During the year the District revises the budget to deal with unexpected changes in revenues and expenditures as additional information becomes available. Schedules showing the District’s original and final budget amounts compared with actual amounts paid and received for the General and Special Revenue Funds are provided later in this report as required supplementary information. - 14 - SCHOOL DISTRICT OF CLAYTON MANAGEMENT'S DISCUSSION AND ANALYSIS - UNAUDITED Year ended June 30, 2021 Operating Funds (General and Special Revenue Funds Combined) - Budgeting Highlights - Continued The District’s financial strength is derived primarily from its strong local property values as over 83.0% of the District’s operating revenues are generated through local property taxes. Under Missouri Statutes, property tax rates fluctuate with changes in assessed values preventing windfall revenue increases during periods of growing property values. This mechanism also protects taxing entities during periods of falling property values and has minimized the impacts of recent property value declines. The 2020-2021 property tax revenues for all funds decreased by approximately $2.3 million or 4.0% from the 2019-2020 totals primarily because of the settlement of protested property tax cases in favor of the taxpayer by St. Louis County. The District revised the original current property tax budget after assessed valuation information was obtained from St. Louis County. Property tax revenues finished the year approximately $1.3 million below the original budget and approximately $0.5 million above the revised budget for all funds. For the year ended June 30, 2021, the General Fund budgetary basis actual expenditures were approximately $3.7 million less than final budgeted amounts. COVID-19 caused expenditures to be less for student activities by approximately $634 thousand, for food services by approximately $724 thousand, for summer fee-based programs by approximately $486 thousand, for utilities by approximately $239 thousand, for training and professional travel by approximately $366 thousand, for purchased services by $286 thousand and for supplies by approximately $381 thousand. The Special Revenue Fund budgetary basis actual expenditures were approximately $0.7 million less than the final budget primarily in the function of Instruction. Expenditures were lower than budget in salaries and benefits primarily due to COVID-19 reducing the amount of extra pay stipends for student activities, summer programs, and athletics as well as reducing the cost of substitute teacher expenditures. For the year ended June 30, 2021, the combined General and Special Revenue change in fund balances was approximately $3.6 million greater than the 2020-2021 final budget. Missouri law prohibits a district from overspending the expenditure budget per fund. - 15 -

For the year ended June 30, 2021, the combined General and Special Revenue change in fund balances was approximately $3.6 million greater than the 2020-2021 final budget. Missouri law prohibits a district from overspending the expenditure budget per fund. - 15 - SCHOOL DISTRICT OF CLAYTON MANAGEMENT'S DISCUSSION AND ANALYSIS - UNAUDITED Year ended June 30, 2021 Capital Assets and Debt Administration Capital Assets At June 30, 2021, the District had capital assets with a net book value of $102.0 million, which includes $55.0 million in accumulated depreciation. Table 4 shows a breakdown of capital assets, net of accumulated depreciation, at year end. Table 4 Capital Assets - Net June 30, 2021 2020 Governmental activities Business- type activities Total Governmental activities Business- type activities Total Land $ 714,536 $ - $ 714,536 $ 714,536 $ - $ 714,536 Construction in progress - - - 2,362,709 - 2,362,709 Buildings and improvements 97,784,161 - 97,784,161 96,015,678 - 96,015,678 Furniture and equipment 3,448,299 75,754 3,524,053 3,338,060 87,767 3,425,827 Total $ 101,946,996 $ 75,754 $ 102,022,750 $ 102,430,983 $ 87,767 $ 102,518,750 The total additions for the year were $3.8 million which consisted of $2.7 of building and improvements and $1.0 in furniture and equipment purchases. In June 2019, the District entered into an approximately $5.1 million capital lease for the purpose of renovation and improvements to Meramec Elementary and to fund capital contributions to the joint venture Clayton Recreation, Sports and Wellness Commission which is undergoing a $10 million renovation project. The remaining lease proceeds were spent in the current year. Debt Administration At June 30, 2021, the District had $55.8 million in general obligation bonds outstanding. Missouri statute allows school districts to incur debt up to an amount equal to 15% of the most current assessed valuation. The District’s allowable debt level was approximately $147.0 million at June 30, 2021, far above the District’s current level of debt. The District’s Debt Service levy for 2020-2021 was $0.623 on each $100 of assessed valuation. The Debt Service Fund balance at June 30, 2021 was $5.4 million and equal to nearly 73.8% of the fiscal year 2022 annual debt service expense. The District’s bond rating is AAA with Standard and Poor’s. Other long-term liabilities of the District include compensated absences and capital leases for renovation and improvement projects. Additional information about debt is provided in Note E. - 16 -

