUAL FUND ANALYSIS As previously noted, the Mount Vernon Community School District uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. The financial performance of the District as a whole is reflected in its governmental funds, as well. As the District completed the year, its governmental funds reported a combined fund balance of $4,462,778 as compared to last year s ending fund balances of $4,752,166. Governmental Fund Highlights General Fund revenues increased from $13,982,989 in fiscal 2017 to $14,440,076 in fiscal 2018, while General Fund expenditures increased from $13,584,835 in fiscal 2017 to $14,370,995 in fiscal 2018. The District s General Fund balance increased from $2,178,925 in fiscal 2017 to $2,265,526 in fiscal 2018. The increase in General Fund expenditures was due primarily to the increase in wages and salaries. School Board policy 1004 has a goal of a solvency ratio of at least 10%. The solvency ratio is the General Fund undesignated and unreserved fund balance divided by General Fund total revenue. For fiscal year 2018 the solvency ratio was 12.8%. 13

BUDGETARY HIGHLIGHTS The functional budget areas of the annual budget were not exceeded. CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets At June 30, 2018, the District had invested $22.4 million, net of accumulated depreciation, in a broad range of capital assets, including land, buildings, athletic facilities, computers, audio-visual equipment and transportation equipment. (See Figure A-6) More detailed information about the District s capital assets is presented in Note 4 to the financial statements. Depreciation expense for the year was $895,016. The original cost of the District s capital assets was $33.8 million, primarily in the governmental funds. Figure A-6 Capital Assets, net of Depreciation (Expressed in Thousands) Governmental Business type Total Total Activities Activities District Change June 30, June 30, June 30, June 30, 2018 2017 2018 2017 2018 2017 2017-2018 Land $358 $358 - - $358 $358 $- Construction in Progress 806 - - - 806-806 Buildings 20,197 20,721 - - 20,197 20,721-524 Improvements other than buildings 528 566 - - 528 566-38 Furniture and equipment 453 619 33 57 486 676-190 Totals $22,342 $22,264 $33 $57 $22,375 $22,321 $54 Long-Term Debt At June 30, 2018, the District had $18,229,998 of Governmental Activities long-term debt outstanding (See Figure A-7). Additional information about the District s long-term debt is presented in Note 5 to the financial statements. Figure A-7 Outstanding Long-Term Obligations (Expressed in Thousands) Governmental Activities June 30, 2018 2017 Total Change (Not restated) General obligation bonds $3,410 $3,955 $-545 Local sales tax bonds 5,816 6,305-489 Early retirement 46 91-45 Capital lease agreements 364-364 Net pension liability 8,513 7,884 629 OPEB liability 81 63 18 Totals $18,230 $18,298 $-68 14

ECONOMIC FACTORS BEARING ON THE DISTRICT S FUTURE At the time these financial statements were prepared and audited, the District was aware of existing circumstances that could significantly affect its financial health in the future: The Iowa State Legislature had not yet set the supplemental state aid percentage for State of Iowa student funding for future years. CONTACTING THE DISTRICT S FINANCIAL MANAGEMENT This financial report is designed to provide the District s 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 this report or need additional financial information, contact Matt Burke, School District Secretary/Treasurer, Mount Vernon Community School District, 525 Palisades Road SW, Mount Vernon, Iowa, 52314. 15

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Basic Financial Statements 17

