INDEPENDENT SCHOOL DISTRICT NO. 413 …...accounting guidance by implementing the provisions of Governmental Accounting Standards Board (GASB) Statement No. 72, Fair Value Measurement

INDEPENDENT SCHOOL DISTRICT NO. 413

MARSHALL, MINNESOTA

FINANCIAL STATEMENTS

FOR THE YEAR ENDED JUNE 30, 2016

TABLE OF CONTENTS

PAGE

INTRODUCTORY SECTION

Schedule of School Board Members and Officials

INDEPENDENT AUDITOR'S REPORT

REQUIRED SUPPLEMENTAL INFORMATION

Management’s Discussion and Analysis 1

BASIC FINANCIAL STATEMENTS

Government-Wide Financial Statements

Statement of Net Position 13

Statement of Activities 14

Fund Financial Statements

Balance Sheet – Governmental Funds 15

Reconciliation of the Governmental Funds Balance Sheet to

the Statement of Net Position 16

Statement of Revenues, Expenditures, and Changes in Fund Balances –

Governmental Funds 17

Reconciliation of the Governmental Funds Statement of Revenues,

Expenditures, and Changes in Fund Balances to the Statement of Activities 18

Statement of Net Position – Proprietary Fund 19

Statement of Revenues, Expenses, and Changes in Net Position – Proprietary Fund 20

Statement of Cash Flows – Proprietary Fund 21

Notes to Financial Statements 22

REQUIRED SUPPLEMENTARY INFORMATION

Schedules of Funding Progress and Employer Contributions for Postemployment Benefit Plans 53

Schedules of District’s Share of Net Pension Liability and District’s

Contributions for Defined Benefit Pension Plans 54

Schedule of Revenues, Expenditures, and Changes in Fund

Balance – Budget and Actual – General Fund 56


Balance – Budget and Actual – Food Service Fund 59


Balance – Budget and Actual – Community Service Fund 60

TABLE OF CONTENTS

PAGE

REQUIRED SUPPLEMENTARY INFORMATION (Cont’d)

Notes to the Required Supplementary Information 61

OTHER SUPPLEMENTARY INFORMATION


Balance – Budget and Actual – Building Construction Fund 62


Balance – Budget and Actual – Debt Service Fund 63


Balance – Budget and Actual – OPEB Debt Service Fund 64

Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual

General Fund - Excluding Transportation and Operating Capital 65

Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual

General Fund - Transportation Activity Only 68

General Fund - Operating Capital Activity Only 69

General Fund - Historical Analysis (Excluding Transportation and

Operating Capital) 71

Community Service Fund - Detail Analysis 72

SINGLE AUDIT AND OTHER REQUIRED REPORTS

Schedule of Findings and Questioned Costs 73

Schedule of Findings and Questioned Costs Corrective Action Plan 76

Summary Schedule of Prior Audit Findings 77

Independent Auditor’s Report on Internal Control Over Financial Reporting and on

Compliance and Other Matters Based on an Audit of Financial Statements Performed in

Accordance with Government Auditing Standards 78

Independent Auditor’s Report on Minnesota Legal Compliance 80

Independent Auditor’s Report on Compliance for Each Major Program and on Internal

Control Over Compliance Required by the Uniform Guidance 81

Schedule of Expenditures of Federal Awards 84

Notes to Schedule of Expenditures of Federal Awards 85

TABLE OF CONTENTS

PAGE STUDENT ACTIVITY FUNDS

Independent Auditor's Report on the Statement of Cash Receipts and Disbursements

of the Student Activity Accounts 86

Statement of Cash Receipts and Disbursements - Student Activity Accounts 87

Independent Auditor's Report on Compliance with Laws and Regulations

Applicable to the Student Activity Accounts 88

Findings on Student Activity Internal Control Structure and Compliance 89

MANAGEMENT LETTER 90

UNIFORM FINANCIAL ACCOUNTING AND REPORTING STANDARDS

COMPLIANCE TABLE 91

INTRODUCTORY SECTION


MARSHALL, MINNESOTA

SCHEDULE OF SCHOOL BOARD MEMBERS AND OFFICIALS

JUNE 30, 2016

TERM

SCHOOL BOARD MEMBERS EXPIRES

Jeff Chapman Chairperson 2019

Matt Coleman Vice-Chairperson 2017

Bill Mulso Treasurer 2017

Curt Kovash Clerk 2017

Dion Caron Director 2019

Karen VanKeulen Clerk 2019

SCHOOL OFFICIALS

Scott Monson Superintendent of Schools

Bruce Lamprecht Director of Business Services

903 East College Drive P.O. Box 548

Marshall, MN 56258 www.hoffmanbrobst.com

507 532 5735 Fax 537 0696

INDEPENDENT AUDITOR’S REPORT

Members of the School Board

Independent School District No. 413

Marshall, Minnesota

Report on the Financial Statements

We have audited the accompanying financial statements of the governmental activities, each major fund, and the

aggregate remaining fund information of Independent School District No. 413, Marshall, Minnesota as of and for the

year ended June 30, 2016, and the related notes to the financial statements, which collectively comprise the District’s

basic financial statements as listed in the table of contents.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with

accounting principles generally accepted in the United States of America; this includes the design, implementation, and

maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free

from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

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 from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial

statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material

misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor

considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to

design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes

evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates

made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit

opinions.

Opinions

In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial

position of the governmental activities, each major fund, and the aggregate remaining fund information of Independent

School District No. 413, Marshall, Minnesota as of June 30, 2016, and the respective changes in financial position

and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles

generally accepted in the United States of America.

http://www.hoffmanbrobst.com/

Change in Accounting Principle

As described in Note 3 to the financial statements, for the year ended June 30, 2016, the District adopted new

accounting guidance by implementing the provisions of Governmental Accounting Standards Board (GASB) Statement

No. 72, Fair Value Measurement and Application, which represents a change in accounting principle. Our opinion is not modified with respect to this matter.

Other Matters

Required Supplementary Information

Accounting principles generally accepted in the United States of America require that the Management’s Discussion

and Analysis and the Required Supplementary Information as listed in the table of contents 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 the 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 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.

Other Information

Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise

Independent School District No. 413, Marshall, Minnesota’s basic financial statements. The introductory section, other

supplementary information, and the uniform financial accounting and reporting standards compliance table listed in the table of contents are presented for purposes of additional analysis and are not a required part of the basic financial

statements. The schedule of expenditures of federal awards is presented for purposes of additional analysis as required

by Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles,

and Audit Requirements for Federal Awards, and is also not a required part of the basic financial statements.

The schedule of expenditures of federal awards and the uniform financial accounting and reporting standards

compliance table are the responsibility of management and were derived from and relate directly to the underlying

accounting and other records used to prepare the basic financial statements. Such information has been subjected to the

auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including

comparing and reconciling such information directly to the underlying accounting and other records used to prepare the

basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance

with auditing standards generally accepted in the United States of America. In our opinion, the schedule of expenditures of federal awards and the uniform financial accounting and reporting standards compliance table are fairly

stated in all material respects in relation to the basic financial statements as a whole.

The introductory section and other supplementary information have 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 them.

Report on Summarized Comparative Information

We have previously audited the District’s June 30, 2015 financial statements, and our report, dated October 27, 2015,

expressed unmodified opinions on the respective financial statements of the governmental activities, each major fund, and the aggregate remaining fund information. In our opinion, the summarized comparative information presented

herein as of and for the year ended June 30, 2015, is consistent, in all material respects, with the audited financial

statements from which it has been derived.

Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, we have also issued our report dated November 1, 2016, on our

consideration of Independent School District No. 413, Marshall, Minnesota’s internal control over financial reporting

and on 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 internal control over financial

reporting or on compliance. That report is an integral part of an audit performed in accordance with Government

Auditing Standards in considering Independent School District No. 413, Marshall, Minnesota’s internal control over

financial reporting and compliance.

Hoffman & Brobst, PLLP


Certified Public Accountants

Marshall, Minnesota

November 1, 2016

REQUIRED SUPPLEMENTAL INFORMATION


MARSHALL, MINNESOTA

MANAGEMENT’S DISCUSSION AND ANALYSIS


1

As management of Independent School District No. 413, Marshall, Minnesota, we offer readers of Independent School

District No. 413, Marshall, Minnesota’s financial statements this narrative overview and analysis of the financial

activities of Independent School District No. 413, Marshall, Minnesota for the fiscal year ended June 30, 2016.

FINANCIAL HIGHLIGHTS

Key financial highlights for the 2015-2016 fiscal year include the following:

Net position in the Statement of Net Position increased $1,256,217 from the prior year to $11,796,028.

This increase was due to a variety of factors, primarily the favorable operating results of the General

Fund, increase in construction in progress, and the decrease in District debt due to the scheduled principal

payments on long-term debt.

The General Fund (excluding transportation and operating capital activities) fund balance increased

$633,936 to $4,870,132. This amounts to 19% of annual District expenditures which exceeds the

District’s fund balance goal of a minimum of 8% of expenditures.

The District entered into three capital leases totaling $854,325 for technology improvements and a van.

These leases mature in fiscal years 2019 and 2020.

The District went to the public in May and asked for approval of a $39M building bond referendum for

additions and improvements to Park Side, the Middle School and the High School, along the with closing

of West Side and constructing a new grade 2-4 elementary building. The referendum failed by 225 votes

and the District continues to look at how it will address the existing need for new, improved and additional space for its growing enrollment.

The District received a Meritorious Budget Award for the 2016 fiscal year budget. The District was also

recognized with a certificate of excellence in financial reporting for the fiscal year 2015 Comprehensive

Annual Financial Report.

The District has begun the capital improvements and health and safety improvements in the current year.

The projects are expected to be completed in the next fiscal year.

OVERVIEW OF THE FINANCIAL STATEMENTS The financial section of the annual report consists of four parts. They are:

Independent Auditor’s Report,

Required Supplementary Information which includes the Management’s Discussion and Analysis (this

section),

Basic financial statements, notes to financial statements, and

Other supplementary information and other required reports and information.


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OVERVIEW OF THE FINANCIAL STATEMENTS (Cont’d) The basic financial statements include two kinds of statements that present different views of the District:

The government-wide financial statements, including the Statement of Net Position and the Statement of

Activities, provide both short-term and long-term information about the District’s overall financial status.

The remaining statements are fund financial statements that focus on individual parts of the District,

reporting the District’s operations in more detail than the government-wide statements. The

governmental funds statements tell how basic services such as regular and special education were

financed in the short term as well as what remains for future spending.

The government-wide statements report information about the District as a whole using accounting methods similar to

those used by private sector companies. The Statement of Net Position includes all of the District’s assets, deferred

outflows of resources, liabilities, and deferred inflows of resources. All of the current year’s revenues and expenses are

accounted for in the Statement of Activities regardless of when cash is received or paid.

The two government-wide statements report the District’s net position and how it has changed. Net position – the

difference between the District’s assets, deferred outflows of resources, liabilities, and deferred inflows of resources –

is one way to measure the District’s financial health or position.

Over time, increases or decreases in the District’s net position are an indicator of whether its financial position

is improving or deteriorating, respectively.

To assess the overall health of the District, one needs to consider additional non-financial factors such as

changes in the District’s property tax base and the condition of school buildings and other facilities.

In the government-wide financial statements the District’s activities are shown in one category:

Governmental Activities – Most of the District’s basic services are included here, such as regular and special

education, transportation, administration, food service, and community education. Property taxes and state

aids finance most of these activities.

FUND FINANCIAL STATEMENTS The fund financial statements provide more detailed information about the District’s funds – focusing on its most significant or “major” funds – rather than the District as a whole. Funds are accounting devices the District uses to

keep track of specific sources of funding and spending on particular programs:

Some funds are required by State law and by bond covenants.

The District establishes other funds to control and manage money for particular purposes or to show that it is

properly using certain revenues.

The District has two kinds of funds:

Governmental funds – The District’s basic services are included in governmental funds, which generally focus on: 1) how cash and other financial assets that can readily be converted to cash flow in and out, and 2)

the balances left at year-end that are available for spending. Consequently, the governmental funds statements

provide a detailed short-term view that helps to determine whether there are more or less financial resources

that can be spent in the near future to finance the District’s programs. Because this information does not

encompass the additional long-term focus of the government-wide statements, additional information

(reconciliation schedules) follows the governmental funds statements that explain the relationship (or

differences) between these two types of financial statement presentations.


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FUND FINANCIAL STATEMENTS (Cont’d)

Proprietary funds – Services for which the District charges a fee are generally reported in proprietary funds.

Proprietary funds are reported in the same way as the government-wide statements. The District uses an

internal service fund to report activities that provide services for its other programs and activities. The District

currently has one internal service fund – the OPEB Revocable Trust Fund.

FINANCIAL ANALYSIS OF THE DISTRICT AS A WHOLE (GOVERNMENT-WIDE STATEMENTS)

NET POSITION

The District’s combined net position was $11,796,028 on June 30, 2016. This was an increase of 11.9% from the

previous year total of $10,539,811. A summary of the District’s net position is as follows:

Net Position – Governmental Activities Percentage

6/30/2016 6/30/2015 Change

Current and Other Assets $ 19,708,424 $ 21,965,347

Capital Assets 48,219,657 44,520,829

Total Assets 67,928,081 66,486,176 2.2%

Related to Pensions 3,467,886 2,714,173

Total Deferred Outflows of Resources 3,467,886 2,714,173 27.8%

Current Liabilities 5,382,702 3,819,346

Noncurrent Liabilities 45,698,410 44,696,772

Total Liabilities 51,081,112 48,516,118 5.3%

Property Tax Levied for Subsequent Year’s

Expenditures 6,128,000 5,781,324


Total Deferred Inflows of Resources 8,518,827 10,144,420 (16.0%)

Net Investment in Capital Assets 23,775,411 23,089,096

Restricted 1,485,645 1,279,347

Unrestricted (13,465,028) (13,828,632)

Total Net Position $ 11,796,028 $ 10,539,811 11.9%


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(Cont’d)

CHANGE IN NET POSITION

The change in net position occurs as a result of revenues being greater than its expenses for the year ended June 30,

2016, and a prior period adjustment for the merger of Duluth Teachers Retirement Fund Association (DTRFA) into the

Minnesota statewide Teachers Retirement Association (TRA). A summary of the District’s revenues and expenses is

as follows:

Change in Net Position – Governmental Activities

Percentage

Revenues 6/30/2016 6/30/2015 Change

Program Revenues Charges for Services $ 2,210,714 $ 2,070,279

Operating Grants and Contributions 10,834,099 10,115,086

Capital Grants and Contributions 191,419 250,777

General Revenues

Property Taxes 6,017,501 5,650,756

Unallocated Federal and State Aid 15,906,989 14,447,794

Other 55,751 33,092

Total Revenues 35,216,473 32,567,784 8.1%

Expenses

District and School Administration 1,170,288 1,209,475

District Support Services 989,275 1,034,604 Regular Instruction 12,704,110 10,691,779

Vocational Instruction 418,741 543,118

Exceptional Instruction 4,898,867 4,286,823

Community Education and Services 2,313,374 2,177,721

Instructional Support Services 2,482,871 2,721,108

Pupil Support Services 3,596,043 3,204,813

Site, Buildings, and Equipment 3,090,597 3,006,823

Fiscal and Other Fixed Cost Programs 102,756 101,943

Interest on Long-Term Debt 596,991 592,874

Loss on Sale of Assets 2,975 134,273

Depreciation – Unallocated 1,175,700 1,175,701

Total Expenses 33,542,588 30,881,055 8.2%

Increase in Net Position 1,673,885 1,686,729

Beginning of Year Net Position,

As Originally Stated 10,539,811 25,079,364

Prior Period Adjustment (GASB 68) (417,668) (16,226,282)

Beginning Net Position, as Restated 10,122,143 8,853,082

End of Year Net Position $ 11,796,028 $ 10,539,811 11.9%

The District’s total revenues consisted of program revenues of $13,236,232, property taxes of $6,017,501, unallocated

federal and state aids of $15,906,989, and a small amount from interest and miscellaneous other sources. Expenses

totaling $33,542,588 consisted primarily of student instructional costs of $18,021,718, student support services of

$6,078,914, administration costs of $2,159,563, site, buildings and equipment costs of $3,090,597, community education services of $2,313,374, and minor other amounts.


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(Cont’d)

CHANGE IN NET POSITION (Cont’d)

The cost of all governmental activities this year was $33,542,588.

The users of the District’s programs paid for 6.6%, or $2,210,714, of the costs.

The federal and state governments subsidized certain programs with grants and contributions. This totaled

$11,025,518, or 32.9% of the total costs.

Most of the District’s net cost of services ($20,306,356), however, was paid for by state taxpayers based on

the statewide education aid formula and by District taxpayers.

FINANCIAL ANALYSIS OF THE DISTRICT’S FUNDS (FUND FINANCIAL STATEMENTS)

FUND BALANCE

The financial performance of the District as a whole is reflected in its governmental funds as well. As the District

completed the year, its governmental funds reported a combined fund balance of $10,436,770. This was down from

$14,305,679 at the end of the prior year, a decrease of $3,868,909. The General Fund increase occurred primarily

because of the District’s conscious effort to control personnel expenditures such as health insurance costs and

nominal salary settlements, and deliberate efforts to control all energy and other costs. Along with this, there was an

increase in the state aids due to a significant increase in enrollment and an increase in the per student general education

aid formula. There was also additional special education cost reimbursements that added to the increased fund balance amount, because of the new, special education funding formula. The full implementation, by the State, of the Local

Optional Revenue, was a help on the revenue side as well. The Food Service Fund had a $13,676 increase due to

lower cost per meals served along with significant, increased student participation. The Community Service Fund

increased primarily due to additional funding mechanisms for the School Readiness programs. The Building

Construction Fund had a decrease of $4,543,511 due to funds being spent on the construction projects, which

accounts for most of the decrease in governmental funds. The Debt Service Fund and OPEB Debt Service Fund

combined increased slightly for this fiscal year.

REVENUES AND EXPENDITURES Revenues of the District’s governmental funds totaled $34,923,157. This was an increase of 7.3 % from the previous

year total of $32,543,835. Total expenditures were $39,647,013. This was an increase of 17.5% from the previous year total of $33,747,451. A summary of the revenues, expenditures, and other sources (uses) reported on the

governmental financial statements is as follows:

Revenues and Expenditures – Governmental Funds

Other Fund Balance

Sources Increase

Revenue Expenditures (Uses) (Decrease) General Fund $ 28,215,031 $ 28,456,296 $ 854,947 $ 613,682

Food Service Fund 1,578,050 1,564,374 - 13,676

Community Service Fund 2,303,729 2,267,522 - 36,207

Building Construction Fund 12,379 4,555,890 - (4,543,511)

Debt Service Fund 2,682,833 2,671,993 - 10,840 OPEB Debt Service Fund 131,135 130,938 - 197

Totals $ 34,923,157 $ 39,647,013 $ 854,947 $ (3,868,909)


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FINANCIAL ANALYSIS OF THE DISTRICT’S FUNDS (FUND FINANCIAL STATEMENTS) (Cont’d)

GENERAL FUND

The General Fund is used by the District to record the primary operations of providing educational services to students

from kindergarten through grade twelve. Pupil transportation activities, capital purchases and major maintenance

projects are also included in the General Fund.

The following schedule presents a summary of General Fund revenues and other financing sources:

Revenues– General Fund

Year Ended Year Ended Amount Percentage

6/30/2016 6/30/2015 Change Change Local Sources

Property Taxes $ 3,069,412 $ 2,742,657 $ 326,755 11.9%

Tuition and Contracts 528,149 455,682 72,467 15.9%

Other Local Sources 1,104,764 1,036,340 68,424 6.6%

State Sources 22,758,222 21,213,309 1,544,913 7.3%

Federal Sources 754,484 754,260 224 0.0%

Total Revenues 28,215,031 26,202,248 2,012,783 7.7%

Other Financing Sources

Proceeds from Sale of Assets 622 1,341 (719) (53.6%)

Capital Lease Financing 854,325 1,904,872 (1,050,547) (55.2%)

Total Other Financing Sources 854,947 1,906,213 (1,051,266) (55.1%)

Total Revenues and Other

Financing Sources $ 29,069,978 $ 28,108,461 $ 961,517 3.4%


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GENERAL FUND (Cont’d) The following schedule presents a summary of General Fund expenditures:

Expenditures – General Fund

Year Ended Year Ended Amount Percentage

6/30/2016 6/30/2015 Change Change Salaries and Wages $ 16,253,936 $ 15,181,998 $ 1,071,938 7.1%

Employee Benefits 4,502,464 4,142,646 359,818 8.7%

Purchased Services 4,348,788 4,243,048 105,740 2.5%

Supplies and Materials 964,982 724,858 240,124 33.1% Other Expenditures 218,526 52,159 166,367 319.0%

Capital Expenditures 1,629,893 2,652,253 (1,022,360) (38.6%)

Debt Service Expenditures 537,707 338,583 199,124 58.9%

Total Expenditures $ 28,456,296 $ 27,335,545 $ 1,120,751 4.1%

In summary, the 2015-2016 General Fund revenues and other financing sources exceeded expenditures by $613,682.

As a result, the total fund balance increased to $6,076,110 at June 30, 2016. After deducting statutory and accounting

standards restrictions and fund balance policy commitments and assignments, the unassigned fund balance increased

$3,211 to $4,596,120 at June 30, 2016. The District closely monitors the General Fund fund balance through its

budgeting process throughout the year. The District’s goal is to maintain a minimum of 8% of expenditures in the

General Fund (excluding transportation and operating capital activities) fund balance. The following chart depicts the

trend of this fund balance:


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GENERAL FUND (Cont’d)

GENERAL FUND BUDGETARY HIGHLIGHTS

During the year ended June 30, 2016 the District revised its operating budget twice. These revisions were planned, and

were necessary because when the initial budget was prepared and adopted (a budget must be in place prior to the

beginning of the fiscal year on July 1), details of student enrollment numbers, salary details, staffing levels, and other

significant information items were not yet definite. These revisions were made in October and January to reflect

significant changes in enrollment data, state funding adjustments, and unforeseen changes in expenditures categories.

While the District’s final budget for the General Fund anticipated that revenues and other financing sources would exceed expenditures and other financing uses by $257,131 the actual results for the year showed a surplus of

$613,682.

Actual revenues and other financing sources were $817,577 or 2.9%, more than budget. The budget

fluctuation is due primarily to not having budgeted for three new capital leases for various technology

projects and a van.

Actual expenditures and other financing uses were $461,026, or 1.6% percent, more than budget. The

budget fluctuation is due to various factors, including unanticipated costs of lease financing of various

technology projects and a van. These factors, along with a number of lesser significant ones, all

contributed to these budget results but don’t necessarily tell the whole story of the increase over budget, as much of this is due to how we have to state our capital lease financing.


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FOOD SERVICE FUND The Food Service Fund revenue for 2015-2016 totaled $1,578,050 and expenditures were $1,564,374, resulting in a

fund balance increase of $13,676. The District contracts with an outside vendor (Taher, Inc.) for the operation of its

food service program and receives financial guarantees for the annual operating results of this program. The fund

balance increase is due to three factors: one is the slight decline in the cost per meal served; two is the significant

increase in enrollment in 15-16 over 14-15; three is the increasing participation experienced due to more of a variety in

the menus offered. The June 30, 2016 Food Service Fund fund balance is $175,627. The School Board has formulated

a goal as part of the budget process to maintain a minimum of $50,000 in its Food Service Fund fund balance.

COMMUNITY SERVICE FUND

In 2015-2016, the total revenues for the Community Service Fund were $2,303,729 and total expenditures were $2,267,522. Total revenues exceeded expenditures by $36,207, resulting in an increase of the same amount in the

June 30, 2016 fund balance. The main reason for this excess is that more was received than expected for ABE

funding, which was able to offset cost overruns in the expenditure side of the budget. The Community Service Fund

balance as of June 30, 2016 is $263,649. The School Board has formulated a goal as part of the budget process to

maintain a minimum of $150,000 in its Community Service Fund fund balance.

BUILDING CONSTRUCTION FUND

Total expenditures exceeded revenues by $4,543,511 for 2015-2016 in the Building Construction Fund. This decrease

is due to spending for the energy conservation and indoor air quality improvement projects. The fund balance at June

30, 2016 is $3,294,034, which is anticipated to be spent in the next fiscal year to complete these projects.

DEBT SERVICE FUND

The Debt Service Fund revenues exceeded expenditures by $10,840 in 2015-2016. The fund balance at June 30, 2016

is $600,989.

OPEB DEBT SERVICE FUND

The OPEB Debt Service Fund had a modest increase in fund balance in 2015-2016. The fund balance at June 30, 2016

is $26,361.

OPEB REVOCABLE TRUST INTERNAL SERVICE FUND

The OPEB Revocable Trust Internal Service Fund incurred a net $23,531 loss on investments and investment

expenses, and paid the General Fund $50,003 for employee benefits. The net position at June 30, 2016 is $941,078.

