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HomeMy WebLinkAbout05-0646 ~ olJ~~4t i!uxL II . II v ~(J. (jrcClftlwtllt ~ eOIHptlf/!I, p. e. t~d,y:"d ,'?Ii,,;!," .r;:1;"Nm/Un& 05'- (, </ C:, Civ./ lev",- EAST PENNSBORO AREA SCHOOL DISTRICT FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2004 TABLE OF CONTENTS INDEPENDENT AUDITORS' REPORT MANAGEMENT'S DISCUSSION AND ANALYSIS BASIC FINANCIAL STATEMENTS Government-wide financial statements Statement of net assets Statement of activities Fund financial statements Balance sheet - governmental funds Reconciliation of the governmental funds balance sheet to the statement of net assets Statement of revenues, expenditures, and changes in fund balances - governmental funds Reconciliation of the governmental funds statement of revenues, expenditures, and changes in fund balance to the statement of activities Statement of net assets - proprietary funds Statement of revenues, expenses, and changes in net assets - proprietary funds Statement of cash flows - proprietary funds Statement of net assets - fiduciary funds NOTES TO FINANCIAL STATEMENTS BUDGETARY COMPARtSON INFORMATION - GENERAL FUND Page Number IAR - 1 to IAR - 2 MDA - 1 to MDA - 8 FS-1 FS - 2 FS - 3 FS -4 FS - 5 FS - 6 FS -7 FS - 8 FS - 9 FS -10 FS - 11 to FS - 28 BCI-1 GREENAWALT & COMPANY, P.e. CERTIFIED PUBLIC ACCOUNTANTS 400 WEST MAIN STREET MECHANICSBURG, PENNSYLVANIA 17055 (717)766-4763 FAX (717)766.2731 62 WEST POMFRET STREET CARLlSLE, P A 17013 (717)24:1-4822 FAX (7171 25H.9-'72 JAlvlES E. LYONS HOWARD R GREENAWALT CREEDON R. HOFFMA:'-J lOI-IN H. KLINGLER DEBORAH J. KELLY R. A. GREE~AWALT{l~56-198J) A. A. REIDINGER (RETIRED) C. EDWARD ROGERS, JR INDEPENDENT AUDITORS' REPORT Board of School Directors East Pennsboro Area School District Enola, Pennsylvania We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund Information of East Pennsboro Area School District as of and for the year ended June 30, 2004, which collectively comprise the District's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the District's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the accompanying financial statements present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of East Pennsboro Area School District, as of June 30, 2004, and the respective changes in financial position and cash flows, where applicable, thereof and for the year then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued our report dated November 8, 2004, on our consideration of the East Pennsboro Area School District's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. IAR-1 MEMBERS - AMERICAN INSTITUTE OF CER TlFIED PUBLIC ACCOUNT ANTS -- PENNSYL V A!\:IA INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS Board of Directors East Pennsboro Area School District Management's discussion and analysis on pages MDA - 1 through MDA - 8 and budgetary comparison information on page BCI - 1 are not a required part of the basic financial statements but are supplementary information required by the accounting principles generally accepted in the United States of America We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it. ~-HI/'~. fie. GREENAVVAL't' & COMP~N,jPC September 23, 2004, except for paragraph 5 as to which the date is November 8, 2004. Mechanicsburg, Pennsylvania IAR-2 EAST PENNSBORO AREA SCHOOL DISTRICT ENOLA, PENNSYLVANIA MANAGEMENT'S DISCUSSION AND ANALYSIS Our discussion and analysis provides an overview of the financial performance for the District for the fiscal year ended June 30, 2004, compared with fiscal year 2003. This is the second year we have reported District activities in accordance with new governmental reporting requirements, and the first year in which we have provided year-to-year comparisons. Please read our discussion and analysis in conjunction with the District's financial statements, which begin on page FS-1. FINANCIAL HIGHLIGHTS . From fiscal year 2003 to 2004, real estate taxes were increased by 0.5 mills, resulting in increased revenue. . 2004 was the first year that we realized the full impact from the replacement in 2003 of the 0.88% Occupational Tax, a $5.00 Resident tax, and a $5.00 per Capita tax with a 0.60% increase to the Earned Income Tax. . We completed a fixed asset inventory and analysis project. This will enable us to better track our furnishings, equipment and library books. Based on an independent appraisal, we have recorded an overall increase to our net assets of $305,326. . The budget for 2005 provides for revenues of $28, 11 0,500 against expenditures of $28,341 ,469. . During the year, we issued $10.0 million in new General Obligation Bonds, referred to as Series of 2004, and used the proceeds to payoff most of our higher cost Series of 2000 General Obligation Bonds. USING THESE FINANCIAL STATEMENTS This report consists of a series of financial statements. The Statement of Net Assets and the Statement of Activities (on pages FS-1 and FS-2) were introduced last year to comply with new governmental reporting requirements. They are referred to as government-wide financial statements, and provide information about the activities of the District as a whole, presenting a longer-term view of the District's finances than Fund statements. Fund financial statements appear on pages FS-3, FS-5 and FS-7 through FS-10. For governmental activities, these statements tell how District services have been financed in the short run, as well as show the amounts remaining for future spending. Proprietary fund statements provide information about non-governmental operations, in this case food services. Fiduciary funds statements report funds held in trust by the District for programs operated and sponsored by various clubs and organizations within the schools The Reconciliation of the Governmental Funds Balance Sheet on page FS-4 connects the governmental fund balance to the total net assets balance from the Statement of Net Assets. The reconciliation on page FS-6 does the same for the components of the changes in fund balances. Reporting the District as a Whole The government-wide statements present financial activities and the results of those activities in two categories, Governmental and Business-type. Capital assets (land, buildings, improvements, furniture and equipment) are presented with all other assets. Long-term debt is presented with all other liabilities. This is distinctly different from the Fund statements in which assets and liabilities are separated into various funds such as General and Capital Projects. The approach to measurement of revenue and expense in the government-wide statements is similar to that used in the private sector and is referred to as following the accrual basis of accounting. This is discussed further in the notes to the financial statements. MDA-1 EAST PENNSBORO AREA SCHOOL DISTRICT ENOLA, PENNSYLVANIA Reporting the District's Most Significant Funds The funds statements provide financial information about the District's significant funds rather than the District as a whole. There are three fund types, Governmental, Proprietary and Fiduciary. The use of each type of fund is described in the notes to the financial statements. Unlike the financial statements that measure revenues on the accrual basis, the funds statements report revenues only to the extent cash has been received, or is expected to be received in the near future. The District as Trustee The District acts as fiduciary for a Students Activities fund. In comparison to the Governmental Funds, the amounts held in the fiduciary funds are small. Fund assets and liabilities at the end of 2004 are presented on page FS-10. THE DISTRICT AS A WHOLE The District's total net assets were $3,945,915 at June 30, 