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MECHANICSBURG AREA SCHOOL DISTRICT
FINANCIAL STATEMENTS
YEAR ENDED JUNE 30, 2013
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TABLE OF CONTENTS
a Page
Number
INDEPENDENT AUDITOR'S REPORT IAR -1 to IAR -.3
MANAGEMENT'S DISCUSSION AND ANALYSIS MDA - 1 to MDA - 11
BASIC FINANCIAL STATEMENTS
District -wide financial statements
Statement of net position FS'- 1
Statement of activities FS-2
Fund financial statements
Balance sheet — governmental funds FS - 3
Reconciliation of the governmental funds balance sheet
to the statement of net position FS - 4
Statement of revenues, expenditures, and changes
in fund balances — governmental funds FS - 5
Reconciliation of the governmental funds statement of revenues,
expenditures, and changes in fund balance to the statement of activities FS-6
Statement of net position — proprietary funds FS - 7
Statement of revenues, expenses, and changes in net position — proprietary funds FS - 8
Statement of cash flows — proprietary funds FS - 9
Statement of fiduciary net position — fiduciary funds FS - 10
Statement of changes in fiduciary net position — fiduciary funds FS - 11
NOTES TO FINANCIAL STATEMENTS FS - 12 to FS - 34
OTHER REQUIRED SUPPLEMENTARY INFORMATION
Budgetary comparison information — general fund ORSI - 1
Other post employment benefit plans ORSI 2
SUPPLEMENTARY INFORMATION SI - 1 to SI - 2
Greenawalt & Company, P.C.
„ James E. Lyons
CERTIFIED PUBLIC ACCOUNTANTS Deborah J. Kelly
Since 1955 Scott J. Christ
a 10 Ronald S. Morgan
INDEPENDENT AUDITOR'S REPORT Howard R. Greenawalt CreedonR.Hoffman
Board of School Directors
Mechanicsburg Area School District
Mechanicsburg, Pennsylvania
Report on the Financial Statements
We have audited the accompanying financial statements of the governmental activities, the business -type activities,
the aggregate discretely presented component unit, each major fund, and the fiduciary funds of Mechanicsburg Area
School District as of and for the. year ended June 30, 2013, and the related notes to the financial statements, which
collectively comprise the District's basic financial statements as listed in the table of contents.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with
accounting principles generally accepted in the United States of America; this includes the design, implementation,
and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are
free from material misstatement, whether due to fraud or error.
Auditor's Responsibility
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 involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial
statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of
material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments,
the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial
statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion.
An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of
significant accounting estimates made by management, as well as evaluating the overall presentation of the financial
statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinion.
IAR - 1
400 West Main Street . Mechanicsburg, PA 17055. 717.766.4763 • Fax 717.766.2731
62 West Pomfret Street • Carlisle, PA 17013 •717.243.4822 . Fax 717.258.9372
www.greenawalt.cc
Board of School Directors
Mechanicsburg Area School District
Mechanicsburg, Pennsylvania
Opinions
In our opinion, the financial statements referred to above present fairly, in all material respects, the respective
financial position of the governmental activities, the business -type activities, the aggregate discretely presented
component unit, each major fund, and the fiduciary funds of Mechanicsburg Area School District, as of June 30, 2013,
and the respective changes in financial position, and, where applicable, cash flows thereof for the year then ended in
conformity with accounting principles generally accepted in the United States of America.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the management's discussion
and analysis on pages MDA -1 through MDA -9 and the other required supplementary information on pages ORSI -1
and ORSI -2 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, who 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.
Other Information
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise
Mechanicsburg Area School District's financial statements as a whole. The combining fiduciary fund financial
statements are presented for purposes of additional analysis and are not a required part of the financial statements.
The combining fiduciary fund financial statements are the responsibility of management and were derived from and
relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such
information has been subjected to the auditing procedures applied in the audit of the basic financial statements and
certain additional procedures, including comparing and reconciling such information directly to the underlying
accounting and other records used to prepare the basic financial statements or to the basic financial statements
themselves, and other additional procedures in accordance with auditing standards generally accepted in the United
States of America. In our opinion, the information is fairly stated in all material respects in relation to the basic
financial statements as a whole.
IAR - 2
Board of School Directors
Mechanicsburg Area School District
Mechanicsburg, Pennsylvania
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated November 15, 2013, on
our consideration of Mechanicsburg Area School District's internal control over financial reporting and on our tests of
its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The
purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance
and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on
compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards
in considering Mechanicsburg Area School District's internal control over financial reporting and compliance.
GREENAWALT & COMPAN , P.C.
November 15, 2013 .
Mechanicsburg, Pennsylvania
IAR - 3
MECHANICSBURG AREA SCHOOL DISTRICT
_ MANAGEMENT'S DISCUSSION AND ANALYSIS
JUNE 30, 2013
Y
The management of the Mechanicsburg Area School District is pleased to present the following discussion
and analysis of the District's financial position at June 30, 2013, 2012, and 2011. It provides an overview of
our financial performance between fiscal years ended June 30, 2013 and 2012, in accordance with
governmental reporting requirements. The purpose of this discussion is to provide a narrative summary of
the financial position and activities of the District in order to enhance the reader's understanding of the
District's basic financial statements.
The District is required to present comparative financial information between the current year and the prior
year in its Management's Discussion and Analysis (MD &A) as mandated by the Governmental Accounting
Standards Board (GASB) Statement No. 34 Basic Financial Statements — and Management's Discussion
and Analysis — for State and Local Governments. This report contains such comparative financial
information.
The District has elected not to include the financial information of its discretely presented component unit,
The Wildcat Foundation, in its Management Discussion and Analysis. The separate audited financial
statements for the Foundation are available by contacting the District office.
FINANCIAL HIGHLIGHTS
The School Board adopted the 2012 -2013 general fund budget with a planned deficit of $643,662. The
actual 2012 -2013 fiscal year results increased fund balance by $2,436,133. Expenditures were over budget
by $428,847 and revenue was over budget by $3,508,642 or 7 %. Increased revenue was due to earned
income tax collection efficiencies garnered through county -wide consolidation through Act 32 of 2008.
This year the school district received $885,976 from the PA Property Tax Relief Fund. This amount was
used to provide property tax reductions to each qualified homeowner in the amount of $121.11. The ending
fund balance at June 30, 2013 is $19,225,108 which is comprised of $8,903,407 non - spendable or
committed for future medical insurance claims and future pension costs, $6,314,787 committed for
retirement of long -term debt and capital outlays and $4,006,914 which is unassigned. The unassigned fund
balance represents 7% of expenditures and transfers to other funds.
OVERVIEW OF THE FINANCIAL STATEMENTS
These financial statements consist of three sections — Management's Discussion and Analysis (this section),
the basic financial statements, and other required supplementary information.
The first two statements of the basic financial statements are government -wide financial statements. These
statements on pages FS -1 and FS -2 consist of the Statement of Net Position and the Statement of Activities.
The government -wide financial statements provide both short-term and long -term information about the
District's overall financial status.
MDA - 1
MECHANICSBURG AREA SCHOOL DISTRICT
r MANAGEMENT'S DISCUSSION AND ANALYSIS (Cont'd.)
JUNE 30, 2013
The remaining basic financial statements consist of fund financial statements. These statements focus on
individual funds of the District and provide a more detailed presentation of the District's operations. The
governmental funds statements on pages FS -3 and FS -5 present how District services are financed in the
short-term as well as what remains for fiiture spending. The proprietary fund statements on pages FS -7
through FS -9 present both short-term and long -term information about the activities that the District
operates similar to a business (the Food Service Fund). The fiduciary fund statements on pages FS -10 and
FS -11 report amounts held in trust by the District for agency and student activity funds.
The basic financial statements also include notes on pages FS -12 through FS -34 that provide a more detailed
explanation of some of the information in the financial statements. Following the basic financial statements
is other required supplementary information on pages ORSI -1 and ORSI -2 that consists of the District's
budgetary comparison and other post - employment benefit plans. Other supplementary information on pages
SI -1 and SI -2 present combining schedules for additional analysis.
Government -wide Statements Report the District as a Whole
The government -wide statements report financial information about the District as a whole using accounting
methods similar to the accounting used by private- sector companies. The Statement of Net Position includes
all of the District's ,assets and liabilities utilizing the full accrual basis of accounting. The Statement of
Activities accounts for all of the District's revenues and expenses, regardless of when cash is received or
paid.
These two government -wide statements report the District's net position and changes in them. The District's
net position represents the difference between the District's assets and liabilities. The District's net position
is one way to measure the District's financial position, or financial health, over time. Increases or decreases
in the District's net position is one indicator of whether its financial health is improving or deteriorating. To
assess the overall health of the District, non - financial factors must also be considered, such as changes in the
District's property tax base and the performance of the students.
The government -wide financial statements of the District are divided into two categories:
• Governmental activities — All of the District's basic services are included here, such as
instruction, administration and community services. Real estate and earned income taxes, and
state and federal subsidies and grants finance most of these activities.
• Business -type activities — The District operates a food service operation and charges fees to
staff, students and visitors to help it cover the costs of the food service operation.
MDA - 2
MECHANICSBURG AREA SCHOOL DISTRICT
MANAGEMENT'S DISCUSSION AND ANALYSIS (Cont'd.)
JUNE 30, 2013
Fund Financial Statements
The District's fund financial statements provide detailed information about the most significant funds, or
major funds — not the District as a whole. Some funds are required to be reported as major funds.
• Governmental funds — Most of the District's activities are reported in governmental funds,
and focus on changes in financial resources, rather than upon net income determination.
These funds are reported using the modified accrual basis of accounting, which measures
cash and all financial assets that can readily be converted to cash. The governmental fund
statements provide a detailed short-term view of the District's operations and the services it
provides. Governmental fund information helps the reader determine whether there are more
or fewer financial resources that can be spent in the near future to finance the District's
programs. The relationship (or differences) between governmental activities (reported in the
Statements of Net Position and the Statement of Activities) and governmental funds is
reconciled in the financial statements on pages FS -4 and FS -6.
• Proprietary funds — These funds are used to account for the District activities that are similar
to business operations in the private sector. When the District charges customers for services
it provides, these services are generally reported in proprietary funds. The Food Service Fund
is the District's proprietary fund and is the same as the business -type activities reported in the
government -wide statements.
• Fiduciary funds — The District is the trustee or agent for individuals, private organizations
and /or governmental units as shown on pages FS -10 and FS -11.
