COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2012 2238 East Ginter Road Tucson, Arizona 85706
TUCSON, ARIZONA COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2012 Issued by: Business and Finance Department
TABLE OF CONTENTS INTRODUCTORY SECTION Letter of Transmittal ASBO Certificate of Excellence GFOA Certificate of Achievement Organizational Chart List of Principal Officials Page i vi vii viii ix FINANCIAL SECTION INDEPENDENT AUDITORS REPORT 1 MANAGEMENT S DISCUSSION AND ANALYSIS (MD&A) (Required Supplementary Information) 5 BASIC FINANCIAL STATEMENTS Government-Wide Financial Statements: Statement of Net Assets 18 Statement of Activities 19 Fund Financial Statements: Balance Sheet Governmental Funds 22 Reconciliation of the Balance Sheet Governmental Funds to the Statement of Net Assets 25 Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds 26 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds to the Statement of Activities 28
TABLE OF CONTENTS (Cont d) FINANCIAL SECTION (Cont d) Page BASIC FINANCIAL STATEMENTS (Concl d) Statement of Fiduciary Assets and Liabilities 29 Notes to Financial Statements 30 SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL (Required Supplementary Information) General Fund 50 Note to Required Supplementary Information 51 COMBINING AND INDIVIDUAL FUND FINANCIAL STATEMENTS AND SCHEDULES Governmental Funds: Combining Balance Sheet All Non-Major Governmental Funds By Fund Type 56 Combining Statement of Revenues, Expenditures and Changes in Fund Balances All Non-Major Governmental Funds By Fund Type 57 Special Revenue Funds: Combining Balance Sheet 60 Combining Statement of Revenues, Expenditures and Changes in Fund Balances 66 Combining Schedule of Revenues, Expenditures and Changes in Fund Balances Budget and Actual 72 Debt Service Fund: Schedule of Revenues, Expenditures and Changes in Fund Balance Budget and Actual 96
TABLE OF CONTENTS (Cont d) FINANCIAL SECTION (Concl d) Page COMBINING AND INDIVIDUAL FUND FINANCIAL STATEMENTS AND SCHEDULES (Concl d) Capital Projects Funds: Combining Balance Sheet 98 Combining Statement of Revenues, Expenditures and Changes in Fund Balances 100 Combining Schedule of Revenues, Expenditures and Changes in Fund Balances Budget and Actual 102 Agency Funds: Combining Statement of Fiduciary Assets and Liabilities 110 Combining Statement of Changes in Fiduciary Assets and Liabilities 112 STATISTICAL SECTION Financial Trends: Net Assets by Component 117 Expenses, Program Revenues, and Net (Expense)/Revenue 118 General Revenues and Total Changes in Net Assets 120 Fund Balances Governmental Funds 122 Governmental Funds Revenues 124 Governmental Funds Expenditures and Debt Service Ratio 126 Other Financing Sources and Uses and Net Changes in Fund Balances Governmental Funds 128
TABLE OF CONTENTS (Concl d) STATISTICAL SECTION (Concl d) Page Revenue Capacity: Assessed Value and Estimated Actual Value of Taxable Property 129 Direct and Overlapping Property Tax Rates 130 Principal Property Taxpayers 131 Property Tax Levies and Collections 132 Debt Capacity: Outstanding Debt by Type 133 Direct and Overlapping Governmental Activities Debt 134 Legal Debt Margin Information 135 Demographic and Economic Information: County-Wide Demographic and Economic Statistics 136 Principal Employers 137 Operating Information: Full-Time Equivalent District Employees by Type 138 Operating Statistics 140 Capital Assets Information 141
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INTRODUCTORY SECTION
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December 17, 2012 Citizens and Governing Board Sunnyside Unified School District No. 12 2238 East Ginter Road Tucson, Arizona 85706 State law mandates that school districts required to undergo an annual single audit publish a complete set of financial statements presented in conformity with accounting principles generally accepted in the United States of America and audited in accordance with auditing standards generally accepted in the United States of America by a certified public accounting firm licensed in the State of Arizona. Pursuant to that requirement, we hereby issue the comprehensive annual financial report of the Sunnyside Unified School District No. 12 (District) for the fiscal year ended June 30, 2012. This report consists of management s representations concerning the finances of the District. Consequently, management assumes full responsibility for the completeness and reliability of all of the information presented in this report. To provide a reasonable basis for making these representations, management of the District has established a comprehensive internal control framework that is designed both to protect the District s assets from loss, theft, or misuse and to compile sufficient reliable information for the preparation of the District s financial statements in conformity with accounting principles generally accepted in the United States of America. Because the cost of internal controls should not outweigh their benefits, the District s comprehensive framework of internal controls has been designed to provide reasonable rather than absolute assurance that the financial statements will be free of material misstatement. As management, we assert that, to the best of our knowledge and belief, this financial report is complete and reliable in all material respects. The District s financial statements have been audited by Heinfeld, Meech & Co., P.C., a certified public accounting firm. The goal of the independent audit was to provide reasonable assurance that the financial statements of the District for the fiscal year ended June 30, 2012, are free of material misstatement. The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; assessing the accounting principles used and significant estimates made by management; and evaluating the overall financial statement presentation. The independent auditors concluded, based upon the audit, that there was a reasonable basis for rendering an unqualified opinion that the District s financial statements for the fiscal year ended June 30, 2012, are fairly presented in conformity with accounting principles generally accepted in the United States of America. The independent auditors report is presented as the first component of the financial section of this report. 2238 East Ginter Road, Tucson, Arizona 85706, 520-545-2043
