Loading...
HomeMy WebLinkAbout09-0628S ~ ,.. SHIPPENSBURG AREA SCHOOL DISTRICT ~ 7 ~ s~ FINANCIAL REPORT JUNE 30, 2008 t , CONTENTS INDEPENDENT AUDITOR' S REPORT 1 - 2 Management's Discussion & Analysis 3 - 10 Basic Financial Statements: Government-wide Financial Statements: Statement of Net Assets 11 - 12 Statement of Activities 13 Fund Financial Statements: Balance Sheet -Governmental Funds 14 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Assets 15 Combined Statement of Revenues, Expenditures and Changes in Fund Balances -Governmental Funds 16 Reconciliation of the Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balances to the Statement of Activities 17 Statement of Revenues, Expenditures and Changes in Fund Balance -Budget and Actual -General Fund 18 Statement of Net Assets -Proprietary Fund - Food Service 19 Statement of Revenues, Expenses and Change in Net Assets -Proprietary Fund -Food Service 20 Statement of Cash Flows -Proprietary Fund - . Food Service 21 - 22 Statement of Fiduciary Net Assets 23 Notes to Financial Statements 24 - 41 ,. CONTENTS (Continued) SUPPLEMENTARY INFORMATION General Fund -Schedule of Revenues 42 - 43 General Fund -Schedule of Expenditures 44 - 49 Combining Balance Sheet -Non-Major Governmental Funds 50 Combining Statement of Revenues, Expenditures and Changes in Fund Balances -Non-Major Governmental Funds 51 Independent Auditor's Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 52 - 53 Independent Auditor's Report on Compliance with Requirements Applicable to Each Major Program and Internal Control over Compliance in Accordance with OMB Circular A-133 54 - 55 Schedule of Findings and Questioned Costs 56 - 57 Schedule of Expenditures of Federal Awards 58 - 61 Notes to Schedule of Expenditures of Federal Awards 62 Summary Schedule of Prior Year's Audit Findings 63 BAR BOYFd~ & BITTER Web Site: www.cpabr.com CERTIFIED PUBLIC ACCOUNTANTS AND CONSULTANTS INDEPENDENT AUDITOR'S REPORT Board of School Directors Shippensburg Area School District Shippensburg, Pennsylvania We have audited the accompanying financial statements of the governmental activities, the business-type activity, each major fund, and the aggregate remaining fund information of the Shippensburg Area School District, as of and for the year ended June 30, 2008, which collectively comprise the District's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the Shippensburg Area School 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 Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective fmancial position of the governmental activities, the business-type activity, each major fund, and the aggregate remaining fund information of the Shippensburg Area School District, as of June 30, 2008, and the respective changes in financial position and cash flows, where applicable, thereof and the respective budgetary comparison for the General 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 our report dated January 5, 2009, on our consideration of the Shippensburg Area School District's internal control over fmancial reporting and 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. CAMP HILL CARLISLE Cf1AMBERSBURG LEWISTOWN STATE COLLEGE An Independently Owned Member of the RSM McGladrey Network The Management's Discussion & Analysis on pages 3 through 10 is not a required part of the basic financial statements but is 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 fmancial statements that collectively comprise the Shippensburg Area School District's basic financial statements. The combining non-major fund fmancial statements and other schedules, listed in the table of contents as supplementary information are presented for purposes of additional analysis and are not a required part of the basic financial statements. The accompanying Schedule of Expenditures of Federal Awards is presented for purposes of additional analysis as required by U. S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements, and in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole. /~ ,~~. ~~ Chambersburg, Pennsylvania January 5, 2009 MANAGEMENT'S DISCUSSION & ANALYSIS (MD&A} SHIPPENSBURG AREA SCHOOL DISTRICT JUNE 30, 2008 The discussion and analysis of Shippensburg Area School District's (District) financial performance provides an overall review of the District's financial activities for the fiscal year ended June 30, 2008. The intent of this discussion and analysis is to look at the District's financial performance as a whole; readers should also review the financial statements and the notes to the basic financial statements to enhance their understanding of the District's financial performance. The Management's Discussion & Analysis (MD&A) is an element of the reporting model adopted by the Governmental Accounting Standards Board (GASB) in their Statement No. 34 Basic Financial Statements and Management's Discussion and Analysis for State and Local Governments issued in June 1999. Certain comparative information between the current year and the prior year is required to be presented in the MD&A. Financial Highlights Special Education The trends of prior years indicate that during the fiscal year 2007-2008, the Shippensburg Area School District would experience another year of significant increases in the costs for Special Education Instruction. Alternative Education Alternative Education costs increased during the 2007-2008 fiscal year. The District transferred increased financial resources to fund Alternative Education Placements for at-risk students during the fiscal year. Building Program The School District is planning to build an addition to the Senior High School. Construction will begin in the fall of 2008. Long Term Debt Refinancing The variable rate Series of 2003 Note was refinanced in early 2008. The new General Obligation Bonds, Series of 2008, will be paid off on November 1, 2029. The fixed rates range from 2.60% to 4.10%. New Issue A new General Obligation Bond in the amount of $2,250,000 was issued to help finance the addition to the Senior High School. The new General Obligation Bonds, Series of 2008A will be paid off on November 15, 2028. The fixed rates range from 2.40% to 4.00%. Refinancing The Series of 2001A Bond was refinanced achieving an estimated savings of $79,115. The new General Obligation Bonds, Series of 2008AA will be paid off on November 15, 2012. The fixed rates range from 2.40% to 3.00%.Table A-1 summarizes the major features of the District's financial statements, including the portion of the District they cover and the types of information they contain. The remainder to this overview section of NID&A explains the structure and contents of the statements. Table A-1 Major Features of Shippensburg Area School District's Government-Wide and Fund Financial Statements Government-Wide Fund Statements Statements Governmental Funds Pro riet Funds Fiduci Funds Scope Entire District (except Activities of the District Activities the District Activities in which the fiduciary funds) that are not operates similaz to District is the trustee or proprietary or private business - agent to someone else's fiduciary, such as Food Service resources - education, Activity Funds administration and communi services Required Financial Statement of Net Assets Balance Sheet Statement of Net Assets Statement of Fiduciary Information Net Assets Statement of Revenues, Statement of Revenues, Statement of Activities Expenditwes and Expenses and Changes Statement of Changes Changes in Fund in Net Assets in Fiduciary Net Assets Balances Statement of Cash Flows Accounting Basis and Accrual accounting and Modified-accrual Accrual accounting and Accrual accounting and Measurement Focus economic-resources accounting and cwrent economic-resowces economic-resources focus financial-resources focus focus focus Type ojasset/liabi[ity All assets and Only assets expected to All assets and All assets and information liabilities, both be used up and liabilities, both liabilities, both short- financial and capital, liabilities that come due financial and capital, term and long-term and short-term and during the yeaz or soon and short-term and long-term thereafter; no capital long-term assets included Type of inflow/outflow All revenues and Revenues for which All revenues and All revenues and information expenses dwing the cash is received during expenses during the expenses during the yeaz, regardless of or soon after the end of year, regazdless of year, regardless of when cash is received the yeaz; expenditures when cash is received when cash is received or paid when goods or services or paid or paid have been received and payment is due during the year or soon thereafter 4 Overview of Financial Statements Government-Wide Statements The government-wide statements report information about the District as a whole using accounting methods similar to those used by private-sector companies. The Statement of Net Assets includes all of the government's assets and liabilities. All of the current year's revenues and expenses are accounted for in the Statement of Activities regardless of when cash is received or paid. The two government-wide statements report the District's net assets and how they have changed. Net assets, the difference between the District's assets and liabilities, are one way to measure the District's financial health or position. Over time, increases or decreases in the District's net assets are an indication of whether its financial health is improving or deteriorating, respectively. To assess the overall health of the District, additional non-financial factors, such as changes in the District's property-tax base and the performance of students, must be considered. 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. Property taxes and state and Federal subsidies and grants finance most of these activities. • Business-type activities -The District conducts afood-service operation and charges fees to students, staff and visitors to cover the costs of their operation. Fund Financial Statements The District's fund financial statements provide detailed information about the most significant funds - not the District as a whole. Some funds are required by state law and by bond requirements. Governmental funds -Most of the District's activities are reported in governmental funds, which focus on the determination of financial position and changes in financial position, not on income determination. They are reported using an accounting method called modified-accrual accounting, which measures cash and all other 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 Statement of Net Assets and the Statement of Activities) and governmental funds is reconciled in the financial statements. Proprietary funds -These funds are used to account for the District's activities that are similar to business operations in the private sector; or where the reporting focuses on determining net income, fmancial position, changes in financial position, and where a significant portion of funding comes through user charges. When the District charges customers for services it provides -whether outside customers or to other units in the District -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, but provides more detail and additional information such as cash flows. Fiduciary funds -The District is the trustee, or fiduciary, for several activity funds. All fiduciary activities are reported in a separate Statement of Net Assets. We exclude these activities from the District's other financial statements because the District cannot use these assets to finance operations. Financial Analysis of the District as a Whole The District's total net assets were $12,833,636, at June 30, 2008. Table A-2 As of June 30, 2008 and 2007 Net Assets Total Pen:erdagz Govemmettal Activities Business-Type Activities Total Chase 6/30/07 6/30/08 6/30/07 6/30/08 6!30/07 6/30/08 2007 2008 