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MECHANICSBURG AREA SCHOOL DISTRICT
FINANCIAL STATEMENTS
YEAR ENDED JUNE 30, 2007
TABLE OF CONTENTS
Page
Number
INDEPENDENT AUDITORS' REPORT
IAR - 1 to IAR - 2
MANAGEMENT'S DISCUSSION AND ANALYSIS
MDA - 1 to MDA - 11
BASIC FINANCIAL STATEMENTS
District-wide financial statements
Statement of net assets
FS-1
Statement of activities
FS-2
Fund financial statements
Balance sheet -governmental funds
FS - 3
Reconciliation of the governmental funds balance sheet
to the statement of net assets
FS - 4
Statement of revenues, expenditures, and changes
in fund balances -governmental funds
FS - 5
Reconciliation of the governmental funds statement of revenues,
expenditures, and changes in fund balance to the statement of activities
FS - 6
Statement of net assets -proprietary funds
FS - 7
Statement of revenues, expenses, and changes in net assets -proprietary funds FS - 8
Statement of cash flows -proprietary funds
FS - 9
Statement of net assets -fiduciary funds
FS -10
Statement of changes in net assets -fiduciary funds
FS -11
NOTES TO FINANCIAL STATEMENTS
FS - 12 to FS - 28
BUDGETARY COMPARISON INFORMATION -GENERAL FUND
BCI - 1
SUPPLEMENTARY INFORMATION
SI-1toSl-4
Greenawalt & Company, P.C.
CERTIFIED PUBLIC ACCOUNTANTS James E. Lyons
Since 1955 HowardRGreenawalt
Creedon R. Homan
~ Deborah J. Kelly
Scott J. Christ
INDEPENDENT AUDITORS' REPORT
Board of School Directors
Mechanicsburg Area School District
Mechanicsburg, Pennsylvania
We have audited the accompanying financial statements of the governmental activities, the business-type activities,
the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information
of Mechanicsburg Area School District as of and for the year ended June 30, 2007, which collectively comprise the
District's basic financial statements as listed in the table of contents. These financial statements are the responsibility
of the District's management. Our responsibility is to express opinions 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
and the standards applicable to financial audits contained in Govemment 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
opinions.
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, the aggregate discretely presented
component units, each major fund, and the aggregate remaining fund information of Mechanicsburg Area School
District, as of June 30, 2007, and the respective changes in financial position, and, where applicable, cash flows
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 November 15, 2007 on our
consideration of Mechanicsburg Area School District's intemal 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
400 West Main Street • Mechanicsburg, PA 17055.717.766.4763 • Fax 717.766.2731
62 West Pomfret Street • Carlisle, PA 17013.717.243.4822 • Fax 717.258.9372
www.greenawalt.cc
Board of School Directors
Mechanicsburg Area School District
Mechanicsburg, Pennsylvania
Management's discussion and analysis on pages MDA - 1 through MDA - 11 and budgetary comparison information
on page BCI - 1 are not a required part of the basic financial statements but are supplementary information required
by accounting principles generally accepted in the United States of America. We have applied certain limited
procedures, which consisted principally of inquiries of management regarding the methods of measurement and
presentation of the required supplementary information. However, we did not audit the information and express no
opinion on it.
Our audit was conducted for the purpose of forming an opinion on the financial statements taken as a whole. The
combining schedules on pages SI - 1 through SI - 4 are for purposes of additional analysis and are not a required part
of the financial statements of Mechanicsburg Area 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 presented in all
material respects in relation to the financial statements taken as a whole.
i
GREENAWALT & COMPA Y, .C.
` November 15, 2007
Mechanicsburg, Pennsylvania
IAR - 2
MECHANICSBURG AREA SCHOOL DISTRICT
JUNE 30, 2007
MANAGEMENT'S DISCUSSION AND ANALYSIS
r
The management of the Mechanicsburg Area School District is pleased to present the following discussion
and analysis of the District's financial position at June 30, 2007, 2006, and 2005. It provides an overview of
our financial performance between fiscal years ended June 30, 2007 and 2006, in accordance with
governmental reporting requirements. The purpose of this discussion is to provide a narrative summary of
the financial position and activities of the District in order to enhance the reader's understanding of the
District's basic financial statements.
The District is required to present comparative financial information between the current year and the prior
year in its Management's Discussion and Analysis (MD&A) as mandated by the Governmental Accounting
Standards Board (GASB) Statement No. 34 Basic Financial Statements -and Management's Discussion and
Analysis -for State and Local Governments. This report contains such comparative financial information.
The District has elected not to include the financial information of its discretely presented component unit,
The Wildcat Foundation, in its Management Discussion and Analysis. The separate audited financial
statements for the Foundation are available by contracting the District office.
FINANCIAL HIGHLIGHTS
For the 2006-2007 fiscal year, the School Board adopted the general fund budget with a planned deficit of
$487,784. The actual 2006-2007 fiscal year results increased fund balance by $4,419,483, mainly due to
above average collections in real estate, realty transfer, and earned income taxes. Expenditures were under
budget by $1,373,020 or 3.2%, which is within a normal variance. The ending fund balance at June 30, 2007
is $10,622,467 which is comprised of $1,722,736 designated for future medical insurance claims and
$8,899,731 which is undesignated. This undesignated fund balance represents 21.2% of expenditures and
transfers out to other funds.
OVERVIEW OF THE FINANCIAL STATEMENTS
These financial statements consist of three sections -Management's Discussion and Analysis (this section),
the basic financial statements, and other required supplementary information.
The first two statements of the basic financial statements are government-wide financial statements. These
statements on pages FS-1 and FS-2 consist of the Statement of Net Assets and the Statement of Activities.
The government-wide financial statements provide both short-term and long-term information about the
District's overall financial status.
MDA - 1
MECHANICSBURG AREA SCHOOL DISTRICT
JUNE 30, 2007
The remaining basic financial statements consist of fund financial statements. These statements focus on
individual funds of the District and provide a more detailed presentation of the District's operations. The
governmental funds statements on pages FS-3 and FS-5 present how general District services are financed
in the short-term as well as what remains for future spending. The proprietary fund statements on pages
FS-7 through FS-9 present both short-term and long-term information about the activities that the District
operates similar to a business.
The basic financial statements also include notes on pages FS-12 through FS-28 that provide a more detailed
explanation of some of the information in the fmancial statements. Following the basic financial statements
is other required supplementary information on page BCI-1 that consists of the District's budgetary
comparison and other supplementary information on pages SI-1 through SI-4 presenting combining
schedules for additional analysis.
