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HomeMy WebLinkAbout01-6802 EAST PENNSBOR0 AREA SCHOOL DISTRICT FINANCIAL STATEMEntS YEAR ENDED ~0NE 30, 2001 INDEX Independent auditors' report Combined balance sheet - All fund types and account groups - June 30, 2001 Combined statement of revenue, expenditures and changes in fund balances - All Governmental Fund Types - year ended June 30, 2001 Combined statement of revenue, expenditures and changes in fund balances - budget and actual - General and Special Revenue Funds - year ended June 30, 2001 Combined statement of revenue, expenses and changes in retained earnings - All Proprietary Fund Types - year ended June 30, 2001 Combined statement of cash flows - All Proprietary Fund Types - year ended June 30, 2001 Notes to financial statements - June 30, 2001 Page Number 4 - 5 7 8 - 20 JAMES E. LYONS HOWARD R. GREENAWALT CREEDON R. HOFFMAN JOHN H. KLINGLER DEBORAH J. KELLY R. A. GREENAWALT (1956-1983) A. A. REIDINGER (RETIRED} C. EDWARD ROGERS, JR. GREENAWALT & COMPANY, P. Co CERTIFIED PUBLIC ACCOUNTANTS 400 WEST MA.~ STREET MECHAN~CSBUnG, PENnSYLVANiA 17055 (717) 766-4763 FAX (717) 766-2731 'rNDEPF, I~DEI~T AUDZTORS ' REPORT 62 WEST POMFRET STREET CARLISLE, PA 17013 (717) 243-4822 FAX (717) 258-9372 Board of School Directors East Pennsboro Area School District Enola, Pennsylvania We have audited the accompanying general-purpose financial statements of East Pennsboro Area School District as of June 30, 2001 and for the year then ended. These general-purpose financial statements are the responsibility of the District's management. Our responsibility is to express an opinion on these general-purpose financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the general-purpose financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the general-purpose financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall general-purpose financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the general-purpose financial statements referred to above present fairly, in all material respects, the financial position of East Pennsboro Area School District as of June 30, 2001, the results of its operations and the cash flows of its Food Service Fund for the year then ended, in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued a report dated October 24, 2001 on our consideration of East Pennsboro Area School District's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grants. That report is an integral part of our audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. October 24, 2001 Mechanicsburg, Pennsylvania MEMBERS -- AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS H PENNSYLVANIA INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS EAST PENNSBORO AREA SCHOOL DISTRICT COMBINED BALANCE SHEET - ALL FUND TYPES AND ACCOUNT GROUPS JUNE 30, 2001 Assets and other debits Cash and cash equivalents Investments Delinquent taxes receivable, net Due from other funds State subsidies receivable Federal subsidies receivable Due from other Governments Other accounts receivable Inventories Land and improvements BuildinGs and improvements Furniture and equipment Food service equipment (net of $ 204,549 accumulated depreciation) Amount to be provided for the retirement of General lonG-term debt Total assets and other debits Liabilities Accrued payroll and benefits Accounts payable Deferred revenue Due to other funds Due to student organizations General obligation bonds and notes payable Accumulated compensated absences Total liabilities Fund equity and other credits Invested in General fixed assets Retained earnings Specific fund balance reserves Unreserved fund balances Total fund equity and other credits Total liabilities, fund equity and other credits Governmental Fund Types Special Capital General Revenue Projects 867,666 $ 34,391 1,039,320 - 507,818 - 301,569 - 108,239 - 23,819 - 41,275 - 463,995 - 16,704,032 3.353.701 $ 34.391 $ 16.704.03~2 988,006 $ 330 379,184 - 435,234 - 1,474,178 1,802,424 330 1,474,178 - 15,229,854 1,551,277 34,061 - 1,551,277 34,061 15,229,854 $ 3.353.70__1 $ 34,391 $ 16.704.03_______~2 The accompanying notes are an integral part of these financial statements. Proprietary Fund Types Food Service Fiduciary Fund Types Trust and Agency Activities Account Groups General General Fixed Assets Long-Term Debt 108,028 226 18,140 31,325 $ 306,658 $ 50,773 $ $ - 325,856 - 39,467,508 - 6,391,836 44,347,496 157,719 $ 306,658 $ 