2004 compared with the previous year balance of $3,201,667. Table A-1 summarizes the Statement of Net Assets from page FS-1 of the financial statements, and Tables A-2 and A-3 present the revenue and expense activities that caused the increase in the balance. To simplify the analysis, in the tables we present dollar figures in thousands. This has resulted in rounding differences, and some columns may not add within a schedule. Table A-1 Net Assets June 30, 2004 (Dollars in thousands) Governmental Business-type Total Primary Activities Activities Government 2004 2003 2004 2003 2004 2003 Current and other assets $ 6,603.0 $ 6,339.1 $ (49.5) $ 62.1 $ 6,553.5 $ 6,401.2 Capital assets 41,053.6 40,691.9 183.5 387.9 41,237.0 41,079.7 Total assets $ 47,656.5 $ 47,031.0 $ 134.0 $ 449.9 $ 47,790.5 $ 47,480.9 Current and other liabilities $ 3,301.9 $ 2,386.0 $ 41.0 $ 140.1 $ 3,342.9 $ 2,526.1 Long-term liabilities 40,501.7 41,753.2 40,501.7 41,753.2 Total liabilities 43,803.6 44,139.1 41.0 140.1 43,844.6 44,279.2 Invested in capital assets (net of (34.5) (1,163.1) 183.5 387.9 149.0 (775.3) related debt) Restricted for capital projects 1,372.5 2,563.7 1,372.5 2,563.7 Unrestricted 2,514.8 1,491.3 (90.5) (78.0) 2,424.4 1,413.2 Total Net Assets 3,852.9 2,891.8 93.0 309.8 3,945.9 3,201.7 Total liabilities and net assets $ 47,656.5 $ 47,031.0 $ 134.0 $ 449.9 $ 47,790.5 $ 47,480.9 Net assets are the difference between total assets and total liabilities, and represent resources that can be used to pay for future operations and capital improvements. The bulk of our assets are capital assets. These have been paid for using borrowed money and do not add significantly to our net asset value. The restricted portion of net assets represents cash and investments that can only be used for buildings and improvements. The remaining restricted fund balance will be used to fund future capital maintenance projects such as new roofing. MDA-2 EAST PENNSBORO AREA SCHOOL DISTRICT ENOLA, PENNSYLVANIA The cash balance as of June 30, 2004 within Business-type Activities is $146,738, but due to the elimination of internal balances, the "Current and other assets" group is showing a negative balance of $49,470. Table A-2 summarizes and compares activity presented in the Statement of Activities (page FS-2). It shows how total net assets increased by $744,248 during the year. Revenues Program Revenues Charges for services Oper. grants and contributions Capital grants and contributions General Revenues Taxes State general subsidies Other Total Revenues Direct Expenses Excess (Deficiency) before Transfers Transfers Special item-change in accounting Change in Net Assets Table A-2 Changes in Net Assets Year ended June 30, 2004 (Dollars in thousands) Governmental Activities 2004 $ 374.9 $ 2,722.0 490.5 2003 338.8 2,318.0 580.5 17,265.1 3,745.5 209.4 24,457.4 24,364.3 93.1 (390.5) (297.4) Business-type Activities 2004 $ 653.2 $ 262.0 2003 587.9 241.2 1.0 830.1 902.4 (72.3) 390.5 318.2 Total Primary Government 2004 $ 1,028.1 $ 2,9839 490.5 18,591.5 3,861.8 271.0 27,2268 26,787.8 438.9 $ 305.3 744.2 $ 2003 926.7 2,559.2 580.5 17,265.1 3,7455 210.4 25,2875 25,2667 20.8 20.8 Revenues during the year increased more than expenses, resulting in an excess of $438,922. In addition to this, we recorded a $305,326 increase in net assets as a special accounting adjustment, related to our fixed asset inventory project 18,591.5 3,861.8 270.0 26,310.7 25,824.6 486.0 $ (3.5) 478.6 961.1 $ 1.0 916.2 963.2 (47.0) 3.5 (173.3) $ (216.8) $ During the year, we completed a fixed asset inventory and analysis project In addition to improving our ability to track and monitor our fixed assets, the results had a favorable impact on reported asset values. Prior to 2003, many of our equipment and library items were not reported in our financial statements. We hired an independent appraiser to determine the estimated historic cost of these items. Incorporating the revised amounts into our financial statements increased our net asset balance by $305,326. This is reported in the Statement of Activities (FS-2), and in Table A-2 above, with the caption "special item-change in accounting". MDA-3 EAST PENNSBORO AREA SCHOOL DISTRICT ENOLA, PENNSYLVANIA Governmental Activities Table A-3, shown on the next page, presents expense information from the Statement of Activities for governmental activities. The total cost of services represents the actual cost of providing the services while the net cost represents the amount of cost that is not recovered through program revenues, meaning user charges, grants and contributions. The total net cost of services of $22,237,265 must be recovered through general revenue, primarily taxes and state subsidies. Amounts not recovered will reduce funds available for future years. Table A-3 Governmental Activities Year ended June 30, 2004 (Dollars in thousands) Total Cost Less: Program Net Cost of Services Revenues of Services 2004 2003 2004 2003 2004 2003 Classroom instruction $ 15,369.7 $ 14,989.2 $ 2,441.7 $ 2,071.5 $ 12,927.9 $ 12,917.7 Instructional student support (Note 1) 2,626.8 1,777.8 137.8 117.9 2,489.0 1,660.0 Administrative and financial support 2,565.6 2,143.5 67.4 51.1 2,498.2 2,092.4 Operation and maintenance of buildi. 2,377 .4 2,210.7 60.6 38.6 2,316.8 2,1721 Student transportation 792.7 717.1 330.5 327.4 462.2 389.7 Extra-curricular student activities 551.2 521.2 58.7 65.8 492.5 455.3 Community services 31.4 14.4 31.4 14.4 Interest on long-term debt 1,509.8 1,974.6 490.5 565.0 1,019.3 1,409.6 Unallocated depreciation expense 15.7 15.7 Total governmental activities $ 25,824.6 $ 24,364.3 $ 3,587.3 $ 3,237.4 22,237.3 21,126.9 Less state general subsidies 3,861.8 3,7455 Total needs from taxes and other local sources $ 18,375.5 $ 17,381.4 Note 1: This item represents such things as the library, school psychologist, etc. Business-Type Activities Table A-4 is similar to the previous table, except it presents business-type service costs. Note that almost all of the cost of food services is paid by program revenues. MDA-4 EAST PENNSBORO AREA SCHOOL DISTRICT ENOLA, PENNSYLVANIA Table A-4 Business-Type Activities Fiscal Vear ended June 30, 2004 (Dollars in thousands) Food services Less: Investment earnings Total Cost Less: Program Net Cost of Services Revenues of Services 2004 2003 2004 2003 2004 2003 $ 963.2 $ 902,4 $ 915.2 $ 829.1 $ 48.0 $ 73.3 1.0 1.0 $ 47.0 $ 72.3 Total business Type activities DISTRICT'S FUNDS The information in Table A-5 summarizes the Governmental Funds' Balance Sheet for June 30, 2003 and 2004. It compares fund balances for the current year to the prior year for the same grouping that is used in the Statement of Net Assets. Table A-5 Comparative Fund Balances (Dollars in thousands) June 30 2004 2003 Change % Change General Fund Restricted $ $ $ Unrestricted 1,211,4 768.1 443.3 57.7% Total General Fund 1,211,4 768.1 443.3 57.7% Capital Projects Fund Restricted 1,003.6 2,379.3 (1,375.7) -57.8% Unrestricted Total Capital Projects Fund 1,003.6 2,379.3 (1,375.7) -57.8% Special Revenue Fund Restricted Unrestricted 10.2 34.7 (24,4) -70.5% Total Special Revenue Fund 10.2 34.7 (24,4) -70.5% All Governmental Funds Restricted 1,003.6 2,379.3 (1,375.7) -57.8% Unrestricted 1,221.6 802.7 418.9 52.2% Total All Governmental Funds $ 2,225.2 $ 3,182.0 $ (956.8) -30.1% MDA-5 EAST PENNSBORO AREA SCHOOL DISTRICT ENOLA, PENNSYLVANIA As previously mentioned, the basis of measurement for fund assets and liabilities is different than that used in the Statement of Net Assets. The differences between the total governmental fund balance of $2,225,236 and the total net assets of $3,852,916 are itemized in the reconciliation presented within the financial statements