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EAST PENNSBORO AREA SCHOOL DISTRICT
FINANCIAL STATEMENTS
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YEAR ENDED JUNE 30, 2006
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TABLE OF CONTENTS
Page
Number
INDEPENDENT AUDITORS' REPORT
. MANAGEMENT'S DISCUSSION AND ANALYSIS
BASIC FINANCIAL STATEMENTS
District-wide financial statements
~' Statement of net assets
Statement of activities
Fund financial statements
Balance sheet -governmental funds
Reconciliation of the governmental funds balance sheet
to the statement of net assets
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Statement of revenues, expenditures, and changes
in fund balances -governmental funds
Reconciliation of the governmental funds statement of revenues, expenditures,
and changes in fund balance to the statement of activities
Statement of net assets -proprietary funds
Statement of revenues, expenses, and changes in net assets -proprietary funds
Statement of cash flows -proprietary funds
Statement of net assets -fiduciary funds
• NOTES TO FINANCIAL STATEMENTS
BUDGETARY COMPARISON INFORMATION -GENERAL FUND
IAR - 1 to IAR - 2
MDA - 1 to MDA - 6
FS-1
FS-2
FS-3
FS - 4
FS-5
FS - 6
FS-7
FS-8
FS-9
FS-10
FS-11 to FS-27
BCI-1
~ GREENAWALT & COMPANY P.C.
CERTIFIED PUBLIC ACCOUNTANTS
4OO WEST MAIN STREET '
JAMES E. LYONS G2 WEST POMFRET
STREET
HOWARD R. GREENAWALT MECHANICSBURG, PENNSYLYANIA t7O5S CARLISLE, PA 17013
CREEDON R. HOFFMAN (717) 243-4822
DEBORAH J. KELLY (717766-4763 FAX (717) 258-9372
FAX (717) 766-2731
R. A. GREENAWALT (1956-1983)
A. A. REIDINGER (RETIRED)
C. EDWARD ROGERS, JR.
INDEPENDENT AUDITORS' REPORT
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Board of School Directors
East Pennsboro Area School District
Enola, Pennsylvania
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We have audited the governmental activities, the business-type activities, each major fund, and the aggregate
remaining fund information of East Pennsboro Area School District as of and for the year ended June 30, 2006, which
collectively comprise the District's basic financial statements. These financial statements are the responsibility of the
District's management. Our responsibility is to express an opinion on these financial statements based on our audit.
The prior year summarized comparative information has been derived from the District's June 30, 2005 financial
statements and, in our report dated October 6, 2005, we expressed unqualified opinions on the respective financial
statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining
fund information.
. We conducted our audit in accordance with auditing standards generally accepted in the United States of America
and the standards applicable to financial audits contained in Government Auditing Standards, issued by the
Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates made by management, as well as
~ evaluating the overall financial statement presentation. We believe that our.audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the respective
financial position of the governmental activities, the business-type activities, each major fund, and the aggregate
~ remaining fund information of East Pennsboro Area School District, as of June 30, 2006, and the respective changes
in financial position and cash flows, where applicable, thereof and for the year then ended in conformity with
accounting principles generally accepted in the United States of America.
In accordance with Government Auditing Standards, we have also issued our report dated October 26, 2006, on our
consideration of the East Pennsboro Area School District's internal control over financial reporting and on our tests of
its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The
purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance
and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on
compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards
and should be considered in assessing the results of our audit.
IAR - 1
MEMBERS -- AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS -- PENNSYLVANIA INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS
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Board of Directors
East Pennsboro Area School District
Management's discussion and analysis on pages MDA - 1 through MDA - 6 and budgetary comparison information on
page BCI - 1 are not a required part of the basic financial statements but are supplementary information required by
the accounting principles generally accepted in the United States of America. We have applied certain limited
procedures, which consisted principally of inquiries of management regarding the methods of measurement and
presentation of the required supplementary information. However, we did not audit the information and express no
opinion on it.
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GREENAWALT & COMPANY, P.C.
~ September 29, 2006, except for paragraph 4 as to which the date is October 26, 2006.
Mechanicsburg, Pennsylvania
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IAR - 2
I • EAST PENNSBORO AREA SCHOOL DISTRICT
ENOLA, PENNSYLVANIA
MANAGEMENT'S DISCUSSION AND ANALYSIS
Our discussion and analysis compares our financial position at June 30 of 2006, 2005 and 2004. It also provides an
overview of our financial performance for the two years between these periods, fiscal years ended June 30, 2006 and
2005, in accordance with governmental reporting requirements. Please read our discussion and analysis in
conjunction with the District's financial statements, which begin on page FS-1.
FINANCIAL HIGHLIGHTS
~ Our financial position remained strong at the end of 2006. A one-time Increase in Earned Income Tax collections
created a favorable variance to our budgeted revenues, putting our total revenues ahead of budget. This,
coupled with controlling our expenses, left us again with adequate fund balances for the future.
• In 2005, we completed Phase I construction at the Middle School. In 2006, we used available capital funds to
complete Phase II renovations. There is a balance of about $1.7 million remaining in our Capital Projects Fund
that we anticipate using during the 2006 - 2007 budget year for additional renovation projects.
~ For 2006, we paid down 5.8 percent of our General Obligation Debt, and did not issue any new debt. Our budget
for 2007 does not call for additional debt and we again expect to have adequate financial resources to meet all of
our debt service obligations.
USING THESE FINANCIAL STATEMENTS
This report consists of a series of financial statements. The Statement of Net Assets and the Statement of Activities
(on pages FS-1 and FS-2) provide information about the activities of the District as a whole, and present alonger-term
view of the District's finances than Fund statements. Fund financial statements are on pages FS-3, FS-5 and FS-7
through FS-10. For governmental activities, these statements tell how District services have been financed in the
short run, as well as show the amount remaining for future spending. Proprietary fund statements provide information
~ about non-governmental operations, in this case food services. Fiduciary funds statements report funds held in trust
by the District for such things as scholarship grants.
The Reconciliation of the Governmental Funds Balance Sheet on page FS-4 connects governmental fund balance to
the total net assets balance from the Statement of Net Assets. The reconciliation on page FS-6 does the same for the
components of the changes in fund balances.
~, Reporting the District as a Whole
The statements present financial activities and the results of those activities in two categories, Governmental and
Business-type. Capital assets (land, buildings, improvements, furniture and equipment) are presented with all other
assets. Long-term debt is presented with all other liabilities. This is distinctly different from the Fund statements in
which assets and liabilities are separated into various funds such as General and Capital Projects.
~ The approach to measurement of revenue and expense is similar to that used in the private sector and is referred to
as following the accrual basis of accounting. This is discussed further in the notes to the financial statements.
Reporting the District's Most Significant Funds
The funds statements provide financial information about the District's significant funds rather than the District as a
whole. There are three fund types, Governmental, Proprietary and Fiduciary. The use of each type of fund is
described in the notes to the financial statements. Unlike the financial statements that measure revenues on the
• accrual basis, the funds statements report revenues only to the extent cash has been received, or is expected to be
received in the near future.
