Schedule of Findings and Questioned Costs

MILFORD, NEW HAMPSHIRE SCHOOL DISTRICT Financial Statements With Schedule of Expenditures of Federal Awards June 30, 2012 and Independent Auditor's Report 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 Report on Compliance With Requirements That Could Have a Direct and Material Effect on Each Major Program and on Internal Control Over Compliance in Accordance With OMB Circular A-133 Schedule of Findings and Questioned Costs

MILFORD, NEW HAMI)SHIRE SCHOOL DISTRICT FINANCIAL STATEMENTS June 30, 2012 TABLE OF CONTENTS INDEPENDENT AUDITOR'S REPORT MANAGEMENT'S DISCUSSION AND ANALYSIS Page(s) I-VI BASIC FINANCIAL STATEMENTS EXHIBITS: A Statement of Net Assets B C D E F Statement of Activities Balance Sheet - Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds Statement of Fiduciary Net Assets - Fiduciary Funds Statement of Changes in Fiduciary Net Assets - Fiduciary Funds 2 3 4 5 6 NOTES TO BASIC FINANCIAL STATEMENTS 7-22 REQUIRED SUPPLEMENTARY INFORMATION SCHEDULES: Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual (Budgetary Basis) - General Fund 2 Schedule of Funding Progress for Other Post-Employment Benefits NOTES TO REQUIRED SUPPLEMENTARY INFORMATION 23 24 25 FEDERAL COMPLIANCE SCHEDULE: I Schedule of Expenditures of Federal Awards NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL A WARDS 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 AudWng Standards 26-27 28 29-30

MILFORD, NEW HAMPSHIRE SCHOOL DISTRICT FINANCIAL STATEMENTS June 30, 2012 TABLE OF CONTENTS (CONTINUED) FEDERAL COMPLIANCE (CONTINUED) RepOli on Compliance With Requirements That Could I-lave a Direct and Material Effect on Each Major Program and on Internal Control Over Compliance in Accordance With OMB Circular A-133 Schedule of Findings and Questioned Costs Page(s) 31-32 33-34 SUPPLEMENTAL SCHEDULES SCHEDULES: A Combining Balance Sheet - Governmental Funds - All Nonmajor Funds B Combining Statement of Revenues, Expenditures and Changes in Fund Balances - Governmental Funds - All Nonmajor Funds 35 36 C Combining Statement of Changes in Assets and Liabilities - All Student Activities Agency Funds 37

~VACHON CLUKAY & COMPANY PC C E RTIFIED PUBLIC ACCOUNTANTS 608 Ches lll ul Slreel Manchesler, New Ham pshire 03104 (603) 622-7070 Fax: (603) 622-1452 wwwvachonclukay.co ll1 INDEPENDENT AUDITOR'S REPORT To the School Board Milford, New Hampshire School District We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of the Milford, New Hampshire School District (the District) as of and for the year ended June 30, 2012, which collectively comprise the District's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the District's management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and the significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our 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 Milford, New Hampshire School District as of June 30, 2012 and the respective changes in financial position thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued our report dated January 31, 2013 on our consideration of the District's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. Accounting principles generally accepted in the United States of America require that the management's discussion and analysis, budgetary comparison information, and the schedule of funding progress for other post-employment benefit on pages i-vi and 23-25 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. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Milford, New Hampshire School District's financial statements as a whole. The combining nonmajor fund financial statements and schedule of expenditures of federal awards, as required by Office of Management and Budget Circular A-I33, Audits a/states, Local Governments, and Non-Profit Organizations, are presented for purposes of additional analysis and are not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates 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 ce11ain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or 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 taken as a whole. January 31,2013

MANAGEMENT'S DISCUSSION AND ANALYSIS FISCAL YEAR ENDING JUNE 30, 2012 Presented herewith please find the Management Discussion & Analysis Report for the Milford School District for the fiscal year ending June 30, 2012. Responsibility for both the accuracy of the data, and the completeness and fairness of this presentation (including all disclosures) rests with management. To the best of our knowledge and belief, the data contained herein is accurate in all material respects. This data is reported in a manner designed to fairly present the District's financial position, and the result of operations of the various funds of the District. All disclosures necessary to enable the reader to gain an accurate understanding of the District's financial activities have been included. Comparative summary financial information is shown here, as is required and contains meaningful information relating to the District's finances and changes in financial position. The School District Administration is responsible for establishing an accounting and internal control structure designed to ensure that the physical, data, informational, intellectual, and human resource assets of the District are protected from loss, theft, and misuse, and to ensure that adequate accounting information is maintained and reported in conformity with generally accepted accounting principles (GAAP). Management also strives to ensure that these assets are put to good and effective use. The internal control structure is designed to provide reasonable assurances that these objectives are attained. Overview of the Financial Statements The financial statements presented herein include all of the activities of the Milford School District (MSD) using the integrated approach as prescribed by GASB Statement 34. This discussion and analysis is intended to serve as an introduction to MSD's financial statements. The basic financial statements comprise three components: 1. Government-wide financial statements 2. Fund financial statements 3. Notes to the basic financial statements Government -Wide Financial Statements The government-wide financial statements are designed to provide readers with a broad overview of the District's finances, in a manner similar to most private-sector companies. The statement of net assets presents information on all of the District's assets and liabilities, with the difference between the two reported as net assets. Increases and decreases in net assets serve as a useful indicator of whether the financial position ofthe District is improving or deteriorating. The statement of activities presents information showing how the government's net assets changed during the most recent fiscal year. All of the current year's revenue and expenses are taken into account regardless of when cash is received or paid.