The independent audit of the financial statements of the District was part of a broader, federally mandated Single Audit as required by the provisions of the Single Audit Act Amendments of 1996 and U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments and Non-Profit Organizations designed to meet the special needs of federal grantor agencies. The standards governing Single Audit engagements require the independent auditor to report not only on the fair presentation of the financial statements, but also on the District s internal controls and compliance with legal requirements, with special emphasis on internal controls and legal requirements involving the administration of federal awards. These reports are available in a separately issued Single Audit Reporting Package. Accounting principles generally accepted in the United States of America require that management provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of Management s Discussion and Analysis (MD&A). This letter of transmittal is designed to complement the MD&A and should be read in conjunction with it. The District s MD&A can be found immediately following the report of the independent auditors. PROFILE OF THE DISTRICT The Sunnyside Unified School District No. 12 is one of 18 public school districts located in Pima County, Arizona. It provides a program of public education from pre-school through grade 12, with an average daily membership of 16,683. The District s Governing Board is organized under Section 15-321 of the Arizona Revised Statutes (A.R.S.). Management of the District is independent of other state or local governments. The County Treasurer collects taxes for the District, but exercises no control over its expenditures/expenses. The membership of the Governing Board consists of five members elected by the public. Under existing statutes, the Governing Board s duties and powers include, but are not limited to, the acquisition, maintenance and disposition of school property; the development and adoption of a school program; and the establishment, organization and operation of schools. The Board also has broad financial responsibilities, including the approval of the annual budget, and the establishment of a system of accounting and budgetary controls. The financial reporting entity consists of a primary government and its component units. A component unit is a legally separate entity that must be included in the reporting entity in conformity with generally accepted accounting principles. The District is a primary government because it is a special-purpose government that has a separately elected governing body, is legally separate, and is fiscally independent of other state or local governments. Furthermore, there are no component units combined with the District for financial statement presentation purposes, and the District is not included in any other governmental reporting entity. The District s major operations include education, student transportation, construction and maintenance of District facilities, food services, bookstore and athletic functions. ii
The District is located in the southeastern portion of the greater metropolitan Tucson area. The economy of the District is primarily based on industry and is supplemented by tourism and government. A significant amount of the industrial development that has been occurring in Tucson is located within the District and will continue to occur because of the Tucson International Airport, which is located within the District s boundaries. Major planning and rezoning is being considered to allow for the development of a state of the art, technology oriented employment campus serving as a gateway to Tucson International Airport. During the 2011-12 school year, the District experienced a 10.7 percent decrease in its secondary assessed valuation. The annual expenditure budget serves as the foundation for the District s financial planning and control. The objective of these budgetary controls is to ensure compliance with legal provisions embodied in the annual expenditure budget approved by the District s Governing Board. The expenditure budget is prepared by fund for all Governmental Funds, and includes function and object code detail for the General Fund and some Special Revenue and Capital Projects Funds. The legal level of budgetary control (that is, the level at which expenditures cannot exceed the appropriated amount) is established at the individual fund level for all funds. Funds that are not required to legally adopt a budget may have overexpenditures of budgeted funds. The budget for these funds is simply an estimate and does not prevent the District from exceeding the budget as long as the necessary revenue is earned. The District is not required to prepare an annual budget of revenue; therefore, a deficit budgeted fund balance may be presented. However, this does not affect the District s ability to expend monies. FACTORS AFFECTING FINANCIAL CONDITION The information presented in the financial statements is perhaps best understood when it is considered from the broader perspective of the specific environment within which the District operates. Local Economy. The economy of the District is