The District as Trustee
The district acts as fiduciary for Students Activities and Agency Funds. In comparison to the Governmental Funds,
the amount held in the fiduciary fund is small. The fund balance assets are presented on page FS-10.
M DA - 1
I • EAST PENNSBORO AREA SCHOOL DISTRICT
ENOLA, PENNSYLVANIA
THE DISTRICT AS A WHOLE
~ Table A-1 summarizes and compares the Statement of Net Assets from page FS-1 of the financial statements for
each of the past three years. We have brought forward the 2004 balances from our 2005 MD&A. These balances are
otherwise not a part of the 2006 financial statement package. Within this and certain other schedules in our
discussion, we have presented the dollar figures in thousands, unless otherwise indicated, to make them easier to
read. This has resulted in rounding differences, and some columns may not add within a schedule.
Table A-1
Net Assets
June 30, 2006
(in Thousands)
Governmental Business-type
Activities Activities
2006 2005 2004 2006 2005 2004
Current and other assets $ 8,643.8 $ 9,703.8 $ 6,603.0 $ (54.5) $ (51.5) $ (49.5)
Capital assets 40,576.2 40,696.8 41,053.6 135.2 152.2 183.5
~ Total assets $ 49,220.0 $ 50,400.5 $ 47,656.5 $ 80.7 $ 100.7 $ 134.0
Current and other liabilities $ 2,933.8 $ 3,266.5 $ 3,301.9 $ 43.1 $ 47.1 $ 41.0
Long-term liabilities 39,983.3 42,039.4 40,501.7 - _ _
Total liabilities 42,917.1 45,305.9 43,803.6 43.1 47.1 41.0
Invested in capital assets (net of related 1,459.7
debt) (840.1) (34.5) 135.2 152.2 183.5
• Restricted for capital projects 1,682.4 3,430.3 1,372.5 - _ _
Unrestricted 3,160.8 2,504.4 2,514.8 (97.6) (98.6) (90.5)
Total Net Assets 6,302.9 5,094.6 3,852.9 37.6 53.6 93.0
Total liabilities and net assets $ 49,220.0 $ 50,400.5 $ 47,656.5 $ 80.7 $ 100.7 $ 134.0
~ Net assets are the difference between total assets and total liabilities, and represent resources that can be used to
pay for future operations and capital improvements. The bulk of our assets are capital assets. These have been paid
for using borrowed money and do not add significantly to our net asset value. The restricted portion of net assets
represents cash and investments that can only be used for buildings and improvements. The remaining restricted
fund balance will be used to fund future capital maintenance projects such as new roofing.
Our current and other assets have decreased by $1,062,862 from 2005 to 2006. The decrease is related to a decline
in our taxes receivable balance.
The cash balance as of June 30, 2006 within Business-type Activities is $98,912, but due to the elimination of internal
balances, the "Current and other assets" group is showing a negative balance of $54,455.
Table A-2 summarizes and compares activity presented in the Statement of Activities (page FS-2). It shows the
activity behind the increase in total net assets over the year ending June 30, 2006.
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MDA-2
t' EAST PENNSBORO AREA SCHOOL DISTRICT
ENOLA, PENNSYLVANIA
Table A-2
Changes in Net Assets
Year ended June 30, 2006
(in Thousands)
Governmental Business-type Total Primary
Activities Activities Government
2006 2005 2006 2005 2006 2005
Revenues
Program Revenues
Charges for services $ 153.8 $ 463.8 $ 762.9 $ 705.1 $ 916.7 $ 1,169.0
Oper. grants and contributions 4,213.1 3,160.4 325.4 305.2 4,538.5 3,465.6
Capital grants and contributions - 696.6 - - - 696.6
i ` General Revenues
Taxes 21,149.9 20,396.1 - - 21,149.9 20,396.1
State general subsidies 4,156.1 3,992.2 - - 4,156.1 3,992.2
Other 506.7 323.2 5.2 2.9 511.9 326.1
Total Revenues 30,179.6 29,032.3 1,093.5 1,013.3 31,273.1 30,045.7
Direct Expenses 28,952.0 27,785.0 1,128.7 1,058.4 30,080.8 28,843.4
Excess (Deficiency) before Transfers 1,227.5 1,247.4 (35.2) (45.1) 1,192.4 1,202.3
Transfers (19.2) (5.7) 19.2 5.7 - -
Special item-change in accounting - - - - _ _
Change in Net Assets $ 1,208.3 $ 1,241.7 $ (16.0) $ (39.4) $ 1,192.4 $ 1,202.3
. The growth in Total Revenues from our Total Primary Governmental activities was in line with the increase in our
direct expenses. Similar to 2005, this resulted in an excess of revenues over expenses, increasing our net asset
balance by $1.2 million.
Governmental Activities
Table A-3, shown on the next page, presents expense information from the Statement of Activities for governmental
activities. The total cost of services represents the actual cost of providing the services while the net cost represents
the amount of cost that is not recovered through program revenues, meaning user charges, grants and contributions.
The total net cost of services of $24,585,067 must be recovered through general revenue, primarily taxes and state
subsidies. Amounts not recovered will reduce funds available for future years.
The total net cost of services was 4.8 percent higher than the previous year.
Classroom instruction costs for 2006 increased by $717,523 over 2005. A third of this related to wage increases. The
~ remaining amount related to increased staff to accommodate growth in census, and new programs such as full-day
kindergarten.
Business-Type Activities
Table A-4, presented on the next page, is similar to the previous table, except it presents business-type service costs.
Note that almost all of the cost of food services is paid by program revenues.
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MDA-3
~' EAST PENNSBORO AREA SCHOOL DISTRICT
ENOLA, PENNSYLVANIA
Table A-4
Business-Type Activities
• Fiscal Year ended June 30, 2006
(in Thousands)
Total Cost Less: Program Net Cost
of Services Revenues of Services
2006 2005 2006 2005 2006 2005
Food services $ 1,128.7 $ 1,058.4 $ 1,088.3 $ 1,010.3 $ 40.4 $ 48.0
Less: Investment earnings 5.2 2 9
Total business Type activities $ 35.2 $ 45.1
~ There were no significant changes during the year with the net cost of services remaining about the same in 2006 as
in 2005.
DISTRICT'S FUNDS
~ The information in Table A-5 summarizes and compares the Governmental Funds' Balance Sheet for June 30, 2006,
2005 and 2004. Note that we again brought forward 2005 and 2004 balances from our 2005 MD&A.
This information is not otherwise a part of the 2006 financial statement package. The groupings are the same as
those used in the Statement of Net Assets.
