AUDIT HIGHLIGHTS YEAR ENDED JUNE 30, 2012 MINNEWASKA SCHOOL DISTRICT #2149

CURRENT YEAR SUMMARY Audit Opinion- “Unqualified Opinion” audit report Pages 2-3

Year Ended June 30, 2012 Year Ended June 30, 2011 Amount of Increase (Decrease) % Increase (Decrease) Local Sources Property Taxes$ 1,635,425$ 2,197,205$ (561,780) (25.6)% Interest earnings 7,910 18,486 (10,576) (57.2)% Other 1,285,209 1,133, , % State sources 10,038,479 9,069, , % Federal sources 687, ,202 (51,863) (7.0)% Other Financing Sources 8,051 18,275 (10,224) (55.9)% Total General Fund Revenue$ 13,662,413$ 13,176,670$ 485, % General Fund Revenues

Year Ended June 30, 2012 Year Ended June 30, 2011 Amount of Increase (Decrease) % Increase (Decrease) Salaries$ 7,404,398$ 7,462,498$ (58,100) ( 0.8)% Employees benefits 1,713,318 1,786,276 ( 72,958) (0.4)% Purchased services 2,658,849 2,440, , % Supplies & material 667, ,099 (52,997) (7.4)% Non-Capital equipment 143, ,952 (52,263) (27.8)% Capital Expenditures 99, ,874 (121,521) (54.8)% Debt Service 224, ,219 (8,354) (3.6)% Other expenditures 69,586 59,677 9, % Total Expenditures$ 12,981,140$ 13,121,200$ (140,060) (1.1)% General Fund Expenditures

Budgeted Amounts Actual General Fund Over (Under) Budget OriginalFinal Revenues Local property tax levies$ 1,603,234$ 1,606,504$ 1,635,425$ 28,921 Other local and county revenues 1,039,988 1,110,158 1,246, ,624 Revenues from state sources 9,646,307 10,027,578 10,038,479 10,901 Revenue from federal sources 677, , ,339 (11,239) Sales and other conversions of assets 29,540 43,930 44, Insurance recovery and settlement -0- 1,697 1,698 1 Total Revenues$ 12,996,896$ 13,488,445$ 13,654,362$ 165,917 General Fund Revenues- Budget to Actual

General Fund Expenditures2012 Budgeted Amounts 2012 Actual General Fund Over (Under) Final Budget Current:OriginalFinal District and school administration$ 546,560$ 582,000$ 588,988$ 6,988 District support services 296, , ,632 (33,006) Regular instruction 5,017,402 4,909,073 4,859,060 (50,013) Vocational instruction 89,504 87,675 86,922 (753) Exceptional instruction 4,270,606 4,305,030 4,282,667 (22,363) Community education and services -0- Instructional support services 116, , ,120 17,391 Pupil support services 1,104,418 1,171,204 1,151,810 (19,394) Site, buildings and equipment 1,104,134 1,,249,059 1,089,430 (159,629) Fiscal and other fixed cost programs 48,495 51,260 51,259 (1) Total Current 12,594,811 12,767,668 12,506,888 (260,780) Capital Outlay 235, , ,042 (7,335) Debt Service: Principal 96, , ,546 (394 ) Interest 138, , ,319 4,363 Debt issuance costs -0- 6, Total Debt Service 234, , ,210 3,969 Total Expenditures$ 13,064,766$13, 245,286$ 12,981,140$ (264,146)

Budgeted Amounts Actual General Fund Variances with Final Budget Favorable (unfavorable) OriginalFinal Excess (deficiency) of revenue over expenditures (67,870) 243, , ,063 Other Financing Sources (Uses) Sale of real property and equipment Capital Equipment Lease -0- 7,976 Total Other Financing Sources (Uses)$ -0- $ 8,051 Excess (Deficiency) of Revenues and Other Financing Sources Over (Under) Expenditures and Other Financing (Uses)$ (67,870)$ 243,159$ 681,273$ 438,114 Fund Balances - Beginning of Year 1,351,651 $ 1,351, Fund Balances - End of Year$ 1,283,781$ 1,594,810$ 2,032,924$ 438,114

