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December 9, 2011

School Board Independent School District No. 284 Wayzata Public Schools Wayzata, Minnesota

This Executive Audit Summary and Management Report presents information which we believe is important to you as members of the school board. We encourage you to review the sections of this report, the audited financial statements and the auditors’ reports. We would be pleased to furnish additional information with respect to these suggestions and discuss this memorandum with you at your convenience. We wish to express our appreciation to the School for the courtesies, cooperation and assistance extended to us during the course of our work.

LarsonAllen LLP

Rachel Flanders, CPA Principal

An independent member of Nexia International


WAYZATA PUBLIC SCHOOLS INDEPENDENT SCHOOL DISTRICT NO. 284 EXECUTIVE AUDIT SUMMARY (EAS) JUNE 30, 2011


WAYZATA PUBLIC SCHOOLS INDEPENDENT SCHOOL DISTRICT NO. 284 TABLE OF CONTENTS JUNE 30, 2011

EXECUTIVE AUDIT SUMMARY

FINANCIAL RESULTS  FUND BALANCES

STUDENTS SERVED FOR AID

OTHER KEY TOPICS  ASBO CERTIFICATE OF EXCELLENCE

APPENDIX A  FINANCIAL TRENDS OF YOUR DISTRICT

APPENDIX B  EXPENDITURES PER STUDENT (ADM) SERVED

13 

LEGISLATIVE ACTIVITY

14 

GENERAL EDUCATION REVENUE

14 

APPENDIX C  FORMAL REQUIRED COMMUNICATIONS

16 

SUMMARY OF PASSED ADJUSTMENTS

20 

APPENDIX D  REPORT ON CONDENSED FINANCIAL STATEMENTS INCLUDED HEREIN

21 


EXECUTIVE AUDIT SUMMARY (EAS) FOR WAYZATA PUBLIC SCHOOLS YEAR ENDED JUNE 30, 2011

We prepared this Executive Audit Summary and Management Report in conjunction with our audit of the District’s financial statements for the year ended June 30, 2011. We appreciated the time that staff took to work with us to complete the engagement—especially the efforts of Bill Rueber and Jim Scheuer, who were our main contacts on the audit. Audit Opinion – The financial statements are fairly stated. We issued what is known as a “clean” audit report. Yellow Book Opinion – No compliance issues were noted in our review of laws, regulations, contracts and grants that could have significant financial implications to the District. Internal Controls – One “material weakness” in internal controls was noted related to segregation of duties of the District’s finance processes. We noted lack of segregation of duties, to various degrees, in the following areas: o o o o o

Cash and Investments Capital assets Self-insurance Severance Journal entries

We also noted one “significant deficiency” in internal controls due to 1 of the 40 employees selected during our internal control testing who was paid the incorrect rate. Single Audit – For the Single Audit, there were four major federal programs tested: Special Education Cluster, Nutrition Cluster, Early Intervention Services Cluster, and Education Jobs Fund. Please see the schedule of findings and questioned costs in the separately issued report for results of the single audit. Legal Compliance – During our testing of 40 disbursements we noted one finding in respect to Minnesota Statutes due to the District not making a payment on an invoice within 35 days of the date of receipt. Student Activity Audit – We reported the following findings related to the audit of the District’s student activity accounts: 1) Improper activity being accounted for in student activity accounts, 2) Inactive student activity accounts not closed and 3) Student activity accounts with deficit balances at year-end. Timely Deposit of Checks – During our testing of food service, we noted instances where checks received in June were not deposited until July. We would recommend that the process for depositing check received in the food service department follow the District’s policies and procedures for depositing checks on a timely basis. Enrollment – For fiscal 2010-2011, the District had an estimated total adjusted average daily membership of 10,511.36 (or 12,156.35 adjusted pupil units). For fiscal 2009-2010, Wayzata Public Schools had an estimated total adjusted average daily membership of 10,376.81 (or 12,013.51 adjusted pupil units).

(1)


Fund Balance – The District’s General Fund unassigned fund balance ended at $11,525,345 as of June 30, 2011. The ending unassigned fund balance (UFARS basis) represents 10.75% of total General Fund expenditures as opposed to 11.02% at the end of the prior year (GASB 54 basis). A District’s fund balance is an important aspect in considering the District’s financial well-being since a healthy fund balance represents things such as cashflow, as a cushion against unanticipated expenditures, enrollment declines, funding deficiencies and aid prorations at the state level and similar problems. Budget to Actual – Total revenues on a net basis in the General Fund were $116,844,598 (which was $658,333 or 0.6% higher than the final amended budgeted amount) while total expenditures were $108,655,027 (which was $2,497,870 or 2.2% lower than the final amended budget). The net effect, after considering transfers out, was a decrease to total fund balance of $1,029,159 compared to the final amended budget which anticipated a decrease of $4,189,697, or a net difference of $3,160,538. A good share of the variance relates to timing differences as in the case of amounts designated for site carryover, as well as the timing of certain capital projects and simple budgeting for contingent items. As part of any budget update initiated for fiscal 2011-2012, the Board will want to take known budget variances into consideration in order to limit future budget differences to every extent possible. We recommend that budget variances in a school district environment be limited to 1% on either side of zero as a goal after considering known differences relating to timing such as site carryover, federal entitlements and capital items. The total revenues in the Debt Service Fund were $10,237,430 (which was $16,048 or .2% lower than the final amended budget) while total expenditures were $10,660,179 (which was $323,705 or 3.13% higher than the final amended budget).

