SIERRA SANDS UNIFIED SCHOOL DISTRICT COUNTY OF …2 In accordance with Government Auditing Standards, we have also issued our report dated December 9, 2008, on our consideration of

SIERRA SANDS UNIFIED SCHOOL DISTRICT COUNTY OF KERN

RIDGECREST, CALIFORNIA

AUDIT REPORT

JUNE 30, 2008

SIERRA SANDS UNIFIED SCHOOL DISTRICT COUNTY OF KERN

JUNE 30, 2008 TABLE OF CONTENTS

Page FINANCIAL SECTION Independent Auditor's Report ........................................................................................................... 1 Management’s Discussion and Analysis ............................................................................................ 3 Basic Financial Statements Government-Wide Financial Statements:

Statement of Net Assets .............................................................................................................. 15

Statement of Activities ................................................................................................................. 16

Fund Financial Statements:

Balance Sheet – Governmental Funds ....................................................................................... 17

Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Assets .................................................................................................. 18

Statement of Revenues, Expenditures, and Changes in Fund Balances – Governmental Funds ..................................................................................... 19

Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities ..................................... 20

Statement of Fiduciary Net Assets – Fiduciary Funds ................................................................ 21

Statement of Changes in Fiduciary Net Assets – Fiduciary Funds ............................................. 22

Notes to the Basic Financial Statements ........................................................................................ 23 REQUIRED SUPPLEMENTARY INFORMATION Statement of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual – General Fund ................................................................. 44

Statement of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual – Special Reserve for Other Than Capital Outlay .................................................................................................... 45

Statement of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual – Building Fund ................................................................. 46 COMBINING STATEMENTS AND BUDGETARY COMPARISON SCHEDULES AS SUPPLEMENTARY INFORMATION Combining Balance Sheet – All Nonmajor Governmental Funds ................................................... 47 Combining Statement of Revenues, Expenditures and Changes in Fund Balances (By Object) – All Nonmajor Governmental Funds ............................................... 48

Page Special Revenue Funds:

Combining Balance Sheet – Nonmajor Special Revenue Funds ................................................ 49

Combining Statement of Revenues, Expenditures, and Changes in Fund Balances (By Object) – Nonmajor Special Revenue Funds ........................................... 50

Combining Statement of Revenues, Expenditures, and Changes in Fund Balances (By Object) – Budget and Actual – Nonmajor Special Revenue Funds .......... 51

Debt Service Funds:

Combining Balance Sheet – Nonmajor Debt Service Funds ...................................................... 54

Combining Statement of Revenues, Expenditures, and Changes in Fund Balances (By Object) – Nonmajor Debt Service Funds .................................................. 55

Combining Statement of Revenues, Expenditures, and Changes in Fund Balances (By Object) – Budget and Actual – Nonmajor Debt Service Funds ................ 56

Capital Projects Funds:

Combining Balance Sheet – Nonmajor Capital Projects Funds .................................................. 58

Combining Statement of Revenues, Expenditures, and Changes in Fund Balances (By Object) – Nonmajor Capital Projects Funds ............................................. 59

Combining Statement of Revenues, Expenditures, and Changes in Fund Balances (By Object) – Budget and Actual – Nonmajor Capital Projects Funds ............ 60

SUPPLEMENTARY INFORMATION Organization .................................................................................................................................... 63

Schedule of Average Daily Attendance .......................................................................................... 64

Schedule of Instructional Time ....................................................................................................... 65

Schedule of Financial Trends and Analysis .................................................................................... 66

Schedule of Expenditures of Federal Awards ............................................................................... 67

Reconciliation of Annual Financial and Budget Report (SACS) with Audited Financial Statements ................................................................................................ 68

Schedule of Charter Schools .......................................................................................................... 71

Schedule of Excess Sick Leave ...................................................................................................... 72

Notes to Supplementary Information .............................................................................................. 73

Page OTHER INDEPENDENT AUDITOR’S REPORTS Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of the Basic Financial Statements Performed in Accordance with Government Auditing Standards ................................................. 74

Report on Compliance with Requirements Applicable to Each Major Program and Internal Control Over Compliance in Accordance with OMB Circular A-133 .............................................................................................................. 76

Report on State Compliance ........................................................................................................... 78 FINDINGS AND RECOMMENDATIONS SECTION Schedule of Findings and Questioned Costs ................................................................................. 80 Summary Schedule of Prior Audit Findings .................................................................................... 81

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INDEPENDENT AUDITOR'S REPORT Board of Trustees Sierra Sands Unified School District Ridgecrest, California We have audited the accompanying financial statements of the governmental activities and each major fund of the Sierra Sands Unified School District, as of and for the year ended June 30, 2008, which collectively comprise the District’s basic financial statements, as listed in the table of contents. These financial statements are the responsibility of the Sierra Sands Unified School District's management. Our responsibility is to express an opinion 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 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. As discussed in the notes to the financial statements, the District adopted the provisions of GASB Statement No. 50, Pension Disclosures. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities and each major fund of the Sierra Sands Unified School District as of June 30, 2008, and the respective changes in financial position thereof for the year then ended, in conformity with accounting principles generally accepted in the United States of America. The Management’s Discussion and Analysis and the budgetary information identified as Required Supplementary Information in the table of contents are not required parts of the basic financial statements, but is supplementary information required by the Governmental Accounting Standards Board. We have applied certain limited procedures, consisting principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it.

BROWN ARMSTRONG PAULDEN MCCOWN STARBUCK THORNBURGH & KEETER

C e r t i f i e d P u b l i c A c c o u n t a n t s

Main Office 4200 Truxtun Ave., Suite 300 Bakersfield, California 93309 Tel 661.324.4971 Fax 661.324.4997 e-mail: [email protected] Shafter Office 560 Central Avenue Shafter, California 93263 Tel 661.746.2145 Fax 661.746.1218

Andrew J. Paulden, CPA Peter C. Brown, CPA Burton H. Armstrong, CPA, MST Steven R. Starbuck, CPA Aileen K. Keeter, CPA Chris M. Thornburgh, CPA Eric H. Xin, MBA, CPA Richard L. Halle, CPA, MST Harvey J. McCown, MBA, CPA Lynn R. Krausse, CPA, MST Rosalva Flores, CPA Connie M. Perez, CPA Diana H. Branthoover, CPA Thomas M. Young, CPA Alicia Dias, CPA, MBA Matthew R. Gilligan, CPA Hanna J. Sheppard, CPA Ryan L. Nielsen, CPA Jian Ou-Yang, CPA Ryan S. Johnson, CPA Jialan Su, CPA Ariadne S. Prunes, CPA Samuel O. Newland, CPA Brooke N. DeCuir, CPA Kenneth J. Witham, CPA Clint W. Baird, CPA Jose Garcia, CPA Adrian Rich, CPA Lance Larralde, CPA

REGISTERED with the Public Company Accounting Oversight Board and MEMBER of the American Institute of Certified Public Accountants

2

In accordance with Government Auditing Standards, we have also issued our report dated December 9, 2008, on our consideration of Sierra Sands Unified School District'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 the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. Our audit was performed for the purpose of forming an opinion on the financial statements that collectively comprise Sierra Sands Unified School District’s basic financial statements. The combining and individual fund financial statements and schedules listed in the table of contents are presented for purposes of additional analysis and are not a required part of the basic financial statements of Sierra Sands Unified School District. The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, and is also not a required part of the basic financial statements of Sierra Sands Unified School District. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole.

BROWN ARMSTRONG PAULDEN McCOWN STARBUCK THORNBURGH & KEETER ACCOUNTANCY CORPORATION

Bakersfield, California December 9, 2008

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SIERRA SANDS UNIFIED SCHOOL DISTRICT

MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) FOR THE YEAR ENDED JUNE 30, 2008

INTRODUCTION This section of Sierra Sands Unified School District's annual financial report represents a discussion and analysis of the District's financial performance during the fiscal year ended June 30, 2008 This Management Discussion and Analysis (MD&A) is a requirement of the Government Accounting Standards Board's (GASB) pronouncement number 34, and its purpose is to provide a more global picture of the District's financial condition. Please read it in conjunction with the District's financial statements that follow this section. FINANCIAL HIGHLIGHTS • The District's total net assets on June 30, 2008 were $49,348,539 compared to $19,005,406 at June

30, 2007.

• During the year, the District's net expenses were $37,733,207, which is $7,074,920 less than the $44,808,127 generated in taxes and other revenues for governmental activities.

• The District’s total revenues in 2007-08 were $56,438,454 compared to $55,127,770 in 2006-07.

• The District's total expenses in 2007-08 were $56,163,301, compared to $56,773,875 in 2006-07.

• The general fund reported a balance in 2007-08 of $9,061,850 compared to an ending balance of $8,936,220 on June 30, 2007.

OVERVIEW OF THE FINANCIAL STATEMENTS This annual report consists of three parts: management's discussion and analysis (this section), the basic financial statements, and required supplementary information. The basic financial statements include two kinds of statements that present different views of the District. • The first two statements are district-wide (a.k.a. government-wide) financial statements that 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 by reporting the District's operations in more detail than the government-wide statements.

• The governmental funds statements tell how basic services like regular and special education were financed in the short term as well as what remains for future spending.

• Proprietary funds statements offer short- and long-term financial information about the activities the District operates like businesses, such as food service.

• Fiduciary fund statements provide information about the financial relationships in which the District acts solely as a trustee or agent for the benefit of others to whom the resources belong.

The financial statements also include notes that explain some of the information in the financial statements and provide more detailed data. The statements are followed by a section of required supplementary information that further explains and supports the financial statements with a comparison of the District’s budget for the year. Figure A-1 shows how the various parts of this annual report are arranged and related to one another.

4

Figure A-1

Summary Detail District-Wide Statements The district-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 assets includes all of the District's assets and all of the current year's revenues and expenses are account for in the statement of activities regardless of when received or paid. The two district-wide statements report the District's net assets and how they have changed. Net assets - the difference between the District's assets and liabilities - is one way to measure the District's financial health or position. • Over time, increases or decreases in the District's net assets are an indicator of whether its financial

health 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 district-wide financial statements, the District's activities are divided into two categories: • Governmental activities – Most of the District's basic services are included here, such as regular and

special education, transportation, and administration. Property taxes and state formula aid finance most of these activities.

• Business-type activities – The District charges fees to help it cover the costs of certain services it provides. The District does not maintain any funds that are categorized as business-type activities.

Management’s Discussion and

Analysis

Basic Financial

Statements

Fund Financial

Statements

District-Wide Financial

Statements

Notes to the Financial

Statements

Required Supplementary

Information

5

Fund Financial Statements The fund financial statements provide more detailed information about the District's most significant funds – not the District as a whole. Some funds are required by State law and by bond covenants. Other funds are established by the District to control and manage money for particular purposes (such as repaying long-term debts) or to show that it is properly using certain revenues (like federal grants). SSUSD has the following kinds of funds: • Governmental Funds – Most of SSUSD's basic services are included in governmental funds that

focus on (1) how cash and other financial assets can be converted to cash and (2) the balances left at year-end that are available for spending. Consequently, the governmental fund statements provide a detailed short-term view that helps determine whether there are more or fewer financial resources that can be spent in the near future to finance the District's programs. These fund statements are broken down into major and non-major components based on their relative size and/or revenues generated as compared to the General Fund.

• Fiduciary Funds – The District has two fiduciary funds: the Retiree Benefit Fund and the Student

Body Fund. These funds can only be used for trust beneficiaries, and therefore cannot be used to finance operations. The Retiree Benefit Fund will continue to build based on actuarial findings in order to pay for current and future retirees. The District will be responsible for ensuring that the assets reported in these funds are used for this intended purpose; as a result, trust feature is excluded from the District's government-wide financial statements.

FINANCIAL ANALYSIS OF THE DISTRICT AS A WHOLE Figure A-2 Figure A-3

Revenue Limit Sources

54%

Federal Revenues

4%

State Revenues

5%

Local Revenues

12% Charges for Services

1% Operating Grants and

Contributions23%

Capital Grants and

Contributions1%

2007-08 Revenue Sources

Instruction58%

Instruction -Related Services

11%

Pupil Services

10%

Enterprise, Ancillary and Community

Services< 1%

General Administration

6%

Plant Services

11%

Other Outgo4%

2007-08 Expenses

Contracts with all of the District's bargaining units were settled in 2007-08. The District once again implemented its fair share program that allocates a portion of the cost of living adjustment received by the District for Revenue Limit. During 2007-08, the District engaged in many preliminary activities surrounding the Measure A modernization projects. Additionally, each school site had a sunshade installed, Vieweg modernization was nearly completed and a couple of other projects such as playgounds were started at a couple of sites. The District's budget committee continued to meet in 2007-08. These meetings were productive as a vehicle to provide input around the relative priority of the District's programs and support activities. They were also a means to facilitate increased dialogue and understanding of the budget environment and process.

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Average Daily Attendance. For the second year in a row, total Average Daily Attendance (ADA) decreased from the prior year due to a drop in enrollment. ADA at P2 in 2007-08 was 5,213 compared to 5,382 ADA at P2 in 2006/2007 and 5,448 ADA at P-2 in 2005/2006. Contributing factors were the slower than anticipated implementation of the Base Realignment and Closure Committee decisions as well as a change in the population pattern. Figure A-4 displays the District's average daily attendance history since fiscal year 1995/1996.

Figure A-4

0

1000

2000

3000

4000

5000

6000

7000

Average Daily Attendance History

P-1 6668 6480 6225 5656 5419 5430 5299 5338 5378 5408 5490 5487 5290

P-2 6651 6415 6197 5581 5391 5374 5288 5292 5345 5391 5448 5382 5213

Annual 6606 6367 6156 5531 5366 5366 5281 5287 5345 5374 5430 5354 5195

1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08

Net Assets. The District's combined net assets were more on June 30, 2008 than they were the year before increasing by 159.7% to $49.3 million. (See Table A-1) The primary reason for this increase is the $23.2 million prior year audit adjustment for long-term liabilities for Other Post Employment Benefits (OPEB). The District is required to be in compliance with GASB 45 in 2008-09, and so it was necessary to remove the anticipated OPEB debt from the District's audit report so that they will start with a $0 balance as of July 1, 2008.

TABLE A-1

2006-07 2007-08 % Change

Current and Other Assets 46,574,325$ 51,704,693$ 11.0%Capital Assets 22,323,758 24,923,233 11.6%

Total Assets 68,898,083 76,627,926 11.2%

Long-term Liabilities 47,448,505 24,095,536 -49.2%Other Liabilities 2,444,171 3,183,851 30.3%

Total Liabilities 49,892,676 27,279,387 -45.3%

Net AssetsInvested in capital assets, net of related debt 17,563,829 20,418,233 16.3%Restricted 4,037,610 7,533,044 86.6%Unrestricted (2,596,033) 21,397,262 924.2%

Total Net Assets 19,005,406$ 49,348,539$ 159.7%

Sierra Sands Unified School DistrictNet Assets - Governmental Activities

9

The total net change of the all governmental fund balances equaled $4.39 million and the fund balance continues to be positive as revenues exceeded expenditures. Property taxes and state formula revenue limit account for 56% of the District's revenue. Instruction and instruction-related services account for 64% of the District's total expenditures. Figure A-5 Figure A-6

Revenue Limit

Sources56%

Federal Revenues

11%

State Revenues

20 % Local Revenues

13%

2007/2008 Total Revenue Sources$56,438,454

Instruction and

Instruction-Related Services

64%

Pupil Services10%

General Administration

6% Plant Services18% Other Outgo

1%

Debt Service1%

2007/2008 Total Expenditures$56,163,301

Changes in Revenues, Expenditures and Fund Balances of all the District's funds combined. Figure A-5 outlines the District's total revenue sources for 2007-08 from all funds combined. Comparatively, Figure A-6 outlines the District's total expenditures by function for 2007-08 from all funds combined. Table A-4 identifies the revenues, expenses and fund balances for 2007-08 and compares them to related data from 2006-07. The % change in Other Revenues includes $412.5K for one-time ROP funds plus $327K for a SISC reimbursement for freeze damage at the Sierra Vista Center. Overall, Instruction and Instructional Services combined increased by 7.2% primarily due to changes in teaching faculty salaries and benefits. Please note that the decrease in Instruction-Related expenses was a result of a state-required account code reclassification from Instruction Services to direct Instruction. General Administration expenses also increased due to personnel changes and construction consulting. Other Financing Sources in 2006-07 included the first sale of Measure A bonds equaling $19.5 million.

