june 30, 2014...reconciliation of annual financial and budget report with audited financial...

MANHATTAN BEACH UNIFIED

SCHOOL DISTRICT

ANNUAL FINANCIAL REPORT

JUNE 30, 2014

MANHATTAN BEACH UNIFIED SCHOOL DISTRICT

TABLE OF CONTENTSJUNE 30, 2014

FINANCIAL SECTIONIndependent Auditors' Report 2Management's Discussion and Analysis 5Basic Financial Statements

Government-Wide Financial StatementsStatement of Net Position 14Statement of Activities 15

Fund Financial StatementsGovernmental Funds - Balance Sheet 15Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position 16Governmental Funds - Statement of Revenues, Expenditures, and Changes in Fund Balances 17Reconciliation of the Governmental Funds Statement of Revenues, Expenditures, andChanges in Fund Balances to the Statement of Activities 18

Proprietary Funds - Statement of Net Position 20Proprietary Funds - Statement of Revenues, Expenses, and Changes in Fund Net Position 21Proprietary Funds - Statement of Cash Flows 22Fiduciary Funds - Statement of Net Position 23Fiduciary Funds - Statement of Changes in Net Position 24

Notes to Financial Statements 25

REQUIRED SUPPLEMENTARY INFORMATIONGeneral Fund - Budgetary Comparison Schedule 62Schedule of Other Postemployment Benefits (OPEB) Funding Progress 63

SUPPLEMENTARY INFORMATIONSchedule of Expenditures of Federal Awards 65Local Education Agency Organization Structure 66Schedule of Average Daily Attendance 67Schedule of Instructional Time 68Reconciliation of Annual Financial and Budget Report With Audited Financial Statements 69Schedule of Financial Trends and Analysis 70Combining Statements - Non-Major Governmental Funds

Combining Balance Sheet 71Combining Statement of Revenues, Expenditures, and Changes in Fund Balances 72

Note to Supplementary Information 73

INDEPENDENT AUDITORS' REPORTSReport on Internal Control Over Financial Reporting and on Compliance and Other Matters Basedon an Audit of Financial Statements Performed in Accordance with Government AuditingStandards 78

Report on Compliance for Each Major Program and Report on Internal Control Over ComplianceRequired by the OMB Circular A-133 78

Report on State Compliance 80


TABLE OF CONTENTSJUNE 30, 2014

SCHEDULE OF FINDINGS AND QUESTIONED COSTSSummary of Auditors' Results 83Financial Statement Findings 84Federal Awards Findings and Questioned Costs 85State Awards Findings and Questioned Costs 86Summary Schedule of Prior Audit Findings 87Management Letter 88

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FINANCIAL SECTION

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INDEPENDENT AUDITOR'S REPORT

Governing BoardManhattan Beach Unified School DistrictManhattan Beach, California

Report on the Financial Statements

We have audited the accompanying financial statements of the governmental activities, the business-typeactivities, each major fund, and the aggregate remaining fund information of the Manhattan Beach Unified SchoolDistrict (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 accordancewith 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 financialstatements 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 auditin accordance with auditing standards generally accepted in the United States of America and the standardsapplicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General ofthe United States; and Standards and Procedures for Audits of California K-12 Local Education Agencies2013-2014, issued by the California Education Audit Appeals Panel as regulations. Those standards require thatwe plan and perform the audit to obtain reasonable assurance about whether the financial statements are free frommaterial misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in thefinancial statements. The procedures selected depend on the auditor's judgment, including the assessment of therisks of material misstatement of the financial statements, whether due to fraud or error. In making those riskassessments, the auditor considers internal control relevant to the District's preparation and fair presentation of thefinancial statements in order to design audit procedures that are appropriate in the circumstances, but not for thepurpose of expressing an opinion on the effectiveness of the District's internal control. Accordingly, we expressno such opinion. An audit also includes evaluating the appropriateness of accounting policies used and thereasonableness of significant accounting estimates made by management, as well as evaluating the overallpresentation of the financial statements.

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

8270 Aspen Street Rancho Cucamonga, CA 91730 Tel: 909.466.4410 Fax: 909.466.4431 www.vtdcpa.com

Vavrinek, Trine, Day & Co., LLPCertified Public Accountants

VALUE THE D IFFERENCE

FRESN O • L AGUN A H I L LS • PALO ALTO • P LEASANTON • RAN C HO CUC AMON GA • R I v E R S I d E • SACRAMENTO

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Opinions

In our opinion, the financial statements referred to above present fairly, in all material respects, the respectivefinancial position of the governmental activities, the business-type activities, the aggregate discretely presentedcomponent units, each major fund, and the aggregate remaining fund information of the Manhattan Beach UnifiedSchool District, as of June 30, 2014, and the respective changes in financial position and, where applicable, cashflows thereof for the year then ended in accordance with accounting principles generally accepted in the UnitedStates of America.

Emphasis of Matter - Change in Accounting Principles

As discussed in Notes 1 and 15 to the financial statements, the District has elected to change its method ofaccounting for cost of debt issuance as prescribed by GASB Statement No. 65, Items Previously Reported asAssets 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 supplementaryinformation, such as management's discussion and analysis on pages 5 through 12 and budgetary comparison andother postemployment benefit information on pages 62 and 63, respectively, be presented to supplement the basicfinancial statements. Such information, although not a part of the basic financial statements, is required by theGovernmental Accounting Standards Board who considers it to be an essential part of financial reporting forplacing the basic financial statements in an appropriate operational, economic, or historical context. We haveapplied certain limited procedures to the required supplementary information in accordance with auditingstandards generally accepted in the United States of America, which consisted of inquiries of management aboutthe methods of preparing the information and comparing the information for consistency with management'sresponses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of thebasic financial statements. We do not express an opinion or provide any assurance on the information because thelimited 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 collectivelycomprise the Manhattan Beach Unified School District's basic financial statements. The accompanyingsupplementary information such as the combining and individual nonmajor fund financial statements andSchedule 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 aslisted on the table of contents, such as the introductory and statistical section are presented for purposes ofadditional analysis and are not a required part of the basic financial statements.

The accompanying supplementary information previously referenced is the responsibility of management and wasderived from and relates directly to the underlying accounting and other records used to prepare the basicfinancial statements. Such information has been subjected to the auditing procedures applied in the audit of thebasic financial statements and certain additional procedures, including comparing and reconciling suchinformation directly to the underlying accounting and other records used to prepare the basic financial statementsor to the basic financial statements themselves, and other additional procedures in accordance with auditingstandards generally accepted in the United States of America. In our opinion, the Schedule of Expenditures ofFederal Awards and other accompanying supplementary information is fairly stated, in all material respects, inrelation to the basic financial statements as a whole.

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Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, we have also issued our report dated December 4, 2014, onour consideration of the Manhattan Beach Unified School District's internal control over financial reporting andon our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements andother matters. The purpose of that report is to describe the scope of our testing of internal control over financialreporting and compliance and the results of that testing, and not to provide an opinion on internal control overfinancial reporting or on compliance. That report is an integral part of an audit performed in accordance withGovernment Auditing Standards in considering Manhattan Beach Unified School District's internal control overfinancial reporting and compliance.

Rancho Cucamonga, CaliforniaDecember 4, 2014

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SHAPING THE FUTURE THROUGH EDUCATIONAL EXCELLENCE

This section of Manhattan Beach Unified School District's (the District) annual financial report presents ourdiscussion and analysis of the District's financial performance during the fiscal year that ended on June 30, 2014.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 usingthe 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 economicresources measurement focus using the accrual basis of accounting. They present governmental activities andbusiness-type activities separately. These statements include all assets of the District (including capital assets), aswell as all liabilities (including long-term obligations). Additionally, certain eliminations have occurred asprescribed 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 modifiedaccrual basis of accounting.

The Business-Type Activities are prepared using the economic resources measurement focus and the accrual basisof accounting.

The Fiduciary Activities are prepared using the economic resources measurement focus and the accrual basis ofaccounting.

Reconciliation of the Fund Financial Statements to the Government-Wide Financial Statements is provided toexplain the differences created by the integrated approach.

The Primary unit of the government is the Manhattan Beach Unified School District.


MANAGEMENT'S DISCUSSION AND ANALYSISJUNE 30, 2014

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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 andabout its activities. These statements include all assets and liabilities of the District using the accrual basis ofaccounting, which is similar to the accounting used by most private-sector companies. All of the current year'srevenues 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 betweenassets and liabilities, 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 are one indicator of whether its financial health is improving ordeteriorating. Other factors to consider are changes in the District's property tax base and the condition of theDistrict's facilities.

The relationship between revenues and expenses is the District's operating results. Since the governing board'sresponsibility is to provide services to our students and not to generate profit as commercial entities do, one mustconsider other factors when evaluating the overall health of the District. The quality of the education and thesafety of our schools will likely be an important component in this evaluation.

In the Statement of Net Position and the Statement of Activities, we present the District activities as follows:

Governmental Activities - Most of the District's services are reported in this category. This includes theeducation of kindergarten through grade twelve students, adult education students, the operation of childdevelopment activities, and the on-going effort to improve and maintain buildings and sites. Property taxes, Stateincome taxes, user fees, interest income, Federal, State, and local grants, as well as general obligation bonds,finance these activities.

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 awhole. Some funds are required to be established by State law and by bond covenants. However, managementestablishes many other funds to help it control and manage money for particular purposes or to show that it ismeeting legal responsibilities for using certain taxes, grants, and other money that it receives from theU.S. Department of Education.



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Governmental Funds - Most of the District's basic services are reported in governmental funds, which focus onhow 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 cashand all other financial assets that can readily be converted to cash. The governmental fund statements provide adetailed 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 bespent in the near future to finance the District's programs. The differences of results in the governmental fundfinancial statements to those in the government-wide financial statements are explained in a reconciliationfollowing each governmental fund financial statement.

Proprietary Funds - When the District charges users for the services it provides, whether to outside customers orto other departments within the District, these services are generally reported in proprietary funds. Proprietaryfunds are reported in the same way that all activities are reported in the Statement of Net Position and theStatement of Revenues, Expenses, and Changes in Fund Net Position. In fact, the District's enterprise funds are thesame as the business-type activities we report in the government-wide statements, but provide more detail andadditional information, such as cash flows, for proprietary funds. We use internal service funds (the othercomponent of proprietary funds) to report activities that provide supplies and services for the District's otherprograms and activities, such as the District's Self-Insurance Fund. The internal service funds are reported withgovernmental 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 studentbody activities, scholarships, employee retiree benefits, and pensions. The District's fiduciary activities arereported in the Fiduciary Funds - Statements of Net Position. We exclude these activities from the District's otherfinancial statements because the District cannot use these assets to finance its operations. The District isresponsible for ensuring that the assets reported in these funds are used for their intended purposes.

FINANCIAL HIGHLIGHTS

The Board of Trustees has increased the District's reserve in prior years for economic uncertainty (REU) fromthree percent to five percent. As a result, the District exceeds all State Department of Education requirements formaintenance of the REU.

Due to significant fiscal issues and uncertainties relative to the State of California budget, the District hasmaintained a conservative approach to budgeting expenditures. In late 2013-2014, the Board of Trustees andemployee associations reached agreement on a five percent salary increase for 2013-2014, retroactive toJuly 1, 2013.

The District has expended approximately $ 15.2 million on construction during 2013-2014 mainly for Mira CostaHigh School.



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To further its financial stability, the District continues to seek opportunities to reduce its long-term debtobligations. Passage of a General Obligation Bond in 2008-2009 (Measure BB) is an example of one financialvehicle used for this purpose as well as to improve District facilities. At the same time, the District issued 2013General Obligation Refunding Bonds, to prepay bonds issued under Series A of the Election of 2000. As of June30, 2014, set aside money in a escrow accounts in the amount of $15 million will be used to liquidate Series Abonds that are no longer obligation of the District.

Energy saving program was started at yearend and the District has obtained a commercial loan with a localfinancial institution in July 2014 in the amount of approximately $9.8 million Combined with the Prop 39funding the overall project costs will exceed $10 million. It is anticipated that the savings on electricity will beused to repay the loan over an 18 year term.



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THE DISTRICT AS A WHOLE

Net Position

The District's net position was $5,332,399 for the fiscal year ended June 30, 2014. Of this amount, $(30,754,148)was unrestricted. Restricted net position is reported separately to show legal constraints from debt covenants andenabling legislation that limit the governing board's ability to use the net position for day-to-day operations. Ouranalysis below, in summary form, focuses on the net position (Table 1) and change in net position (Table 2) of theDistrict's governmental and business-type activities.

Table 1

2013 2013

2014 As Restated 2014 2013 2014 As Restated

Assets

Current and other assets 51,937,649$ 69,270,309$ 2,039,658$ 1,594,741$ 53,977,307$ 70,865,050$

Capital assets 116,463,163 102,323,920 - - 116,463,163 102,323,920

Total Assets 168,400,812 171,594,229 2,039,658 1,594,741 170,440,470 173,188,970

Liabilities

Current liabilities 18,626,967 18,160,310 268,395 181,273 18,895,362 18,341,583

Non-current long-term

obligations 146,222,709 150,212,680 - - 146,222,709 150,212,680

Total Liabilities 164,849,676 168,372,990 268,395 181,273 165,118,071 168,554,263

Net Position

Investment in capital assets 18,007,139 13,311,612 - - 18,007,139 13,311,612

Restricted 18,069,408 12,061,721 - - 18,069,408 12,061,721

Unrestricted (32,525,411) (24,330,526) 1,771,263 1,413,468 (30,754,148) (22,917,058)

Total Net Position 3,551,136$ 1,042,807$ 1,771,263$ 1,413,468$ 5,322,399$ 2,456,275$

Activities Activities Total

Governmental Business-Type

The $(30,754,148) in unrestricted net position of governmental and business-type activities represents theaccumulated results of all past years' operations.



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Changes in Net Position

The results of this year's operations for the District as a whole are reported in the Statement of Activities onpage 15. Table 2 takes the information from the Statement, rounds off the numbers, and rearranges them slightlyso you can see our total revenues for the year.

Table 2

2014 2013 2014 2013 2014 2013

Revenues

Program revenues:

Charges for services 100,680$ 61,229$ -$ -$ 100,680$ 61,229$

Operating grants and

contributions 15,085,734 13,894,420 - - 15,085,734 13,894,420

General revenues:

Federal and State aid not

restricted 17,048,378 12,885,709 - - 17,048,378 12,885,709

Property taxes 37,158,823 37,765,918 - - 37,158,823 37,765,918

Other general revenues 5,780,353 4,971,525 4,061,799 4,045,847 9,842,152 9,017,372

Total Revenues 75,173,968 69,578,801 4,061,799 4,045,847 79,235,767 73,624,648

Expenses

Instructional 47,316,268 46,096,617 - - 47,316,268 46,096,617

Student support services 6,137,309 6,121,376 - - 6,137,309 6,121,376

Administration 5,303,670 3,531,552 - - 5,303,670 3,531,552

Maintenance and operations 5,664,337 7,520,425 - - 5,664,337 7,520,425

Other 8,244,055 9,437,270 3,704,004 4,381,868 11,948,059 13,819,138

Total Expenses 72,665,639 72,707,240 3,704,004 4,381,868 76,369,643 77,089,108

Change in Net Position 2,508,329$ (3,128,439)$ 357,795$ (336,021)$ 2,866,124$ (3,464,460)$

Activities Activities District Activities

Governmental Business-Type Total School

Governmental Activities

As reported in the Statement of Activities on page 15, the cost of all of our governmental activities this year was$72,665,639. However, the amount that our taxpayers ultimately financed for these activities through local taxeswas only $37,158,823 because the cost was paid by those who benefited from the programs ($100,680) or byother governments and organizations who subsidized certain programs with grants and contributions($15,085,734). We paid for the remaining "public benefit" portion of our governmental activities with$22,828,731 in Federal and State funds, and with other revenues, like interest and general entitlements.



