okmulgee county, oklahoma july 1, 2011 to june 30, …annual financial report dewar school district...

ANNUAL FINANCIAL REPORT

DEWAR SCHOOL DISTRICT NO. 1-008

OKMULGEE COUNTY, OKLAHOMA

JULY 1, 2011 TO JUNE 30, 2012

AUDITED BY

KERRY JOHN PATTEN, C.P.A.

DEWAR SCHOOL DISTRICT NO. 1-008OKMULGEE COUNTY, OKLAHOMA

SCHOOL DISTRICT OFFICIALSJUNE 30, 2012

Board of Education

President Rick Chisum

Vice-President Michael Clingan

Clerk Karen Milan

Member Gary McGowen

Member Larry Hall

Superintendent of Schools

Todd Been

School District Treasurer

Connie DeVore


JUNE 30, 2012

TABLE OF CONTENTSPage

Report of Independent Auditor 1

Combined Financial Statements

Combined Statement of Assets, Liabilities and Fund Balances -All Fund Types and Account Groups - Regulatory Basis 3

Combined Statement of Revenues Collected, Expenditures Paidand Changes in Fund Balances - All Governmental Fund TypesRegulatory Basis 4

Combined Statement of Revenues Collected, Expenditures Paidand Changes in Fund Balances - Budget and Actual - Regulatory BasisGeneral Fund and Special Revenue Fund 5

Notes to the Financial Statements 6

Combining Financial Statements

Combining Statement of Assets, Liabilities and FundBalances - All Special Revenue Funds - Regulatory Basis 17

Combining Statement of Revenues Collected, Expenditures Paidand Changes in Fund Balances -All Special Revenue FundsRegulatory Basis 18

Combining Statement of Assets, Liabilitiesand Fund Balances -Fiduciary Fund - Regulatory Basis 19

Supplemental Information

Budgetary Comparison Schedule - Regulatory BasisBuilding Fund 20

Budgetary Comparison Schedule - Regulatory BasisChild Nutrition Fund 21

Schedule of Expenditures of Federal Awards 22

Notes to the Schedule of Expenditures of Federal Awards 24

School Activity Fund - Receipts, Transfers, Disbursementsand Sub-account Balances 25

Reports Required by Government Auditing Standards

Report on Internal Control over Financial Reporting and on Compliance and OtherMatters Based on an Audit of Financial Statements Performed in AccordanceWith Government Auditing Standards 26

Independent Auditor's Report on Compliance with Requirements That Could Have a DirectMaterial Effect on Each Major Program and Internal Control over Compliance in Accordancewith OMB Circular A-133 28

(continued)

Schedule of Findings and Questioned Costs 30

Summary of PriorAudit Findings 31

Schedule of Comments 32

Schedule of Accountant's Professional Liability Insurance Affidavit 33


2101N. Willow Ave.Broken Arrow, OK 74012Phone Number (918) 250-8838FAX Number (918) 250-9853

The Honorable Board of EducationDewar School District No. 1-008Dewar, Okmulgee County, Oklahoma

Independent Auditor's Report

Ihave audited the accompanying combined fund type and account group financial statements - regulatory basisofthe Dewar School District No. 1-008, Okmulgee County, Oklahoma (District), as listed in the table ofcontents,as combined financial statements as of and for the year ended June 30, 2012. These financial statements arethe responsibility of the District's management. My. responsibility is to express an opinion on these financialstatements based on my audit.

Iconducted my audit in accordance with auditing standards generally accepted in the United States of Americaand Government Auditing Standards, issued by the Comptroller General of the United States. Those standardsreauire that I plan and perform the audit to obtain reasonable assurance about whether the financial statementsare free of material misstatement. An audit includes examining, on a test basis, evidence supportingJheamounts and disclosures in the combined financial statements. An audit also includes assessing the accountingprinciples used and significant estimates made by management, as well as evaluating the overall combinedfinancial statement presentation. Ibelieve that my audit provides a reasonable basis for my opinion.

As discussed in Note 1 (C), these financial statements were prepared in conformity with the accounting andfinancial reporting regulations prescribed or permitted by the Oklahoma State Department of Education^ whicri isa comprehensive basis of accounting other than accounting principles generally accepted in the United Statesof America. The effect on the financial statements resulting from the use of this reguatory basis ^accountingand presentation as compared to accounting principles generally accepted in the United States of Americacannot be reasonable determined, but is considered material.

In my opinion, because the District's policy is to prepare its combined financial statements on the Ibasis ofaccounting discussed in the third paragraph, the combined financial statements referred to in the first paragraphdo not present fairly, in conformity with accounting principles generally accepted in the United States ofAmerica; the financial position of the governmental activities, each major fund, and the aggregate remainingfund information of the Dewar School District No. I-008, in conformity with accounting principles generallyaccepted in the United States of America, the financial position of Okmulgee, County Oklahoma as of June 30,2012, and the respective changes in financial position thereof for the year then ended.

The financial statements referred to above do not include the general fixed asset account group which is adeparture from the regulatory basis of accounting prescribed by the Oklahoma State Department of Education.The amount thatshould be recorded in the general fixed asset account group is not known.

However, in my opinion, except for the effects of the omission of the general fixed asset account group, thecombined financial statements referred to in the first paragraph present fairly in all material respects, theassets, liabilities and fund balances arising from regulatory basis transactions of each fund type and accountqroup of Dewar School District No. I-008, Okmulgee County, Oklahoma, as ofJune 30, 2012 and the revenuescollected and expenditures paid and encumbered for the year then ended on the regulatory basis ofaccountingdescribed in Note 1.

My audit was conducted for the purpose of forming opinions on the fund type and account group financialstatements within the combined financial statements. The accompanying Schedule of Expenditures of FederalAwards is presented for purposes of additional analysis as required by U.S. Office of Management and BudgetCircular A-133,/\i/d/te of States, Local Governments, and Nonprofit Organizations, and is not a required part ofthe combined financial statements. The Combining Statement of Changes in Assets and Liabilities of theFiduciary Funds—Regulatory Basis and other schedules listed as Supplemental Information in the Table ofContents, are presented for purposes of additional analysis and are not a required part of the combined financialstatements of the District. The Combining Statement of Changes in Assets and Liabilities of the FiduciaryFunds—Regulatory Basis and other schedules listed as Supplemental Information in the Table of Contents arethe responsibility of management and were derived from and relate directly to the underlying accounting andother records used to prepare the financial statements. The information has been subjected to the auditingprocedures applied in the audit of the fund type and account group financial statements and certain additionalprocedures, including comparing and reconciling such information directly to the underlying accounting andother records used to prepare the financial statements or to the financial statements themselves, and otheradditional procedures in accordance with auditing standards generally accepted in the United States of America.In my opinion, the information is fairly stated in all material respects in relation to the financial statements as awhole.

In accordance with Government Auditing Standards, I have also issued my report dated February 1, 2013, onmy consideration of the District's internal control over financial reporting and on our tests of its compliance withcertain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of thatreport is to describe the scope of my testing of internal control over financial reporting and compliance and theresults of that testing, and not to provide an opinion on the internal control over financial reporting or oncompliance. That report is an integral part of an audit performed in accordance with Government AuditingStandards and should be considered in assessing the results of my audit.

^^

Kerry JohXPatten, C.P.A.FebruanT1,2013

COMBINED FINANCIAL STATEMENTS


COMBINED STATEMENT OF ASSETS, LIABILITIES AND FUND BALANCES

ALL FUND TYPES AND ACCOUNT GROUPS - REGULATORY BASIS

JUNE 30, 2012

Governmental Fund Types

$

$

Fiduciary FundTypes

Account

Groups

$

$

Total

(MemorandumOnly)

General

$

$

SpecialRevenue

$

$

Debt Service

Trust and

AgencyGeneral

Long-term Debt

$

27,981.02

153,330.69

$ 181,311.71

June 30,2012

ASSETS

Cash

Investments

Amounts available in debt service fund

Amounts to be provided for retirement

of general long-term debt

$ 559.810.25

100.000.00

56.379.50 27.981.02 76.087.82

14,500.00

720,258.59

114,500.00

27,981.02

153,330.69

Total assets $ 659.810.25 56,379.50 27.981.02 90,587.82 1.016,070.30

LIABILITIES AND FUND BALANCES

448.651.49 $ 16,873.28 25,260.28 $ 490,785.05

Liabilities:

Outstanding warrants

Encumbrances

Long-term debt:Capitalized lease obligations payable - - - -

101,311.71 101,311.71

Bonds payable - - - -80,000.00 80,000.00

Interest payable - - - - - -

Total liabilities $ 448,651.49 $ 16,873.28 $ - $ 25,260.28 $ 181,311.71 $ 672,096.76

iind Balances

Designated for capital projects $ - $ - $ -$ - $ - $ -

Designated for debt service - -27,981.02

- -27,981.02

Cash fund balances

$

211,158.76

211,158.76 $

39,506.22

39,506.22

-

$

65,327.54

65,327.54

-

$

315,992.52

Total fund balances $ 27,981.02 $ -343,973.54

Total liabilities and fund balances $ 659,810.25 $ 56,379.50 $ 27,981.02 $ 90,587.82 $ 181,311.71 $ 1,016,070.30

The notes to the financial statements are an integral part of this statement.


