HomeMy WebLinkAbout11-0210
EAST PENNSBORO AREA SCHOOL DISTRICT
FINANCIAL STATEMENTS
YEAR ENDED JUNE 30, 2010
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TABLE OF CONTENTS
Page
Number
INDEPENDENT AUDITORS' REPORT IAR - 1 to IAR - 2
MANAGEMENT'S DISCUSSION AND ANALYSIS MDA - 1 to MDA - 9
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 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
Statement of changes in fiduciary net assets -fiduciary funds FS - 11
NOTES TO FINANCIAL STATEMENTS FS - 12 to FS - 31
OTHER REQUIRED INFORMATION
Budgetary comparison information -general fund ORI - 1
Other post employment benefit plans ORI - 2
Greenawalt & Company, P.C.
James E. Lyons
` CERTIFIED PUBLIC ACCOUNTANTS Howard R. Greenawalt
Since 1955 Deborah J. Kelly
~ Scott J. Christ
Creedon R. Hoffrnan
INDEPENDENT AUDITORS' REPORT
Board of School Directors
East Pennsboro Area School District
Enola, Pennsylvania
We 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
30, 2010, 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. The prior year summarized comparative information has been derived
from the District's June 30, 2009 financial statements and, in our report dated February 15, 2010 we expressed
unqualified opinions on the respective financial statements of the governmental activities, the business-type activities,
each major fund, and the fiduciary funds.
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, each major fund, and the fiduciary funds
of East Pennsboro Area School District, as of June 30, 2010, 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 December 21, 2010 on our
consideration of East Pennsboro 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 17055.717.766.4763 • 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
Management's discussion and analysis on pages MDA - 1 through MDA - 9 and other required information on pages
ORI - 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.
¢ /'
GREENAWALT & COM A , P.C.
December 21, 2010
Mechanicsburg, Pennsylvania
IAR - 2
EAST PENNSBORO AREA SCHOOL DISTRICT
MANAGEMENT'S DISCUSSION AND ANALYSIS
JUNE 30, 2010
Our discussion and analysis compares our financial position at June 30 of 2010, 2009 and 2008. It also
provides an overview of our financial performance for the two years between these periods, fiscal years
ended June 30, 2010 and 2009, in accordance with governmental reporting requirements. Please read our
discussion and analysis in conjunction with the District's financial statements, which begin on page FS-l.
FINANCIAL HIGHLIGHTS
• Our financial position remained viable at the end of 2010. We have maintained sufficient net assets
and fund balances, and established a budget that should result in a stable financial position through
2011-2012
• In 2008, 2009 and 2010 we used available capital funds to complete additional renovation projects at
the Middle School. At the end of 2010, there was $314,856 remaining in our General Obligation
Bond Fund of 2004.
• For 2010, we paid down $2.82 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 October 2009, the District issued General Obligation Bond Series A of 2009, which refunded
General Obligation Bond Series A of 2003 and Series of 2004. The District realized savings of
approximately $747,000, 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
• The District provides medical coverage through the South Central Trust (SCT). Over the last four
years the District has accumulated a surplus within the risk sharing pool. This has enable 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 $2,074,000, $1,700,000 and $1,634,518 at December 31, 2008, 2009 and 2010,
respectively.
USING THESE FINANCIAL STATEMENTS
This report consists of a series of financial statements. The Statement of Net Assets and the Statement of
Activities (on pages FS-1 and FS-2) provide information about the activities of the District as a whole, and
present alonger-term view of the District's finances than Fund statements. Fund financial statements are on
pages FS-3, FS-5 and FS-7 through FS-11. For governmental activities, these statements tell how District
services have been financed in the short run, as well as show the amount remaining for future spending.
Proprietary fund statements provide information about non-governmental operations, in this case food
services. Fiduciary funds statements report funds held in trust by the District for such things as scholarship
grants and student activity funds.
MDA - 1
EAST PENNSBORO AREA SCHOOL DISTRICT
MANAGEMENT'S DISCUSSION AND ANALYSIS (Cont'd.)
JUNE 30, 2010
The Reconciliation of the Governmental Funds Balance Sheet on page FS-4 connects governmental fund
balance to the total net assets balance from the Statement of Net Assets. The reconciliation on page FS-6
does the same for the components of the changes in fund balances.
Reporting the District as a Whole
The statements present financial activities and the results of those activities in two categories, Governmental
and Business-type. Capital assets (land, buildings, improvements, furniture and equipment) are presented
with all other assets. Long-term debt is presented with all other liabilities. This is distinctly different from
the fund statements in which assets and liabilities are separated into various funds such as General and
Capital Projects.
The approach to measurement of revenue and expense is similar to that used in the private sector and is
referred to as following the accrual basis of accounting. This is discussed further in the notes to the financial
statements.
