Hays Consolidated Independent School District...Hays County (the County), created in 1843, is located in south central Texas and is a component of the Austin Metropolitan Statistical

Hays Consolidated Independent

School District

Kyle, Texas

Comprehensive

Annual Financial Report

For the Fiscal year Ended August 31, 2009

Prepared by the Financial Services Department

Carter Scherff, CPA Deputy Superintendent Annette Folmar, CPA Executive Director of Finance Janet Meyer, CPA Assistant Director of Finance

HAYS CONSOLIDATED INDEPENDENT SCHOOL DISTRICT COMPREHENSIVE ANNUAL FINANCIAL REPORT

FOR THE YEAR ENDED AUGUST 31, 2009

TABLE OF CONTENTS Exhibit Page INTRODUCTORY SECTION Letter of Transmittal i Certificate of Achievement iv Administrative Organizational Chart v List of Elected and Appointed Officials vi Certificate of Board vii FINANCIAL SECTION Independent Auditors’ Report 1 Management’s Discussion and Analysis 3 Schedule Basic Financial Statements: Government-wide Financial Statements: A-1 Statement of Net Assets 9 B-1 Statement of Activities 10 Governmental Fund Financial Statements: C-1 Balance Sheet – Governmental Funds 12 C-2 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Assets 14 C-3 Statement of Revenues, Expenditures, and Changes in Fund Balance – Governmental Funds 15 C-4 Reconciliation of the Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances to the Statement of Activities 17 Proprietary Fund Financial Statements: D-1 Statement of Net Assets – Proprietary Funds 18 D-2 Statement of Revenues, Expenses, and Changes in Fund Net Assets – Proprietary Funds 19 D-3 Statement of Cash Flows – Proprietary Funds 20

Fiduciary Fund Financial Statements: E-1 Statement of Fiduciary Net Assets 21 E-2 Statement of Changes in Fiduciary Fund Net Assets 22 Notes to the Basic Financial Statements 23 Required Supplementary Information: G-1 Schedule of Revenues, Expenditures and Changes in Fund Balance Budget and Actual – General Fund 45 Notes to Required Supplementary Information 46 Combining Statements: Nonmajor Governmental Funds: H-1 Combining Balance Sheet 47 H-2 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances 54

Internal Service Funds: H-6 Combining Statement of Net Assets 61 H-7 Combining Statement of Revenues, Expenses, and Changes in Fund Net Assets 62 H-8 Combining Statement of Cash Flows 63 Nonmajor Enterprise Funds: H-6 Combining Statement of Net Assets 64 H-7 Combining Statement of Revenues, Expenses, and Changes in Fund Net Assets 66 H-8 Combining Statement of Cash Flows 68

HAYS CONSOLIDATED INDEPENDENT SCHOOL DISTRICT COMPREHENSIVE ANNUAL FINANCIAL REPORT

FOR THE YEAR ENDED AUGUST 31, 2009 (Continued)

TABLE OF CONTENTS Schedule Page Required TEA Schedules: J-1 Schedule of Delinquent Taxes Receivable 70 J-2 Schedule of Expenditures for Computations of Indirect Cost for 2010 – 2011 72 J-4 Schedule of Revenues, Expenditures and Changes in Fund Balance Budget and Actual – Child Nutrition Program 73 J-5 Schedule of Revenues, Expenditures and Changes in Fund Balance Budget and Actual – Debt Service Fund 74 STATISTICAL SECTION (Unaudited) Government-wide Information: 1 Net Assets by Component 75 2 Expenses, Program Revenues and Net (Expense)/Revenue 77 3 General Revenues and Total Change in Net Assets 79 Fund Information: 4 Fund Balances – Governmental Funds 81 5 Changes in Fund Balances – Governmental Funds 83 6 Total Assessed and Net Taxable Value of Taxable Property 89 7 Property Tax Rates – Direct and Major Overlapping Governments 90 8 Principal Property Taxpayers 92 9 Property Tax Levies and Collections 93 10 Outstanding Debt by Type 94 11 Ratio of Net General Bonded Debt to Taxable Assessed Valuation and Net Bonded Debt per Capita 95 12 Estimated General Obligation Overlapping Debt Statement 97 13 Demographic and Economic Statistics 98 14 Major Employers 99 15 Full-time Equivalent District Employees by Type 100 16 Teacher Data 101 17 Expenditures, Enrollment and per Pupil Cost 103 18 Expenses of Governmental Activities, Enrollment and Per Pupil Cost 104 19 School Building Information 105 20 Fund Balance and Cash Flow Calculation Worksheet (Unaudited) 106 Exhibit FEDERAL AWARDS SECTION 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 107 Report on Compliance with Requirements Applicable to Each Major Program and Internal Control Over Compliance in Accordance with OMB Circular A-133 109 K-1 Schedule of Expenditures of Federal Awards 111 Notes to Schedule of Expenditures of Federal Awards 113 Schedule of Findings and Questioned Costs 114 Summary Schedule of Prior Audit Findings 115

INTRODUCTORY SECTION

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January 19, 2010 Mrs. Patricia J. Wood, President Board of Trustees Hays Consolidated Independent School District 21003 IH 35 Kyle, TX 78640 Dear Mrs. Wood and Members of the Board: The comprehensive annual financial report of the Hays Consolidated Independent School District (the District) is submitted for the year ended August 31, 2009. The District’s Financial Services Department prepared the report last year, subsequently earning the Certificate of Achievement for Excellence in Financial Reporting from the Government Finance Officers Association (GFOA). Responsibility for both the accuracy of the presented data and the completeness and fairness of the presentation, including all disclosures, rests with the District. In our opinion, we believe the data, as presented, is accurate in all material aspects; that they are presented in a manner designed to fairly set forth the financial position and results of operations of the District as measured by the financial activity of its various funds; and that all disclosures necessary to enable the reader to gain an understanding of the District’s financial position have been included in this report. The comprehensive annual financial report is presented in three sections: Introductory, Financial and Statistical. The Introductory section includes this transmittal letter, the District’s organizational chart and a list of principal officials. The management’s discussion and analysis in the Financial section provides an overview of the financial position and results of operations for the year. The Financial section also includes the basic financial statements, the notes to the financial statements and other supplementary information. The Statistical section includes selected financial and demographic information, generally presented on a multi-year basis. The financial statements of the District have been audited by Pattillo, Brown and Hill, L.L.P., a firm of licensed certified public accountants. The goal of the independent audit is to provide reasonable assurance that the financial statements of the District are free of material misstatement. The independent audit involves examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; assessing the accounting principles used and significant estimates made by management; and evaluating the overall financial statement presentation. The independent auditors concluded, based upon the audit, that there was a reasonable basis for rendering an unqualified opinion that the District’s financial statements for the fiscal year ended August 31, 2009, and are fairly presented in conformity with GAAP. The independent auditors’ report is presented as the first component of the Financial section of this report. THE REPORTING ENTITY AND ITS SERVICES Hays Consolidated Independent School District was formed on May 6, 1967, through the consolidation of Kyle Independent School District, Buda County-Line Independent School District and Wimberley Rural High School District. The Wimberley School District withdrew from the consolidation in September 1986 and created Wimberley Independent School District. The District comprises 212 square miles of land, or approximately half of the total area of Hays County, with small portions extending into Travis and Caldwell Counties. The District includes the cities of Kyle and Buda, both of which are located within Hays County. The cities of Kyle and Buda are located on Interstate Highway 35 between Austin and San Marcos. The District also includes the cities of Uhland, Niederwald and Driftwood.

21003 N IH 35, Kyle, Texas 78640Phone (512) 268-2141

Fax (512) 268-2147

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The District is governed by a seven member Board of Trustees (the Board). The Trustees serve three-year staggered terms with at-large elections being held every year. Monthly meetings of the Board are posted and advertised as prescribed under state law so that the Board may fulfill its charge to the students, parents, staff, and taxpayers of the District. Special meetings or study sessions are scheduled as needed. The Board has final control over all school matters except as limited by state law. The Board of Trustees adopted its mission statement, beliefs and goals and set high standards for the students and staff of the District. They are reviewed and revised by the Board periodically. Mission Statement – Hays CISD prepares students to become responsible, productive, and informed citizens. Beliefs – We believe:

• In the total development and uniqueness of each student. • Each student can achieve to higher levels when challenged and motivated. • Each student can be successful if given appropriate amounts of time and a variety of teaching strategies

to match individual student’s learning styles. • Learning is a lifelong process. • Learning occurs best in a safe, supportive environment.

