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Home My WebLink About03-0661SHIPPENSBURG AREA SCHOOL DISTRICT FINANCIAL REPORT JUNE 30, 2002 CONTENTS INDEPENDENT AUDITOR'S REPORT ON THE FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION FINANCIAL STATEMENTS Combined Balance Sheet - All Fund Types and Account Groups Combined Statement of Revenue, Expenditures and Changes in Fund Balances (Deficit) - All Governmental Fund Types Statement of Revenue, Expenditures and Changes in Fund Balance - Budget and Actual - General Fund Statement of Revenue, Expenses and Changes in Retained Earnings (Deficit)/Fund Balance - Proprietary Fund Type and Non-Expendable Trust Fund Statement of Cash Flows - Proprietary Fund Type and Non-Expendable Trust Fund Notes to Financial Statements SUPPLEMENTARY INFORMATION General Fund Schedule of Revenue Schedule of Expenditures 1-2 3-6 11-12 13 -26 27-28 29 - 34 10 7-8 CONTENTS (Continued) SUPPLEMENTARY INFORMATION (Continued) Special Revenue Funds Combining Balance Sheet Combining Statement of Revenue, Expenditures and Changes in Fund Balances (Deficit) Combining Statement of Revenue, Expenditures and Changes in Fund Balances (Deficit) - Budget and Actual Cafeteria Fund Schedule of Revenue Non-Expendable Trust Fund Combining Balance Sheet Combining Statement of Revenue, Expenses and Changes in Fund Balances Agency Funds Combining Balance Sheet Student Activities Funds Combining Balance Sheet Statement of Cash Receipts and Cash Disbursements _ Earned Income Tax Fund Independent Auditor's Report on Compliance and on Internal Control over Financial Reporting Based on an Audit of General Purpose Financial Statements Performed in Accordance with Government Auditing Standards 35 36 37-38 39 40 - 41 42 - 43 44 45 46 47 - 48 CONTENTS (Continued) SUPPLEMENTARY INFORMATION (Continued) Independent Auditor's Report on Compliance with Requirements Applicable to Each Major Program and on Internal Control over Compliance in Accordance with OMB Circular A-133 Schedule of Findings and Questioned Costs Schedule of Expenditures of Federal Awards Notes to Schedule of Expenditures of Federal Awards Summary Schedule of Prior Year's Audit Findings 49 - 50 51 - 52 53 - 56 57 58 [ Bo¥ a a R TT a CERTIFIED PUBLIC ACCOUi~rANTS AND CoNsUl;l~'rs INDEPENDENT AUDITOR'S REPORT Board of School Directors Shippensburg Area School District Shippensburg, Pennsylvania We have audited the accompanying general purpose financial statements of Shippensburg Area School District, as of and for the year ended June 30, 2002, as listed in the table of contents. These general purpose financial statements are the responsibility of the School District's management. Our responsibility is to express an opinion on these general purpose financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards,, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. As explained in Note I to the general purpose financial statements, the School District has recorded General Fixed Assets at values as determined by an American Appraisal Associates Report. Under accounting principles generally accepted in the United States of America, General Fixed Assets should be recorded at cost or estimated historical cost. In our opinion, except for the departure from accounting principles generally accepted in the United States of America described in the preceding paragraph, the general purpose financial statements referred to above present fairly, in all material respects, the financial position of the Shippensburg Area School District, as of June 30, 2002, and the results of its operations and the cash flows of its proprietary fund type and non-expendable trust funds 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 a report dated July 31, 2002, on our consideration of Shippensburg Area School District's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grants. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. CAMp HILl. CARI.ISI.E LEWISTOWN S TA'I'F~ C()LI.F.(JI ~ An Independently Owned MenU)er of lhe RSM Mc(ila(lrcy Nclwork Our audit was performed for the purpose of forming an opinion on the general purpose financial statements of the Shippensburg Area School District taken as a whole. The accompanying Schedule of Expenditures of Federal Awards, as required by the U. S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, and the schedules on pages 27 through 46 are presented for purposes of additional analysis and are not a required part of the general purpose financial statements. Such information has been subjected to the auditing procedures applied in the audit of the general purpose financial statements and, in our opinion, is fairly stated, in all material respects, in relation to the general purpose financial statements taken as a whole. Chambersburg, Pennsylvania July 31, 2002 SH1PPENSBURG AREA SCHOOL DISTRICT COMBINED BALANCE SHEET - ALL FUND TYPES AND ACCOUNT GROUPS June 30, 2002 ASSETS General $ 80,145 $ Governmental Fund Types Special Revenue Capital Project Capital Athletic Reserve Construction 4,012 $ 32,761 $ 367 Cash Investments Receivables Taxes - net Due from other funds Federal subsidies State subsidies Other Inventories Land and site improvements Buildings and improvements Furniture and equipment - net of accumulated depreciation in Enterprise Fund Amount to be provided for retirement of general long-term debt Amount to be provided for compensated absences Total assets 2,418,952 1,034,877 35,042 100,634 56,814 42,952 367 See Notes to Financial Statements. Proprietary Fund Type Enterprise Cafeteria 6,328 Fiduciary Fund Types Trust and Agency Account Groups Non- ~ Expendable General General Fixed Long-Term Trusts Agency Assets Debt 1,628 $ 297,235 $ $ 60,030 28 465 32,276 55,053 51,396 38,659,262 8,537,829 14,620,000 696,738 Totals (Memorandum Only) 2,479,349 1,034,877 35,070 100,634 56,814 43,424 32,276 51,396 38,659,262 8,592,882 14,620,000 696,738 SHIPPENSBURG AREA SCHOOL DISTRICT COMBINED BALANCE SHEET - ALL FUND TYPES AND ACCOUNT GROUPS June 30, 2002 Governmental Fund Types Special Revenue Capital Athletic Reserve General LIABILITIES AND FUND EQUITY Capital Project Construction Liabilities Due to other funds Accounts payable Deferred revenue Accrued expenses Salaries and benefits Payroll withholdings Amount available for student activities Bonds payable Compensated absences payable Total liabilities Fund Equity Contributed capital Investment in general fixed assets Unreserved retained deficit Fund balances Reserved for Athletic Capital reserve Construction Reading Non-expendable trusts Unreserved Total fund balances Total fund equity Total liabilities and fund equity 28 421,046 699,039 1,089,776 48,617 4,230 '"-~2,258,506 4,230 (218) 32,761 786 1,510,124 1,510,910 1,510,910 367 (218) 32,761 367 (218) 32,761 367 367 See Notes to