CONSTANTINE PUBLIC SCHOOLS CONSTANTINE ......Constantine Public Schools Administration’s Discussion and Analysis For the Fiscal Year Ended June 30, 2019 - 3 - Constantine Public

2019

CONSTANTINE PUBLIC SCHOOLSCONSTANTINE, MICHIGAN

FINANCIAL REPORTWITH SUPPLEMENTARY INFORMATION

FOR THE YEAR ENDED JUNE 30,

CONTENTSPAGE

Independent Auditor's Report 1

Management's Discussion and Analysis 3

Financial Statements

Government-Wide Financial Statements

Statement of Net Position 11

Statement of Activities 12

Fund Financial Statements

Balance Sheet - Governmental Funds 13

Reconciliation to the Statement of Net Position 14

Statement of Revenues, Expenditures and Changes in Fund Balance - Governmental Funds 15

Reconciliation to the Statement of Activities 16

Statement of Fiduciary Net Position 17

Notes to Financial Statements 18

Required Supplementary Information

Budgetary Comparison Schedule - General Fund 43

MPSERS Cost-Sharing Multiple-Employer Plan

Schedule of the District's Proportionate Share of the Net Pension Liability 44

Schedule of the District's Contributions to the Pension plan 45

Schedule of the District's Proportionate Share of the Net OPEB Liability 46

Schedule of the District's Contributions to OPEB 47

Other Supplementary Information

Combining Balance Sheet - Nonmajor Governmental Funds 48

Combining Statement of Revenues, Expenditures and Changes in Fund Balance - Nonmajor Governmental Funds 49

Schedule of Expenditures of Federal Awards 50

Indepentent Auditor's Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements

Performed in Accordance with Government Auditing Standards 52

Independent Auditor's Report on Compliance with Requirements Applicable to Each Major Federal Program and Internal Control over Compliance Required by the Uniform Guidance 54

Schedule of Findings and Questioned Costs 56

L

F GAB RIDGE CQ

INDEPENDENT AUDITOR’S REPORT

Board of EducationConstantine Public Schools

We have audited the accompanying financial statements of the governmental activities, each major fund,and the aggregate remaining fund information of Constantine Public Schools, as of and for the yearended June 30, 2019, and the related notes to the financial statements, which collectively comprise theSchool 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 inaccordance with accounting principles generally accepted in the United States of America; this includesthe design, implementation, and maintenance of internal control relevant to the preparation and fairpresentation of financial statements that are free from material misstatement, whether due to fraud orerror.

Auditor’s Responsibility

Our responsibility is to express opinions on these financial statements based on our audit. We conductedour audit in accordance with auditing standards generally accepted in the United States of America andthe standards applicable to financial audits contained in Government Auditing Standards, issued by theComptroller General of the United States. Those standards require that we plan and perform the audit toobtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures inthe financial statements. The procedures selected depend on the auditor’s judgment, including theassessment of the risks of material misstatement of the financial statements, whether due to fraud orerror. In making those risk assessments, the auditor considers internal control relevant to the entity’spreparation and fair presentation of the financial statements in order to design audit procedures that areappropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness ofthe entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluatingthe appropriateness of accounting policies used and the reasonableness of significant accountingestimates made by management, as well as evaluating the overall presentation of the financialstatements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis forour audit opinions.

Opinions

In our opinion, the financial statements referred to above present fairly, in all material respects, therespective financial position of the governmental activities, each major fund, and the aggregate remainingfund information of the Constantine Public Schools, as of June 30, 2019, and the respective changes infinancial position thereof for the year then ended in accordance with accounting principles generallyaccepted in the United States of America.

CERTIFIED PUBLIC ACCOUNTANTS

255 N HIGHWAY US 131 / THREE RIVERS, Mi / 49093 / P 269 273 2641 / WWW.GABRIOGECQCOM

Other Matters

Required Supplementary Information

Accounting principles generally accepted in the United States of America require that the management’sdiscussion and analysis and budgetary comparison information, as identified in the table of contents bepresented to supplement the basic financial statements. Such information, although not a part of the basicfinancial statements, is required by the Governmental Accounting Standards Board, who considers it tobe an essential part of financial reporting for placing the basic financial statements in an appropriateoperational, economic, or historical context. We have applied certain limited procedures to the requiredsupplementary information in accordance with auditing standards generally accepted in the United Statesof America, which consisted of inquiries of management about the methods of preparing the informationand comparing the information for consistency with management’s responses to our inquiries, the basicfinancial statements, and other knowledge we obtained during our audit of the basic financial statements.We do not express an opinion or provide any assurance on the information because the limitedprocedures 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 collectivetycomprise the Constantine Public Schools’ basic financial statements. The combining nonmajor fundfinancial statements are presented for purposes of additional analysis and are not a required part of thebasic financial statements. The schedule of expenditures of federal awards is presented for purposes ofadditional analysis as required by Title 2 U.S. Code of Federal Regulations (CFR) Part 200, UniformAdministrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, and is alsonot a required part of the basic financial statements.

The combining nonmajor fund financial statements and the schedule of expenditures of federal awardsare the responsibility of management and were derived from and relate directly to the underlyingaccounting and other records used to prepare the basic financial statements. Such information has beensubjected to the auditing procedures applied in the audit of the basic financial statements and certainadditional procedures, including comparing and reconciling such information directly to the underlyingaccounting and other records used to prepare the basic financial statements or to the basic financialstatements themselves, and other additional procedures in accordance with auditing standards generallyaccepted in the United States of America. In our opinion, the combining and individual nonmajor fundfinancial statements and the schedule of expenditures of federal awards are fairly stated, in all materialrespects, in relation to the basic financial statements as a whole.

Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, we have also issued our report dated October 31,2019, on our consideration of the Constantine Public Schools’ internal control over financial reporting andon our tests of its compliance with certain provisions of laws, regulations, contracts, and grantagreements and other matters. The purpose of that report is to describe the scope of our testing ofinternal control over financial reporting and compliance and the results of that testing, and not to providean opinion on internal control over financial reporting or on compliance. That report is an integral part ofan audit performed in accordance with Government Auditing Standards in considering Constantine PublicSchools’ internal control over financial reporting and compliance.

Gabridge & Co.

Three Rivers, MichiganOctober 31, 2019

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Constantine Public Schools Administration’s Discussion and Analysis For the Fiscal Year Ended June 30, 2019

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Constantine Public Schools, a K-12 School District located in St. Joseph County, Michigan, has implemented the provisions of Governmental Accounting Standards Board Statement 34 (GASB 34). The Administration’s Discussion and Analysis, a requirement of GASB 34, is intended to be the Constantine Public Schools Administration’s discussion and analysis of the financial results for the fiscal year ended June 30, 2019. Accounting principles generally accepted in the United States of America (GAAP) according to GASB 34 requires the reporting of two types of financial statements: District Wide Financial Statements and Fund Financial Statements. Fund Financial Statements For the most part, the fund financial statements are comparable to prior year’s financial statements. The fund level statements are reported on a modified accrual basis. Only those assets that are “measurable” and “currently available” are reported. Liabilities are recognized to the extent they are normally expected to be paid with current financial resources. The fund statements are formatted to comply with the legal requirements of the Michigan Department of Education’s “Accounting Manual.” In the state of Michigan, The District’s major instructional and instructional support activities are reported in the General Fund. Additional activities are reported in their relevant funds including: Debt Funds, Fitness Center and Food Service Fund. In the fund financial statements, capital assets purchased by cash are reported as expenditures in the year of acquisition. No asset is reported. The issuance of debt is recorded as the financial resource. The current year’s payment of principal and interest on long-term obligations are recorded as expenditures. Future years’ debt obligations are not recorded. District Wide Financial Statements These statements are full accrual basis statements. They report all of the District’s assets and liabilities, both short and long term, regardless if they are “currently available” or not. For example, assets that are restricted for use in the Debt Funds solely for the payment of long-term principal or interest are grouped with unrestricted assets of the General Fund. Capital assets and long-term obligations of the district are reported in the Statement of Net Position of the District wide financial statements.


