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Home My WebLink About07-0634 . . . . BIG SPRING SCHOOL DISTRICT FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2006 .. . . . . . 07- ~3'1 Ctt,J . . TABLE OF CONTENTS . INDEPENDENT AUDITORS' REPORT MANAGEMENT'S DISCUSSION AND ANALYSIS . BASIC FINANCIAL STATEMENTS District-wide financial statements . Statement of net assets Statement of activities Fund financial statements . Balance sheet - governmental funds Reconciliation of the governmental funds balance sheet to the statement of net assets . Statement of revenues, expenditures. and changes in fund balances - governmental funds Reconciliation of the governmental funds statement of revenues, expenditures, and changes in fund balance to the statement of activities . Statement of net assets - proprietary funds Statement of revenues. expenses, and changes in net assets - proprietary funds . Statement of cash flows - proprietary funds Statement of net assets - fiduciary funds NOTES TO FINANCIAL STATEMENTS . BUDGETARY COMPARISON INFORMATION - GENERAL FUND . Page Number IAR - 1 to IAR - 2 MDA - 1 to MDA - 10 FS -1 FS - 2 FS - 3 FS -4 FS - 5 FS - 6 FS -7 FS - 8 FS - 9 FS - 10 FS - 11 to FS - 25 BCI-1 . . . . . . i. . . . GREENAWALT & COMPANY, P.C. CERTIFIED PUBLIC ACCOUNTANTS JAMES E. LYONS HOWARD R. GREENAWALT CREEDON R. HOFFMAN DEBORAH J. KELLY 400 WEST MAIN STREET MECHANICSBURG, PENNSYLVANIA 17055 (717) 766-4763 FAX (717) 766.2731 62 WEST POMFRET STREET CARLISLE, PA 17013 (717) 243-4822 FAX (717) 258-9372 R. A. GREENAWALT (1956-1983) A. A. REIDINGER (RETIRED) C. EDWARD ROGERS, JR. INDEPENDENT AUDITORS' REPORT Board of School Directors Big Spring School District Newville, Pennsylvania We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of Big Spring School District as of and for the year ended June 30, 2006, which collectively comprise the District's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the District's management. Our responsibility is to express an opinion on these financial statements based on our audit. The prior year summarized comparative information has been derived from the District's June 30, 2005 financial statements and, in our report dated October 14, 2005, we expressed unqualified opinions on the respective financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information. 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 opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of Big Spring School District, as of June 30, 2006, 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 reports dated October 31, 2006, on our consideration of Big Spring School District's internal control over financial reporting and 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. . MEMBERS -- AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS -- PENNSYLVANIA INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS IAR -1 . Board of Directors Big Spring School District . . Management's discussion and analysis on pages MDA - 1 through MDA - 10 and budgetary comparison information on page BCI - 1 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. . ~~I?C. GREENAWALT & COMPANY, P.C. . October 31,2006 Mechanicsburg, Pennsylvania . . . . . IAR-2 . . . . . . . . .' . . . BIG SPRING SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30, 2006 This discussion and analysis provides an overview of the District's financial performance for the year ended June 2006. The report format is in accordance with GASB Statement No. 34, Basic Financial Statements - and Management's Discussion and Analysis - for State and Local Governments. Management's Discussion and Analysis (MD&A) includes comparisons of financial position at June 2006, 2005 and 2004. The MD&A also includes comparisons of current year financial activities to the previous year. The 2005 and 2004 amounts have come from our prior year MD&A, and are otherwise not a part of the June 2006 financial statements. Please read our discussion and analysis in conjunction with the District's financial statements, which begin on page FS-l. In this discussion and analysis, dollar amounts are presented in millions, to make it easier to read. FINANCIAL HIGHLIGHTS General Fund revenues for 2005-2006 increased by 5.30% from 2004-2005 and expenditures increased by 6.87% during the same period as the fund balance increased from $0.6 million to $0.7 million. The current fund balance is approximately 2.2% of the General Fund budget, within the 8.0% maximum required under state law for Districts of this size. The District completed the second year of a three-year collective bargaining agreement with the professional staff association and prepared to enter into negotiations for a renewal of that contract. The District continues to expect double-digit percentage increases in health care costs and will explore options to control these increases. These cost increases have moderated in the two most recent fiscal years, but still exceed 13% annually. In the 2005-2006 fiscal year, the District phased in the final increment of debt service related to three construction projects; new High School construction, renovation of the old High School into a Middle School, and renovation of the old Middle School into Mount Rock Elementary School. In January 2006, the District vacated the old Middle School and occupied the renovated Middle School. By June 2006, the District had, for the most part, completed plans for a $3.3 million renovation at the old Middle School and prepared to bid the project. In addition to renovating the old Middle School, the District entered into a $5.6 million Guaranteed Energy Savings project for the purpose of making further capital improvements in exchange for operating savings through increased energy efficiency and reduced maintenance costs. The scope of the Guaranteed Energy Savings project includes 1) geothermal well fields systems to provide heating and air conditioning support to the Middle School, Mount Rock Elementary School and Newville Elementary School, 2) lighting and control systems in the same buildings, and 3) active humidity control at Oak Flat Elementary School. MDA - 1 . . . . . . . . . . . BIG SPRING SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30, 2006 In August 2005, the District issued $4.5 million in new debt primarily for renovation of the old Middle School into Mount Rock Elementary School. In March 2006, the District refinanced a portion of its Series 2001 General Obligation Bonds originally underwritten by the State Public School Building Authority (SPSBA) for construction of the new High School, setting aside the $218,000 savings for various capital improvements throughout the District's buildings. In June 2006, District personnel began implementing provisions of the new Local Tax Reform Act, commonly know at Act 1 of 2006. This law provides, subject to voter referendum, for homestead and farmstead exclusions which reduce the real estate taxes for eligible properties in exchange for an increase in the local Earned Income Tax (EIT). In addition, Act 1 places a limit on future increases in the District's real estate tax rate. Real estate tax increases above the limit, commonly known as the "index," require consent through a formula of exceptions certified by the Pennsylvania Department of Education, the Commonwealth Court system and/or through voter referendum. USING THESE FINANCIAL STATEMENTS This report contains a series of financial statements. The Statement of Net Assets and the Statement of Activities are on pages FS-l and FS-2. These statements provide information about the District as a whole, and present a longer-term view of District finances than fund financial statements. Fund financial statements are on pages FS-3, FS-5 and FS-7 through FS-l O. For governmental funds, the statements show how District services have been financed in the short term, as well as the amount remaining for future spending. Proprietary funds statements provide information about non-governmental operations, in this case food service. The fiduciary funds statement reports amounts held in trust by the District for student activities. Page FS-4 reconciles total governmental fund balances to total net assets of governmental activities. Page FS-6 reconciles the total net change in governmental fund balances to the change in net assets of governmental activities. District-wide Financial Statements District-wide statements present financial activities and the results of those activities in two categories, governmental and business-type. Capital assets (land, buildings, improvements, furniture and equipment) are included with all other assets. Long-term debt is included with all other liabilities. This is distinctly different from the fund statements in which assets and liabilities are separated into various funds such as General and Capital Projects. In the district-wide statements, the approach to measurement of revenues and expenses is similar to that used in the private sector and is referred to as the accrual basis of accounting. This is disclosed further in the notes to financial statements. MDA - 2 . BIG SPRING SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30, 2006 . Fund Financial Statements . Fund statements provide financial information about the District's funds rather than the District as a whole. There are three types of funds, Governmental, Proprietary and Fiduciary. The use of each type of fund is disclosed in the notes to financial statements. Unlike district-wide statements that report revenues on the accrual basis, the fund statements report revenues only to the extent cash has been received, or is expected to be received in the near future. . THE DISTRICT AS A WHOLE Statement of Net Assets · Total net assets were $13.8 million at June 2006, which is a decrease of $0.3 million from June 2005 and a net increase of $0.7 million from June 2004. The following summarizes the Statement of Net Assets (page FS-I ). . Governmental Business-type