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HomeMy WebLinkAbout09-8678OFt - 8 x'78 v; L eM MECHANICSBURG AREA SCHOOL DISTRICT FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2009 TABLE OF CONTENTS Page Number INDEPENDENT AUDITORS' REPORT IAR - 1 to IAR - 2 MANAGEMENT'S DISCUSSION AND ANALYSIS MDA - 1 to MDA - 11 BASIC FINANCIAL STATEMENTS District-wide financial statements Statement of net assets FS - 1 Statement of activities FS - 2 Fund financial statements Balance sheet - governmental funds FS - 3 Reconciliation of the governmental funds balance sheet to the statement of net assets FS-4 Statement of revenues, expenditures, and changes in fund balances - governmental funds FS - 5 Reconciliation of the governmental funds statement of revenues, expenditures, and changes in fund balance to the statement of activities FS - 6 Statement of net assets - proprietary funds FS - 7 Statement of revenues, expenses, and changes in net assets - proprietary funds FS - 8 Statement of cash flows - proprietary funds FS - 9 Statement of net assets - fiduciary funds FS - 10 Statement of changes in net assets - fiduciary funds FS- 11 NOTES TO FINANCIAL STATEMENTS FS - 12 to FS - 32 OTHER REQUIRED INFORMATION Budgetary comparison information - general fund ORI - 1 Other post employment benefit plans ORI - 2 SUPPLEMENTARY INFORMATION SI - 1 to SI - 4 atilea Greenawalt & Company, P.C. CERTIFIED PUBLIC ACCOUNTANTS Since 1955 INDEPENDENT AUDITORS' REPORT Board of School Directors Mechanicsburg Area School District Mechanicsburg, Pennsylvania James E. Lyons Howard R. Greenawalt Deborah J. Kelly Scott J. Christ Creedon R. Hoffman We have audited the accompanying financial statements of the governmental activities, the business-type activities, the aggregate discretely presented component unit, each major fund, and the fiduciary funds of Mechanicsburg Area School District as of and for the year ended June 30, 2009, which collectively comprise the District's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the District's management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in 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 financial position of the governmental activities, the business-type activities, the aggregate discretely presented component unit, each major fund, and the fiduciary funds of Mechanicsburg Area School District, as of June 30, 2009, and the respective changes in financial position, and, where applicable, cash flows thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued our report dated November 24, 2009 on our consideration of Mechanicsburg Area School District's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. IAR - 1 400 West Main Street • Mechanicsburg, PA 17055 9 717.766.4763 • Fax 717.766.2731 62 West Pomfret Street . Carlisle, PA 17013 * 717.243.4922 • Fax 717.258.9372 www.greenawalt.cc Board of School Directors Mechanicsburg Area School District Mechanicsburg, Pennsylvania Management's discussion and analysis on pages MDA - 1 through MDA - 11 and other required information on pages OR] - 1 and ORI - 2 are not a required part of the basic financial statements but are supplementary information required by accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it. Our audit was conducted for the purpose of forming an opinion on the financial statements taken as a whole. The combining schedules on pages SI - 1 through SI - 4 are for purposes of additional analysis and are not a required part of the financial statements of Mechanicsburg Area School District. Such information has been subjected to the auditing procedures applied in the audit of the financial statements and, in our opinion, is fairly presented in all material respects in relation to the financial statements taken as a whole. JEENAWALT GR& COMPA Y, P.C. November 24, 2009 Mechanicsburg, Pennsylvania IAR-2 MECHANICSBURG AREA SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 3 0, 2009 The management of the Mechanicsburg Area School District is pleased to present the following discussion and analysis of the District's financial position at June 30, 2009, 2008, and 2007. It provides an overview of our financial performance between fiscal years ended June 30, 2009 and 2008, in accordance with governmental reporting requirements. The purpose of this discussion is to provide a narrative summary of the financial position and activities of the District in order to enhance the reader's understanding of the District's basic financial statements. The District is required to present comparative financial information between the current year and the prior year in its Management's Discussion and Analysis (MD&A) as mandated by the Governmental Accounting Standards Board (GASB) Statement No. 34 Basic Financial Statements - and Management's Discussion and Analysis - for State and Local Governments. This report contains such comparative financial information. The District has elected not to include the financial information of its discretely presented component unit, The Wildcat Foundation, in its Management Discussion and Analysis. The separate audited financial statements for the Foundation are available by contacting the District office. FINANCIAL HIGHLIGHTS The School Board adopted the 2008-2009 general fund budget with a planned deficit of $638,281 for one- time expenses for curriculum materials and equipment. The actual 2008-2009 fiscal year results increased fund balance by $1,790,620. Expenditures were under budget by $2,200,836 and revenue exceeded budget by $183,065 or .4%. This year the school district received $885,294 from the PA Property Tax Relief Fund. This amount was used to provide property tax reductions to each qualified homeowner in the amount of $127.89. The ending fund balance at June 30, 2009 is $9,989,869 which is comprised of $5,505,378 reserved or designated for future medical insurance claims and future pension costs and $4,484,491 which is undesignated. The undesignated fund balance represents 9.5% of expenditures and transfers to other funds. OVERVIEW OF THE FINANCIAL STATEMENTS These financial statements consist of three sections - Management's Discussion and Analysis (this section), the basic financial statements, and other required supplementary information. The first two statements of the basic financial statements are government-wide financial statements. These statements on pages FS-1 and FS-2 consist of the Statement of Net Assets and the Statement of Activities. The government-wide financial statements provide both short-term and long-term information about the District's overall financial status. MDA - 1 MECHANICSBURG AREA SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30, 2009 The remaining basic financial statements consist of fund financial statements. These statements focus on individual funds of the District and provide a more detailed presentation of the District's operations. The governmental funds statements on pages FS-3 and FS-5 present how general District services are financed in the short-term as well as what remains for future spending. The proprietary fund statements on pages FS-7 through FS-9 present both short-term and long-term information about the activities that the District operates similar to a business (the Food Service Fund). The basic financial statements also include notes on pages FS-12 through FS-32 that provide a more detailed explanation of some of the information in the financial statements. Following the basic financial statements is other required information on pages ORI-1 and ORI-2 that consists of the District's budgetary comparison and other post employment benefit plans. Page ORI-2 is a new statement required by GASB 45. Other supplementary information on pages SI-1 through SI-4 presenting combining schedules for additional analysis. Government-wide Statements Report the District as a Whole The government-wide statements report financial information about the District as a whole using accounting methods similar to the accounting used by private-sector companies. The Statement of Net Assets includes all of the District's assets and liabilities utilizing the full accrual basis of accounting. The Statement of Activities accounts for all of the District's revenues and expenses, regardless of when cash is received or paid. These two government-wide statements report the District's net assets and changes in them. The District's net assets represent the difference between the District's assets and liabilities. The District's net assets are one way to measure the District's financial position, or financial health, over time. Increases or decreases in the District's net assets are one indicator of whether its financial health is improving or deteriorating, respectively. To assess the overall health of the District, non-financial factors must also be considered, such as changes in the District's property tax base and the performance of the students. The government-wide financial statements of the District are divided into two categories: • Governmental activities - All of the District's basic services are included here, such as instruction, administration and community services. Real estate and earned income taxes, and state and federal subsidies and grants finance most of these activities. • Business-type activities - The District operates a food service operation and charges fees to staff, students and visitors to help it cover the costs of the food service operation. MDA-2 MECHANICSBURG AREA SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30, 2009 Fund Financial Statements The District's fund financial statements provide detailed information about the most significant funds, or major funds - not the District as a whole. Some