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Summary of Net Position: The following summarizes the net position at Fiscal years ended June 30, 2018 and June 30, 2019:

Net Position Summary June 30, 2018 June 30, 2019

AssetsCurrent Assets 7,343,764$ 6,468,003$ Restricted Assets - Debt Service 866,976 850,325 Capital Assets - Net 25,517,153 25,253,095

Deferred Outflows of Resources 4,277,183 8,676,430

Total Assets & Deferred Outlfows 38,005,077$ 41,247,852$

LiabilitiesCurrent Liabilities 3,814,298.45 3,681,859.25Long-term Liabilities 41,492,911.00 42,384,614.00

Deferred Inflows of Resources 3,571,735.00 4,995,970.00

Total Liabilities & Deferred Inflows 48,878,944$ 51,062,443$

Analysis of financial Position: During fiscal year ended June 30, 2019, the district’s net position increased by $1,059,277 . A few of the significant factors affecting net position during the year are discussed below: 1. Depreciation Expense GASB 34 requires school Districts to maintain a record of annual depreciation expense and accumulated depreciation. The net increase in accumulated depreciation expense is a reduction in net assets. For fiscal year ended June 30, 2019, the net increase in accumulated depreciation was $158,228, comprised of $899,882 of current year depreciation expense reduced by $741,654 of accumulated depreciation removed from the books related to the disposal of equipment. Depreciation expense is recorded on a straight-line basis over the estimated useful lives of assets. In accordance with accounting principles generally accepted in the United States of America (GAAP), depreciation expense is recorded based on the original cost of the asset less an estimated salvage value. One way to think of depreciation expense is that in order to maintain net assets at the same level, acquisitions of capital outlay and capitalized major maintenance projects would have to equal the annual depreciation expense.


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2. Capital Outlay Acquisitions Actual capital outlay acquisitions for fiscal year ended June 30, 2019 were $731,909. Combined with the increase in accumulated depreciation and retirement of assets, net assets (i.e., net book value) invested in capital assets by during the year. Accumulated depreciation is based on original cost; it does not take into consideration inflation. As a result, the actual investment in capital outlay would have to be more than depreciation expense in order to maintain assets at the same level of maintenance and upkeep. Footnote 6 on page 27 discusses Capital Assets in further detail.

Major acquisitions during the year included Buses and other vehicles 132,485 Furniture, technology & equipment 241,845 Buildings & additions 357,579

3. Net Pension Liability For the year ended June 30, 2019, the requirement for Accounting and Financial Reporting of Pensions, GASB 68 and 71, are in effect. These statements require the district to report their proportionate share of the net pension liability and pension expense, amounts previously unrecorded on the School District’s statements. For the year ended June 30, 2019, the net pension liability reduced Net Position by $15,715,069. 4. Net OPEB Liability For the year ended June 30, 2019, the requirement for Accounting and Financial Reporting of Pensions, GASB 75, are in effect. This statement requires the district to report their proportionate share of the net OPEB liability and OPEB expense, amounts previously unrecorded on the School District’s statements.


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Results of Operations: For the fiscal years ended June 30, 2018 and June 30, 2019, the District wide results of operations were:

General Revenues Amount % of Total Amount % of TotalProperty Taxes levied for General 1,496,612$ 9.06 1,458,791$ 8.29 State of Michigan Aid, Unrestricted 10,243,539 62.02 10,832,296 61.59 Federal Revenes, unrestricted - - - - Property Taxes levied for Debt Service 2,009,332 12.17 2,152,927 12.24 Other Income 291,756 1.77 524,084 2.98

Program RevenuesCharges for Services - Local 412,431 2.50 387,442 2.20 Operating Grants - Federal & State 2,063,153 12.49 2,232,186 12.69

Total Revenues 16,516,822$ 100.00 17,587,726$ 100.00

ExpensesInstruction and Instructional Support 6,506,185$ 44.80 7,055,650$ 42.69 Support Services 5,091,041 35.06 6,330,538 38.30 Athletics 363,423 2.50 419,038 2.54 Food Service 966,153 6.65 1,069,597 6.47 Fitness Center 4,325 0.03 5,086 0.03 Interest Expense/Bond Amortization 689,127 4.75 748,657 4.53 Depreciation (Unallocated) 901,011 6.20 899,882 5.44

Total Expenses 14,521,265$ 100.00 16,528,449$ 100.00

Increase (Decrease) in Net Position 1,995,557$ 1,059,277$

June 30, 2018 June 30, 2019

Constantine Public Schools Revenues by Source 1. Property Taxes levied for General Operations (General Fund Property Taxes) The District levied 17.903 mills of property taxes for operations (General fund) on Non-Homestead Properties for the 2018-2019 school year. Under Michigan law, the taxable levy is based on the taxable valuation of properties. Annually, the taxable valuation increase in property values is capped at the rate of the prior year’s CPI increase or 5%, whichever is less. In addition, the District’s taxable valuation is adjusted to reflect the increase or decrease in real estate values for properties that sold during the year. At the time of sale, a property’s taxable valuation is readjusted to the State Equalized Value, which is, theoretically, 50% of the market value. The District’s non-homestead property levy for the 2018-2019 fiscal year was $1,379,366. The non-homestead property tax levy decreased by 5.56% for the 2018-2019 fiscal year-end. However, in the previous fiscal year it increased slightly.


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The following summarizes the District’s non-homestead levy the past five years:

Non- % IncreaseHomestead from

Fiscal Year Tax Levy Prior Year

2018-2019 1,379,366 (5.56%)2017-2018 1,460,596 3.63%2016-2017 1,409,494 (3.91%)2015-2016 1,466,804 2.05%2014-2015 1,437,399 (2.43%)2013-2014 1,473,164 6.21%

2. State of Michigan Aid, Unrestricted The State of Michigan aid, unrestricted is determined by the following variables:

a. State of Michigan State Aid Act per student foundation allowance b. Student Enrollment – Blended at 90% of current year fall count and 10% of prior year winter count c. The District’s non-homestead levy

Per Student, Foundation Allowance: Annually, the State of Michigan sets the per student foundation allowance. The Constantine Public Schools foundation allowance was $7,871 for 2018-2019, increasing by $240 from the prior school years allowance of 7,631. Student Enrollment: The District’s student enrollment for the fall count of 2018-2019 was 1,449 students, an increase of 6 from last year. The District’s enrollments declined in 2014-2015 to its lowest level in the last eight years. The following summarizes fall student enrollments in the past seven years (FTE – Full Time Equivalent):

Change FromFiscal Year Student FTE Prior Year

2018-2019 1,449 62017-2018 1,443 302016-2017 1,413 82015-2016 1,405 22014-2015 1,403 (21)2013-2014 1,424 (5)2012-2013 1,429 (37)

Subsequent to year-end June 30, 2019, preliminary student enrollments for 2019-2020 indicate that enrollments will increase by approximately 9 students.


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3. Property Taxes levied for Debt Service: The District’s debt fund levy, which is used to pay the principal and interest on bond obligations, is based on the taxable valuation of all properties: homestead and non-homestead. For 2018-2019, the district’s debt millage levy was 6.80 mills, generating a levy of $1,893,039, compared to a levy of $1,870,790 for 2017-2018. The District’s debt service obligations are discussed in footnote 8 on pages 28-30 of the financial statements. 4. Food Service Sales to Students and Adults: The District’s food and milk sales to students and adults increased $19,420 to $287,810 when compared to the prior school year. This was due to an increase in catering. Additionally, the lunch program continued serving universal free breakfast to all Eastside and Riverside students. Student and adult meal prices increased by .10 cents per meal in the 2016-2017 school year. This increase was due to the Equity in School Lunch pricing (Section 105) of the 2010 Child Nutrition Reauthorization Act. This act gives a district five years to catch up paid lunch prices to free and reduced reimbursement rates. If the district had not approved the lunch price increase, federal funds would no longer be available to Constantine Public Schools. Revenues from the Food Services operations exceeded expenditures for the year by $15,334 . General Fund Budget & Actual Revenues & Expenditures

