MADISON METROPOLITAN SCHOOL DISTRICT Madison, Wisconsin

MADISON METROPOLITANSCHOOL DISTRICTMadison, Wisconsin

FINANCIAL STATEMENTSJune 30, 2007

TABLE OF CONTENTS

PAGE

INDEPENDENT AUDITOR’S REPORT .................................................................................... 1

MANAGEMENT'S DISCUSSION AND ANALYSIS .................................................................. 3

BASIC FINANCIAL STATEMENTSDistrict-Wide Financial Statements

Statement of Net Assets .............................................................................................. 15Statement of Activities ................................................................................................ 16

Fund Financial StatementsBalance Sheet - Governmental Funds......................................................................... 17Statement of Revenues, Expenditures and Changes in Fund Balances -

Governmental Funds ............................................................................................. 18Reconciliation of Statement of Revenues, Expenditures and Changes in

Fund Balance of Governmental Funds to Statement of Activities.......................... 19Statement of Net Assets - Proprietary Fund ................................................................ 20Statement of Revenues, Expenses and Changes in Net Assets -

Proprietary Fund .................................................................................................... 21Statement of Cash Flows - Proprietary Fund............................................................... 22Statement of Fiduciary Net Assets - Fiduciary Funds.................................................. 23Statement of Changes in Fiduciary Net Assets - Fiduciary Funds .............................. 24Notes to Financial Statements..................................................................................... 25

REQUIRED SUPPLEMENTARY INFORMATIONBudgetary Comparison Schedule for the General Fund - Budget and Actual ................... 48Budgetary Comparison Schedule for the Special Education Fund - Budget

and Actual.................................................................................................................... 49Notes to Required Supplementary Information.................................................................. 50

OTHER SUPPLEMENTARY INFORMATIONCombining Balance Sheet - Nonmajor Governmental Funds............................................ 51Combining Statement of Revenues, Expenditures and Changes in Fund Balances -

Nonmajor Governmental Funds................................................................................... 52Statement of Revenues, Expenditures and Changes in Fund Balance -

Special Revenue Trust Fund - Budget to Actual.......................................................... 53Statement of Revenues, Expenditures and Changes in Fund Balance -

Debt Service Fund - Budget to Actual ......................................................................... 54Statement of Revenues, Expenditures and Changes in Fund Balance -

Community Service Fund - Budget to Actual ............................................................... 55Statement of Revenues, Expenditures and Changes in Fund Balance -

Package Co-op Fund - Budget to Actual ..................................................................... 56

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Offices in 15 states and Washington, DC h

Independent Auditor’s Report Board of Education Madison Metropolitan School District Madison, Wisconsin We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the Madison Metropolitan School District as of and for the year ended June 30, 2007, which collectively comprise the Madison Metropolitan School District’s basic financial statements as listed in the table of contents. These financial statements are the responsibility of the Madison Metropolitan School District’s Board of Education and management. Our responsibility is to express an opinion 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 the Board of Education and management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. 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 Madison Metropolitan School District as of June 30, 2007, 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. In accordance with Government Auditing Standards, we have also issued our report dated December 3, 2007 on our consideration of Madison Metropolitan School District’s internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grants. 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 read in conjunction with this report in considering the results of our audit.

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The management’s discussion and analysis on pages 3 through 14 and budgetary comparison information on pages 48 through 50 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 Madison Metropolitan School District’s basic financial statements. The other supplementary information listed in the table of contents are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole.

A1 Madison, WisconsinDecember 3, 2007

MADISON METROPOLITAN SCHOOL DISTRICTManagement’s Discussion and Analysis

For the Year Ended June 30, 2007

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This discussion and analysis of the Madison Metropolitan School District’s financial information provides an overall review of financial activities for the fiscal year. The analysis generally focuses on school district financial performance as a whole.

FINANCIAL HIGHLIGHTS

§ The district’s financial position, as reflected in governmental net assets, increased by $426,102. The changes are highlighted in Table 6.

§ Prior service liability related to the Wisconsin Retirement System decreased by $97,779.§ As demonstrated in Note 9 the district maintains a margin of available indebtedness and has

available $2.1 billion of its bonding authority.

OVERVIEW OF THE FINANCIAL STATEMENTS

The basic financial statements are comprised of 1) district-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. In addition, other information supplementary to the basic financial statements is provided.

District-wide financial statements§ The district-wide financial statements are the statement of net assets and statement of

activities. These statements present an aggregate view of the district’s finances in a manner similar to private-sector business. Both statements distinguish functions that are supported principally by property taxes and intergovernmental revenues, called governmental activities, from functions that are intended to recover all or a significant portion of costs through user fees and charges called business-type activities.

§ 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 district’s net assets changed during the year. This statement reports the cost of government functions and how those functions were financed for the fiscal year.

§ The district-wide financial statements are shown on page 15 to 16 of this report.

Fund financial statements§ The district also produced 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. The district, like other state and local governments, uses fund accounting to demonstrate compliance with finance-related legal requirements. Fund statements generally report operations in more detail than the district-wide statements and provide information that may be useful in evaluating a district’s near-term financing requirements.

§ There are two governmental fund financial statements, the balance sheet and the statement of revenues, expenditures and changes in fund balance. Generally, governmental fund statements focus on near-term inflows and outflows of spendable resources and their impact on fund balance.

§ Because the focus of governmental fund financial statements is narrower than that of the district-wide statements, it is useful to make comparison between the information presented. By doing so, readers may better understand the long-term implication of the government’s near-term financial decisions. A reconciliation to facilitate this comparison is provided either at the bottom of the governmental funds statement or as a separate statement.



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§ The district has three kinds of funds: governmental, proprietary, and fiduciary. Governmental funds include the district’s six permanent funds (general, special revenue trust, special education, debt service, community service and cooperative funds) and individual capital project funds as needed. The district has one proprietary fund, the food service fund. The fiduciary funds for the district serve as an agency fund for student and parent organizations and scholarship funds.

§ Financial information is presented separately on both the balance sheet and the statement of revenues, expenditures and changes in fund balance for the general fund, special education fund, and building fund. Data for the special revenue trust, debt service, cooperative and community service funds is combined into a single, aggregated column. Data for each of these individual non-major funds is provided separately as supplementary information. The governmental fund financial statements are on page 17 to 19 of this report.

§ The proprietary fund statements for the district’s food service program are prepared on the same basis of accounting and measurement focus as the district-wide financial statements. In addition, the district provides a statement of cash flows for the proprietary fund. Proprietary fund statements are located on page 20 to 22 of this report.

§ The district serves as a trustee, or fiduciary, for student and parent organizations and scholarship fund. The assets of these organizations do not directly benefit nor are under the direct control of the district. The district’s responsibility is limited to ensuring the assets reported in these funds are used only for their intended purposes. Fiduciary activities are excluded from the district-wide financial statements because the district cannot use these assets to finance its operations. Fiduciary fund statements are presented on page 23 - 24.

§ The district adopts an annual appropriated budget for its general fund and special education fund. Budgetary comparison statements have been provided to demonstrate budget compliance. The budgetary comparison statements are on page 48 to 49 of this report.

Notes to the financial statementsThe notes to the financial statements provide additional information that is essential to the full understanding of the data provided in the district-wide and fund financial statements. The notes to the financial statements can be found on page 25 to 44 of this report.

The major features of the district’s financial statements, including the portion of the activities reported and the type of information contained is shown in the table below.

Fund Financial StatementsDistrict-wide Statements Governmental Proprietary Fiduciary

Scope Entire district (except fiduciary funds).

The activities of the district that are not proprietary or fiduciary, such as instructional, support services, and community services.

Activities the district operates similar to private business. The district’s food service program is its only proprietary operation.

Assets held by the district on behalf of someone else. Student and other organizations that have funds on deposit with the district are reported here.



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Fund Financial StatementsDistrict-wide Statements Governmental Proprietary Fiduciary

Required financial statements

Statement of net assets, and

Statement of activities.

Balance sheet, and

Statement of revenues, expenditures, and changes in fund balance.

Statement of net assets, and

Statement of revenues, expenses, and changes in net assets, and

Statement of cash flows.

Statement of fiduciary net assets, and

Statement of changes in fiduciary net assets.

Basis of accounting and measurement focus

Accrual accounting.

Economic resources focus.

Modified accrual accounting.

Current financial resources focus.

Accrual accounting.


Accrual accounting.


Type of asset and liability information

All assets and liabilities, both financial and capital, short-term and long-term.

Generally, assets expected to be used up and liabilities that comes due during the year or soon thereafter. No capital assets or long-term liabilities included.

All assets and liabilities, financial and capital; short-term and long-term.

All assets and liabilities, financial and capital; short-term and long-term. These funds do not currently contain any capital assets, although they can.

Type of inflow and outflow information

All revenues and expenses during the year, regardless of when cash is received or paid.

Revenues for which cash is received during or soon after the end of the year; expenditures when goods or services have been received and the related liabilities are due and payable.

All revenues and expenses during the year, regardless of when cash is received or paid.

All additions or deductions during the year, regardless of when cash is received and paid.



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FINANCIAL ANALYSIS

The District as a Whole

Net assets. Table 1, below, provides a summary of the district’s net assets for the years ended June 30, 2006 and 2007.

%Change

2006-

2006 2007 2006 2007 2006 2007 2007Assets

Current assets 124,264,539 147,619,839 83,951 97,998 124,348,490 147,717,837 19%Noncurrent assets 137,404,114 137,304,493 414,272 404,510 137,818,386 137,709,003 <1%

Total assets 261,668,653 284,924,332 498,223 502,508 262,166,876 285,426,840 9%

LiabilitiesCurrent liabilities 115,947,817 119,857,625 126,656 141,584 116,074,473 119,999,209 3%Noncurrent liabilities 90,832,006 109,751,775 309,122 269,485 91,141,128 110,021,260 21%

Total liabilities 206,779,823 229,609,400 435,778 411,069 207,215,601 230,020,469 11%

Net AssetsInvested in capital assets,net of related debt 89,386,803 74,977,574 66,883 95,388 89,453,686 75,072,962 -16%

Restricted for:Basset fund 373,779 392,277 - - 373,779 392,277 5%Debt service 510,999 171,965 - - 510,999 171,965 -66%Unrestricted (deficit) (35,382,751) (20,226,884) (4,438) (3,949) (35,387,189) (20,230,833) -43%

Total liabilities and net assets 261,668,653 284,924,332 498,223 502,508 262,166,876 285,426,840 9%

Totals

TABLE 1CONDENSED STATEMENT OF NET ASSETS

June 30, 2007

GovernmentalActivities

Business-TypeActivities

The calculation of net assets uses a historical cost for school buildings that may not accurately reflect the current value.

