june 30, 2011 - edl€¦ · june 30, 2011 financial section ... details of revenue sources and...

ANNUAL FINANCIAL REPORT

JUNE 30, 2011

WALNUT VALLEY UNIFIED SCHOOL DISTRICT

TABLE OF CONTENTSJUNE 30, 2011

FINANCIAL SECTIONIndependent Auditors' Report 2Management's Discussion and Analysis 4Basic Financial Statements

Government-Wide Financial StatementsStatement of Net Assets 16Statement of Activities 17

Fund Financial StatementsGovernmental Funds - Balance Sheet 18Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Assets 19Governmental Funds - Statement of Revenues, Expenditures, and Changes in Fund Balances 20Reconciliation of the Governmental Funds Statement of Revenues, Expenditures, andChanges in Fund Balances to the Statement of Activities 21Proprietary Funds - Statement of Net Assets 23Proprietary Funds - Statement of Revenues, Expenses, and Changes in Fund Net Assets 24Proprietary Funds - Statement of Cash Flows 25Fiduciary Funds - Statement of Net Assets 26

Notes to Financial Statements 27

REQUIRED SUPPLEMENTARY INFORMATIONGeneral Fund - Budgetary Comparison Schedule 64Schedule of Other Postemployment Benefits (OPEB) Funding Progress 65

SUPPLEMENTARY INFORMATIONSchedule of Expenditures of Federal Awards 67Local Education Agency Organization Structure 69Schedule of Average Daily Attendance 70Schedule of Instructional Time 71Reconciliation of Annual Financial and Budget Report With Audited Financial Statements 72Schedule of Financial Trends and Analysis 73Combining Statements - Non-Major Governmental Funds

Combining Balance Sheet 74Combining Statement of Revenues, Expenditures, and Changes in Fund Balances 75

General Fund Selected Financial Information 76Cafeteria Fund Selected Financial Information 77Note to Supplementary Information 78

INDEPENDENT AUDITORS' REPORTSReport on Internal Control Over Financial Reporting and on Compliance and Other MattersBased on an Audit of Financial Statements Performed in Accordance With GovernmentAuditing Standards 81Report on Compliance With Requirements That Could Have a Direct and Material Effect onEach Major Program and on Internal Control Over Compliance in Accordance With OMBCircular A-133 83Report on State Compliance 85


TABLE OF CONTENTSJUNE 30, 2011

SCHEDULE OF FINDINGS AND QUESTIONED COSTSSummary of Auditors' Results 88Financial Statement Findings 89Federal Awards Findings and Questioned Costs 90State Awards Findings and Questioned Costs 91Summary Schedule of Prior Audit Findings 92Management Letter 93

1

FINANCIAL SECTION


MANAGEMENT'S DISCUSSION AND ANALYSISJUNE 30, 2011

6

Figure 2 indicates the percentage of actual attendance of the District's students, which is very high for districtssuch as Walnut Valley. It is important to maintain or improve upon this high level of student attendance becausethe District generates revenue based on ADA and not on enrollment. The District's success in achieving such ahigh rate of attendance is attributable to the efforts of parents, students, and District staff.

Figure 2. Student Attendance Rates

Percentage

of 2nd Month

Year K-12 Enrollment

2011-2012* 14,371 97.6%

2010-2011 14,371 97.6%

2009-2010 14,425 98.0%

2008-2009 14,683 98.1%

2007-2008 14,955 98.2%

2006-2007 15,205 98.2%

2005-2006 15,170 97.8%

2004-2005 15,131 97.8%

2003-2004 15,114 97.9%

2002-2003 15,006 97.9%

2001-2002 14,688 97.9%

2000-2001 14,515 97.7%

1999-2000 14,310 97.7%

Average Daily Attendance (ADA)

*Projected



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School districts have traditionally placed great importance on the accurate projection of student enrollment for theensuing budget year, due to the broad range of funding and programs impacted by this number. These impactsrange from the very basic funding for California school districts which calculates the number of days attended bythe enrolled students times a unique "base revenue limit amount" (in 2008-2009 unified school districts' baserevenue limit ranged between $5,767 and $7,138 per ADA, the District's revenue limit was at the bottom of thisrange at $5,768 for 2007-2008), to how much a particular special program will receive, to the amount of one-timemonies a District may receive. Increased ADA is intended to generate additional dollars to help offset normalinflationary costs of operating the business of education, and related growth costs for the additional enrollment.

Enrollment/ADA Trend

ADA

13,600

13,800

14,000

14,200

14,400

14,600

14,800

15,000

15,200

15,400

15,600

20

11

-20

12

*

20

10

-20

11

20

09

-20

10

20

08

-20

09

20

07

-20

08

20

06

-20

07

20

05

-20

06

20

04

-20

05

20

03

-20

04

20

02

-20

03

20

01

-20

02

20

00

-20

01

19

99

-20

00

School Year

ADA Enrollment



8

REPORTING THE DISTRICT AS A WHOLE

The Statement of Net Assets and Statement of Activities

One of the most important questions asked about the District's finances is, "Is the District better off or worse offas a result of the year's activities?" The Statement of Net Assets and the Statement of Activities report informationabout the District as a whole and about its activities in a manner that helps to answer this question. Thesestatements include all assets and liabilities using the accrual basis of accounting similar to an accounting methodused by private sector corporations. All of the current year's revenues and expenses are taken into considerationregardless of when cash is received or paid.

These two statements report the District's net assets and changes in them. The change in net assets provides thereader a tool to assist in determining whether the District's financial health is improving or deteriorating. Readerswill need to consider both financial as well as other non-financial factors in arriving at their conclusions regardingthe overall health of the District.

Financial factors include the status of negotiations with the District's two large employee unions.

Non-financial factors include: the property tax base, current property tax laws, student enrollment growth, andfacility conditions.

The following data is a summary of the Statement of Net Assets (Table 1) and Statement of Activities (Table 2):

Table 1

2011 2010 2011 2010 2011 2010

AssetsCurrent and other assets 86,837,462$ 62,020,991$ 1,688,497$ 1,351,470$ 88,525,959$ 63,372,461$Capital assets 152,960,308 153,073,630 - - 152,960,308 153,073,630

Total Assets 239,797,770 215,094,621 1,688,497 1,351,470 241,486,267 216,446,091

LiabilitiesCurrent liabilities 21,242,491 21,434,613 - - 21,242,491 21,434,613Long-term obligations 152,053,519 124,057,114 - - 152,053,519 124,057,114

Total Liabilities 173,296,010 145,491,727 - - 173,296,010 145,491,727

Net AssetsInvested in capital assets,net of related debt 47,076,325 48,136,550 - - 47,076,325 48,136,550Restricted 9,051,019 15,579,390 - - 9,051,019 15,579,390

Unrestricted 10,374,416 5,886,954 1,688,497 1,351,470 12,062,913 7,238,424Total Net Assets 66,501,760$ 69,602,894$ 1,688,497$ 1,351,470$ 68,190,257$ 70,954,364$

Governmental Activities Business-Type Activities Total District Activities

The $10,374,416 million in unrestricted net assets of governmental activities represents the accumulated results ofall past years' operations.



9

Table 2

2011 2010 2011 2010 2011 2010

RevenuesProgram revenues:

Charges for services 3,899,912$ 3,804,754$ 901,444$ 724,299$ 4,801,356$ 4,529,053$Operating grants andcontributions 20,461,882 18,503,570 - - 20,461,882 18,503,570

General revenues:State revenue limit sources 74,126,791 71,361,444 - - 74,126,791 71,361,444Property taxes 26,333,397 26,149,635 - - 26,333,397 26,149,635Other general revenues 3,872,827 4,596,706 5,079 10,075 3,877,906 4,606,781

Total Revenues 128,694,809 124,416,109 906,523 734,374 129,601,332 125,150,483

ExpensesInstruction related 87,857,426 85,109,464 - - 87,857,426 85,109,464Student support services 13,235,195 13,678,789 - - 13,235,195 13,678,789

Administration 4,473,002 5,758,917 - - 4,473,002 5,758,917Maintenance and operations 12,224,327 12,245,985 - - 12,224,327 12,245,985Other 14,005,993 13,765,202 569,496 434,777 14,575,489 14,199,979

Total Expenses 131,795,943 130,558,357 569,496 434,777 132,365,439 130,993,134

Change in Net Assets (3,101,134)$ (6,142,248)$ 337,027$ 299,597$ (2,764,107)$ (5,842,651)$

Governmental Activities Business-Type Activities Total District Activities

As shown in the summary, the overall financial position and results of operations has improved during the year.

Fund Financial Statements

The fund financial statements provide detailed information about the most significant funds. Some funds arerequired to be established by State statute, while many other funds are established by the District to help managemoney for particular purposes and compliance with various grant provisions. The District's three types of funds;governmental, proprietary, and fiduciary use different accounting approaches, as further described in the notes tothe financial statements.

Governmental Funds

Most of the District's activities are reported in governmental funds, which focus on how money flows into and outof those funds, and the balances left at year-end available for spending in future periods. These funds are reportedusing an accounting method called modified accrual accounting. Governmental fund statements provide adetailed short-term view of the District's general government operations and the basic services it provides.Governmental fund information helps the reader determine whether there are more or fewer financial resourcesavailable to spend in the near future to finance the District's programs. The relationship (or differences) betweengovernmental activities (reported in the Statement of Net Assets and the Statement of Activities) and governmentalfunds is reconciled in the financial statements.



10

Governmental funds include the major funds of the District such as General Fund, Building Fund, and CountySchool Facilities Fund. The other governmental funds include Debt Service Funds, Special Revenue Funds, andCapital Project Funds. Details of revenue sources and expenditures for governmental funds are shown inFigures 3 and 4.

Figure 3. Revenue Sources for Governmental Funds

Sources of Revenue 2011 2010

Revenue Limit (State) 76,446,812$ 74,784,172$

Federal Revenue 10,298,151 7,258,681

Other State Revenue 18,640,402 23,821,806

Other Local Revenue 23,308,445 18,488,645

Other Financing Sources 48,537,849 1,417,492

Total 177,231,659$ 125,770,796$

Figure 4. Expenditures for Governmental Funds

Expenditures 2011 2010

Certificated Salaries 55,344,837$ 57,263,024$

Classified Salaries 16,839,286 17,610,192

Employee Benefits 26,883,279 25,567,734

Books and Supplies 5,503,275 5,346,706

Services and Other Operating Expenditures 8,553,816 7,972,953

Capital Outlay 5,028,191 9,729,240

Interfund Transfers and Other Financing Uses 16,048,823 11,150,588

Tuition and Transfers 3,514,259 4,559,501

Total 137,715,766$ 139,199,938$

Proprietary Funds

Proprietary funds use the full accrual basis of accounting. The District's proprietary fund is the Summer SchoolFund and is used to account for summer school enrichment programs.

Fiduciary Funds

Fiduciary funds are used to account for resources held for the benefit of parties outside the governmental entity.Fiduciary funds are not reflected in the government-wide financial statement because the resources of those fundsare not available to support the District's own programs. The District uses an agency fund to account forresources held for student activities and groups. These funds include Student Body Funds.



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

Notes to Financial Statements

The notes provide additional information that is essential for a full understanding of the data provided in thegovernment-wide and fund financial statements.

FIXED ASSETS AND DEBT ADMINISTRATION

The Government Accounting Standards Board (GASB) now requires that governmental agencies account forfixed assets in the same way that private and public corporations do. This involves recognizing the value of theDistrict's fixed assets, such as, building, land, and equipment in the fixed assets section of the balance sheet.Districts must now track annual and accumulated depreciation on major assets.

The District reports three major categories of fixed assets; sites and improvements, building and improvements,equipment and work in progress. As of June 30, 2011 and 2010, the District recorded fixed assets of$222,831,189 and $218,210,906, respectively, with a total accumulated depreciation of $69,870,881 and$65,137,276, respectively, for a net book value of $152,960,308 and $153,073,630, respectively.

The District's debt rating continues to be AAA under the Standard and Poor's Investors Service. The currentoutstanding balance on all general obligation bonds as of June 30, 2011 and 2010, was $143,116,804 and$118,577,660, respectively.

Table 3

2011 2010

Land and construction in process 33,549,160$ 31,081,322$

Buildings and improvements (Net of depreciation) 116,542,842 118,700,970

Equipment (Net of depreciation) 2,868,306 3,291,338

Total 152,960,308$ 153,073,630$

Governmental Activities

This year's furniture and equipment additions of $7,133,886 included construction and classroom equipment.



12

Several capital projects are planned for the 2011-2012 year from Bond Measures S and Y including:

Castle Rock Elementary School Core Projects

Chaparral Middle School Co-Curricular Projects

Chaparral Middle School Modernization

Chaparral Middle School Quad Classrooms

CJ Morris Elementary General Construction

CJ Morris Elementary Modernization

Collegewood Elementary Core Projects

Collegewood Elementary General Construction

Diamond Bar High School Co-Curricular Projects

Diamond Bar High School General Construction

Diamond Bar High School Modernization

Diamond Bar High School New CR Building

Diamond Bar High School Pool

Evergreen Elementary Core Projects

Evergreen Elementary General Construction

Maple Hill Elementary School General Projects

Maple Hill Elementary School Modernization

Ron Hockwalt Academy Modernization

Suzanne Middle School Co-Curricular Projects

Suzanne Middle School Core Projects

Suzanne Middle School General Construction

Vejar Core Projects

Walnut Elementary School Core Projects

Walnut High School Co-Curricular

Walnut High School Core Projects

Westhoff Core Projects

We anticipate capital additions to be approximately $20 million for the 2011-2012 year. More detailedinformation about our capital assets is presented in Note 4 of the financial statements.



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Long-Term Obligations

At the end of this year, the District had $152,053,519 in outstanding debt versus $124,057,114 last year, anincrease of $26,201,940. Those debts consisted of:

Table 4

2011 2010

General obligation bonds (Financed with property taxes) 143,116,804$ 118,577,660$

Premium on issuance 1,794,465 -

Capitalized lease obligations 1,761,555 2,398,308

Compensated absences payable 1,400,605 1,265,777

Supplemental employee retirement plan 2,504,247 908,558

OPEB obligation - net 1,475,843 906,811

Total 152,053,519$ 124,057,114$


Detailed information regarding these obligations is presented in Note 8 of the financial statements.

GENERAL FUND AND BUDGET INFORMATION

The District's budget is prepared in accordance with California law and is based on modified accrual basis ofaccounting. This type of accounting recognizes receivables as well as payables. The most significant budgetedfund is the General Fund.

The District begins the budget process in January each year, to be completed by June 30. After updating theforecast for changes in revenue and expenditure assumptions, the operating budget begins at the school level.Each school in the District receives a per-pupil allocation. The departments receive an allocation equal to that ofthe prior year. The site and department budgets are reviewed periodically to ensure that management becomesaware of any significant variations during the year.

General Fund Budget Variations

In June each year, a Budget effective July 1 through June 30 is adopted by the District's Board of Trustees. TheBudget is based on year-end projections from the previous year's budget, as well as forecasts from the Governor'sMay Revise budget. As the school year progresses, the Budget is revised and updated, with numerous financialreports outlining the revisions made available to the public. Finally, in August of the following year, the booksare closed for the July 1 - June 30 fiscal year, and the results are audited, yielding actual final numbers.