Government-wide Statements Report the District as a Whole
The government-wide statements report financial information about the District as a whole using accounting
methods similar to the accounting used by private-sector companies. The Statement of Net Assets includes
all of the District's assets and liabilities utilizing the full accrual basis of accounting. The Statement of
Activities accounts for all of the District's revenues and expenses, regardless of when cash is received or
paid.
These two government-wide statements report the District's net assets and changes in them. The District's
net assets represent the difference between the District's assets and liabilities. The District's net assets are
one way to measure the District's financial position, or financial health, over time. Increases or decreases in
the District's net assets are one indicator of whether its financial health is improving or deteriorating,
respectively. To assess the overall health of the District, nornfinancial factors must also be considered, such
as changes in the District's property tax base and the performance of the students.
The government-wide financial statements of the District are divided into two categories:
• Governmental activities -All of the District's basic services are included here, such as
instruction, administration and community services. Real estate and earned income taxes, and
state and federal subsidies and grants finance most of these activities.
• Business-type activities -The District operates a food service operation and charges fees to staff,
students and visitors to help it cover the costs of the food service operation.
MDA - 2
MECHANICSBURG AREA SCHOOL DISTRICT
JUNE 30, 2007
Fund Financial Statements
The District's fund financial statements provide detailed information about the most significant funds, or
major funds -not the District as a whole. Some funds aze required to be reported as major funds.
• Governmental funds -Most of the District's activities aze reported in governmental funds, and
focus on changes in financial resources, rather than upon net income determination. These funds
are reported using the modified accrual basis of accounting, which measures cash and all
financial assets that can readily be converted to cash. The governmental fund statements provide
a detailed short-term view of the District's operations and the services it provides. Governmental
fund information helps the reader determine whether there are more or fewer financial resources
that can be spent in the near future to finance the District's programs. The relationship (or
differences) between governmental activities (reported in the Statements of Net Assets and the
Statement of Activities) and governmental funds is reconciled in the fmancial statements on
pages FS-4 and FS-6.
• Proprietary funds -These funds are used to account for the District activities that aze similar to
business operations in the private sector. When the District charges customers for services it
provides, these services are generally reported in proprietary funds. The Food Service Fund is the
District's proprietary fund and is the same as the business-type activities reported in the
government-wide statements.
• Fiduciary funds -The District is the trustee or agent for individuals, private organizations and/or
governmental units as shown on pages FS-10 and FS-11.
FINANCIAL ANALYSIS OF THE DISTRICT AS A WHOLE
Net Assets
The District's total net assets were $19,068,320 at June 30, 2007 which includes $18,074,535 in
Governmental Activities and $993,785 in Business-type Activities. This shows an increase of $4,879,752
from total net assets at June 30, 2006, which included an increase of $4,911,783 in Governmental Activities
and a decrease of $32,031 in Business-type Activities.
MDA - 3
MECHANICSBURG AREA SCHOOL DISTRICT
JiJNE 30, 2007
Statement of Net Assets 2006-2007
Current and other assets
Capital assets
Total assets
Current and other liabilities
Long-term liabilities
Total liabilities
Capital assets (net of related debt)
Restricted for capital projects
Unrestricted
Total net assets
Total liabilities and net assets
Governmental
Activities
$ 16,859,210
71,017,278
$ 87,876,488
$ 5,351,868
64,450,085
69,801,953
3,152,395
2,909,218
12,012,922
18,074,535
$ 87,876,488
Business-type
Activities
$ 422,950
605,688
$ 1,028,638
$ 28,474
6,379
34,853
605,688
388,097
993,785
$ 1,028,638
Total
School District
$ 17,282,160
71,622,966
$ 88,905,126
$ 5,380,342
64,456,464
69,836,806
3,758,083
2,909,218
12,401,019
19,068,320
$ 88,905,126
Statement of Net Assets 2005-2006
Current and other assets
Capital assets
Total assets
Current and other liabilities
Long-term liabilities
Total liabilities
Capital assets (net of related debt)
Restricted for capital projects
Unrestricted
Total net assets
Total liabilities and net assets
Governmental
Activities
$ 12,622,505
71,983,220
$ 84,605,725
$ 4,632,032
66,810,941
71,442,973
(2,186,507)
7,184,754
8,164,505
13,162,752
$ 84,605,725
Business-type
Activities
$ 403,635
664,084
$ 1,067,719
$ 41,903
41,903
664,084
361,732
1,025,816
$ 1,067,719
Total
School District
$ 13,026,140
72,647,304
$ 85,673,444
$ 4,673,935
66,810,941
71,484,876
(1,522,423)
7,184,754
8,526,237
14,188,568
$ 85,673,444
MDA-4
MECHANICSBURG AREA SCHOOL DISTRICT
JUNE 30, 2007
Statement of Net Assets 2004-2005
Current and other assets $ 21,558,425 $ 285,357 $ 21
843
782
Capital assets 58,594,525 742,158 ,
,
59,336,683
Total assets $ 80,152,950 $ 1,027,515 $ 81,180,465
Current and other liabilities $ 4,551,725 $ 19,098 $ 4
570
823
Long-term liabilities 65 043 182 .2,493 ,
,
65
045
675
Total liabilities 69,594,907 21,591 ,
,
69,616,498
Capital assets (net of related debt) (5,047,107) 742,158 (4,304
949)
Restricted for capital projects 9,445,494 - ,
9,445
494
Unrestricted 6,159,656 263,766 ,
6
423
422
Total net assets 10,558,043 1,005,924 ,
,
11,563,967
Total liabilities and net assets $ 80,152,950 $ 1,027,515 $ 81,180,465
Statement of Activities
The results of this year's operations as a whole are reported in the Statement of Activities. Direct expenses
are listed by programs, then offset by program revenues to determine net (expense) revenue and changes in
net assets. General revenues, such as taxes, state general subsidies, and investment earnings are then applied
prior to transfers, and special items, to determine the change in net assets. For the 2006-2007 fiscal year, the
change in net assets for governmental activities was an increase of $4,911,783 and a decrease of $32,031 for
business-type activities, for a net total increase of $4,879,752 as reflected in the following chart. For the
2005-2006 fiscal year, the change in net assets for governmental activities was an increase of $2,604,709
and an increase of $19,892 for business-type activities for a net total increase of $2,624,601 as reflected in
the chart below:
MDA - 5
MECHANICSBURG AREA SCHOOL DISTRICT
JUNE 30, 2007
Statement of Activities 2006-2007
Program revenues
Charges for services
Operating grants and contributions
Capital grants and contributions
General revenues
Taxes
Other local revenue
State general subsidies
Investment earnings
Total revenues
Direct expenses
Excess (deficiency) before transfers
Transfers between activities
Change in net assets
Governmental
Activities
$ 789,230
4,880,108
719,586
33,941,925
5,060,687
1,284,895
46,676,431
41,591,572
5,084,859
(173,076)
$ 4,911,783
Business-type
Activities
$ 1,022,687
561,099
6,541
23,468
1,613,795
1,818,902
(205,107)
173,076
$ (32,031)
Total
School District
$ 1,811,917
5,441,207
719,586
33,941,925
6,541
5,060,687
1,308,363
48,290,226
43,410,474
4,879,752
Statement of Activities 2005-2006
Program revenues
Charges for services
Operating grants and contributions
Capital grants and contributions
General revenues
Taxes
Other local revenue
State general subsidies
Investment earnings
Total revenues
$ 526,358
4,436,804
635,358
31,222,456
4,895,525
937,982
42,654,483
$ 1,031,142
458,463
(4,473)
21,834
1,506,966
$ 1,557,500
4,895,267
635,358
Direct expenses
Excess (deficiency) before transfers
$ 4,879,752
31,222,456
(4,473)
4,895,525
959,816
44,161,449
39,881,210 1,655,638 41,536,848
2,773,273
(148,672)
2,624,601
Transfers between activities (168,564) 168,564
Change in net assets $ 2,604,709 $ 19,892
MDA - 6
$ 2,624,601
MECHANICSBURG AREA SCHOOL DISTRICT
JUNE 30, 2007
Local Sources
Direct expenses represent 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
net cost of services must be recovered through general revenue, primarily taxes and state subsidies.
