SCHOOL DISTRICT OF CLAYTON MANAGEMENT'S DISCUSSION AND ANALYSIS - UNAUDITED Year ended June 30, 2020 The District as a Whole - Continued Table 2 Changes in Net Position from Operating Results Year Ended June 30, 2020 2019 Governmental activities Business- type activities Total Governmental activities Business- type activities Total Revenues Program revenues Charges for services $ 7,898,300 $ 522,090 $ 8,420,390 $ 8,834,939 $ 1,099,031 $ 9,933,970 Operating grants and contributions 2,254,982 - 2,254,982 1,499,399 - 1,499,399 General revenues Property taxes 59,764,410 - 59,764,410 42,443,840 - 42,443,840 Federal and State aid not restricted to specific purposes 1,987,417 - 1,987,417 2,352,559 - 2,352,559 Voluntary student transfer aid 1,367,251 - 1,367,251 1,568,157 - 1,568,157 Other 7,048,608 - 7,048,608 6,120,786 - 6,120,786 Total revenues 80,320,968 522,090 80,843,058 62,819,680 1,099,031 63,918,711 Expenses Instruction 32,333,373 - 32,333,373 30,370,087 - 30,370,087 Student services 2,918,501 - 2,918,501 2,636,099 - 2,636,099 Support services 2,219,105 - 2,219,105 1,972,618 - 1,972,618 Building administration 3,049,902 - 3,049,902 2,726,093 - 2,726,093 Executive administration 3,281,145 - 3,281,145 3,044,210 - 3,044,210 Business services 928,638 - 928,638 931,787 - 931,787 Central office support services 4,772,627 - 4,772,627 5,335,592 - 5,335,592 Operation of plant 11,754,267 - 11,754,267 10,895,241 - 10,895,241 Security services 171,267 - 171,267 203,982 - 203,982 Nonallowable transportation 192,241 - 192,241 185,278 - 185,278 Food services 966,005 - 966,005 1,184,498 - 1,184,498 Adult/community programs 1,134,749 - 1,134,749 1,201,406 - 1,201,406 Facilities acquisition and construction 4,572,239 - 4,572,239 - - - Interest and other charges 3,154,927 - 3,154,927 3,907,058 - 3,907,058 Local district services - 587,773 587,773 - 883,805 883,805 Total expenses 71,448,986 587,773 72,036,759 64,593,949 883,805 65,477,754 Excess (deficiency) before other income and transfers 8,871,982 (65,683) 8,806,299 (1,774,269) 215,226 (1,559,043) Other income Transfers (109,325) 109,325 - 223,267 (223,267) - Total other income (109,325) 109,325 - 223,267 (223,267) - Change in net position 8,762,657 43,642 8,806,299 (1,551,002) (8,041) (1,559,043) Beginning net position 15,264,780 44,125 15,308,905 16,815,782 52,166 16,867,948 Ending net position $ 24,027,437 $ 87,767 $ 24,115,204 $ 15,264,780 $ 44,125 $ 15,308,905 - 12 - SCHOOL DISTRICT OF CLAYTON MANAGEMENT'S DISCUSSION AND ANALYSIS - UNAUDITED Year ended June 30, 2020 Governmental and Business-Type Activities As reported in the Statement of Activities, the cost of all governmental and business-type activities totaled $72.0 million in fiscal year 2020. However, the District’s local taxpayers ultimately funded $59.8 million or 83.1% of these costs because some of the costs were paid by those who benefited from the programs ($8.4 million), by other governments and organizations who subsidized certain programs ($3.6 million), and by miscellaneous sources ($9.0 million). Table 3 shows the cost of each of the District’s largest functions, as well as each function’s net cost (total cost less revenue generated by the activities). The net cost shows the financial burden that was placed on the District’s taxpayers by each of the functions. Providing this information allows citizens to consider the cost of each function in comparison to the benefits they believe are provided by that function. Table 3 Net Cost of Governmental Activities Year ended June 30, 2020 2019 Total cost of services Net cost of services Total cost of services Net cost of services Governmental activities Instruction $ 32,333,373 $ 30,672,612 $ 30,370,087 $ 28,058,231 Student services 2,918,501 2,918,501 2,636,099 2,636,099 Support services 2,219,105 2,135,607 1,972,618 1,866,773 Administration 7,259,685 7,247,733 6,702,090 6,694,023 Operation of plant 11,925,534 9,970,013 11,099,223 10,014,300 Facilities acquisition and construction 4,572,239 4,572,239 - - Other 7,065,622 624,072 7,906,774 1,083,127 Interest and other charges 3,154,927 3,154,927 3,907,058 3,907,058 71,448,986 61,295,704 64,593,949 54,259,611 Business-type activities Local district services 587,773 65,683 883,805 (215,226) Total $ 72,036,759 $ 61,361,387 $ 65,477,754 $ 54,044,385 Instruction expenses include activities directly involved in the teaching of pupils, and the interaction between teacher and pupil. Student services are those services which provide administrative, technical (such as guidance and health), and logistical support to facilitate and enhance instruction, and to a lesser degree, community services. Support services include the activities involved with assisting staff with the content and process of teaching to pupils as well as library services. Administration includes expenses associated with administrative and financial supervision of the District. Operation of plant activities involves maintaining school grounds, buildings, and equipment in an effective working condition. - 13 -