CAPITAL ASSET AND DEBT ADMINISTRATION

CAPITAL ASSETS As of June 30, 2016, the District had net capital assets of $48,219,657 representing a broad range of capital assets,

including construction in progress, school buildings and improvements, computer and audio-visual equipment, and

various other equipment for instructional, support and administrative purposes. Total depreciation expense for the

year was $2,241,681. Information about the District’s capital assets is shown below. More detailed information

about the District’s capital assets is presented in Note 4 to the financial statements.


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CAPITAL ASSET AND DEBT ADMINISTRATION (Cont’d)

CAPITAL ASSETS (Cont’d)

Capital Assets

Percentage

6/30/2016 6/30/2015 Change

Land $ 1,628,927 $ 1,628,927 0.0%

Construction in Progress 4,546,628 - 100.0%

Buildings and Improvements 57,626,453 57,526,494 0.2%

Equipment and Vehicles 11,926,129 10,644,207 12.0 %

Less: Accumulated Depreciation (27,508,480) (25,278,799) 8.8%

Net Capital Assets $ 48,219,657 $ 44,520,829 8.3%

DEBT ADMINISTRATION At year-end, the District had $26,283,000 in general obligation bonds outstanding. The District also had various

other long-term liabilities as detailed in Note 5 to the financial statements.

Three capital leases totaling $854,325 were obtained during the fiscal year for technology improvements

and a van.

The District continues to pay its scheduled debt payments, retiring $2,496,612 of bonds and capital leases

in the year ending June 30, 2016.

Outstanding Debt

Percentage

6/30/2016 6/30/2015 Change

General Obligation Bonds $ 26,283,000 $ 28,263,000 (7.0%)

Capital Lease Obligations 2,003,548 1,665,835 20.3%

Total $ 28,286,548 $ 29,928,835 (5.5%)

FACTORS BEARING ON THE DISTRICT’S FUTURE

In November of 2011, the District’s voters approved a five-year extension of the operating referendum, which was

recognized by the District beginning in fiscal year 2013. As we move forward we will need to continue to monitor our referendum amount and its impact on our General Fund budget. Because of various legislative actions, the whole

concept of referendum funding has been changed. With the advent of Location Equity Revenue (LER) initially, and

now the Local Optional Revenue (LOR) component that replaced LER, the ‘game’ has changed and the District

needs to be keenly aware of how these changes are affecting the source and flow of revenue for the District. With

the exception of these voter approved operating referendums, the District is otherwise significantly dependent on the

State of Minnesota for its revenue authority.

The Legislature approved foundation formula increases for both the 2015-2016 and 2016-2017 fiscal years. This has

a very positive effect for school district operations and maintaining a balanced budget. Along with this, long-term

facilities maintenance revenue was approved. This begins in 2016-2017, and will increase per pupil unit each year

for three years. This has a significant, positive effect for the District as the District has had to set difficult priorities

as to maintaining the facilities throughout the District. The metered payment schedule is currently at 90%, where it should be, and we are now in a very good cash flow position. It appears that will continue to be the case into the

foreseeable future. Economic conditions in Minnesota continue to get better and the Legislature in 2017 will

continue to have more options available to them in providing programs and support for E-12 education including the

possibility of continued expansion of the universal pre-school for all four-year old’s passed in the 2016 legislative

session. This is bringing a significant change for school districts in Minnesota that were awarded grants and as we

look to the future, it will need to be fully funded and not another unfunded mandate.


MARSHALL, MINNESOTA



11

FACTORS BEARING ON THE DISTRICT’S FUTURE (Cont’d) The District went to the voters on November 5, 2013 for an operating referendum of $150 per pupil unit which

would have generated approximately $400,000 annually for four years beginning July 1, 2014. Unfortunately, it

failed by twenty-three votes. The District continues to pursue upgrades in both the areas of safety/security and

technology and has made budget priority changes to accommodate both of these high priority needs. Through the

use of lease/purchase financing, the District is able to purchase technology and carry out deferred maintenance

projects, like roof replacements, without totally ‘blowing up’ our General and Capital Outlay budgets. The new

Long Term Facilities Maintenance revenue will be a huge help in alleviating some of the lease/purchase

arrangements for maintenance projects.

The School Board authorized an additional new board approved referendum authority in the amount of approximately

$32.51 per adjusted pupil unit. The total referendum authority shall be $300 per adjusted pupil unit. This Board approved referendum authority, as adjusted, was active beginning with this audit year of fiscal 2015-2016 and is

authorized for three years through the 2017-2018 fiscal year.

The District’s future projections continue to reflect increasing enrollment. This positively impacts the District’s

funding since enrollment is what actually determines most of a school district’s funding components. Hence, if

there was an increase in enrollment, the District could anticipate an increase in revenues even if there were no

increases to the formulas. Maintaining enrollment stability, and growing it, continues to be one of the District’s

goals.

Average ADMs (Average Daily Memberships)

2200

2300

2400

2500

2600

FY15 FY16 FY17 FY18 FY19

In response to the demographic study that was completed in January 2014 and the continued enrollment growth, both

projected and real, the District formed a facilities study committee. The purpose of the committee was to review the

District’s existing facilities and propose ideas for repurposing and/or expanding them. The recommendation of the

committee was to proceed with plans for a facilities/building referendum. This building bond referendum was held in

May and was defeated by 225 votes. Surveys and studies are now in place with hope of bringing the bond referendum

back to the voters in Spring of 2017.

The majority of labor contracts are in effect for two-year periods. The contract with the District certified teachers is

in effect for the two-year period ending June 30, 2017. The contracts with other District non-certified personnel are

in effect for the two-year period ending June 30, 2018. The District bargains in good faith with staff representatives

during the negotiations process, but always needs to balance that approach with the availability of resources, along

with looking at the long-term financial well-being of the District. Negotiated settlements are always an area of

financial challenge for the District. Labor costs and related benefits account for approximately 81% of the District’s

General Fund operating expenditures, excluding transportation and operating capital.


MARSHALL, MINNESOTA



12

CONTACTING THE DISTRICT’S FINANCIAL MANAGEMENT This financial report is designed to provide District citizens, taxpayers, customers, investors and creditors with a

general overview of the District’s finances and to demonstrate the District’s accountability for the money it receives.

If one has questions about this report or needs additional financial information, contact the Business Office,

Independent School District No. 413, 401 S. Saratoga Street, Marshall, MN 56258, visit the District website at

www.marshall.k12.mn.us, or call (507) 537-6924.

http://www.marshall.k12.mn.us/

BASIC FINANCIAL STATEMENTS

2016 2015

ASSETS

Current Assets:

Cash and Investments $ 12,725,055 $ 14,928,084

Property Taxes Receivable-Net 3,088,595 2,940,934

Accounts and Interest Receivable 126,138 183,988

Due From Other Minnesota School Districts 48,320 51,184

Due From State of Minnesota 3,045,032 2,618,677

Due From Federal Government 418,336 273,549

Prepaid Expenses 152,712 15,944

Inventory 14,235 17,226

Total Current Assets 19,618,423 21,029,586

Noncurrent Assets:

Investments - 935,761

Restricted Cash and Investments 90,001 -

Capital Assets:

Land 1,628,927 1,628,927

Construction in Progress 4,546,628 -

Other Capital Assets, Net of Depreciation 42,044,102 42,891,902

Total Noncurrent Assets 48,309,658 45,456,590

TOTAL ASSETS 67,928,081 66,486,176

DEFERRED OUTFLOWS OF RESOURCES


TOTAL ASSETS AND DEFERRED OUTFLOWS OF RESOURCES $ 71,395,967 $ 69,200,349

LIABILITIES

Current Liabilities:

Salaries Payable $ 98,821 $ 136,587

Accounts and Interest Payable 1,944,076 699,589

Due to Other Governmental Units 33,971 47,158

Payroll Liabilities 264,610 111,520

Unearned Revenue 139,536 175,590

Current Portion of Long-Term Liabilities 2,901,688 2,648,902

Total Current Liabilities 5,382,702 3,819,346

Noncurrent Liabilities:

Noncurrent Liabilities Payable from Restricted Cash and Investments 90,000 -

Noncurrent Portion of Long-Term Liabilities 45,608,410 44,696,772

Total Noncurrent Liabilities 45,698,410 44,696,772

TOTAL LIABILITIES 51,081,112 48,516,118

DEFERRED INFLOWS OF RESOURCES

Property Tax Levied for Subsequent Year's Expenditures 6,128,000 5,781,324


TOTAL DEFERRED INFLOWS OF RESOURCES 8,518,827 10,144,420

NET POSITION

Net Investment in Capital Assets 23,775,411 23,089,096

Restricted For:

Capital Asset Acquisition 615,782 694,001

Food Service 175,627 161,951

Community Service 286,505 227,952

Other Purposes 407,731 195,443

Unrestricted (13,465,028) (13,828,632)

TOTAL NET POSITION 11,796,028 10,539,811

TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND NET POSITION $ 71,395,967 $ 69,200,349

Governmental Activities


MARSHALL, MINNESOTA

STATEMENT OF NET POSITION

JUNE 30, 2016

(with Partial Comparative Information as of June 30, 2015)

The accompanying notes are an integral part of these statements.

13

2015

Net (Expense) Net (Expense)

Operating Capital Revenue and Revenue and

Charges for Grants and Grants and Changes in Changes in

Expenses Services Contributions Contributions Net Position Net Position

Governmental Activities:

District and School Administration $ 1,170,288 $ (1,170,288) $ (1,183,069)

District Support Services 989,275 $ 1,650 $ 6,074 (981,551) (1,015,180)

Regular Instruction 12,704,110 $ 832,698 3,433,396 62,837 (8,375,179) (6,910,658)

Vocational Instruction 418,741 - 99,069 - (319,672) (470,372)

Exceptional Instruction 4,898,867 401,366 2,548,150 - (1,949,351) (1,212,597)

Community Education and Services 2,313,374 110,038 1,999,422 - (203,914) (174,737)

Instructional Support Services 2,482,871 - 327,984 14,104 (2,140,783) (2,337,061)

Pupil Support Services 3,596,043 791,994 2,420,777 - (383,272) (228,785)

Site, Buildings and Equipment 3,090,597 74,618 3,651 108,404 (2,903,924) (2,907,663)

Fiscal and Other Fixed Cost Programs 102,756 - - - (102,756) (101,943)

Interest on Long-Term Debt 596,991 - - - (596,991) (592,874)

Loss on Sale of Assets 2,975 - - - (2,975) (134,273)

Depreciation-Unallocated ** 1,175,700 - - - (1,175,700) (1,175,701)

Total Governmental Activities 33,542,588 2,210,714 10,834,099 191,419 (20,306,356) (18,444,913)

General Revenues:

** This line excludes direct Property Taxes Levied for:

depreciation expenses of the General Purposes 3,045,675 2,759,194

various programs Community Education and Service 191,016 186,483

Debt Service 2,780,810 2,705,079

Federal and State Aid Not

Restricted to Specific Purposes 15,906,989 14,447,794

Earnings on Investments 7,593 14,649

Miscellaneous Revenues 48,158 18,443

Total General Revenues 21,980,241 20,131,642

Change in Net Position 1,673,885 1,686,729

Net Position - Beginning of Year, As Originally Stated 10,539,811 25,079,364

Prior Period Adjustment (417,668) (16,226,282)

Net Position, Beginning of Year, As Restated 10,122,143 8,853,082

Net Position - Ending $ 11,796,028 $ 10,539,811

(with Partial Comparative Information for the Year Ended June 30, 2015)

2016

Functions/Programs

Program Revenues


MARSHALL, MINNESOTA

STATEMENT OF ACTIVITIES



14

Food Community Building Debt OPEB Debt

General Service Service Construction Service Service 2016 2015

ASSETS

Cash and Investments $ 4,748,591 $ 212,605 $ 399,557 $ 4,359,341 $ 1,974,484 $ 95,199 $ 11,789,777 $ 14,854,985

Current Property Taxes Receivable 1,588,164 - 90,414 - 1,328,505 62,373 3,069,456 2,923,592

Delinquent Property Taxes Receivable 8,947 - 571 - 9,288 333 19,139 17,342

Accounts and Interest Receivable 88,060 8,069 24,209 - - - 120,338 178,236

Due From Other Minnesota School Districts 48,320 - - - - - 48,320 51,184

Due From State of Minnesota 2,847,559 - 194,579 - 2,759 135 3,045,032 2,618,677

Due From Federal Government 381,450 21,398 15,488 - - - 418,336 273,549

Prepaid Expenditures 152,712 - - - - - 152,712 15,944

Inventory - 14,235 - - - - 14,235 17,226

Cash and Investments with Escrow Agent - - - 90,001 - 90,001 -

TOTAL ASSETS $ 9,863,803 $ 256,307 $ 724,818 $ 4,359,341 $ 3,405,037 $ 158,040 $ 18,767,346 $ 20,950,735

LIABILITIES

Salaries Payable $ 80,059 $ 18,762 $ 98,821 $ 136,587

Accounts and Interest Payable 422,374 $ 80,680 78,138 $ 1,065,307 1,646,499 375,535

Due to Other Governmental Units - - 33,971 - 33,971 47,158

Payroll Liabilities 264,610 - - - 264,610 111,520

Unearned Revenue - - 139,536 - 139,536 175,590

TOTAL LIABILITIES 767,043 80,680 270,407 1,065,307 $ - $ - 2,183,437 846,390

DEFERRED INFLOWS OF RESOURCES

Unavailable Revenue - Delinquent Property Taxes 8,947 - 571 - 9,288 333 19,139 17,342

Property Tax Levied for Subsequent Year's Expenditures 3,011,703 - 190,191 - 2,794,760 131,346 6,128,000 5,781,324

TOTAL DEFERRED INFLOWS OF RESOURCES 3,020,650 - 190,762 - 2,804,048 131,679 6,147,139 5,798,666

FUND BALANCES

Nonspendable Fund Balances 152,712 14,235 - - - - 166,947 33,170

Restricted Fund Balances 843,960 161,392 263,649 3,294,034 600,989 26,361 5,190,385 9,679,600

Assigned Fund Balances 483,318 - - - - - 483,318 -

Unassigned Fund Balances 4,596,120 - - - - - 4,596,120 4,592,909

TOTAL FUND BALANCES 6,076,110 175,627 263,649 3,294,034 600,989 26,361 10,436,770 14,305,679

TOTAL LIABILITIES, DEFERRED INFLOWS OF

RESOURCES, AND FUND BALANCES $ 9,863,803 $ 256,307 $ 724,818 $ 4,359,341 $ 3,405,037 $ 158,040 $ 18,767,346 $ 20,950,735


Major Funds

Total Governmental Funds


MARSHALL, MINNESOTA

BALANCE SHEET - GOVERNMENTAL FUNDS

JUNE 30, 2016


15

2016 2015

Total Fund Balances for Governmental Funds $ 10,436,770 $ 14,305,679

Amounts reported for governmental activities in the

statement of net position are different because:

Capital assets used in governmental activities are not

financial resources and therefore are not reported as

assets in governmental funds. Those assets consist of:

Land 1,628,927 1,628,927

Construction in Progress 4,546,628 -

Other Capital Assets, Net of $27,508,480 of

Accumulated Depreciation 42,044,102 42,891,902

Property taxes receivable will be collected this year,

but are not available soon enough to pay for the current

period's expenditures, and therefore are reported as

unavailable revenue in the funds. 19,139 17,342

The OPEB Revocable Trust Internal Service Fund

is used to charge the benefits to the fund that incurs

the cost. This amount represents assets available to

fund the liabilities. 941,078 1,014,612

Interest on long-term debt is not accrued in governmental

funds, but rather is recognized as an expenditure when due. (297,577) (324,054)

Deferred outflows and inflows of resources related to pensions

are applicable to future periods and, therefore, are not reported

in the funds.

Deferred Outflows of Resources Related to Pensions 3,467,886 2,714,173

Deferred Inflows of Resources Related to Pensions (2,390,827) (4,363,096)

Long-term liabilities, including bonds payable and unamortized

bond premium, are not due and payable in the current period

and therefore are not reported as liabilities in the governmental

funds. Long-term liabilities at year-end consist of:

Bonds Payable (26,283,000) (28,263,000)

Capital Leases Payable (2,003,548) (1,665,835)

Severance Benefits Payable (638,054) (653,215)

Other Post Employment Benefits Payable (584,515) (506,651)

Pension Benefits Payable (17,376,397) (14,316,404)

Unamortized Bond Premium/Discount (1,714,584) (1,940,569)

Total Net Position of Governmental Activities $ 11,796,028 $ 10,539,811

JUNE 30, 2016



MARSHALL, MINNESOTA

RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET

TO THE STATEMENT OF NET POSITION


16


General Service Service Construction Service Service 2016 2015

REVENUES

Local Property Tax Levies $ 3,069,412 $ 190,895 $ 2,649,972 $ 129,767 $ 6,040,046 $ 5,648,623

Other Local and County Revenues 1,626,092 246,343 $ 12,379 5,272 17 1,890,103 1,685,581

Revenue From State Sources 22,758,222 $ 68,486 1,709,948 - 27,589 1,351 24,565,596 22,994,920

Revenue From Federal Sources 754,484 768,009 156,543 - - - 1,679,036 1,511,448

Sales and Other Conversion of Assets 6,821 741,555 - - - - 748,376 703,263

TOTAL REVENUES 28,215,031 1,578,050 2,303,729 12,379 2,682,833 131,135 34,923,157 32,543,835

EXPENDITURES

Current:

District and School Administration 1,121,552 - - - - - 1,121,552 1,133,400

District Support Services 1,006,997 - - - - - 1,006,997 1,023,982

Regular Instruction 12,158,393 - - - - - 12,158,393 10,937,489

Vocational Instruction 408,119 - - - - - 408,119 459,374

Exceptional Instruction 4,846,528 - - - - - 4,846,528 4,303,629

Community Education and Services 39,707 - 2,235,282 - - - 2,274,989 2,172,004

Instructional Support Services 1,398,593 - - - - - 1,398,593 1,232,510

Pupil Support Services 2,556,600 1,558,938 - - - - 4,115,538 3,892,617

Site, Buildings and Equipment 2,649,451 - - 919,992 - - 3,569,443 2,750,563

Fiscal and Other Fixed Cost Programs 102,756 - - - - - 102,756 101,943

Capital Outlay: 1,629,893 5,436 26,813 3,635,898 - - 5,298,040 2,666,992

Debt Service: -

Principal 511,454 - 5,158 - 1,875,000 105,000 2,496,612 2,236,277

Interest 26,253 - 269 - 793,293 25,488 845,303 832,971

Other Debt Service Expenditures - - - - 3,700 450 4,150 3,700

TOTAL EXPENDITURES 28,456,296 1,564,374 2,267,522 4,555,890 2,671,993 130,938 39,647,013 33,747,451

EXCESS OF REVENUES OVER (UNDER)

EXPENDITURES (241,265) 13,676 36,207 (4,543,511) 10,840 197 (4,723,856) (1,203,616)

OTHER FINANCING SOURCES (USES)

Issuance of Bonds - - - - - - - 7,938,000

Proceeds from Sale of Assets 622 - - - - - 622 1,341

Capital Lease Financing 854,325 - - - - - 854,325 1,904,872

854,947 - - - - - 854,947 9,844,213

EXCESS OF REVENUES AND OTHER

SOURCES OVER (UNDER)

EXPENDITURES AND OTHER USES 613,682 13,676 36,207 (4,543,511) 10,840 197 (3,868,909) 8,640,597

FUND BALANCE BEGINNING OF YEAR 5,462,428 161,951 227,442 7,837,545 590,149 26,164 14,305,679 5,665,082

FUND BALANCE END OF YEAR $ 6,076,110 $ 175,627 $ 263,649 $ 3,294,034 $ 600,989 $ 26,361 $ 10,436,770 $ 14,305,679



GOVERNMENTAL FUNDS

STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES

MARSHALL, MINNESOTA

Major Funds

Total Governmental Funds



17

2016 2015

Total Net Change in Fund Balances - Governmental Funds $ (3,868,909) $ 8,640,597

Amounts reported for governmental activities in the

statement of activities are different because:

Capital outlays to purchase or build capital assets are reported

in governmental funds as expenditures. However, for governmental

activities those costs are shown in the statement of net position and

allocated over their estimated useful lives as annual depreciation

expense in the statement of activities. This is the amount by which

capitalized outlays exceeds depreciation expense in the period.

Capital Outlays 5,952,509 2,431,732

Depreciation Expense (2,241,681) (2,032,155)

Proceeds from the sale of capital assets are reported in

governmental funds as other financing sources without regard

to any cost basis adjustment. However, for governmental activities those

proceeds are adjusted for any remaining cost basis of the assets

that were disposed.

(12,000) (142,114)

Repayment of long-term debt is reported as an expenditure in

governmental funds, but the repayment reduces long-term

liabilities on the statement of net position. In the current period

these amounts consist of:

Repayment of Bond Principal 1,980,000 1,905,000

Repayment of Capital Lease Principal 516,612 331,277

Long-term borrowing and other bond financing is reported as

revenue (other financing sources) in governmental funds, but

these proceeds increase long-term liabilities on the statement

net position. In the current period these amounts consisted of:

Capital Lease Financing (854,325) (1,904,872)

Issuance of Bonds - (7,938,000)

The OPEB Revocable Trust Internal Service Fund

is used to charge the benefits to the fund that incurs

the cost. The increase (decrease) in net position is reported

within the governmental activities in the statement of activities. (73,534) (51,785)

Interest on long-term debt is recognized as an expenditure in the

governmental funds when it is due. In the statement of activities,

however, interest expense is recognized as it accrues regardless

of when it is due. In addition, the amortization of bond premium/discount

decreases/increases interest expense in the statement of activities. 252,462 243,797

Property taxes that will not be collected for several months after

the District's fiscal year end are not considered available revenues

in the governmental funds, and are instead considered unavailable tax

revenues. They are, however, recorded as revenues in the statement

of activities. 1,797 (32,693)

In the statement of activities, severance benefits are measured by the

amounts earned during the year. In the governmental funds, however,

expenditures for these items are measured by the amount of financial

resources used (essentially, the amounts paid). 15,161 42,418

Governmental funds recognized pension contributions as expenditures

at the time of payment whereas the statement of activities factors in items

related to pensions on a full accrual persepctive.

State Aid Related to Pension Expense 305,403 34,363

Pension Expense (221,746) 226,592

In the statement of activities, other post employment benefits are

measured by the amounts actuarily accrued during the year. In the

governmental funds, however, expenditures for these items are measured by

the amount of actual or implicit resources used. (77,864) (67,428)

Change in Net Position of Governmental Activities $ 1,673,885 $ 1,686,729

RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF

REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES

TO THE STATEMENT OF ACTIVITIES




MARSHALL, MINNESOTA


18


Internal Service Fund

2016 2015

ASSETS

Cash and Cash Equivalents $ 10,387 $ 73,099

Investments 924,891 935,761

Interest Receivable 5,800 5,752

TOTAL ASSETS $ 941,078 $ 1,014,612

LIABILITIES AND NET POSITION

LIABILITIES

None

TOTAL LIABILITIES $ - $ -

NET POSITION

Unrestricted 941,078 1,014,612

TOTAL LIABILITIES AND NET POSITION $ 941,078 $ 1,014,612


STATEMENT OF NET POSITION

PROPRIETARY FUND

JUNE 30, 2016

(with Comparative Information as of June 30, 2015)

MARSHALL, MINNESOTA


19



2016 2015

OPERATING REVENUES

None $ - $ -

OPERATING EXPENSES

Employee Benefits 50,003 60,327

Total Operating Expenses 50,003 60,327

OPERATING INCOME (LOSS) (50,003) (60,327)

NONOPERATING REVENUES (EXPENSES)

Investment Income (Loss) (15,198) 16,754

Investment Expense (8,333) (8,212)

Total Nonoperating Revenues (Expenses) (23,531) 8,542

CHANGE IN NET POSITION (73,534) (51,785)

NET POSITION - BEGINNING 1,014,612 1,066,397

NET POSITION - ENDING $ 941,078 $ 1,014,612


STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION

PROPRIETARY FUND


(with Comparative Information for the Year Ended June 30, 2015)

MARSHALL, MINNESOTA


20



2016 2015

CASH FLOWS FROM OPERATING ACTIVITIES

Cash Paid to District for Employee Benefits $ (50,003) $ (60,327)

Net Cash Flows Provided by (Used in)

Operating Activities (50,003) (60,327)

CASH FLOWS FROM INVESTING ACTIVITIES

Investment Purchases/Sales - Net (36,654) 65,365

Cash Paid for Trust Fees (8,333) (8,212)

Cash Received from Interest and Gains on Investments 32,278 61,027

Net Cash Flows Provided by (Used in)

Investing Activities (12,709) 118,180

NET INCREASE (DECREASE) IN CASH

AND CASH EQUIVALENTS (62,712) 57,853

CASH AND CASH EQUIVALENTS, BEGINNING 73,099 15,246

CASH AND CASH EQUIVALENTS, ENDING $ 10,387 $ 73,099

SCHEDULE RECONCILING OPERATING INCOME

(LOSS) TO NET CASH FLOWS PROVIDED BY

(USED IN) OPERATING ACTIVITIES

Operating Income (Loss) $ (50,003) $ (60,327)

Adjustments to Reconcile Operating Income (Loss) to Net

Cash Flows Provided by (Used in) Operating Activities

None - -

Net Cash Flows Provided by (Used In)

Operating Activities $ (50,003) $ (60,327)


STATEMENT OF CASH FLOWS

PROPRIETARY FUND


(with Comparative Information for the Year Ended June 30, 2015)

MARSHALL, MINNESOTA


21


MARSHALL, MINNESOTA

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2016

22

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A. BASIS OF PRESENTATION The financial statements of Independent School District No. 413, Marshall, Minnesota have been prepared in

conformity with accounting principles generally accepted in the United States of America (GAAP) as applied

to governmental units. The Governmental Accounting Standards Board (GASB) is the accepted standard

setting body for establishing governmental accounting and financial reporting principles. The GASB

pronouncements are recognized as U.S. generally accepted accounting principles for state and local

governments.

