FontanaUSD-12GO-POS Body - i-Deal Prospectus

The Information contained in this PRELIMINARY OFFICIAL STATEMENT has been deemed by the District to be final as of the date hereof; however, the information contained herein is subject to completion or amendment. These 

securities may not be sold, nor may offers to buy be accepted, prior to the time the Official Statement is delivered in final form. Under no circumstances shall this PRELIMINARY OFFICIAL STATEMENT constitute an offer to sell or the 

solicitation of an offer to buy, nor shall there be any sale of these securities, in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction. 

NEW ISSUE 

DTC BOOK-ENTRY ONLY 

PRELIMINARY OFFICIAL STATEMENT DATED OCTOBER 2, 2012 

Moody’s Rating: “Aa3” 

See “RATING” herein 

In the opinion of Meyers, Nave, Riback, Silver & Wilson, A Professional Law Corporation, Bond Counsel to the District, based upon an 

analysis of existing laws, regulations, rulings and court decisions, and assuming, among other matters, the accuracy of certain 

representations and compliance with certain covenants, interest on the Bonds is excluded from gross income for federal income tax 

purposes under Section 103 of the Internal Revenue Code of 1986, as amended, and is exempt from State of California personal income 

taxes. In the further opinion of Bond Counsel, interest on the Bonds is not a specific preference item for purposes of the federal 

individual and corporate alternative minimum taxes, although Bond Counsel observes that such interest is included in adjusted current 

earnings when calculating corporate alternative minimum taxable income. Bond Counsel expresses no opinion regarding any other tax 

consequences related to the ownership or disposition of, or the accrual or receipt of interest on, the Bonds. See “LEGAL MATTERS – 

Tax Matters” herein. 

DATED: Date of Delivery 

$49,500,000.00 * $87,925,000 * 

FONTANA UNIFIED SCHOOL DISTRICT FONTANA UNIFIED SCHOOL DISTRICT 

(SAN BERNARDINO COUNTY, CALIFORNIA) (SAN BERNARDINO COUNTY, CALIFORNIA) 

ELECTION OF 2006 

2012 GENERAL OBLIGATION 

GENERAL OBLIGATION BONDS, SERIES C 

REFUNDING BONDS 

DUE: August 1, as shown on the inside cover 

The Fontana Unified School District (San Bernardino County, California) Election of 2006 General Obligation Bonds, Series C in the 

aggregate principal amount of $49,500,000.00 * (the “Series C Bonds”) are being issued by the Fontana Unified School District (the 

“District”) in order to pay certain outstanding bond anticipation notes of the District and to pay costs of issuance. See “THE BONDS— 

General Obligation Bond Election of 2006” herein. 

The Fontana Unified School District (San Bernardino County, California) 2012 General Obligation Refunding Bonds in the aggregate 

principal amount of $87,925,000 * (the “Refunding Bonds” and, together with the Series C Bonds, the “Bonds”) are being issued by the 

District to refund certain outstanding general obligation bonds of the District originally issued for authorized school purposes and to pay 

costs of issuance of the Bonds. See “PLAN OF REFUNDING” herein. 

The Board of Supervisors of San Bernardino County is empowered and obligated to annually levy and collect ad valorem property taxes 

without limitation as to rate or amount on all taxable property in the District (except for certain personal property which is taxable at 

limited rates) for the payment of principal of and interest on the Bonds. See “SECURITY AND SOURCE OF PAYMENT” herein. 

The Series C Bonds are being issued as capital appreciation bonds. The Series C Bonds accrete interest from their date of delivery, 

compounded semiannually on February 1 and August 1 of each year, commencing February 1, 2013. The Refunding Bonds are being 

issued as current interest bonds. Interest on the Refunding Bonds is first payable on February 1, 2013, and semiannually thereafter on 

February 1 and August 1 of each year. See “THE BONDS” herein. The Bonds are subject to redemption prior to maturity. See “THE 

BONDS—Redemption Provisions” herein. 

The Bonds are being issued as fully registered bonds, without coupons, and when delivered will be registered in the name of Cede & Co., 

as nominee of The Depository Trust Company, New York, New York (“DTC”). DTC will act as securities depository for the Bonds. 

Individual purchases of the Bonds will be made in book-entry-only form and only in authorized denominations as described in this 

Official Statement. So long as Cede & Co. is the registered owner of the Bonds, payments of principal of and interest on the Bonds will 

be made by U.S. Bank National Association, as paying agent (the “Paying Agent”) on the Bonds, to DTC for subsequent disbursement to 

DTC Participants who will remit such payments to the Beneficial Owners of the Bonds. See “THE BONDS—DTC Book-Entry Only” 

herein. 

THIS COVER PAGE CONTAINS CERTAIN INFORMATION FOR QUICK REFERENCE ONLY. IT IS NOT INTENDED TO BE A 

SUMMARY OF ALL FACTORS RELEVANT TO AN INVESTMENT IN THE BONDS. INVESTORS SHOULD READ THE ENTIRE 

OFFICIAL STATEMENT TO OBTAIN INFORMATION ESSENTIAL TO THE MAKING OF AN INFORMED INVESTMENT DECISION. 

CAPITALIZED TERMS USED ON THIS COVER PAGE NOT OTHERWISE DEFINED WILL HAVE THE MEANINGS SET FORTH 

HEREIN. 

MATURITY SCHEDULES 

See Inside Cover 

The Series C Bonds are being purchased for reoffering by ___________ as underwriter of the Series C Bonds. The Refunding Bonds are 

being purchased for reoffering by ___________ as underwriter of the Refunding Bonds. The Bonds are offered when, as and if issued by 

the District and received by the Underwriters, subject to approval as to legality by Meyers, Nave, Riback, Silver & Wilson, A 

Professional Law Corporation, San Francisco, California, Bond Counsel. It is anticipated that the Bonds, in definitive form, will be 

available for delivery through the facilities of DTC in New York, New York on or about October 25, 2012. 

* Preliminary, subject to adjustment. 

This Official Statement is dated ________, 2012

MATURITY SCHEDULES 

Maturity Date 

August 1 

$49,500,000.00 * 

FONTANA UNIFIED SCHOOL DISTRICT 

ELECTION OF 2006 GENERAL OBLIGATION BONDS, SERIES C 

Initial 

Principal Amount Accretion Rate Yield to Maturity Maturity Value * CUSIP + 

2030 $ __,___.__ _.___% _.___% $ 2,800,000.00 

2031 __,___.__ _.___ _.___ 2,975,000.00 

2033 __,___.__ _.___ _.___ 15,600,000.00 

2034 __,___.__ _.___ _.___ 15,250,000.00 

2035 __,___.__ _.___ _.___ 16,000,000.00 

2036 __,___.__ _.___ _.___ 16,800,000.00 

2037 __,___.__ _.___ _.___ 17,600,000.00 

2038 __,___.__ _.___ _.___ 18,450,000.00 

2039 __,___.__ _.___ _.___ 19,400,000.00 

2040 __,___.__ _.___ _.___ 20,350,000.00 

2041 __,___.__ _.___ _.___ 21,300,000.00 

2042 __,___.__ _.___ _.___ 22,400,000.00 

2043 __,___.__ _.___ _.___ 20,000,000.00 

2044 __,___.__ _.___ _.___ 12,000,000.00 

Maturity Date 

August 1 

$87,925,000 * 


2012 GENERAL OBLIGATION REFUNDING BONDS 

Principal 

Amount * 

Coupon 

Interest Rate 

2013 $ 3,050,000 _.___ % _.___ % 

2014 1,700,000 _.___ _.___ 

2015 2,780,000 _.___ _.___ 

2016 3,160,000 _.___ _.___ 

2017 3,490,000 _.___ _.___ 

2018 3,860,000 _.___ _.___ 

2019 4,185,000 _.___ _.___ 

2020 4,570,000 _.___ _.___ 

2021 4,975,000 _.___ _.___ 

2022 5,365,000 _.___ _.___ 

2023 5,820,000 _.___ _.___ 

2024 6,320,000 _.___ _.___ 

2025 6,815,000 _.___ _.___ 

2026 7,355,000 _.___ _.___ 

2027 7,990,000 _.___ _.___ 

2028 8,710,000 _.___ _.___ 

2029 6,280,000 _.___ _.___ 

2030 1,000,000 _.___ _.___ 

2031 500,000 _.___ _.___ 

Reoffering 

Price or Yield CUSIP + 

* Preliminary; subject to adjustment. 

+ CUSIP is a registered trademark of the American Bankers Association. CUSIP data herein is provided by CUSIP Global 

Services, managed by Standard & Poor's Financial Services LLC on behalf of The American Bankers Association. This data is 

not intended to create a database and does not serve in any way as a substitute for the CUSIP Services. Neither the District nor 

the Underwriters are responsible for the selection or correctness of the CUSIP numbers set forth herein. 

ii

THIS OFFICIAL STATEMENT IS SUBMITTED WITH RESPECT TO THE SALE OF THE BONDS REFERRED TO HEREIN AND MAY 

NOT BE REPRODUCED OR USED, IN WHOLE OR IN PART, FOR ANY OTHER PURPOSE. THIS OFFICIAL STATEMENT IS NOT 

TO BE CONSTRUED AS A CONTRACT WITH THE PURCHASERS OF THE BONDS. 

THE BONDS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES 

EXCHANGE ACT OF 1934, AS AMENDED, IN RELIANCE UPON EXCEPTIONS THEREIN FOR THE ISSUANCE AND SALE OF 

MUNICIPAL SECURITIES. THE BONDS HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES LAW OF 

ANY STATE. 

THIS OFFICIAL STATEMENT DOES NOT CONSTITUTE AN OFFER TO SELL NOR THE SOLICITATION OF AN OFFER TO BUY 

NOR SHALL THERE BE ANY SALE OF THE BONDS BY A PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL FOR 

SUCH PERSON TO MAKE AN OFFER, SOLICITATION OR SALE. 

NO DEALER, BROKER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED BY THE DISTRICT TO GIVE ANY 

INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED HEREIN, AND IF GIVEN OR 

MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED 

BY THE DISTRICT. 

THE INFORMATION SET FORTH HEREIN HAS BEEN FURNISHED BY THE DISTRICT AND OTHER SOURCES THAT ARE 

BELIEVED TO BE RELIABLE, BUT IS NOT GUARANTEED AS TO ACCURACY OR COMPLETENESS. THE INFORMATION AND 

EXPRESSIONS OF OPINION HEREIN ARE SUBJECT TO CHANGE WITHOUT NOTICE AND NEITHER DELIVERY OF THIS 

OFFICIAL STATEMENT NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY 

IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE DISTRICT SINCE THE DATE HEREOF. 

THE UNDERWRITERS HAVE REVIEWED THE INFORMATION IN THIS OFFICIAL STATEMENT IN ACCORDANCE WITH, AND 

AS PART OF, THEIR RESPONSIBILITIES UNDER FEDERAL SECURITIES LAWS, AS APPLIED TO THE FACTS AND 

CIRCUMSTANCES OF THIS TRANSACTION, BUT THE UNDERWRITERS DO NOT GUARANTEE THE ACCURACY OR 

COMPLETENESS FO SUCH INFORMATION. 

CERTAIN STATEMENTS INCLUDED OR INCORPORATED BY REFERENCE IN THIS OFFICIAL STATEMENT CONSTITUTE 

“FORWARD-LOOKING STATEMENTS” WITHIN THE MEANING OF THE UNITED STATES PRIVATE SECURITIES LITIGATION 

REFORM ACT OF 1995, SECTION 21E OF THE UNITED STATES SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND 

SECTION 27A OF THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED. SUCH STATEMENTS ARE GENERALLY 

IDENTIFIABLE BY THE TERMINOLOGY USED SUCH AS “PLAN,” EXPECT,” “ESTIMATE,” “PROJECT,” “BUDGET” OR 

SIMILAR WORDS. THE ACHIEVEMENT OF CERTAIN RESULTS OR OTHER EXPECTATIONS CONTAINED IN SUCH FORWARD- 

LOOKING STATEMENTS INVOLVES KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY 

CAUSE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS DESCRIBED TO BE MATERIALLY DIFFERENT FROM ANY 

FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING 

STATEMENTS. THE DISTRICT DOES NOT PLAN TO ISSUE ANY UPDATES OR REVISIONS TO THOSE FORWARD-LOOKING 

STATEMENTS IF OR WHEN ITS EXPECTATIONS OR EVENTS, CONDITIONS OR CIRCUMSTANCES ON WHICH SUCH 

STATEMENTS ARE BASED CHANGE. 

IN CONNECTION WITH THE OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS THAT 

STABILIZE OR MAINTAIN THE MARKET PRICE OF THE BONDS OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT 

OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY 

TIME. THE UNDERWRITERS MAY OFFER AND SELL THE BONDS TO CERTAIN DEALERS, INSTITUTIONAL INVESTORS, 

BANKS OR OTHERS AT PRICES LOWER OR HIGHER THAN THE PUBLIC OFFERING PRICES STATED ON THE COVER PAGE 

HEREOF AND SAID PUBLIC OFFERING PRICES MAY BE CHANGED FROM TIME TO TIME BY THE UNDERWRITERS. 

iii

$49,500,000.00 * $87,925,000 * 







BOARD OF EDUCATION 

BarBara L. Chavez, President 

Henry Hawthorn, Vice President 

Kathleen Binks, Member 

Leticia Garcia, Member 

Sophia Green, Member 

DISTRICT ADMINISTRATION 

Cali L. Oslen-Binks, Superintendent 

Alejandro Alvarez, Associate Superintendent, Business Services 

William W. Wu, J.D., Assistant Superintendent, Human Resources 

Oscar Duenas, Associate Superintendent, Instructional Services 

Fontana Unified School District 

9680 Citrus Avenue 

Fontana, California 92335 

(909) 357-7600 

FINANCIAL ADVISOR 

Government Financial Strategies inc. 

1228 N Street, Suite 13 

Sacramento, California 95814 

(916) 444-5100 

BOND COUNSEL 

Meyers, Nave, Riback, Silver & Wilson, A Professional Law Corporation 

575 Market Street, Suite 2600 

San Francisco, California 94105 

(415) 421-3711 

PAYING AGENT / ESCROW AGENT 

U.S. Bank National Association 

633 W Fifth Street, 24th Floor 

Los Angeles, California 90071 

(213) 615-6063 


iv

$49,500,000.00 * $87,925,000 * 







TABLE OF CONTENTS 

Page # 

INTRODUCTORY STATEMENT ...................................................................................................................................................... 1 

The District ..................................................................................................................................................................................... 1 

Authority for Issuance .................................................................................................................................................................... 1 

Purpose of Issues ............................................................................................................................................................................ 2 

Source of Payment for the Bonds ................................................................................................................................................... 2 

Description of the Bonds ................................................................................................................................................................ 2 

Bond Insurance ............................................................................................................................................................................... 2 

Continuing Disclosure .................................................................................................................................................................... 3 

Professionals Involved .................................................................................................................................................................... 3 

Other Information ........................................................................................................................................................................... 3 

THE BONDS ........................................................................................................................................................................................ 3 

General Obligation Bond Election of 2006 .................................................................................................................................... 3 

Form and Registration .................................................................................................................................................................... 4 

Payment of Principal and Interest ................................................................................................................................................... 4 

Transfer and Exchange ................................................................................................................................................................... 5 

Redemption Provisions ................................................................................................................................................................... 5 

Defeasance ...................................................................................................................................................................................... 6 

Unclaimed Moneys ......................................................................................................................................................................... 6 

DTC Book-Entry Only ................................................................................................................................................................... 6 

Sources and Uses of Funds ............................................................................................................................................................. 8 

Debt Service Schedules ................................................................................................................................................................ 11 

SECURITY AND SOURCE OF PAYMENT .................................................................................................................................... 14 

General .......................................................................................................................................................................................... 14 

Property Taxation System ............................................................................................................................................................. 14 

Assessed Valuation of Property Within the District ..................................................................................................................... 14 

Largest Taxpayers in District ........................................................................................................................................................ 18 

Tax Rates ...................................................................................................................................................................................... 18 

Alternative Method of Tax Apportionment .................................................................................................................................. 19 

Tax Collections and Delinquencies .............................................................................................................................................. 19 

Direct and Overlapping Bonded Debt .......................................................................................................................................... 20 

SAN BERNARDINO TREASURY POOL ....................................................................................................................................... 22 

COUNTY ECONOMIC PROFILE .................................................................................................................................................... 23 

General Information ...................................................................................................................................................................... 23 

Population ..................................................................................................................................................................................... 24 

Unemployment ............................................................................................................................................................................. 24 

Major Employers .......................................................................................................................................................................... 25 

Taxable Sales ................................................................................................................................................................................ 26 


v

THE DISTRICT ................................................................................................................................................................................. 26 

General Information ...................................................................................................................................................................... 26 

The Board of Education and Key Administrative Personnel ........................................................................................................ 27 

Enrollment .................................................................................................................................................................................... 27 

Charter Schools ............................................................................................................................................................................. 27 

Pupil-Teacher Ratios .................................................................................................................................................................... 28 

Employee Relations ...................................................................................................................................................................... 28 

Pension Plans ................................................................................................................................................................................ 28 

Other Post-Employment Benefits ................................................................................................................................................. 29 

DISTRICT FINANCIAL INFORMATION ....................................................................................................................................... 30 

Accounting Practices .................................................................................................................................................................... 30 

Budget and Financial Reporting Process ...................................................................................................................................... 30 

Financial Statements ..................................................................................................................................................................... 32 

Revenues ....................................................................................................................................................................................... 33 

Expenditures ................................................................................................................................................................................. 34 

Short-Term Borrowings ................................................................................................................................................................ 34 

Capitalized Lease Obligations ...................................................................................................................................................... 34 

Long-Term Debt ........................................................................................................................................................................... 35 

STATE FUNDING OF PUBLIC EDUCATION ............................................................................................................................... 35 

Revenue for Public Education ...................................................................................................................................................... 35 

Distribution of Revenue for School Districts ............................................................................................................................... 36 

State IOUs and Deferrals .............................................................................................................................................................. 37 

The 2011-12 State Budget ............................................................................................................................................................ 38 

The 2012-13 State Budget ............................................................................................................................................................ 38 

Litigation Challenging State Funding of Education ..................................................................................................................... 39 

Future Budgets .............................................................................................................................................................................. 40 

CONSTITUTIONAL & STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES & EXPENDITURES ................. 40 

Limitations on Revenues .............................................................................................................................................................. 40 

Expenditures and Appropriations ................................................................................................................................................. 41 

LEGAL MATTERS ........................................................................................................................................................................... 42 

No Litigation ................................................................................................................................................................................. 42 

Legal Opinion ............................................................................................................................................................................... 42 

Tax Matters ................................................................................................................................................................................... 42 

Legality for Investment ................................................................................................................................................................. 44 

RATING ............................................................................................................................................................................................. 44 

FINANCIAL ADVISOR .................................................................................................................................................................... 44 

INDEPENDENT AUDITORS ........................................................................................................................................................... 44 

UNDERWRITING AND INITIAL OFFERING PRICE ................................................................................................................... 44 

CONTINUING DISCLOSURE ......................................................................................................................................................... 45 

ADDITIONAL INFORMATION ...................................................................................................................................................... 45 

APPENDIX A —THE FINANCIAL STATEMENTS OF THE DISTRICT AS OF AND FOR THE YEAR ENDING 

JUNE 30, 2011 

APPENDIX B—ACCRETED VALUES TABLE 

APPENDIX C—FORM OF CONTINUING DISCLOSURE CERTIFICATE 

APPENDIX D—PROPOSED FORMS OF OPINION OF BOND COUNSEL 

APPENDIX E—SAN BERNARDINO COUNTY INVESTMENT POLICY STATEMENT 

vi

OFFICIAL STATEMENT 

$49,500,000.00 * $87,925,000 * 







INTRODUCTORY STATEMENT 

The purpose of this Official Statement is to provide certain information concerning the sale and delivery of the Fontana Unified 

School District (San Bernardino County, California) Election of 2006 General Obligation Bonds, Series C in the aggregate 

principal amount of $49,500,000.00 * (the “Series C Bonds”), and the Fontana Unified School District (San Bernardino County, 

California) 2012 General Obligation Refunding Bonds in the aggregate principal amount of $87,925,000 * (the “Refunding 

Bonds” and, together with the Series C Bonds, the “Bonds”). 

This INTRODUCTORY STATEMENT is not a summary of this Official Statement. It is only a brief description of and guide to 

this Official Statement. This INTRODUCTORY STATEMENT is qualified by more complete and detailed information contained 

in the entire Official Statement and the documents summarized or described herein. A full review should be made of the entire 

Official Statement by prospective investors in the Bonds. The offering of the Bonds to potential investors is made only by means 

of the entire Official Statement. 

The District 

The Fontana Unified School District (the “District”) is a unified school district organized under the laws of the State of California 

(the “State”). The District provides kindergarten through 12 th grade educational services to an area of approximately 55 square 

miles in the County of San Bernardino (the “County”). The District’s boundaries include the City of Fontana and portions of the 

cities of Rialto and Rancho Cucamonga, as well as unincorporated areas of the County. The District currently operates five high 

schools, two continuation high schools, seven middle schools, 29 elementary schools and one adult school. See “THE 

DISTRICT” and “DISTRICT FINANCIAL INFORMATION” herein. 

Authority for Issuance 

The Series C Bonds are issued by the District under and pursuant to the provisions of Article 4.5 (commencing with Section 

53506) of Chapter 3, Part 1, Division 1, Title 1 of the State Government Code, and all laws amendatory thereof or supplemental 

thereto, and pursuant to the provisions of Resolution No. 12-53 (the “Resolution”) adopted by the District’s Board of Education 

(the “Board”) on September 5, 2012 and a paying agent agreement dated October 1, 2012, between the District and U.S. Bank 

National Association (the “Paying Agent Agreement”). 

The Series C Bonds represent the third series of bonds authorized at an election held in the District on June 6, 2006 (the “2006 

Election”), whereby a 55% majority of the votes cast by voters in the District authorized the issuance of $275 million aggregate 

principal amount of general obligation bonds for authorized school purposes. See “THE BONDS—General Obligation Bond 

Election of 2006” herein. 


- 1 -

The Refunding Bonds are issued by the District under and pursuant to the provisions of Articles 9 and 11 of Chapter 3 of Part 1 of 

Division 2 of Title 5 of the State Government Code, and all laws amendatory thereof or supplemental thereto, and pursuant to the 

Resolution and the Paying Agent Agreement. The State Government Code permits the issuance of bonds payable from ad 

valorem taxes without a vote of the electors solely in order to refund other outstanding bonds which were originally approved by 

such a vote, provided that the total net interest cost to maturity on the refunding bonds plus the principal amount of the refunding 

bonds does not exceed the total net interest cost to maturity plus the principal amount of the bonds being refunded. 

Purpose of Issues 

Proceeds of the Series C Bonds will be applied to pay the Fontana Unified School District (San Bernardino County, California) 

General Obligation Bond Anticipation Notes maturing December 1, 2012 (the “Prior Notes”) and pay costs of issuance of the 

Series C Bonds. 

Proceeds of the Refunding Bonds will be applied to refund the Fontana Unified School District (San Bernardino County, 

California) Election of 2006 General Obligation Bonds, Series A maturing August 1, 2015 through August 1, 2031, inclusive (the 

“Prior Bonds”) and pay costs of issuance of the Refunding Bonds. See “THE BONDS-Sources and Uses of Funds” herein. 

Source of Payment for the Bonds 

The Board of Supervisors of San Bernardino are empowered and obligated to annually levy and collect ad valorem property 

taxes, without limitation as to rate or amount, on all taxable property in the District (except for certain personal property which is 

taxable at limited rates) for the payment of principal of and interest on the Bonds. See “SECURITY AND SOURCE OF 

PAYMENT” herein. 

Description of the Bonds 

The Bonds will be dated their date of delivery and will be issued as fully registered bonds, without coupons, in book-entry form 

only. The Bonds will be initially issued and registered in the name of Cede & Co. as nominee of The Depository Trust Company, 

New York, New York (“DTC”). Payments of the principal of and interest on the Bonds will be made by U.S. Bank National 

Association as paying agent, registrar and transfer agent on the Bonds to DTC for subsequent disbursement to the Beneficial 

Owners (as defined herein) of the Bonds. See “THE BONDS – Book-Entry-Only System” herein. 

The Series C Bonds are issued as capital appreciation bonds in denominations of $5,000 Maturity Value (as defined herein), or 

any integral multiple thereof, and mature on August 1 in each of the years and in the amounts set forth on the inside cover page 

hereof. The Series C Bonds accrete interest from their date of delivery, compounded semiannually on February 1 and August 1 of 

each year, commencing February 1, 2013. Interest on the Series C Bonds is computed on the basis of a 360-day year of twelve 

30-day months. See “THE BONDS” herein. 

The Refunding Bonds are issued as current interest bonds in denominations of $5,000 principal amount, or any integral multiple 

thereof, and mature on August 1 in each of the years and in the amounts set forth on the inside cover page hereof. Interest with 

respect to the Refunding Bonds is payable on February 1 and August 1 of each year, commencing February 1, 2013. Interest on 

the Refunding Bonds is computed on the basis of a 360-day year of twelve 30-day months. See “THE BONDS” herein. 

Bond Insurance 

The decision as to whether or not payment of debt service on the Bonds will be insured will be determined by the Underwriters of 

the Bonds at the time of the sale of the Bonds. 

- 2 -

Continuing Disclosure 

The District will covenant for the benefit of holders and Beneficial Owners (as defined herein) to make available certain financial 

information and operating data relating to the District and to provide notices of the occurrence of certain enumerated events in 

compliance with S.E.C. Rule 15c2-12(b)(5). The specific nature of the information to be made available and of the notices of 

certain enumerated events are set forth in “APPENDIX C – FORM OF CONTINUING DISCLOSURE CERTIFICATE.” See 

also "CONTINUING DISCLOSURE" herein. 

Professionals Involved 

Government Financial Strategies inc., Sacramento, California, has acted as financial advisor with respect to the sale and delivery 

of the Bonds. See “FINANCIAL ADVISOR” herein. All proceedings in connection with the sale and delivery of the Bonds are 

subject to the approving legal opinion of Meyers, Nave, Riback, Silver & Wilson, A Professional Law Corporation, San 

Francisco, California, bond counsel to the District with respect to the Bonds (“Bond Counsel”). U.S. Bank National Association 

will act as paying agent with respect to the Bonds (the “Paying Agent”) and escrow agent with respect to the Prior Bonds (the 

“Escrow Agent”). Bond Counsel and Paying Agent will receive compensation from the District contingent upon the sale and 

delivery of the Bonds. 

Other Information 

This Official Statement may be considered current only as of its date that has been made a part of the cover page hereof, and the 

information contained herein is subject to change. A description of the Bonds and the District, together with summaries of certain 

provisions of the Resolution, the Paying Agent Agreement and other legal documents related to the Bonds, are included in this 

Official Statement. Such summaries do not purport to be comprehensive or definitive, and are qualified in their entirety by 

reference to such documents. 

Interested parties may obtain copies of the Resolution, the Paying Agent Agreement, audited financial statements, annual budget, 

or any other information which is generally made available to the public by contacting the District through the Associate 

Superintendent, Business Services at the address and telephone set forth on page “iv” of this Official Statement, or by contacting 

Government Financial Strategies inc., the District’s financial advisor, at the address and telephone set forth on page “iv” of this 

Official Statement. 

THE BONDS 

General Obligation Bond Election of 2006 

Pursuant to provisions of the Education Code of the State of California and the Elections Code of the State of California 

(collectively, the “Law”), the Board adopted a resolution calling for an election to authorize the issuance of $275 million in 

aggregate principal amount of general obligation bonds for authorized school purposes. On June 6, 2006, at an election duly held 

pursuant to the Law, more than 55% of the qualified voters within the boundaries of the District voted to approve “Measure C” as 

follows: 

“To improve health, safety, class instruction by: reducing overcrowding; improving traffic 

flow, drop-off areas, handicapped student accessibility; purchasing computers, land for new 

schools; building/equipping energy efficient libraries, labs, facilities, elementary, middle, 

high schools; shall Fontana Unified School District issue $275 million of bonds at legal rates 

with guaranteed financial audits, citizen oversight, and no money for administrators’ 

salaries?” 

- 3 -

The Registrar-Recorder/County Clerk of San Bernardino certified the results of the election as follows: 

Results of June 6, 2006 Election 


Yes Votes 

No Votes 

5,598 (65.5%) 2,949 (34.5%) 

Source: Registrar-Recorder/County Clerk, San Bernardino 

The Series C Bonds represent the third series of general obligation bonds to be issued under Measure C. Upon the issuance of the 

Series C Bonds, the District will have approximately $64.9 * million of unissued authorization remaining under the 2006 Election. 

Form and Registration 

The Bonds will be dated their date of delivery and will be issued as fully registered bonds, without coupons, in book-entry form 

only. The Bonds will be initially issued and registered in the name of Cede & Co. as nominee of DTC. Purchases of Bonds under 

the DTC book-entry system must be made by or through a DTC participant, and ownership interests in Bonds will be recorded as 

entries on the books of said participants. Except in the event that use of this book-entry system is discontinued for the Bonds, 

Beneficial Owners (as defined herein) will not receive physical certificates representing their ownership interests. 

The Paying Agent agrees to keep and maintain for and on behalf of the District at the Paying Agent office, books and records, 

electronic or otherwise (herein referred to as the "Bond Register") for recording the names and addresses of the owners (the 

“Registered Owners”), the transfer, exchange, and replacement of the Bonds, and the payment of the principal of and interest on 

the Bonds to the Registered Owners and containing such other information as may be reasonably required by the District and 

subject to such reasonable regulations as the District and the Paying Agent may prescribe. All transfers, exchanges, and 

replacement of Bonds shall be noted in the Bond Register. 

Payment of Principal and Interest 

The Series C Bonds are issued as capital appreciation bonds in denominations of $5,000 Maturity Value (as defined herein), or 

any integral multiple thereof, and mature on August 1 in each of the years and in the amounts set forth on the inside cover page 

hereof. The Series C Bonds accrete in value from their delivery date at the rates per annum (the "Accretion Rate") set forth on 

the inside cover hereof, compounded semiannually on February 1 and August 1 of each year commencing February 1, 2013. The 

accreted value (“Accreted Value”) of a Series C Bond is the initial principal amount on the date of delivery plus the interest 

accrued thereon, compounded semiannually at the Accretion Rate on the basis of a 360-day year of twelve 30-day months, to the 

date for which its value is calculated. The Accreted Value of a Bond on its maturity date is its “Maturity Value.” See 

“APPENDIX B—ACCRETED VALUES TABLE” herein. 

The Refunding Bonds are issued as current interest bonds in denominations of $5,000 principal amount, or any integral multiple 

thereof, and mature on August 1 in each of the years and in the amounts set forth on the inside cover page hereof. Interest with 

respect to the Refunding Bonds is payable on February 1 and August 1 of each year, commencing February 1, 2013. Interest on 

the Refunding Bonds is computed on the basis of a 360-day year of twelve 30-day months. 

The principal of and interest on the Bonds will be paid in lawful money of the United States of America by the Paying Agent to 

DTC, who will, in turn, disburse such payment to direct and indirect participants of DTC for subsequent disbursement to 

Beneficial Owners. The principal of and interest on the Bonds is payable upon maturity or prior redemption of a Bond upon its 

surrender at the principal office of the Paying Agent. So long as Cede & Co. or its registered assignee is the Registered Owner of 

the Bonds, payment shall be made by wire transfer. 

* Preliminary; subject to adjustment 

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Transfer and Exchange 

The Bonds may be transferred by the person in whose name it is registered, in person or by the duly authorized attorney of such 

person, upon surrender of the Bonds to the Paying Agent for cancellation, accompanied by delivery of a duly executed written 

instrument of transfer in a form approved by the Paying Agent. 

Every Bond surrendered to the Paying Agent for transfer or exchange shall have been duly endorsed or be accompanied by a 

written instrument of transfer, the signature on which has been guaranteed by an eligible guarantor institution, in form satisfactory 

to the Paying Agent, duly executed by either the Registered Owner thereof or his authorized agent in writing. The Paying Agent 

may request any supporting documentation it determines is necessary to affect a registration, transfer or exchange of the Bonds. 

Redemption Provisions 

Series C Bonds. The Series C Bonds are subject to redemption prior to their respective stated maturity dates, at the option of the 

District, from any source of available funds, as a whole or in part on any date (by such maturities as may be specified by the 

District) on or after August 1, 2022, at a redemption price equal to 100% of the Accreted Value of the Series C Bonds called for 

redemption at the date fixed for redemption. 

Refunding Bonds. The Refunding Bonds maturing on or before August 1, 2022, are not subject to redemption prior to their 

respective maturity dates. The Refunding Bonds maturing on or after August 1, 2023, are subject to redemption prior to their 

respective stated maturity dates, at the option of the District, from any source of available funds, as a whole or in part on any date 

(by such maturities as may be specified by the District) on or after August 1, 2022, at a redemption price equal to 100% of the 

principal amount of Refunding Bonds called for redemption, together with accrued interest, if any, to the date fixed for 

redemption. 

Selection of Bonds for Redemption. If less than all the outstanding Bonds of any maturity are to be redeemed, not more than 60 

days prior to the redemption date, the District shall select the particular Bonds to be redeemed from the outstanding Bonds of such 

maturity that have not previously been called for redemption by lot in any manner that the Paying Agent in its sole discretion shall 

deem appropriate and fair. The Paying Agent shall promptly notify the District in writing of the Bonds so selected for redemption 

and, in the case of a Bond selected for partial redemption, the principal or Maturity Value thereof, as applicable, to be redeemed. 

Notice of Redemption. The Paying Agent shall mail a notice of redemption not fewer than 30 nor more than 60 days prior to the 

redemption date by first-class mail, postage prepaid, to the respective Registered Owners of any Bonds designated for redemption 

at their addresses appearing on the Bond Register. 

Each notice of redemption shall state (a) the date of such notice, (b) the series designation of the bonds, (c) the date of issue, (d) 

the redemption date, (e) the redemption price, (f) the place or places of redemption (including the name and appropriate address 

or addresses of the Paying Agent), (g) the CUSIP number (if any) of the maturity or maturities, and (h) if less than all of any such 

maturity, the distinctive numbers of the Bonds of such maturity to be redeemed and, in the case of Bonds to be redeemed in part 

only, the respective portions of the Bonds to be redeemed. 

Each notice of redemption shall either (a) explicitly state that the proposed redemption is conditioned on there being on deposit on 

the redemption date sufficient money to pay in full the redemption price of the Bonds or portions thereof to be redeemed or (b) be 

sent only if sufficient money to pay in full the redemption price of the Bonds or portions thereof to be redeemed is on deposit. 

Each such notice shall also (a) state that on said date there will become due and payable on each of said Bonds the redemption 

price thereof, or of said specified portion of the principal amount or Accreted Value thereof in the case of a Bond to be redeemed 

in part only, together with interest accrued thereon to the date fixed for redemption, (b) state that from and after such redemption 

date interest thereon shall cease to accrue, and (c) require that such Bonds be then surrendered at the address or addresses of the 

Paying Agent specified in the redemption notice. Neither the District nor the Paying Agent shall have any responsibility for any 

defect in the CUSIP number that appears on any bond or in any redemption notice with respect thereto, and any such redemption 

notice may contain a statement to the effect that CUSIP numbers have been assigned by an independent service for convenience 

of reference and that neither the District nor the Paying Agent shall be liable for any inaccuracy in such numbers. 

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Failure by the Paying Agent to give notice to the information service or securities depositories or failure of any Registered Owner 

to receive notice or any defect in any such notice shall not affect the sufficiency of the proceedings for redemption. Failure by the 

Paying Agent to mail notice to any one or more of the respective Registered Owners of any Bonds designated for redemption 

shall not affect the sufficiency of the proceedings for redemption with respect to the Registered Owner or Registered Owners to 

whom such notice was mailed. 

Effect of Redemption. Notice of redemption having been duly given as aforesaid and moneys for payment of the redemption price 

of the Bonds so to be redeemed being held by the Paying Agent, then on the redemption date designated in such notice (a) the 

Bonds so to be redeemed shall become due and payable at the redemption price specified in such notice, (b) interest on such shall 

cease to accrue or accrete, (c) such Bonds shall cease to be entitled to any benefit or security under the Paying Agent Agreement, 

and (d) the Registered Owners of such Bonds shall have no rights in respect thereof except to receive payment of said redemption 

price. Upon surrender of any such Bonds for redemption in accordance with said notice, such Bonds shall be paid by Paying 

Agent at the redemption price. 

Defeasance 

The Bonds may be paid and discharged (a) by paying or causing to be paid the principal or Accreted Value of and compounded 

interest on all Bonds outstanding, and when the same become due and payable; (b) by depositing with the Paying Agent, escrow 

agent or other fiduciary, in trust, at or before maturity, cash which together with the amounts then on deposit in the debt service 

fund for the payment of the Bonds (the “Tax Collection Fund”) together with the interest to accrue thereon without the need for 

further investment, is fully sufficient to pay all Bonds outstanding at maturity thereof, including any premium and all interest 

thereon, notwithstanding that any Bonds shall not have been surrendered for payment; or (c) by depositing with the Paying Agent, 

escrow agent, or other fiduciary, in trust, lawful money or non-callable direct obligations issued by the United States Treasury or 

obligations which are unconditionally guaranteed by the United States of America, in such amount as will, together with the 

interest to accrue thereon without the need for further investment, be fully sufficient to pay and discharge all Bonds outstanding at 

maturity thereof, including any premium and all interest thereon, notwithstanding that any Bonds shall not have been surrendered 

for payment. 

All obligations of the County, the District and the Paying Agent with respect to all outstanding Bonds shall cease and terminate 

after all Bonds have been paid and discharged, except only the obligation of the Paying Agent to pay or cause to be paid to the 

Registered Owners of the Bonds all sums due thereon, and the obligation of the District to pay to the Paying Agent amounts 

owing to the Paying Agent. 

Unclaimed Moneys 

Subject to applicable law, any money held for the payment on the Bonds and remaining unclaimed for two years after all of the 

Bonds have become due and payable shall be transferred to the District. 

DTC Book-Entry Only 

The following description includes the procedures and record-keeping with respect to beneficial ownership interests in the Bonds, 

payment of principal and interest, other payments with respect to the Bonds to Direct Participants or Beneficial Owners, 

confirmation and transfer of beneficial ownership interests in such Bonds, notices to Beneficial Owners and other related 

transactions by and between DTC, the participants, and the Beneficial Owners. However, DTC, the participants, and the 

Beneficial Owners should not rely on the following information with respect to such matters, but should instead confirm the same 

with DTC or the Direct Participants, as the case may be. 

DTC, New York, NY, will act as securities depository for the Bonds. The Bonds will be issued as fully-registered securities 

registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized 

representative of DTC. One fully-registered Bond certificate will be issued for each issue (or series) of the Bonds, each in the 

aggregate principal amount of such issue, and will be deposited with DTC. 

DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a 

“banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing 

corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the 

provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million 

- 6 -

issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 

countries) that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among 

Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry 

transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities 

certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing 

corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation 

(“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing 

Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the 

DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and 

clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly 

(“Indirect Participants”). DTC has a Standard & Poor’s rating of AA+. The DTC Rules applicable to its Participants are on file 

with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com. 

Purchases of the Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the 

Bonds on DTC’s records. The ownership interest of each actual purchaser of each Bond (“Beneficial Owner”) is in turn to be 

recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of 

their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as 

well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered 

into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct 

and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their 

ownership interests in the Bonds, except in the event that use of the book-entry system for the Bonds is discontinued. 

To facilitate subsequent transfers, all the Bonds deposited by Direct Participants with DTC are registered in the name of DTC’s 

partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit 

of the Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in 

beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC’s records reflect only the 

identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. 

The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. 

Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, 

and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject 

to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of the Bonds may wish to 

take certain steps to augment the transmission to them of notices of significant events with respect to the Bonds, such as 

redemptions, tenders, defaults, and proposed amendments to the Bond documents. For example, Beneficial Owners of the Bonds 

may wish to ascertain that the nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to Beneficial 

Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that 

copies of notices be provided directly to them. 

Redemption notices shall be sent to DTC. If less than all of the Bonds within an issue are being redeemed, DTC’s practice is to 

determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed. 

Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to the Bonds unless authorized by a 

Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the 

District as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those 

Direct Participants to whose accounts the Bonds are credited on the record date (identified in a listing attached to the Omnibus 

Proxy). 

Redemption proceeds, distributions, and dividend payments on the Bonds will be made to Cede & Co., or such other nominee as 

may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s 

receipt of funds and corresponding detail information from the District or Paying Agent, on payable date in accordance with their 

respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing 

instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered 

in “street name,” and will be the responsibility of such Participant and not of DTC, Paying Agent, or the District, subject to any 

statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and 

dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the 

responsibility of the District or Paying Agent, disbursement of such payments to Direct Participants will be the responsibility of 

DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. 

- 7 -

DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to the 

District or Paying Agent. Under such circumstances, in the event that a successor depository is not obtained, Bond certificates are 

required to be printed and delivered. 

The District may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities 

depository). In that event, Bond certificates will be printed and delivered to DTC. 

The information in this section concerning DTC and DTC’s book-entry system has been obtained from sources that the District 

believes to be reliable, but the District takes no responsibility for the accuracy thereof. 

Sources and Uses of Funds 

A portion of the proceeds from the sale of the Series C Bonds, together with available moneys from the Prior Notes (the “Other 

Available Funds”), will be irrevocably deposited into an escrow fund (the “Note Escrow Fund”) to be created and maintained by 

the Escrow Agent under that certain escrow agreement (the “Note Escrow Agreement”) by and between the District and the 

Escrow Agent, dated as of October 1, 2012. Moneys in the Note Escrow Fund will be invested in non-callable direct obligations 

of the United States Treasury or other non-callable obligations the payment of the principal of and interest on which is guaranteed 

by a pledge of the full faith and credit of the United States of America. AMTEC (in conjunction with Ross & Company, PLLC, a 

certified public accountant licensed to practice in the State), acting as verification agent with respect to the Note Escrow Fund, 

will certify in writing that moneys irrevocably deposited in the Note Escrow Fund will be sufficient for the payment of principal 

and interest coming due and payable on the Prior Notes on December 1, 2012. 

A portion of the proceeds of the Series C Bonds will be retained by the Paying Agent in a costs of issuance account and used to 

pay costs associated with the issuance of the Series C Bonds (the “Series C Costs of Issuance Fund”). 

The premium, if any, received by the District from the sale of the Bonds, along with any additional proceeds of sale of the Series 

C Bonds not needed to fund the Escrow Fund or to pay costs of issuance of the Bonds, will be transferred by the Escrow Agent to 

the Treasurer for deposit in the Tax Collection Fund, to be used only for payments of principal of and interest on general 

obligation bonds of the District. Moneys in the Tax Collection Fund will be invested by the Treasurer in the Pool. See “SAN 

BERNARDINO COUNTY TREASURY POOL” and “APPENDIX D — SAN BERNARDINO COUNTY INVESTMENT 

STATEMENT” herein. 

[The remainder of this page intentionally left blank.] 

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Set forth in the following table are the sources and expected uses of Series C Bond proceeds. 

Sources and Uses of Funds Schedule 


Election of 2006, Series C Bonds 

SOURCES OF FUNDS 

Par Amount of Series C Bonds 

Original Issue Premium 

Other Available Funds 

TOTAL SOURCES OF FUNDS 

USES OF FUNDS 

Note Escrow Fund 

Tax Collection Fund 

Series C Costs of Issuance Fund 1 

Underwriter's Discount 2 

TOTAL USES OF FUNDS 

Series C Bonds 

1 

Costs of issuance include fees and expenses of bond counsel, financial advisor, rating agencies, and other expenses related to the 

issuance of the Series C Bonds. 