funds are required to be reported as major funds. • Governmental funds - Most of the District's activities are reported in governmental funds, and focus on changes in financial resources, rather than upon net income determination. These funds are reported using the modified accrual basis of accounting, which measures cash and all financial assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term view of the District's operations and the services it provides. Governmental fund information helps the reader determine whether there are more or fewer financial resources that can be spent in the near future to finance the District's programs. The relationship (or differences) between governmental activities (reported in the Statements of Net Assets and the Statement of Activities) and governmental funds is reconciled in the financial statements on pages FS-4 and FS-6. • Proprietary funds - These funds are used to account for the District activities that are similar to business operations in the private sector. When the District charges customers for services it provides, these services are generally reported in proprietary funds. The Food Service Fund is the District's proprietary fund and is the same as the business-type activities reported in the government-wide statements. • Fiduciary funds - The District is the trustee or agent for individuals, private organizations and/or governmental units as shown on pages FS-10 and FS-11. FINANCIAL ANALYSIS OF THE DISTRICT AS A WHOLE Net Assets The District's total net assets were $24,209,983 at June 30, 2009 which includes $23,291,406 in Governmental Activities and $918,577 in Business-type Activities. This shows an increase of $2,828,609 from total net assets at June 30, 2008, which included an increase of $2,813,873 in Governmental Activities and an increase of $14,736 in Business-type Activities. MDA - 3 MECHANICSBURG AREA SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30, 2009 Statement of Net Assets 2008-2009 Governmental Activities Business-type Activities Current and other assets Capital assets Total assets Current and other liabilities Long-term liabilities Total liabilities Capital assets (net of related debt) Restricted for capital projects Unrestricted Total net assets Total liabilities and net assets Statement of Net Assets 2007-2008 Current and other assets Capital assets Total assets Current and other liabilities Long-term liabilities Total liabilities Capital assets (net of related debt) Restricted for capital projects Unrestricted Total net assets Total liabilities and net assets $ 17,583,362 68,709,216 $ 86,292,578 $ 492,359 477,970 $ 970,329 $ 4,044,172 $ 51,752 58,957,000 - 63,001,172 51,752 10,483,926 477,970 12,807,480 440,607 23,291,406 918,577 $ 86,292,578 $ 970,329 Governmental Business-type Activities Activities $ 18,521,940 68,839,547 $ 87,361,487 $ 405,801 538,878 $ 944,679 $ 5,072,083 61,811,871 66,883,954 7,274,553 145,657 13,057,323 20,477,533 $ 87,361,487 $ 27,482 13,356 40,838 538,878 364,963 903,841 $ 944,679 Total School District $ 18,075,721 69,187,186 $ 87,262,907 $ 4,095,924 58,957,000 63,052,924 10,961,896 13,248,087 24,209,983 $ 87,262,907 Total School District $ 18,927,741 69,378,425 $ 88,306,166 $ 5,099,565 61,825,227 66,924,792 7,813,431 145,657 13,422,286 21,381,374 $ 88,306,166 MDA-4 MECHANICSBURG AREA SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30, 2009 Statement of Net Assets 2006-2007 Governmental Activities Business-type Activities Total School District Current and other assets $ 16,859,210 Capital assets 71,017,278 Total assets $ 87,876,488 Current and other liabilities $ 5,351,868 Long-term liabilities 64,450,085 Total liabilities 69,801,953 Capital assets (net of related debt) 3,152,395 Restricted for capital projects 2,909,218 Unrestricted 12,012,922 Total net assets 18,074,535 Total liabilities and net assets $ 87,876,488 Statement of Activities $ 422,950 605,688 $ 1,028,638 $ 28,474 6,379 34,853 605,688 388,097 993,785 $ 1,028,638 $ 17,282,160 71,622,966 $ 88,905,126 $ 5,380,342 64,456,464 69,836,806 3,758,083 2,909,218 12,401,019 19,068,320 $ 88,905,126 The results of this year's operations as a whole are reported in the Statement of Activities. Direct expenses are listed by programs, then offset by program revenues to determine net (expense) revenue and changes in net assets. General revenues, such as taxes, state general subsidies, and investment earnings are then applied prior to transfers, and special items, to determine the change in net assets. For the 2008-2009 fiscal year, the change in net assets for governmental activities was an increase of $2,813,873 and an increase of $14,736 for business-type activities, for a net total increase of $2,828,609 as reflected in the following chart. For the 2007-2008 fiscal year, the change in net assets for governmental activities was an increase of $2,402,998 and a decrease of $89,944 for business-type activities for a net total increase of $2,313,054 as reflected in the chart below: MDA - 5 MECHANICSBURG AREA SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30, 2009 Statement of Activities 2008-2009 Governmental Activities Business-type Activities Total School District Program revenues Charges for services Operating grants and contributions Capital grants and contributions General revenues Taxes Other local revenue State general subsidies Investment earnings Total revenues Direct expenses Excess (deficiency) before transfers Transfers between activities Change in net assets Statement of Activities 2007-2008 Program revenues Charges for services Operating grants and contributions Capital grants and contributions General revenues Taxes Other local revenue State general subsidies Investment earnings Total revenues Direct expenses Excess (deficiency) before transfers $ 1,019,813 5,219,506 787,845 35,101,544 6,340,245 433,963 48,902,916 46,624,673 2,278,243 535,630 $ 2,813,873 Governmental Activities $ 882,664 5,133,660 675,968 34,557,334 5,158,864 968,329 47,376,819 44,796,503 2,580,316 $ 1,109,438 664,238 1,990 6,106 1,781,772 $ 2,129,251 5,883,744 787,845 35,101,544 1,990 6,340,245 440,069 50,684,688 1,941,116 48,565,789 (159,344) 2,118,899 174,080 $ 14,736 Business-type Activities $ 1,029,090 602,172 1,296 18,025 1,650,583 1,917,845 (267,262) Transfers between activities (177,318) 177,318 Change in net assets $ 2,402,998 $ (89,944) MDA - 6 709,710 $ 2,828,609 Total School District $ 1,911,754 5,735,832 675,968 34,557,334 1,296 5,158,864 986,354 49,027,402 46,714,348 2,313,054 2,313,054 MECHANICSBURG AREA SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30, 2009 Local Sources Direct expenses represent the actual cost of providing the services while the net cost represents the amount of cost that is not recovered through program revenues, meaning user charges, grants and contributions. The net cost of services must be recovered through general revenue, primarily taxes and state subsidies. Amounts not recovered will reduce funds available for future years. Local Sources 2008-2009 Governmental Activities Instruction Instructional student support Administrative and financial support Operation and maintenance of plant Pupil transportation Student activities Community services Interest on long-term debt Total governmental activities Direct Expenses Program Revenues $ 4,582,189 300,711 204,232 101,472 509,517 136,810 404,388 787,845 $ 7,027,164 Net Cost $ 24,051,168 4,205,268 3,570,832 4,160,966 936,281 924,692 201,215 1,547,087 39,597,509 $ 28,633,357 4,505,979 3,775,064 4,262,438 1,445,798 1,061,502 605,603 2,334,932 $ 46,624,673 Transfers out and special items State general subsidies revenues Total needs from taxes and other local sources Direct Expenses Business-type Activities Food services $ 1,941,116 Program Revenues $ 1,773,676 Transfers received, special items and investment earnings Total needs from taxes and other local sources (535,630) (6,340,245) $ 32,721,634 Net Cost $ 167,440 (182,176) $ (14,736) MDA - 7 MECHANICSBURG AREA SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30, 2009 Local Sources 2007-2008 Governmental Activities Direct Expenses Instruction $ 27,720,954 Instructional student support 4,214,046 Administrative and financial support 3,353,908 Operation and maintenance of plant 4,Q89,658 Pupil transportation 1,483,680 Student activities 959,082 Community services 550,245 Interest on long-term debt 2,424,930 Total governmental activities $ 44,796,503 Transfers out and special items State general subsidies revenues Total needs from taxes and other local sources Direct Expenses Business-type Activities Food services $ 1,917,845 Transfers received, special items and investment earnings Total needs from taxes and other local sources The District Funds Program Net Revenues Cost $ 4,433,965 338,553 138,013 97,872 485,138 140,903 381,880 675,968 $ 6,692,292 Program Revenues $ 1,631,262 $ 23,286,989 3,875,493 3,215,895 3,991,786 998,542 818,179 168,365 1,748,962 38,104,211 177,318 (5,158,864) $ 33,122,665 Net Cost $ 286,583 (196,639) $ 89,944 At June 30, 2009, the District governmental funds reported a combined fund balance of $13,809,061, which is a decrease of $343,888 from June 30, 2008. The information below compares the governmental funds fund balances for June 30, 2009, 2008 and 2007. MDA - 8 MECHANICSBURG AREA SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 3 0, 2009 2007-2008 2007 2008 2009 Change %Change 2008-2009 Change %Change General Fund - unrestricted $ 8,899,731 $ 6,413,871 $ 4,484,491 $ (2,485,860) -27.9% $ (1,929,380) -30.1% General Fund - designated/reserved 1,722,736 1,785,378 5,505,378 62,642 3.6% 3,720,000 208.4% Capital Reserve Fund - unrestricted 1,518,126 5,038,654 2,965,847 3,520,528 