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Alexandria City Public Schools

A Component Unit of the City of Alexandria, Virginia

Comprehensive Annual Financial Report Fiscal Year Ended June 30, 2006

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Alexandria City Public Schools

COMPREHENSIVE ANNUAL FINANCIAL REPORT A Component Unit of the City of Alexandria, Virginia

FISCAL YEAR ENDED

JUNE 30, 2006

Prepared by:

DEPARTMENT OF FINANCIAL AND ADMINISTRATIVE SERVICES

Rebecca L. Perry, Superintendent Leslie J. Peterson, Executive Director for Financial Services & Technology

Rung K. Pham, Director of Finance

Alexandria City Public Schools, Virginia Comprehensive Annual Financial Report

For the Year Ended June 30, 2006

Table of Contents

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Introductory Section (unaudited) Page Transmittal Letter------------------------------------------------------------------------------------- 7 Principal Officials ----------------------------------------------------------------------------------- 12 Alexandria City Public Schools Organization Chart --------------------------------------- 13 ASBO Certificate of Excellence in Financial Reporting----------------------------------- 14 Financial Section Independent Auditors’ Report---------------------------------------------------------------- 17 Management’s Discussion and Analysis ------------------------------------------------- 20 Basic Financial Statements: Government-wide Financial Statements Statement of Net Assets----------------------------------------------------------- 30 Statement of Activities-------------------------------------------------------------- 31 Fund Financial Statements Governmental Funds Balance Sheet------------------------------------------------------------------------ 32 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Assets -------------------------------------------------------- 33 Statement of Revenues, Expenditures, and Changes in Fund Balances------------------------------------------------------------------ 34 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities ----------------------------------------------------------- 35 Fiduciary Funds Statement of Fiduciary Net Assets---------------------------------------------- 36 Statement of Changes in Fiduciary Net Assets------------------------------ 37 Notes to the Financial Statements ----------------------------------------------------- 38 Required Supplementary Information Budgetary Comparison Schedule-General Fund-------------------------------------- 59 Notes to the Budgetary Comparison Schedule ---------------------------------------- 60 Public Employee Retirement Systems-Schedule of Funding Progress --------- 61 Public Employee Retirement Systems-Schedule of Employer Contributions-- 62

Alexandria City Public Schools, Virginia Comprehensive Annual Financial Report


Table of Contents

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Page Other Supplementary Information Nonmajor Governmental Funds: Fund Description ------------------------------------------------------------------------- 64 Combining Balance Sheet-Nonmajor Governmental Funds ------------------ 65 Combining Statement of Revenues, Expenditures and Changes In Fund Balances-Nonmajor Governmental Funds --------------------------- 66 Compliance 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---------------------------------------------------------------------------- 67 Statistical Section (unaudited)

Government-wide information: Net Assets-Last seven fiscal years ----------------------------------------------------------- S-2

Changes in Net Assets-Last seven fiscal years ------------------------------------------- S-3

Fund information: Fund Balances-Governmental Funds-Last seven fiscal years ------------------------ S-4

Changes in Fund Balances-Governmental Funds-

Last seven fiscal years---------------------------------------------------------------------- S-5

Changes in Net Assets-Pension Trust Fund-Last seven fiscal years---------------- S-6

General Fund Expenditures by Detail Object-Last five fiscal years ------------------ S-7

Capital Improvement Expenditures-Last ten fiscal years ------------------------------- S-8

Cost Per Pupil-Last ten fiscal years ---------------------------------------------------------- S-9

Demographic Statistics-Last ten fiscal years--------------------------------------------- S-10

Total Student Membership by Grade-Last ten fiscal years --------------------------- S-11

School Food Service Meals Served-Last five fiscal years ---------------------------- S-12

School Food Service Revenues and Expenditures-Last five fiscal years--------- S-13

Teachers’ Education and Experience------------------------------------------------------ S-14

Teachers’ Base Salaries-Last ten fiscal years------------------------------------------- S-15

Real and Personal Property Tax Assessments and Rates --------------------------- S-16

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INTRODUCTORY SECTION

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School district organization The School Board of the City of Alexandria (Board) is the elected body established under Virginia law to provide public education from kindergarten through twelfth grade to children residing within the City of Alexandria, Virginia. The Board determines educational policy and employs a superintendent of schools to administer the school division. The Board consists of nine members who each serve a three-year term. The City is autonomous from any county, town or other political subdivision of the Commonwealth of Virginia. The City is located on the west bank of the Potomac River across from Washington, D.C. It was established in 1870. ACPS serves the citizens of the City, a population of approximately 138,000. The City is a primary government that is financially accountable for a legally separate entity, the Board. The Board has no power to levy or collect taxes or increase the budget. Because of its relationship with the City, ACPS is considered a component unit of the City, as defined by GAAP. The Board has no component units for financial reporting purposes. ACPS is a small school system, but large enough to command the resources for state-of-the-art teaching and learning. It has a vibrant multicultural community and our students reflect the broad diversity of our City. ACPS is one of 137 school divisions in the Commonwealth of Virginia. The school division operates one high school, two middle schools, a ninth grade school, thirteen elementary schools and a secondary training and education program center. It educates a student population of approximately 10,284 students who come from approximately 88 countries. At the elementary level, ACPS has focus school programs as well as dual language programs. Enhanced educational opportunities are provided at the high school level, including the offer of laptops for all ninth through twelfth grade students. ACPS has 2,117 full-time employees: 1,762 of those employees are assigned to instruction, adult education, and attendance and health programs. Approximately 77.7 percent of the school division expenses ($140.8 million for fiscal year 2006) are spent on instruction, attendance and health services, summer school and adult education programs. Local economy outlook The City continues to enjoy a stable economy. Tourism is strong, unemployment rates low, office vacancy rates moderate, demand for housing moderate, and the number of jobs in the city is increasing. As of December 31, 2005, 94,880 persons were employed in the City, an increase of 2,564 compared to 92,316 at the end of December 31, 2004. The local jobless rate has continued to decrease from 3.1 percent in 2005 to 2.6 percent in 2006. The real estate market, which is the principal source of tax revenue for the City, continued to exhibit a high rate of growth. Total real property assessments increased in calendar year 2006 by 20.3 percent, or $5.6 billion, which consists of $4.1 billion of residential appreciation and $1.5 billion of commercial growth.

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Major Initiatives Technology Integration ACPS continues to be in the forefront of technology integration. Eighty-seven percent of the surrounding school districts surveyed in 2004 did not have a one-to-one computing program. The laptop program launched three years ago at Minnie Howard and two years ago at T.C. Williams meant that ACPS was one among only 13 percent of school districts in the nation that were in the vanguard.

More than 100 T.C. Williams, Minnie Howard and Secondary Training & Education Program (STEP) teachers have volunteered to participate in a pilot for Blackboard, a comprehensive and flexible software platform that delivers a course management system, a customizable portal and online communities. Blackboard provides teachers and students with tools to create, enhance and customize a teaching and learning environment that meets diverse teaching objectives and learner needs.

The New T.C. Williams High School

The new T.C. Williams High School will be on the cutting edge both inside and out. The construction project continues to be on time and on budget. The educational program at T.C. Williams is also being renewed. The school community has committed to eight guiding principles that will focus on professional development, resource allocation, program development and the actual formula for how staff and students are assigned to one of the five smaller learning communities. Distributed administrative leadership and guidance support is built into both the layout of the building and the foundation of the educational program.

Attracting and Retaining the Best Teachers ACPS is fortunate to have exceptional teachers, and we want to keep them. About 75 percent of our teachers hold Master’s degrees or higher and highly-qualified teachers are in demand throughout the Washington metropolitan region. A teacher salary adjustment for 2006-07, adopted by the School Board in June, will keep Alexandria competitive with surrounding jurisdictions.

Tutoring

After-school tutorial classes dramatically increased at all elementary schools. Funding provided through ACPS differentiated resources, Virginia Early Reading Initiative, and Standards of Learning Remediation grants enables principals to pay stipends to teachers who tutor small groups of students on key mathematics and reading skills and concepts. Each school is tasked with designing a program that fits the specific needs of its students.

Financial information Fund Accounting: ACPS reports its financial activities through the use of fund accounting. This is a system wherein transactions are reported in self-balancing sets of accounts to reflect the results of activities. (See Note 1 of the Notes to the Financial Statements for a summary of significant policies and descriptions of fund types.)

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Internal Controls: ACPS management is responsible for establishing and maintaining an internal control structure designed to ensure that the assets of the school division are protected from loss, theft or misuse and to ensure that adequate accounting data are compiled to allow for the preparation of financial statements in conformity with GAAP. The internal control structure is designed to provide reasonable, but not absolute, assurance that ACPS’ management objectives are met. The concept of reasonable assurance is based on the assumption that the cost of internal accounting controls should not exceed the benefits expected to be derived from their implementation. ACPS utilizes a fully automated accounting system as well as an automated system of controls for fixed assets and payroll. These systems, coupled with the manual review of each voucher before payment, ensure that the financial information generated is both accurate and reliable. Budgetary Controls: The City annually appropriates the Board’s General Fund budget, levies taxes to finance the schools’ operations and authorizes the issuance of bonds to support the schools’ capital improvement projects. With the Board budget, the level of control by the City is at the total appropriation level. All activities over which the Board exercises financial accountability have been incorporated to form the Board reporting entity. Such activities include the general operations and support services of the school division and its school food services. The fiscal year begins on July 1 and ends on June 30 with all annual unencumbered appropriations lapsing at year end. ACPS maintains budgetary controls to ensure compliance with the appropriated budget. The objective of these controls is to ensure compliance with legal provisions embodied in the annual appropriated budget approved by the Alexandria City Council (Council). The Council determines the level of funding to be provided to ACPS. Based on that allocation, the Board makes changes and generally adopts the final approved budget in May. Budgets are also prepared annually for nonmajor governmental funds, which represent the grants and special projects fund and the school food services fund. The school lunch program is dependent on federal and state reimbursements and cafeteria sales to support its overall lunch and breakfast feeding activities. Management control is exercised over the budget at the budgetary line item level within each fund. ACPS also maintains an encumbrance accounting system as one technique of accomplishing budgetary control. Encumbrances outstanding at year-end in the general fund and the school food services fund are reported as reservations of fund balances because they do not constitute resources for spending. Each administrator and school principal is furnished monthly reports showing the status of the budget accounts for which they are responsible. The Finance Office also provides each manager a monthly report listing outstanding encumbrances for the current and prior years. As a recipient of state, federal and local financial assistance, ACPS is also responsible for ensuring that an adequate internal control structure is in place to ensure and document compliance with applicable laws and regulations related to these programs. ACPS is included within the City’s single audit. The audit for the year ended June 30, 2006, disclosed no material internal control weaknesses or material instances of noncompliance or other violations of laws, regulations, contracts and grant agreements.

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Cash Management: The City is the custodian of all primary cash and investments used to support ACPS operations. The primary concerns of the City’s cash management and investments program are the safety and preservation of principal, liquidity, and yield. The City takes full advantage of temporarily idle cash and scheduling of vendor payments. To ensure the most competitive rates of investment, the City’s cash resources generally are combined to form a pool of cash and investments. The investment pool’s portfolio is composed of obligations of the U.S. Government and its agencies, repurchase agreements fully collateralized by obligations of the U.S. Government or its agencies, and highly-rated commercial paper. All investments are stated at fair value. Cash held at the school level for student activities is deposited with local banks and is maintained by the individual schools.

Risk Management: ACPS maintains a risk management program that includes several comprehensive insurance and self-insurance policies specifically designed to meet its needs, monitor various control activities, and manage a program on claims against ACPS. ACPS’ insurance coverage includes a comprehensive property and casualty policy; a comprehensive vehicle liability policy; special equipment coverage; group disability insurance; excess worker’s compensation coverage and others. The Board’s health insurance coverage is a fully-insured point of service program and health maintenance organization.

Award and Acknowledgements The Association of School Business Officials International (ASBO) awarded the Alexandria City Public Schools a Certificate of Excellence in Financial Reporting for the fiscal year ended June 30, 2005. This award is granted only after an intensive review of the Comprehensive Annual Financial Report (CAFR) by a panel of expert certified public accountants and practicing school business officials. A Certificate of Achievement is valid for a period of one year only. We believe that the current CAFR also conforms to the ASBO Certificate of Excellence program requirements and we are therefore submitting it to ASBO to confirm our compliance and to obtain another ASBO certificate. The preparation of this report would not have been possible without the efficient and dedicated services of the entire staff of the financial services department. We would like to express our sincere appreciation to everyone in the department who assisted with and contributed to the preparation of this report. Appreciation is also extended to the Board and administration whose continuing support is vital to the financial health of the school division.