Curn:ntandotherassets $ 18,490,692 $ 13,944,893 $ 88,036 $ 81,580 $ 1$578,728 $ 14,026,473 -24.50% Capital assets 34,007,363 42,296,058 147,778 121,983 34;155 141 42 418 041 24.19% Total assets $ 52,498,055 $ 56,240,951 $ 235,814 $ 203,563 $ 5733 869 $ 56 444 514 7.04% Cur~entandotherliabilities $ 4,602,195 $ 5,278,598 $ 56,234 $ 27,716 $ 4,658,429 $ 5,306,314 -13.91% Long-tennliahilities 37,461,685 38,304,564 - 37,461685 38304564 -2.25% Total liabilities $ 42,063,880 $ 43,583,162 $ 56,234 $ 27 716 $ 42,120 114 $ 43 610 878 -3.54% Net Assets Invested in capital assets, net of n:lated debt $ (3,937,637) $ 3,351,058 $ 147,778 $ 121,983 $ (789,859) $ 3,473,041 191.64% Restricted 10,918,566 4,009,582 - - 1Q918,566 4,009,582 63.28% Unrestricted 3,453,246 5,297,149 31,802 53,864 3,485 048 5 351 013 -53.54% Total cetassets $ 10,434,175 $ 12,657,789 $ 179,580 $ 175 847 $ 1Q613 755 $ 12 833 636 -20.92% Most of the District's net assets consist of restricted and unrestricted amounts. The remaining net assets consist of investments in capital assets (land, site improvements, buildings and equipment). The restricted balances are amounts set aside to fund future purchases or capital projects as planned by the District. The unrestricted amounts include designated and undesignated amounts. The results of this year's operations as a whole are reported in the Statement of Activities. All expenses are reported in the first column. Specific charges, grants, revenues and subsidies that directly relate to specific expense categories are presented to determine the final amount of the District's activities which are supported by other general revenues. The two largest general revenues are the Basic Education Subsidy provided by the Commonwealth of Pennsylvania, and the local taxes assessed to community taxpayers. Table A-3 restates information from the Statement of Activities in a different format. Table A-3 Fiscal Years Ended June 30, 2008 and 2007 Changes in Net Assets Total Petcaita~ Gwemmertal Activities Business-Type Activities Total Charrze 6/30/07 6/30/08 6/30/07 6/30/08 6/30107 6/30/08 2007-2008 Rwenues Pmgram revenues Charges forsertices $ 98,394 $ 96,528 $ 779,938 $ 819,015 $ 878,332 $ 915,543 4.24% Operating giants and comibutions 6,793,252 7,616,411 401,801 431,441 7,195,053 8,047,852 11.85% Geieral revenres Property ta`ces 15,321,577 16,204,330 - - 15,321,577 16,204,330 5.76% OUer taxes 4,281,687 4,442,215 - - 4, 281,687 4,442,215 3.75% Grans, subsidies and cortributions, unrestricted 7,469,850 7,715,594 - - 7,469,850 7,715,594 3.29% Other 1,218,574 811,371 5,208 2,661 1,223,782 814,032 -33.48% Total revenues 35,183,334 36,886,449 ],186,947 1,253,117 36,370,281 38,139566 4.86% Expenses Instructional 22,227,749 23,133,384 - - 22,227,749 23,133,384 -4.07% Instructional studatt support 2,978,688 2,650,239 - - ~ 978,688 2,650,239 11.03% Admirtishative and fuuucial Support 2,614,879 2,713,328 - - 2614,879 2,713,328 -3.76% Operation and main[ of plant services 6,094,842 2,470,085 - - 0094,842 2,470,085 59.47% Pupil transportation 1,481,601 1,392,886 - - 1,481,601 1,392,886 5.99% $tudentachivities 653,620 715,759 - - (,53,620 715,759 -9.51% Cotmmnity services 19,399 19,680 - - 19,399 19,680 -1.45% Interest on long-tam debt 1,416,262 1,567,474 - - 1,416,262 1,567,474 -10.68% Food service - - 1,?A3,899 1,256,850 1,243 899 1,256 850 -1.04% Total expenses 37,487,040 34,662,835 1,243,899 1,256,850 3$730,939 35,919685 7.26% Changes in cetasse>s $ (2,303,706) $ 2,223,614 $ (56,952) $ (3,733) $ 0360 658) $ 2 219 881 194.04% 7 The tables below presents the expenses of both the Governmental and Business-Type Activities of the District. Table A-4 presents the District's seven (7) largest functions -instructional programs, instructional student support, administration, operation and maintenance of plant services, pupil transportation, student activities and community services and each program's net cost (total cost less revenues generated by the activities). This table also shows the net costs offset by the other unrestricted grants, subsidies and contributions to show the remaining financial needs supported by local taxes and other miscellaneous revenues. Table A-4 Fiscal Years Ended June 30, 2008 and 2007 Governmental Activities Total Cost Net Cost of Services of Services Functions/Programs 6/30/2007 6/30/2008 6/30/2007 6/30/2008 structiona $ 22,227,749 $23,133,384 $ 17,118,690 $ 17,641,370 Instructional student support 2,978,688 2,650,239 2,572,934 2,183,307 Administration 2,614,879 2,713,328 2,449,859 2,540,815 Operation and maint. of plant services 6,094,842 2,470,085 5,750,090 1,663,623 Pupil transportation Student activities Community services Interest on long-term debt Total governmental activities Less unrestricted gants, subsidies Total needs for grants, taxes and other revenues 7,469,850 7,715,594 $ 23,125,544 $ 19,234,302 Table A-5 reflects the activities of the Food Service Program, the only business-type activity of the District. Table A-5 Fiscal Years Ended June 30, 2008 and 2007 Business-type Activities Total Cost Net Cost of Services of Services Functions/Programs 6/30/2007 6/30/2008 6/30/2007 6/30/2008 Food services Add: investment earnings Total business-type activities 1,481,601 1,392,886 713,431 716,910 653,620 715,759 555,503 617,385 19,399 19,680 18,625 19,012 1,416,262 1,56 7,474 1,416,262 1, 567,474 37, 7,040 34, 2,835 30,595,394 2 ,8 $ 1,243,899 $ 1,256,850 $ 62,160 $ 6,394 5,208 2,661 $ 56,952 $ 3,733 The Statement of Revenues, Expenses and Changes in Net Assets for this proprietary fund will further detail the actual results of operations. The District Funds At June 30, 2008, the District's governmental funds reported a combined fund balance of $9,529,285, which reflects a decrease of $5,343,261 from June 30, 2007. General Fund Budget During the fiscal year, the Board of School Directors (Board) authorizes revisions to the original budget to accommodate differences from the original budget to the actual expenditures of the District. All adjustments are again confirmed at the time the annual audit is accepted, which is after the end of the fiscal year and not prohibited by state law. A schedule showing the District's original and final budget amounts compared with amounts actually paid and received is provided in the financial statements. The District applied for Federal, state and local grants. These grants cannot always be anticipated in the budgeting process. Budgeted revenues increased by $319,180 as a result of additional approved grants. Budgeted expenditures and other financing uses also increased by the same amount to compensate for the additional approved grants. Transfers between specific categories of expenditures/financing uses occur during the year. The most significant transfers are from the budget reserve to specific expenditures. Capital Asset and Debt Administration Capital Assets At June 30, 2008, the District had $42,418,041 invested in a broad range of capital assets, including land, buildings, furniture and equipment. Table A-6 Fiscal Years Ended June 30, 2008 and 2007 Capital Assets -Net of Depreciation Total Peroenta~ Gwemmert_al Activities Business-Tw e Activities Total Chanpe 6/30/07 6/30/08 6/30/07 6130/08 6/30/07 6/30/08 2007 2008 Land and site improvements $ 779,244 $ 751,012 $ - $ - $ 719,244 $ 751,012 -3.62% Buildings and improvements 29,80.5,924 37,731,279 - - 29, &35,924 37,731,279 26.42% Furnittreandequipment 3,382,195 3,687,294 147,778 121,983 3,529,973 3,809,277 7.91% Constructim-in-progress - 126,473 - 126473 100.00% $ 34,007,363 $ 42,296,058 $ 147 778 $ 121 983 $ 3 155 141 $ 42 418 041 24.19% Debt Administration As of July 1, 2007, the District had total outstanding bond principal of $37,945,000. During the year, the District borrowed an additional $18,785,000, and made payments against principal of $17,785,000 resulting in ending outstanding debt as of June 30, 2008, of $38,945,000. Table A-7 Fiscal Years Ended June 30, 2008 and 2007 Outstanding Debt Total Petcenta~ Gwemmertal Activities Business-Type Activities Total Cbar~e 6/30/07 6/30/08 6/30/07 6/30/08 6/30/07 6/30/08 2007 2008 General OHigation Bonds Series of2001A $ 8,325,000 $ - $ - $ - $ $325,000 $ - -100.00% Series of2004 15,415,000 15,410,000 - - 15,415,000 15,410,000 -0.03% Series of2007 4,750,000 4,750,000 - - 4,750,000 4,750,000 0.00% Series of2008 - 9,545,000 - - - 9,545,000 100.00% Series of2008A - 2,250,000 - - - 2,250,000 100.00% Series of2008AA - 6,990,000 - - - 6,990,000 100.00% General OHigation Note Series of2003 9,455,000 - - 9455000 -100.00% $ 37,915,000 $ 38,945,000 $ - $ $ 37945 000 $ 38 945 000 2.64% Other obligations include accrued vacation-pay and sick-leave for specific employees of the District. More detailed information about our long-term liabilities is included in Notes to the Financial Statements. Table A-8 reflects the comparison of revenue and expenditure categories by percentages. Table A-8 Revenues and Expenditures 2004-2005 2005-2006 2006-2007 2007-2008 Local revenues 59.4% 60.7% 53.7% 39.7% State revenues 38.2% 36.9% 32.6% 24.9% Federal revenues 2.4% 2.4% 1.8% 1.6% Other financing sources 0.0% 0.0% 11.9% 33.8% Instruction 60.9% 46.1 % 49.9% 36.8% Support services 26.3% 20.4% 21.9% 15.3% Non-instructional/community 1.7% 1.4% 1.5% l.l% Facilities acquisition, construction and improvement services 2.9% 24.9% 19.7% 15.0% Contacting the District's Financial Management Our financial report is designed to provide our citizens, taxpayers, parents, students, investors and creditors with a general overview of the District's finances and to show the Board's accountability for the money it receives. If you have questions about this report or wish to request additional financial information, please contact Deborah Westover, Business Administrator/Board Secretary, at the Shippensburg Area School District, 317 North Morris Street, Shippensburg, PA 17257, (717) 530-2702. 10 SHIPPENSBURG AREA SCHOOL DISTRICT STATEMENT OF NET ASSETS June 30, 2008 Governmental Business-Type ASSETS Activities Activities Total Current Assets Cash $ 9,455,283 $ 4,598 $ 9,459,881 Investments 1,657,466 - 1,657,466 Receivables Taxes -net of allowance for uncollectibles 1,400,784 - 1,400,784 Federal subsidies 391,951 40,347 432,298 State subsidies 307,402 4,388 311,790 Other 15,016 794 15,810 Internal balances 602 - 602 Due from other governments - _ _ Prepaid expenses 658 - 658 Inventories - 31,453 31,453 Total current assets 13,229,162 81,580 13,310,742 Noncurrent Assets Bond issuance costs -net Land and improvements -net Building and improvements -net Furniture and equipment -net Construction-in-progress Total noncurrent assets Total assets See Notes to Financial Statements. 715,731 - 715,731 751,012 - 751,012 37,731,279 - 37,731,279 3,687,294 121,983 3,809,277 126,473 - 126,473 43,011,789 121,983 43,133,772 $ 56,240,951 $ 203,563 $ 56,444,514 11 LIABILITIES AND NET ASSETS Governmental Activities Business-Type Activities Total Current Liabilities Accounts payable $ 1,101,948 $ 2,137 $ 1,104,085 Current portion of long-term debt General obligation debt 1,920,000 - 1,920,000 Accrued expenses Salaries and benefits 1,826,696 - 1,826,696 Payroll withholdings 210,398 - 210,398 Interest payable 212,006 - 212,006 Deferred revenues - 25,579 25,579 Unearned revenues 7,550 - 7,550 Total current liabilities Noncurrent Liabilities Long-term debt -net of current portion General obligation debt Note payable Capital lease obligation Compensated absences Total noncurrent liabilities 5,278,598 27,716 5,306,314 37,025,000 37,025,000 1,279,564 - 1,279,564 38,304,564 - 38,304,564 Total liabilities Net Assets (Deficit) Invested in capital assets -net of related debt Restricted for: Capital projects Capital reserve Athletic Unrestricted Designated Undesignated Total net assets Total liabilities and net assets 43,583,162 27,716 43,610,878 3,351,058 121,983 3,473,041 3,884,748 - 3,884,748 101,657 - 101,657 23,177 - 23,177 1,050,000 4,247,149 - 1,050,000 53,864 4,301,013 12,657,789 175, 847 12,833,636 $ 56,240,951 $ 203,563 $ 56,444,514 12 U H r~ Q O U N~ w D fzl a a ~. W -~i O U ea dr~ M Oq F ~ z '' 'Lt ~~ W W d ~ ~ i~ O E-' C ~ ~ ~-+ ~ ~ t~ N y ~z i ~ a~i ~ W ~ `J U z N (~ .