Table A-5
Comparative Fund Balances
(in Thousands)
June 2005-2006 2004-2005
~ 2006 2005 2004 Change Change
General Fund
Restricted $ _ $ _ $ _ $ _ $ _
Unrestricted 3,100.4 1,076.3 1,211.4 2,024.1 (135.1)
Total General Fund 3,100.4 1,076.3 1,211.4 2,024.1 (135.1)
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Capital Projects Fund
Restricted 1,682.4 3,039.1 1,003.6 (1,356.7) 2,035.5
Unrestricted _ _ _ _ _
Total Capital Projects Fund 1,682.4 3,039.1 1 003.6 (1 356 7) 2 035 5
~ Special Revenue Fund
Restricted - _ _ _ _
Unrestricted 434.1 316.4 10.2 117.7 306.2
Tota! Special Revenue Fund 434.1 316.4 10.2 117.7 306.2
All Governmental Funds
Restricted 1,682.4 3,039.1 1,003.6 (1,356.7) 2,035.5
Unrestricted 3,534.5 1,392.7 1,221.6 2,141.8 171.1
Total All Governmental Funds $ 5,216.9 $ 4,431.8 $ 2,225.2 $ 785.2 $ 2,206.6
MDA-4
(• EAST PENNSBORO AREA SCHOOL DISTRICT
ENOLA, PENNSYLVANIA
As previously mentioned, the basis of measurement for fund assets and liabilities is different than that used in the
• Statement of Net Assets. The differences between the total governmental fund balance of $5,216,943 and the total
net assets of $6,302,899 are itemized in the reconciliation presented within the financial statements on page FS-4.
The items that caused the change in fund balance during the year are presented in the Statement of Revenues,
Expenditures and Changes in Fund Balances within the financial statements on page FS-5. The fund balance
increased by $785,151 because the total fund revenues were greater than the total fund expenditures.
• General Fund Budgetary Highlights
Table A-6 has been summarized from the comparative budget information presented on page BCI-1 of the required
supplemental information. The total variance was favorable in that we budgeted that total expenditures would be
higher than total revenues by $508,394, when in fact our total revenues exceeded our expenditures by $2,207,831.
Table A-6
Comparison of Budget to Actual
For the Year Ended June 30, 2006 and 2005
(in Thousands)
Budget Actual Variance
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2006 2005 2006 2005 2006 2005
Total revenues $ 28,908.4 $ 28,110.5 $ 31,533.4 $ 27,940.3 $ 2,625.0 $ (170.2)
Total expenditures 29,416.8 28,335.8 29,325.5 27,843.8 91.3 492.0
Revenues over (under) expenditures (508.4) (225.2) 2,207.9 96.6 2,716.3 321.8
Other financing sources (uses) (183.7) (565.7) (183.7) (231.6) - 334.1
• Net change in fund balances $ (692.1) $ (791.0) $ 2,024.2 $ (135.1) $ 2 716.3 $ 655.9
CAPITAL ASSETS
Table A-7 summarizes the Changes in Capital Assets note to the financial statements on pages FS-19. The original
~ cost of the capital assets on the books at June 30, 2006 was $61,684,254. Each year, for capital assets other than
land and construction in progress, this amount is depreciated (reduced in value) to reflect usage. The net balance of
$40,576,170 is the amount remaining after this reduction.
As construction projects are completed, related construction in progress balances are moved into the buildings and
improvements category, and depreciated over the estimated useful life of the improvement.
Table A-7
Governmental Activities Capital Assets Comparison (net of accumulated depreciation)
(in Thousands)
June 30
`
2006 2005 2004
Land $ 325.8 $ 325.8 $ 325.8
Construction in progress 339.1 480.8 -
Buildings and improvements 38,138.4 37,598.7 37,837.8
~ Furniture, fixtures, equipment and library books 1,772.8 2,291.5 2,890.0
Total Capital Assets, net of accumulated depreciation $ 40,576.1 $ 40,696.8 $ 41,053.6
MDA-5
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EAST PENNSBORO AREA SCHOOL DISTRICT
ENOLA, PENNSYLVANIA
DEBT ADMINISTRATION
Table A-8, shown on the next page, summarizes the Long-Term Liabilities note to the financial statements on pages
FS-21 to FS-24. Most of the debt relates to general obligation bonds issued by the District to pay for capital
improvements. Our ability to raise future funds through the issuance of debt depends on how well our existing bonds
are rated by the investment community. Currently, the District is rated by Standard and Poor's as AAA.
Table A-8
Governmental Activities Long-Term Liability Comparison
(in Thousands)
June 30
2006 2005 2004
General obligation debt $ 39,875.0 $ 42,310.0 $ 40,985.0
Capital leases 71.2 155.0 103.0
Compensated absences 699.1 295.8 214.7
Unamortized bond premiums, discounts and refunding (661.9) (721.4) (801.1)
Total Governmental long-term liabilities $ 39,983.4 $ 42,039.4 $ 40,501.7
Each year, the District pays interest to bond holders and pays down a portion of the outstanding debt, referred to as
redemption. During 2006, our redemptions totaled $2,435,000. We did not issue any new debt.
The increase in the Compensated absences liability of $403,318 relates to the anticipated retirement of 18 teachers
during the year. The determination of retirement severance payments is discussed on page FS-24 of the financial
statements.
Next Year's Budget
Table A-9 compares the revised budget for 2006 to the 2007 budget that was approved on June 19, 2006.
Table A-9
Comparison of Budgets
For the Years Ended June 30th, 2007 and 2006
(in Thousands)
Change
2007 2006 Dollar
Total revenues $ 30,627.6 $ 28,908.4 $ 1,719.2 5.9%
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Total expenditures 32,176.8 29,416.8 2,760.0 9.4%
Revenues over (under) expenditures (1,549.2) (508.4) (1,040.8) N/A
Other financing sources (uses) (363.0) (183.7) (179.3) N/A
Net change in fund balances $ (1,912.2) $ (692.1) $ (1,220.1) N/A
Total expenditures are budgeted to increase at a much lower rate than the previous year's budgeted increase. The
2006 budget reflected planned staff increases, while the 2007 budget anticipates the retirement of 18 teachers.
MDA-6
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EAST PENNSBORO AREA SCHOOL DISTRICT
RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET
TO THE STATEMENT OF NET ASSETS
JUNE 30, 2006
n
u
•
•
•
Total fund balances -Governmental funds
Amounts reported for governmental activities in the statement
of net assets are different because:
Capital assets are not financial resources and therefore are not reported
as assets in the governmental funds. At year end, the cost of capital
assets is $ 61,684,254, and the accumulated depreciation
is $ 21,108,084
$ 5,216,943
40, 576,170
Taxes receivable will be collected, but are not available soon enough to
pay for the current year's expenditures, and therefore are deferred in the
governmental funds. At year end, these taxes receivable consist of:
Real estate taxes $ 2g2,gg5
Personal taxes 15,038
Earned income taxes 493,212 801,245
Certain liabilities are not due and payable in the current year, and therefore
are not reported as liabilities in the governmental funds. At the year end,
these liabilities consist of:
Bonds payable
Capital lease obligations
Compensated absences
Long-term liabilities
Accrued interest on bonds payable
Costs related to the issuance of bonds are reported as expenditures
in the governmental funds. At year end, the remaining unamortized
bond related costs consist of:
Bond issuance costs
Bond discounts (premiums)
Refunding costs
Total net assets -Governmental activities
The accompanying notes are an integral part of these financial statements.
