FORTUNA UNION HIGH SCHOOL DISTRICT County of · PDF fileIndependent Auditor's Report on...

FORTUNA UNION HIGH SCHOOL DISTRICT County of Humboldt Fortuna, California

FINANCIAL STATEMENTS

Year Ended June 30, 2015

With

INDEPENDENT AUDITOR'S REPORT

FORTUNA UNION HIC;H SCHOOL DISTRICT

TABLE OF CONTENTS

June 30, 2015

INTRODUCTION SECTION

Title Page Table of Contents

FINANCIAL SECTION

Independent Auditor's Report on Financial Statements 1

Management's Discussion and Analysis (Required Supplementary Infonnation) 4.1

Basic Financial Statements

Government-wide Financial Statements: Statement of Net Position Statement of Activities

Fund Financial Statements: Balance Sheet- Governmental Funds Reconciliation of the Governmental Funds

Balance Sheet to the Statement of Net Position Statement of Revenues, Expenditures, and Changes in

Fund Balances- Governmental Funds Reconciliation of the Governmental Funds Statement of Revenues,

Expenditures, and Changes in Fund Balances to the Statement of i\ctivities

Statement of Fiduciary Net Position- Fiduciary Funds Notes to the Financial Statements

REQUIRED SUPPLEMENTARY INFORIVL\TION

Statement of Revenues, Expenditures, and Changes in Fund Balances: Budget and Actual (GAAP)- Major Funds

General Fund Building Fund Capital Outlay Fund

5 6

7

8

9

10 11 12

47 48 49

FORTUNA UNION HIGH SCHOOL DISTRICT

TABLE OF CONTENTS

June 30, 2015

Schedule of Other Post-employment Benefit Funding Progress and Employer Contributions

Schedule of the District's Proportionate Share of the Net Pension Liability for the Last Ten Years - California Public Employees' Retirement System

Schedule of the District's Proportionate Share of the Net Pension Liability for the Last Ten Years- California State Teachers' Retirement System

Schedule of Contributions for the Last Ten Years- California Public Employees' Retirement System

Schedule of Contributions for the Last Ten Years - California State Teachers' Retirement System

SUPPLEMENTARY INFORMATION

Combining Statements- Nonmajor Funds: Combining Balance Sheet Combining Statement of Revenues, Expenditures,

and Changes in Fund Balance (By Object)

Organization

Schedule of Average Daily Attendance

Schedule ofinstructional Time

Schedule of Financial Trends and Analysis

Schedule of Charter Schools

Schedule of Expenditures of Federal Awards

Notes to the Schedule of Expenditures of Federal Awards

50

51

52

53

54

55

56

57

58

59

60

61

62

63


TABLE OF CONTENTS

June 30, 2015

Reconciliation of Annual Financial and Budget Report with Audited Financial Statements

OTHER INDEPENDENT AUDITOR'S REPORTS

Independent Auditor's Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance urith Government Auditing Standards

Independent i\uditor's Report on State Compliance

Independent Auditor's Report on Compliance For Each Major Program and on Internal Control Over Compliance Required By OMB Circular A-133

AUDIT FINDINGS AND QUESTIONED COSTS SECTION

Schedule of Audit Findings and Questioned Costs

Summary Schedule of Prior Audit Findings

64

65

68

71

74

81

John R. Coil, C:l'.-1.. D IM l\l<~rk C. Wetzel, CP:\ '

1\lichacl R. Cline, Cl'.-\ DAVID L. MOON IE & CO., LLP

Certified Public Accountants


Kenneth X. Stringer. Cl':\

Aaron S. \\'eiss, cP:\

Joshu<t S. ~Iiller, Cl':\

1\Iatthe\\" .J. ! Iague, (:1'.-\

INDEPENDENT AUDITOR'S REPORT ON FINJ\NCIAL STATEMENTS

Board of Trustees Fortuna Union High School District 379 12•h Street Fortuna, California 95540

Report on the Financial Statements

We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of the Fortuna Union High School District (the "District") as of and for the year ended June 30, 2015, and the related notes to the financial statements, which collectively comprise the District's basic financial statements as listed in the table of contents.

Management's Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor's Responsibility

Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing StandardJ, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial

1

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.T2:) Second Strcel. Suite :Hll 0 Eurek<t, CA 9:>:"")1)} 6 707 . ..:J42.1/:{7 (Bus.) • 707.-142.:12~1~ (Fa:-.:) ll dl 111 @d/111 .rjm.rum F-m,til


INDEPENDENT AUDITOR'S REPORT ON FINANCIAL STI\TEMENTSCONTINUED

statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.

Opinions

In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the District as of June 30, 2015, and the respective changes in financial position for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Other Matters

1vquired Supplemmtary Information

Accounting principles generally accepted in the United States of America require that the management's discussion and analysis, the budgetary comparison information, the schedule of post-employment benefit funding progress, and the schedules of pension liabilities and contribution on pages 4.1 through 4.10 and 4 7 through 54 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, econom.ic, or historical context. We have applied certain lim.ited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. \X'e do not express an opinion or provide any assurance on the information because the lim.ited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

2

FORTUNA. UNION HIGH SCHOOL DISTRICT

INDEPENDENT AUDITOR'S REPORT ON FINANCIAL STATEMENTSCONTINUED

Other Information

Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the District's basic financial statements. The combining nonmajor fund financial statements and other supplementary schedules listed in the table of contents are presented for purposes of additional analysis and are not a required part of the basic financial statements. The schedule of expenditures of federal awards is presented for purposes of additional analysis as required by U.S. Office of Management and Budget Circular A-133, Attdit.r ofState.r, Local Government.r, and Non-Profit Ot;ganization.r, and is also not a required part of the basic financial statements.

The combining nonmajor fund financial statements, the other supplementary schedules listed in the table of contents, and the schedule of expenditures of federal awards are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining nonmajor fund financial statements, the other supplementary schedules listed in the table of contents, and the schedule of expenditures of federal awards are fairly stated in all material respects in relation to the financial statements as a whole.

Other Reporting Required by Government Auditing Standards

In accordance with Goz•ernment Auditing Standard.r, we have also issued our report dated December 4, 2015, on our consideration of the District's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Goz•ernment Auditin..g Standard.r in considering the District's internal control over financial reporting and compliance.

'D~:i.(]\1\~* &_ CERTIFIED PUBLIC ACCOUNTANTS Eureka, California December 4, 2015

3

Introduction

Fortuna Union High School District Management's Discussion and Analysis For Fiscal Year Ending June 30, 2015

The Management's Discussion and Analysis section of the audit is management's view of the District's financial condition, and provides an opportunity to discuss important fiscal issues with the Governing Board and the public.

The mission of the Fortuna Union High School District is to graduate students who can function effectively as productive citizens in the modem world. In concert with our community, we will do evezything we possibly can to teach our students to read, write, and do math at or above the minimum California State Standards. Further, we will teach our students to understand and use modern technology, work cooperatively to solve problems, understand and respect human differences, and accept the inevitability of change. Our motto - "What you are to be, you are now becoming" ~means that our responsibility is to give students the academic and social tools they need to be positive contributing members of their community, state and country. At the present time, the District serves approximately one thousand one hundred (1068) students in three schools, Fortuna High School, East High School (Continuation School), and Academy of the Redwoods (an Early College High School) on the campus of the nearby community college, College of the Redwoods.

Using This Annual Report This section of the District's annual financial report presents our discussion and analysis of our financial performance during the fiscal year that ended on June 30, 2015. It should be read in conjunction with the Independent Auditor's Report immediately preceding and the financial statements that follow this section. This arumal report consists of a series of financial statements. The Statement of Net Assets and Statement of Activities provide information about the activities of the District as a whole and present a longer-term view of the District's finances. The fund financial statements for governmental activities provide information about how District services were financed in the short-term, and how much remains for future spending. Fund financial statements also report the District's operations in more detail than the government-wide statements by providing information about the District's most significant funds. The remaining statements provide financial information about activities for which the District acts solely as a trustee or agent for the benefit of those outside the District.

Financial Highlights :>- The District's total of net position was $2,184,197. :>- The District had a decrease in net position for 2014-2015 of$652,206. Total2014-2015 expenditures were $11,581,683

with 2014-2015 current year revenues of $10,923,477. :>- Capital assets increased by $1,797,093. Accumulated depreciation increased by $450,501. :>- California Basic Education Data System (CBEDS) enrollment in October 2014 was reported at 1066. :>- The average daily attendance (ADA) as reported at the second period was 997.67 and 12.40 ADA for our Special Education

Master Plan students who are served by our Special Day Class Program. Y The District maintains more than the State required minimum reserves for economic uncertainty of three percent (3%). The

reserve serves as a source of funds for uninsured losses as well as cash flow coverage. This calculation is based upon the combined General and Special Reserve Funds expenditures, transfers out and other uses (total outgo). For fiscal year 2014-15 expenditures and other uses totaled $10,838,384 for the General Fund. Available reserves were $605,460 which is 5.59%.

:>- The District's long-term debt consists of two general obligation bonds. The first bond was passed by the voters in 2000 in involved the modernization of classroom buildings on the main campus that was completed in 2007. In February 2011 the bond debt from this bond was refinanced at a lower interest rate thereby lowering the cost to taxpayers by nearly 50% from the original bond rate.

:>- The District began work on the first of three major projects to be funded by the bond approved by voters in 2012. The total amount of the bond is $10,000,000 with the first series sold in February 2013 in the amount of$3,500,000. The first project, the replacement of the East High School building, was completed in August 2014. The second project, the renovation of the two gyms on the main campus of Fortuna Union High School, will begin in 2016.

:>- The amount of debt outstanding for both bonds is $4,447,900. :>- Standard and Poor's most recent bond rating for the District is A+.

The Financial Report The full annual financial report consists of three separate parts, including the basic financial statements, supplementary information, and Management's Discussion and Analysis. The three sections together provide a comprehensive overview of the District. The basic financial statements are comprised of two kinds of statements that present financial information from different perspectives, government-wide and funds.

4.1

Fortuna Union High School District Management's Discussion and Analysis~ Continued

For Fiscal Year Ending June 30. 2015

)o> Government-wide financial statements, which comprise the first two statements, provide both short-term and long-term information about the District's overall financial position.

? Individual parts of the District, which are reported as fund financial statements comprise the remaining statements.

•!• Basic services funding is described in the government funds statements. These statements include short-term financing and identify the balance remaining for future spending.

•!• Financial relationships, for which the District acts as an agent or trustee for the benefit of others to whom the resources belong, are presented in the fiduciary fund statements.

Notes to the fmancials, which are included in the financial statements, provide more detailed data and explain some of the information in the statements. The required supplementary information provides further explanations and provides additional support for the financial statements. A budgetary comparison of the District's General Fund and major Special Reserve Funds is included.

Reporting the District as a Whole

The District as a whole is reported in the Government-wide statements and uses accounting methods similar to those used by companies in the private sector. All of the District's assets and liabilities are included in the Statement of Net Assets. The Statement of Activities reports all of the current year's revenues and expenses regardless of when cash is received or paid.

The District's financial health or position (net assets) can be measured by the difference between the District's assets and liabilities.

• Increases or decreases in the net assets of the District over time are indicators of whether its financial position is providing or deteriorating, respectively.

• Additional non-financial factors such as the condition of school buildings and other facilities, as well as changes in the property tax base of the District need to be considered in assessing the overall health of the District.

Information included in the Statement of Net Assets and the Statement of Activities, consists solely of the governmental activities of the District.

Governmental Activities are the basic services provided by the District, such as regular and special education, administration, and transportation which are included here, and are primarily financed by state apportionments, property taxes, impact aid, and other state and federal aid. Non-basic services, such as child nutrition are also included here, but are fmanced by a combination of state and federal contracts, grants, and local revenues.

Reporting the District's Most Significant Funds

The District's fund-based financial statements provide detailed information about the District's most significant funds. Some funds are required to be established by State law, while other funds have been established to control and manage money for specific purposes.

Governmental Funds:

The major governmental funds of the District are the General Fund, Capital Outlay Reserve, and Building Fund. Governmental reporting focuses on how money flows into and out of the funds and the balances that remain at the end of the year. A modified accrual basis of accounting measures cash and all other financial assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term view of the District's operations and services. Governmental fund information helps to detennine the level of financial resources available in the near future to finance the District's programs.

Fiduciwy Funds:

The District is the trustee, or fiduciary, for its student activity funds. All of the District's fiduciary activities are reported in separate Fiduciary Statements. We exclude these activities from the District's other financial statements because the District cannot use these assets to finance their operations. The District is responsible for ensuring that the assets reported in these funds are used for their intended purposes.

Attached here are Pages 4.3 through 4.9. Tables and Charts. 4.2

Fortuna Union High School District Management's Discussion and Analysis~ Continued

For Fiscal Year Ending June 30, 2015

Financial Analysis of the School District As A Whole 2014-2015

Com11arative Statement of Net Position Governmental Activities

2015 Assets: Cash $ 1,883,880 $ Receivables $ 364,977 $ Stores inventory $ 3,867 $ Capital Assets, net $ 11,882,245 $ Prepaid bond issuance costs, net $ $

T ota1 Assets $ 14,134,969 $

Deferred Outflows of Resources: Deferred outflows related to pensions $ 496,191 $

Total Deferred Outflows $ 496,191 $

Total Assets and Deferred Outflows $ 14,631,160 $

Liabilities: Accounts Payable $ 77,872 $ Deferred Revenues $ $ Long-term Liabilities: $ 10,728,089 $

Due within one year $ 113,570 $ Due in more than one year $ 10,614,519 $ T ota1 Liabilities $ 10,805,961 $

Deferred Inflows of Resources:

Deferred inflows related to penssions $ 1,641,000 $ Total Deferred Inflows $ 1,641,000 $

Net Position: Invested in Capital Assets

Net of Related Debt $ 7,434,345 $ Restricted for:

Capital Projects $ $ Debt Service $ 189,666 $ Educational Programs $ 263,730 $ Other Purposes (expendable) $ 13,728 $

Unrestricted $ (5,717,272) $ Total Net Position $ 2,184,197 $

Table inc!udesf/nancial data of combined gOJ·ernmental funds.

4.3

2014

4,451,603 412,185

12,791 10,535,652

15,412,231

15,412,231

750,902 1,875

4,581,224 103,509

4,477,715 5,334,001

6,011,452

1,549,518 185,072 296,198

42,615 1,993,375

10,078,230

Fortuna Union High School District Management's Discussion and Analysis- Continued


Total District Expenditures Exceeded Total District Revenues by $652.206 during fiscal year 2014-2015

Comparative Statement of Changes in Net Position Governmental Activities

2015 2014

Program Revenues: Charges for Services $ 42,484 $ 48,790 Operating Grants and Contributions $ I ,249,902 $ 1,315,740 Capital Grants and Contributions $ $

General Revenues Taxes Levied $ 4,058,316 $ 3,958,968 Federal and State Aid $ 5,042,707 $ 4,245,624 Interest and Investment Earnings $ 22,827 $ 22,361 Interagency Revenues $ 280,098 $ 254,783 Miscellaneous $ 233,143 $ 170,878

Total Revenues $ 10,929,477 $ 10,017,144

Program Expenses: Instruction $ 6,557,210 $ 5,855,887 Instruction-Related Services $ 1,280,733 $ I, 133,821 Pupil Services $ I ,521,485 $ I ,551,743 General Adminstration $ 622,211 $ 608,347 Plant Services $ 1,158,268 $ 1,004,454 Ancillary Services $ 265,241 $ 256,371 Community Services $ $ Enterprise Activities $ $ Interest on Long-term Debt $ I 76,535 $ I69,950 Other Outgo $ $ Total Expenses $ 11,581,683 $ 10,580,573

Change in Net Position $ (652,206) $ (563,429)

Table includes .financial data of combined gOI'ernmentalfimds.

