FONTANA UNIFIED SCHOOL DISTRICT AUDIT … Letter ... The supplementary information is presented for...

FONTANAUNIFIEDSCHOOLDISTRICT

AUDITREPORT

FortheFiscalYearEndedJune30,2017

FONTANAUNIFIEDSCHOOLDISTRICTFortheFiscalYearEndedJune30,2017TableofContents

FINANCIALSECTION Page

IndependentAuditors'Report..................................................................................................................................................................1Management'sDiscussionandAnalysis...............................................................................................................................................3BasicFinancialStatements:Government‐wideFinancialStatements:

StatementofNetPosition...........................................................................................................................................................13StatementofActivities.................................................................................................................................................................14

GovernmentalFundsFinancialStatements:BalanceSheet...................................................................................................................................................................................15ReconciliationoftheGovernmentalFundsBalanceSheettotheStatementofNetPosition.......................16StatementofRevenues,Expenditures,andChangesinFundBalances.................................................................17ReconciliationoftheGovernmentalFundsStatementofRevenues,Expenditures,

andChangesinFundBalancestotheStatementofActivities...........................................................................18ProprietaryFundFinancialStatements:

StatementofNetPosition...........................................................................................................................................................19StatementofRevenues,Expenses,andChangesinNetPosition..............................................................................20StatementofCashFlows.............................................................................................................................................................21

FiduciaryFundsFinancialStatements:StatementofFiduciaryNetPosition......................................................................................................................................22StatementofChangesinFiduciaryNetPosition..............................................................................................................23

NotestoFinancialStatements...............................................................................................................................................................24

REQUIREDSUPPLEMENTARYINFORMATIONBudgetaryComparisonSchedule–GeneralFund.........................................................................................................................57BudgetaryComparisonSchedule–CafeteriaFund......................................................................................................................58ScheduleofChangesintheNetOPEBLiabilityandRelatedRatios......................................................................................59ScheduleofOPEBContributions...........................................................................................................................................................60ScheduleofInvestmentReturns...........................................................................................................................................................61ScheduleofProportionateShareoftheNetPensionLiability................................................................................................62ScheduleofPensionContributions......................................................................................................................................................63NotestotheRequiredSupplementaryInformation....................................................................................................................64

SUPPLEMENTARYINFORMATION

LocalEducationalAgencyOrganizationStructure.......................................................................................................................66ScheduleofAverageDailyAttendance..............................................................................................................................................67ScheduleofInstructionalTime.............................................................................................................................................................68ScheduleofFinancialTrendsandAnalysis......................................................................................................................................69ReconciliationofAnnualFinancialandBudgetReportwithAuditedFinancialStatements.....................................70ScheduleofExpendituresofFederalAwards.................................................................................................................................71NotetotheSupplementaryInformation...........................................................................................................................................72

FONTANAUNIFIEDSCHOOLDISTRICTFortheFiscalYearEndedJune30,2017TableofContents

OTHERINDEPENDENTAUDITORS'REPORTS Page

IndependentAuditors'ReportonInternalControloverFinancialReportingandonCompliance andOtherMattersBasedonanAuditofFinancialStatementsPerformedinAccordancewith GovernmentAuditingStandards.....................................................................................................................................................73IndependentAuditors'ReportonStateCompliance...................................................................................................................75IndependentAuditors'ReportonComplianceForEachMajorFederalProgramandReportonInternal ControlOverComplianceRequiredbytheUniformGuidance........................................................................................77

FINDINGSANDQUESTIONEDCOSTS

ScheduleofAuditFindingsandQuestionedCosts: SummaryofAuditors'Results......................................................................................................................................................79 CurrentYearAuditFindingsandQuestionedCosts...........................................................................................................80 SummaryScheduleofPriorAuditFindings...........................................................................................................................84ManagementLetter....................................................................................................................................................................................85

FinancialSection

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INDEPENDENTAUDITORS'REPORTBoardofEducationFontanaUnifiedSchoolDistrictFontana,CaliforniaReportontheFinancialStatementsWehaveauditedtheaccompanyingfinancialstatementsofthegovernmentalactivities,eachmajorfund,andthe aggregate remaining fund information of Fontana Unified School District, as of and for the fiscal yearended June 30, 2017, and the related notes to the financial statements, which collectively comprise theDistrict'sbasicfinancialstatementsaslistedinthetableofcontents.Management'sResponsibilityfortheFinancialStatementsManagement is responsible for the preparation and fair presentation of these financial statements inaccordancewithaccountingprinciplesgenerallyaccepted in theUnitedStatesofAmerica; this includes thedesign,implementation,andmaintenanceofinternalcontrolrelevanttothepreparationandfairpresentationoffinancialstatementsthatarefreefrommaterialmisstatement,whetherduetofraudorerror.Auditors'ResponsibilityOurresponsibilityistoexpressopinionsonthesefinancialstatementsbasedonouraudit.WeconductedourauditinaccordancewithauditingstandardsgenerallyacceptedintheUnitedStatesofAmerica,thestandardsapplicabletofinancialauditscontainedinGovernmentAuditingStandards,issuedbytheComptrollerGeneralof the United States, and the 2016‐17 Guide for Annual Audits ofK‐12 Local Education Agencies and StateComplianceReporting. Those standards require that we plan and perform the audit to obtain reasonableassuranceaboutwhetherthefinancialstatementsarefreefrommaterialmisstatement.Anauditinvolvesperformingprocedurestoobtainauditevidenceabouttheamountsanddisclosuresinthefinancialstatements.Theproceduresselecteddependontheauditor'sjudgment,includingtheassessmentoftherisksofmaterialmisstatementofthefinancialstatements,whetherduetofraudorerror.Inmakingthoserisk assessments, the auditor considers internal control relevant to the entity's preparation and fairpresentation of the financial statements in order to design audit procedures that are appropriate in thecircumstances,butnot for thepurposeofexpressinganopinionontheeffectivenessoftheentity's internalcontrol. Accordingly,we express no suchopinion.An audit also includes evaluating the appropriatenessofaccountingpoliciesusedandthereasonablenessofsignificantaccountingestimatesmadebymanagement,aswellasevaluatingtheoverallpresentationofthefinancialstatements.Webelievethattheauditevidencewehaveobtainedissufficientandappropriatetoprovideabasisforourauditopinions.OpinionsInouropinion,thefinancialstatementsreferredtoabovepresentfairly,inallmaterialrespects,therespectivefinancial position of the governmental activities, each major fund, and the aggregate remaining fundinformationofFontanaUnifiedSchoolDistrict, asof June30,2017, and the respective changes in financialposition and, where applicable, cash flows thereof for the fiscal year then ended in accordance withaccountingprinciplesgenerallyacceptedintheUnitedStatesofAmerica.

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ChangeinAccountingPrincipleAsdiscussedinNote1.I.tothebasicfinancialstatements,theDistricthaschangeditsmethodforaccountingandreporting forpostemploymentbenefitsother thanpensionsduring fiscalyear2016‐17due to theadoptionofGovernmentalAccountingStandardsBoardStatementNo.74,“FinancialReportingforPostemploymentBenefitPlans Other Than Pension Plans” and the early adoption of Governmental Accounting Standards BoardStatementNo.75,"AccountingandFinancialReportingforPostemploymentBenefitsOtherThanPensions".Theadoption of these standards required retrospective application, resulting in a $77,571,540 reduction ofpreviouslyreportednetpositionatJuly1,2016.Ouropinionisnotmodifiedwithrespecttothismatter.OtherMattersRequiredSupplementaryInformationAccounting principles generally accepted in the United States of America require that the management'sdiscussion and analysis on pages 3 through 12, budgetary comparison information on pages 57 and 58,scheduleofchangesinthenetOPEBliabilityandrelatedratiosonpage59,scheduleofOPEBcontributionsonpage 60, schedule of investment returns on page 61, schedule of proportionate share of the net pensionliabilityonpage62,andscheduleofcontributionsonpage63bepresentedtosupplementthebasicfinancialstatements. Such information, although not a part of the basic financial statements, is required by theGovernmentalAccountingStandardsBoard,whoconsidersittobeanessentialpartoffinancialreportingforplacingthebasicfinancialstatementsinanappropriateoperational,economic,orhistoricalcontext.Wehaveapplied certain limitedprocedures to the required supplementary information in accordancewithauditingstandards generally accepted in theUnited States ofAmerica,which consisted of inquiries ofmanagementabout the methods of preparing the information and comparing the information for consistency withmanagement'sresponses toour inquiries, thebasic financialstatements,andotherknowledgeweobtainedduringourauditofthebasicfinancialstatements.Wedonotexpressanopinionorprovideanyassuranceonthe information because the limited procedures do not provide us with sufficient evidence to express anopinionorprovideanyassurance.OtherInformationOur audit was conducted for the purpose of forming opinions on the financial statements that collectivelycomprisetheDistrict'sbasicfinancialstatements.Thesupplementaryinformationispresentedforpurposesofadditionalanalysisandisnotarequiredpartofthebasicfinancialstatements.ThescheduleofexpendituresoffederalawardsispresentedforpurposesofadditionalanalysisasrequiredbyTitle2U.S.CodeofFederalRegulations(CFR)Part200,UniformAdministrativeRequirements,CostPrinciples,andAuditRequirements forFederal Awards, and is also not a required part of the basic financial statements. The supplementaryinformation on pages 67 to 70 and the schedule of expenditures of federal awards on page 71 are theresponsibility ofmanagement andwere derived from and relate directly to the underlying accounting andother records used to prepare the basic financial statements. Such information has been subjected to theauditingproceduresappliedintheauditofthebasicfinancialstatementsandcertainadditionalprocedures,includingcomparingandreconcilingsuchinformationdirectlytotheunderlyingaccountingandotherrecordsused to prepare the basic financial statements or to the basic financial statements themselves, and otheradditional procedures in accordance with auditing standards generally accepted in the United States ofAmerica.Inouropinion,theinformationisfairlystatedinallmaterialrespectsinrelationtothebasicfinancialstatementsasawhole.Theinformationonpage66hasnotbeensubjectedtotheauditingproceduresappliedin theauditof thebasicfinancialstatementsandaccordingly,wedonotexpressanopinionorprovideanyassuranceonit.OtherReportingRequiredbyGovernmentAuditingStandardsInaccordancewithGovernmentAuditingStandards,wehavealsoissuedourreportdatedDecember12,2017,on our consideration of the District's internal control over financial reporting and on our tests of itscompliancewithcertainprovisionsof laws,regulations,contracts,andgrantagreementsandothermatters.Thepurposeofthatreportistodescribethescopeofourtestingofinternalcontroloverfinancialreportingandcomplianceandtheresultsofthattesting,andnottoprovideanopiniononinternalcontroloverfinancialreporting or on compliance. That report is an integral part of an audit performed in accordance withGovernment Auditing Standards in considering the District's internal control over financial reporting andcompliance.

Murrieta,CaliforniaDecember12,2017

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FigureA‐1.OrganizationofFontanaUnifiedSchoolDistrict'sAnnualFinancialReport

FONTANAUNIFIEDSCHOOLDISTRICTManagement'sDiscussionandAnalysis(Unaudited)FortheFiscalYearEndedJune30,2017ThisdiscussionandanalysisofFontanaUnifiedSchoolDistrict'sfinancialperformanceprovidesanoverviewoftheDistrict'sfinancialactivitiesforthefiscalyearendedJune30,2017.PleasereaditinconjunctionwiththeDistrict'sfinancialstatements,whichimmediatelyfollowthissection.FINANCIALHIGHLIGHTS The District's financial status increased overall as a result of this year's operations. Net position of

governmentalactivitiesincreasedby$26.7million,or29.8%. Governmentalexpenseswereabout$513.9million.Revenueswereabout$540.6million. TheDistrictacquiredover$12.7millioninnewcapitalassetsduringtheyear.Theseexpenditureswere

incurredprimarilyfromconstructioninprogressandequipmentpurchases. TheDistrict decreased its outstanding long‐termdebtby $22.5million. Thiswasprimarilydue to the

decreaseinOPEBliabilityandbondpayments. GradesK‐12averagedailyattendance(ADA)decreasedby704,or1.9%.OVERVIEWOFTHEFINANCIALSTATEMENTSThis annual report consists of three parts – management discussion and analysis (this section), the basicfinancial statements, and required supplementary information. The basic financial statements include twokindsofstatementsthatpresentdifferentviewsoftheDistrict: Thefirsttwostatementsaredistrict‐widefinancialstatementsthatprovidebothshort‐termandlong‐term

informationabouttheDistrict'soverallfinancialstatus. The remaining statements are fund financial statements that focus on individual parts of the District,

reportingtheDistrict'soperationsinmoredetailthanthedistrict‐widestatements. Thegovernmental fundsstatementstellhowbasicservices likeregularandspecialeducationwere

financedintheshorttermaswellaswhatremainsforfuturespending. Short and long‐term financial information about the activities of the District that operate like

businesses(self‐insurancefunds)areprovidedintheproprietaryfundsstatements. Fiduciary funds statement provides information about the financial relationships in which the

Districtactssolelyasatrusteeoragentforthebenefitofotherstowhomtheresourcesbelong.Thefinancialstatementsalsoinclude notes that explainsome of the information inthe statements and providemore detailed data. FigureA‐1 shows how the variousparts of this annual reportare arranged and related tooneanother.

Management'sDiscussionandAnalysis

BasicFinancial

Information

RequiredSupplementaryInformation

FundFinancialStatements

District‐WideFinancialStatements

NotestoFinancialStatements

SUMMARY DETAIL

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FONTANAUNIFIEDSCHOOLDISTRICTManagement'sDiscussionandAnalysis(Unaudited)FortheFiscalYearEndedJune30,2017

OVERVIEWOFTHEFINANCIALSTATEMENTS(continued)FigureA‐2summarizesthemajorfeaturesoftheDistrict'sfinancialstatements,includingtheportionoftheDistrict'sactivitiestheycoverandthetypesofinformationtheycontain.FigureA‐2.MajorFeaturesoftheDistrict‐WideandFundFinancialStatements

TypeofStatements

District‐Wide

GovernmentalFunds

ProprietaryFunds

FiduciaryFunds

Scope EntireDistrict,exceptfiduciaryactivities

TheactivitiesoftheDistrictthatarenotproprietaryorfiduciary,suchasspecialeducationandbuildingmaintenance

ActivitiesoftheDistrictthatoperatelikeabusiness,suchasself‐insurancefunds

InstancesinwhichtheDistrictadministersresourcesonbehalfofsomeoneelse,suchasscholarshipprogramsandstudentactivitiesmonies

Requiredfinancialstatements

StatementofNetPosition

StatementofActivities

BalanceSheet

StatementofRevenues,Expenditures&ChangesinFundBalances

StatementofNetPosition

StatementofRevenues,Expenses,&ChangesinNetPosition

StatementofCashFlows

StatementofFiduciaryNetPosition

StatementofChangesinFiduciaryNetPosition

Accountingbasisandmeasurementfocus

Accrualaccountingandeconomicresourcesfocus

Modifiedaccrualaccountingandcurrentfinancialresourcesfocus



Typeofasset/liabilityinformation

Allassetsandliabilities,bothfinancialandcapital,short‐termandlong‐term

Onlyassetsexpectedtobeusedupandliabilitiesthatcomedueduringtheyearorsoonthereafter;nocapitalassetsincluded

Allassetsandliabilities,bothshort‐termandlong‐term;TheDistrict'sfundsdonotcurrentlycontainnonfinancialassets,thoughtheycan

Allassetsandliabilities,bothshort‐termandlong‐term;TheDistrict'sfundsdonotcurrentlycontainnonfinancialassets,thoughtheycan

Typeofinflow/outflowinformation

Allrevenuesandexpensesduringyear,regardlessofwhencashisreceivedorpaid

Revenuesforwhichcashisreceivedduringorsoonaftertheendoftheyear;expenditureswhengoodsorserviceshavebeenreceivedandpaymentisdueduringtheyearorsoonthereafter

Allrevenuesandexpensesduringtheyear,regardlessofwhencashisreceivedorpaid

Allrevenuesandexpensesduringtheyear,regardlessofwhencashisreceivedorpaid

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OVERVIEWOFTHEFINANCIALSTATEMENTS(continued)Theremainderofthisoverviewsectionofmanagement'sdiscussionandanalysishighlightsthestructureandcontentsofeachofthestatements.District‐WideStatementsThe district‐wide statements report information about the District as a whole using accounting methodssimilartothoseusedbyprivate‐sectorcompanies.ThestatementofnetpositionincludesalloftheDistrict'sassetsand liabilities. Allof thecurrentyear'srevenuesandexpensesareaccountedfor inthestatementofactivitiesregardlessofwhencashisreceivedorpaid.Thetwodistrict‐widestatementsreporttheDistrict'snetpositionandhowithaschanged.Netposition–thedifferencebetweentheDistrict'sassetsanddeferredoutflowsofresourcesandliabilitiesanddeferredinflowsofresources–isonewaytomeasuretheDistrict'sfinancialhealth,orposition. Overtime,increasesanddecreasesintheDistrict'snetpositionareanindicatorofwhetheritsfinancial

positionisimprovingordeteriorating,respectively. ToassesstheoverallhealthoftheDistrict,youneedtoconsideradditionalnonfinancial factorssuchas

changesintheDistrict'sdemographicsandtheconditionofschoolbuildingsandotherfacilities. In the district‐wide financial statements, the District's activities are categorized as Governmental

Activities. MostoftheDistrict'sbasicservicesareincludedhere,suchasregularandspecialeducation,transportation,andadministration.Propertytaxesandstateaidfinancemostoftheseactivities.

FundFinancialStatementsThefundfinancialstatementsprovidemoredetailedinformationabouttheDistrict'smostsignificantfunds–nottheDistrictasawhole.FundsareaccountingdevicestheDistrictusestokeeptrackofspecificsourcesoffundingandspendingonparticularprograms: SomefundsarerequiredbyStatelawandbybondcovenants. TheDistrictestablishesotherfundstocontrolandmanagemoneyforparticularpurposes(likerepaying

itslong‐termdebt)ortoshowthatisproperlyusingcertainrevenues.TheDistricthasthreekindsoffunds:1) Governmental funds –Most of theDistrict's basic services are included in governmental funds,which

generallyfocuson(1)howcashandotherfinancialassetsthatcanreadilybeconvertedtocashflowinand out and (2) the balances left at year‐end that are available for spending. Consequently, thegovernmental funds statements provide a detailed short‐term view that helps you determinewhethertherearemoreorfewerfinancialresourcesthatcanbespentinthenearfuturetofinancetheDistrict'sprograms. Because this informationdoesnotencompass theadditional long‐termfocusof thedistrict‐widestatements,weprovideadditional informationonaseparatereconciliationpage thatexplains therelationship(ordifferences)betweenthem.

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OVERVIEWOFTHEFINANCIALSTATEMENTS(continued)FundFinancialStatements(continued)2) Proprietary funds –When the District charges other District funds for the services it provides, these

services are reported in proprietary funds. Proprietary funds are reported in the same way that allactivitiesarereportedintheStatementofNetPositionandStatementofActivities.Infact,theDistrict'sinternal service fund is included within the governmental activities reported in the district‐widestatementsbutprovidemoredetailandadditionalinformation,suchascashflows.TheDistrictusestheinternal service fund to report activities that relate to the District's self‐insured program forworkerscompensationclaims.

3) Fiduciary funds –TheDistrict is the trustee, or fiduciary, for assets thatbelong toothers, suchas thestudentactivitiesfundsandretireebenefitsfund.TheDistrictisresponsibleforensuringthattheassetsreported in these funds are used only for their intended purposes and by those to whom the assetsbelong. All of the District's fiduciary activities are reported in a separate statement of fiduciary netposition. We exclude these activities from the district‐wide financial statements because the Districtcannotusetheseassetstofinanceitsoperations.

FINANCIALANALYSISOFTHEDISTRICTASAWHOLENetPosition.TheDistrict'scombinednetpositionwashigheronJune30,2017,thanitwastheyearbefore–increasing29.8%to$116.6million(SeeTableA‐1).TableA‐1:StatementofNetPosition

VarianceIncrease

2017 2016* (Decrease)Assets

Currentassets 314,690,396$ 297,676,899$ 17,013,497$Capitalassets 551,282,509 562,428,822 (11,146,313)Totalassets 865,972,905 860,105,721 5,867,184

Deferredoutflowsofresources 124,713,985 82,265,708 42,448,277Liabilities

Currentliabilities 62,968,273 68,108,639 (5,140,366)Long‐termliabilities 397,983,363 342,908,892 55,074,471Netpensionliability 393,158,092 315,777,223 77,380,869Totalliabilities 854,109,728 726,794,754 127,314,974

Deferredinflowsofresources 19,985,203 42,670,239 (22,685,036)NetpositionNetinvestmentincapitalassets 328,703,040 330,088,306 (1,385,266)Restricted 96,503,105 86,282,654 10,220,451Unrestricted (308,614,186) (326,540,256) 17,926,070

Totalnetposition 116,591,959$ 89,830,704$ 26,761,255$

*asrestatedunderGASB74.

GovernmentalActivities

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FINANCIALANALYSISOFTHEDISTRICTASAWHOLE(continued)Changesinnetposition,governmentalactivities. TheDistrict'stotalrevenuesincreased1.7%to$540.6million(SeeTableA‐2).Theincreaseisdueprimarilytohigherchargesforservices.The total cost of all programs and services increased 2.5% to $513.9million. The District's expenses arepredominantlyrelatedtoeducatingandcaringforstudents,79.4%.ThepurelyadministrativeactivitiesoftheDistrictaccountedforjust3.9%oftotalcosts.Asignificantcontributortotheincreaseincostswasnegotiatedsalaryandbenefitincreasesandone‐timefacilityprojects.TableA‐2:StatementofActivities

VarianceIncrease

2017 2016 (Decrease)Revenues

ProgramRevenues:Chargesforservices 9,361,290$ 6,847,456$ 2,513,834$Operatinggrantsandcontributions 111,045,434 102,447,989 8,597,445Capitalgrantsandcontributions (2,820,525) 74,638 (2,895,163)

GeneralRevenues:Propertytaxes 44,972,631 41,915,766 3,056,865Federalandstateaidnotrestricted 366,541,131 362,907,322 3,633,809Othergeneralrevenues 11,528,546 17,430,939 (5,902,393)TotalRevenues 540,628,507 531,624,110 9,004,397

ExpensesInstruction‐related 348,022,150 337,067,867 10,954,283Pupilservices 60,016,195 56,357,418 3,658,777Administration 20,290,032 22,071,367 (1,781,335)Plantservices 49,853,563 46,239,576 3,613,987Allotheractivities 35,685,312 39,470,650 (3,785,338)

TotalExpenses 513,867,252 501,206,878 12,660,374Increase(decrease)innetposition 26,761,255$ 30,417,232$ (3,655,977)$


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FONTANAUNIFIEDSCHOOLDISTRICTManagement'sDiscussionandAnalysis(Unaudited)FortheFiscalYearEndedJune30,2017FINANCIALANALYSISOFTHEDISTRICT'SFUNDSThe financial performance of theDistrict as awhole is reflected in its governmental funds aswell. As theDistrict completed this year, its governmental funds reported a combined fund balance of $250.6million,which isabove lastyear'sending fundbalanceof$223.5million. Theprimarycauseof the increased fundbalanceisstateandfederalrevenue.TableA‐3:TheDistrict'sFundBalances

OtherSourcesJuly1,2016* Revenues Expenditures and(Uses) June30,2017

FundGeneralFund 117,380,318$ 470,486,644$ 443,741,541$ (7,544,319)$ 136,581,102$AdultEducationFund 503,759 2,028,651 2,227,943 ‐ 304,467ChildDevelopmentFund 647,036 8,107,349 7,765,923 8,971 997,433CafeteriaFund 12,299,151 25,158,439 27,549,362 694 9,908,922DeferredMaintenanceFund 875,308 7,438 62,510 ‐ 820,236SpecialReserveFund(OtherThan

CapitalOutlay) 11,824,429 101,552 ‐ ‐ 11,925,981CapitalFacilitiesFund 11,994,285 6,806,994 768,191 ‐ 18,033,088CountySchoolFacilitiesFund 13,269,102 (2,820,525) ‐ ‐ 10,448,577SpecialReserveFund(CapitalOutlay) 7,346,900 57,662 248,341 8,429,054 15,585,275CapitalOutlayFundforBlended

ComponentUnits 29,382,258 5,866,601 7,525,391 ‐ 27,723,468BondInterestandRedemptionFund 18,023,852 16,046,318 15,841,164 ‐ 18,229,006

223,546,398$ 531,847,123$ 505,730,366$ 894,400$ 250,557,555$

*Asrestated

FundBalances

GeneralFundBudgetaryHighlightsOverthecourseoftheyear,theDistrictrevisedtheannualoperatingbudgetseveraltimes.Themajorbudgetamendmentsfallintothesecategories:

Revenues–increasedby$35.9millionprimarilytoreflectfederalandstatebudgetactions. Salaries and benefits costs – increased $52.7 million due to negotiated increases in salaries and

benefits. Other non‐personnel expenses – increased $59.9 million to re‐budget carryover funds and revise

operationalcostestimates.

