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LAWTON COMMUNITY SCHOOLS STATE OF MICHIGAN

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									               LAWTON COMMUNITY SCHOOLS
STATE OF MICHIGAN, COUNTIES OF VAN BUREN AND KALAMAZOO

 FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION

             For the Year Ended June 30, 2011
                                   TABLE OF CONTENTS


                                                                                Page No.

Independent Auditors’ Report                                                       1

Administration’s Discussion and Analysis                                          2-7

Basic Financial Statements
 District-Wide Financial Statements
   Statement of Net Assets                                                         8
   Statement of Activities                                                         9
 Fund Financial Statements
   Combined Balance Sheet – Governmental Funds and the Reconciliation of the
      Balance Sheet of Governmental Funds to the Statement of Net Assets          10
   Combined Statement of Revenues, Expenditures and Changes in Fund
      Balances – Governmental Funds                                               11
   Reconciliation of the Combined Statement of Revenues, Expenditures and
      Changes in Fund Balances – Governmental Funds to the Statement of
      Activities                                                                  12
 Fiduciary Funds
   Combining Statement of Fiduciary Net Assets                                    13
 Notes to the Financial Statements                                               14-26

Required Supplementary Information
 Budget Comparison Schedule – General Fund                                        27

Other Supplementary Information
 Combining Balance Sheet – Non-Major Governmental Funds                           28
 Combining Statement of Revenues, Expenditures and Changes in Fund
   Balances – Non-Major Governmental Funds                                        29
 Schedule of Revenues – General Fund                                              30
 Schedule of Expenditures and Other Financing Uses – General Fund                31-34
 Schedule of Changes in Long-Term Debt                                            35
 Schedule of Maturities of Bonded Debt                                           36-40

Single Audit
  Schedule of Expenditures of Federal Awards                                      41
  Note to Schedule of Expenditures of Federal Awards                              42

 Report on Internal Control Over Financial Reporting and on Compliance and
  Other Matters Based on an Audit of Financial Statements Performed in
  Accordance with Government Auditing Standards                                  43-44

 Report on Compliance with Requirements That Could Have a Direct and Material
  Affect on Each Major Program and on Internal Control Over Compliance in
  Accordance with OMB Circular A-133                                             45-46

 Schedule of Findings and Questioned Costs                                       47-49
                      SEBER TANS, PLC
                      CONSULTANTS & CERTIFIED PUBLIC ACCOUNTANTS
                                         INDEPENDENT AUDITORS’ REPORT


         To the Board of Education
         Lawton Community Schools, State of Michigan, Counties of Van Buren and Kalamazoo

         We have audited the accompanying financial statements of the governmental activities, each major
         fund, and the aggregate remaining fund information of Lawton Community Schools (the District) as of
         and for the year ended June 30, 2011, which collectively comprise the District’s basic financial
         statements as listed in the table of contents. These financial statements are the responsibility of the
         District’s management. Our responsibility is to express an opinion on these financial statements
         based on our audit.

         We conducted our audit in accordance with auditing standards generally accepted in the United States
         of America and the standards applicable to financial audits contained in Governmental Auditing
         Standards, issued by the Comptroller General of the United States. Those standards require that we
         plan and perform our audit to obtain reasonable assurance about whether the financial statements are
         free of material misstatement. An audit includes examining, on a test basis, evidence supporting the
         amounts and disclosures in the financial statements. An audit also includes assessing the accounting
         principles used and significant estimates made by management, as well as evaluating the overall
         financial statement presentation. We believe our audit provides a reasonable basis for our opinion.

         In our opinion, the financial statements referred to above present fairly, in all material respects, the
         respective financial position of the governmental activities, each major fund, and the aggregate
         remaining fund information of Lawton Community Schools as of June 30, 2011, and the respective
         changes in financial position thereof for the year then ended in conformity with accounting principles
         generally accepted in the United States of America.

         In accordance with Government Auditing Standards, we have also issued our report dated September
         30, 2011, on our consideration of the District’s internal control over financial reporting and on our tests
         of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and
         other matters. The purpose of that report is to describe the scope of our testing of internal control
         over financial reporting and compliance and the results of that testing, and not to provide an opinion
         on internal control over financial reporting or on compliance. That report is an integral part of an audit
         performed in accordance with Government Auditing Standards and should be considered in assessing
         the results of our audit.

         Accounting principles generally accepted in the United States of America require that the
         administration’s discussion and analysis and budgetary comparison information on pages 2 through 7
         and 27 be presented to supplement the basic financial statements. Such information, although not a
         part of the basic financial statements, is required by the Governmental Accounting Standards Board,
         who considers it to be an essential part of financial reporting for placing the basic financial statements
         in an appropriate operational, economic, or historical context. We have applied certain limited
         procedures to the required supplementary information in accordance with auditing standards generally
         accepted in the United States of America, which consisted of inquiries of management about the
         methods of preparing the information and comparing the information for consistency with
         management’s responses to our inquiries, the basic financial statements, and other knowledge we
         obtained during our audit of the basic financial statements. We do not express an opinion or provide
         any assurance on the information because the limited procedures do not provide us with sufficient
         evidence to express an opinion or provide any assurance.

555 W. Crosstown Parkway, Suite 304
Kalamazoo, Michigan 49008                                                                               Phone (269) 343-8180
www.sebertans.com                                                                                         Fax (269) 343-5419
Our audit was conducted for the purpose of forming opinions on the financial statements that
collectively comprise the District’s financial statements as a whole. The introductory section,
combining and individual nonmajor fund financial statements, and statistical section are presented for
purposes of additional analysis and are not a required part of the financial statements. The combining
and individual nonmajor fund financial statements are the responsibility of management and were
derived from and relate directly to the underlying accounting and other records used to prepare the
financial statements. The information has been subjected to the auditing procedures applied in the
audit of the financial statements and certain additional procedures, including comparing and
reconciling such information directly to the underlying accounting and other records used to prepare
the financial statements or to the financial statements themselves, and other additional procedures in
accordance with auditing standards generally accepted in the United States of America. In our
opinion, the information is fairly stated in all material respects in relation to the financial statements as
a whole. The introductory and statistical sections have not been subjected to the auditing procedures
applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or
provide any assurance on them.



Seber Tans, PLC
Kalamazoo, Michigan
September 30, 2011




                                                     1
Lawton Community Schools
State of Michigan, Counties of Van Buren and Kalamazoo
Administration’s Discussion and Analysis
For the Year Ended June 30, 2011


District–Wide Financial Statements

The District-wide statements provide a perspective of the District as a whole. These statements use the
full accrual basis of accounting similar to private sector companies. There are two District-wide
statements: the Statement of Net Assets and the Statement of Activities.

The Statement of Net Assets combines and consolidates the governmental funds’ current financial
resources (short-term spendable resources) with capital assets and long-term obligations, regardless of
whether they are currently available or not.

Consistent with the full accrual basis of accounting, the Statement of Activities accounts for current year
revenues and expenses regardless of when cash is received or paid. The intent of this statement is to
summarize and simplify the user’s analysis of the costs of various District services.

When analyzed together, the two statements help the reader determine whether the District is financially
stronger or weaker as a result of the year’s activities.

Fund Financial Statements

The fund financial statements focus on individual parts of the District, reporting the District’s operation in
more detail than the District-wide statements. The fund financial statements are reported on a modified
accrual basis. Only those assets that are measurable and currently available are reported. Recognition
of liabilities is limited to the extent that there is reasonable expectation that those obligations will be paid
with current financial resources.

The fund financial statements are formatted to comply with the legal requirements of the Michigan
Department of Education’s Public School Accounting Manual. In the State of Michigan, the District’s
major instructional and instructional support activities are reported in the General Fund. Additional
activities are reported in their relevant funds. The funds used by Lawton Community Schools include
capital project funds, fiduciary funds, debt funds, and special revenue fund for food service. Effective with
the accompanying fiscal 2010 financial statements, athletic activities are included in the general fund
rather than in a separate fund since athletic activities are primarily funded from general fund sources.

Lawton Community Schools is the trustee, or fiduciary, for its student activity funds and for a number of
scholarships established for the benefit of our students. These fiduciary activities are reported in
separate statements of fiduciary net assets. They are excluded from the other financial statements
because the District may not use the assets to finance its operations. The District is responsible for
ensuring that the assets reported in these funds are used for their intended purposes.




                                                       2
Lawton Community Schools
State of Michigan, Counties of Van Buren and Kalamazoo
Administration’s Discussion and Analysis
For the Year Ended June 30, 2011


Financial Analysis of the District as a Whole

Summary of Net Assets

                                                                2011                 2010
         ASSETS
          Current assets                                   $    4,240,643      $     3,784,437
          Capital assets, net book value                       24,761,008           25,487,204
          TOTAL ASSETS                                     $   29,001,651      $    29,271,641

         LIABILITIES
           Current liabilities                             $    3,379,611      $     3,097,148
           Long-term liabilities                               25,315,794           26,162,172
           TOTAL LIABILITIES                                   28,695,405           29,259,320

         NET ASSETS (DEFICIT)
          Invested in capital assets, net of related            (1,567,325)          (1,604,086)
          debt
          Restricted for debt service and capital
             projects                                              479,218              410,687
          Unrestricted and undesignated                          1,394,353            1,205,720
          TOTAL NET ASSETS                                         306,246               12,321

           TOTAL LIABILITIES AND NET ASSETS                $   29,001,651      $    29,271,641


No significant construction projects or capital asset purchases occurred during the fiscal year ended June
30, 2011. The District continues to receive pledged donations to repay the money that had been spent to
build the Athletic complex in prior years. The amount received in fiscal year 2011 was $20,000.

Results of Operations

The net assets of the District increased by $293,925 during the fiscal year ended June 30, 2011, after
they had decreased by $439,647 during the fiscal year ended June 30, 2010. This information is detailed
in the schedule below. Reconciliation of the difference between the increase in net assets and the
increase in fund balance is on page 12.




                                                       3
Lawton Community Schools
State of Michigan, Counties of Van Buren and Kalamazoo
Administration’s Discussion and Analysis
For the Year Ended June 30, 2011



                                                                  2011              2010
         REVENUES
          Program revenues:
            Charges for services                          $          257,402    $      254,301
            Operating grants                                       1,674,932         1,517,496
          General revenues:
            Property taxes                                         2,799,012         2,749,766
            State foundation allowance                             6,300,686         6,283,216
            Other                                                     62,329             7,454
            TOTAL REVENUES                                        11,094,361        10,812,233

         EXPENSES
          Instruction and instructional support                    4,532,457         5,546,599
          Support services                                         3,509,642         2,655,667
          Food services                                              551,401           533,403
          Athletics                                                       ---          183,739
          Interest                                                 1,222,024         1,397,472
          Capital Outlay                                              49,912                 -
          Depreciation (unallocated)                                 935,000           935,000
          TOTAL EXPENSES                                          10,800,436        11,251,880

         INCREASE (DECREASE) IN NET ASSETS                    $      293,925    $     (439,647)


The District still received about 90% of its revenues for fiscal 2011 from State School Aid and local
property taxes, however this percentage decreased again from years past, when starting in 2009 the
District began receiving more in Federal funds. Those funds were in the form of new grants designed to
stimulate the economy and also used to replace the loss of State funds due to State of Michigan
budgetary constraints. Most of the State of Michigan State School Aid is unrestricted and based on three
variables:

   1. State of Michigan State School Aid Act per student foundation allowance
   2. Student enrollment calculated by blending 75% of the current year fall count and 25% of the prior
      year winter count
   3. The District’s non-homestead property tax levy

Per Student Foundation Allowance

Annually as part of its budget process, the Michigan legislature announces a dollar foundation allowance
for each public school student in the State. The per pupil foundation allowance had increased for a few
years until FY2009, when the amount reached was $7,316 per student. At the end of that fiscal year, the
per student amount was prorated and replaced wholly with American Reinvestment and Recovery Act
(ARRA) Federal Stimulus Funds, totaling $407,000.

