Loading...
HomeMy WebLinkAbout03-0807SOUTH MIDDLETON SCHOOL DISTRICT FINANCIAL REPORT JUNE 30, 2002 CONTENTS RT 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) - Ail 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 - Proprietary Fund Type - Enterprise - Cafeteria Statement of Cash Flows - Proprietary Fund Type - Enterprise - Cafeteria Notes to Financial Statements SUPPLEMENTARY INFORMATION Statement of Assets and Liabilities Fiduciary Fund Types - Agency Funds 2-5 6-9 l0 11 12- 13 14-28 29 CERTIFIED PUBLIC ACCOUNTANTS AND CONSULTANTS WEB SITE: www.cpabr, corn INDEPENDENT AUDITOR'S REPORT Board of School Directors South Middleton School District Boiling Springs, Pennsylvania We have audited the accompanying general purpose financial statements of South Middleton School District, as of and for the year ended June 30, 2002. 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. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. 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 general purpose financial statements present fairly, in all material respects, the financial position of South Middleton School District, as of June 30, 2002, and the results of its operations and cash flow of its proprietary fund type for the year then ended in conformity with accounting principles generally accepted in the United States of America. Our audit was made for the purpose of forming an opinion on the general purpose financial statements of South Middleton School District taken as a whole. The statement listed as supplementary information in the table of contents is presented for additional analysis and is not a required part of the financial statements of South Middleton School District. Such information has been subjected' to the auditing procedures applied in the audit of the financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole. Camp Hill, Pennsylvania July 30, 2002 CAMP HILL ° CARLISLE · CHAMBERSBURG · LEWISTOWN o STATE COLLEGE An Independently Owned Member of tho McGladrey Nelwork Worldwide Service Through RSM International SOUTH MIDDLETON SCHOOL DISTRICT COMBINED BALANCE SHEET - ALL FUND TYPES AND ACCOUNT GROUPS June 30, 2002 Governmental Fund Types Special Revenue Capital General Athletic Reserve ASSETS $ 1,564 $ 3,200,642 $ 3,693,518 Debt Service 166 Cash Receivables Taxes Earned income tax (second quarter) Realty transfer tax Special education consortium tuition Federal subsidies Other Due from other funds Inventories Land and site improvements Buildings Furniture and equipment - net of accumulated depreciation in Enterprise Fund Amount available in debt service fund Amount to be provided for retirement of general long-term debt Amount to be provided for compensated absences Total assets 540,281 107,176 18,371 244,058 3,331 64,569 30,847 21,512 4,723,663 $ 1,564 $ 3,200,642 166 See Notes to Financial Statements. Proprietary Fund Type Fiduciary Fund Types Enterprise Cafeteria Trust Agency Account Groups General Fixed Assets General Long-Term Debt Totals (Memorandum Only) $ 203,590 37,478 $ 157,702 $ 7,294,660 48,278 1,508,068 25,932,875 540,281 107,176 18,371 244,058 3,331 64,569 30,847 69,790 1,508,068 25,932,875 110,788 - 6,234,720 - 6,345,508 - 166 166 ~ - 22,467,307 22,467,307 ~ - - 318,117 318,117 $ 362,656 $ 37,478 $ 157,702 $ 33,675,663 $22,785,590 $ 64,945,124 SOUTH MIDDLETON SCHOOL DISTRICT COMBINED BALANCE SHEET - ALL FUND TYPES AND ACCOUNT GROUPS June 30, 2002 LIABILITIES AND FUND EQUITY Governmental Fund Types Special Revenue Capital Debt General Athletic Reserve Service Liabilities Accounts payable Due to other funds Deferred revenue Accrued expenses Salaries and benefits Amount available for student activities General obligation bonds Note payable Sick leave payable Total liabilities $ 498,199 $ - $ 17,654 523,705 - 616,971 1,638,875 17,654 - Fund Equity Investment in general fixed assets Retained earnings Contributed capital Fund balances (deficit) Reserved for Athletics Capital reserve Debt service Unreserved Total fund balances (deficit) Total fund equity Total liabilities and fund equity (16,090) _ 3,200,642 - _ 166 3,084,788 - - 3,084,788 (16,090) 3,200,642 166 3,084,788 (16,090) 3,200,642 166 $ 4,723,663 $ 1,564 $ 3,200,642 $ 166 See Notes to Financial Statements. Proprietary Fiduciary Fund Type Fund Types Enterprise Cafeteria Trust Agency Account Groups General General Totals Fixed Long-Term (Memorandum