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The discussion and analysis of Minidoka County School ...

  1. 1. MINIDOKA COUNTY SCHOOL DISTRICT #331 MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003 The discussion and analysis of Minidoka County School District’s financial performance provides an overall review of the school district’s financial activities for the fiscal year ended June 30, 2003. The purpose of this discussion and analysis is to look at the school district’s financial performance as a whole; readers could also review the notes to the basic financial statements to enhance their understanding of the school district’s financial performance. Financial Highlights Key financial highlights for 2002-03 are as follows: • In total, net assets decreased $265,533 which represents a 95 percent increase from 2001-2002. • General Fund revenues accounted for $22,109,181 in revenue or 81 percent of all revenues. Non General Fund revenues in the form of charges for services, operating grants and contributions, and capital grants and contributions accounted for $5,195,300 or 19 percent of total revenues of $27,304,481. • Total assets of governmental activities decreased by $1,835,875 and cash equivalents decreased by 3,822,915. Receivables increased by $129,786 and capital assets increased by 3,259,018. • The School District had $27,570,140 in expenses; only $3,087,052 of these expenses were offset by program specific charges for services, grants or contributions. General revenues (primarily taxes) of $24,217,429 were adequate to provide for these programs. • Among major funds, the General Fund had $22,109,181 in revenues and $21,272,110 in expenditures. The General Fund’s balance decreased $124,830 over 2001-2002. This decrease was a goal set by the Board of Education to lower the fund balance. • The school district transferred $895,730 from the General Fund to the Permanent Improvement Capital Projects Fund. Of that amount, $182,774 received from the State for bus depreciation was transferred into plant facilities to purchase new buses. The remaining $712,956 was part of our 2 year supplemental levy to help with capital projects that are budgeted out of the plant facilities fund. The remaining Supplemental Levy monies collected were left in the General Fund to cover painting and carpeting projects. The school district also transferred $95,733 to the Food Service fund to match benefits. Other major transfers were from Plant facilities fund to the debt retirement fund of $783,566 for payment of the Safety levy/lease loan and a surplus of funds left in the debt service fund in the amount of $389,388.20 was transferred to the capital projects fund for capital acquisition. • The school district also collects a 1.7% indirect cost rate from several Federal Grant funds and deposits the proceeds to the General fund. A total of 36,647 in indirect costs were transferred to the General fund in 2002-2003. 1
  2. 2. MINIDOKA COUNTY SCHOOL DISTRICT #331 MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003 Using this General Accepted Accounting Principals Report The Statement of Net Assets and Statement of Activities provides information about the activities of the whole school district, presenting both an aggregate view of the school district’s finances and a longer-term view of those finances. Fund financial statements provide the next level of detail. For governmental funds, these statements tell how services were financed in the short- term as well as what remains for future spending. The fund financial statements also look at the school district’s most significant funds with all other nonmajor funds presented in total in one column. In the case of Minidoka County School District, the General Fund is by far the most significant fund. Statement of Net Assets and the Statement of Activities While this document contains the large number of funds used by the school district to provide programs and activities, the view of the school district as a whole looks at all financial transactions and asks the question, “How did we do financially during 2002-03?” The Statement of Net Assets and the Statement of Activities answer this question. These statements include all assets and liabilities using the accrual basis of accounting similar to the accounting used by most private-sector companies. This basis of accounting takes into account all of the current year’s revenues and expenses regardless of when cash is received or paid. These two statements report the school district’s net assets and changes in those assets. This change in net assets is important because it tells the reader that, for the school district as a whole, the financial position of the school district has improved or diminished. The causes of this change may be the result of many factors, some financial, and some not. Non-financial factors include the school district’s property tax base, changes in property tax laws and interpretations of these laws, facility condition, required educational programs and other factors. In the Statement of Net Assets and the Statement of Activities, the school district reports governmental activities. Governmental activities are the activities where most to the school district’s programs and services are reported including, but not limited to, instruction, support services, operation and maintenance of plant, pupil transportation and extracurricular activities. The school district does not have any business like activities. Fund Financial Statements Fund financial reports provide detailed information about the school district’s major funds. The school district uses many funds to account for a multitude of financial transactions. However, these fund financial statements focus on the school district’s most significant funds. The school district’s major governmental funds are the General Fund and the Permanent Improvement Capital Projects Fund. 2