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Statement of Fiduciary Net Assets

$3,743,925

$516,816

Student Body Fund Retiree Benefit Fund

Figure A-7

22%

12%

35%

31%

Balance Sheet - Governmental Funds

General Fund Special Reserve Fund Building Fund Other Governmental Funds

LONG TERM DEBT Figure A-8 The District maintains four debt obligations other than current liabilities. The first is capital lease obligations, which currently includes a $90,000 outstanding balance for the repayment of the state preschool building loan. The second type of debt is compensated absences (i.e., employee vacations) that has a current liability of $122,668. The passage of Measure A (a governmental obligation bond in the amount of $50,500,000) for modernization for each of the District's eleven school sites (of which $19,467,868 has been funded). A lease revenue bond in the amount of $4,500,000 to facilitate in the purchase and renovation of a support facility completes the long term debt position of the District. The District’s current liability for the lease revenue bond is $4,415,000. STUDENT BODY FUND Due to the vigorous efforts by student body account bookkeepers and managers as well as the District's efforts to standardize the student body accounting system, the District experienced no audit findings in this area in 2007-08. To maintain compliance and internal controls, the District will continue to regularly monitor student body financial reports, provide staff development opportunities, maintain communication and upgrade accounting tools.

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BONDED DEBT On August 25, 2006, the District sold $19,467,868 of General Obligation Bonds – Election 2006. The annual requirements to amortize the General Obligation Bonds are shown in Table A-7 below.

Table A-7

Year Ending June 30, Principal Interest Total

2008 -$ 672,212$ 672,212$ 2009 225,000 667,993 892,993 2010 285,000 658,430 943,430 2011 365,000 645,786 1,010,786 2012 445,000 629,586 1,074,586

2013-2017 3,235,000 2,778,170 6,013,170 2018-2022 5,445,000 1,848,407 7,293,407 2023-2027 6,216,436 2,691,440 8,907,876 2028-2032 3,251,432 6,543,568 9,795,000

19,467,868$ 17,135,592$ 36,603,460$

OTHER DEBT – LEASE REVENUE BOND On March 1, 2007, the District acquired $4,500,000 of Lease Revenue Bonds. A portion of these revenues were used toward the purchase of the Sierra Vista Center and the remaining balance will be used to prepare a portion of the facility for District Administrative offices. The annual requirements to amortize these Lease Revenue Bonds are shown in Table A-8 below. This debt obligation will be primarily funded through rental income from the commercial businesses located in the Sierra Vista Center.

Table A-8


2009 115,000$ 181,983$ 296,983$ 2010 115,000 177,382 292,382 2011 120,000 172,783 292,783 2012 125,000 167,983 292,983

2013-2017 710,000 760,713 1,470,713 2018-2022 865,000 606,315 1,471,315 2023-2027 1,060,000 414,440 1,474,440 2028-2032 1,305,000 171,061 1,476,061

4,415,000$ 2,652,660$ 7,067,660$

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FACTORS BEARING ON THE DISTRICT’S FUTURE At the time these financial statements were prepared and audited, the District was aware of six existing circumstances that could significantly affect its financial health in the future: • The Base Realignment And Closure (BRAC) legislation was passed in 2005 and it is still anticipated

that significant growth will occur between now and 2011, which is the statutory date the BRAC decisions must be completely implemented. While the Department of Defense has not released the business plan related to its BRAC implementation methodology and timeline, there has been on-going dialogue between the Base, the community and the school district. It is the District's belief that the process is moving forward, and while there is still an element of uncertainty regarding the magnitude, demographic and timing to the District's anticipated BRAC-related student growth, the uncertainty has diminished somewhat.

• The District began utilizing the Vieweg Educational center as a temporary school facility during 2008-

09. The District still anticipates that around the time all modernization efforts are completed, the growth precipitated by the implementation of the BRAC decisions as well as other population changes will require Vieweg to remain a regular elementary school facility. As a result, the support functions located at the Vieweg facility have been relocated to the Sierra Vista Center.

• Pierce and Richmond Elementary Schools, Murray Middle School, Burroughs High School, the

Vieweg Educational Center and the District Support Complex are located in buildings owned by the District on land owned by the U.S. Navy. A 25-year lease for all of these sites was signed in April 2008.

• As the District moves forward with implementing its plans for the future, it recognizes the many

challenges associated with growth and change. The contributions of the area's citizens continues to play a major part in the District's success. With regard to the Modernization efforts related to Measure A, the District accomplished a number of important tasks in preparation for the more substantive modernization projects. The Lease/Lease Back construction delivery method was the construction delivery method of choice, and Barnhart, Inc. has been engaged to perform all of Phase I. Work in the renovation of the Sierra Vista Center as well as all Phase I projects is anticipated to commence in early to mid 2008-09.

• The District anticipates a second draw on the Measure A bond for modernization in early to mid 2008-

09. Even though the market is not encouraging, SSUSD administrators believe that its steady and stable fiscal management will enable the next bond sale to be successful.

• A significant factor affecting the future of the District is the situation related to the negative fiscal

situation in the State of California. The State's financial condition has continued to deteriorate and is an especially challenging situation for all public agencies particularly education. This situation has been compounded and greatly exacerbated by fiscal problems experienced on the National level.

Contacting the School District’s Financial Management This financial report is designed to provide our citizens, taxpayers, and creditors with a general overview of the District's finances and to show the District's accountability for the money it receives. If you have questions about this report or need additional financial information, please contact Elaine W. Janson, Assistant Superintendent of Business and Support Services, at Sierra Sands Unified School District, 113 West Felspar, Ridgecrest, California 93555; or send an e-mail to [email protected].

GOVERNMENT-WIDE FINANCIAL STATEMENTS

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

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SIERRA SANDS UNIFIED SCHOOL DISTRICT STATEMENT OF NET ASSETS

JUNE 30, 2008

Governmental Activities

ASSETSCash 40,550,211$ Accounts Receivable 5,942,409 Due from Other Funds 4,995,911 Stores 93,808 Prepaids 122,354 Fixed Assets (Net) 24,923,233

Total Assets 76,627,926

LIABILITIESAccounts Payable 1,857,200 Due to Other Funds 1,251,986 Other Current Liabilities 74,665 Noncurrent Liabilities:

Due Within One Year 477,668 Due in More Than One Year 23,617,868

Total Liabilities 27,279,387

NET ASSETSInvested in Capital Assets, Net of Related Debt 20,418,233 Restricted 7,533,044 Unrestricted 21,397,262

Total Net Assets 49,348,539$


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SIERRA SANDS UNIFIED SCHOOL DISTRICT STATEMENT OF ACTIVITIES

FOR THE YEAR ENDED JUNE 30, 2008

Net (Expense)Revenue andChanges inNet Assets

Operating CapitalCharges for Grants and Grants and Governmental

Functions/Programs Expenses Services Contributions Contributions Activities

Governmental Activities:Instruction 29,670,737$ 106,456$ 7,906,082$ 301,158$ (21,357,041)$ Instruction-Related Services 5,860,463 2,529 1,173,053 - (4,684,881) Pupil Services 5,397,927 612,672 3,295,801 - (1,489,454) Ancillary Services 246,281 - 151 - (246,130) Community Services 7,431 - 6,440 - (991) Enterprise 13,138 - 16 - (13,122) General Administration 3,076,607 29,424 439,714 - (2,607,469) Plant Services 5,750,711 6,541 413,775 - (5,330,395) Other Outgo 2,221,879 57,199 160,956 - (2,003,724)

Total Governmental Activities 52,245,174 814,821 13,395,988 301,158 (37,733,207)

Total Primary Government 52,245,174$ 814,821$ 13,395,988$ 301,158$ (37,733,207)

General Revenues:Revenue Limit Sources 32,331,887 Federal Revenues 2,275,444 State Revenues 2,865,068 Local Revenues 7,335,728

44,808,127

7,074,920

Net Assets Beginning 19,005,406 Prior Period Adjustment 23,268,213 Net Assets as Restated 42,273,619

Net Assets Ending 49,348,539$

Program Revenues

Change in Net Assets

Total General Revenues

FUND FINANCIAL STATEMENTS


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SIERRA SANDS UNIFIED SCHOOL DISTRICT BALANCE SHEET

GOVERNMENTAL FUNDS JUNE 30, 2008

Special Reserve Other TotalGeneral Other Than Building Governmental Governmental

Fund Capital Outlay Fund Funds FundsASSETS

Cash and Cash Equivalents 5,847,614$ 5,647,029$ 17,445,736$ 11,609,832$ 40,550,211$ Accounts Receivable 4,741,618 - 531,980 668,811 5,942,409 Due from Other Funds 483,432 455,567 - 4,056,912 4,995,911 Stores 67,466 - - 26,342 93,808 Prepaids 108,648 - - 13,706 122,354

TOTAL ASSETS 11,248,778$ 6,102,596$ 17,977,716$ 16,375,603$ 51,704,693$

LIABILITIES AND FUND BALANCESLIABILITIES

Accounts Payable 1,666,804$ -$ 146,974$ 43,422$ 1,857,200$ Due to Other Funds 467,187 - 371,685 413,114 1,251,986 Other Current Liabilities 52,937 - - 21,728 74,665

TOTAL LIABILITIES 2,186,928 - 518,659 478,264 3,183,851

FUND BALANCESReserved for:

Revolving Cash 22,000 - - - 22,000 Stores Inventories 67,466 - - 26,342 93,808 Prepaid Items 108,648 - - 13,706 122,354 Legally Restricted 3,370,045 - - 1,438,201 4,808,246 Economic Uncertainties 2,486,636 - - - 2,486,636

Unreserved 3,007,055 6,102,596 17,459,057 - 26,568,708 Unreserved, Reported in Nonmajor:

Special Revenue Funds - - - 6,168,768 6,168,768 Debt Service Funds - - - 626,339 626,339 Capital Projects Funds - - - 7,623,983 7,623,983

TOTAL FUND BALANCES 9,061,850 6,102,596 17,459,057 15,897,339 48,520,842

TOTAL LIABILITIES AND FUND BALANCES 11,248,778$ 6,102,596$ 17,977,716$ 16,375,603$ 51,704,693$


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SIERRA SANDS UNIFIED SCHOOL DISTRICT RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET

TO THE STATEMENT OF NET ASSETS FOR THE YEAR ENDED JUNE 30, 2008

Total Fund Balances - Governmental Funds 48,520,842$

Amounts reported for governmental activities in the statement of net assets aredifferent because:

Capital assets used in governmental activities are not financial resources and therefore are not reported as assets in governmental funds. The cost ofthe assets is $42,705,317 and the accumulated depreciation is $17,782,084 24,923,233

Long-term liabilities, including bonds payable, are not due and payable in the current period and therefore are not reported as liabilities in the funds. Long-term liabilities at year-end consist of:

General Obligation Bonds 19,467,868 Certificates of Participation 4,415,000 Capital Leases Payable 90,000 Employee Benefit Obligations 122,668

(24,095,536)

Total Net Assets - Governmental Activities 49,348,539$

All payables, accrued liabilities and long-term obligations are reported in the government wide financial statements. In general, payables and accrued liabilities that will be paid from government funds are reported on the governmental fund financial statements regardless of whether they will be liquidated with current resources. However, the noncurrent portion of capital leases, compensated absence and special termination benefits that will be paid from governmental funds are reported as a liability in the fund financial statements only to the extent that they Aare due from payment during the current fiscal year. In general, liabilities that mature or come due from payment during the fiscal year are considered to have been made with current available financial resources. Bonds and other long-term obligations that will be paid from governmental funds are not recognized as a current liability in the fund financial statements when due but rather recognized as an expense when paid.


19

SIERRA SANDS UNIFIED SCHOOL DISTRICT STATEMENT OF REVENUES, EXPENDITURES, AND

CHANGES IN FUND BALANCES GOVERNMENTAL FUNDS


Special Reserve Other TotalGeneral Other Than Building Governmental Governmental

Fund Capital Outlay Fund Funds FundsREVENUES

Revenue Limit Sources:State Apportionments 27,294,609$ -$ -$ -$ 27,294,609$ Local Sources 4,890,750 - - - 4,890,750

Total Revenue Limit Sources 32,185,359 - - - 32,185,359

Federal Revenues 4,877,094 - - 1,134,873 6,011,967 Other State Revenues 9,830,193 - - 1,252,116 11,082,309 Other Local Revenues 2,958,776 - 867,895 3,332,148 7,158,819

TOTAL REVENUES 49,851,422 - 867,895 5,719,137 56,438,454

EXPENDITURESInstruction 29,860,449 - - 439,132 30,299,581 Instruction - Related Services 5,669,412 - - 70,749 5,740,161 Pupil Services 3,744,611 - - 1,791,132 5,535,743 Ancillary Services 255,968 - - - 255,968 Community Services 7,431 - - - 7,431 Enterprise 13,138 - - - 13,138 All Other General Administration 3,056,321 - - 197,624 3,253,945 Plant Services 6,129,982 - 3,339,791 604,480 10,074,253 Other Outgo 295,100 - - - 295,100 Debt Service: Principal - - - 15,000 15,000 Interest - - - 672,981 672,981

TOTAL EXPENDITURES 49,032,412 - 3,339,791 3,791,098 56,163,301

Excess (Deficiency) of RevenuesOver Expenditures 819,010 - (2,471,896) 1,928,039 275,153

OTHER FINANCING SOURCES (USES)Other Sources - - 371,610 - 371,610 Operating Transfers In - 455,567 - 3,981,738 4,437,305 Operating Transfers Out (693,380) - - - (693,380)

TOTAL OTHER FINANCING SOURCES (USES) (693,380) 455,567 371,610 3,981,738 4,115,535

Net Change in Fund Balances 125,630 455,567 (2,100,286) 5,909,777 4,390,688

Fund Balances at Beginning of Year 8,936,220 5,647,029 19,559,343 9,987,562 44,130,154

Fund Balances at End of Year 9,061,850$ 6,102,596$ 17,459,057$ 15,897,339$ 48,520,842$


20

SIERRA SANDS UNIFIED SCHOOL DISTRICT RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES

TO THE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2008

Total Net Change in Fund Balances - Governmental Funds 4,390,688$

Amounts reported for governmental activities in the statement of activities are different because:

Governmental funds report capital outlays as expenditures. However, in the statement of activities, the cost of those assets is allocated over their estimated useful lives as depreciation expense. This is the amount by which capital outlay exceeded depreciation in the current period.

Fixed Asset Additions 3,938,274$ Current Year Depreciation (1,338,798)

2,599,476

Issuance of long-term financial obligations is a source of revenue in the governmental funds, but the receipt of these proceeds increases long-term liabilities in the statement of net assets.