Assets Debt Only) 28,321 $ ' $ $ - $ $ 498,199 - 13,193 - 30,847 - - 552,026 - 32,761 - 649,732 37,478 111,748 - 149,226 - - 20,592,265 20,592,265 - - 1,875,208 1,875,208 - - - 318,117 318,117 28,321 37,478 157,702 - 22,785,590 24,665,620 - 33,675,663 - 33,675,663 145,157 - - 145,157 189,178 - - 189,178 (16,090) 3,200,642 166 3,084,788 ' - - 6,269,506 334,335 - 33,675,663 - 40,279,504 $ 362,656 $ 37,478 $ 157,702 $ 33,675,663 $22,785,590 $ 64,945,124 SOUTH MIDDLETON SCHOOL DISTRICT COMBINED STATEMENT OF REVENUE, EXPENDITURES AND CHANGES IN FUND BALANCES (DEFICIT) - ALL GOVERNMENTAL FUND TYPES Year Ended June 30, 2002 Governmental Special General Athletic Revenue Local sources State appropriations Federal appropriations Total revenue 12,597,467 $ 57,697 5,522,390 - 34,378 - 18,154,235 57,697 Expenditures Instructional Support services Operation of noninstructional services Construction/improvement services Other Athletics General obligation bonds, notes and capital lease liabilities Principal Interest Total expenditures Excess (deficiency) of revenue over expenditures (Continued) 10,390,914 - 5,490,765 - 235,503 - 183,932 150,523 16,301,114 150,523 1,853,121 (92,826) Fund Types Revenue Totals Capital Debt Capital (Memorandum Reserve Service Projects Only) 87,172 $ 50,090 $ $ 12,792,426 - 5,522,390 - 34,378 87,172 50,090 18,349,194 652,298 - 10,390,914 - 5,490,765 - - 235,503 - - 652,298 196,413 11 380,356 - - 150,523 9,381,299 9,381,299 - 1,370,621 1,370,621 652,298 10,948,333 11 28,052,279 (565,126) (10,898,243) (11) (9,703,085) 7 SOUTH MIDDLETON SCHOOL DISTRICT COMBINED STATEMENT OF REVENUE, EXPENDITURES AND CHANGES IN FUND BALANCES (DEFICIT) - ALL GOVERNMENTAL FUND TYPES (Continued) Year Ended June 30, 2002 Governmental Special General Athletic Other Financing Sources (Uses) Proceeds from bond issuance Operating transfers in Operating transfers out Transfers from other LEAs Compensation for capital assets Other financing sources (uses) - net Excess (deficiency) of revenue and other financing sources over expenditures and other financing uses Fund Balances - July 1, 2001 Decrease in reserve for inventories Fund Balances (Deficit) - June 30, 2002 1,564 78,300 (3,653,210) (1,564) 244,058 - 3,420 - (3,404,168) 76,736 (1,551,047) (16,090) 4,638,693 (2,858) $ 3,084,788 $ (16,090) See Notes to Financial Statements. Fund Types Revenue Totals Capital Debt Capital (Memorandum Reserve Service Projects Only) - 8,740,000 8,740,000 1,500,015 2,158,409 3,738,288 (143,500) (15) (3,798,289) - 244,058 - 3,420 1,356,515 10,898,409 (15) 8,927,477 791,389 166 (26) (775,608) 2,409,253 26 7,047,972 (2,858) $ 3,200,642 $ 166 $ $ 6,269,506 9 SOUTH MIDDLETON SCHOOL DISTRICT STATEMENT OF REVENUE, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL - GENERAL FUND Year Ended June 30, 2002 Revenue Local sources State appropriations Federal appropriations Total revenue Budget Actual Variance Favorable (Unfavorable) 12,939,411 $ 12,597,467 $ (341,944) 5,559,532 5,522,390 (37,142) 48,652 34,378 (14,274) 18,547,595 18,154,235 (393,360) Expenditures Instructional Support services Operation of noninstructional services Other Total expenditures 10,623,758 10,390,914 232,844 5,443,382 5,490,765 (47,383) 309,021 235,503 73,518 1,000 183,932 (182,932) 16,377,161 16,301,114 76,047 Excess of revenue over expenditures 2,170,434 1,853,121 (317,313) Other Financing Sources (Uses) Operating transfers in Operating transfers out Other - net Other financing uses - net (2,226,041) 1,564 1,564 (3,653,210) (1,427,169) 247,478 247,478 (2,226,041) (3,404,168) (1,178,127) Deficiency of revenue and other financing sources over expenditures and other financing uses (55,607) (1,551,047) $ (1,495,440) Fund Balance - July 1, 2001 Increase in reserve for inventories Fund Balance - June 30, 2002 4,638,693 (2,858) $ 3,084,788 See Notes to Financial Statements. l0 SOUTH MIDDLETON SCHOOL DISTRICT STATEMENT OF REVENUE, EXPENSES AND CHANGES IN RETAINED EARNINGS - PROPRIETARY FUND TYPE - ENTERPRISE - CAFETERIA Year Ended June 30, 2002 Operating Revenue Sales Operating Expenses Donated commodities used Food and milk Labor, taxes and benefits Supplies~ Trash removal Equipment repairs and maintenance Travel and other Depreciation Total operating expenses Operating loss Nonoperating Revenue (Expenses) Investment income Federal and state subsidies Value of donated commodities Social security reimbursement Retirement