Respectfully submitted,

Rebecca L. Perry Leslie J. Peterson Rung K. Pham Superintendent Executive Director Director of Finance

Financial Services and Technology

Alexandria City Public Schools, Virginia Principal Officials

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School Board

Ms. Mary M. Danforth ..................................................................................................... Chairman

Mr. Charles Wilson.................................................................................................. Vice-Chairman

Dr. Sally Ann Baynard........................................................................................................Member

Mr. Mark R. Eaton..............................................................................................................Member

Mr. Kenneth L. Foran .........................................................................................................Member

Ms. Gwendolyn H. Lewis ...................................................................................................Member

Ms. Melissa W. Luby..........................................................................................................Member

Mr. Arthur E. Schmalz........................................................................................................Member

Mr. Mark O. Wilkoff ............................................................................................................Member

Ms. Rosemary Webb, Clerk of the Board

Administration

Rebecca L. Perry ....................................................................................................Superintendent

Cathy David ........................................................................................... Deputy Superintendent

John A. Grymes ..................................... Assistant Superintendent for Federal & State Programs

Cheryl Ross-Audley ............................................ Assistant Superintendent for Human Resources

Leslie J. Peterson ........................................Executive Director, Financial Services & Technology

ALEXANDRIA CITY PUBLIC SCHOOLSORGANIZATION CHART

Executive Director,Monitoring & Evaluation

Executive Director,Information & Outreach

Director,Planning & Constrution

Curriculum Specialists,Health, PE & Family Life and Fine Arts

Clerk of the Board

Director,Transportation

Director,Food & Nutrition

Services

Exec. Assistant to the Superintendent

Curriculum Specialists,Foreign Language, Library, and TAG

Director,Career & Tech Ed

and Adult Ed

Director,Student Services

Director,ESL

Director,Pupil Services

Curriculum Specialist,Reading

Executive Director,Secondary Programs

Director,Staff Development

Curriculum Specialists, Science & Social

Studies

Curriculum Specialists,Mathematics & Language Arts

Director,Finance

Supervisor, Budget

Purchasing Agent

Director,Human Resources

Director,Recruitment &

Retention

Executive Director,Financial Services and

Technology

Assistant Superintendent,Federal and State Programs

Assistant Superintendent,Administrative Services

and Public Relations

Director,Integrated

Technology Services

Executive Director,Elementary Programs

Director,Educational

Facilities

Assistant Superintendent,Human Resources

State Board of Education

Alexandria City School Board

Superintendent of Schools

Deputy Superintendent

Alexandria Community

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This Certificate of Excellence in Financial Reporting is presented to

ALEXANDRIA CITY PUBLIC SCHOOLS

For its Comprehensive Annual Financial Report (CAFR) For the Fiscal Year Ended June 30, 2005

Upon recommendation of the Association’s Panel of Review which has judged that the Report substantially conforms to principles and standards of ASBO’s Certificate of Excellence Program

President Interim Executive Director

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FINANCIAL SECTION

KPMG LLP. KPMG LLP, a U.S. limited liability partnership, is a member of KPMG International, a Swiss cooperative.

KPMG LLP 2001 M Street, NW Washington, DC 20036

Independent Auditors’ Report

The Members of the Alexandria City School Board City of Alexandria, Virginia:

We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of the Alexandria City Public Schools (ACPS)—a component unit of the City of Alexandria, Virginia—as of and for the year ended June 30, 2006, which collectively comprise the ACPS’ basic financial statements as listed in the accompanying table of contents. These financial statements are the responsibility of the ACPS’ management. Our responsibility is to express opinions on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and Specifications for Audits of Counties, Cities, and Towns, issued by the Auditor of Public Accounts of the Commonwealth of Virginia (Specifications). Those standards and Specifications 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 consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the ACPS’ internal control over financial reporting. Accordingly, we express no such opinion. 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 the significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions.

In our opinion, the basic financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the Alexandria City Public Schools as of June 30, 2006, and the respective changes in financial position thereof for the year then ended, in conformity with U.S. generally accepted accounting principles.

In accordance with Government Auditing Standards, we have also issued our report dated October 31, 2006, on our consideration of the ACPS’ internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters.

The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit.

The Management’s Discussion and Analysis, the budgetary comparison schedule, and the schedules of funding progress and employer contributions on pages 20 through 29, pages 59 and 60, and pages 61 and 62, respectively, are not required parts of the basic financial statements but are supplementary information required by U.S. generally accepted accounting principles. 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 this 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 ACPS’ basic financial statements. The information identified as introductory section, other supplementary information, and statistical section in the table of contents is presented for purposes of additional analysis and is not a required part of the basic financial statements. The other supplementary 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. The information included in the introductory and statistical sections has not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we express no opinion on it.

October 31, 2006

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MANAGEMENT’S DISCUSSION AND ANALYSIS

Alexandria City Public Schools, Virginia Management’s Discussion and Analysis

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INTRODUCTION Our discussion and analysis of Alexandria City Public Schools’ (ACPS) financial performance provides an overview of ACPS’ financial activities for the fiscal year ended June 30, 2006. The intent of this management discussion and analysis is to consider ACPS’ financial performance as a whole. Readers should also review the transmittal letter, basic financial statements and notes to the financial statements to enhance their understanding of ACPS’ financial performance. Management’s Discussion and Analysis (MD&A) is an element of the reporting model adopted by the Governmental Accounting Standards Board (GASB) in Statement No. 34, Basic Financial Statements and Management’s Discussion and Analysis-for State and Local Governments. Certain comparative information between the current year and the prior year is required to be presented in the MD&A. The reporting model is a combination of both government-wide financial statements and fund financial statements. Financial Highlights ACPS’ total net assets on a government-wide basis were $18.3 million at June 30, 2006, representing a decrease of $4.2 million, or 18.9 percent in comparison to June 30, 2005. The decrease was due primarily to the funding of capital projects from cash flow rather than bond proceeds. On a government-wide basis for governmental activities, expenses of $183.0 million exceeded revenues of $178.8 million by $4.2 million, or 2.4%. ACPS’ governmental funds expenditures exceeded revenues by $5.1 million, or 2.8%. The change reduced the governmental funds’ fund balance to $11.8 million. Of this amount, $9.2 million is unreserved and available for future appropriations. Overview of the Financial Statements This section of the Comprehensive Annual Financial Report consists of four parts: 1) Management’s Discussion and Analysis, 2) basic financial statements (government-wide and fund statements) including notes to the financial statements, 3) required supplementary information, and 4) other supplementary information. The basic financial statements consist of two kinds of statements that present different views of ACPS’ financial activities. The government-wide financial statements provide both long-term and short-term information about ACPS’ overall financial status. The fund financial statements report ACPS’ operations in more detail than the government-wide statements.

• The statement of net assets and statement of activities provide information on a government-wide basis. These statements present an aggregate view of ACPS’ finances. Government-wide statements contain useful long-term information as well as information for the just completed fiscal year.

• The remaining statements are fund financial statements that focus on the individual

funds of ACPS providing primarily short-term information. Fund statements report operations in more detail than government-wide statements.


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• The notes to the financial statements explain some of the information in the statements and provide additional disclosures so that statement users have a complete picture of ACPS’ financial activities and position.

• The required supplementary information further enhances the financial statements with a

budgetary comparison and pension trend data. The budgetary comparison provides three separate types of information: the original budget, the final amended budget and the actual amounts. Two schedules of actuarial information are required to be presented in connection with defined benefit pension plans: a schedule of funding progress and a schedule of employer contributions.

• The other supplementary information refers to information about nonmajor governmental

funds and is presented immediately following the required supplementary information on pensions. The combining financial statements can be found on pages 65-66.

The following diagram shows how the various parts of the financial section are arranged and relate to one another.

FINANCIAL SECTION

Government-wide Financial Statements The government-wide financial statements are designed to provide readers with a broad view of the school division’s finances in a manner similar to a private sector business. The Statement of Net Assets and the Statement of Activities provide information about the activities of the school division as a whole, presenting both an aggregate and a long-term view of the finances. These statements include all assets and liabilities using the accrual basis of accounting. This basis of accounting includes all of the current year’s revenues and expenses regardless of when cash is received or paid.

(2) Basic Financial Statements

(3) Required Supplementary Information

(1) Management’s Discussion and Analysis

Government-wide Financial Statements

Fund Financial Statements

Notes to the Financial Statements

(4) Other Supplementary Information


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The Statement of Net Assets presents information on all of ACPS’ assets and liabilities with the difference between the two reported as net assets. Increases or decreases in net assets over time may serve as a useful indicator of whether the financial position is improving or deteriorating. The Statement of Activities presents information on ACPS’ costs of providing services and the resources obtained to finance those services. This statement also highlights to what extent those services are able to cover their costs with user fees, operating grants and contributions, as opposed to being financed with general revenues. In addition, the statement provides overall information as to whether the financial position has improved or deteriorated during the fiscal year. Financial Analysis of ACPS as a Whole In government-wide financial statements, the activities can be divided into two categories-governmental activities and business-type activities. ACPS reports only governmental activities since it has no business-type activities. The governmental activities of ACPS include most of the schools’ basic services, such as instruction, administration, attendance and health, pupil transportation, operation and maintenance of school buildings, summer school, adult education, food services and community services. City of Alexandria (City) appropriations and state aid finance most of these activities. In response to GASB Statement No. 34, the Virginia General Assembly passed a law that establishes local option of creating, for financial reporting purposes, a tenancy in common between the city and the local school board when the city issues bonds for financing school construction. The sole purpose of the law is to allow cities and counties the ability to match the recording of school assets and related liabilities. As a result, certain school assets financed with the City’s general obligation bonds are recorded as part of the primary government rather than as part of ACPS. According to the law, the tenancy in common ends when the associated obligation is repaid; therefore, the assets will revert to the Board when the bonds are repaid. Capital debt financing activities are not reported in the ACPS’, but in the City’s financial statements.


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Net assets. Table 1, below, provides a summary of ACPS’ net assets as of June 30, 2006 compared to June 30, 2005.

Percentage Change

2006 2005 2005-2006

Current and other assets 40,702,394$ 45,746,933$ -11.0%Capital assets, net 6,541,535 5,988,353 9.2%Total assets 47,243,929 51,735,286 -8.7%

Current liabilities 22,631,090 23,167,938 -2.3%Long-term liabilities 6,354,366 6,066,862 4.7%Total liabilities 28,985,456 29,234,800 -0.9%

Net assetsInvested in capital assets 6,541,535 5,988,353 9.2%Unrestricted 11,716,938 16,512,133 -29.0%Total net assets 18,258,473$ 22,500,486$ -18.9%

Activities

Table 1Summary of Net Assets

As of June 30, 2006 and 2005

Governmental

• Total assets decreased due to payments for school construction and other improvement projects as part of ACPS’ Capital Improvement Program for which bond proceeds were not made available in the current fiscal year.

• Capital assets, net of depreciation increased slightly from the prior fiscal year due to the purchase of new equipment. Note that all capital projects funded by the City’s long-term debt are carried in the City’s financial statements.

• Long-term liabilities reflected increases in accrued sick pay, accrued vacation pay and

accrued personal leave.


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Changes in net assets. Table 2 shows the changes in net assets from fiscal year 2005 to fiscal year 2006.

2006 2005 Difference % ChangeRevenues

Program revenues:Charges for services 2,124,748$ 2,086,955$ 37,793 1.8%Operating grants and contributions 13,097,186 12,028,924 1,068,262 8.9%

General revenues:City appropriation 139,340,097 141,688,238 (2,348,141) -1.7%State aid 24,075,496 23,410,871 664,625 2.8%Grants not restricted to specific programs 77,769 57,456 20,313 35.4%Other local funds 42,816 61,168 (18,352) -30.0%Total revenues 178,758,112 179,333,612 (575,500) -0.3%

ExpensesInstructional:

General instruction 133,599,425 123,558,235 10,041,190 8.1%Adult education 1,104,184 1,081,890 22,294 2.1%Summer school 1,964,061 1,980,461 (16,400) -0.8%

Support Services:Administration 11,726,347 11,952,499 (226,152) -1.9%Attendance and health services 4,171,692 3,674,326 497,366 13.5%Pupil transportation 5,168,493 4,155,942 1,012,551 24.4%Operation of school plant 10,759,876 9,658,105 1,101,771 11.4%Maintenance of school plant 4,291,972 4,139,398 152,574 3.7%

Operation of Noninstructional Services:Food services 4,371,644 4,907,089 (535,445) -10.9%Community Services 103,633 98,935 4,698 4.7%

Capital improvement services 5,738,798 5,067,286 671,512 13.3%Total expenses 183,000,125 170,274,166 12,725,959 7.5%

Change in net assets (4,242,013) 9,059,446 (13,301,459) -146.8%Net Assets Beginning of Year 22,500,486 13,441,040 9,059,446 67.4%Net Assets End of Year 18,258,473$ 22,500,486$ (4,242,013)$ -18.9%

Governmental Activities

Table 2Summary of Changes in Net Assets

For the Years ended June 30, 2006 and 2005

Some of the major variances between the current and prior fiscal year are explained below: • $1.1 million increase in operating grants and contributions is primarily related to increased

funding for Title I and Title VI.

• $2.3 million decrease in city appropriation is attributable to bond proceeds not made available for the Capital Improvement Projects.

• General instruction expenses increased by $10.0 million (8.1%) during fiscal year 2006. Most of this increase was for employee raises and health insurance contributions.


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• Pupil transportation expenses increased by $1.0 million (24.4%). The transportation costs for students with special needs combined with increased fuel costs and increased bus maintenance costs accounted for nearly 40% of the increased cost.

• Operation of school plant expenses increased by $1.1 million. The increased cost for

natural gas and electricity accounted for approximately 40% of the increase. • Food services expenses decreased by $0.5 million due to a decline in the student

enrollment and improved operation efficiency implemented by the department. Fund Financial Statements The fund financial statements provide more detailed information about ACPS’ funds, focusing on its most significant or “major” funds--not ACPS as a whole. Funds are a grouping of related accounts that are used to maintain control over resources that have been segregated for specific activities or objectives. ACPS, like other state and local governments, uses fund accounting to demonstrate compliance with finance-related legal requirements. ACPS’ fund financial statements provide detailed information about ACPS’ most significant funds. The focus of ACPS’ governmental funds is near-term inflows, outflows, and balances of spendable resources. Unreserved fund balance may serve as a useful measure of ACPS’ net resources available for spending at the end of the fiscal year. As ACPS completed the year, its governmental funds reported fund balances of $11.8 million. Approximately 78 percent of this amount ($9.2 million) constitutes unreserved fund balance, which is available for spending at ACPS’ discretion. The remainder of the fund balance is reserved to indicate that it is not available for new spending because it is already reserved as follows: 1) to liquidate contracts and purchase orders of the prior period, 2) to account for reported inventories in the nonmajor funds and 3) to account for prepaid items. Information about ACPS’ major funds starts on page 32. These funds are accounted for using the modified accrual basis of accounting.