FS-4
(39,875,000)
(71,172)
(699,076)
(40,645,248)
(475,905)
167,748
(23,871)
685,817
(41,121,153)
829,694
$ 6, 302, 899
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EAST PENNSBORO AREA SCHOOL DISTRICT
STATEMENT OF NET ASSETS -PROPRIETARY FUNDS
JUNE 30, 2006
(With Summarized Financial Information for June 30, 2005)
Food Service
•
•
•
2006 2005
Assets
Cash and cash equivalents
Due from other funds
Due from other governments
Other receivables
Inventories
Total current assets
Furniture and equipment (net of accumulated depreciation)
Total assets
Liabilities
Due to other funds
Accounts payable
Deferred revenues
Total current liabilities
Net assets
Invested in capital assets (net of related debt)
Unrestricted
Total net assets
Total liabilities and net assets
The accompanying notes are an integral part of these financial statements.
FS-7
$ 98,912 $ 100,885
- 32,204
6,060 8,576
8,161 2,057
12,412 14,756
125,545 158,478
135,171 152,212
$ 260,716 $ 310,690
$ 180,000 $ 210,000
30,383 38,384
12,718 8,713
223,101 257,097
135,171 152,212
(97,556) (98,619)
37,615 53,593
$ 260,716 $ 310,690
EAST PENNSBORO AREA SCHOOL DISTRICT
STATEMENT OF REVENUES, EXPENSES
AND CHANGES IN NET ASSETS -PROPRIETARY FUNDS
FOR THE YEAR ENDED JUNE 30, 2006
(With Summarized Financial Information for the Year Ended June 30, 2005)
Operating revenues -Food service revenue
Operating expenses
Other purchased service
• Food and milk
Other supplies
Depreciation
Total operating expenses
~ Operating income (loss)
Nonoperating revenues
Earnings on investments
State sources -meal subsidies
Federal sources -commodities
~ Federal sources -meal subsidies
Total nonoperating revenues
Income (loss) before transfers and special items
•
Transfers from other funds
Change in net assets
Net assets -beginning
Net assets -ending
The accompanying notes are an integral part of these financial statements.
FS-8
Food Service
2006 2005
$ 762,877 $ 705,126
1,011,451
47, 938
36,995
32, 349
1,128,733
(365,856)
953,182
46,722
27,243
31,245
1,058,392
(353,266)
5,202
39,970
47, 938
237, 540
330,650
(35,206)
19,228
(15, 978)
53,593
$ 37,615
2,947
38,814
46, 722
219,683
308,166
(45,100)
5,694
(39,406)
92, 999
$ 53,593
.~
EAST PENNSBORO AREA SCHOOL DISTRICT
STATEMENT OF CASH FLOWS -PROPRIETARY FUNDS
FOR THE YEAR ENDED JUNE 30, 2006
(With Summarized Financial Information for the Year Ended June 30, 2005)
•
Operating activities
~ Cash received from users
Cash payments to suppliers for goods and services
Cash payments for other operating expenses
Net cash provided by (used for) operating activities
• Non-capital financing activities
State sources
Federal sources
Notes and loans received (repaid)
General fund contributed services
Net cash provided by (used for) non-capital financing activities
Food Service
2006 2005
$ 760,778 $ 706,069
(1,019,452) (950,072)
(34,651) (28,208)
(293,325) (272,211)
40,324 37,603
239,702 212,318
2,204 (32,204)
19,228 5,694
301,458 223,411
~ Capital and related financing activities
Cash payments for equipment (15,308) -
Net cash provided by (used for) capital and related financing activities (15,308) -
Investing activities
~ Earnings on investments
Net cash provided by (used for) investing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents -beginning
Cash and cash equivalents -ending
Reconciliation of operating income (loss) to net cash
provided by (used for) operating activities
• Operating income (loss)
Adjustments to reconcile operating income (loss) to net cash
provided by (used for) operating activities
Depreciation
Donated commodities
. Net change in other assets and other liabilities
Accounts receivable
Inventories
Accounts payable
Deferred revenue
Total adjustments
~ Net cash provided by (used for) operating activities
5,202 2,947
5,202 2,947
(1,973) (45,853)
100,885 146,738
$ 98,912 $ 100,885
$ (365,856) $ (353,266)
32,349
47,938
(6,104)
2, 344
(8,001)
4, 005
72,531
$ (293,325)
31,245
46,722
(2,057)
(964)
3,110
2,999
81,055
$ (272,211)
The accompanying notes are an integral part of these financial statements.
• FS-9
EAST PENNSBORO AREA SCHOOL DISTRICT
STATEMENT OF NET ASSETS -FIDUCIARY FUNDS
JUNE 30, 2006
(With Summarized Financial Information for June 30, 2005)
u
~ Assets
Cash and cash equivalents
Total assets
n
n
u
J
--~
•,
Liabilities
Deferred revenue
Due to student groups
Total liabilities
Net assets
Total liabilities and net assets
Student Totals
Agency Activities 2006 2005
$ 86,015 $ 89,802 $ 175,817 $ 82,991
$ 86,015 $ 89,802 $ 175,817 $ 82,991
$ 86,015 $ - $ 86,015 $ -
- 89,802 89,802 82,991
86, 015 89, 802 175, 817 82, 991
$ 86,015 $ 89,802 $ 175,817 $ 82,991
The accompanying notes are an integral part of these financial statements.
FS-10
EAST PENNSBORO AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2006
•
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
East Pennsboro Area School District is the level of government which has oversight responsibility and control
~ over activities related to public school education. The report includes services provided by the District to residents
within the boundaries of the Cumberland County municipality of East Pennsboro Township. Services provided
include a comprehensive curriculum for primary and secondary education as well as special education and
vocational education programs. The District receives revenue from local, state and federal sources and must
comply with the requirements of these funding sources.
•
The financial statements of East Pennsboro Area School District have been prepared in accordance with
generally accepted accounting principles as applied to governmental units. The Governmental Accounting
Standards Board is the authoritative standard-setting body for the establishment of governmental accounting and
financial reporting principles. Accounting guidance is also provided through the Comptroller's office for
~ Pennsylvania Department of Education. The more significant of these accounting policies are as follows:
Reporting entity
Governmental Accounting Standards Board Statement No. 39 "Determining Whether Certain Organizations are
~ Component Units" (an amendment of Statement No. 14), established the criteria for determining the activities,
organizations and functions of government to be included in the financial statement of the reporting entity. In
evaluating the District as a reporting entity, management has addressed all potential component units which may
or may not fall within the school's financial accountability. The criteria used to evaluate component units for
possible inclusion as part of the District's reporting entity are:
~ Economic resources received or held by the separate organization are entirely for the direct benefit of the
District or its constituents.
• The District is entitled to, or has the ability to access a majority of the economic resources received or
held by the separate organization.
• The economic resources received or held by an individual organization that the District is entitled to (or
~ has the ability to) access is significant to the District.
There are no component units that the District feels meet all the above criteria for inclusion in this reporting entity.