There are several reasons for Budget revisions. Most notable are salary increases granted by the Board ofTrustees for District employees, for the original budget does not include salary increases. Also, any changes inthe number of staff and/or staff utilization of health and welfare benefits that vary from the original projectionswould also yield budget revisions. New grants and entitlements, as well as changes in levels of funding, alsogenerate budget revisions.



14

Finally, the Federal and State budget issues have an impact on the District's budget. As revenues from these twosources increase and decrease, so do District revenues, since 97% of District's General Fund revenues come fromState and Federal revenue streams.

The final actual numbers of the General Fund that will be certified by January 30 of the next year will reflect theculmination of all these factors.

The net difference in fund balances between the final budget and the activity budget was a decrease of $2,475,763and may be summarized as follows:

Increase in total revenues and other financing sources 2,840,942$

Increase in total expenditures and other financing uses (5,316,705)

Decrease in fund balance (2,475,763)$

FOR THE FUTURE

Walnut Valley Unified School District is financially sound, but will face a number of fiscal challenges due to itsdependence, as are all Districts in the State, on State revenues that are driven by the State's economy. TheDistrict's fiscal team continuously monitors information, data and forecasts of the State's economy, revenue, andbudgetary proposals. District planners use this information to make decisions that maintain the financial stabilityof the District.

2011-2012 budget assumptions were:

The Average Daily Attendance (ADA) is projected to be 14,532, including County Special Education. The Cost of Living Adjustment (COLA) is projected to be (2.24%) with deficit factors of 19,754% with

$330 per ADA additional reduction. Lottery revenue is projected at $121 per student. Salary and statutory benefit accounts reflect the increased level resulting from the calculated step and

column increase after attrition of 1.5% or $1,031,416 for certificated employees and 1.5% or $245,343 forclassified employees.

Continue class-size reduction at four grades (K-3) at $1,071 per student less 30% penalty. No reduction in benefit levels, budgeted for inflation at 14% over current rates. Early retirement plan implemented with anticipated savings of $420,000. Budgets for all other funds prepared in accordance with Governor's May Revise budget. Unrestricted resources have been transferred to cover projected encroachment amount of $6,446,780. Routine Restricted Maintenance Account budgeted at 2.62% of total General Fund Expenditures.

Due to the State budget crisis, the District is forced to look at budget reductions. The District has conductedindependent studies of the transportation department, demographics and Special Education. The District isexploring additional methods to help reduce costs and balance the budget. We are continuing to look at the entirebudget for possible reductions.



15

The following chart represents the "All Funds Expenditure Budget" as of the budget adopted on June 29, 2011:

General Fund79.6%

Child Development1.4%

Cafeteria3.0%

DeferredMaintenance

0.6%

Building15.0%

Other Funds0.2%

Capital Facilities0.1%

2011-2012Adopted Budget

General Fund Child Development Cafeteria

Deferred Maint. Building Other Funds

Capital Facilities

CONTACTING THE DISTRICT'S FINANCIAL MANAGEMENT

This financial report is designed to provide our citizens, taxpayers, investors and creditors with a generaloverview of the School District's finances and to show the District's accountability for the money it receives. Ifyou have questions about this report, or need additional financial information, contact Mr. Jack LeBrun, AssistantSuperintendent, Business Services, 880 South Lemon Avenue, Walnut, CA 91789.


STATEMENT OF NET ASSETSJUNE 30, 2011

The accompanying notes are an integral part of these financial statements.

16

Governmental Business-Type

Activities Activities Total

ASSETS

Deposits and investments 60,496,709$ 1,688,497$ 62,185,206$

Receivables 24,426,394 - 24,426,394

Prepaid expenditures 432,934 - 432,934

Deferred costs on issuance 716,308 - 716,308

Stores inventories 329,395 - 329,395

Other current assets 435,722 - 435,722

Capital Assets

Land and construction in process 33,549,160 - 33,549,160

Other capital assets 189,282,029 - 189,282,029

Less: Accumulated depreciation (69,870,881) - (69,870,881)

Total Capital Assets 152,960,308 - 152,960,308

Total Assets 239,797,770 1,688,497 241,486,267

LIABILITIES

Accounts payable 11,582,628 - 11,582,628

Interest payable 1,923,578 - 1,923,578

Deferred revenue 1,736,285 - 1,736,285

Current loans 6,000,000 - 6,000,000

Long-Term Obligations

Current portion of long-term obligations 7,630,278 - 7,630,278

Noncurrent portion of long-term obligations 144,423,241 - 144,423,241

Total Long-Term Obligations 152,053,519 - 152,053,519

Total Liabilities 173,296,010 - 173,296,010

NET ASSETS

Invested in capital assets, net of related debt 47,076,325 - 47,076,325

Restricted for:

Debt service 6,079,326 - 6,079,326

Capital projects 1,264,212 - 1,264,212

Educational programs 1,103,569 - 1,103,569

Other activities 603,912 - 603,912

Unrestricted 10,374,416 1,688,497 12,062,913

Total Net Assets 66,501,760$ 1,688,497$ 68,190,257$


STATEMENT OF ACTIVITIESFOR THE YEAR ENDED JUNE 30, 2011


17

Charges for OperatingServices and Grants and

Functions/Programs Expenses Sales ContributionsGovernmental Activities:Instruction 76,407,033$ 284,720$ 13,249,184$Instruction-related activities:

Supervision of instruction 3,267,679 2,181 1,128,114Instructional library, media and technology 1,278,338 13,595 190,811School site administration 6,904,376 1,601 205,975

Pupil services:Home-to-school transportation 1,681,360 317,621 894,033Food services 4,164,782 2,987,096 1,243,219All other pupil services 7,389,053 90,228 1,741,342

Administration:Data processing 535,596 - -All other administration 3,937,406 124,477 514,119

Plant services 12,224,327 48,867 443,617

Ancillary services 449,580 3,066 9,274Community services 1,873,110 26,460 98,431Enterprise services 6,082 - -

Interest on long-term obligations 8,162,963 - -Other outgo 3,514,258 - 743,763

Total Governmental Activities 131,795,943 3,899,912 20,461,882

Business-Type Activities:Summer school 569,496 901,444 -

Total School District 132,365,439$ 4,801,356$ 20,461,882$

General revenues and subventions:Property taxes, levied for general purposesProperty taxes, levied for debt service

Taxes levied for other specific purposesFederal and State aid not restricted to specific purposesInterest and investment earningsMiscellaneous

Subtotal, General RevenuesChange in Net Assets

Net Assets - BeginningNet Assets - Ending

Program Revenues

17

Governmental Business-Type Total

Activities Activities School District

(62,873,129)$ -$ (62,873,129)$

(2,137,384) - (2,137,384)(1,073,932) - (1,073,932)(6,696,800) - (6,696,800)

(469,706) - (469,706)65,533 - 65,533

(5,557,483) - (5,557,483)

(535,596) - (535,596)(3,298,810) - (3,298,810)

(11,731,843) - (11,731,843)

(437,240) - (437,240)(1,748,219) - (1,748,219)

(6,082) - (6,082)

(8,162,963) - (8,162,963)(2,770,495) - (2,770,495)

(107,434,149) - (107,434,149)

- 331,948 331,948(107,434,149) 331,948 (107,102,201)

16,177,598 - 16,177,59810,155,799 - 10,155,799

88,152 - 88,15274,126,791 - 74,126,791

954,933 5,079 960,0122,829,742 - 2,829,742

104,333,015 5,079 104,338,094(3,101,134) 337,027 (2,764,107)69,602,894 1,351,470 70,954,36466,501,760$ 1,688,497$ 68,190,257$

Changes in Net AssetsNet (Expenses) Revenues and


GOVERNMENTAL FUNDSBALANCE SHEETJUNE 30, 2011


18

Bond Interest

General Building and Redemption

Fund Fund Fund

ASSETS

Deposits and investments 9,415,869$ 37,382,128$ 8,002,904$

Receivables 24,207,784 40,821 -

Due from other funds 197,704 - -

Prepaid expenditures 415,451 - -

Stores inventories 282,043 - -

Other current assets 435,722 - -

Total Assets 34,954,573$ 37,422,949$ 8,002,904$

LIABILITIES AND FUND BALANCES

Liabilities:

Accounts payable 10,992,876$ 141,369$ -$

Due to other funds - - -

Other current liabilities 6,000,000 - -

Deferred revenue 1,726,346 - -

Total Liabilities 18,719,222 141,369 -

Fund Balances:

Nonspendable 732,494 - -

Restricted 1,103,569 37,281,580 8,002,904

Committed - - -

Assigned 11,165,694 - -

Unassigned 3,233,594 - -

Total Fund Balances 16,235,351 37,281,580 8,002,904

Total Liabilities and

Fund Balances 34,954,573$ 37,422,949$ 8,002,904$

18

Non-Major Total

Governmental Governmental

Funds Funds

5,695,808$ 60,496,709$

177,789 24,426,394

- 197,704

17,483 432,934

47,352 329,395

- 435,722

5,938,432$ 86,318,858$

448,383$ 11,582,628$

197,704 197,704

- 6,000,000

9,939 1,736,285

656,026 19,516,617

78,130 810,624

4,659,077 51,047,130

545,199 545,199

- 11,165,694

- 3,233,594

5,282,406 66,802,241

5,938,432$ 86,318,858$


RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEETTO THE STATEMENT OF NET ASSETSJUNE 30, 2011


19

Total Fund Balance - Governmental Funds 66,802,241$

Amounts Reported for Governmental Activities in the Statement

of Net Assets are Different Because:

Capital assets used in governmental activities are not financial resources

and, therefore, are not reported as assets in governmental funds.

The cost of capital assets is: 222,831,189$

Accumulated depreciation is: (69,870,881)

Net Capital Assets 152,960,308

In governmental funds, debt issue costs are recognized as expenditures

in the period they are incurred. In the government-wide financial

statements, debt issue costs are amortized over the life of the debt.

Unamortized debt issue costs included on the

Statement of Net Assets are: 716,308

In governmental funds, unmatured interest on long-term obligations is

recognized in the period when it is due. On the government-wide

financial statements, unmatured interest on long-term obligations is

recognized when it is incurred. (1,923,578)

Long-term obligations at year-end consist of:

General obligation bonds 143,116,804

Compensated absences 1,400,605

Capital lease obligations 1,761,555

Supplemental employee retirement plan 2,504,247

OPEB obligation 1,475,843

Premium on debt 1,794,465

Total Long-Term Obligations (152,053,519)

Total Net Assets - Governmental Activities 66,501,760$


GOVERNMENTAL FUNDSSTATEMENT OF REVENUES, EXPENDITURES ANDCHANGES IN FUND BALANCESFOR THE YEAR ENDED JUNE 30, 2011


20

Bond

Interest and

General Building Redemption

Fund Fund Fund

REVENUESRevenue limit sources 76,446,812$ -$ -$

Federal sources 9,138,802 - -

Other State sources 17,915,264 - 82,668

Other local sources 7,006,594 293,975 10,510,110

Total Revenues 110,507,472 293,975 10,592,778

EXPENDITURESCurrent

Instruction 70,913,880 - -

Instruction-related activities:

Supervision of instruction 3,092,421 - -

Instructional library, media and technology 1,208,813 - -

School site administration 6,413,970 - -

Pupil services:

Home-to-school transportation 1,579,095 - -

Food services 23,751 - -

All other pupil services 7,064,392 - -

Administration:

Data processing 531,127 - -

All other administration 3,310,121 - -

Plant services 11,395,603 - -

Facility acquisition and construction - 4,923,921 -

Ancillary services 421,273 - -

Community services 432,065 - -

Other outgo 3,500,834 - -

Enterprise services 6,082 - -

Debt service

Principal 103,575 13,660,000 5,085,000

Interest and other 157,092 2,088,581 4,738,844

Total Expenditures 110,154,094 20,672,502 9,823,844

Excess (Deficiency) of Revenues Over Expenditures 353,378 (20,378,527) 768,934

Other Financing Sources (Uses)Transfers in 5,290,000 - -

Other sources - 43,247,849 -

Transfers out - (700,000) -

Net Financing Sources (Uses) 5,290,000 42,547,849 -

NET CHANGE IN FUND BALANCES 5,643,378 22,169,322 768,934

Fund Balances - Beginning (Before Restatement) 10,529,931 15,112,258 7,233,970

Restatement 62,042 - -

Fund Balances - Beginning (As Restated) 10,591,973 15,112,258 7,233,970Fund Balances - Ending 16,235,351$ 37,281,580$ 8,002,904$

20

Non-Major Total

Governmental Governmental

Funds Funds

-$ 76,446,812$

1,159,349 10,298,151

642,470 18,640,402

5,497,766 23,308,4457,299,585 128,693,810

196,971 71,110,851

- 3,092,421

- 1,208,813

- 6,413,970

- 1,579,095

4,141,031 4,164,782

- 7,064,392

- 531,127

214,459 3,524,580

329,663 11,725,266

89,009 5,012,930

- 421,273

1,418,204 1,850,269

13,424 3,514,258

- 6,082

533,178 19,381,753

277,324 7,261,841

7,213,263 147,863,703

86,322 (19,169,893)

- 5,290,000

- 43,247,849

(4,590,000) (5,290,000)(4,590,000) 43,247,849

(4,503,678) 24,077,9569,848,126 42,724,285

(62,042) -

9,786,084 42,724,2855,282,406$ 66,802,241$


RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OFREVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCESTO THE STATEMENT OF ACTIVITIESFOR THE YEAR ENDED JUNE 30, 2011


21

Total Net Change in Fund Balances - Governmental Funds 24,077,956$

Amounts Reported for Governmental Activities in the

Statement of Activities are Different Because:

Capital outlays to purchase or build capital assets are reported in

governmental funds as expenditures, however, for governmental

activities, those costs are shown in the Statement of Net Assets and

allocated over their estimated useful lives as annual depreciation

expenses in the Statement of Activities.

This is the amount by which capital outlays exceeds depreciation in

the period.

Capital outlays 4,852,720$

Depreciation expense (4,966,042) (113,322)

In the Statement of Activities, certain operating expenses - compensated

absences (vacations) and special termination benefits (early retirement)

are measured by the amounts earned during the year. In the

governmental funds, however, expenditures for these items are

measured by the amount of financial resources used (essentially, the

amounts actually paid). This year, Supplemental Employee

Retirement Plan payments were $1,595,689 less than amounts earned.