50 773 $ 46,185,200 $ 44,347,496 $ $ - $ $ - 107,355 5,089 - - - 13,847 - - - 301,569 - - - 50,773 - 43,965,000 - - 382,496 121,202 306,658 50,773 0 44,347,496 36,517 46,185,200 36,517 0 0 46,185,200 0 $ 157,719 $ 306,658 $ __50,773 $ 46,185,200 $ 44,347,496 EAST PENNSBORO AREA SCHOOL DISTRICT COMBINED STATEMENT OF REVENUE, EXPENDITURES AND CHANGES IN FUND BALANCES - ALL GOVERNMENTAL FUND TYPES YEAR ENDED JUNE 30, 2001 Revenue Local sources State sources Federal sources Total revenue Expenditures Instruction Support services Operation of noninstructional services Facilities acquisition, construction and improvements Debt service Total expenditures Excess of revenue under expenditures Other financing sources (uses) Receipts from other LEA's Refunds of prior years' expenditures Interfund transfers in Interfund transfers out Net proceeds from the issuance of long-term debt Total other financing sources (uses) Excess of revenue and other financing sources over (under) expenditures and other financing uses Fund balances, July 1, 2000 Fund balances, June 30, 2001 General $ 15,880,606 5,991,046 121,106 21,992,758 13,095,045 5,748,842 348,942 31,650 3,312,317 22,536,796 (544,038) 98,917 20,913 (76,919) 42,911 Special Revenue $ 45,564 45,564 92,865 92,865 (47,301) 65,000 65,000 (501,127) 17,699 2,052,404 16,362 $ 1,551,277 $ 34,061 Capital Pro~ects $ 1,175,577 1,175,577 9,478,798 143,283 9,622,081 (8,446,504) 2,919,319 2,919,319 (5,527,185) 20,757,039 $ 15,229,854 The accompanying notes are an integral part of these financial statements. EAST PENNSBORO AREA SCHOOL DISTRICT COMBINED STATEMENT OF REVENUE, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL - GENERAL AND SPECIAL REVENUE FUNDS YEAR ENDED JUNE 30, 2001 Revenue Local sources State sources Federal sources Total revenue Expenditures Instruction Regular programs Special programs Vocational education programs Other instructional programs Community College education programs Total instruction Support services Pupil personnel Instructional staff Administration Pupil health Business Operation and maintenance of plant services Student transportation services Central Other support services Total support services Operation of noninstructional services Student activities Community services Total operation of non- instructional services General Fund Budset Actual $ 15,626,973 $ 15,880,606 6,061,906 5,991,046 194,952 121,106 21,883,831 21,992,758 10,509,353 10,447,580 2,024,911 1,966,242 277,488 277,486 111,733 110,018 Variance Favorable (Unfavorable) $ 253,633 (70,860) (73,846) 108,927 61,773 58,669 2 1,715 293,800 293,719 81 13,217,285 13,095,045 122,240 591,870 584,318 7,552 695,786 657,439 38,347 1,600,773 1,531,259 69,514 222,896 216,315 6,581 205,298 200,740 4,558 1,958,746 1,821,182 137,564 711,342 689,398 21,944 40,000 25,265 14,735 23,024 22,926 98 6,049,735 5,748,842 300,893 336,364 316,645 19,719 32,871 32,297 574 369,235 348,942 20,293 (Continued) Special Revenue Fund Budget Actual Variance Favorable (Unfavorable) 27,750 $ 45,564 27,750 45,564 $ 17,814 17,814 97,200 97,200 92,865 92,865 0 4,335 4,335 EAST PENNSBORO AREA SCHOOL DISTRICT COMBINED STATEMENT OF REVENUE, EXPENDITURES AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL - GENERAL AND SPECIAL REVENUE FUNDS (Cont'd.) YEAR ENDED JUNE 30, 2001 General Fund Budget Actual Expenditures (Cont'd.) Facilities acquisition, construction and improvement services $ Debt service Total expenditures Excess of revenue over (under) expenditures Other financing sources (uses) Receipts from other LEA's Refunds of prior year expenditures Interfund transfers in Interfund transfers out Budgetary reserve Total other financing sources (uses) Excess of revenue and other financing sources over (under) expenditures and other financing uses Fund balance, July 1, 2000 Fund balance, June 30, 2001 $ 190,62_____~5 Variance Favorable (Unfavorable) 57,000 $ 31,650 3,312,439 3,312,317 23,005,694 22,536,796 (1,121,863) (544,038) $ 25,350 122 468,898 577,825 98,917 98,917 5,000 20,913 15,913 344,960 - (344,960) (87,925) (76,919) 11,006 (773,431) - 773,431 (511,396) 42,911 554,307 (1,633,259) (501,127) 1,132,132 1,823,884 2,052,404 228,520 $ 1 551 277 $ 1 360 652 The accompanying notes are an integral part of these financial statements. - 5 - Special Revenue Fund Budget Actual Variance Favorable (Unfavorable 97,200 92,865 4,335 (69,450) (47,301) 22,149 70,000 65,000 (5,000) 70,000 65,000 (5,000) 550 17,699 17,149 