B. FINANCIAL REPORTING ENTITY Independent School District No. 413, Marshall, Minnesota (the District) is an instrumentality of the State of

Minnesota established to function as an educational institution. The elected School Board (Board) is responsible for legislative and fiscal control of the District. A Superintendent is appointed by the Board and is

responsible for administrative control of the District.

U.S. Generally Accepted Accounting Principles (GAAP) require that the District’s financial statements

include all funds, departments, agencies, boards, commissions, and other organizations which are not legally

separated from the District. In addition, the District’s financial statements are to include all component units –

entities for which the District is financially accountable.

Financial accountability includes such aspects as appointing a voting majority of the organization’s governing

body, significantly influencing the programs, projects, activities or level of services performed or provided by

the organization or receiving specific financial benefits from, or imposing specific financial burden on, the organization. These financial statements include all funds of the District. There are no other entities for

which the District is financially accountable.

Student activities are determined primarily by student participants under the guidance of an adult and are

generally conducted outside school hours. The School Board does have a fiduciary responsibility in

establishing broad policies and ensuring that appropriate financial records are maintained for student

activities. However, in accordance with Minnesota State Statutes, the District’s School Board has not elected

to control or exercise oversight responsibility with respect to the underlying student activities. Accordingly,

the student activity accounts are not included in these financial statements.

C. BASIC FINANCIAL STATEMENT PRESENTATION The government-wide financial statements (i.e. the Statement of Net Position and the Statement of Activities)

display information about the reporting government as a whole. These statements include all the financial

activities of the District.

The Statement of Activities demonstrates the degree to which the direct expenses of a given function or

segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific

function or segment. Program revenues include charges to customers or applicants who purchase, use, or

directly benefit from goods, services, or privileges provided by a given function or segment and grants and

contributions that are restricted to meeting the operational or capital requirements of a particular function or

segment. Taxes and other items not properly included among program revenues are reported instead as

general revenues.

The District applies restricted resources first when an expense is incurred for purpose for which both restricted

and unrestricted net position are available. Depreciation expense that can be specifically identified by

function is included in the direct expenses of each function. Generally, the effect of material interfund activity

has been removed from the government-wide financial statements.

Separate fund financial statements are provided for governmental funds. All individual governmental funds

are reported as separate columns in the fund financial statements.


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1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)

D. MEASUREMENT FOCUS AND BASIS OF ACCOUNTING The accounting and financial reporting treatment applied is determined by its measurement focus and basis of

accounting. The government-wide 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 taxes are

generally recognized as revenues in the fiscal year for which they are levied. Grants and similar items are

recognized when all eligibility requirements imposed by the provider have been met.

Governmental fund financial statements are reported using the current financial resources measurement focus

and the modified accrual basis of accounting. Under this basis of accounting transactions are recorded in the

following manner:

1. Revenue Recognition – Revenue is recognized when it becomes measurable and available. “Measurable”

means the amount of the transaction can be determined and “available” means collectible within the

current period or soon enough thereafter to be used to pay liabilities of the current period. Property tax

revenue is generally considered as available if collected within 60 days after year-end. State revenue is

recognized in the year to which it applies according to Minnesota Statutes and U.S. generally accepted

accounting principles. Minnesota Statutes include state aid funding formulas for specific fiscal years.

Federal revenue is recorded in the year in which the related expenditure is made. Food service sales,

community education tuition, and other miscellaneous revenue (except investment earnings) are recorded

as revenues when received because they are generally not measurable until then. Investment earnings are

recorded when earned because they are measurable and available. A six-month availability period is generally used for other fund revenue.

2. Recording of Expenditures – Expenditures are generally recorded when a liability is incurred. However,

expenditures are recorded as prepaid for approved disbursements or liabilities incurred in advance of the

year in which the item is to be used. Principal and interest on long-term debt issues are recognized on

their due dates.

Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues

and expenses generally result from providing services and producing and delivering in connection with a

proprietary fund’s principal ongoing operations. The principal operating revenues of the Internal Service

Fund are District contributions. Operating expenses for proprietary funds normally include claims paid and

administrative expenses. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses.

Description of Funds

The existence of the various District funds has been established by the State of Minnesota, Department of

Education. The accounts of the District are organized on the basis of funds, each of which is considered a

separate accounting entity. A description of the funds included in this report is as follows:

Governmental Funds General Fund – The General Fund is used to account for all financial resources except those required to be

accounted for in another fund. It includes the general operations and pupil transportation activities of the

District, as well as the capital related activities such as maintenance of facilities, equipment purchases, health and safety projects, and disabled accessibility projects.

Food Service Fund – The Food Service Fund is used to account for food service revenues and expenditures.

Community Service Fund – The Community Service Fund is used to account for services provided to

residents in the areas of recreation, civic activities, nonpublic pupils, veterans, adult or early childhood

programs or other similar services.


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D. MEASUREMENT FOCUS AND BASIS OF ACCOUNTING (Cont’d)

Governmental Funds (Cont’d)

Building Construction Fund – The Building Construction Fund is used to account for financial resources to be

used for the construction of major capital facilities.

Debt Service Fund – The Debt Service Fund is used to account for the accumulation of resources for, and

payment of, general long-term debt principal, interest, and related costs.

OPEB Debt Service Fund – The OPEB Debt Service Fund is used to account for the accumulation of

resources for, and payment of, long-term debt principal, interest, and related costs pertaining to the District’s

General Obligation Taxable OPEB Bonds, Series 2009B.

Proprietary Fund Internal Service Fund – The OPEB Revocable Trust Internal Service Fund is used to account for retiree

benefits relating to health insurance.

GASB Statement No. 34 specifies that the accounts and activities of each of the District’s most significant

governmental funds (termed “major funds”) be reported in separate columns on the fund financial statements.

Other non-major funds can be reported in total. Although only the General Fund, Building Construction

Fund, and Debt Service Fund are major funds by definition, the District has elected to report all funds as

major funds and therefore presents all funds in separate columns on the fund financial statements – an option

permitted by GASB Statement No. 34.

Private-sector standards of accounting and financial reporting issued prior to December 1, 1989, generally are

followed in both the government-wide and propriety fund financial statements to the extent that those

standards do not conflict with or contradict guidance of Governmental Accounting Standards Board (GASB).

E. BUDGETING

Budgets presented in this report for comparison to actual amounts are presented in accordance with U.S.

generally accepted accounting principles. Each June, the School Board adopts an annual budget for the

following fiscal year for the General, Food Service, Community Service, Building Construction, Debt Service,

and OPEB Debt Service Funds. The approved budget is published in summary form in the District’s legal

newspaper by November 30 of each year. Reported budget amounts represent the amended budget as adopted

by the School Board. Legal budgetary control is at the fund level.

Procedurally, in establishing the budgetary data reflected in these financial statements, the Superintendent

submits to the School Board prior to July 1, a proposed operating budget for the fiscal year commencing July

1. The operating budget includes proposed expenditures and the means to finance them. The budget is legally

enacted by School Board action. Revisions to budgeted amounts must be approved by the School Board.

Total fund expenditures in excess of the budget require approval of the School Board. Spending control is

established by the amount of expenditures budgeted for the fund, but management control is exercised at line

item levels. Budget provisions for the Debt Service Fund are set by state law governing required debt service

levels.

Unencumbered expenditure appropriations lapse at year-end. Encumbrances are generally not recorded.


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25


F. CASH AND INVESTMENTS

Cash and investments include balances from all funds, except the Internal Service Fund, that are combined

and invested to the extent available in various securities as authorized by state law. State statutes authorize the

District to invest in obligations of the U.S. Treasury, commercial paper, corporate bonds, repurchase

agreements and the State Treasurer’s Investment Pool. Earnings from the pooled investments are allocated to

the individual funds based on the average of month-end cash and investment balances. Investments are

reported at fair value.

For the purposes of the statement of cash flows for the Internal Service Fund, cash and investments with

original maturities of three months or less are considered to be cash equivalents.

Cash and investments at June 30, 2016 are comprised of deposits; certificates of deposit; shares in the

Minnesota School District Liquid Asset Fund (MSDLAF); and mutual funds, corporate and government

bonds, and stocks purchased through Bremer Trust, N.A. The MSDLAF is an external investment pool not

registered with the Securities and Exchange Commission (SEC) that follows the same regulatory rules of the

SEC under Rule 2.a.7. The fair value of the position in the pool is the same as the value of the pool shares.

The District has formal policies in place as of June 30, 2016 to address custodial credit risk for deposits. The

District also has formal policies in place as of June 30, 2016 to address interest rate risk, credit risk,

concentration of credit risk and custodial credit risk for investments.

G. CASH AND INVESTMENTS WITH ESCROW AGENT/RESTRICTED CASH AND

INVESTMENTS

Certain resources set aside for repayment of Qualified Zone Academy bond payments are classified as cash

and investments with escrow agent on the balance sheet because their use is limited by applicable bond

covenants.

H. ACCOUNTS RECEIVABLE Accounts receivable represent amounts receivable from individuals, firms, and corporations for goods and

services furnished by the District. Amounts due from the State of Minnesota and from other governmental

units for general education aids and reimbursements under various specific programs are reported at the

estimated amounts to be received based on available information at the date of this report. In some instances,

adjustments and proration by these agencies, which are dependent upon the amount of funds available for

distribution, may result in differing amounts actually being received. Any such differences will be absorbed into operations of the subsequent period. No substantial losses are anticipated from present receivable

balances, therefore, no allowance for uncollectible accounts is deemed necessary. The only receivables not

expected to be collected within one year are delinquent property taxes receivable, which are generally

immaterial.

I. INVENTORIES Inventories are recorded using the consumption method of accounting and consist of purchased food, supplies

and surplus commodities received from the federal government. Food and supply purchases are recorded at

invoice cost, computed on a first-in, first-out method, and surplus commodities are stated at standardized cost,

as determined by the Department of Agriculture.

J. PREPAYMENTS Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as

prepayments. Prepaid items are reported using the consumption method and recorded as an expense or

expenditure at the time of consumption.


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K. PROPERTY TAXES The Board of Education annually adopts a tax levy and certifies it to the County in December for collection in

the following year. The County is responsible for collecting all property taxes for the District. These taxes

attach an enforceable lien on taxable property within the District on January 1 and are payable by the property

owners in May and October of each year. The taxes are collected by the County Treasurer and tax settlements

are made to the District periodically throughout the year.

Statutory funding formulas determine the majority of the District revenue in the General and special revenue

funds. This revenue is divided between property taxes and State aids by the legislature based on education

funding priorities. Changes in this allocation are periodically accompanied by a change in property tax

revenue recognition referred to as the “tax shift.” The remaining portion of taxes collectible in 2016 is recorded as a deferred inflow of resources (property tax levied for subsequent year’s expenditures).

Taxes that remain unpaid are classified as delinquent taxes receivable. Revenue from these delinquent

property taxes that is not collected within 60 days of year-end is reported as a deferred inflow of resources

(unavailable revenue) in the fund financial statements because it is not known to be available to finance the

operations of the District in the current year.

L. CAPITAL ASSETS Capital assets are capitalized at historical cost, or estimated historical cost for assets where actual historical

cost is not available. Donated assets are recorded as capital assets at their estimated fair market value at the

date of donation. The District maintains a threshold level of $1,000 for capitalizing capital assets. The cost of normal maintenance and repairs that do not add to the value of the asset or materially extend asset lives are not

capitalized.

Capital assets are recorded in the government-wide financial statements, but are not reported in the fund

financial statements. Capital assets are depreciated using the straight-line method over their estimated useful

lives. Since surplus assets are sold for an immaterial amount when declared as no longer needed for public

school purpose by the District, no salvage value is taken into consideration for depreciation purposes. Useful

lives vary from 20 to 50 years for land improvements and buildings, and 5 to 15 years for equipment.

Capital assets not being depreciated include land and construction in progress, if any.

The District does not possess any material amounts of infrastructure capital assets. Items such as sidewalks and other land improvements are considered to be part of the cost of buildings or other improvable property.

M. LONG-TERM OBLIGATIONS In the government-wide financial statements, long-term debt and other long-term obligations are reported as

liabilities in the applicable governmental activities. Existing bonded debt is reported at the face value of

remaining indebtedness. For any new indebtedness that may be issued, bond premiums and discounts will be

deferred and amortized over the life of the bonds using the straight-line method. Bonds payable will be

reported net of the applicable bond premium or discount.

In the fund financial statements, governmental fund types recognize bond premiums and discounts during the

current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other

financing uses. Principal payments are reported as debt service expenditures.

N. DEFERRED OUTFLOWS OF RESOURCES In addition to assets, the Statement of Net Position will sometimes report a separate section for deferred

outflows of resources. This separate financial statement element, deferred outflows of resources, represents a

consumption of net position that applies to future period(s) and so will not be recognized as an outflow of

resources (expense/expenditure) until then.


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O. DEFERRED INFLOWS OF RESOURCES

In addition to liabilities, the Statement of Net Position and the governmental funds Balance Sheet will

sometimes report a separate section for deferred inflows of resources. This separate financial statement

element, deferred inflows of resources, represents an acquisition of net position or fund balance that applies to

future period(s) and so will not be recognized as an inflow of resources (revenue) until that time.

P. DEFINED BENEFIT PENSION PLANS

Teachers Retirement Association For purposes of measuring the net pension liability, deferred outflows/inflows of resources, and pension

expense, information about the fiduciary net position of the Teachers Retirement Association (TRA) and

additions to/deductions from TRA’s fiduciary net position have been determined on the same basis as they are reported by TRA.

TRA has a special funding situation created by direct aid contributions made by the State of Minnesota, City

of Minneapolis and Minneapolis School District. This direct aid is a result of the merger of the Minneapolis

Teachers Retirement Fund Association merger into TRA in 2006. A second direct aid source is from the State

of Minnesota for the merger of the Duluth Teacher’s Retirement Fund Association (DTRFA) in 2015.

Additional information can be found in Note 8.

Public Employees Retirement Association

For purposes of measuring the net pension liability, deferred outflows/inflows of resources, and pension

expense, information about the fiduciary net position of the Public Employees Retirement Association (PERA) and additions to/deductions from PERA’s fiduciary net position have been determined on the same

basis as they are reported by PERA. For this purpose, plan contributions are recognized as of employer

payroll paid dates and benefit payments and refunds are recognized when due and payable in accordance

with the benefit terms. Investments are reported at fair value.

Q. ACCRUED EMPLOYEE BENEFITS

Vacation Pay Twelve-month employees of the District earn vacation pay at various rates based on years of service. Unused

vacation pay may be carried forward one year after the year in which it is earned. For certain classes of

employees this benefit is payable upon termination.

Sick Pay Substantially all District employees are entitled to sick leave at various rates. For certain employees, unused

sick leave enters into the calculation of severance pay upon termination.

403(b) Retirement Plan Certified employees are eligible to participate in a 403(b) salary reduction plan with matching contributions

by the District. The District match increases with years of service to a maximum of $1,700. Total matching

contributions of the District are limited to a $30,000 total career contribution per individual and $135,000 for

all certified employees for the year ended June 30, 2016.

Administrative support employees are eligible to participate in a 403(b) salary reduction plan with matching

contributions by the District. The District match increases with years of service to a maximum of $1,100. Total matching contributions of the District are limited to a $10,000 total career contribution per individual.

Principals of the District are eligible to participate in a 403(b) salary reduction agreement with matching

contributions by the District. The plans call for eligibility after 1 year of service and are limited in various

amounts limited by group and length of service with a maximum yearly cap of $2,250 and a lifetime cap of

$35,000 per individual.


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Q. ACCRUED EMPLOYEE BENEFITS (Cont’d)

403(b) Retirement Plan (Cont’d) Confidential employees are eligible to participate in a 403(b) salary reduction plan with matching

contributions by the District. The District matches eligible individual employee’s contributions up to two

percent of annual gross salary per year for those employees with at least one year of consecutive service.

Total matching contributions of the District are limited to a $30,000 total career contribution per individual for

the year ended June 30, 2016.

The Superintendent of the District is eligible to participate in a 403(b) salary reduction agreement with

matching contributions by the District. The plan limits the matching contributions to a yearly cap of $3,000.

Certain other employees of the District are eligible to participate in a 403(b) salary reduction agreement with

matching contributions by the District. The eligibility for these plans vary and are limited in various amounts

limited by group and length of service with various maximum yearly and lifetime caps per individual.

District contributions to all 403(b) retirement plans for the year ended June 30, 2016 are $178,972.

Severance Pay

Full time certified employees hired prior to July 1, 1999 and who are at least 55 years of age are eligible for

severance benefits payable in contributions to a District sponsored health care savings plan. The severance

compensation is based on unused sick leave up to a maximum of 100 days. Severance under this agreement

shall be deposited by the District into the employee’s health care savings account. This severance benefit will end for those who retire after June 30, 2020. If a certified employee eligible for severance pay also

participates in the 403(b) matching contribution plan, any severance pay entitlement will be reduced by the

amount of contributions received under the 403(b) plan.

Principals who are at least 55 years of age are eligible for severance benefits payable in health and/or other

benefits paid by the District. The severance compensation is based on unused sick leave up to a maximum of

120 days. Severance under this agreement shall be deposited by the District into the employee’s health care

savings account.

Clerical employees of the District with five consecutive years of experience earn severance pay at a rate of

three days per year of service for the first 15 years and four days per year of service thereafter, to a maximum

of the lesser of 60 days or accrued unused sick leave. Severance under this agreement shall be paid to the employee in cash in one lump sum.

Confidential employees of the District with five years of experience earn severance pay of two weeks. After

ten years of service, this increases to three weeks of severance. If the years of service is over ten years, one

week of severance is added for every additional five years of experience. The employee must have enough

sick leave accrued to cover the balance of the severance. Severance under this agreement shall be deposited

by the District into the employee’s health care savings account.

Custodial employees of the District with five consecutive years of experience earn severance pay at a rate of

two to three days per year of service, to a maximum of 70 days. Severance under this agreement shall be

deposited by the District into the employee’s health care savings account.

The Superintendent and certain other employees of the District with at least five years of service are eligible

for severance benefits payable in health insurance premiums paid by the District or in a single lump sum cash

payment. The severance compensation calls for two months’ salary after five years of service with an

increase to four months after ten years of service.

During fiscal year 2016, the decrease in severance liabilities totaled $15,161. At June 30, 2016 a liability for

severance pay totaling $638,054 is recorded in the Statement of Net Position.


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R. RISK MANAGEMENT

The District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets;

errors and omissions; injuries to employees; natural disasters and workers compensation. The District

purchases commercial insurance coverage for such risks.

The District maintains a self-insured dental insurance plan for substantially all employees. All known

liabilities under this plan as of June 30, 2016 have been recorded in the financial statements. Based on prior

experience any incurred, but not reported claims as of June 30, 2016 are deemed to be immaterial, and

therefore no liability estimate has been included in the financial statements.

There has been no significant reduction in insurance coverage from the previous year in any of the District’s policies. Settled claims resulting from these risks did exceed insurance coverage during this fiscal year.

Settled claims resulting from these risks have not exceeded insurance coverage in the prior two fiscal years.

S. FUND BALANCE

In the fund financial statements, fund balance is divided into five classifications based primarily on the extent

to which the District is bound to observe constraints imposed upon the use of resources reported in

governmental funds. These classifications are as follows:

Nonspendable – consists of amounts that cannot be spent because it is not in spendable form, such as

prepaid and inventory items.

Restricted – consists of amounts related to externally imposed constraints established by creditors,

grantors or contributors; or constraints imposed by state statutory provisions.

Committed – consists of amounts that are constrained for specific purposes that are internally imposed by

formal action (resolution) of the School Board. Those committed amounts cannot be used for any other

purpose unless the School Board removes or changes the specified use by taking the same type of action

it employed to previously commit those amounts.

Assigned – consists of amounts intended to be used by the District for specific purposes but do not meet

the criteria to be classified as restricted or committed. In governmental funds other than the General

Fund, assigned fund balance represents the remaining amount that is not restricted or committed. In the

General Fund, assigned amounts represent intended uses established by the School Board itself or by an official to which the School Board delegates the authority. Pursuant to School Board resolution, the

Director of Business Services is authorized to establish assignments of fund balance.

Unassigned – is the residual classification for the General Fund and also reflects negative residual

amounts in other funds.

If resources from more than one fund balance classification could be spent, the District will strive to spend

resources from fund balance classifications in the following order (first to last): restricted, committed,

assigned, and unassigned as determined by the School Board.

The District has formally adopted fund balance policies for several funds as set forth in the annual budget book. The District’s policy is to maintain a minimum of 8% of expenditures in the General Fund (excluding

transportation and operating capital), a minimum of $50,000 in the Food Service Fund, and a minimum of

$150,000 in the Community Service Fund.


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T. NET POSITION

Net position represents the difference between assets, deferred outflows of resources, liabilities, and deferred

inflows of resources in the government-wide financial statements. Net position invested in capital assets

consists of capital assets, net of accumulated depreciation, reduced by the outstanding balance of any long-

term debt used to build or acquire the capital assets. Net position is reported as restricted in the government-

wide financial statement when there are limitations imposed on its use through external restrictions imposed

by creditors, grantors, laws or regulations of other governments. All other net position items that do not meet

the definition of “net investment in capital assets” or “restricted” are reported as unrestricted.

U. USE OF ESTIMATES

The preparation of 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 disclosure of contingent assets and liabilities at the date of the financial

statements and the reported amounts of revenues and expenses during the reporting period. Actual results

could differ from those estimates.

V. RECLASSIFICATIONS

Certain amounts in the prior year data have been reclassified in order to be consistent with the current year’s

presentation. The total amount of the District’s prior year fund balance did not change due to these

reclassifications.

2. STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY

A. DEFICIT FUND BALANCES

At June 30, 2016, the District had no funds with negative fund balances.

3. DEPOSITS AND INVESTMENTS

A. DEPOSITS

In accordance with Minnesota Statutes, the District maintains deposits at those depository banks authorized by

the School Board, all of which are members of the Federal Reserve System.

Minnesota Statutes require that all District deposits be secured by a bank guaranty bond or 110% of collateral

valued at market or par, whichever is lower, less the amount covered by the Federal Deposit Insurance

Corporation (FDIC).

Custodial Credit Risk: For deposits, is the risk that, in the event of failure of a depository financial institution,

the District will not be able to recover deposits or will not be able to recover collateral securities that are in the

possession of an outside party. As of June 30, 2016, the District’s bank balance was not exposed to custodial

credit risk because it was insured and properly collateralized with securities held by the pledging financial

institution’s trust department or agent and in the District’s name.

B. INVESTMENTS Interest Rate Risk: Interest rate risk is the risk that changes in interest rates will adversely affect the fair value

of an investment. The District’s investment policy states investments will be managed in a manner to attain a

market rate of return through various economic and budgetary cycles, while preserving and protecting the

capital in the investment portfolio and taking into account constraints on risk and cash flow requirements. The District’s investments were not exposed to interest rate risk at June 30, 2016.

Credit Risk: Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its

obligations. The District’s investment policy states the District may invest its available funds in those

instruments specified in Minnesota Statutes or any other law governing the investment of school district

funds. The District’s investments were not exposed to credit risk at June 30, 2016.


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31

3. DEPOSITS AND INVESTMENTS (Cont’d)

B. INVESTMENTS (Cont’d) Concentration of Credit Risk: Concentration of credit is the risk of loss attributed to the magnitude of a

government’s investment in a single issuer. The District’s investment policy states that the District shall

diversify its investments to avoid incurring unreasonable risks inherent in over-investing in specific

instruments, individual financial institutions or maturities. The policy does not state the maximum percentage

of the District’s investment portfolio that may be invested in a single type of investment instrument.