Goals for 2009-2010 – The District will:

• Commission a study team to review Academy High School programs and services and formulate recommendations to the superintendent.

• Identify and encourage areas for collaboration – in particular student-related and community service – between Hays High and Lehman High schools.

• Identify, encourage and educate new community leadership throughout the District. The District provides a well-rounded program of public education for children from pre-kindergarten through grade 12. In addition to basic instructional programs, the District offers special education, gifted and talented, Bilingual/ESL, remedial, college preparatory, and career and technical programs. The District is fully accredited by the Texas Education Agency (TEA). The District operates 11 elementary schools, 5 middle schools, 2 traditional high schools, 1 alternative education program high school, and 1 disciplinary alternative education program campus. Enrollment for the 2008-09 year was 13,881, an increase of approximately 6.9% over the previous year. In May 2008, the Hays CISD voters approved a bond package of $86.7 million to address enrollment growth. The package included two new elementary schools, a new middle school and District-wide improvements. Simon Middle School opened in August 2009. Construction of both Ralph Pfluger Elementary School and Carpenter Hill Elementary School will be completed in the summer of 2010. ECONOMIC INFORMATION Hays County (the County), created in 1843, is located in south central Texas and is a component of the Austin Metropolitan Statistical Area. Hays County is traversed by Interstate Highway 35, U. S. Highway 290, State Highways 21 and 123 and 10 farm-to-market roads with the City of San Marcos as the county seat. The 2000 census was 97,589, increasing 31,975, or 48.73% since 1990. The Hays Consolidated Independent School District covers land which is considered ranching and recreational area. Residential and resort development has recently begun to increase in the northern parts of the District. The District is centered over the City of Kyle, a local retail and shipping center, with a 2000 census population of 5,314, increasing 3,089, or 138.83% since 1990. Kyle and Buda are located on Interstate Highway 35 between San Marcos and Austin.

HAYS CONSOLIDATED INDEPENDENT SCHOOL DISTRICT Administrative Organizational Chart

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Students Parents Citizens

Board of Trustees

Superintendent

Assistant Superintendent

Human Resources

Assistant Superintendent Info., Com., Student Svcs

Deputy Superintendent

Director Student Services

Director Health Services

Executive Director Finance

Executive Director Maintenance and

Operations

Director New Construction

Executive Director Technology

Executive Director Human Resources

Director Transportation

Director Maintenance

Director Operations

Director Child Nutrition

Director Purchasing

Assistant Superintendent

Curric. & Instruction

Principals

Director Community Partnerships

Executive Director Special Education

Executive Director Curriculum &

Instruction

Executive Director Assessment

Director Career & College Readiness

Director Bilingual/ESL

Director Library/ Media Services

Athletic & Music Directors

Director Professional Development

Director Management

Information Systems

Director Performing Arts Center

Director Elementary Academic Services /

RTI

Director Secondary Academic Services

Director Federal Programs

Director Network Services

Director Instructional Technology

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HAYS CONSOLIDATED INDEPENDENT SCHOOL DISTRICT School Board and Administrators

Board of Trustees Patti Wood President Mark Jones Vice President Bert Bronaugh Secretary Melissa Villarreal Trustee Willie Tenorio Trustee Ralph Pfluger Trustee Chip DuPont Trustee

Administration Jeremy Lyon, Ph. D. Superintendent of Schools Carter Scherff Deputy Superintendent Julie Jerome Assistant Superintendent Carolyn Hitt Assistant Superintendent Kimbroly Pool, Ed. D. Assistant Superintendent

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CERTIFICATE OF BOARD

Hays Consolidated Independent School District Hays 105906

Name of School District County Co.-Dist. Number We, the undersigned, certify that the attached annual financial reports of the above-named school district were reviewed and

(check one) _____ approved _____ disapproved for the year ended August 31, 2009, at a meeting of the Board of Trustees of

such school district on the 25th day of January, 2010.

Signature of Board Secretary Signature of Board President

If the Board of Trustees disapproved of the auditors’ report, the reason(s) for disapproving it is (are): (attach list as necessary)

FINANCIAL SECTION

INDEPENDENT AUDITORS’ REPORT

Board of Trustees of Hays Consolidated Independent School District Kyle, Texas We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of Hays Consolidated Independent School District (the “District”), as of and for the year ended August 31, 2009, which collectively comprise the District’s basic financial statements as listed in the table of contents. These financial statements are the responsibility of the District’s management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of Hays Consolidated Independent School District as of August 31, 2009, and the respective changes in financial position, and cash flows, where applicable, thereof, for the year then ended in conformity with accounting principles generally accepted in the United States of America.

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401 WEST HIGHWAY 6 g P. O. BOX 20725 g WACO, TX 76702-0725 g (254) 772-4901g FAX: (254) 772-4920 g www.pbhcpa.com AFFILIATE OFFICES: BROWNSVILLE, TX (956) 544-7778 g HILLSBORO, TX (254) 582-2583

TEMPLE, TX (254) 791-3460 g WHITNEY, TX (254) 694-4600 g ALBUQUERQUE, NM (505) 266-5904

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In accordance with Government Auditing Standards, we have also issued our report dated January 19, 2010, on our consideration of the District’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit.

The Management’s Discussion and Analysis and budgetary comparison information on pages 3

through 8 and 45 through 46, are not a required part of the basic financial statements but are supplementary information required by accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it.

Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the District’s basic financial statements. The introductory section, combining and individual nonmajor fund financial statements, TEA schedules, budgetary comparison schedules and statistical section are presented for the purposes of additional analysis and are not a required part of the basic financial statements. The accompanying Schedule of Expenditures of Federal Awards is presented for purposes of additional analysis as required by U. S. Office of Management and Budget Circular A-133, Audits of States, Local Governments and Nonprofit Organizations, and is also not a required part of the basic financial statements of Hays Consolidated Independent School District. The combining and individual nonmajor fund financial statements, required TEA schedules, budgetary comparison schedules and accompanying Schedule of Expenditures of Federal Awards have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole. The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we express no opinion on it.

January 19, 2010

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HAYS CONSOLIDATED INDEPENDENT SCHOOL DISTRICT

MANAGEMENT’S DISCUSSION AND ANALYSIS

AUGUST 31, 2009 As Management of the Hays Consolidated Independent School District, we offer readers of the District’s financial statements this narrative overview and analysis of the financial activities of the Hays Consolidated Independent School District for the fiscal year ended August 31, 2009. We encourage readers to consider the information presented here in conjunction with the District’s financial statements, which follow this section. FINANCIAL HIGHLIGHTS

• The District held a bond election in May 2008, at which voters authorized the issuance of $86.7 million dollars of unlimited tax school building bonds. The bond package included two elementary schools, a new middle school, new buses and new technology, improvements to existing campuses, middle school track improvements, the purchase of land and infrastructure for future sites, and parent drop off and parking improvements at several campuses.

• A product of the 2008 bond program, Simon Middle School opened in August 2009. Two additional

schools, Ralph Pfluger Elementary and Carpenter Hill Elementary, will open in August 2010. • The District maintained its property tax rate of $1.4613 for 2009-10. The tax rate for Hays CISD has

remained constant since 2007-08. Prior to that, the 2006-07 total tax rate was $1.7780 and the 2005-06 rate was $1.8763.

• At the end of the current fiscal year, fund balance for the general fund was $22,098,480, with

$21,068,679 undesignated, unreserved. Undesignated, unreserved fund balance represents 21 percent of total general fund expenditures.

• For the seventh year in a row, Hays CISD earned a rating of Superior Achievement by the Texas

Education Agency under its Financial Integrity Rating System of Texas (FIR$T). Superior Achievement is the highest rating possible and is based on 24 criteria used to determine the overall financial health and stability of school districts throughout Texas.