primarily based on manufacturing and is supplemented by tourism and government services. With the District containing such major transportation facilities as the Tucson International Airport, two lines of the Union Pacific Railroad, and Interstates 10 and 19, several location benefits are provided to manufacturers and other business concerns. A sizable area in the northeastern section of the District, zoned for industrial purposes, is the location of the District s industrial activity and the site of six industrial parks. Raytheon Systems Co. (formerly Hughes Missile Systems) is located in the southern portion of the District, adjacent to the Tucson International Airport, and is one of the largest individual employers in the District, with approximately 10,500 employees. During the 2011-12 year, the District worked with the School Facilities Board on local residential developments and requested funding for the construction of new school facilities. The School Facilities Board reviewed the District s request and student enrollment projections and approved the construction of additional high school classrooms. Additional classrooms were added to Desert View High School and Sunnyside High School, which were completed in July 2012. iii
Long-term Financial Planning. The District continued implementation of its technology plan (classroom computers, printers, telephones, cabling, etc.). In November 2011, voters approved an 88.0 million bond referendum that will provide revenue for the following projects: 1. 27.0 million for District Technology Plan 2. 1.0 million for safety and security enhancements 3. 6.0 million for new buses 4. 10.0 million for athletic facilities improvements 5. 12.0 million for a new K-8 fine arts school 6. 32.0 million for District-wide remodeling and renovations The seven year, 15 percent maintenance and operations override election in May 2007 was not reauthorized in November 2011. This resulted in the District losing one-third of its override (2.65 million) for fiscal year 2012-13. The District continued the utilities reduction program during the previous fiscal year. During fiscal year 2010-11, the District continued to monitor electrical, gas, water, and communications expenses for implementation of energy savings. The District has moved forward with capital improvement plans to budget future years unrestricted Capital Outlay to partially fund these projects along with submitting funding requests to the School Facilities Board for Building Renewal Funds. AWARDS AND ACKNOWLEDGMENTS Awards. The Association of School Business Officials International (ASBO) awarded a Certificate of Excellence in Financial Reporting to the District for its report of a comprehensive annual financial report for the fiscal year ended June 30, 2011. In addition, the Government Finance Officers Association (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the District for its comprehensive annual financial report for the fiscal year ended June 30, 2011. In order to be awarded these certificates, the District published an easily readable and efficiently organized comprehensive annual financial report. This report satisfied both accounting principles generally accepted in the United States of America and applicable legal requirements. The certificate is valid for a period of one year only. We believe that our current comprehensive annual financial report will continue to meet the programs requirements and we are submitting it to ASBO and GFOA to determine its eligibility for the fiscal year 2011-12 certificates. Acknowledgments. The preparation of the comprehensive annual financial report on a timely basis was made possible by the dedicated service of the entire staff of the business and finance department. Each member of the department has our sincere appreciation for the contributions made in the preparation of this report. iv
In closing, without the leadership and support of the Governing Board of the District, preparation of this report would not have been possible. Respectfully submitted, Manuel L. Isquierdo, Ed.D. Superintendent Hector M. Encinas Chief Financial Officer v
Association of School Business Officials International The Certificate of Excellence in Financial Reporting Award is presented to Sunnyside Unified School District No. 12 For Its Comprehensive Annual Financial Report (CAFR) For the Fiscal Year Ended June 30, 2011 The CAFR has been reviewed and met or exceeded ASBO International s Certificate of Excellence standards Brian L. Mee, SFO, RSBA President John D. Musso, CAE, RSBA Executive Director vi
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LIST OF PRINCIPAL OFFICIALS GOVERNING BOARD Buck Crouch President Eva Carrillo Dong Clerk Louie C. Gonzales Member Vacant Position Member Daniel Hernandez, Jr. Member ADMINISTRATIVE STAFF Dr. Manuel L. Isquierdo, Superintendent Dr. Mary J. Favela, Assistant Superintendent/ Student Services Mr. Steve Holmes, Assistant Superintendent/ Curriculum & Instruction Mr. Hector M. Encinas, Chief Financial Officer ix
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FINANCIAL SECTION
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10120 N. Oracle Road Tucson, Arizona 85704 Tel (520) 742-2611 Fax (520) 742-2718 INDEPENDENT AUDITORS REPORT Governing Board Sunnyside Unified School District No. 12 We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of the Sunnyside Unified School District No. 12 (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 for the Sunnyside Unified School District No. 12, 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 December 17, 2012, on our consideration of the Sunnyside Unified School District No. 12 s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. TUCSON PHOENIX FLAGSTAFF ALBUQUERQUE www.heinfeldmeech.com
