Board of Education of Collierville Schools. Audited Financial Statements

Transcription

1 Board of Education of Collierville Schools Audited Financial Statements For the Fiscal Year Ended June 30, 2015

2 Table of Contents INTRODUCTORY SECTION Board Officials... 1 Organization Chart... 2 FINANCIAL SECTION INDEPENDENT AUDITORS REPORT... 3 MANAGEMENT S DISCUSSION AND ANALYSIS (Required Supplementary Information)... 6 BASIC FINANCIAL STATEMENTS District-Wide Financial Statements: Statement of Net Position Statement of Activities Fund Financial Statements: Governmental Fund Financial Statements Balance Sheet Governmental Funds Reconciliation of the Balance Sheet Governmental Funds to the Statement of Net Position Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balance Governmental Funds to the Statement of Activities Statement of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual General Purpose Fund Statement of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual Federal Projects Fund Fiduciary Fund Financial Statement Statement of Fiduciary Net Position Agency Fund School Activities Notes to Financial Statements REQUIRED SUPPLEMENTARY INFORMATION Schedule of Funding Progress Schedule of Contributions Schedule of Proportionate Share of Net Pension Asset Teacher Legacy Pension Plan of TCRS.. 43 Schedule of Contributions Teacher Legacy Pension Plan of TCRS Schedule of Contributions Teacher Retirement Plan of TCRS Schedule of Contributions Legacy Public Employee Retirement Plan of TCRS Schedule of Contributions Hybrid Public Employee Retirement Plan of TCRS... 47

3 Table of Contents (Continued) SUPPLEMENTAL INFORMATION Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual Cafeteria Fund Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual Discretionary Grants Fund Schedule of Changes in Assets and Liabilities Agency Fund School Activities Schedule of Revenue and Expenditures By Type (Budgetary Basis) Federal Projects Fund Schedule of Construction in Progress COMPLIANCE SECTION Schedule of Expenditures of Federal and State Awards Notes to Schedule of Expenditures of Federal and State Awards Independent Auditors 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 Independent Auditor s Report on Compliance of Each Major Program and on Internal Control Over Compliance Required By OMB Circular A Schedule of Findings and Questioned Costs... 59

4 Introductory Section

5 Financial Section

6 Independent Auditors Report Board of Education Collierville Schools Collierville, Tennessee Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the general purpose fund, each major fund, and fiduciary fund of the Board of Education of Collierville Schools (the Schools ), which are funds of the Town of Collierville, Tennessee, as of and for the year ended June 30, 2015, and the related notes to financial statements, which collectively comprise the Schools basic financial statements as listed in the table of contents. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Schools preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the general purpose fund, each major fund, and fiduciary fund of the Board of Education of Collierville Schools as of June 30, 2015, and the respective changes in financial position and budgetary comparison for the general purpose fund and federal projects fund for the year then ended in conformity with accounting principles generally accepted in the United States of America. 3

7 Other Matters Change in Accounting Principle As discussed in Notes 1 and 2 to the financial statements, beginning balances were restated due to the implementation of GASB Statement No. 68, Accounting and Financial Reporting for Pensions, and GASB Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date - an amendment of GASB Statement No. 68, in Our opinion is not modified with respect to these changes. Emphasis of the Matter As discussed in Note 1, the financial statements of the Board of Education of Collierville Schools are intended to present the financial position and the changes in financial position of only the governmental activities, each major fund, and fiduciary fund of the Town of Collierville, Tennessee that is attributable to the transactions of the Board of Education of Collierville Schools. They do not purport to, and do not present fairly the financial position of the Town of Collierville, Tennessee as of June 30, 2015, the changes in its financial position, budgetary comparisons, or where applicable, its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. Our opinion is not modified with respect to this matter. Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management s discussion and analysis (pages 6-10) and the required supplementary information as listed in the table of contents (pages 41-47), be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming an opinion on the financial statements that collectively comprise the Schools basic financial statements. The supplemental information, as listed in the table of contents, is presented for the purpose of additional analysis and is not a required part of the basic financial statements. The schedule of expenditures of federal and state awards is presented for purposes of additional analysis as required by U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, and is also not a required part of the basic financial statements. The schedule of expenditures of federal and state awards and the supplement information, as listed in the table of contents, are the responsibility of management and are derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the schedule of expenditures of federal and state awards and the supplemental information, as listed in the table of contents, are fairly stated in all material respects in relation to the basic financial statements as a whole. 4

8 The schedule of board officials and organization chart has not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on it. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 18, 2015, on our consideration of the Schools internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Schools internal control over financial reporting and compliance. Memphis, Tennessee December 18,