Financial Statements. Proprietary Fund Type Enterprise Cafeteria Fiduciary Fund Types Trust and Agency Account Groups Non- Expendable Trusts Agency General General Totals Fixed Long-Term (Memorandum Assets Debt Only) 15,796 $ 678 12,005 19,246 $ $ $ 35,070 156 426,110 711,044 1,089,776 196,924 245,541 80,916 80,916 14,620,000 14,620,000 696,738 696,738 28,479 297,242 15,316,738 17,905,195 281,401 281,401 47,248,487 47,248,487 (215,730) (215,730) 61,658 (218) 32,761 367 786 61,658 1,510,124 61,658 1,605,478 65,671 61,658 47,248,487 48,919,636 $ 94,150 $ 61,658 $ 297,242 $ 47,248,487 $ 15,316,738 $ 66,824,831 SHIPPENSBURG AREA SCHOOL DISTRICT COMBINED STATEMENT OF REVENUE, EXPENDITURES AND CHANGES IN FUND BALANCES (DEFICIT) ALL GOVERNMENTAL FUND TYPES Year Ended June 30, 2002 General Governmental Fund Types Special Revenue Capital Athletic Reserve Revenue Local sources State appropriations Federal appropriations Total revenue Expenditures Instructional Support services Operation of non-instructional services Facilities acquisition, construction and improvement services Debt service Capital outlay Total expenditures Excess (deficiency) of revenue over expenditures Other Financing Sources (Uses) Operating transfers in Operating transfers out Interest Proceeds from sale of equipment Other financing sources - net Excess (deficiency) of revenue and other financing sources over expenditures and other financing uses Fund Balances - July l, 2001 Fund Balances (Deficit) - June 30, 2002 12,266,108 10,150,519 672,463 $ 49,663 $ 23,089,090 49,663 14,720,478 6,404,833 287,098 143,846 30,621 1,340,587 22,783,617 143,846 305,473 (94,183) 85,320 (85,320) 101,990 2,582 19,252 85,320 1,383 (1,383) 475 475 324,725 (8,863) (908) 1,186,185 8,645 33,669 $ 1,510,910 $ (218) $ 32,761 See Notes to Financial Statements. Capital Prqject Totals (Memorandum Construction Only) $ 12,315,771 10,150,519 672,463 23,138,753 14,720,478 6,404,833 430,944 30,621 1,340,587 481 1,864 481 22,929,327 (481) 209,426 85,320 (85,320) 848 103,313 2,582 848 105,895 367 315,321 1,228,499 $ 367 $ 1,543,820 SHIPPENSBURG AREA SCHOOL DISTRICT STATEMENT OF REVENUE, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL - GENERAL FUND Year Ended June 30, 2002 Revenue Budget Actual Variance Favorable (Unfavorable) Local sources State appropriations Federal appropriations Total revenue Expenditures Instructional Support services Operation of non-instructional services Facilities acquisition, construction and improvement services Other Total expenditures Excess (deficiency) of revenue over expenditures Other Financing Sources (Uses) Operating transfers out Interest Proceeds from sale of equipment Other financing sources (uses) - net Excess (deficiency) of revenue and other financing sources over expenditures and other financing uses Fund Balance - July 1,2001 Fund Balance - June 30, 2002 See Notes to Financial Statements. 12,292,788 $ 12,266,108 $ (26,680) 10,303,944 10,150,519 (153,425) 496,576 672,463 175,887 23,093,308 23,089,090 (4,218) 14,720,481 14,720,478 3 6,404,830 6,404,833 (3) 287,098 287,098 30,621 30,621 1,664,958 1,340,587 324,371 23,107,988 22,783,617 324,371 (14,680) 305,473 320,153 (85,320) (85,32O) 101,990 101,990 2,582 2,582 (85,320) 19,252 104,572 (100,000) 324,725 $ 424,725 1,186,185 $ 1,510,910 SH1PPENSBURG AREA SCHOOL DISTRICT STATEMENT OF REVENUE, EXPENSES AND CHANGES IN RETAINED EARNINGS (DEFICIT)/FUND BALANCE - PROPRIETARY FUND TYPE AND NON-EXPENDABLE TRUST FUND Year Ended June 30, 2002 Proprietary Fiduciary Fund Type Fund Type Totals Enterprise Non-Expendable (Memorandum Cafeteria Trust Only) Operating Revenue Sales Operating Expenses Donated commodities used Food and milk Labor, taxes and benefits Professional and technical services Supplies Electricity Trash removal Extermination fees Equipment repairs and maintenance Rentals Advertising Travel Dues and fees Depreciation Scholarships Total operating expenses Operating loss Nonoperating Revenue Interest Federal subsidies State subsidies Value of donated commodities Social security subsidy Retirement subsidy Contributions Total nonoperating revenue Net income (loss) Retained Earnings (Deficit)/Fund Balance - July 1, 2001 Retained Earnings (Deficit)/Fund Balance - June 30, 2002 See Notes to Financial Statements. 616,621 $ $ 616,621 51,714 51,714 338,315 338,315 444,546 444,546 6,798 6,798 19,757 19,757 20,000 20,000 2,418 2,418 1,414 1,414 12,973 12,973 300 300 1,108 1,108 825 825 1,260 1,260 7,198 7,198 3,750 3,750 908,626 3,750 912,376 (292,005) (3,750) (295,755) 1,052 2,862 3,914 203,404 203,404 26,459 26,459 51,714 51,714 13,152 13,152 1,542 1,542 700 700 297,323 3,562 300,885 5,318 (188) 5,130 (221,048) 61,846 (159,202) (215,730) $ 61,658 $ (154,072) 10 SHIPPENSBURG AREA SCHOOL DISTRICT STATEMENT OF CASH FLOWS - PROPRIETARY FUND TYPE AND NON-EXPENDABLE TRUST FUND Year Ended June 30, 2002 Cash Flows From Operating Activities Cash received from meal sales Cash payments for goods and services Cash payments to employees for services Net cash used in operating activities Proprietary Fiduciary Fund Type Fund Type Totals Enterprise Non-Expendable (Memorandum Cafeteria Trust Only) $ 616,621 $ $ 616,621 (391,574) (3,616) (395,190) (444,546) (444,546) (219,499) (3,616) (223,115) 203,404 203,404 41,153 41,153 700 700 244,557 700 245,257 (28,460) (28,460) 1,052 2,862 3,914 (160) (160) 1,052 2,702 3,754 (2,350) (214) (2,564) 8,678 1,842 10,520 $ 6,328$ 1,628 $ 7,956 Cash Flows From Noncapital Financing Activities Federal subsidies State subsidies Contributions Net cash provided by noncapital financing activities Cash Flows From Capital and Related Financing Activities Acquisition of equipment Cash Flows From Investing Activities Investment income Change in investments Net cash provided by investing activities Net decrease in cash Cash: July 1,2001 June 30,2002 (Continued) 11 SHIPPENSBURG AREA SCHOOL DISTRICT STATEMENT OF CASH FLOWS - PROPRIETARY FUND TYPE AND NON-EXPENDABLE TRUST FUND (Continued) Year Ended June 30, 2002 Proprietary Fiduciary Fund Type Fund Type Totals Enterprise Non-Expendable (Memorandum Cafeteria Trust Only) Reconciliation of Operating Loss to Net Cash used in Operating Activities Operating loss Adjustments to reconcile operating loss to net cash used in operating activities Depreciation Value of donated commodities Changes in assets and liabilities: (Increase) decrease in: Receivables Inventories (Decrease) increase in: Due to other funds Accounts payable Deferred revenue Net cash used in operating activities See Notes to Financial Statements. 