Bangor Township Schools Year Ended June 30
Bangor Township Schools
Year Ended June 30, 2017
Financial Statements and Single Audit Act Compliance
BANGOR TOWNSHIP SCHOOLS ELECTED OFFICERS For the Year Ended June 30, 2017 ADMINISTRATION Superintendent Chief Financial Officer
Matt Schmidt Jonathan Foco
BOARD OF EDUCATION President Vice President Secretary Treasurer Trustee Trustee Trustee
Richard Kowalski John Loop Melissa Kaczmarek Brian Tobin Jason Forgash Mark Seymour Patrick Shaffer
BANGOR TOWNSHIP SCHOOLS Table of Contents Page Independent Auditors' Report
1
Management's Discussion and Analysis
5
Basic Financial Statements District-wide Financial Statements: Statement of Net Position Statement of Activities Fund Financial Statements: Balance Sheet - Governmental Funds Reconciliation of Fund Balances for Governmental Funds to Net Position of Governmental Activities Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds Reconciliation of Net Changes in Fund Balances of Governmental Funds to Change in Net Position of Governmental Activities Statement of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual - General Fund Statement of Fiduciary Assets and Liabilities Notes to the Financial Statements
20 28 30
Required Supplementary Information MPSERS Cost-Sharing Multiple-Employer Plan: Schedule of the District's Proportionate Share of the Net Pension Liability Schedule of District Contributions
51 52
Combining and Individual Fund Financial Statements and Schedules Nonmajor Governmental Funds: Combining Balance Sheet Combining Statement of Revenues, Expenditures and Changes in Fund Balances Schedule of Revenues, Expenditures and Changes in Fund Balance Budget and Actual: Food Service Special Revenue Fund Community Service Special Revenue Fund
13 14 16 17 18 19
55 57
59 60
BANGOR TOWNSHIP SCHOOLS Table of Contents Single Audit Act Compliance Independent Auditors' Report on the Schedule of Expenditures of Federal Awards Required by the Uniform Guidance
62
Schedule of Expenditures of Federal Awards
63
Notes to the Schedule of Expenditures of Federal Awards
65
Independent Auditors’ Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards
66
Independent Auditors’ Report on Compliance for Each Major Federal Program and Internal Control over Compliance Required by the Uniform Guidance
68
Schedule of Findings and Questioned Costs
70
Summary Schedule of Prior Audit Findings
71
Rehmann Robson
INDEPENDENT AUDITORS' REPORT
5800 Gratiot Rd. Suite 201 Saginaw, MI 48638 Ph: 989.799.9580 Fx: 989.799.0227 rehmann.com
October 4, 2017 Board of Education Bangor Township Schools Bay City, Michigan 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 Bangor Township Schools (the “District”), as of and for the year ended June 30, 2017, 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. Independent Auditors' Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free 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 statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the District’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.
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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 Bangor Township Schools, as of June 30, 2017, and the respective changes in financial position thereof and the budgetary comparison for the general fund for the year then ended in conformity with accounting principles generally accepted in the United States of America. Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management's discussion and analysis and schedules for the pension plan, as listed in the table of contents, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide assurance. 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 and individual fund financial statements and schedules are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual fund financial statements and schedules 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 and individual fund financial statements and schedules are fairly stated, in all material respects, in relation to the basic financial statements as a whole.
2
Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated October 4, 2017, on our consideration of the District’s internal control over financial reporting and 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 the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the District's internal control over financial reporting and compliance.
3
MANAGEMENT'S DISCUSSION AND ANALYSIS
4
BANGOR TOWNSHIP SCHOOLS Management's Discussion and Analysis Bangor Township Schools (the "District") is a K-12 school district located in Bay City, Michigan. As management of the District, we offer the readers of the District's financial statements this narrative overview and analysis of its financial activities for the years ended June 30, 2017 and 2016. The management’s discussion and analysis is provided at the beginning of the audit to provide an overview of the past and current position of the District’s financial condition. This summary should not be taken as a replacement for the financial statements, which consist of the basic financial statements and other supplemental information and present all the District’s revenue and expenditures by program for the general fund, special revenue funds, capital projects fund, and debt service funds. Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction to the District's basic financial statements. The District's basic financial statements are comprised of four components: 1) district-wide financial statements, 2) fund financial statements, 3) statement of fiduciary assets and liabilities, and 4) notes to the financial statements. This report also contains supplementary information to compliment the financial information provided. District-Wide Financial Statements. The district-wide financial statements are designed to provide readers with a broad overview of the District's finances, similar to the private sector financial statements. They provide a clear picture of the District as a single entity to complement the traditional fund-based financial statements. The statement of net position presents information on all of the District's assets, deferred outflows of resources, liabilities, and deferred inflows of resources, with the difference reported as net position. Net position should be understood as a measure of “net worth” rather than as a measure of expendable or available resources. Over time, increases or decreases in the net position of the District may service as a useful indicator of whether the Bangor Township Schools' financial position is improving or deteriorating. The statement of activities presents information showing how the District’s net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., earned but unused compensated leave). Both of the government-wide financial statements display functions of the District that are principally supported by taxes and intergovernmental revenues (governmental activities). The activities of the District include instruction, supporting services, food services, athletics, and community services. The District has no business-type activities as of and for the year ended June 30, 2017. Fund Financial Statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The District, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. The District has two types of funds: governmental funds and fiduciary funds. Governmental Funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating the District’s near-term financing requirements.
5
BANGOR TOWNSHIP SCHOOLS Management's Discussion and Analysis Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long term impact of the District’s near term financing decisions. Both the governmental funds balance sheet and the governmental funds statement of revenues, expenditures and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. Fiduciary Fund. The District acts as the trustee for its student activity funds. All of the District’s fiduciary activities are reported in a separate statement of fiduciary assets and liabilities. These activities are excluded from the District’s government-wide financial statements because the District cannot use these assets to finance its operations. District-wide Financial Analysis Net position may serve over time as a useful indicator of a government’s financial position. In the case of the District, liabilities and deferred inflows of resources exceeded assets and deferred outflows of resources by $19,540,078 at the end of the most recent fiscal year. The following schedule provides a summary of the District’s assets, deferred outflows of resources, liabilities, deferred inflows of resources, and net position: Statement of Net Position
Assets Current and other assets Capital assets, net
Deferred outflows of resources Liabilities Long-term liabilities Other liabilities
Deferred inflows of resources Net Position Net investment in capital assets Restricted Unrestricted (deficit)
June 30, 2017
June 30, 2016
$ 8,398,111 15,342,794 23,740,905
$ 7,683,433 15,755,315 23,438,748
5,494,357
4,320,637
12,296,969 36,375,265 48,672,234
13,161,955 35,035,959 48,197,914
103,106
107,747
4,782,698 2,408,145 (26,730,921)
Total net position (deficit)
4,329,936 2,034,296 (26,910,508)
$(19,540,078) $(20,546,276)
The above analysis focuses on the net position. The change in net position of the District’s governmental activities is discussed below. The deficit net position of $19,540,078 is directly related to the net pension liability. The District's net investment in capital assets totaled $4,782,698. This compares the original cost, less depreciation of the District’s capital assets, to long-term debt used to finance the acquisition of those assets. Most of the debt will be repaid from voter-approved property taxes collected as the debt service comes due. An amount of $2,408,145 is restricted to pay debt service amounts owed by the District, and for future food service and community service expenses. This results in an unrestricted deficit of $26,730,921.
6
BANGOR TOWNSHIP SCHOOLS Management's Discussion and Analysis The operating results of the general fund will have a significant impact on the change in unrestricted net position from year-to-year. The results of this year’s operations for the District as a whole are reported in the statement of activities, which shows the changes in net position for the recent fiscal year. As reported in the statement of activities, the cost of all governmental activities this year was $25,223,139. Certain activities were partially funded from those who benefited from the programs (charges for services), in the amount of $1,007,089, by other governments and organizations that subsidized certain programs with grants and contributions, in the amount of $5,068,072, or capital grants and contributions, in the amount of $333,946. The remaining “public benefit” portion of governmental activities was funded with $3,408,459 in taxes, $16,385,704 in State foundation allowance, $13,401 in unrestricted investment earnings, and $12,666 in grants and contributions not restricted to specific programs. During 2017, the District experienced an increase in net position of $1,006,198. Change in Net Position For Year Ended June 30, 2017 Program revenues: Charges for services Operating grants and contributions Capital grants and contributions General revenues: Property taxes Unrestricted state aid Grants and contributions not restricted to specific programs Unrestricted investment earnings Total revenues Expenses Instruction Supporting services Food services Athletics Community services Interest on long-term debt Unallocated depreciation Total expenses Change in net position
$ 1,007,089 5,068,072 333,946
Net position, end of the year
$
886,279 4,630,583 225,679
3,408,459 16,385,704 12,666 13,401 26,229,337
3,482,309 15,729,725 18,355 5,747 24,978,677
13,983,676 8,038,244 1,164,173 576,412 219,088 167,235 1,074,311 25,223,139
13,579,612 7,693,229 1,140,099 549,137 181,378 229,313 1,048,407 24,421,175
1,006,198
557,502
(20,546,276)
Net position, beginning of the year
June 30, 2016
(21,103,778)
$(19,540,078) $(20,546,276)
The District's net position increased by $1,006,198 during the current fiscal year, compared to an increase in $557,502 in the prior fiscal year. This change is mainly due to an increase in the unrestricted State aid revenue of $655,979, which was the result of an increase from the state in the foundation allowance of 120 dollars per student and increase of student count of 47 pupils. This increase in the foundation allowance was offset by an increase of $404,065 in instruction expenses, which was the result of giving a step increase to the teachers, 1% to all other employees, and a 17% increase to health insurance. The supporting services increased by adding 200,000 into our curriculum budget. The district has taken a different strategy that all curriculum purchases need to run through the curriculum director. With that stance the district moved an additional 125,000 into the textbook line. The district also had an added cost in its Virtual school from the prior year of roughly 110,000. This was a direct effect of increase students in the program and purchasing the curriculum online. The district also incurred about 50,000 more for EI students that was paid out to the ISD.
7
BANGOR TOWNSHIP SCHOOLS Management's Discussion and Analysis As discussed above, the net cost shows the financial burden that was placed on the State and District taxpayers by each of these functions. Since property taxes and unrestricted State aid constitute the vast majority of the District's operating revenue sources, the Board of Education and Administration must annually evaluate the needs of the School District and balance those needs with State-prescribed available unrestricted revenue. Bangor Township Schools' Governmental Funds As noted earlier, the District uses funds to help it control and manage money for particular purposes. Looking at the funds helps the reader consider whether the District is being held accountable for the resources taxpayers and others provide to it and may give more insight into the District’s overall financial health. As the District completed the most recent school year, the governmental funds reported a combined fund balance of $6,171,298, an increase of $965,168 from the prior year. The changes by major and non-major funds are as follows: 2009 Bond Nonmajor Total Debt Service Governmental Governmental General Fund Fund Funds Funds Fund balance, beginning of year Increase in fund balance Fund balance, end of year
$ 2,884,092
$ 1,399,998
245,319 $ 3,129,411
$
922,040
$ 5,206,130
233,333
486,516
965,168
$ 1,633,331
$ 1,408,556
$ 6,171,298
In the general fund, the District's principal operating fund, the fund balance had an increase of $245,319 from the prior year. The district was able to add to its fund balance due to cost effectiveness of everyone's dedication to spending wisely. The district wants to maintain its fund balance per NEOLA policy 6220. The fund balance of the general fund is available to fund costs related to allowable school operating purposes. The combined fund balance of the debt service funds, which is restricted, was $1,858,790. Millage rates for debt service were established at 2.35 mills for the most recent fiscal year. Millage rates are determined annually to ensure that the District accumulates sufficient resources to pay annual bond debt service. The other nonmajor funds (special revenue and capital projects) increased by $446,855 primarily due to the transfers from the general fund to the capital projects to pay for the transportation parking lot. General Fund Budgetary Highlights Over the course of the year, the District revises its budget as it attempts to account for unexpected changes in revenue and expenditures. State law requires that the budget be amended to ensure that expenditures do not exceed appropriations. The final amendment to the budget was actually adopted on June 26, 2017. A statement showing the District’s original and final budget amounts compared with amounts actually paid and received is provided in the basic financial statements. The original budget was adopted on June 27, 2016 and revisions were made to the current year general fund original budget on January 30, 2017. The district had an increase of 89 students from its original budget to the amended budget which was an increase of $668,479 in revenue. There was also an increase of At-Risk funding in the amount of $86,547. Title1 also had an increase of $72,191 all do to the increase in the number of students qualifying for free and reduced lunch. The District increased its expenditure budget by $105,000 to purchase new textbooks. Three newer buses were added to the bus fleet in the amount of $130,000. The District also contracted for the construction of a transportation parking lot in the amount of $338,000. The District has continuously been giving raises and trying to maintain it's infrastructure while not impacting its fund balance.
8
BANGOR TOWNSHIP SCHOOLS Management's Discussion and Analysis Capital Asset and Debt Administration Capital Assets. At June 30, 2017, the District had $15,342,794 invested in a broad range of capital assets, including land, buildings and improvements, vehicles, and equipment and other. This amount represents a net decrease (net additions, disposals, and depreciation) of $412,521 or approximately 2.6%, from the prior year. June 30, 2017 181,770
June 30, 2016
Land Buildings and improvements (net of accumulated depreciation) Vehicles (net of accumulated depreciation) Equipment and other (net of accumulated depreciation)
$
$
181,770
13,370,455 815,277 975,292
13,936,008 708,562 928,975
Total capital assets, net
$ 15,342,794
$ 15,755,315
The district purchased five newer buses during the fiscal year in the amount of $250,900. The district also put in a new PA system at John Glenn and Christa McAuliffe in the amount of $41,375. Other projects that occurred during the year are as followed: Walls at Bangor WEST and Lincoln in the amount of $38,745, 3 sets of chrome book carts in the amount of $22,706, and a new compact 3039 R John Deer Tractor in the amount of $32,496. Additional information on the District's capital assets can be found in the notes to financial statements section of this report. Long-term Debt. At the end of this year, Bangor Township School District had $10,425,000 in bonds outstanding versus $11,200,000 in the previous year - a decrease of approximately 6.9%. Long-term debt consisted of the following: June 30, 2017
June 30, 2016
General Obligation Bonds Installment notes Unamortized premium Compensated absences
$ 10,425,000 166,657 61,739 1,643,573
$ 11,200,000 248,026 82,315 1,631,614
Total debt
$ 12,296,969
$ 13,161,955
Additional information on the District's long-term debt can be found in the notes to financial statements section of this report.
9
BANGOR TOWNSHIP SCHOOLS Management's Discussion and Analysis Economic Factors and Next Year's Budgets and Rates Elected officials and administration considered many factors when preparing the District’s 2017-18 fiscal year budget. The retirement rate increased 0.62% to 25.56% for the upcoming 2017-18 school year. The district experienced a 2% increase in the insurance premium. One of the most important factors affecting the budget is our student count. The State foundation revenue is determined by multiplying the blended student count by the foundation allowance per pupil. The blended count for 2017-18 fiscal year is 90% of the September 2017 and 10% of the February 2018 student counts. The 2017-18 budgets were adopted in June 2017, based on an estimate of 2,541 students that will be enrolled in September 2017. Approximately 83% of total general fund revenue is from the foundation allowance. The State is looking to increase the foundation allowance from $7,511 to $7,631 per student for the 2017-18 school year. Under State law, the District can’t assess additional property tax revenue for general operations. As a result, District funding is heavily dependent on the State’s ability to fund local school operations. Once the final student count and related per pupil funding is validated, State law requires the School District to amend the budget if actual District resources are not sufficient to fund original appropriations. Since the District’s revenue is heavily dependent on State funding and the health of the State School Aid Fund, the actual revenue received depends on the State’s ability to collect revenue to fund its appropriation to school districts. The State periodically holds revenue estimating conferences to estimate revenue. If actual State revenue is less than their estimates, reduction to the per-pupil funding allowance may be necessary. The District’s unassigned general fund balance of $3,108,280 is sufficient to meet any unanticipated shortfalls the State may experience in the School Aid Fund for the 2017-18 school year. Requests for Information This financial report is designed to give our citizens, taxpayers, parents, students, investors and creditors a general overview of the District’s finances and to demonstrate the District’s accountability for the money it receives. Questions concerning this report or requests for additional information should be addressed to Jonathan Foco, Chief Financial Officer, Bangor Township Schools, 3359 E. Midland Road, Bay City, Michigan 48706; telephone number (989) 684-8121, x1204.
10
BASIC FINANCIAL STATEMENTS
11
DISTRICT-WIDE FINANCIAL STATEMENTS
12
BANGOR TOWNSHIP SCHOOLS Statement of Net Position June 30, 2017 Governmental Activities Assets Cash and cash equivalents Investments Receivables Other assets Capital assets not being depreciated Capital assets being depreciated, net
$
Total assets
2,944,829 1,801,398 3,618,449 33,435 181,770 15,161,024 23,740,905
Deferred outflows of resources Deferred pension amounts Deferred loss on bond refunding
5,401,057 93,300
Total deferred outflows of resources
5,494,357
Liabilities Accounts payable and accrued liabilities Long-term liabilities: Due within one year Due in more than one year Net pension liability
1,471,048 10,825,921 34,122,390
Total liabilities
48,672,234
2,252,875
Deferred inflows of resources Deferred pension amounts
103,106
Net position Net investment in capital assets Restricted for: Debt service Food services Community services Unrestricted (deficit)
4,782,698 1,832,728 436,188 139,229 (26,730,921)
Total net position (deficit)
$ (19,540,078)
The accompanying notes are an integral part of these financial statements.
13
BANGOR TOWNSHIP SCHOOLS Statement of Activities For the Year Ended June 30, 2017 Program Revenues
Functions / Programs Governmental activities: Instruction Supporting services Food services Athletics Community services Interest on longterm debt Unallocated depreciation Total
Charges for Services
Expenses
$
$
13,983,676 8,038,244 1,164,173 576,412 219,088
$
95,772 159,975 408,890 111,635 230,817
Operating Grants and Contributions
Capital Grants and Contributions
$
$
456,564 3,725,801 885,707 -
Net (Expense) Revenue
333,946 -
$ (13,097,394) (4,152,468) 130,424 (464,777) 11,729
167,235
-
-
-
(167,235)
1,074,311
-
-
-
(1,074,311)
333,946
(18,814,032)
25,223,139
$
1,007,089
$
5,068,072
General revenues: Property taxes Unrestricted state aid Grants and contributions not restricted to specific programs Unrestricted investment earnings
$
3,408,459 16,385,704 12,666 13,401
Total general revenues
19,820,230
Change in net position
1,006,198
Net position, beginning of year
(20,546,276)
Net position, end of year
$ (19,540,078)
The accompanying notes are an integral part of these financial statements.
14
FUND FINANCIAL STATEMENTS
15
BANGOR TOWNSHIP SCHOOLS Balance Sheet Governmental Funds June 30, 2017
General Fund Assets Cash and cash equivalents Investments Accounts receivable Due from other governments Due from other funds Prepaid items Inventories Total assets Liabilities Accounts payable Salaries payable Accrued liabilities Due to other funds
2009 Bond Debt Service Fund
Nonmajor Governmental Funds
Totals
$
690,447 1,801,398 52,399 3,558,194 21,131 -
$
1,633,331 -
$
621,051 7,856 783,543 12,304
$
2,944,829 1,801,398 52,399 3,566,050 783,543 21,131 12,304
$
6,123,569
$
1,633,331
$
1,424,754
$
9,181,654
$
206,437 1,208,282 795,896 783,543
$
-
$
12,216 3,982 -
$
206,437 1,220,498 799,878 783,543
Total liabilities
2,994,158
-
16,198
3,010,356
Fund balances Nonspendable Restricted Assigned Unassigned
21,131 3,108,280
1,633,331 -
12,304 788,572 607,680 -
33,435 2,421,903 607,680 3,108,280
Total fund balances
3,129,411
1,633,331
1,408,556
6,171,298
Total liabilities and fund balances
$
6,123,569
$
1,633,331
The accompanying notes are an integral part of these financial statements.
16
$
1,424,754
$
9,181,654
BANGOR TOWNSHIP SCHOOLS Reconciliation Fund Balances for Governmental Funds to Net Position of Governmental Activities June 30, 2017 Fund balances - total governmental funds
$
6,171,298
Amounts reported for governmental activities in the statement of net position are different because: Capital assets used in governmental activities are not financial resources, and therefore are not reported in the fund statement. Capital assets not being depreciated Capital assets being depreciated, net
181,770 15,161,024
Certain liabilities, such as bonds payable, are not due and payable in the current period, and therefore are not reported in the funds. Bonds and installment notes payable Unamortized premiums Unamortized deferred loss on bond refunding Accrued interest on bonds payable Compensated absences
(10,591,657) (61,739) 93,300 (26,062) (1,643,573)
Certain pension-related amounts, such as the net pension liability and deferred amounts are not due and payable in the current period or do not represent current financial resources and therefore are not reported in the funds. Net pension liability Deferred outflows related to the net pension liability Deferred inflows related to the net pension liability
(34,122,390) 5,401,057 (103,106)
Net position of governmental activities
$ (19,540,078)
The accompanying notes are an integral part of these financial statements.
