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EAST PENNSBORO AREA SCHOOL DISTRICT
FINANCIAL STATEMENTS
YEAR ENDED JUNE 30, 2009
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TABLE OF CONTENTS
Page
Number
ENDENT AUDITORS' REPORT IAR - 1 to IAR - 2
GEMENT'S DISCUSSION AND ANALYSIS MDA - 1 to MDA - 8
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 balances 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
DTES TO FINANCIAL STATEMENTS FS - 11 to FS - 31
THER REQUIRED INFORMATION
Budgetary comparison information - general fund ORI - 1
Other post employment benefit plans ORI - 2
Greenawalt & Company, RC.
James E. Lyons
CERTIFIED PUBLIC ACCOUNTANTS Howard R. Greenawalt
Since 1955 Deborah J. Kelly
Scott J. Christ
Creedon R. Hoffman
INDEPENDENT AUDITORS' REPORT
rd of School Directors
t Pennsboro Area School District
la, Pennsylvania
e have audited the accompanying financial statements of the governmental activities, the business-type activities,
each major fund, and the fiduciary funds of East Pennsboro Area School District as of and for the year ended June
3D, 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
t ese financial statements based on our audit. The prior year summarized comparative information has been derived
f m the District's June 30, 2008 financial statements and, in our report dated January 5, 2009 we expressed
u qualified opinions on the respective financial statements of the governmental activities, the business-type activities,
e ch major fund, and the fiduciary funds.
Vie 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
e amining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit
a so includes assessing the accounting principles used and significant estimates made by management, as well as
e aluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our
o inions.
I our opinion, the financial statements referred to above present fairly, in all material respects, the respective
financial position of the governmental activities, the business-type activities, each major fund, and the fiduciary funds
o East Pennsboro Area School District, as of June 30, 2009, and the respective changes in financial position, and,
here applicable, cash flows thereof for the year then ended in conformity with accounting principles generally
a ceoted in the United States of America.
accordance with Government Auditing Standards, we have also issued our report dated February 15, 2010 on our
msideration of East Pennsboro Area School District's internal control over financial reporting and on our tests of its
)mpliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The
irpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance
id the results of that testing, and not to provide an opinion on the internal control over financial reporting or on
?mpliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards
id should be considered in assessing the results of our audit.
IAR - 1
400 West Main Street • Mechanicsburg, PA 17055 - 717.766.4763 • Fax 717.766.2731
62 West Pomfret Street • Carlisle, PA 17013 * 717.243.4822 • Fax 717.258.9372
www.greenawalt.cc
Board of Directors
East Pennsboro Area School District
1anagement's discussion and analysis on pages MDA - 1 through MDA - 8 and other required information on pages
SRI - 1 and ORI - 2 are not a required part of the basic financial statements but are supplementary information
?quired by accounting principles generally accepted in the United States of America. We have applied certain limited
rocedures, which consisted principally of inquiries of management regarding the methods of measurement and
resentation of the required supplementary information. However, we did not audit the information and express no
pinion on it.
CGREENAWALT & COMPAN, P.C.
ebruary 15, 2010
nicsburg, Pennsylvania
IAR - 2
EAST PENNSBORO AREA SCHOOL DISTRICT
MANAGEMENT'S DISCUSSION AND ANALYSIS
JUNE 30, 2009
discussion and analysis compares our financial position at June 30 of 2009, 2008 and 2007. It also
ides an overview of our financial performance for the two years between these periods, fiscal years
d June 30, 2009 and 2008, in accordance with governmental reporting requirements. Please read our
fission and analysis in conjunction with the District's financial statements, which begin on page FS-1.
CIAL HIGHLIGHTS
• Our financial position remained viable at the end of 2009. We have maintained sufficient net assets
and fund balances, and established a budget that should result in a stable financial position through
2010-2011
• In 2007, 2008 and 2009 we used available capital funds to complete additional renovation projects at
the Middle School. At the end of 2009, there was a balance of about $494,768 remaining in our
General Obligation Bond Fund of 2004.
• For 2009, we paid down $2.83 million of our General Obligation Debt. No additional debt has been
incurred. We again expect to have adequate financial resources to meet all of our debt service
obligations.
• In 2009 the District issued General Obligation Bond Series of 2009, which refunded General
Obligation Bond Series A of 2001 and Series of 2003. The District realized savings of $254,975, net
of state reimbursement.
• The District has provided operating revenues within the constraints of ACT 1 of 2006. Since the
implementation of ACT 1, the district has significantly reduced and eliminated critical areas of the
budget. These reductions and eliminations did not directly impact educational services, but will
impact future budgets in the area of capital improvements and maintenance of facilities.
• The District provides medical coverage through the South Central Trust (SCT). Over the last three
years the District has accumulated a surplus within the risk sharing pool. This has enable to the
District to contain costs and provide stability for future years as the cost of medical coverage
fluctuates from year to year based on utilization. The reserved fund balances for the District's
reserve at South Central Trust were $1,455,000, $2,074,000 and $1,700,000 at December 31, 2007,
2008 and 2009, respectively.
THESE FINANCIAL STATEMENTS
report consists of a series of financial statements. The Statement of Net Assets and the Statement of
?ities (on pages FS-1 and FS-2) provide information about the activities of the District as a whole, and
;nt a longer-term view of the District's finances than Fund statements. Fund financial statements are on
s FS-3, FS-5 and FS-7 through FS-10. For governmental activities, these statements tell how District
ces have been financed in the short run, as well as show the amount remaining for future spending.
rietary fund statements provide information about non-governmental operations, in this case food
ces. Fiduciary funds statements report funds held in trust by the District for such things as scholarship
.s and student activity funds.
MDA - 1
EAST PENNSBORO AREA SCHOOL DISTRICT
MANAGEMENT'S DISCUSSION AND ANALYSIS
JUNE 30, 2009
Reconciliation of the Governmental Funds Balance Sheet on page FS-4 connects governmental fund
ice to the total net assets balance from the Statement of Net Assets. The reconciliation on page FS-6
the same for the components of the changes in fund balances.
the District as a Whole
ie statements present financial activities and the results of those activities in two categories, Governmental
d Business-type. Capital assets (land, buildings, improvements, furniture and equipment) are presented
th all other assets. Long-term debt is presented with all other liabilities. This is distinctly different from
fund statements in which assets and liabilities are separated into various funds such as General and
ipital Projects.
approach to measurement of revenue and expense is similar to that used in the private sector and is
red to as following the accrual basis of accounting. This is discussed further in the notes to the financial
the District's Most Significant Funds
funds statements provide financial information about the District's significant funds rather than the
rict as a whole. There are three fund types, Governmental, Proprietary and Fiduciary. The use of each
of fund is described in the notes to the financial statements. Unlike the entity-wide financial statements
measure revenues on the accrual basis, the funds statements report revenues only to the extent cash has
L received, or is expected to be received in the near future.