Employee Benefit Obligations (15,244) (15,244)

Repayment of long-term financing obligations principal is an expenditure in the governmental funds, but the repayment reduces long-term liabilities in the statement of net assets.

Certificates of Participation 85,000 Capital Lease Obligations 15,000

100,000

Change in Net Assets of Governmental Activities 7,074,920$


21

SIERRA SANDS UNIFIED SCHOOL DISTRICT STATEMENT OF FIDUCIARY NET ASSETS

FIDUCIARY FUNDS JUNE 30, 2008

PensionTrust AgencyFund Fund

Retiree StudentBenefit BodyFund Fund

ASSETSCash in County Treasury 3,710,671$ -$ Cash on Hand and in Banks - 516,816 Accounts Receivable 33,254 -

Total Assets 3,743,925 516,816

LIABILITIESDue to Other Funds 3,743,925 - Due to Student Groups - 516,816

Total Liabilities 3,743,925 516,816

NET ASSETSHeld in Trust for Pension Benefit - -

Total Net Assets -$ -$


22

SIERRA SANDS UNIFIED SCHOOL DISTRICT STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS

FIDUCIARY FUNDS FOR THE YEAR ENDED JUNE 30, 2008

EmployeeRetirement

PlanADDITIONS

Investment Income 157,551$

Total Additions 157,551

DEDUCTIONSTransfers Out 3,743,925

Total Deductions 3,743,925

CHANGE IN NET ASSETS (3,586,374)

Net Assets - Beginning of the Year 3,586,374

Net Assets - End of the Year -$

23

SIERRA SANDS UNIFIED SCHOOL DISTRICT NOTES TO THE BASIC FINANCIAL STATEMENTS

FOR THE YEAR ENDED JUNE 30, 2008 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Accounting Policies

The District accounts for its financial transactions in accordance with the policies and procedures of the Department of Education's California School Accounting Manual. The accounting policies of the District conform to accounting principles generally accepted in the United States of America as prescribed by the Governmental Accounting Standards Board (GASB) and the American Institute of Certified Public Accountants (AICPA).

B. Reporting Entity

The Sierra Sands Unified School District is the level of government primarily accountable for activities related to public education. The governing authority consists of seven elected officials who, together, constitute the Board of Trustees. The Sierra Sands Unified School District (the "District") and the Inyo-Kern Schools Financing Authority (the "Authority") have financial and operational relationships, which meet the reporting entity definition criteria of GASB Statement No. 14, The Financial Reporting Entity, for inclusion of the Authority as a component unit of the District. Accordingly, certain financial activities of the Authority have been included in the financial statements of the District. The Authority was formed by a joint exercise powers agreement dated December 3, 1990, between the Sierra Sands Unified School District (Sierra Sands) and the Lone Pine Unified School District (Lone Pine). The purpose of the Authority is to provide assistance for the educational purposes of Sierra Sands and Lone Pine. The Authority is a public entity separate and distinct from each of its participant districts. Sierra Sands and Lone Pine have reorganized by the transfer of certain land from the territory of Sierra Sands to the territory of Lone Pine. In consideration of the mutual undertaking of the reorganization, Lone Pine conveyed to the Authority fee title to certain land together with buildings, facilities and improvements situated thereon, which are currently not used or needed for classroom buildings. Such real property is leased by the Authority to Lone Pine pursuant to the Lease Agreement dated December 3, 1990. The Lease Agreement became effective for the fiscal year ended June 30, 1992. The Authority's financial activity is included in the financial statements as part of the District's Special Revenue Funds and the District's Debt Service Funds. In addition, the Authority issued $4,500,000 of Lease Revenue Bonds on March 1, 2007. The proceeds of these Bonds will be used to reimburse the District for certain facilities to be used as District headquarters and acquire facilities. The following are those aspects of the relationship between the District and the Authority which satisfy GASB Statement No. 14 criteria: Manifestations of Oversight The Authority has no employees. The District's Superintendent and Assistant Superintendent for Administrative and Business Services function as agents of the Authority. Neither individual receives additional compensation for work performed in this capacity.

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NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) B. Reporting Entity (Continued)

Accountability for Fiscal Matters The financing arrangement regarding the transactions must have the consent of the District. Scope of Public Service The Authority was created for the purpose of financially assisting Lone Pine and Sierra Sands Unified School Districts. Special Financing Relationships/Related Party Transactions Lone Pine conveyed to the Authority fee title in and to certain real property owned by Lone Pine and not used for classroom buildings. The real property is leased by Lone Pine pursuant to the Lease Agreement dated December 3, 1990. The term of the Lease Agreement is 30 years. The Authority has the right to extend the term of the Lease Agreement for one or more additional 30 years upon written notice. The term of the Lease Agreement will end in the event that no additional net revenues will be received by Lone Pine for a period of three consecutive fiscal years or the Board will make the determination that no additional net revenues are reasonably expected to be received by Lone Pine during the next five fiscal years. Lone Pine will pay to the Authority an annual amount of contributions each fiscal year. Such amounts are payable at the times and in the manner set forth in the Lease Agreement. In accordance with the terms of the Lease Agreement, lease payments received by the Authority were $1,542,539. A total of $752,715 of distributions were made to Sierra Sands Unified School District during the fiscal year ended June 30, 2008. The Inyo-Kern Schools Financing Authority issued Lease Revenue Bonds to assist the District in acquisition and renovation of facilities to be used as District headquarters. It is expected that repayment of the Lease Revenue Bonds will be made from Authority revenues.

C. Implementation of New Accounting Pronouncements During the fiscal year ended June 30, 2008, the District was also required to implement GASB Statement No. 50, Pension Disclosures, which amends existing accounting guidance under GASB No. 27, Accounting for Pensions by State and Local Governmental Employers. GASB Statement No. 50 more closely aligns the financial reporting requirements for pensions with those for other postemployment benefits (OPEB), as discussed above. Note 11 shows the disclosures as required by GASB Statement No. 50.

D. Basis of Presentation

Government-wide Financial Statements: The government-wide financial statements (i,e., the statement of net assets and the statement of changes in net assets) report information on all of the nonfiduciary activities of the District and its component units. Internal service fund activity is eliminated to avoid doubling revenues and expenses.

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NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) D. Basis of Presentation (Continued)

The government-wide statements are prepared using the economic resources measurement focus. This is the same approach used in the preparation of the proprietary fund and fiduciary fund financial statements but differs from the manner in which governmental fund financial statements are prepared. Governmental fund financial statements, therefore, include a reconciliation with brief explanations to better identify the relationship between the government-wide statements and the statements for the governmental funds. The government-wide statement of activities presents a comparison between direct expenses and program revenues for each function or program of the District's governmental activities. Direct expenses are those that are specifically associated with a service, program, or department and are therefore clearly identifiable to a particular function. The District does not allocate indirect expenses to functions in the statement of activities. Program revenues include charges paid by the recipients of goods or services offered by a program, as well as grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues which are not classified as program revenues are presented as general revenues of the District, with certain exceptions. The comparison of direct expenses with program revenues identifies the intent to which each governmental function is self-financing or draws from the general revenues of the District. Fund Financial Statements: Fund financial statements report detailed information about the District. The focus of governmental fund financial statements is on major funds rather than reporting funds by type. Each major governmental fund is presented in a separate column, and all non-major funds are aggregated into one column. Fiduciary funds are reported by fund type. The accounting and financial treatment applied to a fund is determined by its measurement focus. All governmental funds are accounted for using a flow of current financial resources measurement focus. With this measurement focus, only current assets and current liabilities are generally included on the balance sheet. The Statement of Revenues, Expenditures, and Changes in Fund Balances for these funds present increases (i.e., revenues and other financing sources) and decreases (i.e. expenditures and other financial uses) in net current assets. Fiduciary funds are reported using the economic resources measurement focus.

E. Basis of Accounting

Basis of accounting refers to when revenues and expenditures are recognized in the accounts and reported in the financial statements. Government-wide financial statements are prepared using the accrual basis of accounting. Governmental funds use the modified accrual basis of accounting. Fiduciary funds use the accrual basis of accounting. Revenues – Exchange and Non-exchange Transactions: Revenue resulting from exchange transactions, in which each party gives and receives essentially equal value, is recorded under the accrual basis when the exchange takes place. On a modified accrual basis, revenue is recorded in the fiscal year in which the resources are measurable and become available. "Available" means the resources will be collected within the current fiscal year or are expected to be collected soon enough thereafter to be used to pay liabilities of the current fiscal year. For the District, "available" means collectible within the current period or within 60 days after year-end.

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NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) E. Basis of Accounting (Continued)

Non-exchange transactions, in which the District receives value without directly giving equal value in return, include property taxes, grants, and entitlements. Under the accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from grants and entitlements is recognized in the fiscal year in which all eligibility requirements have been satisfied. Eligibility requirements include timing requirements, which specify the year when the resources are to be used of the fiscal year when use is first permitted; matching requirements, in which the District must provide local resources to be used for a specific purpose; and expenditure requirements, in which the resources are provided to the District on a reimbursement basis. Under the modified accrual basis, revenue from nonexchange transactions must also be available before it can be recognized. Deferred Revenue/Unearned Revenue: Deferred revenue arises when assets are received before revenue recognition criteria have been satisfied. Grants and entitlements received before eligibility requirements are met are recorded as deferred revenue. On governmental fund financial statements, receivables associated with non-exchange transactions that will not be collected within the availability period have also been recorded as deferred revenue. Expenses/Expenditures: On the accrual basis of accounting, expenses are recognized at the time a liability is incurred. On the modified accrual basis of accounting, expenditures are generally recognized in the accounting period in which the related fund liability is incurred, as under the accrual basis of accounting. However, under the modified accrual basis of accounting, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. Allocations of cost, such as depreciation and amortization, are not recognized in the governmental funds. When both restricted and unrestricted resources are available for use, it is the District's policy to use restricted resources first, and then unrestricted resources as they are needed.

F. Fund Accounting

The accounts of the District are organized on the basis of funds or account groups, each of which is considered to be a separate accounting entity. The operations of each fund are accounted for with a separate set of self-balancing accounts that comprise its assets, liabilities, fund equity, revenues, and expenditures or expenses, as appropriate. District resources are allocated to and accounted for in individual funds based upon the purpose for which they are to be spent and the means by which spending activities are controlled. The District's accounts are organized into major, non-major, and fiduciary funds as follows: MAJOR GOVERNMENTAL FUNDS 1. General Fund is the general operating fund of the District. It is used to account for all financial

resources except those required to be accounted for in another fund.

2. Special Reserve Fund for Other Than Capital Outlay is used to account for specifically identified revenue and expenditures as designated by the Board of Trustees.

3. Building Fund is used to account for all General Obligation Bond proceeds and associated revenues used to acquire, construct and improve District land, buildings and equipment.

27

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) F. Fund Accounting (Continued)

NON-MAJOR GOVERNMENTAL FUNDS Special Revenue Funds are used to account for the proceeds of specific revenue sources that are legally restricted to expenditures for specific purposes. The District maintains five non-major special revenue funds: 1. Adult Education Fund is used to account for resources committed to adult education programs

maintained by the District.

2. Child Development Fund is used to account for resources committed to the child development programs maintained by the District.

3. Cafeteria Fund is used to account for revenues received and expenditures made to operate the District's cafeteria.

4. Deferred Maintenance Fund is used for the purpose of major repair or replacement of District property.

5. Special Reserve Fund for Post-Employment Benefits is used to reserve funds for future costs of post-employment benefits.

Debt Service Funds are used to account for the accumulation of resources for and the payment of general long-term debt principal, interest and related costs. The District maintains two non-major debt service funds: 1. Bond Interest and Redemption Fund is used to account for the accumulation and resources for,

and the repayment of District General Obligation Bonds principal, interest and related costs.

2. Blended Component Unit for Debt Service – Inyo-Kern Schools Financing Authority is used to account for all debt activity of this component unit joint powers authority (component unit) as it related to the Authority's Lease Revenue Bonds.

Capital Projects Funds are used to account for the acquisition and/or construction of all major governmental general fixed assets. The District maintains four non-major capital projects funds: 1. Capital Facilities Fund is used to account for resources received from developer impact fees

assessed under provisions of the California Environmental Quality Act (CEQA).

2. Blended Component Unit for Capital Projects – Inyo-Kern Schools Financing Authority is used to account for all reviews and transfers of this component unit joint powers authority component.

3. County School Facilities Fund is used to account for Proposition 1A funds received from the Office of Public School Construction pursuant to SB 50 (State School Facilities). These funds will be used for school modernization and school growth construction under the 50/50 match program.

4. Special Reserve for Capital Outlay accounts for future major capital purchases. FIDUCIARY FUNDS 1. Expendable Trust Funds are used to account for assets held by the District as Trustee. The

District maintains one non-major expendable trust fund, Retiree Benefits Fund, which is used to provide contingency reserves for District payment of current and future retiree health and welfare benefits.

2. Agency Funds are used to account for assets of others for which the District acts as an agent. The District maintains ten non-major agency funds, one for each school's student body.

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NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) G. Budgets and Budgetary Accounting

Annual budgets are adopted on a basis consistent with accounting principles generally accepted in the United States of America for all governmental funds. By state law the District's Governing Board must adopt a final budget no later than July 1. A public hearing must be conducted to receive comments prior to adoption. The District's Governing Board satisfied these requirements. These budgets are revised by the District's Governing Board and District Superintendent during the year to give consideration to unanticipated income and expenditures. The original and final revised budgets are presented for the General Fund in the financial statements. Formal budgetary integration was employed as a management control device during the year for all budgeted funds. The District employs budget control by minor object and by individual appropriation accounts. Expenditures cannot legally exceed appropriations by major object account.

H. Encumbrances

Encumbrance accounting is used in all budgeted funds to reserve portions of applicable appropriations for which commitments have been made. Encumbrances are recorded for purchase orders, contracts, and other commitments when they are written. Encumbrances are liquidated when the commitments are paid. All encumbrances were liquidated at June 30, 2008.

I. Assets, Liabilities, and Equity

1. Deposits and Investments

Cash balances held in banks and in revolving funds are insured to $100,000 by the Federal Depository Insurance Corporation. All cash held by the financial institutions is fully insured or collateralized. In accordance with Education Code Section 41001, the District maintains substantially all its cash in the County Treasury. The County pools these funds with those of other districts in the County and invests the cash. These pooled funds are carried at cost, which approximates market value. Interest earned is deposited quarterly into participating funds. Any investment losses are proportionately shared by all funds in the pool. The County is authorized to deposit cash and invest excess funds by California Government Code Section 53648 et seq. The funds maintained by the County are either secured by federal depository insurance or are collateralized. The amount of dollars invested in derivatives with the County Treasury was not significant as of June 30, 2008. (See Note 2.)

2. Eliminations/Interfund Receivables and Payables

Transactions between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as interfund receivables and payables. These interfund receivables and payables are eliminated on the Government-wide Statement of Net Assets.

3. Stores Inventories and Prepaid Expenditures

Inventories are recorded using the purchases method in that the cost is recorded as an expenditure at the time individual inventory items are purchased. Inventories are valued at average cost and consist of expendable supplies held for consumption. Reported inventories are equally offset by a fund balance reserve which indicates that these amounts are not "available for appropriation and expenditure" even though they are a component of net current assets. The District has the option of reporting an expenditure in governmental funds for prepaid items either when purchased or during the benefiting period. The District has chosen to report the expenditure when incurred.