17
BANGOR TOWNSHIP SCHOOLS Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds For the Year Ended June 30, 2017
General Fund Revenues Local sources State sources Federal sources Reimbursements Charges for services
$
Total revenues Expenditures Current: Instruction Supporting services Food services Athletics Community services Debt service: Principal repayment Interest and fiscal charges Tax abatements Capital outlay Total expenditures Revenue over expenditures
2,685,446 20,111,505 456,564 12,666 111,635
2009 Bond Debt Service Fund
Nonmajor Governmental Funds
$
$
-
1,631,868 42,348 843,359 -
Totals $
4,317,314 20,153,853 1,299,923 12,666 111,635
23,377,816
-
2,517,575
25,895,391
13,701,609 7,781,862 568,713 6,285
-
1,139,765 209,268
13,701,609 7,781,862 1,139,765 568,713 215,553
81,369 3,622 485,704
-
775,000 176,526 500 -
856,369 180,148 500 485,704
22,629,164
-
2,301,059
24,930,223
748,652
-
216,516
965,168
663,333 (663,333)
Other financing sources (uses) Transfers in Transfers out
80,000 (583,333)
233,333 -
350,000 (80,000)
Total other financing sources (uses)
(503,333)
233,333
270,000
-
245,319
233,333
486,516
965,168
2,884,092
1,399,998
922,040
5,206,130
Net change in fund balances Fund balance, beginning of year Fund balance, end of year
$
3,129,411
$
1,633,331
The accompanying notes are an integral part of these financial statements.
18
$
1,408,556
$
6,171,298
BANGOR TOWNSHIP SCHOOLS Reconciliation Net Changes in Fund Balances of Governmental Funds to Change in Net Position of Governmental Activities For the Year Ended June 30, 2017 Net change in fund balances - total governmental funds
$
965,168
Amounts reported for governmental activities in the statement of activities are different because: Governmental funds report capital outlays as expenditures. However, in the statement of activities, the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. Capital assets purchased/constructed Donated capital assets Depreciation expense
485,704 333,946 (1,232,171)
Bond proceeds provide current financial resources to governmental funds in the period issued, but issuing bonds increases long-term liabilities in the statement of net position. Repayment of bond principal is an expenditure in the governmental funds, but the repayment reduces long-term liabilities in the statement of net position. Principal payments on long-term liabilities
856,369
Some expenses reported in the statement of activities do not require the use of current financial resources and therefore are not reported as expenditures in governmental funds. Change in net pension liability and related deferred amounts Change in accrued interest payable on long-term debt Amortization of bond premium Amortization of deferred loss on bond refunding Change in the accrual for compensated absences Change in net position of governmental activities
(403,772) 3,999 20,576 (11,662) (11,959) $ 1,006,198
The accompanying notes are an integral part of these financial statements.
19
BANGOR TOWNSHIP SCHOOLS Statement of Revenues, Expenditures and Changes in Fund Balance Budget and Actual - General Fund For the Year Ended June 30, 2017
Original Budget Revenues Local sources: Property taxes Property taxes-interest and penalties Interest Transfers from other districts: Rental of facilities Transportation fees Other
$
2,399,640 6,000 2,000
Final Budget
$
2,391,945 17,700 10,000
Actual
$
2,393,555 25,183 10,961
Actual Over (Under) Final Budget
$
1,610 7,483 961
72,000 90,478 42,250
81,000 90,478 91,805
77,598 82,377 95,772
2,612,368
2,682,928
2,685,446
2,518
State sources: State Aid Foundation Other State Aid At Risk Special Education
17,296,040 362,324 659,593 796,589
18,105,533 420,305 738,603 858,683
18,076,992 434,398 741,424 858,691
(28,541) 14,093 2,821 8
Total state sources
19,114,546
20,123,124
20,111,505
(11,619)
Federal sources: Title I Title IIA
289,990 110,272
362,181 110,768
362,181 94,383
(16,385)
Total federal sources
400,262
472,949
456,564
(16,385)
18,355
12,666
12,666
101,454
117,678
111,635
(6,043)
22,246,985
23,409,345
23,377,816
(31,529)
Total local sources
Reimbursements: Insurance claims Charges for services Total revenues
(3,402) (8,101) 3,967
-
continued…
20
BANGOR TOWNSHIP SCHOOLS Statement of Revenues, Expenditures and Changes in Fund Balance Budget and Actual - General Fund For the Year Ended June 30, 2017
Original Budget Expenditures Instruction: Basic programs: Elementary school: Salaries Employee benefits Purchased services Supplies and materials Total elementary school
$
2,477,500 1,687,040 97,500 59,200 4,321,240
Final Budget
$
2,482,500 1,741,740 186,704 80,200 4,491,144
Actual
$
2,483,777 1,699,156 190,078 81,094 4,454,105
Actual Over (Under) Final Budget
$
1,277 (42,584) 3,374 894 (37,039)
Middle school: Salaries Employee benefits Purchased services Supplies and materials Other Total middle school
1,616,150 994,227 48,025 32,100 375 2,690,877
1,572,500 1,030,279 85,425 56,007 375 2,744,586
1,569,774 1,005,665 92,908 49,611 375 2,718,333
(2,726) (24,614) 7,483 (6,396) (26,253)
High school: Salaries Employee benefits Purchased services Supplies and materials Total high school
1,937,740 1,237,846 81,225 46,710 3,303,521
1,946,940 1,276,746 90,150 91,210 3,405,046
1,959,123 1,251,808 92,968 88,742 3,392,641
12,183 (24,938) 2,818 (2,468) (12,405)
Preschool: Salaries Employee benefits Purchased services Supplies and materials Other Total preschool
159,385 82,250 32,400 2,100 276,135
163,850 75,971 33,391 19,550 292,762
167,014 82,228 37,846 1,575 499 289,162
3,164 6,257 4,455 (17,975) 499 (3,600)
10,591,773
10,933,538
10,854,241
(79,297)
Total basic programs
continued…
21
BANGOR TOWNSHIP SCHOOLS Statement of Revenues, Expenditures and Changes in Fund Balance Budget and Actual - General Fund For the Year Ended June 30, 2017
Original Budget Expenditures (continued) Instruction (concluded): Added needs: Special education: Salaries Employee benefits Purchased services Supplies and materials Other Total special education Compensatory education: Salaries Employee benefits Purchased services Supplies and materials Total compensatory education Total added needs Total instruction Supporting services: Pupil services: Guidance: Salaries Employee benefits Purchased services Supplies and materials Total pupil services
$
1,053,850 781,170 44,690 9,700 110,000 1,999,410
Final Budget
$
1,016,100 777,360 60,190 21,800 135,000 2,010,450
Actual
$
1,028,170 747,527 57,227 16,776 145,270 1,994,970
Actual Over (Under) Final Budget
$
12,070 (29,833) (2,963) (5,024) 10,270 (15,480)
505,526 293,308 7,916 806,750
541,960 296,259 2,687 840,906
541,151 302,619 8,628 852,398
(809) 6,360 5,941 11,492
2,806,160
2,851,356
2,847,368
(3,988)
13,397,933
13,784,894
13,701,609
(83,285)
393,600 356,148 1,950 2,250 753,948
393,300 355,438 2,200 1,250 752,188
396,367 347,818 2,204 1,442 747,831
3,067 (7,620) 4 192 (4,357) continued…
22
BANGOR TOWNSHIP SCHOOLS Statement of Revenues, Expenditures and Changes in Fund Balance Budget and Actual - General Fund For the Year Ended June 30, 2017
Original Budget Expenditures (continued) Supporting services (continued): Instructional staff: Improvement of instruction: Salaries Employee benefits Purchased services Supplies and materials Total improvement of instruction
$
65,662 53,202 27,747 82,500 229,111
Final Budget
$
127,750 67,955 106,605 218,215 520,525
Actual
$
113,799 65,948 97,395 218,294 495,436
Actual Over (Under) Final Budget
$
(13,951) (2,007) (9,210) 79 (25,089)
Library: Salaries Employee benefits Purchased services Supplies and materials Total library
64,000 54,230 9,300 10,338 137,868
64,000 58,880 8,800 10,338 142,018
64,208 55,120 8,812 8,714 136,854
208 (3,760) 12 (1,624) (5,164)
Computer assisted instruction Salaries Employee benefits Purchased services Supplies and materials Total computer assisted instruction
54,000 36,425 218,650 12,600 321,675
69,100 46,925 267,050 18,200 401,275
69,640 47,406 266,112 18,029 401,187
540 481 (938) (171) (88)
41,550 21,324 500 27,500
37,800 21,560 10,023 10,100
38,185 18,789 10,023 10,073
385 (2,771) (27)
90,874
79,483
77,070
(2,413)
779,528
1,143,301
1,110,547
(32,754)
Supervision and direction of instructional staff: Salaries Employee benefits Supplies and materials Other Total supervision and direction of instructional staff Total instructional staff
continued…
23
BANGOR TOWNSHIP SCHOOLS Statement of Revenues, Expenditures and Changes in Fund Balance Budget and Actual - General Fund For the Year Ended June 30, 2017
Original Budget Expenditures (continued) Supporting services (continued): General Administration: Board of education: Salaries Purchased services Supplies and materials Other Total board of education Executive administration: Salaries Employee benefits Purchased services Supplies and materials Other Total executive administration Total general administration School administration: Office of the principal: Salaries Employee benefits Purchased services Supplies and materials Other Total school administration Business Services: Fiscal Services: Salaries Employee benefits Purchased services Supplies and materials Total fiscal services
$
7,000 78,550 550 10,500 96,600
Final Budget
$
7,000 71,650 12,000 90,650
Actual
$
7,470 72,967 12,422 92,859
Actual Over (Under) Final Budget
$
470 1,317 422 2,209
251,850 159,660 8,500 3,000 9,000 432,010
160,500 100,065 11,000 3,000 9,000 283,565
162,903 99,040 7,969 1,296 10,981 282,189
2,403 (1,025) (3,031) (1,704) 1,981 (1,376)
528,610
374,215
375,048
765,050 508,960 28,650 10,500 4,000 1,317,160
769,050 517,660 28,650 9,500 4,000 1,328,860
775,941 515,727 26,040 8,140 3,262 1,329,110
6,891 (1,933) (2,610) (1,360) (738) 250
131,500 93,650 8,100 2,000 235,250
130,500 98,550 20,540 2,000 251,590
130,361 97,806 18,087 1,688 247,942
(139) (744) (2,453) (312) (3,648)
833
continued…
24
BANGOR TOWNSHIP SCHOOLS Statement of Revenues, Expenditures and Changes in Fund Balance Budget and Actual - General Fund For the Year Ended June 30, 2017
Original Budget Expenditures (continued) Supporting services (continued): Business Services (concluded): Internal services: Salaries Employee benefits Purchased services Supplies and materials Total internal services Other business services: Purchased services Other Tax abatements Total other business services Total business services
$
11,500 6,000 28,550 5,000 51,050
Final Budget
$
11,500 6,300 26,650 55,000 99,450
Actual
$
10,560 5,709 23,937 54,523 94,729
Actual Over (Under) Final Budget
$
(940) (591) (2,713) (477) (4,721)
25,705 2,000 40,000 67,705
25,725 2,000 7,000 34,725
25,725 1,782 4,680 32,187
(218) (2,320) (2,538)
354,005
385,765
374,858
(10,907)
Operation and maintenance of plant: Salaries Employee benefits Purchased services Supplies and materials Other Total operation and maintenance of plant
574,550 450,040 905,517 136,500 5,700
566,050 453,475 928,294 158,000 3,500
542,133 429,850 936,519 191,726 2,403
(23,917) (23,625) 8,225 33,726 (1,097)
2,072,307
2,109,319
2,102,631
(6,688)
Pupil transportation: Salaries Employee benefits Purchased services Supplies and materials Other Total pupil transportation
510,300 348,080 66,522 200,353 5,000 1,130,255
514,100 351,682 70,972 156,353 5,000 1,098,107
512,569 338,895 62,389 144,965 6,671 1,065,489
(1,531) (12,787) (8,583) (11,388) 1,671 (32,618) continued…
25
BANGOR TOWNSHIP SCHOOLS Statement of Revenues, Expenditures and Changes in Fund Balance Budget and Actual - General Fund For the Year Ended June 30, 2017
Original Budget Expenditures (continued) Supporting services (concluded): Central services: Staff/personnel services: Salaries Employee benefits Purchased services Supplies and materials Total staff/personnel services Data processing services: Salaries Employee benefits Purchased services Supplies and materials Total data processing services Other central services: Employee benefits Total central services Other support services: Student activities: Salaries Employee benefits Purchased services Total other support services Total supporting services
$
80,900 41,195 7,115 250 129,460
Final Budget
$
80,900 42,595 17,785 3,420 144,700
Actual
$
81,825 42,022 16,814 3,381 144,042
Actual Over (Under) Final Budget
$
925 (573) (971) (39) (658)
67,950 37,380 202,900 12,800 321,030
67,950 38,780 203,800 12,800 323,330
65,013 37,155 206,251 9,875 318,294
(2,937) (1,625) 2,451 (2,925) (5,036)
32,000
28,500
29,107
482,490
496,530
491,443
(5,087)
83,700 37,307 28,000
74,600 35,607 77,100
72,321 34,167 78,417
(2,279) (1,440) 1,317
149,007
187,307
184,905
(2,402)
7,567,310
7,875,592
7,781,862
(93,730)
607
continued…
26
BANGOR TOWNSHIP SCHOOLS Statement of Revenues, Expenditures and Changes in Fund Balance Budget and Actual - General Fund For the Year Ended June 30, 2017
Original Budget Expenditures (concluded) Athletics: Salaries Employee benefits Purchased services Supplies and materials Other Total athletics Community services: Nonpublic school pupils: Purchased services Supplies and materials
$
Final Budget
Actual
Actual Over (Under) Final Budget
214,810 111,868 193,173 13,592 8,440
219,785 116,668 203,414 16,842 8,440
219,080 121,423 198,126 17,572 12,512
(705) 4,755 (5,288) 730 4,072
541,883
565,149
568,713
3,564
8,242 2,708
$
7,307 3,050
$
2,825 3,460
$
(4,482) 410
Total community services
10,950
10,357
6,285
(4,072)
Debt service: Principal repayment Interest and fiscal charges
79,488 5,512
79,488 5,512
81,369 3,622
1,881 (1,890)
Total debt service
85,000
85,000
84,991
(9)
196,225
484,000
485,704
21,799,301
22,804,992
22,629,164
447,684
604,353
748,652
144,299
Other financing sources (uses) Transfers in Transfers out
72,000 (333,334)
72,000 (483,334)
80,000 (583,333)
8,000 99,999
Total other financing sources (uses)
(261,334)
(411,334)
(503,333)
107,999
186,350
193,019
245,319
52,300
2,884,092
2,884,092
2,884,092
-
Capital outlay Total expenditures Revenues over (under) expenditures
Net change in fund balance Fund balance, beginning of year Fund balance, end of year
$
3,070,442
$
3,077,111
$
3,129,411
1,704 (175,828)
$
52,300 concluded
The accompanying notes are an integral part of these financial statements.
27
BANGOR TOWNSHIP SCHOOLS Statement of Fiduciary Assets and Liabilities June 30, 2017 Agency Fund Assets Cash and cash equivalents Liabilities Due to student groups Due to others
$
450,059
$
397,660 52,399 450,059
$
The accompanying notes are an integral part of these financial statements.
28
NOTES TO FINANCIAL STATEMENTS
29
BANGOR TOWNSHIP SCHOOLS Notes to Financial Statements 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Reporting Entity Bangor Township Schools (the “District”) has followed the guidelines of the Governmental Accounting Standards Board’s Statement No. 61 and has determined that no entities should be consolidated into its basic financial statements as component units. Therefore, the reporting entity consists of the primary government financial statements only. The criteria for including a component unit include entities for which the District is considered to be financially accountable. District-Wide and Fund Financial Statements The district-wide financial statements (i.e., the statement of net position and the statement of activities) report information on all of the nonfiduciary activities of the primary government. For the most part, the effect of interfund activity has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenue, are reported separately from businesstype activities, which rely to a significant extent on fees and charges for support. The District had no business-type activities during the year ended June 30, 2017. The statement of activities demonstrates the degree to which the direct expenses of a given function or segment is offset by program revenue. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenue includes 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenue are reported instead as general revenue. Separate financial statements are provided for governmental funds and fiduciary funds, even though the latter are excluded from the district-wide financial statements. Major individual governmental funds are reported as separate columns in the fund financial statements. Measurement Focus, Basis of Accounting and Financial Statement Presentation The district-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting as are the fiduciary fund financial statements, except for agency funds, which do not have a measurement focus. Revenue is recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenue in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenue is recognized as soon as they are both measurable and available. Revenue is considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the government considers revenue to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due.
30
BANGOR TOWNSHIP SCHOOLS Notes to Financial Statements Property taxes, intergovernmental revenue, and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenue of the current fiscal period. All other revenue items are considered to be measurable and available only when cash is received by the government. The District reports the following major governmental funds: The General Fund is the government’s primary operating fund. It accounts for all financial resources not accounted for and reported in another fund. The 2009 Bond Debt Service Fund is used to account for all financial resources restricted to expenditure for principal and interest related to the 2009 Debt Service Bonds. Additionally, the District reports the following fund types: The special revenue funds are used to account for and report the proceeds of specific revenue sources that are restricted or committed to expenditure for specific purposes other than debt service or capital projects. The debt service funds are used to account for all financial resources restricted, committed or assigned to expenditure for principal and interest. The capital projects fund is used to account for all financial resources restricted, committed or assigned to expenditure for the acquisition or construction of capital assets. The agency fund accounts for assets held for other groups and organizations and are custodial in nature. When both restricted and unrestricted resources are available for use, it is the government’s policy to use restricted resources first, and then unrestricted resources as they are needed. Deposits and investments The District’s cash and cash equivalents are considered to be cash on hand, demand deposits and shortterm investments with original maturities of three months or less from the date of acquisition. Investments consist of participation in an external investment pool (Michigan Liquid Asset Fund). The District's shares are recorded at amortized cost, which approximates fair value. Receivables and Payables The District follows the practice of recording revenues that have been earned but not yet received as receivables. Receivables consist primarily of State Aid payments from the State of Michigan and Federal grant funds earned but not yet collected. No amounts have been identified as potentially uncollectible by management, and therefore, no amount has been recorded as a provision for bad debts. Activity between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as either “due to/from other funds” (i.e., the current portion of interfund loans) or “advances to/from other funds” (i.e., the noncurrent portion of interfund loans).
31
BANGOR TOWNSHIP SCHOOLS Notes to Financial Statements Other Assets All inventories are valued at cost using the first-in/first out (“FIFO”) method. Inventories of governmental funds are recorded as expenditures when consumed rather than when purchased. Payments to vendors for services that will benefit periods beyond a fund's fiscal year-end are recorded as prepaid items. Capital Assets Capital assets, which include property and equipment, are reported in the governmental activities column in the district-wide financial statements. Capital assets are defined by the District as assets with an initial, individual cost of more than $5,000 and an estimated useful life in excess of one year. Such assets are recorded at historical cost if purchased or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated acquisition cost as of the date of donation. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized. Major outlays for capital assets and improvements are capitalized as projects are constructed. Capital assets of the primary government are depreciated using the straight-line method over the following estimated useful lives: Assets
Years 20-50 5-10 5-10
Buildings and improvements Vehicles Equipment and other Deferred 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 that applies to a future period(s) and will not be recognized as an outflow of resources (expense/expenditure) until then. The District reports deferred outflows of resources related to the net pension liability and unamortized loss on bond refunding. A portion of the deferred pension amounts represent contributions to the plan subsequent to the plan measurement date. More detailed information on pension-related deferred outflows of resources can be found in Note 14. Salaries Payable and Accrued Employee Benefits A liability is recorded at June 30 for those amounts owed to teachers and other employees of the District who do not work during the summer when school is not in session but have elected to have their salaries paid over an entire year. This has the effect of properly charging their salaries to expenditures in the fiscal year in which their services are received, even though they are not paid until July and August of the following fiscal year. The liability for accrued retirement and the employer share of FICA related to the salaries payable has been recorded, as has the liability for employee health insurances for the months of July and August. The District pays these insurances for this period as a part of the compensation for services rendered in the preceding school year.