  3. 3. MINIDOKA COUNTY SCHOOL DISTRICT #331 MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003 Governmental Funds Most of the school district’s activities are reported in governmental funds, which focus on how money flows into and out of those funds and balances left at year-end available for spending in the future periods. These funds are reported using an accounting method called modified accrual accounting, which measures cash and all other financial assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term view of the school district’s general government operations and the basic services it provides. Governmental fund information helps you determine whether there are more or fewer financial resources that can be spent in the near future to finance educational programs. The relationship (or difference) between governmental activities (reported in the Statement of Net Assets and the Statement of Activities) and governmental funds is reconciled in the financial statements. The School District as a Whole Recall that the Statement of Net Assets provides the perspective of the school district as a whole. Exhibit 1 provides a summary of the school district’s net assets for 2002-03 compared to 2001-02: EXHIBIT 1 NET ASSETS ASSETS 2001-2002 2002-2003 Current and Other Assets 16,448,293 11,353,400 Capital Assets 11,467,816 14,726,834 Total Assets 27,916,109 26,080,234 LIABILITIES Long-Term Liabilities 9,000,000 9,895,000 Other Liabilities 6,080,068 3,761,479 Total Liabilities 15,080,068 13,656,479 NET ASSETS Invested in Capital Assets, Net of Debt 2,467,816 4,831,834 Restricted 7,329,875 4,761,479 Unrestricted 3,038,350 2,823,939 Total Net Assets 12,836,041 12,423,755 Total assets of governmental activities decreased by $1,835,875 as cash and cash equivalents decreased by $3,822,915, receivables increased by $129,786 and capital assets decreased by 3,259,018. Unrestricted net assets, the part of net assets that can be used to finance day-to-day activities without constraints established by grants or legal requirements, of the school district decreased by $214,411. Exhibit 2 shows the changes in net assets for fiscal year 2001-02 and 2002-03. 3
  4. 4. MINIDOKA COUNTY SCHOOL DISTRICT #331 MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003 EXHIBIT 2 CHANGES IN NET ASSETS Revenues 2001-2002 2002-2003 % Change Program Revenues: Charges for Services 418,793 447,071 6.75% Operating Grants and Contributions 1,963,700 2,639,981 34.44% General Revenues: Property Taxes 3,946,627 4,064,068 2.98% Grants and Entitlements 20,329,120 19,613,747 -3.52% Other 585,758 539,614 -7.88% Total Revenues 27,243,998 27,304,481 0.22% Program Expenses Instructional 16,502,300 15,742,336 -4.61% Support Services 7,602,118 8,943,891 17.65% Non-Instructional 1,411,985 1,308,706 -7.31% Capital Outlay 6,734,095 898,509 -86.66% Interest and Fees 363,010 676,572 86.38% Total Expense 32,613,508 27,570,014 -15,46% Decrease in Net Assets (5,369,510) (265,533) -95.05% The significant difference in comparison from 2001-02 to 2002-03 is that 2001-02 was not restated due to statement 34 changes. Governmental Activities The Idaho school finance system makes it necessary for school districts to seek voter approval of supplemental and/or school plant facility levies. The state’s foundation program does not provide an adequate level of funding to provide basic educational services and to adequately maintain facilities. Minidoka County School District voters approved a 20 year bond levy in the amount of $9,895,000 on March 18, 2003 to replace the existing safety levy and approved a 2 year supplemental levy in the amount of $978,500 on April 23, 2002. The levy rates for these levies in 2003 were .001156 for the supplemental and .00092 for the old safety facilities levy that was replaced with a bond levy. The Minidoka County School District plans to renew it’s supplemental levy in the 2004 year with a modest or no increased dollar amount. Instruction comprises 57 percent of district expenses. Support services expenses make up 32 percent of the expenses. 4