Exhibit A Page 1 of 2 STATEMENT OF NET POSITION June 30, 2018 Governmental Business-type Activities Activities Total Assets Cash and pooled investments $ 5,610,848 $ 254,854 $ 5,865,702 Receivables: Property tax: Current year 32,288-32,288 Succeeding year 5,630,892-5,630,892 Income surtax 451,444-451,444 Accounts 807 11,844 12,651 Due from other governments 644,698-644,698 Inventories - 4,956 4,956 Capital assets, net of accumulated depreciation (note 4) 22,341,790 32,826 22,374,616 Total assets 34,712,767 304,480 35,017,247 Deferred Outflows of Resources Pension related deferred outflows 2,662,244 104,586 2,766,830 Liabilities Accounts payable 487,627 2,003 489,630 Salaries and benefits payable 1,338,236 30,856 1,369,092 Unearned revenue - 14,185 14,185 Accrued interest payable 71,392-71,392 Long-term liabilities (note 5): Portion due within one year: Early retirement 45,578-45,578 Bonds payable 1,072,000-1,072,000 Capital lease purchase agreements 119,237-119,237 Portion due after one year: Bonds payable 8,154,000-8,154,000 Capital lease purchase agreements 244,802-244,802 Net pension liability 8,513,434 334,450 8,847,884 Total OPEB liability 80,947-80,947 Total liabilities 20,127,253 381,494 20,508,747 18

Exhibit A Page 2 of 2 STATEMENT OF NET POSITION June 30, 2018 Governmental Business-type Activities Activities Total Deferred Inflows of Resources Unavailable property tax revenue $ 5,630,892 $ - $ 5,630,892 Pension related deferred inflows 203,847 8,008 211,855 OPEB related deferred inflows 8,714-8,714 Total deferred inflows of resources 5,843,453 8,008 5,851,461 Net Position Net investment in capital assets 13,115,790 32,826 13,148,616 Restricted for: Categorical funding 413,046-413,046 Debt service 627,058-627,058 Capital projects 533,277-533,277 Physical plant and equipment levy purposes 208,640-208,640 Management levy purposes 423,592-423,592 Student activities 237,139-237,139 Public education and recreation 50,576-50,576 Unrestricted (4,204,813) (13,262) (4,218,075) Total net position $ 11,404,305 $ 19,564 $ 11,423,869 See notes to financial statements. 19

STATEMENT OF ACTIVITIES Year Ended June 30, 2018 Program Revenues Operating Capital Charges for Grants and Grants and Functions/Programs Expenses Services Contributions Contributions Governmental Activities: Instruction $ 10,987,087 $ 3,059,077 $ 929,023 $ 6,529 Support services: Student 339,684-338,767 - Instructional staff 1,425,921-363,420 - Administration 1,671,517 - - - Operation and maintenance of plant 1,002,365 1,300 - - Transportation 410,655-5,463-4,850,142 1,300 707,650 - Other expenditures: Facilities acquisition 156,816-54,146 - Long-term debt interest and fiscal charges 628,706 - - - AEA flowthrough 468,090-468,090 - Depreciation (unallocated) * 603,241 - - - 1,856,853-522,236 - Total governmental activities 17,694,082 3,060,377 2,158,909 6,529 20

Exhibit B Page 1 of 2 Net (Expense) Revenue and Changes in Net Position Governmental Business-Type Activities Activities Total $ (6,992,458) $ - $ (6,992,458) (917) - (917) (1,062,501) - (1,062,501) (1,671,517) - (1,671,517) (1,001,065) - (1,001,065) (405,192) - (405,192) (4,141,192) - (4,141,192) (102,670) - (102,670) (628,706) - (628,706) - - - (603,241) - (603,241) (1,334,617) - (1,334,617) (12,468,267) - (12,468,267) 21

STATEMENT OF ACTIVITIES Year Ended June 30, 2018 Program Revenues Operating Capital Charges for Grants and Grants and Functions/Programs Expenses Services Contributions Contributions Business-Type Activities: Non-instructional programs: Food service operations $ 722,070 $ 503,321 $ 205,965 - Daycare operations 202,647 249,570 - - 924,717 752,891 205,965 - Total $ 18,618,799 $ 3,813,268 $ 2,364,874 $ 6,529 General revenues: Property tax levied for: General purposes Debt service Capital outlay Income surtax Statewide sales, services and use tax Unrestricted state grants Unrestricted investment earnings Other Transfers Total general revenues and transfers Change in net position Net position beginning of year, as restated Net position end of year * = This amount excludes the depreciation included in the direct expenses of the various programs. See notes to financial statements. 22