Reporting the District's Most Significant Funds
The funds statements provide financial information about the District's significant funds rather than the
District as a whole. There are three fund types, Governmental, Proprietary and Fiduciary. The use of each
type of fund is described in the notes to the financial statements. Unlike the entity-wide financial statements
that measure revenues on the accrual basis, the funds statements report revenues only to the extent cash has
been received, or is expected to be received in the near future.
The District as Trustee
The District acts as fiduciary for the Students Activities and Agency Funds. In comparison to the
Governmental Funds, the amount held in the fiduciary fund is small. The fiduciary fund net assets are
presented on page FS-10.
THE DISTRICT AS A WHOLE
Table A-1 summarizes and compares the Statement of Net Assets from page FS-1 of the financial
statements for each of the past three years. We have brought forward the 2008 balances from our 2009
MD&A. These balances are otherwise not a part of the 2010 financial statement package. Within this and
certain other schedules in our discussion, we have presented the dollar figures in thousands, unless
otherwise indicated, to make them easier to read. This has resulted in rounding differences, and some
columns may not add within a schedule.
MDA-2
EAST PENNSBORO AREA SCHOOL DISTRICT
MANAGEMENT'S DISCUSSION AND ANALYSIS (Cont'd.)
- JUNE 30, 2010
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
Table A-1
Statement of Net Assets
Governmental Activities
2010 2009 2008
$11,088 $ 8,851 $ 6,643
35,947 37,097 38,575
$47,035 $45,948 $45,218
$ 3,088 $ 2,883 $ 2,683
30,244 32,339 34,756
33,332 35,222 37,439
7,168 5,778 4,640
315 495 531
6,220 4,453 2,608
13,703 10,726 7,779
$47,035 $45,948 $45,218
Business-type Activities
2010 2009 2008
$ 211
223 $ 135
246 $ 110
280
$ 434 $ 381 $ 390
$ 69 $ 41 $ 43
69 41 43
223
142 246
94 280
67
365 340 347
$ 434 $ 381 $ 390
Total net assets are the difference between total assets and total liabilities, and represent resources that can
be used to pay for future operations and capital improvements. The bulk of our assets are capital assets.
These have been paid for using borrowed money and do not add significantly to our net asset value. The
restricted portion of net assets represents cash and investments that can only be used for buildings and
improvements. The remaining restricted fund balance will be used to fund future capital maintenance
projects such as new roofing.
Table A-2 summazizes and compazes activity presented in the Statement of Activities (page FS-2). It shows
the activity behind the increase in total net assets over the yeaz ending June 30, 2010.
MDA-3
' EAST PENNSBORO AREA SCHOOL DISTRICT
MANAGEMENT'S DISCUSSION AND ANALYSIS (Cont'd.)
- JUNE 30, 2010
Table A-2
Changes in Net Assets
Revenues
Program revenues
Charges for services
Operating grants and contributions
Capital grants and contributions
General revenues
Taxes
State general subsidies
Other
Total revenues
Direct expenses
Excess (deficiency) before transfers
Govemmental
Activities
2010 2009
$ 350 $ 254 $ 804 $ 835 $ 1,154 $ 1,089
5,225 4,254 473 394 5,698 4,648
347 469 - - 347 469
22,803 23,620
5,465 5,694
41 152
34,231 34,443
31,235 31,475
2,996 2,968
Business-type
Activities
2010 2009 2010
- - 22,803 23,620
- - 5,465 5,694
- (5) 41 147
1,277 1,224 35,508 35,667
1,271 1,253 32,506 32,728
6 (29) 3,002 2,939
Totals
Transfers (19) (21) 19 21 - _
Change in net assets $ 2,977 $ 2,947 $ 25 $ (8) $ 3,002 $ 2,939
The change in Total Revenues from our Total Primary Governmental activities was in line with the decrease
in our direct expenses.
Governmental Activities
Table A-3, shown on the next page, presents expense information from the Statement of Activities for
governmental activities. The total cost of services represents 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 total net cost of services of $25,312,268 must be recovered through
general revenue, primarily taxes and state subsidies. Amounts not recovered will reduce funds available for
future years.
2009
MDA-4
EAST PENNSBORO AREA SCHOOL DISTRICT
MANAGEMENT'S DISCUSSION AND ANALYSIS (Cont'd.)
JUNE 30, 2010
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
Table A-3
Governmental Activates
Direct Expenses
2010 2009
$19,884 $19,988
2,639 2,654
2,928 3,189
2,515 2,429
1,247 1,207
670 647
13 27
1,338 1,333
$31,234 $31,474
Program Revenues
2010 2009
$ 4,573 $ 3,508
181 209
88 106
73 64
583 543
77 78
347 469
$ 5,922 $ 4,977
Net Expense
2010 2009
$15,311 $16,480
2,458 2,445
2,840 3,083
2,442 2,365
664 664.
593 569
13 27
991 864
25,312 26,497
State general subsidies revenues
Total needs from taxes and other local sources
Business-Type Activities
(5,465) (5,694)
$19,847 $20,803
Table A-4, is similar to the previous table, except it presents business-type service costs. Note that almost
all of the cost of food services is paid by program revenues.