on page FS-4. The items that caused the change in fund balance during the year are presented in the Statement of Revenues, Expenditures and Changes in Fund Balances within the financial statements on page FS-5. The fund balance decreased by $956,802 because the total fund expenditures were greater than the total fund revenues. Within the General Fund balance of $1,211,375 for 2004 is $310,000 that we have designated as an amount to be reserved for future capital equipment needs. General Fund Budgetary Highlights Table A-6 has been summarized from the comparative budget information presented on page BCI-1 of the required supplemental information. The total variance shows that actual results were close to the planned results. A budgetary reserve of $510,000 was not used. T otai revenues Table A-6 Comparison of Budget to Actual For the Year Ended June 30, 2005 and 2004 (Dollars in thousands) Budget Actual 2004 2003 2004 2003 $ 25,992.6 $ 24,597.0 $ 25,772.5 $ 24,148.3 25,714.0 24,945.2 25,415.9 24,385.8 278.5 (348.2) 356.6 (2375) (553.5) (334.4) 86.7 (123.4) $ (275.0) $ (682.6) $ 443.3 $ (380.9) Variance 2004 2003 $ (220.1) $ (448.6) 298.2 559.3 78.1 110.7 640.2 211.1 $ 718.3 $ 321.8 T etal expenditures Revenues over (under) expenditures Other financing sources (uses) Net change in fund balances CAPITAL ASSETS Table A-7 summarizes the Changes in Capital Assets note to the financial statements on pages FS-20. The original cost of the capital assets on the books at June 30, 2004 was $58,149,334. Each year, for capital assets other than land and construction in progress, this amount is depreciated (reduced in value) to reflect usage. The net balance of $41,053,565 is the amount remaining after this reduction As construction projects are completed, related construction in progress balances are moved into the buildings and improvements cate90ry, and depreciated over the estimated useful life of the improvement. MDA-6 EAST PENNSBORO AREA SCHOOL DISTRICT ENOLA, PENNSYLVANIA Table A-7 Governmental Activities Capital Assets Comparison (net of accumulated depreciation) (Dollars in thousands) June 30 Land Site improvements Buildings and improvements Furniture, fixtures, equipment and library books Total Capital Assets, net of accumulated depreciation 2004 $ 325.8 668.3 37,169.5 2,890.0 $ 41,053.6 2003 $ 325.8 706.1 37,131.8 2,528.1 $ 40,691.9 DEBT ADMINISTRATION Table A-8, shown on the next page, summarizes the Long-Term Liabilities note to the financial statements on pages FS-22 to FS-25. Most of the debt relates to general obligation bonds issued by the District to pay for capital improvements. Our ability to raise future funds through the issuance of debt depends on how well our existing bonds are rated by the investment community. Currently, the District is rated by Standard and Poor's as AAA. Table A-8 Governmental Activities Long-Term Liability Comparison (Dollars in thousands) June 30 General obligation debt $ Capital leases Compensated absences Unamortized bond premiums, discounts and refunding Total Governmental long-term liabilities $ 2004 2003 40,985.0 $ 41,855.0 103.0 214.7 204.3 (801.1 ) (306.2) 40,501.7 $ 41,753.2 Each year, the District pays interest to bond holders and pays down a portion of the outstanding debt, referred to as redemption. During 2004, in addition to the scheduied redemptions, we repiaced $9,355,000 of bonds referred to as Series of 2000 with $10,000,000 of bonds referred to as Series of 2004. This action resulted in an economic gain of $750,000 that will be realized during the years ending June 30, 2005 through June 30, 2013. This is discussed on page FS-23 of the footnotes to the financial statements. ECONOMIC FACTORS AND NEXT YEAR'S BUDGETS AND RATES Taxes Our largest source of revenue comes from taxes. As the result of a referendum in November 2001, beginning in fiscal year 2003, we replaced three taxes, a 0.88% Occupational Tax, a $5.00 Resident tax, and a $5.00 per Capita tax with a 0.60% increase to the Earned Income Tax. Our previous share of the Earned Income Tax of 0.50% increased to 1.10%. Fiscal year 2004 was the first year that we realized the full impact of this new tax structure. Total tax collections should not be affected by this change. MDA-7 EAST PENNSBORO AREA SCHOOL DISTRICT ENOLA, PENNSYLVANIA The Occupational Tax was assessed and paid on a current basis. The Earned Income Tax is based on calendar year earnings, and a portion of the tax will not be collected in the current period. In the fund statements, this deferred portion is not counted as revenue. In the Statement of Net Assets, the amount due is shown as Taxes Receivable, and counted as revenue in the Statement of Activities. For fiscal years 2003 to 2004, real estate tax rates were raised to from 11.58 mills to 12.08 mills. The 2005 budget refiects an approved rate of 12.82 mills. Budget Table A-9 compares the revised budget for 2004 to the 2005 budget that was approved on June 10, 2004. Total revenues Total expenditures Table A-9 Comparison of Budgets For the Years Ended June 30th, 2005 and 2004 (Dollars in thousands) 2005 2004 $ 28,110.5 $ 25,992.6 Revenues over (under) expenditurE (231.0) Other financing sources (uses) (560.0) Net change in fund balances $ (791.0) $ 278.5 (553.5) (275.0) Change $ 2,117.9 2,627.4 (509.5) (6.5) $ (516.0) 28,341.5 25,714.0 Included in the "Other financing sources (uses)" amount of $560,000 is $310,000 that is earmarked for long-range capital expenditures related to the replacement of major equipment items. MDA-8 l- t.) 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'" <1l <1l ~ '" c rt:? $ '" <1l '& ~ o \- <1l ~ c OJ "'i\i .0 -0 co ~ -0 C '" <1l '" g .~ % \- <J> ~ c ro "'i\i .0 -0 C ~ S o \- '" (j) u- oj. co '" f. .s S <J> "'i\i '0 c ro ~ '" <J> '" -S '0 -t:: ro 0. "'i\i ~ "" .s .S c OJ '" Iii <J> .s o co "" .s '" co OJ ~ C C L , EAST PENNSBORO AREA SCHOOL DISTRICT RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS JUNE 30, 2004 Total fund balances - Governmental funds Amounts reported for governmental activities in the statement of net assets are different because: Capital assets are not financial resources and therefore are not reported as assets in the governmental funds. At year end, the cost of capital assets is $ 58,149,334, and the accumulated depreciation is $ 17,095,769. Taxes receivable will be collected, but are not available soon enough to pay for the current year's expenditures, and therefore are deferred in the governmental funds. At year end, these taxes receivable consist of: Real estate taxes Personal taxes Earned income taxes Certain liabilities are not due and payable in the current year, and therefore are not reported as liabilities in the governmental funds. At the year end, these liabilities consist of: Bonds payable Capital lease obligations Compensated absences Long-term liabilities Accrued interest on bonds payable Costs related to the issuance of bonds are reported as expenditures in the governmental funds. At year end, the remaining unamortized bond related costs consist of: Bond issuance costs Bond discounts (premiums) Refunding costs Total net assets - Governmental activities The accompanying notes are an integral part of these financial statements. FS-4 $ 181,035 98,932 1,070,435 (40,985,000) (103,035) (214,704) (41,302,739) (447,035) 172,437 (21,722) 822,772 $ 2,225,236 41,053,565 1,350,402 (41,749,774) 973,487 $ 3,852,916 (f) I- 0 U Z ....O::l ... 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"-'" ro U U ~ _ 0 0- w~ c;: ID.o E .~ ~~ "-= <0 <0 <- N ID = .,; ID ~ :~ 13 '" '0 e ID E ID 1;; ;;; ~m .S ~ C~ ID- > '" ID e ~ .~ I" aill " w " m .~ 0 c .S ID ~~ ro " "-e ID .- ~ " - ID e " ID t; ~ U ~ '" w ~ -g.E 2~ roD C ,!:Q ID- El1 Ef- ~ ..: o '" "'~ ID ID -5-E .!: C1 (/) .