Exhibit B Page 2 of 2 Net (Expense) Revenue and Changes in Net Position Governmental Business-Type Activities Activities Total - (12,784) (12,784) - 46,923 46,923-34,139 34,139 (12,468,267) 34,139 (12,434,128) $ 4,344,723 $ - $ 4,344,723 623,426-623,426 564,763-564,763 446,040-446,040 1,046,562-1,046,562 5,425,675-5,425,675 46,377 2,792 49,169 164,891-164,891 17,214 (17,214) - 12,679,671 (14,422) 12,665,249 211,404 19,717 231,121 11,192,901 (153) 11,192,748 $ 11,404,305 $ 19,564 $ 11,423,869 23

Exhibit C Page 1 of 2 BALANCE SHEET GOVERNMENTAL FUNDS June 30, 2018 Debt Capital General Service Projects Nonmajor Total Assets Cash and pooled investments $ 3,273,303 $ 690,375 $ 878,284 $ 768,886 $ 5,610,848 Receivables: Property tax: Current year 22,766 3,661 3,081 2,780 32,288 Succeeding year 3,836,257 1,012,024 531,651 250,960 5,630,892 Income surtax 451,444 - - - 451,444 Accounts - - 807-807 Due from other governments 555,997-88,701-644,698 Total assets $ 8,139,767 $ 1,706,060 $ 1,502,524 $ 1,022,626 $ 12,370,977 24

Exhibit C Page 2 of 2 BALANCE SHEET GOVERNMENTAL FUNDS June 30, 2018 Liabilities, Deferred Inflows of Resources and Fund Balances Debt Capital General Service Projects Nonmajor Total Liabilities: Accounts payable $ 248,304 $ - $ 224,542 $ 14,781 $ 487,627 Salaries and benefits payable 1,338,236 - - - 1,338,236 Total liabilities 1,586,540-224,542 14,781 1,825,863 Deferred inflows of resources: Unavailable revenues: Succeeding year property tax 3,836,257 1,012,024 531,651 250,960 5,630,892 Other 451,444 - - - 451,444 Total deferred inflows of resources 4,287,701 1,012,024 531,651 250,960 6,082,336 Fund balances: Restricted for: Categorical funding (note 11) 413,046 - - - 413,046 Revenue bonds sinking fund - 583,940 - - 583,940 Debt service - 110,096 - - 110,096 School infrastructure - - 537,691-537,691 Physical plant and equipment - - 208,640-208,640 Management levy purposes - - - 469,170 469,170 Student activities - - - 237,139 237,139 Public education and recreation - - - 50,576 50,576 Unassigned 1,852,480 - - - 1,852,480 Total fund balances 2,265,526 694,036 746,331 756,885 4,462,778 Total liabilities, deferred inflows of resources, and fund balances $ 8,139,767 $ 1,706,060 $ 1,502,524 $ 1,022,626 $ 12,370,977 See notes to financial statements. 25

Exhibit D RECONCILIATION OF THE BALANCE SHEET GOVERNMENTAL FUNDS TO THE STATEMENT OF NET POSITION June 30, 2018 Total fund balances of governmental funds $ 4,462,778 Amounts reported for governmental activities in the Statement of Net Position are different because: Capital assets used in governmental activities are not financial resources and, therefore, are not reported as assets in the governmental funds. 22,341,790 Other long-term assets, including income surtax receivable, are not available to pay current year expenditures and, therefore, are recognized as deferred inflows of resources in the governmental funds. 451,444 Accrued interest payable on long-term liabilities is not due and payable in the current year and, therefore, is not reported as a liability in the governmental funds. (71,392) Pension and OPEB related deferred outflows of resources and deferred inflows of resources are not due and payable in the current year and, therefore, are not reported in the governmental funds, as follows: Deferred outflows of resources $ 2,662,244 Deferred inflows of resources (212,561) 2,449,683 Long-term liabilities, including early retirement, bonds payable, capital lease purchase agreements, net pension liability and total OPEB liability, are not due and payable in the current year and, therefore, are not reported in the governmental funds. (18,229,998) Net position of governmental activities $ 11,404,305 See notes to financial statements. 26