COMBINED STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES

ALL GOVERNMENTAL FUND TYPES - REGULATORY BASIS

FOR THE YEAR ENDED JUNE 30, 2012

Revenues collected:

Local sources

Intermediate sources

State sources

Federal sources

Total revenues collected

Expenditures paid:

Instruction

Support services

Non-instructional services

Capital outlay

Other outlays

Other uses

Repayments

Debt service:

Principal retirement

Interest

Total expenditures paid

Excess of revenues collected over (under)

expenses paid before adjustments to

prior year encumbrances

Adjustments to prior year encumbrances

Other financing sources (uses):

Bond sale proceeds

Operating transfers in/(out)

Bank charges

Total other financing sources (uses)

Excess (deficiency) of revenue collectedover expenditures paid and other

financing sources (uses)

Fund balances, beginning of year

Fund balances, end of year


Governmental Fund Types

General

167,663.46 $

43,690.20

2,436,996.99

609,269.30

SpecialRevenue

44,484.12 $

4,285.86

188.003.49

$ 3,257,619.95 $ 236,773.47 $

2,146,061.27

1,163,846.97

14,107.85

6,310.46

34,677.84

6,138.08

19,914.17

199,448.98

Debt Service

68,713.82

68,713.82

70,000.00

4,205.00

$ 3,371,142.47 $ 219,363.15 $ 74,205.00 $

$ (113,522.52) $ 17,410.32 $ (5,491.18)

$ $ $

$

Total

(MemorandumOnly)

June 30, 2012

280,861.40

43,690.20

2,441,282.85

797,272.79

3,563,107.24

2,146,061.27

1,183,761.14

213,556.83

6,310.46

104,677.84

10,343.08

3,664,710.62

(101,603.38)

$ - $ - $ $ -

$ (113,522.52) $ 17,410.32 $ (5,491.18) $ (101,603.38)

$ 324,681.28 $ 22,095.90 $ 33,472.20 $ 380,249.38

$ 211,158.76 $ 39,506.22 $ 27,981.02 $ 278,646.00


COMBINED STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BLANACES - BUDGET AND ACTUALBUDGETED GOVERNMENTAL FUND TYPES - REGULATORY BASIS


Revenues collected:

Local sources


State sources

Federal sources


Expenditures paid:

Instruction

Support services


Capital outlay

Other outlays

Other Uses

Repayment

Debt service:


Interest



expenses paid before adjustments to prior

year encumbrances



Operating transfers in/out

Bank Charges


Excess (deficiency) of revenue collected

over expenditures paid and other


Fund balance, beginning of year

Fund balance, end of year

Original Budget

114,001.58

41,963.81

2,357,062.25

274,051.32

2,787,078.96

General Fund

Final Budget

114,001.58

41.963.81

2,399,774.22

504.730.39

3.060.470.00

$ 3.103,222.05 $ 3,376,613.09 $

8,538.19 8,538.19

Actual

167,663.46

43,690.20

2,436,996.99

609,269.30

3.257,619.95

2,146,061.27

1,163.846.97

14.107.85

6.310.46

34.677.84

6.138.08

Original Budget

I 22.323.44

4,078.94

170,352.93

! 196,755.31

36,924.20

181,927.01

Special Revenue Fund

Final Budget

22,323.44 $

4,078.94

188,003.48

214,405.86 $

36,924.20

199,577.56

Actual

44,484.12

4,285.86

188,003.49

236,773.47

19,914.17

199,448.98

$ 3,111,760.24 $ 3,385,151.28 $ 3,371,142.47 $ 218,851.21 $ 236,501.76 $ 219.363.15

$ (324,681.28) $ (324,681.28) $ (113,522.52) $ (22.095.90) $ (22.095.90) $ 17.410.32

$ - $ -$ -$ -$ -$

$ . $

$

$

$

(324.681.28)

324,681.28

$

$

$

$

(113,522.52)

324,681.28

211,158.76

$

$

$

$

22,095.90

$ $

$

$

$

-

$ (324,681.28)

324,681.28

$ 17,410.32

$

$

$

$

22,095.90 22,095.90

39,506.22


NOTES TO THE FINANCIAL STATEMENTS


NOTES TO THE FINANCIAL STATEMENTS - REGULATORY BASISFOR THE YEAR ENDED JUNE 30, 2012

1. Summary of Significant Accounting Policies

The accompanying financial statements of the Dewar School District No. I-008 (the "District") conform tothe regulatory basis of accounting, which is an other comprehensive basis of accounting prescribed by theOklahoma State Department of Education and conforms to the system of accounting authorized by theState of Oklahoma. Accordingly, the accompanying financial statements are not intended to presentfinancial position and results of operations in conformity with accounting principles generally accepted inthe United States of America. The District's accounting policies are described in the following notes thatare an integral part of the District's financial statements.

A. Reporting Entity

The District is a corporate body for public purposes created under Title 70 of the Oklahoma Statutes and,accordingly, is a separate entity for operating and financial reporting purposes. The District is part of thepublicschool system of Oklahoma under the general direction and control of the State Board of Educationand is financially dependent on the State of Oklahoma. The general operating authority for the publicschool system is the Oklahoma School Code contained in Title70, Oklahoma Statutes.

The governing body of the District is the Board of Education composed of elected members. Theappointed superintendent is the executive officer of the District.

In evaluating how to define the District, for financial reporting purposes, management has considered allpotential component units. The decision to include a potential component unit in the reporting entity wasmade by applying the criteria established by the Governmental Accounting Standards Board (GASB). Thebasic - but not the only - criterion for including a potential component unit within the reporting entity is thegoverning body's ability to exercise oversight responsibility. The most significant manifestation of thisability is financial interdependency. Other manifestations of the ability to exercise oversight responsibilityinclude, but are not limited to, the selection of governing authority, the designation of management, theability to significantly influence operations, and accountability for fiscal matters. A second criterion used inevaluating potential component units is the scope of public service. Application of this criterion involvesconsidering whether the activity benefits the District and/or its citizens, or whether the activity is conductedwithin the geographic boundaries of the District and is generally available to its patrons. A third criterionused to evaluate potential component units for inclusion or exclusion from the reporting entity is theexistence of special financing relationships, regardless of whether the District is able to exercise oversightresponsibilities. Based upon the application of these criteria, there are no potential component unitsincluded in the District's reporting entity. These statements present only the activities of the District.

B. Measurement Focus

The District uses funds and account groups to report on its financial position and the results of itsoperations. Fund accounting is designed to demonstrate legal compliance and to aid financialmanagement by segregating transactions related to certain district functions or activities.

A fund is an independent accounting entity with a self-balancing set of accounts. The account groups arefinancial reporting devices designed to provide accountability for certain assets and liabilities that are notrecorded directly in the funds.

Funds are classified into three categories: governmental, proprietary and fiduciary. Each category, in turn,isdivided into separate"fund types.** The District has thefollowing fund types and account groups:

Governmental Funds

Governmental funds are used to account for all or most of a government's general activities, including thecollection and disbursement of earmarked monies (special revenue funds), the acquisition or constructionof general fixed assets (capital project funds), and the servicing of general long-term debt (debt servicefunds). Basis of accounting relates to the timing of the measurements made, regardless of themeasurement focus applied. All governmental type funds are accounted for using the Regulatory(Statutory) basis of accounting. All revenues from all sources, including property taxes, entitlements,grants, and shared revenues are recognized when they are received, rather than earned. Expendituresare generally recognized when encumbered or reserved, rather than at the time the related liability isincurred. Unmatured interest for debt service is recognized when due and certain compensatedabsences and claims and judgments are recognized when the obligations are expected to be liquidated



Summary of Significant Accounting Policies (continued)

with expendable, available financial resources. Fiduciary type funds are accounted for using the cashbasis of accounting. These practices differ from accounting principles generally accepted generallyaccepted in the United States of America.