MANAGEMENT'S DISCUSSION AND ANAL YSIS FISCAL YEAR ENDING JUNE 30, 2012 Fund Financial Statements A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The District uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All the funds of the District can be divided into two categories: governmental funds and fiduciary funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on nearterm inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating the District's near-term financing requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government's near-term financing decisions. Both the governmental fund balance sheet and the statement of revenues, expenditures and changes in fund balances provide a reconciliation to facilitate this comparison between the governmental activities statement of net assets and statement of activities. The District maintains numerous individual governmental funds. Information is presented separately in the governmental fund balance sheet and the statement of revenues, expenditures and changes in fund balances for the General Fund, Special Funds and Permanent Funds, which are considered major funds. Data from the other governmental funds are combined into a single, aggregate presentation within the Non-major Governmental Funds. The District adopts an annual appropriation budget for its governmental funds. A budgetary comparison has been provided for the General Fund to demonstrate compliance with this budget. Fiduciary funds are used to account for resources held for the benefit of parties outside of the District. Fiduciary funds are not reflected in the government-wide financial statements because the resources of those funds are not available to support the District's own programs. Notes to the Basic Financial Statements The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. ii

MANAGEMENT'S DISCUSSION AND ANALYSIS FISCAL YEAR ENDING JUNE 30, 2012 Government-Wide Financial Analysis Statement of Net Assets The table below provides a summary of the District's net assets for the years ended June 30, 2010,2011 and 2012. Statement of Net Assets: Current and other assets: Capital assets - net Other assets Total assets Current and other liabilities: Noncurrent liabilities Other liabilities Total Liabilities Net assets: Invested in capital assets, net of related debt Restricted Unrestricted (deficit) Total net assets 2010 $ 21,373,338 3,920,587 $ 25,293,925 $ 11,092,956 2,004,355 $ 13!097!311 $ 11,164,196 2,200,011 (1,167,593) $ 12)~614 2011 2012 $ 21,787,256 $ 20,741,459 4,496,416 3,667,773 ~ 26.281.672 $ 24.409,232 $ 10,540,170 $ 9,485,439 2,029,932 1,766,082 $ 12!570!102 $ 11!251!521 $ 12,352,106 $ 12,521,770 2,610,826 2,480,547 (1,249,362) (1,844,606) $ 13)13!570 $ 13!157!711 The largest portion of the District's net assets reflects its investment in capital assets such as land, buildings, and equipment, less any related outstanding debt used to acquire those assets. Although the District's investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves generally cannot be used to liquidate these liabilities. An additional portion of the District's net assets represents resources that are subject to external restrictions on how they may be used. For the Milford School District, those restrictions include those related to endowments and donations/grants received by the District. See Note 11 for the Restricted Net Assets. The deficit in Unrestricted Net Assets is a result of unfunded long-term liabilities including the Early Retirement Benefit, Compensated Absences, and Other Post-Employment Benefits. At present, these obligations are funded in each current year budget only. iii