32
BANGOR TOWNSHIP SCHOOLS Notes to Financial Statements Deferred Inflows of Resources 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 that applies to one or more future periods and so will not be recognized as an inflow of resources (revenue) until that time. The governmental funds also report unavailable revenues, which arise only under a modified accrual basis of accounting that are reported as deferred inflows of resources. These amounts are deferred and recognized as an inflow of resources in the period that the amounts become available. The District's deferred inflows of resources are related to pension costs. More detailed information can be found in Note 14. Compensated Absences and Other Termination Benefits It is the District’s policy to permit employees to accumulate various earned but unused vacation and sick pay benefits. These are accrued when incurred in the district-wide financial statements. A liability for these amounts is reported in governmental funds only if they have matured, for example, as a result of employee resignations or retirements. Benefits are accrued based on various contract stipulations and lengths of service for the various bargaining units. In addition, employees with 15 or more years of service that are members of the District’s teacher’s and administration bargaining units are entitled to severance payouts of $15,000 upon separation from the District. Also, teachers that were hired prior to June 1, 1994, are entitled to a $6,000 longevity payment in their last year of employment. Long-term obligations In the district-wide financial statements, long-term obligations are reported as liabilities in the governmental activities statement of net position. Where applicable, bond premiums and discounts are deferred and amortized over the life of the bonds using the effective interest method. In the fund financial statements, governmental fund types recognize bond premiums and discounts during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. Fund Equity In the fund financial statements, governmental funds report nonspendable fund balance for amounts that cannot be spent because they are either (a) not in spendable form or (b) legally or contractually require to be maintained intact. Restricted fund balance is reported when externally imposed constraints are placed on the use of the resources by grantors, contributors, or laws or regulations of other governments. Committed fund balance is reported for amounts that can be used for specific purposes pursuant to constraints imposed by formal action of the government’s highest level of decision making authority, the Board of Education. A formal resolution of the Board of Education is required to establish, modify or rescind a fund balance commitment. The District reports assigned fund balance for amounts that are constrained by the government’s intent to be used for specific purposes, but are neither restricted nor committed. The Board has delegated the authority to assign fund balance to the CFO. Unassigned fund balance is the residual classification for the general fund.
33
BANGOR TOWNSHIP SCHOOLS Notes to Financial Statements When the District incurs an expenditure for purposes for which various fund balance classifications can be used, it is the District's policy to use restricted fund balance first, then committed fund balance, assigned fund balance, and finally unassigned fund balance. Pensions For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the Plan and additions to/deductions from the plan fiduciary net position have been determined on the same basis as they are reported by the plan. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. Property Taxes Property taxes are assessed as of December 31 each year and attach as an enforceable lien on property as of the following July 1. School property taxes are levied on July 1 each year, based on the previous year’s assessment, by Township governments whose boundaries include property within the District, and are due by September 15. Delinquent real taxes are advanced to the District by the Counties involved. Taxes are recorded as revenue in the year levied. Taxes receivable are recorded for property taxes collected within 60 days of year-end, if any. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.
2. STATE OF MICHIGAN SCHOOL AID The District reports State of Michigan school aid in the fiscal year in which the District is entitled to the revenue as provided by State of Michigan school aid appropriation acts. State funding represented 86% of the District's general fund revenue during the 2017 fiscal year.
3. DEFICIT FUND EQUITY At June 30, 2017, the District reported deficits in total and unrestricted governmental activities net position of $19,528,416 and $26,730,921, respectively. This is due to the provisions of GASB 68 which requires the District to report its proportionate share of the MPSERS net pension liability on the governmentwide statement of net position.
34
BANGOR TOWNSHIP SCHOOLS Notes to Financial Statements 4. BUDGETARY INFORMATION The general fund and special revenue funds are under formal budgetary control. Budgets shown in the financial statements are adopted annually on a basis consistent with accounting principles generally accepted in the United States of America ("GAAP"), and are not significantly different from the modified accrual basis used to reflect actual results, and consist only of those amounts contained in the formal budget as originally adopted or as amended by the Board of Education. The budgets for the general fund and special revenue funds are adopted on a functional activity basis. All annual appropriations lapse at fiscal year-end. 5. EXCESS OF EXPENDITURES OVER BUDGET Public Act 621 of 1978, as amended, provides that a local unit shall not incur expenditures that are in excess of the amount appropriated. During the year ended June 30, 2017, the District incurred expenditures, which were in excess of the amounts appropriated as follows: Actual Expenditure
Final Budget General fund: Instruction: Compensatory education Supporting services: Board of education Office of the principal Other central services Athletics Capital outlay Transfers out Food Service Fund Transfers out
$
840,906
$
852,398
Unfavorable Variance
$
11,492
90,650 1,328,860 28,500 565,149 484,000 483,334
92,859 1,329,110 29,107 568,713 485,704 583,333
2,209 250 607 3,564 1,704 99,999
72,000
80,000
8,000
6. DEPOSITS AND INVESTMENTS A reconciliation of cash and investments as shown on the Statement of Net Position and Statement of Fiduciary Assets and Liabilities follows: Governmental Activities
Fiduciary Fund
$
2,944,829 1,801,398
$
450,059 -
$
3,394,888 1,801,398
$
4,746,227
$
450,059
$
5,196,286
Checking/savings accounts Investments Cash on hand
$
3,393,457 1,801,398 1,431
Total
$
5,196,286
Cash and cash equivalents Investments
Total
Cash and investments are comprised of the following at year-end:
35
BANGOR TOWNSHIP SCHOOLS Notes to Financial Statements In accordance with GASB 79, the District's shares in the MILAF External Investment Pool are recorded at amortized cost, which approximates fair value. The District chooses to disclose its investments by specifically identifying each. As of year end, the District had the following investments.
Investment Michigan Liquid Asset Fund
Maturity n/a
Amortized Cost $
1,801,398
Rating S & P AAAm
Investment and Deposit Risk Interest Rate Risk. State law limits the allowable investments and the maturities of some of the allowable investments as identified in the list of authorized investments below. The District’s investment policy does not have specific limits in excess of state law on investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates. The District’s investments held at yearend do not have maturity dates. Credit Risk. State law limits investments to specific government securities, certificates of deposits and bank accounts with qualified financial institutions, commercial paper with specific maximum maturities and ratings when purchased, bankers acceptances of specific financial institutions, qualified mutual funds and qualified external investment pools as identified in the list of authorized investments below. The District’s investment policy does not have specific limits in excess of state law on investment credit risk. The ratings for each investment are identified above for investments held at year-end. Custodial Credit Risk - Deposits. Custodial credit risk is the risk that in the event of a bank failure, the District’s deposits may not be returned. State law does not require and the District does not have a policy for deposit custodial credit risk. As of year-end $3,409,294, of the District’s bank balance of $3,659,294 was exposed to custodial credit risk because it was uninsured and uncollateralized. Custodial Credit Risk - Investments. For an investment, custodial credit risk is the risk that, in the event of the failure of the counterparty, the District will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. State law does not require and the District does not have a policy for investment custodial credit risk. The investments listed above do not have any custodial credit risk, as these investments are uncategorized as to credit risk. Concentration of Credit Risk . State law limits allowable investments but does not limit concentration of credit risk as identified in the list of authorized investments below. The District’s investment policy does not have specific limits in excess of state law on concentration of credit risk. All investments held at yearend are in external investment pools and are carried at amortized cost.
36
BANGOR TOWNSHIP SCHOOLS Notes to Financial Statements Michigan law authorizes the District to deposit and invest in: Bonds, bills, or notes of the United States; obligations, the principal and interest of which are fully guaranteed by the United States; or obligations of the State. In a primary or fourth class school district, the bonds, bills or notes shall be payable at the option of the holder upon not more than 90 days notice or, if not so payable, shall have maturity dates not more than five years after the purchase dates. Certificates of deposits issued by a State or national bank, savings accounts of a state or federal savings and loan association, or certificates of deposit or share certificates of a state or federal credit union organized and authorized to operate in this State. Commercial paper rated prime at the time of purchase and maturing not more than 270 days after the date of purchase. Securities issued or guaranteed by agencies or instrumentalities of the United States, United States government or federal agency obligation repurchase agreements, and bankers’ acceptance issued by a bank that is a member of the federal deposit insurance corporation. Mutual funds composed entirely of investment vehicles that are legal for direct investment by a school district. Investment pools, as authorized by the surplus funds investment pool act, composed entirely of instruments that are legal for direct investment by a school district. 7. RECEIVABLES The District's receivables at year-end consist of the following:
General Fund
Nonmajor Funds
Receivables Accounts receivable Due from other governments
$
52,399 3,558,194
$
7,856
$
52,399 3,566,050
Total receivables
$
3,610,593
$
7,856
$
3,618,449
37
Total
BANGOR TOWNSHIP SCHOOLS Notes to Financial Statements 8. CAPITAL ASSETS Capital asset activity for the year ended June 30, 2017, was as follows: Beginning Balance Governmental Activities Capital assets, not being depreciated: Land
$
Capital assets, being depreciated: Buildings and improvements Vehicles Equipment and other
Less accumulated depreciation for: Buildings and improvements Vehicles Equipment and other Total capital assets being depreciated, net Governmental activities capital assets, net
181,770
Additions
$
Disposals
-
$
-
$
181,770
28,298,812 1,493,603 1,718,649 31,511,064
389,937 250,900 178,813 819,650
(208,402) (208,402)
28,688,749 1,536,101 1,897,462 32,122,312
14,362,804 785,041 789,674 15,937,519
955,490 144,185 132,496 1,232,171
(208,402) (208,402)
15,318,294 720,824 922,170 16,961,288
15,573,545
$
Ending Balance
15,755,315
$
(412,521)
-
(412,521) $
-
15,161,024
$
15,342,794
Depreciation expense was charged to functions/programs of the primary government as follows: Depreciation of governmental activities by function Supporting services $ Food services Depreciation - Unallocated
144,185 13,675 1,074,311
Total depreciation expense
1,232,171
$
38
BANGOR TOWNSHIP SCHOOLS Notes to Financial Statements 9. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES The District's accounts payable and accrued liabilities at year-end consist of the following:
Fund financial statements Accounts payable Salaries payable Accrued liabilities
General Fund
Nonmajor Funds
$
206,437 1,208,282 795,896
$
12,216 3,982
$
2,210,615
$
16,198
Total $
206,437 1,220,498 799,878 2,226,813
District-wide financial statements Accrued interest on bonds payable
26,062
Total accounts payable and accrued liabilities
$
2,252,875
10. INTERFUND RECEIVABLES, PAYABLES AND TRANSFERS At June 30, 2017, interfund receivables and payables in the fund financial statements consisted of the following: Due from Other Funds General Fund Nonmajor funds
Due to Other Funds
$
783,543
$
783,543 -
$
783,543
$
783,543
The District often reports interfund balances between many of its funds. These interfund balances resulted primarily from the time lag between the dates that (1) interfund goods and services are provided or reimbursable expenditures occur, (2) transactions are recorded in the accounting system, and (3) payments between funds are made. For the year ended June 30, 2017, interfund transfers consisted of the following:
Transfers In General Fund 2009 Bond Debt Service Fund Nonmajor funds
Transfers Out
$
80,000 233,333 350,000
$
583,333 80,000
$
663,333
$
663,333
39
BANGOR TOWNSHIP SCHOOLS Notes to Financial Statements Transfers are used to: (1) move revenue from the fund that is required to collect them to the fund that is required or allowed to expend them; (2) move receipts restricted to or allowed for debt service from the funds collecting the receipts to the debt service fund as debt service payments become due; and (3) use unrestricted revenue collected in the general fund to finance various programs accounted for in other funds in accordance with budgetary authorizations. For the year ended June 30, 2017, the District transferred funds from the general fund to the 2009 Bond Debt Service Fund for debt service payments and the Food Service Special Revenue Fund transferred funds to the general fund to pay for indirect costs incurred in the general fund. The District also transferred funds from the general fund to the Public Improvement Capital Projects Fund. 11. OPERATING LEASES The District had various noncancelable operating leases for buses, computers, and copiers, with total expenditures of $120,692 for the year ended June 30, 2017. The bus leases ended during fiscal 2017. The future minimum lease payments for the computer and copier leases are as follows: 2018 2019 Total minimum lease payments
$
108,192 108,192
$
216,384
12. LONG-TERM DEBT The following is a summary of long-term debt transactions of the District for the year ended June 30, 2017: Beginning Balance General obligation bonds $ Thomas passenger bus installment notes Total installment debt Unamortized premium Compensated absences
$
11,200,000
Additions $
Deductions -
$
Ending Balance
(775,000) $
10,425,000
Due Within One Year $
820,000
248,026 11,448,026
-
(81,369) (856,369)
166,657 10,591,657
82,669 902,669
82,315 1,631,614
85,624
(20,576) (73,665)
61,739 1,643,573
20,576 547,803
13,161,955
$
85,624
$
(950,610) $
Compensated absences are generally liquidated by the General Fund.
40
12,296,969
$
1,471,048
BANGOR TOWNSHIP SCHOOLS Notes to Financial Statements Bonds and notes payable at June 30, 2017, are comprised of the following individual issues: 2012 refunding building and site bonds, $5,125,000, due in annual principal installments ranging from $600,000 to $865,000 through May 1, 2020; interest rate of 3.00%.
$
2,460,000
2016 Refunding bonds, $4,510,000, due in annual principal installments ranging from $45,000 to $1,110,000 through May 1, 2024; interest rate of 1.79%.
4,465,000
2009 Building and site Qualified School Construction Bonds (“QSCB”), $3,500,000. These bonds require a sinking fund to be established with transfers of $233,333 to an escrow agent annually on September 1st. These zero-coupon bonds are due in total on September 1, 2024.
3,500,000
Installment purchase, $336,924, four 2014 Thomas 77-passenger school buses, due in annual principal installments ranging from $53,954 to $58,401 through May 1, 2019; interest rate of 1.59%.
115,884
Installment purchase, $147,619, two 2011 Thomas 77-passenger school buses and one Thomas 2014 30-passenger school bus, due in annual principal installments ranging from $23,639 to $25,587 through May 1, 2019; interest rate of 1.59%.
50,773 $
10,591,657
Annual debt service requirements to maturity for general obligation bonds and installment purchase notes are as follows: Year Ended June 30,
Principal
Interest
2018 2019 2020 2021 2022 2023-2025
$
902,669 948,988 915,000 1,050,000 1,075,000 5,700,000
$
156,047 130,670 104,262 77,418 58,622 59,250
Total
$
10,591,657
$
586,269
Defeased Debt The balance of the defeased debt outstanding at June 30, 2017, was $7,010,000. As a result, the refunded bonds are considered to be defeased and the liability has been removed from the district-wide statement of net position.
41
BANGOR TOWNSHIP SCHOOLS Notes to Financial Statements 13. RISK MANAGEMENT The District is exposed to various risks of loss related to property loss, torts, errors and omissions, employee injuries (workers’ compensation) as well as medical benefits provided to employees. The District has purchased commercial insurance for general liability, property and casualty and health claims and participates in the MASB/SET-SEG (risk pool) for claims relating to employee injuries/workers’ compensation. Settled claims relating to the commercial insurance have not exceeded the amount of insurance coverage in any of the past three fiscal years. The shared-risk pool program in which the District participates operates as a common risk-sharing management program for school districts in Michigan; member premiums are used to purchase commercial excess insurance coverage and to pay member claims in excess of deductible amounts.
14. RETIREMENT PLAN Plan Description The Michigan Public School Employees' Retirement System (the "System" or MPSERS) is a cost-sharing, multiple employer, state-wide, defined benefit public employee retirement plan governed by the State of Michigan (the "State") originally created under Public Act 136 of 1945, recodified and currently operating under the provisions of Public Act 300 of 1980, as amended. Section 25 of this act establishes the board's authority to promulgate or amend the provisions of the System. The board consists of twelve members eleven appointed by the Governor and the State Superintendent of Instruction, who serves as an ex-officio member. The System is administered by the Office of Retirement Services (ORS) within the Michigan Department of Technology, Management & Budget. The Department Director appoints the Office Director, with whom the general oversight of the System resides. The State Treasurer serves as the investment officer and custodian for the System. The System’s financial statements are available at www.michigan.gov/mpsers-cafr. Benefits Provided Benefit provisions of the defined benefit pension plan are established by State statute, which may be amended. Public Act 300 of 1980, as amended, establishes eligibility and benefit provisions for the defined benefit (DB) pension plan. Depending on the plan option selected, member retirement benefits for are determined by final average compensation, years of service, and a pension factor ranging from 1.25% to 1.50%. DB members are eligible to receive a monthly benefit when they meet certain age and service requirements. The System also provides disability and survivor benefits to DB plan members.
42
BANGOR TOWNSHIP SCHOOLS Notes to Financial Statements DB member plan member who leaves Michigan public school employment may request a refund of his or her member contributions to the retirement system account if applicable. A refund cancels a former member’s rights to future benefits. However, returning members who previously received a refund of their contributions may reinstate their service through repayment of the refund upon satisfaction of certain requirements. Contributions and Funded Status Employers are required by Public Act 300 of 1980, as amended, to contribute amounts necessary to finance the coverage of active and retired members. Contribution provisions are specified by State statute and may be amended only by action of the State Legislature. Employer contributions to the System are determined on an actuarial basis using the entry age normal actuarial cost method. Under this method, the actuarial present value of the projected benefits of each individual included in the actuarial valuation is allocated on a level basis over the service of the individual between entry age and assumed exit age. The portion of this cost allocated to the current valuation year is called the normal cost. The remainder is called the actuarial accrued liability. Normal cost is funded on a current basis. The unfunded (overfunded) actuarial accrued liability as of the September 30, 2016 valuation will be amortized over a 20-year period for the 2016 fiscal year. The table below summarizes pension contribution rates in effect for the Plan year 2017.
Benefit Structure Basic Member Investment Plan (MIP) Pension Plus Defined Contribution
Member Rates
Employer Rates
0.0% - 4.0% 3.0% - 7.0% 3.0% - 6.4% 0.0%
18.95% - 19.03% 18.95% - 19.03% 17.73% - 18.40% 14.56% - 15.27%
The District's contribution to MPSERS under all pension plans for the year ended June 30, 2017 was $3,056,031. Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions At June 30, 2017, the District reported a liability of $34,122,390 for its proportionate share of the MPSERS net pension liability. The net pension liability was measured as of September 30, 2016, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation rolled forward from September 2015. The District’s proportion of the net pension liability was determined by dividing each employer’s statutorily required pension contributions to the system during the measurement period by the percent of pension contributions required from all applicable employers during the measurement period. At September 30, 2016, the District’s proportion was .13677%, which was an increase of .00359% from its proportion measured as of September 30, 2015.
43
BANGOR TOWNSHIP SCHOOLS Notes to Financial Statements For the year ended June 30, 2017, the District recognized pension expense of $3,546,598. At June 30, 2017, the District reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:
Deferred Outflows of Resources Differences between expected actual experience Changes in assumptions Net difference between projected and actual earnings on pension plan investments Changes in proportion and differences between employer contributions and proportionate share of contributions
$
425,255 533,477
$
567,114
District contributions subsequent to the measurement date $
(80,871) $ -
344,384 533,477 567,114
984,002
(22,235)
961,767
2,509,848
(103,106)
2,406,742
2,891,209
Total
Net Deferred Outflows (Inflows) of Resources
Deferred Inflows of Resources
5,401,057
$
(103,106) $
2,891,209 5,297,951
Deferred outflows of resources related to pensions of $2,891,209 resulting from employer contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, 2018. Other amounts as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows: Year Ended June 30,
Amount
2018 2019 2020 2021
$
563,019 518,421 1,082,094 243,208
Total
$
2,406,742
44
BANGOR TOWNSHIP SCHOOLS Notes to Financial Statements Actuarial Assumptions Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and 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 that 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. The total pension liability in the September 30, 2015 actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement: Actuarial cost method Entry age, normal Wage inflation rate 3.5% Investment rate of return: MIP and Basic plans (non-hybrid) 8.0% Pension Plus plan (hybrid) 7.0% 3.5% - 12.3%, including wage inflation at 3.5% Projected salary increases 3% annual non-compounded for MIP members Cost of living adjustments RP-2000 Male and Female Combined Healthy Life Mortality Tables, Mortality adjusted for mortality improvements to 2025 using projection scale BB. This assumption was first used for the September 30, 2014 valuation of the System. For retirees, 100% of the table rates were used. For active members, 80% of the table rates were used for males and 70% of the table rates were used for females. Assumption changes as a result of an experience study for the period 2007 through 2012 have been adopted by the System for use in the annual pension valuations beginning with the September 30, 2014 valuation. The total pension liability as of September 30, 2016, is based on the results of an actuarial valuation date of September 30, 2015, and rolled forward using generally accepted actuarial procedures, including the experience study.
45
BANGOR TOWNSHIP SCHOOLS Notes to Financial Statements Long-Term Expected Return on Plan Assets 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. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. Best estimates of arithmetic real rates of return for each major asset class included in the pension plan’s target asset allocation as of September 30, 2016, are summarized in the following table:
Target Allocation
Asset Class Domestic equity pools Alternative investment pools International equity Fixed income pools Real estate and infrastructure pools Absolute return pools Short-term investment pools
28.00% 18.00% 16.00% 10.50% 10.00% 15.50% 2.00% 100.00%
Long-term Expected Real Rate of Return
Expected MoneyWeighted Rate of Return
5.90% 9.20% 7.20% 0.90% 4.30% 6.00% 0.00%
1.64% 1.66% 1.15% 0.09% 0.43% 0.93% 0.00% 5.90%
Inflation
2.10%
Investment rate of return
8.00%
Discount Rate A discount rate of 8.0% was used to measure the total pension liability (7.0% for the Pension Plus plan, a hybrid plan provided through non-university employers only). This discount rate was based on the long term expected rate of return on pension plan investments of 8.0% (7.0% for the Pension Plus plan). The projection of cash flows used to determine this discount rate assumed that plan member contributions will be made at the current contribution rate and that employer contributions will be made at rates equal to the difference between actuarially determined contribution rates and the member rate. Based on these assumptions, the pension plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. 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.
