NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT

Transcription

1 CONTINUING DISCLOSURE REPORT FOR FISCAL YEAR ENDED JUNE 30, 2014 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT 1. General Obligation Bonds, Election of 2002 Series 2005B General Obligation Refunding Bonds 3. General Obligation Bonds, Election of 2002 Series 2007C 4. General Obligation Bonds, Election of 2002 Series 2009D General Obligation Refunding Bonds 6. General Obligation Bonds, Election of 2002 Series 2009E General Obligation Refunding Bonds, Series A General Obligation Refunding Bonds March 23, 2015 Prepared by: 2321 Rosecrans Avenue, Suite 3200 El Segundo, CA 90245

2 TABLE OF CONTENTS Outstanding District Indebtedness 1 Summary of Financial Information on Revenues, Expenditures and Fund Balances for the District s General Fund State Funding Received by the District for the Last Completed Fiscal Year Average Daily Attendance of the District for the Last Completed Fiscal Year Enrollment 1 Assessed Valuations 1 Secured Ad Valorem Tax Levies and Delinquencies 2 Page Appendix A Audited Financial Statements for FY Appendix B Adopted Budget for FY

3 Outstanding District Indebtedness The District s outstanding indebtedness information is contained in the Audited Financial Statements for the fiscal year ended June 30, 2014, attached hereto as Appendix A. Summary of Financial Information on Revenues, Expenditures and Fund Balances for the District s General Fund The District s financial information is contained in the Audited Financial Statements for the fiscal year ended June 30, 2014 and Adopted Budget for fiscal year , attached hereto as Appendix A and Appendix B, respectively. State Funding Received by the District for the Last Completed Fiscal Year Information relating to State funding received by the District is contained in the audited financial statements for the fiscal year ended June 30, 2014, attached hereto as Appendix A. Average Daily Attendance of the District for the Last Completed Fiscal Year Average Daily Fiscal Year Attendance (1) ,455 Note: (1) The Average Daily Attendance is rounded to the nearest whole number. Source: The District. Enrollment Source: The District. Fiscal Year Enrollment ,370 Assessed Valuation Fiscal Year Local Secured Utility Unsecured Total $9,671,486,615 $2,221,429 $450,598,596 $10,124,306, ,169,245,358 2,221, ,535,335 10,647,002,122 Source: California Municipal Statistics, Inc. 1

4 Secured Tax Charges and Delinquencies Secured Tax Charge and Delinquency Secured Amt. Del. % Del. Tax Charge (1) June 30 June 30 $18,772, $276, % Secured Amt. Del. % Del. Tax Charge (2) June 30 June 30 $6,986, $99, % (1) 1% General Fund apportionment. Excludes redevelopment agency impounds. Reflects countywide delinquency rate. (2) Debt service levy only. Source: California Municipal Statistics Audited Financial Statements The Audited Financial Statements for the fiscal year ended June 30, 2014 are attached hereto as Appendix A. Adopted Budget The Adopted Budget for the fiscal year is attached hereto as Appendix B. This Annual Report is provided solely pursuant to the District s Continuing Disclosure Agreements in connection with the above referenced financings. The filing of this Annual Report does not constitute or imply any representation (i) that all of the information provided is material to investors, (ii) regarding any other financial, operating or other information about the District or the above referenced financings, or (iii) that no changes, circumstances or events have occurred since the end of the fiscal year to which this Annual Report relates (other than as contained in this Annual Report), or any other date specified with respect to any of the information contained in this Annual Report, or that no other information exists, which may have a bearing on the security for the above referenced financings or an investor s decision to buy, sell, or hold the above referenced financings. No statement in this Annual Report should be construed as a prediction or representation about future financial performance of the District. Some of information obtained through third party sources, are believed by the District to be reliable, but has not been independently verified by the District and is not guaranteed as to accuracy by the District. There can be no assurance as to the accuracy of such information and inquiries concerning the 2

5 scope and methodology of procedures carried out to complete such information should be directed to the third party providers. Dated: March 23, 2015 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT 3

6 Appendix A Audited Financial Statements A

7 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT ANNUAL FINANCIAL REPORT JUNE 30, 2014

8 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT TABLE OF CONTENTS JUNE 30, 2014 FINANCIAL SECTION Independent Auditor's Report 2 Management's Discussion and Analysis 5 Basic Financial Statements Government-Wide Financial Statements Statement of Net Position 18 Statement of Activities 19 Fund Financial Statements Governmental Funds - Balance Sheet 20 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position 21 Governmental Funds - Statement of Revenues, Expenditures, and Changes in Fund Balances 22 Reconciliation of the Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances to the Statement of Activities 23 Proprietary Funds - Statement of Net Position 25 Proprietary Funds - Statement of Revenues, Expenses, and Changes in Fund Net Position 26 Proprietary Funds - Statement of Cash Flows 27 Fiduciary Funds - Statement of Net Position 28 Fiduciary Funds - Statement of Changes in Net Position 29 Notes to Financial Statements 30 REQUIRED SUPPLEMENTARY INFORMATION General Fund - Budgetary Comparison Schedule 68 Special Education Pass-Through Fund Budgetary Comparison Schedule 69 Schedule of Other Postemployment Benefits (OPEB) Funding Progress 70 SUPPLEMENTARY INFORMATION Schedule of Expenditures of Federal Awards 72 Local Education Agency Organization Structure 74 Schedule of Average Daily Attendance 75 Schedule of Instructional Time 76 Reconciliation of Annual Financial and Budget Report With Audited Financial Statements 77 Schedule of Financial Trends and Analysis 78 Combining Statements - Non-Major Governmental Funds Combining Balance Sheet 79 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances 80 General Fund Selected Financial Information 81 Cafeteria Fund Selected Financial Information 82 Note to Supplementary Information 83 SUPPLEMENTARY INFORMATION - UNAUDITED Continuing Disclosure for Bond Issuance 86 Note to Supplementary Information - Unaudited 87

9 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT TABLE OF CONTENTS JUNE 30, 2014 INDEPENDENT AUDITOR'S REPORTS Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance With Government Auditing Standards 89 Report on Compliance for Each Major Program and Report on Internal Control Over Compliance Required by OMB Circular A Report on State Compliance 93 SCHEDULE OF FINDINGS AND QUESTIONED COSTS Summary of Auditor's Results 96 Financial Statement Findings 97 Federal Awards Findings and Questioned Costs 98 State Awards Findings and Questioned Costs 99 Summary Schedule of Prior Audit Findings 103 Management Letter 104

10 FINANCIAL SECTION 1

11 INDEPENDENT AUDITOR'S REPORT Governing Board Norwalk-La Mirada Unified School District Norwalk, California Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the Norwalk-La Mirada Unified School District (the District) as of and for the year ended June 30, 2014, and the related notes to the financial statements, which collectively comprise the District's basic financial statements as listed in the table of contents. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and Standards and Procedures for Audits of California K-12 Local Education Agencies , issued by the California Education Audit Appeals Panel as regulations. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the District's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the District's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. 2

12 Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the Norwalk-La Mirada Unified School District, as of June 30, 2014, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Emphasis of Matter - Change in Accounting Principles As discussed in Note 16 to the financial statements, the District has elected to change its method of accounting for cost of debt issuance as prescribed by GASB Statement No. 65, Items Previously Reported as Assets and Liabilities. Our opinion is not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the required supplementary information, such as management's discussion and analysis on pages 5 through 17 and budgetary comparison and other postemployment benefit information on pages 68 through 70, respectively, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Norwalk-La Mirada Unified School District's basic financial statements. The accompanying supplementary information such as the combining and individual nonmajor fund financial statements and Schedule of Expenditures of Federal Awards, as required by Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations and the other supplementary information as listed on the table of contents, are presented for purposes of additional analysis and are not a required part of the basic financial statements. The accompanying supplementary information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the accompanying supplementary information is fairly stated, in all material respects, in relation to the basic financial statements as a whole. 3

13 The Continuing Disclosure for Bond Issuance and related note has not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on it. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 3, 2014, on our consideration of the Norwalk-La Mirada 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 internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Norwalk-La Mirada Unified School District's internal control over financial reporting and compliance. Rancho Cucamonga, California December 3,

14 This section of Norwalk-La Mirada Unified School District's (the District) annual financial report presents our discussion and analysis of the District's financial performance during the fiscal year that ended on June 30, Please read it in conjunction with the District's financial statements, which immediately follow this section. OVERVIEW OF THE FINANCIAL STATEMENTS The Financial Statements The financial statements presented herein include all of the activities of the District and its component units using the integrated approach as prescribed by Governmental Accounting Standards Board (GASB) Statement No. 34. The Government-Wide Financial Statements present the financial picture of the District from the economic resources measurement focus using the accrual basis of accounting. They present governmental activities and business-type activities separately. These statements include all assets of the District (including capital assets), as well as all liabilities (including long-term obligations). Additionally, certain eliminations have occurred as prescribed by the statement in regards to interfund activity, payables, and receivables. The Fund Financial Statements include statements for each of the three categories of activities: governmental, business-type, and fiduciary. The Governmental Activities are prepared using the current financial resources measurement focus and modified accrual basis of accounting. The Business-Type Activities are prepared using the economic resources measurement focus and the accrual basis of accounting. The fiduciary activities are agency funds, which only report a balance sheet and do not have a measurement focus. Reconciliation of the Fund Financial Statements to the Government-Wide Financial Statements is provided to explain the differences created by the integrated approach. The Primary unit of the government is the Norwalk-La Mirada Unified School District. 5 BOARD OF EDUCATION MARGARITA L. RIOS JESSE URQUIDI DARRYL R. ADAMS KAREN L. MORRISON President Vice President Member Member CHRIS PFLANZER SEAN M. REAGAN ANA VALENCIA GINGER SHATTUCK Member Member Member Superintendent

15 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30, 2014 REPORTING THE DISTRICT AS A WHOLE The Statement of Net Position and the Statement of Activities The Statement of Net Position and the Statement of Activities report information about the District as a whole and about its activities. These statements include all assets and liabilities of the District using the accrual basis of accounting, which is similar to the accounting used by most private-sector companies. All of the current year's revenues and expenses are taken into account regardless of when cash is received or paid. These two statements report the District's net position and changes in them. Net position is the difference between assets and deferred outflows of resources, and liabilities and deferred inflows of resources, which is one way to measure the District's financial health, or financial position. Over time, increases or decreases in the District's net position will serve as a useful indicator of whether the financial position of the District is improving or deteriorating. Other factors to consider are changes in the District's property tax base and the condition of the District's facilities. The relationship between revenues and expenses is the District's operating results. Since the governing board's responsibility is to provide services to our students and not to generate profit as commercial entities do, one must consider other factors when evaluating the overall health of the District. The quality of the education and the safety of our schools will likely be an important component in this evaluation. In the Statement of Net Position and the Statement of Activities, we separate the District activities as follows: Governmental Activities - Most of the District's services are reported in this category. This includes the education of kindergarten through grade twelve students, adult education students, the operation of child development activities, and the on-going effort to improve and maintain buildings and sites. Property taxes, State income taxes, user fees, interest income, Federal, State, and local grants, as well as general obligation bonds, finance these activities. Business-Type Activities - The District charges fees to help it cover the costs of certain services it provides. The District's child care program is included here. REPORTING THE DISTRICT'S MOST SIGNIFICANT FUNDS Fund Financial Statements The fund financial statements provide detailed information about the most significant funds - not the District as a whole. Some funds are required to be established by State law and by bond covenants. However, management establishes many other funds to help it control and manage money for particular purposes or to show that it is meeting legal responsibilities for using certain taxes, grants, and other money that it receives from the U.S. Department of Education. 6

16 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30, 2014 Governmental funds - Most of the District's basic services are reported in governmental funds, which focus on how money flows into and out of those funds and the balances left at year-end that are available for spending. These funds are reported using an accounting method called modified accrual accounting, which measures cash and all other financial assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term view of the District's general government operations and the basic services it provides. Governmental fund information helps determine whether there are more or fewer financial resources that can be spent in the near future to finance the District's programs. The differences of results in the governmental fund financial statements to those in the government-wide financial statements are explained in a reconciliation following each governmental fund financial statement. Proprietary funds - When the District charges users for the services it provides, whether to outside customers or to other departments within the District, these services are generally reported in proprietary funds. Proprietary funds are reported in the same way that all activities are reported in the Statement of Net Position and the Statement of Revenues, Expenses, and Changes in Fund Net Position. In fact, the District's enterprise funds are the same as the business-type activities we report in the government-wide statements, but provide more detail and additional information, such as cash flows, for proprietary funds. We use internal service funds (the other component of proprietary funds) to report activities that provide supplies and services for the District's other programs and activities, such as the District's Self-Insurance Fund. The internal service funds are reported with governmental activities in the government-wide financial statements. THE DISTRICT AS A TRUSTEE Reporting the District's Fiduciary Responsibilities The District is the trustee, or fiduciary, for funds held on behalf of others, like our funds for associated student body activities and scholarships. The District's fiduciary activities are reported in the Statement of Fiduciary Net Position and the Statement of Revenues, Expenses, and Changes in Fund Net Position. We exclude these activities from the District's other financial statements because the District cannot use these assets to finance its operations. The District is responsible for ensuring that the assets reported in these funds are used for their intended purposes. 7

17 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30, 2014 THE DISTRICT AS A WHOLE Net Position The District's net position was $145.0 million for the fiscal year ended June 30, Of this amount, ($25.6) million was unrestricted. Restricted net position is reported separately to show legal constraints from debt covenants and enabling legislation that limit the governing board's ability to use that net position for day-to-day operations. Our analysis below, in summary form, focuses on the net position (Table 1) and change in net position (Table 2) of the District's activities. Table 1 (Amounts in millions) Governmental Activities Business-Type Activities School District Activities as Restated as Restated ASSETS Current and other assets $ $ $ 0.1 $ - $ $ Capital assets Total Assets Deferred Outflows of Resources LIABILITIES Current liabilities Long-term obligations Total Liabilities NET POSITION Net investment in capital assets Restricted Unrestricted (25.6) (6.8) - - (25.6) (6.8) Total Net Position $ $ $ - $ - $ $ The ($25.6) million in unrestricted net position represents the accumulated results of all past years' operations. This unrestricted net position puts the District in a position, if required, to take care of its obligations, but still have a sufficient fund balance. The Board of Education has been especially prudent in light of continuing declining enrollment to provide direction to staff. Unrestricted net position the part of net position that can be used to finance day-to-day operations without constraints established by debt covenants, enabling legislation, or other legal requirements decreased by ($18.8) million (($25.6) million compared to ($6.8) million). 8

18 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30, 2014 Changes in Net Position The results of this year's operations for the District as a whole are reported in the Statement of Activities on page 19. Table 2 takes the information from the Statement, rounds off the numbers, and rearranges them slightly so you can see our total revenues for the year. Table 2 (Amounts in millions) Governmental Activities Business-Type Activities School District Activities Revenues Program revenues: Charges for services $ 2.8 $ 3.3 $ 0.8 $ 0.7 $ 3.6 $ 4.0 Operating grants and contributions General revenues: Federal and State aid not restricted Property taxes Other general revenues Total Revenues Expenses Instruction-related Student support services Administration Maintenance and operations Other Total Expenses Transfers (0.2) (0.2) - - Change in Net Position $ (16.4) $ (23.7) $ - $ - $ (16.4) $ (23.7) Governmental Activities As reported in the Statement of Activities on page 19, the cost of all of our governmental activities this year was $233.3 million, an increase of $1.8 million or 0.8 percent over the prior year. However, the amount that our taxpayers ultimately financed for these activities through local taxes is only a small portion equating to 11 percent of overall expenditures and the vast majority of expenditures were paid by those who benefited from the programs ($2.8 million) or by other governments and organizations who subsidized certain programs with grants and contributions ($57.1 million). We paid for the remaining "public benefit" portion of our governmental activities with $130.5 million from Federal and State unrestricted funds and from other revenue sources, such as interest and general entitlements. 9

19 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30, 2014 In Table 3, we have presented the cost and net cost of each of the District's largest functions: regular program instruction, including special instruction programs and other instruction-related programs, student support services, including student transportation and school food services, administration, maintenance and operations, and all other remaining functional costs. As discussed above, net cost shows the financial burden that was placed on the District's taxpayers by each of these functions. Providing this information allows our citizens to consider the cost of each function in comparison to the benefits they believe are provided by that function. Table 3 (Amounts in millions) Total Cost of Services Net Cost of Services Instruction-related $ $ $ $ Student support services Administration Maintenance and operations Other Total $ $ $ $ THE DISTRICT'S FUNDS As the District completed this year, our governmental funds reported a combined fund balance of $76.9 million, which is a decrease of $16.9 million from last year. An itemized chart is provided below labeled as Table 4. Table 4 (Amounts in millions) Balances and Activity July 1, 2013 Revenues Expenditures June 30, 2014 General Fund $ 40.2 $ $ $ 30.4 Special Education Pass-Through Fund Adult Education Fund Building Fund Child Development Fund Cafeteria Fund Deferred Maintenance Fund Capital Facilities Fund County School Facilities Fund Special Reserve Fund for Capital Outlay Projects Bond Interest and Redemption Fund Total $ 93.8 $ $ $

20 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30, 2014 The primary reasons for these decreases are: The General Fund difference is inclusive of the Special Reserve Fund for Postemployment Benefits (Fund 20) in accordance with GASB 54 Fund Balance Regulations. The combined fund balances were reduced from $40.2 million down to $30.4, a change of $9.8 million. o The General Fund is our principal operating fund and decreased by $9.72 million, totaling over ninety-nine percent of the ending fund balance decrease of $9.8 million. The unrestricted portion decreased significantly by $9.68 million, while the restricted balances decreased slightly by $0.05 million; as result of the following: The District's ended with a structural operating deficit of $3.40 million for the unrestricted General Fund which was explained in the prior year report and continued into The District experienced further declining enrollment/attendance of nearly 350 students, resulting in a loss of unrestricted revenues of nearly $1.8 million. Negotiations between the District and both certificated and classified bargaining units were settled in , increasing unrestricted General Fund expenditures by $3.6 million. The cost components of the settlement agreement consisted of one-time salary bonuses for both associations, an on-going percent cost-of-living increase for certificated and management staff, one-time relief from health and welfare benefits for all employee contributions, and an on-going increase in the District contribution for health and welfare benefits to mitigate future premium increases against all employees. Routine operating costs, specifically utilities and new sewer fees increased by $0.38 million. Restricted program ending fund balances were utilized to purchase instructional materials. o The Special Reserve Fund for Postemployment Benefits decreased slightly by $0.01 million. The Post Retirement Fund was established in to fund the 2009 memorandum of understanding between the District and employee associations to support the cost of retiree medical premiums. Beginning in , the Board of Education approved the application to participate in the Mandated Block Grant program, generating $0.73 million in funding and nearly offsetting the $0.74 million to cover the pay-as-you-go amount for OPEB. The Building Fund decreased from $25.8 million to $17.6 million, a decrease of $8.2 million, or roughly 48.5 percent of the total $16.9 million fund balances decrease. The Building Fund utilized Bond Proceeds to continue the modernization and construction of two school sites (Benton & Corvallis), the re-roofing of La Mirada High School, and other various facilities related projects. 11

