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North East Independent School District Comprehensive Annual Financial Report Year Ended June 30, 2017 8961 Tesoro Drive San Antonio, Texas 78217

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North East Independent School District

Comprehensive

Annual Financial Report

Year Ended June 30, 2017

8961 Tesoro Drive

San Antonio, Texas 78217

North East Independent School District San Antonio, Texas

Comprehensive Annual Financial Report

Year Ended June 30, 2017

Report Issued by the Department of

Finance and Accounting

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North East Independent School District Comprehensive Annual Financial Report

Finance and Accounting Team:

Daniel Villarreal, CPA, RTSBA, Associate Superintendent for Business Services/ Chief Financial Officer

Brian Moy, Executive Director of Finance and Accounting

Mary Alex, CPA, Senior Director of Grants Administration and Financial Control

Jeff Coats, Senior Director of Accounting and Payroll

Steve Tovar, Senior Director of Risk Management, Employee Benefits, and Health Services

Susie Lackorn, Director of Budgets and Financial Analysis

Dee Troy, CPA, RTSBA, Senior Financial Analyst for Campus Support and Human Resources

Vanessa Terrazas, Senior Financial Analyst for Instruction

Nancy Bomer, Senior Financial Analyst for Business Services and Operations

Shanna Toborg, RTSBA, District Treasurer

Janie Villarreal, Senior Accounting Manager

Emma Jackson, CPP, Payroll Manager

Chana Floyd, Accounting Manager

Internal Audit:

Anthony J. Mitchell, CPA, Director of Internal Audit

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Page Exhibit INTRODUCTORY SECTION Letter of Transmittal v GFOA Certificate of Achievement x List of Elected Officials and Administrators xi Certificate of Board xii Organization Chart xiii FINANCIAL SECTION Independent Auditors Report 1 Managements Discussion and Analysis 5 Basic Financial Statements: Government-Wide Financial Statements: Statement of Net Position 21 A 1 Statement of Activities 22 B 1 Fund Financial Statements: Balance Sheet Governmental Funds 24 C 1 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position 26 C 2 Statement of Revenues, Expenditures, and Changes in Fund Balance Governmental Funds 28 C 3 Reconciliation of the Governmental Funds Statement of Revenues,

Expenditures, and Changes in Fund Balances to the Statement of Activities 30 C 4 Statement of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual General Fund 31 C 5 Statement of Net Position Proprietary Funds 32 D 1 Statement of Revenues, Expenses, and Changes in Fund Net Position Proprietary Funds 33 D 2 Statement of Cash Flows Proprietary Funds 34 D 3 Statement of Fiduciary Net Position Fiduciary Funds 36 E 1

Statement of Changes in Fiduciary Fund Net Position Fiduciary Funds 37 E 2

Notes to the Financial Statements 39 REQUIRED SUPPLEMENTARY INFORMATION Schedule of the Districts Proportionate Share Of the Net Pension Liability 90 G 1 Schedule of District Contributions 91 G 2

Page Exhibit SUPPLEMENTARY INFORMATION Combining and Individual Fund Statements and Schedules: Nonmajor Governmental Funds Fund Descriptions 95

Combining Balance Sheet Nonmajor Governmental Funds 102 H 1 Combining Statement of Revenues, Expenditures, and Changes In Fund Balances Nonmajor Governmental Funds 110 H 2 Internal Service Funds Fund Descriptions 117 Combining Statement of Net Position Internal Service Funds 120 H 3 Combining Statement of Revenues, Expenses, and Changes In Fund Net Position Internal Service Funds 122 H 4 Combining Statement of Cash Flows Internal Service Funds 124 H 5 Enterprise Funds Fund Descriptions 129 Combining Statement of Net Position Nonmajor Enterprise Funds 130 H 6 Combining Statement of Revenues, Expenses, and Changes In Fund Net Position Nonmajor Enterprise Funds 131 H 7 Combining Statement of Cash Flows Nonmajor Enterprise Funds 132 H 8 Agency Funds Fund Descriptions 134 Combining Statement of Changes in Assets and Liabilities All Agency Funds 135 H 9

Schedules Required by the Texas Education Agency: Schedule of Delinquent Taxes Receivable 138 J 1 Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual National School Breakfast and Lunch Program Fund 140 J 2 Schedule of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual Debt Service Fund 141 J 3 STATISTICAL SECTION (unaudited) Financial Trend Information: Government Wide Information Net Position by Component Last Ten Years 144 Governmental Activities Revenues and Expenses Last Ten Years 146 Business-Type Activities Revenues and Expenses Last Ten Years 148 General Revenues and Changes in Net Position Last Ten Years 150 Fund Balances, Governmental Funds Last Ten Years 152 Governmental Fund Revenues Last Ten Years 154 Governmental Fund Expenditures by Function Last Ten Years 156 General Fund Other Sources, Uses, and Changes in Fund Balance - Last Ten Years 158 General Fund Revenues per ADA Last Ten Years 160 General Fund Expenditures per ADA Last Ten Years 162

Page Exhibit Revenue Capacity Information Assessed and Actual Value of Taxable Property Last Ten Years 166 Direct and Overlapping Property Tax Rates Last Ten Years 168 Property Tax Levies and Collections Last Ten Years 170 Principal Property Taxpayers Current Year and Nine Years Prior 171 Allocation of Tax Rates and Levies Last Ten Years 172 Debt Capacity Information Outstanding Debt by Type Last Ten Years 174 Direct and Overlapping Debt as of June 30, 2017 175 Debt Margin Information Last Ten Years 176 Debt to Net Assessed Valuation Last Ten Years 178 Bonded Debt to Operating Expenditures Last Ten Years 180 Demographic and Economic Information Demographic and Economic Information Last Ten Years 182 Student Demographic Information Last Ten Years 183 Principal Employers Current Year and Nine Years Ago 184 Commercial and Residential Construction Last Ten Years 185 Operating Information Employees by Full Time Equivalent by Job Function Last Ten Years 188 Teacher Salary Comparison Last Ten Years 190 Operating Statistics Last Ten Years 191 Fidelity Bonds Current Year 192 School Building Information Last Ten Years 194 FEDERAL AWARDS SECTION Independent Auditors Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance With Government Auditing Standards 197 Independent Auditors Report on Compliance For Each Major Program and on Internal Control Over Compliance Required by the Uniform Guidance 199 Schedule of Findings and Questioned Costs 201 Summary Schedule of Prior Audit Findings 203 Schedule of Expenditures of Federal Awards 204 K 1 Notes to Schedule of Expenditures of Federal Awards 206

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November 13, 2017 Mrs. Shannon Grona, President, Board of Trustees, and Patrons of the North East Independent School District Dear Mrs. Grona, Board of Trustees, and Patrons: Management hereby submits the Comprehensive Annual Financial Report (CAFR) for the fiscal year ended June 30, 2017. The North East Independent School Districts (the District) Finance and Accounting Department prepared the CAFR in accordance with generally accepted accounting principles (GAAP). The CAFR is managements report of financial operations to the Board of Trustees (the Board), taxpayers, grantor agencies, employees, the Texas Education Agency, and other interested parties. The financial statements in this report provide an overview of the Districts operations and financial position as a whole and of its individual funds. Responsibility for the accuracy and completeness of the financial statements and fairness of the presentation, including all disclosures, rests with the District. We believe the data, as presented, is accurate in all material respects. The Texas Education Agency (TEA) requires all school districts publish within 150 days of the close of each fiscal year a complete set of financial statements presented in conformity with GAAP and audited in accordance with generally accepted auditing standards (GAAS) by a firm of licensed certified public accountants. Managements Discussion and Analysis (MD&A) is a required narrative introduction, overview, and analysis of the basic financial statements and should be read in conjunction with this letter of transmittal. The Districts MD&A can be found immediately following the report of the independent auditors. DISTRICT PROFILE The District provides a full range of educational services appropriate to grade levels Pre-K through 12. These include regular and enriched academic education, special education for students with disabilities, gifted and talented classes and many individualized programs, such as specialized instruction for at-risk students and those with limited English proficiency. These basic programs are supplemented by a wide variety of offerings in career and technology, fine arts, and athletics.