The majority of MMSD’s buildings are in excellent condition as a result of general operating funds appropriated for maintenance and repair as well as funds provided as a result of a maintenance referendum approved in November of 1999, which provided $20,000,000 over five years. The district maintains a deferred maintenance priority list for allocation of funds. The district sought and gained approval for an additional maintenance referendum in May of 2005, which extends this authority for five more years. This authority will provide an average of $4.79 million annually during that time. An additional annual $500,000 for five years was approved for renovation, repair, and replacement of technology and instructional equipment.

In business-type activities, net assets were $91,439.



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Change in net assets. Table 2 shows the changes in net assets for the fiscal years 2006 and 2007.

2006 2007 2006 2007 2006 2007Revenues:Program Revenues

Charges for services 11,856,584 13,835,427 3,493,998 3,520,700 15,350,582 17,356,127 Grants and contributions 41,467,975 39,731,783 4,557,128 4,892,474 46,025,103 44,624,257

General revenuesProperty taxes

General purposes 185,513,485 194,098,327 - - 185,513,485 194,098,327Debt service 6,335,555 5,336,525 - - 6,335,555 5,336,525 Community service 8,587,841 9,930,331 - - 8,587,841 9,930,331 Mobile home fees - 73,724 - - - 73,724

State and federal aids notrestricted to specific functions 62,519,134 59,794,994 - - 62,519,134 59,794,994

Interest and investment earnings 3,063,905 4,093,916 - - 3,063,905 4,093,916 Miscellaneous (6,139) 70,717 - - (6,139) 70,717 Transfers (221,887) (257,002) 221,887 257,002 - -

Total Revenues 319,116,453 326,708,742 8,273,013 8,670,176 327,389,466 335,378,918

Expenses:Government Activities

Total instruction 181,018,052 183,992,710 - - 181,018,052 183,992,710Total support service 135,662,536 140,550,458 - - 135,662,536 140,550,458Total non-program 1,304,295 1,739,472 - - 1,304,295 1,739,472

Business-type ActivitiesSchool food service program - - 8,229,337 8,641,182 8,229,337 8,641,182 Total Expenses 317,984,883 326,282,640 8,229,337 8,641,182 326,214,220 334,923,822

Change in net assets 1,131,570 426,102 43,676 28,994 1,175,246 455,096

Net assets beginning of year 53,757,260 54,888,830 18,769 62,445 53,776,029 54,951,275 Net assets end of year 54,888,830 55,314,932 62,445 91,439 54,951,275 55,406,371

TotalSchool District

Change in Net AssetsJune 30, 2007

GovernmentalActivities

Business-typeActivities



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Revenues

§ As shown, general state aid provides about 18% of the funding for governmental activities. In addition MMSD relies on property taxes for 64% of its revenues as shown on Chart 1 below.

§ Program revenues, in the form of charges for services and operating grants and contributions, accounted for $57,737,706 or 18% of the total revenues.

Chart 1 Sources of Revenues for Fiscal Year 2007

Other1.1%

Interdistrict Sources

0.5%

Local Sources3.9%

Operating Grants &

Contributions12.2%

General State Aid

18.3%

Property Taxes64.1%

Expenses

The district continued effective management of resources and improved efforts to take advantage of additional funding sources.

§ The district sought and received competitive federal grants in 2007. These grants allowed the district to meet the growing demands of programs for students.

§ The district took greater advantage of cooperative purchasing opportunities; aggressively pursued e-rate funds, and improved cost allocation to programs supported with direct user fees.

§ Expenses by major function are illustrated in Chart 2.



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Chart 2 Expenditures for Fiscal Year 2007

Instruction54.0%

Pupil Transportation

3.7%

Other4.6%

Community Services

2.8%Debt Service

6.5%School

Administration11.3%

General Administration

6.4% Pupil Services5.8%

Instructional Staff Services

4.9%

General Administration includes district level functions and all building maintenance, operations, and utilities.

Governmental Activities

Net cost of governmental activities. Table 3 reports the cost of eight major district activities. The table also shows each activity’s net cost (total cost less fees generated by the activities and intergovernmental aid provided for specific programs). In all categories except Community Service (interest on debt and other do not have program revenues), program revenues did not keep pace with the increased cost of providing the service, thereby increasing reliance on general-purpose revenues.



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2006 Net 2007 NetCost Cost

Functions/Programs 2006 2007 2006 2007 of Services of Services

Total instruction 181,018,052 183,992,710 33,766,953 34,503,852 (147,251,099) (149,488,858)Pupil services 19,728,696 19,562,782 6,456,632 3,470,576 (13,272,064) (16,092,206) Instructional staffservices 18,817,896 16,641,048 6,708,610 6,135,932 (12,109,286) (10,505,116)

General administrationservices 21,403,524 21,801,638 280,766 2,066,882 (21,122,758) (19,734,756)

School administrationservices 31,005,687 33,909,089 1,948,277 2,032,279 (29,057,410) (31,876,810)

Pupil administrationservices 9,441,008 12,674,167 1,528,710 1,427,894 (7,912,298) (11,246,273)

Other support services 21,123,634 16,615,936 400,666 868,437 (20,722,968) (15,747,499) Community services 9,447,331 9,463,230 2,668,777 3,009,524 (6,778,554) (6,453,706) Debt service 4,694,758 5,338,440 - 51,834 (4,694,758) (5,286,606) Non-program service 1,304,295 1,739,472 - - (1,304,295) (1,739,472)

Total governmentalactivities 317,984,881 321,738,512 53,759,391 53,567,210 (264,225,490) (268,171,302)

TABLE 3NET COST OFGOVERNMENTAL ACTIVITIES

June 30, 2007

Total Cost Revenues

Business-Type ActivitiesRevenues for the district’s business-type activities (food service program) were comprised of charges for services, federal and state reimbursements and transfer from other funds (see Table 2).

§ Food services expenses exceeded revenues by $257,002. The Board of Education has agreed to supplement the morning breakfast program so as to make the program available in all schools and to assure the continued availability of meals to needy families.

§ Federal and state reimbursement for meals, including payments for free and reduced lunches, were $4,892,474.

§ The district fully charges the food service program for direct expenses associated with program operations.

Governmental Funds

The district completed the year with a total governmental fund balance of $40,073,183.

§ The debt service fund balance will fluctuate from year to year because the fund balance must be at least equal to the amount of debt payments that are scheduled prior to January 20 of the subsequent year. The typical debt service schedule for the district requires interest payments prior to January 20 with an additional interest payment and principal payment occurring in March of each year.



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§ The district obtained referendum-authorized funding for refinancing state trust fund loans and building a new elementary school in fiscal year 2007. As of June 30, the majority of these funds remain unspent and are reflected in the increase in the governmental fund balance.

General Fund Budget

§ The district approves an interim budget in June for the subsequent year (beginning July 1st). Consistent with current state statutes and regulations an original budget is adopted in October. In October, following determination of official enrollment and certification of general state aids. Generally, the original budget is not significantly modified. The district monitored and adjusted its original 2006-2007 as follows:

v Adjusted for several state and federal grants.v Individual school allocation is based on a per pupil dollar value for the number of

projected students and adjusted to reflect the actual third Friday of September enrollment.

v Utilized a Position Allocation Control System to monitor staff by position and translate into costs for budget management and adjustment.

CAPITAL ASSET AND DEBT ADMINISTRATIONCapital Assets

At the end of the 2007 fiscal year, the district had invested $261,631,765 in a broad range of capital assets, including buildings, sites, library books, and equipment (see Table A-4). Additional information about capital assets can be found in Note 4. Total accumulated depreciation on these assets was $123,092,829 for governmental activities and $829,933 for business-type activities.

%Change

2006 2007 2006 2007 2006 2007Land 11,281,817 11,281,817 - - 11,281,817 11,281,817 0%Construction in

progress 913,101 3,377,208 - - 913,101 3,377,208 270%Buildings and

improvements 221,894,150 223,893,023 - - 221,894,150 223,893,023 1%Furniture and

equipment 22,149,303 21,845,274 1,234,443 1,234,443 23,383,746 23,079,717 -1%Less: Accumulated

depreciation (118,834,257) (123,092,829) (820,171) (829,933) (119,654,428) (123,922,762) 4%Total Capital Assets 137,404,114 137,304,493 414,272 404,510 137,818,386 137,709,003 <1%

Totals

TABLE A-4CAPITAL ASSETS

June 30, 2007

Governmental Business-typeActivities Activities



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Long-Term Debt

At year-end, the district had $121,671,057 in general obligation bonds and other long-term debt of which $11,649,796 is due within one year of the close date of June 30, 2007- table A-5.

TotalAmounts due noncurrent

2006 2007 within one year liabilitiesLong-term notes 4,782,970 1,466,314 219,436 1,246,878 Bonds 32,900,000 52,190,000 4,165,000 48,025,000 Capital leases 10,681,730 8,979,729 1,924,727 7,055,002 Vested employee benefits 24,375,631 27,160,578 3,016,122 24,144,456 Prior service liability (WIRetirement System) 31,972,215 31,874,436 2,324,511 29,549,925 Totals 104,712,546 121,671,057 11,649,796 110,021,261

TABLE A-5Long-term DebtJune 30, 2007

Balance

Additional information about the district’s changes in Fund Balances is presented in Table 6.

TABLE 6STATEMENTS OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE

GOVERNMENTAL FUNDSAs of June 30, 2007

Net change in fund balance – total governmental funds $17,649,809

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

The acquisition of capital assets are reported in the governmental funds as expenditures. However, for governmental activities those costs are shown in thestatement of net assets and allocated over their estimated useful lives as annual depreciation expense reported in the statement of activities.Capital outlay reported in governmental fund statements: 5,053,618Depreciation expense reported in the statement of activities: (5,147,376)Amount by which capital outlays are greater than depreciationIn the current period: (93,758)

Vested employees benefits are reported in the governmental funds when amounts are paid. The statement of activitiesreports the value of benefits earned during the year.Special termination of benefits paid in current year: 5,989,304Special termination of benefits earned in the current year: (8,774,252)Amounts paid are less than amounts earned by: (2,784,948)



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The prior service liability of the Wisconsin Retirement System is reported in the government funds when amounts are paid.The statement of activities reports the value of benefitsearned during the year.Contributions made in the current year: 2,422,290Benefits earned in the current year: (2,324,511)Contributions made are more than benefits by: 97,779

Repayment of principal on long-term obligations is reportedin the governmental funds as an expenditure, but is reportedas a reduction in long-term obligations in the statement of net assets, and does not affect the statement of activities.The amount of long-term obligations principal payments in thecurrent year is: 16,790,647

Long-term bonds are reported in governmental funds as an other financing source, but is reported as an increase in outstanding long-term debt on the statement of net assets,and does not affect the statement of activities.The amount of long-term bonds incurred is: (30,889,154)

Capital leases are reported in governmental funds as an otherfinancing source, but are reported as an increase in outstanding long-term debt on the statement of net assets,and does not affect the statement of activities.The amount of capital leases incurred in the current year is: (211,102)

The District disposed of outdated computers/equipment resulting in a reduction of capital assets and recapture ofprior depreciation expense reported on the statement of netassets as a net loss and has no affect on the governmentalfund balance sheet.The value of capital assets disposed of during the year was: 894,667The amount of depreciation recapture for the year was: (888,804)The difference in the value of assets net of recaptured depreciation creates a lot of: (5,863)

In governmental funds interest payments on outstandingdebt are reported as an expenditure when paid. In thestatement of activities interest is reported as incurred.The amount of interest paid during the current period: 2,539,248The amount of interest accrued during the current period: (2,666,556)Interest paid is less than interest accrued by: (127,308)

Change in net assets – governmental activities $ 426,102



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FACTORS BEARING ON THE DISTRICT’S FUTURE

Currently known circumstances that will impact the district’s financial status in the future are:

§ The existing labor agreements for supportive educational employees and special educational employees remain unsettled as of June 30, 2007.