FINANCIAL ANALYSIS OF THE DISTRICT AS A WHOLE
Net Position
The District's total net position was $40,975,789 at June 30, 2013 which includes $40,031,779 in
Governmental Activities and $944,010 in Business -type Activities. This shows an increase of $4,238,136
from total net position at June 30, 2012, which included an increase of $4,241,799 in Governmental
Activities and a decrease of $3,663 in Business -type Activities, prior to a restatement of net position at June
30, 2012 of $1,165,067 for the implementation of GASB 65 requiring bond issuance costs to be expensed
immediately rather than amortized over the life of the bonds.
MDA - 3
MECHANICSBURG AREA SCHOOL DISTRICT
MANAGEMENT'S DISCUSSION AND ANALYSIS (Cont'd.)
JUNE 30, 2013
Statement of Net Position 2012 -2013
Governmental Business -type Total
Activities Activities School District
Current and other assets $ 32,749,892 $ 736,752 $ 33,486,644
Capital assets 63,379,005 266,386 63,645,391
Total assets 96,128,897 1,003,138 97,132,035
Current and other liabilities 4,481,073 50,729 4,531,802
Long -term liabilities 51,616,045 8,399 51,624,444
Total liabilities 56,097,118 59,128 56,156,246
Capital assets (net of related debt) 13,135,434 266,386 13,401,820
Restricted for capital projects 741,435 - 741,435
Unrestricted . 26 677,624 26,832,534
Total net position $ 40,031,779 $ 944,010 $ 40,975,789
Statement of Net Postions 2011 -2012
Governmental Business -type Total
Activities Activities School District
Current and other assets $ 28,677,858 $ 711,266 $ 29,389,124
Capital assets 67,042,701 304,798 67,347,499
Total assets 95,720 1,016,064 96,736,623
Current and other liabilities 4,290,944 42,789 4,333,733
Long -term liabilities 55,639,635 25,602 55,665,237
Total liabilities 59,930,579 68,391 59,998,970
Capital assets (net of related debt) 12,611,275 304 12,916,073
Restricted for capital projects 813 - 813,123
Unrestricted 22,365,582 642 23,008,457
Total net position $ 35,789,980 $ 947,673 $ 36,737,653
MDA -4
MECHANICSBURG AREA SCHOOL DISTRICT
MANAGEMENT'S DISCUSSION AND ANALYSIS (Cont'd.)
JUNE 30, 2013
Statement of Net Position 2010 -2011
Governmental Business -type Total
Activities Activities School District
Current and other assets $ 26,364,449 $ 653,802 $ 27,018,251
Capital assets 68,511,001 360,704 68,871,705
Total assets 94,875,450 1,014,506 95,889,956
Current and other liabilities 5,572,526 43,166 5,615,692
Long -term liabilities 58,637,672 24,391 58,662,063
Total liabilities 64,210,198 67,557 64,277,755
Capital assets (net of related debt) 11,060,592 360,704 11,421,296
Restricted for capital projects ` 1,951,656 - 1,951,656
Unrestricted 17,653,004 586,245 18,239,249
Total net assets $ 30,665,252 $ 946,949 $ 31,612,201
Statement of Activities
The results of this year's operations as a whole are reported in the Statement of Activities. Direct expenses
are listed by programs, and then offset by program revenues to determine net (expense) revenue and
changes in net position. General revenues, such as taxes, state general subsidies, and investment earnings
are then applied prior to transfers, and special items, to determine the change in net position. For the 2012-
2013 fiscal year, the change in net position for governmental activities was an increase of $5,406,866 and a
decrease of $3,663 for business -type activities, for a net total increase of $5,403,203 as reflected in the chart
on page MDA - 6. For the 2011 -2012 fiscal year, the change in net assets for governmental activities was an
increase of $5,124,728 and an increase of $724 for business -type activities for a net total increase of
$5,125,452 as reflected in the chart on page MDA - 6:
MDA - 5
MECHANICSBURG AREA SCHOOL DISTRICT
MANAGEMENT'S DISCUSSION AND ANALYSIS (Cont'd.)
JUNE 30, 2013
Statement of Activities 2012 -2013
Governmental Business -type Total
Activities Activities School District
Program revenues
Charges for services $ 1,420,695 $ 938,021 $ 2,358,716
Operating grants and contributions 6,238,456 881,588 7,120,044
Capital grants and contributions 741,381 - 741,381
General revenues
Taxes 40,926,549 - 40,926,549
Other local revenue - - -
State general subsidies 6,578,096 - 6,578,096
Investment earnings 41,873 757 42,630
Total revenues 55,947,050 1,820,366 57,767,416
Direct expenses 50,428,133 1,936,080 52,364,213
Excess (deficiency) before transfers 5,518,917 (115,714) 5,403,203
Transfers between activities (112,051) 112,051 -
Change in net position $ 5,406,866 $ (3,663) $ 5,403,203
Statement of Activities 2011 -2012
Governmental Business -type Total
Activities Activities School District
Program revenues
Charges for services $ 1,177,556 $ 1,011,268 $ 2,188,824
Operating grants and contributions 5,719,212 797,089 6,516,301
Capital grants and contributions 671,326 - 671,326
General revenues
Taxes 39,427,230 - 39,427,230
Other local revenue - - -
State general subsidies 6,578,107 - 6,578,107.
Investment earnings 72,340 793 73,133
Total revenues 53,645,771 1,809,150 55,454,921
Direct expenses 48,407,758 1,921,711 50,329,469
Excess (deficiency) before transfers 5,238,013 (112,561) 5,125,452
Transfers between activities (113,285) 113,285 -
Change in net position $ 5,124,728 $ 724 $ 5,125,452
MDA - 6
MECHANICSBURG AREA SCHOOL DISTRICT
MANAGEMENT'S DISCUSSION AND ANALYSIS (Cont'd.)
JUNE 30, 2013
Local Sources
Direct expenses represent the actual cost of providing the services while the net cost represents the amount
of cost that is not recovered through program revenues, meaning user charges, grants and contributions. The
net cost of services must be recovered through general revenue, primarily taxes and state subsidies.
Amounts not recovered will reduce funds available for future years.
Local Sources 2012 -2013
Governmental Activities
Direct Program Net
Expenses Revenues Cost
Instruction $ 32,637,903 $ 5,596,607 $ 27,041,296
Instructional student support 5,313,652 399,664 4,913,988
Administrative and financial support 4,049,778 288,438 3,761,340
Operation and maintenance of plant 3,792,228 150,177 3,642,051
Pupil transportation 1,614 566,428 1,048,447
Student activities 983,506 200,572 782,934
Community services 610,077 457,265 152,812
Interest on long -term debt 1,426,114 741,381 684,733
$ 50,428,133 $ 8,400,532• 42,027,601
Transfers out 112,051
State general subsidies revenues (6,578,096)
Total needs from taxes and other local sources $ 35,561,556
Business -type Activities
Direct Program Net
Expenses Revenues Cost
Food services $ 1,936,080 $ 1,819,609 $ 116,471
Transfers received (112,051)
Total needs from taxes and other local sources $ 4,420
MDA - 7
MECHANICSBURG AREA SCHOOL DISTRICT
MANAGEMENT'S DISCUSSION AND ANALYSIS (Cont'd.)
JUNE 30, 2013
Local Sources 2011 -2012
Governmental Activities
Direct Program Net
Expenses Revenues Cost
Instruction $ 31,015,908 $ 5,003,651 $ 26,012,257
Instructional student support 4,858,072 356,394 4,501,678
Administrative and financial support 3,813,581 250,416 3,563,165
Operation and maintenance of plant 3,720,045 131,049 3,588,996
Pupil transportation 1,600,912 558,153 1,042,759
Student activities 995,623 132,096 863,527
Community services 614,453 465,009 149,444
Interest on long -term debt 1,789,164 671,326 1,117,838
$ 48,407,758 $ 7,568,094 40,839,664
Transfers out 113,285
State general subsidies revenues - (6,578,107)
Total needs from taxes and other local sources $ 34,374,842
Business -type Activities
Direct Program Net
Expenses Revenues Cost
Food services $ 1,921,711 $ 1,808,357 $ 113,354
Transfers received (113,285)
Total needs from taxes and other local sources $ 69
The District Funds
At June 30, 2013, the District governmental funds reported a combined fund balance of $27,254,321, which
is an increase of $4,346,138 from June 30, 2012. The information below compares the governmental funds
fund balances for June 30, 2013, 2012 and 2011 using current fund balances categories under GASB 54.
MDA - 8
MECHANICSBURG AREA SCHOOL DISTRICT
MANAGEMENT'S DISCUSSION AND ANALYSIS (Cont'd.)
JUNE 30, 2013
2011 -2012 2012 -2013
2011 2012 2013 Change %Change Chan a %Change
General Fund - unassigned $ 4,394,000 $ 4,784,049 $ 4,006,914 $ 390,049 8.9% $ (777,135) - 16.2%
General Fund - committed 10,001,986 10,864,926 14,328,194 862,940 8.6% 3,463,268 31.9%
General Fund - nonspendable 740,000 1,140,000 890,000 400,000 54.1% (250,000) -21.9%
Capital Reserve Fund - committed 1,793,179 4,051,908 5,898,866 2,258,729 126.0% 1,846,958 45.6%
Construction Fund - restricted 1,951,656 813,123 741,435 (1,138,533) -58.3% (71,688) -8.8%
Debt Service Fund - committed 1,107,050 1,254,177 1,388,912 147,127 13.3% 134,735 10.7%
Total governmental funds $ 19,987,871 $ 22,908,183 $ 27,254,321 $ 2,920,312 14.6% $ 4,346,138 19.0%
Total unassigned $ 4,394,000 $ 4,784,049 $ 4,006,914 $ 390,049 8.9% $ (777,135) - 16.2%
Total restricted/committed 14,853,871 16,984,134 22,357,407 2,130,263 14.3% 5,373,273 31.6%
Total nonspendable 740,000 1,140,000 890,000 400,000 54.1% (250,000) -21.9%
Total governmental funds $ 19,987,871 $ 22,908,183 $ 27,254,321 $ 2,920,312 14.6% $ 4,346,138 19.0%
Governmental Funds - Reconciliation
The General Fund Balance increase of $2,436,133 was due to favorable variances on expenditures and
revenue. The district over budgeted pension expenditures in order to develop a reserve to mitigate projected
pension increases. Revenue exceeded budget for 2012 -13 primarily due to increased earned income tax
collections, resulting from increased collection efficiencies and improved economic conditions.
The Capital Reserve Fund increase of $1,846,958 was due to a transfer from the general fund for future
capital projects.
The Construction Fund decrease of $71,688 was due to final payments on the 16- classroom addition to the
Middle School, as well as furniture for the new environmental center classroom.
The Debt Service Fund increase of $134,735 was due to favorable interest rates on a variable rate bond
issue.
General Fund Budget
A General Fund budget is adopted each year in accordance with the Pennsylvania School Code. The revised
budget reflects budget transfers as approved by the Board.