Accounting principles generally accepted in the United States of America require that the management s discussion and analysis on pages 5 through 14 and budgetary comparison information on pages 50 and 51 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 District s financial statements as a whole. The accompanying supplementary information such as the introductory section, combining and individual fund financial statements and schedules, and statistical section are presented for purposes of additional analysis and are not a required part of the financial statements. The combining and individual fund financial statements and schedules are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole. The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them. HEINFELD, MEECH & CO., P.C. CPAs and Business Consultants December 17, 2012 Page 2
Page 3 MANAGEMENT S DISCUSSION AND ANALYSIS (MD&A) (Required Supplementary Information)
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MANAGEMENT S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2012 As management of the Sunnyside Unified School District No. 12 (District), we offer readers of the District s financial statements this narrative overview and analysis of the financial activities of the District for the fiscal year ended June 30, 2012. We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in our letter of transmittal, which can be found in the introductory section of this report. FINANCIAL HIGHLIGHTS The District s total net assets of governmental activities increased 3.8 million which represents a 3 percent increase from the prior fiscal year. General revenues accounted for 97.4 million in revenue, or 70 percent of all current fiscal year revenues. Program specific revenues in the form of charges for services and grants and contributions accounted for 40.9 million or 30 percent of total current fiscal year revenues. The District had approximately 134.6 million in expenses related to governmental activities, an increase of 3 percent from the prior fiscal year. Among major funds, the General Fund had 86.4 million in current fiscal year revenues, which primarily consisted of state aid and property taxes, and 86.4 million in expenditures. The General Fund s fund balance decreased 75,504 to 17.6 million at the end of the current fiscal year. Page 5
MANAGEMENT S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2012 OVERVIEW OF FINANCIAL STATEMENTS This discussion and analysis are intended to serve as an introduction to the District s basic financial statements. The District s basic financial statements comprise three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. Government-wide financial statements. The government-wide financial statements are designed to provide readers with a broad overview of the District s finances, in a manner similar to a private-sector business. The accrual basis of accounting is used for the government-wide financial statements. 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. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of the District is improving or deteriorating. The statement of activities presents information showing how the District s net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused compensated absences). The government-wide financial statements outline functions of the District that are principally supported by property taxes and intergovernmental revenues. The governmental activities of the District include instruction, support services, operation and maintenance of plant services, student transportation services, operation of non-instructional services, and interest on long-term debt. Fund financial statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The District uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the District can be divided into two categories: governmental funds and fiduciary funds. Governmental funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements use the modified accrual basis of accounting and focus on near-term inflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating the District s near-term financing requirements. Page 6
MANAGEMENT S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2012 OVERVIEW OF FINANCIAL STATEMENTS (Concl d) Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the District s near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures and changes in fund balances for the General, Debt Service, and Bond Building Funds, all of which are considered to be major funds. Data from the other governmental funds are combined into a single, aggregated presentation. Individual fund data for each of these non-major governmental funds is provided in the form of combining statements and schedules. Fiduciary funds. Fiduciary funds are used to account for resources held for the benefit of parties outside the District. Fiduciary funds are not reflected in the government-wide financial statements because the resources of those funds are not available to support the District s own programs. Due to their custodial nature, fiduciary funds do not have a measurement focus. Notes to the financial statements. The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found immediately following the basic financial statements. Other information. In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information concerning the District s budget process. The District adopts an annual expenditure budget for all governmental funds. A schedule of revenues, expenditures and changes in fund balances budget and actual has been provided for the General Fund as required supplementary information. Page 7