Amounts not recovered will reduce funds available for future yeazs.
Local Sources 2006-2007
Governmental Activities
Instruction
Instructional student support
Administrative and financial suppo
Operation and maintenance of plant
Pupil transportation
Student activities
Community services
Interest on long-term debt
Total governmental activities
Direct
Expenses
Program
Revenues
$ 4,145,821
324,470
128,372
96,973
483,172
116,197
374,333
719,586
$ 6,388,924
Program
Revenues
Net
Cost
$ 21,585,422
3,386,091
2,886,633
3,741,587
882,077
790,603
94,724
1,835,511
35,202,648
$ 25,731,243
3,710,561
rt 3,015,005
3,838,560
1,365,249
906, 800
469,057
2,555,097
$ 41,591,572
173,076
(5,060,687)
$ 30,315,037.
Net
Cost
$ 235,116
Transfers out and special items
State general subsidies revenues
Total needs from taxes and other local sources
Direct
Expenses
Business-type Activities
Food services $ 1,818,902
Transfers received, special items and investment earnings
Total needs from taxes and other local sources
$ 1,583,786
(203,085)
$ 32,031
MDA - 7
MECHANICSBURG AREA SCHOOL DISTRICT
JUNE 30, 2007
Local Sources 2005-2006
Direct
Expenses
Governmental Activities
Instruction $ 24,040,984
Instructional student support 3 349 816
Administrative and financial support 2,603,426
Operation and maintenance of plant 4,263,712
Pupil transportation 1 685 067
Student activities 923,539
Community services 445 137
Interest on long-term debt 2 569529
Total governmental activities $ 39,881,210
Program
Revenues
$ 3,689,774
267,812
101,963
84,273
358,680
111,589
349,071
635,358
$ 5,598,520
Net
Cost
$ 20,351,210
3,082,004
2,501,463
4,179,439
1,326,387
811,950
96,066
1,934,171
34,282,690
Transfers out and special items
State general subsidies revenues
Total needs from taxes and other local sources
Direct
Expenses
Business-type Activities
Food services $ 1,655,638
Transfers received, special items and investment earnings
Total needs from taxes and other local sources
The District Funds
Program
Revenues
$ 1,489,605
168,564
(4,895,525)
$ 29,555,729
Net
Cost
$ 166,033
(185,925)
$ (19,892)
At June 30, 2007, the District governmental funds reported a combined fund balance of $15,731,623, which
is an increase of $28,381 from June 30, 2006. The information below compares the governmental funds
fund balances for June 30, 2007, 2006 and 2005.
MDA - 8
MECHANICSBURG AREA SCHOOL DISTRICT
JUNE 30, 2007
2005-2006 2005-2006 2006-2007 2006-2007
2005 2006 2007 Chanee %Chanee Chanee %Chanee
General Fund -unrestricted
General Fund -designated $ 4,446,632 $ 5,097,458 $ 8,899,731 $ 650,826 14.6% $ 3,802,273 74.6%
Capital Reserve Fund -unrestricted 849,937
174,256 1,105,526
1
692
580 1,722,736
1
518
126 255,589
1
51 30.1% 617,210 55.8%
Athletic Fund -unrestricted
149 ,
,
451 ,
, ,
8,324 871.3% (174,454) -10.3%
Construction Fund -restricted
9,445,494
7,184,754 175
2,909,218 302
(2,260,740) 202.7%
-23.9% (276)
(4
275
536) -61.2%
-59
5%
Debt Service Fund -designated 644,053 622,473 681,637 (21,580) -3.4% ,
,
59,164 .
9.5%
Total governmental funds $ 15,560,521 $ 15,703,242 $ 15,731,623 $ 142,721 0.92% $ 28
381 0
2%
, .
Total unrestricted
Total restricted/designated $ 4,621,037
10
9 $ 6,790,489 $ 10,418,032 $ 2,169,452 46.9% $ 3,627,543 53.4%
,
39,484 8,912,753 5,313,591 (2,026 731) -18.5% (3,599,162) -40.4%
Total governmental funds $ 15,560,521 $ 15,703,242 $ 15,731,623 $ 142,721 0.92% $ 28,381 0.2%
Governmental Funds -Reconciliation
The General Fund Balance increase of $4,419,483 was due to above average collections in real estate, realty
transfer, and earned income taxes.
The Capital Reserve Fund decrease of $174,454 was due to completion of capital projects.
The Construction Fund decrease of $4,275,536 was due to the completion of construction projects.
The Debt Service Fund increase of $59,614 was due to reduced interest rates on a variable rate bond issue.
General Fund Budget
A General Fund budget is adopted each yeaz in accordance with the Pennsylvania School Code. The revised
budget reflects budget transfers as approved by the Boazd.
The District applies for State and Federal grants each yeaz. Certain grants may not be anticipated during the
budgeting process and must be added to the budget during the fiscal yeaz. In addition, the grants that are
anticipated during the budgeting process are based on estimates. The budget must then be modified based on
the actual grant awazd.
