HomeMy WebLinkAbout14-0303 J' t ,.
CE
ii�J 7 { � {�+��
ivi
C' rMNITY
SHIPPENSBURG AREA SCHOOL DISTRICT
FINANCIAL REPORT
JUNE 30 2013
p j
366cl?
V
Y
CONTENTS
INDEPENDENT AUDITOR'S REPORT 1-3
Management's Discussion & Analysis 4-12
Basic Financial Statements:
Government -wide Financial Statements:
Statement of Net Position 13-14
Statement of Activities 15
Fund Financial Statements:
Balance Sheet - Governmental Funds 16
Reconciliation of the Governmental Funds Balance
Sheet to the Statement of Net Position 17
Statement of Revenues, Expenditures and
Changes in Fund Balances - Governmental Funds 18
Reconciliation of the Governmental Funds
Statement of Revenues, Expenditures and Changes
in Fund Balances to the Statement of Activities 19
Statement of Revenues, Expenditures and Changes in
Fund Balance - Budget and Actual - General Fund 20
Statement of Net Position - Proprietary Fund -
Food Service 21
Statement of Revenues, Expenses and Change in Net
Position - Proprietary Fund - Food Service 22
Statement of Cash Flows - Proprietary Fund -
Food Service 23
Statement of Fiduciary Net Position 24
Notes to Financial Statements 25-48
4
CONTENTS (Continued)
REQUIRED SUPPLEMENTARY INFORMATION
Post - Employment Benefits Plan 49
SUPPLEMENTARY INFORMATION
Schedule of Revenues - General Fund 50-51
Schedule of Expenditures - General Fund 52-57
Independent Auditor's Report on Internal Control
over Financial Reporting and on Compliance and
Other Matters Based on an Audit of Financial
Statements Performed in Accordance with
Government Auditing Standards 58-59
Independent Auditor's Report on Compliance for
Each Major Federal Program and Report on Internal
Control over Compliance as Required by OMB
Circular A -133 60-61
Schedule of Findings and Questioned Costs 62-63
Schedule of Expenditures of Federal Awards 64-67
Notes to Schedule of Expenditures of Federal Awards 68
Summary Schedule of Prior Year's Audit Findings 69
f ?I�R_ Boyer & Ritter L.0
Certified Public Accountants and Consultants
INDEPENDENT AUDITOR'S REPORT
Board of School Directors
Shippensburg Area School District
Shippensburg, Pennsylvania
Report on the Financial Statements
We have audited the accompanying financial statements of the governmental activities, the business -type
activity, each major fund, and the aggregate remaining fund information of Shippensburg Area School
District, as of and for the year ended June 30, 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 from 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.
Camp Hill, PA • Carlisle, PA • Chambersburg, PA • State College, PA
An IndependenE !\Member of the BDO Seidman Alliance
h
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinions.
Opinions
In our opinion, the financial statements referred to above present fairly, in all material respects, the
respective financial positions of the governmental activities, the business -type activity, each major fund,
and the aggregate remaining fund information of Shippensburg Area School District, as of June 30, 2013,
and the respective changes in financial position and, where applicable, cash flows thereof for the year
then ended in accordance with accounting principles generally accepted in the United States of America.
Emphasis of Matter
As described in Note 1, Shippensburg Area School District has implemented a reporting model to account
for deferred inflows of resources, deferred outflows of resources, and net position as required by the
provisions of the Governmental Accounting Standards Board ( "GASB ") Statement 63, Financial
Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position, and
GASB 65, Items Previously Recognized as Assets and Liabilities, as of July 1, 2012. Our opinions on
these statements are not modified with respect to this matter.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that Management's
Discussion and Analysis and Post - Employment Benefits — Schedule of Funding Progress on pages 4 -12
and 49, respectively, be presented to supplement the basic financial statements. Such information,
although not a part of the basic financial statements, is required by the Governmental Accounting
Standards Board 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 Shippensburg Area School District's basic financial statements. The Schedule of Expenditures
of Federal Awards, as required by Office of Management and Budget Circular A -133, Audits of States,
Local Governments, and Non - Profit Organizations and the Schedules of Revenues - General Fund and
Expenditures - General Fund are presented for purposes of additional analysis and are not a required part
of the basic financial statements.
2
The Schedule of Expenditures of Federal Awards and the Schedules of Revenues — General Fund and
Expenditures - General Fund 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 Schedule of
Expenditures of Federal Awards and the Schedules of Revenues - General Fund and Expenditures -
General Fund are fairly stated, in all material respects, in relation to the basic financial statements as a
whole.
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated November 18,
2013, on our consideration of Shippensburg Area School District's internal control over financial
reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and
grant agreements and other matters. The purpose of that report is to describe the scope of our testing of
internal control over financial reporting and compliance and the results of that testing, and not to provide
an opinion on internal control over financial reporting or on compliance. That report is an integral part of
an audit performed in accordance with Government Auditing Standards in considering Shippensburg Area
School District's internal control over financial reporting and compliance.
Chambersburg, Pennsylvania
November 18, 2013
3
SHIPPENSBURG AREA SCHOOL DISTRICT
MANAGEMENT'S DISCUSSION & ANALYSIS (MD &A)
YEAR ENDED JUNE 30, 2013
The discussion and analysis of Shippensburg Area School District's (District) financial performance
provides an overall review of the District's financial activities for the fiscal year ended June 30, 2013.
The intent of this discussion and analysis is to look at the District's financial performance as a whole;
readers should also review notes to the basic financial statements and financial statements to enhance
their understanding of the District's financial performance.
Financial Highlights
Debt Administration
The District refinanced the General Obligation Bonds, Series of 2008 and Series of 2008A taking
advantage of lower interest rates. The refinanced General Obligation Bonds are the Series of 2013.
Out -of- District Placements for Students
Out -of- District placements for Charter Schools, Special Education and Alternative Education for at -risk
students continue to increase.
4
Table A -1 summarizes the major features of the District's financial statements, including the portions of
the District they cover and the types of information they contain. The remainder of this overview section
of MD &A explains the structure and contents of the statements.
Table A -1
Major Features of Shippensburg Area School District's
Government -Wide and Fund Financial Statements
Government -Wide Fund Statements
Statements Governmental Funds Proprietary Funds Fiduciary Funds
Scope Entire District (except Activities of the District Activities the District Activities in which the
fiduciary funds) that are not proprietary operates similar to private District is the trustee or
or fiduciary, such as business - agent for someone else's
education, administration, Food Service resources -
and community services Activity Funds
Required Financial Statement of Net Position Balance Sheet Statement of Net Position Statement of Fiduciary
Information Net Position
Statement of Activities Statement of Revenues, Statement of Revenues,
Expenditures and Changes Expenses and Change in Statement of Changes in
in Fund Balances Net Position Fiduciary Net Position
Statement of Cash Flows
Accounting Basis and Accrual accounting and Modified - accrual Accrual accounting and Accrual accounting and
Measurement Focus economic - resources focus accounting and current economic - resources focus economic - resources focus
financial- resources focus
Type of asset/liability All assets and liabilities, Only assets expected to be All assets and liabilities, All assets and liabilities,
information both financial and capital, used up and liabilities that both financial and capital, both short-term and long -
and short-term and long- come due during the year and short-term and long- term
tern or soon thereafter; no term
capital assets included
Type of in./low /outflow All revenues and expenses Revenues for which cash is All revenues and expenses All revenues and
information during the year, regardless received during or soon during the year, regardless expenses during the year,
of when cash is received after the end of the year; of when cash is received or regardless of when cash
or paid expenditures when goods paid is received or paid
or services have been
received and payment is
due during the year or soon
thereafter
5
Overview of Financial Statements
Government -Wide Statements
The government -wide statements report information about the District as a whole using accounting
methods similar to those used by private- sector companies. The Statement of Net Position includes all of
the government's assets and liabilities. All of the current year's revenues and expenses are accounted for
in the Statement of Activities regardless of when cash is received or paid.
The two government -wide statements report the District's net position and how it has changed. Net
position, the difference between the District's assets and liabilities, is one way to measure the District's
financial health or position.
Over time, increases or decreases in the District's net position indicate whether or not the District's
financial health is improving or deteriorating, respectively.
To assess the overall health of the District, additional non - financial factors, such as changes in the
District's property-tax base and the performances of students, must be considered.
The government -wide financial statements of the District are divided into two categories:
• Governmental activities - All of the District's basic services are included here, such as instruction,
administration, and community services. Property taxes, and state and Federal subsidies and
grants finance most of these activities.
• Business -type activities - The District conducts a food - service operation and charges fees to
students, staff, and visitors to cover the costs of the program's operation.
Fund Financial Statements
The District's fund financial statements provide detailed information about the most significant funds -
not the District as a whole. Some funds are required by state law and by bond requirements.
Governmental funds - Most of the District's activities are reported in governmental funds,
which focus on the determination of financial position and changes in financial position, not on
income determination. They are reported using an accounting method called modified- accrual
basis of accounting, which measures cash and all other financial assets that can readily be
converted to cash. The governmental -fund statements provide a detailed, short-term view of the
District's operations and the services it provides. Governmental -fund information helps the
reader determine whether there are more or fewer financial resources that can be spent in the near
future to finance the District's programs. The relationships (or differences) between
governmental activities (reported in the Statement of Net Position and the Statement of
Activities) and governmental funds are reconciled in the financial statements.
Proprietary funds - These funds are used to account for the District's activities that are similar
to business operations in the private sector, or where the reporting focuses on determining net
income, financial position, changes in financial position, and where a significant portion of
funding comes through user charges. When the District charges customers for services it
provides - whether outside customers or other units within the District - these services are
generally reported in proprietary funds. The Food Service Fund is the District's proprietary fund
and is the business -type activity reported in the government -wide statements.
6
Fiduciary funds - The District is the trustee, or fiduciary, for several activity funds. All
fiduciary activities are reported in a separate Statement of Net Position. We exclude these
activities from the District's other financial statements because the District cannot use these
assets to finance operations.
Financial Analysis of the District as a Whole
The District's total net position was $20,251,147, at June 30, 2013.
Table A -2
As of June 30, 2013 and 2012
Net Position
Governmental Business -Type Governmental Business -Type
Activities Activities Total Activities Activities Total
6/30/2013 6/30/2013 6/30/2013 6/30/2012 6/30/2012 6/30/2012
Current and other assets $ 13,111,558 $ 162,798 $ 13,274,356 $ 11,833,727 $ 56,465 $ 11,890,192
Capital assets 45,628,043 18,442 45,646,485 46,869,088 39,121 46,908,209
Total assets 58,739,601 181,240 58,920,841 58,702,815 95,586 58,798,401
Deferred outflows of resources 309,891 - 309,891 - - -
Total assets and deferred
outflows of resources $ 59,049,492 $ 181,240 $ 59,230,732 $ 58,702,815 $ 95,586 $ 58,798,401
Current and other liabilities $ 6,597,179 $ 224,793 $ 6,821,972 $ 5,857,302 $ 69,199 $ 5,926,501
Long -term liabilities 32,157,613 - 32,157,613 33,695,156 - 33,695,156
Total liabilities 38,754,792 224,793 38,979,585 39,552,458 69,199 39,621,657
Invested in capital assets,
net of related debt 12,790,997 18,442 12,809,439 12,740,535 39,121 12,779,656
Restricted 163,731 - 163,731 203,800 - 203,800
Unrestricted, undesignated 7,339,972 (61,995) 7,277,977 6,206,022 (12,734) 6,193,288
Total net position 20,294,700 (43,553) 20,251,147 19,150,357 26,387 19,176,744
Total liabilities
and net position $ 59,049,492 $ 181,240 $ 59,230,732 $ 58,702,815 $ 95,586 $ 58,798,401
Most of the District's net position is invested in capital assets (land, site improvements, buildings, and
equipment). The remaining net position consists of restricted and unrestricted amounts. The restricted
balances are amounts set aside to fund future purchases or capital projects as planned by the District. The
unrestricted amounts include designated and undesignated amounts.
The results of this year's operations as a whole are reported in the Statement of Activities. All expenses
are reported in the first column. Specific charges, grants, revenues and subsidies that directly relate to
specific expense categories are presented to determine the final amount of the District's activities that is
supported by other general revenues. The two largest general revenues are the Basic Education Subsidy,
provided by the Commonwealth of Pennsylvania, and the local taxes assessed to community taxpayers.
7
Table A -3 presents information from the Statement of Activities in a different format.