~ i" " "" ~a; a5 2 "-U x U ID '" we '" " " 0 ID E ~ '" "-ID ~-E ID >- ro~ U) ~ ID " :;; W ~ m '0 E Ul ,~ e <D ID W E :i3 >-,,- '" X "- ID 6' '" "' '" ~ .'" " w e ID "- X " ID = .,; .~ 'S: (ij 'ti Q) '" >- o~ e '" ID e Ee S!.a lli" w " ID W :5 m .!: ti .1: ill) > ID ID U ~ e o " III ro w" " ID ern .2 w ]j :i5 e "- ~ ~ e U :;; 0 >- g,~ ~:g c= - ID w~ i"f- .~ (ij " " e >- ID " ~-E ID '" ~ .!: " ~ ID" '" w o " "-<D ~ ~ ~o.. '" E w ID ID >- g.o ID" w ID .D e '" ro " ID ~E w " e 0 ID E "-ro E ID 8-5 - >- 0.0 J'l" e i" " " E w >-'" ro ID "- E a; '" o - " (; ai <- " '" e :g " o U U ro .1: ID '" e ro ~ U E c1! m u ID "- (/) N <- o <0 '" OF> CD (/) u.. W ID ~ :~ 13 ro m e ID E e :;; > o C) u; c " E " rn Vi m .0 c:: '" e '" " "' '" S - o t: '" "- m C;, '" .~ e ell '" ro "' " 15 e '" e .;;:' e '" "- E o " " '" " "" f- w a; w w ro 0; e .E ID '" e ro ~ U EAST PENNSBORO AREA SCHOOL DISTRICT STATEMENT OF NET ASSETS - PROPRIETARY FUNDS JUNE 30, 2004 Food Service 2004 2003 Assets Cash and cash equivalents $ 146,738 $ 245,747 Due from other governments 8,185 Inventories 13,792 18,156 Total current assets 160,530 272,088 Furniture and equipment (net of accumulated depreciation) 183,457 387,850 Total assets $ 343,987 $ 659,938 Liabilities Due to other funds $ 210,000 $ 210,000 Accounts payable 35,274 134,209 Deferred revenues 5,714 5,906 Total current liabilities 250,988 350,115 Net assets Invested in capital assets (net of related debt) 183,457 387,850 Unrestricted (90,458) (78,027) Total net assets 92,999 309,823 Total liabilities and net assets $ 343,987 $ 659,938 The accompanyin9 notes are an integral part of these financial statements. FS-7 EAST PENNSBORO AREA SCHOOL DISTRICT STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS - PROPRIETARY FUNDS FOR THE YEAR ENDED JUNE 30, 2004 Food Service 2004 2003 Operating revenues - Food service revenue $ 653,230 $ 587,933 Operating expenses Other purchased service 868,825 814,412 Food and milk 37,792 39,419 Other supplies 25,513 16,620 Depreciation 31,105 31,966 Total operating expenses 963,235 902,4 17 Operating income (loss) (310,005) (314,484) Nonoperating revenues Earnings on investments 1,002 1,022 State sources - commodities 37,792 39,419 State sources - meal subsidies 34,776 32,912 Federal sources - meal subsidies 189,404 168,847 Total nonoperating revenues 262,974 242,200 Income (loss) before transfers and special items (47,031) (72,284) Transfers from other funds 3,495 390,454 Special item - change in accounting (173,288) Change in net assets (216,824) 318,170 Net assets - beginning 309,823 (8,347) Net assets - ending $ 92,999 $ 309,823 The accompanying notes are an integral part of these financial statements. FS - 8 EAST PENNSBORO AREA SCHOOL DISTRICT STATEMENT OF CASH FLOWS - PROPRIETARY FUNDS FOR THE YEAR ENDED JUNE 30, 2004 Food Service 2004 2003 Operating activities Cash received from users $ 653,037 $ 588,911 Cash payments to suppliers for goods and services (967,759) (868,431 ) Cash payments for other operating expenses (21,148) (21,306) Net cash provided by (used for) operating activities (335,870) (300,826) Non-capital financing activities State sources 36,056 32,032 Federal sources 196,308 164,266 Notes and loans received (repaid) 200,000 General fund contributed services 3,495 3,352 Net cash provided by (used for) non-capital financing activities 235,859 399,650 Investing activities Earnings on investments 1,002 1,022 Net cash provided by (used for) investing activities 1,002 1,022 Net increase (decrease) in cash and cash equivalents (99,009) 99,846 Cash and cash equivalents - beginning 245,747 145,901 Cash and cash equivalents - ending $ 146,738 $ 245,747 Reconciliation of operating income (loss) to net cash used in operating activities Operating income (loss) Adjustments to reconcile operating income (loss) to net cash used in operating activities Depreciation Donated commodities Net change in other assets and other liabilities Inventories Accounts payable Deferred reven ue Total adjustments Net cash provided by (used for) operating activities The accompanying notes are an integral part of these financial statements. FS -9 $ (310,005) $ (314,484) 31,105 31,966 37,792 39,419 4,365 (4,686) (98,935) (54,019) (192) 978 (25,865) 13,658 $ (335,870) $ (300,826) EAST PENNSBORO AREA SCHOOL DISTRICT STATEMENT OF NET ASSETS - FIDUCIARY FUNDS JUNE 30, 2004 Student Activities Fund 2004 2003 Assets Cash and cash equivalents $ 89,663 $ 77,707 Total assets $ 89,663 $ 77 ,707 Liabilities Due to student groups $ 89,663 $ 77,707 T otalliabilities 89,663 77 ,707 Net assets Total liabilities and net assets $ 89,663 $ 77,707 The accompanying notes are an integral part of these financial statements. FS -10 EAST PENNSBORO AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2004 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES East Pennsboro Area School District is the level of government which has oversight responsibility and control over activities related to public school education. The report includes services provided by the District to residents within the boundaries of the Cumberland County Municipality of East Pennsboro Township. Services provided include a comprehensive curriculum for primary and secondary education as well as special education and vocational education programs. The District receives revenue from local, state and federal sources and must comply with the requirements of these funding sources. The financial statements of East Pennsboro Area School District have been prepared in accordance with generally accepted accounting principles as applied to governmental units. The Governmental Accounting Standards Board 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: Reporting entity Governmental Accounting Standards Board Statement No. 39 "Determining Whether Certain Organizations are Component Units" (an amendment of Statement No. 14), established the criteria for determining the activities, organizations and functions of government to be included in the financial statement of the reporting entity. In evaluating the District as a reporting entity, management has addressed all potential component units which may or may not fall within the school's financial accountability. The criteria used to evaluate component units for possible inclusion as part of the District's reporting entity are: . Economic resources received or held by the separate organization are entirely for the direct benefit of the District or its constituents. . The District is entitled to, or has the ability to access a majority of the economic resources received or held by the separate organization. . The economic resources received or held by an individual organization that the District is entitled to (or has the ability to) access is significant to the District. There are no component units that the District feels meet all the above criteria for inclusion in this reporting entity. Jointly-governed organizations The District is a participant in four jointly-governed organizations, each of which is a separate legal entity that offers educational services to the District and its residents. Each of these entities serves several school districts and/or municipalities and therefore are not included in this reporting entity. These entities do not have taxing power, but are required to adopt an annual budget, which is funded primarily by its member Districts or others that use its services. Complete financial statements for these entities can be obtained from the respective entity's administrative office. FS -11 EAST PENNSBORO AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS (Cont'd.) JUNE 30, 2004 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd.) Jointly-governed