~ l~ N O ~" ~ N N O ~. N GG ~ w O `~ ~. ~ a ~ .C U Ot~~nMO~Net~ M M 00 ~O 01 M O d' 00 -+MOM~C[~011~0\ ~O .-~ ~ ~ ~ ~ ~ Vl 01 ~ ~ 69 ~t O O ~n ~ l~ v1 '-• ,--~ a\ O~ M ~ Q\ ~ ~ ~ 00 V1 M N M N ~!1 00 ~+ ~--~ 00 l~ ~D ~O ~ N vi M O ~D O~ M ~ O e} •-~ ~ O ~ _ .-+ O ^ N ~ l~ v'~ M ~ N ~O N ~~ [~ O\ N O N ~ ~ ~ ~ ~ M O 01 O~ ~ ~ ~ ~O ~ ~C M 00 M M ~O ~O l~ V7 ~l~ol N INIM o, ... ~ ... O t~ v1 M O V1 N ~ l~0-~N~oo~l~ M M 00 ~p O\ M O CF ~--~ M O M ~C [~ O~ [~ ~~V~i~l ~O`~~ ~--i r-i l~ N N ~~v ,..~ ~~~ ~ a.i ~O O Vl ~ ~O V1 O ~ ~ ~ ~ ~ M N V1 ~--~ .~ V1 ~O 1~ et N V'i '-+ O M rl ~ ~ ~ i~ I N ~ [ ~ v1 ~ N ~O ~ l~ O~ N O 69 rY N M ~ ~O ~ 00 .-~ ,-, N N M ~--~ M ~ M ~ ~ .-~ (~ 01 ~ [~ O\ 00 ~p ~ ch 00 ~ 00 ~D l~ l~ [~ M M et d ~ .-+ [~ ~D ~O ~ O ~ ~ ~ 69 N G 00 O O 00 V1 M ~ ~ ~ ~ ~O N et N l~ ~ ~ N t11 --~ O V'1 ~ N y 01 ~ a\ ~ O~ V1 O N ~ O~ .~ .-r ~. ~ Q\ ~ O. es ~ ~ a i o vrnoo~n~Drno v ~n O ~n a i 00 M N 00 00 V) 00 [~ M V1 dp M N M O oO t ~ ~O ~ 00 00 ~0 }., M O ri O N ~n O~ l~ N ~O O~ w M try •--~ l~ Q~ ~--~ ~p ~p ~ r+ S ~ ~ rt M [~ ~ ~ N a1 « ~, ~ M M U Yr N '~ '~ i ~ °~' ~ U N N ~ °. ~ N w U ~, O p ., Of., a+ N vi ~ ¢' ~ ~ O y 4 .~ ~ , O , ~ v ~ aoi ~ : ~ . ~~ ~ U ~ N Y w Y V R 'CS x+" N M ~ vi .~ ~ C 'C ,,., N ~ ~ ~ r+ ~ ,~+ ~ ~ ~ p O ++ p 0. U . • «f O ~ i~ '~ ~ ~ ~ U ^ ~ N ~ Q~ ~ ~ ~ ~ API r ~ ~ ~ ' ~ a' ~ c d ~ ~' ~ V ' ~ ' ~~, p ~ ~ am N ~ y 7 'y N b~A y d fJ H ~i ~+ V ~ N a ~ N O y ~ + + ~ i i i y , ~ ~ tiv ~ ? o . o~ ~ ~~ N ~ ~ v i v i a~ 'o a~ ~ o ~ oQOav~U ~ ~ a. ~ o ~ ~ w o a i o aaC7 > ~~ c ~' C° i ~ ~~ C7 H Gq E~ o , C7 F U Z ~ a~~i r~+ .~ w O ~O. 0 a~ M SHIPPENSBURG AREA SCHOOL DISTRICT BALANCE SHEET -GOVERNMENTAL FUNDS June 30, 2008 Capital Non-Major Total Projects Governmental Governmental General Construction Funds Funds ASSETS Cash $ 5,172,595 $ 4,122,182 $ 160,506 $ 9,455,283 Investments 1,644,952 12,514 - 1,657,466 Receivables Taxes -net of allowance for uncollectibles 1,400,784 - - 1,400,784 Federal subsidies 391,951 - - 391,951 State subsidies 307,402 - - 307,402 Other 15,016 - - 15,016 Due from other funds Prepaid expenses Total assets LIABILITIES AND FUND BALANCES Accounts payable Accrued expenses Salaries and benefits Payroll withholdings Deferred revenues Unearned revenue Total liabilities Fund Balances Reserved for Capital projects Capital reserve Athletic Unreserved Designated Undesignated Total fund balances Total liabilities and fund balances See Notes to Financial Statements. 602 - - 602 658 - - 658 8,933,960 4,134,696 $ 160,506 $ 13,229,162 $ 817,819 $ 249,948 $ 34,181 $ 1,101,948 1,826,696 - - 1,826,696 210,398 - - 210,398 553,285 - - 553,285 6,059 - 1,491 7,550 3,414,257 249,948 35,672 3,699,877 - 3,884,748 - 3,884,748 - - 101,657 101,657 - - 23,177 23,177 1,050,000 - - 1,050,000 4,469,703 - - 4,469,703 5,519,703 3,884,748 124,834 9,529,285 $ 8,933,960 $ 4,134,696 $ 160,506 $ 13,229,162 14 SHIPPENSBURG AREA SCHOOL DISTRICT RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS June 30, 200$ Total Fund Balances -Governmental Funds $ 9,529,285 Amounts reported for governmental activities in the Statement of Net Assets are different because: Capital Assets used in governmental activities are not financial resources, and therefore, they are not reported as assets in governmental funds. The cost of assets is $59,822,836, and the accumulated depreciation is $17,526,778. Property taxes receivable will be collected this year, but are not available soon enough to pay for the current period's expenditures, and therefore, they are deferred revenues in the funds. Governmental funds report bond issuance costs as expenditures. However, in the Statement of Activities, the costs of issuance are allocated over the lives of the debt issues. This is the amount by which bond issuance costs exceed accumulated amortization. Long-term liabilities, including bonds payable and compensated absences, are not due and payable in the current period, and therefore, they are not reported as liabialities in the funds. Long-term liabilities at year-end consist of: Bonds payable (38,945,000) Accrued interest (212,006) Compensated absences (1,279,564) Total net assets -governmental activities See Notes to Financial Statements. 42,296,058 553,285 715,731 (40,436,570) $ 12,657,789 15 SHIPPENSBURG AREA SCHOOL DISTRICT COMBINED STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES -GOVERNMENTAL FUNDS Year Ended June 30, 2008 Capital Non-Major Total Projects Governmental Governmental General Construction Funds Funds Revenues Local sources State appropriations Federal appropriations Total revenues Expenditures Instructional Support services Cperation ofnon-instructional services Construction/improvement services Debt service Principal Interest Total expenditures Excess (deficiency) of revenues over expenditures Other Financing Sources (Uses) Bond proceeds Refund of prior years' receipts Operating transfers in Operating transfers out Total other financing sources (uses) Net changes in fund balances Fund Balances -July 1, 2007 Fund Balances -June 30, 2008 See Notes to Financial Statements. $ 21,816,700 $ 198,739 $ 66,775 $ 22,082,214 13,845,129 - - 13,845,129 883,120 - - 883,120 36,544,949 198,739 66,775 36,810,463 22,158,383 166,022 - 22,324,405 8,769,970 374,157 108,170 9,252,297 479,096 - 225,553 704,649 - 9,074,005 - 9,074,005 1,690,000 16,095,000 - 17,785,000 1,409,523 98,951 - 1,508,474 34,506,972 25,808,135 333,723 60,648,830 2,037,977 (25,609,396) (266,948) (23,838,367) - 18,785,000 - 18,785,000 (289,894) - - (289,894) - - 182,360 182,360 (182,360) - - (182,360) (472,254} 18,785,000 182,360 18,495,106 1,565,723 (6,824,396) (84,588) (5,343,261) 3,953,980 10,709,144 209,422 14,872,546 $ 5,519,703 3,884,748 124,834 9,529,285 16 SHIPPENSBURG AREA SCHOOL DISTRICT RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES Year Ended June 30, 2008 Net change in fund balances -total governmental funds $ (5,343,261) Amounts reported for governmental activities in the Statement of Activities are different because: Capital outlays are reported in governmental funds as expenditures. However, in the Statement of Activities, the costs of those assets are allocated over their useful lives as depreciation expense. This is the amount by which depreciation exceeds capital outlays in the period. Capital outlays Less depreciation expense The net effect of various miscellaneous transactions involving capital assets (ie. sales, trade-ins, and donations) is to decrease net assets. Because some property taxes will not be collected for several months after the District's fiscal year ends, they are not considered as "available" revenues in the governmental funds. Deferred tax revenues decreased by this amount this year. Interest on long-term debt in the Statement of Activities differs from the amount reported in the governmental funds because interest is recognized as an expenditure in the funds when it is due, and thus requires the use of current financial resources. In the Statement of Activities, interest expense is recognized as the interest accrues, regazdless of when it is due. The additional interest accrued in the Statement of Activities over the amount due is shown here. Some expenses reported in the Statement of Activities do not require the use of current financial resources, and therefore, they aze not reported as expenditures in governmental funds. The issuance of long-term debt provides current financial resources to governmental funds, while the repayment of the principal of long- term debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net assets. Also, governmental funds report the effect of issuance costs, premiums, discounts, and similar items when debt is first issued, whereas these amounts are deferred and amortized in the Statement of Activities. This amount is the net effect of these differences in the treatment of long-term debt and related items. Issuance of long-teen debt Repayment of long-term debt Bond issuance costs Amortization of bond issuance costs Change in net assets of governmental activities See Notes to Financial Statements. 9,589,410 (1,432,273) 8,157,137 131,558 75,986 (59,000) (72,879) (18,785,000) 17,785,000 368,514 (34,441) (665,927) $ 2,223,614 17 SHIPPENSBURG AREA SCHOOL DISTRICT STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGETAND ACTUAL -GENERAL FUND Year Ended June 30, 2008 . Variance with Final Budgeted Amounts Budget Favorable Original Final Actual (iJnfavorable) Revenues Local sources $ 21,520,065 $ 21,751,061 $ 21,816,700 $ 65,639 State appropriations 12,840,756 12,924,794 13,845,129 920,335 Federal appropriations 808,030 812,176 883,120 70,944 Total revenues 35,168,851 35,488,031 36,544,949 1,056,918 Expenditures Instructional Support services Operation ofnon-instructional services Debt service Total expenditures Excess (deficiency) of revenues over expenditures Other Financing Uses Refund of prior years' receipts Operating transfers out Budgetary reserve Total other financing uses Net changes in fund balance Fund Balance -July 1, 2007 Fund Balance -June 30, 2008 See Notes to Financial Statements. 22,102,541 22,313,628 22,158,383 155,245 9,639,594 9,508,086 8,769,970 738,116 490,455 494,545 479,096 15,449 3,256,925 3,539,976 3,099,523 440 453 35,489,515 35,856,235 34,506,972 1,349,263 (320,664) (368,204) 2,037,977 2,406,181 - - (289,894) (289,894) (182,360) (182,360) (182,360) - (100,000) (100,000) - 100,000 (282,360) (282,360) (472,254) (189,894) $ (603,024) $ (650,564) 1,565,723 $ 2,216,287 3,953,980 $ 5,519,703 18 SHIPPENSBURG AREA SCHOOL DISTRICT STATEMENT OF NET ASSETS - PROPRIETARY FUND -FOOD SERVICE June 30, 2008 ASSETS Current Assets Cash $ 4,598 Receivables Federal subsidies 40,347 State subsidies 4,388 Other 794 Inventories 31,453 Total current assets 81,580 Noncurrent Assets Furniture and equipment -net 121,983 Total assets $ 203,563 LIABILITIES AND NET ASSETS Liabilities Accounts payable $ 2 137 Deferred revenues 25,579 Total liabilities -all current 27,716 Net Assets Invested in capital assets 121,983 Unrestricted 53,864 Total net assets 175,847 Total liabilities and net assets $ 203,563 See Notes to Financial Statements. 19 SIiIPPENSBURG AREA SCHOOL DISTRICT STATEMENT OF REVENUES, EXPENSES AND CHANGE IN NET ASSETS - PROPRIETARY FUND -FOOD SERVICE Year Ended June 30, 2008 Operating Revenues Food service revenue $ 819,015 Operating Expenses Labor, taxes and benefits 603,536 Professional and technical services 5,081 Disposal services 2 306 Electricity 20 000 Equipment repairs and maintenance 17,037 Extermination services 1,485 Advertising 1 132 Printing and binding 590 Travel 1,469 Supplies 35,803 Food and milk 476,886 Donated commodities used 64,108 Depreciation 25 795 Dues and fees 1,622 Total operating expenses 1,256,850 Operating loss (437,835) Nonoperating Revenues (Expense) Investment income 2,661 Federal subsidies 305,073 State subsidies 62,260 Value of donated commodities 64,108 Total nonoperating revenues 434,102 Change in net assets (3,733) Net Assets -July 1, 2007 179,580 Net Assets -June 30, 2008 $ 175,847 See Notes to Financial Statements. 