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SHIPPENSBURG AREA SCHOOL DISTRICT
FINANCIAL REPORT
JiTNE 30, 2012
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CONTENTS
INDEPENDENT AUDITOR'S REPORT 1 - 2
Management's Discussion & Analysis 3 - 11
Basic Financial Statements:
Government-wide Financial Statements:
Statement of Net Assets 12 - 13
Statement of Activities 14
Fund Financial Statements:
Balance Sheet -Governmental Funds 15
Reconciliation of the Governmental Funds Balance
Sheet to the Statement of Net Assets 16
Statement of Revenues, Expenditures and
Changes in Fund Balances -Governmental Funds 17
Reconciliation of the Governmental Funds
Statement of Revenues, Expenditures and Changes
in Fund Balances to the Statement of Activities 18
Statement of Revenues, Expenditures and Changes in
Fund Balance -Budget and Actual -General Fund 19
Statement of Net Assets -Proprietary Fund -
Food Service 20
Statement of Revenues, Expenses and Change in Net
Assets -Proprietary Fund -Food Service 21
Statement of Cash Flows -Proprietary Fund -
Food Service 22 - 23
Statement of Fiduciary Net Assets 24
Notes to Financial Statements 25 - 48
CONTENTS (Continued)
REQUIRED SUPPLEMENTARY INFORMATION
Post-Employment Benefits Plan
49
SUPPLEMENTARY INFORMATION
Schedule of Revenues -General Fund 50 - 51
Schedule of Expenditures -General Fund 52 - 57
Independent Auditor's Report on Internal Control
over Financial Reporting and on Compliance
and Other Matters Based on an Audit of
Financial Statements Performed in Accordance
with Government Auditing Standards 58 - 59
Independent Auditor's Report on Compliance with
Requirements that Could Have a Direct and
Material Effect on Each Major Program
and on Internal Control over Compliance in
Accordance with OMB Circular A-133 60 - 61
Schedule of Findings and Questioned Costs 62 - 63
Schedule of Expenditures of Federal Awards 64 - 67
Notes to Schedule of Expenditures of Federal Awards 68
Summary Schedule of Prior Year's Audit Findings 69
.Boyer&Ritter
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INDEPENDENT AUDITOR'S REPORT
Board of School Directors
Shippensburg Area School District
Shippensburg, Pennsylvania
We have audited the accompanying financial statements of the governmental activities, the business-type
activity, each major fund, and the aggregate, remaining fund information of Shippensburg Area School
District, as of and for the year ended June 30, 2012, which collectively comprise the District's basic
financial statements as listed in the table of contents. These financial statements are the responsibility of
Shippensburg Area School District's management. Our responsibility is to express opinions on these
financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of
America and the standards applicable to financial audits contained in Government Auditing Standards,
issued by the Comptroller General of the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing
an opinion on the effectiveness of the District's internal control over financial reporting. Accordingly, we
express no such opinion. An audit also includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall, financial statement
presentation. We believe 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 positions of the governmental activities, the business-type activity, each major fund,
and the aggregate, remaining fund information of Shippensburg Area School District, as of June 30, 2012,
and the respective changes in financial position and cash flows, where applicable, thereof and the
respective budgetary comparison for the General Fund for the year then ended in conformity with
accounting principles generally accepted in the United States of America.
Camp Mill, PA * Carlisle, PA • Cham6ersburg, PA ~ Staie College, PA
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The hkC~lodroy ANirn+ce a o prsxnhr af~a~on d'e eawnsng and caasul~ng $rtnt. The hieQtadroy All.once memb-r fim» mainbin A,1ir ,mme,
aubnamy ar,~! independwrce and are tafponsi6ls Eot 1hsM awn team hs arraregemeMS, deitsery of eanSCes aui mainlreona at dent rslmionshipL
In accordance with Government Auditing Standards, we have also issued our report dated November 27,
2012, on our consideration of Shippensburg 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 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.
Accounting principles generally accepted in the United States of America require that Management's
Discussion & Analysis and Post-Employment Benefits Plan -Schedule of Funding Progress on pages 3
through 11 and on page 49, respectively, be presented to supplement the basic financial statements. Such
information, although not a part of the basic financial statements, is required by the Governmental
Accounting Standards Board which considers it to be an essential part of financial reporting for placing
the basic financial statements in an appropriate operational, economic, or historical context. We have
applied certain limited procedures to the required supplementary information in accordance with auditing
standards generally accepted in the United States of America, which consisted of inquiries of
management about the methods of preparing the information and comparing the information for
consistency with management's responses to our inquiries, the basic financial statements, and other
knowledge we obtained during our audit of the basic financial statements. We do not express an opinion
or provide any assurance on the information because the limited procedures do not provide us with
sufficient evidence to express an opinion or provide any assurance.
Our audit was conducted for the purpose of forming an opinion on the financial statements that
collectively comprise Shippensburg Area School District's basic financial statements. The Schedule of
Expenditures of Federal Awards, as required by Office of Management and Budget Circular A-133,
Audits of States, Local Governments, and Non-Profit Organizations, and the Schedules of Revenues -
General Fund and Expenditures -General Fund are presented for purposes of additional analysis and are
not required parts of the fmancial statements. Such information is the responsibility of management and
was derived from and relates directly to the underlying accounting and other records used to prepare the
financial statements. The information has been subjected to the auditing procedures applied in the audit
of the financial statements and certain additional procedures, including comparing and reconciling such
information directly to the underlying accounting and other records used to prepare the financial
statements or to the financial statements themselves, and other additional procedures in accordance with
auditing standards generally accepted in the United States of America. In our opinion, the Schedules of
Revenues -General Fund and Expenditures -General Fund and the Schedule of Expenditures of Federal
Awards are fairly stated in all material respects in relation to the financial statements as a whole.
,~~
Chambersburg, Pennsylvania
November 27, 2012
2
SHIPPENSBURG AREA SCHOOL DISTRICT
MANAGEMENT'S DISCUSSION & ANALYSIS (MD&A)
YEAR ENDED NNE 30, 2012
The discussion and analysis of Shippensburg Area School District's (District) financial performance
provides an overall review of the District's financial activities for the fiscal year ended June 30, 2012.
The intent of this discussion and analysis is to look at the District's financial performance as a whole;
readers should also review notes to the basic financial statements and financial statements to enhance
their understanding of the District's financial performance.
Financial Highlights
Debt Administration
The District refinanced the General Obligation Bonds, Series of 2007, with the General Obligation
Bonds, Series of 2012, to take advantage of lower interest rates.
Out-of-District Placements for Students
Out-of-District placements in Charter Schools, Special Education Instruction, and Alternative Education
for at-risk students continue to increase.
Table A-1 summarizes the major features of the District's financial statements, including the portions of
the District they cover and the types of information they contain. The remainder of this overview section
of MD&A explains the structure and contents of the statements.
Table A-1
Major Features of Shippensburg Area School District's
Government-Wide and Fund Financial Statements
Government-Wide Fund Statements
Statements Governmental Funds Pro rie Funds Fiduci Funds
Scope Entire District (except Activities of the District Activities the District Activities in which the
fiduciary funds) that are not operates similar to District is the trustee or
proprietary or private business - agent for someone
fiduciary, such as Food Service else's resources -
education, Activity Funds
administration, and
communi services
Required Financial Statement of Net Assets Balance Sheet Statement of Net Assets Statement of Fiduciary
/nformatlon Net Assets
Statement of Activities Statement of Revenues, Statement of Revenues,
Expenditures and Expenses and Change Statement of Changes
Changes in Fund in Net Assets in Fiduciary Net Assets
Balances
Statement of Cash
Flows
Accounting Basis and Accrual accounting and Modified-accrual Accrual accounting and Accrual accounting and
Measurement Focus economic-resources accounting and current economic-resources economic-resources
focus financial-resources focus focus
focus
Type of assel/liability All assets and Only assets expected to All assets and All assets and
information liabilities, both be used up and liabilities, both liabilities, both short-
financial and capital, liabilities that come due financial and capital, term and long-term
and short-term and during the year or soon and short-term and
long-term thereafter; no capital long-term
assets included
Type of inflow/outflow All revenues and Revenues for which All revenues and All revenues and
information expenses during the cash is received during expenses during the expenses during the
year, regardless of or soon after the end of year, regardless of year, regardless of
when cash is received the year, expenditures when cash is received when cash is received
or paid when goods or services or paid or paid
have been received and
payment is due during
the year or soon
thereafter
Overview of Financial Statements
Government-Wide Statements
The government-wide statements report information about the District as a whole using accounting
methods similar to those used by private-sector companies. The Statement of Net Assets includes all of
the government's assets and liabilities. All of the current year's revenues and expenses are accounted for
in the Statement of Activities regardless of when cash is received or paid.
The two government-wide statements report the District's net assets and how they have changed. Net
assets, the difference between the District's assets and liabilities, are one way to measure the District's
financial health or position.
Over time, increases or decreases in the District's net assets are an indication of whether its financial
health is improving or deteriorating, respectively.
To assess the overall health of the District, additional non-financial factors, such as changes in the
District's property-tax base and the performances of students, must be considered.
The government-wide financial statements of the District are divided into two categories:
• Governmental activities -All of the District's basic services are included here, such as instruction,
administration, and community services. Property taxes, and state and Federal subsidies and
grants finance most of these activities.
• Business-type activities -The District conducts afood-service operation and charges fees to
students, staff, and visitors to cover the costs of the program's operation.
Fund Financial Statements
The District's fund financial statements provide detailed information about the most significant funds -
not the District as a whole. Some funds are required by state law and by bond requirements.
Governmental funds -Most of the District's activities are reported in governmental funds,
which focus on the determination of financial position and changes in financial position, not on
income determination. They are reported using an accounting method called modified-accrual
basis of accounting, which measures cash and all other financial assets that can readily be
converted to cash. The governmental-fund statements provide a detailed, short-term view of the
District's operations and the services it provides. Governmental-fund information helps the
reader determine whether there are more or fewer financial resources that can be spent in the near
future to finance the District's programs. The relationships (or differences) between
governmental activities (reported in the Statement of Net Assets and the Statement of Activities)
and governmental funds are reconciled in the financial statements.
Proprietary funds -These funds are used to account for the District's activities that are similar
to business operations in the private sector, or where the reporting focuses on determining net
income, financial position, changes in financial position, and where a significant portion of
funding comes through user charges. When the District charges customers for services it
provides -whether outside customers or other units within the District -these services are
generally reported in proprietary funds. The Food Service Fund is the District's proprietary fund
and is the business-type activity reported in the government-wide statements.
Fiduciary funds -The District is the trustee, or fiduciary, for several activity funds. All
fiduciary activities are reported in a separate Statement of Net Assets. We exclude these
activities from the District's other financial statements because the District cannot use these
assets to finance operations.
Financial Analysis of the District as a Whole
The District's total net assets were $19,176,744, at June 30, 2012.
Table A-2
As of June 30, 2012 and 2011
Net Assets
Governmental
Activities
6/30/12 Business-Type
Activities
6/30/12
Total
6/30/12 Governmental
Activities
6/30/11 Business-Type
Activities
6/30/11
Total
6/30/11
Current and other assets $ 11,833,727 $ 56,465 $ 11,890,192 $ 12,582,285 $ 52,481 $ ]2,934,766
Capital assets 46,869,088 39,121 46,908,209 46,396,208 63,185 46,459,393
Total assets $ 58,702,815 $ 95,586 $ 58,798,401 $ 59,278,493 $ 115,666 $ 59,394,159
Current and other liabilities $ 5,857,302 $ 69,199 $ 5,926,501 $ 6,606,392 $ 71,741 $ 6,675,133
Long-term liabilities 33,695,156 - 33,695,156 35,445,261 - 35,445,261
Total liabilities 39,552,458 69,199 39,621,657 42,051,653 71,741 42,123,394
Invested in capital assets,
net of related debt 12,740,535 39,121 12,779,656 10,037,478 63,185 10,100,663
Restricted 203,800 - 203,800 1,979,077 - 1,979,077
Unrestricted, undesignated 6,206,022 (12,734) 6,193,288 5,210,285 (19,260) 5,191,025
Total net assets 19,150,357 26,387 19,176,744 17,226,840 43,925 17,270,765
Total liabilities
and net assets $ 58,702,815 $ 95,586 $ 58,798,401 $ 59,278,493 $ l 15,666 $ 59,394,159
Most of the District's net assets are invested in capital assets (land, site improvements, buildings, and
equipment). The remaining net assets consist of restricted and unrestricted amounts. The restricted
balances are amounts set aside to fund future purchases or capital projects as planned by the District. The
unrestricted amounts include designated and undesignated amounts.
The results of this year's operations as a whole are reported in the Statement of Activities. All expenses
are reported in the first column. Specific charges, grants, revenues, and subsidies that directly relate to
specific expense categories are presented to determine the final amount of the District's activities that is
supported by other general revenues. The two largest general revenues are the Basic Education Subsidy
provided by the Commonwealth of Pennsylvania, and the local taxes assessed to community taxpayers.
