torrance unified school district audit report for the … · 2019. 6. 19. · 3 figure...

TORRANCEUNIFIEDSCHOOLDISTRICT

AUDITREPORTFortheFiscalYearEnded

June30,2017

TORRANCEUNIFIEDSCHOOLDISTRICTFortheFiscalYearEndedJune30,2017TableofContents

FINANCIALSECTION Page

IndependentAuditors’Report.................................................................................................................................................................1Management’sDiscussionandAnalysis..............................................................................................................................................3BasicFinancialStatements:

Government‐wideFinancialStatementsStatementofNetPosition.........................................................................................................................................................13StatementofActivities...............................................................................................................................................................14

GovernmentalFundsFinancialStatementsBalanceSheet.................................................................................................................................................................................15ReconciliationoftheGovernmentalFundsBalanceSheettothe StatementofNetPosition................................................................................................................................................16StatementofRevenues,Expenditures,andChangesinFundBalances...............................................................17ReconciliationoftheGovernmentalFundsStatementofRevenues,

Expenditures,andChangesinFundBalancestotheStatementofActivities.............................................18ProprietaryFundsFinancialStatements

StatementofNetPosition.........................................................................................................................................................19StatementofRevenues,Expenses,andChangesinFundNetPosition................................................................20StatementofCashFlows...........................................................................................................................................................21

FiduciaryFundsFinancialStatementStatementofFiduciaryNetPosition....................................................................................................................................22

NotestoFinancialStatements...............................................................................................................................................................23

REQUIREDSUPPLEMENTARYINFORMATIONBudgetaryComparisonSchedule–GeneralFund.........................................................................................................................51ScheduleofFundingProgress...............................................................................................................................................................52ScheduleofProportionateShareoftheNetPensionLiability................................................................................................53ScheduleofPensionContributions......................................................................................................................................................54NotestotheRequiredSupplementaryInformation....................................................................................................................55

SUPPLEMENTARYINFORMATIONLocalEducationalAgencyOrganizationStructure.......................................................................................................................57ScheduleofAverageDailyAttendance..............................................................................................................................................58ScheduleofInstructionalTime.............................................................................................................................................................59ScheduleofFinancialTrendsandAnalysis......................................................................................................................................60ReconciliationofAnnualFinancialandBudgetReportwithAuditedFinancialStatements.....................................61ScheduleofExpendituresofFederalAwards.................................................................................................................................62NotetotheSupplementaryInformation...........................................................................................................................................63

TORRANCEUNIFIEDSCHOOLDISTRICTFortheFiscalYearEndedJune30,2017TableofContents(continued)

OTHERINDEPENDENTAUDITORS’REPORTS Page

IndependentAuditors’ReportonInternalControloverFinancialReportingandonComplianceandOther

MattersBasedonanAuditofFinancialStatementsPerformedinAccordancewithGovernmentAuditingStandards.............................................................................................................................................................................64

IndependentAuditors’ReportonStateCompliance...................................................................................................................66IndependentAuditors’ReportonComplianceForEachMajorFederalProgramandReportonInternal ControlOverComplianceRequiredbytheUniformGuidance........................................................................................68

FINDINGSANDQUESTIONEDCOSTSScheduleofAuditFindingsandQuestionedCosts: SummaryofAuditors’Results......................................................................................................................................................70 CurrentYearAuditFindingsandQuestionedCosts...........................................................................................................71 SummaryScheduleofPriorAuditFindings...........................................................................................................................80

FinancialSection

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INDEPENDENTAUDITORS’REPORTBoardofEducationTorranceUnifiedSchoolDistrictTorrance,CaliforniaReportontheFinancialStatementsWehaveauditedtheaccompanyingfinancialstatementsofthegovernmentalactivities,eachmajorfund,andthe aggregate remaining fund information of TorranceUnified SchoolDistrict, as of and for the fiscal yearended June 30, 2017, and the related notes to the financial statements, which collectively comprise theDistrict’sbasicfinancialstatementsaslistedinthetableofcontents.Management’sResponsibilityfortheFinancialStatementsManagement is responsible for the preparation and fair presentation of these financial statements inaccordancewithaccountingprinciplesgenerallyaccepted in theUnitedStatesofAmerica; this includes thedesign,implementation,andmaintenanceofinternalcontrolrelevanttothepreparationandfairpresentationoffinancialstatementsthatarefreefrommaterialmisstatement,whetherduetofraudorerror.Auditors’ResponsibilityOurresponsibilityistoexpressopinionsonthesefinancialstatementsbasedonouraudit.WeconductedourauditinaccordancewithauditingstandardsgenerallyacceptedintheUnitedStatesofAmerica,thestandardsapplicabletofinancialauditscontainedinGovernmentAuditingStandards,issuedbytheComptrollerGeneralof the United States, and the 2016‐17 Guide for Annual Audits ofK‐12 Local Education Agencies and StateComplianceReporting. Those standards require that we plan and perform the audit to obtain reasonableassuranceaboutwhetherthefinancialstatementsarefreefrommaterialmisstatement.Anauditinvolvesperformingprocedurestoobtainauditevidenceabouttheamountsanddisclosuresinthefinancialstatements.Theproceduresselecteddependontheauditor’sjudgment,includingtheassessmentoftherisksofmaterialmisstatementofthefinancialstatements,whetherduetofraudorerror.Inmakingthoserisk assessments, the auditor considers internal control relevant to the entity’s preparation and fairpresentation of the financial statements in order to design audit procedures that are appropriate in thecircumstances,butnot for thepurposeofexpressinganopinionontheeffectivenessoftheentity’s internalcontrol. Accordingly,we express no suchopinion.An audit also includes evaluating the appropriatenessofaccountingpoliciesusedandthereasonablenessofsignificantaccountingestimatesmadebymanagement,aswellasevaluatingtheoverallpresentationofthefinancialstatements.Webelievethattheauditevidencewehaveobtainedissufficientandappropriatetoprovideabasisforourauditopinions.OpinionsInouropinion,thefinancialstatementsreferredtoabovepresentfairly,inallmaterialrespects,therespectivefinancial position of the governmental activities, each major fund, and the aggregate remaining fundinformationofTorranceUnifiedSchoolDistrict,asof June30,2017,andtherespectivechanges infinancialposition and, where applicable, cash flows thereof for the fiscal year then ended in accordance withaccountingprinciplesgenerallyacceptedintheUnitedStatesofAmerica.

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OtherMattersRequiredSupplementaryInformationAccounting principles generally accepted in the United States of America require that the management'sdiscussionandanalysisonpages3 through12,budgetarycomparison informationonpage51, scheduleoffunding progress on page 52, schedule of proportionate share of the net pension liability on page 53, andschedule of contributions on page 54 be presented to supplement the basic financial statements. Suchinformation,althoughnotapartofthebasicfinancialstatements,isrequiredbytheGovernmentalAccountingStandardsBoard,whoconsidersittobeanessentialpartoffinancialreportingforplacingthebasicfinancialstatements in anappropriateoperational, economic, orhistorical context. Wehaveapplied certain limitedprocedures to the required supplementary information in accordance with auditing standards generallyacceptedintheUnitedStatesofAmerica,whichconsistedofinquiriesofmanagementaboutthemethodsofpreparing the informationandcomparing the information forconsistencywithmanagement's responses toourinquiries,thebasicfinancialstatements,andotherknowledgeweobtainedduringourauditofthebasicfinancialstatements.Wedonotexpressanopinionorprovideanyassuranceontheinformationbecausethelimitedproceduresdonotprovideuswithsufficientevidencetoexpressanopinionorprovideanyassurance.OtherInformationOur audit was conducted for the purpose of forming opinions on the financial statements that collectivelycomprisetheDistrict'sbasicfinancialstatements.Thesupplementaryinformationispresentedforpurposesofadditionalanalysisandisnotarequiredpartofthebasicfinancialstatements.ThescheduleofexpendituresoffederalawardsispresentedforpurposesofadditionalanalysisasrequiredbyTitle2U.S.CodeofFederalRegulations(CFR)Part200,UniformAdministrativeRequirements,CostPrinciples,andAuditRequirements forFederal Awards, and is also not a required part of the basic financial statements. The supplementaryinformation on pages 58 to 61 and the schedule of expenditures of federal awards on page 62 are theresponsibility ofmanagement andwere derived from and relate directly to the underlying accounting andother records used to prepare the basic financial statements. Such information has been subjected to theauditingproceduresappliedintheauditofthebasicfinancialstatementsandcertainadditionalprocedures,includingcomparingandreconcilingsuchinformationdirectlytotheunderlyingaccountingandotherrecordsused to prepare the basic financial statements or to the basic financial statements themselves, and otheradditional procedures in accordance with auditing standards generally accepted in the United States ofAmerica.Inouropinion,theinformationisfairlystatedinallmaterialrespectsinrelationtothebasicfinancialstatementsasawhole.Theinformationonpage57hasnotbeensubjectedtotheauditingproceduresappliedin theauditof thebasicfinancialstatementsandaccordingly,wedonotexpressanopinionorprovideanyassuranceonit.OtherReportingRequiredbyGovernmentAuditingStandardsInaccordancewithGovernmentAuditingStandards,wehavealsoissuedourreportdatedDecember8,2017,on our consideration of the District’s internal control over financial reporting and on our tests of itscompliancewithcertainprovisionsof laws,regulations,contracts,andgrantagreementsandothermatters.Thepurposeofthatreportistodescribethescopeofourtestingofinternalcontroloverfinancialreportingandcomplianceandtheresultsofthattesting,andnottoprovideanopiniononinternalcontroloverfinancialreporting or on compliance. That report is an integral part of an audit performed in accordance withGovernment Auditing Standards in considering the District’s internal control over financial reporting andcompliance.

Murrieta,CaliforniaDecember8,2017

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FigureA‐1.OrganizationofTorranceUnifiedSchoolDistrict’sAnnualFinancialReport

TORRANCEUNIFIEDSCHOOLDISTRICTManagement’sDiscussionandAnalysis(Unaudited)FortheFiscalYearEndedJune30,2017ThisdiscussionandanalysisofTorranceUnifiedSchoolDistrict’sfinancialperformanceprovidesanoverviewoftheDistrict’sfinancialactivitiesforthefiscalyearendedJune30,2017.PleasereaditinconjunctionwiththeDistrict’sfinancialstatements,whichimmediatelyfollowthissection. FINANCIALHIGHLIGHTS TheDistrict’snetpositioningovernmentalactivitiesdecreasedby$10million,or53.5%. Governmentalexpenseswereabout$311.3million.Revenueswere$301.3million. TheDistrictspentapproximately$77.4millioninnewcapitalassetsduringtheyear.Theseexpenditures

wereincurredprimarilyfromtheBuildingFund. GradesK‐12averagedailyattendance(ADA)decreasedby158,or0.7%.OVERVIEWOFTHEFINANCIALSTATEMENTSThis annual report consists of three parts – management discussion and analysis (this section), the basicfinancial statements, and required supplementary information. The basic financial statements include twokindsofstatementsthatpresentdifferentviewsoftheDistrict: The first two statements aredistrict‐wide financial statements that provide both short‐term and long‐

terminformationabouttheDistrict’soverallfinancialstatus. The remaining statements are fund financial statements that focus on individual parts of the District,

reportingtheDistrict’soperationsinmoredetailthanthedistrict‐widestatements. Thegovernmentalfundsstatementstellhowbasicserviceslikeregularandspecialeducationwere

financedintheshorttermaswellaswhatremainsforfuturespending. Short and long‐term financial information about the activities of the District that operate like

businesses(self‐insurancefunds)areprovidedintheproprietaryfundsstatements. Fiduciary funds statement provides information about the financial relationships in which the

Districtactssolelyasatrusteeoragentforthebenefitofotherstowhomtheresourcesbelong.Thefinancialstatementsalsoinclude notes that explainsome of the information inthe statements and providemore detailed data. FigureA‐1 shows how the variousparts of this annual reportare arranged and related tooneanother.

Management’sDiscussionandAnalysis

BasicFinancial

Information

RequiredSupplementaryInformation

FundFinancialStatements

District‐WideFinancialStatements

NotestoFinancialStatements

SUMMARY DETAIL

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TORRANCEUNIFIEDSCHOOLDISTRICTManagement’sDiscussionandAnalysis(Unaudited)FortheFiscalYearEndedJune30,2017OVERVIEWOFTHEFINANCIALSTATEMENTS(continued)FigureA‐2summarizesthemajorfeaturesoftheDistrict’sfinancialstatements,includingtheportionoftheDistrict’sactivitiestheycoverandthetypesofinformationtheycontain.FigureA‐2.MajorFeaturesoftheDistrict‐WideandFundFinancialStatements

TypeofStatements

District‐Wide

GovernmentalFunds

ProprietaryFunds

FiduciaryFunds

Scope Entiredistrict,exceptfiduciaryactivities

TheactivitiesoftheDistrictthatarenotproprietaryorfiduciary,suchasspecialeducationandbuildingmaintenance

ActivitiesoftheDistrictthatoperatelikeabusiness,suchasself‐insurancefunds

Instancesinwhichthedistrictadministersresourcesonbehalfofsomeoneelse,suchasscholarshipprogramsandstudentactivitiesmonies

Requiredfinancialstatements

StatementofNetPosition

StatementofActivities

BalanceSheet

StatementofRevenues,Expenditures&ChangesinFundBalances

StatementofNetPosition

StatementofRevenues,Expenses&ChangesinNetPosition

StatementofCashFlows

StatementofFiduciaryNetPosition

Accountingbasisandmeasurementfocus

Accrualaccountingandeconomicresourcesfocus

Modifiedaccrualaccountingandcurrentfinancialresourcesfocus



Typeofasset/liabilityinformation

Allassetsandliabilities,bothfinancialandcapital,short‐termandlong‐term

Onlyassetsexpectedtobeusedupandliabilitiesthatcomedueduringtheyearorsoonthereafter;nocapitalassetsincluded

Allassetsandliabilities,bothshort‐termandlong‐term;TheDistrict’sfundsdonotcurrentlycontainnonfinancialassets,thoughtheycan

Allassetsandliabilities,bothshort‐termandlong‐term;TheDistrict’sfundsdonotcurrentlycontainnonfinancialassets,thoughtheycan

Typeofinflow/outflowinformation

Allrevenuesandexpensesduringyear,regardlessofwhencashisreceivedorpaid

Revenuesforwhichcashisreceivedduringorsoonaftertheendoftheyear;expenditureswhengoodsorserviceshavebeenreceivedandpaymentisdueduringtheyearorsoonthereafter

Allrevenuesandexpensesduringtheyear,regardlessofwhencashisreceivedorpaid

Allrevenuesandexpensesduringtheyear,regardlessofwhencashisreceivedorpaid

Theremainderofthisoverviewsectionofmanagement’sdiscussionandanalysishighlightsthestructureandcontentsofeachofthestatements.

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TORRANCEUNIFIEDSCHOOLDISTRICTManagement’sDiscussionandAnalysis(Unaudited)FortheFiscalYearEndedJune30,2017OVERVIEWOFTHEFINANCIALSTATEMENTS(continued)District‐WideStatementsThe district‐wide statements report information about the District as a whole using accounting methodssimilartothoseusedbyprivate‐sectorcompanies.TheStatementofnetpositionincludesalloftheDistrict’sassetsand liabilities. Allof thecurrentyear’srevenuesandexpensesareaccountedfor inthestatementofactivitiesregardlessofwhencashisreceivedorpaid.Thetwodistrict‐widestatementsreporttheDistrict’snetpositionandhowithaschanged.Netposition–thedifferencebetweentheDistrict’sassetsanddeferredoutflowsofresourcesandliabilitiesanddeferredinflowsofresources–isonewaytomeasuretheDistrict’sfinancialhealth,orposition. Overtime,increasesanddecreasesintheDistrict’snetpositionareanindicatorofwhetheritsfinancial

positionisimprovingordeteriorating,respectively. ToassesstheoverallhealthoftheDistrict,youneedtoconsideradditionalnonfinancialfactorssuchas

changesintheDistrict’sdemographicsandtheconditionofschoolbuildingsandotherfacilities. In the district‐wide financial statements, the District’s activities are categorized as Governmental

Activities. MostoftheDistrict’sbasicservicesareincludedhere,suchasregularandspecialeducation,transportation,andadministration.Propertytaxesandstateaidfinancemostoftheseactivities.

FundFinancialStatementsThefundfinancialstatementsprovidemoredetailedinformationabouttheDistrict’smostsignificantfunds–nottheDistrictasawhole.FundsareaccountingdevicestheDistrictusestokeeptrackofspecificsourcesoffundingandspendingonparticularprograms.TheDistricthasthreekindsoffunds: Governmental funds –Most of the District’s basic services are included in governmental funds,which

generallyfocuson(1)howcashandotherfinancialassetsthatcanreadilybeconvertedtocashflowinand out and (2) the balances left at year‐end that are available for spending. Consequently, thegovernmental funds statementsprovideadetailed short‐termview thathelpsyoudeterminewhethertherearemoreorfewerfinancialresourcesthatcanbespentinthenearfuturetofinancetheDistrict’sprograms. Becausethisinformationdoesnotencompasstheadditionallong‐termfocusofthedistrict‐widestatements,weprovideadditionalinformationonaseparatereconciliationpagethatexplainstherelationship(ordifferences)betweenthem.

Proprietary funds –When the District charges other District funds for the services it provides, these

services are reported in proprietary funds. Proprietary funds are reported in the sameway that allactivitiesarereportedintheStatementofNetPositionandStatementofActivities.Infact,theDistrict’sinternal service fund is included within the governmental activities reported in the district‐widestatementsbutprovidesmoredetailandadditionalinformation,suchascashflows.TheDistrictusestheinternal service fund to report activities that relate to theDistrict’s self‐insuredprogram forpropertyandliabilityclaims,dentalinsurance,andhealthandwelfarecosts.

Fiduciary funds – TheDistrict is the trustee, or fiduciary, for assets that belong to others, such as the

studentactivitiesfunds.TheDistrictisresponsibleforensuringthattheassetsreportedinthesefundsareusedonlyfortheirintendedpurposesandbythosetowhomtheassetsbelong.AlloftheDistrict’sfiduciary activities are reported in a separate statement of fiduciary net position. We exclude theseactivities from the district‐wide financial statements because the District cannot use these assets tofinanceitsoperations.

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TORRANCEUNIFIEDSCHOOLDISTRICTManagement’sDiscussionandAnalysis(Unaudited)FortheFiscalYearEndedJune30,2017FINANCIALANALYSISOFTHEDISTRICTASAWHOLENetPosition.TheDistrict'scombinednetpositionwasloweronJune30,2017,thanitwastheyearbefore–decreasing53.8%to$(28.7)million(SeeTableA‐1).TableA‐1:StatementofNetPosition

VarianceIncrease

2017 2016 (Decrease)Assets

Currentassets 331,017,464$ 338,509,617$ (7,492,153)$Capitalassets 425,908,174 358,094,067 67,814,107Totalassets 756,925,638 696,603,684 60,321,954

Deferredoutflowsofresources 68,444,659 39,318,308 29,126,351Liabilities

Currentliabilities 49,242,775 42,946,638 6,296,137Long‐termliabilities 551,738,954 493,604,895 58,134,059Netpensionliability 240,976,627 191,802,127 49,174,500Totalliabilities 841,958,356 728,353,660 113,604,696

Deferredinflowsofresources 12,122,097 26,231,042 (14,108,945)NetpositionNetinvestmentincapitalassets 97,534,699 93,733,731 3,800,968Restricted 40,252,338 40,760,348 (508,010)Unrestricted (166,497,193) (153,156,789) (13,340,404)

Totalnetposition (28,710,156)$ (18,662,710)$ (10,047,446)$

GovernmentalActivities

Changesinnetposition,governmentalactivities. TheDistrict'stotalrevenuesincreased9.4%to$301.3million (See Table A‐2). The increase is due primarily to increased state LCFF funding and categoricalprogramrevenue.The total cost of all programsand services increased15.2% to$311.3million. TheDistrict's expensesarepredominantlyrelatedtoeducatingandcaringforstudents,75.8%.ThepurelyadministrativeactivitiesoftheDistrictaccountedforjust3.9%oftotalcosts.Asignificantcontributortotheincreaseincostswasincreasedsalariesandbenefits.

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TORRANCEUNIFIEDSCHOOLDISTRICTManagement’sDiscussionandAnalysis(Unaudited)FortheFiscalYearEndedJune30,2017FINANCIALANALYSISOFTHEDISTRICTASAWHOLE(continued)TableA‐2:StatementofActivities

VarianceIncrease

2017 2016 (Decrease)Revenues

ProgramRevenues:Chargesforservices 5,107,723$ 5,128,067$ (20,344)$Operatinggrantsandcontributions 56,450,145 45,293,534 11,156,611Capitalgrantsandcontributions ‐ 561,918 (561,918)

GeneralRevenues:Federalandstateaidnotrestricted 145,552,567 135,306,084 10,246,483Propertytaxes 90,121,958 85,292,856 4,829,102Othergeneralrevenues 4,044,174 3,807,301 236,873TotalRevenues 301,276,567 275,389,760 25,886,807

ExpensesInstruction‐related 209,845,379 176,387,937 33,457,442Pupilservices 26,088,116 23,417,617 2,670,499Administration 12,035,664 12,687,602 (651,938)Plantservices 20,234,495 21,147,585 (913,090)Allotheractivities 43,120,359 36,683,083 6,437,276

TotalExpenses 311,324,013 270,323,824 41,000,189Increase(decrease)innetposition (10,047,446)$ 5,065,936$ (15,113,382)$


FINANCIALANALYSISOFTHEDISTRICT’SFUNDSThe financial performance of theDistrict as awhole is reflected in its governmental funds aswell. As theDistrict completed this year, its governmental funds reported a combined fund balance of $268.8million,which isbelow lastyear'sending fundbalanceof$285.3million. Theprimarycauseof thedecreasedfundbalanceisanincreaseinprojectexpenses inconnectionwithgeneralobligationbondprojectscomingfromtheBuildingFund.TableA‐3:TheDistrict'sFundBalances

OtherSourcesJuly1,2016 Revenues Expenditures and(Uses) June30,2017

FundGeneralFund 57,875,185$ 242,107,752$ 250,220,581$ ‐$ 49,762,356$AdultEducationFund 223,627 6,297,708 6,021,150 ‐ 500,185ChildDevelopmentFund 66,409 1,564,292 1,401,322 ‐ 229,379CafeteriaFund 2,217,445 7,670,361 7,555,938 ‐ 2,331,868DeferredMaintenanceFund 135,789 504,824 508,452 ‐ 132,161BuildingFund 195,914,343 2,243,156 73,622,303 61,300,000 185,835,196CapitalFacilitiesFund 698,586 595,837 265,536 ‐ 1,028,887BondInterestandRedemptionFund 28,152,792 25,843,582 30,513,690 5,534,762 29,017,446

285,284,176$ 286,827,512$ 370,108,972$ 66,834,762$ 268,837,478$

FundBalances

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TORRANCEUNIFIEDSCHOOLDISTRICTManagement’sDiscussionandAnalysis(Unaudited)FortheFiscalYearEndedJune30,2017FINANCIALANALYSISOFTHEDISTRICT’SFUNDS(continued)GeneralFundBudgetaryHighlightsOverthecourseoftheyear,theDistrictrevisedtheannualoperatingbudgetseveraltimes.WhiletheDistrict'sfinalbudgetfortheGeneralFundanticipatedthatexpenditureswouldexceedrevenuesbyabout$11.2million,theactualresultsfortheyearshowthatexpendituresexceededrevenuesbyroughly$8.1million.Actualrevenueswere$0.4millionlessthananticipated,andexpenditureswere$3.5millionlessthanbudgeted.ThatamountconsistsprimarilyofrestrictedcategoricalprogramdollarsthatwerenotspentasofJune30,2017,thatwillbecarriedoverintothe2017‐18budget.

CAPITALASSETANDDEBTADMINISTRATIONCapitalAssetsBy the end of 2016‐17 the District had invested $77.4 million in new capital assets, related to siteimprovements and ongoing construction. (More detailed information about capital assets can be found inNote6tothefinancialstatements).Totaldepreciationexpensefortheyearexceeded$9.6million.TableA‐4:CapitalAssetsatYear‐End,NetofDepreciation

VarianceIncrease

2017 2016 (Decrease)Land 1,711,069$ 1,711,069$ ‐$Buildings&Improvements 308,603,331 275,649,218 32,954,113Equipment 4,201,351 3,966,291 235,060Constructioninprogress 111,392,423 76,767,489 34,624,934Total 425,908,174$ 358,094,067$ 67,814,107$


Long‐TermDebtAt year‐end the District had $551.7 million in general obligation bonds, capital leases, loans payables,certificates of participation, QZABs, and employment benefits – an increase of 11.8% from last year – asshowninTableA‐5.(MoredetailedinformationabouttheDistrict'slong‐termliabilitiesispresentedinNote7tothefinancialstatements).