Activities Activities Totals 2006 2005 2004 2006 2005 2004 2006 2005 2004 Current and other assets $ 8.9 $10.8 $17.8 $ 0.2 $ 0.1 $ 0.1 $ 9.1 $10.9 $17.9 . Capital assets 48.0 45.5 39.0 0.9 0.7 0.5 48.9 46.2 39.5 Total assets $56.9 $ 56.3 $56.8 $ 1.1 $ 0.8 $ 0.6 $58.0 $57.1 $57.4 Current and other liabilities $ 2.8 $ 4.0 $ 3.1 $ - $ - $ - $ 2.8 $ 4.0 $ 3.1 Long-term liabilities 41.3 38.9 41.1 0.1 0.1 0.1 41.4 39.0 41.2 . Total liabilities 44.1 42.9 44.2 0.1 0.1 0.1 44.2 43.0 44.3 Capital assets (net of related debt) 7.9 7.7 (0.8) 0.9 0.7 0.5 8.8 8.4 (0.3) Restricted for capital projects 3.3 4.6 12.2 3.3 4.6 12.2 Unrestricted 1.6 1.1 1.2 0.1 1.7 1.1 1.2 . Total net assets 12.8 13.4 12.6 1.0 0.7 0.5 13.8 14.1 13.1 Total liabilities and net assets $56.9 $56.3 $56.8 $ 1.1 $ 0.8 $ 0.6 $58.0 $57.1 $57.4 . Net assets are the difference between assets and liabilities, and represent resources that can be used to pay for future operations and capital improvements. The majority of our 2006 net assets, $12.1 million out of $13.8 million total, are invested in capital assets (net of related debt) or restricted for capital projects. MDA - 3 . l . BIG SPRING SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30, 2006 . Statement of Activities . The following summarizes the Statement of Activities (page FS-2). It shows that total net assets decreased by $0.3 million during 2006. Total net assets also decreased by $0.3 million during 2005, prior to the impact of the special item related to changes in the recorded value of capital assets. Governmental Business-type . Activities Activities Totals 2006 2005 2006 2005 2006 2005 Program revenues Charges for services $ 0.2 $ 0.2 $ 0.7 $ 0.7 $ 0.9 $ 0.9 Operating grants and contributions 5.9 5.7 OJ 0.3 6.2 6.0 . Capital grants and contributions 1.1 1.2 1.1 1.2 General revenues Taxes 17.3 15.6 17.3 15.6 Earnings on investments 0.4 OJ 0.4 OJ State general subsidies 7.9 7.7 7.9 7.7 . Total revenues 32.8 30.7 1.0 1.0 33.8 31.7 Direct expenses 32.9 30.7 1.2 1.3 34.1 32.0 . Excess revenues (expenses) before transfers and special item (0.1) (0.2) (0.3) (0.3) (0.3) Transfers between activities (0.4) (0.2) 0.4 0.2 Special item - change in capital assets 1.0 0.3 1.3 . Change in net assets $ (0.5) $ 0.8 $ 0.2 $ 0.2 $ (OJ) $ 1.0 The change in net assets is the difference between revenues and expenses using the accrual basis of accounting. . . MDA - 4 . . BIG SPRING SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30, 2006 . The following summarizes expense information from the Statement of Activities (page FS-2). Direct expenses represents the actual cost of providing the services while the net expense represents the amount of cost that is not recovered through program revenues, meaning user charges, grants and contributions. The net expense must be recovered through general revenues, primarily taxes and state general subsidies. Amounts not recovered reduce funds available for future years. . . . Instruction Instructional student support Administrative and financial support Operation and maintenance of plant Pupil transportation Student activities Community services Interest on long-term debt . Direct Expenses 2006 2005 $ 20.0 $ 18.8 2.4 2.3 2.5 2.4 3.6 3.2 2.1 1.8 0.6 0.6 1.7 1.6 $ 32.9 $ 30.7 Transfers to business-type activities Special item - change in capital assets . Net expenses - governmental activities State general subsidies revenues Total needs from taxes and other local sources . . . Food service . Transfers from governmental activities Special item - change in capital assets Net expense (revenue) . Direct Expenses 2006 2005 $ 1.2 $ 1.3 MDA - 5 Governmental Activities Program Revenues 2006 2005 $ 4.3 $ 4.3 0.1 0.2 0.1 0.1 0.1 0.1 1.4 1.3 0.1 0.1 1.0 1.0 $ 7.1 $ 7.1 Business-type Activities Program Revenues 2006 2005 $ 1.0 $ 1.0 Net Expense 2006 2005 $ 15.7 $ 14.5 2.3 2.1 2.4 2.3 3.5 3.1 0.7 0.5 0.5 0.5 0.7 0.6 25.8 23.6 0.4 0.2 ( 1.0) 22.8 7.7 15.1 $ 26.2 7.9 18.3 $ Net Expense 2006 2005 $ 0.2 $ 0.3 (0.4) (0.2) (0.3) $ (0.2) $ (0.2) . BIG SPRING SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30, 2006 . THE DISTRICT'S FUNDS . Governmental Funds - fund balances Governmental fund balances 2005-2006 2004-2005 2006 2005 2004 Change Change . General Fund - unrestricted $ 0.7 $ 0.6 $ 0.1 $ 0.1 $ 0.5 Capital Reserve Fund - unrestricted 0.1 0.5 0.1 (0.5) Athletic Fund - unrestricted Capital Projects Fund - restricted 3.3 4.6 12.2 (1.3) (7.6) $ 4.1 $ 5.2 $ 12.8 $ (1.1) $ (7.6) . Total unrestricted $ 0.8 $ 0.6 $ 0.6 $ 0.2 $ Total restricted 3.3 4.6 12.2 (1.3) (7.6) $ 4.1 $ 5.2 $ 12.8 $ (1.1) $ (7.6) . Changes from 2005 to 2006 . The General Fund had budgeted a $0.7 million decrease in fund balance. The actual increase was $0.1 million. The $0.8 million variance was primarily because actual revenue exceeded budgeted revenue. This is summarized on page BCl - 1 (budgetary comparison information). . The Capital Reserve Fund increase of $0.1 million was due to the funds transferred from the General Fund during the year. . The Capital Projects Fund decrease of $1.3 million was primarily due to completing two major renovation projects, the former high school conversion to a middle school and the former annex conversion to administrative offices and a fitness facility. General obligation bonds of $4.5 million were issued primarily to fund the planned conversion of the former middle school to an elementary school. . MDA - 6 . . BIG SPRING SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30, 2006 . Changes from 2004 to 2005 . The General Fund had budgeted a $0.2 million decrease in fund balance. The actual increase was $0.5 million. The $0.7 million difference was primarily because actual revenue exceeded budgeted revenue. This is summarized on page BCI - 1 (budgetary comparison information). . The Capital Reserve Fund decrease of $0.5 million was primarily the roof replacement and sewer extension projects at Plainfield elementary school. The Capital Projects Fund decrease of $7.6 million was for various phases of converting the old high school and portions of the former middle school. . General Fund Budget The following summarizes the budgetary comparison information presented on page BCI-I, along with comparisons to the previous year. . . Final Budget Actual Amount Variance 2006 2005 2006 2005 2006 2005 Total revenues $ 31.8 $ 30.0 $ 32J $ 30.7 $ 0.5 $ 0.7 Total expenditures 32.2 30J 31.9 29.9 (OJ) (0.4) Excess revenues (expenditures) (0.4) (OJ) 0.4 0.8 0.8 1.1 Other financing sources (uses) (OJ) 0.1 (OJ) (0.3) (0.4) Net change in fund balance $ (0.7) $ (0.2) $ 0.1 $ 0.5 $ 0.8 $ 0.7 . In 2006, actual revenues exceeded the budgeted amount by $0.5 million, primarily due to additional state revenues. Actual expenditures were within $0.3 million of the original budgeted amount. Additional details . are on page BCI-I (budgetary comparison information). The 2005 positive revenue variance of $0.7 million was primarily due to the one time subsidy adjustment related to the high school construction project. Actual expenditures were $0.4 million below the budgeted amount. Other financing sources (uses) resulted in a negative budget variance of $0.4 million. . MDA - 7 . . BIG SPRING SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30, 2006 . CAPITAL ASSETS When construction projects are completed, the construction in progress balances are moved into the respective categories, and depreciated over their estimated useful lives. Two major renovation projects, the former high school conversion to a middle school and the former annex conversion to administrative offices and a fitness facility, were completed and placed in service in August 2005. . . 2006 . Governmental activities Land $ 0.5 Construction in progress 0.1 Buildings and improvements 45.4 Furniture and equipment 1.2 Library books 0.2 Computer equipment 0.6 $ 48.0 . Business-type activities Furniture and equipment $ . Capital assets (net of depreciation) 2005-2006 2005 2004 Change 2004-2005 Change $ 0.5 $ 0.6 $ $ (0.1 ) 7.4 0.8 (7.3 ) 6.6 35.1 34.9 10.3 0.2 1.4 1.8 (0.2) (0.4) 0.2 0.1 0.1 0.9 0.8 (0.3) 0.1 $ 45.5 $ 39.0 $ 2.5 $ 6.5 0.9 $ $ 0.2 $ $ 0.7 0.5 0.2 Capital assets in the governmental activities were $48.0 million at June 2006, $45.5 million at June 2005 and $39.0 million at June 2004. During 2006, there was $5.1 million of capital assets purchased and $2.6 million of depreciation expense. During 2005, the District purchased $7.5 million of capital assets and had . depreciation expense of $2.0 million, and there was a special item - change in capital assets that amounted to a $1.0 million increase. . . . MDA - 8 . BIG SPRING SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30, 2006 . LONG-TERM LIABILITIES The following summarizes the long-term liabilities note to financial statements (pages FS-21 and FS-22). . Most of the debt is general obligation bonds issued to pay for capital improvements. The District's ability to raise future funds through the issuance of debt depends on how existing bonds are rated by the investment community. Moody's Investors Service, Inc. assigned its municipal bond rating of "Aaa" to the District's most recent series of general obligation bonds, the 2005 Series issued in August 2005. . 