0 16,362 16,362 $ 550 $ 34.061 $ 33.511 EAST PENNSBORO AREA SCHOOL DISTRICT COMBINED STATEMENT OF REVENUE, EXPENSES AND CHANGES IN RETAINED EARNINGS - ALL PROPRIETARY FUND TYPES YEAR ENDED JUNE 30, 2001 Operating revenue Local sources - food service revenue Total operating revenue Operating expenses Payments to food service contractor Donated co~,~,odities consumed Supplies Depreciation Total operating expenses Operating income (loss) Nonoperating revenue (expenses) Earnings on investments State sources Federal sources Federal donated commodities Total nonoperating revenue (expenses) Income (loss) before transfers Operating transfers General Fund contributed services General Fund equipment purchases Total operating transfers Net income (loss) Retained earnings, July 1, 2000 Retained earnings, June 30, 2001 Food Service $ 423,552 423,552 639,398 39,330 8,359 9,016 696,103 (272,551) 2,796 33,065 162,083 39,330 237,274 (35,277) 4,625 7,294 11,919 (23,358) 59,875 $ 36,51________/7 The accompanying notes are an integral part of these financial statements. - 6 - EAST PENNSBORO AREA SCHOOL DISTRICT COMBINED STATEMENT OF CASH FLOWS - ALL PROPRIETARY FUND TYPES YEAR ENDED JUNE 30, 2001 Cash flows from operating activities Cash received from users Cash paid to food service contractor Cash payments for operating expenses Net cash used in operating activities Cash flows from non-capital financing activities State sources Federal sources Net cash provided by non-capital financing activities Cash flows from investing activities EarninGs on investments Net cash provided by investing activities Net increase in cash and cash equivalents Cash and cash equivalents, July 1, 2000 Cash and cash equivalents, June 30, 2001 Reconciliation of operating loss to net cash provided by (used in) operating activities Operating income (loss) Adjustments to reconcile operating income .(loss) to net cash used in operatinG activities Depreciation Federal donated commodities General Fund contributed services Decrease (increase) in assets Inventories Increase (decrease) in liabilities Accounts payable Deferred revenue Total adjustments Net cash used in operating activities Food Service $ 423,552 (551,035) (2,306) (129,789) 32,839 162,083 194,922 2,796 2,796 67,929 40,099 $ 108,028 $ (272,551) 9,016 39,330 4,625 7,157 88,363 (5,729) 142,762 $ (129,789) The accompanyinG notes are an integral part of these financial statements. - 7 - EAST PENNSBORO AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2001 1. Reporting entity 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 Cumberland County community 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. Criteria established in Governmental Accounting Standards Board Statement Number 14 were used in determining the entities to be included in the reporting entity. These criteria include basic items such as financial interdependency, selection of governing authority, designation of management, ability to significantly influence operations, accountability for fiscal matters, scope of public service and special financing relationships. All operations of the District are included in the reporting entity. Based on the foregoing criteria, the District has not included any component units in the reporting entity since no component units fully meet the criteria for inclusion. The District is a participant in three jointly-governed operations, each of which is a separate legal entity that offers educational services to the District and its residents. Each of these entities serves many school districts and are therefore not included as part of East Pennsboro Area School District's reporting entity. These other entities are as follows: 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. 2. Summary of significant accounting policies The accounting records of East Pennsboro Area School District are maintained on the basis of accounting practices prescribed or permitted by the Manual of Accounting and Related Financial Procedures for Pennsylvania School Systems, issued by the Pennsylvania Department of Education in accordance with the provisions of the School Laws of Pennsylvania. These practices are in conformity with generally accepted accounting principles as applicable to governmental units. A summary of the more significant accounting policies follows. - 8 - EAST PENNSBORO AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS (Cont'd.) JUNE 30, 2001 2. Summary of significant accounting