subsidy Loss on sale of equipment Total nonoperating revenue Loss before operating transfer Operating Transfer From Other Fund Net loss Retained Earnings: July 1, 2001 June 30, 2002 See Notes to Financial Statements. $ 379,436 29,839 236,042 305,617 4,693 5,039 20,118 3,196 26,225 630,769 (251,333) 2,654 107,821 29,839 7,450 315 (2,750) 145,329 (106,004) 60,001 (46,003) 191,160 $ 145,157 11 SOUTH MIDDLETON SCHOOL DISTRICT STATEMENT OF CASH FLOWS PROPRIETARY FUND TYPE - ENTERPRISE - CAFETERIA 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 Cash Flows From Noncapital Financing Activities Operating transfer in Federal and state subsidies Social security reimbursement Retirement subsidy 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 Net decrease in cash Cash: July 1, 2001 June 30, 2002 (Continued) $ 381,169 (267,995) (305,617) (192,443) 60,001 107,821 7,450 315 175,587 (4,836) 2,654 (19,038) 222,628 $ 203,590 12 SOUTH MIDDLETON SCHOOL DISTRICT STATEMENT OF CASH FLOWS PROPRIETARY FUND TYPE - ENTERPRISE - CAFETERIA (Continued) Year Ended June 30, 2002 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: Deferred revenue Net cash used in operating activities See Notes to Financial Statements. $ (251,333) 26,225 29,839 1,733 (4,164) 5,257 $ (192,443) 13 SOUTH MIDDLETON SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS Note 1. Summary of Significant Accounting Policies Reporting Entity: The South Middleton School District complies with Accounting Principles Generally Accepted in the United States of America (GAAP). Accounting principles generally accepted in the United States of America require that the reporting entity include (1) the primary government, (2) organizations for which the primary government is financially accountable and (3) other organizations for which the nature and significance of their relationship with the primary government are such that exclusion would cause the reporting entity's financial statements to be misleading or incomplete. The criteria provided in Government Accounting Standards Board Statement No. 14 has been considered below. The School District is affiliated with the Cumberland/Perry Area Vocational-Technical School and eleven member school districts. The School District is also affiliated with the Harrisburg Area Community College (HACC). The member school districts participate in providing oversight responsibility to the Cumberland/Perry Area Vocational-Technical School and HACC through the following: Appointment of Board members who are also Board members of the participating schools. Approval and funding of operating budgets. See additional information regarding payments to the Vo-Tech School in Note 11. Despite the foregoing, the overriding issue is that the volume of participating school districts does not permit South Middleton School District to exercise "significant influence" over the operations of the Cumberland/Perry Area Vocational-Technical School and HACC. Consequently, the Cumberland/Perry Area Vocational-Technical School and HACC are not considered "component units" of the South Middleton School District in determining the "reporting entity" as required by Government Accounting Standards Board Statement No. 14. 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 which they are to be spent and the means by which 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: 14 SOUTH MIDDLETON SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS Note 1. Summary of Significant Accounting Policies (Continued) Basis of Presentation - Fund Accounting (Continued): 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 the related liabilities (except those accounted for in Proprietary Funds) are accounted for through Governmental Funds. The measurement focus is upon determination of changes in financial resources, rather than upon net income determination. Governmental Funds 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, earned income tax, per capita and occupational taxes, and state and federal distributions. Many of the more important activities of the Scho91 District, including instruction, administration of the School District and certain noninstructional 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. Debt Service Fund Debt Service Funds are used to account for the accumulation of resources for and payment of general long-term debt principal, interest and related costs. 