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TORRANCEUNIFIEDSCHOOLDISTRICTManagement’sDiscussionandAnalysis(Unaudited)FortheFiscalYearEndedJune30,2017CAPITALASSETANDDEBTADMINISTRATION(continued)TableA‐5:OutstandingLong‐TermDebtatYear‐End

VarianceIncrease

2017 2016 (Decrease)Generalobligationbonds 528,738,458$ 469,400,249$ 59,338,209$QualifiedZoneAcademyBond 2,320,000 2,320,000 ‐Capitalleases 3,890,543 5,053,812 (1,163,269)Compensatedabsences 3,068,203 3,019,060 49,143Otherpostemploymentbenefits 1,799,750 1,889,774 (90,024)Claimspayable 11,922,000 11,922,000 ‐Total 551,738,954$ 493,604,895$ 58,134,059$


FACTORSBEARINGONTHEDISTRICT’SFUTURETheGovernorsignedthe2017‐18BudgetActandotherbudget‐relatedbillsonJune27,2017.Proposition98OverviewStatebudgetingforschoolsandcommunitycollegesisbasedprimarilyonProposition98,approvedbyvotersin1988andamendedin1990.Inthissection,weprovideanoverviewofProposition98changesundertheenactedbudgetpackage.Proposition98EstablishesMinimumSpendingLevelProposition98establishesaminimumspendingrequirementcommonlycalledtheminimumguarantee.Theminimum guarantee is determined by threemain formulas (known as tests) and various inputs, includingGeneralFundrevenue,percapitapersonalincome,andK‐12attendance.Thestatecanspendattheminimumguaranteeoranylevelaboveit.Spendingabovetheminimumguaranteeoneyeartypicallybecomespartofthe base for calculating the minimum guarantee the next year. If the minimum guarantee increases afterbudgetenactmentduetoupdatedinputs,thestateowesa“settle‐up”obligation.Insomeyears,thestatealsocreates or pays “maintenance factor.” Maintenance factor is created when General Fund revenue is weakrelativetopercapitapersonalincomeandispaidwhenGeneralFundrevenueisstronger.

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TORRANCEUNIFIEDSCHOOLDISTRICTManagement’sDiscussionandAnalysis(Unaudited)FortheFiscalYearEndedJune30,2017FACTORSBEARINGONTHEDISTRICT’SFUTURE(continued)Proposition98(continued)Overview(continued)2015‐16and2016‐17MinimumGuaranteesDownbutTotalSpendingUpSlightlyThe 2015‐16 minimum guarantee has decreased $379 million due to lower‐than‐expected General Fundrevenue. Proposition 98 spending that year, however, has increased $53 million due to various minoradjustments involving the Local Control Funding Formula (LCFF) and community college apportionments.The2016‐17minimumguaranteehasdecreased$558million,againduetolowerestimatesofGeneralFundrevenue. Proposition 98 spending that year has decreased by $484million, but total spending, including asettle‐uppaymentof$514million,isupslightly($29million)fromtheJune2016level.Thesettle‐uppaymentallows the state to cover some 2016‐17 LCFF costs using funds set aside for Proposition 2 (2014) debtpayments. In both 2015‐16 and 2016‐17, Proposition 98 spending is above the calculated minimumguarantees.2017‐18SpendingUp$3.1BillionOverRevised2016‐17LevelIn2017‐18,totalspendingacrossallsegmentsis$74.5billion,anincreaseof$3.1billion(4.4percent)fromthe revised 2016‐17 level. For 2017‐18, the state funds at the estimate of the minimum guarantee. Thisestimate builds upon the higher levels of spending provided in 2015‐16 and 2016‐17. (Had the state notfundedabovetheguaranteeinthosetwoyears,the2017‐18guaranteewouldhavebeen$542millionlower.)Test2istheoperativetestin2017‐18,withthechangeintheguaranteeattributabletoa3.7percentincreaseinpercapitapersonal incomeanda0.05percentdecline inK‐12attendance.Theincreaseintheguaranteealso reflects amaintenance factorpaymentof $536million.Under theadministration’sestimates, the statewouldend2017‐18withanoutstandingmaintenancefactorobligationof$900million.AboutOne‐ThirdofIncreaseCoveredWithHigherPropertyTaxRevenueOfthetotalProposition98spendingprovidedin2017‐18,$52.6billionisstateGeneralFundand$21.9billionislocalpropertytaxrevenue.From2016‐17to2017‐18,stateGeneralFundincreases$2.1billion(accountingforabouttwo‐thirdsofthe$3.1billionincreaseinspending)andpropertytaxrevenueincreasesby$1billion.The primary factor explaining the growth in property tax revenue is the projected 5.3 percent growth inassessedpropertyvalues,whichissimilartotheaveragegrowthrateoverthepast20years.Regardinglocalrevenueassociatedwiththedissolutionofredevelopmentagencies,thebudgetplanassumesanetincreaseof$31million.Thisconsistsofa$131millionincreaseintheongoingrevenueshiftedtoschoolsandcommunitycolleges, offset by a $100 million decrease in revenue from the sale of assets formerly owned byredevelopmentagencies.SpendingPackageReducesOutstandingSettle‐UpObligationby$603MillionThe budget plan includes a $603 million settle‐up payment related to meeting the 2009‐10 minimumguarantee.Thispaymentreducesthestate’soutstandingsettle‐upobligationfromslightlyabove$1billionto$440million.Ofthe$603millionprovided,thebudgetplanallocates$514millionforcovering2016‐17LCFFcosts, $86 million for the community college guided pathways initiative, and $3 million for the CareerTechnicalEducationIncentiveGrantprogram.Thestatebudgetpackagescoresallofthesettle‐upspendingasaProposition2debtpayment.

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TORRANCEUNIFIEDSCHOOLDISTRICTManagement’sDiscussionandAnalysis(Unaudited)FortheFiscalYearEndedJune30,2017FACTORSBEARINGONTHEDISTRICT’SFUTURE(continued)Proposition98(continued)K‐12Education$64.7BillionProposition98FundingforK‐12Educationin2017‐18Thebudgeted2017‐18levelis$2.7billion(4.3percent)morethanrevised2016‐17leveland$2.2billion(3.6percent)more than the 2016‐17BudgetAct level. The budget increases funding per student by $450 (4.3percent)overthe2016‐17BudgetActlevel,bringingProposition98fundingperstudentupto$10,863.PackageIncludesMixofOngoingandOne‐TimeSpendingThebudgetincludes$2.4billioninaugmentationsforK‐12education.Oftheseaugmentations,$1.5billionareongoingincreasesand$933millionareone‐timeinitiatives.Inadditiontothesechanges,thebudgetpackageincludes$328millioninone‐timeinitiativesfundedfromothersources.(Ofthisamount,$325millionisfromProposition98 reversiondollarsand$3million is fromasettle‐uppayment.Of thereversiondollars,$114million is fora fundswapprimarily relating tospecialeducation.)Thebudgetalsoauthorizes$593millionfromProposition51(2016)generalobligationbondproceedsforschoolfacilities.GeneralPurposeFundingAcceleratesImplementationofLCFFforSchoolDistrictsandCharterSchoolsThebudgetprovidesanadditional$1.4billionongoingProposition98fundingforthispurpose,bringingtotalLCFFfundingforschooldistrictsandcharterschoolsto$57.4billion,a2.7%increaseovertherevised2016‐17 level. The administration estimates this funding will result in the LCFF‐target level being 97 percent‐funded.SchooldistrictsandcharterschoolsmayuseLCFFmoniesforanyeducationalpurpose.FundsOne‐TimeDiscretionaryGrantsThe largestone‐timeaugmentation forK‐12education is$877million that localeducationagencies (LEAs)may use for any educational purpose. Funding is distributedbased on averagedaily attendance ($147perADA). IfanLEAhasunpaidmandateclaims,fundingcountstowardthoseclaims.AsmostLEAsdonothaveanysuchclaims,weestimateonlyaboutone‐third($268million)ofthefundingwillendupreducingtheK‐12mandatesbacklog.WeestimatetheK‐12mandatesbacklogwillbe$799millionattheendof2017‐18.OtherChangesSpecifiesUseofRemainingProposition39FundsandExtendsEnergy‐EfficiencyProgramsIndefinitelyThe budget provides $423 million Proposition 98 funding for energy‐efficiency projects at schools andcommunitycolleges.ThisreflectsthefifthandfinalyearofProposition39(2012)funding.Trailerlegislation,however,extendsthedateforschoolstousethisfundingbyoneyear,toJune30,2019,andsetsrulesforhowanyremaininguncommittedfundsaretobeused.Thefirst$75millioninremainingfundsisearmarkedforschooldistrictsandCOEstoreplaceorretrofitschoolbuses.PriorityisgiventoLEAshavingtheoldestbuses,servingdisadvantagedcommunities,orservinghighsharesoflow‐incomestudents.Thenext$100millionisearmarkedforacompetitivegrantprogramtoprovideK‐12LEAswithlow‐andno‐interestloansforenergyprojects.AnyfundingstillremainingistobedistributedasgrantstoK‐12LEAsaccordingtoProposition39rules. The trailer legislation also extends the Proposition 39 energy‐efficiency programs for K‐12 and CCCLEAsbeginning in2018‐19, contingentupon fundsbeingmade available through theannualbudget actorotherstatute.

12

TORRANCEUNIFIEDSCHOOLDISTRICTManagement’sDiscussionandAnalysis(Unaudited)FortheFiscalYearEndedJune30,2017FACTORSBEARINGONTHEDISTRICT’SFUTURE(continued)Proposition98(continued)SchoolFacilitiesProvidesFirstInstallmentofProposition51BondFundingforSchoolFacilitiesPassed by the voters in November 2016, Proposition 51 authorizes the state to sell $9 billion in generalobligationbonds—$7billionforschoolsand$2billionforcommunitycolleges.Thestateplanstoissue$593million of these bonds for K‐12 facility projects in 2017‐18. This would fully fund the state’s list of $368millioninalreadyapprovedfacilityprojects,aswellas$225millioninadditionalprojects.EstablishesNewAuditRulesTrailerlegislationshiftsauditresponsibilitiesforstate‐fundedschoolfacilityprojectsfromtheOfficeofPublicSchoolConstruction to local independentauditors.Moving forward, the localauditorsare toreviewfacilityexpenditurestoensurethattheycomplywiththerulesofthestate’sSchoolFacilitiesProgram.InJune2017,theStateAllocationBoardalsoenactedaregulatorychangerequiringdistrictstosigngrantagreementspriortoreceivingstatefundingthatspecifyallowableprojectexpenditures.AllofthesefactorswereconsideredinpreparingtheTorranceUnifiedSchoolDistrictbudgetforthe2017‐18fiscalyear.CONTACTINGTHEDISTRICT’SFINANCIALMANAGEMENTThis financial report is designed toprovideour citizens, taxpayers, customers, and investors and creditorswith a general overview of the District’s finances and to demonstrate the District’s accountability for themoney it receives. If you have any questions about this report or need additional financial information,contacttheDistrict’sFiscalServicesDepartmentat(310)972‐6021.

Thenotestofinancialstatementsareanintegralpartofthisstatement. 13

TORRANCEUNIFIEDSCHOOLDISTRICTStatementofNetPositionJune30,2017

TotalGovernmentalActivities

ASSETSCash 318,514,875$Investments 1,514,839Accountsreceivable 10,369,918Inventories 543,792Prepaidexpense 74,040Capitalassets:

Non‐depreciableassets 113,103,492Depreciableassets 435,889,357Lessaccumulateddepreciation (123,084,675)Totalassets 756,925,638

DEFERREDOUTFLOWSOFRESOURCESDeferredamountsonrefunding 6,918,992Deferredoutflowsrelatedtopensions 61,525,667

Totaldeferredoutflowsofresources 68,444,659

LIABILITIESAccountspayable 47,430,554Unearnedrevenue 1,812,221Long‐termliabilities:

Portiondueorpayablewithinoneyear 15,281,362Portiondueorpayableafteroneyear 536,457,592

Netpensionliability 240,976,627Totalliabilities 841,958,356

DEFERREDINFLOWSOFRESOURCESDeferredinflowsrelatedtopensions 12,122,097

NETPOSITION

Netinvestmentincapitalassets 97,534,699Restrictedfor:

Capitalprojects 1,028,887Debtservice 29,017,446Categoricalprograms 10,206,005

Unrestricted (166,497,193)

Totalnetposition (28,710,156)$


TORRANCEUNIFIEDSCHOOLDISTRICTStatementofActivitiesFortheFiscalYearEndedJune30,2017

Net(Expense)Operating Revenueand

Chargesfor Grantsand ChangesinExpenses Services Contributions NetPosition

GovernmentalActivitiesInstructionalServices:

Instruction 178,935,421$ 152,167$ 30,177,441$ (148,605,813)$Instruction‐RelatedServices:

Supervisionofinstruction 12,341,995 895 3,066,666 (9,274,434)Instructionallibrary,mediaandtechnology 1,068,067 4,805 106,498 (956,764)Schoolsiteadministration 17,499,896 86,172 2,155,462 (15,258,262)

PupilSupportServices:Home‐to‐schooltransportation 4,918,587 ‐ ‐ (4,918,587)Foodservices 7,270,217 3,935,988 3,489,838 155,609Allotherpupilservices 13,899,312 7,925 2,390,944 (11,500,443)

GeneralAdministrationServices:Dataprocessingservices 4,055,475 4,270 84,803 (3,966,402)Othergeneraladministration 7,980,189 185,921 945,349 (6,848,919)

PlantServices 20,234,495 528,655 9,989,299 (9,716,541)AncillaryServices 3,061,338 2,358 139,414 (2,919,566)EnterpriseActivities 257,178 ‐ ‐ (257,178)InterestonLong‐termDebt 25,089,147 ‐ ‐ (25,089,147)OtherOutgo 4,787,626 198,567 3,904,431 (684,628)DebtIssuanceCostsandDiscounts 305,893 ‐ ‐ (305,893)Depreciation(Unallocated) 9,619,177 ‐ ‐ (9,619,177)

TotalGovernmentalActivities 311,324,013$ 5,107,723$ 56,450,145$ (249,766,145)

GeneralRevenues:

Propertytaxes 90,121,958Federalandstateaidnotrestrictedtospecificpurpose 145,552,567Interestandinvestmentearnings 684,460Miscellaneous 3,359,714

Totalgeneralrevenues 239,718,699

Changeinnetposition (10,047,446)

Netposition‐July1,2016 (18,662,710)

Netposition‐June30,2017 (28,710,156)$

Functions/Programs

ProgramRevenues


TORRANCEUNIFIEDSCHOOLDISTRICTBalanceSheet‐GovernmentalFundsJune30,2017

GeneralFund

BuildingFund

BondInterestandRedemption

Fund

Non‐MajorGovernmental

Funds

TotalGovernmental

FundsASSETS

Cash 66,078,697$ 199,237,686$ 29,017,446$ 4,259,145$ 298,592,974$Investments 1,514,839 ‐ ‐ ‐ 1,514,839Accountsreceivable 6,455,701 1,089,233 ‐ 1,576,447 9,121,381Storesinventories 446,702 ‐ ‐ 97,090 543,792Prepaidexpenditures 74,040 ‐ ‐ ‐ 74,040Duefromotherfunds 399,371 ‐ ‐ 621,223 1,020,594

TotalAssets 74,969,350$ 200,326,919$ 29,017,446$ 6,553,905$ 310,867,620$

LIABILITIESANDFUNDBALANCES

LiabilitiesAccountspayable 23,087,070$ 14,491,723$ ‐$ 1,618,534$ 39,197,327$Duetootherfunds 621,223 ‐ ‐ 399,371 1,020,594Unearnedrevenue 1,498,701 ‐ ‐ 313,520 1,812,221

TotalLiabilities 25,206,994 14,491,723 ‐ 2,331,425 42,030,142

FundBalancesNonspendable 580,742 ‐ ‐ 107,090 687,832Restricted 7,720,605 185,835,196 29,017,446 3,417,198 225,990,445Committed ‐ ‐ ‐ 468,813 468,813Assigned 20,860,169 ‐ ‐ 229,379 21,089,548Unassigned 20,600,840 ‐ ‐ ‐ 20,600,840

TotalFundBalances 49,762,356 185,835,196 29,017,446 4,222,480 268,837,478

TotalLiabilitiesandFundBalances 74,969,350$ 200,326,919$ 29,017,446$ 6,553,905$ 310,867,620$


TORRANCEUNIFIEDSCHOOLDISTRICTReconciliationoftheGovernmentalFundsBalanceSheettotheStatementofNetPositionJune30,2017Totalfundbalances‐governmentalfunds 268,837,478$

Amountsreportedforgovernmentalactivities inthestatementofnetpositionaredifferentbecausecapitalassetsusedforgovernmentalactivitiesarenotfinancialresourcesandthereforearenotreportedasassetsingovernmentalfunds.Thecostoftheassetsis$548,992,849,andtheaccumulateddepreciationis($123,084,675). 425,908,174

Ingovernmentalfunds,interestonlong‐termdebtisnotrecognizeduntiltheperiodinwhichitmaturesandispaid.Inthegovernment‐widestatementofactivities,itisrecognizedintheperiodthatitisincurred.Theadditionalliabilityforunmaturedinterestowingattheendoftheperiodwas: (6,557,192)

Ingovernmentalfunds,interestsubsidiesreceivedfromBuildAmericaBonds(BAB)andQualifiedSchoolConstructionBonds(QSCB)arerecognizedintheperiodthattheyarereceived.Inthegovernment‐widestatements,theyarerecognizedintheperiodthattheyareearned.Thefederalinterestsubsidiesincludedinreceivablesinthegovernment‐widestatementswere: 610,875

Ingovernmentalfunds,onlycurrentliabilitiesarereported.Inthestatementofnetposition,allliabilities,includinglong‐termliabilities,arereported.Long‐termliabilitiesrelatingtogovernmentalactivitiesconsistof:

Generalobligationbondspayable 528,738,458Qualifiedzoneacademybonds 2,320,000Capitalleases 3,890,543Compensatedabsences 3,068,203Otherpostemploymentbenefits 1,799,750Claimspayable 11,922,000 (551,738,954)

Thenetpensionliabilityisnotdueandpayableinthecurrentreportingperiod,andthereforeisnotreportedasaliabilityinthefundfinancialstatements. (240,976,627)

Ingovernmentalfunds,deferredoutflowsandinflowsofresourcesrelatingtopensionsarenotreportedbecausetheyareapplicabletofutureperiods.Inthestatementofnetposition,deferredoutflowsandinflowsofresourcesrelatingtopensionsarereported.

Deferredoutflowsofresourcesrelatingtopensions 61,525,667Deferredinflowsofresourcesrelatingtopensions (12,122,097)

Deferredamountsonrefundingrepresentamountspaidtoanescrowagentinexcessoftheoutstandingdebtatthetimeofthepaymentforrefundedbondswhichhavebeendefeased.Ingovernment‐widestatementsitisrecognizedasadeferredoutflowofresources.Theremainingdeferredamountsonrefundingattheendoftheperiodwere: 6,918,992

Internalservicefundsareusedtoconductcertainactivitiesforwhichcostsarechargedtootherfundsonafullcost‐recoverybasis.Becauseinternalservicefundsarepresumedtooperateforthebenefitofgovernmentalactivities,assetsandliabilitiesofinternalservicefundsarereportedwithgovernmentalactivitiesinthestatementofnetposition.Netpositionforinternalservicesfundsattheendoftheperiodis: 18,883,528

Totalnetposition‐governmentalactivities (28,710,156)$


TORRANCEUNIFIEDSCHOOLDISTRICTStatementofRevenues,Expenditures,andChangesinFundBalances–GovernmentalFundsFortheFiscalYearEndedJune30,2017

GeneralFund

BuildingFund

BondInterestandRedemption

Fund


Funds

TotalGovernmental

FundsREVENUES

LCFFsources 193,854,795$ ‐$ ‐$ 500,000$ 194,354,795$Federalsources 8,965,043 ‐ 1,975,106 4,298,731 15,238,880Otherstatesources 33,019,117 ‐ 145,707 6,903,184 40,068,008Otherlocalsources 6,268,797 2,243,156 23,722,769 4,931,107 37,165,829

TotalRevenues 242,107,752 2,243,156 25,843,582 16,633,022 286,827,512EXPENDITURES

Current:InstructionalServices:

Instruction 162,138,079 ‐ ‐ 4,221,120 166,359,199Instruction‐RelatedServices:

Supervisionofinstruction 11,239,461 ‐ ‐ 210,958 11,450,419Instructionallibrary,mediaandtechnology 1,062,355 ‐ ‐ 83,847 1,146,202Schoolsiteadministration 14,702,441 ‐ ‐ 1,590,845 16,293,286

PupilSupportServices:Home‐to‐schooltransportation 4,900,758 ‐ ‐ ‐ 4,900,758Foodservices 6,190 ‐ ‐ 7,227,136 7,233,326Allotherpupilservices 12,689,696 ‐ ‐ 238,650 12,928,346

GeneralAdministrationServices:Dataprocessingservices 4,363,404 ‐ ‐ ‐ 4,363,404Othergeneraladministration 9,808,245 ‐ ‐ ‐ 9,808,245

Plantservices 17,267,275 ‐ ‐ 766,719 18,033,994Ancillaryservices 2,921,708 ‐ ‐ ‐ 2,921,708Transfersofindirectcosts (705,929) ‐ ‐ 705,929 ‐

CapitalOutlay 3,739,291 73,622,303 ‐ 707,194 78,068,788Intergovernmentaltransfers 4,787,626 ‐ ‐ ‐ 4,787,626DebtService:

Principal 1,163,269 ‐ 11,933,716 ‐ 13,096,985Interest 136,712 ‐ 17,823,060 ‐ 17,959,772Issuancecostsanddiscounts ‐ ‐ 756,914 ‐ 756,914

TotalExpenditures 250,220,581 73,622,303 30,513,690 15,752,398 370,108,972

Excess(Deficiency)ofRevenuesOver(Under)Expenditures (8,112,829) (71,379,147) (4,670,108) 880,624 (83,281,460)

OTHERFINANCINGSOURCES(USES)Proceedsfromgeneralobligationbonds ‐ 61,300,000 ‐ ‐ 61,300,000Premiumsondebtissuance ‐ ‐ 5,228,850 ‐ 5,228,850Proceedsfromrefundingbonds ‐ ‐ 32,995,000 ‐ 32,995,000Premiumsonrefundingbonds ‐ ‐ 291,986 ‐ 291,986Transfertoescrowagentfordefeaseddebt ‐ ‐ (32,981,074) ‐ (32,981,074)

TotalOtherFinancingSourcesandUses ‐ 61,300,000 5,534,762 ‐ 66,834,762

NetChangeinFundBalances (8,112,829) (10,079,147) 864,654 880,624 (16,446,698)

57,875,185 195,914,343 28,152,792 3,341,856 285,284,176

FundBalances,June30,2017 49,762,356$ 185,835,196$ 29,017,446$ 4,222,480$ 268,837,478$

FundBalances,July1,2016


TORRANCEUNIFIEDSCHOOLDISTRICTReconciliationoftheGovernmentalFundsStatementofRevenues,Expenditures,andChanges

inFundBalancestotheStatementofActivitiesFortheFiscalYearEndedJune30,2017Totalnetchangeinfundbalances‐governmentalfunds (16,446,698)$

Amountsreportedforgovernmentalactivitiesinthestatementofactivitiesaredifferentbecause:

Capitaloutlaysarereportedingovernmentalfundsasexpenditures.However,inthestatementofactivities,thecostofthoseassetsisallocatedovertheirestimatedusefullivesasdepreciationexpense.Thedifferencebetweencapitaloutlayexpendituresanddepreciationexpensefortheperiodis:

Expendituresforcapitaloutlay 77,433,284Depreciationexpense (9,619,177) 67,814,107

Ingovernmentalfunds,repaymentsoflong‐termdebtarereportedasexpenditures.Inthegovernment‐widestatements,repaymentsoflong‐termdebtarereportedasreductionsofliabilities.Expendituresforrepaymentoftheprincipalportionoflong‐termdebtwere: 44,096,985