MANAGEMENT'S DISCUSSION AND ANALYSIS FISCAL YEAR ENDING JUNE 30, 2012 Statement of Activities Changes in net assets for fiscal years 2010, 2011 and 2012 are as follows: Statement of Activities: 2010 2011 2012 Program revenues: Charges for services $ 1,413,273 $ 1,548,706 $ 1,620,419 Operating grants and contributions 2,908,874 3,113,651 2,528,008 Capital grants and contributions 641,052 1,685,063 366,534 Total program revenues 4,963,199 6,347,420 4,514,961 General revenues: Property taxes 21,678,473 21,731,932 22,393,675 State adequacy education grant 5,924,653 8,245,513 8,238,375 State fiscal stabilization funding 2,273,106 Education jobs funding 248,676 Interest and investment earnings 218,389 430,188 21,029 Contributions to permanent fund principal 257 Miscellaneous 121,302 101,814 88,104 Total general revenues 30,216,180 30,758,123 30,741,183 Total revenues 35,179,379 37,105,543 35,256,144 Program expenses: Instruction 15,387,797 15,611,009 15,600,646 Supporting services 2,170,210 2,229,034 2,194,972 Instructional staff services 495,680 491,159 439,571 General administration 3,304,623 3,298,890 3,321,080 Other services and benefits 7,632,696 7,929,872 8,671,301 Operation and maintenance of plant 3,465,417 3,374,508 3,396,777 Pupil transportation 821,308 898,215 931,622 Food service 769,248 777,870 802,442 Interest on long-term debt 581,182 514,722 453,592 Total program expenses 34,628,161 35,125,279 35,812,003 Change in net assets 551,218 1,980,264 (555,859} Net assets - beginning of year, as restated 11,645,396 11,733,306 13,713,570 Net assets - ending of year $ 12,196,614 $ 13,713,570 $ 13!157 1 711 iv

MANAGEMENT'S DISCUSSION AND ANALYSIS FISCAL YEAR ENDING JUNE 30, 2012 MILFORD SCHOOL DISTRICT ACTIVITIES As shown in the above statement, there was a change in net assets of (555,859). Exhibit D in the Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities explains most of this change. It is primarily because capital (non-current) assets - consisting of buildings and improvements, vehicles, equipment, depreciation expense - are not financial resources and, therefore, are not reported in the funds. Non-current liabilities - consisting of bonds payable, accrued interest on bonds, capital leases, compensated absences, and post employment benefits payable - are not due and payable in the current period and therefore are not reported in the funds. Further explanations of these changes are referenced in the Notes to the Basic Financial Statements and Exhibit B, Statement of Activities. Financial Summary of the School District's Funds The General Fund shows a fund balance of$811,756. This is a decrease of $646,795, which is primarily due to revenues under expenditures. The beginning fund balance assisted in current year expenditures. The decrease in the Special Funds is primarily due to decreased grant funding. The decrease in the Permanent Funds is due to lower interest and investment income. Refer to Exhibit D in the Basic Financial Statements. Other non-major governmental funds include the operations of Food Service, Capital Projects (Jacques Four Classroom Addition), and Driver Education. Most of the decrease pertained to the final capital outlays for the project. Schedules A and B in the supplemental section of the Financial Statements further clarify these funds. Capital Assets The Milford School District considers a capital asset to be an asset whose costs exceed $5,000 and has a useful life of greater than one (1) year. Assets are depreciated using the straight-line method over the course of their useful life. During the 2012 fiscal year the District purchased Special Education Kitchen and Life Skills Work Stations for the Middle School and High School as well as a PowerSchool Server with Cloud Backup. The District disposed of four vehicles; 1995 Ford F250 with plow, 1996 Nissan Quest Van, 1994 Ford F250 and 2008 Dodge Caliber. The Dodge Caliber was used for the Drivers Education Program. We had three vehicles but only two instructors. The Jacques Elementary Four Classroom Addition moved from Construction in Progress to Buildings and Improvements since this project is completed. See Note 6 in the Notes to the Basic Financial Statements for a summary of all capital assets. Long-Term Liabilities During the fiscal year 2012 the District showed a reduction of Bonds Payable of $1,105,000 as a result of payments made during the yeal The Notes Payable reduction reflects the loan payment of $91,976 for the Jacques Four Classroom Addition. The District showed a decrease of $18,485 in capital leases as a result of meeting its annual obligations on its vehicles. Early retirement v

MANAGEMENT'S DISCUSSION AND ANAL YSIS FISCAL YEAR ENDING JUNE 30, 2012 benefits decreased net of $39,020 due to more participants active in the program. Compensated Absences increased by $58,312 due to increases in the number of eligible employees. See Notes 8 and 9 in the Notes to the Basic Financial Statements for a summary of all outstanding long-term obligations. Budgetary Highlights Budgetary information for the General Fund (a major governmental fund) is included in the Required Supplementary Information section, under Schedule 1. Budgetary information in these financial statements has been presented for only one of the District's major governmental funds (the General Fund). The budgetary information is neither practical nor meaningful for the Special Revenues Fund (Federal Projects). Similarly, the Food Service and Driver Education Funds have not been included. Actual revenues exceeded the budgeted amount by $239,443. The District received Special Education Tuition for services provided to other school districts above what was anticipated and additional Medicaid revenues were received from the State ofnh. The District under expended its budget by $348,272. Close attention was paid to instructional and curriculum needs, the operation and maintenance of buildings, technology infrastructure requirements, and participation changes in employee group insurance plans. ECONOMIC FACTORS Given the economic climate, budgetary constraints continue and effort is focused on operating within existing funding levels. Contacting Milford School District's Financial Management This financial report is intended to provide our citizens and creditors with a general overview of the District's finances and accountability for the resources it receives. If you have questions about this report or need to get additional information, contact the Business Administrator at 100 West Street, Milford, NH 03055, telephone 603-673-2202. vi