Variance VarianceRevenues Revenues Revenues Actual & Actual &

Fiscal Year Original Budget Final Budget Final Actual Original Budget Final Budget

2018-2019 13,153,598 13,906,225 14,312,729 (8.81%) (2.92%)2017-2018 12,333,427 13,386,585 13,386,585 (8.54%) 0.00%2016-2017 11,959,763 12,662,740 12,662,737 (5.88%) 0.00%2015-2016 11,926,009 12,491,170 12,491,158 (4.74%) 0.00%2014-2015 12,157,739 12,200,913 12,197,991 (0.33%) 0.02%

General Fund Revenues - Budget Vs Actual 5-Year History

Variance VarianceExpenditures Expenditures Expenditures Actual & Actual &

Fiscal Year Original Budget Final Budget Final Actual Original Budget Final Budget

2018-2019 13,331,144 13,475,272 13,559,921 (1.72%) (0.63%)2017-2018 12,448,377 13,252,098 13,243,878 (6.39%) 0.06%2016-2017 12,158,452 11,676,355 11,715,308 3.64% (0.33%)2015-2016 12,345,862 12,582,891 12,555,427 (1.70%) 0.22%2014-2015 12,744,192 12,218,528 12,217,498 4.13% 0.01%

General Fund Expenditures - Budget Vs Actual 5-Year History


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Original vs. Final Budget: The Uniform Budget Act of the State of Michigan requires that the local Board of Education approve the original budget for the upcoming fiscal year prior to July 1, the start of the fiscal year. As a matter of practice, Constantine Public Schools amends its budget during the school year. For Fiscal year 2018-2019, the budget was amended in April and June 2019. The June 2019 budget amendment was the final budget for the fiscal year. Change from Original to Final Budget:

2017 - 2018 % 2018 - 2019 %Total Revenues - Original Budget 100.00% 100.00%Total Revenues - Final Budget 108.54% 105.72%

Increase (Decrease) in Budgeted Revenues 8.54% 5.72%1,053,158$

General Fund Revenues

752,627$

12,333,427$ 13,386,585

13,153,598$ 13,906,225

The District’s final general fund revenues were more than the final budget by $406,504. General Fund Expenditures: The District’s budget for expenditures changed as follows during the year:

2017 - 2018 % 2018 - 2019 %Total Revenues - Original Budget 100.00% 100.00%Total Revenues - Final Budget 106.46% 101.08%

Increase (Decrease) in Budgeted Revenues 6.46% 1.08%803,721$ 144,128$

General Fund Expenditures

12,448,377$ 13,331,144$ 13,252,098 13,475,272

The District’s final general fund expenditures were more than the final budget by $84,649. The budget is shown in greater detail on page 37 of the financial statements. Professional Teaching Staff Changes for 2018-2019 Operations The District’s teaching staff has decreased over the last two years. As the student count decreases, teaching staff can be eliminated through attrition (retirement). Staff was reassigned to accommodate highly qualified status and vacancies left from retirements. The teaching staff changes for 2018-2019 can be summarized: FTE FTE FTE 2017-2018 2018-2019 Inc (Dec) Regular Education Teachers 62 68 6 Special Education Teachers 9 9 -


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Factors Bearing on the District’s Future During the 2017-2018 fiscal year, the District retained a grant-writer, and the Thompson Foundation awarded the District their yearly grant of 1.5 million in 2018. This grant was intended to further the District’s goal of educating 21st century learners by providing 1:1 for all students, and more intensive, job-embedded professional development for educational staff. The District expects the grant program to last through the end of the year, phases are completed every few months as deliverables are returned to the foundation, with the final funds expended to be very close to the 1.5 million mark. This will affect the district in the future, as funds will be set aside to purchase new devices for 1st grade students every year, and make sure our supply is replenished as we move through the decade to come. Break Down: Instructional Technology Classroom AV Systems $481,500 Teacher Devices $61,100 Student Devices (1st-12th Grade) $371,260 Student Devices (Kindergarten) $54,060 Subtotal Instructional Technology $967,920 Computer Labs - Standard $ 63,200 Computer Labs - Specialty $15,000 Subtotal Student Technology $78,200

Program Specific Technology STEM / STEAM Kits $ 60,000 Media Creation $6,250 CTE / Industrial Arts Equipment $108,700 MS/HS Robotics $8,240 Subtotal Program Specific $183,190 Administration & Miscellaneous Devices Non-Instructional Workstations $ 25,600 Subtotal Administration Workstations $25,600

Grant Total - Estimated Technology Costs $1,254,910 Total Award: $1,525,693 (including payments made directly to CBD for training) Other Factors The volatility of funding from the State of Michigan has a direct bearing on the future of Constantine Public Schools. If the State suffers a budget shortfall, recent history shows they borrow from another fund or stabilization revenues to cover the shortfall. If they continue, eventually state funds will not have the monies available to cover other areas suffering a shortfall. Consequently, the per pupil foundation allowance will be directly affected, which in turn, flows down to the students in this community. Resources will have to be reduced, hampering the district from making purchases needed for curriculum goals. The current unstable economic outlook for all schools in the State of Michigan is one of the largest factors facing Constantine Public Schools and the future of the students in this community. Contacting the District’s Financial Management This financial report is designed to provide our citizens and taxpayers with a general overview of the District’s finances. If you have questions about this report or need additional information, contact Lisa Pointer-Seidner, Business Manager, Constantine Public Schools (269) 435-8900.

GovernmentalActivities

AssetsCash and Cash Equivalents 533,292$ Investments 3,357,285 Receivables, Net - Due from other governments 2,492,733 Inventories 17,560 Prepaid Expenses 67,133 Restricted assets for debt service 850,325 Capital Assets - net 25,253,095 Total Assets 32,571,423

Deferred Outflows of ResourcesDeferred Pension Amounts 5,727,854 Deferred OPEB Amounts 2,129,460 Deferred Charges from Bond Refundings 819,116

Total Assets and Deferred Outflows of Resources 41,247,852$

LiabilitiesAccounts Payable 330,209$ Accrued Interest 119,201 Accrued Payroll and other Liabilities 1,100,225 Unearned Revenues 626,709 State Aid Note - Student Lunch Deposits 10,516 Bonds Payable - Due within one year 1,415,000 Incentive Separation - Due within one year 80,000

Non-Current LiabilitiesIncentive Separation 40,000 Compensatory Absences 74,891 Net Pension Liability 19,154,255 Net OPEB Liability 5,190,468 Bonds Payable 17,925,000

Total Liabilities 46,066,473

Deferred Inflows of ResourcesDeferred Pension Amounts 2,288,668 Deferred OPEB Amounts 1,486,294 Deferred Amounts from Bond Refundings 1,221,008

Total Liabilities and Deferred Inflows of Resources 51,062,443$

Net AssetsInvested in Capital Assets Net of Related Debt 5,511,202$ Restricted for Debt Service 848,243 Unrestricted (16,174,037)

Total Net Assets (9,814,591)$

CONSTANTINE PUBLIC SCHOOLSSTATEMENT OF NET POSITION

JUNE 30, 2019

See accompanying notes to financial statements‐ 11 ‐

2019

GovernmentalActivities

Net (Expenses)Operating Revenue and Grants and Changes in

Functions/Programs Expenses Contributions Net PositionGovernmental activities

Instruction and instructional student support 7,055,650$ 1,443,135$ (5,575,329)$ Support services 6,330,538 - (6,330,538) Athletics 419,038 - (369,018) Food services 1,069,597 789,051 5,864 Fitness Center 5,086 - 8,739 Interest expense 781,587 - (781,587) Bond amortization (unallocated) (32,930) - 32,930 Depreciation (unallocated) 899,882 - (899,882)

Total Governmental Activities 16,528,449$ 2,232,186$ (13,908,821)$

General RevenuesProperty taxes, levied for general operations 1,458,791 Property taxes, levied for debt service 2,152,927 State of Michigan aid, no specific purposes 10,832,296 Interest 82,708 Other 441,375

Total General Revenues 14,968,098

Change in Net Position 1,059,277

Net Position - Beginning of year (10,873,868)