organizations (Cont'd.) West Shore Tax Bureau provides earned income tax collection services. Capital Area Intermediate Unit provides special education services and programs. Cumberland Perry Area Vocational Technical School provides vocational and technical education services and programs. Harrisburg Area Community College provides community college education services and programs. Fund accounting The accounts of the District are organized on the basis of funds, each of which is considered a separate accounting entity. The operations of each fund are accounted for by providing a separate set of self-balancing accounts which comprise its assets, liabilities, fund equity, revenues, and expenditures, or expenses, as appropriate. Resources are allocated to and accounted for in individuai funds based upon the purposes for which they are to be spent When both restricted and unrestricted resources are available for use, it is the District's general policy to use the restricted (primarily operating grants) resources first, then unrestricted resources as they are needed. The District has the following major types of funds: Governmental Funds - These funds account for the activities through which most of the District's operations are provided. Proprietary Funds - These funds account for the operations of the District that are financed and operated in a manner similar to private business enterprises. Fiduciary Funds - These funds account for the assets held by the District as a trustee or agent for individuals, private organizations and/or governmental units and are therefore not available to support the District's own programs. Basis of presentation Government-wide financial statements (i.e., the statement of net assets and the statement of activities) report information on all of the nonfiduciary activities of the District As a general rule the effect of interfund activity has been eliminated from these statements. Governmental activities, which normally are supported by taxes and intergovernmentai revenues, are reported separately from bus.lness-type activaies which rely, to a significant extent, on fees and charges for support. FS -12 EAST PENNSBORO AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS (Cont'd.) JUNE 30, 2004 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd.) Basis of presentation (Cont'd.) The statement of activities demonstrates the degree to which the direct expenses of given functions or programs are offset by program revenues. Direct expenses are those that are clearly identifiable within a specific function or program. Program revenues include charges to customers who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or program. In addition, program revenues include grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or program. Taxes and other items not properly included among program revenues are reported as general revenues. Fund financial statements are also provided for all governmental funds, proprietary funds, and fiduciary funds of the District. Major individual governmental funds and major individual proprietary funds are reported as separate columns in the fund financial statements. Nonmajor funds, if any, are aggregated and presented in a single column. Fiduciary funds are reported by fund. Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with the fund's principal ongoing operations. Operating expenses for the District's proprietary fund include food production costs, supplies, administrative costs, and depreciation on capital assets. All revenues or expenses not meeting this definition are reported as nonoperating revenues and expenses. The District reports the following major governmental funds: The General Fund is the primary operating fund. It accounts for all financial resources except those required to be accounted for in another fund. The Capital Project Fund accounts for bonds proceeds and the expenditure of those funds. The Athletic Fund accounts for the proceeds of specific revenue sources that are restricted to expenditures for specified purposes, primarily athletics. The District reports the following Proprietary Fund: The Food Service Fund accounts for the operations of the cafeteria. The District reports the following fiduciary fund: The Student Activities Fund accounts for programs operated and sponsored by various clubs and organizations within the schools. FS -13 EAST PENNSBORO AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS (Cont'd.) JUNE 30, 2004 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd.) Measurement focus and basis of accounting The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting as are the proprietary fund and the fiduciary fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Real estate and personal taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. Net assets (total assets less total liabilities) are used as a practical measure of economic resources and the operating statement includes all transactions and events that increased or decreased net assets. Depreciation and amortization are charged as an expense against current operations. Accumulated depreciation and unamortized costs are reported in the statement of net assets. The 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 generally considers tax revenue to be available if collected within 60 days of the end of the fiscal period, except for earned income taxes which the government considers to be available if collected within 90 days of the end of the fiscal period. Revenue from federal, state and other grants designated for payment of specific expenditures is recognized when the related expenditures are incurred; accordingly, when such funds are received, they are 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. Budgets and budgetary accounting An operating budget is adopted prior to the beginning of each year for the General Fund on a modified accrual basis of accounting. The General Fund is the only fund for which a budget is legally required. The Pennsylvania School Code dictates specific procedures relative to 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 This process includes the publishing of notices by advertisement that the proposed budget has been prepared and is available for public inspection at the administrative office of the District, and that public hearings are held on the proposed operating budget which are required to be scheduled at least ten days prior to when final action on adoption is taken by the Board. FS -14 EAST PENNSBORO AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS (Cont'd.) JUNE 30, 2004 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd.) Budgets and budgetary accounting (Cont'd.) Legal budgetary control is maintained at the sub-function/major object level. The Board may approve transfers of funds appropriated to any particular item of expenditure in accordance with the Pennsylvania School Code. It is the District's policy that all budget transfers are presented to and approved by the Board. In order to preserve a portion of an appropriation for which an expenditure has been committed by a purchase order, contract or other form of commitment, an encumbrance is recorded. Unused encumbrances expire at the end of each year. Included in the General Fund budget are program budgets as prescribed by the federal and state agencies funding the program. These budgets are approved on a program by program basis by the federal and state funding agencies. Taxes and taxes receivable Real estate taxes are levied as of July 1 with a legal, enforceable claim against the property and/or taxpayer. Amounts not collected within six months (December 31) are considered delinquent and submitted to outside