Other long-term liabilities of the District include compensated absences and capital leases for renovation and improvement projects. Additional information about debt is provided in Note E. - 16 - SCHOOL DISTRICT OF CLAYTON MANAGEMENT'S DISCUSSION AND ANALYSIS - UNAUDITED Year ended June 30, 2021 Economic Factors and Fiscal Year 2021-2022 Budget As a community, the students, staff, parents and patrons of the School District of Clayton are united in our commitment to student learning. Our mission, vision and core values embody why we are here, what we want our students to become, and the principles that guide our work. The District’s mission to inspire each student to love learning and embrace challenge within a rich and rigorous academic culture, and the vision to develop leaders who shape the world through independence, creativity and critical thinking set the standard for the education we provide. In addition to the mission, vision and core values, the District also uses our Profile of the Clayton Graduate that describes the attributes we want for every Clayton graduate. We envision graduates who are self-actualized, intellectually curious, culturally competent, empathetic, creative and collaborative. We use this profile to influence our approach to learning and challenge the mental models of what our schools should look like for our students. The Board approved the District’s strategic plan on November 11, 2020. Varied stakeholders developed the strategic plan keeping the end in mind – the students – using the profile as the foundation of the work. The goals of the strategic plan are meant to be aspirational and bold:  We will ensure all learners, regardless of their identity, feel safe and valued.  We will commit to the educational growth of our learners through an equitable, personalized and individualized learning experience.  We will be dedicated to the personal growth of our learners in their social, emotional and physical well-being. Under each of these goals are objectives that are concrete and measurable. While our District’s strategic plan will serve as a guide for where we are going over the next three to five years, we will also be purposeful about being reflective and make adjustments along the way. We are taking an evergreen approach to our strategic plan. This means we will evaluate it more often and make changes as needed based on evidence we gather. We will have action steps that are aspirational, attainable, and aligned to our resources. The strategic plan’s data dashboard, which is an interactive tool on the District website, allows all District stakeholders to monitor our progress and hold us accountable to making growth in our goals and objectives.. - 17 -

We will have action steps that are aspirational, attainable, and aligned to our resources. The strategic plan’s data dashboard, which is an interactive tool on the District website, allows all District stakeholders to monitor our progress and hold us accountable to making growth in our goals and objectives.. - 17 - SCHOOL DISTRICT OF CLAYTON MANAGEMENT'S DISCUSSION AND ANALYSIS - UNAUDITED Year ended June 30, 2021 The District optimizes and aligns resources to ensure we meet stated goals and objectives. To ensure we have both the fiscal and human capital needed, we use an organizational planning model that causes us to annually review our alignment of strategic goals and finances. We build our annual budget based on an organizational structure focused on instruction, human resources, capital improvement, programs and financial sustainability. We use our growth data to determine if the way we are allocating resources is having the impact we expect. The District’s instructional and departmental operating budgets are prepared through a Zero-Based Budgeting (ZBB) approach. This approach helps ensure that the budget is developed to align with priorities for instructional practices and organizational needs. The ZBB approach is built on needs and priorities rather than on historical spending trends. The ZBB process is about creating accountability for what the District spends and transparency of the decisions for where the District spends. Proposed 2021-2022 total expenditures including normal debt service payments, business-type activities, and extraordinary items total $68.5 million. Projected total revenues, inclusive of business-type, debt service, and extraordinary items of $70.7 million will result in a surplus $2.2 million and grow the overall fund balance to $37.5 million. Because many of the revenues and expenditures included in the total budget are restricted for specific purposes, the operating budget more clearly reflects the District’s expected results of operations. The operating revenue budget is projected to increase