District as Trustee
he District acts as fiduciary for Students Activities and Agency Funds. In comparison to the Governmental
unds, the amount held in the fiduciary fund is small. The fiduciary fund net assets are presented on page
5-10.
DISTRICT AS A WHOLE
able A-1 summarizes and compares the Statement of Net Assets from page FS-1 of the financial
:atements for each of the past three years. We have brought forward the 2007 balances from our
008MD&A. These balances are otherwise not a part of the 2009 financial statement package. Within this
nd certain other schedules in our discussion, we have presented the dollar figures in thousands, unless
therwise indicated, to make them easier to read. This has resulted 'in rounding differences, and some
olumns may not add within a schedule.
MDA-2
EAST PENNSBORO AREA SCHOOL DISTRICT
MANAGEMENT'S DISCUSSION AND ANALYSIS
JUNE 30, 2009
Table A-1
Statement of Net Assets
Governmental Activities
Current and other assets
Capital assets
Total assets
2009 2008 2007
$ 8,851 $ 6,643 $ 8,059
37,097 38,575 39,963
$ 45,948 $ 45,218 $ 48,022
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
$ 2,883 $ 2,683 $ 2,815
32,339 34,756 37,442
35,222 37,439 40,257
5,778 4,640 3,495
495 531 631
4,453 2,608 3,639
10,726 7,779 7,765
$ 45,948 $ 45,218 $ 48,022
Business-type Activities
2009 2008 2007
$ 135
246 $ 110
280 $ (21)
310
$ 381 $ 390 $ 289
$ 41 $ 43 $ 52
41 43 52
246
94 280
67 310
(73)
340 347 237
$ 381 $ 390 $ 289
otal net assets are the difference between total assets and total liabilities, and represent resources that can
e used to pay for future operations and capital improvements. The bulk of our assets are capital assets.
hese have been paid for using borrowed money and do not add significantly to our net asset value. The
;stricted portion of net assets represents cash and investments that can only be used for buildings and
nprovements. The remaining restricted fund balance will be used to fund future capital maintenance
rojects such as new roofing.
ile A-2 summarizes and compares activity presented in the Statement of Activities (page FS-2). It shows
activity behind the increase in total net assets over the year ending June 30, 2009.
MDA-3
EAST PENNSBORO AREA SCHOOL DISTRICT
MANAGEMENT'S DISCUSSION AND ANALYSIS
JUNE 30, 2009
Table A-2
Changes in Net Assets
Governmental Activities Business-type Activities
2009 2008 2009 2008
Totals
2009 2008
Revenues
Program revenues
Charges for services $ 254 $ 230 $ 835 $ 823 $ 1,089 $ 1,053
Operating grants
and contributions 4,254 4,527 394 378 4,648 4,905
Capital grants - -
and contributions 469 466 - - 469 466
General revenues - -
Taxes 23,620 20,893 - - 23,620 20,893
State general subsidies 5,694 4,663 - - 5,694 4,663
Other 152 355 (5) 4 147 359
Total revenues 34,443 31,134 1,224 1,205 35,667 32,339
Direct expenses 31,475 30,954 1,253 1,261 32,728 32,215
Excess (deficiency before transfers) 2,968 180 (29) (56) 2,939 124
Transfers (21) (167) 21 167 - -
Change in net assets $ 2,947 $ 13 $ (8) $ 111 $ 2,939 $ 124
ie growth in Total Revenues from our Total Primary Governmental activities was in line with the increase
our direct expenses.
Activities
le A-3, shown on the next page, presents expense information from the Statement of Activities for
ernmental activities. The total cost of services represents the actual cost of providing the services while
net cost represents the amount of cost that is not recovered through program revenues, meaning user
•ges, grants and contributions. The total net cost of services of $26,497,174 must be recovered through
oral revenue, primarily taxes and state subsidies. Amounts not recovered will reduce funds available for
re years.
MDA-4
EAST PENNSBORO AREA SCHOOL DISTRICT
MANAGEMENT'S DISCUSSION AND ANALYSIS
JUNE 30, 2009
Classroom instruction
Instructional student support
Administrative and financial support
Operation and maintenance of buildings
Student transportation
Student activities
Community services
Interest on long-term debt
Total governmental activities
State general subsidies revenues
Total needs from taxes and other local sources
Type Activities
Table A-3
Governmental Activites
Direct Expenses Program Revenues Net Expense
2009 2008 2009 2008 2009 2008
$ 19,988 $ 19,067
2,654 2,953
3,189 3,308
2,429 2,471
1,207 1,140
647 650
27 2
1,333 1,363
$ 31,474 $ 30,954
$ 3,508
209
106
64
543
78
$ 3,831
216
111
57
472
70
469 466
$ 4,977 $ 5,223
$ 16,480
2,445
3,083
2,365
664
569
27
864
$ 15,236
2,737
3,197
2,414
668
580
2
897
26,497 25,731
(5,694) (4,663)
$ 20,803 $ 21,068
ale A-4, is similar to the previous table, except it presents business-type service costs. Note that almost
of the cost of food services is paid by program revenues.
Table A-4
Business-type Activities
Direct Expenses Program Revenues Net Expense
2009 2008 2009 2008 2009 2008
Food services $ 1,253 $ 1,261 $ 1,228 $ 1,201 $ 25 $ 60
Investment earnings (1) (4)
Total net expense $ 24 $ 56
were no other significant changes during the year with the net cost of services remaining about the
in 2009 as in 2008.