Table A -3
Fiscal Years Ended June 30, 2013 and 2012
Changes in Net Position
Governmental Business -Type Governmental Business -Type
Activities Activities Total Activities Activities Total
6/30/2013 6/30/2013 6/30/2013 6/30/2012 6/30/2012 6/30/2012
Revenues
Program revenues
Charges for services $ 226,231 $ 744,128 $ 970,359 $ 223,093 $ 802,897 $ 1,025,990
Operating grants
and contributions 7,154,352 669,253 7,823,605 7,492,749 606,940 8,099,689
Capital grants
and contributions - - - - -
General revenues
Property taxes 18,951,126 18,951,126 18,226,488 18,226,488
Other taxes 5,360,373 5,360,373 4,513,812 4,513,812
Grants, subsidies and
contributions, unrestricted 9,480,228 - 9,480,228 9,477,202 - 9,477,202
Other 134,537 99 134,636 565,729 509 566,238
Transfers - - - - _
Total revenues 41,306,847 1,413,480 42,720,327 40,499,073 1,410,346 41,909,419
Expenses
Instructional 26,700,872 - 26,700,872 26,175,681 - 26,175,681
Instructional student support 3,050,064 3,050,064 3,084,111 3,084,111
Administrative and
financial support 3,220,861 3,220,861 3,215,142 3,215,142
Operation and maint.
of plant services 2,413,902 2,413,902 2,306,555 2,306,555
Pupil transportation 2,067,868 2,067,868 1,869,162 1,869,162
Student activities 740,846 740,846 731,268 731,268
Community services 7,53I 7,531 6,295 6,295
Interest on long-term debt 1,316,600 - 1,316,600 1,187,342 - 1,187,342
Food service - 1,483,420 1,483,420 - 1,427,884 1,427,884
Total expenses 39,518,544 1,483,420 41,001,964 38,575,556 1,427,884 40,003,440
Changes in net position $ 1,788,303 $ (69,940) $ 1,718,363 $ 1,923,517 $ (17,538) $ 1,905,979
8
The tables below presents the expenses of both the Governmental and Business -Type Activities of the
District.
Table A -4 presents the District's functions - instructional programs, instructional student support,
administration, operation and maintenance of plant services, pupil transportation, student activities, and
community services and each program's net cost (total cost less revenues generated by the activities).
This table also shows the net costs offset by other unrestricted grants, subsidies, and contributions to
show the remaining financial needs supported by local taxes and other miscellaneous revenues.
Table A -4
Fiscal Years Ended June 30, 2013 and 2012
Governmental Activities
Total Cost Net Cost Total Cost Net Cost
of Services of Services of Services of Services
Functions/Programs 6/30/2013 6/30/2013 6/30/2012 6/30/2012
Instructional $ 26,700,872 $ 21,896,678 $ 26,175,681 $ 21,472,642
Instructional student support 3,050,064 2,598,005 3,084,111 2,599,822
Administration and financial support 3,220,861 2,979,873 3,215,142 2,980,312
Operation and maint. of plant services 2,413,902 1,532,097 2,306,555 1,134,008
Pupil transportation 2,067,868 1,207,598 1,869,162 891,998
Student activities 740,846 599,579 731,268 587,295
Community services 7,531 7,531 6,295 6,295
Interest on long -term debt 1,316,600 1,316,600 1,187,342 1,187,342
Total governmental activities — $ - 39,518,544 32,137,961 $ 38,575,556 30,859,714
Less unrestricted grants, subsidies (9,480,228) (9,477,202)
Total needs for grants, taxes
and other revenues $ 22,657,733 $ 21,382,512
Table A -5 reflects the activities of the Food Service Fund, the only business -type activity of the District.
Table A -5
Fiscal Years Ended June 30, 2013 and 2012
Business -Type Activities
Total Cost Net Cost Total Cost Net Cost
of Services of Services of Services of Services
Functions/Programs 6/30/2013 6/30/2013 6/30/2012 6/30/2012
Food services $ 1,483,420 $ (70,039) $ 1,427,884 $ (18,047)
Less investment earnings 99 509
Less transfers - _
Total business -type activities $ (69,940) $ (17,538)
The Statement of Revenues, Expenses and Change in Net Position for this proprietary fund will further
detail the actual results of operations.
9
The District Funds
At June 30, 2013, the District's governmental funds reported a combined fund balance of $8,214,626,
which reflects an increase of $1,470,495 from June 30, 2012.
General Fund Budget
During the fiscal year, the Board of School Directors (Board) authorizes revisions to the original budget
to accommodate differences from the original budget to the actual expenditures of the District. All
adjustments are again confirmed at the time the annual audit is accepted, which is after the end of the
fiscal year and not prohibited by state law. A schedule showing the District's original and final budgeted
amounts compared with amounts actually paid and received is provided in the financial statements.
The District applied for Federal, state, and local grants. These grants cannot always be anticipated in the
budgeting process. Budgeted revenues increased by $414,849 as a result of additional approved grants.
Budgeted expenditures and other financing uses also increased by the same amount to compensate for the
additional approved grants. Transfers between specific categories of expenditures /financing uses occur
during the year. The most significant transfers are from the budget reserve to specific expenditures.
Capital Asset and Debt Administration
Capital Assets
At June 30, 2013, the District had $45,646,485 invested in a broad range of capital assets, including land,
buildings, furniture and equipment.
Table A -6
Fiscal Years Ended June 30, 2013 and 2012
Capital Assets - Net of Depreciation
6/30/2012 Increases Decreases 6/30/2013
Governmental Activities
Land $ 272,820 $ - $ - $ 272,820
Construction -in- progress 3,121,530 32,652 3,154,182 -
Site improvements 1,005,775 - - 1,005,775
Buildings and improvements 56,359,787 3,154,182 - 59,513,969
Furniture and equipment 8,496,614 124,728 33,717 8,587,625
69,256,526 3,311,562 3,187,899 69,380,189
Less accumulated depreciation
Site improvements 578,457 32,266 - 610,723
Buildings and improvements 16,841,416 1,236,408 - 18,077,824
Furniture and equipment 4,967,565 129,751 33,717 5,063,599
22,387,438 1,398,425 33,717 23,752,146
Governmental Activities,
Capital Assets - Net $ 46,869,088 $ 1,913,137 $ 3,154,182 $ 45,628,043
Business -Type Activities,
Capital Assets - Net $ 39,121 $ (20,679) $ - $ 18,442
10
Debt Administration
As of June 30, 2013, the District had total outstanding bond principal of $32,490,000, plus bond premium
of $347,046, totaling $32,837,046; compensated absences of $1,192,053; and other post - employment
benefits of $523,514. The District has an outstanding, lease - rental obligation of $3,263,720.
Table A -7
Fiscal Years Ended June 30, 2013 and 2012
Outstanding Debt
Governmental Activities
6/30/2013 6/30/2012 Change
General Obligation Bonds
Series of 2008 $ 285,000 $ 8,315,000 $ (8,030,000)
Series A of 2008 - 1,970,000 (1,970,000)
Series AA of 2008 - 645,000 (645,000)
Series of 2011 2,885,000 3,065,000 (180,000)
Series A of 2011 15,150,000 15,875,000 (725,000)
Series of 2012 4,320,000 4,325,000 (5,000)
Series of 2013 9,850,000 - 9,850,000
32,490,000 34,195,000 (1,705,000)
Bond premium 347,046 228,672 118,374
32,837,046 34,423,672 (1,586,626)
Compensated absences 1,192,053 1,124,705 67,348
Other post - employment benefits 523,514 411,898 111,616
$ 34,552,613 $ 35,960,275 $ (1,407,662)
Other obligations include accrued vacation pay and sick leave for specific employees of the District and
other post- employment benefits. More detailed information about our long -term liabilities is included in
the Notes to Financial Statements.
Rental Obligation
As of June 30, 2013, the District had total, estimated, outstanding lease- rental obligations, issued by the
Pennsylvania State Public School Building Authority (Authority) of $3,263,720. The lease - rental debt,
Series of 2011, was issued to finance costs of a capital project consisting of planning, designing,
renovating, constructing, furnishing, and equipping the Franklin County Career and Technology Center
( FCCTC) and the cost and expenses of such financing. The FCCTC and the five member school districts
have entered into a lease agreement with the Authority, and each school district will pay its proportionate
share of the lease rentals in order to fund the Series of 2011 debt.
I1
Table A -8 reflects the comparison of General Fund revenue and expenditure categories by percentages.
Table A -8
Revenues and Expenditures
2012 -2013 2011 -2012 2010 -2011 2009 -2010
Local revenues 61.2% 59.7% 56.8% 56.3%
State revenues 36.9% 37.8% 36.0% 36.9%
Federal revenues 1.9% 2.5% 7.2% 6.3%
Other financing sources 0.0% 0.0% 0.0% 0.5%
Instruction 64.4% 63.4% 63.6% 59.5%
Support services 26.2% 25.5% 26.5% 26.6%
Non - instructional /community 1.8% 1.8% 1.8% 1.9%
Facilities acquisition, construction
and improvement services 0.0% 0.2% 0.0% 3.6%
Debt service 7.5% 9.0% 8.0% 8.4%
Other financing uses 0.1% 0.1% 0.1% 0.0%
Contacting the District's Financial Management
Our financial report is designed to provide our citizens, taxpayers, parents, students, investors, and creditors
with a general overview of the District's finances and to show the Board's accountability for the money it
receives. If you have questions about this report or wish to request additional financial information, please
contact Deborah Westover, Business Administrator/Board Secretary, at Shippensburg Area School District,
317 North Morris Street, Shippensburg, PA 17257, (717) 530 -2700.
SHIPPENSBURG AREA SCHOOL DISTRICT
STATEMENT OF NET POSITION
June 30, 2013
Governmental Business -Type
Activities Activity Total
Assets
Cash and cash equivalents $ 8,148,572 $ 46,241 $ 8,194,813
Investments 1,644,952 - 1,644,952
Receivables
Taxes - net of allowance
for uncollectibles 1,671,588 - 1,671,588
Federal subsidies 785,647 75,211 860,858
State subsidies 610,686 7,319 618,005
Other 56,540 568 57,108
Internal balances 193,573 - 193,573
Inventories - 33,459 33,459
Capital Assets
Land and site improvements - net 667,872 - 667,872
Buildings and improvements - net 41,436,145 - 41,436,145
Furniture and equipment - net 3,524,026 18,442 3,542,468
Total capital assets 45,628,043 18,442 45,646,485
Total assets 58,739,601 181,240 58,920,841
Deferred Outflows of Resources
Deferred amounts on refunding debt 309,891 - 309,891
Total assets and deferred
outflows of resources $ 59,049,492 $ 181,240 $ 59,230,732
See Notes to Financial Statements.
13
Governmental Business -Type
Activities Activity Total
Liabilities
Accounts payable $ 727,735 $ 6,847 $ 734,582
Accrued expenses
Salaries and benefits 3,249,329 - 3,249,329
Payroll withholdings 85,055 - 85,055
Interest 125,210 - 125,210
Internal balances - 191,513 191,513
Deferred revenues - 26,433 26,433
Unearned revenues 14,850 - 14,850
Long -term liabilities
Due within one year 2,395,000 - 2,395,000
Due in more than one year 32,157,613 - 32,157,613
Total long -term liabilities 34,552,613 - 34,552,613
Total liabilities 38,754,792 224,793 38,979,585
Net Position
Net investment in capital assets 12,790,997 18,442 12,809,439
Restricted for capital projects 163, 3 ) 1 - 163,731
Unrestricted 7,339,972 (61,995) 7,277,977
Total net position 20,294,700 (43,553) 20,251,147
Total liabilities and net position $ 59,049,492 $ 181,240 $ 59,230,732
14
SHIPPENSBURG AREA SCHOOL DISTRICT
STATEMENT OF ACTIVITIES
Year Ended June 30, 2013
Net (Expense) Revenue and
Program Revenues Changes in Net Position
Operating
Charges for Grants and Governmental Business -Type
Functions /Programs Expenses Services Contributions Activities Activity Total
Governmental Activities
Instructional $ 26,700,872 $ 113,438 $ 4,690,756 $ (21,896,678) $ - $ (21,896,678)
Instructional student support 3,050,064 - 452,059 (2,598,005) - (2,598,005)
Administration and financial support 3,220,861 - 240,988 (2,979,873) - (2,979,873)
Operation and maintenance of plant services 2,413,902 20,861 860,944 (1,532,097) - (1,532,097)
Pupil transportation 2,067,868 - 860,270 (1,207,598) - (1,207,598)
Student activities 740,846 91,932 49,335 (599,579) - (599,579)
Community services 7,531 - - (7,531) - (7,531)
Interest on long -term debt 1,316,600 - - (1,316,600) - (1,316,600)
Total governmental activities 39,518,544 226,231 7,154,352 (32,137,961) - (32,137,961)
Business -Type Activity
Food service 1,483,420 744,128 669,253 - (70,039) (70,039)
Total School District 41,001,964 970,359 7,823,605 (32,137,961) (70,039) (32,208,000)
General Revenues
Property taxes, levied for general purposes, net 18,951,126 - 18,951,126
Public utility, realty transfer, earned income, and per capita for general purposes, net 5,360,373 - 5,360,373
Grants, subsidies, and contributions, not restricted 9,480,228 - 9,480,228
Investment earnings 8,165 99 8,264
Miscellaneous income 126,372 - 126,372
Total general revenues 33,926,264 99 33,926,363
Changes in net position 1,788,303 (69,940) 1,718,363
Net Position - July 1, 2012, as previously stated 19,150,357 26,387 19,176,744
Prior period adjustment (See Note 9) (643,960) - (643,960)
Net Position - July 1, 2012, as restated 18,506,397 26,387 18,532,784
Net Position - June 30, 2013 20,294,700 (43,553) 20,251,147
See Notes to Financial Statements.