21 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30, 2014 The Cafeteria Fund and Bond Interest and Redemption Fund both had slight increases in their ending fund balances of $0.60 million, respectively. The Cafeteria Fund did not receive new equipment and equipment replacement in as anticipated. The Bond Interest and Redemption Fund had operating income that exceeded debt payment. General Fund Budgetary Highlights Over the course of the year, the District revises its budget as it attempts to deal with unexpected changes in revenues and expenditures. The final amendment to the budget was adopted on May 4, (A schedule showing the District's original and final budget amounts compared with amounts actually paid and received is provided in our annual report on page 68.) In total, budgetary revisions for the fiscal year projected a decrease in the estimated fund balance of $9.24 million. Final actuals resulted in a fund balance decrease of $9.74 million, which was explained in the section above. The total difference between the final budget and actuals was $0.50 million. Revenue changes were $13.2 million higher than original anticipated, inclusive of transfers in; and expenditures were higher by $16.6 million, inclusive of transfers out, from the Adopted Budget. Noteworthy budget revisions to revenues are outlined below: o Revenue Limit funding was replaced by the new Local Control Funding Formula, also known as LCFF, resulting in significant budgetary changes totaling $31.2 million. All previously identified categorical programs (e.g. EIA, Transportation, CSR, etc.) were folded into the LCFF, resulting in an increase/shift of $23.5 million. A Gap funding increase of twelve (12) percent was also finalized once the details of the new formula were made available, further increasing revenues by $7.3 million. o Federal revenues increased slightly by $0.36 million, as a result carryovers, new programs, and minor funding changes from various restricted funding sources. o State revenues decreased by $18.4 million or nearly 45 percent as follows: Previously funded categorical programs were shifted to LCFF, resulting in a decrease of $23.5 million. Lottery carryover and revised rates increased funding by $0.19 million New program revenues for Mandated Block Grant ($0.70 million), ASES Middle Schools ($0.21 million), Clean Energy Jobs Program ($0.29 million), and Common Core State Standards ($3.97 million). o Local revenue revisions were lowered twelve percent, or $0.42 million due to the loss of Microsoft Settlement reimbursement funds of ($0.68 million), and an increase of $0.27 million for E-rate reimbursements being received. o Contributions and transfers-in increased by $0.43 million. The District entered in capital leases for equipment and booked the proceeds, resulting in an increase of $0.28 million. Other interfund transfers-in were also slightly increased by $0.14 million. 12

22 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30, 2014 Noteworthy budget revisions to expenditures are outlined below: o Certificated salaries were $3.0 million higher than the Adopted Budget due additional classroom teacher positions to support educational programs for students. Increases to cover a negotiated cost-of-living increase of percent, effective January 1, 2014; and a one-time bonus. Classified salaries were also $0.53 million higher than original projections to cover two one-time bonuses negotiated with the bargaining unit. o Changes in salaries and the impact of negotiated salary increases increased fringe benefit costs over original budgets. Additionally, negotiated settlements for health benefits included one-time contributions to cover employer out-of-pocket contributions for October 2013 through June 2014, an increase in the District contribution per eligible employee from $9,000 to $9,800, and an ongoing annual increase in the District contribution of $0.60 million to mitigate future health and welfare premium increases to employees increased overall employee benefits by $3.51 million. o Books and supply budgets were $3.23 million higher primarily due to the use of $2.1 million in one-time Common Core State Funding to purchase new classroom materials. Other changes for the use of one-time carryover to purchase additional instructional textbooks/materials and technology supplies also increased budgets. o Other operating expenditures and capital outlay increased by $2.7 million, or 21.5 percent to reflect the following changes: Higher utility costs of $0.38 million. Restricted routine maintenance costs for field repair and other maintenance projects of $0.46 million. $0.46 million for Common Core software and licenses provided to sites. Additional contracted services for special education and mental health related pupils of $0.25 million. Transportation contracts for bus maintenance, services, and other related contract increases for $

23 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30, 2014 CAPITAL ASSET AND DEBT ADMINISTRATION Capital Assets At June 30, 2014, the District had $269.7 million in a broad range of capital assets (net of depreciation), including land, buildings, and furniture and equipment. This amount represents a net increase (including additions, deductions, and depreciation) of $5.0 million, or 1.9 percent, from last year (Table 5). Table 5 (Amounts in millions) Governmental Activities Business-Type Activities Total Land and construction in progress $ 21.4 $ 14.3 $ - $ - $ 21.4 $ 14.3 Buildings and improvements Furniture and equipment Total $ $ $ - $ - $ $ Capital assets represent one of the largest investments for the District. Modernization and construction projects continue to progress and a more detailed explanation is outlined in Note 4. Significant projects over prior year commitments continue to include Benton and Corvallis Middle School modernization renovation and construction; Morrison and Sanchez Elementary School play structure and resurfacing; La Mirada multi-purpose room/nutrition center renovation; and district-wide kitchen remodels and upgrades. Long-Term Obligations At the end of this year, the District had $230.5 million in long-term obligations outstanding versus $224.1 million last year, an increase of 2.9 percent. Those obligations consisted of: Table 6 (Amounts in millions) Governmental Activities Business-Type Activities Total General obligation bonds - net (financed with property taxes) $ $ $ - $ - $ $ Certificates of participation Postemployment benefits Other Total $ $ $ - $ - $ $ The District's general obligation bond rating continues to be AAA and Aaa assigned by Standard and Poor's and Moody's, respectively, and has not changed since the prior year. The State limits the amount of general obligation debt that districts can issue to five percent of the assessed value of all taxable property within the district's boundaries. The District's outstanding general obligation debt is significantly below the voter- approved threshold statutorily imposed limits. 14

24 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30, 2014 Other long-term obligations are inclusive of compensated absences payable, workers' compensation claims liability and assessment, and the supplemental early retirement plan. We present more detailed information regarding our long-term obligations in Note 8 of the financial statements. ECONOMIC FACTORS AND NEXT YEAR'S BUDGETS AND RATES In considering the District Budget for the year, the governing board and management used the following criteria: The key assumptions in our revenue forecast are: 1. Revenue Limit/LCFF is budgeted at $7,862, an increase of $888 per ADA from funding levels. Revenue Limit/LCFF funding includes a positive statutory 0.85 percent cost-of-living adjustment, which increases base grants annually. It is important to note that the COLA affects only the calculation of the LCFF Target, and does not describe the net increase in funding for each district. Projected Second Period Apportionment (P2 ADA) is calculated at 18,530 excluding non-public school and County Operated Programs. Enrollment projections indicate a decline in student population that directly effects revenue limit/lcff funding. Under the funding provision for revenue limit/lcff, the District is eligible to claim the higher totals between current and prior year ADA; consequently, budget projections for are based using generated ADA. a. Property tax revenues are budgeted at $16.8 million, or 9.45 percent of total revenues. b. Revenue limit/lcff income is projected at $ million (inclusive of EPA funding), a significant increase of $14.3 million over prior year estimated actuals. The increase is a result of Governor's Proposal to increase funding by $4.5 billion statewide, resulting in an estimated "Gap" funding of percentage, or $16.07 million. Similar to revenue limits, LCFF Gap funding is partially offset by declining enrollment of an estimated 340 students, or roughly $1.8 million. 2. Federal income decreased by $1.1 million, or 9.4 percent from the previous year, and is budgeted at $10.29 million. Title I funding is estimated to decline ten percent based on historical trends and will be adjusted once final allocations are made available. The loss of one-time carryover funds for various federal programs is also estimated in the Adopted Budget. 3. Income from State funding sources is budgeted at $18.26 million, a decrease of $4.42 million or 19.5 percent from the District's final budget amounts. At nearly 64 percent, special education revenue is the largest source of state funding. However, the decline in revenues is primarily due to the loss of $4.0 million in Common Core State funds. 4. Local revenues are projected to be $0.61 million, or 20.3 percent lower than prior year estimates, and are budgeted at $2.41 million. One-time income for various mini-grants and the reimbursable E-rate program resulted in the change. Other local income continues to include interest income, use-of-facilities proceeds, income from other local agency agreements, and locally restricted LAUP preschool program reimbursements. 15

25 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30, 2014 Expenditures are based on the following forecasts: Staffing Ratio Enrollment Grades kindergarten through third 28:1 5,558 Grades four through five 31:1 2,669 Grades six through eight 30:1 4,287 Grades nine through twelve 28.8:1 5,669 The new items specifically addressed in the budget are: 1. Certificated and classified salaries and benefits total nearly 85 percent of total expenditures and reflect staffing ratios approved in policy and employee contracts. Certificated and classified salaries total $ million, an increase of $2.9 million, or 2.55 percent from prior year estimated totals. Salary projections include the following: a. Negotiations for the and were settled with both bargaining associations and the cost of the certificated/management percent cost-of-living increase, and classified onetime bonus are budgeted. b. Certificated and classified budgeted salaries also include the increased or improved services to pupils reflected in the District's Local Control Accountability Plan. c. Step, scale, and longevity increases estimated at $0.98 million, which has been adjusted for attrition. 2. Employee benefits are budgeted at $35.4 million, and include statutory benefits for all positions as follows: (STRS 9.50 percent, PERS percent, OASDI 6.2 percent, Medicare 1.45 percent, SUI 0.05 percent, Workers' Comp 2.76 percent, Alternative Retirement 5.00 percent, and OPEB 0.03 percent.). STRS and PERS rates reflect increases from previous years and the State has warned that future increases are scheduled for the foreseeable future to address unfunded pension liabilities. a. The District negotiated to increase the contribution for each active employee eligible for health and welfare benefits from $9,000 to $9,800, effective Plan Year 2014; and will also contribute an additional $0.60 million annually to mitigate future medical premium increases. The District also makes a contribution to cover retiree's pay-as-you go portion. 3. $27.10 million, or percent of the total General Fund operating budget is allocated for books, supplies, other operating expenses and services, capital outlay, and other outgo and uses. 4. Lottery funds are budgeted using $156.00/ADA and estimated ADA of 21,636, which reflects regulations freezing the funded ADA at levels through Lottery proceeds are directly utilized by school sites to fund operations and to also purchase various State-mandated textbooks. 5. Staff presented the LCAP and use of supplemental and concentration funds to meet the needs of the targeted students (also known as the proportionality percentage) as required by statute to the Board of Education, which was approved and included in the District Budget. Total funding required to meet the proportionality percentage requirement is budgeted at $12.3 million. 16

26 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30, 2014 CONTACTING THE DISTRICT'S FINANCIAL MANAGEMENT This financial report is designed to provide our citizens, taxpayers, students, and investors 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 any additional financial information, contact Estuardo Santillan, Assistant Superintendent, Business Services at Norwalk-La Mirada Unified School District, Pioneer Blvd, Norwalk, California, 90650, or at esantillan@nlmusd.k12.ca.us. 17

27 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT STATEMENT OF NET POSITION JUNE 30, 2014 Governmental Business-Type Activities Activities Total ASSETS Deposits and investments $ 92,220,155 $ 112,935 $ 92,333,090 Receivables 34,246,241 1,700 34,247,941 Prepaid expenses 19,037-19,037 Stores inventories 330, ,032 Capital assets Land and construction in process 21,346,571-21,346,571 Other capital assets 344,766,802 12, ,779,597 Less: accumulated depreciation (96,447,770) (12,795) (96,460,565) Total Capital Assets 269,665, ,665,603 Total Assets 396,481, , ,595,703 DEFERRED OUTFLOWS OF RESOURCES Deferred charge on refunding 2,328,909-2,328,909 LIABILITIES Accounts payable 22,528,400 19,183 22,547,583 Accrued interest payable 554, ,635 Unearned revenue 258,632 46, ,623 Long-term obligations Current portion of long-term obligations 8,208,673-8,208,673 Noncurrent portion of long-term obligations 222,253, ,253,452 Total Long-Term Obligations 230,462, ,462,125 Total Liabilities 253,803,792 66, ,869,966 NET POSITION Net investment in capital assets 143,632, ,632,631 Restricted for: Debt service 7,875,072-7,875,072 Capital projects 4,600,411-4,600,411 Educational programs 320, ,137 Other activities 14,200,802-14,200,802 Unrestricted (25,622,868) 48,461 (25,574,407) Total Net Position $ 145,006,185 $ 48,461 $ 145,054,646 The accompanying notes are an integral part of these financial statements. 18

28 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2014 Program Revenues Charges for Operating Capital Services and Grants and Grants and Functions/Programs Expenses Sales Contributions Contributions Governmental Activities: Instruction $ 122,779,005 $ 659,517 $ 28,704,538 $ 22,017 Instruction-related activities: Supervision of instruction 8,268,680 76,599 4,405,349 - Instructional library, media, and technology 699,880-93,670 - School site administration 13,666,745 54,721 1,105,397 - Pupil services: Home-to-school transportation 5,227,376 3, ,213 - Food services 9,694,413 1,593,231 7,986,061 - All other pupil services 7,896,406 46,138 2,199,315 - Administration: Data processing 2,451,546 1,478 12,350 - All other administration 8,311,408 79,520 1,085,802 - Plant services 20,372,356 39, ,152 - Ancillary services 1,007, Community services 84, Enterprise services 531, Interest on long-term obligations 7,450, Other outgo 18,006, ,196 10,747,854 - Depreciation (unallocated) 1 6,848, Total Governmental Activities 233,297,306 2,748,569 57,113,701 22,017 Business-Type Activities Enterprise services 543, , Total Business-Type Activities 543, , Total School District $ 233,840,608 $ 3,524,519 $ 57,113,701 $ 22,017 The accompanying notes are an integral part of these financial statements. General revenues and subventions: Property taxes, levied for general purposes Property taxes, levied for debt service Taxes levied for other specific purposes Federal and State aid not restricted to specific purposes Interagency revenues Interest and investment earnings Miscellaneous Subtotal, General Revenues Transfers Change in Net Position Net Position - Beginning, as restated Net Position - Ending 1 This amount excludes any depreciation that is included in the direct expenses of the various programs. 19

29 Net (Expenses) Revenues and Changes in Net Position Business- Governmental Type Activities Activities Total $ (93,392,933) $ - $ (93,392,933) (3,786,732) - (3,786,732) (606,210) - (606,210) (12,506,627) - (12,506,627) (5,100,197) - (5,100,197) (115,121) - (115,121) (5,650,953) - (5,650,953) (2,437,718) - (2,437,718) (7,146,086) - (7,146,086) (19,683,001) - (19,683,001) (1,007,630) - (1,007,630) (84,733) - (84,733) (531,369) - (531,369) (7,450,060) - (7,450,060) (7,064,782) - (7,064,782) (6,848,867) - (6,848,867) (173,413,019) - (173,413,019) - 232, , , ,648 (173,413,019) 232,648 (173,180,371) 18,409,803-18,409,803 7,554,404-7,554, , , ,386, ,386, , , , ,646 12,619,458 1,093 12,620, ,820,604 1, ,821, ,000 (200,000) - (16,392,415) 33,741 (16,358,674) 161,398,600 14, ,413,320 $ 145,006,185 $ 48,461 $ 145,054,646 19

30 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT GOVERNMENTAL FUNDS BALANCE SHEET JUNE 30, 2014 Special Education Non-Major Total General Pass-Through Building Governmental Governmental Fund Fund Fund Funds Funds ASSETS Deposits and investments $ 12,447,576 $ 86,224 $ 19,659,324 $ 27,494,973 $ 59,688,097 Receivables 26,881,190 4,125,287 81,405 3,063,848 34,151,730 Due from other funds 600, ,000 Prepaid expenditures 19, ,037 Stores inventories 196, , ,032 Total Assets $ 40,144,000 $ 4,211,511 $ 19,740,729 $ 30,692,656 $ 94,788,896 LIABILITIES AND FUND BALANCES Liabilities: Accounts payable $ 9,490,165 $ 4,211,511 $ 2,183,103 $ 1,139,410 $ 17,024,189 Due to other funds , ,000 Unearned revenue 243, , ,632 Total Liabilities 9,733,349 4,211,511 2,183,103 1,754,858 17,882,821 Fund Balances: Nonspendable 340, , ,069 Restricted 320,137-17,557,626 21,183,467 39,061,230 Committed , ,682 Assigned 4,481, ,999,814 11,481,310 Unassigned 25,268, ,268,784 Total Fund Balances 30,410,651-17,557,626 28,937,798 76,906,075 Total Liabilities and Fund Balances $ 40,144,000 $ 4,211,511 $ 19,740,729 $ 30,692,656 $ 94,788,896 The accompanying notes are an integral part of these financial statements. 20

31 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET POSITION JUNE 30, 2014 Total Fund Balance - Governmental Funds $ 76,906,075 Amounts Reported for Governmental Activities in the Statement of Net Position are Different Because: Capital assets used in governmental activities are not financial resources and, therefore, are not reported as assets in governmental funds. The cost of capital assets is: $ 366,113,373 Accumulated depreciation is: (96,447,770) Net Capital Assets 269,665,603 This is the deferred amount on refunding as a result of refunding of bonds. The difference between the amounts that were sent to the escrow agent for the repayment of the old debt and the actual remaining debt obligation will be amortized as an adjustment to interest expense over the remaining life of the refunded debt. This balance represents the unamortized remaining balance as of year-end. 2,328,909 In governmental funds, unmatured interest on long-term obligations is recognized in the period when it is due. On the government-wide statements, unmatured interest on long-term obligations is recognized when it is incurred. (554,635) An Internal Service Fund is used by the District's management to charge the costs of the workers' compensation insurance program to the individual funds. The assets and liabilities of the Internal Service Fund are included with governmental activities. 5,913,618 Long-term obligations, including bonds payable, are not due and payable in the current period and, therefore, are not reported as liabilities in the funds. Long-term obligations at year-end consist of: General obligation bonds (139,488,698) Unamortized premium on bond issuance (3,475,210) 2005 Certificates of Participation (QZAB program) (2,770,165) Capital leases payable (185,434) Other postemployment benefits (OPEB) (20,424,923) Compensated absences (vacations) (1,974,646) Supplemental early retirement plan (SERP) (645,283) In addition, the District has issued "capital appreciation" General Obligation Bonds. The accretion of interest on the General Obligation Bonds to date is: (40,289,026) Total Long-Term Obligations (209,253,385) Total Net Position - Governmental Activities $ 145,006,185 The accompanying notes are an integral part of these financial statements. 21

