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MECHANICSBURG AREA SCHOOL DISTRICT
FINANCIAL STATEMENTS
YEAR ENDED JUNE 30, 2014
TABLE OF CONTENTS
Page
Number
INDEPENDENT AUDITOR'S REPORT IAR- 1 to IAR-2
MANAGEMENT'S DISCUSSION AND ANALYSIS MDA- 1 to MDA- 10
BASIC FINANCIAL STATEMENTS
District-wide financial statements
Statement of net position FS- 1
Statement of activities FS -2.
Fund financial statements
Balance sheet—governmental funds FS-3
Reconciliation of the governmental funds balance sheet
to the statement of net position FS-4
Statement of revenues, expenditures, and changes
in fund balances—governmental funds FS-5
Reconciliation of the governmental funds statement of revenues,
expenditures, and changes in fund balance to the statement of activities FS-6
Statement of net position—proprietary funds FS -7
Statement of revenues, expenses, and changes in net position—proprietary funds FS-8
Statement of cash flows—proprietary funds FS-9
Statement of fiduciary net position—fiduciary funds FS- 10
Statement of changes in fiduciary net position—fiduciary funds FS- 11
NOTES TO FINANCIAL STATEMENTS FS-12 to FS-34
OTHER REQUIRED SUPPLEMENTARY INFORMATION
Budgetary comparison information—general fund ORSI- 1
Other post employment benefit plans ORSI -2
Greenawalt & Company, P.C.
CERTIFIED PUBLIC ACCOUNTANTS James E.Lyons
Deborah J.Kelly
Since 1955 Scott J.Christ
Ronald S.Morgan
INDEPENDENT AUDITOR'S REPORT Howard R.Greenawalt
Creedon R.Hoffman
Board of School Directors
Mechanicsburg Area School District
Mechanicsburg, Pennsylvania
Report on the Financial Statements
We have audited the accompanying financial statements of the governmental activities, the business-type activities,
the aggregate discretely presented component unit, each major fund, and the fiduciary funds of Mechanicsburg Area
School District as of and for the year ended June 30, 2014, and the related notes to the financial statements, which
collectively comprise the District's basic financial statements as listed in the table of contents.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with
accounting principles generally accepted in the United States of America; this includes the design, implementation,
and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are
free from material misstatement, whether due to fraud or error.
Auditor's Responsibility
Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in
accordance with auditing standards generally accepted in the United States of America and the standards applicable
to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United
States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial
statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of
material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments,
the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial
statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion.
An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of
significant accounting estimates made by management, as well as evaluating the overall presentation of the financial
statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinion.
IAR- 1
400 West Main Street.Mechanicsburg,PA 17055.717.766.4763•Fax 717.766.2731
62 West Pomfret Street.Carlisle,PA 17013,717.243.4822.Fax 717.258.9372
www.greenawalt.cc
Board of School Directors
Mechanicsburg Area School District
Mechanicsburg, Pennsylvania
Opinions
In our opinion, the financial statements referred to above present fairly, in all material respects; the respective
financial position of the governmental activities, the business-type activities, the aggregate discretely presented
component unit, each major fund, and the fiduciary funds of Mechanicsburg Area School District, as of June 30, 2014,
and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in
conformity with accounting principles generally accepted in the United States of America.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the management's discussion
and analysis on pages MDA-1 through MDA-10 and the other required supplementary information on pages ORSIA'
and ORSI-2 be presented to supplement the basic financial statements. Such information, although not a part of the
basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an
essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic,
or historical context. We have applied certain limited procedures to the required supplementary information in
accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries
of management about the methods of preparing the information and comparing the information for consistency with
management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during
our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information
because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any
assurance.
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated November 17, 2014, on
our consideration of Mechanicsburg Area School District's internal control over financial reporting and on our tests of
its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The
purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance
and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on
compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards
in considering Mechanicsburg Area School District's internal control over financial reporting and compliance.
GREENAWALT&C077, P.C.
November 17, 2014
Mechanicsburg, Pennsylvania
IAR -2
MECHANICSBURG AREA SCHOOL DISTRICT
MANAGEMENT'S DISCUSSION AND ANALYSIS
JUNE 30, 2014
The management of the Mechanicsburg Area School District is pleased to present the following discussion
and analysis of the District's financial position at June 30, 2014, 2013, and 2012. It provides an overview of
our financial performance between fiscal years ended June 30, 2014 and 2013, in accordance with
governmental reporting requirements. The purpose of this discussion is to provide a narrative summary of
the financial position and activities of the District in order to enhance the reader's understanding of the
District's basic financial statements.