(99,815,836)

Ingovernmentalfunds,interestsubsidiesreceivedfromBuildAmericaBonds(BAB)andQualifiedSchoolConstructionBonds(QSCB)arerecognizedintheperiodthattheyarereceived.Inthegovernment‐widestatements,theyarerecognizedintheperiodthattheyareearned.Thedifferenceinfederalinterestsubsidiesfromtheprioryearincludedinreceivablesinthegovernment‐widestatementswere: (320,979)

Ingovernmentalfunds,OPEBcostsarerecognizedwhenemployercontributionsaremade.Inthestatementofactivities,OPEBcostsarerecognizedontheaccrualbasis.Thisyear,thedifferencebetweenOPEBcostsandactualemployercontributionswas: 90,024

Ingovernmentalfunds,ifdebtisissuedatapremium,thepremiumisrecognizedasanOtherFinancingSourceintheperioditisincurred.Inthegovernment‐widestatements,thepremiumisamortizedasinterestoverthelifeofthedebt.Amortizationofpremiumfortheperiodis: 1,784,859

Ingovernmentalfunds,pensioncostsarerecognizedwhenemployercontributionsaremade.Inthestatementofactivities,pensioncostsarerecognizedontheaccrualbasis.Thisyear,thedifferencebetweenaccrual‐basispensioncostsandactualemployercontributionswas: (7,496,376)

Ingovernmentalfunds,accretedinterestoncapitalappreciationbondsisnotrecordedasanexpenditurefromcurrentresources.Inthegovernment‐widestatementofactivities,however,thisisrecordedasinterestexpensefortheperiod. (4,240,948)

Ingovernmentalfunds,interestonlong‐termdebtisrecognizedintheperiodthatitbecomesdue.Inthegovernment‐widestatementofactivities,itisrecognizedintheperiodthatitisincurred.Unmaturedinterestowingattheendoftheperiod,lessmaturedinterestpaidduringtheperiodbutowingfromthepriorperiod,was: 781,567

Inthestatementofactivities,compensatedabsencesaremeasuredbytheamountsearned duringtheyear.Inthegovernmentalfunds,however,expendituresfortheseitemsaremeasuredbytheamountoffinancialresourcesused(essentially,theamountsactuallypaid). (49,143)

Theamountspaidtotherefundedbondescrowagentinexcessoftherefundedbondatthetimeofpaymentarerecordedasdeferredamountsonrefundingandareamortizedoverthelifeoftheliability.Theamountrecognizedasdeferredamountsinthecurrentyear,lessamortizedamounts,was: 1,557,171

Theinternalservicefundisusedbymanagementtochargethecostofself‐insuranceactivities.Thenetrevenue(expense)oftheinternalservicefundisreportedwithgovernmentalactivities. 2,197,821

Changeinnetpositionofgovernmentalactivities (10,047,446)$

Ingovernmentalfunds,proceedsfromdebtarerecognizedasOtherFinancingSources.Inthegovernment‐widestatements,proceedsfromdebtarereportedasincreasestoliabilities.Amountsrecognizedingovernmentalfundsasproceedsfromdebt,netofissuepremiumordiscountwere:


TORRANCEUNIFIEDSCHOOLDISTRICTStatementofNetPosition–ProprietaryFundsJune30,2017

InternalServiceFund

ASSETSCash 19,921,901$Accountsreceivable 637,662

TotalAssets 20,559,563

LIABILITIESAccountspayable 1,478,035Long‐termliabilities:

EstimatedclaimliabilityforIBNR 198,000

Totalliabilities 1,676,035

NETPOSITIONRestricted 18,883,528$


TORRANCEUNIFIEDSCHOOLDISTRICTStatementofRevenues,Expenses,andChangesinFundNetPosition–ProprietaryFundsFortheFiscalYearEndedJune30,2017


InternalServiceFund

OPERATINGREVENUESSelf‐insurancepremiums 21,165,095$Allotherlocal 615,891

Totaloperatingrevenues 21,780,986

OPERATINGEXPENSESClassifiedsalaries 297,462Employeebenefits 90,480Booksandsupplies 11,432Paymentsforservices 19,284,676

Totaloperatingexpenses 19,684,050

OperatingIncome(Loss) 2,096,936

NON‐OPERATINGREVENUESInterestincome 100,885

ChangeinNetPosition 2,197,821

NetPosition,July1,2016 16,685,707

NetPosition,June30,2017 18,883,528$


TORRANCEUNIFIEDSCHOOLDISTRICTStatementofCashFlows–ProprietaryFundsFortheFiscalYearEndedJune30,2017

InternalServiceFund

CASHFLOWSFROMOPERATINGACTIVITIESReceivedfromin‐districtpremiums 21,165,095$Receivedfromallotherlocalsources 1,281,372Paymentstoemployeesandfringebenefits (387,942)Paymentstovendorsandsuppliers (11,432)Paymentsoninsuranceclaims (19,346,708)Netcashprovided(used)byoperatingactivities 2,700,385

CASHFLOWSFROMINVESTINGACTIVITIESInvestmentincome 91,519

Netincrease(decrease)incashandcashequivalents 2,791,904Cashandcashequivalents,July1,2016 17,129,997Cashandcashequivalents,June30,2017 19,921,901$

Operatingincome(loss) 2,096,936$Adjustmentstoreconcileoperatingincome(loss)tonetcash

provided(used)byoperatingactivities:Changesinoperatingassetsandliabilities:

Receivables,net 665,481Accountspayableandaccruedliabilities (62,032)Totaladjustments 603,449

Netcashprovided(used)byoperatingactivities 2,700,385$

(used)byoperatingactivities:Reconciliationofoperatingincome(loss)tonetcashprovided


TORRANCEUNIFIEDSCHOOLDISTRICTStatementofFiduciaryNetPositionJune30,2017

Payroll StudentBodyClearingFund Funds Total

ASSETSCash ‐$ 2,486,109$ 2,486,109$Accountsreceivable 223,907 6,624 230,531

TotalAssets 223,907$ 2,492,733$ 2,716,640$

LIABILITIESCashoverdraft 60,357$ ‐$ 60,357$Duetoregulatoryagencies 163,550 ‐ 163,550Duetostudentgroups ‐ 2,492,733 2,492,733

TotalLiabilities 223,907$ 2,492,733$ 2,716,640$

AgencyFunds

23

TORRANCEUNIFIEDSCHOOLDISTRICTNotestoFinancialStatementsJune30,2017NOTE1–SUMMARYOFSIGNIFICANTACCOUNTINGPOLICIESTorranceUnifiedSchoolDistrict(the"District")accountsforitsfinancialtransactionsinaccordancewiththepoliciesandproceduresoftheCaliforniaDepartmentofEducation’sCaliforniaSchoolAccountingManual.TheaccountingpoliciesoftheDistrictconformtoaccountingprinciplesgenerallyacceptedintheUnitedStatesofAmericaasprescribedbytheGovernmentalAccountingStandardsBoard.Thefollowingisasummaryofthemoresignificantpolicies:A. ReportingEntity

A reporting entity is comprised of the primary government, component units, and other organizationsthatareincludedtoensurethefinancialstatementsarenotmisleading.TheprimarygovernmentoftheDistrictconsistsofallfunds,departments,andagenciesthatarenotlegallyseparatefromtheDistrict.ForTorrance Unified School District, this includes general operations, food service, and student relatedactivitiesoftheDistrict.Component units are legally separate organizations for which the District is financially accountable.Componentunitsmayalso includeorganizations thatare fiscallydependenton theDistrict, in that theDistrict approves their budget, the issuance of their debt or the levying of their taxes. In addition,component units are other legally separate organizations for which the District is not financiallyaccountablebutthenatureandsignificanceoftheorganization’srelationshipwiththeDistrictissuchthatexclusionwouldcausetheDistrict’sfinancialstatementstobemisleadingorincomplete.TheDistricthasidentifiednoorganizationsthatarerequiredtobereportedascomponentunits.

B. BasisofPresentation,BasisofAccounting

1. BasisofPresentationGovernment‐WideFinancialStatementsThestatementofnetpositionandthestatementofactivitiesdisplayinformationabouttheprimarygovernment(theDistrict)anditscomponentunit.Thesestatementsincludethefinancialactivitiesoftheoverallgovernment,exceptforfiduciaryactivities.Eliminationshavebeenmadetominimizethedouble‐countingofinternalactivities. Governmentalactivitiesgenerallyarefinancedthroughtaxes,intergovernmentalrevenues,andothernonexchangetransactions.ThestatementofactivitiespresentsacomparisonbetweendirectexpensesandprogramrevenuesforeachfunctionoftheDistrict’sgovernmentalactivities.Directexpensesarethosethatarespecificallyassociatedwithaprogramorfunctionand,therefore,areclearlyidentifiabletoaparticularfunction.Program revenues include (a) fees, fines, and charges paid by the recipients of goods or servicesoffered by the programs and (b) grants and contributions that are restricted to meeting theoperational or capital requirements of a particular program. Revenues that are not classified asprogramrevenues,includingalltaxes,arepresentedasgeneralrevenues.

24

TORRANCEUNIFIEDSCHOOLDISTRICTNotestoFinancialStatementsJune30,2017NOTE1–SUMMARYOFSIGNIFICANTACCOUNTINGPOLICIES(continued)

B. BasisofPresentation,BasisofAccounting(continued)

1. BasisofPresentation(continued)

FundFinancialStatementsThe fund financialstatementsprovide informationabouttheDistrict’s funds, including its fiduciaryfunds (andblendedcomponentunits). Separatestatements foreach fundcategory ‐governmental,proprietary, and fiduciary ‐ are presented. The emphasis of fund financial statements is onmajorgovernmental funds, each displayed in a separate column. All remaining governmental funds areaggregatedandreportedasnonmajorfunds.Proprietaryfundoperatingrevenues,suchaschargesforservices,resultfromexchangetransactionsassociatedwith the principal activity of the fund. Exchange transactions are those inwhich eachpartyreceivesandgivesupessentiallyequalvalues. Nonoperatingrevenues,suchassubsidiesandinvestmentearnings,resultfromnonexchangetransactionsorancillaryactivities.MajorGovernmentalFundsTheDistrictmaintainsthefollowingmajorgovernmentalfunds:

GeneralFund:Thisfundisusedtoaccountforandreportallfinancialresourcesnotaccountedforandreportedinanotherfund.BuildingFund: This fund isusedtoaccountfortheacquisitionofmajorgovernmentalcapitalfacilitiesandbuildingsfromthesaleofgeneralobligationbonds.Bond InterestandRedemptionFund: This Fund is used to account for theaccumulationofresourcesfor,andtherepaymentof,Districtbonds,interest,andrelatedcosts.

Non‐MajorGovernmentalFundsTheDistrictmaintainsthefollowingnon‐majorgovernmentalfunds:

SpecialRevenueFunds:

Adult Education Fund: This fund is used to account for resources committed to adulteducationprogramsmaintainedbytheDistrict.

ChildDevelopmentFund: This fund isused to account for resources committed to childdevelopmentprogramsmaintainedbytheDistrict.CafeteriaFund:ThisfundisusedtoaccountforrevenuesreceivedandexpendituresmadetooperatetheDistrict’sfoodserviceoperations.DeferredMaintenance Fund: This fund is used to account for resources committed tomajorrepairorreplacementofDistrictproperty.

25


B. BasisofPresentation,BasisofAccounting(continued)

1. BasisofPresentation(continued)

Non‐MajorGovernmentalFunds(continued)

CapitalProjectsFunds:

CapitalFacilitiesFund:ThisfundisusedtoaccountforresourcesreceivedfromdeveloperimpactfeesassessedunderprovisionsoftheCaliforniaEnvironmentalQualityAct.County School Facilities Fund: This fund is used to account for state apportionmentsprovidedformodernizationofschoolfacilitiesunderSB50.

ProprietaryFundsProprietaryfundreportingfocusesonthedeterminationofoperatingincome,changesinnetassets,financialposition,andcashflows. Proprietaryfundsareclassifiedasenterpriseorinternalservice.TheDistricthasthefollowingproprietaryfunds:

Internal Service Funds: These funds are used to account for services rendered on a cost‐reimbursementbasiswithintheDistrict.TheDistrictmaintainstwointernalservicefunds.

Property/LiabilityInsuranceFund:ThisfundisusedtoaccountforresourcescommittedtopaythecostsoftheDistrict’sself‐insuredproperty/liabilityprogram.Medical/Dental Fund: This fund is used to account for resources committed to pay thecostsoftheDistrict’shealthandwelfarebenefitsandclaimsforitsemployees.

FiduciaryFundsFiduciary fund reporting focuses onnet position and changes in net position. Fiduciary funds areusedtoreportassetsheldinatrusteeoragencycapacityforothersandthereforecannotbeusedtosupport the District’s own programs. The fiduciary fund category includes pension (and otheremployeebenefit)trustfunds,investmenttrustfunds,private‐purposetrustfunds,andagencyfunds.TheDistrictmaintainsthefollowingfiduciaryfunds:

AgencyFunds:ThesefundsareusedtoaccountforassetsofothersforwhichtheDistrictactsasan agent. The "due to regulatory agencies" accountwithin the payroll clearing fund is used torecorddedicatedfundsforpayrollandrelatedexpenses.TheDistrictalsomaintainsstudentbodyfunds,whichareusedtoaccountfortheraisingandexpendingofmoneytopromotethegeneralwelfare, morale, and educational experience of the student body. The amounts reported forstudentbodyfundsrepresentthecombinedtotalsofallschoolswithintheDistrictthatmaintainastudentbodyfund.

26

TORRANCEUNIFIEDSCHOOLDISTRICTNotestoFinancialStatementsJune30,2017NOTE1–SUMMARYOFSIGNIFICANTACCOUNTINGPOLICIES(continued)B. BasisofPresentation,BasisofAccounting(continued)

2. MeasurementFocus,BasisofAccounting

Government‐Wide,Proprietary,andFiduciaryFundFinancialStatementsThe government‐wide, proprietary, and fiduciary fund financial statements are reported using theeconomicresourcesmeasurementfocusandtheaccrualbasisofaccounting.Revenuesarerecordedwhenearnedandexpensesarerecordedat thetime liabilitiesare incurred,regardlessofwhentherelated cash flows take place. Nonexchange transactions, inwhich theDistrict gives (or receives)valuewithoutdirectlyreceiving(orgiving)equalvalue inexchange, includepropertytaxes,grants,entitlements,anddonations. Onanaccrualbasis,revenuefrompropertytaxes isrecognizedinthefiscalyearinwhichalleligibilityrequirementshavebeensatisfied.GovernmentalFundFinancialStatementsGovernmental fundsarereportedusingthecurrent financialresourcesmeasurement focusandthemodifiedaccrualbasisofaccounting.Underthismethod,revenuesarerecognizedwhenmeasurableand available. Expenditures are recorded when the related fund liability is incurred, except forprincipalandinterestongenerallong‐termdebt,claimsandjudgments,andcompensatedabsences,whicharerecognizedasexpenditurestotheextenttheyhavematured.Capitalassetacquisitionsarereportedasexpendituresingovernmentalfunds. Proceedsofgenerallong‐termdebtandfinancingfromcapitalleasesarereportedasotherfinancingsources.

3. Revenues‐ExchangeandNon‐ExchangeTransactionsRevenue resulting from exchange transactions, in which each party gives and receives essentiallyequalvalue,isrecordedontheaccrualbasiswhentheexchangetakesplace. Onamodifiedaccrualbasis, revenue is recorded in the fiscal year in which the resources are measurable and becomeavailable. Available means that the resources will be collected within the current fiscal year.Generally, available is defined as collectiblewithin 60days. However, to achieve comparability ofreportingamongCaliforniadistrictsandsoasnot todistortnormalrevenuepatterns,withspecificrespect to reimbursement grants and corrections to state‐aid apportionments, the CaliforniaDepartment of Education has defined available for districts as collectible within one year. Thefollowing revenue sources are considered to be bothmeasurable and available at fiscal year‐end:Stateapportionments,interest,certaingrants,andotherlocalsources.Non‐exchangetransactions,inwhichtheDistrictreceivesvaluewithoutdirectlygivingequalvalueinreturn, includepropertytaxes,certaingrants,entitlements,anddonations. Revenuefrompropertytaxes isrecognized inthe fiscalyear inwhichthetaxesarereceived. Revenuefromcertaingrants,entitlements,anddonationsisrecognizedinthefiscalyearinwhichalleligibilityrequirementshavebeen satisfied. Eligibility requirements include time and purpose requirements. On a modifiedaccrual basis, revenue from non‐exchange transactions must also be available before it can berecognized.

27


C. BudgetaryData

The budgetary process is prescribed by provisions of the California Education Code and requires thegoverningboardtoholdapublichearingandadoptanoperatingbudgetnolaterthanJuly1ofeachyear.TheDistrictgoverningboardsatisfiedtheserequirements.Theadoptedbudgetissubjecttoamendmentthroughouttheyeartogiveconsiderationtounanticipatedrevenueandexpendituresprimarilyresultingfromeventsunknownatthetimeofbudgetadoptionwiththelegalrestrictionthatexpenditurescannotexceedappropriationsbymajorobjectaccount.

Theamountsreportedastheoriginalbudgetedamountsinthebudgetarystatementsreflecttheamountswhentheoriginalappropriationswereadopted.Theamountsreportedasthefinalbudgetedamountsinthebudgetarystatementsreflecttheamountsafterallbudgetamendmentshavebeenaccountedfor.Forbudgetpurposes,onbehalfpaymentshavenotbeen includedasrevenueandexpendituresasrequiredundergenerallyacceptedaccountingprinciples.

D. Encumbrances

Encumbranceaccounting isused inallbudgeted funds toreserveportionsofapplicableappropriationsforwhichcommitmentshavebeenmade.Encumbrancesarerecordedforpurchaseorders,contracts,andother commitmentswhen they arewritten. Encumbrances are liquidatedwhen the commitments arepaid.AllencumbrancesareliquidatedasofJune30.

E. Assets,DeferredOutflowsofResources,Liabilities,DeferredInflowsofResources,andNet

Position

1. CashandCashEquivalentsThe District considers cash and cash equivalents to be cash on hand and demand deposits. Inaddition, because theTreasuryPool is sufficiently liquid to permitwithdrawal of cash at any timewithoutpriornoticeorpenalty,equityinthepoolisalsodeemedtobeacashequivalent.

2. InventoriesandPrepaidItemsInventoriesarevaluedatcostusingthefirst‐in/first‐out(FIFO)method.Thecostsofgovernmentalfund‐typeinventoriesarerecordedasexpenditureswhenconsumedratherthanwhenpurchased.Certainpaymentstovendorsreflectcostsapplicabletofutureaccountingperiodsandarerecordedasprepaiditems.

3. CapitalAssetsPurchased or constructed capital assets are reported at cost or estimatedhistorical cost. Donatedcapital assets, donated works of art and similar items, and capital assets received in a serviceconcessionarrangementarereportedatacquisitionvalueratherthanfairvalue.Thecostofnormalmaintenanceandrepairsthatdonotaddtothevalueoftheassetormateriallyextendassets’livesarenotcapitalized.Capital assets are depreciated using the straight‐line method over the following estimated usefullives:

Description EstimatedLives

BuildingsandImprovements 20‐50yearsFurnitureandEquipment 15‐20yearsVehicles 8years

28

TORRANCEUNIFIEDSCHOOLDISTRICTNotestoFinancialStatementsJune30,2017NOTE1–SUMMARYOFSIGNIFICANTACCOUNTINGPOLICIES(continued)E. Assets, Deferred Outflows of Resources, Liabilities, Deferred Inflows of Resources, and Net

Position(continued)

4. UnearnedRevenueUnearned revenue arises when potential revenue does not meet both the "measurable" and"available" criteria for recognition in the current period or when resources are received by theDistrict prior to the incurrence of qualifying expenditures. In subsequent periods, when bothrevenue recognition criteria are met, or when the District has a legal claim to the resources, theliability for unearned revenue is removed from the combined balance sheet and revenue isrecognized.Certaingrantsreceivedthathavenotmeteligibilityrequirementsarerecordedasunearnedrevenue.On the governmental fund financial statements, receivables that will not be collected within theavailableperiodarealsorecordedasunearnedrevenue.

5. DeferredOutflows/InflowsofResourcesIn addition to assets, the statement of net position will sometimes report a separate section fordeferred outflows of resources. This separate financial statement element, deferred outflows ofresources,representsaconsumptionofnetpositionthatappliestoafutureperiodandsowillnotberecognizedasanoutflowofresources(expense/expenditure)untilthen.TheDistricthastwoitemsthatqualifyforreportinginthiscategory.Thefirstitemisrelatedtoitspensionplansasmorefullydescribed in the footnote entitled “Pension Plans”. The second is deferred amount on refunding,whichresultedfromthedifferenceinthecarryingvalueofrefundeddebtanditsreacquisitionprice.This amount is shown as deferred and amortized over the shorter of the life of the refunded orrefundingdebt.Inaddition to liabilities, the statementofnetpositionwill sometimes reporta separate section fordeferred inflows of resources. This separate financial statement element, deferred inflows ofresources, represents an acquisition of net position that applies to a future period andwill not berecognized as an inflow of resources (revenue) until that time. The District has one item thatqualifiesforreportinginthiscategory.ThatitemistorecognizetheDistrict'sproportionateshareofthedeferredinflowsofresourcesrelatedtoitspensionplansasmorefullydescribedinthefootnoteentitled"PensionPlans".

6. CompensatedAbsencesThe liability for compensated absences reported in the government‐wide statements consists ofunpaid, accumulated annual and sick leave balances. The liability has been calculated using thevestingmethod, inwhich leave amounts for both employeeswho currently are eligible to receivetermination payments and other employees who are expected to become eligible in the future toreceivesuchpaymentsuponterminationareincluded.

7. PensionsFor purposes of measuring the net pension liability and deferred outflows/inflows of resourcesrelated to pensions, and pension expense, information about the fiduciary net position of theDistrict’s California State Teachers Retirement System (CalSTRS) and California Public Employees’RetirementSystem(CalPERS)plansandadditionto/deductionsfromthePlans’fiduciarynetpositionhave been determined on the same basis as they are reported by CalSTRS and CalPERS. For thispurpose,benefitpayments(includingrefundsofemployeecontributions)arerecognizedwhendueandpayableinaccordancewiththebenefitterms.Investmentsarereportedatfairvalue.

29


Position(continued)

8. FundBalancesThefundbalanceforgovernmentalfundsisreportedinclassificationsbasedontheextenttowhichthegovernment isboundtohonorconstraintsonthespecificpurposesforwhichamounts inthosefundscanbespent.Nonspendable: Fund balance is reported as nonspendable when the resources cannot be spentbecausetheyareeitherinanonspendableformorlegallyorcontractuallyrequiredtobemaintainedintact.Resourcesinnonspendableformincludeinventoriesandprepaidassets.Restricted: Fund balance is reported as restricted when the constraints placed on the use ofresourcesareeitherexternallyimposedbycreditors,grantors,contributors,orlawsorregulationsofothergovernments;orimposedbylawthroughconstitutionalprovisionorbyenablinglegislation.Committed:TheDistrict’shighestdecision‐makinglevelofauthorityrestswiththeDistrict’sBoard.Fund balance is reported as committed when the Board passes a resolution that places specifiedconstraints on how resources may be used. The Board can modify or rescind a commitment ofresourcesthroughpassageofanewresolution.Assigned:ResourcesthatareconstrainedbytheDistrict’sintenttousethemforaspecificpurpose,but are neither restricted nor committed, are reported as assigned fund balance. Intent may beexpressedbyeithertheBoard,committees(suchasbudgetorfinance),orofficialstowhichtheBoardhasdelegatedauthority.Unassigned: Unassigned fund balance represents fund balance that has not been restricted,committed,orassignedandmaybeutilizedbytheDistrictforanypurpose.Whenexpendituresareincurred,andbothrestrictedandunrestrictedresourcesareavailable,itistheDistrict’spolicytouserestrictedresourcesfirst,thenunrestrictedresourcesintheorderofcommitted,assigned,andthenunassigned,astheyareneeded.

9. NetPosition

Net position is classified into three components: net investment in capital assets; restricted; andunrestricted.Theseclassificationsaredefinedasfollows: Net investment in capitalassets ‐ This component of net position consists of capital assets,

including restricted capital assets, net of accumulated depreciation and reduced by theoutstandingbalancesofanybonds,mortgages,notes,orotherborrowingsthatareattributabletothe acquisition, construction, or improvement of those assets. If there are significant unspentrelateddebtproceedsatyear‐end,theportionofthedebtattributabletotheunspentproceedsarenotincludedinthecalculationofnetinvestmentincapitalassets.Rather,thatportionofthedebtisincludedinthesamenetpositioncomponentastheunspentproceeds.