9 Management's Discussion and Analysis Year Ended June 30, 2015 INTRODUCTION The discussion and analysis of the Board of Education of Collierville Schools ( Collierville Schools or Schools ) financial performance provides an overview of the Schools financial activities for the fiscal year ended June 30, The intent of this management discussion and analysis is to look at the Schools financial performance as a whole; readers should also review the financial statements and notes to financial statements to enhance their understanding of Collierville Schools financial performance. Management s Discussion and Analysis ( MD&A ) is an element of the reporting model adopted by the Governmental Accounting Standards Board ( GASB ) in their Statement No. 34, Basic Financial Statements and Management s Discussion and Analysis for State and Local Governments, issued June Certain comparative information between the current year and the prior year is required to be presented in the MD&A. However, since this was the Schools first year of operation, comparative presentation will be available beginning with the year ending June 30, FINANCIAL HIGHLIGHTS Key financial highlights for the fiscal year ended June 30, 2015 are as follows: Total revenue realized in 2015 was $73.6 million. Several factors contributed to this. Basic Education Program ( BEP ) revenue totaled $32.4 million with a growth amount of $0.8 million at the end of the fiscal year. In the area of grants, Schools received the bulk of its grant funding in IDEA totaling $1.1 million. Expenses totaled $59.0 million in 2015 with 61% of this amount reflected in the Instruction category. Other large dollar expense areas were student transportation, utilities, janitorial services, and maintenance. The capital projects fund included $0.6 million from the roofing project at Collierville High School. Total Net Position for was $61.5 million resulting from the recording of capital assets, the longterm liability for OPEB and the long-term liability for the Schools litigation settlement with Shelby County Board of Education. Ending governmental fund balances totaled $10.2 million for fiscal year OVERVIEW OF FINANCIAL STATEMENTS This discussion and analysis is intended to serve as an introduction to the Schools basic financial statements. The basic financial statements comprise three components: 1) district-wide financial statements, 2) fund financial statements, and 3) notes to financial statements. This report also contains other supplementary information in addition to the basic financial statements. District-wide financial statements The district-wide financial statements are designed to provide readers with a broad overview of the Schools finances in a manner similar to a private-sector business. The Statement of Net Position presents information on all of the Schools assets, deferred inflows of resources, liabilities, and deferred outflow of resources, with the remainder reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the Schools is improving or deteriorating. 6

10 Management's Discussion and Analysis Year Ended June 30, 2015 The Statement of Activities presents information showing how net position changed during the fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of the related cash flows. Thus, revenues and expenses are reported in the statement for some items that will result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but not used vacation leave). 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 Schools, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental funds All of the Schools activities are reported in governmental funds (general purpose, capital projects, federal projects, and other), which focus on how money flows in and out of those funds and the balances left at year-end available for spending in future periods. The governmental fund statements provide a detailed short-term view of the Schools general operations and the basic services it provides. Notes to financial statements The notes provide additional information that is essential to a full understanding of the data provided in the district-wide and fund financial statements. District-wide financial analysis The statements of net position for fiscal 2015 and 2014 are summarized below: (in millions) Total assets $ 68.1 $ 52.6 Total deferred outflows of resources Total liabilities Total deferred inflows of resources Total Net Position $ 61.5 $ 46.9 The Statements of Activities for 2015 and 2014 are summarized below: (in millions) Governmental activities Program revenues: Operating grants and contributions $ 35.6 $ - Charges for services General revenues: Taxes General contributions Other revenues Total revenues

11 Management's Discussion and Analysis Year Ended June 30, 2015 Expenses: Instruction Support services Administration Plant Operations & maintenance Student Transportation Capital Outlay Food Service Interest Charges Total Expenses Special item litigation settlement Special item transfer of operations - - (5.3) 52.2 Increase in Net Position Net Position - Beginning of Year, as restated Net Position - End of Year $ 61.5 $ 46.9 Revenues Collierville Schools total revenue was $73.6 million in Operating grants and contributions totaled $35.6 million which includes BEP revenue, which totaled $32.4 million with an increase of $0.8 million at the end of the fiscal year, and IDEA funding totaling $1.1 million for the 2015 fiscal year. In addition, there was a $5.0 million transfer from the Town of Collierville, Tennessee (the Town ) for initial start-up for Property tax revenues and other tax collections from Shelby County increased 8% over budgeted amounts. Expenses Expenses totaled $59.0 million in 2015 with the bulk of this amount being spent in the Instruction area. This consists primarily of teachers salaries and benefits, substitutes, computer equipment, and the instructional supplies and materials needed in the schools. Other major expenses incurred in 2015 consisted of student transportation, janitorial services, and utilities. The table below presents the total and net cost of the major activities of Collierville Schools: instruction, support services, administration, operation and maintenance of plant, student transportation, food services, capital outlay, and interest charges. (in millions) Total Cost of Services 2015 Net Cost of Services 2015 Expenses: Instruction $ 36.2 $ 1.6 Support services Administration Operation and maintenance of plant Student transportation Capital outlay Food service Interest charges Total expenses $ 59.0 $