20 SHIPPENSBURG AREA SCHOOL DISTRICT STATEMENT OF CASH FLOWS - PROPRIETARY FUND -FOOD SERVICE Year Ended June 30, 2008 Cash Flows From Operating Activities Cash received from meal sales $ 819,015 Cash payments for goods and services (586,771) Cash payments to employees for services (603,536) Net cash used in operating activities (371,292) Cash Flows From Non-Capital Financing Activities Federal subsidies 305,073 State subsidies 62,260 Net cash provided by non-capital financing activities 367,333 Cash Flows From Investing Activities Investment income 2,661 Net decrease in cash (1,298) Cash: July 1, 2007 5,896 June 30, 2008 $ 4,598 (Continued) 21 SHIPPENSBURG AREA SCHOOL DISTRICT STATEMENT OF CASH FLOWS - PROPRIETARY FUND -FOOD SERVICE (Continued) Year Ended June 30, 2008 Reconciliation of Operating Loss to Net Cash Used in Operating Activities Operating loss $ (437 835) Adjustments to reconcile operating loss to net cash used in operating activities Depreciation 25,795 Value of donated commodities 64,108 Changes in assets and liabilities: (Increase) decrease in: Receivables (903) Inventories 6,061 (Decrease) increase in: Accounts payable 1,345 Due to other funds (31,000) Deferred revenues 1,137 Net cash used in operating activities $ (371 292) See Notes to Financial Statements. 22 SHIPPENSBURG AREA SCHOOL DISTRICT STATEMENT OF FIDUCIARY NET ASSETS June 30, 2008 James Burd Nancy Grayson Intermediate Elementary Elementary School Middle School Senior High Activity Fund Activi Fund Activity Fund Activity Fund Activity Fund ASSETS Cash $ 4,493 $ 2,171 $ 6,432 $ 26,711 $ 104,523 LIABILITIES Due to other funds $ - $ - $ - $ - $ 602 Due to student groups 4,493 2,171 6,432 26,586 103,153 Accounts payable - - - 125 768 Total liabilities $ 4,493 $ 2,171 $ 6,432 $ 26,711 $ 104,523 See Notes to Financial Statements. 23 SHIPPENSBURG AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS Note 1. Summary of Significant Accounting Policies Shippensburg Area School District operates three elementary schools, one middle school and one high school in Shippensburg, Pennsylvania. The District operates under current standards prescribed by the Pennsylvania Department of Education in accordance with the provisions of the School Laws of Pennsylvania. The District operates under alocally-elected, nine-member Board. The financial statements of Shippensburg Area School District (the District) have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) 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. The more significant of these accounting policies are as follows: A. Reporting Entity Shippensburg Area School District's financial statements include the operations of all entities for which the School Board exercises oversight responsibility. Oversight responsibility is demonstrated by financial interdependency, selection of governing authority, designation of management, ability to significantly influence operations, and accountability for fiscal matters. Shippensburg Area School District is the lowest level of government which has oversight responsibility and control over all activities related to public school education in the Commonwealth of Pennsylvania. The District receives funding from local, state and Federal government sources and must comply with the requirements of these funding-source entities. However, the District is not included in any other governmental "reporting entity" since the School Board Members are elected by the public and have decision-making authority, the power to designate management, the ability to significantly influence operations and primary accountability for fiscal matters. Additionally, the District does not exercise oversight responsibility over any other entities, and consequently, no other entities have been included in the accompanying financial statements. B. Government-wide and Fund Financial Statements The government-wide financial statements (i.e., the Statement of Net Assets and the Statement of Activities) report information on all of the non-fiduciary activities of the primary government and its component units. For the most part, the effect of interfund activity has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. Likewise, the primary government is reported separately from certain legally- separate component units for which the primary government is financially responsible. The Statement of Activities demonstrates the degree to which the direct expenses of a given function or segment is offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include 1) charges to customers or applicants who purchase, use or directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not included among program revenues are reported as general revenues. 24 SHIPPENSBURG AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS Note 1. Summary of Significant. Accounting Policies (Continued) B. Government-wide and Fund Financial Statements (Continued) Separate-fund financial statements are provided in the report for all of the governmental, proprietary, and fiduciary funds of the District, even though the latter are excluded from the government-wide financial statements. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements. Non-major funds are aggregated and presented in a single column. Fiduciary funds are reported by fund type. C. Measurement Focus, Basis of Accounting and Financial Statement Presentation The District complies with accounting principles generally accepted in the United States of America (GAAP) and applies all relevant Governmental Accounting Standards Board (GASB) Pronouncements. The government-wide financial statements are reported using the economic-resources measurement focus and the accrual basis of accounting, as are the proprietary and fiduciary-fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenues 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 is charged as expense against current operations and accumulated depreciation is reported on the Statement of Net Assets. Governmental-fund financial statements are reported 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 collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the government considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Revenues from Federal, state and other grants designated for payment of specific School District expenditures is recognized when the related expenditures are incurred; accordingly, when such funds are received, they are recorded as deferred revenues until earned. Expenditures generally are recorded when liabilities are incurred, as under accrual accounting. However, debt-service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. When both restricted and unrestricted resources are available for use, it is the District's policy to use restricted resources first, then unrestricted resources as they are needed. Governmental funds are those through which most governmental functions of the District are financed. The acquisition, use and balances of the District's expendable financial resources and related liabilities (except those accounted for in proprietary funds) are accounted for through governmental funds. 25 SHIPPENSBURG AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS Note 1. Summary of Significant Accounting Policies (Continued) C. Measurement Focus, Basis of Accounting and Financial Statement Presentation (Continued) The District reports the following major governmental funds: The General Fund is the District's primary operating fund. It accounts for all financial resources except those required to be in another fund. Revenues are primarily derived from local property, earned income, per capita and occupational taxes, and state and Federal distributions. Many of the more important activities of the District, including instruction, administration of the District and certain non-instructional services are accounted for in this fund. The Capital Projects Fund is used to account for financial resources available for the acquisition or construction of major capital facilities (other than those financed by proprietary funds). The District operates one enterprise fund, the Food Service Fund. This fund accounts for the activities of the District's food service program. Additionally, the District reports the following non-major governmental funds: The Athletic Funds are authorized by Section 511 of the Public School Code of 1949 to account for the revenues and expenditures of athletic activities. The funds account for gate receipts and other revenues from athletic events and certain budgeted costs of the District's athletic programs. The Capital Reserve Fund (Section 2932 is authorized by P.L. 145, Act of April 30, 1943, known as Section 2932 School Laws of Pennsylvania) accounts for (1) monies transferred during any fiscal year from appropriations made for any particular purpose which may not be needed, and (2) surplus monies in the General Fund of the District at the end of any fiscal year. This fund is included in the financial statements as a Special Revenue Fund. 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 proprietary fund's principal on-going operations. The principal operating revenues of the District's enterprise fund are food service charges. Operating expenses for the District's enterprise 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. The District does not attempt to allocate "building-wide costs" to the Food Service Fund. Thus, General Fund expenditures which partially benefit the Food Service Fund (utilities, janitorial services, insurance, etc.) are not proportionately recognized within the Food Service Fund; similarly, the Food Service Fund does not recognize a cost for the building space it occupies (no rental-of-facilities expense). The Activity Funds account for the monies authorized by Section 511 of the Public School Code of 1949 for school publications and organizations. A portion of the Activity Funds is an Agency Fund which is separate from other Agency Funds because of legal requirements. Agency Funds are custodial in nature (assets equal liabilities) and do not involve measurement of results of operations. Agency Funds are also accounted for using the modified-accrual basis of accounting. 26 SHIPPENSBURG AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS Note 1. Summary of Significant Accounting Policies (Continued) D. Budgets and Budgetary Accounting An operating budget is adopted prior to the beginning of each year for the General Fund 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 District's budget and reporting of its financial statements: The District, before levying annual school taxes, is required to prepare an operating budget for the succeeding fiscal year. The District is required to publish notice by advertisement, at least once in two newspapers of general circulation in the municipality in which it is located, and within fifteen days of fmal action, that the proposed budget has been prepared and is available for public inspection at the administrative office of the District. Notice that public hearings will be held on the proposed operating budget must be included in the advertisement; such hearings 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 of School Directors may make transfers of funds appropriated to any particular item of expenditure by legislative action in accordance with the Pennsylvania School Code. Management may amend the budget at the sub- function/sub-object level without Board approval. Appropriations lapse at the end of the fiscal period. Budgetary information reflected in the financial statements is presented at or below the level of budgetary control and includes the effect of approved budget amendments. E. Assets, Liabilities and Net Assets or Equity Cash and Cash Equivalents: For purposes of the Statement of Cash Flows presented for the proprietary fund, the District considers all highly-liquid investments with maturities of three months or less when purchased to be cash equivalents. Investments: Investments are stated at market value. Allowance for Estimated Uncollectible Taxes and Deferred Revenues: The allowance for estimated uncollectible taxes is based upon an historical estimate of delinquent taxes that will not be received within one year of the fiscal year-end. Deferred revenues are based upon an historical estimate of delinquent taxes expected to be received within one year of the fiscal year-end. The portion of taxes receivable which is expected to be received within sixty days of June 30 is recorded as revenue in the current year. The remaining amount of taxes receivable which is expected to be received within one year from June 30 is recorded as deferred revenues. All other amounts in taxes receivable are written off as estimated uncollectible taxes. 