North East Independent School District 8961 TESORO DRIVE, SAN ANTONIO, TEXAS 78217

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The District encompasses approximately 140 square miles in north and northeast Bexar County. Founded in 1949, the District has operated as an independent school district since 1955. The District is one of the largest districts in the State of Texas with a projected enrollment of approximately 66,000 students for the 2017-2018 school year. The District is an urban-suburban community, lying within the boundaries of San Antonio and encompassing several smaller municipalities. All campuses are fully accredited by the TEA. The District tailors its instructional programs to enrich and expand student learning and exposure to the tenets of responsible citizenship. District leaders believe this philosophy is instrumental in keeping the completion rate high (95%) and the Districts number of college-bound students high. The Board constitutes the governing body elected from seven single-member districts and sets the tone for instruction and service to students and patrons with its mission statement and goals. Internal and Budgetary Controls The District has established a comprehensive internal control framework designed both to protect the Districts assets from loss, theft or misuse and to compile sufficiently reliable information for the preparation of the Districts financial statements in conformity with GAAP. Internal controls are designed to provide management with reasonable, but not absolute, assurance assets are safeguarded against loss from unauthorized use or disposition and those transactions are executed in accordance with managements authorization and recorded properly. The concept of reasonable assurance recognizes the cost of a control should not exceed the benefits likely to be derived, and the evaluation of costs and benefits requires estimates and judgments by management. As a recipient of federal, state and local grants, the District is also responsible for an adequate internal control structure that ensures compliance with applicable laws and regulations related to the grants. All funded grants are subject to testing as part of the Districts Single Audit as mandated by the Single Audit Act Amendments of 1996 and Title 2 United States Code of Federal regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). The results of the Districts Single Audit for the fiscal year ended June 30, 2017, provided no instances of material weaknesses in the internal control structure or significant violations of applicable laws and regulations. The report may be viewed in the Federal Awards section of the CAFR. Budgetary controls are established in accordance with TEA regulations and District policy for all managers with line-item responsibility. TEA regulations set the level of budgetary control at the functional expenditure level. The Board authorized the administration, through resolution, to provide budgetary transfers when there is no impact on the fund balance. These transfers are approved by the Board in a subsequent budget amendment. The Board must approve all budget amendments impacting fund balance of the General, Debt Service and National School Breakfast and Lunch Program Funds. The District utilizes a line-item budget of proposed expenditures and the means of financing them. The emphasis of the budget process is to identify the activities requiring resources and to rank those activities according to the needs of the entire District. Administrators have the responsibility to develop and manage their own program budgets once approved. Budget amendments are presented to the Board for approval throughout the fiscal year. Summary of Achievements The Districts achievements continue to be heralded in local, state and national publications. The success of the District is evidenced in its students high standardized test scores, Advanced Placement Program

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participation and abundant scholarships and awards presented to the Districts students. The District enjoys a well-deserved reputation for academic and financial excellence, and continues to receive numerous accolades for the performance of its students. Most recently, the District has been recognized for the following:

The District received a rating of Superior on the Schools Financial Integrity Rating System of Texas (FIRST). This is the 15th year in a row the District has earned the States highest financial accountability rating.

The Districts administrative costs as a percent of instructional costs for 2015-2016 was 5.1 percent. This was the lowest of all districts in Bexar County and places the District in the top three percent of all Texas school districts.

In 2016-2017, the District had 20 National Merit Finalists, 22 National Merit Semifinalists, 52 Commended Scholars, and 78 Hispanic Scholars.

Almost 90 percent of the Districts 2017 graduates planned to attend a two-year, four-year, trade, technical, or business school/institution. They received $81.2 million in scholarship offers.

In 2017, the District graduated 950 Summa Cum Laude students (100+ average). ECONOMIC CONDITION AND OUTLOOK Property Tax and State Education Funding School districts in the State of Texas are funded through two main sources of revenue: local property taxes and State aid that is based on the number of students in attendance in the District, the type of instructional services provided, and the school districts property wealth and tax collection efforts. Additional property tax revenue can be generated by increasing the property tax rate or by an increase in valuation of property within the district. Since 2007-2008, the District has levied a property tax rate for maintenance and operations (M&O) of $1.04 per hundred dollars of taxable property value the maximum rate that a school district can levy without prior approval by district voters. Property values within the District are projected to increase by approximately $2.1 billion, or 5.7%, for the 2017-2018 fiscal year. The increase is expected to generate an additional $29.7 million of M&O property tax revenue. However, any local property value increase reduces State funding the following year. For example, the 2016-2017 property value increase of $2.7 billion will cause a reduction in State funding for 2017-2018 of at least $24.1 million. The District was able to lower its Interest & Sinking (I&S) tax rate for 2017-2018 by 2 cents, due to the increase in valuation and as a result of actively managing the Districts debt portfolio. This is the third consecutive year the District lowered the tax rate. In total, the tax rate was reduced 7.5 cents over the three years. Since 2007, the State legislature has significantly reduced education funding in Texas. The decrease in funding has occurred by first lowering the rate that school districts can assess for property taxes and, second, by altering the funding formulas used to allocate funding for education. The most noteworthy change was in 2011 when the Legislature cut funding statewide by more than $5 billion. In the 2015

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legislative session, funding was partially restored. Despite the partial restoration of funds for education in the State budget, many school districts are still receiving less revenue than under previous funding formulas. Compared to funding formulas prior to the 2011 legislative reductions, the District received $122 million less in State funding from 2011-2012 through 2015-2016. In 2015, the Legislature altered funding formulas again. First, the basic per-student allotment was increased 2% which increased formula aid by $10.5 million. However, this was almost entirely offset by a decrease in local property tax revenue from a State mandated increase in the homestead exemption. Hundreds of Texas school districts and charter schools filed lawsuits alleging the funding system created by the Texas Legislature in 2011 was unconstitutional. The lawsuits were consolidated by the 250th District Court of Travis County and the trial commenced in October 2012. In August 2014, District Court Judge John Dietz of Austin ruled that the States educational funding system is unconstitutional, as it (a) is inadequate to support a general diffusion of knowledge; (b) is inefficient as all students are not afforded substantially equal access to education funds, and (c) effectively creates a State-wide property tax. The State appealed the case to the Texas Supreme Court. In May 2016, the Texas Supreme Court ruled in favor of the State on all counts. Despite affirming the constitutionality of the system, the Court acknowledged the system is flawed and called for action by the Legislature. In its opinion, the Court noted, Our Byzantine school funding system is undeniably imperfect, with immense room for improvement. But it satisfies minimum constitutional requirement... We hope lawmakers will seize this urgent challenge and upend an ossified regime ill-suited for 21st century Texas. Unfortunately, the 2017 Legislative Session passed with no improvements to education funding Local & State Economy The local economy continues to be strong. The unemployment rate dipped slightly from 4.0 percent in August 2016 to 3.7 percent in August 2017, the lowest in the metropolitan area in more than twenty-five years. Per capita income has risen each of the past five years, and is now nearly 40 percent higher than ten years ago. Construction activity is well above pre-recession levels. The State of Texas rebounded from a slight slowdown in the economy in the States 2016 fiscal year. The economy generated 2.3 percent more in sales tax revenue for the State in their fiscal year 2017 than in fiscal year 2016. Although still substantially lower than five years ago, gross production value of crude oil jumped 25 percent compared to 2016. The unemployment rate for the State dropped from 4.7 percent in 2016 to 4.0 percent in 2017. Long-Term Financial Planning As one of the largest school districts in the State of Texas, and with an evolving student population, the District must plan ahead. Student enrollment and demographics drives the Districts planning process along with managements commitment to providing the best education possible to our students. The Districts strategic planning is an ongoing process led by the Superintendent and Executive Staff. The planning process begins with statistical analysis of the results of State mandated standardized testing and leads to the development of campus plans and educational programs to achieve the Districts goals. This planning process identifies the educational needs of the District to drive the campus plans and the proper allocation of all District resources.

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It is the responsibility of the Finance and Accounting Department to oversee the financial planning, tracking and accounting for the finances of the District in serving the community and its students. The Superintendents Office and Executive Staff oversee and coordinate all the elements involved in the strategic and financial planning process for the District on a long-term basis each fiscal year. The long-term financial plan for the District calls for the General Fund to maintain a year-end fund balance at or near 2.5 months of operations if possible. However, there are many factors outside of the Districts control that influence the Districts ability to achieve this, primarily the uncertainty of any Legislative action to improve State funding for education. AWARDS AND ACKNOWLEDGMENTS Certificate of Achievement for Excellence in Financial Reporting The Government Finance Officers Association (GFOA) of the United States and Canada awarded a Certificate of Achievement for Excellence in Financial Reporting to the District for its Comprehensive Annual Financial Report for the year ended June 30, 2016. In order to be awarded a Certificate of Achievement, a government unit must publish an easily readable and efficiently organized Comprehensive Annual Financial Report whose contents conform to program standards. Such reports must satisfy both GAAP and applicable legal requirements. This award is valid for a period of one year only. We believe our current report continues to conform to the Certificate of Achievement Program requirements, and we will once again submit it to the GFOA. Acknowledgments The preparation of this report on a timely basis involves the entire staff of the Finance and Accounting Department, including the Offices of Accounting and Payroll, Budget and Financial Analysis, Grant Administration and Financial Control, and Employee Benefits and Risk Management. We also want to express our appreciation to the bookkeepers and administrative assistants for their contributions to the process. We are grateful for everyones assistance in making this system work smoothly and efficiently. We thank our independent auditor ABIP, P.C., whose professional competence and leadership assisted us in developing this award-winning report.