12 Management's Discussion and Analysis Year Ended June 30, 2015 Net cost of services is the total cost less fees generated by the activities and intergovernmental revenue provided for specific programs. The net cost shows the financial burden on taxpayers by each activity. The total cost of governmental services in 2015 was $59.0 million. Federal and state grants, subsidized programs, and contributions financed $36.7 million of the cost. The local town and state taxpayers financed the remainder of Schools cost, which was $22.4 million for Financial analysis of the schools funds Collierville Schools ended fiscal year 2015 with strong fund balances in its governmental funds. The combined balance of all governmental funds was $10.2 million. Approximately 88% of the total fund balance is unassigned. The remainder of the fund balance is primarily assigned for future specific spending, in this case, OPEB. Overall, the Schools maintained adequate cash balances and ended the year in a strong financial position. General purpose fund budgetary highlights The general purpose fund budget was amended three times during the year. Total revenues were $6.8 million more than originally anticipated. Key factors contributing to the increase were as follows: Received $5.0 million transfer from the Town at the beginning of the year. Shelby County Taxes were $1.7 million more than anticipated. BEP growth money was received at the end of the fiscal year in the amount of $0.8 million. General fund expenditures budget Actual general fund expenditures were $58.0 million or 6% less that the original 2015 budget. The majority of the variance can be attributed to leaner expenditures in all support services areas than was anticipated at the outset. General purpose fund fund balance The general purpose fund s fund balance totaled $10.1 million in Should Collierville Schools ever need to budget a deficit to fund the next school year s operations, the State BEP requires that 3% of the subsequent year s budgeted expenses be held in fund balance. Any remaining fund balance above this amount can be appropriated for use in the subsequent fiscal year. As Collierville Schools has not budgeted for a deficit for fiscal 2016, no amounts have been reserved in fund balance and; thus, remain in the unassigned fund balance of the general purpose fund. Capital projects fund Collierville Schools uses capital projects funds to account for school construction and improvement projects, which are financed primarily through Town and Shelby County bond issues. In fiscal 2015, Collierville Schools replaced the roof on Collierville High School using funds received from Shelby County Government in the amount of $0.6 million paid through Shelby County Schools. The Town funded the renovation of the track at Collierville High School in the amount of $0.2 million. Additional construction program expenditures included flooring at Crosswind Elementary School, furniture at the new Central Office, and the initial architectural and study fees for the new Collierville High School totaling approximately $0.6 million. Capital assets Collierville Schools investment in capital assets for its governmental activities as of June 30, 2015, amounted to $52.7 million (net of accumulated depreciation). This investment in capital assets includes land, buildings, improvements, and equipment and furniture. 9

13 Management's Discussion and Analysis Year Ended June 30, 2015 Capital Assets, net of depreciation are as follows: (in millions) Land $ 4.4 $ 4.4 Construction in progress Equipment and furniture Buildings and improvements Total $ 52.7 $ 52.2 Long-term debt Collierville Schools has no long-term debt as the school Board is fiscally dependent on the Town for the issuance of debt for its capital projects. However, Collierville Schools does have a long-term obligation for the settlement of litigation related to the creation of the Collierville Schools municipal school district. At June 30, 2015, the Schools still owed $5.0 million to Shelby County payable through fiscal Factors bearing on Collierville Schools future One of the greatest challenges facing Collierville Schools is the planning for and building of a new high school. During the school year, the Board of Education was approached with the issue of enrollment at the high school exceeding the capacity to house those students. Not only did the high school need space but Collierville Schools also needed more space in the middle school grade span. At the June 5, 2015 school Board meeting, the school Board approved the recommendation to purchase a site and develop a new high school. At this time, the plan is to start the construction in the spring of 2016 and start the first class in the fall of The third middle school would open at that same time in the former high school building. Collierville Schools is currently embarking on its Digital Learning project. This is the Schools version of a 1:1 initiative which will eventually put devices into the hands of all students ensuring a more enriched technology-driven learning experience for all students in Collierville Schools. At this time, the project is in its initial planning stage. Upon finishing its first year as a municipal school system, the Superintendent s number one goal for the upcoming years is fiscal accountability. Collierville Schools has an obligation to the citizens of the Town of Collierville, Tennessee to provide a quality education to all their students, preparing them for a life of scholarship, integrity, and service. In order to do that, Collierville Schools must run a fiscally sound operation. The Schools will continue to maximize all financial resources available in order to provide a quality education for all its students. Requests for information This financial report is designed to provide citizens, taxpayers, parents, students, investors, and creditors with a general overview of Collierville Schools finances and to show the Schools accountability for the funds it receives. Additional details and/or questions can be requested by mail at the following address: Collierville Schools Chief Financial Officer 146 College Street Collierville, Tennessee