15
SHIPPENSBURG AREA SCHOOL DISTRICT
BALANCE SHEET - GOVERNMENTAL FUNDS
June 30, 2013
Capital Total
General Projects Governmental
Fund Fund Funds
Assets
Cash $ 7,984,842 $ 163,731 $ 8,148,573
Investments 1,644,952 - 1,644,952
Receivables
Taxes - net of allowance
for uncollectibles 1,671,588 - 1,671,588
Federal subsidies 785,647 - 785,647
State subsidies 610,686 - 610,686
Other 56,540 - 56,540
Due from other funds 193,573 - 193,573
Total assets $ 12,947,828 $ 163,731 $ 13,111,559
Liabilities
Accounts payable $ 727,736 $ - $ 727,736
Accrued expenses
Salaries and benefits 3,249,329 - 3,249,329
Payroll withholdings 85,055 - 85,055
Unearned revenues 14,850 - 14,850
Total liabilities 4,076,970 - 4,076,970
Deferred Inflows of Resources
Delinquent property taxes 819,963 - 819,963
Fund Balances
Committed for
Future retirement increases 5,700,000 - 5,700,000
Assigned 1,751,521 163,731 1,915,252
Unassigned 599,374 - 599,374
Total fund balances 8,050,895 163,731 8,214,626
Total liabilities, deferred inflows
of resources and fund balances $ 12,947,828 $ 163,731 $ 13,111,559
See Notes to Financial Statements.
16
SHIPPENSBURG AREA SCHOOL DISTRICT
RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET
TO THE STATEMENT OF NET POSITION
June 30, 2013
Total fund balances - governmental funds $ 8,214,626
Amounts reported for governmental activities in the Statement
of Net Position are different because:
Capital assets used in governmental activities are not financial resources,
and therefore, they are not reported as assets in governmental funds. The
cost of capital assets is $69,380,189, and the accumulated depreciation
is $23,752,146. 45,628,043
Property taxes receivable will be collected this year, but are not
available soon enough to pay for the current period's expenditures,
and therefore, they are deferred inflows of resources in the funds. 819,963
The difference between the re- acquisition price and the net
carrying amount of the old debt is a deferred outflow of resources,
which is not reported in the governmental funds. 309,891
Long -term liabilities, including bonds payable, compensated absences, and
other post- employment benefits are not due and payable in the current period,
and therefore, they are not reported as liabilities in the funds.
Long -term liabilities at year -end consist of:
Bonds payable (32,490,000)
Bond (premium) discount (347,046)
Accrued interest (125,210)
Compensated absences (1,192,053)
Other post - employment benefits (523,514)
(34,677,823)
Total net position - governmental activities $ 20,294,700
See Notes to Financial Statements.
17
SHIPPENSBURG AREA SCHOOL DISTRICT
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN
FUND BALANCES - GOVERNMENTAL FUNDS
Year Ended June 30, 2013
Capital Total
General Projects Governmental
Fund Fund Funds
Revenues
Local sources $ 25,163,328 $ 86 $ 25,163,414
State sources 15,170,822 - 15,170,822
Federal sources 817,107 - 817,107
Total revenues 41,151,257 86 41,151,343
Expenditures
Instruction 25,504,570 - 25,504,570
Support services 10,355,660 139,889 10,495,549
Operation of non - instructional services 708,329 - 708,329
Facilities acquisition, construction
a - 70,539 70,539
and improvement
Debt service 3,031,812 320,403 3,352,215
Total expenditures 39,600,371 530,831 40,131,202
Excess (deficiency) of revenues
over expenditures 1,550,886 (530,745) 1,020,141
Other Financing Sources (Uses)
Issuance of refunding bonds - 9,850,000 9,850,000
Interfund transfers in 14,236 51,609 65,845
Payment to refunded -bond escrow agent - (9,585,000) (9,585,000)
Bond - issuance premium - 188,303 188,303
Refund of prior years' receipts (2,949) - (2,949)
Interfund transfers out (51,609) (14,236) (65,845)
Total other financing sources (uses) (40,322) 490,676 450,354
Net changes in fund balances 1,510,564 (40,069) 1,470,495
Fund Balances - July 1, 2012 6,540,331 203,800 6,744,131
Fund Balances - June 30, 2013 $ 8,050,895 $ 163,731 $ 8,214,626
See Notes to Financial Statements.
18
SHIPPENSBURG AREA SCHOOL DISTRICT
RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF
REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE
STATEMENT OF ACTIVITIES
Year Ended June 30, 2013
Net change in fund balances - total governmental funds $ 1,470,495
Amounts reported for governmental activities in the Statement of
Activities are different because:
Capital outlays are reported in governmental funds as expenditures.
However, in the Statement of Activities, the costs of those assets are
allocated over their useful lives as depreciation expense. This
is the amount by which depreciation exceeds capital outlays
in the period.
Capital outlays 157,380
Less depreciation expense (1,398,425) (1,241,045)
Because some property taxes will not be collected for several
months after the District's fiscal year ends, they are not considered
as "available" revenues in the governmental funds. Deferred inflows
of resources increased by this amount this year. 155,506
Interest on long -term debt in the Statement of Activities differs from the
amount reported in the governmental funds because interest is
recognized as an expenditure in the funds when it is due, and thus
requires the use of current financial resources. In the Statement of
Activities, interest expense is recognized as the interest accrues,
regardless of when it is due. The decrease in interest accrued reflected
in the Statement of Activities is shown here. 26,288
Some expenses reported in the Statement of Activities do not require
the use of current financial resources, and therefore, they are not
reported as expenditures in governmental funds. (178,964)
The issuance of long -term debt provides current financial resources
to governmental funds, while the repayment of the principal of long-
term debt consumes the current financial resources of governmental funds.
Neither transaction, however, has any effect on net assets. Also,
governmental funds report the effects of premiums, discounts, and similar
items when debt is first issued, whereas these amounts are deferred and
amortized in the Statement of Activities. This is the net effect of these
differences in treatment of long -term debt and related items.
Issuance of long -term debt (9,850,000)
Refunding of general obligation bonds 7,695,000
Repayment of long -term debt 3,860,000
Bond (premium) discount (149,343)
Amortization of refunding loss (30,603)
Amortization of bond (premium) discount 30,969 1,556,023
Change in net position of governmental activities $ 1,788,303
See Notes to Financial Statements.
19
SHIPPENSBURG AREA SCHOOL DISTRICT
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE -
BUDGET AND ACTUAL - GENERAL FUND
Year Ended June 30, 2013
Variance with Final
Budgeted Amounts Budget Favorable
Original Final Actual (Unfavorable)
Revenues
Local sources $ 24,392,713 $ 24,655,151 $ 25,163,328 $ 508,177
State sources 15,187,318 15,305,221 15,170,822 (134,399)
Federal sources 717,719 756,613 817,107 60,494
Total revenues 40,297,750 40,716,985 41,151,257 434,272
Expenditures
Instruction 25,747,005 25,504,570 25,504,570 -
Support services 11,023,603 10,355,660 10,355,660 -
Operation of non - instructional services 556,832 708,329 708,329 -
Debt service 3,203,196 4,467,368 3,031,812 1,435,556
Total expenditures 40,530,636 41,035,927 39,600,371 1,435,556
Excess (deficiency) of revenues
over expenditures (232,886) (318,942) 1,550,886 1,869,828
Other Financing Sources (Uses)
Interfund transfers in - - 14,236 14,236
Refund of prior years' receipts - (2,949) (2,949) -
Interfund transfers out (145,000) - (51,609) (51,609)
Total other financing uses (145,000) (2,949) (40,322) (37,373)
Net changes in fund balance $ (377,886) $ (321,891) 1,510,564 $ 1,832,455
Fund Balance - July 1, 2012 6,540,331
Fund Balance - June 30, 2013 $ 8,050,895
See Notes to Financial Statements.
20
SHIPPENSBURG AREA SCHOOL DISTRICT
STATEMENT OF NET POSITION -
PROPRIETARY FUND - FOOD SERVICE
June 30, 2013
ASSETS
Current Assets
Cash $ 46,241
Receivables
Federal subsidies 75,211
State subsidies 7,319
Other 568
Inventories 33,459
Total current assets 162,798
Noncurrent Assets
Furniture and equipment - net 18,442
Total assets $ 181,240
LIABILITIES AND NET POSITION
Liabilities
Accounts payable $ 6,847
Due to other funds 191,513
Unearned revenues 26,433
Total liabilities - all current 224,793
Net Position
Invested in capital assets 18,442
Unrestricted (61,995)
Total net position (43,553)
Total liabilities and net position $ 181,240
See Notes to Financial Statements.
21
SHIPPENSBURG AREA SCHOOL DISTRICT
STATEMENT OF REVENUES, EXPENSES AND CHANGE IN NET POSITION -
PROPRIETARY FUND - FOOD SERVICE
Year Ended June 30, 2013
Operating Revenues
Food service revenue $ 744,128
Operating Expenses
Labor, taxes and benefits 710,234
Professional and technical services 820
Disposal services 2,431
Electricity 20,000
Equipment repairs and maintenance 44,570
Extermination services 1,969
Advertising 1,179
Printing and binding 1,104
Travel 1,632
Supplies 41,969
Food and milk 559,817
Donated commodities used 73,626
Depreciation 20,679
Equipment - replacement 2,124
Dues and fees 1,266
Total operating expenses 1,483,420
Operating loss (739,292)
Nonoperating Revenues (Expense)
Investment earnings 99
Federal subsidies 514,727
State subsidies 80,900
Value of donated commodities 73,626
Total nonoperating revenues 669,352
Change in net position (69,940)
Net Position - July 1 2012 26,387
Net Position - June 30, 2013 $ (43,553)
See Notes to Financial Statements.
22
SHIPPENSBURG AREA SCHOOL DISTRICT
STATEMENT OF CASH FLOWS -
PROPRIETARY FUND - FOOD SERVICE
Year Ended June 30, 2013
Cash Flows From Operating Activities
Cash received from meal sales $ 744,580
Cash payments for goods and services (599,544)
Cash payments to employees for services (710,234)
Net cash used in operating activities (565,198)
Cash Flows From Non - Capital Financing Activities
Federal subsidies 514,727
State subsidies 80,900
Net cash provided by non - capital
financing activities 595,627
Cash Flows From Investing Activities
Investment earnings 99
Net increase in cash 30,528
Cash:
July 1, 2012 15,713
June 30, 2013 $ 46,241
Reconciliation of Operating Loss to Net Cash Used
in Operating Activities
Operating loss $ (739,292)
Adjustments to reconcile operating loss to net
cash used in operating activities
Depreciation 20,679
Value of donated commodities 73,626
Changes in assets and liabilities:
(Increase) decrease in:
Receivables (74,232)
Inventories (1,573)
(Decrease) increase in:
Accounts payable 4,590
Due to other funds 150,552
Unearned revenues 452
Net cash used in operating activities $ (565,198)
See Notes to Financial Statements.
23
SHIPPENSBURG AREA SCHOOL DISTRICT
STATEMENT OF FIDUCIARY NET POSITION
June 30, 2013
James Burd Nancy Grayson Intermediate
Elementary Elementary School Middle School Senior High
Activity Fund Activity Fund Activity Fund Activity Fund Activity Fund Total
ASSETS
Cash $ 5,431 $ 4,433 $ 3,247 $ 36,010 $ 89,374 $ 138,495
Total assets $ 5,431 $ 4,433 $ 3,247 $ 36,010 $ 89,374 $ 138,495
LIABILITIES
Due to other funds $ - $ - $ 267 $ 1,793 $ - $ 2,060
Due to student groups 5,431 4,433 2,980 34,165 89,374 136,383
Payables - - - 52 - 52
Total liabilities $ 5,431 $ 4,433 $ 3,247 $ 36,010 $ 89,374 $ 138,495
See Notes to Financial Statements.
24
SHIPPENSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies
Shippensburg Area School District operates three elementary schools, one middle school, and one high
school in Shippensburg, Pennsylvania. The District operates under current standards prescribed by the
Pennsylvania Department of Education in accordance with the provisions of the School Laws of
Pennsylvania. The District operates under a locally - elected, nine - member, Board -form of government.
The financial statements of Shippensburg Area School District (the District) have been prepared in
accordance with accounting principles generally accepted in the United States of America (GAAP) as
applied to governmental units. The Governmental Accounting Standards Board (GASB) is the
authoritative, standard- setting body for the establishment of governmental- accounting and financial -
reporting principles. The more significant of these accounting policies are as follows:
A. Reporting Entity
Shippensburg Area School District's financial statements include the operations of all entities for which
the School Board exercises oversight responsibility. Oversight responsibility is demonstrated by financial
interdependency, selection of governing authority, designation of management, ability to significantly
influence operations, and accountability for fiscal matters.