The District is required to present comparative financial information between the current year and the prior
year in its Management's Discussion and Analysis (MD&A) as mandated by the Governmental Accounting
Standards Board (GASB) Statement No. 34 Basic Financial Statements - and Management's Discussion
and Analysis - for State and Local Governments. This report contains such comparative financial
information.
The District has elected not to include the financial information of its discretely presented component unit,
The Wildcat Foundation, in its Management Discussion and Analysis. The separate audited financial
statements for the Foundation are available by contacting the District office.
FINANCIAL HIGHLIGHTS
The School Board adopted the 2013-2014 general fund budget with a planned deficit of $984,000. The
actual 2013-2014 fiscal year results increased fund balance by $5,216,035. Expenditures were under budget
by $3,773,842 and revenue was over budget by $2,426,193 or 4%. Increased revenue was primarily due to
earned income tax collection efficiencies garnered through county-wide consolidation through Act 32 of
2008. This year the school district received $881,731 from the PA Property Tax Relief Fund. This amount
was used to provide property tax reductions to each qualified homeowner in the amount of$121.12. The
ending fund balance at June 30, 2014 is $24,441,143 which is comprised of$9,953,407 non-spendable or
committed for future medical insurance claims and future pension costs, $9,579,742 committed for
retirement of long-term debt, capital outlays, and technology and $4,907,994 which is unassigned. The
unassigned fund balance represents 8% of 2014-2015 budgeted expenditures and transfers to other funds.
OVERVIEW OF THE FINANCIAL STATEMENTS
These financial statements consist of three sections: Management's Discussion and Analysis (this section),
the basic financial statements, and other required supplementary information.
The first two statements of the basic financial statements are government-wide financial statements. These
statements on pages FS-1 and FS-2 consist of the Statement of Net Position and the Statement of Activities.
The government-wide financial statements provide both short-term and long-term information about the
District's overall financial status.
MDA - 1
MECHANICSBURG AREA SCHOOL DISTRICT
MANAGEMENT'S DISCUSSION AND ANALYSIS (Cont'd.)
JUNE 30, 2014
The remaining basic financial statements consist of fund financial statements. These statements focus on
individual funds of the District and provide a more detailed presentation of the District's operations. The
governmental funds statements on pages FS-3 and FS-5 present how District services are financed in the
short-term as well as what remains for future spending. The proprietary fund statements on pages FS-7
through FS-9 present both short-term and long-term information about the activities that the District
operates similar to a business (the Food Service Fund). The fiduciary fund statements on pages FS-10 and
FS-11 report amounts held in trust by the District for agency and student activity funds.
The basic financial statements also include notes on pages FS-12 through FS-34 that provide a more detailed
explanation of some of the information in the financial statements. Following the basic financial statements
is other required supplementary information on pages ORSI-1 and ORSI-2 that consists of the District's
budgetary comparison and other post-employment benefit plans.
Government-wide Statements Report the District as a Whole
The government-wide statements report financial information about the District as a whole using accounting
methods similar to the accounting used by private-sector companies. The Statement of Net Position includes
all of the District's assets and liabilities utilizing the full accrual basis of accounting. The Statement of
Activities accounts for all of the District's revenues and expenses, regardless of when cash is received or
paid.
These two government-wide statements report the District's net position and changes in them. The District's
net position represents the difference between the District's assets and liabilities. The District's net position
is one way to measure the District's financial position, or financial health, over time. Increases or decreases
in the District's net position are one indicator of whether its financial health is improving or deteriorating.
To assess the overall health of the District, non-financial factors must also be considered, such as changes in
the District's property tax base and the performance of the students.
The government-wide financial statements of the District are divided into two categories:
• Governmental activities - All of the District's basic services are included here, such as
instruction, administration and community services. Real estate and earned income taxes, and
state and federal subsidies and grants finance most of these activities.
• Business-type activities - The District operates a food service operation and charges fees to
staff, students and visitors to help it cover the costs of the food service operation.
MDA- 2
MECHANICSBURG AREA SCHOOL DISTRICT
MANAGEMENT'S DISCUSSION AND ANALYSIS (Cont'd.)
• JUNE 30, 2014
Fund Financial Statements
The District's fund financial statements provide detailed information about the most significant funds, or
major funds -not the District as a whole. Some funds are required to be reported as major funds.