A reduction in the allowance occurred again in FY2010 with a $165 per student reduction which was not
replaced by any other funds, and set the foundation allowance at $7,151 per student. In FY2011 the per
pupil foundation allowance remained flat from the prior year at $7,146 per student.




                                                   4
Lawton Community Schools
State of Michigan, Counties of Van Buren and Kalamazoo
Administration’s Discussion and Analysis
For the Year Ended June 30, 2011


Student Enrollment

The District’s student enrollment for the fall count of 2010-2011 was 1,044 students, which represented a
decrease of 31 students from the fall of the previous year. The actual fall enrollment figure was 10
students fewer than what was projected for fall 2010 count during the spring budget process. The
following table summarizes fall student enrollments in the past six years:

                 September        K-5           6-8             9-12            Total
                   2005           486           263             377             1,126
                   2006           458           275             384             1,117
                   2007           468           281             370             1,119
                   2008           455           258             377             1,090
                   2009           482           248             345             1,075
                   2010           443           262             339             1,044

Preliminary projections for fall 2011 count suggest a continuation to the trend of a decreased student
count, forecasting the number at 1,015 students.

Property Taxes Levied for General Operations

In fiscal year 2010-2011, the District levied 18 mills of property taxes for operations (General Fund) on
non-homestead properties. Under Michigan law, the tax levy is based on the taxable valuation of
properties. The annual taxable value increase in property is capped at the lesser of the rate of the prior
year’s Consumer Price Index increase or 5%, whichever is less. At the time of sale, a property’s taxable
valuation is readjusted to the State Equalized Value, theoretically 50% of the market value. The following
summarizes the local tax revenues as a percent of all General Fund revenues for the past five years:

                                                  Non-              % of
                                               Homestead         General Fund
                             Fiscal Year        Tax Levy          Revenue
                             2010-2011         $ 1,017,528          11.6
                             2009-2010           1,000,502          11.9
                             2008-2009             956,285          10.9
                             2007-2008           1,021,850          11.6
                             2006-2007           1,001,554          11.5



Local Property Tax History

The non-homestead property tax levy value showed an increase for the second year in a row in fiscal
year 2010-2011. It appears that the poor economic situation that Michigan has been in, which influenced
the property values to decrease in 2008-2009, has slowed and may be continuing to improve.




                                                      5
Lawton Community Schools
State of Michigan, Counties of Van Buren and Kalamazoo
Administration’s Discussion and Analysis
For the Year Ended June 30, 2011


Capital Assets

The District completed the construction of a new middle school in December 2004, and refurbished and
added new construction to the old high school in fiscal year 2005. In fiscal year 2006, a new track and
related facilities were constructed. The newly constructed facilities, other than the track, were placed in
service in January 2005. The track complex was placed in service in August 2006. As part of a solid
financial plan, the District commits funds each year to the maintenance and repair of its capital assets.
Additionally, the District continues to update an inventory of its physical assets annually as well as striving
to update methods for accuracy in reporting those figures.

Long-Term Debt

The District continued to make significant principal payments on its long-term obligations during the year,
decreasing the principal balance from $25.8 million, net of current maturities, to $25.0 million at fiscal
year-end. In addition to principal payments, the 2001 Debt was refunded at a lower interest rate and will
produce significant savings to the District during the life of the bond. The District also continues to be able
to borrow less from the School Bond Loan Fund in order meet its obligations.

Original versus Revised Budget

The Uniform Budget Act of the State of Michigan requires that a local Board of Education approve the
original budget for the upcoming fiscal year prior to July 1, the start of the fiscal year. The projected
budget for 2010-2011 was originally approved on June 21, 2010 and amended on June 27, 2011.

General Fund Revenues

          Total revenues – revised budget                                          $      8,908,120
          Total revenues – original budget                                                7,889,053
                                                                                    $     1,019,067

In fiscal year 2011, federal accounting rules changed such that the District’s Athletic Fund revenues and
expenses would be included in the General Fund, and no longer be a stand-alone fund. This change in
procedure added $194,203 in revenue to the General Fund, of the $1,019,067 additional revenue from
originally budgeted.

A large portion of the difference in actual revenues from projected is once again the receipt of federal
funds, the amount which, at the time of budgeting, was unknown. This accounts for around $575,000 of
the increase in revenues and includes EduJobs Funds, Special Education ARRA Funds, Title I ARRA
Funds and ARRA Stabilization Funds. The remaining amount of additional revenue is from increases in
State Aid categorical amounts and property taxes and a property damage insurance claim.




                                                      6
Lawton Community Schools
State of Michigan, Counties of Van Buren and Kalamazoo
Administration’s Discussion and Analysis
For the Year Ended June 30, 2011


General Fund Expenditures

          Total expenditures and other financing uses – revised budget            $     8,501,141
          Total expenditures and other financing uses – original budget                 7,855,090
                                                                                  $       646,051

Again, due to the change in federal accounting rules to include the Athletic Fund in the General Fund,
expenses in the General Fund were higher than originally projected. The inclusion of the Athletic Fund
expenses contributed $186,150 of the $646,051 difference in expenditures. The major part of the rest of
the difference is attributed to an increase in expenses to match the Federal Grant funds received.

Economic Factors and Next Year’s Budget and Rates

With a new governor and legislature elected in the fall of 2010, there were many changes announced to
rebase school funding and operations in the next fiscal year and beyond, as the government worked to
have a balanced budget in place on time.

First, affecting state school aid revenues, will be a rebased per pupil foundation allowance to
approximately $6,800-$6,900 per student, a portion of which is contingent upon District best-practices
that can be implemented to earn the additional funds. Second, the amount of funding will also include
calculating the blended membership count at a 90/10% level as opposed to the 75/25% calculation used
in past years. Third, the student count day will be the first Wednesday in October, rather than the last
Wednesday in September. And finally, going forward into fiscal year 2012, ARRA Federal Funds will not
be available. On the expenditure side, a new law caps the expense a district can have annually for health
insurance.

The State’s deteriorating economic condition appears to have stabilized but the funds are still lacking in
the economy as it is slowly recovering. Budgeting for 2011-2012 proved to be challenging with the
reduction in state school aid revenues and the loss of ARRA Federal Funds. Also, the District continues
to suffer the impact of the lack of interest being paid on funds in savings and investment accounts, as
those rates paid on accounts have not increased after dropping significantly in the 4th quarter of 2008.

The District continues diligent and conservative planning and purchasing to accomplish its goal of being
fiscally responsible to taxpayers while providing quality education for its students, as well as maintaining
its facilities.


Requests for Information

This financial report is designed to provide our citizens, taxpayers, parents, students, investors and
creditors with a general overview of the District’s finances and to demonstrate the District’s accountability
for the money it receives. Additional detail, including the required Budget and Salary Compensation
Transparency Reporting, is available on the District’s website (www.lawtoncs.org). Questions concerning
this report or requests for additional information should be addressed to Superintendent Joseph Trimboli
at jtrimboli@lawtoncs.org.




                                                     7
     Lawton Community Schools
     State of Michigan, Counties of Van Buren and Kalamazoo
     District-Wide Statement of Net Assets
     June 30, 2011

                                                                  Governmental
     ASSETS                                                         Activities

       Current Assets
        Cash                                                      $    1,030,518
        Investments                                                    1,631,331
        Accounts receivable                                            1,491,643
        Other current assets                                              81,195
        Inventory                                                          5,956
              Total Current Assets                                     4,240,643

       Property and Equipment
        Capital assets, net of accumulated depreciation               24,761,008

              Total Assets                                        $   29,001,651

     LIABILITIES AND NET ASSETS

       Current Liabilities
        Accounts payable                                          $      207,323
        Salaries payable and related withholdings                        494,166
        Accrued interest                                               1,440,850
        Deferred revenue                                                   6,746
        Current maturities of bonds payable                            1,230,526
              Total Current Liabilities                                3,379,611

       Bonds Payable, net of current maturities                       24,965,794

       Compensated Absences                                             350,000

     NET ASSETS (DEFICIT)
      Invested in capital assets, net of related debt (deficit)       (1,567,325)
      Restricted for debt service                                        399,218
      Restricted for capital projects                                     80,000
      Unrestricted                                                     1,394,353
              Total Net Assets                                           306,246

              Total Liabilities and Net Assets                    $   29,001,651




See Notes to Financial Statements

                                                            8
    Lawton Community Schools
    State of Michigan, Counties of Van Buren and Kalamazoo
    District-Wide Statement of Activities
    For the Year Ended June 30, 2011


                                                                                                 Governmental
                                                                                                  Activities Net
                                                                                                   (Expense)
                                                                    Program Revenue               Revenue and
                                                              Charges for       Operating        Changes in Net
                                        Expenses                Service          Grants              Assets

    Functions/Programs
     Governmental activities:
      Instruction & instructional
        support                     $     (4,532,457)     $          1,230       $   1,292,233   $   (3,238,994)
      Support services                    (3,509,642)              256,172             382,699       (2,870,771)
      Food services                         (551,401)                    -                   -         (551,401)
      Interest on long-term debt          (1,222,024)                    -                   -       (1,222,024)
      Capital outlay                         (49,912)                                                   (49,912)
      Depreciation (unallocated)            (935,000)                     -                  -         (935,000)
     Total Governmental
        Activities                  $    (10,800,436)     $        257,402       $   1,674,932   $   (8,868,102)



                                    GENERAL REVENUES:
                                     Taxes:
                                       Property taxes, levied for general
                                        obligations                                              $      988,678
                                       Property taxes, levied for debt service                        1,810,334
                                     State of Michigan aid, unrestricted                              6,300,686
                                     Donations and other general revenue                                 50,574
                                     Interest and investment earnings                                    11,755
                                     Total General Revenues                                           9,162,027

                                    INCREASE IN NET ASSETS                                              293,925

                                    Net Assets, Beginning of Year                                        12,321

                                    Net Assets, End of Year                                      $      306,246




See Notes to Financial Statements

                                                          9
      Lawton Community Schools
      State of Michigan, Counties of Van Buren and Kalamazoo
      Combined Balance Sheet - Governmental Funds and the
      Reconciliation of the Balance Sheet of Governmental Funds to
      The Statement of Net Assets
      June 30, 2011
                                                                                                                                            Other
                                                                                   2010               2006               2005             Nonmajor            Total
                                                                                   Debt               Debt               Debt              Govern-           Govern-
                                                             General              Service            Service            Service            mental            mental

     ASSETS
      Cash                                               $        573,283     $        128,629   $      34,291     $      165,864     $      128,451     $   1,030,518
      Investments                                               1,629,083                    -               -                  -              2,248         1,631,331
      Accounts receivable                                       1,487,399                    -               -                  -              4,244         1,491,643
      Inventory                                                         -                    -               -                  -              5,956             5,956
      Prepaid expenses                                              1,195                    -               -                  -                  -             1,195
      Due from other funds                                         24,458                    -               -                  -                  -            24,458
               Total Assets                              $      3,715,418     $        128,629   $      34,291     $      165,864     $      140,899     $   4,185,101