15 SOUTH MIDDLETON SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS Note 1. Summary of Significant Accounting Policies (Continued) Basis of Presentation - Fund Accounting (Continued): Governmental Funds (Continued) Capital Projects Fund This fund is used to account for financial resources to be used for the acquisition or construction of major capital facilities. Proprietary Fund Types Proprietary Funds are used to account for the School District's on-going 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. 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. The expendable trust fund accounts for assets where both the principal and interest may be spent. These assets are scholarship monies received and administered by the District. Agency funds include a central payroll account and activity fund. The Activity Fund accounts for the monies authorized by Section 511 of the Public School Code of 1949 for school publications and organizations. A portion of the Activity Fund is an Agency Fund which is separate from other Agency Funds because of legal requirements. 16 SOUTH MIDDLETON 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 South Middleton School District's reporting entity applies all relevant Governmental Accounting Standards Board (GASB) pronouncements. Proprietary funds apply Financial Accounting Standards Board (FASB) pronouncements and Accounting Principles Board (APB) opinions and Accounting Research Bulletins (ARBs) of the Committee on Accounting Procedure 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 property 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 is recognized when due. Disbursements for inventory-type items and prepaid expenses are considered expenditures at the time of purchase. 17 SOUTH MIDDLETON SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS Note 1. Summary of Significant Accounting Policies (Continued) Basis of Accounting (Continued): The Cafeteria Fund uses the Pennsylvania Department of Education-prescribed "modified enterprise fund" method of accounting. Under this 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 5 - 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). Agency and Trust Funds are custodial in nature (assets equal liabilities) and do not involve measurement of results of operations. Agency Funds, except for the Activity Fund and the Trust Fund, are also accounted for using the modified accrual basis of accounting. The Activity Fund records transactions using the cash basis of accounting. This basis does not differ significantly from the modified accrual basis. Use of Estimates: Management uses estimates and assumptions in preparing financial statements. These estimates and assumptions affect the reported amounts of assets and liabilities and the reported revenue and expenditures. 18 SOUTH MIDDLETON SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS Note 1. Summary of Significant Accounting Policies (Continued) Budgets and Budgeta _fy Accounting: The School District adopts a budget for the General Fund. This is the only Fund which is legally adopted by the School District. 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 departments within School District Funds. Budgeted amounts are as originally adopted or as amended by the School Board at various times. General Fixed Assets: General fixed assets, land; consisting of buildings, furniture and equipment, are recorded at values as determined costs. Accounting principles generally accepted in the United States of America require General Fixed Assets to be recorded at cost. Original purchase and replacement equipment is charged to the appropriate General Fund expenditure account as prescribed by the Department of Education. No depreciation has been provided for General Fixed Assets. General Long-Term Debt: The General Long-Term Debt Account Group consists of.' 1. Outstanding General Obligation Bonds - Series of 1991 issued on June 6, 1991. 2. Outstanding General Obligation Bonds - Series A of 1994 - Capital Appreciation Bonds issued on April 6, 1994. 3. Outstanding General Obligation Bonds - Series of 1996 issued on April 15, 1996. 4. Outstanding General Obligation Bonds - Series of 1998 issued on March 1, 1998. 5. Outstanding General Obligation Bonds - Series of 2001 issued on December 1, 2001. 6. G.E. Capital Note. 7. Sick leave payable. 