231.9% (2,072,807) -41.1% Athletic Fund - unrestricted 175 4,289 (3,393) 4,114 2350.9% (7,682) -179.1% Construction Fund - restricted 2,909,218 145,657 - (2,763,561) -95.0% (145,657) -100.0% Debt Service Fund - designated 681,637 765,100 856,738 83,463 12.2% 91,638 12.0% Total governmental funds $ 15,731,623 $ 14,152,949 $ 13,809,061 $ (1,578,674) -10.0% $ (343,888) -2.4% Total unrestricted $ 10,418,032 $ 11,456,814 $ 7,446,945 $ 1,038,782 10.0% $ (4,009,869) -35.0% Total restricted/designated 5,313,591 2,696,135 6,362,116 (2,617,456) -49.3% 3,665,981 136.0% Total governmental funds $ 15,731,623 $ 14,152,949 $ 13,809,061 $ (1,578,674) -10.0% $ (343,888) -2.4% Governmental Funds - Reconciliation The General Fund Balance increase of $1,790,620 was due to favorable variances on expenditures. Revenue was essentially at budget for 2008-09. The Capital Reserve Fund decrease of $2,072,807 was due to payments for capital projects. The Construction Fund decrease of $145,657 was due to the completion of construction projects. The Debt Service Fund increase of $91,638 was due to favorable interest rates on a variable rate bond issue. General Fund Budget A General Fund budget is adopted each year in accordance with the Pennsylvania School Code. The revised budget reflects budget transfers as approved by the Board. The District applies for State and Federal grants each year. Certain grants may not be anticipated during the budgeting process and must be added to the budget during the fiscal year. In addition, the grants that are anticipated during the budgeting process are based on estimates. The budget must then be modified based on the actual grant award. MDA-9 MECHANICSBURG AREA SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30, 2009 June 30, 2009 Budget Total revenues $ 48,583,259 Total expenditures 43,074,897 Excess revenues (expenditures) 5,508,362 Other financing sources (uses) (6,146,643) Net change in fund balance $ (638,281) June 30, 2008 Budget Total revenues $ 45,431,798 Total expenditures 40,389,383 Excess revenues (expenditures) 5,042,415 Other financing sources (uses) (7,315,077) Net change in fund balance $ (2,272,662) CAPITAL ASSETS Actual Variance $ 48,766,324 40,874,061 $ 183,065 2,200,836 7,892,263 (6,101,643) $ 1,790,620 Actual $ 47,129,794 38,757,936 8,371,858 (10,795,076) $ (2,423,218) 2,383,901 45,000 $ 2,428,901 Variance $ 1,697,996 1,631,447 3,329,443 (3,479,999) $ (150,556) At June 30, 2009, the District had $67,737,158 in Governmental activities capital assets, which represents a net increase after depreciation of $125,278. Capital assets (net of depreciation) Governmental activities Land Construction in progress Land improvements Buildings and improvements Furniture and equipment Library books Total governmental capital assets Business-type activities Furniture and equipment 2007-2008 2008-2009 2007 2008 2009 Change Change $ 605,983 $ 605,983 $ 605,983 $ - $ - 1,198,342 957,103 22,675 (241,239) (934,428) 2,059,717 1,923,848 3,017,445 (135,869) 1,093,597 60,592,308 62,469,056 62,396,446 1,876,748 (72,610) 1,522,513 1,553,014 1,575,463 30,501 22,449 72,574 102,876 119,146 30,302 16,270 $ 66,051,437 $ 67,611,880 $ 67,737,158 $ 1,560,443 $ 125,278 $ 605,688 $ 538,878 $ 477,970 $ (66,810) $ (60,908) MDA - 10 MECHANICSBURG AREA SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30, 2009 LONG-TERM LIABILITIES Bonds payable at June 30, 2007, 2008 and 2009 were $63,990,000, $61,305,000 and $58,260,000 respectively. Scheduled payments of principal made during the year to the bondholders were $3,060,000. The amount of bond principal due within one year is $3,110,000. The Series of 2001 and 2004 bond issues were refinanced in March 2009 resulting in a net savings of $423,465. Compensated absences decreased during the year from an entity-wide perspective from $599,567 to $598,712 at June 30, 2009. Compensated absences increased from June 30, 2007 to June 30, 2008 from an entity-wide perspective from $553,811 to $599,567. Recording for other post employment benefits began in 2008-2009. The liability at June 30, 2009 from an entity-wide perspective was $152,265. NEXT YEAR'S BUDGET AND ECONOMIC FACTORS Total revenue Total expenditures Excess revenues (expenditures) before transfers Transfers Net change in fund balance Budget Budget 2009-2010 2008-2009 Change $ 50,351,611 $ 48,583,259 $ 1,768,352 44,797,993 43,496,973 (1,301,020) 5,553,618 5,086,286 467,332 (6,756,257) (5,724,567) (1,031,690) $ (1,202,639) $ (638,281) $ (564,358) The new budget for 2009-2010 represents an increase in total expenditures of 2.99%. This increase is due to contracted salary increases, contracted education services, and fuel and operational costs. The 2009-2010 budget increased the real estate tax rate to 14.29 mills. The District plans to reduce its fund balance by $1,202,639 to offset the planned budget deficit, one million dollars of this amount reflects a transfer to the Capital Reserve Fund to partially finance a planned construction project. CONTACTING THE DISTRICT FINANCIAL MANAGEMENT The District's financial report is intended to provide the readers with a general overview of the District's finances and to show the Board's accountability for the funds it receives. If you have questions about this report or wish to request additional financial information, please contact the district office of Mechanicsburg Area School District, 100 East Elmwood Avenue, Mechanicsburg, PA 17055, (717) 691-4500. MDA - 11 _ CO . . 0 0 . 0 . . co N N N 0 . . .? . . co 0 T N (0 O O co N c O O O O rn ? 0 ? ( O C ) i O ? 0 0 0 co ? c Y Cl) M O co 00 N co W) N O 0 O O O co 0 L c M LO co M 0) co a7 r r to ti O r E .- O r U -M ' v01l-(0 ' ' 00000 I- a)vITIT M 000 v (D ' 11- M ti vIT IV 0 co O LO K) I- O ? 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G .r N ?- F- V c c o a o a d d .• 0 5 (D ur c o Co " En ° J O Z - x o T U C w s N U > N U a U- Q Z Cc r- tU N O O $ Co ' $ t6 O N r M 0 CL 03 cr Q O T ? G c ca +r d 'a ? E O r ?i - - X O N co N to G L -0 c IS d o tb ~ W N w 42 N t >, N W E o V N O O? A 0 C O C N d L y° Z tn 0> w 4 , 't N y N C" C c`6 G N W a ;4 y C w r_ (D 0 X A @ N > N C Q ¢ L O N O cA N N ' .. y N r .. C N X C t6 a L A m ,O Z3 > w CJL. r CD 4) co co G) CO 0) ca O C °. G p c m ' O. 0 0 O N w C O _0 5- O a o) ME o N E F 41 > o_ Co c ? G a Q) a? °' W o d o 0 to 46 vi o ° E c N m> Q) a a N u' x p t° m c v N W m o(D N O 0 a N c o 07 N 'L O C G O (n d> CL N .0 o Q 0 O N N N ° 0 0 0 E 0 O > a a Z N O N E N C - N ri a? a x N m m w E to co E f6 ? io ~ % C a 0- w t Y, X 0 a) 0 a) O a) t l) CL c t! m ri W a N a c d o L o (D c y c ° a i t 1S > > A N N• _. S C° U C 7 w E .?+ m A 0 7 0 U Cl O 6 O to t0 a 67 N O . E y t!/ C a O c N V C t tn CO cn IS a) o (D !a E L N T ' d C ate- w N N •Q C >' N U t(?? E Co d y t= G C O C N N > tb 0 0 tU o 7 U) O tU 0 tll N N 7 tU tU E j • 'YS n O ,cY4 N O . tll 7 , is V) „ O E N IM D. 0.. W E w E r A -' O N C V N O O G tU a 2 a a O o co a C >' N CO N Q t71 T a E a s d E ° c n U m ° ;a 1O V i a L c o X cm > co m d c d on a U ? to u, r ? o o Q. MECHANICSBURG AREA SCHOOL DISTRICT STATEMENT OF NET ASSETS - PROPRIETARY FUNDS JUNE 30, 2009 Assets Cash and cash equivalents Accounts receivable Inventories Total current assets Furniture and equipment (net of accumulated depreciation) Total assets Liabilities Current liabilities Deferred revenues Accounts payable Compensated absences Total current liabilities Net assets Invested in capital assets (net of related debt) Unrestricted Total net assets Total liabilities and net assets Food Service $ 466,809 1,044 24,506 492,359 477,970 $ 970,329 $ 27,393 5,092 19,267 51,752 477,970 440,607 918,577 $ 970,329 The accompanying notes are an integral part of these financial statements. FS-7 MECHANICSBURG AREA SCHOOL DISTRICT STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS - PROPRIETARY FUNDS FOR THE YEAR ENDED JUNE 30, 2009 Operating revenues Food service revenue Charges for services Other operating revenues Total operating revenues Operating expenses Salaries Employee benefits Purchased property service Other purchased service Food and milk Other supplies Depreciation Total operating expenses Operating income (loss) Nonoperating revenues (expenses) Earnings on investments State sources - commodities State sources - social security and retirement subsidies State sources - meal subsidies Federal sources - meal and other subsidies Total nonoperating revenues Loss before transfers Transfers from other funds Change in net assets Net assets - beginning Net assets - ending Food Service $ 1,081,885 27,553 1,990 1,111,428 563,114 224,512 138,416 856 869,018 83,368 61,832 1,941,116 (829,688) 6,106 90,687 34,699 72,052 466,800 670,344 (159,344) 174,080 14,736 903,841 $ 918,577 The accompanying notes are an integral part of these financial statements. FS-8 MECHANICSBURG AREA SCHOOL DISTRICT STATEMENT OF CASH FLOWS - PROPRIETARY FUNDS FOR THE YEAR ENDED JUNE 30, 2009 Food Service Operating activities Cash received from users $ 1,113,558 Cash payments to employees for services (752,909) Cash payments to suppliers for goods and services (776,185) Cash payments for other operating expenses (115,193) Net cash provided by (used for) operating activities (530,729) Non-capital financing activities State sources 107,524 Federal sources 471,425 Net cash provided by (used for) non-capital financing activities 578,949 Capital and related financing activities Cash payments for equipment (924) Net cash provided by (used for) capital and related financing activities (924) Investing activities Earnings on investments 6,106 Net cash provided by (used for) investing activities 6,106 Net increase (decrease) in cash and cash equivalents 53,402 Cash and cash equivalents - beginning 413,407 Cash and cash equivalents - ending $ 466,809 Reconciliation of operating income (loss) to net cash used in operating activities Operating income (loss) $ (829,688) Adjustments to reconcile operating income (loss) to net cash provided by (used for) operating activities Depreciation 61,832 Donated commodities 90,687 Contribution of General Fund 174,080 Net change in other assets and other liabilities Accounts receivable (845) Inventories (1,249) Due to/from other funds (36,459) Deferred revenue 2,975 Accounts payable 2,027 Compensated absences 5,911 Total adjustments 298,959 Net cash provided by (used for) operating activities $ (530,729) The accompanying notes are an integral part of these financial statements. FS-9 ? Z 0 Q 4? V W O ? N N W N M QQZ Z? .7 W tD O Q W Q I,V N N CD CO p N 05 C O Y r- tD r Lc_ CO r .7 Q , d? N c0 0 N C t0 0 O h- C co ka M r W LO M CO t A O? ? m U G M M N <[ 6AP c0 N N ~ ' 0 l N d r a tf? CAP G N td O ? N ? 