32 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES FOR THE YEAR ENDED JUNE 30, 2014 Special Education Non-Major Total General Pass-Through Building Governmental Governmental Fund Fund Fund Funds Funds REVENUES Local control funding formula $ 132,160,839 $ - $ - $ - $ 132,160,839 Federal sources 10,714,242 3,659,504-14,449,813 28,823,559 Other State sources 26,978,135 10,779,199-1,962,855 39,720,189 Other local sources 3,306, ,349 12,368,043 15,829,354 Total Revenues 173,160,178 14,438, ,349 28,780, ,533,941 EXPENDITURES Current Instruction 114,123, ,396, ,520,136 Instruction-related activities: Supervision of instruction 7,293, ,077 8,104,320 Instructional library, media, and technology 676, , ,092 School site administration 11,180, ,185,259 13,365,396 Pupil services: Home-to-school transportation 5,129, ,129,512 Food services 12, ,587,886 9,600,456 All other pupil services 7,201, ,352 7,739,245 Administration: Data processing 2,357, ,357,391 All other administration 7,751, ,606 8,252,957 Plant services 18,869, ,164,357 20,033,996 Facility acquisition and construction 395,454-8,426,170 2,762,082 11,583,706 Ancillary services 986, ,863 Community services 82, ,811 Other outgo 3,568,129 14,438, ,006,832 Enterprise services , ,653 Debt service Principal 118, ,435,000 4,553,736 Interest and other 1, ,766,006 2,767,222 Total Expenditures 179,749,285 14,438,703 8,426,170 31,505, ,119,324 Excess (Deficiency) of Revenues Over Expenditures (6,589,107) - (8,271,821) (2,724,455) (17,585,383) Other Financing Sources (Uses) Transfers in 300, ,756,651 4,056,651 Other sources - proceeds from issuance of debt 284, ,115,000 15,399,649 Transfers out (3,734,634) - - (122,017) (3,856,651) Other uses - payment to refunded bond escrow agent (14,905,708) (14,905,708) Net Financing Sources (Uses) (3,149,985) - - 3,843, ,941 NET CHANGE IN FUND BALANCES (9,739,092) - (8,271,821) 1,119,471 (16,891,442) Fund Balances - Beginning 40,149,743-25,829,447 27,818,327 93,797,517 Fund Balances - Ending $ 30,410,651 $ - $ 17,557,626 $ 28,937,798 $ 76,906,075 The accompanying notes are an integral part of these financial statements. 22

33 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT GOVERNMENTAL FUNDS RECONCILIATION OF GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2014 Total Net Change in Fund Balances - Governmental Funds Amounts Reported for Governmental Activities in the Statement of Activities are Different Because: $ (16,891,442) Capital outlays to purchase or build capital assets are reported in governmental funds as expenditures; however, for governmental activities, those costs are shown in the Statement of Net Position and allocated over their estimated useful lives as annual depreciation expenses in the Statement of Activities. This is the amount by which capital outlays exceed depreciation in the period. Capital outlays $ 11,780,026 Depreciation expense (6,848,867) Net Expense Adjustment 4,931,159 Loss on disposal of capital assets is reported in the government-wide Statement of Net Assets, but is not recorded in the governmental funds. (920) In the Statement of Activities, certain operating expenses - compensated absences (vacations) and special termination benefits (early retirement) are measured by the amounts earned during the year. In the governmental funds, however, expenditures for these items are measured by the amount of financial resources used (essentially, the amounts actually paid). This year, early retirement benefits of $645,283 were paid. Vacation earned was less than the amounts used by $32, ,633 Contributions for postemployment benefits are recorded as an expense in the governmental funds when paid. However, the difference between the annual required contribution and the actual contribution made, if less, is recorded in the government wide statements as an expense. The actual amount of the contribution was less than the annual required contribution. (2,855,359) Proceeds received from issuance of debt is a revenue in the governmental funds, but it increases long-term obligations in the Statement of Net Position and does not affect the Statement of Activities: Proceeds from refunding general obligation bonds (15,115,000) Proceeds for issuance of capital leases (284,649) Governmental funds report the effect of premiums, discounts, and the deferred amount on a refunding when the debt is first issued, whereas the amounts are deferred and amortized in the Statement of Activities. This amount is the net effect of these related items: Deferred charges on refunding 505,975 Premium on issuance 2,148,281 Combined Adjustment 2,654,256 The accompanying notes are an integral part of these financial statements. 23

34 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT GOVERNMENTAL FUNDS RECONCILIATION OF GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES (Continued) FOR THE YEAR ENDED JUNE 30, 2014 Repayment of principal is an expenditure in the governmental funds, but it reduces long-term liabilities in the Statement of Net Position and does not affect the Statement of Activities: General obligation bonds $ 18,320,000 Capital lease obligations 118,736 Interest on long-term obligations in the Statement of Activities differs from the amount reported in the governmental funds because interest is recorded as an expenditure in the funds when it is due, and thus requires the use of current financial resources. In the Statement of Activities, however, interest expense is recognized as the interest accrues, regardless of when it is due. The additional interest reported in the Statement of Activities is the result of two factors. First, accrued interest on the general obligation bonds and the certificates of participation decreased by $365,948 and second, $6,682,334 of accumulated interest was accreted on the District's "capital appreciation" general obligation bonds. (6,316,386) An Internal Service Fund is used by the District's management to charge the costs of workers' compensation coverage, liability and property coverage, and health benefits to the individual funds. The net revenue of the Internal Service Fund is reported with governmental activities. (1,630,443) Change in Net Position of Governmental Activities $ (16,392,415) The accompanying notes are an integral part of these financial statements. 24

35 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT PROPRIETARY FUNDS STATEMENT OF NET POSITION JUNE 30, 2014 ASSETS Current Assets Business-Type Activities Governmental Enterprise Fund Activities - Child Care Internal Enterprise Service Fund Deposits and investments $ 112,935 $ 32,532,058 Receivables 1,700 94,511 Total Current Assets 114,635 32,626,569 Noncurrent Assets Furniture and equipment 12,795 - Less: accumulated depreciation (12,795) - Total Capital Assets - - Total Assets 114,635 32,626,569 LIABILITIES Current Liabilities Accounts payable 19,183 5,504,211 Unearned revenue 46,991 - Current portion of claims liability - 2,167,767 Total Current Liabilities 66,174 7,671,978 Noncurrent Liabilities Noncurrent portion of claims liability and SELF assessment - 19,040,973 NET POSITION Restricted - 5,913,618 Unrestricted 48,461 - Total Net Position $ 48,461 $ 5,913,618 The accompanying notes are an integral part of these financial statements. 25

36 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT PROPRIETARY FUNDS STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET POSITION FOR THE YEAR ENDED JUNE 30, 2014 Business-Type Activities Governmental Enterprise Fund Activities - Child Care Internal Enterprise Service Fund OPERATING REVENUES Local and intermediate sources $ 775,950 $ 28,112,464 OPERATING EXPENSES Payroll costs 493, ,216 Professional and contract services 18,031 29,675,894 Supplies and materials 32,018 60,667 Total Operating Expenses 543,302 29,914,777 Operating Income (loss) 232,648 (1,802,313) NONOPERATING REVENUES Interest income 1, ,870 Transfers out (200,000) - Change in Net Position 33,741 (1,630,443) Total Net Position - Beginning 14,720 7,544,061 Total Net Position - Ending $ 48,461 $ 5,913,618 The accompanying notes are an integral part of these financial statements. 26

37 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT PROPRIETARY FUNDS STATEMENT OF CASH FLOWS FOR THE YEAR ENDED JUNE 30, 2014 Business-Type Activities Governmental Enterprise Fund Activities - Child Care Internal Enterprise Service Fund CASH FLOWS FROM OPERATING ACTIVITIES Cash receipts from customers $ 800,256 $ - Cash received from assessments made to other funds - 28,077,858 Cash payments to employees for services (493,253) (178,216) Cash payments to suppliers of goods or services (25,774) (26,774,231) Other operating cash payments (18,031) (4,191) Net Cash Provided by Operating Activities 263,198 1,121,220 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Transfers out (200,000) - CASH FLOWS FROM INVESTING ACTIVITIES Interest on investments 1, ,870 Net Increase in Cash and Cash Equivalents 64,291 1,293,090 Cash and Cash Equivalents - Beginning 48,644 31,238,968 Cash and Cash Equivalents - Ending $ 112,935 $ 32,532,058 RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH PROVIDED BY OPERATING ACTIVITIES Operating income (loss) $ 232,648 $ (1,802,313) Adjustments to reconcile operating income (loss) to net cash provided by operating activities: Changes in assets and liabilities: Receivables 195 (34,606) Prepaid expenses 1,362 - Accounts payable 4, ,931 Unearned revenue 24,111 - Claims liability - 2,676,208 NET CASH PROVIDED BY OPERATING ACTIVITIES $ 263,198 $ 1,121,220 The accompanying notes are an integral part of these financial statements. 27

38 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT FIDUCIARY FUNDS STATEMENT OF NET POSITION JUNE 30, 2014 Scholarship Agency Trust Funds ASSETS Deposits and investments $ 16,731 $ 893,325 Receivables 60 - Total Assets 16,791 $ 893,325 LIABILITIES Due to student groups - 893,325 Total Liabilities - $ 893,325 NET POSITION Restricted 16,791 Total Net Position $ 16,791 The accompanying notes are an integral part of these financial statements. 28

39 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT FIDUCIARY FUNDS STATEMENT OF CHANGES IN NET POSITION FOR THE YEAR ENDED JUNE 30, 2014 ADDITIONS Trust Interest $ 109 Scholarship DEDUCTIONS Other expenditures 500 Change in Net Position (391) Net Position - Beginning 17,182 Net Position - Ending $ 16,791 The accompanying notes are an integral part of these financial statements. 29

40 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2014 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Financial Reporting Entity The Norwalk-La Mirada Unified School District (the District) was unified on July 1, 1965 under the laws of the State of California. The District operates under a locally elected seven-member Board form of government and provides educational services to grades K-12 as mandated by the State and/or Federal agencies. The District is located in, and occupies the cities of Norwalk and La Mirada, in addition to smaller portions of the cities of Santa Fe Springs, Whittier, and unincorporated areas of. The District operates 17 elementary schools, six middle schools, three high schools, a continuation high school, and two adult education schools. A reporting entity is comprised of the primary government, component units, and other organizations that are included to ensure the financial statements are not misleading. The primary government of the District consists of all funds, departments, boards, and agencies that are not legally separate from the District. For Norwalk-La Mirada Unified School District, this includes general operations, food service, and student related activities of the District. Basis of Presentation - Fund Accounting The accounting system is organized and operated on a fund basis. A fund is defined as a fiscal and accounting entity with a self-balancing set of accounts, which are segregated for the purpose of carrying on specific activities or attaining certain objectives in accordance with special regulations, restrictions, or limitations. The District's funds are grouped into three broad fund categories: governmental, proprietary, and fiduciary. Governmental Funds Governmental funds are those through which most governmental functions typically are financed. Governmental fund reporting focuses on the sources, uses, and balances of current financial resources. Expendable assets are assigned to the various governmental funds according to the purposes for which they may or must be used. Current liabilities are assigned to the fund from which they will be paid. The difference between governmental fund assets and liabilities is reported as fund balance. The following are the District's major and non-major governmental funds: Major Governmental Funds General Fund The General Fund is the chief operating fund for all districts. It is used to account for the ordinary operations of the District. All transactions except those accounted for in another fund are accounted for in this fund. One fund currently defined as a special revenue fund in the California State Accounting Manual (CSAM) does not meet the GASB Statement No. 54 special revenue fund definition. Specifically, Fund 20, Special Reserve Fund for Postemployment Benefits, is not substantially composed of restricted or committed revenue sources. While this fund is authorized by statute and will remain open for internal reporting purposes, this fund functions effectively as an extension of the General Fund, and accordingly has been combined with the General Fund for presentation in these audited financial statements. As a result, the General Fund reflects an increase in fund balance of $4,481,496 as of June 30,

41 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2014 Special Education Pass-Through Fund This fund is used by the Administrative Unit of a multi-district Special Education Local Plan Area (SELPA) to account for Special Education revenue passed through to other member districts. Building Fund The Building Fund exists primarily to account separately for proceeds from the sale of bonds (Education Code Section 15146) and may not be used for any purposes other than those for which the bonds were issued. Non-Major Governmental Funds Special Revenue Funds The Special Revenue funds are established to account for the proceeds from specific revenue sources (other than trusts, major capital projects, or debt service) that are restricted or committed to the financing of particular activities and that compose a substantial portion of the inflows of the fund. Additional resources that are restricted, committed, or assigned to the purpose of the fund may also be reported in the fund. Adult Education Fund The Adult Education Fund is used to account separately for Federal, State, and local revenues for adult education programs and is to be expended for adult education purposes only. Child Development Fund The Child Development Fund is used to account separately for Federal, State, and local revenues to operate child development programs and is to be used only for expenditures for the operation of child development programs. Cafeteria Fund The Cafeteria Fund is used to account separately for Federal, State, and local resources to operate the food service program (Education Code Sections ) and is used only for those expenditures authorized by the governing board as necessary for the operation of the District's food service program (Education Code Sections and 38100). Deferred Maintenance Fund The Deferred Maintenance Fund is used to account separately for State apportionments and the District's contributions for deferred maintenance purposes (Education Code Sections ) and for items of maintenance approved by the State Allocation Board. Capital Project Funds The Capital Project funds are used to account for financial resources that are restricted, committed, or assigned to the acquisition or construction of major capital facilities and other capital assets (other than those financed by proprietary funds and trust funds). Capital Facilities Fund The Capital Facilities Fund is used primarily to account separately for monies received from fees levied on developers or other agencies as a condition of approving a development (Education Code Sections ). Expenditures are restricted to the purposes specified in Government Code Sections or to the items specified in agreements with the developer (Government Code Section 66006). 31

42 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2014 County School Facilities Fund The County School Facilities Fund is established pursuant to Education Code Section to receive apportionments from the 1998 State School Facilities Fund (Proposition la), the 2002 State School Facilities Fund (Proposition 47), the 2004 State School Facilities Fund (Proposition 55), or the 2006 State Schools Facilities Fund (Proposition 1D) authorized by the State Allocation Board for new school facility construction, modernization projects, and facility hardship grants, as provided in the Leroy F. Greene School Facilities Act of 1998 (Education Code Section et seq.). Special Reserve Fund for Capital Outlay Projects The Special Reserve Fund for Capital Outlay Projects exists primarily to provide for the accumulation of General Fund monies for capital outlay purposes (Education Code Section 42840). Debt Service Funds The Debt Service funds are used to account for the accumulation of restricted, committed, or assigned resources for and the payment of principal and interest on general long-term debt. Bond Interest and Redemption Fund The Bond Interest and Redemption Fund is used for the repayment of bonds issued for a District (Education Code Sections ). Proprietary Funds Proprietary funds are used to account for activities that are more business-like than government-like in nature. Business-type activities include those for which a fee is charged to external users or to other organizational units of the local education agency, normally on a full cost-recovery basis. Proprietary funds are generally intended to be self-supporting and are classified as enterprise or internal service. The District has the following proprietary funds: Enterprise Fund Enterprise funds may be used to account for any activity for which a fee is charged to external users for goods or services. The only enterprise fund of the District accounts for the financial transactions related to the fee-based child care program of the District. Internal Service Fund Internal service funds may be used to account for goods or services provided to other funds of the District on a cost-reimbursement basis. The District operates a self-insurance program that is accounted for in an internal service fund. The Internal Service Fund consists of three sub-funds as follows: Health and Welfare Fund The Health and Welfare Fund is used to account for resources committed to the District's medical insurance program. Workers' Compensation Fund The Workers' Compensation Fund is used to account for resources committed to the District's self-insurance program for workers' compensation. Property and Liability Fund The Property and Liability Fund is used to account for resources committed to the District's self-insurance program for property and liability insurance. Fiduciary Funds Fiduciary funds are used to account for assets held in trustee or agent capacity for others that cannot be used to support the District's own programs. The fiduciary fund category is split into four classifications: pension trust funds, investment trust funds, private-purpose trust funds, and agency funds. The key distinction between trust and agency funds is that trust funds are subject to a trust agreement that affects the degree of management involvement and the length of time that the resources are held. 32

43 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2014 Trust funds are used to account for the assets held by the District under a trust agreement for individuals, private organizations, or other governments and are therefore, not available to support the District's own programs. The District operates a trust fund for the Paul and Estelle Fincik Scholarship Fund. Agency funds are custodial in nature (assets equal liabilities) and do not involve measurement of results of operations. Such funds have no equity accounts since all assets are due to individuals or entities at some future time. The District's agency fund accounts for associated student body (ASB) activities. Basis of Accounting - Measurement Focus Government-Wide Financial Statements The government-wide financial statements are prepared using the economic resources measurement focus and the accrual basis of accounting. This is the same approach used in the preparation of the proprietary fund financial statements, but differs from the manner in which governmental fund financial statements are prepared. The government-wide statement of activities presents a comparison between expenses, both direct and indirect, and program revenues for each segment of the business-type activities of the District and for each governmental function, and excludes fiduciary activity. Direct expenses are those that are specifically associated with a service, program, or department and are therefore, clearly identifiable to a particular function. The District does not allocate indirect expenses to functions in the Statement of Activities. Program revenues include charges paid by the recipients of the goods or services offered by the programs and grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues are presented as general revenues. The comparison of program revenues and expenses identifies the extent to which each program or business segment is self-financing or draws from the general revenues of the District. Eliminations have been made to minimize the double counting of internal activities. Net position should be reported as restricted when constraints placed on net position are either externally imposed by creditors (such as through debt covenants), grantors, contributors, or laws or regulations of other governments or imposed by law through constitutional provisions or enabling legislation. The net position restricted for other activities result from special revenue funds and the restrictions on their use. Fund Financial Statements Fund financial statements report detailed information about the District. The focus of governmental and proprietary fund financial statements is on major funds rather than reporting funds by type. Each major fund is presented in a separate column. Non-major funds are aggregated and presented in a single column. The internal service fund is presented in a single column on the face of the proprietary fund statements. Governmental Funds All governmental funds are accounted for using the flow of current financial resources measurement focus and the modified accrual basis of accounting. With this measurement focus, only current assets and current liabilities generally are included on the balance sheet. The statement of revenues, expenditures, and changes in fund balances reports on the sources (revenues and other financing sources) and uses (expenditures and other financing uses) of current financial resources. This approach differs from the manner in which the governmental activities of the government-wide financial statements are prepared. Governmental fund financial statements, therefore, include reconciliations with brief explanations to better identify the relationship between the government-wide financial statements, prepared using the economic resources measurement focus and the accrual basis of accounting, and the governmental fund financial statements, prepared using the flow of current financial resources measurement focus and the modified accrual basis of accounting. 33

44 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2014 Proprietary Funds Proprietary funds are accounted for using the flow of economic resources measurement focus and the accrual basis of accounting. All assets and all liabilities associated with the operation of this fund are included in the Statement of Net Position. The statement of changes in fund net position presents increases (revenues) and decreases (expenses) in net total assets. The statement of cash flows provides information about how the District finances and meets the cash flow needs of its proprietary fund. Fiduciary Funds Fiduciary funds are accounted for using the flow of economic resources measurement focus and the accrual basis of accounting. Fiduciary funds are excluded from the government-wide financial statements because they do not represent resources of the District. Revenues Exchange and Non-Exchange Transactions Revenue resulting from exchange transactions, in which each party gives and receives essentially equal value, is recorded on 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 that 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 expected to be received within 90 days of fiscal year-end. However, to achieve comparability of reporting among California districts and so as not to distort normal revenue patterns, with specific respect to reimbursement grants and corrections to state-aid apportionments, the California Department of Education has defined available for districts as collectible within one year. The following revenue sources are considered to be both measurable and available at fiscal year-end: State apportionments, interest, certain grants, and other local sources. Non-exchange transactions, in which the District receives value without directly giving equal value in return, include property taxes, certain grants, entitlements, and donations. Revenue from property taxes is recognized in the fiscal year in which the taxes are received. Revenue from certain grants, entitlements, and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied. Eligibility requirements include time and purpose restrictions. On a modified accrual basis, revenue from non-exchange transactions must also be available before it can be recognized. Unearned Revenue Unearned revenue arises when potential revenue does not meet both the "measurable" and "available" criteria for recognition in the current period or when resources are received by the District prior to the incurrence of qualifying expenditures. In subsequent periods, when both revenue recognition criteria are met, or when the District has a legal claim to the resources, the liability for unearned revenue is removed from the balance sheet and revenue is recognized. Certain grants received before the eligibility requirements are met are recorded as unearned revenue. On the governmental fund financial statements, receivables that will not be collected within the available period are also recorded as unearned revenue. Expenses/Expenditures On the accrual basis of accounting, expenses are recognized at the time they are incurred. The measurement focus of governmental fund accounting is on decreases in net financial resources (expenditures) rather than expenses. Expenditures are generally recognized in the accounting period in which the related fund liability is incurred, if measurable, and typically paid within 90 days. Principal and interest on longterm obligations, which has not matured, are recognized when paid in the governmental funds as expenditures. Allocations of costs, such as depreciation and amortization, are not recognized in the governmental funds but are recognized in the entity-wide statements. 34