policies (Cont'd.) Fund accounting The accounting records of the District are organized on the basis of fund types and account groups. Each fund type may consist of several different funds. Each fund is a separate entity with self-balancing accounts which comprise its assets, liabilities, fund balance/retained earnings, revenues and expenditures/expenses as appropriate. The fund types and the account groups utilized by East Pennsboro Area School District are as follows: Governmental Fund Types Governmental. Funds are those through which most governmental functions of the School District are financed. The acquisition, use and balances of the District's expendable financial resources and the related liabilities (except those accounted for in proprietary funds) are accounted for through governmental funds. The measurement focus is upon determination of changes in financial resources, rather than upon net income determination. The funds of the District included in this category are: General Fund The General Fund is used to account for all financial transactions not accounted for in another fund. Revenues are primarily derived from local property, per capita, occupation, earned income taxes and State and Federal distributions. Many of the more important activities of the School District, including instruction, administration of the School District and certain noninstructional services are accounted for in this fund. Special Revenue Fund - Special Revenue Funds are used to account for the proceeds of specific revenues that are restricted to expenditures for specified purposes. Capital Projects Fund - Capital Projects Funds are used to account for financial resources to be used for the acquisition or construction of capital facilities. Proprietary Fund Types Proprietary Funds account for operations that are financed and operated in a manner similar to private business enterprises: Food Service Fund - The Food Service Fund is used to account for the financial transactions associated with the operations of the cafeterias. EAST PENNSBORO AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS (Cont'd.) JUNE 30, 2001 2. Summary of significant accounting policies (Cont'd.) Fund accounting (Cont'd.) Fiduciary Fund Types Fiduciary Funds are used to account for assets held by a Governmental unit in a trustee capacity or as an agent for other funds or entities. They are custodial in nature and do not involve measurement of the results of operations: Trust and AGency Fund Accounts for proceeds from activities open to the entire student body and faculty. AGency funds also include a central payroll fund. The payroll fund accounts for salaries earned by District employees. It handles the disbursing of such amounts to the employees and to taxing and other agencies on their behalf. Activities Fund Accounts for programs operated and sponsored by various clubs and organizations within the schools. Activity funds are AGency Funds which are separately accounted for because of legal requirements. Account Groups Account Groups are not funds. They are only concerned with the measurement of financial position and are not involved with the measurement of results of operations. General Fixed Assets Accounts for the District's investment in land, buildings, equipment and furnishings. General LonG-Term Debt - Accounts for notes, bonds, capital leases and compensated absences payable in future years. Basis of accounting The accounting and financial reportinG treatment applied by the different funds is based on their measurement focus, which determines when revenues and expenditures are recognized. Governmental Fund Types These funds are accounted for using a "current financial resources" measurement focus which is a modified accrual basis of accountinG. Revenues are recorded when susceptible to accrual (both measurable and available). Available means collected within the current period or soon enough thereafter to pay current liabilities. - 10 - EAST PENNSBORO AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS (Cont'd.) JUNE 30, 2001 2. Summary of significant accounting policies (Cont'd.) Basis of accounting (Cont'd.) Governmental Fund Types (Cont'd.) Expenditures are Generally recognized when the related fund liability is incurred. Exceptions to this general rule include principal and interest on General lonG-term debt which is recognized when due. Disbursements for inventory type items and prepaid expenses are