Management’s Discussion and Analysis
For Fiscal Year Ended June 30, 2007
This reporting model was adopted by the Governmental Accounting Standards Board (GASB) in their Statement No. 34 Basic Financial Statements – and Management Discussion and Analysis (MD&A) – for State and Local Governments issued in June of 2000. This is our fourth year of implementation so certain comparative information between the current year and the prior year is required to be presented in the MD&A. Our district has met those requirements to our knowledge.
Generally
accepted accounting principles (GAAP), according to GASB 34, require the
reporting of two
types
of financial statements: fund financial
statements and government-wide financial statements.
The
fund level statements are reported on a modified accrual basis in that only
those assets that are “measurable” and “currently available” are reported. Liabilities are recognized to the extent they
are normally expected to be paid with current financial resources.
The
fund statements are formatted to comply with the legal requirements of the Michigan
Department
of
Education’s “Accounting Manual.” In the
State of Michigan, school districts’ major instructional
and
instructional support activities are reported in the General Fund. Additional activities are reported
in
various other funds. These include
Special Revenue Funds, Debt Service Funds, and Capital Projects
Funds.
In
the fund financial statements, capital assets purchased are reported as
expenditures in the year of
acquisition
with no asset being reported. The
issuance of debt is recorded as a financial resource. The
current
year’s payments of principal and interest on long-term obligations are recorded
as expenditures.
The
obligations for future years’ debt service are not recorded in the fund
financial statements.
The
government-wide financial statements, required by GASB 34, are calculated using
full accrual accounting and more closely represent those presented by business
and industry. All of the District’s
assets and liabilities, both short and long-term, are reported. As such, these statements include capital
assets, net of related depreciation, as well as the bonded debt of the
District.
For Fiscal Year Ended June 30, 2007
The
following schedule summarizes the net assets at fiscal year ended June 30,
2007:
Current assets $1,914,804 $ 1,657,635
Deferred
Costs
55,539 405,000
Less
Accumulated amortization (25,313)
Capital
assets 13,351,492 13,350,337
Less: Accumulated depreciation (5,874,834)
(5,474,694)
Total assets $
9,447,001 $ 9,912,965
Current
liabilities $ 911,631
$1,090,899
Long-term liabilities 7,079,046 7,733,828
Total
liabilities $
7,990,667 8,824,727
Invested in capital assets,
net of related debt $ 90,195 $ 77,925
Restricted for debt service 562,366 534,553
Unrestricted 803,763 475,760
Total
net assets 1,456,324 1,088,238
Total liabilities and net
assets $ 9,447,001 9,912,965
During
the fiscal year ended June 30, 2007, the District’s net assets decreased by $
465,964
A
few of the more significant factors affecting net assets during the year are
discussed below.
1. Depreciation Expense
GASB
34 requires school districts to maintain a record of annual depreciation
expense and the
accumulation
of depreciation expense over time. The
net increase in accumulated depreciation
expense
is a reduction in net assets.
Management’s Discussion and Analysis
For Fiscal Year Ended June 30, 2007
Depreciation
expense is recorded on a straight-line basis over the estimated useful lives of
the assets. In
accordance
with GAAP, depreciation expense is calculated based on the original cost of the
asset less an
estimated
salvage value, where applicable. For the
fiscal year ended June 30, 2007, $ 400,140
was
recorded
for depreciation expense.
2. Capital Outlay Acquisitions
For
the fiscal year ended June 30, 2007, $ 20,249
of expenditures were capitalized and recorded as assets of the
District. These additions to the
District’s capital assets will be depreciated over time as explained above.
The
net effect of the new capital assets and the current year’s depreciation is a
decrease to capital assets
in
the amount of $379,891 for the fiscal
year ended June 30, 2007.