2006 2005 2004 Governmental activities General obligation bonds $ 41.1 $ 38.1 $ 40.2 . Compensated absences 0.6 0.6 0.7 Unamortized bond costs (OJ) 0.2 0.2 $ 41.4 $ 38.9 $ 41.1 2005-2006 Change 2004-2005 Change $ 3.0 $ (2.1 ) (0.1 ) $ (0.5) 2.5 $ (2.2) . Each year, the District pays interest on the bonds and a portion of the outstanding bonds, referred to as redemption. The District made regularly scheduled bond redemptions of $2.2 million during 2006 and $2.1 million during 2005. During 2006, the District issued the 2005 Series of $4.5 million and also advance refunded a portion of its 2001 Series by issuing the 2006 Series which resulted in a net increase of $0.7 million. . NEXT YEAR'S BUDGET AND ECONOMIC FACTORS Original Original . Budget Budget 2006-2007 2005-2006 Change Total revenue $ 34.0 $ 31.3 $ 2.7 Total expenditures 33.4 31.6 1.8 . Excess revenues (expenditures) 0.6 (0.3) 0.9 Other financing sources (uses) (0.6) (0.4) (0.2) Net change in fund balance $ 0.0 $ (0.7) $ 0.7 . MDA - 9 . . BIG SPRING SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30, 2006 . The revenue budget for 2006-2007 represents a 8.63% increase. The real estate millage rate increases by .99 mills, from 12.375 to 13.365. The earned income tax rate remains at 1.65%. · The expenditure budget for 2006-2007 represents a 5.70% increase. Rate increases for health insurance and retirement are contributing factors to the increased expenditures. CONTACTING THE DISTRICT FINANCIAL MANAGEMENT . The District's financial report is intended to provide the readers with a general overview of the District's finances and to show the Board's accountability for the money it receives. If you have questions about this report or wish to request additional financial information, please contact the district office of Big Spring School District, 45 Mount Rock Road, Newville, PA 17241, (717) 776-2000. . . . . . . MDA-10 . . . . .. . G) o o N o ("') (]) C :l ..., . ~ o O:::(J) ~I- .... (/) ~ .E C (J) .~ ...J<(tO..... otij8~ OZNO J: u.. 0 1: 00("')- LUCii (/) I- Z '(3 C)aJ:JC Z~...,~ - LU u:: 0::: I- "0 Q..<( (]) (/) t:5 .~ C) co in ~ :l (J) :S ~ . . . . . 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"=I' "=I' LO ..- ..- LO ~ (/) u.. ..- 0> I'-- 00 I'-- en C (]) E (]) ..... co iii (ij '(3 c co c I;:: (]) III (]) :S .... o t co a. co .... 0) (]) ..... ,S: c: co ~ co III (]) ..... o c 0) c: '>. c: co a. E o U o co (]) ..c: I- E,<} ("') ("') I'-- to o I'-- Eft 0) c: :0 c: (]) 11l (]) U c: co m .0 "0 c: ::l u.. GREENAWALT & COMPANY, P.C. CERTIFIED PUBLIC ACCOUNTANTS 400 WEST MAIN STREET MECHANICSBURG, PENNSYLVANIA 17055 (717) 766-4763 FAX (717) 766.2731 62 WEST POMFRET STREET CARLISLE, PA 17013 (717) 243-4822 FAX (717) 258-9372 JAMES E. LYONS HOWARD R. GREENAWALT CREEDON R, HOFFMAN DEBORAH J. KELLY R. A. GREENAWALT (1956-1983) A. A. REIDINGER (RETIRED) C. EDWARD ROGERS, JR. November 9, 2006 Board of School Directors Big Spring School District Newville, Pennsylvania We have audited the financial statements of Big Spring School District for the year ended June 30, 2006, and have issued our report thereon dated October 31, 2006, Professional standards require that we provide you with the following information related to our audit. Our Responsibility under U.S. Generallv Accepted Auditina Standards and OMS Circular A-133 As stated in our engagement letter dated May 16, 2006, our responsibility, as described by professional standards, is to plan and perform our audit to obtain reasonable, but not absolute, assurance about whether the financial statements are free of material misstatement. Because an audit is designed to provide reasonable, but not absolute, assurance and because we did not perform a detailed examination of all transactions, there is a risk that material misstatements may exist and not be detected by us. In planning and performing our audit, we considered Big Spring School District's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide assurance on the internal control over financial reporting, We also considered internal control over compliance with 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, As part of obtaining reasonable assurance about whether Big Spring School District's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grants, 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. Also, in accordance with OMB Circular A-133, we examined, on a test basis, evidence about Big Spring School District's compliance with the types of compliance requirements described in the U. S. Office of Management and Budget (OMB) Circular A-133 Compliance Supplement applicable to each of its major federal programs for the purpose of expressing an opinion on Big Spring School District's compliance with those requirements. While our audit provides a reasonable basis for our opinion, it does not provide a legal determination on Big Spring School District's compliance with those requirements. MEMBERS n AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS n PENNSYLVANIA INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS ~' Board of School Directors November 9, 2006 Page two SiQnificant AccountinQ Policies Management has the responsibility for selection and use of appropriate accounting policies, In accordance with the terms of our engagement letter, we will advise management about the appropriateness of accounting policies and their application, The significant accounting policies used by the District are described in the notes to financial statements. No new accounting policies were adopted and no existing policies were changed during the year. We noted no transactions entered into by the District during the year that were both significant and unusual, and of which, under professional standards, we are required to inform you, or transactions for which there is a lack of authoritative guidance or consensus, AccountinQ Estimates Accounting estimates are an integral part of the financial statements prepared by management and are based on management's knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly from those expected. The two most sensitive estimates affecting the financial statements were the adequacy of the amount available for accrued health insurance costs, and the estimate of taxes receivable. Management's estimate of capital assets and accumulated depreciation is based on a June 2004 detailed report. Activity for the years ended June 2005 and June 2006 have been estimated, but the detailed report has not been updated since June 2004. We evaluated the key factors and assumptions used to estimate the June 2006 balances in determining they are reasonable in relation to the financial statements taken as a whole, Management's estimate of the adequacy of the amount available for accrued health insurance costs is based on information provided by South Central Trust. We evaluated the key factors and assumptions used to develop the adequacy of the amount in determining that it is reasonable in relation to the financial statements taken as a whole. Management's estimate of the future collectibility of taxes receivable is primarily based on past experience and other historical data. We evaluated the key factors and assumptions used to develop the receivable in determining that it is reasonable in relation to the financial statements taken as a whole, Audit Adiustments For purposes of this letter, professional standards define an audit adjustment as a proposed correction of the financial statements that, in our judgment, may not have been detected except through our auditing procedures, An audit adjustment mayor may not indicate matters that could have a significant effect on the District's financial reporting process (that is, cause future financial statements to be materially misstated). In our judgment, none of the adjustments we proposed, whether recorded or unrecorded by the District, either individually or in the aggregate, indicate matters that could have a significant effect on the District's financial reporting process. .... · Board of School Directors November 9, 2006 Page three Disanreements with Mananement For purposes of this letter, professional standards define a disagreement with management as a matter, whether or not resolved to our satisfaction, concerning a financial accounting, reporting, or auditing matter that could be significant to the financial statements or the auditor's report. We are pleased to report that no such disagreements arose during the course of our audit. Consultations with Other Independent Accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a "second opinion" on certain situations. If a consultation involves application of an accounting principle to the governmental unit's financial statements or a determination of the type of auditor's opinion that may be expressed on, those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all the relevant facts, To our knowledge, there were no such consultations with other accountants. Issues Discussed Prior to Retention of Independent Auditors We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior to retention as the District's auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention. Difficulties Encountered in Perform inn the Audit We encountered no significant difficulties in dealing with management in performing our audit. 