The District applies for State and Federal grants each year. Certain grants may not be anticipated during the
budgeting process and must be added to the budget during the fiscal year. In addition, the grants that are
anticipated during the budgeting process are based on estimates. The budget must then be modified based on
the actual grant award.
MDA -9
MECHANICSBURG AREA SCHOOL DISTRICT
MANAGEMENT'S DISCUSSION AND ANALYSIS (Cont'd.)
JUNE 30., 2013
June 30, 2013 Budget Actual Variance
Total revenues $ 53,002,568 $ 56,511,210 $ 3,508,642
Total. expenditures 47,985,973 45,411,148 2,574,825
Excess revenues (expenditures) 5,016,595 11,100,062 6,083,467
Other financing sources (uses) (5,660,257) (8,663,929) (3,.003,672)
Net changes in fund balance $ (643,662) $ 2,436,133 $ 3,079,795
June 30, 2012 Budget Actual Variance
Total revenues $ 51,440,734 $ 53,065,524 $ 1,624,790
Total expenditures 46,268,603 43,587,804 2,680,799
Excess revenues (expenditures) 5,172,131 9,477,720 4,305,589
Other financing sources (uses) (5,656,257) (7,824,731) (2,168,474)
Net changes in fund balance $ (484,126) $ 1,652,989 $ 2,137,115
CAPITAL ASSETS
At June 30, 2013, the District had $63,379,005 in Governmental activities capital assets, which represents a
net decrease after depreciation of $2,498,629.
Capital assets (net of depreciation) 2011 -2012 2012 -2013
2011 2012 2013 Change Change
Governmental activities
Land $ 605,983 $ 605,983 $ 605,983 $ - $ -
Construction in progress 3,669,294 19,595 75,795 (3,649,699) 56,200
Land improvements 2,750,390 2,529,083 2,313,101 (221,307) (215,982)
Buildings and improvements 58,797,563 61,195,997 58,957,032 2,398,434 (2,238,965)
Furniture and equipment 1,442,203 1,375,705 1,274,734 (66,498) (100,971)
Library books 147,296 151,271 152,360 3,975 1,089
Total governmental capital assets $ 67,412,729 $ 65,877,634 $ 63,379,005 $ (1,535,095) $ (2,498,629)
Business -type activities
Furniture and equipment $ 360,704 $ 304,798 $ 266,386 $ (55,906) $ (38,412)
MDA - 10
MECHANICSBURG AREA SCHOOL DISTRICT
MANAGEMENT'S DISCUSSION AND ANALYSIS (Cont'd.)
JUNE 30, 2013
LONG -TERM LIABILITIES
Bonds payable at June 30, 2011, 2012 and 2013 were $57,435,000, $54,380,000, and $49,985,000
respectively. Scheduled payments of principal made during the year to the bondholders were $3,795,000.
During the current fiscal year, the District refinanced bond issues resulting in a savings on future debt
payments. The amount of bond principal due within one year is $3,375,000.
Compensated absences decreased during the year from an entity -wide perspective from $653,045 to
$630,548 at June 30, 2013. Compensated absences decreased from June 30, 2011 to June 30, 2012 from an
entity -wide perspective from $756,294 to $653,045.
Recording for other post employment benefits began in 2008 -2009. The liability from an entity -wide
perspective increased from $555,164 to $741,926 at June 30, 2013. Other post employment benefits
increased from June 30, 2011 to June 30, 2012 from an entity -wide perspective from $430,969 to $555,164.
NEXT YEAR'S BUDGET AND ECONOMIC FACTORS
Budget Budget
2013 -2014 2012 -2013 Change
Total revenue $ 54,114,869 $ 53,002,568 $ 1,112,301
Total expenditures 49,528,183 47,985,973 1,542
Excess revenues (expenditures)
before transfers 4,586,686 5,016,595 (429,909)
Transfers (5,570 (5,660,257) 89,570
Net change in fund balance $ (984,001) $ (643,662) $ (340,339)
The budget for 2013 -2014 represents an increase in total expenditures of 3.2 %. This is largely due to
increased pension obligations. The budget contained no real estate tax increase. The mill rate remained at
12.289. The District plans to reduce its fund balance by $984,001 to offset the planned budget deficit.
CONTACTING THE DISTRICT FINANCIAL MANAGEMENT
The District's financial report is intended to provide the readers with a general overview of the District's
finances and to show the Board's accountability for the funds it receives. If you have questions about this
report or wish to request additional financial_ information, please contact the district office of Mechanicsburg
Area School District, 100 East Elmwood Avenue, Mechanicsburg, PA 17055, (717) 691 -4500.
MDA - 11
MECHANICSBURG AREA SCHOOL DISTRICT
STATEMENT OF NET POSITION
JUNE 30, 2013
Primary Government
Governmental Business -type Component
Activities Activities Total Unit
Assets
Cash and cash equivalents $ 16,187,865 $ 754,733 $ 16,942,598 $. , 424,918
Investments 9,180,000 - 9,180,000 -
Taxes receivable (net of allowance for uncollectibles) 3,968,492 - 3,968,492 -
Internal balances 40,256 (40,256) -
Due from other governments 1,510,460 - 1,510,460 -
Prepaid expenses 905,170 - 905,170 1,630
Other receivables 216,214 2,586 218,800 33,712
Inventories - 19,689 19,689 -
Restricted cash and cash equivalents for construction 741,435 - 741,435 -
Endowment investments - - 285,130
Capital assets not being depreciated 681,778 - 681,778 621,082
Capital assets being depreciated, net 62,697,227 266,386 62,963,613 -
Total assets 96,128,897 1,003,138 97,132,035 1,366,472
Liabilities
Accounts payable 559,053 1,006 560,059 290
Payroll and benefits payable 3,456,315 - 3,456,315 -
Unearned revenues 688 49,723 50,411 -
Accrued interest on bonds payable 465,017 - 465,017 -
Long -term liabilities
Due within one year 3,678,850 - 3,678,850 -
Due in more than one year 47,678,624 8,399 47,687,023 -
Unamortized bond premiums and refunding costs 258,571 - 258,571
Total liabilities 56,097,118 59,128 56,156,246 290
Net position
Invested in capital assets (net of related debt) 13,135,434 266,386 13,401,820 -
Restricted for capital projects 741,435 - 741,435 -
Temporarily restricted - - - 191,314
Permanently restricted - - - 229,726
Unrestricted 26,154,910 677,624 26,832,534 945,142
Total net position $ 40,031,779 $ 944,010 40,975,789 1,366,182
The accompanying notes are an integral. part of these financial statements.
FS - 1
MECHANICSBURG AREA SCHOOL DISTRICT
STATEMENT OF ACTIVITIES
YEAR ENDED JUNE 30, 2013
Program Revenues Net (Expense) Revenue and Changes in Net Position
Operating Capital Grants Primary Government
Direct Charges for Grants and and Governmental Business -type Component
Functions /Programs Expenses Services Contributions Contributions Activities Activities Total Unit
Primary Government
Governmental activities
Instruction $ 32,637,903 $ 820,812 $ 4,775,795 $ - $ (27,041,296) $ - $ (27,041,296) $ -
Instructional student support 5,313,652 - 399,664 (4,913,988) - (4,913,988) -
Administrative and financial support 4,049,778 - 288,438 - (3,761,340) - (3,761,340) -
Operation and maintenance of plant 3,792,228 13,059. 137,118 - (3,642,051) - (3,642,051) -
Pupil transportation 1,614,875 - 566,428 - (1,048,447) - (1,048,447) -
Student activities 983,506 147,842 52,730 - (782,934) - (782,934)
Community services 610,077 438,982 18,283 - (152,812) (152,812)
Interest on long -term debt 1,426,114 - - 741,381 (684,733) - (684,733) -
Total governmental activities 50,428,133 1,420,695 6,238,456 741,381 (42,027,601) - (42,027,601) -
Business -type activities
Food service 1,936,080 938,021 881,588 - - (116,471) (116,471) -
Total primary government $ 52,364,213. $ 2,358,716 $ 7,120,044 $ 741 (42,027,601) (116,471) (42,144,072) -
Component Units
Wildcat Foundation $ 331,228 $ - $ 204,410 $ - (126,818)
General revenues
Real estate taxes 30,861,620 - 30,861,620 -
Earned income taxes 9,240,338 -
9,240,338
Othertaxes 824,591 - 824,591 -
Investment earnings 41,873 757 42,630 30
State general subsidies 6,578,096 - 6,578,096 -
Transfers (112,051) 1.12,051 - -
Total general revenues and transfers 47,434,467 112,808 47,547,275 30,461
Change in net position 5,406,866 (3,663) 5,403,203 (96,357)
Net position (restated) - beginning 34,624,913 947,673 35,572,586 1,462,539
Net position - ending $ 40,031,779 $ 944,010 $ 4,0,975,789 $ 1,366,182
The accompanying notes are an integral part of these financial statements.
FS -2
MECHANICSBURG AREA SCHOOL DISTRICT
_ BALANCE SHEET - GOVERNMENTAL FUNDS
JUNE 30, 2013
Total
Capital Construction Debt Governmental
General Reserve Funds Service Funds
Assets
Cash and cash equivalents $ 8,782,256 $ 6,016,697 $ 741,435 $ 1,388,912 $ 16,929,300
Investments 9,180,000 - - - 9,180,000
Taxes receivable (net of allowance for uncollectibles) 3,968,492 - - - 3,968,492
Due from other funds 40,256 - - - 40,256
Due from other governments 1,510,460 - - - 1,510,460
Other receivables 216,214 - - - 216,214
Prepaid expenses 905,170 - - - 905,170
Total assets $ 24,602,848 $ 6,016,697 $ 741,435 $ 1,388,912 $ 32,749,892
Liabilities and fund balances
Accounts payable $ 441,222 $ 117,831 $ - $ - $ 559,053
Payroll and benefits payable 3,456,315 - - - 3,456,315
Unearned revenues 1,480,203 - - - 1,480,203
Total liabilities . 5,377,740 117,831 - - 5,495,571
Fund balances
Nonspendable
Health care costs prepaid 890,000 - - - 890,000
Restricted
Capital projects - - 741,435 - 741,435
Committed
Future medical and pension costs 8,013,407 - - - 8,013,407
Retirement of long- term debt 1,314,787 - - 1,388,912 2,703,699
Capital outlays 5,000,000 5,898,866 - 10,898,866
Unassigned 4,006,914 - - - 4,006,914
Total fund balances 19,225,108 5,898,866 741,435 1,388,912 27,254,321
Total liabilities and fund balances $ 24,602,848 $ 6,016,697 $ 741,435 $ 1,388 $ 32,749,892
The accompanying notes are an integral part of these financial statements.