For
the fiscal year ended June 30, 2007, the results of operations, on a
District-wide basis, were:
Property
taxes 1,612,415 26.52 $ 1,524,947 25.69%
Investment
earnings 12,714 .21 13,370 0.23%
State
sources 3,842,797 63.20 3,756,264 63.25%
Other 118,537 1.95 118,690 2.00%
Total
general revenues $5,586,463 91.88% $ 5,413,271 91.17%
Charges
for services 108,490 1.79% $ 114,920 1.93%
Operating
grants 385,167 6.33
409,610 6.90%
Total
program revenues 493,657 8.12 524,530 8.83%
Total
revenues $ 6,080,120 100.00% $5,937,801 100.00%
Instruction 3,034,134 53.12 $
3,182,733 52.78%
Support
services 1,535,566 26.88 1,634,509 27.11%
Transfer
to other districts 6,472 .11 5,354 .09%
Food
services 235,846 4.13 229,071 3.80%
Athletics 154,679 2.71 172,722 2.86%
Interest
on long-term debt 323,709 5.67
357,241 5.92%
Unallocated
depreciation 400,140 7.01 426,867 7.08%
Amortization 20,249 .35 20,250 .34%
Other
1,239 .02 942 .02%
Total
expenses 5,712,034 100.00% $6,029,689 100.00%
Increase
(decrease) in net assets
Increase
in net assets 368,086 $ (91,888)
Management’s Discussion and Analysis
For Fiscal Year Ended June 30, 2007
Significant
revenues and expenditures are discussed in the segments below:
1. Property Taxes
The
District 18 mills of property taxes for operations on non-homestead properties. According to Michigan
law,
the taxable levy is based on the taxable valuation of properties. The annual taxable valuation increases
are
capped at the rate of the prior year’s Consumer’s Price Index increase or 5%,
whichever is less. At the
time
property is sold, its taxable valuation is readjusted to the State Equalized
Value, which in theory is half of the property’s market value.
For
the 2006-2007 fiscal year, the district levied $ 830,410 non-homestead property
taxes. This represented an increase of 1.6% from the prior year. The amount of unpaid property taxes at June
30,
2007,
less an estimate for those deemed to be un-collectible, was $4,538.
The following table summarizes the non-homestead property tax levies for operations for the past five years:
%
Increase
Non-homestead (Decrease)
Fiscal
Year
Tax Levy from
prior year
2006 - 2007 $
830,410
1.60%
2005 - 2006 $
817,203
6.77%
2004 - 2005 $
765,384
3.40%
2003 – 2004 $
740,285 10.80
2002 – 2003 668,581 1.60
2001 – 2002 658,606 9.20
2000 – 2001 603,342 6.70
1999 – 2000 565,480 4.70
2. State Sources
The
majority of the state sources is comprised of the per student foundation
allowance. The State of
Michigan
funds districts based on a blended student enrollment. The blended enrollment consists of
75%
of the current year’s fall count and 25% of the prior year’s spring count. For the 2006 – 2007
fiscal
year, the District’s foundation allowance was $ 7,085 per student FTE.
Management’s Discussion and Analysis
For Fiscal Year Ended June 30, 2007
3. Student Enrollment
The
following schedule compares actual to budgeted FTE for the blended student
enrollment for the
past
five fiscal years:
Actual Budgeted Variance Blended Blended Favorable
Student FTE Student FTE (Unfavorable)
2006 - 2007 628.75 628.75 0
2005
– 2006 632.13 632 .13
2004
– 2005
632 632 0
2003
– 2004 623 623 0
2002
– 2003 630.5 615 15.5
2001
– 2002 644 646 (2)
2000
– 2001 665.96 646.2 19.76
1999
– 2000 658.99 661 (2.01)
4. Operating Grants
The
District funds a significant portion of its operations with categorical
sources. For the fiscal year ended
June
30, 2007, federal, state and other grants accounted for $385,167 This represents a decrease of $24,443
over the total grant sources received for the 2006 – 2007 fiscal year.
5. County Special Education Allocation
For
the fiscal year ended June 30, 2007, the District received an allocation from
the Tuscola Intermediate
School
District in the amount of $ 1,543 to assist with the education of students with
special needs.
6. Interest Earnings
The District received interest on its investments in the amount of $12,714 for the fiscal year ended June 30, 2007. Interest revenues decreased from the prior fiscal year by $656.
Management’s Discussion and Analysis
For Fiscal Year Ended June 30, 2007
7. Comparative Expenditures
A
comparison of the expenditures reported on the Statement of Revenues,
Expenditures, and Changes in Fund balances is shown below.
2006 – 2007 2005 – 2006 Increase
Expenditures Fiscal
Year Fiscal Year (Decrease)
Instruction $
3,052,664
3,211,887 (159,223)
Supporting
services
1,543,508 1,647,003 (103,495)
Food
service activities 235,846 229,071 6,775
Athletic activities 154,679 172,722 (18,043)
Debt
service
588,949 748,819 (159,870)
Total expenditures $ 5,575,646 6,009,502 (433,856 )
Management’s Discussion and Analysis
For Fiscal Year Ended June 30, 2007
The
Uniform Budget Act of the State of Michigan requires that the local Board of
Education approve the
original
budget for the upcoming fiscal year prior to its starting on July 1st.