OVERVIEW OF THE FINANCIAL STATEMENTS This discussion and analysis is intended to serve as an introduction to the Hays Consolidated Independent School District’s basic financial statements. The District’s basic financial statements comprise three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other required supplementary information in addition to the basic financial statements themselves. Government-wide financial statements. The government-wide financial statements are designed to provide readers with a broad overview of the Hays Consolidated Independent School District’s finances in a manner similar to a private-sector business. The statement of net assets presents information on all of the District’s assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of the District is improving or deteriorating. The statement of activities presents information showing how the government’s net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g. uncollected taxes).

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Both of the government-wide financial statements distinguish functions of the District that are principally supported by taxes and intergovernmental revenues (governmental activities). The governmental activities of the District are designed to educate and benefit the children of the community. Functional codes for Texas school districts are uniform throughout the state. They include instruction and instructional-related services, instructional and school leadership, support services for students, administrative support services, non-student based support services, ancillary services, debt service and capital outlay for facilities and construction. Fund financial statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The Hays Consolidated Independent School District, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. The fund financial statements provide more detailed information about the District’s most significant funds and not the District as a whole.

• Some funds are required by State law and/or bond covenants. • Other funds may be established by the Board to control and manage money for particular purposes or

to show that it is properly using certain taxes or grants. All of the funds of the Hays Consolidated Independent School District can be divided into three categories: governmental funds, proprietary funds, and fiduciary funds. Governmental funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of expendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government’s near-term financing requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government’s near-term financial decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balance provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The District maintains individual governmental funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balances for the general fund, the debt service fund, and the capital projects fund that are considered to be major funds. Data from the other individual governmental funds are combined into a single, aggregated presentation. Individual fund data for each of these non-major governmental funds is provided in the form of combining statements elsewhere in this report. Proprietary funds. Proprietary funds provide the same type of information as the government-wide financial statements, only in more detail. There are two proprietary fund types. Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements. The District uses enterprise funds for childcare operations and health clinic services. The second type of proprietary fund is the internal service fund. Internal service funds are an accounting device used to accumulate and allocate costs internally among the various functions. The District uses internal service funds for printing services and to report activities outstanding from its previously self-funded workers’ compensation program. Fiduciary funds. Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government-wide financial statement because the resources of those funds are not available to support the District’s own programs. The District is the trustee, or fiduciary, for these funds and is responsible for ensuring that the assets reported in these funds are used for their intended purpose. All of the District’s fiduciary activities are reported in a separate statement of fiduciary net assets. These activities are excluded from the District’s government-wide financial statements because the District cannot use these assets to finance its operations. Notes to the financial statements. The notes provide additional information that is essential to a complete understanding of the data provided in the government-wide and fund financial statements.

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GOVERNMENT-WIDE FINANCIAL ANALYSIS As noted earlier, net assets may serve over time as a useful indicator of a government’s financial position. In the case of the Hays Consolidated Independent School District, assets exceeded liabilities by $14,216,750 as of August 31, 2009. The District’s total net assets increased $39,831 over the prior year.

2009 2008 2009 2008 2009 2008

Current and other assets 106,322,420$ 138,530,414$ 221,655$ 182,205$ 106,544,075$ 138,712,619$ Capital assets 271,853,374 245,698,373 - - 271,853,374 245,698,373

Total assets 378,175,794 384,228,787 221,655 182,205 378,397,449 384,410,992

Long-term liabilities 335,864,777 343,653,348 - - 335,864,777 343,653,348 Other liabilities 28,278,427 26,540,950 37,495 39,775 28,315,922 26,580,725 Total liabilities 364,143,204 370,194,298 37,495 39,775 364,180,699 370,234,073

Net assets: Invested in capital assets, net of related debt 10,685,595 2,307,570 - - 10,685,595 2,307,570 Restricted 573,209 199,357 - - 573,209 199,357 Unrestricted 2,773,786 11,527,562 184,160 142,430 2,957,946 11,669,992

Total net assets 14,032,590$ 14,034,489$ 184,160$ 142,430$ 14,216,750$ 14,176,919$

Governmental Activities Business-type Activities

TABLE 1


NET ASSETS

Totals

A portion of the District’s net assets reflects its investment in capital assets (e.g. land, buildings, machinery, and equipment) less any related debt used to acquire those assets that are still outstanding. The District uses these capital assets to provide services to students; consequently, these assets are not available for future spending. Although the District’s investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. An additional portion of the District’s net assets represents resources that are subject to external restrictions on how they may be used (e.g. debt service). This surplus is not an indication that the District has significant resources available to meet financial obligations next year, but rather the result of having long-term commitments that are less than currently available resources. Governmental activities. Program and general revenues for the year totaled $140,742,439, a 6% increase over the prior year. Expenses for the year totaled $140,702,608 which is an increase of 9% from the prior year. Key elements of the increase or decrease are shown in the following table:

2009 2008 2009 2008 2009 2008

REVENUES Program revenues: Charges for services 3,636,000$ 3,148,652$ 1,071,202$ 810,508$ 4,707,202$ 3,959,160$ Operating grants and contributions 15,048,930 13,761,277 - - 15,048,930 13,761,277 General revenues: Maintenance and operations taxes 35,917,979 32,024,233 - - 35,917,979 32,024,233 Debt service taxes 14,566,881 12,939,907 - - 14,566,881 12,939,907 Grants and contributions not restricted 68,430,655 67,548,779 - - 68,430,655 67,548,779 Investment earnings 1,408,635 2,808,175 - - 1,408,635 2,808,175 Miscellaneous local and intermediate 662,157 206,440 - - 662,157 206,440

Total revenues 139,671,237 132,437,463 1,071,202 810,508 140,742,439 133,247,971

EXPENSES Instruction 70,698,911 65,519,854 - - 70,698,911 65,519,854 Instructional resources and media services 2,405,631 1,945,468 - - 2,405,631 1,945,468 Curriculum and staff development 1,480,294 1,631,962 - - 1,480,294 1,631,962 Instructional leadership 1,206,655 1,021,230 - - 1,206,655 1,021,230 School leadership 5,881,895 5,597,283 - - 5,881,895 5,597,283 Guidance, counseling and evaluation services 3,591,055 3,369,494 - - 3,591,055 3,369,494 Social work services 276,329 143,600 - - 276,329 143,600 Health services 1,472,429 1,392,086 26,325 22,638 1,498,754 1,414,724 Student (pupil) transportation 7,774,751 8,185,517 - - 7,774,751 8,185,517 Food services 5,489,368 5,398,699 - - 5,489,368 5,398,699 Co-curricular/extracurricular activities 2,884,748 2,674,290 - - 2,884,748 2,674,290 General administration 2,796,386 2,991,317 - - 2,796,386 2,991,317 Plant maintenance and operations 12,488,161 12,200,011 - - 12,488,161 12,200,011 Security and monitoring services 939,220 846,175 - - 939,220 846,175 Data processing services 2,231,685 1,791,751 - - 2,231,685 1,791,751 Community services 421,358 472,218 - - 421,358 472,218 Debt service - interest and fees 16,953,909 12,853,787 - - 16,953,909 12,853,787 Facilities acquisition and construction - 3,369 - - - 3,369 Payments to fiscal agent/SSA 166,125 115,285 - - 166,125 115,285 Other intergovernmental charges 514,226 - - - 514,226 - Childcare services - - 1,003,147 760,167 1,003,147 760,167

Total expenses 139,673,136 128,153,396 1,029,472 782,805 140,702,608 128,936,201

INCREASE (DECREASE) IN NET ASSETS 1,899)( 4,284,067 41,730 27,703 39,831 4,311,770

NET ASSETS, BEGINNING 14,034,489 9,750,422 142,430 114,727 14,176,919 9,865,149

NET ASSETS, ENDING 14,032,590$ 14,034,489$ 184,160$ 142,430$ 14,216,750$ 14,176,919$

Governmental Activities Business-type Activities

TABLE 2


CHANGES IN NET ASSETS

Totals

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Property taxes, including penalties and interest, increased 12% and accounted for 36% of total 2009 revenues. This revenue increase was the result of additional property values related to new businesses and residential construction. Business-type Activities. Revenues of the District’s business-type activities represent $1,003,147 from childcare operations at District campuses and $22,638 from health clinic operations. FINANCIAL ANALYSIS OF THE DISTRICT’S FUNDS As noted earlier, the Hays Consolidated Independent School District uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements, bond covenants, and segregation for particular purposes. Governmental funds. The focus of the District’s governmental funds is to provide information on near-term inflows, outflows, and balances of expendable resources. Such information is useful in assessing the District’s financing requirements. In particular, unreserved, undesignated fund balance may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year. As of the end of the current fiscal year, the District’s governmental funds reported combined ending fund balances of $82,666,798. A complete listing of fund balances at August 31, 2009, is shown in the following table:

Fiscal YearFund Balances 2009 % of Total

General Fund, Unreserved/Designated 1,029,801$ 1.2%General Fund, Unreserved/Undesignated 21,068,679 25.5%Food Service, Unreserved/Undesignated 573,209 0.7%2008 Capital Projects, Unreserved/Undesignated 46,112,705 55.8%2006 Capital Projects, Unreserved/Undesignated 5,537,938 6.7%2004 Capital Projects, Unreserved/Undesignated 668,479 0.8%Local Capital Projects, Unreserved/Undesignated 1,098,870 1.3%Debt Service, Reserved for Retirement of Long-term Debt 6,577,117 8.0%

Total Fund Balances 82,666,798$ 100.0% The General Fund increased its total fund balance by $3,833,747. Expenditures were less than anticipated in the areas of payroll costs and supplies. The District’s total capital projects fund balance of $53,417,992 is primarily due to proceeds from the 2008 bond program. The bond package included two elementary schools, a new middle school, new buses and new technology, improvements to existing campuses, middle school track improvements, the purchase of land and infrastructure for future sites, and parent drop off and parking improvements at campuses. Simon Middle School was completed before the end of 2008-09 and construction is underway on the two new elementary schools that are due to open in August 2010. Construction fund balances remaining are due to ongoing construction projects, interest earnings, project savings, and retainage on completed projects. GENERAL FUND BUDGETARY HIGHLIGHTS Over the course of the year, actual expenditures were less than final budget amounts for the General Fund. Positive variances were widespread, including the functional categories of instruction, transportation, and maintenance. Also, resources available were $89,588 above the final budgeted amount.

8

CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets. At the end of 2009, the District had invested $271,853,374 in a broad range of capital assets, including land, equipment, buildings, and vehicles. This amount represents a net increase (including depreciation, additions and deductions) of $26,155,001 over last year. A product of the 2008 bond program, Simon Middle School opened in August 2009. Two additional schools, Ralph Pfluger Elementary and Carpenter Hill Elementary, will open in August 2010. Additional information on the District’s capital assets can be found in Note III, D on pages 34 and 35 of this report. Long-term Debt. At year-end the District has $340,451,123 in bonds outstanding. Additional information about the District’s debt is presented in Note III, E through I on pages 35 through 40 of this report. The Hays Consolidated Independent School District maintains an “AAA” rating from Standard & Poor’s and Fitch for general obligation debt based upon the guarantee from the State of Texas Permanent School Fund (PSF). On July 8, 2008, Fitch Ratings upgraded the underlying debt rating of the District from “A” to “A+.” On July 11, 2008, Standard & Poor’s Ratings Services upgraded the underlying debt rating of the District from “A” to “A+.” ECONOMIC FACTORS AND NEXT YEAR’S BUDGETS AND RATES

• The District is in the process of developing a strategic plan for all areas of operations that will guide the allocation of resources for the next five years and beyond.

• The District’s 2009-10 enrollment for budget purposes was 14,542, an increase of 4.8% from 2008-09.

Enrollment for 2009-10 was 14,588 on January 11, 2010. • The 2009-10 budget addressed Board priorities for employee compensation, funding the needs

associated with the District’s growth, the opening of Simon Middle School. The budget also included funding for expansion of high school career and technical course offerings.

• The District’s 2009-10 total tax rate remained unchanged at $1.4613 per $100/valuation, with a

Maintenance and Operations tax of $1.04 and Interest and Sinking of $0.4213. The 2006 Special Session of the Texas Legislature mandated a compression of the local maintenance tax rate to $1.04. In 2006-07, an additional four cents was added after compression to maximize the District’s Tier II funding from the state.

The largest increases in the 2009-10 budget were for additional teachers to address enrollment growth, compensation increases for all employees, and opening of a new school. If budget estimates are realized, the District’s undesignated, unreserved general fund balance is not expected to change significantly by the close of 2009-10. CONTACTING THE DISTRICT’S FINANCIAL MANAGEMENT This financial report is designed to provide our citizens, taxpayers, customers, and investors and creditors with a general overview of the District’s finances and to demonstrate the District’s accountability for the money it receives. If you have questions about this report or need additional financial information, contact the District’s Financial Services Department at (512) 268-2141, or log on to www.hayscisd.net.

BASIC FINANCIAL STATEMENTS

EXHIBIT A-1HAYS CONSOLIDATED INDEPENDENT SCHOOL DISTRICT

STATEMENT OF NET ASSETSAUGUST 31, 2009

1 2 3

ControlData

CodesGovernmental

Activities ActivitiesType

Business

Total

Primary Government

ASSETS188,273 297,270 485,543 Cash and Cash Equivalents $ $ $1110

- 99,073,160 99,073,160 Current Investments1120 - 2,205,208 2,205,208 Property Taxes Receivable (Delinquent)1220 - (663,570) (663,570)Allowance for Uncollectible Taxes1230 - 3,090,437 3,090,437 Due from Other Governments1240 - 53,142 53,142 Accrued Interest1250

33,382 12,239 45,621 Other Receivables, net1290 - 130,519 130,519 Deferred Expenses1410 - 2,124,015 2,124,015 Capitalized Bond and Other Debt Issuance Costs1420

Capital Assets: - 16,034,790 16,034,790 Land1510 - 238,057,618 238,057,618 Buildings, Net1520 - 10,277,425 10,277,425 Furniture and Equipment, Net1530 - 7,483,541 7,483,541 Construction in Progress1580

Total Assets1000 378,175,794 221,655 378,397,449

LIABILITIES4,115 6,534,290 6,538,405 Accounts Payable2110 - 642,673 642,673 Interest Payable2140 - 944,081 944,081 Payroll Deductions & Withholdings2150

33,380 3,468,466 3,501,846 Accrued Wages Payable2160 - 8,789,648 8,789,648 Due to Other Governments2180 - 201,981 201,981 Accrued Expenses2200 - 113,965 113,965 Deferred Revenues2300

Noncurrent Liabilities - 7,583,323 7,583,323 Due Within One Year2501 - 335,864,777 335,864,777 Due in More Than One Year2502

Total Liabilities2000 364,143,204 37,495 364,180,699

NET ASSETS - 10,685,595 10,685,595 Invested in Capital Assets, Net of Related Debt3200 - 573,209 573,209 Restricted for Federal and State Programs3820

184,160 2,773,786 2,957,946 Unrestricted Net Assets3900

Total Net Assets3000 14,032,590 184,160 14,216,750 $ $ $

9

The notes to the financial statements are an integral part of this statement.