Table A-4
Business-type Activities
Direct Expenses Program Revenues Net Expense
2010 2009 2010 2009 2010 2009
Food services $ 1,271 $ 1,253 $ 1,277 $ 1,228 $ (6) $ 25
Investment earnings _ (1)
Total net expense $ (6) $ 24
There were no other significant changes during the year with the net cost of services remaining about the
same in 2010 as in 2009.
DISTRICT'S FUNDS
The information in Table A-5 summarizes and compares the Governmental Funds' Balance Sheet for June
30, 2010, 2009 and 2008. Note that we again brought forward 2009 and 2008 balances from our 2009
MD&A. This information is not otherwise a part of the 2010 financial statement package. The groupings are
the same as those used in the Statement of Net Assets.
MDA-5
EAST PENNSBORO AREA SCHOOL DISTRICT
MANAGEMENT'S DISCUSSION AND ANALYSIS (Cont'd.)
JUNE 30, 2010
Table A-5
Governmental Fund Balances
2009-2010 2008-2009
2010 2009 2008 Chance %Chance Chance %Chance
General Fund - reserved/designated $ 2,059 $ 1,700 $ 2,074 $ 359 $ (374)
General Fund -unrestricted 4,740 2,988 1,027 1,752 1,961
Capital Projects Fund -reserved 314 495 531 (181) (36)
Special Revenue Fund -unrestricted 295 264 359 31 (95)
Total governmental funds $ 7,408 $ 5,447 $ 3,991 $ 1,961. 36.0% $ 1,456 36.5%
Total reserved $ 2,373 $ 2,195 $ 2,605 $ 178 $ (410)
Total unrestricted - undesignated 5,035 3,252 1,386 1,783 1,866
Total governmental funds $ 7,408 $ 5,447 $ 3,991 $ 1,961 36.0% $ 1,456 36.5%
As previously mentioned, the basis of measurement for fund assets and liabilities is different than that used
in the Statement of Net Assets. The differences between the total governmental fund balance of $7,408,402
and the total net assets of $13,703,538 are itemized in the reconciliation presented within the financial
statements on page FS-4.
The items that caused the change in fund balance during the year are presented in the Statement of
Revenues, Expenditures and Changes in Fund Balances within the financial statements on page FS-5. The
fund balance increased by $1,961,428 because the total fund expenditures, including transfers, were less
than the total fund revenues.
General Fund Budgetary Highlights
Table A-6 has been summarized from the comparative budget information presented on page ORI-1 of the
required supplemental information. The total variance was favorable in that we budgeted that total
expenditures would be higher than total revenues by $604,481 when in fact our total expenditures, before
transfers, were less than our revenues by $2,233,626.
Table A-6
Budget to Actual Comparsion
Total revenues
Total expenditures
Excess revenues (expenditures)
Other financing sources (uses)
Net change in fund balance
Budget
2010 2009
2010 2009
2010 2009
$ (1,118)
3,304 $ 221
1,551
2,186
528 1, 772
500
$ 2,714 $ 2,272
Actual
Variance
$35,460 $33,855
35,413 34,000
47 (145)
$34,342 $34,076
32,109 32,449
2,233 1,627
(651) (540) (123) (40)
$ (604) $ (685) $ 2,110 $ 1,587
MDA-6
EAST PENNSBORO AREA SCHOOL DISTRICT
MANAGEMENT'S DISCUSSION AND ANALYSIS (Cont'd.)
JUNE 30, 2010
CAPITAL ASSETS
Table A-7 summarizes the Capital Assets note to the financial statements on page FS-22. The original cost
of the capital assets on the books at June 30, 2010 was $63,971,947. Each year, for capital assets other than
land and construction in progress, this amount is depreciated (reduced in value) to reflect usage. The net
balance of $35,946,682 is the amount remaining after this reduction.
As construction projects are completed, related construction in progress balances are moved into the
buildings and improvements category, and depreciated over the estimated useful life of the improvement.
During 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
Business-type activities
Furniture and equipment
LONG-TERM LIABILITIES
2010 2009 2008
$ 326 $ 326 $ 326
34,446 35,692 36,998
1,175 1,079 1,251
$35,947 $37,097 $38,575
$ 223 $ 246 $ 280
Table A-8 summarizes the Long-Term Liabilities note to the financial statements on pages FS-23 to FS-28.
Most of the debt relates to general obligation bonds issued by the District to pay for capital improvements.
Our ability to raise future funds through the issuance of debt depends on how well our existing bonds are
rated by the investment community. Currently, the District is rated by Standard and Poor's as AAA. ACT 1
of 2006 impacts a school district's ability to incur debt without voter approval. The District does not
anticipate incurring additional debt in the near future.