     LIABILITIES AND FUND BALANCES

     Liabilities
      Accounts payable                                   $        206,823     $              -   $             -   $              -   $          500     $     207,323
      Due to other funds                                                -                    -                 -                  -           24,458            24,458
      Salaries payable and related withholdings                   494,166                    -                 -                  -                -           494,166
      Deferred revenue                                              2,290                    -                 -                  -            4,456             6,746
                 Total Liabilities                                703,279                    -                 -                  -           29,414           732,693

     Fund Balances
      Nonspendable                                                  1,195                    -               -                  -              5,956             7,151
      Restricted                                                        -              128,629          34,291            165,864             70,434           399,218
      Committed for capital projects and other                    471,984                    -               -                  -             29,000           500,984
      Assigned for equipment replacement                                -                    -               -                  -              6,095             6,095
      Unassigned                                                2,538,960                    -               -                  -                  -         2,538,960
               Total Fund Balances                              3,012,139              128,629          34,291            165,864            111,485         3,452,408

               Total Liabilities & Fund Balances         $      3,715,418     $        128,629   $      34,291     $      165,864     $      140,899     $   4,185,101



               Reconciliation of the combined balance sheet - governmental funds to the statement of net assets:

               Total governmental fund balances                                                                                       $    3,452,408

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

               Capital assets used in governmental activities are not financial resources, and are not reported in the funds:

                 The cost of the capital assets is                                                                      35,863,634
                 Accumulated depreciation is                                                                           (11,102,626)
                                                                                                                                          24,761,008
               Long term liabilities that are not due and payable in the current period and are not reported in the funds:

                  Bonds payable                                                                                                           (26,196,320)
                  Compensated absences                                                                                                       (350,000)

               Promises to give recorded as receivables                                                                                       80,000

               Accrued interest is not included as a liability in governmental funds                                                       (1,440,850)

               Net Assets of Governmental Activities                                                                                  $      306,246




See Notes to Financial Statements
                                                                                        10
     Lawton Community Schools
     State of Michigan, Counties of Van Buren and Kalamazoo
     Combined Statement of Revenues, Expenditures and Changes in
     Fund Balances - Governmental Funds
     For the Year Ended June 30, 2011
                                                                                                                                  Other
                                                                                2010             2006              2005         Nonmajor
                                                                                Debt             Debt              Debt          Govern-     Total Govern-
                                                           General Fund        Service          Service           Service        mental         mental

     REVENUES
      Local sources                                        $   1,154,323   $ 1,050,692      $ 224,803         $    381,673      $ 315,497    $    3,126,988
      Intermediate sources                                        64,714             -              -                    -              -            64,714
      State sources                                            6,789,596             -              -                    -         20,614         6,810,210
      Federal sources                                            738,609             -              -                    -        362,085         1,100,694
      Interest                                                     5,561         5,803            119                  193             79            11,755
               Total Revenues                                  8,752,803     1,056,495        224,922              381,866        698,275        11,114,361

     OTHER FINANCING SOURCES
      Refunding bonds                                                  -       5,335,000              -                  -              -         5,335,000
      Proceeds from school bond loan fund                              -               -        156,451            126,697              -           283,148
                                                                       -       5,335,000        156,451            126,697              -         5,618,148


               Total Revenues & Other Financing Sources        8,752,803       6,391,495        381,373            508,563       698,275         16,732,509

     EXPENDITURES
      Education
       Instruction                                             5,033,858               -              -                  -             -          5,033,858
       Support services                                        2,958,241               -              -                  -       551,401          3,509,642
      Capital outlay                                             258,716               -              -                  -             -            258,716
      Debt service                                                     -       1,099,819        380,589            381,147       149,590          2,011,145
                Total Expenditures                             8,250,815       1,099,819        380,589            381,147       700,991         10,813,361

     Other Financing Uses
      Payment to refunding bond escrow agent                           -       5,335,000                  -                 -           -         5,335,000


               Total Expenditures & Other Financing Uses       8,250,815       6,434,819        380,589            381,147       700,991         16,148,361



     Excess (Deficiency) of Revenues and Other Financing
      Sources Over Expenditures                                 501,988          (43,324)           784            127,416         (2,716)         584,148

     Fund Balances, Beginning of Year                          2,510,151        171,953           33,507            38,448       114,201          2,868,260

     Fund Balances, End of Year                            $   3,012,139   $    128,629     $     34,291      $    165,864      $ 111,485    $    3,452,408




See Notes to Financial Statements
                                                                           11
    Lawton Community Schools
    State of Michigan, Counties of Van Buren and Kalamazoo
    Reconciliation of the Combined Statement of Revenues,
    Expenditures and Changes in Fund Balances - Governmental Funds
    To the Statement of Activities
    For the Year Ended June 30, 2011

    Net change in fund balance - total governmental funds                            $    584,148

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


    Governmental funds report capital outlays as expenditures; in
     the statement of activities, these costs are allocated over their
     estimated useful lives as depreciation:

          Depreciation expense                                           (935,000)
          Capital outlay                                                  208,804         (726,196)


    Amortization of premium on bonds payable. Bond obligations
     payable are not recognized on governmental funds until paid.
     Accordingly, premiums and the related amortization to interest
     expense is not recorded on the governmental funds but is
     reported as interest expense in the statement of activities.                          (51,000)

    Accrued interest is recorded in the statement of activities when
     incurred; it is not reported in governmental funds until paid.                       (220,000)


    Repayment of bond principal is an expenditure in the
     governmental funds, but not in the statement of activities
     (where it reduces long-term bonds payable).                                         1,060,121


    Increase in compensated absence payable is reported in the
      statement of activities when incurred; it is not reported in
      governmental funds until paid.                                                       (50,000)


    Payments of promises to give are recognized in
     governmental funds as income. Payments on promises
     to give are not recognized in the statement of activities
     upon the unconditional promise to pay rather than when
     payment is made.                                                                      (20,000)


    Proceeds from the school bond loan fund is revenue in the
     governmental funds, but not in the statement of activities
     (where it increases long-term bonds payable).                                        (283,148)

    Change in Net Assets of Governmental Activities                                  $    293,925




See Notes to Financial Statements

                                                               12
    Lawton Community Schools
    State of Michigan, Counties of Van Buren and Kalamazoo
    Combining Statement of Fiduciary Net Assets
    June 30, 2011

                                                        Private         Agency –
                                                       Purpose –        Student
                                                      Scholarship       Activities           Total

    ASSETS
     Cash                                             $     5,292   $        82,665      $     87,957
     Investments                                            4,942            10,000            14,942
            Total Assets                              $    10,234   $        92,665      $    102,899

    LIABILITIES AND NET ASSETS

      Liabilities
         Due to student groups                        $         -   $        92,665      $     92,665

      Net Assets
        Restricted for scholarships                        10,234                    -         10,234
            Total Fund Balances                            10,234                    -         10,234

              Total Liabilities and Net Assets        $    10,234   $        92,665      $    102,899




See Notes to Financial Statements

                                                 13
Lawton Community Schools
State of Michigan, Counties of Van Buren and Kalamazoo
Notes to the Financial Statements
For the Year Ended June 30, 2011


NOTE A - Summary of Significant Accounting Policies

   The accounting policies of Lawton Community Schools (the District) conform to accounting principles
   generally accepted in the United States of America (GAAP) as applicable to governmental units. The
   following is a summary of the significant accounting policies used by the District.

   Reporting Entity

   The District is an independent entity with an elected Board of Education. The Board has complete
   oversight responsibility and is responsible for all financial matters except property tax assessment
   and collection, which is handled by the cities and townships. The criteria established by the
   Governmental Accounting Standards Board for determining the various governmental organizations
   to be included in the reporting entity’s financial statements include oversight responsibility, scope of
   public service, and special financing relationships. On this basis, there are no component units that
   are included in this report.

   District-Wide and Fund Financial Statements

   The district-wide financial statements (i.e., the statement of net assets and the statement of activities)
   report information on all of the non-fiduciary activities of the primary government. For the most part,
   the effect of interfund activity has been removed from these statements. Governmental activities,
   which normally are supported by taxes and intergovernmental revenues, are reported separately from
   business-type activities, which rely to a significant extent on fees and charges for support. All the
   district’s government-wide activities are considered governmental activities.

   The statement of activities demonstrates the degree to which the direct expenses of a given function
   or segment is offset by program revenues. Direct expenses are those that are clearly identifiable with
   a specific function. Program revenue includes (1) charges to customers or applicants who purchase,
   use, or directly benefit from goods, services, or privileges provided by a given function and (2) grants
   and contributions that are restricted to meeting the operational or capital requirements of a particular
   function. Taxes, intergovernmental payments, and other items not properly included among program
   revenue are reported instead as general revenue.

   Separate financial statements are provided for governmental funds and fiduciary funds, even though
   the latter are excluded from the government-wide financial statements.            Major individual
   governmental funds are reported as separate columns in the fund financial statements.

   Measurement Focus, Basis of Accounting, and Financial Statement Presentation

   District-Wide Statements

   The district-wide financial statements are reported using the economic resources measurement focus
   and the accrual basis of accounting. Revenue is recorded when earned and expenses are recorded
   when a liability is incurred, regardless of the timing of related cash flows. Property taxes are
   recognized as revenue in the year for which they are levied. Grants, categorical aid and similar items
   are recognized as revenue as soon as all eligibility requirements imposed by the provider have been
   met.




                                                    14
Lawton Community Schools
State of Michigan, Counties of Van Buren and Kalamazoo
Notes to the Financial Statements
For the Year Ended June 30, 2011


NOTE A - Summary of Significant Accounting Policies (Continued)

   As a general rule, the effect of inter-fund activity has been eliminated from the government-wide
   financial statements.

   Fund Based Statements

   Governmental fund financial statements are reported using the current financial resources
   measurement focus and the modified accrual basis of accounting. Revenue is recognized as soon
   as it is both measurable and available. Revenue is considered to be available if it is collected within
   the current period or soon enough thereafter to pay liabilities of the current period. For this purpose,
   the government considers revenues to be available if they are collected within 60 days of the end of
   the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under
   accrual accounting. However, debt service expenditures, as well as expenditures related to
   compensated absences and severance pay, are recorded only when payment is due.

   Property taxes, unrestricted state aid, intergovernmental grants and interest associated with the
   current fiscal period are all considered to be susceptible to accrual and so have been recognized as
   revenue of the current fiscal period. All other revenue items are considered to be available only when
   cash is received by the government.

   The fiduciary fund statement is also reported using the economic resources measurement focus and
   the accrual basis of accounting.

   The District reports the following major governmental funds:

       The General Fund is the District’s primary operating fund. It accounts for all financial resources
       of the District, except those required to be accounted for in another fund. Effective July 1, 2010,
       the District adopted GASB 54, Fund Balance Reporting and Governmental Fund Type
       Definitions. In accordance with GASB 54 the District included its athletic department operations in
       its general fund activities rather than a separate Athletic Fund that had been utilized in prior
       years. The athletic department operations are primarily supported by general fund resources
       rather than special revenues. Therefore, the activities of the athletic department are most
       appropriately shown in the general fund. The Athletics Fund had a balance of $24,452 as of
       June 30, 2010. The General Fund beginning balance as of July 1, 2010 has been restated to
       include the Athletics Fund.