§ The State of Wisconsin has an open enrollment law that allows students to attend the school district of their choice with few restrictions. The state adjusts each district’s general state aid payment based on the number of students who transfer.

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:

Steve Hartley, Chief of Staff or Donna Williams, Director of Budget, Planning, and AccountingMadison Metropolitan School District545 West Dayton StreetMadison, WI 53703

Governmental Business-TypeActivities Activities Total

Assets Current assets

Cash and investments 73,819,799$ -$ 73,819,799$ Receivables

Taxes 59,738,684 - 59,738,684 Accounts 3,626,995 - 3,626,995

Internal balances 832,767 (832,767) - Due from other governments 9,107,496 780,209 9,887,705 Inventories and prepaid items 494,097 150,557 644,654

Total current assets 147,619,838 97,999 147,717,837 Noncurrent assets

Land 11,281,817 - 11,281,817 Construction in progress 3,377,208 - 3,377,208 Buildings and building improvements 223,893,023 - 223,893,023 Furniture and equipment 21,845,274 1,234,443 23,079,717 Less: Accumulated depreciation (123,092,829) (829,933) (123,922,762)

Total noncurrent assets 137,304,493 404,510 137,709,003 Total assets 284,924,331 502,509 285,426,840

LiabilitiesCurrent liabilities

Short-term notes payable 79,600,000 - 79,600,000 Accounts payable 3,394,929 - 3,394,929 Payroll and related benefits payable 21,777,528 - 21,777,528 Interest payable 3,279,479 3,949 3,283,428 Deferred revenue 195,529 97,999 293,528 Current portion of long-term obligations 11,610,159 39,637 11,649,796

Total current liabilities 119,857,624 141,585 119,999,209 Noncurrent liabilities

Noncurrent portion of long-term obligations 109,751,776 269,485 110,021,261 Total liabilities 229,609,400 411,070 230,020,470

Net assetsInvested in capital assets, net of related debt 74,977,572 95,388 75,072,960 Restricted for

Bassett fund 392,277 - 392,277 Debt service 171,965 - 171,965

Unrestricted (deficit) (20,226,882) (3,949) (20,230,831) Total net assets 55,314,932$ 91,439$ 55,406,371$

MADISON METROPOLITAN SCHOOL DISTRICTSTATEMENT OF NET ASSETS

June 30, 2007

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

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MADISON METROPOLITAN SCHOOL DISTRICTSTATEMENT OF ACTIVITIES


Charges Operating Business- for Grants and Government Type

Functions/Programs Expenses Services Contributions Activities Activities Total

Governmental activities:Instruction:

Regular instruction 120,063,476$ 2,913,902$ 11,154,007$ (105,995,567)$ -$ (105,995,567)$ Vocational instruction 5,232,595 518,311 277,755 (4,436,529) - (4,436,529) Special education instruction 48,878,810 665,241 17,443,046 (30,770,523) - (30,770,523) Other instruction 9,817,829 1,043,741 487,849 (8,286,239) - (8,286,239)

Total instruction 183,992,710 5,141,195 29,362,657 (149,488,858) - (149,488,858) Support service

Pupil services 19,562,782 1,599,695 1,870,881 (16,092,206) - (16,092,206) Instructional staff services 16,641,048 705,698 5,430,234 (10,505,116) - (10,505,116) General administration services 21,801,638 1,446,387 620,495 (19,734,756) - (19,734,756) Building administration services 33,909,089 2,005,080 27,199 (31,876,810) - (31,876,810) Pupil transportation services 12,674,167 35,232 1,392,662 (11,246,273) - (11,246,273) Other support services 16,615,936 654,185 214,252 (15,747,499) - (15,747,499) Community services 9,463,230 2,196,121 813,403 (6,453,706) - (6,453,706) Debt service 5,338,440 51,834 - (5,286,606) - (5,286,606) Depreciation-unallocated 4,544,128 - - (4,544,128) - (4,544,128) Total Support Services 140,550,458 8,694,232 10,369,126 (121,487,100) - (121,487,100)

Non-program 1,739,472 - - (1,739,472) - (1,739,472) Total governmental activities 326,282,640 13,835,427 39,731,783 (272,715,430) - (272,715,430)

Business-type activities:School food service program 8,641,182 3,520,700 4,892,474 - (228,008) (228,008)

Total school district 334,923,822$ 17,356,127$ 44,624,257$ (272,715,430) (228,008) (272,943,438)

General revenues:Property taxes:

General purposes 194,098,327 - 194,098,327 Debt services 5,336,525 - 5,336,525 Community services 9,930,331 - 9,930,331 Mobile home fees 73,724 - 73,724

State and federal aids not restricted to specific functions 59,794,994 - 59,794,994 Interest and investment earnings 4,093,916 - 4,093,916 Miscellaneous 70,717 - 70,717

Total general revenues 273,398,534 - 273,398,534

Transfers (257,002) 257,002 -

Change in net assets 426,102 28,994 455,096 .

Net assets - beginning of year 54,888,830 62,445 54,951,275

Net assets - end of year 55,314,932$ 91,439$ 55,406,371$

Net (Expenses) Revenue and Changes in Net AssetsProgram Revenues


16

MADISON METROPOLITAN SCHOOL DISTRICTBALANCE SHEET

GOVERNMENTAL FUNDSJune 30, 2007

Other TotalGeneral Special Capital Governmental Governmental

Fund Education Projects Funds Funds

AssetsCash and investments 56,241,734$ 150$ 17,433,924$ 143,991$ 73,819,799$ Receivables

Taxes 59,738,684 - - - 59,738,684 Accounts 2,921,751 - - 709,207 3,630,958

Due from other governments 8,613,493 494,003 - - 9,107,496 Due from other funds 2,119,347 - 157,568 1,891,988 4,168,903 Inventories and prepaid items 494,097 - - - 494,097

Total assets 130,129,106$ 494,153$ 17,591,492$ 2,745,186$ 150,959,937$

Liabilities and fund balancesLiabilities:

Short-term note payable 79,600,000$ -$ -$ -$ 79,600,000$ Accounts payable 3,292,008 - - - 3,292,008 Payroll and related benefits payable 21,772,004 - - 5,524 21,777,528 Interest/deposit payable 2,578,669 - - - 2,578,669 Due to other organizations 102,922 - - - 102,922 Deferred revenue 66,518 - - 129,011 195,529 Due to other funds 2,053,518 494,153 208,886 583,541 3,340,098

Total liabilities 109,465,639 494,153 208,886 718,076 110,886,754

Fund balancesReserved 886,374 - - 872,773 1,759,147 Designated, reported in:

General Fund 19,777,093 - - - 19,777,093 Special Revenue Fund - - - 1,154,337 1,154,337 Capital Projects Fund - - 17,382,606 - 17,382,606

Total fund balances 20,663,467 - 17,382,606 2,027,110 40,073,183

Total liabilities and fund balances 130,129,106$ 494,153$ 17,591,492$ 2,745,186$

Total net assets reported for governmental activities in the statement of net assets are different from theamount reported above as total governmental funds fund balance because:

Capital assets used in governmental activities are not financial resources and thereforeare not reported in the fund statements. Amounts reported for governmental activities in the statement of net assets:Governmental capital assets 260,397,322$ Governmental accumulated depreciation (123,092,829)

137,304,493 Long-term liabilities, including bonds and notes payable, are not due in the current period and

therefore are not reported in the fund statements. Long-term liabilities reported in the statement of net assets that are not reported in the funds balance sheet are:

General obligation debt (53,656,314) Capital lease obligations (8,670,607) Accrued interest on general obligation debt (700,808) Vested employee benefits (59,035,015) (122,062,744)

Total net assets-governmental activities 55,314,932$


17

MADISON METROPOLITAN SCHOOL DISTRICTSTATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES


Special CapitalGeneral Education Projects Nonmajor

Fund Fund Fund Funds Total

Revenues:Property taxes 194,172,051$ -$ -$ 15,266,856$ 209,438,907$ Other local sources 7,890,902 40,607 308,913 4,582,070 12,822,492 Intermediate sources 30,121 2,113 - - 32,234 Interdistrict sources 1,004,159 624,634 - - 1,628,793 State sources 67,446,773 17,128,135 - 62,639 84,637,547 Federal sources 8,473,715 5,455,662 - 959,854 14,889,231 Other sources 3,440,675 - - 81,728 3,522,403

Total revenues 282,458,396 23,251,151 308,913 20,953,147 326,971,607

Expenditures:Instruction:

Regular instruction 118,709,101 406,769 - 791,249 119,907,119 Vocational instruction 5,106,772 - - 144,799 5,251,571 Special instruction 154,282 48,735,303 - - 48,889,585 Other instruction 9,706,466 5,214 - 94,943 9,806,623

Total instruction 133,676,621 49,147,286 - 1,030,991 183,854,898 Support services:

Pupil services 10,751,836 8,758,862 - 113,344 19,624,042 Instructional staff services 13,079,358 2,094,972 - 1,456,649 16,630,979 General administration services 21,423,585 285,053 - - 21,708,638 Building administration services 32,970,508 27,200 2,775,180 2,721,303 38,494,191 Pupil transportation 9,560,883 3,113,284 - - 12,674,167 Community services - - - 9,480,221 9,480,221 Debt service 4,968,863 - - 17,032,916 22,001,779 Other support services 13,192,752 312,916 294,382 156,615 13,956,665

Total support services 105,947,785 14,592,287 3,069,562 30,961,048 154,570,682 Non-program 1,739,472 - - - 1,739,472

Total expenditures 241,363,878 63,739,573 3,069,562 31,992,039 340,165,052

Excess (deficiency) of revenues over expenditures 41,094,518 (40,488,422) (2,760,649) (11,038,892) (13,193,445)

Other financing sources (uses):Transfer in 628,566 40,488,422 - 1,609,174 42,726,162 Transfer out (41,387,633) - (972,303) (623,228) (42,983,164) Long-term debt issued - - 20,448,930 10,440,224 30,889,154 Capital leases issued - - 211,102 - 211,102

Net change in fund balances 335,451 - 16,927,080 387,278 17,649,809

Fund balances - beginning of year 20,328,016 - 455,526 1,639,832 22,423,374

Fund balances - end of year 20,663,467$ -$ 17,382,606$ 2,027,110$ 40,073,183$

GOVERNMENTAL FUNDS


18

MADISON METROPOLITAN SCHOOL DISTRICTRECONCILIATION OF STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN

FUND BALANCE OF GOVERNMENTAL FUNDS TO STATEMENT OF ACTIVITIESFor the Year Ended June 30, 2007

Net change in fund balances - total governmental funds 17,649,809$

Amounts reported for governmental activities in the statement of activitiesare different because:

The acquisition of capital assets are reported in the governmental funds asexpenditures. However, for governmental activities those costs are shown in thestatement of net assets and allocated over their estimated useful lives asannual depreciation expense reported in the statement of activities.