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BIG SPRING SCHOOL DISTRICT STATEMENT OF NET ASSETS - PROPRIETARY FUNDS JUNE 30, 2006 (With Summarized Financial Information for June 30, 2005) . Food Service 2006 2005 Assets . Cash and cash equivalents $ 90,318 $ 64,556 Due from other governments 31 , 132 6,399 Other receivables 3,564 Inventories 35,118 39,541 Total current assets 156,568 114,060 . Furniture and equipment (net of accumulated depreciation) 917,343 717,862 Total assets $ 1,073,911 $ 831,922 . Liabilities Accounts payable $ 3,890 $ 6,037 Payroll and benefits payable 4,655 Due to other funds 22,251 Deferred revenues 4,043 3,465 . Current portion of compensated absences 7,000 7,000 Total current liabilities 37,184 21,157 Long-term portion of compensated absences 52,127 55,706 . Total liabilities 89,311 76,863 Net assets Invested in capital assets (net of related debt) 917,343 717,862 Unrestricted 67,257 37,197 . Total net assets 984,600 755,059 Total liabilities and net assets $ 1,073,911 $ 831,922 . . The accompanying notes are an integral part of these financial statements. FS -7 . . BIG SPRING SCHOOL DISTRICT STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS - PROPRIETARY FUNDS FOR THE YEAR ENDED JUNE 30, 2006 (With Summarized Financial Information for the Year Ended June 30, 2005) . Food Service 2006 2005 . Operating revenues - Food service revenue $ 753,817 $ 702,808 Operating expenses Salaries 425,340 415,133 Employee benefits 163,165 170,100 Purchased property service 64,365 61,298 . Food and milk 460,283 511,388 Other expenses 10,598 6,094 Depreciation 92,519 86,047 Total operating expenses 1,216,270 1,250,060 . Operating income (loss) (462,453) (547,252) Nonoperating revenues Earnings on investments 2,712 850 State sources - social security and retirement subsidies 26,000 24,455 State sources - meal subsidies 24,372 26,441 . Federal sources - meal subsidies 180,364 169,872 Federal sources - donated commodities 46,546 84,681 Total nonoperating revenues 279,994 306,299 Income (loss) before transfers (182,459) (240,953) . Transfers from other funds 412,000 194,000 Special item - change in capital assets 267,114 Change in net assets 229,541 220,161 Net assets - beginning 755,059 534,898 . Net assets - ending $ 984,600 $ 755,059 . . The accompanying notes are an integral part of these financial statements. FS - 8 . . BIG SPRING SCHOOL DISTRICT STATEMENT OF CASH FLOWS - PROPRIETARY FUNDS FOR THE YEAR ENDED JUNE 30, 2006 (With Summarized Financial Information for the Year Ended June 30, 2005) . Food Service 2006 2005 Operating activities Cash received from users $ 757,959 $ 699,088 . Cash payments to employees for services (574,488) (584,747) Cash payments to suppliers for goods and services (486,424) (502,013) Net cash provided by (used for) operating activities (302,953) (387,672) Non-capital financing activities State sources 47,406 51,040 . Federal sources 158,597 170,463 General fund contributed services 120,000 194,000 Net cash provided by (used for) non-capital financing activities 326,003 415,503 Capital and related financing activities Cash payments for equipment (7,821 ) . Net cash provided by (used for) capital and related financing activities (7,821 ) Investing activities Earnings on investments 2,712 850 Net cash provided by (used for) investing activities 2,712 850 . Net increase in cash and cash equivalents 25,762 20,860 Cash and cash equivalents - beginning 64,556 43,696 Cash and cash equivalents - ending $ 90,318 $ 64,556 . Reconciliation of operating income (loss) to net cash used for operating activities Operating income (loss) $ (462,453) $ (547,252) Adjustments to reconcile operating income (loss) to net cash provided by (used for) operating activities Depreciation 92,519 86,047 . Donated commodities 46,546 84,681 Net change in other assets and other liabilities Accounts receivable 3,564 (3,464) Inventories 4,423 (13,090) Accounts payable (2,147) 5,176 Payroll and benefits payable (4,655) 674 . Due to other funds 22,251 Deferred revenues 578 (256) Compensated absences (3,579) (188) Total adjustments 159,500 159,580 Net cash provided by (used for) operating activities $ (302,953) $ (387,672) . The accompanying notes are an integral part of these financial statements. FS - 9 . . . . Assets Cash and cash equivalents Total assets . Liabilities Due to student groups Total liabilities . Net assets BIG SPRING SCHOOL DISTRICT STATEMENT OF NET ASSETS - FIDUCIARY FUNDS JUNE 30, 2006 (With Summarized Financial Information for June 30, 2005) Student Activities 2006 2005 $ 155,066 $ 155,066 $ 155,066 155,066 $ 155,066 Total liabilities and net assets . . . . . The accompanying notes are an integral part of these financial statements, FS - 10 . $ 166,581 $ 166,581 $ 166,581 166,581 $ 166,581 - . BIG SPRING SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2006 . SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES . Big Spring School District is the level of government which has oversight responsibility and control over activities related to public school education. The report includes services provided by the District to residents within its boundaries: the Cumberland County Townships of Cooke, Lower Frankford, Upper Frankford, Lower Mifflin, Upper Mifflin, North Newton, South Newton, Penn and West Pennsboro and the Borough of Newville. Services provided include a comprehensive curriculum for primary and secondary education as well as special education and vocational education programs. The District receives revenue from local, state and federal sources and must comply with the requirements of these funding sources, . . The financial statements of Big Spring School District have been prepared in accordance with generally accepted accounting principles as applied to governmental units. The Governmental Accounting Standards Board is the authoritative standard-setting body for the establishment of governmental accounting and financial reporting principles. Accounting guidance is also provided through the Comptroller's office for Pennsylvania's Department of Education. The more significant of these accounting policies are as follows: Reporting entity . The Governmental Accounting Standards Board establishes criteria for determining the activities, organizations and functions of government to be included in the financial statements of the reporting entity, In evaluating the District as a reporting entity, management has addressed all potential component units which mayor may not fall within the established criteria. The criteria used to evaluate component units for possible inclusion as part of the District's reporting entity are: . The economic resources received or held by the separate organization are entirely for the direct benefit of the District or its constituents. The District is entitled to (or has the ability to) access a majority of the economic resources received or held by the separate organization. . The economic resources received or held by the separate organization that the District is entitled to (or has the ability to) access is significant to the District. There are no component units that meet all of the above criteria for inclusion in this reporting entity. . Jointly-governed organ izations . The District is a participant in three jointly-governed organizations, each of which is a separate legal entity that offers services to the District and its residents, Each entity serves several school districts, and therefore are not included in this reporting entity. The entities do not have taxing power, but each is required to adopt an annual budget, which is funded primarily by its member Districts or others that use its services, Complete financial statements for these entities can be obtained from their administrative offices, FS - 11 . . BIG SPRING SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS (Cont'd,) JUNE 30, 2006 . SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd.) Jointly-governed organizations (Cont'd.) . Capital Area Intermediate Unit provides special education services and programs, Cumberland Perry Area Vocational Technical School provides vocational and technical education services and programs, . Capital Tax Collection Bureau provides earned income tax collection services, Basis of presentation - District-wide financial statements . District-wide financial statements (Le., the statement of net assets and the statement of activities) report information on all of the nonfiduciary activities of the District. As a general rule the effect of interfund activity has been eliminated from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are presented separately from business-type activities which rely to a significant extent, on fees and charges for support, . The district-wide financial statements are presented using the economic resources measurement focus and the accrual basis of accounting as are the proprietary fund and the fiduciary fund financial statements, Revenues are recognized when earned and expenses are recognized when a liability is incurred, regardless of the timing of related cash flows, Real estate and personal taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. Net assets (total assets less total liabilities) are used as a practical measure of economic resources and the operating statement includes all transactions and events that increased or decreased net assets. Depreciation and amortization are charged as an expense against current operations, Capital assets (net of accumulated depreciation) and bonds payable (net of unamortized costs) are presented in the statement of net assets. . . The statement of activities demonstrates the degree to which the direct expenses of given functions or programs are offset by program revenues. Direct expenses are those that are clearly identifiable within a specific function or program. Program revenues include charges to customers who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or program. In addition, program revenues include grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or program. Taxes and other items not properly included among program revenues are presented as general revenues. . Basis of presentation - Fund financial statements . Fund financial statements are also provided for all governmental funds, proprietary funds, and fiduciary funds of the District. Major individual governmental funds and major individual proprietary funds are reported as separate columns in the fund financial statements. Nonmajor funds, if any, are aggregated and presented in a single column. Fiduciary funds are reported by fund. FS - 12 . . BIG SPRING SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS (Cont'd.) JUNE 3D, 2006 . SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd.) Basis of presentation - Fund financial statements (Cont'd.) . The governmental funds are presented using the current financial resources measurement focus and the modified accrual basis of accounting, Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are received within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the District considers tax revenue to be available if received within 2 months of the end of the fiscal period. Revenue from federal, state and other grants designated for payment of speCific expenditures is recognized when the related expenditures are incurred; accordingly, when such funds are received, they are recognized as deferred revenues until earned. Expenditures generally are recognized when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recognized only when payment is due. I- . Proprietary funds generally follow standards for accounting and financial presentation for private business enterprises to the extent that those standards do not conflict with or contradict guidance of the Governmental Accounting Standards Board. . Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with the fund's principal ongoing operations, Operating expenses for the District's proprietary fund include food production costs, supplies, administrative costs, and depreciation on capital assets. All revenues or expenses not meeting this definition are reported as nonoperating revenues and expenses. . Fund accounting . The accounts of the District are organized on the basis of funds, each of which is considered a separate accounting entity. The operations of each fund are accounted for by providing a separate set of self-balancing accounts which comprise its assets, liabilities, fund equity, revenues, and expenditures, or expenses, as appropriate. Resources are allocated to and accounted for in individual funds based upon the purposes for which they are to be spent. When both restricted and unrestricted resources are available for use, it is the District's general policy to use the restricted (primarily operating grants) resources first, then unrestricted resources as they are needed. it The District has the following major types of funds: Governmental Funds - These funds account for the activities through which most of the District's operations are provided, . Proprietary Funds - These funds account for the operations of the District that are financed and operated in a manner similar to private business enterprises. FS - 13 . . BIG SPRING SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS (Cont'd.) JUNE 30, 2006 . SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd.) Basis of presentation - Fund financial statements (Cont'd.) . Fund accounting (Cont'd.) Fiduciary Funds - These funds account for the assets held by the District as a trustee or agent for individuals, private organizations and/or governmental units and are therefore not available to support the District's own programs. . The District presents the following major governmental funds: The General Fund is the primary operating fund. It accounts for all financial resources except those required to be accounted for in another fund. . An operating budget is adopted prior to the beginning of each year on a modified accrual basis of accounting. The General Fund is the only fund for which a budget is legally required, . The Pennsylvania School Code dictates specific procedures relative to budget adoption and financial statement presentation. The District, before levying annual school taxes, is required to prepare an operating budget for the succeeding fiscal year. This process includes the publishing of notices by advertisement, that the proposed budget has been prepared and is available for public inspection at the administrative office of the District, and that public hearings are held on the proposed operating budget which are required to be scheduled at least ten days prior to when final action on adoption is taken by the Board. . Legal budgetary control is maintained at the sub-function/major object level. The Board may approve transfers of funds appropriated to any particular item of expenditure in accordance with the Pennsylvania School Code. Management may amend the budget at the sub-function/sub-object level without Board approval, provided it is not at a higher level than the Board adopted budget. . In order to preserve a portion of an appropriation for which an expenditure has been committed by a purchase order, contract or other form of commitment, an encumbrance is recognized, Unused encumbrances expire at the end of each year. . Included in the budget are program budgets as prescribed by the federal and state agencies funding the program. These budgets are approved on a program by program basis by the federal and state funding agencies, During the year these programs increased both revenues and expenditures of the original budget by $ 510,593. . The Capital Reserve Fund accounts for transfers from the General Fund and expenditures of those funds for capital outlays. FS - 14 . . BIG SPRING SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS (Cont'd.) JUNE 30, 2006 . SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd.) Basis of presentation - Fund financial statements (Cont'd.) . Fund accounting (Cont'd.) The Athletic Fund accounts for athletic revenues and transfers from the General Fund and expenditures of those funds for athletics, . The Capital Projects Fund accounts for bond proceeds and expenditures of those funds for capital outlays. The District presents the following proprietary fund: The Food Service Fund accounts for the operations of the cafeterias. . The District presents the following fiduciary funds: The Student Activities Fund accounts for programs operated and sponsored by various clubs and organizations within the schools, :e Cash and cash equivalents and investments The District's cash and cash equivalents are considered to be cash on hand, demand deposits (including pooled investments), and short-term investments with original maturities of three months or less from the date of acquisition. . The types of authorized investments are limited by State regulations. Pooled investment funds are required to be operated in accordance with State regulations. Investments, including pooled investments, are reported at fair value. . Taxes and taxes receivable . Real estate and personal taxes are levied as of July 1 with a legal, enforceable claim against the property and/or taxpayer. Amounts not collected within six months (December 31) are considered delinquent and submitted to outside agencies/entities for collection actions. Receivables and payables between funds . Activity between funds that represent lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as "due to/from other funds", Any residual balances outstanding between the governmental activities and business-type activities are reported in the district-wide financial statements as "internal balances", Any balances between funds are short term items pending periodic repayments. FS - 15 . . BIG SPRING SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS (Cont'd.) JUNE 30, 2006 . SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd.) Inventories . Inventories are presented at the lower of cost or market on a first-in, first-out basis, and are expensed when used, Donated commodities are recognized as revenue and are inventoried at an estimated cost value, Capital assets . . Capital assets, which include property, plant, equipment, and infrastructure assets (e,g., roads, sidewalks, and similar items), are presented in the applicable governmental or business-type activities columns in the district- wide financial statements. Capital assets are defined by the District as assets with an initial, individual cost of more than $ 1,500 and an estimated useful life in excess of one year. Management has elected to include certain homogeneous groups with individual costs of less than $ 1,500 as capital assets for financial presentation purposes. In addition, capital assets purchased with long-term debt may be capitalized regardless of the thresholds established. Such assets are presented at historical cost or estimated historical cost if purchased or constructed, . Major outlays for capital assets and improvements are capitalized as projects are constructed, The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend asset lives are not capitalized. Capital assets are depreciated using the straight-line method over the following estimated useful lives: Assets Governmental Activities Business-type Activities . . Buildings Interior renovations Site improvements Furniture Machinery and equipment Library books Audio visual equipment Computer equipment 50 25 15 to 20 15 1 0 to 15 7 6 5 15 15 5 . Long-term liabilities . In the district-wide financial statement, and proprietary fund types in the fund financial statements, bonds payable and compensated absences are presented as liabilities in the applicable governmental activities or proprietary fund statement of net assets. Refunding costs and bond discounts are amortized over the life of the bonds using the effective interest method. Bond issuance costs are presented as deferred charges and amortized over the term of the related debt. FS - 16 . . BIG SPRING SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS (Cont'd,) JUNE 30, 2006 . SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd.) Long-term liabilities (Cont'd.) . In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance and refunding costs, as current period expenditures. The face amount of debt issued is presented as other financing sources while discounts and refunding costs on debt issuances are presented as debt service expenditures. Issuance costs, whether or not withheld from the actual debt proceeds received, are presented as support service expenditures. . Estimates . The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain presented amounts and disclosures, Accordingly, actual results could differ from those estimates. Comparative information . Comparative totals for the prior year have been presented in the accompanying financial statements in order to provide an understanding of changes in the District's financial position and operations. Certain amounts presented in the prior year have been reclassified in order to be consistent with current year's presentation, However, presentations of prior year totals by fund and activity type have not been presented in each of the statements since their inclusion would make the statements unduly complex and difficult to read. Summarized comparative