Custodial Credit Risk: For an investment, this is the risk that, in the event of the failure of the counterparty,

the government will not be able to recover the value of its investments or collateral securities that are in the

possession of an outside party. The District’s investment policy states that all investment securities purchased

by the District shall be held in third-party safe keeping by an institution designated as custodial agent. The District’s investments were not exposed to custodial credit risk at June 30, 2016.

The following table presents the District’s cash and investment balances at June 30, 2016:

Credit Average Percentage

Cash/Investment Type Rating Maturities of Total Balance

Pooled Cash and Investments:

Money Market Accounts N/A N/A 85.3% $ 10,931,004

Checking Account N/A N/A 6.7 858,573

Petty Cash N/A N/A 0.0 200

11,789,777

Cash and Investments with Escrow Agent:

Savings Account N/A N/A 0.7 90,001

OPEB Cash and Investments:

Cash N/A N/A 0.0 114

Money Market Accounts N/A N/A 0.1 10,273

Mutual Funds N/A N/A 1.6 205,085

U.S. Treasuries N/A 0.77 Years 0.4 50,045

Corporate Bonds A- – BBB+ 2.47 Years 1.0 130,490

Federal Agency Obligations N/A 0.52 Years 0.8 105,415

Municipal Obligations AA+ – BB+ 3.11 Years 1.3 164,263

Corporate Stock N/A N/A 2.1 269,593

935,278

Total Cash and Investments 100.0% $ 12,815,056

Cash and Investments are presented in the June 30, 2016 basic financial statements as follows:

Statement of Net Position:

Current Assets:

Cash and Investments $ 12,725,055

Noncurrent Assets: Restricted Cash and Investments 90,001

Total $ 12,815,056


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C. FAIR VALUE MEASUREMENTS

In the current year, the District implemented GASB Statement No. 72, Fair Value Measurement and

Application. This Statement provides guidance for determining a fair value measurement for financial

reporting purposes. This Statement also provides guidance for applying fair value to certain investments

and disclosures related to all fair value measurements. No restatement of the June 30, 2015, net

position/fund balance occurred as a result of adopting GASB Statement No. 72.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit

price) in an orderly transaction between market participants at the measurement date. The Governmental

Accounting Standards Board (GASB) establishes a hierarchy for grouping assets and liabilities, based on the

significance of inputs used to measure fair value. The asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value

measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use

of unobservable inputs. There are three levels of inputs that may be used to measure fair value:

Level 1 Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities

in active markets that the District has the ability to access.

Level 2 Inputs other than quoted prices included within Level 1 that are observable for the asset or

liability, either directly or indirectly, such as:

quoted prices for similar assets or liabilities in active markets;

quoted prices for identical or similar assets or liabilities in inactive markets;

inputs other than quoted prices that are observable for the asset or liability;

inputs that are derived principally from or corroborated by observable market data by

correlation or other means.

If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for

substantially the full term of the asset or liability.

Level 3 Inputs to the valuation methodology are unobservable and significant to the fair market value

measurement.

The entity has the following recurring fair value measurements as of June 30, 2016:

Fixed income securities - Fixed income securities other than bond mutual funds are valued using

market corroborated inputs. Bond mutual funds are valued at market prices for identical assets in

active markets.

Equity securities - All equity securities are valued at quoted market prices for identical assets.

There were no Level 3 inputs as of June 30, 2016.

The following table sets forth by level, within the fair value hierarchy, the District’s investments at fair

value as of June 30, 2016.


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C. FAIR VALUE MEASUREMENTS (Cont’d)

2016

Quoted Prices in

Active Markets Significant

For Identical Observable

Assets Inputs

Fair Value Level 1 Level 2

Investments by Fair Value Level

Fixed income securities

U.S. treasury notes $ 50,045 $ - $ 50,045

U.S. government agencies 105,415 - 105,415 Corporate and foreign bonds 130,490 - 130,490

Municipal obligations 164,263 - 164,263

Bond mutual funds 18,660 18,660 -

Total fixed income securities 468,873 18,660 450,213

Equity securities

Alternative investments 43,055 43,055 -

Common equity securities 269,593 269,593 -

Equity mutual funds 143,370 143,370 -

Total equity securities 456,018 456,018 -

Total investments by fair value level $ 924,891 $ 474,678 $ 450,213

A Summary of Cash and Investments as of June 30, 2016 is as follows:

Investments disclosed by fair value level $ 924,891

Accounts not disclosed by fair value level:

Money Market Accounts 10,941,277

Checking Account 858,573

Savings Account 90,001

Cash 114

Petty Cash 200

Total Cash and Investments $ 12,815,056


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4. CAPITAL ASSETS Capital asset activity for the year ended June 30, 2016 was as follows:

Beginning Ending

Balance Increases Decreases Balance Governmental Activities

Capital Assets, Not Being Depreciated

Land $ 1,628,927 $ - $ - $ 1,628,927

Construction in Progress - 4,546,628 - 4,546,628

Total Capital Assets, Not

Being Depreciated 1,628,927 4,546,628 - 6,175,555

Capital Assets, Being Depreciated Land Improvements 1,180,794 - - 1,180,794

Buildings and Improvements 56,345,700 99,959 - 56,445,659

Equipment and Transportation Vehicles 10,644,207 1,305,922 24,000 11,926,129

Total Capital Assets,

Being Depreciated 68,170,701 1,405,881 24,000 69,552,582

Accumulated Depreciation for:

Land Improvements 491,433 53,937 - 545,370

Buildings and Improvements 17,826,256 1,283,748 - 19,110,004

Equipment and Transportation Vehicles 6,961,110 903,996 12,000 7,853,106

Total Accumulated Depreciation 25,278,799 2,241,681 12,000 27,508,480

Total Capital Assets, Being

Depreciated, Net 42,891,902 42,044,102

Governmental Activities Capital

Assets, Net $ 44,520,829 $ 48,219,657

Depreciation expense was charged to functions of the District as follows:


District and School Administration $ 33,441

District Support Services 4,414

Regular Instruction 283,275

Vocational Instruction 609

Exceptional Instruction 15,658 Community Education and Services 4,851

Instructional Support Services 88,113

Pupil Support Services 407,209

Site, Buildings and Equipment 228,411

Unallocated 1,175,700

Total Depreciation Expense, Governmental Activities $ 2,241,681


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5. LONG-TERM LIABILITIES

A. DESCRIPTION OF LONG-TERM DEBT

Long-term debt is comprised of the following as of June 30, 2016:

Interest Original Maturity Debt

Issue Rate Issue Date Outstanding

OPEB Bonds, Series 2009B 1.75 – 4.70% $ 1,035,000 02/01/2020 $ 470,000

Building Refunding Bonds, Series 2012B 3.00 – 4.00% $ 21,555,000 02/01/2024 17,875,000

Alternative Facilities Bonds

Series 2015C 2.65% $ 2,915,000 06/15/2026 2,915,000

Capital Facilities Bonds

Series 2015B (QZAB) 0.00% $ 1,350,000 06/15/2030 1,350,000 Alternative Facilities Bonds

Series 2015B (QZAB) 0.00% $ 3,673,000 06/15/2027 3,673,000

Capital Lease Payable (Parking Lot) 3.49% $ 155,210 07/01/2015 -

Capital Lease Payable (Vehicle) 3.99% $ 15,202 10/11/2016 2,720

Capital Lease Payable (Roof Improvement) 2.79% $ 499,830 09/01/2018 301,187

Capital Lease Payable (Computer Equipment) 1.49% $ 920,042 03/03/2019 556,474




Capital Lease Payable (Vehicle) 4.29% $ 14,325 04/22/2019 14,325

Total Outstanding Long-Term Debt $ 28,286,548

General Obligation Bonds

On September 15, 2009 the District issued $1,035,000 of General Obligation Taxable OPEB Bonds, Series

2009B. The proceeds of the issue were used to fund the District’s actuarially determined liabilities to pay

postemployment benefits to its employees or officers after their termination of service. The District will levy

property taxes for the retirement of these bonds. Principal and interest payments on these bonds are recorded

in the OPEB Debt Service Fund. Interest paid in 2015-2016 was $25,488.

On August 28, 2012 the District issued $21,555,000 of General Obligation School Building Refunding Bonds,

Series 2012B. The proceeds of the issue were used to finance an advance crossover refunding of the 2015

through 2024 maturities of the District’s $37,000,000 General Obligation School Building Bonds, Series

2003A, dated May 1, 2003. The proceeds were placed in an escrow account which paid the interest on the advance refunding bonds until February 2014, at which time the 2003A series bonds became callable and the

escrow was used to pay the refunded debt. This advance refunding was undertaken to reduce the District’s

future debt service payments by $2,832,256, resulting in a present value savings of $2,538,757. The

refunding will reduce the District’s debt service levies for taxes payable in 2014-2023 by an average of

$283,000 per year. Principal and interest payments on these bonds are recorded in the Debt Service Fund.

Interest paid in 2015-2016 was $719,050.

On June 29, 2015 the District issued $2,915,000 of General Obligation Alternative Facilities Bonds, Series

2015C. The proceeds of this issue were used to fund the cost of indoor air quality improvements at the

Marshall Middle School. The District will levy property taxes for the retirement of these bonds. Principal and

interest payments on these bonds are recorded in the Debt Service Fund. Interest paid in 2015-2016 was $25,488.


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5. LONG-TERM LIABILITIES (Cont’d)

A. DESCRIPTION OF LONG-TERM DEBT (Cont’d)

Qualified Zone Academy Bonds On June 29, 2015 the District entered into an agreement with Dubuque Bank & Trust for $1,350,000 of

General Obligation Capital Facilities Bonds, Series 2015A (Qualified Zone Academy Bonds). The proceeds

of this issue were used for energy conservation measures throughout the District. The bonds do not bear

interest. Annual payments of $90,000 will be made to a reserve account at Dubuque Bank & Trust. The

reserve account holds the cash until the bonds’ maturity on June 15, 2030, at which time the balance in the

reserve account will pay off the bonds. The balance in the reserve account is $90,001 as of June 30, 2016.

The District will levy property taxes for the retirement of these bonds. Escrow and principal payments on

these bonds are recorded in the Debt Service Fund. There was no interest paid in 2015-2016.

On June 29, 2015 the District entered into an agreement with Dubuque Bank & Trust for $3,673,000 of

General Obligation Alternative Facilities Bonds, Series 2015B (Qualified Zone Academy Bonds). The

proceeds of this issue were used to fund the cost of indoor air quality improvements at the Marshall Middle

School. The bonds do not bear interest. Annual payments ranging from $100,000 to $1,673,000 will be made

to a reserve account at Dubuque Bank & Trust. The reserve account holds the cash until the bonds’ maturity

on June 15, 2027, at which time the balance in the reserve account will pay off the bonds. The balance in the

reserve account is $-0- as of June 30, 2016. The District will levy property taxes for the retirement of these

bonds. Escrow and principal payments on these bonds are recorded in the Debt Service Fund. There was no

interest paid in 2015-2016.

Capital Leases Payable On August 31, 2011 the District financed a portion of a parking lot project by entering into a lease agreement.

The lease agreement qualifies as a capital lease for accounting purposes and, therefore, has been recorded at

the present value of their future minimum lease payments as of the inception date. The total cost of the

parking lot is $252,897, of which $155,210 was financed under this lease. This lease obligation was repaid

through the General Fund, and was paid in full as of June 30, 2016. Interest paid in 2015-2016 was $1,148.

On October 11, 2013 the District purchased a Chevrolet Impala by entering into a lease agreement. The lease

agreement qualifies as a capital lease for accounting purposes and, therefore, has been recorded at the present

value of their future minimum lease payments as of the inception date. The total cost of the vehicle purchased

under this lease is $17,612, of which $15,202 was financed under this lease. Interest paid in 2015-2016 was

$269. This lease obligation will be repaid through the Community Service Fund.

On July 1, 2014 the District financed a roofing project by entering into a lease agreement. The lease


value of their future minimum lease payments as of the inception date. The total cost of the roofing project is

$499,830, of which $499,830 was financed under the lease. Interest paid in 2015-2016 was $11,055. This

lease obligation will be repaid through the General Fund.

On August 20, 2014 the District purchased computer equipment by entering into a lease agreement. The lease


value of their future minimum lease payments as of the inception date. The total cost of the computer

equipment purchased under this lease is $920,042, of which $920,042 was financed under the lease. Interest

paid in 2015-2016 was $11,086. This lease obligation will be repaid through the General Fund.

On April 15, 2015 the District purchased computer equipment by entering into a lease agreement. The lease






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A. DESCRIPTION OF LONG-TERM DEBT (Cont’d)

On July 24, 2015 the District purchased computer equipment by entering into a lease agreement. The lease





On May 15, 2016 the District purchased computer equipment by entering into a lease agreement. The lease



equipment purchased under this lease is $550,000, of which $550,000 was financed under the lease. No interest was paid in 2015-2016 5. This lease obligation will be repaid through the General Fund.

On April 22, 2016 the District purchased a Dodge Grand Caravan by entering into a lease agreement. The

lease agreement qualifies as a capital lease for accounting purposes and, therefore, has been recorded at the

present value of their future minimum lease payments as of the inception date. The total cost of the vehicle

purchased under this lease is $23,350, of which $14,325 was financed under this lease. No interest was paid in

2015-2016. This lease obligation will be repaid through the General Fund.

These assets are being depreciated using a straight-line method over the life of the asset.

B. MINIMUM DEBT PAYMENTS Minimum annual principal and interest payments to retire general obligation bonds payable are as follows:

General Obligations QZAB

Bonds Payable Bonds Payable

Year Ending June 30 Principal Interest Principal Interest

2017 $ 2,060,000 $ 742,480 $ - $ -

2018 2,145,000 659,750 - -

2019 2,235,000 573,433 - -

2020 2,300,000 504,522 - -

2021 2,270,000 411,648 - -

2022-2026 10,250,000 813,780 - -

2027-2031 - - 5,023,000 -

$ 21,260,000 $ 3,705,613 $ 5,023,000 $ -

The future minimum lease obligations and the net present value of the minimum lease payments of the capital

leases as of June 30, 2016 are as follows:

Computer Roof

Vehicle Equipment Improvement

Year Ending June 30 Leases Leases Lease

2017 $ 7,913 $ 532,304 $ 106,050

2018 5,140 532,304 106,050

2019 5,140 532,304 106,050 2020 - 142,079 -

Total Minimum Lease Payments 18,193 1,738,991 318,150

Less Amount Representing

Interest (1,148) (53,675) (16,963)

Present Value of Minimum

Lease Payments $ 17,045 $ 1,685,316 $ 301,187


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C. CHANGES IN LONG-TERM LIABILITIES Long-term liability balances and activity for the year ended June 30, 2016 were as follows:

Amounts

Beginning Ending Due within

Balance Additions Reductions Balance One Year


General Obligation Bonds

OPEB Bonds, Series 2009B $ 575,000 $ 105,000 $ 470,000 $ 110,000

Building Refunding Bonds,

Series 2012B 19,750,000 1,875,000 17,875,000 1,950,000

Alternative Facilities Bonds Series 2015C 2,915,000 - 2,915,000 -

Qualified Zone Academy Bonds

Capital Facilities Bonds

Series 2015A 1,350,000 - 1,350,000 -

Alternative Facilities Bonds

Series 2015B 3,673,000 - 3,673,000 -

Capital Leases Payable

Parking Lot 40,282 40,282 - -

Vehicle 7,879 5,159 2,720 2,720

Roof Improvement 396,182 94,995 301,187 97,646

Computer Equipment 736,492 180,018 556,474 182,727 Computer Equipment 485,000 122,709 362,291 118,862

Computer Equipment - $ 290,000 73,449 216,551 71,047

Computer Equipment - 550,000 - 550,000 138,126

Vehicle - 14,325 - 14,325 4,574

Unamortized Premiums 1,941,552 - 226,200 1,715,352 226,200

Unamortized Discounts (983) - (215) (768) (214)

Severance Benefits Payable 653,215 - 15,161 638,054 -

OPEB Payable 506,651 77,864 - 584,515 -

Pension Benefits Payable 14,316,404 5,291,923 2,231,930 17,376,397 -

$ 47,345,674 $ 6,224,112 $ 4,969,688 $ 48,600,098 $ 2,901,688

6. OTHER POST EMPLOYMENT BENEFITS The District follows Governmental Accounting Standards Board (GASB) Statement No. 45, Accounting and

Financial Reporting by Employers for Post Employment Benefits Other Than Pensions.

A. PLAN DESCRIPTION

The District provides health insurance benefits for certain retired employees under a single-employer fully-

insured plan. Active employees who retire from the District when eligible to receive a retirement benefit from

the Teachers Retirement Association (TRA) or Public Employees Retirement Association (PERA) and do not

participate in any other health benefits program providing similar coverage, will be eligible to continue

coverage with respect to both themselves and their eligible dependent(s) under the District’s health benefits

program. Retirees are required to pay 100% of the total premium cost. Since the premium is a blended rate

determined on the entire active and retiree population, the retirees are receiving an implicit rate subsidy. As of July 1, 2014, there were 324 active participants and 7 retired participants. Benefit and eligibility provisions are

established through individual contracts and negotiations between the District and various unions representing

District employees and are renegotiated each two-year bargaining period. The District’s OPEB plan issues a

stand-alone financial report that may be obtained by writing or calling the District.


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6. OTHER POST EMPLOYMENT BENEFITS (Cont’d)

B. FUNDING POLICY

As of June 30, 2015, the District decided to fund its other post employee benefit (OPEB) obligation on a pay

as you go basis rather than draw from the OPEB plan. For fiscal year 2015, the District contributed $50,003

to the plan.

C. ANNUAL OPEB COST AND NET OPEB OBLIGATION

The District’s annual OPEB cost is calculated based on the annual required contribution (ARC) of the

employer, an amount actuarially determined in accordance with the parameters of GASB Statement No. 45.

The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each

year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed 30 years.

The following table shows the components of the District’s annual OPEB cost for fiscal years 2016 and 2015, the amount actually contributed to the plan, and changes in the District’s net OPEB obligation:

2016 2015 Annual Required Contribution (ARC) $ 134,698 $ 134,698

Interest on Net OPEB Obligation 25,333 21,961

Amortization of Net OPEB Obligation with interest (32,164) (28,904)

Annual OPEB Cost 127,867 127,755 Contributions Made (Including Implicit Subsidy) (50,003) (60,327)

Increase in Net OPEB Obligation 77,864 67,428

Net OPEB Obligation, Beginning of Year 506,651 439,223

Net OPEB Obligation, End of Year $ 584,515 $ 506,651

The District’s annual OPEB cost, the percentage of the annual OPEB cost contributed to the plan, and the net

OPEB obligation for 2016 and 2015 were:

Fiscal Annual Percentage Net OPEB

Year Ended OPEB Cost Contributed Obligation

6/30/2016 $127,867 39.11% $ 584,515

6/30/2015 $127,755 47.22% $ 506,651

D. FUNDED STATUS AND FUND PROGRESS

As of July 1, 2014, the most recent actuarial valuation date, the District’s unfunded actuarial and accrued

liability (UAAL) was $933,150. The annual payroll for active employees covered by the plan in the actuarial valuation was $12,538,117 for a ratio of UAAL to covered payroll of 7.44%.

Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions

about the probability of occurrence of events far into the future. Examples include assumptions about future

employment, mortality, and healthcare cost trends. Amounts determined regarding the funded status of the

plan and the annual required contributions of the employer are subject to continual revision as actual results

are compared with past expectations and new estimates are made about the future. The schedule of funding

progress immediately following the notes to the financial statements presents required supplementary

information about whether the actuarial value of plan assets is increasing or decreasing over time relative to

the actuarial accrued liabilities for benefits.

E. ACTUARIAL METHODS AND ASSUMPTIONS

Projections of benefits for financial reporting purposes are based on the substantive plan (as understood by the

employer and the plan members) and include the types of benefits provided at the time of each valuation. The

actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-

term volatility in actuarial accrued liabilities, consistent with the long-term perspective of the calculations.


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6. OTHER POST EMPLOYMENT BENEFITS (Cont’d)

E. ACTUARIAL METHODS AND ASSUMPTIONS (Cont’d) In the July 1, 2014 actuarial valuation, the projected unit credit actuarial cost method was used. The actuarial

assumptions include a 5.0% discount rate, which is based on the estimated long-term investment yield on the

general assets of the District’s General Fund and OPEB Revocable Trust Internal Service Fund. The annual

healthcare cost trend rate is 7.50%, reduced incrementally to an ultimate rate of 5.0% after ten years. The

unfunded actuarial accrued liability is being amortized over a closed 30-year period increasing at 3.0% per

year (the payroll growth rate).

On September 15, 2009 the District issued $1,035,000 of General Obligation Taxable OPEB Bonds, Series

2009B to fund the OPEB liability. Since these proceeds were placed in a revocable trust, the financing of the

obligation does not qualify as funding the liability under GASB Statement No. 45. The activity related to the OPEB revocable trust is presented in the Internal Service Fund. As of June 30, 2016, the ending market value

of these assets was $935,278.

The District is not required to have another actuarial valuation until July 1, 2016.

7. FUND BALANCE CLASSIFICATION

At June 30, 2016, a summary of the governmental fund balance classifications is as follows:


General Service Service Construction Service Service

Fund Fund Fund Fund Fund Fund Total

Nonspendable: Prepaid Expenditures $ 152,712 $ - $ - $ - $ - $ - $ 152,712

Inventory - 14,235 - - - - 14,235

152,712 14,235 - - - 166,947

Restricted for:

Staff Development 167,872 - - - - - 167,872

Gifted and Talented 7,691 - - - - - 7,691

Safe Schools – Crime Levy (26,841) - - - - - (26,841)

Deferred Maintenance 79,456 - - - - - 79,456

Health and Safety (33,955) - - - - - (33,955)

Operating Capital 649,737 - - - - - 649,737

Food Service - 161,392 - - - - 161,392

Community Education - - (22,285) - - - (22,285)

Early Childhood Family Education - - 30,269 - - - 30,269

School Readiness - - 112,422 - - - 112,422

Adult Education - - 143,243 - - - 143,243

Alternative Facility Program - - - 3,007,073 - - 3,007,073

Building Construction - - - 286,961 - - 286,961

Debt Service - - - - 600,989 26,361 627,350

843,960 161,392 263,649 3,294,034 600,989 26,361 5,190,385

Assigned:

Projected Budget Deficit 483,318 - - - - - 483,318

Unassigned: 4,596,120 - - - - - 4,596,120

Total Fund Balance: $ 6,076,110 $ 175,627 $ 263,649 $ 3,294,034 $ 600,989 $ 26,361 $ 10,436,770

The District is reporting negative restricted fund balances in Safe Schools – Crime Levy, Health and Safety, and Community Education at June 30, 2016. Minnesota Statutes require the District to report a deficit in the restricted

fund balance, when applicable, in order to permit the statutory revenue formula calculations. These deficits will be

offset with future operating tax levies.


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8. PENSION PLANS Substantially all employees of the District are required by State law to belong to pension plans administered by

Teachers Retirement Association (TRA) or Public Employees Retirement Association (PERA), all of which are

administered on a statewide basis. Disclosures relating to these plans follow:

A. TEACHERS RETIREMENT ASSOCIATION

1. Plan Description

The Teachers Retirement Association (TRA) is an administrator of a multiple employer, cost-sharing,

defined benefit retirement fund. TRA administers a Basic Plan (without Social Security coverage) and a

Coordinated Plan (with Social Security coverage) in accordance with Minnesota Statutes, Chapters 354

and 356. TRA is a separate statutory entity and administered by a Board of Trustees. The Board consists

of four active members, one retired member and three statutory officials.

Teachers employed in Minnesota’s public elementary and secondary schools, charter schools, and certain

educational institutions maintained by the state (except those teachers employed by the City of St. Paul

and by the University of Minnesota system) are required to be TRA members. State university,

community college, and technical college teachers first employed by the Minnesota State College and

Universities (MnSCU) may elect TRA coverage within one year of eligible employment. Alternatively,

these teachers may elect coverage through the Defined Contribution Retirement Plan (DCR) administered

by MnSCU.

2. Benefits Provided TRA provides retirement benefits as well as disability benefits to members, and benefits to survivors

upon death of eligible members. Benefits are established by Minnesota Statute and vest after three years

of service credit. The defined retirement benefits are based on a member's highest average salary for any

five consecutive years of allowable service, age, and a formula multiplier based on years of credit at

termination of service.

Two methods are used to compute benefits for TRA's Coordinated and Basic Plan members. Members

first employed before July 1, 1989 receive the greater of the Tier I or Tier II benefits as described:

Tier I: Step Rate Formula Percentage

Basic 1st ten years of service 2.2 percent per year

All years after 2.7 percent per year

Coordinated 1st ten years if service years are prior to July 1, 2006 1.2 percent per year

1st ten years if service years are July 1, 2006 or after 1.4 percent per year

All other years of service if service years are

prior to July 1, 2006 1.7 percent per year

All other years of service if service years are

July 1, 2006 or after 1.9 percent per year

With these provisions:

(a) Normal retirement age is 65 with less than 30 years of allowable service and age 62 with 30 or more years of allowable service.