Jointly-governed organizations
The District is a participant in four jointly-governed organizations, each of which is a separate legal entity that
offers educational services to the District and its residents. Each of these entities serves several school districts
and/or municipalities and therefore are not included in this reporting entity. These entities do not have taxing
power, but are required to adopt an annual budget, which is funded primarily by its member Districts or others that
~ use its services. Complete financial statements for these entities can be obtained from the respective entity's
administrative office.
FS-11
EAST PENNSBORO AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2006
n
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd.)
Jointly-governed organizations (Cont'd.)
West Shore Tax Bureau provides earned income tax collection services.
Capital Area Intermediate Unit provides special education services and programs.
Cumberland Perry Area Vocational Technical School provides vocational and technical education
services and programs.
• Harrisburg Area Community College provides community college education services and programs.
Basis of presentation -District-wide financial statements
District-wide financial statements (i.e., the statement of net assets and the statement of activities) report
~ information on all of the nonfiduciary activities of the District. As a general rule the effect of interfund activity has
been eliminated from these statements. Governmental activities, which normally are supported by taxes and
intergovernmental revenues, are presented separately from business-type activities which rely to a significant
extent, on fees and charges for support.
• The district-wide financial statements are presented using the economic resources measurement focus and the
accrual basis of accounting as are the proprietary fund and the fiduciary fund financial statements. Revenues are
recognized when earned and expenses are recognized when a liability is incurred, regardless of the timing of
related cash flows. Real estate and personal taxes are recognized as revenues in the year for which they are
levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the
provider have been met. Net assets (total assets less total liabilities) are used as a practical measure of economic
• resources and the operating statement includes all transactions and events that increased or decreased net
assets. Depreciation and amortization are charged as an expense against current operations. Accumulated
depreciation and unamortized costs are presented in the statement of net assets.
The statement of activities demonstrates the degree to which the direct expenses of given functions or programs
~ are offset by program revenues. Direct expenses are those that are clearly identifiable within a specific function or
program. Program revenues include charges to customers who purchase, use, or directly benefit from goods,
services, or privileges provided by a given function or program. In addition, program revenues include grants and
contributions that are restricted to meeting the operational or capital requirements of a particular function or
program. Taxes and other items not properly included among program revenues are presented as general
revenues.
•
Basis of presentation -Fund financial statements
Fund financial statements are also provided for all governmental funds, proprietary funds, and fiduciary funds of
the District. Major individual governmental funds and major individual proprietary funds are presented as separate
~ columns in the fund financial statements. Nonmajor funds, if any, are aggregated and presented in a single
column. Fiduciary funds are presented by fund.
FS-12
a
EAST PENNSBORO AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2006
u
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd.)
Basis of presentation -Fund financial statements (Cont'd.)
•
The governmental funds are presented using the current financial resources measurement focus and the modified
accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available.
Revenues are considered to be available when they are received within the current period or soon enough
thereafter to pay liabilities of the current period. For this purpose, the District considers tax revenue to be
available if received within 60 days of the end of the fiscal period, except for earned income tax revenue which
may be considered available if received within 60 to 90 days of the end of the fiscal year, depending upon the
frequency of payments from the District's collection bureau. Revenue from federal, state and other grants
designated for payment of specific expenditures is recognized when the related expenditures are incurred;
accordingly, when such funds are received, they are recognized as deferred revenues until earned. Expenditures
~ generally are recognized when a liability is incurred, as under accrual accounting. However, debt service
expenditures, as well as expenditures related to compensated absences and claims and judgments, are
recognized only when payment is due.
Proprietary funds generally follow standards for accounting and financial presentation for private business
~ enterprises to the extent that those standards do not conflict with or contradict guidance of the Governmental
Accounting Standards Board.
Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and
expenses generally result from providing services and producing and delivering goods in connection with the
fund's principal ongoing operations. Operating expenses for the District's proprietary fund include food production
~ costs, supplies, administrative costs, and depreciation on capital assets. All revenues or expenses not meeting
this definition are presented as nonoperating revenues and expenses.
Fund accounting
• The accounts of the District are organized on the basis of funds, each of which is considered a separate
accounting entity. The operations of each fund are accounted for by providing a separate set of self-balancing
accounts which comprise its assets, liabilities, fund equity, revenues, and expenditures, or expenses, as
appropriate. Resources are allocated to and accounted for in individual funds based upon the purposes for which
they are to be spent.
When both restricted and unrestricted resources are available for use, it is the District's general policy to use the
restricted (primarily operating grants) resources first, then unrestricted resources as they are needed.
The District has the following major types of funds:
Governmental Funds -These funds account for the activities through which most of the District's operations
are provided.
FS-13
~:
EAST PENNSBORO AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2006
n
u
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd.)
Basis of presentation -Fund financial statements (Cont'd.)
Fund accounting (Cont'd.)
Proprietary Funds -These funds account for the operations of the District that are financed and operated in a
manner similar to private business enterprises.
Fiduciary Funds -These funds account for the assets held by the District as a trustee or agent for individuals,
private organizations and/or governmental units and are therefore not available to support the District's own
programs.
~ The District presents the following major governmental funds:
The General Fund is the primary operating fund. It accounts for all financial resources except those required
to be accounted for in another fund.
~ An operating budget is adopted prior to the beginning of each year on a modified accrual basis of
accounting. The General Fund is the only fund for which a budget is legally required.
The Pennsylvania School Code dictates specific procedures relative to adoption of the budget and
presenting of its financial statements. The District, before levying annual school taxes, is required to
S, prepare an operating budget for the succeeding fiscal year. This process includes the publishing of
notices by advertisement, that the proposed budget has been prepared and is available for public
inspection at the administrative office of the District, and that public hearings are held on the proposed
operating budget which are required to be scheduled at least ten days prior to when final action on
adoption is taken by the Board.
~ Legal budgetary control is maintained at the sub-function/major object level. The Board may approve
transfers of funds appropriated to any particular item of expenditure in accordance with the Pennsylvania
School Code. Management may amend the budget at the sub-functionlsub-object level without Board
approval, provided it is not at a higher level than the Board adopted budget.
~ In order to preserve a portion of an appropriation for which an expenditure has been committed by a
purchase order, contract or other form of commitment, an encumbrance is recognized. Unused
encumbrances expire at the end of each year.
Included in the budget are program budgets as prescribed by the federal and state agencies funding the
i program. These budgets are approved on a program by program basis by the federal and state funding
agencies.
FS-14
1
EAST PENNSBORO AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2006
•
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd.)
Basis of presentation -Fund financial statements (Cont'd.)
Fund accounting (Cont'd.)
The Capital Reserve Fund accounts for transfers from other funds and related investments earnings for
capital outlays not accounted for in another fund.
The Athletic Fund accounts for athletic revenues and expenditures of those funds for athletic purposes.
The Capital Projects Fund accounts for bonds proceeds and the expenditure of those funds.
~ The District reports the following Proprietary Fund:
The Food Service Fund accounts for the operations of the cafeteria.
The District reports the following Fiduciary fund:
The Student Activities Fund accounts for programs operated and sponsored by various clubs and
organizations within the schools.
The District Agency Fund accounts for programs operated and sponsored by various non-school
~ organizations or funds received by the District with restrictions from an outside party. These funds are
separate from student activity funds.