information should be read in conjunction with the District's financial statements for the year ended June 30, 2005, from which the summarized information was derived. . CASH AND CASH EQUIVALENTS AND INVESTMENTS . Pennsylvania statutes provide for investment of District funds into authorized investment types including U,S, Treasury bills, other short-term U.S, and Pennsylvania government obligations, and insured or collateralized time deposits and certificates of deposit. The statutes do not prescribe regulations related to demand deposits; however, they do allow the pooling of funds for investment purposes. . Custodial credit risk is the risk that in the event of a depository institution failure, the District's deposits may not be returned to it. The District does not have a formal policy regarding custodial credit risk for deposits, However, the District requires all deposits in excess of FDIC insurance coverage to be collateralized by the depository institution with approved collateral as provided by law, . At June 30, 2006, the District's deposits totaled $ 4,734,375 and the depository institution balances totaled $ 5,962,411. Of the depository institution balances, $ 485,000 was covered by federal depository insurance and $ 1,398,779 was collateralized. The remaining depository institution balances of $ 4,078,632 are collateralized by external investment pools with Pennsylvania Local Government Investment Trust (PLGIT) and Pennsylvania School District Liquid Asset Fund (PSDLAF). FS - 17 . . BIG SPRING SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS (Cont'd,) JUNE 30, 2006 . CASH AND CASH EQUIVALENTS AND INVESTMENTS (Cont'd.) Cash and cash equivalents and investments are as follows: . Cash and Cash Equivalents Investments Governmental activities $ 1,303,991 $ 3,185,000 . Business-type activities 90,318 Fiduciary funds 155.066 $ 1.549 375 $ 3.185.000 TAXES RECEIVABLE . Taxes receivable are as follows: Taxes Taxes Receivable Allowance for Receivable Deferred (Gross) Uncollectibles (Net) Tax Revenue . Real estate taxes $ 637,426 $ (2,426) $ 635,000 $ 360,000 Earned income taxes 1,480,000 1,480,000 1,480,000 Personal taxes 9.306 (4.306) 5.000 5.000 General Fund 2,126,732 (6,732) 2,120,000 1,845,000 Full accrual adjustment (1.845.000) . Governmental activities $ 2.126.732 $ (6,732) $ 2.120.000 $ DUE FROM OTHER GOVERNMENTS . Due from other governments are as follows: Governmental Business-type Activities Activities Local sources - earned income taxes $ 430,279 $ . Local sources - IDEA - B grant 522,298 Local sources - other districts 103,131 Local sources - other items 39,650 State sources 421,611 3,794 Federal sources 10.617 27.338 . $ 1 527 586 $ 31 1 32 FS - 18 . . BIG SPRING SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS (Cont'd,) JUNE 30, 2006 Ie CAPITAL ASSETS Changes in capital assets were as follows: . Beginning Ending Balance Increases Decreases Balance Governmental activities Capital assets not being depreciated . Land $ 501,824 $ - $ - $ 501,824 Construction in progress 7.415.943 4.462.979 (11.808.000) 70.922 7.917.767 4.462.979 (11.808.000) 572.746 Capital assets being depreciated . Buildings and improvements 45,316,612 11,808,000 57,124,612 Furniture and equipment 3,035,983 292,573 3,328,556 Library books 2,167,460 39,548 2,207,008 Computer equipment 4.495.115 237.867 4.732.982 55.015.170 12.377.988 67.393.158 . Accumulated depreciation Buildings and improvements (10,219,874) (1,508,540) (11,728,414) Furniture and equipment (1,682,196) (423,683) (2,105,879) Library books (2,006,100) (39,856) (2,045,956) Computer equipment (3.550.300) (579.640) (4.129.940) . (17.458.470) (2.551.719) (20,010,189) Capital assets being depreciated, net 37.556.700 9.826.269 47.382.969 Governmental activities capital assets, net $ 45474.467 $ 14.289.248 $ (11 808.000) $ 47955.715 . Business-type activities Capital assets being depreciated Furniture and equipment $ 1,249,234 $ 292,000 $ - $ 1,541,234 Accumulated depreciation . Furniture and equipment (531.372) (92.519) (623,891 ) Capital assets being depreciated, net 717.862 199.481 917.343 Business-type activities capital assets, net $ 717862 $ 199 481 $ - $ 917.343 . FS - 19 . . BIG SPRING SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS (Cont'd,) JUNE 30, 2006 . CAPITAL ASSETS (Cont'd.) Depreciation expense was charged to functions/programs as follows: . . Governmental activities Instruction Instructional student support Administrative and financial support Operation and maintenance of plant Student activities . Business-type activities - Food service $ 2,059,492 226,042 100,463 125,579 40 .143 $ 2.551.719 $ 92 519 DEFERRED REVENUES . Governmental funds present deferred revenue in connection with receivables for revenues that are not considered to be available to pay liabilities of the current period, Governmental funds also defer revenue recognition with resources that have been received, but not yet earned, Deferred revenues in the General Fund of $ 1,849,050 consists of $ 1,845,000 of taxes receivable not received within 2 months of the end of the fiscal period, and $ 4,050 of resources that have been received but not yet earned. . Deferred revenue in the proprietary funds and the district-wide financial statements represents resources that have been received but not yet earned. . LONG-TERM LIABILITIES Changes in all long-term liabilities were as follows: Beginning Ending Due Within Balance Increases Decreases Balance One Year Governmental activities Bonds payable $ 38,055,000 $ 14,495,000 $ (11,480,000) $ 41,070,000 $ 2,550,000 Compensated absences 680.310 242.210 (330.760) 591.760 300.000 $ 38.735310 $ 14.737.210 $ (11.810.760) $ 41.661.760 $ 2 850.000 Business-type activities Compensated absences $ 62.706 $ 3.364 $ (6.943) $ 59.127 $ 7.000 . . FS - 20 . . BIG SPRING SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS (Cont'd.) JUNE 30, 2006 I. LONG-TERM LIABILITIES (Cont'd.) . Changes in bonds payable were as follows: Beginning Balance New Issue Refundino Scheduled Redemptions Ending Balance 1997 Series $ 2,015,000 $ - $ - $ (465,000) $ 1,550,000 1999 Series 3,950,000 (230,000) 3,720,000 2001 Series 13,805,000 (9,280,000) (610,000) 3,915,000 . 2003 Series 18,285,000 (895,000) 17,390,000 2005 Series 4,500,000 4,500,000 2006 Series 9.995.000 9.995.000 $ 38 055 000 $ 4 500.000 $ 715.000 $ (2 200 000) $ 41 070000 . Due Within Interest Rates Maturitv Date Callable Date One Year 1997 Series 5,075% March 2009 Not callable $ 490,000 . 1999 Series (1 ) December 2017 45 days notice 240,000 2001 Series 4.00% to 5,10% February 2021 August 2011 485,000 2003 Series 2.15% to 4.40% April 2023 April 2013 930,000 2005 Series 3.10% to 4.50% June 2016 December 2010 380,000 2006 Series 3.25% to 4,05% March 2021 August 2011 25.000 . $ 2.550.000 (1) The 1999 Series pays interest at a variable rate of .55% above the "weekly rate", not to exceed 25.00%, At June 2006 the "weekly rate" was 3,98%. . During the year ended June 2006, $ 862,230 of debt service was paid from the Capital Projects Fund. Scheduled debt service requirements, payable by the General Fund, are as follows: . Year Endinq June Principal Interest Total 2007 $ 2,550,000 $ 1,639,430 $ 4,189,430 2008 2,840,000 1,565,351 4,405,351 2009 2,955,000 1,447,719 4,402,719 2010 2,515,000 1,319,347 3,834,347 2011 2,605,000 1,229,143 3,834,143 2012-2016 14,775,000 4,424,600 19,199,600 2017-2021 11,260,000 1,615,308 12,875,308 2022-2023 1.570.000 103.895 1.673.895 $ 41.070000 $ 13.344793 $ 54.414.793 FS - 21 . . . BIG SPRING SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS (Cont'd.) JUNE 30, 2006 . LONG-TERM LIABILITIES (Cont'd.) During the year ended June 2006, the District issued its 2005 Series and 2006 Series of bonds, . . In August 2005, the 2005 Series of bonds were issued in the amount of $ 4,500,000. After discounts and issuance costs of $ 89,287, the net proceeds of $ 4,410,713 were available to the District. Approximately $ 1,100,000 was used to complete renovation projects, Those projects included converting the former high school to a middle school and converting the former annex to District administrative offices and a fitness center. As of June 2006, approximately $ 3,300,000 is available for future projects. . In March 2006, the 2006 Series of bonds were issued in the amount of $ 9,995,000. After discounts and issuance costs of $ 231,113, the net proceeds of $ 9,763,887 were deposited into an irrevocable trust fund, for the advance refunding of a portion ($ 9,280,000) of the 2001 Series of bonds, The primary purpose of this advance refunding was to take advantage of favorable interest rates, by reducing future debt service by approximately $ 252,000, Approximately $ 218,000 of the economic gain will be realized during the year ended June 2007. . The investments and fixed earnings of the irrevocable trust fund is sufficient to fully service the previous series of bonds until they are called, For financial reporting purposes these bonds are considered defeased and therefore not included as a liability in the statement of net assets, As of June 2006 defeased bonds outstanding are as follows: Callable Date Par Value Outstandinq Defeased Date . 2001 Series March 2006 August 2011 $ 9,280,000 . Compensated absences (those for which employees receive pay) are presented using the termination payment method. A liability is computed using estimates which apply historical data to current factors. The District maintains records of unused leave and applies the contracted rate for employees eligible for termination payments. The District allows only restricted sabbatical leave and therefore does not present any liability in advance of the sabbatical. Payments for compensated absences are made in the year the absence is taken or the employee retires, At retirement or death, while in District service, employees (with at least 10 years service in the District) or their beneficiaries shall choose one of the following options (subject to a maximum of $ 12,000 for administrators and $ 9,000 for all other employees): . 