considered expenditures at the time of purchase. Proprietary Fund Types The Food Service Fund uses the "flow of economic resources" measurement focus, which is a full accrual method of accounting. This fund accounts for operations using accounting pronouncements required for private business enterprises, unless those pronouncements conflict with or contradict governmental accounting pronouncements. Donated commodities are inventoried at an estimated cost value when received. Inventories (valued on the first-in, first-out method) are recorded as an asset, and the portion represented by donated commodities is recorded as deferred revenue. Food service equipment is capitalized, with depreciation (computed on the straiGht-line method using an estimated useful lives of 5 to 12 years) recorded as an operating expense. Fiduciary Fund Types Trust and Agency Funds are custodial in nature (assets equal liabilities), and do not involve measurement of results of operations. These funds are accounted for in essentially the same manner as Governmental Funds. Account Groups Land, buildings, equipment and furnishings are recorded at historical cost or at estimated historical cost if actual historical cost is not available. Depreciation is not provided on these assets. Long-term debt is offset by an amount to be provided by future taxation or other revenue sources. General obligation bonds and notes payable in future years are recorded as District debt. Interest on bonds and notes is recognized when such interest is due. - 11 - EAST PENNSBORO AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS (Cont'd.) JUNE 30, 2001 2. Su~r~ary of significant accounting policies (Cont'd.) Basis of accounting (Cont'd.) Account Groups (Cont'd.) Compensated absences (those for which employees receive pay) are presented usinG the termination payment method. A liability is recorded through the use of 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. Cash and cash equivalents The District pools cash resources of certain funds to facilitate the management of cash. Cash and cash equivalents applicable to a particular fund are readily identifiable. The balances in the pooled cash management accounts are available to meet current operation requirements. For purposes of the Food Service Fund statement of cash flows, the District considers all deposits purchased with an original maturity of three months or less to be cash or cash equivalents. BudGets The District adopts, prior to the beGinninG of each fiscal year, an annual budget for the General Fund and Athletic Fund. A part of this budget process is the adoption of local tax rates, subject to various legal restrictions. The District approves subsequent budget revisions (primarily transfers between expenditure categories) as necessary. Unused appropriations expire at the end of each year. Revenue - Local sources Real estate, occupation, residence and per capita taxes are levied as of July 1 with a legal, enforceable claim against the taxpayer and/or property. These taxes are recognized as revenue when received during the fiscal year and also estimated to be received within sixty days after the end of the fiscal year. Amounts estimated to be received between sixty days and one year after the end of the fiscal year are recorded as deferred revenue. An allowance for uncollectibles is recorded for taxes estimated not to be collectible within one year after the end of the fiscal year. Other tax revenues, including taxpayer-assessed revenues such as earned income taxes, are recognized as revenue when received during the fiscal year or soon enough thereafter to be susceptible to accrual. - 12 - EAST PENNSBORO AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS (Cont'd.) JTJNE 30, 2001 2. Summary of significant accounting policies (Cont'd.) Revenue - State sources State subsidies due the District as current fiscal year entitlements are recognized as revenue in the current fiscal year. Revenue - Federal sources Federal program revenues are recorded as deferred revenue when the program is approved, and are recognized as income when related program expenditures are incurred. Pension plan Substantially all full-time and part-time employees of the District participate in a cost-sharing multiple employer defined benefit 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. Inter-fund transactions Expenditures by the General Fund for the benefit of other funds are reflected in the respective statements of revenue and expenditures/expenses, based on management's estimates. The District does not attempt to allocate all costs which benefit the other funds due to the difficulties associated with the measurement of such benefits. 