30


Position(continued)

9. NetPosition(continued)

Restricted ‐This componentofnetposition consistsof constraintsplacedonnetpositionusethroughexternal constraints imposedby creditors (suchas throughdebt covenants), grantors,contributors,orlawsorregulationsofothergovernmentsorconstraintsimposedbylawthroughconstitutionalprovisionsorenablinglegislation.

Unrestrictednetposition‐Thiscomponentofnetpositionconsistsofnetpositionthatdoesnotmeetthedefinitionof"netinvestmentincapitalassets"or"restricted".

Whenbothrestrictedandunrestrictedresourcesareavailableforuse,itistheDistrict’spolicytouserestrictedresourcesfirst,thenunrestrictedresourcesastheyareneeded.

F. MinimumFundBalancePolicy

TheDistricthasnotadoptedaformalminimumfundbalancepolicy,asrecommendedbyGASBStatementNo. 54; however, the District follows the guidelines recommended in the Criteria and Standards ofAssembly Bill (AB) 1200, which recommend a Reserve for Economic Uncertainties consisting ofunassigned amounts equal to no less than threepercent of total General Fund expenditures andotherfinancinguses.Whenanexpenditureisincurredforpurposesforwhichbothrestrictedandunrestrictedfundbalanceisavailable, the District considers restricted funds to have been spent first. When an expenditure isincurredforwhichcommitted,assigned,orunassignedfundbalancesareavailable,theDistrictconsidersamounts to have been spent first out of committed funds, then assigned funds, and finally unassignedfunds, asneededunless thegoverningboardhasprovidedotherwise in its commitmentorassignmentactions.

G. UseofEstimates

The preparation of financial statements in conformity with generally accepted accounting principlesrequiresmanagementtomakeestimatesandassumptionsthataffectthereportedamountsofassetsandliabilitiesanddisclosureofcontingentassetsandliabilitiesatthedateofthefinancialstatementsandthereportedamountsofrevenuesandexpendituresduringthereportingperiod.Actualresultscoulddifferfromthoseestimates.

H. PropertyTaxCalendar

The County is responsible for the assessment, collection, and apportionment of property taxes for alljurisdictions including the schools and special districts within the County. The Board of Supervisorslevies property taxes as of September 1 on property values assessed on July 1. Secured property taxpaymentsaredueintwoequalinstallments.ThefirstisgenerallydueNovember1andisdelinquentwithpenaltiesonDecember10,andthesecondisgenerallydueonFebruary1andisdelinquentwithpenaltiesonApril10.SecuredpropertytaxesbecomealienonthepropertyonJanuary1.

31

TORRANCEUNIFIEDSCHOOLDISTRICTNotestoFinancialStatementsJune30,2017NOTE1–SUMMARYOFSIGNIFICANTACCOUNTINGPOLICIES(continued)I. NewGASBPronouncements

Duringthe2016‐17fiscalyear,thefollowingGASBPronouncementsbecameeffective:1. StatementNo.73,AccountingandFinancialReportingforPensionsandRelatedAssetsThatAre

NotWithin the Scope of GASB Statement 68, and Amendments to Certain Provisions of GASBStatements67and68(Issued06/15)The requirements of this Statement extend the approach to accounting and financial reportingestablished in Statement 68 to all pensions, with modifications as necessary to reflect that foraccountingandfinancialreportingpurposes,anyassetsaccumulatedforpensionsthatareprovidedthrough pension plans that are not administered through trusts thatmeet the criteria specified inStatement68shouldnotbeconsideredpensionplanassets.Italsorequiresthatinformationsimilarto that required by Statement 68 be included in notes to financial statements and requiredsupplementary information by all similarly situated employers and nonemployer contributingentities.

2. StatementNo.74,FinancialReporting forPostemploymentBenefitPlansOtherThanPensionPlans(Issued06/15)This Statement replaces Statements No. 43, Financial Reporting for Postemployment Benefit PlansOtherThanPensionPlans,asamended,andNo.57,OPEBMeasurementsbyAgentEmployersandAgentMultiple‐EmployerPlans. StatementNo.75,AccountingandFinancialReporting forPostemploymentBenefitsOtherThanPensions, establishes new accounting and financial reporting requirements forgovernments whose employees are provided with OPEB, as well as for certain nonemployergovernments that have a legal obligation to provide financial support for OPEB provided to theemployeesofotherentities. ThescopeofthisStatementincludesOPEBplans–definedbenefitanddefinedcontribution–administeredthroughtruststhatmeetthefollowingcriteria:

ContributionsfromemployersandnonemployercontributingentitiestotheOPEBplanandearningsonthosecontributionsareirrevocable.

OPEBplanassetsarededicatedtoprovidingOPEBtoplanmembersinaccordancewiththebenefitterms.

OPEB plan assets are legally protected from the creditors of employers, nonemployercontributingentities,andtheOPEBplanadministrator.IftheplanisadefinedbenefitOPEBplan,planassetsalsoarelegallyprotectedfromcreditorsoftheplanmembers.

3. StatementNo.77,TaxAbatementDisclosures(Issued08/15)

For financial reporting purposes, this Statement defines a tax abatement as resulting from anagreementbetweenagovernmentandanindividualorentityinwhichthegovernmentpromisestoforgotaxrevenuesandtheindividualorentitypromisestosubsequentlytakeaspecificactionthatcontributes to economic development or otherwise benefits the government or its citizens. ThisStatementrequiresdisclosureoftaxabatementinformationabout(1)areportinggovernment’sowntaxabatementagreements,and(2)thosethatareenteredintobyothergovernmentsandthatreducethereportinggovernment’staxrevenues.

4. Statement No. 78, Pensions Provided Through Certain Multiple‐Employer Defined BenefitPensionPlans(Issued12/15)ThisStatementamendsthescopeandapplicabilityofStatement68toexcludepensionsprovidedtoemployees of state or local governmental employers through a cost‐sharing multiple‐employerdefinedbenefitpensionplanthat(1)isnotastateorlocalgovernmentalpensionplan,(2)isusedtoprovidedefinedbenefitpensionsbothtoemployeesofstateorlocalgovernmentalemployersandto

32

TORRANCEUNIFIEDSCHOOLDISTRICTNotestoFinancialStatementsJune30,2017NOTE1–SUMMARYOFSIGNIFICANTACCOUNTINGPOLICIES(continued)I. NewGASBPronouncements(continued)

4. StatementNo.78(continued)employees of employers that are not state or local governmental employers, and (3) has nopredominant state or local governmental employer (either individually or collectively with otherstateorlocalgovernmentalemployersthatprovidepensionsthroughthepensionplan).

5. StatementNo.80,BlendingRequirementsforCertainComponentUnits–AnAmendmentofGASB

StatementNo.14(Issued01/16)This Statement amends the blending requirements for the financial statement presentation ofcomponentunitsofallstateandlocalgovernments. Theadditionalcriterionrequiresblendingofacomponentunitincorporatedasanot‐for‐profitcorporationinwhichtheprimarygovernmentisthesolecorporatemember.

6. StatementNo.82,PensionIssues–AnAmendmentofGASBStatementsNo.67,No.68,andNo.73

(Issued03/16)The objective of this Statement is to address certain issues that have been raisedwith respect toStatementsNo.67,FinancialReportingforPensionPlans,No.68,AccountingandFinancialReportingforPensions,andNo.73,AccountingandFinancialReportingforPensionsandRelatedAssetsThatAreNotwithintheScopeofGASBStatement68,andAmendmentstoCertainProvisionsofGASBStatements67and68. Specifically, this Statement addresses issues regarding (1) the presentation of payroll‐relatedmeasures in required supplementary information, (2) the selectionofassumptionsand thetreatmentofdeviationsfromtheguidanceinanActuarialStandardofPracticeforfinancialreportingpurposes, and (3) the classification of payments made by employers to satisfy employee (planmember)contributionrequirements.

NOTE2–CASHANDINVESTMENTSCashandinvestmentsatJune30,2017,arereportedatfairvalueandconsistedofthefollowing:

RatingGovernmental

FundsProprietary

Fund TotalFiduciaryFunds

PooledFunds:CashinCountyTreasury 296,625,546$ 19,921,901$ 316,547,447$ ‐$

TotalPooledFunds 296,625,546 19,921,901 316,547,447 ‐

Deposits:Cashonhandandinbanks 1,897,428 ‐ 1,897,428 2,486,109Cashinrevolvingfund 70,000 ‐ 70,000 ‐

TotalDeposits 1,967,428 ‐ 1,967,428 2,486,109

TotalCash 298,592,974$ 19,921,901$ 318,514,875$ 2,486,109$

Investments:MoneyMarketFunds N/A 241$ ‐$ 241$CommercialPaper A‐1 1,514,598 ‐ 1,514,598

1,514,839$ ‐$ 1,514,839$


33

TORRANCEUNIFIEDSCHOOLDISTRICTNotestoFinancialStatementsJune30,2017NOTE2–CASHANDINVESTMENTS(continued)

InvestmentsecurityratingsreportedasofJune30,2017,aredefinedbyStandardandPoors.

PooledFundsIn accordancewithEducationCodeSection41001, theDistrictmaintains substantiallyallof its cash in theCounty Treasury. The County pools and invests the cash. These pooled funds are carried at cost whichapproximatesfairvalue.Interestearnedisdepositedannuallytoparticipatingfunds.Anyinvestmentlossesareproportionatelysharedbyallfundsinthepool.Because theDistrict’s deposits aremaintained in a recognizedpooled investment fundunder the careof athirdpartyandtheDistrict’sshareofthepooldoesnotconsistofspecific,identifiableinvestmentsecuritiesownedbytheDistrict,nodisclosureoftheindividualdepositsandinvestmentsorrelatedcustodialcreditriskclassificationsisrequired.Inaccordancewithapplicablestate laws, theCountyTreasurermay invest inderivativesecuritieswith theState of California. However, at June 30, 2017, the County Treasurer has represented that the PooledInvestmentFundcontainednoderivativesorotherinvestmentswithsimilarriskprofiles.CustodialCreditRisk–DepositsCustodialcreditriskistheriskthatintheeventofabankfailure,theDistrict’sdepositsmaynotbereturnedtoit.TheDistrictdoesnothaveapolicyforcustodialcreditriskfordeposits.Cashbalancesheldinbanksareinsuredupto$250,000bytheFederalDepositoryInsuranceCorporation(FDIC)andarecollateralizedbytherespective financial institutions. In addition, the California Government Code requires that a financialinstitutionsecuredepositsmadebyStateorlocalgovernmentalunitsbypledgingsecuritiesinanundividedcollateralpoolheldbyadepositoryregulatedunderStatelaw(unlesssowaivedbythegovernmentalunit).Themarketvalueofthepledgedsecuritiesinthecollateralpoolmustequalatleast110percentofthetotalamount deposited by the public agencies. California law also allows financial institutions to secure publicdeposits by pledging first trust deedmortgage notes having a value of 150 percent of the secured publicdepositsandlettersofcredit issuedbytheFederalHomeLoanBankofSanFranciscohavingavalueof105percentofthesecureddeposits.AsofJune30,2017,$4,684,404oftheDistrict'sbankbalancewasexposedtocustodialcreditriskbecauseitwasuninsuredandcollateralizedwithsecuritiesheldbythepledgingfinancialinstitution'strustdepartmentoragency,butnotinthenameoftheDistrict.Investments‐InterestRateRiskTheDistrict’sinvestmentpolicylimitsinvestmentmaturitiesasameansofmanagingitsexposuretofairvaluelossesarisingfromincreasinginterestrates.TheDistrict’sinvestmentpolicylimitsinvestmentpurchasestoinvestmentswithatermnottoexceedthreeyears.InvestmentspurchasedwithmaturitytermsgreaterthanthreeyearsrequireapprovalbytheBoardofEducation.InvestmentspurchasedwithmaturitiesgreaterthanoneyearrequirewrittenapprovalbytheSuperintendentpriortocommitment.

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TORRANCEUNIFIEDSCHOOLDISTRICTNotestoFinancialStatementsJune30,2017

NOTE2–CASHANDINVESTMENTS(continued)

MaturitiesofinvestmentsheldatJune30,2017,consistofthefollowing:

Investments:MoneyMarketFunds N/A 241$ ‐$ 241$CommercialPaper A‐1 1,514,598 ‐ 1,514,598

1,514,839$ ‐$ 1,514,839$

Investments‐CreditRiskTheDistrict’s investmentpolicy limits investmentchoices toobligationsof local, stateand federalagencies,commercialpaper,certificatesofdeposit, repurchaseagreements,corporatenotes,bankeracceptances,andother securities allowed by State Government Code Section 53600. At June 30, 2017, all investmentsrepresented governmental securitieswhichwere issued, registered and held by the District’s agent in theDistrict’sname.Investments‐ConcentrationofCreditRiskTheDistrictdoesnotplacelimitsontheamountitmayinvestinanyoneissuer.AtJune30,2017,theDistricthadthefollowinginvestmentsthatrepresentsmorethanfivepercentoftheDistrict’snetinvestments.

CommercialPaper 100.0% NOTE3–ACCOUNTSRECEIVABLEAccountsreceivableasofJune30,2017,consistedofthefollowing:

GeneralFund

BuildingFund


Funds TotalSelf‐Insurance

FundFederalGovernment:Categoricalaidprograms 925,539$ ‐$ 841,670$ 1,767,209$ ‐$

StateGovernment:Lottery 1,006,051 ‐ ‐ 1,006,051 ‐Categoricalaidprograms 3,287,601 ‐ 453,475 3,741,076 ‐

Local:Interest 222,548 1,089,233 ‐ 1,311,781 25,057Otherlocalrevenue 1,013,962 ‐ 281,302 1,295,264 612,605

Total 6,455,701$ 1,089,233$ 1,576,447$ 9,121,381$ 637,662$

ProprietaryFundGovernmentalFunds

35

TORRANCEUNIFIEDSCHOOLDISTRICTNotestoFinancialStatementsJune30,2017NOTE4–INTERFUNDACTIVITIESBalancesDueTo/FromOtherFundsBalancesdueto/fromotherfundsatJune30,2017,consistedofthefollowing:GeneralFundduetoCafeteriaFundfortemporarycashtransferandpaymentofindirectcosts 621,223$CafeteriaFundduetotheGeneralFundforindirectcosts 399,371

Total 1,020,594$

NOTE5–FUNDBALANCESAtJune30,2017,fundbalancesoftheDistrict’sgovernmentalfundswereclassifiedasfollows:

BondInterest Non‐Major

General Building andRedemption GovernmentalFund Fund Fund Funds Total

Nonspendable:RevolvingCash 60,000$ ‐$ ‐$ 10,000$ 70,000$Stores 446,702 ‐ ‐ 97,090 543,792PrepaidExpenditures 74,040 ‐ ‐ ‐ 74,040

TotalNonspendable 580,742 ‐ ‐ 107,090 687,832Restricted:

Categoricalprograms 7,720,605 ‐ ‐ 153,533 7,874,138Foodserviceprogram ‐ ‐ ‐ 2,234,778 2,234,778Capitalprojects ‐ 185,835,196 ‐ 1,028,887 186,864,083Debtservice ‐ ‐ 29,017,446 ‐ 29,017,446

TotalRestricted 7,720,605 185,835,196 29,017,446 3,417,198 225,990,445Committed:

Adulteducationprogram ‐ ‐ ‐ 336,652 336,652Deferredmaintenanceprogram ‐ ‐ ‐ 132,161 132,161

TotalCommitted ‐ ‐ ‐ 468,813 468,813Assigned:

Studentachievement,textbooks,one‐timefunding 11,153,885 ‐ ‐ ‐ 11,153,885QZAB 1,514,840 ‐ ‐ ‐ 1,514,840Targetedstudentgroups 4,610,830 ‐ ‐ ‐ 4,610,830Adulteducation 3,580,614 ‐ ‐ ‐ 3,580,614Otherassignments ‐ ‐ ‐ 229,379 229,379

TotalAssigned 20,860,169 ‐ ‐ 229,379 21,089,548Unassigned:

Reserveforeconomicuncertainties 20,600,840 ‐ ‐ ‐ 20,600,840TotalUnassigned 20,600,840 ‐ ‐ ‐ 20,600,840

Total 49,762,356$ 185,835,196$ 29,017,446$ 4,222,480$ 268,837,478$

36

TORRANCEUNIFIEDSCHOOLDISTRICTNotestoFinancialStatementsJune30,2017NOTE6–CAPITALASSETSANDDEPRECIATIONCapitalassetactivityfortheyearendedJune30,2017,wasasfollows:

Balance, Balance,July1,2016 Additions Retirements June30,2017

Capitalassetsnotbeingdepreciated:Land 1,711,069$ ‐$ ‐$ 1,711,069$Constructioninprogress 76,767,489 76,001,659 41,376,725 111,392,423

Totalcapitalassetsnotbeingdepreciated 78,478,558 76,001,659 41,376,725 113,103,492Capitalassetsbeingdepreciated:

Buildings&Improvements 379,966,210 41,969,444 ‐ 421,935,654Equipment 13,114,797 838,906 ‐ 13,953,703

Totalcapitalassetsbeingdepreciated 393,081,007 42,808,350 ‐ 435,889,357Accumulateddepreciationfor:

Buildings&Improvements (104,316,992) (9,015,331) ‐ (113,332,323)Equipment (9,148,506) (603,846) ‐ (9,752,352)

Totalaccumulateddepreciation (113,465,498) (9,619,177) ‐ (123,084,675)Totalcapitalassetsbeingdepreciated,net 279,615,509 33,189,173 ‐ 312,804,682

Governmentalactivitycapitalassets,net 358,094,067$ 109,190,832$ 41,376,725$ 425,908,174$

NOTE7–GENERALLONG‐TERMDEBTChangesinlong‐termdebtfortheyearendedJune30,2017,wereasfollows:

Balance, Balance, AmountsDueJuly1,2016 Additions Deductions June30,2017 WithinOneYear

GeneralObligationBonds:Principalrepayments 424,988,171$ 94,295,000$ 42,933,716$ 476,349,455$ 11,759,610$Accretedinterestcomponent 16,499,382 4,512,232 271,284 20,740,330 600,390Unamortizedissuancepremium 27,912,696 5,520,836 1,784,859 31,648,673 1,889,232Total‐Bonds 469,400,249 104,328,068 44,989,859 528,738,458 14,249,232QualifiedZoneAcademyBond 2,320,000 ‐ ‐ 2,320,000 ‐CapitalLeases 5,053,812 ‐ 1,163,269 3,890,543 1,032,130CompensatedAbsences 3,019,060 49,143 ‐ 3,068,203 ‐OtherPostemploymentBenefits 1,889,774 ‐ 90,024 1,799,750 ‐ClaimsPayable 11,922,000 ‐ ‐ 11,922,000 ‐

Totals 493,604,895$ 104,377,211$ 46,243,152$ 551,738,954$ 15,281,362$

PaymentsforgeneralobligationbondsaremadebytheBondInterestandRedemptionFund.Capitalleasespaymentsaremadeby theGeneralFund. Accumulatedvacationwillbepaid forby the fund forwhich theemployeeworked.

37

TORRANCEUNIFIEDSCHOOLDISTRICTNotestoFinancialStatementsJune30,2017NOTE7–GENERALLONG‐TERMDEBT(continued)A. GeneralObligationBonds

TheDistricthasissuedgeneralobligationbondsunderdifferentvoter‐approvedmeasures,asdescribedbelow. Bondsarepayablesolely fromadvaloremtaxestobe leviedwithintheDistrictpursuanttotheCaliforniaConstitutionandotherstatelaw.TheBoardofSupervisorsoftheCountyisempoweredandisobligatedtolevyadvaloremtaxesuponallpropertysubjecttotaxationbytheDistrict,withoutlimitationas to rate or amount (except as to certainpersonal propertywhich is taxable at limited rates), for thepaymentofprincipalofandinterestontheBonds.Electionof2008(MeasuresYandZ)AtanelectionheldonNovember4,2008, theDistrictreceivedauthorizationunderMeasureY, to issuebonds in an aggregate principal amount not to exceed $265,000,000 to finance critical core facilityimprovements, and under Measure Z, to issue bonds in an aggregate principal amount not to exceed$90,000,000tofinanceselectedadditionalfacilityimprovements.Eachmeasurerequiredapprovalbyatleast55%ofthevotescastbyeligiblevoterswithintheDistrict.MeasureYreceivedanapprovalvoteofapproximately74.13%,andMeasureZreceivedanapprovalvoteofapproximately71.23%. BuildAmericaBondsAportionoftheMeasureYbondsweredesignated“BuildAmericaBonds”forpurposesoftheAmericanRecoveryandReinvestmentActof2009(the“RecoveryAct”).PursuanttotheRecoveryAct,theDistrictreceivedacashsubsidypaymentfromtheUnitedStatesTreasuryequalto35%oftheinterestpayableontheBondsonorabouteachinterestpaymentdate.Thecashpaymentdidnotconstitutea full faithandcreditguaranteeoftheUnitedStatesGovernment,butwasrequiredtobepaidbytheTreasuryundertheRecoveryAct.TheDistrictwasobligatedtodepositanycashsubsidypaymentsitreceivesintothedebtservicefundfortheBonds.AsofJune30,2017,thesebondswererefunded.QualifiedSchoolConstructionBondsAnotherportionoftheMeasureYbondswasissuedas“qualifiedschoolconstructionbonds”asdefinedinSection 54F of the Internal Revenue Code of 1986 (the “Code”) and as “specified tax credit bonds” asdefinedinSection6431(f)(2)oftheCode.TheDistrictexpectstoreceiveacashsubsidypaymentfromtheUnitedStatesTreasuryontheBondsequaltothelesserof(i)100%ofthetaxcreditratepostedbytheInternal Revenue Service and applicable to the Bonds or (ii) the interest due on such Bonds on eachinterestdateonorabouteachinterestdatefortheBonds.TheSubsidydoesnotconstituteafullfaithandcreditguaranteeoftheUnitedStateswithrespecttotheBonds,butisrequiredtobepaidbytheTreasuryunder the Code. Any Subsidy payments received by the District are required to be deposited into theinterestandsinkingfundoftheDistrictwithintheCountytreasury.Electionof2014(MeasuresTandU) AtanelectionheldonNovember4,2014, theDistrict receivedauthorizationunderMeasureT to issuebondsinanaggregateprincipalamountnottoexceed$144,300,000tofinanceschoolsafety,securityandtechnology improvements. Measure T required approval by at least 55% of the votes cast by eligiblevoterswithintheDistrictandreceivedanapprovalvoteofapproximately66.56%.

38

TORRANCEUNIFIEDSCHOOLDISTRICTNotestoFinancialStatementsJune30,2017NOTE7–GENERALLONG‐TERMDEBT(continued)A. GeneralObligationBonds

Electionof2014(MeasuresTandU)(continued) AtanelectionheldonNovember4,2014, theDistrictreceivedauthorizationunderMeasureU to issuebonds in an aggregate principal amount not to exceed $50,000,000 to finance physical education andcommunityrecreationimprovements.MeasureUrequiredapprovalbyatleast55%ofthevotescastbyeligiblevoterswithintheDistrictandreceivedanapprovalvoteofapproximately61.92%.RefundingIssues2011GeneralObligationRefundingBondsOnMarch31, 2011, theDistrict issued $1,940,000ofGeneralObligationRefundingBonds. ThebondswereissuedtoadvancerefundaportionofthepreviouslyissuedMeasureR,SeriesBbonds.2015GeneralObligationRefundingBondsOnFebruary26,2015,theDistrictissued$56,210,000ofGeneralObligationRefundingBonds.Thebondsbear fixed interest rates ranging between2.0%and5.0%with annualmaturities fromAugust1, 2015throughAugust1,2033. Thenetproceedsof$65,161,106(afterpremiumsof$9,413,207and issuancecostsandunderwriter’sdiscountof$451,022)wereusedtoprepayaportionoftheDistrict’soutstandingMeasure Y Series 2009 Bonds, Measure Z Series 2009 Bonds, and Measure Y Series 2009B‐1 Bonds.Deferred amounts on refunding as of June 30, 2017, of $5,047,958 remain to be amortized for thisrefunding. As of June 30, 2017, the principal balance outstanding on the defeased debt amounted to$55,150,000.2016RefundingGeneralObligationBondsOnAugust30,2016, theDistrict issued$32,995,000ofGeneralObligationRefundingBonds.Thebondsbear fixed interest rates ranging between2.0%and4.0%with annualmaturities fromAugust1, 2020through August 1, 2034. The net proceeds of $32,981,074 (after premiums of $291,986 and issuancecostsof$305,892)wereusedtoprepayaportionoftheDistrict’soutstandingElectionof2008(MeasureY),Series2009B‐2BuildAmericaBonds.ThenetproceedswereusedtopurchaseU.S.governmentsecurities.Thosesecuritiesweredepositedintoan irrevocabletrustwithanescrowagenttoprovide for futuredebtservicepaymentsontherefundedbonds. As a result, the refundedbonds are considered tobedefeased, and the related liability for thebondshasbeenremovedfromtheDistrict'sliabilities.Amountspaidtotheescrowagentinexcessoftheoutstandingdebtatthetimeofpaymentarerecordedasdeferredamountsonrefundingonthestatementofnetpositionandareamortizedtointerestexpenseoverthelifeoftheliability. Deferredamountsonrefundingasof June30,2017of $1,871,034 remain tobeamortized for this refunding. Asof June30,2017,theprincipalbalanceoutstandingonthedefeaseddebtamountedto$31,000,000.The refunding decreased the District's total debt service payments by $5,612,167. The transactionresultedinaneconomicgain(differencebetweenthepresentvalueofthedebtserviceontheoldandthenewbonds)of$4,034,021.