WhiletheDistrict'sfinalbudgetfortheGeneralFundanticipatedthatexpenditureswouldexceedrevenuesbyabout $73.3million, the actual results for the year show that revenues exceeded expenditures by roughly$26.7million.Actualrevenueswere$14.7millionlessthananticipated,butexpenditureswere$114.7millionless thanbudgeted. Thatamountconsistsprimarilyofrestrictedcategoricalprogramdollars thatwerenotspentasofJune30,2017,thatwillbecarriedoverintothe2017‐18budget.CAPITALASSETANDDEBTADMINISTRATIONCapitalAssetsBytheendof2016‐17theDistricthadinvested$12.7millioninnewcapitalassets,relatedtoconstructioninprogress,siteimprovements,andequipmentpurchases.(Moredetailedinformationaboutcapitalassetscanbe found in Note 6 to the financial statements). Total depreciation expense for the year exceeded $23.8million.

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FONTANAUNIFIEDSCHOOLDISTRICTManagement'sDiscussionandAnalysis(Unaudited)FortheFiscalYearEndedJune30,2017CAPITALASSETANDDEBTADMINISTRATION(continued)TableA‐4:CapitalAssetsatYearEnd,NetofDepreciation

VarianceIncrease

2017 2016 (Decrease)Land 58,877,302$ 58,877,302$ ‐$Improvementofsites 28,019,762 30,217,634 (2,197,872)Buildings 434,422,983 417,964,293 16,458,690Equipment 18,675,418 18,661,952 13,466Constructioninprogress 11,287,044 36,707,641 (25,420,597)Total 551,282,509$ 562,428,822$ (11,146,313)$


Long‐TermDebtAtyear‐end theDistricthad$398.0million ingeneralobligationbonds,certificatesofparticipation,QZABs,capitalleases,andemploymentbenefits–adecreaseof5.4%fromlastyear’srestatedbalance–asshowninTableA‐5. (MoredetailedinformationabouttheDistrict'slong‐termliabilitiesispresentedinNote7tothefinancialstatements).TableA‐5:OutstandingLong‐TermDebtatYear‐End

VarianceIncrease

2017 2016* (Decrease)Generalobligationbonds 238,333,127$ 245,356,386$ (7,023,259)$Certificatesofparticipation 33,000,281 35,045,449 (2,045,168)QZABs 1,481,358 1,824,941 (343,583)Compensatedabsences 2,139,120 2,086,838 52,282Capitalleases 834,773 ‐ 834,773Otherpostemploymentbenefits 122,194,704 136,166,818 (13,972,114)Total 397,983,363$ 420,480,432$ (22,497,069)$

*asrestatedunderGASB74.


FACTORSBEARINGONTHEDISTRICT'SFUTURETheGovernorsignedthe2017‐18BudgetActandotherbudget‐relatedbillsonJune27,2017.Proposition98OverviewStatebudgetingforschoolsandcommunitycollegesisbasedprimarilyonProposition98,approvedbyvotersin1988andamendedin1990.Inthissection,weprovideanoverviewofProposition98changesundertheenactedbudgetpackage.

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FONTANAUNIFIEDSCHOOLDISTRICTManagement'sDiscussionandAnalysis(Unaudited)FortheFiscalYearEndedJune30,2017FACTORSBEARINGONTHEDISTRICT'SFUTURE(continued)Proposition98(continued)Overview(continued)Proposition98EstablishesMinimumSpendingLevelProposition98establishesaminimumspendingrequirementcommonlycalledtheminimumguarantee.Theminimum guarantee is determined by threemain formulas (known as tests) and various inputs, includingGeneralFundrevenue,percapitapersonalincome,andK‐12attendance.Thestatecanspendattheminimumguaranteeoranylevelaboveit.Spendingabovetheminimumguaranteeoneyeartypicallybecomespartofthebaseforcalculatingtheminimumguaranteethenextyear.Proposition98EstablishesMinimumSpendingLevel(continued)Iftheminimumguaranteeincreasesafterbudgetenactmentduetoupdatedinputs,thestateowesa“settle‐up” obligation. In some years, the state also creates or pays “maintenance factor.” Maintenance factor iscreatedwhenGeneralFundrevenueisweakrelativetopercapitapersonalincomeandispaidwhenGeneralFundrevenueisstronger.2015‐16and2016‐17MinimumGuaranteesDownbutTotalSpendingUpSlightlyThe 2015‐16 minimum guarantee has decreased $379 million due to lower‐than‐expected General Fundrevenue. Proposition 98 spending that year, however, has increased $53 million due to various minoradjustments involving the Local Control Funding Formula (LCFF) and community college apportionments.The2016‐17minimumguaranteehasdecreased$558million,againduetolowerestimatesofGeneralFundrevenue. Proposition 98 spending that year has decreased by $484million, but total spending, including asettle‐uppaymentof$514million,isupslightly($29million)fromtheJune2016level.Thesettle‐uppaymentallows the state to cover some 2016‐17 LCFF costs using funds set aside for Proposition 2 (2014) debtpayments. In both 2015‐16 and 2016‐17, Proposition 98 spending is above the calculated minimumguarantees.2017‐18SpendingUp$3.1BillionOverRevised2016‐17LevelIn2017‐18,totalspendingacrossallsegmentsis$74.5billion,anincreaseof$3.1billion(4.4percent)fromthe revised 2016‐17 level. For 2017‐18, the state funds at the estimate of the minimum guarantee. Thisestimate builds upon the higher levels of spending provided in 2015‐16 and 2016‐17. (Had the state notfundedabovetheguaranteeinthosetwoyears,the2017‐18guaranteewouldhavebeen$542millionlower.)Test2istheoperativetestin2017‐18,withthechangeintheguaranteeattributabletoa3.7percentincreaseinpercapitapersonal incomeanda0.05percentdecline inK‐12attendance.Theincreaseintheguaranteealso reflects amaintenance factorpaymentof $536million.Under theadministration’sestimates, the statewouldend2017‐18withanoutstandingmaintenancefactorobligationof$900million.AboutOne‐ThirdofIncreaseCoveredWithHigherPropertyTaxRevenueOfthetotalProposition98spendingprovidedin2017‐18,$52.6billionisstateGeneralFundand$21.9billionislocalpropertytaxrevenue.From2016‐17to2017‐18,stateGeneralFundincreases$2.1billion(accountingforabouttwo‐thirdsofthe$3.1billionincreaseinspending)andpropertytaxrevenueincreasesby$1billion.The primary factor explaining the growth in property tax revenue is the projected 5.3 percent growth inassessedpropertyvalues,whichissimilartotheaveragegrowthrateoverthepast20years.Regardinglocalrevenueassociatedwiththedissolutionofredevelopmentagencies,thebudgetplanassumesanetincreaseof$31million.Thisconsistsofa$131millionincreaseintheongoingrevenueshiftedtoschoolsandcommunitycolleges, offset by a $100 million decrease in revenue from the sale of assets formerly owned byredevelopmentagencies.

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FONTANAUNIFIEDSCHOOLDISTRICTManagement'sDiscussionandAnalysis(Unaudited)FortheFiscalYearEndedJune30,2017FACTORSBEARINGONTHEDISTRICT'SFUTURE(continued)Proposition98(continued)SpendingPackageReducesOutstandingSettle‐UpObligationby$603MillionThe budget plan includes a $603 million settle‐up payment related to meeting the 2009‐10 minimumguarantee.Thispaymentreducesthestate’soutstandingsettle‐upobligationfromslightlyabove$1billionto$440million.Ofthe$603millionprovided,thebudgetplanallocates$514millionforcovering2016‐17LCFFcosts, $86 million for the community college guided pathways initiative, and $3 million for the CareerTechnicalEducationIncentiveGrantprogram.Thestatebudgetpackagescoresallofthesettle‐upspendingasaProposition2debtpayment.K‐12Education$64.7BillionProposition98FundingforK‐12Educationin2017‐18Thebudgeted2017‐18levelis$2.7billion(4.3percent)morethanrevised2016‐17leveland$2.2billion(3.6percent)more than the 2016‐17BudgetAct level. The budget increases funding per student by $450 (4.3percent)overthe2016‐17BudgetActlevel,bringingProposition98fundingperstudentupto$10,863.PackageIncludesMixofOngoingandOne‐TimeSpendingThebudgetincludes$2.4billioninaugmentationsforK‐12education.Oftheseaugmentations,$1.5billionareongoingincreasesand$933millionareone‐timeinitiatives.Inadditiontothesechanges,thebudgetpackageincludes$328millioninone‐timeinitiativesfundedfromothersources.(Ofthisamount,$325millionisfromProposition98 reversiondollarsand$3million is fromasettle‐uppayment.Of thereversiondollars,$114million is fora fundswapprimarily relating tospecialeducation.)Thebudgetalsoauthorizes$593millionfromProposition51(2016)generalobligationbondproceedsforschoolfacilities.GeneralPurposeFundingAcceleratesImplementationofLCFFforSchoolDistrictsandCharterSchoolsThebudgetprovidesanadditional$1.4billionongoingProposition98fundingforthispurpose,bringingtotalLCFFfundingforschooldistrictsandcharterschoolsto$57.4billion,a2.7%increaseovertherevised2016‐17 level. The administration estimates this funding will result in the LCFF‐target level being 97 percent‐funded.SchooldistrictsandcharterschoolsmayuseLCFFmoniesforanyeducationalpurpose.FundsOne‐TimeDiscretionaryGrantsThe largestone‐timeaugmentation forK‐12education is$877million that localeducationagencies (LEAs)may use for any educational purpose. Funding is distributedbased on averagedaily attendance ($147perADA). IfanLEAhasunpaidmandateclaims,fundingcountstowardthoseclaims.AsmostLEAsdonothaveanysuchclaims,weestimateonlyaboutone‐third($268million)ofthefundingwillendupreducingtheK‐12mandatesbacklog.WeestimatetheK‐12mandatesbacklogwillbe$799millionattheendof2017‐18.OtherChangesSpecifiesUseofRemainingProposition39FundsandExtendsEnergy‐EfficiencyProgramsIndefinitelyThe budget provides $423 million Proposition 98 funding for energy‐efficiency projects at schools andcommunitycolleges.ThisreflectsthefifthandfinalyearofProposition39(2012)funding.Trailerlegislation,however,extendsthedateforschoolstousethisfundingbyoneyear,toJune30,2019,andsetsrulesforhowanyremaininguncommittedfundsaretobeused.Thefirst$75millioninremainingfundsisearmarkedforschooldistrictsandCOEstoreplaceorretrofitschoolbuses.PriorityisgiventoLEAshavingtheoldestbuses,servingdisadvantagedcommunities,orservinghighsharesoflow‐incomestudents.

12

FONTANAUNIFIEDSCHOOLDISTRICTManagement'sDiscussionandAnalysis(Unaudited)FortheFiscalYearEndedJune30,2017FACTORSBEARINGONTHEDISTRICT'SFUTURE(continued)Proposition98(continued)OtherChanges(continued)SpecifiesUseofRemainingProposition39FundsandExtendsEnergy‐EfficiencyPrograms Indefinitely(continued)Thenext$100millionisearmarkedforacompetitivegrantprogramtoprovideK‐12LEAswithlow‐andno‐interest loans for energy projects. Any funding still remaining is to be distributed as grants to K‐12 LEAsaccording to Proposition 39 rules. The trailer legislation also extends the Proposition 39 energy‐efficiencyprogramsforK‐12andCCCLEAsbeginningin2018‐19,contingentuponfundsbeingmadeavailablethroughtheannualbudgetactorotherstatute.AugmentsAfterSchoolEducationandSafety(ASES)ProgramProposition49, passedby the voters in2002, requires the state toprovide $550million inProposition98fundsannuallyfortheASESprogram.SinceProposition49wasenacted,ASESprovidershavereceived$7.50perchildperday.Thebudget increasesASES fundingby$50million (9%)—bringing total funding to$600million.Theaugmentationwillincreasetheper‐childper‐dayrate.SchoolFacilitiesProvidesFirstInstallmentofProposition51BondFundingforSchoolFacilitiesPassed by the voters in November 2016, Proposition 51 authorizes the state to sell $9 billion in generalobligationbonds—$7billionforschoolsand$2billionforcommunitycolleges.Thestateplanstoissue$593million of these bonds for K‐12 facility projects in 2017‐18. This would fully fund the state’s list of $368millioninalreadyapprovedfacilityprojects,aswellas$225millioninadditionalprojects.EstablishesNewAuditRulesTrailerlegislationshiftsauditresponsibilitiesforstate‐fundedschoolfacilityprojectsfromtheOfficeofPublicSchoolConstruction to local independentauditors.Moving forward, the localauditorsare toreviewfacilityexpenditurestoensurethattheycomplywiththerulesofthestate’sSchoolFacilitiesProgram.InJune2017,theStateAllocationBoardalsoenactedaregulatorychangerequiringdistrictstosigngrantagreementspriortoreceivingstatefundingthatspecifyallowableprojectexpenditures.AllofthesefactorswereconsideredinpreparingtheFontanaUnifiedSchoolDistrictbudgetforthe2017‐18fiscalyear.CONTACTINGTHEDISTRICT'SFINANCIALMANAGEMENTThis financial report is designed toprovideour citizens, taxpayers, customers, and investors and creditorswith a general overview of the District's finances and to demonstrate the District's accountability for themoney it receives. If you have any questions about this report or need additional financial information,contacttheDistrict'sFiscalServicesOfficeat(909)357‐7600.

Thenotestofinancialstatementsareanintegralpartofthisstatement. 13

FONTANAUNIFIEDSCHOOLDISTRICTStatementofNetPositionJune30,2017

TotalGovernmentalActivities

ASSETSCash 272,570,313$Investments 20,155,126Accountsreceivable 20,741,681Inventories 84,070Prepaidexpenses 1,139,206Non‐depreciableassets 70,164,346Depreciableassets 793,051,501Lessaccumulateddepreciation (311,933,338)

Totalassets 865,972,905

DEFERREDOUTFLOWSOFRESOURCESDeferredamountsonrefunding 6,957,103Deferredoutflowsfrompensions 117,756,882

Totaldeferredoutflowsofresources 124,713,985

LIABILITIESAccountspayable 57,622,108Unearnedrevenue 5,346,165Long‐termliabilities:

Portiondueorpayablewithinoneyear 15,487,704Portiondueorpayableafteroneyear 382,495,659

Netpensionliability 393,158,092

Totalliabilities 854,109,728

DEFERREDINFLOWSOFRESOURCESDeferredinflowsfrompensions 19,985,203

NETPOSITIONNetinvestmentincapitalassets 328,703,040Restrictedfor:

Capitalprojects 44,066,940Debtservice 18,229,006Educationalprograms 34,207,159

Unrestricted (308,614,186)

Totalnetposition 116,591,959$


FONTANAUNIFIEDSCHOOLDISTRICTStatementofActivitiesFortheFiscalYearEndedJune30,2017

Net(Expense)Operating Capital Revenueand

Chargesfor Grantsand Grantsand ChangesinExpenses Services Contributions Contributions NetPosition

GovernmentalActivitiesInstructionalServices:

Instruction 282,434,882$ 987,832$ 62,027,500$ (2,820,525)$ (222,240,075)$Instruction‐RelatedServices:

Supervisionofinstruction 31,818,500 367,641 12,042,024 ‐ (19,408,835)Instructionallibrary,mediaandtechnology 5,381,525 659 113,145 ‐ (5,267,721)Schoolsiteadministration 28,387,243 354,474 1,400,270 ‐ (26,632,499)

PupilSupportServices:Home‐to‐schooltransportation 4,820,428 ‐ ‐ ‐ (4,820,428)Foodservices 25,700,195 780,630 22,501,680 ‐ (2,417,885)Allotherpupilservices 29,495,572 23,214 6,540,276 ‐ (22,932,082)

GeneralAdministrationServices:Dataprocessingservices 9,490,025 ‐ ‐ ‐ (9,490,025)Othergeneraladministration 10,800,007 86,543 4,962,133 ‐ (5,751,331)

Plantservices 49,853,563 288,613 1,117,991 ‐ (48,446,959)

Ancillaryservices 29,012 963 50 ‐ (27,999)Communityservices 26,860 ‐ 835 ‐ (26,025)Enterpriseactivities 45,489 ‐ ‐ ‐ (45,489)Interestonlong‐termdebt 10,242,350 ‐ ‐ ‐ (10,242,350)Otheroutgo 1,533,268 6,470,721 339,530 ‐ 5,276,983Depreciation(unallocated) 23,808,333 ‐ ‐ ‐ (23,808,333)

TotalGovernmentalActivities 513,867,252$ 9,361,290$ 111,045,434$ (2,820,525)$ (396,281,053)

GeneralRevenues:Propertytaxes 44,972,631Federalandstateaidnotrestrictedtospecificpurpose 366,541,131Interestandinvestmentearnings 1,533,351Interagencyrevenues 327,477Miscellaneous 9,667,718

Totalgeneralrevenues 423,042,308

Changeinnetposition 26,761,255

Netposition‐July1,2016,asoriginallystated 172,906,436

Adjustmentsforrestatements(Note14) (83,075,732)

Netposition‐July1,2016,asrestated 89,830,704

Netposition‐June30,2017 116,591,959$

Functions/Programs

ProgramRevenues


FONTANAUNIFIEDSCHOOLDISTRICTBalanceSheet–GovernmentalFundsJune30,2017

GeneralFund

CafeteriaFund

Non‐MajorGovernmental

Funds

TotalGovernmental

FundsASSETS

Cash 192,407,887$ 8,612,143$ 64,532,753$ 265,552,783$Investments ‐ ‐ 20,155,126 20,155,126Accountsreceivable 13,797,230 5,052,141 1,856,001 20,705,372Duefromotherfunds 4,723,926 1,388 9,052,645 13,777,959Inventories ‐ 84,070 ‐ 84,070Prepaidexpenditures 1,139,206 ‐ ‐ 1,139,206

TotalAssets 212,068,249$ 13,749,742$ 95,596,525$ 321,414,516$

LIABILITIESANDFUNDBALANCES

LiabilitiesAccountspayable 47,064,077$ 628,528$ 916,301$ 48,608,906$Duetootherfunds 11,451,523 3,212,292 2,238,075 16,901,890Unearnedrevenue 5,045,566 ‐ 300,599 5,346,165

TotalLiabilities 63,561,166 3,840,820 3,454,975 70,856,961

FundBalancesNonspendable 1,239,206 94,060 ‐ 1,333,266Restricted 23,268,984 9,814,862 91,048,666 124,132,512Committed ‐ ‐ 820,236 820,236Assigned 11,925,981 ‐ 272,648 12,198,629Unassigned 112,072,912 ‐ ‐ 112,072,912

TotalFundBalances 148,507,083 9,908,922 92,141,550 250,557,555

TotalLiabilitiesandFundBalances 212,068,249$ 13,749,742$ 95,596,525$ 321,414,516$


FONTANAUNIFIEDSCHOOLDISTRICTReconciliationoftheGovernmentalFundsBalanceSheettotheStatementofNetPositionJune30,2017

Totalfundbalances‐governmentalfunds 250,557,555$

Capitalassetsathistoricalcost: 863,215,847Accumulateddepreciation: (311,933,338)Net: 551,282,509

6,957,103

(3,294,579)

Generalobligationbondspayable 238,333,127Certificatesofparticipationpayable 33,000,281QZABbondspayable 1,481,358Capitalleasepayable 834,773Compensatedabsences 2,139,120Otherpostemploymentbenefitspayable 122,194,704Total (397,983,363)

Thenetpensionliabilityisnotdueandpayableinthecurrentreportingperiod,andthereforeisnotreportedasaliabilityinthefundfinancialstatements. (393,158,092)

Deferredoutflowsofresourcesrelatingtopensions 117,756,882Deferredinflowsofresourcesrelatingtopensions (19,985,203)Net: 97,771,679

4,459,147

Totalnetposition‐governmentalactivities 116,591,959$

Internalservicefundsareusedtoconductcertainactivitiesforwhichcostsarechargedtootherfundsonafullcost‐recoverybasis.Becauseinternalservicefundsarepresumedtooperateforthebenefitofgovernmentalactivities,assetsandliabilitiesofinternalservicefundsarereportedwithgovernmentalactivitiesinthestatementofnetposition.Netpositionfortheinternalservicefundis:

Amountsreportedforassetsandliabilitiesforgovernmentalactivitiesinthestatementofnetpositionaredifferentfromamountsreportedingovernmentalfundsbecause:

Ingovernmentalfunds,onlycurrentassetsarereported.Inthestatementofnetposition,allassetsarereported,includingcapitalassetsandaccumulateddepreciation.

Deferredamountsonrefundingrepresentamountspaidtoanescrowagentinexcessoftheoutstandingdebtatthetimeofthepaymentforrefundedbondswhichhavebeendefeased.Inthegovernment‐widestatementsitisrecognizedasadeferredoutflowofresources.Theremainingdeferredamountsonrefundingattheendoftheperiodwere:

Ingovernmentalfunds,interestonlong‐termdebtisnotrecognizeduntiltheperiodinwhichitmaturesandispaid.Inthegovernment‐widestatementofactivities,itisrecognizedintheperiodthatitisincurred.Theadditionalliabilityforunmaturedinterestowingattheendoftheperiodwas:

Ingovernmentalfunds,onlycurrentliabilitiesarereported.Inthestatementofnetposition,allliabilities,includinglong‐termliabilities,arereported.Long‐termliabilitiesrelatingtogovernment‐widestatements,consistof:

Ingovernmentalfunds,deferredoutflowsandinflowsofresourcesrelatingtopensionsarenotreportedbecausetheyareapplicabletofutureperiods.Inthestatementofnetposition,deferredoutflowsandinflowsofresourcesrelatingtopensionsarereported.


FONTANAUNIFIEDSCHOOLDISTRICTStatementofRevenues,Expenditures,andChangesinFundBalances–GovernmentalFundsFortheFiscalYearEndedJune30,2017

GeneralFund

CafeteriaFund


Funds

TotalGovernmental

FundsREVENUES

LCFFsources 376,984,719$ ‐$ 22,250$ 377,006,969$Federalsources 24,262,625 22,705,512 1,201,398 48,169,535Otherstatesources 62,621,376 1,523,301 4,236,074 68,380,751Otherlocalsources 6,719,476 929,626 30,640,766 38,289,868

TotalRevenues 470,588,196 25,158,439 36,100,488 531,847,123EXPENDITURES

Current:Instruction 273,466,697 ‐ 7,283,579 280,750,276Instruction‐relatedservices:

Supervisionofinstruction 30,533,328 ‐ 1,695,523 32,228,851Instructionallibrary,mediaandtechnology 4,194,079 ‐ ‐ 4,194,079Schoolsiteadministration 27,345,529 ‐ 439,992 27,785,521

Pupilsupportservices:Home‐to‐schooltransportation 4,834,970 ‐ ‐ 4,834,970Foodservices 194,120 25,412,133 17,876 25,624,129Allotherpupilservices 28,511,409 ‐ 231,780 28,743,189

Ancillaryservices 29,012 ‐ ‐ 29,012Communityservices 26,143 ‐ ‐ 26,143Generaladministrationservices:

Dataprocessingservices 9,465,698 ‐ ‐ 9,465,698Othergeneraladministration 11,418,321 ‐ ‐ 11,418,321

Plantservices 48,758,075 36,554 1,704,059 50,498,688Transfersofindirectcosts (1,119,443) 830,291 289,152 ‐

Intergovernmental 638,607 ‐ ‐ 638,607Capitaloutlay 5,385,369 1,270,384 3,864,992 10,520,745Debtservice:

Issuancecosts ‐ ‐ 261 261Principal 59,627 ‐ 10,663,802 10,723,429Interest ‐ ‐ 8,248,447 8,248,447

TotalExpenditures 443,741,541 27,549,362 34,439,463 505,730,366

Excess(Deficiency)ofRevenuesOver(Under)Expenditures 26,846,655 (2,390,923) 1,661,025 26,116,757

OTHERFINANCINGSOURCES(USES)Interfundtransfersin ‐ 694 8,438,025 8,438,719Interfundtransfersout (8,438,719) ‐ ‐ (8,438,719)Proceedsfromcapitallease 894,400 ‐ ‐ 894,400

TotalOtherFinancingSourcesandUses (7,544,319) 694 8,438,025 894,400

NetChangeinFundBalances 19,302,336 (2,390,229) 10,099,050 27,011,157

134,708,939 12,299,151 82,042,500 229,050,590

(5,504,192) ‐ ‐ (5,504,192)

129,204,747 12,299,151 82,042,500 223,546,398

FundBalances,June30,2017 148,507,083$ 9,908,922$ 92,141,550$ 250,557,555$

FundBalances,July1,2016

AdjustmentforRestatement(Note14b.)