General Fund - The general fund is used to account for all financial transactions except those required tobe accounted for in another fund. Major revenue sources include local property taxes and federal andstate funding. Expenditures include all costs associated with the daily operations of the schools, except forprograms funded for building repairs and maintenance, school construction and debt service on bonds andother long-term debt. The general fund includes federal and state restricted monies that must beexpended for specific programs.

Special Revenue Fund - The special revenue funds are used for proceeds of specific revenue sources thatare legally restricted to expenditures for specified purposes.

Building Fund - The building fund consists mainly of monies derived from property taxes levied for thepurpose of erecting, remodeling, repairing or maintaining school buildings and for purchasingfurniture, equipment and computer software to be used on or for technology center property, forpaying energy and utility costs, for purchasing telecommunications services, for paying fire andcasualty insurance premiums for center facilities, for purchasing security systems, and for payingsalaries of security personnel.

Child Nutrition Fund - The child nutrition fund consists of revenues from local collections, state, andfederal sources used to benefit the food service program.

Debt Service Fund - The debt service fund is the District's sinking fund and is used to account for theaccumulation of financial resources for the payment of general long-term debt principal and interest. Theprimary revenue sources are local property taxes levied specifically for debt service and interest earningsfrom temporary investments.

Fiduciary Funds

Fiduciary funds are used to account for assets held on behalf of outside parties, including othergovernments or on behalfof other funds within the District. When these assets are held under the terms ofa trust agreement, trust funds are used for their accounting and reporting. Agency funds generally areused to account for assets that the District holds on behalf of others as their agent and do not involvemeasurement of results of operations.

Agency Funds - The agency fund is the school activities fund, which is used to account for monies,collected principally through fundraising efforts of the students and District-sponsored groups. Theadministration is responsible, under the authority of the Board, for collecting, disbursing, andaccounting for these activity funds.

Account Groups

Account groups are not funds and consist of a self-balancing set of accounts used only to establishaccounting control over long-term debt and general fixed assets.

General Long-Term Debt Account Group - This account group was established to account for alllong-term debt of the District, which is offset by the amount available in the debt service fund and theamount to be provided in future years to complete retirement of the debt principal.

General Fixed Asset Account Group - This account group is used to account for property, plant, andequipment of the school district. The District does not have the information necessary to include thisgroup in its combined financial statements.




C. Basis of Accounting and Presentation

The District prepares its financial statements in a presentation format that is prescribed by the OklahomaState Department of Education. This format is essentially the generally accepted form of presentationused by state and local governments prior to the effective date of GASB Statement No. 34, Basic FinancialStatements-Management's Discussion and Analysis-for State and Local Governments. This formatsignificantly differs from that required by GASB 34.

The basic financial statements are essentially prepared on a basis of cash receipts and disbursementsmodified as required by the regulations of the Oklahoma State Department of Education (OSDE) asfollows:

• Encumbrances represented by purchase orders, contracts, and other commitments forthe expenditure of monies and are recorded as expenditures when approved.

• Investments are recorded as assets when purchased.• Warrants payable are recorded as liabilities when issued.• Long-term debt is recorded when incurred.• Compensated absences are recorded as an expenditure when the obligation is paid.• Fixed assets are recorded in the General Fixed Asset Account Group and not in the basic

financial statements. Fixed assets are not depreciated.•

This regulatory basis of accounting differs from accounting principles generally accepted in the UnitedStates of America, which require revenues to be recognized when they become available and measurable,or when they are earned, and expenditures or expenses to be recognized when the related liabilities areincurred for governmental fund types; and, when revenues are earned.

D. Budgets and Budgetary Accounting

Prior to July 1 each year, the governing board of the school district prepares a verified application showingthe needs of the school district and submits the application to the County Excise Board, who makestemporary appropriations for lawful current expenses of the school district. The temporary appropriationsare merged with the annual appropriations when the annual budget for the school district is finallyapproved.

Prior to October 1 each year, the school Board of Education must make a financial statement, showing thetrue fiscal condition of the school as of the close of the previous fiscal year ended June 30, along with anitemized statement of estimated needs and probable income from all sources for the fiscal year.

A budget is legally adopted by the Board of Education for the general fund and special revenue fund(s) ofthe school district.

Encumbrances represent commitments to unperformed contracts for goods or services. Encumbranceaccounting - under which purchase orders and other commitments of resources are recorded asexpenditures of the applicable fund - is utilized in all governmental funds of the District. Under OklahomaLaw, unencumbered appropriations lapse at the end of the year.

E. Assets. Liabilities and Fund Eguitv

Memorandum Only - Total Column

The total column on the general purpose financial statements is captioned "memorandum only" to indicatethat it is presented only to facilitate financial analysis. Data in this column does not present financialposition, results of operations or cash flows in conformity with generally accepted accounting principles.Neither is such data comparable to a consolidation. Interfund eliminations have not been made on theaggregation of this data.

Cash - Cash consists of cash on hand, demand deposit accounts, and interest bearing checking accounts.




Investments - State statutes govern the District's investment policy. Permissible investments includedirect obligations of the United States Government and Agencies; certificates of deposit of savings andloan associations, and bank and trust companies; and savings accounts or savings certificates of savingsand loan associations, and trust companies. Collateral is required for demand deposits and certificates ofdeposit for all amounts not covered by federal deposit insurance. Investments are stated at cost.

Inventories - Inventories consist of minimal amounts of expendable supplies held for consumption. Thevalue of consumable inventories at year-end is not material to the District's financial statements. The costsof inventories are recorded as expenditures when encumbered and purchased, rather than whenconsumed.

Compensated Absences - Vested or accumulated vacation leave that is expected to be liquidated withexpendable, available financial resources is reported as expenditure and a fund liability of thegovernmental fund that will pay it. There are no amounts of vested or accumulated vacation leave that arenot expected to be liquidated with expendable, available financial resources. Vested or accumulatedvacation leave of proprietary funds is recorded as an expense and liability of those funds as the benefitsaccrue to employees.

No liability is recorded for non-vesting accumulating rights to receive such pay benefits. Vestedaccumulated rights to receive sick pay benefits have been reported in the general long-term debt accountgroup since none of the vested sick leave is expected to be liquidated with expendable, available financialresources.

Fixed Assets - The District has not maintained a record of its general fixed assets, and, accordingly, aGeneral Fixed Asset Account Group is not included in the financial statements. General fixed assetspurchased are recorded as expenditures in the various funds at the time of purchase.

Long-Term Debt - Long-term debt is recognized as a liability of a governmental fund when due or whenresources have been accumulated in the debt service fund for payment early in the following year. Forother long-term obligations, only that portion expected to be financed from expendable, available financialresources is reported as a fund liability of a governmental fund. The remaining portion of such obligationsis reported in the general long-term debt account group.

Cash Fund Balance - Cash fund balance represents the funds not encumbered by purchase order, legalcontracts, and outstanding warrants.

F. Revenues, Expenses and Expenditures

Local Revenues - Revenue from local sources is revenue produced within the school district, whichincludes ad valorem taxes. It is available for current educational expenses and for other purposesauthorized by the school board.

The District is authorized by state lawto levy property taxes, which consist of ad valorem taxes on real andpersonal property within the District. The county assessor, upon receipt of the certification of tax leviesfrom the County Excise Board, extends the tax levies on the tax roll for submission to the county treasurerprior to October 1. The county treasurer must commence tax collection within fifteen days of receipt of thetax rolls. The first half of the tax is due prior to January 1. The second half is due prior to April 1.

If the first payment is not made timely, the entire tax becomes due and payable on January 2. Second halftaxes become delinquent on April 1 of the year following the year of assessment. If not paid by thefollowing Oct. 1, the property is offered for sale for the amount of taxes due. The owner has two years toredeem the property by paying the taxes and penalty owed. If at the end of two years the owner has notdone so, the purchaser is issued a deed to the property.

Intermediate Revenues - Revenue from intermediate sources is revenue from funds collected by anintermediate administrative unit or political sub-division, such as a county or municipality, and redistributedto the school district.