7 N N ? N tb V ? Co fl) co U ,cY; U Q 4 r- c0 r M r 07 6y a M EF? M N t- I?i r N N O r N .J N N t4 G O t6 N (D b a?+ U ? y N N [? (6 Z a r N LL y N im c c N N r O a (b G tO6 N t6 N O O MECHANICSBURG AREA SCHOOL DISTRICT STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS - FIDUCIARY FUNDS JUNE 30, 2009 Additions Investment earnings Gifts and contributions Total additions Deductions Scholarships awarded Change in net assets Net assets, beginning Net assets, ending Private Purpose Trust $ 1,970 43,706 45,676 32,844 12,832 134,404 $ 147,236 The accompanying notes are an integral part of these financial statements. FS-11 MECHANICSBURG AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2009 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Mechanicsburg Area School District is the level of government which has oversight responsibility and control over activities related to public school education. The report includes services provided by the District to residents within the boundaries of the Cumberland County municipalities of Upper Allen Township, Shiremanstown and Mechanicsburg Boroughs. Services provided include a comprehensive curriculum for primary and secondary education as well as special education and vocational education programs. The District receives revenue from local, state and federal sources and must comply with the requirements of these funding sources. The financial statements of Mechanicsburg Area School District have been prepared in accordance with generally accepted accounting principles as applied to governmental units. The Governmental Accounting Standards Board (GASB) is the authoritative standard-setting body for the establishment of governmental accounting and financial reporting principles. Accounting guidance is also provided through the Comptroller's office for Pennsylvania Department of Education. The more significant of these accounting policies are as follows: Reporting entity Governmental Accounting Standards Board Statement No. 39 "Determining Whether Certain Organizations are Component Units" (an amendment of Statement No. 14), established the criteria for determining the activities, organizations and functions of government to be included in the financial statement of the reporting entity. In evaluating the District as a reporting entity, management has addressed all potential component units which may or may not fall within the school's financial accountability. The criteria used to evaluate component units for possible inclusion as part of the District's reporting entity are: • Economic resources received or held by the separate organization are entirely for the direct benefit of the District or its constituents. • The District is entitled to, or has the ability to access a majority of the economic resources received or held by the separate organization. • The economic resources received or held by an individual organization that the District is entitled to (or has the ability to) access is significant to the District. The District has included The Wildcat Foundation (the Foundation) as a discretely presented component unit. The financial data of the Foundation is reported in the component unit column in the basic financial statements. This separate column is used to emphasize that the Foundation is legally separate from the District. The Foundation was formed for the purpose of supporting projects related to educational programs and to create opportunities for development for the students, staff and community within the Mechanicsburg Area School District. The separate financial statements for the Foundation are available by contacting the District office. FS-12 MECHANICSBURG AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS (Cont'd.) JUNE 30, 2009 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd.) Jointly-governed organizations The District is a participant in four jointly-governed organizations, each of which is a separate legal entity that offers educational services to the District and its residents. Each of these entities serves several school districts and/or municipalities and therefore are not included in this reporting entity. These entities do not have taxing power, but are required to adopt an annual budget, which is funded primarily by its member Districts or others that use its services. Complete financial statements for these entities can be obtained from the respective entity's administrative office. Capital Area Intermediate Unit provides special education services and programs. Cumberland Perry Area Vocational Technical School provides vocational and technical education services and programs. West Shore Tax Bureau provides earned income tax collection services. Harrisburg Area Community College provides community college education services and programs. Basis of presentation - District-wide financial statements District-wide financial statements (i.e., the statement of net assets and the statement of activities) report information on all of the nonfiduciary activities of the District. As a general rule the effect of interfund activity has been eliminated from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are presented separately from business-type activities which rely to a significant extent, on fees and charges for support. The district-wide financial statements are presented using the economic resources measurement focus and the accrual basis of accounting as are the proprietary fund and the fiduciary fund financial statements. Revenues are recognized when earned and expenses are recognized when a liability is incurred, regardless of the timing of related cash flows. Real estate and personal taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. Net assets (total assets less total liabilities) are used as a practical measure of economic resources and the operating statement includes all transactions and events that increased or decreased net assets. Depreciation and amortization are charged as an expense against current operations. Accumulated depreciation and unamortized costs are reported in the statement of net assets. The statement of activities demonstrates the degree to which the direct expenses of given functions or programs are offset by program revenues. Direct expenses are those that are clearly identifiable within a specific function or program. Program revenues include charges to customers who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or program. In addition, program revenues include grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or program. Taxes and other items not properly included among program revenues are reported as general revenues. FS-13 MECHANICSBURG AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS (Cont'd.) JUNE 30, 2009 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd.) Basis of presentation - Fund financial statements Fund financial statements are also provided for all governmental funds, proprietary funds, and fiduciary funds of the District. Major individual governmental funds and major individual proprietary funds are reported as separate columns in the fund financial statements. Nonmajor funds, if any, are aggregated and presented in a single column. Fiduciary funds are reported by fund. The governmental funds are presented using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are received within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the District considers tax revenue to be available if received within 90 days of the end of the fiscal period. Revenue from federal, state and other grants designated for payment of specific expenditures is recognized when the related expenditures are incurred; accordingly, when such funds are received, they are recognized as deferred revenues until earned. Expenditures generally are recognized when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recognized only when payment is due. Proprietary funds generally follow standards for accounting and financial presentation for private business enterprises to the extent that those standards do not conflict with or contradict guidance of the Governmental Accounting Standards Board. Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with the fund's principal ongoing operations. Operating expenses for the District's proprietary fund include food production costs, supplies, administrative costs, and depreciation on capital assets. All revenues or expenses not meeting this definition are reported as nonoperating revenues and expenses. Fund accounting The accounts of the District are organized on the basis of funds, each of which is considered a separate accounting entity. The operations of each fund are accounted for by providing a separate set of self-balancing accounts which comprise its assets, liabilities, fund equity, revenues, and expenditures, or expenses, as appropriate. Resources are allocated to and accounted for in individual funds based upon the purposes for which they are to be spent. When both restricted and unrestricted resources are available for use, it is the District's general policy to use the restricted (primarily operating grants) resources first, then unrestricted resources as they are needed. FS-14 MECHANICSBURG AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS (Cont'd.) JUNE 30, 2009 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd.) Basis of presentation - Fund financial statements (Cont'd.) Fund accounting (Contd.) The District has the following major types of funds: Governmental Funds - These funds account for the activities through which most of the District's operations are provided. Proprietary Funds - These funds account for the operations of the District that are financed and operated in a manner similar to private business enterprises. Fiduciary Funds - These funds account for the assets held by the District as a trustee or agent for individuals, private organizations and/or governmental units and are therefore not available to support the District's own programs. The District presents the following major governmental funds: The General Fund is the primary operating fund. It accounts for all financial resources except those required to be accounted for in another fund. An operating budget is adopted prior to the beginning of each year on a modified accrual basis of accounting. The General Fund is the only fund for which a budget is legally required. The Pennsylvania School Code dictates specific procedures relative to budget adoption and financial statement presentation. The District, before levying annual school taxes, is required to prepare an operating budget for the succeeding fiscal year. This process includes the publishing of notices by advertisement, that the proposed budget has been prepared and is available for public inspection at the administrative office of the District, and that public hearings are held on the proposed operating budget which are required to be scheduled at least ten days prior to when final action on adoption is taken by the Board. Legal budgetary control is maintained at the sub-function/major object level. The Board may approve transfers of funds appropriated to any particular item of expenditure in accordance with the Pennsylvania School Code. Management may amend the budget at the sub-function/sub-object level without Board approval, provided it is not at a higher level than the Board adopted budget. In order to preserve a portion of an appropriation for which an expenditure has been committed by a purchase order, contract or other form of commitment, an encumbrance is recognized. Unused encumbrances expire at the end of each year. FS - 15 MECHANICSBURG AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS (Cont'd.) JUNE 30, 2009 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd.) Basis of presentation - Fund financial statements (Cont'd.) Fund accounting (Contd.) Included in the budget are program budgets as prescribed by the federal and state agencies funding the program. These budgets are approved on a program by program basis by the federal and state funding agencies. The Capital Reserve Fund accounts for transfers from other funds and related investment earnings for capital outlays not accounted for in another fund. The Athletic Fund accounts for athletic revenues and expenditures of those funds for athletic purposes. The Construction Funds accounts for bond proceeds and the expenditure of those funds. The Debt Service Fund accounts for bond refinancing and related costs. The District presents the following proprietary fund: The Food Service Fund accounts for the operations of the cafeterias. The District presents the following fiduciary funds: Expendable and Non-expendable Trusts account for contributions to and interest earnings on scholarship funds donated to the District, and for payments of scholarship funds to selected students. The District Agency Fund accounts for programs operated and sponsored by non-school organizations. These funds are separated from student activity funds. The Student Activities Fund accounts for programs operated and sponsored by various clubs and organizations within the schools. Cash and cash equivalents and investments The District's cash and cash equivalents are considered to be cash on hand, demand deposits (including pooled investments), and short-term investments with original maturities of three months or less from the date of acquisition. The types of authorized investments are limited by State regulations. Pooled investment funds are required to be operated in accordance with State regulations. Investments, including pooled investments, are reported at fair value. FS-16 MECHANICSBURG AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS (Cont'd.) JUNE 30, 2009 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd.) Taxes and taxes receivable Real estate and personal taxes are levied as of July 1 with a legal, enforceable claim against the property and/or taxpayer. Amounts not collected within six months (December 31) are considered delinquent and submitted to outside agencies/entities for collection actions. Receivables and payables between funds Activity between funds that represent lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as "due to/from other funds". Any residual balances outstanding between the governmental activities and business-type activities are presented in the district-wide financial statements as "internal balances". Balances between funds are considered to be short term items pending periodic repayments. Inventories and prepaid items Inventories are presented at the lower of cost or market on a first-in, first-out basis, and are expended when consumed. Donated commodities are recognized as revenue and are inventoried at an estimated cost value. Certain payments, if any, to vendors reflect expenses applicable to future periods and are presented as prepaid items in both district-wide and fund financial statements. Capital assets Capital assets, which include property, plant, equipment, and infrastructure assets (e.g., roads, sidewalks, and similar items), are presented in the applicable governmental or business-type activities columns in the district- wide financial statements. Capital assets are defined by the District as assets with an initial, individual cost of more than $ 5,000 and an estimated useful life in excess of one year. Management has elected to include certain homogeneous groups with individual costs of less than $ 5,000 as capital assets for financial presentation purposes. In addition, capital assets purchased with long-term debt may be capitalized regardless of the thresholds established. Such assets are presented at historical cost or estimated historical cost if purchased or constructed. Major outlays for capital assets and improvements are capitalized as projects are constructed. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend asset lives are not capitalized. FS - 17 MECHANICSBURG AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS (Cont'd.) JUNE 30, 2009 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd.) Capital assets (Cont'd.) Capital assets are depreciated using the straight-line method over the following estimated useful lives: Assets Governmental Business-type Activities Activities Buildings Interior renovations Site improvements Furniture Machinery and equipment Library books Computer equipment Vehicles Long-term liabilities 50 - 25 - 20 - 20 20 10 to 15 15 5 - 5 5 8 - In the district-wide financial statement, and proprietary fund types in the fund financial statements, long term debt and other long term obligations are presented as liabilities in the applicable governmental activities or proprietary fund statement of net assets. Refunding costs and bond premiums and discounts are amortized over the life of the bonds using the effective interest method. Bond issuance costs are presented as deferred charges and amortized over the term of the related debt. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance and refunding costs, as current period expenditures. The face amount of debt issued is presented as other financing sources while discounts and refunding costs on debt issuances are presented as debt service expenditures: Issuance costs, whether or not withheld from the actual debt proceeds received, are presented as support service expenditures. Net assets Net assets represent the difference between assets and liabilities. In the district-wide financial statements and proprietary fund financial statements, net assets are classified in the following categories: Invested in capital assets (net of related debt) - This category groups all capital assets into one component of net assets. Accumulated depreciation and outstanding debt that are attributable to the acquisition, construction or improvement of these assets reduce this category. FS-18 MECHANCISBURG AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS (Cont'd.) JUNE 30, 2009 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd.) Net assets(Cont'd.) Restricted - This category presents external restrictions imposed by creditors, grantors, contributors or laws or regulations of other governments and restrictions imposed by law through constitutional provisions or enabling legislation. Temporarily restricted - This category presents external time and/or use restrictions imposed by donors. Permanently restricted - This category presents donor-imposed stipulations that they be maintained permanently with only the income available for specified uses. Unrestricted - This category presents the net assets of the District, which are not restricted for any project or other purpose. However, these funds may be internally designated for specific projects or purposes in the fund financial statements. Fund balance reserves and designations In the governmental fund financial statements, reserves and designations segregate portions of the fund balance that are either not available or have been earmarked for specific purposes. Reservations or designations of fund balances are described below. Reserved for prepaid expenses. This category reflects resources already utilized so they are not considered as current available funds. Reserved for capital projects. This category reflects resource which, due to terms of bond indentures, must be utilized for capital projects; therefore, they are not considered as current available funds for any other purposes. Designated. The District has designated $ 3,500,000 toward the future payment of accruing retirement plan obligations and $ 1,785,378 toward the future payment of medical premiums. Additional funds have been designated for the retirement of long-term debt. Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain presented amounts and disclosures. Accordingly, actual results could differ from those estimates. FS-19 MECHANCISBURG AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS (Cont'd.) JUNE 30, 2009 CASH AND CASH EQUIVALENTS AND INVESTMENTS Pennsylvania statutes provide for investment of governmental funds into certain authorized investment types including U.S. Treasury bills, other short-term U.S. and Pennsylvania government obligations, and insured or collateralized time deposits and certificates of deposit. The statutes do not prescribe regulations related to demand deposits; however, they do allow the pooling of governmental funds for investment purposes. Custodial credit risk is the risk that in the event of a bank failure, the government's deposits may not be returned to it. The District's policy requires that all deposits in excess of FDIC insurance coverage be collateralized with approved collateral as provided by law. At June 30, 2009, the District's deposits totaled $ 1,857,755 and the bank balances totaled $ 2,291,806 Of the bank balances, $ 269,914 was covered by federal depository insurance and $ 2,021,892 was collateralized under Act No. 72 of the 1971 Session of the Pennsylvania General Assembly, in which financial institutions were granted the authority to secure deposits of public bodies by pledging a pool of assets, as defined in the Act, to cover all public funds deposited in excess of Federal Depository Insurance limits. The pledged collateral is held by the Federal Reserve Bank, but is not titled in the District's name. The District also has cash equivalents with three organizations that operate as common law trusts established pursuant to the Intergovernmental Cooperation Act and related statutes for the purpose of pooling investments. Each organization's fundamental policy is to maintain a net asset value of $ 1 per share, but there can be no assurance that the net asset value will not vary from $ 1 per share. They may only purchase securities which are permitted under PA law. As of June 30, 2009, the District's deposits in these organizations are as follows: Pennsylvania Local Government Investment Trust (PLGIT) $ 6,641,552 Pennsylvania Treasurer's INVEST Program (PA INVEST) 3,016,585 Pennsylvania School District Liquid Asset Fund (PSDLAF) 3,488,808 13.146.945 Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment. The District does not have a formal investment policy for interest rate risk. The weighted average maturity of the securities held by each of the organization's is generally less than 90 days. Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The District does not have a formal investment policy for credit risk. The District's deposits in each of the organization's were rated "AAAm" by Standard & Poor's. Cash and cash equivalents at June 30, 2009 are as follows: Governmental activities $ 13,913,832 Business-type activities 466,809 Fiduciary funds 624.059 Total cash and cash equivalents $ 15,004,700 FS-20 MECHANICSBURG AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS (Cont'd.) JUNE 30, 2009 TAXES RECEIVABLE Taxes receivable are as follows: Real estate taxes Earned income taxes Personal taxes General Fund Taxes Taxes Receivable Allowance for Receivable Deferred (Gross) Uncollectibles (Net) Tax Revenue $ 542,316 $ 32,540 $ 509,776 $ 305,473 1,576,267 - 1,576,267 106,959 2,118,583 32,540 2,086,043 412,432 Full accrual adjustment - - - (412,432) Governmental activities $ 2,118,583 $ 32,540 2.086.043 $ - DUE FROMITO OTHER FUNDS AND INTERFUND TRANSFERS There were no interfund balances at June 30, 2009. Interfund transfers were as follows: Other financing sources Other financinq uses Debt Service Fund $ 5,739,993 $ 5,739,993 General Fund Food Service Fund 174,080 174,080 General Fund Athletic/Special Revenue Fund 98,000 98,000 General Fund Capital Reserve Fund 89,570 89,570 General Fund Capital Reserve Fund 350 350 Construction Fund DUE FROM OTHER GOVERNMENTS Due from other governments are as follows: Local sources - other taxes Local sources - other items State sources Federal sources Governmental Business-type Activities Activities $ 70,869 $ - 455,272 - 390,170 - 393,033 - 1.309.344 $ FS - 21 MECHANICSBURG AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS (Cont'd.) JUNE 30, 2009 CHANGES IN CAPITAL ASSETS Capital asset activity for the year was as follows: Governmental activities Capital assets not being depreciated Land Construction in progress Capital assets being depreciated Land improvements Buildings and improvements Furniture and equipment Library books Accumulated depreciation Land improvements Buildings and improvements Furniture and equipment Library books Capital assets being depreciated, net Governmental activities capital assets, net Business-type activities Capital assets being depreciated Equipment Accumulated depreciation Equipment Capital assets being depreciated, net Business-type activities capital assets, net Beginning Current Year Activity Ending Balance Increases Decreases Balance $ 605,983 $ - $ - $ 605,983 957,103 22,675 (957,103) 22,675 1,563,086 22,675 (957,103) 628,658 3,837,770 1,294,166 - 5,131,936 79,342,176 2,376,219 - 81,718,395 4,276,711 572,969 (26,660) 4,823,020 1,650,104 61,443 (20,190) 1,691,357 89,106,761 4,304,797 (46,850) 93,364,708 (1,913,922) (200,569) - (2,114,491) (16,873,120) (2,448,829) - (19,321,949) (2,723,697) (539,856) 15,996 (3,247,557) (1,547,228) (45,173) 20,190 (1,572,211) (23,057,967) (3,234,427) 36,186 (26,256,208) 66,048,794 1,070,370 (10,664) 67,108,500 67.611.880 1.093.045 (967.767) 67.737.158 $ 1,083,848 $ 924 $ (9,167) $ 1,075,605 (544,970) (61,832) 9.167 (597,635) 538,878 (60, 908) - 477,970 $ 538.878 (60.908) $ - $ 477,970 FS - 22 MECHANICSBURG AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS (Cont'd.) JUNE 30, 2009 CHANGES IN CAPITAL ASSETS (Cont'd.) Depreciation expense was charged to functions/programs as follows: Governmental activities Instruction Instructional student support Administrative and financial support Operation and maintenance of plant Transportation Student activities Community services Business-type activities - Food service DEFERRED REVENUES $ 2,011,992 702,184 251,644 165,675 5,465 70,949 26.518 3.234.427 $ 61 832 Governmental funds present deferred revenue in connection with receivables for revenues that are not considered to be available to pay liabilities of the current period. Governmental funds also defer revenue recognition with resources that have been received, but not yet earned. Deferred revenues in the General Fund of $ 496,733 consists of $ 412,432 of taxes receivable not received within 90 days of the end of the fiscal period, and $ 84,301 of resources that have been received but not yet earned. Deferred revenue in the proprietary funds and the district-wide financial statements represents resources that have been received but not yet earned. LONG-TERM LIABILITIES Changes in all long-term liabilities were as follows: Beginning Ending Due Within Balance Increases Decreases Balance One Year Governmental activities Bonds payable $ 61,305,000 $ 10,175,000 $ (13,220,000) $ 58,260,000 $ 3,110,000 Compensated absences 586,211 116,364 (123,130) 579,445 200,000 Other post employment benefits - 296,885 (144,620) 152.265 136.000 61.891.211 10.588.249 (13.487.750) $ 58.991.710 $ 3,446,000 Business-type activities Compensated absences $ 13,356 $ 5,911 $ - $ 1%2-6-Z $ - FS - 23 MECHANICSBURG AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS (Cont'd.) JUNE 30, 2009 LONG-TERM LIABILITIES (Cont'd.) Bonds payable Changes in bonds payable were as follows: Beginning New Scheduled Ending Balance Issue Refunding Redemptions Balance 2000 Series C $ 4,965,000 $ - $ - $ (5,000) $ 4,960,000 2001 Series 240,000 - (200,000) (40,000) - 2002 Series A 8,190,000 - - (780,000) 7,410,000 2003 Series 7,205,000 - - (1,335,000) 5,870,000 2004 Series 9,970,000 - (9,960,000) (10,000) - 2005 Series 7,940,000 - - (295,000) 7,645,000 2006 Series 3,960,000 - - (145,000) 3,815,000 2006 Series A 9,990,000 - - (5,000) 9,985,000 2007 Series 8,845,000 - - (445,000) 8,400,000 2009 Series - 10,175,000 10,175,000 61.305.000 $ - $ 15.000 (3.060.000) 58.260.000 Amounts Due Interest Rates Maturity Date Callable Date Within One Year 2000 Series C Variable rate stabilized at 4.50% October 2016 2002 Series A 1.40% to 4.80% August 2022 2003 Series 1.60% to 3.60% February 2013 2005 Series 3.00% to 4.50% August 2026 2006 Series 3.40% to 4.20% August 2026 2006 Series A 3.625% to 4.125% August 