FundBalances,July1,2016,asrestated


FONTANAUNIFIEDSCHOOLDISTRICTReconciliationoftheGovernmentalFundsStatementofRevenues,Expenditures,andChanges

inFundBalancestotheStatementofActivitiesFortheFiscalYearEndedJune30,2017

Totalnetchangeinfundbalances‐governmentalfunds

Amountsreportedforgovernmentalactivities inthestatementofactivitiesaredifferentbecause: 27,011,157$

Expendituresforcapitaloutlay 10,614,505Depreciationexpense (23,808,333)Net: (13,193,828)

2,106,471

(58,956)

10,733,429

(894,400)

(491,455)

1,484,852

(2,746,644)

(250,658)

(52,282)

(11,756,101)

13,972,114

897,556

Changeinnetpositionofgovernmentalactivities 26,761,255$

Ingovernmentalfunds,thecostsofcapitalassetsarereportedasexpendituresintheperiodwhentheassetsareacquired.Inthestatementofactivities,costsofcapitalassetsareallocatedovertheirestimatedusefullivesasdepreciationexpense.Thedifferencebetweencapitaloutlayexpendituresanddepreciationexpensefortheperiodwas:

Ingovernmentalfunds,donatedcapitalassetsarenotreportedbecausetheydonotaffectcurrentfinancialresources.Inthegovernment‐widestatements,donatedcapitalassetsarereportedasarevenueandasincreasestocapitalassetsattheirfairmarketvalueonthedateofdonation.Thefairmarketvalueofcapitalassetsdonatedduringtheyearwas:

Ingovernmentalfunds,theentireproceedsfromdisposalofcapitalassetsarereportedasrevenue.Inthestatementofactivities,onlytheresultinggainorlossisreported.Thedifferencebetweentheproceedsfromdisposalofcapitalassetsandtheresultinggainorlossis:

Ingovernmentalfunds,repaymentsoflong‐termdebtarereportedasexpenditures.Inthegovernment‐widestatements,repaymentsoflong‐termdebtarereportedasareductionofliabilities.Expendituresforrepaymentoftheprincipalportionoflongtermdebtwere:

Ingovernmentalfunds,ifdebtisissuedatapremiumoratadiscount,thepremiumisrecognizedasanOtherFinancingSourceintheperioditisincurred.Inthegovernment‐widestatements,thepremiumisamortizedasinterestoverthelifeofthedebt.Amortizationofpremiumfortheperiodwas:

Deferredamountsonrefundingrepresentamountspaidtoanescrowagentinexcessoftheoutstandingdebtatthetimeofthepaymentforrefundedbondswhichhavebeendefeased.Inthegovernmentalfundsthesechargesarerecognizedasanexpenditure.However,inthestatementofactivities,theseamountsareamortizedoverthelifeoftherefundeddebt.Deferredamountsonrefundingamortizedduringtheyearwere:

Ingovernmentalfunds,accretedinterestoncapitalappreciationbondsisnotrecordedasanexpenditurefromcurrentresources.Inthegovernment‐widestatementofactivities,however,thisisrecordedasinterestexpensefortheperiod.Accretedinterestearnedlessaccretedinterestpaidduringtheyearwas:

Ingovernmentalfunds,interestonlong‐termdebtisrecognizedintheperioditbecomesdue.Inthegovernment‐widestatementofactivities,itisrecognizedintheperiodthatitisincurred.Unmaturedinterestowingattheendoftheperiod,lessmaturedinterestpaidduringtheperiodbutowingfromthepriorperiod,was:

Ingovernmentalfunds,compensatedabsencesaremeasuredbytheamountspaidduringtheperiod.Inthestatementsofactivities,compensatedabsencesaremeasuredbytheamountsearned.Thedifferencebetweencompensatedabsencespaidandcompensatedabsencesearnedwas:

Ingovernmentalfunds,proceedsfromcapitalleasesarereportedasotherfinancingsources.Inthegovernment‐widestatements,proceedsfromcapitalleasesarereportedasaliability.Proceedsfromcapitalleasesfortheyearwere::

Internalservicefundsareusedtoconductcertainactivitiesforwhichcostsarechargedtootherfundsonafullrecoverybasis.Becauseinternalservicefundsarepresumedtobenefitgovernmentalactivities,internalserviceactivitiesarereportedasgovernmentalinthestatementofactivities.Thenetincreaseordecreaseininternalservicefundswas:

Ingovernmentalfunds,OPEBcostsarerecognizedwhenemployercontributionsaremade.Inthestatementsofactivitiescostsaremeasuredandrecognizedinrelationtotheannualrequiredcontribution.Theannualrequiredcontributionisthenormalcostrelatedtothecurrentperiodplusacalculatedamountnecessarytosystematicallyamortizeanyunfundedliabilityinaccordancewithgenerallyacceptedaccountingprinciples.Thisyear,thedifferencebetweentheannualrequiredcontributionandamountsactuallyfundedwas:

Ingovernmentfunds,pensioncostsarerecognizedwhenemployercontributionsaremadeinthestatementofactivities,pensioncostsarerecognizedontheaccrualbasis.Thisyear,thedifferencebetweenaccrual‐basisandactualemployercontributionswas:


FONTANAUNIFIEDSCHOOLDISTRICTStatementofNetPosition–ProprietaryFundJune30,2017


InternalServiceFund

ASSETSCash 7,017,530$Accountsreceivable 36,309Duefromotherfunds 3,175,805

Totalassets 10,229,644

LIABILITIESEstimatedliabilityforopenclaimsandIBNRs 5,585,244Accountspayable 133,379Duetootherfunds 51,874

Totalliabilities 5,770,497

NETPOSITIONRestricted 4,459,147$


FONTANAUNIFIEDSCHOOLDISTRICTStatementofRevenues,Expenses,andChangesinFundNetPosition–ProprietaryFundFortheFiscalYearEndedJune30,2017


InternalServiceFund

OPERATINGREVENUESSelf‐insurancepremiums 3,178,520$Otherlocalrevenues 22,287

Totaloperatingrevenues 3,200,807

OPERATINGEXPENSESPaymentsforpersonnelcosts 313,837Paymentsformaterialsandsupplies 9,251Paymentsforclaimsandotheroperatingexpenses 2,042,140

Totaloperatingexpenses 2,365,228

OPERATINGINCOME(LOSS) 835,579

NON‐OPERATINGREVENUESInterestincome 61,977

Changeinnetposition 897,556

Netposition,July1,2016 3,561,591

Netposition,June30,2017 4,459,147$


FONTANAUNIFIEDSCHOOLDISTRICTStatementofCashFlows–ProprietaryFundFortheFiscalYearEndedJune30,2017


InternalServiceFund

CASHFLOWSFROMOPERATINGACTIVITIESReceivedfromin‐districtpremiums 3,039,516$Paymentstoemployeesandfringebenefits (341,904)Paymentstovendorsandsuppliers 5,716Paymentsoninsuranceclaims (1,998,778)Otherreceipts(payments) 8,427

Netcashprovided(used)byoperatingactivities 712,977

CASHFLOWSFROMINVESTINGACTIVITIESInvestmentincome 51,381

Netincrease(decrease)incashandcashequivalents 764,358Cashandcashequivalents,July1,2016 6,253,172Cashandcashequivalents,June30,2017 7,017,530$

Reconciliationofoperatingincome(loss)tonetcashprovided(used)byoperatingactivities:Operatingincome(loss) 835,579$Adjustmentstoreconcileoperatingincome(loss)tonetcashprovided(used)byoperatingactivities:

Changesinassets,liabilities,anddeferredoutflowsofresources:Receivables,net (13,860)Duefromotherfunds (139,004)EstimatedliabilityforopenclaimsandIBNRs 43,362Accountspayableandaccruedliabilities 14,967Duetootherfunds (28,067)

Netcashprovided(used)byoperatingactivities 712,977$


FONTANAUNIFIEDSCHOOLDISTRICTStatementofFiduciaryNetPositionJune30,2017

Agency TrustFunds FundStudent RetireeBody Benefits

ASSETS Funds Fund Total

Cash 1,555,719$ 2$ 1,555,721$Investments ‐ 33,216,045 33,216,045Scholarshipfunds 73,931 ‐ 73,931Accountsreceivable 24,975 ‐ 24,975Inventories‐suppliesandmaterials 87,041 ‐ 87,041Miscellaneous 5,114 ‐ 5,114

Totalassets 1,746,780$ 33,216,047 34,962,827

LIABILITIESAccountspayable 171,906$ ‐ 171,906Duetostudentgroups 1,574,874 ‐ 1,574,874

Totalliabilities 1,746,780$ ‐ 1,746,780

NETPOSITIONRestrictedforpostemploymentbenefits 33,216,047$ 33,216,047$


FONTANAUNIFIEDSCHOOLDISTRICTStatementofChangesinFiduciaryNetPositionFortheFiscalYearEndedJune30,2017

TrustFund

RetireeBenefitsFund

ADDITIONSInterest 719,647$Increaseinfairvalueofinvestments 1,233,449In‐districtcontributions 10,270,681

TotalAdditions 12,223,777

DEDUCTIONSOperatingexpenses 172,676

Changeinnetposition 12,051,101

Netpositionasoriginallystated 15,660,754

Adjustmentforrestatement(Note14b.) 5,504,192

Netposition‐July1,2016 21,164,946

Netposition‐June30,2017 33,216,047$

24

FONTANAUNIFIEDSCHOOLDISTRICTNotestoFinancialStatementsJune30,2017NOTE1–SUMMARYOFSIGNIFICANTACCOUNTINGPOLICIESFontanaUnifiedSchoolDistrict (the "District")accounts for its financial transactions inaccordancewith thepoliciesandproceduresoftheCaliforniaDepartmentofEducation'sCaliforniaSchoolAccountingManual.TheaccountingpoliciesoftheDistrictconformtoaccountingprinciplesgenerallyacceptedintheUnitedStatesofAmericaasprescribedbytheGovernmentalAccountingStandardsBoard.Thefollowingisasummaryofthemoresignificantpolicies:A. ReportingEntity

Areportingentityiscomprisedoftheprimarygovernment,componentunits,andotherorganizationsthatare included to ensure the financial statements are not misleading. The primary government of theDistrictconsistsofallfunds,departments,andagenciesthatarenotlegallyseparatefromtheDistrict.ForFontana Unified School District, this includes general operations, food service, and student relatedactivitiesoftheDistrict.Component units are legally separate organizations for which the District is financially accountable.Component unitsmay also include organizations that are fiscally dependent on theDistrict, in that theDistrict approves their budget, the issuance of their debt or the levying of their taxes. In addition,component units are other legally separate organizations for which the District is not financiallyaccountablebutthenatureandsignificanceoftheorganization'srelationshipwiththeDistrictissuchthatexclusionwouldcausetheDistrict'sfinancialstatementstobemisleadingorincomplete.Forfinancialreportingpurposes,thecomponentunitshaveafinancialandoperationalrelationshipwhichmeets the reporting entity definition criteria of the Governmental Accounting Standards Board (GASB)StatementNo.14,TheFinancialReportingEntity,andthusareincludedinthefinancialstatementsusingtheblendedpresentationmethodas if theywerepartof theDistrict'soperationsbecausethegoverningboardof thecomponentunits isessentially thesameasthegoverningboardoftheDistrictandbecausetheirpurposeistofinancetheconstructionoffacilitiestobeusedforthedirectbenefitoftheDistrict.The Fontana Unified School District Public Financing Authority (the Authority) financial activity ispresented inthe financialstatementsastheCapitalProjects forBlendedComponentUnitsFundandtheDebtServiceforBlendedComponentUnitsFund.CertificatesofparticipationandotherdebtissuedbytheAuthorityareincludedaslong‐termliabilitiesinthegovernment‐widefinancialstatements. IndividuallypreparedfinancialstatementsarenotpreparedfortheAuthority.TheFontanaUnifiedSchoolDistrictCommunityFacilitiesDistricts(CFDs)financialactivityispresentedinthefinancialstatementsastheCapitalProjectsFundforBlendedComponentUnits.IndividuallypreparedfinancialstatementsarenotpreparedforeachoftheCFDs.

25

FONTANAUNIFIEDSCHOOLDISTRICTNotestoFinancialStatementsJune30,2017NOTE1–SUMMARYOFSIGNIFICANTACCOUNTINGPOLICIES(continued)B. BasisofPresentation,BasisofAccounting

1. BasisofPresentationGovernment‐WideFinancialStatementsThestatementofnetpositionand thestatementofactivitiesdisplay informationabout theprimarygovernment(theDistrict)anditscomponentunits.Thesestatementsincludethefinancialactivitiesoftheoverallgovernment,exceptforfiduciaryactivities.Eliminationshavebeenmadetominimizethedouble‐countingof internalactivities. Governmentalactivitiesgenerallyare financedthroughtaxes,intergovernmentalrevenues,andothernonexchangetransactions.ThestatementofactivitiespresentsacomparisonbetweendirectexpensesandprogramrevenuesforeachfunctionoftheDistrict'sgovernmentalactivities.Directexpensesarethosethatarespecificallyassociatedwithaprogramorfunctionand,therefore,areclearlyidentifiabletoaparticularfunction.Program revenues include (a) fees, fines, and charges paid by the recipients of goods or servicesoffered by the programs and (b) grants and contributions that are restricted to meeting theoperational or capital requirements of a particular program. Revenues that are not classified asprogramrevenues,includingalltaxes,arepresentedasgeneralrevenues.FundFinancialStatementsThe fund financial statementsprovide information about theDistrict's funds, including its fiduciaryfunds (andblended component units). Separate statements for each fund category ‐governmental,proprietary, and fiduciary ‐ are presented. The emphasis of fund financial statements is onmajorgovernmental funds, each displayed in a separate column. All remaining governmental funds areaggregatedandreportedasnonmajorfunds.Proprietaryfundoperatingrevenues,suchaschargesforservices,resultfromexchangetransactionsassociatedwiththeprincipalactivityofthefund.Exchangetransactionsarethoseinwhicheachpartyreceives and gives up essentially equal values. Nonoperating revenues, such as subsidies andinvestmentearnings,resultfromnonexchangetransactionsorancillaryactivities.MajorGovernmentalFundsTheDistrictreportsthefollowingmajorgovernmentalfunds:

GeneralFund:ThisfundisthegeneraloperatingfundoftheDistrict.Itisusedtoaccountforallfinancialresourcesexcept thoserequiredtobeaccountedfor inanotherfund. TheDistrictalsomaintainsaSpecialReserveFundforOtherThanCapitalOutlayProjectswhichdoesnotcurrentlymeet the definition of a special revenue fund as it is not primarily composed of restricted orcommittedrevenuesources. BecausethisfunddoesnotmeetthedefinitionofaspecialrevenuefundunderGASB54,theactivityinthefundisbeingreportedwithintheGeneralFund.CafeteriaFund: This fund isused toaccount for revenues receivedandexpendituresmade tooperatetheDistrict'sfoodserviceoperations.

26

FONTANAUNIFIEDSCHOOLDISTRICTNotestoFinancialStatementsJune30,2017NOTE1–SUMMARYOFSIGNIFICANTACCOUNTINGPOLICIES(continued)

B. BasisofPresentation,BasisofAccounting(continued)

1. BasisofPresentation(continued)

Non‐MajorGovernmentalFundsTheDistrictreportsthefollowingnon‐majorgovernmentalfunds:

SpecialRevenueFunds:

Adult Education Fund: This fund is used to account for resources restricted for adulteducationprogramsmaintainedbytheDistrict.ChildDevelopmentFund: This fund is used to account for resources restricted for childdevelopmentprogramsmaintainedbytheDistrict.DeferredMaintenanceFund:ThisfundisusedtoaccountforresourcescommittedtomajorrepairorreplacementofDistrictproperty.

CapitalProjectsFunds:

Building Fund: This fund is used to account for the acquisition of major governmentalcapitalfacilitiesandbuildingsfromthesaleofgeneralobligationbondsandbondanticipationnotes.

CapitalFacilitiesFund:ThisfundisusedtoaccountforresourcesreceivedfromdeveloperimpactfeesassessedunderprovisionsoftheCaliforniaEnvironmentalQualityAct.County School Facilities Fund: This fund is used to account for state apportionmentsprovidedformodernizationofschoolfacilitiesunderSB50.SpecialReserveFund forCapitalOutlayProjects: This fundisusedtoaccountforfundssetasideforBoarddesignatedconstructionprojects.

CapitalProjectsFundforBlendedComponentUnits:ThisfundisusedtoaccountfortheactivityofthecertificatesofparticipationandtheCommunityFacilitiesDistricts.

DebtServiceFund:

BondInterestandRedemptionFund:ThisFundisusedtoaccountfortheaccumulationofresourcesfor,andtherepaymentof,Districtbonds,interest,andrelatedcosts.

ProprietaryFundsProprietaryfundreportingfocusesonthedeterminationofoperatingincome,changesinnetposition,financialposition, andcash flows. Proprietary fundsareclassifiedasenterpriseor internal service.TheDistricthasthefollowingproprietaryfund:

Self‐Insurance Fund: This fund may be used to account for any activity for which goods orservices are provided to other funds of the District in return for a fee to cover the cost ofoperations. TheDistrict operates aworkers' compensation program that is accounted for in aself‐insuranceservicefund.

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1. BasisofPresentation(continued)

FiduciaryFundsFiduciaryfundreportingfocusesonnetpositionandchangesinnetposition.Fiduciaryfundsareusedto report assets held in a trustee or agency capacity for others and therefore cannot be used tosupport the District's own programs. The fiduciary fund category includes pension (and otheremployeebenefit)trustfunds,investmenttrustfunds,private‐purposetrustfunds,andagencyfunds.TheDistrictmaintainsthefollowingfiduciaryfunds:

AgencyFunds:TheDistrictmaintains a separate agency fund for each school that operates anAssociatedStudentBody(ASB)Fund,whetheritisorganizedornot.RetireeBenefitsFund:This fund isused toaccount separately foramountsheld in trust fromsalary reduction agreements, other irrevocable contributions for employees' retirement benefitpaymentsorboth.

2. MeasurementFocus,BasisofAccounting

Government‐Wide,Proprietary,andFiduciaryFundFinancialStatementsThe government‐wide, proprietary, and fiduciary fund financial statements are reported using theeconomicresourcesmeasurementfocusandtheaccrualbasisofaccounting. Revenuesarerecordedwhenearnedandexpensesare recordedat the time liabilities are incurred, regardlessofwhen therelated cash flows take place. Nonexchange transactions, in which the District gives (or receives)valuewithoutdirectly receiving (or giving) equal value in exchange, includeproperty taxes, grants,entitlements, anddonations. Onanaccrualbasis, revenue fromproperty taxes is recognized in thefiscalyearinwhichalleligibilityrequirementshavebeensatisfied.GovernmentalFundFinancialStatementsGovernmental funds are reportedusing the current financial resourcesmeasurement focusand themodifiedaccrualbasisofaccounting.Underthismethod,revenuesarerecognizedwhenmeasurableand available. Expenditures are recorded when the related fund liability is incurred, except forprincipaland interestongeneral long‐termdebt,claimsand judgments,andcompensatedabsences,whicharerecognizedasexpenditurestotheextenttheyhavematured.Capitalassetacquisitionsarereportedasexpenditures ingovernmental funds. Proceedsofgeneral long‐termdebtand financingfromcapitalleasesarereportedasotherfinancingsources.

3. Revenues‐ExchangeandNon‐ExchangeTransactionsRevenue resulting from exchange transactions, in which each party gives and receives essentiallyequalvalue, isrecordedon theaccrualbasiswhentheexchangetakesplace. Onamodifiedaccrualbasis, revenue is recorded in the fiscal year in which the resources are measurable and becomeavailable. Available means that the resources will be collected within the current fiscal year.Generally, available is defined as collectiblewithin 60 days. However, to achieve comparability ofreporting amongCaliforniadistricts and so asnot todistort normal revenuepatterns,with specificrespect to reimbursement grants and corrections to state‐aid apportionments, the CaliforniaDepartment of Education has defined available for districts as collectible within one year. Thefollowing revenue sources are considered to be both measurable and available at fiscal year‐end:Stateapportionments,interest,certaingrants,andotherlocalsources.

28



3. Revenues‐ExchangeandNon‐ExchangeTransactions(continued)

Non‐exchangetransactions,inwhichtheDistrictreceivesvaluewithoutdirectlygivingequalvalueinreturn, includeproperty taxes, certain grants, entitlements, anddonations. Revenue frompropertytaxes is recognized in the fiscal year inwhich the taxesare received. Revenue fromcertaingrants,entitlements,anddonationsisrecognizedinthefiscalyearinwhichalleligibilityrequirementshavebeen satisfied. Eligibility requirements include time and purpose requirements. On a modifiedaccrual basis, revenue from non‐exchange transactions must also be available before it can berecognized.

C. BudgetaryDataThe budgetary process is prescribed by provisions of the California Education Code and requires thegoverningboardtoholdapublichearingandadoptanoperatingbudgetnolaterthanJuly1ofeachyear.TheDistrictgoverningboardsatisfiedtheserequirements.Theadoptedbudgetissubjecttoamendmentthroughouttheyeartogiveconsiderationtounanticipatedrevenueandexpendituresprimarilyresultingfromeventsunknownatthetimeofbudgetadoptionwiththe legalrestrictionthatexpenditurescannotexceedappropriationsbymajorobjectaccount.

Theamountsreportedastheoriginalbudgetedamountsinthebudgetarystatementsreflecttheamountswhentheoriginalappropriationswereadopted.Theamountsreportedasthefinalbudgetedamountsinthebudgetarystatementsreflecttheamountsafterallbudgetamendmentshavebeenaccountedfor.Forbudget purposes, on behalf payments havenotbeen included as revenue and expenditures as requiredundergenerallyacceptedaccountingprinciples.

D. EncumbrancesEncumbranceaccountingisusedinallbudgetedfundstoreserveportionsofapplicableappropriationsforwhich commitments have beenmade. Encumbrances are recorded for purchase orders, contracts, andother commitments when they are written. Encumbrances are liquidated when the commitments arepaid.AllencumbrancesareliquidatedasofJune30.

E. Assets,DeferredOutflowsofResources,Liabilities,DeferredInflowsofResources,andNetPosition

1. CashandCashEquivalents

TheDistrictconsiderscashandcashequivalentstobecashonhandanddemanddeposits.Inaddition,becausetheTreasuryPoolissufficientlyliquidtopermitwithdrawalofcashatanytimewithoutpriornoticeorpenalty,equityinthepoolisalsodeemedtobeacashequivalent.

2. InventoriesandPrepaidItemsInventoriesarevaluedatcostusingthe first‐in/first‐out(FIFO)method. Thecostsofgovernmentalfund‐typeinventoriesarerecordedasexpenditureswhenconsumedratherthanwhenpurchased.Certainpaymentstovendorsreflectcostsapplicabletofutureaccountingperiodsandarerecordedasprepaiditems.

29

FONTANAUNIFIEDSCHOOLDISTRICTNotestoFinancialStatementsJune30,2017NOTE1–SUMMARYOFSIGNIFICANTACCOUNTINGPOLICIES(continued)E. Assets,DeferredOutflowsofResources,Liabilities,DeferredInflowsofResources,andNetPosition

(continued)

3. CapitalAssetsPurchased or constructed capital assets are reported at cost or estimated historical cost. Donatedcapital assets, donated works of art and similar items, and capital assets received in a serviceconcessionarrangementarereportedatacquisitionvalueratherthanfairvalue. Thecostofnormalmaintenanceandrepairsthatdonotaddtothevalueoftheassetormateriallyextendassets’livesarenotcapitalized.Capitalassetsaredepreciatedusingthestraight‐linemethodoverthefollowingestimatedusefullives:

Description EstimatedLives

BuildingsandImprovements 25‐50yearsFurnitureandEquipment 15‐20yearsVehicles 8years

4. UnearnedRevenue

Unearned revenue arises when potential revenue does not meet both the "measurable" and"available"criteriaforrecognitioninthecurrentperiodorwhenresourcesarereceivedbytheDistrictprior to the incurrence of qualifying expenditures. In subsequent periods, when both revenuerecognition criteria aremet, orwhen theDistricthasa legal claim to the resources, the liability forunearnedrevenueisremovedfromthecombinedbalancesheetandrevenueisrecognized.Certaingrantsreceivedthathavenotmeteligibilityrequirementsarerecordedasunearnedrevenue.On the governmental fund financial statements, receivables that will not be collected within theavailableperiodarealsorecordedasunearnedrevenue.