Cash and cash equivalents and investments
The District's cash and cash equivalents are considered to be cash on hand, demand deposits (including pooled
~ investments), and short-term investments with original maturities of three months or less from the date of
acquisition.
The types of authorized investments are limited by State regulations. Pooled investment funds are required to be
operated in accordance with State regulations.
f
Investments, including pooled investments, are presented at fair value.
Taxes and taxes receivable
i Real estate taxes are levied as of July 1 with a legal, enforceable claim against the property and/or taxpayer.
Amounts not collected within six months (December 31) are considered delinquent and submitted to outside
agencies/entities for collection actions.
FS-15
i7
EAST PENNSBORO AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2006
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd.)
Receivables and payables between funds
Activity between funds that represent lending/borrowing arrangements outstanding at the end of the fiscal year
are referred to as "due to/from other funds". Any residual balances outstanding between the governmental
activities and business-type activities are reported in the government-wide financial statements as "internal
balances". Any balances between funds are short-term items pending periodic repayments.
Inventories
Inventories are presented at the lower of cost or market on a first-in, first-out basis, and are expended when used.
Donated commodities are recognized as revenue and are inventoried at an estimated cost value.
Capital assets
Capital assets, which include property, plant, equipment, and infrastructure assets (e.g., roads, sidewalks, and
similar items), are reported in the applicable governmental or business-type activities columns in the government-
. wide financial statements. Capital assets are defined by the District as assets with an initial, individual cost of
more than $ 1,000 and an estimated useful life in excess of one year. Management has elected to include certain
homogeneous groups with individual costs of less than $ 1,000 as capital assets for financial reporting purposes.
In addition, capital assets purchased with long-term debt may be capitalized regardless of the thresholds
established. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed.
~ Major outlays for capital assets and improvements are capitalized as projects are constructed. The costs of
normal maintenance and repairs that do not add to the value of the asset or materially extend asset lives are not
capitalized.
All reported capital assets are depreciated using the straight-line method over the following estimated useful lives:
Assets Years
Buildings 40
Building improvements 15 to 40
Site improvements 20
Furniture, fixtures and equipment 5 to 15
Library books 7
Proprietary fund equipment purchases are capitalized at cost and depreciated on a straight-line basis over useful
~ lives of 5 to 12 years.
FS-16
i
EAST PENNSBORO AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2006
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd.)
Long-term liabilities
•
In the district-wide financial statement, and in the proprietary fund types in the fund financial statements, long-
term debt and other long-term obligations are presented as liabilities in the applicable governmental activities or
proprietary fund statement of net assets. Refunding costs and bond premiums and discounts are amortized over
the life of the bonds using the effective interest method and the straight-line method. Bond issuance costs are
~ presented as deferred charges and amortized over the term of the related debt.
In the fund financial statements, govern ental fund types recognize bond premiums and discounts, as well as
bond issuance and refunding costs, as ~irrent period expenditures. The face amount of debt issued is presented
as-other financing sources while discounts and refunding costs on debt issuances are presented as debt service
~ expenditures. Issuance costs, whether or not withheld from the actual debt proceeds received, are presented as
support service expenditures.
Estimates
S The preparation of financial statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
Comparative information
~ Comparative totals for the prior year have been presented in the accompanying financial statements in order to
provide an understanding of changes in the District's financial position and operations. Certain amounts
presented in the prior year have been reclassified in order to be consistent with current year's presentation.
However, presentations of prior year totals by fund and activity type have not been presented in each of the
statements since their inclusion would make the statements unduly complex and difficult to read. Summarized
~' comparative information should be read in conjunction with the District's financial statements for the year ended
June 30, 2005, from which the summarized information was derived.
CASH AND CASH EQUIVALENTS AND INVESTMENTS
~ Pennsylvania statutes provide for investment of governmental funds into certain authorized investment types
including U.S. Treasury bills, other short-term U.S. and Pennsylvania government obligations, and insured or
collateralized time deposits and certificates of deposit. The statutes do not prescribe regulations related to
demand deposits; however, they do allow the pooling of governmental funds for investment purposes.
~ The deposit and investment policy of the District adheres to state statutes and prudent business practice.
FS-17
EAST PENNSBORO AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2006
CASH AND CASH EQUIVALENTS AND INVESTMENTS (Cont'd.)
Custodial credit risk is the risk that in the event of a bank failure, the government's deposits may not be returned
~ to it. The District policy requires that all deposits in excess of FDIC insurance coverage be collateralized with
approved collateral as provided by law. At June 30, 2006, the District's bank deposits totaled $ 5,729,350 and the
bank balances totaled $ 6,378,753. Of the bank balances, $ 200,000 was covered by federal depository insurance
and $ 6,019,269 was collateralized under Act No. 72 of the 1971 Session of the Pennsylvania General Assembly,
in which financial institutions were granted the authority to secure deposits of public bodies by pledging a pool of
r assets, as defined in the Act, to cover all public funds deposited in excess of Federal Depository Insurance limits.
The remaining bank balances of $ 159,484 are collateralized by an external investment pool with the
Pennsylvania Local Government Investment Trust.
Cash and cash equivalents at June 30, 2006 are as follows:
•
Governmental activities $ 5,454,621
Business-type activities 98,912
Fiduciary funds 175.817
~ 5.729.350
TAXES RECEIVABLE
Taxes receivable are as follows:
Taxes Taxes
Receivable Allowance for Receivable Deferred
(Gross) Uncollectibles (Nett Tax Revenue
Real estate taxes $ 433,924 $ 21,696 $ 412,228 $ 292,995
~ Earned income taxes 1,529,567 - 1,529,567 493,212
Personal taxes 18,798 3.760 15.038 15,038
General Fund 1,982,289 25,456 1,956,833 801,245
Full accrual adjustment - - - (801.245)
Governmental activities $ 1 982 289 $ 25.456 1.956.833 ~ -
FS-18
•
EAST PENNSBORO AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2006
r-.
u
u
DUE FROM OTHER GOVERNMENTS
Due from other governments are as follows:
Governmental Business-type
Activities Activities
Local sources -other taxes
State sources
Federal sources
$ 49,151 $ -
246, 758 857
244,803 5.203
$ 540.712 $ 6.060
u
CHANGES IN CAPITAL ASSETS
Capital asset activity for the year was as follows:
Governmental activities
~ Capital assets not being depreciated
Land
Construction in progress
Capital assets being depreciated
~ Buildings and improvements
Furniture and equipment
Library books
Accumulated depreciation
i Buildings and improvements
Furniture and equipment
Library books
t Total capital assets being depreciated, net
Governmental activities capital assets, net
r
Beginning Ending
Balance Increases Decreases Balance
$ 325,826 $ - $ - $ 325,826
480835 339.096 (480.835) 339.096
806,661 339,096 (480,835) 664,922
52,994,650 1,903,571 - 54,898,221
5,075,629 151,430 (8,655) 5,218,404
876,728 25,979 - 902,707
58.947,007 2,080,980 (8,655) 61,019,332
(15,395,984) (1,363,831) - (16,759,815)
(3,153,829) (588,098) 29,063 (3,712,864)
(507,066) (128.339) (635,405)
(19,056,879) (2,080,268) 29.063 (21.108.084)
39,890.128 712 20.408 39,911,248
$ 40.696.789 $ 339,808 $ (460,427) $ 40,576,170
FS-19
:~
EAST PENNSBORO AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2006
u
CHANGES IN CAPITAL ASSETS (Cont'd.)