       The 2005, 2006, and 2010 Debt Service Funds are used to record tax, interest, and other
       revenue, and for payment of principle, interest and other expenditures on the 2005 refunding
       bond issue, the 2006 refunding bond issue, and the 2010 bond issue, respectively.

   Additionally, the District reports the following fund types:

       The 2001 Capital Projects Fund is used to record interest, other revenue for payment, and
       expenses associated with the construction of capital facilities.

       Special Revenue Funds are used to account for the proceeds of specific revenue sources that
       are restricted to expenditures for specified purposes. The School Service Funds are Special
       Revenue Funds that segregate, for administrative purposes, the transactions of a particular
       activity from regular revenue and expenditure accounts. The District maintains full control of
       these funds. The School Service Fund maintained by the District is the Food Service Fund.



                                                      15
Lawton Community Schools
State of Michigan, Counties of Van Buren and Kalamazoo
Notes to the Financial Statements
For the Year Ended June 30, 2011


NOTE A - Summary of Significant Accounting Policies (Continued)

       Fiduciary Funds are used to account for assets held by the District in a trustee capacity or as an
       agent. Fiduciary Fund net assets and results of operations are not included in the government-
       wide statements. Agency Funds are custodial in nature (assets equal liabilities) and do not
       involve measurement of results of operations.

       The District presently maintains one Agency Fund (Student Activities Fund) to record the
       transactions of student and parent groups for school and school-related purposes. The funds are
       segregated and held in trust for the students and parents. The District also maintains one Private
       Purpose Fund (Scholarship Fund) that is restricted to the payment of scholarships. These funds
       are segregated and held in trust for the payment of student scholarships.

   Assets, Liabilities, and Net Assets or Equity

   Deposits and Investments

   Cash and cash equivalents include cash on hand, demand deposits, and short-term investments with
   a maturity of three months or less when acquired. Investments are stated at fair value.

   Receivables and Payables

   In general, outstanding balances between funds are reported as “due to/from other funds.” Activities
   between funds that are representative of lending/borrowing arrangements outstanding at the end of
   the fiscal year are referred to as “advances to/from other funds.”

   All trade and property tax receivables are shown net of an allowance for uncollectible amounts.
   Taxes are levied on December 1 and are collected through February 28 by various local units for the
   District. The local units then remit to the District any delinquent real property taxes by June 30.

   The State of Michigan utilizes a foundation allowance approach, which provides for a specific annual
   amount of revenue per student based on a state-wide formula. The foundation allowance is generally
   funded from a combination of state and local sources. Revenues from state sources are primarily
   governed by the School Aid Act and the School Code of Michigan. The state portion of the
   foundation is provided from the state’s School Aid Fund and is recognized as revenue in accordance
   with state law and accounting principles generally accepted in the United States of America. For
   2011, the state utilized $496,384 of federal funds provided by the American Recovery and
   Reinvestment Act (ARRA), along with the state and local sources previously described, to meet the
   foundation allowance total. The ARRA funds are subject to the earmark and accounting provision
   described in the immediately following paragraph.

   The District also receives revenue from the state to administer certain categorical education
   programs. State rules require that revenue earmarked for these programs be used for its specific
   purpose. Certain categorical funds require an accounting to the state of the expenditures incurred.
   For categorical funds meeting this requirement, funds received, which are not expended by the close
   of the fiscal year, are recorded as deferred revenue. Other categorical funding is recognized when
   the appropriation is received.




                                                   16
Lawton Community Schools
State of Michigan, Counties of Van Buren and Kalamazoo
Notes to the Financial Statements
For the Year Ended June 30, 2011


NOTE A - Summary of Significant Accounting Policies (Continued)

   Inventories and Prepaid Costs

   Inventories are valued at cost, on a first-in, first-out basis. Inventories of governmental funds are
   recorded as expenditures when consumed rather than when purchased. United States Department
   of Agriculture Commodities inventory received by the Food Service Fund are recorded as inventory
   and deferred revenue until used. Certain payments to vendors reflect costs applicable to future fiscal
   years and are recorded as prepaid costs in both district-wide and fund financial statements.

   Capital Assets

   Capital assets, which include land, buildings, equipment, and vehicles, are reported in the applicable
   governmental column in the government-wide financial statements. Capital assets are defined by the
   government as assets with an initial individual cost of more than $1,000 and an estimated useful life
   in excess of 1 year. Such assets are recorded at historical cost or estimated historical cost if
   purchased or constructed. Donated capital assets are recorded at estimated fair market value at the
   date of donation. Costs of normal repair and maintenance that do not add to the value or materially
   extend asset life are not capitalized. The District does not have infrastructure type assets.

   Building, equipment, and vehicles are depreciated using the straight-line method over the following
   useful lives:

       Buildings and additions                     20-50 years
       Buses and other vehicles                    5-10 years
       Furniture and other equipment               5-20 years

   Compensated Absences

   The liability for compensated absences reported in the government-wide statements consists of
   unpaid, accumulated annual vacation balances. The liability has been calculated using the vesting
   method, in which leave amounts for both employees who are currently eligible to receive termination
   payments and other employees who are expected to become eligible in the future to receive such
   payments upon termination are included.

   Long-Term Obligations

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

   In the fund financial statements, governmental fund types recognize bond premiums and discounts
   as well as bond issuance costs during the current period. Premiums received on debt issuances are
   reported as other financing sources while discounts are reported as other financing uses. Issuance
   costs are reported as debt service expenditures.




                                                  17
Lawton Community Schools
State of Michigan, Counties of Van Buren and Kalamazoo
Notes to the Financial Statements
For the Year Ended June 30, 2011


NOTE A - Summary of Significant Accounting Policies (Continued)

   Fund Equity and Adoption of GASB 54, Fund Balance Reporting and Governmental Fund Type
   Definitions

   Effective July 1, 2010, the District adopted GASB 54, Fund Balance Reporting and Governmental
   Fund Type Definitions. GASB 54 eliminates the use of the terms “reserved” and “designated” in the
   reporting of fund balance, and replaces those terms with five new categories for segregating fund
   balance: non-spendable, restricted, committed, assigned, and unassigned. Adoption of GASB 54
   changed the presentation of fund balance in the fund financial statements but did not change the
   recording of total fund balance, assets, liabilities, revenues, other financing sources, other financing
   uses, or expenditures. Expenditures that meet the purpose for which a reserve committed or
   assigned fund balance has been established are considered as use to satisfy the reserve, committed,
   or assigned purpose. In other words, expenditures are applied first to the restricted purpose.

   Non-spendable fund balance includes amounts either not in a spendable form or legally or
   contractually required to be maintained intact. The District has categorized prepaid expenses and
   inventories as non-spendable fund balance.

   Restricted fund balance includes amounts that are restricted by externally imposed restrictions of
   creditors, grantors, contributors, or laws or regulations of other governments, or imposed by law
   through constitutional provisions or enabling legislation. The District has categorized assets held for
   debt repayment ($351,951) and capital projects ($47,267) as restricted fund balance.

   Committed fund balance includes amounts that are committed for specific purposes by formal action
   of the District’s Board. The District has committed general fund balances for capital projects and
   equipment purchases ($471,984). The District has committed lunch fund balances for future cash
   flow needs of the fund ($24,000).

   Assigned fund balance includes amounts that are intended by the District to be used for specific
   purposes, but are neither restricted nor committed. Amounts may be assigned formal action of the
   District’s Board or a Board Committee, or by the Superintendent providing written notice to the Board
   or a Board Committee during a public meeting. The District has assigned lunch fund balances for
   capital equipment replacements.

   Unassigned fund balance includes the remaining fund balance after applying the above criteria.

   Comparative Data/Reclassifications

   Comparative data is not included in the District’s financial statements.

   Estimates

   The preparation of financial statements in conformity with accounting principles generally accepted in
   the United States of America requires the District’s management to make estimates and assumptions
   that affect certain reported amounts and disclosures. Accordingly, actual results may differ from
   those estimates.




                                                    18
Lawton Community Schools
State of Michigan, Counties of Van Buren and Kalamazoo
Notes to the Financial Statements
For the Year Ended June 30, 2011


NOTE B - Stewardship, Compliance, and Accountability

   Budgetary Information

   Annual budgets are adopted on a basis consistent with accounting principles generally accepted in
   the United States of America and state law for the general and special revenue funds. All annual
   appropriations lapse at fiscal year end.

   The budget document presents information by fund and function. The legal level of budgetary control
   adopted by the governing body (i.e., the level at which expenditures may not legally exceed
   appropriations) is the function level. State law requires the district to have its budget in place by July
   1. Expenditures in excess of amounts budgeted is a violation of Michigan Law. State law permits
   districts to amend its budgets during the year. During the year, the budget was amended in a legally
   permissible manner.

   Excess of Expenditures Over Appropriations in Budgeted Funds

   The following expenditures have been made in excess of the budget classification shown:

                                                 Total              Amount of            Budget
    Fund Type                                 Appropriated         Expenditures         Variance

    General Fund
     Capital outlay                                247,419             258,716             (11,297)


NOTE C – Cash and Investments

   At year-end, the District’s deposits and investments were reported in the basic financial statements in
   the following categories:

                                             Governmental          Fiduciary         Total Primary
                                               Activities           Funds             Government
       Cash and cash equivalents            $ 1,030,518          $     87,957        $ 1,118,475
       Investments                              1,631,331              14,942           1,646,273
       Total                                $ 2,661,849          $    102,899        $ 2,764,748

   The breakdown between deposits and investments for the District is as follows:

       Bank deposits (checking, savings and money market accounts)                  $    1,118,475
       Investments (certificates of deposit)                                                14,942
       Investments in cash management funds                                              1,631,331
                                                                                    $    2,764,748

   The District’s cash and investments are subject to several types of risk, which are examined in more
   detail below.




                                                    19
Lawton Community Schools
State of Michigan, Counties of Van Buren and Kalamazoo
Notes to the Financial Statements
For the Year Ended June 30, 2011


NOTE C - Cash and Investments (Continued)

   Deposits with financial institutions

   Michigan Compiled Laws, State Statute’s, and the District’s investment policy authorize the District to
   make deposits in the accounts of federally-insured banks, credit unions, and savings and loan
   associations that have an office in Michigan. The District’s deposits are in accordance with statutory
   authority. The District utilizes one bank for the deposit of funds.

   Custodial credit risk of bank deposits

   Custodial credit risk of deposits is the risk that, in the event of the failure of a depository financial
   institution, the District will not be able to recover its deposits. Bank deposits are exposed to custodial
   credit risk if they are not covered by depository insurance and are uncollateralized. As of June 30,
   2011, $1,035,823 of the District’s bank balance of $1,285,823 was exposed to custodial credit risk
   because it was uninsured.

   The District believes that it is impractical to insure all bank deposits due to the amounts of the
   deposits and the limits of FDIC insurance. As a result, the District evaluates each financial institution
   with which it deposits funds and assesses the risk level of each institution. Only the institutions with
   an acceptable estimated risk level are used as depositories.

   Investments

   The District is allowed to invest in U.S. Treasury or Agency obligations, U.S. Government
   repurchases agreements, bankers’ acceptances, commercial paper rated prime at the time of
   purchase which mature not more than 270 days after the date of purchase, and mutual funds in
   investments pools that are composed of authorized investment vehicles. The District’s investments
   are in accordance with statutory authority.