MANAGEMENT S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2012 GOVERNMENT-WIDE FINANCIAL ANALYSIS Net assets may serve over time as a useful indicator of a government s financial position. In the case of the District, assets exceeded liabilities by 118.4 million at the current fiscal year end. The largest portion of the District s net assets reflects its investment in capital assets (e.g., land and improvements, buildings and improvements, vehicles, furniture and equipment and construction in progress), less any related debt used to acquire those assets that is still outstanding. The District uses these capital assets to provide services to its students; consequently, these assets are not available for future spending. Although the District s investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. In addition, a portion of the District s net assets are restricted for federal and state projects, food service, other local initiatives, debt service repayment, and capital outlay investment. The following table presents a summary of the District s net assets for the fiscal years ended June 30, 2012 and June 30, 2011. As of As of June 30, 2012 June 30, 2011 Current and other assets 45,155,923 48,732,495 Capital assets, net 114,462,316 101,637,638 Total assets, net 159,618,239 150,370,133 Current liabilities 6,713,360 12,721,777 Long-term liabilities 34,523,926 23,038,126 Total liabilities 41,237,286 35,759,903 Net assets: Invested in capital assets, net of related debt 86,808,936 81,847,638 Restricted 10,896,978 11,529,406 Unrestricted 20,675,039 21,233,186 Total net assets 118,380,953 114,610,230 At the end of the current fiscal year the District reported positive balances in all three categories of net assets. The same situation held true for the prior fiscal year. The District s financial position is the product of several financial transactions including the net result of activities, the acquisition and payment of debt, the acquisition and disposal of capital assets, and the depreciation of capital assets. Page 8
MANAGEMENT S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2012 GOVERNMENT-WIDE FINANCIAL ANALYSIS (Cont d) The following are significant current year transactions that had an impact on the Statement of Net Assets. The principal retirement of 6.0 million of bonds and the issuance of 14.7 million in school improvement bonds. The principal retirement of 561,642 of leases and issuance of 3.5 million of leases. The addition of 17.7 million in capital assets through various land improvements, building improvements and purchases of land, vehicles, furniture and equipment. An increase of 4.7 million in accumulated depreciation as a result of current fiscal year depreciation expense. Changes in net assets. The District s total revenues for the current fiscal year were 138.3 million. The total cost of all programs and services was 134.6 million. The following table presents a summary of the changes in net assets for the fiscal years ended June 30, 2012 and June 30, 2011. Fiscal Year Ended June 30, 2012 Fiscal Year Ended June 30, 2011 Revenues: Program revenues: Charges for services 3,132,205 3,391,030 Operating grants and contributions 28,345,934 27,206,505 Capital grants and contributions 9,464,337 2,688,302 General revenues: Property taxes 29,141,314 32,589,477 Investment income 81,170 135,359 Unrestricted county aid 5,639,055 5,348,882 Unrestricted state aid 62,541,661 66,477,865 Unrestricted federal aid 706,035 Total revenues 138,345,676 138,543,455 Expenses: Instruction 68,882,996 66,915,650 Support services students and staff 23,671,404 23,157,655 Support services administration 11,669,325 11,140,395 Operation and maintenance of plant services 14,984,973 13,909,875 Student transportation services 4,896,665 4,686,116 Operation of non-instructional services 9,626,650 9,044,638 Interest on long-term debt 842,940 1,208,407 Total expenses 134,574,953 130,062,736 Change in net assets 3,770,723 8,480,719 Net assets, beginning 114,610,230 106,129,511 Net assets, ending 118,380,953 114,610,230 Page 9
MANAGEMENT S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2012 GOVERNMENT-WIDE FINANCIAL ANALYSIS (Cont d) Expenses 70 60 50 Millions 40 30 20 10 0 FY2011-12 FY2010-11 The following are significant current year transactions that have had an impact on the change in net assets. Capital grants and contributions increased 6.8 million due to the receipt of School Facilities Board funding. Property taxes decreased 3.4 million due to a decrease in the primary and secondary assessed valuations. Unrestricted state aid decreased 3.9 million due to reductions in state equalization assistance. The following table presents the cost of the District s major functional activities. The table also shows each function s net cost (total cost less charges for services generated by the activities and intergovernmental aid provided for specific programs). The net cost shows the financial burden that was placed on the State and District s taxpayers by each of these functions. Page 10
MANAGEMENT S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2012 GOVERNMENT-WIDE FINANCIAL ANALYSIS (Concl d) Year Ended June 30, 2012 Year Ended June 30, 2011 Total Expenses Net (Expense)/ Revenue Total Expenses Net (Expense)/ Revenue Instruction 68,882,996 (50,041,673) 66,915,650 (54,883,976) Support services students and staff 23,671,404 (13,464,933) 23,157,655 (12,327,573) Support services administration 11,669,325 (10,463,928) 11,140,395 (10,597,585) Operation and maintenance of plant services 14,984,973 (13,907,638) 13,909,875 (13,642,825) Student transportation services 4,896,665 (4,691,750) 4,686,116 (4,505,179) Operation of non-instructional services 9,626,650 (219,615) 9,044,638 388,646 Interest on long-term debt 842,940 (842,940) 1,208,407 (1,208,407) Total 134,574,953 (93,632,477) 130,062,736 (96,776,899) The cost of all governmental activities this year was 134.6 million. Federal