  5. 5. MINIDOKA COUNTY SCHOOL DISTRICT #331 MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003 The Statement of Activities shows the cost of program services and the charges for services and grants offsetting those services. Exhibit 3 shows the total cost of services and the net cost of services. That is, it identifies the cost of these services supported by tax revenue and unrestricted State entitlements. EXHIBIT 3 Total Cost of Total Cost of Services 2002 Services 2003 Instructional 16,502,300 15,742,336 Support Services: Pupils and Instructional Staff 3,401,125 4,578,379 Board of Education, Administration Fiscal and Business 733,947 711,115 Operation and Maintenance of Plant 8,831,810 3,202,860 Pupil Transportation 1,361,424 1,350,046 Central 7,907 0 Interest and Fees 363,010 676,572 Total Expense 32,613,508 27,570,014 Instruction expenses include activities dealing with the teaching of pupils and the interaction between teacher and pupil. Pupils and instructional staff include the activities involved with assisting staff with the content and process of teaching to pupils. Board of education, administration, fiscal and business includes expenses associated with administrative and financial supervision of the district. Operation and maintenance of plant activities involve keeping the school grounds, buildings, and equipment in an effective working condition. Central includes expenses for purchases or warehousing of items district wide. Pupil transportation includes activities involved with the conveyance of students to and from school as well as to and from school activities, as provided by state law. Operation of Non-instructional services includes the preparation, delivery, and servicing of lunches, snacks and other incidental meals to students, parents and staff in connection with school activities and or training. Interest and fiscal charges involves the transactions associated with the payment of interest and other related charges to debt of the School District. 5
  6. 6. MINIDOKA COUNTY SCHOOL DISTRICT #331 MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003 The dependence upon tax revenues is apparent. Over 85% of instruction activities are supported through local and state taxes and other general revenues; for all activities general revenue support is 78%. The state is the primary support for meeting operation expenses. The Minidoka County School District property taxes provides the major support for constructing and maintaining facilities. General Fund Budgeting Highlights The school district’s budget is prepared according to Idaho law and is based on accounting for certain transactions on a basis of cash receipts, disbursements, and encumbrances. The most significant budgeted fund is the General Fund. During the course of the fiscal 2002-2003 year, the Minidoka School Board of Trustees amends its General Fund budget once and reports the revised budget at the end of the year in a public budget hearing. The amended budget resulted in appropriations decreasing $604,956, a 3 percent decrease from the adopted budget. This decrease was primarily due to enrollment declines and to state hold backs in revenue, due to declines in state revenue. These declines occurred as part of the general economics decline in the State of Idaho. For the General Fund, the revised budget hearing and other financing sources estimate was $22,139,004. The original budget estimate from the adopted budget was $22,743,960. During fiscal year 2002-03, the school district budgeted $1,236,607 for property taxes and 21,507,353 for other taxes and intergovernmental revenues. The school district received 1,238,655 in property and other taxes revenue and 20,900,349 in intergovernmental revenue. Reduction in local revenue was in interest revenue, approximately $145,000 due to declining interest rates which was 56% of what was actually budgeted, but was softened with revenue received from Erate and local patronage from the electric companies. Reduction in State revenue for salary and benefit apportionment was caused by a decrease in unit funding, a decrease in the distribution factor, loss of endowment funds and shortfalls in state tax collections. 6
  7. 7. MINIDOKA COUNTY SCHOOL DISTRICT #331 MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003 Capital Assets At the end of the fiscal year 2002-2003, the School District had $14,726,834 invested in land, building, furniture and equipment, and vehicles qualifying as fixed assets. Exhibit 4 shows fiscal 2002-2003 balances compared to 2001-2002. EXHIBIT 4 Capital Assets (Net of Depreciation) at June 30, 2001-2002 2002-2003 Land 354,500 354,500 Buildings and Improvements 9,240,788 12,819,899 Furniture and Equipment 667,561 570,986 Vehicles 1,193,171 969,654 Art Collection 11,795 11,795 Totals $11,467,816 $14,726,834 Overall capital assets increased $3,259,018 from fiscal year 2001-2002 to fiscal year 2002-2003. Increases in capital assets (primarily buildings and improvement) were offset by depreciation expense for the year. At fiscal year end, the School District had contractual purchase commitments and encumbered purchase orders totaling $232,625. Contractual purchase commitments from Plant facilities was $100,130 to Alarmco Inc. for improvements at West Minico and Bryson Sales for bus purchases and $132,435 of the total was for other General Fund purchase orders. Debt Administration At June 30, 2003, the School District only had a $9,985,000 loan as outstanding debt, $323,441 due within one year. The loan was a refinance from a previous lease/option loan to a general obligation bond series on May 29, 2003 and will be paid off in 2021. The refinance of the lease/option loan helped to gain $1,040,00 in proceeds by converting to a lower interest rate bond levy loan. The proceeds will go toward building improvements at Acequia Elementary, Heyburn Elementary, Big Valley Elementary, West Minico Middle School and Minico High School. Exhibit 5 Outstanding Debt at June 30, 2001-2002 2002-2003 Safety loan Bond Levy Bond and Safety Levy Construction loans $9,000,000 $9,895,000 7