Vacation earned was more than the amounts used by $134,828.(1,730,517)

In governmental funds, proceeds from debt are recognized as Other

Financing Sources. In the government-wide financial statements,

proceeds from debt are reported as increases to liabilities. Amounts

recognized in governmental funds as proceeds from debt, net of issue

premium or discount, were:

General obligation bonds (41,452,385)


RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OFREVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCESTO THE STATEMENT OF ACTIVITIES (Continued)FOR THE YEAR ENDED JUNE 30, 2011


22

Governmental funds report the effect of premiums, discounts, issuance

costs, and the deferred amount on a refunding when the debt is first

issued, whereas the amounts are deferred and amortized in the Statement

of Activities. This amount is the net effect of this related item:

Premium on issuance (1,794,465)$

Cost of issuance 716,308

Combined adjustment (1,078,157)$ -

Repayment of bond principal is an expenditure in the governmental funds,

but it reduces long-term obligations in the Statement of Net Assets and

does not affect the Statement of Activities:

General obligation bonds 18,745,000

Capital lease obligations 636,753

Interest on long-term obligations in the Statement of Activities differs

from the amount reported in the governmental funds because interest

is recorded as an expenditure in the funds when it is due, and thus

requires the use of current financial resources. In the Statement of

Activities, however, interest expense is recognized as the interest

accrues, regardless of when it is due. The additional interest reported

in the Statement of Activities is the result of two factors. First, accrued

interest on the general obligation bonds increased by $214,239 and

second, $1,831,759 of additional accumulated interest was accreted on

the District's "capital appreciation" general obligation bonds.(1,617,430)

In the Statement of Activities, Other Postemployment Benefits (OPEB)

obligation are measured by an actuarially determined Annual Required

Contribution (ARC). In the governmental funds, however, expenditures

for these items are measured by the amount of financial resources used

(essentially, the amounts actually paid). This year, amounts contributed

toward the OPEB obligation were less than the ARC by $569,032. (569,032)

Change in Net Assets of Governmental Activities (3,101,134)$


PROPRIETARY FUNDSSTATEMENT OF NET ASSETSFOR THE YEAR ENDED JUNE 30, 2011


23

Business-Type

Activities

Enterprise

Funds

Summer

School

ASSETS

Current AssetsDeposits and investments 1,688,497$

NET ASSETSUnrestricted 1,688,497$


PROPRIETARY FUNDSSTATEMENT OF REVENUES, EXPENSES AND CHANGESIN FUND NET ASSETSFOR THE YEAR ENDED JUNE 30, 2011


24

Business-Type

Activities

Enterprise

Funds

Summer

School

OPERATING REVENUES

Charges for services 901,444$

OPERATING EXPENSES

Payroll costs 536,484

Professional and contract services 19,807

Supplies and materials 13,205

Total Operating Expenses 569,496

Operating Gain 331,948

NON-OPERATING REVENUES

Interest income 5,079

Change in Net Assets 337,027

Total Net Assets - Beginning 1,351,470

Total Net Assets - Ending 1,688,497$


PROPRIETARY FUNDSSTATEMENT OF CASH FLOWSFOR THE YEAR ENDED JUNE 30, 2011


25

Business-Type

Activities

Enterprise

Funds

Summer

School

CASH FLOWS FROM OPERATING ACTIVITIES

Cash received from user charges 901,444$

Cash payments to employees and suppliers (569,496)

Net Cash Provided by Operating Activities 331,948

CASH FLOWS FROM INVESTING ACTIVITIES

Interest on investments 5,079

Net increase in cash and cash equivalents 337,027

Cash and cash equivalents - Beginning 1,351,470

Cash and cash equivalents - Ending 1,688,497$

RECONCILIATION OF OPERATING GAIN TO NET

CASH PROVIDED BY OPERATING ACTIVITIES:

Operating gain 331,948$

NET CASH PROVIDED BY OPERATING ACTIVITIES 331,948$


FIDUCIARY FUNDSSTATEMENT OF NET ASSETSJUNE 30, 2011


26

Agency

Funds

ASSETS

Deposits and investments 1,669,292$

Receivables 4,333

Stores inventories 46,943

Other current assets 7,946

Total Assets 1,728,514$

LIABILITIES

Due to student groups 1,728,514$


NOTES TO FINANCIAL STATEMENTSJUNE 30, 2011

27

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Financial Reporting Entity

The Walnut Valley Unified School District (the District) was unified in 1970 under the laws of the State ofCalifornia. The District operates under a locally elected five-member Board form of government and provideseducational services to grades K - 12 as mandated by the State and/or Federal agencies. The District operates nineelementary, three middle, two comprehensive high schools, and one continuation high school.

A reporting entity is comprised of the primary government, component units, and other organizations that areincluded to ensure the financial statements are not misleading. The primary government of the District consists ofall funds, departments, boards, and agencies that are not legally separate from the District. For Walnut ValleyUnified School District, this includes general operations, food service, and student related activities of theDistrict.

Component Units

Component units are legally separate organizations for which the District is financially accountable. Componentunits may also include organizations that are fiscally dependent on the District, in that the District approves theirbudget, the issuance of their debt or the levying of their taxes. In addition, component units are other legallyseparate organizations for which the District is not financially accountable but the nature and significance of theorganization's relationship with the District is such that exclusion would cause the District's financial statementsto be misleading or incomplete. For financial reporting purposes, the component unit has a financial andoperational relationship which meets the reporting entity definition criteria of the Governmental AccountingStandards Board (GASB) Statement No. 14, The Financial Reporting Entity, and thus is included in the financialstatements of the District. The component unit, although a legally separate entity, is reported in the financialstatements using the blended presentation method as if it were part of the District's operations because thegoverning board of the component unit is essentially the same as the governing board of the District and becauseits purpose is to finance the construction of facilities to be used for the direct benefit of the District and to operatethe District's summer school program.

The Walnut Valley Financing Corporation's (the Corporation) financial activity is presented in the financialstatements as the Corporation's Capital Projects Fund and as the Summer School Enterprise Fund. Individuallyprepared financial statements are not prepared for Walnut Valley Financing Corporation.

Basis of Presentation - Fund Accounting

The accounting system is organized and operated on a fund basis. A fund is defined as a fiscal and accountingentity with a self-balancing set of accounts, which are segregated for the purpose of carrying on specific activitiesor attaining certain objectives in accordance with special regulations, restrictions, or limitations. The District'sfunds are grouped into three broad fund categories: governmental, proprietary, and fiduciary.



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Governmental Funds Governmental funds are those through which most governmental functions typically arefinanced. Governmental fund reporting focuses on the sources, uses, and balances of current financial resources.Expendable assets are assigned to the various governmental funds according to the purposes for which they mayor must be used. Current liabilities are assigned to the fund from which they will be paid. The differencebetween governmental fund assets and liabilities is reported as fund balance. The following are the District'smajor and non-major governmental funds:

Major Governmental Funds

General Fund The General Fund is the chief operating fund for all districts. It is used to account for and reportall financial resources not accounted for and reported in another fund.

One fund currently defined as special revenue fund in the California State Accounting Manual (CSAM) does notmeet the GASB Statement No. 54 special revenue fund definition. Specifically, Fund 17, Deductible InsuranceFund, is not substantially composed of restricted or committed revenue sources. While this fund is authorized bystatute and will remain open for internal reporting purposes, this fund functions effectively as an extension of theGeneral Fund, and accordingly has been combined with the General Fund for presentation in these auditedfinancial statements.

As a result, the General Fund reflects an increase fund balance of $61,262.

Building Fund The Building Fund exists primarily to account separately for proceeds from the sale of bonds(Education Code Section 15146) and may not be used for any purposes other than those for which the bonds wereissued.

Bond Interest and Redemption Fund The Bond Interest and Redemption Fund is used for the repayment ofbonds issued for a district (Education Code Sections 15125-15262).

Non-Major Governmental Funds

Special Revenue Funds The Special Revenue funds are established to account for the proceeds of specificrevenue sources that are restricted or committed to expenditures for the specific purpose (other than debtservice or capital projects) of the individual funds.

Child Development Fund The Child Development Fund is used to account separately for Federal, State, andlocal revenues to operate child development programs and is to be used only for expenditures for theoperation of child development programs.

Cafeteria Fund The Cafeteria Fund is used to account separately for Federal, State, and local resources tooperate the food service program (Education Code Sections 38090-38093) and is used only for thoseexpenditures authorized by the governing board as necessary for the operation of the District's food serviceprogram (Education Code Sections 38091 and 38100).



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Deferred Maintenance Fund The Deferred Maintenance Fund is used to account separately for Stateapportionments and the District's contributions for deferred maintenance purposes (Education Code Sections17582-17587) and for items of maintenance approved by the State Allocation Board, except for Stateapportionments which, as a result of Senate Bill 4 of the 2009-2010 Third Extraordinary Session (SBX3 4),may be used for any educational purpose.

Capital Project Funds The Capital Project funds are used to account for and report financial resources that arerestricted, committed, or assigned to expenditures for capital outlays, including the acquisition or construction ofcapital facilities and other capital assets (other than those financed by proprietary funds and trust funds).

Capital Facilities Fund The Capital Facilities Fund is used primarily to account separately for moniesreceived from fees levied on developers or other agencies as a condition of approving a development(Education Code Sections 17620-17626). Expenditures are restricted to the purposes specified in GovernmentCode Sections 65970-65981 or to the items specified in agreements with the developer (Government CodeSection 66006).

Special Reserve Fund for Capital Outlay Projects The Special Reserve Fund for Capital Outlay Projectsexists primarily to provide for the accumulation of General Fund monies for capital outlay purposes(Education Code Section 42840).

Corporation Capital Projects Fund The Corporation Capital Projects Funds are used to account for theacquisition and/or construction of all major governmental fixed assets.

Proprietary Funds Proprietary fund reporting focuses on the determination of operating income, changes in netassets, financial position, and cash flows. The District applies all GASB pronouncements, as well as the FinancialAccounting Standards Board pronouncements issued on or before November 30, 1989, unless thosepronouncements conflict with or contradict GASB pronouncements. Proprietary funds are classified as enterpriseor internal service. The District has no internal service funds and the following enterprise fund:

Enterprise Fund Enterprise funds may be used to account for any activity for which a fee is charged to externalusers for goods or services. The District accounts for the financial transactions related to the summer schoolactivities of the District. The following is the Districts' non-major enterprise fund:

Summer School Fund The Summer School Fund is used to account for resources committed to the summerschool enrichment programs.

Fiduciary Funds Fiduciary fund reporting focuses on net assets and changes in net assets. The fiduciary fundcategory is split into four classifications: pension trust funds, investment trust funds, private-purpose trust funds,and agency funds.

Trust funds are used to account for the assets held by the District under a trust agreement for individuals, privateorganizations, or other governments and are therefore, not available to support the District's own programs. TheDistrict has no trust funds. Agency funds are custodial in nature (assets equal liabilities) and do not involvemeasurement of results of operations. Such funds have no equity accounts since all assets are due to individualsor entities at some future time. The District's agency fund accounts for student body activities.



30

Basis of Accounting - Measurement Focus

Government-Wide Financial Statements The government-wide financial statements are prepared using theeconomic resources measurement focus and the accrual basis of accounting. This is the same approach used inthe preparation of the proprietary fund financial statements, but differs from the manner in which governmentalfund financial statements are prepared.

The government-wide Statement of Activities presents a comparison between expenses, both direct and indirect,and program revenues for each segment of the business-type activities of the District and for each governmentalfunction, and excludes fiduciary activity. Direct expenses are those that are specifically associated with a service,program, or department and are therefore, clearly identifiable to a particular function. The District does notallocate indirect expenses to functions in the Statement of Activities, except for depreciation. Program revenuesinclude charges paid by the recipients of the goods or services offered by the programs and grants andcontributions that are restricted to meeting the operational or capital requirements of a particular program.Revenues that are not classified as program revenues are presented as general revenues. The comparison ofprogram revenues and expenses identifies the extent to which each program or business segment is self-financingor draws from the general revenues of the District. Eliminations have been made to minimize the double countingof internal activities.

Net assets should be reported as restricted when constraints placed on net asset use are either externally imposedby creditors (such as through debt covenants), grantors, contributors, or laws or regulations of other governmentsor imposed by law through constitutional provisions or enabling legislation. The net assets restricted for otheractivities result from special revenue funds and the restrictions on their net asset use.

Fund Financial Statements Fund financial statements report detailed information about the District. The focusof governmental fund financial statements is on major funds rather than reporting funds by type. Each major fundis presented in a separate column. Non-major funds are aggregated and presented in a single column.

Governmental Funds All governmental funds are accounted for using a flow of current financial resourcesmeasurement focus and the modified accrual basis of accounting. With this measurement focus, only currentassets and current liabilities generally are included on the balance sheet. The Statement of Revenues,Expenditures, and Changes in Fund Balances reports on the sources (revenues and other financing sources) anduses (expenditures and other financing uses) of current financial resources. This approach differs from themanner in which the governmental activities of the government-wide financial statements are prepared.Governmental fund financial statements therefore include reconciliation with brief explanations to better identifythe relationship between the government-wide financial statements and the statements for the governmental fundson a modified accrual basis of accounting and the current financial resources measurement focus. Under thisbasis, revenues are recognized in the accounting period in which they become measurable and available.Expenditures are recognized in the accounting period in which the fund liability is incurred, if measurable.

Proprietary Funds Proprietary fund reporting focuses on the determination of operating income, changes in netassets, financial position, and cash flows. The District applies all GASB pronouncements, as well as the FinancialAccounting Standards Board pronouncements issued on or before November 30, 1989, unless thosepronouncements conflict with or contradict GASB pronouncements. Proprietary funds are classified as enterpriseor internal service. The District has the following proprietary funds:



31

Enterprise Funds Enterprise funds may be used to account for any activity for which a fee is charged toexternal users for goods or services. The only enterprise fund of the District accounts for the financialtransactions related to the Summer School Program of the District.

Fiduciary Funds Fiduciary funds are accounted for using the flow of economic resources measurement focusand the accrual basis of accounting. Fiduciary funds are excluded from the government-wide financial statementsbecause they do not represent resources of the District.

Revenues - Exchange and Non-Exchange Transactions Revenue resulting from exchange transactions, inwhich each party gives and receives essentially equal value, is recorded on the accrual basis when the exchangetakes place. On a modified accrual basis, revenue is recorded in the fiscal year in which the resources aremeasurable and become available. Available means that the resources will be collected within the current fiscalyear or are expected to be collected soon enough thereafter, to be used to pay liabilities of the current fiscal year.Generally, available is defined as collectible within 90 days. However to achieve comparability of reportingamong California districts and so as not to distort normal revenue patterns, with specific respect to reimbursementgrants and corrections to State-aid apportionments, the California Department of Education has defined availablefor districts as collectible within one year. The following revenue sources are considered to be both measurableand available at fiscal year-end: State apportionments, interest, certain grants, and other local sources.

Non-exchange transactions, in which the District receives value without directly giving equal value in return,include property taxes, certain grants, entitlements, and donations. Revenue from property taxes is recognized inthe fiscal year in which the taxes are received. Revenue from certain grants, entitlements, and donations isrecognized in the fiscal year in which all eligibility requirements have been satisfied. Eligibility requirementsinclude time and purpose requirements. On a modified accrual basis, revenue from non-exchange transactionsmust also be available before it can be recognized.

Deferred Revenue Deferred revenue arises when potential revenue does not meet both the "measurable" and"available" criteria for recognition in the current period or when resources are received by the District prior to theincurrence of qualifying expenditures. In subsequent periods, when both revenue recognition criteria are met, orwhen the District has a legal claim to the resources, the liability for deferred revenue is removed from thecombined balance sheet and revenue is recognized.

Certain grants received that have not met eligibility requirements are recorded as deferred revenue. On thegovernmental fund financial statements, receivables that will not be collected within the available period are alsorecorded as deferred revenue.