//signature on file// //signature on file// Brian Gottardy, Ed.D., Superintendent of Schools Daniel Villarreal, CPA, RTSBA, Associate Superintendent for Business

Services/ Chief Financial Officer

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North East Independent School District

List of Elected Officials and Administrators

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Board of Trustees

Name Title

Mrs. Shannon Grona President Mrs. Brigitte Perkins Vice President Mrs. Sandy Hughey Secretary Mr. Tony Jaso Member Mr. Joseph Trevino Member Mr. Jim Wheat Member Mr. Edd White Member

Administrators

Name Title

Brian Gottardy, Ed.D. Superintendent of Schools Ronald D. Clary Associate Superintendent

of Operations Donna Newman, Ed.D. Associate Superintendent

of Instruction and Campus Administration

Daniel Villarreal, CPA Associate Superintendent

of Business Services/ Chief Financial Officer

Sean Maika, Ed.D. Interim Assistant Superintendent

of Instruction and Campus Administration

North East Independent School District

Certificate of Board

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North East Independent School District Bexar 015-910 Name of Local Education Agency County County-District Number

We, the undersigned, certify that the attached auditors report of the above-named school district was

reviewed and (check one) [ X ] approved [ ] disapproved for the year ended June 30, 2017, at a

meeting of the Board of School Trustees of such school district on the 13th day of November, 2017.

//signature on file// //signature on file// Signature of Board Secretary Signature of Board President

North East Independent School District

Organization Chart

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NEISD

COMMUNITY

BOARD OF

TRUSTEES

DIRECTOR OF

INTERNAL AUDIT

CHIEF OF

POLICE

SUPERINTENDENT EXECUTIVE DIRECTOR

COMMUNICATIONS

EXECUTIVE

ASSOCIATE

EXECUTIVE DIRECTOR

NORTH EAST EDU. FNDN.

ASSOCIATE SUPERINTENDENT

FOR BUSINESS SVS./CFO

ASSOCIATE SUPERINTENDENT

INST. & CAMPUS ADMIN

ASSOCIATE SUPERINTENDENT

OPERATIONS

ASSISTANT SUPERINTENDENT

CAMPUS ADMINISTRATIONS

EXECUTIVE DIRECTOR

FINANCE & ACCOUNTING

EXECUTIVE DIRECTOR ADULT

& COMMUNITY EDUCATION

EXECUTIVE DIRECTOR

LEARNING SUPPORT SERVICES

EXECUTIVE DIRECTOR

SCHOOL ADMINISTRATION

EXECUTIVE DIRECTOR CONST.

MGMT. & ENGINEERING

EXECUTIVE DIRECTOR

MIS

EXECUTIVE DIRECTOR

ATHLETICS

EXECUTIVE DIRECTOR

PERFORMANCE & PLANNING

EXECUTIVE DIRECTOR

SCHOOL ADMINISTRATION

EXECUTIVE DIRECTOR FAC.

MAINTENANCE & OPERATIONS

EXECUTIVE DIRECTOR

PROCUREMENT & ECOMMERCE

EXECUTIVE DIRECTOR

CURRICULUM & INSTRUCTION

EXECUTIVE DIRECTOR

SCHOOL ADMINISTRATION

EXECUTIVE DIRECTOR

SCHOOL ADMINISTRATION

EXECUTIVE DIRECTOR SCHOOL

NUTRITION SERVICES

EXECUTIVE DIRECTOR

TECHNOLOGY & LIBRARY SVC.

EXECUTIVE DIRECTOR FINE ARTS

& STUDENT ACTIVITIES

EXECUTIVE DIRECTOR

SPECIAL EDUCATION

PRINCIPALS EXECUTIVE DIRECTOR

TRANSPORTATION

EXECUTIVE DIRECTOR

HUMAN RESOURCES

EXECUTIVE DIRECTOR

STUDENT SUPPORT SERVICES

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INDEPENDENT AUDITORS REPORT

Board of Trustees North East Independent School District San Antonio, Texas

Report on the Financial Statements

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 North East Independent School District (the District) as of and for the year ended June 30, 2017, and the related notes to the financial statements, which collectively comprise the Districts basic financial statements as listed in the table of contents.

Managements Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors Responsibility

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

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatements of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entitys preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entitys internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

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

Opinions

In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund and the aggregate remaining fund information of North East Independent School District as of June 30, 2017, and the respective changes in financial position, and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America and the respective budgetary comparison for the General Fund.

Other Matters

Required Supplementary Information

Accounting principles generally accepted in the United States of America require that the Managements Discussion and Analysis; Schedule of the Districts Proportionate Share of the Net Pension Liability Teacher Retirement System of Texas; and Schedule of District Contributions Teacher Retirement System of Texas, as listed in the table of contents, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with managements responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

Other Information

Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise North East Independent School District's basic financial statements. The introductory section, combining and individual non-major fund financial statements, schedules required by the Texas Education Agency, and statistical section are presented for purposes of additional analysis and are not a required part of the basic financial statements. The schedule of expenditures of federal awards is presented for purposes of additional analysis as required by Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, and is also not a required part of the basic financial statements.

The combining and individual non-major fund financial statements, schedules required by the Texas Education Agency, and the schedule of expenditures of federal awards are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining and individual non-major fund financial statements, schedules required by Texas Education Agency, and the schedule of expenditures of federal awards are fairly stated in all material respects in relation to the basic financial statements as a whole.

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The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them.

Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, we have also issued our report dated November 13, 2017, on our consideration of North East Independent School Districts internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering North East Independent School Districts internal control over financial reporting and compliance.

Certified Public Accountants San Antonio, Texas

November 13, 2017

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North East Independent School District

Managements Discussion & Analysis

Year Ended June 30, 2017 (Unaudited)

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In this section of the CAFR, the District discusses and analyzes its financial performance for the year ended June 30, 2017. Please read this section in conjunction with the transmittal letter, the independent auditors' report, and the District's Basic Financial Statements.

FINANCIAL HIGHLIGHTS

Government-wide net position totaled $157.5 million as of June 30, 2017. This was an increase

of $5.1 million from operations compared to the prior year.

The Districts total assets increased $6.8 million from the previous year. Cash and investments

increased $16.2 million and amounts owed from the other governments decreased $11.1

million, primarily due to a decrease in amounts owed from the State of Texas for the Foundation

School Program.

Total liabilities decreased $17.9 million with the $25.8 million reduction in non-current liabilities

offset by an increase to accounts payable of $7.3 million.

Government-wide expenses increased $6.5 million from the previous year. The most significant

increase was a salary increase for all employees that totaled $8.6 million.

The General Fund ended the year with a fund balance of $123.1 million, which is no change from the previous year-end. The unassigned portion of fund balance increased by $1.1 million to $120.4 million. The fund balance amount available for operations is equal to approximately 2.9 months of daily operations.

During fiscal year 2017, the District issued $58.1 million variable rate debt to remarket an existing variable rate issue. The District issued $55.0 million in tax-exempt commercial paper, bringing the total outstanding balance of the commercial paper program at June 30, 2017 to $61.0 million.

North East Independent School District

Managements Discussion & Analysis

Year Ended June 30, 2017 (Unaudited)

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USING THIS ANNUAL REPORT This annual report consists of a series of financial statements. The two major categories of statements are the government-wide statements and the fund financial statements. The government-wide financial statements include the Statement of Net Position and the Statement of Activities. These statements provide information about the activities of the District as a whole and present a longer-term view of the District's property and debt obligations and other financial matters. They reflect the flow of total economic resources in a manner similar to the financial reports of a private business enterprise. The fund financial statements report the District's operations in more detail than the government-wide statements by providing information about the District's most significant funds. For governmental activities, these statements indicate how services were financed for the short term and identify the resources that remain for future spending. The fund financial statements reflect the flow of current financial resources and supply the basis for tax levies and the appropriations budget. The fund financial statements for proprietary activities reflect how the Districts goods or services were charged to District departments or to external customers and how the sales revenues covered the expenses of the goods or services. The fiduciary statements provide financial information about activities for which the District acts solely as a trustee or agent for the benefit of those outside of the District. The notes to the financial statements provide narrative explanations or additional data needed for full disclosure in the government-wide statements or the fund financial statements. The combining statements for Nonmajor Governmental Funds provide additional information about the District's individual funds. The Federal Awards Section contains data used by monitoring or regulatory agencies to determine the Districts compliance with the terms of grant awards.