3. Cash and investments The District's cash and cash equivalents consist of cash balances deposited in financial institutions. Cash and cash equivalents at June 30, 2001 are categorized as follows: Cash and cash equivalents Change funds Insured (FDIC) Collateral held in the District's name Collateral not held in the District's name Total Carrying Bank Value Balance $ 50o $ - 200,000 200,000 1,167,016 1,965,788 $ 1 367 516 $ 2,165,788 13 - EAST PENNSBORO AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS (Cont'd) JUNE 30, 2001 3. Cash and investments (Cont'd.) Investments are categorized into these three categories of credit risk: 1. Insured or registered or securities held by the District or its agent in the District's name. Uninsured and unregistered, with securities held by the counterparty's trust department or agent in the District's name. Uninsured and unregistered, with securities held by the counterparty or by its trust department or agent but not in the District's name. This includes public funds which are secured by pooled collateral as permitted by Act 72. The investments, whose market value approximates cost due to the short term nature of the investments, are categorized as follows: Insured $ Collateral held in the District's name Collateral not held in the District's name Pooled investments PA Local Government Investment Trust PA Local Government Investment Trust Arbitrage Rebate Management Program Total The types of authorized investments are limited by state regulations. Investment policies followed during the categorization of investments shown above. 4. Delinquent taxes receivable Delinquent taxes receivable at June 30, 2001 consist of the following: 0 1,039,320 16,704,032 Current year in process of collection Held by delinquent collectors Delinquent taxes receivable Less: allowance for uncollectibles Net delinquent taxes receivable $ 17,743,352 year did not significantly alter the Real Total Estate Personal $ 714,717 $ 278,842 $ 435,875 1,362,627 124,205 1,238,422 2,077,344 403,047 1,674,297 (1,569,526) (168,474) (1,401,052) $ 50____~7,818 $ 234,573 $ __273,24______~5 - 14 - EAST PENNSBORO AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS (Cont'd.) JUNE 30, 2001 5. Land, buildings, equipment and furnishings As explained in Note 2, buildings and equipment are reflected on the balance sheet under the General Fixed Assets Group of Accounts stated at historical cost or estimated historical cost if actual historical costs are not available. A summary of changes in fixed assets is as follows: Beginning End of Year Increases Decreases of Year General Fixed Assets Land and improvements Buildings and improvements Furniture and equipment $ 325,856 $ - $ - $ 325,856 29,957,060 9,510,448 - 39,467,508 5,970,760 421,076 - 6,391,836 $ 36,253,676 $ 9,931.524 $ 0 $ 46,1_____85,200 Food Service Fund Equipment Accumulated depreciation $ 228,580 $ 7,294 $ - $ 235,874 (195,533) (9,016) - (204,549) $ 33,047 $ __(1,722)$ _~0 $ 3______1,32____~5 6. General obligation bonds and notes payable A summary of changes in general obligation bonds and notes payable is as follows: Payments Beginning and Other End of Year Additions Decreases of Year General Obligation Bonds Series A of 1997, 3.80% to 5.05%, maturing 9/1/2011 $ 7,790,000 Series AA of 1997, 4.00% to 4.20%, maturing 9/1/2001 760,000 Series of 1998, 3.60% to 4.30%, maturing 9/1/2006 4,260,000 Series A of 1998, 4.10% to 4.70%, maturing 2/15/2015 9,775,000 - Series of 1999, 4.15% to 5.60%, maturing 8/15/2020 4,995,000 - Series of 2000, 5.10% to 5.70%, maturing 8/15/2018 9,995,000 - Series of 2001, 3.60% to 5.00%, maturing 8/15/2021 - 3,000,000 - $ 270,000 370,000 610,000 5,000 $ 7,520,000 390,000 3,650,000 9,770,000 4,995,000 9,995,000 3,0OO,000 37,575,000 3,000,000 1,255,000 39,320,000 15 - EAST PENNSBORO AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS (Cont'd.) JUNE 30, 2001 6. General obligation bonds and notes payable (Cont'd.) General Obligation Notes Series of 1999, Variable rate, maturing 2/1/2018 Payments Beginnin~ and Other End of Year Additions Decreases of Year $ 4,825,000 $ $ 180,000 $ 4,645,000 $ 42,400.000 $ 3,000.000 $ 1.435.000 $ 43.96__5.000 Total scheduled debt service