2 

Underwriter’s discount includes the premium for bond insurance, if any, to be paid by the underwriter at the underwriter’s option 

and expense. 

A portion of the proceeds from the sale of the Refunding Bonds will be irrevocably deposited into an escrow fund (the “Series A 

Escrow Fund”) to be created and maintained by the Escrow Agent under that certain escrow agreement (the “Bond Escrow 

Agreement”) by and between the District and the Escrow Agent, dated as of October 1, 2012. Moneys in the Escrow Fund will be 

invested in non-callable direct obligations of the United States Treasury or other non-callable obligations the payment of the 

principal of and interest on which is guaranteed by a pledge of the full faith and credit of the United States of America. 

AMTEC (in conjunction with Ross & Company, PLLC, a certified public accountant licensed to practice in the State), acting as 

verification agent with respect to the Series A Escrow Fund, will certify in writing that moneys irrevocably deposited in the Series 

A Escrow Fund, together with earnings thereon, will be sufficient for the payment of interest coming due and payable to the date 

fixed for redemption plus the redemption amount of the Prior Bonds, redeemable on August 1, 2014 at a price of 100% of par, the 

first optional redemption date for the Prior Bonds. Upon such irrevocable deposit, the Prior Bonds will be deemed paid and no 

longer outstanding. 


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The Prior Bonds and refunding details are identified in the following table. 

Prior Bonds 


Series 

Maturities 

To Be Refunded 

Principal Amount 

To Be Refunded 

Redemption 

Date 

Redemption 

Price 

Election of 2006, Series A August 1, 2015 - 2031 $81,440,000 August 1, 2014 100% 

A portion of the proceeds of the Refunding Bonds will be retained by the Paying Agent in a costs of issuance account and used to 

pay costs associated with the issuance of the Refunding Bonds (the “Refunding Costs of Issuance Fund”). Any proceeds of sale 

of the Refunding Bonds not needed to fund the Refunding Escrow Fund or to pay costs of issuance of the Refunding Bonds will 

be transferred by the Escrow Agent to the Treasurer for deposit in the Tax Collection Fund. Amounts deposited into the Tax 

Collection Fund, as well as proceeds of taxes held therein for payment of the Refunding Bonds, will be invested pursuant to law 

and the investment policy of the County. See “SAN BERNARDINO COUNTY TREASURY POOL” and “APPENDIX D— 

SAN BERNARDINO COUNTY INVESTMENT POLICY STATEMENT” herein. 

Set forth in the following table are the sources and expected uses of the proceeds of the Refunding Bonds. 

Sources and Uses of Funds Schedule 


2012 General Obligation Refunding Bonds 

SOURCES OF FUNDS 

Par Amount of Bonds 

Original Issue Premium 

TOTAL SOURCES OF FUNDS 

USES OF FUNDS 

Series A Escrow Fund 

Refunding Costs of Issuance Fund 1 

Underwriter's Discount 2 

TOTAL USES OF FUNDS 

Refunding Bonds 

1 

Costs of issuance include fees and expenses of bond counsel, financial advisor, rating agencies, and other expenses related to the 

issuance of the Refunding Bonds. 

2 

Underwriter’s discount includes the premium for bond insurance, if any, to be paid by the underwriter at the underwriter’s option 

and expense. 

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Debt Service Schedules 

Scheduled debt service (without regard to optional redemption) on the Series C Bonds will be as shown in the following table. 

Debt Service Schedule 


Election of 2006, Series C Bonds 

August 1 

Initial 

Principal 

Accrued 

Interest Maturity Value * 

2030 $ 2,800,000.00 

2031 2,975,000.00 

2033 15,600,000.00 

2034 15,250,000.00 

2035 16,000,000.00 

2036 16,800,000.00 

2037 17,600,000.00 

2038 18,450,000.00 

2039 19,400,000.00 

2040 20,350,000.00 

2041 21,300,000.00 

2042 22,400,000.00 

2043 20,000,000.00 

2044 12,000,000.00 

$220,925,000.00 



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Scheduled debt service (without regard to optional redemption) on the Refunding Bonds will be as shown in the following table. 

Debt Service Schedule 



Date Principal * Interest 

February 1, 2013 

August 1, 2013 $3,050,000.00 


August 1, 2014 1,700,000.00 


August 1, 2015 2,780,000.00 


August 1, 2016 3,160,000.00 


August 1, 2017 3,490,000.00 


August 1, 2018 3,860,000.00 


August 1, 2019 4,185,000.00 


August 1, 2020 4,570,000.00 


August 1, 2021 4,975,000.00 


August 1, 2022 5,365,000.00 


August 1, 2023 5,820,000.00 


August 1, 2024 6,320,000.00 


August 1, 2025 6,815,000.00 


August 1, 2026 7,355,000.00 


August 1, 2027 7,990,000.00 


August 1, 2028 8,710,000.00 


August 1, 2029 6,280,000.00 


August 1, 2030 1,000,000.00 


August 1, 2031 500,000.00 

$87,925,000.00 

Semi-Annual 

Debt Service 

Annual 

Debt Service 


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Upon issuance of the Bonds, scheduled debt service (without regard to optional redemption) on the District’s outstanding general 

obligation bond debt will be as shown in the following table. See “DISTRICT FINANCIAL INFORMATION – Long-Term 

Borrowings” for more information on the District’s outstanding bonded debt. 

Outstanding General Obligation Bond Debt 


Fiscal Year Bonds to Remain Total G.O. Bond 

Ending June 30 Outstanding Series C Bonds Refunding Bonds Debt Service 

2013 $ 13,884,713 

2014 12,146,931 

2015 12,738,528 

2016 12,539,425 

2017 10,941,878 

2018 11,196,750 

2019 11,548,313 

2020 9,302,419 

2021 7,469,219 

2022 7,843,531 

2023 6,107,875 

2024 6,457,781 

2025 6,826,188 

2026 7,259,156 

2027 7,702,750 

2028 8,105,656 

2029 8,492,219 

2030 9,215,000 

2031 9,700,000 

2032 10,380,000 

2033 22,500,000 

2034 -- 

2035 -- 

2036 -- 

2037 -- 

2038 -- 

2039 -- 

2040 -- 

2041 -- 

2042 -- 

2043 -- 

2044 -- 

2045 -- 

2046 -- 

2047 -- 

Total $212,358,331 

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SECURITY AND SOURCE OF PAYMENT 

General 

In order to provide sufficient funds for repayment of principal of and compounded interest on the Bonds when due, the Board of 

Supervisors of the County is empowered and is obligated to levy ad valorem taxes upon all property subject to taxation by the 

District, without limitation as to rate or amount (except as to certain personal property which is taxable at limited rates). Such 

taxes are in addition to other taxes levied upon property within the District. When collected, the tax revenues are deposited in the 

District’s Tax Collection Fund required to be maintained by the County and to be used solely for debt service on general 

obligation bonds of the District. 

Education Code Section 15270, enacted as a component of Proposition 39, requires a school district issuing certain general 

obligation bonds to project anticipated debt service necessary to repay such bonds and any pre-existing bonds authorized at the 

same election. Such projection must indicate that taxes levied to meet debt service requirements on existing and anticipated 

bonds may not exceed $60 per $100,000 of assessed value. As a result of reductions in the assessed value of property within the 

District, actual tax levies for Measure C debt service requirements have exceeded $60 per $100,000 of assessed value in the past 

several years. 

With the issuance of the Series C Bonds and the Refunding Bonds, tax levies for Measure C debt service requirements are 

projected to exceed $60 per $100,000 of assessed value in certain years. However, tax levies for Measure C debt service 

requirements in any year with incremental Series C Bond debt service are projected to be less than $60 per $100,000 of assessed 

value, and tax levies for Measure C debt service requirements through the term of the Refunding Bonds are projected to be lower 

than had the Series C Bonds and Refunding Bonds not been issued. The County has levied taxes in amounts necessary to serve 

debt service on the District's existing general obligation bonds, and the County is obligated to continue to do so following the 

issuance of the Series C Bonds and the Refunding Bonds. 

Property Taxation System 

Property tax revenues result from the application of the appropriate tax rate to the total net assessed value of taxable property in 

the District. School districts levy property taxes for payment of voter-approved bonds and receive property taxes for general 

operating purposes as well. 

Local property taxation is the responsibility of various county officers. For each school district located in a county, the county 

assessor computes the value of locally assessed taxable property. Based on the net assessed value of property and the scheduled 

debt service on outstanding bonds in each year, the county treasurer/tax collector computes the rate of tax necessary to pay such 

debt service, and presents the tax rolls (including rates of tax for all taxing jurisdictions in the county) to the county board of 

supervisors for approval. The county treasurer/tax collector prepares and mails tax bills to taxpayers and collects the taxes. In 

addition, the county treasurer/tax collector, as ex officio treasurer of each school district located in the county, holds and invests 

school district funds, including taxes collected for payment of school bonds, and is charged with payment of principal and interest 

on such bonds when due. Taxes on property in a school district whose boundaries extend into more than one county are 

administered separately by the county in which the property is located (the District is located solely in the County). The State 

Board of Equalization also assesses certain special classes of property, as described later in this section. 

Assessed Valuation of Property Within the District 

All property (real, personal and intangible) is taxable unless an exemption is granted by the State Constitution or United States 

law. Under the State Constitution, exempt classes of property include household and personal effects, intangible personal 

property (such as bank accounts, stocks and bonds), business inventories, and property used for religious, hospital, scientific and 

charitable purposes. The State Legislature may create additional exemptions for personal property, but not for real property. 

Although most taxable property is assessed by the assessor of the county in which the property is located, some special classes of 

property are assessed by the State Board of Equalization, as described below under the heading, “State-Assessed Property.” 

Taxes are levied for each fiscal year on taxable real and personal property assessed as of the preceding January 1, at which time 

the lien attaches. Under Proposition 13, an amendment to the State Constitution adopted in 1978, the county assessor’s valuation 

of real property is established as shown on the fiscal year 1975-76 tax bill, or, thereafter, as the appraised value of real property 

when purchased, newly constructed, or a change in ownership has occurred. Assessed value of property may be increased 

- 14 -

annually to reflect inflation at a rate not to exceed 2% per year, or reduced to reflect a reduction in the consumer price index or 

comparable data for the area under taxing jurisdiction or in the event of declining property value caused by substantial damage, 

destruction, market forces or other factors. As a result of these rules, real property that has been owned by the same taxpayer for 

many years can have an assessed value that is much lower than the market value of the property and of similar properties more 

recently sold. Likewise, changes in ownership of property and reassessment of such property to market value commonly lead to 

increases in aggregate assessed value even when the rate of inflation or consumer price index would not permit the full 2% 

increase on any property that has not changed ownership. See “CONSTITUTIONAL & STATUTORY PROVISIONS 

AFFECTING DISTRICT REVENUES & EXPENDITURES.” 

Appeals of Assessed Valuation. State law affords an appeal procedure to taxpayers who disagree with the assessed value of their 

taxable property. Taxpayers may request a reduction in assessment directly from the county assessor, who may grant or refuse 

the request, and may appeal an assessment directly to the county board of equalization, which rules on appealed assessments 

whether or not settled by the county assessor. The county assessor is also authorized to reduce the assessed value of any taxable 

property upon a determination that the market value has declined below the then-current assessment, whether or not appealed by 

the taxpayer. 

The District can make no predictions as to the changes in assessed values that might result from pending or future appeals by 

taxpayers. Any reduction in aggregate District assessed valuation due to appeals, as with any reduction in assessed valuation due 

to other causes, will cause the tax rate levied to repay the Bonds to increase accordingly, so that the fixed debt service on the 

Bonds (and other outstanding bonds) may be paid. Any refund of paid taxes triggered by a successful assessment appeal will be 

debited by the county treasurer/tax collector against all taxing agencies who received tax revenues, including the District. 

State-Assessed Property. Under the Constitution, the State Board of Equalization assesses property of State-regulated 

transportation and communications utilities, including railways, telephone and telegraph companies, and companies transmitting 

or selling gas or electricity. The Board of Equalization also is required to assess pipelines, flumes, canals and aqueducts lying 

within two or more counties. The value of property assessed by the Board of Equalization is allocated by a formula to local 

jurisdictions in the county, including school districts. Taxation by the local county tax officials is in the same manner as for 

locally assessed property. Taxes on privately owned railway cars, however, are levied and collected directly by the Board of 

Equalization. Property used in the generation of electricity by a company that does not also transmit or sell that electricity is 

taxed locally instead of by the Board of Equalization. Thus, the reorganization of regulated utilities and the transfer of electricitygenerating 

property to non-utility companies, as often occurred under electric power deregulation in California, affects how those 

assets are assessed, and which local agencies benefit from the property taxes derived. In general, the transfer of State-assessed 

property located in the District to non-utility companies will increase the assessed value of property in the District, since the 

property’s value will no longer be divided among taxing jurisdictions in the County. The transfer of property located and taxed in 

the District to a State-assessed utility will have the opposite effect: generally reducing the assessed value in the District, as the 

value is shared among the other jurisdictions in the County. 

The District is unable to predict future transfers of State-assessed property in the District and the County, the impact of such 

transfers on its utility property tax revenues, or whether future legislation or litigation may affect ownership of utility assets, the 

State’s methods of assessing utility property, or the method by which tax revenues of utility property is allocated to local taxing 

agencies, including the District. 

Locally taxed property is classified either as “secured” or “unsecured,” and is listed accordingly on separate parts of the 

assessment roll. The “secured roll” is that part of the assessment roll containing State-assessed property and property (real or 

personal) for which there is a lien on real property sufficient, in the opinion of the county assessor, to secure payment of the taxes. 

All other property is “unsecured,” and is assessed on the “unsecured roll.” Property assessed by the State Board of Equalization is 

commonly identified for taxation purposes as “utility” property. 

The greater the assessed value of taxable property in the District, the lower the tax rate necessary to generate taxes sufficient to 

pay scheduled debt service on the Bonds. 


- 15 -

Shown in the following table is the assessed valuation in the District in recent years, including homeowner’s exemption. 

Historical Total Secured and Unsecured Assessed Valuation 


Fiscal Year Total Secured Total Unsecured Total Percentage 

July 1 Assessed Value Assessed Value Assessed Value Change 

2002 -03 $5,563,226,372 $491,929,423 $6,055,155,795 -- 

2003 -04 6,027,285,779 514,964,399 6,542,250,178 8.0% 

2004 -05 6,831,222,674 508,844,427 7,340,067,101 12.2 

2005 -06 7,962,033,777 545,488,076 8,507,521,853 15.9 

2006 -07 9,780,530,882 570,919,938 10,351,450,820 21.7 

2007 -08 11,357,583,461 633,257,443 11,990,840,904 15.8 

2008 -09 11,726,850,701 706,905,823 12,433,756,524 3.7 

2009 -10 10,561,799,678 731,304,605 11,293,104,283 -9.2 

2010 -11 10,149,839,733 743,202,985 10,893,042,718 -3.5 

2011 -12 10,077,336,813 700,588,486 10,777,925,299 -1.1 

2012 -13 10,082,951,894 721,923,424 10,804,875,318 0.3 

Source: San Bernardino Office of the Assessor. 

There has been a significant slowdown in the housing market in the County leading to a reduction in sales prices. As a result, the 

County Assessor has lowered the assessed value of a number of parcels throughout the District. The County Assessor may further 

reduce assessed value in future fiscal years. 

The District may not issue bonds in excess of 2.5% of the assessed valuation of taxable property within its boundaries. The 

District’s gross bonding capacity is estimated at $270.1 million. Upon issuance of the Bonds, the District will have remaining 

bonding capacity of approximately $26.6 * million. 



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Shown in the following table is a distribution of taxable real property located in the District by principal purpose for which the 

land is used along with the local secured assessed valuation (excludes homeowners’ exemption) and number of parcels for each 

use for fiscal year 2012-13. 

Assessed Valuation and Parcels by Land Use 


2012-13 % of No. of % of 

Non-Residential: Assessed Valuation (1) Total Parcels Total 

Agricultural $ 12,757,460 0.13% 15 0.04% 

Commercial/Race Track 874,894,789 8.68 779 1.93 

Professional Offices 105,924,760 1.05 124 0.31 

Industrial 2,127,380,169 21.10 745 1.85 

Recreational/Golf 27,154,896 0.27 121 0.30 

Government/Social/Institutional 10,475,528 0.10 85 0.21 

Miscellaneous/Water Company 23,125,435 0.23 44 0.11 

Subtotal Non-Residential $3,181,713,037 31.56% 1,913 4.75% 

Residential: 

Single Family Residence $5,451,685,163 54.08% 31,280 77.61% 

Condominium/Townhouse 152,082,838 1.51 1,323 3.28 

Mobile Home 24,646,617 0.24 743 1.84 

Mobile Home Park 20,393,144 0.20 36 0.09 

2-4 Residential Units 226,146,795 2.24 1,088 2.70 

5+ Residential Units/Apartments 347,398,164 3.45 367 0.91 

Miscellaneous Residential 9,484,783 0.09 50 0.12 

Subtotal Residential $6,231,837,504 61.82% 34,887 86.56% 

Unknown Use $667,504,773 6.62% 3,506 8.70% 

Total $10,081,055,314 100.00% 40,306 100.00% 

1 Local secured assessed valuation: excludes tax-exempt property. 

Source: California Municipal Statistics, Inc. 


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Largest Taxpayers in District 

The 20 largest taxpayers in the District own property that comprises 13.1% of the local assessed valuation of secured property in 

the District. These taxpayers, ranked by aggregate assessed value of taxable property, as shown on the 2012-13 secured tax roll, 

and the amount of each owner’s assessed valuation for all taxing jurisdictions within the District, are shown in the following 

table. 

Largest Taxpayers 


2012-13 Local Secure % of 

Property Owner Primary Land Use Assessed Valuation Total * 

1. California Steel Industries Inc.Industrial $379,998,528 3.77% 

2. San Gabriel Valley Water Co. Water Company 134,917,018 1.34 

3. The California Speedway Corp. Race Track 122,916,952 1.22 

4. Vintage Park East LLC Industrial 116,715,998 1.16 

5. Intex Properties Inland Empire Corp. Industrial 53,486,461 0.53 

6. North Fontana Investment Co. LLC Undeveloped 43,386,306 0.43 

7. Prologis-MacQuarie U.S. Industrial 41,079,931 0.41 

8. 9774 Calabash LLC Industrial 40,341,316 0.40 

9. Trader Joe’s Company Industrial 40,151,521 0.40 

10. Vista Metals Corp. Industrial 39,325,078 0.39 

11. California Auto Dealers Exchange LLC Commercial 39,023,162 0.39 

12. The Baralat Company Commercial 38,095,307 0.38 

13. Dayton Hudson Corp. Industrial 36,572,774 0.36 

14. Home Depot USA Commercial 33,850,589 0.34 

15. Hua-Jian Investment LLC Industrial 28,220,640 0.28 

16. SAIA Motor Freight Line LLC Industrial 27,788,856 0.28 

17. Wal-Mart Realty Company Commercial 27,547,451 0.27 

18. United Facilities Inc. Industrial 27,365,400 0.27 

19. Forged Metals Inc. Industrial 27,349,107 0.27 

20. Teachers Insurance & Annuity Assoc. of America Industrial 27,000,000 0.27 

$1,325,132,395 13.14% 

* 

2012-13 local secured assessed valuation (excludes homeowners’ exemption): $10,081,055,314 


Tax Rates 

The State Constitution permits the levy of an ad valorem tax on taxable property not to exceed 1% of the full cash value of the 

property, and State law requires the full 1% tax to be levied. The levy of special ad valorem property taxes in excess of the 1% 

levy is permitted as necessary to provide for debt service payments on school bonds and other voter-approved indebtedness. 

The rate of tax necessary to pay fixed debt service on the Bonds in a given year depends in large part on the net assessed value of 

taxable property in that year. (Unsecured property is taxed at the secured property tax rate from the prior year.) Economic and 

other factors beyond the District’s control, such as a general market decline in land values, reclassification of property to a class 

exempt from taxation, whether by ownership or use (such as exemptions for property owned by State and local agencies and 

property used for qualified educational, hospital, charitable or religious purposes), or the complete or partial destruction of taxable 

property caused by natural or manmade disaster, such as earthquake, flood, fire, toxic dumping, etc., could cause a reduction in 

the net assessed value of taxable property within the District and necessitate a corresponding increase in the annual tax rate to be 

levied to pay the principal of and interest on the Bonds. Issuance of additional authorized bonds in the future might also cause the 

tax rate to increase. 

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The following table shows ad valorem property tax rates for the last several years in a typical tax rate area of the District (TRA 

10-000). TRA 10-000 comprises approximately 13.8% of the total assessed value of taxable property in the District. 

Typical Total Tax Rates 

TRA 10-000 


2007-08 2008-09 2009-10 2010-11 2011-12 

General 1.0000 1.0000 1.0000 1.0000 1.0000 

Fontana Unified School District .1054 .1071 .1135 .1375 .1460 

Chaffey Community College District .0192 .0209 .0122 .0091 .0153 

Metropolitan Water District .0045 .0043 .0043 .0037 .0037 

Total 1.1291 1.1323 1.1300 1.1503 1.1650 


Alternative Method of Tax Apportionment 

As an alternative method of property tax allocation for the County, the County Board of Supervisors approved implementation of 

the Alternative Method of Distribution of Tax Levies and Collections and of Tax Sale Proceeds (the “Teeter Plan”) effective 

fiscal year 1993-94 pursuant to sections 4701 through 4717 of the State’s Revenue & Taxation Code. The Teeter Plan guarantees 

distribution of 100% of the ad valorem taxes and assessments levied to the taxing entities within the County, with the County 

retaining all penalties and interest affixed upon delinquent properties and redemptions of subsequent collections. 

The cash position of the County Auditor-Controller / Treasurer / Tax Collector (the “Treasurer”) is protected by a special fund, 

known as the “Tax Loss Reserve Fund,” which accumulates moneys from tax and penalty collections. Amounts exceeding the 

amount required to be maintained in the tax loss reserve fund may be credited to the County's general fund. Amounts required to 

be maintained in the tax loss reserve fund may be drawn on to the extent of the amount of uncollected taxes credited to each 

agency in advance of receipt. 

The Teeter Plan is to remain in effect unless the County Board of Supervisors orders its discontinuance or unless, prior to the 

commencement of any fiscal year of the County (which commences on July 1), the Board of Supervisors receives a petition for its 

discontinuance from two-thirds of the participating revenue districts in the County. The Board of Supervisors may also, after 

holding a public hearing on the matter, discontinue the procedures with respect to any tax levying agency or assessment levying 

agency in the County if the rate of secured tax delinquency in that agency in any year exceeds 3% of the total of all taxes and 

assessments levied on the secured rolls in that agency. 

If the Teeter Plan were discontinued, only those secured property taxes actually collected would be allocated to political 

subdivisions, including the District. Further, the District’s tax revenues would be subject to taxpayer delinquencies, and the 

District would realize the benefit of interest and penalties collected from delinquent taxpayers, pursuant to law. 

Tax Collections and Delinquencies 

A school district’s share of the 1% countywide tax is based on the actual allocation of property tax revenues to each taxing 

jurisdiction in the county in fiscal year 1978-79, as adjusted according to a complex web of statutory modifications enacted since 

that time. Revenues derived from special ad valorem taxes for voter-approved indebtedness, including the Bonds, are reserved to 

the taxing jurisdiction that approved and issued the debt, and may only be used to repay that debt. 

The Treasurer prepares the property tax bills. Property taxes on the regular secured assessment roll are due in two equal 

installments: the first installment is due on November 1, and becomes delinquent at 5:00 p.m. December 10, after which time a 

10% penalty attaches. The second installment is due on February 1 and becomes delinquent at 5:00 p.m. April 10, after which 

time a 10% penalty plus a $10 cost attaches. If taxes remain unpaid by 5:00 p.m. June 30, the tax is deemed to be in default, and 

an additional penalty of 1.5% per month on the unpaid tax is added along with a $15 redemption fee. If taxes are unpaid for a 

period of five years or more, the property is subject to sale by the Treasurer. 

- 19 -

Taxes on the unsecured roll as of the January 1 lien date become delinquent if unpaid on August 31, after which time a 10% 

penalty plus a $70 cost attaches. If unsecured taxes are unpaid at 5:00 p.m. on October 31, an additional penalty of 1.5% attaches 

on the first day of each month until paid. The County has four ways of collecting delinquent unsecured personal property taxes: 

(i) bringing a civil action against the taxpayer; (ii) filing a certificate in the office of the County clerk specifying certain facts in 

order to obtain a lien on certain property of the taxpayer; (iii) filing a certificate of delinquency for record in the County 

recorder’s office in order to obtain a lien on certain property of the taxpayer; and (iv) seizing and selling personal property 

improvements or possessory interests belonging or assessed to the delinquent taxpayer. 

So long as the Teeter Plan remains in effect, the District’s receipt of revenues with respect to the levy of ad valorem property 

taxes will not be dependent upon actual collections of such taxes. 

Direct and Overlapping Bonded Debt 

The statement of direct and overlapping bonded debt relating to the District, which is set forth on the following page, was 

prepared by California Municipal Statistics, Inc. It has been included for general information purposes only. The District has 

not reviewed the statement for completeness or accuracy and makes no representations in connection with the statement. 

Contained within the District's boundaries are numerous overlapping local entities providing public services. These local entities 

may have outstanding bonds issued in the form of general obligation, lease revenue and special assessment bonds. The first 

column in the table names each public agency which has outstanding debt as of September 1, 2012, and whose territory overlaps 

the District in whole or in part. The second column shows the percentage of each overlapping agency’s assessed value located 

within the boundaries of the District. This percentage, multiplied by the total outstanding debt of each overlapping agency (which 

is not shown in the table) produces the amount shown in the third column, which is the apportionment of each overlapping 

agency’s outstanding debt to taxable property in the District. 

The table generally includes long-term obligations sold in the public credit markets by the public agencies listed. Such long-term 

obligations generally are not payable from revenues of the District (except as indicated) nor are they necessarily obligations 

secured by land within the District. In many cases, long-term obligations issued by a public agency are payable only from the 

general fund or other revenues of such public agency. 

In addition, property owners within the District may be subject to other special taxes and assessments levied by other taxing 

authorities that provide services within the District. Such special taxes and assessments are not represented in the statement of 

direct and overlapping bonded debt. 


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Statement of Direct and Overlapping Bonded Debt (As of September 1, 2012) 


DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT: 

2012-13 Assessed Valuation: $10,804,875,318 

Redevelopment Incremental Valuation: 5,795,126,778 

Adjusted Assessed Valuation: $ 5,009,748,540 

DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT: % Applicable 1 Debt 9/1/12 

Metropolitan Water District 0.268% $ 526,741 

Chaffey Community College District 9.137 13,168,048 

Fontana Unified School District 100.000 280,102,845 2,3 

City of Fontana Community Facilities District No. 2 19.240 3,542,084 




TOTAL DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT $346,664,718 

DIRECT AND OVERLAPPING GENERAL FUND DEBT: 

San Bernardino County General Fund Obligations 4.377% $ 25,650,314 

San Bernardino County Pension Obligations 4.377 22,749,248 

San Bernardino County Flood Control District General Fund Obligations 4.377 4,582,938 

Chaffey Community College District General Fund Obligations 9.137 1,121,628 

Fontana Unified School District Certificates of Participation 100.000 48,675,000 

City of Fontana Certificates of Participation 74.136 41,126,946 

City of Rialto Certificates of Participation 7.761 210,711 

West Valley Vector Control District Certificates of Participation 0.110 3,625 

TOTAL DIRECT AND OVERLAPPING GENERAL FUND DEBT $144,120,410 

COMBINED TOTAL DEBT $490,785,128 4 

Ratios to 2012-13 Assessed Valuation: 

Direct Debt ($280,102,845) ......................................................... 2.59% 

Total Direct and Overlapping Tax and Assessment Debt ............. 3.21% 

Ratios to Adjusted Assessed Valuation: 

Combined Direct Debt ($328,777,845) ...................................... 6.56% 

Combined Total Debt .................................................................... 9.80% 

STATE SCHOOL BUILDING AID REPAYABLE AS OF 6/30/12: $0 

1 Based on 2011-12 ratios. 

2 Excludes general obligation and refunding general obligation bonds to be sold. 

3 Includes $94,997,120 general obligation bond anticipation notes. 

4 Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and tax allocation bonds and non-bonded 

capital lease obligations. Qualified Zone Academy Bonds are included based on principal amount due at maturity. 

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SAN BERNARDINO TREASURY POOL 

The information set forth under this section relating to the San Bernardino County Treasury Pool has been obtained from the 

office of the Treasurer and is believed to be reliable but is not guaranteed as to accuracy or completeness. Neither the District 

nor the Underwriter make any representation as to the accuracy or completeness of such information. Further information may 

be obtained by contacting the Office of the San Bernardino County Auditor-Controller / Treasurer / Tax Collector, 172 W. 3 rd 

Street, First Floor, San Bernardino, California, 92415, telephone (909) 387-6375. 

General. The Treasurer is responsible for the investment of the funds of the County, all school districts and community college 

districts and certain special districts in the County, which are required under state law to be deposited into the County treasury 

(“Involuntary Depositors”). In addition, certain agencies invest certain of their funds in the County treasury on a voluntary basis 

(“Voluntary Depositors” and together with the Involuntary Depositors, the “Depositors”). Deposits made by the County and the 

various local agencies are commingled in a pooled investment fund (the “Treasury Pool”). No particular deposits are segregated 

for separate investment. 

The Treasury Pool is presently assigned the following credit quality ratings: 

• Fitch Ratings, Inc. - “AAA” (credit quality) and “V1” (volatility) 

These ratings are assessments of the overall credit quality of the Treasury Pool’s portfolio. The ratings thus reflect the level of 

protection against losses from credit defaults. These ratings reflect only the views of the rating agency and any explanation of the 

significance of such ratings may be obtained from the rating agency as follows: Fitch Ratings, Inc., One State Street Plaza, New 

York, New York 10004. 

Under State law, Depositors in the Treasury Pool are permitted to withdraw funds that they have deposited on 30 days notice. The 

County does not expect that the Treasury Pool will encounter liquidity shortfalls based on its current portfolio and investment 

guidelines or realize any losses that may be required to be allocated among all Depositors in the Treasury Pool. 

The County has established a Treasury Oversight Committee as required by State law. The members of the Oversight Committee 

include the County Administrative Officer, two members of the public and the Superintendent of Schools or his designee. The 

role of the Oversight Committee is to review and monitor the County’s Investment Policy (the “Investment Policy”) that is 

prepared by the Treasurer. 

Investments of the Treasury Pool. Investments of the Treasury Pool are placed in those securities authorized by various sections 

of the California Government Code and the Investment Policy, which include obligations of the United States Treasury, Agencies 

of the United States Government, local bond issues, bankers acceptances, commercial paper of prime quality, certificates of 

deposit (both collateralized and negotiable), repurchase and reverse repurchase agreements, medium term corporate notes and 

shares of beneficial interest in diversified management companies (mutual funds). Generally, investments in repurchase 

agreements cannot exceed a term of 180 days and the security underlying the agreement shall be valued at 102% or greater of the 

funds borrowed against the security. The value of the repurchase agreement shall be adjusted no less than weekly. In addition, 

reverse repurchase agreements generally may not exceed 10% of the base value of the portfolio and the term of the agreement 

may not exceed 92 calendar days. Securities lending transactions are considered reverse repurchase agreements for purposes of 

this limitation. Base value is defined as the total cash balance excluding any amounts borrowed (i.e., amounts obtained through 

selling securities by way of reverse repurchase agreements or other similar borrowing methods). 

Legislation that would modify the currently authorized investments and place restrictions on the ability of municipalities to invest 

in various securities is considered from time to time by the California State Legislature. Therefore, there can be no assurances that 

the current investments in the Treasury Pool will not vary significantly from the investments described herein. 

The Investment Policy currently states the primary goals of the Treasurer when investing public funds to be as follows: the 

primary objective is to safeguard the principal of the funds under the Treasurer’s control, the secondary objective is to meet the 

liquidity needs of the Treasury Pool Participants, and the third objective is to achieve a return on the funds under the control of 

the Treasurer within the parameters of prudent risk management. The Investment Policy contains a requirement that 40% of the 

Treasury Pool should be invested in securities maturing in one year or less, and the entire portfolio should maintain a duration-tomaturity 

of less than 1.5 years. With respect to reverse repurchase agreements, the Investment Policy provides for a maximum 

maturity of 92 days (unless the reverse repurchase agreement includes a written guarantee of a minimum earning or spread for the 

entire period of such agreement) and a limitation on the total amount of reverse repurchase agreements to 10% of the total 

investments in the Treasury Pool. 

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The Treasury Pool also does not own any reverse repurchase agreements, nor has the County engaged in securities lending. The 

Treasury Pool has not purchased and does not own any asset-backed securities, mortgage-backed securities, collateralized debt 

obligations, collateralized loan obligations, or any other securities backed by or derived from sub-prime or Alt-A mortgages. 

FNMA, FHLMC, FHLB and FFCB holdings are senior unsecured obligations. 

Certain Information Relating to Treasury Pool. The following table reflects information with respect to the Treasury Pool as of 

the close of business August 31, 2012. As described above, a wide range of investments is authorized by state law. Therefore, 

there can be no assurances that the investments in the Treasury Pool will not vary significantly from the investments described 

below. In addition, the value of the various investments in the Treasury Pool will fluctuate on a daily basis as a result of a 

multitude of factors, including generally prevailing interest rates and other economic conditions. Therefore, there can be no 

assurance that the values of the various investments in the Treasury Pool will not vary significantly from the values described 

below. In addition, the values specified in the following tables were based upon estimates of market values provided to the 

County by a third party. Accordingly, there can be no assurance that if these securities had been sold on June 30, 2012, the 

Treasury Pool necessarily would have received the values specified. The Treasury Pool has no exposure to any defaulted 

securities, nor does it own any securities of institutions in liquidation. 

County of San Bernardino Treasury Pool 

County Pool Investments 

As of August 31, 2012 

Security Type Par Value Market Value 

Bankers Acceptances $ 0.00 $ 0.00 

Certificates of Deposit 865,000,000.00 865,159,288.75 

Collateralized Certificates of Deposit 0.00 0.00 

Commercial Paper 550,000,000.00 549,924,270.00 

Corporate Notes 0.00 0.00 

Federal Agencies 1,873,234,000.00 1,892,339,045.63 

Money Market Funds 178,000,000.00 178,000,000.00 

Municipal Debt 0.00 0.00 

Repurchase Agreements 50,000,000.00 49,999,673.00 

TLGP Corp. Debt 0.00 0.00 

U.S. Treasuries 450,000,000.00 455,518,043.75 

Cash 347,625,839.04 347,625,839.04 

Total Investments $ 4,313,859,839.04 $ 4,338,566,160.17 

COUNTY ECONOMIC PROFILE 

The information in this section concerning the County economy is provided as supplementary information only, and is not 

intended to be an indication of security for the Bonds. The Bonds are payable from the proceeds of an ad valorem tax, approved 

by the voters of the District pursuant to applicable laws and Constitutional requirements, and required to be levied by the County 

on all taxable property in the District in an amount sufficient for the timely payment of principal of and interest on the Bonds. 

See “SECURITY AND SOURCE OF PAYMENT” herein. 

General Information 

The County is one of 58 counties in the State and is located in the southeast corner of the State. 

Based on data compiled by DataQuick Information Systems, the median sale price of a single-family home in the County was 

$165,000 in July 2012, an increase of approximately 9.3% from $151,000 in July 2011. The median sale price of a single-family 

home in the City of Fontana was $215,500 in July 2012, an increase of approximately 5.1% from $205,000 in July 2011. 

- 23 -

Population 

The following table displays population data from the 2010 census along with estimated population as of January 1 for the past 

two years for the County and the City of Fontana. 

Historical Population 

City of Fontana and San Bernardino County 

Source: State Department of Finance 

2010 2011 2012 

Fontana 196,069 197,786 199,898 

San Bernardino County 2,035,210 2,046,619 2,063,919 

Unemployment 

The following table contains a summary of the City of Fontana’s unemployment data seasonally unadjusted. 

Historical Unemployment 

City of Fontana 

Annual Annual Annual Annual July 

2008 2009 2010 2011 2012 1 

Total Labor Force 62,400 62,200 62,400 62,300 62,500 

# Employed 57,200 53,800 53,200 53,800 54,400 

# Unemployed 5,200 8,400 9,200 8,600 8,100 

Unemployment Rate 8.3% 13.5% 14.7% 13.7% 12.9% 

1 Preliminary. 

Source: State Employment Development Department. 


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The following table contains a summary of the County’s unemployment data seasonally unadjusted. 

Historical Unemployment 

San Bernardino County 

Annual Annual Annual Annual July 

2008 2009 2010 2011 2012 1 

Total Labor Force 863,300 858,300 860,700 860,600 863,600 

# Employed 794,500 747,400 738,900 747,100 756,200 

# Unemployed 68,800 110,900 121,800 113,400 107,300 

Unemployment Rate 8.0% 12.9% 14.2% 13.2% 12.4% 

1 Preliminary. 

Source: State Employment Development Department. 

Major Employers 

The following table provides a listing of 25 major employers in the County, in alphabetical order. 

Major Employers 


Employer Name Location Industry 

Arrowhead Regional Medical Center Colton Hospitals 

Big Bear Mountain Resorts Big Bear Lake Resorts 

California State-San Bernardino San Bernardino Schools-Universities & Colleges Academic 

Colton Joint Unified School District Colton Schools 

Desert Valley Medical Center Victorville Hospitals 

Environmental Systems Research Redlands Computer-Software Developers 

FEDEX Ground Bloomington Delivery Service 

Kaiser Permanente Pathology Fontana Hospitals 

Loma Linda University Children Loma Linda Hospitals 

Loma Linda University Med Center Loma Linda Hospitals 

Mountain High Ski Resort Wrightwood Skiing Centers & Resorts 

Ontario Intl AIRPORT-ONT Ontario Airports 

Redlands Community Hospital Redlands Hospitals 

San Antonio Community Hospital Upland Hospitals 

San Bernardino County School Supt San Bernardino Schools 

San Bernardino Community Hospital San Bernardino Mental Health Services 

San Bernardino County Sheriff San Bernardino Police Departments 

San Manuel Band of Mission San Bernardino Casinos 

San Manuel Indian Bingo/Casino Highland Government Ofcs-Authorities/Commissions 

Snow Summit Mountain Resort Big Bear Lake Skiing Centers & Resorts 

Snowline Joint Unified School Phelan Schools 

St Mary Medical Center Apple Valley Hospitals 

Transportation Department San Bernardino State Government-Transportation Programs 

VA Medical Center-Loma Linda Loma Linda Hospitals 

YRC Bloomington Trucking 

Source: California Employment Development Department, America’s Labor Market Information System Employer Database, 

2012 2 nd Edition. 

- 25 -

Taxable Sales 

Total taxable sales reported during calendar year 2010 in the City of Fontana were approximately $1,994,725,000, an 11.6% 

increase from the total taxable sales of approximately $1,787,499,000 reported during calendar year 2009. Data for calendar year 

2011 is not yet available. 

The number of establishments selling merchandise subject to sales tax and the valuation of taxable transactions in the City of 

Fontana is presented in the following table, rounded to the nearest thousand. 

Taxable Retail Sales 

City of Fontana 

2006 2007 2008 2009 2010 

Sales Tax Permits 2,437 2,784 4,413 3,705 3,920 

Taxable Sales (000’s) $2,134,307 $2,354,860 $2,180,581 $1,787,499 $1,994,725 

Source: State Board of Equalization 

Total taxable sales reported during the calendar year 2010 in the County were approximately $24,687,862,000, a 4.3% increase 

from the total taxable sales of approximately $23,652,433,000 reported during calendar year 2009. Data for calendar year 2011 is 

not yet available. 

The number of establishments selling merchandise subject to sales tax and the valuation of taxable transactions in the County is 

presented in the following table, rounded to the nearest thousand. 

Taxable Retail Sales 


2006 2007 2008 2009 2010 

Sales Tax Permits 46,528 47,810 48,994 45,062 47,562 

Taxable Sales (000’s) $31,309,905 $30,450,731 $27,777,703 $23,652,433 $24,687,862 

Source: State Board of Equalization 

THE DISTRICT 

The information in this section concerning the operations of the District and its finances is provided as supplementary 

information only, and it should not be inferred from the inclusion of this information in this Official Statement that the principal 

of or interest on the Bonds is payable from the general fund of the District. The Bonds are payable from the proceeds of an ad 

valorem tax, approved by the voters of the District pursuant to applicable laws and Constitutional requirements, and required to 

be levied by the County on all taxable property in the District in an amount sufficient for the timely payment of principal and 

interest on the Bonds. See “SECURITY AND SOURCE OF PAYMENT” herein. 

General Information 

The District is a unified school district organized under the laws of the State. The District provides kindergarten through 12 th 

grade educational services to an area of approximately 55 square miles in the County. The District’s boundaries include the City 

of Fontana and portions of the cities of Rialto and Rancho Cucamonga, as well as unincorporated areas of the County. The 

District currently operates five high schools, two continuation high schools, seven middle schools, 29 elementary schools and one 

adult school. 

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The Board of Education and Key Administrative Personnel 

The Board governs all activities related to public education within the jurisdiction of the District. The Board consists of five 

members. Each Board member is elected by the public for a four-year term of office, and elections for the Board are staggered 

every two years. The Board has the decision-making authority, the power to designate management, the responsibility to 

significantly influence operations and is accountable for all fiscal matters relating to the District. 

The current members of the Board and positions held are set forth in the following table. 

The Board of Education 


Name Title Term Expires 

BarBara L. Chavez President December 2012 

Henry Hawthorn Vice President December 2014 

Kathleen Binks Member December 2012 

Leticia Garcia Member December 2014 

Sophia Green Member December 2014 

The Superintendent of the District is appointed by the Board and reports to the Board. The Superintendent is responsible for 

managing the District's day-to-day operations and supervising the work of other key District administrators. The current members 

of the District’s administration and positions held are set forth on page “iv” of this Official Statement. 

Enrollment 

Student enrollment determines to a large extent what a California public school district receives in funding for program, facilities 

and staff needs. Average daily attendance (“ADA”) is a measurement of the number of pupils attending classes of the District. 

The purpose of attendance accounting from a fiscal standpoint is to provide the basis on which apportionments of State funds are 

made to school districts. See “STATE FUNDING OF PUBLIC EDUCATION” herein. Set forth below is Period 2 (“P-2”) ADA 

for the District (for previous fiscal years and a projection of P-2 ADA for the current fiscal year. 

Average Daily Attendance 


2008-09 2009-10 2010-11 2011-12 2012-13 * 

P-2 ADA 39,789 38,982 39,266 39,106 39,095 

* Budgeted. 

Charter Schools 

Charter schools operate as autonomous public schools, under charter from a school district, county office of education, or the 

State Board of Education, with minimal supervision by the local school district. Charter schools receive revenues from the State 

and from the District for each student enrolled, and thus effectively reduce revenues available for students enrolled in District 

schools. However, certain per-pupil expenditures of the District also decrease based upon the number of students enrolled in 

charter schools. Pursuant to Proposition 39, school districts are required to provide facilities comparable to those provided to 

regular school district students for charter schools having a projected average daily attendance of at least 80 or more students 

from that district. 

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There are currently no charter schools operating within the District. 

Pupil-Teacher Ratios 

Set forth below are the pupil-to-teacher ratios of the District. 

Pupil-to-Teacher Ratios 


Level 

Pupil-Teacher Ratio 

Kindergarten 18:1 

1 st through 3 rd 30:1 

4 th through 8 th 26:1 

9 th through 12 th 26:1 

Employee Relations 

California law provides that employees of public school districts of the State are to be divided into appropriate bargaining units 

which then are to be represented by an exclusive bargaining agent. 