FS -3
i
� D�S�R,cc SNEER
G AR�' S c k4gs O �
N,GSBVR O�ERNMEN NET POs \T 27 , 254 32
� E G OF
`O 0
1 0
NE S . t P TE \ MN� � , 2013
RED
63 379 ' p05
e•
ecaus •
ion are d \8erent b vernmenta\ funds'
enta\ funds Cement ofi net P °sit as assets dj in ati o 5 00 9 s 38,981'900 Ol
Gover \n nn` the .0 a e r e
fore are not re cu u \aced deP
d �a \antes
enta\ a ct�v�tie s m ?41,926
\fun ac re °t repotted 1
iota so an d t31 e 5 a nd the `51$ 49
°vernrn g5? , ?
mou nts rep °fed for g of f\nanc�a\ r s s s $10 0 '� 0 ear and th GO�ss °{•• (5 t X17
465,
P \ta\ assets ar co tot cap \ta\ a `n the Curren ese t�abi\ \ties
GaP en d the e d ay ab \P y ear e nd, th
Pt year re no, nn►en a\ en
\n t t
Ge�a�ti \, \�\:�es a 258,
h e °ve
ay
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j3 , \�aon� an notes P ccrua\
sated absen �b a
GomPe ost emP \OIm v\t a s \e end�t�res \n th g°
Ot her P term Nab onds pay as exP
tong' t °n b e nted t ° 4 ?9,515
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d r etund� n9 d re \aced co
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for the Curren ycons \st °{ 401031, ??
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rem�u am �Ze
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B ° nd d end, the re s mfef,01 soon enou9hthese tares
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i
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Net PO 411101\
e f \nanc�a\ statements• vs-4
. ad °f theS
I
MECHANICSBURG AREA SCHOOL DISTRICT
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - GOVERNMENTAL FUNDS
YEAR ENDED JUNE 30, 2013
Total
Capital Construction Debt Governmental
General Reserve Funds Service. Funds
_Revenues
Local sources - taxes $ 41,493,205. $ - $ - $ $ 41,493,205
Local sources - other 2,014,067 2,132 207 157 2,016,563
State sources 12,244,062 - - - 12,244,062
Federal sources 759,876 - - - 759,876
Total revenues 56,511,210 2,132 207 157 66,513,706
Expenditures
Instruction 30,298,867 - - - 30,298,867
Support services 13,594,720 - - - 13,594,720
Non instructional services 1,498,089 - - 115,410 1,613,499
Capital outlay 12,300 747,844 71,895 - 832,039
Debt service 7,172 - - 5,324,701 5,331,873
Total expenditures 45,411,148 747,844 71,895 5,440,111 51,670,998
Excess (deficiency) of revenues over expenditures 11,100,062 (745,712) (71,688) (5,439,954) 4,842,708
Other financing sources (uses)
Refunding bond proceeds - - - 9,015,000 9,015 -000
Transfers from other funds 2,592,670 5,959,208 8,551,878
Debt service (refunded bond issues) - - - (9;399,519) (9,399,519)
Transfers to other funds (8,663,929) - - - (8,663,929)
Net changes in fund balances 2,436,133 1,846,958 (71,688) 134,735 4,346,138
Fund balances - beginning 16,788,975 4,051,908 813,123 1,254,177 22,908,183
Fund balances - ending $ 19,225,108 $ 5,898,866 $ 741,435 $ 1,388,912 $ 27,254,321
The accompanying notes are an integral part of these financial statements.
FS -5
Q1S�R"CT E OF AGTiviTlEs
RG AREA S ��N Ai -NGEp p T "E ST P'T
4 346,
N,CSBV THE Gp Np BP ..
CI -IP
MEGNA T10N
of NG E S 1N F D
REG %ju?0 ANp E PpEp � 30
EVENUES, SPEND YEAR
STATEM
of R 952 ,$51 2,495,6291
allocated $ 3 80 ks
4
l funds different because es the cost °e Pease a follows 1 451
enta re t of actwrt% Cron
s , Govemm activities a
the statement of In the statemen d de ptecra
e in fun bal s a outlays an
chan9 actrvities in ental fund • 8,e c pitai use 0001 4,39
s 015,
Total net ental the g °ve mm During the y financing 19,
ortedfor g°vernm dilutes in ease other o s ;tion• 13, 410,000
and expendit�ot effect net P
Am is reP fe e
d s exp dpredation exp -2-Z,49 s a s
d as other finandrne sound payments do
D un
Capital e rteas mated us Dyn duo{ r C,rements
� sa
over tCap;tai outlan expense eats ate Present of activities, PrO the expense 7621
m 1186,
Depte datio repay in the statem g l eaf*
e roce and er d
men al fuEay are as follows s In the slat d e er lased du ns the a se r
du
Bond a no on d sl In the g a prind�p r o enta, fund abs ences cCtviti�es, th exPe the yea 102?l23 kt�e b roceeds ,1 o vemm died d during
, Dui n9 t e y the 2013 series of b s expenditut '(he v ia lot co tai funds. t thbeenefi acct xis increase e
ed ents ted a r. m en e nt
Proms al reP resen the ye o vem loo ent of a cfJvifie s, t e
aym rep es
prind�P a during the 9 o st emP udn9 the y
ensated absences d by employe as expenditureabilityfor other P due in the static e d ented
meals of comp amo unt eam resente sts. The .
Pay b the mentbenefits ate P riot co when the Pays on bon payable a nd its Payoff am ,zgon expe 1215 4811 1207 , 1451
is meas ured y toy amortization of p
of other post , P emp rimariiy for a ovemmental f for accrued intere t of refun ded de tte frfe of the debt a 8 336
Is sttmates ;n th g liability r
paYn' nai a en ditures ear The catrymg a s ° at e allocated ove
clod as exp d they G
s a the
include Preserrtount accru ed rence between moue
me nfs of interest a re b he t am costs lany d�ffe ities these a es 129,6561 1566,6561
e nf of actN revenu 0001
Pay ease `s measured y ding tem ws' as availab 153 , g 406
exp un remiu o s fu ot(rZaiwn exp` on ae bo d ate not Con
red
Bond disco is 1p d and am ley
the 9 ding cos of the fiscal ye
Op en ,at in cos ts incurre a nd refun oaths after the end ear as follows'.
a s e ar ium
Dun g nd di , sco is 1 eras e s sedl ring t y veraf nr du
pnwr11zation exp %se ed
me l d e crea
Because so ental Wilds,
unea n d taxes inertias
in the g°ver o ate taxes
Real a ome taxes
Banned inc a ctivitie s
Govemmentat ts. FS . 6
Change in
net Posrtron � of these financial statemen
en integral Part
MECHANICSBURG AREA SCHOOL DISTRICT
STATEMENT OF NET POSITION - PROPRIETARY FUNDS
JUNE 30, 2013
Food
Service
Assets
Cash and cash equivalents $ 754,733
Accounts receivable 2,586
Inventories 19,689
Total current assets 777,008
Capital assets being depreciated, net 266,386
Total assets 1,043,394
Liabilities
Due to general fund 40,256
Unearned revenues 49,723
Accounts payable 1,006
Current portion of compensated absences
Total current liabilities 90,985
Long -term portion of compensated absences 8,399
Total liabilities 99,384
Net position
Invested in capital assets (net of related debt) 266,386
Unrestricted 677,624
Total net position $ 944,010
The accompanying notes are an integral part of these financial statements.
FS.- 7
MECHANICSBURG AREA SCHOOL DISTRICT
STATEMENT OF REVENUES, EXPENSES
AND CHANGES IN NET POSITION - PROPRIETARY FUNDS
YEAR ENDED JUNE 30, 2013
Food
Service
Operating revenues
Food service revenue $ 915,300
Charges for services 20,M7
Other operating revenues 2,334
Total operating revenues 938,021
Operating expenses
Salaries 574,521
Employee benefits 270,536
Purchased property service 50,421
Other purchased service 62,229
Food and milk 838,349
Other supplies 83,127
Depreciation 56,897
Total operating expenses 1,936,080
Operating income (loss) (998,059)
Nonoperating revenues
Earnings on investments 757
State sources - social security and retirement subsidies 58,557
State sources - meal subsidies 62,689
Federal sources - meal and other subsidies 661,345
Federal sources - donated commodities 98,997
Total nonoperating revenues 882,345
Loss before transfers (115,714)
Transfers from other funds 112,051
Change in net position (3,663)
Net position - beginning 947,673
Net position - ending $ 944,010
The accompanying notes are an integral part of these financial statements.
FS -8
MECHANICSBURG AREA SCHOOL DISTRICT
STATEMENT OF CASH FLOWS - PROPRIETARY FUNDS
YEAR ENDED JUNE 30, 2013
Food
Service
Operating activities
Cash received from users $ 948,515
Cash payments to employees for services (784,868)
Cash payments to suppliers for goods and services (745,410)
Cash payments for other operating expenses (141,678)
Net cash provided by (used for) operating activities (723,441)
Non - capital financing activities
State sources 122,109
Federal sources 668,781
Net cash provided by (used for) non - capital financing activities 790,890
Capital and related financing activities
Cash payments for equipment (18,485)
Net cash provided by (used for) capital and related financing activities (18,485)
Investing activities
Earnings on investments 757
Net cash provided by (used for) investing activities 757
Net change in cash and cash equivalents 49,721
Cash and cash equivalents - beginning 705,012
Cash and cash equivalents - ending $ 754,733
Reconciliation of operating income (loss) to net cash provided by (used for) operating activities
Operating income (loss) $ (998,059)
Adjustments to reconcile operating income (loss) to net cash
provided by (used for) operating activities
Depreciation 56,897
Donated commodities 98,997
Contribution of General Fund 112,051
Net change in other assets and other liabilities
Accounts receivable 771
Inventories (4,276)
Due to /from other funds 19,441
Unearned revenue 9,722
Accounts payable- (1,782)
Compensated. absences (17,203)
Total adjustments 274,618
Net cash provided by (used for) operating activities $ (723,441 }
The accompanying notes are an integral part of these financial statements.
FS -9
MECHANICSBURG AREA SCHOOL DISTRICT
STATEMENT OF FIDUCIARY NET POSITION - FIDUCIARY FUNDS
JUNE 30, 2013
Private
Purpose
Trusts Agency Activities Total
Assets
Cash and cash equivalents $ 199,106 $ 699,967 $ 145,013 $ 1,044,086
Total assets 199,106 699,967 145,013 1,044,086
Liabilities
Due to other organizations - 699,967 145,013 844,980
Total liabilities - .699,967 145,013 844,980
Net position $ 199,106 $ - $ - $ 199,106
The accompanying notes are an integral part of these financial statements.