agencies/entities for collection actions. Receivables and payables between funds Activity between funds that represent lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as "due to/from other funds". Any residual balances outstanding between the governmental activities and business-type activities are reported in the government-wide financial statements as "internal balances". Balances between funds are considered to be short-term items pending periodic repayments. Inventories Inventories are presented at the lower of cost or market on a first-in, first-out basis, and are expended when used. Donated commodities are recognized as revenue and are inventoried at an estimated cost value. FS -15 EAST PENNSBORO AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS (Conl'd.) JUNE 30, 2004 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cant'd.) Capital assets Capital assets, which include property, plant, equipment, and infrastructure assets: e.g., roads, sidewalks, and similar items), are reported in the applicable governmental or business-type activities columns in the government- wide financial statements. Capital assets are defined by the District as assets with an initial, individual cost of more than $ 1,000 and an estimated useful life in excess of one year. Management has elected to include certain homogeneous groups with individual costs of less than $ 1,000 as capital assets for financial reporting purposes. In addition, capital assets purchased with long-term debt may be capitalized regardless of the thresholds established. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Major outlays for capital assets and improvements are capitalized as projects are constructed. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend asset lives are not capitalized. All reported capital assets are depreciated using the straight-line method over the following estimated useful lives: Assets Years Buildings Building improvements Site improvements Furniture, fixtures and equipment Library books 40 15 to 40 20 5 to 15 7 Proprietary fund equipment purchases are capitalized at cost and depreciated on a straight-line basis over useful lives of 5 to 12 years. Long-term liabilities In the government-wide financial statement, and in the proprietary fund types in the fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities or proprietary fund statement of net assets. Refunding costs and bond discounts are amortized over the life of the bonds using the effective interest method. Bond issuance costs are reported as deferred charges and amortized over the term of the related debt. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance and refunding costs, as current period expenditures. The face amount of debt issued is reported as other financing sources while discounts and refunding costs on debt issuances are reported as debt service. Issuance costs, whether or not withheld from the actual debt proceeds reCeived, are reported as support service expenditures. FS -16 EAST PENNSBORO AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS (Cont'd.) JUNE 30, 2004 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd.) Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Comparative data Comparative totals for the prior year are presented in order to provide an understanding of changes in the District's financial position and operations. Certain amounts presented in the prior year have been reclassified to be consistent with the current year's presentation. However, presentation of prior year totals by fund and activity type have not been presented in each of the statements since their inclusion would cause the statements to be unduly complex and difficult to read. Financial accounting standards for proprietary funds Standards for accounting and financial reporting for private business enterprises generally are followed for proprietary fund financial statements to the extent that those standards do not conflict with or contradict guidance of the Governmental Accounting Standards Board. Changes in accounting principles During 2004, the District completed its fixed asset inventory and analysis project designed to enhance the District's tracking and monitoring of its furnishings, equipment and library books and the accumulated depreciation thereon This project included the hiring of an independent appraisal company who completed the District's fixed asset inventory and issued its preliminary report in late fall of 2003. As a result of this project, the District has recorded an increase in the July 1, 2003 historical cost of its fixed assets of $ 107,454, and a decrease in accumulated depreciation of $ 197,872, resulting in an increase in the net assets of the governmental activities of $ 478,614 and a decrease in the net assets of the business-type activities of $ 173,288. The cumulative effect of these changes is reflected on the Statement of Activity (page FS-2) and the Statement of Revenues, Expenses and Changes in Net Assets - Proprietary Funds (page FS-8) as a "Special item - change in accounting." FS -17 EAST PENNSBORO AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS (Conl'd.) JUNE 30, 2004 CASH AND CASH EQUIVALENTS AND INVESTMENTS The District's cash and cash equivalents and investments have been categorized to indicate the level of risk assumed by the District. Category 1 includes cash and cash equivalents and investments that are insured or registered, or securities held by the District or by its agent in the District's name. Category 2 includes uninsured or unregistered, with securities held by the counterpart's trust department or agent in the District's name. Category 3 includes uninsured and unregistered, with securities held by the counterparty or by its trust department or agent but not in the District's name, including public funds collateralized as permitted by Act 72 of the Commonwealth of Pennsylvania. Total Carrying AmounU Bank Market Value Balance $ 857,207 $ 1,017,194 $ 500 $ 2.609,053 2.609.053 $ 3 466 760 $ 3626247 1 Cateqorv 2 3 Demand deposits Change fund 135,682 $ $ 881,512 135682 $ $ 881 512 Pooled investments PLGiT Cash and cash equivalents, in the proprietary funds statement of cash flows, consists of demand deposit accounts. The types of authorized investments are limited by State regulations. Investment policies followed during the year did not significantly alter the categorizations shown above. The pooled investments funds are required to be operated in accordance with state laws and regulations. FS-18 EAST PENNSBORO AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS (Cont'd.) JUNE 30, 2004 TAXES RECEIVABLE Taxes receivable are as follows: Taxes Taxes Receivable Allowance for Receivable Deferred (Gross) U ncollectibles (Net) Tax Revenue Real estate taxes $ 434,562 $ 120,721 $ 313,841 $ 187,231 Personal taxes 1.016.755 968.358 48.397 48.397 General Fund 1,451,317 1,089,079 362,238 235.628 Full accrual adjustment (44.339) 44,339 (235,628) Total $ 1 451 317 $ 1 044740 $ 406 577 $ The deferred revenue balance in the General Fund of $ 265,997 consists of deferred taxes of $ 235,628 and deferred revenue for federal grants of $ 30,369. DUE FROM OTHER GOVERNMENTS Due from other governments are as follows: Governmental Activities Business-type Activities Total Local sources - taxes State sou rces Federal sources $ 45,293 $ 198,555 231.668 $ 45,293 198,555 231.668 $ 475516 $ $ 475516 OTHER RECEIVABLES Other receivables are as follows: Governmental Activities Business-type Activities $ 2108085 $ Total $ 1,027.648 10,002 1,037,650 1,070435 $ 2108085 Earned income taxes receivable Other revenues receivable General fund Full accrual adjustment - earned income taxes $ 1,027,648 $ 10,002 1,037,650 1 070.435 