The District has three recognized bargaining units representing its non-management employees. The Fontana Teachers 

Association is the exclusive bargaining unit for the non-management, certificated personnel of the District. The Fontana School 

Police Officers Association is the exclusive bargaining agent for the District’s non-management school resource officers, while 

The United Steelworkers, on behalf of Local 8599, represent District safety officers and the remainder of the District’s classified 

non-management employees. 

Set forth in the following table are the District’s bargaining units, number of employees by full-time equivalents (“FTEs”), and 

contract status. 

Bargaining Units, Number of Employees, and Contract Status 


CERTIFICATED # OF FTEs STATUS 

Fontana Teachers Association 1,872 In negotiations for fiscal year 2012-13 

CLASSIFIED # OF FTEs STATUS 

Fontana School Police Officers Association 15 In negotiations for fiscal year 2012-13 

The United Steelworkers, Local 8599 1,209 In negotiations for fiscal year 2012-13 

The District also employs 223 management/supervisor/confidential FTEs not represented by a bargaining agent. 

Pension Plans 

All full-time employees of the District are eligible to participate under defined benefit retirement plans maintained by agencies of 

the State. Certificated employees are eligible to participate in the cost-sharing multiple-employer State Teachers’ Retirement 

System (“STRS”). Classified employees are eligible to participate in the agent multiple-employer Public Employees’ Retirement 

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Fund of the Public Employees’ Retirement System (“PERS”), which acts as a common investment and administrative agent for 

participating public entities within the State. 

STRS operates under the State Education Code sections commonly known as the State Teachers’ Retirement Law. Membership 

is mandatory for all certificated employees of public schools within the State meeting the eligibility requirements. STRS provides 

retirement, disability and death benefits based on an employee’s years of service, age and final compensation. Employees vest 

after five years of service and may receive retirement benefits at age fifty-five. 

Active plan members are required to contribute 8.0% of their salary, and the District is required to contribute an actuarially 

determined rate (8.25% in fiscal year 2010-11). The District's contribution to STRS was $12,314,551 in fiscal year 2010-11, 

was $12,688,220 in fiscal year 2011-12, and is budgeted to be $12,687,332 in fiscal year 2012-13. 

All full-time classified employees of the District participate in PERS, which provides retirement, disability and death benefits 

based on an employee’s years of service, age and final compensation. Employees vest after five years of service and may receive 

retirement benefits at age fifty. These benefit provisions and all other requirements are established by State statute and District 

resolution. 

Active plan members are required to contribute 7.0% of their salary, and the District is required to contribute an actuarially 

determined rate (10.707% in fiscal year 2010-11). The District's contribution to PERS was $5,422,073 in fiscal year 2010-11, 

was $5,459,375 in fiscal year 2011-12, and is budgeted to be $5,845,815 in fiscal year 2012-13. For a more complete description 

of the District’s pension plan and annual contribution requirements, see “See “APPENDIX A” attached hereto. 

The District offers an Alternative Retirement Program (“APPLE”), a non-qualified Internal Revenue Code Section 457 plan, to 

seasonal and temporary employees and employees not covered by another retirement system, pursuant to the requirements of 

Internal Revenue Code Section 3121(b)(7)(f). The benefit provisions and contribution requirements of the plan members and the 

District are established and may be amended by the Board. 

Under APPLE, contributions of 7.5% of covered compensation of eligible employees are made by the employer and the 

employee. Total contributions, employer and employee combined, were $185,928 during fiscal year 2010-11. District liabilities 

are limited to the amount of current contributions. 

Other Post-Employment Benefits 

In addition to the pension benefits described above, the District provides postemployment health care benefits (known as “other 

post-employment benefits, or “OPEB”), in accordance with District employment contracts, to retirees meeting certain eligibility 

requirements. The District pays 100% of the cost of current insurance premiums for eligible retirees and their beneficiaries for a 

maximum of eight years for medical insurance and six years for dental and vision insurance. 

In June 2004, the Governmental Accounting Standards Board (“GASB”) pronounced Statement No. 45, Accounting and Financial 

Reporting by Employers for Post Employment Benefits Other Than Pensions (“GASB 45”). The pronouncement required public 

agency employers providing healthcare benefits to retirees to recognize and account for the costs for providing these benefits on 

an accrual basis and provide footnote disclosure on the progress toward funding the benefits, in order to quantify a government 

agency’s current liability for future benefit payments. GASB 45 is directed at quantifying and disclosing OPEB obligations, and 

does not impose any requirement on public agencies to fund such obligations. 

The District completed an actuarial study assessing the District’s OPEB liability as of April 1, 2010. Based on the study, the 

District’s actuarial accrued liability (the "AAL", which can also be considered to be the present value of all benefits earned to date 

assuming that an employee accrues retiree healthcare benefits ratably over his career) was $95,413,658. The AAL is an actuarial 

estimate that depends on a variety of assumptions about future events, such as health care costs and beneficiary mortality. Every 

year, active employees earn additional future benefits, an amount known as the “normal cost,” which is added to the AAL. To the 

extent that the District has not set aside moneys in an OPEB trust with which to pay these accrued and accruing future liabilities, 

there is an unfunded actuarial accrued liability (“UAAL”). As of April 1, 2010, the District had set aside $1,262,983 in an 

irrevocable trust to fund its future obligations; as a result, the District’s UAAL was $94,150,675. As of August 31, 2012, the 

balance in the irrevocable trust was $1,650,114. 

The annual required contribution (“ARC”) is the amount required if the District were to fund each year’s normal cost plus an 

annual amortization of the unfunded actuarial accrued liability, assuming the UAAL will be fully funded over a 30-year period. If 

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the amount budgeted and funded in any year is less than the ARC, the difference reflects the amount by which the UAAL is 

growing. As of April 1, 2010, the ARC was determined to be $8,759,628. 

See “APPENDIX A—THE FINANCIAL STATEMENTS OF THE DISTRICT AS OF AND FOR THE YEAR ENDED JUNE 

30, 2011” attached hereto. 

DISTRICT FINANCIAL INFORMATION 

The information in this section concerning the operations of the District and its finances are provided as supplementary 

information only, and it should not be inferred from the inclusion of this information in this Official Statement that the principal 

of or interest on the Bonds is payable from the general fund of the District. The Bonds are payable from the proceeds of an ad 

valorem tax, approved by the voters of the District pursuant to applicable laws and Constitutional requirements, and required to 

be levied by the County on all taxable property in the District in an amount sufficient for the timely payment of principal and 

interest on the Bonds. See “SECURITY AND SOURCE OF PAYMENT” herein. 

Accounting Practices 

The District accounts for its financial transactions in accordance with the policies and procedures of the California Department of 

Education’s California School Accounting Manual. The accounting policies of the District conform to accounting principles 

generally accepted in the United States of America as prescribed by the Governmental Accounting Standards Board and the 

American Institute of Certified Public Accountants. 

The District’s financial statements consist of government-wide statements and fund-based financial statements. Governmentwide 

statements, consisting of a statement of net assets and a statement of activities, report all the assets, liabilities, revenue and 

expenses of the District and are accounted for using the economic resources measurement focus and accrual basis of accounting. 

The fund-based financial statements consist of a series of statements that provide information about the District’s major and nonmajor 

funds. Governmental funds, including the District’s General Fund, special revenues funds, capital project funds and debt 

service funds, are accounted for using the modified accrual basis of accounting. Under the modified accrual basis of accounting, 

revenues are recognized in the accounting period in which they become measurable and available, while expenditures are 

recognized in the period in which the liability is incurred, if measurable. Proprietary funds and fiduciary funds are accounted for 

using the economic resources measurement focus and accrual basis of accounting. See “NOTE 1” in “APPENDIX A” herein for 

a further discussion of applicable accounting policies. 

The independent auditor for the District is Nigro & Nigro, PC, a Professional Accountancy Corporation, Murrieta, California. 

Selected information concerning the financial statements of the District as of and for the year ended June 30, 2011, are set forth in 

“APPENDIX A” attached hereto. The auditor has not performed any subsequent events review or other procedures relative to 

these audited financial statements since the date of its letter. 

Budget and Financial Reporting Process 

The District’s General Fund finances the legally authorized activities of the District for which restricted funds are not provided. 

General Fund revenues are derived from such sources as federal and State school apportionments, taxes, use of money and 

property, and aid from other governmental agencies. 

The District is required by provisions of the State Education Code to maintain a balanced budget each year, where the sum of 

expenditures plus the ending fund balance cannot exceed revenues plus the carry-over fund balance from the previous year. The 

State Department of Education imposes a uniform budgeting format for school districts. 

The fiscal year for all school districts is July 1 to June 30. The same calendar applies to the budgets of county offices of 

education, except that their budgets and reports go to the Superintendent of Public Instruction for review. The State budget, too, 

is extremely important since school districts depend on it for a substantial portion of their revenue. There is a very close timing in 

the summer between final approval of the State budget, school finance legislation, and the adoption of local district budgets. In 

some years, the State budget is not approved by the deadline, which forces school districts to begin the new fiscal year with only 

estimates of the amount of money they will actually receive. 

- 30 -

The school district budgeting process involves continuous planning and evaluation. Within the deadlines, school districts work 

out their own schedules for considering whether or not to hire or replace staff, negotiating contracts with all employees, reviewing 

programs, and assessing the need to repair existing or acquire new facilities. Decisions depend on the critical estimates of 

enrollment, fixed costs, commitments in contracts with employees as well as best guesses about how much money will be 

available for elementary and secondary education. 

The timing of some decisions is forced by legal deadlines. For example, preliminary layoff notices to teachers must be delivered 

in March, with final notices in May. This necessitates projecting enrollments and determining staffing needs long before a school 

district will know either its final financial positions for the current year or its income for the next year. 

The governing board must submit a budget to the County Superintendent of Schools by July 1, and a publicized opportunity for 

public participation in the budget process is required by law. There are two options for budget adoption. School districts may 

adopt their budgets by July 1 and then revise and readopt them by September 8 after a public hearing. Alternatively, school 

districts may decide, by the previous October 31, to hold public hearings before adopting their budgets by July 1. School districts 

choosing this option revise their revenues and expenditures after the State budget act is adopted, without a second public hearing. 

All school districts must perform a criteria and standards review before budget adoption. In addition, those school districts on the 

alternative schedule for adoption must repeat the review before their revision only if the July 1 budget was disapproved. 

Legislation requires criteria and standards for stringent review of school districts' finances, focusing primarily on predictions of 

actual daily attendance, operating deficit, and reserves. The legislation also dictates when and how outside committees, or an 

appointed trustee in emergency situations, must work with school districts. This oversight is part of an effort to reduce the 

number of districts in financial trouble and to increase the responsible use of tax dollars. 

The county superintendents monitor all school districts' budgets, ongoing financial obligations and multi-year contracts. They 

have specific powers for recommending actions to revise budgets. They are not, however, authorized to abrogate existing 

collective bargaining agreements. School districts must review their financial position for the periods ending October 31 and 

January 31 in order to certify their ability to meet commitments through the rest of the school year. 

Each school district is required by the State Education Code to file these two interim reports each year by not later than December 

15 and March 15. Each interim report shows fiscal year to date financial operations and the current budget, with any budget 

amendments made in light of operations and conditions to that point. The county offices of education must then, within 30 days, 

evaluate the interim reports and forward their comments to the State Department of Education and the State Controller's Office. 

Included in the report is a certification by the president of the governing board of each school district that classifies the school 

district according to its ability to meet its financial obligations. The certifications are grouped into three categories: positive 

certification, which designates that the school district will be able to meet its financial obligations for the remainder of the fiscal 

year and the following two years; qualified certification, which means that the school district may not be able to meet its financial 

obligations for the remainder of the fiscal year and following two years if certain events occur; and negative certification, which 

signifies that the school district will not be able to meet its financial obligations for the remainder of the fiscal year or of the 

following year. A certification by the governing board may be overridden by the county superintendent. If either the first or 

second interim report is not positive, the county superintendent may require the district to provide a third interim report by June 1 

covering the period ending April 30. If not required, a third interim report is generally not prepared (though may be at the 

election of the district). The same calendar applies to the budgets of county offices of education, except that their budgets and 

reports go to the State Superintendent of Public Instruction for review. 

The county superintendent must annually present a report to the governing board of the school district and the State 

Superintendent of Public Instruction regarding the fiscal solvency of any school district with a disapproved budget, qualified 

interim certification, or negative interim certification, or that is determined at any time to be in a position of fiscal uncertainty, 

pursuant to Education Code Section 42127.6. Any school district with a qualified or negative certification must allow the county 

office of education at least ten working days to review and comment on any proposed agreement made between its bargaining 

units and the school district before it is ratified by the board (or the state administrator). The county superintendent will notify the 

school district, the county board of education, the governing board and the district superintendent (or the state administrator), and 

each parent and teacher organization of the school district within those 10 days if, in his or her opinion, the agreement would 

endanger the fiscal well-being of the school district. Also, pursuant to Education Code Section 42133, a school district that has a 

qualified or negative certification in any fiscal year may not issue, in that fiscal year or the next succeeding fiscal year, non-voter 

approved debt unless the county superintendent of schools determines that the repayment of that debt by the school district is 

probable. 

- 31 -

The filing status of the District’s interim reports for the past five years appears below. 

Certifications of Interim Financial Reports 


Fiscal year First Interim Second Interim 

2007-08 Positive Positive 



2010-11 Qualified Qualified 

2011-12 Positive Qualified 

Financial Statements 

Figures presented in summarized form herein have been gathered from the District’s financial statements. The audited financial 

statements of the District for the fiscal year ending June 30, 2011, have been included in the appendix to this Official Statement. 

See “APPENDIX A” herein. Audited financial statements and other financial reports for all prior fiscal years are on file with the 

District and available for public inspection during normal business hours. Copies of financial statements relating to any year are 

available to prospective investors and or their representatives upon request by contacting the District at the address and telephone 

number set forth on page “iv” of this Official Statement, or by contacting the District’s financial advisor, Government Financial 

Strategies inc., 1228 “N” Street, Suite 13, Sacramento, California, 95814-5609, Tel. (916) 444-5100. 


- 32 -

The following illustration sets forth audited District’s General Fund data for fiscal years 2008-09 through 2010-11, unaudited 

General Fund data for fiscal year 2011-12, and budgeted data for fiscal year 2012-13. 

General Fund Activity 


2008-09 2009-10 2010-11 2011-12 2012-13 

Audited Audited Audited Unaudited Budget 

BEGINNING BALANCE $37,871,644 $54,957,915 $36,071,325 $54,331,989 $52,556,006 

Adjustments 0 0 837,358 0 

RESTATED BEGINNING BALANCE $37,871,644 $54,957,915 $36,908,683 $54,331,989 $52,556,006 

REVENUES 

Revenue Limit Sources $223,724,634 $194,943,078 $207,108,527 $206,818,200 $189,838,338 

Federal Revenue 41,389,998 27,943,396 38,445,297 34,334,592 25,395,414 

Other State Revenues 75,276,774 67,588,687 69,008,614 69,878,488 68,473,411 

Other Local Revenues 6,079,331 4,530,874 3,397,999 3,730,881 2,207,469 

TOTAL REVENUES $346,470,737 $295,006,035 $317,960,437 $314,762,161 $285,914,632 

EXPENDITURES 

Certificated Salaries $165,529,057 $154,303,628 $147,633,960 $153,373,600 $153,897,631 

Classified Salaries 49,886,599 48,106,455 43,768,432 43,544,104 43,251,925 

Employee Benefits 69,742,363 69,796,252 73,071,049 71,786,192 75,602,206 

Books and Supplies 14,226,252 11,564,222 7,778,232 13,243,249 8,850,239 

Services / Other Operating Exp. 28,938,414 27,556,362 26,897,508 28,404,731 29,607,105 

Capital Outlay 1,424,078 2,353,537 310,763 709,084 653,377 

Other Outgo 68,284 50,495 52,904 41,689 0 

Direct Support / Indirect Costs (1,205,146) (1,025,709) (1,078,124) (1,171,004) (1,048,574) 

TOTAL EXPENDITURES $328,609,901 $312,705,242 $298,434,724 $309,931,645 $310,813,909 

OTHER FINANCING SOURCES ($774,565) ($1,187,383) ($2,102,407) $0 $0 

NET INCREASE (DECREASE) $17,086,271 ($18,886,590) $17,423,306 $4,830,516 ($24,899,277) 

ENDING BALANCE $54,957,915 $36,071,325 $54,331,989 $59,162,505 $34,263,228 

Revenues 

The District categorizes its General Fund revenues into four primary sources: revenue limit sources, federal revenues, other state 

revenues and other local revenues. 

Revenue Limit Sources. Since fiscal year 1973-74, California school districts have operated under general purpose revenue limits 

established by the State Legislature. In general, the state revenue limit for a school district is calculated by multiplying a “base 

revenue limit” per student by the school district’s student enrollment measured in units of average daily attendance. The revenue 

limit calculations are adjusted annually in accordance with a number of factors designated primarily to provide cost of living 

increases and to equalize revenues among all California school districts of the same type. The District’s base revenue limit per 

unit of ADA was $6,502.84 in fiscal year 2011-12 (before a deficit factor of 0.79398) and is budgeted to be $6,714.84 in fiscal 

year 2012-13 (before a deficit factor of 0.77728). 

Revenue limit sources accounted for approximately 65.1% of total General Fund revenues in fiscal year 2010-11, were 65.7% of 

General Fund revenues in fiscal year 2011-12, and are budgeted to be 66.4% of General Fund revenues in fiscal year 2012-13. 

- 33 -

Funding of the District’s revenue limit is accomplished by a mix of a) local taxes (composed predominantly of property taxes, and 

including miscellaneous taxes and community redevelopment funds, if any) and b) State apportionments of basic and equalization 

aid. The majority of the District’s revenue limit funding comes from State apportionments; State apportionments are budgeted to 

be approximately 95.0% of revenue limit sources in fiscal year 2012-13. 

Federal Revenues. The federal government provides funding for several District programs. These federal revenues, most of 

which historically have been restricted, were approximately 12.1% of General Fund revenues in fiscal year 2010-11, were 10.9% 

of General Fund revenues in fiscal year 2011-12, and are budgeted to be 8.9% of General Fund revenues in fiscal year 2012-13. 

Other State Revenues. In addition to apportionment revenues, the State provides funding for several District programs. While the 

majority of these other State revenues have historically been restricted, the State budget for fiscal year 2011-12 extended spending 

flexibility through 2014-15 for a variety of categorical programs. These other State revenues were 21.7% of total General Fund 

revenues in fiscal year 2010-11, were 22.2% of General Fund revenues in fiscal year 2011-12, and are budgeted to be 23.9% of 

General Fund revenues in fiscal year 2012-13. Included in other State revenues are proceeds received from the State from the 

State Lottery. 

Other Local Revenues. Revenues from other local sources were approximately 1.1% of total General Fund revenues in fiscal year 

2010-11, were 1.2% of General Fund revenues in fiscal year 2011-12, and are budgeted to be 0.8% of General Fund revenues in 

fiscal year 2012-13. 

Expenditures 

The largest components of a school district’s general fund expenditures are certificated and classified salaries and employee 

benefits. Changes in salary and benefit expenditures from year to year are generally based on changes in staffing levels, 

negotiated salary increases, and the overall cost of employee benefits. Even with no negotiated salary increases or changes in 

staffing levels, normal “step and column” advancements on the salary scale result in increased salary expenditures. The District 

has budgeted increases of 1.4% for salaries and 7.0% for benefits for fiscal year 2012-13. 

Employee salaries and benefits were approximately 88.6% of General Fund expenditures in fiscal year 2010-11, were 86.7% of 

General Fund expenditures in fiscal year 2011-12, and are budgeted to be 87.8% of General Fund expenditures in fiscal year 

2012-13. 

Short-Term Borrowings 

The District has in the past issued short-term tax and revenue anticipation notes. Proceeds from the issuance of notes by the 

District during previous fiscal years have been used to reduce inter-fund dependency and to provide the District with greater 

overall efficiency in the management of its funds. The District has never defaulted on any of its short-term borrowings. 

Capitalized Lease Obligations 

The District has made use of various capital lease arrangements in the past under agreements that provide for title of items and 

equipment being leased to pass to the District upon expiration of the lease period. As of June 30, 2011, the District has no capital 

lease obligations outstanding. 

- 34 -

The District’s outstanding certificates of participation (“COPs”) and qualified zone academy bonds (“QZABs”) as of June 30, 

2012 are set forth in the following table. 

Outstanding COPs and QZABs 


Date Issued Debt Type Final Maturity Amount Issued 

Outstanding as of 

June 30, 2012 

Debt Service in 

2012-13 

April 1, 2005 QZAB 1 April 1, 2021 $ 5,000,000 $ 2,228,649 $ 247,627 

April 25, 2007 COP September 1, 2037 49,910,000 44,910,000 3,250,763 

1 

Debt service includes amount deposited into a sinking fund for payment of QZAB at maturity. 

Long-Term Debt 

The District’s outstanding general obligation bond and note debt as of June 30, 2012 is set forth in the following table. 

Outstanding General Obligation Bonds and Notes 


Authorization Issue Final Maturity Amount Issued 

Outstanding as of 

June 30, 2012 1 

Debt Service in 

Fiscal Yr. 2012-13 

Refunding 1992 Refunding July 1, 2015 $23,688,126 $1,964,808 $1,880,000 

Refunding 1997 A Refunding July 1, 2018 18,670,227 4,634,151 2,300,000 

Refunding 2004 Refunding May 1, 2020 18,930,000 13,075,000 1,823,725 

2006 Election Series A 2 August 1, 2031 90,000,000 82,665,000 4,422,600 

2006 Election Series B February 1, 2033 70,585,909 70,020,909 3,481,969 

Refunding 2009 Refunding May 1, 2022 18,110,000 12,700,000 1,754,219 

2006 Election 2009 Notes 3 December 1, 2012 94,997,120 94,997,120 106,020,000 

1 

Amounts exclude accreted interest on capital appreciation bonds. 

2 To be refunded in part by the Refunding Bonds. 

3 Proceeds of the Series C Bonds to be used for final payment. 

STATE FUNDING OF PUBLIC EDUCATION 

The information in this section concerning State funding of public education is provided as supplementary information only, and 

it should be not be inferred from the inclusion of this information in this Official Statement that the principal of or interest on the 

Bonds is payable from State revenues. The Bonds are payable from the proceeds of an ad valorem tax, approved by the voters of 

the District pursuant to applicable laws and Constitutional requirements, and required to be levied by the County on all taxable 

property in the District in an amount sufficient for the timely payment of principal and interest on the Bonds. 

Revenue for Public Education 

Sources of Revenue. The State’s K-12 education system is supported primarily from State revenues, mostly sales and income 

taxes. The availability of State funds for public education is a function of constitutional provisions affecting school district 

revenues and expenditures (see “CONSTITUTIONAL & STATUTORY PROVISIONS AFFECTING SCHOOL DISTRICT 

REVENUES & EXPENDITURES). As a result, changes in State revenues may affect appropriations made by the State to school 

districts. State revenue sources for school districts are supplemented with local property taxes, federal aid, local miscellaneous 

- 35 -

funds, and the California State Lottery. 

In recent years, approximately 58% of all funds for California K-12 public education came from the State budget, which is 

required to be proposed by the Governor by January 10 and adopted by June 15 of each year (although the State often is late 

adopting the budget). Approximately 21% of funding for K-12 education comes from local property taxes. The State 

Constitution limits property taxes to one percent of the value of property; property taxes may only exceed this limit to repay voter 

approved debt. 

Statewide, approximately 13% of school districts’ revenues come from the federal government, and about 6% come from local 

miscellaneous sources. The latter category includes items such as food sales, money for debt repayment, interest on reserves and, 

in some cases, more significant sources such as developer fees and parcel taxes. Developer fees are fees that school districts can 

levy on new residential or commercial development within their boundaries to finance the construction or renovation of school 

facilities. Many school districts also seek grants or contributions, sometimes channeled through private foundations established to 

solicit donations from local families and businesses. School districts that still have unused school buildings or sites can lease or 

sell them for miscellaneous income as well. A significant number of school districts have secured the required two-thirds 

approval from local voters to levy special taxes on parcels or residences and/or have won voter approval, with either a two-thirds 

vote or a 55% majority, to sell general obligation bonds or to establish special taxing districts for the construction of schools. Use 

of such taxes is restricted by law. 

The final revenue source for school districts is the California State Lottery. Approved by voters in late 1984, the lottery generates 

about 1% of total school revenues. Every three months the Lottery Commission calculates 34% of lottery proceeds for all public 

education institutions, the minimum according to the lottery law. Every K-14 school district receives the same amount of lottery 

funds per pupil from the State, which may be spent for any instructional purpose, excluding capital projects. 

No other source of general purpose revenue is currently permitted for schools. Proposition 13 eliminated the possibility of raising 

additional ad valorem property taxes for general school support, and the courts have declared that fees may not be charged for 

school-related activities other than for busing services. 

The State Revenue Limit. The State Revenue Limit was first instituted in 1973-74 to provide a mechanism to calculate the amount 

of general purpose revenue a school district, community college district or county board of education is entitled to receive from 

State and local sources. Each school district has its own target amount of funding from State funds and local property taxes per 

average daily attendance. ADA is the average number of pupils attending school over the year. This target is known as revenue 

limit, and the funding from this calculation forms the bulk of all school districts' income. The State Legislature usually grants 

annual cost-of-living adjustments (COLAs) to revenue limits. The exact amount depends on whether the school district is an 

elementary, high school or a unified school district. 

Apportionments for revenue limits are calculated three times a year for each school district, community college district and 

county board of education. The first calculation is performed for the February 20th First Principal Apportionment (based on 

Period 1 ADA determined in December), the second calculation for the June 25th Second Principal Apportionment (based on 

Period 2 ADA determined in April), and the final calculation for the end of the year Annual Apportionment (also based on Period 

2 ADA). Calculations are reviewed by the county and submitted to the State Department of Education with respect to school 

districts and to the Chancellor of the California Community Colleges with respect to community college districts, which, 

respectively, reviews the calculations for accuracy, calculates the amount of state aid owed to such school district or community 

college district, as the case may be, and notifies the State Controller of the amount, who then distributes the state aid. 

School districts that receive their revenue limit income entirely from property taxes are called “basic aid” school districts. These 

school districts are permitted to keep all their property tax money (even if it exceeds their revenue limit). As guaranteed in the 

State Constitution, the State must apportion $120 per pupil to all school districts. However, the categorical aid (see below) that 

basic aid school districts receive counts toward this requirement. The District is not a basic aid district. 

Distribution of Revenue for School Districts 

General Purpose. The largest part of each school district's revenue funds general operating expenses associated with providing 

education, including salaries, benefits, supplies, textbooks and regular maintenance. As previously mentioned, the Revenue Limit 

governs the amount each school district receives. Each school district also receives some State and federal money for special 

programs, special costs, or categories of children with particular educational needs, called “categorical aid.” 

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Categorical Aid. This special support goes into a school district's General Fund, but its expenditure is restricted to the purpose for 

which it is granted. About seventy-five percent (75%) of the total money generated for education is for general purposes, and 

about twenty-five percent (25%) is for categorical aid. The complex allocation system is adjusted somewhat by the State 

Legislature almost every year, with unpredictable effects on individual school districts. 

There are a number of major federal and State categorical aid programs. Some allocations come automatically to school districts, 

while others require an application. Some programs are based on the characteristics of the children or families in a particular 

school district, such as gifted and talented, non-English speaking, migrant, low income or handicapped students. Other programs 

are for specific activities or expenses, such as transportation, textbooks or childcare. Each year a large amount of aid is allocated 

directly to the State Teachers' Retirement System (STRS) fund. For the past several years, supplemental grants have been 

directed to equalizing school districts' income from revenue limits plus specific categoricals. Most of the federal funds flow 

through the California Department of Education, which retains a certain percentage for administration. 

In terms of dollars and the number of children served, the largest categorical aid program is special education under the 

Individuals with Disabilities Education Act. According to court decisions and federal and California law, school districts are 

responsible for the appropriate education of each handicapped child from age 3 to 21 who lives within their boundaries. The 

allocations do not cover the cost of educating them. School districts are required to contribute a certain amount of general 

purpose funds for Special Education, and many spend much more. This is known as “encroachment.” 

School Facilities. Growing enrollments and/or aging facilities require school districts to build or make major renovations to 

school buildings. The income from developer fees on residential or commercial property is insufficient to fund all facilities costs. 

General obligation bond moneys issued by a two-thirds voter approval may only be used for purchase or improvement of real 

property; general obligation bond moneys issued by 55% voter approval (pursuant to Proposition 39) can be used only for 

construction, rehabilitation, equipping of school facilities, or the acquisition or lease of real property for school facilities. See 

“CONSTITUTIONAL & STATUTORY PROVISIONS AFFECTING REVENUES & EXPENDITURES” herein. Mello-Roos 

taxes can be used for this as well as for ongoing maintenance or purchase of needed equipment. A majority of voters has 

regularly approved state bond measures for the construction or reconstruction of schools. 

State IOUs and Deferrals 

In recent years, fiscal stress and difficulties in achieving a balanced State budget have resulted in actions that include the State 

issuing IOUs (defined below) to its creditors, and the deferral of school funding. 

On July 2, 2009, as a result of declines in State revenues commencing in fiscal year 2008-09, the State Controller began to issue 

registered warrants (or “IOUs”) for certain lower priority State obligations in lieu of warrants (checks) which could be 

immediately cashed. The registered warrants, the issuance of which did not require the consent of recipients, bore interest. With 

enactment of an amended budget in late July, 2009, the State was able to call all its outstanding registered warrants for 

redemption on September 4, 2009. The issuance of state registered warrants in 2009 was only the second time the State has issued 

state registered warrants to such types of state creditors since the 1930s. 

Furthermore, commencing in fiscal year 2008-09, to better manage its cash flow in light of declining revenues, the State has 

enacted several statutes deferring amounts owed to public schools, until a later date in the fiscal year, or even into the following 

fiscal year, in order to more closely align the State’s revenues with its expenditures. This technique has been used several times 

through the enactment of budget bills in fiscal years 2008-2009 through 2012-13. Some of these statutory deferrals were made 

permanent, and others were implemented only for one fiscal year. For fiscal year 2012-13, enacted K-12 inter-year deferrals total 

$7.4 billion; however, should a proposed tax initiative to be considered by voters at a November 2012 election fail, inter-year 

deferrals would increase to $9.5 billion. 

Fiscal stress and cash pressures currently facing the State may continue or become more difficult, and continuing declines in State 

tax receipts or other results of the current economic recession may materially adversely affect the financial condition of the State. 

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The 2011-12 State Budget 

The information in this section has been compiled from publicly available information through the State Department of Finance 

and the State Legislative Analyst’s Office. Neither the District nor the Underwriters assume any responsibility for the accuracy 

of such information as set forth or incorporated by reference herein, although they believe that the information provided by the 

above-listed sources is reliable. 

Adopted Budget. On June 30, 2011, the Governor signed into law the 2011-12 State budget (the “2011-12 State Budget”). The 

2011-12 State Budget, including previously enacted legislation, closed a projected $26.6 billion budget gap through $15.0 billion 

in expenditure reductions, $0.9 billion in revenue increases and $2.9 billion in other solutions, which, combined with an increased 

State revenue forecast of $8.3 billion, resulted in a budgeted State general fund reserve of $543 million at the end of fiscal year 

2011-12. 

Funding for K-12 Education. The 2011-12 State Budget included total funding of $64.1 billion for all K-12 education programs 

($34.7 billion from the State’s general fund and $29.4 billion from other funds). The 2011-12 State Budget funded the 

Proposition 98 minimum funding requirement at $48.7 billion, of which $32.9 billion was budgeted from the State general fund. 

The 2011-12 State Budget included a series of trigger reductions in the event the State’s revenues were less than forecast. As part 

of the second series of such trigger reductions, had State revenues fallen short of projections by more than $2 billion in fiscal year 

2011-12, up to $1.5 billion in reductions to school district revenue limit funding would have been implemented, with a 

corresponding reduction to the minimum school year length by seven days. In December 2012, the State announced, based on 

revised revenue estimates, trigger cuts for K-12 education totaling $79.6 million. 

The 2012-13 State Budget 

The information in this section has been compiled from publicly available information through the State Department of Finance 

and the State Legislative Analyst’s Office. Neither the District nor the Underwriters assume any responsibility for the accuracy 

of such information as set forth or incorporated by reference herein, although they believe that the information provided by the 

above-listed sources is reliable. 

Adopted Budget. On June 27, 2012, the Governor signed the fiscal year 2012-13 State budget (the “2012-13 Budget”). The 2012- 

13 Budget closes a $15.7 billion budget gap and builds a reserve of nearly $1 billion with (i) $8.1 billion in expenditure 

reductions, (ii) $6 billion in increased revenues (which assumes the approval by the voters of the Governor’s tax initiative, “The 

Schools and Local Public Safety Protection Act”, at a November 2012 election) and (iii) $2.5 billion from certain loan and 

transfer measures. 

The Schools and Local Public Safety Protection Act proposes to temporarily increase the personal income tax on the State’s 

wealthiest taxpayers for seven years and increase the sales tax by 0.25% for four years. The measure would generate an estimated 

$8.5 billion in revenues through fiscal year 2012-13. 

The 2012-13 Budget contains the following spending reduction measures: 

• Reformation of existing K-14 education mandates claim process by providing a block grant as an alternative. For non-school 

mandates, provides a multiyear suspension of most mandates to provide greater flexibility to local governments. ($720 

million savings) 

• Creation of framework to transfer cash assets previously held by redevelopment agencies to cities, counties, and special 

districts to fund core public services. Assets transferred to schools will offset State general fund costs. ($1.5 billion savings) 

• Other adjustments including using a fiscal year 2011-12 over-appropriation of the minimum guarantee to prepay Proposition 

98 funding required by a court settlement. ($1.9 million savings) 

State general fund revenues (including transfers) are budgeted to be approximately $95.9 billion in fiscal year 2012-13, an 

increase of 10.4% from a revised fiscal year 2011-12 State general fund revenues and transfers of $86.8 billion. State general 

fund expenditures are budgeted to be $91.4 billion in fiscal year 2012-13, an increase of 5.0% from a revised $87.0 billion figure 

for fiscal year 2011-12. 

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The following table identifies historical and budgeted State general fund revenues and expenditures. 

State General Fund under the 2012-13 Budget 

Source: The California Department of Finance 

2011-12 2012-13 

Revised 

Budget 

(Millions) 

(Millions) 

Prior-year Fund Balance ($2,685) ($2,882) 

Revenues and Transfers 86,830 95,887 

Total Resources Available 84,145 93,005 

Expenditures 87,027 91,338 

Ending Fund Balances ($2,882) $1,667 

Encumbrances 719 719 

Reserve (3,601) 948 

K-12 Education. The 2012-13 Budget includes Proposition 98 funding of $53.6 billion, of which $36.8 billion is from the State 

general fund. This funding level assumes passage of The Schools and Local Public Safety Protection Act, which increases 

Proposition 98 funding by $2.9 billion in fiscal year 2012-13. 

Other significant K-12 funding adjustments include: 

• Redevelopment Agency Asset Liquidation – An increase of $1.3 billion in local property taxes for fiscal year 2012-13 to 

reflect the distribution of cash assets previously held by redevelopment agencies. The increase in local revenue reduces 

Proposition 98 State general fund contribution by an identical amount. 

• Proposition 98 Adjustments – A decrease of approximately $630 million due to (i) eliminating the hold-harmless adjustment 

provided to schools from the elimination of the sales tax gasoline in 2010-11, and (ii) using a consistent current value 

methodology to rebench the guarantee for the exclusion of child care programs, the inclusion of special education mental 

health services, as well as new and existing property tax shifts. Additionally, the 2012-13 Budget reduces current year 

appropriations for a number of different programs by $220.1 million, backfilling them with one-time Proposition 98 general 

fund, which achieves State general fund savings by an identical amount. 

• Quality Education Investment Act – A decrease of $450 million State general fund for fiscal year 2012-13. The overappropriation 

in fiscal year 2011-12 will be used to repay the $450 million required to be provided on top of the minimum 

guarantee in fiscal year 2012-13 pursuant to the California Teachers Association v. Schwarzenegger settlement agreement. 

• Deferrals – An increase of $2.1 billion Proposition 98 State general fund to reduce K-12 inter-year deferrals to $7.4 billion. 

• Charter Schools – An increase of $53.7 billion Proposition 98 State general fund for charter schools categorical programs to 

fund growth in enrollment. Additionally, legislation expands the ability of school districts to convey surplus property to 

charter schools, while also increasing financial assistance by allowing county treasurers to provide them with short-term cash 

loans, and by authorizing charter schools to utilize temporary revenue anticipation note borrowings. 

• Mandate Block Grant – An increase of $86.2 million over the fiscal year 2011-12 funding level to provide a total of $166.6 

million for K-12 mandates through a new voluntary block grant. 

• Child Care Costs – Savings of $294.3 million in non-Proposition 98 State general fund through various cost-reduction 

measures, including reduction of provider contracts across the board and suspension of statutory COLA. 

If The Schools and Local Public Safety Protection Act is not approved by voters in November 2012, automatic trigger cuts of 

approximately $5.4 billion for K-14 schools would be implemented effective January 1, 2013. Such trigger cuts equate to a 

reduction in funding of approximately $457 per ADA. To accommodate this mid-year reduction, school districts are authorized 

(subject to collective bargaining) to reduce the school year to 160 days for fiscal years 2012-13 and 2013-14, 15 days shorter than 

the 175 instructional days currently required. 

Litigation Challenging State Funding of Education 

On September 28, 2011, the California School Boards Association, the Association of California School Administrators, the Los 

Angeles Unified School District, the San Francisco Unified School District and the Turlock Unified School District filed a 

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petition for a writ of mandate in the Superior Court of the State of California in and for the City and County of San Francisco (the 

“CSBA Petition”). The petitioners allege that the 2011-12 Budget improperly diverted sales tax revenues away from the State 

general fund, resulting in a reduction to the minimum funding guarantee of approximately $2.1 billion. The CSBA Petition seeks 

an order from the Court compelling the State Treasurer, Superintendent of Public Instruction and the State Controller to 

recalculate the minimum funding guarantee in accordance with the provisions of the California Constitution. 

The District is not a party to the CSBA Petition. The District cannot predict whether any of the plaintiffs listed in the CSBA 

Petition will be successful, what the potential remedies would be or the State’s response to any such remedies. The District makes 

no representation with regards to how any final court decision with respect to the CSBA Petition would affect the financial status 

of the District or the State. 

Future Budgets 

The District cannot predict what actions will be taken in the future by the State Legislature and the Governor to address changing 

State revenues and expenditures or the impact such actions will have on State revenues available in the current or future years for 

education. The State budget will be affected by national and State economic conditions and other factors over which the District 

will have no control. Certain actions could result in a significant shortfall of revenue and cash, and could impair the State's ability 

to fund schools as budgeted. Continued State budget shortfalls in future fiscal years could have an adverse financial impact on 

the District. 

For more information on the State Budget, please refer to the State Department of Finance’s website at www.dof.ca.gov and to 

the Legislative Analyst’s Office’s website at www.lao.ca.gov. 

CONSTITUTIONAL & STATUTORY PROVISIONS AFFECTING DISTRICT REVENUES & EXPENDITURES 

Limitations on Revenues 

Article XIIIA of the California Constitution. Article XIIIA of the State Constitution, adopted and known as Proposition 13, was 

approved by the voters in June 1978. Section 1(a) of Article XIIIA limits the maximum ad valorem tax on real property to one 

percent of “full cash value,” and provides that such tax shall be collected by the counties and apportioned according to State law. 

Section 1(b) of Article XIIIA provides that the one-percent limitation does not apply to ad valorem taxes levied to pay interest and 

redemption charges on: (i) indebtedness approved by the voters prior to July 1, 1978, or (ii) bonded indebtedness for the 

acquisition or improvement of real property approved on or after July 1, 1978, by two-thirds of the votes cast on the proposition, 

or (iii) bonded indebtedness incurred by a school district or community college district for the construction, reconstruction, 

rehabilitation or replacement of school facilities or the acquisition or lease of real property for school facilities, approved by 55% 

of the voters of the district, but only if certain accountability measures are included in the bond proposition. 

Section 2 of Article XIIIA defines “full cash value” to mean the county assessor’s valuation of real property as shown on the 

fiscal year 1975-76 tax bill, or, thereafter, the appraised value of real property when purchased, newly constructed, or a change in 

ownership has occurred. The full cash value may be adjusted annually to reflect inflation at a rate not to exceed 2% per year, or 

to reflect a reduction in the consumer price index or comparable data for the area under taxing jurisdiction, or may be reduced in 

the event of declining property value caused by substantial damage, destruction or other factors. The Revenue and Taxation Code 

permits county assessors who have reduced the assessed valuation of a property as a result of natural disasters, economic 

downturns or other factors, to subsequently “recapture” such value (up to the pre-decline value of the property) at an annual rate 

higher than 2%, depending on the assessor’s measure of the restored value of the damaged property. The California courts have 

upheld the constitutionality of this procedure, as described below. Legislation enacted by the State Legislature to implement 

Article XIIIA provides that, notwithstanding any other law, local agencies may not levy any ad valorem property tax except the 

1% base tax levied by each County and taxes to pay debt service on indebtedness approved by the voters as described above. 

Since its adoption, Article XIIIA has been amended a number of times. These amendments have created a number of exceptions 

to the requirement that property be reassessed when purchased, newly constructed or a change in ownership has occurred. These 

exceptions include certain transfers of real property between family members, certain purchases of replacement dwellings for 

persons over age 55 and by property owners whose original property has been destroyed in a declared disaster, and certain 

improvements to accommodate disabled persons and for seismic upgrades to property. These amendments have resulted in 

marginal reductions in the property tax revenues of the District. 

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Both the California State Supreme Court and the United States Supreme Court have upheld the validity of Article XIIIA. 

Section 51 of the Revenue and Taxation Code permits county assessors who have reduced the assessed valuation of a property as 

a result of natural disasters, economic downturns or other factors, to subsequently “recapture” such value (up to the pre-decline 

value of the property) at an annual rate higher than 2%, depending on the assessor’s measure of the restoration of value of the 

damaged property. The constitutionality of this procedure was challenged in a lawsuit brought in 2001 in the Orange County 

Superior Court and in similar lawsuits brought in other counties, on the basis that the decrease in assessed value creates a new 

“base year value” for purposes of Proposition 13 and that subsequent increases in the assessed value of a property by more than 

2% in a single year violate Article XIII A. On appeal, the California Court of Appeal upheld the recapture practice in 2004, and 

the State Supreme Court declined to review the ruling, leaving the recapture law in place. A drop in assessed valuation would not 

result in any long-term loss of taxes levied to pay the District’s bonds, but would instead cause the County to raise the rate of ad 

valorem taxes to generate revenues sufficient for the payment of principal of and interest on such bonds. 

Article XIIIC and Article XIIID of the California Constitution. On November 5, 1996, the voters of the State approved 

Proposition 218, the so-called “Right to Vote on Taxes Act.” Proposition 218 added Articles XIIIC and XIIID to the State 

Constitution, which contain a number of provisions affecting the ability of local agencies, including school districts, to levy and 

collect both existing and future taxes, assessments, fees and charges. Among other things, Article XIIIC establishes that every tax 

is either a “general tax” (imposed for general governmental purposes) or a “special tax” (imposed for specific purposes); prohibits 

special purpose government agencies such as school districts from levying general taxes; and prohibits any local agency from 

imposing, extending or increasing any special tax beyond its maximum authorized rate without a two-thirds vote. Article XIIIC 

also provides that no tax may be assessed on property other than ad valorem property taxes imposed in accordance with Articles 

XIII and XIIIA of the California Constitution and special taxes approved by a two-thirds vote under Article XIIIA, Section 4. 

Article XIIIC also provides that the initiative power shall not be limited in matters of reducing or repealing local taxes, 

assessments, fees and charges. The State Constitution and the laws of the State impose a duty on the county treasurer-tax 

collector to levy a property tax sufficient to pay debt service on school bonds coming due in each year. The initiative power 

cannot be used to reduce or repeal the authority and obligation to levy such taxes which are pledged as security for payment of the 

Bonds or to otherwise interfere with performance of the duty of the District and the County with respect to such taxes. 