Shippensburg Area School District is the lowest level of government which has oversight responsibility
and control over all activities related to public - school education in the Commonwealth of Pennsylvania.
The District receives funding from local, state and Federal - government sources and must comply with the
requirements of these funding- source entities. However, the District is not included in any other
governmental "reporting entity" since the School Board Members are elected by the public and have
decision - making authority, the power to designate management, the ability to significantly influence
operations, and primary accountability for fiscal matters. The District is affiliated with the Capital Area
Intermediate Unit (CAN) along with 23 other member school districts. The District is also affiliated with
the Franklin County Career and Technology Center (FCCTC) along with four other member school
districts. The member school districts participate in providing oversight responsibility to the CAM and
FCCTC through the following:
Approval of Board members who are also Board members of the participating school districts
Approval of funding of operating budgets
The District is also affiliated with Shippensburg University through the Grace B. Luhrs University
Elementary School (GBLUES).
Despite the foregoing affiliations, the overriding issue is that the volume of participating school districts
does not permit Shippensburg Area School District to exercise "significant influence" over the operations
of the CAN and FCCTC; therefore, the CAM and FCCTC are not considered "component units" of
Shippensburg Area School District in determining the "reporting entity" as required by GASB Statement
No. 39.
25
f
SHIPPENSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies (Continued)
B. Government -wide and Fund Financial Statements
The government -wide financial statements (i.e., the Statement of Net Position and the Statement of
Activities) report information on all of the non - fiduciary activities of the primary government. For the
most part, the effect of inter -fund activity has been removed from these statements. Governmental
activities, which normally are supported by taxes and intergovernmental revenues, are reported separately
from business -type activities, which rely to a significant extent on fees and charges for support.
The Statement of Activities demonstrates the degree to which the direct expenses of a given function or
segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a
specific function or segment. Program revenues include 1) charges to customers or applicants who
purchase, use, or directly benefit from goods, services, or privileges provided by a given function or
segment and 2) grants and contributions that are restricted to meeting the operational or capital
requirements of a particular function or segment. Taxes and other items not included among program
revenues are reported as general revenues.
Separate -fund financial statements are provided in the report for all of the governmental, proprietary, and
fiduciary funds of the District, even though the latter are excluded from the government -wide financial
statements. Major, individual, governmental and enterprise funds are reported as separate columns in the
fund financial statements. Non -major funds are aggregated and presented in a single column. Fiduciary
funds are reported by fund type.
C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation
The District complies with accounting principles generally accepted in the United States of America
(GAAP) and applies all relevant Governmental Accounting Standards Board (GASB) Pronouncements.
The government -wide financial statements are reported using the economic - resources measurement focus
and the accrual basis of accounting, as are the proprietary and fiduciary-fund financial statements.
Revenues are recorded when earned, and expenses are recorded when a liability is incurred, regardless of
the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are
levied. Grants and similar items are recognized as revenues as soon as all eligibility requirements
imposed by the provider have been met. Net position (total assets and deferred outflows less total
liabilities and deferred inflows) are used as a practical measure of economic resources, and the operating
statement includes all transactions and events that increased or decreased net position. Depreciation is
charged as an expense against current operations, and accumulated depreciation is reported on the
Statement of Net Position.
26
SHIPPENSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies (Continued)
C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation (Continued)
Governmental -fund financial statements are reported using the current, financial- resources measurement
focus and the modified - accrual basis of accounting. Revenues are recognized as soon as they are both
measurable and available. Revenues are considered to be available when they are collectible within the
current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the
government considers revenues to be available if they are collected within 60 days of the end of the
current fiscal period. Revenues from Federal, state, and other grants designated for payment of specific
District expenditures are recognized when the related expenditures are incurred; accordingly, when such
funds are received, they are recorded as deferred revenues until earned. Expenditures generally are
recorded when a liability is incurred, as under accrual accounting. However, debt - service expenditures,
as well as expenditures related to compensated absences and claims and judgments, are recorded only
when payment is due.
When both restricted and unrestricted (including committed, assigned, and unassigned) resources are
available for use, it is the District's policy to use the resources with the most stringent restrictions first,
followed by resources in decreasing order of restriction, as funds are needed.
Governmental funds are those through which most governmental functions of the District are financed.
The acquisitions, uses, and balances of the District's expendable financial resources and related liabilities
(except for those accounted for in proprietary funds) are accounted for through governmental funds.
The District reports the following major governmental funds:
The General Fund is the District's primary operating fund. It accounts for all financial resources except
those required to be accounted for in another fund. Revenues are primarily derived from local property,
earned income and per capita taxes, and state and Federal distributions. Many of the more important
activities of the District, including instruction, administration of the District, and certain non - instructional
services are accounted for in this fund.
The Capital Projects Fund is used to account for and report financial resources that are restricted,
committed, or assigned to expenditures for capital outlays, including the acquisition or construction of
capital facilities and other capital assets.
The District operates one enterprise fund, the Food Service Fund. This fund accounts for the activities of
the District's food - service program.
27
SHIPPENSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies (Continued)
C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation (Continued)
Proprietary funds distinguish operating revenues and expenses from non - operating items. Operating
revenues and expenses generally result from providing services and producing and delivering goods in
connection with the proprietary fund's principal, on -going operations. The principal operating revenues
of the District's enterprise fund are food - service charges. Operating expenses for the District's enterprise
fund include food - production costs, supplies, administrative costs, and depreciation of capital assets. All
revenues or expenses not meeting these classifications are reported as non - operating revenues and
expenses.
The District does not attempt to allocate "building -wide costs" to the Food Service Fund. Thus, General
Fund expenditures which partially benefit the Food Service Fund (utilities, janitorial services, insurance,
etc.) are not proportionately recognized within the Food Service Fund; similarly, the Food Service Fund
does not recognize a cost for the building space it occupies (no rental -of- facilities expense).
The Activity Funds account for the monies authorized by Section 511 of the Public School Code of 1949
for school publications and organizations. A component of the Activity Funds is an Agency Fund which
is separate from other Agency Funds because of legal requirements. Agency Funds are custodial in
nature (assets equal liabilities) and do not involve measurement of results of operations. Agency Funds
are also accounted for using the modified- accrual basis of accounting.
D. Budgets and Budgetary Accounting
An operating budget is adopted prior to the beginning of each fiscal year for the General Fund on the
modified- accrual basis of accounting. The General Fund is the only fund for which a budget is legally
required. The Pennsylvania School Code dictates specific procedures relative to the adoption of the
District's budget and reporting of its financial statements.
The District, before levying annual school taxes, is required to prepare an operating budget for
the succeeding fiscal year.
The District is required to publish notice by advertisement, at least once in two newspapers of
general circulation in the municipality in which it is located, and within fifteen days of final
action, that the proposed budget has been prepared and is available for public inspection at the
administrative office of the District.
Notice that public hearings will be held on the proposed operating budget must be included in the
advertisement; such hearings are required to be scheduled at least ten days prior to when final
action on adoption is taken by the Board.
Legal - budgetary control is maintained at the sub- function/major- object level. The Board of School
Directors may make transfers of funds appropriated for any particular item of expenditure by legislative
action in accordance with the Pennsylvania School Code. Management may amend the budget at the sub -
function/sub- object level without Board approval. Appropriations lapse at the end of the fiscal period.
Budgetary information reflected in the financial statements is presented at or below the level of budgetary
control and includes the effects of approved budget amendments.
28
SHIPPENSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies (Continued)
E. Assets, Deferred Outflows, Liabilities, Deferred Inflows, and Net Position or Equity
Cash and Cash Equivalents For purposes of the Statement of Cash Flows presented for the proprietary
fund, the District considers all highly - liquid investments with maturities of three months or less when
purchased to be cash equivalents.
Investments Investments are stated at fair value.
Allowance for Estimated Uncollectible Taxes and Deferred Revenues The allowance for estimated
uncollectible taxes is based upon an historical estimate of delinquent taxes that will not be received within
one year of the fiscal year -end. Deferred revenues are based upon an historical estimate of delinquent
taxes expected to be received within one year of the fiscal year -end.
The portion of taxes receivable which is expected to be received within sixty days of June 30 is recorded
as revenue in the current year. The remaining amount of taxes receivable which is expected to be
received within one year from June 30 is recorded as deferred revenue. All other amounts in taxes
receivable are written off as estimated uncollectible taxes.
Inventories Inventories are presented at the lower of cost or market on a first -in, first -out basis, and are
expensed when used.
A physical inventory of the Food Service Fund's food and supplies was taken as of June 30, 2013. The
inventory consisted of government- donated commodities which were valued at their estimated, fair -
market values, and purchased commodities and supplies, both of which were valued at cost using the first-
in, first -out (FIFO) method. The District has adopted an inventory- recordkeeping system which
distinguishes between donated and purchased commodities. Accordingly, deferred revenue for donated
commodities has been recorded.
Capital Assets and Depreciation Capital assets; consisting of property, plant and equipment; are reported
in the applicable governmental or business -type activities column in the government -wide financial
statements. Capital assets are defined by the District as assets with an initial, individual cost of more than
$5,000 or a grouping of assets exceeding $10,000 and having useful lives of longer than one year, unless
the assets are acquired by debt proceeds, in which case the assets must be capitalized. Management
considers various factors in the capitalization of assets, including the assets' estimated useful lives, costs,
and the extent to which the assets are parts of larger capital projects. The District's capital assets include
library books, classroom texts, computer equipment, classroom furniture, and other instructional
equipment, subject to the on -going discretion of management. The costs of normal maintenance and
repairs that do not add to the values of the assets or materially extend assets' useful lives are not
capitalized.
Depreciation is provided for capital assets on the straight -line basis over the estimated useful lives of the
assets or groups of assets as determined by management.
29
SHIPPENSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies (Continued)
E. Assets, Deferred Outflows, Liabilities, Deferred Inflows, and Net Position or Equity (Continued)
Deferred Outflows of Resources - Deferred amounts on refunding debt The District recognizes the
difference between the re- acquisition price and the net carrying amount of the old debt as a deferred
outflow and recognizes it as a component of interest over the remaining life of the old or new debt,
whichever is shorter.
Long -Term Obligations In the government -wide financial statements, long -term debt and other long-
term obligations are reported as liabilities in the applicable governmental or business -type activities
columns in the Statement of Net Position. Bond premiums and discounts are deferred and amortized over
the lives of the bonds using the effective - interest method. Bonds payable are reported either inclusive or
net of applicable bond premiums or discounts, respectively.
In the fund financial statements, governmental -fund types recognize bond premiums and discounts during
the current period. The face amount of the debt issued is reported as other financing sources while
discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld
from the actual debt proceeds received, are reported as debt - service expenditures.
Compensated Absences Under the system of financial accounting and reporting for Pennsylvania School
Systems, the District accrues certain accumulated employee benefits, such as unpaid vacation and sick -
pay. The calculations of these amounts are determined by the appropriate vacation, sick, and retirement
lump -sum payments which would be available to employees if they were to leave or retire from the
District, and the calculations are adjusted for expected employee- turnover rates. Accrued benefit days,
multiplied by appropriate salary amounts, are reflected as a long -term liability unless retirements are
likely within the upcoming fiscal year. Those costs, determined to be current -year costs, are reflected as a
liability of the General Fund.
Post - Employment Benefits In the government -wide financial statements, the District recognized the
costs and liabilities associated with post - employment benefits other than pension compensation, which is
funded through the District's contributions to the statewide Public School Employees' Retirement
System, a governmental, cost - sharing, multiple - employer, defined - benefit pension plan. The District
provides retiree health, vision, dental, and prescription -drug coverage to eligible, retired employees and
qualified spouses /beneficiaries. The District has estimated the cost of providing these benefits through an
actuarial valuation.
Transfers Advances between funds that are not expected to be repaid are accounted for as transfers. In
those cases when repayment is expected, the advances are accounted for through the various "due from"
and "due to" accounts.
30
SHIPPENSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies (Continued)
E. Assets, Deferred Outflows, Liabilities, Deferred Inflows, and Net Position or Equity (Continued)
Deferred Inflows of Resources - Unearned Revenues The District recognizes the property tax revenues
when they become available. Available includes those property tax receivables expected to be collected
within sixty days after year -end. Those property tax receivables expected to be collected after sixty days
after year -end are shown as deferred inflows of resources in the fund financial statements. Governmental
funds also defer revenue recognition in connection with resources that have been received, but not yet
earned.
Fund Balance The District's fund- balance classifications are defined and described as follows:
Non - spendable Represents fund balance amounts that cannot be spent because they are not in a
spendable form or are contractually required to be maintained intact.
Restricted Represents fund balance amounts that are constrained for a specific purpose through
restrictions of external parties, through constitutional provisions, or by enabling legislation.
Committed Represents fund balance amounts that can only be used for specific purposes pursuant to
the constraints imposed by formal action of the Board of School Directors, the District's highest level
of decision - making authority. Committed amounts cannot be used for any other purpose unless the
Board removes the constraints or changes the specified purpose through the same action it used to
commit the funds.