and State governments and charges for services subsidized certain programs with grants and contributions and other local revenues of 40.9 million. Net cost of governmental activities of 93.6 million was financed by general revenues, which are made up of primarily property taxes of 29.1 million, state aid of 62.5 million, and county aid of 5.6 million. FINANCIAL ANALYSIS OF THE DISTRICT S FUNDS As noted earlier, the District uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental funds. The focus of the District s governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the District s financing requirements. In particular, unassigned fund balance may serve as a useful measure of the District s net resources available for spending at the end of the fiscal year. The financial performance of the District as a whole is reflected in its governmental funds. As the District completed the year, its governmental funds reported a combined fund balance of 30.7 million, an increase of 2.8 million due primarily to unexpended bond proceeds in the Bond Building Fund from the issuance of 14.7 million in school improvement bonds to be used for the improvements of two high schools. Page 11
MANAGEMENT S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2012 FINANCIAL ANALYSIS OF THE DISTRICT S FUNDS (Concl d) The General Fund comprises 57 percent of the total fund balance. Approximately 17.5 million, or 99 percent of the General Fund s fund balance constitutes unassigned fund balance. The General Fund is the principal operating fund of the District. The fund balance decreased 75,504 in the General Fund to 17.6 million as of fiscal year end. General Fund revenues decreased 3.0 million as a result of reductions in state equalization assistance. General Fund expenditures decreased 2.0 million. The Debt Service Fund s fund balance decreased 366,863 to 2.0 million as of the fiscal year end. Debt Service Fund revenues decreased 687,578 as a result of decreased property taxes. The Bond Building Fund s fund balance increased 3.7 million at fiscal year end due to unexpended bond proceeds from the issuance of school improvement bonds. BUDGETARY HIGHLIGHTS Over the course of the year, the District revised the General Fund annual expenditure budget due to an actual budget balance carryforward increase and sudden growth in student enrollment. The difference between the original budget and the final amended budget was a 664,721 increase, or one percent. Significant variances for the final amended budget and actual revenues resulted from the District not being required by the State of Arizona to prepare a revenue budget. A schedule showing the original and final budget amounts compared to the District s actual financial activity for the General Fund is provided in this report as required supplementary information. There were no significant variances between the final amended budget and actual expenditures. Page 12
MANAGEMENT S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2012 CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets. As of year end, the District had invested 190.2 million in capital assets, including school buildings, athletic facilities, buses and other vehicles, computers, and other equipment. This amount represents a net increase prior to depreciation of 16.7 million from the prior fiscal year. Total depreciation expense for the current fiscal year was 4.7 million. The following schedule presents a summary of capital asset balances for the fiscal years ended June 30, 2012 and June 30, 2011. As of June 30, 2012 As of June 30, 2011 Capital assets non-depreciable 14,690,081 7,108,339 Capital assets depreciable, net 99,772,235 94,529,299 Total 114,462,316 101,637,638 Additional information on the District s capital assets can be found in Note 6. Debt Administration. At year end, the District had 31.3 million in long-term debt outstanding, 6.9 million due within one year. This represents a net increase of 11.6 million due to the issuance of 14.7 million in school improvement bonds. The District s general obligation bonds are subject to two limits; the Constitutional debt limit (total debt limit) on all general obligation bonds (up to 30 percent of the total secondary assessed valuation) and the statutory debt limit on Class B bonds (the greater of 10 percent of the total secondary assessed valuation or 1,500 per student). The current total debt limitation for the District is 139.2 million and the Class B debt limit is 46.4 million, which are more than the District s total outstanding general obligation and Class B debt, respectively Additional information on the District s long-term debt can be found in Notes 7 through 9. Page 13
MANAGEMENT S DISCUSSION AND ANALYSIS (MD&A) YEAR ENDED JUNE 30, 2012 ECONOMIC FACTORS AND NEXT YEAR S BUDGET AND RATES Many factors were considered by the District s administration during the process of developing the fiscal year 2012-13 budget. Among them: Fiscal year 2011-12 budget balance carry forward (estimated 333,259). Estimated student population (16,448). Employee salaries. Budgeted expenditures in the General Fund decreased 4 percent to 83.8 million in fiscal year 2012-13. Decreased payroll and employee benefit costs is the primary reason for the decrease. State aid and property taxes are expected to be the primary funding sources. CONTACTING THE DISTRICT S FINANCIAL MANAGEMENT This financial report is designed to provide our citizens, taxpayers, and investors and creditors with a general overview of the District s finances and to demonstrate the District s accountability for the resources it receives. If you have questions about this report or need additional information, contact the Business and Finance Department, Sunnyside Unified School District No. 12, 2238 E. Ginter Road, Tucson, Arizona 85706-5806. Page 14