HAYS CONSOLIDATED INDEPENDENT SCHOOL DISTRICTSTATEMENT OF ACTIVITIES


ControlData

Codes Expenses ServicesCharges for

ContributionsGrants andOperating

Program Revenues431

Primary Government:GOVERNMENTAL ACTIVITIES:

806,242 70,698,911 8,699,987 Instruction $ $ $11 - 2,405,631 80,499 Instructional Resources and Media Services12 - 1,480,294 263,982 Curriculum and Instructional Staff Development13 - 1,206,655 235,037 Instructional Leadership21 - 5,881,895 285,091 School Leadership23 - 3,591,055 417,007 Guidance, Counseling and Evaluation Services31 - 276,329 14,281 Social Work Services32 - 1,472,429 69,319 Health Services33 - 7,774,751 269,563 Student (Pupil) Transportation34

2,354,933 5,489,368 3,429,927 Food Services35274,927 2,884,748 84,664 Extracurricular Activities36

- 2,796,386 94,725 General Administration41199,898 12,488,161 321,925 Plant Maintenance and Operations51

- 939,220 11,029 Security and Monitoring Services52 - 2,231,685 483,202 Data Processing Services53 - 421,358 256,575 Community Services61 - 16,943,725 - Debt Service - Interest on Long Term Debt72 - 10,184 - Debt Service - Bond Issuance Cost and Fees73 - 166,125 32,119 Payments to Fiscal Agent/Member Districts of SSA93 - 514,226 - Other Intergovernmental Charges99

139,673,136 3,636,000 15,048,930 [TG] Total Governmental Activities:

BUSINESS-TYPE ACTIVITIES:72,827 77,656 - Childcare - KES01

254,751 269,734 - Childcare - BES0260,732 55,444 - Childcare - TES0387,616 76,622 - Childcare - SHES04

109,123 99,832 - Childcare - NES06156,853 138,598 - Childcare - EGES07133,650 134,401 - Childcare - FES08

26,345 26,325 - School Based Health Clinic09169,305 150,860 - All Remaining EF Funds Combined10

1,029,472 1,071,202 - [TB] Total Business-Type Activities:

[TP] TOTAL PRIMARY GOVERNMENT: 140,702,608 4,707,202 15,048,930 $ $ $DataControlCodes

General Revenues:Taxes:

Property Taxes, Levied for General PurposesMT Property Taxes, Levied for Debt ServiceDT

Grants and Contributions not RestrictedGCInvestment EarningsIEMiscellaneous Local and Intermediate RevenueMI

Total General RevenuesTR

Net Assets--BeginningChange in Net Assets

Net Assets--Ending

CNNB

NE

10The notes to the financial statements are an integral part of this statement.

EXHIBIT B-1

Net (Expense) Revenue and

Activities ActivitiesBusiness Type

TotalGovernmental

Changes in Net Assets6 7 8

Primary Government

- (61,192,682) (61,192,682)$ $ $ - (2,325,132) (2,325,132) - (1,216,312) (1,216,312) - (971,618) (971,618) - (5,596,804) (5,596,804) - (3,174,048) (3,174,048) - (262,048) (262,048) - (1,403,110) (1,403,110) - (7,505,188) (7,505,188) - 295,492 295,492 - (2,525,157) (2,525,157) - (2,701,661) (2,701,661) - (11,966,338) (11,966,338) - (928,191) (928,191) - (1,748,483) (1,748,483) - (164,783) (164,783) - (16,943,725) (16,943,725) - (10,184) (10,184) - (134,006) (134,006) - (514,226) (514,226)

(120,988,206) - (120,988,206)

(4,829) - (4,829)(14,983) - (14,983)

5,288 - 5,288 10,994 - 10,994

9,291 - 9,291 18,255 - 18,255

(751) - (751)20 - 20

18,445 - 18,445

- 41,730 41,730

(120,988,206) 41,730 (120,946,476)

- 35,917,979 35,917,979 - 14,566,881 14,566,881 - 68,430,655 68,430,655 - 1,408,635 1,408,635 - 662,157 662,157

120,986,307 - 120,986,307

(1,899)14,034,489

14,032,590 $

41,730 142,430

184,160 $

39,831 14,176,919

14,216,750 $

11

HAYS CONSOLIDATED INDEPENDENT SCHOOL DISTRICTBALANCE SHEET

GOVERNMENTAL FUNDSAUGUST 31, 2009

ControlData

Codes GeneralFund Fund

Debt Service50

ProjectsCapital

6010

ASSETS - - - Cash and Cash Equivalents $ $ $1110

6,434,622 36,362,653 48,064,452 Investments - Current1120674,682 1,530,526 - Property Taxes - Delinquent1220

(244,062)(419,508) - Allowance for Uncollectible Taxes (Credit)123035,505 2,220,000 - Due from Other Governments1240

- - 53,142 Accrued Interest125051,435 561,505 861,232 Due from Other Funds1260

- 12,239 - Other Receivables1290 - 129,268 - Deferred Expenditures1410

Total Assets1000 40,396,683 6,952,182 48,978,826 $ $ $

LIABILITIES AND FUND BALANCESLiabilities:

1,000 3,281,651 2,866,121 Accounts Payable $ $ $2110 - 944,081 - Payroll Deductions and Withholdings Payable2150 - 3,201,754 - Accrued Wages Payable2160 - 1,109,659 - Due to Other Funds2170 - 8,789,648 - Due to Other Governments2180 - - - Accrued Expenditures2200

374,065 971,410 - Deferred Revenues2300

Total Liabilities2000 18,298,203 375,065 2,866,121

Fund Balances:Unreserved Designated For:

- 1,029,801 - Other Purposes3590Unreserved and Undesignated:

- 21,068,679 - Reported in the General Fund3600 - - - Reported in Special Revenue Funds3610 - - 46,112,705 Reported in Capital Projects Funds3620

6,577,117 - - Reported in Debt Service Funds3640

Total Fund Balances3000 22,098,480 6,577,117 46,112,705

Total Liabilities and Fund Balances4000 40,396,683 6,952,182 48,978,826 $ $ $

12


EXHIBIT C-1

OtherFunds Funds

GovernmentalTotal

232,310 232,310 $ $8,106,333 98,968,060

- 2,205,208 - (663,570)

834,932 3,090,437 - 53,142

196,992 1,671,164 - 12,239

1,251 130,519

9,371,818 105,699,509 $ $

349,280 6,498,052 $ $ - 944,081

266,106 3,467,860 561,990 1,671,649

- 8,789,648 201,981 201,981 113,965 1,459,440

1,493,322 23,032,711

- 1,029,801

- 21,068,679 573,209 573,209

7,305,287 53,417,992 - 6,577,117

7,878,496 82,666,798

9,371,818 105,699,509 $ $

13

EXHIBIT C-2HAYS CONSOLIDATED INDEPENDENT SCHOOL DISTRICT

RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THESTATEMENT OF NET ASSETS

AUGUST 31, 2009

82,666,798 $Total Fund Balances - Governmental Funds

133,701 1 The District uses internal service funds to charge the costs of certain activities, such as The District uses internal service funds to charge the costs of certain activities, such as self-insurance and printing, to appropriate functions in other funds. The assets and The District uses internal service funds to charge the costs of certain activities, such as self-insurance and printing, to appropriate functions in other funds. The assets and liabilities of the internal service funds are included in governmental activities in the

The District uses internal service funds to charge the costs of certain activities, such as self-insurance and printing, to appropriate functions in other funds. The assets and liabilities of the internal service funds are included in governmental activities in the statement of net assets. The net effect of this consolidation is to increase net assets.

(103,822,956)2 Capital assets used in governmental activities are not financial resources and therefore Capital assets used in governmental activities are not financial resources and therefore are not reported in governmental funds. At the beginning of the year, the cost of these Capital assets used in governmental activities are not financial resources and therefore are not reported in governmental funds. At the beginning of the year, the cost of these assets was $313,829,078 and the accumulated depreciation was $68,130,705. In

Capital assets used in governmental activities are not financial resources and therefore are not reported in governmental funds. At the beginning of the year, the cost of these assets was $313,829,078 and the accumulated depreciation was $68,130,705. In addition, long-term liabilities, including bonds payable, are not due and payable in the current period, and, therefore are not reported as liabilities in the funds. The net effect

Capital assets used in governmental activities are not financial resources and therefore are not reported in governmental funds. At the beginning of the year, the cost of these assets was $313,829,078 and the accumulated depreciation was $68,130,705. In addition, long-term liabilities, including bonds payable, are not due and payable in the current period, and, therefore are not reported as liabilities in the funds. The net effect of including the beginning balances for capital assets (net of depreciation) and long-

Capital assets used in governmental activities are not financial resources and therefore are not reported in governmental funds. At the beginning of the year, the cost of these assets was $313,829,078 and the accumulated depreciation was $68,130,705. In addition, long-term liabilities, including bonds payable, are not due and payable in the current period, and, therefore are not reported as liabilities in the funds. The net effect of including the beginning balances for capital assets (net of depreciation) and long-term debt in the governmental activities is to decrease net assets.