Capital outlay reported in governmental fund statements 5,053,618$ Depreciation expense reported in the statement of activities (5,147,376)

Amount by which capital outlays are greater than depreciation (93,758) Vested employee benefits are reported in the government funds when amountsare paid. The statement of activities reports the value of benefits earned during the year.

Special termination of benefits paid in current year 5,989,304 Special termination of benefits earned in current year (8,774,252)

Amounts paid are less than amounts earned (2,784,948)

The prior service liability of the Wisconsin Retirement System is reported inthe government funds when amounts are paid. The statement of activities reports the value of benefits earned during the year.

Contributions made in current year 2,422,290 Benefits earned in current year (2,324,511)

Contributions made are more than benefits earned 97,779

Repayment of principal on long-term obligations is reported in the governmental fundsas an expenditure, but is reported as a reduction in long-term obligations in the statement of net assets, and does not affect the statement of activities.

The amount of long-term obligations principal payments in the current year 16,790,647

Long Term Bonds are reported in governmental funds as an other financing source,but are reported as an increase in outstanding long-term debt statementof net assets, and does not affect the statement of activities.

The amount of long term bonds incurred is: (30,889,154)

Capital leases are reported in governmental funds as an other financing source,but are reported as an increase in outstanding long-term debt statementof net assets, and does not affect the statement of activities. (211,102)

The amount of capital leases incurred

The district disposed of outdated computers/equipment resulting in a reduction of capitalassets and recapture of prior year depreciation expense reported on the statement of net assets as a net loss and has no affect on the governmental fund balance sheet.

The value of capital assets disposed of during the year was: 894,667 The amount of depreciation recapture for the year was: (888,804)

The difference in the value of assets net of recaptured depreciationcreates a loss of : (5,863)

In governmental funds interest payments on outstanding debt are reportedas an expenditure when paid. In the statement of activities interest isreported as incurred.

The amount of interest paid during the current period 2,539,248 The amount of interest accrued during the current period (2,666,556)

Interest paid is more than interest accrued by (127,308)

Change in net assets - governmental activities 426,102$


19

MADISON METROPOLITAN SCHOOL DISTRICTSTATEMENT OF NET ASSETS

PROPRIETARY FUNDJune 30, 2007

FoodService Fund

AssetsCurrent assets:

Due from other governments 780,209$ Inventories and prepaid items 150,557

Total current assets 930,766

Noncurrent assets:Furniture and equipment 1,234,443 Less: accumulated depreciation (829,933)

Total noncurrent assets 404,510

Total assets 1,335,276

LiabilitiesCurrent liabilities:

Due to other funds 832,767 Interest payable 3,949 Current portion of lease payable 39,637 Deferred revenue 97,999

974,352 Long Term liabilities:

Lease payable 269,485

Total liabilities 1,243,837

Net assets Invested in capital assets, net of related debt 95,388 Unrestricted (deficit) (3,949)

Total net assets 91,439$


20

MADISON METROPOLITAN SCHOOL DISTRICTSTATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS

PROPRIETARY FUNDFor the Year Ended June 30, 2007

FoodService Fund

Revenues:Food sales 3,520,700$ State sources 134,896 Federal sources 4,378,038 Federal commodities 379,540

Total revenues 8,413,174

Operating expenses:Salaries and wages 2,924,526 Employer paid benefits 1,850,602 Purchased services 268,022 Supplies, food and materials 3,584,101 Other 4,169 Depreciation 9,762

Total operating expenses 8,641,182

Operating loss (228,008)

Transfers:Transfer in 257,002

Change in net assets 28,994

Net assets - beginning of year 62,445

Net assets - end of year 91,439$


21

MADISON METROPOLITAN SCHOOL DISTRICTSTATEMENT OF CASH FLOWS

PROPRIETARY FUNDFor the Year Ended June 30, 2007

FoodService Fund

Cash flows from operating activitiesCash received from user charges 3,534,748$ Cash received from other government payments 4,398,522 Cash payments to employees for services (4,775,128) Cash payments for utilities and other purchased services (268,022) Cash payments to suppliers for goods and services (3,196,776) Cash payments for other operating expenses (4,658)

Net cash used in operating activities (311,314)

Cash flows from non-financing activitiesCash received from other funds 349,581

Cash flows from capital and related financing activitiesPrincipal payments on capitalized leases (38,267)

Net increase in cash and cash equivalents -

Cash and cash equivalents - beginning of year -

Cash and cash equivalents - end of year -$

Reconciliation of operating loss to net cash used inoperating activitiesOperating loss (228,008)$ Adjustments to reconcile operating loss to net cash

used in operating activities:Depreciation 9,762

Changes in assets and liabilities:Due from other governments (114,412) Inventories 7,785 Interest payable (489) Deferred revenue 14,048

Net cash used in operating activities (311,314)$

Noncash Noncapital Financing ActivitiesDuring the year the district received commodities from the

U.S. Department of Agriculture in the amount of: 379,540$


22

MADISON METROPOLITAN SCHOOL DISTRICTSTATEMENT OF FIDUCIARY NET ASSETS

FIDUCIARY FUNDSJune 30, 2007

Scholarship AgencyFund Fund

AssetsCash and investments 779,619$ 580,467$ Interest receivable 64 - Due from other funds 3,962 -

Total assets 783,645 580,467

LiabilitiesDue to student organizations - 580,467

Total assets - 580,467

Net assetsReserved 783,645$ -$


23

MADISON METROPOLITAN SCHOOL DISTRICTSTATEMENT OF CHANGES IN FIDUCIARY NET ASSETS

FIDUCIARY FUNDSFor the Year Ended June 30, 2007

ScholarshipFund

AdditionsInterest income 37,443$ Gifts and contributions 203,618

Total additions 241,061

DeductionsScholarships and awards paid 283,566

Total deductions 283,566

Change in net assets (42,505)

Net assets - beginning of year 826,150

Net assets - end of year 783,645$


24

MADISON METROPOLITAN SCHOOL DISTRICTNOTES TO FINANCIAL STATEMENTS

June 30, 2007

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NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The financial statements of the Madison Metropolitan School District ("district") have been prepared in conformity with generally accepted accounting principles (GAAP) as applied to government units. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. The significant accounting principles and policies utilized by the district are described below:

A. REPORTING ENTITY

The Madison Metropolitan School District is organized as a unified school district. The district, governed by a seven member elected school board, operates grades K through 12 and is comprised of all or parts of ten taxing districts.

This report includes all funds of the Madison Metropolitan School District. The reporting entity for the district consists of a) the primary government, b) organizations for which the primary government is financially accountable, and c) other organizations for which the nature and significance of their relationship with the primary government are such that their exclusion would cause the reporting entity’s financial statements to be misleading or incomplete. A legally separate organization should be reported as a component unit if the elected officials of the primary government are financially accountable to the organization. The primary government is financially accountable if it appoints a voting majority of the organization’s governing body and 1) it is able to impose its will on that organization or 2) there is a potential for the organization to provide specific financial benefits or burdens on the primary government. The primary government may be financially accountable if an organization is fiscally dependent on the primary government. A legally separate, tax exempt organization should be reported as a component unit of a reporting entity if all of the following criteria are met: 1) the economic resources received or held by the separate organization are entirely or almost entirely for the direct benefit of the primary government, its component units, or its constituents; 2) the primary government is entitled to, or has the ability to otherwise access, a majority of the economic resources received or held by the separate organization; 3) the economic resources received or held by an individual organization that the specific primary government, or its component units, is entitled to, or has the ability to otherwise access, are significant to that primary government. This report does not contain any component units.

The financial statements do not include the Madison School Community Recreation Center because this component unit is not significant to the financial statements.


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NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

B. BASIS OF PRESENTATION

District-wide Statements

The statement of net assets and the statement of activities present financial information about the district’s governmental and business type activities. These statements include the financial activities of the overall government in its entirety, except those that are fiduciary. Eliminations have been made to minimize the double counting of internal transactions. These statements distinguish between the governmental and business type activities of the district. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange transactions. Business type activities are financed in part by fees charged to external parties.

The statement of activities presents a comparison between direct expenses and program revenues for business type activities and for each function of the district’s governmental activities. Direct expenses are those that are specifically associated with and are clearly identifiable to a particular function. Program revenues include (a) charges paid by the recipients for goods or services offered by the programs and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues.

Fund Financial Statements

The fund statements provide information about the district’s funds, including fiduciary funds. Separate statements for each fund category - governmental, proprietary, and fiduciary - are presented. The emphasis of fund financial statements is on major governmental and enterprise funds; each displayed in a separate column. All remaining governmental and enterprise funds are aggregated and reported as nonmajor funds.

Proprietary fund operating revenues, such as charges for services, result from exchange transactions associated with the principal activity of the fund. Exchange transactions are those in which each party receives and gives up essentially equal value. Nonoperating revenues, such as subsidies and investment earnings, result from nonexchange transactions or ancillary activities.


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B. BASIS OF PRESENTATION (continued)

The district reports the following major governmental funds:

General Fund - This is the district’s primary operating fund. It accounts for all financial activity that is not required to be accounted for in another fund.

Special Education Fund - This fund accounts for activities associated with providing educational programs for students with disabilities. Sources include financial aid received from the state and federal government and payments from other school districts. Excess expenditures of the fund are financed with a transfer from the general fund. This fund is required to be reported as a major fund by the Wisconsin Department of Public Instruction.

Capital Projects Fund - This fund accounts for the resources restricted for the acquisition or construction of specific capital projects or items.