(b) 3 percent per year early retirement reduction factors for all years under normal retirement age.

(c) Unreduced benefits for early retirement under a Rule-of-90 (age plus allowable service equals 90

or more).

or


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42

8. PENSION PLANS (Cont’d)

A. TEACHERS RETIREMENT ASSOCIATION (Cont’d)

2. Benefits Provided (Cont’d) Tier II: For years of service prior to July 1, 2006, a level formula of 1.7 percent per year for

coordinated members and 2.7 percent per year for basic members is applied. For years of

service July 1, 2006 and after, a level formula of 1.9 percent per year for Coordinated

members and 2.7 for Basic members applies. Beginning July 1, 2015, the early retirement

reduction factors are based on rates established under Minnesota Statute. Smaller

reductions, more favorable to the member, will be applied to individuals who reach age 62

and have 30 years or more of service credit.

Members first employed after June 30, 1989, receive only the Tier II calculation with a normal retirement age that is their retirement age for full Social Security retirement benefits, but not to exceed

age 66.

Six different types of annuities are available to members upon retirement. The No Refund Life Plan is

a lifetime annuity that ceases upon the death of the retiree - no survivor annuity is payable. A retiring

member may also choose to provide survivor benefits to a designated beneficiary(ies) by selecting one

of the five plans which have survivorship features. Vested members may also leave their contributions

in the TRA Fund upon termination of service in order to qualify for a deferred annuity at retirement

age. Any member terminating service is eligible for a refund of their employee contributions plus

interest.

The benefit provisions stated apply to active plan participants. Vested, terminated employees who are

entitled to benefits but not yet receiving them are bound by the provisions in effect at the time they last

terminated their public service.

3. Contribution Rate

Per Minnesota Statutes, Chapter 354 sets the contribution rates for employees and employers. Rates for

each fiscal year ended June 30, 2015, and June 30, 2016 were:

Employee Employer

Basic 11.0% 11.5%

Coordinated 7.5% 7.5%

The following is a reconciliation of employer contributions in TRA’s CAFR “Statement of Changes in

Fiduciary Net Position” to the employer contributions used in Schedule of Employer and Non-Employer

Pension Allocations.

Employer contributions reported in TRA’s CAFR

Statement of Changes in Fiduciary Net Position $ 340,207,590

Deduct employer contributions not related to future

contribution efforts (704,635)

Deduct TRA’s contributions not included in allocation (435,999)

Total employer contributions 339,066,956

Total non-employer contributions 41,587,410

Total contributions reported in Schedule of Employer

and Non-Employer Allocations $ 380,654,366


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3. Contribution Rate (Cont’d) Amounts reported in the allocation schedules may not precisely agree with financial statement amounts or

actuarial valuations due to the number of decimal places used in the allocations. TRA has rounded

percentage amounts to the nearest ten thousandths.

4. Merger of Duluth Teacher’s Retirement Fund Association (DTRFA)

Legislation enacted in 2014 merged the Duluth Teachers Retirement Fund Association (DTRFA) with

TRA effective June 30, 2015. The beginning balances of total pension liability and fiduciary net position

were adjusted to reflect the merger of DTRFA.

6/30/14 Prior to Merger 6/30/14 After Merger

Total Pension Liability (A) $ 24,901,612,000 $ 25,299,564,000

Plan Fiduciary Net Position (B) 20,293,684,000 20,519,756,000

Net Pension Liability (A-B) $ 4,607,928,000 $ 4,779,808,000

5. Actuarial Assumptions

The total pension liability in the June 30, 2015 actuarial valuation was determined using the following

actuarial assumptions, applied to all periods included in the measurement.

Key Methods and Assumptions Used in Valuation of Total Pension Liability

Actuarial Information

Measurement Date June 30, 2015

Valuation Date July 1, 2015

Experience Study October 30, 2009

Actuarial Cost Method Entry Age Normal

Actuarial Assumptions:

Investment Rate of Return 8.0%

Wage Inflation 3.0%

Projected Salary increase 3.5 – 12%, based on years of service

Cost of living adjustment 2.0%


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5. Actuarial Assumptions (Cont’d)

Mortality Assumption

Pre-retirement RP 2000 non-annuitant generational mortality, white collar

adjustment, male rates set back 5 years and female rates set

back 7 years.

Post-retirement RP 2000 annuitant generational mortality, white collar

adjustment, male rates set back 2 years and female rates set

back 3 years.

Post-disability RP 2000 disabled retiree mortality, without adjustment.

The actuarial assumptions used in the June 30, 2015, valuation were based on the results of an actuarial

experience study for the period July 1, 2004, to June 30, 2008, and a limited scope experience study dated

August 29, 2014. The limited scope experience study addressed only inflation and long-term rate of

return for the GASB 67 valuation.

The long-term expected rate of return on pension plan investments was determined using a building-

block method in which best-estimate ranges of expected future real rates of return (expected returns, net

of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates

of return by the target asset allocation percentage and by adding expected inflation.

The target allocation and best estimates of geometric real rates of return for each major asset class are

summarized in the following table:

Long-Term Expected

Asset Class Target Allocation Real Rate of Return

Domestic Stocks 45% 5.50%

International Stocks 15% 6.00

Bonds 18% 1.45

Alternative Assets 20% 6.40

Unallocated Cash 2% 0.50

Total 100%

The TRA actuary has determined the average of the expected remaining service lives of all members for

fiscal year 2015 is 5.73 years. The “Difference Between Expected and Actual Experience”, “Changes of

Assumptions” and “Changes in Proportion” use the amortization period of 5.73 years in the schedule

presented. The amortization period for “Net Difference Between Projected and Actual Investment

Earnings on Pension Plan Investments” is over a period of 5 years as required by GASB 68.

6. Discount Rate

The discount rate used to measure the total pension liability was 8.0 percent. This is a decrease from the

discount rate at the prior measurement date of 8.25%. The projection of cash flows used to determine the discount rate assumed that employee contributions will be made at the fiscal 2016 contribution rate,

contributions from school districts will be made at contractually required rates (actuarially determined),

and contributions from the state will be made at current statutorily required rates. Based on those

assumptions, the pension plan’s fiduciary net position was projected to be available to make all projected

future benefit payments of current active and inactive employees. Therefore, the long-term expected rate

of return on pension plan investments was applied to all periods of projected benefit payments to

determine the total pension liability.


MARSHALL, MINNESOTA


JUNE 30, 2016

45



7. Net Pension Liability

On June 30, 2016, the District reported a liability of $14,085,497 for its proportionate share of the net

pension liability. The net pension liability was measured as of June 30, 2015, and the total pension

liability used to calculate the net pension liability was determined by an actuarial valuation as of that date.

The District’s proportion of the net pension liability was based on the District’s contributions to TRA in

relation to total system contributions including direct aid from the State of Minnesota, City of

Minneapolis and Minneapolis School District. District proportionate share was 0.2277% at the end of the

measurement period and 0.2430% for the beginning of the year.

The pension liability amount reflected a reduction due to direct aid provided to TRA. The amount recognized by the District as its proportionate share of the net pension liability, the direct aid, and total

portion of the net pension liability that was associated with the District were as follows:

District’s proportionate share of net pension liability $ 14,085,497

State’s proportionate share of the net pension liability

associated with the District $ 1,727,521

There was a change in actuarial assumptions that affected the measurement of the total liability since the

prior measurement date. Post-retirement benefit adjustments are now assumed to be 2.0 percent annually

with no increase to 2.5 percent projected. The prior year valuation assumed a 2.5 percent increase

commencing July 1, 2034.

For the year ended June 30, 2016, the District recognized pension expense of $1,139,064. It also

recognized $305,403 as an increase to pension expense for the support provided by direct aid.

On June 30, 2016, the District had deferred resources related to pensions from the following sources:

Deferred Outflows Deferred Inflows

of Resources of Resources

Differences between expected and

actual economic experience $ 721,896 $ -

Changes in actuarial assumptions 1,082,801 -

Net difference between projected and

actual earnings on pension plan investments - 1,077,289

Change in Proportion 195,262 736,990

Contributions paid to TRA subsequent to the

measurement date 923,761 -

Total $ 2,923,720 $ 1,814,279


MARSHALL, MINNESOTA


JUNE 30, 2016

46



7. Net Pension Liability (Cont’d)

$923,761 reported as deferred outflows of resources related to pensions resulting from District

contributions to TRA subsequent to the measurement date will be recognized as a reduction of the net

pension liability in the year ended June 30, 2017. Other amounts reported as deferred outflows and

inflows of resources related to TRA pensions will be recognized in pension expense as follows:

Year ended June 30 Pension Expense Amount

2017 $ (161,285)

2018 $ (161,285)

2019 $ (161,284) 2020 $ 614,102

2021 $ 55,432

Thereafter $ -

8. Pension Liability Sensitivity

The following presents the District’s proportionate share of the net pension liability calculated using the

discount rate of 8.0 percent as well as the liability measured using one percent lower and one percent

higher.

District proportionate share of NPL

1 percent decrease Current 1 percent increase

(7.0%) (8.0%) (9.0%)

$21,439,950 $14,085,497 $7,947,994

The Employer’s proportion of the net pension liability was based on the employer contributions to TRA

in relation to TRA’s total employer contributions including direct aid contributions from the State of

Minnesota, City of Minneapolis and Minneapolis School District.

9. Pension Plan Fiduciary Net Position

Detailed information about the plan’s fiduciary net position is available in a separately-issued TRA

financial report. That report can be obtained at www.MinnesotaTRA.org, or by writing to TRA at 60

Empire Drive, Suite 400, St. Paul, MN, 55103-4000; or by calling 651-296-2409 or 800-657-3669.

B. PUBLIC EMPLOYEES RETIREMENT ASSOCIATION

1. Plan Description

The District participates in the following defined benefit pension plan administered by the Public

Employees Retirement Association (PERA). PERA’s defined benefit pension plans are established

and administered in accordance with Minnesota Statutes, Chapters 353 and 356. PERA’s defined

benefit pension plans are tax qualified plans under Section 401(a) of the Internal Revenue Code.

General Employees Retirement Plan (GERF)

All full-time and certain part-time employees of the District, other than teachers, are covered by the

General Employees Retirement Fund (GERF). GERF members belong to either the Coordinated Plan

or the Basic Plan. Coordinated Plan members are covered by Social Security and Basic Plan members are not. The Basic Plan was closed to new members in 1967. All new members must participate in the

Coordinated Plan.

2. Benefits Provided

PERA provides retirement, disability, and death benefits. Benefit provisions are established by

Minnesota Statute and can only be modified by the state legislature.

http://www.minnesotatra.org/


MARSHALL, MINNESOTA


JUNE 30, 2016

47


B. PUBLIC EMPLOYEES RETIREMENT ASSOCIATION (Cont’d)

2. Benefits Provided (Cont’d)

Benefit increases are provided to benefit recipients each January. Increases are related to the funding

ratio of the plan. Members in plans that are at least 90% funded for two consecutive years are given

2.5% increases. Members in plans that have not exceeded 90% funded, or have fallen below 80%, are

given 1% increases.

The benefit provisions stated in the following paragraph of this section are current provisions and

apply to active plan participants. Vested, terminated employees who are entitled to benefits but are not

receiving them yet are bound by the provisions in effect at the time they last terminated their public

service.

GERF Benefits

Benefits are based on a member’s highest average salary for any five successive years of allowable

service, age, and years of credit at termination of service. Two methods are used to compute benefits

for PERA's Coordinated and Basic Plan members. The retiring member receives the higher of a step-

rate benefit accrual formula (Method 1) or a level accrual formula (Method 2). Under Method 1, the

annuity accrual rate for a Basic Plan member is 2.2% of average salary for each of the first ten years of

service and 2.7% for each remaining year. The annuity accrual rate for a Coordinated Plan member is

1.2% of average salary for each of the first ten years and 1.7% for each remaining year. Under Method

2, the annuity accrual rate is 2.7% of average salary for Basic Plan members and 1.7% for Coordinated

Plan members for each year of service. For members hired prior to July 1, 1989, a full annuity is available when age plus years of service equal 90 and normal retirement age is 65. For members hired

on or after July 1, 1989, normal retirement age is the age for unreduced Social Security benefits capped

at 66. Disability benefits are available for vested members, and are based upon years of service and

average high-five salary.

3. Contributions

Minnesota Statutes Chapter 353 sets the rates for employer and employee contributions. Contribution

rates can only be modified by the state legislature.

GERF Contributions

Basic Plan members and Coordinated Plan members were required to contribute 9.1% and 6.5% of

pay, respectively, in fiscal year 2016. In fiscal year 2016, the District was required to contribute 11.78% of Basic Plan members and 7.5% for the Coordinated Plan. The District’s contributions to the

GERF for the year ended June 30, 2016, were $308,702. The District’s contributions were equal to the

required contributions for each year as set by State Statute.

4. Pension Costs GERF Pension Costs

At June 30, 2016, the District reported a liability of $3,290,900 for its proportionate share of the

GERF’s net pension liability. The net pension liability was measured as of June 30, 2015, and the total

pension liability used to calculate the net pension liability was determined by an actuarial valuation as

of that date. The District’s proportion of the net pension liability was based on the District’s

contributions received by PERA during the measurement period for employer payroll paid dates from July 1, 2014, through June 30, 2015, relative to the total employer contributions received from all of

PERA’s participating employers. At June 30, 2015, the District’s proportion was 0.0635%, which was

a decrease of 4.4% from its proportion measured as of June 30, 2014.

GERF benefit provision changes during the measurement period included (1) the merger of the former

Minneapolis Employees Retirement Fund division into GERF, effective January 1, 2015, and (2)

revisions to Minnesota Statutes to make changes to contribution rates less prescriptive and more

flexible.


MARSHALL, MINNESOTA


JUNE 30, 2016

48



4. Pension Costs (Cont’d)

The discount rate used to calculate liabilities for the June 30, 2015 measurement date was 7.9%. The

Legislature has since set the discount rate in statute at 8%. Beginning with the June 30, 2016,

measurement date the discount rate used when calculating liabilities based on GASB 68 accounting

requirements will be increased to 8% to be consistent with the rate set in statute used for funding

purposes.

For the year ended June 30, 2016, the District recognized pension expense of $315,145 for its

proportionate share of GERF’s pension expense.

At June 30, 2016, the District reported its proportionate share of GERF’s deferred outflows of

resources and deferred inflows of resources from the following sources:

Deferred Outflows Deferred Inflows

of Resources of Resources

Differences between expected and

actual economic experience $ 30,518 $ 165,917

Changes in actuarial assumptions 204,946 -

Difference between projected and Actual earnings on pension plan investments - 292,952

Changes in proportion - 117,679

Contributions paid to PERA subsequent to the

measurement date 308,702 -

Total $ 544,166 $ 576,548

$308,702 reported as deferred outflows of resources related to pensions resulting from District

contributions to GERF subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, 2017. Other amounts reported as deferred outflows and

inflows of resources related to GERF pensions will be recognized in pension expense as follows:

Year ended June 30 Pension Expense Amount

2017 $ (100,411)

2018 $ (100,413)

2019 $ (218,142)

2020 $ 77,882

2021 $ -

Thereafter $ -


MARSHALL, MINNESOTA


JUNE 30, 2016

49



5. Actuarial Assumptions

The total pension liability in the June 30, 2015, actuarial valuation was determined using the following

actuarial assumptions:

Inflation 2.75% per year

Active Member Payroll Growth 3.50% per year

Investment Rate of Return 7.90%

Salary increases were based on a service-related table. Mortality rates for active members, retirees,

survivors and disabilitants were based on RP-2000 tables for males or females, as appropriate, with

slight adjustments.

Actuarial assumptions used in the June 30, 2015, valuation were based on the results of actuarial

experience studies. The experience study in the GERF was for the period July 1, 2004, through June

30, 2008, with an update of economic assumptions in 2014.

The long-term expected rate of return on pension plan investments is 7.9%. The State Board of

Investment, which manages the investments of PERA, prepares an analysis of the reasonableness of

the long-term expected rate of return on a regular basis using a building-block method in which best-

estimate ranges of expected future rates of return are developed for each major asset class. These

ranges are combined to produce an expected long-term rate of return by weighting the expected future

rates of return by the target asset allocation percentages. The target allocation and best estimates of

arithmetic real rates of return for each major asset class are summarized in the following table:

Long-Term Expected

Asset Class Target Allocation Real Rate of Return

Domestic Stocks 45% 5.50% International Stocks 15% 6.00%

Bonds 18% 1.45%

Alternative Assets 20% 6.40%

Cash 2% 0.50%

Total 100%

6. Discount Rate

The discount rate used to measure the total pension liability was 7.9%. The projection of cash flows

used to determine the discount rate assumed that employee and employer contributions will be made at

the rate specified in statute. Based on that assumption, each of the pension plan’s fiduciary net

position was projected to be available to make all projected future benefit payments of current active and inactive employees. Therefore, the long-term expected rate of return on pension plan investments

was applied to all periods of projected benefit payments to determine the total pension liability.

7. Pension Liability Sensitivity

The following presents the District’s proportionate share of the net pension liability for the GERF,

calculated using the discount rate disclosed in the preceding paragraph, as well as what the District’s

proportionate share of the net pension liability would be if it were calculated using a discount rate 1

percentage point lower or 1 percentage point higher than the current discount rate:


MARSHALL, MINNESOTA


JUNE 30, 2016

50



7. Pension Liability Sensitivity (Cont’d)

District proportionate share of GERF NPL

1 percent decrease Current 1 percent increase

(6.9%) (7.9%) (8.9%)

$5,174,464 $3,290,900 $1,735,365

8. Pension Plan Fiduciary Net Position

Detailed information about each defined benefit pension plan’s fiduciary net position is available in a

separately-issued PERA financial report. That report may be obtained on the Internet at www.mnpera.org; by writing to PERA at 60 Empire Drive #200, St. Paul, Minnesota, 55103-2088; or

by calling (651) 296-7460 or 1-800-652-9026.

9. OPERATING LEASES

The District entered into a 60-month print management agreement with Bennet Office Technologies as of July 9,

2010. This agreement was amended May 23, 2011 to extend the agreement to July 31, 2016. This agreement calls

for monthly payments calculated as follows: cost per page ($.01228 monochrome/$.0369 color) multiplied by the

number of pages created in the prior month. The current estimated monthly print volume is 531,587 pages per

month in monochrome/26,341 pages per month in color. Based on these estimates, the monthly payment is

expected to be approximately $7,500. Expenditures under this print agreement were $92,918 for the year ended

June 30, 2016.

Future minimum obligations under this agreement are as follows:

2017 $ 7,500

2018 -

2019 -

2020 -

2021 -

The District entered into an operating lease agreement for building space from Marshall Call Center Building, LLC

on November 12, 2013. This lease calls for monthly minimum payments of $28,084. This lease expires

December 31, 2018, after which the District has an option to extend or renew the lease for five years. Expenditures under this lease were $322,864 for the year ended June 30, 2016.

Future minimum obligations under this agreement are as follows:

2017 $ 337,009

2018 337,009

2019 168,505

2020 -

2021 -

The District has entered into an operating lease agreement for building space from Lyon County and Central MN Jobs and Training. This leases call for monthly minimum payments of $1,857. This lease is renewable on an

annual basis. Expenditures under this lease was $22,849 for the year ended June 30, 2016.


MARSHALL, MINNESOTA


JUNE 30, 2016

51

10. AGREEMENTS WITH SOUTHWEST MINNESOTA STATE UNIVERSITY AND FOUNDATION

The District has entered into a facilities and equipment usage agreement with Southwest Minnesota State

University (SMSU) Foundation for the use of the regional event center field lighting. This agreement calls for

annual payments of $10,000 for no longer than ten years for a total of $100,000 aggregate amount. This

agreement will expire in fiscal year 2018. Expenditures under this agreement were $10,000 for the year ended

June 30, 2016.

Future minimum lease obligations under this agreement are as follows:

2017 $ 10,000

2018 10,000

2019 - 2020 -

2021 -

On August 21, 2012 the District entered into an Agreement with SMSU for a cooperative venture including the

design, bidding, construction, management, operation and shared use of a community-based jointly-used, track and

field complex, including a combined track and field complex to include a football and soccer field, and associated

stadium facilities.

In addition to this agreement, on April 22, 2013, the District entered into a lease agreement with SMSU for the

Marshall Regional Track and Field Complex. This lease agreement commenced on July 1, 2013, and continues

through June 30, 2023. The terms of the lease call for ten equal installments of $159,372, with an option to renew the lease for a period to be agreed upon at the completion of the initial lease term. The lease agreement allows the

District the use of the Marshall Regional Track and Field Complex as agreed upon in the previously mentioned

agreement. Expenditures under this agreement were $159,372 for the year ended June 30, 2016.

Future minimum lease obligations under this agreement are as follows:

2017 $ 159,372

2018 159,372

2019 159,372

2020 159,372

2021 159,372

11. INTERNAL TRANSFERS

During 2016, the following authorized internal transfer was made:

From To Purpose Amount

General Fund General Fund

(Transportation) (Operating) Excess Cash Transfer $ 125,000

For internal reporting purposes and analysis of the General Fund, the District maintains separate funds for

operations, transportation, and capital outlay. The above transfer is only reflected in the Other Supplementary

Information section of this report. The affected schedules are the Schedule of Revenues, Expenditures, and

Changes in Fund Balance – Budget and Actual General Fund - Excluding Transportation and Operating Capital and the Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual General Fund -

Transportation Activity Only.


MARSHALL, MINNESOTA


JUNE 30, 2016

52

12. PRIOR PERIOD ADJUSTMENT

The beginning net position of the governmental activities has been decreased to reflect the merger of the Duluth

Teachers Retirement Fund Association (DTRFA) with TRA during the measurement year used for the June 30,

2016 audit, as mentioned in Note 8. The result of this merger records the District’s proportionate share of the

additional net pension liability on the District’s government-wide financial statements. Beginning

governmental activities net position has been restated from $10,539,811 to $10,122,143 (a decrease of

$417,668).

13. GASB STANDARD ISSUED BUT NOT YET IMPLEMENTED GASB Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than

Pensions, replaces the requirements of Statement No. 45, Accounting and Financial Reporting by Employers for

Postemployment Benefits Other Than Pensions, as they relate to governments that provide other postemployment benefits (OPEB) to their employees. Statement No. 75 requires governments providing other

postemployment benefits to recognize their long-term obligation for OPEB as a liability for the first time, and to

more comprehensively and comparably measure the annual costs of OPEB benefits. Statement No. 75 is

effective for implementation for the year ended June 30, 2018.

14. SUBSEQUENT EVENTS

Union Agreements

On July 18, 2016 the School Board approved the 2016-2018 Principals’ Master Agreement and the

Administrative Support Group Contract. On August 15, 2016 the School Board approved the 2016-2018

Custodial Association Master Agreement and the Support Staff Association Master Agreement. On September

19, 2016 the School Board approved the 2016-2018 Confidential Group Master Agreement.

Print Management Agreement

On July 18, 2016 the School Board approved a five-year contract with Bennett Office Technologies to provide

managed print services to the District effective August 1, 2016. This agreement calls for monthly payments

calculated as follows: cost per page ($.01399 monochrome/$.04249 color) multiplied by the number of pages

created in the prior month. The estimated monthly print volume is 500,000 pages per month in

monochrome/33,333 pages per month in color. Based on these estimates, the monthly payment is expected to be

approximately $8,411.

REQUIRED SUPPLEMENTARY INFORMATION AND

OTHER SUPPLEMENTARY INFORMATION


MARSHALL, MINNESOTA


SCHEDULES OF FUNDING PROGRESS AND EMPLOYER CONTRIBUTIONS

FOR POSTEMPLOYMENT BENEFIT PLANS

JUNE 30, 2016

53

SCHEDULE OF FUNDING PROGRESS FOR POSTEMPLOYMENT BENEFIT PLANS

Other Postemployment Benefits

Actuarial Actuarial Unfunded UAAL as a

Actuarial Value of Accrued Actuarial Accrued Funded Covered Percentage of

Valuation Assets Liability Liability Ratio Payroll Covered Payroll

Date (a) (b) (b - a) (a / b) (c) ((b – a) / c)

7/1/2014 $ - $ 933,150 $ 933,150 0.00% $ 12,538,117 7.44%

7/1/2012 - 1,067,805 1,067,805 0.00 11,969,934 8.92

7/1/2010 - 1,181,447 1,181,447 0.00 11,836,948 9.99

7/1/2008 - 1,005,301 1,005,301 0.00 11,646,384 8.63

SCHEDULE OF EMPLOYER CONTRIBUTIONS FOR POSTEMPLOYMENT BENEFIT PLANS

Other Postemployment Benefits

Fiscal Year Annual Employer Percentage Net OPEB

Ended OPEB Cost Contribution Contributed Obligation

6/30/2016 $ 127,867 $ 50,003 39.11% $ 584,515

6/30/2015 127,755 60,327 47.22 506,651

6/30/2014 142,475 73,401 51.52 439,223

6/30/2013 144,006 51,819 35.98 370,149

6/30/2012 159,233 68,755 43.17 277,962

6/30/2011 160,440 78,708 49.06 187,484

6/30/2010 127,581 69,340 54.35 105,752

6/30/2009 128,471 80,960 63.02 47,511

Note: Schedule is intended to show 10-year trend. Additional years will be reported as they become available.