EXHIBIT A MILFORD, NEW HAMPSHIRE SCHOOL DISTRICT Statement of Net Assets June 30, 2012 ASSETS Current Assets: Cash and cash equivalents Accounts receivable Due from other governments Prepaid expenses Total Current Assets Noncurrent Assets: Capital assets: Non-depreciable capital assets Depreciable capital assets, net Total Noncurrent Assets Total Assets Governmental Activities $ 676,093 2,849 2,961,681 27,150 3,667,773 326,250 20,415,209 20,741,459 $ 24,409,232 LIAB ILITIES Current Liabilities: Accounts payable Accrued expenses Deferred revenue Current portion of bonds payable Current portion of capital leases payable Current poltion of early retirement benefits payable Total Current Liabilities Noncurrent Liabilities: Bonds payable Notes payable Capital leases payable Early retirement benefits payable Compensated absences payable Other post-employment benefits payable Total Noncurrent Liabilities Total Liabilities NET ASSETS Invested in capital assets, net of related debt Restricted Unrestricted (deficit) Total Net Assets Total Liabilities and Net Assets $ 120,790 428,109 13,725 845,000 6,472 351,986 1,766,082 7,105,000 256,329 6,888 610,875 1,069,848 436,499 9,485,439 11,251,521 12,521,770 2,480,547 (1,844,606) 13,157,711 $ 24,409,232 See accompanying notes to the basic financial statements 1

EXHIBITB MILFORD, NEW HAMPSHIRE SCHOOL DISTRICT Statement of Activities For the Year Ended June 30, 2012 Functions/Programs Expenses Charges for Services Program Revenues Operating Grants and Contributions Capital Grants and Contributions N et (Expense) Revenue and Changes in in Net Assets Governmental Activities: Instruction Supporting services Instructional staff services General administration Other services and benefits Operation and maintenance of plant Pupil transportation Food service Debt service Total governmental activities $ 15,600,646 2,194,972 439,571 3,321,080 8,671,301 3,396,777 931,622 802,442 453,592 $ 35,812,003 $ 1,119,405 501,014 $ 1,620,419 $ 1,666,233 409,635 78,589 84,027 1,420 288,104 $ 2,528,008 $ 366,534 $ 366,534 $(12,815,008) (1,785,337) (360,982) (3,237,053) (8,671,301) (3,396,777) (930,202) (13,324) (87,058) (31,297,042) General revenues: Property taxes State adequacy education grant Interest and investment earnings Miscellaneous Total general revenues Change in net assets Net assets - beginning Net assets - ending 22,393,675 8,238,375 21,029 88,104 30,741,183 (555,859) 13,713,570 $ 13,157,711 See accompanying notes to the basic financial statements 2

EXHIBIT C MILFORD, NEW HAMPSHIRE SCHOOL DISTRICT Balance Sheet Governmental Funds June 30, 2012 Assets: Cash and cash equivalents Accounts receivable Due from other governments Due from other funds Prepaid expenses Total Assets Nonmajor General Special Permanent Governmental Fund Funds Funds Funds $ 675,694 $ 399 2,349 $ 500 147,968 384,735 $ 2,413,922 15,056 207,839 100,331 128,067 $ 1,161,917 $ 385,235 $ 2,413,922 $ 115,786 Total Governmental Funds $ $ 676,093 2,849 2,961,681 308,170 128,067 4,076,860 Liabilities: Accounts payable Accrued expenses Deferred revenue Due to other funds Total Liabilities $ 110,350 $ 10,440 239,811 $ 13,725 308,170 350,161 318,610 $ 13,725 $ 120,790 239,811 13,725 308,170 682,496 Fund Balances: Nonspendable Restricted Committed Assigned Total Fund Balances Total Liabilities and Fund Balances 128,067 2,300,902 66,625 113,020 71,402 612,287 102,061 811,756 66,625 2,413,922 102,061 $ 1,161,917 $ 385,235 $ 2,413,922 $ 115,786 2,428,969 179,645 71,402 714,348 3,394,364 Amounts reported for governmental activities in the statement of net assets are different because: Capital assets used in governmental activities are not financial resources and, therefore, are not rep0l1ed in the funds Prepaid expenses for debt service requirements reduce long-term liabilities on the accrual basis in the statement of net assets, not the modified accrual basis Long-term liabilities are not due and payable in the current period and, therefore, are not reported in the funds. Long-term liabilities at year end consist of: Bonds payable Notes payable Capital leases payable Accrued interest on long-term obligations Early retirement benefits Other post-employment benefits Compensated absences Net assets of governmental activities 20,741,459 (100,917) (7,950,000) (256,329) (13,360) (188,298) (962,861) (436,499) (1,069,848) $ 13,157,711 See accompanying notes to the basic financial statements 3