12 (292,005) $ (3,750) $ (295,755) 7,198 7,198 51,714 51,714 (123) 434 311 8,099 8,099 15,796 15,796 (92) (300) (392) (10,086) (10,086) (219,499) $ (3,616) $ (223,115) SHIPPENSBURG AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS Note 1. Summary of Significant Accounting Policies The accounting policies of the Shippensburg Area School District conform with accounting principles generally accepted in the United States of America as applicable to governmental units. The following is a summaryofthe School D' ' ' ..... ~strlct s s~gnlficant accounting pollcms: Reporting Entity: The Shippensburg Area School District's financial statements include the operations of all organizations for which the School Board exercises oversight responsibility. Oversight responsibility is demonstrated by financial interdependency, selection of governing authority, designation of management, ability to significantly influence operations, and accountability for fiscal matters. The Shippensburg Area School District is the lowest level of government which has oversight responsibility and control over all activities related to public school education in the Commonwealth of Pennsylvania. The District receives funding from local, state and Federal government sources and must comply with the requirements of these funding-source entities. However, the District is not included in any other governmental "reporting entity" since the School Board members are elected by the public and have decision-making authority, the power to designate management, the ability to significantly influence operations and primary accountability for fiscal matters. Additionally, the District does not exercise oversight responsibility over any other entities, and consequently, no other entities have been included in the accompanying financial statements. Basis of Presentation - Fund Accounting: The accounts of the School District are organized on the basis of funds and account groups, each of which is considered a separate accounting entity. The operations of each fund are accounted for with a separate set of self-balancing accounts that comprise its assets, liabilities, fund equity, revenue and expenditures or expenses. Government resources are allocated to and accounted for in individual funds based upon the purposes for ~vhich they are to be spent and the means by ~vhich spending activities are controlled. The various funds are summarized by type in the financial statements. The following fund types and account groups are used by the School District: Governmental Fund Types Governmental Funds are those through which most governmental functions of the School District are financed. The acquisition, use and balances of the School District's expendable financial resources and related liabilities (except those accounted for in Proprietary and Payroll Funds) are accounted for through Governmental Funds. The measurement focus is upon determination of changes in financial resources rather than upon net income determination. 13 SHIPPENSBURG AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS Note 1. Summary of Significant Accounting Policies (Continued) Basis of Presentation - Fund Accounting (Continued): Govemmental Fund Types (Continued) General Fund The General Fund is used to account for all financial transactions not accounted for in another fund. Revenue is primarily derived from local property, per capita and occupation taxes, and state and Federal distributions. Many of the more important activities of the School District, including instruction, administration of the School District and certain non-instructional services are accounted for in this fund. Special Revenue Funds Special Revenue Funds are used to account for specific governmental revenue (other than major capital projects) that are legally restricted to expenditures for specified purposes. The Athletic Fund is authorized by Section 511 of the Public School Code of 1949 to account for the revenue and expenditures of athletic activities. The Capital Reserve Fund (Section 2932 is authorized by P.L. 145, Act of April 30, 1943, known as Section 2932 School Laws of Pennsylvania) accounts for (1) monies transferred during any fiscal year from appropriations made for any particular purpose which may not be needed, and (2) surplus monies in the General Fund of the School District at the end of any fiscal year. This fund is included in the financial statements as a Special Revenue Fund. Capital Project Fund The Capital Project Fund is used to account for financial resources available for the acquisition or construction of major capital facilities (other than those financed by proprietary and trust funds). 14 SHIPPENSBURG AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS Note 1. Summary of Significant Accounting Policies (Continued) Basis of Presentation - Fund Accounting (Continued): Proprietary Fund Types Proprietary Funds are used to account for the School District's ongoing activities which are similar to those often found in the private sector. The measurement focus is upon determination of net income and capital maintenance. Proprietary Fund: Enterprise Fund The Cafeteria Fund accounts for all revenue and expenses pertaining to cafeteria operations since such operations are financed and operated in a manner similar to a private business enterprise. It is the intent of the governing body that the cost of providing such goods or services to the students on a continuing basis be financed or recovered primarily through user charges or cost reimbursement plans. Fiduciary Fund Types Fiduciary Funds are used to account for assets held by the School District in a Trustee capacity or as an agent for individuals, private organizations, other governmental units and/or other funds. Fiduciary Fund: Trust and Agency Funds Trust and Agency Funds are used to account for assets held by the School District in a trustee capacity or as an agent for individuals, private organizations, other governmental units and/or other funds. Agency funds are custodial in nature and do not involve measurement of results of operations. Agency funds include the student activity fund, payroll fund and earned income tax fund. The Trust Fund includes the non-expendable scholarship funds. The Activity Fund accounts for the monies authorized by Section 511 of the Public School Code of 1949 for school publications and organizations. The Activity Fund is an Agency Fund but is separate from other Agency Funds because of legal requirements. 