FS -19 EAST PENNSBORO AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS (Cont'd,) JUNE 30, 2004 CHANGES IN CAPITAL ASSETS Capital asset activity for the year was as follows: Effect of Beginning Accounting Ending Balance Chanoes Increases Decreases Balance Governmental activities Capital assets not being depreciated Land $ 325 826 $ $ $ $ 325,826 Capital assets being depreciated Site improvements 756,653 756,653 Buildings and improvements 49,973,863 1,243,609 51,217,472 Furniture, fixtures and equipment 4,365,979 301,402 517,367 181,021 5,003,727 Library books 815,904 29,752 845,656 55,912,399 301 ,402 1.790 ,72 8 181,021 57,823,508 Less accumulated depreciation for: Site improvements 50,552 37,834 88,386 Buildings and improvements 12,842,030 1,205,933 14,047,963 Furniture, fixtures and equiprnent 2,145,835 68,981 543,066 181,021 2,576,861 Library books 507,944 (246,193) 120,808 382,559 15,546,361 (177.212) 1,907,641 181,021 17,095,769 Total capital assets being depreciated, net 40 366,038 478,614 (116913) 40,727,739 Governmental activities capital assets, net $ 40691 864 $ 478 614 $ (116913) $ $ 41 053565 FS - 20 EAST PENNSBORO AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS (Cont'd) JUNE 30, 2004 CHANGES IN CAPITAL ASSETS (Cont'd.) Effect of Beginning Accounting Ending Balance Chanqes Increases Decreases Balance Business-type activities Capital assets being depreciated Equipment $ 614,538 $ (193,948) $ - $ - $ 420,590 Less accumulated depreciation for'. Equipment 226,688 120.660) 31,105 237.133 T ota\ capital assets being depreciated, net 387.850 1173,288) 131.105) 183 457 Business-type activities capital assets, net $ 387 850 $ (173288) $ 131 105) $ $ 183 457 Depreciation expense was charged to functions/programs as follows: Governmental activities Instruction I nstructional student support Administrative and financial support Operation and maintenance of plant Pupil transportation Student activities Total depreciation expenses - Governmental activities $ 962,752 657,151 176,939 77,481 3,457 29.861 $ 1 907641 Business-type activities Food service $ 31105 FS -21 EAST PENNSBORO AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS (Cont'd) JUNE 30, 2004 LONG-TERM LIABILITIES A summary of the changes in all long-term liabilities for the year ended June 30, 2004 is as follows: Beginning Ending Due Within Balance Additions Reductions Balance One Year Governmental Activities: General obligation debt $ 41,855,000 $ 10,000,000 $ (10,870,000) $ 40,985,000 $ 2,175,000 Capital leases 130,200 (27,165) 103,035 42,597 Compensated absences 204,323 46,826 (36.445) 214,704 55,000 Governmental activity long-term liabilities $ 42 059 323 $ 10177 026 $ 110 933 610) $ 41 302739 $ 2 272 59i' A. General obligation notes and bonds payable Changes in general obligation notes and bonds payable were as follows: Beginning Scheduled Ending Balance New Issue RefundinQ Redemptions Balance General Obligation Bonds: Series of 2000 $ 9,985,000 $ - $ (9,355,000) $ (10,000) $ 620,000 Series of 2001 2,995,000 (105,000) 2,890,000 Series A of 2001 7,355,000 (390,000) 6,965,000 Series of 2003 9,600,000 (165,000) 9,435,000 Series A of 2003 5,270,000 5,270,000 Series AA of 2003 2,395,000 (640,000) 1,755,000 Series of 2004 10,000,000 10,000000 37,600,000 645,000 (1,310,000) 36,935,000 General Obligation Notes: Series of 1999 4,255,000 (205,000) 4,050000 $ 41855000 $ - $ 645 000 $ Ii 515 000) $ 40 985 000 FS -22 EAST PENNSBORO AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS (Cont'd.) JUNE 30, 2004 LONG-TERM LIABILITIES (Cont'd.) A. General obligation notes and bonds payable (Conl'd.) Amounts Due Within Interest Rates Maturitv Date Callable Date One Year GOB Series of 2000 5.10% to 5.70% August 2018 February 2005 $ 10,000 GOB Series of 2001 3.60% to 5.00% August 2021 August 2006 110,000 GOB Series A of 2001 1.95% to 3.80% September 2011 September 2006 405,000 GOB Series of 2003 2.75% to 3.75% February 2015 August 2008 580,000 GOB Series A of 2003 2.00% to 3.90% August 2020 August 2008 125,000 GOB Series AA of 2003 2.00% August 2006 Not callable 730,000 GOB Series of 2004 3.00% to 4.00% August 2018 February 2009 GON Series of 1999 Variable February 2018 Not callable 215000 $ 2 175 000 Scheduled debt service requirements, payable by the General Fund, are as follows: Year Endino June 30 Principal Interest Total 2005 2,175,000 1,310,673 3,485,673 2006 2,370,000 1,285,096 3,655,096 2007 2,345,000 1,223,592 3,568,592 2008 2,375,000 1,155,633 3,530,633 2009 2,450,000 1,083,239 3,533,239 2010-2014 13,560,000 4,168,630 17,728,630 2015-2019 14,240,000 1,580,395 15,820,395 2020-2024 1,470.000 82.615 1,552.615 $ 40 985 000 $ 11 889873 $ 52 874 873 In March 2004, the District issued its General Obligation Bonds, Series of 2004 in the amount of $ 10,000,000 for the advance refunding of a portion of the 2000 Series. After discounts and issuance costs of $ 223,365, the net proceeds of $ 9,776,365 were deposited in an irrevocable trust fund. The investments and fixed earnings of that trust are sufficient to service $ 9,355,000 of the 2000 Series until they mature. This advance refunding reduced future debt service, resulting in an economic gain of approximately $ 750,000 which will be realized primarily during the years ending June 30,2005 through June 30, 2013. FS - 23 EAST PENNSBORO AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS (Cont'd.) JUNE 30, 2004 LONG-TERM LIABILITIES (Cont'd.) B. Capital lease obligations Changes in capital lease obligations were as follows: Beginning Balance Additions Pavments Ending Balance H P Financial Services $ $ 130200 $ 27 165 $ 103 035 The future minimum lease obligations and the net present value of these lease payments at June 30, 2004 were as follows (all governmental activities): 2004-05 2005-06 2006-07 Total minimum lease payment Less: amounts representing interest $ 47,059 47,059 15,687 109,805 (6,770) Present value of minimum lease payments $ 103,035 C. Compensated absences Changes in compensated absences were as follows: Beginning Ending Balance Net ChanQe Balance Governmental activities Severance payments $ 164,005 $ 8,747 $ 172,752 Vacation leave 40,318 1,634 41952 $ 204 323 $ 10381 $ 214704 Compensated absences (those for which employees received pay) are presented using the termination payment method. A liability is computed using estimates which apply historical data to current factors. The District maintains records of unused leave and applies the contracted rate for employees eligible for termination payments. The District allows only restricted sabbatical leave and therefore does not present any liability in advance of the sabbatical. Payments for compensated absences are made in the year the absence is taken or the employee retires, When an employee retires, the payout is as follows: FS - 24 EAST PENNSBORO AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS (Cont'd) JUNE 30, 2004 LONG-TERM LIABILITIES (Cont'd.) C. Compensated absences (Cont'd.) Vacation (administrative personnel only) - unused vacation days (not to exceed 5 days) are paid at the time of separation. Sickness - no payout required except to retirees who meet the requirements below for severance payments Personal days - unused personal days (not to exceed 5 days) may be carried over but no payment is required upon termination Retirement severance payments - retiring employees with at least seven consecutive years of District employment immediately prior to retirement, at least twenty years of service to the District, and at least thirty years of total school service credited under the State Retirement System are eligible for severance payments based on years of service and accumulated sick leave days. The retirement payment