EXHIBITD MILFORD, NEW HAMPSHIRE SCHOOL DISTRICT Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds For the Year Ended June 30,2012 MILFORD, NEW HAMPSHIRE SCHOOL DISTRICT Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities For the Year Ended June 30,2012 Nonmajor Total General Special Permanent Governmental Governmental Fund Funds Funds Funds Funds Revenues: Taxes $22,393,675 $22,393,675 I Change in Fund Balances - Total Governmental Funds $ (870,904) Intergovernmental 9,382,843 $1,461,970 $ 288,104 11,132,917 Charges for services 1,042,840 405 577,174 1,620,419 I Amounts reported for governmental activities in the Interest and investment income 5,129 $ 15,900 21,029 statement of activities are different because: Miscellaneous 62,673 18,725 6,706 88,104 Total Revenues 32,887,160 1,481,100 15,900 871,984 35,256,144 I Governmental funds report capital outlays as expenditures. However, in the statement of activities, the cost of those assets is Expenditures: I allocated over their estimated useful lives as depreciation expense. Current operations: This is the amount by which depreciation expense exceeded capital Instruction 14,519,431 917,433 19,155 62,212 15,518,231 outlays in the current period. (1,036,174) Supporting services 1,780,186 414,786 2,194,972 Instructional staff services 360,852 78,589 130 439,571 I Repayment of bond and capital lease principal is an expenditure in the General administration 3,263,512 84,918 3,348,430 governmental funds, but the repayment reduces long-term liabilities Other services and benefits 8,808,764 8,808,764 in the statement of net assets. 1,215,461 Operation and maintenance of plant 2,220,600 2,220,600 Pupil transportation 924,292 12,449 936,741 lin the statement of activities, interest is accrued on outstanding Food servi ce 796,892 796,892 bonds and capital leases, whereas in governmental funds an Capital outlay 396 12,880 158,427 171,703 interest expenditure is reported when due. 27.210 Debt service: Principal 1,208,070 1,208,070 I Governmental funds only report the disposal of assets to the extent Interest 483,074 483,074 proceeds are received from the sale: In the stat~n:ent of activities, Total Expenditures 33,569,177 1,508,606 19,155 1,030,110 36,127,048 a gain or loss IS reported for each disposal. ThIs IS the amount of the loss of disposed capital assets reduced by the actual proceeds Excess revenues over (under) expenditures (682,017) (27,506) (3,255) (158,126) (870,904) received from the sale of capital assets. (9,623) Other financing sources (uses): Some expenses reported in the statement of activities, such as Transfers in 35,222 35,222 compensated absences, early retirement benefits, and other Transfers out (35,000) (222) (35,222) post-employment benefits, do not require the use of current Total other financing sources (uses) 35,222 (35,000) (222) financial resources and, therefore, are not reported as expenditures in governmental funds. 118,171 Net change in fund balances (646,795) (27,506) (38,255) (158,348) (870,904) Change in Net Assets of Governmental Activities $ (555,859) Fund balances at beginning of year 1,458,551 94,131 2,452,177 260,409 4,265,268 Fund balances at end of year $ 811,756 $ 66,625 $2,413,922 $ 102,061 $ 3,394,364 See accompanying notes to the basic financial statements 4

EXHIBIT E MILFORD, NEW HAMPSHIRE SCHOOL DISTRICT Statement of Fiduciary Net Assets Fiduciary Funds June 30, 20 I 2 ASSETS Cash and cash equivalents Due from other governments Total assets Private Purpose Trusts $ 562,916 $ 562,916 Agency Funds $ 203,972 $ 203,972 Due to student groups Total liabilities LIABILITIES $ $ 203,972 $ 203,972 NET ASSETS Held in trust Total net assets Total liabilities and net assets 562,916 562,916 $ 562,916 See accompanying notes to the basic financial statements 5

EXHIBIT F MILFORD, NEW HAMPSHIRE SCHOOL DISTRICT Statement of Changes in Fiduciary Net Assets Fiduciary Funds For the Year Ended June 30, 2012 ADDITIONS: Contributions: Private donations Total Contributions Investment earnings: Interest and investment income Net decrease in fair value of investments Total Investment Earnings Total Additions DEDUCTIONS: Scholarship benefits Total Deductions Change in Net Assets Net assets - beginning of year Net assets - end of year Private- Purpose Trusts $ 6,790 6,790 13,834 (8,880) 4,954 11,744 8,080 8,080 3,664 559,252 $ 562,916 See accompanying notes to the basic financial statements 6