Page 15 BASIC FINANCIAL STATEMENTS
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Page 17 GOVERNMENT-WIDE FINANCIAL STATEMENTS
STATEMENT OF NET ASSETS JUNE 30, 2012 ASSETS Current assets: Cash and investments Property taxes receivable Accounts receivable Due from governmental entities Deposits held by others Inventory Total current assets Noncurrent assets: Deferred charges Land Land improvements Buildings and improvements Vehicles, furniture and equipment Construction in progress Accumulated depreciation Total noncurrent assets Total assets LIABILITIES Current liabilities: Accounts payable Construction contracts payable Due to governmental entities Accrued payroll and employee benefits Compensated absences payable Accrued interest payable Unearned revenues Obligations under capital leases Bonds payable Total current liabilities Noncurrent liabilities: Non-current portion of long-term obligations Total noncurrent liabilities Total liabilities NET ASSETS Invested in capital assets, net of related debt Restricted for: Federal and state projects Food service Other local initiatives Debt service Capital outlay Unrestricted Total net assets Governmental Activities 8,135,420 1,373,527 130,220 34,588,678 187,896 293,432 44,709,173 446,750 7,108,339 7,756,825 143,443,757 24,352,366 7,581,742 (75,780,713) 114,909,066 159,618,239 1,360,433 1,328,858 98,146 3,572,298 800,000 301,387 52,238 616,662 6,255,000 14,385,022 26,852,264 26,852,264 41,237,286 86,808,936 1,175,371 2,225,803 1,822,452 2,263,352 3,410,000 20,675,039 118,380,953 Page 18 The notes to the basic financial statements are an integral part of this statement.
STATEMENT OF ACTIVITIES YEAR ENDED JUNE 30, 2012 Functions/Programs Governmental activities: Instruction Support services - students and staff Support services - administration Operation and maintenance of plant services Student transportation services Operation of non-instructional services Interest on long-term debt Total governmental activities Expenses 68,882,996 23,671,404 11,669,325 14,984,973 4,896,665 9,626,650 842,940 134,574,953 Charges for Services 1,366,221 410,855 218,642 1,136,487 3,132,205 Program Revenues Operating Grants and Contributions 8,010,765 9,795,616 1,205,397 858,693 204,915 8,270,548 28,345,934 Capital Grants and Contributions 9,464,337 9,464,337 Net (Expense) Revenue and Changes in Net Assets Governmental Activities (50,041,673) (13,464,933) (10,463,928) (13,907,638) (4,691,750) (219,615) (842,940) (93,632,477) General revenues: Taxes: Property taxes, levied for general purposes Property taxes, levied for debt service Property taxes, levied for capital outlay Investment income Unrestricted county aid Unrestricted state aid Total general revenues Changes in net assets Net assets, beginning of year Net assets, end of year 22,717,838 6,423,221 255 81,170 5,639,055 62,541,661 97,403,200 3,770,723 114,610,230 118,380,953 Page 19 The notes to the basic financial statements are an integral part of this statement.
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Page 21 FUND FINANCIAL STATEMENTS
BALANCE SHEET - GOVERNMENTAL FUNDS JUNE 30, 2012 ASSETS Cash and investments Property taxes receivable Accounts receivable Due from governmental entities Due from other funds Deposits held by others Inventory Total assets General 359,271 1,045,358 27,497,354 109,613 29,011,596 Debt Service 1,856,144 315,353 6,648,242 8,819,739 Bond Building 7,000,467 7,000,467 LIABILITIES AND FUND BALANCES Liabilities: Accounts payable Construction contracts payable Due to governmental entities Due to other funds Accrued payroll and employee benefits Deferred revenues Bonds payable Bond interest payable Total liabilities 702,019 98,146 6,997,597 2,850,741 797,435 11,445,938 239,996 6,255,000 301,387 6,796,383 444,524 2,863,719 3,308,243 Fund balances (deficits): Nonspendable Restricted Unassigned Total fund balances 109,613 17,456,045 17,565,658 2,023,356 2,023,356 3,692,224 3,692,224 Total liabilities and fund balances 29,011,596 8,819,739 7,000,467 The notes to the basic financial statements are an integral part of this statement. Page 22
Non-Major Governmental Funds 412,776 12,816 130,220 7,091,324 6,483,861 187,896 183,819 14,502,712 Total Governmental Funds 9,628,658 1,373,527 130,220 34,588,678 13,132,103 187,896 293,432 59,334,514 658,414 884,334 4,764,025 721,557 100,942 7,129,272 1,360,433 1,328,858 98,146 14,625,341 3,572,298 1,138,373 6,255,000 301,387 28,679,836 183,819 8,401,103 (1,211,482) 7,373,440 14,502,712 293,432 14,116,683 16,244,563 30,654,678 59,334,514 Page 23
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RECONCILIATION OF THE BALANCE SHEET - GOVERNMENTAL FUNDS TO THE STATEMENT OF NET ASSETS JUNE 30, 2012 Total governmental fund balances 30,654,678 Amounts reported for governmental activities in the Statement of Net Asset are different because: Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds. Governmental capital assets 190,243,029 Less accumulated depreciation (75,780,713) 114,462,316 Some tax revenues will not be available to pay for current period expenditures and, therefore, are deferred in the funds. Property taxes 1,049,205 Intergovernmental 36,930 1,086,135 Deferred items related to the net cost of issuance of bonds are amortized over the life of the associated bond issue in the government-wide statements but not reported in the funds. 446,750 Long-term liabilities are not due and payable in the current period and, therefore, are not reported in the funds. Compensated absences payable (3,178,322) Obligations under capital leases (2,925,604) Bonds payable (22,165,000) (28,268,926) Net assets of governmental activities 118,380,953 Page 25 The notes to the basic financial statements are an integral part of this statement.