TRICT'S FUNDS
'he information in Table A-5 summarizes and compares the Governmental Funds' Balance Sheet for June
0, 2009, 2008 and 2007. Note that we again brought forward 2008 and 2007 balances from our 2008
4D&A. This information is not otherwise a part of the 2009 financial statement package. The groupings are
ie same as those used in the Statement of Net Assets. ,
MDA-5
EAST PENNSBORO AREA SCHOOL DISTRICT
MANAGEMENT'S DISCUSSION AND ANALYSIS
JUNE 30, 2009
Table A-5
Governmental Fund Balances
2008-2009 2007-2008
2009 2008 2007 Change %Change Change %Change
eneral Fund - reserved $ 1,700 $ 2,074 $ 1,455 $ (374) $ 619
eneral Fund - unrestricted 2,988 1,027 1,979 1,961 (952)
apital Projects Fund - reserved 495 531 631 (36) (100)
Special Revenue Fund - unrestricted 264 359 457 (95) (98)
otal governmental funds $ 5,447 $ 3,991 $ 4,522 $ 1,456 36.5% $ (531) -11.7%
otal reserved $ 2,195 $ 2,605 $ 2,086 $ (410) $ 519
otal unrestricted - undesignated 3,252 1,386 2,436 1,866 (1,050)
otal governmental funds $ 5,447 $ 3,991 $ 4,522 $ 1,456 36.5% $ (531) -11.7%
As previously mentioned, the basis of measurement for fund assets and liabilities is different than that used
i the Statement of Net Assets. The differences between the total governmental fund balance of $5,446,974
and the total net assets of $10,726,493 are itemized in the reconciliation presented within the financial
statements on page FS-4.
items that caused the change in fund balance during the year are presented in the Statement of
=es, Expenditures and Changes in Fund Balances within the financial statements on page FS-5. The
balance increased by $1,445,971 because the total fund expenditures, including transfers, were less
the total fund revenues.
neral Fund Budgetary Highlights
)le A-6 has been summarized from the comparative budget information presented on page ORI-1 of the
uired supplemental information. The total variance was favorable in that we budgeted that total
>enditures would be higher than total revenues by $145,008 when in fact our total expenditures, before
isfers, were less than our revenues by $1,627,193.
Table A-6
Budget to Actual Comparsion
Budget Actual
2009 2008 2009
Total revenues
Total expenditures
Excess revenues (expenditures)
Other financing sources (uses)
Net change in fund balance
$ 33,855 $ 32,805
34,000 33,756
(145) (951)
(540) (701)
$ (685) $ (1,652)
2008
$ 34,076 $ 31,756
32,449 31,889
1,627 (133)
(40) (201)
$ 1,587 $ (334)
Variance
2009 2008
$ 221 $ (1,049)
1,551 1,867
1,772 818
500 500
$ 2,272 $ 1,318
MDA-6
EAST PENNSBORO AREA SCHOOL DISTRICT
MANAGEMENT'S DISCUSSION AND ANALYSIS
JUNE 30, 2009
?APITAL ASSETS
able A-7 summarizes the Changes in Capital Assets note to the financial statements on pages FS-21. The
riginal cost of the capital assets on the books at June 30, 2009 was $63,456,483. Each year, for capital
3sets other than land and construction in progress, this amount is depreciated (reduced in value) to reflect
sage. The net balance of $37,097,240 is the amount remaining after this reduction.
construction projects are completed, related construction in progress balances are moved into the
Wings and improvements category, and depreciated over the estimated useful life of the improvement.
the year our capital projects activity was limited to carrying renovations to existing buildings.
Table A-7
Capital Assets
Governmental activities
Land
Construction in progress
Buildings and improvements
Furniture, equipment
and library books
Total governmental capital assets
2009 2008 2007
$ 326 $ 326 $ 326
35,692 36,998 38,180
1,079 1,251 1,457
$ 37,097 $ 38,575 $ 39,963
Business-type activities
Furniture and equipment
G-TERM LIABILITIES
$ 246 $ 280 $ 310
able A-8 summarizes the Long-Term Liabilities note to the financial statements on pages FS-22 to FS-28.
ost of the debt relates to general obligation bonds issued by the District to pay for capital improvements.
ur ability to raise future funds through the issuance of debt depends on how well our existing bonds are
ted by the investment community. Currently, the District is rated by Standard and Poor's as AAA. ACT 1
f 2006 impacts a school district's ability to incur debt without voter approval. The District does not
nticipate incurring additional debt in the near future.
MDA-7
EAST PENNSBORO AREA SCHOOL DISTRICT
MANAGEMENT'S DISCUSSION AND ANALYSIS
JUNE 30, 2009
Table A-8
Long-term Liabilities
Governmental activities
General obligation debt
Capital leases
Compensated absences
Other Post Employment Benefits
Unamortized bond costs
2009 2008 2007
$ 32,030 $ 34,650 $ 37,270
- - 11
567 632 750
119 - -
(378) (526) (589)
$ 32,338 $ 34,756 $ 37,442
year, the District pays interest to bond holders and pays down a portion of the outstanding debt,
-d to as redemption. During 2009, our redemptions totaled $2,830,000, net of refunding. The district
nced the Series A of 2001 and Series of 2003 bonds through issuance of its Series of 2009 bonds in the
It of $9,825,000 resulting in net savings of $254,975.
apensated absences decreased during the year from an entity-wide perspective from $631,705 to
7,195 at June 30, 2009. Compensated absences decreased from June 30, 2007 to June 30, 2008 from an
ty-wide perspective from $749,869 to $631,705.
ding for other post employment benefits began in 2008-2009. The liability at June 30, 2009 from an
wide perspective was $119,207.
ext Year's Budget
ble A-9 compares the original budget for 2009 to the 2010 budget that was approved June, 2009.
Table A-9
Budget Comparsions
2009-2010 2008-2009 Change
Total revenues $ 34,180 $ 33,789 $ 391
Total expenditures 34,252 33,941 311
Excess revenues (expenditures) (72) (152) 80
Other financing sources (uses) (533) (533) -
Net change in fund balance $ (605) $ (685) $ 80
Similar to our 2009 budget, our budgeted expenditures for 2010 exceed budgeted revenues.
MDA-8
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EAST PENNSBORO AREA SCHOOL DISTRICT
RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET
TO THE STATEMENT OF NET ASSETS
JUNE 30, 2009
fund balances - Governmental funds $ 5,446,974
,mounts reported for governmental activities in the statement
of net assets are different because:
Capital assets are not financial resources and therefore are not reported
as assets in the governmental funds. At year end, the cost of capital
assets is $ 63,456,484 and the accumulated depreciation
is $ 26,359,244 37,097,240
Taxes receivable will be collected, but are not available soon enough to
pay for the current year's expenditures, and therefore are deferred in the
governmental funds. At year end, these taxes receivable consist of:
Real estate taxes $ 284,238
Earned income taxes 180,887 465,125
Certain liabilities are not due and payable in the current year, and therefore
are not reported as liabilities in the governmental funds. At the year end,
these liabilities consist of:
Bonds payable (32,030,000)
Compensated absences (567,195)
Other post-employment benefit accrual (119,207)
Long-term liabilities (32,716,402)
Accrued interest on bonds payable (277,697) (32,994,099)
Costs related to the issuance of bonds are reported as expenditures
in the governmental funds. At year end, the remaining unamortized
bond related costs consist of:
Bond issuance costs 333,516
Bond discounts (premiums) (103,612)
Refunding costs 481,349 711,253
net assets - Governmental activities $ 10,726,493
accompanying notes are an integral part of these financial statements.