• Governmental funds - Most of the District's activities are reported in governmental funds, and
focus on changes in financial resources, rather than upon net income determination. These funds
are reported using the modified accrual basis of accounting, which measures cash and all
financial assets that can readily be converted to cash. The governmental fund statements provide
a detailed short-term view of the District's operations and the services it provides. Governmental
fund information helps the reader determine whether there are more or fewer financial resources
that can be spent in the near future to finance the District's programs. The relationship (or
differences) between governmental activities (reported in the Statements of Net Position and the
Statement of Activities) and governmental funds is reconciled in the financial statements on
pages FS-4 and FS-6.
• Proprietary funds - These funds are used to account for the District activities that are similar to
business operations in the private sector. When the District charges customers for services it
provides,these services are generally reported in proprietary funds. The Food Service Fund is the
District's proprietary fund and is the same as the business-type activities reported in the
government-wide statements.
• Fiduciary funds - The District is the trustee or agent for individuals, private organizations and/or
governmental units as shown on pages FS-10 and FS-11.
MDA - 3
MECHANICSBURG AREA SCHOOL DISTRICT
MANAGEMENT'S DISCUSSION AND ANALYSIS (Cont'd.)
JUNE 30, 2014
FINANCIAL ANALYSIS OF THE DISTRICT AS A WHOLE
Net Position
The District's total net position was $47,076,906 at June 30, 2014 which includes $46,197,780 in
Governmental Activities and $879,126 in Business-type Activities. This shows an increase of $6,101,117
from total net position at June 30, 2013, which included an increase of $6,166,001 in Governmental
Activities and a decrease of$64,884 in Business-type Activities.
Statement of Net Position 2013-2014
Governmental Business-Type Total
Activities Activities School District
Current and other assets $ 37,203,011 $ 719,100 $ 37,922,111
Capital assets 62,352,641 216,623 62,569,264
Total assets 99,555,652 935,723 100,491,375
Current and other liabilities 4,992,722 53,006 5,045,728
Long-term liabilities 48,365,150 3,591 48,368,741
Total liabilities 53,357,872 56,597 53,414,469
Capital assets (net of related debt) 15,523,331 216,623 . 15,739,954
Restricted for capital projects 239,938 - 239,938
Unrestricted 30,434,511 662,503 31,097,014
Total net position $ 46,197,780 $ 879,126 $ 47,076,906
Statement of Net Position 2012-2013
Governmental Business-Type Total
Activities Activities School District
Current and other assets $ 32,749,892 $ 736,752 $ 33,486,644
Capital assets 63,379,005 266,386 63,645,391
Total assets 96,128,897 1,003,138 97,132,035
Current and other liabilities 4,481,073 50,729 4,531,802
Long-term liabilities 51,616,045 8,399 51,624,444
Total liabilities 56,097,118 59,128 56,156,246
Capital assets (net of related debt) 13,135,434 266,386 13,401,820
Restricted for capital projects 741,435 - 741,435
Unrestricted 26,154,910 677,624 26,832,534
Total net position $ 40,031,779 $ 944,010 $ 40,975,789
MDA-4
MECHANICSBURG AREA SCHOOL DISTRICT
MANAGEMENT'S DISCUSSION AND ANALYSIS (Coned.)
JUNE 30, 2014
Statement of Net Position 2011-2012
Governmental Business-Type Total
Activities Activities School District
Current and other assets $ 28,677,858 $ 711,266 $ 29,389,124
Capital assets 67,042,701 304,798 67,347,499
Total assets 95,720,559 1,016,064 96,736,623
Current and other liabilities 4,290,944 42,789 4,333,733
Long-term liabilities 55,639,635 25,602 55,665,237
Total liabilities 59,930,579 68,391 59,998,970
Capital assets(net of related debt) 12,611,275 304,798 12,916,073
Restricted for capital projects 813,123 - 813,123
Unrestricted 22,365,582 642,875 23,008,457
Total net position $ 35,789,980 $ 947,673 $ 36,737,653
Statement of Activities
The results of this year's operations as a whole are reported in the Statement of Activities. Direct expenses
are listed by programs, and then offset by program revenues to determine net (expense) revenue and
changes in net position. General revenues, such as taxes, state general subsidies, and investment earnings
are then applied prior to transfers, and special items, to determine the change in net position. For the 2013-
2014 fiscal year, the change in net position for governmental activities was an increase of$6,166,001 and a
decrease of$64,884 for business-type activities, for a net total increase of$6,101,117. For the 2012-2013
fiscal year, the change in net assets for governmental activities was an increase of $5,406,866 and an
decrease of$3,663 for business-type activities for a net total increase of$5,403,203 as reflected in the chart
on page MDA-6.
