MINNEWASKA SCHOOL DISTRICT #2149

AUDITHIGHLIGHTSYEAR ENDED JUNE 30, 2012MINNEWASKA SCHOOL DISTRICT #2149CURRENT YEAR SUMMARYAudit Opinion- Unqualified Opinion audit report Pages 2-3

Year EndedJune 30, 2012Year EndedJune 30, 2011Amount ofIncrease(Decrease)%Increase(Decrease)Local Sources Property Taxes$ 1,635,425$ 2,197,205$ (561,780) (25.6)%Interest earnings 7,910 18,486 (10,576) (57.2)%Other 1,285,209 1,133,586 151,623 13.4 %State sources 10,038,479 9,069,916 968,563 10.7 %Federal sources 687,339 739,202 (51,863) (7.0)%Other Financing Sources 8,051 18,275 (10,224) (55.9)%Total GeneralFund Revenue$ 13,662,413$ 13,176,670$ 485,743 3.7 % General Fund Revenues

Year EndedJune 30, 2012Year EndedJune 30, 2011Amount ofIncrease(Decrease)%Increase(Decrease)Salaries$ 7,404,398$ 7,462,498$ (58,100) ( 0.8)%Employees benefits 1,713,318 1,786,276 ( 72,958) (0.4)%Purchased services 2,658,849 2,440,605 218,244 8.9%Supplies & material 667,102 720,099 (52,997) (7.4)%Non-Capital equipment 143,689 198,952 (52,263) (27.8)%Capital Expenditures 99,353 219,874 (121,521) (54.8)%Debt Service 224,865 233,219 (8,354) (3.6)%Other expenditures 69,586 59,677 9,889 16.6%Total Expenditures$ 12,981,140$ 13,121,200$ (140,060) (1.1)% General Fund Expenditures

Budgeted AmountsActual General FundOver (Under) BudgetOriginalFinalRevenuesLocal property tax levies$ 1,603,234$ 1,606,504$ 1,635,425$ 28,921 Other local and county revenues 1,039,988 1,110,158 1,246,782 136,624Revenues from state sources 9,646,307 10,027,578 10,038,479 10,901Revenue from federal sources 677,827 698,578 687,339 (11,239)Sales and other conversions of assets 29,540 43,930 44,639 709Insurance recovery and settlement -0- 1,697 1,698 1Total Revenues$ 12,996,896$ 13,488,445$ 13,654,362$ 165,917General Fund Revenues- Budget to Actual Original Budget $450,000 less. Special Ed AidGeneral Fund Expenditures2012 Budgeted Amounts2012 Actual General FundOver (Under) Final BudgetCurrent:OriginalFinalDistrict and school administration$ 546,560$ 582,000$ 588,988 $ 6,988 District support services 296,891 296,638 263,632 (33,006)Regular instruction 5,017,402 4,909,073 4,859,060 (50,013)Vocational instruction 89,504 87,675 86,922 (753)Exceptional instruction 4,270,606 4,305,030 4,282,667 (22,363)Community education and services -0- -0- -0- -0-Instructional support services 116,801 115,729 133,120 17,391Pupil support services 1,104,418 1,171,204 1,151,810 (19,394)Site, buildings and equipment 1,104,134 1,,249,059 1,089,430 (159,629)Fiscal and other fixed cost programs 48,495 51,260 51,259 (1)Total Current 12,594,811 12,767,668 12,506,888 (260,780)Capital Outlay 235,238 250,377 243,042 (7,335)Debt Service:Principal 96,051 105,940 105,546 (394 ) Interest 138,666 114,956 119,319 4,363Debt issuance costs -0- 6,345 6,345 -0-Total Debt Service 234,717 227,241 231,210 3,969Total Expenditures$ 13,064,766 $13, 245,286$ 12,981,140$ (264,146)Budgeted AmountsActual General FundVariances with Final Budget Favorable (unfavorable)OriginalFinalExcess (deficiency) of revenue over expenditures (67,870) 243,159 673,222 430,063Other Financing Sources (Uses)Sale of real property and equipment -0- -0- 75 75Capital Equipment Lease -0- -0- 7,976 7,976Total Other Financing Sources (Uses)$ -0-$ -0-$ 8,051$ 8,051Excess (Deficiency) of Revenues and Other Financing Sources Over (Under) Expenditures and Other Financing (Uses)$ (67,870)$ 243,159$ 681,273$ 438,114Fund Balances - Beginning of Year 1,351,651 1,351,651$ 1,351,651 -0-Fund Balances - End of Year$ 1,283,781$ 1,594,810$ 2,032,924$ 438,114Fund Balance ClassificationsFund balance is divided into five classifications:Nonspendable Not in spendable formRestricted Fund balance is reported as restricted when constraints externally imposedCommitted Can be used only for the specific purposes imposed by a formal action (resolution) of the School District Board of EducationAssigned Intended to be used by the School District for specific purposesUnassigned All spendable amounts not contained in the other classifications