1, Accumulated unused sick leave days times $ 50 per day 2. Number of full years of service in the District times $ 160 per year . FS - 22 . . BIG SPRING SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS (Cont'd.) JUNE 30, 2006 . PENSION PLAN . Substantially all full-time and part-time employees of the District participate in the plan, The District recognizes expenditures or expenses equal to its contractually-required contributions, subject to the modified accrual basis of accounting in governmental funds. . The District contributes to The Public School Employees' Retirement System (the System), a governmental cost sharing multiple-employer defined benefit plan. The plan is under the authority of the Public School Employees' Retirement Code (the Code), as amended. The plan provides retirement and disability, legislatively mandated ad hoc cost-of-living adjustments, and healthcare insurance premium assistance to qualifying annuitants. The System issues a comprehensive annual financial report that includes financial statements and required supplementary information for the plan, A copy of the report may be obtained by writing to the System at PO Box 125, Harrisburg, PA 17108-0125, or by accessing the System's website at www.psers.state.pa.us. . The contribution policy is established in the Code and requires contributions by active members and employers, Contribution rates for active members are set by law and are dependent upon members' class, In most cases, the contribution rates based on qualified member compensation are as follows: . Membership Class T-C Membership Class T-C Membership Class T-D Membership Class T-D Active members hired before July 22, 1983 Active members hired on or after July 22, 1983 Active members hired before July 22, 1983 Active members hired on or after July 22, 1983 5,25% 6.25% 6,50% 7,50% . Active members newly hired after July 1, 2001 are automatically Class T-D, The contribution rates for all members in Membership Class T-D were effective January 1,2002. . Contributions required of employers are based upon an actuarial valuation, For the fiscal year ended June 2006 the employer contribution rate was 4,69 percent of covered payroll, composed of 4,00 percent for pension benefits and ,69 percent for healthcare insurance premium assistance. The District's contributions to the system for the years ended June 2006, 2005 and 2004 were $ 735,469 $ 648,394, and $ 551,878, respectively, Those amounts are equal to the required contributions for each year, POSTEMPLOYMENT BENEFITS OTHER THAN PENSION BENEFITS . Under the negotiations agreement with Big Spring Education Association, the District shall provide for continuance of health care insurance after retirement until age 65. The retiree will pay the monthly premiums, except that employees who retire after thirty or more years with the District, shall have up to five years of health care insurance benefits provided on the basis of the retiree paying 50% of the monthly premiums. During the year ended June 2006, there were a total of 64 retirees covered for health insurance. . The District finances this benefit on a pay-as-you-go basis, For the year ended June 2006, the estimated net cost to the District was $ 300,760 ($ 698,095 estimated plan costs paid for the retirees less $ 397,335 estimated premiums paid by the retirees). FS - 23 . . BIG SPRING SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS (Cont'd.) JUNE 30, 2006 . RISK MANAGEMENT Health insurance . The District's health insurance plan allows each participant to choose one of the three coverage options available through South Central Trust. South Central Trust is not a risk sharing pool. The Trust was established for processing claims and obtaining reinsurance through commercial insurance carriers, The Trust has reinsurance for claims in excess of $ 100,000 specific (per person) and 125% aggregate (estimated District annual cost). District transactions with the Trust were as follows: . Amount available for accrued costs, beginning $ 821,400 Payments to the trust $ 3,758,157 Decrease in accrual to the trust (250.000) . 3,508,157 Claims paid by the trust (3,038,093) Administrative and other fees (162,245) Stop loss premiums and commissions (188,167) . (3,388.505) Amount available for accrued costs, ending $ 941 052 The amount available for accrued costs was as follows: . Accrual for claims incurred Accrual for administrative and other fees Accrual for health insurance coverage on payroll payable $ 504,552 27,000 409.500 $ 941 052 . There are various methodologies for estimating claims that have been incurred but not reported (IBNR), District management has selected the methodology of '60 days of paid claims'. District management believes this methodology provides an adequate amount for accrued costs. . Other insurance . The District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The District maintains commercial insurance coverage covering each of those risks of loss. Management believes such coverage is sufficient to preclude any significant uninsured losses to the District. Settled claims have not exceeded this commercial coverage in any of the past three fiscal years. FS - 24 . . BIG SPRING SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS (Cont'd.) JUNE 30, 2006 . RISK MANAGEMENT (Cont'd.) Other insurance (Cont'd.) . For State unemployment compensation laws, the District is self-insured, which is a common practice for local governmental units, Any unemployment claims are paid by the District on a quarterly basis as incurred. . For workers' compensation insurance, approximately 80 Districts participate in a public entity risk sharing pool (School Districts Insurance Consortium) for processing claims and obtaining reinsurance through commercial insurance carriers, Under this plan, the District's annual cost should not exceed standard commercial insurance rates. COMMITMENTS AND CONTINGENCIES . The District's contract with its teaching staff expires in June 2007. In the normal course of business, the District is subject to legal disputes and claims, The District does not anticipate any material losses from any pending or threatened litigation. . In the normal course of preparing for the subsequent school year, the District has awarded bids for various supplies, fuel contracts, etc. No major commitments in excess of routine requirements have been made by the District. . The District participates in state and federal grant programs which are governed by various rules and regulations. Expenditures charged to these grant programs are subject to program compliance audits and reviews by the grantor agencies. The District is potentially liable for any expenditures which may be disallowed by the rules of these grant programs. The District does not anticipate any material disallowance of program expenditures. SUBSEQUENT EVENTS . The District is in the process of finalizing the following two interrelated projects: . The former middle school is to be converted to an elementary school. At June 2006, the Capital Projects Fund has approximately $ 2,900,000 available for this project. Based on a current cost estimate of approximately $ 3,300,000, the District will have to explore its options for funding the balance of this project. . The other project is a guaranteed energy savings project with a total installation cost of approximately $ 5,600,000. At June 2006, the Capital Projects Fund has $ 400,000 available for the District's required initial payment for this project. 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'\ ~ ~ ~ ~ ~ rl) ~ ~ ~ .~ ~~ ~~ ~.~ . . . BIG SPRING SCHOOL DISTRICT . SUPPLEMENTARY AUDIT REPORT ON FEDERAL AWARD PROGRAMS YEAR ENDED JUNE 30, 2006 . . . . . . . . . . TABLE OF CONTENTS . Page Number I. I 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 1 - 2 Independent Auditors' Report on Compliance With Requirements Applicable to Each Major Program, Internal Control Over Compliance in Accordance With OMS Circular A-133 and the Schedule of Expenditures of Federal Awards 3-5 . Schedule of Expenditures of Federal Awards 6-7 Schedule of Findings and Questioned Costs 8-9 Summary Schedule of Prior Audit Findings 10 . . . . . . GREENAWALT & COMPANY, P.C. CERTIFIED PUBLIC ACCOUNTANTS . 400 WEST MAIN STREET MECHANICSBURG, PENNSYLVANIA 17055 (717) 766-4763 FAX (717) 766-2731 62 WEST POMFRET STREET CARLISLE, PA 17013 (717) 243-4822 FAX (717) 258-9372 JAMES E, LYONS HOWARD R. GREENAWALT CREEDON R, HOFFMAN DEBORAH J. KELLY R. A. GREENAWALT (1956-1983) A. A. REIDINGER (RETIRED) C. EDWARD ROGERS, JR. 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 Board of School Directors . Big Spring School District Newville, Pennsylvania We have audited the financial statements of the governmental activities, the business-type activities, each major fund, . and the aggregate remaining fund information of Big Spring School District as of and for the year ended June 30, 2006, which collectively comprise Big Spring School District's basic financial statements and have issued our report thereon dated October 31, 2006. 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 Big Spring School District's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinions on the financial statements and not to provide an opinion on the internal control over financial reporting. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control that might be material weaknesses. A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements caused by error or fraud in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control over financial reporting and its operation that we consider to be material weaknesses. . Compliance and other matters . . As part of obtaining reasonable assurance about whether Big Spring 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, - 1 - . MEMBERS -- AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS -- PENNSYLVANIA INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS . 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 (Cont'd.) . . This report is intended solely for the information and use of the Board of School Directors, management and federal awarding agencies and pass through entities and is not intended to be and should not be used by anyone other than these specified parties. . ~~r:::~AN~.~7'!?C. . October 31, 2006 Mechanicsburg, Pennsylvania . ,. I I , . . . - 2- . . . . . . . I. I . . . GREENAWALT & COMPANY, P.C. CERTIFIED PUBLIC ACCOUNTANTS JAMES E. LYONS HOWARD R. GREENAWALT CREEDON R, HOFFMAN DEBORAH J. KELLY 400 WEST MAIN STREET MECHANICSBURG, PENNSYLVANIA 17055 (717) 766-4763 FAX (717) 766-2731 62 WEST POMFRET STREET CARLISLE, PA 17013 (717) 243-4822 FAX (717) 258-9372 R. A GREENAWALT (1956-1983) A. A. REIDINGER (RETIRED) C. EDWARD ROGERS, JR. Independent Auditors' Report on Compliance With Requirements Applicable to Each Major Program, Internal Control Over Compliance in Accordance With OMS Circular A-133 and the Schedule of Expenditures of Federal Awards Board of School Directors Big Spring School District Newville, Pennsylvania Compliance We have audited the compliance of Big Spring School District with the types of compliance requirements described in the U.S. Office of Management and Budget (OMB) Circular A-133 Compliance Supplement that are applicable to each of its major federal programs for the year ended June 30, 2006. Big Spring 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 the District's management. Our responsibility is to express an opinion on Big Spring 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 Big Spring 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 on Big Spring School District's compliance with those requirements. In our opinion, Big Spring School District complied, in all material respects, with the requirements referred to above that are applicable to each of its major federal programs for the year ended June 30, 2006. - 3 - . MEMBERS -- AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS -- PENNSYLVANIA INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS . . Independent Auditors' Report on Compliance With Requirements Applicable to Each Major Program, Internal Control Over Compliance in Accordance With OMB Circular A-133 and the Schedule of Expenditures of Federal Awards (Cont'd.) Internal control over compliance . The management of Big Spring School District is responsible for establishing and maintaining effective internal control over compliance with requirements of laws, regulations, contracts and grants applicable to federal programs, In planning and performing our audit, we considered Big Spring School District's internal control over compliance with 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. Our consideration of the internal control over compliance would not necessarily disclose all matters in the internal control that might be material weaknesses. A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that noncompliance with · applicable requirements of law, regulations, contracts, and grants caused that would be material in relation to a major federal program being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control over compliance and its operation that we consider to be material weaknesses. . Schedule of expenditures of federal awards We have audited the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of Big Spring School District, as of and for the year ended June 30, 2006, and have issued our report thereon dated October 31, 2006. Our audit was performed for the purpose of . forming opinions on the financial statements that collectively comprise the Big Spring School District's basic financial statements. The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by OMB Circular A-133 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 basic financial statements taken as a whole. . This report is intended solely for the information and use of the Board of School Directors, management and federal awarding agencies and pass through entities and is not intended to be and should not be used by anyone other than these specified parties, · ~af)/tdI 'f ~'-"t I p[ GREENAWALT & COMPANY, P.C. . October 31,2006 Mechanicsburg, Pennsylvania -4- . BIG SPRING SCHOOL DISTRICT SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED JUNE 30, 2006 Grant Period Federal Grantor/Pass Source Federal Pass Through Beginning/ Throuqh Grantor Proqram Title Code CFDA # Grantor # Ending Date U.S. Deoartment of Aqriculture Passed through PA Department of Education National School Lunch Program I(F) 10.555 N/A 7/1/05-6/30/06 National School Lunch Program I(S) N/A N/A 7/1/05-6/30/06 National School Lunch Program I(F) 10.555 N/A 7/1/04-6/30/05 National School Lunch Program I(S) N/A N/A 7/1/04-6/30/05 Passed through PA Dept. of Agriculture Value of USDA Donated Commodities I(F) 10.550 N/A 7/1/05-6/30/06 Total U.S. Department of Agriculture U.S. Deoartment of Education Passed through PA Department of Education Title I 84.010(M) 13-060037 7/5/05-9/30/06 Title I 84.010(M) 13-050037 7/1/04-9/30/05 Title I - Academic Achievement 84.010 77-050037 7/1/04-9/30/05 Title I - Academic Achievement 84.010 77 -040037 7/1/03-9/30/05 Title V 84.298 11-060037 7/5/05-9/30/06 Title V 84.298 11-050037 7/1/04-9/30/05 Title II -Improving Teacher Quality 84,367 20-060037 7/5/05-9/30/06 Title II - Improving Teacher Quality 84.367 20-050037 7/1/04-9/30/05 Title II - Educational Technology 84.318 55-060037 7/5/05-9/30/06 Title II - Educational Technology 84.318 55-050037 7/1/04-9/30/05 Safe and Drug Free Schools 84.186 100-060037 10/12/05-9/30/06 Safe and Drug Free Schools 84.186 100-050037 11/12/04-9/30/05 Passed through Capital Area Intermediate Unit IDEA-B 84.027 A(M) 62-060015 7/1/05-9/30/06 IDEA-B 84.027A(M) 62-050015 7/1/04-9/30/05 Total U.S, Department of Education Total Federal Awards - 5 - . . Accrued Accrued . (Deferred) (Deferred) Program or Total Received Revenue Revenue Revenue Award Amount For Year 7/1/2005 Recognized Expenditures 6/30/2006 . N/A $ 153,027 $ $ 180,364 $ 180,364 $ 27,337 N/A 20,578 24,372 24,372 3,794 N/A 5,571 5,571 . N/A 828 828 N/A 46,546 46,546 46,546 $ 226,550 $ 6,399 $ 251,282 $ 251,282 $ 31,131 . $ 387,255 $ 387,255 $ $ 387,255 $ 387,255 $ 427,238 85,448 85,448 . 7,992 1,776 7,992 7,992 6,216 63,460 42,307 42,307 6,001 1,600 6,001 6,001 4,401 9,108 3,036 3,036 149,635 149,635 149,635 149,635 154,951 30,990 30,990 . 6,304 6,304 6,304 6,304 10,087 1,345 1,345 16,077 16,077 16,077 16,077 15,975 7,261 7,261 . 522,298 522,298 522,298 522,298 466,646 293,228 293,228 $ 1,026,262 $ 463,615 $ 1,095,562 $ 1,095,562 $ 532,915 $ 1,252,812 $ 470,014 $ 1,346,844 $ 1,346,844 $ 564,046 . . . . BIG SPRING SCHOOL DISTRICT SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS (Cont'd.) FOR THE YEAR ENDED JUNE 30, 2006 . NOTE A - SIGNIFICANT ACCOUNTING POLICIES . This schedule is a summary of the School District's federal awards programs presented on the accrual basis of accounting; that is revenues are recognized when the expenditures are incurred. NOTE B - DONATED COMMODITIES . Nonmonetary assistance is reported in the schedule at market value (provided by USDA) of the commodities received, Calculation of 25% Rule . Total expenditures per schedule $ 1,346,844 Less: State expenditures 24.372 Total Federal expenditures $ 1 322472 . Major programs Special Education Cluster IDEA-B, CFDA #84.027 A $ 522,298 Title I, CFDA#84.010 387.255 . Total (68.78% of total federal expenditures) $ 909.553 Source codes: . I - Indirect funding F - Federal share S - State share Legends: . (M) Major programs . -6- . . . BIG SPRING SCHOOL DISTRICT SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED JUNE 30, 2006 A. Summary of audit results 1, . 2. 3, . 4. 5. I. 6. . . The auditors' report expresses an unqualified opinion on the financial statements of Big Spring School District. There were no reportable conditions disclosed during the audit of the financial statements. There were no instances of noncompliance disclosed during the audit which could be material to the financial statements of Big Spring School District. There were no reportable conditions disclosed during the audit of the major federal award programs, The auditors' report on compliance for the major federal award programs for Big Spring School District expresses an unqualified opinion. There were no audit findings relative to the major federal award programs for Big Spring School District. 7. The programs tested as a major program included: Special Education Cluster IDEA-B, CFDA #84.027 A Title I, CFDA #84.010 8, The threshold for distinguishing Types A and B programs was $ 300,000. 9. Big Spring School District was determined to be a low-risk auditee. B. Findings - financial statement audit . None C, Findings and questioned costs - major federal award programs audit . . . None - 7 - . BIG SPRING SCHOOL DISTRICT SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS YEAR ENDED JUNE 30, 2006 . #2005-1 Reportable Condition - Maior federal award proQrams audit . Special Education Cluster IDEA-B, CFDA #84,027 The District fully expended the grant award. However, two of the six budget category balances did not agree with the accounting records. . School District's Corrective Action At the beginning of the grant accounting process, all individuals involved in the process will meet to share program information and ensure that the appropriate grant information appears identically on the grant program documentation as well as the grant accounting records. All parties involved in the program implementation process will meet . periodically throughout the year to ensure that the record-keeping is consistent. Status This matter has been resolved for the period ending June 30,2006. . . . - . . -8- . >- a~ .-~ 1-"'- ~? () cS .. , ~ ~...~J --L' , U-:::C 1-- LL o ("') U'-) N .,.,,".- ,.":-.. n:'l u_: u- r--- c::~ C:':::J C'--l ;-r ... ',- :) (".:) ....