4.4



The financial burden placed on the District's General Fund for providing the services listed below was $10,289,297.

Total Cost of Services Total Cost of Services % Net Cost of Services Net Cost of Services 2015 2014 Change 2015 2014

Program Expenses: Instruction $ 6,557,210 $ 5,855,887 12.0% $ (5,752,526) $ (4,958,727) Instruction-Related Services $ 1,280,733 $ 1,133,821 13.0% (1,092,038) (I, 104,498) Pupil Services $ 1,521,485 $ 1,551,743 -1.9% (1,246,949) (1,255,459) General Adminstration $ 622,211 $ 608,347 2.3% (603,226) (589,462) Plant Services $ 1,158,268 $ 1,004,454 15.3% (1,157,343) (881 ,576) Ancillary Services $ 265,241 $ 256,371 3.5% (260,680) (256,371) Community Services $ $ 0.0% 0 0 Interest on Long-term Debt $ 176,535 $ 169,950 3.9% (176,535) (169,950) Other Outgo $ $ 0.0% 0 0

Total Expenses $ 11,581,683 $ 10,580,573 9.46% (I 0,289,297) (9,216,043)

Tahle mr.Judexjinancial data olmmhmed governmen10/fund.1·.

% Change

16.0% -I. I% -0.7% 2.3%

31.3% 1.7% 0.0% 3.9% 0.0%

11.6%

The table presented above shows the cost of major District activities. The table also shows each activity's net cost (total cost less fees generated by the activities and state and federal aid provided for specific programs).

The net cost shows the financial burden that was placed on the District's general revenues.

4.5

Program Revenues; Charges for Services Operating Grants and Contributions Capital Grants and Contributions

General Revenues Taxes Levied Federal and State Aid Interest and Investment Earnings Interagency Revenues Miscellaneous

Total Revenues


For Fiscal Year Ending June 30, lOIS

$ $ $

$ $ $ $ $

$

Summary of Revenues For Governmental Activities

FYE 2015

Amount

42,484 I ,249,902

4,058,316 5,042,707

22,827 280,098 233,143

10,929,477

Percent of

Total

0.39% 11.44% 0.00%

37.13% 46.14%

0.21% 2.56% 2.13%

100.00%

FYE 2014

Amount

$ 48,790

$ 1,315,740 $

$ 3,958,968 $ 4,245,624

$ 22,361

$ 254,783

$ !70,878

$ 10,017,144

Increase( Decrease)

li-om fYE 20 14

$ $ $

$ $ $ $ $

$

(6,306) (65,838)

99,348 797,083

466 25,315 62,265

912,333

Percent

Increase( Decrease)

-12.92% -5.00% 0.00%

2.51% 18.77% 2.08% 9.94%

36.44%

9.11%

Table indudesfinancial data ofcombi!led governmental.fimds.

Summary of Revenues

Interest and ln,•estm<9nt_~ Earnings, $22,827 ,

0.21%

Interagency Revenues, $280,098,

2.58%

Federal and State $5,042,707, 46.43%

Miscellaneous, $233,143,2.15%

-----------·-------

4.6

Charges for Services, $42,484, 0.39%

Operating Grants and Contributions,

$1,249,902, 11.44%

Taxes Levied, $4,058,316, 37.37%

I ----· ________ j

Fortuna Union High School District Management's Discussion and Analysis M Continued

For Fiscal Year Ending June 30,2015

Summar1: of Exl!enses For Governmental Activities

FYE 2015 Percent of FYE 2014

Amount Total Amount

Program Expenses: Instruction $ 6,557,210 56.62% $ 5,855,887 JnstructionMRelated Services $ 1,280,733 11.06% $ 1,133,821 Pupil Services $ 1,521,485 13.14% s 1,551,743 General Adminstration $ 622,211 5.37% $ 608,347 Plant Services $ I ,158,268 10.00% $ I ,004,454 Ancillary Services $ 265,241 2.29% $ 256,371 Community Services s 0.00% $ Enterprise Activities s 0.00% $ Interest on Long-tenn Debt $ 176.535 1.52% $ 169,950 Other Outgo $ 0.00% $

Total Expenses: $ 11,581,683 100.00% $ 10,580,573

Table includes financial data of combined governmental funds.

Ancillary Services, ----_..!~~~:2~:: $265,241, 2.29%

Plant Services, $1,158,268,----9.99%

General Adminstration, ---$622,211, 5.36%

Pupil Services, $1,521,485 13.12%

4.7

Increase( Decrease) Percent

$ $ $ $

$ $ $ $ $ $

$

from FYE 2014 Increase( Decrease)

701,323 12% 146,912 13% (30,258) -2% 13,864 2%

153,814 15% 8,870 3%

0% 0%

6,585 4% 0%

1,001,110 9%

$6,557,210, 56.62%

Land



Comparative Schedule of Capital Assets

Comparative Statement of Capital Assets

2015 2014

$ 72,980 $ 72,980 Sites and Improvements $ 1,551,709 $ 1,551,709 Buildings & Improvements $ 16,628,263 $ 14,097,496 Furniture & Equipment $ 1 ,844, I65 $ 1,758,160 Work In Progress $ 950,033 $ 1,769,7I2

Subtotals: $ 21,047,150 $ 19,250,057

Less: Accumulated Depreciation: $ (9,164,906) $ (8,7I4,405)

Capital Assets, Net $ 11,882,244 $ 10,535,652

Work In Progress includes Bond projects (East High Building, FHS Gyms and Athletic Complex).

4.8

General Fund* Cafeteria Fund Bldg Facilities Fund

Fortuna Union High School District Management's Discussion and Analysis - Continued


Comparative Schedules of Fund Balances

Comparative Schedule of Fund Balances

Fund Balances Fund Balances June 30,2015 June 30, 2014

$ 1,262,798 $ 1,614,655 $ 11,458 $ 22,972 $ $ 1,549,518

Capital Outlay Reserve Fund $ 710,928 $ 751,585 Bond Interest Fund $ 189,666 $ 185,072

Totals $ 2,174,850 $ 4,123,802

Increase (Decrease)

$ (351 ,857) $ (11,514) $ (1,549,518) $ (40,657) $ 4,594

$ (I ,948,952)

*Note: General Fund includes the balances from the Special Reserve Fund and the Retiree Benefit Fund.

The total of all Fund Balances decreased by $1,948,952 between June 30,2014 and June 30,2015 due to costs associated with the Bond projects and spending down carryover in the General Fund.

4.9

Fortuna Union High School District Management's Discussion and Analysis - Continued


General Fund Budgetary Highlights

The District's budget is prepared in accordance with California Jaw and is based on the modified accrual basis of accounting. Over the course of the year, the District revised its annual operating budget at various times to reflect the most recent financial information available. The most significant budget adjustments made during the year fall into the fo1lowing categories: revisions to the adopted budget required after approval of the State budget and revisions to adjust program revenues and expenditures to final awards for state and federal categorical programs.

Economic Factors Bearing on the District's Future

The California State budget outlook has begun to approve with the State paying down deferrals and beginning to address the cuts that Education has endured since 2007. 2014-2015 saw the continuation of the implementation of the Local Control Funding Formula which has simplified the funding structure and increased local control. The economic forecast for the next two years is hopeful, but continues to be uncertain.

Even though the State budget outlook has improved, the District has had a decline in enrollment in recent years. CBEDS enrollment as of October I, 2014, for the Fortuna Union High School District (Fortuna Union High School, East High School, and the Academy of the Redwoods) was 1066. This is a decrease of29 from the October 3, 2013 of 1095. Enrollment and ADA projections are problematic given the uncertainties in the general economy, however it appears that enrolhnent will increase in 2015-2016 and average around 1100 over the next couple of years.

Contacting the District's Financial Management

The financial report is designed to provide our citizens, taxpayers, students, investors and creditors with a general overview of the District's finances and to demonstrate the District's accountability for the money it receives. If you have questions regarding this report or need additional frnancial information, contact the Superintendent, Fortuna Union High School District, 379 Twelfth Street, Fortuna, CA 95540.

4.10


STATEMENT OF NET POSITION

ASSETS

Cash Accounts receivable Stores

June 30, 2015

Invested in capital assets, net of depreciation

Total assets

DEFERRED OUTFLOWS OF RESOURCES

Deferred outflows related to pensions Total deferred outflows of resources

Total assets and deferred outflows of resources

LIABILITIES

Accounts payable Long-term liabilities:

Due within one year Due in more than one year

Total liabilities

DEFERRED INFLOWS OF RESOURCES

Deferred inflows related to pensions

Total deferred inflows of resources

NET POSITION

Net investment in capital assets Restricted for:

Debt Service Educational programs Other purposes

Unrestricted

Total net position

$

Governmental Activities

1,883,879 364,976

3,867 11,882,245

14,134,967

496,191 496,191

$ 14,631,158

$ 77,872

113,570 10,614,519

10,805,961

1,641,000

1,641,000

7,434,345

189,666 263,730

13,728 (5,717,272)

2,184,197

The notes to the financial statements are an integral part of this statement.

5


STATEMENT OF \CTI\'ITJES

For The Year Ended June 30, 2015

Expenses

GtJvernmental .-\ctivities

Instruction Instruction-related services:

Supervision of instruction

lnstructinnallibrary, media and technology School site administration

Pupil services:

Home-t<H;ch<>tll transp(>ttation

Food services

All other pupil services General administration:

Data processing All other general administration

Plant services

Ancillary services Interest on long-term debt

Total g(nrernmental activities

General revenues:

Taxes and subventions:

Taxes levied for general purposes

Taxes levied for debt service

Taxes levied for other specific purposes

s

s

Federal and state aid not restricted to specific purposes Interest and investment earnings

Interagency revenues },[iscellaneous

Total general revenues

Change in net position

Net position bef.,rinning, as restated

Net position ending

6,557,210

3,500 112,152

1,165,081

548,578

234,363

738,544

28,606

593,605

1,158,268

265,241

176 535

11,581,683

Charges for Services

s 42,214

270

s 42,484

Program Revenues

Operating Grants and

Contributions

s 804,684

157,358

31,33 7

102,473

129,849

18,985

655

4,561

s 1,249,902

The notes to the fmancial statements are an integral part of this statement.

6

Net (Expense)

Revenue and

changes in

Net Assers

Capital Grants

and Governmental Cmtributions Activities

s (5,752,526)

153,858

(112,152)

(1,133,744)

(548,578)

(89,676)

(608,695)

(28,606)

(574,620)

(1,157,343)

(260,680) (176,535)

s s (10,289,297)

s 3,720,895

256,673

80,748

5,042,707 22,827

280,098 233 143

9,637,091

(652,206)

2 836,403

s 2,184,197


BAL\NCE SHEET

GOVERNMENTAL FUNDS

June 30, 2015

Building Capital General Fund Outlav

ASSETS

Cash in County Treasury $ 973,062 $ 5,705 $ 709,437

Cash in revolving fund 2,270

Accounts receivable 359,633 1,491

Stores inventory

Total assets $ 1,334,965 $ 5,705 $ 710,928


Total deferred outflows of resources

Total assets and deferred outflows of resources $ 1,334,965 $ 5,705 $ 710,928

LIABILITIES

Accounts payable $ 72,167 $ 5,705

Total liabilities 72,167 5,705



FUND BALANCES

Nonspendable 2,270

Restricted 263,730

Assigned 391,338 $ 710,928

Unassigned 605,460

Total fund balances 1,262,798 710,928

Total liabilities, deferred inflows of resources and fund balances $ 1,334,965 $ 5,705 $ 710,928

Other Go,Ternmental

Funds

$ 193,175

230 3,852

3,867

$ 201,124

$ 201,124

$ 4,097 197,027

201,124

$ 201,124

The notes to the fmancial statements are an integral part of this statement.

7

Total Governmental

Funds

$ 1,881,379 2,500

364,976 3,867

$ 2,252,722

$ 2,252,722

$ 77,872

77,872

6,367

460,757 1,102,266

605,460

2,174,850

$ 2.252,722


RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET POSITION

June 30, 2015

Total fund balances -governmental funds balance sheet:

Amounts reported for assets and liabilities for governmental activities in the statement of net position are different from amounts reported in governmental funds because:

Capital assets: In governmental funds, only current assets are reported. In the statement of net position, all assets are reported, including capital assets and accumulated depreciation.

Capital assets at historical cost Accumulated depreciation

Net

$ 21,047,150 (9,164,905)

Long-term liabilities: In governmental funds, only current liabilities are reported. In the statement of net position, all liabilities, including long-term liabilities, are reported. Long-term liabilities relating to governmental activities consist of:

General obligation bonds payable Net pension liability Other postemployment benefits payable Capital lease Compensated absences payable

Total

$ (4,447,900) (6,136,000)

(91,841) (28,380) (23,968)

Deferred outflows and inflows of resources relating to pensions: In governmental funds, deferred outflows and inflows of resources relating to pensions are not reported because they are applicable to future periods. In the Statement of Net Position, deferred outflows and inflows of resources relating to pensions are reported as follows:

Deferred outflows of resources related to pensions Deferred inflows of resources related to pensions

Total

Total Net Position, Governmental Activities

$ 496,191 (1 ,641 ,000)

The notes to the financial statements are an integral part of this statement. 8

$ 2,174,850

11,882,245

(1 0,728,089)

(1,144,809)

$ 2,184,197

FORTUK-\ UNION HIGH SCHOOL DISTRICT

ST-\TEi\lENT OF REVENUES EXPENDITURES

AND GHNGES IN FUND BALANCES

GO\'ERN?\!ENT"-\L FUNDS

For The Year Ended]une 30,2015

Other Total Building Capital Governmental Governmental

General Fund Outlar Funds Funds Revenues:

Local control funding formula sources:

State apportionments $ 4,708,034 $ 4,708,034 Local sources 3,720,895 3,720,895

Federal 629,448 $ 94,336 723,784

Other state 475,142 8,754 483,896 Other local 908,903 $ 3,319 $ 11,695 299,950 1,223,867

Total revenues 10,442,422 3,319 11,695 403,040 10,860,476

Expenditures: Instruction 6,095,524 6,095,524 Instruction-related services 1,319,506 1,319,506

Pupil services 1,231,709 215,746 1,447,455 Ancillary services 263,370 263,370 General administration 621,085 621,085

Plant services 1,150,717 1,660,937 25,000 1,379 2,838,033 Debt service - principal 15,725 76,300 92,025 Debt service - interest 176,535 176,535

Total expenditures 10,697,636 1,660,937 25,000 469,960 12,853,533

Excess (deficiency) of revenues

over (under) expenditures (255,214) (1,657,618) (13,305) (66,920) (1,993,057)

Other financing sources (uses): Proceeds from debt 44,105 44,105 Operating transfers in 108,100 80,748 60,000 248,848

Operating transfers out (140,748) (108,100) (248,848)

Total other financing sources (uses) (96,643) 108,100 (27,352) 60,000 44,105

Excess of revenues and other financing sources over (under) expenditures and

other financing sources (uses) (351,857) (1,549,518) (40,657) (6,920) (1,948,952)

Fund balances, July I, 2014 1,614,655 1,549,518 751,585 208,044 4,123,802

Fund balances, June 30, 2015 $ 1,262,798 $ $ 710,928 $ 201,124 $ 2,174,850


9

FORTUNA UNION HIGH SCHOOL DISTRICT RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF

REVENUES EXPENDITURES AND CHANGES IN FUND BALANCE TO THE STATEMENT OF ACTIVITIES For The Year Ended .June 30, 2015

Total changes in fund balances, governmental funds: $ (1,948,952)

Amounts reported for governmental activities in the statement of activities are different from amounts reported in governmental funds because:

Capital outlay: In governmental funds, the costs of capital assets are reported as expenditures in the period when the assets are acquired. In the statement of activities, costs of capital assets are allocated over their estimated useful lives as depreciation expense. The difference between capital outlay expenditures and depreciation expense for the period is:

Expenditures for capital outlay Depreciation expense

Net

$ 1,797,093 (450,500)

Debt service: In governmental funds, repayments of long-term debt are reported as expenditures. In the government-wide statements, repayments of long~term debt are reported as reductions of liabilities. Expenditures for repayment of the principal portion of long-term debt were:

Debt proceeds: In governmental funds, proceeds from debt are recognized as Other 1-'inancing Sources. In the government-wide statements, proceeds from debt are reported as increases to liabilities. Amounts recognized in governmental funds as proceeds from debt were:

Proceeds from capital lease

Compensated absences: In governmental funds, compensated absences are measured by the amounts paid during the period. In the statement of activities, compensated absences are measured by the amounts earned. The difference between compensated absences paid and compensated absences earned was:

Pensions: In government funds, pension costs are recognized when employer contributions are made. In the statement of activities, pension costs are recognized on the accrual basis. This year, the difference between accrual-basis pension costs and actual employer contributions was:

Postemployment benefits other than pensions (OPEB): In governmental funds, OPEB costs are recognized when employer contributions are made. In the statement of activities, OPEB costs are recognized on the acnual basis. This year, the difference between OPEB costs and actual employer contributions was:

Rounding

Changes In Net Position, Governmental Activities

The notes to the financial statements are an integral part of this statement. 10

1,346,593

92,025

(44,105)

3,241

(38,982)

(62,026)

(652,206)

FOR'fUn\ UNION HIGH SCHOOL DISTRICT

STATEMENT OF FIDUCIARY NET POSITION FIDUCIARY FUNDS


ASSETS

Cash on hand and in banks

Total assets




LIABILITIES

Due to student groups

Total liabilities



NET POSITION

Total net position

Agency Funds

Student Body Fund

136,369

136,369

$ 136,369

$ 136,369

136,369

$

$

$

$

$

$

Total Fiduciary

Funds

136,369

136,369

136,369

136,369

136,369


11

FORTUNJ\ UNION HIGH SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS


1. Summat:y of Si!,mificant Accounting Policies

A. Accounting Policies

Tbe District accounts for its financial transactions in accordance with the policies and procedures of the Department of Education's "California School Accounting Manual". The accounting policies of the District conform to accounting principles generally accepted in the United States of America (GAAP) as prescribed by the Governmental i\ccounting Standards Board (GASB) and the American Institute of Certified Public Accountants (AICP A).

B. Reporting Entity

The District has no oversight responsibility over any other governmental unit and is not included in any other governmental "reporting entity" as defined in Governmental Accounting Standards Board pronouncements, since the Board of Trustees of the District is elected by the public and has decision-making authority, the power to designate management, the ability to significantly influence operations, and the primaty accountability for fiscal matters. There are no component units included within the reporting entity.

The District participates in two joint ventures under joint powers agreements QPAs): the North Coast Schools' Insurance Group and the North Coast Schools' Medical Insurance Group. The relationship between the District and the JPAs is such that neither JPA is a component unit of the District for financial reporting purposes.

C. Basis of Presentation

Government-wide Financial Statements:

The government-wide financial statements (i.e., the statement of net position and the statement of activities) report information on all of the nonfiduciaty activities of the District and its component units.

The government-wide statements are prepared using the economic resources measurement focus. This is the same approach used in the preparation of the fiduciarv fund financial statements, but differs from the manner in which governmental fund financial statements are prepared. Governmental fund financial statements, therefore, include a reconciliation with brief explanations to better identify the relationship between the government-wide statements and the statements for the governmental funds.

12

FORTUNA UNION HIGH SCHOOL DISTRICT NOTES TO THE FINANCIAL STATEMENTS CONTINUED


The government-wide statement of activities presents a comparison between direct expenses and program revenues for each function or program of the District's governmental activities. Direct expenses are those that are specifically associated with a service, program, or department and are therefore clearly identifiable to a particular function. The District does not allocate indirect expenses to functions in the statement of activities. Program revenues include charges paid by the recipients of goods or services offered by a program, as well as grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues which are not classified as program revenues are presented as general revenues of the District, with certain exceptions. The comparison of direct expenses with program revenues identifies the extent to which each governmental function is self-financing or draws from the general revenues of the District.

Fund Financial Statements:

Fund financial statements report detailed information about the District. The focus of governmental fund financial statements is on major funds rather than reporting funds by type. Each major governmental fund is presented in a separate column, and all non-major funds are aggregated into one colwnn. Fiduciary funds are reported by fund type.

The accounting and fmancial treatment applied to a fund is determined by its measurement focus. All governmental funds are accounted for using a flow of current financial resources measurement focus. With this measurement focus, only current assets and current liabilities are generally included on the balance sheet. The Statement of Revenues, Expenditures, and Changes in Fund Balances for these funds present increases (i.e., revenues and other financing sources) and decreases (i.e., expenditures and other financing uses) in net current assets.

Fiduciary funds are reported using the economic resources measurement focus.

D. Basis of Accounting

Basis of accounting refers to when revenues and expenditures are recognized in the accounts and reported in the financial statements. Government-wide financial statements are prepared using the accrual basis of accounting. Governmental funds use the modified accrual basis of accounting. Fiduciary funds use the accrual basis of accounting.

13

FORTUNA UNION HIGH SCHOOL DISTRICT NOTES TO THE FINANCIAL STATE~fENTS- CONTINUED


Revenues- Exchange and Non-exchange Transactions:

Revenue resulting from exchange transactions, in which each party gtves and receives essentially equal value, is recorded under the accrual basis when the exchange takes place. On a modified accrual basis, revenue is recorded in the fiscal year in which the resources are measurable and become available. "Available" means the resources will be collected within the current fiscal year or are expected to be collected soon enough thereafter to be used to pay liabilities of the current fiscal year. For the District, "available" means collectible \V~thin the current period or \v~thin 60 days after year-end.

Non-exchange transactions, in which the District receives value without directly giving equal value in return, include property taxes, grants and entitlements. Under the accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from grants and entitlements is recognized in the fiscal year in which all eligibility requirements have been satisfied. Elit,>ibility requirements include timing requirements, which specify the year when the resources are to be used or the fiscal year when use is first permitted; matching requirements, in which the District must provide local resources to be used for a specific purpose; and expenditure requirements, in which the resources are provided to the District on a reimbursement basis. Under the modified accrual basis, revenue from non-exchange transactions must be available before it can be recognized.

Unearned revenue:

Unearned revenue arises when assets are received before revenue recogrutton criteria have been satisfied. Grants and entitlements received before eligibility requirements are met are recorded as unearned revenue.

Deferred Inflows and Outflows of Resources:

Deferred outflows of resources represents a consumption of net position or fund balance that applies to a future period(s) and thus, will not be recognized as an outflow of resources (expense/ expenditure) until that future period.

Deferred inflows of resources, represents an acquisition of net position or fund balance that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that future period.

14

FORTUNA" UNION HIGH SCHOOL DISTRICT NOTES TO THE FINANCIAL STATEMENTS- CONTINUED


Expenses/Expenditures:

On the accrual basis of accounting, expenses are recognized at the time a liability is incurred. On the modified accrual basis of accounting, expenditures are generally recognized in the accounting period in which the related fund liability is incurred, as under the accrual basis of accounting. However, under the modified accrual basis of accounting, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. Allocations of cost, such as depreciation and amortization, are not recognized in the governmental funds.

When both restricted and unrestricted resources are available for use, it is the District's policy to use restricted resources first, then unrestricted resources as they are needed.

E. Fund Accounting

The accounts of the District are organized on the basis of funds, each of which is considered to be a separate accounting entity. The operations of each fund are accounted for with a separate set of self-balancing accounts that comprise its assets, deferred outflows, liabilities, deferred inflows, fund equity, revenues, and expenditures. Resources are allocated to and accounted for in individual funds based upon the purpose for which they are to be spent and the means by which spending activities are controlled. The District's accounts are organized into major, non-major, and fiduciary funds as follows:

Major Governmental Funds:

The General Fund is the operating fund of the District. It is used to account for all financial resources except those required to be accounted for in another fund.

The Capital Outlay Fund is used for the purpose of accumulating funds and tracking expenditures for major capital outlay projects.

The Building Fund is used for the purpose of accumulating funds and tracking expenditures for the District's bond-funded capital outlay projects.

Non-major Governmental Funds:

Special Revenue Funds are used to account for the proceeds of specific revenue sources that are legally restricted to expenditures for specific purposes. The District maintains one Non-major Special Revenue Fund: the Cafeteria Fund.

15

FORTUNA UNION HIGH SCHOOL DISTRICT NOTES TO THE FINANCIAL STATEMENTS- CONTINUED

For The Year Ended June 30,2015

Debt Service Funds are used to account for the accwnulation of resources for, and the payment of, general long-tenn debt principal, interest, and related costs. The District maintains one debt service fund: the Bond Interest and Redemption Fund.

Fiduciary Funds:

Agency Funds are used to account for assets of others for which the District acts as an agent. The District has one Student Body Fund to account for activities of student groups.

F. Budgets and Budgetary Accounting

Annual budgets are adopted on a basis consistent with generally accepted accounting principles for all government funds. By state law, the District's governing board must adopt a final budget no later than July 1. A public hearing must be conducted to receive comments prior to adoption. The District's governing board satisfied these requirements.

These budgets are revised by the District's governing board and the District Superintendent during the year to give consideration to unanticipated income and expenditures. The original and final revised budgets are presented for the major funds in the financial statements.

Formal budgetary integration was employed as a management control device during the year for all budgeted funds. The District employs budget control by minor object and by individual appropriation accounts. Expenditures cannot legally exceed appropriations by major object account.

G. Assets. Deferred Outflows. Liabilities. Deferred Inflows. and Equity

1. Deposits and Investments

Cash balances held in banks and in the Revolving Fund are insured up to $250,000 by the Federal Depository Insurance Corporation. All cash held by the financial institutions is fully insured or collateralized.

In accordance with Education Code Section 41001, the District maintains substantially all of its cash in the Humboldt County Treasury. The County pools these funds with those of other districts in the County and invests the cash. These pooled funds are carried at cost which approximates market value. Interest earned is deposited quarterly into participating funds. Any investment losses are proportionately shared by all funds in the pool.

16



The County is authorized to deposit cash and invest excess funds by California Government Code Section 53648 et seq. The funds maintained by the County are either secured by federal depository insurance or are collateralized.

The Humboldt County Treasury has no investments in derivatives.

The District does not have a specific policy which relates to interest rate risk.

2. Stores Inventories and Prepaid Expenditures

Inventories are recorded using the purchase method in that the cost is recorded as an expenditure at the time individual inventory items are purchased. Inventories are valued at average cost and consist of expendable supplies held for consumption. Reported inventories are equally offset by a fund balance reserve, which indicates that these amounts are not "available for appropriation and expenditure" even though they are a component of net current assets.

The District has the option of reporting an expenditure in governmental funds for prepaid items either when purchased or during the benefiting period. The District has chosen to report the expenditures when incurred.

3. Capital Assets

Purchased or constructed capital assets are reported at cost or estimated historical cost. Donated fixed assets are recorded at their estimated fair value at the date of the donation. The cost of normal maintenance and repairs that do not add to the value of the asset or materially extend assets' lives are not capitalized. A capitalization threshold of $5,000 is used.

Capital assets are being depreciated ustng the straight-line method over the follo'W'ing estimated useful lives:

Asset Class Infrastructure Buildings Building Improvements Vehicles Office Equipment Computer Equipment

17

Estimated Useful Lives

30 50 20

2-15 3-15 3-15

FORTUNA UNION HIGH SCHOOL DISTRICT NOTES TO THE FINANCIAL S'L\TEMENTS- CONTINUED


4. Unearned Revenue

The District recognizes unearned revenue when grant cash receipts and accounts receivable exceed qualified grant expenditures.

5. Deferred Inflows and Outflows of Resources

In addition to assets, the statement of net position will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position or fund balance that applies to a future period(s) and thus, will not be recognized as an outflow of resources (expense/expenditure) until that future period. The District had only one item that qualified for reporting in this category. It is the amount paid in the year ended June 30, 2015 for the employer portion of the STRS and PERS contributions, which \Viii be taken into the calculation of pension expense and net pension liability in next year's Statement of Net Position and Statement of Activities.

In addition to liabilities, the statement of net position will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position or fund balance that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that future period. The District had only one item that qualified for reporting in this category as of June 30, 2015. It is the pension-related net difference between projected and actual earnings on pension plan investments. This difference is amortized over a five-year period and recognized in pension expense.

6. Compensated Absences

All vacation pay is accrued when incurred in the government-wide financial statements. 1\ liability for these amounts is reported in the governmental funds only if they have matured, for example, as a result of employee resignations and retirements.

Accumulated sick leave benefits are not recognized as liabilities of the District. The District's policy is to record sick leave as an operating expense in the period taken since such benefits do not vest nor is payment probable; however, unused sick leave is added to the creditable service period for calculation of retirement benefits when the employee retires.

18

FORTUNA UNION HIGH SCHOOL DISTRICT NOTES TO THE FINANCIAL S"L\TEMENTS CONTINUED


7. I nterfund Activity

Interfund activity results from loans, serviCes provided, reimbursements or transfers between funds. Loans are reported as interfund receivables and payables as appropriate and are subject to elimination upon consolidation. Services provided, deemed to be at market or near market rates, are treated as revenues and expenditures or expenses. Reimbursements occur when one fund incurs a cost, charges the appropriate benefiting fund and reduces its related cost as a reimbursement. All other interfund transactions are treated as transfers. Transfers In and Transfers Out are netted and presented as a single "Transfers" line on the government-wide statement of activities. Similarly, interfund receivables and payables are netted and presented as a single "Internal Balances" line of the government-wide statement of net position.

8. Long-Term Obligations

In the government-wide financial statements, long-term debt and other longterm obligations are reported as liabilities in the statement of net position. Bond premiums and discounts, if any, are deferred and amortized over the life of the bonds using the effective-interest method. Bonds payable, if any, are reported net of applicable bond premium or discount. Bond issuance costs, if any, are expensed as incurred. The District's proportionate share of CalSTRS' and CalPERS' net pension liability is reported and adjusted annually based on actuarial computations.

In the fund financial statements, governmental funds recognize bond premiums and discounts as well as bond issuance costs, during the current period. The face amount of the debt issued, premiums, or discount is reported as other financing sources/ uses.

9. Fund Balance

GASB Statement No. 54, "Fund Balance Reporting and Governmental Fund Type Definitions" provides clearly defined fund balance categories to make the nature and extent of the constraints placed on a government's fund balances more transparent. The following classifications describe the relative strength of the spending constraints:

Nonspendable - amounts that cannot be spent either because they are in nonspendable form or because they are legally or contractually required to be maintained intact.

19



Restricted - amounts that can be spent only for specific purposes because of constitutional provisions or enabling legislation or because of constraints that are externally imposed by creditors, grantors, contributors, or the laws or regulations of other governments.

Committed - amounts that can be used only for specific purposes determined by a formal action of the District's Governing Board. The District's Governing Board is the highest level of decision-making authority for the District. Commitments mav be established, modified, or rescinded onlv

" . through resolutions approved by the Governing Board.

Assit,med - amounts that do not meet the criteria to be classified as restricted or committed but that are intended to be used for specific purposes. Under the District's adopted policy, only the Governing Board may assign amounts for specific purposes.

Unassigned - all other spendable amounts.