FS-4
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EAST PENNSBORO AREA SCHOOL DISTRICT
STATEMENT OF NET ASSETS - PROPRIETARY FUNDS
JUNE 30, 2009
(With Summarized Financial Information for June 30, 2008)
Food Service
Cash and cash equivalents
Due from other governments
Other receivables
Inventories
Total current assets
Furniture and equipment (net of accumulated depreciation)
Total assets
2009
$ 113,557
4,664
16,644
134,865
246,319
$ 381,184
2008
$ 90,724
6,232
526
12,786
110,268
279,994
$ 390,262
ilities
Accounts payable
Deferred revenues
Total current liabilities
assets
Invested in capital assets (net of related debt)
Unrestricted
Total net assets
Total liabilities and net assets
$ 23,924
17,469
41,393
246,319
93,472
339,791
$ 381,184
$ 27,720
14,858
42,578
279,994
67,690
347,684
$ 390,262
accompanying notes are an integral part of these financial statements.
FS-7
EAST PENNSBORO AREA SCHOOL DISTRICT
STATEMENT OF REVENUES, EXPENSES
AND CHANGES IN NET ASSETS - PROPRIETARY FUNDS
FOR THE YEAR ENDED JUNE 30, 2009
(With Summarized Financial Information for the Year Ended June 30, 2008)
perating revenues - Food service revenue
operating expenses
Other purchased service
Food and milk
Other supplies
Depreciation
Total operating expenses
rating income (loss)
operating revenues (expenses)
Investments earnings
Loss on sale of fixed assets
State sources - meal subsidies
Federal sources - commodities
Federal sources - meal subsidies
Total nonoperating revenues (expenses)
-oss before transfers
Transfers from other funds
,hange in net assets
Vet assets - beginning
Vet assets - ending
Food Service
2009 2008
$ 834,593 $ 822,563
1,130, 978
46,666
34,204
40,932
1,252,780
(418,187)
1,124, 943
54,577
39,829
41,358
1,260,707
(438,144)
775
(5,383)
40,543
46,666
306,197
388,798
(29,389)
21,496
(7,893)
347,684
$ 339,791
3,659
41,646
54,577
281,885
381,767
(56,377)
167,324
110,947
236,737
$ 347,684
accompanying notes are an integral part of these financial statements.
FS-8
EAST PENNSBORO AREA SCHOOL DISTRICT
STATEMENT OF CASH FLOWS - PROPRIETARY FUNDS
FOR THE YEAR ENDED JUNE 30, 2009
(With Summarized Financial Information for the Year Ended June 30, 2008)
rating activities
Cash received from users
Cash payments to suppliers for goods and services
Cash payments for other operating expenses
Net cash provided by (used for) operating activities
financing activities
State sources
Federal sources
Notes and loans received (repaid)
General fund contributed services
Capital projects fund contributed services
Net cash provided by (used for) non-capital financing activities
Food Service
2009 2008
$ 837,729
(1,134,775)
(38,062)
(335,108)
$ 822,054
(1,136,053)
(36,047)
(350,046)
40,789
307,520
11,727
9,770
369,806
41,877
283,090
(150,000)
156,087
11,238
342,292
pital and related financing activities
Cash payments for equipment (12,640) (11,238)
Net cash provided by (used for) capital and related financing activities (12,640) (11,238)
sting activities
Investments earnings 775 3,658
Net cash provided by (used for) investing activities 775 3,658
et increase (decrease) in cash and cash equivalents 22,833 (15,334)
and cash equivalents - beginning 90,724 106,058
and cash equivalents - ending $ 113,557 $ 90,724
teconciliation of operating income (loss) to net cash
provided by (used for) operating activities
Operating income (loss) $ (418,187) $ (438,144)
Adjustments to reconcile operating income (loss) to net cash
provided by (used for) operating activities
Depreciation 40,932 41,358
Donated commodities 46,666 54,577
Net change in other assets and other liabilities
Accounts receivable 525 (525)
Inventories (3,858) 2,951
Accounts payable (3,796) (10,279)
Deferred revenue 2,610 16
Total adjustments 83,079 88,098
Net cash provided by (used for) operating activities $ (335,108) $ (350,046)
e accompanying notes are an integral part of these financial statements.
FS-9
EAST PENNSBORO AREA SCHOOL DISTRICT
STATEMENT OF NET ASSETS - FIDUCIARY FUNDS
JUNE 30, 2009
(With Summarized Financial Information for June 30, 2008)
Cash and cash equivalents
Total assets
Due to student groups
Due to other organizations
Total liabilities
et assets
Total liabilities and net assets
Agency
Student Totals
Activities 2009 2008
$ 253,657 $ 88,162 $ 341,819 $. 83,700
$ 253,657 $ 88,162 $ 341,819 $ 83,700
$ - $ 88,162 $ 88,162 $ 83,700
253,657 - 253,657 -
253,657 88,162 341,819 83,700
$ 253,657 $ 88,162 $ 341,819 $ 83,700
e accompanying notes are an integral part of these financial statements.
FS-10
EAST PENNSBORO AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2009
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
East Pennsboro Area School District is the level of government which has oversight responsibility and control
over activities related to public school education. The report includes services provided by the District to residents
within the boundaries of the Cumberland County municipality of East Pennsboro Township. Services provided
include a comprehensive curriculum for primary and secondary education as well as special education and
vocational education programs. The District receives revenue from local, state and federal sources and must
comply with the requirements of these funding sources.
The financial statements of East Pennsboro Area School District have been prepared in accordance with
generally accepted accounting principles as applied to governmental units. The Governmental Accounting
Standards Board (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.
There are no component units that the District feels meet all the above criteria for inclusion in this reporting entity.