State Revenues - Revenue from state sources for current operations are primarily governed by the stateaid formula under the provisions of Article XVIII, Title 70, Oklahoma Statutes. The State Board ofEducation administers the allocation of state aid funds to school districts based on informationaccumulated from the districts.

After review and verification of reports and supporting documentation, the State Department of Educationmay adjust subsequent fiscal period allocations of money for prior year errors disclosed by review.Normally, such adjustments are treated as reductions or additions of revenue of the year when theadjustment is made.

The District receives revenue from the state to administer certain categorical educational programs. StateBoard of Education rules require that revenue earmarked for these programs be expended only for theprogram forwhich the money is provided. These rulesalso require that the money not expended, as of theclose of the fiscal year, be carried forward into the following year to be expended for the same categoricalprograms. The State Departmentof Education requires that categorical educational program revenues beaccounted for in the general fund.

Federal Revenues - Revenue from Federal sources is money originating from the Federal government andmade available to the school district either as direct grants or under various programs passed-through theState Department of Education.

The Federal government also makes payments to school districts whose revenues are adversely affectedby the presence of Federal activities. Although these payments are made in consideration of lost propertytax revenue, the Oklahoma State Department of Education advocates classifying such amounts asrevenue from Federal sources.

Instruction Expenditures - Instruction expenditures include the activities dealing directly with the interactionbetween teachers and students. Teaching may be provided for students in a school classroom, in anotherlocation, such as a home or hospital, and in other learning situations, such as those involving co curricularactivities. It may also be provided through some other approved medium, such as television, radio,telephone and correspondence. Examples of expenditures that might be included here are the activities ofteacher assistant of any type (clerks, graders, teaching machines, etc.), which assist in the instructionalprocess. The activities of tutors, translators, and interpreters would be recorded here. Departmentchairpersons who teach for any portion of time are included here. Tuition/transfer fees paid to other LEAswould be included here.

Support Services Expenditures - Support services expenditures provide administrative, technical (such asguidance and health) and logistical support to facilitate and enhance instruction. These services exist asadjuncts for fulfilling the objective of instruction, community services and enterprise programs, rather thanas entitles within them.

Operation of Non-Instructional Services Expenditures - Activities concerned with providing non-instructional services to students, staff, and the community.

Facilities Acouisition and Construction Services Expenditures - Consist of activities involved with theacquisition of land and buildings; remodeling buildings; the construction of buildings and additions tobuildings; initial installation or extension of service systems and other built-in equipment; and improvementto sites.

Other Outlays Expenditures - A number of outlays of governmental funds are not properly classified asexpenditures, but still require budgetary or accounting control. These are classified as Other Outlays.These include debt service payments (principal and interest).

Other Uses Expenditures - This includes scholarships provided by private gifts and endowments; studentaid and staff awards supported by outside revenue sources (i.e., foundations). Also, expenditures for self-funded employee benefit programs administered either by the Districtor a third party administrator.

Repayment Expenditures - Repayment expenditures represent checks/warrants issued to outsideagencies for refund or restricted revenue previously received for overpayments, non-qualifiedexpenditures, and other refunds to be repaid from District funds.

10




Interfund Transactions - Quasi-external transactions are accounted for as revenues, expenditures orexpenses. Transactions that constitute reimbursements to a fund or expenditures/expenses initially madefrom it that are properly applicable to another fund, are recorded as expenditures/expenses in the fund thatis reimbursed.

All other interfund transactions, except quasi-external transactions and reimbursements, are reported astransfers. Nonrecurring or nonroutine permanent transfers of equity are reported as residual equitytransfers.

Budgetary Information

Under current Oklahoma Statutes, a formal Estimate of Needs (Budget) is required for all funds except fortrust and agency funds. Budgets are presented for all funds that include the originally approved budgetedappropriations for expenditures and final budgeted appropriations as adjusted for supplementalappropriations and approved transfers between budget categories. The annual Estimate of Needs, whenapproved by the Board and subsequently filed with the County Clerk and approved by the County ExciseBoard, becomes the legal budget. Supplemental appropriations, if required, were made during the yearand are reflected on the budget vs. actual presentations shown included in supporting schedules.

2. Deposit Categories of Credit Risk

Collateral is required for demand deposits and certificates of deposit for all amounts not covered by federaldeposit insurance. The District's investment policies are governed by state statute. Permissibleinvestments include:

1. Directobligations of the United States Government to the payment of which the full faith and creditof the government is pledged.

2. Obligations to the payment of which the full faith and credit of the state is pledged.

3. Certificates of deposits of banks when such certificates of deposits are secured by acceptablecollateral as in the deposit of other public monies.

4. Savings accounts or savings certificates of savings and loan associations to the extent that suchaccounts or certificates are fully insured by the Federal Savings and Loan Insurance Corporation.

5. Repurchase agreements that have underlying collateral consisting of those items specified inparagraphs 1 and 2 of this section including obligations of the United States, its agencies andinstrumentalities, and where collateral has been deposited with a trustee of custodian bank in anirrevocable trust or escrow account established for such purposes.

6. County, municipal or school district direct debt obligations for which an ad valorem tax may belevied or bond and revenue anticipation notes, money judgments against such county, municipalityor school district ordered by a court of record or bonds or bond and revenue anticipation notesissued by a public trust for which such county, municipality or school district is a beneficiary thereof.All collateral pledged to secure public funds shall be valued at no more than market value.

7. Money market mutual funds regulated by the Securities and Exchange Commission and whichinvestments consist of obligations of the United States, its agencies and instrumentalities, andinvestments in those items listed above.

8. Warrants, bonds or judgments of the school district.

11



Deposit Categories of Credit Risk (continued)

9. Qualified pooled investment programs, the investments of which consist of those items specifiedabove, as well as obligations of the United States agencies and instrumentalities, regardless of thesize of the district's budget. To be qualified, a pooled investment program for school funds must begoverned through an Interlocal cooperative agreement formed pursuant to Title 70 Section 5-117b,and the program must competitively select its investment advisors and other professionals. Anypooled investment program must be approved by the Board of Education.

The District's investment policy instructs the treasurer to minimize risks by diversifying the investmentportfolio; structuring investments so that securities mature in time to meet cash requirements; and byinvesting the full amount of all accounts of the District.

Custodial Credit Risk:

Deposits and Investments - The District's demand deposits are required by law to be collateralized by theamount that is not federally insured.

Securities pledged as collateral are held by a third party or Federal Reserve Bank. Joint custodysafekeeping receipts are held in the name of the depositing institution, but are pledged to the District. Thesecurity cannot be released, substituted, or sold without the School Treasurer's approval and release ofthe security.

Certificates of deposit are collateralized at least by the amount not federally insured. As of June 30, 2012,the District had no deposits exposed to custodial credit risk.

The District's investments consist of direct obligations of the U.S. government and agencies' securities.

Interest Rate Risk:

Investments are made based upon prevailing market conditions at the time of the transaction with theintent to hold the instrument until maturity. However, the District has no formal written policy addressinginterest rate risk.

Credit Risk:

The District has no formal written policy addressing credit risk.

At June 30, 2012, the District has no investments that are not guaranteed by the full faith and credit of theUnited States Government.

3. General Long-Term Debt

State statutes prohibit the District from becoming indebted in an amount exceeding the revenue to bereceived for any fiscal year without approval by the District's voters. Bond issues have been approved bythe voters and issued by the District for various capital improvements. These bonds are required to befully paid serially within 25 years from the date of issue.

General long-term debt of the District includes of bonds payable. Debt service requirements for bonds arepayable solely from fund balance and future revenues of the debt service fund.

12



General Long-Term Debt (continued)

A brief description of the outstanding general obligation bond issues at June 30, 2012, is set forth below:

AmountOutstanding

School District No. I-008 Building Bonds,Series 2008, original issue

$290,000.00, average interest rate of 3.031%,first installment of $70,000.00 due on June 1, 2010, andannual installments of $70,000.00 due thereafter,final payment of $80,000.00 due on June 1,2013. $ 80,000.00

Total Bonds Outstanding $ 80,000.00

The annual debt service requirements for retirement of bond principal and payment of interest are asfollows:

Year endingJune 30, Principal Interest Total

2013

Total

$

$

80,000.00 $

80,000.00 $

2,280.00 $

2,280.00 $

82,280.00

82,280.00

Interest expense incurred on general long-term debt during the current year totaled $4,205.00.