Table A-3 presents information from the Statement of Activities in a different format.
Table A-3
Fiscal Years Ended June 30, 2012 and 2011
Changes in Net Assets
Governmental
Activities
6/30/12 Business-Type
Activities
6130/12
Total
6/30112 Govemmentat
Activities
6!30/11 Business-Type
Activities
6/30/11
Total
6/30!11
Revenues
Program revenues
Chazges for services $ 223,093 $ 802,897 $ 1,025,990 $ 184,127 $ 795,270 $ 979,397
Operating grants
and contributions 7,492,749 606,940 8,099,689 9,818,334 544,552 10,362,886
Capital grants
and contributions - - - - - -
General revenues
Property taxes 18,226,488 - 18,226,488 18,146,856 - 18,146,856
Other taxes 4,513,812 - 4,513,812 4,075,423 - 4,075,423
Grants, subsidies and
contributions, unrestricted 9,477,202 - 9,477,202 8,636,841 - 8,636,841
Other 565,729 509 566,238 460,694 497 461,191
Transfers - - - - -
Totalrevenues 40,499,073 1,410,346 41,909,419 41,322,275 1,340,319 42,662,594
Expenses
Instructional 26,175,681 - 26,175,681 26,222,250 - 26,222,250
Instructional student support 3,084,111 - 3,084,111 2,976,804 - 2,976,804
Administrative and
financial support 3,215,142 - 3,215,142 3,082,098 - 3,082,098
Operation and maint.
of plant services 2,306,555 - 2,306,555 2,525,887 - 2,525,887
Pupil transportation 1,869,162 - 1,869,162 2,007,108 - 2,007,108
Student activities 731,268 - 731,268 737,426 - 737,426
Community services 6,295 - 6,295 21,604 - 21,604
Interest on long-term debt 1,187,342 - 1,187,342 1,282,562 - 1,282,562
Food service - 1,427,884 1,427,884 - 1,388,703 1,388,703
Total expenses 38,575,556 1,427,884 40,003,440 38,855,739 1,388,703 40,244,442
Changes in net assets $ 1,923,517 $ (17,538) $ 1,905,979 $ 2,466,536 $ (48,384) $ 2,418,152
7
The tables below present the expenses of both the Governmental and Business-Type Activities of the
District.
Table A-4 presents the District's functions -instructional programs, instructional student support,
administration, operation and maintenance of plant services, pupil transportation, student activities, and
community services and each program's net cost (total cost less revenues generated by the activities).
This table also shows the net costs offset by other unrestricted grants, subsidies, and contributions to
show the remaining financial needs supported by local taxes and other miscellaneous revenues.
Table A-4
Fiscal Years Ended June 30, 2012 and 2011
Governmental Activities
Total Cost Net Cost Total Cost Net Cost
of Services of Services of Services of Services
Functions/Programs 6/30/2012 6/30/2012 6/30/2011 6/30/2011
Instructional $ 26,175,681 $ 21,472,642 $ 26,222,250 $ 19,941,681
Instructional student support 3,084,111 2,599,822 2,976,804 2,069,484
Administration and financial support 3,215,142 2,980,312 3,082,098 2,891,281
Operation and maint. of plant services 2,306,555 1,134,008 2,525,887 1,134,629
Pupil transportation 1,869,162 891,998 2,007,108 880,591
Student activities 731,268 587,295 737,426 632,153
Community services 6,295 6,295 21,604 20,897
Interest on long-term debt 1,187,342 1,187,342 1,282,562 1,282,562
Total governmental activities ,
Less unrestricted grants, subsidies (9,477,202) (8,636,841)
Total needs for grants, taxes
and other revenues $ 21,382,512 $ 20,216,437
Table A-5 reflects the activities of the Food Service Fund, the only business-type activity of the District.
Table A-5
Fiscal Years Ended June 30, 2012 and 2011
Business-Type Activities
Total Cost Net Cost
of Services of Services
Functions/Programs 6/30/2012 6/30/2012
0o services ,
Less investment earnings 509
Less transfers - _
Total business-type activities 1 ,5
Total Cost Net Cost
of Services of Services
6/30/2011 6/30/2011
497
_~~
The Statement of Revenues, Expenses and Change in Net Assets for this proprietary fund will further
detail the actual results of operations.
The District Funds
At June 30, 2012, the District's governmental funds reported a combined fund balance of $6,744,131,
which reflects a decrease of $604,925 from June 30, 2011.
General Fund Budget
During the fiscal year, the Board of School Directors (Board) authorizes revisions to the original budget
to accommodate differences from the original budget to the actual expenditures of the District. All
adjustments are again confirmed at the time the annual audit is accepted, which is after the end of the
fiscal year and not prohibited by state law. A schedule showing the District's original and final budget
amounts compared with amounts actually paid and received is provided in the financial statements.
The District applied for Federal, state, and local grants. These grants cannot always be anticipated in the
budgeting process. Budgeted revenues increased by $258,043 as a result of additional approved grants.
Budgeted expenditures and other financing uses also increased to compensate for the additional approved
grants. Transfers between specific categories of expenditures/financing uses occur during the year. The
most significant transfers are from the budget reserve to specific expenditures.
Capital Asset and Debt Administration
Capital Assets
At June 30, 2012, the District had $46,908,209 invested in a broad range of capital assets, including land,
buildings, furniture, and equipment.
Table A-6
Fiscal Years Ended June 30, 2012 and 2011
Capital Assets -Net of Depreciation
6/30/2011 Increases
Decreases
6/30/2012
Governmental Activities
Land $ 272,820 $ - $ - $ 272,820
Construction-in-progress 1,346,170 1,775,360 - 3,121,530
Site improvements 1,005,775 - - 1,005,775
Buildings and improvements 56,359,787 - - 56,359,787
Furniture and equipment 8,457,735 147,919 109,040 8,496,614
67,442,287 1,923,279 109,040 69,256,526
Less accumulated depreciation
Site improvements 546,142 32,315 - 578,457
Buildings and improvements 15,604,764 1,236,652 - 16,841,416
Furniture and equipment 4,895,173 181,407 109,015 4,967,565
21,046,079 1,450,374 109,015 22,387,438
Governmental Activities,
Capital Assets -Net $ 46,396,208 $ 472,905 $ 25 $ 46,869,088
Business-Type Activities,
Capital Assets -Net $ 63,185 $ (24,064) $ - $ 39,121
9
Debt Administration
As of June 30, 2012, the District had total outstanding bond principal of $34,195,000, less bond discount of
$66,447, totaling $34,128,553; compensated absences of $1,124,705; and other post-employment benefit
obligations of $411,898. The District has a rental obligation of $3,689,014.
Table A-7
Fiscal Years Ended June 30, 2012 and 2011
Outstanding Debt
Governmental Activities
6/30/12 6/30/11 Change
General Obligation Bonds
Series of 2007 $ - $ 4,285,000 $ (4,285,000)
Series of 2008
Series A of 2008
Series AA of 2008
Series of 2011
Series A of 2011
Series of 2012
Bond Discount
Compensated absences
Other post-employment benefits
8,315,000 8,645,000 (330,000)
1,970,000 2,045,000 (75,000)
645,000 2,325,000 (1,680,000}
3,065,000 3,235,000 (170,000)
15,875,000 15,875,000 -
4,325,000 - 4,325,000
34,195,000 36,410,000 (2,215,000)
(66,447) (51,270) (15,177)
34,128,553 36,358,730 (2,230,177)
1,124,705 1,201,735 (77,030)
411,898 304,796 107,102
$ 35,665,156 $ 37,865,261 $ (2,200,105)
More detailed information about our long-term liabilities is included in Notes to Financial Statements.
Rental Obligation
As of June 30, 2012, the District had rental obligations totaling $3,389,014 payable to the Pennsylvania
State Public School Building Authority (Authority). This obligation, Series of 2011, was issued to pay the
costs of a capital project consisting of planning, designing, renovating, constructing, furnishing, and
equipping the Franklin County Career and Technology Center (FCCTC) and the costs and expenses of such
financing. The FCCTC and the five member school districts have entered into a lease agreement with the
Authority, and each school district will pay its proportionate share of the rentals in order to fund the Series
of 2011 debt.
10
Table A-8 reflects the comparison of General Fund revenue and expenditure categories by percentages.
Table A-8
Revenues and Expenditures
2011-2012 2010-2011 2009-2010 2008-2009
Local revenues 59.7% 56.8% 56.3% 54.8%
State revenues 37.8% 36.0% 36.9% 37.4%
Federal revenues 2.5% 7.2% 6.3% 2.0%
Other financing sources 0.0% 0.0% 0.5% 5.8%
Instruction 63.4% 63.6% 59.5% 55.8%
Support services 25.5% 26.5% 26.6% 23.7%
Non-instructional/community 1.8% 1.8% 1.9% 1.9%
Facilities acquisition, construction
and improvement services 0.2% 0.0% 3.6% 10.4%
Debt service 9.0% 8.0% 8.4% 8.2%
Other financing uses 0.1 % 0.1 % 0.0% 0.0%
Contacting the District's Financial Management
Our financial report is designed to provide our citizens, taxpayers, parents, students, investors, and creditors
with a general overview of the District's finances and to show the Board's accountability for the money it
receives. If you have questions about this report or wish to request additional financial information, please
contact Deborah Westover, Business Administrator/Board Secretary, at Shippensburg Area School District,
317 North Morris Street, Shippensburg, PA 17257, (717) 530-2700.
11
SHIPPENSBURG AREA SCHOOL DISTRICT
STATEMENT OF NET ASSETS
June 30, 2012
Governmental Business-Type
ASSETS Activities Activities Total
Current Assets
Cash $ 6,824,139 $ 15,713 $ 6,839,852
Investments 1,644,952 - 1,644,952
Receivables
Taxes -net of allowance
for uncollectibles 1,317,664 - 1,317,664
Federal subsidies 809,186 7,995 817,181
State subsidies 422,164 568 422,732
Other 84,825 303 85,128
Internal balances 40,961 - 40,961
Prepaid expenses 501 - 501
Inventories - 31,886 31,886
Total current assets 11,144,392 56,465 11,200,857
Noncurrent Assets
Bond-issuance costs -net 689,335 - 689,335
Land and site improvements -net 700,138 - 700,138
Buildings and improvements -net 39,518,371 - 39,518,371
Furniture and equipment -net 3,529,049 39,121 3,568,170
Construction-in-progess 3,121,530 - 3,121,530
Total noncurrent assets 47,558,423 39,121 47,597,544
Total assets $ 58,702,815 $ 95,586 $ 58,798,401
See Notes to Financial Statements.
12
Governmental Business-Type
LIABILITIES AND NET ASSETS Activities Activities Total
Current Liabilities
Accounts payable
Current portion of long-term debt
General obligation debt
Accrued expenses
Salaries and benefits
Payroll withholdings
Interest payable
Internal balances
Deferred revenues
Unearned revenues
Total current liabilities
Noncurrent Liabilities
Long-term debt -net of current portion
General obligation debt
Compensated absences
Other post-employment benefits
Total noncurrent liabilities
Total liabilities
Net Assets
Invested in capital assets -net of
related debt
Restricted for
Capital projects
Unrestricted
Total net assets
$ 724,837 $ 2,257 $ 727,094
1,970,000 - 1,970,000
2,829,741 - 2,829,741
167,499 - 167,499
151,498 - 151,498
- 40,961 40,961
- 25,981 25,981
13,727 - 13,727
5,857,302 69,199 5,926,501
32,158,553 - 32,158,553
1,124,705 - 1,124,705
411,898 - 411,898
33,695,156 - 33,695,156
39,552,458 69,199 39,621,657
12,740,535 39,121 12,779,656
203,800 - 203,800
6,206,022 (12,734) 6,193,288
19,150,357 26,387 19,176,744
Total liabilities and net assets $ 58,702,815 $ 95,586 $ 58,798,401
13
SHIPPENSBURG AREA SCHOOL DISTRICT
STATEMENT OF ACTIVITIES
Year Ended June 30, 2012
Net (Expense) Revenue and
Program Revenues Changes in Net Assets
Operating
Charges for Grants and Governmental Business-Type
Functions/Programs Expenses Services Contributions Activities Activities Total
Governmental Activities
Instructional $ 26,175,681 $ 115,238 $ 4,587,801 $ (21,472,642) $ - $ (21,472,642)
Instructional student support 3,084,111 - 484,289 (2,599,822) - (2,599,822)
Administration and financial support 3,215,142 - 234,830 (2,980,312) - (2,980,312)
Operation and maintenance of plant services 2,306,555 14,857 1,157,690 (1,134,008) - (1,134,008)
Pupil transportation 1,869,162 - 977,164 (891,998) - (891,998)
Student activities 731,268 92,998 50,975 (587,295) - (587,295)
Community services 6,295 - - (6,295) - (6,295)
Interest on long-term debt 1,187,342 - - (1,187,342) - (1,187,342)
Total governmental activities 38,575,556 223,093 7,492,749 (30,859,714) - (30,859,714)
Business-Type Activity
Food service 1,427,884 802,897 606,940 - (18,047) (18,047)
Total School District ~ 40,003, 1,0 5,9 0 8,099,689 (30,859,714) (1 ,047) (30,877,761)
General Revenues
Property taxes, levied for general purposes, net
Public utility, realty transfer, earned income, and per capita for general purposes, net
Grants, subsidies, and contributions, not restricted
Investment earnings
Miscellaneous income
Total general revenues
Changes in net assets
Net Assets -July 1, 2011
Net Assets -June 30, 2012
See Notes to Financial Statements.