42,691,930 3 Current year capital outlays and long-term debt principal payments are expenditures in Current year capital outlays and long-term debt principal payments are expenditures in the fund financial statements,but they should be shown as increases in capital assets Current year capital outlays and long-term debt principal payments are expenditures in the fund financial statements,but they should be shown as increases in capital assets and reductions in long-term debt in the government-wide financial statements. The net

Current year capital outlays and long-term debt principal payments are expenditures in the fund financial statements,but they should be shown as increases in capital assets and reductions in long-term debt in the government-wide financial statements. The net effect of including the 2009 capital outlays and debt principal payments is to increase net assets.

(8,982,358)4 The 2009 depreciation expense increases accumulated depreciation. The net effect of The 2009 depreciation expense increases accumulated depreciation. The net effect of the current year's depreciation is to decrease net assets.

1,345,475 5 Some of the District's taxes will be collected after year-end, but are not available to paySome of the District's taxes will be collected after year-end, but are not available to payfor the current period's expenditures, and therefore are reported as deferred revenues Some of the District's taxes will be collected after year-end, but are not available to payfor the current period's expenditures, and therefore are reported as deferred revenues in the funds The net effect of this recognition is to increase net assets.

14,032,590 $19 Net Assets of Governmental Activities


HAYS CONSOLIDATED INDEPENDENT SCHOOL DISTRICTSTATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE

GOVERNMENTAL FUNDSFOR THE YEAR ENDED AUGUST 31, 2009

ControlData

Codes FundGeneral

10

FundDebt Service

50

ProjectsCapital

60

REVENUES:38,292,030 14,811,648 775,924 Total Local and Intermediate Sources $ $ $570065,285,186 7,214,128 - State Program Revenues5800

315,415 - - Federal Program Revenues5900

Total Revenues5020 103,892,631 22,025,776 775,924

EXPENDITURES:Current:

57,337,894 - 648,369 Instruction00111,763,941 - 270,172 Instructional Resources and Media Services00121,231,265 - - Curriculum and Instructional Staff Development00131,025,566 - - Instructional Leadership00215,376,183 - 12,258 School Leadership00233,160,293 - - Guidance, Counseling and Evaluation Services0031

276,329 - - Social Work Services00321,384,662 - 3,039 Health Services00336,608,773 - 695,943 Student (Pupil) Transportation0034

- - 19,332 Food Services00352,757,495 - 25,197 Extracurricular Activities00362,785,878 - - General Administration0041

12,588,066 - 166,115 Facilities Maintenance and Operations0051884,595 - 10,584 Security and Monitoring Services0052

1,086,170 - 19,456 Data Processing Services0053174,554 - - Community Services0061

Debt Service:405,496 8,905,000 - Debt Service - Principal on Long Term Debt0071110,316 15,184,917 - Debt Service - Interest on Long Term Debt0072

9,184 1,000 - Debt Service - Bond Issuance Cost and Fees0073Capital Outlay:

- - 31,499,259 Facilities Acquisition and Construction0081Intergovernmental:

134,006 - - Payments to Fiscal Agent/Member Districts of SSA0093514,226 - - Other Intergovernmental Charges0099

Total Expenditures6030 99,614,892 24,090,917 33,369,724

1100 Excess (Deficiency) of Revenues Over (Under) Expenditures

4,277,739 (2,065,141) (32,593,800)

OTHER FINANCING SOURCES (USES): 58,334 - - Sale of Real and Personal Property7912

- - - Transfers In7915(502,326) - - Transfers Out (Use)8911

Total Other Financing Sources (Uses) 7080 (443,992) - -

1200 Net Change in Fund Balances 3,833,747 (2,065,141) (32,593,800)0100 Fund Balance - September 1 (Beginning) 18,264,733 8,642,258 78,706,505

3000 Fund Balance - August 31 (Ending) $ 22,098,480 $ 6,577,117 $ 46,112,705


EXHIBIT C-3

OtherFunds Funds

GovernmentalTotal

56,517,773 2,638,171 $ $74,656,232 2,156,918 8,816,719 8,501,304

13,296,393 139,990,724

64,163,970 6,177,707 2,231,125 197,012 1,453,841 222,576 1,205,730 180,164 5,414,333 25,892 3,402,453 242,160

276,329 - 1,387,725 24 8,436,839 1,132,123 5,490,931 5,471,599 2,783,128 436 2,785,878 -

12,783,620 29,439 898,504 3,325

1,981,694 876,068 421,358 246,804

9,310,496 - 15,295,233 -

10,184 -

33,031,823 1,532,564

166,125 32,119 514,226 -

16,370,012 173,445,545

(3,073,619) (33,454,821)

58,334 - 467,788 467,788

(502,326) -

467,788 23,796

(2,605,831) (33,431,025)10,484,327 116,097,823

$ 7,878,496 $ 82,666,798

16

EXHIBIT C-4HAYS CONSOLIDATED INDEPENDENT SCHOOL DISTRICT

RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES,AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES


(33,431,025)$Total Net Change in Fund Balances - Governmental Funds

39,041 The District uses internal service funds to charge the costs of certain activities, such as The District uses internal service funds to charge the costs of certain activities, such as self-insurance and printing, to appropriate functions in other funds. The net income The District uses internal service funds to charge the costs of certain activities, such as self-insurance and printing, to appropriate functions in other funds. The net income (loss) of internal service funds are reported with governmental activities. The net effect

The District uses internal service funds to charge the costs of certain activities, such as self-insurance and printing, to appropriate functions in other funds. The net income (loss) of internal service funds are reported with governmental activities. The net effect of this consolidation is to increase net assets.

42,691,930 Current year capital outlays and long-term debt principal payments are expenditures in Current year capital outlays and long-term debt principal payments are expenditures in the fund financial statements, but they should be shown as increases in capital assets and Current year capital outlays and long-term debt principal payments are expenditures in the fund financial statements, but they should be shown as increases in capital assets and reductions in long-term debt in the government-wide financial statements. The net effect

Current year capital outlays and long-term debt principal payments are expenditures in the fund financial statements, but they should be shown as increases in capital assets and reductions in long-term debt in the government-wide financial statements. The net effectof removing the 2009 capital outlays and debt principal payments is to increase net assets. The components of this difference are noted in Note II, A. on page 30.

(8,982,358)Depreciation is not recognized as an expense in governmental funds since it does not Depreciation is not recognized as an expense in governmental funds since it does not require the use of current financial resources. The net effect of the current year's Depreciation is not recognized as an expense in governmental funds since it does not require the use of current financial resources. The net effect of the current year's depreciation is to decrease net assets.

(319,487)Revenues in the statement of activities that do not provide current financial resources Revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the funds. The net effect of this recognition is to Revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the funds. The net effect of this recognition is to decrease net assets.

(1,899)$ Change in Net Assets of Governmental Activities


EXHIBIT D-1HAYS CONSOLIDATED INDEPENDENT SCHOOL DISTRICT

STATEMENT OF NET ASSETSPROPRIETARY FUNDS

AUGUST 31, 2009

TotalEnterprise

Funds Service FundsInternalTotal

Governmental Activities -

Business-Type Activities -

ASSETSCurrent Assets:

64,960 188,273 Cash and Cash Equivalents $ $105,100 - Investments - Current

485 - Due from Other Funds - 33,382 Other Receivables

Total Assets 221,655 170,545

LIABILITIESCurrent Liabilities:

36,238 4,115 Accounts Payable606 33,380 Accrued Wages Payable

Total Liabilities 37,495 36,844

NET ASSETS133,701 184,160 Unrestricted Net Assets

Total Net Assets 184,160 133,701 $ $


EXHIBIT D-2HAYS CONSOLIDATED INDEPENDENT SCHOOL DISTRICT

STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET ASSETSPROPRIETARY FUNDS


TotalEnterprise

Funds Service FundsInternalTotal

Business-Type Activities -


OPERATING REVENUES:37,994 1,071,202 Local and Intermediate Sources $ $

Total Operating Revenues 1,071,202 37,994

OPERATING EXPENSES:1,310 944,919 Payroll Costs

10,525 17,515 Professional and Contracted Services20,484 61,788 Supplies and Materials1,172 5,250 Other Operating Costs

Total Operating Expenses 1,029,472 33,491

Income Before Transfers 41,730 4,503

34,538 - Transfer InOperating Income

Total Net Assets - September 1 (Beginning)

Total Net Assets - August 31 (Ending)