5. DeferredOutflows/InflowsofResourcesIn addition to assets, the statement of net position will sometimes report a separate section fordeferred outflows of resources. This separate financial statement element, deferred outflows ofresources,representsaconsumptionofnetpositionthatappliestoafutureperiodandsowillnotberecognizedasanoutflowofresources(expense/expenditure)until then. TheDistricthastwoitemsthatqualifyforreportinginthiscategory. Thefirstitemisrelatedtoitspensionplansasmorefullydescribed in the footnote entitled “Pension Plans”. The second is deferred amount on refunding,whichresultedfromthedifferenceinthecarryingvalueofrefundeddebtanditsreacquisitionprice.This amount is shown as deferred and amortized over the shorter of the life of the refunded orrefundingdebt.In addition to liabilities, the statement of net positionwill sometimes report a separate section fordeferredinflowsofresources.Thisseparatefinancialstatementelement,deferredinflowsofresources,representsanacquisitionofnetpositionthatappliestoafutureperiodandwillnotberecognizedasaninflowofresources(revenue)untilthattime.TheDistricthasoneitemthatqualifiesforreportinginthiscategory.ThatitemistorecognizetheDistrict'sproportionateshareofthedeferredinflowsofresourcesrelatedtoitspensionplansasmorefullydescribedinthefootnoteentitled"PensionPlans".

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(continued)

6. CompensatedAbsencesThe liability for compensated absences reported in the government‐wide statements consists ofunpaid,accumulatedannualandvacationleavebalances. Theliabilityhasbeencalculatedusingthevesting method, in which leave amounts for both employees who currently are eligible to receivetermination payments and other employees who are expected to become eligible in the future toreceivesuchpaymentsuponterminationareincluded.

7. PostemploymentBenefitsOtherThanPensions(OPEB)ForpurposesofmeasuringthenetOPEBliability,deferredoutflowsofresourcesanddeferredinflowsofresourcesrelatedtoOPEB,andOPEBexpense, informationaboutthefiduciarynetpositionoftheFontanaUnifiedSchoolDistrictRetireeBenefitsPlan (“thePlan”) andadditions to/deductions fromthePlan’sfiduciarynetpositionhavebeendeterminedonthesamebasisastheyarereportedbythePlan. For this purpose, the Plan recognizes benefit paymentswhen due and payable in accordancewiththebenefitterms.Investmentsarereportedatfairvalue,exceptformoneymarketinvestmentsandparticipatinginterest‐earninginvestmentcontractsthathaveamaturityatthetimeofpurchaseofoneyearorless,whicharereportedatcost.

8. PensionsFor purposes of measuring the net pension liability and deferred outflows/inflows of resourcesrelatedtopensions,andpensionexpense,informationaboutthefiduciarynetpositionoftheDistrict'sCaliforniaStateTeachersRetirementSystem(CalSTRS)andCaliforniaPublicEmployees'RetirementSystem(CalPERS)plansandadditionto/deductionsfromthePlans'fiduciarynetpositionhavebeendeterminedonthesamebasisastheyarereportedbyCalSTRSandCalPERS.Forthispurpose,benefitpayments (including refunds of employee contributions) are recognized when due and payable inaccordancewiththebenefitterms.Investmentsarereportedatfairvalue.

9. FundBalancesThe fundbalance forgovernmental funds isreported inclassificationsbasedontheextent towhichthegovernment isbound tohonorconstraintson the specificpurposes forwhichamounts in thosefundscanbespent.Nonspendable: Fund balance is reported as nonspendable when the resources cannot be spentbecausetheyareeitherinanonspendableformorlegallyorcontractuallyrequiredtobemaintainedintact.Resourcesinnonspendableformincludeinventoriesandprepaidassets.Restricted: Fund balance is reported as restricted when the constraints placed on the use ofresourcesareeitherexternallyimposedbycreditors,grantors,contributors,orlawsorregulationsofothergovernments;orimposedbylawthroughconstitutionalprovisionorbyenablinglegislation.Committed: TheDistrict'shighestdecision‐makinglevelofauthorityrestswiththeDistrict'sBoard.Fund balance is reported as committed when the Board passes a resolution that places specifiedconstraints on how resources may be used. The Board can modify or rescind a commitment ofresourcesthroughpassageofanewresolution.

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(continued)

9. FundBalances(continued)Assigned: ResourcesthatareconstrainedbytheDistrict'sintenttousethemforaspecificpurpose,but are neither restricted nor committed, are reported as assigned fund balance. Intent may beexpressedbyeithertheBoard,committees(suchasbudgetorfinance),orofficialstowhichtheBoardhasdelegatedauthority.Unassigned: Unassigned fund balance represents fund balance that has not been restricted,committed,orassignedandmaybeutilizedbytheDistrictforanypurpose. Whenexpendituresareincurred,andbothrestrictedandunrestrictedresourcesareavailable,itistheDistrict'spolicytouserestrictedresources first, thenunrestrictedresources in theorderofcommitted,assigned,andthenunassigned,astheyareneeded.

10. NetPosition

Net position is classified into three components: net investment in capital assets; restricted; andunrestricted.Theseclassificationsaredefinedasfollows: Net investment in capital assets ‐ This component of net position consists of capital assets,

including restricted capital assets, net of accumulated depreciation and reduced by theoutstandingbalancesofanybonds,mortgages,notes,orotherborrowingsthatareattributabletothe acquisition, construction, or improvement of those assets. If there are significant unspentrelateddebtproceedsatyear‐end,theportionofthedebtattributabletotheunspentproceedsarenotincludedinthecalculationofnetinvestmentincapitalassets.Rather,thatportionofthedebtisincludedinthesamenetpositioncomponentastheunspentproceeds.

Restricted ‐ This component of net position consists of constraints placed on net position usethrough external constraints imposed by creditors (such as through debt covenants), grantors,contributors,orlawsorregulationsofothergovernmentsorconstraintsimposedbylawthroughconstitutionalprovisionsorenablinglegislation.

Unrestrictednetposition‐Thiscomponentofnetpositionconsistsofnetpositionthatdoesnotmeetthedefinitionof"netinvestmentincapitalassets"or"restricted".

Whenbothrestrictedandunrestrictedresourcesareavailableforuse,itistheDistrict'spolicytouserestrictedresourcesfirst,thenunrestrictedresourcesastheyareneeded.

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FONTANAUNIFIEDSCHOOLDISTRICTNotestoFinancialStatementsJune30,2017

NOTE1–SUMMARYOFSIGNIFICANTACCOUNTINGPOLICIES(continued)F. MinimumFundBalancePolicy

TheDistricthasestablishedandmaintainsreservationsoffundbalanceinaccordancewithGASBNo.54.Fund balancemeasures the net financial resources available to finance expenditures of future periods.TheDistrict'sUnassignedGeneralFundBalancewillbemaintainedtoprovidetheDistrictwithsufficientworkingcapitalandamarginofsafetytoaddresslocalandregionalemergencieswithoutborrowing.TheUnassignedGeneralFundBalancemayonlybeappropriatedbyresolutionoftheBoardofEducation.Fund balance of the District may be committed for a specific source by formal action of the Board ofEducation.AmendmentsormodificationtothecommittedfundbalancemustalsobeapprovedbyformalactionoftheBoardofEducation.Committedfundbalancedoesnotlapseatyear‐end.Theformalactionrequiredtocommitfundbalanceshallbebyboardresolutionormajorityvote.TheBoardofEducationdelegatesauthoritytoassignfundbalanceforaspecificpurposetotheAssociateSuperintendent,BusinessServicesoftheDistrictwithnotificationatthenextscheduledBoardMeetingtotheBoardofEducation.Forpurposesoffundbalanceclassification,expendituresaretobespentfromrestrictedfundbalancefirstandthenunrestricted.Expendituresincurredintheunrestrictedfundbalancesshallbereducedfirstfromthecommittedfundbalance,thenfromtheassignedfundbalanceandlastly,theunassignedfundbalance.TheDistrictcurrentlyadherestothestatemandatedminimalleveloffundbalanceasoutlinedinTitleVoftheCaliforniaCodeofRegulationsSection15443,Reserve.

G. PropertyTaxCalendar

The County is responsible for the assessment, collection, and apportionment of property taxes for alljurisdictionsincludingtheschoolsandspecialdistrictswithintheCounty.TheBoardofSupervisorsleviespropertytaxesasofSeptember1onpropertyvaluesassessedonJuly1. Securedpropertytaxpaymentsaredueintwoequalinstallments.ThefirstisgenerallydueNovember1andisdelinquentwithpenaltiesonDecember10,andthesecondisgenerallydueonFebruary1andisdelinquentwithpenaltiesonApril10.SecuredpropertytaxesbecomealienonthepropertyonJanuary1.

H. UseofEstimates

The preparation of financial statements in conformity with generally accepted accounting principlesrequiresmanagementtomakeestimatesandassumptionsthataffectthereportedamountsofassetsandliabilitiesanddisclosureofcontingentassetsandliabilitiesatthedateofthefinancialstatementsandthereportedamountsof revenuesandexpendituresduring thereportedperiod. Actual resultscoulddifferfromthoseestimates.

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NOTE1–SUMMARYOFSIGNIFICANTACCOUNTINGPOLICIES(continued)

I. NewGASBPronouncements

Duringthe2016‐17fiscalyear,thefollowingGASBPronouncementsbecameeffective:1. StatementNo.73,AccountingandFinancialReportingforPensionsandRelatedAssetsThatAre

NotWithin the Scope of GASB Statement 68, and Amendments to Certain Provisions of GASBStatements67and68(Issued06/15)The requirements of this Statement extend the approach to accounting and financial reportingestablished in Statement 68 to all pensions, with modifications as necessary to reflect that foraccountingand financial reportingpurposes,anyassetsaccumulated forpensions thatareprovidedthrough pension plans that are not administered through trusts thatmeet the criteria specified inStatement68shouldnotbeconsideredpensionplanassets.Italsorequiresthatinformationsimilarto that required by Statement 68 be included in notes to financial statements and requiredsupplementaryinformationbyallsimilarlysituatedemployersandnonemployercontributingentities.

2. StatementNo. 74, FinancialReporting for PostemploymentBenefit PlansOtherThanPensionPlans(Issued06/15)This Statement replaces Statements No. 43, Financial Reporting for Postemployment Benefit PlansOtherThanPensionPlans,asamended,andNo.57,OPEBMeasurementsbyAgentEmployersandAgentMultiple‐EmployerPlans. StatementNo. 75,AccountingandFinancialReporting forPostemploymentBenefitsOther Than Pensions, establishes new accounting and financial reporting requirements forgovernments whose employees are provided with OPEB, as well as for certain nonemployergovernments that have a legal obligation to provide financial support for OPEB provided to theemployeesofotherentities. Thescopeof thisStatement includesOPEBplans–definedbenefitanddefinedcontribution–administeredthroughtruststhatmeetthefollowingcriteria:

Contributions fromemployersandnonemployercontributingentities to theOPEBplanandearningsonthosecontributionsareirrevocable.

OPEBplanassetsarededicatedtoprovidingOPEBtoplanmembers inaccordancewiththebenefitterms.

OPEB plan assets are legally protected from the creditors of employers, nonemployercontributingentities,andtheOPEBplanadministrator.IftheplanisadefinedbenefitOPEBplan,planassetsalsoarelegallyprotectedfromcreditorsoftheplanmembers.

3. StatementNo.77,TaxAbatementDisclosures(Issued08/15)

For financial reporting purposes, this Statement defines a tax abatement as resulting from anagreementbetweenagovernmentandan individualorentity inwhichthegovernmentpromisestoforgo tax revenuesand the individualorentitypromises to subsequently takea specificaction thatcontributes to economic development or otherwise benefits the government or its citizens. ThisStatementrequiresdisclosureoftaxabatementinformationabout(1)areportinggovernment’sowntaxabatementagreements,and(2)thosethatareenteredintobyothergovernmentsandthatreducethereportinggovernment’staxrevenues.

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FONTANAUNIFIEDSCHOOLDISTRICTNotestoFinancialStatementsJune30,2017NOTE1–SUMMARYOFSIGNIFICANTACCOUNTINGPOLICIES(continued)I. NewGASBPronouncements(continued)

3. Statement No. 78, Pensions Provided Through Certain Multiple‐Employer Defined BenefitPensionPlans(Issued12/15)ThisStatementamendsthescopeandapplicabilityofStatement68toexcludepensionsprovidedtoemployees of state or local governmental employers through a cost‐sharing multiple‐employerdefinedbenefitpensionplanthat(1)isnotastateorlocalgovernmentalpensionplan,(2)isusedtoprovidedefinedbenefitpensionsbothtoemployeesofstateorlocalgovernmentalemployersandtoemployees of employers that are not state or local governmental employers, and (3) has nopredominant state or local governmental employer (either individually or collectively with otherstateorlocalgovernmentalemployersthatprovidepensionsthroughthepensionplan).

4. StatementNo.80,BlendingRequirementsforCertainComponentUnits–AnAmendmentofGASB

StatementNo.14(Issued01/16)This Statement amends the blending requirements for the financial statement presentation ofcomponentunitsofallstateandlocalgovernments. Theadditionalcriterionrequiresblendingofacomponentunitincorporatedasanot‐for‐profitcorporationinwhichtheprimarygovernmentisthesolecorporatemember.

5. StatementNo.82,PensionIssues–AnAmendmentofGASBStatementsNo.67,No.68,andNo.73

(Issued03/16)The objective of this Statement is to address certain issues that have been raisedwith respect toStatementsNo.67,FinancialReportingforPensionPlans,No.68,AccountingandFinancialReportingforPensions,andNo.73,AccountingandFinancialReportingforPensionsandRelatedAssetsThatAreNotwithintheScopeofGASBStatement68,andAmendmentstoCertainProvisionsofGASBStatements67and68. Specifically, this Statement addresses issues regarding (1) the presentation of payroll‐relatedmeasures in required supplementary information, (2) the selectionofassumptionsand thetreatmentofdeviationsfromtheguidanceinanActuarialStandardofPracticeforfinancialreportingpurposes, and (3) the classification of payments made by employers to satisfy employee (planmember)contributionrequirements.

35

FONTANAUNIFIEDSCHOOLDISTRICTNotestoFinancialStatementsJune30,2017NOTE2–CASHANDINVESTMENTSCashandinvestmentsatJune30,2017,arereportedatfairvalueandconsistedofthefollowing:

RatingGovernmental

FundsProprietary

Fund TotalFiduciaryFunds

PooledFunds:CashinCountyTreasury 265,442,793$ 6,867,530$ 272,310,323$ 2$

Deposits:Cashonhandandinbanks ‐ ‐ ‐ 1,629,650Cashinrevolvingfund 109,990 150,000 259,990 ‐

TotalDeposits 109,990 150,000 259,990 1,629,650

TotalCash 265,552,783$ 7,017,530$ 272,570,313$ 1,629,652$Investments:

USBankMoneyMarket A‐1+ 20,155,126$ ‐$ 20,155,126$ ‐$Benefit‐Trust:FixedIncome:

BlackrockTotalReturn‐K 2,973,908GuggenheimInvestmentsMacro 2,957,615GuggenheimInvestmentsBondFund 2,978,018HartfordWorldBond‐Y 1,318,872LeggMasonBWGlobal 1,018,451LeggMasonBWAlternativeCredit 997,244PrudentialFundsTotalReturnBondCLQ 2,980,363WesternAssetCorePlusBond 2,992,691

DomesticEquities:AlgerFundsSmallCapFocusZ 1,035,408AlgerFundsSpectraZ 1,667,856BrandesFundsIntl.SmallCap 661,484BrandesFundsEmergingMarkets 491,855ColumbiaContrarianCore 1,332,023OakmarkSelectFund 1,320,575HartfordFundsMidcapClassY 679,531UndiscoveredManagersBehavioralValue 653,787

InternationalEquities:BrandesFundsInternationalEquity‐R6 995,110HartfordInternationalValue‐Y 1,013,722ClearbridgeInternationalCMCap‐IS 679,216AmericanFundsNewPerspectiveF2 681,318AmericanFundsNewWorldF2 504,291ThornburgInvestmentIncomeBuilderI 987,138

RealEstate:CohenandSteersRealEstateSecurities‐Z 1,308,754PrudentialFundsGlobalRealEstateCLQ 986,815

TotalInvestments 33,216,045$


InvestmentsecurityratingsreportedasofJune30,2017,aredefinedbyStandardandPoors.

36


NOTE2–CASHANDINVESTMENTS(continued)PooledFundsIn accordancewithEducationCodeSection41001, theDistrictmaintains substantiallyallof its cash in theCounty Treasury. The County pools and invests the cash. These pooled funds are carried at cost whichapproximatesfairvalue.Interestearnedisdepositedannuallytoparticipatingfunds.Anyinvestmentlossesareproportionatelysharedbyallfundsinthepool.Because theDistrict's deposits aremaintained in a recognizedpooled investment fundunder the careof athirdpartyandtheDistrict'sshareofthepooldoesnotconsistofspecific,identifiableinvestmentsecuritiesownedbytheDistrict,nodisclosureoftheindividualdepositsandinvestmentsorrelatedcustodialcreditriskclassificationsisrequired.Inaccordancewithapplicablestate laws, theCountyTreasurermay invest inderivativesecuritieswith theState of California. However, at June 30, 2017, the County Treasurer has represented that the PooledInvestmentFundcontainednoderivativesorotherinvestmentswithsimilarriskprofiles.CustodialCreditRisk–DepositsCustodialcreditriskistheriskthatintheeventofabankfailure,theDistrict'sdepositsmaynotbereturnedtoit.TheDistrictdoesnothaveapolicyforcustodialcreditriskfordeposits.Cashbalancesheldinbanksareinsuredupto$250,000bytheFederalDepositoryInsuranceCorporation(FDIC)andarecollateralizedbytherespective financial institutions. In addition, the California Government Code requires that a financialinstitutionsecuredepositsmadebyStateorlocalgovernmentalunitsbypledgingsecuritiesinanundividedcollateralpoolheldbyadepositoryregulatedunderStatelaw(unlesssowaivedbythegovernmentalunit).Themarketvalueofthepledgedsecuritiesinthecollateralpoolmustequalatleast110percentofthetotalamount deposited by the public agencies. California law also allows financial institutions to secure publicdeposits by pledging first trust deedmortgage notes having a value of 150 percent of the secured publicdepositsandlettersofcredit issuedbytheFederalHomeLoanBankofSanFranciscohavingavalueof105percentofthesecureddeposits.AsofJune30,2017,$1,488,254oftheDistrict'sbankbalancewasexposedtocustodialcreditriskbecauseitwasuninsured.However,itwascollateralizedwithsecuritiesheldbythepledgingfinancialinstitution'strustdepartmentoragency,butnotinthenameoftheDistrict.Investments‐InterestRateRiskTheDistrict'sinvestmentpolicylimitsinvestmentmaturitiesasameansofmanagingitsexposuretofairvaluelossesarisingfromincreasinginterestrates.TheDistrict'sinvestmentpolicylimitsinvestmentpurchasestoinvestmentswithatermnottoexceedthreeyears.InvestmentspurchasedwithmaturitytermsgreaterthanthreeyearsrequireapprovalbytheBoardofEducation.InvestmentspurchasedwithmaturitiesgreaterthanoneyearrequirewrittenapprovalbytheSuperintendentpriortocommitment.

37

FONTANAUNIFIEDSCHOOLDISTRICTNotestoFinancialStatementsJune30,2017NOTE2–CASHANDINVESTMENTS(continued)MaturitiesofinvestmentsheldatJune30,2017,consistedofthefollowing:

FairValue

LessThanOneYear

OneYearThroughFiveYears

Investmentmaturities:USBankMoneyMarket 20,155,126$ 20,155,126$ ‐$Benefit‐Trust:FixedIncome:

BlackrockTotalReturn‐K 2,973,908 2,973,908 ‐GuggenheimInvestmentsMacro 2,957,615 2,957,615 ‐GuggenheimInvestmentsBondFund 2,978,018 2,978,018 ‐HartfordWorldBond‐Y 1,318,872 1,318,872 ‐LeggMasonBWGlobal 1,018,451 1,018,451 ‐LeggMasonBWAlternativeCredit 997,244 997,244 ‐PrudentialFundsTotalReturnBondCLQ 2,980,363 2,980,363 ‐WesternAssetCorePlusBond 2,992,691 2,992,691 ‐

DomesticEquities:AlgerFundsSmallCapFocusZ 1,035,408 1,035,408 ‐AlgerFundsSpectraZ 1,667,856 1,667,856 ‐BrandesFundsIntl.SmallCap 661,484 661,484 ‐BrandesFundsEmergingMarkets 491,855 491,855 ‐ColumbiaContrarianCore 1,332,023 1,332,023OakmarkSelectFund 1,320,575 1,320,575 ‐HartfordFundsMidcapClassY 679,531 679,531 ‐UndiscoveredManagersBehavioralValue 653,787 653,787 ‐

InternationalEquities: ‐BrandesFundsInternationalEquity‐R6 995,110 995,110 ‐HartfordInternationalValue‐Y 1,013,722 1,013,722 ‐ClearbridgeInternationalCMCap‐IS 679,216 679,216 ‐AmericanFundsNewPerspectiveF2 681,318 681,318 ‐AmericanFundsNewWorldF2 504,291 504,291 ‐ThornburgInvestmentIncomeBuilderI 987,138 987,138

RealEstate: ‐CohenandSteersRealEstateSecurities‐Z 1,308,754 1,308,754 ‐PrudentialFundsGlobalRealEstateCLQ 986,815 986,815 ‐

Total 53,371,171$ 53,371,171$ ‐$

Maturity

38

FONTANAUNIFIEDSCHOOLDISTRICTNotestoFinancialStatementsJune30,2017NOTE2–CASHANDINVESTMENTS(continued)Investments‐CreditRiskTheDistrict's investmentpolicy limits investmentchoices toobligationsof local, stateandfederalagencies,commercialpaper,certificatesofdeposit, repurchaseagreements,corporatenotes,bankeracceptances,andother securities allowed by State Government Code Section 53600. At June 30, 2017, all investmentsrepresentedgovernmentalsecurities,mutualfunds,andotherequitieswhichwereissued,registeredandheldbytheDistrict'sagentintheDistrict'sname.Investments‐ConcentrationofCreditRiskTheDistrictdoesnotplacelimitsontheamountitmayinvestinanyoneissuer.AtJune30,2017,theDistricthadthefollowinginvestmentthatrepresentedmorethanfivepercentoftheDistrict'snetinvestments:

ConcentationofCreditRiskU.S.BankMoneyMarket 38%BlackrockTotalReturn‐K 6%GuggenheimInvestmentsMacro 6%GuggenheimInvestmentsBondFund 6%PrudentialFundsTotalReturnBondCLQ 6%WesternAssetCorePlusBond 6%

NOTE3–ACCOUNTSRECEIVABLEAccountsreceivableasofJune30,2017,consistedofthefollowing:

ProprietaryFund

GeneralFund

CafeteriaFund


Funds Totals

Self‐InsuranceFund

FederalGovernment:Categoricalaidprograms 10,300,756$ 4,671,019$ 308,617$ 15,280,392$ ‐$

StateGovernment:Lottery 1,630,424 ‐ ‐ 1,630,424 ‐Specialeducation 518,425 ‐ ‐ 518,425 ‐Categoricalaidprograms 170,948 281,185 981,791 1,433,924 ‐

Local:Interest 504,900 20,366 133,279 658,545 22,449Otherlocalresources 671,777 79,571 432,314 1,183,662 13,860

Total 13,797,230$ 5,052,141$ 1,856,001$ 20,705,372$ 36,309$

GovernmentalFunds

39

FONTANAUNIFIEDSCHOOLDISTRICTNotestoFinancialStatementsJune30,2017NOTE4–INTERFUNDTRANSACTIONS

A. BalancesDueTo/FromOtherFunds

Balancesdueto/fromotherfundsatJune30,2017,consistedofthefollowing:

Non‐MajorGeneral Cafeteria Governmental Governmental ProprietaryFund Fund Funds FundsTotal Fund Total

GeneralFund ‐$ 786$ 8,451,304$ 8,452,090$ 2,999,433$ 11,451,523$CafeteriaFund 3,109,139 ‐ ‐ 3,109,139 103,153 3,212,292Non‐MajorGovernmentalFunds 1,564,254 602 600,000 2,164,856 73,219 2,238,075Self‐InsuranceFund 50,533 ‐ 1,341 51,874 ‐ 51,874