• Governmental Funds: Most of ACPS’ activities are reported in governmental funds, which focus on (1) how money flows into and out of those funds and (2) the balances left at year-end available for spending in future periods. The governmental fund statements provide a detailed short-term view of ACPS’ general government operations and the basic services it provides. Governmental fund information helps determine whether there are more or fewer resources that can be spent in the near future to finance educational programs. Governmental funds do not report on long-term commitments as they are reported in the government-wide statements. Therefore, the relationships (or differences) between the government-wide statements and the governmental funds are reconciled and explained following the governmental funds statements.

• Fiduciary Funds: ACPS is a trustee, or fiduciary, for its employees’ pension plan. All of

the fiduciary activities are reported in a separate statement of fiduciary net assets and a statement of changes in fiduciary net assets. These activities are excluded from ACPS’ government-wide statements because ACPS cannot use these assets to finance its operations. The financial statements for the plan are prepared on the accrual basis of accounting. The student activity monies are also accounted for in this fund type as an agency fund.


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The following schedule presents a summary of the general operating fund, capital projects fund and non-major fund revenues for the year ended June 30, 2006, as compared to 2005. It also depicts the amount and percentage of increases and decreases in revenues relative to prior year revenues. Revenues

Percent2006 Increase Increase

2006 2005 Percent (Decrease) (Decrease)(thousands of dollars) Amount Amount of Total from 2005 from 2005

City of Alexandria 139,340$ 141,688$ 77.9% (2,348)$ -1.7%State aid 25,235 24,362 14.1% 873 3.6%Federal aid 11,651 10,923 6.5% 728 6.7%Tuition and fees 567 642 0.3% (75) -11.7%Food sales 1,368 1,308 0.8% 60 4.6%Gifts and donations 43 57 0.0% (14) -24.6%Other local funds 554 353 0.3% 201 56.9%

Total 178,758$ 179,333$ 100.0% (575)$ -0.3%

The City of Alexandria provided the primary source of revenue to the school division, totaling $138.8 million and $0.6 million for the general fund and capital projects fund, respectively. This represents a decrease of $2.3 million, or 1.7% over fiscal year 2005. State aid increased $0.9 million, or 3.6%. Federal aid increased by $0.7 million due to increased grant funding.


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The following schedule presents a summary of the general fund, capital projects fund and non-major fund expenditures for the fiscal year ended June 30, 2006, and the percentage increase and decrease relative to prior year amounts. Expenditures

Percent2006 Increase Increase

2006 2005 Percent (Decrease) (Decrease)(dollars in thousands) Amount Amount of Total from 2005 from 2005

Administration 12,072$ 12,035$ 6.6% 37$ 0.3%General instruction 133,789 123,505 72.8% 10,284 8.3%Attendance and health services 4,172 3,674 2.3% 498 13.6%Pupil transportation 5,427 4,650 3.0% 777 16.7%Operation of school plant 10,760 9,658 5.9% 1,102 11.4%Maintenance of school plant 4,330 4,050 2.4% 280 6.9%Summer school 1,964 1,981 1.1% (17) -0.9%Adult education 1,104 1,082 0.6% 22 2.0%Food services 4,363 4,895 2.4% (532) -10.9%Community services 104 99 0.1% 5 5.1%Capital improvement services 5,738 4,666 3.1% 1,072 23.0%

Total 183,823$ 170,295$ 100.0% 13,528$ 7.9%

• General instruction increased due to teacher cost of living adjustments, step increases,

hiring of additional teachers, employees medical and hospitalization costs and the rate change in the Virginia Retirement System contributions for teachers. The General Assembly approved the change in the contribution rate from 6.03% to 6.62% for the period July 1, 2005 to June 30, 2006.

• Food services decreased by $0.5 million due to the reduction in the number of meals

served and increased operation of efficiency. • Total expenditures increased $13.5 million from $170.3 million in fiscal year 2005 to

$183.8 million in fiscal year 2006. Aside from the increases for employee compensation and benefits, the additional costs supported new and expanded initiatives such as the Kindergarten Literacy Intervention, Academic Counselor for Athletes, School Support Team, No Child Left Behind and Textbook Replacement.

Capital Assets At June 30, 2006, ACPS had $6.5 million invested in land and land improvements, buildings and building improvements, and furniture and equipment for governmental activities (see Note 5). Table 3 shows the fiscal year 2006 balance net of accumulated depreciation. This amount represents a slight net decrease (including additions, deductions and depreciation) from last year.


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Under legislation passed by the General Assembly of Virginia, projects under construction and any school assets funded by the City’s long-term debt are carried in the City’s financial records until the associated debt has been paid in full. When the debt issue is retired, the assets and any remaining asset value are transferred to ACPS. Table 3 only reflects assets that have been transferred to ACPS.

Increase Percentage2006 2005 (Decrease) Change

Land and land improvements 999,381$ 999,381$ - 0.0%Buildings and building improvements 1,960,989 2,283,295 (322,306) -14.1%Furniture and equipment 3,581,165 2,705,677 875,488 32.4%

- Totals 6,541,535$ 5,988,353$ 553,182 9.2%

Governmental Activities

Table 3Capital Assets

(net of accumulated depreciation)As of June 30, 2006 and 2005

General Fund Budgetary Highlights The ACPS budget is prepared by fund, account and department. All annual unencumbered appropriations lapse at fiscal year-end. Differences between the original budget and the final amended budget were minor. • In October 2005, the Board took action to revise the original budget to reflect total estimated

expenditures of $167.7 million, including using $2.3 million of available fund balances.

• Actual General Fund revenues approximate expenditures for fiscal year 2006.

General Fund Budget

(in millions)

Budget Amended Actual

RevenuesIntergovernmental 163.8$ 163.8$ 163.0$ Other 0.6 0.6 0.6

Total 164.4 164.4 163.6

Expenditures 166.7 167.7 163.6 Total 166.7 167.7 163.6

Change in Fund Balance (2.3)$ (3.3)$ -$


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Post Employment Benefits In preparation for the implementation of Governmental Accounting Standard Board Statement No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions (GASB 45), ACPS had actuaries prepare a preliminary evaluation of post retirement costs, as of June 30, 2006. The preliminary evaluation estimated the Unfunded Actuarial Accrued Liability to be $39.0 million and the Annual Required Contribution to be $4.9 million for a funded plan. This information was based on a 30-year amortization of the unfunded actuarial liability and a 7.5 percent discount rate. The 7.5 percent discount rate was based on the assumption that the City would fund a separate investment trust fund to finance the payment of benefits. If a separate investment trust fund is not established, GASB 45 requires the City to use a discount rate assumption that reflects the rate the City receives on its general investments. If a discount rate of 4.0 percent is used, the Unfunded Actuarial Accrued Liability would increase to $66.0 million and the Annual Required Contribution would increase to $7.1 million. During fiscal year 2007, a more specific multi-year funding strategy will be developed and presented to the City Council for funding. Next Year’s Budget The Board adopted a final balanced budget for fiscal year 2007 that reflected total resources, including $4.3 million of available fund balances, and total appropriations of $177.8 million for the General Operating Fund. This budget represents an increase of $14.4 million or 8.5 percent over the fiscal year 2006 approved budget. Approximately 86 percent of the budget is for compensation-related expenditures. Contacting the Alexandria City Public Schools Financial Management This financial report is designed to provide our citizens, taxpayers, and creditors with a general overview of ACPS’ finances and to show ACPS’ accountability for the money it receives. If you have any questions about this report or need additional financial information, please contact the Finance Office at Alexandria City Public Schools, 2000 N. Beauregard Street, Alexandria, Virginia 22311, telephone 703-824-6646 or email [email protected].

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GovernmentalActivities

Assets

Due from the City of Alexandria 28,809,072$ Due from other governments 4,428,881 Other receivables 34,305 Prepaid items and other assets 7,224,708 Inventories 205,428 Capital assets:

Land and land improvements 999,381 Other capital assets, net of depreciation 5,542,154

Total assets 47,243,929

Liabilities

Accrued personnel services 16,701,299 Accounts payable 4,266,923 Deferred revenue 1,171,828 Long-term liabilities: compensated absences

Due within one year 491,040 Due in more than one year 6,354,366

Total liabilities 28,985,456

Net Assets

Invested in capital assets 6,541,535 Unrestricted 11,716,938

Total net assets 18,258,473$

See accompanying notes to the basic financial statements.

Alexandria City Public Schools, VirginiaStatement of Net Assets

June 30, 2006

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OperatingCharges for Grants and Governmental

Functions Expenses Services Contributions Activities

Instructional:General instruction 133,599,425$ 55,437$ 10,477,634$ (123,066,354)$ Adult education 1,104,184 136,540 - (967,644) Summer school 1,964,061 106,047 - (1,858,014)

Support Services: - Administration 11,726,347 - - (11,726,347) Attendance and health services 4,171,692 - - (4,171,692) Pupil transportation 5,168,493 - - (5,168,493) Operation of school plant 10,759,876 - - (10,759,876) Maintenance of school plant 4,291,972 269,074 - (4,022,898)

Operation of Noninstructional Services: - Food services 4,371,644 1,557,650 2,619,552 (194,442) Community services 103,633 - - (103,633)

Capital Improvement Services 5,738,798 - - (5,738,798)

Total governmental activities 183,000,125$ 2,124,748$ 13,097,186$ (167,778,191)

General revenues:Intergovernmental:

City of Alexandria 139,340,097 State aid 24,075,496

Grants not restricted to specific programs 77,769 Other 42,816 Total general revenues 163,536,178

Change in net assets (4,242,013)

Net assets-beginning of year 22,500,486

Net assets-end of year 18,258,473$


Alexandria City Public Schools, VirginiaStatement of Activities


Program Revenues

Net (Expense)

Changes in Net AssetsRevenue and

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CapitalGeneral Projects Nonmajor Total

AssetsDue from the City of Alexandria 23,564,540$ 5,244,532$ -$ 28,809,072$ Due from other governments 1,364,509 - 3,064,372 4,428,881 Due from other funds 904,172 - 1,145,343 2,049,515 Other receivables 6,952 - 27,353 34,305 Prepaid items and other assets 966,177 - 1,255 967,432 Inventories - - 205,428 205,428

Total assets 26,806,350$ 5,244,532 4,443,751$ 36,494,633$

Liabilities and Fund BalancesLiabilities

Accrued personnel services 15,622,877$ -$ 1,078,422$ 16,701,299$ Accrued compensated absences 491,040 - - 491,040 Accounts payable 1,204,915 2,802,874 259,134 4,266,923 Due to other funds 1,145,343 - 904,172 2,049,515 Deferred revenue - - 1,171,828 1,171,828

Total liabilities 18,464,175$ 2,802,874$ 3,413,556$ 24,680,605$

Fund balancesReserved for:

Inventories -$ -$ 205,428$ 205,428$ Encumbrances 1,291,812 - 195,748 1,487,560 Prepaid items 963,677 - - 963,677

Unreserved:Designated for:

Subsequent year's budget 4,305,319 - - 4,305,319 Undesignated 1,781,367 2,441,658 629,019 4,852,044

Total fund balances 8,342,175$ 2,441,658$ 1,030,195$ 11,814,028$

Total liabilities and fund balances 26,806,350$ 5,244,532$ 4,443,751$ 36,494,633$


Alexandria City Public Schools, VirginiaBalance Sheet

Governmental FundsJune 30, 2006

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Total fund balances-governmental funds 11,814,028$

Amounts reported for governmental activities in the statement of net assets are different from amounts reported for governmental funds because:

Capital assets used in governmental activities are not current financial resourcesand therefore are not reported in the governmental funds. (Note 5)

Non-depreciable assets 999,381$ Depreciable assets 62,958,396 Less: Accumulated depreciation (57,416,242) 6,541,535

Amount of pension contribution to the School Supplement Retirement System is greater than the pension cost and is recorded as a prepaid item in the Statement of Net Assets. (Note 7) 6,257,276

Long-term liabilities consist of compensated absences which arenot due and payable in the current period and therefore are not reported in the funds. (Note 9) (6,354,366)

Total net assets of governmental activities in the Statement 18,258,473$ of Net Assets


Alexandria City Public Schools, VirginiaReconciliation of the Governmental Funds Balance Sheet to

the Statement of Net AssetsJune 30, 2006

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CapitalGeneral Projects Nonmajor Total

RevenuesIntergovernmental:

City of Alexandria 138,753,138$ 586,959$ -$ 139,340,097$ State aid 24,075,496 - 1,159,970 25,235,466 Federal aid 204,010 - 11,447,362 11,651,372

Tuition and fees 487,843 - 79,256 567,099 Food sales - - 1,367,578 1,367,578 Gifts and donations - - 42,816 42,816 Other 77,769 - 475,915 553,684

Total revenues 163,598,256 586,959 14,572,897 178,758,112 Expenditures

Current:Administration 12,062,558$ -$ 9,140$ 12,071,698$ General instruction 123,796,768 - 9,992,593 133,789,361 Attendance and health services 4,142,376 - 29,316 4,171,692 Pupil transportation 5,426,771 - - 5,426,771 Operation of school plant 10,759,876 - - 10,759,876 Maintenance of school plant 4,142,483 - 187,865 4,330,348 Summer school 1,819,711 - 144,350 1,964,061 Adult education 1,071,752 - 32,432 1,104,184 Food services 275,183 - 4,087,381 4,362,564 Community services 103,633 - - 103,633

Capital improvement services - 5,738,798 - 5,738,798 Total expenditures 163,601,111$ 5,738,798$ 14,483,077$ 183,822,986$

Net change in fund balances (2,855)$ (5,151,839)$ 89,820$ (5,064,874)$

Fund balance-beginning of year 8,345,030 7,593,497 940,375 16,878,902

Fund balance-end of year 8,342,175$ 2,441,658$ 1,030,195$ 11,814,028$


Alexandria City Public Schools, VirginiaStatement of Revenues, Expenditures, and Changes in Fund Balances

Governmental FundsFor the Year Ended June 30, 2006

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Net change in fund balances-total governmental funds (5,064,874)$

