MINNEWASKA SCHOOL DISTRICT

#2149AUDIT

HIGHLIGHTSYEAR ENDED JUNE 30, 2013

Audit Opinion- “Unqualified Opinion” audit report Pages 2-3

District’s Financial Position Improving!

CURRENT YEAR SUMMARY

Charges for Services9.2%

Federal & State Aids & Grant Programs70.2%

Property Taxes19.5%

Miscellaneous Local1.1%

Figure A-3 Sources of Minnewaska Area School's Revenues

Fiscal Year 2013

Year EndedJune 30, 2013

Year EndedJune 30, 2012

Amount ofIncrease

(Decrease)

%Increase

(Decrease)

Local Sources

Property Taxes $ 1,697,140 $ 1,635,425 $ 61,715 3.8%Interest

earnings 8,338 7,910 428 5.4%Other 1,167,743 1,285,209 (117,466) (9.1)%

State sources 10,035,296 10,038,479 3,183 0.0 %Federal sources 501,046 687,339 (186,293) (27.1)%Other Financing Sources 62.374 8,051 54,323 674.7%

Total GeneralFund Revenue $ 13,471,937 $ 13,662,413 $ (190,476) (1.4)%

General Fund Revenues

Administration & District Support4.2%

District Support Services1.9%

Direct Instruction33.1%

Vocational instruction0.4%Exceptional Instruction

28.2%

Community Ed2.0%

Instructional support services1.0%

Pupil & Instructional support 7.4%

Site, Buildings, Equipment13.0%

3 Others8.8%

Figure A-4 Minnewaska Area School's ExpensesFiscal Year 2013

Year EndedJune 30, 2013

Year EndedJune 30, 2012

Amount ofIncrease

(Decrease)

%Increase

(Decrease)

Salaries $ 7,256,717 $ 7,404,398 $ (147,681) ( 2.0)%Employees benefits 1,720,497 1,713,318 7,179 0.4%Purchased services 2,781,489 2,658,849 122,640 4.6%Supplies & material 732,101 667,102 64,999 9.7%Non-Capital equipment 129,125 143,689 (14,544) (10.1)%Capital Expenditures 170,494 99,353 71,141 71.6%Debt Service 243,295 224,865 18,430 8.2%Other expenditures 60,074 69,566 (9,492) (13.6)%

Total Expenditures $ 13,093,812 $ 12,981,140 $ 112,672 .9%

General Fund Expenditures

Fund BalancesFund Balances (Deficits) 2013 2012 Change

Total Nonspendable 323,491 246,632 76,859

Restricted for:

Debt Payment 264,290 328,550 (64,260)

Community Education 11,716 9,595 2,121

Staff Development 23,930 33,118 (9,188)

Deferred Maintenance 1 1 -0-Operating Capital 313,101 344,063 (30,962)

Gifted and Talented 1,962 6,016 (4,054)

Safe Schools -0- 1,395 (1,395)

Severance & Retirement 273,261 160,173 113,088

Total Restricted 888,261 882,911 5,350

Committed to:

Separation 478,322 478,322 -0-

Assigned to:

Retirement -0- 171,602 (171,602)

Music Department 26,799 -0- 26,799

Total Assigned 26,799 171,602 (144,803)

Unassigned General 997,051 614,619 382,432

Food Service (26,323) 5,503 (31,826)

Total Fund Balances $ 2,687,581 $2,399,589 287,992

Fund balance is divided into five classifications: Nonspendable Not in spendable form Restricted Fund balance is reported as

restricted when constraints externally imposed Committed Can be used only for the specific

purposes imposed by a formal action (resolution) of the School District Board of Education

Assigned Intended to be used by the School District for specific purposes

Unassigned All spendable amounts not contained in the other classifications

Fund Balance Classifications

Current = Aprox. $1 million

Ideal = Aprox. $2 million

"A budget tells us what we can't afford, but it keep us from buying it."— William Feather

Debt Relief Solution #1

Budgeted Amounts

Actual General Fund

Over (Under) BudgetOriginal Final

Revenues

Local property tax levies $ 1,723,894 $ 1,718,909 $ 1,697,140 $ (21,769)

Other local and county revenues 795,174 1,018,101 1,107,944 89,843

Revenues from state sources 9,890,364 9,939,359 10,035,296 95,937

Revenue from federal sources 520,150 501,421 501,046 (375)

Sales and other conversions of assets 41,634 67,695 68,137 442

Insurance recovery and settlement -0- -0- -0- -0-

Total Revenues $12,931,216 $ 13,245,485 $ 13,409,563 $ 164,078

General Fund Revenues- Budget to Actual

General Fund Expenditures 2013 Budgeted Amounts

2013 Actual General Fund

Over (Under) Final

BudgetCurrent: Original Final

District and school administration $ 570,055 $ 646,873 $ 628,284 $ (18,589)