14 Statement of Net Position June 30, 2015 Assets Cash $ 12,185,048 Receivables Other governments 3,092,162 Other 100,531 Inventory 29,303 Capital assets not being depreciated 5,652,931 Capital assets being depreciated, net 47,002,048 Net pension asset 1,675 Total assets 68,063,698 Deferred outflows of resources Actuarial losses - pension 149,528 Pension contributions submitted after measurement date 3,511,047 Total deferred outflows of resources 3,660,575 Liabilities Accounts payable and accrued liabilities 4,026,479 Due to Town of Collierville, net 421,263 Unearned revenue 53,597 Settlement liability Due within one year 471,093 Due in more than one year 4,514,203 OPEB liability Due in more than one year 585,910 Total liabilities 10,072,545 Deferred inflows of resources Actuarial gains - pension 138,067 Total deferred inflows of resources 138,067 Net position Investment in capital assets 52,654,979 Restricted Child nutrition 29,303 Capital projects 92,341 Unrestricted 8,737,038 Total net position $ 61,513,661 See notes to financial statements. 11

15 Statement of Activities For the Year Ended June 30, 2015 Net (Expense) Revenue and Changes in Net Position Operating Charges for Grants and Governmental Expenses Services Contributions Activities Functions/Programs Instruction $ 36,131,264 $ 139,674 $ 34,500,094 $ (1,491,496) Support services 6,824, ,723 (6,327,832) Administration 7,810, (7,810,014) Operation and maintenance of plant 4,526, (4,526,520) Student transportation 1,947, (1,947,294) Food service 1,649, , ,713 (137,895) Interest charges 111, (111,496) Total $ 58,888,982 $ 1,082,401 $ 35,565,530 (22,352,547) General revenues: Shared revenues - taxes 30,689,006 General contributions 5,953,929 Other revenues 295,737 Total general revenues 36,938,672 Change in net position 14,586,125 Net position - beginning of year, as restated 46,927,536 Net position - end of year $ 61,513,661 See notes to financial statements. 12

16 Balance Sheet - Governmental Funds June 30, 2015 Total General Purpose Federal Projects Cafeteria Discretionary Grants Capital Projects Governmental Fund Fund Fund Funds Funds Funds Assets Cash $ 12,185,048 $ - $ - $ - $ - $ 12,185,048 Receivables Other governments 2,357, ,220-32, ,789 3,092,162 Other 100, ,531 Due from other funds 225,350-34, ,429 Inventory , ,303 Total assets $ 14,868,584 $ 100,220 $ 63,382 $ 32,498 $ 601,789 $ 15,666,473 Liabilities Accounts payable and accrued liabilities $ 3,612,955 $ 80,865 $ 205 $ 5,455 $ 326,999 $ 4,026,479 Due to Town of Collierville 421, ,263 Due to other funds 34,079 19,355-23, , ,429 Unearned revenue 730,831-33,874 3, ,202 Total liabilities 4,799, ,220 34,079 32, ,448 5,475,373 Fund balances Nonspendable , ,303 Restricted ,341 92,341 Assigned 1,067, ,067,508 Unassigned 9,001, ,001,948 Total fund balances 10,069,456-29,303-92,341 10,191,100 Total liabilities and fund balances $ 14,868,584 $ 100,220 $ 63,382 $ 32,498 $ 601,789 $ 15,666,473 See notes to financial statements. 13