Assigned Represents fund balance amounts that are constrained by the government's intent to be used
for a specific purpose but are neither restricted nor committed. Through Board policy, the Board has
delegated the authority to express intent to the District's Business Administrator.
Unassigned Represents fund balance amounts that have not been restricted, committed, or assigned to
specific purposes within the General Fund.
The District has a board policy which prescribes fund balance guidelines. The District will strive to
maintain an unassigned, General Fund balance of not less than five percent of the budgeted expenditures
for that fiscal year.
Use of Estimates Management uses estimates and assumptions in preparing financial statements. These
estimates and assumptions affect the reported amounts of assets and liabilities and the reported revenues
and expenditures.
Subsequent Events In preparing these financial statements, the District evaluated subsequent events for
either recording or disclosure in its financial statements through November 18, 2013, the date the
financial statements were available to be issued.
31
SHIPPENSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies (Continued)
E. Assets, Deferred Outflows, Liabilities, Deferred Inflows, and Net Position or Equity (Continued)
Implementation of New Accounting Principles GASB issued Statement No. 63, Financial Reporting of
Deferred Outflows of Resources, Deferred Inflows of Resources and Net Position provides financial
reporting guidance for deferred outflows of resources and deferred inflows of resources. The
requirements of this statement improve financial reporting by standardizing the presentation of deferred
outflows and inflows of resources and their effects on the District's net position. This Standard was
adopted for fiscal year ended June 30, 2013. The adoption of this statement reclassified Net Assets to Net
Position, and identified two new elements to make up a Statement of Net Position. These elements and
corresponding amounts are discussed further in Note 9.
GASB Statement No. 65, Items Previously Reported as Assets and Liabilities, sets forth criteria to
properly classify previously- reported assets and liabilities as deferred outflows or deferred inflows of
resources or to recognize certain items that were previously reported as assets and liabilities as outflows
or inflows of resources. The Standard was issued in March 2012, and is effective for periods beginning
after December 15, 2012. This Standard was adopted for year ended June 30, 2013.
Note 2. Deposits and Investments
Under Section 440.1 of the Public School Code of 1949, as amended, the District is permitted to invest
funds consistent with sound business practices in the following types of investments:
• U.S. Treasury Bills
• Short-term obligations of the U.S. Government or its agencies or its instrumentalities
• Deposits in savings accounts or time deposits or share accounts of institutions insured by either:
1. The Federal Deposit Insurance Corporation (FDIC), or
2. The Federal Savings and Loan Insurance Corporation (FSLIC), or
3. The National Credit Union Share Insurance Fund (NCUSIF)
to the extent that such accounts are so insured, and for any amounts above maximum insurable
limits, provided that approved collateral as provided by law shall be pledged by the depository
• Obligations of (a) the United States of America or its agencies or instrumentalities backed by the
full -faith and credit of the United States of America, and (b) the Commonwealth of Pennsylvania,
or instrumentalities thereof backed by the full -faith and credit of these political subdivisions
• Shares of investment companies whose investments are restricted to the above categories.
The deposit and investment policies of the District adhere to state statutes and prudent business practices.
There were no deposit or investment transactions during the year that violated either state statutes or
District policies.
32
SHIPPENSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS
Note 2. Deposits and Investments (Continued)
Deposits: Custodial- Credit Risk
Custodial- credit risk is the risk that in the event of a bank failure, the District's investments may not be
returned to it. As of June 30, 2013, $3,827,196 of the District's total bank balances of $4,077,196, were
exposed to custodial - credit risk as follows:
Amount
Uninsured and collateralized by assets maintained in conformity with Act 72 $ 3,827,196
Act 72 is an act standardizing the procedures for pledges of assets to secure deposits of public funds with
banking institutions pursuant to other laws; establishing a standard rule for the types, amounts, and
valuations of assets eligible to be used as collateral for deposits of public funds; permitting assets to be
pledged against deposits on a pooled basis; and authorizing the appointment of custodians to act as
pledgors of the assets.
Investments
As of June 30, 2013, the District had the following investments:
Weighted -
Average
Investment Type Maturity Rating Fair Value
Pennsylvania Local Government
Investment Trust ( PLGIT)
PLGIT Class 56 days AAAm $ 4,475,219
Pennsylvania School District Liquid
Asset Fund (PSDLAF) 51 days AAAm 99,182
Orrstown Financial Advisors Not Rated 1,644,952
$ 6,219,353
Portfolio Assets
PLGIT - This fund invests primarily in U.S. Treasury and Federal- agency securities and repurchase
agreements secured by such obligations, as well as certain municipal obligations and collateralized or
insured certificates of deposit. Weighted - average maturity for the fund is expected to be kept at or below
60 days.
PSDLAF - This fund invests in U.S. Treasury obligations, securities issued by the U.S. government its
agencies and instrumentalities, and repurchase agreements collateralized by such securities and contracted
with highly -rated counterparties. Weighted- average maturity for the fund is expected to be kept at or
below 60 days.
The District also maintains, at Orrstown Financial Advisors, investments which are invested in U.S.
Treasury obligations.
33
SHIPPENSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS
Note 2. Deposits and Investments (Continued)
Weighted - Average Maturity
The weighted- average maturity (WAM) method expresses investment time horizons, the time when
investments become due and payable, in years or months, weighted to reflect the dollar -size of individual
investments within an investment type. WAMs are computed for each investment type. A portfolio's
WAM is derived by dollar - weighting the WAM for each investment type.
Interest -Rate Risk
The District does not have a formal investment policy that limits investment maturities as a means of
managing its exposure to fair -value losses arising from increasing interest rates.
Credit Risk
As indicated above, Section 440.1 of the Public School Code of 1949, as amended, limits the composition
of the District's investments, and the District has no investment policy that would further limit its
investment choices.
Concentrations -of- Credit Risk
The District places no limit on the amounts invested in any one issuer. The percentages of the
concentrations of the District's investments at June 30, 2013, are as follows:
Percent of
Investment Portfolio
Pennsylvania Local Government Investment Trust (PLGIT) 71.96%
Pennsylvania School District Liquid Asset Fund (PSDLAF) 1.59%
Orrstown Financial Advisors 26.45%
100.00%
34
SHIPPENSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS
Note 3. Taxes Receivable, Deferred Revenues, and Estimated Uncollectible Taxes
Summaries of taxes receivable and related accounts at June 30, 2013, are as follows:
Amount
Uncollected taxes - real estate $ 1,088,129
Uncollected taxes - personal 24,823
Interest and commissions - net 12,678
Earned income taxes 524,043
Realty transfer taxes 21,915
Taxes Receivable - Net $ 1,671,588
Taxes to be collected within 60 days $ 855,941
Deferred revenues - delinquent taxes 819,963
Allowance for uncollectible taxes (4,316)
Taxes Receivable - Net $ 1,671,588
Deferred Revenue - General Fund
Delinquent taxes $ 819,963
Deferred Revenue - Food Service Fund
Student deposits $ 21,823
Donated food 4,610
$ 26,433
35
NOTES TO FINANCIAL STATEMENTS
Note 4. Property Taxes
Based upon assessed valuations, the municipal tax collector bills and collects property taxes on behalf of the
District. Property taxes are levied on July 1 st. Taxes are collected at a 2.00% discount until August 31 st, at
face amount from September l st until October 31 st, and include a 10.00% penalty thereafter. The County
Tax Bureaus collect delinquent real estate taxes for the District.
The District's tax rates for all purposes in 2012 -2013 were 10.22 mills ($10.22 per $1,000 assessed
valuation) for Cumberland County and 93.35 mills ($93.35 per $1,000 assessed valuation) for Franklin
County. Refunds on payments of prior -year taxes are classified as other debt - service items under the
Commonwealth of Pennsylvania accounting system. Current tax collections for the District were
approximately 94.98% of total tax levied.
Note 5. Interfund Accounts
Individual fund receivable and payable balances at June 30, 2013, are as follows:
Interfund Interfund
Receivables Payables
General $ 193,573 $ -
Food Service - 191,513
Middle School Activity - 1,793
Intermediate School Activity - 267
$ 193,573 $ 193,573
All interfund receivable /payable balances resulted from time lags between the dates that (1) interfund goods
and services were provided or reimbursable expenditures occurred, (2) transactions were recorded in the
accounting system, and (3) payments between funds were made. All balances are expected to be repaid
within the following year.
SHIPPENSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS
Note 5. Interfund Accounts (Continued)
Operating transfers between funds at June 30, 2013, are as follows:
Transfers In Transfers Out
General $ 14,236 $ 51,609
Capital Projects 51,609 -
Construction - 14,236
$ 65,845 $ 65,845
Transfers and payments within the District are substantially for purposes of subsidizing operations,
funding capital projects and asset acquisitions, or maintaining debt - service on a routine basis. Resources
are accumulated in a fund to support and simplify the administration of various projects or programs.
Note 6. Food Service Fund Inventories
The composition of Food Service Fund inventories at June 30, 2013, is as follows:
Amount
Materials and supplies $ 8,068
Purchased food 20,781
Donated food 4,610
$ 33,459
37
SHIPPENSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS
Note 7. Capital Assets
Capital asset activity for the year ended June 30, 2013, was as follows:
July 1, 2012 Increases Decreases June 30, 2013
Governmental Activities
Capital assets not being depreciated
Land $ 272,820 $ - $ - $ 272,820
Construction -in- progress 3,121,530 32,652 3,154,182 -
Total capital assets not
being depreciated 3,394,350 32,652 3,154,182 272,820
Capital assets, being depreciated
Site improvements 1,005,775 - - 1,005,775
Buildings and improvements 56,359,787 3,154,182 - 59,513,969
Furniture and equipment 8,496,614 124,728 33,717 8,587,625
Total capital assets being depreciated 65,862,176 3,278,910 33,717 69,107,369
Less accumulated depreciation
Site improvements 578,457 32,266 - 610,723
Buildings and improvements 16,841,416 1,236,408 - 18,077,824
Furniture and equipment 4,967,565 129,751 33,717 5,063,599
Total accumulated depreciation 22,387,438 1,398,425 33,717 23,752,146
Total capital assets being
depreciated, net 43,474,738 1,880,485 - 45,355,223
Governmental Activities, Capital
Assets - Net $ 46,869,088 $ 1,913,137 $ 3,154,182 $ 45,628,043
Business -Type Activity
Machinery and equipment $ 695,302 $ - $ - $ 695,302
Accumulated depreciation (656,181) (20,679) - (676,860)
Business -Type Activity, Capital
Assets - Net $ 39,121 $ (20,679) $ - $ 18,442
Depreciation expense was charged to the functions /programs of the District as follows:
Amount
Governmental Activities
Instructional $ 1,044,868
Instructional student support 128,009
Administration and financial support 127,457
Operation and maintenance of plant services 58,043
Student activities 40,048
Total governmental activities 1,398,425
Business -Type Activity
Food Service 20,679
Total School District $ 1,419,104
38
SHIPPENSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS
Note 8. Accrued Salaries and Benefits
Accrued salaries and benefits at June 30, 2013, consist of the following:
Amount
Accrued salaries $ 2,146,378
Retirement 917,312
Social security 164,198
Workers' compensation 21,441
$ 3,249,329
Accrued salaries represent teachers' salaries earned during the 2012 -13 school year which will be paid
subsequent to June 30, 2013. Accrued retirement represents the Public School Employees' Retirement
Board contribution for the second quarter of calendar year 2013, including the portion pertaining to
accrued salaries at June 30, 2013. Accrued social security represents the District's liability arising from
accrued salaries at June 30, 2013.
Note 9. Long -Term Obligations
During the fiscal year ended June 30, 2013, long -term obligations changed as follows:
July 1 2012 Increases Decreases June 30, 2013
Governmental Activities
General Obligation Bonds -
Series of 2008 $ 8,315,000 $ - $ 8,030,000 $ 285,000
General Obligation Bonds -
Series A of 2008 1,970,000 - 1,970,000 -
General Obligation Bonds -
Series AA of 2008 645,000 - 645,000 -
General Obligation Bonds -
Series of 2011 3,065,000 - 180,000 2,885,000
General Obligation Bonds -
Series A of 2011 15,875,000 - 725,000 15,150,000
General Obligation Bonds -
Series of 2012 4,325,000 - 5,000 4,320,000
General Obligation Bonds -
Series of 2013 - 9,850,000 - 9,850,000
34,195,000 9,850,000 11,555,000 32,490,000
Bond premium (discount) 228,672 149,343 30,969 347,046
34,423,672 9,999,343 11,585,969 32,837,046
Compensated absences 1,124,705 67,348 - 1,192,053
Other post - employment benefits 411,898 111,616 - 523,514
Total Long-Term Obligations $ 35,960,275 $ 10,178,307 $ 11,585,969 $_34,552,613
39
SHIPPENSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS
Note 9. Long -Term Obligations (Continued)
General Obligation Bonds - Series of 2008 - On April 1, 2008, the District issued General Obligation
Bonds in the principal amount of $9,545,000. The proceeds were used to refund the District's General
Obligation Note, Series of 2003 and to pay the costs of issuing and insuring the bonds. The bonds bear
annual interest rates ranging from 2.60% to 4.10 %. Interest is payable semi - annually on November 1
and May 1, and the bonds mature serially in amounts ranging from $270,000 to $630,000 through
November 1, 2029. Total interest expense paid on the Series of 2008 Bonds during the year ended
June 30, 2013, was $307,658. These bonds were partially refunded during 2012 -2013 fiscal year.