MARSHALL, MINNESOTA


SCHEDULES OF DISTRICT’S SHARE OF NET PENSION LIABILITY AND DISTRICT’S

CONTRIBUTIONS

FOR DEFINED BENEFIT PENSION PLANS

JUNE 30, 2016

54

TEACHERS RETIREMENT ASSOCIATION

SCHEDULE OF DISTRICT’S PROPORTIONATE SHARE OF NET PENSION LIABILITY

District’s

Proportionate

State’s Share

Proportionate of the

Share Net Plan

District’s (Amount) Pension Fiduciary

District’s Proportionate of the Liability Net

Proportion Share Net (Asset) Position

(Percentage) (Amount) Pension as a as a of the of the Liability Percentage Percentage

Net Net (Asset) District’s of its of the

Pension Pension associated Covered- Covered- Total

Fiscal Year Liability Liability with Employee Employee Pension

Ending (Asset) (Asset) District Total Payroll Payroll Liability

(a) (b) (a+b) (c) (a/c)

6/30/2015 0.2277% $14,085,497 $ 1,727,521 $ 15,813,018 $11,561,598 121.8% 76.8%

6/30/2014 0.2430 11,197,265 787,729 11,090,224 11,088,567 101.0 81.5


TEACHERS RETIREMENT ASSOCIATION

SCHEDULE OF DISTRICT’S CONTRIBUTIONS

Contributions Contributions

in Relation as a

to the District’s Percentage of

Statutorily Statutorily Contribution Covered- Covered-

Fiscal Year Required Required Deficiency Employee Employee

Ending Contribution Contribution (Excess) Payroll Payroll

(a) (b) (a-b) (d) (b/d)

6/30/2016 $923,761 $ 923,761 $ - $12,331,029 7.5%

6/30/2015 866,871 866,871 - 11,561,598 7.5%



MARSHALL, MINNESOTA


SCHEDULES OF DISTRICT’S SHARE OF NET PENSION LIABILITY AND DISTRICT’S

CONTRIBUTIONS

FOR DEFINED BENEFIT PENSION PLANS

JUNE 30, 2016

55

PUBLIC EMPLOYEES RETIREMENT ASSOCIATION

SCHEDULE OF DISTRICT’S PROPORTIONATE SHARE OF NET PENSION LIABILITY

PUBLIC EMPLOYEES GENERAL EMPLOYEES RETIREMENT PLAN

District’s

Proportionate

Share of the

District’s District’s Net Pension Plan Fiduciary

Proportion Proportionate Liability (Asset) Net Position

(Percentage) Share (Amount) District’s as a Percentage as a Percentage

of the of the Covered- of its of the

Fiscal Year Net Pension Net Pension Employee Covered-Employee Total Pension Ending Liability (Asset) Liability (Asset) Payroll Payroll Liability

(a) (b) (a/b)

6/30/2015 0.0635% $3,290,900 $3,737,768 88.0% 78.2%

6/30/2014 0.0664 3,119,139 3,486,746 89.5 78.7


PUBLIC EMPLOYEES RETIREMENT ASSOCIATION

SCHEDULE OF DISTRICT’S CONTRIBUTIONS

PUBLIC EMPLOYEES GENERAL EMPLOYEES RETIREMENT PLAN

Contributions Contributions

in Relation as a

to the Percentage of Statutorily Statutorily Contribution Covered- Covered-

Fiscal Year Required Required Deficiency Employee Employee

Ending Contribution Contribution (Excess) Payroll Payroll

(a) (b) (a-b) (d) (b/d)

6/30/2016 $ 308,702 $ 308,702 $ - $ 4,120,259 7.5%

6/30/2015 275,762 275,762 - 3,737,768 7.4


Increase

2016 2015 (Decrease)

Original Final Actual Variance Actual Actuals

REVENUES

Local Property Tax Levies:

Maintenance Levy $ 2,705,116 $ 2,720,011 $ 2,717,582 $ (2,429) $ 2,044,764 $ 672,818

Referendum Levy 351,830 351,830 351,830 - 697,893 (346,063)

3,056,946 3,071,841 3,069,412 (2,429) 2,742,657 326,755

Other Local and County Revenues:

County Apportionment 39,440 46,470 25,294 (21,176) 39,837 (14,543)

Other County Revenues 38,887 42,838 48,435 5,597 44,760 3,675

Other School Districts-Tuition/Reimbursements 472,276 499,682 528,149 28,467 455,682 72,467

Tuition and Fees 154,000 158,682 195,522 36,840 158,682 36,840

Admissions and Concessions 118,000 112,065 116,530 4,465 112,065 4,465

Earnings From Investments 3,900 3,900 12,637 8,737 3,390 9,247

Rent For School Facilities 47,246 46,348 63,334 16,986 46,348 16,986

Program Reimbursements-Pride in the Tiger 69,917 62,324 53,066 (9,258) 500 52,566

Program Reimbursements-DHS 209,827 285,089 204,091 (80,998) 285,089 (80,998)

MA-TEC- Daycare and Vending Revenues 251,200 251,200 255,307 4,107 233,758 21,549

LCTS Funding 40,651 40,651 27,451 (13,200) 40,651 (13,200)

Miscellaneous Revenues and Reimbursements 54,818 61,547 96,276 34,729 62,730 33,546

1,500,162 1,610,796 1,626,092 15,296 1,483,492 142,600

Revenue From State Sources:

Endowment Fund Apportionment 76,214 76,214 76,214 - 68,786 7,428

General Education Aid 17,863,045 18,661,209 18,667,653 6,444 16,970,521 1,697,132

General Education Aid-Referendum Aid 406,877 415,394 464,692 49,298 550,363 (85,671)

Shared Time 5,000 5,000 3,093 (1,907) 4,548 (1,455)

Integration Aid 220,239 226,387 223,244 (3,143) 204,927 18,317

Literacy Incentive Aid 110,785 104,692 112,069 7,377 105,609 6,460

Disparity and Abatement Aid 2,435 2,435 2,435 - 1,734 701

Homestead/Agricultural Levy Credits 14,665 14,665 14,665 - 6,634 8,031

Special Education 2,572,301 2,812,305 2,714,819 (97,486) 2,776,828 (62,009)

Non Public Transportation 99,947 99,947 61,537 (38,410) 97,633 (36,096)

Alt Teacher Compensation 397,571 402,698 401,896 (802) 389,883 12,013

Other State Programs 18,722 5,646 15,905 10,259 35,843 (19,938)

21,787,801 22,826,592 22,758,222 (68,370) 21,213,309 1,544,913

Revenue From Federal Sources:

Title I 305,765 319,891 295,349 (24,542) 294,379 970

Title II 78,579 78,333 77,144 (1,189) 76,532 612

Special Education 303,296 288,458 330,095 41,637 351,514 (21,419)

Other Federal Programs 46,700 52,490 51,896 (594) 31,835 20,061

734,340 739,172 754,484 15,312 754,260 224

Sales and Other Conversion of Assets:

Resale Materials 4,000 2,000 4,763 2,763 7,620 (2,857)

Insurance Recovery 2,500 2,000 2,058 58 910 1,148

6,500 4,000 6,821 2,821 8,530 (1,709)

TOTAL REVENUES 27,085,749 28,252,401 28,215,031 (37,370) 26,202,248 2,012,783

EXPENDITURES

Current:

District and School Administration:

Salaries and Wages 811,068 772,114 777,058 (4,944) 788,941 (11,883)

Employee Benefits 305,930 305,572 289,981 15,591 302,120 (12,139)

Purchased Services 31,659 30,690 24,483 6,207 20,534 3,949

Supplies and Materials 4,070 5,030 6,251 (1,221) 4,536 1,715

Other Expenditures 17,003 17,003 23,779 (6,776) 17,269 6,510

1,169,730 1,130,409 1,121,552 8,857 1,133,400 (11,848)

District Support Services:

Salaries and Wages 352,823 354,323 349,291 5,032 338,509 10,782

Employee Benefits 182,031 181,308 168,706 12,602 157,898 10,808

Purchased Services 371,649 372,531 342,741 29,790 522,775 (180,034)

Supplies and Materials 17,670 17,670 7,353 10,317 8,536 (1,183)

Other Expenditures 9,896 147,396 142,741 4,655 (279) 143,020

Less: Chargebacks - - (3,835) 3,835 (3,457) (378)

934,069 1,073,228 1,006,997 66,231 1,023,982 (16,985)

Regular Instruction:

Salaries and Wages 8,612,243 8,819,155 8,824,476 (5,321) 8,140,225 684,251

Employee Benefits 2,074,048 2,127,749 2,186,424 (58,675) 1,923,277 263,147



Other Expenditures 6,300 18,010 5,506 12,504 4,434 1,072

11,631,964 12,097,747 12,158,393 (60,646) 10,937,489 1,220,904

56


SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE -

BUDGET AND ACTUAL - GENERAL FUND


(with Comparative Actual Amounts for the Year Ended June 30, 2015)

MARSHALL, MINNESOTA

2016 Budgeted Amounts

Increase2016 2015 (Decrease)

EXPENDITURES (Cont'd) Original Final Actual Variance Actual Actuals

Current (Cont'd):

Vocational Instruction:

Salaries and Wages $ 260,846 $ 270,275 $ 271,193 $ (918) $ 319,923 $ (48,730)

Employee Benefits 63,460 63,061 68,003 (4,942) 72,574 (4,571)


Supplies and Materials 7,100 7,100 12,581 (5,481) 15,529 (2,948)

391,351 400,381 408,119 (7,738) 459,374 (51,255)

Exceptional Instruction:

Salaries and Wages 3,410,027 3,476,006 3,384,846 91,160 3,134,530 250,316


Purchased Services 356,206 479,609 545,052 (65,443) 341,245 203,807

Supplies and Materials 30,540 46,250 41,674 4,576 35,378 6,296


4,730,830 4,899,722 4,846,528 53,194 4,303,629 542,899

Community Education and Services:

Salaries and Wages 35,260 34,075 34,229 (154) 32,678 1,551

Employee Benefits 6,178 6,178 5,478 700 5,687 (209)

41,438 40,253 39,707 546 38,365 1,342

Instructional Support Services:





Other Expenditures 13,300 13,300 5,640 7,660 6,787 (1,147)

1,472,279 1,530,545 1,398,593 131,952 1,232,510 166,083

Pupil Support Services:



Purchased Services 1,385,484 1,430,484 1,399,045 31,439 1,338,763 60,282


Other Expenditures 375 375 340 35 662 (322)

2,617,618 2,663,047 2,556,600 106,447 2,463,914 92,686

Site, Buildings and Equipment:


Employee Benefits 429,022 411,954 417,694 (5,740) 398,618 19,076

Purchased Services 1,407,515 1,251,388 1,136,579 114,809 1,215,192 (78,613)


Other Expenditures 750 1,532 3,915 (2,383) 3,597 318

2,979,275 2,792,682 2,649,451 143,231 2,650,103 (652)

Fiscal And Other Fixed Cost Programs:

District Insurance 85,000 99,792 102,756 (2,964) 101,943 813

85,000 99,792 102,756 (2,964) 101,943 813

Capital Outlay:

District and School Administration - - - - 33,420 (33,420)

District Support Services 9,551 9,551 27,430 (17,879) 4,778 22,652

Regular Instruction 188,077 141,183 135,386 5,797 229,561 (94,175)

Vocational Instruction 22,250 22,250 6,697 15,553 87,303 (80,606)

Exceptional Instruction 26,260 36,750 22,204 14,546 50,731 (28,527)

Instructional Support Services 163,559 138,257 980,978 (842,721) 1,526,791 (545,813)

Pupil Support Services 3,510 3,510 360 3,150 2,471 (2,111)

Site, Buildings and Equipment 218,885 378,257 456,838 (78,581) 717,198 (260,360)

632,092 729,758 1,629,893 (900,135) 2,652,253 (1,022,360)

Debt Service:

Principal 378,415 511,453 511,454 (1) 326,364 185,090

Interest 24,875 26,253 26,253 - 12,219 14,034

403,290 537,706 537,707 (1) 338,583 199,124

TOTAL EXPENDITURES 27,088,936 27,995,270 28,456,296 (461,026) 27,335,545 1,120,751

EXCESS OF REVENUES

OVER (UNDER) EXPENDITURES (3,187) 257,131 (241,265) (498,396) (1,133,297) 892,032


Proceeds from Sale of Assets - - 622 622 1,341 (719)

Capital Lease Financing - - 854,325 854,325 1,904,872 (1,050,547)

- - 854,947 854,947 1,906,213 (1,051,266)



EXPENDITURES AND OTHER USES (3,187) 257,131 613,682 356,551 772,916 (159,234)

FUND BALANCE BEGINNING OF YEAR 5,462,428 5,462,428 5,462,428 - 4,689,512 772,916

FUND BALANCE END OF YEAR $ 5,459,241 $ 5,719,559 $ 6,076,110 $ 356,551 $ 5,462,428 $ 613,682

57




MARSHALL, MINNESOTA




2016 2015

Actual Actual

FUND BALANCE ANALYSIS

NONSPENDABLE FUND BALANCE

Prepaid Expenditures $ 152,712 $ -

RESTRICTED FUND BALANCES

Staff Development 167,872 96,870

Gifted and Talented 7,691 15,821

Safe Schools - Crime Levy (26,841) ** (19,925) **

Deferred Maintenance 79,456 82,752

Health and Safety (33,955) ** (48,679) **

Operating Capital 649,737 742,680

TOTAL RESTRICTED FUND BALANCES 843,960 869,519

ASSIGNED FUND BALANCE

Projected Budget Deficit 483,318 -

UNASSIGNED FUND BALANCE 4,596,120 4,592,909

TOTAL FUND BALANCE $ 6,076,110 $ 5,462,428

** Required by MN Statute to record a deficit, when applicable, in order to permit statutory revenue formula calculations.

58


MARSHALL, MINNESOTA





Increase



REVENUES


Miscellaneous Revenues and Reimbursements $ - $ - $ - $ - $ 3,843 $ (3,843)


School Lunch Aid 50,680 50,680 53,865 3,185 48,682 5,183

School Milk Program 5,810 5,810 6,320 510 6,657 (337)

School Breakfast Program 10,867 10,867 8,301 (2,566) 8,694 (393)

67,357 67,357 68,486 1,129 64,033 4,453


School Lunch Aid 89,262 89,262 112,475 23,213 100,422 12,053

Special Assistance 386,300 386,300 438,163 51,863 357,006 81,157

School Breakfast Program 74,487 74,487 98,410 23,923 76,702 21,708

After School Snack Program 3,000 3,000 6,469 3,469 2,996 3,473

USDA Commodities 76,230 76,230 81,020 4,790 73,255 7,765

Other Federal Programs 9,888 9,888 31,472 21,584 35,995 (4,523)

639,167 639,167 768,009 128,842 646,376 121,633

Sales And Other Conversion Of Assets:

Sale of Lunches and Breakfasts 654,525 654,525 655,292 767 605,463 49,829

Special Food Sales 81,343 81,343 86,263 4,920 89,270 (3,007)

735,868 735,868 741,555 5,687 694,733 46,822

TOTAL REVENUES 1,442,392 1,442,392 1,578,050 135,658 1,408,985 169,065

EXPENDITURES

Current:


Salaries and Wages 23,850 23,850 26,801 (2,951) 25,852 949

Contracted Labor 669,167 669,167 779,003 (109,836) 711,025 67,978

PaySchools Fees 11,000 11,000 11,700 (700) 9,496 2,204

Utilities 27,765 27,765 30,139 (2,374) 30,319 (180)

Food Purchases 595,362 595,362 544,984 50,378 487,278 57,706

USDA Commodities 76,230 76,230 81,020 (4,790) 73,255 7,765

Milk Purchases 90,000 90,000 85,291 4,709 91,478 (6,187)

1,493,374 1,493,374 1,558,938 (65,564) 1,428,703 130,235

Capital Outlay:

Pupil Support Services: - - 5,436 (5,436) 5,338 98

TOTAL EXPENDITURES 1,493,374 1,493,374 1,564,374 (71,000) 1,434,041 130,333

EXCESS OF REVENUES

OVER (UNDER) EXPENDITURES (50,982) (50,982) 13,676 64,658 (25,056) 38,732

FUND BALANCE BEGINNING OF YEAR 161,951 161,951 161,951 - 187,007 (25,056)

FUND BALANCE END OF YEAR $ 110,969 $ 110,969 $ 175,627 $ 64,658 $ 161,951 $ 13,676



Prepaid Expenditures $ - $ 15,944

Inventory 14,235 17,226

TOTAL NONSPENDABLE FUND BALANCE 14,235 33,170

RESTRICTED FUND BALANCE

Food Service 161,392 128,781

TOTAL FUND BALANCE $ 175,627 $ 161,951

59




MARSHALL, MINNESOTA

BUDGET AND ACTUAL - FOOD SERVICE FUND



Increase



REVENUES


Community Service Levy $ 191,878 $ 192,751 $ 190,895 $ (1,856) $ 186,873 $ 4,022

Other Local And County Revenues:

Miscellaneous Local Taxes - - 60 60 499 (439)

Earnings From Investments 250 262 1,273 1,011 512 761

Fees From Patrons 106,706 138,343 158,289 19,946 100,430 57,859

Drivers Education Fees 58,386 58,386 58,455 69 47,244 11,211

City of Marshall 8,500 8,500 8,500 - 8,500 -

Other Contributions/Grants 131,580 33,580 19,766 (13,814) 35,652 (15,886)

305,422 239,071 246,343 7,272 192,837 53,506


Disparity and Abatement Aid 202 202 202 - 190 12

Homestead/Agricultural Levy Credits 1,838 1,838 1,838 - 944 894

Preschool Screening 10,140 6,084 13,022 6,938 8,984 4,038

Adult Basic Education 1,398,087 1,372,504 1,431,922 59,418 1,470,188 (38,266)

Adult Basic Education Supplemental 60,000 60,000 77,754 17,754 60,000 17,754

Non Public School Programs 68,888 68,888 70,032 1,144 72,576 (2,544)

Early Childhood Family Education 54,484 48,645 48,645 - 53,156 (4,511)

School Readiness 35,441 66,533 66,533 - 35,441 31,092

1,629,080 1,624,694 1,709,948 85,254 1,701,479 8,469


Adult Basic Education 82,434 71,015 71,015 - 82,434 (11,419)

Civics Grant 50,000 50,000 50,000 - - 50,000

FAST Trac 15,000 15,000 1,564 (13,436) 4,153 (2,589)

Other Federal Revenues - - 33,964 33,964 24,225 9,739

147,434 136,015 156,543 20,528 110,812 45,731

TOTAL REVENUES 2,273,814 2,192,531 2,303,729 111,198 2,192,001 111,728

EXPENDITURES

Current:


Salaries and Wages 554,985 595,707 654,094 (58,387) 546,451 107,643


Purchased Services 1,424,046 1,247,189 1,299,818 (52,629) 1,335,469 (35,651)


Other Expenditures 72,337 72,837 91,449 (18,612) 97,562 (6,113)

2,213,123 2,086,340 2,235,282 (148,942) 2,133,639 101,643

Capital Outlay:

Community Education and Services: 2,577 7,648 26,813 (19,165) 9,401 17,412

Debt Service:

Principal 4,913 4,913 5,158 (245) 4,913 245

Interest 513 513 269 244 514 (245)

5,426 5,426 5,427 (1) 5,427 -


EXCESS OF REVENUES

OVER (UNDER) EXPENDITURES 52,688 93,117 36,207 56,910 43,534 (7,327)

FUND BALANCE BEGINNING OF YEAR 227,442 227,442 227,442 - 183,908 43,534

FUND BALANCE END OF YEAR $ 280,130 $ 320,559 $ 263,649 $ 56,910 $ 227,442 $ 36,207



Community Education $ (22,285) ** $ 10,051

Early Childhood Family Education 30,269 2,093

School Readiness 112,422 77,991

Adult Education 143,243 137,307



60



MARSHALL, MINNESOTA


BUDGET AND ACTUAL - COMMUNITY SERVICE FUND




MARSHALL, MINNESOTA

NOTES TO THE REQUIRED SUPPLEMENTARY INFORMATION

JUNE 30, 2016

61

1. DEFINED BENEFIT PENSION PLANS

Teachers Retirement Association

Change of benefit terms. The DTRFA was merged into TRA on June 30, 2015.

Change of assumptions. The annual COLA for the June 30, 2015, valuation assumed 2%. The prior year

valuation used 2% with an increase to 2.5% commencing in 2034. The discount rated used to measure the total

pension liability was 8.0%. This is a decrease from the discount rate at the prior measurement date of 8.25%.

Details, if necessary, can be obtained from the TRA CAFR.

Public Employees Retirement Association

There are no factors that affect trends in the amounts reported, such as change of benefit terms or assumptions

from the prior measurement date.

2. STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY

A. DEFICIT SPENDING

The School Board approved the fiscal year 2016 budget, which projected deficit spending in the following

fund:

Food Service Fund $ 50,982

B. EXPENDITURES EXCEEDING APPROPRIATIONS

For the year ended June 30, 2016, the District had expenditures exceeding the latest amended budgets in the

following funds:

Fund Budget Expenditures Excess

General Fund $27,995,270 $28,456,296 $ 461,026

Food Service Fund $ 1,493,374 $ 1,564,374 $ 71,000

Community Service Fund $ 2,099,414 $ 2,267,522 $ 168,108

Budget revisions were last approved in January of 2016. These excesses were realized since that time and are

approved by the School Board upon acceptance of this report.