Lease Commitments

The District had the following lease commitments for football lighting, copiers, and a floor scrubber in effectat June 30, 2012.

Year endingJune 30, Principal

$

$

Interest

$

$

Total

Requirements20132014201520162017

Total

$

$

29,128.3023,274.9022,058.1223,253.52

3,596.87

101,311.71

5,100.463,665.612,436.571,241.18

45.08

12,488.90

34,228.7626,940.5124,494.6924,494.70

3,641.95

113,800.61

The above leases contain a clause that gives the District the ability to terminate the lease agreements atthe end of the fiscal year. The District has recorded the liability for future lease payments in the GeneralLong Term Debt Account Group.

The lease payments are appropriated annually from school district funds.

The District also has an operating lease for a school bus at a yearly rate of $15,500.00 for FY 2012, andcan be extended for two more years.

13



General Long-Term Debt (continued)

Change in General Long-Term Debt

BondsPayable

LeasesPayable

TotalPayable

150,000.00 $ 97,391.56 $ 247,391.56

- 38,598.00 38,598.00

70,000.00 34,677.85 104,677.85

80,000.00 $ 101,311.71 $ 181,311.71

Balance, July 1, 2011 $

Additions

Retirements

Balance, June 30, 2012 $

4. Employee Retirement System

Description of Plan

The System is a qualified governmental defined benefit retirement plan. For GASB purposes it is a cost-sharing multiple-employer Public Employee Retirement System. The supervising authority for themanagement and operation of the System is a 13-member Board of Trustees, which acts as a fiduciary forinvestment of the funds and the application of plan interpretations. The System provides retirement anddisability benefits, annual cost of living adjustments, death benefits and other benefits to plan membersand beneficiaries. Oklahoma State Statutes establish benefit provisions and may be amended onlythrough legislative action. The Oklahoma Teachers' Retirement System issues a publicly availablefinancial report that includes financial statements and required supplementary information for the System.The report may be obtained by writing to the Oklahoma Teachers' Retirement System, P.O. Box 53624,Oklahoma City, Oklahoma 73152.

Basis of Accounting

The System's financial statements are prepared in conformity with accounting principles generallyaccepted in the United States of America. The financial statements have also been prepared incompliance with the requirements of the Government Accounting Standards Board Statement No. 34. Thefinancial statements are prepared on the accrual basis of accounting, under which expenses are recordedwhen the liability is incurred, revenues are recorded in the accounting period they are earned and becomemeasurable, and investment purchases and sales are recorded as of their trade dates. Member andemployer contributions are recognized when due, pursuant to formal commitments. Benefits and refundsare recognized when due and payable.

The pension benefit obligation is a standardized disclosure measure of the present value of pensionbenefits. This pension valuation method reflects the present value of estimated pension benefits that willbe paid in future years as a result ofemployee services performed to date and is adjusted for the effect ofprojected salary increases. There are no actuarial valuations performed on individual school districts. Thenonfunded pension benefit obligation of the System, as determined as part of the latest actuarial valuationdated June 30, 2012, is as follows:

Dollars in Millions

Actuarial Accrued Liability $ 18,588Actuarial Value of Assets 10.190

Unfunded Actuarial Accrued Liability$ 8,398

14



Employee Retirement System (continued)

Funding Policy

A participant with five years of creditable service may retire with a normal retirement allowance at the ageof sixty-two (62) or with reduced benefits as early as age fifty-five (55). The normal retirement allowancepaid monthly for life and then to beneficiaries, if certain options are exercised, equals two percent of theaverage of the highest three earning years of contributory service multiplied by the number of years ofcredited service. Retiring members may count up to 120 days of unused accumulated sick leave towardan additional year of service credit. A participant leaving employment before attaining retirement age, butcompleting ten years of service, may elect to vest his accumulated contributions and defer receipt of aretirement annuity until a later date. When a participant dies in active service and has completed ten yearsof credited service, the beneficiary is entitled to a death benefit of $18,000.00 and the participant'scontributions plus interest. If the beneficiary is a surviving spouse, the surviving spouse may, in lieu of thedeath benefit, elect to receive, subject to the surviving spousal options, the participant's retirement benefitsaccrued at the time of death. The contribution rates for the Districts, which are not actuarially determined,and its employees are established by statute and applied to the employee's earnings, plus employer-paidfringe benefits. The employers' contribution rate is 9.5%. Employees contribute 7.0% of coveredcompensation.

Annual Pension Cost

The District's total contribution for 2012, 2011 and 2010 were $324,483.83, $422,771.59, and $321,146.33,respectively. The District's total payroll for fiscal year 2011-12 amounted to $2,056,034.18.

5. Litigation

The District is contingently liable for lawsuits and other claims in the ordinary course of its operations. Thesettlement of such contingencies under the budgetary process would require appropriation of revenues yetto be realized, and would not materially affect the financial position of the District at June 30, 2012.

6. Risk Management

The District is exposed to various risks of loss related to torts; theft of, damage to and destruction ofassets; errors and omissions; injuries to employees; or acts of God. The District purchases commercialinsurance to cover these risks, including general and auto liability, property damage, and public officialsliability. Settled claims resulting from these risks have not exceeded the commercial insurance coverage inany of the past three fiscal years.

The School also participates in a risk pool for Workers' Compensation coverage in which there is transferor pooling of risks among the participants of that pool. In accordance with GASB No. 10, the Schoolreports the required contribution to the pool, net of refunds, as insurance expense. The risk pool is theOklahoma School Assurance Group (OSAG), an organization formed for the purpose of providing workers'compensation coverage to participating schools in the State of Oklahoma. In that capacity, OSAG isresponsible for providing loss control services and certain fiscal activities, including obtaining contractarrangements for the underwriting, excess insurance agreements, claims processing, and legal defense forany and all claims submitted to them during the plan year. As a member of OSAG, the District is requiredto pay fees set by OSAG according to an established payment schedule. A portion of the fees paid by theDistrict goes into a loss fund for the District. The fee for the loss fund is calculated by projecting lossesbased on the schools losses for the last five years. OSAG provides coverage in excess of the Loss Fund,so the District's liability for claim loss is limited to the balance of the loss fund. If the District does not usetheir loss fund in three years, it is returned to them with no interest.

The District participates in the Oklahoma Public Schools Unemployment Compensation Account under thesponsorship of the Oklahoma State School Boards Association and the cooperative council for OklahomaSchool Administration. The account was established to let school districts self-insure unemploymentbenefits for school employees. The funds are held in the name of each school district as reserves to payunemployment claims.

15



Risk Management (continued)

Each school district is individually liable for that portion of the benefits paid from the fund attributable towages paid by the school district in the same manner as if no group account had been established. Thereserve funds may be withdrawn from the account upon request of the school district. At June 30, 2012,the Dewar School District had reserves on deposit with the Oklahoma Public Schools UnemploymentCompensation Accounting totaling $4,418.88. This amount has not been included in the District's balancesheet at June 30, 2012.

Surety Bonds

The treasurer is bonded by Western Surety, bond number 68439278, for the penal sum of $50,000.00 forthe term of July 10, 2011, to July 10, 2012.

The deputy treasurer and minute clerk is bonded by Western Surety, bond number 68954555, for the penalsum of $50,000.00 for the term of January 21, 2011, to January 21, 2012.

The encumbrance clerk is bonded by Western Surety, bond number 70546898, for the penal sum of$25,000.00 for the term of March 15, 2011, to March 15, 2012.

The Superintendent of school is bonded by Western Surety Company, bond number 70570141, for thepenal sum of $1,000.00 and a term of August 15, 2011, to August 15, 2012.

