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LAKE COUNTY EDUCATION SERVICE DISTRICT

INDEPENDENT AUDITOR’S REPORT,BASIC FINANCIAL STATEMENTS and

SUPPLEMENTARY INFORMATION

For the Year Ended June 30, 2011

LAKE COUNTY EDUCATION SERVICE DISTRICTLakeview, Lake County, Oregon

June 30, 2011

CONTENTS PAGE

INTRODUCTORY SECTION

Board of Directors and Officials ...................................................................................................................1

FINANCIAL SECTIONIndependent Auditor’s Report................................................................................................................... 2-3Management’s Discussion and Analysis................................................................................................. 4-13Basic Financial Statements:

Government-Wide Financial Statements:Statement of Net Assets...................................................................................................................14Statement of Activities ....................................................................................................................15

Governmental Funds Financial Statements: Balance Sheet ..................................................................................................................................16Reconciliation of the Balance Sheet – Governmental Funds to

the Statement of Net Assets ........................................................................................................17Statement of Revenues, Expenditures, and Changes in

Fund Balances ............................................................................................................................18Reconciliation of the Statement of Revenues, Expenditures, and Changes

in Fund Balances – Governmental Funds to the Statement of Activities....................................19Proprietary Fund Financial Statements:

Statement of Net Assets...................................................................................................................20Statement of Revenue, Expenses, and Changes in

Net Assets...................................................................................................................................21Statement of Cash Flows .................................................................................................................22

Notes to the Basic Financial Statements......................................................................................... 23-34Required Supplementary Information:

Statement of Revenues, Expenditures and Changes in Fund Balance (Budget Basis)General Fund ..............................................................................................................................35Notes to Required Supplementary Information – Budgetary Reporting .....................................36

Other Supplementary Information:Non-Major Governmental Funds

Combining Balance Sheet ..........................................................................................................37Combining Statement of Revenues, Expenditures, and Changes in Fund Balances ..................38Schedule of Revenues, Expenditures, and Changes in Fund Balance

Budget and Actual (Budget Basis):Adult Education ESL/GED Fund .......................................................................................39Warner Creek GED Testing Fund ......................................................................................40Writing Assessment Fund...................................................................................................41High School Teacher Fund.................................................................................................42Adel Principal Office Fund ................................................................................................43Adel Clerk Office Fund......................................................................................................44

Electric Restructure Grant Fund .........................................................................................45Teacher Mentoring Grant Fund ..........................................................................................46Student Mentoring Grant Fund...........................................................................................47School Improvement Grant Fund .......................................................................................48IDEA Enhancement Grant Fund ........................................................................................49

FINANCIAL SECTION CONTINUED:

Other Supplementary Information Continued:Schedule of Revenues, Expenditures, and Changes in Fund Balance

Budget and Actual (Budget Basis) continued:IDEA Students with Disabilities Fund ...............................................................................50IDEA Planning Grant Fund................................................................................................51System Performance Review & Improvement....................................................................52Early Childhood Special Education Fund ..........................................................................53Early Intervention Fund......................................................................................................54McKinney Homeless Fund .................................................................................................55Construction Fund ..............................................................................................................56Business Auto Fund ...........................................................................................................57

Other Financial Schedules:Schedule of Cash, Cash Items, Investments and Collateral Security ....................................................58Schedule of Property Tax Transactions ................................................................................................59Oregon Department of Education Required Information......................................................................60District Revenue Summary-All Funds..................................................................................................61Schedule of Expenditure of Federal Awards ....................................................................................... 62Notes to the Schedule of Expenditure of Federal Awards ................................................................... 63Expenditure Summaries (Budget Basis):

General Fund ................................................................................................................................ 64Special Revenue Funds................................................................................................................. 65Capital Project Funds.................................................................................................................... 66Proprietary Fund ........................................................................................................................... 67

REPORTS REQUIRED BY OREGON STATE REGULATIONS

Report Required by Oregon State Regulations ..................................................................................... 68-69Comments and Disclosures Required by the State of Oregon............................................................... 70-71Summary of Revenues and Expenditures................................................................................................... 72

REPORT REQUIRED BY GOVERNMENT AUDITING STANDARDS

Report on Compliance and on Internal Control Over Financial Reporting Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards.........................................................................................................73-74

INTRODUCTORY SECTION


BOARD OF DIRECTORS AND OFFICIALSJune 30, 2011

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Name Position

Vicky Taylor ChairpersonLakeview, Oregon

Dale Chiono Vice-ChairpersonSummer Lake, Oregon

Jeanette Grant DirectorLakeview, Oregon

Rob Elder DirectorPaisley, Oregon

Leslie Arcularius DirectorLakeview, Oregon

Vacant

Vacant

Amy Hutchinson AdvisoryLakeview, Oregon

Bob Pardee AdvisoryLakeview, Oregon

OFFICIALS

Alice Hunsaker Superintendent

Sara Sarensen Business Manager

FINANCIAL SECTION

2

George W. Wilber, CrFA,CPARobert M. Armstrong, CPA Mary Jo Evers, CFE, CPA

Arlie W. Oster, CPA (1931-1998)Brian R. Whitman, CPA

Cara R. Wilber, CPAJessica A. Knowles, CPA

Kari J. Ott, CPA

77 W Adams, Burns, Oregon 97720Phone (541) 573-6151 FAX (541) 573-5605www.opgcpa.com

Certified Public Accountants, PC

Professional Group

INDEPENDENT AUDITOR’S REPORT

The Board of DirectorsLake County Education Service DistrictLakeview, Lake County Oregon

We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of Lake County Education Service District , as of June 30, 2011 and for the year then ended, which collectively comprise Lake County Education Service District ’s basic financial statements as listed in the table of contents. These financial statements are the responsibility of Lake County Education Service District ’s management. Our responsibility is to express opinions on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America, and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions.

In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of Lake County Education Service District , as of June 30, 2011, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America (GAAP).

In accordance with Government Auditing Standards, we have issued our report dated November 11, 2011 on our consideration of Lake County Education Service District ’s internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit.

Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis on pages 4 through 13 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to this required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the

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basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Lake County Education Service District’s financial statements as a whole. The required supplementary information, other supplementary information and other financial schedules as listed in the financial section on the table of contents are presented for purposes of additional analysis and are not a required part of the financial statements. The accompanying schedule of expenditure of federal awards is also presented for purposes of additional analysis and is also not a required part of the financial statements. The required supplementary information, other supplementary information, other financial schedules and the schedule of expenditures of federal awards are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements taken as a whole.

The introductory section, as listed in the table of contents, has not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on it.

Oster Professional Group, CPA’s, PC

By

Burns, Oregon

November 11, 2011

LAKE COUNTY EDUCATION SERVICE DISTRICTMANAGEMENT’S DISCUSSION AND ANALYSIS

For the fiscal year ended June 30, 2011

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This discussion and analysis of Lake County Education Service District’s annual financial report presents an overview of the ESD’s financial activities for the fiscal year that ended June 30, 2011. Please consider it in conjunction with Lake County ESD’s financial reports, which follow this section.

This reporting model was adopted by the Governmental Accounting Standards Board (GASB) in their Statement No. 34 Basic Financial Statements – and Management’s Discussion and Analysis – for State and Local Governments issued June, 2000. Certain comparative information between the current year and the prior year is required to be presented in the MD&A; therefore this report will include comparative information for key financial information.

FINANCIAL HIGHLIGHTS

General revenues accounted for $1,163,438 in revenue or 78% of all revenues. Program specific revenues in the form of charges for services and operating grants accounted for $321,589 or 22% of the total revenue amount of $1,485,027.

Lake County ESD had $1,503,972 in expenses; $321,589 of these expenses were offset by program specific charges for services or grants. The remaining expenses of $1,182,383 were offset by revenuesconsisting primarily of taxes, state school support and contracts for services.

The General Fund had $1,158,461 in revenues and $1,147,485 in expenditures. The General Fund’s ending fund balance increased by $7,056, taking it from $277,780 (after restatements) at the end of 2010 to $284,836 at the end of 2011. This increase was due to staffing changes that occurred mid-year as discussed in the “Current Financial Issues & Concerns” section on page 12. Overall, Lake County ESD is financially healthy.

The Print Shop, Lake County ESD’s only Enterprise Fund, had $23,620 in revenue and $21,964 in expenses for a gain of $1,656, leaving the ending net asset balance at $1,936.

OVERVIEW OF THE FINANCIAL STATEMENTS

This annual report consists of a series of financial statements and notes to those statements to provide more detailed data. These statements are organized so the reader can understand Lake County ESD as a wholeand present an overall view of the finances.

The Statement of Net Assets and Statement of Activities provide information about the activities of the whole district, presenting both an aggregate view of Lake County ESD’s finances and a longer-term view of those finances. Fund financial statements provide the next level of detail. For governmental funds, these statements also look at Lake County ESD’s most significant funds with all other non-major funds presented in total in a single column. The table below summarizes the main features of Lake CountyESD’s financial statements.



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Features of ESD-Wide and Fund Financial Statements

Fund Statements Government-wide Statements Governmental Funds Proprietary Funds

Scope Entire ESD Combined The activities of the ESD that are not proprietary

Activities the ESD operates, charging a fee for services

Required Financial Statements

Statement of Net Assets (page 14)Statement of Activities (page 15)

Balance Sheet (page 16) Statement of Revenues, Expenditures, and Changes in Fund Balances (page 18)

Statement of Net Assets(page 20)Statement of Revenues, Expenses, and Changes in Net Assets (page 21) Statement of Cash Flows (page 22)

Accounting Basis and Measurement Focus

Accrual accounting and economic resources focus

Accrual accounting and current financial resources focus

Accrual accounting and economic resources focus

Type of Asset/Liability Information

All assets and liabilities,both financial and capital, short-term and long-term

Only assets expected to be used up and liabilities that come due at year end, or soon thereafter, no capital assets included

All assets and liabilities,both financial and capital, short-term and long-term

Type of Inflow/Outflow Information

All revenues and expense during year, regardless of when cash is received or paid

Revenues for which cash is received during or soon after the end of the year; expenditures when goods or services have been received and payment is due during the year or soon thereafter

All revenues and expenses during the year, regardless of when cash is received or paid

Required Supplemental Information is included to support and explain the data in the basic financial statements. Statements include: Budgetary Comparison Statement (page 35).



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Modified Accrual Accounting vs. Full Accrual Accounting

The following table shows the difference in modified accrual accounting, as done on past financial statements and full accrual accounting, as required by GASB34.

Modified Accrual Full Accrual

Revenue Available and measurable.

Available within 60 days of year end.

Record revenue if payment is: received during the year or soon

after (60 days), and is used to pay current year’s

liabilities

Earned and measurable.

It is earned when it is “reasonably certain to be collected.”

Expenses Recognized in the accounting period in which the fund liability is incurred and measurable.

Record expenditures when: there is an outflow of cash, or there is a promise to pay for goods

or services that have been received.

Recognized in the accounting period in which the liability is incurred and measurable.

Record expenditures when there is a decrease in net assets from using up assets (or there is an outflow of assets) in the course of operating a district and providing goods and services.

STATEMENT OF NET ASSETS AND STATEMENT OF ACTIVITIES

While this report contains the large number of funds used by Lake County ESD to provide programs and activities, the view of the ESD as a whole looks at all financial transactions and asks the question “How did we do financially during fiscal year 2011?” The Statement of Net Assets and the Statement of Activities answer this question. These statements include all assets and liabilities using the full accrual basis of accounting similar to the accounting system used by most private sector companies. This basis of accounting takes into consideration all of the current year’s revenues and expenses regardless of when cash was received or paid.

These statements report Lake County ESD’s net assets and changes in those assets. This change in net assets is important because it identifies whether the financial position of the ESD has improved or diminished for the district as a whole. The cause of this change may be the result of many factors, such as Lake County ESD’s property tax base, increase/reduction in state school funds, facility conditions,maintenance-of-effort requirements, school district participation, and other factors.

In the Statement of Net Assets and the Statement of Activities, the ESD is divided into two distinct kinds of activities:

Governmental Activities – Most of the ESD programs and services are reported here including instruction, support services, operation and maintenance of plant, and interfund transfers.

Business-Type Activity – This service is provided on a charge for goods or services basis to recover all of the expenses of the goods or services provided.



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MAJOR FUND REPORTING

Fund Financial Statements

Fund financial reports provide detailed information about Lake County ESD’s major funds. The ESD uses many funds to account for a multitude of financial transactions. However, these fund financial statements focus on the ESD’s most significant funds. Lake County ESD’s major governmental fund for fiscal year 2011 was the General Fund. The ESD’s only business-type or enterprise fund for fiscal year 2011 was the Print Shop.