FS -10
MECHANICSBURG AREA SCHOOL DISTRICT
STATEMENT OF CHANGES IN FIDUCIARY NET .POSITION - FIDUCIARY FUNDS
YEAR ENDED JUNE 30, 2013
Private Purpose
Trusts
Additions
Gifts and contributions $ 68,485
Investment income 1
Total additions 68,503
Deductions
Scholarships and awards 38,527
Change in net position 29,976
Net position - beginning 169,130
Net position - ending $ 199,106
The accompanying notes are an integral part of these financial statements.
FS -11
MECHANICSBURG AREA SCHOOL DISTRICT
NOTES TO.FINANCIAL STATEMENTS
JUNE 30, 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Mechanicsburg Area School District is the level of government which has oversight responsibility and control over
activities related to public school education. The report includes services provided by the District to residents
within the boundaries of the Cumberland County municipalities of Upper Allen Township, Shiremanstown and
Mechanicsburg Boroughs. Services -provided include a comprehensive curriculum for primary and secondary
education as well as special education and vocational education programs. The District receives revenue from
local, state and federal sources and must comply with the requirements of these funding sources.
The financial statements of Mechanicsburg. Area School District have been prepared in accordance with generally
accepted accounting principles as applied to governmental units. The Governmental Accounting Standards Board
(GASB) is the authoritative standard- setting body for the establishment of governmental accounting and financial
reporting principles. Accounting guidance is also provided through the Comptroller's office for the Pennsylvania
Department of Education. The more significant of these accounting policies are as follows:
Reporting entity
GASB establishes criteria for determining the activities, organizations and functions of government to be included
in the financial statement of the reporting entity. In evaluating the District as a reporting entity, management has
addressed all potential component units which may or may not fall within the established criteria. The criteria used
to evaluate component units for possible inclusion as part of the District's reporting entity are:
The economic resources received or held by the separate organization are entirely for the direct benefit of the
District or its constituents.
The District is entitled to (or has the ability to) access a majority of the economic resources received or held
by the separate organization.
The economic resources received or held by an individual organization that the District is entitled to (or has
the ability to) access is significant to the District.
The District has included The Wildcat Foundation (the Foundation) as a discretely presented component unit. The
financial data of the Foundation is reported in the component unit column in the basic financial statements. This
separate column is used to emphasize that the Foundation is .legally separate from the District. The Foundation
was formed for the purpose of supporting projects related to educational programs and to create opportunities for
development for the students, staff and community within the Mechanicsburg Area School District. The separate
financial statements for the Foundation are available by contacting the District office.
FS -12
MECHANICSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd.)
Jointly - governed organizations
The District is a participant in four jointly - governed organizations, each of which is a separate legal entity that
offers services to the District and its residents. Each of these entities serves several school districts and /or
municipalities and therefore are not included in this reporting entity. These entities do not have taxing power, but
are required to adopt an annual budget, which is funded primarily by its member Districts or others that use its
services. Complete financial statements for these entities can be obtained from the respective entity's
administrative office.
Capital Area Intermediate Unit provides special education services and programs.
Cumberland Perry Area Vocational Technical School provides vocational and technical education
services and programs.
Harrisburg Area Community College provides community college education services and programs.
Cumberland County Tax Bureau provides earned income tax collection services.
Basis of presentation - District -wide financial statements
District -wide financial statements (i.e., the Statement of Net Position and the Statement of Activities) present
information on all of the nonfiduciary activities of the District. As a general rule the effect of interfund activity has
been eliminated from these statements. Governmental activities, which normally are supported by taxes and
intergovernmental revenues, are presented separately from business -type activities which rely to a significant
extent, on fees and charges for support.
District -wide financial statements are presented using the economic resources measurement focus and the
accrual basis of accounting as are the proprietary fund and the fiduciary fund financial statements. Revenues are
recognized when earned and expenses are, recognized when a liability is incurred, regardless of the timing of
related cash flows. Real estate and personal taxes are recognized as revenues in the year for which they are
levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the
provider have been met. Net position (total assets less total liabilities) is used as a practical measure of economic
resources and the operating statement includes all transactions and events that increased or decreased net
position. Depreciation and amortization are charged as an expense against current operations. Capital assets (net
of accumulated depreciation) and bonds payable (net of unamortized discounts or premiums) are presented in the
statement of net position.
The statement of activities demonstrates the degree to which the direct expenses of given functions or programs
are offset by program revenues. Direct expenses are those that are clearly identifiable within a specific function or
program. Program revenues include charges to customers who purchase, use, or directly benefit from goods,
services, or privileges provided by a given function or program. In addition, program revenues include grants and
contributions that are restricted to meeting the operational or capital requirements of a particular function or
program. Taxes and other items not properly included among program revenues are reported as general
revenues.
FS -13
MECHANICSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd.)
Basis of presentation - Fund financial statements
Fund financial statements are also provided for all governmental funds, proprietary funds, and fiduciary funds of
the District. Major individual governmental funds and major individual proprietary funds are reported as separate
columns in the fund financial statements. Nonmajor funds, if any, are aggregated and presented in a single
column. Fiduciary funds are reported by fund.
Governmental funds are presented using the current financial resources measurement focus and the modified
accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available.
Revenues are considered to be available when they are received within the current period or soon enough
thereafter to pay liabilities of the current period. For this purpose, the District considers tax revenue to be
available if received within 90 days of the end of the fiscal period. Revenue from federal, state and other grants
designated for payment of specific expenditures is recognized when the related expenditures are incurred;
accordingly, when such funds are received, they are recognized as unearned revenues until earned. Expenditures
generally are recognized when a liability is incurred, as under accrual accounting. However, debt service
expenditures, as well as expenditures related to compensated absences and claims and judgments, are
recognized only when payment is due.
Proprietary funds generally follow standards for accounting and financial presentation for private business
enterprises to the extent that those standards do not conflict with or contradict guidance of the GASB. Proprietary
funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses
generally result from providing services and producing and delivering goods in connection with the fund's principal
ongoing operations. Operating expenses for the District's proprietary fund include food production costs, supplies,
administrative costs, and depreciation on capital assets. All revenues or expenses not meeting this definition are
reported as nonoperating revenues and expenses.
Fund accounting
The accounts of the District are organized on the basis of funds, each of which is considered a separate
accounting entity. The operations of each fund are accounted for by providing a separate set of self - balancing
accounts which comprise its assets, liabilities, fund equity, revenues, and expenditures, or expenses, as
appropriate. Resources are allocated to and accounted for in individual funds based upon the purposes for which
they are to be spent.
When both restricted and unrestricted resources are available for use, it is the District's general policy to use the
restricted (primarily operating grants) resources first, then unrestricted resources as they are needed.
The District has the following types of funds:
Governmental Funds — These funds account for the activities through which most of the District's operations
are provided.
FS - 14
MECHANICSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd.)
Basis of presentation - Fund financial statements (Cont'd.)
Fund accounting (Cont'd.)
Proprietary Funds — These funds account for the operations of the District that are financed and operated in a
manner similar to private business enterprises.
Fiduciary Funds — These funds account for the assets held by the District as a trustee or agent for individuals,
private organizations and /or governmental units and are therefore not available to support the District's own
programs.
The District presents the following major governmental funds:
The General Fund is the primary operating fund. It accounts for all financial resources except those required
to be accounted for in another fund.
An operating budget is adopted prior to the beginning of each year on a modified. accrual basis of
accounting. The General Fund is the only fund for which a budget is legally required.
The Pennsylvania School Code dictates specific procedures relative to budget adoption and financial
statement presentation. The District, before levying annual school taxes, is required to prepare an
operating budget for the succeeding fiscal year. This process includes the publishing of notices by
advertisement, that the proposed budget has been prepared and is available for public inspection at the
administrative office of the District, and that public hearings are held on the proposed operating budget
which are required to be scheduled at least ten days prior to when final action on adoption is taken by the
Board.
Legal budgetary control is maintained at the sub - function /major object level. The Board may approve
transfers of funds appropriated to any particular item of expenditure in accordance with the Pennsylvania
School Code. Management may amend the budget at the sub - function /sub - object level without Board
approval, provided it is not at a higher level than the Board adopted budget.
In order to preserve a portion of an appropriation for which an expenditure has been committed by a
purchase order, contract or other form of commitment, an encumbrance is recognized. Unused
encumbrances expire at the end of each year.
Included in the budget are program budgets as prescribed by the federal and state agencies funding the
program. These budgets are approved on a program by program basis by the federal and state funding
agencies.
FS -15
MECHANICSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd.)
Basis of presentation - Fund financial statements (Cont'd.)
Fund accounting (Cont'd.)
Capital Projects Funds can consist of more than one project each set up under separate "Construction
Funds ", to separately account for each project. Each issuance of new debt (primarily bonds) is a project to
account for the debt proceeds and the expenditure of those proceeds. The District also maintains a capital
reserve account for funds transferred from the General Fund and the expenditure of those funds for capital
outlays.
The Debt Service Fund accounts for bond refinancing, related costs and other debt - related payments.
The District presents the following proprietary fund:
The Food Service Fund accounts for the operations of the cafeterias.
The District presents the following fiduciary funds:
The Private Purpose Trusts account for contributions to and interest earnings on scholarship funds donated to
the District, and for payments of scholarship funds to selected students.
The Agency Fund accounts for programs operated and sponsored by school related organizations. These
funds are separated from student activity funds.
The Activities Fund accounts for programs operated and sponsored by various clubs and organizations within
the schools.
Cash and cash equivalents and investments
Cash and cash equivalents are considered to be cash on hand, demand deposits (including pooled investments),
and short-term investments with original maturities of three months or less from the date of acquisition.
The types of authorized investments are limited by State regulations. Pooled investment funds are required to be
operated in accordance with State regulations.
Investments, including pooled investments, are presented at fair value.
Taxes and taxes receivable
Real estate and personal taxes are levied as of July 1 with a legal, enforceable claim against the property and /or
taxpayer. Amounts not collected within six months (December 31) are considered delinquent and submitted to
outside agencies /entities for collection actions.
FS -16
MECHANICSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd.)
Receivables and payables between funds
Activity between funds that represent lending /borrowing arrangements outstanding at the end of the fiscal year
are referred to as "due from /to other funds ". Any residual balances outstanding between the governmental
activities and business -type activities are presented in the district -wide financial statements as "internal balances ".
Balances between funds are considered to be short term items pending periodic repayments.
Inventories and prepaid items
Inventories are presented at the lower of cost or market on a first -in, first -out basis, and are expended when
consumed. Donated commodities are recognized as revenue and are inventoried at an estimated cost value.
Certain payments, if any, to vendors reflect expenses applicable to future periods and are presented as prepaid
items in both district -wide and fund financial statements.