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In Table 3, we have presented the cost and net cost of each of the District's largest functions: regular programinstruction, pupil transportation services, other pupil services, administration, maintenance and operations, andother outgo. As discussed above, net cost shows the financial burden that was placed on the District's taxpayers byeach of these functions. Providing this information allows our citizens to consider the cost of each function incomparison to the benefits they believe are provided by that function.

Table 3

2014 2013 2014 2013

Instruction 47,316,268$ 46,096,617$ 35,254,143$ 35,211,314$

Pupil transportation 361,055 387,939 256,978 311,546

Other pupil services 5,776,254 5,733,437 3,459,821 3,468,136

Administration 5,303,670 3,531,552 5,122,125 3,432,094

Maintenance and operations 5,664,337 7,520,425 5,652,600 7,445,535

Other outgo 8,244,055 9,437,270 7,733,558 8,882,966Total 72,665,639$ 72,707,240$ 57,479,225$ 58,751,591$

Total Cost of Services Net Cost of Services

THE DISTRICT'S FUNDS

As the District completed this year, our governmental funds reported a combined fund balance of $42,830,162,which is a decrease of $13,150,233 from last year (Table 4).

Table 4

July 1, 2013

As Restated Revenues Expenditures June 30, 2014

General Fund (includes Fund 17) 13,481,969$ 62,312,505$ 60,838,161$ 14,956,313$

Building Fund 25,596,340 117,412 15,365,608 10,348,144

Bond Interest and Redemption Fund 9,438,491 9,736,804 8,243,128 10,932,167

Cafeteria Fund 1,392,816 2,298,307 2,127,488 1,563,635

Capital Facilities Fund 907,815 675,126 905,235 677,706

Special Reserve Fund for Other Than

Capital Outlay Projects 5,162,964 33,198 843,965 4,352,197Total 55,980,395$ 75,173,352$ 88,323,585$ 42,830,162$

Balances and Activity



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CAPITAL ASSET AND DEBT ADMINISTRATION

Capital Assets

At June 30, 2014, the District had $116,463,163, in a broad range of capital assets (net of depreciation), includingland, buildings, furniture, and equipment. This amount represents a net increase (including additions, deductions,and depreciation) of $14,139,243, or 13.82 percent, from last year (Table 5).

Table 5

2014 2013

Land and construction in progress 49,578,614$ 34,034,366$

Buildings and improvements 66,258,067 68,167,535

Equipment 626,482 122,019Total 116,463,163$ 102,323,920$


This year's additions included continuing of the District's wireless project, resulting in wireless internetconnectivity for all school site common areas, classrooms, and offices and completion of a new Math/ScienceBuilding at Mira Costa High School on Phases II

Projects budgeted for 2014- 2015 on Phrase III include Band and Orchestra Building, Theater and Drama, andStudent Quad Area.

Long-Term Obligations

At the end of this year, the District had $151,164,782 in bonds outstanding versus $152,764,538 last year, adecrease of 1,599,756 percent.

Table 6

2014 2013

General obligation bonds 151,164,782$ 152,764,538$

Premium on bonds 3,044,765 3,227,533

Compensated absences 492,179 439,066

Postemployment benefits 595,196 600,476Total 155,296,922$ 157,031,613$


Other obligations include compensated absences payable, and other long-term obligations. We present moredetailed information regarding our long-term obligations in Note 7 of the financial statements.



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ECONOMIC FACTORS AND NEXT YEAR'S BUDGETS AND RATES

In considering the District Budget for the 2014-2015 year, the governing board and management used thefollowing criteria:

The key Average Daily Attendance (ADA) assumptions in our 2014-2015 revenue forecast under the new LocalControl Funding Formula (LCFF) are: ADA or the number of students used to calculate revenue was 6,751, andLCFF "target" revenue per ADA for a total of $53,905,053 before deficit of $7,984, with LCFF revenue limit perADA after a 17.16 percent deficit, of $6,815 for total funding of $46,008,923. Unrestricted lottery revenue isprojected at $128 per ADA, with restricted lottery at $34 per ADA.

CONTACTING THE DISTRICT'S FINANCIAL MANAGEMENT

This financial report is designed to provide our citizens, taxpayers, students, and investors and creditors with ageneral overview of the District's finances and to show the District's accountability for the money it receives. Ifyou have questions about this report or need any additional financial information, contact the AssistantSuperintendent for Administrative Services, at Manhattan Beach Unified School District, South 325 PeckAvenue, Manhattan Beach, California 90266.


STATEMENT OF NET POSITIONJUNE 30, 2014

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

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Governmental Business-Type

Activities Activities Total

ASSETS

Deposits and investments 44,092,646$ 2,030,911$ 46,123,557$

Receivables 7,586,854 8,747 7,595,601

Deferred charges - - -

Stores inventories 62,843 - 62,843

Other current assets 195,306 - 195,306

Capital assets:

Land and construction in process 49,578,614 - 49,578,614

Other capital assets 110,138,778 - 110,138,778

Less: Accumulated depreciation (43,254,229) - (43,254,229)

Total Capital Assets 116,463,163 - 116,463,163

Total Assets 168,400,812 2,039,658 170,440,470

LIABILITIES

Accounts payable 8,512,564 196,895 8,709,459

Interest payable 550,581 - 550,581

Unearned revenue 489,609 71,500 561,109

Long-term obligations:

Current portion of long-term obligations 9,074,213 - 9,074,213

Noncurrent portion of long-term obligations 146,222,709 - 146,222,709

Total Long-Term Obligations 155,296,922 - 155,296,922

Total Liabilities 164,849,676 268,395 165,118,071

NET POSITION

Net investment in capital assets 18,007,139 - 18,007,139

Restricted for:

Debt service 10,381,586 - 10,381,586

Capital projects 5,029,903 - 5,029,903

Educational programs 1,094,284 - 1,094,284

Other activities 1,563,635 - 1,563,635

Unrestricted (32,525,411) 1,771,263 (30,754,148)Total Net Position 3,551,136$ 1,771,263$ 5,322,399$


STATEMENT OF ACTIVITIESFOR THE YEAR ENDED JUNE 30, 2014


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Charges for OperatingServices and Grants and

Functions/Programs Expenses Sales ContributionsGovernmental Activities:Instruction 41,953,848$ 59,178$ 10,797,721$Instruction-related activities:

Supervision of instruction 1,184,107 6,387 438,612Instructional library, media, and technology 1,497,646 - 704,081School site administration 2,680,667 - 56,146

Pupil services:Home-to-school transportation 361,055 3,818 100,259Food services 2,025,071 - 290,676All other pupil services 3,751,183 17,839 2,007,918

Administration:Data processing 678,426 - -All other administration 4,625,244 5,853 175,692

Plant services 5,664,337 - 11,737Ancillary services 324,652 - 298,332Interest on long-term obligations 6,693,819 - -Other outgo 1,225,584 7,605 204,560

Total Governmental Activities 72,665,639 100,680 15,085,734Business-Type Activities:Enterprise services 3,704,004 - -

Total Business-Type Activities 3,704,004 - -General revenues and subventions:

Property taxes, levied for general purposesProperty taxes, levied for debt serviceTaxes levied for other specific purposes

Federal and State aid not restricted to specific purposesInterest and investment earningsTransfersMiscellaneous

Subtotal, General RevenuesChange in Net PositionNet Position - BeginningPrior Period AdjustmentBeginning Balance (as Restated)Net Position - Ending

Program Revenues

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Governmental Business-TypeActivities Activities Total

(31,096,949)$ -$ (31,096,949)$

(739,108) - (739,108)(793,565) - (793,565)

(2,624,521) - (2,624,521)

(256,978) - (256,978)(1,734,395) - (1,734,395)(1,725,426) - (1,725,426)

(678,426) - (678,426)(4,443,699) - (4,443,699)(5,652,600) - (5,652,600)

(26,320) - (26,320)(6,693,819) - (6,693,819)(1,013,419) - (1,013,419)

(57,479,225) - (57,479,225)

- (3,704,004) (3,704,004)- (3,704,004) (3,704,004)

27,446,356 - 27,446,3569,699,327 - 9,699,327

13,140 - 13,14017,048,378 - 17,048,378

279,306 13,615 292,921332,961 - 332,961

5,168,086 4,048,184 9,216,27059,987,554 4,061,799 64,049,353

2,508,329 357,795 2,866,1243,221,239 1,413,468 4,634,707

(2,178,432) - (2,178,432)1,042,807 1,413,468 2,456,2753,551,136$ 1,771,263$ 5,322,399$

Net (Expenses) Revenues andChanges in Net Position


GOVERNMENTAL FUNDSBALANCE SHEETJUNE 30, 2014


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Bond Interestand

General Building RedemptionFund Fund Fund

ASSETSDeposits and investments 14,890,058$ 11,288,288$ 10,932,167$Receivables 7,476,511 53,092 -Stores inventories 37,357 - -Other current assets 195,306 - -

Total Assets 22,599,232$ 11,341,380$ 10,932,167$

LIABILITIES AND FUND BALANCESLiabilities:

Accounts payable 7,153,310$ 993,236$ -$Unearned revenue 489,609 - -

Total Liabilities 7,642,919 993,236 -Fund Balances:

Nonspendable 47,357 - -Restricted 1,094,284 1,532,243 10,932,167Assigned 667,793 8,815,901 -Unassigned 13,146,879 - -

Total Fund Balances 14,956,313 10,348,144 10,932,167Total Liabilities andFund Balances 22,599,232$ 11,341,380$ 10,932,167$

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Non Major TotalGovernmental Governmental

Funds Funds

6,877,181$ 43,987,694$56,889 7,586,49225,486 62,843

- 195,3066,959,556$ 51,832,335$

366,018$ 8,512,564$- 489,609

366,018 9,002,173

25,486 72,8436,568,052 20,126,746

- 9,483,694- 13,146,879

6,593,538 42,830,162

6,959,556$ 51,832,335$


RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEETTO THE STATEMENT OF NET POSITION

JUNE 30, 2014


16

Total Fund Balance - Governmental Funds 42,830,162$

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: 159,717,392$

Accumulated depreciation is: (43,254,229)

Net Capital Assets 116,463,163

In governmental funds, unmatured interest on long-term obligations

is recognized in the period when it is due. On the government-wide

financial statements, unmatured interest on long-term obligations is

recognized when it is incurred. (550,581)

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. 105,314

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:

Bonds payable 106,699,547

Accrued interest on the bonds 44,465,235

Premium on bonds 3,044,765

Compensated absences 492,179

Net OPEB obligation 595,196

Total Long-Term Obligations (155,296,922)Total Net Position - Governmental Activities 3,551,136$


GOVERNMENTAL FUNDSSTATEMENT OF REVENUES, EXPENDITURES, ANDCHANGES IN FUND BALANCES

FOR THE YEAR ENDED JUNE 30, 2014


17

Bond Interestand

General Building RedemptionFund Fund Fund

REVENUESLocal Control Funding Formula 43,565,810$ -$ -$Federal sources 1,141,273 - -Other State sources 7,125,191 - 37,477Other local sources 10,480,231 117,412 9,699,327

Total Revenues 62,312,505 117,412 9,736,804EXPENDITURESCurrent

Instruction 40,531,844 - -Instruction-related activities:

Supervision of instruction 1,160,009 - -Instructional library, media and technology 1,461,901 - -School site administration 2,588,493 - -

Pupil services:Home-to-school transportation 337,560 - -Food services - - -All other pupil services 3,639,530 - -

Administration:Data processing 661,959 - -All other administration 3,495,454 - -

Plant services 5,411,175 99,412 -Facility acquisition and construction - 15,266,196 -Ancillary services 324,652 - -

Debt servicePrincipal - - 4,807,240Interest and other - - 3,435,888

Total Expenditures 59,612,577 15,365,608 8,243,128Excess (Deficiency) of RevenuesOver (Under) Expenditures 2,699,928 (15,248,196) 1,493,676

OTHER FINANCING SOURCES (USES)Transfers in - - -Other sources - - -Transfers out - - -Other uses (1,225,584) - -

Net Financing Sources (Uses) (1,225,584) - -NET CHANGE IN FUND BALANCES 1,474,344 (15,248,196) 1,493,676Fund Balances - Beginning 12,449,406 25,596,340 9,438,491Prior Period Adjustment 1,032,563 - -Fund Balances - Beginning (as Restated) 13,481,969 25,596,340 9,438,491Fund Balances - Ending 14,956,313$ 10,348,144$ 10,932,167$

17

Non-Major TotalGovernmental Governmental

Funds Funds

-$ 43,565,810$285,202 1,426,475

5,475 7,168,1432,715,954 23,012,9243,006,631 75,173,352

- 40,531,844

- 1,160,009- 1,461,901- 2,588,493

- 337,5602,025,071 2,025,071

- 3,639,530

- 661,9591,007,652 4,503,106

- 5,510,587843,965 16,110,161

- 324,652

- 4,807,240- 3,435,888

3,876,688 87,098,001

(870,057) (11,924,649)

- -- -- -- (1,225,584)- (1,225,584)

(870,057) (13,150,233)8,496,158 55,980,395

(1,032,563) -7,463,595 55,980,3956,593,538$ 42,830,162$


RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OFREVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCESTO THE STATEMENT OF ACTIVITIES



18

Total Net Change in Fund Balances - Governmental Funds (13,150,233)$

Amounts Reported for Governmental Activities in the Statement

of Activities are Different Because:

Capital outlays to purchase or build capital assets are reported in

governmental funds as expenditures, however, for governmental activities,

those costs are shown in the Statement of Net Position and allocated over

their estimated useful lives as annual depreciation expenses in the

Statement of Activities.

This is the amount by which capital outlays exceeds depreciation expense in

the period.

Capital outlays 16,147,384$

Depreciation expense (2,008,141)

Net expense adjustment 14,139,243

In the Statement of Activities, Other Postemployment Benefits Obligations

(OPEB) are measured by an actuarially determined Unfunded Frozen

Actuarial Accrued Liability (UFAAL). 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,

amounts contributed toward the OPEB obligation were more than the

Interest on net OPEB obligation by $5,280. 5,280

In the Statement of Activities, certain operating expense - compensated

absences (vacation) are measured by the amounts earned during the year.