MDA-7
EAST PENNSBORO AREA SCHOOL DISTRICT
MANAGEMENT'S DISCUSSION AND ANALYSIS (Cont'd.)
JUNE 30, 2010
Table A-8
Long-term Liabilities
Governmental activities
General obligation debt
Compensated absences
Other Post Employment Benefits
Unamortized bond costs
2010 2009 2008
$29,210 $32,030 $34,650
626 567 632
263 119 -
145 (378) (526)
$30,244 $32,338 $34,756
Each year, the District pays interest to bond holders and pays dov~m a portion of the outstanding debt,
referred to as redemption. During 2010, our redemptions totaled $2,760,000, net of refunding. The District
refinanced the Series A of 2003 and Series of 2004 bonds through issuance of its Series A of 2009 bonds in
the amount of $13,700,000 resulting in net savings to the District of approximately $747,000.
Compensated absences increased during the year from anentity-wide perspective from $567,195 to
$625,619 at June 30, 2010. Compensated absences decreased from June 30, 2008 to June 30, 2009 from an
entity-wide perspective from $631,705 to $567,195.
Recording for other post employment benefits began in 2008-2009. The liability at June 30, 2010 from an
entity-wide perspective was $262,634, which was a net increase of $143,427 from the previous year balance
of $119,207.
Next Year's Budget
Table A-9 compares the original budget for 2009-2010 to the 2010-2011 budget that was approved June,
2010.
Table A-9
Budget Comparsions
Total revenues
Total expenditures
Excess revenues (expenditures)
Other financing sources (uses)
Net change in fund balance
2010-2011 2009-2010 Chance
$ 34,323 $ 34,180 $ 143
35,426 34,252 1,174
(1,103) (72) (1,031)
(1,772) (533) (1,239)
$ (2,875) $ (605) $ (2,270)
MDA-8
EAST PENNSBORO AREA SCHOOL DISTRICT
MANAGEMENT'S DISCUSSION AND ANALYSIS (Cont'd.)
JUNE 30, 2010
Similar to our 2010 budget, our budgeted expenditures for 2011 exceed budgeted revenues.
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 East Pennsboro
Area School District, 890 Valley Street, Enola, PA 17025, (717) 732-3601.
MDA-9
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EAST PENNSBORO AREA SCHOOL DISTRICT
RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET
TO THE STATEMENT OF NET ASSETS
JUNE 30, 2010
Total fund balances -Governmental funds $ 7,408,402
Amounts 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 $ 63,971,947 and the accumulated depreciation
is $ 28,025,265 35,946,682
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 $ 202,684
Earned income taxes 71,721 274,405
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 (29,210,000)
Compensated absences (625,619)
Other post-employment benefit accrual (262,634)
Long-term liabilities (30,098,253)
Accrued interest on bonds payable (259,180) (30,357,433)
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 577,345
Bond discounts (premiums) (561,134) .
Refunding costs 415,271 431,482
Total net assets -Governmental activities $ 13,703,538
The 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, 2010
(With Summarized Financial Information for June 30, 2009)
Assets
Cash and cash equivalents
Due from other governments
Due from general fund
Inventories
Total current assets
Furniture and equipment (net of accumulated depreciation)
Total assets
Liabilities
Accounts payable
Deferred revenues
Total current liabilities
Net assets
Invested in capital assets {net of related debt)
Unrestricted
Total net assets
Total liabilities and net assets
Food Service
2010 2009
$ 128,277
14, 048
50,018
19,251
211,594
$ 113,557
4,664
16,644
134,865
222,795
$ 434,389
$ 50,944
18,231
69,175
222,795
142,419
365,214
$ 434,389
246, 319
$ .381,184
$ 23, 924
17,469
41, 393
246, 319
93,472
339, 791
$ 381,184
The 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, 2010
(With Summarized Financial Information for the Year Ended June 30, 2009)
Operating revenues -Food service revenue
Operating expenses
Other purchased service
Food and milk
Other supplies
Depreciation
Total operating expenses
Operating income (loss)
Nonoperating 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)
Income (loss) before transfers
Transfers from other funds
Change in net assets
Net assets -beginning
Net assets -ending
Food Service
2010 2009
$ 804,665 $ 834,593
1,116,189
78,169
33, 907
42, 939
1,271,204
(466, 539)
1,130,978
46,666
34,204
40, 932
1,252,780
(418,187)
331
42, 004
78,169
352,519
473,023
6,484
18, 939
25,423
339, 791
$ 365,214
775
(5,383)
40, 543
46,666
306,197
388,798
(29, 389)
21,496
(7,893)
347,684
$ 339,791
The 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, 2010
(With Summarized Financial Information for the Year Ended June 30, 2009)
Operating activities
Food Service
2010 2009
Cash received from users $ 805,427 $ 837,729
Cash payments to suppliers for goods and services (1,089,170) (1,134,775)
Cash payments for other operating expenses (36,514) (38,062)
Net cash provided by (used for) operating activities (320,257) (335,108)
Non-capital financing activities
State sources 35,840 40,789
Federal sources 299,282 307,520
General fund contributed services 1,035 11,727
Capital projects fund contributed services 17,903 9,770
Net cash provided by (used for) non-capital financing activities 354,060 369,806
Capital and related financing activities '
Cash payments for equipment (19,414) (12,640)
Net cash provided by (used for) capital and related financing activities (19,414) (12,640)
Investing activities
Investments earnings
Net cash provided by (used for) investing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents -beginning
Cash and cash equivalents -ending
Reconciliation of operating income (loss) to net cash
provided by (used for) operating activities
Operating income (loss)
Adjustments to reconcile operating income (loss) to net cash