• Business-type activities
Capital assets being depreciated
Furniture and equipment
Accumulated depreciation
Furniture and equipment
Capital assets being depreciated, net
Business-type activities capital assets, net
Beginning Ending
Balance Increases Decreases Balance
$ 420,590 $ 15,308 $
(268,378) (32,349)
152,212 (17,041)
- $ 435,898
_ (300,727)
_ 135,171
$ 152.212 $ (17.041) $ - $ 135.171
Depreciation expense was charged to functions/programs as follows:
Governmental activities
Instruction $ 1,057,210
Instructional student support 703,270
i Administrative and financial support 198,773
Operation and maintenance of plant 81,230
Transportation 7,442
Student activities 32.343
~ $ 2.080.268
Business-type activities -Food service $ 32.349
DEFERRED REVENUES
Governmental funds present deferred revenue in connection with receivables for revenues that are not
considered to be available to pay liabilities of the current period. Governmental funds also defer revenue
recognition with resources that have been received, but not yet earned. Deferred revenues in the General fund of
$ 822,449 consist of $ 801,245 taxes receivable not received within 60 to 90 days of the end of the fiscal period,
~ and $ 21,204 of resources that have been received but not yet earned.
Deferred revenue in the proprietary funds and the district-wide financial statements represents resources that
have been received but not yet earned.
FS-20
EAST PENNSBORO AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2006
LONG-TERM LIABILITIES
i
A summary of the changes in all long-term liabilities for the year ended June 30, 2006 is as follows:
Beginning Ending Due Within
Balance Additions Reductions Balance One Year
Governmental Activities:
~ General obligation debt $ 42,310,000 $ - $ 2,435,000 $ 39,875,000 $ 2,680,000
Capital leases 155,011 - 83,839 71,172 59,817
Compensated absences 295,758 468,818 65,500 699,076 105,800
Governmental activity
long-term liabilities $ 42.760.769 $ 468 818 ~ 2.584.339 40.645.248 2.845.617
~ - -
A. General obligation notes and bonds payable
Changes in general obligation notes and bonds payable were as follows:
~ Beginning Scheduled Ending
Balance New Issue Refundino Redemptions Balance
General Obligation Bonds:
Series of 2000 $ 610,000 $ - $ - $ 5,000 $ 605,000
~ Series of 2001 2,780,000 - - 115,000 2,665,000
Series A of 2001 6,560,000 - - 415,000 6,145,000
Series of 2003 8,855,000 - - 595,000 8,260,000
Series A of 2003 5,145,000 - - 265,000 4,880,000
Series AA of 2003 1,025,000 - - 745,000 280,000
Series of 2004 10,000,000 - - 5,000 9,995,000
~ Series A of 2004 3.500.000 - - 65.000 3,435,000
38,475,000 - - 2,210,000 36,265,000
General Obligation Notes:
Series of 1999 3.835.000 - 225.000 3.610.000
~ 42.310.000 $ - $ - ~ 2.435.000 39.875.000
FS-21
~7
EAST PENNSBORO AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2006
n
u
LONG-TERM LIABILITIES (Cont'd.)
A. General obligation notes and bonds payable (Cont'd.)
GOB Series of 2000
~ GOB Series of 2001
GOB Series A of 2001
GOB Series of 2003
GOB Series A of 2003
GOB Series AA of 2003
~ GOB Series of 2004
GOB Series A of 2004
GON Series of 1999
Interest Rates Maturity Date Callable Date
5.10% to 5.70% August 2018 February 2005
3.60% t0 5.00% August 2021 August 2006
1.95% to 3.80% September 2011 September 2006
2.75% to 3.75% February 2015 August 2008
2.00% to 3.90% August 2020 August 2008
2.00% August 2006 Not callable
3.00% to 4.00% August 2018 February 2009
1.65% to 4.00% February 2015 February 2011
Variable February 2018 Not callable
Scheduled debt service requirements, payable by the General Fund, are as follows:
Year Ending June 30
Amounts
Due Within
One Year
$ 40,000
115,000
765, 000
640, 000
265, 000
280, 000
5,000
335, 000
235.000
Principal Interest Total
2007 $ 2,680,000 $ 1,334,992 $ 4,014
992
• ,
2008 2,720,000 1,260,333 3,980,333
2009 2,805,000 1,179,659 3,984,659
2010 2,905,000 1,091,319 3,996,319
2011 3,015,000 993,258 4,008,258
2012-2016 15,960,000 3,349,652 19,309,652
~ 2017-2021 9,555,000 699,521 10,254,521
2022 and thereafter 235,000 5.875 240.875
39.875.000 9.914.609 49.789.609
i B. Capital lease obligations
Changes in capital lease obligations were as follows:
Beginning Ending
~ Balance Additions Payments Balance
HP Financial Services ~ 155.011 $ - $ 83.839 $ 71.172
FS-22
n
EAST PENNSBORO AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2006
•
•
LONG-TERM LIABILITIES (Cont'd.)
B. Capital lease obligations (Cont'd.)
The future minimum lease obligations and the net present value of these lease payments at June 30, 2006
were as follows (all governmental activities):
2006-07
2007-08
Total minimum lease payment
Less: amounts representing interest
$ 61, 562
11,469
73,031
1,859
Present value of minimum lease payments
C. Compensated absences
$ 71.172
Changes in compensated absences were as follows:
Governmental activities
Severance payments
Vacation leave
Beginning Ending
Balance Net Change Balance
$ 249,667 $ 404,457 $ 654,124
46,091 (1,139) 44,952
n
.~
J
r'
Compensated absences (those for which employees received pay) are presented using the termination
payment method. A liability is computed using estimates which apply historical data to current factors. The
District maintains records of unused leave and applies the contracted rate for employees eligible for
termination payments. The District allows only restricted sabbatical leave and therefore does not present any
liability in advance of the sabbatical. Payments for compensated absences are made in the year the absence
is taken or the employee retires. When an employee retires, the payout is as follows:
Vacation (administrative personnel only) -unused vacation days (not to exceed 5 days) are paid at the
time of separation.
Sickness - no payout required except to retirees who meet the requirements below for severance
payments
•
n
..
Personal days -unused personal days (not to exceed 5 days) may be carried over but no payment is
required upon termination
FS - 23
EAST PENNSBORO AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2006
•
•
r
•
LONG-TERM LIABILITIES (Cont'd.)