  8. 8. MINIDOKA COUNTY SCHOOL DISTRICT #331 MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003 General Fund Balance At fiscal year end, the fund balance for the General fund was $2,651,832. Attached is an exhibit showing what designations, contingencies and reserves are budgeted for payment in the fiscal year 2003-2004. These designations are necessary because of the June 30 year end that imposes a budget deadline for all projects. These are budgeted projects that (1) could not be finished and paid by June 30, (2) could not be initiated by June 30, 2003, or (3) that require the accumulation of more funds than can be accumulated in one budget year. EXHIBIT 6 FUND BALANCE DESIGNATIONS $ 2,651,831.59 Designated to Grant Funds>>>>>>>> $ 263,165.00 (LRE,LEP,MEDICAID,IRI,90%,STANDARDS,MENTOR) $ 2,388,666.59 DESIGNATIONS: 4.73% 03-04 CONTINGENCY $ 1,016,186.00 BUDGETED CARRYOVER FOR 03-04 $ 114,703.00 BUDGETED CARRYOVER FOR 03-04 $ 219,510.00 CARRYOVER PURCHASE ORDERS $ 132,435.00 SUMMER SCHOOL SALARIES PD IN JULY $ 32,000.00 CURRICULUM CARRYOVER $ 90,000.00 MCOC/IYR CARRYOVER $ 15,450.00 READING FIRST GRANT MATCH/INSERVICE $ 60,000.00 FENCING FOR 20 ACRES ON BID $ 57,000.00 ACEQUIA DRAINAGE ON BID $ 80,000.00 SECURITY SYSTEMS ON BID $ 100,000.00 DUST COLLECTION SYSTEM $ 80,000.00 HEYBURN SIDEWALKS $ 80,000.00 WEST ROOF ON BID $ 100,000.00 STORAGE UNITS $ 63,000.00 MEMORIAL HVAC MATCHING $$$ $ 31,000.00 LEVY PURCHASE ORDERS $ 46,000.00 HEYBURN WINDOWS $ 65,000.00 PAINTING PROJECTS OVER $ 6,075.00 TOTAL DESIGNATIONS>>>>>>>>>>>>>> $ 2,388,359.00 REMAINING $ 307.59 8
  9. 9. MINIDOKA COUNTY SCHOOL DISTRICT #331 MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003 The General Fund balances documented in Exhibit 8 include designations as well as contingencies. The district has maintained a General Fund contingency fund of approximately 5% since 1996-97. The 2002-03 General Fund contingency is about 4.7%, a slight decline due to revenue holdbacks from the state. EXHIBIT 7 TWELVE YEAR GENERAL FUND BALANCE TOTALS Fiscal Year Fund Balance June 30, 2002-03 $2,651,832 2001-02 $2,776,662 2000-01 $4,131,948 1999-00 $3,133,559 1998-99 $3,784,222 1997-98 $3,114,370 1996-97 $2,079,228 1995-96 $1,384,228 1994-95 $ 517,413 1993-94 $ (108,694) 1992-93 $ 333,302 1991-92 $ 632,198 1990-91 $ 298,752 EXHIBIT 8 TWELVE YEAR ENROLLMENT(K-12) Student FTE Fiscal Year Population (CertIficated Staff) 2002.3 4316 289 2001.2 4388 286 2000.1 4482 299 1999-00 4733 296 1998.99 4849 301 1997.98 5035 306 1996.97 5214 310 1995.96 5253 n/a 1994.95 5345 n/a 1993.94 5375 n/a 1992.93 5406 n/a 1991.92 5386 n/a 9
  10. 10. MINIDOKA COUNTY SCHOOL DISTRICT #331 MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2003 1990-91 5252 n/a Current Financial Issues and Concerns The Minidoka County School District is financially stable. The Minidoka district community supports its public schools and the school district has plans to renew its two year supplemental levy. The Minidoka School District has experienced a long record of declining student enrollment. This has been accompanied by a corresponding decrease in state foundation funds representing decreased revenues for staffing and other expenses. Exhibit 8 provides data for the years 1991-2003. The district has reduced its staff each year to avert the financial crisis that enrollment decreases can create. The Minidoka County School District must educate a minority student population that requires costly special program funding. Limited English proficiency students comprise 16% of the Minidoka student population. The Minidoka District community includes many households that function at a poverty level as indicated by a 2003 federal free and reduced lunch rate of 86.6%. The Minidoka County School District is a poor district with a very limited tax base. The Idaho school district average market value per student for 2003 was $269,298; the Minidoka County market value per student was $194,859, ranked #72 out of 113 districts. With a major potato processing plant scheduled to close November 2003, the Minidoka County tax base will likely decline. The Minidoka County School District’s financial condition is sound despite declining enrollments, increased numbers of special education and limited English proficiency students, and the maintenance needs of aging buildings. The Minidoka County School District Board of trustees have prudently managed budgets. The Board of trustees have maintained positive fund balances and have reduced staff in accordance with student enrollment declines. The Minidoka County School District plans to continue its practice of sound fiscal management. Contacting the School District’s Financial Management This financial report is designed to provide our citizens, taxpayers, investors and creditors with a general overview of the school district’s finances and to show the school district’s accountability for the money it receives. If you have questions about this report or need additional financial information contact Michelle DeLuna, Treasurer at Minidoka County School District, 633 Fremont Ave, Rupert, Idaho 83350 or email at 10