27 SHIPPENSBURG AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS Note 1. Summary of Significant Accounting Policies (Continued) E. Assets, Liabilities and Net Assets or Equity (Continued) Inventories: On government-wide financial statements, inventories are presented at the lower of cost or market on a first-in, first-out basis, and aze expensed when used. A physical inventory of the Food Service Fund's food and supplies was taken as of June 30, 2008. The inventory consisted of government-donated commodities which were valued at estimated fair mazket value, and purchased commodities and supplies, valued at cost using the first-in, first-out (FIFO) method. The District has adopted an inventory recordkeeping system which does distinguish between donated and purchased commodities. Accordingly, deferred revenue for donated commodities has been recorded. Capital Assets and Depreciation: Capital assets, which include property, plant and equipment, are reported in the applicable governmental or business-type activities column in the government-wide financial statements. Capital assets aze capitalized at the discretion of management, unless the assets are acquired by debt proceeds, in which case the assets must be capitalized. Management considers various factors in the capitalization of assets, including the assets' estimated useful lives, costs, and the extent to which the assets aze part of a larger capital project. The District's capital assets include library books, classroom texts, computer equipment, classroom furniture, and other instructional equipment, subject to the on-going discretion of management. The costs of normal maintenance and repairs that do not add to the value of the assets or materially extend asset lives aze not capitalized. Depreciation is provided for fixed assets on the straight-line basis over the estimated useful lives of the assets or groups of assets as determined by management. Long Term Obli atg_ ions: In the government-wide financial statements, long-term debt and other long- term obligations are reported as liabilities in the applicable governmental or business-type activity columns in the Statement of Net Assets. Bond premiums and discounts, as well as issuance costs, are deferred and amortized over the lives of the issues using the effective interest method. Bonds payable aze reported net of applicable bond premiums or discounts. Bond issuance costs are reported as deferred chazges and amortized over the terms of the related debt. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of the debt issued is reported as other financing sources while discounts on debt issuances aze reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, aze reported as debt service expenditures. Compensated Absences: Under the system of fmancial accounting and reporting for Pennsylvania School Systems, the District accrues certain accumulated employee benefits, such as unpaid vacation and sick pay. Calculation of this amount is determined by the appropriate vacation, sick and retirement lump-sum payments which would be available to employees if they would leave or retire from the District and is adjusted for expected turnover rates of employees. Accrued benefit days, multiplied by appropriate salary amounts, aze reflected as a long-term liability unless retirements are likely within the upcoming fiscal year. Those costs, determined to be current-year costs, are reflected as a liability of the General Fund. 28 SHIPPENSBURG AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS Note 1. Summary of Significant Accounting Policies (Continued) E. Assets, Liabilities and Net Assets or Equity (Continued) Transfers: Advances between funds that are not expected to be repaid are accounted for as transfers. In those cases when repayment is expected, the advances are accounted for through the various "due from" and "due to" accounts. Fund Balance: The District classifies fund balances as follows: Reserved Reserved is used to denote that portion of the fund balance, which is not available for expenditure appropriation or is legally segregated for a specific purpose. • Reserved for athletics represents that portion of fund balance legally restricted to athletic programs. • Reserved for capital reserve represents that portion of fund balance legally restricted to capital projects. Unreserved • Designated is used to indicate intentions for financial-resource utilization. • Undesignated is used to denote that portion of fund balance which is available for appropriations. Use of Estimates: Management uses estimates and assumptions in preparing financial statements. These estimates and assumptions affect the reported amounts of assets and liabilities and the reported revenue, expenditures and disclosures. 29 SHIPPENSBURG AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS Note 2. Deposits and Investments Under Section 440.1 of the Public School Code of 1949, as amended, the District is permitted to invest funds consistent with sound business practices in the following types of investments: • U.S. Treasury Bills • Short-term obligations of the U.S. Government or its agencies or its instrumentalities • Deposits in savings accounts or time deposits or share accounts of institutions insured by either: 1. The Federal Deposit Insurance Corporation (FDIC), or 2. The Federal Savings and Loan Insurance Corporation (FSLIC}, or 3. The National Credit Union Share Insurance Fund (NCUSIF} to the extent that such accounts are so insured, and for any amounts above maximum insurable limits, provided that approved collateral as provided by law shall be pledged by the depository • Obligations of (a) the United States of America or its agencies or instrumentalities backed by the full-faith and credit of the United States of America, and (b) the Commonwealth of Pennsylvania or instrumentalities thereof backed by the full-faith and credit of these political subdivisions • Shares of investment companies whose investments are restricted to the above categories The deposit and investment policies of the District adhere to state statutes and prudent business practices. There were no deposit or investment transactions during the year that violated either state statutes or District policies. Deposits: Custodial-Credit Risk Custodial-credit risk is the risk that in the event of a bank failure, the District's investments may not be returned to it. As of June 30, 2008, $5,559,182 of the District's total bank balances of $5,659,182, was exposed to custodial-credit risk as follows: Amount Uninsured and collateralized by assets maintained in conformity with Act 72 $ 5,559,182 Act 72 is an act standardizing the procedures for pledges of assets to secure deposits of public funds with banking institutions pursuant to other laws; establishing a standard rule for the types, amounts and valuations of assets eligible to be used as collateral for deposits of public funds; permitting assets to be pledged against deposits on a pooled basis and authorizing the appointment of custodians to act as the pledgor of the assets. 30 SHIPPENSBURG AREA SCIiOOL DISTRICT NOTES TO FINANCIAL STATEMENTS Note 2. Deposits and Investments (Continued) Investments: As of June 30, 2008, the District had the following investments: Investment Type Weighted Average Maturity Rating Fair Value Pennsylvania Local Government Investment Trust (PLGIT) PLGIT Class 58 days AAAm $ 590 PLGIT/ARM 59 days AAAm 4,122,182 Pennsylvania School District Liquid Asset Fund (PSDLAF) 24 days AAAm 1,905 Orrstown Financial Advisors Not Rated 1,644,952 Commerce Bank -Trust Account Not Rated 12,514 $ 5,782,143 Portfolio Assets PLGIT -This fund invests primarily in U.S. Treasury and Federal agency securities and repurchase agreements secured by such obligations, as well as certain municipal obligations and collateralized or insured certificates of deposit. Weighted-average portfolio maturity for the fund is expected to be kept at or below 60 days. PSDLAF -This fund invests in U.S. government securities, its agencies and instrumentalities, and repurchase agreements collateralized by such securities and contracted with highly rated counterparties. Weighted-average portfolio maturity for the fund is expected to be kept at or below 60 days. The District also maintains investments at Ortstown Financial Advisors and Commerce Bank which are invested in U.S. Treasury obligations. Wei ted-Avera~;e Maturity The weighted-average maturity (WAM) method expresses investment time horizons, the time when investments become due and payable, in years or months, weighted to reflect the dollar size of individual investments within an investment type. In this illustration, WAMs are computed for each investment type. The portfolio's WAM is derived by dollar-weighting the WAM for each investment type. Interest-Rate Risk The District does not have a formal investment policy that limits investment maturities as a means of managing its exposure to fair-value losses arising from increasing interest rates. 31 SHIPPENSBURG AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS Note 2. Deposits and Investments (Continued) Credit Risk As indicated above, Section 440.1 of the Public School Code of 1949, as amended, limits the composition of the District's investments, and the District has no investment policy that would further limit its investment choices. Concentrations-of-Credit Risk The District places no limit on the amounts invested in any one issuer. The percentage of the concentration of the District's investments at June 30, 2008, are as follows: Percent of Investment Portfolio Pennsylvania Local Government Investment Trust (PLGIT) 71.30% Pennsylvania School District Liquid Asset Fund (PSDLAF) 0.03% Orrstown Financial Advisors Commerce Bank -Trust Account 28.45% 0.22% 100.00% 32 SHIPPENSBURG AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS Note 3. Taxes Receivable, Deferred Revenues and Estimated Uncollectible Taxes A summary of the taxes receivable and related accounts at June 30, 2008, follows: Amount Uncollected taxes -real estate $ 734,660 Uncollected taxes -personal 18,562 Interest and commissions -net 10,976 Earned income taxes 612,610 Realty transfer taxes 23,976 Taxes Receivable -Net $ 1,400,784 Taxes to be collected within 60 days $ 853,687 Deferred revenues -delinquent taxes 553,285 Allowance for uncollectible taxes (6,188) Taxes Receivable -Net $ 1,400,784 Deferred Revenue -General Fund Delinquent taxes $ 553,285 Deferred Revenue -Food Service Fund Student deposits $ 16,981 Donated commodities 8,598 $ 25,579 33 SHIPPENSBURG AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS Note 4. Interfund Accounts Individual fund receivable and payable balances at June 30, 2008, are as follows: Interfund Interfund Receivables Payables General $ 602 $ - Senior High Activity Individual fund transfer activity at June 30, 2008, is as follows: - 602 $ 602 $ 602 Transfers In Transfers Out General Capital Reserve Senior High Athletic Middle School Athletic Note 5. Food Service Fund Inventory $ - $ 182,360 60,615 - 87,434 - 34,311 - $ 182,360 $ 182,360 The composition of Food Service Fund inventory at June 30, 2008, is as follows: Amount Materials and supplies $ 8,634 Purchased food 14,221 Donated food 8,598 $ 31,453 Note 6. Property Taxes Property taxes are levied on July 1st. Taxes are collected at a discount until August 31st, at their face amount from September 1st until October 31st, and include a penalty thereafter. The taxes are billed and collected by elected tax collectors. The County Tax Bureaus collect delinquent real estate taxes for the District. 