46
BANGOR TOWNSHIP SCHOOLS Notes to Financial Statements Sensitivity of District’s 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 calculated using the discount rate of 8.0% (7.0% for the Hybrid Plan), 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 percentage point lower or 1 percentage higher:
1% Decrease (7.0%) District's proportionate share of the net pension liability
$
43,941,049
Current Discount Rate (8.0%)
$
34,122,390
1% Increase (9.0%)
$
25,844,316
Pension Plan Fiduciary Net Position Detailed information about the pension plan’s fiduciary net position is available in the separately issued MPSERS financial statements available on the State of Michigan Office of Retirement Services website at www.michigan.gov/orsschools. Payable to the Pension Plan At June 30, 2016, the District reported a payable of $412,404 for the outstanding amount of pension contributions to the Plan required for the year ended June 30, 2017. Other Postemployment Benefits Retirees enrolled in MPSERS before September 4, 2012 have the option of participating in the Premium Subsidy plan, a defined benefit postemployment healthcare plan, which is funded by employers on a prefunded basis. The State of Michigan has contracted to provide the comprehensive group medical, hearing, dental and vision coverage for retirees and beneficiaries. All health care benefits are on a selffunded basis. A significant portion of the premium is paid by MPSERS with the balance deducted from the monthly pension. Employer contributions range from 5.69% to 6.83% of covered payroll. Plan participants contribute 3% of covered payroll to the Retiree Healthcare Fund. At retirement, these individuals receive a subsidy for healthcare premiums that covers up to 80% of cost. Plan members enrolled on or after September 4, 2012 participate in the Personal Healthcare Fund. This defined contribution other postemployment benefits plan includes a required 2% employee contribution into a personal tax-deferred account, which is matched by an additional 2% employer contribution. Employees are fully vested in these contributions which can be used, along with earnings thereon, to pay for postemployment healthcare expenses. Plan members working prior to September 4, 2012 were given the option to convert from the Premium Subsidy plan to the Personal Healthcare Fund option. Effective February 1, 2013, these members are no longer required to make the 3% employee contribution. Amounts paid into the Retiree Healthcare Fund between September 4, 2012 and February 1, 2013 were credited to each individual’s Personal Healthcare Fund account. Any contributions made prior to September 4, 2012 were declared unconstitutional by the Supreme Court. Such amounts will be refunded by MPSERS to each District, including interest, and will then be refunded to individual employees.
47
BANGOR TOWNSHIP SCHOOLS Notes to Financial Statements The District’s contributions to MPSERS for other postemployment benefits amounted to $1,217,671 for the year ended June 30, 2017. 15. COMMITMENTS AND CONTINGENCIES Under the terms of various Federal and State grants and regulatory requirements, periodic audits are required and certain costs may be questioned as not being appropriate expenditures under the terms of the grants and requirements. Such audits could lead to reimbursement to the grantor or regulatory agencies. However, management does not believe such disallowances, if any, will be material to the financial position of the District. As is the case with other entities, the District faces exposure from potential claims and legal proceedings involving environmental matters. No such claims or proceedings have been asserted as of June 30, 2017. 16. FUND BALANCE - GOVERNMENTAL FUNDS The District adopted the provisions of GASB Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions . GASB 54 establishes fund balance classifications that comprise a hierarchy based primarily on the extent to which a government is bound to observe constraints imposed upon the use of resources reported in governmental funds. Detailed information on fund balances of governmental funds is as follows: 2009 Bond Debt Service Fund
General Fund Nonspendable: Inventories Prepaid items Total nonspendable
$
21,131 21,131
$
Nonmajor Governmental Funds
-
$
12,304 12,304
Total
$
12,304 21,131 33,435
Restricted for: Food Services Community services Debt service Total restricted
-
1,633,331 1,633,331
423,884 139,229 225,459 788,572
423,884 139,229 1,858,790 2,421,903
Assigned for: Public improvement
-
-
607,680
607,680
3,108,280
-
-
3,108,280
Unassigned Totals fund balances governmental funds
$
3,129,411
48
$
1,633,331
$
1,408,556
$
6,171,298
BANGOR TOWNSHIP SCHOOLS Notes to Financial Statements 17. NET INVESTMENT IN CAPITAL ASSETS The composition of net investment in capital assets as of June 30, 2017, was as follows: Governmental Activities Capital assets: Not being depreciated Being depreciated, net Less related debt: Bonds and notes payable Deferred loss on bond refunding Unamortized premium Net investment in capital assets
$
181,770 15,161,024 (10,591,657) 93,300 (61,739)
$
4,782,698
18. SUBSEQUENT EVENTS Contracts and Capital Purchases On July 10, 2017, the school entered into an agreement with a contractor for the performance of the Bus Garage Parking Improvement Project to be completed in two parts, for a total contracted amount of $338,154. The school also purchased a school bus in the amount of $58,500 on July 13, 2017. Retirement Plan Discount Rate In 2017, the Michigan Public Schools Employees’ Retirement System’s Board approved a decrease in the assumed investment rate of return (discount rate) to be used in the System’s annual actuarial valuation for the non-hybrid defined benefit pension plan from 8.0% to 7.5% effective for the 2016 valuation and following. The September 30, 2016 Annual Actuarial Valuation Report will be used to establish the employer contribution for fiscal year beginning October 1, 2018 and will be based upon the 7.5% investment rate of return assumption. The actuarial computed employer contributions and the net pension liability are expected to increase as a result of lowering the assumed investment rate of return.
49
REQUIRED SUPPLEMENTARY INFORMATION
50
BANGOR TOWNSHIP SCHOOLS Required Supplementary Information MPSERS Cost-Sharing Multiple Employer Plan Schedule of the District's Proportionate Share of the Net Pension Liability Year Ended June 30, 2017 District's proportion of the net pension liability
2016
0.13677%
2015
0.13318%
0.13087%
District's proportionate share of the net pension liability
$
34,122,390
$
32,528,594
$
28,826,085
District's covered payroll
$
11,672,870
$
11,091,704
$
11,120,159
District's proportionate share of the net pension liability as a percentage of its covered payroll Plan fiduciary net position as a percentage of the total pension liability
292.32%
293.27%
259.22%
63.27%
63.17%
66.20%
The amounts presented for each fiscal year were determined as of September 30 of the preceding year. Note: GASB 68 was implemented in fiscal year 2015. This schedule is being built prospectively. Ultimately, 10 years of data will be presented.
51
BANGOR TOWNSHIP SCHOOLS Required Supplementary Information MPSERS Cost-Sharing Multiple Employer Plan Schedule of District Contributions Year Ended June 30, 2017 Contractually required contribution
$
Contributions in relation to the contractually required contribution
2016
3,056,031
$
(3,056,031)
2015
3,086,928
$
(3,086,928)
3,424,935
(3,424,935)
Contribution deficiency (excess)
$
-
$
-
$
-
District's covered payroll
$
11,624,710
$
11,241,583
$
11,135,120
Contributions as a percentage of covered payroll
26.29%
27.46%
30.76%
Note: GASB 68 was implemented in fiscal year 2015. This schedule is being built prospectively. Ultimately, 10 years of data will be presented.
52
COMBINING AND INDIVIDUAL FUND FINANCIAL STATEMENTS AND SCHEDULES
53
NONMAJOR GOVERNMENTAL FUNDS
54
BANGOR TOWNSHIP SCHOOLS Combining Balance Sheet Nonmajor Governmental Funds June 30, 2017 Debt Service
Special Revenue Food Service Assets Cash and cash equivalents Due from other governments Due from other funds Inventories
2006/2016 Bond Issue Debt Service Fund
Community Service
2012 Bond Issue Debt Service Fund
$
422,386 7,856 9,840 12,304
$
100 139,129 -
$
181,388 -
$
17,177 26,894 -
Total assets
$
452,386
$
139,229
$
181,388
$
44,071
Liabilities Salaries payable Accrued liabilities
$
12,216 3,982
$
-
$
-
$
-
Total liabilities
16,198
-
-
-
Fund balances Nonspendable Restricted Assigned
12,304 423,884 -
139,229 -
181,388 -
44,071 -
Total fund balances
436,188
139,229
181,388
44,071
Total liabilities and fund balances
$
452,386
55
$
139,229
$
181,388
$
44,071
Capital Projects Public Improvement
Totals
$
607,680 -
$
621,051 7,856 783,543 12,304
$
607,680
$
1,424,754
$
-
$
12,216 3,982
$
-
16,198
607,680
12,304 788,572 607,680
607,680
1,408,556
607,680
$
1,424,754
56
BANGOR TOWNSHIP SCHOOLS Combining Statement of Revenues, Expenditures and Changes in Fund Balances Nonmajor Governmental Funds For the Year Ended June 30, 2017 Debt Service
Special Revenue Food Service
2006/2016 Bond Issue Debt Service Fund
Community Service
2012 Bond Issue Debt Service Fund
Revenues Local sources
$
State sources Federal sources Total revenues
409,364
$
230,817
$
202,215
$
789,472
42,348
-
-
-
843,359
-
-
-
1,295,071
230,817
202,215
789,472
Expenditures Current: Community services
-
209,268
-
-
1,139,765
-
-
-
Principal repayment
-
-
45,000
730,000
Interest and fiscal charges
-
-
80,729
95,797
Tax abatements
-
-
500
-
Total expenditures
1,139,765
209,268
126,229
825,797
155,306
21,549
75,986
(36,325)
-
-
-
-
(80,000)
-
-
-
(80,000)
-
-
-
75,306
21,549
75,986
(36,325)
360,882
117,680
105,402
80,396
Food services Debt service:
Revenue over expenditures Other financing sources (uses) Transfers in Transfers out Total other financing sources (uses) Net change in fund balances Fund balances, beginning of year Fund balances, end of year
$
436,188
57
$
139,229
$
181,388
$
44,071
Capital Projects Public Improvement $
-
Totals $
-
42,348
-
843,359
-
2,517,575
-
209,268
-
1,139,765
-
775,000
-
176,526
-
500
-
2,301,059
-
216,516
350,000
350,000
-
$
1,631,868
(80,000)
350,000
270,000
350,000
486,516
257,680
922,040
607,680
$
1,408,556
58
BANGOR TOWNSHIP SCHOOLS Schedule of Revenues, Expenditures and Changes in Fund Balance Budget and Actual - Food Services Special Revenue Fund For the Year Ended June 30, 2017
Original Budget Revenues Local sources: Food sales Other revenue Interest Total local sources
$
State sources
340,500 50,000 200 390,700
Final Budget
$
338,700 62,500 400 401,600
Actual
$
344,031 64,859 474 409,364
Actual Over (Under) Final Budget
$
5,331 2,359 74 7,764
43,480
43,480
42,348
(1,132)
712,500 73,000 785,500
748,700 73,000 821,700
747,458 95,901 843,359
(1,242) 22,901 21,659
1,219,680
1,266,780
1,295,071
309,330 168,047 38,050 568,025 15,650
314,030 183,587 35,000 599,325 29,250
299,706 175,260 27,335 609,734 27,730
(14,324) (8,327) (7,665) 10,409 (1,520)
1,099,102
1,161,192
1,139,765
(21,427)
Revenue over expenditures
120,578
105,588
155,306
49,718
Other financing uses Transfers out
(72,000)
(72,000)
(80,000)
8,000
48,578
33,588
75,306
41,718
360,882
360,882
360,882
-
Federal sources: Grants Commodities Total federal sources Total revenues Expenditures Food services: Salaries Employee benefits Purchased services Supplies and materials Other expenses Total expenditures
Net change in fund balance Fund balance, beginning of year Fund balance, end of year
$
409,460
59
$
394,470
$
436,188
28,291
$
41,718
BANGOR TOWNSHIP SCHOOLS Schedule of Revenues, Expenditures and Changes in Fund Balance Budget and Actual - Community Service Special Revenue Fund For the Year Ended June 30, 2017
Original Budget Revenues Local sources Participation fees
$
Expenditures Community services: Salaries Employee benefits Purchased services Supplies and materials Other expenses Total expenditures Net change in fund balance Fund balance, beginning of year Fund balance, end of year
$
Final Budget
180,140
$
219,540
Actual
$
230,817
Actual Over (Under) Final Budget
$
11,277
93,860 43,689 5,400 6,400 25,100
110,010 54,651 5,400 6,400 40,570
106,099 52,267 4,988 3,543 42,371
(3,911) (2,384) (412) (2,857) 1,801
174,449
217,031
209,268
(7,763)
5,691
2,509
21,549
19,040
117,680
117,680
117,680
-
123,371
$
60
120,189
$
139,229
$
19,040
SINGLE AUDIT ACT COMPLIANCE
61
Rehmann Robson 5800 Gratiot Rd. Suite 201 Saginaw, MI 48638 Ph: 989.799.9580 Fx: 989.799.0227 rehmann.com
Independent Auditors' Report on the Schedule of Expenditures of Federal Awards Required by the Uniform Guidance October 4, 2017 Members of the Board of Education of Bangor Township Schools Bay City, Michigan We have audited the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of Bangor Township Schools (the "District") as of and for the year ended June 30, 2017, and the related notes to the financial statements, which collectively comprise the District's basic financial statements. We issued our report thereon dated October 4, 2017, which contained unmodified opinions on those financial statements. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the basic financial statements. The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) and is not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the schedule of expenditures of federal awards is fairly stated, in all material respects, in relation to the basic financial statements as a whole.
Rehmann is an independent member of Nexia International.
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BANGOR TOWNSHIP SCHOOLS Schedule of Expenditures of Federal Awards
For the Year Ended June 30, 2017
Federal Agency / Cluster / Program Title U.S. Department of Agriculture Child Nutrition Cluster: Cash assistance: National School Breakfast: Breakfast Breakfast
CFDA Number
Passed Through
Pass-through / Grantor Number
10.553 10.553
MDE MDE
161970 171970
Approved Grant Award Amount
$
164,246 167,728
National School Lunch Program: Free & Reduced Free & Reduced Non-cash assistance: Food Distribution: Entitlement commodities
10.555 10.555
MDE MDE
161960 171960
544,093 491,394
10.555
MDE
N/A
95,901
Summer Food Service Program Summer Food Service Program
10.559 10.559
MDE MDE
160900 161900
8,662 894
84.010
MDE
171530-1617
362,181
84.367A
MDE
170520-1617
110,768
Total U.S. Department of Agriculture
U.S. Department of Education Elementary and Secondary Education Act Title I Part A: Regular 2016/2017 Title II A - Improving Teacher Quality: Regular 2016/2017 Total U.S. Department of Education Total Federal Financial Assistance
See notes to schedule of expenditures of federal awards.
63
Current Year Cash/ In-Kind Received
Accrued Revenue June 30, 2016
$
$
-
$
15,010 167,728 182,738
Expenditures (Memo Only) Prior Year(s)
Expenditures Year Ended June 30, 2017
Accrued (Unearned) Revenue June 30, 2017
$
$
$
149,236 149,236
15,010 167,728 182,738
-
-
63,770 491,394
480,323 -
63,770 491,394
-
-
95,901 651,065
480,323
95,901 651,065
-
-
8,662 894 9,556
-
8,662 894 9,556
-
-
843,359
629,559
843,359
-
-
362,181
-
362,181
-
-
93,133
-
94,383
1,250
-
455,314
-
456,564
1,250
-
$
1,298,673
$
629,559
$
1,299,923
64
$
1,250
BANGOR TOWNSHIP SCHOOLS Notes to Schedule of Expenditures of Federal Awards 1. BASIS OF PRESENTATION The accompanying schedule of expenditures of federal awards (the “Schedule”) includes the federal grant activity of Bangor Township Schools (the “District”) under programs of the federal government for the year ended June 30, 2017. The information in this schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Because the Schedule presents only a selected portion of the operations of the District, it is not intended to and does not present the financial position, changes in net position or cash flows of the District. 2. RECONCILIATION OF BASIC FINANCIAL STATEMENTS Expenditures reported on the Schedule are reported on the modified accrual basis of accounting, which is described in Note 1 to the District's financial statements. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. Negative amounts shown on the Schedule represent adjustments or credits made in the normal course of business to amounts reported as expenditures in prior years. Pass-through entity identifying numbers are presented where available. Cash received is recorded on the cash basis; expenditures are recorded on the modified accrual basis of accounting. Revenue is recognized when the qualifying expenditures have been included and all grant requirements have been met. The Schedule has been arranged to provide information on both actual cash received and the revenue recognized. Accordingly, the effects of accruals of accounts receivable, unearned revenue and accounts payable items at both the beginning and end of the fiscal year have been reported. Expenditures are in agreement with amounts reported in the financial statements and the financial reports. The amounts on the Grant Auditor Report reconcile with this Schedule. The amounts reported on the Recipient Entitlement Balance (PAL) Report agree with this schedule for USDA donated food commodities. Spoilage and pilferage are included in expenditure amounts reported. For purposes of charging indirect costs to federal awards, the District has not elected to use the 10 percent de minimis cost rate as permitted by §200.414 of the Uniform Guidance. 3. PASS-THROUGH AGENCIES The District receives certain federal grants as subawards from non-federal entities. Pass-through entities, where applicable, have been identified in the Schedule with an abbreviation, defined as follows: Pass-through Agency Abbreviation MDE
Pass-through Agency Name Michigan Department of Education
65
Rehmann Robson 5800 Gratiot Rd. Suite 201 Saginaw, MI 48638 Ph: 989.799.9580 Fx: 989.799.0227 rehmann.com
Independent Auditors’ Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards October 4, 2017 Board of Education Bangor Township Schools Bay City, Michigan 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 Auditing Standards 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 Bangor Township Schools (the "District"), as of and for the year ended June 30, 2017, and the related notes to the financial statements, which collectively comprise the District's basic financial statements, and have issued our report thereon dated October 4, 2017. 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. A deficiency 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 weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency 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.
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66
Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. Compliance and Other Matters As part of obtaining reasonable assurance about whether the District’s financial statements are free of 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 determination 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 no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. 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 entity's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity's internal control and compliance. Accordingly, this communication is not suitable for any other purpose.
67
Rehmann Robson 5800 Gratiot Rd. Suite 201 Saginaw, MI 48638 Ph: 989.799.9580 Fx: 989.799.0227 rehmann.com
Independent Auditors’ Report on Compliance for Each Major Federal Program and Internal Control over Compliance Required by the Uniform Guidance
October 4, 2017
Board of Education Bangor Township Schools Bay City, Michigan Report on Compliance for Each Major Federal Program We have audited the compliance of the Bangor Township Schools (the "District") with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on the District’s major federal program for the year ended June 30, 2017. The District’s major federal program is identified in the summary of auditors’ results section of the accompanying schedule of findings and questioned costs. Management’s Responsibility Management is responsible for compliance with federal statutes, regulations, and the terms and conditions of its federal awards applicable to its federal programs. Independent Auditors’ Responsibility Our responsibility is to express an opinion on compliance for the District’s major federal program 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 America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Those standards and the Uniform Guidance 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 the 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 necessary in the circumstances.
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68
We believe that our audit provides a reasonable basis for our opinion on compliance for the major federal program. However, our audit does not provide a legal determination of the District’s compliance. Opinion on the 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 its major federal program for the year ended June 30, 2017. Report on Internal Control Over Compliance Management of the District is responsible for establishing and maintaining 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 the Uniform Guidance, 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. A deficiency in internal control over compliance 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 weakness in internal control over compliance 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 significant deficiency in internal control over compliance 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 that 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. Purpose of this Report 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 the Uniform Guidance. Accordingly, this report is not suitable for any other purpose.
69
BANGOR TOWNSHIP SCHOOLS Schedule of Findings and Questioned Costs For the Year Ended June 30, 2016 SECTION I - SUMMARY OF AUDITORS’ RESULTS Financial Statements Type of report the auditor issued on whether the financial statements audited were prepared in accordance with GAAP:
Unmodified
Internal control over financial reporting: Material weakness(es) identified?
yes
X
no
Significant deficiency(ies) identified?
yes
X
none reported
yes
X
no
Material weakness(es) identified?
yes
X
no
Significant deficiency(ies) identified?
yes
X
none reported
yes
X
no
Noncompliance material to financial statements noted? Federal Awards Internal control over major programs:
Any audit findings disclosed that are required to be reported in accordance with 2 CFR 200.516(a)? Identification of major programs and type of auditors' report issued on compliance for the major program: CFDA Number
Name of Federal Program or Cluster
Type of Report
10.553, 10.555, 10.559
Child Nutrition Cluster
Unmodified
Dollar threshold used to distinguish between Type A and Type B programs:
$
Auditee qualified as low-risk auditee?
750,000 X
SECTION II – FINANCIAL STATEMENT FINDINGS None. SECTION III – FEDERAL AWARD FINDINGS AND QUESTIONED COSTS None.
70
yes
no
BANGOR TOWNSHIP SCHOOLS Summary Schedule of Prior Audit Findings For the Year Ended June 30, 2016 Finding 2016-001 – Preparation of the Schedule of Expenditures of Federal Awards (SEFA) The audit identified that the District initially misreported the Federal expenditures reported on its SEFA related to CFDA Number 10.555 by an understatement of $74,676 and CFDA Number 10.559 by an understatement of $12,429. In addition, the District initially included state funds on its SEFA of $44,355. This finding was not repeated in fiscal 2017. Finding 2016-002 – Audit Adjustments The audit identified that the District overstated revenues in the Food Service Fund and understated governmental activities revenues by approximately $75,000 and $226,000, respectively. Adjustments were necessary to adjust federal revenue and contributed capital to appropriate balances at year-end. This finding was not repeated in fiscal 2017.