North East Independent School District

Managements Discussion & Analysis

Year Ended June 30, 2017 (Unaudited)

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The Statement of Net Position and the Statement of Activities The primary purpose of the government-wide financial statements (the Statement of Net Position and the Statement of Activities) is to show positive or negative changes in the Districts financial condition as a result of this fiscal year's activities. The Statement of Net Position includes all District assets and liabilities at the end of the year while the Statement of Activities includes all revenues and expenses generated by the District's operations for the fiscal year. These statements reflect private sector accounting practices based on full accrual reporting for revenues and expenses. The District's revenues are divided as follows: (1) program revenues provided by outside parties who share the costs of some programs, such as tuition from students outside the District or U.S. Department of Education grants to assist low-income children or those with disabilities; and (2) general revenues provided by local taxpayers or the Texas Education Agencys (TEA) State foundation program. All District assets are reported whether they serve the current year or future years. Liabilities are considered regardless of whether they must be paid in the current or future years. The District's net position (the difference between assets and deferred outflows of resources and liabilities and deferred inflows of resources) provide one measure of the District's financial health, or financial position. Over time, increases or decreases in the District's net position is one indicator of whether its financial health is improving or deteriorating. To fully assess the overall health of the District, one should also consider non-financial factors, such as changes in the Districts average daily attendance, changes in its property tax base, the condition of the Districts facilities, as well as the Districts academic rating. The District experienced a slight increase in government-wide net position. The Districts property tax base valuation increased by 6.1% from the prior year. The tax rate for the Districts operations remained at $1.04 per hundred dollars of valuation for fiscal year 2016-2017 which is the same rate for the past nine fiscal years. The resulting increase in property tax revenue for maintenance and operations was $29.7 million. State aid, however, fell by $26.3 million in 2016-2017. The Districts growth in prior years, along with the age and condition of several facilities, has necessitated the renovation of existing facilities and construction of additional facilities. The need for additional or improved facilities is continually reassessed to ensure that our students are best served. The growth is evidenced by the increases in capital assets.

North East Independent School District

Managements Discussion & Analysis

Year Ended June 30, 2017 (Unaudited)

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In the Statement of Net Position and the Statement of Activities, the Districts operations are categorized into two types of activities:

Governmental activities: Most of the District's basic services are reported here, including instruction, counseling, co-curricular activities, food services, transportation, maintenance, community services, and general administration. Property taxes, tuition, fees, and state and federal grants finance most of these activities.

Business-type activities: Revenue-generating activities are reported here. The North East Aquatics and Tennis Fund is a business activity that charges its customers a fee to use the facilities at the Josh Davis Natatorium and adjacent tennis facilities. Uniform Rental is also a business activity that charges participants for uniform rental in various Fine Arts programs. The Preschool Program for Children with Disabilities Fund provides daycare services for children with disabilities and for children of District employees. The final business-type activity is the Community Education program, which offers courses to the general public for a fee in addition to operating an after-school care program for children.

Fund Financial Statements The fund financial statements provide detailed information about the most significant funds, not the District as a whole. Laws and contracts require the District to establish some funds, such as grants received under the U. S. Department of Educations No Child Left Behind Act. The District's administration establishes many other funds to help it control and manage funding for particular purposes (like campus activities). The District's two types of fundsgovernmental and proprietaryuse different accounting approaches:

Governmental Funds: Most of the District's basic services are reported in governmental funds. These funds use modified accrual accounting, which measures the receipt and disbursement of cash and all other financial assets that can be readily converted to cash, and reports balances available for future spending. The governmental fund statements provide a detailed short-term view of the District's general operations and the basic services it provides. Reconciliation schedules following each of the fund financial statements describe the differences between governmental activities (reported in the Statement of Net Position and the Statement of Activities) and governmental funds.

North East Independent School District

Managements Discussion & Analysis

Year Ended June 30, 2017 (Unaudited)

9

Proprietary Funds: These funds report activities where the District charges users (whether outside customers or other units of the District) for services. Proprietary funds use the same full accrual accounting methods employed in the Statement of Net Position and the Statement of Activities. The District has two types of proprietary funds: enterprise funds and internal service funds. Enterprise funds are reported as business-type activities in the government-wide statements. The Districts Enterprise Funds provide goods and services to external parties and include:

Uniform Rental Community Education Preschool Program for Children with Disabilities North East Aquatics and Tennis

Internal Service Funds provide supplies and services for the Districts other funds and include: Document Management & Printing Services Health Insurance Data Processing Center Network Technology Services Dental Insurance Rolling Owner Controlled Insurance Program Workers Compensation Insurance Unemployment Compensation Insurance Police Services

Reporting the District's Fiduciary Responsibilities The District is the trustee, or fiduciary, for money raised by student activity programs, employee groups, and donations for specific purposes where both the principal and earnings may be expended. All of the District's fiduciary activities, Student Activity Funds, Central Office Fund, and the Private Purpose Trust Fund for Scholarships, are reported in a separate Statement of Fiduciary Net Position. These resources are excluded from the District's other financial statements since the District cannot use these assets to finance its operations. The Districts only fiduciary responsibility is to ensure that the assets reported in these funds are used for their intended purposes.

North East Independent School District

Managements Discussion & Analysis

Year Ended June 30, 2017 (Unaudited)

10

GOVERNMENT-WIDE FINANCIAL ANALYSIS This analysis focuses on Government-Wide Net Position (Table I). The Districts Net Position is reported at $157.5 million as of June 30, 2017. Net position increased $5.1 million from the prior year. Current assets increased $7.8 million, primarily in cash and cash equivalents; however this is offset by an increase in other liabilities of $7.9 million, with the largest increase in accounts payable. Overall, the Districts investment in capital assets to meet its infrastructure needs represents 77.6% of the total assets. The District capitalized $83.9 million of completed construction projects and capitalized another $35.1 million of capital expenditures during the fiscal year, with the majority of that amount being capitalized as buildings and improvements. The remaining 22.4% of total assets is comprised mainly of cash, cash equivalents and investment balances. Debt payable to bond holders represents the Districts major liabilities. The total bond debt, unamortized premiums on bonds, and commercial paper represents 93.1% of the Districts total liability to outside interests. The remaining amount is comprised of amounts owed to vendors, employees, and for actuarially determined liabilities related to the Districts self-funded insurance liabilities and its net pension liability. Long Term liabilities decreased $25.8 million, comprised mainly of a $14.3 million decrease in unamortized bond premiums and a $6.2 million decrease to the Districts share of Teacher Retirement System of Texas net pension liability. The Districts net investment in capital assets decreased $4.3 million as the growth in capital assets was offset by a greater amount of accumulated depreciation/amortization on those assets. Restricted net position increased $3.7 million, primarily due to the increase in funds restricted for future debt service payments.

North East Independent School District

Managements Discussion & Analysis

Year Ended June 30, 2017 (Unaudited)

11

Governmental Activities 2017 2016 Change

Current and Other Assets $ 402,099.5 $ 394,290.5 $ 7,809.0 2.0 %Capital Assets 1,395,685.7 1,395,757.3 (71.6) (0.0) % Total Assets 1,797,785.2 1,790,047.8 7,737.4 0.4 %Deferred Outflows 99,077.3 114,597.0 (15,519.7) 100.0 %

Other Liabilities 119,036.9 111,131.7 7,905.2 7.1 %Long Term Liabilities 1,611,942.2 1,637,786.9 (25,844.7) (1.6) % Total Liabilities 1,730,979.1 1,748,918.6 (17,939.5) (1.0) %Deferred Inflows 15,489.9 11,358.2 4,131.7 100.0 %

Net Position:Net Investment in Capital Assets 9,008.1 13,556.5 (4,548.4) (33.6) %Restricted 130,075.5 126,348.2 3,727.3 3.0 %Unrestricted 11,309.8 4,463.3 6,846.5 153.4 %Governmental Net Position $ 150,393.4 $ 144,368.0 $ 6,025.4 4.2 %

Business-Type ActivitiesCurrent and Other Assets $ 2,102.0 $ 3,222.3 $ (1,120.3) (34.8) %Capital Assets 5,386.9 5,173.1 213.8 4.1 % Total Assets 7,488.9 8,395.4 (906.5) (10.8) %

Other Liabilities 351.7 360.9 (9.2) (2.5) % Total Liabilities 354.8 360.9 (6.1) (1.7) %

Net Position:Net Investment in Capital Assets 5,386.9 5,173.0 213.9 4.1 %Unrestricted 1,747.1 2,861.5 (1,114.4) (38.9) %Business-Type Net Position $ 7,134.0 $ 8,034.5 $ (900.5) (11.2) %

Government-Wide TotalsCurrent and Other Assets $ 404,201.5 $ 397,512.8 $ 6,688.7 1.7 %Capital Assets 1,401,072.6 1,400,930.4 142.2 0.0 % Total Assets 1,805,274.1 1,798,443.2 6,830.9 0.4 %Deferred Outflows 99,077.3 114,597.0 (15,519.7) 100.0 %

Other Liabilities 119,388.6 111,492.6 7,896.0 7.1 %Long Term Liabilities 1,611,942.2 1,637,786.9 (25,844.7) (1.6) % Total Liabilities 1,731,330.8 1,749,279.5 (17,948.7) (1.0) %Deferred Inflows 15,489.9 11,358.2 4,131.7 100.0 %

Net Position:Net Investment in Capital Assets 14,395.0 18,729.5 (4,334.5) (23.1) %Restricted 130,075.5 126,348.2 3,727.3 3.0 %Unrestricted 13,056.9 7,324.8 5,732.1 78.3 %Government-Wide Net Position $ 157,527.4 $ 152,402.5 $ 5,124.9 3.4 %

Table INET POSITION(In Thousands)

Percent Change

North East Independent School District

Managements Discussion & Analysis

Year Ended June 30, 2017 (Unaudited)

12

GOVERNMENTAL ACTIVITIES FINANCIAL ANALYSIS Changes in Governmental Activities Net Position are presented in Table II. The District's Governmental Activities revenues were $750.4 million, a decrease of 2.1 million from the prior year. The Districts two main sources of revenue are local property taxes and formula aid from the State. These two sources comprise approximately 82.6% of government-wide revenue as shown in Figure A-1 below. Property tax revenue increased $29.1 million as a result of an 8.3 percent increase in the value of the property tax base, offset by a reduction in the Interest & Sinking tax rate of 2 cents. On-behalf revenue recognized for the Districts share of state pension contributions decreased $13.8 million. State formula aid decreased $27.1 million. State formula aid decreases proportionately with any increase in property values.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Figure A-1 Governmental Activities Revenues by Source

Other

Grants

State Aid

Taxes

The expenses for governmental activities totaled $745.3 million, an increase of $10.9 million over the prior year. This is primarily due to a raise in employee salaries given during the fiscal year.