MDA-9
MECHANICSBURG AREA SCHOOL DISTRICT
JUNE 30, 2007
June 30, 2007 Budget Actual Variance
Total revenues $ 42,866,296 $ 46,400,543 $ 3
534
247
Total expenditures 37,765,194 36,436,980 ,
,
1,328,214
Excess revenues (expenditures) 5,101,102 9,963,563 4,862,461
Other financing sources (uses) (5,588,886) (5,544,080) 44,806
Net change in fund balance $ (487,784) $ 4,419,483 $ 4,907,267
June 30, 2006 Budget Actual Variance
Total revenues $ 40,948,586 $ 42,937,780 $ 1,989
194
Total expenditures 35,804,138 35,123,413 ,
b80,725
Excess revenues (expenditures) 5,144,448 7,814,367 2,669,919
• Other financing sources (uses) (5,297,362) (6,907,952) (1,610,590)
Net change in fund balance $ (152,914) $ 906,415 $ 1,059,329
CAPITAL ASSETS
At June 30, 2007, the District had $66,051,437 in Governmental activities capital assets, which represents
an increase of $2,676,011. The District has made substantial capital improvements over the past two years,
including renovations to five elementary schools.
Capital assets (net of depreciation)
Governmental activities
Land
Construction in progress
Land improvements
Buildings and improvements
Furniture and equipment
Library Books
Total governmental capital assets
Business-type activities
Furniture and equipment
2005-2006 2006-2007
2005 2006 2007 Chance Chance
$ 605,983 $ 605,983 $ 605,983 $ - $ _
9,676,984
2,656,528
44,115,371
1,267,048
272,611 15,794,500
3,045,577
42,666,303
1,208,145
54,918 1,198,342
2,059,717
60,592,308
1,522,513
72,574 6,117,516
389,049
(1,449,068)
(58,903)
(217,693) (14,596,158)
(985,860)
17,926,005
314,368
17,656
$ 58,594,525 $ 63,375,426 $ 66,051,437 $ 4,780,901 $ 2,676,011
$ 742,158 $ 664,084 $ 605,688 $ (78,074) $ (58,396)
MDA - 10
MECHANICSBURG AREA SCHOOL DISTRICT
JiJNE 30, 2007
LONG-TERM LIABILITIES
Bonds payable at June 30, 2005, 2006 and 2007 were $64,420,330, $66,460,000 and $63,990,000
respectively. Scheduled payments of principal made during the year to the bondholders were $2,665,000.
The amount of bond principal due within one year is $2,685,000. Moody's has assigned its municipal bond
rating of "Aaa" to a bond refinancing in May 2007.
Compensated absences increased during the year from anentity-wide perspective from $466,597 to
$553,811 at June 30, 2007. Compensated absences decreased from June 30, 2005 to June 30, 2006 from an
entity-wide perspective from $699,730 to $466,597.
NEXT YEAR'S BUDGET AND ECONOMIC FACTORS
Total revenue
Total expenditures
Excess revenues (expenditures)
before transfers
Transfers
Net change in fund balance
Budget Budget
2007-2008 2006-2007 Chance
$ 45,431,798 $ 42,866,296 $ 2,565,502
40,236,277 37,809,194 (2,427,083)
5,195,521 5,057,102 138,419
_ (7,468,183) (5,544,886) (1,923,297
$ (2,272,662) $ (487,784) $ (1,784,878)
The new budget for 2007-2008 represents an increase in total expenditures of 6.42%. This increase is
largely due to the increase in the retirement rate from 6.46% to 7.13%, contracted salary increases,
contracted education services, new facility operational costs, and increase in debt service payments. The
2007-2008 budget also included a transfer of $1,889,570 to the Capital Reserve Fund. The 2007-2008
budget increased the real estate tax rate to 13.26 mills.. The District plans to reduce its fund balance by
$2,272,662 to offset the planned budget deficit.
There are no changes to economic factors that are expected to have a significant impact on our 2008-2009
budget.
CONTACTING THE DISTRICT FINANCIAL MANAGEMENT
The District's financial report is intended to provide the readers with a general overview of the District's
finances and to show the Board's accountability for the funds it receives. If you have questions about this
report or wish to request additional financial information, please contact the district office of Mechanicsburg
School District, 100 East Elmwood Avenue, Mechanicsburg, PA 17055, (717) 691-4500.
MDA - 11
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MECHANICSBURG AREA SCHOOL DISTRICT
STATEMENT OF NET ASSETS -PROPRIETARY FUNDS
JUNE 30, 2007
Food
Service
Assets
Cash and cash equivalents
Due from other governments
Inventories
Total current assets
Furniture and equipment (net of accumulated depreciation)
Total assets
Liabilities
Current liabilities
Due to other funds
Deferred revenues
Accounts payable
Compensated absences
Total current liabilities
Total liabilities
Net assets
Invested in capital assets (net of related debt)
Unrestricted
Total net assets
Total liabilities and net assets
$ 562,979
9, 798
17,656
590,433
605,688
$ 1,196,121
$ 167,483
22,214
6,260
6,379
202,336
202, 336
605,688
388, 097
993,785
$ 1,196,121
The accompanying notes are an integral part of these financial statements.
FS-7
MECHANICSBURG AREA SCHOOL DISTRICT
STATEMENT OF REVENUES, EXPENSES
AND CHANGES IN NET ASSETS -PROPRIETARY FUNDS
FOR THE YEAR ENDED JUNE 30, 2007
Operating revenues
Food service revenue
Charges for services
Other operating revenues
Total operating revenues
Operating expenses
Salaries
Employee benefits
Purchased property service
Other purchased service
Food and milk
Other supplies
Depreciation
Total operating expenses
Operating income (loss)
Nonoperating revenues (expenses)
Earnings on investments
Loss on sale of fixed assets
Grant revenue
State sources -commodities
State sources -social security and retirement subsidies
State sources -meal subsidies
Federal sources -meal and other subsidies
Total nonoperating revenues
Loss before transfers
Transfers from other funds
Change in net assets
Net assets -beginning
Net assets -ending
Food
Service
$ 1,001,318
17, 746
3,623
1, 022,687
505,766
208, 772
143,448
506
801, 897
85, 308
73,205
1, 818, 902
(796,215)
24, 372
(904)
6, 541
68,603
36, 709
59,461
396, 326
591 1 nR
(205,107)
173,076
(32,031)
1, 025, 816
$ 993,785
The accompanying notes are an integral part of these financial statements.