2019 2007 Series 3.70% to 4.00% August 2022 2009 Series 2.00% to 3.90% August 2021 Currently February 2010 August 2008 February 2010 February 2011 February 2011 August 2012 August 2014 $ 5,000 805,000 1,380,000 305,000 150,000 5,000 460,000 FS-24 MECHANICSBURG AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS (Cont'd.) JUNE 30, 2009 LONG-TERM LIABILITIES (Cont'd.) Bonds payable (Cont'd.) Year Ending June 30 2010 2011 2012 2013 2014 2015-2019 2020-2024 2025 and later $ 2,165,295 2,119,711 2,011,576 1,851,524 1,700,996 6,151,702 1,767,285 438,859 $ 5,275,295 5,344,711 5,351,576 5,461, 524 5,550,996 28,146,702 18,362,285 2,973,859 Principal Interest Total $ 3,110,000 3,225,000 3,340,000 3,610,000 3,850,000 21,995,000 16,595,000 2,535,000 $ 58 260.000 S-18-M.948 76.466.948 In April 2009, the District issued its 2009 Series of Bonds in the amount of $ 10,175,000 for the current refunding of the 2001 Series and 2004 Series of Bonds. The purpose of this refunding was to take advantage of favorable interest rates. This refunding increased current year debt service, net of state aid by $ 219,498, but decreased net future years debt service by $ 642,963 resulting in a net overall debt service reduction of $ 423,465. After refunding the old bonds of $ 10,249,822 and payment issuance costs and net bond premiums of $ 155,264, the net proceeds after a required District contribution ($ 250,000) of $ 19,914 were applied to the initial debt service payment for the new bonds in August 2009. Compensated absences Compensated absences (those for which employees receive pay) are presented using the termination payment method. A liability is computed using estimates which apply historical data to current factors. The District maintains records of unused leave and applies the contracted rate for employees eligible for termination payments. The District allows only restricted sabbatical leave and therefore does not present any liability in advance of the sabbatical. Payments for compensated absences are made in the year the absence is taken or the employee retires. When an employee retires, the payout is as follows: Unused sick leave will be paid at the following rates: Number of Years Less than ten 10 through 14 15 or more Percentage of Accumulated Days 20% 35% 50% FS-25 MECHANICSBURG AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS (Cont'd.) JUNE 30, 2009 LONG-TERM LIABILITIES (Cont'd.) Compensated absences (Cont'd.) For teachers and administrators, any unused sick leave shall be paid at the daily substitute rate. For support staff and Food Service Fund employees, unused sick leave will be paid at the lowest hourly rate for support employees. Retirement incentive payments Professional employees who become eligible for retirement without penalty, and elect to retire in that year, will have a one time District payment made to their individual 403(b) retirement account of $ 10,000. Those employees who choose not to retire in that year will not be eligible for the retirement incentive payment in any succeeding year. Since many of these incentive payments will not be taken by the eligible employees, no liability has been accrued for retirement incentive payments. Other post employment benefits (OPEBs) Beginning with the year ended June 2009, the District became subject to reporting OPEBs in accordance with Governmental Accounting Standard Board Statement No. 45 (GASB 45). GASB 45 requires recognition of OPEBs as part of the compensation package of active employees for services rendered. The cost and obligation for OPEBs are required to be measured by an actuarial valuation. The District chose to implement GASB 45 prospectively, so there is no OPEB obligation reported at the beginning of the year. Plan description Under a previous negotiated agreement (expired June 30, 2009) with the Mechanicsburg Education Association, the District provides health insurance up to a maximum of $ 15,000 in premiums for any individual who retired with 30 years of service to the District, age 62 with 1 year of service or 35 years of service regardless of age. This coverage commences when the retiree reaches age 62 and continues until reaching Medicare age. All other eligible retirees (see pension plan) including teachers, administrators, and support staff are allowed to continue coverage for themselves and their dependents until the retiree attains the Medicare eligible age. Retiree's premiums are less than the District's actual cost to provide health care coverage to retirees. The premium amount retirees pay is a blended rate for covering both active and retired Plan members. The fact that the blended rate that retirees pay is less than the cost of covering retired members and their beneficiaries results in what is known as an "implicit rate subsidy," which creates an additional cost to the District. FS-26 MECHANICSBURG AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS (Cont'd.) JUNE 30, 2009 LONG-TERM LIABILITIES (Cont'd.) Other post employment benefits (OPEBs) (Cont'd.) Plan description (Cont'd.) Participant information Active participants Vested former members Retired participants Funding Policy 478 60 The District funds Plan liabilities on a "pay-as-you-go" basis, and has not established an OPEB trust fund to accumulate assets to fund Plan obligations. The District has no statutory or contractual obligation to fund the Plan and would only do so at the District's discretion. Annual OPEB cost and net OPEB obligation The District's annual OPEB cost (expense) is calculated based on the actuarially determined annual required contribution (ARC) of the employer. The ARC represents the amount needed to fund the cost of benefits attributed to the current year, plus an amortized portion of the unfunded actuarial accrued liability (UAAL). The District has selected a blended amortization method, which results in the UAAL being amortized over a period of 7 years. Components of the District's annual OPEB cost, the amount actually contributed to the Plan, and changes in the net OPEB obligation are as follows: Employer normal cost Amortization of unfunded actuarial accrued liability Annual required contribution Interest on the net OPEB obligation Adjustment to the ARC Annual OPEB cost Contributed to the plan Increase in net OPEB obligation Net OPEB obligation - beginning Net OPEB obligation - end $ 78,162 218.723 296,885 296,885 (144,620) 152,265 $ 152,265 FS - 27 MECHANICSBURG AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS (Cont'd.) JUNE 30, 2009 LONG-TERM LIABILITIES (Cont'd.) Other post employment benefits (OPEBs) (Cont'd.) Annual OPEB cost and net OPEB obligation (Contd.) The percentage of annual OPEB cost contributed was as follows: Percentage of Annual Annual OPEB Net OPEB Year ended OPEB Cost Cost Contributed Obligation June 2009 $ 296,885 48.71% $ 152,265 Funding status and funding progress The District's actuarial accrued liability (AAL) for OPEBs as of January 2008 was $ 1,288,868. There are no Plan assets, thus, the entire amount is unfunded. The District does not have any current plans to fund the AAL. Actuarial UAAL as Actuarial Actuarial Accrued a % of Valuation Value of Liability Unfunded Funded Covered Covered Date Assets (AAL) AAL Ratio Payroll Payroll January 2008 $ - $ 1,288,868 $ 1,288,868 0.00 $20,610,024 6.25% Actuarial assumptions and methods Actuarial assumptions and methods used in the January 2008 actuarial valuation include the following: Interest rate 4.50% General inflation rate 3.00% Health care cost trend rate 8.50% in 2008 trending to 5.00% in 2015 and later Actuarial cost method Benefits are allocated on a level basis over the earnings of an individual from date of hire to assumed retirement date Amortization (blended) Active employees over expected future service period, and retirees over expected future payment period FS-28 MECHANICSBURG AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS (Cont'd.) JUNE 30, 2009 LONG-TERM LIABILITIES (Contd.) Other post employment benefits (OPEBs) (Cont'd.) Actuarial assumptions and methods (Cont'd.) Actuarial evaluations on an ongoing basis involve estimates of the reported amounts and assumptions about the probability of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Actuarially determined amounts are subject to continual revision as actual results are compared to past expectations and new estimates are made about the future. Projections of benefits are based on the types of benefits provided under the plan at the time of each valuation and on the pattern of sharing of benefit costs between the employer and plan members to that point in time. Actuarial calculations reflect a long-term perspective, and consistent with that perspective, actuarial methods and assumptions used include techniques that are designed to reduce short-term volatility in accrued liabilities. The required schedule of funding progress in the other required information (ORI) immediately following the notes to financial statements, is to present multi-year trend information about whether the actuarial value of Plan assets is increasing or decreasing over time relative to the actuarial accrued liability for benefits. However, because the District maintains no Plan assets, information relative to Plan asset disclosures is not applicable. Additionally, because this is the year of implementation of GASB 45, the OPEB disclosure standards are implemented prospectively; therefore, the ORI does not reflect similar information for the two preceding years. OPERATING LEASES The District is obligated under various equipment and modular classroom lease agreements at June 30, 2009. Total Operating lease payments included in General Fund expenditures for the year ended June 30, 2009 amounted