Exhibit E Page 1 of 2 STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS Year Ended June 30, 2018 Debt Capital General Service Projects Nonmajor Total Revenues: Local sources: Local tax $ 4,291,444 $ 614,095 $ 516,831 $ 470,125 $ 5,892,495 Tuition 2,376,477 - - - 2,376,477 Other 184,475 5,669 142,513 616,351 949,008 State sources 7,159,531 9,331 1,054,417 6,988 8,230,267 Federal sources 428,149 - - - 428,149 Total revenues 14,440,076 629,095 1,713,761 1,093,464 17,876,396 Expenditures: Current: Instruction 9,913,555-56,818 661,932 10,632,305 Support services: Student 330,792 - - - 330,792 Instructional staff 882,605-560,649-1,443,254 Administration 1,555,843-46,082 24,024 1,625,949 Operation and maintenance of plant 889,185-30,998 60,950 981,133 Transportation 330,925 - - 18,359 349,284 3,989,350-637,729 103,333 4,730,412 Other expenditures: Facilities acquisition - - 880,520 102,637 983,157 Long term debt: Principal - 1,138,004 - - 1,138,004 Interest and fiscal charges - 683,390 15,989-699,379 AEA flowthrough 468,090 - - - 468,090 468,090 1,821,394 896,509 102,637 3,288,630 Total expenditures 14,370,995 1,821,394 1,591,056 867,902 18,651,347 Excess (deficiency) of revenues over (under) expenditures 69,081 (1,192,299) 122,705 225,562 (774,951) 27

Exhibit E Page 2 of 2 STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS Year Ended June 30, 2018 Debt Capital General Service Projects Nonmajor Total Other financing sources (uses): Sale of equipment $ 306 $ - $ - $ - $ 306 Execution of capital leases - - 376,208-376,208 Revenue bonds issued - 5,816,000 - - 5,816,000 Payment to escrow agent - (5,724,165) - - (5,724,165) Interfund transfers in (note 3) 17,214 1,193,801 - - 1,211,015 Interfund transfers out (note 3) - - (1,193,801) - (1,193,801) Total other financing sources (uses) 17,520 1,285,636 (817,593) - 485,563 Change in fund balances 86,601 93,337 (694,888) 225,562 (289,388) Fund balances beginning of year 2,178,925 600,699 1,441,219 531,323 4,752,166 Fund balances end of year $ 2,265,526 $ 694,036 $ 746,331 $ 756,885 $ 4,462,778 See notes to financial statements. 28

Exhibit F Page 1 of 2 RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES Year Ended June 30, 2018 Change in fund balances - total governmental funds $ (289,388) Amounts reported for governmental activities in the Statement of Activities are different because: Capital outlays to purchase or build capital assets are reported in governmental funds as expenditures. These costs are not reported in the Statement of Activities, but they are allocated over the estimated useful lives of the capital assets as depreciation expense in the Statement of Activities. The amounts of capital outlay expenditures, contributed capital assets and depreciation expense in the current year are as follows: Expenditures for capital assets $ 941,558 Capital assets contributed by other entities 6,529 Depreciation expense (870,767) 77,320 Income surtax revenue not received until several months after the District's fiscal year end is not considered available revenue and is recognized as deferred inflows of resources in the governmental funds. 5,041 Proceeds from issuing long-term liabilities provide current financial resources to governmental funds, but issuing debt increases long-term liabilities in the Statement of Net Position and does not affect the Statement of Activities. (6,192,208) Repayment of long-term liabilities is an expenditure in the governmental funds, but it reduces long-term liabilities in the Statement of Net Position. 6,862,169 Interest on long-term debt in the Statement of Activities differs from the amount reported in the governmental funds because interest is recorded as an expenditure in the governmental funds when due. In the Statement of Activities, interest expense is recognized as the interest accrues, regardless of when it is due. 70,673 The current year District employer share of IPERS contributions are reported as expenditures in the governmental funds, but are reported as deferred outflows of resources in the Statement of Net Position. 35,752 29