18,226,488 - 18,226,488
4,513,812 - 4,513,812
9,477,202 - 9,477,202
45,246 509 45,755
520,483 - 520,483
32,783,231 509 32,783,740
1,923,517 (17,538) 1,905,979
17,226,840 43,925 17,270,765
19,150,357 26,3 7 19,176,7 4
14
SHIPPENSBURG AREA SCHOOL DISTRICT
BALANCE SHEET -GOVERNMENTAL FUNDS
June 30, 2012
Capital Total
General Projects Governmental
Fund Funds Funds
ASSETS
Cash $ 6,620,957 $ 203,182 $ 6,824,139
Investments 1,644,952 - 1,644,952
Receivables
Taxes -net of allowance
for uncollectibles 1,317,664 - 1,317,664
Federal subsidies 809,186 - 809,186
State subsidies 422,164 - 422,164
Other 84,207 618 84,825
Due from other funds 40,961 - 40,961
Prepaid expenses 501 - 501
Total assets 10,940,592 203,800 11,144,392
LIABILITIES AND FUND BALANCES
Liabilities
Accounts payable
Accrued expenses
Salaries and benefits
Payroll withholdings
Deferred revenues
Unearned revenues
Total liabilities
$ 724,837 $
$ 724,837
Fund Balances
Restricted for
Capital projects
Committed for
Future retirement increases
Assigned
Unassigned
Total fund balances
Total liabilities and fund balances
See Notes to Financial Statements.
2,829,741 - 2,829,741
167,499 - 167,499
664,457 - 664,457
13,727 - 13,727
4,400,261 - 4,400,261
- 84,942 84,942
4,300,000 - 4,300,000
1,687,007 118,858 1,805,865
553,324 - 553,324
6,540,331 203,800 6,744,131
$ 10,940,592 $ 203,800 $ 11,144,392
15
SHIPPENSBURG AREA SCHOOL DISTRICT
RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET
TO THE STATEMENT OF NET ASSETS
June 30, 2012
Total fund balances -governmental funds $ 6,744,131
Amounts reported for governmental activities in the Statement
of Net Assets are different because:
Capital assets used in governmental activities are not financial resources,
and therefore, they aze not reported as assets in governmental funds. The
cost of capital assets is $69,256,526, and the accumulated depreciation
is $22,387,438. 46,869,088
Property taxes receivable will be collected this year, but are not
available soon enough to pay for the current period's expenditures,
and therefore, they aze deferred revenues in the funds. 664,457
Governmental funds report bond-issuance costs as expenditures.
However, in the Statement of Activities, the costs of issuance are
allocated over the lives of the debt issues. This is the amount by
which bond-issuance costs exceed accumulated amortization. 689,335
Long-term liabilities, including bonds payable, compensated absences, and
other post-employment benefits are not due and payable in the current period,
and therefore, they are not reported as liabilities in the funds.
Long-term liabilities at year-end consist o£
Bonds payable (34,195,000)
Bond discount 66,447
Accrued interest (151,498)
Compensated absences (1,124,705)
Other post-employment benefits (411,898)
(35,816,654)
Total net assets -governmental activities $ 19,150,357
See Notes to Financial Statements.
16
SHIPPENSBURG AREA SCHOOL DISTRICT
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN
FUND BALANCES -GOVERNMENTAL FUNDS
Year Ended June 30, 2012
Capital Total
General Projects Governmental
Fund Fund Funds
Revenues
Local sources
State sources
Federal sources
Total revenues
$ 24,330,202 $ 154 $ 24,330,356
15,342,222 - 15,342,222
1,009,865 - 1,009,865
40,682,289 154 40,682,443
Expenditures
Instruction
Support services
Operation ofnon-instructional services
Facilities acquisition, construction
and improvement
Debt service
Total expenditures
Excess (deficiency) of revenues
over expenditures
Other Financing Sources (Uses)
Issuance of refunding bonds
Interfund transfers in
Payment to refunded-bond escrow agent
Bond-issuance premium
Refund of prior years' receipts
Interfund transfers out
Total other financing sources (uses)
Net changes in fund balances
Fund Balances -July 1, 2011
Fund Balances -June 30, 2012
See Notes to Financial Statements.
25,075,243 - 25,075,243
10,063,983 109,757 10,173,740
695,325 - 695,325
84,497 1,811,297 1,895,794
3,543,944 132,314 3,676,258
39,462,992 2,053,368 41,516,360
1,219,297 (2,053,214) (833,917)
4,325,000 4,325,000
45,000 45,000
- (4,120,000) (4,120,000)
- 27,937 27,937
(3,945) - (3,945)
(45,000) - (45,000)
(48,945) 277,937 228,992
1,170,352 (1,775,277) (604,925)
5,369,979 1,979,077 7,349,056
$ 6,540,331 203,800 $ 6,744,131
17
SHIPPENSBURG AREA SCHOOL DISTRICT
RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF
REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE
STATEMENT OF ACTIVITIES
Year Ended June 30, 2012
Net change in fund balances -total governmental funds $ (604,925)
Amounts reported for governmental activities in the Statement of
Activities aze different because:
Capital outlays are reported in governmental funds as expenditures.
However, in the Statement of Activities, the costs of those assets are
allocated over their useful lives as depreciation expense. This
is the amount by which capital outlays exceed depreciation
in the period.
Capital outlays
Less depreciation expense
The net effect of vazious miscellaneous transactions involving capital
assets (ie. sales, trade-ins, and donations) is to decrease net assets.
Because some property taxes will not be collected for several
months after the District's fiscal year ends, they aze not considered
as "available" revenues in the governmental funds. Deferred tax
revenues decreased by this amount this year.
Interest on long-term debt in the Statement of Activities differs from the
amount reported in the governmental funds because interest is
recognized as an expenditure in the funds when it is due, and thus
requires the use of current financial resources. In the Statement of
Activities, interest expense is recognized as the interest accrues,
regazdless of when it is due. The decrease in interest accrued reflected
in the Statement of Activities is shown here.
Some expenses reported in the Statement of Activities do not require
the use of current financial resources, and therefore, they aze not
reported as expenditures in governmental funds.
The issuance oflong-term debt provides current financial resources
to governmental funds, while the repayment of the principal of long-
term debt consumes the current financial resources of governmental funds.
Neither transaction, however, has any effect on net assets. Also,
governmental funds report the effects of issuance costs, premiums,
discounts, and similaz items when debt is first issued, whereas these
amounts are deferred and amortized in the Statement of Activities. This
amount is the net effect of these differences in the treatment oflong-term
debt and related items.
Issuance oflong-term debt and related discount
Repayment oflong-term debt
Payment ofbond-issuance costs
Amortization ofbond discount
Amortization ofbond-issuance costs
Change in net assets of governmental activities
See Notes to Financial Statements.
1,923,279
(1,450,374) 472,905
(25)
(183,333)
19,177
(30,072)
(4,303,199)
6,540,000
100,007
(6,624)
(80,394) 2,249,790
$ 1,923,517
Ig
SHIPPENSBURG AREA SCHOOL DISTRICT
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE -
BUDGET AND ACTUAL -GENERAL FUND
Year Ended June 30, 2012
Variance with Final
Budgeted Amounts Budget Favorable
Original Final Actual (Unfavorable)
Revenues
Local sources $ 24,564,308 $ 24,756,171 $ 24,330,202 $ (425,969)
State sources 14,834,104 14,834,104 15,342,222 508,118
Federal sources 731,247 797,427 1,009,865 212,438
Total revenues 40,129,659 40,387,702 40,682,289 294,587
Expenditures
Instruction
Support services
Operation ofnon-instructional services
Facilities acquisition, construction
and improvement
Debt service
Total expenditures
Excess of revenues
over expenditures
Other Financing Uses
Refund of prior years' receipts
Interfund transfers out
Total other financing uses
Net changes in fund balance
Fund Balance -July 1, 2011
Fund Balance -June 30, 2012
See Notes to Financial Statements.
24,744,895 25,075,212 25,075,243 (31)
11,002,899 10,063,973 10,063,983 (10)
542,396 695,329 695,325 4
- 84,497 84,497 -
3,727,189 4,423,964 3,543,944 880,020
40,017,379 40,342,975 39,462,992 879,983
112,280 44,727 1,219,297 1,174,570
- (3,945) (3,945) -
(116,480) (45,000) (45,000) -
(116,480) (48,945) (48,945) -
$ (4,200) $ (4,218) 1,170,352 $ 1,174,570
5,369,979
$ 6,540,331
19
SHIPPENSBURG AREA SCHOOL DISTRICT
STATEMENT OF NET ASSETS -
PROPRIETARY FUND -FOOD SERVICE
June 30, 2012
ASSETS
Current Assets
Cash $ 15,713
Receivables
Federal subsidies 7,995
State subsidies 568
Other 303
Inventories 31,886
Total current assets 56,465
Noncurrent Assets
Furniture and equipment -net 39,121
Total assets 95,586
LIABILITIES AND NET ASSETS
Liabilities
Accounts payable $ 2,257
Due to other funds 40,961
Deferred revenues 25,981
Total liabilities -all current 69,199
Net Assets
Invested in capital assets 39,121
Unrestricted (12,734)
Total net assets 26,387
Total liabilities and net assets $ 95,586
See Notes to Financial Statements.
20
SHIPPENSBURG AREA SCHOOL DISTRICT
STATEMENT OF REVENUES, EXPENSES AND CHANGE IN NET ASSETS -
PROPRIETARY FUND -FOOD SERVICE
Year Ended June 30, 2012
Operating Revenues
Food service revenue $ 802,897
Operating Expenses
Labor, taxes and benefits 686,413
Professional and technical services 4,027
Disposal services 2,306
Electricity 20,000
Equipment repairs and maintenance 33,658
Extermination services 1,764
Advertising 951
Printing and binding 504
Travel 899
Supplies 33,654
Food and milk 549,593
Donated commodities used 69,040
Depreciation 24,064
Dues and fees 1,011
Total operating expenses 1,427,884
Operating loss (624,987)
Nonoperating Revenues (Expense)
Investment earnings 509
Federal subsidies 466,765
State subsidies 71,135
Value of donated commodities 69,040
Total nonoperating revenues 607,449
Change in net assets (17,538)
Net Assets -July 1, 2011 43,925
Net Assets -June 30, 2012 26,387
See Notes to Financial Statements.
21
SHIPPENSBURG AREA SCHOOL DISTRICT
STATEMENT OF CASH FLOWS -
PROPRIETARY FUND -FOOD SERVICE
Year Ended June 30, 2012
Cash Flows From Operating Activities
Cash received from meal sales S 803,234
Cash payments for goods and services (649,974)
Cash payments to employees for services (686,413)
Net cash used in operating activities (533,153)
Cash Flows From Non-Capital Financing Activities
Federal subsidies 466,765
State subsidies 71,135
Net cash provided by non-capital
financing activities 537,900
Cash Flows From Investing Activities
Investment earnings 509
Net increase in cash
Cash:
July 1, 2011
June 30, 2012
5,256
10,457
S 15,713
(Continued)
22
SHIPPENSBURG AREA SCHOOL DISTRICT
STATEMENT OF CASH FLOWS -
PROPRIETARY FUND -FOOD SERVICE (Continued)
Year Ended June 30, 2012
Reconciliation of Operating Loss to Net Cash Used
in Operating Activities
Operating loss $ (624,987)
Adjustments to reconcile operating loss to net
cash used in operating activities
Depreciation 24,064
Value of donated commodities 69,040
Changes in assets and liabilities:
(Increase) decrease in:
Receivables 6,937
Inventories (5,665)
(Decrease) increase in:
Accounts payable (1,399)
Due to other funds (1,480)
Deferred revenues 337
Net cash used in operating activities (533,153)
See Notes to Financial Statements.
23
SHIPPENSBURG AREA SCHOOL DISTRICT
STATEMENT OF FIDUCIARY NET ASSETS
June 30, 2012
James Burd Nancy Grayson Intermediate
Elementary Elementary School Middle School Senior High
Activity Fund Activity Fund Activity Fund Activity Fund Activity Fund
ASSETS
Cash $ 3,880 $ 2,938 $ 236 $ 37,621 $ 88,783
Total assets $ 3,880 $ 2,938 236 $ 37,621 $ 88,783
LIABILITIES
Due to student groups $ 3,880 $ 2,938 $ 236 $ 37,456 $ 88,783
Payables - - - 165 -
Totalliabilities $ 3,880 $ 2,938 $ 236 $ 37,621 $ 88,783
See Notes to Financial Statements.