FS-8
MECHANICSBURG AREA SCHOOL DISTRICT
STATEMENT OF CASH FLOWS -PROPRIETARY FUNDS
FOR THE YEAR ENDED JUNE 30, 2007
Food
Service
Operating activities
Cash received from users
Cash payments to employees for services
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
Grant revenue
Net cash provided by (used for) non-capital financing activities
Capital and related financing activities
Cash payments for equipment
Net cash provided by (used for) capital and related financing activities
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 used in operating activities
Operating income (loss)
Adjustments to reconcile operating income (loss) to net cash
provided by (used for) operating activities
Depreciation
Donated commodities
Contribution of General Fund
Net change in other assets and other liabilities
Accounts receivable
Inventories
Due to/from other funds
Deferred revenue
Accounts payable
Compensated absences
Total adjustments
Net cash provided by (used for) operating activities
$ 1,023,944
(640,884)
(855, 397)
(506)
(472,843)
96,119
395, 318
6, 541
497, 978
(15,713)
(15,713)
24, 372
24, 372
33, 794
529,185
$ 562,979
$ (796,215)
73,205
68,603
173, 076
(53)
4,112
11,479
1,312
(9,058)
696
323, 372
$ (472,843)
The accompanying notes are an integral part of these financial statements.
FS-9
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MECHANICSBURG AREA SCHOOL DISTRICT
STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS -FIDUCIARY FUNDS
JUNE 30, 2007
Additions
Investment earnings
Gifts and contributions
Total additions
Deductions
Scholarships awarded
Change in net assets
Net assets, beginning
Net assets, ending
Private Purpose
Trust
$ 19,116
2, 085
21,201
9,989
11,212
93,965
$ 105,177
The accompanying notes are an integral part of these financial statements.
FS - 11
MECHANICSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2007
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Mechanicsburg 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 municipalities of Upper Allen Township, Shiremanstown and
Mechanicsburg Boroughs. 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 Mechanicsburg Area School District have been prepared in accordance with generally
accepted accounting principles as applied to governmental units. The Governmental Accounting Standards Board
(GASB) 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.
The District has included The Wildcat Foundation (the Foundation) as a discretely presented component unit. The
financial data of the Foundation is reported in the component unit column in the basic financial statements. This
separate column is used to emphasize that the Foundation is legally separate from the District. The Foundation
was formed for the purpose of supporting projects related to educational programs and to create opportunities for
development for the students, staff and community within the Mechanicsburg Area School District. The separate
financial statements for the Foundation are available by contacting the District office.
FS - 12
MECHANICSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2007
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd.)
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.
Capital Area Intermediate Unit provides special education services and programs.
Cumberland Perry Area Vocational Technical School provides vocational and technical education
services and programs.
West Shore Tax Bureau provides earned income tax collection services.
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 intertund 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 reported 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 reported as general
revenues.
FS - 13
MECHANICSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2007
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd.)
Basis of presentation -Fund financial statements
Fund financial statements are also provided for all governmental funds, proprietary funds, and fiduciary funds of
the District. Major individual governmental funds and major individual proprietary funds are reported as separate
columns in the fund financial statements. Nonmajor funds, if any, are aggregated and presented in a single
column. Fiduciary funds are reported by fund.
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 90 days of the end of the fiscal period. Revenue from federal, state and other grants
designated for payment of specific expenditures is recognized when the related expenditures are incurred;
accordingly, when such funds are received, they are recognized as deferred revenues until earned. Expenditures
generally are recognized when a liability is incurred, as under accrual accounting. However, debt service
expenditures, as well as expenditures related to compensated absences and claims and judgments, are
recognized only when payment is due.
Proprietary funds generally follow standards for accounting and financial presentation for private business
enterprises to the extent that those standards do not conflict with or contradict guidance of the Governmental
Accounting Standards Board.
Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and
expenses generally result from providing services and producing and delivering goods in connection with the
fund's principal ongoing operations. Operating expenses for the District's proprietary fund include food production
costs, supplies, administrative costs, and depreciation on capital assets. All revenues or expenses not meeting
this definition are reported as nonoperating revenues and expenses.
Fund accounting
The accounts of the District are organized on the basis of funds, each of which is considered a separate
accounting entity. The operations of each fund are accounted for by providing a separate set of self-balancing
accounts which comprise its assets, liabilities, fund equity, revenues, and expenditures, or expenses, as
appropriate. Resources are allocated to and accounted for in individual funds based upon the purposes for which
they are to be spent.
When both restricted and unrestricted resources are available for use, it is the District's general policy to use the
restricted (primarily operating grants) resources first, then unrestricted resources as they are needed.
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-14
MECHANICSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2007
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
prepare an operating budget for the succeeding fiscal year. This process includes the publishing of
notices by advertisement, that the proposed budget has been prepared and is available for public
inspection at the administrative office of the District, and that public hearings are held on the proposed
operating budget which are required to be scheduled at least ten days prior to when final action on
adoption is taken by the Board.
Legal budgetary control is maintained at the sub-function/major object level. The Board may approve
transfers of funds appropriated to any particular item of expenditure in accordance with the Pennsylvania
School Code. Management may amend the budget at the sub-function/sub-object level without Board
approval, provided it is not at a higher level than the Board adopted budget.
In order to preserve a portion of an appropriation for which an expenditure has been committed by a
purchase order, contract or other form of commitment, an encumbrance is recognized. Unused
encumbrances expire at the end of each year.
Included in the budget are program budgets as prescribed by the federal and state agencies funding the
program. These budgets are approved on a program by program basis by the federal and state funding
agencies.
The Capital Reserve Fund accounts for transfers from other funds and related investment earnings for capital
outlays not accounted for in another fund.
FS - 15
MECHANICSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2007
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd.)
Basis of presentation -Fund financial statements (Cont'd.)
Fund accounting (Cont'd.)
The Athletic Fund accounts for athletic revenues and expenditures of those funds for athletic purposes.
The Construction Funds accounts for bond proceeds and the expenditure of those funds.
The Debt Service Fund accounts for bond refinancing and related costs.
The District presents the following proprietary fund:
The Food Service Fund accounts for the operations of the cafeterias.
The District presents the following fiduciary funds:
Expendable and Non-expendable Trusts account for contributions to and interest earnings on scholarship
funds donated to the District, and for payments of scholarship funds to selected students.
The District Agency Fund accounts for programs operated and sponsored by non-school organizations.
These funds are separated from student activity funds.
The Student Activities Fund accounts for programs operated and sponsored by various clubs and
organizations within the schools.
Cash and cash equivalents and investments
The District's cash and cash equivalents are considered to be cash on hand, demand deposits (including pooled
investments), and short-term investments with original maturities of three months or less from the date of
acquisition.