34 SHIPPENSBURG AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS Note 7. General Fixed Assets Capital asset activity for the year ended June 30, 2008, was as follows: July 1, 2007 Increases Decreases June 30, 2008 ovemmenta chvrties Capital assets, not being depreciated Land $ 272,820 $ - $ - $ 272,820 Construction-in-progress - 126,473 - 126,473 Total capital assets, not being depreciated 272,820 126,473 - 399,293 Capital assets, being depreciated Site improvements 929,699 - - 929,699 Buildings and improvements 41,485,158 8,951,650 - 50,436,808 Furniture and equipment 7,676,042 511,287 130,293 8,057,036 Total capital assets, being depreciated 50,090,899 9,462,937 130,293 59,423,543 Less accumulated depreciation Site improvements Buildings and improvements Furniture and equipment Total accumulated depreciation Total capital assets, being depreciated, net Governmental Activities, Capital Assets -Net Business-Type Activity Machinery and equipment Accumulated depreciation Business-Type Activity, Capital Assets -Net 423,275 28,232 - 451,507 11,639,234 1,066,295 - 12,703,529 4,293,847 337,746 261,851 4,369,742 16,356,356 1,432,273 261,851 17,526,778 33,734,543 8,030,664 (131,558) 41,896,765 $ 34,007,363 $ 8,157,137 $ (131,558) $42,296,058 $ 688,098 $ - $ - $ 688,098 (540,320) (25,795) - (566,115) $ 147,778 $ (25,795) $ - $ 121,983 Depreciation expense was charged to the functions/programs of the District as follows: Amount Governmental Activities Instructional $ 1,078,858 Instructional student support 127,261 Administration and financial support 127,286 Operation and maintenance of plant services 57,885 Student activities 40,490 Community services 493 Total governmental activities 1,432,273 Business-Type Activity Food Service 25,795 Total School District $ 1,458,068 35 SHIPPENSBURG AREA SCHOOL DISTRICT NOTES TO FINANCLAL STATEMENTS Note 8. Accrued Salaries and Benefits Accrued salaries and benefits at June 30, 2008, consist of the following: Amount Accrued salaries Retirement Social security Workers' compensation $ 1,233,794 490,178 92,854 9,870 $ 1,826,696 Accrued salaries represent teachers' salaries earned during the 2007-08 school year which will be paid subsequent to June 30, 2008. Accrued retirement represents the public school employees' retirement board-contribution for the second quarter of calendar year 2008, including the portion pertaining to accrued salaries at June 30, 2008. Accrued social security represents the District's liability arising from accrued salaries at June 30, 2008. Note 9. Long-Term Debt During the fiscal year ended June 30, 2008, general long-term debt changed as follows: Balances July 1, 2007 Increase Decrease Balances June 30, 2008 Governmental Activities General Obligation Bonds - Series A of 2001 $ 8,325,000 $ - $ 8,325,000 $ - General Obligation Note - Series of 2003 9,455,000 - 9,455,000 - General Obligation Bonds - Series of 2004 15,415,000 - 5,000 15,410,000 General Obligation Bonds - Series of 2007 4,750,000 - - 4,750,000 General Obligation Bonds - Series of 2008 - 9,545,000 - 9,545,000 General Obligation Bonds - Series of 2008 - A - 2,250,000 - 2,250,000 General Obligation Bonds - Series of 2008 - AA - 6,990,000 - 6,990,000 37,945,000 18,785,000 17,785,000 38,945,000 Compensated absences payable 1,206,685 72,879 - 1,279,564 $ 39,151,685 $ 18,857,879 $ 17,785,000 $ 40,224,564 36 SHIPPENSBURG AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS Note 9. Long-Term Debt (Continued) General Obligation Bonds - Series A of 2001 - On October 15, 2001, the District issued General Obligation Bonds in the principal amount of $9,805,000. The proceeds were used to advance refund the District's outstanding General Obligation Bonds, Series of 1997 and to pay the costs and expenses of issuing the bonds. The bonds bear annual interest rates ranging from 2.40% to 4.20%. Interest is payable semi-annually on November 15 and May 15, and the bonds mature serially in amounts ranging from $5,000 to $1,660,000 through November 15, 2012. Total interest expense paid on the Series A of 2001 Bonds during the year ended June 30, 2008, was $309,083. These bonds were satisfied during fiscal year ended June 30, 2008. General Obligation Note -Series of 2003 - On December 30, 2003, the District obtained secured financing from the New Garden General Authority in the principal amount of $9,945,000. The proceeds were used to finance the cost of acquisition, construction or renovation of certain facilities and to pay the costs and expenses of issuing the note. Principal payments, commencing on November 1, 2005, are due annually, and interest is payable monthly, commencing on May 1, 2005, at a variable rate not to exceed 12.00%. Total interest expense paid on the Series of 2003 Note during the year ended June 30, 2008, was $370,692. This note was satisfied during fiscal year ended June 30, 2008. General Obligation Bonds -Series of 2004 - On October 1, 2004, the District issued General Obligation Bonds in the principal amount of $15,420,000. The proceeds were used to finance the cost of planning, designing, acquiring, constructing, furnishing and equipping (1) new elementary school building for fourth and fifth grades; (2) addition and improvements to James Burd Elementary School and Nancy Grayson Elementary School; and (3) to the extent of remaining funds, other buildings and facilities of the School District, and issuing and insuring the Bonds. The bonds bear annual interest rates ranging from 2.05% to 4.45%. Interest is payable semi-annually on November 15 and May 15, and the bonds mature serially in amounts ranging from $5,000 to $2,035,000 through November 15, 2020. Total interest expense paid on the Series of 2004 Bonds during the year ended June 30, 2008, was $633,561. General Obligation Bonds -Series of 2007 - On May 1, 2007, the District issued General Obligation Bonds in the principal amount of $4,750,000. The proceeds were used to finance the cost of planning, designing, acquiring, constructing, furnishing and equipping additions and improvements to James Burd Elementary School and Nancy Grayson Elementary School; and to the extent of remaining funds, other buildings and facilities of the School District, and issuing and insuring the Bonds. The bonds bear annual interest rates ranging from 3.60% to 4.15%. Interest is payable semi-annually on November 15 and May 15, and the bonds mature serially in amounts ranging from $150,000 to $330,000 through November 15, 2028. Total interest expense paid on the Series of 2007 Bonds during the year ended June 30, 2008, was $195,137. General Oblation Bonds -Series of 2008 - On April 1, 2008, the District issued General Obligation Bonds in the principal amount of $9,545,000. The proceeds were used to currently refund the District's General Obligation Note, Series of 2003 and the costs of issuing and insuring the Bonds. The bonds bear annual interest rates ranging from 2.60% to 4.10%. Interest is payable semi-annually on November 1 and May 1, and the bonds mature serially in amounts ranging from $270,000 to $630,000 through November 1, 2029. Total interest expense paid on the Series of 2008 Bonds during the year ended June 30, 2008, was $-0-. 37 SHIPPENSBURG AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS Note 9. Long-Term Debt (Continued) General Oblation Bonds - Series A 2008 - On June 1, 2008, the District issued General Obligation Bonds in the principal amount of $2,250,000. The proceeds were used to finance the cost of planning, designing, acquiring, constructing, furnishing and equipping additions and improvements to Shippensburg Area High School; and to the extent of remaining funds, other buildings and facilities of the School District, and issuing and insuring the Bonds. The bonds bear annual interest rates ranging from 2.40% to 4.00%. Interest is payable semi-annually on November 15 and May 15, and the bonds mature serially in amounts ranging from $65,000 to $170,000 through November 15, 2028. Total interest expense paid on the Series A of 2008 Bonds during the year ended June 30, 2008, was $-0-. General Obligation Bonds -Series AA of 2008 - On June 1, 2008, the District issued General Obligation Bonds in the principal amount of $6,990,000. The proceeds were used to currently refund the District's General Obligation Bonds, Series A of 2001 and the costs of issuing and insuring the Bonds. The economic gain on the refunding of the bonds was $122,876. The bonds bear annual interest rates ranging from 2.40% to 3.00%. Interest is payable semi-annually on November 15 and May 15, and the bonds mature serially in amounts ranging from $645,000 to $1,680,000 through November 15, 2012. Total interest expense paid on the Series AA of 2008 Bonds during the year ended June 30, 2008, was $-0-. The District is in compliance with all debt covenants of the outstanding bond issues. Those covenants include the following: District shall include the annual debt service in its budget for the fiscal year, shall appropriate these amounts from its general revenues, and shall punctually cause the payment of the principal and interest of each of the bonds. 38 SHIPPENSBURG AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS Note 9. Long-Term Debt (Continued) Maturities of the long-term debt issues are as follows: Yeaz Ending June 30, Governmental Activities Principal Interest Total 2009 $ 1,920,000 $ 1,428,547 $ 3,348,547 2010 2,140,000 1,350,306 3,490,306 2011 2,190,000 1,290,369 3,480,369 2012 2,255,000 1,232,316 3,487,316 2013 2,145,000 1,168,800 3,313,800 2014-2018 11,875,000 4,618,325 16,493,325 2019-2023 9,810,000 2,137,593 11,947,593 2024-2028 4,875,000 864,275 5,739,275 2029-2030 1,735,000 61,395 1,796,395 $ 38,945,000 $ 14,151,926 $ 53,096,926 Compensated Absences -Under the terms of the District's employment policies, employees are reimbursed for accrued vacation upon retirement or other termination of employment. The reimbursement rate is established by the employment contract and varies by employee classification. In addition, employees are granted sick days per school year and any unused sick days are permitted to be carried over to future years. Upon retirement from the District, employees are reimbursed for accumulated sick days equal to the number of unused days multiplied by an amount per the employment contract. The employees are also offered options regarding retirement payouts as prescribed in the contract if certain conditions are met. For the year ended June 30, 2008, benefits attributed to employees retiring during the 2007-08 year amounted to $61,683 for 12 participants. The total liability for accrued vacation, sick leave and retirement bonuses at June 30, 2008, has been reflected in the Statement of Net Assets and totals $1,279,564. Note 10. Post-Employment Benefits Under the Consolidated Omnibus Budget Reconciliation Act (COBRA), the District provides healthcare benefits to eligible former employees and their dependents. Requirements are outlined by the Federal Government for this coverage. The premium plus a 2% administrative fee is paid in full by the eligible participant. This program is offered for duration of up to 18 months or 36 months after an employee's termination date. At June 30, 2008, there were 4 participants covered under COBRA. 39 SHIPPENSBURG AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS Note 11. Defined-Benefit Pension Plan Plan Description: The District contributes to the statewide Public School Employees' Retirement System (the System), a governmental, cost-sharing, multiple-employer, defined-benefit plan administered by the System. In addition to regular retirement benefits, the System also provides for disability, legislatively-mandated ad hoc cost-of-living adjustments, and healthcare insurance-premium assistance to qualifying annuitants. Membership in the System is mandatory for substantially all full-time public school employees in the Commonwealth of Pennsylvania (Commonwealth). State statutes assign the authority to establish and amend benefit provisions of the Pennsylvania Public School Employees' Retirement Code to the Pennsylvania General Assembly (Act No. 96 of October 2, 1975, as amended), (24 Pa. C.S. 8101-8535). 