   Custodial credit risk of Investments

   Custodial credit risk for investments is the risk that, in the event of the failure of the counterparty (e.g.
   broker-dealer or other investment holder), the District will not be able to recover the value of its
   investment or collateral securities that are in the possession of an outside party. State statutes and
   the District’s investment policy do not contain requirements that would limit the exposure to custodial
   credit risk for investments.

   Interest rate risk

   Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of
   an investment. The longer the maturity of an investment, the greater the sensitivity of its fair value to
   changes in market interest rates. One of the ways that the District manages its exposure to interest
   rate risk is by purchasing a combination of shorter term and longer term investments and by timing
   cash flows from maturities so that a portion of the portfolio is maturing or coming close to maturity
   evenly over time as necessary to provide the cash flow and liquidity needed for operations. The
   District’s policy does not address other ways to minimize interest rate risk.




                                                      20
Lawton Community Schools
State of Michigan, Counties of Van Buren and Kalamazoo
Notes to the Financial Statements
For the Year Ended June 30, 2011


NOTE C - Cash and Investments (Continued)

   Credit risk

   Credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the
   investment. This risk is measured by the assignment of a rating by a nationally recognized statistical
   rating organization. Obligations of the U.S. Government are not considered to have credit risk. The
   District’s investment policy does not further limit its investment choices.

   Concentration of credit risk

   State statutes and the District’s investment policy place no limitations on the amount that can be
   invested in any one issuer. Investments in any one issuer (other than U.S. Treasury securities) that
   represent 5% or more of the School’s total investments are as follows. These investments are not
   insured by the Federal Deposit Insurance Corporation and are in addition to the uninsured cash
   deposits disclosed on page 19:

                                                                                              Rating by
                                                                              Reported        Standard
                 Issuer                        Investment Type                Amount          & Poor’s

    MILAF+Max Class                       Cash Funds (short-term)             $ 1,629,083        AAAm


NOTE D - Capital Assets

   Capital asset activity of the District’s governmental activities was as follows:

                                  Balance                                                Balance
                                   July 1,                                               June 30,
                                    2010             Additions          Disposals          2011
   Cost
    Buildings and
      improvements            $ 30,727,209       $         17,000   $           ---   $ 30,744,209
    Outdoor equipment              398,522                  3,263               ---        401,785
    Furnishings and
      equipment                    3,478,547            88,592                  ---       3,567,139
    Vehicles and tractors          1,050,552            99,949                  ---       1,150,501
                                  35,654,830           208,804                  ---      35,863,634

   Accumulated Depreciation
    Buildings and
      improvements                 7,227,026           545,692                  ---       7,772,718
    Outdoor equipment                171,981            19,056                  ---         191,037
    Furnishings and
      equipment                    2,189,546           305,441                  ---       2,494,987
    Vehicles and tractors            579,073            64,811                  ---         643,884
                                  10,167,626           935,000                  ---      11,102,626

      Net capital assets      $ 25,487,204       $    (726,196)       $         ---   $ 24,761,008




                                                      21
Lawton Community Schools
State of Michigan, Counties of Van Buren and Kalamazoo
Notes to the Financial Statements
For the Year Ended June 30, 2011


NOTE D - Capital Assets (Continued)

Depreciation expense was not charged to activities as the District considers its assets to impact multiple
activities and allocation is not practical.


NOTE E - Interfund Receivable and Payable

    Interfund balances at June 30, 2011 consisted of the following individual fund receivable and payable:

                                      Interfund                                      Interfund
      Fund                          Receivable        Fund                            Payable
      General                       $     24,458      Food Service                 $      24,458


NOTE F - Long-Term Debt

    The District issues bonds, notes and other contractual commitments to provide for the acquisition and
    construction of major capital facilities. General obligation bonds and advance refunding bonds are
    direct obligations and pledge the full faith and credit of the District. Other long-term obligations
    include loans and compensated absences.

    Long-term obligation activity is summarized as follows:
                                                                             Balance       Amount due
                               Balance                                       June 30,       within one
                             July 1, 2010     Additions       Reductions       2011            year

    Government obligation
         bonds               $ 23,165,000    $        ---     $ (805,000)   $ 22,360,000   $ 1,225,000
    Durant resolution
     package bond                  29,925             ---         (5,121)        24,804            5,526
    School bond loan fund       4,450,547        283,148              ---     4,733,695              ---
    Compensated absences          300,000          50,000             ---       350,000              ---
                             $ 27,945,472    $ 333,148        $ (810,121)   $ 27,468,499   $ 1,230,526




                                                    22
Lawton Community Schools
State of Michigan, Counties of Van Buren and Kalamazoo
Notes to the Financial Statements
For the Year Ended June 30, 2011


NOTE F - Long-Term Debt (Continued)

   Long-term debt consisted of the following at June 30, 2011:

     Bond issue of 2010 with annual payments ranging from $0 to $1,100,000
       plus interest ranging from 2.0% to 4.0%                                $         5,335,000
     Advance refunding bond issue of 2006 with annual payments ranging from
       $0 to $1,115,000 plus interest ranging from 4.1% to 4.375%                       8,975,000
     Advance refunding bond issue of 2005 with annual payments ranging from
       $50,000 to $1,070,000 plus interest ranging from 3.0% to 5.0%                    7,640,000
     Advance refunding bond issue of 1998 with annual payments ranging from
       $0 to $140,000 plus interest ranging from 4.35% to 4.65%                          410,000
     School bond fund loan payable with no fixed payment schedule, with
       interest accruing at 4.82%                                                       4,733,695
     1998 school improvement bond issue (Durant) with annual payments
       ranging from $0 to $19,278 plus interest at 4.76% paid directly by the
       State of Michigan                                                                   24,804
     Accumulated sick pay carried over to future years                                    350,000
     Total principal payable                                                           27,468,499
     Interest payable                                                                  10,907,745

     Total long term debt                                                          $ 38,376,244

   Future minimum payments of long-term debt for years ended June 30, are as follows:

                                               Principal             Interest           Total

     2012                                  $    1,230,526        $      878,522    $    2,109,048
     2013                                       1,279,278               849,491         2,128,769
     2014                                       1,290,000               819,106         2,109,106
     2015                                       1,070,000               788,596         1,858,596
     2016                                       1,070,000               735,096         1,805,096
     2017-2021                                  5,470,000             2,976,448         8,446,448
     2022-2026                                  5,570,000             1,848,952         7,418,952
     2027-2031                                  5,405,000               702,700         6,107,700
     Thereafter                                 4,733,695             1,308,834         6,042,529
     Subtotal                                  27,118,499            10,907,745        38,026,244
     Accumulated sick pay                         350,000                    ---          350,000

                                            $ 27,468,499         $ 10,907,745      $ 38,376,244




                                                  23
Lawton Community Schools
State of Michigan, Counties of Van Buren and Kalamazoo
Notes to the Financial Statements
For the Year Ended June 30, 2011


NOTE F - Long-Term Debt (Continued)

   Advance Refunding Bonds

   In fiscal 2011, the District defeased the remaining 2001 bond obligations by issuance of the 2010
   advance refunding bonds. Previously, the District had partially defeased the 2001 bond obligation by
   issuing the 2005 and 2006 advance refunding bonds. Transactions related to payments and
   defeasance of the 2001 debt have, for financial reporting purposes, been reported in the 2010 debt
   fund. The 2001 debt obligations existing at the time of the defeasance totaled $ 6,742,127
   ($5,085,000 principal and $1,657,127 interest). The District has purchased investment securities in
   amounts sufficient to repay the 2001 debt when it becomes due. The securities were purchased with
   proceeds from the issuance of the 2010 advance refunding bonds. The 2010 advance refunding
   bond obligations incurred totaled $6,496,127 ($5,335,000 principal and $1,161,127 interest). The
   present value of the economic gain from the defeasance transaction was calculated to be
   approximately $215,000, as of the date of the refunding. This gain is not recognized in the
   accompanying financial statements as it will be realized over the life of the advance refunding bonds.

   At June 30, 2011, the total amount of the 2001 bond debt still outstanding but excluded from the
   District’s financial statements is $20,835,000.

   Bond Premiums

   In connection with the refunding bonds, the District has paid premiums over the stated principal
   balance of the bonds to obtain lower interest rates. In fiscal 2011, the District paid a premium of
   $250,000. As of June 30, 2011, the unamortized premium paid on all refunding bonds totaled
   $922,179 and is recorded as a reduction to bond obligations outstanding in the District wide financial
   statement.

   Durant Non-Plaintiff Bond

   The District was part of the Durant vs. State of Michigan lawsuit regarding underfunding of state
   mandated programs, as a “non-plaintiff.” The case was settled in July 1997 in favor of the plaintiffs
   and non-plaintiffs. The District accepted an offer of $192,088 in March 1998. The State of Michigan
   will pay one-half of the sum over ten years, which began in November 1998, and the remaining one-
   half was provided through a bonding program during fiscal 1999. The lump-sum payment and related
   expenditures were recorded by the District in the general fund during fiscal 1999. The ten
   installments and related expenditures have been and will continue to be recorded by the District in
   the general fund.

   School Bond Fund Loan

   The School Bond Loan Fund payable represents notes payable to the State of Michigan for loans
   made to the District, as authorized by the 1963 State of Michigan Constitution, as amended by Public
   Act 92 of 2005, for the purpose of paying principal and interest on general obligation bonds of the
   District issued for capital expenditures. Interest rates are determined annually by the State
   Administrative Board. Interest ranging from 3.0 % to 5.375% has been assessed for the year ended
   June 30, 2011. Repayment is required when the millage rate necessary to cover the annual bonded
   debt service falls below 7 mills. The District is required to levy mills and repay to the State any
   excess of the amount levied over the bonded debt service requirements.




                                                  24
Lawton Community Schools
State of Michigan, Counties of Van Buren and Kalamazoo
Notes to the Financial Statements
For the Year Ended June 30, 2011


NOTE G - Risk Management

   The District has joined together with other school districts in Michigan to form SET-SEG, a public
   entity risk pool currently operating as a common risk management and insurance program for its
   members. The District pays annual premiums to SET-SEG for its property, comprehensive general
   liability, and school board legal liability insurance coverage.

   The District carries commercial insurance for all other risks of loss, including workers’ compensation,
   boiler, fleet, and excess liability. Settled claims resulting from these risks have not exceeded
   commercial insurance coverage in any of the past three fiscal years. There was no reduction in
   coverage obtained through insurances during the past fiscal year.


NOTE H - Defined Benefit Pension Plan and Post Retirement Benefits

   Plan Description

   The District participates in the Michigan Public School Employees’ Retirement System (MPSERS), a
   statewide, cost-sharing, multiple-employer defined benefit public employee retirement system
   governed by the State of Michigan that covers substantially all employees of the District. The system
   provides retirement, survivor and disability benefits to plan members and their beneficiaries. The
   Michigan Public School Employees’ Retirement System issues a publicly available financial report
   that includes financial statements and required supplementary information for the system. That
   report may be obtained by writing to the system at MPSERS, P.O. Box 30171, Lansing, MI 48909-
   7671.

   Funding Policy

   Employer contributions to the system result from the implementing effects of the School Finance
   Reform Act. Under these procedures, each school district is required to contribute the full actuarial
   funding contribution amount to fund pension benefits, plus an additional amount to fund retiree health
   care benefit amounts on a cash disbursement basis.