(2)


FINANCIAL RESULTS Fund Balances

FUND DESCRIPTION GENERAL FUND A. UNASSIGNED

$

B. NONSPENDABLE (1) PREPAID ITEMS (2) INVENTORY C. ASSIGNED FOR (1) OAKWOOD ESCROW (2) RE-EMPLOYMENT INSURANCE (3) ONE-TIME CAPITAL TRANSFER (4) SITE CARRYOVER (5) Q-COMP D. RESTRICTED FOR (1) STAFF DEVELOPMENT (2%) (2) DISTRICT COOPERATION (3) AREA LEARNING CENTER (4) DEFERRED MAINTENANCE (5) BASIC SKILLS (6) CAREER AND TECHNICAL PROGRAMS (7) DOWN PAYMENT LEVY (8) HEALTH AND SAFETY (9) GRADUATION STANDARDS GIFTED AND TALENTED (10) OPERATING CAPITAL (11) DISABILITY ACCESSIBILITY (12) SAFE SCHOOLS LEVY (13) DOME ESCROW BUDGET TOTAL GENERAL FUND DIFFERENCE % VARIANCE FOOD SERVICE A. NONSPENDABLE (1) PREPAID ITEMS (2) INVENTORY B. RESTRICTED FOR (1) OTHER PURPOSES BUDGET TOTAL FOOD SERVICE DIFFERENCE % VARIANCE COMMUNITY EDUCATION A. NONSPENDABLE (1) PREPAID ITEMS D. RESTRICTED FOR (1) REGULAR COMMUNITY ED (2) EARLY CHILDHOOD FAMILY ED (3) SCHOOL READINESS (4) OTHER PURPOSES BUDGET TOTAL COMMUNITY EDUCATION DIFFERENCE % VARIANCE BUILDING FUND A. NONSPENDABLE (1) PREPAID ITEMS B. RESTRICTED FOR (1) DOWN PAYMENT LEVY C. UNASSIGNED BUDGET TOTAL BUILDING FUND DIFFERENCE % VARIANCE BUDGET TOTAL DEBT SERVICE

$

$

$

$

$

$

$

6/30/2010

2010-11

TRANSFERS

2010-11

TRANSFERS

AUDITED

AUDITED

INTO

AUDITED

OUT OF

CHANGE IN

AUDITED

BALANCE

REVENUES

FUNDS

EXPENDITURES

FUNDS

UNSPENDABLES

BALANCE

11,572,351

$

DIFFERENCE % VARIANCE

$

-

$

100,140,283

$

9,228,572

$

(65,500) $

-

-

-

-

1,370,792 298,911 588,935 1,149,883 174,745

111,826

-

1,370,792 54,562 286,280 -

-

-

244,349 588,935 863,603 286,571

1,454,818 250,000 33,855 640,603 -

1,245,784 278,600 659,469 973,657 195,993 773,907

-

1,504,195 278,600 656,035 884,595 195,993 739,813

-

-

1,196,407 250,000 37,289 729,665 34,094

3,693,229 7,452 106,708 364,500 17,687,471 22,770,405 5,082,934

290,038 2,460,384 477,433 116,191,265 116,854,440 663,175 0.57%

-

290,038 1,803,533 450,308 111,152,897 108,655,027 $ (2,497,870) -2.25%

9,228,065 9,228,572 507 0.01%

-

4,350,080 7,452 133,833 364,500 18,580,708 21,741,246 3,160,538

3,155 77,599 1,437,962 1,191,498 1,518,716 327,218

6,971

$

$

$

-

$

-

4,929,995 4,939,218 4,929,995 $ (9,223) -0.19%

-

$

-

337,802 90,568 10,288 501,436 1,212,944 947,065 $ (265,879)

6,048,086 544,753 198,078 1,288,135 7,587,901 8,079,052 491,151 6.47%

361,452 1,163,862 4,592,972 5,254,421 6,118,286 863,865

$

-

$

3,157 3,157 3,157 #DIV/0! 10,253,478

1,853,801 $ (211,542)

$

$

$

$

$

150,507 150,000 150,507 507

5,902,515 2,603,200 8,505,715 8,505,715 -

$

$

$

$

5,081,962 5,024,058 5,081,962 57,904 1.15%

$

$

-

$

$

5,742,704 576,030 198,078 1,373,790 7,520,478 7,890,602 370,124 4.92%

$

-

$

4,525,461 6,813,323 7,502,515 11,338,784 3,836,269 51.13% 10,673,446

572,350

10,237,430 $ (16,048) -0.16%

-

572,350 -

$

$

$

$

-

-

76,432 (10,932)

11,525,345

955,268 108,355

2,065,343 $

109,387,349

6/30/2011

$

$

$

$

$

-

$

(1,226) $ (19,070) 20,296 -

$

(5,533) 5,533 -

$

1,929 58,529 1,306,291 1,433,876 1,366,749 (67,127)