Total 4,723,926$ 1,388$ 9,052,645$ 13,777,959$ 3,175,805$ 16,953,764$

22,250$786

8,429,0542,999,433

189,704600,00014,356

1,170,124602

58,8633,109,139103,153204,42650,5331,341

Total 16,953,764$

DueFromOtherFunds

GeneralFundduetoSelf‐InsuranceFundforworker'scompensation

AdultEducationFundduetoSelf‐InsuranceFundforworker'scompensation

ChildDevelopmentFundduetoSelf‐InsuranceFundforworker'scompensation

CafeteriaFundduetoSelf‐InsuranceFundforworker'scompensation

Self‐InsuranceFundduetoGeneralFundforworker'scompensation

GeneralFundduetoAdultEducationFundforgeneraleducationstudentsenrolledinadulteducationprograms

Self‐InsuranceFundduetoChildDevelopmentFundforworker'scompensation

GeneralFundduetoCafeteriaFundforcateringandbaddebtforunallowableexpenses

ChildDevelopmentFundduetoCafeteriaFundforcatering

GeneralFundduetoSpecialReserveFundforCapitalOutlayProjectsforRDAFundsDistribution

AdultEducationFundduetoGeneralfundforprinting,vehiclerepair,AdultEdCalWorks,AEB1andAEB2AdultEdBlockGrants,supplies,postageandsuspenseclearing

ChildDevelopmentFundduetoGeneralFundforprintingcosts,envelopes,postage,payrolladjustments,andindirectcostallocations

CafeteriaFundduetoGeneralFundforvehiclerepair,computeruserfees,fuelcharges,printing,indirectcostallocationsandsuspenseclearing

CapitalFacilitiesFundduetoGeneralFundforindirectcosts

AdultEducationFundduetoSpecialReserveFundforCapitalOutlayProjectsfortemporaryborrowingtomeetcashflowneeds

B. TransfersTo/FromOtherFundsTransfersto/fromotherfundsforthefiscalyearendedJune30,2017,consistedofthefollowing:

GeneralFundtransfertoChildDevelopmentFundtoreimburseforspecialeducationenrollmentsinearlyeducationprogram 8,971$GeneralFundtransfertoCafeteriaFundforbaddebtforunallowableexpenses 694GeneralFundtransfertoSpecialReserveFundforCapitalOutlayProjectsforRDAFundsDistribution 8,429,054

Total 8,438,719$

40

FONTANAUNIFIEDSCHOOLDISTRICTNotestoFinancialStatementsJune30,2017NOTE5–FUNDBALANCESAtJune30,2017,fundbalancesoftheDistrict'sgovernmentalfundswereclassifiedasfollows:

Non‐Major

General Cafeteria GovernmentalFund Fund Funds Total

Nonspendable:Revolvingcash 100,000$ 9,990$ ‐$ 109,990$Inventories ‐ 84,070 ‐ 84,070Prepaidexpenditures 1,139,206 ‐ ‐ 1,139,206

TotalNonspendable 1,239,206 94,060 ‐ 1,333,266Restricted:

Categoricalprograms 23,268,984 ‐ 919,418 24,188,402Adulteducationprogram ‐ ‐ 109,834 109,834Foodserviceprogram ‐ 9,814,862 ‐ 9,814,862Capitalprojects ‐ ‐ 71,790,408 71,790,408Debtservice ‐ ‐ 18,229,006 18,229,006

TotalRestricted 23,268,984 9,814,862 91,048,666 124,132,512Committed:

Deferredmaintenanceprogram ‐ ‐ 820,236 820,236TotalCommitted ‐ ‐ 820,236 820,236

Assigned:Otherassignments 11,925,981 ‐ 272,648 12,198,629

TotalAssigned 11,925,981 ‐ 272,648 12,198,629Unassigned:

Remainingunassignedbalances 112,072,912 ‐ ‐ 112,072,912TotalUnassigned 112,072,912 ‐ ‐ 112,072,912

Total 148,507,083$ 9,908,922$ 92,141,550$ 250,557,555$

41

FONTANAUNIFIEDSCHOOLDISTRICTNotestoFinancialStatementsJune30,2017NOTE6–CAPITALASSETSANDDEPRECIATIONCapitalassetactivityfortheyearendedJune30,2017,wasasfollows:

Balance, Balance,

July1,2016 Additions Retirements June30,2017Capitalassetsnotbeingdepreciated:

Land 58,877,302$ ‐$ ‐$ 58,877,302$Constructioninprogress 36,707,641 808,137 26,228,734 11,287,044Totalcapitalassetsnotbeingdepreciated 95,584,943 808,137 26,228,734 70,164,346

Capitalassetsbeingdepreciated:Improvementofsites 69,334,077 77,839 23,969 69,387,947Buildings 627,086,311 32,224,850 ‐ 659,311,161Equipment 59,508,345 5,838,884 994,836 64,352,393Totalcapitalassetsbeingdepreciated 755,928,733 38,141,573 1,018,805 793,051,501

Accumulateddepreciationfor:Improvementofsites (39,116,443) (2,275,711) (23,969) (41,368,185)Buildings (209,122,018) (15,766,160) ‐ (224,888,178)Equipment (40,846,393) (5,766,462) (935,880) (45,676,975)Totalaccumulateddepreciation (289,084,854) (23,808,333) (959,849) (311,933,338)Totalcapitalassetsbeingdepreciated,net 466,843,879 14,333,240 58,956 481,118,163

Governmentalactivitycapitalassets,net 562,428,822$ 15,141,377$ 26,287,690$ 551,282,509$

NOTE7–GENERALLONG‐TERMDEBTChangesinlong‐termdebtfortheyearendedJune30,2017,wereasfollows:

Balance, Balance, Amount Due

July1,2016 Additions Deductions June30,2017 WithinOneYearGeneralObligationBonds:Principalrepayments 206,850,234$ ‐$ 8,581,175$ 198,269,059$ 8,711,800$Accretedinterestcomponent 20,504,002 4,721,425 1,878,825 23,346,602 1,928,200Unamortizedissuancepremium 18,002,150 ‐ 1,284,684 16,717,466 1,284,684Total‐Bonds 245,356,386 4,721,425 11,744,684 238,333,127 11,924,684

CertificatesofParticipation:Principalrepayments 31,045,000 ‐ 1,845,000 29,200,000 2,830,000Unamortizedissuancepremium 4,000,449 ‐ 200,168 3,800,281 200,168Total‐CertificatesofParticipation 35,045,449 ‐ 2,045,168 33,000,281 3,030,168

QualifiedZoneAcademyBondScheduleddeposits 1,238,138 ‐ 247,627 990,511 247,627Accumulatedinterest 586,803 ‐ 95,956 490,847 106,345Total‐QualifiedZoneAcademyBond 1,824,941 ‐ 343,583 1,481,358 353,972

CompensatedAbsences 2,086,838 52,282 ‐ 2,139,120 ‐Capitalleases ‐ 894,400 59,627 834,773 178,880OtherPostemploymentBenefits 136,166,818 ‐ 13,972,114 122,194,704 ‐

Totals 420,480,432$ 5,668,107$ 28,165,176$ 397,983,363$ 15,487,704$

PaymentsforgeneralobligationbondsaremadebytheBondInterestandRedemptionFund.CertificatesofParticipationpaymentsaremadebytheCapitalProjectsFundforBlendedComponentUnits.QZABpaymentsaremadebytheSpecialReserveFundforCapitalOutlayProjects.CapitalleasepaymentsaremadefromtheGeneralFund. Accumulatedvacationandpensioncostswillbepaidforbythefundforwhichtheemployeeworked.

42

FONTANAUNIFIEDSCHOOLDISTRICTNotestoFinancialStatementsJune30,2017NOTE7–GENERALLONG‐TERMDEBT(continued)A. GeneralObligationBonds

Electionof2006OnJune6,2006,anelectionwasheldwheretheregisteredvotersintheDistrictapprovedbyafifty‐fivepercentmajoritytheissuanceandsaleof$275millionprincipalamountofgeneralobligationbonds.Thebondsarebeingissuedtoacquire,construct,renovateandequipcertainDistrictfacilities.AsofJune30,2017, there are three bond issuances outstanding from this authorization: the Series A, Series B, andSeries C Bonds. The Bonds are general obligations of the District, and the County is empowered andobligated to levy ad valorem taxes upon all property within the District subject to taxation for thepaymentofinterestonandprincipaloftheBondswhendue.PriorYears'RefundingBondsIn prior years theDistrict has issued refunding bonds for the purposes of defeasing previously issuedbonds. ThenetproceedsofthesebondswereusedtopurchaseU.S.governmentsecurities,whichweredepositedintoanirrevocabletrustwithanescrowagenttoprovideforfuturedebtservicepaymentsonthe refunded bonds. As a result, the refunded bonds are considered to be defeased, and the relatedliabilityforthebondshasbeenremovedfromtheDistrict'sliabilities.AsofJune30,2017,theprincipalbalanceoutstandingonthepreviouslydefeaseddebtwas$50,975,000.

Amountspaidtotheescrowagentinexcessoftheoutstandingdebtatthetimeofpaymentarerecordedasdeferredamountsonrefundingonthestatementofnetpositionandareamortizedtointerestexpenseoverthelifeoftheliability.DeferredamountsonrefundingasofJune30,2017of$5,350,307remaintobeamortized.Asummaryofoutstandinggeneralobligationbondsissuedispresentedbelow:

Issue Maturity Interest Original Balance, Balance,

Series Date Date Rate Issue July1,2016 Additions Deductions June30,2017RefundingBonds1997R 6/18/1997 2018 4.40%‐5.95% 18,670,227$ 1,739,885$ ‐$ 621,175$ 1,118,710$2009R 2/11/2009 2022 3.0%‐5.25% 18,110,000 10,175,000 ‐ 1,410,000 8,765,0002012R 10/25/2012 2031 2.0%‐5.0% 78,115,000 72,910,000 ‐ 2,445,000 70,465,0002014R 5/22/2014 2031 2.25%‐5.0% 12,975,000 9,810,000 ‐ 1,650,000 8,160,0002016R 6/1/2016 2029 2.0%‐5.0% 49,910,000 49,910,000 ‐ 1,005,000 48,905,000

SubtotalRefundingBonds 144,544,885 ‐ 7,131,175 137,413,710MeasureC(2006)2006B 3/11/2008 2033 3.0%‐5.25% 70,585,909 15,045,909 ‐ 1,450,000 13,595,9092006C 10/25/2012 2044 5.0%‐5.75% 47,259,440 47,259,440 ‐ ‐ 47,259,440

SubtotalMeasureC 62,305,349 ‐ 1,450,000 60,855,349Total 206,850,234$ ‐$ 8,581,175$ 198,269,059$

1997R 4,027,322$ 349,907$ 1,878,825$ 2,498,404$2006B 7,233,326 1,195,051 ‐ 8,428,3772006C 9,243,354 3,176,467 ‐ 12,419,821

20,504,002$ 4,721,425$ 1,878,825$ 23,346,602$

AccretedInterest

43

FONTANAUNIFIEDSCHOOLDISTRICTNotestoFinancialStatementsJune30,2017NOTE8–GENERALLONG‐TERMDEBT(continued)A. GeneralObligationBonds(continued)

The annual requirements to amortize general obligation bonds outstanding at June 30, 2017, are asfollows:

FiscalYear Principal Interest Total

2017‐18 8,711,800$ 7,649,256$ 16,361,056$2018‐19 9,616,910 7,382,471 16,999,3812019‐20 9,815,000 4,876,906 14,691,9062020‐21 8,925,000 4,459,756 13,384,7562021‐22 9,915,000 4,050,106 13,965,1062022‐27 55,145,000 13,154,519 68,299,5192027‐32 47,682,122 27,898,694 75,580,8162032‐37 20,855,772 58,544,228 79,400,0002037‐42 20,043,721 69,756,279 89,800,0002042‐45 7,558,734 35,041,266 42,600,000

Total 198,269,059$ 232,813,481$ 431,082,540$

B. CertificatesofParticipation

OnApril 25, 2007, the District issued $49,910,000 in certificates of participation through the FontanaUnifiedSchoolDistrictPublicFinancingAuthorityforthepurposeofprovidingfundsfortheconstructionandimprovementofcertainschoolfacilities.PaymentswillbefinancedthroughCFDresources.2016RefundingCertificatesofParticipationOnJune8,2016,theDistrictissued$27,945,000inCertificatesofParticipation.Thecertificatesbearfixedinterestratesrangingbetween3.0%and5.0%withannualmaturitiesfromSeptember1,2016throughSeptember1,2035.Thenetproceedsof$38,711,200(afterpremiumsof$3,960,745andissuancecostsof$555,688)wereusedtoprepayaportionoftheDistrict’soutstanding2007CertificatesofParticipation.ThenetproceedswereusedtopurchaseU.S.governmentsecurities.Thosesecuritiesweredepositedintoan irrevocabletrustwithanescrowagenttoprovide for futuredebtservicepaymentsontherefundedcertificates. Asaresult,therefundedcertificatesareconsideredtobedefeased,andtherelatedliabilityforthebondshasbeenremovedfromtheDistrict'sliabilities.Amountspaidtotheescrowagentinexcessof theoutstandingdebt at the timeofpaymentare recordedasdeferredamountson refundingon thestatement of net position and are amortized to interest expenseover the life of the liability. DeferredamountsonrefundingasofJune30,2017of$1,606,796remaintobeamortizedforthisrefunding.AsofJune30,2017,theprincipalbalanceoutstandingonthedefeaseddebtamountedto$36,480,000.

44

FONTANAUNIFIEDSCHOOLDISTRICTNotestoFinancialStatementsJune30,2017NOTE8–GENERALLONG‐TERMDEBT(continued)

B. CertificatesofParticipation(continued)

Theannualrequirementstoamortizeallcertificatesareasfollows:

FiscalYear Principal Interest Total

2017‐18 2,830,000$ 1,197,275$ 4,027,275$2018‐19 1,335,000 1,099,325 2,434,3252019‐20 1,420,000 1,030,450 2,450,4502020‐21 1,505,000 957,325 2,462,3252021‐22 1,595,000 879,825 2,474,8252022‐27 8,935,000 3,154,325 12,089,3252027‐32 7,305,000 1,331,200 8,636,2002032‐36 4,275,000 258,350 4,533,350

Total 29,200,000$ 9,908,075$ 39,108,075$

C. QualifiedZoneAcademyBond

On April 1, 2005, the District entered into a site lease agreement with the California School BoardsAssociationFinanceCorporation. Thepurposeof theagreement is toprovide financing for the costofpurchasing equipment and certain improvements to property. The financing for the improvements isprovidedby the issuanceofQualifiedZoneAcademyBonds (QZABs),pursuant toSection1397Eof theInternalRevenueCode.Leasepaymentswillberequiredasfollows:

Fiscal Scheduled AccumulatedYear Deposit Interest Total

2017‐18 247,628$ 106,345$ 353,973$2018‐19 247,627 117,030 364,6572019‐20 247,628 128,054 375,6822020‐21 247,628 139,418 387,046

Total 990,511$ 490,847$ 1,481,358$

D. CapitalLeases

TheDistrict agreed to a capital leaseof29vehiclesonFebruary1,2017, foravalueof$894,400 fromEnterpriseFleetManagement.Remainingleasepaymentswillberequiredasfollows:

FiscalYear Total

2017‐18 178,880$2018‐19 178,8802019‐20 178,8802020‐21 178,8802021‐22 119,253

834,773$

TheDistrictwillreceivenosubleaserevenuesnorpayanycontingentrentalsfortheequipment.

45


NOTE9–JOINTVENTURESThe FontanaUnified SchoolDistrict participates in joint ventures under joint powers agreementswith theMidwest Claims Employees Workers' Comp Excess, Southern California ReLiEF, RiversideEmployee/EmployerPartnership(REEP),andStatewideEducationalWrapUpProgram(SEWUP)forbenefits.TherelationshipsbetweentheDistrictandtheJPAsaresuchthattheJPAsarenotacomponentunitoftheDistrictforfinancialreportingpurposes.The JPAsprovidepropertyand liability insurancecoverageaswellashealthandwelfarebenefitscoverage.TheJPAsaregovernedbyaboardconsistingofarepresentativefromeachmemberdistrict. ThegoverningboardcontrolstheoperationsofitsJPAsindependentofanyinfluencebythememberdistrictsbeyondtheirrepresentationonthegoverningboard.EachmemberdistrictpaysapremiumcommensuratewiththelevelofcoveragerequestedandsharessurplusesanddeficitsproportionatelytoitsparticipationintheJPAs.AuditedinformationisavailabledirectlyfromtheJPA’s.

NOTE10–COMMITMENTSANDCONTINGENCIESA. StateandFederalAllowances,AwardsandGrants

TheDistricthasreceivedstateandfederalfundsforspecificpurposesthataresubjecttoreviewandauditbythegrantoragencies.Althoughsuchauditscouldgenerateexpendituredisallowancesundertermsofthegrants,itisbelievedthatanyrequiredreimbursementwillnotbematerial.

B. ConstructionCommitmentsAs of June 30, 2017, the District had commitments with respect to unfinished capital projects ofapproximately$9.0milliontobepaidfromacombinationofStateandlocalfunds.

C. Litigation

The District is involved in certain legalmatters that arose out of the normal course of business. TheDistrict has not accrued a liability for any potential litigation against it because it does not meet thecriteriatobeconsideredaliabilityatJune30,2017.

NOTE11–RISKMANAGEMENTPropertyandLiabilityTheDistrictisexposedtovariousrisksoflossrelatedtotorts;theftof,damageto,anddestructionofassets;errors and omissions. During fiscal year ending June 30, 2017, the District participated in the SouthernCaliforniaReLiEFpublicentityriskpoolforpropertyandliabilityinsurancecoverageabovetheself‐insuredretentionamountsof $25,000 for liability claimsand$10,000 forproperty claims. Settledclaimshavenotexceededthiscommercialcoverageinanyofthepastthreeyears.Therehasnotbeenasignificantreductionincoveragefromtheprioryear.Workers'CompensationFor fiscal year 2016‐17, theDistrictwas self‐funded forworkers’ compensation for the first $750,000of aclaim,withexcesscoverageprovidedbyMid‐WestEmployers(afullyinsuredprogram).EmployeeMedicalBenefitsTheDistrict has contractedwithKaiser, Express Scripts, Blue ShieldHMO, andBlue ShieldPOS to provideemployeemedical,prescriptionandsurgicalbenefits,DeltaDental,MetLifeDentalandSafeGuardfordentalbenefits,andMESVisionforvisionbenefits.

46


NOTE11–RISKMANAGEMENT(continued)ClaimsLiabilityThe District records an estimated liability for workers' compensation claims against the District. Claimsliabilitiesarebasedonestimatesof theultimatecostofreportedclaims(including futureclaimadjustmentexpenses)andanestimateforclaimsincurredbutnotreportedbasedonhistoricalexperience.UnpaidClaimsLiabilitiesTheDistrictestablishesaliabilityforbothreportedandunreportedevents,whichincludesestimatesofbothfuture payments of losses and related claim adjustment expenses. The following represent the changes inapproximateaggregateliabilitiesfortheDistrict'sworkers'compensationfromJuly1,2015toJune30,2017:

Workers'Compensation

LiabilityBalance,July1,2015 5,541,156$Claimsandchangesinestimates 2,043,852Claimspayments (2,043,126)

LiabilityBalance,June30,2016 5,541,882Claimsandchangesinestimates 2,085,502Claimspayments (2,042,140)

LiabilityBalance,June30,2017 5,585,244$

AssetsavailabletopayclaimsatJune30,2017 10,229,644$

NOTE12–PENSIONPLANSQualified employees are covered under multiple‐employer defined benefit pension plans maintained byagencies of the State of California. Certificated employees are members of the California State Teachers'Retirement System (CalSTRS), and classified employees are members of California Public Employees'RetirementSystem(CalPERS).A. GeneralInformationaboutthePensionPlans

PlanDescriptionsThe District contributes to the California State Teachers' Retirement System (CalSTRS), a cost‐sharingmultiple‐employer public employee retirement system defined benefit pension plan administered byCalSTRS. Benefit provisions under the Plan are established by State statute and District resolution.CalSTRS issues publicly available reports that include a full description of the pension plan regardingbenefitprovisions,assumptions,andmembershipinformationthatcanbefoundontheCalSTRSwebsite.The District also contributes to the School Employer Pool under the California Public Employees'Retirement System (CalPERS), a cost‐sharing multiple‐employer public employee retirement systemdefinedbenefitpensionplanadministeredbyCalPERS.BenefitprovisionsunderthePlanareestablishedby State statute and District resolution. CalPERS issues publicly available reports that include a fulldescriptionofthepensionplanregardingbenefitprovisions,assumptions,andmembershipinformationthatcanbefoundontheCalPERSwebsite.

47

FONTANAUNIFIEDSCHOOLDISTRICTNotestoFinancialStatementsJune30,2017NOTE12–PENSIONPLANS(continued)A. GeneralInformationaboutthePensionPlans(continued)

BenefitsProvidedCalSTRSprovidesretirement,disability,anddeathbenefits.Retirementbenefitsaredeterminedas2%offinalcompensationforeachyearofcreditedserviceatage60formembersunderCalSTRS2%at60,orage62formembersunderCalSTRS2%at62, increasingtoamaximumof2.4%atage63formembersunder CalSTRS 2% at 60, or age 65 for members under CalSTRS 2% at 62. The normal retirementeligibilityrequirementsareage60formembersunderCalSTRS2%at60,orage62formembersunderCalSTRS2%at62,withaminimumoffiveyearsofservicecreditedundertheDefinedBenefitProgram,whichcanincludeservicepurchasedfromteachinginanout‐of‐stateorforeignpublicschool.Employeesareeligibleforservice‐relateddisabilitybenefitsafterfiveyearsofservice,unlessthememberisdisabledduetoanunlawfulactofbodilyinjurycommittedbyanotherpersonwhileworkinginCalSTRScoveredemployment,inwhichcasetheminimumisoneyear.Disabilitybenefitsareequaltofiftypercentoffinalcompensation regardless of age and service credit. Designated recipients of CalSTRS retiredmembersreceivea$6,163 lump‐sumdeathpayment. There isa2%simple increaseeachSeptember1 followingthefirstanniversaryofthedateonwhichthemonthlybenefitbegantoaccrue.Theannual2%increaseisapplied to all continuing benefits other than Defined Benefit Supplement annuities. However, if thememberretireswithaReducedBenefitElection,theincreasedoesnotbegintoaccrueuntilthememberreachesage60andisnotpayableuntilthememberreceivesthefullbenefit.Thisincreaseisalsoknownastheimprovementfactor.CalPERSalsoprovidesretirement,disability,anddeathbenefits.Retirementbenefitsaredeterminedas1.1%offinalcompensationforeachyearofcreditedserviceatage50formembersunder2%at55,or1%atage52formembersunder2%at62, increasingtoamaximumof2.5percentatage63formembersunder2%at55,orage67formembersunder2%at62.Tobeeligibleforserviceretirement,membersmustbeatleastage50andhaveaminimumoffiveyearsofCalPERS‐creditedservice.Membersjoiningon or after January 1, 2013 must be at least age 52. Disability retirement has no minimum agerequirementandthedisabilitydoesnothavetobejobrelated.However,membersmusthaveaminimumoffiveyearsofCalPERSservicecredit.Pre‐retirement death benefits range from a simple return of member contributions plus interest to amonthlyallowanceequaltohalfofwhatthememberwouldhavereceivedatretirementpaidtoaspouseor domestic partner. To be eligible for any type ofmonthly pre‐retirement death benefit, a spouse ordomestic partner must have been either married to the member or legally registered before theoccurrenceoftheinjuryortheonsetoftheillnessthatresultedindeath,orforatleastoneyearpriortodeath.Cost‐of‐livingadjustmentsareprovidedbylawandarebasedontheConsumerPriceIndexforallUnited States cities. Cost‐of‐living adjustments are paid the second calendar year of the member'sretirementontheMay1checkandtheneveryyearthereafter.Thestandardcost‐of‐livingadjustmentisamaximumof2percentperyear.ContributionsActiveCalSTRSplanmembersunder2%at60were required to contribute10.25%andplanmembersunder2%at62wererequiredtocontribute9.205%oftheirsalary in2016‐17.Therequiredemployercontributionrateforfiscalyear2016‐17was12.58%ofannualpayroll.Thecontributionrequirementsofthe plan members are established by State statute. Active CalPERS plan members are required tocontribute7.0%oftheirsalary,andtheDistrictisrequiredtocontributeanactuariallydeterminedrate.