Jointly-governed organizations
The District is a participant in four jointly-governed organizations, each of which is a separate legal entity that
offers educational services to the District and its residents. Each of these entities serves several school districts
and/or municipalities and therefore are not included in this reporting entity. These entities do not have taxing
power, but are required to adopt an annual budget, which is funded primarily by its member Districts or others that
use its services. Complete financial statements for these entities can be obtained from the respective entity's
administrative office.
FS-11
EAST PENNSBORO AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2009
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd.)
Jointly-governed organizations (Cont'd.)
West Shore Tax Bureau provides earned income tax collection services.
Capital Area Intermediate Unit provides special education services and programs.
Cumberland Perry Area Vocational Technical School provides vocational and technical education
services and programs.
Harrisburg Area Community College provides community college education services and programs.
Basis of presentation - District-wide financial statements
District-wide financial statements (i.e., the statement of net assets and the statement of activities) report
information on all of the nonfiduciary activities of the District. As a general rule the effect of interfund activity has
been eliminated from these statements. Governmental activities, which normally are supported by taxes and
intergovernmental revenues, are presented separately from business-type activities which rely to a significant
extent, on fees and charges for support.
The district-wide financial statements are presented using the economic resources measurement focus and the
accrual basis of accounting as are the proprietary fund and the fiduciary fund financial statements. Revenues are
recognized when earned and expenses are recognized when a liability is incurred, regardless of the timing of
related cash flows. Real estate and personal taxes are recognized as revenues in the year for which they are
levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the
provider have been met. Net assets (total assets less total liabilities) are used as a practical measure of economic
resources and the operating statement includes all transactions and events that increased or decreased net
assets. Depreciation and amortization are charged as an expense against current operations. Accumulated
depreciation and unamortized costs are presented in the statement of net assets.
The statement of activities demonstrates the degree to which the direct expenses of given functions or programs
are offset by program revenues. Direct expenses are those that are clearly identifiable within a specific function or
program. Program revenues include charges to customers who purchase, use, or directly benefit from goods,
services, or privileges provided by a given function or program. In addition, program revenues include grants and
contributions that are restricted to meeting the operational or capital requirements of a particular function or
program. Taxes and other items not properly included among program revenues are presented as general
revenues.
Basis of presentation - Fund financial statements
Fund financial statements are also provided for all governmental funds, proprietary funds, and fiduciary funds of
the District. Major individual governmental funds and major individual proprietary funds are presented as separate
columns in the fund financial statements. Nonmajor funds, if any, are aggregated and presented in a single
column. Fiduciary funds are presented by fund.
FS-12
EAST PENNSBORO 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.)
The governmental funds are presented using the current financial resources measurement focus and the modified
accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available.
Revenues are considered to be available when they are received within the current period or soon enough
thereafter to pay liabilities of the current period. For this purpose, the District considers tax revenue to be
available if received within 60 days of the end of the fiscal period, except for earned income tax revenue which
may be considered available if received within 60 to 90 days of the end of the fiscal year, depending upon the
frequency of payments from the District's collection bureau. Revenue from federal, state and other grants
designated for payment of specific expenditures is recognized when the related expenditures are incurred;
accordingly, when such funds are received, they are recognized as deferred revenues until earned. Expenditures
generally are recognized when a liability is incurred, as under accrual accounting. However, debt service
expenditures, as well as expenditures related to compensated absences and claims and judgments, are
recognized only when payment is due.
Proprietary funds generally follow standards for accounting and financial presentation for private business
enterprises to the extent that those standards do not conflict with or contradict guidance of the Governmental
Accounting Standards Board.
Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and
expenses generally result from providing services and producing and delivering goods in connection with the
fund's principal ongoing operations. Operating expenses for the District's proprietary fund include food production
costs, supplies, administrative costs, and depreciation on capital assets. All revenues or expenses not meeting
this definition are presented as nonoperating revenues and expenses.
Fund accounting
The accounts of the District are organized on the basis of funds, each of which is considered a separate
accounting entity. The operations of each fund are accounted for by providing a separate set of self-balancing
accounts which comprise its assets, liabilities, fund equity, revenues, and expenditures, or expenses, as
appropriate. Resources are allocated to and accounted for in individual funds based upon the purposes for which
they are to be spent.
When both restricted and unrestricted resources are available for use, it is the District's general policy to use the
restricted (primarily operating grants) resources first, then unrestricted resources as they are needed.
The District has the following major types of funds:
Governmental Funds - These funds account for the activities through which most of the District's operations
are provided.
FS-13
EAST PENNSBORO AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2009
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd.)
Basis of presentation - Fund financial statements (Cont'd.)
Fund accounting (Contd.)
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 presentations. The District, before levying annual school taxes, is required to prepare an
operating budget for the succeeding fiscal year. This process includes the publishing of notices by
advertisement, that the proposed budget has been prepared and is available for public inspection at the
administrative office of the District, and that public hearings are held on the proposed operating budget
which are required to be scheduled at least ten days prior to when final action on adoption is taken by the
Board.
Legal budgetary control is maintained at the sub-function/major object level. The Board may approve
transfers of funds appropriated to any particular item of expenditure in accordance with the Pennsylvania
School Code. Management may amend the budget at the sub-function/sub-object level without Board
approval, provided it is not at a higher level than the Board adopted budget.
In order to preserve a portion of an appropriation for which an expenditure has been committed by a
purchase order, contract or other form of commitment, an encumbrance is recognized. Unused
encumbrances expire at the end of each year.
Included in the budget are program budgets as prescribed by the federal and state agencies funding the
program. These budgets are approved on a program by program basis by the federal and state funding
agencies.
FS-14
EAST PENNSBORO 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 Capital Projects Fund accounts for bonds proceeds and the expenditure of those funds for capital
outlays.
The Capital Reserve Fund accounts for transfers from other funds and related investments earnings for
capital outlays not accounted for in another fund.
The Special Revenue Fund accounts for athletic revenues and proceeds of other specific revenue sources
that are restricted to expenditures of those funds for athletic and other specified purposes.
The District reports the following Proprietary Fund:
The Food Service Fund accounts for the operations of the cafeterias.
The District reports the following Fiduciary Fund:
The Student Activities Fund accounts for programs operated and sponsored by various clubs and
organizations within the schools.
The District Agency Fund accounts for contributions to and interest earnings on scholarship funds donated to
the District and for payments, if any, of scholarship funds to selected students.
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 presented at fair value.
Taxes and taxes receivable
Real estate taxes are levied as of July 1 with a legal, enforceable claim against the property and/or taxpayer.