Exhibit F Page 2 of 2 RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES Year Ended June 30, 2018 Some expenses reported in the Statement of Activities do not require the use of current financial resources and, therefore, are not reported as expenditures in the governmental funds, as follows: Early retirement $ 45,579 Pension expense (390,747) OPEB expense (12,787) $ (357,955) Change in net position of governmental activities $ 211,404 See notes to financial statements. 30

Exhibit G STATEMENT OF FUND NET POSITION PROPRIETARY FUNDS June 30, 2018 School Nonmajor- Nutrition Daycare Total Assets Cash and cash equivalents $ 161,651 $ 93,203 $ 254,854 Accounts receivable - 11,844 11,844 Inventories 4,956-4,956 Capital assets, net of accumulated depreciation (note 4) 32,826-32,826 Total assets 199,433 105,047 304,480 Deferred Outflows of Resources Pension related deferred outflows 67,234 37,352 104,586 Liabilities Accounts payable 726 1,277 2,003 Salaries and benefits payable 15,735 15,121 30,856 Unearned revenue 14,185-14,185 Net pension liability 215,004 119,446 334,450 Total liabilities 245,650 135,844 381,494 Deferred Inflows of Resources Pension related deferred inflows 5,149 2,859 8,008 Fund Net Position Net investment in capital assets 32,826-32,826 Unrestricted (16,958) 3,696 (13,262) Total fund net position $ 15,868 $ 3,696 $ 19,564 See notes to financial statements. 31

Exhibit H STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET POSITION PROPRIETARY FUNDS Year Ended June 30, 2018 School Nonmajor- Nutrition Daycare Total Operating revenues: Local sources: Charges for services $ 503,321 $ 249,570 $ 752,891 Operating expenses: Non-instructional programs: Salaries 235,578 151,397 386,975 Benefits 85,238 44,339 129,577 Purchased services 93 1,100 1,193 Supplies 362,896 19,827 382,723 Depreciation 24,249-24,249 Total operating expenses 708,054 216,663 924,717 Operating income (loss) (204,733) 32,907 (171,826) Non-operating revenues: Interest on investments 2,084 708 2,792 State sources 4,891-4,891 Federal sources 201,074-201,074 Total non-operating revenues 208,049 708 208,757 Non-operating expsenses: Indirect cost transfer (note 3) 17,214-17,214 Change in fund net position (13,898) 33,615 19,717 Fund net position beginning of year 29,766 (29,919) (153) Fund net position end of year $ 15,868 $ 3,696 $ 19,564 See notes to financial statements. 32

Exhibit I Page 1 of 2 STATEMENT OF CASH FLOWS PROPRIETARY FUNDS Year Ended June 30, 2018 School Nonmajor- Nutrition Daycare Total Cash flows from operating activities: Cash received from sale of lunches and breakfasts $ 502,725 $ - $ 502,725 Cash received from miscellaneous operating activities - 246,861 246,861 Cash paid to employees for services (315,936) (187,646) (503,582) Cash paid to suppliers for goods or services (314,800) (21,163) (335,963) Net cash provided by (used by) operating activities (128,011) 38,052 (89,959) Cash flows from non-capital financing activities: State grants received 4,891-4,891 Federal grants received 154,468-154,468 Indirect cost transfer (17,214) - (17,214) Net cash provided by non-capital financing activities 142,145-142,145 Cash flows from investing activities: Interest on investments 2,084 708 2,792 Net increase in cash and cash equivalents 16,218 38,760 54,978 Cash and cash equivalents beginning of year 145,433 54,443 199,876 Cash and cash equivalents end of year $ 161,651 $ 93,203 $ 254,854 33