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 Diane J. Wert, Office of Financial Management, Public School Employees' Retirement System, P.O. Box 125, Harrisburg, Pennsylvania, 17108-0125. This publication is also available on the PSERS website at www.psers.state.pa.us/publications/cafr/index.htm. Funding Policv: The contribution policy is established by the Public School Employees' Retirement Code and requires contributions by the active members, employers, and the Commonwealth. Contribution Rates: The current contribution rate for active members joining the System before July 22, 1983, is set by law at 5.25% or at 6.50% of the member's qualifying compensation. For active members joining the System on or after July 22, 1983, and who were active or inactive as of July 1, 2001, the rate of contribution is 6.25% or 7.50% of the member's qualifying compensation. Members who joined the System after June 30, 2001, contribute at 7.50%. For all new hires, the higher contribution rates began with service rendered on or after January 1, 2002. District Contributions: The District's required contributions are based upon an actuarial valuation. For the fiscal yeaz ended June 30, 2008, the District's rate of contribution was 7.13% of covered payroll. The 7.13% rate is composed of a pension contribution rate of 6.44% for pension benefits and 0.69% for healthcaze insurance-premium assistance. The District is required to pay the entire contribution and will be reimbursed by the Commonwealth in an amount equal to the Commonwealth's share as determined by the income-aid ratio (as defined in Act 29 of 1994), which is at least one-half of the total District's rate. The District's contributions to the Plan for the years ended June 30, 2008, 2007 and 2006, were $1,205,343, $1,049,064, and $751,041, respectively, and are equal to the required contributions for each year. 40 SHIPPENSBURG AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS Note 12. Participation in Risk Sharing Pool The District is a participant in arisk-sharing pool. to provide workers' compensation coverage. The expense for this coverage for the 2007-08 year was $53,290, comprised of aself-insured retention of $45,674 and a contribution to the Central Fund of $7,616. Actual claims during the year are first paid out of the self-insured retention. Claims that exceed the self-insured retention are satisfied by the Central Fund. The Central Fund maintains excess insurance to cover any claims that exceed $400,000 per accident. There are approximately 80 districts participating in the pool. If there is a deficiency in the pooled funds, each member is assessed a proportionate share of the deficiency. Upon withdrawal by a member from the pool, the terminating member has no rights to funds in the pool. Note 13. Risk Management The District is exposed to various risks of loss related to torts; theft of, damage to, or destruction of assets and errors or omissions. Significant losses are covered by commercial insurance for all major programs. For insured programs, there have been no significant reductions in settlement coverage. Settlement amounts have not exceeded insurance coverage for the current yeaz or the three prior years. Note 14. Subsequent Event Recent domestic and global economic disruptions and resultant uncertainty have generated unprecedented volatility in currency, commodity, credit and equity mazkets, culminating in failures of certain banking and financial-services firms and requiring governmental intervention to preserve other similar institutions. These recent events underscore the level of investment risk associated with the current economic environment, and accordingly, the values of assets and liabilities presented in the accompanying financial statements. Current mazket volatility precludes determinations of the temporary and/or permanent components of any adverse, neaz-term changes in those values. 41 SUPPLEMENTARY INFORMATION SHIPPENSBURG AREA SCHOOL DISTRICT GENERAL FUND -SCHEDULE OF REVENUES Year Ended June 30, 2008 Revenues Local sources Real estate taxes Current $ 15,088,920 Interun 80,905 Public utility tax 26,084 Payments in lieu of taxes 18,528 Current per capita taxes 679 - 52,057 511 52,046 Occupational privilege tax 75,919 Earned income tax 3,750,748 Real estate transfer taxes 479,184 Delinquent real estate taxes 939,991 Delinquent per capita taxes 679 2,486 511 2,486 Delinquent occupation tax 1,205 Interest 311,991 IDEA 603,756 Rentals 27,728 Tuition 9,260 Refunds and other miscellaneous revenue 293,406 Total local sources 21,816,700 State appropriations Basic instructional subsidy 7,715,594 Charter schools 46,435 Section 1305 and 1306 59,631 Homebound instruction 1,778 Migratory children 119 Special education 1,714,511 Transportation 675,976 (Continued) 42 SHIPPENSBURG AREA SCHOOL DISTRICT GENERAL FUND -SCHEDULE OF REVENUES (Continued) Year Ended June 30, 2008 Revenues (Continued) State appropriations (Continued) Rentals and sinking fund payments 1,302,496 Health services 68,993 Dual enrollment grant 7,438 Social security reimbursement 675,446 Retirement reimbursement 647,474 Accountability block grant 599,233 Classrooms for the Future grant 330,000 Extra grants 5 Total state appropriations 13,845,129 Federal appropriations Title I -Grants to Local Educational Agencies 633,704 Title II -Improving Teacher Quality 164,604 Title V -Innovative Education 2,968 Medical Assistance Program 81,844 Total Federal appropriations 883,120 Total revenues $ 36,544,949 43 SHIPPENSBURG AREA SCHOOL DISTRICT GENERAL FUND -SCHEDULE OF EXPENDITURES Year Ended June 30, 2008 Expenditures Instructional Regular programs Salaries $ 10,158,877 Employee benefits 3,339,862 Purchased services Professional and technical 9,142 Property 121,821 Other 783,878 Supplies 354,932 Property 363,063 Other objects 4,002 Total regular programs 15,135,577 Special programs Salaries 2,428,122 Employee benefits 912,100 Purchased services Professional and technical 1,592,660 Other 478,278 Supplies 52,319 Property 2,798 Total special programs 5,466,277 Vocational education programs Salaries 453,583 Employee benefits 119,324 Purchased services Property 669 Other 716,315 Supplies 15,355 Property 2,688 Other objects 160 Total vocational education programs (Continued) 1,308,094 44 SHIPPENSBURG AREA SCHOOL DISTRICT GENERAL FUND -SCHEDULE OF EXPENDITURES (Continued) Year Ended June 30, 2008 Expenditures (Continued) Instructional (Continued) Other instructional programs Salaries 124,518 Employee benefits 28,813 Purchased services Professional and technical 78,168 Property 25 Other 9,473 Supplies 1,643 Total other instructional programs 242,640 Adult education programs Salaries 2,661 Employee benefits 410 Supplies 1,321 Total adult education programs 4,392 Community college education program 1,403 Total instructional 22,158,383 Support Services Pupil personnel Salaries 788,755 Employee benefits 241,953 Purchased services Professional and technical 5,961 Property 30 Other 6,121 Supplies 22,750 Property 1,649 Other objects 1,844 Total pupil personnel 1,069,063 (Continued) 45 SHIPPENSBURG AREA SCHOOL DISTRICT GENERAL FUND -SCHEDULE OF EXPENDITURES (Continued) Year Ended June 30, 2008 Expenditures (Continued) Support Services (Continued) Instructional staff Salaries 505,763 Employee benefits 206,415 Purchased services Professional and technical 2,236 Property 73,570 Other 10,371 Supplies 228,156 Property 35,739 Other objects 6,504 Total instructional staff 1,068,754 Administration Salaries 1,339,122 Employee benefits 442,544 Purchased services Professional and technical 185,043 Property 1,756 Other 69,482 Supplies 20,137 Property 2,796 Other objects 18,142 Total administration 2,079,022 Pupil health Salaries 258,738 Employee benefits 100,835 Purchased services Professional and technical 18,189 Property 80 Supplies 7,319 Total pupil health 385,161 (Continued) 46 SHIPPENSBURG AREA SCHOOL DISTRICT GENERAL FUND -SCHEDULE OF EXPENDITURES (Continued) Year Ended June 30, 2008 Expenditures (Continued) Support Services (Continued) Business Salaries 214,43 8 Employee benefits 112,670 Purchased services Professional and technical 1,569 Property 255 Other 27,712 Supplies 1,663 Other objects 645 Total business 358,952 Operation and maintenance of plant services Salaries 706,497 Employee benefits 314,603 Purchased services Property 801,404 Other 140,688 Supplies 319,209 Property 19,923 Other objects 181 Total operation and maintenance of plant services 2,302,505 Student transportation services Purchased services Professional and technical 4,737 Other 1,386,898 Supplies 1,231 Other objects 20 Total student transportation services (Continued) 1,392,886 47 SHIPPENSBURG AREA SCHOOL DISTRICT GENERAL FUND -SCHEDULE OF EXPENDITURES (Continued) Year Ended June 30, 2008 Expenditures (Continued) Support Services (Continued) Central service Purchased services Professional and technical 32,726 Property 25,406 Supplies 26,328 Property 2,105 Other objects 250 Total central service Other support services Total support services Operation of Non-Instructional Services Student activities Salaries Employee benefits Purchased services Professional and technical Property Other Supplies Total student activities (Continued) 86,815 26,812 8,769,970 349,727 74,051 700 17,023 10,344 8,064 459,909 48 SHIPPENSBURG AREA SCHOOL DISTRICT GENERAL FUND -SCHEDULE OF EXPENDITURES (Continued) Year Ended June 30, 2008 Expenditures (Continued) Operation ofNon-Instructional Services (Continued) Community services Salaries 6,021 Employee benefits 931 Purchased services Supplies 5,235 Other objects 7,000 Total community services 19,187 Total operation of non-instructional services 479,096 Debt Service 3,099,523 Other Financing Sources Refund of prior years' receipts 289,894 Operating transfers out 182,360 Total other financing uses 472,254 Total expenditures $ 34,979,226 49 SHIPPENSBURG AREA SCHOOL DLSTRICT COMBINING BALANCE SHEET -NON-MAJOR GOVERNMENTAL FUNDS June 30, 2008 Special Revenue Total Non-Major Middle School Senior High Capital Governmental Athletic Athletic Reserve Funds ASSETS Cash $ 13,162 $ 11,862 $ 135,482 $ 160,506 LIABILITIES AND FUND BALANCES Liabilities Accounts payable Unearned revenue Total liabilities Fund Balances Reserved for $ - $ 356 $ 33,825 $ 34,181 - 1,491 - 1,491 - 1,847 33,825 35,672 Capital reserve - - 101,657 101,657 Athletic 13,162 10,015 - 23,177 Total fund balances 13,162 10,015 101,657 124,834 Total liabilities and fund balances $ 13,162 $ 11,862 $ 135,482 $ 160,506 50 SHIPPEN5BURG AREA SCHOOL DISTRICT COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES -NON-MAJOR GOVERNMENTAL FUNDS Year Ended June 30, 2008 Special Revenue Total Non-Major Middle School Senior High Capital Governmental Athletic Athletic Reserve Funds Revenues Local sources $ 14,632 $ 51,842 $ 301 $ 66,775 Expenditures Support services Operation of non-instructional services Total expenditures Deficiency of revenues over expenditures Other Financing Sources Operating transfers in Total other financing sources - - 108,170 108,170 48,261 168,667 8,625 225,553 48,261 168,667 116,795 333,723 (33,629) (116,825) (116,494) (266,948) 34,311 87,434 60,615 182,360 34,311 87,434 60,615 182,360 Net change in fund balances 682 (29,391) (55,879) (84,588) Fund Balances -July 1, 2007 12,480 39,406 157,536 209,422 Fund Balances -June 30, 2008 $ 13,162 $ 10,015 $ 101,657 $ 124,834 51 ® BOYF~ & BITTER Web Site: www.cpabr.com CERTIFIED PUBLIC ACCOUNTANTS AND CONSULTANTS INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENTAUDITINGSTANDARDS Board of School Directors Shippensburg Area School District Shippensburg, Pennsylvania We have audited the financial statements of Shippensburg Area School District as of and for the year ended June 30, 2008, and have issued our report thereon dated January 5, 2009. 