MILFORD, NEW HAMPSHIRE SCHOOL DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS June 30, 2012 NOTE I-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accounting policies of the Milford, New Hampshire School District conform to accounting principles generally accepted in the United States of America for local educational units of government, except as indicated hereinafter. The following is a summary of significant accounting policies. Financial Reporting Entity The Milford, New Hampshire School District (the District) is an independent governmental entity organized under the laws of the State of New Hampshire to provide public education within the borders of the Town of Milford, New Hampshire. The District's legislative body is the annual meeting of registered voters within the District and is governed by an elected School Board. The District has no other separate organizational units, which meet criteria for inclusion in the financial statements as defined by the Governmental Accounting Standards Board (GASB). Basis of Presentation The District's basic financial statements consist of government-wide statements, including a statement of net assets and a statement of activities, and fund financial statements which provide a more detailed level of financial information. 1. Government-Wide Financial Statements: The statement of net assets and the statement of activities display information about the District as a whole. These statements include the financial activities of the primary government, except for fiduciary funds. The statement of net assets presents the financial condition of the governmental activities of the District at year end. The statement of activities presents a comparison between direct expenses and program revenues for each program or function of the District's governmental activities. Direct expenses are those that are specifically associated with a service, program or department and therefore clearly identifiable to a particular function. Program revenues include charges paid by the recipient of the goods or services offered by the program, grants and contributions that are restricted to meeting the operational or capital requirements of a particular program and interest earned on grants that is required to be used to support a particular program. Revenues which are not classified as program revenues are presented as general revenues of the District. 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. 2. Fund Financial Statements: During the year, the District segregates transactions related to certain District functions or activities in separate funds in order to aid financial management and to demonstrate legal compliance. Fund financial statements are designed to present financial information of the District at this more detailed level. The focus of governmental fund financial statements is on major funds. Each major fund is presented in a 7

MILFORD, NEW HAMPSHIRE SCHOOL DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2012 separate column. Nonmajor funds are aggregated and presented in a single column. The fiduciary funds are repolied by type. Fund Accounting The District uses funds to maintain its financial records during the fiscal year. A fund is defined as a fiscal and accounting entity with a self-balancing set of accounts. The District employs the use of two categories of funds: governmental and fiduciary. 1. Governmental Funds: Governmental funds are those through which most governmental functions typically are financed. Governmental fund reporting focuses on the sources, uses and balances of current financial resources. Expendable assets are assigned to the various governmental funds according to the purposes for which they mayor must be used. Current liabilities are assigned to the fund from which they will be paid. The difference between governmental fund assets and liabilities is reported as fund balance. The following are the District's major governmental funds: The General Fund is the main operating fund of the District and is used to account for all financial resources except those required to be accounted for in another fund. The Special Funds account for the various restricted grants and donations received by the District. The Permanent Funds account for the financial transactions related to resources that are legally restricted to the extent that only earnings and not principal may be used for purposes that support the District's programs. 2. Fiduciary Funds: Fiduciary fund reporting focuses on net assets and changes in net assets. The fiduciary fund category is split into two classifications: private purpose trust funds and agency funds. The District maintains nine private purpose trust funds, which account for monies designated to benefit individuals within the District. The District also maintains an agency fund known as the Student Activities Fund. The agency funds were established to account for revenues generated by student managed activities. The District's agency funds are custodial in nature (assets equal liabilities) and do not involve the measurement of results of operations. Measurement Focus 1. Government-Wide Financial Statements: The government-wide financial statements are prepared using the economic resources measurement focus. All assets and liabilities associated with the operation of the District are included on the Statement of Net Assets. 8

MILFORD, NEW HAMPSHIRE SCHOOL DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2012 2. Fund Financial Statements: 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 generally are included on the balance sheet. The statement of revenues, expenditures and changes in fund balances repolis on the sources (i.e., revenues and other financing sources) and uses (i.e., expenditures and other financing uses) of current financial resources. This approach differs from the manner in which the governmental activities of the government-wide financial statements are prepared. Governmental fund financial statements therefore include a reconciliation with brief explanations to better identify the relationship between the government-wide statements and the statements for governmental funds. Basis of Accounting Basis of accounting determines when transactions are recorded in the financial records and reported on the financial statements. Government-wide financial statements are prepared using the accrual basis of accounting. Fiduciary funds also use the accrual basis of accounting. Governmental funds use the modified accrual basis of accounting. Differences in the accrual and the modified accrual basis of accounting arise in the recognition of revenue, the recording of deferred revenue, and in the presentation of expenses versus expenditures. I. Revenues - Exchange and Non-exchange Transactions: Revenue resulting from exchange transactions, in which each paliy gives and receives essentially equal value, is recorded on the accrual basis when the exchange takes place. On a modified accrual basis, revenue is recorded in the fiscal year in which the resources are measurable and become available. A vailable means that 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 expected to be received within sixty days of fiscal year end. Non-exchange transactions, in which the District receives value without directly giving equal value in return, include propeliy taxes, grants, entitlements and donations. On an accrual basis, revenue from propeliy taxes is recognized in the fiscal year for which the taxes are levied (see Note 2). Revenue from grants, entitlements and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied. Eligibility requirements include timing requirements, which specify the year when the resources are required 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 specified purpose; and expenditure requirements, in which the resources are provided to the District on a reimbursement basis. On a modified accrual basis, revenue from non-exchange transactions must also be available before it can be recognized. Under the modified accrual basis, the following revenue sources are considered to be both measurable and available at fiscal year end: property taxes available as an advance, interest, tuition, grants, and student fees. 9