The types of authorized investments are limited by State regulations. Pooled investment funds are required to be
operated in accordance with State regulations.
Investments, including pooled investments, are reported at fair value.
Taxes and taxes receivable
Real estate and personal taxes are levied as of July 1 with a legal, enforceable claim against the property and/or
taxpayer. Amounts not collected within six months (December 31) are considered delinquent and submitted to
outside agencies/entities for collection actions.
FS - 16
MECHANICSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2007
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 district-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 presented in the applicable governmental or business-type activities columns in the district-
wide financial statements. Capital assets are defined by the District as assets with an initial, individual cost of
more than $ 5,000 and an estimated useful life in excess of one year. Management has elected to include certain
homogeneous groups with individual costs of less than $ 5,000 as capital assets for financial presentation
purposes. In addition, capital assets purchased with long-term debt may be capitalized regardless of the
thresholds established. Such assets are presented at historical cost or estimated historical cost if purchased or
constructed.
Major outlays for capital assets and improvements are capitalized as projects are constructed. The costs of
normal maintenance and repairs that do not add to the value of the asset or materially extend asset lives are not
capitalized.
Capital assets are depreciated using the straight-line method over the following estimated useful lives:
Governmental
Assets Activities
Buildings 50
Interior renovations 25
Site improvements 20
Furniture 20
Machinery and equipment 10 to 15
Library books 5
Computer equipment 5
Vehicles 8
Business-type
Activities
20
15
5
FS-17
MECHANICSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2007
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd.)
Long-term liabilities
In the district-wide financial statement, and proprietary fund types in the fund financial statements, bonds payable
and compensated absences are presented as liabilities in the applicable governmental activities or proprietary
fund statement of net assets. Refunding costs and bond premiums and discounts are amortized over the life of
the bonds using the effective interest method. Bond issuance costs are presented as deferred charges and
amortized over the term of the related debt.
fn the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as
bond issuance and refunding costs, as current period expenditures. The face amount of debt issued is presented
as other >'Inancing sources while discounts and refunding costs on debt issuances are presented as debt service
expenditures. Issuance costs, whether or not withheld from the actual debt proceeds received, are presented as
support service expenditures.
Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect certain presented amounts and disclosures.
Accordingly, actual results could differ from those estimates.
New accounting policies
The Governmental Accounting Standards Board (GASB) has issued several statements which will become
effective in future reporting years. The statements which will have the greatest impact on the District are GASB 43
"Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans" and GASB 45 "Accounting
and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions". The purpose of these
two statements is to set new accounting standards for state and local government employers that offer retiree
health benefits and other non-pension postemployment benefits. In particular, these statements require the
accrual of liabilities and expenses of other postemployment benefits (OPEB) over the working career of plan
members. The effective date of GASB 43 for the District is the June 2008 fiscal year. GASB 45 comes into effect
one year after GASB 43. The requirements of these statements are under review by the District and management
is evaluating the impact these pronouncements will have on the District's financial statements.
DEPOSITS 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.
FS-18
MECHANCISBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2007
DEPOSITS 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's policy requires that all deposits in excess of FDIC insurance coverage be collateralized with
approved collateral as provided by law. At June 30, 2007, the District's bank deposits totaled $ 2,252,779 and the
bank balances totaled $ 2,644,084. Of the bank balances, $ 100,000 was covered by federal depository insurance
and $ 2,544,084 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
assets, as defined in the Act, to cover all public funds deposited in excess of Federal Depository Insurance limits.
The pledged collateral is held by the Federal Reserve Bank, but is not titled in the District's name.
The District also has cash equivalents with three organizations that operate as common law trusts established
pursuant to the Intergovernmental Cooperation Act and related statutes for the purpose of pooling investments.
Each organization's fundamental policy is to maintain a net asset value of $ 1 per share, but there can be no
assurance that the net asset value will not vary from $ 1 per share. They may only purchase securities which are
permitted under PA law. As of June 30, 2007, the District's deposits in these organizations are as follows:
Pennsylvania Local Government Investment Trust (PLGIT) $ 9,752,850
Pennsylvania Treasurer's INVEST Program (PA INVEST) 4,381,074
Pennsylvania School District Liquid Asset Fund (PSDLAF) 1.712.479
Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment. The
District does not have a formal investment policy for interest rate risk. The weighted average maturity of the
securities held by each of the organization's is generally less than 90 days.
Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The District
does not have a formal investment policy for credit risk. The District's deposits in each of the organization's were
rated "AAAm" by Standard & Poor's.
Cash and cash equivalents at June 30, 2007 are as follows:
Governmental activities $ 17,036,749
Business-type activities 562,979
Fiduciary funds 499.514
Total cash and cash equivalents $ 18.099 ~a~
FS-19
MECHANICSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2007
TAXES RECEIVABLE
Taxes receivable are as follows:
Real estate taxes
Earned income taxes
Personal taxes
General Fund
Full accrual adjustment
Governmental activities
DUE FROM OTHER GOVERNMENTS
Due from other governments are as follows:
Taxes Taxes
Receivable Allowance for Receivable Deferred
(Gross) Uncollectibles (Net) Tax Revenue
$ 478,547 $ 28,713 $ 449,834 $ 275,688
1,885,447 - 1,885,447 232,668
12.590 2.133 10.457 g,g77
2,376,584 30,846 2,345,738 518,333
(518.333)
Governmental Business-type
Activities _ Activities
Local sources -other taxes
Local sources -other items
State sources
Federal sources
$ 168, 799 $
307, 534 53
388,603 1,321
375.960 8.424
1.240_ $ 9.798
FS - 20
MECHANICSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2007
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
Land improvements
Buildings and improvements
Furniture and equipment
Library books
Accumulated depreciation
Land improvements
Buildings and improvements
Furniture and equipment
Library books
Capital assets being depreciated, net
Governmental activities capital assets, net
Business-type activities
Capital assets being depreciated
Equipment
Accumulated depreciation
Equipment
Capital assets being depreciated, net
Business-type activities capital assets, net
Beginning Current Year Activity Ending
Balance Increases Decreases Bal
ance
$ 605,983 $ - $ - $ 605,983
15.794.500 _ 1.182.317 (15.778.475) 1.198.342
16.400.483 1.182:317 (15
778
475) 1
804
325
_ .
. __
.
.
3,824,765 - - 3,824,765
55,980,716 19,193,556 - 75,174,272
2,932,153 855,816 (37,059) 3,750,910
1.630.473 33.943 (31.782) _ 1.632.634
64.368.107 20.083.315 (68
841) 84
382
581
. .