1,438

$

415,895

-

10,660,179 $ (13,267) -0.12%

1,031,700 97,423

643,184 59,291 10,288 571,821 1,164,488 1,286,022 121,534

777,347

(415,895) - $ -

2,540,916 (29,889) 7,121,486 3,288,374 (3,833,112) 2,006,183

-

$

-

$

2,003,402 (2,781)

PROPRIETARY AND TRUST TRUST FUNDS INTERNAL SERVICE FUND - SELF INS & RET

$

22,971,861 10,965,030

$

4,586,998 13,599,970

$

-

$

107,059 15,608,164

$

-

$

-

$

27,451,800 8,956,836

TOTAL OTHER FUNDS

$

33,935,906

$

18,186,968

$

-

$

15,715,223

$

-

$

-

$

36,407,651

NOTE: The General Fund information is presented in the format required by the Uniform Financial Accounting and Reporting Standards issued by the Minnesota Department of Education.

(3)


FINANCIAL RESULTS (CONTINUED) Students Served for Aid 2007 9,405.59 (441.85) 8,963.74 1,003.41 9,967.15

Total Residents Open Enrollment Out Net Residents Served Open Enrollment In Net ADM Served Net Pupil Units Served

11,545.29

2008 9,452.61 (488.82) 8,963.79 1,043.15 10,006.94

2009 9,588.95 (545.28) 9,043.67 1,152.59 10,196.26

2010 9,761.11 (532.95) 9,228.16 1,148.65 10,376.81

2011 9,989.61 (574.21) 9,415.40 1,095.96 10,511.36

11,672.17

11,856.22

12,013.51

12,156.35

WAYZATA PUBLIC SCHOOLS

Student Enrollment for Aid (in ADMs) 11,000 10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 2007

2008

2009

Open Enrollment In

2010

2011

Net Residents Served

As reflected in the above chart and graph, the District continues to attract over two students through open enrollment for every resident student choosing to attend to elsewhere.

(4)


OTHER KEY TOPICS ASBO Certificate of Excellence The District submitted its June 30, 2010 CAFR (Comprehensive Annual Financial Report) to the Association of School Business Officials as part of ASBO’s Certificate of Excellence in Financial Reporting program and was awarded the Certificate of Excellence. We believe this reflects the District's commitment to the high standard of financial reporting excellence required by the ASBO program. Although not guaranteed, we believe the District’s June 30, 2011 CAFR will continue to qualify for the award.

(5)


APPENDIX A FINANCIAL TRENDS OF YOUR DISTRICT Within this report there are a number of areas where condensed financial statement data has been presented. The last page of this document (Appendix E) contains an Independent Auditors’ Report on Condensed Financial Statements Included Herein that should be considered when reading such condensed information. Also, the District adopted the provisions of Governmental Accounting Standards Board Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions, as of and for the year ended June 30, 2011. The prior year fund balance information has been presented using these new fund balance categories for comparative analysis only. Student Enrollment

WAYZATA PUBLIC SCHOOLS Student Enrollment (in ADMs)

11,000 10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 2007 Secondary

2007 Pre-K & KH Reg Kindergarten Elementary Secondary Net ADM Served

72 637 4,368 4,890 9,967

Percent Change

1.17%

2008

2009

Elementary

2008 82 551 4,452 4,922 10,007 0.40%

2010

Reg Kindergarten

2009 85 611 4,535 4,965 10,196 1.89%

2011 Pre-K & KH

2010 75 686 4,650 4,967 10,377 1.77%

2011 91 694 4,754 4,972 10,511 1.30%

As noted in the above chart, the District’s student count for fiscal 2010-2011 increased by 1.30% over the prior year.

(6)


General Fund Revenue The following table and graph summarizes the District’s General Fund revenue sources for the last five years: WAYZATA PUBLIC SCHOOLS General Fund % of Revenue 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

5%

4%

4%

3%

69%

68%

67%

60%

26%

27%

27%

29%

2007

2008

2009

2010

3%

52%

41%

2011

Other Local & Misc

Federal Sources

State Sources

Local Property Taxes

The table below illustrates the fluctuation that occurs between the taxes and state aid categories based on legislative activity. The Legislature determines what portion of the general education funding formula will be paid by local taxpayers. In addition, when the tax shift percentage changes or the state provides property tax relief such as the education homestead market value aid, this only impacts the mix between state aids and taxes and does not change total revenue. For example, in fiscal 2011, the MDE shifted a total of approximately $13.5 million of the payable 2011 property tax receipts for the general and community service funds, allowing for these funds to be recognized in fiscal 2011 rather than fiscal 2012, and giving the appearance of a significant increase in taxes for the 2011. For this and other reasons, school finance in Minnesota continues to be a very difficult subject to explain to the general public. Local Property Taxes State Sources Federal Sources Other Total Revenues

2007 $ 25,764,175 68,290,486 1,889,930 3,563,394 $ 99,507,985

2007 Local Property Taxes State Sources Federal Sources Other Total Revenues

26% 69% 2% 4% 100%

2008 $ 28,057,583 71,575,997 1,840,926 3,693,177 $ 105,167,683

2008

2009 $ 30,120,568 73,499,699 2,906,486 3,192,027 $ 109,718,780

2009

27% 68% 2% 3% 100%

(7)