Expenses/Expenditures On the accrual basis of accounting, expenses are recognized at the time they areincurred. The measurement focus of governmental fund accounting is on decreases in net financial resources(expenditures) rather than expenses. Expenditures are generally recognized in the accounting period in which therelated fund liability is incurred, if measurable, and typically paid within 90 days. Principal and interest on long-term obligations, which has not matured, are recognized when paid in the governmental funds as expenditures.Allocations of costs, such as depreciation and amortization, are not recognized in the governmental funds but arerecognized in the entity-wide statements.



32

Cash and Cash Equivalents

The District's cash and cash equivalents are considered to be cash on hand, demand deposits, and short-terminvestments with original maturities of three months or less from the date of acquisition. Cash equivalents alsoinclude cash with county treasury balances for purposes of the Statement of Cash Flows.

Investments

Investments held at June 30, 2011, with original maturities greater than one year are stated at fair value. Fairvalue is estimated based on quoted market prices at year-end. All investments not required to be reported at fairvalue are stated at cost or amortized cost. Fair values of investments in county and State investment pools aredetermined by the program sponsor.

Stores Inventories

Inventories consist of expendable food and supplies held for consumption. Inventories are stated at cost, on theweighted average basis. The costs of inventory items are recorded as expenditures in the governmental funds andexpenses in the proprietary funds when used.

Capital Assets and Depreciation

The accounting and reporting treatment applied to the capital assets associated with a fund are determined by itsmeasurement focus. General capital assets are long-lived assets of the District. The District maintains acapitalization threshold of $5,000. The District does not possess any infrastructure. Improvements arecapitalized; the costs of normal maintenance and repairs that do not add to the value of the asset or materiallyextend an asset's life are not capitalized, but are expensed as incurred.

When purchased, such assets are recorded as expenditures in the governmental funds and capitalized in thegovernment-wide financial Statement of Net Assets. The valuation basis for general capital assets are historicalcost, or where historical cost is not available, estimated historical cost based on replacement cost. Donated capitalassets are capitalized at estimated fair market value on the date donated.

Depreciation of capital assets is computed and recorded by the straight-line method. Estimated useful lives of thevarious classes of depreciable capital assets are as follows: buildings, 20 to 50 years; improvements/infrastructure,5 to 50 years; equipment, 2 to 15 years.

Interfund Balances

On fund financial statements, receivables and payables resulting from short-term interfund loans are classified as"interfund receivables/payables". These amounts are eliminated in the governmental column of the Statement ofNet Assets.



33

Compensated Absences

Compensated absences are accrued as a liability as the benefits are earned. The entire compensated absenceliability is reported on the government-wide Statement of Net Assets. For governmental funds, the current portionof unpaid compensated absences is recognized upon the occurrence of relevant events such as employeeresignations and retirements that occur prior to year-end that have not yet been paid with expendable availablefinancial resources. These amounts are reported in the fund from which the employees who have accumulatedleave are paid.

Sick leave is accumulated without limit for each employee at the rate of one day for each month worked. Leavewith pay is provided when employees are absent for health reasons; however, the employees do not gain a vestedright to accumulated sick leave. Employees are never paid for any sick leave balance at termination ofemployment or any other time. Therefore, the value of accumulated sick leave is not recognized as a liability inthe District's financial statements. However, credit for unused sick leave is applicable to all classified schoolmembers who retire after January 1, 1999. At retirement, each member will receive .004 year of service credit foreach day of unused sick leave. Credit for unused sick leave is applicable to all certificated employees and isdetermined by dividing the number of unused sick days by the number of base service days required to completethe last school year, if employed full-time.

Accrued Liabilities and Long-Term Obligations

All payables, accrued liabilities, and long-term obligations are reported in the government-wide and proprietaryfund financial statements. In general, governmental fund payables and accrued liabilities that, once incurred, arepaid in a timely manner and in full from current financial resources are reported as obligations of the funds.

However, claims and judgments, compensated absences, special termination benefits, and contractually requiredpension contributions that will be paid from governmental funds are reported as a liability in the fund financialstatements only to the extent that they are due for payment during the current year. Bonds, capital leases, andlong-term loans are recognized as a liability on the fund financial statements when due.

Fund Balances - Governmental Funds

As of June 30, 2011, fund balances of the governmental funds are classified as follows:

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

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

Committed - amounts that can be used only for specific purposes determined by a formal action of the governingboard. The governing board is the highest level of decision-making authority for the District. Commitments maybe established, modified, or rescinded only through resolutions or other action as approved by the governingboard.



34

Assigned - amounts that do not meet the criteria to be classified as restricted or committed but that are intended tobe used for specific purposes. Under the District's adopted policy, only the governing board or chief businessofficer/assistant superintendent of business services may assign amounts for specific purposes.

Unassigned - all other spendable amounts.

Spending Order Policy

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

Minimum Fund Balance Policy

In fiscal year 2010-2011, the governing board adopted a minimum fund balance policy for the General Fund inorder to protect the District against revenue shortfalls or unpredicted one-time expenditures. The policy requires aReserve for Economic Uncertainties consisting of unassigned amounts equal to no less than three percent ofGeneral Fund expenditures and other financing uses.

Net Assets

Net assets represent the difference between assets and liabilities. Net assets invested in capital assets, net ofrelated debt consists of capital assets, net of accumulated depreciation, reduced by the outstanding balances of anyborrowings used for the acquisition, construction or improvement of those assets. Net assets are reported asrestricted when there are limitations imposed on their use either through the enabling legislation adopted by theDistrict or through external restrictions imposed by creditors, grantors, or laws or regulations of othergovernments. The District applies restricted resources when an expense is incurred for purposes for which bothrestricted and unrestricted net assets are available. The government-wide financial statements report $9,051,019of restricted net assets which is restricted by enabling legislation.

Interfund Activity

Exchange transactions between funds are reported as revenues in the seller funds and as expenditures/expenses inthe purchaser funds. Flows of cash or goods from one fund to another without a requirement for repayment arereported as interfund transfers. Repayments from funds responsible for particular expenditures/expenses to thefunds that initially paid for them are not presented on the financial statements. Interfund transfers are eliminatedin the governmental and business-type activities columns of the Statement of Activities, except for the net residualamounts transferred between governmental and business-type activities.

Estimates

The preparation of the financial statements in conformity with accounting principles generally accepted in theUnited States of America requires management to make estimates and assumptions that affect the amountsreported in the financial statements and accompanying notes. Actual results may differ from those estimates.



35

Budgetary Data

The budgetary process is prescribed by provisions of the California Education Code and requires the governingboard to hold a public hearing and adopt an operating budget no later than July 1 of each year. The Districtgoverning board satisfied these requirements. The adopted budget is subject to amendment throughout the year togive consideration to unanticipated revenue and expenditures primarily resulting from events unknown at the timeof budget adoption with the legal restriction that expenditures cannot exceed appropriations by major objectaccount.

The amounts reported as the original budgeted amounts in the budgetary statements reflect the amounts when theoriginal appropriations were adopted. The amounts reported as the final budgeted amounts in the budgetarystatements reflect the amounts after all budget amendments have been accounted for. For budget purposes, the onbehalf payments have not been included as revenue and expenditures as required under generally acceptedaccounting principles.

Property Tax

Secured property taxes attach as an enforceable lien on property as of January 1. Taxes are payable in twoinstallments on November 1 and February 1 and become delinquent on December 10 and April 10, respectively.Unsecured property taxes are payable in one installment on or before August 31. The County of Los Angelesbills and collects the taxes on behalf of the District. Local property tax revenues are recorded when received.

Changes in Accounting Principles

In March 2009, the GASB issued GASB Statement No. 54, Fund Balance Reporting and Governmental FundType Definitions. The objective of this Statement is to enhance the usefulness of fund balance information byproviding clearer fund balance classifications that can be more consistently applied and by clarifying the existinggovernmental fund type definitions. This Statement establishes fund balance classifications that comprise ahierarchy based primarily on the extent to which a government is bound to observe constraints imposed upon theuse of the resources reported in governmental funds.

The initial distinction that is made in reporting fund balance information is identifying amounts that areconsidered nonspendable, such as fund balance associated with inventories. This Statement also provides foradditional classification as restricted, committed, assigned, and unassigned based on the relative strength of theconstraints that control how specific amounts can be spent.



36

The restricted fund balance category includes amounts that can be spent only for the specific purposes stipulatedby constitution, external resource providers, or through enabling legislation. The committed fund balanceclassification includes amounts that can be used only for the specific purposes determined by a formal action ofthe government's highest level of decision-making authority. Amounts in the assigned fund balance classificationare intended to be used by the government for specific purposes but do not meet the criteria to be classified asrestricted or committed. In governmental funds other than the General Fund, assigned fund balance represents theremaining amount that is not restricted or committed. Unassigned fund balance is the residual classification forthe government's General Fund and includes all spendable amounts not contained in the other classifications. Inother funds, the unassigned classification should be used only to report a deficit balance resulting fromoverspending for specific purposes for which amounts had been restricted, committed, or assigned. Governmentsare required to disclose information about the processes through which constraints are imposed on amounts in thecommitted and assigned classifications.

Governments also are required to classify and report amounts in the appropriate fund balance classifications byapplying their accounting policies that determine whether restricted, committed, assigned, and unassignedamounts are considered to have been spent. Disclosure of the policies in the notes to the financial statements isrequired.

This Statement also provides guidance for classifying stabilization amounts on the face of the balance sheet andrequires disclosure of certain information about stabilization arrangements in the notes to the financial statements.The definitions of the General Fund, special revenue fund type, capital projects fund type, debt service fund type,and permanent fund type are clarified by the provisions in this Statement. Interpretations of certain terms withinthe definition of the special revenue fund type have been provided and, for some governments, thoseinterpretations may affect the activities they choose to report in those funds. The capital projects fund typedefinition also was clarified for better alignment with the needs of preparers and users. Definitions of othergovernmental fund types also have been modified for clarity and consistency.

The District has implemented the provisions of this Statement for the year ended June 30, 2011.

New Accounting Pronouncements

In November 2010, the GASB issued Statement No. 61, The Financial Reporting Entity: Omnibus-an amendmentof GASB Statements No. 14 and No. 34. The objective of this Statement is to improve financial reporting for agovernmental financial reporting entity. The requirements of GASB Statement No. 14, The Financial ReportingEntity, and the related financial reporting requirements of GASB Statement No. 34, Basic Financial Statements-and Management's Discussion and Analysis-for State and Local Governments, were amended to better meet userneeds and to address reporting entity issues that have arisen since the issuance of those Statements.

This Statement modifies certain requirements for inclusion of component units in the financial reporting entity.For organizations that previously were required to be included as component units by meeting the fiscaldependency criterion, a financial benefit or burden relationship also would need to be present between the primarygovernment and that organization for it to be included in the reporting entity as a component unit. Further, fororganizations that do not meet the financial accountability criteria for inclusion as component units but that,nevertheless, should be included because the primary government's management determines that it would bemisleading to exclude them, this Statement clarifies the manner in which that determination should be made andthe types of relationships that generally should be considered in making the determination.



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This Statement also amends the criteria for reporting component units as if they were part of the primarygovernment (that is, blending) in certain circumstances. For component units that currently are blended based onthe "substantively the same governing body" criterion, it additionally requires that (1) the primary governmentand the component unit have a financial benefit or burden relationship or (2) management (below the level of theelected officials) of the primary government have operational responsibility (as defined in paragraph 8a) for theactivities of the component unit. New criteria also are added to require blending of component units whose totaldebt outstanding is expected to be repaid entirely or almost entirely with resources of the primary government.The blending provisions are amended to clarify that funds of a blended component unit have the same financialreporting requirements as a fund of the primary government. Lastly, additional reporting guidance is provided forblending a component unit if the primary government is a business-type activity that uses a single columnpresentation for financial reporting.

This Statement also clarifies the reporting of equity interests in legally separate organizations. It requires aprimary government to report its equity interest in a component unit as an asset. The provisions of this Statementare effective for financial statements for periods beginning after June 15, 2012. Early implementation isencouraged.

NOTE 2 - DEPOSITS AND INVESTMENTS

Summary of Deposits and Investments

Deposits and investments as of June 30, 2011, are classified in the accompanying financial statements as follows:

Governmental activities 60,496,709$

Business-type activities 1,688,497

Fiduciary funds 1,669,292Total Deposits and Investments 63,854,498$

Deposits and investments as of June 30, 2011, consist of the following:

Cash on hand and in banks 6,840,110$

Cash in revolving 48,295

Investments 56,966,093Total Deposits and Investments 63,854,498$

Policies and Practices

The District is authorized under California Government Code to make direct investments in local agency bonds,notes, or warrants within the State; U.S. Treasury instruments; registered State warrants or treasury notes;securities of the U.S. Government, or its agencies; bankers acceptances; commercial paper; certificates of depositplaced with commercial banks and/or savings and loan companies; repurchase or reverse repurchase agreements;medium term corporate notes; shares of beneficial interest issued by diversified management companies,certificates of participation, obligations with first priority security; and collateralized mortgage obligations.



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Investment in County Treasury - The District is considered to be an involuntary participant in an externalinvestment pool as the District is required to deposit all receipts and collections of monies with their CountyTreasurer (Education Code Section 41001). The fair value of the District's investment in the pool is reported inthe accounting financial statements at amounts based upon the District's pro-rata share of the fair value providedby the County Treasurer for the entire portfolio (in relation to the amortized cost of that portfolio). The balanceavailable for withdrawal is based on the accounting records maintained by the County Treasurer, which isrecorded on the amortized cost basis.

General Authorizations

Limitations as they relate to interest rate risk, credit risk, and concentration of credit risk are indicated in theschedules below:

Maximum Maximum Maximum

Authorized Remaining Percentage Investment

Investment Type Maturity of Portfolio In One Issuer

Local Agency Bonds, Notes, Warrants 5 years None None

Registered State Bonds, Notes, Warrants 5 years None None

U.S. Treasury Obligations 5 years None None

U.S. Agency Securities 5 years None None

Banker's Acceptance 180 days 40% 30%

Commercial Paper 270 days 25% 10%

Negotiable Certificates of Deposit 5 years 30% None

Repurchase Agreements 1 year None None

Reverse Repurchase Agreements 92 days 20% of base None

Medium-Term Corporate Notes 5 years 30% None

Mutual Funds N/A 20% 10%

Money Market Mutual Funds N/A 20% 10%

Mortgage Pass-Through Securities 5 years 20% None

County Pooled Investment Funds N/A None None

Local Agency Investment Fund (LAIF) N/A None None

Joint Powers Authority Pools N/A None None

Interest Rate Risk

Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of aninvestment. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value tochanges in market interest rates. The District manages its exposure to interest rate risk by investing in the CountyPool.



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Weighted Average Maturity

The District monitors the interest rate risk inherent in its portfolio by measuring the weighted average maturity ofits portfolio. Information about the weighted average maturity of the District's portfolio is presented in thefollowing schedule:

Weighted Average

Fair Maturity

Investment Type Value In DaysCounty Pool 57,296,493$ 600

Credit Risk

Credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment.This is measured by the assignment of a rating by a nationally recognized statistical rating organization. TheDistrict's investment in the County Pool is not required to be rated, nor has it been rated as of June 30, 2011.