   The pension benefit rate totaled 16.94% for the period July 1, 2010 through September 30, 2010,
   19.41% for October 2010 and 20.66% for the period November 1, 2010 through June 30, 2011 of the
   covered payroll to the plan. Basic plan members make no contributions, but Member Investment
   Plan members contribute at rates ranging from 3.0% to 6.4% of gross wages. The District’s
   contributions to the MPSERS plan for the years ended June 30, 2011, 2010, and 2009 were
   $894,757, $799,146 and $806,077, respectively.

   Post Employment Benefits

   Under the MPSERS Act, all retirees participating in the MPSERS Pension Plan have the option of
   continuing health, dental, and vision coverage. Retirees having this coverage contribute an amount
   equivalent to the monthly cost for Part B Medicare and 10% of the monthly premium amount for the
   health, dental, and vision coverage. Required contributions for post employment health care benefits
   are included as part of the District’s total contribution to the MPSERS plan discussed above.




                                                   25
Lawton Community Schools
State of Michigan, Counties of Van Buren and Kalamazoo
Notes to the Financial Statements
For the Year Ended June 30, 2011


NOTE I - Commitments and Contingencies

   Grant Programs

   The District participates in numerous state and federal grant programs, which are governed by
   various rules and regulations of the grantor agencies. Costs charged to the respective grant
   programs are subject to audit and adjustment by the grantor agencies; therefore, to the extent that
   the District has not complied with the rules and regulations governing the grants, refunds of any
   money received may be required and the collectibility of any related receivable at June 30, 2011 may
   be impaired. In the opinion of the District’s management, there are no significant contingent liabilities
   relating to compliance with the rules and regulations governing the respective grants. Therefore, no
   provision has been recorded in the accompanying financial statements for such contingencies.

   Unemployment

   The District is a reimbursing employer to the Michigan Employment Security Agency (MESA) and as
   such is responsible to pay the MESA for those benefits paid and charged to its account. As of June
   30, 2011, appropriate liabilities have been recorded for all claims paid or chargeable by the MESA.
   However, no provision has been made for future payments that might result from claims in process or
   unfilled.

   State Foundation Allowance Funding

   As described in Note A, the State of Michigan utilizes a Foundation Allowance System to provided
   funding of school district activities. During 2011, the State utilized federal funds provided by the
   ARRA to meet the State’s foundation commitment to the District. The State of Michigan has not
   finalized its budget for the 2012 fiscal year and, as such, has not determined its ability to fund the
   foundation allowance at current levels.


NOTE J – Subsequent Events

   Management has evaluated subsequent events through September 30, 2011, the date on which the
   financial statements were available to be issued.




                                                    26
REQUIRED SUPPLEMENTARY INFORMATION
Lawton Community Schools
State of Michigan, Counties of Van Buren and Kalamazoo
Budget Comparison Schedule - General Fund
For the Year Ended June 30, 2011

                                                Budgeted Amounts

                                                                                                 Variance with Final
                                           Original            Final               Actual        Budget Fav (Unfav)

REVENUES
 Local sources
    Property taxes                     $      1,009,204    $       1,017,528   $       988,678   $          (28,850)
    Earnings on investments                       6,512                5,512             5,561                   49
    Other local revenue                          23,401              157,655           165,645                7,990
    Athletic transfer                                 -              130,000                 -             (130,000)
 Intermediate sources                            48,492               63,275            64,714                1,439
 State sources                                                                                                    -
    Unrestricted school aid                   6,140,800            6,263,539         6,300,686               37,147
    Restricted school aid                       470,360              501,612           488,910              (12,702)
 Federal sources                                190,284              768,999           738,609              (30,390)
            Total Revenues                    7,889,053            8,908,120         8,752,803             (155,317)

EXPENDITURES
  Education
    Instruction                               4,855,458            5,088,337         5,033,858               54,479
    Supporting services                       2,836,732            3,165,385         2,958,241              207,144
  Capital outlay                                152,900              247,419           258,716              (11,297)
  Debt service                                   10,000                    -                 -                    -
           Total Expenditures                 7,855,090            8,501,141         8,250,815              250,326

Excess of Revenues and Other
 Financing Sources Over Expenditures   $         33,963    $        406,979    $       501,988   $           95,009




                                                      27
OTHER SUPPLEMENTARY INFORMATION
Lawton Community Schools
State of Michigan, Counties of Van Buren and Kalamazoo
Combining Balance Sheet - Non-Major Governmental Funds
June 30, 2011

                                                                                              Capital
                                                       Food Service       1998 Debt           Projects
                                                          Fund              Fund               Fund              Total

ASSETS
 Cash                                                  $     60,265   $       23,167      $      45,019      $     128,451
 Investments                                                      -                -              2,248              2,248
 Accounts receivable                                          4,244                -                  -              4,244
 Inventory                                                    5,956                -                  -              5,956
          Total Assets                                 $     70,465   $       23,167      $      47,267      $     140,899

LIABILITIES AND FUND BALANCES
 Accounts payable                                      $        500   $               -   $              -   $         500
 Due to other funds                                          24,458                   -                  -          24,458
 Deferred revenue                                             4,456                   -                  -           4,456
          Total Liabilities                            $     29,414                   -                  -   $      29,414

FUND BALANCES
 Nonspendable                                          $      5,956              -        $           -      $       5,956
 Restricted                                                       -           23,167             47,267             70,434
 Committed for future cash flow                              29,000                -                  -             29,000
 Assigned for equipment replacement                           6,095                -                  -              6,095
 Unassigned                                                       -                -                  -                  -
                                                             41,051           23,167             47,267            111,485

         Total Liabilities and Fund Balances           $     70,465   $       23,167      $      47,267      $     140,899




                                                  28
Lawton Community Schools
State of Michigan, Counties of Van Buren and Kalamazoo
Combining Statement of Revenues, Expenditures and Changes in Fund
Balances - Non-Major Governmental Funds
For the Year Ended June 30, 2011

                                                                                             Capital
                                                       Food Service         1998 Debt        Projects
                                                          Fund                Fund            Fund              Total

REVENUES
 Local sources                                         $    162,331     $      153,166   $              -   $    315,497
 State sources                                               20,614                  -                  -         20,614
 Federal sources                                            362,085                  -                  -        362,085
 Interest                                                         -                 79                  -             79
          Total Revenues                                    545,030            153,245                  -        698,275


EXPENDITURES
 Food service                                               551,401                  -                  -        551,401
 Debt service                                                     -            149,590                  -        149,590
         Total Expenditures                                 551,401            149,590                  -        700,991

Excess (Deficiency) of Revenues
  Over Expenditures                                           (6,371)            3,655                  -          (2,716)

Fund Balances, Beginning of Year                             47,422             19,512           47,267          114,201

Fund Balances, End of Year                             $     41,051     $       23,167   $       47,267     $    111,485




                                                  29
Lawton Community Schools
State of Michigan, Counties of Van Buren and Kalamazoo
Schedule of Revenues - General Fund
For the Year Ended June 30, 2011




REVENUES
 Revenue from local sources
   Property taxes                                        $     988,678
   Other local revenue                                         165,645
   Earnings on investments                                       5,561
         Total revenue from local sources                    1,159,884

 Revenue from intermediate school district                     64,714

 Revenue from state sources
  Unrestricted
    State aid membership                                     6,300,686
  Restricted
    At risk                                                   256,324
    Special education                                         171,512
    Compensatory education                                     54,400
    Durant                                                      6,674
         Total restricted                                     488,910

         Total revenue from state sources                    6,789,596

 Revenue from federal sources
  Title I                                                     196,484
  Title II                                                     45,741
  Education Stabilization Funds                               496,384
           Total revenue from federal sources                 738,609

         Total Revenues                                  $   8,752,803




                                                30
Lawton Community Schools
State of Michigan, Counties of Van Buren and Kalamazoo
Schedule of Expenditures and Other Financing
Uses - General Fund
For the Year Ended June 30, 2011


EXPENDITURES
 Instruction
   Elementary
      Salaries                                           $   1,230,344
      Benefits                                                 636,824
      Purchased services                                        26,552
      Supplies, materials, and other                            48,319
          Total elementary                                   1,942,039

    Middle school
     Salaries                                                 604,025
     Benefits                                                 346,308
     Purchased services                                        12,859
     Supplies, materials, and other                            21,994
          Total middle school                                 985,186

    High school
      Salaries                                                 753,648
      Benefits                                                 407,472
      Purchased services                                        31,774
      Supplies, materials, and other                            47,012
          Total high school                                  1,239,906

    Pre-school
      Salaries                                                 29,498
      Benefits                                                 16,944
      Purchased services                                        1,135
      Supplies, materials, and other                              977
          Total pre-school                                     48,554

    Special education
     Salaries                                                 291,668
     Benefits                                                 159,107
     Purchased services                                         6,978
     Supplies, materials, and other                            24,237
         Total special education                              481,990




                                       31
Lawton Community Schools
State of Michigan, Counties of Van Buren and Kalamazoo
Schedule of Expenditures and Other Financing
Uses - General Fund (Continued)
For the Year Ended June 30, 2011


   Title I and Title II programs
     Salaries                                            $    149,499
     Benefits                                                  83,782
     Supplies, materials, and other                            19,072
           Total Title I programs                             252,353

   Alternative education
     Salaries                                                  39,266
     Benefits                                                  34,430
     Purchased services                                        10,134
         Total alternative education                           83,830

         Total instruction                                   5,033,858

 Supporting services
  Pupil guidance services
    Salaries                                                  141,652
    Benefits                                                   81,738
    Purchased services                                            529
    Supplies, materials, and other                                710
         Total pupil guidance services                        224,629

   Curriculum coordinator
    Salaries                                                   30,605
    Benefits                                                   12,612
    Purchased services                                          6,295
    Supplies, materials, and other                                118
         Total curriculum coordinator                          49,630

   Library
     Salaries                                                  45,734
     Benefits                                                  26,768
     Supplies, materials, and other                             6,277
         Total library                                         78,779

   Audio/visual
    Purchased services                                            545
    Supplies, materials, and other                                109
         Total audio/visual                                       654




                                         32
Lawton Community Schools
State of Michigan, Counties of Van Buren and Kalamazoo
Schedule of Expenditures and Other Financing
Uses - General Fund (Continued)
For the Year Ended June 30, 2011


  Board of education
   Salaries                                              $        700
   Purchased services                                          42,667
   Supplies, materials, and other                              20,574
       Total board of education                                63,941

  Executive administration
    Salaries                                                  151,993
    Benefits                                                   81,518
    Purchased services                                          3,158
    Supplies, materials, and other                              6,950
        Total executive administration                        243,619

  School administration
    Salaries                                                  364,453
    Benefits                                                  173,129
    Purchased services                                          3,924
        Total school administration                           541,506

  Business and fiscal management
   Salaries                                                    97,848
   Benefits                                                    66,282
   Purchased services                                          29,191
   Supplies, materials, and other                              23,981
       Total business and fiscal management                   217,302

  Operation and maintenance
   Salaries                                                    283,892
   Benefits                                                    119,218
   Purchased services                                          578,180
   Supplies, materials, and other                               45,585
       Total operation and maintenance                       1,026,875

  Pupil transportation
   Salaries                                                    78,551
   Benefits                                                    19,644
   Purchased services                                          37,197
   Supplies, materials, and other                              55,947
         Total pupil transportation                           191,339




                                              33
Lawton Community Schools
State of Michigan, Counties of Van Buren and Kalamazoo
Schedule of Expenditures and Other Financing
Uses - General Fund (Continued)
For the Year Ended June 30, 2011