Governmental Funds (General, Special and Capital Projects Funds)

Most of Lake County ESD’s activities are reported in governmental funds, which focus on how monies flow into and out of those funds and the balances left at fiscal year-end for spending in future periods. These funds are reported using an accounting method called modified accrual accounting, which measures cash and all other financial assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term view of Lake County ESD’s general government operations and the basic services it provides. Governmental fund information helps determine whether there are more or less financial resources that can be spent in the near future to finance educational programs. The relationship, or differences, between governmental activities reported in the Governmental Fund Financial Statementsand Governmental Activities is reconciled in the financial statements.

Proprietary Funds (Enterprise)

The proprietary fund is used to account for the business-type activities of the district. This fund provides for the revenue and expenses from providing printing services to school districts served by the ESD.

FINANCIAL ANALYSIS OF THE ESD’S FUNDS

On the next page are graphs showing the composition of the sources of funds (revenue) and expenditures in our fund groups. More specific fund balance analysis is as follows:

The General Fund is used for resolution programs and fiscal overhead. Activities of the General Fund increased the fund balance by $7,056, mainly due to staffing changes and organizational restructuring/streamlining.

The non-major Special Revenue Funds are for regional programs, grants, and contracts. These funds, collectively, had a decrease in fund balance of $38,048. Most of this decrease was in the electric restructure grant (a project was completed and funds were distributed to cover those expenses). The remaining decrease of $1,945 is the net amount of fluctuations in several Special Revenue Fund accounts, with all fluctuations being less than $6,500; however, the most notable change among the remaining funds is the closing of the Adult Education Fund into the General Fund, constituting a $2,080 decrease. This fund was closed because the grant source funding the program is no longer available to Lake County.

Capital Revenue Funds are for future automobile expenditures and for construction reserve. These funds increased their fund balances $9,910.

The Proprietary Fund is an enterprise fund whereby the district receives revenue from printing services. This fund had a net gain of $1,656 for the fiscal year.

LAKE COUNTY EDUCATION SERVICE DISTRICTMANAGEMENT’S DISCUSSION AND ANAL


Sources of Funds

The General Fund is supported by local taxes, state replacement dollars, Medicaid reimbursement.

The Special Revenue Funds are supported by federal and contracts.

The Capital Revenue Funds are supported byprograms.

The Proprietary Fund is supported by charges for goods and services to other government entities.

$285,51419%

$11,1731%

$23,6202%

General Fund

Capital Funds



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Sources of Funds – 2010-11$1,478,768

The General Fund is supported by local taxes, state replacement dollars, contracts for services,

Funds are supported by federal and state grants, other grants and local

evenue Funds are supported by transfers from the General Fund and charges to


$1,158,46178%

$285,51419%

Special Revenue Funds

Proprietary Funds

contracts for services, and

, other grants and local

transfers from the General Fund and charges to


LAKE COUNTY EDUCATION SERVICE DISTRICTMANAGEMENT’S DISCUSSION AND ANAL


The following graphs show the comparison by year of the funds, which are comprised of the General Fund and

Governmental Funds

Governmental Funds

$-

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

$800,000

$900,000

Local/Intermediate

$545,982

$623,815

2009-10

$-

$200,000

$400,000

$600,000

$800,000

$1,000,000

$1,200,000

$1,400,000

Instruction

$210,681 $194,877

2009-10



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comparison by year of the revenue and expenditures for Lake County ESD’s governmental and Non-major funds.

Governmental Funds – Revenue2009-10 & 2010-11

Governmental Funds – Expenditures2009-10 & 2010-11

State Federal

$836,313

$128,674

$623,815

$754,614

$76,719

10 2010-11

Support Services

$1,259,657

$194,877

$1,281,353

10 2010-11

ESD’s governmental



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The ESD as a Whole

Recall that the Statement of Net Assets provides the perspective of the ESD as a whole.

The following table provides a summary of the ESD’s net assets and comparison of prior year to current.

6/30/2011 6/30/2010 6/30/2011 6/30/2010 6/30/2011 6/30/2010

Current Assets 457,876$ 473,365$ 1,936$ 351$ 459,812$ 473,716$

Capital Assets 125,659 131,437 - - 125,659 131,437

Total Assets 583,535 604,802 1,936 351 585,471 605,153

Current Liabilities 48,016 4,352 - 71 48,016 4,423

Total Liabilities 48,016 4,352 - 71 48,016 4,423

Invested in Capital Assets

Net of Related Debt 125,659 131,437 - - 125,659 131,437

Restricted Net Assets 35,361 - - - 35,361 -

Unrestricted Net Assets 374,499 469,013 1,936 280 376,435 469,293

Total Net Assets 535,519$ 600,450$ 1,936$ 280$ 537,455$ 600,730$

Governmental Activities Business-type Activities Total Primary Government

Condensed Statement of Net Assets



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The table below shows a comparison between current and prior years’ revenues, expenditures, and changes in net assets for fiscal year 2010-2011.

Condensed Statement of Revenues, Expenses, and Changes in Net Assets

6/30/2011 6/30/2010 6/30/2011 6/30/2010 6/30/2011 6/30/2010

Revenues:

Program Revenues:

Charges for Services 48,719$ 70,897$ 23,620$ 23,099$ 72,339$ 93,996$

Operating Grants/Contrib. 249,250 319,439 - - 249,250 319,439

General Revenues:

Property Taxes 333,766 323,011 - - 333,766 323,011

State School Support/SIF 665,854 680,271 - - 665,854 680,271

Interest 3,377 3,602 - - 3,377 3,602

Other 160,441 114,616 - - 160,441 114,616

Total Revenues 1,461,407 1,511,836 23,620 23,099 1,485,027 1,534,935

Expenses:

Governmental Activities:

Instructional Programs 194,877 210,678 - - 194,877 210,678

Supporting Services 1,281,353 1,259,660 - - 1,281,353 1,259,660

Depreciation 5,778 5,778 - - 5,778 5,778

Business-Type Activities:

Printing Services - - 21,964 24,573 21,964 24,573

Total Expenses 1,482,008 1,476,116 21,964 24,573 1,503,972 1,500,689

Increase/(Decrease) Net Assets (20,601) 35,720 1,656 (1,474) (18,945) 34,246

Net Assets, Beginning, after restatement 556,120 564,730 280 1,754 556,400 566,484

Net Assets, Ending 535,519$ 600,450$ 1,936$ 280$ 537,455$ 600,730$

Governmental Activities Business-Type Activities

Total Primary

Government



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GENERAL FUND BUDGETARY HIGHLIGHTS

Lake County ESD’s budget is prepared according to Oregon law and is based on accounting for transactions on a basis of cash receipts, disbursements and encumbrances. The most significant budgeted fund is the General Fund.

Fund changes in the preparation of the 2010-11 budget include the continuance of all services and the elimination of .5 FTE School Psychologist position.

CAPITAL ASSET ACTIVITY

There were no additions or deletions of capital assets in the current fiscal year.

CURRENT FINANCIAL ISSUES AND CONCERNS

The Lake County Education Service District is currently financially stable resulting primarily from a modification of the state’s equalization formula, which guarantees the Lake County ESD at least one million dollars in State School Funds and local taxes. This guarantee continues to be very reassuring during our budgeting cycles.

Services continuing from the 2009-10 year include: speech therapists, school psychologist, counseling, academic counselors for K-12 districts, curriculum and staff development, teacher mentoring, special education administration, itinerant special education teacher, foreign language program, home school oversight, attendance monitoring (as needed), e-rate filing, adult continuing education, Early Intervention/Early Childhood Special Education, Child Find, and internet connectivity. Services that were added or reinstated with the 2010-11 year include: school improvement flow through funds ($24,000), annual audit, and professional development in the areas of math and science through the Sustainability Grant. These services were provided at no charge to the school districts of Lake County.

Although services to students generally continued at the same level, there were some changes in staffing that affected the ESD as a whole. First, and most significantly, the Lake County ESD underwent a change in leadership with the retirement of the superintendent, effective June 30, 2010. Alice Hunsaker replaced Judy May as .5 FTE superintendent and added .1 FTE to take on the Director of Special Education duties. In September of 2010, the Director of School Improvement resigned and Ms. Hunsaker took on an additional .2 FTE to cover the Director of School Improvement responsibilities, along with Marcia Nichols, also hired at .2 FTE. The other position change came when the School Psychologist/Special Ed Teacher resigned effective June 30, 2010 in order to move closer to family. In assessing the current needs of our county schools, it was determined that one full time School Psychologist would be able to service the whole county; therefore, only the Special Ed Teacher position was filled (.5 FTE).

These staffing changes provided an overall reduction in expenses for the Lake County ESD thereby adding over $7,000 to the cash carryover while still allowing all the school districts’ annual audit to be paid by the ESD, as well as reinstating flow through funds in the amount of $24,000. Adding services, as opposed to just sending cash, had been discussed and it was decided that the schools would appreciate receiving the funds in order to smooth out their own fiscal difficulties during theeconomic downturn.

Upcoming years look to be financially stable for the Lake County ESD. Because we are at the funding floor, increases in revenue from the State School Fund are not likely in the near future without action by the Oregon Legislature. This means that Lake County ESD will have to prioritize the services we offer and continue to be creative in how we provide services. The good thing about flat funding is that we have not been hit with the funding cuts as other schools and ESDs have in the last couple years. While nothing is certain, we are hopeful this trend will continue.

With the events that occurred at Willamette ESD a couple years ago, the Oregon Legislature has taken particular interest in ESDs in general and moved to take action affecting ESDs throughout the State of Oregon. Last year’s session did not produce any major reforms to the ESDs; therefore, it is possible (if not likely) that the issue of ESDs will resurface in theupcoming years. Regardless of what happens on a statewide level, Lake County ESD is dedicated to ensuring that our component schools have the support needed to provide quality education to the students of Lake County.



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The Lake County ESD staff appreciates the strategic planning committee and its role in the process of determining the quality and quantity of educational opportunities for our students. The charge is providing quality education opportunities for all students and school improvement services for our school districts are taken very seriously by our staff.

In conclusion, the Lake County Education Service District has committed itself to financial excellence and transparency. Lake County ESD’s system of financial planning, budgeting and internal financial controls are firmly in place and the ESD plans to continue its sound fiscal management to meet the challenges of the futures.

CONTACTING THE ESD’S FINANCIAL MANAGEMENT

This financial report is designed to provide our citizens and taxpayers with a general overview of Lake County ESD’s finances and demonstrate the ESD’s accountability for the money it receives. If you have any questions about this report or need additional financial information, contact the ESD’s Business Manager at 357 North L Street Lakeview, OR 97630.

BASIC FINANCIAL STATEMENTS

GOVERNMENT-WIDE FINANCIAL STATEMENTS

Governmental Business-Type

Activities Activities Total

ASSETS

Cash and investments 366,916$ 1,936$ 368,852$

Receivables

Taxes 42,332 - 42,332

Accounts 48,628 - 48,628

Land 12,344 - 12,344

Buildings and building improvements 147,417 - 147,417

Machinery, equipment, and furniture 48,589 - 48,589

Accumulated depreciation (82,691) - (82,691)

TOTAL ASSETS 583,535 1,936 585,471

LIABILITIES

Accounts payable 47,675 - 47,675

Accrued liabilities

Payroll, payroll taxes, insurance 341 - 341

TOTAL LIABILITIES 48,016 - 48,016

June 30, 2011


Lakeview, Lake County, Oregon

STATEMENT OF NET ASSETS

NET ASSETS

Invested in capital assets, net of related debt 125,659 - 125,659

Restricted for:

Special programs 35,361 - 35,361

Unrestricted 374,499 1,936 376,435

TOTAL NET ASSETS 535,519$ 1,936$ 537,455$

See notes to the basic financial statements. 14

Program Revenues

Operating

Charges for Grants and Governmental Business Type

Functions/Programs Expenses Services Contributions Activities Activities Total

Regular programs 33,844$ 1,231$ 6,736$ (25,877)$ -$ (25,877)$

Special programs 143,585 36,315 136,675 29,405 - 29,405

Adult continuing education 17,448 - - (17,448) - (17,448)

Student support services 700,135 - 72,068 (628,067) - (628,067)

Instructional staff support 162,623 - 33,771 (128,852) - (128,852)

General administration 96,254 - - (96,254) - (96,254)

School administration 35,458 - - (35,458) - (35,458)

Business support services 217,019 - - (217,019) - (217,019)

Central activities 75,642 - - (75,642) - (75,642)

Facilities acquisition and construction - 11,173 - 11,173 - 11,173

Total governmental activities 1,482,008 48,719 249,250 (1,184,039) - (1,184,039)

Business type activities

Business support services 21,964 23,620 - - 1,656 1,656 TOTAL 1,503,972$ 72,339$ 249,250$ (1,184,039) 1,656 (1,182,383)