20



As of June 30, 2015, fund balances were composed of the following: C>pital

Outlay Nonmajor Total

General Reserve Building Governmental Governmental

Fund Fund Fund Funds Funds

Nonspendable:

Revolving cash $ 2,270 $ 230 $ 2,500

Inventories 3,867 3,867

Total ?'\!onspendable 2,270 4,097 6,367

Restricted:

~Jedi-Cal Billing 17,215 17,215

Lottery Instructional ~.faterials 105,521 105,521

California Clean Energy Jobs .-\ct 87,762 87,762

Legal claims 53,232 53,232

Cafeteria programs 7,361 7,361

Debt service 189,666 189,666

Total Restricted 263,730 197,027 460,757

Committed:

Total Committed

.Assigned:

Donations 27,360 27,360

Deferred maintenance 165,843 165,843

Lottery 19,049 19,049

Capital outlay $ 710,928 710,928

Retiree benefits 179,086 179,086

Total.~ssigned 391,338 710,928 1,102,266

Unassigned:

Designated for

economic uncertainties 605,460 605,460

T oral Unassigned 605,460 605,460

Total Fund Balance $ 1,262,798 $ 710,928 $ $ 201,124 $ 2,174,850

When an expenditure is incurred for purposes for which both restricted and unrestricted fund balance is available, the District considers restricted funds to have been spent first. When an expenditure is incurred for which committed, assigned, or unassigned fund balances are available, the District considers amounts to have been spent first out of committed funds, then assigned funds, and finally unassigned funds, as needed, unless the District's Governing Board has provided otherwise in its commitment or assignment actions.

The District is committed to maintaining a prudent level of financial resources to protect against the need to reduce service levels because of temporary

21



revenue shortfalls or unpredicted expenditures. The District's Minimum Fund Balance Policy requires a Reserve for Economic Uncertainties, consisting of unassigned amounts, equal to no less than ten percent of General Fund expenditures and other financing uses.

10. Local Control Funding Formula/Property Taxes

The District's Local Control Funding Formula ("LCFF") is received from a combination of local property taxes, state apportionments, and other local sources.

The County of Humboldt is responsible for assessing, collecting, and apportioning property taxes. Taxes are levied for each fiscal year on taxable real and personal property in the county. The levy is based on the assessed values as of the preceding March 1, which is also the lien date. Property taxes on the secured roll are due on November 1 and February 1, and taxes become delinquent after December 10 and April 10, respectively. Property taxes on the unsecured roll are due on the lien date (March 1 ), and become delinquent if unpaid by August 31.

Secured property taxes are recorded as revenue when apportioned, in the fiscal year of the levy. The County of Humboldt apportions secured property tax revenue in accordance with the alternate method of distribution prescribed by Section 4705 of the California Revenue and Taxation Code. This alternate method provides for crediting each applicable fund with its total secured taxes upon completion of the secured tax roll-approximately October 1 of each year.

The County Auditor-Controller reports the amount of the District's allocated property tax revenue to the California Department of Education. Property taxes are recorded as local LCFF sources by the District.

The California Department of Education reduces the District's entitlement by the District's local property tax revenue. The balance is paid from the state General Fund, and is known as the State Apportionment.

The District's base LCFF is the amount of general purpose tax revenue, per average daily attendance G\DA), that tl1e District is entitled to by law. This amount is multiplied by the second period ADA to derive the District's total entitlement.

22

FORTUNi\ UNION HIGH SCHOOL DISTRICT NOTES TO THE FINANCL\L STATEMENTS- CONTINUED


H. Use of Estimates

The preparation of financial statements in conformity \vith generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenditures during the reporting period. Actual results could differ from those estimates.

I. New Governmental Accounting Standards Board (GA.SB) Standard

During the year ended June 30, 2015, the District implemented GASB Statement No. 68, At(l)unting and rznamia! &porting for Pen.rionJ-an amendment of GASB Statement No. 27 (GASB No. 68). GASB No. 68 will improve the usefulness of information in employer and governmental non-employer contributing entity financial reports and will enhance its value for assessing accountability and interperiod equity by requiring recognition of the entire net pension liability and a more comprehensive measure of pension expense. Usefulness and accountability also will be enhanced through new note disclosures and required supplementary information. The comparability of reported pension information also will be improved by the changes related to the attribution method used to detennine service cost and the total pension liability, requirements for immediate recot,mition in pension expense of certain items, and the establishment of standardized expense recognition periods for amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions. The provisions of this statement are effective for financial statements for periods beginning after June 15, 2014. The implementation of this standard resulted in a reduction of beginning net position as reported in the Statement of Activities, which is further described in Note 13, "Restatement of Net Position".

During the year ended June 30, 2015, the District implemented GASB Statement No. 71, Pension Tran.ritionfor ContributionJ Made SubJequent to the lvieaJurement Datean amendment ofGASB Statement No. 68. GASB No. 71 eliminates the source of a potential understatement of restated beginning net position and expense in the first year of implementation of GASB Statement No. 68 in the accrual-basis financial statements of employers and non-employer contributing entities by requiring that, at transition, a government recognize a beginning deferred outflow of resources for its pension contributions, if any, made subsequent to the measurement date of the beginning net pension liability. The provisions of this statement are required to be applied simultaneously with the provisions of GASB Statement No. 68, which are effective for financial statements for periods beginning after June 15,2014.

23



2. Cash and Investments

Cash at June 30, 2015 consisted of the following:

Governmental Funds: Cash in Revolving Fund Pooled Funds -

Cash in County Treasury Total Governmental Funds

Fiduciary Funds: Agency Fund - Cash in bank Total Fiduciary Funds:

Fait Value

$ 2,500

1,880,019 $ 1,882,519

$ 136,369 $ 136,369

Carrying Value

$ 2,500

1,881,379 $ 1,883,879

$ 136,369 $ 136,369

Cash balances held in banks and in the Revolving Funds are insured up to $250,000 by the Federal Depository Insurance Corporation. All cash held by the financial institutions is fully insured or collateralized.

In accordance with Education Code Section 41001, the District maintains substantially all of its cash in the Hwnboldt County Treasury as part of the common investment pool. The County is restricted by Government Code Section 53635, pursuant to Section 53601, to invest in time deposits, U.S. Government securities, state registered warrants, notes or bonds, State Treasurer's investment pool, banker's acceptances, commercial paper, negotiable certificates of deposit, and repurchase or reverse repurchase agreements.

Credit Risk - Investments

Credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization.

The County Treasurer's investments consist of 70.51 percent federal agencies, 22.86 percent money markets, 0.71 percent municipal bonds and 5.92 percent certificates of deposit. The S & P credit ratings for these investments include AA.A., A.A., A +e, and Ae, and non-rated for certificates of deposit and the California State Treasurer's local agency investment fund.

24



Custodial Credit Risk- Deposits

Custodial credit risk for deposits is the risk that in the event of a bank failure, the District will not be able to recover its deposits or will not be able to recover collateral securities that are in the possession of an outside party. The custodial credit risk for investments is the risk that in the event of a failure of the counter party (e.g. brokerdealer) to a transaction, the District will not be able to recover the value of its investment or collateral securities that are in the possession of another party. Neither the California Government Code nor the County's investment policy contains legal or policy requirements that would limit the District's exposure to custodial credit risk for deposits or investments, except that the California Government Code requires that a financial institution secure deposits made by state or local government units by pledging securities in an undivided collateral pool held by a depository regulated under state law. The market value of the pledged securities in the collateral pool must equal at least 110 percent of the total amount deposited by the public agencies. California law also allows financial institutions to secure District deposits by pledging first trust deed mortgage notes having a value of 150 percent of the secured public deposits. As of June 30, 2015, none of the District's deposits were exposed to custodial credit risk.

Interest Rate Risk- Investments

Interest rate risk is the measurement of how changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment, the more sensitive to changes in market interest rates of its fair value. One of the ways the County of Humboldt Treasurer manages its exposure to interest rate risk is by purchasing a combination of short-term and long-term investments and by timing cash flows from maturities so a portion of its portfolio is maturing or coming close to maturity to ensure the cash flow and liquidity of operations. The weighted average maturity of the County of Humboldt Treasurer's investments is 764 days.

25

3.

4.



Receivables

Receivables at June 30, 2015 consist of the following: Other

Capital Governmental

General Outlay Funds I--;ederal Governtnent:

Federal Programs $ 136,923 $ 3,533

State Government:

Categorical Aid Programs 38,035 319

LCFF 100,974

Lottery 58,317

Total State Government 197,326 319

Local (iovernment:

Other 20,210

Interest 5,174 $ 1,491

Total Local Government 25,384 1,491

Total Receivables $ 359,633 $ 1,491 $ 3,852

Interfund Transactions

Interfund Receivables /Payables

As of June 30, 2015 there were no interfund receivables and payables.

Interfund Transfers

Total

$ 140,456

38,354

100,974

58,317

197,645

20,210

6,665

26,875

$ 364,976

Interfund transfers consist of operating transfers from funds receiving revenue to funds through which the resources are to be expended.

Interfund transfers for fiscal year 2014-2015 were as follows:

Fund Transfers In Transfers Out

General Fund $ 140,748

Building Fund $ 108,100 Capital Outlay Fund 80,748 108,100 Cafeteria Fund 60,000

$ 248,848 $ 248,848

Transfer from the General Fund to the Capital Outlay Fund was for current capital projects.

26

FORTUNA UNION HIGH SCHOOL DISTRICT NOTES TO THE FINANCL'\L STATEMENTS- CONTINUED


Transfer from the General Fund to the Cafeteria Fund was for cafeteria program operating expenses.

Transfer from the Capital Outlay Fund to the Building Fund was for current capital projects.

5. Capital "\ssets

Capital asset activity for the period ended June 30,2015, was as follows:

Beginning Ending

Balance Increases Decreases Balance

Governmental activities:

Capital a.r.rel.r not being depredated·

Land $ 72,980 $ 72,980

\X'ork in progress 1,769,712 $ 176,399 $ 996,078 950,033

Total capital assets not being depreciated 1,842,692 176,399 996,078 1,023,013

Capital asse/J being depnciated·

Buildings 14,097,496 2,530,767 16,628,263

Improvements 1,551,709 1,551,709

Equipment 1,758,160 100,005 $ 14,000 1,844,165

Total capital assets being depreciated 17,407,365 2,630,772 14,000 20,024,137

Less: accumulated depreciation for:

Buildings 6,402,636 327,687 6,730,323

Improvements 913,047 42,016 955,063

Equipment 1,398,722 94,797 14,000 1,479,519

Total accumulated depreciation 8,714,405 464,500 14,000 9,164,905

Total capital assets being

depreciated, net 8,692,960 2,166,272 10,859,232

Governmental activities capital assets, net $ 10,535,652 $ 2,342,671 $ 996,078 $ 11,882,245

27

6.

FORTUNA UNION HIGH SCHOOL DISTRICT NOTES TO THE FINANCL\L STATEMENTS- CONTINUED


Depreciation was charged to functions as follows:

Instruction

Instructional Library, 1\ledia and Tech

School Site Administration

Home-to-school Transportation

Food Services

Ancillary Services

Plant Services

Joint Ventures ,

Current Year

$ 291,113

2,400

11,564

46,444

19,814

9,962

83,203

$ 464,500

The District participates in two joint ventures under joint powers agreements QPAs): the North Coast Schools' Insurance Group and the North Coast Schools' Medical Insurance Group.

North Coast Schools' Insurance Group (NCSIG) -The NCSIG arranges for and provides workers compensation and property and liability insurance for its members: all of the Humboldt and Del Norte County School Districts and their County Offices of Education. The NCSIG is governed by a commission composed of one representatiYe from each member agency. A nine member executive committee elected by and from the commission controls the operations of the NCSIG, including selection of management and approYal of operating budgets. The NCSIG is independent of any influence by the member districts beyond their representation on the commission. Each member district pays a premium commensurate \Vith the level of coverage requested and shares surpluses and deficits proportionately to its participation in the NCSIG.

North Coast Schools' Medical Insurance Group (NCSMIG) -The NCSMIG arranges for and provides medical, dental and vision insurance for its members: Humboldt County Office of Education and all Humboldt County School Districts. The NCSMIG is governed by a board of directors composed of representatives from member districts which have one hundred or more insured lives and one representative for those member districts with less than one hundred insured lives. The Board controls the operations of the NCSMIG including selection of management and approval of operating budgets. NCSMIG is independent of influence by the member districts beyond their representation on the Board. Each member district pays a premium commensurate with the level of coverage requested and shares surpluses and deficits proportionately to its participation in the NCSMIG.

28

FORTUNA UNION HIGH SCHOOL DISTRICT NOTES TO THE FIK\NCIAL STATEl\fENTS- CONTINUED


The following is a summary of financial information for NCSIG and NCSMIG at June 30, 2014 (the most recent infotmation available):

NCSIG

Total assets $ 5,566,037 Total liabilities 1,552,970 Total net position $ 4,013,067

Total revenues $ 6,275,733 Total expenses 5,529,664 Change in net position $ 746,069

s

$

$

$

NCSMIG

8,548,511 4,415,208 4,133,303

37,469,087 37,496,258

(27,171)

A copy of the most recent financial statements for NCSIG and NCSMIG can be requested by writing to 901 Myrtle Ave., Eureka, CA 95501.

7. Refunding General Obligation Bonds Payable

The District issued general obligation bonds in 1999 in the amount of $1,500,000 with an average interest rate of 5.6 percent. In 2010/11 the District did an advance refunding of these bonds. The District completed the refunding to reduce its total debt service payments by $100,328. The outstanding refunding general obligation bonded debt of the District as of June 30, 2015 is:

Amount Issued Redeemed

Date of Interest ~Iamrity of Original Outstanding Current Current Outstanding

Issue Rate Date Issue July 1, 2014 Year Year June 30, 2015

2/24/2011 4.50% 8/1/2024 $ 1,226,500 $ 1,024,200 $ $ 76,300 $ 947,900

29

FORTUNA. UNION HIGH SCHOOL DISTRICT NOTES TO THE FINANCIAL STXrEMENTS- CONTINUED


The annual requirements to amortize the refunding general obligation bonds payable, outstanding as of June 30, 2015, are as follows:

Year

Ended

June 30, Principal Interest Total

2016 $ 75,900 $ 40,948 $ 116,848

2017 80,400 37,431 117,831

2018 84,700 33,716 118,416

2019 88,900 29,810 118,710

2020 93,000 25,718 118,718

2021-2025 525,000 61,074 586,074 Totals $ 947,900 $ 228,697 $ 1,176,597

8. General Obligation Bonds Payable - Series 2013

On November 6, 2012 the qualified electors of the District approved the issuance of general obligation bonds in the maximum amount of $10,000,000 under the procedures specified in Proposition 39, In February 2013 the District authorized the sale of the first series of bonds in the aggregate amount of $3,500,000, The outstanding general obligation bonded debt for the Series 2013 bond issuance of the District as of June 30, 2015 is:

Amount Issued Redeemed

Date of Interest Maturity of Original Outstanding Current Current Outstanding

Issue Rate Date Issue July 1, 2014 Year Year June 30, 2015

2/28/2013 1.45%) - 4.00°/il 8/1/2043 $ 3,500,000 $ 3,500,000 $ - $ $ 3,500,000

30

The



annual requirements to amortize the Series 2013 general obligation bonds payable outstanding as of June 30,2015, are as follows:

Year Ended

June 30, Principal Interest Total

2016 $ 132,163 $ 132,163 2017 132,163 132,163 2018 $ 5,000 132,126 137,126 2019 5,000 132,048 137,048 2020 10,000 131,903 141,903

2021-2025 210,000 647,173 857,173 2026-2030 405,000 599,373 1,004,373 2031-2035 670,000 503,090 1,173,090 2036-2040 1,030,000 340,745 1,370,745 2041-2044 1,165,000 97,500 1,262,500 Totals $ 3,500,000 $ 2,848,284 $ 6,348,284

9. Capital Leases

The District entered into a long-term lease agreement for the purchase of computers, valued at $44,1 OS. These agreements provide for title to pass upon expiration of the lease period.

