Projections continue to trend upward primarily due to an increase in resident enrollment. District administration will continue to monitor resident enrollment trends and its impact on the District’s non-resident enrollment. 11 Resident Enrollment Resident Projection The total resident enrollment projection for the 2019-2020 school year is 2,241 students which is a 2.9% increase compared to the September 2018 count day resident total student enrollment of 2,178. Students from New Residential Developments – There were 600 units and 42 townhomes that recently completed construction during 2018. There are an additional estimated 521 residential rental units either approved or pending approval by the cities of Clayton and Richmond Heights. The District has been tracking enrollment of students residing in residential high rise or downtown Clayton apartments since 2012-2013. Enrollment records indicate this is a transient population. Approximately two-thirds of students residing in high rise or downtown Clayton apartments continue to reside in them after two years. This percentage drops to approximately fifty percent of those same students after three years. The District enrolled nine new students from the new developments during the 2018-2019 school year but saw a significant drop in student enrollment from Clayton on the Park. Overall, the number of students residing in residential high rise or downtown Clayton apartments is lower in 2018-2019 than in 2015-2016 and 2013-2014. The District continues to closely monitor and annually evaluate the impact of these types of developments on its residential enrollment. Non-Resident Enrollment Board Grant – The District allows the children of employees to enroll as students in the District. This enrollment is projected to increase next school year to 185 students which is a 10.1% increase when compared to the September 2018 count day total of 168. Statutory Transfer Tuition Students – Pursuant to Missouri Revised Statutes Section 167.131, the District has enrolled students from unaccredited school districts in the same or adjoining county since the 2013-2014 school year. Both the Normandy School Collaborative and Riverview Gardens School District gained provisional accreditation and the Board agreed to phase out students per an approved memorandum of understanding’s (MOU) student transition plan. Statutory tuition enrollment is projected to decrease 29 students or 52.7% primarily due to normal grade progression under the MOU’s transition terms. Voluntary Transfer Student Program (VTS) – The Voluntary Transfer Student Program (VTS) is a program administered by the Voluntary Interdistrict Choice Corporation , a non-profit entity formed to collect and administer state funds to support the voluntary transfer students who choose to attend a district other than the student district of residence (the City of St. Louis School District). The voluntary transfer enrollment is projected to fall to 218 which is a 3.5% decrease when compared to the September 2018 count day enrollment of 226 students. Personal Tuition and Tax-Credit Tuition Students – According to RSMo 167.151 the School Board, in its discretion, may admit to the school pupils not entitled to free instruction and prescribe the tuition fee to be paid by them. Personal tuition and tax credit enrollment are projected to decrease two students due to graduation. 12

Personal Tuition and Tax-Credit Tuition Students – According to RSMo 167.151 the School Board, in its discretion, may admit to the school pupils not entitled to free instruction and prescribe the tuition fee to be paid by them. Personal tuition and tax credit enrollment are projected to decrease two students due to graduation. 12 The health insurance plan year is a calendar year, not fiscal, and is negotiated in the summer months each year. BUDGETS AND BUDGETARY ACCOUNTING Budget Management The District follows these procedures in establishing the budgetary data reflected in the financial statements:  In accordance with RSMo Chapter 67 and Board Policy DB, the District adopts a budget for each fund.  Prior to July, the Superintendent, who serves as the budget officer, submits to the Board of Education a proposed budget for the fiscal year beginning on the following July 1. The proposed budget includes estimated revenues and proposed expenditures for all District funds. Budgeted expenditures cannot exceed beginning available monies plus estimated revenues for the year.  A public hearing is conducted to obtain taxpayer comments. Prior to its approval by the Board of Education, the budget document is available for public inspection.  Prior to July 1, the budget is legally enacted by a vote of the Board of Education.  Subsequent to its formal approval of the budget, the Board of Education has the authority to make necessary adjustments to the budget by a formal vote of the Board. For each fund, total fund expenditures may not legally exceed final amended budgeted expenditures. Expenditure appropriations lapse at the end of the fiscal year.  Budgets are adopted on the cash basis of accounting for all governmental funds. The cash basis is used to enable the District to more accurately budget revenue and expenses as the resources are expended or received. Budget Cycle Teacher Salaries are negotiated in odd- numbered years beginning in January and receiving Board approval by the end of March. 13