Amounts not collected within six months (December 31) are considered delinquent and submitted to outside
agencies/entities for collection actions.
FS-15
EAST PENNSBORO AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2009
OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd.)
Receivables and payables between funds
Activity between funds that represent lending/borrowing arrangements outstanding at the end of the fiscal year
are referred to as "due to/from other funds". Any residual balances outstanding between the governmental
activities and business-type activities are reported in the government-wide financial statements as "internal
balances". Any balances between funds are short-term items pending periodic repayments.
Inventories 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 $ 1,000 and an estimated useful life in excess of one year. Management has elected to include certain
homogeneous groups with individual costs of less than $ 1,000 as capital assets for financial reporting purposes.
In addition, capital assets purchased with long-term debt may be capitalized regardless of the thresholds
established. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed.
Major outlays for capital assets and improvements are capitalized as projects are constructed. The costs of
normal maintenance and repairs that do not add to the value of the asset or materially extend asset lives are not
capitalized.
Capital assets are depreciated using the straight-line method over the following estimated useful lives:
Assets
Government Business-type
Activities Activities
Buildings
Building improvements
Site improvements
Furniture, fixtures and equipment
Library books
40 -
15to40 -
20 -
5to15 5to12
7 -
FS - 16
EAST PENNSBORO AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2009
OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd.)
Long-term liabilities
In the district-wide financial statement, and in the proprietary fund types in the fund financial statements, long-
term debt and other long-term obligations are presented as liabilities in the applicable governmental activities or
proprietary fund statement of net assets. Refunding costs and bond premiums and discounts are amortized over
the life of the bonds using the effective interest method and the straight-line method. Bond issuance costs are
presented as deferred charges and amortized over the term of the related debt.
In the fund financial statements, 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.
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.
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.
FS-17
EAST PENNSBORO AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2009
MMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd.)
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.
Comparative information
Comparative totals for the prior year have been presented in the accompanying financial statements in order to
provide an understanding of changes in the District's financial position and operations. Certain amounts
presented in the prior year have been reclassified in order to be consistent with current year's presentation.
However, presentations of prior year totals by fund and activity type have not been presented in each of the
statements since their inclusion would make the statements unduly complex and difficult to read. Summarized
comparative information should be read in conjunction with the District's financial statements for the year ended
June 30, 2008, from which the summarized information was derived.
H AND CASH EQUIVALENTS
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 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 $ 1,298,245 and the bank
balances totaled $ 1,616,593. Of the bank balances, $ 583,483 was covered by federal depository insurance and
$ 1,033,110 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 pledges collateral is held by the Federal Reserve Bank, but is not titled in the District's name.
The District also has cash equivalents with the Pennsylvania Local Government Investment Trust (PLGIT) and the
Pennsylvania School District Liquid Asset fund (PSDLAF) that operate a common law trusts established pursuant
to the Intergovernmental Cooperation Act and related statutes for the purpose of pooling investments. It is a
fundamental policy of these trusts 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. At June 30, 2009, the District's deposits in PLGIT and PSDLAF totaled $ 2,863,516 and $ 595,522,
respectively.
FS-18
EAST PENNSBORO AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2009
CASH AND CASH EQUIVALENTS (Cont'd.)
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 PLGIT 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 PLGIT were rated "AAAm" by
Standard & Poor's.
Cash and cash equivalents at June 30, 2009 are as follows:
Governmental activities $ 4,301,907
Business-type activities 113,557
Fiduciary funds 341.819
Total cash and cash equivalents 4.757.283
'AXES RECEIVABLE
Taxes receivable are as follows:
Taxes Taxes
Receivable Allowance for Receivable Deferred
(Gross) Uncollectibles (Net) Tax Revenue
Real estate taxes $ 446,353 $ 13,390 $ 432,963 $ 284,238
Earned income taxes 1,327,082 - 1,327,082 180,887
Personal taxes - - - -
General Fund 1,773,435 13,390 1,760,045 465,125
Full accrual adjustment - - - (465,125)
Governmental activities $ 1,773.435 $ 13 390 1.760.045 $
FS-19
EAST PENNSBORO AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2009
DUE FROM/TO OTHER FUNDS AND INTERFUND TRANSFERS
Interfund balances are as follows:
Assets Liabilities
General Fund $ 5,775 $ 5,775 Special Revenue Fund
Capital Projects Fund 81,561 81,561 Special Revenue Fund
$ 87,336 $ 87 336
Interfund transfers were as follows:
Other financing sources Other financing uses
Food Service Fund $ 9,770 $ 9,770 Capital Reserve Fund
Food Service Fund 11,726 11,726 General Fund
Special Revenue Fund 27,986 27,986 General Fund
WE FROM OTHER GOVERNMENTS
Due from other governments are as follows:
Local sources - other taxes
State sources
Federal sources
Governmental Business-type
Activities Activities
$ 63,382 $ -
315,227 503
376.902 4,161
$ 755.511 $ 4,664
FS - 20
EAST PENNSBORO AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2009
?HANGES IN CAPITAL ASSETS
Capital asset activity for the year was as follows:
Governmental activities
Capital assets not being depreciated
Land
Construction in progress
Capital assets being depreciated
Buildings and improvements
Furniture and equipment
Library books
Accumulated depreciation
Beginning Ending
Balance Increases Decreases Balance
$ 325,826 $ - $ - $ 325,826
325,826
-
325,826
56,619,681 107,056 - 56,726,737
5,338,481 92,309 (6,495) 5,424,295
957,126 22,500 - 979,626
62,915,288 221,865 (6,495) 63,130,658
Buildings and improvements (19,621,587) (1,412,908) - (21,034,495)
Furniture and equipment (4,161,556) (267,800) 6,495 (4,422,861)
Library books (883,285) (18,603) - (901,888)
(24,666,428) (1,699,311) 6,495 (26,359,244)
Total capital assets being depreciated, net 38,248,860 (1,477,446) - 36,771,414
Governmental activities capital assets, net 38.574.686 (1.477.446) $ - 37.097.240
Business-type activities
Capital assets being depreciated
Furniture and equipment
Accumulated depreciation
Furniture and equipment
Capital assets being depreciated, net
$ 624,519 $ 12,640 $ (13,658) $ 623,501
(344,525) (40,932) 8,275 (377,182)
279,994 (28,292) (5,383) 246,319
Business-type activities capital assets, net $ 279.994 $ (28.292) $ (5.383) $ 246 319
FS-21
EAST PENNSBORO 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 $ 939,525
Instructional student support 284,118
Administrative and financial support 330,943
Operation and maintenance of plant 96,946
Transportation 12,798
Student activities 34,981
$ 1.699.311
Business-type activities - Food service $ 40,932
EFERRED REVENUES
Governmental funds present deferred revenue in connection with receivables for revenues that are not
considered to be available to pay liabilities of the current period. Governmental funds also defer revenue
recognition with resources that have been received, but not yet earned. Deferred revenues in the General fund of
$ 482,904 consist of $ 465,125 taxes receivable not received within 60 to 90 days of the end of the fiscal period,
and $ 17,779 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.