In the governmental funds, however, expenditures for this item are

measured by the amount of financial resources used (essentially, the

amounts actually paid). Vacation used was less than the amounts earned

by $53,113. (53,113)


RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OFREVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCESTO THE STATEMENT OF ACTIVITIES (Continued)



19

Repayment of bond principal is an expenditure in the governmental funds,

but it reduces long-term obligations in the Statement of Net Position and

does not affect the Statement of Activities:

General obligation bonds 6,860,000

Under the modified basis of accounting used in the governmental funds,

expenditures are not recognized for transactions that are not normally paid

with expendable available financial resources. In the Statement of

Activities, however, which is presented on the accrual basis, expenses and

liabilities are reported regardless of when financial resources are available.

This adjustment combines the net changes of the following balances:

Amortization of debt premium 182,768

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 increased by $233,215

and second, $5,260,244 of additional accumulated interest was

accreted on the District's "capital appreciation" general obligation bonds. (5,493,459)

An Internal Service Fund is used by the District's management to charge the

costs of services to the individual funds. The net change in net assets of

the Internal Service Fund is reported with governmental activities. 17,843

Change in Net Position of Governmental Activities 2,508,329$


PROPRIETARY FUNDSSTATEMENT OF NET POSITIONJUNE 30, 2014


20

GovernmentalEnterprise Fund Activities -

Community InternalPreschool Service Fund

ASSETSDeposits and investments 2,030,911$ 104,952$Receivables 8,747 362

Total Current Assets 2,039,658 105,314

LIABILITIESCurrent Liabilities

Accounts payable 196,895 -Unearned revenue 71,500 -

Total Current Liabilities 268,395 -

NET POSITIONUnrestricted 1,771,263 105,314

Total Net Position 1,771,263$ 105,314$

Business-Type

Activities


PROPRIETARY FUNDSSTATEMENT OF REVENUES, EXPENSES, AND CHANGESIN FUND NET POSITION



21

Business-TypeActivities Governmental

Enterprise Fund Activities -Community Internal

Preschool Service FundOPERATING REVENUES

Local and intermediate sources 4,048,184$ 18,405$

OPERATING EXPENSESPayroll costs 2,585,642 -Supplies and materials 411,653 1,178Facility rental 702,671 -Other operating costs 4,037 -

Total Operating Expenses 3,704,003 1,178Operating Income 344,181 17,227

NON-OPERATING REVENUESInterest income 13,614 616

Change in Net Position 357,795 17,843Total Net Position - Beginning 1,413,468 87,471Total Net Position - Ending 1,771,263$ 105,314$


PROPRIETARY FUNDSSTATEMENT OF CASH FLOWSFOR THE YEAR ENDED JUNE 30, 2014


22

Business-Type

Activities

Enterprise Governmental

Fund Activities -

Community Internal

Preschool Service Fund

CASH FLOWS FROM OPERATING ACTIVITIES

Cash receipts from other local sources 4,114,611$ 18,405$

Cash payments for salaries and benefits (2,585,642) -

Cash payments for interfund services used, including

payments in lieu of taxes that are payments for, and

equivalent to, services provided (1,102,739) (1,178)

Net Cash Provided by Operating Activities 426,230 17,227

CASH FLOWS FROM INVESTING ACTIVITIES

Interest on investments 13,614 421

Net Change in Cash and Cash Equivalents 439,844 17,648

Cash and Cash Equivalents - Beginning 1,591,067 87,304Cash and Cash Equivalents - Ending 2,030,911$ 104,952$

RECONCILIATION OF OPERATING INCOME TO NET CASH

PROVIDED BY OPERATING ACTIVITIES:

Operating income 344,181$ 17,227$

Adjustments to reconcile operating income to net cash provided by

operating activities:

Changes in assets and liabilities:

Receivables (5,073) -

Account payable 15,622 -

Unearned revenue 71,500 -

NET CASH PROVIDED BY OPERATING ACTIVITIES 426,230$ 17,227$


FIDUCIARY FUNDSSTATEMENT OF NET POSITIONJUNE 30, 2014


23

Retiree

Benefits Agency

Trust Funds

ASSETS

Deposits and investments 409,158$ 192,532$

Receivables 1,519 -Total Assets 410,677 192,532$

LIABILITIES

Due to student groups - 192,532$

NET POSITION

Unreserved 410,677$


FIDUCIARY FUNDSSTATEMENT OF CHANGES IN NET POSITIONFOR THE YEAR ENDED JUNE 30, 2014


24

Retiree

Benefits

ADDITIONS Trust

Interest 2,861$

DEDUCTIONS

Other expenditures 75,504

Change in Net Position (72,643)

Net Position - Beginning 401,792

Prior Period Adjustment 81,528

Fund Balances - Beginning (as Restated) 483,320Net Position - Ending 410,677$


NOTES TO FINANCIAL STATEMENTSJUNE 30, 2014

25

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Financial Reporting Entity

The Manhattan Beach Unified School District (the District) was established in 1912 and unified in 1993 under thelaws of the State of California. The District operates under a locally elected five-member Board form ofgovernment and provides educational services to grades K - 12 as mandated by the State and/or Federal agencies.The District operates five elementary schools, one middle school, and one high school.

A reporting entity is comprised of the primary government, component units, and other organizations that areincluded to ensure the financial statements are not misleading. The primary government of the District consists ofall funds, departments, boards, and agencies that are not legally separate from the District. For Manhattan BeachUnified School District, this includes general operations, food service, and student related activities of theDistrict.

Component Units

Component units are legally separate organizations for which the District is financially accountable. Componentunits may also include organizations that are fiscally dependent on the District, in that the District approves theirbudget, the issuance of their debt or the levying of their taxes. In addition, component units are other legallyseparate organizations for which the District is not financially accountable but the nature and significance of theorganization's relationship with the District is such that exclusion would cause the District's financial statementsto be misleading or incomplete.

The Manhattan Beach Education Foundation Inc. The Manhattan Beach Education Foundation Inc.(the Foundation) is a legally separate, tax-exempt entity. The Foundation's sole purpose is to provide financialsupport for Manhattan Beach Unified School District. Although the District does not control the timing or theamount of receipts of the Foundation, the majority of the resources held by the Foundation can only be used by, orfor the benefit, of the District. The Foundation is not considered a component unit of the District. During the yearended June 30, 2014, the Foundation contributed approximately $5,240,683 to the District. Current auditedfinancial information was not available at the time of the District's audit.

Basis of Presentation - Fund Accounting

The accounting system is organized and operated on a fund basis. A fund is defined as a fiscal and accountingentity with a self-balancing set of accounts, which are segregated for the purpose of carrying on specific activitiesor attaining certain objectives in accordance with special regulations, restrictions, or limitations. The District'sfunds are grouped into three broad fund categories: governmental, proprietary, and fiduciary.

Governmental Funds Governmental funds are those through which most governmental functions typically arefinanced. 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 mayor must be used. Current liabilities are assigned to the fund from which they will be paid. The difference betweengovernmental fund assets and liabilities is reported as fund balance. The following are the District's major andnon-major governmental funds:



26

Major Governmental Funds

General Fund The General Fund is the chief operating fund for all districts. It is used to account for the ordinaryoperations of the District. All transactions except those accounted for in another fund are accounted for in thisfund.

One fund currently defined as special revenue funds in the California State Accounting Manual (CSAM) does notmeet the GASB Statement No. 54 special revenue fund definition. Specifically, Fund 14, Deferred MaintenanceFund, is not substantially composed of restricted or committed revenue sources. While this fund is authorized bystatute and will remain open for internal reporting purposes, the fund function effectively as an extension of theGeneral Fund, and accordingly, has been combined with the General Fund for presentation in the audited financialstatements.

As a result, the General Fund reflects an increase in assets, fund balance, and revenues of $117,745, $117,745,and $848, respectively.

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 wereissued.

Bond Interest and Redemption Fund The Bond Interest and Redemption Fund is used for the repayment ofbonds issued for a district (Education Code Sections 15125-15262).

Non-Major Governmental Funds

Special Revenue Funds The Special Revenue funds are established to account for the proceeds from specificrevenue sources (other than trusts, major capital projects, or debt service) that are restricted or committed to thefinancing of particular activities and that compose a substantial portion of the inflows of the fund. Additionalresources that are restricted, committed, or assigned to the purpose of the fund may also be reported in the fund.

Cafeteria Fund The Cafeteria Fund is used to account separately for Federal, State, and local resources tooperate the food service program (Education Code Sections 38090-38093) and is used only for thoseexpenditures authorized by the governing board as necessary for the operation of the District's food serviceprogram (Education Code Sections 38091 and 38100).

Capital Project Funds The Capital Project funds are used to account for and report financial resources that arerestricted, committed, or assigned to the acquisition or construction of major capital facilities and other capitalassets (other than those financed by proprietary funds and trust funds).

Capital Facilities Fund The Capital Facilities Fund is used primarily to account separately for moniesreceived from fees levied on developers or other agencies as a condition of approving a development(Education Code Sections 17620-17626). Expenditures are restricted to the purposes specified in GovernmentCode Sections 65970-65981 or to the items specified in agreements with the developer (Government CodeSection 66006).



27

Special Reserve Fund for Capital Outlay Projects The Special Reserve Fund for Capital Outlay Projectsexists primarily to provide for the accumulation of General Fund monies for capital outlay purposes(Education Code Section 42840).

Proprietary Funds Proprietary fund reporting focuses on the determination of operating income, changes in netposition, financial position, and cash flows. The District applies all GASB pronouncements, as well as theFinancial Accounting Standards Board pronouncements issued on or before November 30, 1989, unless thosepronouncements conflict with or contradict GASB pronouncements. Proprietary funds are classified as enterpriseor 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 toexternal users for goods or services. The only enterprise fund of the District accounts for the financialtransactions related to the Community Preschool of the District.

Internal Service Fund Internal service funds may be used to account for any activity for which goods orservices are provided to other funds of the District on a cost-reimbursement basis. The District operates aSelf-Insurance Fund that is accounted for in an internal service fund.

Fiduciary Funds Fiduciary funds are used to account for assets held in trustee or agent capacity for others thatcannot be used to support the District's own programs. The fiduciary fund category is split into fourclassifications: pension trust funds, investment trust funds, private-purpose trust funds, and agency funds. Thekey distinction between trust and agency funds is that trust funds are subject to a trust agreement that affects thedegree of management involvement and the length of time that the resources are held.

Trust funds are used to account for the assets held by the District under a trust agreement for individuals, privateorganizations, or other governments and are therefore, not available to support the District's own programs. TheDistrict's trust fund is a Retiree Benefits Trust 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 aredue to individuals or entities at some future time. The District's agency fund accounts for associated student bodyactivities (ASB).

Basis of Accounting - Measurement Focus

Government-Wide Financial Statements The government-wide financial statements are prepared using theeconomic resources measurement focus and the accrual basis of accounting. This is the same approach used in thepreparation of the proprietary fund financial statements, but differs from the manner in which governmental fundfinancial statements are prepared.



28

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 governmentalfunction, 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 notallocate indirect expenses to functions in the Statement of Activities, except for depreciation. Program revenuesinclude charges paid by the recipients of the goods or services offered by the programs and grants andcontributions 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 ofprogram revenues and expenses identifies the extent to which each program or business segment is self-financingor draws from the general revenues of the District. Eliminations have been made to minimize the double countingof internal activities.

Net position should be reported as restricted when constraints placed on net asset use are either externallyimposed by creditors (such as through debt covenants), grantors, contributors, or laws or regulations of othergovernments or imposed by law through constitutional provisions or enabling legislation. The net positionrestricted for other activities result from special revenue funds and the restrictions on their net asset use.

Fund Financial Statements Fund financial statements report detailed information about the District. The focusof 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 singlecolumn.

Governmental Funds All governmental funds are accounted for using the flow of current financialresources 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 ofRevenues, Expenditures, and Changes in Fund Balances reports on the sources (revenues and other financingsources) and uses (expenditures and other financing uses) of current financial resources. This approach differsfrom the manner in which the governmental activities of the government-wide financial statements areprepared. Governmental fund financial statements, therefore, include reconciliations with brief explanationsto better identify the relationship between the government-wide financial statements, prepared using theeconomic resources measurement focus and the accrual basis of accounting, and the governmental fundfinancial statements, prepared using the flow of current financial resources measurement focus and themodified accrual basis of accounting.

Proprietary Funds Proprietary funds are accounted for using the flow of economic resources measurementfocus and the accrual basis of accounting. All assets and all liabilities associated with the operation of thisfund are included in the Statement of Net Position. The Statement of Changes in Fund Net Position presentsincreases (revenues) and decreases (expenses) in net total assets. The Statement of Cash Flows providesinformation 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 measurementfocus and the accrual basis of accounting. Fiduciary funds are excluded from the government-wide financialstatements because they do not represent resources of the District.



29

Revenues - Exchange and Non-Exchange Transactions Revenue resulting from exchange transactions, inwhich each party gives and receives essentially equal value, is recorded on the accrual basis when the exchangetakes place. On a modified accrual basis, revenue is recorded in the fiscal year in which the resources aremeasurable and become available. Available means that the resources will be collected within the current fiscalyear or are expected to be collected soon enough thereafter, to be used to pay liabilities of the current fiscal year.Generally, available is defined as collectible within 45 or 60 days. However, to achieve comparability of reportingamong California districts and so as not to distort normal revenue patterns, with specific respect to reimbursementgrants and corrections to State-aid apportionments, the California Department of Education has defined availablefor districts as collectible within one year. The following revenue sources are considered to be both measurableand 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 inthe fiscal year in which the taxes are received. Revenue from certain grants, entitlements, and donations isrecognized in the fiscal year in which all eligibility requirements have been satisfied. Eligibility requirementsinclude time and purpose restrictions. On a modified accrual basis, revenue from non-exchange transactions mustalso 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 theincurrence of qualifying expenditures. In subsequent periods, when both revenue recognition criteria are met, orwhen the District has a legal claim to the resources, the liability for unearned revenue is removed from the balancesheet and revenue is recognized.

Certain grants received before the eligibility requirements are met are recorded as unearned revenue. On thegovernmental fund financial statements, receivables that will not be collected within the available period are alsorecorded as unearned revenue.

Expenses/Expenditures On the accrual basis of accounting, expenses are recognized at the time they areincurred. 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 therelated fund liability is incurred, if measurable, and typically paid within 90 days. Principal and interest on long-term 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 arerecognized in the entity-wide statements.

Cash and Cash Equivalents

The District's cash and cash equivalents are considered to be cash on hand, demand deposits, and short-terminvestments with original maturities of three months or less from the date of acquisition. Cash equivalents alsoinclude cash with county treasury balances for purposes of the Statement of Cash Flows.



30

Investments

Investments held at June 30, 2014, with original maturities greater than one year are stated at fair value. Fair valueis estimated based on quoted market prices at year-end. All investments not required to be reported at fair valueare stated at cost or amortized cost. Fair values of investments in county and State investment pools aredetermined by the program sponsor.

Stores Inventories

Inventories consist of expendable food and supplies held for consumption. Inventories are stated at cost, on thefirst-in, first-out basis. The costs of inventory items are recorded as expenditures in the governmental funds andexpenses in the proprietary funds when used.