The cash basis is used to enable the District to more accurately budget revenue and expenses as the resources are expended or received. Budget Cycle Teacher Salaries are negotiated in odd- numbered years beginning in January and receiving Board approval by the end of March. 13 Budget Development Process Zero-Based Budgeting – An Overview Each year, the Superintendent and the Chief Financial Officer present a proposed budget to the Board of Education that includes estimates of the total expenditures required to operate the District. Before that can happen, staff across the District must work through a number of components to develop these cost estimates. This process requires active involvement from teachers, building leaders, coordinators and all support staff in setting the stage. District Administrators are committed to fostering inclusive budget discussions centered on student achievement and the goals that are leading the Superintendent’s work. The 2015-2016 budget was the first budget prepared through a Zero-Based Budgeting (ZBB) approach which is one of the key initiatives used to implement the Resource Management theme in the District’s Strategic Plan. This approach helps ensure that the budget is developed to align with priorities for instructional practices and organizational needs. It’s different because it’s built on needs and priorities as opposed to historical spending trends. The ZBB process is about creating accountability for what we spend and transparency around the decisions we make about where we spend our money. The 2019-2020 budget process will continue to be prepared using a Zero-Based Budgeting approach Building the Budget to Align with Budget Priorities Since there is no wrong way to prepare a budget or a standard budget process for ZBB, each administrator built the process around the building’s/department’s culture to ensure what they do, who they do it for, why they do it and how well they do it are all maintained. By developing their own approach to this process, the building/department owns each decision provides input to each decision and is accountable for its results and how the results are defined. Each administrative leader was tasked to identify the Needs of the building or department by using decision units. Needs are defined as resources required to provide only the most fundamental services essential to execute the written curriculum, ensure adequate support services and operate the building. A decision unit is a decision-making group of staff that can be comprised of representatives from grade levels, subject areas, programs and departments that develop and prioritize budget requests. The Need’s recommendations are analytically reviewed by the Chief Financial Officer and significant fluctuations are discussed with the administrative leader who submitted the request. Next, each administrative leader was tasked to identify Wants and Enhancements of the building or department again by using decision units. Wants are defined as resources essential to provide educational services, which expand the written curriculum and achieve the level of excellence provided by the District. Enhancements are defined as resources that will expand educational services and opportunities for students in alignment with the Strategic Plan. Each administrative leader was asked to work with their decision unit(s) to prioritize the list of Wants and Enhancements in order from most important to least important. The decision unit level prioritized Wants and Enhancements lists are then discussed at a March District Leadership Council meeting and prioritized at a District-wide level. Collaborating to Balance A zero-based budget starts from a "zero base" and every function within an organization is analyzed for its needs and wants – all expenses must be justified. Budgets are then built for the upcoming year based upon these District-wide prioritized requests. The final ZBB budget is then balanced given funding constraints approved by the Board. 14

Budgets are then built for the upcoming year based upon these District-wide prioritized requests. The final ZBB budget is then balanced given funding constraints approved by the Board. 14 All members of the District Leadership Council share in the experience of analyzing budget trade-offs and making tough decisions between building and department requested wants and enhancements. Stakeholder Involvement Stakeholder feedback is essential to a transparent, forward-thinking budget. There are several tools the Board and administration use to communicate with the public.  Committees – There are several committees in the District that help guide the direction of schools, curriculum and the budget. Examples include the Long-Term Financial Planning (LTFP) Committee and its subcommittees, curriculum committees, and Parent-Teacher Organizations.  Public Survey – On a bi-annual basis, the District will conduct an outsourced public survey through a marketing research firm to provide an unbiased view of public opinion. This gives all residents a chance to have their voices heard.  Social Media – The District maintains a Facebook page and Twitter feed to provide a two-way dialog with citizens. Several individual programs in the District also maintain an active and vibrant social media presence. Budget Monitoring Throughout the fiscal year, two-way communication is maintained between the Office of Business and Finance and the various budget administrators. Since events change throughout the year, budget administrators will periodically need to revise a budget item. What results is a “give and take” approach to the request for revisions in budget amounts. First, the administrator’s entire function is reviewed for areas that might have excess budget amounts. If it is determined that there are excess budget amounts, then a budget transfer is completed to move the excess budget amount needed to fill the request. If it is determined that the administrator’s function has no excess budget amount, then other functions are reviewed for excess budget amounts. Finally, if these reviews reveal no excess budget amounts, then a budget modification request is submitted to the Board for approval. Monthly, a report is provided to the Board indicating actual performance compared to budget. In addition, the Director of Finance reviews actual performance compared to budget on a continuing basis. As the year progresses, this review increases in focus to the extent that over the last few months of the fiscal year the budget is reviewed on a line item by line item basis. 15

In addition, the Director of Finance reviews actual performance compared to budget on a continuing basis. As the year progresses, this review increases in focus to the extent that over the last few months of the fiscal year the budget is reviewed on a line item by line item basis. 15 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Fund Accounting Missouri law and Board Policy DI require that school districts account for their budget using fund accounting. All revenue received and expenditures made by the District are allocated to separate funds. Missouri law also requires that separate accounts are established for each fund and that expenditures from any fund may not exceed estimated expenditures for that fund for the fiscal year. Governmental Funds General Fund The General Fund is the primary operating fund of the District and is used to account for all financial resources except those required to be accounted for in another fund. This includes salaries and employee benefits for non-certificated personnel (such as office or maintenance personnel), District paid retirement contributions for all personnel, instructional materials, and school operational costs, such as utilities and facility repairs. All textbooks are purchased through this fund. Special Revenue Fund The Special Revenue Fund is used to account for specific revenue sources that are restricted or committed for the payment of salaries and certain employee benefits for certified personnel including teachers, counselors, librarians and certified administrators. Debt Service Fund Money in this fund is used for the retirement of bonds issued to finance school renovation or new construction. Bond issues must be approved by four-sevenths of the voters at primary or general elections, or by two-thirds of the citizens at all other elections. When the voters approve a bond issue, they authorize the Board to set a tax rate in the Debt Service Fund that will meet the principle and interest payments due each fiscal year. Capital Projects Fund Capital expenditures such as building renovation and construction, equipment, and furniture are paid from this Fund. Proprietary Funds Enterprise Fund (Business-Type Activities) Enterprise funds are used to account for business-type activities financed primarily by user charges. This includes programs such as SummerQuest, Kids Zone, driver’s education, and facility rentals. Internal Service Fund The internal service fund accounts for the activities of the District’s medical self-insurance fund. This includes the collection of premiums from employees and the payment of claims, direct insurance payments and administrative fees. The District’s budgeted revenues, expenditures and fund balances as of June 30, 2019 are presented on the next page. 16