District support services 298,460 264,670 266,172 1,502

Regular instruction 4,850,662 4,846,392 4,857,328 10,936

Vocational instruction 58,294 59,166 59,739 573

Exceptional instruction 4,136,532 4,283,170 4,339,035 55,865

Community education and services -0- -0- -0- -0-

Instructional support services 121,386 113,765 122,948 9,183

Pupil support services 1,142,201 1,121,730 1,127,854 6,124

Site, buildings and equipment 1,141,105 1,102,830 1,089,123 (13,707)

Fiscal and other fixed cost programs 62,463 60,395 60,395 -0-

Total Current 12,381,158 12,498,991 12,550,878 51,877

Capital Outlay 188,800 234,831 299,639 64,808

Debt Service:

Principal 117,555 128,967 128,251

(716)

Interest 110,045 109,788 110,011 223

Debt issuance costs 6,350 5,033 5,033 -0-

Total Debt Service 233,950 227,241 243,295 (493)

Total Expenditures $12,803,908 $12,977,610 $ 13,093,812 $ 116,202

Budgeted Amounts

Actual General Fund

Variances with Final Budget

Favorable (unfavorable)Original Final

Excess (deficiency) of revenue over expenditures 127,308 267,875 315,751 47,876

Other Financing Sources (Uses)

Sale of real property and equipment -0- -0- -0- -0-

Capital Equipment Lease -0- -0- 62,374 62,374

Total Other Financing Sources (Uses) $ -0- $ -0- $ 62,374 $ 62,374

Excess (Deficiency) of Revenues and Other Financing Sources Over (Under) Expenditures and Other Financing (Uses) $ 127,308 $ 267,875 $ 378,125 $ 110,250

Fund Balances - Beginning of Year

2,032,924 2,032,924 $ 2,032,924 -0-

Fund Balances - End of Year $ 2,160,232 $ 2,300,799 $ 2,411,049 $ 110,250

The property tax shift is an accounting entry that takes a portion of the school district's property tax revenue and moves it forward one

fiscal year, i.e., taxes that would otherwise be revenue for fiscal year 2014 are shifted into fiscal year 2013. This shift replaces state aid that will be repaid at some future date. The property tax

shift requirement is in Minnesota Statutes, section 123B.75, subdivision 5.

In less than 3 years OPEB Fund will have no assets remaining .

POST EMPLOYMENT SEVERANCEBENEFITS

Early Retirement Incentive (Severance) Plan

Post-Employment Insurance Benefits

2013

$653,814

2012

$638,495

The District has reserved and committed fund balance to cover this liability.

Fiscal Year Ended Annual OPEB CostPercentage of Annual OPEB

Cost Contributed Net OPEB Assets06/30/2013 $ 253,844 0.0% $ 696,97206/30/2012 $ 246,626 0.0% $ 950,816

06/30/2011 $ 135,537 0.0% $ 1,195,64206/30/2010 $ 126,471 0.0% $ 1,333,17906/30/2009 $ 184,629 739.8% $ 1,459,650

:

The District’s annual OPEB cost, the percentage of the annual OPEB cost contributed to the plan, and the net OPEB obligation are as follows

Prior Year Follow upCorrectedDeficiency 2012-1 Ineligible students were being

provided services by Title I teachers

Deficiency 2012-2- Controls did not detect that ineligible students were receiving free and reduced meals & some students should have received free and reduced benefits, but didn’t.

Deficiency 2012-3 – Documenting Time Charged to Federal Programs

Work in Progress Deficiency 2012-4 – Period End Financial

Reporting Process

Good Internal Controls

The audit requires separate reporting on our consideration of Internal Controls and Compliance.

Control deficiency is when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions to prevent or detect financial misstatements on a timely basis.

Material Weakness Reasonable possibility that a material misstatement of the

financial statements will not be prevented or detected by the District’s internal controls.

Significant DeficiencyDeficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance."

Internal Controls & Compliance Reporting Pages 65-66

MATERIAL WEAKNESSDeficiency 2013-1 Day Treatment Billings. Page 70

SIGNIFICANT DEFICIENCYDeficiency 2013-2 – Period End Financial Reporting Page 71

STATE COMPLIANCE Page 69No performance bond obtained on janitorial maintenance

contract

CURRENT YEAR SUMMARY

FEDERAL AWARDS COMPLIANCE Page 62 No deficiencies noted

The District has improved its financial position in the past year. Need to continue to strengthen its fund balances.

The District needs to continue to closely monitor its accounting for revenues & expenditures related to Day Treatment & Special Ed. Billings need to be done in a timely manner with proper oversight. Once payments for the prior year are finalized the current year budget should be reviewed as actual receipts can vary from estimated receipts.

The District needs to monitor its rising unfunded OPEB actuarial accrued liability and consider how it is going to fund the coming deficit. Also consider using General Fund assets instead of OPEB assets for future retirement incentives.

The District needs to balance the need for capital maintenance with taking on additional debt.

2013 Conclusions

Thanks to the District Staff for their cooperation during the audit.

SAS 114 Letter

Desautels Bartosiewski & Associates CPAs