Capital Assets and Depreciation

The accounting and reporting treatment applied to the capital assets associated with a fund are determined by itsmeasurement focus. Capital assets are long-lived assets of the District. The District maintains a capitalizationthreshold of $5,000. The District does not possess any infrastructure. Improvements are capitalized; the costs ofnormal maintenance and repairs that do not add to the value of the asset or materially extend an asset's life are notcapitalized, but are expensed as incurred.

When purchased, such assets are recorded as expenditures in the governmental funds and capitalized in thegovernment-wide Statement of Net Position. The valuation basis for capital assets is historical cost, or wherehistorical cost is not available, estimated historical cost based on replacement cost. Donated capital assets arecapitalized 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 basisfor proprietary fund capital assets is the same as those used for the capital assets of governmental funds.

Depreciation is computed using the straight-line method. Estimated useful lives of the various classes ofdepreciable capital assets are as follows: buildings, 20 to 50 years; improvements/infrastructure, 5 to 50 years;equipment, 2 to 20 years.

Interfund Balances

On fund financial statements, receivables and payables resulting from short-term interfund loans are classified as"interfund receivables/payables". These amounts are eliminated in the governmental and business-type activitiescolumns of the Statement of Net Position, except for the net residual amounts due between governmental andbusiness-type activities, which are presented as internal balances.



31

Compensated Absences

Compensated absences are accrued as a liability as the benefits are earned. The entire compensated absenceliability is reported on the government-wide Statement of Net Position. For governmental funds, the currentportion of unpaid compensated absences is recognized upon the occurrence of relevant events such as employeeresignations and retirements that occur prior to year-end that have not yet been paid with expendable availablefinancial resources. These amounts are reported in the fund from which the employees who have accumulatedleave are paid.

Sick leave is accumulated without limit for each employee at the rate of one day for each month worked. Leavewith pay is provided when employees are absent for health reasons; however, the employees do not gain a vestedright to accumulated sick leave. Employees are never paid for any sick leave balance at termination ofemployment or any other time. Therefore, the value of accumulated sick leave is not recognized as a liability inthe District's financial statements. However, credit for unused sick leave is applicable to all classified schoolmembers who retire after January 1, 1999. At retirement, each member will receive .004 year of service credit foreach day of unused sick leave. Credit for unused sick leave is applicable to all certificated employees and isdetermined by dividing the number of unused sick days by the number of base service days required to completethe 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 proprietaryfund financial statements. In general, governmental fund payables and accrued liabilities that, once incurred, arepaid in a timely manner and in full from current financial resources are reported as obligations of thegovernmental funds.

However, claims and judgments, compensated absences, special termination benefits, and contractually requiredpension contributions that will be paid from governmental funds are reported as a liability in the governmentalfund financial statements only to the extent that they are due for payment during the current year. Bonds, capitalleases, and other long-term obligations are recognized as liabilities in the governmental fund financial statementswhen due.

Debt Issuance Costs, Premiums, and Discounts

In the government-wide financial statements and in the proprietary fund type financial statements, long-termobligations are reported as liabilities in the applicable governmental activities, business-type activities, orproprietary fund statement of net position. Debt premiums and discounts, as well as issuance costs, related toprepaid 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 arerecognized in the current period. The face amount of the debt is reported as other financing sources. Premiumsreceived on debt issuance are also reported as other financing sources. Issuance costs, whether or not withheldfrom the actual debt proceeds, are reported as debt service expenditures.



32

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 arelegally or contractually required to be maintained intact.

Restricted - amounts that can be spent only for specific purposes because of constitutional provisions or enablinglegislation or because of constraints that are externally imposed by creditors, grantors, contributors, or the laws orregulations of other governments.

Assigned - amounts that do not meet the criteria to be classified as restricted or committed but that are intended tobe used for specific purposes. Under the District's adopted policy, only the governing board or chief businessofficer/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 whichcommitted, assigned, or unassigned fund balances are available, the District considers amounts to have been spentfirst out of committed funds, then assigned funds, and finally unassigned funds, as needed, unless the governingboard 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 Districtagainst revenue shortfalls or unpredicted one-time expenditures. The policy requires a Reserve for EconomicUncertainties consisting of unassigned amounts equal to no less than three percent of General Fund expendituresand other financing uses.

Net Position

Net position represents the difference between assets and liabilities. Net position net investment in capital assets,consists of capital assets, net of accumulated depreciation, reduced by the outstanding balances of any borrowingsused for the acquisition, construction or improvement of those assets. The District has no related debt outstandingas of June 30, 2014. Net position is reported as restricted when there are limitations imposed on their use eitherthrough 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 anexpense is incurred for purposes for which both restricted and unrestricted net position is available. Thegovernment-wide financial statements report $18,069,408 of restricted net position.



33

Operating Revenues and Expenses

Operating revenues are those revenues that are generated directly from the primary activity of the proprietaryfunds. Operating expenses are necessary costs incurred to provide the good or service that are the primary activityof the fund. All revenues and expenses not meeting this definition are reported as non-operating revenues andexpenses.

Interfund Activity

Transfers between governmental and business-type activities in the government-wide financial statements arereported in the same manner as general revenues.

Exchange transactions between funds are reported as revenues in the seller funds and as expenditures/expenses inthe purchaser funds. Flows of cash or goods from one fund to another without a requirement for repayment arereported as interfund transfers. Interfund transfers are reported as other financing sources/uses in governmentalfunds and after non-operating revenues/expenses in proprietary funds. Repayments from funds responsible forparticular expenditures/expenses to the funds that initially paid for them are not presented in the financialstatements. Interfund transfers are eliminated in the governmental and business-type activities columns of theStatement of Activities, except for the net residual amounts transferred between governmental and business-typeactivities.

Estimates

The preparation of the financial statements in conformity with accounting principles generally accepted in theUnited States of America requires management to make estimates and assumptions that affect the amountsreported 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 governingboard to hold a public hearing and adopt an operating budget no later than July 1st of each year. The Districtgoverning board satisfied these requirements. The adopted budget is subject to amendment throughout the year togive consideration to unanticipated revenue and expenditures primarily resulting from events unknown at the timeof budget adoption with the legal restriction that expenditures cannot exceed appropriations by major objectaccount.

The amounts reported as the original budgeted amounts in the budgetary statements reflect the amounts when theoriginal appropriations were adopted. The amounts reported as the final budgeted amounts in the budgetarystatements reflect the amounts after all budget amendments have been accounted for. For budget purposes, onbehalf payments have not been included as revenue and expenditures as required under generally acceptedaccounting principles.



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Property Tax

Secured property taxes attach as an enforceable lien on property as of January 1. Taxes are payable in twoinstallments 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 billsand 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. ThisStatement establishes accounting and financial reporting standards that reclassify, as deferred outflows ofresources or deferred inflows of resources, certain items that were previously reported as assets and liabilities andrecognizes, as outflows of resources or inflows of resources, certain items that were previously reported as assetsand liabilities.

Concepts Statement No. 4, Elements of Financial Statements, introduced and defined the elements included infinancial 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 resourcesshould be limited to those instances identified by the Board in authoritative pronouncements that are establishedafter applicable due process. Prior to the issuance of this Statement, only two such pronouncements have beenissued. Statement No. 53, Accounting and Financial Reporting for Derivative Instruments, requires the reportingof a deferred outflow of resources or a deferred inflow of resources for the changes in fair value of hedgingderivative instruments, and Statement No. 60, Accounting and Financial Reporting for Service ConcessionArrangements, requires a deferred inflow of resources to be reported by a transferor government in a qualifyingservice concession arrangement. This Statement amends the financial statement element classification of certainitems 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 statementelements deferred outflows of resources and deferred inflows of resources, such as changes in the determinationof 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, 2014.

As the result of implementing GASB Statement No. 65, the District has restated the beginning net position in thegovernment-wide Statement of Net Position, effectively decreasing net position as of July 1, 2013, by $2,178,432.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—anamendment of GASB Statement No. 27. The primary objective of this Statement is to improve accounting andfinancial reporting by state and local governments for pensions. It also improves information provided by stateand local governmental employers about financial support for pensions that is provided by other entities. ThisStatement results from a comprehensive review of the effectiveness of existing standards of accounting andfinancial reporting for pensions with regard to providing decision-useful information, supporting assessments ofaccountability and inter-period equity, and creating additional transparency.



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This Statement replaces the requirements of Statement No. 27, Accounting for Pensions by State and LocalGovernmental Employers, as well as the requirements of Statement No. 50, Pension Disclosures, as they relate topensions that are provided through pension plans administered as trusts or equivalent arrangements (hereafterjointly referred to as trusts) that meet certain criteria. The requirements of Statements No. 27 and No. 50 remainapplicable 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 theemployees of state and local governmental employers through pension plans that are administered through truststhat have the following characteristics:

Contributions from employers and non-employer contributing entities to the pension plan and earnings onthose contributions are irrevocable.

Pension plan assets are dedicated to providing pensions to plan members in accordance with the benefitterms.

Pension plan assets are legally protected from the creditors of employers, non-employer contributingentities, and the pension plan administrator. If the plan is a defined benefit pension plan, plan assets also arelegally protected from creditors of the plan members.

This Statement establishes standards for measuring and recognizing liabilities, deferred outflows of resources, anddeferred inflows of resources, and expense/expenditures. For defined benefit pensions, this Statement identifiesthe methods and assumptions that should be used to project benefit payments, discount projected benefitpayments 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 employerswhose employees are provided with pensions through the pension plan and whether pension obligations andpension plan assets are shared. Employers are classified in one of the following categories for purposes of thisStatement:

Single employers are those whose employees are provided with defined benefit pensions through single-employer pension plans—pension plans in which pensions are provided to the employees of only oneemployer (as defined in this Statement).

Agent employers are those whose employees are provided with defined benefit pensions through agentmultiple-employer pension plans—pension plans in which plan assets are pooled for investment purposesbut separate accounts are maintained for each individual employer so that each employer’s share of thepooled 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 throughcost-sharing multiple-employer pension plans—pension plans in which the pension obligations to theemployees of more than one employer are pooled and plan assets can be used to pay the benefits of theemployees of any employer that provides pensions through the pension plan.



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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 definedcontribution pensions. This Statement also addresses circumstances in which a non-employer entity has a legalrequirement to make contributions directly to a pension plan.

This Statement is effective for fiscal years beginning after June 15, 2014. Early implementation is encouraged.

In November 2013, the GASB issued Statement No. 71, Pension Transition for Contributions Made Subsequentto the Measurement Date — An Amendment of GASB Statement No. 68. The objective of this Statement is toaddress an issue regarding application of the transition provisions of Statement No. 68, Accounting and FinancialReporting for Pensions. The issue relates to amounts associated with contributions, if any, made by a state or localgovernment employer or nonemployer contributing entity to a defined benefit pension plan after the measurementdate of the government's beginning net pension liability.

Statement No. 68 requires a state or local government employer (or nonemployer contributing entity in a specialfunding situation) to recognize a net pension liability measured as of a date (the measurement date) no earlierthan the end of its prior fiscal year. If a state or local government employer or nonemployer contributing entitymakes a contribution to a defined benefit pension plan between the measurement date of the reported net pensionliability and the end of the government's reporting period, Statement No. 68 requires that the governmentrecognize its contribution as a deferred outflow of resources. In addition, Statement No. 68 requires recognitionof deferred outflows of resources and deferred inflows of resources for changes in the net pension liability of astate or local government employer or nonemployer contributing entity that arise from other types of events. Attransition to Statement No. 68, if it is not practical for an employer or nonemployer contributing entity todetermine the amounts of all deferred outflows of resources and deferred inflows of resources related topensions, paragraph 137 of Statement No. 68 required that beginning balances for deferred outflows of resourcesand deferred inflows of resources not be reported.

Consequently, if it is not practical to determine the amounts of all deferred outflows of resources and deferredinflows of resources related to pensions, contributions made after the measurement date of the beginning netpension liability could not have been reported as deferred outflows of resources at transition. This could haveresulted in a significant understatement of an employer or nonemployer contributing entity's beginning netposition and expense in the initial period of implementation.

This Statement amends paragraph 137 of Statement No. 68 to require that, at transition, a governmentrecognize a beginning deferred outflow of resources for its pension contributions, if any, made subsequent tothe measurement date of the beginning net pension liability. Statement No. 68, as amended, continues torequire that beginning balances for other deferred outflows of resources and deferred inflows of resourcesrelated 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 StatementNo. 68.



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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 44,092,646$

Business-type activities 2,030,911

Fiduciary funds 601,690

Total Deposits and Investments 46,725,247$

Deposits and investments as of June 30, 2014, consist of the following:

Cash on hand and in banks 1,310,629$

Cash in revolving 10,000

Investments 45,404,618

Total Deposits and Investments 46,725,247$

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 depositplaced 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 externalinvestment pool as the District is required to deposit all receipts and collections of monies with their CountyTreasurer (Education Code Section 41001). The fair value of the District's investment in the pool is reported inthe accounting financial statements at amounts based upon the District's pro-rata share of the fair value providedby the County Treasurer for the entire portfolio (in relation to the amortized cost of that portfolio). The balanceavailable for withdrawal is based on the accounting records maintained by the County Treasurer, which isrecorded on the amortized cost basis.



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General Authorizations

Limitations as they relate to interest rate risk, credit risk, and concentration of credit risk are indicated in theschedules 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

Interest Rate Risk

Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of aninvestment. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value tochanges in market interest rates. The District does not have a formal investment policy that limits investmentmaturities as a means of managing its exposure to fair value losses arising from increasing interest rates. TheDistrict manages its exposure to interest rate risk by investing in the county pool longer term investments and bytiming cash flows from maturities so that a portion of the portfolio is maturing or coming close to maturity evenlyover time as necessary to provide the cash flow and liquidity needed for operations.



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Specific Identification

Information about the sensitivity of the fair values of the District's investments to market interest rate fluctuationis provided by the following schedule that shows the distribution of the District's investment by maturity:

Fair Weighted Average

Investment Type Value Days to MaturityLos Angeles County Investment Pool 45,204,838$ 741

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. TheDistrict's investment in the Los Angeles County Investment Pool is not required to be rated, nor has it been ratedas of 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 Districtdoes not have a policy for custodial credit risk for deposits. However, the California Government Code requiresthat a financial institution secure deposits made by State or local governmental units by pledging securities in anundivided collateral pool held by a depository regulated under state law (unless so waived by the governmentalunit). The market value of the pledged securities in the collateral pool must equal at least 110 percent of the totalamount deposited by the public agency. California law also allows financial institutions to secure public depositsby pledging first trust deed mortgage notes having a value of 150 percent of the secured public deposits and lettersof credit issued by the Federal Home Loan Bank of San Francisco having a value of 105 percent of the secureddeposits. As of June 30, 2014, the District's bank balance of $3,995,758 was exposed to custodial credit riskbecause it was uninsured, but collateralized with securities held by the pledging financial institution's trustdepartment or agent, but not in the name of the District.



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NOTE 3 - RECEIVABLES

Receivables at June 30, 2014, consisted of intergovernmental grants, entitlements, interest, and other localsources. All receivables are considered collectible in full.