Future minimum lease payments under these agreements are as follows:

2016 2017

Year Ended June 30

Less: amount representing interest

Total

$

$

Payments

15,725 15,725

(3,070)

28,380

The District will receive no sublease rental revenues nor pay any contingent rentals associated with these leases.

31



10. Pension Plans

A. General Information about the Pension Plans

All qualified employees are covered under cost-sharing multiple-employer defined benefit pension plans maintained by agencies of the State of California. Certificated employees are eligible to participate in the California State Teachers' Retirement System (CalSTRS), and classified employees are eligible to participate in the California Public Employees' Retirement System (CalPERS).

Public Employees' Retirement System (PERS)

Plan Description

All qualified full-time and part-time classified employees of the public school system arc eligible to participate in the District's PERS Plan. Benefit provisions under the PERS Plan are established by State statute and District resolution. CalPERS issues publicly available reports that include a full description of the pension plan regarding benefit provisions, assumptions, and membership information. These reports can be obtained at CalPERS' website under "Forms and Publications".

Benefits Provided

CalPERS provides servtce retirement and disability benefits, annual cost of living adjustments, and death benefits to plan members, who must be public employees and beneficiaries. Benefits are based on years of credited service, equal to one year of full time employment. Members with five years of total service are eligible to retire at age 50 with statutorily reduced benefits. All members are eligible for non-duty disability benefits after 10 years of service. The death benefit is one of the following: the Basic Death Benefit, the 1957 Survivor Benefit, or the Optional Settlement 2W Death Benefit. The cost of living adjustments for each plan are applied as specified by the Public Employees' Retirement Law.

The Plan's provisions and benefits in effect at June 30, 2015 are summarized as follows:

32



Hire date Benefit formula Benefit vesting schedule Benefit payments Retirement age Monthly benefits, as a % of eligible compensation Required employee contribution rates

Contributions

CalPERS Prior to January

1, 2013 2%@55 5 years service Monthly for life so- 63

1.10% to 2.5% 7%

On or After January 1, 2013

2°;(,@ 62 5 years service Monthly for life 52- 67

1.0% to 2.5% 6.974%

Section 20814(c) of the California Public Employees' Retirement Law requires that the employer contribution rates for all public employers be determined on an annual basis by the actuary and shall be effective on the July 1 following notice of a change in the rate. The total plan contributions are detennined through CalPERS' annual actuarial valuation process. The actuarially determined rate is the estimated amount necessary to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. The District is required to contribute the difference between the actuarially determined rate and the contribution rate of employees. For the measurement period ended June 30, 2014 (the measurement date), the average active employee contribution rate is 6.974 percent of annual pay, and the employer's contribution rate is 11.442 percent of annual payroll. It is the responsibility of the District to make necessary accounting adjustments to reflect the impact due to any Employer Paid Member Contributions or situations where members are paying a portion of the employer contribution.

For the year ended June 30, 2015, the CalPERS contributions recognized as part of pension expense for the Plan were as follows:

Contributions - employer Contributions - employee (paid by employer)

Total

State Teachers' Retirement System (STRS)

Plan Description

$ 141,429

$ 141,429

All qualified full-time and part-time public school teachers and certain other

33



employees of the public school system are eligible to participate in the District's STRS Plan. Benefit provisions under the STRS Plan are established by State statute and Local Government resolution. CalSTRS issues publicly available reports that include a full description of the pension plans regarding benefit provisions, assumptions and membership information that can be found on the CalSTRS website.

Benefits Provided

CalSTRS provides retirement benefits based on members' final compensation, age, and years of service credit. In addition, the retirement program provides benefits to members upon disability and to survivors/beneficiaries upon the death of eligible members.

The Plan's provisions and benefits in effect at June 30, 2015 are summarized as follows:

Hire date Benefit formula Benefit vesting schedule Benefit payments Retirement age Monthly benefits, as a % of eligible compensation Required employee contribution rates Required employer contribution rates

Contributions

Prior to January 1, 2013

2%@60 5 years service Monthly for life 50- 63

1.10% to 2.4% 8.15% 8.88%

On or After January 1, 2013

2%@62 5 years service Monthly for life 55-65

1.16% to 2.4% 8.15% 8.88%

Required member, employer and state contribution rates are set by the California Legislature and Governor and detailed in Teachers' Retirement Law. Contribution rates are expressed as a level percentage of payroll using the entry age normal actuarial cost method. For the year ended June 30, 2015 the required employer contribution was 8.88 percent of applicable member earnings.

For the year ended June 30, 2015, the CalSTRS contributions recognized as part of pension expense for the Plan were as follows:

34

FORTUNA UNION HIGH SCHOOL DISTRICT NOTES TO THE FIN"\NCIAL STATEMENTS- CONTINUED


Contributions - employer Contributions - employee (paid by employer)

Total

$ 301,744

$ 301,744

B. Pension Liabilities. Pension Expenses and Deferred Outflows/Inflows of Resources Related to Pensions

As of June 30, 2015, the District reported net pension liabilities for its proportionate shares of the net pension liability as follows:

PERS Plan STRS Plan

Total

$

$

1,337,000 4,799,000 6,136,000

The District's net pension liability for each Plan is measured as its proportionate share of the net pension liability for the Plan as a whole. The net pension liability of each of the Plans is measured as of June 30, 2014, and the total pension liability for each Plan used to calculate the net pension liability was determined by an actuarial valuation as of June 30, 2013 rolled forward to June 30, 2014 using standard update procedures. The District's proportion of the net pension liability was based on a projection of the District's long-term share of contributions to each pension plan relative to the projected contributions of all participating employers, actuarially determined. The District's proportionate share of the net pension liability for each Plan as of June 30, 2014 was as follows:

Proportion- June 30, 2013 Proportion- June 30, 2014

Change - Increase (Decrease)

CalPERS 0.011775% 0.011775%

0.0000%

CalSTRS 0.00821% 0.00821%

0.0000%

For the year ended June 30, 2015, the District recognized pension expense of $808,101 in the statement of activities. At June 30, 2015, the District reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

35



Deferred Outlows of Deferred Inflows Resources of Resources

Pension contributions subsequent to measurement date - CalPERS $ 149,278

Pension contributions subsequent to measurement date - CalSTRS 346,913

Net differences between projected and actual earnings on plan investments -CalPERS $ 459,000

Net differences berween projected and actual earnings on plan investments -CalSTRS 1,182,000

$ 496,191 $ 1,641,000

$496,191 reported as deferred outflows of resources related to contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, 2016. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized as pension expense as follows:

Year Ended june 30

2016 2017 2018 2019 Total

Actuarial Assumptions

Increase (Decrease) Pension Expense

$ 410,250 410,250 410,250 410,250

$ 1,641,000

For the measurement period ended June 30, 2014 (the measurement date), the total pension liabiliry for each Plan was determined by rolling forward the June 30, 2013 total pension liabiliry. The June 30, 2013 and June 30, 2014 total pension liabilities for each plan were based on the following actuarial assumptions:

36

FORTUN,". UNION HIGH SCHOOL DISTRICT NOTES TO THE FINANCIAL STATEMENTS- CONTINUED



Actuarial Cost Method Actuarial Assumptions:

Discount Rate Inflation Payroll Growth Projected Salary Increase Investment Rate of Return !\fortality

Post Retirement Benefit Increase

Entry-age normal cost method

7.5% 2.75% 3.0% 3.2%- 10.8% (a) 7.5% (b)

Derived using CalPERS' membership data for all funds

Contract COLA up to 2.0% until purchasing power protection allowance floor applies, 2. 7 5% thereafter

(a) - Depending on age, service, and type of employment (b)- Net of pension plan investment expense, including inflation

The mortality table used was developed based on CalPERS specific data. The table includes 20 years of mortality improvements using Society of Actuaries Scale BB. For more details on this table, please refer to the 2014 experience study report.

All other actuarial assumptions used in the June 30, 2013 valuation were based on the results of a January 2014 actuarial experience study for the period from 1997 to 2011, including updates to salary increase, mortality, and retirement rates. Further details of the Experience Study can found on the CalPERS website.


Actuarial Cost Method Actuarial Assumptions:

Discount Rate Inflation Payroll Growth Investment Rate of Return Mortality

Post Retirement Benefit Increase

Entry-age normal cost method

7.6% 3.00% 3.75% 7.6% (a)

Derived using industry standard RP2000 mortality tables adjusted to fit CalSTRS experience 2.0% simple

(a) - Net of pension plan investment expense, including inflation

37

FORTUNA UNION HICH SCHOOL DISTRICT NOTES TO THE FIN1\NCIAL STATEMENTS CONTINUED


Discount Rate


The discount rate used to measure the total pension liability was 7.60 percent. The projection of cash flows used to determine the discount rate assumed that contributions from plan members and employers will be made at statutory contribution rates in accordance with the rate increases per AB 1469. Projected inflows from investment earnings were calculated using the long-term assumed investment rate of return (7 .60 percent) and assuming that contributions, benefit payments, and administrative expense occur midyear. Based on those assumptions, STRS' fiduciary net position was projected to be available to make all projected future benefit payments to current plan members. Therefore, the long-term assumed investment rate of return was applied to all periods of projected benefit payments to determine the total pension liability.

The long-term expected rate of return on pension plan investments was determined using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. The best-estimate ranges were developed using capital market assumptions from CalSTRS general investment consultant (Pension Consulting Alliance - PCA) as an input to the process. Based on the model from CalSTRS consulting actuary's (Milliman) investment practice, a best estimate range was determined by assuming the portfolio is re-balanced annually and that annual returns are lognormally distributed and independent from year to year to develop expected percentiles for the long-term distribution of annualized returns. The assumed asset allocation by PC\ is based on board policy for target asset allocation in effect on February 2, 2012, the date the current experience study was approved by the board.

Best estimates of 1 0-year geometric real rates of return and the assumed asset allocation for each major asset class used as input to develop the actuarial investment rate of return are summarized in the following table:

38



Long-term (1 0-Year) New Strategic Average Expected

Asset Class Allocation Real Rate of Return Global Equity 47% 4.50% Private Equity 12% 6.20% Real Estate 15% 4.35% Inflation Sensitive 5% 3.20% Fixed Income 20% 0.20'Yo Cash I Liquidity 1% 0.00%

Total 100%


The discount rate used to measure the total pension liability was 7.50 percent. A projection of the expected benefit payments and contributions was performed to determine if assets would run out. The test revealed the assets would not run out. Therefore the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability for the Schools Pool. The results of the crossover testing for the Schools Pool are presented in a detailed report that can be obtained at CalPERS' website.

According to Paragraph 30 of Statement 68, the long-term discount rate should be determined without reduction for pension plan administrative expense. The 7.50 percent investment return assumption used in tlus accounting valuation is net of administrative expenses. Administrative expenses are assumed to be 15 basis points. An investment return excluding administrative expenses would have been 7.65 percent. Using this lower discount rate has resulted in a slightly higher total pension liability and net pension liability. For the Schools Pool, this difference was deemed immaterial.

CalPERS is scheduled to review all actuarial assumptions as part of its regular Asset Liability Management (ALM) review cycle that is scheduled to be completed in February 2018. Any changes to the discount rate will require Board action and proper stakeholder outreach. For these reasons, CalPERS expects to continue using a discount rate net of administrative expenses for GASB 67 and 68 calculations through at least the 2017-18 fiscal year. CalPERS will continue to check the materiality of the difference in calculation until such time as the methodology has been changed.

The long-term expected rate of return on pension plan investments was determined using a building-block method in which best-estimate ranges of

39



expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class.

In determining the long-term expected rate of return, Ca!PERS staff took into account both short-term and long-term market return expectations as well as the expected pension fund cash flows. Such cash flows were developed assuming that both members and employers will make their required contributions on time and as scheduled in all future years. Using historical returns of all the funds' asset classes, expected compound (geometric) returns were calculated over the shortterm (Erst 10 years) and the long-term (11-60 years) using a building-block approach. Using the expected nominal returns for both short-term and long-term, the present value of benefits was calculated for each fund. The expected rate of return was set by calculating the single equivalent expected return that arrived at the same present value of benefits for cash flows as the one calculated using both short-term and long-term returns. The expected rate of return was then set equivalent to the single equivalent rate calculated above and rounded down to the nearest one quarter of one percent.

The table below reflects the long-term expected real rate of return by asset class. The rate of return was calculated using the capital market assumptions applied to determine the discount rate and asset allocation. These rates of return are net of administrative expenses.

New Strategic Real Return Asset Class Allocation Years 1 -10 ~a)

Global Equity 47.0% 5.25% Global Fixed Income 19.0% 0.99% Inflation Sensitive 6.0°/c, 0.45% Private Equity 12.0% 6.83% Real Estate 11.0% 4.50% Infrastructure and Forestla· 3.0% 4.50% Liquidity 2.0'/'o -0.55%

Total 100.0%

(a) -An expected inflation rate of 2.5% was used for this period. (b) - An expected inflation rate of 3.0% was used for this period.

Real Return Years 11+ (b)

5.71% 2.43% 3.36% 6.95% 5.13% 5.09%

-1.05%

Sensitivity of the Proportionate Share of the Net Pension Liability to Changes in the Discount Rate

The following presents the District's proportionate share of the net pension liability

40


For TheY car Ended June 30, 2015

for the plans, calculated using the discount rate for the plans, as well as what the District's proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1-perccntage point lower or 1-percentage point higher than the current rate:

Discount Rate

less 1% (6.5%)

Plan's net pension liability $ 2,345,000

Discount Rate

less 1% (6.6%)

Plan's net pension liability $ 7,480,000

Pension Plan Fiduciary Net Position

Current Discount (7.5%)

$ 1,337,000

Current Discount (7.6%)

$ 4,799,000

Discount Rate plus 1% (8.5%)

$ 494,000

Discount Rate plus 1% (8.6%)

$ 2,563,000

Detailed information about the pension plans' fiduciary net position is available in the separately issued CalPERS and CalSTRS financial reports available on the CalPERS' and CalSTRS' websites.

C. Pavable to the Pension Plan

At June 30, 2015, the District reported no amount payable for the outstanding amount of contributions to the pension plan required for the year ended June 30, 2015.

D. Special Funding Situation

The State of California is legally responsible for making contributions directly to the STRS Pension Plan on behalf of school districts. This is considered a "special funding situation". The following are required disclosures regarding the special funding situation for the STRS Pension Plan:

41

FORTUNA UNION HIGH SCHOOL DISTRICT NOTES TO THE FINANCIAL S'L\TEMENTS- CONTINUED


State of Californian nonemployer contributing entity's proportionate share of net pension liability associated with the District

District's proportionate share of net pension liability 2,898,000 4,799,000

Total of State of California and District Share of the Net Pension Liability $ 7,697,000

Revenue recognized in Statement of Activities for support provided by the State of California as a nonemployer contributing entity $ 272,929

11. Changes in Long-Term Debt

Long-term obligations include debt and other long-term liabilities. Changes in longterm obligations for the period ended June 30, 2015 are as follows:

Governmental Activities:

Accnted vacation

Refunding general obligation bonds

General obligation bond Series 2013

Net pension liability

Capital lease

Other pos !employment

benefits

Total Governmental Activities

Beginning

Balance

$ 27,209

1,024,200

3,500,000

29,815

$ 4,581,224

Increases

* $ 6,136,000

44,105

62,026

$ 6,242,131

Decreases

$ 3,241

76,300

15,725

$ 95,266

$

Ending

Balance

23,968

947,900

3,500,000

6,136,000

28,380

91,841

$ 10,728,089

* - Net pension liability has been recorded for the first time in the year ended June 30, 2015, in

accordance \vith provision of GASB Statement No. 68.