27% 67% 3% 3% 100%

2010 $ 32,411,824 66,884,277 10,308,241 2,701,136 $ 112,305,478

2010 29% 60% 9% 2% 100%

2011 $ 48,158,945 60,585,365 5,106,770 2,993,518 $ 116,844,598

2011 41% 52% 4% 3% 100%


Expenditures Per Student Expenditures per student (average daily membership) are summarized in the following graph: General Fund Expenditures Per Student (Per ADM)

2011

2010

2009

2008

2007

$8,500

General Fund - All Expenditures

$9,000

$9,500

$10,000

$10,500

2007

2008

2009

2010

2011

$9,234

$9,847

$10,331

$10,120

$10,337

General Fund expenditures for fiscal 2011 were $108,655,027 which represents a increase of $3,639,970 or 3.5% from fiscal 2010. The following schedule shows total expenditures of the General Fund by program type: WAYZATA PUBLIC SCHOOLS General Fund % of Expenditures 100% 90% 80%

9%

8%

8%

9%

8%

9%

10%

9%

10%

10%

8%

8%

8%

8%

8%

14%

14%

13%

14%

14%

49%

47%

48%

47%

46%

4%

4%

3%

4%

3%

2007

2008

2009

2010

2011

70% 60% 50% 40% 30% 20% 10% 0%

Capital Outlay

Fixed Cost Prog & Debt Service

Operations & Maintenance

Pupil Support Services

Instructional Support Services

Special Education Instruction

Vocational Instruction

Regular Instruction

District Support Services

District & School Admin

(8)


Expenditures Per Student (Continued) WAYZATA PUBLIC SCHOOLS General Fund Expenditures by Function

$120,000,000 $100,000,000 $80,000,000 $60,000,000 $40,000,000 $20,000,000 $0 2007

2008

2009

2010

Capital Outlay/Fiscal and other Fixed Charges

Fixed Cost Prog & Debt Service

Operations & Maintenance

Pupil Support Services

Instructional Support Services

Special Education Instruction

Vocational Instruction

Regular Instruction

District Support Services

District & School Admin

District and School Admin District Support Services Regular Instruction Vocational Instruction Special Education Instruction Instructional Support Services Pupil Support Services Operations and Maintenance Capital Outlay Fixed Cost Prog and Debt Service Total Expenditures

2007 $ 3,400,679 4,019,941 44,808,912 682,739 13,315,819 7,003,890 8,347,354 7,823,675 2,215,203 414,542 $ 92,032,754

2008 $ 3,669,319 4,164,663 45,950,162 1,537,278 14,147,637 8,143,070 9,483,248 8,261,489 2,863,975 314,135 $ 98,534,976

2009 3,577,748 4,178,363 50,863,997 1,988,651 13,844,731 8,048,957 9,663,416 8,719,673 4,073,135 375,102 $ 105,333,773

$

2011

2010 3,810,046 3,406,672 49,261,911 2,312,353 14,855,969 8,170,600 10,004,783 9,179,456 3,733,167 280,100 $ 105,015,057

$

2011 3,792,268 3,725,315 50,484,858 2,400,776 15,382,312 8,953,839 10,779,639 9,050,432 3,583,206 502,382 $ 108,655,027

$

The following chart summarizes District General Fund expenditures by object type: 2011

Salaries Employee Benefits Purchased Services Supplies and Materials Capital Expenditures Other Expenditures Total Expenditures

$

$

Budget 64,407,779 17,914,273 17,664,061 3,661,530 3,735,620 3,769,634 111,152,897

$

$

Actual 64,558,252 18,735,977 17,520,237 3,539,123 3,583,206 718,232 108,655,027

(9)

2010 Over (Under) Budget $ 150,473 821,704 (143,824) (122,407) (152,414) (3,051,402) $ (2,497,870)

% 0.2% 4.6% -0.8% -3.3% -4.1% -80.9% -2.2%

Actual $ 62,189,192 17,647,424 17,436,452 3,527,923 3,733,167 480,899 $ 105,015,057


General Fund Operations and Financial Position The following table presents five years of comparative operating results for the District’s General Fund. Please note that amounts have been reclassified for the implementation of GASB 54 as if all years presented were categorized in accordance with the provisions of GASB 54.

Revenues Expenditures

2008 $ 105,167,683 98,534,976

7,475,231

6,632,707

4,385,007

7,290,421

8,189,571

1,096 1,000 (5,814,349) (5,812,253)

232,656 9,677 1,540,291 (6,000,020) (4,217,396)

12,979 5,205,000 (7,358,640) (2,140,661)

2,997 349 1,250,000 39,818 (7,109,370) (5,816,206)

9,842 (9,228,572) (9,218,730)

1,662,978

2,415,311

2,244,346

1,474,215

(1,029,159)

14,973,555

16,636,533

19,051,844

21,296,190

22,770,405

Excess of Revenues Over Expenditures Other Financing Sources (Uses): Sale of Equipment and Property Proceeds Insurance Recovery Proceeds Capital Lease Proceeds Sale of Bonds Proceeds Capital Lease Premium Operating Transfers Out Total Other Financing Uses Excess (Deficiency) of Revenues and Other Financing Sources Over (Under) Expenditures and Other Financing Uses Fund Balance: Beginning of Year End of Year Nonspendable Assigned Restricted Unassigned Fund Balance Total Fund Balance Unassigned Fund Balance as a Percentage of Expenditures