16

COMBINING FINANCIAL STATEMENTS

ASSETS:

Cash

Investments

Total assets


COMBINING STATEMENT OF ASSETS, LIABILITIES AND FUND BALANCES

ALL SPECIAL REVENUE FUNDS - REGULATORY BASIS

JUNE 30, 2012

Building FundChild Nutrition

Fund

Total

June 30, 2012

$ 19,406.53 $ 36,972.97 $ 56,379.50

$ 19,406.53 $ 36,972.97 $ 56,379.50

LIABILITIES AND FUND BALANCES:

Liabilities:


Encumbrances

Total liabilities

Fund balances:

Cash fund Balances

Total fund balances

Total liabilities and fund balances

17

$

$"

$ 16,873.28 $ 16,873.28

$ 16,873.28 $ 16,873.28

19,406.53 $ 20,099.69 $ 39,506.22

19,406.53 $ 20,099.69 $ 39,506.22

$ 19,406.53 $ 36,972.97 $ 56,379.50


COMBINING STATEMENT OF REVENUES COLLECTED, EXPENDITURES PAID AND CHANGES IN FUND BALANCES

ALL SPECIAL REVENUE FUNDS - REGULATORY BASIS


Revenues collected:

Local sources


State sources

Federal sources

Total revenue collected

Expenditures paid:

Instruction

Support services


Capital outlay

Other outlays

Other uses

Repayments

Debt service:


Interest



expenses paid before adjustments to prior

year encumbrances



Operating transfers in/(out)

Bank charges


Excess of revenues and other sources over (under)

expenditures and other sources (uses)


Fund balances, end of year

18

Building Fund

18,611.79

18,611.79

19,914.17

Child Nutrition

Fund

25,872.33 $

4,285.86

188,003.49

218,161.68 $

199,448.98

Total

June 30, 2012

44,484.12

4,285.86

188,003.49

236,773.47

19,914.17

199,448.98

$ 19,914.17 $ 199,448.98 $ 219,363.15

(1,302.38) $ 18,712.70 $ 17,410.32

$ $

$

$ - $ - $ -

$ (1,302.38) $ 18,712.70 $ 17,410.32

$ 20,708.91 $ 1,386.99 $ 22,095.90

$ 19,406.53 $ 20,099.69 $ 39,506.22

SCHOOL DISTRICT NO.

COMBINING STATEMENT OF ASSETS, LIABILITIES AND FUND BALANCES

FIDUCIARY FUND - REGULATORY BASIS

JUNE 30, 2012

ASSETS:

Cash

Investments

Total assets

LIABILITIES AND FUND BALANCES:

Liabilities:


Encumbrances

Total liabilities

Fund balances:

Cash fund Balances

Total fund balances

Total liabilities and fund balances

19

Agency Fund

Activity Fund

$ 76,087.82

14,500.00

$ 90,587.82

25,260.28

$ 25,260.28

$ 65,327.54

$ 65,327.54

$ 90,587.82

SUPPLEMENTAL INFORMATION

Revenues collected:

Local sources


State sources

Federal sources


Expenditures paid:

Instruction

Support services


Capital outlay

Other Outlays

Other Uses

Repayment

Total expenditures







Bank charges


Excess (definiency) of revenue collectedover (under) expenditures paid and other





BUDGETARY COMPARISON SCHEDULE - REGULATORY BASIS

BUILDING FUND


20

Original Budget Final Budget Actual

Final BudgetFavorable

(Unfavorable)

$ 16,215.29 $ 16,215.29 $ 18,611.79 $ 2,396.50

$ 16,215.29 $ 16,215.29 $ 18,611.79 $ 2,396.50

$ $ - $ - $

36,924.20 36,924.20 19,914.17 17,010.03

$ 36,924.20 $ 36,924.20 $ 19,914.17 $ 17,010.03

$ (20,708.91) $ (20,708.91) $ (1,302.38) $ 19,406.53

$ -$ - $ - $

$ (20,708.91) $ (20,708.91) $ (1,302.38) $ 19,406.53

$ 20,708.91 $ 20,708.91 $ 20,708.91 $

$ - $ $ 19,406.53 $ 19,406.53

Revenues collected:

Local sources


State sources

Federal sources


Expenditures paid:

Instruction

Support services


Capital outlay

Other Outlays

Other Uses

Repayment

Debt service:


Interest

Total expenditures







Bank charges


Excess (definiency) of revenue collected

over (under) expenditures paid and other





BUDGETARY COMPARISON SCHEDULE - REGULATORY BASIS

CHILD NUTRITION FUND


21

Original Budget Final Budget

Variance with

Final BudgetFavorable

Actual (Unfavorable)

6,108.15 $ 6,108.15 $ 25,872.33 $ 19,764.18

4,078.94 4,078.94 4,285.86 206.92

170,352.93

$

188,003.48

198,190.57 $

188,003.49

218,161.68

0.01

180,540.02 $ 19,971.11

181,927.01 199,577.56 199,448.98 128.58

$ 181,927.01 S 199,577.56 $ 199,448.98 $ 128.58

$ (1,386.99) $ (1,386.99) $ 18,712.70 $ 20,099.69

(1,386.99) $ (1,386.99) $ 18,712.70 $ 20,099.69

$ 1,386.99 $ 1,386.99 $ 1,386.99 $

$ - $ $ 20,099.69 $ 20,099.69

DEWAR SCHOOL DISTRICT NO. I-8

SCHEDULE OF FEDERAL AWARDS EXPENDED


Federal Grantor/Pass-Through Grantor/Program Title

U.S. Department of Education

Direct Programs:

2011-2012 Programs

Title VIII, Impact Aid Operations

* Title VII, Indian Education

* Small Rural Schools

Sub-Total

Federal

CFDA#

Grantor's

Number

84.041 S041B20123913

84.060A S060A110608

84.358A S358A112822

Passed-Through State Department of Education

2010-2011 Proarams

Title I 84.010 N/A

Title II, Part A Training & Recruiting Fund 84.367 N/A

21st Century 84.287 N/A

IDEA-B Flow Through 84.027 N/A

Sub-Total

2011-2012 Proarams

* Title I, Basic 84.010 N/A

* IDEA-B Flow Through 84.027 N/A

Title II, Part A Training & Recruiting Fund 84.367 N/A

21st Century 84.287 N/A

* Preschool 84.173 N/A

Sub-Total

Passed- Through State Department of

Rehabilitation Services:

2011-2012 Programs

Rehabilitation Services

Sub- Total

(continued)

The accompanying notes are an integral part of this schedule

84.126 N/A

22

Balance at

July 1,2011

(21,474.81)

(14,444.27)

(32,272.19)

(11,185.42)

(79,376.69)

Receipts Expenditures

$ 99,743.39 $ 99,743.39 $

$ 58,170.00 $ 58,170.00 $

23,816.00 23,816.00

181,729.39 $

21,474.81 $

14,444.27

32,272.19

11,185.42

79,376.69 $

122,085.17

98,197.54

25,398.43

71,868.22

3,606.19

321,155.55 $

3,646.75 $

3,646.75 $

181,729.39 $

122,085.17

98,197.54

25,398.43

108,724.98

3,606.19

358,012.31 $

4,862.96 $

4,862.96 $

Balance at

June 30, 2012

(36,856.76)

(36,856.76)

(1,216.21)

(1,216.21)

Federal Grantor/Pass-Through Grantor/Program Title

U. S. Department of Agriculture

Passed-Through State Department

of Education:

Child Nutrition Cluster:

Non-Cash Assistance (Commodities):

National School Lunch Program

Non-Cash Assistance Sub-Total

Cash Assistance:

School Breakfast Program

National School Lunch Program

Cash Assistance Sub- Total

Sub- Total for Child Nutrition Cluster

U.S. Department of Health and Human Services

Passed-Through Oklahoma Health

Care Authority

2010-2011 Programs

Medicaid Assistance Program

Sub- Total

2011-2012 Programs

Medicaid Assistance Program

Sub- Total

2010-2011 Programs

Johnson O'Malley

Sub-Total

2011-2012 Programs

Johnson O'Malley

Sub- Total

TOTAL FEDERAL ASSISTANCE

* Major program

The accompanying notes are an integral part of this schedule

Federal

CFDA#

10.555

10.553

10.555

93.778

93.778

15.130

15.130


SCHEDULE OF FEDERAL AWARDS EXPENDED


Grantor's

Number

N/A

N/A

N/A

N/A

N/A

N/A

N/A

23

Balance at

July 1,2011

5,728.49

Receipts ExpendituresBalance at

June 30, 2012

$ 10,286.00 $ 10,286.00 $ -

$ 10,286.00 $ 10,286.00 $ -

$ 72,814.95 $ 2,779.51 $ 70,035.44

115,188.54 2,879.80 112,308.74

$ 188,003.49 $ 5,659.31 $ 182,344.18

$ 198,289.49 $ 15,945.31 $ 182,344.19

5,728.49

5,728.49

2,199.99

2,199.99

-

$ 5,728.49 - -

$ 8,938.02 6,738.03

$ -8,938.02 6,738.03

$ (3,264.27) $ 3,264.27 $ $

$ (3,264.27) $ 3,264.27 $ $

11,158.63 $ 11,158.63 $

11,158.63 $ 11,158.63

(76,912.47) $ 807,558.79 $ 578,446.63 $ 152,199.69


NOTES TO THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDSFOR THE YEAR ENDED JUNE 30, 2012

1. For all federal programs, the District uses the fund types prescribed by the Oklahoma StateDepartment of Education and conforms to the system of accounting authorized by the State ofOklahoma. General and Child Nutrition Funds are used to account for resources restricted, ordesignated for, specific purposes by a grantor. Federal and state financial assistance generallyis accounted for in the General and Child Nutrition Fund.