Non-Major Internal Total

General Building Governmental Service Governmental Proprietary Fiduciary

Fund Fund Funds Fund Activity Funds Funds

Federal Government

Categorical aid 309,309$ -$ -$ -$ 309,309$ -$ -$

State Government

State principal

apportionment 1,834,989 - 36,116 - 1,871,105 - -

Categorical aid 703,014 - - - 703,014 - -

Lottery 547,023 - - - 547,023 - -

Local Government

Interest 22,978 53,092 20,773 362 97,205 8,747 1,519

Other Local Sources 4,059,198 - - - 4,059,198 - -

Total 7,476,511$ 53,092$ 56,889$ 362$ 7,586,854$ 8,747$ 1,519$



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NOTE 4 - CAPITAL ASSETS

Capital asset activity for the fiscal year ended June 30, 2014, was as follows:

Balance Balance

July 1, 2013 Additions Deductions June 30, 2014


Capital Assets Not Being Depreciated:

Land 3,909,383$ -$ -$ 3,909,383$

Construction in progress 30,124,983 15,544,248 - 45,669,231Total Capital Assets

Not Being Depreciated 34,034,366 15,544,248 - 49,578,614

Capital Assets Being Depreciated:

Land improvements 3,664,604 - - 3,664,604

Buildings and improvements 101,949,666 - - 101,949,666

Furniture and equipment 3,921,372 603,136 - 4,524,508Total Capital Assets Being

Depreciated 109,535,642 603,136 - 110,138,778

Total Capital Assets 143,570,008 16,147,384 - 159,717,392

Less Accumulated Depreciation:

Land improvements 2,709,439 78,931 - 2,788,370

Buildings and improvements 34,737,296 1,830,537 - 36,567,833

Furniture and equipment 3,799,353 98,673 - 3,898,026

Total Accumulated Depreciation 41,246,088 2,008,141 - 43,254,229Governmental Activities Capital

Assets, Net 102,323,920$ 14,139,243$ -$ 116,463,163$

Depreciation expense was charged as a direct expense to governmental functions as follows:


Instruction 1,374,171$

Supervision of instruction 24,098

Instructional library, media, and technology 35,745

School site administration 92,174

Home-to-school transportation 23,495

All other pupil services 111,653

Data processing 16,467

All other administration 139,365

Plant services 190,973Total Depreciation Expenses Governmental Activities 2,008,141$



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NOTE 5 - ACCOUNTS PAYABLE

Accounts payable at June 30, 2014, consisted of the following:

Non-Major Total

General Building Governmental Governmental Proprietary

Fund Fund Funds Activities Funds

Vendor payables 2,393,630$ 993,236$ 312,438$ 3,699,304$ 11,750$

State principal apportionment 586,816 - - 586,816 -

Salaries and benefits 4,169,648 - 51,731 4,221,379 185,145

Other 3,216 - 1,849 5,065 -

Total 7,153,310$ 993,236$ 366,018$ 8,512,564$ 196,895$

NOTE 6 - UNEARNED REVENUE

Unearned revenue at June 30, 2014, consisted of the following:

Governmental

Activities

General Proprietary

Fund Funds

Federal financial assistance 680$ -$

Other local 488,929 71,500

Total 489,609$ 71,500$



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NOTE 7 - 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 152,764,538$ 5,260,244$ 6,860,000$ 151,164,782$ 9,074,213$

Premium on bonds 3,227,533 - 182,768 3,044,765 -

Compensated absences 439,066 53,113 - 492,179 -

Other postemployment benefits 600,476 39,031 44,311 595,196 -

157,031,613$ 5,352,388$ 7,087,079$ 155,296,922$ 9,074,213$

Payments for General Obligation Bonds are made in the Bond Interest and Redemption Fund.

Payments for Compensated Absences are typically liquidated in the General Fund and the Non-MajorGovernmental Funds.

Payments for Other Postemployment Benefits are typically made in the General Fund.



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Bonded Debt

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 Accretion Redeemed June 30, 2014

1996 2021 3.60 - 5.65% 25,184,723$ 17,954,696$ -$ 908,156$ 2,425,000$ 16,437,852$

1998 2024 4.50 - 5.25% 6,000,501 12,368,134 - 658,140 335,000 12,691,274

1999 2025 3.50 - 5.87% 5,000,040 7,017,155 - 422,730 385,000 7,054,885

2001 2026 3.00 - 5.33% 5,148,769 7,848,197 - 425,745 310,000 7,963,942

2001 2027 4.00 - 5.69% 21,513,829 9,729,333 - 614,785 - 10,344,118

2002 2027 3.00 - 5.57% 4,485,101 3,878,169 - 227,850 95,000 4,011,019

2002 2027 3.10 - 5.57% 5,940,925 8,869,006 - 506,944 205,000 9,170,950

2004 2015 2.00 - 4.00% 18,400,000 2,860,000 - - 1,350,000 1,510,000

2009 2032 6.39 - 6.73% 7,651,589 9,993,149 - 693,456 - 10,686,605

2010 2046 6.33 - 6.71% 9,738,877 11,841,699 - 802,438 - 12,644,137

2011 2025 2.00 - 5.00% 12,270,000 11,335,000 - - 785,000 10,550,000

2012 2020 0.59 - 2.61% 5,260,000 5,260,000 - - 795,000 4,465,000

2012 2024 2.00 - 4.50% 9,930,000 9,930,000 - - - 9,930,000

2013 2025 2.00 - 4.00% 22,625,000 22,625,000 - - - 22,625,000

2013 2020 0.44 - 2.01% 11,255,000 11,255,000 - - 175,000 11,080,000

152,764,538$ -$ 5,260,244$ 6,860,000$ 151,164,782$



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1995 Election, 1996 Series A Capital Appreciation Bonds

On February 20, 1996, the District issued $12,165,000, Series A Current Interest Bonds, and $13,019,723,Series A Capital Appreciation Bonds. Proceeds from the bonds will be used for the purpose to modernizefacilities within the District. The bonds mature on September 1, 2020, and yield an interest rate of 3.60 percent to5.65 percent. At June 30, 2014, the principal balance outstanding was $16,437,852.

The bonds mature through 2021 as follows:

Principal Current

Including Accreted Interest to

Fiscal Year Interest to Date Maturity Total

2015 2,492,357$ 162,370$ 2,654,727$

2016 2,442,630 303,190 2,745,820

2017 2,386,810 452,704 2,839,514

2018 2,347,296 599,583 2,946,879

2019 2,295,417 750,240 3,045,657

2019-2021 4,473,342 1,661,658 6,135,000Total 16,437,852$ 3,929,745$ 20,367,597$

1995 Election, 1998 Series B Capital Appreciation Bonds

On February 27, 1998, the District issued $6,000,501, Series B Capital Appreciation Bonds. Proceeds from thebonds will be used for the purpose to modernize facilities within the District. The bonds mature onSeptember 1, 2023, and yield an interest rate of 4.50 percent to 5.25 percent. At June 30, 2014, the principalbalance outstanding was $12,691,274.


Principal Current



2015 401,643$ 3,357$ 405,000$

2016 457,096 27,904 485,000

2017 515,051 59,950 575,001

2018 553,367 96,633 650,000

2019 609,650 145,350 755,000

2020-2024 10,154,467 5,170,533 15,325,000Total 12,691,274$ 5,503,727$ 18,195,001$



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1995 Election, 1999 Series C Current Interest, and Capital Appreciation Bonds

On September 23, 1999, the District issued $990,000, Series C Current Interest Bonds, and $4,010,040, Series CCapital Appreciation Bonds. Proceeds from the bonds will be used for the purpose to modernize facilities withinthe District. The bonds mature on September 1, 2024, and yield an interest rate of 3.50 percent to 5.87 percent. AtJune 30, 2014, the principal balance outstanding was $7,054,885.


Principal Current



2015 381,231$ 3,769$ 385,000$

2016 363,835 26,165 390,000

2017 355,968 49,032 405,000

2018 347,792 72,208 420,000

2019 335,469 94,531 430,000

2020-2024 642,170 257,830 900,000

2025 4,628,420 3,871,580 8,500,000Total 7,054,885$ 4,375,115$ 11,430,000$

1995 Election, 2001 Series D Current Interest, and Capital Appreciation Bonds

On January 23, 2001, the District issued $885,000, Series D Current Interest Bonds, and $4,263,769, Series DCapital Appreciation Bonds. Proceeds from the bonds will be used for the purpose to modernize facilities withinthe District. The bonds mature on September 1, 2025, and yield an interest rate of 3.00 percent to 5.33 percent. AtJune 30, 2014, the principal balance outstanding was $7,963,942.


Principal Current



2015 346,855$ 3,145$ 350,000$

2016 365,938 24,062 390,000

2017 386,540 48,460 435,000

2018 403,883 76,117 480,000

2019 426,261 108,739 535,000

2020-2024 1,705,826 779,174 2,485,000

2025-2026 4,328,639 3,576,361 7,905,000Total 7,963,942$ 4,616,058$ 12,580,000$



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2000 Election, Series A Current Interest and Capital Appreciation Bonds

On May 3, 2001, the District issued $16,885,000, Series A Current Interest Bonds, and $4,628,829, Series ACapital Appreciation Bonds. Proceeds from the bonds were used for the purpose to modernize the high schoolwithin the District. The bonds have a final maturity date of September 1, 2026, and yield an interest rate of4.00 percent to 5.69 percent. On March 2004, the District issued $18,400,000 of General Obligation RefundingBonds to advance refund the $16,885,000 Current Interest Bonds. As a result, the $16,885,000 Series A CurrentInterest Bonds are considered to be defeased and the liability for these bonds has been removed from theaccompanying financial statements. The outstanding principal amount of the defeased debt as of June 30, 2014,was $10,564,000. At June 30, 2014, the principal balance outstanding for the Bonds was $10,344,118.


Principal Current



2019-2023 6,499,763$ 3,880,237$ 10,380,000$

2024-2027 3,844,355 3,640,645 7,485,000Total 10,344,118$ 7,520,882$ 17,865,000$

2000 Election, 2002 Series B Current Interest and Capital Appreciation Bonds

On January 23, 2002, the District issued $2,545,000, Series B Current Interest Bonds, and $1,940,101, Series BCapital Appreciation Bonds. Proceeds from the bonds will be used for the purpose to modernize one of theelementary schools within the District. The bonds mature on September 1, 2026, and yield an interest rate of3.00 percent to 5.57 percent. At June 30, 2014, the principal balance outstanding was $4,011,019.


Principal Current



2015 99,040$ 960$ 100,000$

2016 107,430 7,570 115,000

2017 123,361 16,639 140,000

2018 141,293 28,707 170,000

2019 160,710 44,290 205,000

2020-2024 1,415,550 799,450 2,215,000

2025-2027 1,963,635 1,951,365 3,915,000

Total 4,011,019$ 2,848,981$ 6,860,000$



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1995 Election, 2002 Series E Current Interest, and Capital Appreciation Bonds

On January 23, 2002, the District issued $1,415,000, Series E Current Interest Bonds, and $4,525,925, Series ECapital Appreciation Bonds. Proceeds from the bonds will be used for the purpose to modernize one of theelementary schools within the District. The bonds mature on September 1, 2026, and yield an interest rate of3.10 percent to 5.57 percent. At June 30, 2014, the principal balance outstanding was $9,170,950.


Principal Current



2015 203,087$ 1,913$ 205,000$

2016 177,835 12,165 190,000

2017 159,175 20,825 180,000

2018 133,678 26,322 160,000

2019 114,458 30,542 145,000

2020-2024 474,500 250,500 725,000

2025-2027 7,908,217 7,426,783 15,335,000Total 9,170,950$ 7,769,050$ 16,940,000$

2004 Refunding Bonds

On March 2004, the District issued $18,400,000 in 2004 refunding General Obligation Bonds. Proceeds from thebonds will be used for the purpose to refunding Series 2001A General Obligation Bonds (serial current interestbonds portion). The bonds mature on September 1, 2014, and yield an interest rate of 2.00 percent to 4.00 percent.At June 30, 2014, the principal balance outstanding was $1,510,000.

The bonds mature thorough 2015 as follows:

Fiscal Year Principal Interest Total2015 1,510,000$ 504,040$ 2,014,040$



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2008 Election, 2009 Series A Capital Appreciation Bonds

On June 23, 2009, the District issued $7,651,589 in 2009 Series A, Capital Appreciation Bonds. Proceeds fromthe bonds will be used for the purpose to finance the rehabilitation of District buildings, and prepayment of certainlease payments related to Certificates of Participation. The bonds mature on September 1, 2031, and yield aninterest rate of 6.39 percent to 6.73 percent. At June 30, 2014, the principal balance outstanding was $10,686,605.


Principal Current



2025-2029 4,226,112$ 6,748,888$ 10,975,000$

2030-2032 6,460,493 12,149,507 18,610,000Total 10,686,605$ 18,898,395$ 29,585,000$

2008 Election, 2010 Series B Capital Appreciation Bonds

On June 23, 2010, the District issued $9,738,877 in 2010 Series B, Capital Appreciation Bonds. Proceeds fromthe bonds will be used for the purpose to finance the rehabilitation of District buildings and prepayment of certainlease payments related to Certificates of Participation. The bonds mature on September 1, 2045, and yield aninterest rate of 6.33 percent to 6.71 percent. At June 30, 2014, the principal balance outstanding was $12,644,137.


Principal Current



2025-2029 -$ 2,093,000$ 2,093,000$

2030-2034 1,175,785 7,941,715 9,117,500

2035-2039 2,564,301 14,443,199 17,007,500

2040-2044 1,510,126 12,776,899 14,287,025

2045-2046 7,393,925 9,603,075 16,997,000Total 12,644,137$ 46,857,888$ 59,502,025$



50

2008 Election, 2011 Series C Current Interest Bonds

On June 30, 2011, the District issued $12,270,000, Series C Current Interest Bonds. Proceeds from the bonds willbe used for the purpose to finance the rehabilitation of Mira Costa High School and the payment of certain leasepayments to the Certificate of Participation Series A of 2011. The bonds mature on September 1, 2024, and yieldan interest rate of 2.00 percent to 5.00 percent. At June 30, 2014, the principal balance outstanding was$10,550,000.


Fiscal Year Principal Interest Total

2015 610,000$ 371,238$ 981,238$

2016 675,000 346,838 1,021,838

2017 755,000 319,838 1,074,838

2018 835,000 292,638 1,127,638

2019 905,000 275,938 1,180,938

2020-2023 5,975,000 895,375 6,870,375

2024-2025 795,000 39,750 834,750Total 10,550,000$ 2,541,615$ 13,091,615$

2008 Election, 2012 Series D Current Interest Bonds

On February 29, 2012, the District issued $5,260,000, Series D Current Interest Bonds. Proceeds from the bondswill be used for the purpose to finance improvements to the District's high school and to defease the District'soutstanding Certificate of Participation Series A of 2011. The bonds mature on September 1, 2019, and yield aninterest rate of 0.59 percent to 2.61 percent. At June 30, 2014, the principal balance outstanding was $4,465,000.