Year Ended June 30, 2009 2010 $ 109,718,780 $ 112,305,478 105,333,773 105,015,057

2007 $ 99,507,985 92,032,754

$

2011 116,844,598 108,655,027

$ 16,636,533

$

19,051,844

$

21,296,190

$

22,770,405

$

21,741,246

$

$

950,256 3,022,195 6,785,272 8,294,121 19,051,844

$

1,037,195 2,206,699 7,229,669 10,822,627 21,296,190

$

1,063,623 3,583,266 6,551,165 11,572,351 22,770,405

$

1,129,123 1,983,458 7,103,320 11,525,345 21,741,246

336,495 1,601,473 7,364,548 7,334,017 $ 16,636,533

$

7.97%

8.42%

$

10.27%

$

11.02%

$

10.61%

The District’s General Fund had an excess of expenditures over revenues and other financing uses of $1,029,159 for fiscal 2011, bringing total fund balance to $21,741,246 at June 30, 2011. Total fund balance includes a net of $7,103,320 in restricted accounts as prescribed by state statute plus an additional $1,983,458 in assigned accounts and $1,129,123 in nonspendable accounts. That leaves an unassigned fund balance of $11,525,345 at year-end.

(10)


Food Service Fund The following chart reflects the growth of the food service program over the past five years:

Revenues Expenditures

2007

2008

Year Ended June 30, 2009

2010

$ 4,570,143 4,943,844

$ 4,786,042 4,533,113

$ 4,897,286 4,609,343

$ 4,984,664 4,728,153

252,929

287,943

256,511

721,333

974,262

1,262,205

974,262

$ 1,262,205

$ 1,518,716

1,026,578

1,073,852

1,116,088

Excess (Deficiency) of Revenues Over (Under) Expenditures

(373,701)

Fund Balance: Beginning of Year

1,095,034

End of Year

$

721,333

Lunches Served to Students

$

962,001

Revenue per Lunch Served Fund Balance: Nonspendable Restricted Total Fund Balance

$

4.75

$

4.66

$

$

91,747 629,586 721,333

$

98,339 875,923 974,262

$

$

$

4.56

$

115,390 1,146,815 $ 1,262,205

$

2011 $

4,929,995 5,081,962

(151,967)

1,518,716 $

1,366,749 1,107,878

4.47

$

4.45

80,754 1,437,962 $ 1,518,716

$

60,458 1,306,291 1,366,749

$

Total expenditures exceeded total revenues by $151,967 in the District’s Food Service Fund for 2011, resulting in an ending fund balance of $1,366,749 at June 30, 2011. The following chart reflects the number and type of meals served to students over the past 10 years: MEALS SERVED TO STUDENTS

1,200,000 1,100,000 1,000,000 900,000 800,000 700,000 600,000 500,000 400,000 300,000 200,000 100,000 Reduced Meals Free Meals

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

21,821

21,388

25,103

25,574

33,946

30,651

39,503

46,704

56,064

50,782

55,391

71,321

86,277

96,712

117,570

139,269

170,649

191,163

206,006

206,572

Full-Price Meals

706,859

726,069

750,412

779,610

803,181

792,081

816,426

835,985

854,018

850,524

Total meals served

784,071

818,778

861,792

901,896

954,697

962,001

1,026,578

1,073,852

1,116,088

1,107,878

Reduced Meals

Free Meals

(11)

Full-Price Meals


Community Service Fund The following table presents five years of comparative operating results for the District’s Community Service Fund:

Revenues Expenditures

2007

2008

Year Ended June 30, 2009

2010

2011

$ 6,582,987 6,493,431

$ 6,885,730 6,885,134

$ 7,435,450 7,606,239

$ 7,578,197 7,716,302

$ 8,079,052 7,890,602

89,556

596

-

Excess (Deficiency) of Revenues Over (Under) Expenditures

(170,789)

(138,105)

188,450

14,419

46,000

161,349

150,507

89,556

15,015

(124,789)

23,244

338,957

944,039

1,033,595

923,821

947,065

$ 1,033,595

$ 1,048,610

$

923,821

$

947,065

$ 1,286,022

$

$

$

12,209 911,612 923,821

$

6,971 940,094 947,065

$

Operating Transfers In Excess (Deficiency) of Revenues and Other Financing Sources Over (Under) Expenditures Fund Balance: Beginning of Year End of Year Fund Balance: Nonspendable Restricted Total Fund Balance

3,996 1,029,599 $ 1,033,595

6,554 1,042,056 $ 1,048,610

1,048,610

$

$

1,438 1,284,584 $ 1,286,022

The District’s Community Service Fund had an excess of revenues over expenditures of $338,957 for fiscal 2011, bringing the combined fund balance to $1,286,022 at June 30, 2011. The fund balance reserves for Community Ed, ECFE and school readiness are limited by statute to 25% of program expenditures so it important to continue monitoring those balances carefully to ensure that no funding is lost for those programs. Total revenues of the District’s Community Service Fund for 2011 were $491,151 (or 6.5%) higher than the budgeted amount while total expenditures were over budget by $370,124 (or 4.9%). As a result, total fund balance increased by $121,534 more than had been reflected in the budget, including the transfer in from the general fund.