Legislation adopted in 1997 provides that Article XIIIC shall not be construed to mean that any owner or beneficial owner of a 

municipal security assumes the risk of or consents to any initiative measure which would constitute an impairment of contractual 

rights under the contracts clause of the U.S. Constitution. 

Article XIIID deals with assessments and property-related fees and charges. Article XIIID explicitly provides that nothing in 

Article XIIIC or XIIID shall be construed to affect existing laws relating to the imposition of fees or charges as a condition of 

property development; however it is not clear whether the initiative power is therefore unavailable to repeal or reduce developer 

and mitigation fees imposed by the District. Developer fees imposed by the District are restricted as to use and are neither 

pledged nor available to pay the Bonds. 

The interpretation and application of Proposition 218 will ultimately be determined by the courts with respect to a number of the 

matters discussed above, and it is not possible at this time to predict with certainty the outcome of such determination. 

Expenditures and Appropriations 

Article XIIIB of the California Constitution. In addition to the limits Article XIIIA imposes on property taxes that may be 

collected by local governments, certain other revenues of the State and local governments are subject to an annual “appropriations 

limit” or “Gann Limit” imposed by Article XIIIB of the State Constitution, which effectively limits the amount of such revenues 

that government entities are permitted to spend. Article XIIIB, approved by the voters in June 1979, was modified substantially 

by Proposition 111 in 1990. The appropriations limit of each government entity applies to “proceeds of taxes,” which consist of 

tax revenues, state subventions and certain other funds, including proceeds from regulatory licenses, user charges or other fees to 

the extent that such proceeds exceed “the cost reasonably borne by such entity in providing the regulation, product or service.” 

“Proceeds of taxes” excludes tax refunds and some benefit payments such as unemployment insurance. No limit is imposed on 

the appropriation of funds which are not “proceeds of taxes,” such as reasonable user charges or fees, and certain other non-tax 

funds. 

Article XIIIB also does not limit appropriation of local revenues to pay debt service on bonds existing or authorized by January 1, 

1979, or subsequently authorized by the voters, appropriations required to comply with mandates of courts or the federal 

government, appropriations for qualified capital outlay projects, and appropriation by the State of revenues derived from any 

increase in gasoline taxes and motor vehicle weight fees above January 1, 1990, levels. The appropriations limit may also be 

- 41 -

exceeded in cases of emergency; however, the appropriations limit for the three years following such emergency appropriation 

must be reduced to the extent by which it was exceeded, unless the emergency arises from civil disturbance or natural disaster 

declared by the Governor, and the expenditure is approved by two-thirds of the legislative body of the local government. 

The State, and each local government entity, has its own appropriations limit. Each year, the limit is adjusted to allow for 

changes, if any, in the cost of living, the population of the jurisdiction, and any transfer to or from another government entity of 

financial responsibility for providing services. Each school district is required to establish an appropriations limit each year. In 

the event that a school district’s revenues exceed its spending limit, the district may increase its appropriations limit to equal its 

spending by taking appropriations limit from the State. 

Proposition 111 requires that each agency’s actual appropriations be tested against its limit every two years. If the aggregate 

“proceeds of taxes” for the preceding two-year period exceeds the aggregate limit, the excess must be returned to the agency’s 

taxpayers through tax rate or fee reductions over the following two years. If the State’s aggregate “proceeds of taxes” for the 

preceding two-year period exceeds the aggregate limit, 50% of the excess is transferred to fund the State’s contribution to school 

and college districts. 

Future Initiatives. Articles XIIIA, XIIIB, XIIIC, and XIIID, and Propositions 98 and 111 were each adopted as measures that 

qualified for the ballot pursuant to the State’s initiative process. From time to time, other initiative measures could be adopted, 

further affecting District revenues or the District’s ability to expend revenues. 

LEGAL MATTERS 

No Litigation 

There is no action, suit or proceeding known to be pending or threatened restraining or enjoining the sale and delivery of the 

Bonds, or in any way contesting or affecting the validity thereof or any proceeding of the District taken with respect to the 

issuance or sale of the Bonds, or the pledge or application of moneys or security provided for the payment of the Bonds, or the 

authority of the County to levy property taxes to pay principal and interest on the Bonds when due. 

Legal Opinion 

The legal opinion of Bond Counsel, approving the validity of the Bonds, will be supplied to the original purchasers of the Bonds 

without cost. Copies of the proposed forms of such legal opinion is attached to this Official Statement as “APPENDIX D.” 

Bond Counsel’s employment is limited to a review of the legal proceedings required for authorization of the Bonds and to 

rendering the aforementioned opinion. Bond Counsel has not undertaken any responsibility for the accuracy, completeness, or 

fairness of this Official Statement and the opinion of Bond Counsel will not extend to any documents, agreements, 

representations, offering circulars, official statements or other material of any kind concerning the Bonds that are not referred to 

in the aforementioned opinion. The fees of Bond Counsel are contingent upon the issuance and delivery of the Bonds. 

Tax Matters 

The following discussion of federal income tax matters written to support the promotion and marketing of the Bonds was not 

intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding federal tax penalties that may be 

imposed. Each taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax advisor. 

In the opinion of Meyers, Nave, Riback, Silver & Wilson, A Professional Law Corporation, Bond Counsel to the District (“Bond 

Counsel”), based upon an analysis of existing laws, regulations, rulings, and court decisions, and assuming, among other matters, 

the accuracy of certain representations and compliance with certain covenants, interest on the Bonds is excluded from gross 

income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986, as amended (the “Code”), and is 

exempt from State of California personal income taxes. In the further opinion of Bond Counsel, interest on the Bonds is not a 

specific preference item for purposes of the federal individual and corporate alternative minimum taxes, although Bond Counsel 

observes that such interest is included in adjusted current earnings when calculating corporate alternative minimum taxable 

income. Bond Counsel expects to deliver at the time of issuance of the Bonds the opinion substantially in the form set forth in 

“APPENDIX D” hereto. 

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To the extent the issue price of any maturity of the Bonds is less than the amount to be paid at maturity of such Bonds (excluding 

amounts stated to be interest and payable at least annually over the term of such Bonds), the difference constitutes “original issue 

discount,” the accrual of which, to the extent properly allocable to each Beneficial Owner thereof, is treated as interest on the 

Bonds which is excluded from gross income for federal income tax purposes and State of California personal income taxes. For 

this purpose, the issue price of a particular maturity of the Bonds is the first price at which a substantial amount of such maturity 

of the Bonds is sold to the public (excluding bond houses, brokers, or similar persons or organizations acting in the capacity of 

underwriters, placement agents or wholesalers). The original issue discount with respect to any maturity of the Bonds accrues 

daily over the term to maturity of such Bonds on the basis of a constant interest rate compounded semiannually (with straight-line 

interpolations between compounding dates). The accruing original issue discount is added to the adjusted basis of such Bonds to 

determine taxable gain or loss upon disposition (including sale, redemption, or payment on maturity) of such Bonds. Beneficial 

Owners of the Bonds should consult their own tax advisors with respect to the tax consequences of ownership of Bonds with 

original issue discount, including the treatment of Beneficial Owners who do not purchase such Bonds in the original offering to 

the public at the first price at which a substantial amount of such Bonds is sold to the public. 

Bonds purchased, whether at original issuance or otherwise, for an amount higher than their principal amount payable at maturity 

(or, in some cases, at their earlier call date) (“Premium Bonds”) will be treated as having amortizable bond premium. No 

deduction is allowable for the amortizable bond premium in the case of bonds, like the Premium Bonds, the interest on which is 

excluded from gross income for federal income tax purposes. However, the amount of tax-exempt interest received, and a 

Beneficial Owner’s basis in a Premium Bond, will be reduced by the amount of amortizable bond premium properly allocable to 

such Beneficial Owner. Beneficial Owners of Premium Bonds should consult their own tax advisors with respect to the proper 

treatment of amortizable bond premium in their particular circumstances. 

The Code imposes various restrictions, conditions, and requirements relating to the exclusion from gross income for federal 

income tax purposes of interest on obligations such as the Bonds. The District has made certain representations and covenanted to 

comply with certain restrictions, conditions, and requirements designed to ensure that interest on the Bonds will not be included in 

federal gross income. Inaccuracy of these representations or failure to comply with these covenants may result in interest on the 

Bonds being included in gross income for federal income tax purposes, possibly from the date of original issuance of the Bonds. 

The opinion of Bond Counsel assumes the accuracy of these representations and compliance with these covenants. Bond Counsel 

has not undertaken to determine (or to inform any person) whether any actions taken (or not taken), or events occurring (or not 

occurring), or any other matters coming to Bond Counsel’s attention after the date of issuance of the Bonds may adversely affect 

the value of, or the tax status of interest on, the Bonds. 

Although Bond Counsel is of the opinion that interest on the Bonds is excluded from gross income for federal income tax 

purposes and is exempt from State of California personal income taxes, the ownership or disposition of, or the accrual or receipt 

of interest on, the Bonds may otherwise affect a Beneficial Owner’s federal, state, or local tax liability. The nature and extent of 

these other tax consequences depends upon the particular tax status of the Beneficial Owner or the Beneficial Owner’s other items 

of income or deduction. Bond Counsel expresses no opinion regarding any such other tax consequences. 

Future legislative proposals, if enacted into law, clarification of the Code, or court decisions may cause interest on the Bonds to 

be subject, directly or indirectly, to federal income taxation or to be subject to or exempted from state income taxation or 

otherwise prevent Beneficial Owners from realizing the full current benefit of the tax status of such interest. The introduction or 

enactment of any such future legislative proposals, clarification of the Code, or court decisions may also affect the market price 

for, or marketability of, the Bonds. Prospective purchasers of the Bonds should consult their own tax advisors regarding any 

pending or proposed federal or state tax legislation, regulations or litigation, as to which Bond Counsel expresses no opinion. 

The opinion of Bond Counsel is based on current legal authority, covers certain matters not directly addressed by such authorities, 

and represents Bond Counsel’s judgment as to the proper treatment of the Bonds for federal income tax purposes. It is not 

binding on the Internal Revenue Service (“IRS”) or the courts. Furthermore, Bond Counsel cannot give and has not given any 

opinion or assurance about the future activities of the District or about the effect of future changes in the Code, the applicable 

regulations, the interpretation thereof or the enforcement thereof by the IRS. The District has covenanted, however, to comply 

with the requirements of the Code. 

Bond Counsel’s engagement with respect to the Bonds ends with the issuance of the Bonds, and, unless separately engaged, Bond 

Counsel is not obligated to defend the District or the Beneficial Owners regarding the tax-exempt status of the Bonds in the event 

of an audit examination by the IRS. Under current procedures, parties (such as the Beneficial Owners) other than the District and 

its appointed counsel would have little, if any, right to participate in the audit examination process. Moreover, because achieving 

judicial review in connection with an audit examination of tax-exempt bonds is difficult, obtaining an independent review of IRS 

positions with which the District legitimately disagrees may not be practicable. Any action of the IRS, including but not limited 

- 43 -

to selection of the Bonds for audit, or the course or result of such audit, or an audit of bonds presenting similar tax issues may 

affect the market price for, or the marketability of, the Bonds, and may cause the District or the Beneficial Owners to incur 

significant expense. 

Legality for Investment 

Under provisions of the California Financial Code, the Bonds are legal investments for commercial banks in California to the 

extent that the Bonds, in the informed opinion of the investing bank, are prudent for the investment of funds of depositors. Under 

provisions of the California Government Code, the Bonds are eligible to secure deposits of public moneys in California. 

RATING 

Moody’s Investors Service ("Moody’s") has assigned a municipal bond rating of “Aa3” to the Bonds. Such rating reflects only 

the views of such organization and an explanation of the significance of such rating may be obtained from Moody’s. There is no 

assurance that any such rating will continue for any given period of time or that it will not be revised downward or withdrawn 

entirely by the rating agency, if in the judgment of the rating agency, circumstances so warrant. Any such downward revision or 

withdrawal of such rating may have an adverse effect on the market price of the Bonds. 

FINANCIAL ADVISOR 

Government Financial Strategies inc. has been employed by the District to perform financial advisory services in relation to the 

sale and delivery of the Bonds. Government Financial Strategies inc., in its capacity as financial advisor, has read and 

participated in drafting certain portions of this Official Statement. Government Financial Strategies inc. has not, however, 

independently verified nor confirmed all of the information contained within this Official Statement. Government Financial 

Strategies inc. will not participate in the underwriting of the Bonds. Fees charged by Government Financial Strategies inc. are not 

contingent upon the sale of the Bonds. 

INDEPENDENT AUDITORS 

The financial statements of the District as of and for the year ending June 30, 2011, have been audited by Nigro & Nigro, PC, a 

Professional Accountancy Corporation, Murrieta, California. Information concerning the financial statements of the District as of 

and for the year ended June 30, 2011, are set forth in “APPENDIX A” attached hereto. The District has not requested nor did the 

District obtain permission from Nigro & Nigro, PC to include the audited financial statements as an appendix to this Official 

Statement. Nigro & Nigro, PC has not performed any subsequent events review or other procedures relative to these audited 

financial statements since the date of its letter. Complete copies of all past and current financial statements may be obtained from 

the District. 

UNDERWRITING AND INITIAL OFFERING PRICE 

The Series C Bonds were sold to ___________ (the “Series C Underwriter”) pursuant to a bond purchase agreement by and 

among the District and the Series C Underwriter. The purchase price of the Series C Bonds is $________, equal to the principal 

amount of the Series C Bonds, less an underwriting discount of $_______, at a true interest cost (TIC) to the District of 

_________%. 

The Refunding Bonds were sold to ___________ (the “Refunding Underwriter,” and, together with the Series C Underwriter, the 

“Underwriters”) pursuant to a bond purchase agreement by and among the District and the Refunding Underwriter. The purchase 

price of the Refunding Bonds is $___________, equal to the principal amount of the Refunding Bonds, plus an original issue 

premium of $_______, less an underwriting discount of $_______, at a true interest cost (TIC) to the District of _________%. 

- 44 -

The Underwriters have certified the initial offering prices or yields stated on the inside cover page to this Official Statement. The 

Underwriters may offer and sell the Bonds to certain dealers (including dealers depositing Bonds into investment trusts), dealer 

banks, banks acting as agents and others at prices other than said public offering prices. The reoffering prices may be changed 

from time to time by the Underwriters. 

CONTINUING DISCLOSURE 

The District has covenanted for the benefit of the holders and Beneficial Owners of the Bonds to provide certain financial 

information and operating data relating to the District (the “Annual Report”), by not later than eight months after the end of the 

fiscal year, commencing with the report for the 2011-12 fiscal year (which is due no later than February 28, 2013), and to provide 

notices of the occurrence of certain enumerated events. The Annual Report and notices of certain enumerated events will be filed 

by the District with the Municipal Securities Rulemaking Board through its Electronic Municipal Market Access system. The 

specific nature of the information to be contained in the Annual Report or the notices are set forth in “APPENDIX C—FORM OF 

CONTINUING DISCLOSURE CERTIFICATE.” These covenants have been made in order to assist the Underwriters in 

complying with S.E.C. Rule 15c2-12(b)(5) (the “Rule”). 

Due to administrative oversight, the District did not file its annual reports for fiscal years 2007-08, 2008-09 and 2009-10 as well 

as event notices due to rating downgrades in a timely manner. To ensure future filings are made in a timely manner, the District 

has retained Government Financial Strategies inc. as dissemination agent for its prior undertakings with regard to the Rule. As of 

the date of this Official Statement, all required filings have been made in connection with prior undertakings. 

ADDITIONAL INFORMATION 

Additional information concerning the District, the Bonds or any other matters concerning the sale and delivery of the Bonds may 

be obtained by contacting the District through the Associate Superintendent, Business Services at the address and telephone 

number set forth on page “iv” of this Official Statement, or by contacting Government Financial Strategies inc. at the address and 

telephone number set forth on page “iv” of this Official Statement. 

The execution and delivery of this Official Statement by the District has been duly authorized by its governing board. 


By: 

_____________________________ 

Cali L. Olsen-Binks 

Superintendent 

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[THIS PAGE INTENTIONALLY LEFT BLANK]

APPENDIX A 

THE FINANCIAL STATEMENTS OF THE DISTRICT 

AS OF AND FOR THE YEAR ENDED JUNE 30, 2011


FONTANA UNIFIED 

SCHOOL DISTRICT 

AUDIT REPORT 

For the Fiscal Year Ended 

June 30, 2011


For the Fiscal Year Ended June 30, 2011 

Table of Contents 

FINANCIAL SECTION 

Page 

Independent Auditors’ Report .................................................................................................................................................................. 1 

Management’s Discussion and Analysis ............................................................................................................................................... 3 

Basic Financial Statements: 

Government-wide Financial Statements: 

Statement of Net Assets ............................................................................................................................................................... 12 

Statement of Activities ................................................................................................................................................................. 13 

Governmental Funds Financial Statements: 

Balance Sheet ................................................................................................................................................................................... 14 

Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Assets ........................... 15 

Statement of Revenues, Expenditures, and Changes in Fund Balances ................................................................. 16 

Reconciliation of the Governmental Funds Statement of Revenues, Expenditures, 

and Changes in Fund Balances to the Statement of Activities ........................................................................... 17 

Proprietary Fund Financial Statements: 


Statement of Revenues, Expenses, and Changes in Net Assets .................................................................................. 19 

Statement of Cash Flows ............................................................................................................................................................. 20 

Fiduciary Fund Financial Statements: 


Statement of Changes in Net Assets ....................................................................................................................................... 22 

Notes to Financial Statements ............................................................................................................................................................... 23 

REQUIRED SUPPLEMENTARY INFORMATION 

Budgetary Comparison Schedule – General Fund ......................................................................................................................... 52 

Budgetary Comparison Schedule – Cafeteria Fund ...................................................................................................................... 53 

Schedule of Funding Progress ............................................................................................................................................................... 54 

Notes to the Required Supplementary Information .................................................................................................................... 55 

SUPPLEMENTARY INFORMATION 

Local Educational Agency Organization Structure ....................................................................................................................... 56 

Schedule of Average Daily Attendance .............................................................................................................................................. 57 

Schedule of Instructional Time ............................................................................................................................................................. 58 

Schedule of Financial Trends and Analysis ...................................................................................................................................... 59 

Schedule of Expenditures of Federal Awards ................................................................................................................................. 60 

Reconciliation of Annual Financial and Budget Report with Audited Financial Statements ..................................... 61 

Note to the Supplementary Information ........................................................................................................................................... 62



Table of Contents 

OTHER INDEPENDENT AUDITORS’ REPORTS 

Page 

Independent Auditors' Report on Internal Control over Financial Reporting and on Compliance 

and Other Matters Based on an Audit of Financial Statements Performed in Accordance with 

Government Auditing Standards ..................................................................................................................................................... 63 

Independent Auditors' Report on Compliance with Requirements That Could Have a Direct and 

Material Effect on Each Major Program and on Internal Control over Compliance in Accordance 

with OMB Circular A-133 .................................................................................................................................................................. 65 

Independent Auditors’ Report on State Compliance ................................................................................................................... 67 

FINDINGS AND QUESTIONED COSTS 

Schedule of Audit Findings and Questioned Costs: 

Summary of Auditors’ Results ...................................................................................................................................................... 69 

Current Year Audit Findings and Questioned Costs ........................................................................................................... 70 

Summary Schedule of Prior Audit Findings ........................................................................................................................... 74 

Management Letter .................................................................................................................................................................................... 75

Financial Section

INDEPENDENT AUDITORS’ REPORT 

Board of Education 


Fontana, California 

We have audited the accompanying financial statements of the governmental activities, each major fund, and 

the aggregate remaining fund information of Fontana Unified School 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 Fontana Unified School District's management. Our 

responsibility is to express opinions on these financial statements based on our audit. 

We conducted our audit in accordance with auditing standards generally accepted in the United States of 

America and the standards applicable to financial audits contained in Government Auditing Standards, issued 

by the Comptroller General of the United States. Those standards require that we plan and perform the audit 

to obtain reasonable assurance about whether the financial statements are free of material misstatement. An 

audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial 

statements. An audit also includes assessing the accounting principles used and significant estimates made by 

management, as well as evaluating the overall financial statement presentation. We believe that our audit 

provides a reasonable basis for our opinions. 

In our opinion, the 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 Fontana Unified School District as of June 30, 2011 and the respective changes in financial 

position and cash flows, where applicable, thereof for the year then ended in conformity with accounting 

principles generally accepted in the United States of America. 

In accordance with Government Auditing Standards, we have also issued our report dated December 7, 2011 

on our consideration of Fontana Unified School 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 the internal control 

over financial reporting or on compliance. That report is an integral part of an audit performed in accordance 

with Government Auditing Standards and should be considered in assessing the results of our audit. 

The management’s discussion and analysis on pages 3 through 11 and the required supplementary 

information on pages 52 through 54 are not a required part of the basic financial statements but are 

supplementary information required by accounting principles generally accepted in the United States of 

America. We have applied certain limited procedures, which consisted principally of inquiries of management 

regarding the methods of measurement and presentation of the required supplementary information. 

However, we did not audit the information and express no opinion on it. 

1

Our audit was conducted for the purpose of forming opinions on the financial statements that collectively 

comprise Fontana Unified School District’s basic financial statements. The other supplementary information 

listed in the table of contents, including the Schedule of Expenditures of Federal Awards, which is required by 

U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit 

Organizations, is presented for purposes of additional analysis and is not a required part of the basic financial 

statements. Such information has been subjected to the auditing procedures applied in the audit of the basic 

financial statements and, in our opinion, is fairly stated, in all material respects, in relation to the financial 

statements taken as a whole. 

December 7, 2011 

2


Management’s Discussion and Analysis (Unaudited) 


This discussion and analysis of Fontana Unified School District’s financial performance provides an overview 

of the District’s financial activities for the fiscal year ended June 30, 2011. Please read it in conjunction with 

the District’s financial statements, which immediately follow this section. 

FINANCIAL HIGHLIGHTS 

• The District’s financial status increased overall as a result of this year’s operations. Net assets of 

governmental activities increased by $28.9 million, or 7.2%. 

• Governmental expenses were about $363.1 million. Revenues were about $392.0 million. 

• The District spent over $28.9 million in new capital assets during the year. These expenditures were 

incurred primarily from general obligation bonds. 

• The District decreased its outstanding long-term debt by $5.3 million. This was primarily due to the 

general obligation bond payments. 

• Grades K-12 average daily attendance (ADA) increased by 286, or 0.7%. 

OVERVIEW OF THE FINANCIAL STATEMENTS 

This annual report consists of three parts – management discussion and analysis (this section), the basic 

financial statements, and required supplementary information. The basic financial statements include two 

kinds of statements that present different views of the District: 

• The first two statements are district-wide financial statements that provide both short-term and long-term 

information about the District’s overall financial status. 

• The remaining statements are fund financial statements that focus on individual parts of the District, 

reporting the District’s operations in more detail than the district-wide statements. 

• The governmental funds statements tell how basic services like regular and special education were 

financed in the short term as well as what remains for future spending. 

• Short and long-term financial information about the activities of the District that operate like 

businesses (self-insurance funds) are provided in the proprietary funds statements. 

• Fiduciary funds statement provides information about the financial relationships in which the 

District acts solely as a trustee or agent for the benefit of others to whom the resources belong. 

Figure A-1. Organization of Fontana Unified School District’s Annual 

Financial Report 

The financial statements also 

include notes that explain 

some of the information in 

the statements and provide 

more detailed data. Figure 

A-1 shows how the various 

parts of this annual report 

are arranged and related to 

one another. 

Management’s 

Discussion 

and Analysis 

District- 

Wide 

Financial 

Basic 

Financial 

Information 

Fund 

Financial 

Statements 

Required 

Supplementary 

Information 

Notes to 

Financial 

Statements 

SUMMARY 

DETAIL 

Nigro & Nigro, PC 3




OVERVIEW OF THE FINANCIAL STATEMENTS (continued) 

Figure A-2 summarizes the major features of the District’s financial statements, including the portion of the 

District’s activities they cover and the types of information they contain. 

Figure A-2. Major Features of the District-Wide and Fund Financial Statements 

Type of 

Statements District-Wide Governmental Funds Proprietary Funds Fiduciary Funds 

Scope 

Required 

financial 

statements 

Accounting 

basis and 

measurement 

focus 

Type of 

asset/liability 

information 

Type of 

inflow/outflow 

information 

Entire district, except 

fiduciary activities 

• Statement of Net 

Assets 

• Statement of 

Activities 

Accrual accounting 

and economic 

resources focus 

All assets and 

liabilities, both 

financial and capital, 

short-term and longterm 

All revenues and 

expenses during year, 

regardless of when 

cash is received or 

paid 

The activities of the 

district that are not 

proprietary or 

fiduciary, such as 

special education and 

building maintenance 

• Balance Sheet 


Revenues, 

Expenditures & 

Changes in Fund 

Balances 

Modified accrual 

accounting and 

current financial 

resources focus 

Only assets expected 

to be used up and 

liabilities that come 

due during the year or 

soon thereafter; no 

capital assets included 

Revenues for which 

cash is received during 

or soon after the end 

of the year; 

expenditures when 

goods or services have 

been received and 

payment is due during 

the year or soon 

thereafter 

Activities of the district 

that operate like a 

business, such as selfinsurance 

funds 

• Statement of Net 

Assets 


Revenues, Expenses, 

& Changes in Net 

Assets 

• Statement of Cash 

Flows 

Accrual accounting and 

economic resources 

focus 

All assets and liabilities, 

both short-term and 

long-term; The district’s 

funds do not currently 

contain nonfinancial 

assets, though they can 


expenses during the 

year, regardless of 

when cash is received 

or paid 

Instances in which the 

district administers 

resources on behalf of 

someone else, such as 

scholarship programs 

and student activities 

monies 


Fiduciary Net 

Assets 


Changes in 

Fiduciary Net 

Assets 

Accrual accounting and 

economic resources 

focus 

All assets and 

liabilities, both shortterm 

and long-term; 

The district’s funds do 

not currently contain 

nonfinancial assets, 

though they can 


expenses during the 

year, regardless of 

when cash is received 

or paid 

Nigro & Nigro, PC 4




OVERVIEW OF THE FINANCIAL STATEMENTS (continued) 

The remainder of this overview section of management’s discussion and analysis highlights the structure and 

contents of each of the statements. 

District-wide Statements 

The district-wide statements report information about the District as a whole using accounting methods 

similar to those used by private-sector companies. The statement of net assets includes all of the District’s 

assets and liabilities. All of the current year’s revenues and expenses are accounted for in the statement of 

activities regardless of when cash is received or paid. 

The two district-wide statements report the District’s net assets and how they have changed. Net assets – the 

difference between the District’s assets and liabilities – is one way to measure the District’s financial health or 

position. 

• Over time increases and decreases in the District’s net assets are an indicator of whether its financial 

position is improving or deteriorating. 

• To assess the overall health of the District, you need to consider additional nonfinancial factors such as 

changes in the District’s property tax base and the condition of school buildings and other facilities. 

• In the district-wide financial statements, the District’s activities are categorized as Governmental 

Activities. Most of the District’s basic services are included here, such as regular and special education, 

transportation, and administration. Property taxes and state formula aid finance most of these activities. 

Fund Financial Statements 

The fund financial statements provide more detailed information about the District’s most significant funds – 

not the District as a whole. Funds are accounting devices the District uses to keep track of specific sources of 

funding and spending on particular programs: 

• Some funds are required by State law and by bond covenants. 

• The District establishes other funds to control and manage money for particular purposes (like repaying 

its long-term debt) or to show that is properly using certain revenues. 

The District has three kinds of funds: 

1) Governmental funds – Most of the District’s basic services are included in governmental funds, which 

generally focus on (1) how cash and other financial assets that can readily be converted to cash flow in 

and out and (2) the balances left at year-end that are available for spending. Consequently, the 

governmental funds statements provide a detailed short-term view that helps you determine whether 

there are more or fewer financial resources that can be spent in the near future to finance the District’s 

programs. Because this information does not encompass the additional long-term focus of the districtwide 

statements, we provide additional information on a separate reconciliation page that explains the 

relationship (or differences) between them. 

Nigro & Nigro, PC 5




Fund Financial Statements (continued) 

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

services are reported in proprietary funds. Proprietary funds are reported in the same way that all 

activities are reported in the Statement of Net Assets and Statement of Activities. In fact, the District’s 

internal service fund is included within the governmental activities reported in the district-wide 

statements but provide more detail and additional information, such as cash flows. The District uses the 

internal service fund to report activities that relate to the District’s self-insured program for workers 

compensation claims. 

3) Fiduciary funds – The District is the trustee, or fiduciary, for assets that belong to others, such as the 

student activities funds. The District is responsible for ensuring that the assets reported in these funds 

are used only for their intended purposes and by those to whom the assets belong. All of the District’s 

fiduciary activities are reported in a separate statement of fiduciary net assets. We exclude these 

activities from the district-wide financial statements because the District cannot use these assets to 

finance its operations. 

FINANCIAL ANALYSIS OF THE DISTRICT AS A WHOLE 

Net Assets. The District’s combined net assets were higher on June 30, 2011, than they were the year before 

– increasing 7.2% to $428.2 million. (See Table A-1.) 

Table A-1 

Governmental Activities 

(In millions) 

Variance 

Increase 

2011 2010* (Decrease) 

Current assets $ 276.6 $ 259.3 $ 17.3 

Capital assets 598.0 586.5 11.5 

Total assets 874.6 845.8 28.8 

Current liabilities 41.0 35.9 5.1 

Long-term liabilities 405.4 410.6 (5.2) 

Total liabilities 446.4 446.5 (0.1) 

Net assets 

Invested in capital assets, 

net of related debt 335.3 340.3 (5.0) 

Restricted 88.4 56.4 32.0 

Unrestricted 4.5 2.6 1.9 

Total net assets $ 428.2 $ 399.3 $ 28.9 

* As restated 

Nigro & Nigro, PC 6




FINANCIAL ANALYSIS OF THE DISTRICT AS A WHOLE (continued) 

Changes in net assets, governmental activities. The District’s total revenues increased 11.4% to $392.0 

million (See Table A-2). The increase is due primarily to revenue limit and categorical funding. 

The total cost of all programs and services decreased 2.4% to $363.1 million. The District’s expenses are 

predominantly related to educating and caring for students, 76.8%. The purely administrative activities of the 

District accounted for just 2.4% of total costs. A significant contributor to the decrease in costs was the 

District’s budget cuts and a decrease in full-time equivalent employees. 

Table A-2 


(In millions) 

Variance 

Increase 

2011 2010* (Decrease) 

Total Revenues $ 392.0 $ 351.9 $ 40.1 

Total Expenses 363.1 372.0 (8.9) 

Increase (decrease) in net assets $ 28.9 $ (20.1) $ 49.0 

* As restated 

FINANCIAL ANALYSIS OF THE DISTRICT’S FUNDS 

The financial performance of the District as a whole is reflected in its governmental funds as well. As the 

District completed this year, its governmental funds reported a combined fund balance of $226.0 million, 

which is above last year’s ending restated fund balance of $214.2 million. The primary cause of the increased 

fund balance is the additional federal funds received. During 2010-11, spending was frozen for four months. 

General Fund Budgetary Highlights 

Over the course of the year, the District revised the annual operating budget several times. The major budget 

amendments fall into these categories: 

• Revenues – decreased by $41.7 million primarily to reflect federal and state budget actions. 

• Salaries and benefits costs – decreased $12.6 million. 

• Other non-personnel expenses – decreased $21.8 million to re-budget carryover funds and revise 

operational cost estimates. 

While the District’s final budget for the General Fund anticipated revenues would fall short of expenditures by 

about $13.5 million, the actual results for the year show that revenues exceeded expenditures by roughly 

$19.5 million. Actual revenues were $30.3 million more than anticipated, but expenditures were $2.8 million 

less than budgeted. That amount consists primarily of restricted categorical program dollars that were not 

spent as of June 30, 2011 that will be carried over into the 2011-12 budget. 

Nigro & Nigro, PC 7




CAPITAL ASSET AND DEBT ADMINISTRATION 

Capital Assets 

By the end of 2010-11 the District had invested $28.9 million in new capital assets, related to the District’s 

ongoing modernization program. (More detailed information about capital assets can be found in Note 6 to 

the financial statements). Total depreciation expense for the year exceeded $17.4 million. 

Table A-3: Capital Assets at Year-End, before depreciation 


(In millions) 

Variance 

Increase 

2011 2010 (Decrease) 

Land $ 58.9 $ 58.9 $ - 

Improvement of sites 37.7 40.7 (3.0) 

Buildings 454.6 364.1 90.5 

Equipment 7.3 8.3 (1.0) 

Construction in progress 39.5 114.5 (75.0) 

Total $ 598.0 $ 586.5 $ 11.5 

Long-Term Debt 

At year-end the District had $405.3 million in general obligation bonds, bond anticipation notes, certificates of 

participation, QZABs, and employment benefits – a decrease of 1.3% from last year – as shown in Table A-4. 

(More detailed information about the District’s long-term liabilities is presented in Note 7 to the financial 

statements). 

Table A-4: Outstanding Long-Term Debt at Year-End 


(In millions) 

Variance 

Increase 

2011 2010 (Decrease) 

General obligation bonds $ 217.2 $ 221.6 $ (4.4) 

Bond anticipation notes 103.0 102.5 0.5 

Certificates of participation 46.7 47.8 (1.1) 

QZAB 3.5 3.7 (0.2) 

Compensated absences 1.5 1.8 (0.3) 

Early retirement incentive 10.9 14.9 (4.0) 

Other postemployment benefits 22.5 18.3 4.2 

Total $ 405.3 $ 410.6 $ (5.3) 

Nigro & Nigro, PC 8




FACTORS BEARING ON THE DISTRICT’S FUTURE 

The Governor signed the 2011-12 Budget Act on June 30, 2011. The Legislature passed three iterations of the 

budget bill—one in March and two in June— all using the new majority-vote provision contained in 

Proposition 25 (an initiative adopted by voters in November 2010). The March version was not sent to the 

Governor, the first June version was vetoed, and the third budget bill was eventually signed. The Legislature 

also sent a number of budget related trailer bills to the Governor in both March and June. 

Proposition 98 

Proposition 98 funding constitutes about 70 percent of total funding for K-12 education. Since the adoption of 

the 2010-11 Budget Act, Proposition 98 spending for 2010-11 increased by a net of $129 million. The cut to 

basic aid school districts, adopted in March 2011, reduced categorical funding for basic aid districts by an 

amount equivalent to an 8.9 percent revenue limit reduction. This reduction is equivalent to the base revenue 

limit reductions that apply to non-basic aid school districts. The reduction (for both basic aid and non-basic 

aid districts) is maintained in 2011-12. Total K-12 education funding remains relatively flat from 2010-11 to 

2011-12. The share covered by local property taxes, however, is significantly higher (largely due to estimated 

redevelopment agency remittance payments) whereas the share covered by the General Fund is lower. 

The 2011-12 budget package includes various “trigger” reductions that would be implemented if estimates of 

state revenues as of December 2011 are more than $1 billion lower than budget assumptions, with additional 

reductions triggered if revenues fall more than $2 billion below budget assumptions. 

If Revenues Fall Somewhat Short of Projections, Certain Community College and Child Care Cuts 

Triggered. If revenue estimates are $1 billion to $2 billion below budget assumptions, the state would 

reduce community college apportionments by $30 million and implement a 4 percent across-the-board 

reduction to child care programs, for savings of $23 million. If the reductions were triggered, the state 

also would implement a $10 per-unit increase on community college fees. The additional revenues from 

the fee increase would offset the effects of the apportionment reduction on community colleges. 

If Revenues Fall Further Below Projections, Certain K-12 Cuts and Additional CCC Cuts Also 

Triggered. If revised revenue estimates are more than $2 billion below budget assumptions, up to $1.9 

billion in additional K-12 and community college reductions would be triggered. The K-12 revenue limits 

would be reduced based on a sliding scale, in proportion to the size of the General Fund shortfall. The 

revenue limit reductions would be capped at $1.5 billion—associated with revenue estimates falling $4 

billion or more below budget assumptions. Funding for the Home-to-School Transportation program also 

would be eliminated effective January 2012 (for half-year savings of $248 million), and community 

college apportionments would be further reduced by $72 million. 

K-12 Trigger Also Includes Shorter School Year Provisions. If revised revenue estimates fall $2 billion 

below budget estimates, the state also would allow K-12 schools to reduce the school year by an 

additional seven days in 2011-12. Any reductions in instructional time and accompanying reductions in 

salaries or benefits, however, would need to be achieved by school districts through the collective 

bargaining process. 

Nigro & Nigro, PC 9




FACTORS BEARING ON THE DISTRICT’S FUTURE (continued) 

The budget package continues the state’s reliance on payment deferrals to achieve budget solution, deferring 

an additional $2.1 billion in K-12 payments and $129 million in CCC payments from 2011-12 to 2012-13. 

Proposition 98 payment deferrals now total $10.4 billion. As a result of these deferrals, 20 percent of funding 

for Proposition 98-supported programs in 2011-12 will not be paid until 2012-13. In essence, the first $10 

billion in Proposition 98 funding for 2012-13 will pay for services that schools and community colleges will 

have already provided in 2011-12. 

Revenue Limit “Deficit Factor” Still Growing. The state’s existing obligation for K-12 revenue limits is 

also growing. When the state has made a base reduction to K-12 revenue limits and/or has not provided 

an annual cost-of-living adjustment (COLA), it has chosen to create a deficit factor. In essence, the deficit 

factor reflects a statutory commitment to use Proposition 98 funds at some point in the future to raise 

revenue limits to the level they would have been absent the base reductions and foregone COLAs that 

have occurred over the last four years. Cumulative base revenue limit reductions and foregone revenue 

limit COLAs total $8 billion in 2011-12—$7.9 billion for school districts (resulting in a deficit factor of 

19.8 percent) and $144 million for county offices of education (resulting in a deficit factor of 20 percent). 

Mandate Backlog Still Growing. The state’s existing backlog of K-14 mandate claims also continues to 

increase. Although the budget provides $90 million for the ongoing cost of K-14 mandates, 2011-12 costs 

are projected to be $180 million. This underfunding, when coupled with an already large backlog, leaves 

the state at the end of 2011-12 with $3.8 billion in unpaid claims. 

K-12 Education 

Per-pupil programmatic funding decreased by $117 from 2010-11 to 2011-12, reflecting a 1.5 percent yearover-year 

reduction. School districts will receive $522 less per pupil in 2011-12 than in 2007-08. The year-toyear 

reduction in K-12 programmatic funding is primarily due to the loss of one-time federal funds. Schools in 

California received $6 billion in American Recovery and Reinvestment Act (ARRA) funding that could be spent 

in 2008-09, 2009-10, and 2010-11. School districts will have exhausted these revenues, however, by 2011-12. 

Many school districts will still have funding available from the federal Education Jobs and Medicaid Assistance 

Act of 2010, which provided California schools with $1.2 billion in one-time federal funding to retain school 

staff and reduce teacher layoffs. These funds, however, are not sufficient to entirely offset the loss of ARRA 

funding. 

The budget package also includes several budget provisions that affect school district financial management 

and administration. 

State Prohibits Districts From Using Summer Layoff Window. The budget package suspends existing 

law that allows school districts to lay off teachers during the period between five days after the budget is 

enacted and August 15 if school district revenue limits in the enacted budget do not increase by at least 2 

percent. Given that the budget package includes no increases to K-12 revenue limits, the law would have 

been operative in 2011. 

Nigro & Nigro, PC 10




FACTORS BEARING ON THE DISTRICT’S FUTURE (continued) 

State Requires Districts to Build Budgets Assuming Flat Year-Over-Year Revenues. The budget 

package also requires school districts to project the same level of per-pupil funding in 2011-12 as they 

received in 2010-11 and to maintain staffing and program levels commensurate with those funding levels. 

The Governor’s signing message for the education trailer bill, however, emphasizes that school districts 

might still need to make reductions due to cost increases, the loss of federal funds, declining enrollment, 

or other factors. The signing message also states that the law was not intended to interfere with these 

local school board decisions. 

State Suspends Requirement for Districts to Demonstrate Multiyear Solvency. The budget package 

also temporarily modifies the approval process for school district budgets. Under current law, the county 

superintendent is required to review and approve a school district’s budget to ensure the district can 

meet its financial obligations in that fiscal year and has a financial plan to satisfy its obligations for the 

two subsequent years. In 2011-12, a county superintendent would be unable to disapprove a school 

district’s budget based on the district’s inability to meet its financial obligations in 2012-13 and 2013-14. 

Governor Vetoes Funding for Longitudinal Teacher Data System. The Governor vetoed $2.1 million in 

federal funds and $84,000 in special funds for the California Longitudinal Teacher Integrated Education 

Data System. Authorized by 2006 legislation, this information system was intended to help the state 

identify teacher workforce trends; assess future teacher workforce needs; analyze the effectiveness of 

teacher recruitment, retention, and support programs; and develop related state policies. The Governor’s 

veto leaves no funding for the project in 2011-12 and ends further development of the system. 

State Grants Flexibility for Two Additional Years. The March 2011 education trailer bill extends by two 

additional years most of the flexibility options that the state originally granted to school districts in the 

February 2009 budget package (including options related to K-3 Class Size Reduction, other categorical 

programs, and shortened school year). 

All of these factors were considered in preparing the Fontana Unified School District budget for the 2011-12 

fiscal year. 

CONTACTING THE DISTRICT’S FINANCIAL MANAGEMENT 

This financial report is designed to provide our citizens, taxpayers, customers, and investors and creditors 

with a general overview of the District’s finances and to demonstrate the District’s accountability for the 

money it receives. If you have any questions about this report or need additional financial information, 

contact the District’s Fiscal Services Office at (909) 357-5000. 