.
(779,188) (148,440) (837,420) (1,765,048)
(13,314,413) (2,104,971) 837,420 (14,581,964)
(1,724,008) (541,448) 37,059 (2,228,397)
(1,575.555) _ (16.287) 31.782 (1.560.060)
(17.393.164) (2,811.146) 68
841 (20
135
469)
. .
.
46.974.943 17.272.169 - 64
247
112
_ .
.
$ 63.375.426 $ 18.454.486 (15.778.47.) $ 66.051.437
$ 1,079,286 $ 15,712 $ (11,150) $ 1,083,848
(415.202) (73.205) __ 10.247 (478.160)
664.084 (57.493) (903) 605.688
$ 664.084 (57.QA-) $ (903) $ 605;688
FS-21
MECHANICSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2007
CHANGES IN CAPITAL ASSETS (Cont'd.)
Depreciation expense was charged to functions/programs as follows:
Governmental activities
Instruction $ 2,474,592
Instructional student support 295 992
Administrative and financial support 9,073
Operation and maintenance of plant 24,836
Student activities 6.653
2.811.146
Business-type activities -Food service $ 73.20
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. Govemmental funds also defer revenue
recognition with resources that have been received, but not yet earned. Deferred revenues in the General Fund of
$ 652,281 consists of $ 518,333 of taxes receivable not received within 90 days of the end of the fiscal period,
and $ 133,948 of resources that have been received but not yet earned.
Deferred revenue in the proprietary funds and the district-wide 1nancial statements represents resources that
have been received but not yet earned.
LONG-TERM LIABILITIES
Changes in all long-term liabilities were as follows:
Governmental activities
Bonds payable
Compensated absences
Business-type activities
Compensated absences
Beginning Ending Due Within
Balance Increases Decreases Balance One Year
$ 66,460,000 $ 8,990,000 $ (11,460,000) $ 63,990,000 $ 2,685,000
460.915 418.517 _ (332.000) 547.432 235.000
FS-22
MECHANICSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2007
LONG-TERM LIABILITIES (Cont'd.)
Bonds payable
Changes in bonds payable were as follows:
Beginning New Scheduled .Ending
Balance Issue _ Refunding Redemptions Balance
2000 Series C $ 4,975,000 $
2001 Series 310,000
2002 Series 9,175,000
2002 Series A 9,670,000
2003 Series 9,745,000
2004 Series 9,990,000
2005 Series 8,500,000
2006 Series 4,100,000
2006 Series A 9,995,000
2007 Series _
- $ - $ 5,000 $ 4,970,000
- - 30,000 280,000
- (8,795,000) 380,000 _
- - 730, 000 8, 940, 000
- - 1,235,000 8,510,000
- - 10,000 9,980,000
- - 275,000 8,225,000
- - - 4,100,000
- - - 9,995,000
8.990.000 - 8.990.000
Interest Rates Maturity Date Callable Date
2000 Series C Variable rate stabilized
at 4.50%
2001 Series 3.95% to 5.00%
2002 Series 2.00% to 5.00%
2002 Series A 1.40% to 4.80%
2003 Series 1.60% to 3.60%
2004 Series 3.20% to 4.60%
2005 Series 3.00% to 4.50%
2006 Series 3.40% to 4.20%
2006 Series A 3.625% to 4.125%
2007 Series 3.70% to 4.00%
October 2016
August 2019
August 2022
August 2022
February 2013
August 2021
August 2026
August 2026
August 2019
August 2022
Currently
August 2007
February 2007
February 2010
August 2008
February 2009
February 2010
February 2011
February 2011
August 2012
Amounts Due
Within One Year
$ 5, 000
40, 000
750, 000
1,305,000
10,000
285, 000
140, 000
5,000
145.000
FS - 23
MECHANICSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2007
LONG-TERM LIABILITIES (Cont'd.)
Bonds payable (Cont'd.)
Year Ending June 30
2008
2009
2010
2011
2012
2013-2017
2018-2022
2023 and later
Principal Interest Total
$ 2,685,000
3,060,000
3,175,000
3, 330, 000
3,455,000
19, 890, 000
22,935,000
5,460,000
$ 2,411,678
2,413,479
2,315,664
2,209,699
2,097,181
8,035,875
3,553,453
729.073
$ 5,096,678
5,473,479
5,490,664
5,539,699
5, 552,181
27, 925, 875
26,488,453
6.189.073
$ 87.756.102
In May 2007, the District issued its General Obligation Bonds, Series of 2007 in the amount of $ 8,990,000. After
discounts and issuance costs of $ 101,493, net proceeds of $ 8,887,706 were deposited into an irrevocable trust
fund to refund ($ 8,795,000) the 2002 Series of bonds with the remaining proceeds of $ 801 deposited into the
District's 2007 sinking fund. This refunding reduced future debt service, resulting in an economic gain of
approximately $ 318,000 which will be realized over the term of the new 2007 Series, primarily in fiscal year
2007/2008.
Compensated absences
Compensated absences (those for which employees receive pay) are presented using the termination payment
method. A liability is computed using estimates which apply historical data to current factors. The District
maintains records of unused leave and applies the contracted rate for employees eligible for termination
payments. The District allows only restricted sabbatical leave and therefore does not present any liability in
advance of the sabbatical. Payments for compensated absences are made in the year the absence is taken or the
employee retires. When an employee retires, the payout is as follows:
Unused sick leave will be paid at the following rates:
Number of Years
Percentage of
Accumulated Days
Less than ten
10 through 14
15 or more
20
35
50
FS - 24
MECHANICSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2007
LONG-TERM LIABILITIES (Cont'd.)
Compensated absences (Cont'd.)
For teachers and administrators, any unused sick leave shall be paid at the daily substitute rate.
For support staff and Food Service Fund employees, unused sick leave will be paid at the lowest hourly rate for
support employees.
Under the District's negotiated agreement with Mechanicsburg Education Association, professional employees of
the District who become eligible for retirement after 20 years service to the District, and elect to retire in that year,
will receive a retirement payment of $ 10,000.
OPERATING LEASES
The District is obligated under various equipment, vehicle, and modular classroom lease agreements at June 30,
2007. Total Operating lease payments included in General Fund expenditures for the year ended June 30, 2007
amounted to approximately $ 97,000. The following is a schedule of future minimum rental payments required
under the operating lease agreements.
Year Ending
June 30
2008 $ 101,982
2009 73,138
2010 30,319
2011 8, 909
2012 5.148
Total minimum payments required 219
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.