General Obligation Bonds - Series A of 2008 - On June 1, 2008, the District issued General Obligation
Bonds in the principal amount of $2,250,000. The proceeds were used to finance the cost of planning,
designing, acquiring, constructing, furnishing, and equipping additions and improvements to
Shippensburg Area High School; and to the extent of remaining funds, other buildings and facilities of
the School District; and paying the costs of issuing and insuring the bonds. The bonds bear annual
interest rates ranging from 2.40% to 4.00 %. Interest is payable semi - annually on November 15 and
May 15, and the bonds mature serially in amounts ranging from $65,000 to $170,000 through
November 15, 2028. Total interest expense paid on the Series A of 2008 Bonds during the year ended
June 30, 2013, was $72,303. These bonds were refunded during 2012 -2013 fiscal year.
General Obligation Bonds - Series AA of 2008 - On June 1, 2008, the District issued General Obligation
Bonds in the principal amount of $6,990,000. The proceeds were used to refund the District's General
Obligation Bonds, Series A of 2001 and to pay the costs of issuing and insuring the bonds. The
economic gain on the refunding of the bonds was $122,876. The bonds bear annual interest rates
ranging from 2.40% to 3.00 %. Interest is payable semi - annually on November 15 and May 15, and the
bonds mature serially in amounts ranging from $645,000 to $1,680,000 through November 15, 2012.
Total interest expense paid on the Series AA of 2008 Bonds during the year ended June 30, 2013, was
$9,030. These bonds were satisfied during 2012 -2013 fiscal year.
General Obligation Bonds - Series of 2011 - On May 3, 2011, the District issued General Obligation
Bonds in the principal amount of $3,235,000. The proceeds were used to pay the costs of planning,
designing, acquiring, constructing, furnishing, and equipping additions and improvements to the
Shippensburg Area High School, and to the extent of remaining funds, other buildings and facilities of
the School District; and to pay the costs of issuing and insuring the bonds. The bonds bear annual
interest rates ranging from 2.00% to 4.40 %. Interest is payable semi - annually on November 15 and
May 15, and the bonds mature serially in amounts ranging from $170,000 to $275,000 through
November 15, 2025. Total interest expense paid on the Series of 2011 Bonds during the year ended
June 30, 2013, was $102,290.
40
SHIl'PENSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS
Note 9. Long -Term Obligations (Continued)
General Obligation Bonds - Series A of 2011 - On May 3, 2011, the District issued General Obligation
Bonds in the principal amount of $15,875,000. The proceeds were used to currently refund the School
District's outstanding General Obligation Bonds, Series of 2004 and to pay the costs of issuing and
insuring the bonds. The economic gain on the refunding of the 2004 bonds was $567,893. The bonds
bear annual interest rates ranging from 2.00% to 4.00 %. Interest is payable semi - annually on November
15 and May 15, and the bonds mature serially in amounts ranging from $725,000 to $2,065,000 through
November 15, 2020. Total interest expense paid on the Series A of 2011 Bonds during the year ended
June 30, 2013, was $474,460.
General Obligation Bonds - Series of 2012 - On May 1, 2012, the District issued General Obligation
Bonds in the principal amount of $4,325,000. The proceeds were used to currently refund the School
District's outstanding General Obligation Bonds, Series of 2007 and to pay the costs of issuing and
insuring the bonds. The economic gain on the refunding of the 2007 bonds was $205,770. The bonds
bear annual interest rates ranging from 2.00% to 3.25°/x. Interest is payable semi - annually on November
15 and May 15, and the bonds mature serially in amounts ranging from $5,000 to $330,000 through
November 15, 2028. Total interest expense paid on the Series of 2012 Bonds during the year ended
June 30, 2013, was $113,923.
General Obligation Bonds - Series of 2013 - On March 5, 2013, the District issued General Obligation
Bonds in the principal amount of $9,850,000. The proceeds were used to currently refund a portion of
the School District's outstanding General Obligation Bonds, Series of 2008, currently refund all of the
School District's outstanding General Obligation Bonds, Series A of 2008, and to pay the costs of
issuing and insuring the Bonds. The economic gain on the refunding of the 2008 and 2008 -A bonds was
$959,172. The bonds bear annual interest rates ranging from 0.50% to 3.00 %. Interest is payable semi-
annually on November 1 and May 1, and the bonds mature serially in amounts ranging from $5,000 to
$755,000 through November 1, 2029. Total interest expense paid on the Series of 2013 Bonds during
the year ended June 30, 2013, was $36,557.
The District is in compliance with all debt covenants of the outstanding bond issues. Those covenants
include the following: the District shall include the annual debt - service in its budget for the fiscal year,
shall appropriate said debt - service from its general revenues, and shall punctually cause the payment of
the principal and interest of each of the bonds.
41
SHIPPENSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS
Note 9. Long -Term Obligations (Continued)
Maturities of the long -term debt issues are as follows:
Governmental Activities
Year Ending June 30, Principal Interest Total
2014 $ 2,395,000 $ 885,839 $ 3,280,839
2015 2,470,000 815,194 3,285,194
2016 2,805,000 729,219 3,534,219
2017 2,905,000 643,610 3,548,610
2018 2,980,000 568,845 3,548,845
2019 -2023 11,480,000 1,665,875 13,145,875
2024 -2028 5,780,000 609,574 6,389,574
2029 -2030 1,675,000 30,624 1,705,624
$ 32,490,000 $ 5,948,780 $ 38,438,780
Prior Period Adjustment - GASB 65 Implementation - Implementation of GASB 65 recognizes costs of
issuance as an expense; therefore, the adoption of this statement resulted in a corresponding decrease in
bond - issuance costs and net position of $643,960 as of July 1, 2012.
The unrealized loss on the bond refunding was reclassified from bonds payable to deferred outflows of
resources. Beginning balances were changed to reflect this as of July 1, 2012.
Compensated Absences - Under the terms of the District's employment policies, employees are
reimbursed for accrued vacation upon retirement or other termination of employment. The
reimbursement rate is established by the employment contract and varies by employee classification. In
addition, employees are granted sick days per school year, and any unused sick days are permitted to be
carried over to future years. Upon retirement from the District, employees are reimbursed for
accumulated sick days equal to the number of unused days multiplied by an amount per the employment
contract. The employees are also offered options regarding retirement payouts as prescribed in the
contract if certain conditions are met. For the year ended June 30, 2013, benefits attributed to five
employees retiring during the 2012 -13 fiscal year amounted to $39,041. The total liability for accrued
vacation, sick- Ieave, and retirement bonuses has been reflected in the Statement of Net Position.
Note 10. Post - Employment Benefits
Under the Consolidated Omnibus Budget Reconciliation Act (COBRA), the District provides healthcare
benefits to eligible, former employees and their dependents. Requirements are outlined by the Federal
Government for this coverage. The premium, plus a 2.00% administrative fee, is paid in full by the
eligible participant. This program is offered for 18 months or 36 months after an employee's
termination date. At June 30, 2013, there were two participants covered under COBRA.
42
SHIPPENSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS
Note 11. Rental Obligation
Rental debt, Series of 2011, dated June 29, 2011, was issued by the Pennsylvania State Public School
Building Authority (Authority) to pay the costs of a capital project consisting of the planning, designing,
renovating, constructing, furnishing, and equipping the Franklin County Career and Technical Center
( FCCTC) and to pay the costs and expenses of such financing. The FCCTC and the five member school
districts have entered into a lease agreement with the Authority, and each school district will pay its
proportionate share of the rentals in order to fund the Series of 2011 debt.
The rental principal balance payable as of June 30, 2013, was $1,860,172.
Shippensburg Area School District's portion of annual, minimum, future rental indebtedness, including
interest at rates ranging between 2.00% and 5.00 %, is as follows:
Year Amount
2014 $ 125,488
2015 125,624
2016 125,296
2017 125,597
2018 125,816
2019 -2023 627,027
2024 -2028 627,909
2029 -2033 626,960
2034 -2038 628,236
2039 125,767
43
SHIPPENSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS
Note 12. Defined- Benefit Pension Plan
Plan Description
Name of Plan: Public School Employees' Retirement System (the System)
Type of Plan: Governmental, cost - sharing, multiple - employer 401 (a) defined - benefit plan
Benefits: Retirement and disability; legislatively- mandated, ad hoc cost -of- living adjustments;
healthcare insurance - premium assistance to qualifying annuitants
Authority: The Public School Employees' Retirement Code (Act No. 96 of October 2, 1975, as
amended) (24 Pa. C.S. 8101 -9102)
Annual Financial Report: The System issues a Comprehensive Annual Financial Report (CAFR) that
includes financial statements and required supplementary information for the plan. A copy of the
report may be obtained by writing to Beth Girman, Office of Financial Management, Public School
Employees' Retirement System, 5 N. 5� Street, Harrisburg, PA, 17101 -1905 or by emailing Beth at
bgirman @pa.gov. The CAFR is also available on the publications page of the PSERS website
www.psers.state.pa.us.
Funding Policy
Authority: The contribution policy is established by the Public School Employees' Retirement Code
and requires contributions by active members, employers, and the Commonwealth.
Contribution Rates
Member Contributions: Active members who joined the System prior to July 22, 1983, contribute at
5.25% (Membership Class T -C) or at 6.50% (Membership Class T -D) of the members' qualifying
compensation. Members who joined the System on or after July 22, 1983, and who were active or
inactive as of July 1, 2001, contribute at 6.25% (Membership Class T -C) or at 7.50% (Membership
Class T -D) of the members' qualifying compensation. Members who joined the System after June 30,
2001 and before July 1, 2011, contribute at 7.50% (automatic Membership Class T -D). For all new
hires and for members who elected Class T -D Membership, the higher contribution rates began with
service rendered on or after January 1, 2002. Members who joined the System after June 30, 2011,
automatically contribute at the Membership Class T -E rate of 7.50% (base rate) of the members'
qualifying compensation. All new hires after June 30, 2011, who elect Membership Class T -F
contribute at 10.30% (base rate) of the members' qualifying compensation. Membership Class T -E
and Class 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 %.
Employer Contributions: Contributions required of employers are based upon an actuarial valuation.
For fiscal year ended June 30, 2013, the rate of employers' contribution was 12.36% of covered
payroll. The 12.36% rate is composed of a pension contribution rate of 11.50% for pension benefits
and 0.86% for healthcare insurance - premium assistance.
The District is required to pay the entire contribution and will be reimbursed by the Commonwealth in
an amount equal to the Commonwealth's share as determined by the income -aid ratio (as defined in
Act 29 of 1994), which is at least one -half of the District's total rate. The District's contributions to
the Plan for the years ended June 30, 2013, 2012, and 2011, were $2,294,497, $1,609,228, and
$1,092,282, respectively, and are equal to the required contributions for each year.
44
SHIPPENSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS
Note 13. Post - Employment Benefits Other Than Pensions
Plan Description - Shippensburg Area School District administers a single- employer, defined - benefit
healthcare plan. The plan provides medical, vision, and dental benefits to eligible retirees and their
spouses through the District's group health - insurance plan, which covers both active and retired
members. Benefit provisions are established through negotiations between the District and the various
unions representing District employees and are renegotiated each bargaining period. All employees
are eligible upon retirement with 30 years of PSERS service or upon superannuation retirement
(PSERS members prior to July 1, 2011 who are age 60 with 30 years of service, age 62 with 1 year of
service, or 35 years of service regardless of age; or PSERS members after July 1, 2011, who are age
65 with 3 years of service or upon attainment of a total combination of age plus service equal to or
greater than 92 with a minimum of 35 years of service). Retired employees are allowed to continue
coverage for themselves and their dependents in the employer's group health- insurance plan until the
retired employees reach Medicare age. The plan does not issue a publicly - available, financial report.
Funding. Policy - Contribution requirements also are negotiated between the District and the various
unions. Retired employees are responsible for payments equal to the premium determined by the
District's plan. The District funds the plan on a pay -as- you -go basis, and there is no obligation to
make contributions in advance of when the insurance premiums or claims are due for payment.
Annual OPEB Cost and Net OPEB Obli ag, tion - The District's annual, other post - employment benefit
(OPEB) cost (expense) is calculated based on the annual, required contribution of the employer
(ARC), an amount actuarially determined in accordance with GASB Statement No. 45. The ARC
represents the level of funding that, if paid on an on -going basis, is projected to cover normal cost each
year and to amortize any unfunded, actuarial liabilities (or funding excess) over a period not to exceed
thirty years. The following table shows the components of the District's annual, OPEB cost for the
year, the amount actually contributed to the plan, and changes in the District's net OPEB obligation to
the plan.