71
Year Ended June 30, 2017
Financial Statements and Single Audit Act Compliance
BANGOR TOWNSHIP SCHOOLS ELECTED OFFICERS For the Year Ended June 30, 2017 ADMINISTRATION Superintendent Chief Financial Officer
Matt Schmidt Jonathan Foco
BOARD OF EDUCATION President Vice President Secretary Treasurer Trustee Trustee Trustee
Richard Kowalski John Loop Melissa Kaczmarek Brian Tobin Jason Forgash Mark Seymour Patrick Shaffer
BANGOR TOWNSHIP SCHOOLS Table of Contents Page Independent Auditors' Report
1
Management's Discussion and Analysis
5
Basic Financial Statements District-wide Financial Statements: Statement of Net Position Statement of Activities Fund Financial Statements: Balance Sheet - Governmental Funds Reconciliation of Fund Balances for Governmental Funds to Net Position of Governmental Activities Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds Reconciliation of Net Changes in Fund Balances of Governmental Funds to Change in Net Position of Governmental Activities Statement of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual - General Fund Statement of Fiduciary Assets and Liabilities Notes to the Financial Statements
20 28 30
Required Supplementary Information MPSERS Cost-Sharing Multiple-Employer Plan: Schedule of the District's Proportionate Share of the Net Pension Liability Schedule of District Contributions
51 52
Combining and Individual Fund Financial Statements and Schedules Nonmajor Governmental Funds: Combining Balance Sheet Combining Statement of Revenues, Expenditures and Changes in Fund Balances Schedule of Revenues, Expenditures and Changes in Fund Balance Budget and Actual: Food Service Special Revenue Fund Community Service Special Revenue Fund
13 14 16 17 18 19
55 57
59 60
BANGOR TOWNSHIP SCHOOLS Table of Contents Single Audit Act Compliance Independent Auditors' Report on the Schedule of Expenditures of Federal Awards Required by the Uniform Guidance
62
Schedule of Expenditures of Federal Awards
63
Notes to the Schedule of Expenditures of Federal Awards
65
Independent Auditors’ Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards
66
Independent Auditors’ Report on Compliance for Each Major Federal Program and Internal Control over Compliance Required by the Uniform Guidance
68
Schedule of Findings and Questioned Costs
70
Summary Schedule of Prior Audit Findings
71
Rehmann Robson
INDEPENDENT AUDITORS' REPORT
5800 Gratiot Rd. Suite 201 Saginaw, MI 48638 Ph: 989.799.9580 Fx: 989.799.0227 rehmann.com
October 4, 2017 Board of Education Bangor Township Schools Bay City, Michigan 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 Bangor Township Schools (the “District”), as of and for the year ended June 30, 2017, 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. Independent Auditors' Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free 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 statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the District’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.
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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 Bangor Township Schools, as of June 30, 2017, and the respective changes in financial position thereof and the budgetary comparison for the general fund for the year then ended in conformity with accounting principles generally accepted in the United States of America. Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management's discussion and analysis and schedules for the pension plan, as listed in the table of contents, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide assurance. 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 and individual fund financial statements and schedules are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual fund financial statements and schedules 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 and individual fund financial statements and schedules are fairly stated, in all material respects, in relation to the basic financial statements as a whole.
2
Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated October 4, 2017, on our consideration of the District’s internal control over financial reporting and 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 the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the District's internal control over financial reporting and compliance.
3
MANAGEMENT'S DISCUSSION AND ANALYSIS
4
BANGOR TOWNSHIP SCHOOLS Management's Discussion and Analysis Bangor Township Schools (the "District") is a K-12 school district located in Bay City, Michigan. As management of the District, we offer the readers of the District's financial statements this narrative overview and analysis of its financial activities for the years ended June 30, 2017 and 2016. The management’s discussion and analysis is provided at the beginning of the audit to provide an overview of the past and current position of the District’s financial condition. This summary should not be taken as a replacement for the financial statements, which consist of the basic financial statements and other supplemental information and present all the District’s revenue and expenditures by program for the general fund, special revenue funds, capital projects fund, and debt service funds. Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction to the District's basic financial statements. The District's basic financial statements are comprised of four components: 1) district-wide financial statements, 2) fund financial statements, 3) statement of fiduciary assets and liabilities, and 4) notes to the financial statements. This report also contains supplementary information to compliment the financial information provided. District-Wide Financial Statements. The district-wide financial statements are designed to provide readers with a broad overview of the District's finances, similar to the private sector financial statements. They provide a clear picture of the District as a single entity to complement the traditional fund-based financial statements. The statement of net position presents information on all of the District's assets, deferred outflows of resources, liabilities, and deferred inflows of resources, with the difference reported as net position. Net position should be understood as a measure of “net worth” rather than as a measure of expendable or available resources. Over time, increases or decreases in the net position of the District may service as a useful indicator of whether the Bangor Township Schools' financial position is improving or deteriorating. The statement of activities presents information showing how the District’s net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., earned but unused compensated leave). Both of the government-wide financial statements display functions of the District that are principally supported by taxes and intergovernmental revenues (governmental activities). The activities of the District include instruction, supporting services, food services, athletics, and community services. The District has no business-type activities as of and for the year ended June 30, 2017. Fund Financial Statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The District, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. The District has two types of funds: governmental funds and fiduciary funds. Governmental Funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating the District’s near-term financing requirements.
5
BANGOR TOWNSHIP SCHOOLS Management's Discussion and Analysis Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long term impact of the District’s near term financing decisions. Both the governmental funds balance sheet and the governmental funds statement of revenues, expenditures and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. Fiduciary Fund. The District acts as the trustee for its student activity funds. All of the District’s fiduciary activities are reported in a separate statement of fiduciary assets and liabilities. These activities are excluded from the District’s government-wide financial statements because the District cannot use these assets to finance its operations. District-wide Financial Analysis Net position may serve over time as a useful indicator of a government’s financial position. In the case of the District, liabilities and deferred inflows of resources exceeded assets and deferred outflows of resources by $19,540,078 at the end of the most recent fiscal year. The following schedule provides a summary of the District’s assets, deferred outflows of resources, liabilities, deferred inflows of resources, and net position: Statement of Net Position
Assets Current and other assets Capital assets, net
Deferred outflows of resources Liabilities Long-term liabilities Other liabilities
Deferred inflows of resources Net Position Net investment in capital assets Restricted Unrestricted (deficit)
June 30, 2017
June 30, 2016
$ 8,398,111 15,342,794 23,740,905
$ 7,683,433 15,755,315 23,438,748
5,494,357
4,320,637
12,296,969 36,375,265 48,672,234
13,161,955 35,035,959 48,197,914
103,106
107,747
4,782,698 2,408,145 (26,730,921)
Total net position (deficit)
4,329,936 2,034,296 (26,910,508)
$(19,540,078) $(20,546,276)
The above analysis focuses on the net position. The change in net position of the District’s governmental activities is discussed below. The deficit net position of $19,540,078 is directly related to the net pension liability. The District's net investment in capital assets totaled $4,782,698. This compares the original cost, less depreciation of the District’s capital assets, to long-term debt used to finance the acquisition of those assets. Most of the debt will be repaid from voter-approved property taxes collected as the debt service comes due. An amount of $2,408,145 is restricted to pay debt service amounts owed by the District, and for future food service and community service expenses. This results in an unrestricted deficit of $26,730,921.
6
BANGOR TOWNSHIP SCHOOLS Management's Discussion and Analysis The operating results of the general fund will have a significant impact on the change in unrestricted net position from year-to-year. The results of this year’s operations for the District as a whole are reported in the statement of activities, which shows the changes in net position for the recent fiscal year. As reported in the statement of activities, the cost of all governmental activities this year was $25,223,139. Certain activities were partially funded from those who benefited from the programs (charges for services), in the amount of $1,007,089, by other governments and organizations that subsidized certain programs with grants and contributions, in the amount of $5,068,072, or capital grants and contributions, in the amount of $333,946. The remaining “public benefit” portion of governmental activities was funded with $3,408,459 in taxes, $16,385,704 in State foundation allowance, $13,401 in unrestricted investment earnings, and $12,666 in grants and contributions not restricted to specific programs. During 2017, the District experienced an increase in net position of $1,006,198. Change in Net Position For Year Ended June 30, 2017 Program revenues: Charges for services Operating grants and contributions Capital grants and contributions General revenues: Property taxes Unrestricted state aid Grants and contributions not restricted to specific programs Unrestricted investment earnings Total revenues Expenses Instruction Supporting services Food services Athletics Community services Interest on long-term debt Unallocated depreciation Total expenses Change in net position
$ 1,007,089 5,068,072 333,946
Net position, end of the year
$
886,279 4,630,583 225,679
3,408,459 16,385,704 12,666 13,401 26,229,337
3,482,309 15,729,725 18,355 5,747 24,978,677
13,983,676 8,038,244 1,164,173 576,412 219,088 167,235 1,074,311 25,223,139
13,579,612 7,693,229 1,140,099 549,137 181,378 229,313 1,048,407 24,421,175
1,006,198
557,502
(20,546,276)
Net position, beginning of the year
June 30, 2016
(21,103,778)
$(19,540,078) $(20,546,276)
The District's net position increased by $1,006,198 during the current fiscal year, compared to an increase in $557,502 in the prior fiscal year. This change is mainly due to an increase in the unrestricted State aid revenue of $655,979, which was the result of an increase from the state in the foundation allowance of 120 dollars per student and increase of student count of 47 pupils. This increase in the foundation allowance was offset by an increase of $404,065 in instruction expenses, which was the result of giving a step increase to the teachers, 1% to all other employees, and a 17% increase to health insurance. The supporting services increased by adding 200,000 into our curriculum budget. The district has taken a different strategy that all curriculum purchases need to run through the curriculum director. With that stance the district moved an additional 125,000 into the textbook line. The district also had an added cost in its Virtual school from the prior year of roughly 110,000. This was a direct effect of increase students in the program and purchasing the curriculum online. The district also incurred about 50,000 more for EI students that was paid out to the ISD.
7
BANGOR TOWNSHIP SCHOOLS Management's Discussion and Analysis As discussed above, the net cost shows the financial burden that was placed on the State and District taxpayers by each of these functions. Since property taxes and unrestricted State aid constitute the vast majority of the District's operating revenue sources, the Board of Education and Administration must annually evaluate the needs of the School District and balance those needs with State-prescribed available unrestricted revenue. Bangor Township Schools' Governmental Funds As noted earlier, the District uses funds to help it control and manage money for particular purposes. Looking at the funds helps the reader consider whether the District is being held accountable for the resources taxpayers and others provide to it and may give more insight into the District’s overall financial health. As the District completed the most recent school year, the governmental funds reported a combined fund balance of $6,171,298, an increase of $965,168 from the prior year. The changes by major and non-major funds are as follows: 2009 Bond Nonmajor Total Debt Service Governmental Governmental General Fund Fund Funds Funds Fund balance, beginning of year Increase in fund balance Fund balance, end of year
$ 2,884,092
$ 1,399,998
245,319 $ 3,129,411
$
922,040
$ 5,206,130
233,333
486,516
965,168
$ 1,633,331
$ 1,408,556
$ 6,171,298
In the general fund, the District's principal operating fund, the fund balance had an increase of $245,319 from the prior year. The district was able to add to its fund balance due to cost effectiveness of everyone's dedication to spending wisely. The district wants to maintain its fund balance per NEOLA policy 6220. The fund balance of the general fund is available to fund costs related to allowable school operating purposes. The combined fund balance of the debt service funds, which is restricted, was $1,858,790. Millage rates for debt service were established at 2.35 mills for the most recent fiscal year. Millage rates are determined annually to ensure that the District accumulates sufficient resources to pay annual bond debt service. The other nonmajor funds (special revenue and capital projects) increased by $446,855 primarily due to the transfers from the general fund to the capital projects to pay for the transportation parking lot. General Fund Budgetary Highlights Over the course of the year, the District revises its budget as it attempts to account for unexpected changes in revenue and expenditures. State law requires that the budget be amended to ensure that expenditures do not exceed appropriations. The final amendment to the budget was actually adopted on June 26, 2017. A statement showing the District’s original and final budget amounts compared with amounts actually paid and received is provided in the basic financial statements. The original budget was adopted on June 27, 2016 and revisions were made to the current year general fund original budget on January 30, 2017. The district had an increase of 89 students from its original budget to the amended budget which was an increase of $668,479 in revenue. There was also an increase of At-Risk funding in the amount of $86,547. Title1 also had an increase of $72,191 all do to the increase in the number of students qualifying for free and reduced lunch. The District increased its expenditure budget by $105,000 to purchase new textbooks. Three newer buses were added to the bus fleet in the amount of $130,000. The District also contracted for the construction of a transportation parking lot in the amount of $338,000. The District has continuously been giving raises and trying to maintain it's infrastructure while not impacting its fund balance.
8
BANGOR TOWNSHIP SCHOOLS Management's Discussion and Analysis Capital Asset and Debt Administration Capital Assets. At June 30, 2017, the District had $15,342,794 invested in a broad range of capital assets, including land, buildings and improvements, vehicles, and equipment and other. This amount represents a net decrease (net additions, disposals, and depreciation) of $412,521 or approximately 2.6%, from the prior year. June 30, 2017 181,770
June 30, 2016
Land Buildings and improvements (net of accumulated depreciation) Vehicles (net of accumulated depreciation) Equipment and other (net of accumulated depreciation)
$
$
181,770
13,370,455 815,277 975,292
13,936,008 708,562 928,975
Total capital assets, net
$ 15,342,794
$ 15,755,315
The district purchased five newer buses during the fiscal year in the amount of $250,900. The district also put in a new PA system at John Glenn and Christa McAuliffe in the amount of $41,375. Other projects that occurred during the year are as followed: Walls at Bangor WEST and Lincoln in the amount of $38,745, 3 sets of chrome book carts in the amount of $22,706, and a new compact 3039 R John Deer Tractor in the amount of $32,496. Additional information on the District's capital assets can be found in the notes to financial statements section of this report. Long-term Debt. At the end of this year, Bangor Township School District had $10,425,000 in bonds outstanding versus $11,200,000 in the previous year - a decrease of approximately 6.9%. Long-term debt consisted of the following: June 30, 2017
June 30, 2016
General Obligation Bonds Installment notes Unamortized premium Compensated absences
$ 10,425,000 166,657 61,739 1,643,573
$ 11,200,000 248,026 82,315 1,631,614
Total debt
$ 12,296,969
$ 13,161,955
Additional information on the District's long-term debt can be found in the notes to financial statements section of this report.
9
BANGOR TOWNSHIP SCHOOLS Management's Discussion and Analysis Economic Factors and Next Year's Budgets and Rates Elected officials and administration considered many factors when preparing the District’s 2017-18 fiscal year budget. The retirement rate increased 0.62% to 25.56% for the upcoming 2017-18 school year. The district experienced a 2% increase in the insurance premium. One of the most important factors affecting the budget is our student count. The State foundation revenue is determined by multiplying the blended student count by the foundation allowance per pupil. The blended count for 2017-18 fiscal year is 90% of the September 2017 and 10% of the February 2018 student counts. The 2017-18 budgets were adopted in June 2017, based on an estimate of 2,541 students that will be enrolled in September 2017. Approximately 83% of total general fund revenue is from the foundation allowance. The State is looking to increase the foundation allowance from $7,511 to $7,631 per student for the 2017-18 school year. Under State law, the District can’t assess additional property tax revenue for general operations. As a result, District funding is heavily dependent on the State’s ability to fund local school operations. Once the final student count and related per pupil funding is validated, State law requires the School District to amend the budget if actual District resources are not sufficient to fund original appropriations. Since the District’s revenue is heavily dependent on State funding and the health of the State School Aid Fund, the actual revenue received depends on the State’s ability to collect revenue to fund its appropriation to school districts. The State periodically holds revenue estimating conferences to estimate revenue. If actual State revenue is less than their estimates, reduction to the per-pupil funding allowance may be necessary. The District’s unassigned general fund balance of $3,108,280 is sufficient to meet any unanticipated shortfalls the State may experience in the School Aid Fund for the 2017-18 school year. Requests for Information This financial report is designed to give our citizens, taxpayers, parents, students, investors and creditors a general overview of the District’s finances and to demonstrate the District’s accountability for the money it receives. Questions concerning this report or requests for additional information should be addressed to Jonathan Foco, Chief Financial Officer, Bangor Township Schools, 3359 E. Midland Road, Bay City, Michigan 48706; telephone number (989) 684-8121, x1204.
10
BASIC FINANCIAL STATEMENTS
11
DISTRICT-WIDE FINANCIAL STATEMENTS
12
BANGOR TOWNSHIP SCHOOLS Statement of Net Position June 30, 2017 Governmental Activities Assets Cash and cash equivalents Investments Receivables Other assets Capital assets not being depreciated Capital assets being depreciated, net
$
Total assets
2,944,829 1,801,398 3,618,449 33,435 181,770 15,161,024 23,740,905
Deferred outflows of resources Deferred pension amounts Deferred loss on bond refunding
5,401,057 93,300
Total deferred outflows of resources
5,494,357
Liabilities Accounts payable and accrued liabilities Long-term liabilities: Due within one year Due in more than one year Net pension liability
1,471,048 10,825,921 34,122,390
Total liabilities
48,672,234
2,252,875
Deferred inflows of resources Deferred pension amounts
103,106
Net position Net investment in capital assets Restricted for: Debt service Food services Community services Unrestricted (deficit)
4,782,698 1,832,728 436,188 139,229 (26,730,921)
Total net position (deficit)
$ (19,540,078)
The accompanying notes are an integral part of these financial statements.
13
BANGOR TOWNSHIP SCHOOLS Statement of Activities For the Year Ended June 30, 2017 Program Revenues
Functions / Programs Governmental activities: Instruction Supporting services Food services Athletics Community services Interest on longterm debt Unallocated depreciation Total
Charges for Services
Expenses
$
$
13,983,676 8,038,244 1,164,173 576,412 219,088
$
95,772 159,975 408,890 111,635 230,817
Operating Grants and Contributions
Capital Grants and Contributions
$
$
456,564 3,725,801 885,707 -
Net (Expense) Revenue
333,946 -
$ (13,097,394) (4,152,468) 130,424 (464,777) 11,729
167,235
-
-
-
(167,235)
1,074,311
-
-
-
(1,074,311)
333,946
(18,814,032)
25,223,139
$
1,007,089
$
5,068,072
General revenues: Property taxes Unrestricted state aid Grants and contributions not restricted to specific programs Unrestricted investment earnings
$
3,408,459 16,385,704 12,666 13,401
Total general revenues
19,820,230
Change in net position
1,006,198
Net position, beginning of year
(20,546,276)
Net position, end of year
$ (19,540,078)
The accompanying notes are an integral part of these financial statements.
14
FUND FINANCIAL STATEMENTS
15
BANGOR TOWNSHIP SCHOOLS Balance Sheet Governmental Funds June 30, 2017
General Fund Assets Cash and cash equivalents Investments Accounts receivable Due from other governments Due from other funds Prepaid items Inventories Total assets Liabilities Accounts payable Salaries payable Accrued liabilities Due to other funds
2009 Bond Debt Service Fund
Nonmajor Governmental Funds
Totals
$
690,447 1,801,398 52,399 3,558,194 21,131 -
$
1,633,331 -
$
621,051 7,856 783,543 12,304
$
2,944,829 1,801,398 52,399 3,566,050 783,543 21,131 12,304
$
6,123,569
$
1,633,331
$
1,424,754
$
9,181,654
$
206,437 1,208,282 795,896 783,543
$
-
$
12,216 3,982 -
$
206,437 1,220,498 799,878 783,543
Total liabilities
2,994,158
-
16,198
3,010,356
Fund balances Nonspendable Restricted Assigned Unassigned
21,131 3,108,280
1,633,331 -
12,304 788,572 607,680 -
33,435 2,421,903 607,680 3,108,280
Total fund balances
3,129,411
1,633,331
1,408,556
6,171,298
Total liabilities and fund balances
$
6,123,569
$
1,633,331
The accompanying notes are an integral part of these financial statements.
16
$
1,424,754
$
9,181,654
BANGOR TOWNSHIP SCHOOLS Reconciliation Fund Balances for Governmental Funds to Net Position of Governmental Activities June 30, 2017 Fund balances - total governmental funds
$
6,171,298
Amounts reported for governmental activities in the statement of net position are different because: Capital assets used in governmental activities are not financial resources, and therefore are not reported in the fund statement. Capital assets not being depreciated Capital assets being depreciated, net
181,770 15,161,024
Certain liabilities, such as bonds payable, are not due and payable in the current period, and therefore are not reported in the funds. Bonds and installment notes payable Unamortized premiums Unamortized deferred loss on bond refunding Accrued interest on bonds payable Compensated absences
(10,591,657) (61,739) 93,300 (26,062) (1,643,573)
Certain pension-related amounts, such as the net pension liability and deferred amounts are not due and payable in the current period or do not represent current financial resources and therefore are not reported in the funds. Net pension liability Deferred outflows related to the net pension liability Deferred inflows related to the net pension liability
(34,122,390) 5,401,057 (103,106)
Net position of governmental activities
$ (19,540,078)
The accompanying notes are an integral part of these financial statements.