provided by (used for) operating activities
Depreciation
Donated commodities
Net change in other assets and other liabilities
Accounts receivable
Inventories
Accounts payable
Deferred revenue
Total adjustments
Net cash provided by (used for) operating activities
331 775
331 775
14,720 22,833
113,557 90,724
$ 128,277 $ 113,557
$ (466,539) $ (418,187)
42,939
78,169
(2,607)
27,019
762
146,282
$ (320,257)
40, 932
46,666
525
(3,858)
(3,796)
2,610
83,079
$ (335,108)
The 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, 2010
(With Summarized Financial Information for June 30, 2009)
Private
Purpose Student Totals
Trusts Activities 2010 2009
Assets
Cash and cash equivalents $ 930,334 $ 108,997 $ 1,039,331 $ 341,819
Total assets $ 930,334 $ 108,997 $ 1,039,331 $ 341,819
Liabilities
Due to student groups $ - $ 108,997 $ 108,997 $ 88,162
Total liabilities - 108,997 108,997 88,162
Net assets
Restricted 930,334 - 930,334 253,657
Total liabilities and net assets $ 930,334 $ 108,997 $ 1,039,331 $ 341,819
The accompanying notes are an integral part of these financial statements.
FS-10
EAST PENNSBORO AREA SCHOOL DISTRICT
STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS -FIDUCIARY FUNDS
JUNE 30, 2010
(With Summarized Financial Information for June 30, 2009)
Private Purpose Trust
2010 2009
Additions
Investment earnings
Gifts and contributions
Total additions
Deductions
Scholarships awarded
Change in net assets
Net assets, beginning
Net assets, ending
$ 5,636
675,041
680,677
4,000
676,677
253,657
$ 930,334
$ 2,157
251,500
253,657
253,657
$ 253,657
The accompanying notes are an integral part of these financial statements.
FS-11
EAST PENNSBORO AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2010
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
The GASB establishes 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:
• The 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 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-12
EAST PENNSBORO AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2010
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd.)
Jointly~overned 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. Capital assets (net
of accumulated depreciation) and bonds payable (net of 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-13
EAST PENNSBORO AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2010
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 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 GASB.
Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and
expenses generally result from providing services and producing and delivering goods in connection with the
fund's principal ongoing operations. Operating expenses for the District's proprietary fund include food production
costs, supplies, administrative costs, and depreciation on capital assets. All revenues or expenses not meeting
this definition are reported as nonoperating revenues and expenses.
Fund accounting
The accounts of the District are organized on the basis of funds, each of which is considered a separate
accounting entity. The operations of each fund are accounted for by providing a separate set of self-balancing
accounts which comprise its assets, liabilities, fund equity, revenues, and expenditures, or expenses, as
appropriate. Resources are allocated to and accounted for in individual funds based upon the purposes for which
they are to be spent.
When both restricted and unrestricted resources are available for use, it is the District's general policy to use the
restricted (primarily operating grants) resources first, then unrestricted resources as they are needed.
The District has the following major types of funds:
Governmental Funds -These funds account for the activities through which most of the District's operations
are provided.
Proprietary Funds -These funds account for the operations of the District that are financed and operated in a
manner similar to private business enterprises.
FS-14
EAST PENNSBORO AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2010
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd.~
Basis of presentation -Fund financial statements (Cont'd.)
Fund accounting (Cont'd.)
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. During the year these programs increased both revenues and expenditures of the original
budget by $ 1,279,407.
The Capital Projects Fund accounts for bonds proceeds and the expenditure of those funds.
FS-15
EAST PENNSBORO AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2010
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd.)
Basis of presentation -Fund financial statements (Cont'd.)
Fund accounting (Contd.)
The Capital Reserve Fund accounts for transfers from the General Fund and expenditures of these funds for
capital outlays.
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 funds:
The Activities Fund accounts for programs operated and sponsored by various clubs and organizations within
the schools.
The Agency Fund accounts for contributions to and interest earnings on scholarship funds donated to the
District and for payments 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-16
EAST PENNSBORO AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2010
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd.)
Receivables 'and payables between funds
Activity between funds that represent lending/borrowing arrangements outstanding at the end of the fiscal year
are referred to as "due to/from other funds". Any residual balances outstanding between the governmental
activities and business-type activities are reported in the district-wide financial statements as "internal balances".