C. Compensated absences (Cont'd.)
Retirement severance payments -retiring employees with at least seven consecutive years of District
employment immediately prior to retirement, at least twenty years of service to the District, and at least
thirty years of total school service credited under the State Retirement System are eligible for severance
payments based on years of service and accumulated sick leave days. The retirement payment amount is
equal to $ 300 times the number of years of continuous District service to a maximum of $ 9,000 for thirty
years. In addition, eligible retirees are reimbursed for accumulated unused sick leave in excess of one
hundred days to a maximum of three hundred days at a rate of $ 50 per day for a maximum payment of
$ 10,000 for accumulated sick leave. Additional severance is payable to retirees with a minimum of
twenty years of service to the District of $ 20,000 payable over five years. This new severance benefit
replaces post-employment health benefits provided under the prior contract as more fully described in the
following note. Total maximum severance payments to each eligible retiree under the new collective
bargaining agreement in effect through August 31, 2009 is $ 39,000.
OPERATING LEASES
The District leases photocopying machines pursuant to various lease agreements which are being accounted for
as operating leases. Total lease rental payments during the year ended June 30, 2006 were $ 123,676 Minimum
net lease rental payments for future periods are expected to be as follows:
•
2006-2007
2007-2008
2008-2009
$ 52,124
12, 930
6, 069
•
MANAGEMENT SERVICES
The cafeteria facilities of the District were operated by a third party vendor. Under the terms of the contract, the
vendor provides for the operation and maintenance of food services as required by law, with the policies subject
to the approval of the District. Operating costs, management fees and administrative costs are billed monthly to
the District.
PENSION PLAN
Substantially all full-time and part-time employees of the District participate in the pension plan. The District
recognizes expenditures or expenses equal to its contractually-required contributions, subject to the modified
~ accrual basis of accounting in governmental funds.
FS - 24
•
EAST PENNSBORO AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2006
r,
u
PENSION PLAN (Cont'd.)
The District contributes to The Public School Employees' Retirement System (the System), a governmental cost
~ sharing multiple-employer defined benefit plan. The plan is under the authority of the Public School Employees'
Retirement Code (the Code), as amended. The plan provides retirement and disability, legislatively mandated ad
hoc cost-of-living adjustments, and healthcare insurance premium assistance to qualifying annuitants. The
System issues a comprehensive annual financial report that includes financial statements and required
supplementary information for the plan. A copy of the report may be obtained by writing to the System at PO Box
~ 125, Harrisburg, PA 17108-0125, or by accessing the System's website at www.gsers.state.pa.us.
The contribution policy is established in the Code and requires contributions by active members and employers.
Contribution rates for active members are set by law and are dependent upon members' class. In most cases, the
contribution rates based on qualified member compensation are as follows:
~ Membership Class T-C Active members hired before July 22, 1983 5.25%
Membership Class T-C Active members hired on or after July 22, 1983 6.25%
Membership Class T-D Active members hired before July 22, 1983 6.50%
Membership Class T-D Active members hired on or after July 22, 1983 7.50%
~ Active members newly hired after July 1, 2001 are automatically Class T-D. The contribution rates for all
members in Membership Class T-D were effective January 1, 2002.
Contributions required of employers are based upon an actuarial valuation. For the fiscal year ended June 30,
2006, the employer contribution rate was 4.69 percent of covered payroll, composed of 4.00 percent for pension
~ benefits and 0.69 percent for healthcare insurance premium assistance. The District's contributions to the system
for the years ending June 2006, 2005 and 2004 were $ 668,163, $ 579,590, $ 504,105, respectively. Those
amounts are equal to the required contributions for each year.
OTHER POST-EMPLOYMENT RETIREMENT BENEFITS
~ Under the District prior collective bargaining agreement, expired as of August 31, 2005, the District offered one
post-employment benefit to retired professional employees other than pension benefits as discussed in the
previous note. For employees with twenty or more years of service to the District retiring prior to September 1,
2005, the District pays the basic medical insurance premiums for five years (excluding family coverage) following
retirement. The District finances this benefit on apay-as-you-go basis. The cost of this benefit amounted to
~ approximately $ 122,000 during the year ended June 30, 2006 and covered 37 eligible retired employees. The
District does allow other employees not eligible for this benefit to remain in its group medical insurance plan upon
payment by the retired employee of the cost of such coverage.
n
u
FS - 25
r~
..
EAST PENNSBORO AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2006
r~
u
RISK MANAGEMENT
~ Health insurance
In September, 2005, the District became a member of South Central Trust for processing claims and obtaining
reinsurance through commercial insurance carriers. The District has reinsurance for claims in excess of $ 125,000
specific (per person). The District has a maximum lifetime benefit of $ 5,000,000 per person. District transactions
~ with the trust were as follows:
Amount available for accrued costs, beginning $ -
Payments to the trust $ 2,745,216
~ Decrease in accrual to the trust (324,564)
2,420,652
Claims paid by the trust (1,977,514)
Stop loss premiums (162,895)
~ Administrative fees (13,944)
(2,154,353)
Amount available for accrued costs, ending $ 266.299
Consultants of the Trust provide estimated amounts, based on various methodologies, for use in estimating
~ claims that have been incurred but not reported (IBNR). District management believes this methodology provides
an adequate amount for accrued costs, based on approximately 60 days of paid claims.
Other insurance
~ The District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets;
errors and omissions; and natural disasters. The District maintains commercial insurance coverage covering each
of those risks of loss. Management believes such coverage is sufficient to preclude any significant uninsured
losses to the District. Settled claims have not exceeded this commercial coverage in any of the past three fiscal
years.
•
For State unemployment compensation laws, the District is self-insured, which is a common practice for local
governmental units. Any unemployment claims are paid by the District on a quarterly basis as incurred.
For workers' compensation insurance, approximately 80 Districts participate in a public entity risk sharing pool
~ (School Districts Insurance Consortium) for processing claims and obtaining reinsurance through commercial
insurance carriers. Under this plan, the District's annual cost should not exceed standard commercial insurance
rates.
FS-26
C~
EAST PENNSBORO AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2006
•
COMMITMENTS AND CONTINGENCIES
The District's collective bargaining agreement with its teaching staff expires August 31, 2009.
In the normal course of preparing for the subsequent school year, the District has awarded bids for various
supplies, fuel contracts, etc. No major commitments in excess of routine requirements have been made by the
District.
~ The District participates in numerous state and federal grant programs which are governed by various rules and
regulations of the grantor agencies. Expenditures charged to the respective grant programs are subject to audit
and review by the grantor agencies; therefore, any findings or adjustments by the grantor agencies could have an
effect on the recorded grants receivable and/or deferred grant revenues, and on the related grant revenues and
expenditures. The District does not anticipate any material disallowance of program expenditures.
•
As part of its ongoing capital projects, the District has entered into contract commitments totaling approximately
$ 1,200,000 for various construction and improvement projects at June 30, 2006, including amounts due on
disputed contracts waiting for final settlement.
~ The District is named as a defendant in various lawsuits, all in the ordinary course of business. The District
intends to vigorously defend itself against these actions. Legal counsel for the District has advised that they
cannot offer an opinion as to the probable outcome of all such actions. In the opinion of management, the ultimate
liabilities, if any, resulting from these claims will not have a material adverse effect on the financial position of the
District.
:~
J
FS - 27
•
•
•
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