Amount
Annual required contribution (ARC) $ 230,108
Interest on net OPEB obligation 18,535
Adjustment to annual required contribution (25,287)
Annual OPEB cost (expense) 223,356
Contributions made (estimated) (111,740)
Estimated increase in net OPEB obligation 111,616
Net OPEB obligation - beginning of year 411,898
Estimated net OPEB obligation - end of year $ 523,514
The District's annual OPEB costs, the percentage of annual OPEB cost contributed to the plan, and the
net OPEB obligation for the 2011, 2012 and 2013 fiscal years were as follows:
Annual Percentage of Net
OPEB Annual OPEB OPEB
Fiscal Year Ended Cost Cost Contributed Obligation
6/30/2011 $ 234,577 59.34% $ 204,085
6/30/2012 $ 232,926 54.02% $ 411,898
6/30/2013 $ 223,356 50.03% $ 523,514
45
SHIPPENSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS
Note 13. Post - Employment Benefits Other Than Pensions (Continued)
Funded Status and Funding? Progress - As of July 1, 2012, the most recent actuarial valuation date, the
actuarial - accrued liability for benefits was $1,751,096, all of which was unfunded. The covered
payroll (annual payroll of active employees covered by the plan) was $17,618,267, and the ratio of the
unfunded, actuarial - accrued liability to the covered payroll was 9.94 %.
Actuarial valuations of an on -going plan involve estimates of the value of the reported amounts and
assumptions about the probability of occurrence of events far into the future. Examples include
assumptions about future employment, mortality, and the healthcare -cost trend. Amounts determined
regarding the funded status of the plan and the annual, required contributions of the employer are
subject to continual revision as actual results are compared with past expectations, and new estimates
are made about the future. The Schedule of Funding Progress, presented as required supplementary
information following the notes to the financial statements, presents multi -year, trend information that
shows whether the actuarial value of plan assets is increasing or decreasing over time relative to the
actuarial - accrued liabilities for benefits.
Actuarial Method and Assumptions - Projections of benefits for financial- reporting purposes are based
on the substantive plan (the plan as understood by the employer and plan members) and include the
types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit
costs between the employer and plan members to that point. The actuarial methods and assumptions
used include techniques that are designed to reduce short-terns volatility in actuarial- accrued liabilities
and the actuarial values of assets, consistent with the long -term perspectives of the calculations.
Actuarial - valuation date 7/1/2012
Actuarial -cost method Entry -Age Normal
Amortization method Level- Dollar
Remaining amortization period 30 -year Open
Asset - valuation method Equal to Market Values of Assets
Actuarial assumptions
Investment rate -of -return 4.50%
Projected salary increases 3.00% COLA, 1.00% real -wage growth,
0.25 % -3.00% merit increase for
teachers and administrators
Healthcare - inflation rate 7.50% in 2012, decreasing by 0.5% per
year to 5.50% in 2016; rates gradually
decrease in 2017 and beyond
46
SHIPPENSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS
Note 14. Affiliates
Shippensburg Area School District is a member of the Capital Area Intermediate Unit. Through
membership, the District is able to secure various special services, including Special Education,
curriculum development, and certain internal - service functions. The District paid $636,603 as its
share to the Capital Area Intermediate Unit during 2012 -2013.
Shippensburg Area School District is a member of the Franklin County Career and Technology
Center. Students of the District are offered courses and curriculums at the Center that are related to
various technical - training fields. Costs of the Center are shared with other local school districts. The
District paid $1,042,097 as its share to the Franklin County Career and Technology Center during
2012 -2013.
Shippensburg Area School District is affiliated with Shippensburg University through the Grace B.
Luhrs University Elementary School. The University provides teachers for Kindergarten through
Second Grade, and the District provides teachers for the Third through Fifth Grades and support
services. The District reimburses the University based on a basic - education subsidy divided by the
average, daily membership. The District paid $102,143 as its share to Shippensburg University during
2012 -2013.
Note 15. Participation in Risk- Sharing Pool
The District is a participant in a risk - sharing pool to provide workers' compensation coverage. The
expense for this coverage for the 2012 -13 year was $64,333, comprised of a self - insured retention of
$7,101 and a contribution to the Central Fund of $57,232. Actual claims during the year are first paid
out of the self - insured retention. Claims that exceed the self- insured retention are satisfied by the
Central Fund. The Central Fund maintains excess insurance to cover any claims that exceed $400,000
per accident. There are approximately 80 districts participating in the pool. If there is a deficiency in
the pooled funds, each member is assessed a proportionate share of the deficiency. Upon withdrawal
by a member from the pool, the terminating member has no rights to funds in the pool.
47
SHIPPENSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS
Note 16. Risk Management
The District is exposed to various risks of loss related to torts; theft of, damage to, or destruction of
assets; and errors or omissions. Significant losses are covered by commercial insurance for all major
programs. For insured programs, there have been no significant reductions in settlement coverage.
Settlement amounts have not exceeded insurance coverage for the current or three prior years.
Note 17. Significant Commitments
The District has not entered into any significant commitments as of June 30, 2013.
REQUIRED SUPPLEMENTARY INFORMATION
SHIPPENSBURG AREA SCHOOL DISTRICT
POST - EMPLOYMENT BENEFITS PLAN
SCHEDULE OF FUNDING PROGRESS
REQUIRED SUPPLEMENTARY INFORMATION
Actuarial -
Accrued UAAL as a
Actuarial Liability Unfunded Percentage
Actuarial- Value of (AAL) - AAL Funded Covered of Covered
Valuation Assets Entry -Age (IJAAL) Ratio Payroll Payroll
Date (a) (b) (b - a) (a / b) (c) ((b - a) / c)
7/1/2008 $ - $ 1,658,596 $ 1,658,596 0.00% $ 17,294,275 9.59%
7/1/2009 n/a n/a n/a n/a n/a n/a
7/1/2010 $ - $ 1,798,754 $ 1,798,754 0.00% $ 18,086,350 9.95%
7/1/2011 n/a n/a n/a n/a n/a n/a
7/1/2012 $ - $ 1,751,096 $ 1,751,096 0.00% $ 17,618,267 9.94%
For financial reporting purposes, an actuarial valuation is required at least biennially for OPEB plans
with a total membership (including employees in active service, terminated employees who have
accumulated benefits but are not yet receiving them, and retired employees and beneficiaries currently
receiving benefits) of 200 or more, or at least triennially for plans with a total membership of fewer
than 200.
Trend information is presented only for years in which information is available.
49
SUPPLEMENTARY INFORMATION
SHIPPENSBURG AREA SCHOOL DISTRICT
SCHEDULE OF REVENUES - GENERAL FUND
Year Ended June 30, 2013
Revenue from Local Sources
Real estate taxes
Current $ 17,441,226
Interim 108,547
Public utility tax 30,197
Payments in lieu of taxes 18,528
Current per capita taxes
Section 679 55,352
Act 511 55,352
Local services tax 91,301
Earned income tax 4,767,627
Real estate transfer taxes 345,606
Delinquent real estate taxes 1,227,320
Delinquent per capita taxes
Section 679 7,469
Act 511 7,469
Interest 8,079
Admissions 91,939
IDEA 646,651
Rentals 20,861
Tuition 113,438
Refunds and other miscellaneous revenue 126,366
Total revenue from local sources 25,163,328
Revenue from State Sources
Basic education 8,553,900
Tuition for children placed in private homes 59,402
Migratory children 37
Special education for school -aged pupils 1,691,189
Transportation 860,270
(Continued)
50
SHIPPENSBURG AREA SCHOOL DISTRICT
SCHEDULE OF REVENUES - GENERAL FUND (Continued)
Year Ended June 30, 2013
Revenue from State Sources (Continued)
Building reimbursement 751,200
Health services 66,588
State property tax reduction 926,328
PA accountability 217,903
Social security reimbursement 758,494
Retirement reimbursement 1,285,511
Total revenue from state sources 15,170,822
Revenue from Federal Sources
Title I - Grants to Local Educational Agencies 605,935
Title II - Improving Teacher Quality 131,829
Medical Assistance Program 79,343
Total revenue from Federal sources 817,107
Other Financing Sources
Interfund transfers in 14,236
Total revenues $ 41,165.493
51
SHIPPENSBURG AREA SCHOOL DISTRICT
SCHEDULE OF EXPENDITURES - GENERAL FUND
Year Ended June 30, 2013
Instruction
Regular programs
Salaries $ 11,224,237
Employee benefits 4,510,783
Purchased services
Professional and technical 47,984
Property 107,489
Other 1,533,376
Supplies 268,119
Property 6,898
Other objects 5,182
Total regular programs 17,704,068
Special programs
Salaries 2,676,862
Employee benefits 1,165,306
Purchased services
Professional and technical 1,426,512
Property 1,200
Other 686,834
Supplies 31,309
Property 7,650
Other objects 75
Total special programs 5,995,748
Vocational education programs
Salaries 421,513
Employee benefits 160,337
Purchased services
Property 570
Other 949,277
Supplies 12,482
Other objects 160
Total vocational education programs 1,544,339
(Continued)
52
SHIPPENSBURG AREA SCHOOL DISTRICT
SCHEDULE OF EXPENDITURES - GENERAL FUND (Continued)
Year Ended June 30, 2013
Instruction (Continued)
Other instructional programs
Salaries 97,109
Employee benefits 31,994
Purchased services
Professional and technical 106,235
Property 246
Other 4,681
Supplies 2,759
Total other instructional programs 243,024
Adult education programs
Salaries 2,665
Employee benefits 552
Supplies 5,466
Total adult education programs 8,683
Higher- education programs 8,708
Total instruction 25,504,570
Support Services
Pupil personnel
Salaries 928,147
Employee benefits 397,118
Purchased services
Professional and technical 13,213
Other 6,986
Supplies 7,383
Other objects 1,301
Total pupil personnel 1,354,148
(Continued)
53
SHIPPENSBURG AREA SCHOOL DISTRICT
SCHEDULE OF EXPENDITURES - GENERAL FUND (Continued)
Year Ended June 30, 2013
Support Services (Continued)
Instructional staff
Salaries 518,170
Employee benefits 196,092
Purchased services
Property 317
Other 6,459
Supplies 331,734
Property 105,195
Other objects 2,481
Total instructional staff 1,160,448
Administration
Salaries 1,500,150
Employee benefits 639,724
Purchased services
Professional and technical 220,825
Property 2,330
Other 17,045
Supplies 20,579
Property 1,859
Other objects 19,320
Total administration 2,421,832
Pupil health
Salaries 320,587
Employee benefits 130,530
Purchased services
Professional and technical 21,021
Property 100
Supplies 5,258
Total pupil health 477,496
(Continued)
54
SHIPPENSBURG AREA SCHOOL DISTRICT
SCHEDULE OF EXPENDITURES - GENERAL FUND (Continued)
Year Ended June 30, 2013
Support Services (Continued)
Business
Salaries 259,136
Employee benefits 160,008
Purchased services
Professional and technical 3,876
Other 29,259
Supplies 2,287
Other objects 485
Total business 455,051
Operation and maintenance of plant services
Salaries 801,164
Employee benefits 472,884
Purchased services
Property 602,930
Other 153,938
Supplies 293,273
Property 8,709
Other objects 730
Total operation and maintenance of plant services 2,333,628
Student transportation services
Purchased services
Professional and technical 5,102
Other 2,057,817
Supplies 4,854
Other objects 95
Total student transportation services 2,067,868
(Continued)
55
SHIPPENSBURG AREA SCHOOL DISTRICT
SCHEDULE OF EXPENDITURES - GENERAL FUND (Continued)
Year Ended June 30, 2013
Support Services (Continued)
Central service
Purchased services
Professional and technical 24,318
Property 15,987
Supplies 10,897
Total central service 51,202
Other support services 33,987
Total support services 10,355,660
Operation of Non - Instructional Services
Student activities
Salaries 360,146
Employee benefits 99,113
Purchased services
Professional and technical 60,178
Property 36,234
Other 75,373
Supplies 66,888
Other objects 2,866
Total student activities 700,798
(Continued)
56
SHIPPENSBURG AREA SCHOOL DISTRICT
SCHEDULE OF EXPENDITURES - GENERAL FUND (Continued)
Year Ended June 30, 2013
Operation of Non - Instructional Services (Continued)
Community services
Supplies 7,531
Total operation of non - instructional services 708,329
Debt Service
Principal 2,010,716
Interest 1,021,096
Total debt service 3,031,812
Other Financing Sources
Refund of prior years' receipts 2,949
Interfund transfers out 51,609
Total other financing Sources 54,558
Total expenditures and other financing Sources $ 39,654,929
57
EM Boyer & Ritter L.0
Certified Public Accountants and Consultants
INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL
OVER FINANCIAL REPORTING AND ON COMPLIANCE AND
OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS
PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
Board of School Directors
Shippensburg Area School District
Shippensburg, Pennsylvania
We have audited, in accordance with the 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, the financial statements of the governmental
activities, the business -type activity, each major fund, and the aggregate remaining fund information of
Shippensburg Area School District as of and for the year ended June 30, 2013, and the related notes to the
financial statements, which collectively comprise Shippensburg Area School District's basic financial
statements, and have issued our report thereon dated November 18, 2013.