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. Internal Control Over Financial Reporting In planning and performing our audit, we considered Shippensburg Area School District's internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the District's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the District's internal control over financial reporting. A control deficiency exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affects the entity's ability to initiate, authorize, record, process, or report financial data reliably in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement of the entity's financial statements that is more than inconsequential will not be prevented or detected by the entity's internal control. A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the fmancial statements will not be prevented or detected by the entity's internal control. Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and would not necessarily identify all deficiencies in internal control that might be significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined above. CAMP HILL CARLISLE CHAMBERSBURG LEWISTOw1V STATE COLLEGE An Independently Owned Member of the RSM McGladrey Neiwork Compliance and Other Matters As part of obtaining reasonable assurance about whether Shippensburg Area School District's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. This report is intended solely for the information and use of management, the Board of School Directors, Federal-awarding agencies and pass-through entities, and is not intended to be and should not be used by anyone other than those specified parties. W~~ Chambersburg, Pennsylvania January 5, 2009 53 BOYER & BITTER Web Site: www.cpabr.com CERTIFIED PUBLIC ACCOUNTANTS AND CONSULTANTS INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A-133 Board of School Directors Shippensburg Area School District Shippensburg, Pennsylvania Compliance We have audited the compliance of Shippensburg Area School District with the types of compliance requirements described in the U. S. Office of Management and Budget (OMB) Circular A-133, Compliance Supplement that are applicable to each of its major Federal programs for the year ended June 30, 2008. Shippensburg Area School District's major Federal programs are identified in the summary of auditor's results section of the accompanying Schedule of Findings and Questioned Costs. Compliance with the requirements of laws, regulations, contracts and grants applicable to each of its major Federal programs is the responsibility of the District's management. Our responsibility is to express an opinion on the District's compliance based on our audit. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circulaz A-133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major Federal program occurred. An audit includes examining, on a test basis, evidence about the District's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on the District's compliance with those requirements. In our opinion, Shippensburg Area School District complied, in all material respects, with the requirements referred to above that are applicable to each of its major Federal programs for the year ended June 30, 2008. CAMP HILL CARLISLE CHAMBERSBURG LEWISTOwN STATE COLLEGE An Independently Owned Member of the RSM McGladrey Network Internal Control Over Compliance The management of Shippensburg Area School District is responsible for establishing and maintaining effective internal control over compliance with requirements of laws, regulations, contracts and grants applicable to Federal programs. In planning and performing our audit, we considered the District's internal control over compliance with requirements that could have a direct and material effect on a major Federal program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance but, not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the District's internal control over compliance. A control deficiency in an entity's internal control over compliance exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect noncompliance with a type of compliance requirement of a Federal program on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affects the entity's ability to administer a Federal program such that there is more than a remote likelihood that noncompliance with a type of compliance requirement of a Federal program that is more than inconsequential will not be prevented or detected by the entity's internal control. A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that material noncompliance with a type of compliance requirement of a Federal program will not be prevented or detected by any entity's internal control. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and would not necessarily identify all deficiencies in internal control that might be significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above. This report is intended solely for the information and use of management, the Board of School Directors, Federal-awarding agencies and pass-through entities, and is not intended to be and should not be used by anyone other than those specified parties. ~~~ Chambersburg, Pennsylvania January 5, 2009 55 SHIPPENSBURG AREA SCHOOL DISTRICT Schedule of Findings and Questioned Costs Year Ended June 30, 2008 Section I -- Summary of Independent Auditor's Results Financial Statements Type of auditor's report issued: Unqualified Internal control over financial reporting: • Material weaknesses identified? • Significant deficiencies identified that are not considered to be material weaknesses? Yes X No Yes X None Reported Noncompliance material to financial statements noted? Federal Awards Internal control over major programs: • Material weaknesses identified? • Significant deficiencies identified that are not considered to be material weaknesses? Yes X No Yes X No Yes X None Reported Type of auditor's report issued on compliance for major programs: Unqualified • Any audit findings disclosed that are required to be reported in accordance with Section .510(a) of OMB Circular A-133? _ Yes X No 56 ` SHIPPENSBURG AREA SCHOOL DISTRICT Schedule of Findings and Questioned Costs Year Ended June 30, 2008 Section I -- Summary of Independent Auditor's Results (Continued) Identification of major programs: CFDA Numbers Name of Federal Program or Cluster 84.027 84.367 Special Education -Grants to States Title II -Improving Teacher Quality Dollar threshold used to distinguish between type A and type B programs $300,000 Auditee qualified as low-risk auditee? X Yes _ No Section II -- Financial Statement Findings A. Significant Deficiencies in Internal Control There were no findings relating to the financial statement audit required to be reported. B. Compliance Findings There were no findings relating to the financial statement audit required to be reported. Section III -Findings and Questioned Costs for Federal Awards A. Significant Deficiencies in Internal Control There were no fmdings relating to the Federal awards required to be reported in accordance with Section .510(a) of OMB Circular A-133. B. Compliance Findings There were no findings relating to the Federal awards required to be reported in accordance with Section .510(a) of OMB Circular A-133. 57 SHIPPENSBURG AREA SCHOOL DISTRICT SCHEDULE OF EXPENDTTURES OF FEDERAL AWARDS Year Ended June 30, 2008 Pas s- Federal Through Source CF.DA. Grantors Grant Code Number Number Period U. S. Department of Education Passed through the Pennsylvania Department of Education Title I -Grants to Local Educational Agencies I 84.010 013-080387 07-08 Title I - Grarrts to Local Educational Agencies I 84.010 013-070387 06-07 Academic Achievement Award I 84.010 077-070387 06-07 Title V -Innovative Education I 84.298 011-080387 07-08 Title V -Innovative Education I 84.298 011-070387 06-07 Title II -Improving Teacher Quality I 84.367 020-080387 07-08 Title II -Improving Teacher Quality I 84.367 020-070387 06-07 Passed through the Capital Area Intermediate Unit Consortium Special Education -Grants to States I 84.027 N/A 07-08 Special Education -Grants to States I 84.027 N/A 06-07 Total U. S. Department of Education (Continued) 58 Total Accrued Accrued Program Received (Deferred) (Deferred) or Annual (Refunded) in Revenue at Revenue Revenue at Award Fiscal Year 7/1/2007 Recognized ~ Expenditures 6/30/2008 $ 629,648 $ 405,124 $ - $ 519,402 $ 519,402 $ 114,278 $ 549,504 157,509 86,736 110,150 110,150 39,377 $ 4,152 4,152 - 4,152 4,152 - $ 3,131 2,907 - 2,968 2,968 61 $ 3,137 - - - - - $ 162,939 93,108 - 124,304 124,304 31,196 $ 160,011 57,039 16,739 40,300 40,300 - $ 603,756 416,208 - 603,756 603,756 187,548 $ 558,358 558,358 558,358 - - - 1,694,405 661,833 1,405,032 1,405,032 372,460 59 SHIPPENSBURG AREA SCHOOL DISTRICT SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS (Continued) Year Ended June 30, 2008 Pass- Federal Through Source C.F.D.A. Grantor's Grant Code Number Number Period U. S. Department of Agriculture Passed through the Pennsylvania Department of Education: National School Lunch Program I (F) 10.555 N/A 07-08 National School Lunch Program I (F) 10.555 N/A 06-07 National School Lunch Program I (S) N/A N/A 07-08 National School Lunch Program I (S) N/A N/A 06-07 Special Milk Program for Children Passed through the Pennsylvania Department of Agriculture: Food Donation (a) Total U. S. Department of Agriculture Total Expenditures of Federal Awards Source Codes: I (F) 10.556 N/A 06-07 I (F) 10.550 N/A 07-08 Legends: D -Direct Funding (a) Donated commodities valued at local market values I -Indirect Funding (b) Total amount of commodities received from (F) -Federal Share Department of Agriculture (S) -State Share (c) Inventories at July 1, 2007 (d) Total amount of commodities used (e) Inventories at June 30, 2008 See Notes to Schedule of Expenditures of Federal Awards. 60 { +. Total Accrued Accrued Program Received (Deferred) (Deferred) or Annual (Refunded) Revenue at Revenue Revenue at Award Fiscal Year 7/1/2007 Recognized Expenditures 6/30/2008 N/A 264,726 - 305,073 305,073 40,347 N/A 39,390 39,390 - - - N/A 28,641 - 33,029 33,029 4,388 N/A 4,415 4,415 - - - N/A ~ N/A 561 561 - (b) 60,675 (c) (12,031) 64,108 (d) 64,108 (e) (8,598) 398,408 32,335 402,210 402,210 36,137 $ 2,092,813 $ 694,168 $ 1,807,242 $ 1,807,242 $ 408,597 Test of 25% Rule: Total Expenditures Less State Expenditures Total Federal Expenditures Programs selected for testing as major programs: Title II -Improving Teacher Quality Speci al Education -Grants to States $ 1,807,242 33,029 $ 1,774,213 $ 164,604 603,756 $ 768,360 / 1,774,213 = 43.31% 61 1 SHIPPENSBURG AREA SCHOOL DISTRICT NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS Note 1. Significant Accounting Policies The accompanying Schedule of Expenditures of Federal Awards is a summary of the activity of the District's Federal award programs and presents transactions that would be included in the fmancial statements of the District presented on the accrual basis of accounting, as contemplated by accounting principles generally accepted in the United States of America. Note 2. Special Education -Grants to States Special Education -Grants to States has been audited in accordance with OMB Circular A-133. Note 3. Title II -Improving Teacher Quality Title II -Improving Teacher Quality has been audited in accordance with OMB Circular A-133. 62 SIIIPPENSBURG AREA SCHOOL DISTRICT SUMMARY SCHEDULE OF PRIOR YEAR'S AUDIT FINDINGS Year Ended June 30, 2008 There were no audit findings for the year ended June 30, 2007. 63 C . ~l J r„ ~ ~ ~ ~ ~Y cN.`a 4~ ~ T ._.w.' ' ._~ '~ ~~ ' ~~ 7~ ~ .~ w ~ ~; ~ t~tl v ~, N # ~.; ""~. ~ "~