Exhibit I Page 2 of 2 STATEMENT OF CASH FLOWS PROPRIETARY FUNDS Year Ended June 30, 2018 School Nonmajor- Nutrition Daycare Total Reconciliation of operating income (loss) to net cash provided by (used by) operating activities: Operating income (loss) $ (204,733) $ 32,907 $ (171,826) Adjustments to reconcile operating income (loss) to net cash provided by (used by) operating activities: Depreciation 24,249-24,249 Commodities used 46,606-46,606 (Increase) in accounts receivable - (2,709) (2,709) Decrease in inventories 864-864 Increase (decrease) in accounts payable 719 (236) 483 Increase in salaries and benefits payable 91 165 256 (Decrease) in unearned revenue (596) - (596) Increase in net pension liability 10,110 12,901 23,011 (Increase) in deferred outflows of resources (6,633) (5,839) (12,472) Increase in deferred inflows of resources 1,312 863 2,175 Net cash provided by (used by) operating activities $ (128,011) $ 38,052 $ (89,959) Non-cash financing activities: During the year ended June 30, 2018, the District received $46,606 of federal commodities. See notes to financial statements. 34

Exhibit J STATEMENT OF FIDUCIARY ASSETS AND LIABILITIES FIDUCIARY FUNDS June 30, 2018 Agency Assets: Cash and pooled investments $ 65,991 Liabilities: Accounts payable $ 3,364 Other payables 62,627 Total liabilities $ 65,991 See notes to financial statements. 35

Exhibit K STATEMENT OF CHANGES IN FIDUCIARY NET POSITION FIDUCIARY FUNDS Year Ended June 30, 2018 Private Purpose Trust Scholarship Additions: Local sources: Gifts and contributions $ 1,001 Deductions: Instruction: Scholarships awarded 1,950 Change in fiduciary net position (949) Fiduciary net position beginning of year 949 Fiduciary net position end of year $ - See notes to financial statements. 36

NOTES TO FINANCIAL STATEMENTS June 30, 2018 Note 1. Summary of Significant Accounting Policies Mount Vernon Community School District is a political subdivision of the State of Iowa and operates public schools for children in grades kindergarten through twelve. The geographic area served includes the City of Mount Vernon, Iowa, and agricultural territory in Johnson, Jones, and Linn Counties. The District is governed by a Board of Education whose members are elected on a non-partisan basis. The District s financial statements are prepared in conformity with U.S. generally accepted accounting principles as prescribed by the Governmental Accounting Standards Board. A. Reporting Entity For financial reporting purposes, Mount Vernon Community School District has included all funds, organizations, agencies, boards, commissions and authorities. The District has also considered all potential component units for which it is financially accountable and other organizations for which the nature and significance of their relationship with the District are such that exclusion would cause the District s financial statements to be misleading or incomplete. The Governmental Accounting Standards Board has set forth criteria to be considered in determining financial accountability. These criteria include appointing a voting majority of an organization s governing body and (1) the ability of the District to impose its will on that organization or (2) the potential for the organization to provide specific benefits to or impose specific financial burdens on the District. Mount Vernon Community School District has no component units which meet the Governmental Accounting Standards Board criteria. The District appoints members of the Mount Vernon School Foundation Board, which is considered a related organization. B. Basis of Presentation Government-wide Financial Statements The Statement of Net Position and the Statement of Activities report information on all of the nonfiduciary activities of the District. For the most part, the effect of interfund activity has been removed from these statements. Governmental activities, which normally are supported by tax and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for service. The Statement of Net Position presents the District s nonfiduciary assets, deferred outflows of resources, liabilities, and deferred inflows of resources, with the difference reported as net position. Net position is reported in the following three categories: Net investment in capital assets consists of capital assets, net of accumulated depreciation and reduced by outstanding balances for bonds, notes, and other debt attributable to the acquisition, construction, or improvement of those assets. Restricted net position results when constraints placed on net position use are either externally imposed or imposed by law through constitutional provisions or enabling legislation. Enabling legislation did not result in any restricted net position. 37