45 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2014 Cash and Cash Equivalents The District's cash and cash equivalents are considered to be cash on hand, demand deposits, and short-term investments with original maturities of three months or less from the date of acquisition. Cash equivalents also include cash with county treasury balances for purposes of the statement of cash flows. Investments Investments held at June 30, 2014, with original maturities greater than one year are stated at fair value. Fair value is estimated based on quoted market prices at year-end. All investments not required to be reported at fair value are stated at cost or amortized cost. Fair values of investments in county and State investment pools are determined by the program sponsor. Prepaid Expenditures (Expenses) Prepaid expenditures (expenses) represent amounts paid in advance of receiving goods or services. 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 expenditures when paid. Stores Inventories Inventories consist of expendable food and supplies held for consumption. Inventories are stated at cost, on the first-in, first-out basis. The costs of inventory items are recorded as expenditures in the governmental and fiduciary funds when used. Capital Assets and Depreciation The accounting and reporting treatment applied to the capital assets associated with a fund are determined by its measurement focus. General capital assets are long-lived assets of the District. The District maintains a capitalization threshold of $5,000. The District does not possess any infrastructure. Improvements are capitalized; the costs of normal maintenance and repairs that do not add to the value of the asset or materially extend an asset's life are not capitalized, but are expensed as incurred. When purchased, such assets are recorded as expenditures in the governmental funds and capitalized in the government-wide financial statement of net position. The valuation basis for general capital assets are historical cost, or where historical cost is not available, estimated historical cost based on replacement cost. Donated capital assets are capitalized at estimated fair market value on the date donated. Capital assets in the proprietary funds are capitalized in the fund in which they are utilized. The valuation basis for proprietary fund capital assets are the same as those used for the capital assets of governmental funds. Depreciation of capital assets is computed and recorded by the straight-line method. Estimated useful lives of the various classes of depreciable capital assets are as follows: buildings and improvements, 20 to 50 years; equipment, 2 to 15 years; and vehicles, 8 years. 35

46 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2014 Compensated Absences Compensated absences are accrued as a liability as the benefits are earned. The entire compensated absence liability is reported on the government-wide statement of net position. For governmental funds, the current portion of unpaid compensated absences is recognized upon the occurrence of relevant events such as employee resignations and retirements that occur prior to year-end that have not yet been paid with expendable available financial resources. These amounts are reported in the fund from which the employees who have accumulated leave are paid. Sick leave is accumulated without limit for each employee at the rate of one day for each month worked. Leave with pay is provided when employees are absent for health reasons; however, the employees do not gain a vested right to accumulated sick leave. Employees are never paid for any sick leave balance at termination of employment or any other time. Therefore, the value of accumulated sick leave is not recognized as a liability in the District's financial statements. However, credit for unused sick leave is applicable to all classified school members who retire after January 1, At retirement, each member will receive.004 year of service credit for each day of unused sick leave. Credit for unused sick leave is applicable to all certificated employees and is determined by dividing the number of unused sick days by the number of base service days required to complete the last school year, if employed full-time. Accrued Liabilities and Long-Term Obligations All payables, accrued liabilities, and long-term obligations are reported in the government-wide and proprietary fund financial statements. In general, governmental fund payables and accrued liabilities that, once incurred, are paid in a timely manner and in full from current financial resources are reported as obligations of the governmental funds. However, claims and judgments, compensated absences, special termination benefits, and contractually required pension contributions that will be paid from governmental funds are reported as a liability in the governmental fund financial statements only to the extent that they are due for payment during the current year. Bonds, capital leases, and other long-term obligations are recognized as liabilities in the governmental fund financial statements when due. Debt Issuance Costs, Premiums and Discounts In the government-wide financial statements and in the proprietary fund type financial statements, long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities, or proprietary fund statement of net Position. Debt premiums and discounts, as well as issuance costs, related to prepaid insurance costs are amortized over the life of the bonds using the straight-line method. In governmental fund financial statements, bond premiums and discounts, as well as debt issuance costs are recognized in the current period. The face amount of the debt is reported as other financing sources. Premiums received on debt issuance are also reported as other financing sources. Issuance costs, whether or not withheld from the actual debt proceeds, are reported as debt service expenditures. 36

47 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2014 Fund Balances - Governmental Funds As of June 30, 2014, fund balances of the governmental funds are classified as follows: Nonspendable - amounts that cannot be spent either because they are in nonspendable form or because they are legally or contractually required to be maintained intact. Restricted - amounts that can be spent only for specific purposes because of constitutional provisions or enabling legislation or because of constraints that are externally imposed by creditors, grantors, contributors, or the laws or regulations of other governments. Committed - amounts that can be used only for specific purposes determined by a formal action of the governing board. The governing board is the highest level of decision-making authority for the District. Commitments may be established, modified, or rescinded only through resolutions or other action as approved by the governing board. Assigned - amounts that do not meet the criteria to be classified as restricted or committed but that are intended to be used for specific purposes. Under the District's adopted policy, only the governing board or chief business officer/assistant superintendent of business services may assign amounts for specific purposes. Unassigned - all other spendable amounts. Spending Order Policy When an expenditure is incurred for purposes for which both restricted and unrestricted fund balance is available, the District considers restricted funds to have been spent first. When an expenditure is incurred for which committed, assigned, or unassigned fund balances are available, the District considers amounts to have been spent first out of committed funds, then assigned funds, and finally unassigned funds, as needed, unless the governing board has provided otherwise in its commitment or assignment actions. Minimum Fund Balance Policy The governing board adopted a minimum fund balance policy for the General Fund in order to protect the district against revenue shortfalls or unpredicted one-time expenditures. The policy requires a Reserve for Economic Uncertainties consisting of unassigned amounts equal to no less than five percent of General Fund expenditures and other financing uses. Net Position Net position represents the difference between assets and liabilities. Net position net of investment in capital assets consists of capital assets, net of accumulated depreciation, reduced by the outstanding balances of any borrowings used for the acquisition, construction or improvement of those assets. Net position is reported as restricted when there are limitations imposed on their use either through the enabling legislation adopted by the District or through external restrictions imposed by creditors, grantors, or laws or regulations of other governments. The District first applies restricted resources when an expense is incurred for purposes for which both restricted and unrestricted net position is available. Enabling legislation relates to laws passed that create a revenue source to be used for specific purposes. The government-wide financial statements report $26,996,422 restricted by enabling legislation. 37

48 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2014 Operating Revenues and Expenses Operating revenues are those revenues that are generated directly from the primary activity of the proprietary funds. For the District, these revenues are charges to other funds related to the self-insurance program and child care fees. Operating expenses are necessary costs incurred to provide the good or service that is the primary activity of the fund. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. Interfund Activity Transfers between governmental and business-type activities in the government-wide financial statements are reported in the same manner as general revenues. Exchange transactions between funds are reported as revenues in the seller funds and as expenditures/expenses in the purchaser funds. Flows of cash or goods from one fund to another without a requirement for repayment are reported as interfund transfers. Interfund transfers are reported as other financing sources/uses in governmental funds and after non-operating revenues/expenses in proprietary funds. Repayments from funds responsible for particular expenditures/expenses to the funds that initially paid for them are not presented in the financial statements. Interfund transfers are eliminated in the governmental and business-type activities columns of the Statement of Activities, except for the net residual amounts transferred between governmental and business-type activities. Estimates The preparation of the 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 amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates. Budgetary Data The budgetary process is prescribed by provisions of the California Education Code and requires the governing board to hold a public hearing and adopt an operating budget no later than July 1 st of each year. The District governing board satisfied these requirements. The adopted budget is subject to amendment throughout the year to give consideration to unanticipated revenue and expenditures primarily resulting from events unknown at the time of budget adoption with the legal restriction that expenditures cannot exceed appropriations by major object account. The amounts reported as the original budgeted amounts in the budgetary statements reflect the amounts when the original appropriations were adopted. The amounts reported as the final budgeted amounts in the budgetary statements reflect the amounts after all budget amendments have been accounted for. For budget purposes, on behalf payments have not been included as revenue and expenditures as required under generally accepted accounting principles. 38

49 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2014 Property Tax Secured property taxes attach as an enforceable lien on property as of January 1. Taxes are payable in two installments on November 1 and February 1 and become delinquent on December 10 and April 10, respectively. Unsecured property taxes are payable in one installment on or before August 31. The County of Los Angeles bills and collects the taxes on behalf of the District. Local property tax revenues are recorded when received. Change in Accounting Principles In March 2012, the GASB issued Statement No. 65, Items Previously Reported as Assets and Liabilities. This Statement establishes accounting and financial reporting standards that reclassify, as deferred outflows of resources or deferred inflows of resources, certain items that were previously reported as assets and liabilities and recognizes, as outflows of resources or inflows of resources, certain items that were previously reported as assets and liabilities. Concepts Statement No. 4, Elements of Financial Statements, introduced and defined the elements included in financial statements, including deferred outflows of resources and deferred inflows of resources. In addition, Concepts Statement 4 provides that reporting a deferred outflow of resources or a deferred inflow of resources should be limited to those instances identified by the Board in authoritative pronouncements that are established after applicable due process. Prior to the issuance of this Statement, only two such pronouncements have been issued. Statement No. 53, Accounting and Financial Reporting for Derivative Instruments, requires the reporting of a deferred outflow of resources or a deferred inflow of resources for the changes in fair value of hedging derivative instruments, and Statement No. 60, Accounting and Financial Reporting for Service Concession Arrangements, requires a deferred inflow of resources to be reported by a transferor government in a qualifying service concession arrangement. This Statement amends the financial statement element classification of certain items previously reported as assets and liabilities to be consistent with the definitions in Concepts Statement 4. This Statement also provides other financial reporting guidance related to the impact of the financial statement elements deferred outflows of resources and deferred inflows of resources, such as changes in the determination of the major fund calculations and limiting the use of the term deferred in financial statement presentations. The District has implemented the provisions of this Statement for the year ended June 30, As the result of implementing GASB Statement No. 65, the District has restated the beginning net position in the government-wide Statement of Net Position, effectively decreasing net position as of July 1, 2013, by $2,856,495. The decrease results from no longer deferring and amortizing bond issuance costs. New Accounting Pronouncements In June 2012, the GASB issued Statement No. 68, Accounting and Financial Reporting for Pensions an amendment of GASB Statement No. 27. The primary objective of this Statement is to improve accounting and financial reporting by state and local governments for pensions. It also improves information provided by state and local governmental employers about financial support for pensions that is provided by other entities. This Statement results from a comprehensive review of the effectiveness of existing standards of accounting and financial reporting for pensions with regard to providing decision-useful information, supporting assessments of accountability and inter-period equity, and creating additional transparency. 39

50 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2014 This Statement replaces the requirements of Statement No. 27, Accounting for Pensions by State and Local Governmental Employers, as well as the requirements of Statement No. 50, Pension Disclosures, as they relate to pensions that are provided through pension plans administered as trusts or equivalent arrangements (hereafter jointly referred to as trusts) that meet certain criteria. The requirements of Statements No. 27 and No. 50 remain applicable for pensions that are not covered by the scope of this Statement. The scope of this Statement addresses accounting and financial reporting for pensions that are provided to the employees of state and local governmental employers through pension plans that are administered through trusts that have the following characteristics: Contributions from employers and non-employer contributing entities to the pension plan and earnings on those contributions are irrevocable. Pension plan assets are dedicated to providing pensions to plan members in accordance with the benefit terms. Pension plan assets are legally protected from the creditors of employers, non-employer contributing entities, and the pension plan administrator. If the plan is a defined benefit pension plan, plan assets also are legally protected from creditors of the plan members. This Statement establishes standards for measuring and recognizing liabilities, deferred outflows of resources, and deferred inflows of resources, and expense/expenditures. For defined benefit pensions, this Statement identifies the methods and assumptions that should be used to project benefit payments, discount projected benefit payments to their actuarial present value, and attribute that present value to periods of employee service. Note disclosure and required supplementary information requirements about pensions also are addressed. Distinctions are made regarding the particular requirements for employers based on the number of employers whose employees are provided with pensions through the pension plan and whether pension obligations and pension plan assets are shared. Employers are classified in one of the following categories for purposes of this Statement: Single employers are those whose employees are provided with defined benefit pensions through singleemployer pension plans pension plans in which pensions are provided to the employees of only one employer (as defined in this Statement). Agent employers are those whose employees are provided with defined benefit pensions through agent multiple-employer pension plans pension plans in which plan assets are pooled for investment purposes but separate accounts are maintained for each individual employer so that each employer's share of the pooled assets is legally available to pay the benefits of only its employees. Cost-sharing employers are those whose employees are provided with defined benefit pensions through cost-sharing multiple-employer pension plans pension plans in which the pension obligations to the employees of more than one employer are pooled and plan assets can be used to pay the benefits of the employees of any employer that provides pensions through the pension plan. 40

51 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2014 In addition, this Statement details the recognition and disclosure requirements for employers with liabilities (payables) to a defined benefit pension plan and for employers whose employees are provided with defined contribution pensions. This Statement also addresses circumstances in which a non-employer entity has a legal requirement to make contributions directly to a pension plan. This Statement is effective for fiscal years beginning after June 15, Early implementation is encouraged. In November 2013, the GASB issued Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date An Amendment of GASB Statement No.68. The objective of this Statement is to address an issue regarding application of the transition provisions of Statement No. 68, Accounting and Financial Reporting for Pensions. The issue relates to amounts associated with contributions, if any, made by a state or local government employer or nonemployer contributing entity to a defined benefit pension plan after the measurement date of the government's beginning net pension liability. Statement No. 68 requires a state or local government employer (or nonemployer contributing entity in a special funding situation) to recognize a net pension liability measured as of a date (the measurement date) no earlier than the end of its prior fiscal year. If a state or local government employer or nonemployer contributing entity makes a contribution to a defined benefit pension plan between the measurement date of the reported net pension liability and the end of the government's reporting period, Statement No. 68 requires that the government recognize its contribution as a deferred outflow of resources. In addition, Statement No. 68 requires recognition of deferred outflows of resources and deferred inflows of resources for changes in the net pension liability of a state or local government employer or nonemployer contributing entity that arise from other types of events. At transition to Statement No. 68, if it is not practical for an employer or nonemployer contributing entity to determine the amounts of all deferred outflows of resources and deferred inflows of resources related to pensions, paragraph 137 of Statement No. 68 required that beginning balances for deferred outflows of resources and deferred inflows of resources not be reported. Consequently, if it is not practical to determine the amounts of all deferred outflows of resources and deferred inflows of resources related to pensions, contributions made after the measurement date of the beginning net pension liability could not have been reported as deferred outflows of resources at transition. This could have resulted in a significant understatement of an employer or nonemployer contributing entity's beginning net position and expense in the initial period of implementation. This Statement amends paragraph 137 of Statement No. 68 to require that, at transition, a government recognize a beginning deferred outflow of resources for its pension contributions, if any, made subsequent to the measurement date of the beginning net pension liability. Statement No. 68, as amended, continues to require that beginning balances for other deferred outflows of resources and deferred inflows of resources related to pensions be reported at transition only if it is practical to determine all such amounts. The provisions of this Statement are required to be applied simultaneously with the provisions of Statement No

52 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2014 NOTE 2 - DEPOSITS AND INVESTMENTS Summary of Deposits and Investments Deposits and investments as of June 30, 2014, are classified in the accompanying financial statements as follows: Governmental activities $ 92,220,155 Business-type activities 112,935 Fiduciary funds 910,056 Total Deposits and Investments $ 93,243,146 Deposits and investments as of June 30, 2014, consist of the following: Cash on hand and in$ banks 893,325 Cash in revolving 400,000 Investments 91,949,821 Total Deposits and Investments $ 93,243,146 Policies and Practices The District is authorized under California Government Code to make direct investments in local agency bonds, notes, or warrants within the State; U.S. Treasury instruments; registered State warrants or treasury notes; securities of the U.S. Government, or its agencies; bankers acceptances; commercial paper; certificates of deposit 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, certificates of participation, obligations with first priority security; and collateralized mortgage obligations. Investment in County Treasury - The District is considered to be an involuntary participant in an external investment pool as the District is required to deposit all receipts and collections of monies with their County Treasurer (Education Code Section 41001). The fair value of the District's investment in the pool is reported in the accounting financial statements at amounts based upon the District's pro-rata share of the fair value provided by the County Treasurer for the entire portfolio (in relation to the amortized cost of that portfolio). The balance available for withdrawal is based on the accounting records maintained by the County Treasurer, which is recorded on the amortized cost basis. 42

53 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2014 General Authorizations Limitations as they relate to interest rate risk, credit risk, and concentration of credit risk are indicated in the schedules below: Maximum Maximum Maximum Authorized Remaining Percentage Investment Investment Type Maturity of Portfolio in One Issuer Local Agency Bonds, Notes, Warrants 5 years None None Registered State Bonds, Notes, Warrants 5 years None None U.S. Treasury Obligations 5 years None None U.S. Agency Securities 5 years None None Banker's Acceptance 180 days 40% 30% Commercial Paper 270 days 25% 10% Negotiable Certificates of Deposit 5 years 30% None Repurchase Agreements 1 year None None Reverse Repurchase Agreements 92 days 20% of base None Medium-Term Corporate Notes 5 years 30% None Mutual Funds N/A 20% 10% Money Market Mutual Funds N/A 20% 10% Mortgage Pass-Through Securities 5 years 20% None County Pooled Investment Funds N/A None None Local Agency Investment Fund (LAIF) N/A None None Joint Powers Authority Pools N/A None None 43

54 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2014 Authorized Under Debt Agreements Maximum Maximum Maximum Authorized Remaining Percentage Investment Investment Type Maturity of Portfolio in One Issuer U.S. Treasury Obligations N/A None None Farmers Home Administration certificates N/A None None General Services Administration certificates N/A None None U.S. Maritime Administration financing N/A None None Small Business Administration certificates N/A None None Guaranteed Pool certificates N/A None None Government National Mortgage Association (GNMA) securities and bonds N/A None None U.S Department of Housing and Urban Development obligations N/A None None U.S. Export-Import Bank obligations N/A None None Washington Metropolitan Area Transit Authority bonds N/A None None Federal Housing Administration debentures N/A None None Federal Home Loan Mortgage Corporation obligations N/A None None Farm Credit Banks bonds and notes N/A None None Federal Financing Bank N/A None None Federal Home Loan Banks obligations N/A None None Federal National Mortgage Association securities and obligations N/A None None Student Loan Marketing Association securities N/A None None Financing Corporation obligations N/A None None Resolution Funding Corporation obligations N/A None None Secured certificates of deposit, saving accounts, and deposit accounts N/A None None Unsecured certificates of deposit, time deposits, and bankers acceptance 30 days None None Fully insured deposits N/A None None Commercial paper 270 days None None Money market funds N/A None None Investment Pool N/A None None Local Agency Investment Fund (LAIF) N/A None None Repurchase Agreements 30 days None None Repurchase Agreements 270 days None None State obligations N/A None None Investment Agreements N/A None None Pre-Refunded Municipal Bonds N/A None None 44