Custodial Credit Risk - Deposits

This is the risk that in the event of a bank failure, the District's deposits may not be returned to it. The Districtdoes not have a policy for custodial credit risk for deposits. However, the California Government Code requiresthat a financial institution secure deposits made by State or local governmental units by pledging securities in anundivided collateral pool held by a depository regulated under State law (unless so waived by the governmentalunit). The market value of the pledged securities in the collateral pool must equal at least 110 percent of the totalamount deposited by the public agency. California law also allows financial institutions to secure public depositsby pledging first trust deed mortgage notes having a value of 150 percent of the secured public deposits and lettersof credit issued by the Federal Home Loan Bank of San Francisco having a value of 105 percent of the secureddeposits. As of June 30, 2011, $2,563,589 of the District's bank balance was exposed to custodial credit riskbecause it was uninsured and collateralized with securities held by the pledging financial institution's trustdepartment or agent, but not in the name of the District.



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NOTE 3 - RECEIVABLES

Receivables at June 30, 2011, consisted of intergovernmental grants, entitlements, interest, and other localsources. All receivables are considered collectible in full.

Non-Major Total

General Building Governmental Governmental Fiduciary

Fund Fund Funds Activities Fund

Federal Government

Categorical aid 3,333,475$ -$ 118,653$ 3,452,128$ -$

State Government

Apportionment 15,412,722 - - 15,412,722 -

Categorical aid 3,719,829 - 8,262 3,728,091 -

Lottery 1,056,934 - - 1,056,934 -

Local Government

Interest 29,266 40,821 19,680 89,767 -

Other Local Sources 655,558 - 31,194 686,752 4,333Total 24,207,784$ 40,821$ 177,789$ 24,426,394$ 4,333$



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NOTE 4 - CAPITAL ASSETS

Capital asset activity for the fiscal year ended June 30, 2011, was as follows:

Balance Balance

July 1, 2010 Additions Deductions June 30, 2011


Capital Assets Not Being Depreciated

Land 9,708,132$ -$ -$ 9,708,132$

Construction in process 21,373,190 4,749,004 2,281,166 23,841,028

Total Capital Assets

Not Being Depreciated 31,081,322 4,749,004 2,281,166 33,549,160

Capital Assets Being Depreciated

Land improvements 9,163,658 1,785,827 - 10,949,485

Buildings and improvements 163,344,021 495,339 - 163,839,360

Furniture and equipment 14,389,468 103,716 - 14,493,184

Total Capital Assets

Being Depreciated 186,897,147 2,384,882 - 189,282,029

Less Accumulated Depreciation

Land improvements 5,043,553 254,046 - 5,297,599

Buildings and improvements 48,763,156 4,185,248 - 52,948,404

Furniture and equipment 11,098,130 526,748 - 11,624,878

Total Accumulated Depreciation 64,904,839 4,966,042 - 69,870,881Governmental Activities Capital Assets, Net 153,073,630$ 2,167,844$ 2,281,166$ 152,960,308$

Depreciation expense was charged as a direct expense to governmental functions as follows:


Instruction 3,298,942$

Supervision of instruction 150,472

Instructional library, media, and technology 69,525

School site administration 281,575

Home-to-school transportation 82,436

All other pupil services 298,459

Data processing 4,469

All other administration 244,826

Plant services 484,190

Ancillary services 28,307

Community services 22,841Total Depreciation Expenses Governmental Activities 4,966,042$



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NOTE 5 - INTERFUND TRANSACTIONS

Interfund Receivables/Payables (Due To/Due From)

Interfund receivable and payable balances arise from interfund transactions and are recorded by all funds affectedin the period in which transactions are executed. Interfund receivable and payable balances at June 30, 2011,between major and non-major governmental funds are as follows:

Non-Major

Governmental

Due To Funds

General Fund 197,704$

The balance of $197,704 is due to the General Fund from the Cafeteria (Non-Major Governmental) Fund

for salaries and benefits.

Due From

Operating Transfers

Interfund transfers for the year ended June 30, 2011, consisted of the following:

Non-Major Total

Building Governmental Governmental

Transfers To Fund Funds ActivitiesGeneral Fund 700,000$ 4,590,000$ 5,290,000$

700,000$

1,790,000

2,800,000

Total 5,290,000$

Transfers From

The Building Fund transferred to the General Fund for the routine repair and maintenance

match.

The Deferred Maintenance (Non-Major Governmental) Fund transferred to the General

Fund to exercise flexibility transfers and to build balance for the 2011-12 budget.

The Special Reserve Fund for Capital Outlay Projects (Non-Major Governmental)

transferred to the General Fund for early retirement incentive program.

Interfund transfers are used to (1) move revenues from the fund that statute or budget requires to collect them tothe fund that statute or budget requires to expend them and (2) use unrestricted revenues collected in the GeneralFund to finance various programs accounted for in other funds in accordance with budgetary authorizations.



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NOTE 6 - ACCOUNTS PAYABLE

Accounts payable at June 30, 2011, consisted of the following:

Non-Major Total

General Building Governmental Governmental

Fund Fund Funds Activities

Vendor payables 2,342,058$ -$ 361,284$ 2,703,342$

Salaries and benefits 8,650,818 - 87,099 8,737,917

Construction - 141,369 - 141,369Total 10,992,876$ 141,369$ 448,383$ 11,582,628$

NOTE 7 - DEFERRED REVENUE

Deferred revenue at June 30, 2011, consisted of the following:

Non-Major Total

General Governmental Governmental

Fund Funds Activities

Federal financial assistance 1,717,627$ -$ 1,717,627$

State categorical aid 8,719 - 8,719

Other local - 9,939 9,939Total 1,726,346$ 9,939$ 1,736,285$



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NOTE 8 - LONG-TERM OBLIGATIONS

Summary

The changes in the District's long-term obligations during the year consisted of the following:

Additions/Balance Issuance/ Balance Due in

July 1, 2010 Accretion Deductions June 30, 2011 One YearGovernmental Activities

General obligation bonds 118,577,660$ 43,284,144$ 18,745,000$ 143,116,804$ 6,025,000$Premium on issuance - 1,794,465 - 1,794,465 -Accumulated vacation - net 1,265,777 134,828 - 1,400,605 -Capital leases 2,398,308 - 636,753 1,761,555 638,507Supplemental employee

retirement plan 908,558 2,562,460 966,771 2,504,247 966,771OPEB obligation - net 906,811 991,012 421,980 1,475,843 -

124,057,114$ 48,766,909$ 20,770,504$ 152,053,519$ 7,630,278$

Bonded Debt

Payments on the General Obligation Bonds are made from the Bond Interest and Redemption Fund.

Payments for Accumulated Vacation are typically liquidated in the fund in which the employee worked.

Payments on the Capital Leases are made from the General Fund, the Child Development Fund, the DeferredMaintenance Fund, the Capital Facilities Fund, and the Special Reserve Fund for Capital Outlay Projects.

Payments on the Supplemental Employee Retirement Plan are made from the General Fund.

Payments for OPEB obligation are made from the General Fund.



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General Obligation Bonds

The outstanding general obligation bonded debt is as follows:

Issue/

Maturity Date

Interest

Rate

Original

Issue

Bonds

Outstanding,

July 1, 2010 Issued

Capital

Appreciation Redeemed

Bonds

Outstanding,

June 30, 2011

1997A Series

1997/2019

5.75%-

7.20% 46,257,718$ 29,107,301$ -$ 247,899$ (3,190,000)$ 26,165,200$

2000A Series

2000/2025 5.50% 7,000,000 230,000 - - (230,000) -

2000C Series

2002/2027

4.90%-

5.125% 8,000,000 6,710,000 - - (6,455,000) 255,000

2000D Series

2003/2034

2.00%-

5.95% 21,998,114 26,926,222 - 933,510 (7,875,000) 19,984,732

2000E Series

2005/2030

4.11%-

5.11% 6,001,837 7,650,859 - 644,133 - 8,294,992

2005 Refunding

2005/2027

3.25%-

5.25% 12,170,000 11,705,000 - - (285,000) 11,420,000

2007A Series S

2008/2033

3.50%-

5.00% 29,600,000 29,095,000 - - (515,000) 28,580,000

2007A Series Y

2008/2033

4.00%-

6.10% 7,200,887 7,153,278 - 6,217 (195,000) 6,964,495

2007B Series S

2011/ 2042

5.25%-

7.10% 19,996,838 - 19,996,838 - - 19,996,838

2007B Series Y

2011/ 2042

1.79%-

6.28% 7,990,547 - 7,990,547 - - 7,990,547

2011 Refunding

2011/2028

2.00%-

5.00% 13,465,000 - 13,465,000 - - 13,465,000

118,577,660$ 41,452,385$ 1,831,759$ (18,745,000)$ 143,116,804$

Election 1997, Series A General Obligation Bonds

During the 1996-1997 fiscal year, the District issued $46,257,718 in Election 1997, Series A, General ObligationBonds. Proceeds from the bonds will be used for the purpose of construction and renovation of various schoolfacilities in the District. At June 30, 2011, the principal balance outstanding was $26,165,200.



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The payments are as follows:

Year Ending Interest to

June 30, Principal Maturity Total

2012 3,540,000$ 1,447,020$ 4,987,020$

2013 3,950,000 1,178,460 5,128,460

2014 4,400,000 878,940 5,278,940

2015 4,920,000 544,680 5,464,680

2016 4,705,000 171,180 4,876,180

2017-2019 1,732,718 6,747,282 8,480,000

Subtotal 23,247,718 10,967,562 34,215,280

Accreted Interest 2,917,482 (2,917,482) -Total 26,165,200$ 8,050,080$ 34,215,280$

Election 2000, Series A General Obligation Bonds

During the 2000-2001 fiscal year, the District issued $7,000,000 in Election 2000, Series A, General ObligationBonds. Proceeds from the bonds will be used for the purpose of construction and renovation of various schoolfacilities in the District. In May 2005, the 2005 General Obligation Refunding Bonds refunded a portion of thebonds. At June 30, 2011, there was no balance outstanding.

Election 2000, Series C General Obligation Bonds

During the 2001-2002 fiscal year, the District issued $8,000,000 in Election 2000, Series C, General ObligationBonds. Proceeds from the bonds will be used for the purpose of construction and renovation of various schoolfacilities in the District. At June 30, 2011, the principal balance outstanding was $255,000.



June 30, Principal Maturity Total2012 255,000$ 315,054$ 570,054$

Election 2000, Series D General Obligation Bonds

During the 2003-2004 fiscal year, the District issued $21,998,114 in Election 2000, Series D, General ObligationBonds. Proceeds from the bonds will be used for the purpose of construction and renovation of various schoolfacilities in the District. At June 30, 2011, the principal balance outstanding was $19,984,732.



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2012 520,000$ 438,868$ 958,868$

2013 625,000 416,488 1,041,488

2014 740,000 388,725 1,128,725

2015 - - -

2016 - - -

2017-2021 679,030 1,180,970 1,860,000

2022-2026 3,396,441 7,768,559 11,165,000

2027-2031 4,634,758 16,040,242 20,675,000

2032-2034 2,717,885 12,557,115 15,275,000

Subtotal 13,313,114 38,790,967 52,104,081


Election 2000, Series E General Obligation Bonds

During the 2004-2005 fiscal year, the District issued $6,001,837 in Election 2000, Series E, General ObligationBonds. Proceeds from the bonds will be used for the purpose of construction and renovation of various schoolfacilities in the District. At June 30, 2011, the principal balance outstanding was $8,294,992.




2012 -$ 29,400$ 29,400$

2013 - 29,400 29,400

2014 - 29,400 29,400

2015 - 29,400 29,400

2016 - 29,400 29,400

2017-2021 2,284,904 1,632,996 3,917,900

2022-2026 2,296,717 3,513,283 5,810,000

2027-2031 1,826,767 3,928,233 5,755,000

Subtotal 6,408,388 9,221,512 15,629,900




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2005 General Obligation Refunding Bonds

During the 2004-2005 fiscal year, the District issued $12,170,000 in 2005 General Obligation Refunding Bonds.Proceeds from the bonds will be used to refund certain maturities of the District's outstanding General ObligationBonds, Election 2000, Series A and the District's outstanding General Obligation Bonds, Election 2000, Series Band to finance the acquisition, construction and modernization of property and school facilities. At June 30, 2011,the principal balance outstanding was $11,420,000.




2012 535,000$ 499,030$ 1,034,030$

2013 555,000 481,643 1,036,643

2014 575,000 459,442 1,034,442

2015 600,000 436,442 1,036,442

2016 620,000 410,943 1,030,943

2017-2021 3,595,000 1,564,125 5,159,125

2022-2026 4,460,000 674,963 5,134,963

2027 480,000 20,400 500,400Total 11,420,000$ 4,546,988$ 15,966,988$

Election 2007, Series A, Measure S General Obligation Bonds

During the 2007-2008 fiscal year, the District issued $29,600,000 in Election 2007, Series A, Measure S GeneralObligation Bonds. Proceeds from the bonds will be used to finance the cost of repair, acquisition, constructionand equipment of classrooms, science labs, and school facilities. At June 30, 2011, the principal balanceoutstanding was $28,580,000.




2012 665,000$ 1,373,288$ 2,038,288$

2013 180,000 1,356,838 1,536,838

2014 255,000 1,349,225 1,604,225

2015 335,000 1,337,225 1,672,225

2016 425,000 1,319,062 1,744,062

2017-2021 3,075,000 6,223,787 9,298,787

2022-2026 5,770,000 5,260,444 11,030,444

2027-2031 10,355,000 3,283,625 13,638,625

2032-2033 7,520,000 466,500 7,986,500Total 28,580,000$ 21,969,994$ 50,549,994$



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Election 2007, Series A, Measure Y General Obligation Bonds

During the 2007-2008 fiscal year, the District issued $7,200,887 in Election 2007, Series A, Measure Y GeneralObligation Bonds. Proceeds from the bonds will be used to finance the costs of the improvement of schoolgrounds, fields and facilities, including gyms, equipment, tennis courts and a swimming pool. At June 30, 2011,the principal balance outstanding was $6,964,495.




2012 235,000$ 320,638$ 555,638$

2013 140,000 313,138 453,138

2014 165,000 307,037 472,037

2015 55,000 302,637 357,637

2016 75,000 300,037 375,037

2017-2021 625,887 1,544,601 2,170,488

2022-2026 1,390,000 1,228,113 2,618,113

2027-2031 2,475,000 777,106 3,252,106

2032-2033 1,790,000 111,250 1,901,250

Subtotal 6,950,887 5,204,557 12,155,444

Accreted Interest 13,608 (13,608) -Total 6,964,495$ 5,190,949$ 12,155,444$

Election 2007, Series B, Measure S General Obligation Bonds

During the 2010-2011 fiscal year, the District issued $19,996,838 in Election 2007, Series B, Measure S GeneralObligation Bonds. Proceeds from the bonds will be used to finance the cost of repair, acquisition, constructionand equipment of classrooms, science labs, and school facilities. At June 30, 2011, the principal balanceoutstanding was $19,996,838.