39

TORRANCEUNIFIEDSCHOOLDISTRICTNotestoFinancialStatementsJune30,2017NOTE7–GENERALLONG‐TERMDEBT(continued)A. GeneralObligationBonds(continued)

Asummaryofoutstandingbondsisshownbelow:

Issue Maturity Interest Original Balance, Balance,Series Date Date Rate Issue July1,2016 Issued Redeemed June30,2017RefundingBonds2015 2/26/2015 8/1/2033 2.0%‐4.0% 56,210,000$ 55,815,000$ ‐$ 290,000$ 55,525,000$2016 8/30/2016 8/1/2034 2.0%‐5.0% 32,995,000 ‐ 32,995,000 ‐ 32,995,000

SubtotalRefundingBonds 55,815,000 32,995,000 290,000 88,520,000MeasureY(2008)2009 2/5/2009 8/1/2033 1.8%‐6.0% 58,000,000 7,430,000 ‐ 2,200,000 5,230,000

2009B‐1 10/29/2009 8/1/2026 3.0%‐5.25% 23,604,106 13,754,106 ‐ 1,500,000 12,254,1062009B‐2 10/29/2009 8/1/2034 7.10% 31,000,000 31,000,000 ‐ 31,000,000 ‐2011A 4/14/2011 8/1/2018 N/A 2,014,993 1,339,846 ‐ 328,716 1,011,1302011B 4/14/2011 2/1/2026 5.52%‐6.21% 25,000,000 25,000,000 ‐ ‐ 25,000,0002014 2/27/2014 8/1/2039 3.0%‐5.0% 60,003,937 60,003,937 ‐ 1,300,000 58,703,9372016 2/10/2016 8/1/2039 2.0%‐5.0% 65,375,000 65,375,000 ‐ ‐ 65,375,000

SubtotalMeasureY 203,902,889 ‐ 36,328,716 167,574,173MeasureZ(2008)2009 2/5/2009 8/1/2033 4.0%‐6.0% 36,000,000 3,975,000 ‐ 1,300,000 2,675,000

2009B‐1 10/29/2009 8/1/2034 3.0%‐4.0% 18,920,282 18,220,282 ‐ 675,000 17,545,2822014 2/27/2014 8/1/2035 1.5%‐5.0% 35,075,000 35,075,000 ‐ 50,000 35,025,000

SubtotalMeasureZ 57,270,282 ‐ 2,025,000 55,245,282MeasureT(2014)2015 2/26/2015 8/1/2040 2.0%‐5.0% 73,000,000 73,000,000 ‐ 2,940,000 70,060,0002016 12/8/2016 8/1/2042 4.0%‐5.25% 46,300,000 ‐ 46,300,000 ‐ 46,300,000

SubtotalMeasureT 73,000,000 46,300,000 2,940,000 116,360,000MeasureU(2014)2015 2/26/2015 8/1/2040 2.0%‐5.0% 35,000,000 35,000,000 ‐ 1,350,000 33,650,0002016 12/8/2016 8/1/2041 3.5%‐5.25% 15,000,000 15,000,000 ‐ 15,000,000

SubtotalMeasureU 35,000,000 15,000,000 1,350,000 48,650,000Total 424,988,171$ 94,295,000$ 42,933,716$ 476,349,455$

MeasureY,Series2009B‐1 4,799,043$ 1,138,394$ ‐$ 5,937,437$MeasureY,Series2011A 970,721 242,891 271,284 942,328MeasureY,Series2014 2,689,140 1,498,414 ‐ 4,187,554

MeasureZ,Series2009B‐1 8,040,478 1,632,533 ‐ 9,673,01116,499,382$ 4,512,232$ 271,284$ 20,740,330$

AccretedInterest

The annual requirements to amortize all general obligation bonds payable outstanding as of June 30,2017,areasfollows:

FiscalYear Principal Interest Total2017‐18 11,759,610$ 18,737,412$ 30,497,022$2018‐19 13,081,520 18,193,474 31,274,9942019‐20 9,915,192 17,891,558 27,806,7502020‐21 8,383,960 18,702,697 27,086,6572021‐22 18,280,000 16,359,882 34,639,8822022‐27 70,328,533 95,636,038 165,964,5712027‐32 87,454,392 89,850,852 177,305,2442032‐37 126,087,763 74,919,749 201,007,5122037‐42 120,178,485 16,186,053 136,364,5382042‐43 10,880,000 217,600 11,097,600

Total 476,349,455$ 366,695,315$ 843,044,770$

40

TORRANCEUNIFIEDSCHOOLDISTRICTNotestoFinancialStatementsJune30,2017NOTE7–GENERALLONG‐TERMDEBT(continued)B. CapitalLeases

TheDistrictleasesequipmentandbussesvaluedat$8,498,076underagreementsthatprovidefortitletopassuponexpirationoftheleaseperiodandwheretheleasetermismostoftheequipment’susefullife.

FiscalYear Principal Interest Total

2017‐18 1,032,130$ 102,849$ 1,134,979$2018‐19 993,490 74,910 1,068,4002019‐20 920,412 48,828 969,2402020‐21 944,511 24,729 969,240

Total 3,890,543$ 251,316$ 4,141,859$

TheDistrictwillreceivenosubleaserentalrevenuesnorpayanycontingentrentalsfortheequipment.

C. QualifiedZoneAcademyBondTheDistrictobtainedan interest freeQualifiedZoneAcademyBond (QZAB) inSeptember,2005 in theamount of $2,320,000 for the purpose of acquiring equipment and making improvements to variousschool sites. TheQZABwillmature in September 2021. The terms of the agreement are such that theDistrictdeposits$124,372annuallyintoasinkingfundheldwithU.S.Bank,(theCustodian),commencingSeptember, 2006. Thedeposit and interest earnedwill be held by theCustodian as collateral until thepaymentofthedebtonthematuritydate.ThefundsondepositwiththeCustodianwillbeinvestedsuchthat theoriginaldepositand interestearned isprojected tobesufficient to repay thedebt in fulluponmaturity. The amount ondeposit in the sinking fund is reported as a restricted investment (cashwithfiscal agent) on the government‐wide statement of net position. During the fiscal year, $124,372wasdepositedintothesinkingfundandthebalanceasofJune30,2017,was$1,486,830.Leasepaymentswillberequiredasfollows:

FiscalYear

EndingJune30, Principal2018 ‐$2019 ‐2020 ‐2021 ‐2022 ‐2023 2,320,000

Total 2,320,000$

D. ClaimsPayable

Thirdpartyadministratorsprovidedataonestimatedclaimliabilities(paidandreserves).AsofJune30,2017, the estimated outstanding liability was $11,922,000 for workers’ compensation. Such amountswerecalculatedbaseduponanoutsideactuarialvaluationasofJune2015,andhavebeenaccruedintheaccompanyinggovernment‐wide financialstatements.TheDistrict’s liability forclaimspayable isbasedon claims reserves established by the claims administrators and actuarial studies. The claims liabilityincludesanallowanceforincurred,butnotreportedlosses.

41

TORRANCEUNIFIEDSCHOOLDISTRICTNotestoFinancialStatementsJune30,2017NOTE8–RISKMANAGEMENTPropertyandLiabilityTheDistrictisexposedtovariousrisksoflossrelatedtotorts;theftof,damageto,anddestructionofassets;errorsandomissions; injuriestoemployeesandnaturaldisasters. DuringfiscalyearendingJune30,2017,TorranceUnifiedSchoolDistrictwasself‐insuredforpropertyandliabilitylosses.Theself‐insuredretention(SIR)amountfortheDistrictis$100,000.TheDistrictpurchasesexcessliabilitycoveragefromCSACupto$5millionandparticipates in theSELF JPA forclaimsover$5million. TheDistrictpurchasesexcesspropertycoverageupto$1billion.Workers’CompensationForfiscalyear2017,theDistrictwasself‐fundedforworkerscompensation,withexcesscoverageforclaimsover$1millionpurchasedfromacommercialcarrier.EmployeeMedicalBenefitsTheDistricthasaself‐fundedprogramformedicalanddentalbenefits.ClaimsLiabilityThe District records an estimated liability for workers’ compensation claims against the District. Claimsliabilitiesarebasedonestimatesof theultimatecostofreportedclaims(including futureclaimadjustmentexpenses)andanestimateforclaimsincurredbutnotreportedbasedonhistoricalexperience.UnpaidClaimsLiabilitiesTheDistrictestablishesaliabilityforbothreportedandunreportedevents,whichincludesestimatesofbothfuturepaymentsoflossesandrelatedclaimadjustmentexpenses.ThefollowingrepresentthechangesinapproximateaggregateliabilitiesfortheDistrictfromJuly1,2015toJune30,2017:

LiabilityBalance,June30,2015 198,000$Claimsandchangesinestimates 19,042,132Claimspayments (19,042,132)

LiabilityBalance,June30,2016 198,000Claimsandchangesinestimates 19,284,676Claimspayments (19,284,676)

LiabilityBalance,June30,2017 198,000$

AssetsavailabletopayclaimsatJune30,2017 20,559,563$

Medical,Dental,Property&Liability

NOTE9–COMMITMENTSANDCONTINGENCIESA. StateandFederalAllowances,Awards,andGrants

TheDistricthasreceivedstateandfederalfundsforspecificpurposesthataresubjecttoreviewandauditbythegrantoragencies.Althoughsuchauditscouldgenerateexpendituredisallowancesundertermsofthegrants,itisbelievedthatanyrequiredreimbursementwillnotbematerial.

42

TORRANCEUNIFIEDSCHOOLDISTRICTNotestoFinancialStatementsJune30,2017NOTE9–COMMITMENTSANDCONTINGENCIES(continued)

B. ConstructionCommitments

At June 30, 2017, the District had commitments with respect to unfinished capital projects ofapproximately$65.6milliontobepaidfromacombinationofStateandlocalfunds.

C. Litigation

The District is involved in certain legalmatters that arose out of the normal course of business. TheDistrict has not accrued a liability for any potential litigation against it because it does not meet thecriteriatobeconsideredaliabilityatJune30.

NOTE10–PENSIONPLANSQualified employees are covered under multiple‐employer defined benefit pension plans maintained byagencies of the State of California. Certificated employees are members of the California State Teachers’Retirement System (CalSTRS), and classified employees are members of California Public Employees’RetirementSystem(CalPERS).A. GeneralInformationaboutthePensionPlans

PlanDescriptionsThe District contributes to the California State Teachers’ Retirement System (CalSTRS), a cost‐sharingmultiple‐employer public employee retirement system defined benefit pension plan administered byCalSTRS. Benefit provisions under the Plan are established by State statute and District resolution.CalSTRS issues publicly available reports that include a full description of the pension plan regardingbenefitprovisions,assumptions,andmembershipinformationthatcanbefoundontheCalSTRSwebsite.

The District also contributes to the School Employer Pool under the California Public Employees’Retirement System (CalPERS), a cost‐sharing multiple‐employer public employee retirement systemdefinedbenefitpensionplanadministeredbyCalPERS.BenefitprovisionsunderthePlanareestablishedby State statute and District resolution. CalPERS issues publicly available reports that include a fulldescriptionofthepensionplanregardingbenefitprovisions,assumptions,andmembershipinformationthatcanbefoundontheCalPERSwebsite.

BenefitsProvidedCalSTRSprovidesretirement,disability,anddeathbenefits.Retirementbenefitsaredeterminedas2%offinalcompensationforeachyearofcreditedserviceatage60formembersunderCalSTRS2%at60,orage62formembersunderCalSTRS2%at62, increasingtoamaximumof2.4%atage63formembersunder CalSTRS 2% at 60, or age 65 for members under CalSTRS 2% at 62. The normal retirementeligibilityrequirementsareage60formembersunderCalSTRS2%at60,orage62formembersunderCalSTRS2%at62,withaminimumoffiveyearsofservicecreditedundertheDefinedBenefitProgram,whichcanincludeservicepurchasedfromteachinginanout‐of‐stateorforeignpublicschool.Employeesareeligibleforservice‐relateddisabilitybenefitsafterfiveyearsofservice,unlessthememberisdisabledduetoanunlawfulactofbodilyinjurycommittedbyanotherpersonwhileworkinginCalSTRScoveredemployment,inwhichcasetheminimumisoneyear.Disabilitybenefitsareequaltofiftypercentoffinalcompensation regardless of age and service credit. Designated recipients of CalSTRS retiredmembersreceivea$6,163 lump‐sumdeathpayment. There isa2%simple increaseeachSeptember1 followingthefirstanniversaryofthedateonwhichthemonthlybenefitbegantoaccrue.

43

TORRANCEUNIFIEDSCHOOLDISTRICTNotestoFinancialStatementsJune30,2017NOTE10–EMPLOYEERETIREMENTPLANS(continued)A. GeneralInformationaboutthePensionPlans(continued)

BenefitsProvided(continued)The annual 2% increase is applied to all continuing benefits other than Defined Benefit Supplementannuities.However,ifthememberretireswithaReducedBenefitElection,theincreasedoesnotbegintoaccrueuntilthememberreachesage60andisnotpayableuntilthememberreceivesthefullbenefit.Thisincreaseisalsoknownastheimprovementfactor.CalPERSalsoprovidesretirement,disability,anddeathbenefits.Retirementbenefitsaredeterminedas1.1%of finalcompensationforeachyearofcreditedserviceatage50formembersunder2%at55,or1.0%atage52 formembersunder2%at62, increasingtoamaximumof2.5%atage63formembersunder2%at55,orage67formembersunder2%at62.Tobeeligibleforserviceretirement,membersmustbeatleastage50andhaveaminimumoffiveyearsofCalPERS‐creditedservice.Membersjoiningon or after January 1, 2013 must be at least age 52. Disability retirement has no minimum agerequirementandthedisabilitydoesnothavetobejobrelated.However,membersmusthaveaminimumoffiveyearsofCalPERSservicecredit.

Pre‐retirement death benefits range from a simple return of member contributions plus interest to amonthlyallowanceequaltohalfofwhatthememberwouldhavereceivedatretirementpaidtoaspouseor domestic partner. To be eligible for any type ofmonthly pre‐retirement death benefit, a spouse ordomestic partner must have been either married to the member or legally registered before theoccurrenceoftheinjuryortheonsetoftheillnessthatresultedindeath,orforatleastoneyearpriortodeath.Cost‐of‐livingadjustmentsareprovidedbylawandarebasedontheConsumerPriceIndexforallUnited States cities. Cost‐of‐living adjustments are paid the second calendar year of the member’sretirementontheMay1checkandtheneveryyearthereafter.Thestandardcost‐of‐livingadjustmentisamaximumof2percentperyear.ContributionsActiveCalSTRSplanmembersunder2%at60were required to contribute10.25%andplanmembersunder2%at62wererequiredtocontribute9.205%oftheirsalaryin2016‐17.Therequiredemployercontributionrateforfiscalyear2016‐17was12.58%ofannualpayroll.Thecontributionrequirementsofthe plan members are established by State statute. Active CalPERS plan members are required tocontribute7.0%oftheirsalary,andtheDistrictisrequiredtocontributeanactuariallydeterminedrate.Theactuariallydeterminedrateistheestimatedamountnecessarytofinancethecostsofbenefitsearnedbyemployeesduringtheyear,withanadditionalamounttofinanceanyunfundedaccruedliability.Therequiredemployercontributionforfiscalyear2016‐17was13.888%.ThecontributionrequirementsoftheplanmembersareestablishedbyStatestatute.ForthefiscalyearendedJune30,2017,thecontributionsrecognizedaspartofpensionexpenseforeachPlanwereasfollows:

CalSTRS CalPERSEmployercontributions 14,197,460$ 5,427,499$EmployercontributionspaidbyState 8,405,344$ ‐$Employeecontributionspaidbyemployer ‐$ ‐$

44

TORRANCEUNIFIEDSCHOOLDISTRICTNotestoFinancialStatementsJune30,2017NOTE10–EMPLOYEERETIREMENTPLANS(continued)B. Pension Liabilities, Pension Expenses, and Deferred Outflows/Inflows of Resources Related to

PensionsAsof June30, 2017, theDistrict reportednetpension liabilities for itsproportionate sharesof thenetpensionliabilityofeachPlanasfollows:

ProportionateShareofNetPensionLiability

CalSTRS 181,173,440$CalPERS 59,803,187

TotalNetPensionLiability 240,976,627$

TheDistrict’snetpensionliabilityforeachPlanismeasuredastheproportionateshareofthenetpensionliability. The net pension liability of each of the Plans is measured as of June 30, 2016, and the totalpensionliabilityforeachPlanusedtocalculatethenetpensionliabilitywasdeterminedbyanactuarialvaluation as of June 30, 2015 rolled forward to June 30, 2016 using standard update procedures. TheDistrict’s proportion of the net pension liability was based on a projection of the District’s long‐termshare of contributions to the pension plans relative to the projected contributions of all participatingemployers,actuariallydetermined.TheDistrict’sproportionateshareofthenetpensionliabilityforeachPlanasofJune30,2015and2016wasasfollows:

CalSTRS CalPERSProportion‐June30,2015 0.2170% 0.3101%Proportion‐June30,2016 0.2240% 0.3028%

Change‐Increase(Decrease) 0.0070% ‐0.0073%

For theyear ended June30,2017, theDistrict recognizedpensionexpenseof$28,707,992.At June30,2017, theDistrict reporteddeferredoutflowsofresourcesanddeferred inflowsofresourcesrelated topensionsfromthefollowingsources:

DeferredOutflows DeferredInflowsofResources ofResources

Pensioncontributionssubsequenttomeasurementdate 19,624,959$ ‐$Differencesbetweenactualandexpectedexperience 2,572,110 (4,419,520)Changesinassumptions ‐ (1,796,730)Adjustmentduetodifferencesinproportions 9,740,019 ‐Netdifferencesbetweenprojectedandactualearningsonplaninvestments 29,588,579 (5,905,847)

61,525,667$ (12,122,097)$

45


Pensions(continued)

The total amount of $19,624,959 reported as deferred outflows of resources related to contributionssubsequenttothemeasurementdatewillberecognizedasareductionofthenetpensionliabilityintheyear ended June 30, 2017. Other amounts reported as deferred outflows of resources and deferredinflowsofresourcesrelatedtopensionswillberecognizedaspensionexpenseasfollows:

YearEndedJune30, Amount2018 5,069,512$2019 5,109,9462020 8,459,0782021 3,466,2332022 108,010

Thereafter ‐ ActuarialAssumptions – The total pension liabilities in the June 30, 2015, actuarial valuations weredeterminedusingthefollowingactuarialassumptions:

CalSTRS CalPERSValuationDate June30,2015 June30,2015MeasurementDate June30,2016 June30,2016ActuarialCostMethod Entryagenormal EntryagenormalActuarialAssumptions:DiscountRate 7.60% 7.65%Inflation 3.00% 2.75%WageGrowth 3.75% VariesPost‐retirementBenefitIncrease 2.00% 2.00%InvestmentRateofReturn 7.60% 7.65%

CalSTRS uses custommortality tables to best fit the patterns ofmortality among itsmembers. ThesecustomtablesarebasedonRP2000seriestablesadjustedtofitCalSTRSexperience.RP2000seriestablesareanindustrystandardsetofmortalityratespublishedbytheSocietyofActuaries.SeeCalSTRSJuly1,2006‐June30,2010ExperienceAnalysisformoreinformation. Theunderlyingmortalityassumptionsand all other actuarial assumptions used in the CalPERS June 30, 2015 valuation were based on theresultsof anactuarial experience study for theperiod1997 to2011.Furtherdetailsof theExperienceStudycanbefoundontheCalPERSwebsite.

46


Pensions(continued)DiscountRate–forCalSTRSThediscount rateused tomeasure the totalpension liabilitywas7.60%. Theprojectionof cash flowsusedtodeterminethediscountrateassumedthatcontributionsfromplanmembersandemployerswillbemade at statutory contribution rates in accordancewith the rate increase per Assembly Bill 1469.Projected inflows from investment earnings were calculated using the long‐term assumed investmentrate of return (7.60%)and assuming that contributions, benefit payments, and administrative expenseoccur midyear. Based on those assumptions, the STRP’s fiduciary net position was projected to beavailabletomakeallprojectedfuturebenefitpaymentstocurrentplanmembers.

Therefore, the long‐term assumed investment rate of return was applied to all periods of projectedbenefitpaymentstodeterminethetotalpensionliability.DiscountRate–forCalPERSThe discount rate used tomeasure the total pension liability for PERF Bwas 7.65%. A projection ofexpectedbenefitpayments and contributionswasperformed todetermine if theassetswould runout.The test revealed the assets would not run out. Therefore, the long‐term expected rate of return onpensionplaninvestmentswasappliedtoallperiodsofprojectedbenefitpaymentstodeterminethetotalpensionliabilityforPERFB.TheresultsofthecrossovertestingforthePlanarepresentedinadetailedreportthatcanbeobtainedonCalPERS'website.The long‐term expected rate of return on pension plan investmentswas determined using a building‐blockmethodinwhichbestestimaterangesofexpectedfuturerealratesofreturn(expectedreturns,netofpensionplaninvestmentexpenseandinflation)aredevelopedforeachmajorassetclass.In determining the long‐term expected rate of return, both short‐term and long‐term market returnexpectationsaswellas theexpectedpensionfundcashflowsweretaken intoaccount. Usinghistoricalreturnsofallofthefunds'assetclasses,expectedcompound(geometric)returnswerecalculatedovertheshort term(first10years)andthe long‐term(11‐60years)usingabuilding‐blockapproach. Usingtheexpectednominalreturnsforbothshort‐termandlong‐term,thepresentvalueofbenefitswascalculatedforeachfund. Theexpectedrateofreturnwassetbycalculatingthesingleequivalentexpectedreturnthatarrivedatthesamepresentvalueofbenefitsforcashflowsastheonecalculatedusingbothshort‐termandlong‐termreturns.Theexpectedrateofreturnwasthensetequivalenttothesingleequivalentratecalculatedaboveandroundeddowntothenearestonequarterofonepercent.The long‐term expected real rates of return by asset class can be found in CalPERS' ComprehensiveAnnualFinancialReportforthefiscalyearendedJune30,2016.

47


Pensions(continued)

DiscountRate–forCalPERS(continued)Thetablebelowreflectsthelong‐termexpectedrealrateofreturnbyassetclass.Therateofreturnwascalculated using the capital market assumptions applied to determine the discount rate and assetallocation.Theseratesofreturnarenetofadministrativeexpenses.