Capital assets
Capital assets, which include property, plant, equipment, and infrastructure assets (e.g., roads, sidewalks, and
similar items), are presented in the applicable governmental or business -type activities columns in the district -
wide financial statements. Capital assets are defined by the District as assets with an initial, individual cost of
more than $ 5,000 and an estimated useful life in excess of one year. Management has elected to include certain
homogeneous groups with individual costs of less. than $ 5,000 as capital assets for financial presentation
purposes. In addition, capital assets purchased with long -term debt may be capitalized regardless of the
thresholds established. Such assets are presented at historical cost or estimated historical cost if purchased or
constructed.
Major outlays for capital assets and improvements are capitalized as projects are constructed. The costs of
normal maintenance and repairs that do not add to the value of the asset or materially extend asset lives are not
capitalized.
FS -17
MECHANICSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.).
JUNE 30, 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd.)
Capital assets (Cont'd.)
Capital assets are depreciated using the straight -line method over the following estimated useful lives:
Governmental Business -type
Assets Activities Activities
Buildings 50 -
Interior renovations 25 -
Land improvements 20 -
Furniture 20 20
Machinery and equipment 10 to 15 15
Library books 5 -
Computer equipment 5 5
Vehicles 8 -
Long -term liabilities
In the district -wide financial statement, and proprietary fund types in the fund financial statements, bonds and
notes payable and other long term obligations are presented as liabilities.. Bond discounts (premiums) and any
refunding costs are amortized over the life of the bonds using the effective interest method.
In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as
bond issuance and refunding costs, as current period expenditures. The face amount of debt issued is presented
as other financing sources while discounts and refunding costs on debt issuances are presented as debt service
expenditures. Issuance costs, whether or not withheld from the actual debt proceeds received, are presented as
support service expenditures.
Net position
Net position represents the difference between assets and liabilities. In the district -wide financial statements and
proprietary fund financial statements, categories of net position are:
Invested in capital assets (net of related debt) - This category groups all capital assets into one component
of net position. Accumulated depreciation and outstanding debt that are attributable .to the acquisition,
construction or improvement of these assets reduce this category.
FS -18
MECHANCISBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
.JUNE 30, 2013
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd.)
Net position (Cont'd.)
Restricted — This category presents funds constrained to be used for a specific purpose as per: external
parties, contributors or enabling legislation.
Unrestricted - This category presents the net position of the District, which is not restricted for any project or
other purpose. However, these funds may be committed or assigned for specific projects or purposes in the
fund financial statements.
Temporarily restricted (component unit only) - This category presents external time and /or use restrictions
imposed by donors.
Permanently restricted (component unit only) - This category presents donor - imposed stipulations that they
be maintained permanently with only the income available for specified uses.
Governmental fund balances
GASB has established criteria for classifying fund balances into specifically defined classifications based on a
hierarchy that reflects the extent to which the District is bound to honor constraints on how those funds can be
spent. The District's general policy is to first use restricted funds, if any, prior to using unassigned funds.
Classifications of fund balances are:
Nonspendable - Amounts that cannot be spent because they are either in a (a) non - spendable form (i.e.
inventories) or (b) legally or contractually required to be, maintained intact (i.e. the principal of a permanent
fund).
Restricted - Amounts constrained to be used for a specific purpose as per: External parties, contributors or
enabling legislation.
Committed - Amounts constrained to be used for a specific purpose as per: The District's highest level of
decision making authority which is the Board of School Directors.
Assigned Amounts intended to be used for a specific purpose as per: Committee or individual authorized by
the Board of School Directors (for example a budget or finance committee, or business manager /financial
officer).
Unassigned - Amounts available for any purpose (amounts that are not Nonspendable, Restricted,
Committed or Assigned) in the General Fund.
FS -19
MECHANCISBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2013
J
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd.)
Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect certain presented amounts and disclosures.
Accordingly, actual results could differ from those estimates.
Recent accounting standards
GASB Statement No. 63 improves financial reporting by standardizing the presentation of deferred outflows of
resources, deferred inflows of resources, and their effects on the District's net position, rather than net assets.
The District has implemented this pronouncement. This pronouncement does not impact any amounts, but does
impact terminology and presentation.
GASB Statement No. 65 impacts certain. items that were previously reported as assets and. liabilities in the
district -wide financial statements. The District has implemented this pronouncement. Priorto this pronouncement,
bond issuance costs were' required to be amortized over the life on the bonds. GASB 65 determined that bond
issuance costs do not meet the definition of an asset, and 'should be expensed during the year in which those
costs are incurred.
Implementation required restating financial statements for the period presented, which is summarized as follows:
Net position of governmental activities as of June 30, 2012 - as previously reported $ 35,789,980
Change in net position for the year ended June 30, 2012 (1,165,067
Net position of governmental activities as of June 30, 2012 - restated $ 34 624.913
There are several GASB pronouncements that will become effective for future reporting periods. Other than the.
impact of GASB 68, the District does not currently 'anticipate any significant impact on the District's financial
statements.
GASB Statement No. 68, effective for the year ending June 2015, is to improve accounting and financial reporting
for pensions., This pronouncement will impact the Statement of Net Position (page FS -1), the Statement of
Activities (page FS -2), and the Pension Plan disclosures in the Notes to Financial Statements. The District
currently expects GASB 68 will have 'a very large negative impact to the district -wide financial statements.
Subsequent events
In preparing these financial statements,. the District has evaluated events and transactions for potential
recognition or disclosure through November 15, 2013, the date the financial .statements were available to be
issued and there are no items requiring disclosure.
FS - 20
MECHANCISBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2013
CASH AND CASH EQUIVALENTS AND INVESTMENTS
Pennsylvania statutes provide for investment of District funds into authorized investment types including U.S.
Treasury bills, other short-term U.S. and Pennsylvania government obligations, and insured or collateralized time
deposits and certificates of deposit. The statutes do not prescribe regulations related to demand deposits;
however, they do allow the pooling of funds for investment purposes.
Custodial credit risk is the risk that in the event of a depository institution failure, the District's deposits may not be
returned to it. The District's policy requires that all deposits in excess of federal deposit insurance coverage be
collateralized by the depository institution with approved collateral as provided by law.
At June 30, 2013, the District's deposits totaled $ 13,010,743 and the depository institution balances totaled
$ 13,637,750. Of the depository institution balances, $ 2,730,000 was covered by federal depository
insurance and $ 10,907,750 was collateralized under Act No. 72 of the 1971 Session of the Pennsylvania
General Assembly, in which financial institutions were granted the authority to secure deposits of public
bodies by pledging a pool of assets, as defined in the Act, to cover all public funds deposited in excess of
Federal Depository Insurance limits. The pledged collateral is held by the Federal Reserve Bank, but is not
titled in the District's name.
The District also has cash equivalents and investments with three organizations that operate as common law
trusts established pursuant to the Intergovernmental Cooperation Act and related statutes for the purpose of
pooling investments. Each organization's fundamental policy is to maintain a net asset value of $ 1 per share,
but there can be no assurance that the net asset value will not vary from $ 1 per share. They may only
purchase securities which are permitted under PA law. As of June 30, 2013, the District's deposits in these
organizations are as follows:
Cash and Cash
Equivalents Investments
Pennsylvania Local Government Investment Trust (PLGIT) $ 9,769,463 $ 2,480,000
Pennsylvania Treasurer's INVEST Program (PA INVEST) 4,338,066 -
Pennsylvania School District Liquid Asset Fund (PSDLAF) 789.847 6,700,000
14.897.376 9.180.000
FS -21
MECHANICSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2013
CASH AND CASH EQUIVALENTS AND INVESTMENTS (Contd.)
Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment. The
District does not have a formal investment policy for interest rate risk. The weighted average maturity of the
securities held by each of the organizations is generally less than 90 days.
Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The District
does not have a formal investment policy for credit risk. The District's deposits in each of the organization's were
rated °AAAm" by Standard & Poor's.
Cash and cash equivalents and investments at June 30, 2013 are as follows:
Cash and Cash
Equivalents Investments
Governmental activities $ 16,929,300 $ 9,180,000
Business -type activities 754,733 -
Fiduciary funds 1,044,086 -
Total cash and cash equivalents and investments 18.728.119 $ 9,180,000
Investments consist of certificates of deposits with original maturities of more than three months from the date of
acquisition.
TAXES RECEIVABLE
Taxes receivable are as follows:
Taxes Taxes
Receivable Allowance for Receivable Unearned
(Gross) Uncollectibles (Net) Tax Revenue
Real estate taxes $ 723,502 $ (29,000) $ 694,502 $ 467,515
Earned income taxes 3,273,990 - 3,273,990 1,012,000
General Fund 3,997,492 (29,000) 3,968,492 1,479,515
Full accrual adjustment - - - (1,479,515
Governmental activities 3.997.492 (29.000) 3.968.492 $ -
FS -22
MECHANICSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2013
DUE FROMITO OTHER FUNDS AND INTERFUND TRANSFERS
Interfund balances are as follows:
Assets Liabilities
General Fund $ 40,256 $ 40,256 Food Service Fund
Interfund transfers were as follows:
Other financing sources Other financing uses
Debt Service Fund $ 5,959,208 $ 5,959,208 General Fund
Food Service Fund 112,051 112,051 General Fund
Capital. Reserve Fund 2,592,670 2,592,670 General Fund
DUE FROM OTHER GOVERNMENTS
Due from other governments are as follows:
Governmental Business -type
Activities Activities
Local sources — other taxes $ 115,771 $ -
Local sources — other items 594,952 -
State sources 684,965
Federal sources 114,772 -
1.510.460 $
FS - 23
MECHANICSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2013
CAPITAL ASSETS
Changes irr capital assets were as follows:
Beginning Ending
Balance Increases Decreases Balance
Governmental activities
Capital assets not being depreciated
Land $ 605,983 $ - $ - $ 605,983
Construction in progress 19,595 75.795 (19,595 75,795
625,578 75.795 (19,595 -681,778
Capital assets being depreciated
Land improvements 5,306,901 - - 5,306,901
Buildings and improvements 88,200,347 409,690 - 88,610,037
Furniture and equipment 5,604,200 425,424 (131,549) 5,898,075
Library books 1,833,782 75.476 (35,144 1,874,114
100.945,230 910.590 (166,693 101.689.127
Accumulated depreciation
Land improvements (2,777,818) (215,982) - (2,993,800)
Buildings and improvements (27,004,350) (2,648,655) - (29,653,005)
Furniture and equipment (4,228,495) (512,456) 117,610 (4,623,341)
Library books (1,682,511 (74,387 35,144 (1.721,754
(35,693,174 (3,451,480 152,754 (38,991,900
Capital assets being depreciated, net 65.252,056 (2,540,890 (13,939 62,697,227
Governmental activities capital assets, net 65.877.634 (2,465,095 $ (33.534 63.379.005
Business -type activities
Capital assets being depreciated
Equipment $ 1,069,693 $ 18,485 $ - $ 1,088,178
Accumulated depreciation
Equipment (764,895 (56,897
Capital assets being depreciated, net 304.798 (38,412 - 266.386
Business -type activities capital assets, net $ 304,798 (38.412 $ - $ 266,386
FS -24
MECHANICSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2013
CAPITAL ASSETS (Cont'd.)