29

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) I. Assets, Liabilities, and Equity (Continued)

4. Capital Assets Capital assets purchased or acquired with an original cost of $5,000 or more are reported at historical cost or estimated historical cost. Contributed assets are reported at fair market value as of the date received. Additions, improvements, and other capital outlays that significantly extend the useful life of an asset are capitalized. Other costs incurred for repairs and maintenance are expensed as incurred. Depreciation on all assets is provided on the straight-line basis over the following estimated useful lives:

Estimated Description Useful Lives Site Improvements 20 – 30 years Building and Improvements 25 – 50 years Furniture and Equipment 5 – 15 years Vehicles 10 years

5. Accrued Liabilities and Long-Term Debt Obligations

All payables, accrued liabilities and long-term obligations are reported in the government-wide financial statements. In general, payables and accrued liabilities that will be paid from governmental funds are reported on the governmental fund financial statements regardless of whether they will be liquidated with current resources. However, the noncurrent portion of capital leases, compensated absences and special termination benefits that will be paid from governmental funds are reported as a liability in the fund financial statements only to the extent that they are due for payment during the current fiscal year. In general, liabilities that mature or come due for payment during the fiscal year are considered to have been made with current available financial resources. Bonds and other long-term obligations that will be paid from governmental funds are not recognized as a current liability in the fund financial statements when due but rather recognized as an expense when paid.

6. Deferred Revenue/Unearned Revenue

Cash received for federal and state special projects and programs is recognized as revenue to the extent that qualified expenditures have been incurred. Deferred revenue is recorded to the extent cash received on specific projects and programs exceeds qualified expenditures.

7. Compensated Absences

All vacation pay plus related payroll taxes is accrued when incurred in the government-wide financial statements. A liability for these amounts is reported in the governmental funds only if they have matured, for example, as a result of employee resignations and retirements. Accumulated sick leave benefits are not recognized as liabilities of the District. The District's policy is to record sick leave as an operating expense in the period taken, since such benefits do not vest nor is payment probable; however, unused sick leave is added to the creditable service period for calculation of retirement benefits when the employee retires.

8. Long-Term Obligations

In the government-wide financial statements, long-term debt and other long-term obligations are reported as liabilities in the Statement of Net Assets. Bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds using the straight-line basis.

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NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) I. Assets, Liabilities, and Equity (Continued)

9. Fund Balance Reserves and Designations

Reservations of the ending fund balance indicate the portions of fund balance not appropriable for expenditure or amounts legally segregated for a specific future use. The reserve for revolving fund and reserve for stores inventory reflect the portions of fund balance represented by revolving fund cash and stores inventory, respectively. These amounts are not available for appropriation and expenditure at the balance sheet date. Designations of the ending fund balance indicate tentative plans for financial resource utilization in a future period.

10. Revenue Limit/Property Tax

The District's revenue limit is received from a combination of local property taxes, state apportionments, and other local sources. The county is responsible for assessing, collecting, and apportioning property taxes. Taxes are levied for each fiscal year on taxable real and personal property in the county. The levy is based on the assessed values as of the preceding March 1, which is also the lien date. Property taxes on the secured roll are due on November 1 and February 1, and taxes become delinquent after December 10 and April 10, respectively. Property taxes on the unsecured roll are due on the lien date (March 1), and become delinquent if unpaid by August 31. Secured property taxes are recorded as revenue when apportioned, in the fiscal year of the levy. The county apportions secured property tax revenue in accordance with the alternate method of distribution prescribed by Section 4705 of the California Revenue and Taxation Code. This alternate method provides for crediting each applicable fund with its total secured taxes upon completion of the secured tax roll – approximately October 1 of each year. The County Auditor reports the amount of the District's allocated property tax revenue to the California Department of Education. Property taxes are recorded as local revenue limit sources by the District. The California Department of Education reduces the District's entitlement by the District's local property tax revenue. The balance is paid from the state General Fund, and is known as the State Apportionment. The District's base revenue limit is the amount of general-purpose tax revenue, per average daily attendance (ADA), that the District is entitled to by law. This amount is multiplied by the second period ADA to derive the District's total entitlement.

J. 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 expenditures or expenses, as appropriate, during the reporting period. Actual results could differ from those estimates.

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NOTE 2 – CASH AND INVESTMENTS General The District has adopted Governmental Accounting Standards Board Statement 31 (GASB 31) which requires investments of governmental agencies to be reported at fair value. However, investment pools, such as a state or county treasury, may report the value of short-term investments with remaining maturities of less than 90 days at amortized costs. The majority of the County Treasury investments have a remaining maturity of less than 90 days. In addition, GASB 31 does not apply to immaterial cost/value differences. For the year ended June 30, 2005, the District implemented GASB Statement No. 40, Deposit and lnvestment Risk Disclosures. GASB Statement No. 40 requires governmental entities to assess categories of risk associated with their deposits and investments and disclose these risks. Unrestricted Cash and investments consisted of the following at June 30, 2008:

Governmental FiduciaryFunds Funds Totals

Cash on Hand and in Banks 59,340$ 516,816$ 576,156$ Pooled Investments 39,052,670 3,710,671 42,763,341 Cash with Fiscal Agent 1,438,201 - 1,438,201

Total 40,550,211$ 4,227,487$ 44,777,698$

All cash and time deposits are entirely insured or collateralized. The California Government Code requires state banks to secure District deposits by pledging government securities as collateral. The fair value of pledged securities must equal at least 110% of the District's deposits. The District may waive collateral requirements for deposits that are fully insured up to $100,000 by the Federal Deposit Insurance Corporation (FDIC). The surplus funds of the District may be invested in any of the approved investments contained in the California Government Code Sections 53600 et seq., limited further by the investment policy adopted by the District. Investments Authorized by the Entity's Investment Policy The District's investment policy authorizes investment in the local government investment pool administered by Kern County. The District's investment policy does not contain any specific provisions intended to limit the District's exposure to interest rate risk, credit risk, and concentration of credit risk. Additionally, the District may invest idle or surplus funds in accordance with California Government Code Section 53601. The following represents permissible investments per this code section:

• Local agency bonds, notes or warrants within the state • United States Treasury instruments • Registered state warrants or treasury notes • Securities of the U.S. Government, or its agencies • Bankers acceptances • Commercial paper • Certificates of deposit (or time deposits) placed with commercial banks and/or savings and

loan companies • Repurchase or reverse repurchase agreements • Medium term corporate notes • Shares of beneficial interest issued by diversified management companies

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NOTE 2 – CASH AND INVESTMENTS (Continued) Investments Authorized by the Entity's Investment Policy (Continued)

• Certificate of Participation • Obligations with first priority security • Collateralized mortgage obligations

Investments Authorized by Debt Agreements Investment of debt proceeds held by bond trustee are governed by provisions of the debt agreements, rather than the general provisions of the California Government Code or the District's investment policy. The District had debt proceeds investments as of June 30, 2008 held in U.S. Bank. Disclosures Relating to Interest Rate Risk Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value to changes in market interest rates. As of fiscal year-end, the weighted average maturity of the investments contained in the Kern County Investment Pool is approximately fifteen (15) months and held by fiscal agents is approximately thirteen (13) months. Information about the sensitivity of the fair values of the District's investments to market interest rate fluctuations is provided by the following table that shows the maturity date of each investment:

Maturity Carrying Fair Value FairDate Amount Adjustment Value

Kern County Investment Pool - 15 monthUnrestricted average 42,763,341$ -$ 42,763,341$

13 monthFiscal Agents average 1,438,201$ -$ 1,438,201$

Disclosures Relating to Credit Risk Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. The Kern County Investment Pool does not have a rating provided by a nationally recognized statistical rating organization. Concentration of Credit Risk The investment policy of the District contains no limitations on the amount that can be invested in any one issuer beyond that stipulated by the California Government Code. Investments in any one issuer that represent 5% or more of total investments by reporting unit are as follows: As of June 30, 2008, $42,763,341 of the cash and investments are held in the form of a nonnegotiable unrated investment in the Kern County Investment Pool. As of June 30, 2008 $1,438,201 of the cash and investments are held in the form of an unrated investment in U.S. Bank.

33

NOTE 2 – CASH AND INVESTMENTS (Continued) Custodial Credit Risk Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, a government will not be able to recover its deposits or will not be able to recover collateral securities that are in the possession of an outside party. The California Government Code and the District's investment policy do not contain legal or policy requirements that would limit the exposure to custodial credit risk for deposits, other than the following provision for deposits: The California Government Code requires that a financial institution secure deposits made by state or local governmental units by pledging securities in an undivided collateral pool held by a depository regulated under state law (unless so waived by the governmental unit). The market value of the pledged securities in the collateral pool must equal at least 110% of the total amount deposited by the public agencies. California law also allows financial institutions to secure District deposits by pledging first trust deed mortgage notes having a value of 150% of the secured public deposits. None of the District's deposits with financial institutions were in excess of federal depository insurance limits. The custodial credit risk for investments is the risk that, in the event of the failure of the counterparty (e.g., broker-dealer) to a transaction, a government will not be able to recover the value of its investment or collateral securities that are in the possession of another party. The California Government Code and the District's investment policy do not contain legal or policy requirements that would limit the exposure to custodial credit risk for investments. With respect to investments, custodial credit risk generally applies only to direct investments in marketable securities. Custodial credit risk does not apply to a local government's indirect investment in securities through the use of mutual funds or government investment pools such as the Kern County Investment Pool. Investment in Kern County Investment Pool In accordance with Education Code Section 41001, the District maintains substantially all of its cash in the Kern County Treasury as part of the common investment pool. The District is considered to be an involuntary participant in the external investment pool. Interest is deposited into participating funds, except for the payroll-clearing fund, which is credited to the General Fund. The County is restricted by Government Code Section 53635 pursuant to Section 53601 to invest in time deposits, U.S. government securities, state registered warrants, notes or bonds, State Treasurer's investment pool, bankers' acceptances, commercial paper, negotiable certificates of deposit, and repurchase or reverse repurchase agreements. Derivative Investments The District did not directly enter into any derivative investments.

34

NOTE 3 – EXCESS OF EXPENDITURES OVER APPROPRIATIONS As of June 30, 2008 expenditures exceeded final appropriations in individual funds as follows:

ExcessAppropriations Category Expenditures

Major Funds:General Fund:

Direct Support/Indirect Costs 28,498$

Non-Major Funds:Adult Education:

Certificated Salaries 5,928 Employee Benefits 1,160 Books and Supplies 9,229 Services and Other Operating Expenses 1,111

Child Development Fund:Certificated Salaries 560 Classified Salaries 434 Employee Benefits 376 Books and Supplies 1,115 Services and Other Operating Expenses 21,241 Other Outgo 7,523

Cafeteria Fund:Classified Salaries 20,260 Books and Supplies 6,518

Deferred Maintenance Fund:Books and Supplies 9,738

Bond Interest and Redemption Fund:Interest and Fiscal Changes 672,981

Blended Component Unit - Debt Service:Services and Other Operating Expenditures 371,610

Capital Facilities Fund:Capital Outlay 10,551

35

NOTE 4 – ACCOUNTS RECEIVABLE Receivables at June 30, 2008 consist of the following:

FiduciaryFund

Other Total RetireeGeneral Building Governmental Governmental Benefit

Fund Fund Funds Funds Fund

Federal Government:Federal Financial Assistance Programs 871,039$ -$ 164,458$ 1,035,497$ -$

Total Federal 871,039 - 164,458 1,035,497 -

State Government:Principal Apportionment 1,824,278 - 1,249 1,825,527 - State Financial Assistance Programs 1,028,546 - 12,614 1,041,160 -

Total State 2,852,824 - 13,863 2,866,687 -

Local Receivables:Local Sources 865,634 371,609 415,624 1,652,867 - Interest Receivable 152,121 160,371 74,866 387,358 33,254

Total Local 1,017,755 531,980 490,490 2,040,225 33,254

Total Accounts Receivable 4,741,618$ 531,980$ 668,811$ 5,942,409$ 33,254$

All Governmental Funds

NOTE 5 – INTERFUND TRANSACTIONS lnterfund activity is reported as either loans, services provided, reimbursements, or transfers. Loans are reported as interfund receivables and payables, as appropriate, and are subject to elimination upon consolidation. Services provided, deemed to be at market or near market rates, are treated as revenues and expenditures/expenses. Reimbursements are when one fund incurs a cost, charges the appropriate benefiting fund, and reduces its related cost as a reimbursement. All other interfund transactions are treated as transfers. Transfers among governmental or proprietary funds are netted as part of the reconciliation to the government-wide financial statements. Due From/Due To Other Funds Individual fund interfund receivables and payables balances at June 30, 2008 are as follows:

Interfund InterfundReceivables Payables

General Fund 483,432$ 467,187$ Special Reserve for Other Than Capital Outlay 455,567 - Building Fund - 371,685 Non Major Governmental Funds 4,056,912 413,114 Retiree Benefit Fund - 3,743,925

Totals 4,995,911$ 4,995,911$

36

NOTE 5 – INTERFUND TRANSACTIONS (Continued) lnterfund Transfers lnterfund transfers consist of operating transfers from funds receiving resources to funds through which the resources are to be expended. lnterfund transfers for the 2007/08 fiscal year were as follows: Funds Transfers In Transfers Out

General Fund -$ 693,380$ Special Reserve Fund Other Than Capital Outlay 455,567 - All Other Funds

Deferred Maintenance Fund 237,813 - Special Reserve Fund for Postemployement Benefits 3,743,925 -

Retiree Benefit Fund - 3,743,925

4,437,305$ 4,437,305$

Transfer from General Fund to Deferred Maintenance Fund forDeferred Maintenance. 237,813$

Transfer from Special Reserve Fund for Post Employement Benefitsto Retiree Benefit Fund for Post Employement Benefits 3,743,925

Transfer from General Fund to Special Reserve Other Than Capital Outlay Projects Fund to build the reserve in anticipation of the State'sfiscal crisis. 455,567

Total Government Funds 4,437,305$

NOTE 6 – FIXED ASSETS AND DEPRECIATION The changes in fixed assets for the year ended June 30, 2008, are shown below:

Balance BalanceJuly 1, 2007 Additions Deductions June 30, 2008

Sites, Buildings and Improvements 33,685,900$ 1,195,597$ -$ 34,881,497$ Machinery and Equipment 4,426,705 807,065 - 5,233,770 Construction in Progress 654,438 1,935,612 - 2,590,050

Totals 38,767,043 3,938,274 - 42,705,317

Less: Accumulated Depreciation

Sites, Buildings and Improvements 14,280,892 1,019,526 - 15,300,418 Machinery and Equipment 2,162,394 319,272 - 2,481,666

Totals 16,443,286 1,338,798 - 17,782,084

Governmental ActivitiesCapital Assets - Net 22,323,757$ 2,599,476$ -$ 24,923,233$

Depreciation expense was charged to Governmental Activities as follows:

Instruction 1,190,457$ Transportation 148,341

Total Depreciation Expense 1,338,798$

37

NOTE 7 – LEASES A. Capital Leases

The District leases equipment and buildings valued at $150,000 under agreements that provide for title to pass upon expiration of the lease period. Future minimum lease payments for the General Long-Term Account Group are as follows:

Year Ending June 30, Lease Payments

2009 15,000$ 2010 15,000 2011 15,000 2012 15,000 2013 15,000 2014 15,000

Total 90,000

Less Amount Representing Interest -

Present Value of Net Minimum Lease Payments 90,000$

B. Operating Leases

The District has entered into various operating leases for equipment with lease terms in excess of one year. None of these agreements contain purchase options. All of these agreements contain a termination clause providing for cancellation after a specified number of days written notice to lessors but it is unlikely that the District will cancel any of the agreements prior to the expiration date. Future minimum lease payments under these agreements are as follows:

Year Ending June 30, Lease Payment

2009 294,201$ 2010 240,905 2011 194,350

Total 729,456$

NOTE 8 – BONDED DEBT General Obligation Bonds On August 25, 2006, the District sold $19,467,868 of General Obligation Bonds – Election 2006. The net proceeds of the Bonds will be used to finance the acquisition, construction and modernization of property and school facilities. The outstanding general obligation bonded debt of Sierra Sands Unified School District at June 30, 2008 is:

Date of Interest Maturity Amount of Outstanding Issued in Redeemed in OutstandingIssue Rate Date Original Issue July 1, 2007 Current Year Current Year June 30, 2008

08/25/06 3.75% to 4.92% 05/01/2031 19,467,868$ 19,467,868$ -$ -$ 19,467,868$

38

NOTE 8 – BONDED DEBT (Continued) The annual requirements to amortize General Obligation Bonds payable outstanding as of June 30, 2008 are as follows:


2009 225,000$ 667,993$ 892,993$ 2010 285,000 658,430 943,430 2011 365,000 645,786 1,010,786 2012 445,000 629,586 1,074,586 2013 505,000 609,324 1,114,324

2014-2018 3,625,000 2,625,306 6,250,306 2019-2023 5,980,000 1,591,948 7,571,948 2024-2028 5,522,199 3,780,676 9,302,875 2029-2032 2,515,669 5,254,331 7,770,000

Totals 19,467,868$ 16,463,380$ 35,931,248$

NOTE 9 – OTHER DEBT Lease Revenue Bonds Inyo-Kern Schools Financing Authority On March 1, 2007, the Inyo-Kern Schools Financing Authority (Authority) component unit of the Sierra Sands Unified School District sold $4,500,000 of Lease Revenue Bonds. These bonds were issued to reimburse the acquisition and construction of school facilities and improvements to be owned and operated by Sierra Sands Unified School District. The outstanding Lease Revenue Bonds of Inyo-Kern Schools Financing Authority at June 30, 2008 is:

Date of Interest Maturity Outstanding Issued in Redeemed in OutstandingIssue Rate Date July 1, 2007 Current Year Current Year June 30, 2008

03/01/2007 4.00% to 4.29% 05/01/2032 4,500,000$ -$ 85,000$ 4,415,000$

The annual requirements to amortize these Lease Revenue Bonds payable outstanding at June 30, 2008 are as follows:


2009 115,000$ 181,983$ 296,983$ 2010 115,000 177,382 292,382 2011 120,000 172,783 292,783 2012 125,000 167,983 292,983 2013 130,000 162,983 292,983

2014-2018 740,000 732,313 1,472,313 2019-2023 900,000 571,712 1,471,712 2024-2028 1,105,000 369,921 1,474,921 2029-2032 1,065,000 115,600 1,180,600

Totals 4,415,000$ 2,652,660$ 7,067,660$

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NOTE 10 – LONG-TERM DEBT SCHEDULE OF CHANGES

Balance Balance Balance Due Within

July 1, 2007 Adjustments as Restated Addition Deductions June 30, 2008 One Year

General Obligation Bonds Payable 19,467,868$ -$ 19,467,868$ -$ -$ 19,467,868$ 225,000$

Lease Revenue Bonds Payable 4,500,000 - 4,500,000 - 85,000 4,415,000 115,000

Capital Lease Obligations 105,000 - 105,000 - 15,000 90,000 15,000

Sub-Total Debt Obligations 24,072,868 - 24,072,868 - 100,000 23,972,868 355,000

Compensated Absences 107,424 - 107,424 15,244 - 122,668 122,668

Post Employment Benefits Payable 23,268,213 (23,268,213) - - - - -

Sub-Total Employment Benefit Obligations 23,375,637 (23,268,213) 107,424 15,244 - 122,668 122,668

Totals 47,448,505$ (23,268,213)$ 24,180,292$ 15,244$ 100,000$ 24,095,536$ 477,668$

NOTE 11 – EMPLOYEE RETIREMENT SYSTEMS Qualified employees are covered under multiple-employer defined benefit pension plans maintained by agencies of the State of California. Certificated employees are members of the State Teachers' Retirement System, and classified employees are members of the Public Employees' Retirement System. State Teachers' Retirement System (STRS) Plan Description The Sierra Sands Unified School District contributes to the State Teachers' Retirement System (STRS), a cost-sharing multiple-employer public employee retirement system defined benefit pension plan administered by STRS. The plan provides retirement, disability, and survivor benefits to beneficiaries. Benefit provisions are established by state statutes, as legislatively amended, within the State Teachers' Retirement Law. STRS issues a separate comprehensive annual financial report that includes financial statements and required supplementary information. Copies of the STRS annual financial report may be obtained from the STRS, 7667 Folsom Boulevard, Sacramento, California 95826. Funding Policy Active plan members are required to contribute 8.00% of their salary and the Sierra Sands Unified School District is required to contribute an actuarially determined rate. The actuarial methods and assumptions used for determining the rate are those adopted by the STRS Teachers' Retirement Board. The required employer contribution rate for fiscal year 2007/2008 was 8.25% of annual payroll. The contribution requirements of the plan members are established by state statute. The Sierra Sands Unified School District's contributions to STRS for the fiscal years ended June 30, 2008, 2007, and 2006 were $1,705,671, $1,616,005, and $1,497,524, respectively, and equal 100% of the required contributions for each year California Public Employees' Retirement System (CalPERS) Plan Description The Sierra Sands Unified School District contributes to the School Employer Pool under the California Public Employees' Retirement System (CalPERS), a cost-sharing multiple-employer public employee retirement system defined benefit pension plan administered by CalPERS. The plan provides retirement and disability benefits, annual cost-of-living adjustments, and death benefits to plan members and beneficiaries. Benefit provisions are established by state statutes, as legislatively amended, within the Public Employees' Retirement Law. CalPERS issues a separate comprehensive annual financial report that includes financial statements and required supplementary information. Copies of the CalPERS annual financial report may be obtained from the CalPERS Executive Office, 400 P Street, Sacramento, California 95814.

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NOTE 11 – EMPLOYEE RETIREMENT SYSTEMS (Continued) California Public Employees' Retirement System (CalPERS) (Continued) Funding Policy Active plan members are required to contribute 7.00% of their salary (7% of monthly salary over $133.33 if the member participates in Social Security), and the Sierra Sands Unified School District is required to contribute an actuarially determined rate. By contractual agreement the District pays the employee's contribution to CalPERS. The actuarial methods and assumptions used for determining the rate are those adopted by the CalPERS Board of Administration. The required employer contribution rate for fiscal year 2007/2008 was 9.306% of annual payroll. The contribution requirements of the plan members are established by state statute. The Sierra Sands Unified School District's contributions to CalPERS for the fiscal years ended June 30, 2008, 2007, and 2006 were $1,101,915, $1,175,842, and $1,131,695, respectively, and equal 100% of the required contributions for each year. NOTE 12 – ALTERNATIVE RETIREMENT PLAN Plan Description Effective November 1997, the Sierra Sands Unified School District adopted the SlSC Defined Benefit Plan as an alternative to Social Security. The District pays the full cost of the plan and the benefits are designed to be paid out at age 65, however, benefits can be received upon termination or retirement. All benefits are 100% vested beginning on date of participation. All employees who are not participating in any other retirement plan are immediately eligible for participation. Employees who are members of, or retired from, the Public Employees' Retirement System (PERS) or the State Teachers' Retirement System (STRS) are generally not eligible for participation. Funding Policy Members do not contribute to the SlSC Defined Benefit Plan. The District contributes 3.9% of the eligible member's annual payroll. The contribution is intended to provide an annual normal retirement benefit equal to 1.5% of the eligible member's final average pay for covered service up to 30 years. The Sierra Sands Unified School District's contribution to the SlSC Defined Benefit Plan for the fiscal year ended June 30, 2008, was $23,516 and equaled 100% of the required contribution. NOTE 13 – COMMITMENTS AND CONTINGENCIES A. State and Federal Allowances, Awards and Grants

The District has received state and federal funds for specific purposes that are subject to review and audit by the grantor agencies. Although such audits could generate expenditure disallowances under terms of the grants, it is believed that any required reimbursements will not be material.

B. Joint Powers Agreements

The District is a member of the Self-Insured Schools of California (SISC). Although these insurance programs have been reviewed for adequate protection, it is understood that a contingent liability could exist whenever a district is self-insured. Separate audited financial statements are issued annually by SlSC and are available upon request. The District participates in a joint powers agreement for legal services and education services for special education students which are coordinated by the Kern County Superintendent of Schools. Each joint powers agreement (JPA) is governed by a board of representatives of the District independently accountable for its operations and fiscal matters. The relationship between the District and JPA's is such that they are not considered component units of the District for financial reporting purposes (see Note 15).

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NOTE 13 – COMMITMENTS AND CONTINGENCIES (Continued) C. Early Retirement

During the current year the District did not enter into any early retirement incentive programs pursuant to Education Code Sections 22714 and 44929 (Golden Handshake).

D. Settlement Agreement and General Release

Pursuant to court's judgment the District has entered into a settlement and general release agreement with the Ridgecrest Charter School District to make payment towards lease of portables used by District schools as facilities for the years 2006/2007, 2007/2008, and 2008/2009 payable on July 1, beginning of each fiscal year. The total liability under this agreement for each year including attorney fees payable in three installments amounts to $113,031 per annum.

NOTE 14 – FIXED ASSET CONTRIBUTIONS/PUBLIC IMPROVEMENTS AGREEMENT During the fiscal year ended June 30, 1992, the District and the Ridgecrest Redevelopment Agency (the Agency) entered into an agreement whereby the Agency paid approximately $4,000,000 of the cost of construction of the Gateway School in consideration for the Agency retaining the District's share of the additional property tax revenues that will be generated from the increase in assessed valuations on the property upon which the school was constructed. This Agency contribution was reflected in the General Fixed Asset Account Group of the District during the year ended June 30, 1992. NOTE 15 – POST EMPLOYMENT BENEFITS OTHER THAN PENSION BENEFITS In addition to the pension benefits described in Notes 11 and 12, the District provides post retirement health care benefits to all employees who retire from the District on or after attaining age 55 with at least 10 years of service. These post retirement health care benefits will be paid through age 65. On June 30, 2008, 97 retirees met these eligibility requirements. For the fiscal year ending June 30, 2008, $1,074,337 in post retirement health care benefits were paid by the District. The valuation disclosures as required under GASB 45 are as follows: Present Value of Future Benefits (PVFB)

Active 19,243,155$ Retired 4,152,041

Total PVFB 23,395,196$

Accrued Liability (AL)Active 10,191,151$ Retired 4,152,041

Total AL 14,343,192

Assets in Retiree Benefit Fund (3,743,925)

Total Unfunded AL 10,599,267$

Annual Required Contributions (ARC)Service Cost at Year-End 1,074,337$ 30-Year Amortization of Unfunded ARC 920,413

Total ARC 1,994,750$

42

NOTE 16 – LITIGATION The District is involved in several lawsuits the outcome of which is not determinable at this time. District management believes all litigation will be successfully defended at a minimal cost to the District.

NOTE 17 – COUNTY PROPERTY TAX CONTINGENT LIABILITIES Sierra Sands Unified School District's share of the estimated property tax liability based on information gathered from the Office of the Auditor-Controller of the County of Kern through June 30, 2008, for litigation and other tax refund claims pending at the time is as follows:

Total Liabilities 30,635$ Less: Impounds (30,635)

Net Liability -$

Sierra Sands Unified School District has previously requested the Auditor-Controller to impound a portion of its current property tax entitlement to meet its share of the obligation for refunds of tax monies in the event of such an order by the Assessment Appeals Board or the Courts. It should be noted that these figures do not include any appeals or litigation filed or completed after June 30, 2006, but they do include provisions for valuations and taxes in dispute through June 30, 2006. NOTE 18 – JOINT VENTURES (JOINT POWERS AGREEMENT) The Sierra Sands Unified School District participates in three joint ventures under joint powers agreement (JPA's) with the Self-Insured Schools of California Workers’ Compensation Program (SISC I), Self-Insured Schools of California Property and Liability Program (SISC II), and Self-Insured Schools of California Health and Welfare Benefit Program (SISC III). The relationship between the District and the JPA's is such that the JPA's are not component units of the District for financial reporting purposes. Self-Insured Schools of California (SISC) - SISC arranges for and provides insurance for its members. SISC groups are governed by boards consisting of representatives from member districts. The boards control the operations of SISC, including selection of management and approval of operating budgets, independent of any influence by the member districts beyond their representation on the board. Each member district pays a premium commensurate with the level of coverage requested and shares surpluses and deficits proportionate to their participation in SISC. Condensed combined financial information of SISC I, SISC II and SISC III, for the most current year available is as follows:

September 30,2007

SISC I SISC II SISC III

Total Assets 100,894,093$ 28,926,812$ 219,239,436$ Total Liabilities (64,825,905) (28,129,633) (99,692,855)

Net Assets 36,068,188$ 797,179$ 119,546,581$

Revenues 29,654,045$ 18,427,865$ 830,434,428$ Expenses (11,332,574) (19,481,098) (790,707,570)

Increase (Decrease) 18,321,471$ (1,053,233)$ 39,726,858$

June 30, 2007

SISC I, SISC II, and SISC III did not have long-term debt outstanding at June 30, 2007 and September 30, 2007, respectively.