amount is equal to $ 300 times the number of years of continuous District service to a maximum of $ 9,000 for thirty years. In addition, eligible retirees are reimbursed for accumulated unused sick leave in excess of one hundred days to a maximum of three hundred days at a rate of $ 50 per day for a maximum payment of $ 10,000 for accumulated sick leave. Total maximum severance payments to each eligible retiree under the new collective bargaining agreement in effect through August 31,2005 is $ 19,000 OPERATING LEASES The District leases photocopying machines pursuant to various lease agreements which are being accounted for as operating leases. Total lease rental payments during the year ended June 30, 2004 were $ 114,112. Minimum net lease rental payments for future periods are expected to be as follows: 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 $ 123,676 123,796 52,124 12,930 6,069 MANAGEMENT SERVICES The cafeteria facilities of the District were operated by a third party vendor. Under the terms of the contract, the vendor provides for the operation and maintenance of food services as required by law, with the policies subject to the approval of the District. Operating costs, management fees and administrative costs are billed monthly to the District. FS - 25 EAST PENNSBORO AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS (Cont'd) JUNE 30, 2004 PENSION PLAN Substantially all full-time and part-time employees of the District participate in the pension plan. The District recognizes expenditures or expenses equal to its contractually-required contributions, subject to the modified accrual basis of accounting in governmental funds. The District contributes to The Public School Employees' Retirement System (the System), a governmental cost sharing multiple-employer defined benefit plan. The plan is under the authority of the Public School Employees' Retirement Code (the Code), as amended. The plan provides retirement and disability, legislatively mandated ad hoc cost-of-living adjustments, and healthcare insurance premium assistance to qualifying annuitants. The System issues a comprehensive annual financial report that includes financial statements and required supplementary information for the plan. A copy of the report may be obtained by writing to the System at PO Box 125, Harrisburg, PA 17108-0125, or by accessing the System's website at www.psers.state.pa.us. The contribution policy is established in the Code and requires contributions by active members, employers and the Commonwealth. Active members are required to contribute as follows: Active members who joined the System prior to July 22, 1983, contribute at 5.25 percent (Class TC) or at 6.50 percent (Class TO) of the member's 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 percent (Class TC) or at 7.50 percent (Class TO) of the member's qualifying compensation. Members who joined the System after June 30, 2001, contribute at 7.50 percent (automatic Class TO). For all new hires and for members who elected Class TO membership, the higher contribution rates began with service rendered on or after January 1, 2002. Contributions required of employers are based upon an actuarial valuation. For the fiscal year ended June 30, 2004, the employer contribution rate was 3.77 percent of covered payroll, composed of 2.98 percent for pension benefits and 0.79 percent for healthcare insurance premium assistance. The District's contributions to PSERS for the years ending June 30, 2004, 2003 and 2002 were $ 504,105, $ 144,840 and $ 130,180, respectively. Those amounts are equal to the required contributions for each year. OTHER POST-EMPLOYMENT RETIREMENT BENEFITS The District offers one post-employment benefit to retired professional employees other than pension benefits as discussed in the previous note. For employees with twenty or more years of service to the District, the District will pay the basic medical insurance premiums for five years (excluding family coverage) following retirement The District finances this benefit on a pay-as-you-go basis. The cost of this benefit amounted to approximately $ 47,000 during the year ended June 30, 2004 and covered 24 eligible retired employees. The District does allow other employees not eligible for this benefit to remain in its group medical insurance plan upon payment by the retired employee of the cost of such coverage. FS - 26 EAST PENNSBORO AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS (Cont'd.) JUNE 30, 2004 RISK MANAGEMENT The District is exposed to various risks of loss related to torts; theft of, damage to, and destructiDn Df assets; errors and DmissiDns; and natural disasters. The District maintains cDmmercial insurance cDverage cDvering each Df thDse risks Df IDss. Management believes such cDverage is sufficient tD preclude any significant uninsured losses tD the District. Settled claims have not exceeded this commercial cDverage in any Df the past three fiscal years. FDr State unemplDyment cDmpensatiDn laws, the D'lstrict is self-insured, which is a CDmmDn practice fDr IDcal gDvernmental units. Any unemployment claims are paid by the District Dn a quarterly basis as incurred. The District is a member of a group Df SChDDi Districts who have jDined tDgether tD self-insure their wDrkers' cDmpensatiDn expDsure. The District pays annual cDntributiDns to the group based Dn a formula utilizing the District's Dwn claim experience and annual payroll. Claims in excess Df the District's retentiDn experience are paid by a Central Fund within the group and, if necessary, by an insurance cDmpany carrying excess liability cDverage. COMMITMENTS AND CONTINGENCIES The District's cDntract with its teaching staff is scheduled to expire August 31, 2005. In the normal course of preparing for the subsequent SChDDI year, the District has awarded bids for variDus supplies, fuel cDntracts, etc. ND majDr cDmmitments in excess of routine requirements have been made by the District. The District participates in numerous state and federal grant prDgrams which are gDverned by variDus rules and regulatiDns Df the grantor agencies. Costs charged tD the respective grant prDgrams are subject tD audit and review by the grantor agencies; therefore, any findings Dr adjustments by the grantDr agencies cDuld have an effect Dn the recDrded grants receivable and/Dr deferred grant revenues, and Dn the related grant revenues and expenditures. As part Df its Dngoing capital projects, the District has entered into contract cDmmitments totaling approximately $ 1,000,000 fDr variDus cDnstructiDn and improvement projects at June 30, 2004, including amounts due on disputed contracts waiting for final settlement. The District is named as a defendant in variDus lawsuits, all in the Drdinary CDurse Df business. The District intends tD vigorously defend itself against these actiDns. Legal counsel for the District has advised that they cannot Dffer an DpiniDn as tD the probable DutcDme Df all such actiDns. In the DpiniDn of management, the ultimate liabilities, if any, resulting from these claims will nDt have a material adverse effect Dn the financial pDsition Df the District. FS - 27 EAST PENNSBORO AREA SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS (Cont'd) JUNE 30, 2004 SUBSEQUENT EVENTS In July 2004, the District issued a Tax and Revenue Anticipation Note, Series of 2004/2005 in the amount of $ 5,000,000. The note matures on June 30, 2005 with monthly interest due at the fixed annual rate of 2.74%. The District granted a security interest to Community Banks, the holder of the Note, in all tax and other revenues of the District during the period the Note is outstanding. 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