GENERAL REVENUE

Property taxes 333,766 - 333,766

State school fund-general support 665,854 - 665,854

Earnings on investments 3,377 - 3,377

Miscellaneous 160,441 - 160,441

Total general revenue 1,163,438 - 1,163,438

Change in Net Assets (20,601) 1,656 (18,945)

Net assets - June 30, 2010, before restatement 600,450 280 600,730

Net (Expense) Revenue

and Changes in Net Assets



STATEMENT OF ACTIVITIES

June 30, 2011

Net assets - June 30, 2010, before restatement 600,450 280 600,730

Restatement , see note 11 (44,330) - (44,330)

Net assets - June 30, 2010, after restatement 556,120 280 556,400

TOTAL NET ASSETS - JUNE 30, 2011 535,519$ 1,936$ 537,455$


GOVERNMENTAL FUND FINANCIAL STATEMENTS

Other Total

Governmental June 30,

General Funds 2011

ASSETS

Cash and investments 295,389$ 71,527$ 366,916$

Receivables

Property tax 42,332 - 42,332

Interfund loan 30,626 - 30,626

Other 2,067 46,561 48,628

Total assets 370,414$ 118,088$ 488,502$

LIABILITIES AND FUND BALANCES

Liabilities

Accounts payable 47,140$ 535$ 47,675$

Accrued liabilities 341 - 341

Interfund loan payable - 30,626 30,626

Deferred revenues 38,097 - 38,097

Total liabilities 85,578 31,161 116,739

Fund balances

Non-spendable 30,626 - 30,626

Restricted - 35,361 35,361

Committed 21,000 51,566 72,566

Unassigned 233,210 - 233,210

Total fund balances 284,836 86,927 371,763

Total liabilities and fund balances 370,414$ 118,088$ 488,502$

June 30, 2011



BALANCE SHEET

GOVERNMENTAL FUNDS


TOTAL FUND BALANCES 371,763$

Amounts reported for governmental activities in the

Statement of Net Assets are different because:

Capital assets are not financial resources and therefore are not

reported in the governmental funds

Cost 208,350$

Accumulated depreciation (82,691) 125,659

Revenue reported as deferred revenue in the governmental fund financial

statements was recorded as revenue in the government-wide

financial statement. 38,097

TOTAL NET ASSETS 535,519$



RECONCILIATION OF GOVERNMENTAL FUNDS

BALANCE SHEET TO STATEMENT OF NET ASSETS

June 30, 2011


Other

Governmental Total

General Funds June 30, 2011

Revenues

Taxes 327,507$ -$ 327,507$

Local sources 158,364 54,173 212,537

Intermediate sources - 83,771 83,771

State sources 672,090 82,524 754,614

Federal sources 500 76,219 76,719

Total revenues 1,158,461 296,687 1,455,148

Expenditures

Instruction

Regular programs 33,844 - 33,844

Special programs - 143,585 143,585

Adult continuing education programs 1,505 15,943 17,448

Supporting services

Students 649,215 50,920 700,135

Instructional staff 142,233 20,390 162,623

General administration 96,254 - 96,254

School administration - 35,458 35,458

Business services 148,792 62,449 211,241

Central activities 75,642 - 75,642

Total expenditures 1,147,485 328,745 1,476,230

Excess of revenues over (under) expenditures 10,976 (32,058) (21,082)

STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES



ALL GOVERNMENTAL FUND TYPES

For the Year Ended

June 30, 2011

Excess of revenues over (under) expenditures 10,976 (32,058) (21,082)

Other financing sources (uses)

Transfers in (out) (3,920) 3,920 -

Total other financing sources (uses) (3,920) 3,920 -

Net change in fund balance 7,056 (28,138) (21,082)

Available fund balance, July 1, before restatement 307,110 115,065 422,175

Restatement, see note 11 (29,330) - (29,330)

Available fund balance, July 1, after restatement 277,780 115,065 392,845

Available fund balance, June 30 284,836$ 86,927$ 371,763$


NET CHANGE IN FUND BALANCES (21,082)$

Amounts reported for governmental activities in the Statement of Activities

are different because:

Governmental funds report capital outlay as expenditures.

However, in the Statement of Activities the cost of those

assets is allocated over their estimated useful lives and

reported as depreciation expense. This is the amount by

which capital outlays exceeded depreciation in the current

period.

Less current year depreciation 5,778$ (5,778)

Certain delinquent property tax not collected for several months after year end

is not considered available revenue and is deferred in the governmental funds.

The change in deferred revenue is not reflected in the governmental funds, but

is in the Statement of Activities as a change in revenues. 6,259

CHANGE IN NET ASSETS (20,601)$



RECONCILIATION OF THE STATEMENT OF REVENUES,

EXPENDITURES, AND CHANGES IN FUND BALANCES OF

GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES

June 30, 2011


PROPRIETARY FUND FINANCIAL STATEMENTS



STATEMENT OF NET ASSETS

PROPRIETARY FUND

June 30, 2011

Printing

Service

ASSETS

Cash 1,936$

Total assets 1,936

LIABILITIES

Liabilities

Accounts payable -

Total liabilities -

NET ASSETS

Net assets

Unrestricted 1,936 Total net assets 1,936$


Printing

Service

Operating revenues

Local sources

1940 Services to other districts 20,366$

1990 Miscellaneous 3,254

Total local sources 23,620

Total Operating Revenue 23,620

Operating expenses

2000 Support services

2574 Printing, publishing, and duplicating services

100 Salaries 4,763

200 Associated payroll costs 3,900

300 Purchased services 8,567

400 Supplies and materials 4,734

Total support services 21,964

Total operating expenses 21,964

Operating income (loss) 1,656

Net assets beginning of year 280

Net assets end of year 1,936$

For the Year Ended

June 30, 2011



STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS

PRINTING SERVICE


Printing

Service

CASH FLOWS FROM OPERATING ACTIVITIES:

Receipts from customers and users 23,620$

Payments to suppliers (13,372)

Payments to employees (8,663)

Net cash provided by operating activities 1,585

NET INCREASE IN CASH 1,585

CASH AND CASH EQUIVALENTS, July 1, 2010 351CASH AND CASH EQUIVALENTS, June 30, 2011 1,936$

RECONCILIATION OF OPERATING INCOME TO NET CASH

PROVIDED BY OPERATING ACTIVITIES

Operating Income 1,656$

Adjustments to reconcile net income to net cash

provided (used) by operating activities:

Increase (decrease) in accounts payable (71)

Total adjustments (71) Net cash provided (used) by operating activities 1,585$

For the Year Ended

June 30, 2011



STATEMENT OF CASH FLOWS

PROPRIETARY FUND


NOTES TO THE BASIC FINANCIAL STATEMENTS


NOTES TO THE BASIC FINANCIAL STATEMENTSJune 30, 2011

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Note 1. Summary of Significant Accounting Policies

The administration of Lake County Education Service District is vested in a seven member board of directors, a district superintendent, and a business manager.

The following is a summary of significant accounting policies utilized by the district in the preparation of the accompanying financial statements.

A. Reporting Entity

A seven member board of directors exercises governance responsibilities over all entities related to public elementary and secondary school education within the jurisdiction of Lake County Education Service District as set by the state of Oregon. The board receives funding from local, state and federal sources, however, Lake County Education Service District is not included in any other governmental reporting entity as defined in Section 2100, Codification of Governmental Accounting and Financial Reporting Standards. Board members are elected by the public and have decision making authority, the power to designate management, the responsibility to significantly influence operations, and primary accountability for fiscal matters. No other entities met requirements for inclusion in Lake County Education Service District.

B. Fund Accounting

The accounts of the district are organized based on funds and account groups, each of which is considered a separate accounting entity. The operations of each fund are accounted for with a separate set of self-balancing accounts that comprise its assets, liabilities, fund balances, revenues, and expenditures, or expenses, as appropriate. District resources are allocated to, and accounted for, in individual funds based upon the purposes for which they are to be spent and the means by which spending activities are controlled. The funds are grouped, in the financial statements in this report, into four generic fund types under two broad fund categories as follows:

GOVERNMENTAL FUNDS

General Fund - The General Fund is the general operating fund of the district. It is used to account for all financial resources except those required to be accounted for in another fund.

Special Revenue Funds - Special revenue funds are used to account for the proceeds of specific revenue sources (other than major capital projects) that are legally restricted to expenditures for specified purposes.

Capital Project Funds - Capital project funds are generally used to account for financial resources to be used for the acquisitions or construction of major capital facilities.

PROPRIETARY FUNDS

Enterprise Funds - Enterprise funds are used to account for printing services provided to other districts and the community. Principal revenue sources are fees charged for services.



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C. Basis of Presentation

Government-Wide Financial Statements

The Statement of Net Assets and the Statement of Activities display information about the district. These statements include the governmental financial activities of the overall district. Eliminations have been made to minimize the double counting of internal activities. These statements distinguish between the governmental and business-type activities of the district. Governmental activities are financed primarily through property taxes, intergovernmental revenues, and charges for services.Business-type activities are financed in whole or in part by fees charged to external parties.

The Statement of Net Assets presents the district’s assets and liabilities, with the difference reported as net assets. Net assets are reported in three categories:

Invested in capital assets, net of related debt consists of capital assets, net of accumulated depreciation and reduced by outstanding balances for bonds, notes and other debt attributable to the acquisition, construction or improvement of those assets.

Restricted Net Assets result when constraints placed on net asset use are either externally imposed or imposed by law through constitutional provisions or enabling legislation.

Unrestricted net assets consist of net assets that do not meet the definition of the two preceding categories. Unrestricted net assets often have constraints on resources imposed by management, which can be removed or modified.

The Statement of Activities presents a comparison between direct expenses and program revenues for each of its functions/programs. Direct expenses are those that are specifically associated with a function and, therefore, are clearly identifiable to that function. Eliminations have been made to minimize the double counting of internal activities in the Statement of Activities. Program revenues include: (1) charges to students or others for tuition, fees, rentals, material, supplies or services provided, (2) operating grants and contributions and (3) capital grants and contributions. Revenues that are not classified as program revenues, including property taxes and state support, are presented as general revenues.

Fund Financial Statements

Separate financial statements are provided for governmental funds and proprietary funds. Separate statements for each fund category – governmental and proprietary – are presented. The emphasis of fund financial statements is on major governmental and enterprise funds, each displayed in a separate column in the fund financial statements. All remaining governmental funds are aggregated and reported as non-major governmental funds.

The district reports the following major governmental fund:

The General Fund is the general operating fund of the district. It is used to account for all financial resources except those required to be accounted for in another fund.



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Private sector standards of accounting and financial reporting issued prior to December 1, 1989, generally are followed in both the government-wide and the proprietary fund financial statements to the extent they do not conflict or contradict guidance of the GASB. Governments also have the option of following subsequent private sector guidance for their business type activities and enterprise funds. The district has elected to not follow subsequent private sector guidance.

Proprietary fund operating revenues, such as charges for services, result from exchange transactions associated with the principal activity of the fund. Exchange transactions are those in which each party receives and gives up essentially equal values. Non-operating revenues, such as subsidies and investment earnings, result from non-exchange transactions or ancillary activities. The district’s proprietary fund is the Printing Service Fund. This fund is used to account for the printing service operations of the district.

D. Measurement Focus and Basis of Accounting

The government-wide and proprietary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property tax is recognized as revenue in the year for which it is levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been satisfied.

Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized when they become both measurable and available to finance expenditures of the fiscal period. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the government considers revenues to be available if they are collected within 60 days after year end.

Property tax, intergovernmental revenues (shared revenues, grants and reimbursements from other governments) and interest associated with the current fiscal period are all considered to be susceptible to accrual. All other revenue items are considered to be measurable and available only when cash is received by the district.

Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, principal and interest on long-term debt, claims and judgments and compensated absences are recognized as expenditures only when payment is due. Capital asset acquisitions are reported as expenditures in governmental funds. Proceeds of general long-term debt and acquisitions under capital leases are reported as other financing sources.

Under the terms of grant agreements, the district funds certain programs by a combination of specific cost-reimbursement grants and general revenues. Thus, when program expenses are incurred, there are both restricted and unrestricted net assets available to finance the program. It is the district’s policy to first apply cost-reimbursement grant resources to such programs, and then general revenues.

E. Statement of Cash Flows

For purposes of the Statement of Cash Flows, the district considered all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. All cash and investments of the proprietary fund types are pooled with the district’s pooled cash and investments.



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F. Budgets and Budgetary Accounting

A budget is prepared for each district fund in accordance with the modified accrual basis of accountingand legal requirements set forth in the Oregon local budget law. The resolution authorizing appropriations for each fund sets the level by which expenditures cannot legally exceed appropriations. Total instruction, supporting services, community services, interagency/fund transactions, contingencies and debt service appropriations by fund are the levels of control. The detail budget document, however, is required to contain more specific, detailed information for the above mentioned expenditure categories. Appropriations lapse at June 30.