2. The accounting and financial reporting treatment applied to a fund is determined by its'measurement focus. The Governmental Fund types are accounted for using a current financialmeasurement focus. All federal grant funds were accounted for in the General and ChildNutrition Funds, which are Governmental Fund types. With this measurement focus, onlycurrent assets and current liabilities and the fund balance are included on the balance sheet.Operating statements of these funds present increases and decreases in net current assets.

The Regulatory Basis of Accounting is used for the Governmental Fund types and Agencyfunds. This basis of accounting recognizes revenue from all sources when they are received.Federal grant funds are considered to be recognized when encumbered or reserved to theextent of expenditures made under the provisions of the grant.

3. Positive amounts listed in the either "Balance at July 1, 2011" or "Balance at June 30, 2012"column represent funds received by the school and not yet expended or coded to the program.Negative amounts represent expenditures which have been claimed, but the revenue not yetcollected.

4. The District received donated foods through the Federal Food Distribution Program (10.555). AtJune 30, 2012, the school maintained an immaterial amount of food commodities inventory. Perthe Regulatory Basis of Accounting, the commodities received and used are not recognized asrevenue or expenditures in the school's Financial Statements.

5. Reconciliation of the Revenue shown on the Schedule of Expenditures of Federal Awards toStatement of Revenue, Expenditures and Changes in Fund Balance is as follows:

Revenue

Total Revenue per "Schedule of Expenditures of Federal Awards" $ 807,558.79

Less Commodities (10,286.00)

Net Total $ 797,272.79

Total Revenue per "Statement of Revenue, Expenditures, and

Changes in Fund Balances"

General Fund $ 609,269.30

Child Nutrition Fund 188,003.49

Net Total $ 797,272.79

24


SCHOOL ACTIVITY FUND

RECEIPTS, TRANSFERS, DISBURSEMENTS AND SUB-ACCOUNT BALANCES


Net

Balance Transfers/ Balance

Activities 7-1-11 Deposited Adjustments Disbursed 6-30-12

Athletics All Sports $ 8,710.40 S> 48,938.22 $ (2,687.21) $ 43,108.26 $ 11,853.15

General 208.12 - 362.29 420.59 149.82

Library 685.07 3,124.60 - 3,271.79 537.88

Flower Fund 2.82 - - - 2.82

Annual 6,151.38 6,194.53 3,066.50 10,997.23 4,415.18

Tech Ed Class 263.62 1,028.44 - 762.54 529.52

FHA Club 1,477.35 58,768.77 (100.00) 50,645.13 9,500.99

Sr. High Pep Club 205.84 2,593.25 542.94 2,212.53 1,129.50

Scholarship Fund 989.51 1,058.16 76.33 1,250.00 874.00

Band and Music 1,377.27 11,487.76 450.00 10,712.88 2,602.15

Bus Barn Insurance Account 371.66 - (371.66) - -

Dewar Elementary Activity 11,100.45 20,685.58 3,410.83 22,742.83 12,454.03

Dewar MS Activity 64.27 - - - 64.27

Dewar High School Activity 49.77 - - - 49.77

CD Investment 14,500.00 - - - 14,500.00

Crossroads Conference - 8,700.88

5 162,580.19

350.00 2,386.42 6,664.46

Total Activities $ 46,157.53 3 $ 5,100.02 $ 148,510.20 $ 65,327.54

25

REPORTS REQUIRED BY GOVERNMENT AUDITING STANDARDS


2101N. Willow Ave,Broken Arrow, OK 74012Phone Number (918) 250-8838FAX Number (918) 250-9853

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

STATEMENTS PERFORMED IN ACCORDANCE WITHGOVERNMENT AUDITING STANDARDS

The Honorable Board of EducationDewar School District No. 1-008Dewar, Okmulgee County, Oklahoma

I have audited the accompanying fund type and account group financial statements-regulatory basis within thecombined financial statements of the Dewar School District No. 1-008, Dewar, Okmulgee County Oklahoma(District), as of and for the year ended June 30, 2012, and have issued my report thereon'dated February 1,2013, which was adverse with respect to the presentation of the financial statements in conformity withaccounting principles generally accepted in the United States because the presentation followed the regulatorybasis of accounting for Oklahoma school districts and did not conform to the presentation requirements of theGovernmental Accounting Standards Board. However, my report was qualified for the omission ofthe generalfixed asset account group with respect to the presentation of financial statements on the regulatory basis of•accounting authorized by the Oklahoma State Board of Education. I conducted my audit in accordance withauditing standards generally accepted in the United States.of America and the standards applicable to financialaudits contained in Government Auditing Standards, issued by the Comptroller General of the. United States.

Internal Control over Financial ReportingIn planning and performing my audit, I considered Dewar School District's internal control over financialreporting as a basis for designing my audit procedures for the purpose of expressing my opinion on the basicfinancial statements, but not for the purpose ofexpressing an opinion on the effectiveness ofthe Dewar SchoolDistrict's internal control over financial reporting. Accordingly, I do notexpress an opinion on the effectivenessof the District's internal control over financial reporting.

Adeficiency in internal control exists when the design or operation of a control does not allow management oremployees, in the normal course of performing their assigned functions, to prevent, or detect and correctmisstatements on a timely basis. Amaterial weakness is a deficiency, or combination of deficiencies, in internalcontrol, such that there is a reasonable possibility that a material misstatement of the entity's financialstatements will notbe prevented, or detected andcorrected on a timely basis.

My consideration of internal control over financial reporting was for the limited purpose described in the firstparagraph of this section and was not designed to identify all deficiencies in internal control over financialreporting that might be deficiencies, significant deficiencies or material weaknesses. I did not identify anydeficiencies in internal control over financial reporting that I consider to be material weaknesses, as definedabove. However, I identified certain deficiencies in internal control over financial reporting, described in theaccompanying schedule of findings and questioned costs as 2012-1 that Iconsider to be significant deficienciesin internal control over financial reporting. Asignificant deficiency is a deficiency or combination ofdeficiencies,in internal control that is less severe than a material weakness, yet important enough to merit attention bythosecharged with governance.

' 26

Compliance and Other Matters

As part of obtaining reasonable assurance about whether Dewar School District's combined financialstatements are free of material misstatement, I performed tests of its compliance with certain provisions of laws,regulations, contracts and grant agreements, noncompliance with which could have a direct and material effecton the determination of financial statement amounts. However, providing an opinion on compliance with thoseprovisions was not an objective of my audit, and accordingly, I do not express such an opinion. The results ofmy tests disclosed no instances of noncompliance or other matters that are required to be reported underGovernment Auditing Standards. I noted certain immaterial instances of noncompliance that I have reported tomanagement in the Schedule of Comments included on page 32 of this audit report.

This report is intended solely for the information and use of the audit committee, management and federalawarding agencies and pass-through entities, and is not intended to be and should not be used by anyone otherthan these specified parties.

<~-s•*7>Kerry JohryPatten, C.P.AFebruar/1,2013

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KERRY JOHN PATTEN, CP.A.

2101N. Willow Ave.Broken Arrow, OK 74012Phone Number (918) 250-8838FAX Number (918) 250-9853

INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE WITH REQUIREMENTSTHAT COULD HAVE A DIRECT MATERIAL EFFECT ON EACH MAJOR

PROGRAM AND INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCEWITH OMB CIRCULAR A-133

The Honorable Board of EducationDewar School District No. I-008Dewar.Okmulgee County, Oklahoma

Compliance _ ^ ^,, . /r.. . . ..Ihave audited the compliance of Dewar School District No. I-008 Okmulgee County, Oklahoma (District)with the types of compliance requirements described in the U.S. Office of Management and Budget(OMB) Circular A-133 Compliance Supplement that are applicable to each of Dewar School Distnct'smajor federal programs for the year ended June 30, 2012. Dewar School District's major federalprograms are identified in the Summary of Audit Results section of the accompanying Schedule ofFindings and Questioned Costs. Compliance with the requirements of laws, regulations, contracts, andgrants applicable to each of its major federal programs is the responsibility of the District's management.My responsibility is to express an opinion on Dewar. School District's I-008 compliance based on my audit.