17 Reconciliation of the Balance Sheet - Governmental Funds to the Statement of Net Position For the Year Ended June 30, 2015 Total fund balance - governmental funds $ 10,191,100 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 reported in funds. 52,654,979 Some revenues or expenditures reported in the statement of activities are not yet available or expensed and therefore are not reported as revenue or expenses in governmental funds 714,605 The net pension asset resulted from the excess of trust assets over total pension liabilities, the net of which is reported as net pension asset, deferred outflows of resources, and deferred inflows of resources in the statement of net position. These amounts are not available for use in the current period; therefore, are not reported in the funds. 3,524,183 The other postemployement benefits (OPEB) liability resulted from the cummulative excess of required contributions over actual contributions to the School's OPEB trust. These liabilities are included in governmental activities in the statement of net position. (585,910) The liability for the litigation settlement is not due and payable in the current period; therefore, is not reported in the funds. (4,985,296) Total net position - governmental activities $ 61,513,661 See notes to financial statements. 14

18 Statement of Revenues, Expenditures, and Changes in Fund Balances - Governmental Funds For the Year Ended June 30, 2015 Total General Purpose Federal Projects Cafeteria Discretionary Grants Capital Projects Governmental Fund Fund Fund Fund Fund Funds Revenues Shared revenue - county taxes $ 29,806,947 $ - $ - $ - $ - $ 29,806,947 Shared revenue - other local taxes 167, ,454 Federal funds - 1,881, , ,449,915 State funds 33,002, ,172-33,115,615 General contributions from Town of Collierville 5,259, ,259,800 General contributions from Shelby County , ,129 Charges for services 139, , ,082,401 Other revenue 295, ,737 Total revenues 68,672,055 1,881,202 1,511, , ,129 72,871,998 Expenditures Instructional programs Regular education program 31,783, , ,990,495 Special education program 4,241, ,241,942 Vocational education program 883, ,537 Alternative education program 268, ,589 Support services 5,561,256 1,566,915-72,802-7,200,973 General administration 1,531, ,531,364 School administration 4,235, ,235,366 Business administration 2,855, ,855,547 Operation and maintenance of plant 4,183, ,183,302 Student transportation 1,941, ,941,466 Capital outlays 506,674 71,940 40,470 40, ,146 1,647,600 Food services - - 1,700, ,700,717 Total expenditures 57,992,667 1,845,726 1,741, , ,146 62,680,898 Excess of revenues over expenditures 10,679,388 35,476 (229,747) - (294,017) 10,191,100 Other financing sources (uses) Transfer in 35, , , ,884 Transfer out (645,408) (35,476) (680,884) Total other financing sources (uses) (609,932) (35,476) 259, ,358 - Net change in fund balance 10,069,456-29,303-92,341 10,191,100 Fund balance - beginning of year Fund balance - end of year $ 10,069,456 $ - $ 29,303 $ - $ 92,341 $ 10,191,100 See notes to financial statements. 15

19 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balance - Governmental Funds to the Statement of Activities For the Year Ended June 30, 2015 Net change in fund balance, total governmental funds $ 10,191,100 Amounts reported for governmental activities in the statement of activities are different because: Governmental funds report capital outlays as expenditures. In the statement of activities, the cost of those assets is allocated over their estimated useful lives as depreciation expense. Capital outlays capitalized 2,111,758 Depreciation expense (1,727,282) Loss from the disposition of capital assets are reported net of any remaining book net value in the statement of activities. (2,710) Some revenues or expenditures reported in the statement of activities are not yet available or expensed and therefore are not reported as revenue or expenses in governmental funds 714,605 Contributions made to pension plans after the measurement date (June 30, 2014) will not be recognized as an increase in the net pension asset until the following measurement date (June 30, 2015), which will be used to report the net pension liability in the next fiscal year. 3,511,047 Pension and other post-employment benefit expense represents the costs of benefits accrued in the current year, net of changes in deferred outflows and inflows of resources. This expense is not an expenditure of the funds, and; therefore, has not been recorded as a change in net fund balance in the fund financial statements. (608,716) The liability for the litigation settlement is not due and payable in the current period and; therefore, is not reported in the funds. Current year payment 507,819 Interest charges (111,496) Change in net position of governmental activities $ 14,586,125 See notes to financial statements. 16