Statement of Activities 2013-2014
Governmental Business-Type Total
Activities Activities School District
Program revenues
Charges for services $ 1,506,429 $ 934,218 $ 2,440,647
Operating grants and contributions 6,556,541 910,373 7,466,914
Capital grants and contributions 615,885 - 615,885
General revenues
Taxes 41,168,792 - 41,168,792
Earnings on investments 62,753 553 63,306
State general subsidies 6,745,507 - 6,745,507
Transfer among funds - - -
Total revenues 56,655,907 1,845,144 58,501,051
Direct expenses (50,489,906) (1,910,028) (52,399,934)
Change in net position $ 6,166,001 $ (64,884) $ 6,101,117
MDA- 5
MECHANICSBURG AREA SCHOOL DISTRICT
MANAGEMENT'S DISCUSSION AND ANALYSIS (Cont'd.)
JUNE 30, 2014
Statement of Activities 2012-2013
Govemmental Business-Type Total
Activities Activities School District
Program revenues
Charges for services $ 1,420,695 $ 938,021 $ 2,358,716
Operating grants and contributions 6,238,456 881,588 7,120,044
Capital grants and contributions 741,381 - 741,381
General revenues
Taxes 40,926,549 - 40,926,549
Earnings on investments 41,873 757 42,630
State general subsidies 6,578,096 - 6,578,096
Transfer among funds (112,051) 112,051 -
Total revenues 55,834,999 1,932,417 57,767,416
Direct expenses (50,428,133) (1,936,080) (52,364,213)
Change in net position $ 5,406,866 $ (3,663) $ 5,403,203
Local Sources
Direct expenses represent the actual cost of providing the services while the net cost represents the amount
of cost that is not recovered through program revenues, meaning user charges, grants and contributions. The
net cost of services must be recovered through general revenue, primarily taxes and state subsidies.
Amounts not recovered will reduce funds available for future years.
Local Sources 2013-2014
Governmental Activities
Direct Program Net
Expenses Revenues Expense
Instruction $ 32,722,397 $ 5,861,477 $ 26,860,920
Instructional student support 5,492,591 445,149 5,047,442
Administrative and financial support 3,873,799 261,349 3,612,450
Operation and maintenance of plant 3,908,743 184,628 3,724,115
Student transportation 1,650,872 585,245 1,065,627
Student activities 1,032,566 205,231 827,335
Community services 642,277 519,891 122,386
Interest on long-term debt 1,166,661 615,885 550,776
$ 50,489,906 $ 8,678,855 41,811,051
State general subsidies revenues (6,745,507)
Transfer among funds _
Total needs from taxes and other local sources $ 35,065,544
Business-type Activities
Direct Program Net
Expenses Revenues Expense
Food service $ 1,910,028 $ 1,844,591 $ 65,437
Transfer among funds _
Net expenses $ 65,437
MDA - 6
MECHANICSBURG AREA SCHOOL DISTRICT
MANAGEMENT'S DISCUSSION AND ANALYSIS (Cont'd.)
JUNE 30, 2014
Local Sources 2012-2013
Governmental Activities
Direct Program Net
Expenses Revenues Expense
Instruction $ 32,637,903 $ 5,596,607 $ 27,041,296
Instructional student support 5,313,652 399,664 4,913,988
Administrative and financial support 4,049,778 288,438 3,761,340
Operation and maintenance of plant 3,792,228 150,177 3,642,051
Student transportation 1,614,875 566,428 1,048,447
Student activities 983,506 200,572 782,934
Community services 610,077 457,265 152,812
Interest on long-term debt 1,426,114 741,381 684,733
$ 50,428,133 $ 8,400,532 42,027,601
State general subsidies revenues (6,578,096)
Transfer among funds 112,051
Total needs from taxes and other local sources $ 35,561,556
Business-type Activities
Direct Program Net
Expenses Revenues Expense
Food service $ 1,936,080 $ 1,819,609 $ 116,471
Transfer among funds (112,051)
Net expenses $ 4,420
The District Funds
At June 30, 2014, the District governmental funds reported a combined fund balance of$30,990,366, which
is an increase of$3,736,045 from June 30, 2013. The information below compares the governmental funds
fund balances for June 30, 2014, 2013 and 2012 using current fund balances categories under GASB 54.