24
SHIPPENSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies
Shippensburg Area School District operates three elementary schools, one middle school, and one high
school in Shippensburg, Pennsylvania. The District operates under current standards prescribed by the
Pennsylvania Department of Education in accordance with the provisions of the School Laws of
Pennsylvania. The District operates under alocally-elected, nine-member, Board-form of government.
The financial statements of Shippensburg Area School District (the District) have been prepared in
accordance with accounting principles generally accepted in the United States of America (GAAP) as
applied to governmental units. The Governmental Accounting Standards Board (GASB) is the
authoritative, standard-setting body for the establishment of governmental-accounting and financial-
reporting principles. The more significant of these accounting policies are as follows:
A. Reporting Entity
Shippensburg Area School District's financial statements include the operations of all entities for which
the School Board exercises oversight responsibility. Oversight responsibility is demonstrated by financial
interdependency, selection of governing authority, designation of management, ability to significantly
influence operations, and accountability for fiscal matters.
Shippensburg Area School District is the lowest level of government which has oversight responsibility
and control over all activities related to public-school education in the Commonwealth of Pennsylvania.
The District receives funding from local, state and Federal-government sources and must comply with the
requirements of these funding-source entities. However, the District is not included in any other
governmental "reporting entity" since the School Board Members are elected by the public and have
decision-making authority, the power to designate management, the ability to significantly influence
operations, and primary accountability for fiscal matters. The District is affiliated with the Capital Area
Intermediate Unit (CAIU) along with 23 other member school districts. The District is also affiliated with
the Franklin County Career and Technology Center (FCCTC) along with four other member school
districts. The member school districts participate in providing oversight responsibility to the CAIU and
FCCTC through the following:
Approval of Board members who are also Board members of the participating school districts
Approval of funding of operating budgets
The District is also affiliated with Shippensburg University through the Grace B. Luhrs University
Elementary School (GBLUES).
Despite the foregoing affiliations, the overriding issue is that the volume of participating school districts
does not permit Shippensburg Area School District to exercise "significant influence" over the operations
of the CAIU and FCCTC; therefore, the CAIU and FCCTC are not considered "component units" of
Shippensburg Area School District in determining the "reporting entity" as required by GASB Statement
No. 39.
25
SHIPPENSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies (Continued)
B. Government-wide and Fund Financial Statements
The government-wide financial statements (i.e., the Statement of Net Assets and the Statement of
Activities) report information on all of the non-fiduciary activities of the primary government. For the
most part, the effect of inter-fund activity has been removed from these statements. Governmental
activities, which normally are supported by taxes and intergovernmental revenues, are reported separately
from business-type activities, which rely to a significant extent on fees and charges for support.
The Statement of Activities demonstrates the degree to which the direct expenses of a given function or
segments are offset by program revenues. Direct expenses are those that are clearly identifiable with a
specific function or segment. Program revenues include 1) charges to customers or applicants who
purchase, use, or directly benefit from goods, services, or privileges provided by a given function or
segment and 2) grants and contributions that are restricted to meeting the operational or capital
requirements of a particular function or segment. Taxes and other items not included among program
revenues are reported as general revenues.
Separate-fund financial statements are provided in the report for all of the governmental, proprietary, and
fiduciary funds of the District, even though the latter are excluded from the government-wide financial
statements. Major, individual, governmental and enterprise funds are reported as separate columns in the
fund financial statements. Non-major funds are aggregated and presented in a single column. Fiduciary
funds are reported by fund type.
C. Measurement Focus, Basis of Accounting, and Financial-Statement Presentation
The District complies with accounting principles generally accepted in the United States of America
(GAAP) and applies all relevant Governmental Accounting Standards Board (GASB) Pronouncements.
The government-wide financial statements are reported using the economic-resources measurement focus
and the accrual basis of accounting, as are the proprietary and fiduciary-fund financial statements.
Revenues are recorded when earned, and expenses are recorded when a liability is incurred, regardless of
the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are
levied. Grants and similar items are recognized as revenues as soon as all eligibility requirements
imposed by the provider have been met. Net assets (total assets less total liabilities) are used as a
practical measure of economic resources, and the operating statement includes all transactions and events
that increased or decreased net assets. Depreciation is charged as an expense against current operations,
and accumulated depreciation is reported on the Statement of Net Assets.
26
SHIPPENSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies (Continued)
C. Measurement Focus, Basis of Accounting, and Financial-Statement Presentation (Continued)
Governmental-fund financial statements are reported using the current, financial-resources measurement
focus and the modified-accrual basis of accounting. Revenues are recognized as soon as they are both
measurable and available. Revenues are considered to be available when they are collectible within the
current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the
government considers revenues to be available if they are collected within 60 days of the end of the
current fiscal period. Revenues from Federal, state, and other grants designated for payment of specific
District expenditures are recognized when the related expenditures are incurred; accordingly, when such
funds are received, they are recorded as deferred revenues until earned. Expenditures generally are
recorded when 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 recorded only
when payment is due.
When both restricted and unrestricted (including committed, assigned, and unassigned) resources are
available for use, it is the District's policy to use the resources with the most stringent restrictions first,
followed by resources in decreasing order of restriction, as funds are needed.
Governmental funds are those through which most governmental functions of the District are financed.
The acquisitions, uses, and balances of the District's expendable financial resources and related liabilities
(except for those accounted for in proprietary funds) are accounted for through governmental funds.
The District reports the following major governmental funds:
The General Fund is the District's primary operating fund. It accounts for all financial resources
except those required to be accounted for in another fund. Revenues are primarily derived from local
property, earned income and per capita taxes, and state and Federal distributions. Many of the more
important activities of the District, including instruction, administration of the District, and certain
non-instructional services are accounted for in this fund.
The Capital Projects Fund is used to account for and report financial resources that are restricted,
committed, or assigned to expenditures for capital outlays, including the acquisition or construction
of capital facilities and other capital assets.
The District operates one enterprise fund, the Food Service Fund. This fund accounts for the activities of
the District's food-service program.
27
SHIPPENSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies (Continued)
C. Measurement Focus, Basis of Accounting, and Financial-Statement Presentation (Continued)
Proprietary funds distinguish operating revenues and expenses from non-operating items. Operating
revenues and expenses generally result from providing services and producing and delivering goods in
connection with the proprietary fund's principal, on-going operations. The principal operating revenues
of the District's enterprise fund are food-service charges. Operating expenses for the District's enterprise
fund include food-production costs, supplies, administrative costs, and depreciation of capital assets. All
revenues or expenses not meeting these classifications are reported asnon-operating revenues and
expenses.
The District does not attempt to allocate "building-wide costs" to the Food Service Fund. Thus, General
Fund expenditures which partially benefit the Food Service Fund (utilities, janitorial services, insurance,
etc.) are not proportionately recognized within the Food Service Fund; similarly, the Food Service Fund
does not recognize a cost for the building space it occupies (no rental-of-facilities expense).
The Activity Funds account for the monies authorized by Section 511 of the Public School Code of
1949 for school publications and organizations. A component of the Activity Funds is an Agency
Fund which is separate from other Agency Funds because of legal requirements. Agency Funds are
custodial in nature (assets equal liabilities) and do not involve measurement of results of operations.
Agency Funds are also accounted for using the modified-accrual basis of accounting.
D. Budgets and Budgetary Accounting
An operating budget is adopted prior to the beginning of each fiscal year for the General Fund on the
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 the adoption of the
District's budget and reporting of its financial statements.
The District, before levying annual school taxes, is required to prepare an operating budget for
the succeeding fiscal year.
The District is required to publish notice by advertisement, at least once in two newspapers of
general circulation in the municipality in which it is located, and within fifteen days of final
action, that the proposed budget has been prepared and is available for public inspection at the
administrative office of the District.
Notice that public hearings will be held on the proposed operating budget must be included in the
advertisement; such hearings are required to be scheduled at least ten days prior to when final
action on adoption is taken by the Board.
Legal-budgetary control is maintained at the sub-function/major-object level. The Board of School
Directors may make transfers of funds appropriated for any particular item of expenditure by legislative
action in accordance with the Pennsylvania School Code. Management may amend the budget at the sub-
function/sub-object level without Board approval. Appropriations lapse at the end of the fiscal period.
Budgetary information reflected in the financial statements is presented at or below the level of budgetary
control and includes the effects of approved budget amendments.
28
SHIPPENSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies (Continued)
E. Assets, Liabilities, and Net Assets or Equity
Cash and Cash Equivalents: For purposes of the Statement of Cash Flows presented for the proprietary
fund, the District considers all highly-liquid investments with maturities of three months or less when
purchased to be cash equivalents.
Investments: Investments are stated at fair value.
Allowance for Estimated Uncollectible Taxes and Deferred Revenues: The allowance for estimated
uncollectible taxes is based upon an historical estimate of delinquent taxes that will not be received within
one year of the fiscal year-end. Deferred revenues are based upon an historical estimate of delinquent
taxes expected to be received within one year of the fiscal year-end.
The portion of taxes receivable which is expected to be received within sixty days of June 30 is recorded
as revenue in the current year. The remaining amount of taxes receivable which is expected to be
received within one year from June 30 is recorded as deferred revenue. All other amounts in taxes
receivable are written off as estimated uncollectible taxes.
Inventories: Inventories are presented at the lower of cost or market on a first-in, first-out basis, and are
expensed when used.
A physical inventory of the Food Service Fund's food and supplies was taken as of June 30, 2012. The
inventory consisted of government-donated commodities which were valued at their estimated, fair-
market values, and purchased commodities and supplies, both of which were valued at cost using the first-
in, first-out (FIFO) method. The District has adopted aninventory-recordkeeping system which
distinguishes between donated and purchased commodities. Accordingly, deferred revenue for donated
commodities has been recorded.
Capital Assets and Depreciation: Capital assets; consisting of property, plant and equipment; are reported
in the applicable governmental or business-type activities column in the government-wide financial
statements. Capital assets are defined by the District as assets with an initial, individual cost of more than
$5,000 or a grouping of assets exceeding $10,000 and having useful lives of longer than one year, unless
the assets are acquired by debt proceeds, in which case the assets must be capitalized. Management
considers various factors in the capitalization of assets, including the assets' estimated useful lives, costs,
and the extent to which the assets are parts of larger capital projects. The District's capital assets include
library books, classroom texts, computer equipment, classroom furniture, and other instructional
equipment, subject to the on-going discretion of management. The costs of normal maintenance and
repairs that do not add to the values of the assets or materially extend assets' useful lives are not
capitalized.
Depreciation is provided for capital assets on the straight-line basis over the estimated useful lives of the
assets or groups of assets as determined by management.
29
SHIPPENSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies (Continued)
E. Assets, Liabilities, and Net Assets or Equity (Continued)
Long-Term Obli atg ions: In the government-wide financial statements, long-term debt and other long-
term obligations are reported as liabilities in the applicable governmental or business-type activities
columns in the Statement of Net Assets. Bond premiums and discounts, as well as issuance costs, are
deferred and amortized over the lives of the bonds using the effective-interest method. Bonds payable are
reported net of applicable bond premiums or discounts. Bond-issuance costs are reported as deferred
charges and amortized over the terms of the related debt.
In the fund financial statements, governmental-fund types recognize bond premiums and discounts, as
well asbond-issuance costs, during the current period. The face amount of the debt issued is reported as
other financing sources while discounts on debt issuances are reported as other financing uses. Issuance
costs, whether or not withheld from the actual debt proceeds received, are reported asdebt-service
expenditures.
Compensated Absences: Under the system of financial accounting and reporting for Pennsylvania School
Systems, the District accrues certain accumulated employee benefits, such as unpaid vacation and sick-
pay. The calculations of these amounts is determined by the appropriate vacation, sick, and retirement
lump-sum payments which would be available to employees if they were to leave or retire from the
District, and the calculations are adjusted for expected employee-turnover rates. Accrued benefit days,
multiplied by appropriate salary amounts, are reflected as a long-term liability unless retirements are
likely within the upcoming fiscal year. Those costs, determined to be current-year costs, are reflected as a
liability of the General Fund.
Post-Employment Benefits: In the government-wide financial statements, the District recognized the
costs and liabilities associated with post-employment benefits other than pension compensation, which is
funded through the District's contribution to the statewide Public School Employees' Retirement System,
a governmental, cost-sharing, multiple-employer, defined-benefit pension plan. The District provides
retiree health, vision, dental, and prescription-drug coverage to eligible, retired employees and qualified
spouses/beneficiaries. The District has estimated the cost of providing these benefits through an actuarial
valuation.
Transfers: Advances between funds that are not expected to be repaid are accounted for as transfers. In
those cases when repayment is expected, the advances are accounted for through the various "due from"
and "due to" accounts.
30
SHIPPENSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies (Continued)
E. Assets, Liabilities, and Net Assets or Equity (Continued)
Fund Balance: The District's fund-balance classifications are defined and described as follows:
Non-spendable: Represents fund- balance amounts that cannot be spent because they are not in a
spendable form or are contractually required to be maintained intact.