to approximately $ 203,000. The following is a schedule of future minimum rental payments required under the operating lease agreements. Year Ending June 30 2010 $ 139,599 2011 127,659 2012 123,898 2013 45,834 Total minimum payments required $ 436 990 FS-29 MECHANICSBURG AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS (Cont'd.) JUNE 30, 2009 PENSION PLAN Substantially all full-time and part-time employees of the District participate in the pension plan. The District recognizes expenditures or expenses equal to its contractually-required contributions, subject to the modified accrual basis of accounting in governmental funds. The District contributes to The Public School Employees' Retirement System (the System), a governmental cost sharing multiple-employer defined benefit plan. The plan is under the authority of the Public School Employees' Retirement Code (the Code), as amended. The plan provides retirement and disability, legislatively mandated ad hoc cost-of-living adjustments, and healthcare insurance premium assistance to qualifying annuitants. The System issues a comprehensive annual financial report that includes financial statements and required supplementary information for the plan. A copy of the report may be obtained by writing to the System at PO Box 125, Harrisburg, PA 17108-0125, or by accessing the System's website at www.psers.state.pa.us. The contribution policy is established in the Code and requires contributions by active members and employers. Contribution rates for active members are set by law and are dependent upon members' class. In most cases, the contribution rates based on qualified member compensation are as follows: Membership Class T-C Active members hired before July 22, 1983 5.25% Membership Class T-C Active members hired on or after July 22, 1983 6.25% Membership Class T-D Active members hired before July 22, 1983 6.50% Membership Class T-D Active members hired on or after July 22, 1983 7.50% Active members newly hired after July 1, 2001 are automatically Class T-D. The contribution rates for all members in Membership Class T-D were effective January 1, 2002. Contributions required of employers are based upon an actuarial valuation. For the fiscal year ended June 30, 2009 the employer contribution rate was 4.76 percent of covered payroll, composed of 4.00 percent for pension benefits and 0.76 percent for healthcare insurance premium assistance. The District's contributions to PSERS for the years ending June 30, 2009, 2008 and 2007 were $ 1,183,664, $ 1,504,768, and $ 1,283,442, respectively. Those amounts are equal to the required contributions for each year. FS - 30 MECHANICSBURG AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS (Cont'd.) JUNE 30, 2009 RISK MANAGEMENT Health insurance The District is a member of South Central Trust for processing claims and obtaining reinsurance through commercial insurance carriers. The District has reinsurance for claims in excess of $ 125,000 specific (per person). The District has a maximum lifetime benefit of $ 5,000,000 per person. District transactions with the trust were as follows: Cash balance in the trust, beginning Payments to the trust from the District Claims paid by the trust Stop loss premiums Administrative and other fees, net of interest earned $ 487,480 4,737,481 $ (3,907,166) (142,049) (24,901) (4,074,116) Cash balance in the trust, ending District accrual for prepaid health benefits Amount available for accrued claims The amount available in the trust was as follows: Accrual for claims incurred Accrual for health insurance coverage on payroll payable Amount available for accrued claims 1,150,845 (220.000) $ 930, 845 $ 491,377 439,468 $ 930.845 There are various methodologies for estimating a reasonable level for claims that have been incurred but not reported (IBNR). District management has selected the methodology of '60 days of paid claims'. District management believes this methodology provides an adequate amount for accrued claims. FS-31 MECHANICSBURG AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS (Cont'd.) JUNE 30, 2009 RISK MANAGEMENT (Cont'd.) Other insurance The District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The District maintains commercial insurance coverage covering each of those risks of loss. Management believes such coverage is sufficient to preclude any significant uninsured losses to the District. Settled claims have not exceeded this commercial coverage in any of the past three fiscal years. For State unemployment compensation laws, the District is self-insured, which is a common practice for local governmental units. Any unemployment claims are paid by the District on a quarterly basis as incurred. For workers' compensation insurance, approximately 80 Districts participate in a public entity risk sharing pool (School Districts Insurance Consortium) for processing claims and obtaining reinsurance through commercial insurance carriers. Under this plan, the District's annual cost should not exceed standard commercial insurance rates. COMMITMENTS AND CONTINGENCIES Other commitments and contingencies The District's collective bargaining agreement with its teaching staff expires June 30, 2013. In the normal course of business, the District is subject to legal disputes and claims. The District does not anticipate any material losses from any pending or threatened litigation. In the normal course of preparing for the subsequent school year, the District has awarded bids for various supplies, fuel contracts, etc. No major commitments in excess of routine requirements have been made by the District. As part of its ongoing Capital Projects, the District has entered into contract commitments totaling approximately $ 1,067,000 for various construction and improvement projects at June 30, 2009. The District participates in state and federal grant programs which are governed by various rules and regulations. Expenditures charged to these grant programs are subject to program compliance audits and reviews by the grantor agencies. The District is potentially liable for any expenditures which may be disallowed by the rules of these grant programs. The District does not anticipate any material disallowance of program expenditures. 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D V1 (n 07 l6 0 m 6 U E 0 0 E 0 N O 0) t? d t i C m co to y U > 4? a) D o o 0) co m o V" c (? c v N o r (n: a? > Q . : o U) D rn v c c ?8 o2 2 oo?.o? ?m?a?.owm°o) (u I ?0 2 aD :3 =3 =3 (°n _ U) r a °o o m ti c = o a Z M () O) (n `• (°n (°n (°n c`u F- ?a .0 •S v a c r a?'i ' c m y c= m CD E H w (E C5 w c- 0 L) cn :3 75 Z3 (n ' 0 0 0 ? ? r- V) c 7 N N 7 5 (D 0 0 c-i J(nLL 0) « 0 N(D =p 0 U) 'D 7 • 7 CL )a 0 0 co!(n>0 Uo_o_ sQo_m0(nU0LL 0000 CO ?r s (U ? .D > a a) t v c a c ? W O Z (i (i r 0 MECHANICSBURG AREA SCHOOL DISTRICT OTHER POST EMPLOYMENT BENEFIT PLANS JUNE 30, 2009 HEALTH CARE BENEFITS SCHEDULE OF FUNDING PROGRESS Actuarial UAAL as Actuarial Actuarial Accrued a % of Valuation Value of Liability Unfunded Funded Covered Covered Date Assets (AAL) AAL Ratio Payroll Payroll January 2008 $ - $ 1,288,868 $ 1,288,868 0.00 $20,610,024 6.25% Because the June 2009 year was the implementation year for GASB 45, and the District chose to implement prospectively, the above illustration does not reflect similar information for the two preceding years. ORI - 2 SUPPLEMENTARY INFORMATION MECHANICSBURG AREA SCHOOL DISTRICT COMBINING BALANCE SHEET - CONSTRUCTION FUNDS JUNE 30, 2009 2005 2006 Construction Construction Total ASSETS Cash and cash equivalents $ - $ - $ - Total assets $ - $ - $ - LIABILITIES Accounts payable $ - $ - $ - Total liabilities - - - FUND BALANCES Reserve for capital projects - - - Total fund balances - - - Total liabilities and fund balances $ - $ - $ - SI-1 MECHANICSBURG AREA SCHOOL DISTRICT COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - CONSTRUCTION FUNDS FOR THE YEAR ENDED JUNE 30, 2009 Revenues Local sources - other Total revenues Expenditures Support services Capital outlay Total expenditures Excess (deficiency) of revenues of expenditures Other financing sources (uses) Bond proceeds Refunding bond proceeds Debt service (refunded bond issues) Transfers from (to) other funds Net change in fund balances Fund balances, beginning Fund balances, ending 2005 2006 Construction Construction Total $ - $ 929 $ 929 929 929 146,236 146,236 146,236 146,236 (145,307) (145,307) - (350) (350) - (145,657) (145,657) 145,657 145,657 SI - 2 10 N N d CD CO N O O O- co O ?6 p N ? co ! N LL N cD ER G O (di) ta 1 t9 r M ce) ? Ce) r r r ? ? M ` U EFT fl a) LL O , ? CA c OD N to ce) C ? N M M r1 V U. d ? CC) ce) bR N M N ? EFT Z O N ER LL , CO N N c~!1' ? C? Q c? r- N ? .4 cT ` EST V EF7 o W ? cD V W Q. o ?,, ? ? ? Q 4 7 0 ? m `? EA W "l 0G co lo? CL1 1- Z N A to E CD LO CO z co 0 ' o U CD N?°- L -? VFW os,,? co LL?N ? Et, Q ~ bRr W W G Q. ? 0 ? N Ul CL- 4a N N m N ? -0 CO 7 Nn^1' W p S L `= TS c? N N V ? N O E 2 N ? ? ?- to ) ?UQ. •? LL Q1 N J Q M N MECHANICSBURG AREA SCHOOL DISTRICT COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - ALL TRUST FUNDS FOR THE YEAR ENDED JUNE 30, 2009 Revenue and other financing sources Investment income Contributions Total operating revenues Operating expenses Scholarship awards Total operating expenses Operating income (loss) Transfers to (from) trust accounts Net income (loss) Reserved fund balance, July 1, 2007 Reserved fund balance, June 30, 2008 Expendable Non-expendable Trust Trust Totals $ 909 $ 1,061 $ 1,970 43,189 517 43,706 44,098 1,578 45,676 31,297 1,547 32,844 31,297 1,547 32,844 12,801 31 12,832 12,801 31 12,832 73,458 60,946 134,404 $ 86,259 $ 60,977 $ 147,236 SI -4 2H9 DEC ! ! E'r'g 12: 22 7 $I (o . oO A 0 ATV-1 C& am :?s7 '2551!57