Increase



REVENUES


Earnings From Investments $ - $ - $ 12,379 $ 12,379 $ 5 $ 12,374

TOTAL REVENUES - - 12,379 12,379 5 12,374

EXPENDITURES

Current:


Purchased Services - - 919,992 (919,992) 100,460 819,532

Capital Outlay:

Site, Buildings and Equipment: - - 3,635,898 (3,635,898) - 3,635,898

TOTAL EXPENDITURES - - 4,555,890 (4,555,890) 100,460 4,455,430

EXCESS OF REVENUES

OVER (UNDER) EXPENDITURES - - (4,543,511) (4,543,511) (100,455) (4,443,056)


Issuance of Bonds - - - - 7,938,000 (7,938,000)

- - - - 7,938,000 (7,938,000)

EXCESS OF REVENUES

AND OTHER SOURCES OVER (UNDER)

EXPENDITURES AND OTHER USES - - (4,543,511) (4,543,511) 7,837,545 (12,381,056)

FUND BALANCE BEGINNING OF YEAR 7,837,545 7,837,545 7,837,545 - - 7,837,545

FUND BALANCE END OF YEAR $ 7,837,545 $ 7,837,545 $ 3,294,034 $ (4,543,511) $ 7,837,545 $ (4,543,511)



Alternative Facility Program $ 3,007,073 $ 6,514,544

Building Construction 286,961 1,323,001


62



MARSHALL, MINNESOTA


BUDGET AND ACTUAL - BUILDING CONSTRUCTION FUND



Increase



REVENUES

Local Property Tax Levy:

Debt Service Levy $ 2,650,156 $ 2,675,507 $ 2,649,972 $ (25,535) $ 2,588,876 $ 61,096


Miscellaneous Local Taxes 1,604 1,649 436 (1,213) 3,196 (2,760)

Earnings From Investments 16,000 16,000 4,836 (11,164) 2,199 2,637

17,604 17,649 5,272 (12,377) 5,395 (123)



Other State Aids 2,289 2,289 2,289 - 2,380 (91)

27,589 27,589 27,589 - 15,326 12,263

TOTAL REVENUES 2,695,349 2,720,745 2,682,833 (37,912) 2,609,597 73,236

EXPENDITURES

Debt Service:

Principal 1,875,000 1,875,000 1,875,000 - 1,805,000 70,000

Interest 719,050 793,293 793,293 - 791,250 2,043

Other Debt Service Expenditures - - 3,700 (3,700) 3,250 450


EXCESS OF REVENUES

OVER (UNDER) EXPENDITURES 101,299 52,452 10,840 (41,612) 10,097 743

EXCESS OF REVENUES

AND OTHER SOURCES OVER (UNDER)

EXPENDITURES AND OTHER USES 101,299 52,452 10,840 (41,612) 10,097 743


FUND BALANCE END OF YEAR $ 691,448 $ 642,601 $ 600,989 $ (41,612) $ 590,149 $ 10,840



Debt Service $ 600,989 $ 590,149

63




BUDGET AND ACTUAL - DEBT SERVICE FUND


MARSHALL, MINNESOTA


Increase



REVENUES

Local Property Tax Levy:

Debt Service Levy $ 129,665 $ 130,897 $ 129,767 $ (1,130) $ 130,217 $ (450)


Miscellaneous Local Taxes 20 26 17 (9) 9 8


Homestead/Agricultural Levy Credits 1,239 1,239 1,239 - 652 587

Other State Aids 112 112 112 - 121 (9)

1,351 1,351 1,351 - 773 578

TOTAL REVENUES 131,036 132,274 131,135 (1,139) 130,999 136

EXPENDITURES

Debt Service:

Principal 105,000 105,000 105,000 - 100,000 5,000

Interest 25,488 25,488 25,488 - 28,988 (3,500)

Other Debt Service Expenditures - - 450 (450) 450 -

TOTAL EXPENDITURES 130,488 130,488 130,938 (450) 129,438 1,500

EXCESS OF REVENUES

OVER (UNDER) EXPENDITURES 548 1,786 197 (1,589) 1,561 (1,364)


FUND BALANCE END OF YEAR $ 26,712 $ 27,950 $ 26,361 $ (1,589) $ 26,164 $ 197



Debt Service $ 26,361 $ 26,164

64



MARSHALL, MINNESOTA


BUDGET AND ACTUAL - OPEB DEBT SERVICE FUND



Increase



REVENUES


Maintenance Levy $ 2,159,623 $ 2,174,518 $ 2,170,412 $ (4,106) $ 1,565,820 $ 604,592

Referendum Levy 351,830 351,830 351,830 - 697,893 (346,063)

2,511,453 2,526,348 2,522,242 (4,106) 2,263,713 258,529


County Apportionment 39,440 46,470 25,294 (21,176) 39,837 (14,543)

Other County Revenues 28,560 31,187 37,151 5,964 37,820 (669)

Other School Districts-Tuition/Reimbursements 472,276 499,682 528,149 28,467 455,682 72,467

Tuition and Fees 154,000 158,682 195,522 36,840 158,682 36,840

Admissions and Concessions 118,000 112,065 116,530 4,465 112,065 4,465

Earnings From Investments 3,900 3,900 12,637 8,737 3,390 9,247

Rent For School Facilities 47,246 46,348 63,334 16,986 46,348 16,986

Program Reimbursements-Pride in the Tiger 69,917 62,324 53,066 (9,258) 500 52,566

Program Reimbursements-DHS 209,827 285,089 204,091 (80,998) 285,089 (80,998)

MA-TEC- Daycare and Vending Revenues 251,200 251,200 255,307 4,107 233,758 21,549

LCTS Funding 40,651 40,651 27,451 (13,200) 40,651 (13,200)


1,484,335 1,593,645 1,585,308 (8,337) 1,471,052 114,256


Endowment Fund Apportionment 76,214 76,214 76,214 - 68,786 7,428

General Education Aid 16,581,180 17,333,516 17,332,997 (519) 15,694,326 1,638,671

General Education Aid-Referendum Aid 406,877 415,394 464,692 49,298 550,363 (85,671)

Shared Time 5,000 5,000 3,093 (1,907) 4,548 (1,455)

Integration Aid 220,239 226,387 223,244 (3,143) 204,927 18,317

Literacy Incentive Aid 110,785 104,692 112,069 7,377 105,609 6,460

Disparity and Abatement Aid 2,435 2,435 2,435 - 1,734 701


Alt Teacher Compensation 397,571 402,698 401,896 (802) 389,883 12,013

Special Education 2,172,301 2,315,542 2,218,056 (97,486) 2,274,324 (56,268)

Other State Programs 18,722 5,646 15,905 10,259 35,843 (19,938)

20,005,989 20,902,189 20,865,266 (36,923) 19,336,977 1,528,289


Title I 305,765 319,891 295,349 (24,542) 294,379 970

Title II 78,579 78,333 77,144 (1,189) 76,532 612

Special Education 303,296 288,458 330,095 41,637 351,514 (21,419)

Other Federal Programs 46,700 52,490 51,896 (594) 31,835 20,061

734,340 739,172 754,484 15,312 754,260 224

Sales and Other Conversion of Assets:

Resale Materials 4,000 2,000 4,763 2,763 7,620 (2,857)

Insurance Recovery 2,500 2,000 2,058 58 910 1,148

6,500 4,000 6,821 2,821 8,530 (1,709)

TOTAL REVENUES 24,742,617 25,765,354 25,734,121 (31,233) 23,834,532 1,899,589


MARSHALL, MINNESOTA


BUDGET AND ACTUAL - GENERAL FUND (EXCLUDING TRANSPORTATION AND OPERATING CAPITAL)


65



Increase



EXPENDITURES

Current:


Salaries and Wages $ 811,068 $ 772,114 $ 777,058 $ (4,944) $ 788,941 $ (11,883)


Purchased Services 26,219 25,250 24,483 767 14,987 9,496



1,164,290 1,124,969 1,121,552 3,417 1,127,853 (6,301)




Purchased Services 307,821 308,703 339,182 (30,479) 500,670 (161,488)


Other Expenditures 9,896 147,396 142,741 4,655 (279) 143,020

Less: Chargebacks - - (3,835) 3,835 (3,457) (378)

870,241 1,009,400 1,003,438 5,962 1,001,877 1,561


Salaries and Wages 8,612,243 8,819,155 8,824,476 (5,321) 8,140,225 684,251

Employee Benefits 2,074,048 2,127,749 2,186,424 (58,675) 1,923,277 263,147



Other Expenditures 6,300 18,010 5,506 12,504 4,434 1,072

11,535,725 11,980,428 11,905,896 74,532 10,850,311 1,055,585

Vocational Instruction:

Salaries and Wages 260,846 270,275 271,193 (918) 319,923 (48,730)

Employee Benefits 63,460 63,061 68,003 (4,942) 72,574 (4,571)


Supplies and Materials 7,100 7,100 12,581 (5,481) 15,529 (2,948)

391,351 400,381 408,119 (7,738) 459,374 (51,255)

Exceptional Instruction:

Salaries and Wages 3,410,027 3,476,006 3,384,846 91,160 3,134,530 250,316


Purchased Services 356,206 479,609 545,052 (65,443) 341,245 203,807



4,730,830 4,899,722 4,846,528 53,194 4,303,629 542,899


Salaries and Wages 35,260 34,075 34,229 (154) 32,678 1,551

Employee Benefits 6,178 6,178 5,478 700 5,687 (209)

41,438 40,253 39,707 546 38,365 1,342






Other Expenditures 13,300 13,300 5,640 7,660 6,787 (1,147)

1,463,928 1,509,495 1,380,343 129,152 1,232,510 147,833






Other Expenditures 375 375 340 35 662 (322)

1,159,018 1,159,447 1,096,265 63,182 1,077,604 18,661




Purchased Services 1,380,665 1,224,538 1,104,438 120,100 1,128,515 (24,077)


Other Expenditures 750 750 2,586 (1,836) 2,015 571

2,920,425 2,733,050 2,567,689 165,361 2,533,347 34,342

Fiscal And Other Fixed Cost Programs:

District Insurance 85,000 99,792 102,756 (2,964) 101,943 813

85,000 99,792 102,756 (2,964) 101,943 813


66


MARSHALL, MINNESOTA





Increase



EXPENDITURES (Cont'd)

Capital Outlay:

District and School Administration $ - $ - $ - $ - $ 2,421 $ (2,421)

Regular Instruction 78,600 30,900 22,470 8,430 105,693 (83,223)

Vocational Instruction 22,250 22,250 6,697 15,553 87,303 (80,606)

Exceptional Instruction 26,260 36,750 22,204 14,546 50,731 (28,527)

Instructional Support Services 28,600 46,100 530,548 (484,448) 710,207 (179,659)

Pupil Support Services 3,100 3,100 360 2,740 2,471 (2,111)

Site, Buildings and Equipment - 159,372 200,389 (41,017) 159,372 41,017

158,810 298,472 782,668 (484,196) 1,118,198 (335,530)

Debt Service:

Principal 91,775 188,088 376,175 (188,087) 183,550 192,625

Interest 3,777 7,025 14,049 (7,024) 7,553 6,496

95,552 195,113 390,224 (195,111) 191,103 199,121

TOTAL EXPENDITURES 24,616,608 25,450,522 25,645,185 (194,663) 24,036,114 1,609,071

EXCESS OF REVENUES

OVER (UNDER) EXPENDITURES 126,009 314,832 88,936 (225,896) (201,582) 290,518


Capital Lease Financing - - 420,000 420,000 702,521 (282,521)

Transfer from internal Transportation Fund

(internal reporting purposes only) - - 125,000 125,000 - 125,000

TOTAL OTHER FINANCING

SOURCES (USES) - - 545,000 545,000 702,521 (157,521)



EXPENDITURES AND OTHER USES 126,009 314,832 633,936 319,104 500,939 132,997

FUND BALANCE BEGINNING OF YEAR 4,236,196 4,236,196 4,236,196 - 3,735,257 500,939

FUND BALANCE END OF YEAR $ 4,362,205 $ 4,551,028 $ 4,870,132 $ 319,104 $ 4,236,196 $ 633,936



Prepaid Expenditures $ 90,398 $ -


Staff Development 167,872 96,870

Gifted and Talented 7,691 15,821

Safe Schools - Crime Levy (26,841) ** (19,925) **

TOTAL RESTRICTED FUND BALANCE 148,722 92,766

ASSIGNED FUND BALANCE

Projected Budget Deficit 483,318 @ -

UNASSIGNED FUND BALANCE 4,147,694 4,143,430



@ For state reporting purposes the District is required to combine the internal Transportation Fund and internal Operating Capital Fund

with the General Fund. The following table displays what the assigned fund balance in the General Fund (excluding

Transportation and Operating Capital) includes:

$ 273,037 Projected budget deficit in the General Fund (excluding Transportation and Operating Capital)

(96,484) Projected budget surplus in the internal Transportation Fund

306,765 Projected budget deficit in the internal Operating Capital Fund$ 483,318 Total combined projected budget deficit




67


MARSHALL, MINNESOTA



Increase



REVENUES


General Education Aid $ 997,141 $ 1,035,479 $ 1,025,982 $ (9,497) $ 955,041 $ 70,941

Special Education 400,000 496,763 496,763 - 502,504 (5,741)

Non Public Transportation 99,947 99,947 61,537 (38,410) 97,633 (36,096)

TOTAL REVENUES 1,497,088 1,632,189 1,584,282 (47,907) 1,555,178 29,104

EXPENDITURES

Current:




Purchased Services 1,366,942 1,411,942 1,373,398 38,544 1,311,153 62,245

Supplies and Materials 1,200 1,200 440 760 666 (226)

TOTAL EXPENDITURES 1,458,600 1,503,600 1,460,335 43,265 1,386,310 74,025

EXCESS OF REVENUES

OVER (UNDER) EXPENDITURES 38,488 128,589 123,947 (4,642) 168,868 (44,921)


Transfer to General Fund (internal reporting

purposes only) - - (125,000) (125,000) - 125,000



EXPENDITURES AND OTHER USES 38,488 128,589 (1,053) (129,642) 168,868 80,079


FUND BALANCE END OF YEAR $ 487,967 $ 578,068 $ 448,426 $ (129,642) $ 449,479 $ 248,947


UNASSIGNED FUND BALANCE $ 448,426 $ 449,479




68



MARSHALL, MINNESOTA

BUDGET AND ACTUAL - GENERAL FUND (TRANSPORTATION ACTIVITY ONLY)


Increase



REVENUES


Maintenance Levy $ 545,493 $ 545,493 $ 547,170 $ 1,677 $ 478,944 $ 68,226


Other County Revenues 10,327 11,651 11,284 (367) 6,940 4,344


15,827 17,151 40,784 23,633 12,440 28,344


General Education Aid 284,724 292,214 308,674 16,460 321,154 (12,480)

TOTAL REVENUES 846,044 854,858 896,628 41,770 812,538 84,090

EXPENDITURES

Current:


Purchased Services 5,440 5,440 - 5,440 5,547 (5,547)


Purchased Services 63,828 63,828 3,559 60,269 22,105 (18,546)




Purchased Services 8,351 21,050 18,250 2,800 - 18,250

Site, Buildings And Equipment:

Salaries and Wages 14,780 14,780 14,849 (69) 15,267 (418)

Employee Benefits 7,820 7,820 8,085 (265) 7,789 296



Other Expenditures - 782 1,329 (547) 1,582 (253)

58,850 59,632 81,762 (22,130) 116,756 (34,994)

Capital Outlay:

District and School Administration - - - - 30,999 (30,999)

District Support Services 9,551 9,551 27,430 (17,879) 4,778 22,652

Regular Instruction 109,477 110,283 112,916 (2,633) 123,868 (10,952)

Instructional Support Services 134,959 92,157 450,430 (358,273) 816,584 (366,154)

Pupil Support Services 410 410 - 410 - -

Site, Buildings and Equipment 218,885 218,885 256,449 (37,564) 557,826 (301,377)

473,282 431,286 847,225 (415,939) 1,534,055 (686,830)

Debt Service:

Principal 286,640 323,365 135,279 188,086 142,814 (7,535)

Interest 21,098 19,228 12,204 7,024 4,666 7,538

307,738 342,593 147,483 195,110 147,480 3

TOTAL EXPENDITURES 1,013,728 1,041,148 1,350,776 (309,628) 1,913,121 (562,345)

EXCESS OF REVENUES

OVER (UNDER) EXPENDITURES (167,684) (186,290) (454,148) (267,858) (1,100,583) 646,435


Proceeds from Sale of Assets - - 622 622 1,341 (719)

Capital Lease Financing - - 434,325 434,325 1,202,351 (768,026)

- - 434,947 434,947 1,203,692 (768,745)



EXPENDITURES AND OTHER USES (167,684) (186,290) (19,201) 167,089 103,109 (122,310)


FUND BALANCE END OF YEAR $ 609,069 $ 590,463 $ 757,552 $ 167,089 $ 776,753 $ (19,201)

69




MARSHALL, MINNESOTA

BUDGET AND ACTUAL - GENERAL FUND (OPERATING CAPITAL ACTIVITY ONLY)



2016 2015

Actual ActualFUND BALANCE ANALYSIS NONSPENDABLE FUND BALANCE Prepaid Expenditures $ 62,314 $ - RESTRICTED FUND BALANCE Deferred Maintenance 79,456 82,752 Health and Safety (33,955) ** (48,679) ** Operating Capital 649,737 742,680 TOTAL RESTRICTED FUND BALANCE 695,238 776,753




70


MARSHALL, MINNESOTA


BUDGET AND ACTUAL - GENERAL FUND (OPERATING CAPITAL ACTIVITY ONLY)



MARSHALL, MINNESOTA

GENERAL FUND - HISTORICAL ANALYSIS

(EXCLUDING TRANSPORTATION AND OPERATING CAPITAL)

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

REVENUES

Local Property Tax Levies 938,913 998,069 1,870,939 1,995,708 3,109,014 2,138,062 2,262,141 1,169,197 2,263,713 2,522,242

Other Local and County Revenues 1,330,660 1,466,077 1,344,488 1,471,355 1,520,825 1,690,776 1,579,923 1,474,607 1,471,052 1,585,308

Revenue From State Sources 14,995,639 16,042,559 16,430,832 14,671,581 15,110,923 16,694,761 16,623,407 18,700,733 19,336,977 20,865,266

Revenue From Federal Sources 815,327 795,378 814,399 2,355,023 1,392,820 746,269 711,327 713,033 754,260 754,484

Sales and Other Conversions of Assets 38,878 26,702 13,443 42,587 65,866 262,388 11,519 10,082 8,530 6,821

Bond Proceeds - - - 1,035,000 - - - - - -

Capital Lease Financing - - - - - - - - 702,521 420,000

Transfers In - - - - - - - - 125,000

TOTAL REVENUES 18,119,417 19,328,785 20,474,101 21,571,254 21,199,448 21,532,256 21,188,317 22,067,652 24,537,053 26,279,121

EXPENDITURES - PROGRAMS

District and School Admin 912,397 915,451 945,438 984,264 909,719 922,142 915,233 1,181,322 1,130,274 1,121,552

District Support Services 536,193 587,602 616,312 612,747 708,845 795,169 837,229 768,511 1,001,877 1,003,438

Regular Instruction 9,118,892 9,326,135 9,648,131 10,447,110 9,755,338 10,104,200 10,332,695 10,512,734 10,956,004 11,928,366

Vocational Instruction 259,420 245,620 338,693 347,580 330,237 391,891 402,983 366,282 546,677 414,816

Exceptional Instruction 3,401,420 3,914,594 4,186,497 4,363,986 3,984,785 3,975,073 3,964,670 4,110,652 4,354,360 4,868,732

Community Education and Services - - - - - - - - 38,365 39,707

Instructional Support Services 1,070,162 1,129,809 1,283,666 1,243,552 1,326,852 1,204,337 1,129,235 1,161,671 1,942,717 1,910,891

Pupil Support Services 731,511 731,970 823,384 880,313 818,151 881,563 926,923 889,503 1,080,075 1,096,625

Site, Buildings, and Equipment 1,935,008 2,207,070 2,179,757 2,160,577 2,204,959 2,577,761 2,358,162 2,700,193 2,692,719 2,768,078

Fiscal and Other Fixed Cost Programs 167,244 197,226 143,091 129,339 79,985 77,422 126,165 94,010 293,046 492,980

Transfers Out - 34,347 - 64,068 183,163 314,384 - 57,000 - -

TOTAL EXPENDITURES 18,132,247 19,289,824 20,164,969 21,233,536 20,302,034 21,243,942 20,993,295 21,841,878 24,036,114 25,645,185

EXCESS OF REVENUES OVER

(UNDER) EXPENDITURES (12,830) 38,961 309,132 337,718 897,414 288,314 195,022 225,774 500,939 633,936

FUND BALANCE-BEGINNING 1,455,752 1,442,922 1,481,883 1,791,015 2,128,733 3,026,147 3,314,461 3,509,483 3,735,257 4,236,196

FUND BALANCE-ENDING 1,442,922 1,481,883 1,791,015 2,128,733 3,026,147 3,314,461 3,509,483 3,735,257 4,236,196 4,870,132

ADJUSTED CASH BALANCES 542,186 930,498 1,306,869 (729,458) (1,394,882) (2,786,606) 1,208,480 2,566,840 3,129,379 3,394,428

EXPENDITURES - OBJECTS

Salaries and Wages 12,119,381 12,601,222 13,323,865 13,346,569 13,336,646 13,525,407 13,984,444 14,438,023 15,108,215 16,169,937

Employee Benefits 3,083,835 3,493,449 3,665,629 4,675,973 3,534,182 3,942,414 3,717,955 3,851,813 4,118,882 4,477,032

Purchased Services 1,998,232 2,189,898 2,118,111 2,072,221 2,138,952 2,372,154 2,274,021 2,336,840 2,715,623 2,818,684

Supplies and Materials 689,799 701,729 710,732 749,498 709,462 756,938 641,440 655,066 631,573 686,687

Equipment 35,311 45,806 185,385 151,905 277,241 209,855 214,066 347,772 1,118,198 782,668

Other Expenditures/Transfers 205,689 257,720 161,247 237,370 305,551 437,174 161,369 212,364 343,623 710,177

TOTAL EXPENDITURES 18,132,247 19,289,824 20,164,969 21,233,536 20,302,034 21,243,942 20,993,295 21,841,878 24,036,114 25,645,185

71


COMMUNITY SERVICE FUND-DETAIL ANALYSIS SCHOOL

FOR THE YEAR ENDED JUNE 30, 2016 COMMUNITY EDUCATION READINESS ECFE

GENERAL AFTER NON PRE

COMMUNITY DRIVERS YOUTH SCHOOL PUBLIC SCHOOL SCHOOL

TOTAL EDUCATION EDUCATION ABE DEVELOP ENRICHMENT AID SCREENING READINESS ECFE

REVENUES

COUNTY LEVY 190,894.81$ 84,101.85$ 15,742.00$ 20,969.06$ 70,081.90$

OTHER CTY RECPTS 60.49 60.49 - -

OTHER STATE CRDTS 202.59 202.59 - - -

HMSTD MKT VALUE CREDIT 1,838.35 1,838.35 - - -

INTEREST 1,272.72 1,272.72 - - -

STATE AID 1,630,154.02 - 1,431,922.10$ - - 70,032.00$ 13,021.82$ 66,532.60$ 48,645.50

STATE GRANT - SUPPL GRT 77,753.60 - 77,753.60 - - - - - -

FEDERAL AID 71,015.27 - 71,015.27 - - - - - -

FEDERAL GRANT - CIVICS GRANT 50,000.00 - 50,000.00 - - - - - -

PATHWAY 1 TUITION 48,459.78 - - - - - - 48,459.78 -

FEES & CHARGES 168,283.10 - 58,455.20$ - - - - - 84,537.56 25,290.34

OTHER:

MFEC GRANT 210.00 - - 210.00 - - - - - -

LOWER SIOUX 3,292.00 - - 3,292.00 - - - - - -

FAST TRACT 1,564.35 - - 1,564.35 - - - - - -

UNIVERSAL HEALTH CARE 33,964.29 - - 33,964.29 - - - - - -

CITY OF MARSHALL-Karen Support 8,500.00 8,500.00 - - - - - - -

MISCELLANEOUS 16,263.68 10,000.00 - 5,935.17 - 328.51 - - - -

FUND 01 SUPPORT 4,145.51 - - - - - - 4,145.51 - -

TOTAL REVENUES 2,307,874.56 105,976.00 58,455.20 1,675,656.78 15,742.00 21,297.57 70,032.00 17,167.33 199,529.94 144,017.74

EXPENDITURES

REVENUE ALLOCATION-CITY 82,480.81 82,480.81

MUNICIPAL BAND / EQUIPMENT 4,803.50 4,803.50

SALARIES 654,093.80 31,755.00 35,636.26 309,111.42 25,489.49 10,692.00 16,107.31 14,143.17 120,053.28 91,105.87

BENEFITS 126,137.57 5,032.32 3,883.11 52,176.81 7,703.25 1,723.44 4,146.36 1,660.79 33,919.22 15,892.27

PURCHASED SERVICES 1,303,963.41 - 777.60 1,283,715.01 5,100.00 - 10,956.16 326.56 2,578.32 509.76

MATERIALS & SUPPLIES 63,783.25 - 6,586.50 3,268.98 - 571.55 35,487.31 1,036.81 8,547.85 8,284.25

MISCELLANEOUS 9,091.70 - 5,426.84 280.00 - - 3,334.86 - - 50.00

EQUIPMENT 26,814.38 - 6,144.99 20,669.39 - - - - - -

COMMISSIONER APPROVED TRANSFER 500.00 - - 500.00 - - - - - -

TOTAL EXPENDITURES 2,271,668.42 124,071.63 58,455.30 1,669,721.61 38,292.74 12,986.99 70,032.00 17,167.33 165,098.67 115,842.15

FYE EXCESS (DEFICIT) 36,206.14 (18,095.63) (0.10) 5,935.17 (22,550.74) 8,310.58 - - 34,431.27 28,175.59

FUND BALANCE, BEGINNING 227,442.50 (27,132.51) 0.10 137,307.22 28,075.85 9,107.85 - - 77,990.79 2,093.20

FUND BALANCE, ENDING 263,648.64$ (45,228.14)$ 0.00$ 143,242.39$ 5,525.11$ 17,418.43$ -$ -$ 112,422.06$ 30,268.79$

COMMUNITY SERVICES

72

SINGLE AUDIT AND OTHER REQUIRED REPORTS


MARSHALL, MINNESOTA

SCHEDULE OF FINDINGS AND QUESTIONED COSTS


73

A. SUMMARY OF AUDIT RESULTS

1. The auditor's report expresses an unmodified opinion on the financial statements of Independent School

District No. 413, Marshall, Minnesota.

2. Two significant deficiencies disclosed during the audit of the financial statements are reported in the

Independent Auditor’s Report on Internal Control over Financial Reporting and on Compliance and Other

Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing

Standards. One of these conditions is a material weakness.

3. No instances of noncompliance material to the financial statements of Independent School District No. 413,

Marshall, Minnesota were disclosed during the audit.

4. No significant deficiencies were disclosed during the audit of internal control over major federal awards

programs.

5. The auditor's report on compliance for each major federal award program expresses that Independent

School District No. 413, Marshall, Minnesota complied, in all material respects, with the types of

compliance requirements that could have a direct and material effect on each of its major federal programs.

6. Audit findings that are required to be reported in accordance with 2 CFR section 200.516(a) are reported in

this Schedule.