MILFORD, NEW HAMPSHIRE SCHOOL DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2012 2. Deferred Revenue: Deferred revenue arises when assets are recognized before revenue recognition criteria have been satisfied. Grants and entitlements received before the eligibility requirements are met are recorded as deferred revenue. On governmental fund financial statements, receivables that will not be collected within the available period have also been reported as deferred revenue. 3. Expenses/Expenditures: On the accrual basis of accounting, expenses are recognized at the time they are incurred. The measurement focus of governmental fund accounting is on decreases in net financial resources (expenditures) rather than expenses. Expenditures are generally recognized in the accounting period in which the related fund liability is incurred, if measurable. Allocations of cost, such as depreciation and amortization are not recognized in governmental funds. Budgetary Data The District's budget represents functional appropriations as authorized by annual District meetings. The school board may transfer funds between operating categories as they deem necessary. The District adopts its budget under State regulations, which differ somewhat from accounting principles generally accepted in the United States of America in that the focus is on the entire governmental unit rather than on the basis of fund types. State law requires balanced budgets but permits the use of beginning fund balance to reduce the property tax rate. For the year ended June 30, 2012, the District applied $1,007,070 of its unappropriated fund balance to reduce taxes. Encumbrance Accounting Encumbrance accounting, under which purchase orders and other commitments for expenditure of monies are recorded in order to reserve a p0l1ion of the applicable appropriation, is employed as an extension of formal budgetary integration in Governmental Funds. Encumbrances outstanding at year end are reported as a component of fund balance since they do not constitute expenditures or liabilities, but rather commitments related to unperformed contracts for goods and services. Prepaid Expenses Payments made to vendors for services that will benefit periods beyond June 30, 2012 are recorded as prepaid items. Capital Assets General capital assets result from expenditures in the governmental funds. These assets are repol1ed in the governmental activities column of the government-wide statement of net assets, but are not reported in the fund financial statements. 10

MILFORD, NEW HAMPSHIRE SCHOOL DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2012 All capital assets are capitalized at cost (or estimated historical cost) and updated for additions and retirements during the year. Donated capital assets are recorded at their fair values as of the date received. The District maintains a capitalization threshold of $5,000. The District does not possess any infrastructure. Improvements are capitalized; the costs of normal maintenance and repairs that do not add to the value of the asset or materially extend an asset's life are not capitalized. All reported capital assets except for land and construction in progress are depreciated. Improvements are depreciated over the remaining useful lives of the related capital assets. Depreciation is computed using the straight-line method over the following useful lives: Description Buildings and improvements Vehicles Machinery, equipment and other Years 20-40 5 5-20 Compensated Absences District employees earn vacation and sick leave as they provide services. Pursuant to District personnel policy and certain collective bargaining agreements, employees may accumulate (subject to certain limitations) unused sick and vacation pay earned and, upon retirement, resignation, or death may be compensated for such amounts at current rates of payor at a rate agreed to in the collective bargaining agreement. In accordance with certain District collective bargaining agreements, employees are entitled to severance benefits after meeting minimum years of service requirements. For governmental fund financial statements, compensated absences are reported as liabilities and expenditures as payments come due each period upon the occurrence of employee death or retirement. The entire compensated absence liability is reported on the government-wide financial statements. Early Retirement Benefits Any full time teacher in the District who is a member of the collective bargaining unit, at least 55 years old and who has a minimum of 20 years of service as an educator, of which 15 have been with the District, is eligible for early retirement. Benefits will be paid up to a maximum of 7 years. A similar plan is available for administrators. In the governmental fund financial statements, these benefits are reported as liabilities and expenditures as payments come due each period. The entire early retirement benefit liability is reported on the government-wide financial statements. Accrued Liabilities and Long-Term Obligations All payables, accrued liabilities, and long-term obligations are reported in the government-wide financial statements. In general, governmental fund payables and accrued liabilities that, once incurred, are paid in a timely manner and in full from current resources are reported as obligations of the funds. However, compensated absences that will be paid from governmental funds are reported as liabilities in the fund financial statements only to the extent that they are due for payment during the current fiscal year. 11