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - GOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2012 Revenues: Other local Property taxes State aid and grants Federal aid, grants and reimbursements Total revenues General 6,289,545 23,036,400 56,749,500 330,360 86,405,805 Debt Service 13,874 6,487,880 6,501,754 Bond Building Expenditures: Current - Instruction Support services - students and staff Support services - administration Operation and maintenance of plant services Student transportation services Operation of non-instructional services Capital outlay Debt service - Principal retirement Interest and fiscal charges Bond issuance costs Total expenditures 47,726,333 11,772,368 9,389,328 13,621,671 3,232,373 556,998 87,994 86,387,065 6,255,000 613,617 6,868,617 10,934,609 313,396 11,248,005 Excess (deficiency) of revenues over expenditures 18,740 (366,863) (11,248,005) Other financing sources (uses): Transfers in Transfers out Capital lease agreements Issuance of school improvement bonds Premium on sale of bonds Total other financing sources (uses): 383,046 (213,136) 169,910 14,675,000 265,229 14,940,229 Changes in fund balances 188,650 (366,863) 3,692,224 Fund balances, beginning of year 17,641,162 2,390,219 Increase (decrease) in reserve for inventory (264,154) Fund balances, end of year 17,565,658 2,023,356 3,692,224 Page 26 The notes to the basic financial statements are an integral part of this statement.
Non-Major Governmental Funds 3,712,441 76,778 13,873,237 28,235,405 45,897,861 11,363,037 10,731,066 1,077,452 774,136 230,388 8,844,477 16,068,768 561,642 40,589 49,691,555 (3,793,694) 213,136 (383,046) 3,487,246 3,317,336 (476,358) 7,838,071 11,727 7,373,440 Total Governmental Funds 10,015,860 29,601,058 70,622,737 28,565,765 138,805,420 59,089,370 22,503,434 10,466,780 14,395,807 3,462,761 9,401,475 27,091,371 6,816,642 654,206 313,396 154,195,242 (15,389,822) 596,182 (596,182) 3,487,246 14,675,000 265,229 18,427,475 3,037,653 27,869,452 (252,427) 30,654,678 Page 27
RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES YEAR ENDED JUNE 30, 2012 Net changes in fund balances - total governmental funds 2,785,226 Amounts reported for governmental activities in the Statement of Activities are different because: Governmental funds report the portion of capital outlay for capitalized assets as expenditures. However, in the Statement of Activities, the costs of those assets are allocated over their estimated useful lives as depreciation expense. Expenditures for capitalized assets 17,689,027 Less current year depreciation (4,691,876) 12,997,151 Issuance of long-term debt provides current financial resources to governmental funds, but the issuance increases long term liabilities in the Statement of Net Assets. Issuance of school improvement bonds (14,675,000) Obligations under capital leases (3,487,246) (18,162,246) Some revenues in the Statement of Activities that do not provide current financial resources are not reported as revenues in the funds. Property taxes (459,744) Intergovernmental 36,930 (422,814) Repayments of long-term debt principal are expenditures in the governmental funds, but the repayment reduces long-term liabilities in the Statement of Net Assets. Capital lease principal retirement 561,642 Bond principal retirement 6,255,000 6,816,642 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 governmental funds. Deferred charges on issuance of debt (140,567) Loss on disposal of capital assets (172,473) Compensated absences 69,804 (243,236) Change in net assets in governmental activities 3,770,723 Page 28 The notes to the basic financial statements are an integral part of this statement.