7. The programs tested as major programs included:

Child Nutrition Cluster

School Breakfast Program CFDA No. 10.553

National School Lunch Program CFDA No. 10.555

Summer Food Service Program for Children CFDA No. 10.559

Title I

Part A CFDA No. 84.010

8. The threshold for distinguishing types A and B programs was $750,000.

9. Independent School District No. 413, Marshall, Minnesota was not determined to be a low-risk auditee.


MARSHALL, MINNESOTA



74

B. FINDINGS - FINANCIAL STATEMENTS AUDIT

INTERNAL CONTROL

2016-001 Audit Adjustments

Condition: During our audit, we proposed audit adjustments that resulted in significant changes to the

District’s financial statements. This finding was also reported in the prior year audit. The District’s corrective

action plan for the prior year audit filed with the Minnesota Department of Education stated that the District

would strive to ensure that the supporting account balance schedules reconcile to the actual account balances in

the general ledger. We noted an attempt by District personnel to correct this deficiency during the current year;

however, adjustments to reclassify coding and adjust accounts payable were required.

Effect: A control deficiency 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 of the financial statements on a timely basis. One control deficiency that typically is considered significant is

identification by the auditor of a misstatement in the financial statement not initially identified by the entity’s

internal controls. This could affect the District’s ability to initiate, record, process and report financial data

consistent with the assertions of management in the financial statements.

Cause: This condition was caused by an oversight in coding entries and in reviewing year end accounts

payable balances.

Criteria: The District’s accounting staff should review journal entries made to ensure that correct accounts are

affected and review accounts payable and subsequent disbursements for correct amounts and propriety.

Recommendation: We recommend that the District’s accounting staff continue the process of reviewing

journal entries posted to the general ledger. We also recommend that the District’s accounting staff review

subsequent disbursements and accounts payable entries to ensure the appropriate accounts payable balance.

Views of Responsible Officials and Planned Corrective Actions: The District agrees with the finding and the

auditor’s recommendations will be adopted.

2016-002 Payment of Contracts/Assigned Wages

Condition: During our audit, we noted that the District paid an employee at a higher rate than the class

documented in the employee’s notice of assignment.

Effect: A control deficiency 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 wage misstatements

on a timely basis. This could affect the District’s ability to initiate record, process and report financial data

consistent with the assertion of management in the financial statements.

Cause: The wage entered in the payroll system at the beginning of the year was not reviewed to ensure it

matched the class to which the employee was assigned.

Criteria: The District should have a review process in place for all assignment, wage and payroll changes to an

employee.

Recommendation: We recommend that the District implement a review process for all changes made to employee payroll records to ensure accuracy.

Views of Responsible Officials and Planned Corrective Actions: The District agrees with the finding and the

auditor’s recommendations will be adopted.


MARSHALL, MINNESOTA



75

C. FINDINGS AND QUESTIONED COSTS-MAJOR FEDERAL AWARD PROGRAM

AUDIT


School Breakfast Program CFDA No. 10.553

National School Lunch Program CFDA No. 10.555

Summer Food Service Program for Children CFDA No. 10.559

Title I

Part A CFDA No. 84.010

None


MARSHALL, MINNESOTA


CORRECTIVE ACTION PLAN


76


Auditor Recommendation

We recommend that the District’s accounting staff continue the process of reviewing journal entries posted to

the general ledger. We also recommend that the District’s accounting staff review subsequent disbursements

and accounts payable entries to ensure the appropriate accounts payable balance.

Corrective Action Plan (CAP)

1. Explanation of Disagreement with Audit Finding

There is no disagreement with the audit finding.

2. Action Planned in Response to Finding The District’s accounting staff will strive to ensure that journal entries are entered and reviewed

properly, and subsequent disbursements are reviewed for unrecorded accounts payable.

3. Official Responsible for Insuring CAP

The Accounting Specialist is the official responsible for insuring corrective action of the deficiency.

4. Planned Completion Date for CAP

This plan will be implemented for the June 30, 2017 audit.

5. Plan to Monitor Completion of CAP

The Accounting Specialist in conjunction with the Director of Business Services will monitor this CAP.

2016-002 Payment of Contracts/Assigned Wages

Auditor Recommendation

We recommend that the District implement a review process for all changes made to employee payroll records

to ensure accuracy.




2. Action Planned in Response to Finding The District’s accounting staff will review assignment, wage and payroll changes to an employee for

propriety.


The Accounting Specialist is the official responsible for insuring corrective action of the deficiency.

4. Planned Completion Date for CAP

This plan will be implemented for the June 30, 2017 audit.


The Director of Business Services and School Board will be monitoring this plan.


MARSHALL, MINNESOTA

SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS


77

FINDINGS RELATIVE TO FINANCIAL STATEMENT AUDIT

INTERNAL CONTROL


Condition: This finding was a material weakness stating that audit adjustments were required that resulted in

significant changes to the District’s financial statements. These adjustments pertained to reconciling the levy

allocation and special education allocation to the underlying support.

Recommendation: We recommended that the District’s accounting staff reconcile the various general ledger

accounts throughout the year and reconcile all supporting account balance schedules to the actual balances

reflected in the District’s general ledger.

Current Status: The recommendation was adopted in the fiscal year 2016. Material audit adjustments were suggested for the 2016 audit for areas other than the prior year finding.

LEGAL COMPLIANCE

2015-002 Unclaimed Property

Condition: The District had two outstanding checks that were greater than three years old.

Current Status: The District reported and paid/delivered these uncashed checks during the fiscal year 2016. No

similar findings were noted in the 2016 audit.

2015-003 Disbursements Not for Public Purpose

Condition: We noted that the District paid for an item that did not qualify as a valid District expenditure. The

total amount of expenditure was immaterial to the financial statements as a whole.

Current Status: The District monitored disbursements to ensure items were for a valid public purpose. No

similar findings were noted in the 2016 audit.

FINDINGS RELATIVE TO FEDERAL AWARD PROGRAMS

None



507 532 5735

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INDEPENDENT AUDITOR’S REPORT ON INTERNAL CONTROL

OVER FINANCIAL REPORTING AND ON COMPLIANCE AND

OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS

PERFORMED IN ACCORDANCE

WITH GOVERNMENT AUDITING STANDARDS

To the Members of the School Board


Marshall, Minnesota

We have audited, in accordance with the 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, the financial statements of the governmental activities, each major fund, and the aggregate

remaining fund information of Independent School District No. 413, Marshall, Minnesota, as of and for the year ended

June 30, 2016, and the related notes to the financial statements, which collectively comprise Independent School

District No. 413, Marshall, Minnesota’s basic financial statements and have issued our report thereon dated November

1, 2016.

Internal Control Over Financial Reporting

In planning and performing our audit of the financial statements, we considered Independent School District No. 413,

Marshall, Minnesota’s internal control over financial reporting (internal control) to determine the audit procedures that

are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for

the purpose of expressing an opinion on the effectiveness of Independent School District No. 413, Marshall,

Minnesota's internal control. Accordingly, we do not express an opinion on the effectiveness of Independent School

District No. 413, Marshall, Minnesota's internal control.

Our consideration of internal control was for the limited purpose described in the preceding paragraph and was not

designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that were not identified. However, as described in

the accompanying schedule of findings and questioned costs, we identified certain deficiencies in internal control that

we consider to be material weaknesses and significant deficiencies.

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 a combination of deficiencies, in internal control such that

there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented,

or detected and corrected on a timely basis. We consider the deficiency described in the accompanying schedule of

findings and questioned costs as 2016-001 to be a material weakness.

A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a

material weakness, yet important enough to merit attention by those charged with governance. We consider the

deficiency described in the accompanying schedule of findings and questioned costs as 2016-002 to be a significant

deficiency.


79

Compliance and Other Matters

As part of obtaining reasonable assurance about whether Independent School District No. 413, Marshall, Minnesota's

financial statements are free from material misstatement, we performed tests of its compliance with certain provisions

of laws, regulations, contracts, and grant agreements, 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. The results of our

tests disclosed no instances of noncompliance or other matters that are required to be reported under Government

Auditing Standards.

Independent School District No. 413, Marshall, Minnesota’s Response to Finding

Independent School District No. 413, Marshall, Minnesota's response to the findings identified in our audit are

described in the accompanying schedule of findings and questioned costs corrective action plan. Independent School

District No. 413, Marshall, Minnesota's response was not subjected to the auditing procedures applied in the audit of

the financial statements and, accordingly, we express no opinion on it.

Purpose of this Report

The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the

results of that testing, and not to provide an opinion on the effectiveness of the entity’s internal control or on

compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in

considering the entity’s internal control and compliance. Accordingly, this communication is not suitable for any other

purpose.




Marshall, Minnesota

November 1, 2016



507 532 5735

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INDEPENDENT AUDITOR’S REPORT ON

MINNESOTA LEGAL COMPLIANCE



Marshall, Minnesota

We have audited, 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, the financial statements of the governmental activities, each major fund, and the aggregate

remaining fund information of Independent School District No. 413, Marshall, Minnesota, as of and for the year ended

June 30, 2016, and the related notes to the financial statements, and have issued our report thereon dated November 1,

2016.

The Minnesota Legal Compliance Audit Guide for School Districts, promulgated by the State Auditor pursuant to

Minn. Stat. § 6.65, contains seven categories of compliance to be tested: contracting and bidding, deposits and

investments, conflicts of interest, public indebtedness, claims and disbursements, miscellaneous provisions, and

uniform financial accounting and reporting standards for school districts. Our audit considered all of the listed

categories.

In connection with our audit, nothing came to our attention that caused us to believe that Independent School District

No. 413, Marshall, Minnesota, failed to comply with the provisions of the Minnesota Legal Compliance Audit Guide

for School Districts. However, our audit was not directed primarily toward obtaining knowledge of such

noncompliance. Accordingly, had we performed additional procedures, other matters may have come to our attention

regarding Independent School District No. 413, Marshall, Minnesota’s noncompliance with the above referenced provisions.

The purpose of this report is solely to describe the scope of our testing of compliance and the results of that testing, and

not to provide an opinion on compliance. Accordingly, this communication is not suitable for any other purpose.




Marshall, Minnesota

November 1, 2016




507 532 5735

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INDEPENDENT AUDITOR’S REPORT ON COMPLIANCE

FOR EACH MAJOR PROGRAM AND ON INTERNAL CONTROL

OVER COMPLIANCE REQUIRED BY

THE UNIFORM GUIDANCE

To the Members of the School Board Independent School District No. 413

Marshall, Minnesota

Report on Compliance for Each Major Federal Program

We have audited Independent School District No. 413, Marshall, Minnesota’s compliance with the types of compliance

requirements described in the OMB Compliance Supplement that could have a direct and material effect on each of

Independent School District No. 413, Marshall, Minnesota's major federal programs for the year ended June 30, 2016.

Independent School District No. 413, Marshall, Minnesota has elected to implement the new procurement policy

requirements as contained in the OMB Uniform Guidance for the fiscal year which will end June 30, 2018. By electing the OMB grace period, Independent School District No. 413, Marshall, Minnesota is following the previous

procurement standards as contained in circular A-122 for the year ended June 30, 2016. Independent School District

No. 413, Marshall, Minnesota's major federal programs are identified in the summary of auditor's results section of the

accompanying schedule of findings and questioned costs.

Management’s Responsibility

Management is responsible for compliance with the federal statutes, regulations, and the terms and conditions of its

federal awards applicable to its federal programs.

Auditor’s Responsibility Our responsibility is to express an opinion on compliance for each of Independent School District No. 413, Marshall,

Minnesota’s major federal programs based on our audit of the types of compliance requirements referred to above. We

conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of

America; the standards applicable to financial audits contained in Government Auditing Standards issued by the

Comptroller General of the United States; the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200,

Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform

Guidance). Those standards and Uniform Guidance require that we plan and perform the audit to obtain reasonable

assurance about whether noncompliance with the types of compliance requirements referred to above that could have a

direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence

about Independent School District No. 413, Marshall, Minnesota's compliance with those requirements and performing

such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program.

However, our audit does not provide a legal determination of Independent School District No. 413, Marshall,

Minnesota's compliance.


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Opinion on Each Major Federal Program

In our opinion, Independent School District No. 413, Marshall, Minnesota complied, in all material respects, with the

types of compliance requirements referred to above that could have a direct and material effect on each of its major

federal programs for the year ended June 30, 2016.

Report on Internal Control Over Compliance

Management of Independent School District No. 413, Marshall, Minnesota is responsible for establishing and

maintaining effective internal control over compliance with the types of compliance requirements referred to above. In

planning and performing our audit of compliance, we considered Independent School District No. 413, Marshall,

Minnesota's internal control over compliance with the types of requirements that could have a direct and material effect

on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the

purpose of expressing an opinion on compliance for each major federal program and to test and report on internal

control over compliance in accordance with Uniform Guidance, but not for the purpose of expressing an opinion on the

effectiveness of internal control over compliance. Accordingly, we do not express an opinion of the effectiveness of

Independent School District No. 413, Marshall, Minnesota’s internal control over compliance. As noted in the Report on Compliance for Each Major Federal Program section, Independent School District No. 413, Marshall, Minnesota

has elected to implement the new procurement policy requirements as contained in the OMB Uniform Guidance for the

fiscal year which will end June 30, 2018. By electing the OMB grace period, Independent School District No. 413,

Marshall, Minnesota is following the previous procurement standards as contained in circular A-122 for the year ended

June 30, 2016.

A deficiency in internal control over compliance exists when the design or operation of a control over compliance does

not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect

and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material

weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over

compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant

deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over

compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in

internal control over compliance, yet important enough to merit attention by those charged with governance.

Our consideration of internal control over compliance 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 compliance that might be material

weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we

consider to be material weaknesses. However, material weaknesses may exist that have not been identified.

Report on Schedule of Expenditures of Federal Awards Required by OMB Circular A-133

We have audited the financial statements of the governmental activities, each major fund, and the aggregate remaining

fund information of Independent School District No. 413, Marshall, Minnesota as of and for the year ended June 30,

2016, and the related notes to the financial statements, which collectively comprise Independent School District No.

413, Marshall, Minnesota’s basic financial statements. We issued our report thereon dated November 1, 2016, which

contained unmodified opinions on those financial statements. Our audit was conducted for the purpose of forming

opinions on the financial statements that collectively comprise the basic financial statements. The accompanying

schedule of expenditures of federal awards is presented for purposes of additional analysis as required by the Uniform

Guidance and is not a required part of the basic financial statements. Such information is the responsibility of

management and was derived from and relates directly to the underlying accounting and other records used to prepare

the basic 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 basic financial statements or the basic financial

statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the

United States of America. In our opinion, the schedule of expenditures of federal awards is fairly stated in all material

respects in relation to the basic financial statements as a whole.

83

The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal

control over compliance and the results of that testing based on the requirements of the Uniform Guidance.

Accordingly, this report is not suitable for any other purpose.




Marshall, Minnesota

November 1, 2016

Federal

FEDERAL GRANTOR/PASS-THROUGH CFDA Federal

GRANTOR/PROGRAM OR CLUSTER TITLE Number Expenditures

U.S. Department of Education

Passed Through Minnesota Department of Education

Special Education Cluster

Grants to States (IDEA, Part B) 84.027 $ 326,095

Preschool Grants (IDEA Preschool) 84.173 4,000

Total Special Education Cluster 330,095

Title I, Part A 84.010 295,349

Title II, Part A 84.367 77,144

Title III 84.365 51,896

Adult Basic Education 84.002 71,015

Adult Basic Education - Civics Grant 84.002 50,000

Adult Basic Education - Universal Health Care 84.002 33,964

Adult Basic Education - Fast Trac 84.002 1,564

Total U.S. Department of Education 911,027

U.S. Department of Agriculture

Passed Through Minnesota Department of Education


National School Lunch Program

Regular 10.555 112,475

Free/Reduced 10.555 438,163

After School Snack 10.555 6,469

Commodities 10.555 81,196

School Breakfast Program 10.553 98,410

Summer Food Service Program 10.559 31,296

Total Child Nutrition Cluster 768,009

Total U.S. Department of Agriculture 768,009

TOTAL FEDERAL EXPENDITURES $ 1,679,036

NONCASH ASSISTANCE

Noncash assistance is reported in the schedule at the fair market value of the commodities received and disbursed.

FOOD DISTRIBUTION

Non-monetary assistance is reported in the schedule at the fair market value of the commodities received and disbursed.

At June 30, 2016, the District had food commodities totaling $3,408 in inventory.

PASS-THROUGH ENTITY IDENTIFYING NUMBER

The pass-through entity identifying number is unknown.

LOAN PROGRAMS AND LOAN GUARANTEE PROGRAMS

Independent School District No. 413, Marshall, Minnesota, did not provide loan programs or loan guarantee programs,

accordingly, there are no year-end loan balances.

SUBRECIPIENTS

Independent School District No. 413, Marshall, Minnesota, did not provide federal awards to subrecipients.


SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS


MARSHALL, MINNESOTA

84


MARSHALL, MINNESOTA

NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS


85

NOTE A – REPORTING ENTITY

The Schedule of Expenditures of Federal Awards presents the activities of federal award programs expended by

Independent School District No. 413, Marshall, Minnesota. The District’s reporting entity is defined in Note 1 to the

financial statements.

NOTE B – BASIS OF PRESENTATION

The accompanying Schedule of Expenditures of Federal Awards (the Schedule) includes the federal grant activity of

Independent School District No. 413, Marshall, Minnesota, under programs of the federal government for the year

ended June 30, 2016. The information in this Schedule is presented in accordance with the requirements of the Title 2

U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Because the Schedule presents only a selected portion of the

operations of the District, it is not intended to and does not present the financial position, changes in financial position,

or cash flows of the District.

NOTE C – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Expenditures reported on the Schedule are reported on the modified accrual basis of accounting. Such expenditures are

recognized following the cost principles contained in Title 2 U.S. Code of Federal Regulations Part 200, Subpart E –

Cost Principles, wherein certain types of expenditures are not allowable or are limited as to reimbursement. Pass-

through entity identifying numbers are presented where available. The District has elected not to use the 10-percent de

minimis indirect cost rate allowed under the Uniform Guidance.

NOTE D – LOAN PROGRAMS AND LOAN GUARANTEE PROGRAMS

Independent School District No. 413, Marshall, Minnesota, did not provide loan programs or loan guarantee programs,

accordingly, there are no year-end loan balances.


MARSHALL, MINNESOTA

STUDENT ACTIVITY FUNDS




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INDEPENDENT AUDITOR'S REPORT ON THE

STATEMENT OF CASH RECEIPTS AND

DISBURSEMENTS OF THE STUDENT ACTIVITY ACCOUNTS

Members of the School Board, Advisors, and Students


Marshall, Minnesota

We have audited the statement of cash receipts and disbursements of the student activity accounts of Independent

School District No. 413, Marshall, Minnesota for the year ended June 30, 2016. This financial statement is the

responsibility of the District's management. Our responsibility is to express an opinion on this financial statement

based on our audit.

Except as discussed in the following paragraphs, we conducted our audit in accordance with auditing standards

generally accepted in the United States of America. 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

opinion.

The District has not established procedures to provide assurance that all cash collections are recorded in the accounting

records. Accordingly, it was not practicable for us to extend our audit of such cash collections beyond the amounts

recorded.

Because this financial statement is prepared on the basis of cash receipts and disbursements, revenue is recorded when

received, and expenses are recognized when paid rather than when the obligations are incurred. Accordingly, the accompanying financial statement is not intended to present financial position and results of operations in conformity

with accounting principles generally accepted in the United States of America.

In our opinion, except for such adjustments, if any, as might have been determined to be necessary had the cash

collections referred to above been susceptible to satisfactory audit tests, the financial statement referred to above

presents fairly, in all material respects, the cash transactions of the District's student activity accounts for the year ended

June 30, 2016, and the cash balances at that date.




Marshall, Minnesota

November 1, 2016


JULY 1, JUNE 30,

ACTIVITY 2015 2016

ACCOUNT BALANCE RECEIPTS DISBURSEMENTS BALANCE

BPA-MARSHALL PUBLIC SCHOOLS $ 2,396 $ 7,790 $ 4,661 $ 5,525

FOREIGN LANGUAGE / Spanish - 80 76 4

FUTURE FARMERS OF AMERICA 9,830 35,517 42,411 2,936

NATIONAL HONOR SOCIETY 870 1,524 1,762 632

MS STUDENT COUNCIL 2,944 1,653 - 4,597

MHS STUDENT COUNCIL 1,446 3,671 3,486 1,631

SPECTRUM - 150 - 150

SW MN ASSOCIATION OF

STUDENT COUNCILS 572 550 818 304

TOTAL $ 18,058 $ 50,935 $ 53,214 $ 15,779



MARSHALL, MINNESOTA

STATEMENT OF CASH RECEIPTS AND DISBURSEMENTS

STUDENT ACTIVITY ACCOUNTS

87



507 532 5735

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INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE WITH

LAWS AND REGULATIONS APPLICABLE TO THE

STUDENT ACTIVITY ACCOUNTS

To the School Board, Advisers, and Students of


Marshall, Minnesota

We have audited the statement of cash receipts and disbursements of the extracurricular student activity accounts of

Independent School District No. 413, Marshall, Minnesota for the year ended June 30, 2016, and have issued our report

thereon dated November 1, 2016 which was modified because the District has not established procedures to provide

assurance that all cash collections are recorded in the accounting records.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America and

the provisions of the Manual for Activity Fund Accounting (MAFA), issued by the Minnesota Department of

Education, pursuant to Minnesota Statutes Section 123.38.

The Manual for Activity Fund Accounting (MAFA) provides uniform financial accounting and reporting standards for

student activities. Compliance with this manual is the responsibility of the District's management. We have performed

auditing procedures to test compliance with the provisions of this manual. However, our objective was not to provide

an opinion on overall compliance with such provisions.

The results of our tests indicate that, with respect to the items tested, the District did not comply, in all material respects

with the provisions referred to in the above paragraph. Weaknesses pertaining to compliance with the Manual for

Activity Fund Accounting (MAFA) and internal control are noted on page 89. With respect to items not tested, nothing came to our attention that caused us to believe that the District had not complied, in all material respects, with those

provisions.

This report is intended solely for the information and use of the School Board, management, and students of

Independent School District No. 413, Marshall, Minnesota and the Minnesota Department of Education and is not

intended to be and should not be used by anyone other than these specified parties.




Marshall, Minnesota

November 1, 2016



MARSHALL, MINNESOTA

FINDINGS ON STUDENT ACTIVITY INTERNAL CONTROL STRUCTURE

AND COMPLIANCE


89

FINDING:

The District is not in compliance with the Manual for Activity Fund Accounting (MAFA) regarding the student

activity account in the following areas:

The Student Council and Southwest Minnesota Student Council request forms used a photocopy of the

student officer’s signature when disbursements were requested.

There is a lack of accountability for receipts for student activity run dances.

Four of the tested disbursements had a student authorization signature that was not on the officer list of

approved signers.




2. Action Planned in Response to Finding

The District will work towards following the Manual for Activity Fund Accounting (MAFA) to govern the

student activity account.


The Director of Business Services is the official responsible for insuring corrective action of the deficiency.

4. Planned Completion Date for CAP The District will strive to correct these deficiencies in fiscal year 2017.


The Superintendent and School Board will be monitoring this plan.



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MANAGEMENT LETTER



Marshall, Minnesota

In planning and performing our audit of the financial statements of the governmental activities, each major fund, and

the aggregate remaining fund information of the Independent School District No. 413, Marshall, Minnesota, for the year ended June 30, 2016, we considered the District’s internal control in order to determine our auditing procedures

for the purpose of expressing an opinion on the financial statements and not to provide assurance on internal control.

However, during our audit we became aware of the following opportunities for strengthening internal controls and

operating efficiency. We previously reported on the District’s internal control and any related significant deficiencies

and material weaknesses in our report dated November 1, 2016. This letter does not affect our report dated November

1, 2016, on the financial statements of Independent School District No. 413, Marshall, Minnesota.

COMMENTS AND SUGGESTIONS

During the disbursement sample, there was one disbursement tested in which no supporting documentation or receipt was obtained, only a check stub was included. Proper supporting

documentation should be obtained for all disbursements.

Uncollected receivables were noted from the last three fiscal years. Receivables should be

monitored to ensure timeliness of receipt or followup.

We noted that the SMART Finance system did not match the approved budget for the General

Fund (final budget) and Community Service Fund (preliminary and final budget). Proper

comparison should be made to ensure that SMART Finance matches the approved budget.

During our test of employment contracts, we noted that a contract for a principal was not signed

and that the notice of assignments for non-contract employees were not signed. Signed contracts

and assignments should be obtained for all employees.

Severance and vacation payable worksheets need to be reviewed for completeness and accuracy prior to the audit. Individual and master contracts also need to be reviewed for terms of

severance and reflected in these calculations.

The Minnesota Department of Education updated the guidance for Student Activity accounts

effective for the 2017 fiscal year. This guidance is available on the Minnesota Department of

Education’s website and should be reviewed by all applicable District personnel to ensure the

District is in compliance with the updated student activity guidelines.

If you have any questions regarding these items, please contact us.




Marshall, Minnesota

November 1, 2016


Documents

INDEPENDENT SCHOOL DISTRICT NO. 413 …...accounting guidance by implementing the provisions of Governmental Accounting Standards Board (GASB) Statement No. 72, Fair Value Measurement