43

NOTE 19 – COMPLIANCE AND ACCOUNTABILITY A. Finance-Related Legal and Contractual Provisions

In accordance with GASB Statement No. 38, "Certain Financial Statement Note Disclosures," violations of finance-related legal and contractual provisions, if any, are reported below, along with actions taken to address such violations: Violation Action Taken None reported Not applicable

B. Deficit Fund Balance or Fund Net Assets of Individual Funds

Following are funds having deficit fund balances or fund net assets at year end, if any, along with remarks which address such deficits:

Fund Name Deficit Amount Remarks None reported Not applicable Not applicable

NOTE 20 – NET ASSET RESTATEMENT The District’s beginning net assets have been restated to reflect prior period adjustments for the government-wide financial statements for the year ended June 30, 2008: Net Assets - Governmental Activities

Net Assets - Governmental Activities at June 30, 2007, as previously reported 19,005,406$ Prior Period Adjustments:

Adjustment for post employment benefits payable 23,268,213

Net Assets - Governmental Activities at June 30, 2007, as restated 42,273,619$

REQUIRED SUPPLEMENTARY INFORMATION

44

SIERRA SANDS UNIFIED SCHOOL DISTRICT STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN

FUND BALANCE – BUDGET AND ACTUAL (BY OBJECT) GENERAL FUND


Variance with Final Budget

PositiveOriginal Final Actual (Negative)

REVENUESRevenue Limit Sources:

State Apportionments 28,663,176$ 27,168,391$ 27,294,609$ 126,218$ Local Sources 3,459,849 4,890,750 4,890,750 -

Total Revenue Limit Sources 32,123,025 32,059,141 32,185,359 126,218

Federal Revenues 4,467,460 4,665,558 4,877,094 211,536 Other State Revenues 9,570,001 9,990,700 9,830,193 (160,507) Other Local Revenues 1,144,359 2,321,864 2,958,776 636,912

TOTAL REVENUES 47,304,845 49,037,263 49,851,422 814,159

EXPENDITURESCertificated Salaries 21,415,138 21,229,726 20,915,501 314,225 Classified Salaries 6,984,688 7,089,433 7,078,325 11,108 Employee Benefits 11,445,257 11,322,206 11,174,719 147,487 Books and Supplies 3,966,541 4,513,241 4,197,852 315,389 Services and Other Operating Expenditures 4,857,330 5,244,684 4,612,230 632,454 Capital Outlay 2,516,293 1,110,111 849,341 260,770 Other Outgo 200,000 295,100 295,100 - Direct Support/Indirect Costs (117,970) (119,154) (90,656) (28,498)

TOTAL EXPENDITURES 51,267,277 50,685,347 49,032,412 1,652,935

Excess (Deficiency) of Revenues Over Expenditures (3,962,432) (1,648,084) 819,010 2,467,094

OTHER FINANCING SOURCES (USES)Operating Transfers Out (281,559) (693,380) (693,380) -

TOTAL OTHER FINANCING SOURCES (USES) (281,559) (693,380) (693,380) -

Net Change in Fund Balances (4,243,991) (2,341,464) 125,630 2,467,094

Fund Balances at Beginning of Year 8,936,220 8,936,220 8,936,220 -

Fund Balances at End of Year 4,692,229$ 6,594,756$ 9,061,850$ 2,467,094$

Budgeted Amounts

45


FUND BALANCE – BUDGET AND ACTUAL (BY OBJECT) SPECIAL RESERVE FUND FOR OTHER THAN CAPITAL OUTLAY




REVENUES -$ -$ -$ -$

TOTAL REVENUES - - - -

EXPENDITURES - - - -

TOTAL EXPENDITURES - - - -

Excess (Deficiency) of Revenues Over Expenditures - - - -

OTHER FINANCING SOURCES (USES)Operating Transfers In 455,567 455,567 455,567 -

TOTAL OTHER FINANCING SOURCES (USES) 455,567 455,567 455,567 -

Net Change in Fund Balances 455,567 455,567 455,567 -


Fund Balances at End of Year 6,102,596$ 6,102,596$ 6,102,596$ -$

Budgeted Amounts

46


FUND BALANCE – BUDGET AND ACTUAL (BY OBJECT) BUILDING FUND




REVENUESOther Local Revenues 500,000$ 867,895$ 867,895$ -$

TOTAL REVENUES 500,000 867,895 867,895 -

EXPENDITURESClassified Salaries 104,595 80,613 80,613 - Employee Benefits 41,462 34,751 34,751 - Services and Other Operating Expenditures - 153,935 153,935 - Capital Outlay 9,919,749 3,070,492 3,070,492 -

TOTAL EXPENDITURES 10,065,806 3,339,791 3,339,791 -

Excess (Deficiency) of Revenues Over Expenditures (9,565,806) (2,471,896) (2,471,896) -

OTHER FINANCING SOURCES (USES)Other Sources - 371,610 371,610 -

TOTAL OTHER FINANCING SOURCES (USES) - 371,610 371,610 -

Net Change in Fund Balances (9,565,806) (2,100,286) (2,100,286) -


Fund Balances at End of Year 9,993,537$ 17,459,057$ 17,459,057$ -$

Budgeted Amounts

COMBINING STATEMENTS AND BUDGETARY COMPARISON SCHEDULES AS SUPPLEMENTARY INFORMATION

The accompanying notes are an integral part of this statement. 47

SIERRA SANDS UNIFIED SCHOOL DISTRICT COMBINING BALANCE SHEET

NONMAJOR GOVERNMENTAL FUNDS JUNE 30, 2008

TotalSpecial Debt Capital Nonmajor

Revenue Service Projects GovernmentalFunds Fund Funds Funds

ASSETSCash and Cash Equivalents 2,369,928$ 2,064,540$ 7,175,364$ 11,609,832$ Accounts Receivable 201,578 - 467,233 668,811 Due from Other Funds 3,755,754 - 301,158 4,056,912 Stores 26,342 - - 26,342 Prepaids - - 13,706 13,706

TOTAL ASSETS 6,353,602$ 2,064,540$ 7,957,461$ 16,375,603$


Accounts Payable 24,808$ -$ 18,614$ 43,422$ Due to Other Funds 111,956 - 301,158 413,114 Deferred Revenue 21,728 - - 21,728

TOTAL LIABILITIES 158,492 - 319,772 478,264

FUND BALANCESReserved for:

Stores 26,342 - - 26,342 Prepaid Expenditures - - 13,706 13,706 Legally Restricted - 1,438,201 - 1,438,201

Unreserved, Reported in Nonmajor: Special Revenue Funds 6,168,768 - - 6,168,768 Debt Service Funds - 626,339 - 626,339 Capital Projects Funds - - 7,623,983 7,623,983

TOTAL FUND BALANCES 6,195,110 2,064,540 7,637,689 15,897,339

TOTAL LIABILITIES AND FUND BALANCES 6,353,602$ 2,064,540$ 7,957,461$ 16,375,603$


SIERRA SANDS UNIFIED SCHOOL DISTRICT COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND

CHANGES IN FUND BALANCES (BY FUNCTION) NONMAJOR GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2008

TotalSpecial Debt Capital Nonmajor

Revenue Service Projects GovernmentalFunds Fund Funds Funds

REVENUESFederal Revenues 1,134,873$ -$ -$ 1,134,873$ Other State Revenues 931,793 20,323 300,000 1,252,116 Other Local Revenues 750,723 950,308 1,631,117 3,332,148

TOTAL REVENUES 2,817,389 970,631 1,931,117 5,719,137

EXPENDITURESInstruction 439,132 - - 439,132 Instruction - Related Services 70,749 - - 70,749 Pupil Services 1,791,132 - - 1,791,132 General Administration 90,656 - 106,968 197,624 Plant Services 57,850 371,610 175,020 604,480 Debt Service: Principal 15,000 - - 15,000 Interest - 672,981 - 672,981

TOTAL EXPENDITURES 2,464,519 1,044,591 281,988 3,791,098

Excess (Deficiency) of RevenuesOver Expenditures 352,870 (73,960) 1,649,129 1,928,039

OTHER FINANCING SOURCES (USES)Operating Transfers In 3,981,738 - - 3,981,738

TOTAL OTHER FINANCING SOURCES (USES) 3,981,738 - - 3,981,738

Net Change in Fund Balances 4,334,608 (73,960) 1,649,129 5,909,777

Fund Balances at Beginning of Year 1,860,502 2,138,500 5,988,560 9,987,562

Fund Balances at End of Year 6,195,110$ 2,064,540$ 7,637,689$ 15,897,339$



NONMAJOR SPECIAL REVENUE FUNDS JUNE 30, 2008

TotalSpecial Reserve Nonmajor

Adult Child Deferred Fund for SpecialEducation Development Cafeteria Maintenance Postemployement Revenue

Fund Fund Fund Fund Benefits Funds

ASSETSCash 119,448$ 55,660$ 392,531$ 1,802,289$ -$ 2,369,928$ Accounts Receivable 3,050 3,080 179,229 16,219 - 201,578 Due from Other Funds - 11,829 - - 3,743,925 3,755,754 Stores - - 26,342 - - 26,342

TOTAL ASSETS 122,498$ 70,569$ 598,102$ 1,818,508$ 3,743,925$ 6,353,602$


Accounts Payable 13,872$ 1,438$ 9,498$ -$ -$ 24,808$ Due to Other Funds 342 3,241 108,203 170 - 111,956 Deferred Revenue 17,426 4,302 - - - 21,728

Total Liabilities 31,640 8,981 117,701 170 - 158,492

FUND BALANCESFund Balances:

Reserved for Stores - - 26,342 - - 26,342 Undesignated 90,858 61,588 454,059 1,818,338 3,743,925 6,168,768

Total Fund Balances 90,858 61,588 480,401 1,818,338 3,743,925 6,195,110

TOTAL LIABILITIES AND FUND BALANCES 122,498$ 70,569$ 598,102$ 1,818,508$ 3,743,925$ 6,353,602$



CHANGES IN FUND BALANCES (BY FUNCTION) NONMAJOR SPECIAL REVENUE FUNDS FOR THE YEAR ENDED JUNE 30, 2008

TotalSpecial Reserve Nonmajor

Adult Child Deferred Fund for SpecialEducation Development Cafeteria Maintenance Postemployement Revenue

Fund Fund Fund Fund Benefits FundsREVENUES

Federal Revenues -$ 4,301$ 1,130,572$ -$ -$ 1,134,873$ Other State Revenues 249,778 359,300 106,092 216,623 - 931,793 Other Local Revenues 14,031 3,674 664,248 68,770 - 750,723

Total Revenues 263,809 367,275 1,900,912 285,393 - 2,817,389

EXPENDITURESInstruction 158,072 281,060 - - - 439,132 Instruction - Related Services 66,180 4,569 - - - 70,749 Pupil Services - - 1,791,132 - - 1,791,132 General Administration - 7,523 83,133 - - 90,656 Plant Services 27,815 19,765 532 9,738 - 57,850 Debt Service: Principal - 15,000 - - - 15,000

Total Expenditures 252,067 327,917 1,874,797 9,738 - 2,464,519

Excess (Deficiency) of RevenuesOver Expenditures 11,742 39,358 26,115 275,655 - 352,870

OTHER FINANCING SOURCESOperating Transfers In - - - 237,813 3,743,925 3,981,738

Total Other Financing Sources - - - 237,813 3,743,925 3,981,738

Net Change in Fund Balances 11,742 39,358 26,115 513,468 3,743,925 4,334,608

Fund Balances at Beginning of Year 79,116 22,230 454,286 1,304,870 - 1,860,502

Fund Balances at End of Year 90,858$ 61,588$ 480,401$ 1,818,338$ 3,743,925$ 6,195,110$



CHANGES IN FUND BALANCES (BY OBJECT) – BUDGET AND ACTUAL NONMAJOR SPECIAL REVENUE FUNDS FOR THE YEAR ENDED JUNE 30, 2008

Variance VarianceFinal with Final Final with Final

Budget Actual Budget Budget Actual BudgetREVENUES

Federal Revenues -$ -$ -$ -$ 4,301$ 4,301$ Other State Revenues 245,097 249,778 4,681 311,748 359,300 47,552 Other Local Revenues 11,000 14,031 3,031 2,250 3,674 1,424

Total Revenues 256,097 263,809 7,712 313,998 367,275 53,277

EXPENDITURESCertificated Salaries 151,886 157,814 (5,928) 1,787 2,347 (560) Classified Salaries 33,176 32,815 361 3,699 4,133 (434) Employee Benefits 37,013 38,173 (1,160) 3,838 4,214 (376) Books and Supplies 10,156 19,385 (9,229) 17,400 18,515 (1,115) Services and Other Operating Expenditures 2,769 3,880 (1,111) 247,054 268,295 (21,241) Other Outgo - - - - 7,523 (7,523) Capital Outlay - - - 22,970 7,890 15,080 Debt Service: Principal - - - 15,000 15,000 -

Total Expenditures 235,000 252,067 (17,067) 311,748 327,917 (16,169)

Excess (Deficiency) of RevenuesOver Expenditures 21,097 11,742 (9,355) 2,250 39,358 37,108

OTHER FINANCING SOURCESOperating Transfers In - - - - - -

Total Other Financing Sources - - - - - -

Net Change in Fund Balances 21,097 11,742 (9,355) 2,250 39,358 37,108

Fund Balances at Beginning of Year 79,116 79,116 - 22,230 22,230 -

Fund Balances at End of Year 100,213$ 90,858$ (9,355)$ 24,480$ 61,588$ 37,108$

Adult Education Fund Child Development Fund



CHANGES IN FUND BALANCES (BY OBJECT) – BUDGET AND ACTUAL (Continued) NONMAJOR SPECIAL REVENUE FUNDS FOR THE YEAR ENDED JUNE 30, 2008



Federal Revenues 1,029,591$ 1,130,572$ 100,981$ -$ -$ -$ Other State Revenues 66,626 106,092 39,466 221,201 216,623 (4,578) Other Local Revenues 768,189 664,248 (103,941) 28,000 68,770 40,770

Total Revenues 1,864,406 1,900,912 36,506 249,201 285,393 36,192

EXPENDITURESCertificated Salaries - - - - - - Classified Salaries 562,581 582,841 (20,260) - - - Employee Benefits 309,775 306,922 2,853 - - - Books and Supplies 888,650 895,168 (6,518) - 9,738 (9,738) Services and Other Operating Expenditures 8,400 6,733 1,667 - - - Other Outgo 95,000 83,133 11,867 - - - Capital Outlay - - - 218,887 - 218,887 Debt Service: Principal - - - - - -

Total Expenditures 1,864,406 1,874,797 (10,391) 218,887 9,738 209,149

Excess (Deficiency) of RevenuesOver Expenditures - 26,115 26,115 30,314 275,655 245,341

OTHER FINANCING SOURCESOperating Transfers In - - - 225,992 237,813 11,821

Total Other Financing Sources - - - 225,992 237,813 11,821

Net Change in Fund Balances - 26,115 26,115 256,306 513,468 257,162

Fund Balances at Beginning of Year 454,286 454,286 - 1,304,870 1,304,870 -

Fund Balances at End of Year 454,286$ 480,401$ 26,115$ 1,561,176$ 1,818,338$ 257,162$

Deferred Maintenance FundCafeteria Fund



CHANGES IN FUND BALANCES (BY OBJECT) – BUDGET AND ACTUAL (Continued) NONMAJOR SPECIAL REVENUE FUNDS FOR THE YEAR ENDED JUNE 30, 2008



Federal Revenues -$ -$ -$ 1,029,591$ 1,134,873$ 105,282$ Other State Revenues - - - 844,672 931,793 87,121 Other Local Revenues - - - 809,439 750,723 (58,716)

Total Revenues - - - 2,683,702 2,817,389 133,687

EXPENDITURESCertificated Salaries - - - 153,673 160,161 (6,488) Classified Salaries - - - 599,456 619,789 (20,333) Employee Benefits - - - 350,626 349,309 1,317 Books and Supplies - - - 916,206 942,806 (26,600) Services and Other Operating Expenditures - - - 258,223 278,908 (20,685) Other Outgo - - - 95,000 90,656 4,344 Capital Outlay - - - 241,857 7,890 233,967 Debt Service: Principal - - - 15,000 15,000 -

Total Expenditures - - - 2,630,041 2,464,519 165,522

Excess (Deficiency) of RevenuesOver Expenditures - - - 53,661 352,870 299,209

OTHER FINANCING SOURCESOperating Transfers In 55,567 3,743,925 3,688,358 281,559 3,981,738 3,700,179

Total Other Financing Sources 55,567 3,743,925 3,688,358 281,559 3,981,738 3,700,179

Net Change in Fund Balances 55,567 3,743,925 3,688,358 335,220 4,334,608 3,999,388

Fund Balances at Beginning of Year - - - 1,860,502 1,860,502 -

Fund Balances at End of Year 55,567$ 3,743,925$ 3,688,358$ 2,195,722$ 6,195,110$ 3,999,388$

Postemployement Benefits TotalsSpecial Reserve Fund for



NONMAJOR DEBT SERVICE FUNDS JUNE 30, 2008

TotalBond Blended Nonmajor

Interest & Component DebtRedemption Unit - Debt Service

Fund Service Funds

ASSETSCash 626,339$ 1,438,201$ 2,064,540$

TOTAL ASSETS 626,339$ 1,438,201$ 2,064,540$


Total Liabilities -$ -$ -$

FUND BALANCESFund Balances:

Reserved for Legally Restricted Balance - 1,438,201 1,438,201 Undesignated 626,339 - 626,339

Total Fund Balances 626,339 1,438,201 2,064,540

TOTAL LIABILITIES AND FUND BALANCES 626,339$ 1,438,201$ 2,064,540$



CHANGES IN FUND BALANCES (BY FUNCTION) NONMAJOR DEBT SERVICE FUNDS


TotalBond Blended Nonmajor

Interest & Component DebtRedemption Unit - Debt Service

Fund Service FundsREVENUES

Other State Revenues 20,323$ -$ 20,323$ Other Local Revenues 892,192 58,116 950,308