North East Independent School District

Managements Discussion & Analysis

Year Ended June 30, 2017 (Unaudited)

13

Total Total2017 2016

Program Revenues: Charges for Services $ 22,778.1 $ 23,128.2 $ (350.1) (1.5) % Operating Grants and Contributions 81,481.3 80,725.6 755.7 0.9 %General Revenues:

Property Taxes General 494,264.0 465,181.6 29,082.4 6.3 %State Aid 125,126.1 152,196.3 (27,070.2) (17.8) %Grants & Contributions not Restricted 15,945.3 23,696.2 (7,750.9) (32.7) %Investment Earnings 2,618.6 1,775.3 843.3 47.5 %Miscellaneous 8,151.2 5,726.0 2,425.2 42.4 % Total Revenues 750,364.6 752,429.2 (2,064.6) (0.3) %

Expenses: Instruction, Media and Curriculum 432,770.2 439,525.7 (6,755.5) (1.5) % Instructional and School Leadership 47,712.8 47,430.6 282.2 0.6 % Student Support 115,581.1 111,933.1 3,648.0 3.3 % General Administration 13,530.9 12,811.1 719.8 5.6 % Plant Maintenance, Security and Data Processing 87,143.0 75,940.5 11,202.5 14.8 % Community Services 642.8 1,043.0 (400.2) (38.4) % Debt Services 45,272.1 42,977.6 2,294.5 5.3 % Intergovernmental Charges 2,653.1 2,788.7 (135.6) (4.9) %

Total Expenses 745,306.0 734,450.3 10,855.7 1.5 %

Increase or (Decrease) in Net Position Before Transfers 5,058.6 17,978.9 (12,920.3) (71.9) %

Transfers In 966.8 2,137.5 (1,170.7) (54.8) %

Change in Net Position 6,025.4 20,116.4 (14,091.0) (70.0) %

Beginning Net Position 144,368.0 106,201.8 38,166.2 35.9 %

Prior Period Adjustment - 18,049.8 (18,049.8) (100.0) %

Ending Net Position $ 150,393.4 $ 144,368.0 $ 6,025.4 4.2 %

Change in

Amount

Table IICHANGES IN GOVERNMENTAL ACTIVITIES NET POSITION

(In Thousands)

PercentChange

North East Independent School District

Managements Discussion & Analysis

Year Ended June 30, 2017 (Unaudited)

14

BUSINESS-TYPE ACTIVITIES FINANCIAL ANALYSIS Net position attributable to business-type activities decreased $0.9 million (Table III). The Property Management Enterprise Fund was closed in the prior year and its operations and assets were transferred to other funds in an effort to streamline operations. Of the remaining four Enterprise Funds, the Community Education is by far the best performer, generating nearly $9.1 million in revenue.

Total Total 2017 2016

Program Revenues: Charges for Services

Property Management $ 0.0 $ 616.2 $ (616.2) n/aUniform Rentals 69.1 51.9 17.2 33.1 %Community Education 9,071.2 9,182.6 (111.4) (1.2) %Preschool Program for Children

with Disabilities 539.8 564.9 (25.1) (4.4) %North East Aquatics & Tennis 1,007.7 954.7 53.0 5.6 %

Total Program Revenues 10,687.8 11,370.3 (682.5) (6.0) % Expenses:

Property Management 0.0 4,603.8 (4,603.8) n/aUniform Rentals 69.0 16.7 52.3 313.2 %Community Education 9,033.6 8,618.6 415.0 4.8 %Preschool Program for Children

with Disabilities 597.0 729.7 (132.7) (18.2) %North East Aquatics & Tennis 921.9 963.5 (41.6) (4.3) %

Total Expenses 10,621.5 14,932.3 (4,310.8) (28.9) %

Increase or (Decrease) in Net Position Before Transfers 66.3 (3,562.0) 3,628.3 101.9 %

Transfers Out (966.8) (2,137.5) 1,170.7 54.8 %

Change in Net Position (900.5) (5,699.5) 4,799.0 84.2 %

Beginning Net Position 8,034.5 13,734.0 (5,699.5) (41.5) %

Ending Net Position $ 7,134.0 $ 8,034.5 $ (900.5) (11.2) %

Table IIIBUSINESS ACTIVITIES CHANGES IN NET POSITION

(In Thousands)

Change in

AmountPercentChange

North East Independent School District

Managements Discussion & Analysis

Year Ended June 30, 2017 (Unaudited)

15

FUND FINANCIAL ANALYSIS

As the District completed the fiscal year, the Governmental Funds reported a combined fund balance of $268.7 million, which is approximately $2.0 million less than last year's total of $270.7 million. The Debt Service Fund had an increase of $13.3 million in fund balance due to $9.7 million of property taxes collected during the current fiscal year for debt payments that didnt occur until the beginning of the subsequent fiscal year, and a $1.9 million transfer of funds from the General Fund to set aside principal payments for the Qualified School Construction Bonds. These bonds are not due until 2027 but the District is proactively setting aside amounts assigned to pay the principal when they become payable. The increase in the Debt Service Fund was offset by a decrease in fund balance in the Capital Projects Fund of $18.7 million, related to the construction of school facilities and related equipment. The Fund is expending bond proceeds which were received in previous years. The General Fund had a decrease in fund balance of less than $0.1 million. Revenue from property taxes increased due to increased property values. The increase was offset by the less state revenue and additional salary expense incurred due to a raise given to employees and for increased District share of employee health insurance. The Board of Trustees adopts the budgets of the General, Debt Service, and National School Breakfast and Lunch Program funds. Over the course of the year, the Board revised the District's budget six times. These budget amendments are categorized into three classifications: (1) increase to the fund balance; (2) decrease to the fund balance; and (3) no change to the fund balance. This allowed the District to adjust its budget as circumstances and needs changed during the year. The net effect of the budget amendments during the year was to increase appropriations by approximately $2.1 million. The major increase to budgeted appropriations was $1.8 million in the General Fund to re-appropriate funds for purchase orders carried-forward from the prior year. Actual expenditures were less than the final budget in the General Fund by $13.6 million, or 2.5%, mainly attributable to budgeted salaries for positions that were vacant for all or part of the year. Actual expenditures were less than the final budget in the National School Breakfast and Lunch Program Fund by $1.9 million, or 5.1%, attributable to budgeted salaries for positions that were vacant for all or part of the year and various purchase orders not being filled prior to year-end. Actual expenditures in the Debt Service fund were less than the final budget by $0.4 million, or 0.3%.

North East Independent School District

Managements Discussion & Analysis

Year Ended June 30, 2017 (Unaudited)

16

CAPITAL ASSET AND DEBT ADMINISTRATION

Capital Assets As of June 30, 2017, the District had $1.40 billion, net of accumulated depreciation/amortization, invested in a broad range of capital assets, including facilities and equipment for instruction, transportation, athletics, administration, maintenance, and construction in progress. This represents a net decrease of $71.6 thousand from fiscal year 2015-2016. See Footnote IV E for more detailed analysis of the years capital asset activity. This year's government-wide capital asset major additions included (at historical cost): Land $ 10,083,684

Buildings and Improvements 25,323,052

Furniture and Equipment 10,031,137

Construction in Progress 24,008,377

$ 69,446,250

Debt At year-end, the District had $1.46 billion in outstanding bonds, commercial paper, capital leases and unamortized issuance premiums. The District's general obligation bonds have received the highest rating possible from the Moodys Investment Service, Inc. and Fitch Ratings, Inc (Aaa & AAA, respectively) because of the Texas Permanent School Fund guarantee of the Districts debt. The Districts underlying ratings for general obligation bonds are Aa1 by Moodys and AA+, which are the second highest ratings possible from each agency. The Districts commercial paper is rated as P-1 by Moodys and F1+ by Fitch. These are the highest short-term ratings possible. Other obligations include accrued vacation pay, sick leave, workers compensation accrued liability, a net other post-employment benefit (OPEB) liability, and a TRS net pension liability. Detailed information about the District's long-term liabilities is presented (Footnote IV M) in the Notes to the Financial Statements.