Statement of Net Assets 

June 30, 2011 

Total 

Governmental 

ASSETS 

Activities 

Current assets: 

Cash $ 169,081,673 

Investments 11,547,352 

Accounts receivable 90,878,619 

Inventories 123,945 

Prepaid expenses 4,986,935 

Total current assets 276,618,524 

Capital assets: 

Land 58,877,302 

Improvement of sites 59,667,344 

Buildings 587,015,559 

Equipment 31,936,879 

Construction in progress 39,485,306 

Less accumulated depreciation (178,959,294) 

Total capital assets, net of depreciation 598,023,096 

Total assets 874,641,620 

LIABILITIES 

Current liabilities: 

Accounts payable 39,417,029 

Deferred revenue 1,653,005 

Total current liabilities 41,070,034 

Long-term liabilities: 

Portion due or payable within one year 15,198,248 

Portion due or payable after one year 390,186,299 

Total long-term liabilities 405,384,547 

Total liabilities 446,454,581 

NET ASSETS 

Invested in capital assets, net of related debt 335,301,678 

Restricted for: 

Capital projects 54,715,659 

Debt service 16,772,380 

Categorical programs 16,869,313 

Unrestricted 4,528,009 

Total net assets $ 428,187,039 

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



Statement of Activities 


Functions/Programs 

Net (Expense) 

Revenue and 

Changes in 

Program Revenues 

Net Assets 

Operating 

Capital 

Charges for Grants and Grants and Governmental 

Expenses Services Contributions Contributions Activities 


Instructional Services: 

Instruction $ 198,093,943 $ 1,308,586 $ 51,145,867 $ 23,549,052 $ (122,090,438) 

Instruction-Related Services: 

Supervision of instruction 18,340,233 396,442 19,853,373 - 1,909,582 

Instructional library, media 

and technology 3,292,911 - - - (3,292,911) 

School site administration 20,544,511 8,751 213,481 - (20,322,279) 

Pupil Support Services: 

Home-to-school transportation 3,727,769 14,886 1,391,762 - (2,321,121) 

Food services 16,632,960 2,355,422 16,681,460 - 2,403,922 

All other pupil services 18,380,417 21,654 5,032,955 - (13,325,808) 

General Administration Services: 

Data processing services 4,233,464 - 241,336 - (3,992,128) 

Other general administration 4,546,268 101,395 2,099,422 - (2,345,451) 

Plant services 40,251,761 808,251 1,233,269 - (38,210,241) 

Ancillary services 21,001 - 1,461 - (19,540) 

Community services 802,196 831,420 83,684 - 112,908 

Interest on long-term debt 16,314,559 - - - (16,314,559) 

Other outgo 574,046 282,657 32,366 - (259,023) 

Depreciation (unallocated) 17,408,382 - - - (17,408,382) 

Total Governmental Activities $ 363,164,421 $ 6,129,464 $ 98,010,436 $ 23,549,052 $ (235,475,469) 

General Revenues: 

Property taxes 26,455,262 

Federal and state aid not restricted to specific purpose 230,870,660 

Interest and investment earnings 1,303,152 

Interagency revenues 1,500 

Miscellaneous 5,697,782 

Total general revenues 264,328,356 

Change in net assets 28,852,887 

Net assets, July 1, 2010, as originally stated 398,496,794 

Adjustment for restatement 837,358 

Net assets - July 1, 2010, as adjusted 399,334,152 

Net assets, June 30, 2011 $ 428,187,039 




Balance Sheet – Governmental Funds 

June 30, 2011 

General 

Fund 

Cafeteria 

Fund 

Building 

Fund 

County School 

Facilities Fund 

Non-Major 

Governmental 

Funds 

Total 

Governmental 

Funds 

ASSETS 

Cash $ 34,943,644 $ 6,680,657 $ 59,118,873 $ 7,429,278 $ 49,961,844 $ 158,134,296 

Investments - - - - 11,547,352 11,547,352 

Accounts receivable 85,814,457 4,164,125 132,798 40,038 698,000 90,849,418 

Due from other funds 1,487,636 24,184 299 23,646,394 13,043,550 38,202,063 

Inventories 41,322 82,623 - - - 123,945 

Prepaid expenditures 157,261 - - - - 157,261 

Total Assets $ 122,444,320 $ 10,951,589 $ 59,251,970 $ 31,115,710 $ 75,250,746 $ 299,014,335 

LIABILITIES AND FUND BALANCES 

Liabilities 

Accounts payable $ 29,736,107 $ 247,870 $ 1,940,441 $ 5,977 $ 986,935 $ 32,917,330 

Due to other funds 36,898,925 1,092,015 1,164 - 393,625 38,385,729 

Deferred revenue 1,477,299 - - - 175,706 1,653,005 

Total Liabilities 68,112,331 1,339,885 1,941,605 5,977 1,556,266 72,956,064 

Fund Balances 

Nonspendable 273,583 93,753 - - - 367,336 

Restricted 16,869,313 - 57,310,365 31,109,733 68,981,336 174,270,747 

Committed - - - - 4,352,837 4,352,837 

Assigned 28,181,534 9,517,951 - - 360,307 38,059,792 

Unassigned 9,007,559 - - - - 9,007,559 

Total Fund Balances 54,331,989 9,611,704 57,310,365 31,109,733 73,694,480 226,058,271 

Total Liabilities and Fund Balances $ 122,444,320 $ 10,951,589 $ 59,251,970 $ 31,115,710 $ 75,250,746 $ 299,014,335 




Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Assets 

June 30, 2011 

Total fund balances - governmental funds $ 226,058,271 

Amounts reported for assets and liabilities for governmental activities in the statement of net 

assets are different from amounts reported in governmental funds because: 

Capital assets: In governmental funds, only current assets are reported. In the statement of net 

assets, all assets are reported, including capital assets and accumulated depreciation. 

Capital assets at historical cost: 776,982,390 

Accumulated depreciation: (178,959,294) 

Net: 598,023,096 

Unamortized costs: In governmental funds, debt issue costs are recognized as expenditures in 

the period they are incurred. In the government-wide statements, debt issue costs are amortized 

over the life of the debt. Unamortized debt issue costs included in prepaid expense on the 

statement of net assets are: 4,829,674 

Unmatured interest on long-term debt: In governmental funds, interest on long-term debt is not 

recognized until the period in which it matures and is paid. In the government-wide statement of 

activities, it is recognized in the period that it is incurred. The additional liability for unmatured 

interest owing at the end of the period was: (3,364,704) 

Long-term liabilities: In governmental funds, only current liabilities are reported. In the statements 

of net assets, all liabilities, including long-term liabilities, are reported. Long-term liabilities relating 

to government-wide statements, consist of: 

General obligation bonds payable 217,242,041 

Bond anticipation notes payable 103,042,666 

Certificates of participation payable 46,676,561 

QZAB bonds payable 3,491,592 

Compensated absences 1,499,051 

Supplemental early retirement 10,895,098 

Other postemployment benefits payable 22,537,538 

Total (405,384,547) 

Internal service funds: Internal service funds are used to conduct certain activities for which costs are 

charged to other funds on a full cost-recovery basis. Because internal service funds are presumed to 

operate for the benefit of governmental activities, assets and liabilities of internal service funds are 

reported with governmental activities in the statement of net assets. Net assets for internal service 

funds are: 8,025,249 

Total net assets - governmental activities $ 428,187,039 




Statement of Revenues, Expenditures, and Changes in Fund Balances – Governmental Funds 


REVENUES 

General 

Fund 

Cafeteria 

Fund 

Building 

Fund 

County School 


Non-Major 

Governmental 

Funds 

Total 

Governmental 

Funds 

General Revenues: 

Property taxes $ 9,231,902 $ - $ - $ - $ 17,223,360 $ 26,455,262 

Federal and state aid not restricted 

to specific purpose 230,563,300 - - - 307,360 230,870,660 

Earnings on investments 162,127 - 764,210 - 376,815 1,303,152 

Interagency revenues 1,500 - - - - 1,500 

Miscellaneous 1,040,713 - - - 4,657,069 5,697,782 

Program Revenues: 

Charges for services 2,063,465 2,355,422 - - 1,710,577 6,129,464 

Operating grants and contributions 74,897,430 17,612,457 - 33,808 4,793,443 97,337,138 

Capital grants and contributions - - - 23,549,052 - 23,549,052 

Total Revenues 317,960,437 19,967,879 764,210 23,582,860 29,068,624 391,344,010 

EXPENDITURES 

Instructional Services: 

Instruction 190,587,610 - - - 5,098,878 195,686,488 

Instruction-Related Services: 

Supervision of instruction 15,308,558 - - - 2,783,708 18,092,266 

Instructional library, media and technology 3,221,059 - - - - 3,221,059 

School site administration 19,481,891 - - - 513,127 19,995,018 

Pupil Support Services: 

Home-to-school transportation 3,668,026 - - - - 3,668,026 

Food services 1,306 16,465,813 - - - 16,467,119 

All other pupil services 17,758,656 - - - 377,232 18,135,888 

Ancillary services 21,001 - - - - 21,001 

Community services 802,196 - - - - 802,196 

General Administration Services: 

Data processing services 4,171,237 - - - - 4,171,237 

Other general administration 8,430,077 691,952 - - 423,152 9,545,181 

Plant services 34,561,590 153,469 3,923,573 5,976 1,165,351 39,809,959 

Facility acquisition and construction 310,763 73,685 24,566,628 3,207 3,415,785 28,370,068 

Other outgo: 

Transfers between agencies 29,192 - - - - 29,192 

Debt service - issuance costs 57,850 - - - 157 58,007 

Debt service - principal 23,712 - - - 4,919,300 4,943,012 

Debt service - interest - - 2,840,000 - 13,616,072 16,456,072 

Total Expenditures 298,434,724 17,384,919 31,330,201 9,183 32,312,762 379,471,789 

Excess (Deficiency) of Revenues 

Over (Under) Expenditures 19,525,713 2,582,960 (30,565,991) 23,573,677 (3,244,138) 11,872,221 

OTHER FINANCING SOURCES (USES) 

Interfund transfers in - - - 17,978 2,103,610 2,121,588 

Interfund transfers out (2,102,407) - - (1,203) (17,978) (2,121,588) 

Total Other Financing Sources and Uses (2,102,407) - - 16,775 2,085,632 - 

Net Change in Fund Balances 17,423,306 2,582,960 (30,565,991) 23,590,452 (1,158,506) 11,872,221 

Fund Balances, July 1, 2010, as originally stated 

Adjustments for Restatement 

Fund Balances, July 1, 2010, as restated 

36,071,325 7,028,744 87,876,356 7,519,281 74,852,986 213,348,692 

837,358 - - - - 837,358 

36,908,683 7,028,744 87,876,356 7,519,281 74,852,986 214,186,050 

Fund Balances, June 30, 2011 $ 54,331,989 $ 9,611,704 $ 57,310,365 $ 31,109,733 $ 73,694,480 $ 226,058,271 




Reconciliation of the Governmental Funds Statement of Revenues, Expenditures, and Changes 

in Fund Balances to the Statement of Activities 


Total net change in fund balances - governmental funds $ 11,872,221 

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

Capital Outlay: In governmental funds, the costs of capital assets are reported as expenditures in the period when the assets are 

acquired. In the statement of activities, costs of capital assets are allocated over their estimated useful lives as depreciation expense. 

The difference between capital outlay expenditures and depreciation expense for the period is: 

Expenditures for capital outlay 28,128,327 

Depreciation expense (17,408,382) 

Net: 10,719,945 

Donated capital assets: In governmental funds, donated capital assets are not reported because they do not affect current financial 

resources. In the government-wide statements, donated capital assets are reported as revenue and as increases to capital assets at 

their fair market value on the date of donation. The fair market value of capital assets donated was: 

673,298 

Gain or loss from disposal of capital assets: In governmental funds, the entire proceeds from disposal of capital assets are reported as 

revenue. In the statement of activities, only the resulting gain or loss is reported. The difference between the proceeds from disposal of 

capital assets and the resulting gain or loss is: 

Debt service: In governmental funds, repayments of long-term debt are reported as expenditures. In the government-wide statements, 

repayments of long-term debt are reported as a reduction of liabilities. Expenditures for repayment of the principal portion of long 

term debt were: 

(12,221) 

4,943,012 

Debt issue costs: In governmental funds, debt issue costs are recognized as expenditures in the period they are incurred. In the 

government-wide statements, issue costs are amortized over the life of the debt. The difference between debt issue costs recognized in 

the current period and issue costs amortized for the period is: 

Issue costs incurred during the period (58,007) 

Issue costs amortized for the period: 486,847 

Net: (428,840) 

In governmental funds, if debt is issued at a premium or at a discount, the premium or discount is recognized as an Other Financing Use 

in the period it is incurred. In the government-wide statements, the premium or discount is amortized as interest over the life of the 

debt. Amortization of premium or discount for the period is: 

In governmental funds, accreted interest on capital appreciation bonds is not recorded as an expenditure from current resources. In the 

government-wide statement of activities, however, this is recorded as interest expense for the period. 

Unmatured interest on long-term debt: In governmental funds, interest on long-term debt is recognized in the period it becomes due. In 

the government-wide statement of activities, it is recognized in the period that it is incurred. Unmatured interest owing at the end of the 

period, less matured interest paid during the period but owing from the prior period, was: 

Compensated absences: In governmental funds, compensated absences are measured by the amounts paid during the period. In the 

statements of activities, compensated absences are measured by the amounts earned. The difference between compensated absences 

paid and compensated absences earned was: 

In the government-wide statements, expenses must be accrued in connection with any liabilities incurred during the period that are not 

expected to be liquidated with current financial resources, in addition to compensated absences and long-term debt. Examples include 

special termination benefits such as retirement incentives financed over time. This year, liabilities increased by: 

Postemployment benefits other than pensions (OPEB): In governmental funds, OPEB costs are recognized when employer contributions 

are made. In the statements of activities costs are measured and recognized in relation to the annual required contribution. The annual 

required contribution is the normal cost related to the current period plus a calculated amount necessary to systematically amortize 

any unfunded liability in accordance with generally accepted accounting principles. This year, the difference between the annual 

required contribution and amounts actually funded was: 

Internal Service Funds: Internal service funds are used to conduct certain activities for which costs are charged to other funds on a full 

recovery basis. Because internal service funds are presumed to benefit governmental activities, internal service activities are reported 

as governmental in the statement of activities. The net increase or decrease in internal service funds was: 

3,150,008 

(2,849,878) 

(158,617) 

304,642 

4,000,613 

(4,243,618) 

882,322 

Change in net assets of governmental activities $ 28,852,887 




Statement of Net Assets – Proprietary Fund 

June 30, 2011 

Governmental 

Activities 

Internal Service 

Fund 

ASSETS 

Cash $ 10,947,377 

Accounts receivable 29,201 

Due from other funds 200,206 

Total Assets 11,176,784 

LIABILITIES 

Estimated liability for open claims and IBNRs 2,986,943 

Accounts payable 148,052 

Due to other funds 16,540 

Total liabilities 3,151,535 

NET ASSETS 

Unrestricted 8,025,249 

Total net assets $ 8,025,249 




Statement of Revenues, Expenses, and Changes in Net Assets – Proprietary Fund 


Governmental 

Activities 


Fund 

OPERATING REVENUES 

Self-insurance premiums $ 2,428,254 

Other local revenues 33,079 

Total operating revenues 2,461,333 

OPERATING EXPENSES 

Payments for personnel costs 245,984 

Payments for materials and supplies 3,751 

Payments for IBNR, claims and other operating expenditures 1,427,601 

Total operating expenses 1,677,336 

Operating Income 783,997 

NON-OPERATING REVENUES 

Interest income 98,325 

Change in Net Assets 882,322 

Net Assets, June 30, 2010 7,142,927 

Net Assets, June 30, 2011 $ 8,025,249 




Statement of Cash Flows – Proprietary Fund 


Governmental 

Activities 


Fund 

CASH FLOWS FROM OPERATING ACTIVITIES 

Self-insurance premiums $ 2,428,254 

Other operating transfers 6,880,516 

Cash received from other sources 26,252 

Cash paid for operating expenses (1,622,462) 

Net cash provided by operating activities 7,712,560 

CASH FLOWS FROM INVESTING ACTIVITIES 

Interest on investments 88,832 

Net cash provided by investing activities 88,832 

Net increase in cash 7,801,392 

Cash, June 30, 2010 3,145,985 

Cash, June 30, 2011 $ 10,947,377 

Reconciliation of operating income to net cash provided by 

operating activities: 

Operating income $ 783,997 

Adjustments to reconcile operating income to net cash 

provided by operating activities: 

Changes in assets and liabilities: 

Increase in accounts receivable (6,827) 

Decrease in amounts due from other funds 6,880,516 

Decrease in accounts payable and estimated claims liability 72,952 

Increase in amounts due to other funds (18,078) 

Net cash provided by operating activities $ 7,712,560 




Statement of Net Assets – Fiduciary Fund 

June 30, 2011 

Agency 

Trust 

Funds 

Fund 

Student 

Retiree 

Body 

Benefits 

ASSETS Funds Fund Total 

Cash $ 1,247,482 $ 445 $ 1,247,927 

Investments - 9,552,503 9,552,503 

Accounts receivable 5,885 1 5,886 

Miscellaneous 8,402 - 8,402 

Inventories - supplies and materials 85,564 - 85,564 

Prepaids 3,093 - 3,093 

Scholarship 119,587 - 119,587 

Total assets $ 1,470,013 

9,552,949 11,022,962 

LIABILITIES 

Current Liabilities: 

Accounts payable $ 30,828 

8,093,804 8,124,632 

Due to student groups 1,439,185 - 1,439,185 

Total liabilities $ 1,470,013 

8,093,804 9,563,817 

NET ASSETS 

Unrestricted 1,459,145 1,459,145 

Total net assets $ 1,459,145 $ 1,459,145 




Statement of Changes in Net Assets – Fiduciary Fund 


Trust 

Fund 

Retiree Benefits 

Fund 

ADDITIONS 

Interest $ 277,045 

Increase in fair value of investments 393,714 

In-district contributions 4,214,285 

Total Additions 4,885,044 

DEDUCTIONS 

Operating expenditures 4,688,883 

Total Deductions 4,688,883 

Change in net assets 196,161 

Net assets held in trust - July 1, 2010 1,262,984 

Net assets held in trust - June 30, 2011 $ 1,459,145 




Notes to Financial Statements 

June 30, 2011 

NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES 

A. Accounting Policies 

The District accounts for its financial transactions in accordance with the policies and procedures of the 

Department of Education's California School Accounting Manual. The accounting policies of the District 

conform to generally accepted accounting principles as prescribed by the Governmental Accounting 

Standards Board (GASB) and the American Institute of Certified Public Accountants (AICPA). 

B. Reporting Entity 

The District operates under a locally elected five-member Board form of government and provides 

educational services to grades K-12 as mandated by the State. A reporting entity is comprised of the 

primary government, component units, and other organizations that are included to ensure the financial 

statements are not misleading. The primary government of the District consists of all funds, departments, 

and agencies that are not legally separate from the District. For the District, this includes general 

operations, food service, and student related activities. 

Component units are legally separate organizations for which the District is financially accountable. 

Component units may also include organizations that are fiscally dependent on the District in that the 

District approves their budget, the issuance of their debt or the levying of their taxes. In addition, 

component units are other legally separate organizations for which the District is not financially 

accountable but the nature and significance of the organization’s relationship with the District is such that 

exclusion would cause the District’s financial statements to be misleading or incomplete. For financial 

reporting purposes, the component units discussed below are reported in the District’s financial 

statements because of the significance of their relationship with the District. The component units, 

although a legally separate entity, are reported in the financial statements as if they were part of the 

District’s operations because the governing board of the component units is essentially the same as the 

governing board of the District and because their purpose is to finance the construction of facilities to be 

used for the benefit of the District. 

Financing Authority 

The Fontana Unified School District Public Financing Authority is a nonprofit, public benefit 

corporation incorporated under the laws of the State of California and recorded by the Secretary of 

State in 1999. The corporation was formed for the sole purpose of providing financial assistance to 

the District by acquiring, constructing, financing, selling and leasing public facilities, land, personal 

property and equipment for the use and benefit of the District. The District leases certain school 

facilities from the corporation under a lease-purchase agreement dated May 1, 2007. 

Community Facilities Districts 

The District has entered into various agreements with developers to establish Community Facilities 

Districts (CFDs). The purpose of the agreements is to provide for the collection of special taxes to 

provide and finance the design, acquisition and construction of certain public facilities, pursuant to 

the Mello-Roos Community Facilities Act of 1982, as amended. The CFDs are authorized to levy 

special taxes on parcels of taxable property within the CFDs. 




June 30, 2011 

NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (continued) 

B. Reporting Entity (continued) 

Financial Presentation 

For financial presentation purposes, each component unit’s financial activity has been blended, or 

combined, with the financial data of the District. The financial statements present the financial activity of 

the component units within the Capital Projects Fund for Blended Component Units. Fixed assets 

acquired or constructed by the component units are included in the Statement of Net Assets. Separate 

financial statements for the individual component units are not prepared. 

The following are those aspects of the relationship between the District and the component units which 

satisfy the criteria of GASB Statement No. 14, as amended by Statement No. 39, Determining Whether 

Certain Organizations are Component Units. 

Manifestations of Oversight 

• The component units and the District have common boards. 

• The component units have no employees. The District’s Superintendent functions as an agent of 

the component units. 

• The District exercises significant influence over operations of the component units as all projects 

of the component units involve the Fontana Unified School District. 

Accountability of Fiscal Matters 

• The District is responsible for preparation of the annual budgets for the component units. 

Scope of Public Service 

• The component units were created specifically to finance capital improvements for the Fontana 

Unified School District. 

C. Basis of Presentation 

Government-wide Financial Statements 

The government-wide financial statements (i.e., the statement of net assets and the statement of 

activities) report information on all of the nonfiduciary activities of the District and its component units. 

Internal Service Fund activity is eliminated to avoid doubling revenues and expenses. 

The government-wide statements are prepared using the economic resources measurement focus. This is 

the same approach used in the preparation of the proprietary fund and fiduciary fund financial 

statements but differs from the manner in which governmental fund financial statements are prepared. 

Governmental fund financial statements, therefore, include a reconciliation with brief explanations to 

better identify the relationship between the government-wide statements and the statements for the 

governmental funds. 

Certain eliminations have been made as prescribed by GASB Statement No. 34 in regards to interfund 

activities, payables, and receivables. All internal balances in the Statement of Net Assets and Statement of 

Activities have been eliminated, including due to/from other funds and transfers in/out. 




June 30, 2011 


C. Basis of Presentation (continued) 

Government-wide Financial Statements (continued) 

The government-wide statement of activities presents a comparison between direct expenses and 

program revenues for each function or program of the district’s governmental activities. Direct expenses 

are those that are specifically associated with a service, program, or department and are therefore clearly 

identifiable to a particular function. The District does not allocate indirect expenses to functions in the 

statement of activities. Program revenues include charges paid by the recipients of goods or services 

offered by a program, as well as grants and contributions that are restricted to meeting the operational or 

capital requirements of a particular program. Revenues which are not classified as program revenues are 

presented as general revenues of the district, with certain exceptions. The comparison of direct expenses 

with program revenues identifies the extent to which each governmental function is self-financing or 

draws from the general revenues of the District. 

Fund Financial Statements 

Fund financial statements report detailed information about the District. The focus of governmental fund 

financial statements is on major funds rather than reporting funds by type. Each major governmental 

funds are presented in a separate column, and all non-major funds are aggregated into one column. The 

Internal Service Fund is presented on the proprietary fund statements. Fiduciary funds are reported by 

fund type. 

The accounting and financial treatment applied to a fund is determined by its measurement focus. All 

governmental funds are accounted for using a flow of current financial resources measurement focus. 

With this measurement focus, only current assets and current liabilities are generally included on the 

balance sheet. The Statement of Revenues, Expenditures, and Changes in Fund Balances for these funds 

present increases (i.e., revenues and other financing sources) and decreases (i.e., expenditures and other 

financing uses) in net current assets. 

All proprietary fund types are accounted for on a flow of economic resources measurement focus. With 

this measurement focus, all assets and all liabilities associated with the operation of these funds are 

included on the proprietary fund’s Statement of Net Assets. The Statement of Revenues, Expenses, and 

Changes in Net Assets for proprietary funds presents increases (i.e., revenues) and decreases (i.e., 

expenditures) in net total assets. The statement of cash flows provides information about how the 

District finances and meets the cash flows needs of its proprietary activities. 

Proprietary funds distinguish operating revenues and expenses from non-operating items. Operating 

revenues and expenses generally result from providing services and producing and delivering goods in 

connection with a proprietary fund’s principal ongoing operations. The principal operating revenues of 

the internal service fund are charges to other funds for self-insurance costs. Operating expenses for the 

internal service fund include the costs of claims related to self-insurance. 

Fiduciary funds are reported using the economic resources measurement focus. Fiduciary funds are 

excluded from the government-wide financial statements because they do not represent resources of the 

District. 




June 30, 2011 


D. Basis of Accounting 

Basis of accounting refers to when revenues and expenditures are recognized in the accounts and 

reported in the financial statements. Government-wide financial statements are prepared using the 

accrual basis of accounting. Governmental funds use the modified accrual basis of accounting. 

Proprietary and fiduciary funds use the accrual basis of accounting. 

Revenues – exchange and non-exchange transactions 

Revenue resulting from exchange transactions, in which each party gives and receives essential equal 

value, is recorded under the accrual basis when the exchange takes place. On a modified accrual basis, 

revenue is recorded in the fiscal year in which the resources are measurable and become available. 

“Available” means the resources will be collected within the current fiscal year or are expected to be 

collected soon enough thereafter to be used to pay liabilities of the current fiscal year. For the District, 

“available” means collectible within the current period or within 60 days after year-end. 

Non-exchange transactions, in which the District receives value without directly giving equal value in 

return, include property taxes, grants, and entitlements. Under the accrual basis, revenue from property 

taxes is recognized in the fiscal year for which the taxes are levied. Revenue from grants and entitlements 

is recognized in the fiscal year in which all eligibility requirements have been satisfied. Eligibility 

requirements include timing requirements, which specify the year when the resources are to be used or 

the fiscal year when use is first permitted; matching requirements, in which the District must provide 

local resources to be used for a specific purpose; and expenditure requirements, in which the resources 

are provided to the District on a reimbursement basis. Under the modified accrual basis, revenue from 

non-exchange transactions must also be available before it can be recognized. 

Deferred revenue 

Deferred revenue arises when assets are received before revenue recognition criteria have been satisfied. 

Grants and entitlements received before eligibility requirements are met are recorded as deferred 

revenue. On governmental fund financial statements, receivables associated with non-exchange 

transactions that will not be collected within the availability period would be recorded as deferred 

revenue. 

Expenses/expenditures 

On the accrual basis of accounting, expenses are recognized at the time a liability is incurred. On the 

modified accrual basis of accounting, expenditures are generally recognized in the accounting period in 

which the related fund liability is incurred, as under the accrual basis of accounting, debt service 

expenditures, as well as expenditures related to compensated absences and claims and judgments, are 

recorded only when payment is due. Allocations of cost, such as depreciation and amortization, are not 

recognized in the governmental funds. 




June 30, 2011 


E. Fund Accounting 

The accounts of the District are organized on the basis of funds, each of which is considered to be a 

separate accounting entity. The operations of each fund are accounted for with a separate set of selfbalancing 

accounts that comprise its assets, liabilities, fund equity (or retained earnings), revenues, and 

expenditures or expenses, as appropriate. District resources are allocated to and accounted for in 

individual funds based upon the purpose for which they are to be spent and the means by which spending 

activities are controlled. 

Governmental Fund Type Definitions 

Governmental fund types include the General Fund, Special Revenue Funds, Capital Projects Funds, Debt 

Service Funds, and Permanent Funds. 

General Fund: This fund is used to account for and report all financial resources not accounted for 

and reported in another fund. 

Special Revenue Funds: These funds are used to account for and report the proceeds of specific 

revenue sources that are restricted or committed to expenditure for specific purposes other than 

debt service or capital projects. The term proceeds of specific revenue sources establishes that one or 

more specific restricted or committed revenues should be the foundation for a special revenue fund. 

Those specific restricted or committed revenues may be initially received in another fund and 

subsequently distributed to a special revenue fund. The restricted or committed proceeds of specific 

revenue sources are expected to continue to comprise a substantial portion of the inflows reported in 

the fund. Other resources (investment earnings and transfers from other funds, for example) also 

may be reported in the fund if those resources are restricted, committed, or assigned to the specific 

purpose of the fund. 

Capital Projects Funds: These funds are used to account for and report financial resources that are 

restricted, committed, or assigned to expenditure for capital outlays, including the acquisition or 

construction of capital facilities and other capital assets. Capital projects funds exclude those types of 

capital-related outflows financed by proprietary funds or for assets that will be held in trust for 

individuals, private organizations, or other governments. 

Debt Service Funds: These funds are used to account for and report financial resources that are 

restricted, committed, or assigned to expenditure for principal and interest on long-term debt. 

Permanent Funds: These funds should be used to account for and report resources that are 

restricted to the extent that only earnings, and not principal, may be used for purposes that support 

the reporting government’s programs – that is, for the benefit of the government or its citizenry. 

Permanent funds do not include private-purpose trust funds, which should be used to report 

situations in which the government is required to use the principal or earnings for the benefit of 

individuals, private organizations, or other governments. 




June 30, 2011 


E. Fund Accounting (continued) 

Major Governmental Funds 

The District maintains the following major governmental funds: 

General Fund: This fund is used to account for and report all financial resources not accounted for 

and reported in another fund. 

Cafeteria Fund: This fund is used to account for revenues received and expenditures made to 

operate the District's food service operations. 

Building Fund: This fund is used to account for the acquisition of major governmental capital 

facilities and buildings from the sale of general obligation bonds and bond anticipation notes. 

County School Facilities Fund: This fund is used to account for state apportionments provided for 

modernization of school facilities under SB50. 

Non-Major Governmental Funds 

The District maintains the following non-major governmental funds: 

Special Revenue Funds: 

Adult Education Fund: This fund is used to account for resources committed to adult education 

programs maintained by the District. 

Child Development Fund: This fund is used to account for resources committed to child 

development programs maintained by the District. 

Deferred Maintenance Fund: This fund is used for the purpose of major repair or replacement 

of District property. 

Capital Projects Funds: 

Capital Facilities Fund: This fund is used to account for resources received from developer 

impact fees assessed under provisions of the California Environmental Quality Act. 

Special Reserve Fund for Capital Outlay Projects: This fund is used to account for funds set 

aside for Board designated construction projects. 

Capital Projects Funds for Blended Component Units: This fund is used to account for the 

activity of the certificates of participation and of the Community Facilities Districts. 

Debt Service Fund: 

Bond Interest and Redemption Fund: This Fund is used to account for the accumulation of 

resources for, and the repayment of, District bonds, interest, and related costs. 




June 30, 2011 


E. Fund Accounting (continued) 

Proprietary Funds 

Proprietary fund reporting focuses on the determination of operating income, changes in net assets, 

financial position, and cash flows. The District applies all GASB pronouncements, as well as the Financial 

Accounting Standards Board pronouncements issued on or before November 30, 1989, unless those 

pronouncements conflict with or contradict GASB pronouncements. Proprietary funds are classified as 

enterprise or internal service. The District has the following proprietary fund: 

Self-Insurance Fund: This fund may be used to account for any activity for which goods or services 

are provided to other funds of the District in return for a fee to cover the cost of operations. The 

District operates a workers’ compensation program that is accounted for in a self-insurance service 

fund. 

Fiduciary Funds 

Fiduciary fund reporting focuses on net assets and changes in net assets. Fiduciary funds are used to 

report assets held in a trustee or agency capacity for others and therefore cannot be used to support the 

District’s own programs. The fiduciary fund category includes pension (and other employee benefit) trust 

funds, investment trust funds, private-purpose trust funds, and agency funds. The District maintains the 

following fiduciary funds: 

Agency Funds: The District maintains a separate agency fund for each school that operates an 

Associated Student Body (ASB) Fund, whether it is organized or not. 

Retiree Benefit Fund: This fund is used to account separately for amounts held in trust from salary 

reduction agreements, other irrevocable contributions for employees’ retirement benefit payments 

or both. 

F. Budgets and Budgetary Accounting 

Annual budgets are adopted on a basis consistent with generally accepted accounting principles for all 

government funds. By state law, the District's governing board must adopt a budget no later than July 1. 

A public hearing must be conducted to receive comments prior to adoption. The District's governing 

board satisfied these requirements. 

These budgets are revised by the District's governing board during the year to give consideration to 

unanticipated income and expenditures. The final adopted and revised budgets are presented for the 

General Fund and the Cafeteria Fund in the required supplementary information section. 

Formal budgetary integration was employed as a management control device during the year for all 

budgeted funds. The District employs budget control by minor object and by individual appropriation 

accounts. Expenditures cannot legally exceed appropriations by major object account. 

G. Encumbrances 

Encumbrance accounting is used in all budgeted funds to reserve portions of applicable appropriations 

for which commitments have been made. Encumbrances are recorded for purchase orders, contracts, and 

other commitments when they are written. Encumbrances are liquidated when the commitments are 

paid. All encumbrances are liquidated as of June 30. 




June 30, 2011 


H. Assets, Liabilities, and Equity 

1. Cash 

The District’s cash consists of cash on hand, demand deposits and short-term investments with 

original maturities of three months or less from the date of acquisition. Cash held in the county 

treasury is recorded at cost, which approximates fair value, in accordance with GASB Statement No. 

31. 

2. Stores Inventories 

Inventories are recorded using the purchases method in that the cost is recorded as an expenditure at 

the time the individual inventory items are requisitioned. Inventories are valued at average cost and 

consist of expendable supplies held for consumption. Reported inventories are equally offset by a 

fund balance reserve, which indicates that these amounts are not “available for appropriation and 

expenditure” even though they are a component of net current assets. 

3. Capital Assets 

The accounting and reporting treatment applied to the capital assets associated with a fund is 

determined by its measurement focus. Capital assets are reported in the government-wide statement 

of net assets, but are not reported in the fund financial statements. 

Capital assets are capitalized at cost (or estimated historical cost) and updated for additions and 

retirements during the year. Donated fixed assets are recorded at their fair market values as of the 

date received. The District maintains a capitalization threshold of $5,000. The District does not own 

any infrastructure as defined in GASB No. 34. Improvements are capitalized; the costs of normal 

maintenance and repairs that do not add to the value of the asset or materially extend an asset’s life 

are not capitalized. 

All reported capital assets, except for land and construction in progress, are depreciated. 

Improvements are depreciated over the remaining useful lives of the related capital assets. 

Depreciation is computed using the straight-line method over the following useful lives: 

Description 

Buildings and Improvements 

Furniture and Equipment 

Vehicles 

Estimated Lives 

25-50 years 

15-20 years 

8 years 

4. Deferred Revenue 

Cash received for federal and state special projects and programs is recognized as revenue to the 

extent that qualified expenditures have been incurred. Deferred revenue is recorded to the extent 

cash received on specific projects and programs exceeds qualified expenditures. 

5. Compensated Absences 

Accumulated unpaid vacation benefits are accrued as a liability on the government-wide statement of 

net assets as the benefits are earned. For governmental funds, unpaid compensated absences are 

recognized as a fund liability only upon the occurrence of relevant events such as employee 

resignation and retirements that occur prior to year end that have not yet been paid with expendable 

available financial resources. These amounts are recorded as accounts payable in the fund from 

which the employees who have accumulated leave are paid. 




June 30, 2011 


H. Assets, Liabilities, and Equity (continued) 

5. Compensated Absences (continued) 

Accumulated sick leave benefits are not recognized as liabilities of the District. The District's policy is 

to record sick leave as an operating expense in the period taken because such benefits do not vest, 

nor is payment probable; however, unused sick leave is added to the creditable service period for 

calculation of retirement benefits when the employee retires. 

6. 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 applicable bond premium or discount. Bond issuance 

costs are reported as prepaid expenditures and amortized over the term of the related debt. 

In the fund financial statements, governmental funds recognize bond premiums and discounts as well 

as bond issuance costs, during the current period. The face amount of the debt issued, premiums, or 

discounts is reported as other financing sources/uses. 

7. Fund Balance Classifications 

Fund balance reporting for governmental funds is reported in classifications that comprise a 

hierarchy based primarily on the extent to which the District is bound to honor constraints on the 

specific purposes for which amounts in those funds can be spent. Some governments may not have 

policies or procedures that are comparable to those policies that underlie these fund balance 

classifications and therefore would not report amounts in all possible fund balance classifications. 

Nonspendable: The nonspendable fund balance classification includes amounts that cannot be spent 

because they are either (a) not in spendable form or (b) legally or contractually required to be 

maintained intact. The “not in spendable form” criterion includes items that are not expected to be 

converted to cash, for example, revolving cash, inventories, and prepaid amounts. 

Restricted: Fund balances should be reported as restricted when constraints placed on the use of 

resources are either (a) externally imposed by creditors (such as through debt covenants), grantors, 

contributors, or laws or regulations of other governments; or (b) imposed by law through 

constitutional provisions or enabling legislation. 

Committed: Amounts that can only be used for specific purposes pursuant to constraints imposed 

by formal action of the government’s highest level of decision-making authority should be reported 

as committed fund balance. Those committed amounts cannot be used for any other purpose unless 

the government removes or changes the specified use by taking the same type of action it employed 

to previously commit those amounts. 

Assigned: Amounts that are constrained by the government’s intent to be used for specific purposes, 

but are neither restricted nor committed, should be reported as assigned fund balance. Under the 

District’s policy, only the governing board, the superintendent, or the chief business official may 

assign amounts for a specific purpose. 




June 30, 2011 


H. Assets, Liabilities, and Equity (continued) 

7. Fund Balance Classifications (continued) 

Unassigned: Unassigned fund balance is the residual classification for the General Fund. This 

classification represents fund balance that has not been assigned to other funds and that has not been 

restricted, committed, or assigned to specific purposes within the General Fund. This classification 

also includes the Reserve for Economic Uncertainties (REU). 

8. Net Assets 

Net assets represent the difference between assets and liabilities. Net assets invested in capital 

assets, net of related debt consists of capital assets, net of accumulated depreciation, reduced by the 

outstanding balances of any borrowings used for the acquisition, construction or improvements of 

those assets. Net assets are reported as restricted when there are limitations imposed on their use 

through external restrictions imposed by donors, grantors, or laws or regulations of other 

governments. 

I. Property Tax 

Secured property taxes attach as an enforceable lien on property as of January 1. Taxes are payable in 

two installments on November 1 and February 1 and become delinquent on December 10 and April 10, 

respectively. Unsecured property taxes are payable in one installment on or before August 31. The 

County Auditor-Controller bills and collects the taxes on behalf of the District. Local property tax 

revenues are recorded when received. 

J. Use of Estimates 

The preparation of financial statements in conformity with generally accepted accounting principles 

requires management to make estimates and assumptions that affect the reported amounts of assets and 

liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the 

reported amounts of revenues and expenditures during the reported period. Actual results could differ 

from those estimates. 

K. New GASB Pronouncements 

During the 2010-11 fiscal year, the following GASB Pronouncements became effective for the District: 

GASB Statement No.54, Fund Balance Reporting and Governmental Fund Type Definitions: The 

objective of this Statement is to enhance the usefulness of fund balance information by providing clearer 

fund balance classifications that can be more consistently applied and by clarifying the existing 

governmental fund type definitions. This Statement establishes fund balance classifications that comprise 

a hierarchy based primarily on the extent to which a government is bound to observe constraints imposed 

upon the use of the resources reported in governmental funds. More information about this Statement is 

reported in Note 1.H.7. 

GASB Statement No.59, Financial Instruments Omnibus: The objective of this Statement is to update 

and improve existing standards regarding financial reporting and disclosure requirements of certain 

financial instruments and external investment pools for which significant issues have been identified in 

practice. This Statement is not expected to significantly impact the District. 




June 30, 2011 

NOTE 2 – CASH AND INVESTMENTS 

Cash and investments at June 30, 2011 are reported at fair value and consisted of the following: 

Governmental 

Funds 


Proprietary 

Fund 

Fiduciary 

Funds 

Rating 

Total 

Pooled Funds: 

Cash in County Treasury $ 158,048,166 $ 10,797,377 $ 168,845,543 $ 

445 

Total Pooled Funds 158,048,166 10,797,377 168,845,543 445 

Deposits: 

Cash on hand and in banks - - - 1,247,482 

Cash in revolving fund 86,130 150,000 236,130 - 

Total Deposits 86,130 150,000 236,130 1,247,482 

Total Cash $ 158,134,296 $ 10,947,377 $ 169,081,673 $ 1,247,927 

Investments: 

US Bank Mmkt 4 A-1+ $ 11,547,352 $ - $ 11,547,352 $ 

- 

Benefit-Trust: 

AA-/A-1+ 

Delaware diversified income fund - - - 446,893 

Legg Mason bw golbal opps bd is gobsx - - - 205,904 

Metropolitan west total return bond I - - - 439,464 

Oppenheimer cl y - - - 218,164 

Prudential total return bond z - - - 446,660 

Templeton global bond - - - 402,067 

Thornburg investment income builder I - - - 53,395 

Western asset funds non-us opp I - - - 462,492 

Blackrock equity dividend I - - - 838,162 

Brandes instl international equity I - - - 644,902 

Cohen & Steers instl realty shares - - - 424,871 

Jhancock classic value I - - - 842,589 

Hartford capital appreciation y - - - 692,302 

Hartford midcap y - - - 315,474 

Nuveen tradewinds calue opportunities I - - - 402,315 

Nuveen tradewinds global all-cap I - - - 605,519 

Prudential global real estate z - - - 271,268 

Royce global value inmvt - - - 911,770 

Royce special equity instl - - - 318,624 

Thornburg international value I - - - 597,459 

Various - - - 12,209 

Total Investments $ 11,547,352 $ - $ 11,547,352 $ 9,552,503 

Investment security ratings reported as of June 30, 2011 are defined by Standard and Poors. 




June 30, 2011 

NOTE 2 – CASH AND INVESTMENTS (continued) 

Pooled Funds 

In accordance with Education Code Section 41001, the District maintains substantially all of its cash in the 

County Treasury. The County pools and invests the cash. These pooled funds are carried at cost which 

approximates fair value. Interest earned is deposited annually to participating funds. Any investment losses 

are proportionately shared by all funds in the pool. 

Because the District's deposits are maintained in a recognized pooled investment fund under the care of a 

third party and the District's share of the pool does not consist of specific, identifiable investment securities 

owned by the District, no disclosure of the individual deposits and investments or related custodial credit risk 

classifications is required. 

In accordance with applicable state laws, the County Treasurer may invest in derivative securities with the 

State of California. However, at June 30, 2011, the County Treasurer has represented that the Pooled 

Investment Fund contained no derivatives or other investments with similar risk profiles. 

Custodial Credit Risk – Deposits 

Custodial credit risk is the risk that in the event of a bank failure, the District’s deposits may not be returned 

to it. The District does not have a policy for custodial credit risk for deposits. However, cash balances held in 

banks and revolving funds are insured up to $250,000 by the Federal Depository Insurance Corporation 

(FDIC) and are collateralized by the respective financial institutions. In addition, the California Government 

Code requires that a financial institution secure deposits made by State or local governmental units by 

pledging securities in an undivided collateral pool held by a depository regulated under State law (unless so 

waived by the governmental unit). The market value of the pledged securities in the collateral pool must 

equal at least 110 percent of the total amount deposited by the public agencies. California law also allows 

financial institutions to secure public deposits by pledging first trust deed mortgage notes having a value of 

150 percent of the secured public deposits and letters of credit issued by the Federal Home Loan Bank of San 

Francisco having a value of 105 percent of the secured deposits. 

As of June 30, 2011, $839,379 of the District’s bank balance of $1,598,789 was exposed to custodial credit risk 

because it was uninsured and collateralized with securities held by the pledging financial institution’s trust 

department or agency, but not in the name of the District. 

Investments - Interest Rate Risk 

The District's investment policy limits investment maturities as a means of managing its exposure to fair value 

losses arising from increasing interest rates. The District's investment policy limits investment purchases to 

investments with a term not to exceed three years. Investments purchased with maturity terms greater than 

three years require approval by the Board of Education. Investments purchased with maturities greater than 

one year require written approval by the Superintendent prior to commitment. 




June 30, 2011 


Maturities of investments held at June 30, 2011 consist of the following: 

Fair 

Value 

Less Than 

One Year 

Maturity 

One Year Through 

Five Years 

Investment maturities: 

US Bank Mmkt 4 $ 11,547,352 $ 11,547,352 $ 

- 

Benefit-Trust: 

Delaware diversified income fund 446,893 446,893 - 

Legg Mason bw golbal opps bd is gobsx 205,904 205,904 - 

Metropolitan west total return bond I 439,464 439,464 - 

Oppenheimer cl y 218,164 218,164 - 

Prudential total return bond z 446,660 446,660 - 

Templeton global bond 402,067 402,067 - 

Thornburg investment income builder I 53,395 53,395 - 

Western asset funds non-us opp I 462,492 462,492 - 

Blackrock equity dividend I 838,162 838,162 - 

Brandes instl international equity I 644,902 644,902 - 

Cohen & Steers instl realty shares 424,871 424,871 - 

Jhancock classic value I 842,589 842,589 - 

Hartford capital appreciation y 692,302 692,302 - 

Hartford midcap y 315,474 315,474 - 

Nuveen tradewinds calue opportunities I 402,315 402,315 - 

Nuveen tradewinds global all-cap I 605,519 605,519 - 

Prudential global real estate z 271,268 271,268 - 

Royce global value inmvt 911,770 911,770 - 

Royce special equity instl 318,624 318,624 - 

Thornburg international value I 597,459 597,459 - 

Various 12,209 12,209 - 

Total $ 21,099,855 $ 21,099,855 $ 

- 




June 30, 2011 


Investments - Credit Risk 

The District's investment policy limits investment choices to obligations of local, state and federal agencies, 

commercial paper, certificates of deposit, repurchase agreements, corporate notes, banker acceptances, and 

other securities allowed by State Government Code Section 53600. At June 30, 2011, all investments 

represented governmental securities which were issued, registered and held by the District's agent in the 

District's name. 