17
BANGOR TOWNSHIP SCHOOLS Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds For the Year Ended June 30, 2017
General Fund Revenues Local sources State sources Federal sources Reimbursements Charges for services
$
Total revenues Expenditures Current: Instruction Supporting services Food services Athletics Community services Debt service: Principal repayment Interest and fiscal charges Tax abatements Capital outlay Total expenditures Revenue over expenditures
2,685,446 20,111,505 456,564 12,666 111,635
2009 Bond Debt Service Fund
Nonmajor Governmental Funds
$
$
-
1,631,868 42,348 843,359 -
Totals $
4,317,314 20,153,853 1,299,923 12,666 111,635
23,377,816
-
2,517,575
25,895,391
13,701,609 7,781,862 568,713 6,285
-
1,139,765 209,268
13,701,609 7,781,862 1,139,765 568,713 215,553
81,369 3,622 485,704
-
775,000 176,526 500 -
856,369 180,148 500 485,704
22,629,164
-
2,301,059
24,930,223
748,652
-
216,516
965,168
663,333 (663,333)
Other financing sources (uses) Transfers in Transfers out
80,000 (583,333)
233,333 -
350,000 (80,000)
Total other financing sources (uses)
(503,333)
233,333
270,000
-
245,319
233,333
486,516
965,168
2,884,092
1,399,998
922,040
5,206,130
Net change in fund balances Fund balance, beginning of year Fund balance, end of year
$
3,129,411
$
1,633,331
The accompanying notes are an integral part of these financial statements.
18
$
1,408,556
$
6,171,298
BANGOR TOWNSHIP SCHOOLS Reconciliation Net Changes in Fund Balances of Governmental Funds to Change in Net Position of Governmental Activities For the Year Ended June 30, 2017 Net change in fund balances - total governmental funds
$
965,168
Amounts reported for governmental activities in the statement of activities are different because: Governmental funds report capital outlays as expenditures. However, in the statement of activities, the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. Capital assets purchased/constructed Donated capital assets Depreciation expense
485,704 333,946 (1,232,171)
Bond proceeds provide current financial resources to governmental funds in the period issued, but issuing bonds increases long-term liabilities in the statement of net position. Repayment of bond principal is an expenditure in the governmental funds, but the repayment reduces long-term liabilities in the statement of net position. Principal payments on long-term liabilities
856,369
Some expenses reported in the statement of activities do not require the use of current financial resources and therefore are not reported as expenditures in governmental funds. Change in net pension liability and related deferred amounts Change in accrued interest payable on long-term debt Amortization of bond premium Amortization of deferred loss on bond refunding Change in the accrual for compensated absences Change in net position of governmental activities
(403,772) 3,999 20,576 (11,662) (11,959) $ 1,006,198
The accompanying notes are an integral part of these financial statements.
19
BANGOR TOWNSHIP SCHOOLS Statement of Revenues, Expenditures and Changes in Fund Balance Budget and Actual - General Fund For the Year Ended June 30, 2017
Original Budget Revenues Local sources: Property taxes Property taxes-interest and penalties Interest Transfers from other districts: Rental of facilities Transportation fees Other
$
2,399,640 6,000 2,000
Final Budget
$
2,391,945 17,700 10,000
Actual
$
2,393,555 25,183 10,961
Actual Over (Under) Final Budget
$
1,610 7,483 961
72,000 90,478 42,250
81,000 90,478 91,805
77,598 82,377 95,772
2,612,368
2,682,928
2,685,446
2,518
State sources: State Aid Foundation Other State Aid At Risk Special Education
17,296,040 362,324 659,593 796,589
18,105,533 420,305 738,603 858,683
18,076,992 434,398 741,424 858,691
(28,541) 14,093 2,821 8
Total state sources
19,114,546
20,123,124
20,111,505
(11,619)
Federal sources: Title I Title IIA
289,990 110,272
362,181 110,768
362,181 94,383
(16,385)
Total federal sources
400,262
472,949
456,564
(16,385)
18,355
12,666
12,666
101,454
117,678
111,635
(6,043)
22,246,985
23,409,345
23,377,816
(31,529)
Total local sources
Reimbursements: Insurance claims Charges for services Total revenues
(3,402) (8,101) 3,967
-
continued…
20
BANGOR TOWNSHIP SCHOOLS Statement of Revenues, Expenditures and Changes in Fund Balance Budget and Actual - General Fund For the Year Ended June 30, 2017
Original Budget Expenditures Instruction: Basic programs: Elementary school: Salaries Employee benefits Purchased services Supplies and materials Total elementary school
$
2,477,500 1,687,040 97,500 59,200 4,321,240
Final Budget
$
2,482,500 1,741,740 186,704 80,200 4,491,144
Actual
$
2,483,777 1,699,156 190,078 81,094 4,454,105
Actual Over (Under) Final Budget
$
1,277 (42,584) 3,374 894 (37,039)
Middle school: Salaries Employee benefits Purchased services Supplies and materials Other Total middle school
1,616,150 994,227 48,025 32,100 375 2,690,877
1,572,500 1,030,279 85,425 56,007 375 2,744,586
1,569,774 1,005,665 92,908 49,611 375 2,718,333
(2,726) (24,614) 7,483 (6,396) (26,253)
High school: Salaries Employee benefits Purchased services Supplies and materials Total high school
1,937,740 1,237,846 81,225 46,710 3,303,521
1,946,940 1,276,746 90,150 91,210 3,405,046
1,959,123 1,251,808 92,968 88,742 3,392,641
12,183 (24,938) 2,818 (2,468) (12,405)
Preschool: Salaries Employee benefits Purchased services Supplies and materials Other Total preschool
159,385 82,250 32,400 2,100 276,135
163,850 75,971 33,391 19,550 292,762
167,014 82,228 37,846 1,575 499 289,162
3,164 6,257 4,455 (17,975) 499 (3,600)
10,591,773
10,933,538
10,854,241
(79,297)
Total basic programs
continued…
21
BANGOR TOWNSHIP SCHOOLS Statement of Revenues, Expenditures and Changes in Fund Balance Budget and Actual - General Fund For the Year Ended June 30, 2017
Original Budget Expenditures (continued) Instruction (concluded): Added needs: Special education: Salaries Employee benefits Purchased services Supplies and materials Other Total special education Compensatory education: Salaries Employee benefits Purchased services Supplies and materials Total compensatory education Total added needs Total instruction Supporting services: Pupil services: Guidance: Salaries Employee benefits Purchased services Supplies and materials Total pupil services
$
1,053,850 781,170 44,690 9,700 110,000 1,999,410
Final Budget
$
1,016,100 777,360 60,190 21,800 135,000 2,010,450
Actual
$
1,028,170 747,527 57,227 16,776 145,270 1,994,970
Actual Over (Under) Final Budget
$
12,070 (29,833) (2,963) (5,024) 10,270 (15,480)
505,526 293,308 7,916 806,750
541,960 296,259 2,687 840,906
541,151 302,619 8,628 852,398
(809) 6,360 5,941 11,492
2,806,160
2,851,356
2,847,368
(3,988)
13,397,933
13,784,894
13,701,609
(83,285)
393,600 356,148 1,950 2,250 753,948
393,300 355,438 2,200 1,250 752,188
396,367 347,818 2,204 1,442 747,831
3,067 (7,620) 4 192 (4,357) continued…
22
BANGOR TOWNSHIP SCHOOLS Statement of Revenues, Expenditures and Changes in Fund Balance Budget and Actual - General Fund For the Year Ended June 30, 2017
Original Budget Expenditures (continued) Supporting services (continued): Instructional staff: Improvement of instruction: Salaries Employee benefits Purchased services Supplies and materials Total improvement of instruction
$
65,662 53,202 27,747 82,500 229,111
Final Budget
$
127,750 67,955 106,605 218,215 520,525
Actual
$
113,799 65,948 97,395 218,294 495,436
Actual Over (Under) Final Budget
$
(13,951) (2,007) (9,210) 79 (25,089)
Library: Salaries Employee benefits Purchased services Supplies and materials Total library
64,000 54,230 9,300 10,338 137,868
64,000 58,880 8,800 10,338 142,018
64,208 55,120 8,812 8,714 136,854
208 (3,760) 12 (1,624) (5,164)
Computer assisted instruction Salaries Employee benefits Purchased services Supplies and materials Total computer assisted instruction
54,000 36,425 218,650 12,600 321,675
69,100 46,925 267,050 18,200 401,275
69,640 47,406 266,112 18,029 401,187
540 481 (938) (171) (88)
41,550 21,324 500 27,500
37,800 21,560 10,023 10,100
38,185 18,789 10,023 10,073
385 (2,771) (27)
90,874
79,483
77,070
(2,413)
779,528
1,143,301
1,110,547
(32,754)
Supervision and direction of instructional staff: Salaries Employee benefits Supplies and materials Other Total supervision and direction of instructional staff Total instructional staff
continued…
23
BANGOR TOWNSHIP SCHOOLS Statement of Revenues, Expenditures and Changes in Fund Balance Budget and Actual - General Fund For the Year Ended June 30, 2017
Original Budget Expenditures (continued) Supporting services (continued): General Administration: Board of education: Salaries Purchased services Supplies and materials Other Total board of education Executive administration: Salaries Employee benefits Purchased services Supplies and materials Other Total executive administration Total general administration School administration: Office of the principal: Salaries Employee benefits Purchased services Supplies and materials Other Total school administration Business Services: Fiscal Services: Salaries Employee benefits Purchased services Supplies and materials Total fiscal services
$
7,000 78,550 550 10,500 96,600
Final Budget
$
7,000 71,650 12,000 90,650
Actual
$
7,470 72,967 12,422 92,859
Actual Over (Under) Final Budget
$
470 1,317 422 2,209
251,850 159,660 8,500 3,000 9,000 432,010
160,500 100,065 11,000 3,000 9,000 283,565
162,903 99,040 7,969 1,296 10,981 282,189
2,403 (1,025) (3,031) (1,704) 1,981 (1,376)
528,610
374,215
375,048
765,050 508,960 28,650 10,500 4,000 1,317,160
769,050 517,660 28,650 9,500 4,000 1,328,860
775,941 515,727 26,040 8,140 3,262 1,329,110
6,891 (1,933) (2,610) (1,360) (738) 250
131,500 93,650 8,100 2,000 235,250
130,500 98,550 20,540 2,000 251,590
130,361 97,806 18,087 1,688 247,942
(139) (744) (2,453) (312) (3,648)
833
continued…
24
BANGOR TOWNSHIP SCHOOLS Statement of Revenues, Expenditures and Changes in Fund Balance Budget and Actual - General Fund For the Year Ended June 30, 2017
Original Budget Expenditures (continued) Supporting services (continued): Business Services (concluded): Internal services: Salaries Employee benefits Purchased services Supplies and materials Total internal services Other business services: Purchased services Other Tax abatements Total other business services Total business services
$
11,500 6,000 28,550 5,000 51,050
Final Budget
$
11,500 6,300 26,650 55,000 99,450
Actual
$
10,560 5,709 23,937 54,523 94,729
Actual Over (Under) Final Budget
$
(940) (591) (2,713) (477) (4,721)
25,705 2,000 40,000 67,705
25,725 2,000 7,000 34,725
25,725 1,782 4,680 32,187
(218) (2,320) (2,538)
354,005
385,765
374,858
(10,907)
Operation and maintenance of plant: Salaries Employee benefits Purchased services Supplies and materials Other Total operation and maintenance of plant
574,550 450,040 905,517 136,500 5,700
566,050 453,475 928,294 158,000 3,500
542,133 429,850 936,519 191,726 2,403
(23,917) (23,625) 8,225 33,726 (1,097)
2,072,307
2,109,319
2,102,631
(6,688)
Pupil transportation: Salaries Employee benefits Purchased services Supplies and materials Other Total pupil transportation
510,300 348,080 66,522 200,353 5,000 1,130,255
514,100 351,682 70,972 156,353 5,000 1,098,107
512,569 338,895 62,389 144,965 6,671 1,065,489
(1,531) (12,787) (8,583) (11,388) 1,671 (32,618) continued…
25
BANGOR TOWNSHIP SCHOOLS Statement of Revenues, Expenditures and Changes in Fund Balance Budget and Actual - General Fund For the Year Ended June 30, 2017
Original Budget Expenditures (continued) Supporting services (concluded): Central services: Staff/personnel services: Salaries Employee benefits Purchased services Supplies and materials Total staff/personnel services Data processing services: Salaries Employee benefits Purchased services Supplies and materials Total data processing services Other central services: Employee benefits Total central services Other support services: Student activities: Salaries Employee benefits Purchased services Total other support services Total supporting services
$
80,900 41,195 7,115 250 129,460
Final Budget
$
80,900 42,595 17,785 3,420 144,700
Actual
$
81,825 42,022 16,814 3,381 144,042
Actual Over (Under) Final Budget
$
925 (573) (971) (39) (658)
67,950 37,380 202,900 12,800 321,030
67,950 38,780 203,800 12,800 323,330
65,013 37,155 206,251 9,875 318,294
(2,937) (1,625) 2,451 (2,925) (5,036)
32,000
28,500
29,107
482,490
496,530
491,443
(5,087)
83,700 37,307 28,000
74,600 35,607 77,100
72,321 34,167 78,417
(2,279) (1,440) 1,317
149,007
187,307
184,905
(2,402)
7,567,310
7,875,592
7,781,862
(93,730)
607
continued…
26
BANGOR TOWNSHIP SCHOOLS Statement of Revenues, Expenditures and Changes in Fund Balance Budget and Actual - General Fund For the Year Ended June 30, 2017
Original Budget Expenditures (concluded) Athletics: Salaries Employee benefits Purchased services Supplies and materials Other Total athletics Community services: Nonpublic school pupils: Purchased services Supplies and materials
$
Final Budget
Actual
Actual Over (Under) Final Budget
214,810 111,868 193,173 13,592 8,440
219,785 116,668 203,414 16,842 8,440
219,080 121,423 198,126 17,572 12,512
(705) 4,755 (5,288) 730 4,072
541,883
565,149
568,713
3,564
8,242 2,708
$
7,307 3,050
$
2,825 3,460
$
(4,482) 410
Total community services
10,950
10,357
6,285
(4,072)
Debt service: Principal repayment Interest and fiscal charges
79,488 5,512
79,488 5,512
81,369 3,622
1,881 (1,890)
Total debt service
85,000
85,000
84,991
(9)
196,225
484,000
485,704
21,799,301
22,804,992
22,629,164
447,684
604,353
748,652
144,299
Other financing sources (uses) Transfers in Transfers out
72,000 (333,334)
72,000 (483,334)
80,000 (583,333)
8,000 99,999
Total other financing sources (uses)
(261,334)
(411,334)
(503,333)
107,999
186,350
193,019
245,319
52,300
2,884,092
2,884,092
2,884,092
-
Capital outlay Total expenditures Revenues over (under) expenditures
Net change in fund balance Fund balance, beginning of year Fund balance, end of year
$
3,070,442
$
3,077,111
$
3,129,411
1,704 (175,828)
$
52,300 concluded
The accompanying notes are an integral part of these financial statements.
27
BANGOR TOWNSHIP SCHOOLS Statement of Fiduciary Assets and Liabilities June 30, 2017 Agency Fund Assets Cash and cash equivalents Liabilities Due to student groups Due to others
$
450,059
$
397,660 52,399 450,059
$
The accompanying notes are an integral part of these financial statements.
28
NOTES TO FINANCIAL STATEMENTS
29
BANGOR TOWNSHIP SCHOOLS Notes to Financial Statements 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Reporting Entity Bangor Township Schools (the “District”) has followed the guidelines of the Governmental Accounting Standards Board’s Statement No. 61 and has determined that no entities should be consolidated into its basic financial statements as component units. Therefore, the reporting entity consists of the primary government financial statements only. The criteria for including a component unit include entities for which the District is considered to be financially accountable. District-Wide and Fund Financial Statements The district-wide financial statements (i.e., the statement of net position and the statement of activities) report information on all of the nonfiduciary activities of the primary government. For the most part, the effect of interfund activity has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenue, are reported separately from businesstype activities, which rely to a significant extent on fees and charges for support. The District had no business-type activities during the year ended June 30, 2017. The statement of activities demonstrates the degree to which the direct expenses of a given function or segment is offset by program revenue. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenue includes 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenue are reported instead as general revenue. Separate financial statements are provided for governmental funds and fiduciary funds, even though the latter are excluded from the district-wide financial statements. Major individual governmental funds are reported as separate columns in the fund financial statements. Measurement Focus, Basis of Accounting and Financial Statement Presentation The district-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting as are the fiduciary fund financial statements, except for agency funds, which do not have a measurement focus. Revenue is recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenue in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenue is recognized as soon as they are both measurable and available. Revenue is considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the government considers revenue to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due.
30
BANGOR TOWNSHIP SCHOOLS Notes to Financial Statements Property taxes, intergovernmental revenue, and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenue of the current fiscal period. All other revenue items are considered to be measurable and available only when cash is received by the government. The District reports the following major governmental funds: The General Fund is the government’s primary operating fund. It accounts for all financial resources not accounted for and reported in another fund. The 2009 Bond Debt Service Fund is used to account for all financial resources restricted to expenditure for principal and interest related to the 2009 Debt Service Bonds. Additionally, the District reports the following fund types: The special revenue funds are used to account for and report the proceeds of specific revenue sources that are restricted or committed to expenditure for specific purposes other than debt service or capital projects. The debt service funds are used to account for all financial resources restricted, committed or assigned to expenditure for principal and interest. The capital projects fund is used to account for all financial resources restricted, committed or assigned to expenditure for the acquisition or construction of capital assets. The agency fund accounts for assets held for other groups and organizations and are custodial in nature. When both restricted and unrestricted resources are available for use, it is the government’s policy to use restricted resources first, and then unrestricted resources as they are needed. Deposits and investments The District’s cash and cash equivalents are considered to be cash on hand, demand deposits and shortterm investments with original maturities of three months or less from the date of acquisition. Investments consist of participation in an external investment pool (Michigan Liquid Asset Fund). The District's shares are recorded at amortized cost, which approximates fair value. Receivables and Payables The District follows the practice of recording revenues that have been earned but not yet received as receivables. Receivables consist primarily of State Aid payments from the State of Michigan and Federal grant funds earned but not yet collected. No amounts have been identified as potentially uncollectible by management, and therefore, no amount has been recorded as a provision for bad debts. Activity between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as either “due to/from other funds” (i.e., the current portion of interfund loans) or “advances to/from other funds” (i.e., the noncurrent portion of interfund loans).
31
BANGOR TOWNSHIP SCHOOLS Notes to Financial Statements Other Assets All inventories are valued at cost using the first-in/first out (“FIFO”) method. Inventories of governmental funds are recorded as expenditures when consumed rather than when purchased. Payments to vendors for services that will benefit periods beyond a fund's fiscal year-end are recorded as prepaid items. Capital Assets Capital assets, which include property and equipment, are reported in the governmental activities column in the district-wide financial statements. Capital assets are defined by the District as assets with an initial, individual cost of more than $5,000 and an estimated useful life in excess of one year. Such assets are recorded at historical cost if purchased or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated acquisition cost as of the date of donation. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized. Major outlays for capital assets and improvements are capitalized as projects are constructed. Capital assets of the primary government are depreciated using the straight-line method over the following estimated useful lives: Assets
Years 20-50 5-10 5-10
Buildings and improvements Vehicles Equipment and other Deferred 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 that applies to a future period(s) and will not be recognized as an outflow of resources (expense/expenditure) until then. The District reports deferred outflows of resources related to the net pension liability and unamortized loss on bond refunding. A portion of the deferred pension amounts represent contributions to the plan subsequent to the plan measurement date. More detailed information on pension-related deferred outflows of resources can be found in Note 14. Salaries Payable and Accrued Employee Benefits A liability is recorded at June 30 for those amounts owed to teachers and other employees of the District who do not work during the summer when school is not in session but have elected to have their salaries paid over an entire year. This has the effect of properly charging their salaries to expenditures in the fiscal year in which their services are received, even though they are not paid until July and August of the following fiscal year. The liability for accrued retirement and the employer share of FICA related to the salaries payable has been recorded, as has the liability for employee health insurances for the months of July and August. The District pays these insurances for this period as a part of the compensation for services rendered in the preceding school year.
32
BANGOR TOWNSHIP SCHOOLS Notes to Financial Statements Deferred Inflows of Resources 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 that applies to one or more future periods and so will not be recognized as an inflow of resources (revenue) until that time. The governmental funds also report unavailable revenues, which arise only under a modified accrual basis of accounting that are reported as deferred inflows of resources. These amounts are deferred and recognized as an inflow of resources in the period that the amounts become available. The District's deferred inflows of resources are related to pension costs. More detailed information can be found in Note 14. Compensated Absences and Other Termination Benefits It is the District’s policy to permit employees to accumulate various earned but unused vacation and sick pay benefits. These are accrued when incurred in the district-wide financial statements. A liability for these amounts is reported in governmental funds only if they have matured, for example, as a result of employee resignations or retirements. Benefits are accrued based on various contract stipulations and lengths of service for the various bargaining units. In addition, employees with 15 or more years of service that are members of the District’s teacher’s and administration bargaining units are entitled to severance payouts of $15,000 upon separation from the District. Also, teachers that were hired prior to June 1, 1994, are entitled to a $6,000 longevity payment in their last year of employment. Long-term obligations In the district-wide financial statements, long-term obligations are reported as liabilities in the governmental activities statement of net position. Where applicable, bond premiums and discounts are deferred and amortized over the life of the bonds using the effective interest method. In the fund financial statements, governmental fund types recognize bond premiums and discounts during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. Fund Equity In the fund financial statements, governmental funds report nonspendable fund balance for amounts that cannot be spent because they are either (a) not in spendable form or (b) legally or contractually require to be maintained intact. Restricted fund balance is reported when externally imposed constraints are placed on the use of the resources by grantors, contributors, or laws or regulations of other governments. Committed fund balance is reported for amounts that can be used for specific purposes pursuant to constraints imposed by formal action of the government’s highest level of decision making authority, the Board of Education. A formal resolution of the Board of Education is required to establish, modify or rescind a fund balance commitment. The District reports assigned fund balance for amounts that are constrained by the government’s intent to be used for specific purposes, but are neither restricted nor committed. The Board has delegated the authority to assign fund balance to the CFO. Unassigned fund balance is the residual classification for the general fund.