Depreciation expense was charged to functions /programs as follows:
Governmental activities
Instruction $ 2,182,328
Instructional student support 752,105
Administrative and financial support 252,123
Operation and maintenance of plant 159,547
Transportation 9,883
Student activities 63,640
Community services 31.854
$ 3,451,480
Business -type activities - Food service $ 56.897
LONG -TERM LIABILITIES
Changes in all long -term liabilities were as follows:
Beginning Ending Due Within
Balance Increases Decreases Balance One Year
Governmental activities
Bonds and notes payable $ 54,380,000 $ 9,015,000 $ (13,410,000) $ 49,985,000 $ 3,375,000
Compensated absences 653,045 177,503 (200,000) 630,548 180,000
Other post employment benefits 555,164 330.994 (144,232 741,926 123.850
55.588.209 9.523.497 (13.754.232) $ 51,357,474 3.678.850
Business -type activities
Compensated absences $ 25,602, $ - (17.203 $ 8,399 $ -
FS - 25
MECHANICSBURG AREA SCHOOL DISTRICT.
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2013
LONG -TERM LIABILITIES (Cont'd.)
Bonds and notes payable
Changes in bonds and notes payable were as follows:
Beginning New . Current Scheduled Ending
Balance Issue Refunding Redemptions Balance
2000 Series C Notes $ 4,945,000 $ - $ - $ (1,030,000) $ 3,915,000
2006 Series 3,345,000 - (3,175,000) (170,000) -
2007.Series 6,960,000 - (6,440,000) (520,000) -
2009 Series 10,165,000 - - (425,000) 9,740,000
2010 A Series 4,995,000 - - (5,000) 4,990,000
2010 AA Series 13,975,000 - - (1,640,000) 12,335,000
2011 Series 9,995,000 - - (5,000) 9,990,000
2013 Series - - 9,015,000 - 9,015,000
$ 54,380,000 $ - (600.000 (3.795.000 49.985.000
Amounts Due
Interest Rates Maturity Date Callable Date Within One Year
2000 Series C Notes Variable rate stabilized
at 4.50% October 2016 Currently $ 1,075,000
2009 Series 2.00% to 3.90% August 2021 August 2014 1,255,000
2010 A Series 1.00% to 3.55% August 2023 August 2015 5,000
2010 AA Series 1.00% to 3.80% August 2026 August 2015 905,000
2011 Series 2.00% to 2.25% August 2019 August 2016 5,000
2013 Series 0.40% to 2.25% August 2026 February 2018 130,000
$ 3.375 000
In February 2013, the District issued its 2013 Series of bonds, which is summarized as follows:
2013 Series of bonds issued $ 9,015,000
Premiums received on 2013 Series 215,480
District cash contribution 500,000
Payoff 2006 Series of bonds (3,175,000)
Payoff 2007 Series of bonds (6,440,000)
Interest paid -
Bond issue costs (115,410
Amount available to the District - Bond Sinking Fund $ 70
FS - 26
MECHANICSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2013
LONG -TERM LIABILITIES (Cont'd.)
Bonds and notes payable (Cont'd.)
This refunding was to take advantage of favorable interest rates, and to restructure future debt service
requirements. Combined debt service requirements were reduced by approximately $ 1,945,000, with most of the
savings coming in the first two years.
Scheduled debt service requirements are as follows:
Year Ending June 30 Principal Interest Total
2014 $ 3,375,000 $ 1,34 &,851 $ 4,723,851
2015 3,895,000 1,241,990 5,136,990
2016 4,380,000 1,120,873 5,500,873
2017 4,475,000 1,003,858 5,478,858
2018 4,810,000 899,929 5,709,929
2019 -2023 25,155,000 2,580,280 27,735,280
2024 -2027 3,895,000 229,762 4,124.762
$ 49.985.000 8.425.543 58.410.543
Compensated absences
Compensated absences (those for which employees receive pay) are presented using the termination payment
method. A liability is computed using estimates which apply historical data to current factors. The District
maintains records of unused leave and applies the contracted rate for employees eligible for termination
payments. The District allows only restricted sabbatical leave and therefore does not present any liability in
advance of the sabbatical. Payments for compensated absences are made in the year the absence is taken or the
employee retires. When an employee retires, the payout is as follows:
Unused sick leave will be paid at the following rates:
Percentage of
Number of Years Accumulated Days
Less than ten 20%
10 through 14 35%
15 or more 50%
For teachers and administrators, any unused sick leave shall be paid at the daily substitute rate.
For support staff and Food Service Fund employees, unused sick leave will be paid at the lowest hourly
rate for support employees.
FS - 27
MECHANICSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2013
LONG -TERM LIABILITIES (Cont'd.)
Retirement incentive payments
Professional employees who become eligible for retirement without penalty, and have at least 20 years of service,
are eligible for a one time District payment made to their individual 403(b) retirement account of $ 10,000. These
incentive payments are included as compensated absences once employees have met the District's eligibility
requirements.
Other post employment benefits (OPEBs)
OPEBs are presented in accordance with GASB Statement No. 45, which requires their,recognition as part of the
compensation package of active employees for services rendered. The cost and obligation for OPEBs are
required to be measured by an actuarial valuation:
Plan description
All eligible retirees (see pension plan) including teachers, administrators, and support staff are allowed to
continue coverage for themselves and their dependents until the retiree attains the Medicare eligible age. In
order to obtain coverage, retired employees must provide payment equal to the premium determined for the
purpose of COBRA. District administrators must meet PSERS retirement eligibility requirements to qualify.
Teachers must meet the same PSERS requirements plus have a least 20 years of service with the District.
Retiree's premiums are less than the District's actual cost to provide health care coverage to retirees. The
premium amount retirees pay is a blended rate for covering both active and retired Plan members. The fact
that the blended rate that retirees pay is less than the cost of covering retired members and their beneficiaries
results in what is known as an "implicit rate subsidy," which creates an additional cost to the District.
Participant information
Active participants 498
Vested former members 37
Retired participants 35
570
Funding policy
The District funds Plan liabilities on a "pay -as- you -go" basis, and has not established an OPEB trust fund to
accumulate assets to fund Plan obligations. The District has no statutory or contractual obligation to fund the
Plan and would only do so at the District's discretion.
FS - 28
MECHANICSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2013
LONG -TERM LIABILITIES (Cont'd.)
Other post employment benefits (OPEBs) (Cont'd.)
Annual OPEB cost and net OPEB obligation
The annual OPEB cost (expense) is calculated based on the actuarially determined annual required
contribution (ARC) of the District. The ARC represents a funding level that if paid on an ongoing basis is
projected to cover normal cost each year and amortize any unfunded actuarial accrued liability (UAAL) over 7
years (2 years remaining).
Components of the District's annual OPEB cost, the amount contributed to the Plan, and changes in the net
OPEB obligation are as follows:
District normal cost $ 123,654
Amortization of unfunded actuarial accrued liability 266.526
Annual required contribution 390,180
Interest on the net OPEB obligation 24,982
Adjustment to the ARC (84,168
Annual OPEB cost 330,994
Contributions made to the plan (144,232
Increase in net OPEB obligation 186,762
Net OPEB obligation - beginning 555.164
Net OPEB obligation - ending $ 741.926 .
The percentage of annual OPEB cost contributed was as follows:
Percentage of
Annual Annual OPEB Net OPEB
Year ended OPEB Cost Cost Contributed Obligation
June 2013 $ 330,994 43.58% $ 741,926
Funding status and funding progress
The District's actuarial accrued liability (AAL) for OPEBs as of July 2012 was $ 1,757,981. There are no Plan
assets, thus, the entire amount is unfunded. The District does not have any current plans to fund the AAL.
Actuarial UAAL as
Actuarial Actuarial Accrued a % of
Valuation Value of Liability Unfunded Funded Covered Covered
Date Assets (AAL) AAL Ratio Payroll Payroll
July 2012 $ - $ 1,757,981 $ 1,757,981 0.00% $ 24,344,290 7.22%
FS - 29
MECHANICSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2013
LONG -TERM LIABILITIES (Cont'd.)
Other post employment benefits (OPEBs) (Cont'd.)
Actuarial assumptions and methods
Actuarial assumptions and methods used in the July 2012 actuarial valuation include the following:
Interest rate 4.50%
General inflation rate 3.00%
Health care cost trend rate 7.5% in 2013 decreasing by 0.5% per year to 5.5% in 2016.
Rates gradually decrease from 5.3% in 2017 to 4.2% in 2089
and later.
Actuarial cost method Benefits are allocated on a level basis over the earnings of
an individual from date of hire to assumed retirement date
Amortization (blended) Active employees over expected future service period, and
retirees over expected future payment period
Actuarial evaluations on an ongoing basis involve estimates of the reported amounts and assumptions about
the probability of events far into the future. Examples include assumptions about future employment,
mortality, and the healthcare cost trend. Actuarially determined amounts are subject to continual revision as
actual results are compared to past expectations and new estimates are made about the future.
Projections of benefits are based on the types of benefits provided under the plan at the time of each
valuation and on the pattern of sharing of benefit costs between the District and plan members to that point in
time.
Actuarial calculations reflect a long -term perspective, and consistent with that perspective, actuarial methods
and assumptions used include techniques that are designed to reduce short-term volatility in accrued
liabilities.
The required schedule of funding progress in the other required supplementary information (ORSI)
immediately following the notes to financial statements, presents multi -year trend information about whether
the actuarial value of Plan assets is increasing or decreasing over time relative to the actuarial accrued
liability for benefits. However, because the District maintains no Plan assets, information relative to Plan asset
disclosures is not applicable.
FS -30
MECHANICSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2013
OPERATING LEASES
The District is obligated under various equipment and modular classroom lease agreements at June 30, 2013.
Total Operating lease payments included in General Fund expenditures for the year ended June 30, 2013
amounted to approximately $ 139,000. The following is a schedule of future minimum rental payments under the
operating lease agreements required for the years ending:
2014 143,068
2015 128,519
2016 124,363
2017 6,595
Total minimum payments required $ 402.545
PENSION PLAN
Substantially all full -time and part-time employees of the District participate in the ,pension plan. The District
recognizes expenditures or expenses equal to its contractually- required contributions, subject' to the modified
accrual basis of accounting in governmental funds.