2015 740,000$ 79,944$ 819,944$

2016 710,000 72,936 782,936

2017 720,000 63,862 783,862

2018 745,000 51,119 796,119

2019 760,000 37,733 797,733

2020 790,000 20,587 810,587Total 4,465,000$ 326,181$ 4,791,181$



51

2008 Election, 2012 Series E Current Interest Bonds

On February 29, 2012, the District issued $9,930,000, Series E Current Interest Bonds. Proceeds from the bondswill be used for the purpose to finance improvements to the District's high school and to defease the District'soutstanding Certificate of Participation Series A of 2011. The bonds mature on September 1, 2024, and yield aninterest rate of 2.00 percent to 4.50 percent. At June 30, 2014, the principal balance outstanding was $9,930,000.



2015 255,000$ 293,850$ 548,850$

2016 285,000 283,650 568,650

2017 320,000 275,100 595,100

2018 360,000 265,500 625,500

2019 400,000 254,700 654,700

2020-2023 6,050,000 979,200 7,029,200

2024-2025 2,260,000 67,800 2,327,800Total 9,930,000$ 2,419,800$ 12,349,800$

2008 Election, Series F Current Interest Bonds

On May 23, 2013, the District issued $22,625,000, Series F Current Interest Bonds. Proceeds from the bonds willbe used for the purpose to finance improvements to the District's high school. The bonds mature onSeptember 1, 2024, and yield an interest rate of 2.00 percent to 4.00 percent. At June 30, 2014, the principalbalance outstanding was $22,625,000.



2015 1,760,000$ 699,296$ 2,459,296$

2016 1,850,000 559,350 2,409,350

2017 1,435,000 522,350 1,957,350

2018 1,570,000 493,650 2,063,650

2019 1,715,000 462,250 2,177,250

2020-2023 11,340,000 1,492,750 12,832,750

2024-2025 2,955,000 84,675 3,039,675Total 22,625,000$ 4,314,321$ 26,939,321$



52

2013 General Obligation Refunding Bonds

On May 23, 2013, the District issued $11,255,000, 2013 General Obligation Refunding Bonds. Proceeds from thebonds will be used for the purpose to finance improvements to the District's high school. The bonds mature onSeptember 1, 2019, and yield an interest rate of .44 percent to 2.01 percent. At June 30, 2014, the principalbalance outstanding was $11,080,000.



2015 275,000$ 142,289$ 417,289$

2016 1,920,000 141,074 2,061,074

2017 2,030,000 130,667 2,160,667

2018 2,145,000 113,290 2,258,290

2019 2,280,000 84,942 2,364,942

2020 2,430,000 48,892 2,478,892Total 11,080,000$ 661,154$ 11,741,154$

Accumulated Unpaid Employee Vacation

The long-term portion of accumulated unpaid employee vacation for the District at June 30, 2014, amounted to$492,179.

Other Postemployment Benefits (OPEB) Obligation

The District's net OPEB obligation for the year ended June 30, 2014, was $595,196, and contributions made bythe District during the year were $44,311. Interest on the net OPEB obligation was $39,031, which resulted in adecrease to the net OPEB obligation of $5,280. As of June 30, 2014, the net OPEB obligation was $595,196.See Note 9 for additional information regarding the OPEB obligation and the postemployment benefits plan.



53

NOTE 8 - FUND BALANCES

Fund balances are composed of the following elements:

Bond Interest

and Non-Major

General Building Redemption Governmental

Fund Fund Fund Funds Total

Nonspendable

Revolving cash 10,000$ -$ -$ -$ 10,000$

Stores inventories 37,357 - - 25,486 62,843

Total Nonspendable 47,357 - - 25,486 72,843

Restricted

Legally restricted

programs 1,094,284 - - 1,538,149 2,632,433

Capital projects - 1,532,243 - 5,029,903 6,562,146

Debt service - - 10,932,167 - 10,932,167

Total Restricted 1,094,284 1,532,243 10,932,167 6,568,052 20,126,746

Assigned

Funds in escrow 500,000 - - - 500,000

Other 167,793 8,815,901 - - 8,983,694

Total Assigned 667,793 8,815,901 - - 9,483,694

Unassigned

Reserve for economic

uncertainties 2,970,021 - - - 2,970,021

Remaining unassigned 10,176,858 - - - 10,176,858

Total Unassigned 13,146,879 - - - 13,146,879Total 14,956,313$ 10,348,144$ 10,932,167$ 6,593,538$ 42,830,162$



54

NOTE 9 - POSTEMPLOYMENT HEALTH CARE PLAN AND OTHER POSTEMPLOYMENTBENEFITS (OPEB) OBLIGATION

Plan Description

The Postemployment Benefits Plan (the Plan) is a single-employer defined benefit healthcare plan administeredby the District. The Plan provides medical and dental insurance benefits to eligible retirees and their spouses.Membership of the Plan consists of 38 retirees and beneficiaries currently receiving benefits.

The District is no longer offering postemployment health care benefits to its employees. There are certain pastemployees of the District who are entitled to receive various postemployment health care benefits as describedbelow, which are payable from its General Fund. The District pays these amounts on a pay-as-you-go basis. TheDistrict has not conducted an actuarial study for these benefits but because both the number of employees and thedollar amount of the contribution is capped.

The District provides postemployment health care benefits, in accordance with District employment contracts, toall employees who retire from the District on or after attaining age 55 with at least 15 years of service. Currently,nine employees meet those eligibility requirements. The District contributes $400 per year for premiums incurredby retirees and their dependents and the retiree contributes the remainder. Expenditures for postemploymentbenefits are recognized on a pay-as-you-go basis. During the year, expenditures of $3,600 were recognized forretirees' health care benefits.

A third category of postemployment benefits was inherited from the South Bay Union High School District whenthe District was unified in 1993. Employees from this district came with lifetime postemployment benefits, paidby their own Retiree Benefits Fund, separate from the District's General Fund. Membership of the Plan consists of20 retirees currently receiving benefits. As of June 30, 2014, the Retiree Benefit Fund contained $410,677.

Contribution Information

The contribution requirements of plan members and the District are established and may be amended by theDistrict and the Teachers Association (CEA), the local California Service Employees Association (CSEA), andunrepresented groups. The required contribution is based on projected pay-as-you-go financing requirements. Forfiscal year 2013-2014, the District contributed $44,311 to the Plan, all of which was used for current premiums.



55

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. TheARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each yearand amortize any unfunded actuarial accrued liabilities (UAAL) (or funding excess) over a period not to exceed30 years. The following table shows the components of the District's annual OPEB cost for the year, the amountactually contributed to the Plan, and changes in the District's net OPEB obligation to the Plan:

Interest on net OPEB obligation 39,031$

Contributions made (44,311)

Decrease in net OPEB obligation (5,280)

Net OPEB obligation, beginning of year 600,476

Net OPEB obligation, end of year 595,196$

Trend Information

Trend information for annual OPEB cost, the percentage of annual OPEB cost contributed to the Plan, and the netOPEB obligation is as follows:

Annual Actual

Year Ended OPEB Employer Percentage Net OPEB

June 30, Cost Contribution Contributed Obligation

2012 726,648$ 119,391$ 16.43% 654,489$

2013 654,489$ 96,555$ 14.75% 600,476$

2014 600,476$ 44,311$ 7.38% 595,196$

Funded Status and Funding Progress

The schedule of funding progress presented as required supplementary information following the notes to thefinancial statements, presents multiyear trend information that shows whether the actuarial value of plan assets isincreasing or decreasing over time relative to the actuarial accrued liabilities for benefits. As of July 2, 2002, themost recent actuarial valuation date, the plan was zero percent funded. The actuarial accrued liability for benefitswas $600,476, and the actuarial value of assets was zero, resulting in an UAAL of $600,476. The covered payroll(annual payroll of active employees covered by the plan) was $1,649,937, and the ratio of the UAAL to thecovered payroll was 60.12 percent.



56

Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions aboutthe probability of occurrence of events far into the future. Examples include assumptions about futureemployment, investment returns, mortality, and the healthcare cost trend. Amounts determined regarding thefunded status of the Plan and the annual required contributions of the employer are subject to continual revision asactual results are compared with past expectations and new estimates are made about the future. The schedule offunding 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 decreasingover time relative to the actuarial accrued liabilities for benefits.

NOTE 10 - RISK MANAGEMENT

Property and Liability

The District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errorsand omissions; injuries to employees and natural disasters. During fiscal year ending June 30, 2014, the Districtcontracted with Alliance of Schools for Cooperative Insurance Programs (ASCIP) for property and liabilityinsurance coverage. Settled claims have not exceeded this commercial coverage in any of the past three years.There has not been a significant reduction in coverage from the prior year.

Workers' Compensation

For fiscal year 2014, the District participated in the Schools' Excess Liability Fund (SELF), an insurancepurchasing pool. The intent of SELF is to achieve the benefit of a reduced premium for the District by virtue of itsgrouping and representation with other participants in SELF. The workers' compensation experience of theparticipating districts is calculated as one experience and a common premium rate is applied to all districts inSELF. Each participant pays its workers' compensation premium based on its individual rate. Total savings arethen calculated and each participant's individual performance is compared to the overall savings. A participantwill then either receive money from or be required to contribute to the "equity-pooling fund". This "equitypooling" arrangement insures that each participant shares equally in the overall performance of SELF.Participation in SELF is limited to districts that can meet SELF's selection criteria. The third party administratorprovides administrative, cost control and actuarial services to the JPA.

NOTE 11 - EMPLOYEE RETIREMENT SYSTEMS

Qualified employees are covered under multiple-employer retirement plans maintained by agencies of the State ofCalifornia. 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).



57

CalPERS

Plan Description

The District contributes to the School Employer Pool under the CalPERS, a cost-sharing multiple-employerpublic employee retirement system defined benefit pension plan administered by CalPERS. The plan providesretirement and disability benefits, annual cost-of-living adjustments, and survivor benefits to plan members andbeneficiaries. As a result of the Public Employee Pension Reform Act of 2013 (PEPRA), changes have been madeto the defined benefit pension plan effective January 1, 2013. Benefit provisions are established by State statutes,as legislatively amended, within the Public Employees' Retirement Laws. CalPERS issues a separatecomprehensive 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 95811.

Funding Policy

As a result of the implementation of the Public Employee Pension Reform Act of 2013 (PEPRA), new membersmust pay at least 50 percent of the normal costs of the plan, which can fluctuate from year to year. For 2013-2014,the normal cost is 11.85 percent, which rounds to a 6.0 percent contribution rate. "Classic" plan members continueto contribute 7.0 percent. The District is required to contribute an actuarially determined rate. The actuarialmethods and assumptions used for determining the rate are those adopted by the CalPERS Board ofAdministration. The required employer contribution rate for fiscal year 2013-2014 was 11.442 percent of coveredpayroll. The contribution requirements of the plan members are established by State statute. The District'scontributions to CalSTRS for the fiscal years ending June 30, 2014, 2013, and 2012, were $2,345,505,$2,183,665, and $2,035,681, respectively, and equal 100 percent of the required contributions for each year.

CalPERS

Plan Description

The District contributes to the School Employer Pool under the CalPERS, a cost-sharing multiple-employerpublic employee retirement system defined benefit pension plan administered by CalPERS. The plan providesretirement and disability benefits, annual cost-of-living adjustments, and survivor benefits to plan members andbeneficiaries. As a result of the Public Employee Pension Reform Act of 2013 (PEPRA), changes have been madeto the defined benefit pension plan effective January 1, 2013. Benefit provisions are established by State statutes,as legislatively amended, within the Public Employees' Retirement Laws. CalPERS issues a separatecomprehensive 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 95811.



58

Funding Policy

As a result of the implementation of the Public Employee Pension Reform Act of 2013 (PEPRA), new membersmust pay at least 50 percent of the normal costs of the plan, which can fluctuate from year to year. For 2013-2014,the normal cost is 11.85 percent, which rounds to a 6.0 percent contribution rate. "Classic" plan members continueto contribute 7.0 percent. The District is required to contribute an actuarially determined rate. The actuarialmethods and assumptions used for determining the rate are those adopted by the CalPERS Board ofAdministration. The required employer contribution rate for fiscal year 2013-2014 was 11.442 percent of coveredpayroll. The contribution requirements of the plan members are established by State statute. The District'scontributions to CalPERS for the fiscal years ending June 30, 2014, 2013, and 2012, were $1,022,664, $971,301,and $877,976, respectively, and equal 100 percent of the required contributions for each year.

On Behalf Payments

The State of California makes contributions to CalSTRS on behalf of the District. These payments consist of StateGeneral Fund contributions to CalSTRS in the amount of $1,390,593 (5.541 percent of annual payroll).Contributions are no longer appropriated in the annual Budget Act for the legislatively mandated benefits toCalPERS. Therefore, there is no on behalf contribution rate for CalPERS.). Under accounting principles generallyaccepted 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 beenexcluded from the calculation of available reserves, and have not been included in the budgeted amounts reportedin the General Fund - Budgetary Comparison Schedule.

NOTE 12 - COMMITMENTS AND CONTINGENCIES

Grants

The District received financial assistance from Federal and State agencies in the form of grants. The disbursementof funds received under these programs generally requires compliance with terms and conditions specified in thegrant agreements and are subject to audit by the grantor agencies. Any disallowed claims resulting from suchaudits could become a liability of the General Fund or other applicable funds. However, in the opinion ofmanagement, any such disallowed claims will not have a material adverse effect on the overall financial positionof the District at June 30, 2014.

Litigation

The District is involved in various litigation arising from the normal course of business. In the opinion ofmanagement and legal counsel, the disposition of all litigation pending is not expected to have a material adverseeffect on the overall financial position of the District at June 30, 2014.



59

Postemployment Health Benefit Programs

On July 1, 1993, the District unified with the South Bay Union High School District and assumed its earlyretirement incentive and postemployment health benefit program. Contracts were assumed with eligible retireeswhereby retirement and health benefits will be paid for varying lengths of time. On June 30, 2014, 20 retireeswere eligible and a total of $75,504 in benefits were paid under this program.

NOTE 13 - PARTICIPATION IN PUBLIC ENTITY RISK POOLS, JOINT POWERS AUTHORITIESAND OTHER RELATED PARTY TRANSACTIONS

The District is a member of the Alliance of Schools for Cooperative Insurance Programs (ASCIP), Schools'Excess Liability Fund (SELF), and the Centinela South Bay Self-Insurance Authority (CSBSIA) joint powersauthorities (JPA's). The District pays an annual premium to the applicable entity for its health, workers'compensation, and property liability coverage. The relationships between the District, the pools, and the JPA's aresuch that they are not component units of the District for financial reporting purposes.

These entities have budgeting and financial reporting requirements independent of member units and theirfinancial statements are not presented in these financial statements; however, fund transactions between theentities and the District are included in these statements. Audited financial statements are generally available fromthe respective entities.

During the year ended June 30, 2014, the District made payments of $1,445,802 and $21,861 to ASCIP andSELF, respectively.