The district reports the following nonmajor governmental funds:

Debt Service Fund - This fund accounts for the accumulation of resources for and the payment of, long-term debt principal, interest and related costs.

Special Revenue Trust Fund - This special revenue fund accounts for the resources restricted for the acquisition of technology.

Community Service Fund - This special revenue fund accounts for the resources restricted for community-wide recreation activities and the 21st Century grant.

Package Co-op Fund - This special revenue fund accounts for resources restricted for vocational education and school to work programs and a software acquisition consortium.

The district operates one proprietary - enterprise fund, the Food Service Fund. This fund accounts for the activities of the district’s food service programs, generally school breakfast, lunch and snack programs.

The district accounts for assets held as an agent for various student and parent organizations in a fiduciary agency fund.

The district accounts for assets that are accumulated to finance scholarships in the fiduciary fund - scholarships.


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C. MEASUREMENT FOCUS & BASIS OF ACCOUNTING

The district-wide, proprietary, and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash transaction takes place. Nonexchange transactions, in which the district gives or receives value without directly receiving or giving equal value in exchange, include property taxes, grants, entitlements, and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from grants, entitlements, and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied.

State general and categorical aids are recognized as revenue in the entitlement year. Federal and state aids for reimbursable programs are recognized as revenue in the year related program expenditures are incurred. Aids received prior to meeting revenue recognition criteria are recorded as deferred revenues.

The governmental fund statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Under this method, revenues are recognized when measurable and available. The district considers all revenues reported in the governmental funds to be available if the revenues are collected within sixty days after the end of the fiscal year. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt, claims and judgments, and compensated absences which are recognized as expenditures to the extent they have matured. General capital asset acquisitions are reported as expenditures in governmental funds. Proceeds of general long-term debt and acquisitions under capital leases are reported as other financing sources.

Under the terms of grant agreements, the district may fund certain programs by a combination of specific cost-reimbursement grants, categorical block grants, and general revenues. Therefore, when program expenses are incurred, both restricted and unrestricted net assets may be available to finance the program. It is the district’s policy to first apply cost-reimbursement grant resources to such programs, followed by general revenues.

Reports for the district’s food service fund are prepared following the Financial Accounting Standards Board (FASB) Statements and Interpretations issued on or before November 30, 1989; Accounting Principles Board Opinions; and Accounting Research Bulletins, unless those pronouncements conflict with Governmental Accounting Standards Board (GASB) pronouncements.


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D. BUDGETARY ACCOUNTING

Operating budgets are adopted each fiscal year for all governmental funds in accordance with Section 65.90 of the Wisconsin Statutes. The legally adopted budget and budgetary expenditure control is exercised at the total operating budget level for all funds. Reported budget amounts are as amended by School Board resolution.

E. INVESTMENTS

Investments are stated at fair value which approximates market. Determination of fair value for investments in the State Treasurer’s Investment Pool and City of Madison Treasurer’s Pool is based on information provided by the State of Wisconsin Investment Board and the City of Madison, respectively.

F. PROPERTY TAXES

Under Wisconsin law, personal property taxes and first installment real estate taxes are collected by city, town, and village treasurers or clerks who then make proportional settlement with the school district and county treasurer for those taxes collected on their behalf. Second installment real estate taxes and delinquent taxes are collected by the county treasurer who then makes settlement with the city, town, village and school districts before retaining any for county purposes.

The district’s property taxes are levied on or before October 31 on the equalized property valuation certified by the Department of Revenue. As permitted by a collecting municipality’s ordinance, taxes may be paid in full or two or more installments with the first installment payable the subsequent January 31st, and a final payment no later than the following July 31st. The district is paid, by the collecting municipality, its proportionate share of tax collections received through the last day of the preceding month on or before January 15th, and by the 20th of each subsequent month thereafter. On or before August 20th, the County Treasurer makes full settlement to the district for any remaining balance. The County assumes all responsibility for delinquent real property taxes.

Property taxes are recognized as revenue in the period for which the taxes are levied. All property taxes are considered due on January 1st, when an enforceable lien is assessed against the property and the taxpayer is liable for the taxes. All taxes are collected within 60 days of June 30th and are available to pay current liabilities.


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G. ACCOUNTS RECEIVABLE

Accounts receivable in the governmental funds are recorded at the gross amounts with uncollectible amounts recognized under the direct write-off method. No allowance for uncollectible accounts has been provided since it is believed that the amount of such allowance would not be material.

H. INVENTORIES AND PREPAID SUPPLIES

Inventories and prepaid supplies are valued at cost. Inventory in the governmental funds consists of expendable food and supplies held for consumption. The cost is recorded as an expenditure at the time individual inventory items are consumed.

I. NET ASSETS

Net assets represent the difference between assets and liabilities in the district-wide financial statements. Net assets invested in capital assets, net of related debt consists of capital assets, net of accumulated depreciation, reduced by the outstanding balances of any long-term obligations used for the acquisition, construction or improvement for those assets. Net assets are reported as restricted when there are limitations imposed on their use through external restrictions imposed by creditors, grantors or laws or regulations of other governments.

The district applies restricted resources first when an expense is incurred for purposes for which both restricted and unrestricted net assets are available.

J. FUND BALANCE RESERVES

The district reserves those portions of fund equity which are legally segregated for a specific future use or which do not represent available expendable resources and therefore are not available for appropriation or expenditure. Unreserved fund balance indicates that portion of fund equity, which is available for appropriation, in future periods.


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K. COMPENSATED ABSENCES

Compensated absences are absences for which employees will be paid such as vacation and sick leave.

Vacation Type - The district’s policy requires these absences to be used by fiscal year end. As a result, all costs for these absences have been expensed as of year end, and there exists no liability for future payment of absences attributable to services already rendered.

Sick Leave Type - The district’s policy allows employees to earn varying amounts of sick pay for each year employed, accumulating to a maximum vested number of days depending on the type of employee. When conditions as designated in specific contracts are met, retired employees entitled to the district’s payment of group health, life, and dental insurance until the vested amount of sick pay is exhausted.

Because it is probable that the district will compensate the employees through cash payments or the equivalent conditioned on termination, the costs for these absences are accrued and included in the compensated absences liability in the district-wide financial statements at year end. The liability is calculated based on the pay rates in effect at year end.

L. POST-EMPLOYMENT BENEFITS

As provided in applicable negotiated contracts, certified district employees meeting a minimum age and length of service requirement may participate in the district’s group health and insurance program. The district bears the cost of the employee’s participation up to the maximum amount it pays for active employees. For the year ending June 30, 2007 there were 789 participants and expenditures, on a pay-as-you-go basis, were $3,016,123. The district’s health and insurance program liability at June 30, 2007 was $20,425,403.

As provided in applicable negotiated contracts, certified district employees meeting a minimum age and length of service requirement are eligible to receive early retirement benefits of 19% of the employee’s salary for three years. For the year ending June 30, 2007, there were 324 participants and expenditures, on a pay-as-you-go basis were $2,973,181. After applying a discount rate of 5%, the present value of the district’s early retirement liability at June 30, 2007 was $6,735,176.


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M. CAPITAL ASSETS

Capital assets are reported at actual cost or estimated historical costs, based on appraisals conducted by an independent third-party professional appraisal firm. Donated assets are reported at estimated fair market value at the time received.

Capitalization thresholds (the dollar value above which asset acquisitions are added to the capital asset accounts), depreciation methods, and estimated useful lives of capital assets reported in the district-wide statements and proprietary funds are as follows:

Capitalization Depreciation EstimatedThreshold Method Useful Life

Buildings $ 5,000 Straight-line 50 yearsBuilding improvements 5,000 Straight-line 20-25 yearsSite improvements 5,000 Straight-line 10-20 yearsFurniture & equipment 5,000 Straight-line 5-15 yearsComputer & related technology 5,000 Straight-line 4-10 yearsLibrary books* 5,000 Straight-line 7 years

* For purposes of determining the capitalization threshold for these items, the district groups all purchases for the year.

N. USE OF ESTIMATES

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make certain estimates and assumptions that affect the amount reported in the financial statements and accompanying notes. Actual results could differ from those estimates.


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NOTE 2 - EXPLANATION OF CERTAIN DIFFERENCES BETWEEN GOVERNMENTAL FUND STATEMENTS AND DISTRICT-WIDE STATEMENTS

Due to the differences in the measurement focus and basis of accounting used on the government fund statements and district-wide statements certain financial transactions are treated differently. The basic financial statements contain a full reconciliation of these items. Differences between the governmental funds statement of revenues, expenditures and changes in fund balance and the statement of activities fall into one of three broad categories.

1. Long-term revenue differences arise because governmental funds report revenues only when they are considered “available,” whereas the statement of activities reports revenues when earned. Differences in long-term expenses arise because governmental funds report vested employee benefits on a pay-as-you-go basis and the statement of activities reports these amounts as earned by the applicable employees.

2. Capital related differences include (1) the difference between proceeds for the sale of capital assets reported on governmental fund statements and the gain or loss on the sale of assets as reported on the statement of activities, and (2) the difference between recording an expenditure for the purpose of capital items in the governmental fund statements and depreciation expense on those items as recorded in the statement of activities.

3. Long-term debt transaction differences occur because both interest and principal payments are recorded as expenditures in the governmental fund statements, whereas interest expense is recorded in the statement of activities as incurred, and principal payments are recorded as a reduction of liabilities in the statement of net assets.


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NOTE 3 - CASH AND INVESTMENTS

Cash, cash equivalents and investments as shown on the district’s Statement of Net Assets are subject to the following risks:

Amount Risks

Cash and cash equivalentsPetty cash 2,600$ Demand deposits 252,831 CustodialCertificates of deposit 143,156 CustodialWisconsin Local Government

Investment Pool 6,707 Interest rate and creditCity of Madison Investment Pool 49,514,715 Interest rate and creditWisconsin Investment

Cooperative Series 25,097,792 Interest rate and creditU.S. Treasury Notes 162,084 Interest rate and credit

Total cash and investments 75,179,885$

The District's cash and investments are reported in the financial statements as follows:

Per Statement of Net Assets 73,819,799$ Per Statement of Fiduciary Net

Assets Scholarship Fund 779,619 Agency Fund 580,467

Total cash and investments 75,179,885$

Investments are stated at fair value which is the amount at which an investment could be exchanged in a current transaction between willing parties. Fair values are based on quoted market prices. No investments are reported at amortized cost. Adjustments necessary to record investments at fair value are recorded in the operating statement as increases or decreases in investment income.

The Wisconsin Investment Cooperative Series and the City of Madison Investment Pool are investment pools established by an intergovernmental agreement. The pools invest in investments legally permissible under Wisconsin law.