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2012 -$ -$ -$

2013 - 414,583 414,583

2014 140,832 414,168 555,000

2015 188,012 456,988 645,000

2016 189,021 490,979 680,000

2017-2021 2,285,048 2,789,952 5,075,000

2022-2026 2,800,142 4,438,658 7,238,800

2027-2031 2,384,892 6,679,060 9,063,952

2032-2036 3,527,806 15,364,769 18,892,575

2037-2041 6,591,085 5,602,665 12,193,750

2042 1,890,000 94,500 1,984,500Total 19,996,838$ 36,746,322$ 56,743,160$

Election 2007, Series B, Measure Y General Obligation Bonds

During the 2010-2011 fiscal year, the District issued $7,990,547 in Election 2007, Series B, Measure Y GeneralObligation Bonds. Proceeds from the bonds will be used to finance the costs of the improvement of schoolgrounds, fields and facilities, including gyms, equipment, tennis courts and a swimming pool. At June 30, 2011,the principal balance outstanding was $7,990,547.




2012 -$ -$ -$

2013 - 488,213 488,213

2014 - 441,600 441,600

2015 - 441,600 441,600

2016 - 441,600 441,600

2017-2021 - 2,208,000 2,208,000

2022-2026 - 2,208,000 2,208,000

2027-2031 - 2,208,000 2,208,000

2032-2036 214,260 3,094,249 3,308,509

2037-2041 5,911,287 2,407,300 8,318,587

2042 1,865,000 107,238 1,972,238Total 7,990,547$ 14,045,800$ 22,036,347$



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2011 General Obligation Refunding Bonds

During the 2010-2011 fiscal year, the District issued $13,465,000 in 2011 General Obligation Refunding Bonds.Proceeds from the bonds will be used to refund certain maturities of the District's outstanding General ObligationBonds, Election 2000, Series C and to advance refund a portion of the District's outstanding General ObligationBonds, Election 2000, Series D and to pay the costs associated with the issuance of the Bonds. At June 30, 2011,the principal balance outstanding was $13,465,000.




2012 275,000$ 63,352$ 338,352$

2013 265,000 594,675 859,675

2014 270,000 589,375 859,375

2015 1,130,000 581,275 1,711,275

2016 1,290,000 524,775 1,814,775

2017-2021 7,160,000 1,645,125 8,805,125

2022-2026 2,090,000 556,487 2,646,487

2027-2028 985,000 74,750 1,059,750Total 13,465,000$ 4,629,814$ 18,094,814$

Accumulated Unpaid Employee Vacation

The long-term portion of accumulated unpaid employee vacation for the District at June 30, 2011, amounted to$1,400,605.

Capital Leases

The District has entered into agreements to lease various equipment. Such agreements are, in substance,purchases (capital leases) and are reported as capital lease obligations. The District's liability on lease agreementswith options to purchase is summarized below:

Governmental

Activities

Balance, July 1, 2010 2,825,789$

Payments 753,523Balance, June 30, 2011 2,072,266$



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The capital leases have minimum lease payments as follows:

Energy

Fiscal Year Management Copiers Computers Total

2012 480,230$ 88,713$ 147,201$ 716,144$

2013 128,273 91,258 28,765 248,296

2014 128,273 69,266 - 197,539

2015 128,273 12,382 - 140,655

2016 128,273 - 128,273

2017-2021 641,359 - - 641,359

Total 1,634,681 261,619 175,966 2,072,266

Less: Amount Representing Interest 277,379 24,706 8,626 310,711

1,357,302$ 236,913$ 167,340$ 1,761,555$


Present Value of Minimum Lease

Payments

Leased land, buildings, and equipment under capital leases in capital assets at June 30, 2011, include thefollowing:

Building improvement and equipment 5,723,336$Less: Accumulated depreciation (4,079,306)

1,644,030$

Amortization of leased buildings and equipment under capital assets is included with depreciation expense.

Public Agency Retirement Services (PARS) Supplementary Retirement Plan (SRP)

The District purchased an annuity contract on August 1, 2007, for 36 participants of the Walnut Valley UnifiedSchool District PARS Supplementary Retirement Plan 403(b), effective on or before June 30, 2007. Participantselected to receive payment terms ranging from five years to lifetime in varying amounts. On November 4, 2009,the District adopted an Addendum for the plan to incorporate additional eligible participants effective on or beforeJune 30, 2010. The District paid $966,771 in retirement incentives during the year ended June 30, 2011, and theliability for future payments as of June 30, 2011, is as follows:

The District is required to make the following payments for supplemental employee retirement:

Fiscal Year Payment

2012 966,771$

2013 512,492

2014 512,492

2015 512,492Total 2,504,247$



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Other Postemployment Benefits (OPEB) Obligation

The District's annual required contribution for the year ended June 30, 2011, was $945,671, and contributionsmade by the District during the year were $365,800. Interest on the net OPEB obligation and adjustments to theannual required contribution were $45,341 and $(56,177), respectively, which resulted in an increase to the netOPEB obligation of $569,032. As of June 30, 2011, the net OPEB obligation was $1,475,843. See Note 11 foradditional information regarding the OPEB obligation and the postemployment benefits plan.

NOTE 9 - TAX AND REVENUE ANTICIPATION NOTES (TRANS)

On March 24, 2011, the District issued $6,000,000 Tax and Revenue Anticipation Notes bearing a yield interestof 0.85 percent and a stated interest rate of 2.00 percent. The notes were issued to supplement cash flows.Interest and principal are due and payable on February 1, 2012. As of June 30, 2011, Tax and RevenueAnticipations Notes totaling $6,000,000 were still outstanding.

Changes in the outstanding liabilities for the Tax and Revenue Anticipation Notes are as follows:

Outstanding Outstanding

Issue Date Rate Maturity Date July 1, 2010 Additions Payments June 30, 2011March 24, 2011 0.85% February 1, 2012 -$ 6,000,000$ -$ 6,000,000$



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NOTE 10 - FUND BALANCES

Fund balances are composed of the following elements:

Bond Interest Non-MajorGeneral Building and Redemption Governmental

Fund Fund Fund Funds TotalNonspendable

Revolving cash 35,000$ -$ -$ 13,295$ 48,295$Stores inventories 282,043 - - 47,352 329,395Prepaid expenditures 415,451 - - 17,483 432,934

Total Nonspendable 732,494 - - 78,130 810,624

RestrictedLegally restricted programs 1,103,569 - - 603,912 1,707,481Capital projects - 37,281,580 4,055,165 41,336,745Debt services - - 8,002,904 - 8,002,904

Total Restricted 1,103,569 37,281,580 8,002,904 4,659,077 51,047,130

CommittedDeferred maintenance program - - - 545,199 545,199

Total Committed - - - 545,199 545,199

AssignedDeclining enrollment 150,000 - - - 150,000Tier III program balances 909,200 - - - 909,200Deductible insurance 61,262 - - - 61,262Other assignments 10,045,232 - - - 10,045,232

Total Assigned 11,165,694 - - - 11,165,694

UnassignedReserve for economic uncertainties 3,233,594 - - - 3,233,594

Total Unassigned 3,233,594 - - - 3,233,594Total 16,235,351$ 37,281,580$ 8,002,904$ 5,282,406$ 66,802,241$

NOTE 11 - POSTEMPLOYMENT HEALTH CARE PLAN AND OTHER POSTEMPLOYMENTBENEFITS (OPEB) OBLIGATION

Plan Description

The Postemployment Benefits Plan (the Plan) is a single-employer defined benefit healthcare plan administeredby the Walnut Valley Unified School District. The Plan provides medical and dental insurance benefits to eligibleretirees and their spouses. Membership of the Plan consists of retirees 1,056 and beneficiaries currently receivingbenefits 131 and active Plan members. Separate financial statements are not prepared for the Plan.



55

Contribution Information

The contribution requirements of plan members and the District are established and may be amended by theDistrict and the Teachers Association (CEA), the local California Service Employees Association (CSEA), andunrepresented groups. The required contribution is based on projected pay-as-you-go financing requirements.For fiscal year 2010-2011, the District contributed $365,800 to the Plan, all of which was used for currentpremiums.

Annual OPEB Cost and Net OPEB Obligation

The District's annual OPEB cost (expense) is calculated based on the annual required contribution of the employer(ARC), an amount actuarially determined in accordance with the parameters of GASB Statement No. 45. TheARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each yearand amortize any unfunded actuarial accrued liabilities (UAAL) (or funding excess) over a period not to exceedthirty years. The following table shows the components of the District's annual OPEB cost for the year, theamount actually contributed to the Plan, and changes in the District's net OPEB obligation to the Plan:

Annual required contribution 945,671$

Interest on net OPEB obligation 45,341

Adjustment to annual required contribution (56,180)

Annual OPEB cost (expense) 934,832

Contributions made (365,800)

Increase in net OPEB obligation 569,032

Net OPEB obligation, beginning of year 906,811Net OPEB obligation, end of year 1,475,843$

Trend Information

Trend information for annual OPEB cost, the percentage of annual OPEB cost contributed to the Plan, and the netOPEB obligation is as follows:

Annual OPEB Actual Employer Percentage Net OPEB

Fiscal Year Cost Contribution Contributed Obligation

2009 730,719$ 336,610$ 46.07% 394,109$

2010 706,291 193,589 27.41% 906,811

2011 934,832 365,800 39.13% 1,475,843



56

Funded Status and Funding Progress

A schedule of funding progress as of the most recent actuarial valuation is as follows:

Actuarial

Accrued

Liability Unfunded UAAL as a

Actuarial (AAL) - AAL Percentage of

Valuation Actuarial Value Unprojected (UAAL) Funded Ratio Covered Covered Payroll

Date of Assets (a) Unit Credit (b) (b - a) (a / b) Payroll (c) ([b - a] / c)

July 1, 2007 -$ 6,523,251$ 6,523,251$ 0% 72,549,019$ 9.0%

July 1, 2010 - 8,767,471 8,767,471 0% 70,097,436 12.5%

Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions aboutthe probability of occurrence of events far into the future. Examples include assumptions about futureemployment, investment returns, mortality, and the healthcare cost trend. Amounts determined regarding thefunded status of the Plan and the annual required contributions of the employer are subject to continual revision asactual results are compared with past expectations and new estimates are made about the future. The schedule offunding progress, presented as required supplementary information following the notes to the financial statements,presents multiyear trend information about whether the actuarial value of plan assets is increasing or decreasingover time relative to the actuarial accrued liabilities for benefits.

Actuarial Methods and Assumptions

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

In the June 30, 2011, actuarial valuation, the unit credit method was used. Currently, the District does not setaside assets in an irrevocable employee benefit trust. The actuarial assumptions included a five percent discountrate based on employer assets, specifically, the long-term expected return on employer investments that are notrestricted for other purposes and are expected to be used to finance benefits payments. Healthcare cost trend ratesranged from an initial ten percent to an ultimate rate of five percent. The UAAL is being amortized at a closedlevel dollar method. The remaining amortization period at June 30, 2011, was 30 years. The actuarial value ofassets was not determined in this actuarial valuation.



57

NOTE 12 - RISK MANAGEMENT

The District is exposed to various risks of loss related to torts; theft, damage and destruction of assets; errors andomissions; injuries to employees; life and health of employees; and natural disasters. The District purchasescommercial insurance for property damage with coverage up to a maximum of $300 million, subject to variouspolicy sublimits generally ranging from $1 million to $50 million and deductibles ranging from $25,000 to$300,000 per occurrence. The District also purchases commercial insurance for general liability claims withcoverage up to $1 million per occurrence and $2 million aggregate, with excess liability coverage over $25million, all subject to various deductibles up to $20,000 per occurrence and per employee policy limit, subject to adeductible of $100,000 per occurrence per claim, up to a maximum of $1.5 million for 2009. Employee healthbenefits are covered by a commercial insurance policy purchased by the District. The District provides healthinsurance benefits to District employees electing to participate in the plan by paying a monthly premium based onthe number of District employees participating in the plan.

Description

The District's risk management activities are recorded in the General Fund. Employee life, health, and disabilityprograms are administered by the General Fund through the purchase of commercial insurance. The Districtparticipates in various public entity risk pools (JPA's) for the workers' compensation programs and purchasesliability coverage through the JPA's. Refer to Note 16 for additional information regarding the JPA's. Excessproperty and liability coverage is obtained through SELF.

For insured programs, there have been no significant reductions in insurance coverage. Settlement amounts havenot exceeded insurance coverage for the current year or the three prior years.

NOTE 13 - EMPLOYEE RETIREMENT SYSTEMS

Qualified employees are covered under multiple-employer retirement plans maintained by agencies of the State ofCalifornia. Certificated employees are members of the California State Teachers' Retirement System (CalSTRS)and classified employees are members of the California Public Employees' Retirement System (CalPERS).

CalSTRS

Plan Description

The District contributes to CalSTRS; a cost-sharing multiple-employer public employee retirement systemdefined benefit pension plan administered by CalSTRS. The plan provides retirement and disability benefits,annual cost-of-living adjustments, and survivor benefits to beneficiaries. Benefit provisions are established byState statutes, as legislatively amended, within the State Teachers' Retirement Law. CalSTRS issues a separatecomprehensive annual financial report that includes financial statements and required supplementary information.Copies of the CalSTRS annual financial report may be obtained from CalSTRS, 7919 Folsom Blvd., Sacramento,California 95826.



58

Funding Policy

Active plan members are required to contribute 8.0 percent of their salary and the District is required to contributean actuarially determined rate. The actuarial methods and assumptions used for determining the rate are thoseadopted by CalSTRS Teachers' Retirement Board. The required employer contribution rate for fiscal year2010-2011 was 8.25 percent of annual payroll. The contribution requirements of the plan members areestablished by State statute. The District's contributions to CalSTRS for the fiscal years ending June 30, 2011,2010, and 2009, were $4,480,875, $4,670,153, and $4,939,101, respectively, and equal 100 percent of therequired contributions for each year.

CalPERS

Plan Description

The District contributes to the School Employer Pool under CalPERS; a cost-sharing multiple-employer publicemployee retirement system defined benefit pension plan administered by CalPERS. The plan providesretirement and disability benefits, annual cost-of-living adjustments, and survivor benefits to plan members andbeneficiaries. Benefit provisions are established by State statutes, as legislatively amended, within the CaliforniaPublic Employees' Retirement Laws. CalPERS issues a separate comprehensive annual financial report thatincludes financial statements and required supplementary information. Copies of the CalPERS' annual financialreport may be obtained from the CalPERS Executive Office, 400 P Street, Sacramento, California 95811.

Funding Policy

Active plan members are required to contribute 7.0 percent of their salary and the District is required to contributean actuarially determined rate. The actuarial methods and assumptions used for determining the rate are thoseadopted by the CalPERS Board of Administration. The required employer contribution rate for fiscal year2010-2011 was 10.707 percent of covered payroll. The contribution requirements of the plan members areestablished by State statute. The District's contributions to CalPERS for the fiscal years ending June 30, 2011,2010, and 2009, were $1,549,554, $1,495,631, and $1,488,975, respectively, and equal 100 percent of therequired contributions for each year.

Tax Deferred Annuity (TDA)/Social Security

As established by Federal law, all public sector employees who are not members of their employer's existingretirement system (CalSTRS or CalPERS) must be covered by social security or an alternative plan. The Districthas elected to use the TDA as its alternative plan. Contributions made by the District and an employee vestimmediately. The District contributes 3.75 percent of an employee's gross earnings. An employee is required tocontribute 3.75 percent of his or her gross earnings to the pension plan.