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 $ 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 presentation
purposes. In addition, capital assets purchased with long-term debt may be capitalized regardless of the
thresholds established. Such assets are presented at historical cost or estimated historical cost if purchased or
constructed.
Major outlays for capital assets and improvements are capitalized as projects are constructed. The costs of
normal maintenance and repairs that do not add to the value of the asset or materially extend asset lives are not
capitalized.
Capital assets are depreciated using the straight-line method over the following estimated useful lives:
Assets
Government Business-type
Activities Activities
Buildings
Building improvements
Site improvements
Furniture and equipment
Library books
40 -
15 to 40 -
20 -
5 to 15 5 to 12
7 -
FS-17
EAST PENNSBORO AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2010
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd.)
Long-term liabilities
In the district-wide financial statement, and proprietary fund types in the fund financial statements, bonds and
notes payable 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.
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 resources 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-18
EAST PENNSBORO AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2010
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd.)
Recent accounting standards
In March 2009, the GASB issued Statement No. 54, Fund Balance Reporting and Governmental Fund Type
Def<nitions. This statement establishes fund balance classifications that comprise a hierarchy based primarily on
the extent to which a government is bound to observe constraints imposed upon the use of the resources
reported in governmental funds. The District is required to implement GASB 54 in its year beginning July 2010.
In March 2009, the GASB issued Statement No. 55, The Hierarchy of Generally Accepted Accounting Principles
for State and Local Governments. This statement incorporates the hierarchy of generally accepted accounting
principles (GAAP) for state and local governments into the GASB's authoritative literature. GASB 55 was effective
upon issuance. The District has implemented this standard in the current year.
In March 2009, the GASB issued Statement No. 56, Codification of the Accounting and Financial Reporting
Guidance Contained in the AICPA Statements on Auditing Standards. The objective of this statement is to
incorporate into the GASB's authoritative literature certain accounting and financial reporting guidance presented
in the AICPA's Statements on Auditing Standards. This statement addresses three issues not included in the
authoritative literature that establishes accounting principles: related party transactions; going concern
considerations; and subsequent events. GASB 56 was effective upon issuance. The District has implemented this
standard in the current~year.
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, 2009, from which the summarized information was derived.
Subsequent events
In preparing these financial statements, the District has evaluated events and transactions for potential
recognition or disclosure through December 21, 2010, the date the financial statements were available to be
issued.
FS-19
EAST PENNSBORO AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2010
CASH AND CASH EQUIVALENTS
Pennsylvania statutes provide for investment of District funds into 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 funds for investment purposes.
Custodial credit risk is the risk that in the event of a depository institution failure, the District's deposits may not be
returned to it. The District policy requires that all deposits in excess of FDIC insurance coverage be collateralized
by the depository institution with approved collateral as provided by law.
At June 30, 2010, the District's deposits totaled $ 2,081,232 and the depository institution balances
totaled $ 2,488,586. Of the depository institution balances, $ 401,788 was covered by federal depository
insurance and $ 2,086,798 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 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, 2010, the District's deposits in
PLGIT and PSDLAF totaled $ 4,698,307 and $ 300,961, respectively.
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, 2010 are as follows:
Governmental activities $ 5,900,126
Business-type activities 128,277
Fiduciary funds ~ 1,039,331
Total cash and cash equivalents 7.067.734
FS - 20
EAST PENNSBORO AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
- JUNE 30, 2010
TAXES RECEIVABLE
Taxes receivable are as follows:
Taxes Taxes
Receivable Allowance for Receivable Deferred
(Gross) Uncollectibles (Net) Tax Revenue
Real estate taxes $ 365,783 $ 11,335 $ 354,448 $ 202,684
Earned income taxes 1,375,000 - 1,375,000 71.721
General Fund 1,740,783 11,335 1,729,448 274,405
Full accrual adjustment - - - (274,405)
Governmental activities 1.740.783 $ 11.335 $ 1.729.448 $ -