AssetClass CalSTRS CalPERS CalSTRS CalPERSGlobalEquity 47% 51% 6.30% 5.71%GlobalDebtSecurities N/A 20% N/A 2.43%InflationSensitive 4% 6% 3.80% 3.36%PrivateEquity 13% 10% 9.30% 6.95%AbsoluteReturn/RiskMitigatingStrategies 9% N/A 2.90% N/ARealEstate 13% 10% 5.20% 5.13%InfrastructureandForestland N/A 2% N/A 5.09%FixedIncome 12% N/A 0.30% N/ACash/Liquidity 2% 1% ‐1.00% ‐1.05%

100% 100%

TargetAllocationLong‐TermExpected

RateofReturn

SensitivityoftheProportionateShareoftheNetPensionLiabilitytoChangesintheDiscountRateThe following presents the District’s proportionate share of the net pension liability for each Plan,calculatedusingthediscountrateforeachPlan,aswellaswhattheDistrict’sproportionateshareofthenetpensionliabilitywouldbeifitwerecalculatedusingadiscountratethatis1‐percentagepointloweror1‐percentagepointhigherthanthecurrentrate:

CalSTRS CalPERS1%Decrease 6.60% 6.65%NetPensionLiability 260,749,440$ 89,226,688$

CurrentDiscountRate 7.60% 7.65%NetPensionLiability 181,173,440$ 59,803,187$

1%Increase 8.60% 8.65%NetPensionLiability 115,082,240$ 35,302,332$

PensionPlanFiduciaryNetPositionDetailedinformationabouteachpensionplan’sfiduciarynetpositionisavailableintheseparatelyissuedCalSTRSandCalPERSfinancialreports.

C. PayabletothePensionPlansAtJune30,2017,theDistrictreportedapayableof$2,742,246and$445,904fortheoutstandingamountof contributions to the CalSTRS and CalPERS pension plans, respectively, required for the fiscal yearendedJune30,2017.

48

TORRANCEUNIFIEDSCHOOLDISTRICTNotestoFinancialStatementsJune30,2017NOTE11–OTHERPOSTEMPLOYMENTBENEFITSTorranceUnifiedSchoolDistrictadministersasingle‐employerdefinedbenefitotherpostemploymentbenefit(OPEB)planthatprovidesmedical,dentalandvisioninsurancebenefitstoeligibleretireesandtheirspouses.The District implemented Governmental Accounting Standards Board Statement #45, Accounting andFinancialReportingbyEmployersforPostemploymentBenefitPlansOtherThanPensionPlans,in2007‐08.PlanDescriptionsandContributionInformationMembershipintheplanconsistedofthefollowing:

Retireesandbeneficiariesreceivingbenefits 196Activeemployees 2,125Total 2,321

*AsofJuly1,2015,actuarialvaluations

PlanDescriptionsandContributionInformationThe District’s health care plan (Plan) is a single‐employer defined benefit healthcare plan. The Districtprovidespost‐employmenthealth carebenefits to all employeeswho retire from theDistrict andmeet thespecific criteria for thevariousplans. Currently, theDistricthaseightdifferent retirementplans,however,onlytwoplansallownewretireestoparticipate.Descriptionsoftheplansareasfollows:1. Certificated1977‐1987:Minimumof10yearsofservicewiththeDistrictmustbeage55orolderup

toage61.TheDistrictwillprovidetheretireeanannualcontributionofthesameannualamountgivento active certificated bargaining members, towards the cost of their medical, dental, and visionpremiumsforthelifetimeoftheretiree.TheDistricthas42retireesenrolledinthisplan.

2. Certificated1986‐1987:Minimumof15yearsofservicewiththeDistrictmustbeage55orolderuptoage59.TheDistrictwillprovidetheretireeanannualcontributionofthelowestcostofadentalandmedicalplanforthelifetimeoftheretiree.TheDistricthas14retireesenrolledinthisplan.

3. Group5‐Certificated1990‐1993:Minimumof10yearsofservicewiththeDistrict,andmustbeage55orolder.TheDistrictwillprovidetheretireeanannualcontributionof$3,000towardsthecostoftheirmedicalpremiumforthelifetimeoftheretiree.TheDistricthas71retireesenrolledinthisplan.

4. Group5‐Certificated1996‐1997:Minimumof10yearsofservicewiththeDistrict,andmustbeage55orolder.TheDistrictwillprovidetheretireeanannualcontributionof$3,000towardsthecostoftheirmedicalpremiumuptoage75.TheDistricthasoneretireeenrolledinthisplan.

5. Certificated/ClassifiedMedicalRetirementPlanOctober2000: Minimumof 10 years of servicewith the District, and must be age 55 or older. The District will provide the retiree an annualcontributionof$3,360towardsthecostoftheirmedicalanddentalpremiumuptoamaximumoffiveyears, or age 65,whichever comes first, but no less than two years. TheDistrict has three retireesenrolledinthisplan.

6. Certificated/ClassifiedMedicalRetirementPlanOctober2013: Minimumof 10 years of servicewith the District, and must be age 55 or older. The District will provide the retiree an annualcontributionof$3,360towardsthecostoftheirmedical,dental,andvisionpremiumuptoamaximumoffiveyears,orage65,whichevercomesfirst,butnolessthantwoyears.TheDistricthas69retireesenrolledinthisplan.

49

TORRANCEUNIFIEDSCHOOLDISTRICTNotestoFinancialStatementsJune30,2017NOTE11–OTHERPOSTEMPLOYMENTBENEFITS(continued)PlanDescriptionsandContributionInformation(continued)

7. Certificated/ClassifiedRegularRetiree:Anybenefiteligibleemployeewhoiseligibleforretirement

under CalPERS or CalSTRS, and has five years of servicewith theDistrictmay continue their healthinsurance through theDistrictproviding theretireepays the full costof themedicalpremiums.Plus,thosewhocontinue topayafter fringeunderotherplans isexhausted. TheDistricthas524retireesenrolledinthisplan.

8. CertificatedRetireesUnderAB528:CertificatedretireesareallowedtopurchasemedicalanddentalplansthroughtheDistrict if theymeetAB528requirements. TheDistricthasoneretireeenrolledinthisplan.

The contribution requirement of plan members and the District are established under a funding policyapproved by the District’s Board, and may be amended by the District from time to time. The District’sfundingpolicyistocontributeanamountsufficienttopaythecurrentretireeclaimcostsandplanexpenses.For fiscal year 2017, theDistrict contributed $790,761 to the plan, including current claim costs and planexpenses,andnoprefundingofbenefitshasbeenmade.AnnualOPEBCostandNetOPEBObligationTheDistrict’sannualOPEBcost iscalculatedbasedon theAnnualRequiredContribution(ARC),anamountactuariallydeterminedinaccordancewiththeparametersofGASBStatement45.TheARCrepresentsalevelof funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize anyunfoundedactuarialliabilities(orfundingexcess)overaperiodnottoexceedthirtyyears.ThefollowingtableshowsthecomponentsoftheDistrict’sannualOPEBcostfortheyear,theamountactuallycontributedtotheplan,andchangesintheDistrict’snetOPEBobligation:

Annualrequiredcontribution(ARC) 879,148$InterestonnetOPEBobligation 75,591AdjustmenttoARC (254,002)AnnualOPEBcost 700,737Contributionsmade (790,761)Increase(Decrease)innetOPEBliability (90,024)

NetOPEBliability‐July1,2016 1,889,774NetOPEBliability‐June30,2017 1,799,750$

TheDistrict’sannualOPEBcost,thepercentageofannualOPEBcostcontributedtotheplan,andthenetOPEBobligationfor2016‐17andtheprecedingtwoyearsareasfollows:

Annual NetYearEnded OPEB Percentage OPEBJune30, Cost Contributed Obligation2015 729,397$ 99.5% 2,063,646$2016 693,385$ 125.1% 1,889,774$2017 700,737$ 112.8% 1,799,750$

50

TORRANCEUNIFIEDSCHOOLDISTRICTNotestoFinancialStatementsJune30,2017NOTE11–OTHERPOSTEMPLOYMENTBENEFITS(continued)FundedStatusandFundingProgress–OPEBPlansAs of July 1, 2015, themost recent actuarial valuation date, the District did not have a funded plan. Theactuarial accrued liability (AAL) for benefits was $6.0million and the unfunded actuarial accrued liability(UAAL)was$6.0million.Actuarialvaluationsofanongoingplaninvolveestimatesofthevalueofreportedamountsandassumptionsabouttheprobabilityofoccurrenceofeventsfarintothefuture.Examplesincludeassumptionsaboutfutureemployment, mortality, and the healthcare cost trend. Actuarially determined amounts are subject tocontinualrevisionasactualresultsarecomparedwithpastexpectationsandnewestimatesaremadeaboutthe future. The schedules of funding progress present multiyear trend information about whether theactuarial values of plan assets are increasing or decreasing over time relative to the actuarial accruedliabilitiesforbenefits.ActuarialMethodsandAssumptionsProjections of benefits for financial reporting purposes are based on the substantive plan (the plan asunderstoodbytheemployerandplanmembers)andincludethetypesofbenefitsprovidedatthetimeofeachvaluationand thehistoricalpatternofsharingofbenefitcostsbetweentheemployerandplanmembers tothatpoint.Theactuarialmethodsandassumptionsusedincludetechniquesthataredesignatedtoreducetheeffectsofshort‐termvolatilityinactuarialaccruedliabilitiesandtheactuarialvalueofassets,consistentwiththelong‐termperspectiveofthecalculations.Additionalinformationasofthelatestactuarialvaluationfollows:

ValuationDate 7/1/2015

ActuarialCostMethod ProjectedUnitCredit

AmortizationMethod 9‐yearleveldollar,openperiod

DiscountRate 4.0%perannum

HealthcareCostsTrendRate 8.00%

RequiredSupplementaryInformation

Seethenotestotherequiredsupplementaryinformation. 51

TORRANCEUNIFIEDSCHOOLDISTRICTBudgetaryComparisonSchedule–GeneralFundFortheFiscalYearEndedJune30,2017

VariancewithActual* FinalBudget‐

Original Final (BudgetaryBasis) Pos(Neg)Revenues

LCFFsources 192,736,000$ 193,571,000$ 193,854,795$ 283,795$Federalsources 8,963,000 9,266,000 8,965,043 (300,957)Otherstatesources 24,229,000 24,768,000 24,767,342 (658)Otherlocalsources 6,071,000 6,618,000 6,268,797 (349,203)

TotalRevenues 231,999,000 234,223,000 233,855,977 (367,023)

ExpendituresCurrent:

Certificatedsalaries 115,315,000 111,790,398 111,790,396 2Classifiedsalaries 39,921,000 39,742,000 39,613,133 128,867Employeebenefits 46,366,000 45,359,365 45,359,365 ‐Booksandsupplies 9,899,000 12,294,662 10,983,521 1,311,141Servicesandotheroperatingexpenditures 24,501,000 24,164,000 23,987,069 176,931

CapitalOutlay 5,737,000 6,703,000 4,853,747 1,849,253Intergovernmental 5,102,000 5,381,575 5,381,575 ‐

TotalExpenditures 246,841,000 245,435,000 241,968,806 3,466,194

Excess(Deficiency)ofRevenuesOver(Under)Expenditures (14,842,000) (11,212,000) (8,112,829) 3,099,171

FundBalances,July1,2016 64,739,317 56,721,833 57,875,185 (1,153,352)

FundBalances,June30,2017 49,897,317$ 45,509,833$ 49,762,356$ 1,945,819$

* On‐behalfpaymentsof$8,251,775havebeenincludedintheStatementofRevenues,Expenditures,andChangesinFundBalance,butarenotincludedintheactualamountsabove.

BudgetedAmounts


TORRANCEUNIFIEDSCHOOLDISTRICTScheduleofFundingProgressFortheFiscalYearEndedJune30,2017

ScheduleofFundingProgressforRetireeHealthcarePlan

Actuarial UAALasaActuarial Accrued Unfunded PercentageofValuation Valueof Liability AAL Funded Covered CoveredDate Assets (AAL) (UAAL) Ratio Payroll Payroll

7/1/2011 ‐$ 10,555,620$ 10,555,620$ 0.0% 112,617,032$ 9.4%7/1/2013 ‐$ 5,694,899$ 5,694,899$ 0.0% 118,276,998$ 4.8%7/1/2015 ‐$ 5,964,977$ 5,964,977$ 0.0% 145,752,390$ 4.1%


TORRANCEUNIFIEDSCHOOLDISTRICTScheduleofProportionateShareoftheNetPensionLiabilityFortheFiscalYearEndedJune30,2017

2016 2015 2014

CalSTRS

District'sproportionofthenetpensionliability 0.2240% 0.2170% 0.2080%

District'sproportionateshareofthenetpensionliability 181,173,440$ 146,093,080$ 121,548,960$State'sproportionateshareofthenetpensionliability

associatedwiththeDistrict 103,153,993 77,266,927 73,397,247

Totals 284,327,433$ 223,360,007$ 194,946,207$

District'scovered‐employeepayroll 112,939,953$ 97,984,369$ 95,320,485$

District'sproportionateshareofthenetpensionliabilityasapercentageofitscovered‐employeepayroll 160.42% 149.10% 127.52%

Planfiduciarynetpositionasapercentageofthetotalpensionliability 70% 74% 77%

CalPERS

District'sproportionofthenetpensionliability 0.3028% 0.3101% 0.3099%

District'sproportionateshareofthenetpensionliability 59,803,187$ 45,709,047$ 35,181,196$


District'sproportionateshareofthenetpensionliabilityasapercentageofitscovered‐employeepayroll 163.11% 132.68% 104.39%

Planfiduciarynetpositionasapercentageofthetotalpensionliability 74% 79% 83%

*

LastTenFiscalYears*

Thisscheduleisrequiredtoshowinformationfortenyears;however,untilafulltenyeartrendiscompiled,informationispresentedforthoseyearsforwhichinformationisavailable.


TORRANCEUNIFIEDSCHOOLDISTRICTScheduleofPensionContributionsFortheFiscalYearEndedJune30,2017

2017 2016 2015

CalSTRS

Contractuallyrequiredcontribution 14,197,460$ 12,118,457$ 8,701,012$

Contributionsinrelationtothecontractuallyrequiredcontribution 14,197,460 12,118,457 8,701,012

Contributiondeficiency(excess): ‐$ ‐$ ‐$


Contributionsasapercentageofcovered‐employeepayroll 12.58% 10.73% 8.88%

CalPERS

Contractuallyrequiredcontribution 5,427,499$ 4,343,515$ 4,055,051$

Contributionsinrelationtothecontractuallyrequiredcontribution 5,427,499 4,343,515 4,055,051

Contributiondeficiency(excess): ‐$ ‐$ ‐$


Contributionsasapercentageofcovered‐employeepayroll 13.888% 11.847% 11.771%

*

LastTenFiscalYears*

Thisscheduleisrequiredtoshowinformationfortenyears;however,untilafulltenyeartrendiscompiled,informationispresentedforthoseyearsforwhichinformationisavailable.

55

TORRANCEUNIFIEDSCHOOLDISTRICTNotestotheRequiredSupplementaryInformationFortheFiscalYearEndedJune30,2017

NOTE1–PURPOSEOFSCHEDULESBudgetaryComparisonSchedulesTheseschedulesarerequiredbyGASBStatementNo.34asrequiredsupplementaryinformation(RSI)fortheGeneral Fund and for each major special revenue fund that has a legally adopted annual budget. Thebudgetarycomparisonschedulespresentboth(a)theoriginaland(b)thefinalappropriatedbudgetsforthereportingperiodaswellas(c)actualinflows,outflows,andbalances,statedontheDistrict’sbudgetarybasis.A separate column to report the variance between the final budget and actual amounts is also presented,althoughnotrequired.ScheduleofFundingProgressThis schedule is required by GASB Statement No. 45 for all sole and agent employers that provide otherpostemploymentbenefits(OPEB).Theschedulepresents,forthemostrecentactuarialvaluationandthetwoprecedingvaluations, informationabout the fundingprogressof theplan, including, foreachvaluation, theactuarial valuation date, the actuarial value of assets, the actuarial accrued liability, the total unfundedactuarial liability (or funding excess), the actuarial valueof assets as apercentageof the actuarial accruedliability(fundedratio), theannualcoveredpayroll,andtheratioof thetotalunfundedactuarial liability(orfundingexcess)toannualcoveredpayroll.ScheduleofProportionateShareoftheNetPensionLiabilityThis schedule is required by GASB Statement No. 68 and is required for all employers in a cost‐sharingpensionplan.Theschedulereportsthefollowinginformation:

Theproportion(percentage)ofthecollectivenetpensionliability(similartothenotedisclosure) Theproportionateshare(amount)ofthecollectivenetpensionliability Theemployer’scovered‐employeepayroll The proportionate share (amount) of the collective net pension liability as a percentage of the

employer’scovered‐employeepayroll Thepensionplan’sfiduciarynetpositionasapercentageofthetotalpensionliability

ScheduleofPensionContributionsThis schedule is required by GASB Statement No. 68 and is required for all employers in a cost‐sharingpensionplan.Theschedulereportsthefollowinginformation:

If an employer’s contributions to the plan are actuarially determined or based on statutory orcontractual requirements: the employer’s actuarially determined contribution to the pension plan(or, if applicable, its statutorily or contractually required contribution), the employer’s actualcontributions, the difference between the actual and actuarially determined contributions (orstatutorily or contractually required), and a ratio of the actual contributions divided by covered‐employeepayroll.

NOTE2–SUMMARYOFCHANGESOFBENEFITSORASSUMPTIONSBenefitChangesTherewerenochangestobenefittermsthatappliedtoallmembersoftheSchoolsPool.ChangesofAssumptionsTherewerenochangesofassumptions.

56

TORRANCEUNIFIEDSCHOOLDISTRICTNotestotheRequiredSupplementaryInformationFortheFiscalYearEndedJune30,2017

NOTE3–EXCESSOFEXPENDITURESOVERAPPROPRIATIONSAtJune30,2017,theDistrictdidnotincuranyexcessofexpendituresoverappropriationsintheindividualmajorfundpresentedintheBudgetaryComparisonSchedule.

SupplementaryInformation

57

TORRANCEUNIFIEDSCHOOLDISTRICTLocalEducationalAgencyOrganizationStructureJune30,2017The Torrance Unified School District was established in 1947. The District is currently operating 17elementaryschools,8middleschools,and5highschools,oneofwhichisacontinuationschool,and3adulteducationschools,overanareaofapproximately20squaremileswithintheCityofTorrance.TherewerenochangesintheboundariesoftheDistrictduringthecurrentfiscalyear.

BOARDOFEDUCATION

Member

Office

TermExpiresMrs.TerryRagins President November,2020

Mr.MichaelWermers VicePresident November,2018

Mrs.MarthaDeutsch Clerk November,2018

Mr.DonLee Member November,2020

Mr.MarkSteffen Member November,2020

DISTRICTADMINISTRATORS

Dr.GeorgeMannon,Superintendent

Dr.TimStowe,

DeputySuperintendent,AdministrativeServices

Dr.KatiKrumpe,ChiefAcademicOfficer

Dr.NishaDugal,

SeniorDirector,SecondarySchools

Dr.EDonKim,SeniorDirector,ElementarySchools

Dr.MarioLiberati,

SeniorDirector,HumanResources

Ms.JudyChai,FiscalServicesOfficer

Seeaccompanyingnotetosupplementaryinformation. 58

TORRANCEUNIFIEDSCHOOLDISTRICTScheduleofAverageDailyAttendanceFortheFiscalYearEndedJune30,2017

SecondPeriod AnnualReport Report

CertificateNo. CertificateNo.(4CA621D1) (2FD4E5D8)

RegularADA&ExtendedYear:TransitionalKindergartenthroughThird 6,382.99 6,376.95FourththroughSixth 4,930.62 4,927.69SevenththroughEighth 3,622.21 3,622.37NinththroughTwelfth 7,769.14 7,735.74

TotalRegularADA 22,704.96 22,662.75

SpecialEducation‐Nonpublic,NonsectarianSchools:TransitionalKindergartenthroughThird ‐ ‐FourththroughSixth 9.59 9.76SevenththroughEighth 11.27 10.94NinththroughTwelfth 82.18 84.60

TotalSpecialEducation‐Nonpublic,NonsectarianSchools 103.04 105.30

CommunityDaySchool: 21.49 22.98

TotalADA 22,829.49 22,791.03


TORRANCEUNIFIEDSCHOOLDISTRICTScheduleofInstructionalTimeFortheFiscalYearEndedJune30,2017

2016‐17 NumberofDaysActual Traditional

GradeLevel Required Minutes Calendar Status

Kindergarten 36,000 45,555 180 CompliedGrade1 50,400 52,477 180 CompliedGrade2 50,400 52,477 180 CompliedGrade3 50,400 52,477 180 CompliedGrade4 54,000 54,088 180 CompliedGrade5 54,000 54,088 180 CompliedGrade6 54,000 59,582 180 CompliedGrade7 54,000 59,582 180 CompliedGrade8 54,000 59,582 180 CompliedGrade9 64,800 64,809 180 CompliedGrade10 64,800 64,809 180 CompliedGrade11 64,800 64,809 180 CompliedGrade12 64,800 64,809 180 Complied


TORRANCEUNIFIEDSCHOOLDISTRICTScheduleofFinancialTrendsandAnalysisFortheFiscalYearEndedJune30,2017

(Budget)

GeneralFund 20182 2017 2016 2015

Revenuesandotherfinancingsources 231,484,000$ 242,107,752$ 241,084,997$ 219,419,732$

Expenditures 239,712,000 250,220,581 233,179,129 223,145,328

Changeinfundbalance(deficit) (8,228,000) (8,112,829) 7,905,868 (3,725,596)

Endingfundbalance 38,435,185$ 49,762,356$ 57,875,185$ 49,969,317$

Availablereserves1 23,422,500$ 20,600,840$ 21,727,411$ 28,280,604$

Availablereservesasapercentageoftotaloutgo 9.8% 8.2% 9.3% 12.7%

Totallong‐termdebt 777,434,219$ 792,715,581$ 685,407,022$ 584,950,389$

AveragedailyattendanceatP‐2 22,963 22,829 22,987 23,148

TheGeneralFundbalancehasdecreasedby$206,961overthepasttwoyears.Thefiscalyear2017‐18adoptedbudgetprojectsadecreaseof$8,228,000.Foradistrictofthissize,thestaterecommendsavailablereservesofatleast3%oftotalgeneralfundexpenditures,transfersout,andotheruses(totaloutgo).

TheDistricthasincurredanoperatingdeficitintwoofthepastthreeyearsandalsoanticipatesincurringanoperatingdeficitduringthe2017‐18fiscalyear.Long‐termdebthasincreasedby$207,765,192overthepasttwoyears.

Averagedailyattendancehasdecreasedby319overthepasttwoyears.Anincreaseof134ADAisanticipatedduringfiscalyear2017‐18.

1AvailablereservesconsistofallunassignedfundbalancesintheGeneralFund.

2RevisedFinalBudgetJune,2017.


TORRANCEUNIFIEDSCHOOLDISTRICTReconciliationofAnnualFinancialandBudgetReportwithAuditedFinancialStatementsFortheFiscalYearEndedJune30,2017

TherewerenodifferencesbetweentheAnnualFinancialandBudgetReportandtheAuditedFinancialStatementsinanyfunds.


TORRANCEUNIFIEDSCHOOLDISTRICTScheduleofExpendituresofFederalAwardsFortheFiscalYearEndedJune30,2017

Pass‐ThroughFederal Entity

FederalGrantor/Pass‐Through CFDA Identifying Cluster FederalGrantor/ProgramorClusterTitle Number Number Expenditures Expenditures

FederalPrograms:U.S.DepartmentofAgriculture:

PassedthroughCaliforniaDept.ofEducation(CDE):SchoolBreakfastProgram‐Basic 10.553 13525 14,768$SchoolBreakfastProgram‐EspeciallyNeedy 10.553 13526 766,517NationalSchoolLunchProgram 10.555 13523 2,526,649USDADonatedFoods 10.555 N/A 444,536

TotalChildNutritionCluster 3,752,470$

TotalU.S.DepartmentofAgriculture 3,752,470

U.S.DepartmentofEducation:PassedthroughCaliforniaDept.ofEducation(CDE):

NoChildLeftBehind(NCLB):TitleI,PartA,BasicGrantsLow‐IncomeandNeglected 84.010 14329 1,865,333TitleII,PartA,SupportingEffectiveInstruction 84.367 14341 830,002TitleIII,ImmigrantEducationProgram 84.365 15146 99,378TitleIII,LimitedEnglishProficiency 84.365 14346 185,754TotalEnglishLanguageAcquisitionGrantsCluster 285,132

AdultEducationCluster:AdultBasicEducation&ESL 84.002A 14508 257,550AdultSecondaryEducation 84.002 13978 168,048EnglishLiteracy&CivicsEducation 84.002 14794 120,663TotalAdultEducationCluster 546,261

DepartmentofRehabilitation:WorkabilityII,TransitionsPartnership 84.126 10006 552,755Vocational&AppliedTechnologySecondaryII 84.048 14894 105,529

PassedthroughSouthwestSELPA:IndividualswithDisabilitiesEducationAct(IDEA):

BasicLocalAssistanceEntitlement,PartB 84.027 13379 2,966,926LocalAssistance,PartB,Section611,PrivateSchoolISP 84.027A 10115 14,849IDEAPreschoolGrants,PartB,Section619(Age3‐4‐5) 84.173 13430 269,767PreschoolLocalEntitlement,PartB 84.173A 13682 692,498IDEAMentalHealthAllocationPlan,PartB,Section611 84.027 14468 171,567IDEAPreschoolStaffDevelopment,PartB,Section619 84.173A 13431 1,462TotalSpecialEducation(IDEA)Cluster 4,117,069

TotalU.S.DepartmentofEducation 8,302,081

U.S.DepartmentofHealth&HumanServices:PassedthroughCaliforniaDept.ofEducation:MedicaidCluster:

Medi‐CalBillingOption 93.778 10013 758,079Medi‐CalAdministrativeActivities(MAA) N/A 10060 78,088

TotalMedicaidCluster 836,167

TotalU.S.DepartmentofHealth&HumanServices 836,167

TotalExpendituresofFederalAwards 12,890,718$

OftheFederalexpenditurespresentedintheschedule,theDistrictprovidednoFederalawardstosubrecipients.