55 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2014 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. The District does not have a formal investment policy that limits investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates. The District manages its exposure to interest rate risk by investing in the Investment Pool to provide the cash flow and liquidity needed for operations, and by purchasing a combination of shorter term and longer term investments and timing cash flows from maturities so that a portion of the portfolio is maturing or coming close to maturity evenly over time as necessary to provide the cash flow necessary for debt service requirements. Specific Identification Information about the sensitivity of the fair values of the District's investments to market interest rate fluctuation is provided by the following schedule that shows the distribution of the District's investment by maturity: Average Maturity Amortized Fair in Days/ Investment Type Cost Value Maturity Date Investment Pool $ 90,366,852 $ 89,661, First American Treasury Obligations Money Market Mutual Funds 1,792 1, Fortis Funding LLC Commercial Paper 1,581,177 1,556,783 12/29/2014 Total $ 91,949,821 $ 91,220,567 Credit Risk Credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. The District's investment in the Investment Pool is not required to be rated, nor has it been rated as of June 30, The First American Treasury Obligations Money Market Mutual Fund has been rated AAAm and the investment in Fortis Funding LLC Commercial Paper has been rated A-1 by Standard and Poor's Investors Service. 45

56 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2014 Custodial Credit Risk - Deposits This is the risk that in the event of a bank failure, the District's deposits may not be returned to it. The District does not have a policy for custodial credit risk for deposits. However, 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 percent of the total amount deposited by the public agency. California law also allows financial institutions to secure public deposits by pledging first trust deed mortgage notes having a value of 150 percent of the secured public deposits and letters of credit issued by the Federal Home Loan Bank of San Francisco having a value of 105 percent of the secured deposits. As of June 30, 2014, the District's cash in banks were either insured or collateralized by securities held by the pledging financial institution's trust department, but not in the name of the District. 46

57 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2014 NOTE 3 - RECEIVABLES Receivables at June 30, 2014, consisted of intergovernmental grants, entitlements, interest and other local sources. All receivables are considered collectible in full. Federal Government Special Education Non-Major General Pass-Through Building Governmental Fund Fund Fund Funds Categorical aid $ 2,135,264 $ 1,619,643 $ - $ 2,295,211 State Government State principle apportionment 17,961,403 2,505, Other Categorical aid 222, ,345 Special Education 4,084, Lottery 1,625, Local Government Interest 135,813-81,405 50,488 Southeast Academy ROP 394, Other Local Sources 320, ,804 Total $ 26,881,190 $ 4,125,287 $ 81,405 $ 3,063,848 Federal Government Total Internal Governmental Enterprise Fiduciary Service Fund Activities Fund Funds Categorical aid $ - $ 6,050,118 $ - $ - State Government State principle apportionment - 20,467, Other Categorical aid - 689, Special Education 4,084,895 Lottery - 1,625, Local Government Interest 94, , Southeast Academy ROP - 394, Other Local Sources , Total $ 94,511 $ 34,246,241 $ 1,700 $ 60 47

58 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2014 NOTE 4 - CAPITAL ASSETS Capital asset activity for the fiscal year ended June 30, 2014, was as follows: Governmental Activities Capital Assets Not Being Depreciated: Land 9,278,310 Balance Balance July 1, 2013 Additions Deductions June 30, 2014 $ $ - $ - $ 9,278,310 Construction in Progress 5,031,961 7,861, ,900 12,068,261 Total Capital Assets Not Being Depreciated 14,310,271 7,861, ,900 21,346,571 Capital Assets Being Depreciated: Land Improvements 7,286, ,466-8,222,109 Buildings and Improvements 317,423,533 3,285, ,709,500 Furniture and Equipment 15,375, ,293 62,491 15,835,193 Total Capital Assets Being Depreciated 340,085,567 4,743,726 62, ,766,802 Total Capital Assets 354,395,838 12,604, , ,113,373 Less Accumulated Depreciation: Land Improvements 4,680, ,828-4,864,864 Buildings and Improvements 72,765,496 6,115,894-78,881,390 Furniture and Equipment 12,214, ,145 61,571 12,701,516 Total Accumulated Depreciation 89,660,474 6,848,867 61,571 96,447,770 Governmental Activities Capital Assets, Net $ 264,735,364 $ 5,756,059 $ 825,820 $ 269,665,603 Business-Type Activities Furniture and Equipment $ 12,795 $ - $ - $ 12,795 Less Accumulated Depreciation 12, ,795 Business-Type Activities Capital Assets, Net $ - $ - $ - $ - Depreciation expense was excluded as a direct expense to governmental functions. 48

59 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2014 NOTE 5 - INTERFUND TRANSACTIONS Interfund Receivables/Payables (Due to/due from) Interfund receivable and payable balances arise from interfund transactions and are recorded by all funds affected in the period in which transactions are executed. Interfund receivable and payable balances at June 30, 2014, between major and non-major governmental funds, non-major enterprise funds, internal service funds, and fiduciary funds are as follows: The Child Development Non-Major Governmental Fund owes the General Fund for a temporary cash borrowing to be repaid. $ 600,000 Operating Transfers Interfund transfers for the year ended June 30, 2014, consisted of the following: Transfer From Non-Major General Governmental Enterprise Transfer To Fund Funds Fund Total General Fund $ - $ 100,000 $ 200,000 $ 300,000 Non-Major Governmental Funds 3,734,634 22,017-3,756,651 Total $ 3,734,634 $ 122,017 $ 200,000 $ 4,056,651 The General Fund transferred to the Adult Education Non-Major Governmental Fund for adult education funding and their share of lottery. The General Fund transferred to the Deferred Maintenance Non-Major Governmental Fund for deferred maintenance projects. The Child Development Non-Major Governmental Fund transferred to the General Fund for reimbursement of program costs. The County School Facilities Non-Major Governmental Fund transferred to the Special Reserve Fund for Capital Outlay Projects Non-Major Governmental Fund for excess interest earnings. $ 3,265, , ,000 22,017 The Child Care Enterprise Fund transferred to the General Fund as a result of excess earnings from the fee-based program. 200,000 Total $ 4,056,651 49

60 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2014 NOTE 6 - ACCOUNTS PAYABLE Accounts payable at June 30, 2014, consisted of the following: Special Education Non-Major General Pass-Through Building Governmental Fund Fund Fund Funds Salaries and benefits $ 1,941,589 $ - $ - $ 219,867 State principle apportionment 2,776, State categorical aid ,342 Supplies 2,647, ,880 Services 1,678, ,790 Construction 10,570-2,182, ,751 Pass-through of apportionment 432,070 4,211, Other vendor payables 4, ,780 Total $ 9,490,165 $ 4,211,511 $ 2,183,103 $ 1,139,410 Internal Total Service Governmental Enterprise Fund Activities Fund Salaries and benefits $ 5,450,941 $ 7,612,397 $ 15,037 State principle apportionment - 2,776,011 - State categorical aid - 71,342 - Supplies - 2,925,062 3,495 Services 1,125 1,819, Construction - 2,622,213 - Pass-through of apportionment - 4,643,581 - Other vendor payables 52,145 58,586 - Total $ 5,504,211 $ 22,528,400 $ 19,183 50

61 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2014 NOTE 7 - UNEARNED REVENUE Unearned revenue at June 30, 2014, consists of the following: Non-Major Total General Governmental Governmental Enterprise Fund Funds Activities Fund Federal financial assistance $ 2,503 $ - $ 2,503 $ - State categorical aid 106, ,283 - Other local 134,398 15, ,846 46,991 Total $ 243,184 $ 15,448 $ 258,632 $ 46,991 NOTE 8 - LONG-TERM OBLIGATIONS Summary The changes in the District's long-term obligations during the year consisted of the following: Balance Balance Due in July 1, 2013 Additions Deductions June 30, 2014 One Year General Obligation Bonds $ 176,300,390 $ 21,797,334 $ 18,320,000 $ 179,777,724 $ 5,305,000 Premium on issuance 5,623,491-2,148,281 3,475, Certificates of Participation (Qualified Academy Zone Bonds) 2,770, ,770,165 - Capital leases 19, , , ,434 90,623 Accumulated vacation - net 2,006,996-32,350 1,974,646 - Claims liability 18,084,959 4,843,975 2,167,767 20,761,167 2,167,767 Supplemental Early Retirement Plan (SERP) 1,290, , , ,283 Other postemployment benefits (OPEB) 17,569,564 3,594, ,259 20,424,923 - SELF workers' compensation assessment 447, ,573 - Total $ 224,113,225 $ 30,520,576 $ 24,171,676 $ 230,462,125 $ 8,208,673 Payments on the General Obligation Bonds are made by the Bond Interest and Redemption Fund with local revenues. The General Fund makes the payments for the capital leases. The accrued vacation will be paid by the fund for which the employee worked. Claims liability for workers' compensation and SELF assessment are paid out of the Internal Service Fund. Other postemployment benefits and the Supplemental Early Retirement Plan are generally paid by the General Fund. 51

62 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2014 General Obligation Bonds The outstanding general obligation bonded debt is as follows: Bonds Bonds Issue Maturity Interest Original Outstanding Outstanding Date Date Rate Issue July 1, 2013 Issued Accreted Redeemed June 30, /20/2005 8/1/ % $ 44,995,644 $ 64,136,917 $ - $ 3,207,606 $ 610,000 $ 66,734,523 4/20/2005 8/1/ % 57,105,000 24,870, ,985,000 8,885,000 11/27/2007 8/1/ % 29,200,602 27,168, , ,000 27,904,454 7/14/2009 2/1/ % 9,410,103 12,501, ,115-13,410,059 7/14/2009 8/1/ % 13,580,000 9,800, ,230,000 8,570,000 10/8/2009 8/1/ % 21,392,349 26,193,300-1,675,388-27,868,688 1/30/2013 8/1/ % 11,630,000 11,630, ,000 11,290,000 5/20/2014 8/1/ %-2.53% 15,115,000-15,115, ,115,000 $ 176,300,390 $ 15,115,000 $ 6,682,334 $ 18,320,000 $ 179,777, General Obligation Bonds, Series 2005B On April 20, 2005, the District issued the $44,995,644 of 2002 General Obligation Bonds, Series 2005B. The Series 2005B bonds were issued as both current interest bonds and capital appreciation bonds, with the value of the capital appreciation bonds accreting $70,089,356, and an aggregate principal debt service balance of $115,085,000. The bonds have a final maturity to occur on August 1, 2029, with interest rates of 3.00 to 5.31 percent. Proceeds from the sale of the bonds were used to renovate, construct and modernize classrooms and school facilities and to pay all necessary legal, financial, engineering and contingent costs in connection with the issuance of the bonds. At June 30, 2014, the principal balance outstanding of the 2002 General Obligation Bonds, Series 2005B was $66,734,523. Unamortized premium received on issuance of the bonds amounted to $394,553 as of June 30, Refunding General Obligation Bonds On April 20, 2005, the District issued the $57,105,000 of 2005 General Obligation Refunding Bonds. The bonds have a final maturity to occur on August 1, 2019, with interest rates from 3.00 to 5.00 percent. The net proceeds from the issuance were used to advance refund all of the District's outstanding 2003 General Obligation Bonds, Series A. Amounts paid to the refunded bond escrow agent in excess of outstanding debt at the time of payment are recorded as deferred charges on refunding on the statement of net position and are amortized to interest expense over the life of the liability. At June 30, 2014, the principal balance outstanding on the 2005 General Obligation Refunding Bonds was $8,885,000 as a portion of the bonds were refunded by the 2009 General Obligation Refunding Bonds, the 2013 General Obligation Refunding Bonds, Series A, and the 2014 General Obligation Refunding Bonds. 52

63 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, General Obligation Bonds, Series 2007C On November 27, 2007, the District issued the $29,200,602 of 2002 General Obligation Bonds, Series 2007C. The Series 2007C bonds were issued as both current interest bonds and capital appreciation bonds, with the value of the capital appreciation bonds accreting $29,734,398, and an aggregate principal debt service balance of $58,935,000. The bonds have a final maturity to occur on August 1, 2032, with interest rates of 3.50 to 5.22 percent. Proceeds from the sale of the bonds were used to prepay a portion of the District's outstanding obligation related to the 2006 Certificates of Participations (School Facility Bridge Funding) and to pay all necessary legal, financial and contingent costs in connection with the issuance of the bonds. At June 30, 2014, the principal balance outstanding of the 2002 General Obligation Bonds, Series 2007C was $27,904,454 as a portion of the bonds were refunded by the 2009 General Obligation Refunding Bonds as discussed below. Unamortized premium received on issuance of the bonds amounted to $475,131 as of June 30, General Obligation Bonds, Series 2009D On July 14, 2009, the District issued the $9,410,103 General Obligation Bonds, Series 2009D. The Series 2009D bonds were issued as capital appreciation bonds, with the value of the capital appreciation bonds accreting to $43,775,000. The bonds have a final maturity to occur on February 1, 2034, with interest rates of 6.16 to 7.36 percent. Proceeds from the sale of the bonds will be used to renovate, construct and modernize classrooms and school facilities; to prepay a portion of the District's 2006 Certificates of Participation; and pay certain costs of issuance associated with the bonds. At June 30, 2014, the principal balance outstanding of the 2002 General Obligation Bonds, Series 2009D was $13,410,059. Unamortized premium received on issuance of the bonds amounted to $351,352 as of June 30, General Obligation Refunding Bonds On July 14, 2009, the District issued the $13,580,000 of 2009 General Obligation Refunding Bonds. The bonds have a final maturity to occur on August 1, 2021, with interest rates from 1.28 to 4.68 percent. The net proceeds from the issuance were used to advance refund a portion of the District's outstanding 2002 General Obligation Bonds, Series 2007C and 2005 Refunding General Obligation Bonds and to pay the costs of issuance associated with the refunding bonds. Amounts paid to the refunded bond escrow agent in excess of outstanding debt at the time of payment are recorded as deferred charges on refunding on the statement of net position and are amortized to interest expense over the life of the liability. Deferred charges on refunding of $325,438 remain to be amortized using the straight-line method. At June 30, 2014, the principal balance outstanding on the 2009 General Obligation Refunding Bonds was $8,570,000. Unamortized premium received on issuance of the bonds amounted to $263,552 as of June 30, General Obligation Bonds, Series 2009E On October 8, 2009, the District issued the $21,392,349 General Obligation Bonds, Series 2009E. The Series 2009E bonds were issued as both capital appreciation bonds and convertible capital appreciation bonds, with the value of the bonds accreting to $102,175,000. The bonds have a final maturity to occur on August 1, 2038, with interest rates of 5.50 to 6.47 percent. Proceeds from the sale of bonds will be used to renovate, construct and modernize classrooms and school facilities; prepay a portion of the District's 2006 Certificates of Participation; and pay certain costs of issuance associated with the bonds. At June 30, 2014, the principal balance outstanding of the 2002 General Obligation Bonds, Series 2009E was $27,868,688. Unamortized premium received on issuance of the bonds amounted to $1,013,156 as of June 30,

64 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, General Obligation Refunding Bonds, Series A On January 30, 2013, the District issued the $11,630,000 of 2013 General Obligation Refunding Bonds, Series A. The bonds have a final maturity to occur on August 1, 2019, with interest rates from 2.00 to 4.00 percent. The net proceeds from the issuance were used to advance refund a portion of the District's outstanding 2005 General Obligation Refunding Bonds and to pay the costs of issuance associated with the refunding bonds. Amounts paid to the refunded bond escrow agent in excess of outstanding debt at the time of payment are recorded as deferred charges on refunding on the statement of net position and are amortized to interest expense over the life of the liability. Deferred charges on refunding of $1,067,822 remain to be amortized using the straight-line method. At June 30, 2014, the principal balance outstanding on the 2013 General Obligation Refunding Bonds, Series A was $11,290,000. Unamortized premium received on issuance of the bonds amounted to $977,466 as of June 30, General Obligation Refunding Bonds On May 20, 2014, the District issued the $15,115,000 of 2014 General Obligation Refunding Bonds. The bonds have a final maturity to occur on August 1, 2019, with interest rates from 0.45 to 2.53 percent. The net proceeds from the issuance were used to advance refund a portion of the District's outstanding 2005 General Obligation Refunding Bonds and to pay the costs of issuance associated with the refunding bonds. Amounts paid to the refunded bond escrow agent in excess of outstanding debt at the time of payment are recorded as deferred charges on refunding on the statement of net position and are amortized to interest expense over the life of the liability. Deferred charges on refunding of $935,649 remain to be amortized using the straight-line method. At June 30, 2014, the principal balance outstanding on the 2014 General Obligation Refunding Bonds was $15,115,000. Debt Service Requirements to Maturity The bonds mature through 2039 as follows: Principal Current Including Accreted Accreted Interest to Fiscal Year Interest to Date Interest Maturity Total 2015 $ 5,305,000 $ - $ 1,838,337 $ 7,143, ,120,000-1,660,742 7,780, ,246,577 68,423 1,437,055 8,752, ,475, ,294 1,245,783 9,830, ,472, , ,487 10,616, ,570,498 13,014,502 3,837,272 63,422, ,372,879 32,032,121 3,190,206 77,595, ,016,002 67,342, , ,476, ,198,152 51,399,333-67,597,485 Total $ 179,777,724 $ 164,118,128 $ 14,318,857 $ 358,214,709 54

65 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, Certificates of Participation (Qualified Academy Zone Bonds Program) On December 29, 2005, the District, pursuant to a sublease agreement with the Public Property Financing Corporation of California (the Financing Corporation), issued the $2,770, Certificates of Participation (Qualified Academy Zone Bonds). The District had been granted authorization from the State Superintendent of Public Instruction to issue securities in an aggregate principal amount not to exceed $3,069,000 in accordance with the qualified zone academy bonds tax credit program found in Section 1397E of the Internal Revenue Code of 1986 and State regulations, to finance certain projects at qualified zone academies within the District. The District and the Financing Corporation, in order to facilitate the financing of projects qualified under the QZAB Program, entered into a lease arrangement, by which the District will lease to the Financing Corporation those certain parcels of real property located in within the District and pursuant to a sublease the Corporation will sublease the property to the District, with the District required to pay base rental to the Corporation (an initial lease payment of $600,000 was made December 29, 2005). The annual base rental payment of $95,722, to begin December 29, 2006, will be deposited with the Bank of America into an interest generating investment to produce sufficient income to repay the $2,770,165 certificates upon maturity on December 29, At June 30, 2014, the principal balance outstanding was $2,770,165. Capital Leases The District has entered into agreements to lease equipment. Such agreements are, in substance, purchases (capital leases) and are reported as capital lease obligations. The District's liability on lease agreements with options to purchase is summarized below: Balance, July 1, 2013$ 20,737 Additions 297,645 Payments (119,952) Balance, June 30, 2014 $ 198,430 Future payments on capital leases are as follows: Year Ending Lease June 30, Payment 2015 $ 99, ,215 Total 198,430 Less: Amount Representing Interest (12,996) Present Value of Minimum Lease Payments $ 185,434 Accumulated Unpaid Employee Vacation The long-term portion of accumulated unpaid employee vacation for the District at June 30, 2014, amounted to $1,974,