  Technologist
    Salaries                                             $     42,004
    Benefits                                                   32,671
    Purchased services                                         42,607
    Supplies, materials, and other                             11,420
        Total technologist                                    128,702

  Athletics
    Salaries                                             $     57,259
    Benefits                                                   15,857
    Purchased services                                         84,100
    Other fees and dues                                        13,802
    Supplies, materials, and other                              1,163
    Equipment                                                  19,084
         Total athletics                                      191,265

        Total supporting services                            2,958,241

  Capital outlay
   Instruction                                                  8,794
   Supporting services                                        249,922
        Total capital outlay                                  258,716

                   Total Expenditures                    $   8,250,815




                                        34
Lawton Community Schools
State of Michigan, Counties of Van Buren and Kalamazoo
Schedule of Changes in Long-Term Debt
June 30, 2011


                                              Balance at July                                     Balance at
                                                  1, 2010       Additions       Deductions       June 30, 2011

1998 debt fund                                 $     535,000    $           -   $   (125,000)    $     410,000
Interest related to 1998 debt fund                    62,180                -        (24,290)           37,890

2010 debt fund                                      5,965,000       250,000         (880,000)        5,335,000
Interest related to 2010 debt fund                  1,820,372             -         (715,572)        1,104,800

2005 advance refunding debt fund                    7,690,000               -        (50,000)        7,640,000
Interest related to 2005 debt fund                  2,559,163               -       (330,908)        2,228,255

2006 advance refunding debt fund                    8,975,000               -               -        8,975,000
Interest related to 2006 debt fund                  6,606,465               -       (380,393)        6,226,072

School improvement bond issue - series 1998
(Durant)                                              29,925                -         (5,121)           24,804
Interest related to school improvement bond
issue - series 1998 (Durant)                           3,442                -         (1,551)            1,891

School bond loan fund                               4,450,547       283,148                  -       4,733,695
Interest related to school bond loan                1,051,853       256,984                  -       1,308,837

Accumulated sick pay                                 300,000         50,000                  -         350,000

Total                                          $   40,048,947   $   840,132     $ (2,512,835)    $ 38,376,244




                                                        35
Lawton Community Schools
State of Michigan, Counties of Van Buren and Kalamazoo
Schedule of Maturities of Bonded Debt
June 30, 2011

                                                                  Principal          Interest          Total
 2006 ADVANCE REFUNDING BOND ISSUE
   Principal payment due                    May 1
   Interest payments due                    May 1 and
                                            November 1
  Interest rate                             4.1% to
                                            4.375%
   Original issue                           $8,975,000
   Payments due for years ending June 30:
     2012                                                     $              -   $       380,388   $      380,388
     2013                                                                    -           380,388          380,388
     2014                                                                    -           380,388          380,388
     2015                                                                    -           380,388          380,388
     2016                                                                    -           380,388          380,388
     2017                                                                    -           380,388          380,388
     2018                                                                    -           380,388          380,388
     2019                                                                    -           380,388          380,388
     2020                                                               60,000           380,388          440,388
     2021                                                               60,000           377,928          437,928
     2022                                                               65,000           375,468          440,468
     2023                                                               65,000           372,804          437,804
     2024                                                            1,115,000           370,138        1,485,138
     2025                                                            1,105,000           324,424        1,429,424
     2026                                                            1,100,000           279,118        1,379,118
     2027                                                            1,095,000           233,744        1,328,744
     2028                                                            1,085,000           187,206        1,272,206
     2029                                                            1,080,000           141,094        1,221,094
     2030                                                            1,075,000            93,844        1,168,844
     2031                                                            1,070,000            46,817        1,116,817
 Totals                                                       $      8,975,000   $     6,226,077   $   15,201,077




                                                         36
Lawton Community Schools
State of Michigan, Counties of Van Buren and Kalamazoo
Schedule of Maturities of Bonded Debt
June 30, 2011

                                                                    Principal          Interest          Total
 2005 ADVANCE REFUNDING BOND ISSUE
   Principal payment due                    May 1
   Interest payments due                    May 1 and
                                            November 1
   Interest rate                            3.0% to 5.0%
   Original issue                           $7,920,000
   Payments due for years ending June 30:
     2012                                                       $         50,000   $       329,158   $       379,158
     2013                                                                 50,000           327,407           377,407
     2014                                                                 50,000           325,408           375,408
     2015                                                              1,070,000           323,407         1,393,407
     2016                                                              1,070,000           269,908         1,339,908
     2017                                                              1,070,000           216,407         1,286,407
     2018                                                              1,070,000           173,608         1,243,608
     2019                                                              1,070,000           130,807         1,200,807
     2020                                                              1,070,000            88,008         1,158,008
     2021                                                              1,070,000            44,137         1,114,137
 Totals                                                         $      7,640,000   $     2,228,255   $     9,868,255




                                                           37
Lawton Community Schools
State of Michigan, Counties of Van Buren and Kalamazoo
Schedule of Maturities of Bonded Debt
June 30, 2011

                                                                    Principal          Interest          Total
 2010 BOND ISSUE
   Principal payment due                    May 1
   Interest payments due                    May 1 and
                                            November 1
   Interest rate                            2.0% to 4.0%
   Original issue                           $5,335,000
   Payments due for years ending June 30:
     2012                                                       $      1,040,000   $       149,100   $     1,189,100
     2013                                                              1,075,000           128,300         1,203,300
     2014                                                              1,100,000           106,800         1,206,800
     2015                                                                      -            84,800            84,800
     2016                                                                      -            84,800            84,800
     2017                                                                      -            84,800            84,800
     2018                                                                      -            84,800            84,800
     2019                                                                      -            84,800            84,800
     2020                                                                      -            84,800            84,800
     2021                                                                      -            84,800            84,800
     2022                                                              1,065,000            84,800         1,149,800
     2023                                                              1,055,000            42,200         1,097,200
 Totals                                                         $      5,335,000   $     1,104,800   $     6,439,800




                                                           38
Lawton Community Schools
State of Michigan, Counties of Van Buren and Kalamazoo
Schedule of Maturities of Bonded Debt
June 30, 2011

                                                                  Principal         Interest          Total
 1998 ADVANCE REFUNDING BOND ISSUE
   Principal payment due                    May 1
   Interest payments due                    May 1 and
                                            November 1
  Interest rate                             4.35% to
                                            4.65%
   Original issue                           $775,000
   Payments due for years ending June 30:
     2012                                                     $       135,000   $        18,728   $      153,728
     2013                                                             135,000            12,652          147,652
     2014                                                             140,000             6,510          146,510
 Totals                                                       $       410,000   $        37,890   $      447,890




                                                         39
Lawton Community Schools
State of Michigan, Counties of Van Buren and Kalamazoo
Schedule of Maturities of Bonded Debt
June 30, 2011

                                                               Principal          Interest          Total
 DURANT BOND ISSUE
   Principal payment due                    May 1
   Interest payments due                    May 1
   Interest rate                            4.76%
   Original issue                           $96,044
   Payments due for years ending June 30:
     2012                                                  $          5,526   $         1,148   $        6,674
     2013                                                            19,278               743           20,021
 Totals                                                    $         24,804   $         1,891   $       26,695




                                                      40
SINGLE AUDIT
 Lawton Community Schools
 Schedule of Expenditures of Federal Awards
 For the Year Ended June 30, 2011
                                                                                             Accrued                                                                  Accrued
                                                                      Federal   Approved    (Deferred)    (Memo Only)      Current           Current                 (Deferred)
                                                                       CFDA       Grant      Revenue       Prior Year       Year               Year      Adjust-      Revenue
 Federal Grantor/Pass-through Grantor/Program Title/CFDA Number       Number     Amount    July 1, 2010   Expenditures   Expenditures        Receipts    ments     June 30, 2011

 U.S. Department of Agriculture
  Passed through Michigan Department of Education
    Child Nutrition Cluster
      Non-Cash Assistance (Commodities)
        National School Lunch Program                                 10.555      36,969             -          28,723         36,969           36,969         -               -
      Cash Assistance
        School Breakfast Program (101970)                             10.553      92,338             -          84,333          8,006            8,006
        School Breakfast Program (111970)                             10.553      79,456             -                         79,456           79,456         -               -
        National School Lunch Program (101950 Sec. 4)                 10.555      34,067             -          30,413          3,654            3,654         -               -
        National School Lunch Program (111950 Sec. 4)                 10.555      31,837             -                         31,837           31,837         -               -
        National School Lunch Program (101960 Sec. 11)                10.555     199,347             -         177,958         21,389           21,389         -               -
        National School Lunch Program (111960 Sec. 11)                10.555     179,768             -                        179,768          179,768         -               -
                                                                                                     -                        324,110          324,110         -               -
                                                                                                                              361,079          361,079
      Youth Wellness (0819F1)                                         10.574       2,506             -           1,500          1,006            1,006
       Total Department of Agriculture                                                               -                        362,085          362,085         -               -

 U.S. Department of Education
  Passed through Michigan Department of Education
    Title I, Part A Cluster
      Title I Part A Grants (101530 0910)                             84.010     154,802             -         154,802              -                -         -              -
      Title I Part A Grants (111530 1011)                             84.010     110,967             -                        110,967           83,429         -         27,538
      ARRA - Title I, Part A Carryover (111535 - 1011)                84.389      85,517             -                         85,517           85,517         -              -
                                                                                                     -                        196,484          168,946         -         27,538

    Title II Part A Regular Improving Teacher Quality (100520 0910)   84.367      50,284             -          50,284              -                -         -              -
    Title II Part A Regular Improving Teacher Quality (100520 1011)   84.367      45,741             -                         45,741           38,605         -          7,136
                                                                                                     -                         45,741           38,605         -          7,136

    ARRA - Education Stabilization Fund (102525 - 0910)               84.394     306,912             -         306,912              -                -
    ARRA - Education Stabilization Fund (112525 - 1011)               84.394     124,802             -                        124,802          124,802         -               -


    Education Jobs Funds (112545)                                     84.410A    239,188             -                        239,188          160,000         -         79,188

   Passed through Van Buren ISD
    ARRA - Special Education Grants to States (100455-0910)                                     60,714          60,714                          60,714
    ARRA - Special Education Grants to States (100455-1011)           84.391     132,394             -                        132,394                -         -        132,394

        Total for U.S. Department of Education                                                                                738,609          553,067         -        246,256


 Total Federal Programs                                                                    $    60,714                   $   1,100,694   $     915,152   $     -   $    246,256




See Accompanying Note to Schedule of Expenditures of Federal Awards
                                                                                     41
Lawton Community Schools
Note to Schedule of Expenditures of Federal Awards
For the Year June 30, 2011


NOTE A - Basis of Accounting

   The Schedule of Expenditures of Federal Awards includes the federal grant activity of Lawton
   Community Schools and is presented on the accrual basis of accounting. The information in this
   schedule is presented in accordance with the requirements of OMB Circular A-133, Audits of States,
   Local Governments, and Non-Profit Organizations. Therefore, some amounts presented in this
   schedule may differ from amounts presented in or used in the preparation of the financial statements.

NOTE B - Reporting of Federal Amounts

   Management has reported the expenditures in the Schedule of Expenditures of Federal Awards equal
   to those amounts reported in the annual or final cost reports that have been submitted as of June 30,
   2011. The federal amounts reported on the Form R-7120 Grant Sections Auditors Report and the
   CMS Grant Auditor Report are in agreement with the Schedule of Expenditures of Federal Awards.
   The amounts reported on the Recipient Entitlement Balance Reports agree with the Schedule of
   Expenditures of Federal Awards for U.S.D.A. donated food commodities.