The District also contributes to the District 403(b) Tax Deferred Annuity Plan (TDA), which is a definedcontribution pension plan. A defined contribution pension plan provides pension benefits in return for servicesrendered, provides an individual account for each participant, and specifies how contributions to the individual'saccount are to be determined instead of specifying the amount of benefits the individual is to receive. Under adefined contribution pension plan, the benefits a participant will receive depend solely on the amount contributedto the participant's account, the returns earned on investments of those contributions, and forfeitures of otherparticipants' benefits that may be allocated to such participant's account.



59

On Behalf Payments

The State of California makes contributions to CalSTRS on behalf of the District. These payments consist ofState General Fund contributions to CalSTRS in the amount of $2,361,564 (4.267 percent of annual payroll).Under accounting principles generally accepted in the United States of America, these amounts are to be reportedas revenues and expenditures. Accordingly, these amounts have been recorded in these financial statements. Onbehalf payments have been excluded from the calculation of available reserves, and have not been included in thebudgeted amounts reported in the General Fund - Budgetary Comparison Schedule.

NOTE 14 - COMMITMENTS AND CONTINGENCIES

Grants

The District received financial assistance from Federal and State agencies in the form of grants. Thedisbursement of funds received under these programs generally requires compliance with terms and conditionsspecified in the grant agreements and are subject to audit by the grantor agencies. Any disallowed claimsresulting from such audits could become a liability of the General Fund or other applicable funds. However, inthe opinion of management, any such disallowed claims will not have a material adverse effect on the overallfinancial position of the District at June 30, 2011.

Litigation

The District is not currently a party to any legal proceedings.



60

Construction Commitments

As of June 30, 2011, the District had the following commitments with respect to the unfinished capital projects:

Remaining

Construction

CAPITAL PROJECTS Commitments

Diamond Bar High School (Mod) 3,088,486$

Diamond Bar High Pool 623,970

Chaparral-Mod 539,418

Walnut High School (3rd 2 Story) 399,905

Maple Hill-Mod 344,457

CJ Morris Core Projects 261,219

Maple Hill Core Projects 224,401

Chaparral Quad Classrooms/Gym Bldg 184,709

Walnut Elem Core Projects 161,000

CJ Morris-Mod 144,127

Diamond Bar High Classroom Bldg (New) 139,486

Ron Hockwalt Academies -Mod 40,899

District Wide Irrigation 37,407

Walnut High Core Projects 24,127

Walnut High Co-Curricular Projects 17,885

Evergreen Core Projects 12,564

Castle Rock Core Projects 11,940

Vejar Core Projects 11,218

Westhoff Core Projects 5,045

Suzanne MS Core Projects 1,080Total 6,273,344$

* Expected date of completion is not yet determined.

NOTE 15 - EXPENDITURES (BUDGET VERSUS ACTUAL)

At June 30, 2011, the following District major fund exceeded the budgeted amount in total as follows:

Expenditures and Other Uses

Budget Actual ExcessGeneral Fund 104,837,389$ 110,154,094$ (5,316,705)$

Actual expenditures include $2,361,524 on behalf payment not required to be budgeted.



61

NOTE 16 - PARTICIPATION IN PUBLIC ENTITY RISK POOLS AND JOINT POWERAUTHORITIES

The District is a member of the Valley Insurance Program (VIP), the Alliance of Schools for CooperativeInsurance Programs (ASCIP), and the East San Gabriel Valley Regional Occupational Program (ESGVROP) jointpowers authorities (JPA's). The relationships between the District, the pools and the JPA's are such that they arenot component units of the District for financial reporting purposes.

These entities have budgeting and financial reporting requirements independent of member units and theirfinancial statements are not presented in these financial statements; however, fund transactions between theentities and the District are included in these statements. Audited financial statements are generally availablefrom the respective entities.

During the year ended June 30, 2011, the District made payments of $1,814,967, $559,541, and $1,179,364 toVIP, ASCIP, and ESGVROP, respectively.

NOTE 17 - FISCAL ISSUES RELATING TO BUDGET REDUCTIONS

The State of California continues to suffer the effects of a recessionary economy. California school districts arereliant on the State of California to appropriate the funding necessary to continue the level of educational servicesexpected by the State constituency. With the implementation of education trailer bill Senate Bill 16 of the2009-2010 Fourth Extraordinary Session (SBX4 16) (Chapter 23, Statutes of 2009), and Assembly Bill 1610(AB 1610) (Chapter 724, Statutes of 2010), approximately 28 percent of current year appropriations have nowbeen deferred to a subsequent period, creating significant cash flow management issues for districts in addition torequiring substantial budget reductions, ultimately impacting the ability of California school districts to meet theirgoals for educational services.

NOTE 18 - RESTATEMENT OF PRIOR YEAR FUND BALANCES

The District's prior year fund balances for the General Fund and for the Non-Major Governmental Funds havebeen restated as of June 30, 2011 to conform to GASB Statement No. 54's definition of governmental funds.Accordingly, the beginning fund balance for Fund 17, Deductible Insurance Fund, as presented in the Non-MajorGovernmental Fund opinion unit, are reported as a restatement to the beginning fund balance of the General Fund.The restatement does not change the total fund balance amounts reported in the District's audited financialstatements.



62

As discussed in the Notes to the basic financial statements, the accompanying financial statements reflect certainchanges required as a result of the implementation of GASB Statement No. 54 for the year ended June 30, 2011.These changes required a restatement to the beginning fund balance of the General Fund and the Non-MajorGovernmental Funds, as discussed in Note 1.

General Fund

Fund Balance - Beginning 10,529,931$

Change in accounting principles to conform to GASB Statement No. 54 62,042Fund Balance - Beginning as Restated 10,591,973$

Non-Major Governmental Funds

Fund Balance - Beginning 9,848,126$

Change in accounting principles to conform to GASB Statement No. 54 (62,042)Fund Balance - Beginning as Restated 9,786,084$

63

REQUIRED SUPPLEMENTARY INFORMATION


GENERAL FUNDBUDGETARY COMPARISON SCHEDULEFOR THE YEAR ENDED JUNE 30, 2011

64

Variances -

Positive(Negative)

Actual FinalOriginal Final (GAAP Basis) to Actual

REVENUESRevenue limit sources 71,816,799$ 76,266,070$ 76,446,812$ 180,742$

Federal sources 5,401,577 8,935,477 9,138,802 203,325Other State sources 18,248,356 18,619,935 17,915,264 (704,671)Other local sources 1,888,287 3,845,048 7,006,594 3,161,546

Total Revenues1

97,355,019 107,666,530 110,507,472 2,840,942

EXPENDITURESCurrent

Certificated salaries 53,031,942 54,774,532 55,344,838 (570,306)Classified salaries 14,273,888 14,440,290 13,708,670 731,620

Employee benefits 23,438,022 23,728,913 25,972,794 (2,243,881)Books and supplies 2,120,472 1,498,723 3,524,448 (2,025,725)Services and operating expenditures 6,296,753 7,148,996 8,067,453 (918,457)Capital outlay 37,178 103,141 116,493 (13,352)

Other outgo 2,789,299 3,016,577 3,293,181 (276,604)Debt service

Principal 109,581 109,581 109,581 -Interest 16,636 16,636 16,636 -

Total Expenditures 1 102,113,771 104,837,389 110,154,094 (5,316,705)Excess (Deficiency) of Revenues Over Expenditures (4,758,752) 2,829,141 353,378 (2,475,763)

OTHER FINANCING SOURCES (USES)Transfers in 3,500,000 5,290,000 5,290,000 -Transfers out (175,000) - - -

Net Financing Sources (Uses) 3,325,000 5,290,000 5,290,000 -

NET CHANGE IN FUND BALANCE (1,433,752) 8,119,141 5,643,378 (2,475,763)

Fund Balance - Beginning 10,529,931 10,529,931 10,529,931 -Fund Balance - Ending 9,096,179$ 18,649,072$ 16,173,309$ (2,475,763)$

Budgeted Amounts

(GAAP Basis)

1On behalf payments of $2,361,564 are included in the actual revenues and expenditures, but have not been included in the budgetedamounts. In addition, due to the consolidation of Fund 67, Deductible Insurance Fund, for reporting purposes into the General Fund,additional revenues and expenditures pertaining to these other funds are included in the Actual (GAAP Basis) revenues and expenditures,however are not included in the original and final General Fund budgets.


SCHEDULE OF OTHER POSTEMPLOYMENT BENEFITS (OPEB) FUNDINGPROGRESSFOR THE YEAR ENDED JUNE 30, 2011

65

Actuarial

Accrued

Liability Unfunded UAAL as a

Actuarial (AAL) - AAL Percentage of

Valuation Actuarial Value Unprojected (UAAL) Funded Ratio Covered Covered Payroll

Date of Assets (a) Unit Credit (b) (b - a) (a / b) Payroll (c) ([b - a] / c)

July 1, 2007 -$ 6,523,251$ 6,523,251$ 0% 72,549,019$ 9.0%

July 1, 2010 - 8,767,471 8,767,471 0% 70,097,436 12.5%

66

SUPPLEMENTARY INFORMATION


See accompanying note to supplementary information.

67

SCHEDULE OF EXPENDITURES OF FEDERAL AWARDSFOR THE YEAR ENDED JUNE 30, 2011

Pass-ThroughEntity

Federal Grantor/Pass-Through CFDA Identifying FederalGrantor/Program or Cluster Title Number Number Expenditures

U.S. DEPARTMENT OF EDUCATIONForeign Language Acquisition - Chinese 84.293A [1] 177,853$Foreign Language Acquisition 84.293B [1] 245,180Elementary and Secondary School Counseling Program 84.215E [1] 284,290Passed through California Department of Education (CDE):

No Child Left Behind Act (NCLB):Title I, Part A Cluster:

Title I, Part A - Basic Grants Low Income and Neglected 84.010 14329 1,329,149ARRA Title I, Part A - Grants Low Income and Neglected 84.389 15005 431,781

Total Title I, Part A Cluster 1,760,930

Title I, Part G: Advanced Placement (AP) Test Fee Reimbursement

Program 84.330 14831 10,214Title II, Part A - Improving Teacher Quality 84.367 14341 468,186Education Technology State Grants Cluster:

Title II, Part D - Enhancing Education Through Technology,

Formula Grants 84.318 14334 5,868ARRA Title II Part D -Enhancing Education Through

Technology, Formula Grants 84.386 15019 19,056Total Education Technology State Grants Cluster 24,924

Title III, Part A - Limited English Proficiency 84.365 10084 163,158Title IV, Part A - Safe and Drug Free Schools and Communities,

Formula Grants 84.186 14347 29,656Title V, Part A - Innovative Education Strategies 84.298A 14354 880

ARRA: State Fiscal Stabilization Fund 84.394 25008 1,093,768Education Jobs Fund 84.410 25152 2,116,128Child Development: California Preschool Instructional Network 84.173 14530 1,593Vocational Education Grants - Vocational and Applied Technology

Secondary II C, Sec 131 (Carl Perkins Act) 84.048 13924 65,710Passed through East San Gabriel Valley Special Education Local Plan Area:

Individuals with Disabilities Education Act (IDEA):Special Education (IDEA) Cluster:

Basic Local Assistance Entitlement, Part B, Section 611 84.027 13379 1,692,501ARRA Basic Local Assistance, Part B, Section 611 84.391 15003 1,333,882Preschool Grants, Part B, Section 619 84.173 13430 27,559Preschool Local Entitlement, Part B, Section 611 84.027A 13682 37,491Preschool Staff Development, Part B, Section 619 84.173A 13431 627

Total Special Education Cluster 3,092,060Total U.S. Department of Education 9,534,530

[1] Direct funded program, pass-through entity number not applicable.



68

SCHEDULE OF EXPENDITURES OF FEDERAL AWARDSFOR THE YEAR ENDED JUNE 30, 2011

Pass-ThroughEntity

Federal Grantor/Pass-Through CFDA Identifying FederalGrantor/Program or Cluster Title Number Number Expenditures

U.S. DEPARTMENT OF AGRICULTUREPassed through California Department of Education (CDE):

Child Nutrition Cluster:National School Lunch Program 10.555 13391 828,811$Basic Breakfast 10.553 13525 71,683Food Distribution 10.555 13524 258,855

Total Child Nutrition Cluster 1,159,349Total U.S. Department of Agriculture 1,159,349Total Expenditures of Federal Awards 10,693,879$



69

LOCAL EDUCATION AGENCY ORGANIZATION STRUCTUREJUNE 30, 2011

ORGANIZATION

The Walnut Valley Unified School District was unified in 1970, and consists of an area compromisingapproximately 21 square miles. The District operates nine elementary schools, three middle schools, twocomprehensive high schools, and one continuation school.

GOVERNING BOARD

MEMBER OFFICE TERM EXPIRES

Ms. Cynthia Ruiz President 2013

Ms. Carolyn Elfelt Vice President 2011

Mr. Larry Redinger Clerk 2011

Ms. Helen Hall Member 2013

Ms. Nancy Lyons Member 2013

ADMINISTRATION

Dr. Dean S. Conklin Superintendent

Mr. Jack LeBrun Assistant Superintendent, Business Services

Dr. Kathy Granger Assistant Superintendent, Human Resources



70

SCHEDULE OF AVERAGE DAILY ATTENDANCEFOR THE YEAR ENDED JUNE 30, 2011

Second Period AnnualReport Report

ELEMENTARY

Kindergarten 572 574

First through third 2,239 2,242

Fourth through sixth 3,002 3,007

Seventh and eighth 2,527 2,531

Home and hospital 2 3

Special education 102 102

Total Elementary 8,444 8,459

SECONDARY

Regular classes 5,829 5,822

Continuation education 27 30

Home and hospital - 1

Special education 71 70

Total Secondary 5,927 5,923Total K-12 14,371 14,382

Final Report



71

SCHEDULE OF INSTRUCTIONAL TIMEFOR THE YEAR ENDED JUNE 30, 2011

Reduced Reduced

1982-83 1982-83 1986-87 1986-87 2010-11

Actual Actual Minutes Minutes Actual Traditional Multitrack

Grade Level Minutes Minutes Requirement Requirement Minutes Calendar Calendar Status

Kindergarten 35,200 34,222 36,000 35,000 43,410 179 N/A Complied

Grades 1 - 3 50,660 49,253 50,400 49,000

Grade 1 53,310 179 N/A Complied



Grades 4 - 6 52,320 50,867 54,000 52,500




Grades 7 - 8 52,320 50,867 54,000 52,500



Grades 9 - 12 62,760 61,017 64,800 63,000





Number of Days



72

RECONCILIATION OF ANNUAL FINANCIAL AND BUDGET REPORT WITHAUDITED FINANCIAL STATEMENTSFOR THE YEAR ENDED JUNE 30, 2011

There were no adjustments to the Unaudited Actual Financial Report, which required reconciliation to the auditedfinancial statements at June 30, 2011.