41,730 142,430

$ 184,160

39,041 94,660

$ 133,701


EXHIBIT D-3HAYS CONSOLIDATED INDEPENDENT SCHOOL DISTRICTSTATEMENT OF CASH FLOWS

FOR THE YEAR ENDED AUGUST 31, 2009PROPRIETARY FUNDS

Total TotalEnterprise Internal

Funds Service Funds


Business-Type Activities

Cash Flows from Operating Activities:37,994 1,075,809 Cash Received from User Charges $ $

(702)(948,159)Cash Payments to Employees for Services(21,735) - Cash Payments for Insurance Claims(6,607)(86,726)Cash Payments for Suppliers

40,924 Net Cash Provided by Operating

8,950 Activities

Cash Flows from Non-Capital Financing Activities:34,538 - Operating Transfer Out

Cash Flows from Investing Activities:16,697 - Proceeds from Sale & Maturities of Securities

Net Increase in Cash and Cash Equivalents 40,924 60,185 Cash and Cash Equivalents at Beginning of the Year: 147,349 4,775

Cash and Cash Equivalents at the End of the Year: 188,273 64,960 $ $

Operating Income: $ $

Reconciliation of Operating Income to Net CashProvided by Operating Activities:

41,730 4,503

Assets and Liabilities:Effect of Increases and Decreases in Current

- 4,607 Decrease (increase) in Receivables(485) - Decrease (increase) in Inventories5,993 (600)Increase (decrease) in Accounts Payable - (79)Increase (decrease) in Payroll Deductions606 (1,601)Increase (decrease) in Accrued Wages Payable

(1,667)(3,133)Increase (decrease) in Due to Other FundsNet Cash Provided by Operating

8,950 Activities 40,924 $ $


EXHIBIT E-1HAYS CONSOLIDATED INDEPENDENT SCHOOL DISTRICT

STATEMENT OF FIDUCIARY NET ASSETSFIDUCIARY FUNDSAUGUST 31, 2009

PrivatePurpose

Trust Fund FundAgency

ASSETS1,078,683 24,240 Cash and Cash Equivalents $ $

Total Assets 24,240 1,078,683 $

LIABILITIES - 197 Accounts Payable $

1,078,683 - Due to Student Groups

Total Liabilities 197 1,078,683 $

NET ASSETS24,043 Unrestricted Net Assets

Total Net Assets 24,043 $

21


EXHIBIT E-2HAYS CONSOLIDATED INDEPENDENT SCHOOL DISTRICT

STATEMENT OF CHANGES IN FIDUCIARY FUND NET ASSETSFIDUCIARY FUNDS


PrivatePurpose

Trust Fund

ADDITIONS:51,850 Local and Intermediate Sources $

Total Additions 51,850

DEDUCTIONS:8,496 Payroll Costs

32,621 Professional and Contracted Services914 Supplies and Materials

7,718 Other Operating Costs

Total Deductions 49,749

Change in Net Assets

Total Net Assets - September 1 (Beginning)

Total Net Assets - August 31 (Ending)

2,101

21,942

$ 24,043


23


NOTES TO THE BASIC FINANCIAL STATEMENTS

AUGUST 31, 2009 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Hays Consolidated Independent School District (the “District”) is a public educational agency operating under the applicable laws and regulations of the State of Texas. It is governed by a seven-member Board of Trustees (the “Board”) elected by registered voters of the District. The District prepares its basic financial statements in conformity with generally accepted accounting principles and it complies with the requirements of the appropriate version of Texas Education Agency’s Financial Accountability System Resource Guide (the “Resource Guide”) and the requirements of contracts and grants of agencies from which it receives funds. A. Reporting Entity

The Board of Trustees (the “Board”) is elected by the public and it has the authority to make decisions, appoint administrators and managers, and significantly influence operations. It also has the primary accountability for fiscal matters. Therefore, the District is a financial reporting entity as defined by the Governmental Accounting Standards Board (“GASB”) in its Statement No. 14, “The Financial Reporting Entity.” There are no component units included within the reporting entity. The Hays Education Foundation (the “Foundation”), a not-for-profit entity which was organized to provide scholarship funds, is a “related organization” of the District as defined by Governmental Accounting Standards Board Statement No. 14. The members of the Board of the Foundation are appointed by an outside group.

B. Government-wide and Fund Financial Statements

The Statement of Net Assets and the Statement of Activities are government-wide financial statements. They report information on all of the Hays Consolidated Independent School District’s nonfiduciary activities with most of the interfund activities removed. Governmental activities include programs supported primarily by taxes, state foundation funds, grants and other intergovernmental revenues. Business-type activities include operations that rely to a significant extent on fees and charges for support.

(continued)

24

I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

B. Government-wide and Fund Financial Statements (Continued)

The Statement of Activities demonstrates how other people or entities that participate in programs the District operates have shared in the payment of the direct costs. The “charges for services” column includes payments made by parties that purchase, use, or directly benefit from goods or services provided by a given function or segment of the District. Examples include tuition paid by students not residing in the District, school lunch charges, etc. The “grants and contributions” column includes amounts paid by organizations outside the District to help meet the Secondary Education Act. If revenue is not program revenue, it is general revenue used to support all of the District’s functions. Taxes are always general revenues. Interfund activities between governmental funds and between governmental funds and proprietary funds appear as “due to/due from” on the governmental fund Balance Sheet and proprietary fund Statement of Net Assets and as “other resources and other uses” on the governmental fund Statement of Revenues, Expenditures and Changes in Fund Balance and on the proprietary fund Statement of Revenues, Expenses and Changes in Fund Net Assets. All interfund transactions between governmental funds and between governmental funds and internal service funds are eliminated on the government-wide statements. Interfund activities between governmental funds and enterprise funds remain on the government-wide statements and appear on the government-wide Statement of Net Assets as internal balances and on the Statement of Activities as interfund transfers. Interfund activities between governmental funds and fiduciary funds remain as “due to/due from” on the government-wide Statement of Activities. The fund financial statements provide reports on the financial condition and results of operations for three fund categories – governmental, proprietary and fiduciary. Since the resources in the fiduciary funds cannot be used for District operations, they are not included in the government-wide statements. The District considers some governmental funds major and reports their financial condition and results of operations in a separate column. Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses result from providing services and producing and delivering goods in connection with a proprietary fund’s principal ongoing operations. All other revenues and expenses are nonoperating.

C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation

The government-wide financial statements use the economic resources measurement focus and the accrual basis of accounting, as do the proprietary fund and fiduciary fund financial statements. 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 and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met.

(continued)

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C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation (Continued)

Governmental fund financial statements use the current financial resources measurement focus and the modified accrual basis of accounting. With this measurement focus, only current assets, current liabilities and fund balances are included on the balance sheet. Operating statements of these funds present net increases and decreases in current assets (i.e., revenue and other financing sources and expenditures and other financing uses).

The modified accrual basis of accounting recognizes revenue in the accounting period in which it becomes both measurable and available, and it recognizes expenditures in the accounting period in which the fund liability is incurred, if measurable, except for unmatured interest and principal on long-term debt, which is recognized when due. The expenditures related to certain compensated absences and claims and judgments are recognized when the obligations are expected to be liquidated with expendable available financial resources. The District considers all revenue available if it is collectible within 60 days after year-end. Revenue from local sources consists primarily of property taxes. Property tax revenue and revenue received from the state are recognized under the susceptible-to-accrual concept. Miscellaneous revenue is recorded as revenue when received in cash because it is generally not measurable until actually received. Investment earnings are recorded as earned, since they are both measurable and available.

Grant funds are considered to be earned to the extent of expenditures made under the provisions of the grant. Accordingly, when such funds are received, they are recorded as deferred revenue until related and authorized expenditures have been made. If balances have not been expended by the end of the project period, grantors sometimes require the District to refund all or part of the unused amount. Amounts reported as program revenues include 1) charges to customers or applicants for goods, services, or privileges provided, 2) operating grants and contributions, and 3) capital grants and contributions, including special assessments. Internally dedicated resources are reported as general revenues rather than as program revenues. Likewise, general revenues include all taxes. Proprietary funds distinguish operating revenues and expenses from non-operating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund’s principal ongoing operations. The principal operating revenues of the District’s enterprise funds and of the District’s internal service funds are charges to customers for daycare services. Operating expenses for enterprise funds and internal service funds include the cost of daycare services and administrative expenses. All revenues and expenses not meeting this definition are reported as non-operating revenues and expenses.