Restricted: Represents fund-balance amounts that are constrained for a specific purpose through
restrictions of external parties, through constitutional provisions, or by enabling legislation.
Committed: Represents fund-balance amounts that can only be used for specific purposes pursuant to
the constraints imposed by formal action of the Board of School Directors, the District's highest level
of decision-making authority. Committed amounts cannot be used for any other purpose unless the
Board removes the constraints or changes the specified purpose through the same action it used to
commit the funds.
Assigned: Represents fund-balance amounts that are constrained by the government's intent to be used
for a specific purpose but are neither restricted nor committed. Through Board policy, the Board has
delegated the authority to express intent to the District's Business Administrator.
Unassignned: Represents fund-balance amounts that have not been restricted, committed, or assigned to
specific purposes within the General Fund.
The District has a board policy which prescribes fund-balance guidelines. The District will strive to
maintain an unassigned, General Fund balance of not less than five percent of the budgeted expenditures
for that fiscal year.
Use of Estimates: Management uses estimates and assumptions in preparing financial statements. These
estimates and assumptions affect the reported amounts of assets and liabilities and the reported revenues
and expenditures.
Subsequent Events: In preparing these financial statements, the District has evaluated events and
transactions for potential recognition or disclosures through November 27, 2012, the date the financial
statements were available to be issued.
31
SHIPPENSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS
Note 2. Deposits and Investments
Under Section 440.1 of the Public School Code of 1949, as amended, the District is permitted to invest
funds consistent with sound business practices in the following types of investments:
• U.S. Treasury Bills
• Short-term obligations of the U.S. Government or its agencies or its instrumentalities
• Deposits in savings accounts or time deposits or share accounts of institutions insured by either:
l . The Federal Deposit Insurance Corporation (FDIC), or
2. The Federal Savings and Loan Insurance Corporation (FSLIC), or
3. The National Credit Union Share Insurance Fund (NCUSIF)
to the extent that such accounts are so insured, and for any amounts above maximum insurable
limits, provided that approved collateral as provided by law shall be pledged by the depository
• Obligations of (a) the United States of America or its agencies or instrumentalities backed by the
full-faith and credit of the United States of America, and (b) the Commonwealth of Pennsylvania,
or instrumentalities thereof backed by the full-faith and credit of these political subdivisions
• Shares of investment companies whose investments are restricted to the above categories.
The deposit and investment policies of the District adhere to state statutes and prudent business practices.
There were no deposit or investment transactions during the year that violated either state statutes or
District policies.
Deposits: Custodial-Credit Risk
Custodial-credit risk is the risk that in the event of a bank failure, the District's investments may not be
returned to it. As of June 30, 2012, $1,565,354 of the District's total bank balances of $1,815,354, were
exposed to custodial-credit risk as follows:
Amount
Uninsured and collateralized by assets maintained in conformity with Act 72 $ 1,565,354
Act 72 is an act standardizing the procedures for pledges of assets to secure deposits of public funds with
banking institutions pursuant to other laws; establishing a standard rule for the types, amounts, and
valuations of assets eligible to be used as collateral for deposits of public funds; permitting assets to be
pledged against deposits on a pooled basis: and authorizing the appointment of custodians to act as
pledgors of the assets.
32
SHIPPENSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS
Note 2. Deposits and Investments (Continued)
Investments:
As of June 30, 2012, the District had the following investments:
Investment Type Weighted-
Average
Maturity
Rating
Fair Value
Pennsylvania Local Government
Investment Trust (PLGIT)
PLGIT Class 51 days AAAm $ 5,301,469
PLGIT/ARM 48 days AAAm 39,253
Pennsylvania School District Liquid
Asset Fund (PSDLAF) 38 days AAAm 1,939
Orrstown Financial Advisors Not Rated 1,644,952
$ 6,987,613
Portfolio Assets
PLGIT -This fund invests primarily in U.S. Treasury and Federal-agency securities and repurchase
agreements secured by such obligations, as well as certain municipal obligations and collateralized or
insured certificates of deposit. Weighted-average maturity for the fund is expected to be kept at or below
60 days.
PSDLAF -This fund invests in U.S. Treasury securities, U.S. government securities, those of its agencies
and instrumentalities, and over-collateralized repurchase agreements with highly-rated counterparties.
Weighted-average maturity for the fund is expected to be kept at or below 60 days.
The District also maintains, at Orrstown Financial Advisors, investments which are invested in U.S.
Treasury obligations.
Weighted-Average Maturity
The weighted-average maturity (WAM) method expresses investment time horizons, the time when
investments become due and payable, in years or months, weighted to reflect the dollar-size of individual
investments within an investment type. WAMs are computed for each investment type. A portfolio's
WAM is derived by dollar-weighting the WAM for each investment type.
Interest-Rate Risk
The District does not have a formal investment policy that limits investment maturities as a means of
managing its exposure to fair-value losses arising from increasing interest rates.
33
SHIPPENSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS
Note 2. Deposits and Investments (Continued)
Credit Risk
As indicated above, Section 440.1 of the Public School Code of 1949, as amended, limits the composition
of the District's investments, and the District has no investment policy that would further limit its
investment choices.
Concentrations-of-Credit Risk
The District places no limit on the amounts invested in any one issuer. The percentages of the
concentrations of the District's investments at June 30, 2012, are as follows:
Investment
Percent of
Portfolio
Pennsylvania Local Government Investment Trust (PLGIT)
Pennsylvania School District Liquid Asset Fund (PSDLAF)
Orrstown Financial Advisors
76.43
0.03%
23.54%
100.00%
34
SHIPPENSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS
Note 3. Taxes Receivable, Deferred Revenues, and Estimated Uncollectible Taxes
Summaries of taxes receivable and related accounts at June 30, 2012, are as follows:
Amount
Uncollected taxes -real estate $ 1,076,626
Uncollected taxes -personal 12,341
Interest and commissions -net 33,622
Earned income taxes 171,437
Realty transfer taxes 23,638
Taxes Receivable -Net $ 1,317,664
Taxes to be collected within 60 days $ 658,753
Deferred revenues -delinquent taxes 664,457
Allowance for Uncollectible taxes (5,546)
Taxes Receivable -Net $ 1,317,664
Deferred Revenue -General Fund
Delinquent taxes $ 664,457
Deferred Revenue -Food Service Fund
Student deposits $ 22,339
Donated food 3,642
$ 25,981
35
SHIPPENSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS
Note 4. Property Taxes
Based upon assessed valuations, the municipal tax collector bills and collects property taxes on behalf of the
District. Property taxes are levied on July 1st. Taxes are collected at a 2.00% discount until August 31st, at
face amount from September 1st until October 31st, and include a 10.00% penalty thereafter. The County
Tax Bureaus collect delinquent real estate taxes for the District.
The District's tax rates for all purposes in 2011-2012 were 10.01 mills ($10.01 per $1,000 assessed
valuation) for Cumberland County and 95.21 mills ($95.21 per $1,000 assessed valuation) for Franklin
County. Refunds on payments of prior-year taxes are classified as other debt-service items under the
Commonwealth of Pennsylvania accounting system. Current tax collections for the District were
approximately 93.61 % of total tax levied.
Note 5. Interfund Accounts
Individual fund receivable and payable balances at June 30, 2012, are as follows:
Interfund Interfund
Receivables Payables
General $ 40,961 $ -
Food Service
- 40,961
$ 40,961 $ 40,961
All interfund receivable/payable balances resulted from time lags between the dates that (1) interfund goods
and services were provided or reimbursable expenditures occurred, (2) transactions were recorded in the
accounting system, and (3) payments between funds were made. All balances are expected to be repaid
within the following year.
36
SHIPPENSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS
Note 5. [nterfund Accounts (Continued)
Operating transfers between funds at June 30, 2012, are as follows:
Transfers In Transfers Out
General $ - $ 45,000
Capital Projects
45,000 -
$ 45,000 $ 45,000
Transfers and payments within the District are substantially for purposes of subsidizing operations,
funding capital projects and asset acquisitions, or maintaining debt service on a routine basis. Resources
are accumulated in a fund to support and simplify the administration of various projects or programs.
Note 6. Food Service Fund Inventories
The composition of Food Service Fund inventories at June 30, 2012, is as follows:
Amount
Materials and supplies
Purchased food
Donated food
9,450
18,794
3,642
$ 31,886
37
SHIPPENSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS
Note 7. General Fixed Assets
Capital asset activity for the year ended June 30, 2012, was as follows:
July 1, 2011 Increases Decreases June 30, 2012
overnmenta chvrties
Capital assets not being depreciated
Land $ 272,820 $ - $ - $ 272,820
Construction-in-progress 1,346,170 1,775,360 - 3,121,530
Total capital assets not
being depreciated 1,618,990 1,775,360 - 3,394,350
Capital assets, being depreciated
Site improvements 1,005,775 - - 1,005,775
Buildings and improvements 56,359,787 - - 56,359,787
Furniture and equipment 8,457,735 147,919 109,040 8,496,614
Total capital assets being depreciated 65,823,297 147,919 109,040 65,862,176
Less accumulated depreciation
Site improvements
Buildings and improvements
Furniture and equipment
Total accumulated depreciation
Total capital assets being
depreciated, net
Governmental Activities, Capital
Assets -Net
Business-T'ype Activity
Machinery and equipment
Accumulated depreciation
Business-Type Activity, Capital
Assets -Net
546,142 32,315 - 578,457
15,604,764 1,236,652 - 16,841,416
4,895,173 181,407 109,015 4,967,565
21,046,079 1,450,374 109,015 22,387,438
44,777,218 (1,302,455) 25 43,474,738
$ 46,396,208 $ 472,905 $ 25 $ 46,869,088
$ 695,302 $ - $ - $ 695,302
(632,117) (24,064) - (656,181)
$ 63,185 $ (24,064) $ - $ 39,121
Depreciation expense was charged to the functions/programs of the District as follows:
Amount
Governmental Activities
Instructional $ 1,086,439
Instructional student support 131,861
Administration and financial support 130,274
Operation and maintenance of plant services 59,567
Student activities 42,233
Total governmental activities 1,450,374
Business-Type Activity
Food Service 24,064
Total School District $ 1,474,438
38
SHIPPENSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS
Note 8. Accrued Salaries and Benefits
Accrued salaries and benefits at June 30, 2012, consist of the following:
Amount
Accrued salaries $ 2,036,084
Retirement
Social security
Workers' compensation
624,962
152,406
16,289
$ 2,829,741
Accrued salaries represent teachers' salaries earned during the 2011-12 school year which will be paid
subsequent to June 30, 2012. Accrued retirement represents the Public School Employees' Retirement
Board contribution for the second quarter of calendar year 2012, including the portion pertaining to
accrued salaries at June 30, 2012. Accrued social security represents the District's liability arising from
accrued salaries at June 30, 2012.
Note 9. Long-Term Obligations
During the fiscal year ended June 30, 2012, long-term obligations changed as follows:
Julv 1, 2011 Increases Decreases June 30, 2012
Governmental Activities
General Obligation Bonds -
Series of 2007 $ 4,285,000 $ - $ 4,285,000 $ -
General Obligation Bonds -
Series of 2008 8,645,000 - 330,000 8,315,000
General Obligation Bonds -
Series A of 2008 2,045,000 - 75,000 1,970,000
General Obligation Bonds -
Series AA of 2008 2,325,000 - 1,680,000 645,000
General Obligation Bonds -
Series of 2011 3,235,000 - 170,000 3,065,000
General Obligation Bonds -
Series A of 2011 15,875,000 - - 1.5,875,000
General Obligation Bonds -
Series of 2012 - 4
325
000 - ,
,
4,325,000
36,410,000 4,325,000 6,540,000 34,195,000
Bond discount (51,270) (21,801) (6,624) (66,447)
36,358,730 4,303,199 6,533,376 34,128,553
Compensated absences 1,201,735 - 77,030 1,124,705
Other post-employment benefits 304,796 107,102 - 411,898
Total Long-Term Obligations $ 37.865,261 $ 4,410,301 $ 6,610,406 $ 35 665 156
39
SHIPPENSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS
Note 9. Long-Term Obligations (Continued)
General Obligation Bonds -Series of 2007 - On May 1, 2007, the District issued General Obligation
Bonds in the principal amount of $4,750,000. The proceeds were used to finance the cost of planning,
designing, acquiring, constructing, furnishing, and equipping additions and improvements to the James
Burd and Nancy Grayson Elementary Schools; and to the extent of remaining funds, other buildings and
facilities of the School District; and paying the costs of issuing and insuring the Bonds. The bonds bear
annual interest rates ranging from 3.60% to 4.15%. Interest is payable semi-annually on November 15
and May 15, and the bonds mature serially in amounts ranging from $150,000 to $330,000 through
November 15, 2028. Total interest expense paid on the Series of 2007 Bonds during the year ended
June 30, 2012, was $168,122. These bonds were refunded during 2011-2012 fiscal year.