Internal Control over Financial Reporting
In planning and performing our audit, we considered Shippensburg Area School District's internal control
over financial reporting (internal control) to determine the audit procedures that are appropriate in the
circumstances for the purpose of expressing our opinions on the financial statements, but not for the
purpose of expressing an opinion on the effectiveness of the District's internal control. Accordingly, we
do not express an opinion on the effectiveness of the District's internal control.
A deficiency in internal control exists when the design or operation of a control does not allow
management or employees, in the normal course of performing their assigned functions, to prevent, or
detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a
combination of deficiencies, in internal control, such that there is a reasonable possibility that a material
misstatement of the entity's financial statements will not be prevented, or detected and corrected on a
timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control
that is less severe than a material weakness, yet important enough to merit attention by those charged with
governance.
Our consideration of internal control was for the limited purpose described in the first paragraph of this
section and was not designed to identify all deficiencies in internal control that might be material
weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any
deficiencies in internal control that we consider to be material weaknesses. However, material
weaknesses may exist that have not been identified.
Camp Hill, PA • Carlisle, PA • Chambersburg, PA • State College, PA
An Independent Member of the BDO Seidman Alliance
Compliance and Other Matters
As part of obtaining reasonable assurance about whether Shippensburg Area School District's financial
statements are free from material misstatement, we performed tests of its compliance with certain
provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a
direct and material effect on the determination of financial statement amounts. However, providing an
opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do
not express such an opinion. The results of our tests disclosed no instances of noncompliance or other
matters that are required to be reported under Government Auditing Standards.
Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance
and the results of that testing, and not to provide an opinion on the effectiveness of the District's internal
control or on compliance. This report is an integral part of an audit performed in accordance with
Government Auditing Standards in considering the District's internal control and compliance.
Accordingly, this communication is not suitable for any other purpose.
Chambersburg, Pennsylvania
November 18, 2013
59
_B 9 RB0yer&RitterLLC
Certified Public Accountants and Consultants
INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE FOR EACH
MAJOR FEDERAL PROGRAM AND REPORT ON INTERNAL CONTROL OVER
COMPLIANCE AS REQUIRED BY OMB CIRCULAR A -133
Board of School Directors
Shippensburg Area School District
Shippensburg, Pennsylvania
Report on Compliance for Each Major Federal Program
We have audited Shippensburg Area School District's compliance with the types of compliance
requirements described in the OMB Circular A -133 Compliance Supplement that could have a direct
and material effect on each of the District's major Federal programs for the year ended June 30, 2013.
Shippensburg Area School District's major Federal programs are identified in the Summary of Auditor's
Results section of the accompanying Schedule of Findings and Questioned Costs.
Management's Responsibility
Management is responsible for compliance with the requirements of laws, regulations, contracts and
grants applicable to its Federal programs.
Auditor's Responsibility
Our responsibility is to express an opinion on compliance for each of Shippensburg Area School
District's major Federal programs based on our audit of the types of compliance requirements referred to
above. We conducted our audit of compliance in accordance with auditing standards generally accepted
in the United States of America; the standards applicable to financial audits contained in Government
Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A -133,
Audits of States, Local Governments, and Non - Profit Organizations. Those standards and OMB
Circular A -133 require that we plan and perform the audit to obtain reasonable assurance about whether
noncompliance with the types of compliance requirements referred to above that could have a direct and
material effect on a major Federal program occurred. An audit includes examining, on a test basis,
evidence about the District's compliance with those requirements and performing such other procedures
as we considered necessary in the circumstances.
We believe that our audit provides a reasonable basis for our opinion on compliance for each major
Federal program. However, our audit does not provide a legal determination of Shippensburg Area
School District's compliance.
Camp Hill, PA • Carlisle, PA • Chambersburg, PA a State College, PA
An Independent Mernber of the BDO Seidman, Alliance
Opinion on Each Major Federal Program
In our opinion, Shippensburg Area School District complied, in all material respects, with the types of
compliance requirements referred to above that could have a direct and material effect on each of its
major Federal programs for the year ended June 30, 2013.
Report on Internal Control Over Compliance
Management of Shippensburg Area School District is responsible for establishing and maintaining
effective internal control over compliance with the types of compliance requirements referred to above.
In planning and performing our audit of compliance, we considered the District's internal control over
compliance with types of requirements that could have a direct and material effect on each major
Federal program to determine the auditing procedures that are appropriate in the circumstances for the
purpose of expressing an opinion on compliance for each major Federal program and to test and report
on internal control over compliance in accordance with OMB Circular A -133, but not for the purpose of
expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not
express an opinion on the effectiveness of the District's internal control over compliance.
A deficiency in internal control over compliance exists when the design or operation of a control over
compliance does not allow management or employees, in the normal course of performing their
assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance
requirement of a Federal program on a timely basis. A material weakness in internal control over
compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such
that there is a reasonable possibility that material noncompliance with a type of compliance requirement
of a Federal program will not be prevented, or detected and corrected, on a timely basis. A significant
deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in
internal control over compliance with a type of compliance requirement of a Federal program that is less
severe than a material weakness in internal control over compliance, yet important enough to merit
attention by those charged with governance.
Our consideration of internal control over compliance was for the limited purpose described in the first
paragraph of this section and was not designed to identify all deficiencies in internal control over
compliance that might be material weaknesses or significant deficiencies. We did not identify any
deficiencies in internal control over compliance that we consider to be material weaknesses. However,
material weaknesses may exist that have not been identified.
The purpose of this report on internal control over compliance is solely to describe the scope of our
testing of internal control over compliance and the results of that testing based on the requirements of
OMB Circular A -133. Accordingly, this report is not suitable for any other purpose.
Chambersburg, Pennsylvania
November 18, 2013
61
i
SHIPPENSBURG AREA SCHOOL DISTRICT
Schedule of Findings and Questioned Costs
Year Ended June 30, 2013
Section I -- Summary of Auditor's Results
Financial Statements
Type of auditor's report issued: Unmodified
Internal control over financial reporting:
• Material weaknesses identified? _ Yes X No
• Significant deficiencies identified? _ Yes X None Reported
Noncompliance material to financial statements
noted? _ Yes X No
Federal Awards
Internal control over major programs:
• Material weaknesses identified? _ Yes X No
• Significant deficiencies identified? — Yes X None Reported
Type of auditor's report issued on compliance for major programs: Unmodified
• Any audit findings disclosed that are
required to be reported in accordance
with Section 510(a) of OMB Circular A -133? _ Yes X No
Identification of major program:
CFDA Numbers Name of Federal Program or Cluster
84.010 Title I – Improving Basic Programs
Dollar threshold used to distinguish between
type A and type B programs $300,000
Auditee qualified as low -risk auditee? X Yes _ No
62
•
SHIPPENSBURG AREA SCHOOL DISTRICT
Schedule of Findings and Questioned Costs
Year Ended June 30, 2013
Section H — Financial- Statement Findings
A. Significant Deficiencies in Internal Control
There were no findings relating to the financial- statement audit required to be reported.
B. Compliance Findings
There were no findings relating to the financial- statement audit required to be reported.
Section HI -- Findings and Questioned Costs for Federal Awards
A. Significant Deficiencies in Internal Control
There were no findings relating to the Federal awards required to be reported in accordance with
Section 510(a) of OMB Circular A -133.
B. Compliance Findings
There were no findings relating to the Federal awards required to be reported in accordance with Section
510(a) of OMB Circular A -133.
63
i
SHIPPENSBURG AREA SCHOOL DISTRICT
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
Year Ended June 30, 2013
Pass -
Federal Through
Source C.F.D.A. Grantor's Grant
Code Number Number Period
U. S. Department of Health and Human Services
Passed through the Pennsylvania
Department of Public Welfare
Title XIX - Medical Assistance Program I 93.778 N/A 12 -13
U. S. Department of Education
Passed through the Pennsylvania
Department of Education
Title I - Improving Basic Programs 1 84.010 013 - 120387 11 -12
Title I - Improving Basic Programs I 84.010 013- 130387 12 -13
Title I Program Improvement - Set Aside 1 84.010 042 - 110387 11 -12
Title I Program Improvement - Set Aside 1 84.010 042 - 120387 12 -13
Title I1 - Improving Teacher Quality I 84.367 020 - 120387 11 -12
Title II - Improving Teacher Quality 1 84.367 020 - 130387 12 -13
ARRA - Education Jobs Fund 1 84.410 140 - 139242 11 -12
Passed through the Capital Area
Intermediate Unit Consortium
Special Education - Grants to States 1 84.027 N/A 11 -12
Special Education - Grants to States I 84.027 N/A 12 -13
Special Education - Preschool Grants 1 84.173 N/A 12 -13
Special Education - Preschool Grants I 84.173 N/A 11 -12
Special Education - Preschool Grants I 84.173 N/A 12 -13
Total U. S. Department of Education
(Continued)
64
Total Accrued Accrued
Program Received (Deferred) (Deferred)
or Annual (Refunded) in Revenue at Revenue Revenue at
Award Fiscal Year 7/1/2012 Recognized Exp enditures 6/30/2013
$ 1,884 $ 1,884 $ - $ 1,884 $ 1,884 $ -
$ 555,116 107,369 99,933 7,436 7,436 -
$ 532,645 423,878 - 522,036 522,036 98,158
$ 66,180 22,060 22,060 - - -
$ 58,436 51,943 - 57,792 57,792 5,849
$ 134,520 44,488 25,817 18,671 18,671 -
$ 133,332 104,973 - 131,829 131,829 26,856
$ 9,810 9,810 9,810 - - -
$ 610,119 610,119 610,119 - - -
$ 639,128 - - 639,128 639,128 639,128
$ 2,635 2,635 - 2,635 2,635 -
$ 3,695 3,695 3,695 - - -
$ 4,888 4,888 - 4,888 4,888 -
1,385,858 771,434 1,384,415 1,384,415 769,991
65
J
SHIPPENSBURG AREA SCHOOL DISTRICT
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS (Continued)
Year Ended June 30, 2013
Pass -
Federal Through
Source C.F.D.A. Grantor's Grant
Code Number Number Period
U. S. Department of Agriculture
Passed through the Pennsylvania
Department of Education:
National School Lunch Program I 10.555 N/A 11 -12
National School Lunch Program I 10.555 N/A 12 -13
Passed through the Pennsylvania
Department of Agriculture:
Food Donation (a) 1 10.555 N/A 12 -13
Total U. S. Department of Agriculture
Total Expenditures of Federal Awards
Source Codes: Legends:
D -Direct Funding (a) Donated commodities valued at local market values
I - Indirect Funding (b) Total amount of commodities received from
Department of Agriculture
(c) Inventories at July 1, 2012
(d) Total amount of commodities used
(e) Inventories at June 30, 2013
See Notes to Schedule of Expenditures of Federal Awards.
66
ccrued Accrued
eferred) (Deferred)
venue at Revenue Revenue at
1/2012 Recognized Expenditures 6/30/2013
7,996 - -
- 514 514,726 75
(3,642) 73,626 (d) 73,626 (e) (4,610)
4,354 588,352 588,352 70,601
775,788 $ 1,974 $ 1 $ 840,592
$ 587,264 / $ 1,974 -- 29.74%
SHIPPENSBURG AREA SCHOOL DISTRICT
NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
Note 1. Basis of Presentation
The accompanying Schedule of Expenditures of Federal Awards (Schedule) includes the Federal -grant
activity of Shippensburg Area School District under programs of the Federal government for the year
ended June 30, 2013. The information in this Schedule is presented in accordance with the requirements
of OMB Circular A -133, Audits of States, Local Governments, and Non - Profit Organizations. Therefore,
some amounts presented in this Schedule may differ from amounts presented in, or used in the
preparation of the financial statements.
Note 2. Significant Accounting Policies
Expenditures reported in the Schedule are reported on the accrual basis of accounting. Such expenditures
are recognized following the cost principles contained in OMB Circular A -87, Cost Principles for State,
Local, and Indian Tribal Governments, whereby certain types of expenditures are not allowable or are
limited as to reimbursement. Negative amounts shown on the Schedule represent adjustments or credits
made in the normal course of business to amounts reported as expenditures in prior years. Pass - through
entity identifying numbers are presented where available.
Note 3. Sub - recipients
With respect to the Federal expenditures presented in the Schedule, Shippensburg Area School District
did not provide any Federal awards to sub - recipients.
68
SHIPPENSBURG AREA SCHOOL DISTRICT
SUMMARY SCHEDULE OF PRIOR YEAR'S AUDIT FINDINGS
Year Ended June 30, 2013
There were no prior year's audit findings.
69