33
BANGOR TOWNSHIP SCHOOLS Notes to Financial Statements When the District incurs an expenditure for purposes for which various fund balance classifications can be used, it is the District's policy to use restricted fund balance first, then committed fund balance, assigned fund balance, and finally unassigned fund balance. Pensions For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the Plan and additions to/deductions from the plan fiduciary net position have been determined on the same basis as they are reported by the plan. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. Property Taxes Property taxes are assessed as of December 31 each year and attach as an enforceable lien on property as of the following July 1. School property taxes are levied on July 1 each year, based on the previous year’s assessment, by Township governments whose boundaries include property within the District, and are due by September 15. Delinquent real taxes are advanced to the District by the Counties involved. Taxes are recorded as revenue in the year levied. Taxes receivable are recorded for property taxes collected within 60 days of year-end, if any. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.
2. STATE OF MICHIGAN SCHOOL AID The District reports State of Michigan school aid in the fiscal year in which the District is entitled to the revenue as provided by State of Michigan school aid appropriation acts. State funding represented 86% of the District's general fund revenue during the 2017 fiscal year.
3. DEFICIT FUND EQUITY At June 30, 2017, the District reported deficits in total and unrestricted governmental activities net position of $19,528,416 and $26,730,921, respectively. This is due to the provisions of GASB 68 which requires the District to report its proportionate share of the MPSERS net pension liability on the governmentwide statement of net position.
34
BANGOR TOWNSHIP SCHOOLS Notes to Financial Statements 4. BUDGETARY INFORMATION The general fund and special revenue funds are under formal budgetary control. Budgets shown in the financial statements are adopted annually on a basis consistent with accounting principles generally accepted in the United States of America ("GAAP"), and are not significantly different from the modified accrual basis used to reflect actual results, and consist only of those amounts contained in the formal budget as originally adopted or as amended by the Board of Education. The budgets for the general fund and special revenue funds are adopted on a functional activity basis. All annual appropriations lapse at fiscal year-end. 5. EXCESS OF EXPENDITURES OVER BUDGET Public Act 621 of 1978, as amended, provides that a local unit shall not incur expenditures that are in excess of the amount appropriated. During the year ended June 30, 2017, the District incurred expenditures, which were in excess of the amounts appropriated as follows: Actual Expenditure
Final Budget General fund: Instruction: Compensatory education Supporting services: Board of education Office of the principal Other central services Athletics Capital outlay Transfers out Food Service Fund Transfers out
$
840,906
$
852,398
Unfavorable Variance
$
11,492
90,650 1,328,860 28,500 565,149 484,000 483,334
92,859 1,329,110 29,107 568,713 485,704 583,333
2,209 250 607 3,564 1,704 99,999
72,000
80,000
8,000
6. DEPOSITS AND INVESTMENTS A reconciliation of cash and investments as shown on the Statement of Net Position and Statement of Fiduciary Assets and Liabilities follows: Governmental Activities
Fiduciary Fund
$
2,944,829 1,801,398
$
450,059 -
$
3,394,888 1,801,398
$
4,746,227
$
450,059
$
5,196,286
Checking/savings accounts Investments Cash on hand
$
3,393,457 1,801,398 1,431
Total
$
5,196,286
Cash and cash equivalents Investments
Total
Cash and investments are comprised of the following at year-end:
35
BANGOR TOWNSHIP SCHOOLS Notes to Financial Statements In accordance with GASB 79, the District's shares in the MILAF External Investment Pool are recorded at amortized cost, which approximates fair value. The District chooses to disclose its investments by specifically identifying each. As of year end, the District had the following investments.
Investment Michigan Liquid Asset Fund
Maturity n/a
Amortized Cost $
1,801,398
Rating S & P AAAm
Investment and Deposit Risk Interest Rate Risk. State law limits the allowable investments and the maturities of some of the allowable investments as identified in the list of authorized investments below. The District’s investment policy does not have specific limits in excess of state law on investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates. The District’s investments held at yearend do not have maturity dates. Credit Risk. State law limits investments to specific government securities, certificates of deposits and bank accounts with qualified financial institutions, commercial paper with specific maximum maturities and ratings when purchased, bankers acceptances of specific financial institutions, qualified mutual funds and qualified external investment pools as identified in the list of authorized investments below. The District’s investment policy does not have specific limits in excess of state law on investment credit risk. The ratings for each investment are identified above for investments held at year-end. Custodial Credit Risk - Deposits. Custodial credit risk is the risk that in the event of a bank failure, the District’s deposits may not be returned. State law does not require and the District does not have a policy for deposit custodial credit risk. As of year-end $3,409,294, of the District’s bank balance of $3,659,294 was exposed to custodial credit risk because it was uninsured and uncollateralized. Custodial Credit Risk - Investments. For an investment, custodial credit risk is the risk that, in the event of the failure of the counterparty, the District will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. State law does not require and the District does not have a policy for investment custodial credit risk. The investments listed above do not have any custodial credit risk, as these investments are uncategorized as to credit risk. Concentration of Credit Risk . State law limits allowable investments but does not limit concentration of credit risk as identified in the list of authorized investments below. The District’s investment policy does not have specific limits in excess of state law on concentration of credit risk. All investments held at yearend are in external investment pools and are carried at amortized cost.
36
BANGOR TOWNSHIP SCHOOLS Notes to Financial Statements Michigan law authorizes the District to deposit and invest in: Bonds, bills, or notes of the United States; obligations, the principal and interest of which are fully guaranteed by the United States; or obligations of the State. In a primary or fourth class school district, the bonds, bills or notes shall be payable at the option of the holder upon not more than 90 days notice or, if not so payable, shall have maturity dates not more than five years after the purchase dates. Certificates of deposits issued by a State or national bank, savings accounts of a state or federal savings and loan association, or certificates of deposit or share certificates of a state or federal credit union organized and authorized to operate in this State. Commercial paper rated prime at the time of purchase and maturing not more than 270 days after the date of purchase. Securities issued or guaranteed by agencies or instrumentalities of the United States, United States government or federal agency obligation repurchase agreements, and bankers’ acceptance issued by a bank that is a member of the federal deposit insurance corporation. Mutual funds composed entirely of investment vehicles that are legal for direct investment by a school district. Investment pools, as authorized by the surplus funds investment pool act, composed entirely of instruments that are legal for direct investment by a school district. 7. RECEIVABLES The District's receivables at year-end consist of the following:
General Fund
Nonmajor Funds
Receivables Accounts receivable Due from other governments
$
52,399 3,558,194
$
7,856
$
52,399 3,566,050
Total receivables
$
3,610,593
$
7,856
$
3,618,449
37
Total
BANGOR TOWNSHIP SCHOOLS Notes to Financial Statements 8. CAPITAL ASSETS Capital asset activity for the year ended June 30, 2017, was as follows: Beginning Balance Governmental Activities Capital assets, not being depreciated: Land
$
Capital assets, being depreciated: Buildings and improvements Vehicles Equipment and other
Less accumulated depreciation for: Buildings and improvements Vehicles Equipment and other Total capital assets being depreciated, net Governmental activities capital assets, net
181,770
Additions
$
Disposals
-
$
-
$
181,770
28,298,812 1,493,603 1,718,649 31,511,064
389,937 250,900 178,813 819,650
(208,402) (208,402)
28,688,749 1,536,101 1,897,462 32,122,312
14,362,804 785,041 789,674 15,937,519
955,490 144,185 132,496 1,232,171
(208,402) (208,402)
15,318,294 720,824 922,170 16,961,288
15,573,545
$
Ending Balance
15,755,315
$
(412,521)
-
(412,521) $
-
15,161,024
$
15,342,794
Depreciation expense was charged to functions/programs of the primary government as follows: Depreciation of governmental activities by function Supporting services $ Food services Depreciation - Unallocated
144,185 13,675 1,074,311
Total depreciation expense
1,232,171
$
38
BANGOR TOWNSHIP SCHOOLS Notes to Financial Statements 9. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES The District's accounts payable and accrued liabilities at year-end consist of the following:
Fund financial statements Accounts payable Salaries payable Accrued liabilities
General Fund
Nonmajor Funds
$
206,437 1,208,282 795,896
$
12,216 3,982
$
2,210,615
$
16,198
Total $
206,437 1,220,498 799,878 2,226,813
District-wide financial statements Accrued interest on bonds payable
26,062
Total accounts payable and accrued liabilities
$
2,252,875
10. INTERFUND RECEIVABLES, PAYABLES AND TRANSFERS At June 30, 2017, interfund receivables and payables in the fund financial statements consisted of the following: Due from Other Funds General Fund Nonmajor funds
Due to Other Funds
$
783,543
$
783,543 -
$
783,543
$
783,543
The District often reports interfund balances between many of its funds. These interfund balances resulted primarily from the time lag between the dates that (1) interfund goods and services are provided or reimbursable expenditures occur, (2) transactions are recorded in the accounting system, and (3) payments between funds are made. For the year ended June 30, 2017, interfund transfers consisted of the following:
Transfers In General Fund 2009 Bond Debt Service Fund Nonmajor funds
Transfers Out
$
80,000 233,333 350,000
$
583,333 80,000
$
663,333
$
663,333
39
BANGOR TOWNSHIP SCHOOLS Notes to Financial Statements Transfers are used to: (1) move revenue from the fund that is required to collect them to the fund that is required or allowed to expend them; (2) move receipts restricted to or allowed for debt service from the funds collecting the receipts to the debt service fund as debt service payments become due; and (3) use unrestricted revenue collected in the general fund to finance various programs accounted for in other funds in accordance with budgetary authorizations. For the year ended June 30, 2017, the District transferred funds from the general fund to the 2009 Bond Debt Service Fund for debt service payments and the Food Service Special Revenue Fund transferred funds to the general fund to pay for indirect costs incurred in the general fund. The District also transferred funds from the general fund to the Public Improvement Capital Projects Fund. 11. OPERATING LEASES The District had various noncancelable operating leases for buses, computers, and copiers, with total expenditures of $120,692 for the year ended June 30, 2017. The bus leases ended during fiscal 2017. The future minimum lease payments for the computer and copier leases are as follows: 2018 2019 Total minimum lease payments
$
108,192 108,192
$
216,384
12. LONG-TERM DEBT The following is a summary of long-term debt transactions of the District for the year ended June 30, 2017: Beginning Balance General obligation bonds $ Thomas passenger bus installment notes Total installment debt Unamortized premium Compensated absences
$
11,200,000
Additions $
Deductions -
$
Ending Balance
(775,000) $
10,425,000
Due Within One Year $
820,000
248,026 11,448,026
-
(81,369) (856,369)
166,657 10,591,657
82,669 902,669
82,315 1,631,614
85,624
(20,576) (73,665)
61,739 1,643,573
20,576 547,803
13,161,955
$
85,624
$
(950,610) $
Compensated absences are generally liquidated by the General Fund.
40
12,296,969
$
1,471,048
BANGOR TOWNSHIP SCHOOLS Notes to Financial Statements Bonds and notes payable at June 30, 2017, are comprised of the following individual issues: 2012 refunding building and site bonds, $5,125,000, due in annual principal installments ranging from $600,000 to $865,000 through May 1, 2020; interest rate of 3.00%.
$
2,460,000
2016 Refunding bonds, $4,510,000, due in annual principal installments ranging from $45,000 to $1,110,000 through May 1, 2024; interest rate of 1.79%.
4,465,000
2009 Building and site Qualified School Construction Bonds (“QSCB”), $3,500,000. These bonds require a sinking fund to be established with transfers of $233,333 to an escrow agent annually on September 1st. These zero-coupon bonds are due in total on September 1, 2024.
3,500,000
Installment purchase, $336,924, four 2014 Thomas 77-passenger school buses, due in annual principal installments ranging from $53,954 to $58,401 through May 1, 2019; interest rate of 1.59%.
115,884
Installment purchase, $147,619, two 2011 Thomas 77-passenger school buses and one Thomas 2014 30-passenger school bus, due in annual principal installments ranging from $23,639 to $25,587 through May 1, 2019; interest rate of 1.59%.
50,773 $
10,591,657
Annual debt service requirements to maturity for general obligation bonds and installment purchase notes are as follows: Year Ended June 30,
Principal
Interest
2018 2019 2020 2021 2022 2023-2025
$
902,669 948,988 915,000 1,050,000 1,075,000 5,700,000
$
156,047 130,670 104,262 77,418 58,622 59,250
Total
$
10,591,657
$
586,269
Defeased Debt The balance of the defeased debt outstanding at June 30, 2017, was $7,010,000. As a result, the refunded bonds are considered to be defeased and the liability has been removed from the district-wide statement of net position.
41
BANGOR TOWNSHIP SCHOOLS Notes to Financial Statements 13. RISK MANAGEMENT The District is exposed to various risks of loss related to property loss, torts, errors and omissions, employee injuries (workers’ compensation) as well as medical benefits provided to employees. The District has purchased commercial insurance for general liability, property and casualty and health claims and participates in the MASB/SET-SEG (risk pool) for claims relating to employee injuries/workers’ compensation. Settled claims relating to the commercial insurance have not exceeded the amount of insurance coverage in any of the past three fiscal years. The shared-risk pool program in which the District participates operates as a common risk-sharing management program for school districts in Michigan; member premiums are used to purchase commercial excess insurance coverage and to pay member claims in excess of deductible amounts.
14. RETIREMENT PLAN Plan Description The Michigan Public School Employees' Retirement System (the "System" or MPSERS) is a cost-sharing, multiple employer, state-wide, defined benefit public employee retirement plan governed by the State of Michigan (the "State") originally created under Public Act 136 of 1945, recodified and currently operating under the provisions of Public Act 300 of 1980, as amended. Section 25 of this act establishes the board's authority to promulgate or amend the provisions of the System. The board consists of twelve members eleven appointed by the Governor and the State Superintendent of Instruction, who serves as an ex-officio member. The System is administered by the Office of Retirement Services (ORS) within the Michigan Department of Technology, Management & Budget. The Department Director appoints the Office Director, with whom the general oversight of the System resides. The State Treasurer serves as the investment officer and custodian for the System. The System’s financial statements are available at www.michigan.gov/mpsers-cafr. Benefits Provided Benefit provisions of the defined benefit pension plan are established by State statute, which may be amended. Public Act 300 of 1980, as amended, establishes eligibility and benefit provisions for the defined benefit (DB) pension plan. Depending on the plan option selected, member retirement benefits for are determined by final average compensation, years of service, and a pension factor ranging from 1.25% to 1.50%. DB members are eligible to receive a monthly benefit when they meet certain age and service requirements. The System also provides disability and survivor benefits to DB plan members.
42
BANGOR TOWNSHIP SCHOOLS Notes to Financial Statements DB member plan member who leaves Michigan public school employment may request a refund of his or her member contributions to the retirement system account if applicable. A refund cancels a former member’s rights to future benefits. However, returning members who previously received a refund of their contributions may reinstate their service through repayment of the refund upon satisfaction of certain requirements. Contributions and Funded Status Employers are required by Public Act 300 of 1980, as amended, to contribute amounts necessary to finance the coverage of active and retired members. Contribution provisions are specified by State statute and may be amended only by action of the State Legislature. Employer contributions to the System are determined on an actuarial basis using the entry age normal actuarial cost method. Under this method, the actuarial present value of the projected benefits of each individual included in the actuarial valuation is allocated on a level basis over the service of the individual between entry age and assumed exit age. The portion of this cost allocated to the current valuation year is called the normal cost. The remainder is called the actuarial accrued liability. Normal cost is funded on a current basis. The unfunded (overfunded) actuarial accrued liability as of the September 30, 2016 valuation will be amortized over a 20-year period for the 2016 fiscal year. The table below summarizes pension contribution rates in effect for the Plan year 2017.
Benefit Structure Basic Member Investment Plan (MIP) Pension Plus Defined Contribution
Member Rates
Employer Rates
0.0% - 4.0% 3.0% - 7.0% 3.0% - 6.4% 0.0%
18.95% - 19.03% 18.95% - 19.03% 17.73% - 18.40% 14.56% - 15.27%
The District's contribution to MPSERS under all pension plans for the year ended June 30, 2017 was $3,056,031. Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions At June 30, 2017, the District reported a liability of $34,122,390 for its proportionate share of the MPSERS net pension liability. The net pension liability was measured as of September 30, 2016, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation rolled forward from September 2015. The District’s proportion of the net pension liability was determined by dividing each employer’s statutorily required pension contributions to the system during the measurement period by the percent of pension contributions required from all applicable employers during the measurement period. At September 30, 2016, the District’s proportion was .13677%, which was an increase of .00359% from its proportion measured as of September 30, 2015.
43
BANGOR TOWNSHIP SCHOOLS Notes to Financial Statements For the year ended June 30, 2017, the District recognized pension expense of $3,546,598. At June 30, 2017, the District reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:
Deferred Outflows of Resources Differences between expected actual experience Changes in assumptions Net difference between projected and actual earnings on pension plan investments Changes in proportion and differences between employer contributions and proportionate share of contributions
$
425,255 533,477
$
567,114
District contributions subsequent to the measurement date $
(80,871) $ -
344,384 533,477 567,114
984,002
(22,235)
961,767
2,509,848
(103,106)
2,406,742
2,891,209
Total
Net Deferred Outflows (Inflows) of Resources
Deferred Inflows of Resources
5,401,057
$
(103,106) $
2,891,209 5,297,951
Deferred outflows of resources related to pensions of $2,891,209 resulting from employer contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, 2018. Other amounts as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows: Year Ended June 30,
Amount
2018 2019 2020 2021
$
563,019 518,421 1,082,094 243,208
Total
$
2,406,742
44
BANGOR TOWNSHIP SCHOOLS Notes to Financial Statements Actuarial Assumptions Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and 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 that 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. The total pension liability in the September 30, 2015 actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement: Actuarial cost method Entry age, normal Wage inflation rate 3.5% Investment rate of return: MIP and Basic plans (non-hybrid) 8.0% Pension Plus plan (hybrid) 7.0% 3.5% - 12.3%, including wage inflation at 3.5% Projected salary increases 3% annual non-compounded for MIP members Cost of living adjustments RP-2000 Male and Female Combined Healthy Life Mortality Tables, Mortality adjusted for mortality improvements to 2025 using projection scale BB. This assumption was first used for the September 30, 2014 valuation of the System. For retirees, 100% of the table rates were used. For active members, 80% of the table rates were used for males and 70% of the table rates were used for females. Assumption changes as a result of an experience study for the period 2007 through 2012 have been adopted by the System for use in the annual pension valuations beginning with the September 30, 2014 valuation. The total pension liability as of September 30, 2016, is based on the results of an actuarial valuation date of September 30, 2015, and rolled forward using generally accepted actuarial procedures, including the experience study.
45
BANGOR TOWNSHIP SCHOOLS Notes to Financial Statements Long-Term Expected Return on Plan Assets 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. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. Best estimates of arithmetic real rates of return for each major asset class included in the pension plan’s target asset allocation as of September 30, 2016, are summarized in the following table:
Target Allocation
Asset Class Domestic equity pools Alternative investment pools International equity Fixed income pools Real estate and infrastructure pools Absolute return pools Short-term investment pools
28.00% 18.00% 16.00% 10.50% 10.00% 15.50% 2.00% 100.00%
Long-term Expected Real Rate of Return
Expected MoneyWeighted Rate of Return
5.90% 9.20% 7.20% 0.90% 4.30% 6.00% 0.00%
1.64% 1.66% 1.15% 0.09% 0.43% 0.93% 0.00% 5.90%
Inflation
2.10%
Investment rate of return
8.00%
Discount Rate A discount rate of 8.0% was used to measure the total pension liability (7.0% for the Pension Plus plan, a hybrid plan provided through non-university employers only). This discount rate was based on the long term expected rate of return on pension plan investments of 8.0% (7.0% for the Pension Plus plan). The projection of cash flows used to determine this discount rate assumed that plan member contributions will be made at the current contribution rate and that employer contributions will be made at rates equal to the difference between actuarially determined contribution rates and the member rate. Based on these assumptions, the pension plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. 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.