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. Inventories: Inventories are valued at cost using the first-in, first-out (FIFO) method. The costs of governmental fund-type inventories are recorded as expenditures when consumed rather than when purchased. 19 SOUTH MIDDLETON SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS Note 1. Summary of Significant Accounting Policies (Continued) Accrued Sick Leave: Under terms of the School District's employment agreements, employees are granted 10 sick days per school year and any unused sick days are permitted to be carried over to future years. Upon retirement from the School District, employees are reimbursed for 50 percent of their accumulated sick days multiplied by the existing daily substitute teacher rate. In the General Fund, only the current portion of the liability is reported. The long-term portion of the liability is reported in the General Long-Term Debt Account Group. Totals - Memorandum Only: These 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. Deposits and Investments Deposits The deposits of the School District are held in various financial institutions and are carried at cost. Carrying Bank Amount Balance Insured (FDIC) $ 200,979 $ 200,979 Uninsured, uncollateralized Total Deposits 537,813 841,894 $ 738,792 $ 1,042,873 Investments Statutes authorize the School District to invest in the following: · U. S. Treasury Bills. · Short-term obligations of the U. S. Government and Federal agencies. · Insured savings and checking accounts and certificates of deposit in banks, savings and loan associations and credit unions. · General Obligation Bonds of the Federal Government, the Commonwealth of Pennsylvania or any state agency, or of any Pennsylvania political subdivision. · Shares of investment companies whose investments are restricted to the above categories. 20 SOUTH MIDDLETON SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS Note 2. Deposits and Investments (Continued) Investments (Continued) Investments are principally short-term and carrying values approximate market. Investments at June 30, 2002, are held by the Pennsylvania School District Liquid Asset Fund (PSDLAF), Pennsylvania Local Government Investment Trust (PLGIT), Orrstown Trust Department: Carrying Bank Amount Balance Pennsylvania School District Liquid Asset Fund Pennsylvania Local Government Investment Trust Orrstown Trust Department U.S. Treasury Notes $ 3,897,317 $ 4,110,513 1,734,456 1,734,456 924,095 924,095 $ 6,555,868 $ 6,769,064 These investments are secured by collateral pools pledged by the issuing financial institutions in accordance with Act 72 of 1971. 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. All funds in the Pennsylvania School District Liquid Asset Fund are invested in accordance with Section 440.1 of the School Code. Each school district owns a pro-rata share of each investment or deposit which is held in the name of the fund. Note 3. Property Taxes Property taxes are levied on July 1. Taxes are collected at a discount until September 30, at their face amount from October 1 until November 30, and includes a penalty thereafter. The taxes are billed by the School District and are collected by an elected tax collector. The County of Cumberland collects delinquent real estate taxes for the School District. 21 SOUTH MIDDLETON SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS Note 4. Taxes Receivable and Deferred Revenue A summary of taxes receivable and related accounts at June 30, 2002, are as follows: Amount Uncollected taxes - real estate Uncollected taxes - personal Taxes Receivable Taxes to be collected within 60 days Deferred revenue - delinquent taxes Taxes Receivable - Net Deferred Revenue Delinquent taxes Retiree insurance premiums Drug Free Schools Title I - Education of Disadvantaged Children Donated commodities - Cafeteria Fund Total Deferred Revenue - Net $ 342,612 197,669 $ 540,281 $ 74,446 465,835 $ 540,281 $ 465,835 45,440 2,417 10,013 28,321 $ 552,026 Note 5. Interfund Accounts Individual fund receivable and payable balances at June 30, 2002, are as follows: Interfund Fund Receivables Interfund Payables General $ 30,847 Athletic _ Payroll _ 17,654 13,193 $ 30,847 $ 30,847 22 SOUTH MIDDLETON SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS Note 6. Cafeteria Fund Inventory The composition of Cafeteria Fund inventory at June 30, 2002, is as follows: Amount Materials and supplies Purchased food Donated