DUE FROM/TO OTHER FUNDS AND INTERFUND TRANSFERS
Interfund balances are as follows:
Assets Liabilities
General Fund $ 24,403 $ 24,403 Special Revenue Fund
General Fund 6,026 6,026 Special Revenue Fund
Capital Projects Fund 81,561 81,561 Special Revenue Fund
Food Service Fund 50,018 50,018 General Fund
Interfund transfers were as follows:
Other financing sources Other financing uses
General Fund $ 1,511 $ 1,511 Capital Projects Fund
Food Service Fund 17,904 17,904 Capital Projects Fund
Food Service Fund 1,035 1,035 General Fund
Special Revenue Fund 3,597 3,597 General Fund
Capital Reserve Fund 119,955 119,955 General Fund
DUE FROM OTHER GOVERNMENTS
Due from other governments are as follows:
Local sources -other taxes
State sources
Federal sources
FS-21
Governmental Business-type
Activities Activities
$ 75,449 $ -
237,415 1,423
960.227 12.625
1.273.091
' EAST PENNSBORO AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2010
CAPITAL ASSETS
Capital asset activity for the year was as follows:
Governmental activities
Capital assets not being depreciated
Land
Construction in progress
Beginning Ending
Balance Increases Decreases Balance
$ 325,826 $ - $ - $ 325,826
325,826 - - 325,826
Capital assets being depreciated
Buildings and improvements
Furniture and equipment
Library books
Accumulated depreciation
Buildings and improvements
Furniture and equipment
Library books
Capital assets being depreciated, net
56,726,737 173,988 - 56,900,725
5,424,295 310,985 (23,803) 5,711,477
979,626 54,293 - 1,033,919
63,130,658 539,266 (23,803) 63,646,121
(21,034,495) (1,420,083) - (22,454,578)
(4,422,861) (243,493) 23,803 (4,642,551)
(901,888) (26,248) - (928,136)
(26,359,244) (1,689,824) 23,803 28,025,265
36.771,414 (1,150,558) - 35,620,856
Governmental activities capital assets, net 37.097.240 $ .(1.150 558) $ - 35.946.682
Business-type activities
Capital assets being depreciated
Furniture and equipment $ 623,501 $ 19,415 $ - $ 642,916
Accumulated depreciation
Furniture and equipment (377,182) (42,939) - (420,121)
Capital assets being depreciated, net 246,319 (23,524) - 222,795
Business-type activities capital assets, net $ 246.319 $ (23,524) $ - $ 222.795
FS - 22
EAST PENNSBORO AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2010
CAPITAL ASSETS (Cont'd.)
Depreciation expense was charged to functions/programs as follows:
Governmental activities
Instruction $ 822,668
Instructional student support 392,902
Administrative and financial support 326,186
Operation and maintenance of plant 102,232
Transportation 10,845
Student activities 34,991
Business-type activities -Food service $ 42,939
DEFERRED REVENUES
Governmental funds present deferred revenue in connection with receivables for revenues that are not
considered to be available to pay liabilities of the current period. Governmental funds also defer revenue
recognition with resources that have been received, but not yet earned. Deferred revenues in the General fund of
$ 559,732 consist of $ 274,405 taxes receivable not received within 90 days of the end of the fiscal period, and
$ 285,327 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 and notes payable $ 32,030,000 $ 13,700,000 $ (16,520,000) $ 29,210,000 $ 2,865,000
Compensated absences 567,195 85,184 (26,760) 625,619 140,000
Other post employment benefits 119,207 305,708 (162,281) 262,634 50,000
32.716.40 14.090.892 (16.709.041) 30.098.253 $ 3,055,000
FS - 23
` EAST PENNSBORO AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2010
LONG-TERM LIABILITIES (Cont'd.)
General obligation bonds and notes payable
Changes in bonds and notes payable were as follows:
Series A of 2003
Series of 2004
Series A of 2004
Series of 2006
Series of 2009
Series A of 2009
Series of 1999 note
Beginning Scheduled Ending
Balance New Issue Refunding Redemptions Balance
$ 4,070,000 $
9, 980, 000
2,400,000
2,880,000
9,825,000
2,875,000 _
- $ (3,785,000) $ (285,000) $ -
- (9,975,000) (5,000) -
- - (365,000) 2,035,000
- - (225,000) 2,655,000
- - (1,605,000) 8,220,000
- 13,700,000 (5,000) 13,695,000
_ - (270.000) 2,605,000
$ 32,030,000 $ - $ (60 000) (2.760.000) 29.210.000
Amounts
Due Within
Interest Rates Maturity Date Callable Date One Year
Series A of 2004 1.65% to 4.00% February 2015 February 2011 $ 380,000
Series of 2006 3.45% to 4.05% August 2021 August 2012 240,000
Series of 2009 2.00% to 2.50% October 2014 Not callable 1,895,000
Series A of 2009 3.00% August 2020 February 2015 280,000
Series of 1999 Variable February 2018 Not callable 70,000
Scheduled debt service requirements, payable by the General Fund, are as follows:
Year Ending June 30
Principal Interest Total
2011 $ 2,865,000 $ 769,458 $ 3,634,458
2012 2,940,000 700,195 3,640,195
2013 3,395,000 625,969 4,020,969
2014 3,545,000 541,421 4,086,421
2015 3,465,000 447,261 3,912,261
2016-2020 12,130,000 882,323 13,012,323
2021-2022 870.000 24,982 894.982
29.210.000 3.991.609 33.201.609
FS-24
EAST PENNSBORO AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2010
LONG-TERM LIABILITIES (Cont'd.)
General obligation bonds and notes payable (Cont'd.)