Fund Balance Classifications Fund balance is divided into five classifications: Nonspendable Not in spendable form Restricted Fund balance is reported as restricted when constraints externally imposed Committed Can be used only for the specific purposes imposed by a formal action (resolution) of the School District Board of Education Assigned Intended to be used by the School District for specific purposes Unassigned All spendable amounts not contained in the other classifications

Fund Balances Fund Balances (Deficits)General Debt Service Nonmajor Governmental FundsTotal Total Nonspendable 223, ,017246,632 Restricted for: Debt Payment , ,550 Food Service Operations -0- 5,503 Community Education -0- 3,056 School Readiness Early Childhood -0- 4,313 Community Service Operations-0- 1,492 Staff Development 33, ,118 Deferred Maintenance Operating Capital344, ,063 Gifted and Talented6, ,016 Safe Schools1, ,395 Severance & Retirement160, ,173 Total Restricted544,766328,55015,098888,414 Committed to: Separation478,322 Assigned to: Day Treatment105, ,582 Music Department66, ,020 Total Assigned171, ,602 Unassigned (Deficit)614, ,619 Total Fund Balances$ 2,032,924$ 328,550$ 38,115$2,399,589

The property tax shift is an accounting entry that takes a portion of the school district's property tax revenue and moves it forward one fiscal year, i.e., taxes that would otherwise be revenue for fiscal year 2013 are shifted into fiscal year This shift replaces state aid that will be repaid at some future date. The property tax shift requirement is in Minnesota Statutes, section 123B.75, subdivision 5.

POST EMPLOYMENT SEVERANCE BENEFITS This is the unfunded portion that eventually needs to be covered. Early Retirement Incentive (Severance) Plan Post- Employment Insurance Benefits Actuarial Valuation Date Actuarial Value of Assets (a) Actuarial Accrued Liability (AAL) (a) Unfunded AAL (b-a) Funded Ratio (a/b) Covered Payroll (c) UAAL as a Percentage of Covered Payroll (b-a)/c) 7/1/11$ 1,241,468$ 2,507,154 $ 1,265, % $ 6,994, % 7/1/09$ 1,422,070$ 1,725,533$ 303, %$ 7,153, % 1/1/07$ -0-$ 1,646, %$ 7,298, % 2012 $638, $682,579 The District has reserved fund balance to cover this liability.

Prior Year Follow up Corrected Deficiency – Food Service Account Expenses Deficiency Financial Oversight & Monitoring Controls Deficiency Fiscal Agent Responsibilities Work in Progress Deficiency – Period End Financial Reporting Process

Require separate reporting on our consideration of Internal Controls and Compliance. Control deficiency is 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 financial misstatements on a timely basis. Material Weakness Reasonable possibility that a material misstatement of the financial statements will not be prevented or detected by the District’s internal controls. Significant Deficiency 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."

CURRENT YEAR SUMMARY Internal Controls Reporting Pages MATERIAL WEAKNESSES Deficiency I neligible students were being provided services by Title I teachers. Page 70 Deficiency Controls did not detect that ineligible students were receiving free and reduced meals & some students should have received free and reduced benefits, but didn’t. Page 71 SIGNIFICANT DEFICIENCIES Deficiency – Documenting Time Charged to Federal Programs Page 72 Deficiency – Period End Financial Reporting Page 73 STATE COMPLIANCE Page 69 No compliance exceptions noted

Summary (Continued) Federal Awards Program Audit Internal Control Deficiency Deficiency Food Service Account Expenses Page 70

2012 Conclusions The District needs to continue to closely monitor its revenues & expenditures related to Day Treatment & Special Ed. Once payments for prior year are finalized the budget should be reviewed. The District needs to monitor its rising unfunded OPEB actuarial accrued liability and consider how it is going to fund this deficit. The District needs to continue to pay down debt.

SAS 114 Letter Thanks to the District Staff for cooperation during the audit.

Desautels Bartosiewski & Associates CPAs