Any amendments made to the
operating
budget must be approved by the Board prior to the close of the fiscal year on
June 30th.
For
the 2006 – 2007 fiscal year, the district amended the general fund budget two
times with the Board
adopting
the changes in June 2007. The following
schedule shows a comparison of the original general
fund
budget, the final amended general fund budget and actual totals from
operations:
Variance with
Final Budget-
Original Final positive %
Budget Budget Actual (negative) Variance
Total revenues $
4,903,925 $ 4,987,635 $ 4,982,103 $ (5,532)
Expenditures:
Instruction $ 2,900,142 3,076,949 3,052,664 24,285
Supporting
services 1,740,216 1,588,323 1,543,508 44,815
Total expenditures 4,640,359 4,665,273 4,596,172 69,101
Management’s Discussion and Analysis
For Fiscal Year Ended June 30, 2007
Capital Assets
By
the end of the 2006 – 2007 fiscal year, the district had invested $
13,351,492 in a broad range of
capital
assets, including school buildings and facilities, school buses and other
vehicles, and various
types
of equipment. This represents a net
increase of approximately $1,155 over the prior
fiscal
year. Depreciated expense for the year
amounted to roughly $ 400,140 bringing the accumulation
to
$5,874,834 as of June 30, 2007.
At June 30, 2007, the District had nearly $7,745,901, in bonded debt outstanding. This represents a reduction of $431,504 over the amount outstanding at the closed of the prior fiscal year as no new debt was issued in the 2006– 2007 fiscal year.
At the time that these financial statements were prepared and audited, the District was aware of the following items that could significantly affect its financial health in the future.
· With the current economic condition in the country, and especially in the State of Michigan,
uncertainty surrounds the level at which districts will be funded for the student foundation
allowance for the 2006 – 2007 fiscal year.
· As with other employers, the District continues to face a rapid increase in rates paid for
employee benefits, particularly for health insurance. Additionally, while the State has
managed to keep the growth in the rate districts fund the retirement system over the
past few years, the increase in the number of retirees projected to occur over the next few years may result in higher annual increases.
·
The contracts with the Carsonville-Port Sanilac Schools Education
Association, the union that represents the teaching staff, International Union
of Operating Engineers, the union that represents the custodial and support
staff, have all been settled and expire August 31, 2009. Contracts will all administrators and the bus
driver association are all settled with a 2009 expiration date as well.
·
The state of Michigan continues to increase its focus on student
achievement. Results of
standardized test scores (Michigan Education
Assessment Program) are compared from
year to year, with the results being tabulated by
school building and by district. With
the
changes to the federal Title I legislation resulting
from the No Child Behind Act, adequate
yearly progress of students will be more important
as certain portions of funding are now
tied to it.
Management’s Discussion and Analysis
For Fiscal Year Ended June 30, 2007
For
this Proposed Budget hearing we wish to comply with Section 16 of the Uniform
Budgeting and Accounting Act and state that our proposed property tax millage
rate to be levied this fall is 18 mills. This will generate $ 830,410 in local
property taxes. This is based on the
Non-Homestead Taxable Value of 46,133,900.
Revenue:
The
local revenue was adjusted to reflect student enrollment figures from the
February 2007 and projected fall 2007 count.
Expenses:
The pay scales have moved the employees to the appropriate
wage steps for the upcoming year and adjusted for contract settlements.
The healthcare benefits have increased for MESSA
health insurances for the teachers and the Health Savings Accounts for the
other employee groups. Many support
employees of the district have switched
to another insurance plan; Health
Savings Account. This has saved both the
district and the employee several dollars in health care.
The district continues to operate with a half-time
Superintendent. This saves the district
approximately $121,000 per year.
The district continues to be creative with staffing
and had a teacher retire and return part time which saves the district dollars.
We have increased operation and maintenance budgets for increased electric and gas costs.
The district leases its busses, which allows us to
have a newer bus fleet and saves on maintenance costs.
Contracting the District’s
Financial Management
This
financial report is designed to provide our citizens, taxpayers, customers, and
investors
and
creditors with a general overview of the District’s finances and to demonstrate
the District’s accountability for the money it receives. If you have questions about this report, or
need additional
financial
information, please contact:
Harold
Titus, Superintendent
Margie
Christenbery, Business Manager
Carsonville-Port
Sanilac Schools
100 N. Goetze Rd.
Carsonville,
MI 48419
(810) 657-9393