(continued)

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C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation (Continued)

The proprietary fund types and fiduciary funds are accounted for on a flow of economic resources measurement focus and utilize the accrual basis of accounting. This basis of accounting recognizes revenue in the accounting period in which it is earned and becomes measurable, and expenses in the accounting period in which they are incurred and become measurable. The District applies all GASB pronouncements, as well as the Financial Accounting Standards Board pronouncements issued on or before November 30, 1989, unless these pronouncements conflict or contradict GASB pronouncements. The District has elected not to follow subsequent private-sector guidance. With this measurement focus, all assets and all liabilities associated with the operation of these funds are included on the Statement of Net Assets. The fund equity is segregated into invested in capital assets net of related debt, restricted net assets, and unrestricted net assets.

When both restricted and unrestricted resources are available for use, it is the government’s policy to use restricted resources first, then unrestricted resources as they are needed.

D. Fund Accounting

The District reports the following major governmental funds:

The General Fund is the District’s primary operating fund. It accounts for all financial resources except those required to be accounted for in another fund. Debt Service Fund – The District accounts for resources accumulated and payments made for principal and interest on long-term general obligation debt of governmental funds in a Debt Service Fund.

Capital Projects Funds – The proceeds from long-term debt financing and revenue and expenditures related to authorized construction and other capital asset acquisitions are accounted for in a Capital Projects Fund.

The District has no major Enterprise Funds.

Additionally, the District reports the following fund types: Governmental Funds:

Special Revenue Funds – The District accounts for resources restricted to, or designated for, specific purposes by the District or a grantor in a Special Revenue Fund. Most federal and some state financial assistance is accounted for in a Special Revenue Fund, and sometimes unused balances must be returned to the grantor at the close of specified project periods.

(continued)

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D. Fund Accounting (Continued) Capital Projects Fund – The proceeds from long-term debt financing and revenue and expenditures related to authorized construction and other capital asset acquisitions are accounted for in a Capital Projects Fund.

Proprietary Funds:

Enterprise Funds – The District’s activities for which outside users are charged a fee roughly equal to the cost of providing the goods or services of those activities are accounted for in an Enterprise Fund. The District’s non-major Enterprise Funds consist of 11 Campus Childcare Funds, and one School Based Health Clinic.

Internal Service Fund – Revenue and expenses related to services provided to organizations inside the District on a cost reimbursement basis are accounted for in an Internal Service Fund. The District’s Internal Service Funds are the Workers’ Compensation Fund and Print Shop.

Fiduciary Funds:

Private Purpose Trust Fund – The District uses this fund to sponsor a training seminar for music instruction. Revenues for this fund are fees paid by seminar participants. Expenses associated with this conference are also paid out of this fund.

Agency Fund – The District accounts for resources held for others in a custodial capacity in an Agency Fund. The District’s Agency Fund is the Student Activity Fund.

E. Other Accounting Policies 1. The District’s cash and cash equivalents are considered to be cash on hand, demand

deposits and short-term investments with original maturities of three months or less from the date of acquisition. Investments for the District are reported at fair value.

2. For purposes of the statement of cash flows for proprietary and similar fund types, the

District considers highly liquid investments to be cash equivalents if they have a maturity of three months or less when purchased.

3. The District records purchases of supplies as expenditures. Supplies are used for almost

all functions of activity, while food commodities received from the Texas Department of Human Services are used only in the food service program. Although the food commodities are received at no cost, their fair market value is supplied by the Texas Department of Human Services and recorded as expenditures when received.

(continued)

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E. Other Accounting Policies (Continued)

4. In the government-wide financial statements, and proprietary fund types in the fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities, or proprietary fund type statement of net assets. Bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds using the effective interest method. Bonds payable are reported net of the applicable bond premium or discount. Bond issuance costs are reported as deferred charges and amortized over the term of the related debt.

5. It is the District’s policy to permit some employees to accumulate earned but unused

vacation and sick pay benefits. All vacation pay is accrued when incurred in the government-wide, proprietary, and fiduciary fund financial statements. A liability for these amounts is reported in governmental funds only if they have matured, for example, as a result of employee resignations and retirements.

6. Capital assets, which include land, buildings, furniture and equipment, are reported in the

applicable governmental or business-type activities columns in the government-wide financial statements. Capital assets are defined by the District as assets with an initial, individual cost of more than $5,000 and an estimated useful life in excess of two 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.

The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized. Major outlays for capital assets and improvements are capitalized as projects are constructed. Buildings, furniture and equipment of the District is depreciated using the straight-line method over the following estimated useful lives:

Assets Years

Buildings 39Building improvements 20Vehicles 10Office equipment 5 - 15Computer equipment 5

7. As of September 1, 2004, the District is no longer self-insured for its workers’

compensation insurance. All outstanding claims prior to the switch are handled by the District and are accounted for in the Workers’ Compensation Internal Service Fund.

The District also provides healthcare benefits to its employees under a healthcare insurance plan. The insurance is provided by a licensed insurer.

(continued)

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E. Other Accounting Policies (Continued)

8. In the fund financial statements, governmental funds report reservations of fund balance for amounts that are not available for appropriation or are legally restricted by outside parties for use for a specific purpose. Designations of fund balance represent tentative management plans that are subject to change. The remaining portions are unreserved.

9. When the District incurs an expense for which it may use either restricted or unrestricted

assets, it uses the restricted assets first unless unrestricted assets will have to be returned because they were not used.

10. The Data Control Codes refer to the account code structure prescribed by TEA in the

Financial Accountability System Resource Guide. Texas Education Agency requires school districts to display these codes in the financial statements filed with the Agency in order to insure accuracy in building a statewide database for policy development and funding plans.

11. Estimates – The preparation of financial statements in conformity with accounting

principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

The amount of state foundation revenue a school district earns for a year can and does vary until the time when final values for each of the factors in the formula become available. Availability can be as late as midway into the next fiscal year. It is at least reasonably possible that the foundation revenue estimates as of August 31, 2009, will change.

II. RECONCILIATION OF GOVERNMENT-WIDE AND FUND FINANCIAL

STATEMENTS

A. Explanation of Certain Differences Between the Governmental Fund Balance Sheet and the Government-wide Statement of Net Assets

The governmental fund balance sheet includes a reconciliation between fund balance – total governmental funds and net assets – governmental activities as reported in the government-wide statement of net assets. One element of that reconciliation explains, “The net effect of including the beginning balances for capital assets (net of depreciation) and long-term debt in the governmental activities.” The details of this $(103,822,956) difference are as follows:

Capital assets 245,698,373$ Bonds payable 346,226,289)( Loans payable 245,000)( Capital leases payable 1,867,565)( Compensated absences 1,182,475)(

Net adjustment to reduce fund balance - total governmental funds to arrive at net assets - governmental activities 103,822,956)$(

(continued)

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II. RECONCILIATION OF GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS (Continued)

A. Explanation of Certain Differences Between the Governmental Fund Balance

Sheet and the Government-wide Statement of Net Assets (Continued)

The governmental fund balance sheet includes a reconciliation between fund balance – total governmental funds and net assets – governmental activities as reported in the government-wide statement of net assets. One element of that reconciliation explains, “The net effect of including the 2009 capital outlays and debt principal payments is to increase net assets.” The details of this $42,691,930 difference are as follows:

Debt payments 9,244,484$ Debt issue costs 197,668)( Capital outlay 35,137,359 Accreted interest on long-term debt 1,492,245)(

Net adjustment to reduce fund balance - total governmental funds to arrive at net assets - governmental activities 42,691,930$

III. DETAILED NOTES ON ALL FUNDS AND ACCOUNT GROUPS

A. Deposits and Investments

As of August 31, 2009, the District had the following investments:

Fair Weighted AverageInvestment Type Value Maturity (Days)

TexPool 54,651,909$

Documents

Hays Consolidated Independent School District...Hays County (the County), created in 1843, is located in south central Texas and is a component of the Austin Metropolitan Statistical