73

SCHEDULE OF FINANCIAL TRENDS AND ANALYSISFOR THE YEAR ENDED JUNE 30, 2011

(Budget)

20121

2011 2010 2009

GENERAL FUND

Revenues 107,156,220$ 110,507,472$ 106,926,972$ 118,656,629$

Other sources and transfers in 700,000 5,290,000 945,073 2,484,140

Total Revenues

and Other Sources 107,856,220 115,797,472 107,872,045 121,140,769

Expenditures 109,946,156 110,154,094 112,767,794 118,794,928

Other uses and transfers out 175,000 - - -

Total Expenditures

and Other Uses 110,121,156 110,154,094 112,767,794 118,794,928INCREASE/(DECREASE) IN

FUND BALANCE (2,264,936)$ 5,643,378$ (4,895,749)$ 2,345,841$

ENDING FUND BALANCE 13,908,373$ 16,173,309$ 10,529,931$ 15,425,680$

AVAILABLE RESERVES2

3,303,635$ 3,233,594$ 4,359,966$ 6,500,946$

AVAILABLE RESERVES AS A

PERCENTAGE OF TOTAL OUTGO3

3.00% 3.00% 3.95% 5.60%

LONG-TERM OBLIGATIONS N/A -$ 124,057,114$ 126,549,975$

K-12 AVERAGE DAILY

ATTENDANCE AT P-24

14,532 14,371 14,426 14,955

The General Fund balance has increased by $747,629 over the past two years. The fiscal year 2011-2012 budgetprojects a decrease of $2,264,936 (40 percent). For a district this size, the State recommends available reserves ofat least three percent of total General Fund expenditures, transfers out, and other uses (total outgo).

The District has incurred operating surpluses in two of the past three years and anticipates incurring an operatingdeficit during the 2011-2012 fiscal year. Total long-term obligations have increased by $23,709,079 over the pasttwo years.

Average daily attendance has decreased by 548 over the past two years. Growth of 161 ADA is anticipatedduring fiscal year 2011-2012.

1Budget 2012 is included for analytical purposes only and has not been subjected to audit.

2Available reserves consist of reserved for economic uncertainty contained within the General Fund.

3On behalf payments of $2,361,564, $2,443,413, and $2,724,555, have been excluded from the calculation of availablereserves for the fiscal years ending June 30, 2011, 2010, and 2009, respectively.

4General Fund amounts do not include activity related to the consolidation of the Fund 17 Deductable Insurance as required by GASBStatement No. 54.



74

NON-MAJOR GOVERNMENTAL FUNDSCOMBINING BALANCE SHEETJUNE 30, 2011

Child Deferred Capital

Development Cafeteria Maintenance Facilities

Fund Fund Fund Fund

ASSETSDeposits and investments 98,627$ 805,211$ 602,310$ 918,664$Receivables 28,396 131,162 5,624 2,688Prepaid expenditures - 17,483 - -

Stores inventories - 47,352 - -Total Assets 127,023$ 1,001,208$ 607,934$ 921,352$

LIABILITIES AND FUND BALANCESLiabilities:

Accounts payable 88,418$ 150,128$ 62,735$ -$Due to other funds - 197,704 - -

Deferred revenue 9,939 - - -

Total Liabilities 98,357 347,832 62,735 -

Fund Balances:

Nonspendable - 78,130 - -

Restricted 28,666 575,246 - 921,352

Committed - - 545,199 -Total Fund Balances 28,666 653,376 545,199 921,352

Total Liabilities andFund Balances 127,023$ 1,001,208$ 607,934$ 921,352$

74

Special Reserve Corporation TotalFund for Capital Non-Major

Capital Outlay Projects Governmental

Projects Fund Funds

580,591$ 2,690,405$ 5,695,808$9,919 - 177,789

- - 17,483

- - 47,352590,510$ 2,690,405$ 5,938,432$

147,102$ -$ 448,383$- - 197,704

- - 9,939147,102 - 656,026

- - 78,130

443,408 2,690,405 4,659,077

- - 545,199

443,408 2,690,405 5,282,406

590,510$ 2,690,405$ 5,938,432$



75

NON-MAJOR GOVERNMENTAL FUNDSCOMBINING STATEMENT OF REVENUES, EXPENDITURES,AND CHANGES IN FUND BALANCESFOR THE YEAR ENDED JUNE 30, 2011

Child Deferred Deductible

Development Cafeteria Maintenance Insurance

Fund Fund Fund FundREVENUESFederal sources -$ 1,159,349$ -$ -$Other State sources - 61,074 581,396 -

Other local sources 1,647,993 3,133,475 28,907 -

Total Revenues 1,647,993 4,353,898 610,303 -

EXPENDITURESCurrent

Instruction 196,971 - - -

Pupil services:Food services 21,518 4,119,513 - -

Administration:All other administration 63,562 144,090 - -

Plant services - - 297,592 -Facility acquisition and construction - - - -Community services 1,418,204 - - -Other outgo - - - -

Debt servicePrincipal 1,457 - 397,852 -Interest and other 283 - 111,707 -

Total Expenditures 1,701,995 4,263,603 807,151 -

Excess (Deficiency) ofRevenues Over Expenditures (54,002) 90,295 (196,848) -

OTHER FINANCING SOURCES (USES)Transfers out - - (1,790,000) -

Net Financing Sources - - (1,790,000) -

NET CHANGE IN FUND BALANCES (54,002) 90,295 (1,986,848) -

Fund Balances - Beginning (Before Restatement) 82,668 563,081 2,532,047 62,042

Restatement (62,042)

Fund Balances - Beginning (As Restated) 82,668 563,081 2,532,047 -

Fund Balances - Ending 28,666$ 653,376$ 545,199$ -$

75

Special Reserve Corporation TotalCapital Fund for Capital Non-Major

Facilities Capital Outlay Projects Governmental

Fund Projects Fund Funds

-$ -$ -$ 1,159,349$- - - 642,470

265,520 417,971 3,900 5,497,766265,520 417,971 3,900 7,299,585

- - - 196,971

- - - 4,141,031

6,807 - - 214,459

25,777 - 6,294 329,66389,009 - - 89,009

- - - 1,418,204- - 13,424 13,424

- 133,869 - 533,1784,999 160,335 - 277,324

126,592 294,204 19,718 7,213,263

138,928 123,767 (15,818) 86,322

- (2,800,000) - (4,590,000)

- (2,800,000) - (4,590,000)138,928 (2,676,233) (15,818) (4,503,678)

782,424 3,119,641 2,706,223 9,848,126

(62,042)

782,424 3,119,641 2,706,223 9,786,084

921,352$ 443,408$ 2,690,405$ 5,282,406$



76

GENERAL FUND SELECTED FINANCIAL INFORMATIONTHREE-YEAR SUMMARY OF REVENUES, EXPENDITURES ANDCHANGES OF FUND BALANCEFOR THE YEAR ENDED JUNE 30, 2011

(Amounts in thousands) Actual Results for the Years

2010-2011 2009-2010 2008-2009

Percent Percent Percent

of of of

Amount Revenue Amount Revenue Amount Revenue

REVENUES

Federal revenue 9,139$ 8.3 6,201$ 5.8 9,396$ 7.9

State and local revenue

included in revenue limit 76,447 69.2 74,784 69.9 85,078 71.7

Other State revenue 21,700 19.6 23,100 21.6 21,306 18.0

Other local revenue 3,221 2.9 2,842 2.7 2,877 2.4

Total Revenues 110,507 100.0 106,927 100.0 118,657 100.0

EXPENDITURES

Salaries and Benefits

Certificated salaries 55,345 50.1 57,263 53.6 60,255 50.8

Classified salaries 13,709 12.4 14,961 14.0 15,738 13.3

Employee benefits 25,973 23.5 24,681 23.1 25,096 21.1

Total Salaries

and Benefits 95,027 86.0 96,905 90.7 101,089 85.2

Books and supplies 3,525 3.2 3,206 3.0 4,721 4.0

Contracts and operating expenses 8,067 7.3 7,668 7.2 8,285 7.0

Capital outlay 116 0.1 454 0.4 337 0.3

Other outgo 3,419 3.1 4,535 4.2 4,363 3.7

Total Expenditures 110,154 99.6 112,768 105.5 118,795 100.2

EXCESS OF REVENUES OVER

(UNDER) EXPENDITURES 353 0.4 (5,841) (5.5) (138) (0.2)

OTHER FINANCING

SOURCES (USES)

Incoming transfers/sources 5,290 4.8 945 0.9 2,484 2.1INCREASE (DECREASE) IN

FUND BALANCE 5,643 5.2 (4,896) (4.6) 2,346 1.9

FUND BALANCE, BEGINNING 10,530 15,426 13,080FUND BALANCE, ENDING 16,173$ 10,530$ 15,426$



77

CAFETERIA FUND SELECTED FINANCIAL INFORMATIONTHREE-YEAR SUMMARY OF REVENUES, EXPENDITURES ANDCHANGES IN FUND BALANCEFOR THE YEAR ENDED JUNE 30, 2011

(Amounts in thousands) Actual Results for the Years

2010-2011 2009-2010 2008-2009Percent Percent Percent

of of ofAmount Revenue Amount Revenue Amount Revenue

REVENUESFederal - NSLP 1,159$ 26.6 1,057$ 25.3 885$ 23.2State meal program 61 1.4 58 1.4 44 1.2Food sales 3,099 71.2 3,028 72.6 2,832 74.1Other 34 0.8 28 0.7 62 1.5

Total Revenues 4,353 100.0 4,171 100.0 3,823 100.0EXPENDITURES

Salaries and employee benefits 1,898 43.6 1,878 45.0 1,736 45.4Food and supplies 2,141 49.2 2,070 49.6 1,876 49.1Services and operating 50 1.1 47 1.1 67 1.8Capital outlay/other operating 174 4.0 131 3.1 195 5.0

Total Expenditures 4,263 97.9 4,126 98.8 3,874 101.3INCREASE (DECREASE)IN FUND BALANCE 90 2.1 45 1.2 (51) (1.3)

FUND BALANCE, BEGINNING 563 518 569FUND BALANCE, ENDING 653$ 563$ 518$


78

NOTE TO SUPPLEMENTARY INFORMATIONJUNE 30, 2011

NOTE 1 - PURPOSE OF SCHEDULES

Schedule of Expenditures of Federal Awards

The accompanying Schedule of Expenditures of Federal Awards includes the Federal grant activity of the Districtand is presented on the modified accrual basis of accounting. The information in this schedule is presented inaccordance with the requirements of the United States Office of Management and Budget Circular A-133, Auditsof States, Local Governments, and Non-Profit Organizations. Therefore, some amounts presented in thisschedule may differ from amounts presented in, or used in the preparation of, the financial statements.

The following schedule provides reconciliation between revenues reported on the Statement of Revenues,Expenditures and Changes in Fund Balances and in Business-Type Activities, and the related expendituresreported on the Schedule of Expenditures of Federal Awards. The reconciling amounts consist primarily of (StateFiscal Stabilization Fund: ARRA) funds that in the previous period were recorded as revenues but were unspent.These unspent balances have been expended in the current period. These unspent balances are reported as legallyrestricted ending balances within the General Fund.

CFDA

Number Amount

DescriptionTotal Federal Revenues reported in the Statement of Revenues,

Expenditures, and Changes in Fund Balances: 10,298,151$

ARRA State Fiscal Stabilization Fund 84.394 395,728Total Schedule of Expenditures of Federal Awards 10,693,879$

Local Education Agency Organization Structure

This schedule provides information about the District's boundaries and schools operated, members of thegoverning board, and members of the administration.

Schedule of Average Daily Attendance (ADA)

Average daily attendance (ADA) is a measurement of the number of pupils attending classes of the District. Thepurpose of attendance accounting from a fiscal standpoint is to provide the basis on which apportionments ofState funds are made to school districts. This schedule provides information regarding the attendance of studentsat various grade levels and in different programs.

Schedule of Instructional Time

The District has received incentive funding for increasing instructional time as provided by the Incentives forLonger Instructional Day. This schedule presents information on the amount of instructional time offered by theDistrict and whether the District complied with the provisions of Education Code Sections 46200 through 46206.

Districts must maintain their instructional minutes at either the 1982-83 actual minutes or the 1986-87requirement, whichever is greater, as required by Education Code Section 46201.


79

NOTE TO SUPPLEMENTARY INFORMATIONJUNE 30, 2011

Reconciliation of Annual Financial and Budget Report with Audited Financial Statements

This schedule provides the information necessary to reconcile the fund balance of all funds reported on theAnnual Financial and Budget Report Unaudited Actuals to the audited financial statements.

Schedule of Financial Trends and Analysis

This schedule discloses the District's financial trends by displaying past years' data along with current year budgetinformation. These financial trend disclosures are used to evaluate the District's ability to continue as a goingconcern for a reasonable period of time.

Non-Major Governmental Funds – Balance Sheet and Statement of Revenues, Expenditures, and Changesin Fund Balances

The Non-Major Governmental Funds Combining Balance Sheet and Combining Statement of Revenues,Expenditures, and Changes in Fund Balances is included to provide information regarding the individual fundsthat have been included in the Non-Major Governmental Funds column on the Governmental Funds BalanceSheet and Statement of Revenues, Expenditures, and Changes in Fund Balances.

General Fund Selected Financial Information

This schedule provides a comparison of revenues and expenditures as a percentage of total revenue for theGeneral Fund for the past three years.

Cafeteria Fund Selected Financial Information

This schedule provides a comparison of revenues and expenditures as a percentage of total revenue for theCafeteria Fund for the past three years.

80

INDEPENDENT AUDITORS' REPORTS

87

SCHEDULE OF FINDINGS AND QUESTIONED COSTS


SUMMARY OF AUDITORS' RESULTSFOR THE YEAR ENDED JUNE 30, 2011

88

FINANCIAL STATEMENTS

Unqualified

No

None reported

No

FEDERAL AWARDS

No

None reported

Unqualified

CFDA Numbers Name of Federal Program or Cluster

84.010, 84.389 (ARRA) Title I, Part A Cluster (Includes ARRA)

84.367 Title II, Part A - Improving Teacher Quality

84.394 (ARRA) ARRA - State Fiscal Stabilization Fund (SFSF)

84.027, 84.027A, 84.173,

84.173A, 84.391 (ARRA),

84.392 (ARRA)

Special Education (IDEA) Cluster

(Includes ARRA)

84.410 Education Jobs Fund

10.553, 10.555 Child Nutrition Cluster

320,816$

Auditee qualified as low-risk auditee? Yes

STATE AWARDS

Unqualified

Significant deficiency identified?

Type of auditors' report issued:

Internal control over financial reporting:

Material weakness identified?

Noncompliance material to financial statements noted?

Internal control over major programs:

Material weakness identified?

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

Significant deficiency identified?

Type of auditors' report issued on compliance for major programs:

Type of auditors' report issued on compliance for programs:

Identification of major programs:


FINANCIAL STATEMENT FINDINGSFOR THE YEAR ENDED JUNE 30, 2011

89

None reported.


FEDERAL AWARDS FINDINGS AND QUESTIONED COSTSFOR THE YEAR ENDED JUNE 30, 2011

90

None reported.


STATE AWARDS FINDINGS AND QUESTIONED COSTSFOR THE YEAR ENDED JUNE 30, 2011

91

None reported.


SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGSFOR THE YEAR ENDED JUNE 30, 2011

92

There were no audit findings reported in the prior year's schedule of financial statement findings.

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