15 SHIPPENSBURG AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS Note 1. Summary of Significant Accounting Policies (Continued) Basis of Presentation - Fund Accounting (Continued): Account Groups: General Fixed Assets Account Group This account group is used to record all property, plant and equipment of the School District except that which is accounted for in the Enterprise Fund. General Long-Term Debt Account Group This account group presents principally the balance of long-term debt which is backed by the full faith and credit of the School District. Long-term debt accounted for in the Enterprise Fund is excluded. Basis of Accounting: The District applies all relevant Governmental Accounting Standards Board (GASB) pronouncements. Proprietary funds apply Financial Accounting Standards Board (FASB) pronouncements, Accounting Principles Board (APB) Opinions and Accounting Research Bulletins (ARBs) of the Committee on Accounting Procedures issued on or before November 30, 1989, unless those pronouncements conflict with or contradict GASB pronouncements, in which case, GASB prevails. Basis of accounting refers to when revenue and expenditures are recognized in the accounts and reported in the financial statements. All Governmental Funds utilize the modified accrual basis of accounting. Under this method, revenue is recorded when susceptible to accrual, i.e., both measurable and available. "Available" means collectible within the current period or soon enough thereafter to pay current liabilities. Such revenue items, which are accrued in the year to which they apply, are principally properly taxes and inter-governmental revenue. Expenditures are generally recognized under the modified accrual basis of accounting when the related fund liability is incurred. Exceptions to this general rule include principal and interest on general long- term debt which are recognized when due. Disbursements for inventory-type items and prepaid expenses are considered expenditures at the time of purchase. Agency Funds are custodial in nature (assets equal liabilities) and do not involve measurement of results of operations. Agency Funds, except for the Activity Fund, are accounted for using the modified accrual basis of accounting. The Activity Fund records transactions using the cash basis of accounting. The use of this basis in the Activity Fund does not differ significantly from the modified accrual basis. 16 SHIPPENSBURG AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS Note 1. Summary of Significant Accounting Policies (Continued) Basis of Accounting (Continued): The Cafeteria Fund uses the full accrual method of accounting: Furniture and equipment utilized by the Cafeteria Fund is recorded as fixed assets of that Fund (at cost), and is depreciated therein on a straight-line basis over an estimated useful life of 12 years. The fixed assets, net of accumulated depreciation, are a component of retained earnings. Donated commodities received by the Cafeteria Fund are inventoried at estimated cost to purchase comparable products locally or at cost figures provided by the Federal government if comparable products are not locally available. Inventories are valued on a first-in, first-out basis; remainder inventories at year-end are a component of retained earnings. The School District does not attempt to allocate "building-wide costs" to the Cafeteria Fund. Thus, General Fund expenditures which partially benefit the Cafeteria Fund (utilities, janitorial services, insurance, etc.) are not proportionately recognized within the Cafeteria Fund; similarly, the Cafeteria Fund does not recognize a cost for the building space it occupies (no rental-of-facilities expense). Budgets and Budgetary Accounting: The School District adopts an annual budget for the General Fund. The budget is maintained on a modified accrual basis by function and object, with expenditures controlled by line item. Appropriations lapse at the end of each year and must be reappropriated. The School Board approves budget transfers between and within departments of the School District's General Funds. Budgeted amounts are as originally adopted or as amended by the School Board at various times. Cash and Cash Equivalents: For purposes of the Statement of Cash Flows, cash equivalents include time deposits, certificates of deposit, and all highly-liquid debt instruments with original maturities of three months or less. Investments: Investments are stated at market value. Allowance for Estimated Uncollectible Taxes and Deferred Tax Revenm,: The allowance for estimated uncollectible taxes is based upon an historical estimate of delinquent taxes that will not be collected. Deferred tax revenue is based upon an historical estimate of delinquent taxes expected to be collecied subsequent to the first sixty days of the following fiscal year. 17 SHIPPENSBURG AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS Note 1. Summary of Significant Accounting Policies (Continued) Use of Estimate__.___~s: The preparation of general purpose financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. General Fixed Assets: General Fixed Assets are recorded at replacement values as determined by an American Appraisal Associates Report dated December 28, 2001, except for land, which is recorded at cost. Accounting principles generally accepted in the United States of America require General Fixed Assets to be recorded at historical or estimated historical cost. Original-purchase and replacement equipment are charged to the appropriate General Fund expenditure account as prescribed by the Pennsylvania Department of Education. No depreciation has been provided on General Fixed Assets. General Long-Term Debt: The General Long-Term Debt Account Group consists off I. Sick leave and vacation payable. 2. Outstanding General Obligation Bonds - Series of 1997 issued on December 3, 1997. 3. Outstanding General Obligation Bonds - Series of 2001 issued on September 1, 2001. 4. Outstanding General Obligation Bonds - Series A of 2001 issued on October 15, 2001. Totals - Memorandum Only: The total columns on the combined financial statements are not necessary for a fair presentation of the financial statements in conformity with accounting principles generally accepted in the United States of America. They are presented to facilitate financial analysis. Aggregation of this data is not comparable to a consolidation as interfund eliminations have not been made. Note 2. Cash and Investments The cash and investment policies of the District are governed by statute. Cash must be held in insured depositories approved by the School Board and must be fully collateralized. Permissible investments include United States Treasury Bills and short-term obligations of the United States Government or its agencies or instrumentalities, shares of an investment company whose investments are restricted to the preceding categories and ~vhich are invested in the above government instruments, and fully-insured or collateralized certificates of deposit issued by banks or savings and loan associations. 