I conducted my audit of compliance in accordance with auditing standards generally accepted in theUnited States of America; the standards applicable to financial audits contained in Government AuditingStandards issued by the Comptroller General of the United States; and OMB Circular A-133, Audits ofStates Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133require that I plan and perform the audit to obtain reasonable assurance about whether noncompliancewith the types of compliance requirements referred to above that could have a direct and material effecton a major federal program occurred. An audit includes examining, on a test basis, evidence abouDewar School District's compliance with those requirements and performing such other procedures, as Iconsidered necessary in the circumstances. Ibelieve that my audit provides a reasonable basis for myopinion. My audit does not provide a legal determination on Dewar School District's compliance withthose requirements.

In my opinion Dewar School District complied, in all material respects, with the requirements referred toabove that are applicable to each of its major federal programs for the year ended June 30, 2012.

Internal Control over Compliance ..,..«*•The management of Dewar School District is responsible for establishing and maintaining effectiveinternal control over compliance with the requirements of laws, regulations, contracts and grantsapplicable to federal programs. In planning and performing my audit, I considered Dewar SchooDistrict's internal control over compliance with the requirements that could have a direct and materialeffect on a major federal program to determine the auditing procedures for the purpose of expressing myopinion on compliance and to test and report on internal control over compliance in accordance with OMBCircular A-133, but not for the purpose of expressing an opinion on the effectiveness of internal contraover compliance. Accordingly, I do not express an opinion on the effectiveness of the Dewar SchoolDistrict's internal control over compliance.

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A deficiency in internal control over compliance exists when the design or operation of a control overcompliance does not allow management or employees, in the normal course of performing their assignedfunctions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of afederal program, on a timely basis. A material weakness in internal control over compliance is adeficiency, or combination of deficiencies, in internal control over compliance, such that there is areasonable possibility that material noncompliance with a type of compliance requirement of a federalprogram will not be prevented, or detected and corrected on, a timely basis.

My consideration of internal control over compliance was for the limited purpose described in the firstparagraph of this section and was not designed to identify all deficiencies in internal control overcompliance that might be deficiencies, significant deficiencies, or material weaknesses. I did not identifyany deficiencies in internal control over compliance that I considered to be material weaknesses, asdefined above.

This report is intended solely for the information and use of management, others within the entity, andfederal awarding agencies and pass-through entities and is not intended to be and should not be used byanyone other than the specified parties.

Kerry Jo£p/Patten, C.P.A.February 1, 2013

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SCHEDULE OF FINDINGS AND QUESTIONED COSTSFOR THE YEAR ENDED JUNE 30, 2012

A. SUMMARY OF AUDIT RESULTS

1. The auditor's report expresses an adverse opinion on the combined financial statements in conformitywith generally accepted accounting principles and a qualified opinion for the omission of the generalfixed asset account group on the combined financial statements in conformity with a regulatory basisof accounting prescribed by the Oklahoma Department of Education.

2. There was one audit finding reported of deficiencies in internal control, which the auditor considers tobe a "significant deficiency" as defined in A.I.C.P.A. standards.

3. No instances of noncompliance material to the financial statements of Dewar School District whichwould be required to be reported in accordance with Government Auditing Standards.

4. There were no audit findings reported of deficiencies in internal control over major programs, whichthe auditor considers to be a "material weakness" as defined by A.I.C.P.A. standards.

5. The auditor's report on compliance for the major federal award programs for Dewar School Districtexpresses an unqualified opinion on all major federal programs.

6. There were no audit findings relative to major federal award programs for Dewar School District thatwere required to be reported by OMB Circular A-133.

7. The programs tested as majorprograms included: Title VII (84.060A), Small Rural Schools (84.358A),Title I (84.010), and IDEA-B Cluster (84.027 &84.173).

8. A threshold for distinguishing Types A and B programs was $300,000.00.

9. Dewar School District did not qualify as a low risk auditee.

B. FINDINGS - FINANCIAL STATEMENTS AUDIT

2012-1

Condition: An adequate internal control structure does notexist because of the small size of the entity noris there adequate segregation of duties.

Criteria: Internal controls should be in places that provide reasonable assurance that any one individualdoes not have control over several of the financial functions of the School District.

Effect: Because of the inadequate segregation of duties there may be an opportunity for an employee toalter record keeping.

Recommendation: We have recommended that the School District strive to implement an adequatesegregation of duties.

Response: We concur with the recommendation; however, we have concluded that the cost to correct thiscondition would exceed the benefit.

C. FINDINGS AND QUESTIONED COSTS - MAJOR FEDERAL AWARD PROGRAMS AUDIT

1. No matters were reported.

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SUMMARY OF PRIOR AUDIT FINDINGSJULY 1, 2011 TO JUNE 30, 2012

The summary of prior audit findings is required to report the status of all audit findings reported in the prioraudit's schedule of findings and questioned costs relative to federal awards.

Finding: 2011-1

For the FY 2011, my review reflected an adequate internal control structure did not exist because of the smallsize of the entity nor was there adequate segregation of duties. The report classified this condition as a materialweakness.

For the FY 2012, the District implemented procedures that included one more individual in the financial reportingprocess and somewhat mitigated the inadequate segregation of duties. In the 2011-12 fiscal year findings, thecondition has been described as a significant deficiency rather than a material weakness.

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SCHEDULE OF COMMENTSJULY 1, 2011 TO JUNE 30, 2012

The following represent areas noted during my review of the school's accounting system in which I feelimprovements in the internal control and/or operational efficiency may be attained. I have also noted, asrequired, any noncompliance with State Department of Education Regulations.

*l. Condition: In many several, the receiving or other support documentation of expenditures was not signedby the person receiving the goods or services. This condition applied to appropriated funds as well as theactivity fund.

Recommendation: The Public School Board of Education and school Administration should adopt andenforce procedures to insure that all invoices and delivery tickets are signed by the receiver and attachedto the corresponding purchase order. This procedure will indicate merchandise was received insatisfactory condition and merchandise paid for is an actual expense of the school district.

Condition: The school did not always properly encumber purchases or charge the appropriation accountprior to or at the time of ordering goods or services. Oklahoma State law requires the school encumbranceclerk to encumber all purchases and charge the affected appropriation account at the time, or prior to,ordering the goods or services.

Recommendation: The school board of education should adopt and enforce procedures to insure that allpurchases are encumbered and have a purchase order issued prior to the time the purchase is made.Purchases should not be paid if the purchase order date is not prior to the invoice date.

Previous Year's Audit Comments

Excluding conditions marked with an asterisk, there are no other items in the 2010-11 audit report, which havebeen repeated in this report.

I would like to express my appreciation for the courtesies and cooperation extended to us by school districtadministrators and employees during the course of this audit.

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SCHEDULE OF ACCOUNTANT'S PROFESSIONAL LIABILITY INSURANCE AFFIDAVITJULY 1, 2011 TO JUNE 30, 2012

State of Oklahoma )County of Tulsa )

The undersigned auditing firm of lawful age, being first duly sworn on oath, says that said firm had in full forceand effect Accountant's Professional Liability Insurance in accordance with the "Oklahoma Public School AuditLaw" at the time of audit contract and during the entire audit engagement with Dewar School District for theaudit year 2011-12.

++***>*

/£va2\ LINDA KELLICKf^jrZ^\ \ Notwv?Wk inandforthe

I SEAL j I Stai«* x! •:">*>!*homaL \"""V / Cemwiwujn ^05010870V^gjjQ^MyComrrissio'' expires 11/30/2013

Kerry John Patten, C.PAAUDITING FIRM

BY

Subscribed and sworn to before me on this

|5f day of Abtaj, 1&3

NOTARY PUBLIC

Mycommission expires on:

3oday of /Ux/. 206

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okmulgee county, oklahoma july 1, 2011 to june 30, …annual financial report dewar school district...

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