66 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2014 Claims Liability Liabilities associated with workers' compensation claims are reported when it is probable that a loss has occurred and the amount of the loss can be reasonably estimated. Liabilities include an amount for claims that have been incurred but not reported (IBNR). Claim liabilities are based upon estimated ultimate cost of settling the claims, considering recent claim settlement trends including the frequency and amounts of payouts and other economic and social factors. The liability for workers' compensation claims is reported in the Internal Service Fund. The outstanding claims liability at June 30, 2014, amounted to $20,761,167. Supplemental Early Retirement Plan (SERP) During 2010, the District adopted a supplemental early retirement plan whereby certain eligible employees are provided an annuity to supplement the retirement benefits they are entitled to through the California State Teachers' Retirement System. The annuities offered to the employees are to be paid over a five-year period. The annuities, which were purchased for 54 employees who retired during school year, were purchased from United of Omaha Life Insurance Company. During 2011, the District adopted a supplemental early retirement plan whereby certain eligible employees are provided an annuity to supplement the retirement benefits they are entitled to through the California Public Employees' Retirement System. The annuities offered to the employees are to be paid over a five-year period. The annuities, which were purchase purchased for 20 employees who retired during school year, were purchased from United of Omaha Life Insurance Company. As of June 30, 2014, the outstanding obligation for the aforementioned Supplemental Early Retirement Plans was $645,283. Year Ending Total June 30, Payments 2015 $ 645,283 Other Postemployment Benefits (OPEB) Obligation The District's annual required contribution for the year ended June 30, 2014, was $3,992,100, and contributions made by the District during the year were $739,259. Interest on the net OPEB obligation and adjustments to the annual required contribution were $834,554 and ($1,232,036), respectively, which resulted in an increase to the net OPEB obligation of $2,855,359. As of June 30, 2014, the net OPEB obligation was $20,424,923. See Note 11 for additional information regarding the OPEB obligation and the postemployment benefits plan. Workers' Compensation Assessment The District was a member of School Excess Liability Fund (SELF), a cost sharing Joint Powers Authority (JPA) for the purpose of providing the District excess workers' compensation insurance. The SELF board of directors declared an entity assessment to the member districts. At June 30, 2014, the District's outstanding obligation to their pro-rata share of equity assessed was $447,

67 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2014 NOTE 9 - FUND BALANCES Fund balances are composed of the following elements: Non-Major General Building Governmental Fund Fund Funds Total Nonspendable Revolving cash $ 125,000 $ - $ - $ 125,000 Stores inventories 196, ,197 Prepaid expenditures 19, , ,872 Total Nonspendable 340, , ,069 Restricted Legally restricted 320,137-8,153,349 8,473,486 Capital projects - 17,557,626 6,183,380 23,741,006 Debt services - - 6,846,738 6,846,738 Total Restricted 320,137 17,557,626 21,183,467 39,061,230 Committed Adult education program , ,352 Deferred maintenance program , ,330 Total Committed , ,682 Assigned Postemployment benefits 4,481, ,481,496 Child development center reserve , ,627 Capital improvement projects - - 6,860,187 6,860,187 Total Assigned 4,481,496-6,999,814 11,481,310 Unassigned Reserve for economic uncertainties 5,389, ,389,458 Remaining unassigned 19,879, ,879,326 Total Unassigned 25,268, ,268,784 Total $ 30,410,651 $ 17,557,626 $ 28,937,798 $ 76,906,075 57

68 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2014 NOTE 10 - EXPENDITURES (BUDGET VERSUS ACTUAL) At June 30, 2014, the General Fund exceeded the budgeted amount as follows: Expenditures Budget Actual* Excess General Fund $ 173,717,498 $ 179,749,285 $ 6,031,787 * Actual expenditures include $4,535,524 in on-behalf payments that are not included in budgeted amounts. NOTE 11 - POSTEMPLOYMENT HEALTH CARE PLAN AND OTHER POSTEMPLOYMENT BENEFITS (OPEB) OBLIGATION Plan Description The Postemployment Benefits Plan (the Plan) is a single-employer defined benefit healthcare plan administered by the Norwalk-La Mirada School District. The Plan provides medical and dental insurance benefits to eligible retirees and their spouses. Membership of the Plan consists of 98 retirees and beneficiaries currently receiving benefits, 20 terminated Plan members entitled to but not yet receiving benefits, and 1,698 active Plan members. In addition, the District has entered into an agreement with the former superintendent whereby the District will provide fully paid medical and dental benefits for the lifetime of the superintendent. Contribution Information The contribution requirements of plan members and the District are established and may be amended by the District and the Teachers Association (CEA), the local California Service Employees Association (CSEA), and unrepresented groups. The required contribution is based on projected pay-as-you-go financing requirements, with an additional amount to prefund benefits as determined annually through the agreements between the District, FEA, CSEA and the unrepresented groups. For fiscal year , the District contributed $739,259 to the plan, all of which was used for current premiums (approximately 80 percent of total premiums). Plan members receiving benefits contributed $189,029, or approximately 20 percent of the total premiums. 58

69 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2014 Annual OPEB Cost and Net OPEB Obligation The District's annual OPEB cost (expense) is calculated based on the annual required contribution of the employer (ARC), an amount actuarially determined in accordance with the parameters of GASB Statement No. 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial accrued liabilities (UAAL) (or funding excess) over a period not to exceed 30 years. The following table shows the components of the District's annual OPEB cost for the year, the amount actually contributed to the plan, and changes in the District's net OPEB obligation to the Plan: Annual required contribution $ 3,992,100 Interest on net OPEB obligation 834,554 Adjustment to annual required contribution (1,232,036) Annual OPEB cost (expense) 3,594,618 Contributions made (739,259) Increase in net OPEB obligation 2,855,359 Net OPEB obligation, beginning of year 17,569,564 Net OPEB obligation, end of year $ 20,424,923 Trend Information Trend information for annual OPEB cost, the percentage of annual OPEB cost contributed to the Plan, and the net OPEB obligation is as follows: Year Ended Annual Actual Percentage Net OPEB June 30, OPEB Cost Contribution Contributed Obligation 2012 $ 3,825,191 $ 1,017, % $ 14,438, ,841, , % 17,569, ,594, , % 20,424,923 59

70 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2014 Funded Status and Funding Progress A schedule of funding progress as of the most recent actuarial valuation is as follows: Actuarial Accrued UAAL as a Liability Unfunded Percentage Actuarial (AAL) - AAL of Covered Valuation Actuarial Value Unprojected (UAAL) Funded Ratio Covered Payroll Date of Assets (a) Unit Credit (b) (b - a) (a / b) Payroll (c) ([b - a] / c) December 1, 2013 $ - $ 32,583,335 $ 32,583,335 0% $ 112,828, % Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, investment returns, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the Plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progress, presented as required supplementary information following the notes to the financial statements, presents multiyear trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. Actuarial Methods and Assumptions Projections of benefits for financial reporting purposes are based on the substantive Plan (the Plan as understood by the employer and the Plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations. In the December 1, 2013 actuarial valuation, the "entry age normal" method was used. The actuarial assumptions included a 4.75 percent investment rate of return (net of administrative expenses), based on the Plan being funded in an irrevocable employee benefit trust invested in a combined equity and fixed income portfolio. Healthcare cost trend rates reflect an ultimate rate of four percent. The UAAL is being amortized at a level percentage of payroll method. The remaining amortization period at June 30, 2014, was 24 years. The actuarial value of assets was not determined in this actuarial valuation since there were no assets. 60

71 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2014 NOTE 12 - RISK MANAGEMENT Employee Medical Benefits The District has contracted with the Alliance of Schools for Cooperative Insurance Programs (ASCIP) public entity risk pool to provide employee dental benefits. The District also purchases medical, vision, and life insurance from various vendors for health care coverage. The District is not self-funded for employee medical benefits but has chosen to report the costs of health and welfare payments for all employees plus retirees in the Internal Service Fund. Property and Liability The District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. To mitigate this potential loss, the District has established an Internal Service Fund to account for and finance its uninsured risks of loss for property and liability coverage. Under this program, the Internal Service Fund provides coverage for up to a maximum of $50,000 for each general liability claim and $25,000 for each property damage claim. During fiscal year ending June 30, 2014, the District participated in the ASCIP public entity risk pool for property and liability insurance coverage in excess of self-insured limits. Settled claims have not exceeded the insured coverage in any of the past three years. There has not been a significant reduction in coverage from the prior year. In addition, the District purchases commercial insurance for property and liability claims in excess of coverage provided by the Internal Service Fund and for all other risks of loss. Workers' Compensation and Property and Liability Since 1985, the District has self-insured itself for workers' compensation coverage, retaining the risk of loss. The District has established an Internal Service Fund to account for and finance its uninsured risks of loss for workers' compensation coverage. Under this program, the Internal Service Fund provides coverage for up to a maximum of $350,000 for each workers' compensation claim. The District purchases insurance for workers' compensation claims in excess of coverage provided by the Fund from Schools Excess Liability Fund (SELF) JPA. Funding of the Internal Service Fund is based on estimates of the amounts needed to pay prior and current year claims. Workers' Compensation claims are charged to the respective funds which generate the liability and the Property and Liability claims are paid by the General Fund. 61

72 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2014 Unpaid Claims Liabilities The fund establishes a liability for both reported and unreported events, which includes estimates of both future payments of losses and related claim adjustment expenses. The following represent the changes in approximate aggregate liabilities for the District from July 1, 2012 to June 30, 2014: Workers' Property Compensation and Liability Total Liability Balance, July 1, 2012 $ 8,284,700 $ 391,965 $ 8,676,665 Claims and changes in estimates 11,622,999 86,467 11,709,466 Claims payments (2,130,740) (170,432) (2,301,172) Liability Balance, June 30, ,776, ,000 18,084,959 Claims and changes in estimates 4,640, ,897 4,843,975 Claims payments (1,965,870) (201,897) (2,167,767) Liability Balance, June 30, 2014 $ 20,451,167 $ 310,000 $ 20,761,167 Assets available to pay claims at June 30, 2014 $ 26,019,168 $ 666,137 $ 26,685,305 NOTE 13 - EMPLOYEE RETIREMENT SYSTEMS Qualified employees are covered under multiple-employer retirement plans maintained by agencies of the State of California. Certificated employees are members of the California State Teachers' Retirement System (CalSTRS) and classified employees are members of the California Public Employees' Retirement System (CalPERS). CalSTRS Plan Description The District contributes to CalSTRS, a cost-sharing multiple-employer public employee retirement system defined benefit pension plan administered by CalSTRS. The plan provides retirement and disability benefits, annual cost-of-living adjustments, and survivor benefits to beneficiaries. As a result of the Public Employee Pension Reform Act of 2013 (PEPRA), changes have been made to the defined benefit pension plan effective January 1, Benefit provisions are established by State statutes, as legislatively amended, within the State Teachers' Retirement Law. CalSTRS issues a separate comprehensive annual financial report that includes financial statements and required supplementary information. Copies of the CalSTRS annual financial report may be obtained from CalSTRS, 100 Waterfront Place, West Sacramento, California

73 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2014 Funding Policy Due to the implementation of the Public Employee Pension Reform Act of 2013 (PEPRA), new members must pay at least 50 percent of the normal costs of the plan, which can fluctuate from year to year. For , the required contribution rate for new members is 8.0 percent. "Classic" plan members are also required to contribute 8.0 percent of their salary. The District is required to contribute an actuarially determined rate. The actuarial methods and assumptions used for determining the rate are those adopted by CalSTRS Teachers' Retirement Board. The required employer contribution rate for fiscal year was 8.25 percent of annual payroll. The contribution requirements of the plan members are established by State statute. The District's contributions to CalSTRS for the fiscal years ending June 30, 2014, 2013, and 2012, were $6,700,352, $6,674,151, and $6,720,757, respectively, and equal 100 percent of the required contributions for each year. CalPERS Plan Description The District contributes to the School Employer Pool under 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 survivor benefits to plan members and beneficiaries. As a result of the Public Employee Pension Reform Act of 2013 (PEPRA), changes have been made to the defined benefit pension plan effective January 1, Benefit provisions are established by State statutes, as legislatively amended, within the Public Employees' Retirement Laws. 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 Funding Policy As a result of the implementation of the Public Employee Pension Reform Act of 2013 (PEPRA), new members must pay at least 50 percent of the normal costs of the plan, which can fluctuate from year to year. For , the normal cost is percent, which rounds to a 6.0 percent contribution rate. "Classic" plan members continue to contribute 7.0 percent. The District is required to contribute an actuarially determined rate. 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 was percent of covered payroll. The contribution requirements of the plan members are established by State statute. The District's contributions to CalPERS for the fiscal years ending June 30, 2014, 2013, and 2012, were $3,638,281, $3,546,346, and $3,294,860, respectively, and equal 100 percent of the required contributions for each year. Alternative Retirement Program As established by Federal law, all public sector employees who are not members of their employer's existing retirement system (CalSTRS or CalPERS) must be covered by social security or an alternative plan. The District has elected to use CalPERS to act as their administrators and Wells Fargo Bank to act as trustee and investment manager for the District's alternative plan. The plan is a defined benefit plan in which all contributions are made by the District. The District contributes 5.0 percent of an employee's gross earnings. The District contributed $398,853 in the fiscal year. 63

74 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2014 On Behalf Payments The State of California makes contributions to CalSTRS on behalf of the District. These payments consist of State General Fund contributions to CalSTRS in the amount of $4,535,524 (5.541 percent of annual payroll). Contributions are no longer appropriated in the annual Budget Act for the legislatively mandated benefits to CalPERS. Therefore, there is no on behalf contribution rate for CalPERS. Under accounting principles generally accepted in the United States of America, these amounts are to be reported as revenues and expenditures. Accordingly, these amounts have been recorded in these financial statements. On behalf payments have been excluded from the calculation of available reserves, and have not been included in the budgeted amounts reported in the General Fund - Budgetary Comparison Schedule. NOTE 14 - COMMITMENTS AND CONTINGENCIES Grants The District received financial assistance from Federal and State agencies in the form of grants. The disbursement of funds received under these programs generally requires compliance with terms and conditions specified in the grant agreements and are subject to audit by the grantor agencies. Any disallowed claims resulting from such audits could become a liability of the General Fund or other applicable funds. However, in the opinion of management, any such disallowed claims will not have a material adverse effect on the overall financial position of the District at June 30, Litigation The District is involved in various litigation arising from the normal course of business. In the opinion of management and legal counsel, the disposition of all litigation pending is not expected to have a material adverse effect on the overall financial position of the District at June 30, Operating Leases The District has entered into various operating leases for buildings and equipment with lease terms in excess of one year. None of these agreements contain bargain purchase options. All 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. As of June 30, 2014, the District has the following lease obligations: Year Ending Lease June 30, Payment 2015 $ 4,876 Rental expenditures for the year ended June 30, 2014, amounted to $344,

75 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2014 Construction Commitments As of June 30, 2014, the District had the following commitments with respect to the unfinished capital projects: Remaining Construction Expected Date of Capital Projects Commitment Completion Waite Science Classroom Conversion $ 254,515 11/1/2014 Norwalk High School Scoreboard Addition 68,138 11/1/2014 Excelsior Demolition 316,566 11/1/2014 Waite Electronic Marquee 39,575 12/1/2014 Los Alisos Portable Additions 204,575 1/1/2015 Morrison Portable Addition 147,980 1/1/2015 Benton Modernization 6,226,398 3/1/2015 Morrison Playground Replacement 230,730 6/1/2015 Transportation Dispencer Replacement 100,500 6/1/2015 Corvallis Modernization 6,899,145 8/1/2015 $ 14,488,122 NOTE 15 - PARTICIPATION IN JOINT POWERS AGREEMENTS The Norwalk-La Mirada Unified School District is a member of the Southeast Regional Occupational Program (SEROP) joint power authority (JPA), Schools Excess Liability Fund (SELF) JPA, and Alliance of Schools for Cooperative Insurance Programs (ASCIP) Payments for ROP services are paid to the SEROP JPA. Payments are made to ASCIP for dental benefits for District employees and for property and liability insurance. Payments are made to SELF for excess liability coverage for workers' compensation. These entities have budgeting and financial reporting requirements independent of member units and their financial statements are not presented in these financial statements; however, fund transactions between the entities and the District are included in these statements. Audited financial statements are available from the respective entities. During the year ended June 30, 2014, the District made payments of $1,879,454, $410,066, and $2,999,133 to SEROP, SELF, and ASCIP, respectively. 65

76 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2014 NOTE 16 - RESTATEMENT OF PRIOR YEAR NET POSITION The District adopted GASB Statement No. 65, Items Previously Reported as Assets and Liabilities, in the current year. As a result, the effect on the current fiscal year is as follows: Statement of Net Position Net Position - Beginning $ 164,255,095 Restatement/cost of issuance (2,856,495) Net Position - Beginning as Restated $ 161,398,600 66

77 REQUIRED SUPPLEMENTARY INFORMATION 67

78 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT GENERAL FUND BUDGETARY COMPARISON SCHEDULE FOR THE YEAR ENDED JUNE 30, 2014 Variances - Positive (Negative) Budgeted Amounts Actual Final Original Final (GAAP Basis) to Actual REVENUES Local Control Funding Formula $ 100,389,737 $ 131,570,704 $ 132,160,839 $ 590,135 Federal sources 10,999,445 11,361,071 10,714,242 (646,829) Other State sources 41,051,971 22,687,190 26,978,135 4,290,945 Other local sources 3,441,566 3,025,479 3,306, ,483 Total Revenues 1 155,882, ,644, ,160,178 4,515,734 EXPENDITURES Current Certificated salaries 77,271,490 80,265,451 80,259,082 6,369 Classified salaries 31,944,828 32,475,815 32,086, ,330 Employee benefits 31,413,931 34,926,820 38,829,428 (3,902,608) Books and supplies 4,722,046 7,960,761 10,219,252 (2,258,491) Services and operating expenditures 12,229,645 15,165,853 14,773, ,819 Other outgo 1,331,272 2,593,844 3,084,898 (491,054) Capital outlay 420, , ,154 (167,383) Debt service - principal 19, , ,736 (769) Debt service - interest 1,236 1,216 1,216 - Total Expenditures 1 159,354, ,717, ,749,285 (6,031,787) Excess (Deficiency) of Revenues Over Expenditures (3,471,619) (5,073,054) (6,589,107) (1,516,053) Other Financing Sources (Uses) Transfers in 902,495 1,043, ,000 (743,838) Other sources - 284, ,649 - Transfers out (3,235,066) (5,498,829) (3,734,634) 1,764,195 Net Financing Uses (2,332,571) (4,170,342) (3,149,985) 1,020,357 NET CHANGE IN FUND BALANCE (5,804,190) (9,243,396) (9,739,092) (495,696) Fund Balance - Beginning 40,149,743 40,149,743 40,149,743 - Fund Balance - Ending $ 34,345,553 $ 30,906,347 $ 30,410,651 $ (495,696) 1 On behalf payments of $4,535,524 are included in the actual revenues and expenditures, but have not been included in the budgeted amounts. In addition, due to the consolidation of Fund 20, Special Reserve Fund for Postemployment Benefits for reporting purposes into the General Fund, additional revenues and expenditures pertaining to this fund is included in the Actual (GAAP Basis) revenues and expenditures, however is not included in the original and final General Fund budgets. 68