18 SHIPPENSBURG AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS Note 2. Cash and Investments (Continued) Cash and Certificates of Deposit The District's carrying amount of cash deposits and certificates of deposit ($60,030) at June 30, 2002, for all funds amounted to $481,289. Of the total bank balance of $616,798, $113,368 was covered by Federal depository insurance. The remainder of $503,429 is covered by pooled collateral maintained in conformity with Act 72. The carrying amount of cash and investments as presented on the balance sheet includes petty cash of $850. Act 72 is an act standardizing the procedures for pledges of assets to secure deposits of public funds with banking institutions pursuant to other laws; establishing a standard rule for the types, amounts, and valuations of assets eligible to be used as collateral for deposits of public funds; permitting assets to be pledged against deposits on a pooled basis; and authorizing the appointment of custodians to act as pledgees of assets. Investments Certain of the District's investments which may be classified (under standards set by the Governmental Accounting Standards Board) are either insured, registered, or securities which are held by the District's agent in the District's name. Accordingly, all such items are classified in Category 1. Investments may also be categorized as Category 2, which is defined as uninsured or unregistered investments for which the securities are held by the broker's or dealer's trust department or agent in the District's name, and Category 3, which is defined as uninsured or unregistered investments for which the securities are held by the broker or dealer or by its trust department or agent but not in the District's name. The District has no investments which would be classified in Categories 2 or 3. However, the District does have investments which are not in any of the three defined categories because securities are not used as evidence of the investment. The District's investments are categorized below to give an indication of the level of risk assumed at June 30, 2002, (based on bank balances): U. S. Government Securities Category Non- 1 2 3 Categorized $ 2,418,952 $ $ - $ Mutual Funds 367 $ 2,418,952 $ $ $ 367 19 SHIPPENSBURG AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS Note 3. Property Taxes Property taxes are levied on July 1st. Taxes are collected at a discount until August 31st, at their face amount from September 1st until October 31st, and include a penalty thereafter. The taxes are billed and collected by elected tax collectors. The County Tax Bureaus collect delinquent real estate taxes for the School District. Note 4. Taxes Receivable and Deferred Revenue A summary of the taxes receivable and related accounts are as follows: Amount Uncollected taxes - real estate Uncollected taxes - personal Interest and commissions - net Earned income taxes Realty transfer taxes Taxes Receivable - Net Taxes to be collected within 60 days Deferred revenue - delinquent taxes Allowance for uncollectible taxes Taxes Receivable - Net Deferred Revenue Delinquent taxes Donated commodities - Cafeteria Fund $ 662,477 208,645 1,338 138,165 24,252 $ 1,034,877 $ 386,221 699,039 (50,383) $ 1,034,877 $ 699,039 12,005 $ 711,044 20 SHIPPENSBURG AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS Note 5. Accrued Salaries and Benefits Accrued salaries and benefits at June 30, 2002, consist of the following: Amount Accrued salaries $ 994,873 Retirement 11,333 Social security 76,108 Workers' compensation 7,462 $ 1,089,776 Accrued salaries represent teachers' salaries earned during the 2001-02 school year which will be paid subsequent to June 30, 2002. Accrued retirement represents the public school employees' retirement board contribution for the second quarter of calendar year 2002, including the portion pertaining to accrued salaries at June 30, 2002. Accrued social security represents the District's liability arising from accrued salaries at June 30, 2002. Note 6. Cafeteria Fund Inventory The composition of Cafeteria Fund inventory is as follows: Amount Materials and supplies $ 5,903 Purchased food 14,368 Donated food 12,005 $ 32,276 21 SHIPPENSBURG AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS Note 7. Fixed Assets A summary of changes in fixed assets for the year ended June 30, 2002, follows: July 1, 2001 Changes June 30,2002 General Fixed Assets Land and site improvements Buildings and improvements Furniture and equipment Enterprise Fund Fixed Assets Machinery and equipment Accumulated depreciation 51,396 $ $ 51,396 38,087,305 571,957 38,659,262 8,495,353 42,476 8,537,829 $ 46,634,054 $ 614,433 $ 47,248,487 $ 368,586 $ 28,460 $ 397,046 (334,795) (7,198) (341,993) $ 33,791 $ 21,262 $ 55,053 The net changes in fixed assets are combinations of new assets purchased and increases in the appraisal values of all assets. Note 8. General Long-Term Obligations A summary of the reporting entity's general long-term obligations as of June 30, 2002, and transactions during the year then ended follows: Balances Balances July l, 2001 Increase Decrease June 30, 2002 General Long-Term Obligations: General Obligation Bonds - Series of 1996 General Obligation Bonds - Series of 1997 General Obligation Bonds - Series of 2001 General Obligation Bonds - Series A of 2001 Compensated absences payable $ 4,370,000 $ - $ 4,370,000 $ 10,620,000 9,690,000 930,000 4,500,000 615,000 3,885,000 9,805,000 9,805,000 650,352 46,386 696,738 $15,640,352 $ 14,351,386 $14,675,000 $ 15,316,738 22 SHlPPENSBURG AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS Note 8. General Long-Term Obligations (Continued) General Obligation Bonds - Series of 1996 - On July 15, 1996, the School District issued General Obligation Bonds in the principal amount of $4,995,000. The bonds bore annual interest rates ranging from 4.60% to 5.25%. Interest was payable semi-annually on November 15 and May 15, and the bonds were scheduled to mature serially in amounts ranging from $5,000 to $825,000 through November 15, 2006. These bonds were completely refinanced with General Obligation Bonds - Series of 2001. General Obligation Bonds - Series of 1997 - On December 3, 1997, the School District issued General Obligation Bonds in the principal amount of $11,080,000. The bonds bear annual interest rates ranging from 4.00% to 5.10%. Interest is payable semi-annually on November 15 and May 15, and the bonds mature serially in amounts ranging from $100,000 to $1,645,000 through November 15, 2012. These bonds were partially refinanced with General Obligation Bonds - Series A of 2001. General Obligation Bonds - Series of 2001 - On September 1, 2001, the School District issued General Obligation Bonds in the principal amount of $4,500,000. The bonds bear annual interest rates ranging from 2.60% to 3.65%. Interest is payable semi-annually on November 15 and May 15, and the bonds mature serially in amounts ranging from $615,000 to $830,000 through November 15, 2006. General Obligation Bonds - Series A of 2001 - On October 15, 2001, the School District issued General