20 Statement of Revenue, Expenditures, and Changes in Fund Balance Budget and Actual (Budgetary Basis) - General Purpose Fund For the Year Ended June 30, 2015 Budgeted Amounts Original Final Actual Variance with Final Budget - Positive (Negative) Revenues Shared revenue - county taxes $ 27,893,954 $ 30,490,340 $ 29,806,947 $ (683,393) Shared revenue - other local taxes - 167, ,454 - Federal funds 143,442 18,873 18,873 - State funds 32,095,654 33,002,443 33,002,443 - General contributions from Town of Collierville - 5,259,800 5,259,800 - Charges for services 1,318,012 1,259, ,674 (1,119,812) Other revenue 387, , ,864 - Total revenues 61,838,826 70,475,260 68,672,055 (1,803,205) Expenditures Regular education program 32,667,057 33,584,199 31,783,624 1,800,574 Special education program 4,477,903 4,474,903 4,241, ,961 Vocational education program 919, , ,537 35,551 Alternative education programs 291, , ,589 23,372 Support services 6,116,805 6,221,328 5,561, ,072 General administration 1,416,118 1,664,783 1,531, ,419 School administration 4,260,139 4,291,345 4,235,366 55,979 Business administration 3,096,942 3,101,896 2,855, ,349 Operation and maintenance of plant 4,625,687 4,730,257 4,183, ,955 Student transportation 3,482,426 2,950,408 1,941,466 1,008,942 Capital outlays 484, , , ,960 Total expenditures 61,838,826 63,123,802 57,992,667 5,131,134 Excess of revenues over expenditures before transfers - 7,351,458 10,679,388 3,327,929 Other financing sources (uses) Transfers in - 35,476 35,476 - Transfers out - - (645,408) (645,408) Total other financing sources (uses) - 35,476 (609,932) (645,408) Net change in fund balance $ - $ 7,386,934 10,069,456 $ 2,682,521 Fund balance - beginning of the year - Fund balance - end of the year $ 10,069,456 See notes to financial statements. 17

21 Statement of Revenue, Expenditures, and Changes in Fund Balance Budget and Actual (Budgetary Basis) - Federal Projects Fund For the Year Ended June 30, 2015 Budgeted Amounts Original Final Actual Variance with Final Budget - Positive (Negative) Revenues Federal grants $ 2,307,470 $ 2,343,295 $ 1,881,202 $ (462,093) Total revenue 2,307,470 2,343,295 1,881,202 (462,093) Expenditures Current Instruction - Title I-A Personnel 192, , , Contractual Supplies 110, In-service/staff development 12, (300) Other 16, , , , IDEA-B Individuals with Disabilities Ed. Act Personnel 1,308,054 1,311,166 1,106, ,037 Contractual 36,086 36,084 9,750 26,334 Supplies In-service/staff development Other 26, ,371,023 1,347,250 1,115, ,371 Support and training Personnel 393, , ,617 14,736 Contractual Supplies 45,634 37,071 5,414 31,657 In-service/staff development 40, ,784 27,130 84,654 Other 26,090 8,835 8, , , , ,098 Preschool inventive Personnel 10,808 5,845 2,591 3,254 Contractual 1,500 1,500 1,500 - Other ,554 7,345 4,091 3,254 Capital Capital expenditures 87, ,869 71,940 42,929 Total expenditures 2,307,470 2,254,805 1,845, ,079 Excess of revenues over expenditures before transfers - 88,490 35,476 (53,014) Other financing uses Transfers out - (49,534) (35,476) 14,058 Total other financing uses - (49,534) (35,476) 14,058 Net change in fund balance $ - $ 38,956 - $ (38,956) Fund balance - beginning - Fund balance - ending $ - See notes to financial statements. 18

22 Statement of Fiduciary Net Position - Agency Fund - School Activities June 30, 2015 ASSETS Cash $ 1,020,027 Inventories 16,668 Total assets $ 1,036,695 LIABILITIES Due to schools general fund $ 644,656 Due to student groups 392,039 Total liabilities $ 1,036,695 See notes to financial statements. 19