In October 2009, the District issued its 2009 A Series bonds in the amount of $ 13,700,000 for the current
refunding of two other series of bonds payable. After payment of issuance costs, net of original issue premium, of
$ (163,538), the net proceeds of $ 13,863,538 were used to call the $ 13,760,000 of outstanding bonds and pay
accrued interest on those bonds. The main reason for this restructuring was to take advantage of favorable
interest rates. The impact of lower debt service each year through the year 2020 resulted in a present value
savings to the District of approximately $ 747,000.
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
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.
FS - 25
EAST PENNSBORO AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2010
LONG-TERM LIABILITIES (Cont'd.)
Other post employment benefits (OPEBs)
The District reports OPEBs in accordance with Governmental Accounting Standard Board Statement No. 45
(GASB 45), which 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.
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.
Participant information
Active participants 287
Vested former members -
Retired participants 47
334
Funding Policy
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.
FS - 26
EAST PENNSBORO AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2010
LONG TERM LIABILITIES (Cont'd.)
Other post employment benefits (OPEBs) (Cont'd.)
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
$ 66, 854
253, 719
320, 573
5, 364
(20,229)
305, 708
(162,281)
143,427
119.207
Net OPEB obligation -end
The percentage of annual OPEB cost contributed was as follows:
Year ended
Percentage of
Annual Annual OPEB
OPEB Cost Cost Contributed
June 2010
Funding status and funding progress
$ 305,708
53.08%
Net OPEB
Obligation
$ 262,634
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%
FS - 27
EAST PENNSBORO AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2010
LONG-TERM LIABILITIES (Cont'd.)
Other post employment benefits (OPEBs) (Cont'd.)
Actuarial assumptions and methods
Actuarial assumptions and methods used in the June 2009 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.
Actuarial calculations reflect along-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 the year ended June 2009 was the year of implementation of GASB 45, the
OPEB disclosure standards were implemented prospectively; therefore, the ORI does not reflect similar
information for three consecutive valuations.
FS - 28
EAST PENNSBORO AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2010
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 operating lease payments included in General Fund
expenditures for the year ended June 30, 2010 amounted to approximately $ 168,000. Minimum net lease rental
payments for future periods are expected to be as follows:
2010-2011 $ 167,124
2011-2012 1.01,440
Total minimum payments required $ 268.564
MANAGEMENT SERVICES
The cafeteria facilities of the District are 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.
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.gsers.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.
FS - 29
EAST PENNSBORO AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2010
PENSION PLAN (Cont'd.)
Contributions required of employers are based upon an actuarial valuation: For the fiscal year ended June 30,
2010, the employer contribution rate was 4.78 percent of covered payroll, composed of 4.00 percent for pension
benefits and 0.78 percent for healthcare insurance premium assistance. The District's contributions to PSERS for
the years ending June 2010, 2009 and 2008 were $ 724,052, $ 757,357, and $ 1,066,639, respectively. Those
amounts are equal to the required contributions for each year.
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 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. Financial statements of the
Trust are provided to member districts. District transactions with the trust were as follows:
Cash balance in the trust -beginning
Payments from the District and its retirees
Benefit claims paid by the trust
Stop loss premiums and commissions
Administrative and other fees, net of interest earned
$ 2,458,195
3,067,700
$ (2,715,862)
(111,723)
(144,675)
(2,972.260)
Cash balance in the trust -ending
Prepaid health insurance
Amount available for accrued benefit claims
The amount available in the trust was as follows:
Accrual for benefit claims incurred
Accrual for health insurance coverage on payroll payable
Amount available for accrued benefit claims
2,553,635
1,634,518
$ 919.117
$ 573,517
345,600
$ 919.117
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 approximately '60 days of paid claims'.
District management believes this methodology provides an adequate amount for accrued claims.
FS - 30
EAST PENNSBORO AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2010
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; 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
The District's collective bargaining agreement with its teaching staff expires August 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.
The District is also audited by the State's Department of the Auditor General. Findings, if any, from these audits
could result in the repayment of funds, or receipt of additional funds.
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.
SUBSEQUENT EVENTS
The contract between the District and the East Pennsboro Education Association (Teachers Union) was approved
August 2010 for the period September 2009-August 2013.
FS-31
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EAST PENNSBORO AREA SCHOOL DISTRICT
OTHER POST EMPLOYMENT BENEFIT PLANS
JUNE 30, 2010
HEALTH CARE BENEFITS
SCHEDULE OF FUNDING PROGRESS
Actuarial
Actuarial Actuarial Accrued
Valuation Value of Liability
Date Assets (AAL)
June 2009 $ - $ 1,495,092
UAAL as
a % of
Unfunded Funded Covered Covered
AAL Ratio Pavroll Pavroll
$ 1,495,092 0.00 $13,876,545 10.77%
The District is required to have an actuarial valuation at least biennially (every 2 years). If the plan experiences
significant changes, a new actuarial valuation should be performed rather than waiting for the next scheduled
valuation date.
Because the year ended 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 three consecutive
valuations.
ORI - 2