Amounts reported for governmental activities in the Statement of Activities aredifferent because:

Amount of pension contribution is greater than the pension cost. This is the 557,183 net increase in the pension asset in the current period. (Note 7)

Governmental funds report capital outlays as expenditures. However, in the Statement of Activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which new capital assets expenditures exceeded depreciation in the current period. (Note 5) 553,182

Some expenses reported in the Statement of Activities, such as compensated absences, do not require the use of current financial resources and therefore are not reported as expenditures in governmental funds. This is the net increase in the liability for long-term compensated absences. (Note 9) (287,504)

Change in net assets of governmental activitiesin the Statement of Activities (4,242,013)$



Alexandria City Public Schools, VirginiaReconciliation of the Statement of Revenues, Expenditures,

and Changes in Fund Balances of Governmental Funds to the Statement of Activities

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Pension Trust AgencyFund Funds

Assets

Cash held on behalf of student activity funds -$ 615,690$ Investments held in trust for retirement benefits 71,620,465 -

Total assets 71,620,465 615,690

Liabilities

Due to student groups - 615,690

Total liabilities - 615,690$

Net Assets

Held in trust for employee retirement benefits 71,620,465

Total net assets 71,620,465$


Alexandria City Public Schools, VirginiaStatement of Fiduciary Net Assets

June 30, 2006

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Pension TrustFund

Additions

Employer contributions 2,699,728$

Contract investment earnings 3,490,254

Total additions 6,189,982$

Deductions

Benefit payments 3,006,838$

Administrative expenses 72,985

Total deductions 3,079,823$

Changes in net assets 3,110,159$

Net assets-beginning of year 68,510,306

Net assets-end of year 71,620,465$


Alexandria City Public Schools, VirginiaStatement of Changes in Fiduciary Net Assets


Alexandria City Public Schools, Virginia Notes to the Financial Statements For the Year Ended June 30, 2006

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NOTE 1. Summary of Significant Accounting Policies a) Reporting Entity The School Board of the City of Alexandria is a separately-elected governing body operating under the Constitution of Virginia and the Code of Virginia. Since FY 1995, the members of the School Board (Board) have been elected by the citizens of the City of Alexandria (City) to serve three-year terms. The Board determines educational policy and employs a superintendent of schools to implement the Board’s policy. The superintendent is also responsible to the Board for administering the operations of the school system, supervising personnel and advising the Board on all educational matters for the welfare of the students. The mission of Alexandria City Public Schools (ACPS) is to deliver high-quality instruction to a highly-diverse student population so that all students achieve at their highest potential. The City Council (Council) annually approves the Board’s total annual General Fund budget appropriation, levies taxes, and issues debt for school projects. The legal liability for the general obligation debt issued for school capital assets remains with the City. Funds also are received from state and federal sources for general school aid and specific grant purposes, respectively. The Council is prohibited from exercising any control over specific appropriations within the operating budget of the Board. ACPS is considered to be a component unit of the City because ACPS is fiscally dependent on the City and its operations are funded primarily by payments from the City’s general fund. The Board has the discretionary authority to expend the amount appropriated to it by the Council. The financial statements of ACPS have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP) as applied to local governmental units. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing local governmental accounting and financial reporting principles. The reporting model was developed to make annual reports easier to understand and more useful to the people who use governmental financial information to make decisions and includes: Management’s Discussion and Analysis (MD&A) The purpose of the MD&A is to provide an analysis of ACPS’ overall financial strength and operating results. It also includes a description of currently known facts, decisions, or conditions expected to have a significant effect on the future financial position of the school division.

Government-wide financial statements These include financial statements prepared using full accrual accounting for all of the government’s activities. Under the accrual basis, all revenues and costs of providing services are reported, not just those received or paid in the current year or soon thereafter. This approach includes not just current assets and liabilities, but also capital assets and long-term liabilities. Fund financial statements GASB Statement No. 34 requires governmental entities to present financial statements with information about funds with a focus on ACPS major funds. Budgetary comparison schedule The budgetary comparison schedule requires the presentation of both the original budget and final budget and comparison to the actual results.


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b) Basis of Presentation Government-wide Financial Statements The Statement of Net Assets and the Statement of Activities report information on all the activities of ACPS, except for fiduciary funds. The government-wide statements are prepared using the economic resources measurement focus and the accrual basis of accounting. The fund statements are presented on a current financial resources measurement focus and use the modified accrual basis of accounting. Governmental fund financial statements therefore include a reconciliation with brief explanations to better identify the relationship between the government-wide statements and the statements for governmental funds. The government-wide Statement of Activities presents a comparison between direct expenses and program revenues for each function or program within ACPS’ governmental activities. Direct expenses are those that are specifically associated with a service, program, or department and therefore are clearly identifiable to a particular function. Revenues which are not classified as program revenues are presented as general revenues of ACPS. The comparison of direct expenses with program revenues identifies the extent to which the governmental function is self-financing or draws from the general revenues of ACPS. Program revenues are financed by those who use the services of the program or from grants and contributions from parties outside ACPS which are restricted for use in the specific program. These revenues reduce the cost of the functions to be financed from ACPS’ general revenues. Charges for services include general and adult education tuition, cafeteria sales, lease of facilities and summer school tuition. Program-specific operating grants and contribution revenues include the Federal School Lunch program and other federal grants and reimbursements. Expenses are grouped in four broad categories: instructional, support services, operation of non instructional services and capital improvement services. Some functions classified under support services include expenses that are, in essence, indirect expenses of instructional functions. However, ACPS does not allocate those indirect expenses to the instructional programs. Depreciation expense is specifically identified by function and is included in the direct expense of each applicable function. The government-wide financial statements report information on all the activities of ACPS. The effect of interfund activity has been removed from these statements to minimize the “grossing-up” of assets and liabilities. Fund Financial Statements Fund financial statements report detailed information about ACPS. The focus of governmental fund financial statements is on reporting major funds rather than on reporting funds by type. Each major fund is presented in a separate column. Nonmajor funds are aggregated and presented in a single column. Fiduciary funds include the pension trust fund and agency funds. The accounting and financial reporting treatment applied to a fund is determined by its measurement focus. All governmental fund types are accounted for using a flow of current resources measurement focus. The financial statements for governmental funds consist of a balance sheet, which generally includes only current assets and current liabilities, and a statement of revenues, expenditures and changes in fund balances, which reports on the


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sources (i.e., revenues and other financing sources) and uses (i.e., expenditures and other financing uses) of current financial resources. ACPS uses funds to maintain its financial records during the fiscal year. Fund accounting is designed to demonstrate legal compliance and to aid management by segregating transactions related to certain ACPS functions and activities. A fund is defined as a fiscal and accounting entity with a self-balancing set of accounts. ACPS has two categories of funds: governmental funds and fiduciary funds. Governmental funds Governmental funds are those through which most governmental functions of the Board are financed. The acquisition, use and balances of ACPS’ expendable financial resources and the related liabilities are accounted for through governmental funds. The measurement focus is the determination of and changes in financial position, rather than net income. The difference between governmental fund assets and liabilities is reported as fund balance. ACPS’ main operating fund is reported as a major fund. Major funds are determined based on the ratio of each fund compared to the fund category total. The following are ACPS’ major governmental funds:

General Fund – the General Fund is the general operating fund of ACPS. It is used to account for all financial resources, except those required to be accounted for in another fund.

Capital Projects Fund – the Capital Projects Fund is used to account for financial

resources used in the acquisition, construction or renovation of major facilities of ACPS. Fiduciary funds Fiduciary Funds are used to account for assets held by ACPS in a trustee capacity or as an agent for others.

Pension Trust Fund – the Pension Trust Fund is used to account for transactions relating to the School Supplemental Retirement Plan.

Agency Fund – the Agency Fund accounts for student activity monies held by the

school principals of the seventeen schools and for the secondary training and education program center.

c) Budgetary Comparison Schedule ACPS is required to present certain required supplementary information (RSI) within its basic financial statements. Demonstrating compliance with the legally-adopted budget is an important component of a government’s accountability to the public. Many citizens participate in the process of establishing the school’s annual operating budget and have a keen interest in following the actual financial progress over the course of the year. The budgetary information presents the original budget, the final budget and actual results.


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d) Basis of Accounting Basis of accounting determines when transactions are recorded in the financial records and reported in the financial statements. Government-wide financial statements are prepared using the accrual basis of accounting. Governmental funds use the modified accrual basis of accounting. Fiduciary funds use the accrual basis of accounting for the pension trust fund and the cash basis of accounting for the student activity funds. Under the modified accrual basis of accounting, revenues are recognized when susceptible to accrual (i.e., when they are both “measurable and available”). “Measurable” means the amount of the transaction can be determined and “available” means collectible within the current period or soon enough thereafter to pay liabilities of the current period. ACPS considers all revenues available if they are collectible within 60 days after year-end. Expenditures are recorded when the related fund liability is incurred, except for certain compensated absences, along with the related share of the employer’s social security taxes, and claims and judgments which are recognized when the obligations are expected to be liquidated with expendable financial resources. State aid is recorded at the time of receipt or earlier if the “susceptible to accrual” criteria are met. Expenditure-driven grants are recognized as revenue when the qualifying expenditures have been incurred and all other eligibility requirements have been met. Under the accrual basis of accounting, revenues are recognized when earned. Deferred revenue arises when assets are recognized before revenue recognition criteria have been satisfied. Grant proceeds received before the eligibility requirements are met are recorded as deferred revenue. Revenue from the United States Department of Agriculture in the form of commodities is considered earned when the commodities are used. The value of unused commodities is reported as deferred revenue. The pension trust fund is accounted for on a flow of economic resources measurement focus. With this focus, revenues are recorded when earned and expenses are recorded at the time liabilities are incurred. Member and employer contributions are recognized in the period when due and ACPS has made a formal commitment to fund employees’ contributions. Benefits and refunds are recognized when due and payable in accordance with the terms of the plan. e) Encumbrance Accounting Encumbrance accounting, which is the recording of purchase orders, contracts, and other monetary commitments in order to reserve applicable portions of an appropriation, is used as an extension of formal budgetary control. Encumbrances outstanding at year-end in the General Fund and School Food Service Fund, a non-major fund, are reported as reservations of fund balance and do not constitute expenditures or liabilities because the commitments will be honored during the subsequent year. Annual appropriations that are not spent, encumbered, or designated lapse at year-end.


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f) Cash and Investments ACPS cash balances in all funds, except for fiduciary funds, are held by the City and are invested to the extent available by the City Treasurer. These balances are invested in repurchase agreements and obligations of the federal government and are recorded at fair value. The fair value of investments is based on quoted market prices. These balances are reflected as amounts due from the City in the financial statements. The cash in the Agency Fund represents the student activity fund cash balances in the separate bank accounts maintained by the individual schools. Due to the fact that these funds are accounted for on the cash basis of accounting, accrued interest on certificate of deposits with a term of maturity longer than 1 year is not reflected in the cash balance. g) Due from Other Governments and the City The amount due from other governments consists primarily of receivables from state entitlements and federal and state reimbursement of grants expenditures. Amounts due from the City consist of ACPS’ share of the pooled cash invested by the City to maximize interest earnings. h) Interfund Receivables and Payables The composition of interfund receivables and payables balances as of June 30, 2006 is as follows:

Interfund InterfundReceivables Payables(Due from (Due to

Other Funds) Other Funds)

General 904,172$ -$

Grants and Special Projects Fund - 904,172

Total 904,172$ 904,172$

These interfund transactions occur at year-end for financial statement purposes. The ACPS general fund advances monies to the Grants and Special Projects Fund to offset the year-end cash deficit. The deficit occurs because of timing differences between the payment of expenditures and the receipt of cash to cover them. The cash deficit in the Grants and Special Projects Fund represents year-end unreimbursed costs due from grantors. The purpose of this adjustment is to eliminate the negative cash balance in Grants and Special Projects fund at June 30, 2006. i) Inventories Inventories consist of various consumable supplies and commodities maintained by the Food and Nutrition Services office. The School Food Services Fund values and carries its inventory on a cost basis using the weighted-average method. The purchase method of accounting is used in the governmental funds. Reported inventories in the governmental funds are equally


43

offset by a reservation of fund balance. Food commodities received from the United States Department of Agriculture are stated at fair market value and the amount consumed is recognized as revenue. The amount of unused food commodities is reported as inventory and deferred revenue. j) Capital Assets Capital outlays are recorded as expenditures in the governmental funds and as assets in the government-wide financial statements to the extent the ACPS capitalization threshold is met. Capital assets are defined by ACPS as assets with an initial, individual cost of more than $5,000. Major additions, including those that significantly prolong a capital asset’s economic life or expand its usefulness, are capitalized. Normal repairs that merely maintain the asset in its present condition are recorded as expenses and are not capitalized. Depreciation expense for capital assets is identified with a specific function and is included as a direct expense on the statement of activities. All capital assets are capitalized at historical cost (or estimated historical cost) and updated for additions and retirements during the year. Donated fixed assets are recorded at estimated value at the date of donation. ACPS does not own any infrastructure. Upon sale or retirement of equipment, the cost and related accumulated depreciation, if applicable, are eliminated from their respective accounts and any resulting gain or loss is included in the results of operations. All reported capital assets other than land and land improvements are depreciated. Building improvements are depreciated over the shorter of ten years or the remaining useful lives of the related capital assets. Depreciation is computed using the straight-line method over the following useful lives:

Description Estimated Lives Buildings

40 years

Building improvements 10 years Furniture and equipment 5-10 years

k) Compensated Absences ACPS accrues compensated absences when vested. All annual and vested sick leave benefits are accrued as a liability when earned by the employees and are reported in the government-wide financial statements. The current portion of the accrued compensated absences liability is that which pertains to those employees who retired or resigned at June 30, 2006, and who have not received payment for their accrued compensatory leave as of June 30, 2006. This portion of the accrued compensated absences is reported in both the governmental fund statements and government-wide financial statements. Annual Leave: ACPS employees are granted annual leave in varying amounts, based on length of service. Employees who have accrued more than 45 annual leave days by June 30 of any year shall forfeit the excess leave. Upon retirement, resignation, termination, or death,