Total Revenues 912,515 58,116 970,631

EXPENDITURESPlant Services - 371,610 371,610 Debt Service: Interest 672,981 - 672,981

Total Expenditures 672,981 371,610 1,044,591

Net Change in Fund Balances 239,534 (313,494) (73,960)

Fund Balances at Beginning of Year 386,805 1,751,695 2,138,500

Fund Balances at End of Year 626,339$ 1,438,201$ 2,064,540$



CHANGES IN FUND BALANCES (BY OBJECT) – BUDGET AND ACTUAL NONMAJOR DEBT SERVICE FUNDS




Other State Revenues -$ 20,323$ 20,323$ -$ -$ -$ Other Local Revenues - 892,192 892,192 - 58,116 58,116

Total Revenues - 912,515 912,515 - 58,116 58,116

EXPENDITURESServices and Other Operating Expenditures - - - - 371,610 (371,610) Interest and Fiscal Charges - 672,981 (672,981) - - -

Total Expenditures - 672,981 (672,981) - 371,610 (371,610)

Net Change in Fund Balances - 239,534 239,534 - (313,494) (313,494)

Fund Balances at Beginning of Year 386,805 386,805 - 1,751,695 1,751,695 -

Fund Balances at End of Year 386,805$ 626,339$ 239,534$ 1,751,695$ 1,438,201$ (313,494)$

Bond Interest & Redemption Fund Blended Component Unit - Debt Service



CHANGES IN FUND BALANCES (BY OBJECT) – BUDGET AND ACTUAL (Continued) NONMAJOR DEBT SERVICE FUNDS


VarianceFinal with Final

Budget Actual BudgetREVENUES

Other State Revenues -$ 20,323$ 20,323$ Other Local Revenues - 950,308 950,308

Total Revenues - 970,631 970,631

EXPENDITURESServices and Other Operating Expenditures - 371,610 (371,610) Interest and Fiscal Charges - 672,981 (672,981)

Total Expenditures - 1,044,591 (1,044,591)

Net Change in Fund Balances - (73,960) (73,960)

Fund Balances at Beginning of Year 2,138,500 2,138,500 -

Fund Balances at End of Year 2,138,500$ 2,064,540$ (73,960)$

Totals



NONMAJOR CAPITAL PROJECTS FUNDS JUNE 30, 2008

SpecialBlended County Reserve

Capital Component School for Capital Facilities Unit - Capital Facilities Outlay

Fund Projects Fund Fund TotalASSETS

Cash 2,208,947$ 4,666,417$ -$ 300,000$ 7,175,364$ Accounts Receivable 19,900 446,175 - 1,158 467,233 Due from Other Funds - - 301,158 - 301,158 Prepaid Expenditures 13,706 - - - 13,706

TOTAL ASSETS 2,242,553$ 5,112,592$ 301,158$ 301,158$ 7,957,461$


Accounts Payable 18,614$ -$ -$ -$ 18,614$ Due to Other Funds - - - 301,158 301,158

Total Liabilities 18,614 - - 301,158 319,772

FUND BALANCESReserve Fund Balances:

Reserve for Prepaid Items 13,706 - - - 13,706 Undesignated 2,210,233 5,112,592 301,158 - 7,623,983

Total Fund Balances 2,223,939 5,112,592 301,158 - 7,637,689

TOTAL LIABILITIES AND FUND BALANCES 2,242,553$ 5,112,592$ 301,158$ 301,158$ 7,957,461$



CHANGES IN FUND BALANCES (BY FUNCTION) NONMAJOR CAPITAL PROJECTS FUNDS


SpecialBlended County Reserve

Capital Component School for Capital Facilities Unit - Capital Facilities Outlay

Fund Projects Fund Fund TotalREVENUES

Other State Revenues -$ -$ 300,000$ -$ 300,000$ Other Local Revenues 679,262 950,697 1,158 - 1,631,117

Total Revenues 679,262 950,697 301,158 - 1,931,117

EXPENDITURESGeneral Administration 106,968 - - - 106,968 Plant Services 175,020 - - - 175,020

Total Expenditures 281,988 - - - 281,988

Net Change in Fund Balances 397,274 950,697 301,158 - 1,649,129

Fund Balances at Beginning of Year 1,826,665 4,161,895 - - 5,988,560

Fund Balances at End of Year 2,223,939$ 5,112,592$ 301,158$ -$ 7,637,689$



CHANGES IN FUND BALANCES (BY OBJECT) – BUDGET AND ACTUAL NONMAJOR CAPITAL PROJECTS FUNDS




Other State Revenues -$ -$ -$ -$ -$ -$ Other Local Revenues 300,000 679,262 379,262 - 950,697 950,697

Total Revenues 300,000 679,262 379,262 - 950,697 950,697

EXPENDITURESServices and Other Operating Expenditures 275,600 271,437 4,163 - - - Capital Outlay - 10,551 (10,551) - - -

Total Expenditures 275,600 281,988 (6,388) - - -

Net Change in Fund Balances 24,400 397,274 372,874 - 950,697 950,697

Fund Balances at Beginning of Year 1,826,665 1,826,665 - 4,161,895 4,161,895 -

Fund Balances at End of Year 1,851,065$ 2,223,939$ 372,874$ 4,161,895$ 5,112,592$ 950,697$

Capital Facilities Fund Blended Component Unit - Capital Projects



CHANGES IN FUND BALANCES (BY OBJECT) – BUDGET AND ACTUAL (Continued) NONMAJOR CAPITAL PROJECTS FUNDS




Other State Revenues -$ 300,000$ 300,000$ -$ -$ -$ Other Local Revenues - 1,158 1,158 - - -

Total Revenues - 301,158 301,158 - - -

EXPENDITURESServices and Other Operating Expenditures - - - - - - Capital Outlay - - - - - -

Total Expenditures - - - - - -

Net Change in Fund Balances - 301,158 301,158 - - -

Fund Balances at Beginning of Year - - - - - -

Fund Balances at End of Year -$ 301,158$ 301,158$ -$ -$ -$

Special Reserve forCounty School Facilities Fund Capital Outlay Fund



CHANGES IN FUND BALANCES (BY OBJECT) – BUDGET AND ACTUAL (Continued) NONMAJOR CAPITAL PROJECTS FUNDS


VarianceFinal with Final

Budget Actual BudgetREVENUES

Other State Revenues -$ 300,000$ 300,000$ Other Local Revenues 300,000 1,631,117 1,331,117

Total Revenues 300,000 1,931,117 1,631,117

EXPENDITURESServices and Other Operating Expenditures 275,600 271,437 4,163 Capital Outlay - 10,551 (10,551)

Total Expenditures 275,600 281,988 (6,388)

Net Change in Fund Balances 24,400 1,649,129 1,624,729

Fund Balances at Beginning of Year 5,988,560 5,988,560 -

Fund Balances at End of Year 6,012,960$ 7,637,689$ 1,624,729$

Totals

SUPPLEMENTARY INFORMATION

63

SIERRA SANDS UNIFIED SCHOOL DISTRICT ORGANIZATION JUNE 30, 2008

The members of the Board of Trustees of the Sierra Sands Unified School District holding office during the audit period and their respective expiration dates of terms of office were as follows:

NAME OFFICE TERM EXPIRES Judy Dietrichson President November 2010

Kurt Rockwell Vice President / Clerk November 2010

Amy Covert Member November 2010

Pam Lochhead Member November 2008

Dr. Tom Martin Member November 2008

Tom Pearl Member November 2010

Michael Scott Member November 2008

ADMINISTRATION

Joanna Rummer – Superintendent

Howard Smith – Assistant Superintendent, Human Resources

Shirley Kennedy – Assistant Superintendent, Curriculum and Instruction

Elaine Wunderlich Janson – Assistant Superintendent, Business Services

Dianne Speegle, Executive Director, SELPA

See the accompanying notes to supplementary information. 64

SIERRA SANDS UNIFIED SCHOOL DISTRICT SCHEDULE OF AVERAGE DAILY ATTENDANCE


Second Period AnnualReport Report

ELEMENTARY

Kindergarten 344.24 345.57 First through Third 1,174.48 1,176.83 Fourth through Sixth 1,089.56 1,088.52 Seventh through Eighth 747.27 742.25 Special Education, Home and Hospital,

and Extended Year 148.97 150.22

Total Elementary 3,504.52 3,503.39

HIGH SCHOOL

Regular Classes-Grades Nine through Twelve 1,512.36 1,497.27

Special Education, Home and Hospital,and Extended Year 64.83 65.32

Continuation Education 131.06 129.12 Total High School 1,708.25 1,691.71

COUNTY SUPPEMENT

Elementary 0.04 0.03 High School 0.16 0.27 Total County Supplement 0.20 0.30

CLASSES FOR ADULTS

Concurrently Enrolled 31.70 31.66 Not Concurrently Enrolled 60.33 58.91 Total Classes for Adults 92.03 90.57

Total ADA 5,305.00 5,285.97

Hours of Hours of SUMMER SCHOOL Attendance Attendance

Elementary 60,987.00 61,532.00

Secondary 33,181.00 33,181.00

GENERAL Average daily attendance is a measurement of the number of pupils attending classes of the District. The purpose of attendance accounting from a fiscal standpoint is to provide the basis on which apportionments of state funds are made to school districts. This schedule provides information regarding the attendance of students at various grade levels and in different programs. Average daily attendance is based on the Second Period Report for the period ending April 15 and the Annual Report for the period ending June 30.


SIERRA SANDS UNIFIED SCHOOL DISTRICT SCHEDULE OF INSTRUCTIONAL TIME FOR THE YEAR ENDED JUNE 30, 2008

Number1986-87 1982-83 2007-08 of Days Minutes Actual Actual Traditional

Grade Level Requirement Minutes Minutes Calendar Status

Kindergarten 36,000 31,680 36,000 180 In compliance Grade 1 50,400 44,000 50,400 180 In compliance

Grade 2 50,400 44,000 50,400 180 In compliance











GENERAL The District must maintain their instructional minutes at either the 1982-83 actual minutes or the 1986-87 requirement, whichever is greater, as required by Education Code Section 46201. The District has received incentive funding for increasing instructional time as provided by the Incentives for Longer Instructional Day. This schedule presents information on the amount of instruction time offered by the District and whether the District complied with the provisions of Education Code Sections 46201 through 46206.


SIERRA SANDS UNIFIED SCHOOL DISTRICT SCHEDULE OF FINANCIAL TRENDS AND ANALYSIS


(Budgeted)2009 2008 2007 2006

Revenues and Other Financial Sources 45,786,522$ 49,851,422 53,881,977$ 44,999,765$

Expenditures 48,832,517 49,032,412 51,741,139 43,460,208

Other Uses and Transfers Out 294,491 693,380 308,588 212,497

Total Outgo 49,127,008 49,725,792 52,049,727 43,672,705

Change in Fund Balance (Deficit) (3,340,486) 125,630 1,832,250 1,327,060

Ending Fund Balance 5,721,364$ 9,061,850$ 8,936,220$ 7,103,970$

Available Reserves (1) 5,614,364$ 6,377,100$ 8,731,353$ 4,067,563$

Designated for Economic Uncertainties -$ 2,486,636$ -$ 2,173,010$

Undesignated Fund Balance 5,614,364$ 3,890,464$ 8,731,353$ 1,894,553$

Available Reserves as a Percentage of Total Outgo 11.43% 12.82% 16.78% 9.31%

Total Long-Term Debt 22,685,545$ 24,095,536$ 47,118,505$ 15,957,867$

Average Daily Attendance at P-2 5,303 5,305 5,480 5,544

General Fund

GENERAL This schedule discloses the District's financial trends by displaying past years data with current year budget information. These financial trend disclosures are used to evaluate the District's ability to continue as a going concern for a reasonable period of time. (1) Available Reserves consist of all undesignated fund balances and all funds designated for economic

uncertainties contained within the General Fund, Special Reserve Fund (other than Capital Outlay Projects).

General Fund:

Available reserves have decreased during the current fiscal year by $2,354,253. As measured as a percentage of total outgo the reserves have decreased from 16.78% to 12.82%.

Long-Term Debt:

General Obligation Bonds Payable represent 80.79% of the total outstanding long-term debt obligations of the District.

Attendance:

The District's average daily attendance decreased by 239 ADA over the past three years.


SIERRA SANDS UNIFIED SCHOOL DISTRICT SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS


Pass-ThroughFederal Entity

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

Federal Programs:U.S. Department of Education (Direct Funding) Maintenance and Operations - Impact Aid* 84.041 None 2,053,041$

Passed through California Department of Education (CDE):NCLB Title I* 84.010 30100 1,157,732 IDEA - Local Assistance 84.027 33100 924,157 IDEA Part B - Federal Preschool 84.173 33150 31,629 IDEA Part B - Preschool Local Entitlement 84.173 33200 36,843 IDEA Part B - Pre-Kindergarten Staff Development 84.173A 33450 1,000 IDEA Part C - Early Intervention 84.181 33850 25,481 NCLB Title II Teacher Quality 84.367 40350 257,090 NCLB Title II - Enhancing Education Through Technology 84.318 40450 15,341 NCLB Title III - LEP 84.365 42030 68,738 NCLB Title IV - Drug Free Schools 84.186 37100 32,635 NCLB Title V - Innovative Strategies 84.288 41100 6,343 Carl Perkins Vocational Education 84.048 35500 44,201 California Health Science Educators Institute 84.048 58100 1,370

U.S. Department of Defense: DFAS - ROTC 12.unk 54,868

U.S. Department of Health and Human Services Passed Through California Department of Education:

Medi-Cal Billing Option 93.778 56400 199,571

U.S. Department of AgriculturePassed Through California Department of Education (CDE):

National School Lunch* 10.555 53100 883,342 School Breakfast Program 10.553 53100 247,230 Forest Reserve 10.665 None 3,668

Total Federal Awards 6,044,280$

* Tested as a major program under OMB Circular A-133 GENERAL The accompanying schedule of expenditures of federal awards includes the federal grant activity of Sierra Sands Unified School District and is presented on the modified accrual basis of accounting. The information in this schedule is presented in accordance with the requirements of OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Therefore, some amounts presented in this schedule may differ from amounts presented in, or used in the preparation of the general purpose or basic financial statements.