NOTE 15 - RESTATEMENT OF PRIOR YEAR NET POSITION

The District adopted GASB Statement No. 65, Items Previously Reported as Assets and Liabilities, in the currentyear. As a result, the effect on the current fiscal year is as follows:

Statement of Net Position

Net Position - Beginning 4,634,707$

Restatement/cost of issuance (2,178,432)Net Position - Beginning as Restated 2,456,275$



60

The District's prior year fund balance for the General Fund, Capital Facilities Fund, Special Reserve Fund forCapital Outlay Projects, and Retiree Fund has been restated as of June 30, 2014 to account for a change in the netposition as a result of posting expenditures in the General Fund incorrectly during 2012-2013. Actualexpenditures have been charged to the Capital Facilities Fund and Special Reserve Fund for Capital OutlayProjects.

As a result, the effect on the current fiscal year is as follows:

General Fund


Restatement/cash in county 1,032,563Net Position - Beginning as Restated 13,481,969$

Capital Facilities Fund


Restatement/cash in county (457,231)Net Position - Beginning as Restated 907,815$

Special Reserve Fund For Capital Outlay Projects


Restatement/cash in county (575,332)Net Position - Beginning as Restated 5,162,964$

Retiree Benefits Trust

Net Position - Beginning 401,792$

Restatement/ reduced deferred liability 81,528Net Position - Beginning as Restated 483,320$

61

REQUIRED SUPPLEMENTARY INFORMATION


GENERAL FUNDBUDGETARY COMPARISON SCHEDULEFOR THE YEAR ENDED JUNE 30, 2014

62

Variances -Positive

(Negative)Actual Final

Original Final (GAAP Basis) to ActualREVENUESLocal Control Funding Formula 36,798,138$ 42,299,736$ 43,565,810$ 1,266,074$Federal sources 1,472,938 1,456,980 1,141,273 (315,707)Other State sources 8,059,313 5,338,496 7,125,191 1,786,695Other local sources 8,056,458 10,290,086 10,480,231 190,145

Total Revenues1

54,386,847 59,385,298 62,312,505 2,927,207EXPENDITURESCurrent

Certificated salaries 27,454,260 29,052,597 28,674,370 378,227Classified salaries 8,605,574 8,998,064 9,006,010 (7,946)Employee benefits 10,326,784 10,446,318 11,377,093 (930,775)Books and supplies 1,718,312 3,659,608 2,704,912 954,696Services and operating

expenditures 7,596,116 8,338,156 7,813,680 524,476Capital outlay - 32,879 36,512 (3,633)

Total Expenditures1

55,701,046 60,527,622 59,612,577 915,045Excess (Deficiency) of Revenues

Over (Under) Expenditures (1,314,199) (1,142,324) 2,699,928 3,842,252OTHER FINANCING USES

Other uses (1,662,807) (1,704,311) (1,225,584) 478,727Net Financing Sources (Uses) (1,662,807) (1,704,311) (1,225,584) 478,727

NET CHANGE IN FUND BALANCE (2,977,006) (2,846,635) 1,474,344 4,320,979Fund Balance - Beginning As Restated 13,481,969 13,481,969 13,481,969 -Fund Balance - Ending 10,504,963$ 10,635,334$ 14,956,313$ 4,320,979$

Budgeted Amounts

1On behalf payments of $1,390,593 are included in the actual revenues and expenditures, but have not been included in the budgetedamounts. In addition, due to the consolidation of Fund 14, Deferred Maintenance Fund, for reporting purposes into the General Fund,additional revenues and expenditures pertaining to these other funds are included in the Actual (GAAP Basis) revenues and expenditures,however are not included in the original and final General Fund budgets.


SCHEDULE OF OTHER POSTEMPLOYMENT BENEFITS (OPEB) FUNDINGPROGRESS


63

Actuarial

Accrued

Liability Unfunded UAAL as a

Actuarial Actuarial (AAL) - AAL Funded Percentage of

Valuation Value of Unprojected (UAAL) Ratio Covered Covered Payroll

Date Assets (a) Unit Credit (b) (b - a) (a / b) Payroll (c) ([b - a] / c)

July 1, 2002 -$ 991,883$ 991,883$ 0.00% 1,649,937$ 60.12%

64

SUPPLEMENTARY INFORMATION


See accompanying note to supplementary information.

65

SCHEDULE OF EXPENDITURES OF FEDERAL AWARDSFOR THE YEAR ENDED JUNE 30, 2014

Pass-Through

Entity

Federal Grantor/Pass-Through CFDA Identifying Program

Grantor/Program Number Number Expenditures

U.S. DEPARTMENT OF EDUCATION

Passed through California Department of Education (CDE):

Federal Advance Placement and International Baccalaureate

Test Fee 84.330 14831 2,430$

No Child Left Behind Act (NCLB):

Title I, Part A, Grants to Local Educational

Agencies 84.010 14329 117,244

Title II, Part A, Improving Teacher Quality 84.367 14341 63,069

Individuals with Disabilities Education Act (IDEA)

Special Education (IDEA) Cluster:

Basic Local Assistance Entitlement, Part B, Section 611 84.027 13379 811,769

Local Assistance Entitlement, Part B, Section 611

Private School ISP's 84.027 10115 28,459

Preschool Grants, Part B, Section 619 (Age 3-4-5) 84.173 13430 39,969

Preschool Local Entitlement, Part B, Section 611

(Age 3-4-5) 84.027A 13682 78,140

Preschool Staff Development, Part B, Section 619 84.173A 13431 194

Total Special Education (IDEA) Cluster 958,531

Total U.S. Department of Education 1,141,274

U.S. DEPARTMENT OF AGRICULTURE

Passed through CDE:

Child Nutrition Cluster:

National School Lunch Program 10.555 13524 155,620

Basic Breakfast 10.553 13525 33,264

Food Distribution 10.555 13524 96,317

Total U.S. Department of Agriculture 285,201

Total Federal Programs 1,426,475$



66

LOCAL EDUCATION AGENCY ORGANIZATION STRUCTUREJUNE 30, 2014

ORGANIZATION

The Manhattan Beach Unified School District was established in 1912, and unified in 1993, and consists of anarea comprising approximately 3.88 square miles in the southwestern portion of the County of Los Angeles, andis conterminous with the City of Manhattan Beach. The District operates five elementary schools, one middleschool, and one high school. There were no boundary changes during the year.

GOVERNING BOARD

MEMBER OFFICE TERM EXPIRES

Karen Komatinsky President December 2015

Bill Fournell Vice President December 2015

Ellen Rosenberg Clerk December 2017

Jennifer Cochran Member December 2017

Christine Cronin-Hurst Member December 2017

ADMINISTRATION

Michael Matthews, Ed.D Superintendent

1 Rick Bagley, Ed.D Deputy Superintendent, Administrative Services

Dawnalyn Murakawa-Leopard, Ed. D Assistant Superintendent for Administrative Services

Carolyn Seaton Executive Director, Human Resources

Ellyn Schneider Executive Director, Student Services

Brett Geithman, Ed. D Executive Director, Educational Services

1 Resigned August 2014.



67

SCHEDULE OF AVERAGE DAILY ATTENDANCEFOR THE YEAR ENDED JUNE 30, 2014

Second Period Annual

Report Report

Regular ADA

Transitional kindergarten through third 1,873.86 1,876.97

Fourth through sixth 1,486.56 1,487.71

Seventh and eighth 895.06 893.30

Ninth through twelfth 2,385.50 2,369.32

Total Regular ADA 6,640.98 6,627.30

Extended Year Special Education

Transitional kindergarten through third 1.20 1.20

Fourth through sixth 1.32 1.32


Ninth through twelfth 2.08 2.08Total Extended Year

Special Education 5.30 5.30

Special Education, Nonpublic, Nonsectarian Schools



Ninth through twelfth 27.89 25.87Total Special Education,

Nonpublic, Nonsectarian

Schools 37.31 34.73

Extended Year Special Education,

Nonpublic, Nonsectarian Schools



Ninth through twelfth 3.27 3.27Total Extended Year Special

Education, Nonpublic, Nonsectarian

Schools 4.09 4.09Total ADA 6,687.68 6,671.42

Final Report



68

SCHEDULE OF INSTRUCTIONAL TIMEFOR THE YEAR ENDED JUNE 30, 2014

Reduced

1986-87 1986-87 2013-14 Number of Days

Minutes Minutes Actual Traditional Multitrack

Grade Level Requirement Requirement Minutes Calendar Calendar Status

Kindergarten 36,000 35,000 36,000 180 - Complied

Grades 1 - 3 50,400 49,000

Grade 1 51,100 180 - Complied



Grades 4 - 6 54,000 52,500




Grades 7 - 8 54,000 52,500



Grades 9 - 12 64,800 63,000







69

RECONCILIATION OF ANNUAL FINANCIAL AND BUDGET REPORT WITHAUDITED FINANCIAL STATEMENTS


Summarized below are the fund balance reconciliations between the Unaudited Actual Financial Report and theaudited financial statements.

General Building

Fund Fund

FUND BALANCE

Balance, June 30, 2014, Unaudited Actuals 14,563,394$ 10,447,556$

Increase in:

Account receivable 392,919 -

Decrease in:

Cash with fiscal agent - (99,412)

Balance, June 30, 2014, Audited Financial Statements 14,956,313$ 10,348,144$



70

SCHEDULE OF FINANCIAL TRENDS AND ANALYSISFOR THE YEAR ENDED JUNE 30, 2014

(Budget)

20151

2014 2013 2012

GENERAL FUND4

Revenues 59,580,292$ 62,311,657$ 57,163,602$ 55,693,184$

Other sources - - - -Total Revenues and

Other Sources 59,580,292 62,311,657 57,163,602 55,693,184

Expenditures 61,132,704 59,565,421 57,549,742 54,509,414

Other uses and transfers out 1,659,395 1,225,584 1,537,500 2,261,904Total Expenditures and

Other Uses 62,792,099 60,791,005 59,087,242 56,771,318

INCREASE (DECREASE)CHANGE IN FUND BALANCE (3,211,807)$ 1,520,652$ (1,923,640)$ (1,078,134)$

ENDING FUND BALANCE

AS RESTATED 11,626,761$ 14,838,568$ 13,317,916$ 15,241,556$

AVAILABLE RESERVES2

10,457,033$ 13,146,879$ 12,051,594$ 14,427,126$

AVAILABLE RESERVES AS A

PERCENTAGE OF TOTAL OUTGO3

16.65% 22.13% 20.47% 25.95%

LONG-TERM OBLIGATIONS NA 155,296,922$ 157,031,613$ 132,847,211$

K-12 AVERAGE DAILY

ATTENDANCE AT P-2 6,735 6,688 6,599 6,507

The General Fund balance has decreased by $402,988 over the past two years. The fiscal year 2014-2015 budgetprojects a further decrease of $3,211,807 (21.6 percent). For a district this size, the State recommends availablereserves of at least three percent of total General Fund expenditures, transfers out, and other uses (total outgo).

The District has incurred operating deficits in two of the past three years and anticipates incurring an operatingdeficit during the 2014-2015 fiscal year. Total long-term obligations have increased by $22,449,711 over the pasttwo years.

Average daily attendance has increased by 181 over the past two years. Additional growth of 47 ADA isanticipated during fiscal year 2014-2015.

1Budget 2015 is included for analytical purposes only and has not been subjected to audit.

2Available reserves consist of all unassigned fund balances including all amounts reserved for economic uncertainties contained with theGeneral Fund.

3On behalf payments of $1,390,593, $1,255,664, and $1,181,282, has been excluded from the calculation of available reservesfor the fiscal years ending June 30, 2014, 2013, and 2012, respectively.

4General Fund amounts do not include activity related to the consolidation of the Deferred Maintenance Fund as required byGASB Statement No. 54.



71

NON-MAJOR GOVERNMENTAL FUNDSCOMBINING BALANCE SHEETJUNE 30, 2014

Special Reserve TotalCapital Fund for Non-Major

Cafeteria Facilities Capital Outlay GovernmentalFund Fund Projects Funds

ASSETSDeposits and investments 1,748,965$ 745,976$ 4,382,240$ 6,877,181$Receivables 36,116 3,620 17,153 56,889Stores inventories 25,486 - - 25,486

Total Assets 1,810,567$ 749,596$ 4,399,393$ 6,959,556$

LIABILITIES AND FUND BALANCESLiabilities:

Accounts payable 246,932$ 71,890$ 47,196$ 366,018$Total Liabilities 246,932 71,890 47,196 366,018

Fund Balances:Nonspendable 25,486 - - 25,486Restricted 1,538,149 677,706 4,352,197 6,568,052

Total Fund Balances 1,563,635 677,706 4,352,197 6,593,538Total Liabilities andFund Balances 1,810,567$ 749,596$ 4,399,393$ 6,959,556$



72

NON-MAJOR GOVERNMENTAL FUNDSCOMBINING STATEMENT OF REVENUES, EXPENDITURES,AND CHANGES IN FUND BALANCES


Special Reserve TotalCapital Fund for Non-Major

Cafeteria Facilities Capital Outlay GovernmentalFund Fund Projects Funds

REVENUESFederal sources 285,202$ -$ -$ 285,202$Other State sources 5,475 - - 5,475Other local sources 2,007,630 675,126 33,198 2,715,954

Total Revenues 2,298,307 675,126 33,198 3,006,631EXPENDITURESCurrent

Pupil services:Food services 2,025,071 - - 2,025,071

Administration:All other administration 102,417 905,235 - 1,007,652

Plant services - - - -Facility acquisition and construction - - 843,965 843,965

Total Expenditures 2,127,488 905,235 843,965 3,876,688NET CHANGE IN FUND BALANCES 170,819 (230,109) (810,767) (870,057)Fund Balances - Beginning 1,392,816 1,365,046 5,738,296 8,496,158Prior Period Adjustment - (457,231) (575,332) (1,032,563)Fund Balances - Beginning (as Restated) 1,392,816 907,815 5,162,964 7,463,595Fund Balances - Ending 1,563,635$ 677,706$ 4,352,197$ 6,593,538$


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NOTE TO SUPPLEMENTARY INFORMATIONJUNE 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 Districtand is presented on the modified accrual basis of accounting. The information in this schedule is presented inaccordance with the requirements of the United States Office of Management and Budget Circular A-133, Auditsof States, Local Governments, and Non-Profit Organizations. Therefore, some amounts presented in this schedulemay differ from amounts presented in, or used in the preparation of, the financial statements.

Local Education Agency Organization Structure

This schedule provides information about the District's boundaries and schools operated, members of thegoverning board, and members of the administration.

Schedule of Average Daily Attendance (ADA)

Average daily attendance (ADA) is a measurement of the number of pupils attending classes of the District. Thepurpose of attendance accounting from a fiscal standpoint is to provide the basis on which apportionments ofState funds are made to school districts. This schedule provides information regarding the attendance of studentsat 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 forLonger Instructional Day. The District neither met nor exceeded its target funding. This schedule presentsinformation on the amount of instructional time offered by the District and whether the District complied with theprovisions of Education Code Sections 46200 through 46206.

Districts must maintain their instructional minutes at the 1986-87 requirements, as required by Education CodeSection 46201.