The funds typically used to liquidate other long-term liabilities in the past are as follows:

Liability Accrued vacation General obligation bonds Net pension liability Capital lease Other postemployment benefits

Activity Type Governmental Governmental Governmental Governmental Governmental

42

Fund General Debt Service General General General

Amount

Due

Within

One Year

$ 23,968

75,900

13,702

$ 113,570



12. Excess of Expenditures Over Appropriations

As of June 30, 2015, expendirures exceeded appropriations in individual major funds as follows:

Appropriations Category Excess Expendirure General Fund:

Employee benefits Capital outlay Debt service - principal

13. Restatement of Net Position

$ 199,780 237

15,725

The District has restated its net position on the government-wide financial statements as of June 30, 2014, to reflect the accounting treatment for pension liabilities and deferred inflows and outflows of resources in accordance with the implementation of GASB Statement No. 68, Accounting and 1-<-inancia! &porting .for Pen.rion.r-an amendment of GASB Statement No. 27. Under G,\SB No. 68, the District's proportionate share of the overall net pension liability for the CalSTRS and CalPERS pension plans is recognized as a liability of the District, pension expense and deferred inflows and outflows of resources are recorded based on actuarially-determined computations of pension expense, and current year employer contributions to the plans are recorded as deferred outflows of resources, to be taken into account in the computation of the following year's net pension liability.

The restatement of June 30, 2014 net position is as follows:

Net position previously reported june 30,2014

Restatement for the effects of GASB 68: 6/30/14 acruarily computed balance of net pension liability 6/30/14 deferred outlows related to pension

Net position as restated, june 30,2014

14. Post-Employment Other Than Pension Benefits

$ 10,078,230

(7 ,685,000) 443,173

$ 2,836,403

In addition to the pension benefits described above, the District provides postemployment health care benefits to eligible certificated and management employees under the following conditions:

1. For a classified employee, the employee must have reached the age of fifty-five and

43



must have been a full-time employee of the District for fifteen years.

2. For a certificated employee, the employee must have reached the age of fifty-five, must have been a full-time certificated employee within the District for fifteen years, and must qualify for STRS and be drawing retirement there from.

The District's annual other postemployment benefit (OPEB) cost (expense) is calculated based on the annual required contribution of the employer (ARC), an amount actuarially detennined in accordance with the parameters of GASB Statement 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed thirty years.

The following table shows the components of the District's annual OPEB cost for the year, the amount actually contributed to the plan, and changes in the District's net OPEB obligation.

Annual required contribution Interest on net OPEB obligation Annual OPEB cost Contributions made:

Increase (decrease) in net OPEB obligation Net OPEB obligation (asset), beginning of year Net OPEB obligation (asset), end of year

$

$

$

357,154 1,490

358,644 296,618

62,026 29,815 91,841

The District's annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation were as follows:

Percentage of Annual NetOPEB

Fiscal Year Annual OPEB Cost Obligation Ended OPEB Cost Contributed (Asset}

June 30, 2015 $ 358,644 83% $ 91,841 June 30, 2014 377,814 99% 29,815

June 30, 2013 377,919 110% 26,534 A.s of February 12, 2015, the most recent actuarial valuation date, the plan was zero percent funded. The actuarial accrued liability for benefits was $2,573,194, and the actuarial value of assets was $0, resulting in an unfunded actuarial accrued liability (Ui'c,-\L) of $2,573,194. The covered payroll (annual payroll of active employees covered by the Plan) was $5,274,972 and the ratio of the UAAL to the covered payroll was 48.78 percent.

44



The District currently pays for postemployment health care benefits on a pay-as-you-go basis, and has not funded the ARC. The actuarial value of the assets as of June 30, 2015 was $0. The District has set aside funds in an unrestricted assigned Retiree Benefits Fund. The assigned fund balance for retiree benefits at June 30, 2015 was $179,086. Because these funds are not in a formal trust restricted for retiree benefits, they are not included in the computation of plan assets for the postemployment health care benefits.

Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts detennined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revisions as actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progress, shown above, presents multiyear trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits.

Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and the plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques tl1at are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations.

In the February 12, 2015 actuarial valuation, the entry age normal actuarial cost method was used. The actuarial assumptions included a 4.5 percent investment rate (net of administrative expenses), which is a blended rate of tl1e expected long-term investment returns on plan assets and on the employer's own investments calculated based on the funded level of the plan on the valuation date, and an annual healthcare cost trend rate of 4.0 percent. Both rates included a 2.75 percent inflation assumption. The actuarial value of assets was detennined using techniques that spread the effects of short-term volatility in the market value as of the valuation date. The initial UA .. i\L is being amortized at a level percentage of projected payroll. The remaining amortization period at June 30, 2015 was 25 years.

·15. Risk Management

The District is exposed to various risks of loss related to torts, theft or destruction of assets, errors and omissions, and natural disasters. The District manages these risks of loss through participation in public entity risk pools, as described in the note regarding

45



')oint Ventures". There have been no significant reductions in insurance coverage from the prior year.

16. Leases - Operating Leases

The District entered into an operating lease in September, 2011 for a five year lease of eight photocopiers. Future minimum lease payments under these agreements are as follows:

Year Ending .June 30 2016

2017

Total Lease Payments

Total

$ 54,893

13,723 $ 68,616

Total rental expenditures for 2014-15 were $63,601. The District will receive no sublease rental revenues nor pay any contingent rentals associated with this lease.

17. Commitments and Contingencies

State and Federal Allowances. Awards and Grants

The District has received state and federal funds for specific purposes that are subject to

review and audit by the grantor agencies. Although such audits could generate expenditure disallowances under terms of the grants, it is believed that any required reimbursement will not be material.

46

REQUIRED SUPPLEMENTARY INFORMATION


STATEMENT OF REVENUES EXPENDITURES AND CHANGES IN FUND BALANCE- BUDGET AND ACTUAL (GAAP)

GENERAL FUND


Budgeted Amounts

Variance with Final Budget

1\ctual (G"e\AP Positive-Original Final Basis) (Negative)

Revenues:

Local control funding formula sources

State apportionments $ 4,741,768 $ 4,878,950 $ 4,708,034 $ (170,916) Local sources 3,650,177 3,527,195 3,720,895 193,700

Federal revenues 465,805 582,332 629,448 47,116 Other state revenues 190,387 304,265 475,142 170,877 Other local revenues 743,242 832,473 908,903 76,430

Total revenues 9,791,379 10,125,215 10,442,422 317,207

Expenditures:

Certificated salaries 3,943,868 4,098,428 4,094,779 3,649 Classified salaries 1,221,134 1,325,053 1,324,458 595 Employee benefits 2,434,921 2,489,559 2,689,339 (199,780) Books and supplies 656,677 772,368 739,575 32,793 Services and other operating expenditures 1,172,262 1,304,088 1,222,043 82,045 Capital outlay 99,768 100,005 (237) Other outgo 559,114 583,818 511,712 72,106 Debt service - principal 15,725 (15,725)

Total expendimres 9,987,976 10,673,082 10,697,636 (24,554)

Deficiency of revenues under expenditures (196,597) (547,867) (255,214) 292,653

Other fmancing sources (uses):

Proceeds of debt 44,105 44,105 Transfers out (35,000) (45,000) (140,748) (95,748)

Total other fmancing uses (35,000) (45,000) (96,643) (51,643)

Deficiency of revenues and other fmancing sources under expenditures and other uses (231,597) (592,867) (351,857) 241,010

Fund balances, July I, 2014 1,614,655 1,614,655 1,614,655

Fund balances, June 30, 2015 $ 1,383,058 $ 1,021,788 $ 1,262,798 $ 241,010


47


STATEMENT OF REVENUES EXPENDITURES AND CHANGES IN FUND BALANCE- BUDGET AND ACTUAL (GAAP)

BUILDING FUND


Budgeted Amounts

Variance with Final Budget

Actual (GAAP Positive-Original Final Basis) (Negative)

Revenues:

Other state revenues $ 880,000 $ (880,000) Other local revenues 3,878 $ 3,319 (559)

Total revenues 883,878 3,319 (880,559)

Expenditures: Classified salaries 25,623 25,623 Employee benefits 1,052 1,051 1 Services and other operating expenditures 556,972 251,014 305,958 Capital outlay 1,917,753 1,383,249 534,504

Total expenditures 2,501,400 1,660,937 840,463

Excess (deficiency) of revenues over (under) expenditures (1,617,522) (1,657,618) (40,096)

Other financing sources (uses): Transfers in 108,100 108,100

Total other ftnancing sources (uses) 108,100 108,100

Excess (deficiency) of revenues and other financing sources over (under) expenditures and other uses (1 ,617 ,522) (1,549,518) 68,004

Fund balances, July 1, 2014 $ 1,549,518 1,549,518 1,549,518

Fund balances, June 30,2015 $ 1,549,518 $ (68,004) $ $ 68,004


48


STATEMENT OF REVENUES EXPENDITURES AND CHANGES IN FUND BALANCE- BUDGET AND ACTUAL (GA"'.P)

CAPITAL OUTLAY FUND


Budgeted Amounts

Variance with

Revenues:

Other state revenues

Other local revenues

Total revenues

Expenditures: Services and other operating expenditures

Total expenditures

Deficiency of revenues under expenditures

Other financing sources (uses): Transfers in

Transfers out

Total other financing sources (uses)

Deficiency of revenues and other financing sources under expenditures and other uses

Fund balances, July 1, 2014

Fund balances, June 30, 2015

Original

$ 2,577

2,577

600,000

600,000

(597,423)

(597,423)

751,585

$ 154,162

Actual (GAJ\P

Final Basis)

$ 9,127 $ 11,695

9,127 11,695

25,000 25,000

25,000 25,000

(15,873) (13,305)

80,748 (108,100)

(27 ,352)

(15,873) (40,657)

751,585 751,585

$ 735,712 $ 710,928


49

Final Budget Positive -(Negative)

$ 2,568

2,568

2,568

80,748 (108,100)

(27,352)

(24,784)

$ (24,784)

FORTUN}, UNION HIGH SCHOOL DISTRICT

SCHEDULE OF OTHER POST-EMPLOYMENT BENEFIT FUNDING PROGRESS AND EMPLOYER CONTRIBUTIONS

For The Year Ended june 30,2015

Actuarial Accrued UAALas

Actuarial Liability Unfunded a Percentage Actuarial Value of (A_AL) AAL Funded Covered of Covered Valuation Assets Entry Age (UAAL) Ratio Payroll Payroll

Date (a) (b) (b- a) (a/b) c ((b-a)/ c)

2/1/2009 $ $ 2,355,958 $ 2,355,958 0.00% $ 5,630,882 41.84% 2/1/2012 2,749,672 2,749,672 0.00% 4,945,051 55.60%

2/12/2015 2,573,194 2,573,194 0.00% 5,274,972 48.78%

50


SCHEDULE OF THE DISTRICT'S PROPORTION"\ TE SI-L\RE OF THE NET PENSION LIABIUIY FOR THE LAST TEN YEARS * -

CALIFORNL\ PUBLIC EMPLOYEES' RETIREMENT SYSTEM (PERS) June 30, 2015

Proportion of the net pension liability

Proportionate share of the net pension liability

Covered-employee payroll

Proportionate share of the net pension liability as percentage of covered-employee payroll

CalPERS State-wide fiduciary net position

CalPERS State-wide total pension liability

Plan fiduciary net position as a percentage of the total pension liability

NOTES TO SCHEDULE: Benefit changes: There were no changes to benefit terms.

Changes in assumptions:. There were no changes in assumptions.

$

$

June 30, 2015

0.01177 5°/o

1,337,000

1,236,051

108.2%

$ 56,940,364,500

$ 68,292,799,349

83.38%

* - Fiscal year 2015 was the first year of implementation, therefore only one year is shown.

51


SCHEDULE OF THE DISTRICTS PROPORTIONATE SHARE OF THE NET PENSION LIABILITY FOR THE LAST TEN YEARS * -

C\LIFORNIA STATE TEACHERS' RETIREMENT SYSTEl\1 (STRS)

June 30, 2015

Proportion of the net pension liability

District's proportionate share of the net pension liability

State of California's nonemployer contributing entity's proportionate share of the net pension liability associated with the District

Total District and State of California share of net pension liability


Proportionate share of the District's net pension liability as percentage of covered-employee payroll

CalSTRS State-wide fiduciary net position

CalSTRS State-wide total pension liability

Plan fiduciary net position as a percentage of the total pension liability

NOTES TO SCHEDULE: Benefit changes: There were no changes to benefit terms.

Changes in assumptions:. There were no changes in assumptions.

$

$

$

$

$

$

*-Fiscal year 2015 was the first year of implementation, therefore only one year is shown.

52

June 30, 2015

0.00821%

4,799,000

2,898,000

7,697,000

3,657,498

131.2%

190,474,016,000

248,911,000,000

76.52%

FORTUNA UNION HIGH SCHOOL DISTRICT SCHEDULE OF CONTRIBUTIONS FOR THE LAST TEN YEARS *

CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM I]'ERS) June 30, 2015

June 30, 2015

Contractually required contribution (actuarially determined)

Contribution in relation to the actuarially determined contribution

Contribution deficiency (excess)


Contributions as a percentage of coveredemployee payroll

NOTES TO SCHEDULE: Actuarial valuation date 6/30/2013

Methods and assumptions used to determine contribution rates: Actuarial funding method Entry age nonnal cost

$ 141,429

141,429 $

$ 1,236,051

11.44%

Amortization method Level percentage of payroll, closed Remaining amortization period 20 years Asset valuation method Smoothed value Inflation 2.75% Salary increases 3.00% Investment rate of return 7 .5%, net of pension plan investment

Retirement age Mortality

expense 60 years CalPERS Mortality Experience

Study

* - Fiscal year 2015 was the first year of implementation, therefore only one year

53

FORTUNA UNION HIGH SCHOOL DISTRICT SCHEDULE OF CONTRIBUTIONS FOR THE L\ST TEN YE,\RS * CALIFORNIA STATE TEACHERS' RETIREMENT SYSTEM (STRS)

June 30, 2015

June 30, 2015

Contractually required contribution (actuarially detennined)

$ 301,744

Contribution in relation to the actuarially detennined contribution 301,744

Contribution deficiency (excess) $

Covered-employee payroll $ 3,657,498

Contributions as a percentage of coveredemployee payroll

NOTES TO SCHEDULE: Actuarial valuation date 6/30/2013

Methods and assumptions used to detennine contribution rates: Actuarial cost method Entry age normal cost

8.25%

Amortization method Level percentage of payroll, closed Remaining amortization period 30 years ,\sset valuation method Smoothed value Inflation 3.00% Salary increases

Investment rate of return

Retirement age Mortality

3.75 average, including inflation of3.0%

7.6%, net of pension plan investment and administrative expenses

60 years CalSTRS Mortality Experience

Study

* - Fiscal year 2015 was the first year of implementation, therefore only one year

54

SUPPLEMENTARY INFORMATION

FORTUNA UNION HIGH SCHOOL DISTRICT COMBINING BALANCE SHEET

NONMAlOR FUNDS -June 30, 2015

ASSETS

Cash in County Treasury Cash in revolving fund Accounts receivable Stores inventory

Total assets




LIABILITIES

Total liabilities



FUND BALANCES

Nonspendable Restricted

Total fund balances

Total liabilities, deferred inflows of resources and fund balances

55

$

Cafeteria Fund

3,509 230

3,852 3,867

11,458

$ 11,458

$ 4,097 7,361

11,458

$ 11,458

Bond Interest and Redemption

Fund

$ 189,666

189,666

$ 189,666

$ 189,666

189,666

$ 189,666

Total Other

Governmental Funds

$

$

$

$

193,175 230

3,852 3,867

201,124

201,124

4,097 197,027

201,124

201,124

FORTUNA UNION HIGH SCHOOL DISTRICT COMBINING STATEMENT OF REVENUES EXPENDITURES AND CHANGES IN

FUND BALANCE- NONMAJOR FUNDS (]Y OBJEC1) For The Year Ended June 30, 2015

Bond Total Interest and Other

Cafeteria Redemption Governmental Fund Fund Funds

Revenues: Federal revenue $ 94,336 $ 94,336 Other state revenue 8,754 8,754 Other local revenue 42,521 $ 257,429 299,950