Unexpected additional resources may be added to the budget using a supplemental budget and appropriations resolution. A supplemental budget may require hearings before the public, publications in newspapers and approval by the board of directors. Original and supplemental budgets may be modified by the use of appropriations transfers between the levels of control. Such transfers require approval by the board of directors.

The budget for the General Fund and special revenue funds includes capital outlay expenditures in each program for capital outlay applicable to that program.

G. Capital Assets

Capital assets are recorded at original or estimated original cost. Donated capital assets are recorded at their estimated fair market value on the date donated. The district defines capital assets as assets with an initial cost of more than $5,000 and an estimated life in excess of one reporting period. Interest incurred during construction is not capitalized. The cost of normal maintenance and repairs that do not add value to the asset or materially extend asset lives are not capitalized. Capital assets are depreciated using the straight-line method over the following useful lives:

Building and improvements 50 to 100 yearsEquipment 5 to 30 years

H. Property Taxes Receivable

Property taxes assessed in prior years, but not yet collected or accrued, are reported on the balance sheet, but are offset by deferred revenue accounts. The district levies taxes on a fiscal year from July 1 to June 30. The current levy becomes a lien on July 1. Taxes are due November 15, and become delinquent May 15. Foreclosure is started three years after taxes become delinquent. The district turns all tax collection duties over to Lake County, Oregon.

I. Accumulated Unpaid Vacation, Sick Pay, and Other Employee Benefit Amounts

The district has no provision for accumulated unpaid vacation, sick pay, and other employee benefits. The district's policy is that all vacation must be used by the June 30 fiscal year end or it is lost. Each employee may accumulate sick leave and carry it over to the succeeding year. In a year when sick leave is used, the employee is paid the regular contract salary during the absence to the extent of sick leave earned. If necessary, substitutes must be hired by the district. When an employee becomes employed by another district, the accumulated sick leave can be transferred to that district. If sick leaveis not transferred, it is lost and not paid to the employee upon leaving Lake County ESD.



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J. Deposits and Investments

Lake County Education Service District's cash and cash equivalents are considered to be cash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition. All short-term cash surpluses are maintained in savings accounts and the Oregon State Treasury Local Government Investment Pool and allocated to each fund based on the amount of excess cash each fund has deposited.

Oregon statutes and local ordinances authorize the district to invest (short-term and long-term) in certificates of deposit (considered investments for risk categorization purposes), certain bond obligations of civil subdivisions, general obligations of the United States, U.S. agency issues, general obligations of the states of Oregon, Washington, Idaho and California, certain interest bearing bonds of a county, port or school district, certain interest bearing bonds on any city in the state of Oregon, life insurance and annuity contracts, pooled deferred compensation trusts, bank acceptances, and certain corporate bonds.

K. Encumbrances

The district does not use encumbrance accounting.

L. Interfund Receivables and Payables

During the course of operations, numerous transactions occur between individual funds that may result in amounts owed between funds. Those related to goods and services transactions are classified as “due to and from other funds.” Short-term interfund loans are reported as “interfund receivables and payables.” Interfund receivables and payables between funds are eliminated in the Statement of Net Assets.

M. Interfund Transfers

Permanent reallocation of resources between funds of the reporting entity, are classified as interfund transfers. For the purpose of the statement of activities, all interfund transfers between individual governmental funds have been eliminated.

N. Use of Estimates

The preparation of basic financial statements, in conformity with accounting principles generally accepted in the United States of America, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the basic financial statements and reported amounts of revenues and expenses/expenditures during the reporting period.

Note 2. Pension Plan

Plan Description – The district contributes to two pension plans administered by the Oregon Public Employees Retirement System (PERS). The Oregon Public Employees Retirement Fund (OPERF) applies to the district’s contribution for qualifying employees who were hired before August 29, 2003, and is a cost-sharing multiple-employer defined benefit pension plan. The Oregon Public Service Retirement Plan (OPSRP) is hybrid successor plan to the OPERF and consists of two programs: The



28

Pension Program, the defined benefit portion of the plan, applies to qualifying district employees hired after August 29, 2003. Benefits are calculated by a formula for members who attain normal retirement age. The formula takes into account final average salary and years of service. Beginning January 1, 2004, all PERS member contributions go into the Individual Account Program (IAP), the defined contribution portion of the plan. PERS members retain their existing PERS account, but any future member contributions are deposited into the member’s IAP, not the member’s PERS account.

Both PERS plans provide retirement and disability benefits, post employment healthcare benefits, annual cost-of-living adjustments, and death benefits to plan members and beneficiaries. PERS is administered under Oregon Revised Statute Chapter 238, which establishes the Public Employees Retirement Board as the governing body of PERS. PERS issues a publicly available financial report that includes financial statements and required supplementary information. The report may be obtained by writing to PERS, P.O. Box 23700, Tigard, OR, 97281-3700 or by calling 503-598-7377.

Funding Policy – Members of PERS are required to contribute 6.00% of their salary covered under the plan, which is invested in the OPSRP Individual Account Program. The district is required by ORS 238.225 to contribute at an actuarially determined rate for the qualifying employees under the OPSRP plan. The OPERF and the OPSRP rates in effect for the year ended June 30, 2011 were 14.22% and 14.74% respectively. The contribution requirements for plan members are established by ORS Chapter 238 and may be amended by an act of the Oregon Legislature.

Annual Pension Costs – The district’s contributions to PERS for the years ending June 30, 2011, 2010,and 2009 were $61,135, $84,046, and $118,673, respectively, which equaled the required contributions for the year.



29

Note 3. Capital Assets

Capital assets activity for the year was as follows:Balance Balance

June 30, June 30,

2010 Additions Deletions 2011

Governmental activities

Capital assets not being depreciated

Land 12,344$ -$ -$ 12,344$

Total capital assets not being depreciated 12,344 - - 12,344

Capital assets being depreciated

Buildings and improvements 147,417 - - 147,417

Machinery and equipment 48,589 - - 48,589

Total capital assets being depreciated 196,006 - - 196,006

Less accumulated depreciation for

Buildings and improvements 38,774 2,228 41,002

Machinery and equipment 38,139 3,550 - 41,689

Total accumulated depreciation 76,913 5,778 - 82,691

Total capital assets being depreciated, net 131,437 (5,778) - 125,659

Governmental activities capital assets, net 131,437$ (5,778)$ -$ 125,659$

Depreciation expense for the year was charged to the following program:

Governmental activities:Business support services $ 5,778

Note 4. Deposits and Investments

Cash and InvestmentsThe district maintains a cash and investment pool that is available for use by all funds. Each fund type’s portion of this pool is displayed on the combined balance sheet as cash and investments.

Cash and investments are comprised of the following at June 30, 2011:

Petty cash 150$ Deposits with banks 21,969 Investments 346,733

368,852$

Cash and investments are shown on the basic financial statements as:Statement of Net Assets Cash and investments 368,852$

368,852$

As of June 30, 2011, the district held the following investments and maturities:% of

investmentFair Value portfolio

Local Government Investment Pool 346,733$ 100%

Investment type



30

Deposits

The Governmental Accounting Standards Board has adopted accounting principles generally accepted in the United States of America (GAAP), which include standards to categorize deposits to give an indication of the level of custodial risk assumed by the district at June 30, 2011. If bank deposits at year end are not entirely insured or collateralized with securities held by the district or by its agent in the district’s name, the district must disclose the custodial credit risk (below) that exists. Deposits with financial institutions are comprised of bank demand deposits. For deposits in excess of federal depository insurance, Oregon Revised Statutes require depository institutions to be in compliance with ORS 295.

At June 30, 2011 the carrying amount of the district’s deposits (cash and certificates of deposit) in various financial institutions was $21,969 and the bank balances was $145,560. Of these deposits, all were covered by federal depository insurance. The insurance and collateral requirements for deposits are established by banking regulations and Oregon law. Federal depository insurance (FDIC) of $250,000 applies to the deposits in each depository. Where balances continually exceed $250,000, ORS 295.018 requires the depositor to verify that deposit accounts are only maintained at financial institutions on the list of qualified depositories found on the Oregon state treasurer’s website. Qualifying depository banks must pledge securities with a particular value based on the bank’s level of capitalization. At June 30, 2011 and for the year then ended, the district’s deposits were in compliance with the requirements of ORS 295.018.

Custodial credit risk – Custodial credit risk for deposits is the risk that, in the event of a bank failure, a government’s deposits may not be returned to it. The district does not have a policy for custodial credit risk for deposits.

Effective July 1, 2008, House Bill 2901 created a shared liability structure for participating bank depositories in Oregon. Barring any exceptions, a qualifying bank depository is required to pledge collateral valued at least 10% of their quarter-end public fund deposits if they are well capitalized, 25% of their quarter-end public fund deposits if they are adequately capitalized, or 110% of their quarter-end public fund deposits if they are undercapitalized or assigned to pledge 110% by the Office of State Treasurer. In the event of a bank failure, the entire pool of collateral pledged by all qualified Oregon public bank depositories is available to repay the deposits of public funds of governmental entities.

Investments

At June 30, 2011, the district held $346,733 of investments, which is all classified as cash and investmentson the Statement of Net Assets. The district has no policy for managing interest rate risk or credit risk.

The district has invested funds in the Oregon Short-term Fund Local Government Investment Pool (LGIP) during fiscal year 2011. The Local Government Investment Pool (LGIP) was created to meet the financial and administrative responsibilities of federal arbitrage regulations. The investments are regulated by the Oregon Short-term Fund Board and approved by the Oregon Investment Council (ORS 294.805 to 294.895). The Local Government Investment Pool (LGIP) is an external investment pool managed by the state treasurer’s office, which allows governments within the state to pool their funds for investment purposes. The amounts invested in the pool are not classified by risk categories because they are not evidenced by securities that exist in physical or book entry form as defined by GASB Statement No. 40. The Oregon LGIP is unrated for credit quality.

In addition, the Oregon LGIP distributes investment income on an amortized cost basis and participant’s equity in the pool is determined by the amount of participant deposits, adjusted for withdrawals and



31

distributed income. Accordingly, the adjustment to fair value would not represent an expendable increase in the district’s cash position.

Investments in the Oregon LGIP are made under the provisions of ORS 194.180. These funds are held in the district’s name and are not subject to collateralization requirements or ORS 295.018. Investments are stated at cost, which approximated fair value.

A separate financial report for the Oregon Short-term Fund Local Government Investment Pool (LGIP) is prepared by the Secretary of State Audits Division in accordance with GASB StatementNo. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Copies of the report can be obtained from the Oregon Audits Division 255 Capitol Street NE, Suite 500 Salem, OR 97310 or online at http://www.sos.state.or.us/audits/index.html.

Oregon statutes restrict the types of investments in which the district may invest. Authorized investments include obligations of the United States Government and its agencies, certain bonded obligations of Oregon municipalities, bank repurchase agreements, bankers’ acceptances, time certificates of deposit, certain commercial paper, and the Oregon Local Government Investment Pool (LGIP). As of June 30, 2011 and for the year then ended, the district was in compliance with the aforementioned Oregon statutes.

Credit Risk – Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. State statutes authorize the district to invest primarily in general obligations of the United States Government and its agencies, certain bonded obligations of Oregon municipalities, bank repurchase agreements, bankers’ acceptances, certain commercial paper, and the State of Oregon Treasurer’s Local Government Investment Pool (LGIP), among others. The district has no formal investment policy that further restricts its investment choices.

Concentration of Credit Risk – Concentration of credit risk is the risk of a loss attributed to the magnitude of a government’s investment in a single issuer. The district is required to provide information about the concentration of credit risk associated with its investments in one issuer that represents 5 percent or more of the total investments, excluding investments in external investment pools or those issued and explicitly guaranteed by the United States Government. The district has no such investments.

Interest Rate Risk – The district has no formal investment policy that explicitly limits investment maturities as a means of managing its exposure to fair value loss arising from increasing interest rates.

Foreign Currency Risk – The district is prohibited from investments that are not US dollar-denominated; therefore, the district is not exposed to this risk.

Note 5. Interfund Transfers

Interfund transfers during the fiscal year ending June 30, 2011, are as follows:

From Fund To Fund Amount Reason

General Fund Construction Fund 6,000$ To provide for future needs of the districtAdult Education General Fund 2,080 To close fund to general fund

Total 8,080$



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Note 6. Interfund Receivables and Payables

Interfund receivables/payables at June 30, 2011 consists of the following:

Receivable fund Payable fund Amount

General fund Adel Principal Office 2,421$

General fund Adel Clerk Office 6,777

General fund School Improvement Grant 8,222

General fund IDEA Enhancement 1,351

General fund IDEA Students with Disabilities 4,686

General fund IDEA Planning Grant 7,169

Total 30,626$

The purpose of these interfund transactions is to provide for future expected revenue to be received in each payable fund.