MILFORD, NEW HAMPSHIRE SCHOOL DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2012 General obligation bonds, capital leases and other long-term obligations that will be paid from governmental funds are recognized as a liability in the fund financial statements when due. Net Assets Net assets represent the difference between assets and liabilities. Net assets invested in capital assets, net of related debt consists of capital assets, net of accumulated depreciation, reduced by the outstanding balances on any borrowings used for the acquisition, construction or improvement of those assets. Net assets are reported as restricted when there are limitations imposed on their use either through the enabling legislation adopted by the District or through external restrictions imposed by creditors, grantors or laws or regulations of other governments. The District's policy is to first apply restricted resources when an expense is incurred for purposes for which both restricted and unrestricted net assets are available. Fund Balance Policy In accordance with GASB Statement 54, Fund Balance Reporting and Governmental Fund Type Definitions, the District has segregated fund balance into five classifications; Non-spendable, Restricted, Committed, Assigned, and Unassigned. As of June 30, 2012, the District has not established a Fund Balance Policy. These components of fund balance are defined as follows: Nonspendable Fund Balance: Amounts that are not in a spendable form or are required to be maintained intact. Restricted Fund Balance: Amounts constrained to specific purposes by their providers through constitutional provisions or by enabling legislation. Committed Fund Balance: Amounts constrained to specific purposes by a government itself using its highest level of decision-making authority: to be reported as committed, amounts cannot be used for any other purpose unless the government takes the same highest-level action to remove or change the constraint. Assigned Fund Balance: Amounts a government intends to use for a specific purpose; intent can be expressed by the governing body or by an official or body to which the governing body delegates the authority. Unassigned Fund Balance: Amounts that are available for any purpose; these amounts are reported only in the General Fund. In circumstances where an expenditure is to be made for a purpose for which amounts are available in multiple fund balance classifications, the order in which resources will be expended is as follows: restricted fund balance, followed by committed fund balance, assigned fund balance and lastly, unassigned fund balance. Interfund Activity Exchange transactions between funds are reported as revenues in the seller funds and as expenditures/ expenses in the purchaser funds. Flows of cash or goods from one fund to another without a requirement for repayment are reported as interfund transfers. Interfund transfers are reported as other financing 12

MILFORD, NEW HAMPSHIRE SCHOOL DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS (CONTINUED) June 30, 2012 sources/uses in governmental funds. Repayments from funds responsible for paj1icular expenditures/ expenses to other funds that initially paid for them are not presented on the financial statements. Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America require management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results may differ from those estimates. Significant estimates include depreciation expense and the liability for other post-employment benefits. NOTE 2-PROPERTY TAXES Property taxes levied to supp0l1 the Milford, New Hampshire School District are based on the assessed valuation of the prior April 1st for all taxable real propel1y. Under state statutes, the Town of Milford, New Hampshire (an independent governmental unit) collects School District taxes and State of New Hampshire Education taxes as paj1 of local property tax assessments. As collection agent, the Town is required to pay over to the District its share of property tax assessments through periodic payments based on cash flow requirements of the District. The Town assumes financial responsibility for all uncollected property taxes under state statutes. For the year ended June 30, 2012, School District taxes were $19,222,462 and State of New Hampshire Education taxes were $3,171,213. NOTE 3-RISK MANAGEMENT The District is exposed to various risks of losses related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. During the year ended June 30, 2012, the District was a member of the New Hampshire Public Risk Management Exchange (PRIMEX). The District currently repol1s all of its risk management activities in its General Fund. This Trust is classified as a "Risk Pool" in accordance with accounting principles generally accepted in the United States of America. The Trust agreement permits the Trust to make additional assessments to members should there be a deficiency in Trust assets to meet its liabilities. Accounting principles generally accepted in the United States of America require members of pools with a sharing of risk to determine whether or not such assessment is probable and, if so, a reasonable estimate of such assessment. At this time, the Trust foresees no likelihood of an additional assessment for any of the past years. Claims expenditures and liabilities are reported when it is probable that a loss has occurred and the amount of that loss can be reasonably estimated. These losses include an estimate of claims that have been incurred but not reported. Based on the best available information there is no liability at June 30,2012. Property and Liability Insurance PRIMEX provides cel1ain property and liability insurance coverage to member school districts and school administrative units within New Hampshire. As a member of PRIMEX, the District shares in contributing to the cost of and receiving benefit from a self-insured pooled risk management program. 13