Net Position- End of year (9,814,591)$

CONSTANTINE PUBLIC SCHOOLSSTATEMENT OF ACTIVITIES

Program Revenues


Charges for

- - -

387,442$

Services

37,186$ -

50,020 286,411 13,825


2019

Nonmajor TotalGeneral Governmental Governmental

Fund Funds FundsAssets

Cash and cash equivalents 476,198$ 57,094$ 533,292$ Investments 2,554,648 62,108 3,357,285 Receivables, net - - - Due from other funds 22,881 138,791 176,904 Due from other governments 2,492,733 - 2,492,733 Inventories - 17,560 17,560 Prepaid expenses 27,133 40,000 67,133 Restricted cash and investments 41,838 808,487 850,325

Total Assets 5,615,431$ 1,124,040$ 7,495,232$

LiabiltiesAccounts payable - current 291,567$ 38,642$ 330,209$ Other accrued liabilities 1,069,225 - 1,069,225 Due to other funds 169,791 - 207,904 Accrued interest - - - Unearned reveneues 626,709 - 626,709 State aid note - - - Lunch fund deposits - 10,516 10,516

Total Liabilities 2,157,291$ 49,158$ 2,244,563$

Fund BalancesNonspendable

Prepaids 27,133$ 40,000$ 67,133$ Inventoriies - 17,560 17,560

RestrictedDebt Service - 848,243 848,243 Food Service - 146,840 146,840 Fitness Center - 22,239 22,239

AssignedComputer technology 55,000 - 55,000 Roof and maintenance 222,700 - 222,700 Emergency maintenance 50,000 - 50,000 Unemployment 20,675 - 20,675

Unrestricted 3,082,632 - 3,800,280

Total Fund Balances 3,458,140 1,074,882 5,250,669

Total liabilities and fund equity 5,615,431$ 1,124,040$ 7,495,232$

717,648

755,761$

JUNE 30,

-

- - - -

717,648

- 38,114$

-$ -

- -

-

- 15,232

- - - -

755,761$

-$ -

38,114 - -

ProjectsFund

-$ 740,529

Capital

CONSTANTINE PUBLIC SCHOOLSBALANCE SHEET

GOVERNMENTAL FUNDS


2019

Total Governmental Fund Blanaces 5,250,669

Amounts reported for governmental activities in the Statement of Net Positionare different because:

Capital Assets used in governemtnal activities are notfinancial resources and are not reported in the funds

Cost of Capital Assets 39,722,125 Accumulated Depreciation (14,469,030) 25,253,095

Net Pension Liability is a long-term liability not due and payable in thecurrent period and not reported in governmental funds.

Deferred pension amounts - Outflows 5,727,854 Deferred pension amounts - Inflows (2,288,668) Net Pension Liability (19,154,255) (15,715,069)

Net OPEB Liability is a long-term liability not due and payable in thecurrent period and not reported in governmental funds.

Deferred OPEB amounts - Outflows 2,129,460 Deferred OPEB amounts - Inflows (1,486,294) Net OPEB Liability (5,190,468) (4,547,302)

Other long-term liabilities that are not due and payable in the currentperiod and are not reported in the funds include:

Incentive Separation (120,000) Compensated Absences (74,891) (194,891)

Bonds Payable and related deferred amounts are long-term liabilites notdue and payable in the current period and not reported in the funds.

Deferred bond refundings - Outflows 819,116 Deferred bond refundings - Inflows (1,221,008) Bonds Payable (19,340,000) (19,741,893)

Accrued interest payable on bonds is not included as a liability in thegovernemental funds. (119,201)

Net Position of Governmental Activities (9,814,591)

JUNE 30,

CONSTANTINE PUBLIC SCHOOLSRECONCILIATION TO THE STATEMENT OF NET POSITION


2019

Capital Nonmajor TotalGeneral Projects Governmental Governmental

Fund Funds Funds FundsRevenues

Local Sources 2,002,033$ 26,123$ 2,466,324$ 4,494,480$ State Sources 11,863,083 - 37,738 11,900,820 Federal Sources 347,307 - 751,313 1,098,621 Interdistrict Sources 93,805 - - 93,805 Contributions - - - -

Total Revenues 14,306,229 26,123 3,255,375 17,587,726

ExpendituresCurrent

Instruction 7,677,440 - - 7,677,440 Support Services 4,740,194 1,471,876 - 6,212,070 Athletics 419,038 - - 419,038 Fitness Center - - 5,086.45 5,086 Food Services - - 1,060,937.43 1,060,937 Bond Refunded Taxes - - 14,631 14,631

Debt ServicePrincipal - - 1,335,000 1,335,000 Interest and Fees - - 790,538 790,538 Escrow Agent Fees - - 1,800 1,800

Capital Outlay 723,249 - 8,660 731,909

Total Expenditures 13,559,921 1,471,876 3,216,652 18,248,450

Excess (Deficiency) of RevenuesOver Expenditures 746,307 (1,445,754) 38,722 785,030

Other Financing SourcesTransfers In 6,500 700,000 208,309 914,809 Transfers Out (8,070) (700,000) (206,739) (914,809)

Total Other Financing Sources (1,570) - 1,570 -

Net Change in Fund Balance 744,737 (1,445,754) 40,292 (660,724)

Beginning Fund Balance 2,713,402 2,163,401 1,034,589 5,911,393

Ending Fund Balance 3,458,140$ 717,648$ 1,074,882$ 5,250,669$

CONSTANTINE PUBLIC SCHOOLSSTATEMENT OF REVENUES, EXPENDITURES, AND CHANGE IN FUND BALANCE



2019

Net Change in Fund Balances - Total Governmental Funds (660,724)$

Amounts reported for governemental activities in the statement ofactivities are different because:

Governmental funds report capital outlays as expenditures; in the Statementof Activities, these costs are allocated over their estimated useful lives as depreciation expense.

Capital outlay in the current year 731,909$ Gain on disposal of capital assets (96,085) Depreciation expense (899,882) (264,058)

Figures used to calculate the Net Pension Liability are only recorded in theStatement of Activities.

Change in deferred outflows of resources 2,665,597$ Change in Net Pension Liability (2,729,787) Change in deferred inflows of resources (278,736) (342,926)

Figures used to calculate the Net Pension Liability are only recorded in theStatement of Activities.

Change in deferred outflows of resources 1,839,755$ Change in Net OPEB Liability 459,496 Change in deferred inflows of resources (1,284,535) 1,014,716

Incentive separation payments are recorded on the fund statements when paid, but are recorded on the statement of net position when the liability is accrued.

Prior year incentive separation 70,000$ Current year incentive separation (120,000) (50,000)

Compensated absences are recorded when paid in the governemental funds,whereas the statement of activities reflects the expense when it is accrued.

Prior year compensated absences 58,479$ Current year compensated absences (74,891) (16,412)

Repayment of bond principal is an expenditure in the governmental funds, but not inthe Statement of Activities. It reduces debt owed on the Statement of Net Position. 1,335,000

The difference between the net carrying amount of defeased debt and the cost ofthe new debt is deferred and amortized as an element of interest expense over thelife of the refunding debt. Current year amortization of discount on issuance of debt: 32,930

Interest expense is recorded in the statement of activities when it is accrued; in the governemental funds as paid.