Note 7. Leases

Operating lease commitment

Lake County Education Service District’s future minimum lease commitments pertaining to two Aficio copiers with peripherals accounted for as an operating lease in accordance with Statement of Financial Accounting Standards No. 13, at June 30, 2011 are as follows:

Fiscal-Year Ending Total2012 5,323$ 2013 5,323

Present value of

minimum lease

payments 10,646$



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Note 8. Accounts Receivable

Accounts receivable at June 30, 2011 consists of the following:

Fund Type AmountGeneral Fund Property tax receivable 42,332$ General Fund Other receivable 2,067 Adel Principal Office Other receivable 2,421 Adel Clerk Office Other receivable 6,777 School Improvement Grant Grant receivable 8,222 IDEA Enhancement Grant receivable 1,351 IDEA Students with Disabilities Grant receivable 10,518 IDEA Planning Grant Grant receivable 7,169 Early Childhood Special Education Grant receivable 7,577 Early Intervention Grant receivable 2,526

90,960$

Note 9. Risk Management

Lake County Education Service District is exposed to various risks of loss related to torts, theft, damage to and destruction of assets, errors and omissions, injuries to employees, and natural disasters. These risks are covered by the purchase of commercial insurance. The district assumes liability for any deductibles and claims in excess of coverage limitations. Settled claims from these risks have not exceeded commercial insurance coverage in any of the past three fiscal years.

Note 10. Implementation of GASB Statement No. 54—New Fund Balance

The district implemented GASB Statement No. 54 for year ending June 30, 2011. GASB Statement No. 54 requires analysis and presentation of fund balances in five categories. The new fund balance categories are:

Nonspendable—Includes items not immediately converted to cash, such as prepaid items, interfund receivables and inventory.

Restricted—Includes items that are restricted by external creditors, grantors or contributors, or restricted by legal constitutional provisions.

Committed—Includes items committed by the district’s board of directors, by formal board action.

Assigned—Includes items assigned for specific uses, authorized by the district’s superintendent and/or business manager.

Unassigned—This is the residual classification used for those balances not assigned to another category.

Below is a schedule of ending fund balances, based on GASB Statement No. 54 Implementation:



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Fund Balances General Fund

Non Major

funds TotalNonspendable Interfund Receivables 30,626$ -$ 30,626$

Restricted Education-Grants - 35,361 35,361

Committed to: Building repairs & maint. - 9,000 9,000 Vehicles replacement - 8,011 8,011 Early Childhood Programs - 34,555 34,555 PERS 21,000 - 21,000

21,000 51,566 72,566

Unassigned 233,210 - 233,210

TOTAL FUND BALANCES 284,836$ 86,927$ 371,763$

GASB 54 implementation required board approved action to authorize commitments of fund balances. These commitments, outlined in the table above, were approved by the board of directors on June 13, 2011. Commitments of fund balances must be made prior to the end of the fiscal year.

Also on June 13, 2011, the board authorized the Superintendent and the Business Manager to make assignments of ending fund balance. Assignments of fund balances can be done at any time, including after fiscal year end date.

Finally, GASB 54 requires a spending policy, as it relates to ending fund balance. The spending policy states in what order fund balance categories are spent. On June 13, 2011, the board approved the following fund balance order of spending policy:

1. Restricted Fund Balance2. Committed Fund Balance3. Assigned Fund Balance4. Unassigned Fund Balance

Note 11. Restatements

Government Activities: In the Government-Wide statements there were a few adjustments that had to be made for the prior year.

A payable for e-rate had to be booked due to an error on the e-rate application in a previous year.

To book this liability, the beginning net assets of $600,450, as originally reported, has been decreased by $44,330 to $556,120.

Governmental Fund Balance: In the governmental fund statements, the fund balance of the General Fund was also restated by $15,000. This adjustment is due to the closing of the PERS reserve fund to implement GASB Statement No. 54.

REQUIRED SUPPLEMENTARY INFORMATION


STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE

BUDGET AND ACTUAL - GENERAL FUND (BUDGET BASIS)

For the Year Ended

June 30, 2011

Variance with

final budget

Original Final positive or

Budget Budget Actual (negative)

Revenues

Local sources

1100 Property taxes 331,600$ 331,600$ 327,507$ (4,093)$

1500 Investment earnings 5,000 5,000 3,377 (1,623)

1700 Extracurricular 1,000 1,000 1,231 231

1910 Rentals 72,735 72,735 72,705 (30)

1940 Services to other LEAs 6,200 6,200 - (6,200)

1980 Fees charge to grants 8,900 8,900 9,289 389

1990 Miscellaneous revenue 58,000 58,000 27,960 (30,040)

1991 Miscellaneous E rate 46,000 46,000 43,802 (2,198)

State sources

3101 Basic school support fund 670,000 670,000 665,854 (4,146)

3299 Other restricted state grants - - 6,236 6,236

Federal sources

4700 Federal revenue through intermediate source 500 500 500 -

Total revenues 1,199,935 1,199,935 1,158,461 (41,474)

Expenditures

1000 Instruction

300 Purchased services 2,894 2,894 2,613 281

400 Supplies and materials 8,300 8,300 8,112 188

600 Other objects 300 300 385 (85)

700 Transits 24,241 24,241 24,239 2

Total instruction 35,735 35,735 35,349 386

2000 Supporting services

100 Salaries 468,872 424,066 427,665 (3,599)

200 Associated payroll costs 247,412 207,918 189,955 17,963

300 Purchased services 274,811 287,411 277,405 10,006

400 Supplies and materials 22,250 42,250 33,388 8,862

600 Other objects 13,605 13,605 13,046 559

700 Transits 148,000 178,700 170,677 8,023

Total support services 1,174,950 1,153,950 1,112,136 41,814

6000 Contingency

800 Operating contingency 120,000 120,000 - 120,000

Total contingency 120,000 120,000 - 120,000

Total expenditures 1,330,685 1,309,685 1,147,485 162,200

Excess of revenues over (under) expenditures (130,750) (109,750) 10,976 120,726

Other financing sources (uses)

Transfers in 7,750 7,750 2,080 (5,670)

Transfers out (12,000) (33,000) (6,000) 27,000

Total other financing sources (uses) (4,250) (25,250) (3,920) 21,330

Net change in fund balance (135,000) (135,000) 7,056 142,056

Available fund balance, July 1, before restatement 315,000 315,000 307,110 (7,890)

Restatement, see note 11 - - (29,330) (29,330)

Available fund balance, July 1, after restatement 315,000 315,000 277,780 (37,220) Available fund balance, June 30 180,000$ 180,000$ 284,836$ 104,836$


See accompanying independent auditor's report. 35


June 30, 2011

36

Notes to Required Supplementary Information – Budgetary Reporting

In accordance with the state of Oregon, the board of education annually adopts a budget following required public notice and hearing for all funds. The budget may be amended during the year utilizing similar statutorily prescribed procedures. The district’s budget is prepared on the modified accrual basis.

Formal and legal budgetary control for the certified budget is based upon major classes of expenditures known as functions, within funds. These functions include expenditures for instruction, support services, community services, capital acquisitions, and other uses. Although the budget document presents function expenditures or expenses by line item within fund, the legal level of control is at the aggregated fund and functional level. During the year, the district amended the budget once to reclassify expenses between functions in the general fund.

During the year ended June 30, 2011 there were no budget violations.

OTHER SUPPLEMENTARY INFORMATION

Adult

Education Warner Creek Writing

ESL/GED GED Testing Assessment

ASSETSCash -$ -$ -$ Receivables Other - - -

Total assets -$ -$ -$

LIABILITIES AND FUND BALANCES

Liabilities Accounts payable -$ -$ -$ Interfund loan payable - - -

Total liabilities - - -

Fund balances Restricted - - - Committed - - -

Total fund balances - - -

Total liabilities and fund balances -$ -$ -$

See accompanying independent auditor's report.

Lakeview, Lake County, OregonLAKE COUNTY EDUCATION SERVICE DISTRICT

COMBINING BALANCE SHEETNONMAJOR GOVERNMENTAL FUNDS

June 30, 2011

Adel

High School Principal Adel Clerk

Teacher Office Office

-$ -$ -$

- 2,421 6,777

-$ 2,421$ 6,777$

-$ -$ -$ - 2,421 6,777

- 2,421 6,777

- - - - - -

- - -

-$ 2,421$ 6,777$

Electric Teacher Student

Restructure Mentoring Mentoring

Grant Grant Grant

22,612$ -$ 6,496$

- - -

22,612$ -$ 6,496$

-$ -$ -$ - - -

- - -

22,612 - 6,496 - - -

22,612 - 6,496

22,612$ -$ 6,496$

School IDEA

Improvement IDEA Students with

Grant Enhancement Disabilities

-$ -$ -$

8,222 1,351 10,518

8,222$ 1,351$ 10,518$

-$ -$ -$ 8,222 1,351 4,686

8,222 1,351 4,686

- - 5,832 - - -

- - 5,832

8,222$ 1,351$ 10,518$

IDEA System Early Childhood

Planning Performance Review Special

Grant & Improvement Education

-$ -$ 15,723$

7,169 - 7,577

7,169$ -$ 23,300$

-$ -$ 401$ 7,169 - -

7,169 - 401

- - - - - 22,899

- - 22,899

7,169$ -$ 23,300$

TotalEarly McKinney Business June 30,

Intervention Homeless Construction Auto 2011

9,264$ 421$ 9,000$ 8,011$ 71,527$

2,526 - - - 46,561

11,790$ 421$ 9,000$ 8,011$ 118,088$

134$ -$ -$ -$ 535$ - - - - 30,626

134 - - - 31,161

- 421 - - 35,361 11,656 - 9,000 8,011 51,566

11,656 421 9,000 8,011 86,927

11,790$ 421$ 9,000$ 8,011$ 118,088$

37

AdultEducation Warner Creek WritingESL/GED GED Testing Assessment

RevenuesLocal sources -$ 1,255$ -$ Intermediate sources - 14,688 - State sources - - - Federal sources - - -

Total revenues - 15,943 - Expenditures

1000 Instruction100 Salaries - 9,300 - 200 Associated payroll costs - 4,151 - 300 Purchased services - 205 - 400 Supplies and materials - 1,012 - 600 Other objects - 1,275 - 700 Transit - - -

Total instruction - 15,943 - 2000 Support services

100 Salaries - - - 200 Associated payroll costs - - - 300 Purchased services - - - 400 Supplies and materials - - - 600 Other objects - - - 700 Transit - - -

Total support services - - - Total expenditures - 15,943 - Excess of revenues over (under) expenditures - - - Other financing sources

Transfers in (out) (2,080) - - Total other financing sources (2,080) - -

Net change in fund balance (2,080) - -

Available fund balance, July 1 2,080 - - Available fund balance, June 30 -$ -$ -$

See accompanying independent auditor's report.