Fund BalancesFund Balances (Deficits)GeneralDebtServiceNonmajorGovernmental FundsTotal Total Nonspendable 223,615-0-23,017246,632Restricted for:Debt Payment -0-328,550-0-328,550Food Service Operations -0--0-5,5035,503Community Education -0--0-3,0563,056School Readiness -0--0-734734Early Childhood -0--0-4,3134,313Community Service Operations-0--0-1,4921,492 Staff Development 33,118-0--0-33,118Deferred Maintenance 1-0--0-1Operating Capital344,063-0--0-344,063Gifted and Talented6,016-0--0-6,016Safe Schools1,395-0--0-1,395Severance & Retirement160,173-0--0-160,173 Total Restricted544,766328,55015,098888,414Committed to: Separation478,322478,322Assigned to: Day Treatment105,582-0--0-105,582 Music Department 66,020-0--0-66,020Total Assigned171,602-0--0-171,602Unassigned (Deficit)614,619-0--0-614,619Total Fund Balances$ 2,032,924$ 328,550$ 38,115$2,399,589

The property tax shift is an accounting entry that takes a portion of the school district's property tax revenue and moves it forward one fiscal year, i.e., taxes that would otherwise be revenue for fiscal year 2013 are shifted into fiscal year 2012. This shift replaces state aid that will be repaid at some future date. The property tax shift requirement is in Minnesota Statutes, section 123B.75, subdivision 5.

POST EMPLOYMENT SEVERANCEBENEFITSThis is the unfunded portion that eventually needs to be covered.

Early Retirement Incentive (Severance) Plan Post-Employment Insurance Benefits Actuarial Valuation DateActuarial Value of Assets (a)Actuarial Accrued Liability (AAL) (a)Unfunded AAL (b-a)Funded Ratio (a/b)Covered Payroll (c)UAAL as a Percentage of Covered Payroll (b-a)/c)7/1/11$ 1,241,468$ 2,507,154$ 1,265,68649.5%$ 6,994,97518.1%7/1/09$ 1,422,070$ 1,725,533$ 303,463 82.4%$ 7,153,122 4.2%1/1/07$ -0-$ 1,646,049$ 1,646,049 0.0%$ 7,298,26122.5% 2012

$638,495 2011

$682,579The District has reserved fund balance to cover this liability.Prior Year Follow upCorrectedDeficiency 2011-1 Food Service Account ExpensesDeficiency 2011-2 Financial Oversight & Monitoring ControlsDeficiency 2011-4 - Fiscal Agent Responsibilities

Work in Progress Deficiency 2011-3 Period End Financial Reporting Process

Require separate reporting on our consideration of Internal Controls and Compliance.

Control deficiency is 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 financial misstatements on a timely basis.

Material Weakness Reasonable possibility that a material misstatement of the financial statements will not be prevented or detected by the Districts internal controls.

Significant DeficiencyDeficiency, 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." Cookies in the cookie jarCURRENT YEAR SUMMARY

Internal Controls Reporting Pages 65-66

MATERIAL WEAKNESSES Deficiency 2012-1 Ineligible students were being provided services by Title I teachers. Page 70

Deficiency 2012-2- Controls did not detect that ineligible students were receiving free and reduced meals & some students should have received free and reduced benefits, but didnt. Page 71SIGNIFICANT DEFICIENCIESDeficiency 2012-3 Documenting Time Charged to Federal Programs Page 72Deficiency 2012-4 Period End Financial Reporting Page 73STATE COMPLIANCE Page 69

No compliance exceptions noted

Summary (Continued)Federal Awards Program Audit Internal Control Deficiency Deficiency 2011-1-Food Service Account Expenses Page 70

2012 Conclusions

The District needs to continue to closely monitor its revenues & expenditures related to Day Treatment & Special Ed. Once payments for prior year are finalized the budget should be reviewed.The District needs to monitor its rising unfunded OPEB actuarial accrued liability and consider how it is going to fund this deficit.The District needs to continue to pay down debt.

SAS 114 LetterThanks to the District Staff for cooperation during the audit.No Disagreements with Management

Under GASB 45. OPEB plans are required to have an actuarial valuation done at a minimum of every two years.

Desautels Bartosiewski & Associates CPAs