Prior year accrued interest 129,951$ Current year accrued interest (119,201) 10,750

Change in Net Assets of Governmental Activities 1,059,277$

CONSTANTINE PUBLIC SCHOOLSRECONCILIATION TO THE STATEMENT OF ACTIVITIES



Agency FundStudentActivities

Assets

Cash and cash equivalents 210,527$

Total Assets 210,527$

Liabilities

Due to student groups 210,527$

Total Liabilities 210,527$

CONSTANTINE PUBLIC SCHOOLSSTATEMENT OF FIDUCIARY NET POSITION

FIDUCIARY FUNDS2019JUNE 30,


CONSTANTINE PUBLIC SCHOOLS

NOTES TO FINANCIAL STATEMENTS JUNE 30, 2019

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NOTE 1 SIGNIFICANT ACCOUNTING POLICIES The accounting policies of the Constantine Public Schools conform to accounting principles generally accepted in the United States of America as applicable to Districts. The following is a summary of the significant policies: A. Reporting Entity The District is governed by an elected seven-member Board of Education. The accompanying financial statements have been prepared in accordance with criteria established by the Governmental Accounting Standards Board (GASB) for determining the various governmental organizations to be included in the reporting entity. These criteria include oversight responsibility, scope of public service, and special financing relationships that determine which of the governmental organizations are a part of the District’s reporting entity and which organizations are legally separate component units of the District. Based on application of the criteria, the entity does not contain component units. B. District-Wide and Fund Financial Statements The district-wide financial statements (i.e., the statement of net position and the statement of activities) report information on all of the nonfiduciary activities of the District. For the most part, the effect of interfund activity has been removed from these statements. Governmental activities, normally supported by taxes and intergovernmental revenues, are reported separately from business-type activities that rely to a significant extent on fees and charges for support. All of the District’s district-wide activities are considered governmental activities. The statement of activities demonstrates the degree to which the direct expenses of a given function or segment is offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include: (1) sales for food services and ticket sales to athletic events; and (2) grants and contributions that are restricted to meeting the operational requirements of a particular function or segment. Taxes, intergovernmental payments and other items not properly included among program revenues are reported instead as general revenue. Separate financial statements are provided for governmental funds and fiduciary funds, even though the later are excluded from the district-wide financial statements. Major individual governmental funds are reported as separate columns in the fund financial statements. C. Measurement Focus, Basis of Accounting and Financial Statement Presentation District-wide Financial Statements - The district-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenue is recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenue in the year for which they are levied. Grants, categorical aid, and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. Fund-based Statements - Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenue is recognized as soon as it is both measurable and available. Revenue is considered to be available if it is collected within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the government considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, expenditures relating to severance pay, and claims and judgments are recorded only when payment is due.

CONSTANTINE PUBLIC SCHOOLS NOTES TO FINANCIAL STATEMENTS JUNE 30, 2019

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NOTE 1 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) When both restricted and unrestricted resources are available for use, it is the District’s policy to use restricted resources first, and then unrestricted resources as they are needed. Property taxes, unrestricted State aid, intergovernmental grants, and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenue of the current fiscal period. All other revenue items are considered to be available only when the District receives cash. The District reports unearned revenue on its governmental funds’ balance sheets. Unearned revenues arise when potential revenue does not meet both the “measurable” and “available” criteria for recognition in the current period. Unearned revenues also arise when the District receives resources before it has a legal claim to them, as when grant monies are received prior to the incurrence of qualifying expenditures. In subsequent periods, when both revenue recognition criteria are met, or when the district has a legal claim to the resources, the liability for unearned revenue is removed from the combined balance sheet and revenue is recognized. For Constantine Public School District taxpayers, properties are assessed as of December 31 and the related property taxes are levied and become a lien on the following December 1 for 100% of the taxes which are due by March 1st. Taxes are considered delinquent on March 1st, at which time penalties and interest are assessed and the total obligation is added to the county tax rolls. Property taxes become available for expenditure and are thus recognized as revenue in the fiscal year they are levied. The District has adopted a policy of writing off uncollected delinquent taxes after three years. The state taxable value of all real and personal property for the fiscal year ended June 30, 2019 was $278,388,155. The millage rate for general operations was 17.903 mills and 6.800 mills for debt retirement. The State of Michigan utilizes a foundation allowance approach that provides for a specific annual amount of revenue per student based on a statewide formula. The foundation allowance is funded from a combination of state and local sources. The School Aid Act and School Code of Michigan primarily govern revenues from state sources. The state portion of the foundation is provided from the State’s School Aid Fund and is recognized as revenue in accordance with state law and accounting principles generally accepted in the United States of America. The District also receives revenue from the State to administer certain categorical education programs. State rules require that revenue earmarked for these programs be used for its specific purpose. Certain categorical funds require an accounting to the State of the expenditures incurred. Such categorical funds received but not expended by the close of the fiscal year are recorded as deferred revenues. Other categorical funding is recognized when the appropriation is received. The District reports the following major governmental funds: General Fund - The General Fund is the District’s primary operating fund. It accounts for all financial resources of the District, except those required to be accounted for in another fund. Special Revenue Funds – The District’s Special Revenue Funds are used to account for the proceeds of specific revenue sources that are restricted to expenditures for specified purposes. The District’s Special Revenue Funds are the Food Services and the Fitness Center. Any operating deficit generated by these activities is the responsibility of the General Fund. Debt Service Fund – The District’s Debt Service Funds are used to record tax, interest, other revenue for payment of interest, principal, and other expenditures on long-term debt.


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NOTE 1 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Capital Projects Funds – The Capital Projects Fund is used to record both bond proceeds and other revenue and the disbursement of monies specifically designed for acquiring land improvements, buildings, and equipment and for major remodeling and repairs. The fund operates until the purpose for which the fund was created has been accomplished. Fiduciary Funds – The District’s only fiduciary fund is the Student Activities Agency Fund. This fund accounts for assets held by the District in a trustee capacity or as an agent, is custodial in nature (assets equal liabilities), and does not involve the measurement of results of operations. The Student Activities Agency Fund currently maintained by the District records the transactions of student groups for school and school-related purposes. The funds are segregated and held in a trust for the students. D. Deposits and Investments Cash and cash equivalents are considered to be cash on hand, demand deposits, and short-term investments with a maturity of three months or less when acquired. Investments are recorded at fair value, based on quoted market prices, or estimated fair value. During the fiscal year ended June 30, 2019 short-term General Fund investments were limited to the Michigan Liquid Asset Fund (MILAF) and Fidelity government portfolio. MILAF is an investment pool managed by PFM Asset Management LLC that allows school districts within the State of Michigan to pool funds for investment purposes. This fund has an AAA rating by Standard and Poor’s and invests only in funds approved by Michigan Statute. The Fidelity government portfolio normally invests at least 80% of assets in U.S. Government securities and repurchase agreements for those securities with a weighted average maturity of 60 days or less. E. Receivables and Payables In general, outstanding balances between funds are reported as “due to/from other funds.” Activity between funds that is representative of lending/borrowing arrangements outstanding at the end of the fiscal year is referred to as “advances to/from other funds.” These “internal balances” between governmental funds are eliminated in the district-wide financial statement. No allowance for uncollectible accounts has been provided. Management has evaluated the accounts and believes they are all collectible. F. Inventories and Prepaid Costs Inventories are valued at cost, on a first-in, first-out basis. Inventories of governmental funds are recorded as expenditures when consumed rather than when purchased, including United States Department of Agriculture Commodities inventory received by the Food Service Fund. Certain payments to vendors reflect costs applicable to future fiscal years and are recorded as prepaid items in both government-wide and fund financial statements. G. Restricted Assets

Revenues from property tax collections and related interest in the Debt Service Funds are required to be set aside for future repayments of bonded indebtedness. These amounts have been classified as restricted assets. Monies withheld from employees who participate in a flex benefit program are classified as restricted cash on the general fund balance sheet.


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NOTE 1 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) H. Capital Assets Capital assets, i.e., land, buildings, equipment and vehicles, are reported in the applicable governmental column in the district-wide financial statements. The District defines capital assets as assets with an initial individual cost of more than $5,000 and an estimated useful life in excess of 5 years. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair market value at the date of donation. Costs of normal repair and maintenance that do not add to the value or materially extend asset life are expensed in the current period. The District does not have infrastructure-type assets. Property, plant and equipment are depreciated using the straight-line method over the following useful lives:

Buildings and improvements 20 - 50 years Buses and other vehicles 5 - 10 years Furniture and other equipment 5 - 20 years

I. Compensated Absences The District reports compensated absences in accordance with the provisions of GASB Statement No. 16, “Accounting for Compensated Absences.” Sick leave benefits are accrued as a liability using the termination payment method. An accrual for earned sick leave is made to the extent that is probable that the benefits will result in termination payments. The entire compensated absence liability is reported on the district-wide financial statements. For governmental fund financial statements the current portion of unpaid compensated absences is the amount expected to be paid using expendable available resources. At June 30, 2019, there was no current portion due. The noncurrent portion of the liability is not reported on the governmental fund financial statement. J. Deferred Outflows of Resources

In addition to assets, the statement of net position will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to one or more future periods and so will not be recognized as an outflow of resources (expense) until then. The School reports deferred outflows of resources for certain pension-related and postemployment benefits other than pensions (OPEB) amounts, such as change in expected and actual experience, changes in assumptions, and certain contributions made to the plan subsequent to the measurement date. More detailed information can be found in Notes 10 and 11. K. Deferred Inflows of Resources In addition to liabilities, the statement of net position will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to one or more future periods and so will not be recognized as an inflow of resources (revenue) until that time. The School reports deferred inflows of resources for certain pension-related and OPEB amounts, such as the difference between projected and actual earnings of the pension or OPEB plan’s investments. More detailed information can be found in Notes 10 and 11.