(12)


APPENDIX B The table below reflects the comparative data available from the Minnesota Department of Education for all expenditures incurred for the benefit of pre-elementary through secondary education, except expendable trust fund activity. Expenditures Per Student (ADM) Served

District and School Admin and Support Services Regular Instruction (including Co- & Extra-Curricular) Vocational Instruction (Career & Technical) Special Education Instruction Instructional Support Services Pupil Support Services (including Transportation) Operations & Maintenance and Other Total General Fund - Operating Portion Food Service Community Service Capital Expenditure Debt Service Total Pre-K - 12 Expenditures

Statewide 2010 $ 842 4,865 144 1,811 452 854 785 9,753 455 496 498 1,081

Seven-county Metro Area 2010 $ 781 5,069 150 1,992 550 937 755 10,234 456 618 414 1,184

$

$

12,283

12,905

2009 $

757 4,962 194 1,351 785 943 851 9,843 450 742 397 1,011

$

12,443

Percent Change from Prior Year

ISD No. 284 Wayzata 2010 $ 704 4,807 226 1,450 797 976 896 9,855 461 753 364 991 $

12,424

2011 $

712 4,779 227 1,456 848 1,020 857 9,899 481 747 339 1,057

$

12,522

-0.15%

0.79%

Source of Statewide and Seven-county Metro Area Data: School District Profiles published by the MN Dept of Education District and school admin and support services - all costs related to providing administration to the District (school board, superintendent, principals, assistant superintendents, directors of instructional areas, etc.) and all central office administration (business services, human resources, legal, data processing, other districtwide support activities) Regular instruction - includes all activities dealing directly with the teaching of pupils including co-curricular and extra-curricular activities and the interaction between teachers and pupils in the classroom (excluding exceptional, vocational and community education instruction) and includes activities of aides or assistants of any type (paraprofessionals, clerks, graders, etc.) who assist in the educational process, except spec ed aides Vocational instruction - consists of costs related to courses and activities which develop knowledge, skills, attitudes and behavioral characteristics for students seeking career exploration and employability Special education instruction - consists of activities providing learning experiences for pupils of any age, who because of certain atypical characteristics or conditions, have been identified as requiring, or who would benefit by, educational programs differentiated from those provided pupils in regular or vocational instruction Instructional support services - activities for assisting instructional staff with content and process of providing learning experiences for pupils in K-12 (curriculum, staff dev, educ media, libraries and media centers, etc.) Pupil support services - all services to pupils not classified as instructional (counseling and guidance, health services, psychological services, social work, etc.) Operations and maintenance - activities related to the operation, maintenance, repair and remodeling of all physical plant, facilities and grounds of the District Food Service - all costs of the Food Service Fund Community service - all costs of the Community Service Fund Capital Expenditures - all capital expenditures charged to operating funds Debt service - all Debt Service Fund costs (principal, interest and fiscal agent costs--excluding refunding bond payments)

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LEGISLATIVE ACTIVITY What follows are some education-related highlights of recent legislative sessions as summarized from information made available by the Minnesota Department of Education and the Minnesota House of Representatives. GENERAL EDUCATION REVENUE Formula Allowance The 2011 Legislature modified the basic formula allowance beginning in fiscal year 2012. The basic formula allowance remained at $5,124 per pupil unit for fiscal year 2011 and then will increase $50 (1%) for fiscal years 2012 and 2013 ($5,174 and $5,224, respectively). No changes were made in the calculation of adjusted marginal cost pupil units—grade level pupil unit weightings and the 77% current year / 23% prior year marginal cost pupil unit calculations for declining enrollment schools remain unchanged. Staff Development Reserve The staff development reserve that had already been temporarily suspended for fiscal years 2010 and 2011 was also suspended for fiscal years 2012 and 2013. The staff development reserve is equal to 2% of the district’s basic general education revenue. Aid Payment Shifts and Property Tax Shifts The State of Minnesota once again increased the withholding of state aid payments to school districts and charter schools as a mechanism for balancing their budget. The holdback was increased from 30% to 40% for fiscal year 2012. In addition to increasing the holdback, the State also changed the metering of payments to charter schools for fiscal year 2012. Charter schools will now receive their 60% payments over 16 payments from July through February. There will be no payments made for the period March through June. The charter schools will then receive 75% of the remaining 40% holdback on July 15 and the final 25% of the holdback on October 30. Length of School Year The required number of instructional days was changed to instructional hours, not including summer school as follows:   

K – without disability – 425 hours Grades 1-6 – 935 hours Grades 7-12 – 1020 hours

Endowment / Permanent School Fund Effective with the March 2012 payment, charter schools are now eligible for payments from the Endowment/Permanent School Fund. Charter schools will receive about $12/ADM in fiscal year 2012 and about $25/ADM in fiscal year 2013. Employment of Unlicensed Teachers State statute was clarified that state aid may be reduced, but not withheld, when a district employs unlicensed teachers.