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employees may be compensated for accrued leave at their current per diem rate of pay. Annual leave is accrued as it is earned. Sick Leave: Sick leave eligibility and accumulation is specified in the employee handbooks. Upon retirement, resignation, or death, employees receive a lump-sum payment based on daily rates approved by the Board. ACPS does not compensate terminating employees for unused sick leave unless they have completed three consecutive years of employment. Sick leave is accrued for the amount earned and vested. Personal Leave: Full-time employees are granted four personal leave days per year and may accumulate up to eight days per year. Unused personal leave accumulated in excess of the eight days may be carried forward at the end of the year as accumulated sick leave. Personal leave is credited to each employee at the beginning of each contract year. l) Net Assets Net assets represent the difference between assets and liabilities on the government-wide statements. Net assets invested in capital assets consist of capital assets net of accumulated depreciation. Net assets are reported as restricted when there are limitations imposed on their use through legislation adopted by ACPS, through external restrictions imposed by grantors, or through laws or regulations of other governments. Unrestricted assets include approximately $6.3 million in net pension assets that are not available for general school operation. When both restricted and unrestricted net assets are available for an expense, ACPS applies restricted resources first. m) Fund Balance Reserves ACPS reserves those portions of fund balance which are legally segregated for specific future use or which do not represent available expendable resources and therefore are not available for appropriation or expenditure. Fund balance reserves have been established for encumbrances, prepaid items, and inventories. Unreserved fund balance indicates that portion of fund balance which is available for appropriation in future periods. n) Use of Estimates The preparation of the accompanying financial statements required management to make estimates and assumptions about certain amounts included in the financial statements. Actual results will invariably differ from these estimates. o) Pension Trust Fund A trust fund is used to account for assets held in a trustee capacity. The pension trust fund is used to account for the School Supplemental Retirement System of Alexandria City Public Schools, a single-employer defined benefit pension plan.


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p) Accrued Personnel Services At the discretion of ACPS, teachers’ payroll is prorated over 12 months rather than over the 10- month school year in an effort to assist employees in financial planning. Consequently, accrued personnel services at June 30, 2006 include salaries earned prior to year-end but not distributed until the months of July and August 2006. q) Income Tax ACPS, as a component unit of the City of Alexandria, is exempt from all income taxes imposed by any governing body, whether it is a federal, state, local or foreign government. NOTE 2. Deposits and Investments ACPS cash balances from all funds are combined and invested to the extent available by the City Treasurer. ACPS maintains a controlled disbursement account by which funds are automatically transferred from the City’s pooled account to pay ACPS checks drawn on the ACPS account. Since ACPS’ cash and investments are maintained and controlled by the City, ACPS’ equity in pooled cash held in the City treasury is presented in the financial statements as due from the City of Alexandria. A. Deposits As of June 30, 2006, the carrying value of ACPS’ deposits held by the City was $(3,953,057) and there was a zero bank balance. The negative balance represents authorized checks issued and outstanding at June 30, 2006. The bank balance for the student activity agency funds was $674,340 and the carrying amount of deposits held by ACPS was $615,690. The entire bank balance for each of these accounts was covered by federal depository insurance or collateralized in accordance with the Virginia Security for Public Deposits Act (the Act). The Act provides for the pooling of collateral pledged with the Treasurer of Virginia to secure public deposits as a class. The City maintains all ACPS funds except for those of the agency fund, which are maintained by school principals, and the pension trust fund, which is maintained by the pension administrator. The State Treasury Board is responsible for monitoring compliance with the collateralization and reporting requirements of the Act and for notifying local governments of compliance by banks and savings and loan associations. A multiple financial institution collateral pool that provides for additional assessments is similar to depository insurance. If any member institution fails, the entire collateral pool becomes available to satisfy the claims of governmental entities. Funds deposited in accordance with the requirements of the Act are considered fully secured. B. Investments ACPS participates in three pension plans. Two of these plans are part of the Virginia Retirement System (VRS) and are managed by the Commonwealth of Virginia. The Board has directed a financial advisor to invest funds for the School Supplemental Retirement defined benefit pension plan. Assets of the pension plans are invested by the pension carriers in accordance with the provisions of the Code of the Commonwealth of Virginia. The Board requires the pension carrier to invest the funds in a manner that fully guarantees the principal amount of the plan’s assets.


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At June 30, 2006, the cash and investment balances for ACPS were as follows:

Fair Value Less than 1 yr. 1-5 years Long Term

Repurchase Agreements 4,699,727$ 4,699,727$ -$ -$ U.S. Treasuries 14,927,966 14,927,966 - - U.S. Government Agencies 13,134,436 12,379,473 754,963 -

Total 32,762,129$ 32,007,166$ 754,963$ -$

Total Pension Plan Investments 71,620,465$ -$ -$ 71,620,465$

Total Investments 104,382,594$ 32,007,166$ 754,963$ 71,620,465$

Investment Maturities (in years)

The pension plan investments consist of unallocated insurance contracts which are valued at contract value. Contract value represents contributions made under the contract, plus interest at the contract rate, less refunds used to purchase annuities or pay administrative expenses. Funds under the contract that have been allocated and applied to purchase annuities are excluded from the pension plan’s assets. The following is a reconciliation of total deposits and investments to the government-wide financial statements and statement of fiduciary net assets at June 30, 2006.

Cash on hand and in banks (3,953,057)$

Investments (controlled by City) 32,762,129

Investments held in trust for retirement benefits 71,620,465

100,429,537

Cash held on behalf of student activity funds 615,690 Total 101,045,227$


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NOTE 3. Prepaid Items and Other Assets Prepaid items and other assets represent ACPS’ prepaid pension benefits as described in Note 7, premium payments to certain providers applicable to future accounting periods, and other prepayments as follows:

Prepaid pension benefits 6,257,276$ Prepaid insurance 737,466 Other 229,966

Total 7,224,708$

NOTE 4. Due from Other Governments Amounts due from other governments at June 30, 2006 were:

Federal aid State aid Total

General fund 5,490 1,359,019 1,364,509 Nonmajor funds:

Grants and special projects 2,880,510 2,908 2,883,418 School food services 180,954 - 180,954

Total 3,066,954 1,361,927 4,428,881

Amounts due from the Commonwealth of Virginia in the General Fund are attributed to state sales tax and the state educational technology program. Amounts due from the federal government are attributed primarily to the Title I, II, III and VI grants.


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NOTE 5. Capital Assets The following is a summary of the changes in capital assets for the year ended June 30, 2006. Governmental activities

Balance Balance July 1, 2005 Increases Decreases June 30, 2006

Capital assets not being depreciatedLand and land improvements 999,381$ -$ -$ 999,381$

Total land and land improvements 999,381$ -$ -$ 999,381$

Other capital assets:Buildings and building improvements 54,486,551$ -$ -$ 54,486,551$ Furniture and equipment 7,260,330 1,457,057 245,542 8,471,845

Total other capital assets 61,746,881$ 1,457,057$ 245,542$ 62,958,396$

Less accumulated depreciation for:Buildings and building improvements 52,203,256$ 322,306$ -$ 52,525,562$ Furniture and other equipment 4,554,653 581,569 245,542 4,890,680$

Total accumulated depreciation 56,757,909$ 903,875$ * 245,542$ 57,416,242$

Other capital assets, net 4,988,972$ 553,182$ -$ 5,542,154$

Totals 5,988,353$ 553,182$ -$ 6,541,535$

* Depreciation expense was charged to governmental functions as follows:

General instruction 514,074$ Pupil transportation 228,234 Maintenance of school plant 67,530 Administration 84,957 Food services 9,080

Total governmental activities depreciation expense 903,875$

In response to GASB Statement No. 34, the Virginia General Assembly passed a law that establishes local option of creating, for financial reporting purposes, a tenancy in common between the city and the local school board when a city issues bonds for financing school construction. The sole purpose of the law is to allow cities and counties the ability to match the recording of school assets and related liabilities. As a result, certain school assets financed with the City’s general obligation bonds are recorded as part of the primary government rather than as part of ACPS. As of June 30, 2006 the City holds approximately $120.9 million in gross assets used by ACPS. According to the law, the tenancy in common ends when the associated obligation is repaid; therefore, the assets will revert to the Board when the bonds are repaid. Capital debt financing activities are not reported in the ACPS’, but in the City’s financial statements.


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Capital outlays are reported as expenditures in the governmental funds; however, in the statement of activities, the cost of capital assets is allocated over their useful lives as depreciation expense. The adjustment from governmental funds to the government-wide statements is summarized as follows:

Capital outlay 5,738,798$Other assets 405,034 Depreciation expense (903,875) Capital outlay not capitalized (4,686,775)

Total adjustments 553,182$

NOTE 6. Operating Leases ACPS leases office space and equipment under various long-term leases expiring at various dates. Certain leases contain provisions for possible future increased rentals based on changes in the Consumer Price Index. Total costs for such leases were $2,037,425 for the year ended June 30, 2006. The minimum future lease payments for office space are as follows:

Year Ending June 30 Amount2007 1,163,664$ 2008 1,145,312 2009 1,179,656 2010 1,215,016 2011 1,251,468 2012-2016 6,843,541 Total 12,798,657$


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NOTE 7. Retirement Plans ACPS participates in three public employee retirement systems (PERS). Two of these systems, a cost-sharing multiple-employer plan (professional) and an agent multiple-employer plan (non-professional), are administered by the Virginia Retirement System (VRS) and are, therefore, not reflected as ACPS pension trust funds. The third plan (School Supplemental) is a single-employer defined benefit plan, where a stated methodology for determining pension benefits is provided. This plan is part of ACPS’ reporting entity and, as such, is reflected as a Pension Trust Fund. The actuarial valuation for the School Supplemental Retirement System is performed annually. The actuarial valuation for VRS is performed biennially; however, an actuarial update is performed in the interim year. In the cost-sharing multiple-employer pension plan, the Commonwealth of Virginia values the benefits of all school professional employees in the aggregate; therefore, individual school net plan assets and pension benefit obligation information is not available. In the School Supplemental Retirement System, no changes occurred in the actuarial valuation assumptions, plan benefits, actuarial cost method or procedures affecting the comparability of costs. A. Virginia Retirement System Plan Descriptions All full-time salaried permanent employees of ACPS are automatically covered under VRS. Professional employees participate in a VRS statewide teacher cost-sharing multiple-employer plan and non-professional employees participate as a separate group in the agent multiple-employer plan. Benefits vest after five years of service. Employees are eligible for an unreduced retirement benefit at age 65 if they have five years of service or at age 50 with at least thirty years of service. The annual benefit is equal to 1.70% of the average final salary (AFS) for each year of credited service. VRS also provides retirement and disability benefits, annual cost-of-living adjustments, and death benefits to plan members and beneficiaries. VRS issues a publicly-available comprehensive annual financial report that includes financial statements and required supplementary information for VRS. A copy of that report may be downloaded from their website at http://www.varetire.org/Pdf/2005AnnuRept.pdf or may obtained by writing to the Virginia Retirement System, P.O. Box 2500, Richmond, VA 23218-2500. Funding Policy and Annual Pension Cost Plan members are required by state statutes to contribute 5% of their annual covered payroll to the VRS. ACPS has elected to assume the responsibility for the employee share for both VRS plans. In addition, ACPS is required to contribute the remaining amounts necessary to fund its participation in VRS using the actuarial basis specified by statute and approved by the VRS Board of Trustees. If a plan member covered under this plan leaves employment, the accumulated contributions plus interest earned may be refunded. The professional contribution


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rate for the year ended June 30, 2006 was 11.62% and the non-professional contribution rate for the year was 5.0% of annual covered payroll. Both rates include the employee share paid by ACPS. ACPS’ contributions to the VRS state-wide teacher pool for fiscal year 2006 were $10,774,628, while contributions for fiscal years 2005 and 2004 were $9,813,975, and $7,505,695 respectively, equal to the required contribution for each year. There were no changes in actuarial assumptions, benefits provisions, or funding methods for the VRS Non-Professional Employees Plan (the agent multiple-employer plan). The VRS rate for member contributions remains at 5%, which ACPS elected to pay for its employees. Due to the favorable financial performance of the plan, ACPS was not required to contribute an employer’s share for the years ended June 30, 2006, 2005 and 2004. See additional required disclosures in the following section for the agent multiple-employer plan.


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MEMBERSHIP AND PLAN PROVISIONS (non-professional)

Active participants 317Retirees and beneficiaries 185Terminated vested and non-vested 64Normal retirement age 65Benefits age 50 (30 years of services)Benefits vesting years 5Disability and death benefits Yes

Investment earnings 7.5%Projected salary increases attributable to:

Inflation 2.5%Seniority/merit 1.00-3.23%Retirement increases 3.0%

Actuarial methodAmortization methodOpen/closedRemaining amortization period 21Asset valuation method

Percentage of covered payroll contribution:Employee percentage 5.0%Employer percentage 0.0%

Amount contributed:Employee 352,406$ Employer - Total amount contributed 352,406$

Amount 7,048,128$Legally-required reserves NoneLong-term contribution contracts None

COVERED PAYROLL

SIGNIFICANT ACTUARIAL ASSUMPTIONS

FUNDING POLICY AND ANNUAL PENSION COST

Entry age normal costLevel percentage

Open

Modified market


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B. School Supplemental Retirement System Plan description: The School Supplemental Retirement System (the Plan) is a single-employer defined benefit plan sponsored by ACPS. The Plan is governed by ACPS, which is responsible for the management of plan assets. ACPS has delegated the authority to manage certain plan assets to a third party. All full-time employees are eligible to participate in the Plan as of July 1, 1961, if classified as a twelve-month employee. Ten-month employees were eligible to participate in the Plan as of July 1, 1971. The Plan provides disability and death benefits. Benefits at retirement are based upon years of service and the average earnable compensation of an eligible employee during any three years that provide the highest average earnable compensation and are adjusted for inflation after retirement. Benefits at early retirement are reduced by an early retirement factor. Employees are considered vested on or after completing five years of service, or on or after attaining age 60. Employees who retire at or after age 65 or after age 50 with 30 years of credited service are entitled to an annual retirement benefit, payable monthly for life, in an amount equal to .40 percent of effective compensation multiplied by credited future service on and after September 1, 1984, and 1.625 percent of effective compensation not to exceed $100 plus .25 percent of the amount by which effective compensation exceeds $100 multiplied by credited past service before September 1, 1984, and 1.625 percent of past service compensation in excess of $100 plus .25 percent of past service compensation in excess of $100 times credited past service. The Plan does not issue a publicly-available financial report.