23 Notes to Financial Statements Year Ended June 30, 2015 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES In April 2013, Governor Bill Haslam approved House Bill 1288 allowing for the creation of six new municipal school districts in Shelby County. The voters of Collierville, Tennessee, and five other municipalities, approved the creation of a separate municipal school district in a special referendum held in July In June 2014, the Shelby County Board of Education transferred the operations of the eight schools operating within the Town of Collierville, Tennessee to the Collierville Schools municipal school district. In fiscal 2014, Collierville Schools recorded the transfer of operations as a special item in the statement of activities in the amount of $52,215,436, reflecting the carrying amount of the assets transferred in accordance with GASB No. 69. Collierville Schools also settled its lawsuit over the creation of the municipal school districts with the Shelby County Board of Education, incurring a liability and expense of $5,324,494. The municipal school district s first year of full operations began with school year. The Board of Education of Collierville Schools ( Collierville Schools or the Schools ) complies with accounting principles generally accepted in the United States of America ( GAAP ) as codified by Governmental Accounting Standards Board ( GASB ) Statement No. 62, Codification of Accounting and Financial Reporting Guidance in Pre-November 30, 1989 FASB and AICPA Pronouncements. The accounting framework and the more significant accounting policies are discussed in subsequent subsections of this note. (A) Determination of the reporting entity Collierville Schools is a collection of four special revenue funds, a capital projects fund, and a fiduciary fund of the Town of Collierville, Tennessee (the Town ). Accordingly, the accounts and transactions reported in the accompanying financial statements are included in the Town s Comprehensive Annual Financial Report. Collierville Schools is governed by a five member Board of Education; however, matters which may financially obligate the Town must also be approved by the Board of Mayor and Aldermen of the Town. (B) Basis of accounting District-wide financial statements The district-wide financial statements (i.e., the statement of net position and the statement of activities) report information about Collierville Schools as a whole. These statements include the financial activities of the Schools. The statement of activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues. As a general rule, the effect of interfund activity has been eliminated from the district-wide financial statements. The result of these eliminations is a more accurate reporting of the Schools overall revenues and expenses from its activities. Governmental fund financial statements The governmental fund financial statements of the reporting entity are organized into funds, each of which are considered to be separate accounting entities. Each fund is accounted for by providing a set of selfbalancing accounts which constitute its assets, deferred outflows of resources, liabilities, deferred inflows of resources, fund balance, revenues, and expenditures. The Schools governmental fund financial statements include a balance sheet and a statement of revenues, expenditures, and changes in fund balances for all major governmental funds. An accompanying schedules is presented to reconcile and 20

24 Notes to Financial Statements Year Ended June 30, 2015 explain the differences in fund balances and changes in fund balances as presented in these statements to the net position and changes in net position presented in the district-wide financial statements. Collierville Schools has elected to present all of its funds as major funds. The major funds of the financial reporting entity are described below: Governmental funds Fiduciary fund General Purpose Fund The General Purpose Fund, as the primary operating fund, is used to account for all financial resources except those required to be accounted for in another fund. Federal Projects Fund The Federal Projects Fund relates to resources obtained and used under certain federal and state programs and to other sources upon which legal restrictions are imposed. Cafeteria Fund The Cafeteria Fund is used for operating child nutrition programs only. The Cafeteria Fund includes grant proceeds that are legally restricted to expenditures for the specific purpose of child nutrition. Discretionary Grants Fund The Discretionary Grants Fund is used to account for all grant financial resources except those required to be accounted for in the Federal Projects Fund or Cafeteria Fund. These are not federal in nature but rather are derived from local and state entities. Capital Projects Fund The Capital Projects Fund relates to resources obtained and used for the acquisition, construction or improvement of capital facilities. The primary funding source is bond proceeds from the Town. Agency Fund Agency Funds report resources held by the reporting government in a purely custodial capacity (the receipt, temporary investment, and remittance of fiduciary resources). Assets are offset by liabilities in the statement of fiduciary net position for agency funds. The Agency Fund used by the Schools is as follows: The Student Activity Fund accounts for all money received from any source for schoolsponsored student activities or school-sponsored events held at or in connection with a school. Each school maintains its own bank account and records related to their student activities. (C) GASB accounting pronouncements Collierville Schools implemented GASB Statement No. 68, Financial Reporting for Pension Plans An Amendment of GASB Statement No. 27 ( GASB No. 68 ), and GASB Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date an amendment of GASB Statement No. 68 (GASB No. 71 ), for fiscal year GASB No. 68 revises existing guidance for the financial reports of most pension plans for state and local governments and replaces the requirements of Statement No. 27 and Statement No. 50 as they relate to pensions that are provided through pension plans administered as trusts or equivalent arrangements that meet certain criteria. GASB No. 68 improves accounting and financial reporting by state and local governments for pensions. It also improves information provided by state and local governmental employers about financial support for pensions that is provided by other entities. GASB No. 71 amended GASB 68 s requirement that all deferred inflows and outflows must be reported for years being restated or no such items should be reported to allow for an exception for 21