The District contributes to Public School Employees' Retirement System (the System), a governmental cost
sharing multiple- employer 401(a) defined benefit plan. The plan is under the authority of The Public School
Employees' Retirement Code (the Code), as amended. The plan provides retirement and disability, legislatively
mandated ad hoc cost -of- living adjustments, and healthcare insurance premium assistance to qualifying
annuitants. The System issues a comprehensive annual financial report that includes financial statements and
required supplementary information for the plan. A copy of the report may be obtained by writing to the System at
5 N 5 th Street, Harrisburg, PA 17101 -1905, or on the System's website.
The contribution policy is established in the Code and requires contributions by active members, employers and
the Commonwealth. Contribution rates for active members are set by law and are dependent upon members'
class. In most cases, the member contribution rates based on qualifying compensation are as follows:
Membership Class T -C Active members hired before July 22, 1983 5.25%
Membership Class T -C Members hired on or after July 22, 1983 6.25%
and who were active or inactive as of July 1, 2001
Membership Class T -D Active members hired before July 22, 1983 6.50%
Membership Class T -D Members hired on or after July 22, 1983 7.50%
and who were active or inactive as of July 1, 2001
Membership Class T -D Members hired from July 1, 2001 thru June 30, 2011 7.50%
FS -31
MECHANICSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2013
PENSION PLAN (Cont'd.)
Members hired after June 30, 2011 are automatically Membership Class T -E and have a member contribution
rate of 7.50% (base rate). Members hired after June 30, 2011 who elect Membership Class T -F have a ,member
contribution rate of 10.30% (base rate). Membership Class T -E and T -F are affected by a `shared risk' provision in
Act 120 of 2010 that in future fiscal years could cause the Membership Class T -E contribution rate -to fluctuate
between 7.50% and 9.50% and Membership Class T -F contribution rate to fluctuate between 10.30% and
12.30 %.
Contributions required of employers are based upon an actuarial valuation. For the fiscal year ended June 2013
the employer contribution rate was 12.36 percent of covered payroll, composed of 11.50 percent for pension
benefits and 0.86 percent for healthcare insurance premium assistance. District's contributions to the System for
years ended June 2013, 2012 and 2011 were $ 3,087,937, $ 2,112,090 and $ 1,361,369, respectively. Those
amounts are equal to the required contributions for each year.
RISK MANAGEMENT
Health insurance
The District is a member of South Central Trust for processing claims and obtaining reinsurance through
commercial insurance carriers, but the Trust is not a risk sharing pool. The District has reinsurance for claims in
excess of $ 125,000 specific (per person). The District has a maximum lifetime benefit of $ 5,000,000 per person.
Financial statements of the trust are provided to member districts. District transactions with the trust were as
follows:
Cash balance in the trust - beginning $ 2,198,124
Payments from the District and its retirees 5,246,366
Benefit claims paid by the trust $ (5,398,460)
Stop loss premiums and commissions (181,300)
Administrative and other fees, net of interest earned (11.231
(5,590.991
Cash balance in the trust - ending 1
Prepaid health insurance 890,000
Amount available for accrued benefit claims $ 963,499
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MECHANICSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2013
RISK MANAGEMENT (Cont'd.)
Health insurance (Cont'd.)
The amount available for benefit claims was as follows:
Accrual for benefit claims incurred $ 472,849
Accrual for health insurance coverage on payroll payable 490.650
Amount available for accrued benefit claims $ 963 499
There are various methodologies for estimating a reasonable level for claims that have been incurred but not
reported (IBNR). District management has selected the methodology of approximating paid claims using their
actual runout of claims reported plus an additional estimate for unreported claims. District management believes
this methodology provides an adequate amount for accrued claims.
Other insurance
The District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets;
errors and omissions; injuries to employees; and natural disasters. The District maintains commercial insurance
coverage covering each of those risks of loss. Management believes such coverage is sufficient to preclude any
significant uninsured losses to the District. Settled claims have not exceeded this commercial coverage in any of.
the past three fiscal years.
For State unemployment compensation laws, the District is self- insured, which is a common practice for local
governmental units. Any unemployment claims are paid by the District on a quarterly basis as incurred.
For workers' compensation insurance, approximately 80 Districts participate in a .public entity risk sharing pool
(School Districts Insurance Consortium) for processing claims and obtaining reinsurance through commercial
insurance carriers. Under this plan, the District's annual cost should not exceed standard commercial insurance
rates.
COMMITMENTS AND CONTINGENCIES
Other commitments and contingencies
The District's collective bargaining agreement with its teaching staff expires June 30, 2017.
In the normal course of business, the District is subject to legal disputes and claims. The District does not
anticipate any material losses from any pending or threatened litigation.
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MECHANICSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2013
COMMITMENTS AND CONTINGENCIES (Cont'd.)
In the normal course of 'preparing for the subsequent school year, the District has awarded bids for various
supplies, fuel contracts, etc. No major commitments in excess of routine requirements have been made by the
District.
The District participates in state and federal grant programs which are governed by various rules and regulations.
Expenditures charged to these grant programs are subject to program compliance audits and reviews by the
grantor agencies. The District is potentially liable for any expenditures which may be disallowed by the rules of
these grant programs. The District does not anticipate any material disallowance of program expenditures. The
District is also audited by the State's Department of the Auditor General. Findings, if any, from these audits could
result in the repayment of funds, or receipt of additional funds.
As part of its ongoing capital projects, the District has entered into contract commitments approximating
$ 927,000 for the completion of various construction projects at June 30, 2013.
COMMITTED FUND BALANCE
Committed amounts of fund balance of the General Fund are as follows:
Pension plan rate increases $ 5,478,029
Health insurance 2,535,378
Retirement of long -term debt 1,314,787
Capital outlays 5,000,000
14.328.194
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MECHANICSBURG AREA SCHOOL DISTRICT
BUDGETARY COMPARISON INFORMATION - GENERAL FUND
YEAR ENDED JUNE 30, 2013
Budgeted Amounts Variance With
Original Final Actual Final Budget
Revenues
Local sources - taxes $ 38,353,587 $ 38,353,587 $ 41,493,205 $ 3,139,618
Local sources - other 1,799,738 1,799,738 2,014,067 214,329
State sources 12,281,191 12,281,191 12,244,062 (37,129)
Federal sources 568,052 568,052 759,876 191,824
Total revenues 53,002,568 53,002,568 56,511,210 3,508,642
Expenditures
Regular programs 23,072,769 23,056,989 22,194,961 862,028
Special programs 7,102,360 7,101,961 6,920,605 181,356
Vocational programs 245,431 245,431 221,861 23,570
Other instructional programs 484,375 496,155 495,810 345
Higher education programs 462,797 462,797 461,630 .1,167
Pre- kindergarten programs - 4,000 4,000 -
Pupil personnel 1,755,035 1,755,035 1,699,652 55,383
Instructional staff 2,468,259 2,411,243 2,297,601 113,642
Administration 2,880,500 2,880,500 2,826,840 53,660
Pupil health 625,794 683,209 677,549. 5,660
Business 597,525 597,525 584,127 .13,398
Operation and maintenance of plant 4,573,954 4,573,954 3,632,681 941,273
Student transportation 1,658,530 1,658,530 1,604,992 53,538
Central services 140,391 140,391 139,412 979
Other support services 148,745 148,745 131,866 16,879
Student activities 1,272,276 1,146,731 919,866 226,865
Community services 484,732 603,105 578,223 24,882
Capital outlay 12,500 12,500 12,300 200
Debt service - 7,172 7,172 -
Total expenditures 47,985,973 47,985,973 45,411,148 2,574,825
Excess (deficiency) of revenues over expenditures 5,016,595 5,016,595 11,100,062 6,083,467
Other financing sources (uses)
Transfers to other funds (5,596,757) (5,596,757) (8,663,929) (3,067,172)
Budgetary reserve (63,500) (63,500) - 63,500
Net change in fund balances (643,662) (643,662) 2,436,133 3,079,795
Fund balance - beginning 14,048,773 14,048,773 16,788,975 2,740,202
Fund balance - ending $ 13,405,111 $ 13,405,111 $ 19,225,108 $ 5,819,997
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MECHANICSBURG AREA SCHOOL DISTRICT
OTHER POST EMPLOYMENT BENEFIT PLANS
JUNE 30, 2013
HEALTH CARE BENEFITS
SCHEDULE OF FUNDING PROGRESS
Actuarial UAAL as
Actuarial Actuarial Accrued a % of
Valuation Value of Liability Unfunded Funded Covered Covered
Date Assets (AAL) AAL Ratio Payroll Payroll
July 2012 $ - $ 1,757,981 $ 1,757,981 0.00% $ 24,344,290 7.22%
July 2010 - 1,424,261 1,424,261 0.00% 23,290,133 6.12% .
July 2008 - 1,288,868 1,288,868 0.00% 20,610,024 6.25%
The District is required to have an actuarial valuation at least biennially (every 2 years). If the plan experiences
significant changes, a new actuarial valuation should be performed rather than waiting for the next scheduled
valuation date.
ORSI - 2
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MECHANICSBURG AREA SCHOOL DISTRICT
COMBINING STATEMENT OF FIDUCIARY NET POSITION - FIDUCIARY FUNDS
JUNE 30, 2013
Private Purpose Trusts Total
Expendable Non - expendable Trust
Trust Trust Funds Agency Activities Total
Assets
Cash and cash equivalents $ 158,941 $ 40,165 $ 199,106 $ 699,967 $ 145,013 $ 1,044,086
Total assets 158,941 40,165 199,106 699,967 145,013 1,044
Liabilities _ 699,967 145,013 844
Due to other organizations - -
Total liabilities - - - 699,967 145,013 $44,980
Net position - 199,106
Restricted $ 158,941 $ 40,165 $ 199,106 $ - $
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MECHANICSBURG AREA SCHOOL DISTRICT
COMBINING STATEMENT OF CHANGES IN FIDUCIARY NET POSITION - ALL TRUST FUNDS
YEAR ENDED JUNE 30, 2013
Expendable Non- expendable
Trust Trust Total
Additions
Gifts and contributions $ 66,985 $ 1,500 $ 68,485
Investment income - 18 18
Total additions 66,985 1 68,503
Deductions
Scholarships and awards 37,077 1,450 38,527
Total deductions 37,077 1,450 38,527
Operating income (loss) 29,908 68 29,976
Transfers to (from) trust accounts
Change in net position 29,908 68 29,976
Net position - beginning 129,033 40,097 169,130
Net position - ending $ 158,941 $ 40,165 $ 199,106
SI -2