Obligation Bonds in the principal amount of $9,805,000. The bonds bear annual interest rates ranging from 2.40% to 4.20%. Interest is payable semi-annually on November 15 and May 15, and the bonds mature serially in amounts ranging from $5,000 to $1,660,000 through November 15, 2012. The following is a schedule of principal and interest to service long-term bond obligations of the School District: Year Principal Interest Total 2002-2003 $ 1,125,000 $ 515,715 $ 1,640,715 2003-2004 1,185,000 476,080 1,661,080 2004-2005 1,285,000 434,078 1,719,078 2005-2006 1,325,000 390,908 1,715,908 2006-2007 1,375,000 344,631 1,719,631 Therea~er 8,325,000 925,601 9,250,601 $ 14,620,000 $ 3,087,013 $ 17,707,013 23 SHIPPENSBURG AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS Note 9. Compensated Absences Upon retirement, employees are paid for unused sick days at rates varying with length of service and job classification subject to various maximums. These amounts are recorded as expenditures in the period taken or in the year of separation. The amount presented in the general long-term debt account group is an estimate. All teachers and administrators retiring with at least 25 years of service in the Pennsylvania Public School Employees' Retirement System (PSERS) and 15 years of service in the District, are paid by the District for 40% of their accumulated unused sick days (to a maximum of 100 days) at the rate of $50 per day. Support staff with at least 15 years of service with PSERS and the District will receive payment for 100% of their accumulated unused sick days at $50 per day, up to a maximum of $4,500. Support staff supervisors with at least 25 years of service with PSERS and 15 years of service with the District receive payment for 100% of their unused sick days at a rate of $50 per day up to a maximum of $5,500. For the year ended June 30, 2002, benefits attributed to employees retiring during the 2001-02 year amounted to $48,000 for 12 participants. Note 10. Due To/From Other Funds Individual fund receivable and payable balances at June 30, 2002, were as follows: Receivables Payables General fund Payroll Cafeteria 24 35,042 $ 28 - 19,246 28 15,796 $ 35,070 $ 35,070 SHIPPENSBURG AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS Note 11. Post-Employment Benefits Under the Consolidated Omnibus Budget Reconciliation Act (COBRA), the District provides healthcare benefits to eligible former employees and their dependents. Requirements are outlined by the Federal Government for this coverage. The premium plus a 2% administrative fee is paid in full by the eligible participant. This program is offered for a duration of up to 18 months or 36 months after an employee's termination date. At June 30, 2002, there were 11 participants covered under COBRA. Note 12. Participation in Risk Sharing Pool The District is a participant in a risk sharing pool to provide workers' compensation coverage.' The expense for this coverage for the 2001-02 year was $69,754, comprised of a self-insured retention of $30,763 and a contribution to the Central Fund of $38,991. Actual clai~ns during the year are first paid out of the self-insured retention. Claims that exceed the self-insured retention are satisfied by the Central Fund. The Central Fund maintains excess insurance to cover any claims that exceed $400,000 per accident. There are approximately 79 districts participating in the pool. If there is a deficiency in the pooled funds, each member is assessed a proportionate share. Upon withdrawal by an individual member from the pool, the terminating member has no rights to funds in the pool. Note 13. Defined-Benefit Pension Plan Plan Description: The School District contributes to the statewide Public School Employees' Retirement System (the System), a governmental cost-sharing multiple-employer defined-benefit pension plan administered by the System. In addition to regular retirement benefits, the System also provides for disability, legislatively-mandated ad hoc cost-of-living adjustments, and healthcare insurance premium assistance to qualifying annuitants. Membership in the System is mandatory for substantially all full-time public school employees in the Commonwealth of Pennsylvania (Commonwealth). State statutes assign the authority to establish and amend benefit provisions of the Pennsylvania Public School Employees' Retirement Code (the Code) to the Pennsylvania General Assembly (Act No. 96 of October 2, ]975, as amended)(24 Pa. C.S. 8101-8535). The Public School Employees' Retirement System issues a publicly- available comprehensive annual financial report that includes financial statements and required supplementary information for the defined-benefit pension plan. This report may be obtained by writing to Barbara D. Flurie, Office of Financial Management, Public School Employees' Retirement System of Pennsylvania, P.O. Box 125, Harrisburg, Pennsylvania, 17108-0125. This report is also available in the publications section of the PSERS website at www.psers.state.pa.us. 25 SHIPPENSBURG AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS Note 13. Defined-Benefit Pension Plan (Continued) Funding Policy: The contribution policy is established in the Public School Employees' Retirement Code and requires contributions by the active employees, School District and the Commonwealth. Contribution Rates: The current contribution rate for active employees joining the System before July 22, 1983, is set by law at 5.25% or at 6.50% of the employee's qualifying compensation. For active employees joining the System on or after July 22, 1983, and who were active or inactive as of July 1, 2001, the rate of contribution is 6.25% or 7.50% of the employee's qualifying compensation. Members who joined the System after June 30, 2001, contribute at 7.50%. For all new hires, the higher contribution rates began with service rendered on or after January 1, 2002. District Contributions: The School District's required contributions are based upon an actuarial valuation. For the fiscal year ended June 30, 2002, the School District's rate of contribution was 1.09% of covered payroll. The 1.09% rate is entirely attributable to actuarial requirements for healthcare insurance premiums. The School District is required to pay the entire contribution and will be reimbursed by the Commonwealth in an amount equal to the Commonwealth's share as determined by the income aid ration (as defined in Act 29 of 1994), which is at least one-half of the total School District's rate. The School District's contributions to the Plan for the years ended June 30, 2002, 2001, and 2000, were $152,183, $242,658, and $549,081, respectively, and are equal to the required contributions for each year. Note 14. Risk Management The Shippensburg Area School District is exposed to various risks of loss related to torts; theft of, damage to, or destruction of assets and errors or omissions. Significant losses are covered by commercial insurance for all major programs. For insured programs, there have been no significant reductions in settlement coverage. Settlement amounts have not exceeded insurance coverage for the current year or the three prior years. 