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Payment of Creditors It was codified in statute that state education payments can only be made to the school district, charter school or other educational organization earning state aid revenue as a result of providing education services. In order to deal with cash flow issues related to the holdback of state aids some charter schools have been “selling” their future state aid payments and there was a push to have MDE remit such state aid payments directly to the organization “buying” such receivables but this makes it clear that aid payments can only be remitted to a public organization that is providing education to students. Literacy Incentive Aid Beginning in fiscal year 2013, school districts and charter schools will begin to receive literacy incentive aid which includes a proficiency and growth aid component. To qualify for this aid, the schools must have had students in 3rd or 4th grade and have MCA test results for the prior year. While the literacy incentive aid is determined at the school level, there is no requirement for the money to be spent at the school generating the revenue. It may be used for any General Fund purpose. The calculation of the aid is as follows:  

Proficiency aid = $85 x school’s enrollment on October 1 of the previous year x percent of 3rd graders meeting or exceeding proficiency on the 3rd grade reading MCA, averaged across the previous three test administrations (FY 10, 11 and 12 for FY 13 aid). Growth aid = $85 x school’s enrollment on October 1 of the previous year x percent of 4th graders making medium or high growth on the reading MCA, averaged across the previous three test administrations.

For fiscal year 2013 only, the state total aid is capped at $48,585,000. Currently, no proration is anticipated, but that will depend on the 2011 and 2012 test results. School Board Meetings The Open Meeting Law was changed to allow school boards to conduct meetings using interactive technology with audio and visual links but must otherwise comply with all other provisions of the Open Meeting Law. Textbook Definition The definition of textbook was changed to include “electronic books as well as other printed materials delivered electronically.” PSEO (Post-Secondary Enrollment Options) PSEO is now open to students in grades 9 and 10 in addition to those in grades 11 and 12. Districts are also required to disseminate information about PSEO to 8th and 9th graders. Students Without a Disability from Other States It was established that school districts are not required to provide education services to a student who is not a resident of Minnesota, does not have an IEP, and does not have a tuition agreement or arrangement to pay the cost of education from the placing authority.

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APPENDIX C FORMAL REQUIRED COMMUNICATIONS

Board of Education Independent School District No. 284 Wayzata Public Schools We have audited the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of Independent School District No. 284 (the District) for the year ended June 30, 2011, and have issued our report thereon dated December 9, 2011. Professional standards require that we provide you with the following information related to our audit. Our responsibility under U.S. Generally Accepted Auditing Standards and OMB Circular A-133 As stated in our engagement letter dated May 16, 2011, our responsibility, as described by professional standards, is to express opinions about whether the financial statements prepared by management with your oversight are fairly presented, in all material respects, in conformity with U.S. generally accepted accounting principles. Our audit of the financial statements does not relieve you or management of your responsibilities. In planning and performing our audit, we considered the District’s internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinions on the financial statements and not to provide assurance on the internal control over financial reporting. We also considered internal control over compliance with requirements that could have a direct and material effect on a major federal program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with OMB Circular A-133. Accordingly, we do not express an opinion on the effectiveness of the entity’s internal control. 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 grants, 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. Also in accordance with OMB Circular A-133, we examined, on a test basis, evidence about the District’s compliance with the types of compliance requirements described in the “U.S. Office of Management and Budget (OMB) Circular A-133 Compliance Supplement” applicable to each of its major federal programs for the purpose of expressing an opinion on the District’s compliance with those requirements. While our audit provides a reasonable basis for our opinion, it does not provide a legal determination on the District’s compliance with those requirements. 1. Our responsibility is to plan and perform the audit to obtain reasonable, but not absolute, assurance that the financial statements are free of material misstatement.

(16) An independent member of Nexia International


Board of Education Independent School District No. 284 Wayzata Public Schools

Our responsibility under U.S. Generally Accepted Auditing Standards and OMB Circular A-133 (continued) 2. We are responsible for communicating significant matters related to the audit that are, in our professional judgment, relevant to your responsibilities in overseeing the financial reporting process. However, we are not required to design procedures specifically to identify such matters. 3. We are also responsible for communicating Minnesota Legal Compliance. Planned scope and timing of the audit We performed the audit according to the planned scope and timing previously communicated to you in our email about planning matters on October 19, 2011. Significant audit findings Qualitative aspects of accounting practices Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by the District are described in Note 1 to the financial statements. As discussed in Note 1 of the financial statements, the District adopted GASB 54, Fund Balance Reporting and Governmental Fund Type Definitions. Aside from the implementation of this standard, no other new accounting policies were adopted and the application of existing policies was not changed during the year ended June 30, 2011. We noted no transactions entered into by the District during the year for which there is a lack of authoritative guidance or consensus. There are no significant transactions that have been recognized in the financial statements in a different period than when the transaction occurred. Accounting estimates are an integral part of the financial statements prepared by management and are based on management’s knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly from those expected. The most sensitive estimates affecting the financial statements were: 

Due from Minnesota Department of Education

Due from Federal through the Minnesota Department of Education

Estimated useful lives of depreciable capital assets

Claims incurred but not reported

Other postemployment retirement payable

Other retirement incentives payable

(17)