The District contributes to The Public School Employees' Retirement System (the System), a governmental cost
sharing multiple-employer defined benefit plan. The plan is under the authority of the Public School Employees'
Retirement Code (the Code), as amended. The plan provides retirement and disability, legislatively mandated ad
hoc cost-of-living adjustments, and healthcare insurance premium assistance to qualifying annuitants. The
System issues a comprehensive annual financial report that includes financial statements and required
supplementary information for the plan. A copy of the report may be obtained by writing to the System at PO Box
125, Harrisburg, PA 17108-0125, or by accessing the System's website at www.psers.state.pa.us.
FS - 25
MECHANICSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2007
PENSION PLAN (Cont'd.)
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,
2007 the employer contribution rate was 6.46 percent of covered payroll, composed of 5.72 percent for pension
benefits and .74 percent for healthcare insurance premium assistance. The District's contributions to PSERS for
the years ending June 30, 2007, 2006 and 2005 were $ 1,283,442, $ 942,270, and $ 797,476, respectively. Those
amounts are equal to the required contributions for each year.
POSTEMPLOYMENT BENEFITS OTHER THAN PENSION BENEFITS
Under the Collective Bargaining Agreement (expires June 30, 2009) with Mechanicsburg Education Association,
the District provides health insurance up to a maximum of $ 15,000 in premiums for any individual who retired
with 20 years of service to the District. This coverage commences when the retiree reaches age 62 and continues
until age 65. All other retired employees are required to pay the entire premiums. During the year ended June
2007, there were a total of 49 retirees covered for health insurance.
The District finances this benefit on spay-as-you-go basis. For the year ended June 2007, the estimated net cost
to the District was approximately $ 501,000 ($ 764,000 plan costs paid for the retirees less $ 263,000 premiums
paid by the retirees).
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:
FS - 26
MECHANICSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2007
RISK MANAGEMENT (Cont'd.)
Amount available for accrued costs, beginning
Payments to the trust $ 3,723,235
Increase in accrual to the trust
Claims paid by the trust (3,682,252)
Stop loss premiums (148,752)
Administrative fees (17.760)
Amount available for accrued costs, ending
$ 489, 325
3,723,235
(3.848.764)
$ 363.796
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 60-75 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; injuries to employees; and natural disasters. The District maintains commercial insurance
coverage covering each of those risks of loss. Management believes such coverage is sufficient to preclude any
significant uninsured losses to the District. Settled claims have not exceeded this commercial coverage in any of
the past three fiscal years.
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 - 27
MECHANICSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2007
COMMITMENTS AND CONTINGENCIES
Other commitments and contingencies
The District's collective bargaining agreement with its teaching staff expires June 30, 2009.
In the normal course of business, the District is subject to legal disputes and claims. The District does not
anticipate any material losses from any pending or threatened litigation.
In the normal course of preparing for the subsequent school year, the District has awarded bids for various
supplies, fuel contracts, etc. No major commitments in excess of routine requirements have been made by the
District.
As part of its ongoing Capital Projects, the District has entered into contract commitments totaling approximately
$ 1,395,000 for various construction and improvement projects at June 30, 2007.
The District participates in state and federal grant programs which are governed by various rules and regulations.
Expenditures charged to these grant programs are subject to program compliance audits and reviews by the
grantor agencies. The District is potentially liable for any expenditures which may be disallowed by the rules of
these grant programs. The District does not anticipate any material disallowance of program expenditures.
FS - 28
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SUPPLEMENTARY INFORMATION
MECHANICSBURG AREA SCHOOL DISTRICT
COMBINING BALANCE SHEET -CONSTRUCTION FUNDS
JUNE 30, 2007
2006
Construction
Total
ASSETS
Cash and
cash equivalents $ - $ - $ 979,294 $ 2,982,936 $ 3,962,230
Total assets $ - $ - $ 979,294 $ 2,982,936 $ 3,962,230
LIABILITIES
Accounts payable $ -
Total liabilities
FUND BALANCES
Reserve for
capital projects
Total fund balances
$ - $ 965,707 $ 87,305 $ 1,053,012
- 965,707 87,305 1,053,012
- - 13,587 2,895,631 2,909,218
- - 13,587 2,895,631 2,909,218
Total liabilities and
fund balances
2002 2002A 2005
Construction Construction Construction
$ - $ - $ 979,294 $ 2,982,936 $ 3,962,230
SI-1
MECHANICSBURG AREA SCHOOL DISTRICT
COMBINING STATEMENT OF REVENUES, EXPENDITURES AND
CHANGES IN FUND BALANCES -CONSTRUCTION FUNDS
FOR THE YEAR ENDED JUNE 30, 2007
2002 2002A 2005 2006
Construction Construction Construction Construction Total
Revenues
Local sources -other $ 1 $ - $ 147,906 $ 163,633 $ 311,540
Total revenues 1 - 147,906 163,633 311,540
Expenditures
Support services - - 2,458 2,657 5
115
Capital outlay - - 3,422,761 1,159,200 ,
4,581,961
Total expenditures - - 3,425,219 1,161,857 4,587,076
Excess (deficiency) of
revenues over expenditures 1 - (3,277,313) (998,224) (4,275,536)
Other financing
sources (uses)
Bond proceeds _ _
Refunding bond proceeds
_
_
_ _
-
Debt service (refunded _ -
bond issues) _ _ _
Transfers from (to) -
other funds (1,051) (685) - 1,736 _
Net change in fund balances (1,050) (685) (3,277,313) (996,488) (4,275,536)
Fund balances, beginning 1,050 685 3,290,900 3,892,119 7,184,754
Fund balances, ending $ - $ - $ 13,587 $ 2,895,631 $ 2,909,218
SI-2
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1
MECHANICSBURG AREA SCHOOL DISTRICT
COMBINING STATEMENT OF REVENUES, EXPENDITURES AND
CHANGES IN FUND BALANCE -ALL TRUST FUNDS
FOR THE YEAR ENDED JUNE 30, 2007
Revenue and other financing sources
Investment income
Contributions
Total operating revenues
Operating expenses
Scholarship awards
Total operating expenses
Operating income (loss)
Transfers to (from) trust accounts
Net income (loss)
Reserved fund balance, July 1, 2006
Reserved fund balance, June 30, 2007
Expendable Non-expendable
Trust Trust Totals
$ 15,388 $ 3,728 $ 19,116
1, 351 734 2, 085
16,739 4,462 21,201
6,846 3,143 g,ggg
6,846 3,143 g~ggg
9,893 1,319 11,212
9,893 1,319 11,212
21,892 72,073 93,965
$ 31,785 $ 73,392 $ 105,177
SI-4
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