payments for all general obligation debt as of June 30, 2001 are as follows: Total Principal Interest 2001 - 2002 $ 3,564,080 $ 1,500,000 2002 - 2003 3,795,478 1,780,000 2003 - 2004 3,897,507 1,955,000 2004 - 2005 3,898,751 2,040,000 2005 - 2006 3,895,661 2,125,000 2007 to 2011 18,786,728 11,485,000 2012 to 2016 17,926,183 13,495,000 2017 to 2021 10,290,660 9,350,000 2022 240,875 235,000 $ 2 2 1 064,080 015,478 942,507 1 858,751 1 770,661 7 301,728 4,431,183 940,660 5,875 Totals $ 66,295,923 $ 43,965,009 $ 22,330,923 In March 2001, the District borrowed $ 3,000,000 through the issuance of General Obligation Bonds, Series of 2001. Interest on these bonds range from 3.60% to 5.00% and mature from 2002 through 2021. Net proceeds from these bonds will be used for alterations, additions and/or renovations to the existing high school and middle school, including technology, furnishings and equipment, and capital improvements to District's athletic facility. The bonds and notes payable contain options which would allow the District to call any or all remaining bonds and notes as follows: Description Callable On or After 1997 A Series 1997 AA Series 1998 Series 1998 A Series 1999 Series 2000 Series 2001 Series March 1, 2002 Not Callable September 1, 2003 August 15, 2003 August 15, 2004 February 15, 2005 August 15, 2006 Total interest paid on all General Obligation Debt for the year ended June 30, 2001 approximated $ 2,013,058, none of which was capitalized as part of the construction projects. 16 - EAST PENNSBORO AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS (Cont'd.) JUNE 30, 2001 7. Compensated absences At June 30, 2001, the General Long-Term Debt includes a liability for compensated absences of $ 382,496. Payments for compensated absences are made through General Fund expenditures in the year the absence is used or the employee retires. When an employee retires with unused compensated absences, the District's payout policy is as follows: EmerGency and personal - no payout required 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 Personal days - unused personal days (not to exceed 5 days) are paid at a rate of $ 70 per day Retirement severance payments retiring employees with at least seven consecutive years of District employment immediately prior to retirement and have 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. Total maximum severance payments to each eligible retiree under the new collective bargaininG agreement in effect through AuGust 31, 2005 is $ 19,000. ChanGes in compensated absences were as follows: BeGinninG Net Increase End of Year (Decrease) of Year 12,023 $ 7,396 $ 19,419 363,803 (726) 363,077 147,481 (147,481) 523,307 $ (140,811) $ 382,496 Vacation pay Severance payments Retirement incentives Totals $ - 17 - EAST PENNSBORO AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS (Cont'd. JUNE 30, 2001 8. Lease commitments At June 30, 2001, the District was leasing 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, 2001 were $ 69,260. Minimum net lease rental payments for future periods are expected to be as follows: 2001-2002 $ 44,016 2002-2003 26,855 2003-2004 23,123 2004-2005 9,695 9. Pension plan The District contributes to The Public School Employees' Retirement System (the System), a governmental cost sharing multiple-employer defined benefit pension plan. The plan is under the authority of the Public School Employees' Retirement Code (the Code), as amended. The plan provides retirement and disability, legislative 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 Public School Employees' Retirement System, P.O. Box 125, Harrisburg, PA 17108-0125. The contribution policy is established by the Code and requires contributions by active members, employers and the Commonwealth. Active members are required to contribute 5.25 percent of their qualifying compensation if they joined the system prior to July 22, 1983, and 6.25 percent if they joined on or after that date. Contributions required of employers are based upon an actuarial valuation. For the fiscal year ended June 30, 2001 the employer contribution rate was 1.94 percent of covered payroll, composed of 1.64 percent for pension benefits and .30 percent for health insurance premium assistance. The District's contributions to PSERS for the years ending June 30, 2001, 2000 and 1999 were $ 224,598, $ 515,379, and $ 656,559, respectively. Those amounts are equal to the required contribution for each year. 10. 