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 theUnaudited 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 budgetinformation. These financial trend disclosures are used to evaluate the District's ability to continue as a goingconcern for a reasonable period of time.


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NOTE TO SUPPLEMENTARY INFORMATIONJUNE 30, 2014

Non-Major Governmental Funds - Balance Sheet and Statement of Revenues, Expenditures, and Changesin 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 fundsthat have been included in the Non-Major Governmental Funds column on the Governmental Funds BalanceSheet and Statement of Revenues, Expenditures, and Changes in Fund Balances.

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INDEPENDENT AUDITORS' REPORTS

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INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVERFINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS

BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED INACCORDANCE WITH GOVERNMENT AUDITING STANDARDS


We have audited, in accordance with the auditing standards generally accepted in the United States of Americaand the standards applicable to financial audits contained in Government Auditing Standards issued by theComptroller General of the United States, the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of Manhattan Beach UnifiedSchool District (the District) as of and for the year ended June 30, 2014, and the related notes to the financialstatements, which collectively comprise Manhattan Beach Unified School District's basic financial statements,and have issued our report thereon dated December 4, 2014.

Emphasis of Matter - Change in Accounting Principles

As discussed in Notes 1 and 15 to the financial statements, the District has elected to change its method ofaccounting for cost of debt issuance as prescribed by GASB Statement No. 65, Items Previously Reported asAssets 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 Manhattan Beach Unified SchoolDistrict's internal control over financial reporting (internal control) to determine the audit procedures that areappropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but notfor the purpose of expressing an opinion on the effectiveness of Manhattan Beach Unified School District'sinternal control. Accordingly, we do not express an opinion on the effectiveness of Manhattan Beach UnifiedSchool District's internal control.

A deficiency in internal control exists when the design or operation of a control does not allow management oremployees, in the normal course of performing their assigned functions, to prevent, or detect and correct,misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internalcontrol, such that there is a reasonable possibility that a material misstatement of the District's financial statementswill not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or acombination of deficiencies, in internal control that is less severe than a material weakness, yet important enoughto merit attention by those charged with governance.





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Our consideration of internal control was for the limited purpose described in the first paragraph of this sectionand was not designed to identify all deficiencies in internal control that might be material weaknesses orsignificant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internalcontrol that we consider to be material weaknesses. However, material weaknesses may exist that have not beenidentified.

Compliance and Other Matters

As part of obtaining reasonable assurance about whether Manhattan Beach Unified School District's financialstatements are free from material misstatement, we performed tests of its compliance with certain provisions oflaws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and materialeffect on the determination of financial statement amounts. However, providing an opinion on compliance withthose provisions was not an objective of our audit, and accordingly, we do not express such an opinion. Theresults of our tests disclosed no instances of noncompliance or other matters that are required to be reported underGovernment Auditing Standards.

We noted certain matters that we reported to management of Manhattan Beach Unified School District in aseparate letter dated December 4, 2014.

Purpose of This Report

The purpose of this report is solely to describe the scope of our testing of internal control and compliance and theresults of that testing, and not to provide an opinion on the effectiveness of the District's internal control or oncompliance. This report is an integral part of an audit performed in accordance with Government AuditingStandards in considering the District's internal control and compliance. Accordingly, this communication is notsuitable for any other purpose.


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INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE FOREACH MAJOR PROGRAM AND REPORT ON INTERNAL CONTROL

OVER COMPLIANCE REQUIRED BY OMB CIRCULAR A-133


Report on Compliance for Each Major Federal Program

We have audited Manhattan Beach Unified School District's compliance with the types of compliance requirementsdescribed in the OMB Circular A-133 Compliance Supplement that could have a direct and material effect on each ofManhattan Beach Unified School District's (the District) major Federal programs for the year ended June 30, 2014.Manhattan Beach Unified School District's major Federal programs are identified in the summary of auditor's resultssection 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 toits Federal programs.


Our responsibility is to express an opinion on compliance for each of Manhattan Beach Unified School District's majorFederal programs based on our audit of the types of compliance requirements referred to above. We conducted our auditof compliance in accordance with auditing standards generally accepted in the United States of America; the standardsapplicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of theUnited States; and OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Thosestandards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance aboutwhether noncompliance with the types of compliance requirements referred to above that could have a direct and materialeffect on a major Federal program occurred. An audit includes examining, on a test basis, evidence about ManhattanBeach Unified School District's compliance with those requirements and performing such other procedures as weconsidered 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 Manhattan Beach Unified School District's compliance.





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Opinion on Each Major Federal Program

In our opinion, Manhattan Beach Unified School District complied, in all material respects, with the types of compliancerequirements referred to above that could have a direct and material effect on each of its major Federal programs for theyear ended June 30, 2014.

Report on Internal Control Over Compliance

Management of Manhattan Beach Unified School District is responsible for establishing and maintaining effectiveinternal control over compliance with the types of compliance requirements referred to above. In planning and performingour audit of compliance, we considered Manhattan Beach Unified School District's internal control over compliance withthe types of requirements that could have a direct and material effect on each major Federal program to determine theauditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance foreach major Federal program and to test and report on internal control over compliance in accordance with OMB CircularA-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 Manhattan Beach Unified School District's internalcontrol over compliance.

A deficiency in internal control over compliance exists when the design or operation of a control over compliance doesnot allow management or employees, in the normal course of performing their assigned functions, to prevent, or detectand correct, noncompliance with a type of compliance requirement of a Federal program on a timely basis. A materialweakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control overcompliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirementof a Federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency ininternal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliancewith a type of compliance requirement of a Federal program that is less severe than a material weakness in internal controlover 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 thissection and was not designed to identify all deficiencies in internal control over compliance that might be materialweaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that weconsider 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 internalcontrol 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.


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INDEPENDENT AUDITOR'S REPORT ON STATE COMPLIANCE


Report on State Compliance

We have audited Manhattan Beach Unified School District's compliance with the types of compliancerequirements as identified in the Standards and Procedures for Audit of California K-12 Local EducationalAgencies 2013-2014 that could have a direct and material effect on each of the Manhattan Beach Unified SchoolDistrict's State government programs as noted below for the year ended June 30, 2014.

Management's Responsibility

Management is responsible for compliance with the requirements of laws, regulations, contracts, and grantsapplicable to its State's programs.


Our responsibility is to express an opinion on compliance of each of the Manhattan Beach Unified SchoolDistrict's State programs based on our audit of the types of compliance requirements referred to above. Weconducted our audit in accordance with auditing standards generally accepted in the United States of America; thestandards applicable to financial audits contained in Government Auditing Standards, issued by the ComptrollerGeneral of the United States; and the Standards and Procedures for Audits of California K-12 Local EducationalAgencies 2013-2014. These standards require that we plan and perform the audit to obtain reasonable assuranceabout whether noncompliance with the compliance requirements referred to above that could have a materialeffect on the applicable government programs noted below. An audit includes examining, on a test basis, evidenceabout Manhattan Beach Unified School District's compliance with those requirements and performing such otherprocedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basisfor our opinions. Our audit does not provide a legal determination of Manhattan Beach Unified School District'scompliance with those requirements.

Unmodified Opinion

In our opinion, Manhattan Beach Unified School District complied, in all material respects, with the compliancerequirements referred to above that are applicable to the government programs noted below that were audited forthe year ended June 30, 2014.

Other Matters

We noted certain matters that we reported to management of Manhattan Beach Unified School District in aseparate letter dated December 4, 2014.





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In connection with the audit referred to above, we selected and tested transactions and records to determine theManhattan Beach Unified School District's compliance with the State laws and regulations applicable to thefollowing items:

Procedures inAudit Guide

ProceduresPerformed

Attendance Accounting:Attendance Reporting 6 YesTeacher Certification and Misassignments 3 YesKindergarten Continuance 3 YesIndependent Study 23 No, see belowContinuation Education 10 Not Applicable

Instructional Time:School Districts 10 Yes

Instructional Materials:General Requirements 8 Yes

Ratios of Administrative Employees to Teachers 1 YesClassroom Teacher Salaries 1 YesEarly Retirement Incentive 4 Not ApplicableGann Limit Calculation 1 YesSchool Accountability Report Card 3 YesJuvenile Court Schools 8 Not ApplicableLocal Control Funding Formula Certification 1 YesCalifornia Clean Energy Jobs Act 3 Not ApplicableAfter School Education and Safety Program:

General Requirements 4 Not ApplicableAfter School 5 Not ApplicableBefore School 6 Not Applicable

Education Protection Account Funds 1 YesCommon Core Implementation Funds 3 YesUnduplicated Local Control Funding Formula Pupil Counts 3 YesCharter Schools:

Contemporaneous Records of Attendance 8 Not ApplicableMode of Instruction 1 Not ApplicableNon Classroom-Based Instruction/Independent Study 15 Not ApplicableDetermination of Funding for Non Classroom-Based Instruction 3 Not ApplicableAnnual Instruction Minutes Classroom-Based 4 Not ApplicableCharter School Facility Grant Program 1 Not Applicable

We did not perform testing for Independent Study because ADA was below the threshold required for testing.


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SCHEDULE OF FINDINGS AND QUESTIONED COSTS


SUMMARY OF AUDITORS' RESULTSFOR THE YEAR ENDED JUNE 30, 2014

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FINANCIAL STATEMENTSUnmodified

NoNone Reported

No

FEDERAL AWARDS

NoNone Reported

Unmodified

No

CFDA Numbers Name of Federal Program or Cluster

84.027, 84.173,

84.027A, 84.173A Special Education (IDEA) Cluster

300,000$

Auditee qualified as low-risk auditee? Yes

STATE AWARDS

Unmodified

Identification of major Federal programs:

Type of auditor's report issued:Internal control over financial reporting:

Material weakness identified?Significant deficiency identified?

Any audit findings disclosed that are required to be reported in accordance with

Section 510(a) of OMB Circular A-133?

Dollar threshold used to distinguish between Type A and Type B programs:

Type of auditor's report issued on compliance for programs:

Noncompliance material to financial statements noted?

Internal control over major Federal programs:Material weakness identified?Significant deficiency identified?

Type of auditor's report issued on compliance for major Federal programs:


FINANCIAL STATEMENT FINDINGSFOR THE YEAR ENDED JUNE 30, 2014

84

None reported.


FEDERAL AWARDS FINDINGS AND QUESTIONED COSTSFOR THE YEAR ENDED JUNE 30, 2014

85

None reported.


STATE AWARDS FINDINGS AND QUESTIONED COSTSFOR THE YEAR ENDED JUNE 30, 2014

86

None reported.


SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGSFOR THE YEAR ENDED JUNE 30, 2014

87

There were no audit findings reported in the prior year's schedule of financial statement findings.

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In planning and performing our audit of the basic financial statements of Manhattan Beach Unified SchoolDistrict (the District) for the year ending June 30, 2014, we considered its internal control structure in order todetermine our auditing procedures for the purpose of expressing our opinion on the basic financial statements andnot to provide assurance on the internal control structure.

However, during our audit we noted matters that are opportunities for strengthening internal controls andoperating efficiency. The following items represent conditions noted by our audit that we consider importantenough to bring to your attention. This letter does not affect our report dated December 4, 2014, on the basicfinancial statements of Manhattan Beach Unified School District.

2013-2014 OBSERVATIONS AND RECOMMENDATIONS

Other Postemployment Benefits

Observation

The Governmental Accounting Standards Board issued standard No. 45 which affects the way local educationalagencies account for and report their costs and obligations relating to Other Postemployment Benefits (OPEB).Although it is an accounting standard, it required a significant actuarial calculation be performed for the requireddisclosure. The entity needs to obtain a valuation of their OPEB obligations either every two or every three years,depending on the size of their plan. To this end, the District was required to conduct an actuarial study during thispast fiscal year.

Recommendation

As actuarial costs are estimates of future results and to effectively manage benefit costs, the District shouldperiodically examine the existing liability every two years as required under the standard.

Mira Costa High School

Associated Student Body – Prohibited Expenditure

Observation

During the auditor review of the disbursement process, auditor noted one of the expenditures chosen onlycontained a credit card receipt with a lack of evidence for the actual item or service the school received. Auditorcould not determine what actual items or services were received to determine if the expense was allowable for theassociated student body.





Governing BoardManhattan Beach Unified School District

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Recommendation

The invoices or receipts should be present with evidence of what was purchased in order to determine if the itemsare allowable under the associated student body.


Associated Student Body – Timely Deposits

Observation

Deposits are not being made timely by the site bookkeeper. This results in large cash balances being maintained atthe site which severely decreases the safeguarding of the asset. From the sample of testing six of the deposits weremade over 30 days from the date the receipt was issued.

Recommendation

At a minimum, deposits should be made weekly to minimize the amount of cash held at the site. During weeks ofhigh cash activity there may be a need to make more than one deposit. Guidelines should be established fordeposit procedure including the maximum cash on hand that should be maintained at the site.


Associated Student Body – Purchase Order Forms

Observation

During our review of the disbursement of the associated student body, auditor noted 8 out of 40 disbursementstested, were missing evidence of a purchase request form.

Recommendation

Without the control document of a purchase request form, club spending might deplete the group’s accountcausing deficit spending and would cause a cash flow issue for the general associated student body account.


Associated Student Body – Bank Reconciliation

Observation

During our review of the bank reconciliations, auditor noted that the three bank reconciliations selected for testingwere not signed by the preparer and reviewer to determine who was the preparer was and that the review wasdone in a timely manner and by personnel separate from the cash collection and disbursement process forsegregation of duties.


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Recommendation

Documentation of the preparer and the reviewer should be noted on the bank reconciliation to ensure that propersegregation of duties are in place. Additionally the date of the preparation and the review should be noted on thebank reconciliation to document the timeliness of the review.

Manhattan Beach Middle School

Associated Student Body – Bank Reconciliation

Observation

During our review of the bank reconciliations, auditor noted that the bank reconciliation for the months of Marchand April were not performed at the time of the audit and thus not performed on a timely basis.

Recommendation

Timely preparation and review of the bank reconciliation ensure that all items are identified and any adjustmentsare recorded in a timely manner to ensure that the book balance is reasonably stated on the financial statements ofthe associated student body.

Manhattan Beach Middle School

Associated Student Body – Gift Cards

Observation

During our review of the associated student body it was determined that there were two separate instances thatgift cards were purchased with student funds.

Recommendation

Expenditure of student funds for gift cards is not usually allowable because they are considered a gift of publicfunds and therefore, it is recommended that the site cease the purchasing of gift cards.

2012-2013 OBSERVATIONS AND RECOMMENDATIONS

ASSOCIATED STUDENT BODY (ASB)

Mira Costa High School and Manhattan Middle School

Observation

During our review of the ASB account, it was noted that bank reconciliation and financial statements were notprepared for the month of June due to the retirement of the ASB clerk.


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Recommendation

It is recommended that when the District assigns new personnel to the vacant position that bank reconciliationsand financial statements are prepared for any months not completed.

Current Status

Partially implemented; see current year observations and recommendations.

We will review the status of the current year comments during our next audit engagement.


june 30, 2014...reconciliation of annual financial and budget report with audited financial...

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