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NOTE 3 - CASH AND INVESTMENTS (continued)

Wisconsin Statute 66.0603 authorizes The district to invest in the following types of instruments:

• Time deposits in any credit union, bank, savings bank, trust company, or savings and loan association that is authorized to transact business in Wisconsin if the time deposit matures in not more than three years.

• Bonds or securities issued or guaranteed as to principal or interest by the federal government or by a commission, board, or other instrumentality of the federal government (U.S. Treasuries and U.S. Agencies).

• Bonds or securities of any Wisconsin county, city, drainage district, technical college district, village, town, or school district.

• Bonds issued by a local exposition district, local professional baseball park district, or local professional stadium district created under subchapter III or IV of chapter 229 of the Wisconsin statutes or bonds issued by the University of Wisconsin Hospitals or Clinics Authority.

• Any security maturing in seven years or less of the acquisition date with either the highest or second highest rating category of a nationally recognized rating agency.

• Securities of open-end management investment companies or investment trusts if the portfolio is limited to obligations of the U.S. Treasury and U.S. Agencies or repurchase agreements fully collateralized by bonds or securities, subject to various conditions and investment options.

• A local government investment pool, subject to certain conditions.

The district has adopted an investment policy which permits all investments allowed under the state statutes as described above.

Custodial Risk - Deposits: Is the risk that, in the event of a financial institution failure, the district's deposits may not be returned to the district. The district’s carrying value for demand deposits and certificates of deposit were $395,987 at June 30, 2007 and the bank’s carrying value was $688,668, which was insured or collateralized.

Custodial Risk - Investments: 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.

Interest Rate Risk: As a means of limiting its exposure to fair value losses arising from rising interest rates, the district’s investment policy limits the maturity of any security to no more than seven years from the date of purchase or in accordance with state statutes.

Credit Risk: Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligation. The district’s investment policy minimizes credit risk by limiting investments to the safest type of securities.


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NOTE 3 - CASH AND INVESTMENTS (continued)

Concentration of Credit Risk: Is the risk of loss attributed to the magnitude of the district’s investment in a single issuer. The district has entered into an intergovernmental cooperation agreement with the City of Madison whereby excess funds are invested by the City of Madison as permitted by Wisconsin Statutes Sec. 66.0603. Returns are allocated based on the actual daily balance of funds on deposit. The district can withdraw its funds in total with 10 days written notice.


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NOTE 4 - CAPITAL ASSETS

Capital asset balances and activity for the year ended June 30, 2007 were as follows:

Beginning EndingBalance Increases Decreases Balance

Governmental Activities:Capital assets not being depreciated:

Sites (land) 11,281,817$ -$ -$ 11,281,817$ Construction in progress 913,101 3,484,221 (1,020,114) 3,377,208

Total capital assets not being depreciated: 12,194,918 3,484,221 (1,020,114) 14,659,025

Capital assets being depreciated:Buildings and building improvements 221,894,150 1,998,873 - 223,893,023 Furniture and equipment 22,149,303 590,638 (894,667) 21,845,274

Total capital assets being depreciated: 244,043,453 2,589,511 (894,667) 245,738,297

Less accumulated depreciation for:Site Improvements (1,162,342) (77,231) - (1,239,573) Building & building improvements (92,590,315) (4,466,897) - (97,057,212) Furniture and equipment (25,081,600) (603,248) 888,804 (24,796,044)

Total accumulated depreciation (118,834,257) (5,147,376) 888,804 (123,092,829)

Total capital assets being depreciated, net of accumulated depreciation 125,209,196 (2,557,865) (5,863) 122,645,468

Governmental activites capital assets,net of accumulated depreciation 137,404,114$ 926,356$ (1,025,977)$ 137,304,493$

Business-type activites:Capital assets being depreciated:Furniture and equipment 1,234,443$ -$ -$ 1,234,443$ Less: accumulated depreciation (820,171) (9,762) - (829,933)

Business-type activities capital assets,net of accumulated depreciation 414,272$ (9,762)$ -$ 404,510$


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NOTE 4 - CAPITAL ASSETS (continued)

Depreciation expense was charged to governmental functions as follows:

Regular Instruction 242,822$ Vocational Instruction 51,924 Other Instruction 49,425 Pupil Services 86,028 Instructional Staff Services 30,938 General Admin 142,111 Depreciation not charged to a specific function 4,544,128

Total depreciation for governmental activities 5,147,376$

NOTE 5 - INTERFUND BALANCES AND ACTIVITY

Interfund receivable and payable balances in the fund financial statements on June 30, 2007are as follows:

Due From Due to Fund Other Funds Other Funds

General Fund 2,119,347$ 2,053,518$ Special Trust Revenue 16,740 -

Special Education Fund - 494,153 Debt Service Fund 749,183 - Capital Projects Fund 157,568 208,886 Community Service Fund 1,022,720 - Package Coop Fund 103,345 583,541

Total governmental activities 4,168,903 3,340,098

Food Service Fund - 832,767 Fiduciary Trust Fund 3,962 -

Total proprietary and fiduciary 3,962 832,767

Totals 4,172,865$ 4,172,865$

In the statement of net assets, amounts reported in fund balance sheets as interfund balances have been eliminated within the governmental activities columns. The residual internal balance between the governmental activities and business-type activities of $832,767 is not eliminated. The net amount due to the fiduciary trust funds of $3,962 is reported as an external accounts payable in the statement of net assets.


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NOTE 5 - INTERFUND BALANCES AND ACTIVITY (continued)

Interfund balances generally arise from the District’s policy to pool cash and investments and hold those account balances in the General Fund. In addition, interfund balances in the Special Education Fund result from expenditures made prior to receiving grant funds.

Interfund transfers at June 30, 2007 were as follows:

Transfers In Transfers Out

General Fund 628,566$ 41,387,633$ Special Education Fund 40,488,422 - Special Revenue Trust Fund 100,595 - Capital Projects Fund - 972,303 Community Service Fund - 620,000 Debt Service Fund 966,966 - Package Co-op Fund 541,613 3,228

Total governmental activities 42,726,162 42,983,164

Business-type activities 257,002 -

Total transfers 42,983,164$ 42,983,164$

Fund

The district transfers from the general fund to the special education fund to cover any costs not covered by direct revenues. In addition, the district transfers from the general fund to the food service fund amounts to cover any deficit.


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NOTE 6 - FUND BALANCES

The components of the governmental fund balances are as follows:

Capital General Projects Nonmajor

Fund Fund Funds Total

ReservedInventories and prepaids 494,097$ -$ -$ 494,097$ Bassett Fund 392,277 - - 392,277 Debt service - - 872,773 872,773 Total reserved 886,374 - 872,773 1,759,147

UnreservedDesignated

Cash flow 19,331,041 - - 19,331,041 School activities 386,556 - - 386,556 Donations and projects 59,496 - 1,154,337 1,213,833 Capital improvements - 17,382,606 - 17,382,606

Total unreserved 19,777,093 17,382,606 1,154,337 38,314,036

Total 20,663,467$ 17,382,606$ 2,027,110$ 40,073,183$

NOTE 7 - EXCESS OF ACTUAL EXPENDITURES OVER BUDGET IN INDIVIDUAL FUNDS

The following funds had an excess of actual expenditures over budget for the year ended June 30, 2007.

Individual ExcessFund Expenditures

General Fund $4,330,123Capital Project $3,074,898Package Co-op Fund (nonmajor) $1,204,678


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NOTE 8 - SHORT-TERM DEBT

The district issues tax anticipation notes in advance of property tax collections. The notes arenecessary because payments for the year begin in July whereas the tax collections are received from the municipalities beginning in January. Short-term debt activity for the year ended June 30, 2007 was as follows:

Beginning EndingBalance Issued Redeemed Balance

Tax anticipation notes, dueSeptember 8, 2006 76,300,000$ -$ 76,300,000$ -$

Tax anticipation notes, dueSeptember 7, 2007 - 79,600,000 - 79,600,000

Totals 76,300,000$ 79,600,000$ 76,300,000$ 79,600,000$

NOTE 9 - LONG-TERM OBLIGATIONS

Long-term obligations of the district are as follows:

Beginning Ending Due WithinBalance Additions Reductions Balance One Year

Governmental Activities:Notes and loans 4,782,970$ 524,154$ 3,840,810$ 1,466,314$ 219,436$ Bonds 32,900,000 30,365,000 11,075,000 52,190,000 4,165,000

Subtotal 37,682,970 30,889,154 14,915,810 53,656,314 4,384,436

Capital leases 10,334,341 211,102 1,874,837 8,670,606 1,885,090 Unfunded Wisconsin

Retirement liability 31,972,215 2,324,511 2,422,290 31,874,436 2,324,511 Vested employee

benefits 24,375,631 8,774,252 5,989,304 27,160,579 3,016,122

Total 104,365,157$ 42,199,019$ 25,202,241$ 121,361,935$ 11,610,159$

Business-type Activities:Capital leases 347,389$ -$ 38,267$ 309,122$ 39,637$

Type

Payments on bonds and notes are made by the debt service fund. Capital leases are paid by the general and food service funds. Vested employee benefits will be liquidated by several of the governmental funds.


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NOTE 9 - LONG-TERM OBLIGATIONS (continued)

GENERAL OBLIGATION DEBT

All general obligation debt is secured by the full faith, credit, and unlimited taxing powers of the district. General obligation debt at June 30, 2007, is comprised of the following individual issues.