NG-TERM LIABILITIES
Changes in all long-term liabilities were as follows:
Beginning Ending Due Within
Balance Additions Reductions Balance One Year
Governmental Activities:
Bonds payable $ 34,650,000 $ 9,825,000 $ (12,445,000) $ 32,030,000 $ 2,755,000
Compensated absences 631,705 50,490 (115,000) 567,195 120,000
Other post employment benefits - 119.207 - 119.207 -
$ 35.281.705 9.994.697 (12.560.000) $ 32.716.402 2.875.000
FS - 22
EAST PENNSBORO AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2009
LONG-TERM LIABILITIES (Cont'd.)
General obligation notes and bonds payable
Changes in general obligation notes and bonds payable were as follows:
Beginning Scheduled Ending
Balance New Issue Refunding Redemptions Balance
General Obligation Bonds:
Series A of 2001 $ 4,380,000 $ - $ (3,345,000) $ (1,035,000) $ -
Series of 2003 6,955,000 - (6,270,000) (685,000) -
Series A of 2003 4,345,000 - - (275,000) 4,070,000
Series of 2004 9,985,000 - - (5,000) 9,980,000
Series A of 2004 2,755,000 - - (355,000) 2,400,000
Series of 2006 3,100,000 - - (220,000) 2,880,000
Series of 2009 - - 9,825,000 - 9.825.000
31,520,000 - 210,000 (2,575,000) 29,155,000
General Obligation Notes:
Series of 1999 3,130,000 - - (255,000) 2,875,000
Amounts
Due Within
Interest Rates Maturity Date Callable Date One Year
GOB Series A of 2003 2.00% to 3.90% August 2020 August 2008 $ 285,000
GOB Series of 2004 3.00% to 4.00% August 2018 February 2009 5,000
GOB Series A of 2004 1.65% to 4.00% February 2015 February 2011 365,000
GOB Series of 2006 3.45% to 4.05% August 2021 August 2012 225,000
GOB Series of 2009 2.00% to 2.50% October 2014 Not callable 1,605,000
GON Series of 1999 Variable February 2018 Not callable 270,000
2.755.000
FS - 23
EAST PENNSBORO AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2009
KONG-TERM LIABILITIES (Cont'd.)
General obligation notes and bonds payable (Contd.)
Scheduled debt service requirements, payable by the General Fund, are as follows:
Year Ending June 30 Principal Interest Total
2010 $ 2,755,000 $ 888,216 $ 3,643,216
2011 3,090,000 859,221 3,949,221
2012 3,170,000 783,422 3,953,422
2013 3,315,000 706,738 4,021,738
2014 3,465,000 623,786 4,088,786
2015-2019 14,755,000 1,538,212 16,293,212
2020-2024 1,480,000 73,252 1,553,252
$ 32.030.000 $ 5,472,847 37.502.847
In June 2009, the District issued its Series of 2009 bonds in the amount of $ 9,825,000 for the current refunding of
the Series A of 2001 and Series of 2003 bonds. The purpose of this refunding was to take advantage of favorable
interest rates. This refunding decreased future debt service, net of state aid by $ 254,975 to be recognized
primarly in the year ending June 30, 2010. After refunding the old bonds of $ 9,721,789 and payment issuance
costs and net bond premiums of $ 91,195, the net proceeds of $ 12,016 were applied to the initial debt service
payment for the new bonds in October 2009.
Compensated absences
Compensated absences (those for which employees received pay) are presented using the termination
payment method. A liability is computed using estimates which apply historical data to current factors. The
District maintains records of unused leave and applies the contracted rate for employees eligible for
termination payments. The District allows only restricted sabbatical leave and therefore does not present any
liability in advance of the sabbatical. Payments for compensated absences are made in the year the absence
is taken or the employee retires. When an employee retires, the payout is as follows:
Vacation (administrative personnel only) - unused vacation days (not to exceed 5 days) are paid at the
time of separation.
Sickness - no payout required except to retirees who meet the requirements below for severance
payments
Personal days - unused personal days (not to exceed 5 days) may be carried over but no payment is
required upon termination
FS - 24
EAST PENNSBORO AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2009
LONG-TERM LIABILITIES (Cont'd.)
Compensated absences (Cont'd.)
Retirement severance payments - retiring employees with at least seven consecutive years of District
employment immediately prior to retirement, at least twenty years of service to the District, and at least
thirty years of total school service credited under the State Retirement System are eligible for severance
payments based on years of service and accumulated sick leave days. The retirement payment amount is
equal to $ 300 times the number of years of continuous District service to a maximum of $ 9,000 for thirty
years. In addition, eligible retirees are reimbursed for accumulated unused sick leave in excess of one
hundred days to a maximum of three hundred days at a rate of $ 50 per day for a maximum payment of
$ 10,000 for accumulated sick leave. Additional severance is payable to retirees with a minimum of
twenty years of service to the District of $ 20,000 payable over five years. This new severance benefit
replaces post-employment health benefits provided under the prior contract. Total maximum severance
payments to each eligible retiree under the new collective bargaining agreement in effect through August
31, 2009 are $ 39,000.
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 the District prior collective bargaining agreement, expired as of August 31, 2005, the District offered
one post-employment benefit to retired professional employees other than pension benefits as discussed in
the previous note. For employees with twenty or more years of service to the District retiring prior to
September 1, 2005, the District pays the basic medical insurance premiums for five years (excluding family
coverage) following retirement. The District does allow other employees not eligible for this benefit to remain
in its group medical insurance plan upon payment by the retired employee of the cost of such coverage.
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 - 25
EAST PENNSBORO AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2009
LONG-TERM LIABILITIES (Contd.)
Other post employment benefits (OPEBs) (Cont'd.)
Plan description (Cont'd.)