General Obligation Bonds -Series of 2008 - On April 1, 2008, the District issued General Obligation
Bonds in the principal amount of $9,545,000. The proceeds were used to refund the District's General
Obligation Note, Series of 2003 and to pay the costs of issuing and insuring the Bonds. The bonds
bear annual interest rates ranging from 2.60% to 4.10%. Interest is payable semi-annually on
November 1 and May 1, and the bonds mature serially in amounts ranging from $270,000 to $630,000
through November 1, 2029. Total interest expense paid on the Series of 2008 Bonds during the year
ended June 30, 2012, was $316,885.
General Obligation Bonds - Series A of 2008 - On June 1, 2008, the District issued General Obligation
Bonds in the principal amount of $2,250,000. The proceeds were used to finance the cost of planning,
designing, acquiring, constructing, furnishing, and equipping additions and improvements to
Shippensburg Area High School; and to the extent of remaining funds, other buildings and facilities of
the School District; and paying the costs of issuing and insuring the Bonds. The bonds bear annual
interest rates ranging from 2.40% to 4.00%. Interest is payable semi-annually on November 15 and
May 15, and the bonds mature serially in amounts ranging from $65,000 to $170,000 through
November 15, 2028. Total interest expense paid on the Series A of 2008 Bonds during the year ended
June 30, 2012, was $74,473.
General Obligation Bonds -Series AA of 2008 - On June 1, 2008, the District issued General Obligation
Bonds in the principal amount of $6,990,000. The proceeds were used to refund the District's General
Obligation Bonds, Series A of 2001 and to pay the costs of issuing and insuring the Bonds. The
economic gain on the refunding of the bonds was $122,876. The bonds bear annual interest rates
ranging from 2.40% to 3.00%. Interest is payable semi-annually on November 15 and May 15, and the
bonds mature serially in amounts ranging from $645,000 to $1,680,000 through November 15, 2012.
Total interest expense paid on the Series AA of 2008 Bonds during the year ended June 30, 2012, was
$39,900.
40
SHIPPENSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS
Note 9. Long-Term Obligations (Continued)
General Obligation Bonds -Series of 2011 - On May 3, 2011, the District issued General Obligation
Bonds in the principal amount of $3,235,000. The proceeds were used to pay the costs of planning,
designing, acquiring, constructing, furnishing, and equipping additions and improvements to the
Shippensburg Area High School, and to the extent of remaining funds, other buildings and facilities of
the School District; and to pay the costs of issuing and insuring the Bonds. The bonds bear annual
interest rates ranging from 2.00% to 4.40%. Interest is payable semi-annually on November 15 and
May 15, and the bonds mature serially in amounts ranging from $170,000 to $275,000 through
November 15, 2025. Total interest expense paid on the Series of 2011 Bonds during the year ended
June 30, 2012, was $109,373.
General Obligation Bonds - Series A of 2011 - On May 3, 2011, the District issued General Obligation
Bonds in the principal amount of $15,875,000. The proceeds were used to currently refund the School
District's outstanding General Obligation Bonds, Series of 2004 and to pay the costs of issuing and
insuring the Bonds. The economic gain on the refunding of the 2004 bonds was $567,893. The bonds
bear annual interest rates ranging from 2.00% to 4.00%. Interest is payable semi-annually on November
15 and May 15, and the bonds mature serially in amounts ranging from $725,000 to $2,065,000 through
November 15, 2020. Total interest expense paid on the Series A of 2011 Bonds during the year ended
June 30, 2012, was $497,767.
General Obligation Bonds -Series of 2012 - On May 1, 2012, the District issued General Obligation
Bonds in the principal amount of $4,325,000. The proceeds were used to currently refund the School
District's outstanding General Obligation Bonds, Series of 2007 and to pay the costs of issuing and
insuring the Bonds. The economic gain on the refunding of the 2007 bonds was $205,770. The bonds
bear annual interest rates ranging from 2.00% to 3.25%. Interest is payable semi-annually on November
15 and May 15, and the bonds mature serially in amounts ranging from $5,000 to $330,000 through
November 15, 2028. Total interest expense paid on the Series of 2012 Bonds during the year ended
June 30, 2012, was $-0-.
The District is in compliance with all debt covenants of the outstanding bond issues. Those covenants
include the following: the District shall include the annual debt service in its budget for the fiscal year,
shall appropriate said debt service from its general revenues, and shall punctually cause the payment of
the principal and interest of each of the bonds.
41
SHIPPENSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS
Note 9. Long-Term Obligations (Continued)
Maturities of the long-term debt issues are as follows:
Year Ending June 30,
Principal Governmental Activities
Interest
Total
2013 $ 1,970,000 $ 1,079,663 $ 3,049,663
2014 2,530,000 1,014,574 3,544,574
2015 2,635,000 939,143 3,574,143
2016 2,725,000 851,166 3,76,166
2017 2,820,000 766,388 3,586,388
2018-2022 12,945,000 2,566,060 15,511,060
2023-2027 5,775,000 1,079,380 6,854,380
2028-2030 2,795,000 147,848 2,942,848
$ 34,195,000 $ 8,444,222 $ 42,639,222
Compensated Absences -Under the terms of the District's employment policies, employees are
reimbursed for accrued vacation upon retirement or other termination of employment. The
reimbursement rate is established by the employment contract and varies by employee classification. In
addition, employees are granted sick days per school year, and any unused sick days are permitted to be
carried over to future years. Upon retirement from the District, employees are reimbursed for
accumulated sick days equal to the number of unused days multiplied by an amount per the employment
contract. The employees are also offered options regarding retirement payouts as prescribed in the
contract if certain conditions are met. For the year ended June 30, 2012, benefits attributed to five
employees retiring during the 2011-12 fiscal year amounted to $15,815. The total liability for accrued
vacation, sick-leave, and retirement bonuses has been reflected in the Statement of Net Assets.
Note 10. Post-Employment Benefits
Under the Consolidated Omnibus Budget Reconciliation Act (COBRA), the District provides healthcare
benefits to eligible, former employees and their dependents. Requirements are outlined by the Federal
Government for this coverage. The premium, plus a 2.00% administrative fee, is paid in full by the
eligible participant. This program is offered for 18 months or 36 months after an employee's
termination date. At June 30, 2012, there was one participant covered under COBRA.
42
SHIPPENSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS
Note 11. Rental Obligation
Rental debt, Series of 2011, dated June 29, 2011, was issued by the State Public School Building
Authority (Authority) to pay the costs of a capital project consisting of the planning, designing,
renovating, constructing, furnishing, and equipping the Franklin County Career and Technical Center
(FCCTC) and to pay the costs and expenses of such financing. The FCCTC and the five member school
districts have entered into a lease agreement with the Authority, and each school district will pay its
proportionate share of the rentals in order to fund the Series of 2011 debt.
The rental principal balance payable as of June 30, 2012, was $1,899,867.
Shippensburg Area School District's portion of annual, minimum, future rental indebtedness, including
interest at rates ranging between 2.00% and 5.00%, is as follows:
Year Amount
2013 $ 125,310
2014 125,488
2015 125,624
2016 125,296
2017 125,597
2018-2022 627,054
2023-2027 627,959
2028-2032 627,387
2033-2037 628,270
2038-2039 251,029
43
SHIPPENSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS
Note 12. Defined-Benefit Pension Plan
Plan Description
Name of Plan: Public School Employees' Retirement System (the System)
Type of Plan: Governmental, cost-sharing, multiple-employer, defined-benefit plan
Benefits: Retirement and disability; legislatively-mandated, ad hoc cost-of-living adjustments;
healthcare insurance-premium assistance to qualifying annuitants
Authority: The Public School Employees' Retirement Code (Act No. 96 of October 2, 1975, as
amended) (24 Pa. C.S. 8101-8535)
Annual Financial Report: The System issues a Comprehensive Annual Financial Report (CAFR) that
includes financial statements and required supplementary information for the plan. A copy of the
report may be obtained by writing to Diane J. Wert, Office of Financial Management, Public School
Employees' Retirement System, Post Office Box 125, Harrisburg, PA, 17108-0125. The CAFR is
also available on the publications page of the PSERS website.
Funding Policy
Authority: The contribution policy is established by the Public School Employees' Retirement Code
and requires contributions by active members, employers, and the Commonwealth.
Contribution Rates
Member Contributions: Active members who joined the System prior to July 22, 1983, contribute at
5.25% (Membership Class T-C) or at 6.50% (Membership Class T-D) of the members' qualifying
compensation. Members who joined the System on or after July 22, 1983, and who were active or
inactive as of July 1, 2001, contribute at 6.25% (Membership Class T-C) or at 7.50% (Membership
Class T-D) of the members' qualifying compensation. Members who joined the System after June 30,
2001 and before July 1, 2011, contribute at 7.50% (automatic Membership Class T-D). For all new
hires and for members who elected Class T-D Membership, the higher contribution rates began with
service rendered on or after January 1, 2002. Members who joined the System after June 30, 2011,
automatically contribute at the Membership Class T-E rate of 7.50% (base rate) of the member's
qualifying compensation. All new hires after June 30, 2011, who elect Membership Class T-F
contribute at 10.30% (base rate) of the member's qualifying compensation. Membership Class T-E
and T-F are affected by a "shared risk" provision in Act 120 of 2010 according to which future fiscal
years could cause the Membership Class T-E and T-F contribution rates to fluctuate between 7.50%
and 9.50%, and 10.30% and 12.30%, respectively.
Employer Contributions: Contributions required of employers are based upon an actuarial valuation.
For fiscal year ended June 30, 2012, the employers' contribution rate was 8.65% of covered payroll.
The 8.65% rate is composed of an 8.00% rate for pension benefits and a 0.65% rate for healthcare
insurance-premium assistance.
The District is required to pay the entire contribution and will be reimbursed by the Commonwealth in
an amount equal to the Commonwealth's share as determined by the income-aid ratio (as defined in
Act 29 of 1994), which is at least one-half of the District's total rate. The District's contributions to
the Plan for the years ended June 30, 2012, 2011 and 2010, were $1,609,228, $1,092,282, and
$907,883, respectively, and are equal to the required contributions for each year.
44
SHIPPENSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS
Note 13. Post-Employment Benefits Other Than Pensions
Plan Description - Shippensburg Area School District administers asingle-employer, defined-benefit
healthcare plan. The plan provides medical, vision, and dental benefits to eligible retirees and their
spouses through the District's group-health insurance plan, which covers both active and retired
members. Benefit provisions are established through negotiations between the District and the various
unions representing District employees and are renegotiated each bargaining period. All employees
are eligible upon retirement with 30 years of PSERS service or upon superannuation retirement (age
60 with 30 years of service, age 62 with 1 year of service, or 35 years of service regardless of age).
Retired employees are allowed to continue coverage for themselves and their dependents in the
employer's group-health insurance plan until the retired employees reach Medicare age. The plan
does not issue apublicly-available, financial report.
Funding Policy -Contribution requirements also are negotiated between the District and the various
unions. Retired employees are responsible for payments equal to the premium determined by the
District's plan. The District funds the plan on apay-as-you-go basis, and there is no obligation to
make contributions in advance of when the insurance premiums or claims are due for payment.
Annual OPEB Cost and Net OPEB Obligation -The District's annual, other post-employment benefit
(OPEB) cost (expense) is calculated based on the annual, required contribution of the employer
(ARC), an amount actuarially determined in accordance with GASB Statement No. 45. The ARC
represents the level of funding that, if paid on an on-going basis, is projected to cover normal cost each
year and to amortize any unfunded, actuarial liabilities (or funding excess) over a period not to exceed
thirty years. GASB Statement No. 45 was implemented prospectively; therefore, the net OPEB
obligation at transition was $-0-. The following table shows the components of the District's annual,
OPEB cost for the year, the amount actually contributed to the plan, and changes in the District's net
OPEB obligation to the plan.
Amount
Annual required contribution (ARC) $ 237,922
Interest on net OPEB obligation 13,716
Adjustment to annual required contribution (18,712)
Annual OPEB cost (expense) 232.926
Contributions made (estimated) (125,824)
Estimated increase in net OPEB obligation 107,102
Net OPEB obligation -beginning of year 304.796
Estimated net OPEB obligation - end of year 411.898
The District's annual OPEB costs, the percentage of annual OPEB cost contributed to the plan, and the
net OPEB obligation for the 2010, 2011 and 2012 fiscal years were as follows:
Annual Percentage of Net
OPEB AnnuaIOPEB OPEB
Fiscal Year Ended Cost Cost Contributed Obligation
6/30/2010 $ 229,654 59.34% $ 204,085
6/30/2011 $ 234,577 59.34% $ 204,085
6/30/2012 $ 232,926 54.02% $ 411,898
45
SHIPPENSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS
Note 13. Post-Employment Benefits Other Than Pensions (Continued)
Funded Status and Funding Progress - As of July 1, 2010, the most recent actuarial valuation date, the
actuarial accrued liability for benefits was $1,798,754, all of which was unfunded. The covered
payroll (annual payroll of active employees covered by the plan) was $18,086,350, and the ratio of the
unfunded, actuarial-accrued liability to the covered payroll was 9.95%.