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. - 18 - EAST PENNSBORO AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS (Cont'd.) JUNE 30, 2001 11. Other post-employment retirement benefits The District offers one post-employment benefit to retired professional employees other than pension benefits as discussed in Note 9. For employees with twenty or more years of service to the District, the District will pay the basic medical insurance premiums for five years (excluding family coverage) following retirement. The District finances this benefit on a pay-as-you-go basis. The cost of this benefit amounted to approximately $ 51,000 during the year ended June 30, 2001 and covered 24 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. 12. Risk management 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 purposes of State unemployment compensation laws, the District has elected not to be covered by the Pennsylvania Unemployment Compensation Fund. Any unemployment claims are paid by the District on a quarterly basis as incurred. The District is a member of a group of School Districts who have joined together to self-insure their workers' compensation exposure. The District pays annual contributions to the group based on a formula utilizing the District's own claim experience and annual payroll. Claims in excess of the District's retention experience are paid by a Central Fund within the group and, if necessary, by an insurance company carrying excess liability coverage. 13. New accounting pronouncements During the year ended June 30, 2001, the District implemented Government Accounting Standards Board (GASB) Statement No. 33, ~Accounting and Financial Reporting for Nonexchange Transactions". The effect of GASB 33 had no impact on revenue or fund balance of the District. However, assets and liabilities were both increased for revenues meeting the definition of nonexchange transactions. During the year beginning July 1, 2002, the District will be required to implement GASB 34, "Basic Financial Statements - Management's Discussion and Analysis - for State and Local Governments~. The effect of GASB 34 will significantly affect how the District presents its financial statements. The District receives information from various sources, including the Pennsylvania Department of Education, and expects to be ready to satisfactorily implement this accounting standard. - 19 - EAST PENNSBORO AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS (Cont'd.) JUNE 30, 2001 14. Commitments and contingencies A new collective bargaining agreement between the District and the teaching staff was entered into as of November 9, 2000 and is effective from September 1, 2000 through August 31, 2005. 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 requiremeDts 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. Costs 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. As part of its ongoing capital projects, the District has entered into construction contracts with remaining commitments totaling approximately $ 12,541,000 at June 30, 2001. In addition, the District's cost for asbestos abatement discovered in August 2001 during renovations at the high school are estimated at $ 150,000 to $ 200,000. The District is contingently liable for outstanding base rental debt of Cumberland-Perry Area Vocational-Technical School. The District will provide monthly payments over a two year period beginning November 2001 totaling $ 314,838. The District is contingently liable for repayment of East Pennsboro School District Authority Revenue Bonds, Series of 1965, 1968 and 1973. Those issues were refunded by the deposit of funds into an irrevocable escrow account in amounts sufficient to retire the bonds and interest when due. Because of the refunding, these bonds are not included as general obligation debt on the District's balance sheet. At June 30, 2001, the amount of Authority Bonds still outstanding totaled $ 960,000. The District, during the normal course of business, is subject to numerous disputes and claims. At June 30, 2001, the District is named as a party in actions for which the potential liability cannot presently be determined. District management feels that the actions are generally without merit and they intend to vigorously contest the claims. It is management's opinion that the ultimate outcome of the actions will not have a material affect on the District's financial position. - 20 -