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Funding Policy and Pension Cost: The funding policy of the Plan provides for monthly contributions at actuarially-determined rates, which will remain relatively level over time as a percentage of payroll and will accumulate sufficient assets to meet the cost of all basic benefits when due. Contribution rates are determined as part of an actuarial valuation performed as of September 1, 2004 using the aggregate actuarial cost method. The ACPS and its employees are required to make contributions to the Plan at the rate of 1.25% and 1.00% of covered payroll, respectively. ACPS elected to assume the cost of the employees’ contributions. ACPS contributed $1,511,848 for the fiscal year ended June 30, 2006, which represented the employer contribution. Administrative costs of the Plan are paid from the Plan’s investment earnings. The total normal cost increased as a percentage of covered payroll from 1.33% to 1.46% with a net increase in cost of $166,925.

Annual Required Contributions (ARC) 741,611$ Interest in NPA (370,506) ARC Adjustment 583,560 Annual Pension Cost 954,665$ Actual Deposit 1,511,848 Change in NPA (557,183)$ NPA Beginning of year (July 1, 2005) (5,700,093) NPA End of year (June 30, 2006) (6,257,276)$

Calculation of Net Pension Assets (NPA)

Actuarial Annual Percentage ofValuation Pension APC Net Pension

Date Cost (APC) Contribution (Assets)

9/1/2003 708,498$ 114.1% (5,279,616)$ 9/1/2004 840,194 150.0% (5,700,093) 9/1/2005 954,665 158.4% (6,257,276)

School SupplementalSingle-employer defined benefit plan

The Plan uses the aggregate actuarial cost method that does not identify or separately amortize unfunded actuarial liabilities.


55

Active participants 1,843 Retirees and beneficiaries 869 Inactive and active, vested 556 Normal retirement 65 Benefits age 55 (30 yrs)Benefits vesting years 5 yearsDisability and death benefits Yes

Investment earnings 6.50%Projected salary increase attributed to:

Inflation 3.00%Seniority /merit 2.38-5.60%Retirement increases -

Actuarial cost method Aggregate actuarial methodOpen/closed OpenRemaining amortization period 16 yearsAsset valuation method Contractual value

Employer percentage 1.25%

Employer contribution 1,511,848$ Total amount contributed 1,511,848$

Covered payroll 120,947,840$Legally-required reserves NoneLong-term contribution contracts None

Investment concentrations:

Principal Financial Group 100.00%(Long-term guaranteed investment contract account)

MEMBERSHIP AND PLAN PROVISIONS (School Supplemental)

SIGNIFICANT ACTUARIAL ASSUMPTIONS

PERCENTAGE OF COVERED PAYROLL CONTRIBUTION


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NOTE 8. Post Employment Benefits The Board provides a post-retirement health care benefit for employees who have retired from ACPS. The program contributes a subsidy of $265.00 per month for each retiree, and is funded on a pay-as-you go basis. The total cost for this program for the year ended June 30, 2006, was $1,062,996. There are 327 participants currently receiving benefits in the program. NOTE 9. Long-term Liabilities The change in long-term liabilities within the government-wide financial statements during the year consists of the following:

Balance Balance Amount dueJuly 1, 2005 Additions Reductions June 30, 2006 within one year

Compensated absences 6,496,756$ 9,633,914$ 9,285,264$ 6,845,406$ 491,040$

Total 6,496,756$ 9,633,914$ 9,285,264$ 6,845,406$ 491,040$

Under the modified accrual basis of accounting used in the fund financial statements for the governmental funds, expenditures are not recognized for transactions that are not normally paid with expendable available financial resources. In the government-wide statement of activities, however, which is presented on the accrual basis, expenses and liabilities are reported regardless of when financial resources are available. The adjustment from modified accrual to full accrual for compensated absences expenses is $287,504. Compensated absences will be paid from the general fund. NOTE 10. Risk Management ACPS is self-insured for workers’ compensation. Claims are processed by a third-party administrator under contract with ACPS per statutory requirements of the Virginia Workers’ Compensation Act. ACPS has estimated the workers’ compensation liability is not significant, and therefore, a liability has not been recorded at June 30, 2006. Settled claims resulting from these risks have not exceeded commercial reinsurance coverage. There were no material reductions in insurance coverage from coverage in the prior fiscal year nor did settlements exceed coverage for any of the past three fiscal years. ACPS carries commercial insurance on all other risks of loss, including property, theft, auto liability, physical damage and general liability insurance through the Virginia Municipal League. Settled claims resulting from these risks have not exceeded commercial reinsurance coverage for the past three years. There were no material reductions in insurance coverage from coverage in the prior fiscal year nor did settlements exceed coverage for any of the past three fiscal years.


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NOTE 11. Contingent Liabilities ACPS receives financial assistance from numerous federal, state and local government agencies in the form of grants. The disbursement of funds received under these programs generally requires compliance with terms and conditions specified in the grant agreements. Certain expenditures of these funds are subject to audit by the grantors. ACPS is contingently liable to refund amounts received in excess of allowable expenditures. In the opinion of management, no material refunds (if any) will be required as a result of expenditures disallowed by the grantor agencies.

58

REQUIRED SUPPLEMENTARY

INFORMATION

(unaudited)

59

Variance fromfinal budget

PositiveOriginal Final Actual (Negative)

RevenuesIntergovernmental:

City of Alexandria 138,752,494$ 138,752,494$ 138,753,138$ 644$ State aid 24,907,667 24,907,667 24,075,496 (832,171) Federal aid 88,760 88,760 204,010 115,250

Tuition and fees 622,017 622,017 487,843 (134,174) Other local funds 9,500 9,500 77,769 68,269

Total Revenues 164,380,438 164,380,438 163,598,256 (782,182)

ExpendituresCurrent:Administration 12,475,260 13,326,642 12,062,558 1,264,084 General instruction 126,943,315 126,683,261 123,796,768 2,886,493 Attendance and health services 3,983,680 3,961,125 4,142,376 (181,251) Pupil transportation 5,169,246 5,358,917 5,426,771 (67,854) Operation of school plant 10,253,670 10,214,512 10,759,876 (545,364) Maintenance of school plant 4,023,957 4,044,921 4,142,483 (97,562) Summer school 1,704,890 1,913,761 1,819,711 94,050 Adult education 1,554,249 1,481,995 1,071,752 410,243 Food services 438,218 537,051 275,183 261,868 Community services 174,472 175,386 103,633 71,753

Total Expenditures 166,720,957 167,697,571 163,601,111 4,096,460

Revenue over (under) expenditures (2,340,519) (3,317,133) (2,855) 3,314,278

Fund Balance-Beginning of Year 8,345,030 8,345,030 8,345,030 -

Fund Balance-End of Year 6,004,511$ 5,027,897$ 8,342,175$ 3,314,278$

See accompanying note to the budgetary comparison schedule.

Budget

(See Accompanying Independent Auditors' Report)

Alexandria City Public Schools, VirginiaBudgetary Comparison Schedule

General FundFor the Year Ended June 30, 2006

Alexandria City Public Schools, Virginia Notes to the Budgetary Comparison Schedule


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Funding Sources and Budgetary Accounting The Superintendent is required to prepare, with the approval of the Board, and submit to the City Council, a General Fund budget request of the amount needed during the next fiscal year. The Board holds at least two public hearings before it gives final approval for the requested budget. The City Council is also required by City Charter to hold a public hearing on the General Fund budget at which time all interested persons are given an opportunity to comment. The legal level of budgetary control for the General Fund is at the department level (i.e., Office of the Superintendent, Adult Education, Pupil Transportation, Board of Education Office, and the individual schools). The annual budget is adopted on a basis consistent with U.S. generally accepted accounting principles (GAAP) for the General Fund. The unexpended appropriation lapses at the end of each fiscal year. Encumbrances (e.g., purchase orders, contracts) outstanding at year-end are reported as reservations of fund balance and do not constitute expenditures or liabilities because the commitment will be reappropriated and honored during the subsequent year. Formal budgetary integration, including encumbrance accounting, is employed as a management control device during the year for governmental funds. The budget is presented on the modified accrual basis of accounting. Accordingly, the accompanying Budgetary Comparison Schedule presents GAAP expenditures. Management is authorized to transfer funds within major categories of expenditure (i.e., administration, instruction, salaries, benefits, etc.) up to $15,000. Transfers in excess of $15,000 require the approval of the superintendent and the Board; however, revisions that alter the total expenditures of the General Fund must be approved by the City Council. The legally-adopted budget cannot be exceeded.

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VRS-Non-Professional Employees Plan

[1] [2] [3] [4] [5] [6](Overfunded)

Actuarial Actuarial Actuarial Unfunded Assets Annual UAAL as aValuation Value of Accrued Liability AAL as % Covered Percentage of

as of Assets (AAL) (UAAL) of AAL Payroll Covered Payroll[2-1] [1/2] [3/5]

6/30/2000 30,400,117 20,695,631 (9,704,486) 146.89% 5,777,004 -167.98%

6/30/2001 32,946,019 22,243,351 (10,702,668) 148.12% 5,904,380 -181.27%

6/30/2002 33,292,834 23,884,180 (9,408,654) 139.39% 6,320,363 -148.86%

6/30/2003 32,954,429 23,870,548 (9,083,881) 138.05% 5,661,850 -160.44%

6/30/2004 32,779,367 26,171,980 (6,607,477) 125.25% 6,399,299 -103.25%

6/30/2005 32,808,237 29,672,094 (3,136,143) 110.57% 7,321,211 -42.84%

Schedule of Funding Progress

Alexandria City Public Schools, VirginiaPublic Employee Retirement Systems-Schedule of Funding Progress

Required Supplementary Information(See Accompanying Independent Auditors' Report)

A Schedule of Funding Progress for the School Supplemental Retirement System is not required because it uses the aggregate actuarial cost method where actuarial accrued liabilities are not identified or separately amortized. They are amortized through normal cost. Analysis of the dollar amounts of plan assets, actuarial accrued liability, and unfunded actuarial accrued liability in isolation can be misleading. Expressing plan assets as a percentage of the actuarial accrued liability provides one indication of the plan’s funding status on a going-concern basis. Analysis of this percentage over time indicates whether the plan is becoming financially stronger or weaker. Generally, the greater this percentage, the stronger the plan. Trends in the unfunded actuarial accrued liability and annual covered payroll are both affected by inflation. Expressing the unfunded actuarial accrued liability as a percentage of annual covered payroll approximately adjusts for the effects of inflation and aids analysis of the plan’s progress made in accumulating sufficient assets to pay benefits when due. Generally, the smaller the percentage, the stronger the plan.

62

Plan AnnualYear Required Percentage

Ended Contribution Contributed

School Supplemental 8/31/2001 618,723 148.0%8/31/2002 750,985 141.6%8/31/2003 452,521 301.8%8/31/2004 522,762 154.6%8/31/2005 642,857 196.1%8/31/2006 741,611 203.9%

Alexandria City Public Schools, VirginiaPublic Employee Retirement Systems-Schedule of Employer Contributions

Required Supplementary Information(See Accompanying Independent Auditors' Report)

63

OTHER SUPPLEMENTARY

INFORMATION

64

NONMAJOR GOVERNMENTAL FUNDS

FUND DESCRIPTION Nonmajor governmental funds are used to account for the proceeds of specific revenue sources (other than for major capital projects) that are primarily legally restricted to expenditures incurred in accordance with the purposes and terms established by the respective grantors. Below are the descriptions of ACPS’ nonmajor governmental funds. Grants and Special Projects Fund This fund was established to account for the direct financial assistance received by the School Board through categorical grants from federal, state and city agencies. The expenditures of these funds are restricted to the purposes set forth in the grant programs through which the funds were received. School Food Services Fund This fund is used to account for the financial operations of the food services program provided by the School Board. This program is funded by various federal and state subsidies and user charges.

65

Grants and School TotalSpecial Projects Food Nonmajor

Fund Services Fund Funds

Assets

Due from other governments 2,883,418$ 180,954$ 3,064,372$ Due from other funds - 1,145,343 1,145,343 Other receivables - 27,353 27,353 Prepaid items and other assets - 1,255 1,255 Inventories - 205,428 205,428

Total assets 2,883,418$ 1,560,333$ 4,443,751$

Liabilities and Fund Balances

Liabilities:

Accrued personnel services 852,815$ 225,607$ 1,078,422$ Accounts payable 146,059 113,075 259,134 Due to other funds 904,172 - 904,172 Deferred revenue 980,372 191,456 1,171,828

Total liabilities 2,883,418 530,138 3,413,556

Fund balances:

Reserved for:Inventories - 205,428 205,428 Encumbrances - 195,748 195,748

Unreserved:Undesignated - 629,019 629,019

Total fund balances - 1,030,195 1,030,195

Total liabilities and fund balances 2,883,418$ 1,560,333$ 4,443,751$

See accompanying note to the nonmajor governmental funds.