For the Year Ended June 30, 2011


COMBINING SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - NONMAJOR GOVERNMENTAL FUNDS

Adel High School Principal Adel Clerk

Teacher Office Office

-$ 10,183$ 25,275$ - - - - - - - - - - 10,183 25,275

- - - - - - - - - - - - - - - - - - - - -

- 9,636 18,257 - 547 6,093 - - 925 - - - - - - - - - - 10,183 25,275 - 10,183 25,275 - - -

- - - - - -

- - -

- - - -$ -$ -$

Electric Teacher StudentRestructure Mentoring Mentoring

Grant Grant Grant

-$ -$ 100$ 19,083 - 50,000

- - - - - 1,917

19,083 - 52,017

- - - - - - - - - - - - - - - - - - - - -

- - 24,353 - - 5,503

459 - 8,666 - - 4,618 - - 2,381

54,727 - - 55,186 - 45,521 55,186 - 45,521

(36,103) - 6,496

- - - - - -

(36,103) - 6,496

58,715 - - 22,612$ -$ 6,496$

School IDEAImprovement IDEA Students with

Grant Enhancement Disabilities

-$ -$ -$ - - - - - -

20,151 3,494 14,11520,151 3,494 14,115

- - - - - - - 3,494 - - - - - - - - - 14,115- 3,494 14,115

- - - - - -

20,075 - - 76 - -

- - - - - -

20,151 - - 20,151 3,494 14,115

- - -

- - - - - -

- - -

- - 5,832 -$ -$ 5,832$

IDEA System Performance Early ChildhoodPlanning Review & Special

Grant Improvement Education

-$ 1,357$ 4,830$ - - - - - 65,749

13,186 - 16,04213,186 1,357 86,621

4,342 - 46,873 2,245 - 29,966

217 - 9,2422,340 - 145

- - 4,225 - - -

9,144 - 90,451

- - - - - -

165 1,357 - 3,877 - -

- - - - - -

4,042 1,357 - 13,186 1,357 90,451

- - (3,830)

- - - - -

- - (3,830)

- 26,729 -$ -$ 22,899$

TotalsEarly McKinney Business June 30,

Intervention Homeless Construction Auto 2011

-$ -$ -$ 11,173$ 54,173$ - - - - 83,771

16,775 - - - 82,524 7,314 - - - 76,219

24,089 - - 11,173 296,687

14,191 - - - 74,706 9,126 - - - 45,488 1,593 - - - 14,751

63 - - - 3,560 1,408 - - - 6,908

- - - - 14,115 26,381 - - - 159,528

- - - - 52,246 - - - - 12,143 - - - 5,238 36,885 - - - 810 9,381 - - - 1,215 3,596 - 239 - - 54,966 - 239 - 7,263 169,217

26,381 239 - 7,263 328,745 (2,292) (239) - 3,910 (32,058)

- - 6,000 - 3,920 - - 6,000 - 3,920

(2,292) (239) 6,000 3,910 (28,138)

13,948 660 3,000 4,101 115,065 11,656$ 421$ 9,000$ 8,011$ 86,927$

38



SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE

BUDGET AND ACTUAL - ADULT EDUCATION ESL/GED (BUDGET BASIS)

For the Year Ended

June 30, 2011

Variance with

final budget



Revenues

Local sources

1990 Miscellaneous -$ -$ -$ -$

Total local sources - - - -

Total revenues - - - -

Expenditures

1000 Instruction

1300 Adult continuing education programs

100 Salaries 260 260 - 260

200 Associated payroll costs 70 70 - 70

Total instruction 330 330 - 330

Total expenditures 330 330 - 330

Excess of revenues over (under) expenditures (330) (330) - 330

Other financing sources

Transfers out (1,750) (1,750) (2,080) (330)

Total other financing sources (1,750) (1,750) (2,080) (330)

Net change in fund balance (2,080) (2,080) (2,080) -

Available fund balance, July 1 2,080 2,080 2,080 -

Available fund balance, June 30 -$ -$ -$ -$





BUDGET AND ACTUAL - WARNER CREEK GED TESTING FUND (BUDGET BASIS)

For the Year Ended

June 30, 2011

Variance with

final budget



Revenues

Intermediate sources

1900 Local sources 1,510$ 1,510$ 1,255$ (255)$

2200 Restricted revenue 14,688 14,688 14,688 -

Total intermediate sources 16,198 16,198 15,943 (255)

Total revenues 16,198 16,198 15,943 (255)

Expenditures

1000 Instruction

1300 Adult/continuing education programs

100 Salaries 9,300 9,300 9,300 -

200 Associated payroll costs 3,715 3,715 4,151 (436)

300 Purchased services 310 310 205 105


600 Other objects 1,363 1,363 1,275 88

Total instruction 16,198 16,198 15,943 255

Total expenditures 16,198 16,198 15,943 255

Net change in fund balance - - - -

Available fund balance, July 1 - - - -





BUDGET AND ACTUAL -WRITING ASSESSMENT (BUDGET BASIS)

For the Year Ended

June 30, 2011

Variance with

final budget


Budget Budget Actual (negative)Revenues

Intermediate sources2199 Intermediate sources 830$ 830$ -$ (830)$

Total intermediate sources 830 830 - (830)

Total revenues 830 830 - (830)

Expenditures2000 Support services

2570 Internal services100 Salaries 100 100 - 100 200 Associated payroll costs 30 30 - 30 300 Purchased services 100 100 - 100 400 Supplies and materials 500 500 - 500 600 Other objects 100 100 - 100

Total support services 830 830 - 830

Total expenditures 830 830 - 830









BUDGET AND ACTUAL - HIGH SCHOOL TEACHER (BUDGET BASIS)

For the Year Ended

June 30, 2011

Variance with

final budget



Revenues

Local sources

1940 Other sources 12,969$ 12,969$ -$ (12,969)$

Total local sources 12,969 12,969 - (12,969)

Total revenues 12,969 12,969 - (12,969)

Expenditures

1000 Instruction

1131 High school programs

100 Salaries 9,492 9,492 - 9,492

200 Associated payroll costs 3,477 3,477 - 3,477

Total instruction 12,969 12,969 - 12,969

Total expenditures 12,969 12,969 - 12,969








BUDGET AND ACTUAL - ADEL PRINCIPAL OFFICE (BUDGET BASIS)

For the Year Ended

June 30, 2011

Variance with

final budget



Revenues

Local sources

1940 Other sources 11,047$ 11,047$ 9,683$ (1,364)$

1990 Miscellaneous revenue - 700 500 (200)

Total local sources 11,047 11,747 10,183 (1,564)

Total revenues 11,047 11,747 10,183 (1,564)

Expenditures


2410 Office of the principal services

100 Salaries 10,200 10,200 9,636 564

200 Payroll costs 847 1,547 547 1,000

Total support services 11,047 11,747 10,183 1,564

Total expenditures 11,047 11,747 10,183 1,564








BUDGET AND ACTUAL - ADEL CLERK OFFICE (BUDGET BASIS)

For the Year Ended

June 30, 2011

Variance with

final budget



Revenues

Local sources

1940 Other sources 24,916$ 25,416$ 25,275$ (141)$

Total local sources 24,916 25,416 25,275 (141)

Total revenues 24,916 25,416 25,275 (141)


2411 School administration

100 Salaries 17,952 18,452 18,257 195

200 Payroll costs 6,039 6,039 6,093 (54)

300 Purchased services 925 925 925 -

Total support services 24,916 25,416 25,275 141

Total expenditures 24,916 25,416 25,275 141








BUDGET AND ACTUAL - ELECTRIC RESTRUCTURE GRANT (BUDGET BASIS)

For the Year Ended

June 30, 2011

Variance with

final budget



Revenues


2200 Restricted revenue grant 15,000$ 15,000$ 19,083$ 4,083$

Total intermediate sources 15,000 15,000 19,083 4,083

Total revenues 15,000 15,000 19,083 4,083

Expenditures


2540 Operation and maintenance

300 Purchased services 1,000 1,000 459 541

700 Transit 73,000 73,000 54,727 18,273



Net change in fund balance (59,000) (59,000) (36,103) 22,897

Available fund balance, July 1 59,000 59,000 58,715 (285)

Available fund balance, June 30 -$ -$ 22,612$ 22,612$





BUDGET AND ACTUAL -TEACHER MENTORING GRANT (BUDGET BASIS)

For the Year Ended

June 30, 2011

Variance with

final budget



Revenues

Federal sources

4508 Federal through the state 50,000$ 50,000$ -$ (50,000)$

Total federal sources 50,000 50,000 - (50,000)

Total revenues 50,000 50,000 - (50,000)

Expenditures


2240 Instructional staff development

100 Salaries 29,910 29,910 - 29,910

200 Associated payroll costs 9,315 9,315 - 9,315

300 Purchased services 10,775 10,775 - 10,775

Total support services 50,000 50,000 - 50,000





See accompanying independent auditor's report 46




BUDGET AND ACTUAL -STUDENT MENTORING GRANT (BUDGET BASIS)

For the Year Ended

June 30, 2011

Variance with

final budget



Revenues

Local sources

1990 Miscellaneous revenue -$ 100$ 100$ -$

Total local sources - 100 100 -


2200 Restricted revenue grant 50,000 50,000 50,000 -

Total intermediate sources 50,000 50,000 50,000 -

Federal sources

4508 Federal through the state - 1,500 1,917 417

Total federal sources - 1,500 1,917 417

Total revenues 50,000 51,600 52,017 417

Expenditures


2120 Guidance services

100 Salaries 23,000 24,624 24,353 271

200 Associated payroll costs 11,500 5,776 5,503 273



600 Other objects 2,381 2,381 2,381 - 600 Other objects 2,381 2,381 2,381 -



Net change in fund balance - - 6,496 6,496







BUDGET AND ACTUAL - SCHOOL IMPROVEMENT GRANT (BUDGET BASIS)

For the Year Ended

June 30, 2011

Variance with

final budget



Revenues


2200 Other restricted grants 55,000$ 55,000$ -$ (55,000)$

Total intermediate sources 55,000 55,000 - (55,000)

Federal sources

4500 Federal through state grants 5,000 5,000 - (5,000)

4700 Federal through intermediate grants - - 20,151 20,151

Total federal sources 5,000 5,000 20,151 15,151

Total revenues 60,000 60,000 20,151 (39,849)

Expenditures


2240 Instructional staff development


400 Supplies and materials 20,000 20,000 76 19,924










BUDGET AND ACTUAL - IDEA ENHANCEMENT (BUDGET BASIS)

For the Year Ended

June 30, 2011

Variance with

final budget



Revenues

Federal sources

4508 Federal through the state 6,000$ 6,000$ 3,494$ (2,506)$

Total federal sources 6,000 6,000 3,494 (2,506)

Total revenues 6,000 6,000 3,494 (2,506)

Expenditures

1000 Instruction

1250 Less restrictive programs for

students with disabilities

300 Materials and supplies 6,000 6,000 3,494 2,506

Total instruction 6,000 6,000 3,494 2,506



Available fund balance, July 1 - - - - Available fund balance, June 30 -$ -$ -$ -$





BUDGET AND ACTUAL - IDEA STUDENTS WITH DISABILITIES (BUDGET BASIS)

For the Year Ended

June 30, 2011

Variance with

final budget



Revenues

Federal sources



Total revenues 25,000 25,000 14,115 (10,885)

Expenditures

1000 Instruction

1250 Less restrictive programs for


700 Transit 25,000 25,000 14,115 10,885




Available fund balance, July 1 - - 5,832 5,832 Available fund balance, June 30 -$ -$ 5,832$ 5,832$





BUDGET AND ACTUAL - IDEA PLANNING GRANT

For the Year Ended

June 30, 2011

Variance with

final budget



Revenues

Federal sources


Total federal sources 27,000 27,000 13,186 (13,814) Total revenues 27,000 27,000 13,186 (13,814)

Expenditures

1000 Instruction

1250 Less restricted programs for


700 Transfers to Schools 7,000 7,000 - 7,000

1260 Treatment and rehabilitation

100 Salaries - 4,770 4,342 428

200 Associated payroll costs - 2,255 2,245 10

300 Purchased services 8,000 975 217 758

400 Supplies and materials 5,000 5,000 2,340 2,660



2190 Student support services

300 Purchased services 4,000 4,000 165 3,835

400 Supplies and materials 3,000 3,000 3,877 (877)




Available fund balance, July 1 - - - - Available fund balance, June 30 -$ -$ -$ -$





BUDGET AND ACTUAL - SYSTEM PERFORMANCE REVIEW & IMPROVEMENT (BUDGET BASIS)

For the Year Ended

June 30, 2011

Variance with

final budget



Revenues

Local sources

1941 Services to other districts 1,705$ 1,705$ 1,357$ (348)$


Federal sources

4508 Federal through the state 795 795 - (795)

Total federal sources 795 795 - (795)

Total revenues 2,500 2,500 1,357 (1,143)

Expenditures


2190 Student support services











BUDGET AND ACTUAL - EARLY CHILDHOOD SPECIAL EDUCATION (BUDGET BASIS)

For the Year Ended

June 30, 2011

Variance with

final budget



Revenues

Local sources

1990 Miscellaneous 5,200$ 5,200$ 4,830$ (370)$


State sources

3299 Restricted state grant 63,370 63,370 65,749 2,379

Total state sources 63,370 63,370 65,749 2,379

Federal sources

4500 Restricted federal through state 21,125 21,125 16,042 (5,083)


Total revenues 89,695 89,695 86,621 (3,074)

Expenditures

1000 Instruction

1260 Federal early intervention

100 Salaries 51,727 51,727 46,873 4,854

200 Associated payroll costs 32,218 32,218 29,966 2,252


400 Supplies and materials 335 335 145 190

600 Other objects 4,225 4,225 4,225 -



Net change in fund balance (12,005) (12,005) (3,830) 8,175

Available fund balance, July 1 12,005 12,005 26,729 14,724






BUDGET AND ACTUAL - EARLY INTERVENTION FUND (BUDGET BASIS)

For the Year Ended

June 30, 2011

Variance with

final budget



Revenues

State sources

3299 Restricted state grant 21,125$ 21,125$ 16,775$ (4,350)$

Total state sources 21,125 21,125 16,775 (4,350)

Federal sources

4510 Restricted federal through state 7,040 7,040 7,314 274

Total federal sources 7,040 7,040 7,314 274

Total revenues 28,165 28,165 24,089 (4,076)

Expenditures

1000 Instruction

1260 Federal early intervention

100 Salaries 14,826 14,826 14,191 635

200 Associated payroll costs 9,021 9,021 9,126 (105)


400 Supplies and materials 50 50 63 (13)

600 Other objects 1,408 1,408 1,408 -



Net change in fund balance (500) (500) (2,292) (1,792) Net change in fund balance (500) (500) (2,292) (1,792)