Actuarial valuations of an on-going plan involve estimates of the value of the reported amounts and
assumptions about the probability of occurrence of events far into the future. Examples include
assumptions about future employment, mortality, and the healthcare-cost trend. Amounts determined
regarding the funded status of the plan and the annual, required contributions of the employer are
subject to continual revision as actual results are compared with past expectations, and new estimates
are made about the future. The Schedule of Funding Progress, presented as required supplementary
information following the notes to the financial statements, presents multi-year, trend information that
shows whether the actuarial value of plan assets is increasing or decreasing over time relative to the
actuarial-accrued liabilities for benefits.
Actuarial Method and Assumptions -Projections of benefits for financial-reporting purposes are based
on the substantive plan (the plan as understood by the employer and plan members) and include the
types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit
costs between the employer and plan members to that point. The actuarial methods and assumptions
used include techniques that are designed to reduce short-term volatility in actuarial-accrued liabilities
and the actuarial values of assets, consistent with the long-term perspectives of the calculations.
Actuarial-valuation date
Actuarial-cost method
Amortization method
Remaining amortization period
Asset-valuation method
Actuarial assumptions
Investment rate-of-return
Projected salary increases
Healthcare-inflation rate
7/1/2010
Entry-Age Normal
Level-Dollar
30-year Open
Equal to Market Values of Assets
4.50%
3.00% COLA, 1.00% real-wage growth,
0.25%-3.00% merit increase for
teachers and administrators
7.50% in 2010, decreasing by 0.5% per
year to 5.50% in 2014; rates gradually
decrease in 2015 and beyond
46
SHIPPENSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS
Note 14. Affiliates
Shippensburg Area School District is a member of the Capital Area Intermediate Unit. Through
membership, the District is able to secure various special services, including Special Education,
curriculum development, and certain internal-service functions. The District paid $339,735 as its
share to the Capital Area Intermediate Unit during 2011-2012.
Shippensburg Area School District is a member of the Franklin County Career and Technology
Center. Students of the District are offered courses and curriculums at the Center that are related to
various technical-training fields. Costs of the Center are shared with other local school districts. The
District paid $928,449 as its share to the Franklin County Career and Technology Center during 2011-
2012.
Shippensburg Area School District is affiliated with Shippensburg University through the Grace B.
Luhrs University Elementary School. The University provides teachers for Kindergarten through
Second Grade, and the District provides teachers for the Third through Fifth Grades and support
services. The District reimburses the University based on abasic-education subsidy divided by the
average, daily membership. The District paid $92,795 as its share to Shippensburg University during
2011-2012.
Note 15. Participation in Risk-Sharing Pool
The District is a participant in arisk-sharing pool to provide workers'-compensation coverage. The
expense for this coverage for the 2011-12 year was $110,238, comprised of aself-insured retention of
$27,559 and a contribution to the Central Fund of $82,679. Actual claims during the year are first
paid out of the self-insured retention. Claims that exceed the self-insured retention are satisfied by the
Central Fund. The Central Fund maintains excess insurance to cover any claims that exceed $400,000
per accident. There are approximately 80 districts participating in the pool. If there is a deficiency in
the pooled funds, each member is assessed a proportionate share of the deficiency. Upon withdrawal
by a member from the pool, the terminating member has no rights to funds in the pool.
47
SHIPPENSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS
Note 16. Risk Management
The District is exposed to various risks of loss related to torts; theft of, damage to, or destruction of
assets; and errors or omissions. Significant losses are covered by commercial insurance for all major
programs. For insured programs, there have been no significant reductions in settlement coverage.
Settlement amounts have not exceeded insurance coverage for the current or three prior years.
Note 17. Significant Commitments
The District has not entered into any significant commitments as of June 30, 2012.
48
REQUIRED SUPPLEMENTARY INFORMATION
SHIPPENSBURG AREA SCHOOL DISTRICT
POST-EMPLOYMENT BENEFITS PLAN
SCHEDULE OF FUNDING PROGRESS
REQUIRED SUPPLEMENTARY INFORMATION
Actuarial-
Accrued UAAL as a
Actuarial Liability Unfunded Percentage
Actuarial- Value of (AAL) - AAL Funded Covered of Covered
Valuation Assets Entry-Age (UAAL) Ratio Payroll Payroll
Date (a) (b) (b - a) (a / b) (c) ((b - a) / c)
7/1/2008 $ - $ 1,658,596 $ 1,658,596 0.00% $ 17,294,275 9.59%
7/1!2009 n/a n/a n/a n/a n/a n/a
7/1/2010 $ - $ 1,798,754 $ 1,798,754 0.00% $ 18,086,350 9.95%
7/1/2011 n/a n/a n/a n/a n/a n/a
For financial reporting purposes, an actuarial valuation is required at least biennially for OPEB plans
with a total membership (including employees in active service, terminated employees who have
accumulated benefits but are not yet receiving them, and retired employees and beneficiaries currently
receiving benefits) of 200 or more, or at least triennially for plans with a total membership of fewer
than 200.
Trend information is presented only for years in which information is available.
49
SUPPLEMENTARY INFORMATION
SHIPPENSBURG AREA SCHOOL DISTRICT
SCHEDULE OF REVENUES -GENERAL FUND
Year Ended June 30, 2012
Revenue from Local Sources
Real estate taxes
Cureent $ 17,015,313
Interim 53,481
Public utility tax 29,469
Payments in lieu of taxes 18,528
Current per capita taxes
Section 679 54,831
Act 511 54,831
Local services tax 60,500
Earned income tax 3,992,472
Real estate transfer taxes 296,068
Delinquent real estate taxes 1,322,499
Delinquent per capita taxes
Section 679 12,782
Act 511 12,782
Delinquent occupation tax 78
Interest 45,092
Admissions 92,998
IDEA 617,864
Rentals 14,857
Tuition 115,238
Refunds and other miscellaneous revenue 520,519
Total revenue from local sources 24,330,202
Revenue from State Sources
Basic education 8,553,939
Tuition for children placed in private homes 67,309
Migratory children 120
Special education for school-aged pupils 1,691,189
Transportation 977,164
(Continued)
50
SHIPPENSBURG AREA SCHOOL DISTRICT
SCHEDULE OF REVENUES -GENERAL FUND (Continued)
Year Ended June 30, 2012
Revenue from State Sources (Continued)
Building reimbursement 1,050,315
Health services 68,038
State property tax reduction 923,262
PA accountability 217,903
Social security reimbursement 748,921
Retirement reimbursement 1,042,797
Extra grants 1,265
Total revenue from state sources 15,342,222
Revenue from Federal Sources
Title I -Grants to Local Educational Agencies 722,340
Title II -Improving Teacher Quality 139,161
ARRA -'Title I, Part A 29,885
ARRA -Education Jobs Fund 9,810
ERRP 8,288
Medical Assistance Program 100,381
Total revenue from Federal sources 1,009,865
Total revenues $ 40,682,289
51
SHIPPENSBURG AREA SCHOOL DISTRICT
SCHEDULE OF EXPENDITURES -GENERAL FUND
Year Ended June 30, 2012
Instruction
Regular programs
Salaries $ 11,062,393
Employee benefits 4,296,285
Purchased services
Professional and technical 52,948
Property 94,559
Other 1,214,007
Supplies 329,106
Other objects 3,133
Total regular programs 17,052,431
Special programs
Salazies 2,803,681
Employee benefits 1,126,485
Purchased services
Professional and technical 1,236,542
Other 817,498
Supplies 32,487
Other objects 2g
Total special programs 6,016,718
Vocational education programs
Salaries 507,116
Employee benefits 169,316
Purchased services
Property 649
Other 973,276
Supplies IS 038
Other objects 160
Total vocational education programs 1,665,555
(Continued)
52
SHIPPENSBURG AREA SCHOOL DISTRICT
SCHEDULE OF EXPENDITURES -GENERAL FUND (Continued)
Year Ended June 30, 2012
Instruction (Continued)
Other instructional programs
Salaries 138,518
Employee benefits 36,775
Purchased services
Professional and technical 116,725
Property 189
Other 23,042
Supplies 1,049
Total other instructional programs 316,298
Adult education programs
Salaries 4,171
Employee benefits 729
Supplies 4,553
Total adult education programs 9,453
Higher-education programs 14,788
Total instruction 25,075,243
Support Services
Pupil personnel
Salaries 924,510
Employee benefits 367,169
Purchased services
Professional and technical 16,377
Other 7,453
Supplies 15,944
Other objects 1,270
Total pupil personnel
1,332,723
(Continued}
53
SHIPPENSBURG AREA SCHOOL DISTRICT
SCHEDULE OF EXPENDITURES -GENERAL FUND (Continued)
Year Ended June 30, 2012
Support Services (Continued)
Instructional staff
Salaries 509,708
Employee benefits 195,933
Purchased services
Professional and technical 1,500
Property 3,492
Other 6,717
Supplies 358,307
Property 59,986
Other objects 2,807
Total instructional staff 1,138,450
Administration
Salaries 1,486,771
Employee benefits 617,411
Purchased services
Professional and technical 272,887
Property 2,280
Other 41,769
Supplies 15,408
Other objects 17,739
Total administration 2,454,265
Pupil health
Salaries
Employee benefits
Purchased services
Professional and technical
Property
Supplies
Total pupil health
(Continued)
327,565
127,687
21,021
100
6,675
483,048
54
SHIPPENSBURG AREA SCHOOL DISTRICT
SCHEDULE OF EXPENDITURES -GENERAL FUND (Continued)
Year Ended June 30, 2012
Support Services (Continued)
Business
Salaries 253,082
Employee benefits 154,507
Purchased services
Professional and technical 3,326
Other 17,504
Supplies 2,505
Other objects 390
Total business
Operation and maintenance of plant services
Salaries
Employee benefits
Purchased services
Professional and technical
Property
Other
Supplies
Property
Other objects
Total operation and maintenance of plant services
Student transportation services
Purchased services
Professional and technical
Other
Supplies
Other objects
Total student transportation services
(Continued)
431,314
795,876
454,686
1,200
597,387
128,543
261,801
8,204
481
2,248,178
5,370
1,863,694
1,094
95
1,870,253
55
SHIPPENSBURG AREA SCHOOL DISTRICT
SCHEDULE OF EXPENDITURES -GENERAL FUND (Continued)
Year Ended June 30, 2012
Support Services (Continued)
Central service
Salaries 728
Employee benefits 125
Purchased services
Professional and technical 40,153
Property 15,841
Supplies 16,069
Total central service
72,916
Other support services 32,836
Total support services 10,063,983
Operation ofNon-Instructional Services
Student activities
Salaries 377,831
Employee benefits 94,372
Purchased services
Professional and technical 68,423
Property 23,011
Other 69,579
Supplies 53,017
Other objects 2,799
Total student activities
689,032
(Continued)
56
SHIPPENSBURG AREA SCHOOL DISTRICT
SCHEDULE OF EXPENDITURES -GENERAL FUND (Continued)
Year Ended June 30, 2012
Operation ofNon-Instructional Services (Continued)
Community services
Supplies 6,293
Total operation ofnon-instructional services 695,325
Facilities acquisition, construction, and improvement
Property 84,497
Debt Service
Principal 2,420,000
Interest 1,123,944
Total debt service 3,543,944
Other Financing Uses
Refund of prior years' receipts 3,945
Interfund transfers out 45,000
Total other financing uses 48,945
Total expenditures and other financing uses $ 39,511,937
57
.Bayer& Ritter
c;e~rtit[cxt t~ivtt~lit~ wrxcxantx~rrts rYr~d C~xasr~ltw~nts
INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL
OVER FINANCIAL REPORTING AND ON COMPLIANCE AND
OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS
PERFORMED IN ACCORDANCE WITH GOVERNMENTAUDITINGSTANDARDS
Board of School Directors
Shippensburg Area School District
Shippensburg, Pennsylvania
We have audited the financial statements of the governmental activities, the business-type activity, each
major fund, and the aggregate remaining fund information of Shippensburg Area School District as of and
for the year ended June 30, 2012, which collectively comprise Shippensburg Area School District's basic
financial statements and have issued our report thereon dated November 27, 2012. We conducted our
audit in accordance with auditing standards generally accepted in the United States of America and the
standards applicable to financial audits contained in Government Auditing Standards, issued by the
Comptroller General of the United States.
Internal Control Over Financial Renortin
Management of Shippensburg Area School District is responsible for establishing and maintaining
effective internal control over financial reporting. In planning and performing our audit, we considered
Shippensburg Area School District's internal control over financial reporting as a basis for designing our
auditing procedures for the purpose of expressing our opinion on the financial statements, but not for the
purpose of expressing an opinion on the effectiveness of the District's internal control over financial
reporting. Accordingly, we do not express an opinion on the effectiveness of the District's internal
control over financial reporting.
A deficiency in internal control exists when the design or operation of a control does not allow
management or employees, in the normal course of performing their assigned functions, to prevent, or
detect and correct misstatements on a timely basis. A material weakness is a deficiency, or combination
of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement
of the entity's financial statements will not be prevented, or detected and corrected on a timely basis.