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NOTE 1 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

L. Net Pension Liability For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the Plan and additions to/deductions from the plan fiduciary net position have been determined on the same basis as they are reported by the plan. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. M. Postemployment Benefits Other Than Pensions For purposes of measuring the net OPEB liability, deferred outflows of resources and deferred inflows of resources related to OPEB, and OPEB expense, information about the fiduciary net position of the Michigan Public School Employees Retirement System (MPSERS) and additions to/deductions from MPSERS fiduciary net position have been determined on the same basis as they are reported by MPSERS. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value.

N. Accrued Liabilities All payables and accrued liabilities are reported in the district-wide financial statements. In general, payables and accrued liabilities that will be paid from governmental funds are reported on the governmental fund financial statements regardless of whether they will be liquidated with current resources. However, claims and judgments, the noncurrent portion of compensated absences, contractually required pension contributions and special termination benefits that will be paid from governmental funds are reported as a liability in the fund financial statements only to the extent that they will be paid with current, expendable, available financial resources. In general, payments made within sixty days after year-end are considered to have been made with current available financial resources. O. Long-Term Obligations In the district-wide financial statements long-term debt and other long-term obligations are reported as liabilities in the statement of net position. In the governmental fund statements the face amount of debt issued is reported as other financing sources. Issuance costs are reported as debt service expenditures, whereas these costs related to the refunding bonds issued in 2017, 2015, 2014, and 2012 have been amortized on the statement of net position. Current year principal payments are reported as an expenditure on the governmental fund statements whereas on the statement of net assets the payments reduce the long-term obligation. P. Fund Equity The District’s governmental fund balance sheet incorporates Governmental Accounting Standards Board (GASB) Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions. GASB 54 provides more clearly defined fund balance categories to make the nature and extent of the constraints placed on a government’s fund balances more transparent. The following classifications describe the relative strength of the spending constraints: 1) Nonspendable fund balance reflects amounts that cannot be spent because they are either (a) not in

spendable form or (b) legally or contractually required to be maintained intact, e.g., inventories or prepaid expenses.


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NOTE 1 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

2) Restricted fund balance is reported when externally imposed constraints are placed on the use of resources by taxpayers, grantors, contributors, bondholders, or laws or regulations of other governments, e.g., food service fund monies, debt service fund monies.

3) Committed fund balance is reported for amounts that can only be used for specific purposes pursuant to constraints imposed by formal action of the government’s highest level of decision-making authority, the Board of Education. A formal resolution of the Board of Education is required to establish, modify or rescind a fund balance commitment.

4) Assigned fund balance reflects those amounts constrained by the Board’s intent to use them for a specific purpose and are neither restricted nor committed. Intent is permitted to be made by the Board itself or an official to whom the Board has delegated the authority to assign amounts to be used for specific purposes.

5) Unassigned fund balance is reserved for the residual classification for the general fund. It represents fund balance that has not been assigned to other funds, nor restricted, committed or assigned to specific purposes within the general fund. Positive amounts are reported only in the general fund.

When the District incurs an expenditure for purposes for which various fund balance classifications can be used, it is the government’s policy to use restricted fund balance first, then committed fund balance, assigned fund balance, and finally unassigned fund balance. Q. Net Position Net position represents the difference between assets and liabilities. Net position invested in capital assets, net of related debt consists of capital assets, net of accumulated depreciation, reduced by the outstanding balances of any borrowings used for the acquisition, construction or improvement of those assets. Net position is reported as restricted when there are limitations imposed on their use either through the enabling legislation adopted by the District or through external restrictions imposed by creditors, grantors, laws or regulations of other governments. Net position related to debt service are required to be shown as restricted. R. Use of Estimates The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. S. Adoption of Accounting Standards The Governmental Accounting Standards Board (“the GASB”) has issued Statement No. 75 Accounting and Financial Reporting for Postemployment benefits other than pensions (OPEB). Statement 75 requires the ISD to recognize on the face of the government-wide financial statements its proportionate share of the net OPEB liability related to its participation in the MPSERS plan, and to measure the annual costs of the OPEB benefits. Statement 75 is effective for the year ending June 30, 2018.

NOTE 2 STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY

Budgetary Information - Annual budgets are adopted on a basis consistent with accounting principles generally accepted in the United States of America for the general and special revenue funds. All annual appropriations lapse at fiscal year end. Public hearings are held to obtain taxpayer comments before the Board approves the budgets.


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NOTE 2 STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY (CONTINUED) The budget document presents information by fund, function, department and line items. The legal level of budgetary control adopted by the governing body is the function level. State law requires the district to have its budget in place by July 1. Expenditures in excess of appropriations is a violation of state law. State law permits districts to amend its budgets during the year. For the year, the district incurred significant expenditures in excess of appropriations in the following areas:

Favorable(Unfavorable)

Appropriation Actual VarianceSupporting:

Instructional staff services 1,096,623$ 1,390,737$ (294,114)$

NOTE 3 CASH AND CASH EQUIVALENTS

State statues and the District’s investment policy, authorizes local government units to make deposits in the accounts of federally insured banks, credit unions, and savings and loan associations that have an office in Michigan. The District is authorized to invest in bonds, securities and other direct obligations of the United States or any agency or instrumentality of the United States; United States government or federal agency obligations; repurchase agreements; banker’s acceptance of United States banks; commercial paper rated within the two highest classifications which mature not more than 270 days after the date of purchase; obligations of the State of Michigan or its political subdivisions which are rated as investment grade; and mutual funds composed of investment vehicles that are legal for direct investment by local units of government in Michigan. The District has designated five banks and the Michigan School District Liquid Asset Fund (MILAF) for the deposit of the District’s funds. The investment policy adopted by the Board in accordance with Public Act 196 of 1997 has authorized bank investment pools and interlocal agreement investment pools, but not the remainder of State statutory authority as listed above. At fiscal year-end, the District’s cash and cash equivalents were reported in the basic financial statements in the following categories:

Activities Governmental

Activities Fiduciary

Funds Total Primary Government

Unrestricted Deposits $ 533,292 $ 179,527 $ 592,468 Restricted Deposits 850,325 - 721,254

Custodial credit risk of cash and cash equivalents– The District’s cash and cash equivalents are subject to custodial credit risk. Custodial credit risk is the risk that in the event of a bank failure, the District’s deposits may not be returned to it. The District does not have a deposit policy for custodial credit risk. At June 30, 2019, all but $221,609 of the District’s bank deposits were covered by Federal depository insurance (FDIC). Custodial Credit Risk of Investments – Custodial credit risk is the risk that, in the event of the failure of the counterparty, the District will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. The District’s policy for custodial risk states custodial rick will be minimized by limiting investments to the type of securities allowed by state law. The District does not have investments with custodial credit risk.