Available fund balance, July 1 500 500 13,948 13,448






BUDGET AND ACTUAL - MCKINNEY HOMELESS FUND (BUDGET BASIS)

For the Year Ended

June 30, 2011

Variance with

final budget



Revenues

Federal sources

4500 Restricted federal through the state -$ -$ -$ -$

Total federal sources - - - -


Expenditures


2219 Other attendance and social work services

700 Transits 660 660 239 421

Total support services 660 660 239 421

Total expenditures 660 660 239 421

Net change in fund balance (660) (660) (239) 421

Available fund balance, July 1 660 660 660 -

Available fund balance, June 30 -$ -$ 421$ 421$





BUDGET AND ACTUAL - CONSTRUCTION FUND (BUDGET BASIS)

For the Year Ended

June 30, 2011

Variance with

final budget



Revenues

Local Sources

1990 Miscellaneous -$ -$ -$ -$

Total local sources - - - -


Expenditures

4000 Facilities acquisition and construction

4150 Building acquisition and improvement -

500 Capital outlay 9,000 9,000 - 9,000

Total support services 9,000 9,000 - 9,000


Excess of revenues over (under) expenditures (9,000) (9,000) - 9,000

Other financing sources

Transfers in 6,000 6,000 6,000 -

Total other financing sources 6,000 6,000 6,000 -


Available fund balance, July 1 3,000 3,000 3,000 -






BUDGET AND ACTUAL - BUSINESS AUTO FUND (BUDGET BASIS)

For the Year Ended

June 30, 2011

Variance with

final budget



Revenues

Local sources

1970 Services provided other funds 10,000$ 10,000$ 11,173$ 1,173$

Total local sources 10,000 10,000 11,173 1,173

Total revenues 10,000 10,000 11,173 1,173

Expenditures


2570 Internal services


400 Supplies and materials 400 400 810 (410)

500 Capital outlay 4,200 4,200 - 4,200

600 Other objects 1,400 1,400 1,215 185




Available fund balance, July 1 2,500 2,500 4,101 1,601



OTHER FINANCIAL SCHEDULES



SCHEDULE OF CASH, CASH ITEMS, INVESTMENTS, AND COLLATERAL SECURITY

June 30, 2011

All

Funds Total

Cash and cash items

South Valley Bank and Trust *

Demand accounts 21,969$

Total South Valley Bank and Trust 21,969$

Total cash with banks 21,969

Cash-on-hand 150 Total cash and cash items 22,119

Investments

Oregon State Treasury Local Government Investment Pool ** 346,733

Total investments 346,733

Total cash, cash items and investments 368,852$

General Fund 295,389$

Nonmajor Funds 71,527

Proprietary Fund 1,936

Total cash and cash items by fund 368,852$

Collateral security

South Valley Bank and Trust - FDIC 250,000$

* Qualified depository per Oregon Treasurer

** Oregon Local Government Investment Pool is fully collateralized by the State of Oregon


SCHEDULE OF PROPERTY TAX TRANSACTIONS

For the Year Ended

June 30, 2011

Uncollected (Abatement) Total Uncollected

Taxes Current and Rebates Interest Taxes Amount Taxes

Tax Year June 30, 2010 Assessment Adjustments Allowed Collected Collected Collected June 30, 2011

2010-11 331,465$ (437)$ (7,449)$ 308$ 301,058$ 301,366$ 22,521$

2009-10 22,155$ - (342) - 867 9,571 10,438 12,242

2008-09 10,594 - (534) - 890 4,256 5,146 5,804

2007-08 5,615 - (127) - 1,181 3,887 5,068 1,601

2006-07 3,132 - (114) - 868 2,516 3,384 502

2005-06 635 - (110) - 92 252 344 273

2004-05 381 - - - 74 157 231 224

2003-04 152 - - - - - - 152

2002-03 135 - - - - - - 135

2001-02 31 - - - - - - 31

2000-01 29 - - - - - - 29

1999-00 5 - - - - - - 5

1998-99 11 - - - - - - 11

1997-98 15 - - - - - - 15

1996-97 22 - - - - - - 22

1995-96 10 - - - - - - 10

1994-95 18 - - - - - - 18

1993-94 13 - - - - - - 13

1992-93 24 - - - - - - 24

1991-92 9 - - - - - - 9

42,986$ 331,465$ (1,664)$ (7,449)$ 4,280$ 321,697$ 325,977$ 43,641$

Less 3% allowance (1,309)

Net property taxes receivable 42,332$





OREGON DEPARTMENT OF EDUCATION REQUIRED INFORMATIONFORM 581-3211 - SUPPLEMENTAL INFORMATION

June 30, 2011

See accompanying independent auditor’s report 60

A. Energy Bill for Heating - All Funds:Please enter your expenditures for electricity& heating fuel for these Functions & Objects.

B. Replacement of Equipment – General Fund:Include all General Fund expenditures in object 542, except for the following exclusions:Exclude these functions: Exclude these functions:1113, 1122 & 1132 Co-curricular Activities 4150 Construction1140 Pre-Kindergarten 2550 Pupil Transportation1300 Continuing Education 3100 Food Service1400 Summer School 3300 Community Services

Objects 325 &326Function 2540 $ 7,025Function 2550 $ -

$ -

Lake County Education Service DistrictDistrict Audit Revenue Summary - Budgetary BasisFor the fiscal year ended June 30, 2011

Revenue from Local Sources Fund 100 Fund 200 Fund 300 Fund 400 Fund 500 Fund 600 Fund 7001110 Ad Valorem Taxes 322,596$ -$ -$ -$ -$ -$ -$ 1120 Local Option Taxes - - - - - - - 1190 Penalties and interest 4,911 - - - - - - 1200 Rev from Local Government other than district - - - - - - - 1310 Regular Tuition - - - - - - - 1320 Adult/Continuing Ed Tuition - - - - - - - 1330 Summer School Tuition - - - - - - - 1400 Transportation fees - - - - - - - 1500 Earnings on investments 3,377 - - - - - - 1600 Food Service - - - - - - - 1700 Extracurricular 1,231 - - - - - - 1800 Community Services - - - - - - - 1910 Rentals 72,705 - - - - - - 1920 Donations from private sources - - - - - - - 1930 Lease payments from private contractors - - - - - - - 1940 Services provided other LEA - 36,315 - - 20,366 - - 1950 Textbook sales - - - - - - - 1960 Rec of Prior Years Expenditures - - - - - - - 1970 Services provided other funds - - - 11,173 - - - 1980 Fees charged to grants 9,289 - - - - - - 1990 Misc Local source 71,762 6,685 - - 3,254 - -

Total Revenue from Local Sources 485,871 43,000 - 11,173 23,620 - -

Revenue from Intermediate Sources2101 County School Funds - - - - - - - 2102 ESD appt - - - - - - - 2105 Nat Gas, Oil and Min receipts - - - - - - - 2199 Other int. sources - - - - - - - 2200 Restricted Rev int sources - 83,771 - - - - - 2800 Rev in Lieu of Taxes - - - - - - - 2900 Rev for/on Behalf of District - - - - - - -

Total Revenue from Intermediate Sources - 83,771 - - - - -

Revenue from State Sources3101 State School Fund-Gen Support 665,854 - - - - - - 3102 State School Lunch Match - - - - - - - 3103 Common School Fund - - - - - - - 3104 State Managed Cty Timber - - - - - - - 3199 Other Unrestricted Grants-State - - - - - - - 3222 SSSF Transportation - - - - - - - 3299 Other Restricted Grants-State 6,236 82,524 - - - - - 3299 Other Restricted Grants-State 6,236 82,524 - - - - - 3800 State rev in lieu of tax - - - - - - - 3900 State rev for/on behalf of district - - - - - - -

Total Revenue from State Sources 672,090 82,524 - - - - -

Revenue from Federal Sources4100 Unrest Direct from Fed - - - - - - - 4200 Unrest from Fed thru State - - - - - - - 4300 Rest. from Fed - - - - - - - 4500 Restr.from Fed thru state - 54,150 - - - - - 4700 Grants from Fed thru other Int Agencies 500 22,069 - - - - - 4801 Fed Forest Fees - - - - - - - 4802 Impact Aid for Operation - - - - - - - 4899 Other Fed Rev in lieu of Taxes - - - - - - - 4900 Fed Rev for/on behalf of district - - - - - - -

Total Revenue from Federal Sources 500 76,219 - - - - -

Revenue from Other Sources5100 Long Term Debt Financing - - - - - - - 5200 Interfund Transfers 2,080 - - 6,000 - - - 5300 Sale of Fixed Assets - - - - - - - 5400 Beginning Fund Balance 277,780 107,964 - 7,101 280 - -

Total Revenue Other Sources 279,860 107,964 - 13,101 280 - -

Grand Totals 1,438,321$ 393,478$ -$ 24,274$ 23,900$ -$ -$


Federal

CFDA 2011 2011

Federal Grantor/Pass-through Grantor/Program Title Number Cash Receipts Expenditures

U.S. Department of Education

Passed through Oregon Department of Education

Individuals with Disabilities Act, Part B 84.027 14,115$ 14,115$

Individuals with Disabilities Act ,Enhancement 84.027 3,494 3,494

Speech & Language Pathology Cohort 84.323 500 500

18,109 18,109

Passed Through Southern Oregon ESD

American Recovery & Reinvestmetn Act - Autism 84.391 4,042 4,042

4,042 4,042

Passed through Douglas Education Service District

Individuals with Disabilities Act, Preschool Grants 84.173 4,559 4,559

Individuals with Disabilities Act, Part B, 611 84.027 11,482 11,482

Special Education, Grants for Infants and Families 84.181 7,314 7,314

ARRA - Part B 611 - ECSE 84.391 7,280 7,280

ARRA - Part C - EI 84.393 1,864 1,864

32,499 32,499

Passed through High Desert ESD

Sustainability Grant 84.372 20,151 20,151

20,151 20,151

Total U.S. Department of Education 74,801 74,801

Department of Health and Human Services

Passed through Lake County Mental Health

Drug Free Communities 93.276 1,918 1,918

1,918 1,918

Total Department of Health and Human Services 1,918 1,918

Total Federal Assistance 76,719$ 76,719$



SCHEDULE OF FEDERAL AWARDS (BUDGET BASIS)

June 30, 2011

See notes to the schedule of expenditures of federal awards 62

63

LAKE COUNTY EDUCATION SERVICE DISTRICTLAKE COUNTY, OREGON

NOTES TO THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDSFor the year ended

June 30, 2011

Note A. Basis of Presentation

The accompanying schedule of expenditures of federal awards includes the federal grant activity of the Lake Education Service District and is presented on the modified accrual basis of accounting. The information in the schedule is presented in accordance with the requirements of OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Therefore, some of the amounts presented in this schedule may differ from amounts presented in, or used in the preparation of the basic financial statements.