by $1.7 million or 2.94% to a total of $61.1 million primarily due to the increase in local taxes receiving a 1.4% adjustment for CPI. In addition, other local income increased due to the significant reductions in student activities and Family Center revenue for the 2020-2021 school year and returning close to pre-pandemic levels for 2021-2022. Projected revenue is based upon the best information available at this time as well as historical trends. The operating expenditure budget is projected to increase by $1.5 million or 2.60% to a total of $58.6 million. The 2019-2020 was the final year of a two-year salary agreement. Administration and teacher representatives began having salary discussions in February 2021. The Board approved a two-year salary schedule at their April 14, 2021 meeting. A .92% budgetary increase for certified teaching staff has been included in the current projections per the salary agreement. The average salary increase for a teacher is 3.0% due to staff turnover. Administrative salaries, classified salaries, part-time temporary employment and substitute budgets will be increased by 3.0%. This represents an overall budgetary salary increase of 2.0%. In addition, the operating budget supports the maintenance of our facilities and grounds, recommended technology improvements, textbook, musical instrument and athletic uniform replacement, and curriculum implementation plans. Total proposed maintenance Capital Improvement Plan (CIP) expenditures for 2021-2022 will have a total allocation of $940,250. An additional $592,930 will also be used to pay the annual financing payments for improvements at the Center of Clayton. - 18 -

Total proposed maintenance Capital Improvement Plan (CIP) expenditures for 2021-2022 will have a total allocation of $940,250. An additional $592,930 will also be used to pay the annual financing payments for improvements at the Center of Clayton. - 18 - SCHOOL DISTRICT OF CLAYTON MANAGEMENT'S DISCUSSION AND ANALYSIS - UNAUDITED Year ended June 30, 2021 While there are many unknowns in the educational world concerning the COVID-19 pandemic, the District has been responsive to the needs of families to ensure every student receives an equitable education regardless of the learning environment. The District budgeted approximately $1.0 million in federal COVID relief funds because of numerous fiscal recovery acts passed by Congress that provide a substantial infusion of resources to help address the costs of operating during a pandemic, the resulting economic fallout, and lay the foundation for a strong and equitable recovery. The District utilized these funds to install a needlepoint bi-polar ionization system that is integrated into each building’s HVAC system to provide pathogen removal remediation. Further, a Contract Tracing Investigator position was added to assist in compliance with St. Louis County mandates related to the coronavirus pandemic. Personal protective equipment (PPE) including facemasks, face shields, hand sanitizer, touchless paper towel dispensers, spray bottles/microfiber towels, desk partitions/dividers, and signage were purchased to provide a safe environment. Technology enhancements were added to improve/assist with online learning. Finally, additional instructional support positions were added to assist in monitoring students’ progress. The 2021-2022 budget continues to be impacted by the effects of the COVID-19 closures that took place beginning in March of 2020. The economy saw many changes from businesses closing, rising unemployment, declines in the federal funds target rate, etc. The lasting effects of COVID-19 on the District revenues and expenditures remain undetermined. The District will continue to work to control costs and align resources with priorities while also looking at other strategies to maintain financial balance with minimal impact on students and classrooms. Operating revenues will exceed operating expenses, which will increase the operating fund balance by $2.5 million. The 2021-2022 year-end operating fund balances inclusive of business-type activities are projected at $31.8 million or 53%. However, $3.3 million has been formally committed by the Board for future capital expenditures. This leaves a net operating fund balance of $27.7 million or 47% of budgeted operating expenditures which exceeds the Board’s fund balance goal of 18%. As part of the normal budgeting process, long-range projections are developed and continually updated. This process allows the District to determine how much of available resources can be used for ongoing projects, such as new programs or initiatives, versus one-time projects, such as facility repairs. Current long-range projections include new revenue from five developments where construction plans have been approved.  Resident Inn by Marriott – 8125 Forsyth Boulevard, Clayton  Clarendale of Clayton – 7651 & 7601 Clayton Road, Clayton  Forsyth Point – 8049 Forsyth Boulevard, Clayton  Bank of America – 8100 Forsyth Boulevard, Clayton  The Pearl Condominiums – 43-55 Topton Way, Clayton - 19 -