Investments - Concentration of Credit Risk 

The District does not place limits on the amount it may invest in any one issuer. At June 30, 2011, the District 

had the following investment that represents more than five percent of the District's net investments. 

US Bank Mmkt 4 54.7% 

NOTE 3 – ACCOUNTS RECEIVABLE 

Accounts receivable as of June 30, 2011 consist of the following: 

General 

Fund 

Cafeteria 

Fund 

Building 

Fund 

County School 


Non-Major 

Governmental 

Funds 

Total 

Governmental 

Funds 

Proprietary 

Fund 

Fiduciary 

Fund 

Federal Government: 

Categorical aid programs $ 5,267,458 $ 3,709,350 $ - $ - $ 286,072 $ 9,262,880 $ - $ 

- 

State Government: 

Revenue limit 56,085,752 - - - - 56,085,752 - - 

Lottery 2,766,207 - - - - 2,766,207 - - 

Special education 5,692,885 - - - 331,433 6,024,318 - - 

Categorical aid programs 2,831,057 - - - - 2,831,057 - - 

Other state resources 3,128,515 421,882 - - - 3,550,397 - - 

Local: 

Other local resources 9,240,511 - - - - 9,240,511 - - 

Interest 76,572 31,040 132,798 40,038 73,828 354,276 29,201 1 

Miscellaneous 725,500 1,853 - - 6,667 734,020 - - 

Total $ 85,814,457 $ 4,164,125 $ 132,798 $ 40,038 $ 698,000 $ 90,849,418 $ 29,201 $ 

1 




June 30, 2011 

NOTE 4 - INTERFUND TRANSACTIONS 

Interfund activity is reported as loans, services provided, reimbursements, or transfers. Loans are reported as 

interfund receivables and payables as appropriate and are subject to elimination upon consolidation. Services 

provided, deemed to be at market or near market rates, are treated as revenues and expenditures/expenses. 

Reimbursements are when one fund incurs a cost, charges the appropriate benefiting fund, and reduces its 

related cost as a reimbursement. All other interfund transactions are treated as transfers. Transfers among 

governmental or proprietary funds are netted as part of the reconciliation to the government-wide financial 

statements. 

A. Due From/Due To Other Funds 

Individual interfund receivable and payable balances as of June 30, 2011 are as follows: 

Due From Other Funds 

County School Non-Major 

General Cafeteria Building Facilities Governmental Proprietary 

Fund Fund Fund Fund Funds Fund Total 

General Fund $ - $ 20,093 $ - $ 23,646,394 $ 13,043,189 $ 189,249 $ 36,898,925 

Cafeteria Fund 1,086,415 - - - - 5,600 1,092,015 

Building Fund 1,164 - - - - - 1,164 

Non-Major Governmental Funds 383,558 4,050 299 - 361 5,357 393,625 

Proprietary Fund 16,499 41 - - - - 16,540 

Total $ 1,487,636 $ 24,184 $ 299 $ 23,646,394 $ 13,043,550 $ 200,206 $ 38,402,269 

General Fund due to Child Development Fund for interest $ 8,379 

General Fund due to Cafeteria Fund for catering charges 5,431 

General Fund due to Cafeteria Fund for interest 14,662 

General Fund due to Deferred Maintenance Fund for deferred maintenance allowance 1,438,037 

General Fund due to Capital Facilities Fund for interest 27,893 

General Fund due to Capital Facilities Fund for expense correction 431 

General Fund due to County School Facilities Fund for repayment of temporary loan 23,600,000 

General Fund due to County School Facilities Fund for interest 46,394 

General Fund due to Special Reserve Fund for Capital Outlay Projects for repayment of temporary loan 11,400,000 

General Fund due to Special Reserve Fund for Capital Outlay Projects for interest 112,664 

General Fund due to Capital Project Fund for Blended Component Units for interest 55,785 

General Fund due to Self Insurance Fund for suspense transfers 158,236 

General Fund due to Self Insurance Fund for interest 31,013 

Adult Education Fund due to General Fund for suspense transfers 9,878 

Adult Education Fund due to General Fund for operating costs, fund correction, and indirect costs, and tier III sweep 109,738 

Adult Education Fund due to Self Insurance Fund for suspense transfer 482 

Child Development Fund due to General Fund for First 5 Program 1,100 

Child Development Fund due to General Fund for suspense transfers 134,659 

Child Development Fund due to General Fund for funds correction 128 

Child Development Fund due to General Fund for Indirect costs and stores inentory 91,076 

Child Development Fund due to Cafeteria Fund for catering charges 4,050 

Child Development Fund due to Self Insurance Fund for suspense transfers 4,875 

Cafeteria Fund due to General Fund for suspense transfers 135,857 

Cafeteria Fund due to General Fund for fuel charges, retiree benefits, and vehicle supplies and labor 177,445 

Cafeteria Fund due to General Fund for PERS reduction, account correction, and indirect costs 773,113 

Cafeteria Fund due to Self Insurance Fund for suspense transfers 5,600 

Building Fund due to General Fund for account corrections 1,164 

Capital Facilities Fund due to General Fund for developer fees 36,979 

Capital Project Fund for Blended Component Units due to Capital Facilities Fund for account correction 361 

Debt Service Fund due to Building Fund for interest on BAN 299 

Self Insurance Fund due to General Fund for suspense transfers 5,690 

Self Insurance Fund due to General Fund for benefits 10,809 

Self Insurance Fund due to Cafeteria Fund for benefits 41 

Total $ 38,402,269 




June 30, 2011 

NOTE 4 - INTERFUND TRANSACTIONS 

B. Interfund Transfers 

Interfund transfers consist of operating transfers from funds receiving resources to funds through which 

the resources are to be expended. 

Interfund transfers for the 2010-11 fiscal year are as follows: 

Transfers From Other Funds 

County School Non-Major 

Facilities 

Governmental 

Fund Funds Total 

General Fund $ - $ 2,102,407 $ 2,102,407 

County School Facilities Fund - 1,203 1,203 

Non-Major Governmental Funds 17,978 - 17,978 

Total $ 17,978 $ 2,103,610 $ 2,121,588 

General Fund transfer to Adult Education Fund for apportionment transfer $ 664,370 

General Fund transfer to Deferred Maintenance for Tier III transfer 1,438,037 

Capital Facilities Fund transfer to County School Facilities for disallowed expense 17,978 

County School Facilities Fund to Special Reserve Fund for Capital Outlay Projects to close the account 1,203 

Total $ 2,121,588 

NOTE 5 – FUND BALANCES 

Minimum Fund Balance Policy 

Fund balance measures the net financial resources available to finance expenditures of future periods. The 

District's Unassigned General Fund Balance will be maintained to provide the District with sufficient working 

capital and a margin of safety to address local and regional emergencies without borrowing. The Unassigned 

General Fund Balance may only be appropriated by resolution of the Board of Education. 

Fund Balance of the District may be committed for a specific source by formal action of the Board of 

Education. Amendments or modification to the committed fund balance must also be approved by formal 

action of the Board of Education. Committed fund balance does not lapse at year-end. The formal action 

required to commit fund balance shall be by board resolution or majority vote. 

The Board of Education delegates authority to assign fund balance for a specific purpose to the Associate 

Superintendent, Business Services of the District with notification at the next scheduled Board Meeting to the 

Board of Education. 

For purposes of fund balance classification, expenditures are to be spent from restricted fund balance first 

and then unrestricted. Expenditures incurred in the unrestricted fund balances shall be reduced first from the 

committed fund balance, then from the assigned fund balance and lastly, the unassigned fund balance. 

The District currently adheres to the state mandated minimal level of fund balance as outlined in Title V of 

the California Code of Regulations Section 15443, Reserve. 




June 30, 2011 

NOTE 5 – FUND BALANCES (continued) 

At June 30, 2011, fund balances of the District’s governmental funds are classified as follows: 

Non-Major 

General Cafeteria Building County School Governmental 

Fund Fund Fund Facilities Fund Funds Total 

Nonspendable: 

Revolving cash $ 75,000 $ 11,131 $ - $ - $ - $ 86,131 

Stores inventories 41,322 82,622 - - - 123,944 

Prepaid expenditures 157,261 - - - - 157,261 

Total Nonspendable 273,583 93,753 - - - 367,336 

Restricted: 

Categorical programs 16,869,313 - - - - 16,869,313 

Capital projects - - 57,310,365 31,109,733 52,208,956 140,629,054 

Debt service - - - - 16,772,380 16,772,380 

Total Restricted 16,869,313 - 57,310,365 31,109,733 68,981,336 174,270,747 

Committed: 

Adult education program - - - - 313,597 313,597 

Deferred maintenance program - - - - 4,039,240 4,039,240 

Total Committed - - - - 4,352,837 4,352,837 

Assigned: 

Other Designations 28,181,534 - - - - 28,181,534 

Child Development Fund - - - - 360,307 360,307 

Cafeteria Fund - 9,517,951 - - - 9,517,951 

Total Assigned 28,181,534 9,517,951 - - 360,307 38,059,792 

Unassigned: 

Reserve for economic uncertainties 6,013,824 - - - - 6,013,824 

Remaining unassigned balances 2,993,735 - - - - 2,993,735 

Total Unassigned 9,007,559 - - - - 9,007,559 

Total $ 54,331,989 $ 9,611,704 $ 57,310,365 $ 31,109,733 $ 73,694,480 $ 226,058,271 

NOTE 6 – CAPITAL ASSETS AND DEPRECIATION 

Capital asset activity for the year ended June 30, 2011 is shown below: 

Balance, 

Balance, 

July 1, 2010 Additions Retirements June 30, 2011 

Capital assets not being depreciated: 

Land $ 58,877,302 $ - $ - $ 58,877,302 

Construction in progress 114,531,914 17,802,135 92,848,743 39,485,306 

Total capital assets not being depreciated 173,409,216 17,802,135 92,848,743 98,362,608 

Capital assets being depreciated: 

Improvement of sites 59,276,502 390,842 - 59,667,344 

Buildings 484,481,667 102,533,892 - 587,015,559 

Equipment 31,066,408 1,105,218 234,747 31,936,879 

Total capital assets being depreciated 574,824,577 104,029,952 234,747 678,619,782 

Accumulated depreciation for: 

Improvement of sites (18,597,667) (3,417,556) - (22,015,223) 

Buildings (120,440,908) (11,925,323) - (132,366,231) 

Equipment (22,734,863) (2,065,503) (222,526) (24,577,840) 

Total accumulated depreciation (161,773,438) (17,408,382) (222,526) (178,959,294) 

Total capital assets being depreciated, net 413,051,139 86,621,570 12,221 499,660,488 

Governmental activity capital assets, net $ 586,460,355 $ 104,423,705 $ 92,860,964 $ 598,023,096 




June 30, 2011 

NOTE 7 – GENERAL LONG-TERM DEBT 

A schedule of changes in long-term debt for the year ended June 30, 2011 is shown below: 

Balance, 

July 1, 2010 Balance, Amount Due 

as restated Additions Deductions June 30, 2011 Within One Year 

General Obligation Bonds: 

Principal repayments $ 194,284,080 $ - $ 3,566,672 $ 190,717,408 $ 3,931,085 

Accreted interest component 15,078,671 2,354,520 2,598,328 14,834,863 2,703,915 

Unamortized issuance premium 12,273,729 - 583,959 11,689,770 583,959 

Total - Bonds 221,636,480 2,354,520 6,748,959 217,242,041 7,218,959 

Bond Anticipation Notes: 

BANs principal repayments 94,997,120 - - 94,997,120 - 

BANs accreted interest component 1,140,384 3,093,686 - 4,234,070 - 

BANs unamortized issuance premium 6,352,460 - 2,540,984 3,811,476 2,540,984 

Total - BANs 102,489,964 3,093,686 2,540,984 103,042,666 2,540,984 

Certificates of Participation: 

Principal repayments 47,180,000 - 1,105,000 46,075,000 1,165,000 

Unamortized issuance premium 626,626 - 25,065 601,561 25,065 

Total - Certificates of Participation 47,806,626 - 1,130,065 46,676,561 1,190,065 

Qualified Zone Academy Bond 3,739,220 - 247,628 3,491,592 247,628 

Compensated Absences 1,803,693 - 304,642 1,499,051 - 

Supplemental Early Retirement 14,895,711 - 4,000,613 10,895,098 4,000,612 

Other Postemployment Benefits 18,293,920 4,243,618 - 22,537,538 - 

Totals $ 410,665,614 $ 9,691,824 $ 14,972,891 $ 405,384,547 $ 15,198,248 

A. General Obligation Bonds 

1992 Refunding General Obligation Bonds 

On August 27, 1992, the District issued $23,668,126 of General Obligation Refunding Bonds. The general 

obligation bonds were issued to refund approximately $19,697,500 aggregate initial principal amount of 

1990 General Obligation Bonds, Series A. The issuance consisted of: a) Current Interest Bonds of 

$17,520,000 with interest rates ranging from 3.0% to 5.65% and fully matured on July 1, 2005 and b) 

Capital Appreciation Bonds of $6,148,126 with accretion rates ranging from 6.05% to 6.4% and fully 

maturing on July 1, 2015. At June 30, 2011, the outstanding principal balance was $1,964,808. 

1997 General Obligation Refunding Bonds, Series A 

On June 18, 1997, the District issued $18,670,227 of 1997 General Obligation Refunding Bonds, Series A. 

The general obligation bonds were issued to advance refund the District’s 1990 General Obligation Bonds, 

Series B and to pay the initial premium owed. The issuance consisted of: a) Current Interest Bonds of 

$10,475,000 with interest rates ranging from 4.3% to 5.95% and fully matured on July 1, 2007 and b) 

Capital Appreciation Bonds of $8,195,227 with accretion rates ranging from 6.65% to 7.55% and fully 

maturing on July 1, 2018. At June 30, 2011, the outstanding principal balance was $5,471,691. 

2004 Refunding 

On June 30, 2004, the District issued $18,930,000 of Refunding General Obligation Bonds with interest 

rates ranging from 3 percent to 5.25 percent. The general obligation bonds were issued to refund a prior 

issuance with an original issue amount of $15,438,160. The final maturity date of the general obligation 

bond is May 1, 2020. At June 30, 2011, the principal balance outstanding was $14,170,000. 




June 30, 2011 

NOTE 7 – GENERAL LONG-TERM DEBT (continued) 

A. General Obligation Bonds (continued) 

2006 General Obligation Bonds, Series A 

On August 23, 2006, the District issued Election of 2006 General Obligation Bonds, Series A in the amount 

of $90,000,000. The general obligation bonds were issued to acquire, construct, renovate and equip 

certain District facilities. The issuance consisted of: a) Serial Bonds of $62,500,000 with interest rates 

ranging from 4.0% to 5.25% and fully maturing on August 1, 2028 and b) Term Bonds of $27,500,000 

with an interest rate of 5.25% and fully maturing on August 1, 2031. At June 30, 2011, the outstanding 

principal balance was $82,665,000. 

2006 General Obligation Bonds, Series B 

On March 26, 2008, the District issued Election of 2006 General Obligation Bonds, Series B in the amount 

of 70,585,909. The general obligation bonds were issued to acquire, construct, renovate and equip 

certain District facilities. The issuance consisted of: a) Current Interest Serial Bonds of $45,040,000 with 

interest rates ranging from 3.0% to 5.25% and fully maturing on August 1, 2026, b) Current Interest Term 

Bonds of $15,750,000 with an interest rate of 5.25% and fully maturing on August 1, 2028, and c) Capital 

Appreciation Bonds of $9,795,909 with accretion rates ranging from 5.71% to 7.709% and fully maturing 

on February 1, 2033. At June 30, 2011, the outstanding principal balance was $70,485,909. 

2009 Refunding 

On February 24, 2009, the District issued $18,110,000 of Refunding General Obligation Bonds with 

interest rates ranging from 3 percent to 5.25 percent. The original issue premium was $957,725 and after 

the payment of issuance related costs of $396,450, the net proceeds of the general obligation bond were 

$18,671,275. The general obligation bonds were issued to refund a prior issuance with an original issue 

amount of $18,451,712. The final maturity date of the general obligation bond is May 1, 2022. At June 30, 

2011, the principal balance outstanding was $15,960,000. 

The net proceeds were used to purchase U.S. government securities, and those securities were deposited 

in an irrevocable trust with an escrow agent to provide debt service payments until the term bonds are 

paid in full. The advance refunding met the requirements of an in-substance debt defeasance and the 

general obligation bonds were removed from the District’s government-wide financial statements. In 

2010-11, the principal balance outstanding on the defeased debt was paid in full. 

A summary of outstanding general obligation bonds issued is presented below: 

Balance, 

Balance, 

Issue Maturity Interest Original July 1, 2010 July 1, 2010 Balance, 

Series Date Date Rate Issue as originally stated Restatements as restated Additions Deductions June 30, 2011 

1992R 8/27/1992 2018 3.0%-5.65% $ 23,668,126 $ 2,543,622 $ - $ 2,543,622 $ - 

578,814 $ 1,964,808 

1997A 6/18/1997 2018 4.40%-5.95% 18,670,227 6,374,549 - 6,374,549 - 902,858 5,471,691 

2004Ref 6/30/2004 2020 3.0%-5.25% 18,930,000 15,230,000 - 15,230,000 - 1,060,000 14,170,000 

2006A 8/23/2006 2031 4.0%-5.25% 90,000,000 82,665,000 - 82,665,000 - - 82,665,000 

2006B 3/26/2008 2033 3.0% - 5.25% 70,585,909 70,485,909 100,000 70,585,909 - 100,000 70,485,909 

2009R 2/24/2009 2022 3.0% - 5.25% 18,110,000 16,885,000 - 16,885,000 - 925,000 15,960,000 

$ 194,184,080 $ 100,000 $ 194,284,080 $ - $ 3,566,672 $ 190,717,408 

Accreted 

Interest 

1992A $ 5,269,322 $ - $ 5,269,322 $ 507,160 $ 1,301,186 $ 4,475,296 

1997R 8,451,834 - 8,451,834 1,034,483 1,297,142 8,189,175 

2006B 1,357,515 - 1,357,515 812,877 - 2,170,392 

$ 15,078,671 $ - $ 15,078,671 $ 2,354,520 $ 2,598,328 $ 14,834,863 




June 30, 2011 


A. General Obligation Bonds (continued) 

The annual requirements to amortize general obligation bonds outstanding at June 30, 2011 is as follows: 

Fiscal 

Year Principal Interest Total 

2011-12 $ 3,931,085 $ 11,536,284 $ 15,467,369 

2012-13 4,441,262 11,593,845 16,035,107 

2013-14 4,879,566 11,561,090 16,440,656 

2014-15 5,457,516 11,574,752 17,032,268 

2015-16 5,987,184 10,011,448 15,998,632 

2016-21 39,209,885 42,324,833 81,534,718 

2021-26 46,865,000 25,601,969 72,466,969 

2026-31 64,709,470 24,788,592 89,498,062 

2031-33 15,236,440 27,906,061 43,142,501 

Total $ 190,717,408 $ 176,898,874 $ 367,616,282 

B. General Obligation Bond Anticipation Notes 

On January 7, 2010, the District issued 2009 General Obligation Bond Anticipation Notes in the amount of 

$94,997,120. The notes were issued to finance the acquisition, construction, renovation and equipping of 

certain District facilities in anticipation of proceeds from general obligation bonds to be issued by the 

District pursuant to the Authorization. The issue consisted of: a) Current Interest Notes of $71,000,000 

with an interest rate of 4.0% and fully maturing on December 1, 2012 and b) Capital Appreciation Notes 

of $23,997,120 with an accretion rate of 11.95% and fully maturing on December 1, 2012. At June 30, 

2011, the outstanding principal was $94,997,120. 

The annual requirements to amortize general obligation bond anticipation notes payable are as follows: 

Fiscal 


2011-12 $ - $ 2,840,000 $ 2,840,000 

2012-13 94,997,120 12,443,880 107,441,000 

Total $ 94,997,120 $ 15,283,880 $ 110,281,000 




June 30, 2011 


C. Certificates of Participation 

On April 25, 2007 the District issued $49,910,000 in certificates of participation through the Fontana 

Unified School District Public Financing Authority for the purpose of providing funds for the construction 

and improvement of certain school facilities. Payments will be financed through CFD resources. 

The annual requirements to amortize all certificates are as follows: 

Fiscal 


2011-12 $ 1,165,000 $ 2,060,675 $ 3,225,675 

2012-13 1,235,000 2,015,763 3,250,763 

2013-14 1,295,000 1,970,678 3,265,678 

2014-15 1,365,000 1,922,466 3,287,466 

2015-16 1,435,000 1,870,819 3,305,819 

2016-21 8,510,000 8,257,856 16,767,856 

2021-26 10,905,000 5,846,012 16,751,012 

2026-31 10,330,000 3,260,475 13,590,475 

2031-36 9,835,000 1,426,387 11,261,387 

Total $ 46,075,000 $ 28,631,131 $ 74,706,131 

D. Qualified Zone Academy Bond 

On April 1, 2005, the District entered into a site lease agreement with the California School Boards 

Association Finance Corporation. The purpose of the agreement is to provide financing for the cost of 

purchasing equipment and certain improvements to property. The financing for the improvements is 

provided by the issuance of Qualified Zone Academy Bonds (QZABs), pursuant to Section 1397E of the 

Internal Revenue Code. Lease payments will be required as follows: 

Fiscal Scheduled Accumulated 

Year Deposit Interest Total 

2011-12 $ 247,628 $ 48,429 $ 296,057 

2012-13 247,627 57,384 305,011 

2013-14 247,628 66,591 314,219 

2014-15 247,627 76,079 323,706 

2015-16 247,627 80,941 328,568 

2016-21 1,238,140 685,891 1,924,031 

Total $ 2,476,277 $ 1,015,315 $ 3,491,592 




June 30, 2011 


E. Early Retirement Incentives 

SERP – 2008 

In 2008, the District agreed to provide a Supplemental Early Retirement Program (SERP) to eligible 

employees who elected early retirement by June 30, 2008. One hundred fifty-one employees, who met 

the eligibility requirements, elected early retirement. Five payments of $2,027,164 are being paid over a 

five year period starting July 2008. The accumulated future liability for the District at June 30, 2011 

amounts to $4,054,328. 

SERP – 2009 

In 2009, the District also agreed to provide a Supplemental Early Retirement Program (SERP) to eligible 

employees who elected early retirement by June 30, 2009. Ninety employees, who met the eligibility 

requirements, elected early retirement. Five payments of $1,053,022 are being paid over a five year 

period starting July 2009. The accumulated future liability for the District at June 30, 2011 amounts to 

$3,159,066. 

SERP – 2010(1) 


employees who elected early retirement by June 30, 2010. Seventy-one employees, who met the 

eligibility requirements, elected early retirement. Five payments of $892,619 are being paid over a five 

year period starting August 2010. The accumulated future liability for the District at June 30, 2011 

amounts to $3,570,476. 

SERP – 2010(2) 


employees who elected early retirement by June 30, 2010. One employee, who met the eligibility 

requirements, elected early retirement. Five payments of $27,807 are being paid over a five year period 

starting August 2010. The accumulated future liability for the District at June 30, 2011 amounts to 

$111,228. 

A summary of future payments on outstanding early retirement incentives is presented below: 

Fiscal 

Year 

Total 

2011-12 $ 4,000,612 

2012-13 4,000,612 

2013-14 1,973,448 

2014-15 920,426 

Total $ 10,895,098 




June 30, 2011 

NOTE 8 – JOINT VENTURES 

The Fontana Unified School District participates in joint ventures under joint powers agreements with the 

Midwest Claims Employees Workers’ Comp Excess, Southern California ReLiEF and Riverside 

Employee/Employer Program (REEP) for benefits. The relationships between the District and the JPAs are 

such that the JPAs are not a component unit of the District for financial reporting purposes. 

The JPAs provide property and liability insurance coverage as well as, health and welfare benefits coverage. 

The JPAs are governed by a board consisting of a representative from each member district. The governing 

board controls the operations of its JPAs independent of any influence by the member districts beyond their 

representation on the governing board. Each member district pays a premium commensurate with the level of 

coverage requested and shares surpluses and deficits proportionately to its participation in the JPAs. 

Condensed financial information for the year ended June 30, 2011 for REEP is as follows: 

REEP 

ReLiEF 

June 30, 2011 June 30, 2011 

(Unaudited) 

(Unaudited) 

Assets $ 26,032,091 $ 44,807,493 

Liabilities 12,075,323 24,894,282 

Net Assets $ 13,956,768 $ 19,913,211 

Revenues $ 185,398,835 $ 25,726,117 

Expenses 180,785,858 23,891,679 

Operating Income 4,612,977 1,834,438 

Net Non-Operating Income and Expenses 9,343,791 753,549 

Change in Net Assets $ 13,956,768 $ 2,587,987 

NOTE 9 - COMMITMENTS AND CONTINGENCIES 

A. State and Federal Allowances, Awards and Grants 

The District has received state and federal funds for specific purposes that are subject to review and audit 

by the grantor agencies. Although such audits could generate expenditure disallowances under terms of 

the grants, it is believed that any required reimbursement will not be material. 

B. Construction Commitments 

As of June 30, 2011, the District had commitments with respect to unfinished capital projects of 

approximately $5.7 million to be paid from a combination of State and local funds. 

C. Litigation 

The District is involved in certain legal matters that arose out of the normal course of business. The 

District has not accrued a liability for any potential litigation against it because it does not meet the 

criteria to be considered a liability at June 30, 2011. 




June 30, 2011 

NOTE 10 – RISK MANAGEMENT 

Property and Liability 

The District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; 

errors and omissions. During fiscal year ending June 30, 2011, the District participated in the Southern 

California ReLiEF public entity risk pool for property and liability insurance coverage. Settled claims have not 

exceeded this commercial coverage in any of the past three years. There has not been a significant reduction 

in coverage from the prior year. 

Workers’ Compensation 

For fiscal year 2010-11, the District was self-funded for workers compensation, with excess coverage 

provided by the Midwest Consulting Company. 

Employee Medical Benefits 

The District has contracted with Kaiser, Express Scripts, Blue Shield HMO, and Blue Shield POS to provide 

employee medical, prescription and surgical benefits, Delta Dental, MetLife Dental and Safe Guard for dental 

benefits, and MES Vision for vision benefits. 

Claims Liability 

The District records an estimated liability for workers’ compensation claims against the District. Claims 

liabilities are based on estimates of the ultimate cost of reported claims (including future claim adjustment 

expenses) and an estimate for claims incurred but not reported based on historical experience. 

Unpaid Claims Liabilities 

The District establishes a liability for both reported and unreported events, which includes estimates of both 

future payments of losses and related claim adjustment expenses. The following represent the changes in 

approximate aggregate liabilities for the District’s workers’ compensation from July 1, 2010 to June 30, 2011: 

Workers' 

Compensation 

Liability Balance, June 30, 2010 $ 3,047,217 

Claims and changes in estimates 1,364,439 

Claims payments (1,424,713) 

Liability Balance, June 30, 2011 $ 2,986,943 

Assets available to pay claims at June 30, 2011 $ 8,025,249 




June 30, 2011 

NOTE 11 - EMPLOYEE RETIREMENT PLANS 

Qualified employees are covered under multiple-employer defined benefit pension plans maintained by 

agencies of the State of California. Certificated employees are members of the State Teachers’ Retirement 

System (STRS), classified employees are members of the Public Employees’ Retirement System (PERS), and 

employees not covered by STRS or PERS are covered under the ING/Northern Annuity APPLE Plan. 

Plan Description and Provisions 

Public Employees’ Retirement System (PERS) 

Plan Description 

The District contributes to the School Employer Pool under the California Public Employees’ Retirement 

System (CalPERS), a cost-sharing multiple-employer public employee retirement system defined benefit 

pension plan administered by CalPERS. The plan provides retirement and disability benefits, annual cost-ofliving 

adjustments, and death benefits to plan members and beneficiaries. Benefit provisions are established 

by state statutes, as legislatively amended, within the Public Employees’ Retirement Law. CalPERS issues a 

separate comprehensive annual financial report that includes financial statements and required 

supplementary information. Copies of the CalPERS annual financial report may be obtained from the CalPERS 

Executive Office, 400 P Street, Sacramento, California 95814. 

Funding Policy 

Active plan members are required to contribute 7.0% of their salary and the District is required to contribute 

an actuarially determined rate. The actuarial methods and assumptions used for determining the rate are 

those adopted by the CalPERS Board of Administration. The required employer contribution for fiscal year 

2010-11 was 10.707%. The contribution requirements of the plan members are established by State statute. 

The District’s contributions to CalPERS for the last three fiscal years were as follows: 

State Teachers’ Retirement System (STRS) 

Percent of Required 

Contribution 

Contribution 

2010-11 $ 5,422,073 100% 

2009-10 $ 5,343,350 100% 

2008-09 $ 5,325,343 100% 


The District contributes to the State Teachers’ Retirement System (STRS), a cost-sharing multiple-employer 

public employee retirement system defined benefit pension plan administered by STRS. The plan provides 

retirement, disability and survivor benefits to beneficiaries. Benefit provisions are established by state 

statutes, as legislatively amended, within the State Teachers’ Retirement Law. STRS issues a separate 

comprehensive annual financial report that includes financial statements and required supplementary 

information. Copies of the STRS annual financial report may be obtained from STRS, 7667 Folsom Boulevard, 

Sacramento, California 95826. 




June 30, 2011 

NOTE 11 - EMPLOYEE RETIREMENT PLANS (continued) 

State Teachers’ Retirement System (STRS) (continued) 


Active plan members are required to contribute 8.0% of their salary. The required employer contribution 

rate for fiscal year 2010-11 was 8.25% of annual payroll. The contribution requirements of the plan members 

are established by State statute. The District’s contributions to STRS for the last three fiscal years were as 

follows: 

Percent of Required 

Contribution 

Contribution 

2010-11 $ 12,314,551 100% 

2009-10 $ 12,818,113 100% 

2008-09 $ 13,746,716 100% 

On-Behalf Payments 

The District was the recipient of on-behalf payments made by the State of California to STRS for K-12 

education. These payments consist of state General Fund contributions of approximately $6.4 million to STRS 

(4.267% of salaries subject to STRS in 2010-11). 

Alternative Retirement Program (APPLE) 


The Alternative Retirement Program is a non-qualified Internal Revenue Code Section 457 plan. The plan 

covers seasonal and temporary employees and employees not covered by another retirement system, 

pursuant to the requirements of Internal Revenue Code Section 3121(b)(7)(f). The benefit provisions and 

contribution requirements of the plan members and the District are established and may be amended by the 

ARP Board of Education. 


Contributions of 7.5% of covered compensation of eligible employees are made by the employer and the 

employee. Total contributions, employer and employee combined, were $185,928 during 2010-11. The total 

amount of covered compensation was $2,479,040. All eligible employees are covered by the plan and are fully 

vested. Employer liabilities are limited to the amount of current contributions. 

NOTE 12 – OTHER POSTEMPLOYMENT BENEFITS 

Fontana Unified School District administers a defined benefit postemployment plan, where plan assets may be 

used only for the payment of benefits to the members of that plan. The plan assets are accounted for in the 

Retiree Benefit Fund. The District implemented Governmental Accounting Standards Board Statement #45, 

Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans, in 2007-08. 




June 30, 2011 

NOTE 12 – OTHER POSTEMPLOYMENT BENEFITS (continued) 

A. Summary of Significant Accounting Policies 

Basis of Accounting 

The Retiree Benefit Fund’s financial statements are prepared using the accrual basis of accounting. 

Fontana Unified School District has a retirement board of authority to oversee the Retiree Benefit Fund. 

Employer contributions to the plan are recognized when due and the employer has made a formal 

commitment to provide the contributions. Benefits are recognized when due and payable in accordance 

with the terms of the plan. 

Method Used to Value Investments 

Investments are reported at fair value. The District is considered to be an involuntary participant in an 

external investment pool as the District is required to deposit all receipts and collections of monies with 

their County Treasurer (Education Code Section 41001). The fair value of the District’s investment in the 

pool is reported in the accounting financial statements at amounts based upon the District’s pro-rata 

share of the fair value provided by the County Treasurer for the entire portfolio (in relation to the 

amortized cost of that portfolio). The District also has an investment of $1,458,699 in Blue Ridge Trust 

Bank as described in Note 2. 

B. Plan Descriptions and Contribution Information 

Membership of the plan consisted of the following at April 1, 2010, the date of the latest actuarial 

valuation: 

Retirees and beneficiaries receiving benefits 485 

Active plan members 3,665 

Total 4,150 

Number of participating employers One 


Following is a description of the current retiree plan: 

Certificated 

Classified 

and Police 

Management 

Benefit types provided 

Medical, dental 

and vision* 


and vision* 


and vision* 

Duration of benefits 6 years* 6 years* 6 years* 

Required service 15 years* 15 years* 15 years* 

Minimum age 50 50 50 

Dependent coverage Yes Yes Yes 

District contribution % 100% 100% 100% 

District cap None None None 

* Retirees may elect 8 years of medical only coverage. Employees with at least 35 years of service receive lifetime 

coverage. Married employees may elect to receive benefits consecutively subject to certain restrictions. Certain 

retirees may defer receipt of retiree benefits subject to certain restrictions. 

Contributions 

Retired plan members and beneficiaries currently receiving benefits are not required to contribute 

toward the cost of health insurance premiums. The District contributes 100% of the current premium 

cost, which amounted to approximately $4.2 million in 2010-11. 




June 30, 2011 


C. Funded Status and Funding Progress – OPEB Plans 

The funded status of the plan as of the three most recent actuarial valuation dates is as follows: 

Actuarial 

Actuarial Accrued Unfunded 

Valuation Value of Liability AAL Funded 

Date Assets (AAL) (UAAL) Ratio 

February 17, 2006 $ 1 $ 82,646,793 $ 82,646,792 0.0% 

November 20, 2008 $ 71,677 $ 74,858,593 $ 74,786,916 0.1% 

April 1, 2010 $ 1,262,983 $ 95,413,658 $ 94,150,675 1.3% 

Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and 

assumptions about the probability of occurrence of events far into the future. Examples include 

assumptions about future employment, mortality, and the healthcare cost trend. Actuarially determined 

amounts are subject to continual revision as actual results are compared with past expectations and new 

estimates are made about the future. The schedules of funding progress present multiyear trend 

information about whether the actuarial values of plan assets are increasing or decreasing over time 

relative to the actuarial accrued liabilities for benefits. 

The accompanying schedules of employer contributions present trend information about the amounts 

contributed to the plan by the employer in comparison to the ARC, an amount that is actuarially 

determined in accordance with the parameters of GASB Statement 45. The ARC represents a level of 

funding that, if paid on an ongoing basis, is projected to cover normal cost for each year and amortize any 

unfunded actuarial liabilities (or funding excess) over a period not to exceed thirty years. 

Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as 

understood by the employer and plan members) and include the types of benefits provided at the time of 

each valuation and the historical pattern of sharing of benefit costs between the employer and plan 

members to that point. The actuarial methods and assumptions used include techniques that are 

designated to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial 

value of assets, consistent with the long-term perspective of the calculations. 

Additional information as of the latest actuarial valuation follows: 

Valuation Date April 1, 2010 

Actuarial Cost Method 

Entry Age Normal 

Amortization Method 

Level Percentage of Payroll 

Remaining Amortization Period 

27 years 

Asset Valuation 

Not aware of any "plan assets" on the valuation date 

Actuarial Assumptions: 

Discount rate 5.0% 

Long-term healthcare cost trend rate 4.0% 

Inflation 3.0% 




June 30, 2011 


D. Annual OPEB Cost and Net OPEB Obligation 

The following table shows the elements of the District’s annual OPEB cost for the year, the amount 

actually paid on behalf of the plan and changes in the District’s net OPEB liability to the plan for the year 

ended June 30, 2011: 

Amount 

Annual required contribution (ARC) $ 8,759,628 

Interest on net OPEB obligation 914,696 

Adjustment to ARC (810,294) 

Annual OPEB cost 8,864,030 

Contributions made: 

Contributions from governmental funds 

to Retiree Benefits Fund (4,215,886) 

Pay-as-you-go costs (404,526) 

Total contributions made (4,620,412) 

Increase in net OPEB liability 4,243,618 

Net OPEB liability - July 1, 2010 18,293,920 

Net OPEB liability - June 30, 2011 $ 22,537,538 

The District's annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net 

OPEB obligation for 2010-11 and the preceding two years are as follows: 

Net 

Year Ended Annual Percentage OPEB 

June 30, OPEB Cost Contributed Liability 

2009 $ 8,969,190 40% $ 13,745,030 

2010 $ 9,446,880 52% $ 18,293,920 

2011 $ 8,864,030 52% $ 22,537,538 

NOTE 13 – ADJUSTMENTS FOR RESTATEMENT 

The beginning net assets on the Statement of Activities have been restated by $837,358 for special education 

transportation. 


Required Supplementary Information


Budgetary Comparison Schedule – General Fund 


Budgeted Amounts 

Actual 

Variance with 

Final Budget - 

Original Final (Budgetary Basis) Pos (Neg) 

Revenues 

Revenue Limit Sources $ 206,560,942 $ 194,829,452 $ 207,108,527 $ 12,279,075 

Federal 50,706,945 25,907,740 38,445,297 12,537,557 

Other State 68,743,351 64,708,218 69,008,614 4,300,396 

Other Local 3,400,761 2,245,363 3,397,999 1,152,636 

Total Revenues 329,411,999 287,690,773 317,960,437 30,269,664 

Expenditures 

Certificated Salaries 150,479,212 142,227,445 147,633,960 (5,406,515) 

Classified Salaries 43,470,350 44,223,607 43,768,432 455,175 

Employee Benefits 76,892,128 71,747,802 73,071,049 (1,323,247) 

Books and Supplies 24,517,201 12,579,854 7,778,232 4,801,622 

Services and Other Operating Expenditures 40,762,392 30,863,413 26,897,508 3,965,905 

Capital Outlay 1,652,207 785,436 310,763 474,673 

Direct Support/Indirect Costs (1,289,732) (1,205,779) (1,078,124) (127,655) 

Other Outgo 23,712 - 52,904 (52,904) 

Total Expenditures 336,507,470 301,221,778 298,434,724 2,787,054 


Over (Under) Expenditures (7,095,471) (13,531,005) 19,525,713 33,056,718 

Other Financing Sources and Uses 

Interfund Transfers In - - - - 

Interfund Transfers Out (2,170,091) (2,620,091) (2,102,407) 517,684 

Total Other Financing Sources and Uses (2,170,091) (2,620,091) (2,102,407) 517,684 

Net Changes in Fund Balance (9,265,562) (16,151,096) 17,423,306 33,574,402 

Fund Balances, July 1, 2010 36,071,326 35,358,563 36,908,683 1,550,120 

Fund Balances, June 30, 2011 $ 26,805,764 $ 19,207,467 $ 54,331,989 $ 35,124,522 

See accompanying note to required supplementary information. 



Budgetary Comparison Schedule – Cafeteria Fund 


Budgeted Amounts 

Actual 

Variance with 

Final Budget - 

Original Final (Budgetary Basis) Pos (Neg) 

Revenues 

Federal $ 14,812,905 $ 14,333,295 $ 15,954,036 $ 1,620,741 

Other State 1,280,996 1,318,076 1,393,223 75,147 

Other Local 3,004,197 2,510,610 2,620,620 110,010 

Total Revenues 19,098,098 18,161,981 19,967,879 1,805,898 

Expenditures 

Classified Salaries 5,687,907 5,249,643 5,295,789 (46,146) 

Employee Benefits 3,027,596 2,800,759 2,825,053 (24,294) 

Books and Supplies 8,890,568 6,423,684 8,262,970 (1,839,286) 

Services and Other Operating Expenditures 230,120 218,133 235,470 (17,337) 

Capital Outlay 450,000 100,236 73,685 26,551 

Other Outgo 811,907 656,742 691,952 (35,210) 

Total Expenditures 19,098,098 15,449,197 17,384,919 (1,935,722) 


Over (Under) Expenditures - 2,712,784 2,582,960 (129,824) 

Net Changes in Fund Balance - 2,712,784 2,582,960 (129,824) 

Fund Balances, July 1, 2010 6,702,602 7,028,744 7,028,744 - 

Fund Balances, June 30, 2011 $ 6,702,602 $ 9,741,528 $ 9,611,704 $ (129,824) 




Schedule of Funding Progress 


Actuarial 

UAAL as a 

Actuarial Accrued Unfunded Percentage of 

Valuation Value of Liability AAL Funded Covered Covered 

Date Assets (AAL) (UAAL) Ratio Payroll Payroll 

February 17, 2006 $ 1 $ 82,646,793 $ 82,646,792 0.0% $ 189,979,974 44% 

November 20, 2008 $ 71,677 $ 74,858,593 $ 74,786,916 0.1% $ 206,680,579 36% 

April 1, 2010 $ 1,262,983 $ 95,413,658 $ 94,150,675 1.3% $ 195,421,055 48% 




Notes to the Required Supplementary Information 


NOTE 1 – PURPOSE OF SCHEDULES 

Budgetary Comparison Schedules 

These schedules are required by GASB Statement No.34 as required supplementary information (RSI) for the 

General Fund and for each major special revenue fund that has a legally adopted annual budget. The 

budgetary comparison schedules present both (a) the original and (b) the final appropriated budgets for the 

reporting period as well as (c) actual inflows, outflows, and balances, stated on the District’s budgetary basis. 

A separate column to report the variance between the final budget and actual amounts is also presented, 

although not required. 

Schedule of Funding Progress 

This schedule is required by GASB Statement No.45 for all sole and agent employers that provide other 

postemployment benefits (OPEB). The schedule presents, for the most recent actuarial valuation and the two 

preceding valuations, information about the funding progress of the plan, including, for each valuation, the 

actuarial valuation date, the actuarial value of assets, the actuarial accrued liability, the total unfunded 

actuarial liability (or funding excess), the actuarial value of assets as a percentage of the actuarial accrued 

liability (funded ratio), the annual covered payroll, and the ratio of the total unfunded actuarial liability (or 

funding excess) to annual covered payroll. 

NOTE 2 – EXCESS OF EXPENDITURES OVER APPROPRIATIONS 

At June 30, 2011, the District incurred the following excess of expenditures over appropriations in individual 

major funds presented in the Budgetary Comparison Schedules by major object code: 

General 

Cafeteria 

Appropriations Category Fund Fund 

Certificated Salaries $ 5,406,515 $ 46,146 

Employee Benefits 1,323,247 24,294 

Books and Supplies - 1,839,286 

Services and Other Operating Expenditures - 17,337 

Direct Support/Indirect Costs 127,655 - 

Other Outgo 52,904 35,210 


Supplementary Information


Local Educational Agency Organization Structure 

June 30, 2011 

The Fontana Unified School District was established in 1956. The District boundaries encompass an area of 

approximately 55 square miles. The District boundaries include the city of Fontana and portions of the cities 

of Rialto and Rancho Cucamonga, as well as unincorporated areas of the County of San Bernardino. There 

were no changes to the District’s boundaries during the year. The District currently operates 29 elementary 

schools, seven intermediate schools, five high schools, two continuation high schools, and an adult education 

and child development program. 

GOVERNING BOARD 

Member Office Term Expires 

BarBara L. Chavez President 2012 

Leticia Garcia Vice-President 2014 

Gus Hawthorn Member 2012 

Sophia Green Member 2014 

Kathy Binks Member 2012 

DISTRICT ADMINISTRATORS 

Cali L. Olsen-Binks, 


Alejandro Alvarez, 

Associate Superintendent, Business Services 

Oscar Dueñ as, 

Associate Superintendent, Instructional Services 

William Wu, 

Assistant Superintendent, Human Resources 



Schedule of Average Daily Attendance 


Second Period 

Annual 

Report 

Report 

(Certificate No. 