Participant information
Active participants
Vested former members
Retired participants
Funding Policy
287
47
334
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 $ 66,854
Amortization of unfunded actuarial accrued liability 253,719
Annual required contribution 320,573
Interest on the net OPEB obligation _
Adjustment to the ARC _
Annual OPEB cost 320,573
Contributed to the plan (201,366)
Increase in net OPEB obligation 119,207
Net OPEB obligation - beginning _
Net OPEB obligation - end $ 119.207
FS - 26
EAST PENNSBORO 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 (Cont'd.)
The percentage of annual OPEB cost contributed was as follows:
Year ended
Percentage of
Annual Annual OPEB Net OPEB
OPEB Cost Cost Contributed Obligation
June 2009
Funding status and funding progress
$ 320,573
62.81% $ 119,207
The District's actuarial accrued liability (AAL) for OPEBs as of June 2009 was $ 1,495,092. 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
June 2009 $ - $ 1,495,092 $ 1,495,092 0.00 $13,876,545 10.77%
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 8.00% in 2009 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
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.
FS - 27
EAST PENNSBORO AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2009
LONG-TERM LIABILITIES (Cont'd.)
Other post employment benefits (OPEBs) (Cont'd.)
Actuarial assumptions and methods (Contd.)
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 leases photocopying machines and modular office buildings pursuant to various lease agreements
which are being accounted for as operating leases. Total lease rental payments during the year ended June 30,
2009 were $ 173,193. Minimum net lease rental payments for future periods are expected to be as follows:
2009-2010 $ 167,124
2010-2011 167,124
2011-2012 101.440
Total minimum payments required $ 435,688
MANAGEMENT SERVICES
The cafeteria facilities of the District were operated by a third party vendor. Under the terms of the contract, the
vendor provides for the operation and maintenance of food services as required by law, with the policies subject
to the approval of the District. Operating costs, management fees and administrative costs are billed monthly to
the District.
II
NSION PLAN
Substantially all full-time and part-time employees of the District participate in the pension plan. The District
recognizes expenditures or expenses equal to its contractually-required contributions, subject to the modified
accrual basis of accounting in governmental funds.
FS - 28
EAST PENNSBORO AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2009
PENSION PLAN (Cont'd.)
The District contributes to The Public School Employees' Retirement System (the System), a governmental cost
sharing multiple-employer defined benefit plan. The plan is under the authority of the Public School Employees'
Retirement Code (the Code), as amended. The plan provides retirement and disability, legislatively mandated ad
hoc cost-of-living adjustments, and healthcare insurance premium assistance to qualifying annuitants. The
System issues a comprehensive annual financial report that, includes financial statements and required
supplementary information for the plan. A copy of the report may be obtained by writing to the System at PO Box
125, Harrisburg, PA 17108-0125, or by accessing the System's website at www.osers.state.oa.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 2009, 2008 and 2007 were $ 757,357, $ 1,066,639, and $ 937,264, respectively. Those
amounts are equal to the required contributions for each year.
MANAGEMENT
Health insurance
The District is a member of South Central Trust for processing claims and obtaining reinsurance through
commercial insurance carriers. The District participates in a risk sharing investment pool with four other Districts
and one local vocational-technical school. The District has reinsurance for claims in excess of $ 125,000 specific
(per person). The District has a maximum lifetime benefit of $ 5,000,000 per person. District transactions with the
trust were as follows:
FS - 29
EAST PENNSBORO AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2009
? ISK MANAGEMENT (Contd.)
Health insurance (Cont'd.)
Cash balance in the trust, beginning
Payments from the District and its retirees
Claims paid by the trust
Stop loss premiums
Administrative and other fees, net of interest earned
$ 2,351,837
2,936,241
$ (2,587,040)
(108,598)
(134.245)
(2, 829, 883)
Cash balance in the trust, ending
District prepaid expenses for health benefits
Amount available for accrued claims
The amount available for accrued claims was as follows:
Accrual for claims incurred
Accrual for health insurance coverage on payroll payable
Amount available for accrued claims
2,458,195
1,700,000
$ 758 195
$ 423,977
334,218
$ 758 195
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.
Other insurance
The District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets;
errors and omissions; and natural disasters. The District maintains commercial insurance coverage covering each
of those risks of loss. Management believes such coverage is sufficient to preclude any significant uninsured
losses to the District. Settled claims have not exceeded this commercial coverage in any of the past three fiscal
years.
For State unemployment compensation laws, the District is self-insured, which is a common practice for local
governmental units. Any unemployment claims are paid by the District on a quarterly basis as incurred.
For workers' compensation insurance, approximately 80 Districts participate in a public entity risk sharing pool
(School Districts Insurance Consortium) for processing claims and obtaining reinsurance through commercial
insurance carriers. Under this plan, the District's annual cost should not exceed standard commercial insurance
rates.
FS - 30
EAST PENNSBORO AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2009
COMMITMENTS AND CONTINGENCIES
The District's collective bargaining agreement with its teaching staff expired August 31, 2009.
In the normal course of preparing for the subsequent school year, the District has awarded bids for various
supplies, fuel contracts, etc. No major commitments in excess of routine requirements have been made by the
District.
The District participates in 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.
The District has no material contract commitments for construction and improvement projects at June 30, 2009.
The District is named as a defendant in various lawsuits, all in the ordinary course of business. The District
intends to vigorously defend itself against these actions. Legal counsel for the District has advised that they
cannot offer an opinion as to the probable outcome of all such actions. In the opinion of management, the ultimate
liabilities, if any, resulting from these claims will not have a material adverse effect on the financial position of the
District.
UBSEQUENT EVENTS
In September, 2009, the School Board approved to refinance the Series A of 2003 ($ 3,785,000) and the Series of
2004 ($ 9,975,000) with the issuance of its Series A of 2009 General Obligation Bonds in the amount of
$ 13,700,000.
FS-31
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EAST PENNSBORO AREA SCHOOL DISTRICT
OTHER POST EMPLOYMENT BENEFIT PLANS
JUNE 30, 2009
HEALTH CARE BENEFITS
SCHEDULE OF FUNDING PROGRESS
Actuarial
Actuarial Actuarial Accrued
Valuation Value of Liability Unfunded Funded Covered
Date Assets (AAL) AAL Ratio Payroll
June 2009 $ - $ 1,495,092 $ 1,495,092 0.00 $13,876,545
UAAL as
a%of
Covered
Payroll
10.77%
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