Average Dates ofIssue Interest of Balance

Description Dates Rates % Maturity June 30, 2007

Notes payable 7/9/1998 5.75% 3/15/2008 $ 14,880 Notes payable 7/21/1999 5.25% 3/15/2009 114,720 Notes payable 6/30/2001 5.25% 3/15/2011 42,366 Notes payable 11/27/2002 4.50% 3/15/2012 103,289 Notes payable 6/25/2003 4.50% 3/15/2013 54,408 Notes payable 11/27/2002 4.50% 3/15/2012 318,070 Notes payable 6/25/2003 4.00% 3/15/2008 13,264 Notes payable 9/15/2003 5.25% 3/15/2013 50,659 Notes payable 9/16/2004 4.00% 3/15/2009 47,794 Notes payable 9/21/2004 4.50% 3/15/2014 106,864 QZAB payable 4/15/2002 1.50% 4/15/2012 350,000 QZAB payable 12/28/2004 0.00% 12/28/2014 250,000 Bonds payable 3/1/1993 4.75% 4/1/2012 3,000,000 Bonds payable 7/1/1995 5.29% 4/1/2015 5,200,000 Bonds payable 6/1/1997 5.22% 4/1/2017 3,225,000 Bonds payable 4/1/2000 5.53% 10/1/2020 10,400,000 Bonds payable 3/15/2007 3.95% 9/1/2026 30,365,000

Total 53,656,314$


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Aggregate cash flow requirements for the retirement of long-term principal and interest on general obligation debt on June 30, 2007, follows:

Year EndedJune 30, Principal Interest Totals

2008 4,384,436$ 2,403,235$ 6,787,671$ 2009 5,360,395 2,251,701 7,612,096 2010 5,427,581 2,012,468 7,440,049 2011 5,603,211 1,775,153 7,378,364 2012 3,834,073 1,525,550 5,359,623

2013-2017 13,081,618 5,447,065 18,528,683 2018-2022 10,825,000 2,340,562 13,165,562 2023-2027 5,140,000 536,762 5,676,762

Totals 53,656,314$ 18,292,496$ 71,948,810$

The 2007 equalized valuation of the district as certified by the Wisconsin Department of Revenue is $21,746,120,930 The legal debt limit and margin of indebtedness as of June 30, 2007, in accordance with Section 67.03(1)(b) of the Wisconsin Statues follows:

Debt limit (10% of $21,746,120,930) $ 2,174,612,093 Deduct long-term debt application to debt

margin 53,656,314

Margin of indebtedness $ 2,120,955,779

CAPITAL LEASES

Leased property under capital leases on June 30, 2007 includes equipment with an original cost of $17,260,918. The following is a schedule by years of future minimum lease payments under capital leases together with the present value of the net minimum lease payments as of June 30, 2007:


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CAPITAL LEASES (continued)

The District obtained $3,658,778 of lease obligations through the TEACH Wiring Loan Fund Program. The TEACH Wiring Loan Fund Program, in addition to providing the initial lease, is also a financial assistance program, and accordingly 50% of the annual lease is expected to be financed by the TEACH Program upon receipt of the District’s annual payment, due beginning March, 2001 through March, 2011. At the time of the final payment in 2011, 50% will have been funded by the District and 50% will have been funded by the TEACH program.

Year Ended June 30,

2008 $ 2,286,4842009 1,903,4292010 1,481,7882011 1,481,9642012 1,027,6302013-2017 2,002,846

Total minimum lease payments 10,184,141Less: amount representing interest (1,204,413)

Present value of net minimum lease payments $ 8,979,728

REFUNDING DEBT

In March 2007, the District issued $30,250,000 General Obligation Refunding Bonds partially in order to pay the remaining balances on certain State Trust and general obligation bonds. At June 30, 2007, $12,906,206 of notes/bonds outstanding were paid in full. Of this amount, $10,440,234 was paid directly from proceeds of new refunding bonds. The transaction resulted in an economic gain of $400,000.


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NOTE 10 - EMPLOYEE RETIREMENT PLANS

Defined Benefit Pension Plan

All eligible District employees participate in the Wisconsin Retirement System ("System"), a cost-sharing multiple-employer public employee retirement system (PERS). All permanent employees expected to work over 600 hours a year (nonteachers) and 440 hours a year (teachers) are eligible to participate in the System. Covered employees in the General/Teacher category are required by statute to contribute 5.6% of their salary to the plan. Employers may make these contributions to the plan on behalf of employees, which the district does. Employers are required to contribute an actuarially determined amount necessary to fund the remaining projected cost of future benefits.

The payroll for employees covered by the system for the year ended June 30, 2007, was $173,020,740; the employer's total payroll was $185,447,585. The total required contribution for the year ended June 30, 2007 was $20,655,941. Total contributions for the years ended June 30, 2006and 2005 were $20,344,387 and $20,186,934, respectively, equal to the required contributions for the year.

Employees who retire at or after age 65 are entitled to receive a retirement benefit. Employees may retire at age 55 and receive actuarially reduced benefits. The factors influencing the benefit are: (1) final average earnings, (2) years of creditable service, and (3) a formula factor. Final Average Earnings is the average of the employees' three highest years earnings. Employees terminating covered employment before becoming eligible for a retirement benefit may withdraw their contributions and, by doing so, forfeit all rights to any subsequent benefit. For employees beginning participation after January 1, 1990 and no longer actively employed on or after April 24, 1998, creditable service in each of five years is required for eligibility for a retirement annuity. Participants employed prior to 1990 and on or after April 24, 1998 are immediately vested.

The District’s pension related debt at June 30, 2007 was $31,874,436.

The System also provides death and disability benefits for employees. Eligibility for and the amount of all benefits is determined under Chapter 40 of the State Statutes. The System issues an annual financial report which may be obtained by writing to the Department of Employee Trust Funds, P.O. Box 7931, Madison, WI 53707-7931.

Administrator’s Retirement Plan

The district has an administrators' retirement plan which covers eligible administrators with over 10 years of experience with the district. The plan requires contributions by administrators electing to participate in the plan. The district is required to make a defined contribution ranging from $30,000 to $36,000 to the plan upon the administrators' retirement for administrators with at least 15 years of service. The district contributed $182,120 to the plan for the year ended June 30, 2007.


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NOTE 11 - COMMITMENTS AND CONTINGENT LIABILITIES

The district has several legal cases that it is defending. Although the outcome of these lawsuits is not presently determinable, it is the opinion of the District’s counsel that resolution of these matters will not have a material adverse effect on the financial condition of the District.

As of June 30, 2007, the District has construction commitments of approximately $13 million related to construction in progress at year end. It is anticipated that the construction will be completed during fiscal year 2008.

The special education employee’s labor contract expired in 2006, and remained unsettled as of June 30, 2007. The District estimates the retroactive pay due to the special education employees as of June 30, 2007 to be $274,500.

NOTE 12 - SELF-FUNDED INSURANCE PROGRAMS

On January 1, 1992 the district established a self-funded health benefit plan for its employees. The plan administrator is responsible for the approval, processing and payment of claims, after which the plan administrator bills the district each month for reimbursement. The plan reports on a calendar year.

Accounting and budgeting requirements for the plan are established by the Wisconsin Department of Public Instruction. The plan is accounted for in the General Fund.

At June 30, 2007, the district reported a liability of $1,316,963, which represents reported and unreported claims which were incurred on or before June 30, 2007, but were not paid by the district as of that date. This amount consists of claims reported to the district by the plan administrator, claims reported to the plan administrator but not the district and claims which were not yet reported to either the plan administrator or the district. The amounts not reported to the district were estimated by the district based on a monthly accrual rate per employee depending on single versus family coverage. Reported claims and claims incurred but not reported:

Claims andBeginning Changes in Claim EndingBalance Estimates Payments Balance

Health Benefit Plan:2005 - 2006 1,374,629 5,340,350 5,289,863 1,425,116 2006 - 2007 1,425,116 2,897,092 3,973,432 348,776

Dental Benefit Plan:2005 - 2006 - 2,835,847 2,095,723 740,124 2006 - 2007 740,124 3,336,938 3,108,875 968,187


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NOTE 13 - LIMITATION ON SCHOOL DISTRICT REVENUES

Wisconsin statutes limit the amount of revenues school districts may derive from general school aids and property taxes unless a higher amount is approved by a referendum. This limitation does not apply to revenues needed for the payment of any general obligation debt service (including refinanced debt) authorized by either of the following:

• A resolution of the school board or by referendum prior to August 12, 1993.

• A referendum on or after August 12, 1993.

NOTE 14 - RISK MANAGEMENT

The district is exposed to various risks of losses related to torts; theft of, damage to, and destruction of assets; errors and omissions; employee health and accident claims; and natural disasters. For all risks of loss, except employee health, the district’s policy is to purchase commercial insurance. Settled claims have not exceeded commercial coverage in any of the past three years and there has been no significant reductions in insurance coverage from coverage in the prior year.

NOTE 15 - PROSPECTIVE ACCOUNTING PRONOUNCEMENTS

Governmental Accounting Standards Board (GASB) 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions was issued June 2004. This Statement establishes standards for the measurement, recognition, and display of other postemployment benefits (OPEB) expense/expenditures and related liabilities (assets), note disclosures, and, if applicable, required supplementary information (RSI) in the financial reports of employers. This Statement is effective with fiscal year 2008 and the District will be required to report the current obligation, as well as the unfunded prior service liability for other post retirement benefits.

This information is an integral part of the accompanying financial statements.

REQUIRED SUPPLEMENTARY INFORMATION

MADISON METROPOLITAN SCHOOL DISTRICTBUDGETARY COMPARISON SCHEDULE FOR THE GENERAL FUND

BUDGET AND ACTUALFor the Year Ended June 30, 2007

Variance withOriginal Final Actual Final Budget

Revenues:Property taxes 194,012,823$ 194,012,823$ 194,172,051$ 159,228$ Other local sources 7,475,832 7,560,817 7,890,902 330,085 Intermediate sources - 25,988 30,121 4,133 Interdistrict sources 1,112,992 1,112,992 1,004,159 (108,833) State sources 67,093,356 67,162,258 67,446,773 284,515 Federal sources 8,032,622 9,954,146 8,473,715 (1,480,431) Other sources 1,383,674 1,383,674 3,440,675 2,057,001

Total revenues 279,111,299 281,212,698 282,458,396 1,245,698 Expenditures:

Instruction: Regular instruction 120,374,047 118,614,285 118,709,101 (94,816) Vocational instruction 5,211,290 5,215,824 5,106,772 109,052 Special instruction 205,923 185,923 154,282 31,641 Other instruction 9,328,585 9,625,338 9,706,466 (81,128)

Total instruction 135,119,845 133,641,370 133,676,621 (35,251) Support services:

Pupil services 7,248,054 7,302,525 10,751,836 (3,449,311) Instructional staff services 12,427,717 13,802,804 13,079,358 723,446 General administration services 20,952,297 21,144,914 21,423,585 (278,671) Building administration services 34,332,824 33,866,475 32,970,508 895,967 Pupil transportation 9,520,084 9,956,368 9,560,883 395,485 Principal and interest 4,958,683 4,958,683 4,968,863 (10,180) Other support services 9,471,511 10,880,968 13,192,752 (2,311,784)

Total support services 98,911,170 101,912,737 105,947,785 (4,035,048) Non-program 1,479,649 1,479,648 1,739,472 (259,824)

Total expenditures 235,510,664 237,033,755 241,363,878 (4,330,123)

Excess (deficiency) of revenuesover expenditures 43,600,635 44,178,943 41,094,518 (3,084,425)

Other financing sources (uses):Transfer in 620,000 620,000 628,566 8,566 Transfer out (46,111,257) (46,123,406) (41,387,633) 4,735,773

Net change in fund balance (1,890,622) (1,324,463) 335,451 1,659,914

Fund balance - beginning of year 20,328,016 20,328,016 20,328,016 -

Fund balance - end of year 18,437,394$ 19,003,553$ 20,663,467$ 1,659,914$

Budgeted Amounts

These financial statements should be read only in connection with the notes to required supplementary information.