26 SUPPLEMENTARY INFORMATION SHIPPENSBURG AREA SCHOOL DISTRICT GENERAL FUND - SCHEDULE OF REVENUE Year Ended June 30, 2002 Revenue Local sources Real estate taxes Current Interim Public utility tax Payments in lieu of taxes Current per capita taxes 679 511 Occupational privilege tax Earned income tax Occupation tax Real estate transfer taxes Delinquent real estate taxes Delinquent per capita taxes 679 51l Delinquent occupation tax Rentals Tuition Reading recovery Refunds and other miscellaneous revenue Total revenue from local sources 7,992,258 96,763 22,249 6,437 46,798 46,798 49,162 1,854,387 1,023,315 269,243 477,920 5,438 5,438 139,804 936 17,608 48,414 163,140 12,266,108 State appropriations Basic instructional subsidy Read-to-Succeed Charter schools Section 1305 and 1306 Performance incentives Homebound instruction Vocational education Alternative education Driver education Special education Transportation (Continued) 6,377,002 115,876 3,588 37,593 51,918 890 38,077 44,014 2,695 1,472,048 832,070 27 SHIPPENSBURG AREA SCHOOL DISTRICT GENERAL FUND - SCHEDULE OF REVENUE (Continued) Year Ended June 30, 2002 Revenue (Continued) State appropriations (Continued) Rentals and sinking fund payments Medical and dental services Social security reimbursement Retirement reimbursement Total state appropriations Federal appropriations Title I ~ Grants to Local Educational Agencies Eisenhower Professional Development State Grants Safe and Drug-free Schools and Communities Innovative Education Program Strategies Medical Assistance Program Impact Aid IDEA Total Federal appropriations Other financing sources Interest Proceeds from sale of equipment Total other financing sources Total revenue 545,691 57,873 499,219 71,965 10,150,519 349,096 17,282 13,684 94,454 25,322 8O5 171,820 672,463 101,990 2,582 104,572 $ 23,193,662 28 SHIPPENSBURG AREA SCHOOL DISTRICT GENERAL FUND - SCHEDULE OF EXPENDITURES Year Ended June 30, 2002 Expenditures Instructional Regular programs Salaries Employee benefits Purchased services Professional and technical Property Other Supplies Property Other objects Total regular programs Special programs Salaries Employee benefits Purchased services Professional Property Other Supplies Property Total special programs Vocational education programs Salaries Employee benefits Purchased services Properly Other Supplies Property Other Total vocational education programs (Continued) $ 7,539,782 1,403,487 17,223 99,407 388,915 303,248 59,812 3,039 9,814,913 1,766,107 367,256 966,379 180 57,780 21,026 3,762 3,182,490 351,796 60,208 447 546,008 13,219 2,321 3OO 974,299 29 SHIPPENSBURG AREA SCHOOL DISTRICT GENERAL FUND - SCHEDULE OF EXPENDITURES (Continued) Year Ended June 30, 2002 ' Expenditures (Continued) Instructional (Continued) Other instructional programs Salaries Employee benefits Purchased services Professional and technical Property Other Supplies Property Total other instructional programs Adult education programs Salaries Employee benefits Purchased services Other Supplies Total adult education programs Community college education program Total instructional Support Services Pupil personnel Salaries Employee benefits Purchased services Professional and technical Property Other Supplies Property Other objects Total pupil personnel (Continued) 534,122 92,249 43,433 104 7,300 11,178 302 688,688 42,653 9,263 939 1,743 54,598 5,490 14,720,478 471,470 88,739 161,540 249 1,857 7,302 1,248 848 733,253 30 SHIPPENSBURG AREA SCHOOL DISTRICT GENERAL FUND ~ SCHEDULE OF EXPENDITURES (Continued) Year Ended June 30, 2002 Expenditures (Continued) Support Services (Continued) Instructional staff Salaries Employee benefits Purchased services Professional and technical Property Other Supplies Property Other objects Total instructional staff Administration Salaries Employee benefits Purchased services Professional and technical Property Other Supplies Property Other objects Total administration Pupil health Salaries Employee benefits Purchased services Professional and technical Property Supplies Total pupil health (Continued) 429,646 85,078 3,838 4,873 5,120 110,472 39,623 1,898 680,548 984,811 195,324 135,064 1,240 56,055 11,122 4,401 13,719 1,401,736 165,411 36,871 16,005 217 5,128 223,632 31 SHIPPENSBURG AREA SCHOOL DISTRICT GENERAL FUND - SCHEDULE OF EXPENDITURES (Continued) Year Ended June 30, 2002 Expenditures (Continued) Support Services (Continued) Business Salaries Employee benefits Purchased services Professional and technical Property Other Supplies Other objects Total business Operation and maintenance of plant services Salaries Employee benefits Pumhased services Property Other Supplies Property Other objects Total operation and maintenance of plant services Student transportation services Purchased services Professional and technical Other Supplies Other objects Total student transportation services (Continued) 166,475 46,398 1,297 225 20,450 6,484 365 241,694 552,760 133,802 569,667 89,503 183,773 17,193 150 1,546,848 10,016 1,484,641 1,905 2O 1,496,582 32 SHIPPENSBURG AREA SCHOOL DISTRICT GENERAL FUND - SCHEDULE OF EXPENDITURES (Continued) Year Ended June 30, 2002 Expenditures (Continued) Support Services (Continued) Central service Purchased services Professional and technical Property Other Supplies Property Other objects Total central service Other support services Total support services Operation of Non-Instructional Services Student activities Salaries Employee benefits Purchased services Property Other Supplies Total student activities (Continued) 19,259 20,853 760 12,926 4,535 250 58,583 21,957 6,404,833 217,531 24,503 12,035 9,120 4,222 267,411 33 SHIPPENSBURG AREA SCHOOL DISTRICT GENERAL FUND - SCHEDULE OF EXPENDITURES (Continued) Year Ended June 30, 2002 Expenditures (Continued) Operation of Non-lnstructional Services (Continued) Community services Salaries Employee benefits Purchased services Supplies Other objects Total community services Total operation of non-instructional services Facilities acquisition, construction and improvement services Purchased services Professional and technical Other Debt service Operating transfers out Total other Total expenditures 5,947 565 8,475 4,700 19,687 287,098 30,621 1,340,587 85,320 1,425,907 $ 22,868,937 34 SHIPPENSBURG AREA SCHOOL DISTRICT SPECIAL REVENUE FUNDS - COMBINING BALANCE SHEET June 30, 2002 ASSETS Middle School Athletic Fund Senior High Athletic Fund Total Cash LIABILITIES AND FUND BALANCES