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TORRANCEUNIFIEDSCHOOLDISTRICTNotetotheSupplementaryInformationJune30,2017NOTE1–PURPOSEOFSCHEDULESScheduleofAverageDailyAttendance(ADA)Averagedailyattendance(ADA) isameasurementof thenumberofpupilsattendingclassesof theDistrict.The purpose of attendance accounting from a fiscal standpoint is to provide the basis on whichapportionmentsofStatefundsaremadetoschooldistricts.Thisscheduleprovidesinformationregardingtheattendanceofstudentsatvariousgradelevelsandindifferentprograms.ScheduleofInstructionalTimeTheDistrict has participated in the Incentives for Longer InstructionalDay and Longer Instructional Year.TheDistricthasnotmetitstargetfunding.ThisschedulepresentsinformationontheamountofinstructionaltimeofferedbytheDistrictandwhethertheDistrictcompliedwiththeprovisionsofEducationCodeSections46200through46206.ScheduleofFinancialTrendsandAnalysisThisscheduledisclosestheDistrict’s financial trendsbydisplayingpastyears’dataalongwithcurrentyearbudgetinformation.ThesefinancialtrenddisclosuresareusedtoevaluatetheDistrict’sabilitytocontinueasagoingconcernforareasonableperiodoftime.ReconciliationofAnnualFinancialandBudgetReportwithAuditedFinancialStatementsThisscheduleprovidestheinformationnecessarytoreconcilethefundbalanceofall fundsreportedontheUnauditedActualfinancialreporttotheauditedfinancialstatements.ScheduleofExpendituresofFederalAwardsThe schedule of expenditures of Federal awards includes the Federal grant activity of the District and ispresented on the modified accrual basis of accounting. The information in this schedule is presented inaccordance with the requirements of the Title 2 U.S. Code of Federal Regulations (CFR) Part 200,UniformAdministrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Therefore, someamountspresentedinthisschedulemaydifferfromamountspresentedin,orusedinthepreparationofthefinancialstatements.TheDistrictdidnotelecttousethetenpercentdeminimisindirectcostrate.ThefollowingscheduleprovidesareconciliationbetweenrevenuesreportedontheStatementofRevenues,Expenditures, and Changes in Fund Balances and the related expenditures reported on the Schedule ofExpendituresofFederalAwards.ThereconcilingamountsrepresentFederalfundsthathavebeenrecordedasrevenuesthathavenotbeenexpendedbyJune30,2017.

CFDANumber AmountTotalFederalRevenuesfromtheStatementofRevenues,Expenditures,

andChangesinFundBalances 15,238,880$DifferencesbetweenFederalRevenuesandExpenditures:

QualifiedSchoolConstructionBonds‐InterestSubsidy Notapplicable (1,975,106)MedicareRetireeDrugSubsidy Notapplicable (218,334)Medi‐CalBillingOption 93.778 121,170Medi‐CalAdministrativeActivities 93.778 (275,892)

TotalScheduleofExpendituresofFederalAwards 12,890,718$

OtherIndependentAuditors’Reports

64

INDEPENDENTAUDITORS’REPORTONINTERNALCONTROLOVERFINANCIALREPORTINGANDONCOMPLIANCEANDOTHERMATTERSBASEDONANAUDITOFFINANCIALSTATEMENTSPERFORMEDINACCORDANCE

WITHGOVERNMENTAUDITINGSTANDARDSBoardofEducationTorranceUnifiedSchoolDistrictTorrance,CaliforniaWe have audited, in accordance with the auditing standards generally accepted in the United States ofAmericaandthestandardsapplicabletofinancialauditscontainedinGovernmentAuditingStandards issuedbytheComptrollerGeneraloftheUnitedStates,thefinancialstatementsofthegovernmentalactivities,eachmajorfund,andtheaggregateremainingfundinformationofTorranceUnifiedSchoolDistrictasofandfortheyear ended June 30, 2017, and the related notes to the financial statements, which collectively compriseTorrance Unified School District’s basic financial statements, and have issued our report thereon datedDecember8,2017.InternalControlOverFinancialReportingIn planning and performing our audit of the financial statements, we considered Torrance Unified SchoolDistrict's internalcontrolover financial reporting (internal control) todetermine theauditprocedures thatareappropriateinthecircumstancesforthepurposeofexpressingouropinionsonthefinancialstatements,butnotforthepurposeofexpressinganopinionontheeffectivenessoftheTorranceUnifiedSchoolDistrict'sinternal control. Accordingly, we do not express an opinion on the effectiveness of the Torrance UnifiedSchoolDistrict'sinternalcontrol.Adeficiencyininternalcontrolexistswhenthedesignoroperationofacontroldoesnotallowmanagementoremployees, in the normal course of performing their assigned functions, to prevent, or detect and correctmisstatements on a timely basis. Amaterialweakness is a deficiency, or a combination of deficiencies, ininternal control such that there is a reasonable possibility that a material misstatement of the District'sfinancialstatementswillnotbeprevented,ordetectedandcorrectedonatimelybasis.Asignificantdeficiencyis a deficiency, or a combination of deficiencies, in internal control that is less severe than a materialweakness,yetimportantenoughtomeritattentionbythosechargedwithgovernance.Our consideration of internal control was for the limited purpose described in the first paragraph of thissectionandwasnotdesignedtoidentifyalldeficienciesininternalcontrolthatmightbematerialweaknessesor significantdeficiencies. Given these limitations,duringourauditwedidnot identifyanydeficiencies ininternalcontrolthatweconsidertobematerialweaknesses. However,materialweaknessesmayexistthathave not been identified. We did identify a certain deficiency in internal control, described in theaccompanying schedule of findings and questioned costs as Finding 2017‐001 that we consider to be asignificantdeficiency.

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ComplianceandOtherMattersAs part of obtaining reasonable assurance about whether Torrance Unified School District's financialstatementsarefreeofmaterialmisstatement,weperformedtestsofitscompliancewithcertainprovisionsoflaws, regulations, contracts, and grant agreements, noncompliance with which could have a direct andmaterial effect on the determination of financial statement amounts. However, providing an opinion oncompliancewiththoseprovisionswasnotanobjectiveofouraudit,andaccordingly,wedonotexpresssuchan opinion. The results of our tests disclosed no instances of noncompliance or other matters that arerequiredtobereportedunderGovernmentAuditingStandards.TorranceUnifiedSchoolDistrict'sResponsestoFindingsTorrance Unified School District's responses to the findings identified in our audit are described in theaccompanyingscheduleoffindingsandquestionedcosts. TorranceUnifiedSchoolDistrict'sresponseswerenotsubjectedtotheauditingproceduresappliedintheauditofthefinancialstatementsand,accordingly,weexpressnoopiniononthem.PurposeofthisReportThepurposeofthisreportissolelytodescribethescopeofourtestingofinternalcontrolandcomplianceandtheresultsofthattesting,andnottoprovideanopinionontheeffectivenessoftheDistrict'sinternalcontrolor on compliance. This report is an integral part of an audit performed in accordance with GovernmentAuditing Standards in considering the District's internal control and compliance. Accordingly, thiscommunicationisnotsuitableforanyotherpurpose.


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INDEPENDENTAUDITORS'REPORTONSTATECOMPLIANCE

BoardofEducationTorranceUnifiedSchoolDistrictTorrance,CaliforniaReportonStateComplianceWehave auditedTorranceUnified SchoolDistrict's compliancewith the typesof compliance requirementsdescribed in the 2016‐17 Guide for Annual Audits of K‐12 Local Education Agencies and State ComplianceReporting thatcouldhaveadirectandmaterialeffectoneachoftheTorranceUnifiedSchoolDistrict'sstategovernmentprogramsasnotedonthefollowingpageforthefiscalyearendedJune30,2017.Management'sResponsibilityManagement is responsible forcompliancewithstate laws, regulations,andthe termsandconditionsof itsStateprograms.Auditors'ResponsibilityOurresponsibilityistoexpressanopiniononcomplianceforeachofTorranceUnifiedSchoolDistrict'sstateprogramsbasedonourauditofthetypesofcompliancerequirementsreferredtoonthefollowingpage.Weconductedour audit of compliance in accordancewithauditing standardsgenerally accepted in theUnitedStatesofAmerica; the standardsapplicable to financial audits contained inGovernmentAuditingStandards,issuedbytheComptrollerGeneraloftheUnitedStates;andthe2016‐17GuideforAnnualAuditsofK‐12LocalEducationAgenciesandStateComplianceReporting. Thosestandardsrequirethatweplanandperformtheaudit to obtain reasonable assurance about whether noncompliance with the types of compliancerequirementsreferredtoonthefollowingpagethatcouldhaveadirectandmaterialeffectonastateprogramoccurred. An audit includes examining, on a test basis, evidence about Torrance Unified School District'scompliancewith those requirementsandperformingsuchotherproceduresasweconsiderednecessary inthecircumstances.Webelievethatourauditprovidesareasonablebasisforouropiniononcomplianceforeachstateprogram.However,ourauditdoesnotprovidealegaldeterminationofTorranceUnifiedSchoolDistrict'scompliance.Inconnectionwiththeauditreferredtoabove,weselectedandtestedtransactionsandrecordstodeterminetheDistrict'scompliancewiththeStatelawsandregulationsapplicabletothefollowingitems:

Description

ProceduresPerformed

Attendance YesTeacherCertificationandMisassignments YesKindergartenContinuance YesIndependentStudy No(seebelow)ContinuationEducation YesInstructionalTime YesInstructionalMaterials YesRatioofAdministrativeEmployeestoTeachers Yes

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Description

ProceduresPerformed

ClassroomTeacherSalaries YesEarlyRetirementIncentive NotApplicableGannLimitCalculation YesSchoolAccountabilityReportCard YesJuvenileCourtSchools NotApplicableMiddleorEarlyCollegeHighSchools NotApplicableK‐3GradeSpanAdjustment YesTransportationMaintenanceofEffort YesMentalHealthExpenditures YesEducatorEffectiveness YesCaliforniaCleanEnergyJobsAct YesAfterSchoolEducationandSafetyProgram NotApplicableProperExpenditureofEducationProtectionAccountFunds YesUnduplicatedLocalControlFundingFormulaPupilCounts YesLocalControlandAccountabilityPlan YesIndependentStudy‐CourseBased NotApplicableImmunizations YesCharterSchools:

Attendance NotApplicableModeofInstruction NotApplicableNonclassroom‐BasedInstruction/IndependentStudy NotApplicableDeterminationofFundingforNonclassroom‐BasedInstruction NotApplicableAnnualInstructionalMinutes–ClassroomBased NotApplicableCharterSchoolFacilityGrantProgram NotApplicable

WedidnotperformtestingforindependentstudybecausetheADAwasunderthelevelthatrequirestesting.UnmodifiedOpiniononCompliancewithStateProgramsIn our opinion, Torrance Unified School District complied, in all material respects, with the types ofcompliancerequirementsreferredtoabovefortheyearendedJune30,2017.


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INDEPENDENTAUDITORS'REPORTONCOMPLIANCEFOREACHMAJORFEDERALPROGRAMANDREPORTONINTERNALCONTROL

OVERCOMPLIANCEREQUIREDBYTHEUNIFORMGUIDANCE

BoardofEducationTorranceUnifiedSchoolDistrictTorrance,CaliforniaReportonComplianceforEachMajorFederalProgramWehave auditedTorranceUnified SchoolDistrict's compliancewith the typesof compliance requirementsdescribedintheOMBComplianceSupplementthatcouldhaveadirectandmaterialeffectoneachofTorranceUnifiedSchoolDistrict'smajorfederalprogramsfortheyearendedJune30,2017. TorranceUnifiedSchoolDistrict's major federal programs are identified in the summary of auditors' results section of theaccompanyingscheduleoffindingsandquestionedcosts.Management'sResponsibilityManagementisresponsibleforcompliancewithfederalstatutes,regulations,andthetermsandconditionsofitsfederalawardsapplicabletoitsfederalprograms.Auditors'ResponsibilityOurresponsibilityistoexpressanopiniononcomplianceforeachofTorranceUnifiedSchoolDistrict'smajorfederal programs based on our audit of the types of compliance requirements referred to above. Weconductedour audit of compliance in accordancewithauditing standardsgenerally accepted in theUnitedStatesofAmerica; the standardsapplicable to financial audits contained inGovernmentAuditingStandards,issued by the Comptroller General of the United States; and the audit requirements of Title 2 U.S.CodeofFederalRegulationsPart200,UniformAdministrativeRequirements,CostPrinciples,andAuditRequirementsforFederalAwards (Uniform Guidance). Those standards and the Uniform Guidance require thatwe plan andperformtheaudittoobtainreasonableassuranceaboutwhethernoncompliancewiththetypesofcompliancerequirements referred to above that could have a direct and material effect on a major federal programoccurred. An audit includes examining, on a test basis, evidence about Torrance Unified School District'scompliancewith those requirementsandperformingsuchotherproceduresasweconsiderednecessary inthecircumstances.Webelievethatourauditprovidesareasonablebasisforouropiniononcomplianceforeachmajorfederalprogram. However, our audit does not provide a legal determination of TorranceUnified SchoolDistrict'scompliance.OpiniononEachMajorFederalProgramIn our opinion, Torrance Unified School District complied, in all material respects, with the types ofcompliancerequirementsreferredtoabovethatcouldhaveadirectandmaterialeffectoneachofitsmajorfederalprogramsfortheyearendedJune30,2017.

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ReportonInternalControlOverComplianceManagement of Torrance Unified School District is responsible for establishing and maintaining effectiveinternalcontrolovercompliancewiththetypesofcompliancerequirementsreferredtoabove. Inplanningand performing our audit of compliance,we consideredTorranceUnified SchoolDistrict's internal controlovercompliancewith the typesof requirements thatcouldhaveadirectandmaterialeffectoneachmajorfederal program to determine the auditing procedures that are appropriate in the circumstances for thepurposeofexpressinganopiniononcompliance foreachmajor federalprogramand to testandreportoninternal control over compliance in accordance with the Uniform Guidance, but not for the purpose ofexpressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do notexpressanopinionontheeffectivenessoftheDistrict'sinternalcontrolovercompliance.A deficiency in internal control over compliance exists when the design or operation of a control overcompliance does not allowmanagement or employees, in the normal course of performing their assignedfunctions,toprevent,ordetectandcorrect,noncompliancewithatypeofcompliancerequirementofafederalprogram on a timely basis. Amaterialweakness in internal control over compliance is a deficiency, or acombination of deficiencies, in internal control over compliance, such that there is a reasonablepossibilitythat material noncompliance with a type of compliance requirement of a federal program will not beprevented, or detected and corrected, on a timely basis. A significant deficiency in internal control overcomplianceisadeficiency,oracombinationofdeficiencies,ininternalcontrolovercompliancewithatypeofcompliancerequirementofafederalprogramthatislessseverethanamaterialweaknessininternalcontrolovercompliance,yetimportantenoughtomeritattentionbythosechargedwithgovernance.Our consideration of internal control over compliance was for the limited purpose described in the firstparagraphofthissectionandwasnotdesignedtoidentifyalldeficienciesininternalcontrolovercompliancethatmightbematerialweaknessesorsignificantdeficiencies.Wedidnotidentifyanydeficienciesininternalcontrol over compliance thatwe consider to bematerialweaknesses. However,materialweaknessesmayexistthathavenotbeenidentified.Thepurposeofthisreportoninternalcontrolovercomplianceissolelytodescribethescopeofourtestingofinternal control over compliance and the results of that testing based on the requirements of theUniformGuidance.Accordingly,thisreportisnotsuitableforanyotherpurpose.


FindingsandQuestionedCosts

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TORRANCEUNIFIEDSCHOOLDISTRICTScheduleofAuditFindingsandQuestionedCostsFortheFiscalYearEndedJune30,2017SECTIONI‐SUMMARYOFAUDITORS'RESULTS

FinancialStatements

Typeofauditor'sreportissued: UnmodifiedInternalcontroloverfinancialreporting:

Materialweakness(es)identified? NoSignificantdeficiency(s)identifiednotconsideredtobematerialweaknesses? Yes

Noncompliancematerialtofinancialstatementsnoted? No

FederalAwards

Internalcontrolovermajorprograms:Materialweakness(es)identified? NoSignificantdeficiency(s)identifiednotconsideredtobematerialweaknesses? Nonereported

Typeofauditor'sreportissuedoncomplianceformajorprograms: Unmodified

Anyauditfindingsdisclosedthatarerequiredtobereported inaccordancewiththeUniformGuidance,Section200.516 NoIdentificationofmajorprograms:

CFDANumbers NameofFederalProgramorCluster

84.010 TitleI,GrantstoLocalEducationAgencies84.367 TitleII,PartA,SupportingEffectiveInstructionStateGrant

DollarthresholdusedtodistinguishbetweenTypeAandTypeBprograms: 750,000$

Auditeequalifiedaslow‐riskauditee? Yes

StateAwards

Typeofauditor'sreportissuedoncomplianceforstateprograms: Unmodified

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TORRANCEUNIFIEDSCHOOLDISTRICTScheduleofAuditFindingsandQuestionedCostsFortheFiscalYearEndedJune30,2017SECTIONII‐FINANCIALSTATEMENTFINDINGSThis section identifies the significant deficiencies, material weaknesses, and instances of noncompliancerelatedtothefinancialstatementsthatarerequiredtobereportedinaccordancewithGovernmentAuditingStandards.Pursuant toAssemblyBill (AB)3627,allaudit findingsmustbe identifiedasoneormoreof thefollowingcategories:

FiveDigitCode AB3627FindingTypes10000 Attendance20000 InventoryofEquipment30000 InternalControl40000 StateCompliance41000 CalSTRS50000 FederalCompliance60000 Miscellaneous61000 ClassroomTeacherSalaries70000 InstructionalMaterials71000 TeacherMisassignments72000 SchoolAccountabilityReportCard

Finding2017‐001:AssociatedStudentBody(ASB)Controls(30000)Observation‐Throughoutthecourseoftheaudit,weidentifiedseveralinternalcontrolweaknessesinregardstoASBoperationsandoversight:

BankReconciliationsNotTimely‐Duringourtesting,weidentifiedthatbankreconciliationswere

not always prepared timely. At North High, the July, September, October and Novemberreconciliationswerepreparedatleasttwomonthsafterreceivingstatements.AtTorranceHigh,theJuly,August,andSeptemberreconciliationswerepreparedinOctober.TheNovemberreconciliationwaspreparedinJanuaryandtheDecemberreconciliationwaspreparedinFebruary.Also,theASB’sPayPal Account is not being reconciled. AtWestHigh, theOctober reconciliationwas prepared inDecember. Timely and accuratebank reconciliations areprudent andnecessary to ensure that theaccountingrecordsmatchtheamountsheldondeposit.

CashDisbursementsApprovalProcess‐InourtestofcashdisbursementsatMadronaMiddle,wenoted all of the disbursements selected in our sample were not approved by the Districtrepresentative, the ASB advisor, and/or the student representative. Furthermore, at each sitewenotedthatmostofthedisbursementssampledwereapprovedbytheDistrictRepresentative,theASBadvisor, and/or the student representative, but not until after the expenditure had already beenincurred.

LackofEvidenceofReceipt‐DuringourtestingofcashdisbursementsatTorranceHighandSouthHigh,wenotedthatmanyofthedisbursementstestedlackedevidenceofreceiptofgoodsorservices.

ShippingGoodstoPersonalAddress‐DuringourtestingofcashdisbursementsatWestHighand

TorranceHigh,wenotedinstanceswherepurchaseditemswereshippeddirectlytothepurchaser’shomeaddressortoaparent’shome,ratherthantotheschool.Allowingitemstobeshippeddirectlytothepurchaserallowsthepossibilityforfraudulenttransactionstooccurandgoundetected.

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TORRANCEUNIFIEDSCHOOLDISTRICTScheduleofAuditFindingsandQuestionedCostsFortheFiscalYearEndedJune30,2017SECTIONII‐FINANCIALSTATEMENTFINDINGS(continued)Finding2017‐001:AssociatedStudentBody(ASB)Controls(30000)(continued)

InappropriateUseofASBFunds‐Duringourtestingofcashdisbursements,oursample includedsomeexpensesthatareunallowableorquestionable. AtMadronaMiddle theASB pays for PE supplies that are necessary for conducting class, gift

cardsdonatedtoneedyfamilies,andemployeeappreciationmeals. AtTorranceHightheASBpaysforlabsupplies,employeeappreciationmeals,donations,andgift

cardsthatareusedasincentives. AtWestHightherewasapurchaseof$50forcurricularsupplies

Suchitemsareusuallynotallowablebecausetheyareeitheragiftofpublicfunds,personalexpensesofemployees,or foruse intheDistrictcurriculum. ASBfundsareconsideredpublic fundsbecausetheyareraisedthroughtheDistrict’staxidentificationnumberandreceivethebenefitofnontaxablestatus.Anythingthatispurchasedmustbeforgoodsandservicesthatpromotethestudents’generalwelfare,morale,andeducationalexperiences.

LackofSupportingDocumentation forCashReceipts ‐ Inourtestingofcashreceipts,wefoundsomedepositstestedlackedsufficientsupportingdocumentation.AtTorranceHigh,wefoundthatatallysheetorreceiptswere lacking for fourof thetendeposits thatwesampled.AtWestHigh,wefoundthatatallysheetorreceiptswerelackingforfiveofthetendepositsthatwesampled.AtNorthHigh, prenumberedreceipts, tally sheets,ororder formswerenotkept for fiveof the tendepositsthat we sampled. At SouthHigh, we found that a tally sheet or inventory controlworksheetwaslackingfortheJapaneseTomodachiDayClub.Additionally,thenumbersequenceoftheprenumberedreceipts could not be verified for three of the ten deposits. AtMadronaMiddle, we found thatdonationlettersweremissingforaDisneyTripandthatnoorderformswerekeptforcookiedoughandpopcornsales.Withoutoriginalsupportingdocumentation,wecouldnotverifywhetherallcashcollectedhadbeendeposited intact and into the correct ASB accounts. Sound internal controls for handling cashdiscourage theft of ASB funds and protect those who handle the cash. It is important to tie allproceedstothespecificeventfromwhichtheyweregeneratedandtoensurethatallproceedsfromaneventareturnedinandproperlyaccountedfor.

RevenuePotentials ‐ During our inquiries and testing of cash receipts, we noted thatMadronaMiddle, North High, South High, and Torrance High did not prepare revenue potentials. It isimportantforstudentorganizationstohaveadequateinternalcontrolsovertheirfundraisingevents,properlyevaluatetheeffectivenessofthoseevents,andaccountfora fundraiser’s financialactivity.Revenuepotentialsareusedasabudgetingandplanningtool.The formservesasasalesplanthatincludesexpectedsaleslevels,salepricesperunit,expectedcost,andnetincome.

LackofComparisonsofRevenueandExpenseAccounts‐Throughinquiry,wenotedthatevery

middle and elementary school ASB does not prepare annual revenue and expense reports.Preparation and comparison of account activity is an important internal control for the ASBbookkeepertoreviewtheoverallfinancialreportingoftheASBfunds.Thebookkeepershouldreviewcomparisonsandactivityonaperiodicbasis identifyanydiscrepancies, improperaccounts,and/oroverdrawntrustaccounts.