NEXT YEAR'S BUDGETS AND RATES The District still faces significant uncertainty regarding its revenue despite the strong property value growth. In May 2016, the Texas Supreme Court ruled in favor of the State on all counts on the five year school funding lawsuit, overturning the lower courts findings that the school funding system in Texas was unconstitutional. Despite affirming the constitutionality of the system, the Court acknowledged the system is flawed and called for action by the Legislature. At $1.04 per hundred dollars of assessed valuation, the Districts 2017-2018 maintenance and operations (M&O) tax rate is at the States maximum rate without voter approval. Any additional M&O tax rate exceeding $1.04 will require voter approval up to a maximum ceiling of $1.17.

North East Independent School District

Managements Discussion & Analysis

Year Ended June 30, 2017 (Unaudited)

17

The District is considered a property wealthy school district under Chapter 41 of the Texas Education Code. Under these provisions, the Districts State aid will be reduced to offset a portion of any tax revenue from an M&O tax rate above $1.06 per hundred dollars of valuation to help fund property poor school districts. This restriction further limits the Districts ability to increase revenue from increases in property tax revenue. The future local share of the financial needs of the District will depend upon the willingness of its taxpayers to increase the local tax rate if additional funding is required to meet the educational needs of the Districts students. The following figure illustrates the projected (2017-2018) and historical (2016-2017 and prior) sources of the Districts operating revenue.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

General Fund Revenue By Source

Property Taxes State Formula Grants Misc Local, State & Federal Revenue

The I&S tax rate for the 2017-2018 fiscal year lowered to $0.3250 per hundred dollars of assessed valuation. The tax rate was determined by calculating the rate required to meet debt service obligations given the assessed value of real, business and personal property within the Districts boundaries and reflects the changes in debt service requirements associated with bonds issued to build and improve the Districts infrastructure. For fiscal year 2017-2018, the Board of Trustees adopted a General Fund budget that reflected a deficit of $3.5 million, less than 0.7% of operations. The estimated revenue in the adopted budget reflected the anticipation of raising the M&O tax rate above $1.04. The Board ultimately decided to keep the M&O rate at $1.04, and the budget was adjusted accordingly. The budget now includes a deficit of $17.1

North East Independent School District

Managements Discussion & Analysis

Year Ended June 30, 2017 (Unaudited)

18

million. The District estimates that the actual deficit for fiscal year 2017-2018 will be $10.1 million. The difference between the deficit in the adopted budget and the forecasted deficit is due to the Districts active management of the budget throughout the year and conservative estimates of staffing of vacant positions.

CONTACTING THE DISTRICT'S FINANCIAL MANAGEMENT This financial report is designed to provide citizens, taxpayers, customers, investors and creditors with a year-end picture of the District's finances. If you have questions about this report or need additional financial information, contact the Associate Superintendent for Business Services/Chief Financial Officer, Daniel Villarreal, CPA, RTSBA, North East Independent School District, 8961 Tesoro Drive, San Antonio, Texas, 78217.

Basic Financial Statements

20

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EXHIBIT A-1NORTH EAST INDEPENDENT SCHOOL DISTRICTSTATEMENT OF NET POSITION

JUNE 30, 2017

1 2 3

Control

Data

CodesGovernmental

Activities Activities

Type

Business

Total

Primary Government

ASSETS

1,931,776 177,505,653 179,437,429 Cash and Cash Equivalents $ $ $1110 - 158,921,527 158,921,527 Investments1120 - 23,966,212 23,966,212 Property Taxes Receivable (Delinquent)1220 - (1,897,404) (1,897,404)Allowance for Uncollectible Taxes1230 - 37,806,441 37,806,441 Due from Other Governments1240 - 672,344 672,344 Accrued Interest1250

94,631 (94,631) - Internal Balances1260 - 12,287 12,287 Due from Fiduciary Funds1267

75,595 373,378 448,973 Other Receivables, net1290 - 4,688,451 4,688,451 Inventories1300

Capital Assets:961,852 104,457,086 105,418,938 Land1510

3,825,966 1,227,124,973 1,230,950,939 Buildings, Net1520299,067 27,183,365 27,482,432 Furniture and Equipment, Net1530299,986 36,920,230 37,220,216 Construction in Progress1580

- 145,263 145,263 Net OPEB Benefit1990

Total Assets1000 1,797,785,175 7,488,873 1,805,274,048

DEFERRED O UTFLO WS O F RESO URCES

- 41,156,358 41,156,358 Deferred Charge for Refunding1701 - 57,920,926 57,920,926 Deferred Outflow Related to TRS1705

Total Deferred Outflows of Resources1700 99,077,284 - 99,077,284

LIABILITIES

158,975 22,272,190 22,431,165 Accounts Payable2110 - 22,850,495 22,850,495 Interest Payable2140 - 5,579,667 5,579,667 Payroll Deductions & Withholdings2150

55,236 57,962,250 58,017,486 Accrued Wages Payable216063 28,682 28,745 Due to Other Governments2180

19,926 3,805 23,731 Due to Student Groups219012,300 6,015,337 6,027,637 Accrued Expenses2200

108,348 4,324,477 4,432,825 Unearned Revenue2300Noncurrent Liabilities

- 118,200,255 118,200,255 Due Within One Year2501 - 1,347,303,084 1,347,303,084 Due in More Than One Year2502 - 146,438,896 146,438,896 Net Pension Liability (District's Share)2540

Total Liabilities2000 1,730,979,138 354,848 1,731,333,986

DEFERRED INFLO WS O F RESO URCES

- 15,489,933 15,489,933 Deferred Inflow Related to TRS2605

Total Deferred Inflows of Resources2600 15,489,933 - 15,489,933

NET PO SITIO N

5,386,871 9,008,051 14,394,922 Net Investment in Capital Assets3200Restricted:

- 12,213,925 12,213,925 Restricted for Federal and State Programs3820 - 117,661,564 117,661,564 Restricted for Debt Service3850 - 200,000 200,000 Restricted for Scholorships3880

1,747,154 11,309,848 13,057,002 Unrestricted3900

Total Net Position3000 150,393,388 7,134,025 157,527,413 $ $ $

21The notes to the financial statements are an integral part of this statement.

NORTH EAST INDEPENDENT SCHOOL DISTRICTSTATEMENT OF ACTIVITIES

FOR THE YEAR ENDED JUNE 30, 2017

Control

Data

CodesExpenses Services

Charges for

Contributions

Grants and

Operating

Program Revenues

431

Primary Government:

GOVERNMENTAL ACTIVITIES:4,189,978 399,507,523 38,521,544 Instruction $ $ $11

- 13,170,476 435,082 Instructional Resources and Media Services12

710,811 20,092,302 4,842,407 Curriculum and Staff Development13

- 8,518,737 1,021,383 Instructional Leadership21

775,430 39,194,083 1,981,418 School Leadership23

- 22,377,644 2,323,829 Guidance, Counseling and Evaluation Services31

- 4,840,836 2,318,221 Social Work Services32

- 8,413,065 479,758 Health Services33

- 21,195,334 1,057,230 Student Transportation34

12,767,676 37,180,571 21,799,326 Food Services35

2,117,170 21,573,636 314,579 Extracurricular Activities36

- 13,530,876 855,590 General Administration41

496,945 66,840,053 4,057,725 Facilit ies Maintenance and Operations51

- 5,352,855 434,866 Security and Monitoring Services52

- 14,950,097 375,430 Data Processing Services53

1,720,110 642,768 662,906 Community Services61

- 44,440,208 - Debt Service - Interest on Long Term Debt72

- 831,890 - Debt Service - Bond Issuance Cost and Fees73

- 255,805 - Instructional Shared Services Arrangements93

- 102,974 - Juvenile Justice Alternative Ed. Prg.95

- 2,294,330 - Tax Appraisal Services99

745,306,063 22,778,120 81,481,294 [TG] Total Governmental Activities:

BUSINESS-TYPE ACTIVITIES:69,058 69,037 - Uniform Rental01

9,071,163 9,033,588 - Community Education02

539,804 597,046 - Preschool Program03

1,007,745 921,851 - North East Aquatics & Tennis04

10,621,522 10,687,770 - [TB] Total Business-Type Activities:

[TP] TOTAL PRIMARY GOVERNMENT: 755,927,585 33,465,890 81,481,294 $ $ $

DataControlCodes

General Revenues:Taxes:

Property Taxes, Levied for General PurposesMT

Property Taxes, Levied for Debt ServiceDT

State Aid - Formula GrantsSF

Grants and Contributions not RestrictedGC

Investment EarningsIE

Miscellaneous Local and Intermediate RevenueMI

Transfers In (Out)FR

Total General Revenues & TransfersTR

Net Position - Beginning

Change in Net Position

Net Position--Ending

CN

NB

NE

22The notes to the financial statements are an integral part of this statement.