Total revenues 145,611 257,429 403,040

Expenditures: Classified salaries 62,139 62,139 Employee benefits 44,717 44,717 Books and supplies 110,269 110,269 Debt Service -

Principal 76,300 76,300 Interest 176,535 176,535

Total expenditures 217,125 252,835 469,960

Excess (deficiency) of revenues over (under) expenditures (71,514) 4,594 (66,920)

Other financing sources (uses): Operating transfers in 60,000 60,000

Total other financing sources (uses) 60,000 60,000

Net change in fund balance (11,514) 4,594 (6,920)

Fund balances, July 1, 2014 22,972 185,072 208,044

Fund balances, June 30, 2015 $ 11,458 $ 189,666 $ 201,124

56


ORGANIZATION

June 30, 2015

The Fortuna Union High School District was formed in 1903. In 1917, a number of elementary school districts were annexed for high school purposes to form the Fortuna Union High School District. At present, there are eight elementary schools comprising the high school district. They are all located in Humboldt County, as follows:

Fortuna Union Loleta Rohnerville

Hydesville Bridgeville Rio Dell

Cuddeback Scotia Union

The Board of Trustees for the fiscal year ended June 30, 2015 was composed of the following members, each \vith four year terms:

Name

Tom Chapman

Anita Gage

Eldon Whitehead

Charlie Giannini

Rich Black

Cheryl Nicholson

GOVERNING BOARD

Office

President

Vice President

Clerk

Member

Member (,\ppointed 10/14)

Member (Resigned 9/14)

ADMINISTRATION

Glen Senestraro District Superintendent

Corey Weber Business Manager

57

Term Expires

2017

2015

2017

2015

2017

FOR TUN,\ UNION HIGH SCHOOL DISTRICT

SCHEDULE OF AVE~A.GE DAILY ATTENDANCE


High School:

Grades 9 through 12

Total High School

Second Period

Report

997.67

997.67

Annual Report

987.02

987.02

Average daily attendance is a measurement of the number of pupils attending classes of the District. The purpose of attendance accounting from a fiscal standpoint is to provide the basis on which apportionments of state funds are made to school districts. This schedule provides information regarding the attendance of students at various grade levels and in different programs.

58

Grade Level

9 10 11 12


SCHEDULE OF INSTRUCTIONAL TIME


1986-87 Minutes

Reguirement

64,800 64,800 64,800 64,800

Reduced 1986-87 Minutes

Requirement Pursuant to Education

Code Section 46201

63,000 63,000 63,000 63,000

2014-15 Actual

Minutes

63,055 63,055 63,055 63,055

Number of Days

Traditional Calendar*

180 180 180 180

Status

Complied Complied Complied Complied

Districts, including basic aid districts, must maintain their instructional minutes at the 1986-87 requirements as reduced pursuant to Education Code Section 46201. This schedule is required for all districts, including basic aid districts.

The District has participated in Longer Day incentive funding. The Distrcit did not meet or exceed its local control funding formula target. This schedule presents information on the amount of instruction time offered by the District and whether the District complied with the provisions of Education Code Section 46200 through 46206.

* The District did not operate under a Multitrack Calendar.

59

FORTUNA UNION HIGH SCHOOL DISTRlCT

SCHEDULE OF FINANCIAL TRENDS "\ND ANALYSIS


For The Year Ended

Budget General Fund 6/30/2016 6/30/2015 6/30/2014

Revenues and other financial

sources $ 10,534,326 $ 10,486,526 $ 9,557,104

Expenditures 10,684,852 10,697,636 9,927,917 Other uses and transfers out 65,000 140,748 126,914

Total Outgo 10,749,852 10,838,384 10,054,831

Change in Fund Balance $ (215,526) $ (351,858) $ (497,727)

Ending Fund Balance $ 1,047,272 $ 1,262,798 $ 1,614,656

Available Reserves $ 660,691 $ 605,460 $ 804,640

Designated for Economic Uncertainties $ 660,691 $ 605,460 $ 804,640

Undesignated Fund Balance $ $ $

Available Reserves as a Percentage

of Total Outgo 6.15% 5.59~10 8.00'1o

Total Long-Term Debt $ 10,656,617 $ 10,746,219 $ 4,581,224

Average Daily Attendance at P-2 1,009 998 1,028

6/30/2013

$ 9,020,966

9,297,555 105,186

9,402,741

$ (381,775)

$ 2,112,383

$ 744,759

$ 744,759

$

7.92%

$ 4,652,244

1,002

This schedule discloses the District's financial trends by displaying past years' data along with current budget information. These financial trend disclosures are used to evaluate the District's ability to continue as a going concern for a reasonable amount of time.

The General Fund balance has decreased $849,585 over the past two years. The fiscal year 2015-2016 budget projects a decrease of $215,526 (17.1 %). For a district this size, the State recommends available reserves of at least three percent of total expenditures, transfers out, and other uses (total outgo).

The District incurred an operating det!cit in all of the last three years and anticipates incurring an operating deficit during the 2015-2016 fiscal year. Total long-term debt has increased by $6,093,975 over the past two years, mainly due to the implementation in 2014/15 of GASB 68 and the resulting requirement to recognize the District's proportionate share of the State-wide STRS and PERS net pension liability.

Regular average daily attendance has decreased by 4 ADA over the past two years. The District anticipates an increase of 11 ADA during the fiscal year 2015-2016.

60


SCHEDULE OF CHARTER SCHOOLS


Charter Schools Chartered by District

There are currently no charter schools under the jurisdiction of the District

61

Included in District Financial Statements, or

Separate Report

FOR'IUt-;~\ UNION HIGH SCHOOL DISTRICT

SCHEDULE OF EXPENDITURES OF FEDER.\L ~-I WARDS


Federal Programs:

Federal Grantor/Pass Through Grantor/ Program or Cluster Title

U.S. Department of Education: Passed through California Department of Education (CDE):

NCLB: Title I Special Ed: IDE.c\ Basic Loc. _\ssist. Entitlement Part B NCLB: Title III, Limited English NCLB: Title II, Part A, Improving Teacher Quality \' ocarional Education

Total Passed Through California Department of Education (CDE) Total U.S. Department of Education

U.S. Department of Agriculture: Passed through California Department of Education (CDE):

National School Lunch National School Breakfast

Total Passed Through California Department of Education (CDE):

Passed through Humboldt County Office of Education: Forest Reserve

Total Passed Through Humboldt County Office of Education Total U.S. Department of Agriculture

U.S. Department of Labor Passed through California Department of Education (CDE):

\X7orkforce Investment ~\ct Total Passed Through U.S. Department of Education Total U.S. Department of Labor

U,S, Department of Health and Human Services: Passed through California Department of Education (CDE):

LEA l\!edi-Cai Billing Medi~Cal.Administrative A.ctivities

Total Passed Through California Department of Education (CDE) Total U.S. Department of Health and Human Services

TOT\L EXPENDITURES OF FEDER. \LA W~\RDS

Federal CFD~-1

Number

84.010 84.027

84.365

84.367 84.048

10.555

10.553

10.665

17.259

93.778

93.778

The accompanying notes are an integral part of this schedule. 62

Pass· Through Entity Identifying

Number

14329 13379

10084

14341 13924

13523

13526

10044

10055

10013 10006

Federal

Expenditures

$

$

165,854

167,769

37,488 29,519

30,508

431,138 431,138

64,239 30 097

94,336

14,922 14,922

109,258

72,761

72,761

72,761

480

105,445 105,925

105,925

719,082

FORTUNi\ UNION HIGH SCHOOL DISTRICT NOTES TO THE SCHEDULE OF EXPENDITURES OF FEDERAL A WA.RDS

FOR THE YEAR ENDED JUNE 30, 2015

Basis of Presentation

The accompanying schedule of expenditures of federal awards includes the federal grant activity of the District and is presented on the modified accrual basis of accounting. The information in this schedule is presented in accordance with the requirements of OMB Circular A-133, AUDITS OF STATES, LOCAL GOVERNJ\1ENTS, AND NON-PROFIT ORGANIZATIONS. Therefore, some amounts presented in this schedule may differ from amounts presented in, or used in the preparation of, the general purpose financial statements.

63


RECONCILL\TION OF ANNUAL FINANCIAL AND BUDGET REPORT WITH AUDITED FINANCIAL STATEMENTS

For The Year Ended june 30,2015

June 30, 2015 Annual Financial and Budget Report Fund Balance

Adjustments and Reclassifications Increasing and (Decreasing) the Fund Balance -

Reclassify Special Reserve and Retiree Benefits Fund Rounding

June 30, 2015 Audited Financial Statements Fund Balance

64

General Fund

$ 425,020

837,777 1

$ 1,262,798

Special Reserve

Fund

$ 658,691

(658,691)

$

Retiree Benefits

Fund

$ 179,086

(179,086)

$

;>..-lark C. Wetzel, Cl':\ IM .Jnhn R. ColT, Cl'.-\

1\lich;wl R. Cline, Cl'.-\ DAVID L. MOONIE & co., LLP

Cert~fied Publir Accoantants


Keunct h X. St ringn, Cl':\

Aaron S. \Vciss. Cl':\

Joslni<I S. Miller, Cl':\

I\lattlH.'W.J. II ag-ue, {:J'.-\

INDEPENDENT i\UDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING i\ND ON COMPLIANCE AND OTHER MATTERS

BASED ON i\N AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS

Board of Trustees Fortuna Union High School District 379 12th Street Fortuna, California 95540

We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditinc~ Standard.r issued by the Comptroller General of the United States, the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of the Fortuna Union High School District (the "District") as of and for the year ended June 30, 2015, and the related notes to the financial statements, which collectively comprise the District's basic financial statements, and have issued our report thereon dated December 4, 2015.

Internal Control Over Financial Reporting

In planning and performing our audit of the financial statements, we considered the District's internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the District's internal control. Accordingly, we do not express an opinion on the effectiveness of the District's internal control.

i\ dejiden')' in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weaknesJ is a deficiency, or combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the financial statements will not be prevented, or detected and corrected, on a timely basis. A Jignijicant dejiaency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.

65

\100 C Street, Snitc 10:) u Arcata. CA 95521 • 707.)'122.Y)37 (Bus.) ., 707 ... :142.?>291) (Fax)

:)2:1 Second Street, Suitl· :WI .. Etneka. CA q;)~()l • 707.·t-t2.17:n (Bus.) 8 707.442.:)2q?i (Fax) E rllm@dft!Hjill.ll!/11 E-nuil


INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FIN1\NCTi\L REPORTING AND ON COMPLIANCE 1\ND OTHER MATTERS

BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORl\fED IN 1\CCORDANCE WITH GOVERNMENT AUDITING 5TA1'.JDARDS -CONTINUED

Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not desit,med to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and, therefore, material weaknesses or significant deficiencies may exist that were not identified. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. We did identify certain a deficiency in internal control, described in the accompanying Schedule of Audit Findings and Questioned Costs as Finding 2015-0001, that we consider to be a significant deficiency.

Compliance and Other Matters

As part of obtaining reasonable assurance about whether the District's financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the detennination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed instances of noncompliance or other matters that are required to be reported under Gowmment Auditing StandardJ, and which are described in the accompanying Schedule of Audit Findings and Questioned Costs as Findings 2015-0002 through 2015-0004.

District's Response to Findings

The District's responses to the findings identified in our audit are described in the accompanying Schedule of Audit Findings and Questioned Costs. The District's responses were not subjected to the auditing procedures applied in the audit of the financial statements, and, accordingly, we express no opinion on them.

Purpose of this Report

The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the District's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing StandardJ in considering

66


INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS

BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORc'VIED IN ACCORDANCE WITH GOVERNMENTAUDIIING STANDARDS -CONTINUED

the entity's internal control and compliance. Accordingly, this communication is not suitable for any other purpose.

D~~.M~+- Co-. CERTIFIED PUBLIC ACCOUNTANTS Eureka, California December 4, 2015

67

John R. CofT, C:I'A Kemw1 h X. Stringer. CPA

1\lark C. \\'ctzel, Cl'·\

1\licltal'l R. Cline, Cl':\ DAVID L. MOON IE & co., LLP

Certified Public Accountants


INDEPENDENT AUDITOR'S REPORT ON SD\TE COMPLIANCE

Board of Trustees Fortuna Union High School District 379 12•h Street Fortuna, California 95540

Compliance

:\.aron S. Weiss, Cl':\

Joshua S. !\filler, Cl'..\

\lctt!lH'W.J. IIaguc. CPA

We have audited the Fortuna Union High School District's (the District) compliance with the requirements specified in the Guide hJrAnnuaiAuditJ ofK-12 Loml Edumtional AgendeJ and State Compliam" Reporting, issued by the California Education Audit Appeals Panel, that are applicable to the District's educational programs for the year ended June 30, 2015.

Management's Responsibility

Compliance with the applicable compliance requirements referred to above is the responsibility of the District's management.


Our responsibility is to express an opinion on the District's compliance with the applicable compliance requirements referred to above based on our compliance audit.

Our compliance audit was conducted in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in G01Jernment Auditing Standardr, issued by the Comptroller General of the United States; and the Guide for Annual AuditJ of K-12 Local Educational AgendeJ and J tate Compliant? &porting, prescribed in the California Code of &gu!ationJ, Title 5, Section 19810 and following. The compliance audit included examining, on a test basis, evidence about the District's compliance with those requirements and performing such other procedures as we considered necessary under the circumstances. \'Ve believe that our compliance audit provides a reasonable basis for our opuuon. Our compliance audit does not provide a legal determination of the District's compliance.

68

900 (;Street, Suite HH m :\.rcata, CA. 9:):):21 • 7fl'i.~:Z:23:n7 (Bus.) "' 707.44:2.::1298 (Fax)

:Lz:. Second S!J"Ct'l. Sl!li<.' .'Hll • Eureka, CA ~l:l!""JOl III 707A·i2.J7:~7 (Btls.) • 707 . ..:J42.:"i29H {Fax) fl rfllldlrlflli'l"jJ(/.{{!1// F-m,lil


INDEPENDENT AUDITOR'S REPORT ON STATE COMPLIANCE- CONTINUED

In connection with our compliance audit referred to above, we tested the following compliance requirements:

Description

Attendance Teacher certification and misassignments Kindergarten Continuance Independent study Continuation education Instructional Time Instructional Materials Ratio of Administrative Employees to Teachers Classroom Teacher Salaries Early Retirement Incentive Program GANN Limit Calculation School Accountability Report Card Juvenile Court Schools l\1iddle or Early College High School K-3 Grade Span 1\djustment Transportation Maintenance of Effort Regional Occupational Centers or Programs Maintenance

of Effort Adult Education Maintenance of Effort California Clean Energy Jobs Act After School Education and Safety Program:

After school Before school General

Proper Expenditure of Education Protection Account Funds Common Core Implementation Funds Unduplicated Local Control Funding Formula Pupil Counts Local Control and Accountability Plan Charter Schools:

Attendance Mode of Instruction Nonclassroom-Based Instruction/Independent Study

for Charter Schools Determination of Funding for Nonclassroom-Based Instruction Annual Instructionall\1inutes - Classroom Based Charter School Facility Grant Program

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Procedures Performed

Yes Yes

Not applicable Yes Yes Yes Yes Yes Yes

Not applicable Yes Yes

Not applicable Yes

Not applicable Yes

Not applicable Not applicable

Yes

Not applicable Not applicable Not applicable

Yes Yes Yes Yes

Not applicable Not applicable

Not applicable Not applicable Not applicable Not applicable

FOKilJNA UNION HIGH SCHOOL DISTRICT

INDEPENDENT AUDITOR'S REPORT ON STATE COMPLIANCE- CONTINUED

Opinion

In our opinion, the District complied, in all material respects, with the compliance requirements referred to above that are applicable to the District's educational programs for the year ended June 30, 2015.