79 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT SPECIAL EDUCATION PASS-THROUGH FUND BUDGETARY COMPARISON SCHEDULE FOR THE YEAR ENDED JUNE 30, 2014 Variances - Positive (Negative) Budgeted Amounts Actual Final Original Final (GAAP Basis) to Actual REVENUES Federal sources $ 3,651,983 $ 3,834,402 $ 3,659,504 $ (174,898) Other State sources 10,803,780 10,778,259 10,779, Total Revenues 14,455,763 14,612,661 14,438,703 (173,958) EXPENDITURES Current Other outgo 14,455,763 14,612,661 14,438, ,958 Total Expenditures 14,455,763 14,612,661 14,438, ,958 NET CHANGE IN FUND BALANCE Fund Balance - Beginning Fund Balance - Ending $ - $ - $ - $ - 69

80 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT SCHEDULE OF OTHER POSTEMPLOYMENT BENEFITS (OPEB) FUNDING PROGRESS FOR THE YEAR ENDED JUNE 30, 2014 Actuarial Accrued Liability Unfunded UAAL as a Actuarial Actuarial (AAL) - AAL Funded Percentage of Valuation Value Unprojected (UAAL) Ratio Covered Covered Payroll Date of Assets (a) Unit Credit (b) (b - a) (a / b) Payroll (c) ([b - a] / c) July 1, 2008 $ - $ 34,922,000 $ 34,922,000 0% $ 102,619, % December 1, ,112,925 31,112,925 0% 113,318, % December 1, ,583,335 32,583,335 0% 112,828, % 70

81 SUPPLEMENTARY INFORMATION 71

82 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED JUNE 30, 2014 Pass-Through Entity Federal Grantor/Pass-Through CFDA Identifying Federal Grantor/Program or Cluster Title Number Number Expenditures U.S. DEPARTMENT OF EDUCATION Passed through California Department of Education (CDE): Adult Education - Basic Grants to States Cluster: Adult Basic Education: Adult Basic Education and ESL A $ 158,946 Adult Education: Priority 5, Adult Secondary Education ,809 Adult Education: English Literacy and Civics Education A ,520 Subtotal Adult Education - Basic Grants to States Cluster 373,275 No Child Left Behind Act (NCLB) Title I, Part A - Basic Grants Low Income and Neglected ,838,311 Title II, Part A - Improving Teacher Quality ,270 Title X McKinney-Vento Homeless Assistance Grants ,537 Title I, Part C - Migrant Ed Cluster Title I, Part C - Migrant Ed (Regular Program) ,829 Title I, Part C - Migrant Ed (Summer Program) ,387 Subtotal Title I, Part C - Migrant Ed Cluster 467,216 Title I, Part G - Advanced Placement (AP) Test Fee Reimbursement B ,455 Title III, Part C - Limited English Proficiency ,946 Title IV, Part B - 21st Century Community Learning Center ,429 Carl D. Perkins Vocational and Technical Education Act of 1998 Career and Technical Education Cluster: Vocational and Applied Technology Secondary I C, Section ,961 Postsecondary and Adult II C, Sec 132 (Carl Perkins Act) ,659 Subtotal Career and Technical Education Cluster 220,620 Passed through Office of Education (LACOE): Special Education Cluster (IDEA): IDEA Basic Local Assistance Entitlement, Part B ,486,431 IDEA Local Assistance Private School ISPs ,282 IDEA Federal Preschool Grants ,285 IDEA Preschool Local Entitlement A ,813 IDEA Preschool Staff Development, Part B A ,382 Mental Health Allocation, Part B A ,071 Subtotal Special Education Cluster (IDEA) 7,393,264 IDEA Early Intervention Grants, Part C $ 98,558 Passed through Department of Rehabilitation: Workability II - Transition Partnership ,105 Passed through Napa County Office of Education: H027A080116A State Personnel Development Grant A H323A ,960 Subtotal - U.S. Department of Education 14,231,946 See accompanying note to supplementary information. 72

83 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS (Continued) FOR THE YEAR ENDED JUNE 30, 2014 Pass-Through Entity Federal Grantor/Pass-Through CFDA Identifying Federal Grantor/Program or Cluster Title Number Number Expenditures U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES Passed through LACOE: Head Start Program Cluster [1] Head Start: Basic ,315,838 Head Start: Training and Technical Assistance (T&TA) ,876 Head Start: Start-Up Funding ,288 Subtotal Head Start Program Cluster 5,428,002 Passed through CDE: Medi-Cal Billing Option ,312 Child Care and Development Fund Cluster Federal Child Care, Center-Based ,431 Federal Child Care, Center-Based ,316 Subtotal Child Care and Development Fund Cluster 78,747 Subtotal - U.S. Department of Health and Human Services 5,919,061 U.S. DEPARTMENT OF AGRICULTURE Passed through CDE: Child Nutrition Cluster: National School Lunch Program ,783,199 Especially Needy Breakfast Program ,050,303 Meal Supplements ,399 Commodities ,890 Subtotal Child Nutrition Cluster 8,569,791 Passed through Office of Education: Supplemental Nutrition Assistance Program Cluster Network for Healthy California Program ,567 Nutrition Education Obesity Prevention Grant PH ,205 Subtotal Supplemental Nutrition Assistance Program Cluster 27,772 Subtotal - U.S. Department of Agriculture 8,597,563 U.S. DEPARTMENT OF LABOR Passed through Workforce Investment Board of Southeast LA: WIA In School Youth Jobs Program ,269 Total Federal Programs $ 28,796,839 [1] Does not include District in-kind contributions of $1,626,603 to meet Federal match requirements. Contributions by program are as follows: Head Start - Basic $ 1,598,562 Head Start - Training and Technical Assistance ,219 Head Start - Start-Up Funding ,822 Total In-kind Contributions $ 1,626,603 See accompanying note to supplementary information. 73

84 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT LOCAL EDUCATION AGENCY ORGANIZATION STRUCTURE JUNE 30, 2014 ORGANIZATION The Norwalk-La Mirada Unified School District was established on July 1, The District conducts a kindergarten through twelfth grade educational program for approximately 21,000 students through 17 elementary schools, six middle schools, three high schools, a continuation high school, and two adult education schools. The District is located in, and occupies the cities of Norwalk and La Mirada, in addition to smaller portions of the cities of Santa Fe Springs, Whittier, and unincorporated areas of. GOVERNING BOARD MEMBER OFFICE TERM EXPIRES Margarita Lo. Rios President 2017 Jesse Urquidi Vice President 2015 Darryl Adams Member 2017 Karen Morrison Member 2017 Chris Pflanzer Member 2015 Sean Reagan Member 2017 Anna Valencia Member 2017 ADMINISTRATION Ruth Pérez, Ed.D. Wayne Shannon Estuardo Santillan Lila Bronson Superintendent Assistant Superintendent, Human Resources Assistant Superintendent, Business Services Assistant Superintendent, Curriculum and Instruction See accompanying note to supplementary information. 74

85 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT SCHEDULE OF AVERAGE DAILY ATTENDANCE FOR THE YEAR ENDED JUNE 30, 2014 Final Report Second Period Annual Report Report Regular ADA Transitional kindergarten through third 5, , Fourth through sixth 4, , Seventh and eighth 2, , Ninth through twelfth 5, , Total Regular ADA 18, , Extended Year Special Education Transitional kindergarten through third Fourth through sixth Seventh and eighth Ninth through twelfth Total Extended Year Special Education Special Education, Nonpublic, Nonsectarian Schools Transitional kindergarten through third Fourth through sixth Seventh and eighth Ninth through twelfth Total Special Education, Nonpublic, Nonsectarian Schools Extended Year Special Education, Nonpublic, Nonsectarian Schools Transitional kindergarten through third Ninth through twelfth Total Extended Year Special Education, Nonpublic, Nonsectarian Schools Total ADA 18, , See accompanying note to supplementary information. 75

86 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT SCHEDULE OF INSTRUCTIONAL TIME FOR THE YEAR ENDED JUNE 30, 2014 Reduced Number of Days Minutes Minutes Actual Traditional Multitrack Grade Level Requirement Requirement Minutes Calendar Calendar Status Kindergarten 36,000 35,000 57, Complied Grades ,400 49,000 Grade 1 53, Complied Grade 2 53, Complied Grade 3 53, Complied Grades ,000 52,500 Grade 4 54, Complied Grade 5 54, Complied Grade 6 55, Complied Grades ,000 52,500 Grade 7 56, Complied Grade 8 56, Complied Grades ,800 63,000 Grade 9 65, Complied Grade 10 65, Complied Grade 11 65, Complied Grade 12 65, Complied See accompanying note to supplementary information. 76

87 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT RECONCILIATION OF ANNUAL FINANCIAL AND BUDGET REPORT WITH AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2014 Summarized below are the fund balance reconciliations between the Unaudited Actual Financial Report and the audited financial statements. Internal Service Fund NET ASSETS Balance, June 30, 2014, Unaudited Actuals $ 8,587,826 Increase in: Claims liability (2,674,208) Balance, June 30, 2014, Audited Financial Statement $ 5,913,618 See accompanying note to supplementary information. 77

88 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT SCHEDULE OF FINANCIAL TRENDS AND ANALYSIS FOR THE YEAR ENDED JUNE 30, 2014 (Budget) GENERAL FUND 4 Revenues $ 176,802,471 $ 173,134,188 $ 164,579,308 $ 169,060,733 Other sources 1,050,000 1,323,908 3,851,259 6,935,656 Total Revenues and Other Sources 177,852, ,458, ,430, ,996,389 Expenditures 173,271, ,749, ,378, ,325,760 Other uses and transfers out 4,818,582 4,434,853 4,087,962 7,301,501 Total Expenditures and Other Uses 178,089, ,184, ,466, ,627,261 INCREASE (DECREASE) IN FUND BALANCE $ (237,257) $ (9,726,043) $ (6,035,769) $ (1,630,872) ENDING FUND BALANCE $ 25,691,898 $ 25,929,155 $ 35,655,198 $ 41,690,967 AVAILABLE RESERVES 2 $ 24,922,322 $ 25,268,784 $ 34,895,386 $ 37,601,554 AVAILABLE RESERVES AS A PERCENTAGE OF TOTAL OUTGO % 14.07% 20.49% 21.65% LONG-TERM OBLIGATIONS N/A $ 230,462,125 $ 224,113,225 $ 207,945,057 K-12 AVERAGE DAILY ATTENDANCE AT P-2 18,280 18,550 18,869 19,207 The General Fund balance has decreased by $15,761,812 over the past two years. The fiscal year budget projects a further decrease of $237,257 (0.9 percent). For a district this size, the State recommends available reserves of at least three percent of total General Fund expenditures, transfers out, and other uses (total outgo). The District has incurred operating deficits in all of the past three years and anticipates incurring an operating deficit during the fiscal year. Total long-term obligations have increased by $22,517,068 over the past two years. Average daily attendance has decreased by 657 over the past two years. An additional decline of 270 ADA is anticipated during fiscal year Budget 2015 is included for analytical purposes only and has not been subjected to audit. 2 Available reserves consist of all unassigned fund balances including all amounts reserved for economic uncertainties contained with the General Fund. 3 On behalf payments of $4,535,524, $4,188,387, and $3,974,006, have been excluded from the calculation of available reserves for the fiscal years ending June 30, 2014, 2013, and General Fund amounts do not include activity related to the consolidation of the Special Reserve Fund for Other Postemployment Benefits as required by GASB Statement No. 54. See accompanying note to supplementary information. 78

89 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT NON-MAJOR GOVERNMENTAL FUNDS COMBINING BALANCE SHEET JUNE 30, 2014 Adult Child Deferred Education Development Cafeteria Maintenance Fund Fund Fund Fund ASSETS Deposits and investments $ 40,262 $ 11,060 $ 6,881,257 $ 399,330 Receivables 248,438 1,114,593 1,620,932 - Stores inventories ,835 - Total Assets $ 288,700 $ 1,125,653 $ 8,636,024 $ 399,330 LIABILITIES AND FUND BALANCES Liabilities: Accounts payable $ 67,348 $ 337,842 $ 381,576 $ - Due to other funds - 600, Unearned revenue - 15, Total Liabilities 67, , ,576 - Fund Balances: Nonspendable ,835 - Restricted - 32,736 8,120,613 - Committed 221, ,330 Assigned - 139, Total Fund Balances 221, ,363 8,254, ,330 Total Liabilities and Fund Balances $ 288,700 $ 1,125,653 $ 8,636,024 $ 399,330 See accompanying note to supplementary information. 79

90 Capital County School Special Reserve Bond Interest Total Non-Major Facilities Facilities Fund for Capital and Redemption Governmental Fund Fund Outlay Projects Fund Funds $ 1,140,370 $ 3,448,561 $ 8,727,395 $ 6,846,738 $ 27,494,973 3,586 12,139 64,160-3,063, ,835 $ 1,143,956 $ 3,460,700 $ 8,791,555 $ 6,846,738 $ 30,692,656 $ 4,245 $ - $ 348,399 $ - $ 1,139, , ,448 4, ,399-1,754, ,835 1,139,711 3,460,700 1,582,969 6,846,738 21,183, , ,860,187-6,999,814 1,139,711 3,460,700 8,443,156 6,846,738 28,937,798 $ 1,143,956 $ 3,460,700 $ 8,791,555 $ 6,846,738 $ 30,692,656 79

91 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT NON-MAJOR GOVERNMENTAL FUNDS COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES FOR THE YEAR ENDED JUNE 30, 2014 Adult Child Deferred Education Development Cafeteria Maintenance Fund Fund Fund Fund REVENUES Federal sources $ 373,275 $ 5,506,748 $ 8,569,790 $ - Other State sources - 1,211, ,383 - Other local sources 179, ,736 1,812,755 (22) Total Revenues 552,983 7,490,025 11,018,928 (22) EXPENDITURES Current Instruction 1,788,056 4,608, Instruction-related activities: Supervision of instruction 133, , Instructional library, media, and technology 8, School site administration 1,128,629 1,056, Pupil services: Food services - - 9,587,886 - All other pupil services 218, , Administration: All other administration - 57, ,874 - Plant services 320, ,420 56,132 69,578 Facility acquisition and construction - 52, ,437 - Enterprise services - 349, Debt service Principal Interest and other Total Expenditures 3,597,335 7,499,038 10,464,329 69,578 Excess (Deficiency) of Revenues Over Expenditures (3,044,352) (9,013) 554,599 (69,600) Other Financing Sources (Uses) Transfers in 3,265, ,930 Other sources - proceeds from issuance of debt Transfers out - (100,000) - - Other uses - payment to refunded bond escrow agent Net Financing Sources (Uses) 3,265,704 (100,000) - 468,930 NET CHANGE IN FUND BALANCES 221,352 (109,013) 554, ,330 Fund Balances - Beginning - 281,376 7,699,849 - Fund Balances - Ending $ 221,352 $ 172,363 $ 8,254,448 $ 399,330 See accompanying note to supplementary information. 80

92 Capital County School Special Reserve Bond Interest Total Non-Major Facilities Facilities Fund for Capital and Redemption Governmental Fund Fund Outlay Projects Fund Funds $ - $ - $ - $ - $ 14,449, ,931 1,962, ,927 22,017 1,778,391 7,489,531 12,368, ,927 22,017 1,778,391 7,604,462 28,780, ,396, , , ,185, ,587, ,352 18, , , ,884-1,164,357 18,606-2,296,935-2,762, , ,435,000 4,435, ,766,006 2,766, ,061-2,470,819 7,201,006 31,505, ,866 22,017 (692,428) 403,456 (2,724,455) ,017-3,756, ,115,000 15,115,000 - (22,017) - - (122,017) (14,905,708) (14,905,708) - (22,017) 22, ,292 3,843, ,866 - (670,411) 612,748 1,119,471 1,028,845 3,460,700 9,113,567 6,233,990 27,818,327 $ 1,139,711 $ 3,460,700 $ 8,443,156 $ 6,846,738 $ 28,937,798 80

93 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT GENERAL FUND SELECTED FINANCIAL INFORMATION THREE-YEAR SUMMARY OF REVENUES, EXPENDITURES, AND CHANGES OF FUND BALANCE FOR THE YEAR ENDED JUNE 30, 2014 (Amounts in thousands) Actual Results for the Years Percent Percent Percent of of of Amount Revenue Amount Revenue Amount Revenue REVENUES Federal revenue $ 10, $ 12, $ 17, State and local revenue included in Local Control Funding Formula 132, , , Other State revenue 26, , , Other local revenue 2, , , Tuition and transfers in , Total Revenues 173, , , EXPENDITURES Salaries and benefits Certificated salaries 80, , , Classified salaries 32, , , Employee benefits 38, , , Total Salaries and Benefits 151, , , Books and supplies 10, , , Contracts and operating expenses 14, , , Capital outlay Other outgo 3, , , Total Expenditures 179, , , EXCESS OF REVENUES OVER EXPENDITURES (6,615) (3.8) (5,799) (3.5) (1,265) (0.8) OTHER FINANCING SOURCES (USES) Incoming transfers 1, , , Other sources Outgoing transfers (4,435) (2.6) (4,088) (2.5) (7,302) (4.3) INCREASE (DECREASE) IN FUND BALANCE (9,726) (5.6) (6,036) (3.7) (1,631) (1.0) FUND BALANCE, BEGINNING 35,655 41,691 43,322 FUND BALANCE, ENDING $ 25,929 $ 35,655 $ 41,691 See accompanying note to supplementary information. 81

94 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT CAFETERIA FUND SELECTED FINANCIAL INFORMATION THREE-YEAR SUMMARY OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES FOR THE YEAR ENDED JUNE 30, 2014 (Amounts in thousands) Actual Results for the Years Percent Percent Percent of of of Amount Revenue Amount Revenue Amount Revenue REVENUES Federal - NSLP $ 8, $ 8, $ 8, State meal program Food sales 1, , , Other Total Revenues 11, , , EXPENDITURES Salaries and employee benefits 4, , , Food 4, , , Supplies Other 1, , , Total Expenditures 10, , , INCREASE IN FUND BALANCE , , FUND BALANCE, BEGINNING 7,700 6,435 4,893 FUND BALANCE, ENDING $ 8,255 $ 7,700 $ 6,435 * * * * * * * * * * * * * * * * * * * * * * TYPE 'A' LUNCH/BREAKFAST PARTICIPATION Amount Percent Amount Percent Amount Percent TYPE 'A' LUNCHES Paid 273, , , Reduced price 198, , , Free 1,716, ,813, ,791, Total Lunches 2,188, ,254, ,263, BREAKFAST Paid 103, , , Reduced price 85, , , Free 997, ,022, , Total Breakfast 1,186, ,196, ,123, See accompanying note to supplementary information. 82