Alexandria City Public Schools, VirginiaCombining Balance Sheet

Nonmajor Governmental FundsJune 30, 2006

66

Grants and School TotalSpecial Projects Food Nonmajor

Fund Services Fund Funds

Revenue:Intergovernmental:

State aid 1,098,625$ 61,345$ 1,159,970$ Federal aid 8,889,155 2,558,207 11,447,362

Tuition and fees 79,256 - 79,256 Food sales - 1,367,578 1,367,578 Gifts and donations 42,816 - 42,816 Other local funds 285,844 190,071 475,915

Total revenues 10,395,696 4,177,201 14,572,897

Expenditures:Current:

Administration 9,140 - 9,140 General instruction 9,992,593 - 9,992,593 Attendance and health services 29,316 - 29,316 Maintenance of school plant 187,865 - 187,865 Summer school 144,350 - 144,350 Adult education 32,432 - 32,432 Food services - 4,087,381 4,087,381

Total expenditures 10,395,696 4,087,381 14,483,077

Net change in fund balances - 89,820 89,820

Fund balances-beginning of year - 940,375 940,375

Fund balances-end of year -$ 1,030,195$ 1,030,195$

See accompanying note to the nonmajor governmental funds.

Alexandria City Public Schools, VirginiaCombining Statement of Revenues, Expenditures and Changes in Fund Balances-

Nonmajor Governmental FundsFor the Year Ended June 30, 2006

KPMG LLP 2001 M Street, NW Washington, DC 20036

KPMG LLP. KPMG LLP, a U.S. limited liability partnership, is a member of KPMG International, a Swiss cooperative.

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

The Members of the Alexandria City School Board City of Alexandria, Virginia:

We have audited the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of the Alexandria City Public Schools (ACPS) as of and for the year ended June 30, 2006, which collectively comprise the ACPS’ basic financial statements, and have issued our report thereon dated October 31, 2006. We conducted our audit in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and Specifications for Audits of Counties, Cities, and Towns (the Specifications), issued by the Auditor of Public Accounts of the Commonwealth of Virginia.

Internal Control over Financial Reporting

In planning and performing our audit, we considered the ACPS’ internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide an opinion on the internal control over financial reporting. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control that might be material weaknesses. A material weakness is a reportable condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements caused by error or fraud in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control over financial reporting and its operation that we consider to be material weaknesses.

Compliance and Other Matters

As part of obtaining reasonable assurance about whether the ACPS’ financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. Also, the Auditor of Public Accounts of the Commonwealth of Virginia requires us to test the ACPS’ compliance with certain matters specified in the Code of Virginia, including budget and appropriations laws; cash and investments; conflicts of interest; procurement; local retirement systems; unclaimed property; intragovernmental revenues and agreements; and state agency requirements for education. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards or the Specifications.

This report is intended solely for the information and use of the Alexandria City School Board, ACPS management, City Council, City management, the Auditor of Public Accounts of the Commonwealth of Virginia, federal awarding agencies, and pass-through entities, and is not intended to be and should not be used by anyone other than these specified parties.

October 31, 2006

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STATISTICAL SECTION (UNAUDITED)

The statistical tables reflect financial trends, student and personnel data, demographic, and other information. Many of these tables are required by Section 2800.103 of the Governmental Accounting Standards Board codification. Some of these tables are deemed not applicable because the school division does not have bonded debt nor does it levy special assessments. Therefore, the following tables (included in the Comprehensive Annual Financial Report of the City of Alexandria) are not included: Tax Revenues by Source-Last Ten Fiscal Years Assessment and Estimated Actual Value of Taxable Property-Last Ten Calendar Years General Property Tax Rates per $100 of Assessed Values-Last Ten Calendar Years Computation of Legal Debt Margin Ratio of Net General Debt Assessed Value and Net Debt per Capita-Last Ten Fiscal Years Ratio of Annual Debt Service for General Bonded Debt to Total General Expenditures-Last Ten Fiscal Years Overlapping Debt and Debt History Property Value, Construction, and Bank Deposits-Last Ten Calendar Years

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Governmental Activities:

Invested in Unrestricted Totalcapital assets assets net assets

2000 18,967,332 (3,541,003) 15,426,329

2001 21,314,760 4,604,132 25,918,892

2002 6,361,600 (2) 2,729,407 9,091,007

2003 6,036,133 5,958,709 11,994,842

2004 6,052,346 7,388,694 13,441,040

2005 5,988,353 16,512,133 22,500,486

2006 6,541,535 11,716,938 18,258,473

Note: 1. There is no comparative data prior to fiscal year 2000. This was the first year of implementation of GASB Statement No. 34.

2. In response to GASB Statement No.34, the Virginia Assembly passed a law thatestablishes local option of creating for financial reporting purposes, a tenancy in common between the city and the local school board when the city issues bond for financing school construction. The sole purpose of the law is to allow cities and counties the ability to match the recording of school assets and related liabilities. As a result, certain school assets financed with the City's general obligation bonds are recorded as part of the primary government rather than as part of ACPS.

ALEXANDRIA CITY PUBLIC SCHOOLS, VIRGINIA NET ASSETS (1)

Last seven fiscal years

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2000 2001 2002 2003 2004 2005 2006Expenses

General instruction 91.6 98.3 104.3 108.3 115.3 123.5 133.6 Adult education 1.0 1.2 1.1 1.1 1.1 1.1 1.1 Summer school 1.1 1.1 1.5 1.7 1.8 2.0 1.9 Administration 6.4 7.7 8.5 10.4 11.4 12.0 11.7 Attendance and health services 2.7 2.9 3.1 3.3 3.4 3.7 4.2 Pupil transportation 3.7 4.3 4.4 4.4 4.6 4.2 5.2 Operation of school plant 6.2 8.5 8.5 9.1 9.4 9.6 10.8 Maintenance of school plant 4.5 3.4 3.3 3.9 3.7 4.1 4.3 Food services 3.5 3.7 4.1 4.3 4.4 4.9 4.4 Community services 0.4 0.3 0.1 0.1 0.1 0.1 0.1 Capital Improvement Services 4.6 4.8 4.5 4.5 5.0 5.1 5.7

Total governmental expenses 125.7 136.2 143.4 151.1 160.2 170.3 183.0

Program revenuesCharges for services 1.8 2.1 2.1 1.9 1.9 2.1 2.1 Operating grants and contributions 7.9 7.0 7.9 8.8 10.3 12.0 13.1

Total program revenues 9.7 9.1 10.0 10.7 12.2 14.1 15.2

Net (expenses) (116.0) (127.1) (133.4) (140.4) (148.0) (156.2) (167.8)

General revenues Intergovernmental:

City of Alexandria 92.4 116.4 110.1 122.9 128.0 141.7 139.3 State aid 19.6 20.9 20.5 20.3 21.1 23.4 24.2

Grants not restricted to specific programs 1.3 0.3 0.3 0.1 0.3 0.1 0.1 Other local funds 0.1 - - - - 0.1 -

Total general revenues 113.4 137.6 130.9 143.3 149.4 165.3 163.6

Change in net assets (2.6) 10.5 (2.5) 2.9 1.4 9.1 (4.2)

Note: There is no comparative data prior to fiscal year 2000. This was the first year of implementation of GASB Statement No. 34.

ALEXANDRIA CITY PUBLIC SCHOOLS, VIRGINIACHANGES IN NET ASSETS

Last seven fiscal years(In millions)

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2000 2001 2002 2003 2004 2005 2006

General Fund

Reserved for:Encumbrances 1,052.8 1,339.7 1,754.2 929.1 809.0 976.6 1,291.8 Prepaid items 423.7 416.1 466.0 581.4 601.9 722.6 963.7

Unreserved 4,359.4 2,735.8 2,310.3 3,954.2 4,702.4 6,645.8 6,086.7

Total general fund 5,835.9 4,491.6 4,530.5 5,464.7 6,113.3 8,345.0 8,342.2

All Other Governmental Funds

Reserved for:Inventories 80.1 103.9 190.2 217.2 399.0 119.5 205.4 Encumbrances 539.5 195.9 289.6 153.6 246.5 185.5 195.7 Prepaid items 21.5 19.5 23.1 - - - -

Unreserved, reported in:Capital projects funds (11,970.1) (2,668.7) (4,358.5) (736.6) 680.8 7,593.5 2,441.7 Non major governmental funds 1,882.3 1,751.7 1,389.4 982.4 401.0 635.4 629.0

Total all other governmental funds (9,446.7) (597.7) (2,466.2) 616.6 1,727.3 8,533.9 3,471.8

Note: Data are for fiscal years 2000 through 2006 in order to realign themwith the data presented in the tables for net assets and changes in net assets.

(In thousands)

ALEXANDRIA CITY PUBLIC SCHOOLS, VIRGINIA FUND BALANCES-GOVERNMENTAL FUNDS


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2000 2001 2002 2003 2004 2005 2006Revenues

Intergovernmental:City of Alexandria 92.4 116.4 110.1 122.9 128.0 141.7 139.3 State aid 21.0 22.1 21.7 21.3 22.0 24.4 25.2 Federal aid 7.1 5.8 6.5 7.7 9.6 10.9 11.7

Tuition and fees 0.8 0.7 0.7 0.7 0.7 0.6 0.6 Food sales 1.0 1.1 1.2 1.0 1.1 1.3 1.4 Gift and donations 0.1 0.1 0.1 0.1 0.1 0.1 0.1 Other local funds 0.7 0.6 0.6 0.3 0.2 0.3 0.5

Total Revenues 123.1 146.8 140.9 154.0 161.7 179.3 178.8

ExpendituresAdministration 6.8 8.0 8.5 9.6 11.0 12.0 12.1 General instruction 90.0 97.2 103.8 108.5 115.2 123.5 133.8 Attendance and health services 2.7 2.9 3.1 3.3 3.4 3.7 4.2 Pupil transportation 3.4 4.1 4.2 4.2 4.4 4.6 5.4 Operation of school plant 6.2 8.5 8.5 9.1 9.5 9.7 10.8 Maintenance of school plant 4.5 3.4 3.3 3.9 3.6 4.0 4.3 Summer school 1.1 1.1 1.5 1.7 1.9 2.0 2.0 Adult education 1.0 1.2 1.1 1.1 1.1 1.2 1.1 Food services 3.6 4.0 4.1 4.6 4.3 4.9 4.4 Community services 0.4 0.3 0.1 0.1 0.1 0.1 0.1 Capital improvement services 12.8 8.3 4.5 3.9 5.4 4.6 5.7

Total Expenditures 132.5 139.0 142.7 150.0 159.9 170.3 183.9

Net change in fund balances (9.4) 7.8 (1.8) 4.0 1.8 9.0 (5.1)

Note: Data are for fiscal years 2000 through 2006 in order to realign themwith the data presented in the tables for net assets and changes in net assets.

(In millions)

ALEXANDRIA CITY PUBLIC SCHOOLS, VIRGINIA CHANGES IN FUND BALANCES-GOVERNMENTAL FUNDS


.....................

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2000 2001 2002 2003 2004 2005 2006

Additions

Member contributions 1,680,080$ 1,790,929$ 1,101,647$ 2,458,285$ 1,455,215$ 2,269,434$ 2,699,728$ Contract investment earnings 3,112,596 3,411,730 3,574,630 3,577,209 3,612,734 3,546,153 3,490,254 Demutualization compensation - - 5,116,212 - - - -

Total additions to plan net assets 4,792,676$ 5,202,659$ 9,792,489$ 6,035,494$ 5,067,949$ 5,815,587$ 6,189,982$

Deductions

Benefit payments 1,454,686$ 1,695,354$ 2,304,954$ 2,269,421$ 2,477,482$ 2,682,931$ 3,006,838$ Administrative expenses 65,345 87,655 53,321 70,744 86,416 55,774 72,985

Total deductions from plan net assets 1,520,031$ 1,783,009$ 2,358,275$ 2,340,165$ 2,563,898$ 2,738,705$ 3,079,823$

Change in net assets 3,272,645$ 3,419,650$ 7,434,214$ 3,695,329$ 2,504,051$ 3,076,882$ 3,110,159$

ALEXANDRIA CITY PUBLIC SCHOOLS, VIRGINIA

Last seven fiscal yearsPENSION TRUST FUND

CHANGES IN NET ASSETS

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2002 2003 2004 2005 2006PERSONNEL SERVICES

Personnel services 88,299,461$ 91,229,036$ 96,588,134$ 100,039,067$ 105,891,953$ Benefits 23,128,760 24,467,519 26,826,459 30,201,742 32,109,015

Total Personnel Services 111,428,221 115,696,555 123,414,593 130,240,809 138,000,968

NON-PERSONNEL SERVICES

Professional services 1,296,975 1,675,885 1,980,823 2,029,046 2,589,519 Temporary help service fees 182,791 397,467 244,180 369,640 624,013 Maintenance services and contracts 2,082,912 2,206,183 2,279,119 2,434,780 2,602,525 Transportation 335,891 118,316 240,268 311,576 502,775 Printing and binding 202,908 180,678 221,614 238,805 184,546 Purchase of services from other govt. entities 556,302 763,194 851,602 834,541 1,198,124 Other purchased services 54,544 42,769 46,494 70,093 59,819 Internal services 46,792 50,323 91,354 121,687 110,858 Utilities 1,751,854 2,156,719 2,176,340 2,171,499 2,635,670 Communications 707,888 1,131,873 759,924 833,666 866,167 Insurance 244,291 269,777 304,544 347,042 375,310 Leases and rentals 1,736,483 1,750,561 1,694,572 1,754,290 2,002,474 Travel 325,871 385,099 430,531 436,760 498,379 Awards and grants 113,333 84,135 46,301 1,072 3,777 Miscellaneous 69,636 69,880 115,796 161,402 153,134 Educational and recreational supplies 2,638,464 2,149,997 1,742,523 1,588,131 1,761,168 Textbooks 825,939 1,228,195 1,512,077 1,696,071 1,755,063 Books and subscriptions 152,438 137,571 298,331 279,964 287,959 Food supplies and food service supplies 67,361 87,487 98,656 105,199 116,824 Technology - - 348,383 762,397 1,478,500 Medical and laboratory supplies 14,658 15,460 13,317 15,461 20,929 Repair and maintenance supplies 268,722 312,494 373,995 301,615 350,369 Laundry, housekeeping and janitorial supplies 249,438 297,743 310,746 246,474 281,910 Uniforms and wearing apparel 76,123 74,102 85,822 117,764 131,376 Vehicle and power equipment fuel 139,121 185,563 198,917 283,687 466,763 Vehicle and power equipment supplies 183,834 272,191 232,890 207,805 232,279 Other operating supplies 93,721 129,009 129,714 168,900 247,463 Capital outlay 2,752,606 3,286,302 2,291,347 4,058,545 4,062,450 Other uses of funds 153,650 271,293 - - -