25 Notes to Financial Statements Year Ended June 30, 2015 contributions made after the measurement date, allowing these contributions to be reported as deferred outflows of resources. See Note 2 to the financial statements for additional information related to the adoption of this accounting pronouncement. (D) Measurement focus and basis of accounting Measurement focus is a term used to describe which transactions are recorded within the various financial statements. Basis of accounting refers to when transactions are recorded regardless of the measurement focus applied. Measurement focus The district-wide financial statements are reported using the economic resources measurement focus. Accordingly, all of the Schools assets and liabilities, including capital assets and long-term pension liabilities, along with deferred inflows and outflows of resources, are included in the accompanying statement of net position. The statement of activities presents changes in net position. In the fund financial statements, the current financial resources measurement focus or the economic resources measurement focus is used as appropriate. All governmental funds utilize a current financial resources measurement focus. Only current financial assets, deferred outflow of resources, liabilities, and deferred inflow of resources are generally included on their balance sheets. Their operating statements present sources and uses of available spendable financial resources at the end of the period. Basis of accounting The district-wide statement of net position and statement of activities are presented using the accrual basis of accounting. Under the accrual basis of accounting, revenues are recognized in the period in which they are earned while expenses are recognized in the period in which the liability is incurred or economic asset used. Revenues, expenses, gains, losses, assets, and liabilities resulting from exchange and exchangelike transactions are recognized when the exchange takes place. In the fund financial statements, governmental funds are presented on the modified accrual basis of accounting. Under the modified accrual basis of accounting, revenues are recognized in the accounting period in which they become both measurable and available to finance expenditures of the current period. Accordingly, revenues are recorded when received in cash, except that revenues subject to accrual (generally 60 days after year-end) are recognized when due. The primary revenue sources, which have been treated as susceptible to accrual by the Schools, are property taxes and other local taxes. Expenditures are recorded in the accounting period in which the related fund liability is incurred. (E) Budgeting and budgetary control General purpose and federal projects funds revenue and expenditures are controlled by a formal integrated budgetary accounting system in accordance with various legal requirements that govern the operations of the Schools. The budgetary basis of accounting differs from generally accepted accounting principles because encumbrances have been recorded as expenditures. The original budget and all subsequent amendments to the budget, resulting in an increase of expenditures and other financing uses (e.g. transfers) of $1,281,845, are approved by the Board of Education of Collierville Schools as well as the Board of Mayor and Alderman of the Town. The capital projects fund, the cafeteria fund, and the discretionary grants fund are not legally required to adopt an annual budget. (F) Deposits Custodial credit risk is the risk that in the event of a bank failure, the Schools deposits may not be returned to it. Although Collierville Schools has not adopted a formal deposit policy, its policy is to fully collateralize bank deposits in excess of federally insured amounts. Note 3 summarizes the Schools exposure to custodial credit risk. 22

26 Notes to Financial Statements Year Ended June 30, 2015 (G) Receivables Receivables consist primarily of grant funds receivable from the federal government and the State of Tennessee, property taxes receivables from Shelby County, and funds due from the Town for capital projects. (H) Shared revenues Collierville Schools recognizes its share of real and personal property taxes, sales taxes, and other local taxes as revenue in the fiscal year collected by the State of Tennessee, Shelby County, or the Town, as applicable. Collierville Schools does not have any taxing authority. Consequently, the Schools rely on a share of real and personal property taxes collected by Shelby County (the County ). The County tax levy of $4.37 per $100 of assessed value includes $2.14 for both the county schools and the municipal schools of Shelby County. Distribution of the $2.14 to the county schools and the municipal school districts is based on the average daily attendance of each system. Approximately 79.25% and 20.75% was distributed to Shelby County Schools and the municipal school districts of Shelby County, respectively. (I) Inventory Inventory consists of food supplies and is presented at the lower of cost or market. Inventory is charged to operations when consumed using average cost. (J) Interfund transactions Interfund receivables and payables During the course of operations, numerous transactions occur that may result in amounts owed between individual funds. Those related to goods and services type transactions are classified as due to and from other funds. Short-term interfund loans are reported as interfund receivables and payables. Long-term interfund loans (noncurrent portion) are reported as advances from and to other funds. Interfund receivables and payables are eliminated in the statement of net position. Interfund transfers Permanent reallocations of resources between funds of the reporting entity are classified as interfund transfers. Transfers between funds are used to ensure current operations and programs are not interrupted. For the purpose of the statement of activities, all transfers between individual governmental funds have been eliminated. (K) Capital assets Capital assets, which include land, buildings, equipment and furniture, and construction in progress, are reported in the district-wide financial statements. Capital assets are defined by policy as assets with an initial, individual cost of $5,000 or more with a useful life of more than one year. Major outlays for capital assets and improvements are capitalized as projects are constructed. Gifts or contributions of capital assets, including intangible assets, are recorded at fair value when received. The cost 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 land and construction in progress, are depreciated. Depreciation is computed over the remaining useful lives of the related capital assets using the straight-line method of depreciation. Estimated useful lives are as follows: Building and Building improvements Furniture and equipment 25 to 50 years 5 to 20 years 23