95 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT NOTE TO SUPPLEMENTARY INFORMATION JUNE 30, 2014 NOTE 1 - PURPOSE OF SCHEDULES Schedule of Expenditures of Federal Awards The accompanying schedule of expenditures of Federal awards includes the Federal grant activity of the District and is presented on the modified accrual basis of accounting. The information in this schedule is presented in accordance with the requirements of the United States Office of Management and Budget 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 financial statements. The following schedule provides reconciliation between revenues reported on the Statement of Revenues, Expenditures and Changes in Fund Balances, and the related expenditures reported on the Schedule of Expenditures of Federal Awards. The reconciling amounts consist primarily of Medi-Cal Billing Option funds that have been recorded in the current year as revenues, but were unspent. These unspent balances are reported as a legally restricted ending fund balance. CFDA Number Amount Total Federal Revenues from the Statement of Revenues, Expenditures, and Changes in Fund Balances: $ 28,823,559 Medi-Cal Billing Option (26,720) Total Schedule of Expenditures of Federal Awards $ 28,796,839 Subrecipients Of the Federal expenditures presented in the schedule, the District provided Federal awards to subrecipients as follows: Federal Grantor/Pass-Through CFDA Amount Provided to Grantor/Program Number Subrecipients IDEA Basic Local Assistance Entitlement, Part B $ 3,166,266 IDEA Federal Preschool Grants ,062 IDEA Preschool Local Entitlement A 165,588 IDEA Mental Health Allocation, Part B A 137,519 IDEA Preschool Staff Development, Part B A 511 IDEA Early Intervention Grants, Part C $ 98,558 3,659,504 Local Education Agency Organization Structure This schedule provides information about the District's boundaries and schools operated, members of the governing board, and members of the administration. 83

96 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT NOTE TO SUPPLEMENTARY INFORMATION JUNE 30, 2014 Schedule of Average Daily Attendance (ADA) Average daily attendance (ADA) 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. Schedule of Instructional Time The District has received incentive funding for increasing instructional time as provided by the Incentives for Longer Instructional Day. The District neither met nor exceeded its target funding. This schedule presents information on the amount of instructional time offered by the District and whether the District complied with the provisions of Education Code Sections through Districts must maintain their instructional minutes at requirements, as required by Education Code Section Reconciliation of Annual Financial and Budget Report With Audited Financial Statements This schedule provides the information necessary to reconcile the fund balance of all funds reported on the Unaudited Actual Financial Report to the audited financial statements. Schedule of Financial Trends and Analysis This schedule discloses the District's financial trends by displaying past years' data along with current year 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. Non-Major Governmental Funds - Balance Sheet and Statement of Revenues, Expenditures and Changes in Fund Balances The Non-Major Governmental Funds Combining Balance Sheet and Combining Statement of Revenues, Expenditures and Changes in Fund Balances is included to provide information regarding the individual funds that have been included in the Non-Major Governmental Funds column on the Governmental Funds Balance Sheet and Statement of Revenues, Expenditures, and Changes in Fund Balances. General Fund Selected Financial Information This schedule provides a comparison of revenues and expenditures as a percentage of total revenue for the General Fund for the past three years. Cafeteria Fund Selected Financial Information This schedule provides a comparison of revenues and expenditures as a percentage of total revenue for the Cafeteria Fund for the past three years. 84

97 SUPPLEMENTARY INFORMATION - UNAUDITED 85

98 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT CONTINUING DISCLOSURE FOR BOND ISSUANCE - UNAUDITED FOR THE YEAR ENDED JUNE 30, 2014 Local Secured Assessed valuation for fiscal year $ 9,671,486,615 (2) Secured tax levies for fiscal year $ 14,349,738 (1) Secured tax collections for fiscal year $ 14,295,731 (1) Secured tax collections for fiscal year as a percent of the total levy 99.6% Ten Largest Local Secured Taxpayers (2) Assessed Percentage Property Owner Primary Use Valuation of Total (3) 1. Golden Springs Development Company, LLC Industrial $ 290,852, % 2. Duke Realty, LP Industrial 64,464, % 3. Norwalk MM, LLC Office Building 60,933, % 4. Vons Companies Inc. Industrial 46,852, % 5. Price REIT Inc. Shopping Center 46,767, % 6. USF Propco I LLC Industrial 43,733, % 7. IMT Capital JJ Palm County Club, LLC Apartments 43,412, % 8. Avalon California Value III LLC Apartments 36,215, % 9. Levian Family Norwalk, LLC Shopping Center 34,060, % 10. PPF Industrial Valley View LLP Industrial 33,695, % $ 700,987, % (1) (2) (3) Information obtained from the Auditor-Controller's Office. Information obtained from California Municipal Statistics, Inc. Percentage of total assessed valuation was $9,671,486,615. See accompanying note to supplementary information - unaudited. 86

99 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT NOTE TO SUPPLEMENTARY INFORMATION - UNAUDITED JUNE 30, 2014 Continuing Disclosure for Bond Issuance - Unaudited This schedule is included to meet continuing disclosure requirements related to the General Obligation bond issuances. 87

100 INDEPENDENT AUDITOR'S REPORTS 88

101 INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Governing Board Norwalk-La Mirada Unified School District Norwalk, California We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the governmental activities, the businesstype activities, each major fund, and the aggregate remaining fund information of Norwalk-La Mirada Unified School District (the District) as of and for the year ended June 30, 2014, and the related notes to the financial statements, which collectively comprise Norwalk-La Mirada Unified School District's basic financial statements, and have issued our report thereon dated December 3, Emphasis of Matter - Change in Accounting Principles As discussed in Note 16 to the financial statements, the District has elected to change its method of accounting for cost of debt issuance as prescribed by GASB Statement No. 65, Items Previously Reported as Assets and Liabilities. Our opinion is not modified with respect to this matter. Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered Norwalk-La Mirada Unified School District's internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of Norwalk-La Mirada Unified School District's internal control. Accordingly, we do not express an opinion on the effectiveness of Norwalk-La Mirada Unified School District's internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the District's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. 89

102 Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. Compliance and Other Matters As part of obtaining reasonable assurance about whether Norwalk-La Mirada Unified School District's financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. We noted certain matters that we reported to management of Norwalk-La Mirada Unified School District in a separate letter dated December 3, Purpose of This Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the District's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the District's internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Rancho Cucamonga, California December 3,

103 INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM AND REPORT ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY OMB CIRCULAR A-133 Governing Board Norwalk-La Mirada Unified School District Norwalk, California Report on Compliance for Each Major Federal Program We have audited Norwalk-La Mirada Unified School District's compliance with the types of compliance requirements described in the OMB Circular A-133 Compliance Supplement that could have a direct and material effect on each of Norwalk-La Mirada Unified School District's (the District) major Federal programs for the year ended June 30, Norwalk-La Mirada 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. Management's Responsibility Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants applicable to its Federal programs. Auditor's Responsibility Our responsibility is to express an opinion on compliance for each of Norwalk-La Mirada Unified School District's major Federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; 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 Norwalk-La Mirada 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 on compliance for each major Federal program. However, our audit does not provide a legal determination of Norwalk-La Mirada Unified School District's compliance. 91

104 Opinion on Each Major Federal Program In our opinion, Norwalk-La Mirada Unified School District complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major Federal programs for the year ended June 30, Report on Internal Control Over Compliance Management of Norwalk-La Mirada Unified School District is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered Norwalk-La Mirada Unified School District's internal control over compliance with the types of requirements that could have a direct and material effect on each major Federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major Federal program and to test and report on internal control over compliance in accordance with OMB Circular A-133, 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 Norwalk-La Mirada Unified School District's internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a Federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a Federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a Federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of OMB Circular A-133. Accordingly, this report is not suitable for any other purpose. Rancho Cucamonga, California December 3,

105 INDEPENDENT AUDITOR'S REPORT ON STATE COMPLIANCE Governing Board Norwalk-La Mirada Unified School District Norwalk, California Report on State Compliance We have audited Norwalk-La Mirada Unified School District's compliance with the types of compliance requirements as identified in the Standards and Procedures for Audit of California K-12 Local Educational Agencies that could have a direct and material effect on each of the Norwalk-La Mirada Unified School District's State government programs as noted below for the year ended June 30, Management's Responsibility Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants applicable to its State's programs. Auditor's Responsibility Our responsibility is to express an opinion on compliance of each of the Norwalk-La Mirada Unified School District's State programs based on our audit of the types of compliance requirements referred to above. We conducted our audit 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 the Standards and Procedures for Audits of California K-12 Local Educational Agencies These standards require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the compliance requirements referred to above that could have a material effect on the applicable government programs noted below. An audit includes examining, on a test basis, evidence about Norwalk-La Mirada 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 opinions. Our audit does not provide a legal determination of Norwalk-La Mirada Unified School District's compliance with those requirements. Basis for Qualified Opinion on the Unduplicated Local Control Funding Formula Pupil Count As described in the accompanying schedule of findings and questioned costs, Norwalk-La Mirada Unified School District did not comply with requirements regarding the Unduplicated Local Control Funding Formula Pupil Count; finding Compliance with such requirements is necessary, in our opinion, for Norwalk-La Mirada Unified School District to comply with the requirements applicable to that program. Qualified Opinion In our opinion, except for the noncompliance described in the Basis for Qualified Opinion paragraph, Norwalk-La Mirada Unified School District complied, in all material respects, with the types of compliance requirements referred to above for the year ended June 30,

106 Unmodified Opinion on Each of the Other Programs In our opinion, Norwalk-La Mirada Unified School District complied, in all material respects, with the compliance requirements referred to above that are applicable to the government programs noted below that were audited for the year ended June 30, 2014, except as described in the Schedule of State Awards Findings and Questioned Costs section of the accompanying Schedule of Findings and Questioned Costs. In connection with the audit referred to above, we selected and tested transactions and records to determine the Norwalk-La Mirada Unified School District's compliance with the State laws and regulations applicable to the following items: Procedures in Audit Guide Procedures Performed Attendance Accounting: Attendance Reporting 6 Yes Teacher Certification and Misassignments 3 Yes Kindergarten Continuance 3 Yes Independent Study 23 Yes Continuation Education 10 Yes, see below Instructional Time: School Districts 10 Yes Instructional Materials: General Requirements 8 Yes Ratios of Administrative Employees to Teachers 1 Yes Classroom Teacher Salaries 1 Yes Early Retirement Incentive 4 Not Applicable Gann Limit Calculation 1 Yes School Accountability Report Card 3 Yes Juvenile Court Schools 8 Not Applicable Local Control Funding Formula Certification 1 Yes California Clean Energy Jobs Act 3 Yes After School Education and Safety Program: General Requirements 4 Yes After School 5 Yes Before School 6 Not Applicable Education Protection Account Funds 1 Yes Common Core Implementation Funds 3 Yes Unduplicated Local Control Funding Formula Pupil Counts 3 Yes Charter Schools: Contemporaneous Records of Attendance 8 Not Applicable Mode of Instruction 1 Not Applicable Non Classroom-Based Instruction/Independent Study 15 Not Applicable Determination of Funding for Non Classroom-Based Instruction 3 Not Applicable Annual Instruction Minutes Classroom-Based 4 Not Applicable Charter School Facility Grant Program 1 Not Applicable We did not perform testing for the Work Experience Program because the District did not offer this program. Rancho Cucamonga, California December 3,

107 SCHEDULE OF FINDINGS AND QUESTIONED COSTS 95

108 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT SUMMARY OF AUDITOR'S RESULTS FOR THE YEAR ENDED JUNE 30, 2014 FINANCIAL STATEMENTS Type of auditor's report issued: Internal control over financial reporting: Material weakness identified? Significant deficiency identified? Noncompliance material to financial statements noted? FEDERAL AWARDS Internal control over major Federal programs: Material weakness identified? Significant deficiency identified? Type of auditor's report issued on compliance for major Federal programs: Any audit findings disclosed that are required to be reported in accordance with Section.510(a) of OMB Circular A-133? Unmodified No None reported No No None reported Unmodified No Identification of major Federal programs: CFDA Number(s) Name of Federal Program or Cluster Title I, Part A - Basic Grants Low Income and Neglected , A, , A Special Education Cluster (IDEA) Dollar threshold used to distinguish between Type A and Type B programs: Auditee qualified as low-risk auditee? $ Yes 863,905 STATE AWARDS Type of auditor's report issued on compliance for programs: Unmodified for all programs except for the following State program which was qualified: Unmodified Name of Program Unduplicated Local Control Funding Formula Pupil Counts 96

109 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT FINANCIAL STATEMENT FINDINGS FOR THE YEAR ENDED JUNE 30, 2014 None reported. 97

110 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT FEDERAL AWARDS FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED JUNE 30, 2014 None reported. 98

111 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT STATE AWARDS FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED JUNE 30, 2014 The following findings represent instances of noncompliance and/or questioned costs relating to State program laws and regulations. The findings have been coded as follows: Five Digit Code AB 3627 Finding Type State Compliance Unduplicated Local Control Funding Formula Pupil Counts Criteria or Specific Requirements California Education Code Section (b)(4) states that the school districts should revise their submitted data on English learner, foster youth, and free or reduced-price meal eligible pupil counts to ensure the accuracy of data reflected in the California Longitudinal Pupil Achievement Data System. Condition The Unduplicated Local Control Funding Formula Pupil Counts submitted to the California Department of Education was inaccurate. It appears that the District inaccurately reported eligibility for a total of 518 students for Free or Reduced Priced Meals on CALPADS Form 1.18 FRPM/English Learner/Foster Youth Student List. Questioned Costs The District over claimed the total eligible pupils by 518, resulting in a decrease of approximately $329,046 in LCFF funding. Context The condition identified was determined through a selection of students from Form 1.18 based on the criteria as stated on the Standards and Procedures for Audits of California K-12 Local Education Agencies Section19849(a)(1): "Select a representative sample, to achieve a high level of assurance, from the students indicated as a 'No' under the 'Direct Certification' column, that are only free or reduced priced meal eligible (FRPM) identified under the 'NSLP Program' column and verify there is supporting documentation such as a Free and Reduced Meal (FRPM) eligibility application under a federal nutrition program or an alternative household income data collection form that indicates the student was eligible for the designation." 99

112 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT STATE AWARDS FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED JUNE 30, 2014 The auditor selected an initial sample of 60 students and obtained the lunch applications for each student. Upon review of the lunch applications, we found 2 students who were noted as denied on the lunch application, however the students were noted as free or reduced on CALPADS Form The auditor inquired further with the District and determined that the District did not make changes to students' eligibility for those students whose status should have been updated from the prior year from free or reduced to paid. Changes were however made for students whose status changed from paid to free or reduced. The District maintained a list of all students whose status was not updated in CALPADs. The auditor obtained a copy of this list and confirmed that the exceptions noted in our original testing were in fact noted on the list as having a change in status from free or reduced to paid, yet the change was not made. This list noted a total of 518 students whose status should have been changed in CALPADs from free or reduced to paid. Effect The District does not appear to be in compliance with Education Code Section (b)(4). In addition, the District appears to be over claiming the total FRPM eligible pupil by 518 for a reduction in funding of approximately $329,046. The schedule below shows the exceptions by site and Districtwide: School Site Enrollment Count Certified Total Unduplicated Count Adjustment Based on Eligibility for FRPM Adjusted Total Unduplicated Pupil count Adjusted Total Enrollment Count Anna M. Glazier (7) Elementary Arlie F (17) Hutchinson Middle Arturo Sanchez (3) Elementary Cesar Chavez (8) Elementary Corvallis Middle (17) D.D. Johnston (11) Elementary Earl E. Edmondson Elementary (12) Eastwood Elementary El Camino Continuation High Escalona Elementary Foster Road Elementary Gardenhill Elementary John Dolland Elementary (18) (14) (18) (12) (24) (5)

113 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT STATE AWARDS FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED JUNE 30, 2014 School Site John Foster Dulles Elementary John H. Glenn High John H. Nuffer Elementary Julia B. Morrison Elementary Enrollment Count Certified Total Unduplicated Count Adjustment Based on Eligibility for FRPM Adjusted Total Unduplicated Pupil count Adjusted Total Enrollment Count (9) (47) (8) (13) La Mirada High (78) La Pluma (11) Elementary Loretta Lampton (12) Elementary Los Alisos (34) Middle Los Coyotes (16) Middle Nettie L. Waite (8) Middle New River (11) Elementary Norwalk High (78) NPS School Group for NLMUSD (1) 9 18 Reginald M. Benton Middle Thomas B. Moffitt Elementary (20) (6) District-Wide (518) Cause It appears that the condition identified has materialized as a result of the District not updating the status for students whose eligibility changed from the prior year from free or reduced to paid. 101

114 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT STATE AWARDS FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED JUNE 30, 2014 Recommendation The District should emphasize the importance of completing the Form 1.18 accurately, which would include ensuring that all changes are accurately and timely updated based on new eligibility documentation received. In addition, the District should evaluate whether or not their unduplicated pupil count percentage is higher than their unduplicated percentage. If, the District determines that their unduplicated percentage is higher, the District's LCFF calculation will be based on the unduplicated percentage, thus mitigating the financial impact the exceptions noted above have on compliance. Corrective Action Plan The District understands the importance of completing Form 1.8 accurately and ensuring all eligibility requirements are updated in a timely manner. Business office staff will reiterate to the audit team that all future findings be communicated directly so proper follow-up can be assured with the Technology Services Student Information Services staff. For , staff will evaluate and update the unduplicated count for correct eligibility, and determine if a higher percentage exists to mitigate the financial impact. 102

115 NORWALK-LA MIRADA UNIFIED SCHOOL DISTRICT SUMMARY SCHEDULE OF PRIOR AUDT FINDINGS FOR THE YEAR ENDED JUNE 30, 2014 There were no audit findings reported in the prior year's schedule of financial statement findings. 103

116 Governing Board Norwalk-La Mirada Unified School District Norwalk, California In planning and performing our audit of the financial statements of Norwalk-La Mirada Unified School District, for the year ended June 30, 2014, we considered its internal control structure in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide assurance on the internal control structure. However, during our audit we noted matters that are opportunities for strengthening internal controls and operating efficiency. The following items represent conditions noted by our audit that we consider important enough to bring to your attention. This letter does not affect our report dated December 3, 2014 on the government-wide financial statements of the District. DISBURSEMENT Observations During our review of the disbursement process, the following issues were noted: 1. Five out of 40 transactions reviewed had an invoice date prior to the purchase order date, noting that the purchase was made prior to receiving an approval. 2. Five out of 40 transactions reviewed related to travel and conferences were made prior to receiving proper authorization. Recommendations 1. To strengthen internal controls over the purchasing function purchase requisitions and or purchase orders should be prepared prior to purchasing or ordering merchandise. All disbursements should receive approval as specified by the District's purchasing policies prior to the goods or services being ordered. This will allow District staff to ensure sufficient funds are available for each purchase. If necessary, the District should create open purchase orders. An open purchase order will allow the District to set aside a specific amount of money for a specific vendor. As the monies are expended, they will decrease the amount available in the purchase order. 2. To strengthen internal controls over travel and conferences, the district should ensure that travel and conference related transactions are approved prior to any expenditures taking place. All travel and conference requests should receive approval as specified by the District's purchasing policies prior to expenditures taking place for said events. This will allow District staff to ensure sufficient funds are available for each travel and conference event. 104