EXHIBIT B-1

Net (Expense) Revenue and

Activities Activities

Business Type

Total

Governmental

Changes in Net Position

6 7 8

Primary Government

- (356,796,001) (356,796,001)$ $ $

- (12,735,394) (12,735,394)

- (14,539,084) (14,539,084)

- (7,497,354) (7,497,354)

- (36,437,235) (36,437,235)

- (20,053,815) (20,053,815)

- (2,522,615) (2,522,615)

- (7,933,307) (7,933,307)

- (20,138,104) (20,138,104)

- (2,613,569) (2,613,569)

- (19,141,887) (19,141,887)

- (12,675,286) (12,675,286)

- (62,285,383) (62,285,383)

- (4,917,989) (4,917,989)

- (14,574,667) (14,574,667)

- 1,740,248 1,740,248

- (44,440,208) (44,440,208)

- (831,890) (831,890)

- (255,805) (255,805)

- (102,974) (102,974)

- (2,294,330) (2,294,330)

(641,046,649) - (641,046,649)

21 - 21

37,575 - 37,575

(57,242) - (57,242)

85,894 - 85,894

- 66,248 66,248

(641,046,649) 66,248 (640,980,401)

- 371,138,322 371,138,322

- 123,125,707 123,125,707

- 125,126,121 125,126,121

- 15,945,323 15,945,323

- 2,618,560 2,618,560

- 8,151,200 8,151,200

(966,760)966,760 -

647,071,993 (966,760) 646,105,233

6,025,344

144,368,044

150,393,388 $

(900,512)

8,034,537

7,134,025 $

5,124,832

152,402,581

157,527,413 $

23

NORTH EAST INDEPENDENT SCHOOL DISTRICT

BALANCE SHEET

GOVERNMENTAL FUNDS

JUNE 30, 2017

Control

Data

Codes

General

Fund Fund

Debt Service

50

Projects

Capital

6010

ASSETS90,615,772 30,751,455 17,114,808 Cash and Cash Equivalents $ $ $111026,578,740 119,316,973 - Investments11205,941,517 18,024,695 - Property Taxes - Delinquent1220(468,145)(1,429,259) - Allowance for Uncollectible Taxes (Credit)1230

- 27,888,270 - Receivables from Other Governments124016,904 592,432 - Accrued Interest1250

5,617,746 3,853,849 27,925 Due from Other Funds1260 - 326,989 - Other Receivables1290 - 2,635,981 - Inventories1300

Total Assets1000 201,961,385 128,302,534 17,142,733 $ $ $

LIABILITIES18,000 3,733,640 14,338,888 Accounts Payable $ $ $2110

- 5,579,667 - Payroll Deductions and Withholdings Payable2150 - 54,303,769 - Accrued Wages Payable2160

17 7,021,073 146,884 Due to Other Funds21707,140 20,915 - Due to Other Governments2180

- 3,805 - Due to Student Groups2190

- - 1,338,784 Accrued Expenditures2200 - 134,938 - Unearned Revenues2300

Total Liabilities2000 70,797,807 25,157 15,824,556

DEFERRED INFLOWS OF RESOURCES2,652,819 8,099,134 - Unavailable Revenue - Property Taxes2601

Total Deferred Inflows of Resources2600 8,099,134 2,652,819 -

FUND BALANCESNonspendable Fund Balance:

- 2,635,981 - Inventories3410 - - - Other Non-Spendable Fund Balance3445

Restricted Fund Balance: - - - Federal or State Funds Grant Restriction3450

115,008,745 - - Retirement of Long-Term Debt3480 - - - Other Restricted Fund Balance3490

Committed Fund Balance: - - - Other Committed Fund Balance3545

Assigned Fund Balance:10,615,813 - 1,318,177 Other Assigned Fund Balance3590

- 120,428,463 - Unassigned Fund Balance3600

Total Fund Balances3000 123,064,444 125,624,558 1,318,177

$ 201,961,385 $ 128,302,534 $ 17,142,733 Total Liabilities, Deferred Inflows & Fund Balances4000

24

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

EXHIBIT C-1

Other

Funds Funds

Governmental

Total

13,895,560 152,377,595 $ $5,314,383 151,210,096

- 23,966,212 - (1,897,404)

9,917,833 37,806,103 9,700 619,036

4,487,069 13,986,589 15,969 342,958

1,711,547 4,347,528

35,352,061 382,758,713 $ $

2,626,176 20,716,704 $ $ - 5,579,667

2,687,306 56,991,075 7,151,733 14,319,707

543 28,598 - 3,805 - 1,338,784

4,189,539 4,324,477

16,655,297 103,302,817

- 10,751,953

- 10,751,953

1,711,547 4,347,528 200,000 200,000

10,502,378 10,502,378 - 115,008,745

37,194 37,194

6,245,645 6,245,645

- 11,933,990 - 120,428,463

18,696,764 268,703,943

$ $ 382,758,713 35,352,061

25

EXHIBIT C-2NORTH EAST INDEPENDENT SCHOOL DISTRICT

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

JUNE 30, 2017

268,703,943 $Total Fund Balances - Governmental Funds

32,605,507 1 The District uses internal service funds to charge the costs of certain activities, such as self-insurance and printing, to appropriate functions in other funds. The assets and liabilities of the internal service funds are included in governmental activities in the statement of net position. The net effect of this consolidation is to increase net position.

(77,194,604)2 Capital assets used in governmental activities are not financial resources and therefore are not reported in governmental funds. At the beginning of the year, the cost of these assets was $2,054,251,480 and the accumulated depreciation was ($666,287,762). In addition, long-term liabilities, including bonds payable, are not due and payable in the current period, and, therefore are not reported as liabilities in the funds. The net effect of including the beginning balances for capital assets (net of depreciation) and long-term debt in the governmental activities is to decrease net position. Note: Beginning Balances related to TRS are NOT included in this amount.

86,424,259 3 Current year capital outlays and long-term debt principal payments are expenditures in the fund financial statements, but they should be shown as increases in capital assets and reductions in long-term debt in the government-wide financial statements. The net effect of including the 2017 capital outlays and debt principal payments is to increase net position.

(104,007,903)4 Included in the financial statements is the recognition of the District's proportionate share of the net pension liability required by GASB 68. At the beginning of the year, the net position related to TRS was a Deferred Resource Outflow in the amount of $70,053,805, a Deferred Resource Inflow in the amount of $11,358,154 and a net pension liability in the amount of $152,627,493. The impact of this on Net Position is ($93,931,842). Changes from the current year reporting of the TRS plan resulted in a decrease in net position in the amount of ($10,076,061). The combination of the beginning of the year amounts and the changes during the year resulted in a difference between the ending fund balance and the ending net position in the amount of ($104,007,903) .

(66,889,767)5 The 2017 depreciation expense increases accumulated depreciation. The net effect of the current year's depreciation is to decrease net position.

10,751,953 6 Various other reclassifications and eliminations are necessary to convert from the modified accrual basis of accounting to accrual basis of accounting. These include recognizing unavailable revenue from property taxes as revenue, reclassifying the proceeds of bond sales as an increase in bonds payable, and recognizing the liabilities associated with maturing long-term debt and interest. The net effect of these reclassifications and recognitions is to increase net position.

150,393,388 $19 Net Position of Governmental Activities

26

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

27

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NORTH EAST INDEPENDENT SCHOOL DISTRICT

STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE

GOVERNMENTAL FUNDS

FOR THE YEAR ENDED JUNE 30, 2017

Control

Data

Codes Fund

General

10

Fund

Debt Service

50

Projects

Capital

60

REVENUES:378,602,422 124,498,836 340,609 Total Local and Intermediate Sources $ $ $5700149,965,835 2,460,106 218,390 State Program Revenues5800

9,252,825 1,832,594 1,293,289 Federal Program Revenues5900

Total Revenues5020 537,821,082 128,791,536 1,852,288

EXPENDITURES:

Current:328,731,957 - 908,345 Instruction0011

8,778,911 - 171,621 Instructional Resources and Media Services001215,175,065 - - Curriculum and Instructional Staff Development0013

7,570,251 - - Instructional Leadership002135,681,275 - 27,746 School Leadership002319,870,404 - - Guidance, Counseling and Evaluation Services0031

2,468,769 - - Social Work Services00327,855,342 - - Health Services0033

18,859,627 - 1,411,594 Student Transportation003483,375 - - Food Services0035

11,350,151 - 74,436 Extracurricular Activities003613,029,165 - - General Administration004155,124,308 - 5,318,790 Facilit ies Maintenance and Operations0051

5,041,442 - - Security and Monitoring Services00524,532,718 - 9,285,542 Data Processing Services0053

235,203 - - Community Services0061

Debt Service: - 54,000,000 - Principal on Long Term Debt0071 - 56,293,651 - Interest on Long Term Debt0072 - 7,051,890 - Bond Issuance Cost and Fees0073

Capital Outlay:34,990 - 61,386,279 Facilit ies Acquisition and Construction0081

Intergovernmental:255,805 - - Instructional Shared Service Agreements0093102,974 - - Juvenile Justice Alternative Ed. Prg.0095

2,294,330 - - Tax Appraisal Services0099

Total Expenditures6030 537,076,062 117,345,541 78,584,353

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

745,020 11,445,995 (76,732,065)

OTHER FINANCING SOURCES (USES): - 58,095,000 - Refunding Bonds Issued7901 - - 55,000,000 Capital Related Debt Issued7911