Other Matters

The results of our auditing procedures disclosed an instance of noncompliance which is required to be reported in accordance with the California Education Audit Appeals Panel's Guide For Annual Audits of K-12 Local Edumtional Agencies and State Complian<"l? Reporting, and which is described in the accompanying Schedule of Audit Findings and Questioned Costs as Finding 2015-0004. Our opinion on the District's compliance with the requirements specified in the Guide f<or Annual Audit.r of K-12 Loml Educational Agencies and State Compliam-e Reporting is not modified with respect to this matter.

District's Response to Findings

The District's response to the finding identified in our audit is described in the accompanying Schedule of Audit Findings and Questioned Costs. The District's response was not subjected to the auditing procedures applied in the audit of compliance and, accordingly, we express no opinion on the response.

Purpose

The purpose of this report on state compliance is solely to describe the scope of our testing of the District's state compliance and the results of that testing based on the requirements specified in the Guzde f<or Annual Audits of K-12 Loml Educational Agencies and State Complianr-e Reporting. Accordingly, this report is not suitable for any other purpose.

t~ c:f...f/v\~-r- &. CERTIFIED PUBLIC ACCOUNTANTS Eureka, California December 4, 2015

70

John R. Col'f', Cl'_-'1. D [M Kctnlcth X. Stringer, (:J'.--\

!\lark (;. \Vt'tzel, CP:\ Aaron S. Weiss, CP.-'1.

,\1ichacl R. Cline. cPA DAVID L. MOONIE & co., LLP .Joshuct S. :'diller, Cl'.-'1.

Certified Public Accountants Mat!hcwJ.llag·uc,cJ>.-'1.


INDEPENDENT A.UDITOR'S REPORT ON COMPLL\NCE FOR EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY

OMB CIRCULARA-133

Board of Trustees Fortuna Union High School District 379 12th Street Fortuna, California 95540

Report on Compliance for Each Major Federal Program

We have audited Fortuna Union High School District's (the "District") compliance with the types of compliance requirements described in the OMB Circular A-133 Compliam~ Supplement that could have a direct and material effect on each of the District's major federal programs for the year ended June 30, 2015. The District's major federal programs are identified in the summary of auditor's results section of the accompanying Schedule of Audit Findings and Questioned Costs.

Management's Responsibility

Management is responsible for compliance with the requirements of laws, regulations, contracts and grants applicable to its federal programs.


Our responsibility is to express an opimon on compliance for each of the District's major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of },merica; the standards applicable to financial audits contained in Go/Jernment Auditing Standard.r, issued by the Comptroller General of the United States; and OMB Circular ;\-133, Audits ol State.r, l.JJcal GovernmentJ; and Non-Profit Organizations. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the District's compliance with those requirements and performing such other procedures as we considered necessarv in the circumstances.

71

qf)l) (;Street, Suite ]():--) "' Arcata. C..-\. ~):):J:!l a 707.B22.5)~B7 (Bus.·J ., 707.':H2.:J2q1) (Fax)

:)2:) Second Street, Suite >WI .. Furek;t, CA ~~;-)!)()] .. 707.-142.17:n (Bus.) .. 707.-~--t2.:i2\l.S (Fax) II r/!mtlh//!!hjlli.lf!lll E"mail


INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE FOR Ei\CH M_AJOR -PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED

BY OMB CIRCULAR A-133- CONTINUED

We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of the District's compliance.

Opinion on Each Major Federal Program

In our opinion, the District complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended June 30,2015.

Other Matters

The results of our auditing procedures disclosed instances of noncompliance, which are required to be reported in accordance with OMB Circular J\-133 and which are described in the accompanying Schedule of Audit Findings and Questioned Costs as Findings 2015-0002 and 2015-0003. Our opinion on each major federal program is not modified with respect to these matters.

The District's responses to the noncompliance findings identified in our audit are described in the accompanying Schedule of Audit Findings and Questioned Costs. The District's responses were not subjected to the auditing procedures applied in the audit of compliance and, accordingly, we express no opinion on the response.

Report on Internal Control Over Compliance

The management of the District is responsible for establishing and mainta1mng effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered the District's internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with OMB Circular A-133, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the District's internal control over compliance.

1\ deji,iemy in internal ,vtztro! oz,er wmpliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakne.r.r in internal

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INDEPENDENT AUDITOR'S REPORT ON COl\!PLL\NCE FOR EACH J\L\IOR -PROGRAM AND ON INTERNi\L CONTROL OVER COMPLIANCE REQUIRED

BY OMB CIRCULAR A-133- CONTINUED

,vntrol over mmp!iance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A Jignificant deficiency in internal mntro! oz,er mmpliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance.

Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.

The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of OMB Circular A-133. Accordingly, this report is not suitable for any other purpose.

~-;1_-~~-\-G,-_ CERTIFIED PUBLIC ACCOUNTANTS Eureka, California December 4, 2015

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AUDIT FINDINGS AND QUESTIONED COSTS


SCHEDULE OF AUDIT FINDINGS AND QUESTIONED COSTS

June 30, 2015

Section I -Summary of Auditor's Results Financial Statements

Type of auditor's report issued:

Internal control over financial reporting: Material weakness(es) identified? Significant deficiency(ies) identified not considered

to be material weakness(es)?

Noncompliance material to financial statements noted?

Federal Awards Internal control over major programs:

Material weakness( es) identified? Significant deficiency(ies) identified not considered

to be material weakness(es)?

Type of auditor's report issued on compliance for maJor programs:

Any audit findings disclosed that are required to be reported in accordance with Circular ,'\-133, Section .51 O(a)

Identification of major programs: CFDA Numbers

84.010 10.555 10.553

Name of Federal Program or Cluster NCLB: Title I NationalSchoolLunch National School Breakfast

Dollar tl1reshold used to distinguish between Type A and Type B programs:

Auditee qualified as low-risk auditee?

74

Unqualified

No

Yes

No

No

No

Unqualified

Yes

$300,000

Yes


SCHEDULE OF AUDIT FINDINGS AND QUESTIONED COSTS- CONTINUED

June 30, 2015

Section II - Financial Statement Findings

2015-0001: PAYROLL- INTERNAL CONTROLS (CODE 30000)

Criteria

Good internal controls include review of complicated special pay calculations to verify accuracy of the calculation.

Condition

During our testing of payroll, in which we vouched fifteen paychecks with unusual or additional pay items, we noted one instance where an employee was overpaid by $1,181. Based on review of other paychecks, this error was for an unusual pay situation and does not indicate a general material misstatement of salaries.

A.n employee was overpaid by $1,181.

The overpayment was due to a clerical error in adding up extra hours worked by an employee.

Recommendation

We recommend that the District set up a repayment plan to collect the overpayment from the affected employee. We further recommend that the District establish procedures to double-check unusual pay calculations.

Corrective Action Plan

The District agrees and will set up a repayment plan to collect the overpayment from the affected employee and will establish procedures to double-check unusual pay calculations.

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June 30, 2015

Section III- Federal "\ward Findings and Questioned Costs

2015-0002: FEDERAL SCHOOL NUTRITION PROGRAM- REPORTED COSTS (CODE 40000 "\ND 50000)

Programs Affected

National School Lunch Program, U.S. Department of At,>riculture, CFDA number 10.555, passed through the California Department of Education, award year 2014/15, award number not available.

National School Breakfast Program, U.S. Department of Agriculture, CFDA number 10.553, passed through the California Department of Education, award year 2014/15, award number not available.

Criteria

Education Code Section 41352 requires d1at Child Nutrition Program providers submit claims for reimbursement to the California Department of Education within ten days of the end of each month. The June claim includes a cost claim detail report used to report total program expenditures for the year.

Condition

The District's June 2015 cost claim detail report understated the annual costs incurred for the program by $9,022.

The state received incorrect expenditure data.

The June 2015 cost claim detail report did not include the annual adjustment to inventory and other expenses, due to the filing deadline for the cost claim detail report occurring prior to the final year-end adjustments being made.

Questioned Costs

None. The difference in reported expenditures will not affect the District's funding for the school nutrition program.

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FORTUNA. UNION HIGH SCHOOL DISTRICT


June 30, 2015

Recommendation

We recommend that the District submit an amended June 2015 cost claim detail report to increase the originally reported costs for food and labor by $8,924 and $98, respectively, if the State software allows a revision. We further recommend that future annual cost claim detail reports be compared to Cafeteria Fund adjusted expenditures after the fmal annual Cafeteria Fund adjustments are done, and an amended report be flled within two months of the year-end if necessary to agree the report to the adjusted total expenditures.


The District agrees and will submit an amended June 2015 cost claim detail report to increase the originally reported costs for food and labor by $8,924 and $98, respectively, if the State software allows a revision, and will compare future annual cost claim detail reports to Cafeteria Fund adjusted expenditures after the final annual Cafeteria Fund adjustments are done, and will file an amended report within two months of the yearend if necessary to agree the report to the adjusted total expenditures.

2015-0003: FJ:;:DERAL SCHOOL NUTRITION PROGRAM- FREE AND REDUCED 1\PPLICATIONS (CODE 50000)

Programs Affected

National School Lunch Program, U.S. Department of Agriculture, CFDA number 10.555, passed through the California Department of Education, award year 2014/15, award number not available.

National School Breakfast Program, U.S. Department of Agriculture, CFDA number 10.553, passed through the California Department of Education, award year 2014/15, award number not available.

Criteria

Title 7, Section 245.10 of the Code of Federal Regulations requires, among other things, that a local education agency have approved policies for obtaining documentation for determining children's eligibility for free and reduced meals.

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FORTUNA UNION HIGH SCHOOL DIS'l1UCT


June 30, 2015

Condition

During out testing of free and reduced applications, in which we tested 38 applications, we noted one instance where the District incorrectly determined free status for a student that should have just been approved for reduced meal status. Based on review of over one-half of the applications during our testing, in our opinion the error noted above was an isolated occurrence. The error resulted in an over-reimbursement to tl1e District of $126. This is not material to the program and no amendment of claimed meals will be necessary.

Clerical error.

Questioned Costs

The District received an over-reimbursement for free meals of approximately $126.

Recommendation

We recommend that tl1e District carefully review each application to ensure the application has been correctly classified as free, reduced, or paid.


The District agrees and will carefully review each application to ensure the application has been correctly classified as free, reduced, or paid.

Section IV- State Award Finding$ and Questioned Costs

2015-0004: UNDUPLICATED PUPIL COUNTS (CODE 40000)

Criteria

Pursuant to Education Code Section 42238.02(b)(2), the District is required to annually submit its enrolled free and reduced-price meal eligibility, foster youth, and English learner pupil-level records for enrolled pupils to the State Superintendent using the California Longitudinal Pupil Achievement Data System (C\LP"\DS). This information is used to determine the District's unduplicated pupil count. Unduplicated pupil means a pupil enrolled in a school district or a charter school who

78



June 30, 2015

is either classified as an English learner, eligible for a free or reduced-price meal, or is a foster youth. A pupil is counted only once if they qualify under multiple categories. The unduplicated pupil count is used in the calculation of the District's apportionment from the local control funding formula. The count is documented in CALPADS Forms 1.17 and 1.18.

Condition

During our testing of the unduplicated student counts we noted two students for whom the District could not find documentation of eligibility for free/ reduced price meals. Our original sample included approximately 10 percent of the entire population. We expanded our procedures, and detennined there were a total of 18 students incorrectly claimed on the Form 1.18 as eligible for free/ reduced meals.

The District's unduplicated student count was overstated by 18 students. Reducing the unduplicated count by 18 results in a reduction in the revenue from the local control funding formula in the amount of $5,524. Following is a schedule of the reported and audited counts.

Unduplicated Pupil Count Increase (Decrease) to Unduplicated

Pupil Count Based on ~\djustments of:

Eligibility Eligibility Total Enrollment

Certified For Free/ for English Eligibility "~djusted Certified "\djusted Total Reduced Learner For Both Total Total Total

Unduplicated Price J\Ieals Funding FRPM Unduplicated Enrollment Enrollment

Pupil Count (FRP~!) (EL) and EL Pur:il Count Count Count

District Total 516 (18) 498 1,066 1,066

Schools Tested:

Fortuna Union High 406 (14) 392 825 825 ~\cademy of the Redwoods 64 (2) 62 174 174 East High 46 (2) 44 67 67

Cause

It appears the difference is due mainly to students initially carried over from the prior year as eligible for free/reduced meals who either were no longer eligible in 2014/15 or who did not turn in an application for 14/15, and were not then subsequently removed

79



June 30, 2015

from the Form 1.18 prior to the certification date.

Recommendation

\'Ve recommend that the District ensure that free/reduced meals applications are on hand for all students included in the CALPADS Fonns 1.18 and 1.17.


The District agrees and will ensure that free/ reduced meals applications are on hand for all students included in the CALPADS Forms 1.18 and 1.17.

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SUl\fl\L\RY SCHEDULE OF PRIOR YEc\R AUDIT FINDINGS

June 30,2015

2014-1: STUDENT BODY ACCOUNT EXPENDITURES- INTERNAL CONTROLS (CODE 30000)

Condition

During our testing of student body fund expenditures, in which we tested 42 percent of total student body expenditures, we noted five exceptions totaling $8,115, where there was no student approval prior to issuing the disbursement. We also noted two exceptions totaling $1,819 where detailed supporting documentation was not present. We noted one exception where student funds were used as a donation of cash in the amount of $150, and one exception where an employee was paid a stipend of $500 out of the student body account.

Recommendation

We recommend that the District obtain student signatures for approval and detailed supporting documentation for all expenditures prior to disbursement. We also recommend that the District not pay cash donations and employee stipends out of student body funds.

Current Status

Implemented.

2014-2: USE OF GIFT CERTIFICATES AS INCENTIVES/AWARDS- INTERNM, CONTROL (CODE 30000)

Condition

During our testing of District expenditures for goods and services, in which we tested 32 percent of total expenditures, we noted one expenditure in the amount of $100 for gift cards apparently issued as student awards.

Recommendation

We recommend that the District discontinue the purchase of gift cards for student or staff awards.

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SUMJ\L\RY SCHEDULE OF PRIOR YEAR AUDIT FINDINGS- CONTINUED

June 30, 2015

Current Status

Implemented.

2014-3: FEDERAL SCHOOL NUTRITION PROGR.A.M- REPORTED COSTS (CODE 40000 ,\ND 50000)

Condition

The District's June 2014 claim for reimbursement overstated the annual costs incurred for the program by $3,847.

Recommendation

We recommend d1at the District amend the June 2014 claim for reimbursement to the correct total amount. We further recommend that the District make an effort to carefully review the amounts reported on CNFS 71-5 to ensure clerical accuracy.

Current Status

Partially Implemented. See Finding 2015-0002.

2014-4: UNDUPLIC\TED PUPIL COUNTS (CODE 40000)

Condition

During our testing of the unduplicated student counts we noted three students for whom the District could not find documentation of eligibility for free/ reduced price meals. Our sample included all of the schools within the District and comprised 80 percent of the total students claimed as free/ reduced price meals and English language funding elit,rible. Extrapolating this error to the total population results in a computed number of missing applications of 4.

Recommendation

We recommend that d1e District ensure that free/reduced meals applications are on hand for all students included in the CALPADS Forms 1.18 and 1.17.

Current Status

Partially implemented. See Finding 2015-0004.

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