48

FONTANAUNIFIEDSCHOOLDISTRICTNotestoFinancialStatementsJune30,2017NOTE12–PENSIONPLANS(continued)A. GeneralInformationaboutthePensionPlans(continued)

Contributions(continued)Theactuariallydeterminedrateistheestimatedamountnecessarytofinancethecostsofbenefitsearnedbyemployeesduringtheyear,withanadditionalamounttofinanceanyunfundedaccruedliability.Therequiredemployercontributionforfiscalyear2016‐17was13.888%.ThecontributionrequirementsoftheplanmembersareestablishedbyStatestatute.ForthefiscalyearendedJune30,2017,thecontributionsrecognizedaspartofpensionexpenseforeachPlanwereasfollows:

CalSTRS CalPERSEmployercontributions 24,314,141$ 9,403,240$EmployercontributionspaidbyState 14,443,795$ ‐$Employeecontributionspaidbyemployer ‐$ ‐$

B. Pension Liabilities, Pension Expenses, and Deferred Outflows/Inflows of Resources Related toPensionsAsof June30, 2017, theDistrict reportednetpension liabilities for itsproportionate sharesof thenetpensionliabilityofeachPlanasfollows:

ProportionateShareofNetPensionLiability

CalSTRS 293,598,030$CalPERS 99,560,062$

TotalNetPensionLiability 393,158,092$

TheDistrict'snetpensionliabilityforeachPlanismeasuredastheproportionateshareofthenetpensionliability. The net pension liability of each of the Plans is measured as of June 30, 2016, and the totalpensionliabilityforeachPlanusedtocalculatethenetpensionliabilitywasdeterminedbyanactuarialvaluationasof June30,2015, rolled forward to June30,2016,using standardupdateprocedures.TheDistrict's proportion of the net pension liability was based on a projection of the District's long‐termshare of contributions to the pension plans relative to the projected contributions of all participatingemployers,actuariallydetermined.TheDistrict'sproportionateshareofthenetpensionliabilityforeachPlanasofJune30,2015and2016,wasasfollows:

CalSTRS CalPERSProportion‐June30,2015 0.3620% 0.4889%Proportion‐June30,2016 0.3630% 0.5041%

Change‐Increase(Decrease) 0.0010% 0.0152%

49

FONTANAUNIFIEDSCHOOLDISTRICTNotestoFinancialStatementsJune30,2017NOTE12–PENSIONPLANS(continued)B. Pension Liabilities, Pension Expenses, and Deferred Outflows/Inflows of Resources Related to

Pensions(continued)

For theyear ended June30,2017, theDistrict recognizedpensionexpenseof$47,222,081.At June30,2017, theDistrict reporteddeferredoutflowsofresourcesanddeferred inflowsofresourcesrelated topensionsfromthefollowingsources:

DeferredOutflows DeferredInflowsofResources ofResources

Pensioncontributionssubsequenttomeasurementdate 33,717,381$ ‐$Differencesbetweenactualandexpectedexperience 4,282,037 (7,161,990)Changesinassumptions ‐ (2,991,187)Adjustmentduetodifferencesinproportions 31,136,018 ‐Netdifferencesbetweenprojectedandactualearningsonplaninvestments 48,621,446 (9,832,026)

117,756,882$ (19,985,203)$

The total amount of $33,717,381 reported as deferred outflows of resources related to contributionssubsequenttothemeasurementdatewillberecognizedasareductionofthenetpensionliabilityintheyear ended June 30, 2017. Other amounts reported as deferred outflows of resources and deferredinflowsofresourcesrelatedtopensionswillberecognizedaspensionexpenseasfollows:

YearEndedJune30, Amount2018 10,844,101$2019 11,991,4312020 16,188,7922021 8,004,2242022 (917,517)

Thereafter ‐ ActuarialAssumptions – The total pension liabilities in the June 30, 2015, actuarial valuations weredeterminedusingthefollowingactuarialassumptions:

CalSTRS CalPERSValuationDate June30,2015 June30,2015MeasurementDate June30,2016 June30,2016ActuarialCostMethod Entryagenormal EntryagenormalActuarialAssumptions:DiscountRate 7.60% 7.65%Inflation 3.00% 2.75%WageGrowth 3.75% VariesPost‐retirementBenefitIncrease 2.00% 2.00%InvestmentRateofReturn 7.60% 7.65%

50


Pensions(continued)ActuarialAssumptions(continued)CalSTRS uses custommortality tables to best fit the patterns ofmortality among itsmembers. ThesecustomtablesarebasedonRP2000seriestablesadjustedtofitCalSTRSexperience.RP2000seriestablesareanindustrystandardsetofmortalityratespublishedbytheSocietyofActuaries.SeeCalSTRSJuly1,2006‐June30,2010ExperienceAnalysisformoreinformation. Theunderlyingmortalityassumptionsand all other actuarial assumptions used in the CalPERS June 30, 2015 valuation were based on theresultsof anactuarial experience study for theperiod1997 to2011.Furtherdetailsof theExperienceStudycanbefoundontheCalPERSwebsite.DiscountRate–forCalSTRSThediscount rateused tomeasure the totalpension liabilitywas7.60%. Theprojectionof cash flowsusedtodeterminethediscountrateassumedthatcontributionsfromplanmembersandemployerswillbemade at statutory contribution rates in accordancewith the rate increase per Assembly Bill 1469.Projected inflows from investment earnings were calculated using the long‐term assumed investmentrate of return (7.60%)and assuming that contributions, benefit payments, and administrative expenseoccur midyear. Based on those assumptions, the STRP's fiduciary net position was projected to beavailabletomakeallprojectedfuturebenefitpaymentstocurrentplanmembers.Therefore, the long‐term assumed investment rate of return was applied to all periods of projectedbenefitpaymentstodeterminethetotalpensionliability.DiscountRate–forCalPERSThe discount rate used tomeasure the total pension liability for PERF Bwas 7.65%. A projection ofexpectedbenefitpayments and contributionswasperformed todetermine if theassetswould runout.The test revealed the assets would not run out. Therefore, the long‐term expected rate of return onpensionplaninvestmentswasappliedtoallperiodsofprojectedbenefitpaymentstodeterminethetotalpensionliabilityforPERFB.TheresultsofthecrossovertestingforthePlanarepresentedinadetailedreportthatcanbeobtainedonCalPERS'website.The long‐term expected rate of return on pension plan investmentswas determined using a building‐blockmethodinwhichbestestimaterangesofexpectedfuturerealratesofreturn(expectedreturns,netofpensionplaninvestmentexpenseandinflation)aredevelopedforeachmajorassetclass.In determining the long‐term expected rate of return, both short‐term and long‐term market returnexpectationsaswellas theexpectedpensionfundcashflowsweretaken intoaccount. Usinghistoricalreturnsofallofthefunds'assetclasses,expectedcompound(geometric)returnswerecalculatedovertheshort term(first10years)andthe long‐term(11‐60years)usingabuilding‐blockapproach. Usingtheexpectednominalreturnsforbothshort‐termandlong‐term,thepresentvalueofbenefitswascalculatedforeachfund. Theexpectedrateofreturnwassetbycalculatingthesingleequivalentexpectedreturnthatarrivedatthesamepresentvalueofbenefitsforcashflowsastheonecalculatedusingbothshort‐termandlong‐termreturns.Theexpectedrateofreturnwasthensetequivalenttothesingleequivalentratecalculatedaboveandroundeddowntothenearestonequarterofonepercent.

51


Pensions(continued)DiscountRate–forCalPERS(continued)The long‐term expected real rates of return by asset class can be found in CalPERS' ComprehensiveAnnualFinancialReportforthefiscalyearendedJune30,2016.Thetablebelowreflectsthelong‐termexpectedrealrateofreturnbyassetclass.Therateofreturnwascalculated using the capital market assumptions applied to determine the discount rate and assetallocation.Theseratesofreturnarenetofadministrativeexpenses.

AssetClass CalSTRS CalPERS CalSTRS CalPERSGlobalEquity 47% 51% 6.30% 5.71%GlobalDebtSecurities N/A 20% N/A 2.43%InflationSensitive 4% 6% 3.80% 3.36%PrivateEquity 13% 10% 9.30% 6.95%AbsoluteReturn/RiskMitigatingStrategies 9% N/A 2.90% N/ARealEstate 13% 10% 5.20% 5.13%InfrastructureandForestland N/A 2% N/A 5.09%FixedIncome 12% N/A 0.30% N/ACash/Liquidity 2% 1% ‐1.00% ‐1.05%

100% 100%

RateofReturnLong‐TermExpected

TargetAllocation

SensitivityoftheProportionateShareoftheNetPensionLiabilitytoChangesintheDiscountRateThe following presents the District's proportionate share of the net pension liability for each Plan,calculatedusingthediscountrateforeachPlan,aswellaswhattheDistrict'sproportionateshareofthenetpensionliabilitywouldbeifitwerecalculatedusingadiscountratethatis1‐percentagepointloweror1‐percentagepointhigherthanthecurrentrate:

CalSTRS CalPERS1%Decrease 6.60% 6.65%NetPensionLiability 422,553,780$ 148,544,167$

CurrentDiscountRate 7.60% 7.65%NetPensionLiability 293,598,030$ 99,560,062$

1%Increase 8.60% 8.65%NetPensionLiability 186,494,880$ 58,771,155$

PensionPlanFiduciaryNetPositionDetailedinformationabouteachpensionplan'sfiduciarynetpositionisavailableintheseparatelyissuedCalSTRSandCalPERSfinancialreports.

C. PayabletothePensionPlans

AtJune30,2017,theDistrictreportedapayableof$2,887,283and$349,521fortheoutstandingamountof contributions to the CalSTRS and CalPERS pension plans, respectively, required for the fiscal yearendedJune30,2017.

52

FONTANAUNIFIEDSCHOOLDISTRICTNotestoFinancialStatementsJune30,2017NOTE13–OTHERPOSTEMPLOYMENTBENEFITSA. PlanDescription

PlanAdministrationTheFuturisPublicEntityInvestmentTrust(“theTrust”)administerstheFontanaUnifiedSchoolDistrictRetiree Benefits Plan (“the Plan”) – a single‐employer defined benefit plan that is used to providepostemployment benefits other than pensions (OPEB) for all permanent full‐time certificated andclassifiedemployeesoftheDistrict.TheDistrict’sgoverningboarddelegates investmentauthoritytoaRetirementBoardofAuthority. Thegoverning board of the District is authorized to make decisions for the Plan. The function of theRetirement Board of Authority is similar to that of a Plan Committee who is authorized to carry outcertainpoliciesasdeterminedunderthePlan.IncompliancewiththeGovernmentCode,theBoardwouldtypically consist of the Treasurer of the Agency and other appropriate individuals designated by theGoverningBoardorasupdatedbytheRetirementBoardofAuthority.TheRetirementBoardofAuthorityapprovestheInvestmentPolicyStatement(IPS),whichdictatesfixedinvestmentoptions,risktolerancestrategiesandassetclassinvesting.TheRetirementBoardofAuthoritycan reduce its legal liability for investment risk and retain Government Code immunity andindemnificationsiftheyappropriatelydelegateauthoritytoaqualifiedinvestmentadvisor/managerandif theymonitor the performanceof the investment advisor/manager. Further, aRegistered InvestmentAdvisor (RIA) is under the direction of the Discretionary Trustee, which provides additional layers ofsafetyandresponsibility.PlanmembershipAtJune30,2017,thePlanmembershipconsistedofthefollowing:Inactiveplanmembersorbeneficiariescurrentlyreceivingbenefitpayments 582Inactiveplanmembersentitledtobutnotyetreceivingbenefitpayments ‐Activeplanmembers 3,675

Total 4,257

BenefitsprovidedThePlanprovidesmedical,dental,andvisionbenefitsforretirees.Benefitsareprovidedthroughathird‐partyinsurer,andthefullcostofbenefitsiscoveredbytheplan.TrustdocumentsgranttheauthoritytoestablishandamendthebenefittermstotheTrustBoardofAuthority.ContributionsTheTrustprovidesauniformmethodofinvestingcontributionsandearningsofallcontributedamountsbetweenfundsdepositedwithintheBenefitFundortheGeneralFund,asthosetermsaredefinedwithintheTrust. TheTrust is fundedprimarilybycontributionsmadeby theemployer,butalsomay includeothercontributionsmadebyanyparticipantasdeterminednecessaryandappropriateunderapplicablecircumstances.ThesecontributionsshallberemittedtotheTrustonadiscretionarybasis.Planmembersarenotrequiredtocontributetotheplan.

53

FONTANAUNIFIEDSCHOOLDISTRICTNotestoFinancialStatementsJune30,2017NOTE13–OTHERPOSTEMPLOYMENTBENEFITS(continued)B. Investments

InvestmentpolicyTheBoard of Authority (the “BOA”) is directly responsible for the selection and ongoing evaluation ofinvestmentsand/orinvestmentmanagers inaccordancewithapplicable lawsandregulations.TheBOAhasappointeda third‐party,BenefitTrustCompanyasDiscretionaryTrustee, asTrust asset custodian.The trustee isexpected toadminister theassetsof the trust insuchamannerthat the investmentsarediversified among a broad range of investment alternatives with the objective of preservation andprotectionoftheTrust’scapital.TheBOAhasdeterminedthattheBenefitFundshallbedividedintotwoinvestment funds. The first seeks to achieve a target net rate of return of 6% for long‐term, and thesecondseeksatargetnetrateofreturnof4.5%forshort‐term.Theallocationofassetswillbesuchthatnotmorethan5%oftheTrustassetsshallbeinvestedinanysingleequityissue.ConcentrationsThePlanheldinvestmentsotherthanthoseissuedorexplicitlyguaranteedbytheU.S.governmentthatrepresent5%ormoreoftheOPEBplan’sfiduciarynetpositionasfollows:

MutualFund‐DomesticEquity 23.6%MutualFund‐FixedIncome 54.9%MutualFund‐InternationalEquity 14.6%MutualFund‐RealEstate 6.9%

RateofreturnForthefiscalyearendedJune30,2017,theannualmoney‐weightedrateofreturnoninvestments,netofinvestmentexpenses,was6.69%.Themoney‐weightedrateofreturnexpressesinvestmentperformance,netofinvestmentexpense,adjustedforthechangingamountsactuallyinvested.

C. ChangesintheNetOPEBLiabilityoftheDistrict

ThechangesinthenetOPEBliabilityoftheDistrictatJune30,2017wereasfollows:

Total PlanFiduciary NetOPEBLiability NetPosition OPEBLiability

BalanceatJuly1,2016 147,500,746$ 11,333,928$ 136,166,818$Changesfortheyear:Servicecost 5,871,780 ‐ 5,871,780Interest 8,532,314 ‐ 8,532,314Employercontributions ‐ 26,595,788 (26,595,788)Actualinvestmentincome ‐ 1,953,096 (1,953,096)Administrativeexpense ‐ (172,676) 172,676Benefitpayments (6,494,091) (6,494,091) ‐Netchanges 7,910,003 21,882,117 (13,972,114)BalanceatJune30,2017 155,410,749$ 33,216,045$ 122,194,704$

54


NOTE13–OTHERPOSTEMPLOYMENTBENEFITS(continued)C. ChangesintheNetOPEBLiabilityoftheDistrict(continued)

ActuarialAssumptionsThetotalOPEBliabilitywasdeterminedbyanactuarialvaluationasofJune30,2017,usingthefollowingactuarialassumptions,appliedtoallperiodsincludedinthemeasurement,unlessotherwisespecified:

Inflation 2.75percentSalaryincreases 2.75percentInvestmentrateofreturn 5.80percentHealthcarecosttrendrates 4.00percent

Followingarethetablesthemortalityassumptionsarebasedupon.

2009CalSTRSMortalityThe mortality assumptions are based on the 2009 CalSTRS Mortality table created by CalSTRS.CalSTRSperiodicallystudiesmortalityforparticipatingagenciesandestablishesmortalitytablesthatare modified versions of commonly used tables. This table incorporates mortality projection asdeemedappropriatebasedonCalPERSanalysis.

2014CalPERSRetiredandActiveMortalityforSafetyandMiscellaneousEmployeesThemortalityassumptionsarebasedonthe2014CalPERSRetireeandActiveMortalityforSafetyandMiscellaneous Employees tables created by CalPERS. CalPERS periodically studies mortality forparticipatingagenciesandestablishesmortalitytablesthataremodifiedversionsofcommonlyusedtables. This table incorporates mortality projection as deemed appropriate based on CalPERSanalysis.

Followingarethetablestheretirementandturnoverassumptionsarebasedupon.

2009CalSTRSRetirementRatesThe retirement assumptions are based on the 2009 CalSTRS Retirement Rates table created byCalSTRS.CalSTRSperiodicallystudiestheexperienceforparticipatingagenciesandestablishestablesthatareappropriateforeachpool.

2009CalPERS3%@55RatesforSwornPolice2009CalPERSRetirementRatesforSchoolEmployees2009CalPERS2%@60RatesforMiscellaneousEmployeesThe retirement assumptions are based on the 2009 CalPERS Retirement Rates tables created byCalPERS.CalPERSperiodicallystudiestheexperienceforparticipatingagenciesandestablishestablesthatareappropriateforeachpool.

2009CalSTRSTerminationRatesThe turnover assumptions are based on the 2009 CalSTRS Termination Rates table created byCalSTRS.CalSTRSperiodicallystudiestheexperienceforparticipatingagenciesandestablishestablesthatareappropriateforeachpool.

55



2009CalPERSTerminationRatesforSwornPoliceandSchoolEmployeesTheturnoverassumptionsarebasedonthe2009CalPERSTerminationRatesforSwornPoliceandSchool Employees tables created by CalPERS. CalPERS periodically studies the experience forparticipatingagenciesandestablishestablesthatareappropriateforeachpool.

SensitivityoftheNetOPEBLiabilitytoChangesintheHealthcareCostTrendRatesThe following presents the net OPEB liability of the District, as well as what the District’s net OPEBliabilitywouldbeifitwerecalculatedusinghealthcarecosttrendratesthatare1‐percentage‐pointlower(3.0percent)or1‐percentage‐pointhigher(5.0percent)thanthecurrenthealthcarecosttrendrates:

HealthcareCost1%Decrease TrendRates 1%Increase

(3%) (4%) (5%)

NetOPEBliability(asset) 101,810,110$ 122,194,704$ 148,549,406$

DiscountRateThe discount rate used to measure the total OPEB liability was 5.8 percent. We assumed thatcontributionswouldbesufficient to fully fundtheobligationoveraperiodnot toexceed30years. Weusedhistoric5‐yearrealratesofreturnforeachassetclassalongwithourassumedlong‐terminflationassumptiontosetthediscountrate.Weoffsettheexpectedinvestmentreturnbyinvestmentexpensesof25basispoints.Followingistheassumedassetallocationandassumedrateofreturnforeach:

Percentageof Long‐TermExpectedAssetClass Portfolio RealRateofReturn

MutualFund‐DomesticEquity 23.6% 7.5%MutualFund‐FixedIncome 54.9% 4.5%MutualFund‐InternationalEquity 14.6% 7.5%MutualFund‐RealEstate 6.9% 7.5%

We looked at rolling periods of time for all asset classes in combination to appropriately reflectcorrelation between asset classes. That means that the average returns for any asset class don’tnecessarily reflect theaveragesover time individually, but reflect the return for theasset class for theportfolioaverage.Weusedgeometricmeans.

56



SensitivityoftheNetOPEBLiabilitytoChangesintheDiscountRateThe following presents the net OPEB liability of the District, as well as what the District’s net OPEBliabilitywouldbeifitwerecalculatedusingadiscountratethatis1‐percentage‐pointlower(4.8percent)or1‐percentage‐pointhigher(6.8percent)thanthecurrentdiscountrate:

1%Decrease DiscountRate 1%Increase(4.8%) (5.8%) (6.8%)

NetOPEBliability(asset) 149,406,487$ 122,194,704$ 101,686,041$

OPEBExpenseandDeferredOutflowsofResourcesandDeferredInflowsofResourcesRelatedtoOPEBForthefiscalyearendedJune30,2017,theDistrictrecognizedOPEBexpenseof$12,623,674.TheDistricthas no deferred outflows of resources or deferred inflows of resources related toOPEB as of June30,2017.PayabletotheOPEBPlanAtJune30,2017,theDistrictreportednopayablesforoutstandingcontributionstothePlanrequiredfortheyearendedJune30,2017.

NOTE14–ADJUSTMENTSFORRESTATEMENTS

A. BeginningnetpositionontheStatementofActivitieshasbeenrestatedby$77,571,540asrequiredunderGASBNo.74,whichisdescribedinfurtherdetailinNote13.

B. Beginningnetpositionon theStatementofActivitiesandbeginning fundbalances in theGeneralFundandTrust fundhavebeen restatedby $5,504,192. The restatement is due to an expected contributionfrom the trust fund to reimburse the General Fund for 2015‐16 ‘pay as you go’ OPEB costs. Thiscontribution was accrued, but did not take place because of anticipated changes with the OPEBadministrator.

RequiredSupplementaryInformation

Seeaccompanyingnotestorequiredsupplementaryinformation. 57

FONTANAUNIFIEDSCHOOLDISTRICTBudgetaryComparisonSchedule–GeneralFundFortheFiscalYearEndedJune30,2017

Actual*VariancewithFinalBudget‐

Original Final (BudgetaryBasis) Pos(Neg)Revenues

LCFFsources 375,857,765$ 376,984,698$ 376,984,719$ 21$Federalsources 23,868,694 30,740,624 24,262,625 (6,477,999)Otherstatesources 47,857,748 72,487,140 62,621,376 (9,865,764)Otherlocalsources 1,657,000 4,924,371 6,617,924 1,693,553

TotalRevenues 449,241,207 485,136,833 470,486,644 (14,650,189)

ExpendituresCurrent:

Certificatedsalaries 191,449,739 207,096,665 194,337,244 12,759,421Classifiedsalaries 58,547,360 63,679,279 61,316,109 2,363,170Employeebenefits 104,761,049 136,663,785 121,327,152 15,336,633Booksandsupplies 30,239,815 57,618,260 20,473,414 37,144,846Servicesandotheroperatingexpenditures 38,380,545 61,707,860 40,429,062 21,278,798Transfersofindirectcosts (1,145,716) (1,235,565) (1,119,443) (116,122)

Capitaloutlay 23,651,810 32,165,845 6,279,769 25,886,076Intergovernmental 40,000 777,941 638,607 139,334Debtservice ‐ ‐ 59,627 (59,627)


Excess(Deficiency)ofRevenuesOver(Under)Expenditures 3,316,605 (73,337,237) 26,745,103 100,082,340

OtherFinancingSourcesandUsesProceedsfromcapitalleases ‐ ‐ 894,400 894,400Interfundtransfersout ‐ (8,438,026) (8,438,719) (693)

TotalOtherFinancingSourcesandUses ‐ (8,438,026) (7,544,319) 893,707

FundBalances,asrestated,July1,2016 113,928,247 117,380,318 117,380,318 ‐FundBalances,June30,2017 117,244,852$ 35,605,055$ 136,581,102$ 100,976,047$

*

BudgetedAmounts

TheactualamountsreportedinthisschedulearefortheGeneralFundonly,anddonotagreewiththeamountsreportedontheStatementofRevenues,Expenditures,andChangesinFundBalancesbecausetheamountsonthatscheduleincludethefinancialactivityoftheSpecialReserveFundforOtherThanCapitalOutlayProjects,inaccordancewiththefundtypedefinitionspromulgatedbyGASBStatementNo.54.


FONTANAUNIFIEDSCHOOLDISTRICTBudgetaryComparisonSchedule–CafeteriaFundFortheFiscalYearEndedJune30,2017

ActualVariancewithFinalBudget‐

Original Final (BudgetaryBasis) Pos(Neg)Revenues

Federalsources 20,106,936$ 23,671,917$ 22,705,512$ (966,405)$Otherstatesources 1,514,752 1,650,428 1,523,301 (127,127)Otherlocalsources 1,200,747 1,197,797 929,626 (268,171)

TotalRevenues 22,822,435 26,520,142 25,158,439 (1,361,703)

ExpendituresCurrent:

Classifiedsalaries 7,861,946 8,782,362 8,781,903 459Employeebenefits 4,511,020 4,320,878 4,091,342 229,536Booksandsupplies 10,503,353 18,129,610 12,193,096 5,936,514Servicesandotheroperatingexpenditures 920,950 857,351 382,346 475,005Transfersofindirectcosts 835,285 859,550 830,291 29,259

CapitalOutlay 2,107,315 2,433,595 1,270,384 1,163,211


Excess(Deficiency)ofRevenuesOver(Under)Expenditures (3,917,434) (8,863,204) (2,390,923) 6,472,281

OtherFinancingSourcesandUsesInterfundTransfersIn ‐ 694 694 ‐

NetChangeinFundBalance (3,917,434) (8,862,510) (2,390,229) 6,472,281

FundBalances,July1,2016 12,185,385 12,299,151 12,299,151 ‐

FundBalances,June30,2017 8,267,951$ 3,436,641$ 9,908,922$ 6,472,281$

BudgetedAmounts


FONTANAUNIFIEDSCHOOLDISTRICTScheduleofChangesintheNetOPEBLiabilityandRelatedRatiosFortheFiscalYearEndedJune30,2017

2017TotalOPEBliabilityServicecost 5,871,780$Interest 8,532,314Changesofbenefitterms ‐Differencesbetweenexpectedandactualexperience ‐Changesofassumptions ‐Benefitpayments (6,494,091)NetchangeintotalOPEBliability 7,910,003TotalOPEBliability‐beginning 147,500,746TotalOPEBliability‐ending 155,410,749$

PlanfiduciarynetpositionContributions‐employer 26,595,788$Netinvestmentincome 1,953,096Benefitpayments (6,494,091)Administrativeexpense (172,676)Netchangeinplanfiduciarynetposition 21,882,117Planfiduciarynetposition‐beginning 11,333,928Planfiduciarynetposition‐ending 33,216,045$

District'snetOPEBliability 122,194,704$

PlanfiduciarynetpositionasapercentageofthetotalOPEBliability 21.37%

Covered‐employeepayroll 249,438,580$

District'snetOPEBliabilityasapercentageofcovered‐employeepayroll 48.99%

NotestoSchedule:Therewerenobenefitschangesorchangesofassumptionsduringtheyear.