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FoodSales‐Duringourinquiry,wenotedthatTorranceHighandMadronaMiddleconductsfoodsalesofwhat is consideredunhealthy foodandbeverageswithin30minutesofschoolending.TheCaliforniaChildhoodObesityPreventionActof2003andEducationCodesection35182.5establishlimits on the sale of specific food andbeverage items in gradesK‐12. For junior,middle, andhighschools, the regulations only allow the sale of unhealthy food andbeverageson school grounds atleast30minutesaftertheendoftheschoolday.

Recommendation:Werecommendthefollowingforeachitemnotedabove:

Bank Reconciliations Not Timely ‐ We recommend the bookkeepers perform monthly bankreconciliations within two weeks after the statement arrives. Furthermore, the Principal or ASBAdvisor should review the bank reconciliation and initial and date the bank statement andreconciliationasevidencetheywerereviewed.ReviewofthebankreconciliationsbysomeoneotherthantheASBBookkeeperisanimportantinternalcontroltodetecterrorsandpossiblequestionableorsuspiciousactivity.

Cash Disbursements Approval Process ‐ Education Code Section 48933(b) requires all

disbursementsfromASBfundsbeauthorizedbyastudentrepresentative,anadvisor,andadistrictrepresentative (usually a principal or vice‐principal) prior to disbursing the funds. As a “bestpractice”,approvalbyrequiredpartiesshouldbeobtainedbeforetheactualcommitmenttopurchasethe items in order to ensure the expense is a proper use of student‐body funds and falls withinbudgetary guidelines. If it is determined that a planned disbursement is going to exceed theapprovedamount,thedisbursementshouldbepreapproved.

LackofEvidenceofReceipt‐Werecommendthatthesitesdocumentaphysicalreceiptofthegoods

orservicesonthecorrespondinginvoice,packingslip,orotherdocumentation,suchaswriting“oktopay”or“received”andinitialingthedocumentpriorto issuingthecheckforpayment.Thisensuresthatpaymentisnotbeingmadeforitemsreceivedincorrectlyornotreceivedatall.

ShippingGoods toPersonalAddress ‐All items should be shipped directly to the school sites.

Additionally, all goods or services purchasedwith ASB funds should be received by an individualotherthantheoriginalpurchaserandsignitoff.

InappropriateUseofASBFunds‐Werecommendthatthesitediscontinueissuingsuchpayments

fromASBfundsandthatthesiteberemindedofallowableandprohibitedpurchaseswithASBfunds.

Lack of Supporting Documentation for Cash Receipts ‐ Without complete supportingdocumentation,wecouldnotverifywhetherallcashcollectedhadbeendepositedintactandintothecorrectASBaccounts. Sound internalcontrols forhandlingcashdiscouragetheftofASBfundsandprotectthosewhohandlethecash.Itisimportanttotieallproceedstothespecificeventfromwhichthey were generated and to ensure that all proceeds from an event are turned in and properlyaccounted for. We recommend that before any events areheld, controlprocedures, suchas ticketlogs,tallysheets,prenumberedcashreceipts,orcashregisterreceipts,shouldbeestablishedthatwillallowforthereconciliationbetweenmoneycollectedandeventsales.

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RevenuePotentials‐Werecommendthatrevenuepotentialsbepreparedforallmajorfund‐raisingactivities.

LackofFinancialComparisons ‐Werecommendthatperiodicfinancialcomparisonsbeprepared

andreviewed,andsubsequentlysubmittedtotheDistrictofficeonaregularbasistoensureproperoversightandstronginternalcontrols.

Food Sales ‐ We recommend that all sites follow the regulations and have the sales at least 30minutesaftertheendoftheschoolday.Ifthelawsarenotfollowed,thedistrictcanbepenalizedwithreducedfundingtothefoodservice/cafeteriaprogram.

ViewsofResponsibleOfficials:

BankReconciliationsNotTimely–

NorthHigh:HereatNorthHighwewillprepareourFinancialStatementsmonthlyduringMonth‐Endclosing. We have taken necessary steps with our banking institutions to acquire monthly bankstatements in a timely manner in order to perform Bank reconciliations before the end of thefollowingmonth. FinancialStatementsinclude:BalanceSheet,TrialBalance,StatementofRevenue,Profit&LossStatement&BankReconciliations.Oncecompleted,wefilethereportsandsendcopiesofthereportstotheDistrict(Monthly)&DistrictHighSchools(Quarterly)forrecords.

TorranceHigh: TorranceHighwillwork to improveuponthecompletionofbankreconciliations,includingourPayPalaccount,inatimeliermanner. PleasenotethattheASBAccountingSpecialistsonly work eleven months. Completing reconciliations for July, August and September can be adifficulttaskconsideringtheamounthoursasinglepersonisallocated.WestHigh:WestHighASBwillprioritizecompletingtheBankReconciliationsinatimelymanner.

CashDisbursementsApprovalProcess–

Madrona Middle: School has amended its procedures and all disbursements are reviewed andapprovedprior to payment. ASB routinely votes to approve any expensesprior to submission fordisbursementapproval.NorthHigh: North High requires all check disbursement requests be approved before a check isproduced.CheckdisbursementrequestsarereviewedbytheStudentCouncil,ASBAdvisor&DistrictRepresentative. Once approved, the requests are signed and dated and submitted to the ASBAccountantforprocessing.Checkswillnotbecreateduntilthisprocessiscompleted.SouthHigh:SouthHighhasimplementedapre‐approvalprocessforexpendituresforclubadvisors,coaches and directors. There are budgetary guidelines provided, and when an organization’sexpenditureisexpectedtoexceedthebudget,apre‐approvalisrequired.

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TORRANCEUNIFIEDSCHOOLDISTRICTScheduleofAuditFindingsandQuestionedCostsFortheFiscalYearEndedJune30,2017SECTIONII‐FINANCIALSTATEMENTFINDINGS(continued)Finding2017‐001:AssociatedStudentBody(ASB)Controls(30000)(continued)ViewsofResponsibleOfficials(continued):

TorranceHigh:TorranceHighhasimplementedapre‐approvalprocessforexpenditureitemsabovespecificdollaramountsforclubsandathleticteams.WestHigh:WestHighASBhasimplementedanewprocedureforpreapprovalofexpendituresthisyear.EveryASBaccounthasanexpenditurebudgetwhichispreapprovedforthenextschoolyear.Itis completed by the coach/advisor of the account and it is approved by the Student Council. Apurchaseorderiscreatedforeachcategorywithinthepreapprovedbudget.

LackofEvidenceofReceipt–

TorranceHigh: Weprovideallofourclubsponsors,coaches,etc.withasetofguidelinesandholdmeetingswithourcoachesandICCrepresentativesatthestartofeachschoolyear.Thoseguidelinesstatethatoriginalreceiptsaretobeattachedtodisbursementvoucherrequests.

SouthHigh:AtSouthHigh,aspartofourpolicies,weaskallcoaches,advisorsanddirectorstoreportreceiptofgoodstoouroffice.Thereportingmechanismswillcomeinavarietyofmethods–emails,voicemessages,andpackingslips–areallacceptedmethodsofreporting.

ShippinggoodstoPersonalAddress–

WestHigh:WestHighASBwillnotifyallcoaches/advisorsatthebeginningoftheschoolyeartohaveitems shipped to the school address. It is also statedon thePreapprovalofExpenses form that iscompletedinJuneofthepriorschoolyear.TorranceHigh:Informationhandoutsaregiventoteachers,coachesandclubsponsorseachyearonhowtoconductbusinessthroughASB.Theshippingofitemsdirectlytoaperson’shomeasopposedtoshippingtoTorranceHighisnotedinthehandoutassomethingnottodoandawarningisgiventothepersonresponsibleaftertheirfirstinfraction.

InappropriateUseofASBFunds–MadronaMiddle: Madrona Middle School has a club account for CJSF under ASB and it is thisaccountthatpaysforPEsuppliesbutonlyforextra‐curricularactivities.AllPEsuppliesforclassarepurchasedfromtheschoolsupplybudget.Giftcardsandmealsarenolongerpaidfor.TorranceHigh:TorranceHighisawareoftheguidelinesregardingASBfundsandcontinuestoworktolimitthequestionablespendingpractices.WestHigh:ASBwillhaveteachersturninthereceiptstotheBusinessOfficetobereimbursedfrompettycash.

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LackofSupportingDocumentationforCashReceipts–TorranceHigh:Informationhandoutsaregiventoteachers,coachesandclubsponsorseachyearonhow to conduct business throughASB. Turning in original receipts is noted in the handout and awarningisgiventothepersonresponsibleaftertheirfirstinfraction.WestHigh: ASB will emphasize to the groups who have a snack bar that a tally sheet must becompleted.ASBwillbesuretohaveareceiptwithdetailedinformationforeverycheckrequest.NorthHigh: Here at North High we now require every deposit of monies in the ASB account beaccompaniedbyadeposit slip. Also,with the installationofournewASBWorkssoftware,wenowhavenumberedreceiptsforeverycashdeposittransaction.Copiesofeachoftheseitemsalongwiththebankdepositreportarefiledtogetherforourrecords.

SouthHigh: South High has an established receipting process, whereby all coaches, advisors anddirectorsissuereceiptstoallstudentswhenacceptingmonies.Onecopyofthereceiptisgiventothestudent,anothercopycomesintotheActivitiesOfficewiththedeposit,andthelastcopyremainsinthebookasevidence.Additionally,astudentrepresentativesignsoffonthedepositsasevidenceofthetotalreceipts.SouthHighActivitiesOfficehasalsosetupasystemwherewehavegroupsreportdirectly totheActivitiesOfficetoturn inmonies for theirorganizations,andourofficereceiptsthestudents directly. South High has also implemented the tally sheet procedure for club activities.Clubs/organizations are asked to include tally sheets for certain items sold. These tally sheets aresignedbytheadvisorandstudentrepresentative.MadronaMiddle:MadronaMiddle School no longer accepts donations forDisney trips. Madronawillmakearrangementstokeeporderformsonfileforaudit.

RevenuePotentials–

MadronaMiddle:ASBhas implementedarevenuepotentialprocessthat involvestheexaminationand trends of the fundraisers in the past and comparison with current student body numbers toprojecttheamountofmoniesthatcouldbesafelyanticipatedfromanyfundraisingrevenues.NorthHigh:North is in theprocessofcreatingaRevenuePotentialFormforCoaches,TeachersorAdvisorstofilloutformajorfundraisers.Weareworkingdiligentlytohaveapolicyinplacebeforetheendoftheschoolyear.WewillconsulttheFCMATmanualforbestpractices.SouthHigh:RevenuePotentials are included in everyActivityApplication that is passedby SouthHigh Student Council. Additionally, for major fundraising events, budgets are prepared andpreapprovedforupcomingexpenditures,aswellasproposedgains.TorranceHigh: TorranceHighwillcommunicatewithoursisterschoolstocreateand/orcopytherevenuepotentialformsusedtocomplywiththeauditor’sfindings.

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LackofFinancialComparisons–The District Office will work with all elementary and middle schools that have ASB to preparefinancialcomparisonsregularly.

FoodSales–

TorranceHigh:TorranceHighisawareofeducationcodeandwillcontinuetomonitoritsclubsandpromoteahealthylifestyle.MadronaMiddle:MadronaMiddleSchoolnolongersellsanyfoodsubstancesbeforethe30minutewindowhasclosed.

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TORRANCEUNIFIEDSCHOOLDISTRICTScheduleofAuditFindingsandQuestionedCostsFortheFiscalYearEndedJune30,2017SECTIONIII‐FEDERALAWARDFINDINGSANDQUESTIONEDCOSTSThissection identifies theaudit findingsrequiredtobereportedbytheUniformGuidance,Section200.516(e.g., significant deficiencies, material weaknesses, and instances of noncompliance, including questionedcosts).Therewerenofederalawardfindingsorquestionedcostsin2016‐17.

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TORRANCEUNIFIEDSCHOOLDISTRICTScheduleofAuditFindingsandQuestionedCostsFortheFiscalYearEndedJune30,2017SECTIONIV‐STATEAWARDFINDINGSANDQUESTIONEDCOSTSThis section identifies the audit findings pertaining to noncompliance with state program rules andregulations.Therewerenostateawardfindingsorquestionedcostsin2016‐17.

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TORRANCEUNIFIEDSCHOOLDISTRICTSummaryScheduleofPriorAuditFindingsFortheFiscalYearEndedJune30,2017

Original

FindingNo.

Finding

Code

Recommendation

CurrentStatus Finding2016‐001:AssociatedStudentBody(ASB)Controls

Throughoutthecourseoftheaudit,weidentifiedseveralinternalcontrolweaknessesinregardstoASBoperationsandoversight: No Budget Prepared ‐ At Jefferson andRichardson Middle Schools, we noted that theStudent Council did not prepare an annualoperatingbudget. Abudgetisanimportanttooltomonitor the financial activities of the ASB. Afterpreparation of an annual operating budget, theStudent Council should adopt the budget anddocumentitintheminutes.

Bank Reconciliations Not Timely ‐ During ourtesting,weidentifiedthatbankreconciliationswerenotalwayspreparedtimely.AtJeffersonMiddletheJuly,August, andSeptemberbankstatementswerereconciled in November. At Richardson Middle,bank statement reconciliations are prepared onlywhen requested by the District Office. At NorthHigh,theJanuarybankstatementwasreconciledinMarch.AtTorranceHigh,bankstatementshaven’tbeen reconciled since October due to computersystem problems. Timely and accurate bankreconciliationsareprudentandnecessarytoensurethattheaccountingrecordsmatchtheamountsheldondeposit.

Cash Disbursements Approval Process ‐ In ourtest of cash disbursements at North High, SouthHigh, Torrance High, Richardson Middle, andJeffersonMiddle,wenotedthatalargemajorityofthedisbursementsselectedinoursamplewerenotapproved by the District representative, the ASBadvisor, and/or the student representative.Furthermore, at each of the high schools andmiddle schools, we noted that themajority of thedisbursements sampled were approved, but notuntil after the expenditure had already beenincurred.

30000 Werecommendthefollowingforeachitemnotedabove: No Budget Prepared ‐ We recommend that the sitesensure that the Student Council is preparing an annualoperatingbudget.

BankReconciliationsNotTimely ‐We recommend thebookkeepersperformmonthlybankreconciliationswithintwoweeks after the statement arrives. Furthermore, thePrincipal or ASB Advisor should review the bankreconciliationandinitialanddatethebankstatementandreconciliationasevidence theywerereviewed.Reviewofthe bank reconciliations by someone other than the ASBBookkeeper is an important internal control to detecterrorsandpossiblequestionableorsuspiciousactivity.

CashDisbursementsApprovalProcess‐EducationCodeSection 48933(b) requires all disbursements from ASBfunds be authorized by a student representative, anadvisor, and a district representative (usually a principalorvice‐principal)priortodisbursingthefunds.Asa“bestpractice”,approvalbyrequiredpartiesshouldbeobtainedbefore the actual commitment to purchase the items inorder to ensure the expense is a proper use of student‐body funds and fallswithinbudgetary guidelines. If it isdetermined that a planned disbursement is going toexceedtheapprovedamount,thedisbursementshouldbepreapproved.

Implemented.

NotImplemented.SeeFinding2017‐001.


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CurrentStatusFinding2016‐001:AssociatedStudentBody(ASB)Controls(continued)

Discrepancy in or Lack of SupportingDocumentationforCashDisbursements‐Duringour tests of cash disbursements, we noted onedisbursement atRichardsonMiddle thatwaspaidin the amount of $2,520 to the Museum ofTolerance,buttheinvoicewasfor$2,415.AtSouthHigh, four disbursements in our sample of 25lackedanysupportingdocumentation.AtTorranceHigh,fivedisbursementsinoursampleof25lackedany supporting documentation. AtWestHigh, onedisbursement in our sample of 25 lacked anysupportingdocumentation.

LackofEvidenceofReceipt‐Duringourtestingofcash disbursements at Torrance High and SouthHigh, we noted that many of the disbursementstested lacked evidence of receipt of goods orservices.

Shipping Goods to Personal Address ‐ In ourexpenditure testing at South and West HighSchools,wenotedinstanceswherepurchaseditemswere shipped directly to the purchaser’s homeaddress, rather than to the school. Allowing itemsto be shipped directly to the purchaser allows thepossibility for fraudulent transactionstooccurandgoundetected.

Inappropriate Use of ASB Funds ‐ During ourtestingofcashdisbursements,oursampleincludedsome expenses that are unallowable orquestionable. At Jefferson Middle the disbursement was for$50 for the reimbursement of staff meals atChipotle.

AtRichardsonMiddle thedisbursementwas for$40forgiftcards.

At SouthHigh therewere four reimbursementsthat totaled over $900 for staff treats, coachtreats,andcoachchairs.

Discrepancy inorLackofSupportingDocumentationfor Cash Disbursements ‐ We advise the District tofollow‐upontheexceptionstoensurethatthediscrepancyor the disbursement was for a legitimate reason. Inaddition,werecommendthatthesiterequireallapprovalsandappropriatesupportingdocumentationtomatchpriortoissuingdisbursementstoensurethatstudentfundsarebeingproperlyspent.

Lack of Evidence ofReceipt ‐ We recommend that thesitesdocumentaphysicalreceiptofthegoodsorserviceson the corresponding invoice, packing slip, or otherdocumentation, such aswriting “ok to pay” or “received”and initialingthedocumentprior to issuingthecheckforpayment.Thisensuresthatpaymentisnotbeingmadeforitemsreceivedincorrectlyornotreceivedatall.

ShippingGoods toPersonalAddress ‐All itemsshouldbe shipped directly to the school sites. Additionally, allgoods or services purchased with ASB funds should bereceivedbyanindividualotherthantheoriginalpurchaserandsignitoff.

InappropriateUseofASBFunds ‐We recommend thatthesitediscontinueissuingsuchpaymentsfromASBfundsandthatthesiteberemindedofallowableandprohibitedpurchaseswithASBfunds.

Implemented.




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AtNorthHighateacherwasreimbursedfortwodisbursementstotaling$11,637forcomputerlabequipmentandforiMacs.

Lack ofTwo Signatures on Checks ‐ During ourtestofdisbursementsatJeffersonMiddle,wenotedthatthedisbursementssampledwerefoundtohaveonly one authorized signature on the check.Requiring a second signature on all checks is animportant internalcontrolduetotheinherent lackofsegregationofdutieswithintheASBoperations.

Lack of Supporting Documentation for CashReceipts‐Inourtestingofcashreceipts,wefoundsome deposits tested lacked sufficient supportingdocumentation.AtTorranceHigh,wefoundthatatally sheet or prenumbered receipts were lackingforfiveofthetendepositsthatwesampled.AtWestHigh, we found that a tally sheet or receipts forsnack bar sales were lacking. At North High,prenumbered receipts and order forms were notkeptforsixofthetendepositsthatwesampled.AtSouthHigh,prenumberedreceiptsandtallysheetswerenot kept fornineof the tendeposits thatwesampled. At Jefferson Middle, original sourcedocumentationwasnotretainedforanyofthefivedeposits that we tested. At Richardson Middle,originalsourcedocumentationwasnotretainedfornineofthetendepositsthatwetested.Without original supporting documentation, wecouldnotverifywhetherallcashcollectedhadbeendepositedintactandintothecorrectASBaccounts.

LackofTwoSignaturesonChecks‐Werecommendthatall expenditures be required to have two signatures oneachcheckinordertopreventthemisuseofASBfunds.

LackofSupportingDocumentationforCashReceipts‐Without complete supporting documentation, we couldnot verifywhether all cash collected had been depositedintact and into the correctASBaccounts. Sound internalcontrols for handling cash discourage theft of ASB fundsandprotectthosewhohandlethecash.Itisimportanttotieallproceedstothespecificeventfromwhichtheyweregenerated and to ensure that all proceeds from an eventareturnedinandproperlyaccountedfor.Werecommendthatbeforeanyeventsareheld, controlprocedures, suchas ticket logs, tally sheets,prenumberedcashreceipts,orcashregisterreceipts,shouldbeestablishedthatwillallowfor thereconciliationbetweenmoneycollectedandeventsales.

Implemented.


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Revenue Potentials ‐ During our inquiries andtesting of cash receipts,wenoted that noneof theASBspreparerevenuepotentials.Itisimportantforstudent organizations to have adequate internalcontrols over their fundraising events, properlyevaluate the effectiveness of those events, andaccount for a fundraiser’s financial activity.Revenue potentials are used as a budgeting andplanning tool.The formservesasa salesplan thatincludes expected sales levels, salepricesperunit,expectedcost,andnetincome.

Untimely Bank Deposits ‐ During our cashreceipts testingatRichardsonMiddle, eightof theten cash receipts that we sampled were notdeposited until several weeks after they had beencollected.

Revenue Potentials ‐ We recommend that revenuepotentialsbepreparedforallmajorfund‐raisingactivities.

Untimely Bank Deposits ‐ We recommend that theDistrict emphasize to the advisor and teachers thatdepositsshouldbemadeonaweeklybasisormoreoftenasneeded.Money shouldneverbe leftover theweekendorholidaysbecausemanytheftsoftenoccurduringthesetimes.

Not

Implemented.SeeFinding2017‐001.

Implemented.

Finding2016‐002:CafeteriaFundCashReserves

The school food authority should limit its net cashresources to an amount that does not exceed threemonths average expenditures in accordance with 7CFRSection210.14(b).At June30, 2016, fundbalance in theCafeteriaFundwas $2,217,445, which exceeds the average of threemonthsexpendituresby$458,054.

50000 WerecommendtheDistrictcontinuefollowingthespendingplansubmittedtotheCDE.

Implemented.

Finding2016‐003:SchoolAccountabilityReportCard

InaccordancewithEducationCode§33126,theschoolis toprovideanaccountabilityreportcard to includesafety,cleanliness,andadequacyofschoolfacilities,toinclude any needed maintenance to ensure goodrepair.Theconditionreportedshouldbesupportedbythe school's Facilities Inspection Tool (FIT), SchoolFacilitiesConditionEvaluationasrequiredbyEdCode§17002.

72000 We recommend that an employee verify the informationpresented in the SARC. This information is essential topresenttheimageoftheschoolfairlytothepublic.

Implemented.

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CurrentStatusFinding2016‐003:SchoolAccountabilityReportCard(continued)

Inaddition,accordingtoEducationCode§35256,thegoverning board must publish the SchoolAccountabilityReportCard(SARC)foreachschoolbyFebruary1stofeachyear.ItwasnotedthattheSchoolFacilityRepairStatusontheSARCforEdwardJ.RichardsonMiddleSchoolandWestHighSchooldidnotmatchtheFITform.Forbothschools, the SARCs were noted with “Good” repairstatuses. The corresponding FIT forms were bothnotedwith“Fair”ratings.

Finding2016‐004:CALPADSUnduplicatedPupilCounts

Supplemental and concentration grant amounts arecalculated based on the percentage of "unduplicatedpupils" enrolled in the LEA on Census Day (firstWednesdayinOctober).Thepercentageequals: Unduplicated countofpupilswho (1) areEnglish

learners,(2)meetincomeorcategoricaleligibilityrequirements for free or reduced‐price mealsunder theNational School LunchProgram, or (3)arefosteryouth."Unduplicatedcount"meansthateach pupil is counted only once even if the pupilmeetmore thanoneof thesecriteria(ECsections2574(b)(2)and42238.02(b)(1)).

Divided by total enrollment in the LEA (EC

sections2574(b)(1)and42238.02(b)(5)).Allpupilcounts are based on Fall 1 certified enrollmentreportedintheCALPADSasofCensusDay.

Duringourtestingofthefreeandreducedpricemealeligible students reported in the CALPADS 1.17 and1.18 reports, we noted eight students that werereported as qualifying for free or reduced pricedmeals should have been classified as paid, based onthehouseholdincomeontheapplication.

40000 We recommend that the District work with the ChildNutrition Services department to update the CALPADSsystemonceallapplicationsarereceived.Althoughthereisagrace period recognized at a local level, the District shouldupdate CALPADS retroactively to reflect the current yearapplication information in the reporting software. We alsorecommend that procedures are established to ensure thatthe student information systemwhich is used forCALPADSreporting,isupdatedtoreflectthechangesmadeintheChildNutritionServicesinternalsystempriortothesubmissionoftheCALPADSreport.

Implemented.

torrance unified school district audit report for the … · 2019. 6. 19. · 3 figure...

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