4E61DD28) 

(Certificate No. 

A01D31E3) 

Elementary: 

Kindergarten 2,778 2,784 

Grades 1 through 3 8,904 8,895 

Grades 4 through 6 8,487 8,487 

Grades 7 and 8 5,658 5,647 

Home and hospital 8 10 

Community day school - 1 

Special education 978 986 

Extended year program 11 11 

Total Elementary 26,824 26,821 

Secondary: 

Grades 9 through 12, regular classes 11,100 11,026 

Continuation education 715 682 

Home and hospital 22 23 

Community day school 18 17 

Special education 578 571 

Extended year program 11 12 

Total Secondary 12,444 12,331 

Total Average Daily Attendance 39,268 39,152 

See accompanying note to supplementary information. 



Schedule of Instructional Time 


1982-83 Minutes 1986-87 Minutes 

2010-2011 Number of Days 

Previously Actual Traditional 

Grade Level Actual Reduced* Required Reduced* Minutes Calendar Status 

Kindergarten 36,000 35,000 36,000 35,000 35,000 175 Complied 

Grade 1 46,130 44,849 50,400 49,000 51,569 175 Complied 












* Amounts reduced as permitted by Education Code Section 46201.2 (a). 




Schedule of Financial Trends and Analysis 


(Budget) 

General Fund 2012 3 2011 2010 2009 

Revenues and other financing sources $ 301,422,977 $ 317,960,437 $ 295,010,817 $ 347,058,349 

Expenditures 295,173,189 298,434,724 312,705,242 328,609,901 

Other uses and transfers out - 2,102,407 1,192,165 1,362,177 

Total outgo 295,173,189 300,537,131 313,897,407 329,972,078 

Change in fund balance (deficit) 6,249,788 17,423,306 (18,886,590) 17,086,271 

Ending fund balance $ 60,581,777 $ 54,331,989 $ 36,071,325 $ 54,957,915 

Available reserves 1 $ 15,098,668 $ 9,007,559 $ 23,245,810 $ 36,313,517 

Available reserves as a percentage 

of total outgo 5.1% 3.0% 7.4% 11.0% 

Total long-term debt $ 395,907,283 $ 405,384,547 $ 410,565,614 $ 312,839,079 

Average daily attendance at P-2 2 39,017 39,268 38,982 39,030 

The General Fund balance has decreased by ($625,926) over the past two years. The fiscal year 2011-12 adopted 

budget projects an increase of $6,249,788. For a district of this size, the state recommends available reserves of at 

least 2% of total general fund expenditures, transfers out, and other uses (total outgo). 

The District has incurred an operating deficit in only one the past three years, and does not anticipate incurring an 

operating deficit during the 2011-12 fiscal year. Long-term debt has increased by $92,545,469 over the past two years. 

Average daily attendance has increased by 238 over the past two years. A decrease of 251 ADA is 

anticipated during fiscal year 2011-12. 

1 Available reserves consist of all unassigned fund balances in the General Fund. 

2 

Excludes Adult Education ADA. 

3 Revised Final Budget September, 2011. 




Schedule of Expenditures of Federal Awards 


Federal Pass-Through 

Federal Grantor/Pass-Through CFDA Entity Identifying Federal 

Grantor/Program or Cluster Title Number Number Expenditures 

Federal Programs: 

U.S. Department of Agriculture: 

Passed through California Dept. of Education (CDE): 

School Breakfast Program - Basic 10.553 13525 $ 2,506,454 

School Breakfast Program - Especially Needy 10.553 13526 446,161 

National School Lunch Program 10.555 13523 11,992,124 

USDA-Donated Foods 10.555 N/A 1,009,297 

Total U.S. Department of Agriculture 15,954,036 

U.S. Department of Education: 

Smaller Learning Communities, Consolidated 84.315 N/A 364,566 

Passed through California Dept. of Education (CDE): 

ARRA: State Fiscal Stabilization Fund 84.394 25008 1,835,972 

Education Jobs 84.410 25152 6,776,799 

Adult Basic Education (ABE): 

English as a Second Language 84.002 14508 276,785 

Adult Secondary Language 84.002 13978 84,997 

No Child Left Behind Act (NCLB): 

Title I, Part A, Basic Grants 84.010 13797 7,210,586 

ARRA Title I, Part A, - Basic Grant 84.389 15005 5,318,306 

Title I, School Improvement Grant (SIG) 84.377 15127 148,108 

ARRA Title I, School Improvement Grant (SIG) 84.388 15020 1,111,893 

Title I - Part D, Subpart 2, Local Deliquent Programs 84.010 14357 38,369 

ARRA Title I, Part D, Subpart 2, Local Delinquent Programs 84.389 15009 10,641 

Title X, McKinney-Vento Homeless Children Assistance Grants 84.196 14332 28,105 

ARRA, Title X McKinney-Vento Homeless Assistance 84.387 15007 13,469 

Title IV, Part A, Safe & Drug Free Schools and Communities, Formula Grants 84.186 14347 5,308 

Title I - Part B, Even Start Family Literacy 84.213 13001 107,713 

Title IV - Part B, 21 st Century Community Learning Centers Program 84.287 14349 211,092 

Title II - Part D Enhancing Education Through Technology 84.318 14335 117,992 

Titla II, Part D, Education Technology Competitive 84.318 14368 143,257 

ARRA Title II, Part D, Enhancing Education Through Technology (EETT) Formula Grants 84.386 15019 193,044 

ARRA Title II, Part D, Enhancing Education Through Technology, Competitive Grants (EETT) 84.386 15126 38,204 

Title I - Part B, Reading First 84.357 14328 919,757 

Title III - Limited English Proficiency 84.365 10084 992,932 

Title III - Immigrant Education Proficient 84.365 14346 76,201 

Title II - Part A Improving Teacher Quality 84.367A 14341 1,925,682 

Carl Perkins Act, Secondary 84.048 13924 301,727 

Advanced Placement Test Fee 84.330 14504 40,168 

Individuals with Disabilities Education Act (IDEA): 

Basic Local Assistance Entitlement, Part B 84.027 13379 6,538,739 

ARRA Local Assistance Entitlement, Part B 84.391 15003 2,182,842 

IDEA Preschool Local Entitlement, Part B 84.027A 13682 243,714 

ARRA IDEA Part B, Preschool Local Entitlement 84.391 15002 291,135 

IDEA Preschool Grants, Part B 84.173 13430 163,197 

ARRA IDEA Part B, Preschool Grants 84.392 15000 247,612 

Preschool Staff Development 84.173A 13431 1,967 

Private Preschool 84.027 10115 1,184 

ARRA Private School ISP 84.391 10123 1,184 

Early Intervention Grants 84.027 23761 129,885 

Workability II, Transition 84.158 10006 135,840 

Total U.S. Department of Education 38,228,972 

U.S. Department of Health & Human Services: 

Passed through California Dept of Education: 

CCDF Center Child Care 93.596 13609 117,259 

Quality Improvement Activities 93.575 13942 567 

Head Start 93.600 10016 118,138 

Passed through California Dept of Health Services: 

Medi-Cal Billing Option 93.778 10013 313,671 

Total U.S. Department of Health & Human Services 549,635 

Total Expenditures of Federal Awards $ 54,732,643 




Reconciliation of Annual Financial and Budget Report with Audited Financial Statements 


There were no differences between the Annual Financial and Budget Report and the 

Audited Financial Statements in any funds. 




Note to the Supplementary Information 

June 30, 2011 

NOTE 1 – PURPOSE OF SCHEDULES 

Schedule of Average Daily Attendance (ADA) 

Average daily attendance (ADA) is a measurement of the number of pupils attending classes of the District. 

The purpose of attendance accounting from a fiscal standpoint is to provide the basis on which 

apportionments of State funds are made to school districts. This schedule provides information regarding the 

attendance of students at various grade levels and in different programs. 

Schedule of Instructional Time 

The District has received incentive funding for increasing instructional time as provided by the Incentives for 

Longer Instructional Day. This schedule presents information on the amount of instructional time offered by 

the District and whether the District complied with the provisions of Education Code Sections 46200 through 

46206. 

Districts must maintain their instructional minutes at either the 1982-83 actual minutes or the 1986-87 

requirement, whichever is greater, as reduced by Education Code section 46201.2(a). 

Schedule of Financial Trends and Analysis 

This schedule discloses the District’s financial trends by displaying past years’ data along with current year 

budget information. These financial trend disclosures are used to evaluate the District’s ability to continue as 

a going concern for a reasonable period of time. 

Schedule of Expenditures of Federal Awards 

The schedule of expenditures of Federal awards includes the Federal grant activity of the District and is 

presented on the modified accrual basis of accounting. The information in this schedule is presented in 

accordance with the requirements of the United States Office of Management and Budget 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. 

Subrecipients 

Of the Federal expenditures presented in the schedule, the District provided no Federal awards to 

subrecipients. 

Reconciliation of Annual Financial and Budget Report with Audited Financial Statements 

This schedule provides the information necessary to reconcile the fund balance of all funds reported on the 

Unaudited Actual financial report to the audited financial statements. 


Other Independent Auditors' Reports

INDEPENDENT AUDITORS' REPORT ON INTERNAL CONTROL OVER FINANCIAL 

REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN 

AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE 

WITH GOVERNMENT AUDITING STANDARDS 




We have audited the financial statements of the governmental activities, each major fund, and the aggregate 

remaining fund information of Fontana Unified School District as of and for the year ended June 30, 2011, 

which collectively comprise Fontana Unified School District's basic financial statements and have issued our 

report thereon dated December 7, 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 Fontana Unified School District’s internal control over 

financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinions 

on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the 

Fontana Unified School District’s internal control over financial reporting. Accordingly, we do not express an 

opinion on the effectiveness of the Fontana Unified School 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 combination of deficiencies, in 

internal control, such that there is a reasonable possibility that a material misstatement of the District'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 deficiencies, significant deficiencies or material weaknesses. We did not 

identify any deficiencies in internal control over financial reporting that we consider to be material 

weaknesses, as defined above. 

63

Compliance and Other Matters 

As part of obtaining reasonable assurance about whether Fontana Unified School 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 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. 

We noted certain matters that we reported to management of Fontana Unified School District in a separate 

letter dated December 7, 2011. 

This report is intended solely for the information and use of the Board, management, the California 

Department of Education, the State Controller’s Office, 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. 


64

INDEPENDENT AUDITORS' REPORT ON COMPLIANCE WITH REQUIREMENTS THAT 

COULD HAVE A DIRECT AND MATERIAL EFFECT ON EACH MAJOR 

PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE 

IN ACCORDANCE WITH OMB CIRCULAR A-133 




Compliance 

We have audited the compliance of Fontana Unified School District with the types of compliance requirements 

described in the OMB Circular A-133 Compliance Supplement that are applicable to each of its major federal 

programs for the year ended June 30, 2011. Fontana Unified School District’s major federal programs are 

identified in the summary of 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 Fontana Unified School District’s management. Our 

responsibility is to express an opinion on Fontana Unified School 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 Fontana Unified School 

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 of Fontana Unified School District’s compliance with those 

requirements. 

In our opinion, Fontana Unified School District complied, in all material respects, with the 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. 

65

Internal Control Over Compliance 

Management of Fontana Unified School 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 Fontana Unified School District’s 

internal control over compliance with the requirements that could have a direct and material effect on a 

major federal program in order to determine our 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. 

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 a 

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 solely for the information and use of the Board, management, the California 

Department of Education, the State Controller’s Office, and federal awarding agencies and pass-through 

entities and is not intended to be and should not be used by anyone other than the specified parties. 


66

INDEPENDENT AUDITORS’ REPORT ON STATE COMPLIANCE 




We have audited Fontana Unified School District's compliance with the types of compliance requirements 

described in the Standards and Procedures for Audits of California K-12 Local Educational Agencies 2010-11, 

published by the Education Audit Appeals Panel, for the year ended June 30, 2011. The District's State 

programs are identified in the schedule below. Compliance with the requirements of laws, regulations, 

contracts, and grants is the responsibility of the District's management. Our responsibility is to express an 

opinion on Fontana Unified School 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 Standards and Procedures for Audits of California 

K-12 Local Educational Agencies 2010-11. Those standards require that we plan and perform the audit to 

obtain reasonable assurance about whether noncompliance with the types of compliance requirements 

referred to below occurred. An audit includes examining, on a test basis, evidence about Fontana Unified 

School 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 of the District's compliance with those 

requirements. 

Description 

Procedures in 

Audit Guide 

Procedures 

Performed 

Attendance Reporting 8 Yes 

Kindergarten Continuance 3 Yes 

Independent Study 23 No (see below) 

Continuation Education 10 Yes 

Instructional Time: 

School Districts 6 Yes 

County Offices of Education 3 Not applicable 

Instructional Materials General Requirements 8 Yes 

Ratios of Administrative Employees to Teachers 1 Yes 

Classroom Teacher Salaries 1 Yes 

Early Retirement Incentive 4 Not applicable 

Gann Limit Calculation 1 Yes 

School Accountability Report Card 3 Yes 

Public Hearing Requirement - Receipt of Funds 1 Yes 

Class Size Reduction: 

General Requirements 7 Yes 

Option One 3 Yes 

Option Two 4 Yes 

Districts with Only One School Serving K-3 4 Not applicable 

67

Procedures in 

Audit Guide 

Procedures 

Performed 

Description 

After School Education and Safety Program: 

General Requirements 4 Yes 

After School 4 Yes 

Before School 5 Not applicable 

Charter Schools: 

Contemporaneous Records of Attendance 1 Not applicable 

Mode of Instruction 1 Not applicable 

Nonclassroom-Based Instruction/Independent Study 15 Not applicable 

Determination of Funding for Nonclassroom-Based Instruction 3 Not applicable 

Annual Instructional Minutes – Classroom Based 3 Not applicable 

We did not perform testing for independent study because the ADA was under the level that requires testing. 

In our opinion, Fontana Unified School District complied, in all material respects, with the compliance 

requirements referred to above for the year ended June 30, 2011. However, the results of our auditing 

procedures disclosed instances of noncompliance with those requirements, which are required to be reported 

in accordance with Standards and Procedures for Audits of California K-12 Local Educational Agencies 2010-11, 

and which are described in the accompanying schedule of findings and questioned costs as items 2011-1 and 

2011-2. 

This report is intended solely for the information and use of the Board, management, State Controller’s Office, 

Department of Finance, Department of Education, and pass-through entities, and is not intended to be and 

should not be used by anyone other than these specified parties. 


68

Findings and Questioned Costs


Schedule of Audit Findings and Questioned Costs 


SECTION I - SUMMARY OF AUDITORS' RESULTS 

Financial Statements 

Type of auditors' report issued 

Internal control over financial reporting: 

Material weakness(es) identified? 

Significant deficiency(s) identified not considered 

to be material weaknesses? 

Noncompliance material to financial statements noted? 

Unqualified 

No 

No 

No 

Federal Awards 

Internal control over major programs: 




Type of auditors' report issued on compliance for 

major programs: 

Any audit findings disclosed that are required to be reported 

in accordance with Circular A-133, Section .510(a) 

Identification of major programs: 

CFDA Numbers 

Name of Federal Program or Cluster 

84.394 State Fiscal Stabilization Fund 

84.410 Education Jobs 

84.010, 84.389 Title I, Part A, Low Income Cluster 

84.027, 84.391, 

84.392, 84.173 Special Education (IDEA) Cluster 

84.367A Title II, Part A, Improving Teacher Quality 

No 

No 

Unqualified 

Dollar threshold used to distinguish between Type A and 

Type B programs: $ 1,641,979 

Auditee qualified as low-risk auditee? 

Yes 

State Awards 

No 

Internal control over state programs: 




Type of auditors' report issued on compliance for 

state programs: 

No 

Yes 

Qualified 





SECTION II - FINANCIAL STATEMENT FINDINGS 

This section identifies the significant deficiencies, material weaknesses, and instances of noncompliance 

related to the financial statements that are required to be reported in accordance with Government Auditing 

Standards. Pursuant to Assembly Bill (AB) 3627, all audit findings must be identified as one or more of the 

following categories: 

Five Digit Code AB 3627 Finding Types 

10000 Attendance 

20000 Inventory of Equipment 

30000 Internal Control 

40000 State Compliance 

41000 CalSTRS 

50000 Federal Compliance 

60000 Miscellaneous 

61000 Classroom Teacher Salaries 

70000 Instructional Materials 

71000 Teacher Misassignments 

72000 School Accountability Report Card 

There were no financial statement findings in 2010-11. 





SECTION III - FEDERAL AWARD FINDINGS AND QUESTIONED COSTS 

This section identifies the audit findings required to be reported by Circular A-133, Section .510(a) (e.g., 

significant deficiencies, material weaknesses, and instances of noncompliance, including questioned costs). 

There were no federal award findings or questioned costs in 2010-11. 





SECTION IV - STATE AWARD FINDINGS AND QUESTIONED COSTS 

This section identifies the audit findings pertaining to noncompliance with state program rules and 

regulations. 

Finding 2011-1: After School Education and Safety Program (40000) 

Criteria: Districts are required to provide quarterly reports to the State for which attendance is reported for 

the After School Base Grant. In addition, the District should maintain written records that document pupil 

participation by tracing the reported numbers through any documentation used to summarize the numbers of 

students served to written data origination documentation. 

Condition: The District provided the auditors with supporting documentation for the data reported in the 

quarterly report to the State, but were unable to determine whether pupils attended the program for a 

minimum of 15 hours and five day a week or a minimum of nine hours and three days a week for elementary 

and middle schools respectively to accomplish program goals. In addition, the providers are not following the 

District’s early release policy with regard to granting pupil attendance. 

Context: The District contracts with outside providers to assist in operating the after school program in 

accordance with state laws and regulations. The providers submit the attendance records to the District to 

consolidate, prepare and submit the semi-annual report of attendance to the state. Of the three providers, 40 

pupils were selected to verify their attendance: 17 pupils had an incorrect amount of hours reported, five 

pupils were unable to be verified as to whether they attended the program for the minimum required time, 

and one pupil was provided attendance despite attending for less than the time stipulated in the early release 

policy. 

Questioned Cost: The District over-reported 106 days of attendance at a cost of $795. 

Effect: The District has over-reported after school attendance to the state on the semi-annual report of 

attendance. 

Cause: Internal control weaknesses between the providers and the District office, which cause the report of 

attendance to potentially be misreported. 

Recommendation: The District should develop controls to closely monitor the after school program’s 

attendance submitted by the providers for accuracy. This includes reviewing the reviewing the sign-in/out 

sheets to ensure that the students are meeting the minimum weekly attendance requirement and verifying 

whether the providers are utilizing the District approved early release policy. 

District’s Response: The District will monitor the after school program’s attendance submitted by providers 

for accuracy by selecting two random pupils from each school site and reviewing their attendance quarterly. 

The District will establish a new method for tracking the number of hours accurately and provide training for 

staff on the new method. Lastly, the District will review and train staff on the early release policy to ensure 

that our providers follow the District’s early release policy. 





SECTION IV - STATE AWARD FINDINGS AND QUESTIONED COSTS (continued) 

Finding 2011-2: Attendance Rosters (10000) 

Criteria: School districts must record and maintain attendance rosters for all pupils and attendance must not 

be credited for more than the scheduled class time. 

Condition: The site attendance audit at South Tamarind Elementary School identified an instance where the 

substitute teacher rosters were not retained. The school site utilizes an electronic attendance accounting 

system, but substitute teachers are required to record attendance manually. 

Context: The school site verbally identified the practice, so we performed additional tests to determine the 

extent of the problem. Expanded testing of two substitute teachers identified no further instances. 

Questioned Costs: We found no misstated ADA as a result of the exception. 

Cause: The school site utilizes an electronic attendance accounting system, and substitute teachers are not 

authorized to access the attendance system. Therefore, the office manager records the attendance for the 

substitute teachers for that day of attendance. 

Effect: The District provided attendance detail including sign-in/out sheets to indicate the overall ADA is not 

misstated. 

Recommendation: The District should ensure that the school site retain attendance documents at the school 

site or District Office and be available for audit at all times. 

District Response: Attendance training was offered to South Tamarind’s office staff and Principal. The office 

staff was provided with an attendance handbook that provides step-by-step instructions for handling 

attendance accounting at the school site. Fiscal personnel has reviewed site files on several occasions to 

ensure that site staff does not deviate from the procedures associated with attendance accounting legal 

requirements. 

The Technology and the Fiscal Department met to discuss new procedures or precautionary measures to take 

in order to avoid future audit exceptions and to assist site personnel with substitute rosters: 

• The electronic student attendance information system used by Certificated contracted employees, to 

report student attendance, is now available to substitute teachers. Substitute teachers are now 

authorized to access the attendance system and can therefore, readily access the student attendance 

screen each morning to expedite attendance. 



Summary Schedule of Prior Audit Findings 


Original 

Finding No. Finding Code Recommendation Current Status 

Finding 2010-1: 

Continuation 

Attendance 

School districts must use hourly attendance 

accounting in continuation education programs, 

and attendance must not be credited for more 

than the scheduled class time. 

10000 The system should be corrected so that each week of 

attendance generates apportionment hours that 

correspond to the scheduled class times. 

Implemented. 

The attendance system credits pupils with 23.20 

hours of ADA for each week of attendance for 

those pupils attending the full week. Based upon 

the bell schedule provided, each pupil should be 

credited with 24.58 hours of ADA for each week. 


To the Board of Education of 



Our audit of the financial statements of Fontana Unified School District (the organization) as of and for the 

year ended June 30, 2011 was planned and performed in accordance with auditing standards generally 

accepted in the United States of America. As such, we considered the organization’s internal control over 

financial reporting (internal control) as a basis for designing our auditing procedures for the purpose of 

expressing our opinion on the financial statements. However, our auditing procedures were not designed for 

the purpose of expressing an opinion on the effectiveness of the organization’s internal control. Our 

consideration of internal control was limited to procedures performed to evaluate the design of controls 

relevant to an audit of financial statements and to determine whether they have been implemented. 

Therefore, our procedures did not include testing the operating effectiveness of such controls and was not 

designed to discover significant deficiencies in internal control and, accordingly, we do not express an opinion 

on the effectiveness of the company’s internal control. 

As our consideration on internal control was for the limited purpose of expressing our opinion on the 

financial statement described in this letter, we would not necessarily identify all deficiencies in internal 

control that might be significant deficiencies or material weaknesses as those terms are defined by professional 

standards. Also, because of the inherent limitations in internal control, including the possibility of 

management override of controls, misstatements due to error or fraud may occur and not be detected by 

these controls. 

As defined by professional standards, a deficiency exists when the design or operation of a control does not 

allow management or employees, in the normal course of performing their assigned responsibilities, to 

prevent or detect and correct misstatements on a timely basis. A significant deficiency is a deficiency, or a 

combination of deficiencies, in internal control that is less severe than a material weakness, yet important 

enough to merit attention by those charged with governance. A material weakness is a deficiency, or 

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. 

During the course of performing our procedures, we noted matters that are opportunities for strengthening 

internal controls and operating efficiency. The following items represent conditions noted by our audit that 

we consider important enough to bring to your attention. This letter does not affect our report dated 

December 7, 2011, on the financial statements of Fontana Unified School District. 

75

To the Board of Education of 


ASB ACCOUNTING 

Out testing of associated student body (ASB) accounting noted some internal control weaknesses, as described 

below: 

• At three school sites, our testing indicated that a budget was not adopted by the student council. An 

annual budget should be prepared and approved by the student council. The student council should vote 

on the budget and include it in the meeting minutes. 

• At two school sites, our testing identified one expense that exceeded the student council’s original 

approval by more than 10% without approval for the overage and two expenses that were questionable 

in nature. We recommend that expenses in excess of 10% be re-approved by the general ASB to ensure 

that no unauthorized expenditures are made and the expenses are only for the general welfare of the 

students. 

• At one school site, our testing over cash disbursements revealed an instance where the student council 

reimbursed a different individual than originally approved. All ASB expenses should be properly 

approved and ensure the items are for the general welfare of the student group. 

• At one school site, we determined that the ASB has an open club account for the Class of 2010 and two 

clubs that carry negative club balances. The funds in the Class of 2010 club account should be transferred 

to the general ASB and then closed. Club balances should not only be monitored by the club and 

respective advisor, but also the bookkeeper. The Governing Board allows ASBs to operate in schools to 

provide an opportunity for students to learn how an organization’s finances operate. Clubs with negative 

balances are not being managed effectively, which increases the risk for fraud to occur. 

• At seven school sites, our testing of bank deposits revealed that bank deposits were not made in a timely 

manner. We recommend that deposits be made on a weekly basis or more often as needed. Money 

should never be left over the weekend or holidays because many thefts occur during these times. 

• At two school sites, we noted instances where the deposit was not supported by adequate documentation. 

The site collected money for various fundraisers, but noted no tally logs or other means of reconciling the 

deposit. Without supporting documentation, we could not verify whether all cash collected had been 

deposited intact. Sound internal controls for handling cash discourage theft of ASB funds and protect 

those who handle the cash. It is important to tie all proceeds to the specific fund-raiser from which they 

were generated and to ensure that all proceeds from an event are turned in and properly accounted for. 

We recommend that before any events are held, control procedures should be established that will allow 

for the reconciliation between money collected and fund-raiser sales. 

This communication is intended solely for the information and use of the Board of Education and management of 

Fontana Unified School District and is not intended to be and should not be used by anyone other than these 

specified parties. 


76

APPENDIX B 

ACCRETED VALUES TABLE

[TO COME]

APPENDIX C 

FORM OF CONTINUING DISCLOSURE CERTIFICATE

FORM OF CONTINUING DISCLOSURE CERTIFICATE 

THE FONTANA UNIFIED SCHOOL DISTRICT 

(SAN BERNARDINO COUNTY, CALIFORNIA) 






Dated: [Closing Date] 

This Continuing Disclosure Certificate (the “Disclosure Certificate”) is delivered by the Fontana 

Unified School District (the “District”) in connection with the issuance of the above-referenced bonds 

(the “Bonds”) pursuant to a Paying Agent Agreement dated October 1, 2012 (the “Paying Agent 

Agreement”), between the District and U.S. Bank National Association (the “Paying Agent”). The 

District covenants and agrees as follows: 

Section 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being 

delivered by the District for the benefit of the beneficial owners of the Bonds and to assist the 

Participating Underwriters in complying with S.E.C. Rule 15c2-12(b)(5). 

Section 2. Definitions. Unless the context otherwise requires, the definitions set forth in the 

Paying Agent Agreement apply to this Disclosure Certificate. The following additional capitalized terms 

shall have the following meanings: 

Annual Report means any report provided by the District pursuant to, and as described in, 

Sections 3 (Provision of Annual Reports) and 4 (Content of Annual Reports) of this Disclosure 

Certificate. 

Beneficial Owner means any person that (a) has or shares the power, directly or indirectly, to 

make investment decisions concerning ownership of any Bonds (including persons holding Bonds 

through nominees, depositories or other intermediaries), or (b) is treated as the owner of any Bonds for 

federal income tax purposes. 

Bondholders means either the registered owners of the Bonds, or, if the Bonds are registered in 

the name of The Depository Trust Company or another recognized depository, any Beneficial Owner or 

applicable participant in its depository system. 

Dissemination Agent means the District, or any successor Dissemination Agent designated in 

writing by the District and that has filed with the District a written acceptance of such designation. 

EMMA or Electronic Municipal Market Access means the centralized on-line repository for 

documents filed with the MSRB, such as official statements and disclosure information relating to 

municipal bonds, notes and other securities as issued by state and local governments. 

Listed Events means any of the events listed in Section 5(a) (Reporting of Significant Events – 

Significant Events) of this Disclosure Certificate. 

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MSRB means the Municipal Securities Rulemaking Board, which has been designated by the 

Securities and Exchange Commission as the sole repository of disclosure information for purposes of the 

Rule, or any other repository of disclosure information, which may be designated by the Securities and 

Exchange Commission as such for purposes of the Rule in the future. 

Bonds. 

Official Statement means the final Official Statement dated ___________, 2012 relating to the 

Opinion of Bond Counsel means a written opinion of a law firm or attorney experienced in 

matters relating to obligations the interest on which is excludable from gross income for federal income 

tax purposes. 

Participating Underwriter means any of the original underwriters of the Bonds required to 

comply with the Rule in connection with offering of the Bonds. 

Repositories means MSRB or any other repository of disclosure information that may be 

designated by the Securities and Exchange Commission as such for purposes of the Rule in the future. 

(As of the date of this Certificate, there is no California state information repository.) 

Rule means Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the 

Securities Exchange Act of 1934, as the same may be amended from time to time. 

State means the State of California. 

Section 3. 

Provision of Annual Reports. 

a. Delivery of Annual Report to Repositories. The District shall, or shall cause the 

Dissemination Agent to, not later than eight (8) months after the end of the District’s fiscal year (which 

currently ends on June 30), commencing with the report for the 2011-2012 Fiscal Year, provide to the 

Repositories an Annual Report that is consistent with the requirements of Section 4 (Content of Annual 

Reports) of this Disclosure Certificate. The Annual Report may be submitted as a single document or as a 

package of separate documents and may include by cross-reference other information as provided in 

Section 4 (Content of Annual Reports) of this Disclosure Certificate; provided that the audited financial 

statements of the District may be submitted separately from the balance of the Annual Report and later 

than the date required above for the filing of the Annual Report if they are not available by that date. 

b. Change of Fiscal Year. If the District’s fiscal year changes, it shall give notice of 

such change in the same manner as for a Listed Event under Section 5(d) (Notice of Listed Events). 

c. Delivery of Annual Report to Dissemination Agent. Not later than fifteen (15) 

Business Days prior to the date specified in subsection (a) for providing the Annual Report to the 

Repositories, the District shall provide the Annual Report to the Dissemination Agent (if other than the 

District). If by such date, the Dissemination Agent has not received a copy of the Annual Report, the 

Dissemination Agent shall notify the District. 

d. Report of Non-Compliance. If the District is unable to provide an Annual Report 

to the Repositories by the date required in subsection (a), the Dissemination Agent shall send a notice to 

the Repositories in substantially the form attached as Exhibit A. 

C-2

e. Annual Compliance Certification. The Dissemination Agent shall if the 

Dissemination Agent is other than the District, file a report with the District certifying that the Annual 

Report has been provided pursuant to this Disclosure Certificate, stating the date it was provided. 

Section 4. Content of Annual Reports. The District’s Annual Report shall contain or 

include by reference the following: 

a. Financial Statements. The audited financial statements of the District for the 

prior fiscal year, prepared in accordance with generally accepted accounting principles as promulgated to 

apply to government entities from time to time by the Government Accounting Standards Bank. If the 

District’s audited financial statements are not available by the time the Annual Report is required to be 

filed pursuant to Section 3(a) (Provision of Annual Reports -- Delivery of Annual Report to Repositories), 

the Annual Report shall contain unaudited financial statements in a format similar to the financial 

statements contained in the final Official Statement, and the audited financial statements shall be filed in 

the same manner as the Annual Report when they become available; 

b. Other Financial Information and Operating Data. Material financial information 

and operating data with respect to the District of the type included in the Official Statement in the 

following categories (to the extent not included in the District’s audited financial statements): 

(1) State funding received by the District for the last completed fiscal year; 

(2) Average daily attendance of the District for the last completed fiscal year; 

(3) Outstanding District indebtedness; and 

(4) Summary financial information on revenues, expenditures and fund balances for 

the District’s general fund reflecting adopted budget for the current fiscal year. 

Any or all of the items listed above may be included by specific reference to other documents, 

including official statements of debt issues of the District or related public entities that have been 

submitted to each of the Repositories or the Securities and Exchange Commission. If the document 

included by reference is a final official statement, it must be available from the Municipal Securities 

Rulemaking Board. The District shall clearly identify each such other document so included by 

reference. 

Section 5. 

Reporting of Significant Events. 

a. Significant Events. Pursuant to the provisions of this Section, the District shall 

give, or cause to be given, notice of the occurrence of any of the following events with respect to the 

Refunding Bonds: 

(1) principal and interest payment delinquencies; 

(2) non-payment related defaults, if material; 

(3) unscheduled draws on debt service reserves reflecting financial difficulties; 

(4) unscheduled draws on credit enhancements reflecting financial difficulties; 

(5) substitution of credit or liquidity providers, or their failure to perform; 

(6) the issuance by the Internal Revenue Service of proposed or final determinations 

of taxability, or Notices of Proposed Issue (IRS Form 5701-TEB); 

C-3

(7) unless described in subsection (a)(6) above, adverse tax opinions or or other 

material notices or determinations by the Internal Revenue Service with respect 

to the tax status of the Bonds or other material events affecting the tax-exempt 

status of the Bonds; 

(8) modifications to rights of Bondholders, if material; 

(9) Bond calls, if material; 

(10) tender offers; 

(11) defeasances; 

(12) release, substitution, or sale of property securing repayment of the Refunding 

Bonds, if material; 

(13) rating changes; 

(14) bankruptcy, insolvency, receivership or similar event of the District; 

(15) the consummation of a merger, consolidation, or acquisition, or certain asset 

sales, involving the District, or entry into or termination of a definitive agreement 

relating to the foregoing, if material; 

(16) appointment of a successor or additional trustee or the change of name of the 

Trustee, if material. 

b. Determination of Materiality. Whenever the District obtains knowledge of one 

of the foregoing events notice of which must be given only if material, the District shall immediately 

determine if such event would be material under applicable federal securities laws. 

c. Notice to Dissemination Agent. If the District has determined an occurrence of a 

a Listed Event under applicable federal securities laws, the District shall promptly notify the 

Dissemination Agent (if other than the District) in writing. Such notice shall instruct the Dissemination 

Agent to report the occurrence pursuant to subsection (d) (Notice of Listed Events). 

d. Notice of Listed Events. The District shall file, or cause the Dissemination 

Agent to file with the Repositories, a notice of the occurrence of a Listed Event to provide notice of 

specified events in a timely manner not in excess of ten (10) business days after the event’s occurrence. 

Notwithstanding the foregoing, notice of Listed Events described in subsection (a)(9) (bond calls) need 

not be given under this subsection any earlier than the notice (if any) given to Bondholders of affected 

Bonds pursuant to the Paying Agent Agreement. 

Section 6. Filings with MSRB. All documents provided to MSRB under this Disclosure 

Certificate shall be filed in a readable PDF or other electronic format as prescribed by MSRB and shall be 

accompanied by identifying information as prescribed by MSRB. 

Section 7. Termination of Reporting Obligation. The District’s obligations under this 

Disclosure Certificate shall terminate upon the legal defeasance, prior redemption or payment in full of all 

of the Bonds or upon the delivery to the District of an Opinion of Bond Counsel to the effect that 

continuing disclosure is no longer required.. If such termination occurs prior to the final maturity of the 

Bonds, the District shall give notice of such termination in the same manner as for a Listed Event under 

Section 5(d) (Notice of Listed Events). 

Section 8. Dissemination Agent. a. Appointment of Dissemination Agent. The District 

may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its 

obligations under this Disclosure Certificate, and may discharge any such agent, with or without 

appointing a successor Dissemination Agent. If the Dissemination Agent is not the District, the 

Dissemination Agent shall not be responsible in any manner for the content of any notice or report 

C-4

prepared by the District pursuant to this Disclosure Certificate. The initial Dissemination Agent shall be 

the District. 

b. Compensation of Dissemination Agent. The Dissemination Agent shall be paid 

compensation by the District for its services provided hereunder in accordance with its schedule of fees as 

agreed to between the Dissemination Agent and the District from time to time and all expenses, legal fees 

and advances made or incurred by the Dissemination Agent in the performance of its duties hereunder. 

The Dissemination Agent may at any time resign by giving written notice of such resignation to the 

District. 

c. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination 

Agent shall have only such duties as are specifically set forth in this Disclosure Certificate. The District 

agrees to indemnify and save the Dissemination Agent, its officers, directors, employees and agents, 

harmless against any loss, expense, and liability that it may incur arising out of or in the exercise or 

performance of its powers and duties hereunder, including the costs and expenses (including attorneys 

fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination 

Agent’s negligence or willful misconduct. The Dissemination Agent shall not be deemed to be acting in 

any fiduciary capacity for the District, the Bondholders, or any other party. The Dissemination Agent 

may rely and shall be protected in acting or refraining from acting upon any direction from the District or 

an Opinion of Bond Counsel. The obligations of the District under this Section shall survive resignation 

or removal of the Dissemination Agent and payment of the Bonds. No person shall have any right to 

commence any action against the Dissemination Agent seeking any remedy other than to compel specific 

performance of this Disclosure Certificate. 

Section 9. Amendment; Waiver. Notwithstanding any other provision of this Disclosure 

Certificate, the District may amend this Disclosure Certificate (and the Dissemination Agent shall agree 

to any amendment so requested by the District that does not impose any greater duties or risk of liability 

on the Dissemination Agent), and any provision of this Disclosure Certificate may be waived, provided 

that the following conditions are satisfied: 

a. Change in Circumstances. If the amendment or waiver relates to the provisions 

of Sections 3(a) (Delivery of Annual Report to Repositories), 4 (Content of Annual Reports), or 5(a) 

(Significant Events), it may only be made in connection with a change in circumstances that arises from a 

change in legal requirements, change in law, or change in the identity, nature, or status of an obligated 

person with respect to the Bonds, or the type of business conducted; 

b. Compliance as of Issue Date. The undertaking, as amended or taking into 

account such waiver, would have complied with the requirements of the Rule at the time of the original 

issuance of the Bonds, after taking into account any amendments or interpretations of the Rule, as well as 

any change in circumstances, and the District obtains an Opinion of Bond Counsel to that effect; and 

c. Consent of Holders; Non-impairment Opinion. The amendment or waiver either 

(i) is approved by the Bondholders in the same manner as provided in the Paying Agent Agreement for 

amendments to the Paying Agent Agreement with the consent of Bondholders, or (ii) does not materially 

impair the interests of the Bondholders and the District obtains an Opinion of Bond Counsel to that effect. 

If this Disclosure Certificate is amended or any provision of this Disclosure Certificate is waived, 

the District shall describe such amendment or waiver in the next following Annual Report and shall 

include, as applicable, a narrative explanation of the reason for the amendment or waiver and its impact 

on the type (or in the case of a change of accounting principles, on the presentation) of financial 

information or operating data being presented by the District. In addition, if the amendment relates to the 

accounting principles to be followed in preparing financial statements, (i) notice of such change shall be 

given in the same manner as for a Listed Event under Section 5(d) (Notice of Listed Events), and (ii) the 

C-5

Annual Report for the year in which the change is made should present a comparison (in narrative form 

and also, if feasible, in quantitative form) between the financial statements as prepared on the basis of the 

new accounting principles and those prepared on the basis of the former accounting principles. 

Section 10. Additional Information. Nothing in this Disclosure Certificate shall be deemed 

to prevent the District from disseminating any other information, using the means of dissemination set 

forth in this Disclosure Certificate or any other means of communication, or including any other 

information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is 

required by this Disclosure Certificate. If the District chooses to include any information in any Annual 

Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this 

Disclosure Certificate, the District shall have no obligation under this Disclosure Certificate to update 

such information or include it in any future Annual Report or notice of occurrence of a Listed Event. 

Section 11. Default. If the District fails to comply with any provision of this Disclosure 

Certificate any Bondholder of the Bonds may take such actions as may be necessary and appropriate, 

including seeking mandate or specific performance by court order, to cause the District to comply with its 

obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be 

deemed an Event of Default under the Paying Agent Agreement, and the sole remedy under this 

Disclosure Certificate if the District fails to comply with this Disclosure Certificate shall be an action to 

compel performance. 

Section 12. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the 

District, the Dissemination Agent, the Participating Underwriters, and the Bondholders and shall create no 

rights in any other person or entity. 

IN WITNESS WHEREOF, the District has caused this Continuing Disclosure Certificate to be 

executed by its authorized officer as of the day and year first above written. 


By: 


C-6

EXHIBIT A 

FORM OF NOTICE TO REPOSITORIES OF FAILURE TO FILE ANNUAL REPORT 

Name of District: 

Name of Bonds: 


THE FONTANA UNIFIED SCHOOL DISTRICT 







Date of Delivery: 

[Closing Date] 

NOTICE IS HEREBY GIVEN that the Fontana Unified School District(the “District”) has not 

provided an Annual Report with respect to the above-named Bonds as required by a Continuing 

Disclosure Certificate executed [Closing Date], with respect to the above-captioned bond issue. The 

District anticipates that the Annual Report will be filed by ___________. 

Dated: _______________ 


[SAMPLE ONLY] 

______________________________ 

C-7

APPENDIX D 

PROPOSED FORMS OF OPINION OF BOND COUNSEL

FORMS OF OPINION OF BOND COUNSEL 




Re: 

$________ 


(San Bernardino County, California) 

Election of 2006 

General Obligation Bonds, Series C 

Final Opinion of Bond Counsel 

Members of the Board of Education: 

We have acted as bond counsel in connection with the issuance by the Fontana Unified School 

District (the “District”) of $_______________ principal amount of Fontana Unified School District (San 

Bernardino County, California) Election of 2006 General Obligation Bonds, Series C (the “Bonds”). 

Capitalized terms not otherwise defined herein shall have the meanings set forth in the paying agent 

agreement dated October 1, 2012 (the “Paying Agent Agreement”), providing for the issuance of the Bonds. 

In such capacity, we have examined such law and such certified proceedings, certifications, and other 

documents as we have deemed necessary to render this opinion. The opinions expressed herein are based on 

an analysis of existing statutes, regulations, rulings and court decisions and cover certain matters not directly 

addressed by such authorities. Such opinions may be affected by actions taken or omitted to be taken or 

events occurring after the date hereof. We have not undertaken to determine or to inform any person, whether 

any such actions or events are taken or do occur, and we disclaim any obligation to update this opinion. We 

have assumed the genuineness of all documents and signatures presented to us (whether as originals or as 

copies) and the due and legal execution and delivery thereof by, and validity against, any parties other than 

the District. We have not undertaken to verify independently and have assumed the accuracy of the factual 

matters represented, warranted or certified in the documents and of the legal conclusions contained in the 

opinions referred to in the second paragraph hereof. Furthermore, we have assumed compliance with all 

covenants and agreements contained in the Paying Agent Agreement and the Tax Certificate, including, 

without limitation, covenants and agreements compliance with which is necessary to assure that future 

actions, omissions or events will not cause interest on the Bonds to be included in gross income for federal 

income tax purposes. 

Based upon the foregoing, we are of the opinion that, under existing law: 

1. The Bonds have been duly authorized and executed by the District and are valid and binding 

general obligations of the District. 

2. All taxable property in the territory of the District is subject to ad valorem taxation without 

limitation regarding rate or amount (except certain personal property that is taxable at limited rates) to pay the 

Bonds. The County of San Bernardino is required by law to include in its annual tax levy the principal and 

interest coming due on the Bonds to the extent that necessary funds are not provided from other sources. 

D-1

3. Interest on the Bonds is excluded from gross income for federal income tax purposes under 

Section 103 of the Internal Revenue Code of 1986, as amended (the “Code”) and is exempt from personal 

income taxes of the State of California. Interest on the Bonds is not a specific preference item for purposes of 

the federal individual or corporate alternative minimum taxes, although we observe that it is included in 

adjusted current earning when calculating corporate alternative minimum taxable income. We express no 

opinion regarding other tax consequences relating to the ownership or disposition of, or the accrual or receipt 

of interest on the Bonds. 

In rendering the opinion in this paragraph 3, we have relied upon and assumed (i) the material 

accuracy of the representations, statements of intention and reasonable expectations, and certifications of fact, 

contained in the Tax Certificate delivered on the date hereof with respect to the use of proceeds of the Bonds 

and the investment of certain funds, and other matters affecting the exclusion of interest on the Bonds in gross 

income for Federal income tax purposes under Section 103 of the Code, and (ii) compliance by the District 

with procedures and covenants set forth in the Tax Certificate and with the tax covenants set forth in the 

Paying Agent Agreement as to such matters. Under the Code, failure to comply with such procedures and 

covenants may cause the interest on the Bonds to be included in gross income for Federal income tax 

purposes, retroactive to the date of issuance of the Bonds, irrespective of the date on which such 

noncompliance occurs or is ascertained. 