Board of Education Independent School District No. 284 Wayzata Public Schools

Qualitative aspects of accounting practices (continued) Management’s estimate of the due from Minnesota Department of Education is based on amounts anticipated to be received from the state for various aid entitlements for fiscal 2010-2011. The most significant of these is the aid portion of general education revenue. General education revenue and certain other revenues are computed by applying an allowance per student to the number of students served by the District. Student attendance is accumulated in a statewide database – MARSS. Because of the complexity of student accounting and because of certain enrollment options, student information is input by other school districts and the MARSS data for fiscal year 2011 is not finalized until well into fiscal year 2012. Management expects any differences between estimated and actual data will be insignificant. Management’s estimate of due from Federal through the Minnesota Department of Education is based on amounts anticipated to be received through the state for various federal aid entitlements for fiscal 2010-2011. Many federal entitlements require that supporting financial reporting information be provided both in the UFARS accounting system and also the EDRS reporting system. To the extent that these two separate systems are not in agreement and reported in a timely manner, the estimated aid entitlement may be adversely affected. Management expects any differences between estimated and actual data will be insignificant. Management’s estimate of the useful lives for depreciable assets is based on guidance recommended by the Minnesota Department of Education and other sources. The useful life of a depreciable asset determines the amount of depreciation that will be recorded in any given reporting period as well as the amount of accumulated depreciation that is reported at the end of a reporting period. Management’s estimate of Claims Incurred but Not Reported in its Self-Insurance Fund is based on data reported to the District by the plan administrator. Management's estimate of other postemployment benefits payable is based on an actuarially determined calculation, less actual payments incurred on behalf of retirees and an actuarially determined estimate of implicit rate subsidy, which is the estimated increased cost of premiums due to inclusion of retirees in the same plan as the District's active employees. Management’s estimate of other retirement incentives payable is based on an actuarially determined calculation, less actual payments incurred on behalf of retirees and an actuarially determined estimate of implicit rate subsidy, which is the estimated increased cost of premiums due to inclusion of retirees in the same plan as the District's active employees. We reviewed and tested management’s procedures and underlying supporting documentation in the areas discussed above and evaluated the key factors and assumptions used to develop the estimates noted above in determining that they are reasonable in relation to the financial statements taken as a whole. We concluded that the accounting estimates and management judgments appeared to consider all significant factors and resulted in appropriate accounting recognition. The disclosures in the financial statements are neutral, consistent, and clear. Difficulties encountered in performing the audit We encountered no significant difficulties in dealing with management in performing and completing our audit.

(18)


Board of Education Independent School District No. 284 Wayzata Public Schools

Corrected and uncorrected misstatements Professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that are trivial, and communicate them to the appropriate level of management. The attached schedule summarizes uncorrected misstatements of the financial statements. Management has determined that their effects are immaterial, both individually and in the aggregate, to the financial statements taken as a whole. Disagreements with management For purposes of this letter, professional standards define a disagreement with management as a financial accounting, reporting, or auditing matter, whether or not resolved to our satisfaction, that could be significant to the financial statements or the auditors’ report. We are pleased to report that no such disagreements arose during the course of our audit. Management representations We have requested certain representations from management that are included in the management representation letter dated December 9, 2011. Management consultations with other independent accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a “second opinion” on certain situations. If a consultation involves application of an accounting principle to the District’s financial statements or a determination of the type of auditors’ opinion that may be expressed on those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with other accountants. Other audit findings or issues We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior to retention as the District’s auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention. This report is intended solely for the information and use of the Board of Education and management of the District and is not intended to be and should not be used by anyone other than these specified parties.

LarsonAllen LLP Minneapolis, Minnesota December 9, 2011

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WAYZATA PUBLIC SCHOOLS SUMMARY OF PASSED ADJUSTMENTS JUNE 30, 2011

Number 1

2

3

4

Fund

Account

Debit

General Fund

Revenue $ Fund Balance To adjust prior year Due from Other MN School Districts to actual

Credit

53,303 $

(53,303)

Miscellaneous Receivables $ 4,196 Cash $ To adjust for receipts included in deposits in transit not received until after year-end

(4,196)

Food Service

Capital Projects

Fund Balance $ 40,368 Expenses To reverse PY entry for recording additional accounts payable at year-end

Internal Service Fund

Investment Income Investments Fund Balance To adjust life insurance to market and to reverse PY entry

(20)

$ $

$

(40,368)

$

(63,372)

34,714 28,658


APPENDIX D REPORT ON CONDENSED FINANCIAL STATEMENTS INCLUDED HEREIN

Board of Education Independent School District No. 284 Wayzata Public Schools Wayzata, Minnesota We have audited the financial statements of Independent School District No. 284 (the District) as of and for the years ended June 30, 2011, 2010, 2009, 2008, and 2007 (not presented herein). These financial statements are the responsibility of the District's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with U.S. generally accepted auditing standards 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 includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. The condensed Statements of Revenues, Expenditures and Changes in Fund Balance for the years presented on pages 10, 11 and 12 are presented as a summary and therefore do not include all of the disclosures required by U.S. generally accepted accounting principles. In our opinion, because of the significance of the omission of the information referred to in the preceding paragraph, the condensed financial statements referred to above do not present fairly, in conformity with U.S. generally accepted accounting principles, the results of its operations for the years then ended. This report is intended solely for the information and use of the School Board and management of the District and is not intended to be and should not be used by anyone other than these specified parties.

LarsonAllen LLP Minneapolis, Minnesota December 9, 2011

(21) An independent member of Nexia International


2011 executive audit summary and management report