Credit Risk – State law limits investments in commercial paper to the top two credit ratings issued by nationally recognized statistical rating organizations


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NOTE 3 CASH AND CASH EQUIVALENTS (CONTINUED) At year end, the maturities of investments and the credit quality ratings of debt securities are as follows: Michigan Liquid Asset Funds has a AAAm rating by the Standard and Poor’s, at year end, the District held funds with a fair value of $3,357,285 with no maturities. Interest Rate Risk – Interest rate risk is the risk that the fair value of an investment will decrease as a result of a rise in interest rates. The District’s investment policy does not restrict investment maturities, other than commercial paper which can only be purchased with a 270-day maturity. The District minimizes interest rate risk by structuring the investment portfolio so that securities mature to meet the cash requirements for ongoing operations, thereby avoiding the need to sell securities in the open market. Foreign Currency Risk – Foreign currency risk is the risk that an investment denominated in the currency of a foreign county could reduce its U.S. dollar value as a result of changes in foreign currency exchange rates. State law and the District’s policy prohibit investments in foreign currency.

In addition to checking deposits the District usually holds monies in two funds that are neither insured or guaranteed by the FDIC nor collateralized. The first fund, Michigan Liquid Asset Funds (MILAF) has a AAAm rating by Standard and Poor’s which minimizes the risk and invests in financial instruments approved by Michigan statute. The second fund, Fidelity Institutional Government Portfolio Class II money market fund normally invests at least 80% of its assets in U.S. Government securities and repurchase agreements for those securities. The District held no monies in the Fidelity money market fund as of June 30, 2019. The District believes that due to the dollar amounts of cash deposits and the limits of FDIC insurance, it is impractical to insure all deposits. As a result, the District evaluates each financial institution with which it deposits funds and assesses the level of risk of each institution; only those institutions with an acceptable estimated risk level are used as depositories. Interest Rate Risk - Interest rate risk is the risk that the market value of investments will fall due to changes in market interest rates. The Michigan Liquid Asset Fund (MILAF) cash management investment pools have a 7 day yield which reduces interest rate risk to minimal. At fiscal year end, the fund was earning 1.77% interest and the MAX class was earning 1.98% interest.

NOTE 4 RECEIVABLES

At June 30, 2019, due from other governments were comprised of:

State of Michigan 2,134,247$ St Joseph County ISD 4,839 Title I 228,916 Title II 53,544 Title IV 27,290 Title VI - Other Governmental Units 43,897

Total 2,492,733$


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NOTE 5 INTERFUND RECEIVABLES, PAYABLES, AND TRANSFERS

The composition of interfund balances is as follows: Receivable Fund Payable Fund

(Due To) (Due From) AmountGeneral Fund Capital Projects 42 22,881 Lunch Fund General Fund 99,034 Debt Service General Fund 39,757 Capital Projects 41 Capital Projects 42 15,232

Total 176,904

Agency Fund General Fund 31,000

NOTE 6 CAPITAL ASSETS

The following summarizes the changes in capital assets for the fiscal year ended June 30, 2019:

Balance BalanceJuly 01, 2018 Increases Decreases June 30, 2019

Capital Assets being depreciated

Buildings & Additions 34,298,235$ 357,579$ 692,500$ 33,963,314$

Buses & Vehicles 1,587,321 132,485 - 1,719,806

Furniture & Equipment 3,859,977 241,845 145,239 3,956,583

Subtotal 39,745,533 731,909 837,739 39,639,703

Less Accumulated Depreciation

Buildings & Additions 10,514,648 746,562 692,500 10,568,710

Buses & Vehicles 1,291,673 100,208 - 1,391,881

Furniture & Equipment 2,504,481 53,112 49,154 2,508,439

Subtotal 14,310,802 899,882 741,654 14,469,030

Net Capital Assets being depreciated 25,434,731 (167,973) 96,085 25,170,673

Capital Assets not being depreciated

Land 82,422 - - 82,422

Total Capital Assets ‐ Net of Depreciation 25,517,153$ (167,973)$ 96,085$ 25,253,095$

Depreciation expense for fiscal year ended June 30, 2019 was $899,882. Depreciation expense was not allocated to governmental activities as the District considers its assets to impact multiple activities and allocation is not practical. Construction Commitments – The District has a major construction project remodeling the middle school during the year and the commitment will continue for the future year end.


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NOTE 7 SHORT-TERM DEBT The District borrowed $1,000,000 due in August 2018 at .68% interest. The District had accrued $15,142 of interest expense at June 30, 2018. In August 2018 this note was paid in full and the District did not borrow another state aid note during the fiscal year. State aid anticipation notes are backed by the full faith and credit of the District and mature within one year.

NOTE 8 LONG-TERM DEBT The District issues bonds and other contractual commitments to provide for the acquisition and construction of major capital facilities and the acquisition of certain equipment. General obligation bonds are direct obligations and pledge the full faith and credit of the District. The School Building and Site Bonds dated August 22, 2017 were issued to be used for school building and site purposes. The net proceeds of $1,712,714 were deposited in the capital projects fund to be used for renovations. Bond principal and interest in the amount of 2.00% to 3.00% are payable on November 1st and May 1st. The 2015 Refunding Bonds issued date February 2, 2015 were issued to advance refund $15,020,000 of outstanding 2005 and 2006 Refunding Bonds. The net proceeds of $15,141,477 were deposited in an escrow account. Bond principal payments of between $785,000 and $1,290,000 and interest in the amount of 3.0% to 5.0% are payable on November 1st and May 1st. The School Building and Site Bonds dated February 13, 2014 were issued to be used for school building and site purposes. The net proceeds of $6,650,655 were deposited in the capital projects fund to be used for remodeling of the middle school building. Bond principal and interest in the amount of 2.00% to 4.00% are payable on November 1st and May 1st. The refunding bonds dated November 14, 2012, were issued to: 1) advance refund $5,645,000 of outstanding 2002 School Building and Site Bonds which are callable on or after November 1, 2013, and are due and payable November 1, 2013 through May 1, 2017 and on May 1, 2024, and 2) to pay the costs of issuing the bonds. The net proceeds of $4,920,931, plus an additional $997,000 were deposited in an irrevocable trust with an escrow agent to pay the $141,125 of interest owed on the prior bonds on May 1 and November 1, 2013, and pay the principal owed of $5,645,000 on November 1, 2013. The difference between the cash flows required to service the old debt and the cash flows required to service the new debt and complete the refunding totaled $402,098. An economic gain (difference between the present value of the old and new debt service payments) of $297,875 resulted from the refunding. The refunding bonds dated April 25, 2006, were issued to refund outstanding 2002 School Building and Site Bonds which are callable on or after November 1, 2013, and are due and payable May 1, 2025 ($2,070,000 only) and May 1, 2029; and to pay the costs of issuing the bonds. The net proceeds of $7,320,049, plus an additional $183,893 were deposited in an irrevocable trust with an escrow agent to provide for future debt service payments on the refunded bonds. The bonds maturing on May 1, 2024 are term bonds subject to mandatory redemption at par. Redemption dates on May 1st of 2016 through 2024, inclusive, require principal payments plus interest increasing incrementally every two years from $20,000 to $30,000. On May 1, 2024, additional principal of $850,000 is due. The difference between the cash flows required to service the old debt and the cash flows required to service the new debt and complete the refunding totaled $473,207. An economic gain (difference between the present value of the old and new debt service payments) of $281,110 resulted from the refunding. The refunding bonds dated June 7, 2005 were issued to refund outstanding 2002 School Building and Site Bonds which are callable on or after November 1, 2013, and are due and payable May 1, 2018 through May 1, 2021, inclusive, and the May 1, 2022 and May 1, 2023 sinking fund redemptions of the May 1, 2025 term


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NOTE 8 LONG-TERM DEBT (CONTINUED) bond. The issuance will also be used to pay certain costs of issuance. The net proceeds of $7,975,899, plus an additional $30,447, were deposited in an irrevocable trust with an escrow agent to provide for future debt service payments on the refunded bonds. The bonds maturing on May 1, 2018 are term bonds subject to mandatory redemption at par. Redemption dates of May 1, 2016, 2017, and 2018 require principal payments plus interest of $65,000, $70,000 and $1,280,000, respectively. The difference between the cash flows required to service the old debt and the cash flows required to service the new debt and complete the refunding totaled $410,580. An economic gain (difference between the present value of the old and new debt service payments) of $282,315 resulted from the refunding. The refunding bond proceeds are held in escrow agent accounts composed of cash and non-callable direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by the United States of America.