Our consideration of internal control over financial reporting was for the limited purpose described in the
first paragraph of this section and was not designed to identify all deficiencies in internal control over
financial reporting that might be deficiencies, significant deficiencies, or material weaknesses. We did
not identify any deficiencies in internal control over financial reporting that we consider to be material
weaknesses, as defined previously.
Camp Hill, PA • Carlisle, PA • Chamtyersburg, PA • Stcafe College, PA
A~ I~de~rsd~ntly C?~vt~ecf l~hernk~ ; t~tc<~9od~y Aliia~sce
Tha AkGladrey 11ta+ce is o premier o!Gl+a~on aF kndependsro aaawntieg and to~»a1Fn~ fume. The dieyr A1iia?ce memb-r firms mairsgin their name,
eubnomy and i~ and are rarpam~rle (or lhek awn cGard ka arrangemeMS, delivery ~ }ervi+ces and mairNenor+ae a(tlient ralatiarrships,
Compliance and Other Matters
As part of obtaining reasonable assurance about whether Shippensburg Area School District's financial
statements are free of material misstatement, we performed tests of its compliance with certain provisions
of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and
material effect on the determination of financial statement amounts. However, providing an opinion on
compliance with those provisions was not an objective of our audit, and accordingly, we do not express
such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that
are required to be reported under Government Auditing Standards.
This report is intended solely for the information and use of management, the Board of School Directors,
others within the entity, Federal-awarding agencies, and pass-through entities, and is not intended to be,
and should not be, used by anyone other than these specified parties.
,~~
Chambersburg, Pennsylvania
November 27, 2012
59
Boyer&Ritter
C~Artitiexi t't_ft~iK? Ac:~c;oratat~ants artd Cc~scfitants
INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE WITH
REQUIREMENTS THAT COULD HAVE A DIRECT AND MATERIAL EFFECT
ON EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER
COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A-133
Board of School Directors
Shippensburg Area School District
Shippensburg, Pennsylvania
Compliance
We have audited Shippensburg Area School District's compliance with the types of compliance
requirements described in the U. S. Office of Management and Budget (OMB) Circular A-133
Compliance Supplement that could have a direct and material effect on each of the District's major
Federal programs for the year ended June 30, 2012. Shippensburg Area School District's major Federal
programs are identified in the summary of independent auditor's results section of the accompanying
Schedule of Findings and Questioned Costs. Compliance with the requirements of laws, regulations,
contracts, and grants applicable to each of its major Federal programs is the responsibility of the
District's management. Our responsibility is to express an opinion on the District's compliance based on
our audit.
We conducted our audit of compliance in accordance with auditing standards generally accepted in the
United States of America; the standards applicable to financial audits contained in Government Auditing
Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of
States, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133
require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance
with the types of compliance requirements referred to above that could have a direct and material effect
on a major Federal program occurred. An audit includes examining, on a test basis, evidence about the
District's compliance with those requirements and performing such other procedures as we considered
necessary in the circumstances. We believe our audit provides a reasonable basis for our opinion. Our
audit does not provide a legal determination on the District's compliance with those requirements.
[n our opinion, Shippensburg Area School District complied, in all material respects, with the
compliance requirements referred to above that could have a direct and material effect on each of its
major Federal programs for the year ended June 30, 2012.
Camp Hill, PA • Carlisle, PA • Chcimbersburg, PA « State Collage, PA
An Indepondenr}y Chvn~ f~'~amk~r tr~~ladr~ APlic~nce
The "eY AJlionee ie a premiee aiNSaiion of cndsyendeM aa:arnti,+g ak! eanwNSng f&,ns. Tha trieGilod»y Afi'ew+c~ rae~ fime enainklin heir home,
~bromy and i~a and era retpanei6{e for their awn cih3M fae arrangemernie, deRvsry of sarv+eaa and nmtnhraxa of efient relaionshipa.
Internal Control Over Compliance
Management of Shippensburg Area School District is responsible for establishing and maintaining
effective internal control over compliance with the requirements of laws, regulations, contracts, and
grants applicable to Federal programs. In planning and performing our audit, we considered the
District's internal control over compliance with requirements that could have a direct and material effect
on a major Federal program to determine the auditing procedures for the purpose of expressing our
opinion on compliance and to test and report on internal control over compliance in accordance with
OMB Circular A-133, but not for the purpose of expressing an opinion on the effectiveness of internal
control over compliance. Accordingly, we do not express an opinion on the effectiveness of the
District's internal control over compliance.
A deficiency in internal control over compliance exists when the design or operation of a control over
compliance does not allow management or employees, in the normal course of performing their
assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance
requirement of a Federal program on a timely basis. A material weakness in internal control over
compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such
that there is a reasonable possibility that material noncompliance with a type of compliance requirement
of a Federal program will not be prevented, or detected and corrected, on a timely basis.
Our consideration of internal control over compliance was for the limited purpose described in the first
paragraph of this section and was not designed to identify all deficiencies in internal control over
compliance that might be deficiencies, significant deficiencies, or material weaknesses. We did not
identify any deficiencies in internal control over compliance that we consider to be material weaknesses,
as defined above.
This report is intended solely for the information and use of management, the Board of School
Directors, others within the entity, Federal-awarding agencies, and pass-through entities, and is not
intended to be, and should not be, used by anyone other than these specified parties.
/~ ,~.~,
Chambersburg, Pennsylvania
November 27, 2012
61
SHIPPENSBURG AREA SCHOOL DISTRICT
Schedule of Findings and Questioned Costs
Year Ended June 30, 2012
Section I -- Summary of Independent Auditor's Results
Financial Statements
Type of auditor's report issued: Unqualified
Internal control over financial reporting:
• Material weaknesses identified?
• Significant deficiencies identified?
Noncompliance material to financial statements
noted?
Yes X No
Yes X None Reported
Yes X No
Federal Awards
Internal control over major programs:
• Material weaknesses identified?
Yes X No
• Significant deficiencies identified? _ Yes X None Reported
Type of auditor's report issued on compliance for major programs: Unqualified
• Any audit findings disclosed that are
required to be reported in accordance
with Section .510(a) of OMB Circular A-133? _ Yes X No
Identification of major programs:
CFDA Numbers
Name of Federal Program or Cluster
10.555
84.367
Dollar threshold used to distinguish between
type A and type B programs
Auditee qualified as low-risk auditee?
National School Lunch Program
Title II -Improving Teacher Quality
$300,000
X Yes _ No
62
SHIPPENSBURG AREA SCHOOL DISTRICT
Schedule of Findings and Questioned Costs
Year Ended June 30, 2012
Section II -Financial-Statement Findings
A. Significant Deficiencies in Internal Control
There were no findings relating to the financial-statement audit required to be reported.
B. Compliance Findings
There were no findings relating to the financial-statement audit required to be reported.
Section III -Findings and Questioned Costs for Federal Awards
A. Significant Deficiencies in Internal Control
There were no findings relating to the Federal awards required to be reported in accordance with
Section .510(a) of OMB Circular A-133.
B. Compliance Findings
There were no findings relating to the Federal awards required to be reported in accordance with
Section .510(a) of OMB Circular A-133.
63
SHIPPENSBURG AREA SCHOOL DISTRICT
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
Year Ended June 30, 2012
Pass-
Federal Through
Source C.F.D.A. Grantor's Grant
Code Number Number Period
U. S. Department of Health and Human Services
Passed through the Pennsylvania
Department of Public Welfare
Early Retiree Reinsurance Program I 93.546 N/A 11-12
Title XIX -Medical Assistance Program I 93.778 N/A 11-12
Total U. S. Department of Health and Hum an Services
U. S. Department of Education
Passed through the Pennsylvania
Department of Education
Title I -Improving Basic Programs I 84.010 013-110387 10-11
Title I -Improving Basic Programs I 84.010 013-120387 11-12
ARRA - Title I Part A Grants to LEAs I 84.389 127-100387 09-10
Title I Program Improvement -Set Aside I 84.010 042-100387 10-11
Title I Program Improvement -Set Aside I 84.010 042-110387 11-12
Title II -Improving Teacher Quality I 84.367 020-110387 10-11
Title II -Improving Teacher Quality I 84.367 020-120387 11-12
ARRA -Education Jobs Fund I 84.410 140-139242 I 1-12
Passed through the Capital Area
Intermediate Unit Consortium
Special Education -Grants to States I 84.027 N/A 10-I 1
Special Education -Grants to States I 84.027 N/A 11-12
ARRA -Special Education -Grants to States I 84.391 N/A 10-11
Special Education -Preschool Grants I 84.173 N/A 11-12
Special Education -Preschool Grants I 84.173 N/A 1 I-12
Total U. S. Department of Education
(Continued)
64
Total Accrued Accrued
Program Received (Deferred) (Deferred)
or Annual (Refunded) in Revenue at Revenue Revenue at
Award Fiscal Year 7/1/2011 Recognized Expenditures 6/30/2012
$ 8,288 $ 8,288 $ - $ 8,288 $ 8,288 $ -
$ 170 170 - 170 170 -
8,458 - 8,458 8,458 -
$ 571,623 184,122 82,355 101,767 101,767 -
$ 555,116 443,747 - 543,680 543,680 99,933
$ 284,481 33,308 3,423 29,885 29,885 -
$ 100,280 12,535 ],822 10,713 10,713 -
$ 66,180 44,120 - 66,180 66,180 22,060
$ 161,692 42,668 19,356 23,312 23,312 -
$ 134,520 90,032 - 115,849 115,849 25,817
$ 9,810 - - 9,810 9,810 9,810
$ 648,585 648,585 648,585 - - -
$ 610,119 - - 610,119 610,119 610,119
$ 708,633 232,771 232,771 - - -
$ 4,050 4,050 - 4,050 4,050 -
$ 3,695 - - 3,695 3,695 3,695
1,735,938 988,312 1,519,060 1,519,060 771,434
65
SHIPPENSBURG AREA SCHOOL DISTRICT
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS (Continued)
Year Ended June 30, 2012
Federal
Source C.F.D.A.
Code Number Pass-
Through
Grantor's
Number
Grant
Period
U. S. Department of Agriculture
Passed through the Pennsylvania
Department of Education:
National School Lunch Program I 10.555 N/A 10-11
National School Lunch Program I 10.555 N/A I1-12
Passed through the Pennsylvania
Department of Agriculture:
Food Donation (a) I 10.555 N/A 10-11
Total U. S. Department of Agriculture
Total Expenditures of Federal Awards
Source Codes: Legends:
D -Direct Funding (a) Donated commodities valued at local market values
[ -Indirect Funding (b) Total amount of commodities received from
Department of Agriculture
(c) Inventories at July 1, 2011
(d) Total amount of commodities used
(e) Inventories at June 30, 2012
See Notes to Schedule of Expenditures of Federal Awards.
66
Total Accrued Accrued
Program Received (Deferred) (Deferred)
or Annual (Refunded) Revenue at Revenue Revenue at
Award Fiscal Year 7/1/2011 Recognized Expenditures 6/30/2012
N/A 13,625 13,625 - - -
N/A 458,769 - 466,765 466,765 7,996
N/A (b) 70,137 (c) (2,545) 69,040 (d) 69,040 (e) (3,642)
542,531 11,080 535,805 535,805 4,354
$ 2,286,927 $ 999,392 $ 2,063,323 $ 2,063,323 $ 775,788
Test of 25% Rule:
Programs selected for testing as major programs:
National School Lunch Program $ 535,805
Title II -Improving Teacher Quality 139,161
$ 674,966 / $ 2,063,323 = 32.71%
67
SHIPPENSBURG AREA SCHOOL DISTRICT
NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
Note 1. Basis of Presentation
The accompanying Schedule of Expenditures of Federal Awards (Schedule) includes the Federal-grant
activity of Shippensburg Area School District under programs of the Federal govenunent for the year
ended June 30, 2012. The information in this Schedule is presented in accordance with the requirements
of the Office of Management and Budget (OMB) Circular A-133, Audits of States, Local Governments,
and Non-Profit Organizations. Because the Schedule presents only a selected portion of the operations of
the District, it is not intended to and does not present the financial position, changes in net assets, or cash
flows of the District.
Note 2. Significant Accounting Policies
Expenditures reported in the Schedule are reported on the accrual basis of accounting. Such expenditures
are recognized following the cost principles contained in OMB Circular A-87, Cost Principles for State,
Local, and Indian Tribal Governments, whereby certain types of expenditures are not allowable or are
limited as to reimbursement. Negative amounts shown on the Schedule represent adjustments or credits
made in the normal course of business to amounts reported as expenditures in prior years. Pass-through
entity identifying numbers are presented where available.
Note 3. Sub-recipients
With respect to the Federal expenditures presented in the Schedule, Shippensburg Area School District
did not provide any Federal awards to sub-recipients.
68
SHIPPENSBURG AREA SCHOOL DISTRICT
SUMMARY SCHEDULE OF PRIOR YEAR'S AUDIT FINDINGS
Year Ended June 30, 2012
There were no prior year's audit findings.
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