Thisscheduleisrequiredtoshowinformationfortenyears;however,untilafulltenyeartrendiscompiled,informationispresentedforthoseyearsforwhichinformationisavailable.


FONTANAUNIFIEDSCHOOLDISTRICTScheduleofOPEBContributionsFortheFiscalYearEndedJune30,2017

2017

Statutorilyorcontractuallyrequiredcontribution 26,595,788$

Contributionsinrelationtothestatutorilyorcontractuallyrequiredcontribution 26,595,788

Contributiondeficiency(excess) ‐$

Covered‐employeepayroll 249,438,580$

Contributionsasapercentageofcovered‐employeepayroll 10.66%

NotestoSchedule:

Valuationdate:June30,2017

Otherinformation:Theactuarydidnotcalculateanactuariallydeterminedcontributionamount.TheDistrictcontributesonanadhocbasis,butinanamountsufficienttofullyfundtheobligationoveraperiodnottoexceed30years.



FONTANAUNIFIEDSCHOOLDISTRICTScheduleofInvestmentReturnsFortheFiscalYearEndedJune30,2017

2017

Annualmoney‐weightedrateofreturn,netofinvestmentexpense 6.69%



FONTANAUNIFIEDSCHOOLDISTRICTScheduleofProportionateShareoftheNetPensionLiabilityFortheFiscalYearEndedJune30,2017

2016 2015 2014

CalSTRS

District'sproportionofthenetpensionliability 0.3630% 0.3620% 0.3150%

District'sproportionateshareofthenetpensionliability 293,598,030$ 243,712,880$ 184,076,550$State'sproportionateshareofthenetpensionliability

associatedwiththeDistrict 167,164,729 128,896,902 111,154,484

Totals 460,762,759$ 372,609,782$ 295,231,034$

District'scovered‐employeepayroll 183,389,842$ 165,939,764$ 156,232,242$

District'sproportionateshareofthenetpensionliabilityasapercentageofitscovered‐employeepayroll 160.10% 146.87% 117.82%

Planfiduciarynetpositionasapercentageofthetotalpensionliability 70% 74% 77%

CalPERS

District'sproportionofthenetpensionliability 0.5041% 0.4889% 0.5236%

District'sproportionateshareofthenetpensionliability 99,560,062$ 72,064,343$ 59,441,349$


District'sproportionateshareofthenetpensionliabilityasapercentageofitscovered‐employeepayroll 153.32% 124.76% 111.41%

Planfiduciarynetpositionasapercentageofthetotalpensionliability 74% 79% 83%

* Thisscheduleisrequiredtoshowinformationfortenyears;however,untilafulltenyeartrendiscompiled,informationispresentedforthoseyearsforwhichinformationisavailable.

LastTenFiscalYears*


FONTANAUNIFIEDSCHOOLDISTRICTScheduleofPensionContributionsFortheFiscalYearEndedJune30,2017

2017 2016 2015

CalSTRS

Contractuallyrequiredcontribution 24,314,141$ 19,677,730$ 14,735,451$

Contributionsinrelationtothecontractuallyrequiredcontribution 24,314,141 19,677,730 14,735,451

Contributiondeficiency(excess): ‐$ ‐$ ‐$


Contributionsasapercentageofcovered‐employeepayroll 12.58% 10.73% 8.88%

CalPERS

Contractuallyrequiredcontribution 9,403,240$ 7,693,218$ 6,799,457$

Contributionsinrelationtothecontractuallyrequiredcontribution 9,403,240 7,693,218 6,799,457

Contributiondeficiency(excess): ‐$ ‐$ ‐$


Contributionsasapercentageofcovered‐employeepayroll 13.888% 11.847% 11.771%

* Thisscheduleisrequiredtoshowinformationfortenyears;however,untilafulltenyeartrendiscompiled,informationispresentedforthoseyearsforwhichinformationisavailable.

LastTenFiscalYears*

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FONTANAUNIFIEDSCHOOLDISTRICTNotestotheRequiredSupplementaryInformationFortheFiscalYearEndedJune30,2017NOTE1–PURPOSEOFSCHEDULESBudgetaryComparisonSchedulesTheseschedulesarerequiredbyGASBStatementNo.34asrequiredsupplementaryinformation(RSI)fortheGeneral Fund and for each major special revenue fund that has a legally adopted annual budget. Thebudgetarycomparisonschedulespresentboth(a)theoriginaland(b)thefinalappropriatedbudgetsforthereportingperiodaswellas(c)actualinflows,outflows,andbalances,statedontheDistrict'sbudgetarybasis.A separate column to report the variance between the final budget and actual amounts is also presented,althoughnotrequired.ScheduleofChangesintheNetOPEBLiabilityandRelatedRatiosThisschedule is requiredbyGASBStatementNo.74,and isa10‐yearscheduleofchanges in thenetOPEBliability,presentingforeachyear(1)thebeginningandendingbalancesofthetotalOPEBliability,theOPEBplan’sfiduciarynetposition,andthenetOPEBliability,calculatedinconformitywithparagraphs39‐54,and(2)theeffectsonthoseitemsduringtheyearofthefollowing,asapplicable.ScheduleofOPEBContributionsThis is a 10‐year schedule presenting for each year certain information if an actuarially determinedcontributioniscalculatedforemployersornonemployercontributingentities. Thescheduleshouldidentifywhethertheinformationrelatestotheemployers,nonemployercontributingentities,orboth.ScheduleofInvestmentReturnsThisisa10‐yearschedulepresentingforeachfiscalyeartheannualmoney‐weightedrateofreturnonOPEBplaninvestmentscalculatedasrequiredbyparagraph34b(3).ScheduleofProportionateShareoftheNetPensionLiabilityThis schedule is required by GASB Statement No. 68 and is required for all employers in a cost‐sharingpensionplan.Theschedulereportsthefollowinginformation:

Theproportion(percentage)ofthecollectivenetpensionliability(similartothenotedisclosure) Theproportionateshare(amount)ofthecollectivenetpensionliability Theemployer'scovered‐employeepayroll The proportionate share (amount) of the collective net pension liability as a percentage of the

employer'scovered‐employeepayroll Thepensionplan'sfiduciarynetpositionasapercentageofthetotalpensionliability

ScheduleofPensionContributionsThis schedule is required by GASB Statement No. 68 and is required for all employers in a cost‐sharingpensionplan.Theschedulereportsthefollowinginformation:

If an employer's contributions to the plan are actuarially determined or based on statutory orcontractual requirements: the employer's actuarially determined contribution to the pension plan(or, if applicable, its statutorily or contractually required contribution), the employer's actualcontributions, the difference between the actual and actuarially determined contributions (orstatutorily or contractually required), and a ratio of the actual contributions divided by covered‐employeepayroll.

65

FONTANAUNIFIEDSCHOOLDISTRICTNotestotheRequiredSupplementaryInformationFortheFiscalYearEndedJune30,2017NOTE2–SUMMARYOFCHANGESOFBENEFITSORASSUMPTIONSBenefitChangesTherewerenochangestobenefittermsthatappliedtoallmembersoftheSchoolsPool.ChangesofAssumptionsTherewerenochangesofassumptions.NOTE3–EXCESSOFEXPENDITURESOVERAPPROPRIATIONSAtJune30,2017,theDistrictincurredthefollowingexcessofexpendituresoverappropriationsinindividualmajorfundspresentedintheBudgetaryComparisonSchedule:

GeneralFund AmountTransfersofindirectcosts 116,122$Debtservice 59,627Interfundtransfersout 693

SupplementaryInformation

66

FONTANAUNIFIEDSCHOOLDISTRICTLocalEducationalAgencyOrganizationStructureJune30,2017TheFontanaUnifiedSchoolDistrictwasestablished in1956.TheDistrictboundariesencompassanareaofapproximately55squaremiles.TheDistrictboundariesincludethecityofFontanaandportionsofthecitiesof Rialto andRancho Cucamonga, aswell as unincorporated areas of the County of SanBernardino. TherewerenochangestotheDistrict'sboundariesduringtheyear.TheDistrictcurrentlyoperates29elementaryschools,sevenintermediateschools,fivehighschools,twocontinuationhighschools,andanadulteducationandchilddevelopmentprogram.

GOVERNINGBOARD

Member Office TermExpires

MarySandoval President 2018

PeterGarcia Vice‐President/Clerk 2020

JasonO’Brien Member 2020

MattSlowik,MURP,MPA Member 2018

Vacant1 Member NotApplicable

DISTRICTADMINISTRATORS

RandalS.Bassett,Superintendent

OscarDuenas,

AssociateSuperintendent,StudentServices

PatrickKelleher,InterimAssociateSuperintendent,HumanResources

MikiInbody,

AssociateSuperintendent,Teaching&Learning

EvaLueck,2InterimAssociateSuperintendent,BusinessServices

1AttheNovember7,2017election,MarsSernawaselectedtofillthisboardvacancy.2ThecurrentAssociateSuperintendentofBusinessServicesisRyanDiGiulio.

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FONTANAUNIFIEDSCHOOLDISTRICTScheduleofAverageDailyAttendanceFortheFiscalYearEndedJune30,2017

SecondPeriod AnnualReport Report

CertificateNo. CertificateNo.(CC868376) (94902F80)

RegularADA&ExtendedYear:TransitionalKindergartenthroughThird 10,803.73 10,795.63FourththroughSixth 8,691.71 8,680.56SeventhandEighth 5,434.87 5,421.97NinththroughTwelfth 11,526.51 11,442.00

TotalRegularADA 36,456.82 36,340.16

SpecialEducation‐Nonpublic,NonsectarianSchools:TransitionalKindergartenthroughThird 1.52 1.46FourththroughSixth 2.56 2.67SeventhandEighth 8.58 8.99NinththroughTwelfth 21.45 21.43

TotalSpecialEducation‐Nonpublic,NonsectarianSchools 34.11 34.55

TotalADA 36,490.93 36,374.71

Seeaccompanyingnotetosupplementaryinformation. 68

FONTANAUNIFIEDSCHOOLDISTRICTScheduleofInstructionalTimeFortheFiscalYearEndedJune30,2017

2016‐17 NumberofDaysActual Traditional

GradeLevel Required Minutes Calendar Status

Kindergarten 36,000 36,000 180 CompliedGrade1 50,400 53,580 180 CompliedGrade2 50,400 53,580 180 CompliedGrade3 50,400 53,580 180 CompliedGrade4 54,000 54,970 180 CompliedGrade5 54,000 54,970 180 CompliedGrade6 54,000 54,970 180 CompliedGrade7 54,000 61,878 180 CompliedGrade8 54,000 61,878 180 CompliedGrade9 64,800 65,555 180 CompliedGrade10 64,800 65,555 180 CompliedGrade11 64,800 65,555 180 CompliedGrade12 64,800 65,555 180 Complied


FONTANAUNIFIEDSCHOOLDISTRICTScheduleofFinancialTrendsandAnalysisFortheFiscalYearEndedJune30,2017

(Budget)GeneralFund 20182 2017 20163 2015

Revenuesandotherfinancingsources 458,270,924$ 470,486,644$ 464,259,329$ 374,049,524$

Expenditures 462,044,743 443,741,541 417,103,688 356,160,993Otherusesandtransfersout ‐ 7,544,319 33,186 206,521

Totaloutgo 462,044,743 451,285,860 417,136,874 356,367,514

Changeinfundbalance(deficit) (3,773,819) 19,200,784 47,122,455 17,682,010

Endingfundbalance 132,807,283$ 136,581,102$ 117,380,318$ 75,762,055$

Availablereserves1 113,522,808$ 112,072,912$ 49,842,528$ 55,586,813$

Availablereservesasapercentageoftotaloutgo 24.6% 24.8% 11.9% 15.6%

Totallong‐termdebt 780,590,784$ 791,141,455$ 658,686,115$ 587,649,308$

AveragedailyattendanceatP‐2 35,901 36,491 37,195 38,106

TheGeneralFundbalancehasincreasedoveralloverthepasttwoyearsby$60,819,047.Thefiscalyear2017‐18adoptedbudgetprojectsandecreaseof$3,773,819.Foradistrictofthissize,thestaterecommendsavailablereservesofatleast2%oftotalgeneralfundexpenditures,transfersout,andotheruses(totaloutgo).

TheDistricthasincurredanoperatingsurplusinthepastthreeyears,butanticipatesincurringanoperatingdeficitduringthe2017‐18fiscalyear.Long‐termdebthasincreasedby$203,492,147overthepasttwoyears.

Averagedailyattendancehasdecreasedby1,615overthepasttwoyears.Adecreaseof590ADAisanticipatedduringfiscalyear2017‐18.

1AvailablereservesconsistofallunassignedfundbalancesintheGeneralFund.

2RevisedFinalBudgetAugust,2017.

3Asrestated.


FONTANAUNIFIEDSCHOOLDISTRICTReconciliationofAnnualFinancialandBudgetReportwithAuditedFinancialStatementsFortheFiscalYearEndedJune30,2017

TherewerenodifferencesbetweentheAnnualFinancialandBudgetReportandtheAuditedFinancialStatementsinanyfunds.


FONTANAUNIFIEDSCHOOLDISTRICTScheduleofExpendituresofFederalAwardsFortheFiscalYearEndedJune30,2017

Federal Pass‐ThroughFederalGrantor/Pass‐Through CFDA EntityIdentifying Cluster FederalGrantor/ProgramorClusterTitle Number Number Expenditures ExpendituresFederalPrograms:

U.S.DepartmentofAgriculture:PassedthroughCaliforniaDept.ofEducation(CDE):

ChildNutritionCluster:SchoolBreakfastProgram‐EspeciallyNeedy 10.553 13526 3,283,760$NationalSchoolLunchProgram 10.555 13523 14,638,020SummerFoodServiceProgram 10.559 13004 342,068USDADonatedFoods 10.555 N/A 1,694,155

TotalChildNutritionCluster 19,958,003$ChildandAdultCareFoodProgram 10.558 13393 1,538,101TeamNutritionGrant 10.574 15332 13,600FreshFruitandVegetableProgram 10.582 14968 13,243

TotalU.S.DepartmentofAgriculture 21,522,947

U.S.DepartmentofEducation:PassedthroughCaliforniaDept.ofEducation(CDE):

AdultBasicEducation(ABE):AdultEducationCluster:AdultSecondaryEducation 84.002 13978 484,435AdultBasicEducation&ESL 84.002A 14508 161,134EnglishLiteracy&CivicsEducation 84.002A 14109 26,518

TotalAdultEducationCluster 672,087NoChildLeftBehind(NCLB):

TitleI,PartACluster:TitleI,PartA,BasicGrantsLow‐IncomeandNeglected 84.010 14329 13,516,275TitleI,PartD,LocalDelinquentPrograms 84.010 14357 2,980

TotalTitleI,PartACluster 13,519,255TitleI,PartG,AdvancedPlacement(AP)TestFeeReimbursement 84.330 14831 7,974TitleII,PartA,SupportingEffectiveInstruction 84.367 14344 481,125TitleIII,LimitedEnglishProficiency 84.365 14346 1,141,251

CarlPerkinsAct‐Secondary 84.048 14894 380,861IndividualswithDisabilitiesEducationAct(IDEA):

SpecialEducationCluster:LocalAssistanceEntitlement 84.027 13379 6,223,369LocalAssistance,PartB,Sec611,PrivateSchoolISPs 84.027 10115 1,345PreschoolGrants,PartB,Sec619 84.173 13430 159,639PreschoolLocalEntitlement,PartB,Sec611 84.027A 13682 521,441MentalHealthAllocationPlan,PartB,Sec611 84.027A 14468 429,521PreschoolStaffDevelopment 84.173A 13431 1,303QualityAssurance&FocusedMonitoring 84.027A 13693 31,722

TotalSpecialEducationCluster 7,368,340EarlyInterventionGrants,PartC 84.181 23761 129,885WorkabilityII,Transition 84.158 10006 216,181

TotalU.S.DepartmentofEducation 23,916,959

U.S.DepartmentofHealth&HumanServices:PassedthroughCaliforniaDept.ofEducation(CDE):

ChildCareDevelopmentFundClusterFederalChildCare,Center‐Based 93.596 13609 124,450

MedicaidCluster:Medi‐CalBillingOption 93.778 10013 590,376Medi‐CalAdministrativeActivities(MAA) N/A 10060 238,272

TotalMedicaidCluster 828,648DirectFederaltoLocalProgram:

HeadStartCluster:HeadStart 93.600 10016 119,148EarlyHeadStart 93.600 10016 285,713

TotalHeadStartCluster 404,861

TotalU.S.DepartmentofHealth&HumanServices 1,357,959

TotalExpendituresofFederalAwards 46,797,865$

OftheFederalexpenditurespresentedintheschedule,theDistrictprovidednoFederalawardstosubrecipients.

72

FONTANAUNIFIEDSCHOOLDISTRICTNotetotheSupplementaryInformationJune30,2017NOTE1–PURPOSEOFSCHEDULESScheduleofAverageDailyAttendance(ADA)Averagedailyattendance(ADA) isameasurementof thenumberofpupilsattendingclassesof theDistrict.The purpose of attendance accounting from a fiscal standpoint is to provide the basis on whichapportionmentsofStatefundsaremadetoschooldistricts.Thisscheduleprovidesinformationregardingtheattendanceofstudentsatvariousgradelevelsandindifferentprograms.ScheduleofInstructionalTimeTheDistrict has participated in the Incentives for Longer InstructionalDay and Longer Instructional Year.TheDistricthasnotmetitstargetfunding.ThisschedulepresentsinformationontheamountofinstructionaltimeofferedbytheDistrictandwhethertheDistrictcompliedwiththeprovisionsofEducationCodeSections46200through46206.ScheduleofFinancialTrendsandAnalysisThisscheduledisclosestheDistrict's financial trendsbydisplayingpastyears'dataalongwithcurrentyearbudgetinformation.ThesefinancialtrenddisclosuresareusedtoevaluatetheDistrict'sabilitytocontinueasagoingconcernforareasonableperiodoftime.ReconciliationofAnnualFinancialandBudgetReportwithAuditedFinancialStatementsThisscheduleprovidestheinformationnecessarytoreconcilethefundbalanceofall fundsreportedontheUnauditedActualfinancialreporttotheauditedfinancialstatements.ScheduleofExpendituresofFederalAwardsThe schedule of expenditures of Federal awards includes the Federal grant activity of the District and ispresented on the modified accrual basis of accounting. The information in this schedule is presented inaccordance with the requirements of the Title 2 U.S. Code of Federal Regulations (CFR) Part 200,UniformAdministrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Therefore, someamountspresentedinthisschedulemaydifferfromamountspresentedin,orusedinthepreparationofthefinancialstatements.TheDistrictdidnotelecttousethetenpercentdeminimisindirectcostrate.ThefollowingscheduleprovidesareconciliationbetweenrevenuesreportedontheStatementofRevenues,Expenditures, and Changes in Fund Balances and the related expenditures reported on the Schedule ofExpendituresofFederalAwards.ThereconcilingamountsrepresentFederalfundsthathavebeenrecordedasrevenuesthathavenotbeenexpendedbyJune30,2017.

CFDANumber AmountTotalFederalRevenuesfromtheStatementofRevenues,Expenditures,

andChangesinFundBalances 48,169,535$DifferencesbetweenFederalRevenuesandExpenditures:

SeamlessSummerFoodProgram 10.559 (222,923)ChildandAdultCareFoodProgram 10.558 (959,643)TitleII,PrincipalAdministratorTraining 84.367 (29,651)Medi‐CalBillingOption 93.778 (159,453)

TotalScheduleofExpendituresofFederalAwards 46,797,865$

OtherIndependentAuditors'Reports

73

INDEPENDENTAUDITORS'REPORTONINTERNALCONTROLOVERFINANCIALREPORTINGANDONCOMPLIANCEANDOTHERMATTERSBASEDONANAUDITOFFINANCIALSTATEMENTSPERFORMEDINACCORDANCE

WITHGOVERNMENTAUDITINGSTANDARDSBoardofEducationFontanaUnifiedSchoolDistrictFontana,CaliforniaWe have audited, in accordance with the auditing standards generally accepted in the United States ofAmericaandthestandardsapplicabletofinancialauditscontainedinGovernmentAuditingStandards issuedbytheComptrollerGeneraloftheUnitedStates,thefinancialstatementsofthegovernmentalactivities,eachmajorfund,andtheaggregateremainingfundinformationofFontanaUnifiedSchoolDistrictasofandfortheyear ended June 30, 2017, and the related notes to the financial statements, which collectively compriseFontana Unified School District's basic financial statements, and have issued our report thereon datedDecember12,2017.InternalControlOverFinancialReportingIn planning and performing our audit of the financial statements, we considered Fontana Unified SchoolDistrict's internalcontrolover financial reporting (internal control) todetermine theauditprocedures thatareappropriateinthecircumstancesforthepurposeofexpressingouropinionsonthefinancialstatements,butnotforthepurposeofexpressinganopinionontheeffectivenessoftheFontanaUnifiedSchoolDistrict'sinternalcontrol.Accordingly,wedonotexpressanopinionontheeffectivenessoftheFontanaUnifiedSchoolDistrict'sinternalcontrol.Adeficiencyininternalcontrolexistswhenthedesignoroperationofacontroldoesnotallowmanagementoremployees, in the normal course of performing their assigned functions, to prevent, or detect and correctmisstatements on a timely basis. Amaterialweakness is a deficiency, or a combination of deficiencies, ininternal control such that there is a reasonable possibility that a material misstatement of the District'sfinancialstatementswillnotbeprevented,ordetectedandcorrectedonatimelybasis.Asignificantdeficiencyis a deficiency, or a combination of deficiencies, in internal control that is less severe than a materialweakness,yetimportantenoughtomeritattentionbythosechargedwithgovernance.Our consideration of internal control was for the limited purpose described in the first paragraph of thissectionandwasnotdesignedtoidentifyalldeficienciesininternalcontrolthatmightbematerialweaknessesor significantdeficiencies. Given these limitations,duringourauditwedidnot identifyanydeficiencies ininternalcontrolthatweconsidertobematerialweaknesses. However,materialweaknessesmayexistthathavenotbeenidentified.

74

ComplianceandOtherMattersAs part of obtaining reasonable assurance about whether Fontana Unified School District's financialstatementsarefreeofmaterialmisstatement,weperformedtestsofitscompliancewithcertainprovisionsoflaws, regulations, contracts, and grant agreements, noncompliance with which could have a direct andmaterial effect on the determination of financial statement amounts. However, providing an opinion oncompliancewiththoseprovisionswasnotanobjectiveofouraudit,andaccordingly,wedonotexpresssuchanopinion.TheresultsofourtestsdisclosedinstancesofnoncomplianceorothermattersthatarerequiredtobereportedunderGovernmentAuditingStandardsandwhicharedescribedintheaccompanyingscheduleoffindingsandquestionedcostsasFindings2017‐001and2017‐002.FontanaUnifiedSchoolDistrict'sResponsestoFindingsFontana Unified School District's responses to the findings identified in our audit are described in theaccompanyingscheduleof findingsandquestionedcosts. FontanaUnifiedSchoolDistrict'sresponseswerenotsubjectedtotheauditingproceduresappliedintheauditofthefinancialstatementsand,accordingly,weexpressnoopiniononthem.PurposeofthisReportThepurposeofthisreportissolelytodescribethescopeofourtestingofinternalcontrolandcomplianceandtheresultsofthattesting,andnottoprovideanopinionontheeffectivenessoftheDistrict'sinternalcontrolor on compliance. This report is an integral part of an audit performed in accordance with GovernmentAuditing Standards in considering the District's internal control and compliance. Accordingly, thiscommunicationisnotsuitableforanyotherpurpose.