48

MADISON METROPOLITAN SCHOOL DISTRICTBUDGETARY COMPARISON SCHEDULE FOR THE SPECIAL EDUCATION FUND

BUDGET AND ACTUALFor the Year Ended June 30, 2007

Variance withOriginal Final Actual Final Budget

Revenues:Other local sources 40,000$ 40,000$ 40,607$ 607$ Intermediate sources - 2,500 2,113 (387) Interdistrict sources 605,224 605,224 624,634 19,410 State sources 16,606,771 16,590,249 17,128,135 537,886 Federal sources 5,923,506 6,695,835 5,455,662 (1,240,173)

Total revenues 23,175,501 23,933,808 23,251,151 (682,657)

Expenditures:Regular instruction 509,757 661,233 406,769 254,464 Special instruction 50,380,225 50,196,077 48,735,303 1,460,774 Other instruction 5,999 5,999 5,214 785

Total instruction 50,895,981 50,863,309 49,147,286 1,716,023 Support services:

Pupil services 12,103,152 12,043,531 8,758,862 3,284,669 Instructional staff services 2,450,902 2,783,077 2,094,972 688,105 General administration services 135,267 135,232 285,053 (149,821) Building administration services 119,715 239,430 27,200 212,230 Pupil transportation 3,335,272 3,440,272 3,113,284 326,988 Other support services 145,875 1,021,900 312,916 708,984

Total support services 18,290,183 19,663,442 14,592,287 5,071,155 Total expenditures 69,186,164 70,526,751 63,739,573 6,787,178

Excess (deficiency) of revenuesover expenditures (46,010,663) (46,592,943) (40,488,422) 6,104,521

Other financing sources:Transfer in 46,010,663 46,010,663 40,488,422 (5,522,241)

Net change in fund balance - (582,280) - 582,280

Fund balance - beginning of year - - - -

Fund balance - end of year -$ (582,280)$ -$ 582,280$

Budgeted Amounts

These financial statements should be read only in connection with the notes to required supplementary information.

49

50

MADISON METROPOLITAN SCHOOL DISTRICTNOTES TO REQUIRED SUPPLEMENTARY INFORMATION

June 30, 2007

NOTE 1 - BUDGET SCHEDULE

Budgets are adopted each fiscal year for all funds in accordance with Section 65.90 of the Wisconsin Statutes, using the budgetary accounting basis prescribed by the Wisconsin Department of Public Instruction, which is in substantially accordance with generally accepted accounting principles. The legally adopted budget and budgetary expenditure control is exercised at the fund level for all funds. Reported budget amounts are as originally adopted or as amended by the School Board resolution.

The district follows these procedures in establishing the budgetary data reflected in the financial statements.

• Based upon requests from district staff, district administration recommends budget proposals to the School Board.

• The School Board prepares a proposed budget including proposed expenditures and the means of financing them for the July 1 through June 30 fiscal year.

• A public notice is published containing a summary of the budget and identifying the time and place where a public hearing will be held on the proposed budget.

• Pursuant to the public budget hearing, the School Board may alter the proposed budget.

• After the School Board (following the public hearing) adopts the budget, no changes may be made in the amount of tax to be levied or in the amount of the various appropriations and the purposes of such appropriations unless authorized by a 2/3 vote of the entire School Board.

NOTE 2 - CAPITAL LEASES

The District budgets for certain capital leases in the functional expenditures of the general fund. This differs from the fund statements where all capital lease payments are reported as debt service expenditures.

OTHER SUPPLEMENTARY INFORMATION

MADISON METROPOLITAN SCHOOL DISTRICTCOMBINING BALANCE SHEET

NONMAJOR GOVERNMENTAL FUNDSJune 30, 2007

Special Rev Debt Community PackageTrust Service Service Co-opFund Fund Fund Fund Total

AssetsCash and investments -$ 123,590$ 20,401$ -$ 143,991$ Accounts Receivable 100,000 - - 609,207 709,207 Due from other funds 16,740 749,183 1,022,720 103,345 1,891,988

Total assets 116,740$ 872,773$ 1,043,121$ 712,552$ 2,745,186$

Liabilities:Payroll and related benefits payable -$ -$ 5,524$ -$ 5,524$ Deferred revenues - - - 129,011 129,011 Due to other funds - - - 583,541 583,541

Total liabilities - - 5,524 712,552 718,076

Fund balancesReserved for debt service - 872,773 - - 872,773 Designated for future projects 116,740 - 1,037,597 - 1,154,337

Total fund balances 116,740 872,773 1,037,597 - 2,027,110

Total liabilities and fund balances 116,740$ 872,773$ 1,043,121$ 712,552$ 2,745,186$

51

MADISON METROPOLITAN SCHOOL DISTRICTCOMBINING STATEMENT OF REVENUES, EXPENDITURES AND

CHANGES IN FUND BALANCESNONMAJOR GOVERNMENTAL FUNDS


Special Rev Debt Community PackageTrust Service Service Co-opFund Fund Fund Fund Total

Revenues:Property taxes -$ 5,336,525$ 9,930,331$ -$ 15,266,856$ Other local sources 818,192 21,381 2,196,121 1,546,376 4,582,070 State sources - - - 62,639 62,639 Federal sources - - 813,403 146,451 959,854 Other sources - 51,833 - 29,895 81,728

Total revenues 818,192 5,409,739 12,939,855 1,785,361 20,953,147

ExpendituresInstruction:

Regular instruction 296,579 - 494,670 - 791,249 Vocational instruction 51,638 - - 93,161 144,799 Other instruction 94,943 - - - 94,943

Total instruction 443,160 - 494,670 93,161 1,030,991 Support services:

Instructional staff services 102,130 - 1,045,705 308,814 1,456,649 Pupil Services 58,952 - 54,392 - 113,344 Building administration services 199,388 - 600,144 1,921,771 2,721,303 Community services - - 9,480,221 - 9,480,221 Other Support services - - 156,615 - 156,615 Debt service - 17,028,655 4,261 - 17,032,916

Total support services 360,470 17,028,655 11,341,338 2,230,585 30,961,048 Total expenditures 803,630 17,028,655 11,836,008 2,323,746 31,992,039

Excess (deficiency) of revenues over expenditures 14,562 (11,618,916) 1,103,847 (538,385) (11,038,892)

Other financing sources (uses):Transfer in 100,595 966,966 - 541,613 1,609,174 Transfer out - - (620,000) (3,228) (623,228) Long-term debt issued - 10,440,224 - - 10,440,224

Net change in fund balances 115,157 (211,726) 483,847 - 387,278

Fund balances - beginning of year 1,583 1,084,499 553,750 - 1,639,832

Fund balances - end of year 116,740$ 872,773$ 1,037,597$ -$ 2,027,110$

52

VarianceFinal with Final

Budget Actual Budget

Revenues:Local Sources 1,008,737$ 818,192$ (190,545)$

Expenditures:Regular Instruction 323,499 296,579 26,920 Vocational Instruction 71,705 51,638 20,067 Other Instruction 47,824 94,943 (47,119) Total instruction 443,028 443,160 (132) Support services:

Pupil Services 71,552 58,952 12,600 Instructional staff services 140,778 102,130 38,648 Building administration and other services 522,788 199,388 323,400

Total support services 735,118 360,470 374,648 Total expenditures 1,178,146 803,630 374,516

Excess (deficiency) of revenues over expenditures (169,409) 14,562 183,971

Other financing sources:Transfer in - 100,595 100,595

Net change in fund balance (169,409) 115,157 284,566

Fund balance - beginning of year 1,583 1,583 -

Fund balance (deficit) - end of year (167,826)$ 116,740$ 284,566$


CHANGES IN FUND BALANCE

MADISON METROPOLITAN SCHOOL DISTRICTSTATEMENT OF REVENUES, EXPENDITURES AND

SPECIAL REVENUE TRUST FUNDBUDGET AND ACTUAL

53

MADISON METROPOLITAN SCHOOL DISTRICTSTATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE

DEBT SERVICE FUNDBUDGET AND ACTUAL




Revenues:Property taxes 5,336,525$ 5,336,525$ -$ Interest Earnings - 21,381 (21,381) Other Sources - 51,833 (51,833)

5,336,525 5,409,739 (73,214)

Expenditures:Principal and interest 17,028,656 17,028,655 1

Excess (deficiency) of revenues over expenditures (11,692,131) (11,618,916) 73,215

Other financing sources:Transfer in 959,000 966,966 (7,966) Long-term debt issued 10,440,224 10,440,224 -

Net change in fund balance (292,907) (211,726) 65,249

Fund balance - beginning of year 1,084,499 1,084,499 -

Fund balance - end of year 791,592$ 872,773$ 65,249$

54


COMMUNITY SERVICE FUNDBUDGET AND ACTUAL

Year Ended June 30, 2007



Revenues:Property taxes 9,930,331$ 9,930,331$ -$ Other local sources 2,254,758 2,196,121 (58,637) Federal sources 807,062 813,403 6,341

Total revenues 12,992,151 12,939,855 (52,296)

Revenues:Instruction - regular instruction 461,611 494,670 (33,059) Support services

Pupil Services 75,646 54,392 21,254 Instructional staff services 1,068,518 1,045,705 22,813 Building administration services 592,845 600,144 (7,299) Other Support services 235,080 156,615 78,465 Community services 10,516,756 9,480,221 1,036,535 Debt Service - 4,261 (4,261)

Total expenditures 12,950,456 11,836,008 1,114,448

Excess (deficiency) of revenues over expenditures 41,695 1,103,847 1,062,152

Other financing usesTransfer out (620,000) (620,000) -

Net change in fund balance (578,305) 483,847 1,062,152

Fund balance - beginning of year 553,750 553,750 -

Fund balance (deficit) - end of year (24,555)$ 1,037,597$ 1,062,152$

55


PACKAGE CO-OP FUNDBUDGET AND ACTUAL


Original and VarianceFinal with Final


Revenues:Other school districts 534,930$ 1,546,376$ 1,011,446$ Federal sources 158,775 146,451 (12,324) State sources 62,639 62,639 - Other sources - 29,895 29,895

Total revenues 756,344 1,785,361 1,029,017

Expenditures:Instruction - vocational instruction 17,400 93,161 (75,761) Support services

Instructional staff services 309,847 308,814 1,033 Business administration services 791,821 1,921,771 (1,129,950)

Total support services 1,101,668 2,230,585 (1,128,917) Total expenditures 1,119,068 2,323,746 (1,204,678)

Excess (deficiency) of revenues over expenditures (362,724) (538,385) (175,661)

Other financing uses/sources:Transfer out - (3,228) (3,228) Transfer in 362,724 541,613 178,889

Net change in fund balance - - -

Fund balance - beginning of year - - -

Fund balance - end of year -$ -$ -$

56

Documents

MADISON METROPOLITAN SCHOOL DISTRICT Madison, Wisconsin