107,842 - - Sale of Real and Personal Property79123,082,790 1,850,000 3,072,821 Transfers In7915

(4,004,787) - - T ransfers Out (Use)8911 - (58,095,000) - Payment to Bond Refunding Escrow Agent (Use)8940

Total Other Financing Sources (Uses) 7080 (814,155) 1,850,000 58,072,821

1200 Net Change in Fund Balances (69,135) 13,295,995 (18,659,244)

0100 Fund Balance - July 1 (Beginning) 123,133,579 112,328,563 19,977,421

3000 Fund Balance - June 30 (Ending) $ 123,064,444 $ 125,624,558 $ 1,318,177

28

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

EXHIBIT C-3

Other

Funds Funds

Governmental

Total

527,922,127 24,480,260 $ $

158,362,340 5,718,009

60,881,777 48,503,069

78,701,338 747,166,244

354,655,101 25,014,799

9,504,738 554,206

19,450,178 4,275,113

8,177,598 607,347

36,666,252 957,231

21,309,426 1,439,022

4,880,740 2,411,971

7,949,573 94,231

20,375,960 104,739

33,720,023 33,636,648

14,567,423 3,142,836

13,196,811 167,646

64,212,146 3,769,048

5,171,594 130,152

13,818,260 -

517,349 282,146

54,000,000 -

56,293,651 -

7,051,890 -

61,444,557 23,288

255,805 -

102,974 -

2,294,330 -

76,610,423 809,616,379

2,090,915 (62,450,135)

58,095,000 -

55,000,000 -

109,713 1,871

9,430,337 1,424,726

(4,087,577)(82,790)

(58,095,000) -

1,343,807 60,452,473

3,434,722 (1,997,662)

15,262,042 270,701,605

$ 18,696,764 $ 268,703,943

29

EXHIBIT C-4NORTH EAST INDEPENDENT SCHOOL DISTRICT

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

FOR THE YEAR ENDED JUNE 30, 2017

(1,997,662)$Total Net Change in Fund Balances - Governmental Funds

(1,580,524)The District uses internal service funds to charge the costs of certain activities, such as self-insurance and printing, to appropriate functions in other funds. The net income (loss) of internal service funds is reported with governmental activities. The net effect of this consolidation is to decrease net position.

86,424,259 Current year capital outlays and long-term debt principal payments are expenditures in the fund financial statements, but they should be shown as increases in capital assets and reductions in long-term debt in the government-wide financial statements. The net effectof removing the 2017 capital outlays and debt principal payments is to increase net position.

(66,889,767)Depreciation is not recognized as an expense in governmental funds since it does not require the use of current financial resources. The net effect of the current year's depreciation is to decrease net position.

145,099 Various other reclassifications and eliminations are necessary to convert from the modified accrual basis of accounting to accrual basis of accounting. These include recognizing unavailable revenue from property taxes as revenue, adjusting current year revenue to show the revenue earned from the current year's tax levy, reclassifying the proceeds of bond sales, and recognizing the liabilities associated with maturing long-term debt and interest. The net effect of these reclassifications and recognitions is to increasenet position.

(10,076,061)Current year changes due to GASB 68 increased revenues in the amount of $3,240,568 but also increased expenditures in the amount of $13,316,629. The net effect on the change in the ending net position was a decrease in the amount of ($10,076,061).

6,025,344 $ Change in Net Position of Governmental Activities

30

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

EXHIBIT C-5NORTH EAST INDEPENDENT SCHOOL DISTRICTSTATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE

BUDGET AND ACTUAL - GENERAL FUND

FOR THE YEAR ENDED JUNE 30, 2017

Control

Data

CodesOriginal Final

(GAAP BASIS)

(Negative)

Positive or

Final BudgetVariance WithActual Amounts

Budgeted Amounts

REVENUES:379,456,866 376,197,566 378,602,422 (854,444)Total Local and Intermediate Sources $ $ $ $5700145,899,267 147,258,367 149,965,835 4,066,568 State Program Revenues5800

8,532,302 8,055,002 9,252,825 720,523 Federal Program Revenues5900

Total Revenues5020 531,510,935 533,888,435 537,821,082 3,932,647

EXPENDITURES:Current:

336,936,134 337,659,907 328,731,957 8,204,177 Instruction00118,965,718 8,769,930 8,778,911 186,807 Instructional Resources and Media Services0012

15,189,904 15,406,706 15,175,065 14,839 Curriculum and Instructional Staff Development00137,588,944 7,204,672 7,570,251 18,693 Instructional Leadership0021

36,509,098 36,468,938 35,681,275 827,823 School Leadership002320,404,454 19,712,715 19,870,404 534,050 Guidance, Counseling and Evaluation Services0031

2,609,581 2,568,518 2,468,769 140,812 Social Work Services00328,099,528 8,086,126 7,855,342 244,186 Health Services0033

19,574,613 18,469,259 18,859,627 714,986 Student Transportation003479,495 4,375 83,375 (3,880)Food Services0035

11,384,067 11,699,009 11,350,151 33,916 Extracurricular Activities0036

13,300,440 13,348,642 13,029,165 271,275 General Administration004157,125,610 56,257,140 55,124,308 2,001,302 Facilit ies Maintenance and Operations0051

5,073,503 4,890,284 5,041,442 32,061 Security and Monitoring Services00524,634,752 4,716,752 4,532,718 102,034 Data Processing Services0053

281,325 302,487 235,203 46,122 Community Services0061

Capital Outlay:36,500 - 34,990 1,510 Facilit ies Acquisition and Construction0081

Intergovernmental:433,000 400,000 255,805 177,195 Instructional Shared Service Agreements0093139,707 399,707 102,974 36,733 Juvenile Justice Alternative Ed. Prg.0095

2,319,415 2,561,415 2,294,330 25,085 Tax Appraisal Services0099

Total Expenditures6030 548,926,582 550,685,788 537,076,062 13,609,726

1100 Expenditures

(17,415,647) (16,797,353) 745,020 17,542,373 Excess (Deficiency) of Revenues Over (Under)

OTHER FINANCING SOURCES (USES): 110,000 - 107,842 (2,158)Sale of Real and Personal Property7912

3,165,901 3,260,185 3,082,790 (83,111)Transfers In7915(4,054,787)(2,250,000) (4,004,787) 50,000 Transfers Out (Use)8911

Total Other Financing Sources (Uses) 7080 1,010,185 (778,886) (814,155) (35,269)

1200 Net Change in Fund Balances (16,405,462) (17,576,239) (69,135) 17,507,104

0100 Fund Balance - July 1 (Beginning) 123,133,579 123,133,579 123,133,579 -

3000 Fund Balance - June 30 (Ending) $ 106,728,117 $ 105,557,340 $ 123,064,444 $ 17,507,104

31The notes to the financial statements are an integral part of this statement.

EXHIBIT D-1NORTH EAST INDEPENDENT SCHOOL DISTRICT

STATEMENT OF NET POSITIONPROPRIETARY FUNDS

JUNE 30, 2017

Total

Enterprise

Funds Service Funds

Internal

Total

Governmental

Activities -

Business-Type

Activities -

ASSETSCurrent Assets:

25,128,058 1,931,776 Cash and Cash Equivalents $ $7,711,431 - Investments

338 - Due from Other Governments53,308 - Accrued Interest

960,190 236,263 Due from Other Funds30,420 75,595 Other Receivables

340,923 - Inventories

2,243,634 34,224,668 Total Current Assets

Noncurrent Assets:Capital Assets:

- 961,852 Land483,379 5,925,231 Buildings and Improvements

(418,477)(2,099,265)Depreciation on Buildings18,819,216 589,357 Furniture and Equipment

(12,514,962)(290,290)Depreciation on Furniture and Equipment - 299,986 Construction in Progress

5,386,871 6,369,156 Total Noncurrent Assets

Total Assets 7,630,505 40,593,824

LIABILITIESCurrent Liabilities:

1,555,486 158,975 Accounts Payable400,000 - Workers Compensation Payable - Current10,160 - Capital Leases Payable - Current9,578 55,236 Accrued Wages Payable

709,416 141,632 Due to Other Funds84 63 Due to Other Governments

- 19,926 Due to Student Groups4,676,553 12,300 Accrued Expenses

- 108,348 Unearned Revenues

496,480 7,361,277 Total Current Liabilities

Noncurrent Liabilities:

36,351 - Capital Leases - Due in More than One Year590,689 - Workers Compensation - Due in More than One Year

- 627,040 Total Noncurrent Liabilities

Total Liabilities 496,480 7,988,317

NET POSITION6,369,156 5,386,871 Net Investment in Capital Assets

26,236,351 1,747,154 Unrestricted Net Position

Total Net Position 7,134,025 32,605,507 $ $

32

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

EXHIBIT D-2NORTH EAST INDEPENDENT SCHOOL DISTRICT

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

FOR THE YEAR ENDED JUNE 30, 2017

Total

Enterprise

Funds Service Funds

Internal

Total

Business-Type

Activities -

Governmental

Activities -

OPERATING REVENUES:

85,040,775 10,236,963 Local and Intermediate