Other provisions of the Code may give rise to adverse federal income tax consequences to particular 

holders of the Bonds. The scope of this opinion is limited to matters addressed above and no opinion is 

expressed hereby regarding other federal tax consequences that may arise due to ownership of the Bonds. 

We call attention to the fact that the rights and obligations under the Bonds, the Paying Agent 

Agreement and the Tax Certificate and their enforceability may be subject to bankruptcy, insolvency, 

reorganization, arrangement, fraudulent conveyance, moratorium and other laws relating to or affecting 

creditors’ rights, to the application of equitable principles, to the exercise of judicial discretion in appropriate 

cases and to the limitations on legal remedies against unified school districts in the State of California. 

We express no opinion with respect to any indemnification, contribution, penalty, choice of law, 

choice of forum or waiver provisions contained in the foregoing documents. We undertake no responsibility 

for the accuracy, completeness or fairness of the Official Statement or other offering materials relating to the 

Bonds and express herein no opinion relating thereto. 

This opinion is issued as of the date hereof, and we assume no obligation to update, revise or 

supplement this opinion to reflect any action hereafter taken or not taken, or any facts or circumstances, or 

any changes in law or in interpretations thereof, that may hereafter arise or occur, or for any other reason. 

Very truly yours, 

MEYERS, NAVE, RIBACK, SILVER & WILSON, 

A Professional Law Corporation 

D-2




Re: 

$___________ 


(San Bernardino County, California) 


Final Opinion of Bond Counsel 

Members of the Board of Education: 

We have acted as bond counsel in connection with the issuance by the Fontana Unified School 

District (the “District”) of $__________ principal amount of Fontana Unified School District (San Bernardino 

County, California) 2012 General Obligation Refunding Bonds (the “Bonds”). Capitalized terms not 

otherwise defined herein shall have the meanings set forth in the paying agent agreement dated October 1, 

2012 (the “Paying Agent Agreement”), providing for the issuance of the Bonds. 

In such capacity, we have examined such law and such certified proceedings, certifications, and other 

documents as we have deemed necessary to render this opinion. The opinions expressed herein are based on 

an analysis of existing statutes, regulations, rulings and court decisions and cover certain matters not directly 

addressed by such authorities. Such opinions may be affected by actions taken or omitted to be taken or 

events occurring after the date hereof. We have not undertaken to determine or to inform any person, whether 

any such actions or events are taken or do occur, and we disclaim any obligation to update this opinion. We 

have assumed the genuineness of all documents and signatures presented to us (whether as originals or as 

copies) and the due and legal execution and delivery thereof by, and validity against, any parties other than 

the District. We have not undertaken to verify independently and have assumed the accuracy of the factual 

matters represented, warranted or certified in the documents and of the legal conclusions contained in the 

opinions referred to in the second paragraph hereof. Furthermore, we have assumed compliance with all 

covenants and agreements contained in the Paying Agent Agreement and the Tax Certificate, including, 

without limitation, covenants and agreements compliance with which is necessary to assure that future 

actions, omissions or events will not cause interest on the Bonds to be included in gross income for federal 

income tax purposes. 

Based upon the foregoing, we are of the opinion that, under existing law: 

1. The Bonds have been duly authorized and executed by the District and are valid and binding 

general obligations of the District. 

2. All taxable property in the territory of the District is subject to ad valorem taxation without 

limitation regarding rate or amount (except certain personal property that is taxable at limited rates) to pay the 

Bonds. The County of San Bernardino is required by law to include in its annual tax levy the principal and 

interest coming due on the Bonds to the extent that necessary funds are not provided from other sources. 

3. Interest on the Bonds is excluded from gross income for federal income tax purposes under 

Section 103 of the Internal Revenue Code of 1986, as amended (the “Code”) and is exempt from personal 

income taxes of the State of California. Interest on the Bonds is not a specific preference item for purposes of 

the federal individual or corporate alternative minimum taxes, although we observe that it is included in 

adjusted current earning when calculating corporate alternative minimum taxable income. We express no 

D-3

opinion regarding other tax consequences relating to the ownership or disposition of, or the accrual or receipt 

of interest on the Bonds. 

In rendering the opinion in this paragraph 3, we have relied upon and assumed (i) the material 

accuracy of the representations, statements of intention and reasonable expectations, and certifications of fact, 

contained in the Tax Certificate delivered on the date hereof with respect to the use of proceeds of the Bonds 

and the investment of certain funds, and other matters affecting the exclusion of interest on the Bonds in gross 

income for Federal income tax purposes under Section 103 of the Code, and (ii) compliance by the District 

with procedures and covenants set forth in the Tax Certificate and with the tax covenants set forth in the 

Paying Agent Agreement as to such matters. Under the Code, failure to comply with such procedures and 

covenants may cause the interest on the Bonds to be included in gross income for Federal income tax 

purposes, retroactive to the date of issuance of the Bonds, irrespective of the date on which such 

noncompliance occurs or is ascertained. 

Other provisions of the Code may give rise to adverse federal income tax consequences to particular 

holders of the Bonds. The scope of this opinion is limited to matters addressed above and no opinion is 

expressed hereby regarding other federal tax consequences that may arise due to ownership of the Bonds. 

We call attention to the fact that the rights and obligations under the Bonds, the Paying Agent 

Agreement and the Tax Certificate and their enforceability may be subject to bankruptcy, insolvency, 

reorganization, arrangement, fraudulent conveyance, moratorium and other laws relating to or affecting 

creditors’ rights, to the application of equitable principles, to the exercise of judicial discretion in appropriate 

cases and to the limitations on legal remedies against unified school districts in the State of California. 

We express no opinion with respect to any indemnification, contribution, penalty, choice of law, 

choice of forum or waiver provisions contained in the foregoing documents. We undertake no responsibility 

for the accuracy, completeness or fairness of the Official Statement or other offering materials relating to the 

Bonds and express herein no opinion relating thereto. 

This opinion is issued as of the date hereof, and we assume no obligation to update, revise or 

supplement this opinion to reflect any action hereafter taken or not taken, or any facts or circumstances, or 

any changes in law or in interpretations thereof, that may hereafter arise or occur, or for any other reason. 

Very truly yours, 

MEYERS, NAVE, RIBACK, SILVER & WILSON, 

A Professional Law Corporation 

D-4


APPENDIX E 

SAN BERNARDINO COUNTY INVESTMENT POLICY STATEMENT

OFFICE OF THE 

AUDITORCONTROLLER/TREASURER/TAXCOLLECTOR 

COUNTY OF SAN BERNARDINO 

TREASURER’S STATEMENT OF INVESTMENT POLICY 

As approved by the Board of Supervisors on June 26, 2012 

SCOPE: 

The County of San Bernardino’s Investment Policy has been prepared in accordance with 

California State law. This policy shall be reviewed annually by the County’s Treasury Oversight 

Committee and approved by the County Board of Supervisors. The purpose of this policy is to 

establish cash management and investment guidelines for the County Treasurer, who is 

responsible for the management and investment of the County Treasury Pool, which consists of 

the pooled monies held on behalf of the County, school districts, community college districts 

and certain special districts within the County. 

This policy shall apply to all investments held within the County Treasury Pool and made on 

behalf of the County and member agencies of the Pool with the exception of certain bond funds 

for which the Board of Supervisors may specifically authorize other allowable investments, 

consistent with State law. The Treasurer and Treasurer’s staff are responsible for the full-time, 

active management of the Pool. All investments and activities of the Treasurer and staff are 

made with the understanding that the Treasurer holds a public trust with the citizens of the 

County, which shall not be compromised. 

FIDUCIARY RESPONSIBILITY: 

The California Government Code, Section 27000.3, declares each treasurer, or governing body 

authorized to make investment decisions on behalf of local agencies, to be a fiduciary subject to 

the prudent investor standard. 

This standard requires that “When investing, reinvesting, purchasing, acquiring, exchanging, 

selling, or managing public funds, the county treasurer or the board of supervisors, as 

applicable, shall act with care, skill, prudence, and diligence under the circumstances then 

prevailing, specifically including, but not limited to, the general economic conditions and the 

anticipated needs of the county and other depositors, that a prudent person acting in a like 

capacity and familiarity with those matters would use in the conduct of funds of a like character 

and with like aims, to safeguard the principal and maintain the liquidity needs of the county and 

the other depositors. Within the limitations of this section and considering individual 

investments as part of an overall investment strategy, investments may be acquired as 

authorized by law.” This standard shall be applied in the context of managing the overall 

portfolio. 

Page 1 of 16

PORTFOLIO OBJECTIVES: 

It is the policy of the Treasurer to invest public funds in a manner which will preserve the safety 

and liquidity of all investments within the County investment pool while obtaining a reasonable 

return within established investment guidelines. The portfolio should be actively managed in a 

manner that is responsive to the public trust and consistent with State law. Accordingly, the 

County investment pool will be guided by the following principles, in order of importance: 

The primary objective of the Treasurer’s investment of public funds is to safeguard 

investment principal. 

The secondary objective is to maintain sufficient liquidity to insure that funds are 

available to meet daily cash flow requirements. 

The third and last consideration is to achieve a reasonable rate of return or yield 

consistent with these objectives. 

AUTHORITY: 

The Treasurer’s authority for making investments is delegated by the Board of Supervisors in 

accordance with the California Government Code. Statutory authority for the investment and 

safekeeping functions are found in Sections 53600 et seq. and 53630 et seq., of the California 

Government Code. 

AUTHORIZED INVESTMENTS: 

Investments shall be restricted to those authorized in the California Government Code and as 

further restricted by this policy statement, with the exception of certain bond funds in which the 

Board of Supervisors has specifically authorized other allowable investments. All investments 

shall be further governed by the restrictions shown in Schedule I which defines the type of 

investments authorized, maturity limitations, portfolio diversification (maximum percent of 

portfolio), credit quality standards, and purchase restrictions that apply. Whenever a maximum 

allowable percentage of the portfolio is stated for any type of security as detailed above, the 

limit or maximum allowable, is determined by the portfolio size at the market close of the regular 

business day prior to the security purchase date. Maximum limits are applicable at the time of 

security purchase only unless otherwise noted or defined in Schedule I. 

In conjunction with these restrictions, County Treasurer staff shall diversify its investments by 

security type, issuer and maturity. The purpose of this diversification is to reduce portfolio risk 

by avoiding an overconcentration in any particular maturity sector, asset class or specific issuer. 

As Agency security holdings are the largest portion of the pool, diversification among the 

Agency issuers should be considered to the extent practical when making investments. 

PROHIBITED INVESTMENTS: 

No investment shall be made that is prohibited by law. Thus, no investments are authorized in 

inverse floaters, range notes, interest-only strips that are derived from a pool of mortgages, nor 

in any other investment that could result in zero interest if held to maturity. 

Additionally, the following types of investments are also prohibited: 

 

 

Mutual bond funds that do not maintain a constant Net Asset Value (NAV). 

Illiquid investments which lack a readily available market for trading. These investments 

are defined to be: private placement notes or bonds, funding agreements, master notes, 

and loan participations. 

Page 2 of 16

STAFF AUTHORIZED TO MAKE INVESTMENTS: 

Only the Auditor-Controller/Treasurer/Tax Collector, Assistant Auditor-Controller/Treasurer/Tax 

Collector with Treasury oversight responsibility, Cash Manager/Investment Officer, Assistant 

Cash Manager/Investment Officer, Investment Analyst(s) and authorized contracted 

consultant(s) may make investments and order the receipt and delivery of investment securities 

among custodial security clearance accounts. Authority granted to contracted consultant(s) 

shall be defined in their contract(s). 

AUTHORIZED BROKER/DEALERS: 

The County Treasurer shall maintain an ‘Eligible Broker/Dealer List’. Security transactions are 

limited solely to those banks, direct issuers and dealers included on this list. All financial 

institutions must be approved by the County Treasurer before they receive County funds or are 

able to conduct business with the County Treasurer. 

All firms with whom the County does business shall comply with the requirements set forth in 

Schedule IV. County Treasurer staff shall conduct an annual review of each Broker/Dealer’s 

current financial condition and performance in servicing the County over the prior year. Further, 

in compliance with Section 27133(c) & (d) of the California Government Code, no dealer and/or 

securities firm shall be eligible if they have made a political contribution in excess of the 

limitations contained in Rule G-37 of the Municipal Securities Rulemaking Board or exceeded 

the limit on honoraria, gifts, and gratuities set by State law, or by the Fair Political Practices 

Commission, or by County ordinance. 

DUE DILIGENCE: 

County Treasurer staff shall conduct a thorough review and perform due diligence of all 

brokers, dealers, issuers of securities, and mutual funds prior to investing or conducting 

transactions with these parties and on a continuing basis. This due diligence shall include a 

periodic review of recent news, financial statements and SEC filings related to each entity. 

INTERNAL CONTROLS: 

The County Treasurer has established a system of internal controls to provide reasonable 

assurance that the investment objectives are met and to ensure that the assets of the County 

Treasury Pool are protected from loss, theft or misuse. The concept of reasonable assurance 

recognizes that the cost of control shall not exceed the benefits likely to be derived and that the 

valuation of costs and benefits require estimates and judgments by management. The County 

Treasurer shall develop and maintain written procedures for the operation of the investment 

program, which are consistent with this policy. These procedures shall include reference to 

separation of duties, safekeeping, collateralization, wire transfers and banking related activities. 

Except for declared emergencies, the County Treasurer’s Office shall observe the following 

procedures on a daily basis: 

Investment transactions in excess of overnight maturity conducted by the County 

Treasurer’s office shall be documented and subsequently reviewed by the Treasurer. 

All investment transactions shall be entered into the Treasurer’s accounting system 

daily. 

County investments shall be transacted, confirmed, accounted for, and audited by 

different people. 

Page 3 of 16

SECURITY CUSTODY & DELIVERIES: 

All securities purchased shall be deposited for safekeeping with the custodial bank that has 

contracted to provide the County Treasurer with custodial security clearance services or with a 

tri-party custodian bank under a written tri-party custody agreement. All security holdings shall 

be reconciled monthly by the County Treasurer and audited at least quarterly by the 

independent certified public accounting firm approved by the County Board of Supervisors. 

These third party trust department arrangements provide the County with a perfected interest 

in, ownership of and control over the securities held by the bank custodian on the County’s 

behalf, and are intended to protect the County from the bank’s own creditors in the event of a 

bank default and filing for bankruptcy. Securities are not to be held in investment firm/broker 

dealer accounts. 

All security transactions are to be conducted on a “delivery-versus-payment basis”. 

Confirmation receipts on all investments are to be reviewed immediately for conformity with 

County transaction documentation. Confirmations resulting from securities purchased under 

repurchase agreements should clearly state (A) the exact and complete nomenclature of the 

underlying securities purchased and (B) that these securities have been sold to the County 

under a repurchase agreement and (C) the stipulated date and amount of the resale by the 

County back to the seller of the securities. 

REPURCHASE AGREEMENTS: 

Repurchase agreements are restricted to primary dealers of the Federal Reserve Bank of New 

York. All counterparties must sign a Securities Industry & Financial Markets Association 

(formerly known as The Bond Market Association) Master Repurchase Agreement and for triparty 

repurchase agreements a Tri-Party Repurchase Agreement as well before engaging in 

any repurchase agreement transactions. Collateral for repurchase agreements shall have a 

market value of at least 102% of the amount invested and must be marked to market by staff or 

by an independent third-party or custodial bank acting under contract to the County. Collateral 

for term repurchase agreements shall be marked to market no less than once weekly. 

Repurchase agreements are required to be collateralized by securities authorized under 

Section 53601 et. seq. of the California Government Code. 

COMPETITIVE PRICING: 

Investment transactions are to be made at current market prices. When possible, competitive 

prices should be obtained through multiple bids or offers and documented on the trade ticket or 

other written forms. When possible, bids and offers for any investment security should be taken 

from a minimum of three security broker/dealers or banks and awards should be made to the 

best offer. When identical securities are not available from multiple sources, or investments are 

purchased directly from issuers (e.g. commercial paper and certificates of deposit), market 

prices may be documented by reference to offerings of similar securities that are of comparable 

rating and maturity by other direct issuers. 

LIQUIDITY: 

The duration-to-maturity of the portfolio shall not exceed 1.50. To provide sufficient liquidity to 

meet daily expenditure requirements for the following 12 months, the portfolio shall maintain at 

least 40% of its par value in securities having a maturity of 12 months or less. 

PERFORMANCE EVALUATION: 

Portfolio performance is monitored daily by the Treasurer and monthly by third party analysis, 

Page 4 of 16

which includes security pricing and evaluation. Also, quarterly, a total return measurement is 

performed on the portfolio using the Bank of America Merrill Lynch 6-month Treasury Bill Index 

“G0O2” as a benchmark. 

MITIGATING MARKET & CREDIT RISKS: 

Safety of principal is the primary objective of the portfolio. Each investment transaction shall 

seek to minimize the County’s exposure to market and credit risks by giving careful and 

ongoing attention to: (1) the credit ratings issued by Standard & Poor’s, Moody’s and/or Fitch 

rating services on the credit worthiness of each issuer of securities, (2) limiting the duration of 

investments to the time frames noted in Schedule I, and (3) maintaining the diversification and 

liquidity standards expressed within this policy. 

In the event of a downgrade of a security held in the portfolio, the Cash Manager/Investment 

Officer shall report the downgrade to the Treasurer promptly. In the event of a downgrade 

below the minimum credit ratings authorized by this policy, the security shall be evaluated to 

determine whether the security shall be sold or held. It is preferred to sell such a security if 

there is no book loss. In the event of a potential loss upon sale, the Treasurer will evaluate 

whether to hold or sell the security based on the amount of loss, remaining maturity and any 

other relevant factors. 

TRADING & EARLY SALE OF SECURITIES: 

Securities should be purchased with the intent of holding them until maturity. However, in an 

effort to minimize market risks, credit risks, and increase the total return of the portfolio, 

securities may be sold prior to maturity either at a profit or loss when market conditions or a 

deterioration in credit worthiness of the issuer warrant a sale of the securities to either enhance 

overall portfolio yield or to minimize loss of investment principal. In measuring a profit or loss, 

the sale proceeds shall be compared to the original cost as per the County’s books of the 

security plus accrued interest earned and/or any accretion or amortization of principal on the 

security from the date of purchase or the last coupon date, to the date of sale. However, the 

sale of a security at a loss can only be made with the approval of the County Treasurer or his 

designee. 

PURCHASE OF SECURITIES FOR FORWARD SETTLEMENT: 

Purchases of securities for forward settlement are only authorized as long as: (1) the intent of 

the purchase is to hold them in the portfolio and not for speculative trading (2) sufficient cash is 

available to consummate their acceptance into the Treasurer’s portfolio on the settlement date, 

(3) at purchase, there is the ability to hold them in the portfolio to maturity without violating any 

of the diversification/maturity limits of this policy, and (4) the forward settlement period does not 

exceed 21 days. 

PORTFOLIO REPORTS/AUDITING: 

On a monthly basis, the County Treasurer shall prepare and file with the Board of Supervisors, 

Chief Executive Officer, Assistant Auditor-Controller/Treasurer/Tax Collector with Treasury 

oversight responsibility, Assistant Auditor-Controller/Treasurer/Tax Collector with Auditor- 

Controller oversight responsibility, Superintendent of Schools and Treasury Oversight 

Committee a report consisting of, but not limited to, the following: 

 

 

All investments detailing each by type, issuer, date of maturity, par value and stating the 

book vs. current market value together with all other portfolio information required by 

law. 

Compliance of investments to the existing County Investment Policy. 

Page 5 of 16

A statement confirming the ability of the Pool to meet anticipated cash requirements for 

the Pool for the next six months. 

TREASURY OVERSIGHT COMMITTEE: 

In accordance with the California Government Code Section 27131, the Board of Supervisors 

has established a Treasury Oversight Committee. The Treasury Oversight Committee will 

render unbiased and objective opinions on matters involving the Treasurer’s investment of 

public funds. Specifically, the law requires that the Treasury Oversight Committee meet to: 

Review the Treasurer’s annual Investment Policy Statement and any subsequent 

changes thereto, prior to its submission to the Board of Supervisors for review and 

adoption. 

Review the Treasurer’s investment portfolio reports and the portfolio’s compliance with 

law and this Investment Policy. 

Cause an annual audit to be conducted on the Treasurer’s Pooled Investment portfolio. 

The Treasury Oversight Committee shall receive a copy of every Audit Report as prepared by 

the independent certified public accounting firm approved by the County Board of Supervisors. 

Such reports are made in accordance with the California Government Code Sections 26920 

and 26922, and County Board of Supervisor’s resolution dated July 6, 1971, and which includes 

an evaluation of investments for compliance with California Government Code Section 53601 

and 53635. 

All meetings of the Oversight Committee are to be open to the public and subject to the Ralph 

M. Brown Act. By law, the Treasury Oversight Committee is not allowed to direct individual 

investment decisions, nor select individual investment advisors, brokers, or dealers, or impinge 

on the day-to-day operations of the County Treasury. Members of the Oversight Committee are 

prohibited from accepting gifts or gratuities from investment advisors, brokers, dealers, bankers 

or other persons with whom the county treasury conducts business. 

QUARTERLY DISTRIBUTION OF INVESTMENT EARNINGS: 

All moneys deposited in the pool by the participants represent an individual interest in all assets 

and investments in the pool based upon the amount deposited. Portfolio income shall be 

reconciled daily against cash receipts and quarterly prior to the distribution of earnings among 

those entities sharing in pooled fund investment income. It is the intent of this policy to 

safeguard and maintain the principal value of funds invested and to minimize “paper losses” 

caused by changes in market value. Nonetheless, actual portfolio income and/or losses, and 

net of any reserves, will be distributed quarterly, in compliance with the California Government 

Code, among those participants sharing in pooled investment income. Except for specific 

investments in which the interest income is to be credited directly to the fund from which the 

investment was made, all investment income is to be distributed pro-rata based upon each 

participant’s average daily cash balance for the calendar quarter. 

QUARTERLY APPORTIONMENT OF ADMINISTRATIVE COSTS: 

Prior to the quarterly apportionment of pooled fund investment earnings, the County Treasurer 

is permitted, pursuant to the California Government Code, to deduct from investment earnings 

the actual cost of the investments, auditing, depositing, handling and distribution of such 

income. Accordingly, the Treasury shall deduct from pooled fund investment earnings the 

actual cost incurred for: banking services, wire transfers, custodial safekeeping charges, 

building remodeling costs and other capital outlays, the costs of investment advisory services, 

Page 6 of 16

credit ratings, the pro-rata annual cost of the salaries including fringe benefits for the personnel 

in the Treasurer/Tax Collector’s office engaged in the administration, investment, auditing, 

cashiering, accounting, reporting, remittance processing and depositing of public funds for 

investment, together with the related computer and office expenses associated with the 

performance of these functions. 

WITHDRAWAL OF FUNDS: 

Any depositor or public official having funds on deposit, either voluntarily or involuntarily, with 

this pool and that seeks to withdraw these funds for the purpose of investing or depositing them 

outside the Treasury Pool, shall first submit a request for withdrawal to the Treasurer for 

approval prior to withdrawing funds from the Treasury Pool. 

The request should be submitted and processed as follows: 

In writing, from the governing authority of the funds being withdrawn. The request 

should state the amount, date of transfer, where investment and/or deposit is to be 

made and the reason for the request. 

 

The request must be received by the County Treasurer no later than 30 days prior to the 

requested date of withdrawal. 

Prior to approving a withdrawal, the County Treasurer shall find that the proposed 

withdrawal will not adversely affect the interests of the other depositors in the County 

Treasury pool, in accordance with California Government Code section 27136(b). 

POLICY CRITERIA FOR AGENCIES SEEKING VOLUNTARY ENTRY INTO THE TREASURY 

POOL: 

The County Treasurer is not soliciting nor accepting any new agency’s voluntary entry into the 

Treasury Pool. 

ETHICS & CONFLICTS OF INTEREST: 

Officers and staff members involved in the investment process shall refrain from any personal 

business activity that compromises the security and integrity of the County’s investment 

program or impairs their ability to make impartial and prudent investment decisions. The 

Auditor-Controller/Treasurer/Tax Collector, Assistant Auditor-Controller/Treasurer/Tax Collector 

with Treasury oversight responsibility, Cash Manager/Investment Officer, Assistant Cash 

Manager/Investment Officer, and Investment Analyst(s) are required to file annually the 

applicable financial disclosure statements as mandated by the Fair Political Practices 

Commission (FPPC) and/or by County ordinance. In addition, the Assistant Auditor- 

Controller/Treasurer/Tax Collector with Treasury oversight responsibility, Cash 

Manager/Investment Officer, Assistant Cash Manager/Investment Officer, Investment Analyst, 

and any outside investment advisors or contracted consultants are required to sign and abide 

by an Ethics Policy instituted by the Auditor-Controller/Treasurer/Tax Collector. 

POLICY ADOPTION & AMENDMENTS: 

This policy statement will become effective immediately following adoption by the Board of 

Supervisors. It will remain in force as long as the delegation of authority to the Treasurer to 

invest is in effect and until the policy statement is subsequently amended in writing by the 

County Auditor-Controller/Treasurer/Tax Collector, reviewed by the Treasury Oversight 

Committee and approved by the Board of Supervisors. 

Page 7 of 16

COUNTY OF SAN BERNARDINO INVESTMENT POLICY 

OFFICE OF THE AUDITOR-CONTROLLER/TREASURER/TAX COLLECTOR 

(SCHEDULE I) 

AUTHORIZED 

INVESTMENTS 

United States Treasury 

notes, bonds, bills, or 

certificates of indebtedness, 

or those for which the full 

faith and credit of the U. S. 

are pledged for the payment 

of principal and interest 

Notes, participations or 

obligations issued or fully 

guaranteed as to principal 

and interest by an agency of 

the Federal Government or 

U.S. government-sponsored 

enterprises (excluding 

mortgage-backed securities) 

DIVERSIFICATION 

PURCHASE 

RESTRICTIONS 

MATURITY 

(not to 

exceed) 

MINIMUM ALLOWABLE 

CREDIT QUALITY 

(S&P/MOODY'S/FITCH) 

100% None 5 years Not Applicable 

100% Senior debt only 5 years Not Applicable 

Bonds, notes, warrants or 

certificates of indebtedness 

issued by agencies of and/or 

within the County of San 

Bernardino 

Bankers Acceptances issued 

by approved banks 

10% With approval of 

Treasurer 

30% Max $100mm par 

value of any one 

issuer subject to 5% 

overall corporate 

issuer limit. 

5 years AAA by at least 2 of the 3 

rating agencies** 

180 Days Rated by at least 2 of the 3 

rating agencies Minimum A- 

1, P-1, and/or F1 (if rated)** 

Commercial paper of U.S. 

Corps with total assets in 

excess of $500 MM 

40% total for all 

Commercial Paper 

Max 5% of portfolio 

by any one issuer 

subject to 5% 


issuer limit 

270 Days Rated by at least 2 of the 3 



Asset-backed Commercial 

Paper 

40% total for all 

Commercial Paper 

Issuer must have 

program-wide credit 

enhancements 

270 Days 

Rated by at least 2 of the 3 



Negotiable CDs issued by 

approved banks 

30% Max 5% of portfolio 

by any one issuer 

subject to 5% 


issuer limit 

3 years from 

settlement 

date 

Rated by at least 2 of the 3 


1, P-1, and/or F1 short-term 

rating or long-term letter 

rating of “AA” (if rated)** 

Collateralized Certificates of 

Deposit/Deposits 

10% As stipulated in 

Article 2, Section 

53630 et al of the 

Calif. Government 

1 year from 

settlement 

date 

See Section 53630 et al of 

the California Government 

Code 

Page 8 of 16

Repurchase Agreements 

with 102% collateral 

Code 

40% Repurchase 

Agreements 

(contracts) must be 

on file 

180 days Restricted to Primary 

Dealers on Eligible Dealer 

list 

Reverse Repurchase 

Agreements 

10% See Schedule II 92 days (See 

Schedule II) 

Restricted to Primary 

Dealers on Eligible Dealer 

list 

Medium Term Notes of U.S. 

Corporations & Depository 

Institutions and/or Corporate 

or Bank notes (Non 

FDIC/TLGP guaranteed) 

10% Max $100mm par 

value of any one 

issuer subject to 5% 


issuer limit 

3 years from 

settlement 

date 

Minimum letter rating of “AA” 

by at least 2 of the 3 rating 

agencies** 

Medium Term Notes of U.S. 

Corporations & Depository 

Institutions (and/or 

Corporate or Bank notes) 

guaranteed by the Federal 

Deposit Insurance 

Corporation and issued 

under the Temporary 

Liquidity Guarantee Program 

(TLGP) 

30% (including non- 

FDIC guaranteed 

Medium Term Notes) 

Excluded from 5% 


issuer limit due to 

FDIC/TLGP 

guarantee 

5 years Not Applicable 

Money Market mutual funds 

that meet requirements of 

Calif. Govt. Code 

15% Registered with 

SEC. No NAV 

adjustments. No 

loads. Max 10% per 

fund. 

Immediate 

Liquidity 

AAA by at least 2 of the 3 

rating agencies** 

** Standard & Poor’s Ratings Services, Moody’s Investors Service Inc., and Fitch Ratings Ltd. 

Page 9 of 16



STATEMENT OF INVESTMENT POLICY 

SCHEDULE II 

POLICY STATEMENT ON REVERSE REPURCHASE AGREEMENTS 

AND SECURITIES LENDING AGREEMENTS 

The Treasurer hereby institutes the following policies as further safeguards governing investments in Reverse 

Repurchase Agreements and Securities Lending Agreements: 

The total of Reverse Repurchase Agreement and Securities Lending Agreement transactions shall not exceed 

10 percent of the base value of the portfolio. The term of such agreements shall not exceed 92 calendar days, 

unless the agreement includes a written codicil guaranteeing a minimum earning or spread for the entire period 

between the sale of a security using such an agreement and the final maturity date of the same security. 

1. All loaned securities subject to Reverse Repurchase Agreements or Securities Lending Agreements 

shall be properly flagged and immediately accounted for in the Treasurer’s financial system. 

2. Investments purchased from the loaned proceeds of the Reverse Repurchase Agreement shall have 

maturities not exceeding the due date for repayment of the Reverse Repurchase Agreement 

transaction. 

3. Only U.S. Treasury Notes and Federal Agency securities owned, fully paid for, and held in the 

Treasurer’s portfolio for a minimum of 30 days can be subject to Reverse Repurchase Agreement and 

Securities Lending Agreement transactions. 

4. Reverse Repurchase Agreements and Securities Lending Agreements shall only be placed on portfolio 

securities: 

(a) intended to be held to maturity 

(b) fully paid for and held in the portfolio for a minimum of 30 days 

5. Reverse Repurchase Agreements and Securities Lending Agreements shall only be made with the 

authorized primary dealers of the Federal Reserve. 

6. A contractual agreement must be in place prior to entering into a Reverse Repurchase Agreement or 

Securities Lending Agreement with any authorized primary dealer. 

7. Reverse Repurchase Agreement and Securities Lending Agreement transactions shall have the 

approval of the County Treasurer. 

Page 10 of 16




SCHEDULE III 

POLICY CRITERIA FOR COLLATERALIZED CERTIFICATE OF DEPOSITS 

1. The bank must provide us with an executed copy of the authorization for deposit of moneys. 

2. The money-market yield on the certificate of deposit must be competitive to negotiable CD's offered by 

banks on the county's pre-approved list in the maturities desired by the County. The County Treasurer’s 

Office reserves the right to negotiate higher yields based on market conditions at the time. 

3. Collateral Requirements – The County will only accept U.S. Treasury and/or Agency securities as 

collateral. The collateral must be held by a separate custodial bank in an account in the name of San 

Bernardino County. The County must have perfected interest in the collateral. 

For U.S. Treasuries and Agency securities, the following requirements are listed: 

i. Maximum maturity of securities is 5 years 

ii. Collateral must be priced at 110% of the face value of the CD on a daily basis 

iii. Minimum face value of $5 million per pledged security 

The County Treasury must receive written confirmation that these securities have been pledged in repayment 

of the time deposit. Additionally, a statement of the collateral shall be provided on a monthly basis from the 

custodial bank. 

4. The County Treasurer must be given a current audited financial statement for the financial year just ended. 

The financial reports must both include a statement of financial condition as well as an income statement 

depicting current and prior year operations. 

5. The County Treasurer must receive a certificate of deposit which specifically expresses the terms 

governing the transaction, deposit amount, issue date, maturity date, name of depositor, interest rate, 

interest payment terms (monthly, quarterly, etc.) 

6. Notwithstanding the above, the certificate of deposit must meet the requirements of Fitch Ratings Ltd. for 

the County to maintain its AAA pool rating. These requirements typically include an A-1/P-1 and/or F1 

short-term rating. The County may rely on credit ratings of Standard & Poor’s, Moody’s and Fitch to 

determine the creditworthiness of an institution and/or may supplement this research with its own financial 

analysis. 

7. Deposits will only be made with banks and savings and loans having branch office locations within San 

Bernardino County. 

Page 11 of 16




SCHEDULE IV 

POLICY CRITERIA FOR SELECTION OF BROKER/DEALERS 

1. All financial institutions wishing to be considered for the County of San Bernardino’s Broker/Dealer List 

must confirm that they are a member of the Financial Industry Regulatory Authority (FINRA), registered 

with the Securities & Exchange Commission (SEC), and possess all other required licenses. 

2. The County Treasurer’s intent is to enter into a long-term relationship. Therefore, the integrity of the firm 

and the personnel assigned to our account is of primary importance. 

3. The firm must acknowledge receipt of the County Treasurer’s written Investment Policy guidelines. 

4. It is important that the firm provide related services that will enhance the account relationship which could 

include: 

(a) An active secondary market for its securities. 

(b) Internal credit research analysis on commercial paper, bankers’ acceptances and other securities it 

offers for sale. 

(c) Be willing to purchase securities from our portfolio. 

(d) Be capable of providing market analysis, economic projections, and newsletters. 

5. The firm must provide the County with annual financial statements. All firms with whom the County does 

business must have a stable financial condition. 

6. The County Treasury is prohibited from the establishment of a broker/dealer account for the purpose of 

holding the County’s securities. All securities must be subject to delivery at the County’s custodial bank, 

the Bank of New York Mellon. 

7. Without exception, all transactions are to be conducted on a delivery vs. payment (DVP) basis or for 

repurchase agreements, on a tri-party basis. 

8. The broker/dealer must have been in operation for more than five (5) years. 

9. Firms must have adequate financial strength and capital to support the level of trading that is approved. 

Adequate financial strength will be assessed by a review of the balance sheet and income statement of the 

dealer. Broker/dealers with less than $10 million of net capital may be approved for trading that is limited in 

maturity or amount or may not be approved for extended settlement trades. 

10. Repurchase Agreement Counterparty Minimum Requirements: 

Repurchase agreement counterparties will be limited to primary government securities dealers who report 

daily to the Federal Reserve Bank of New York and meet the following criteria: 

(a) Counterparties must have a minimum of two short-term credit ratings of at least A-1/P-1 and/or F1. 

(b) Counterparties and/or their parent must have a minimum of $25 billion in assets and $350 million in 

capital. 

Page 12 of 16

GLOSSARY OF TERMS 

ACCRUED INTEREST – Interest that has accumulated but has not yet been paid from the most recent interest 

payment date or issue date to a certain date. 

AGENCY ISSUES – Securities issued by federal agencies, those chartered by the federal government or 

Government Sponsored Enterprises that are considered to be backed by the federal government. See also 

Government Sponsored Enterprises. 

AMORTIZED COST – The original cost of the principal adjusted for the periodic reduction of any discount or 

premium from the purchase date until a specific date (also called “Book Value”). 

BANKERS ACCEPTANCE – Money market instrument created from transactions involving foreign trade. In its 

simplest and most traditional form, a bankers acceptance is merely a check, drawn on a bank by an importer or 

exporter of goods. 

BASIS POINT – A unit of measurement equal to 1/100 of 1 percent. As an example, the difference between a 

security yielding 3.25% and one yielding 3.20% is five basis points. 

BENCHMARK – An index or security used to compare the performance of a portfolio. 

BOND – A long-term debt instrument of a government or corporation promising payment of the original 

investment plus interest by a specified future date. 

BULLET – A colloquial term for a bond that cannot be redeemed, or called, prior to maturity. 

CALLABLE BOND – A bond in which all or a portion of its outstanding principal may be redeemed prior to 

maturity by the issuer under specified conditions. 

COLLATERALIZATION – Process by which a borrower pledges securities, property or other deposits for the 

purpose of securing the repayment of a loan and/or security. 

COLLATERALIZED CERTIFICATE OF DEPOSIT – An instrument representing a receipt from a bank for a 

deposit at a specified rate of interest for a specified period of time that is collateralized by the bank with 

securities at a minimum of 110% of the deposit amount. 

COMMERCIAL PAPER – Money Market instrument representing an unsecured short-term promissory note of 

a corporation at a specified rate of return for a specified period of time. 

COUPON – The stated interest rate on a debt security that an issuer promises to pay. 

CREDIT QUALITY – An indication of risk that an issuer of a security will fulfill its obligation, as rated by a rating 

agency. 

CREDIT RATING – A standardized assessment, expressed in alphanumeric characters, of a company’s 

creditworthiness. 

CREDIT RISK – The risk to an investor that an issuer will default in the payment of interest and/or principal on 

a security. 

CUSIP – A unique identifier for a security developed by the Committee on Uniform Security Identification 

Page 13 of 16

Procedures (CUSIP). The identifier is a nine-digit alphanumeric character. The first six characters identify the 

issuer, the following two identify the issue, and the final character is a check digit. 

DERIVATIVES – Securities which derive their value from that of another security or an underlying index, 

currency or other measure. Floating rate notes (also “floaters”) are not considered derivatives. 

DISCOUNT INSTRUMENTS – Securities that are sold at a discount to face value. 

DIVERSIFICATION – The practice or concept of investing in a range of securities by sector, maturity, asset 

class or credit quality in order to reduce and spread financial risk. 

DOLLAR WEIGHTED AVERAGE MATURITY – The sum of the amount of each security investment multiplied 

by the number of days to maturity, divided by the total amount of security investments. 

DURATION – Is a measure of the price volatility of a portfolio and reflects an estimate of the projected increase 

or decrease in the value of that portfolio based upon a decrease or increase in the interest rates. A duration of 

1.0 means that for every one percent increase in interest rates, the market value of the Portfolio would 

decrease by 1.0 percent. 

EARNINGS APPORTIONMENT – Is the quarterly interest distribution to the Pool Participants where the actual 

investment costs incurred by the Treasurer are deducted from the interest earnings of the Pool. 

GOVERNMENT OBLIGATIONS – Securities issued by the U.S. Treasury and Federal Agencies. U.S. 

Treasuries are direct obligations of the Federal Government. Agencies are not direct obligations of the Federal 

Government, but involve Federal sponsorship or guarantees. 

GOVERNMENT SPONSORED ENTERPRISES (GSE’S) – Private, shareholder-owned companies with a 

relationship with government agencies. These agencies generally are viewed to have an implied guarantee of 

the U.S. government. These include: 

Federal National Mortgage Association (FNMA) 

Federal Home Loan Bank (FHLB) 

Federal Farm Credit Bank (FFCB) 

Federal Home Loan Mortgage Corporation (FHLMC) 

HIGHLY LIQUID – The most eminent type of security that is easily converted to cash because there are many 

interested buyers and sellers to trade large quantities at a reasonable price. 

ILLIQUID – A security that is difficult to buy or sell or has a wide spread between the bid price and offer price in 

the secondary market. There are few buyers and sellers willing to trade large quantities at a reasonable price. 

INTEREST RATE RISK – The risk associated with declines or rises in interest rates which cause an 

investment in a fixed-income security to increase or decrease in value. Also called “Market Risk”. 

INVERSE FLOATERS – Floating rate notes which pay interest in inverse relationship to an underlying index. 

LIQUID – A security that is easily bought and sold because of the willingness of interested buyers and sellers 

to trade large quantities at a reasonable price. 

LOCAL AGENCY OBLIGATION – An indebtedness issued by a local agency, department, board, or authority 

within the State of California. 

LONG-TERM – The term used to describe a security when the maturity is greater than one year. 

Page 14 of 16

MARKET VALUE – An estimate of the value of a security at which the principal would be sold from a willing 

seller to a willing buyer at the date of pricing. 

MEDIUM TERM NOTES – These are Corporate Notes and Bank Notes that are debt obligations of banks, 

corporations, and insurance companies. They are issued at a specific rate of return for a specific period of 

time. 

MONEY MARKET MUTUAL FUND – A mutual fund with investments directed in short-term money market 

instruments only, which can be withdrawn daily without penalty. 

NEGOTIABLE CERTIFICATE OF DEPOSIT – A Money Market instrument representing a receipt from a bank 

for a deposit at a specified rate of interest for a specified period of time that is traded in secondary markets. 

PAR – The stated maturity value, or face value, of a security. 

PASS-THROUGH SECURITIES – A debt instrument that reflect an interest in a mortgage pool, consumer 

receivables pool and equipment lease-backed pool that serves as collateral for a bond. 

POOL – In this context, the pooled monies of different government agencies administered by the County 

Treasurer. Each pool member owns a fractional interest in the securities held in the Pool. 

PORTFOLIO VALUE – The total book value amount of all the securities held in the Treasurer’s Pooled Money 

Fund. 

PRIMARY DEALER – A group of dealers and banks that can buy and sell securities directly with the Federal 

Reserve Bank of New York. 

PRIVATE PLACEMENTS – Securities that do not have to be registered with the Securities and Exchange 

Commission because they are offered to a limited number of sophisticated investors. 

RANGE NOTES – Notes which pay interest only if the underlying index upon which it is benchmarked, falls 

within a certain range. 

REPURCHASE AGREEMENT – A repurchase agreement consists of two simultaneous transactions. One is 

the purchase of securities by an investor (i.e., the County), the other is the commitment by the seller (i.e. a 

broker/dealer) to repurchase the securities at the same price, plus interest, at some mutually agreed future 

date. 

REVERSE REPURCHASE AGREEMENT – The mirror image of Repurchase Agreements. In this instance the 

County Pool is the seller of securities to an investor (i.e. brokers). 

SAFEKEEPING – A custodian bank’s action to store and protect an investor’s securities by segregating and 

identifying the securities. 

SECURITIES LENDING – A transaction wherein the Treasurer’s Pool transfers its securities to broker/dealers 

and other entities for collateral which may be cash or securities and simultaneously agrees to return the 

collateral for the same securities in the future. 

SHORT-TERM – The term used to describe a security when the maturity is one year or less. 

TOTAL RETURN – The sum of all investment income plus changes in the capital value of a portfolio for a 

given period. 

VOLUNTARY PARTICIPANTS – Local agencies that are not required to deposit their funds with the County 

Page 15 of 16

Treasurer. 

WEIGHTED AVERAGE MATURITY – The remaining average maturity of all securities held in a portfolio. See 

Dollar Weighted Average Maturity. 

WHEN-ISSUED SECURITIES – A security traded before it receives final trading authorization with the investor 

receiving the certificate/security only after the final approval is granted. 

YIELD – The gain, expressed as a percentage, that an investor derives from a financial asset. 

YIELD TO MATURITY – The percentage rate of return paid if the security is held to its maturity date. The 

calculation is based on the coupon rate, length of time to maturity, and market price. It assumes that coupon 

interest paid over the life of the security is reinvested at the same rate. 

Page 16 of 16


1228 N Street, Suite 13 

Sacramento, CA 95814 

(916) 444-5100

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