46
BANGOR TOWNSHIP SCHOOLS Notes to Financial Statements Sensitivity of District’s 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 calculated using the discount rate of 8.0% (7.0% for the Hybrid Plan), 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 percentage point lower or 1 percentage higher:
1% Decrease (7.0%) District's proportionate share of the net pension liability
$
43,941,049
Current Discount Rate (8.0%)
$
34,122,390
1% Increase (9.0%)
$
25,844,316
Pension Plan Fiduciary Net Position Detailed information about the pension plan’s fiduciary net position is available in the separately issued MPSERS financial statements available on the State of Michigan Office of Retirement Services website at www.michigan.gov/orsschools. Payable to the Pension Plan At June 30, 2016, the District reported a payable of $412,404 for the outstanding amount of pension contributions to the Plan required for the year ended June 30, 2017. Other Postemployment Benefits Retirees enrolled in MPSERS before September 4, 2012 have the option of participating in the Premium Subsidy plan, a defined benefit postemployment healthcare plan, which is funded by employers on a prefunded basis. The State of Michigan has contracted to provide the comprehensive group medical, hearing, dental and vision coverage for retirees and beneficiaries. All health care benefits are on a selffunded basis. A significant portion of the premium is paid by MPSERS with the balance deducted from the monthly pension. Employer contributions range from 5.69% to 6.83% of covered payroll. Plan participants contribute 3% of covered payroll to the Retiree Healthcare Fund. At retirement, these individuals receive a subsidy for healthcare premiums that covers up to 80% of cost. Plan members enrolled on or after September 4, 2012 participate in the Personal Healthcare Fund. This defined contribution other postemployment benefits plan includes a required 2% employee contribution into a personal tax-deferred account, which is matched by an additional 2% employer contribution. Employees are fully vested in these contributions which can be used, along with earnings thereon, to pay for postemployment healthcare expenses. Plan members working prior to September 4, 2012 were given the option to convert from the Premium Subsidy plan to the Personal Healthcare Fund option. Effective February 1, 2013, these members are no longer required to make the 3% employee contribution. Amounts paid into the Retiree Healthcare Fund between September 4, 2012 and February 1, 2013 were credited to each individual’s Personal Healthcare Fund account. Any contributions made prior to September 4, 2012 were declared unconstitutional by the Supreme Court. Such amounts will be refunded by MPSERS to each District, including interest, and will then be refunded to individual employees.
47
BANGOR TOWNSHIP SCHOOLS Notes to Financial Statements The District’s contributions to MPSERS for other postemployment benefits amounted to $1,217,671 for the year ended June 30, 2017. 15. COMMITMENTS AND CONTINGENCIES Under the terms of various Federal and State grants and regulatory requirements, periodic audits are required and certain costs may be questioned as not being appropriate expenditures under the terms of the grants and requirements. Such audits could lead to reimbursement to the grantor or regulatory agencies. However, management does not believe such disallowances, if any, will be material to the financial position of the District. As is the case with other entities, the District faces exposure from potential claims and legal proceedings involving environmental matters. No such claims or proceedings have been asserted as of June 30, 2017. 16. FUND BALANCE - GOVERNMENTAL FUNDS The District adopted the provisions of GASB Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions . GASB 54 establishes fund balance classifications that comprise a hierarchy based primarily on the extent to which a government is bound to observe constraints imposed upon the use of resources reported in governmental funds. Detailed information on fund balances of governmental funds is as follows: 2009 Bond Debt Service Fund
General Fund Nonspendable: Inventories Prepaid items Total nonspendable
$
21,131 21,131
$
Nonmajor Governmental Funds
-
$
12,304 12,304
Total
$
12,304 21,131 33,435
Restricted for: Food Services Community services Debt service Total restricted
-
1,633,331 1,633,331
423,884 139,229 225,459 788,572
423,884 139,229 1,858,790 2,421,903
Assigned for: Public improvement
-
-
607,680
607,680
3,108,280
-
-
3,108,280
Unassigned Totals fund balances governmental funds
$
3,129,411
48
$
1,633,331
$
1,408,556
$
6,171,298
BANGOR TOWNSHIP SCHOOLS Notes to Financial Statements 17. NET INVESTMENT IN CAPITAL ASSETS The composition of net investment in capital assets as of June 30, 2017, was as follows: Governmental Activities Capital assets: Not being depreciated Being depreciated, net Less related debt: Bonds and notes payable Deferred loss on bond refunding Unamortized premium Net investment in capital assets
$
181,770 15,161,024 (10,591,657) 93,300 (61,739)
$
4,782,698
18. SUBSEQUENT EVENTS Contracts and Capital Purchases On July 10, 2017, the school entered into an agreement with a contractor for the performance of the Bus Garage Parking Improvement Project to be completed in two parts, for a total contracted amount of $338,154. The school also purchased a school bus in the amount of $58,500 on July 13, 2017. Retirement Plan Discount Rate In 2017, the Michigan Public Schools Employees’ Retirement System’s Board approved a decrease in the assumed investment rate of return (discount rate) to be used in the System’s annual actuarial valuation for the non-hybrid defined benefit pension plan from 8.0% to 7.5% effective for the 2016 valuation and following. The September 30, 2016 Annual Actuarial Valuation Report will be used to establish the employer contribution for fiscal year beginning October 1, 2018 and will be based upon the 7.5% investment rate of return assumption. The actuarial computed employer contributions and the net pension liability are expected to increase as a result of lowering the assumed investment rate of return.
49
REQUIRED SUPPLEMENTARY INFORMATION
50
BANGOR TOWNSHIP SCHOOLS Required Supplementary Information MPSERS Cost-Sharing Multiple Employer Plan Schedule of the District's Proportionate Share of the Net Pension Liability Year Ended June 30, 2017 District's proportion of the net pension liability
2016
0.13677%
2015
0.13318%
0.13087%
District's proportionate share of the net pension liability
$
34,122,390
$
32,528,594
$
28,826,085
District's covered payroll
$
11,672,870
$
11,091,704
$
11,120,159
District's proportionate share of the net pension liability as a percentage of its covered payroll Plan fiduciary net position as a percentage of the total pension liability
292.32%
293.27%
259.22%
63.27%
63.17%
66.20%
The amounts presented for each fiscal year were determined as of September 30 of the preceding year. Note: GASB 68 was implemented in fiscal year 2015. This schedule is being built prospectively. Ultimately, 10 years of data will be presented.
51
BANGOR TOWNSHIP SCHOOLS Required Supplementary Information MPSERS Cost-Sharing Multiple Employer Plan Schedule of District Contributions Year Ended June 30, 2017 Contractually required contribution
$
Contributions in relation to the contractually required contribution
2016
3,056,031
$
(3,056,031)
2015
3,086,928
$
(3,086,928)
3,424,935
(3,424,935)
Contribution deficiency (excess)
$
-
$
-
$
-
District's covered payroll
$
11,624,710
$
11,241,583
$
11,135,120
Contributions as a percentage of covered payroll
26.29%
27.46%
30.76%
Note: GASB 68 was implemented in fiscal year 2015. This schedule is being built prospectively. Ultimately, 10 years of data will be presented.
52
COMBINING AND INDIVIDUAL FUND FINANCIAL STATEMENTS AND SCHEDULES
53
NONMAJOR GOVERNMENTAL FUNDS
54
BANGOR TOWNSHIP SCHOOLS Combining Balance Sheet Nonmajor Governmental Funds June 30, 2017 Debt Service
Special Revenue Food Service Assets Cash and cash equivalents Due from other governments Due from other funds Inventories
2006/2016 Bond Issue Debt Service Fund
Community Service
2012 Bond Issue Debt Service Fund
$
422,386 7,856 9,840 12,304
$
100 139,129 -
$
181,388 -
$
17,177 26,894 -
Total assets
$
452,386
$
139,229
$
181,388
$
44,071
Liabilities Salaries payable Accrued liabilities
$
12,216 3,982
$
-
$
-
$
-
Total liabilities
16,198
-
-
-
Fund balances Nonspendable Restricted Assigned
12,304 423,884 -
139,229 -
181,388 -
44,071 -
Total fund balances
436,188
139,229
181,388
44,071
Total liabilities and fund balances
$
452,386
55
$
139,229
$
181,388
$
44,071
Capital Projects Public Improvement
Totals
$
607,680 -
$
621,051 7,856 783,543 12,304
$
607,680
$
1,424,754
$
-
$
12,216 3,982
$
-
16,198
607,680
12,304 788,572 607,680
607,680
1,408,556
607,680
$
1,424,754
56
BANGOR TOWNSHIP SCHOOLS Combining Statement of Revenues, Expenditures and Changes in Fund Balances Nonmajor Governmental Funds For the Year Ended June 30, 2017 Debt Service
Special Revenue Food Service
2006/2016 Bond Issue Debt Service Fund
Community Service
2012 Bond Issue Debt Service Fund
Revenues Local sources
$
State sources Federal sources Total revenues
409,364
$
230,817
$
202,215
$
789,472
42,348
-
-
-
843,359
-
-
-
1,295,071
230,817
202,215
789,472
Expenditures Current: Community services
-
209,268
-
-
1,139,765
-
-
-
Principal repayment
-
-
45,000
730,000
Interest and fiscal charges
-
-
80,729
95,797
Tax abatements
-
-
500
-
Total expenditures
1,139,765
209,268
126,229
825,797
155,306
21,549
75,986
(36,325)
-
-
-
-
(80,000)
-
-
-
(80,000)
-
-
-
75,306
21,549
75,986
(36,325)
360,882
117,680
105,402
80,396
Food services Debt service:
Revenue over expenditures Other financing sources (uses) Transfers in Transfers out Total other financing sources (uses) Net change in fund balances Fund balances, beginning of year Fund balances, end of year
$
436,188
57
$
139,229
$
181,388
$
44,071
Capital Projects Public Improvement $
-
Totals $
-
42,348
-
843,359
-
2,517,575
-
209,268
-
1,139,765
-
775,000
-
176,526
-
500
-
2,301,059
-
216,516
350,000
350,000
-
$
1,631,868
(80,000)
350,000
270,000
350,000
486,516
257,680
922,040
607,680
$
1,408,556
58
BANGOR TOWNSHIP SCHOOLS Schedule of Revenues, Expenditures and Changes in Fund Balance Budget and Actual - Food Services Special Revenue Fund For the Year Ended June 30, 2017
Original Budget Revenues Local sources: Food sales Other revenue Interest Total local sources
$
State sources
340,500 50,000 200 390,700
Final Budget
$
338,700 62,500 400 401,600
Actual
$
344,031 64,859 474 409,364
Actual Over (Under) Final Budget
$
5,331 2,359 74 7,764
43,480
43,480
42,348
(1,132)
712,500 73,000 785,500
748,700 73,000 821,700
747,458 95,901 843,359
(1,242) 22,901 21,659
1,219,680
1,266,780
1,295,071
309,330 168,047 38,050 568,025 15,650
314,030 183,587 35,000 599,325 29,250
299,706 175,260 27,335 609,734 27,730
(14,324) (8,327) (7,665) 10,409 (1,520)
1,099,102
1,161,192
1,139,765
(21,427)
Revenue over expenditures
120,578
105,588
155,306
49,718
Other financing uses Transfers out
(72,000)
(72,000)
(80,000)
8,000
48,578
33,588
75,306
41,718
360,882
360,882
360,882
-
Federal sources: Grants Commodities Total federal sources Total revenues Expenditures Food services: Salaries Employee benefits Purchased services Supplies and materials Other expenses Total expenditures
Net change in fund balance Fund balance, beginning of year Fund balance, end of year
$
409,460
59
$
394,470
$
436,188
28,291
$
41,718
BANGOR TOWNSHIP SCHOOLS Schedule of Revenues, Expenditures and Changes in Fund Balance Budget and Actual - Community Service Special Revenue Fund For the Year Ended June 30, 2017
Original Budget Revenues Local sources Participation fees
$
Expenditures Community services: Salaries Employee benefits Purchased services Supplies and materials Other expenses Total expenditures Net change in fund balance Fund balance, beginning of year Fund balance, end of year
$
Final Budget
180,140
$
219,540
Actual
$
230,817
Actual Over (Under) Final Budget
$
11,277
93,860 43,689 5,400 6,400 25,100
110,010 54,651 5,400 6,400 40,570
106,099 52,267 4,988 3,543 42,371
(3,911) (2,384) (412) (2,857) 1,801
174,449
217,031
209,268
(7,763)
5,691
2,509
21,549
19,040
117,680
117,680
117,680
-
123,371
$
60
120,189
$
139,229
$
19,040
SINGLE AUDIT ACT COMPLIANCE
61
Rehmann Robson 5800 Gratiot Rd. Suite 201 Saginaw, MI 48638 Ph: 989.799.9580 Fx: 989.799.0227 rehmann.com
Independent Auditors' Report on the Schedule of Expenditures of Federal Awards Required by the Uniform Guidance October 4, 2017 Members of the Board of Education of Bangor Township Schools Bay City, Michigan We have audited the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of Bangor Township Schools (the "District") as of and for the year ended June 30, 2017, and the related notes to the financial statements, which collectively comprise the District's basic financial statements. We issued our report thereon dated October 4, 2017, which contained unmodified opinions on those financial statements. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the basic financial statements. The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) and is not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the schedule of expenditures of federal awards is fairly stated, in all material respects, in relation to the basic financial statements as a whole.
Rehmann is an independent member of Nexia International.
CPAs & Consultants
Wealth Advisors
Corporate Investigators
62
BANGOR TOWNSHIP SCHOOLS Schedule of Expenditures of Federal Awards
For the Year Ended June 30, 2017
Federal Agency / Cluster / Program Title U.S. Department of Agriculture Child Nutrition Cluster: Cash assistance: National School Breakfast: Breakfast Breakfast
CFDA Number
Passed Through
Pass-through / Grantor Number
10.553 10.553
MDE MDE
161970 171970
Approved Grant Award Amount
$
164,246 167,728
National School Lunch Program: Free & Reduced Free & Reduced Non-cash assistance: Food Distribution: Entitlement commodities
10.555 10.555
MDE MDE
161960 171960
544,093 491,394
10.555
MDE
N/A
95,901
Summer Food Service Program Summer Food Service Program
10.559 10.559
MDE MDE
160900 161900
8,662 894
84.010
MDE
171530-1617
362,181
84.367A
MDE
170520-1617
110,768
Total U.S. Department of Agriculture
U.S. Department of Education Elementary and Secondary Education Act Title I Part A: Regular 2016/2017 Title II A - Improving Teacher Quality: Regular 2016/2017 Total U.S. Department of Education Total Federal Financial Assistance
See notes to schedule of expenditures of federal awards.
63
Current Year Cash/ In-Kind Received
Accrued Revenue June 30, 2016
$
$
-
$
15,010 167,728 182,738
Expenditures (Memo Only) Prior Year(s)
Expenditures Year Ended June 30, 2017
Accrued (Unearned) Revenue June 30, 2017
$
$
$
149,236 149,236
15,010 167,728 182,738
-
-
63,770 491,394
480,323 -
63,770 491,394
-
-
95,901 651,065
480,323
95,901 651,065
-
-
8,662 894 9,556
-
8,662 894 9,556
-
-
843,359
629,559
843,359
-
-
362,181
-
362,181
-
-
93,133
-
94,383
1,250
-
455,314
-
456,564
1,250
-
$
1,298,673
$
629,559
$
1,299,923
64
$
1,250
BANGOR TOWNSHIP SCHOOLS Notes to Schedule of Expenditures of Federal Awards 1. BASIS OF PRESENTATION The accompanying schedule of expenditures of federal awards (the “Schedule”) includes the federal grant activity of Bangor Township Schools (the “District”) under programs of the federal government for the year ended June 30, 2017. The information in this schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Because the Schedule presents only a selected portion of the operations of the District, it is not intended to and does not present the financial position, changes in net position or cash flows of the District. 2. RECONCILIATION OF BASIC FINANCIAL STATEMENTS Expenditures reported on the Schedule are reported on the modified accrual basis of accounting, which is described in Note 1 to the District's financial statements. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. Negative amounts shown on the Schedule represent adjustments or credits made in the normal course of business to amounts reported as expenditures in prior years. Pass-through entity identifying numbers are presented where available. Cash received is recorded on the cash basis; expenditures are recorded on the modified accrual basis of accounting. Revenue is recognized when the qualifying expenditures have been included and all grant requirements have been met. The Schedule has been arranged to provide information on both actual cash received and the revenue recognized. Accordingly, the effects of accruals of accounts receivable, unearned revenue and accounts payable items at both the beginning and end of the fiscal year have been reported. Expenditures are in agreement with amounts reported in the financial statements and the financial reports. The amounts on the Grant Auditor Report reconcile with this Schedule. The amounts reported on the Recipient Entitlement Balance (PAL) Report agree with this schedule for USDA donated food commodities. Spoilage and pilferage are included in expenditure amounts reported. For purposes of charging indirect costs to federal awards, the District has not elected to use the 10 percent de minimis cost rate as permitted by §200.414 of the Uniform Guidance. 3. PASS-THROUGH AGENCIES The District receives certain federal grants as subawards from non-federal entities. Pass-through entities, where applicable, have been identified in the Schedule with an abbreviation, defined as follows: Pass-through Agency Abbreviation MDE
Pass-through Agency Name Michigan Department of Education
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Rehmann Robson 5800 Gratiot Rd. Suite 201 Saginaw, MI 48638 Ph: 989.799.9580 Fx: 989.799.0227 rehmann.com
Independent Auditors’ Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards October 4, 2017 Board of Education Bangor Township Schools Bay City, Michigan 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 Auditing Standards 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 Bangor Township Schools (the "District"), as of and for the year ended June 30, 2017, and the related notes to the financial statements, which collectively comprise the District's basic financial statements, and have issued our report thereon dated October 4, 2017. 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. A deficiency 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 weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency 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.
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Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. Compliance and Other Matters As part of obtaining reasonable assurance about whether the District’s financial statements are free of 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 determination 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 no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. 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 entity's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity's internal control and compliance. Accordingly, this communication is not suitable for any other purpose.
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Rehmann Robson 5800 Gratiot Rd. Suite 201 Saginaw, MI 48638 Ph: 989.799.9580 Fx: 989.799.0227 rehmann.com
Independent Auditors’ Report on Compliance for Each Major Federal Program and Internal Control over Compliance Required by the Uniform Guidance
October 4, 2017
Board of Education Bangor Township Schools Bay City, Michigan Report on Compliance for Each Major Federal Program We have audited the compliance of the Bangor Township Schools (the "District") with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on the District’s major federal program for the year ended June 30, 2017. The District’s major federal program is identified in the summary of auditors’ results section of the accompanying schedule of findings and questioned costs. Management’s Responsibility Management is responsible for compliance with federal statutes, regulations, and the terms and conditions of its federal awards applicable to its federal programs. Independent Auditors’ Responsibility Our responsibility is to express an opinion on compliance for the District’s major federal program 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 America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Those standards and the Uniform Guidance 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 the 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 necessary in the circumstances.
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We believe that our audit provides a reasonable basis for our opinion on compliance for the major federal program. However, our audit does not provide a legal determination of the District’s compliance. Opinion on the 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 its major federal program for the year ended June 30, 2017. Report on Internal Control Over Compliance Management of the District is responsible for establishing and maintaining 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 the Uniform Guidance, 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. A deficiency in internal control over compliance 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 weakness in internal control over compliance 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 significant deficiency in internal control over compliance 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 that 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. Purpose of this Report 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 the Uniform Guidance. Accordingly, this report is not suitable for any other purpose.
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BANGOR TOWNSHIP SCHOOLS Schedule of Findings and Questioned Costs For the Year Ended June 30, 2016 SECTION I - SUMMARY OF AUDITORS’ RESULTS Financial Statements Type of report the auditor issued on whether the financial statements audited were prepared in accordance with GAAP:
Unmodified
Internal control over financial reporting: Material weakness(es) identified?
yes
X
no
Significant deficiency(ies) identified?
yes
X
none reported
yes
X
no
Material weakness(es) identified?
yes
X
no
Significant deficiency(ies) identified?
yes
X
none reported
yes
X
no
Noncompliance material to financial statements noted? Federal Awards Internal control over major programs:
Any audit findings disclosed that are required to be reported in accordance with 2 CFR 200.516(a)? Identification of major programs and type of auditors' report issued on compliance for the major program: CFDA Number
Name of Federal Program or Cluster
Type of Report
10.553, 10.555, 10.559
Child Nutrition Cluster
Unmodified
Dollar threshold used to distinguish between Type A and Type B programs:
$
Auditee qualified as low-risk auditee?
750,000 X
SECTION II – FINANCIAL STATEMENT FINDINGS None. SECTION III – FEDERAL AWARD FINDINGS AND QUESTIONED COSTS None.
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yes
no
BANGOR TOWNSHIP SCHOOLS Summary Schedule of Prior Audit Findings For the Year Ended June 30, 2016 Finding 2016-001 – Preparation of the Schedule of Expenditures of Federal Awards (SEFA) The audit identified that the District initially misreported the Federal expenditures reported on its SEFA related to CFDA Number 10.555 by an understatement of $74,676 and CFDA Number 10.559 by an understatement of $12,429. In addition, the District initially included state funds on its SEFA of $44,355. This finding was not repeated in fiscal 2017. Finding 2016-002 – Audit Adjustments The audit identified that the District overstated revenues in the Food Service Fund and understated governmental activities revenues by approximately $75,000 and $226,000, respectively. Adjustments were necessary to adjust federal revenue and contributed capital to appropriate balances at year-end. This finding was not repeated in fiscal 2017.
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