                                                  42
                      SEBER TANS, PLC
                      CONSULTANTS & CERTIFIED PUBLIC ACCOUNTANTS

            REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE
            AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED
                      IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS


            To the Board of Education
            Lawton Community Schools, State of Michigan, Counties of Van Buren and Kalamazoo

            We have audited the financial statements of the governmental activities, each major fund, and the
            aggregate remaining fund information of Lawton Community Schools (the District), as of and for
            the year ended June 30, 2011, which collectively comprise Lawton Community Schools’ basic
            financial statements and have issued our report thereon dated September 30, 2011. We
            conducted our audit in accordance with auditing standards generally accepted in the United
            States of America and the standards applicable to financial audits contained in Government
            Auditing Standards, issued by the Comptroller General of the United States.

            Internal Control Over Financial Reporting

            In planning and performing our audit, we considered the District’s internal control over financial
            reporting as a basis for designing our auditing procedures for the purpose of expressing our
            opinion on the financial statements, but not for the purpose of expressing an opinion on the
            effectiveness of the District’s internal control over financial reporting. Accordingly, we do not
            express an opinion on the effectiveness of the District’s internal control over financial reporting.

            A deficiency in internal control exists when the design or operation of a control does not allow
            management or employees, in the normal course of performing their assigned functions, to
            prevent, or detect and correct misstatements on a timely basis. A material weakness is a
            deficiency, or a combination of deficiencies, in internal control such that there is a reasonable
            possibility that a material misstatement of the entity’s financial statements will not be prevented,
            or detected and corrected on a timely basis.
            Our consideration of internal control over financial reporting was for the limited purpose described
            in the first paragraph of this section and was not designed to identify all deficiencies in internal
            control over financial reporting that might be significant deficiencies, or material weaknesses and,
            therefore, there can be no assurance that all deficiencies, significant deficiencies, or material
            weaknesses have been identified. However, as described in the accompanying schedule of
            findings and questioned costs, we identified certain deficiencies in internal control over financial
            reporting that we consider to be material weaknesses.

                2011-1
                2011-2

            Compliance and Other Matters

            As part of obtaining reasonable assurance about whether the District’s financial statements are
            free of material misstatement, we performed tests of its compliance with certain provisions of
            laws, regulations, contracts, and grant agreements, noncompliance with which could have a
            direct and material effect on the determination of financial statement amounts. However,
            providing an opinion on compliance with those provisions was not an objective of our audit, and

555 W. Crosstown Parkway, Suite 304
Kalamazoo, Michigan 49008                                                                              Phone (269) 343-8180
www.sebertans.com                                                                                        Fax (269) 343-5419
                                                            43
accordingly, we do not express such an opinion. The results of our tests disclosed no instances
of noncompliance or other matters that are required to be reported under Government Auditing
Standards.

Lawton Community Schools’ response to the findings identified in our audit is described in the
accompanying schedule of findings and questioned costs. We did not audit the District’s
response and, accordingly, we express no opinion on it.

This report is intended for the information of the board of education, management, and federal
awarding agencies and pass-through entities and is not intended to be and should not be used by
anyone other than these specified parties.



Seber Tans, PLC
Kalamazoo, Michigan

September 30, 2011




                                              44
                      SEBER TANS, PLC
                      CONSULTANTS & CERTIFIED PUBLIC ACCOUNTANTS

             REPORT ON COMPLIANCE WITH REQUIREMENTS THAT COULD HAVE A DIRECT AND
             MATERIAL AFFECT ON EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER
                       COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A-133


            To the Board of Education
            Lawton Community Schools, State of Michigan, Counties of Van Buren and Kalamazoo

            Compliance

            We have audited Lawton Community Schools’ (the District) compliance with the types of
            compliance requirements described in the OMB Circular A-133 Compliance Supplement that
            could have a direct and material effect on each of the District’s major federal programs for the
            year ended June 30, 2011. The District’s major federal programs are identified on the summary
            of the auditors’ results section of the accompanying schedule of findings and questioned costs.
            Compliance with the requirements of laws, regulations, contracts and grants applicable to each of
            its major federal programs is the responsibility of the District’s management. Our responsibility is
            to express an opinion on the District’s compliance based on our audit.

            We conducted our audit of compliance in accordance with auditing standards generally accepted
            in the United States of America; the standards applicable to financial audits contained in
            Government Auditing Standards, issued by the Comptroller General of the United States; and
            OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Those
            standards and OMB Circular A-133 require that we plan and perform the audit to obtain
            reasonable assurance about whether noncompliance with the types of compliance requirements
            referred to above that could have a direct and material effect on a major federal program
            occurred. An audit includes examining, on a test basis, evidence about the District’s compliance
            with those requirements and performing such other procedures as we considered necessary in
            the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our
            audit does not provide a legal determination on the District’s compliance with those requirements.

            In our opinion, the District complied, in all material respects, with the compliance requirements
            referred to above that could have a direct and material effect on each of its major federal
            programs for the year ended June 30, 2011.

            Internal Control Over Compliance

            Management of the District is responsible for establishing and maintaining effective internal
            control over compliance with the requirements of laws, regulations, contracts, and grants
            applicable to federal programs. In planning and performing our audit, we considered the District’s
            internal control over compliance with the requirements that could have a direct and material effect
            on a major federal program to determine the auditing procedures for the purpose of expressing
            our opinion on compliance and to test and report on internal control over compliance in
            accordance with OMB Circular A-133, but not for the purpose of expressing an opinion on the
            effectiveness of internal control over compliance. Accordingly, we do not express an opinion on
            the effectiveness of the District’s internal control over compliance.




555 W. Crosstown Parkway, Suite 304
Kalamazoo, Michigan 49008                                                                              Phone (269) 343-8180
www.sebertans.com                                                                                        Fax (269) 343-5419
                                                            45
A deficiency in internal control over compliance exists when the design or operation of a control
over compliance does not allow management or employees, in the normal course of performing
their assigned functions, to prevent, or detect and correct, noncompliance with a type of
compliance requirement of a federal program on a timely basis. A material weakness in internal
control over compliance is a deficiency, or combination of deficiencies, in internal control over
compliance, such that there is a reasonable possibility that material noncompliance with a type of
compliance requirement of a federal program will not be prevented, or detected and corrected, on
a timely basis.

Our consideration of internal control over compliance was for the limited purpose described in the
first paragraph of this section and was not designed to identify all deficiencies in internal control
over compliance that might be deficiencies, significant deficiencies, or material weaknesses. We
did not identify any deficiencies in internal control over compliance that we consider to be
material weaknesses, as defined above.

This report is intended for the information of the board of education, management, others within
the District, and federal awarding agencies and pass-through entities and is not intended to be
and should not be used by anyone other than these specified parties.



Seber Tans, PLC
Kalamazoo, Michigan

September 30, 2011




                                                 46
Lawton Community Schools
Schedule of Findings and Questioned Costs
For the Year Ended June 30, 2011


SECTION I – SUMMARY OF AUDITORS’ RESULTS


  Financial Statements
  Type of auditors’ report issued:                            Unqualified
  Internal control over financial reporting:
   Material weakness(es) identified?                          X       Yes              No
   Significant deficiency(ies) identified not considered to
     be material weaknesses?                                          Yes        X     None reported
  Noncompliance material to financial statements noted?               Yes        X     No

  Federal Awards
  Internal Control over major programs:
   Material weakness(es) identified?                                  Yes        X     No
   Significant deficiency(ies) identified not considered to
     be material weaknesses?                                          Yes        X     None reported
  Type of auditor’s report issued on compliance for major
    programs:                                                 Unqualified
  Any audit findings disclosed that are required to be
   reported in accordance with Circular A-133, Section
   510(a)?                                                            Yes        X     No
  Identification of major programs:
  CFDA Number(s)                                              Name of Federal Program or Cluster
                                                              Lunch Fund Cluster:
  10.555                                                          National School Lunch Program
  10.553                                                          National School Breakfast Program
  Dollar threshold used to distinguish between Type A and
   Type B programs:                                           $300,000
  Auditee qualified as low-risk auditee?                              Yes         X    No




                                                    47
Lawton Community Schools
Schedule of Findings and Questioned Costs
For the Year Ended June 30, 2011


SECTION II – FINANCIAL STATEMENT FINDINGS

2011-1

   Statement of Condition: The District’s accounting functions are performed primarily by two
   individuals. Due to the small size of the accounting department, certain receipt and disbursement
   activities are performed by one individual.

   Criteria: The District is responsible for establishing adequate segregation of duties to properly
   segregate the functions of authorizing transactions, recording transactions, controlling assets, and
   reviewing transactions

   Effect of Condition: The inability to segregate duties creates additional risk that transactions may be
   recorded incorrectly or that assets may be misappropriated.

   Recommendation: The Board actively review accounting information and limit employees’ access to
   assets. We recommend that the procedures be written and performance documented.

   Management’s Response: Management continues to be aware of this issue. Due to the size of the
   District, it is not possible to staff to a level that would satisfy this requirement. The staff continues to
   employ strategies and techniques that distribute some of the at-risk types of tasks to other personnel
   in order to create dual control situations.

2011-2

  Statement of Condition: The District does not maintain detailed capital asset records.

  Criteria: The District is required to maintain detailed capital asset records.

  Effect of Condition: The lack of detailed records may cause the District to report inaccurate fixed
  asset amounts.

  Recommendation: The District should develop a process to adequately maintain detailed capital
  assets.

  Management’s Response: Management is aware of this issue and will work toward obtaining an
  appropriate software program and training to manage the task of maintaining detailed capital asset
  records in-house.

SECTION III – FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

  None




                                                     48
Lawton Community Schools
Schedule of Findings and Questioned Costs
For the Year Ended June 30, 2011


SECTION IV – PRIOR YEAR FINDINGS


2010-1

   Statement of Condition: The District’s accounting functions are performed primarily by two
   individuals. Due to the small size of the accounting department, certain receipt and disbursement
   activities are performed by one individual.

   Criteria: The District is responsible for establishing adequate segregation of duties to properly
   segregate the functions of authorizing transactions, recording transactions, controlling assets, and
   reviewing transactions

   Effect of Condition: The inability to segregate duties creates additional risk that transactions may be
   recorded incorrectly or that assets may be misappropriated.

   Recommendation: The Board actively review accounting information and limit employees’ access to
   assets. We recommend that the procedures be written and performance documented.

   Management’s Response: Management continues to be aware of this issue. Due to the size of the
   District, it is not possible to staff to a level that would satisfy this requirement. The staff continues to
   employ strategies and techniques that distribute some of the at-risk types of tasks to other personnel
   in order to create dual control situations.

  This finding has not been cleared and is included in the 2011 findings.


2010-2

  Statement of Condition: The District does not maintain detailed capital asset records.

  Criteria: The District is required to maintain detailed capital asset records.

  Effect of Condition: The lack of detailed records may cause the District to report inaccurate fixed
  asset amounts.

  Recommendation: The District should develop a process to adequately maintain detailed capital
  assets.

  Management’s Response: Management is aware of this issue and will work toward obtaining an
  appropriate software program and training to manage the task of maintaining detailed capital asset
  records in-house.

  This finding has not been cleared and is included in the 2011 findings.




                                                     49

								
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