SIERRA SANDS UNIFIED SCHOOL DISTRICT RECONCILIATION OF ANNUAL FINANCIAL AND BUDGET

REPORT (SACS) WITH AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2008

SpecialReserve Fund

For Other AdultGeneral Than Capital Building Education

Fund Outlay Fund Fund

June 30, 2008 Annual Financial and Budget Report (SACS) Fund Balance/ Retained Earnings 9,061,850$ 6,102,596$ 18,897,258$ 90,858$

Adjustments and Reclassifications:Increasing (Decreasing) the Fund Balance:

Cash in County Treasury - (Overstated) Understated - - - - Cash with Fiscal Agent - (Overstated) Understated - - (1,438,201) - Accounts Receivable - (Overstated) Understated - - - -

Net Adjustments and Reclassifications - - (1,438,201) -

June 30, 2008 Audited Financial Statements Fund Balance/Retained Earnings 9,061,850$ 6,102,596$ 17,459,057$ 90,858$

Special ReserveChild Deferred Fund for

Development Cafeteria Maintenance PostemployementFund Fund Fund Benefits

June 30, 2008 Annual Financial and Budget Report (SACS) Fund Balance/ Retained Earnings 61,588$ 480,401$ 1,818,338$ 3,743,925$


Cash in County Treasury - (Overstated) Understated - - - - Cash with Fiscal Agent - (Overstated) Understated - - - - Accounts Receivable - (Overstated) Understated - - - -

Net Adjustments and Reclassifications - - - -

June 30, 2008 Audited Financial Statements Fund Balance/Retained Earnings 61,588$ 480,401$ 1,818,338$ 3,743,925$



REPORT (SACS) WITH AUDITED FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED JUNE 30, 2008

Blended ComponentUnit For Debt

Bond Interest Service Funds - Inyo- CapitalAnd Redemption Kern Schools Facilies

Fund Financing Authority Fund

June 30, 2008 Annual Financial and Budget Report (SACS) Fund Balance/ Retained Earnings 626,339$ -$ -$


Cash in County Treasury - (Overstated) Understated - - - Cash with Fiscal Agent - (Overstated) Understated - 1,438,201 - Accounts Receivable - (Overstated) Understated - - -

Net Adjustments and Reclassifications - 1,438,201 -

June 30, 2008 Audited Financial Statements Fund Balance/Retained Earnings 626,339$ 1,438,201$ -$

Blended ComponentUnit For Capital

Outlay Projects Inyo- County SpecialKern Schools School Reserve

Financing Authority Fund Fund

June 30, 2008 Annual Financial and Budget Report (SACS) Fund Balance/ Retained Earnings (5,112,592)$ -$ -$


Cash in County Treasury - (Overstated) Understated 4,666,417 - - Cash with Fiscal Agent - (Overstated) Understated - - - Accounts Receivable - (Overstated) Understated 446,175 - -

Net Adjustments and Reclassifications 5,112,592 - -

June 30, 2008 Audited Financial Statements Fund Balance/Retained Earnings -$ -$ -$



REPORT (SACS) WITH AUDITED FINANCIAL STATEMENTS (Continued) FOR THE YEAR ENDED JUNE 30, 2008

LONG-TERMDEBT

June 30, 2008 Annual Financial and Budget Report (SACS) Total Liabilities 47,490,732$

Adjustments and Reclassifications:Increasing (Decreasing) Total Liabilities

Post Employment Benefits Payable - Understated (Overstated) 23,395,196

Net Adjustments and Reclassifications 23,395,196

June 30, 2008 Audited Financial Statements General Long-Term Debt Total Liabilities 24,095,536$


SIERRA SANDS UNIFIED SCHOOL DISTRICT SCHEDULE OF CHARTER SCHOOLS


No charter schools are chartered by Sierra Sands Unified School District.

Included inCharter Schools Audit?

None N/A


SIERRA SANDS UNIFIED SCHOOL DISTRICT SCHEDULE OF EXCESS SICK LEAVE FOR THE YEAR ENDED JUNE 30, 2008

Section 19833.5(a)(3)(c) Disclosure Sierra Sands Unified School District does not provide more than 12 sick leave days in a school year to any CalSTRS member.

73

SIERRA SANDS UNIFIED SCHOOL DISTRICT NOTES TO SUPPLEMENTARY INFORMATION

JUNE 30, 2008 NOTE 1 – PURPOSE OF SCHEDULES A. Schedule of Average Daily Attendance

Average daily attendance is a measurement of the number of pupils attending classes of the District. The purpose of attendance accounting from a fiscal standpoint is to provide the basis on which apportionments of state funds are made to school districts. This schedule provides information regarding the attendance of students at various grade levels and in different programs. Average daily attendance is based on the Second Period Report for the period ending April 15, and the Annual Report for the period ending June 30.

B. Schedule of Instructional Time

The District has received incentive funding for increasing instructional time as provided by the Incentives for Longer Instructional Day. This schedule presents information on the amount of instructional time offered by the District and whether the District complied with the provisions of Educational Code Section 46201 through 46206.

C. Schedule of Financial Trends and Analysis

This schedule provides disclosures of financial trends by displaying past years' data along with current year budget information. These disclosures are consistent with the responsibility to evaluate the District's ability to continue as a going concern for a reasonable period of time.

D. Schedule of Expenditures of Federal Awards

OMB Circular A-133 requires a disclosure of the financial activities of all federally funded programs. To comply with OMB Circular A-133, this schedule was prepared for the District.

E. Reconciliation of Annual Financial And Budget Report with Audited Financial Statements

This schedule provides the information necessary to reconcile the fund balances of all funds and the total liabilities of the general long-term debt account group as reported on the audited financial statements.

F. Schedule of Charter Schools

This schedule provides information as to any charter schools charted by the District and whether these charter schools are included in the District's audit report.

G. Schedule of Excess Sick Leave This schedule provides information as required by Section 19833.5(a)(3).

NOTE 2 – EARLY RETIREMENT INCENTIVE PROGRAM The District has not adopted any early retirement incentive program, pursuant to Education Code Sections 22714 and 44929, whereby the service credit to eligible employees is increased by two years.

OTHER INDEPENDENT AUDITOR’S REPORTS

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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 THE BASIC FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS

Board of Trustees Sierra Sands Unified School District Ridgecrest, California We have audited the financial statements of the governmental activities and each major fund of the Sierra Sands Unified School District, as of and for the year ended June 30, 2008, which collectively comprise the Sierra Sands Unified School District’s basic financial statements and have issued our report thereon dated December 9, 2008. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Internal Control Over Financial Reporting In planning and performing our audit, we considered the Sierra Sands Unified School District’s internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Sierra Sands Unified School District’s internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Sierra Sands Unified School District’s internal control over financial reporting. 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 on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affects the Sierra Sands Unified School District’s ability to initiate, authorize, record, process, or report financial data reliably in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement of the Sierra Sands Unified School District’s financial statements that is more than inconsequential will not be prevented or detected by the Sierra Sands Unified School District’s internal control. A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected by the Sierra Sands Unified School District’s internal control.






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Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and would not necessarily identify all deficiencies in internal control that might be significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined above. Compliance and Other Matters As part of obtaining reasonable assurance about whether the Sierra Sands Unified School District's financial statements are free of 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. This communication is intended solely for the information and use of the audit committee, management, Kern County Superintendent of Schools, California State Department of Education, California State Controller Office, and federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.



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REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND INTERNAL CONTROL

OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A-133 Board of Trustees Sierra Sands Unified School District Ridgecrest, California Compliance We have audited the compliance of the Sierra Sands Unified School District with the types of compliance requirements described in the U. S. Office of Management and Budget (OMB) Circular A-133 Compliance Supplement that are applicable to each of its major federal programs for the year ended June 30, 2008. The Sierra Sands Unified School District’s major federal programs are identified in the summary of auditor’s results section of the accompanying schedule of findings and questioned costs. Compliance with the requirements of laws, regulations, contracts and grants applicable to each of its major federal programs is the responsibility of the Sierra Sands Unified School District’s management. Our responsibility is to express an opinion on the Sierra Sands Unified School District’s compliance based on our audit. 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; and OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133 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 the Sierra Sands Unified School District’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. Our audit does not provide a legal determination of the Sierra Sands Unified School District’s compliance with those requirements. In our opinion, the Sierra Sands Unified School District’s complied, in all material respects, with the requirements referred to above that are applicable to each of its major federal programs for the year ended June 30, 2008.






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Internal Control Over Compliance The management of the Sierra Sands Unified School District is responsible for establishing and maintaining effective internal control over compliance with requirements of laws, regulations, contracts and grants applicable to federal programs. In planning and performing our audit, we considered the Sierra Sands Unified School District’s internal control over compliance with the requirements that could have a direct and material effect on a major federal program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the Sierra Sands Unified School District’s internal control over compliance. A control deficiency in an entity’s internal control over compliance 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 noncompliance with a type of compliance requirement of a federal program on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affects the entity’s ability to administer a federal program such that there is more than a remote likelihood that noncompliance with a type of compliance requirement of a federal program that is more than inconsequential will not be prevented or detected by the entity’s internal control. A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that material noncompliance with a type of compliance requirement of a federal program will not be prevented or detected by the entity’s internal control. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and would not necessarily identify all deficiencies in internal control that might be significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above. This report is intended solely for the information and use of the audit committee, management, Kern County Superintendent of Schools, California State Department of Education, California State Controller Office, and federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.



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REPORT ON STATE COMPLIANCE Board of Trustees Sierra Sands Unified School District Ridgecrest, California We have audited the financial statements of the Sierra Sands Unified School District (the District), as of and for the year ended June 30, 2008, and have issued our report thereon dated December 9, 2008. Our audit was made in accordance with auditing standards generally accepted in the United States of America; Government Auditing Standards, issued by the Comptroller General of the United States; and the Standards and Procedures for Audits of California K-12 Local Educational Agencies 2007-08. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the combined financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the combined 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's management is responsible for the District's compliance with laws and regulations. In connection with the audit referred to above, we selected and tested transactions and records to determine the District's compliance with the state laws and regulations applicable to the following items:

Description

Procedures In Controller’s Audit Guide

Procedures Performed

Attendance Accounting: Attendance Reporting 8 Yes Kindergarten Continuation 3 Yes Independent Study 23 Yes (see below) Continuation Education 10 Yes Adult Education 9 Yes Regional Occupational Center/Programs 6 N/A Instructional Time: School Districts 6 Yes County Offices of Education 3 N/A






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Description

Procedures In Controller’s Audit Guide

Procedures Performed

GANN Limit Calculation 1 Yes Early Retirement Incentive Program 4 N/A Community Day Schools 9 N/A Morgan-Hart Class Size Reduction Program 7 Yes Class Size Reduction Program General Requirements 7 Yes Option One Classes 3 Yes Option Two Classes 4 N/A Districts or charter schools with one school serving K-3 4 N/A Instructional Materials General Requirements 12 Yes Grades K – 8 requirements 1 Yes Grades 9 – 12 requirements 1 Yes Ratios of Administrative Employees to Teachers 1 Yes School Construction Funds School District Bonds 3 Yes State School Facilities Funds 1 N/A Alternative Pension Plans 2 Yes Excess Sick Leave 3 Yes Notice of Right to Elect CalSTRS Membership 1 Yes Proposition 20 Lottery Funds (Cardenas Textbook Act of 2000) 2 Yes State Lottery Funds (California State Lottery Act of 1984) 2 Yes California School Age Families Education (Cal-SAFE) Program 3 Yes School Accountability Report Card 3 Yes Contemporaneous Records of Attendance, for charter schools 1 N/A Mode of Instruction, for charter schools 1 N/A Nonclassroom-Based Instruction/Independent Study, for charter

schools 15 N/A Determination of Funding for Nonclassroom-Based Instruction, for

charter schools 3 N/A Annual Instructional Minutes – Classroom Based, for charter schools 3 N/A

We did not perform testing for “long-term independent study” because the ADA was under the level that requires testing. However, procedures were performs to test short-term independent study. Based on our audit we found that, for the items tested, the Sierra Sands Unified School District complied with the laws and regulations of the state programs referred to above. Further, based on our examination, for items not tested, nothing came to our attention to indicate that the Sierra Sands Unified School District had not complied with the state laws and regulations. This report is intended for the information and use of the audit committee, management, State Controller’s Office, Department of Finance, Department of Education, and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties.



FINDINGS AND RECOMMENDATIONS SECTION

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SIERRA SANDS UNIFIED SCHOOL DISTRICT SCHEDULE OF FINDINGS AND QUESTIONED COSTS

FOR THE FISCAL YEAR ENDED JUNE 30, 2008 I. Summary of Auditor's Results

Financial Statements Type of auditors’ report issued: Unqualified Internal control over financial reporting: • Material weakness identified? Yes X No • Significant deficiencies identified that are not considered

to be material weaknesses? Yes X None Reported

Noncompliance material to financial statements noted? Yes X No Federal Awards Internal control over major federal programs: • Material weakness identified? Yes X No • Reportable conditions identified that are not considered

to be material weaknesses? Yes X None reported Noncompliance material to federal awards? Yes X No Type of auditor’s report issued on compliance for major Unqualified federal programs: Any audit findings disclosed that are required to be reported in Yes X No accordance with Circular A-133 Section 510(a)? Identification of major programs CFDA Number(s) Name of Federal Program or Cluster 84.041 Maintenance and Operations – Impact Aid 84.010 NCLB – Title I 10.555 National School Lunch The threshold for distinguishing type A&B programs was $300,000. Sierra Sands Unified School District has been determined to be a low risk auditee. State Awards Internal control over state programs: • Material weakness identified? Yes X No • Reportable conditions identified that are not considered

to be material weaknesses? Yes X None reported Type of auditor’s report issued on compliance for state awards Unqualified

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II. Financial Statements Findings and Questioned Costs

None. III. Federal Awards Findings and Questioned Costs

None. IV. State Award Findings and Questioned Costs

None. V. A Summary of Prior Audit (all June 30, 2007) Findings and Current Year Status Follows

Number: 2007-1 Finding Code: 10000 and 40000 State Program: Attendance Accounting Award Year: 2006/2007 Specific Requirement: Contracts that meet all the specific independent study requirements pursuant to Education Code 51747 should be included in the District's apportionment ADA calculations. Finding: Completed independent study contracts at Burroughs High School do not appear to be included in the District's P-1, P-2 and annual apportionment attendance ADA calculation. Questioned Costs: None, as apportionment attendance appears understated. Context:

ADA Number Amount Population Unknown $ N/A

Sample size 462 days $13,824

Findings 390 days $11,718 Effect: Attendance is being understated by the number of completed contract days. Effect represents a potential understatement of 2.17 ADA. Recommendation: We recommend procedures be implemented to assure that completed contracts are properly included in attendance. District Response: The District had identified the source of the discrepancy, and it was determined to be an operational versus systems issue. The District has taken action to rectify the situation by providing additional training, regular oversight and review by a second party. Current Year Status: The District has modified its attendance accounting procedure with assistance from School Innovations and Advocacy, it has conducted training session with site attendance clerks and it has created a spreadsheet with checks and balances to ensure the information presented by the sites and used in the period attendance accounting reports match. The District feels the recommendation has been fully implemented.

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Number: 2007-2 Finding Code: 10000 and 40000 State Program: Excess Sick Leave Award Year: 2006/2007 Specific Requirement: Excess sick leave must be expressly authorized or accrued for District Teachers under the State Teacher's Retirement System pursuant to Education Code Section 14502. Finding: Upon review of excess sick leave for administrators it was found that there are employees accruing excess sick leave. According to the Education Code every classified employee employed for five days a week by a school district shall be entitled to 12 days of leave of absences for illness or injury or any other District policy. According to District policy administrators are entitled to one day for every 18 work days. For some this could be as must as 12.5 days. Questioned Costs: Net over-accrual of sick leave of $1,538 (over-accrual $2,972 and under-accrual of $1,434). Context:

ADA Number Amount Population 21 $1,343,680

Sample size 21 $1,343,680

Findings 16 $1,538 Effect: The District is not in compliance with Education Code Section 14502 for improperly accruing excess sick leave. Recommendation: The District should establish review procedures and verification procedures to verify sick leave is being correctly accrued. District Response: The District will review and modify as necessary the sick leave accrual policy and procedure, and the District will implement a verification procedure to verify sick leave is being correctly accrued. Current Year Status: The District has reviewed and modified sick leave accruals in accordance with ed code, and a verification procedure was put in place to verify sick leave is being accurately accrued. The District feels the recommendation has been fully implemented.

Documents

SIERRA SANDS UNIFIED SCHOOL DISTRICT COUNTY OF …2 In accordance with Government Auditing Standards, we have also issued our report dated December 9, 2008, on our consideration of