Administration includes expenses associated with administrative and financial supervision of the District. Operation of plant activities involves maintaining school grounds, buildings, and equipment in an effective working condition. - 13 - SCHOOL DISTRICT OF CLAYTON MANAGEMENT'S DISCUSSION AND ANALYSIS - UNAUDITED Year ended June 30, 2020 Governmental and Business-Type Activities - Continued Other includes services for transportation, food, communications, human resources, and expenses for the District self funding its health insurance plan. Interest and other charges are transactions associated with the payment on debt of the District. Business-type activities are services provided to constituents of the District where all or most of the costs involved are recovered through services charged to the users of such services or from transfers from other funds. The dependence upon tax revenues is apparent. Over 94.9% of instruction activities are supported through taxes and other general revenues; for all governmental activities, general revenue support is 85.8%. The District’s Funds The District uses funds to control and manage money for particular purposes. A review of the funds provides some insight as to whether the District is being accountable for the resources taxpayers and others provide to it, and also provides insight into the District’s overall financial health. In total, governmental funds had a fund balance of $34.1 million at June 30, 2020. This represents an overall increase of $6.0 million from the prior year. The increase was primarily a result of the planned increase in fund balances for the General, Special and Capital funds due to the passing of a tax levy designed to provide resources to the District for future years. Additionally, the General Fund had reduced expenditures as less funds were spent on travel, supplies and overtime as a result of COVID-19 (see Note J). Expenditures for the Special Revenue Fund were slightly less than budgeted as fewer extra pay stipends were awarded due to COVID-19. The Capital Projects Fund had a planned increase in expenditures as proceeds from the prior year's capital lease were expended in the current year. The Debt Service shows proceeds and payments for a bond refunding that occurred in this fiscal year. The overall position of the District’s funds remains financially strong and the District is able to meet all of its ongoing operational expenditures without having to resort to short-term financing activities. Operating Funds (General and Special Revenue Funds Combined) - Budgeting Highlights In accordance with Chapter 67, RSMo, the District adopts a budget for each fund. While the District uses its funding judiciously, there are a number of factors that affect the budget over which the District has little or no control. The District uses site-based budgeting which is designed to tightly control site budgets but provide flexibility for site management. 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 -

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, 2020 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 76.7% 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 2019-2020 property tax revenues for all funds increased by approximately $16 million or 37.7% more than the 2018-2019 totals primarily from the successful passing of a tax levy in April of 2019 and a $1.2 million increase in delinquent property taxes. 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 $3.7 million above the original budget and approximately $1.8 million above the revised budget for all funds. For the year ended June 30, 2020, the General Fund budgetary basis actual expenditures were approximately $2.2 million less than final budgeted amounts. COVID-19 caused expenditures to be less for student activities by approximately $260 thousand, for food services by approximately $320 thousand, for utilities by approximately $253 thousand, for training and professional travel by approximately $313 thousand and for supplies by approximately $373 thousand. The Special Revenue Fund budgetary basis actual expenditures reflect an overall positive variance of approximately $1.1 million from 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, 2020, the combined General and Special Revenue change in fund balances was approximately $4.6 million greater than the 2019-2020 final budget. Missouri law prohibits a district from overspending the expenditure budget per fund. - 15 -

For the year ended June 30, 2020, the combined General and Special Revenue change in fund balances was approximately $4.6 million greater than the 2019-2020 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, 2020 Capital Assets and Debt Administration Capital Assets At June 30, 2020, the District had capital assets with a net book value of $102.5 million, which includes $50.9 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, 2020 2019 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 96,015,678 - 96,015,678 98,535,256 - 98,535,256 Furniture and equipment 3,338,060 87,767 3,425,827 3,338,288 44,125 3,382,413 Total $ 102,430,983 $ 87,767 $ 102,518,750 $ 102,588,080 $ 44,125 $ 102,632,205 The total additions for the year were $4.0 million which consisted of approximately $2.4 million construction in progress, $675,000 of building and improvements and $939,000 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 majority of the lease proceeds were spent in the current year. Debt Administration At June 30, 2020, the District had $62.7 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 $140.1 million at June 30, 2020, far above the District’s current level of debt. The District’s Debt Service levy for 2019-2020 was $0.623 on each $100 of assessed valuation. The Debt Service Fund balance at June 30, 2020 was $6.4 million and equal to nearly 83.5% of the fiscal year 2021 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, 2020 Economic Factors and Fiscal Year 2020-2021 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. During the 2018-2019 school year, the District began developing a new strategic plan with the end in mind: our students. We developed a Profile of a Clayton Graduate that includes competencies we want for every Clayton graduate. During the 2019-2020 school year, we engaged the community to establish the direction of the District’s new strategic plan, using the Profile as the foundation of our work. We envision a plan that will influence our approach to learning and challenge the mental models of what our schools look like for our students. We have established goal statements to guide our work:  We will ensure each learner feels 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. While our District’s new 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. On April 2, 2019, the Board of Education (Board) asked the community to vote on Proposition E, an operating levy increase of 56 cents per $100 of assessed valuation and an eight-cent waiver of Proposition C sales tax revenues. The voters approved the ballot measure with 64.2% of the votes. The net effect of both measures provided the District with an additional 64 cents of operating revenue, or approximately $7.3 million. The additional revenue will maintain and strengthen the District’s academic excellence and fiscal stability by eliminating the gap between revenues and expenses, addressing facility and maintenance needs and rebuilding reserves. The community's support of Proposition E will have a lasting impact on our schools and our students. - 17 -