In 2012, 2005 and 2006 the District defeased in substance certain bonds originally issued in 2002 and callable on or after November 1, 2013, by placing the refunded bond proceeds in an irrevocable trust to provide for all future interest and principal payments on those particular bonds. The District’s portion of bonds outstanding that are considered defeased in substance is $20,175,000. Accordingly, the trust account assets and the liability for the defeased bonds are not included in the GASB 34 financial statements, only the new bond debt is reported as a liability.

Long-term obligations for the District for the year ended June 30, 2019 is summarized below:

Beginning Balance Additions (Reductions)

Ending Balance

Due Within One Year

2017 School Building and Site Bonds (General Obligation) Due in annual installments of $50,000 to 355,000, beginning May 2021 through May 2029 with interest at 2.0% - 3.0%

$1,655,000 $ - $ - $1,655,000 $ -

2015 Refunding Bonds Due in annual installments of $785,000 to 1,290,000, beginning May 2018 through May 2029 with interest at 3.0% -5.0%

12,745,000 - (1,290,000) 11,455,000 1,265,000

2014 School Building And Site Bonds (General Obligation) Due in annual Installments of $225,000 to $985,000 through May 2029 With interest at 2.0%-4.0%

5,895,000 - (25,000) 5,850,000 150,000

2012 Refunding Bonds Due in annual installments of $845,000 to $945,000 through May 1, 2017 with interest at 2 – 4%, and an installment of $380,000 on May1, 2024 with interest at 3.5%

380,000 - - 380,000 -

Total Bonds Payable $ 20,675,000 $ - ($ 1,335,000) $ 19,340,000 $ 1,415,000


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NOTE 8 LONG-TERM DEBT (CONTINUED) Total interest expense on the above obligations in fiscal year ended June 30, 2019 was $790,538. Annual debt service requirements to maturity for the above bond obligations are as follows:

General Obligation Year-End June 30 Principal Interest Total

2020 $ 1,415,000 $ 692,013 $ 2,107,013 2021 1,565,000 623,763 2,188,763 2022 1,655,000 551,713 2,206,713 2023 1,755,000 476,888 2,231,888 2024 1,880,000 401,876 2,281,876

2025-2029 11,070,000 967,928 12,037,928 Total $ 19,340,000 $ 3,714,181 $ 23,054,181

Total compensated absences accrued at year end equaled $74,891 and total accrued incentive separation payments equaled $120,000.

NOTE 9 RISK MANAGEMENT

The District is exposed to various risks of loss related to property loss, torts, errors and omissions, employee injuries (workers’ compensation), as well as medical benefits provided to employees. The District has purchased commercial insurance for health claims and participates in the SET/SEG (risk pool) for claims relating to workers’ compensation and property/casualty claims. Settled claims relating to the commercial insurance have not exceeded the amount of insurance coverage in any of the past three fiscal years.

NOTE 10 EMPLOYEE RETIREMENT AND BENEFIT SYSTEMS

Plan Description The Michigan Public School Employees' Retirement System (System or MPSERS) is a cost-sharing, multiple employer, state-wide, defined benefit public employee retirement plan governed by the State of Michigan (State) originally created under Public Act 136 of 1945, recodified and currently operating under the provisions of Public Act 300 of 1980, as amended. Section 25 of this act establishes the board's authority to promulgate or amend the provisions of the System. The board consists of twelve members— eleven appointed by the Governor and the State Superintendent of Instruction, who serves as an ex-officio member.

The System’s pension plan was established by the State to provide retirement, survivor and disability benefits to public school employees. In addition, the System’s health plan provides all retirees with the option of receiving health, prescription drug, dental and vision coverage under the Michigan Public School Employees’ Retirement Act (1980 PA 300 as amended).

The System is administered by the Office of Retirement Services (ORS) within the Michigan Department of Technology, Management & Budget. The Department Director appoints the Office Director, with whom the general oversight of the System resides. The State Treasurer serves as the investment officer and custodian for the System.

The System’s financial statements are available on the ORS website at www.michigan.gov/orsschools.

Benefits Provided Benefit provisions of the defined benefit pension plan are established by State statute, which may be amended. Public Act 300 of 1980, as amended, establishes eligibility and benefit provisions for the defined


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NOTE 10 EMPLOYEE RETIREMENT AND BENEFIT SYSTEMS (CONTINUED)

benefit (DB) pension plan. Depending on the plan option selected, member retirement benefits are determined by final average compensation, years of service, and a pension factor ranging from 1.25 percent to 1.50 percent. DB members are eligible to receive a monthly benefit when they meet certain age and service requirements. The System also provides disability and survivor benefits to DB plan members.

A DB plan member who leaves Michigan public school employment may request a refund of his or her member contributions to the retirement system account if applicable. A refund cancels a former member’s rights to future benefits. However, returning members who previously received a refund of their contributions may reinstate their service through repayment of the refund upon satisfaction of certain requirements.

Contributions Employers are required by Public Act 300 of 1980, as amended, to contribute amounts necessary to finance the coverage of active and retired members. Contribution provisions are specified by State statute and may be amended only by action of the State Legislature.

Employer contributions to the System are determined on an actuarial basis using the entry age normal actuarial cost method. Under this method, the actuarial present value of the projected benefits of each individual included in the actuarial valuation is allocated on a level basis over the service of the individual between entry age and assumed exit age. The portion of this cost allocated to the current valuation year is called the normal cost. The remainder is called the actuarial accrued liability. Normal cost is funded on a current basis. The unfunded (overfunded) actuarial accrued liability as of the September 30, 2017 valuation will be amortized over a 21-year period beginning October 1, 2017 and ending September 30, 2038.

The schedule below summarizes pension contribution rates in effect for fiscal year ended September 30, 2018.

Pension Contribution Rates

Benefit Structure Member Employer

Universities Non-Universities

Basic 0.0 - 4.0% 24.47% 17.89%

Member Investment Plan 3.0 - 7.0% 24.47% 17.89%

Pension Plus 3.0 - 6.4% N/A 16.61%

Pension Plus 2 6.2% N/A 19.74%

Defined Contribution 0.0% 19.60% 13.54%

Required contributions to the pension plan from the District were 1,735,007 for the year ended September 30, 2018.


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Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions At June 30, 2019, the District reported a liability of 19,154,255 for its proportionate share of the MPSERS net pension liability. The net pension liability was measured as of September 30, 2018, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation rolled forward from September 2017. The District’s proportion of the net pension liability was determined by dividing each employer’s statutorily required pension contributions to the system during the measurement period by the percent of pension contributions required from all applicable employers during the measurement period. At September 30, 2018, the District’s proportion was 0.0006372 percent, which an increase of 0.0000034 percent from its proportion measured as of September 30, 2017.

For the year ending June 30, 2019 the District recognized pension expense of 2,081,148. At June 30, 2019, the District reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

Deferred Outflows of Resources

Deferred Inflows of Resources

Differences between actual and expected experience

$ 88,879 $ 139,191

Changes of Assumptions 4,436,110 -

Net difference between projected and actual earnings on pension plan investments

- 1,309,664

Changes in proportion and differences between Employer contributions and proportionate share of contributions

82,077 839,813

Employer contributions subsequent to the measurement date

1,120,788 -

Total 5,727,854 2,288.668

Contributions subsequent to the measurement date reported as deferred outflows of resources related to pensions resulting from employer contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ending June 30, 2020. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows:


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Deferred (Inflow) and Deferred Outflow of Resources by Year (To Be Recognized in Future Pension Expenses)

2019 926,721

2020 618,444

2021 510,595

2022 262,638

Actuarial Assumptions Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations.

Additional information as of the latest actuarial valuation follows:

Summary of Actuarial Assumptions

Valuation Date:

Actuarial Cost Method:

September 30, 2017

Entry Age, Normal

CONSTANTINE PUBLIC SCHOOLS CONSTANTINE ......Constantine Public Schools Administration’s Discussion and Analysis For the Fiscal Year Ended June 30, 2019 - 3 - Constantine Public

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