Liabilities Accounts payable Fund Balances (Deficit) Total liabilities and fund balances $ 7O6 $ $ $ 706 7O6 $ 3,306 4,230 (924) 3,306 4,012 4,230 (218) 4,012 35 SHIPPENSBURG AREA SCHOOL DISTRICT SPECIAL REVENUE FUNDS - COMBINING STATEMENT OF REVENUE, EXPENDITURES AND CHANGES IN FUND BALANCES (DEFICIT) Year Ended June 30, 2002 Middle School Senior High Athletic Fund Athletic Fund Total Revenue Localsources $ 10,018 $ 39,645 $ 49,663 Expenditures Operation of non-instructional services Deficiency of revenue over expenditures Other Financing Sources Operating transfers in Excess (deficiency) of revenue and other financing sources over expenditures Fund Balances - July 1, 2001 Fund Balances (Deficit) - June 30, 2002 31,093 112,753 143,846 (21,075) (73,108) (94,183) 21,320 64,000 85,320 245 (%108) (8,863) 461 8,184 8,645 $ 706 $ (924) $ (218) 36 SHIPPENSBURG AREA SCHOOL DISTRICT SPECIAL REVENUE FUNDS - COMBINING STATEMENT OF REVENUE, EXPENDITURES AND CHANGES IN FUND BALANCES (DEFICIT) - BUDGET AND ACTUAL Year Ended June 30, 2002 Revenue Local sources $ Expenditures Operation of non-instructional services Deficiency of revenue over expenditures Other financing sources Operating transfers in Excess (deficiency) of revenue and other financing sources over expenditures $ Fund Balances - July 1, 2001 Fund Balances (Deficit) - June 30, 2002 Middle School Athletic Fund Budget Actual Variance Favorable (Unfavorable) 12,105 $ 10,018 $ (2,087) 33,425 31,093 2,332 (21,320) (21,075) 245 21,320 21 320 245 461 $ 706 $ 245 37 Senior High Athletic Fund Variance Favorable Budget Actual (Unfavorable) 43,015 $ 39,645 $ (3,370) 119,429 112,753 6,676 (76,414) (73,108) 3,306 76,414 64,000 (12,414) (9,108) 8,184 $ (924) (9,108) $ Total Variance Favorable Bud[;et Actual (Unfavorable) $ 55,120 $ 49,663 $ (5,457) 152,854 143,846 9,008 (97,734) (94,183) 3,551 97,734 85,320 (12,414) (8,863) 8,645 (218) $ (8,863) 38 6~ £ZCL6E ZPS'I PlL'I~ 6gP'9Z POP'~OZ [E9'919 96E'~ ~6Z'ILE OP6'EI 066'96E ~;00~ '0~ aun£ papu3[ JeaA 3FIN~IA3H ,40 21'IFI(][3HD$ - 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ItVIAIIA~flS &9Ilt.LSI(I qOOHDS V~tV DHFI~ISN~ddlHS Board of School Directors Shippensburg Area School District Shippensburg, Pennsylvania This letter is intended to inform the Board of School Directors of Shippensburg Area School District about significant matters related to the conduct of the annual audit so that it can appropriately discharge its oversight responsibility, and that we comply with our professional responsibilities to the Board of Directors. The following summarizes various matters which must be communicated to you under auditing standards generally accepted in the United States of America. The Auditor's Res onsibili Under Auditin Standards Generall Acce ted in the United States of America Government Auditin Standards and as Re uired b U.S. Office of Mana ement and Budget Circular A-133. Our audit of the financial statements of Shippensburg Area School District for the year ended June 30, 2002, was conducted 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 the financial statements are free of material misstatement, whether caused by error, fraudulent financial reporting or misappropriation of assets. 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. Accordingly, the audit was designed to obtain reasonable, rather than absolute, assurance about the financial statements. We believe that our audit accomplished that objective. Significant Accounting Policies The Board of School Directors has the ultimate responsibility for the appropriateness of the accounting policies used by the District. The District did not adopt any significant new accounting policies nor have there been any changes in existing significant accounting policies during the current period which should be brought to your attention for approval. Significant or Unusual Transactions We did not identify any significant or unusual transactions or significant accounting policies in controversial or emerging areas for which there is a lack of authoritative guidance or consensus. CAItI.ISI A:~ Ci IAMBFA/SBUlt(; LILWL%'roWN S TAT U; COl A.FA;F- CAMI> I~IIA. An Indel)endently owned MelTfl)er of the I/SM McGladrey Network ~ Accountin Estimates Accounting estimfites are an integral part of the preparation of financial statements and are based upon management's current judgment. The process used by management encompasses its knowledge and experience about past and current events and certain assumptions about future events. Management has informed us that it used all relevant facts available to it at the time to make the best judgments about accounting estimates, and we considered this information in the scope of our audit. Estimates significant to the financial statements include the estimate for uncollectible delinquent taxes. The Board may wish · ~he -rocess used to compute and record this accounting estimate. to monitor throughout the year t S~ignificant Audit AdiustmenLs to us to begin our · ents in our judgment, either There were minimal audit adjustments made to the original trial balance presented audit. Of the adjustments that were recorded, none of the adjustm · ~ ...... ict's individually or in the aggregate, would have a significant effect on Shippensburg Area :~cnoo! o~su financial reporting process. Other Information in Documents Containin Audited Financial Statements If such We are not aware of any other documents that contain the audited financial statements. documents were to be published, we would have a responsibility to determine that such financial information was not materially inconsistent with the audited statements of Shippensburg Area School District. D~isagreements with Manal~ement We encountered no disagreements with management over the application of significant accounting principles, the basis for management's judgments on any significant matters, the scope of the audit or significant disclosures to be included in the financial statements. Consultations with Other Accountants. We are not aware of any consultations management had with other accountants about accounting or auditing matters. ~nt Prior to Retention No major issues were discussed with management prior to our retention to perform the aforementioned audit. ~nPerformin the Audit We did not encounter any difficulties in dealing with management relating to the performance of the audit· _Closin~ We will be pleased to respond to any questions you have about the foregoing. We appreciate the opportunity to continue to be of service to Shippensburg Area School District. This report is intended solely for the information and use of the Board of School Directors and management and is not intended to be and should not be used by anyone other than the specified parties. Chambersburg, Pennsylvania July 31, 2002