food Note 7. General Fixed Assets A summary of changes in fixed assets for the year ended June 30, 2002, is as follows: July 1, 2001 Changes 1,617 18,340 28,321 $ 48,278 June 30, 2002 General Fixed Assets Land and site improvements Buildings and building improvements Furniture and equipment Enterprise Fund Fixed Assets Furniture and equipment Less accumulated depreciation Furniture and Equipment - Net 35,750 $ 1,472,318 $ 1,508,068 47,791,510 (21,858,635) 25,932,875 8,209,081 (1,974,361) 6,234,720 $ 56,036,341 $(22,360,678) $ 33,675,663 $ 496,068 $ 121 $ 496,189 (361,141) (24,260) (385,401) $ 134,927 $ (24,139) $ 110,788 For the General Fixed Asset Account Group the net changes represent the School District recording their fixed assets at historical costs for the first time for the year ended June 30, 2002. For the Enterprise Fund fixed assets the net changes in general fixed assets is a combination of new assets purchased and disposed. 23 SOUTH MIDDLETON SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS Note 8. Long-Term Obligations A summary of the reporting entity's long-term obligations as of June 30, 2002, and transactions during the year then ended follows: Balance Balance July l, June 30, 2001 Increase Decrease 2002 General Long-Term Obligations General Obligation Bonds - Series of 1991 General Obligation Bonds - Series of 1994 Series A General Obligation Bonds - Series of 1997 General Obligation Bonds - Series of 1998 General Obligation Bonds - Series of 2001 G.E. Capital Note Sick leave payable Total General Long-Term Obligations $ 2,921,838 $ $ 625,495 $ 2,296,343 626,623 8,430,000 9,340,000 24,299 650,922 8,430,000 435,O0O 8,905,000 8,740,000 8,740,000 1,961,911 - 86,703 1,875,208 264,788 53,329 - 318,117 $ 23,545,160 $ 8,817,628 $ 9,577,198 $ 22,785,590 General Obligation Bonds - Series of 1991 (Capital Appreciation Bonds) - On June 6, 1991, the School District issued General Obligation Bonds in the principal amount of $4,835,460. The bonds bear annual interest rates ranging from 5.50% to 6.85%. Interest is payable at maturity, and the bonds mature serially in amounts ranging from $5,000 to $860,000 through September 1, 2007. General Obligation Bonds - Series of 1994, Series A - On March 15, 1994, the School District issued bonds consisting of General Obligation Bonds, Series A - Capital Appreciation Bonds of $446,422. The bonds bear annual interest rates ranging from 3.25% to 5.70%. The Capital Appreciation Bonds bear interest upon maturity, and the bonds mature on September 1, 2005 and 2006 in amounts from $445,000 and $405,000, respectively. The Capital Appreciation Bonds are not subject to redemption. 24 SOUTH MIDDLETON SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS Note 8. Long-Term Obligations (Continued) General Obligation Bonds - Series of 1997 - On October 1, 1997, the School District issued bonds in the principal amount of $8,510,000. The proceeds of the bonds will be used for and toward: (1) advance refunding a portion of the General Obligation Bonds - Series of 1994; (2) funding of costs and expenses of capital projects which consist of planning, designing, acquiring, constructing, equipping and furnishing alterations, additions, renovations or improvements to public school buildings and facilities, and the acquisition of fixtures, furnishings or equipment related thereof; and (3) paying of costs and expenses related to the foregoing and the issuance of such bonds. The bonds bear interest semi-annually with rates ranging from 3.80% to 5.10%. These bonds were called during the year ended June 30, 2002. General Obligation Bonds - Series of 1998 - On March 1, 1998, the School District issued bonds in the principal amount of $9,995,000. The proceeds of the bonds will be used as follows: (1) advance refunding a portion of the General Obligation Bonds - Series of 1995; (2) advance refunding the School District's General Obligation Bonds - Series of 1996; and (3) paying the costs and expenses related to the foregoing and the issuance of such bonds. The bonds bear interest semi-annually with rates ranging from 3.50% and 4.80%. The bonds mature serially in amounts ranging from $25,000 to $410,000 through November 15, 2016. General Obligation Bonds - Series of 2001 - On December 1, 2001, the School District issued bonds in the principal amount of $8,740,000. The proceeds of the bonds will be used as follows: (1) calling the General Obligation Bonds - Series of 1998 (2) paying the costs and expenses related to the foregoing and the issuance of such bonds. The bonds bear interest semi-annually with rates ranging from 2.10% and 4.10%. The bonds mature serially in amounts ranging from $15,000 to $1,175,000 through September 1, 2013. G.E. Capital Note - On January 10, 2000, G.E. Capital Public Finance, Inc., issued South Middleton School District a ten-year note in the amount of $2,213,371. The proceeds of the note are to be used for a Performance-Based Energy Savings Project, an agreement between the School District and PP&L Spectrum, Inc., that will yield guaranteed energy savings for the District. The note bears interest semi- annually at a rate of 5.79%. Principal payments ranging from $84,263 and $144,581 are due through January 30, 2010. 25 SOUTH MIDDLETON SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS Note 8. Long-Term Obligations (Continued) The following is a schedule of principal and interest to service long-term obligations of the School District: For the year ending June 30, General Obligation Bonds Principal Interest 2003 $ 1,055,590 $ 1,257,527 2004 1,062,023 1,266,328 2005 1,082,830 1,258,187 2006 1,640,802 1,247,580 2007 2,123,983 1,418,158 2008-2012 9,792,245 2,779,621 2013-2017 5,710,000 476,883 $ 22,467,473 $ 9,704,284 Note 9. Advance Refunding On December 1, 2001, the District issued General Obligation Bonds, Series of 2001 in the aggregate principal amount of $8,740,000. The proceeds of these bonds were used to advance refund the General Obligation Bonds, Series of 1997. The transaction resulted in an economic gain for the District of approximately $395,000. Note 10. P6or-YearDefeasance of Debt In prior years, the District defeased certain general obligations and other bonds by placing the proceeds of new bonds in irrevocable trusts to provide for all future debt service payments on the old bonds. Accordingly, the trust account assets and the liability for the defeased bonds are not included in the District's financial statements. At June 30, 2002, $2,060,000 of bonds outstanding are considered defeased. Note 11. Affiliates As explained in Note 1, the South Middleton School District is affiliated with the Cumberland/Perry Area Vocational-Technical School (Vo-Tech School). Total payments of $270,655 were made by the School District to the Vo-Tech School as the former's share of operating expenses for the year ended June 30, 2002. Total payments of $150,462 were made by the School District to the Vo-Tech School as the former's share of construction project billings for the year ended June 30, 2002. 26 SOUTH MIDDLETON SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS Note 12. 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, 1975, 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. Fiurie, Office of Financial Management, Public School Employees' Retirement System of Pennsylvania, P.O. Box 125, Harrisburg, PA, 17108-0125. This report is also available in the publications section of the PSERS website at www.psers.state.pa.us. 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 at 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 District's rate of contribution was 1.09% of covered payroll. The 1.09% rate is entirely attributed 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 $107,979, $181,879, and $397,063, respectively, and are equal to the required contributions for each year. 27 SOUTH MIDDLETON SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS Note 13. Risk Management The 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. Note 14. Significant Commitments As of June 30, 2002, the District had entered into the following significant contract commitments: Payee Description Amount McClure Company, Inc. Cumberland Perry Area Vo-Tech School Roof Replacement Gym Pool/Heater Expansion/Renovation $ 530,470 $ 138,045 SUPPLEMENTARY INFORMATION SOUTH MIDDLETON SCHOOL DISTRICT STATEMENT OF ASSETS AND LIABILITIES FIDUCIARY FUND TYPES - AGENCY FUNDS Year Ended June 30, 2002 ASSETS Agency Funds Activity Payroll Fund Fund Total Cash Total assets LIABILITIES Due to other funds Accrued expenses Salaries and benefits Amount available for student activities Total liabilities $ 111,748 $ 45,954 $ 1'57,702 $ 111,748 $ 45,954 $ 157,702 $ $ 13,193$ 13,193 - 32,761 32,761 111,748 111,748 $ 111,748 $ 45,954 $ 157,702 29