Total Non-personnel Services 17,324,546 19,730,266 19,120,180 21,947,912 25,600,143

GRAND TOTAL 128,752,767$ 135,426,821$ 142,534,773$ 152,188,721$ 163,601,111$

ALEXANDRIA CITY PUBLIC SCHOOLS, VIRGINIAGENERAL FUND EXPENDITURES BY DETAIL OBJECT

Last five fiscal years

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1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Total

John Adams -$ 45$ 480$ 527$ 34$ 197$ -$ 31$ 614$ 1,093$ 3,021$ Charles Barrett 600 771 46 - - 54 314 1,512 117 - 3,414 Patrick Henry 50 - 7 488 - 666 717 - - - 1,928 Jefferson-Houston 400 - - 20 - - 214 309 - - 943 Cora Kelly 400 119 351 269 1,520 5 - - - - 2,664 Lyles-Crouch - 164 - - 339 70 48 134 - 20 775 Douglas MacArthur 250 443 380 262 257 36 15 - - 128 1,771 George Mason - 96 - 64 244 10 346 868 73 - 1,701 Maury - - 21 169 234 1,010 77 - - - 1,511 Mount Vernon - 739 423 45 - 25 419 - 393 15 2,059 James Polk 245 151 374 272 38 - - 6 14 383 1,483 William Ramsay - - - - 182 118 - 20 826 1,611 2,757 F.C. Hammond 200 103 - - - - 50 - 898 - 1,251 George Washington 647 2,719 2,223 321 - - - - - 70 5,980 T.C. Williams 50 158 171 1,080 225 390 - - - - 2,074 Minnie Howard 200 508 - - - 30 6 - - - 744 Rowing Facility - 145 - - - - - - 35 245 425 System Wide 790 599 2,218 1,115 1,744 1,881 1,724 2,527 1,696 2,174 16,468

GRAND TOTAL 3,832$ 6,760$ 6,694$ 4,632$ 4,817$ 4,492$ 3,930$ 5,407$ 4,666$ 5,739$ 50,969$

Source: The City of Alexandria

CAPITAL IMPROVEMENT EXPENDITURESALEXANDRIA CITY PUBLIC SCHOOLS, VIRGINIA

Last ten fiscal years(in thousands)

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Governmental Average Daily Average DailyFunds Actual Per Attendance Membership

Fiscal Year Expenditures Enrollment Pupil Cost [ADA] [ADM] (1)

1997 101,955,247$ 10,156 10,050$ 9,692 10,145

1998 108,767,377 10,488 10,382 9,978 10,477

1999 114,427,674 10,803 10,588 10,176 10,807

2000 121,064,605 11,017 11,080 10,414 10,926

2001 130,722,034 11,167 11,784 10,632 11,093

2002 138,254,604 11,104 12,696 10,425 10,890

2003 146,085,435 10,979 13,506 10,402 10,816

2004 154,484,350 10,762 14,472 10,267 10,675

2005 165,629,638 10,677 16,134 9,927 10,266

2006 178,084,188 10,284 17,425 9,587 10,220

Note: The per pupil cost was computed by dividing the average daily membership (ADM) into total expenditures, excluding capital expenditures.

(1) Source: The Alexandria City Public Schools Information Technology Services.

ALEXANDRIA CITY PUBLIC SCHOOLS, VIRGINIACOST PER PUPIL

Last ten fiscal years

S-10

Number Number Number inReceiving Receiving English as Number in

Fiscal Free or Reduced Unemployment Special a Second Gifted andYear Price Meals (1) Rate (2) Education (3) Population (2) Language (4) Talented (5)

1997 5,189 4.2% 1,736 117,600 1,288 1,067 1998 5,556 3.5% 1,794 119,500 1,187 1,604 1999 5,537 2.5% 1,841 121,700 1,395 1,646 2000 5,763 1.8% 1,918 123,200 1,611 1,596 2001 5,567 2.9% 1,928 128,283 1,809 1,558 2002 5,593 3.5% 1,958 134,000 2,090 1,524 2003 5,243 2.7% 1,949 135,000 2,412 1,618 2004 5,525 3.2% 1,999 134,000 2,628 1,832 2005 5,449 3.1% 1,979 135,000 2,379 1,469 2006 5,169 2.6% 1,900 138,000 2,223 1,421

Note: Population count is an estimate for calendar year 2006.

Source: (1) Food and Nutrition Services(2) The City of Alexandria(3) Office of Student Services(4) English as a Second Language Office(5) Office of Curriculum and Instruction

ALEXANDRIA CITY PUBLIC SCHOOLS, VIRGINIADEMOGRAPHIC STATISTICS


S-11

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Elementary

Kindergarten 1,043 1,075 1,103 1,072 1,120 1,028 1,007 1,031 984 1,001

Grades 1-3 2,758 2,914 3,046 3,214 3,041 3,023 2,871 2,785 2,815 2,650

Grades 4-6 2,226 2,340 2,398 2,484 2,570 2,597 2,602 2,504 2,434 2,319

Grades 7-8 1,416 1,429 1,381 1,398 1,459 1,483 1,480 1,526 1,500 1,459

Total Elementary 7,443 7,758 7,928 8,168 8,190 8,131 7,960 7,846 7,733 7,429

Secondary

9th Grade 722 700 735 701 699 720 756 724 754 763

10th Grade 719 743 761 791 911 899 814 832 759 728

11th Grade 660 667 723 700 662 647 726 662 702 694

12th Grade 536 552 583 588 560 555 570 569 571 585

Total Secondary 2,637 2,662 2,802 2,780 2,832 2,821 2,866 2,787 2,786 2,770

Special Education-District-wide 76 68 73 69 145 152 153 129 158 85

Grand Total 10,156 10,488 10,803 11,017 11,167 11,104 10,979 10,762 10,677 10,284

Note: This table is based on the September 30 student membership.

Source: The Budget Department

ALEXANDRIA CITY PUBLIC SCHOOLS, VIRGINIATOTAL STUDENT MEMBERSHIP BY GRADE


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5-year2002 2003 2004 2005 2006 Average

DAYS MEALS SERVED

National School Lunch Program 175 180 180 183 183 180

NUMBER OF PUPIL LUNCHESSERVED:

Paid lunches 337,230 341,059 350,355 350,476 334,952 342,814 Reduced price lunches 145,200 165,517 159,146 162,295 172,086 160,849 Free lunches 591,806 626,636 601,451 618,032 580,966 603,778

Total Pupil Lunches 1,074,236 1,133,212 1,110,952 1,130,803 1,088,004 1,107,441

NUMBER OF PUPIL BREAKFASTSSERVED:

Paid breakfasts 61,802 57,263 54,104 55,855 54,569 56,719 Reduced price breakfasts 46,005 55,153 50,691 52,960 60,423 53,046 Free breakfasts 252,556 247,913 225,870 251,263 242,961 244,113

Total Pupil Breakfasts 360,363 360,329 330,665 360,078 357,953 353,878

Source: Food and Nutrition Services

ALEXANDRIA CITY PUBLIC SCHOOLSSCHOOL FOOD SERVICE MEALS SERVED


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5-year 5-year2002 2003 2004 2005 2006 Total Average

Revenues

Federal aid 2,027,263$ 2,509,694$ 2,516,300$ 2,983,808$ 2,558,207$ 12,595,272$ 2,519,054$

State aid 57,352 56,469 60,229 57,184 61,345 292,579 58,516

Local 1,620,519 1,238,335 1,246,436 1,444,606 1,557,649 7,107,545 1,421,509

Total Revenue 3,705,134$ 3,804,498$ 3,822,965$ 4,485,598$ 4,177,201$ 19,995,396$ 3,999,079$

Expenditures

Salaries 1,461,817$ 1,514,651$ 1,578,895$ 1,572,939$ 1,629,449$ 7,757,751$ 1,551,550$

Benefits 442,704 511,451 534,202 534,497 610,163 2,633,017 526,603

Purchased services 158,972 146,924 159,239 147,601 139,732 752,468 150,494

Internal services 2,378 1,262 2,706 4,908 4,755 16,009 3,202

Other charges 23,930 26,237 37,301 35,036 47,964 170,468 34,094

Food supplies 1,463,282 1,579,972 1,651,190 2,139,579 1,559,261 8,393,284 1,678,657

Capital outlay 118,453 362,690 101,962 94,350 25,324 702,779 140,556

Other 212,280 200,385 64,105 62,902 70,733 610,405 122,081

Total Expenditures 3,883,816$ 4,343,572$ 4,129,600$ 4,591,812$ 4,087,381$ 21,036,181$ 4,207,236$

Revenues over/(under)Expenditures (178,682)$ (539,074)$ (306,635)$ (106,214)$ 89,820$ (1,040,785)$ (208,157)$

ALEXANDRIA CITY PUBLIC SCHOOLS, VIRGINIASCHOOL FOOD SERVICE REVENUES AND EXPENDITURES


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Number of Percentage ofDegree Teachers Total

Bachelor's Degree 332 26.8%

Master's Degree 660 53.3%

Master's + 30 246 19.9%

Total 1,238 100.0%

Number of Percentage ofYears of Experience Teachers Total

0 - 5 589 47.6%

6 - 10 254 20.5%

11 and over 395 31.9%

Total 1,238 100.0%

Source: The Alexandria City Public Schools Human Resources Office

ALEXANDRIA CITY PUBLIC SCHOOLS, VIRGINIATEACHERS' EDUCATION AND EXPERIENCE

June 30, 2006

S-15

Minimum Mean Maximum PercentageFiscal Year Salary (1) Salary Salary (2) Change (3)

1997 29,665 46,367 63,069 3.7%

1998 30,555 47,758 64,960 3.0%

1999 30,555 47,758 64,960 0.0% (4)

2000 31,166 48,713 66,260 2.0%

2001 31,945 49,931 67,916 2.5%

2002 33,000 51,477 69,954 3.0%

2003 33,825 53,589 73,352 2.5%

2004 34,182 57,057 79,932 2.0% (5)

2005 34,866 58,198 81,530 2.0%

2006 35,563 59,362 83,161 2.0%

NOTES:

1) The minimum salary represents the minimum amount an ACPS teacher with a bachelor's degree may earn for regular classroom instruction during the school year according to the professional salary schedule for teachers and paraprofessionals dependent on educational attainment and

years of service.

2) The maximum salary represents the maximum amount an ACPS teacher with a master's+30 may earn for regular classroom instruction during the school year according to the professional salary schedule for teachers and paraprofessionals dependent on educational attainment and years of service.

3) The percentage change is the official increase for that year as approved by the School Board.

4) There was no pay raise approved by the School Board. In lieu of the pay raise, the School Board elected to assume the cost of the employees' retirement contribution to the Virginia Retirement System (VRS) for the year. The percentage contributed was 5%.

5) In FY 2004, the teacher work year increased from 190 to 192 days.

Source: The Alexandria City Public Schools Human Resources Office and Budget Office

TEACHERS' BASE SALARIES(Annual School Year Salary)Last ten fiscal years

ALEXANDRIA CITY PUBLIC SCHOOLS, VIRGINIA

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Motor Vehicle Machine Calendar Tax rate and Tangibles Tax rate and Tools Tax rate Total

Year Residential Commercial Total per $100 Assessment per $100 Assessment per $100 Assessment

1996 5,658,106 5,284,168 10,942,274 1.070 1,095,920 4.75 10,493 4.50 1,106,413 1997 5,742,376 5,428,427 11,170,803 1.070 1,197,485 4.75 9,270 4.50 1,206,755 1998 5,882,796 5,722,494 11,605,290 1.070 1,203,370 4.75 9,681 4.50 1,213,051 1999 6,169,055 6,018,465 12,187,520 1.110 1,251,250 4.75 10,259 4.50 1,261,509 2000 6,716,942 6,578,366 13,295,308 1.110 1,359,340 4.75 13,281 4.50 1,372,621 2001 7,573,897 7,058,452 14,632,349 1.110 1,386,141 4.75 187,217 4.50 1,573,358 2002 8,889,290 7,243,699 16,132,989 1.080 1,409,955 4.75 16,351 4.50 1,426,306 2003 11,191,850 8,034,076 19,225,926 1.035 1,459,886 4.75 20,369 4.50 1,480,255 2004 13,224,543 9,532,642 22,757,185 0.995 1,391,110 4.75 17,985 4.50 1,409,095 2005 16,272,324 11,087,326 27,359,650 0.915 1,455,520 4.75 15,009 4.50 1,470,529

Note: Property is assessed each year as of January 1. Property is assessed at actual value; therefore assessed values are equal to actual values. Tax rates are assessed per $100 of assessed value.

The City is autonomous from any city, town or other political subdivision of the Commonwealth of Virginia, and there are no overlapping taxingpowers with other political subdivisions.

Source: The City of Alexandria

Last Ten Calendar YearsReal and Personal Property Tax Assessments and Rates

CITY OF ALEXANDRIA, VIRGINIA

Real Property ($000) Personal Property ($000)

Alexandria City Public Schools, Virginia Finance Office

2000 N. Beauregard Street Alexandria, Virginia 22311

www.acps.k12.va.us

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