75

INDEPENDENTAUDITORS'REPORTONSTATECOMPLIANCE

BoardofEducationFontanaUnifiedSchoolDistrictFontana,CaliforniaReportonStateComplianceWe have audited Fontana Unified School District's compliancewith the types of compliance requirementsdescribed in the 2016‐17 Guide for Annual Audits of K‐12 Local Education Agencies and State ComplianceReporting thatcouldhaveadirectandmaterialeffectoneachof theFontanaUnifiedSchoolDistrict'sstategovernmentprogramsasnotedonthefollowingpageforthefiscalyearendedJune30,2017.Management'sResponsibilityManagement is responsible forcompliancewithstate laws, regulations,andthe termsandconditionsof itsStateprograms.Auditors'ResponsibilityOurresponsibilityistoexpressanopiniononcomplianceforeachofFontanaUnifiedSchoolDistrict'sstateprogramsbasedonourauditofthetypesofcompliancerequirementsreferredtoonthefollowingpage.Weconductedour audit of compliance in accordancewithauditing standardsgenerally accepted in theUnitedStatesofAmerica; the standardsapplicable to financial audits contained inGovernmentAuditingStandards,issuedbytheComptrollerGeneraloftheUnitedStates;andthe2016‐17GuideforAnnualAuditsofK‐12LocalEducationAgenciesandStateComplianceReporting. Thosestandardsrequirethatweplanandperformtheaudit to obtain reasonable assurance about whether noncompliance with the types of compliancerequirementsreferredtoonthefollowingpagethatcouldhaveadirectandmaterialeffectonastateprogramoccurred. An audit includes examining, on a test basis, evidence about Fontana Unified School District'scompliancewith those requirementsandperformingsuchotherproceduresasweconsiderednecessary inthecircumstances.Webelievethatourauditprovidesareasonablebasisforouropiniononcomplianceforeachstateprogram.However,ourauditdoesnotprovidealegaldeterminationofFontanaUnifiedSchoolDistrict'scompliance.Inconnectionwiththeauditreferredtoabove,weselectedandtestedtransactionsandrecordstodeterminetheDistrict'scompliancewiththeStatelawsandregulationsapplicabletothefollowingitems:

Description

ProceduresPerformed

Attendance YesTeacherCertificationandMisassignments YesKindergartenContinuance YesIndependentStudy No(seebelow)ContinuationEducation YesInstructionalTime YesInstructionalMaterials YesRatioofAdministrativeEmployeestoTeachers Yes

76

Description

ProceduresPerformed

ClassroomTeacherSalaries YesEarlyRetirementIncentive NotApplicableGannLimitCalculation YesSchoolAccountabilityReportCard YesJuvenileCourtSchools NotApplicableMiddleorEarlyCollegeHighSchools NotApplicableK‐3GradeSpanAdjustment YesTransportationMaintenanceofEffort YesMentalHealthExpenditures YesEducatorEffectiveness YesCaliforniaCleanEnergyJobsAct YesAfterSchoolEducationandSafetyProgram YesProperExpenditureofEducationProtectionAccountFunds YesUnduplicatedLocalControlFundingFormulaPupilCounts YesLocalControlandAccountabilityPlan YesIndependentStudy‐CourseBased No(seebelow)Immunizations YesCharterSchools:

Attendance NotApplicableModeofInstruction NotApplicableNonclassroom‐BasedInstruction/IndependentStudy NotApplicableDeterminationofFundingforNonclassroom‐BasedInstruction NotApplicableAnnualInstructionalMinutes–ClassroomBased NotApplicableCharterSchoolFacilityGrantProgram NotApplicable

WedidnotperformtestingforindependentstudyorcoursebasedindependentstudybecausetheADAwasunderthelevelthatrequirestesting.UnmodifiedOpiniononCompliancewithStateProgramsInouropinion,FontanaUnifiedSchoolDistrictcomplied,inallmaterialrespects,withthetypesofcompliancerequirementsreferredtoabovefortheyearendedJune30,2017.OtherMatter(s)The results of our auditing procedures disclosed instances of noncompliance with the compliancerequirementsreferredtopreviously,whicharerequiredtobereportedinaccordancewiththe2016‐17GuideforAnnualAuditsofK‐12LocalEducationAgenciesandStateComplianceReporting,andwhicharedescribedinthe accompanying schedule of findings and questioned costs as Findings 2017‐001 and 2017‐002. Ouropiniononeachstateprogramisnotmodifiedwithrespecttothesematters.District'sResponsestoFindingsFontanaUnifiedSchoolDistrict'sresponsestothecompliancefindingsidentifiedinourauditaredescribedinthe accompanying schedule of findings and questioned costs. Fontana Unified School District's responseswere not subjected to the auditing procedures in the audit of compliance and, accordingly,we express noopinionontheresponses.


77

INDEPENDENTAUDITORS'REPORTONCOMPLIANCEFOREACHMAJORFEDERALPROGRAMANDREPORTONINTERNALCONTROL

OVERCOMPLIANCEREQUIREDBYTHEUNIFORMGUIDANCE

BoardofEducationFontanaUnifiedSchoolDistrictFontana,CaliforniaReportonComplianceforEachMajorFederalProgramWe have audited Fontana Unified School District's compliancewith the types of compliance requirementsdescribedintheOMBComplianceSupplementthatcouldhaveadirectandmaterialeffectoneachofFontanaUnifiedSchoolDistrict'smajor federalprograms for theyearended June30,2017. FontanaUnifiedSchoolDistrict's major federal programs are identified in the summary of auditors' results section of theaccompanyingscheduleoffindingsandquestionedcosts.Management'sResponsibilityManagementisresponsibleforcompliancewithfederalstatutes,regulations,andthetermsandconditionsofitsfederalawardsapplicabletoitsfederalprograms.Auditors'ResponsibilityOurresponsibilityistoexpressanopiniononcomplianceforeachofFontanaUnifiedSchoolDistrict'smajorfederal programs based on our audit of the types of compliance requirements referred to above. Weconductedour audit of compliance in accordancewithauditing standardsgenerally accepted in theUnitedStatesofAmerica; the standardsapplicable to financial audits contained inGovernmentAuditingStandards,issued by the Comptroller General of the United States; and the audit requirements of Title 2 U.S.CodeofFederalRegulationsPart200,UniformAdministrativeRequirements,CostPrinciples,andAuditRequirementsforFederalAwards (Uniform Guidance). Those standards and the Uniform Guidance require thatwe plan andperformtheaudittoobtainreasonableassuranceaboutwhethernoncompliancewiththetypesofcompliancerequirements referred to above that could have a direct and material effect on a major federal programoccurred. An audit includes examining, on a test basis, evidence about Fontana Unified School District'scompliancewith those requirementsandperformingsuchotherproceduresasweconsiderednecessary inthecircumstances.Webelievethatourauditprovidesareasonablebasisforouropiniononcomplianceforeachmajorfederalprogram. However, our audit does not provide a legal determination of Fontana Unified School District'scompliance.OpiniononEachMajorFederalProgramInouropinion,FontanaUnifiedSchoolDistrictcomplied,inallmaterialrespects,withthetypesofcompliancerequirements referred to above that could have a direct and material effect on each of its major federalprogramsfortheyearendedJune30,2017.

78

ReportonInternalControlOverComplianceManagement of Fontana Unified School District is responsible for establishing and maintaining effectiveinternalcontrolovercompliancewiththetypesofcompliancerequirementsreferredtoabove. Inplanningandperformingourauditofcompliance,weconsideredFontanaUnifiedSchoolDistrict'sinternalcontrolovercompliancewiththetypesofrequirementsthatcouldhaveadirectandmaterialeffectoneachmajorfederalprogramtodeterminetheauditingproceduresthatareappropriateinthecircumstancesforthepurposeofexpressing an opinion on compliance for each major federal program and to test and report on internalcontrolovercomplianceinaccordancewiththeUniformGuidance,butnotforthepurposeofexpressinganopinionontheeffectivenessofinternalcontrolovercompliance.Accordingly,wedonotexpressanopinionontheeffectivenessoftheDistrict'sinternalcontrolovercompliance.A deficiency in internal control over compliance exists when the design or operation of a control overcompliance does not allowmanagement or employees, in the normal course of performing their assignedfunctions,toprevent,ordetectandcorrect,noncompliancewithatypeofcompliancerequirementofafederalprogram on a timely basis. Amaterialweakness in internal control over compliance is a deficiency, or acombination of deficiencies, in internal control over compliance, such that there is a reasonablepossibilitythat material noncompliance with a type of compliance requirement of a federal program will not beprevented, or detected and corrected, on a timely basis. A significant deficiency in internal control overcomplianceisadeficiency,oracombinationofdeficiencies,ininternalcontrolovercompliancewithatypeofcompliancerequirementofafederalprogramthatislessseverethanamaterialweaknessininternalcontrolovercompliance,yetimportantenoughtomeritattentionbythosechargedwithgovernance.Our consideration of internal control over compliance was for the limited purpose described in the firstparagraphofthissectionandwasnotdesignedtoidentifyalldeficienciesininternalcontrolovercompliancethatmightbematerialweaknessesorsignificantdeficiencies.Wedidnotidentifyanydeficienciesininternalcontrol over compliance thatwe consider to bematerialweaknesses. However,materialweaknessesmayexistthathavenotbeenidentified.Thepurposeofthisreportoninternalcontrolovercomplianceissolelytodescribethescopeofourtestingofinternal control over compliance and the results of that testing based on the requirements of theUniformGuidance.Accordingly,thisreportisnotsuitableforanyotherpurpose.


FindingsandQuestionedCosts

79

FONTANAUNIFIEDSCHOOLDISTRICTScheduleofAuditFindingsandQuestionedCostsFortheFiscalYearEndedJune30,2017SECTIONI‐SUMMARYOFAUDITORS'RESULTS

FinancialStatements

Typeofauditors'reportissued UnmodifiedInternalcontroloverfinancialreporting:

Materialweakness(es)identified? NoSignificantdeficiency(s)identifiednotconsideredtobematerialweaknesses? Nonereported

Noncompliancematerialtofinancialstatementsnoted? No

FederalAwards

Internalcontrolovermajorprograms:Materialweakness(es)identified? NoSignificantdeficiency(s)identifiednotconsideredtobematerialweaknesses? Nonereported

Typeofauditors'reportissuedoncomplianceformajorprograms: Unmodified

Anyauditfindingsdisclosedthatarerequiredtobereported inaccordancewiththeUniformGuidance,Section200.516 NoIdentificationofmajorprograms:

CFDANumbers NameofFederalProgramorCluster

10.553,10.555,10.559 ChildNutritionCluster

10.558 ChildandAdultCareFoodProgram

DollarthresholdusedtodistinguishbetweenTypeAandTypeBprograms: 1,403,936$

Auditeequalifiedaslow‐riskauditee? Yes

StateAwards

Typeofauditors'reportissuedoncomplianceforstateprograms: Unmodified

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FONTANAUNIFIEDSCHOOLDISTRICTScheduleofAuditFindingsandQuestionedCostsFortheFiscalYearEndedJune30,2017SECTIONII‐FINANCIALSTATEMENTFINDINGSThis section identifies the significant deficiencies, material weaknesses, and instances of noncompliancerelatedtothefinancialstatementsthatarerequiredtobereportedinaccordancewithGovernmentAuditingStandards.Pursuant toAssemblyBill (AB)3627,allaudit findingsmustbe identifiedasoneormoreof thefollowingcategories:

FiveDigitCode AB3627FindingTypes10000 Attendance20000 InventoryofEquipment30000 InternalControl40000 StateCompliance42000 CharterSchoolFacilitiesPrograms50000 FederalCompliance60000 Miscellaneous61000 ClassroomTeacherSalaries62000 LocalControlAccountabilityPlan70000 InstructionalMaterials71000 TeacherMisassignments72000 SchoolAccountabilityReportCard

Therewerenofinancialstatementfindingsin2016‐17.

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FONTANAUNIFIEDSCHOOLDISTRICTScheduleofAuditFindingsandQuestionedCostsFortheFiscalYearEndedJune30,2017SECTIONIII‐FEDERALAWARDFINDINGSANDQUESTIONEDCOSTSThissection identifies theaudit findingsrequiredtobereportedbytheUniformGuidance,Section200.516(e.g., significant deficiencies, material weaknesses, and instances of noncompliance, including questionedcosts).Therewerenofederalawardfindingsorquestionedcostsin2016‐17.

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FONTANAUNIFIEDSCHOOLDISTRICTScheduleofAuditFindingsandQuestionedCostsFortheFiscalYearEndedJune30,2017SECTIONIV‐STATEAWARDFINDINGSANDQUESTIONEDCOSTSThis section identifies the audit findings pertaining to noncompliance with state program rules andregulations.Finding2017‐001:CALPADSUnduplicatedPupilCounts(40000)Criteria:Supplementalandconcentrationgrantamountsarecalculatedbasedonthepercentageof"unduplicatedpupils"enrolledintheLEAonCensusDay(firstWednesdayinOctober).Thepercentageequals:

Unduplicatedcountofpupilswho(1)areEnglishlearners,(2)meetincomeorcategoricaleligibilityrequirementsforfreeorreduced‐pricemealsundertheNationalSchoolLunchProgram,or(3)arefosteryouth."Unduplicatedcount"meansthateachpupiliscountedonlyonceevenifthepupilmeetsmorethanoneofthesecriteria(ECsections2574(b)(2)and42238.02(b)(1)).

DividedbytotalenrollmentintheLEA(ECsections2574(b)(1)and42238.02(b)(5)).Allpupilcounts

arebasedonFall1certifiedenrollmentreportedintheCALPADSasofCensusDay.Condition: DuringourtestingoftheEnglishLearner(EL)andFreeandReducedPriceMeal(FRPM)eligiblestudents reported in the CALPADS 1.17 and 1.18 reports, we noted two students who were incorrectlyclassified as EL or FRPM eligible. One student was classified as an EL student, but did not have evidencesupportingtheclassification.OnestudentwasclassifiedasFRPMeligible,buttheonlyapplicationonfilewasdatedafterthecensusdate.QuestionedCost:$1,972.Context:Errorsappeartobeisolated.Therewere2instancesnotedoutof180studentstested.Effect: The unduplicated pupil counts in the CALPADS 1.17 and 1.18 reports should be adjusted for thefollowingchanges:

SchoolSite: CALPADSAdjustedbased

onFRPMAdjustedbasedonELeligibility AdjustedTotal

FontanaA.B.MillerHigh 1,855 ‐ ‐ 1,855AlderMiddle 1,078 ‐ ‐ 1,078BeechAvenueElementary 752 (1) ‐ 751CypressElementary 708 ‐ ‐ 708FontanaHigh 2,306 ‐ ‐ 2,306FontanaMiddle 1,123 ‐ (1) 1,122HarryS.TrumanMiddle 1,075 ‐ ‐ 1,075HemlockElementary 333 ‐ ‐ 333LocustElementary 419 ‐ ‐ 419Agregateofremainingschools 23,298 ‐ ‐ 23,298

District‐wide 32,947 (1) (1) 32,945

Theenrollmentcountof38,014wasnotimpactedasaresultoftheproceduresperformed.

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FONTANAUNIFIEDSCHOOLDISTRICTScheduleofAuditFindingsandQuestionedCostsFortheFiscalYearEndedJune30,2017SECTIONIV‐STATEAWARDFINDINGSANDQUESTIONEDCOSTS(continued)Finding2017‐001:CALPADSUnduplicatedPupilCounts(40000)(continued)Recommendation: We recommend that the District implement a review procedure of the CALPADSinformationpriortothereportssubmissiontotheCaliforniaDepartmentofEducation.ViewsofResponsibleOfficials: TheDistrictwillcontinuetoadoptprocedurestoaddressthe factorsthatcausedthenecessaryadjustmentstotheUnduplicatedPupilCount.ProcedureswillincludetakingadditionalstepstoensurethatstudentstransferringintotheDistrictareproperlyreportedasEnglishLearnersbasedontheirHomeLanguageSurvey,CELDTscores,andotherevidencethatsupportsthisdesignation.TheDistrictwillalsomonitor incomingapplications forstudents filing forFreeandReducedPriceMeals toensure thatonlythosereceivedbeforethecensusdatearereflectedasFRPMeligible.Theseprocedureswillensurethatstudents are being classified and reported correctly in the CALPADS student database system and thatadequatesupportingdocumentationexiststosupporttheirdesignation.Finding2017‐002:SchoolAccountabilityReportCard(72000)Criteria:InaccordancewithEducationCode§33126,theschoolistoprovideanaccountabilityreportcardtoinclude safety, cleanliness, and adequacy of school facilities, to include any neededmaintenance to ensuregood repair. The condition reported should be supported by the school's Facilities Inspection Tool (FIT),School Facilities Condition Evaluation as required by Education Code §17002. In addition, according toEducationCode§35256,thegoverningboardmustpublishtheSchoolAccountabilityReportCard(SARC)foreachschoolbyFebruary1stofeachyear.Condition:CypressElementarylistedrestrooms‘Fair’ontheirSARCbuttheyarereportedas ‘Good’onthecorresponding FIT Form. Redwood Elementary listed restrooms as ‘Poor’ on their SARC but ‘Good’ on thecorrespondingFIT.Context:Thereweretwoexceptionsoutof10sitestested.Cause: The information contained in the Facility Inspection Tool was not compared to the informationcontainedintheSchoolAccountabilityReportCardfortheseschoolspriortosubmissionandpublication.Effect:Without proper compliance, the public will be misinformed on the status of the schools’ facilities.Thereisnofinancialimpact.Recommendation:We recommend that an employee verify the information presented in the SARC. Thisinformationisessentialtopresenttheimageoftheschoolfairlytothepublic.Inaddition,theSARCsshouldbepublishedonanannualbasisbyFebruary1st. ViewsofResponsibleOfficials: TheDistricthasimplementedprocedurestoensurethatthedatareportedontheSchoolAccountabilityReportCard(SARC)foreachschoolsiteisconsistentwiththatreportedontheFacilityInspectionTool(FIT)FormforeachschoolsiteasrequiredbyEducationCodeSection33126.Inthefuture, the FIT Form completed for each site will be compared to the data included in the SARC prior topublication.

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FONTANAUNIFIEDSCHOOLDISTRICTSummaryScheduleofPriorAuditFindingsFortheFiscalYearEndedJune30,2017

Original

FindingNo.

Finding

Code

Recommendation

CurrentStatus Finding2016‐001:NationalSchoolLunchProgramCashReserves

The school food authority (SFA) should limit its netcash resources to an amount that does not exceedthree months average expenditures in accordancewith7CFRSection210.14(b).AtJune30,2016,thereservebalanceintheCafeteriaFund was $12,299,151. Three months averageexpenditures are $9,011,820. The excess cashreservesare$3,287,331.

50000 WerecommendtheDistrictcontinuefollowingthespendingplansubmittedtotheCDE.

Implemented.TheDistricthasaspendingplaninplacewiththeCDEthrough

2018.

Finding2016‐002:UnduplicatedPupilCounts

Supplemental and concentration grant amounts arecalculated based on the percentage of “unduplicatedpupils” enrolled in the LEA on Census Day (firstWednesdayinOctober).Thepercentageequals: Unduplicated count of pupils who (1) are Englishlearners, (2) meet income or categorical eligibilityrequirements for freeor reduced‐pricemealsundertheNationalSchoolLunchprogram,or(3)arefosteryouth.“Unduplicatedcount”meansthateachpupiliscountedonlyonceevenifthepupilmeetsmorethanone of these criteria (EC sections 2574(b)(2) and42238.02(b)(1)). Dividedby total enrollment in theLEA (ECsections2574(b)(1)and42238.02(b)(5)).AllpupilcountsarebasedonFall1 certifiedenrollment reported in theCALPADSasofCensusDay.We found three pupils who were classified as anEnglish Learner (EL), but there was no evidence toindicatethatthepupilwasproperlyclassifiedasEL.

40000 We recommend that the District take extra care to ensurethatallpupilsareproperlyclassifiedontheCALPADSreportinthefuture.

NotImplemented.SeeFinding2017‐001.

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TotheBoardofEducationFontanaUnifiedSchoolDistrictFontana,CaliforniaInplanningandperformingourauditofthebasicfinancialstatementsofFontanaUnifiedSchoolDistrictforthefiscalyearendingJune30,2017,weconsidereditsinternalcontrolstructureinordertodetermineourauditingprocedures for the purpose of expressing our opinion on the basic financial statements and not to provideassuranceontheinternalcontrolstructure.However, during our audit we noted matters that are an opportunity for strengthening internal controls andoperating efficiency. The following items represent conditions noted by our audit thatwe consider importantenoughtobringtoyourattention.ThisletterdoesnotaffectourreportdatedDecember12,2017,onthefinancialstatementsofFontanaUnifiedSchoolDistrict.ASSOCIATEDSTUDENTBODY(ASB)FUNDSObservation: During our testing of cash disbursements, we noted disbursements at various sites were notapproved by the District Representative, the ASB advisor, and/or the student representative until after theexpenditure had already been incurred. Education Code Section48933(b) requires all expenditures fromASBfundsbeauthorizedbyastudentrepresentative,anadvisor,andadistrictrepresentative(usuallyaprincipalorvice‐principal)priortodisbursingthefunds.Recommendation: As a “best practice”, approval by required parties should be obtained before the actualcommitmenttopurchasetheitemsinordertoensuretheexpenseisaproperuseofstudent‐bodyfundsandfallswithinbudgetaryguidelines.Observation: In our testing of cash receipts, we noted several deposits that lacked sufficient supportingdocumentation. Withoutoriginalsupportingdocumentation,wecouldnotverifywhetherallcashcollectedhadbeendeposited intact and into thecorrectASBaccounts. Sound internal controls forhandlingcashdiscouragetheftofASBfundsandprotectthosewhohandlethecash.Itisimportanttotieallproceedstothespecificeventfrom which they were generated and to ensure that all proceeds from an event are turned in and properlyreconciledtosales.Recommendation:Werecommendthatbeforeanyeventsareheld,controlprocedures,suchasticketlogs,tallysheets, prenumbered cash receipts, or cash register receipts, should be established that will allow for thereconciliationbetweencashcollectedandeventsales.

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ASSOCIATEDSTUDENTBODY(ASB)FUNDS(continued)Observation:ThroughinquiryandtestingatFontanaHigh,JurupaHills,andSummitHigh,wenotedtextbookfees and AP/PSAT feeswere collected and then paid to the District, in effect using the ASB as a pass‐throughaccount. ASB accounts are not and should not be used as pass‐through or clearing accounts forDistrict funds.AcceptingtheDistrictfundsintotheASBaccountisalsoconsideredcomminglingoffunds.Recommendation:We recommend that the sites forward all District funds to theDistrict Office for receipt oropenaseparateclearingaccountforfundstobetransferredtotheDistrictonamonthlybasis.Observation: In our test of cash receipts at FontanaHigh, we noted a deposit that could not be reconciledbetweenthedepositslipsandtheticketcontrolsheets.Thesupportingcontrolworksheetwaslessthantheactualcashdepositperthebankfortheevent.Recommendation:We recommend the District investigate the discrepancy as it could be an indication of aweaknessincontrols.Observation:DuringourtestingofcashdisbursementsatABMillerHighandSummitHigh,wenotedpurchasesthatweresenttopersonaladdressesratherthantotheschoolsites.Recommendation:We recommend that items purchased forASB should be shipped directly to the school siteratherthanahomeaddresstoensuretheitemsareproperlyreceivedbytheASBandusedforthebenefitofthestudents.Observation: In our testing of cash disbursements at JurupaHillsHigh, we noted funds used for gift cards.Purchases of items that are to be given away as gifts are in effect a gift of public funds. ASB funds are legallyconsidered public funds because they are raised through theDistrict’s tax identificationnumber andunder itsnontaxablestatus.Recommendation:WerecommendthatASBfundsnotbeusedforitemssuchasgiftcards.ASBfundsshouldbeusedforthepurposeforwhichtheyarecollectedandforthebenefitofagroupofstudentsratherthanonlyoneindividual.DISTRICTOFFICEObservation:Duringour testingofDistrictcashdisbursements,we identifieddisbursements thathadpurchaseorderdatesafterthedateoftheinvoice,indicatingalackofpreapprovalofthepurchase.Recommendation:WerecommendtheDistrictobtainproperapprovalpriortoincurringexpendituresandthatalldocumentationisretainedinordertosubstantiateexpenditures.Thisway,itcanbedeterminedifexpendituresareappropriateandnecessaryforaneducationalpurpose.Wewillreviewthestatusofthecurrentyearcommentsduringournextauditengagement.


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