100 200 300 400 500 600 700

Associated Purchased Supplies Capital Other Transfers

Function Salaries Payroll Costs Services & Materials Outlay Objects Transits Total1000 Instruction services1131 High school programs -$ -$ 2,203$ 7,402$ -$ -$ 24,239$ 33,844$ 1300 Adult and continuing education - - 410 710 - 385 - 1,505

Total 1000 instruction services - - 2,613 8,112 - 385 24,239 35,349


2116 Home school supervision 3,810 3,120 582 - - - - 7,512

2122 Counseling services 27,917 16,776 13,388 - - - 101,767 159,848

2142 Psychological testing service 62,428 27,878 14,307 792 - - - 105,405

2143 Psychological counseling service - - - - - - - -

2148 Psychological services childfind 5,366 2,442 991 - - - - 8,799

2150 Speech pathology and audiology services 107,462 59,988 56,693 4,056 - 500 - 228,699

2190 Direction of special education 58,727 19,321 12,118 3,876 - - 44,910 138,952

2211 Direction improvement of instruction 54,647 22,388 19,000 10,248 - - 24,000 130,283

2218 Improvement of instruction leadership - - 10,795 1,155 - - - 11,950

2310 Board of education services - - 7,707 - - 7,759 - 15,466

2320 Executive administration 44,690 10,546 2,850 18 - 1,736 - 59,840

2322 Executive administration other - - 26 - - - - 26

2329 Executive administration services 15,772 2,351 2,799 - - - - 20,922

2520 Fiscal services 22,372 13,127 7,475 206 - 836 - 44,016

2529 Other fiscal services 12,030 6,984 42,907 - - - - 61,921

2540 Operation and maintenance of plant 2,481 284 11,879 833 - 2,065 - 17,542

2570 Internal service 9,963 4,750 4,709 5,891 - - - 25,313

2649 Other staff services - - - 214 - - - 214

2660 Technology services - - 4,585 3,604 - 150 - 8,339

2669 Other technology services - - 64,594 2,495 - - - 67,089

Total 2000 support services 427,665 189,955 277,405 33,388 - 13,046 170,677 1,112,136

5000 Other uses

5200 Transfers Out - - - - - - 6,000 6,000

Total 5000 other uses - - - - - - 6,000 6,000

Total expenditures 427,665$ 189,955$ 280,018$ 41,500$ -$ 13,431$ 200,916$ 1,153,485$

For the Year Ended

June 30, 2011



SCHEDULE OF EXPENDITURES

GENERAL FUND


100 200 300 400 500 600 700


Function Salaries Payroll Costs Services & Materials Outlay Objects Transits Total

1000 Instruction services1250 Less restrictive programs for students with disabilities -$ -$ 3,494$ -$ -$ -$ 14,115$ 17,609$ 1260 Early intervention 65,406 41,337 11,052 2,548 - 5,633 - 125,976

1300 Adult and continuing education 9,300 4,151 205 1,012 - 1,275 - 15,943 Total 1000 instruction services 74,706 45,488 14,751 3,560 - 6,908 14,115 159,528


2120 Guidance services 24,353 5,503 8,666 4,618 - 2,381 - 45,521

2140 Psychological services - - - - - - - -

2190 Service direction, student support services - - 1,522 3,877 - - - 5,399

2219 Other improvement of instruction services - - - - - - 239 239

2240 Instructional staff development - - 20,075 76 - - - 20,151

2410 Office of the superintendent services 9,636 547 - - - - - 10,183

2411 Administration 18,257 6,093 925 - - - - 25,275

2540 Operation and maintenance of plant - - 459 - - - 54,727 55,186

Total 2000 support services 52,246 12,143 31,647 8,571 - 2,381 54,966 161,954

4000 Facilities acquisition and construction

4150 Building acquisition improvement - - - - - - - -

Total 4000 facilities acquisition and construction - - - - - - - -

5000 Other Uses

5200 Transfers out - - - - - - 2,080 2,080

Total 5000 other uses - - - - - - 2,080 2,080

6000 Contingencies

6110 Contingencies - - - - - - - - Total expenditures 126,952$ 57,631$ 46,398$ 12,131$ -$ 9,289$ 71,161$ 321,482$

For the Year Ended

June 30, 2011




SPECIAL REVENUE FUNDS


100 200 300 400 500 600 700




2570 Printing, publishing, and duplicating services -$ -$ 5,238$ 810$ -$ 1,215$ -$ 7,263$

Total 2000 support services - - 5,238 810 - 1,215 - 7,263

Total expenditures -$ -$ 5,238$ 810$ -$ 1,215$ -$ 7,263$

For the Year Ended

June 30, 2011




CAPITAL PROJECT FUNDS


100 200 300 400 500 600 700




2574 Printing, publishing, and duplicating services 4,763$ 3,900$ 8,567$ 4,734$ -$ -$ -$ 21,964$

Total 2000 support services 4,763 3,900 8,567 4,734 - - - 21,964 Total expenditures 4,763$ 3,900$ 8,567$ 4,734$ -$ -$ -$ 21,964$

For the Year Ended

June 30, 2011




PROPRIETARY FUND


REPORTS REQUIRED BY OREGON STATE REGULATIONS

68

George W. Wilber, CrFA, CPARobert M. Armstrong, CPA Mary Jo Evers, CFE, CPA



Kari J. Ott, CPA


Professional Group

INDEPENDENT AUDITOR’S REPORTREQUIRED BY OREGON STATE REGULATIONS

Board of DirectorsLake County Education Service DistrictLakeview, Lake County, Oregon

We have audited the basic financial statements of Lake County Education Service District as of and for the year ended June 30, 2011 and have issued our report thereon dated November 11, 2011. We conducted our audit in accordance with auditing standardsgenerally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States.

Compliance

As part of obtaining reasonable assurance about whether Lake County Education Service District’s financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grants, including the provisions of Oregon Revised Statutes as specified in Oregon Administrative Rules 162-10-000 through 162-10-320 of the Minimum Standards for Audits of Oregon Municipal Corporations, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion.

We performed procedures to the extent we considered necessary to address the required comments and disclosures which included, but were not limited to the following:

Deposit of public funds with financial institutions (ORS Chapter 295) Indebtedness limitations, restrictions, and repayment Budgets legally required (ORS Chapter 294) Insurance and fidelity bonds in force or required by law Programs funded from outside sources Authorized investment of surplus funds (ORS Chapter 294) Public contracts and purchasing (ORS Chapters 279A, 279B, 279C) State school fund factors and calculation

In connection with our testing nothing came to our attention that caused us to believe Lake County Education Service District was not in substantial compliance with certain provisions of law, regulations, contracts and grants, including the provisions of Oregon Revised Statutes as specified in Oregon Administrative Rules 162-10-000 through 162-10-320 of the Minimum Standards for Audits of Oregon Municipal Corporations.

OAR 162-10-230 Internal Control

In planning and performing our audit, we considered Lake County Education Service District’s internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of Lake County Education Service District’s internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of Lake County Education Service District’s internal control over financial reporting.

A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the district’s financial statements will not be prevented, or detected and corrected on a timely basis.

69

Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over financial reporting that might be deficiencies, that we consider to be material weaknesses, as defined above.

We noted certain matters that we reported to management of Lake County Education Service District in a separate letter dated November 11, 2011.

This report is intended solely for the information and use of the board directors, management, others within the district, the Oregon Secretary of State, federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.


By

Burns, OregonNovember 11, 2011


AUDIT COMMENTS AND DISCLOSURES REQUIRED BY THE STATE OF OREGONJune 30, 2011

70

Oregon Administration Rules 162-10-200 through 162-10-320 of the Minimum Standards for Audits of Oregon Municipal Corporations, prescribed by the secretary of state in cooperation with the Oregon State Board of Accountancy, require certain comments and disclosures relating to the audit of fiscal affairs and compliance with legal requirements. Comments relating to significant accounting policies, organization, fund structure, cash security and investments are included in the notes to financial statements. Other required comments and disclosures relating to this audit are set forth below.

Accounting Systems and Control Structure

The organizational structure of the Lake County Education Service District provides sound accounting policies for maintaining an adequate and effective system of accountability and responsibility of funds. The accounting records are being maintained in a satisfactory manner, which offers an adequate system of reporting to interested parties and compliance with legal requirements.

Where possible the district has maintained a plan of organization encompassing methods and measures on internal control to safeguard its assets, check the accuracy and reliability of its accounting data, promote operational efficiency, and carry out board policies.

As we have stated in the following report on compliance and on internal control over financial reporting in accordance with Government Auditing Standards, we do not express an opinion on the district’s effectiveness in those areas. However, we did note certain matters that we reported to management in a separate letter dated November 11, 2011.

Indebtedness

Our review disclosed no conditions which we considered to be matters of noncompliance with the statutory and charter requirements relating to debt.

Budgets

Our review of the 2010-2011 and 2011-2012 budgets indicate the district has substantially complied with local budget law during the preparation and adoption of those budgets. The district appropriates its budget at the function level for legal purposes. The district has also substantially complied with local budget law in the execution of the 2010-2011budget.

Insurance and Fidelity Bond Coverage

We have examined the policies relating to insurance and fidelity bond coverage and ascertained such policies appear to be in force and that they appear to satisfy bond ordinances and other provisions. The district has complied with the provisions of Oregon statutes in respect to bonding of board members and employees. We are not competent, by training, to state whether the insurance policies in force at June 30, 2011 provide adequate coverage. We understand that the coverage is reviewed periodically with the district’s agent of record and that such reviews have been made recently.


AUDIT COMMENTS AND DISCLOSURES REQUIRED BY THE STATE OF OREGONJune 30, 2011

71

Programs Funded from Outside Sources

We have audited the records and financial reports for district grants and made such tests, to the extent deemed appropriate, for the programs in which the district participates. Based on our audit, we found that for the items tested, Lake County Education Service District complied with the material terms and conditions of the federal and state grant contracts and agreements. Further, based on our audit, nothing came to our attention to indicate that Lake County Education Service District had not complied with the material terms and conditions of federal and state grant contracts and agreements which were not specifically tested. Each grant is subject to audit by the grantor agency and any adjustments may become a liability of the appropriate fund.

Public Contracts and Purchasing

Our review of district operations indicates the district complies with state statutes relating to public contracting.

Collateral

Lake County Education Service District bank balances of deposit at June 30, 2011, were entirely insured or collateralized with the Federal Deposit Insurance Corporation. In addition, the district’s deposit accounts were only maintained at financial institutions on the list of qualified depositors compiled by the Oregon state treasurer.

Investments

We have reviewed the district’s compliance with state statutes regarding the investment of surplus public funds. Our review disclosed no conditions that we considered being matters of noncompliance.

Highway Funds

During the fiscal year ended June 30, 2011, the district did not receive revenue from taxes on motor vehicle fuel.

State School Fund

Our review of the district’s calculation and reporting of the factors used to compute the state school fund distribution indicates that the district is in compliance with the requirements of Oregon statutes and as further defined by the Oregon Department of Education.

OREGON AUDITS DIVISION

SUMMARY OF REVENUES AND EXPENDITURES

Name of Municipal Corporation Lake County Education Service District

Address Lakeview, Oregon 97630

Period Covered by Audit Report: From July 1, 2010 to June 30, 2011

Total Revenues and/or Receipts - All Funds 1,485,027$

Less:

Receipts from short-term loans -

Taxes, assessments and other collections to

be distributed to other governmental units - -

Net Revenues and/or Receipts 1,485,027$

Total Expenditures and/or Disbursements - All Funds 1,503,972$

Less:

Interfund loans and transfers -

Principal Payments - short-term loans -

Principal Payments - bonded or other long-term debt -

Principal Payments - warrants issued during prior years -

Turnovers to other municipal corporations

Taxes and Assessments -

Other Distributions -

Other Trust Moneys - -

Net Expenditures and/or Disbursements 1,503,972$

The above information is based upon the revenues and expenditures/expenses for all funds of the

municipal corporation on the basis of accounting used in the audited or reviewed financial statements.

Auditor/Firm Signature

PLEASE ENCLOSE PAYMENT WITH SUMMARY

Over Not Over Fee ORS 297.485 (1)

50,000$ 20$

50,000$ 150,000 40

150,000 500,000 150

500,000 1,000,000 200

1,000,000 5,000,000 250

5,000,000 10,000,000 300

10,000,000 50,000,000 350

50,000,000 400

(Net Expenditures and/or Disbursements)

Within 30 days after submitting the audit report to the municipal corporation, one copy of this summary must

be filed with the Secretary of State, Division of Audits, Salem, Oregon 97310, and one copy must be

delivered to the municipal corporation.

For Use by Division of Audits

Account Code _______________________ Firm Code _______________________ Filing Fee _____________________

…The filing fee shall be determined by the total expenditures made by the municipal

corporation for any and all purposes during the calendar or fiscal year audited, except that

expenditures for principal of bonded debt, principal of short-term loans, principal of warrants

redeemed which were issued during prior audit periods, transfers of loans between funds and

turnovers of taxes or other trust moneys to other municipal corporations shall not be

included in the total expenditures upon which the amount of fee is based.

72

REPORT REQUIRED BY GOVERNMENT AUDITING STANDARDS

73

George W. Wilber, CrFA, CPARobert M. Armstrong, CPA Mary Jo Evers, CFE, CPA



Kari J. Ott, CPA


Professional Group

REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCEAND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS

PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS

Board of DirectorsLake County Education Service DistrictLakeview, Lake County, Oregon

We have audited the financial statements of the governmental activities, business-type activities and each major fund, and the aggregate remaining fund information of Lake County Education Service District as of and for the year ended June 30, 2011, which collectively comprise the Lake County Education Service District’s basic financial statements and have issued our report thereon dated November 11, 2011. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States.

Internal Control Over Financial Reporting

In planning and performing our audit, we considered Lake County Education Service District’s internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of Lake County Education Service District’s internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of Lake County Education Service District’s internal control over financial reporting.

A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions to prevent, or detect misstatements and correct misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the district’s financial statements will not be prevented, or detected and corrected on a timely basis.

Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and would not necessarily identify all deficiencies in internal control over financial reporting that might be deficiencies, significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined above.

Compliance and Other Matters

As part of obtaining reasonable assurance about whether Lake County Education Service District’s financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grantagreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion.

We noted certain matters that we reported to management of Lake County Education Service District in a separate letter dated November 11, 2011.

74

This report is intended solely for the information and use of the board directors, management, others within the district, the Oregon Secretary of State, federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.


By

Burns, OregonNovember 11, 2011

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