Governmental Fund Balances
2013-2014 2012-2013
2014 2013 2012 Change %Change Change %Change
General Fund-committed $18,483,149 $14,328,194 $10,864,926 $ 4,154,955 29.0% $ 3,463,268 31.9%
General Fund-unassigned 4,907,994 4,006,914 4,784,049 901,080 22.5% (777,135) -16.2%
General Fund-nonspendable 1,050,000 890,000 1,140,000 160,000 18.0% (250,000) -21.9%
Capital reserve Fund-committed 4,897,739 5,898,866 4,051,908 (1,001,127). -17.0% 1,846,958 45.6%
Construction Fund-restricted 160,144 741,435 813,123 (581,291) -78.4% (71,688) -8.8%
Debt Service Fund-committed 1,491,340 1,388,912 1,254,177 102,428 7.4% 134,735 10.7%
Total fund balances $30,990,366 $27,254,321 $22,908,183 $ 3,736,045 13.7% $ 4,346,138 19.0%
Total restricted/committed $25,032,372 $22,357,407 $16,984,134 $ 2,674,965 12.0% $ 5,373,273 31.6%
Total unassigned 4,907,994 4,006,914 4,784,049 901,080 22.5% (777,135) -16.2%
Total nonspendable 1,050,000 890,000 1,140,000 160,000 18.0% (250,000) -21.9%
Total governmental funds $30,990,366 $27,254,321 $22,908,183 $ 3,736,045 13.7% $ 4,346,138 19.0%
MDA - 7
MECHANICSBURG AREA SCHOOL DISTRICT
MANAGEMENT'S DISCUSSION AND ANALYSIS (Cont'd.)
JUNE 30, 2014
Governmental Funds-Reconciliation
The General Fund Balance increase of $5,216,035 was due to favorable variances on expenditures and
revenue. The district over budgeted pension expenditures in order to develop a reserve to mitigate projected
pension increases. Debt service savings were achieved through refinancing a general obligation bond issue
in prior years. Revenue exceeded budget for 2013-14 primarily due to increased earned income tax
collections, resulting from increased collection efficiencies and improved economic conditions.
The Capital Reserve Fund decrease of$1,001,127 was due to completion of several planned capital projects.
The Construction Fund decrease of$581,291 was due payments on a renovation project at Shepherdstown
Elementary School and planned roof repairs.
The Debt Service Fund increase of $102,428 was due to favorable interest rates on a variable rate bond
issue.
General Fund Budget
A General Fund budget is adopted each year in accordance with the Pennsylvania School Code. The revised
budget reflects budget transfers as approved by the Board.
The District applies for State and Federal grants each year. Certain grants may not be anticipated during the
budgeting process and must be added to the budget during the fiscal year. In addition, the grants that are
anticipated during the budgeting process are based on estimates. The budget must then be modified based on
the actual grant award.
June 30, 2014
Budget Actual Variance
Total revenues $ 54,061,369 $ 56,487,562 $ 2,426,193
Total expenditures 49,528,183 46,547,748 2,980,435
Excess revenues (expenditures) 4,533,186 9,939,814 5,406,628
Other financing sources (uses) (5,517,187) (4,723,779) 793,408
Net change in fund balance $ (984,001) $ 5,216,035 $ 6,200,036
MDA- 8
MECHANICSBURG AREA SCHOOL DISTRICT
MANAGEMENT'S DISCUSSION AND ANALYSIS (Cont'd.)
JUNE 30, 2014
June 30, 2013
Budget Actual Variance
Total revenues $ 53,002,568 $ 56,511,210 $ 3,508,642
Total expenditures 47,985,973 45,411,148 2,574,825
Excess revenues (expenditures) 5,016,595 11,100,062 6,083,467
Other financing sources (uses) (5,660,257) (8,663,929) (3,003,672)
Net change in fund balance $ (643,662) $ 2,436,133 $ 3,079,795
CAPITAL ASSETS
At June 30, 2014, the District had $62,352,641 in Governmental activities capital assets, which represents a
net decrease after depreciation of$1,026,364.
Capital Assets (Net of Depreciation)
2013-2014 2012-2013
2014 2013 2012 Change Change
Govemmental activities
Land $ 605,983 $ 605,983 $ 605,983 $ - $ -
Construction in progress 159,767 75,795 19,595 83,972 56,200
Land improvements 2,473,383 2,313,101 2,529,083 160,282 (215,982)
Buildings and improvements 57,621,604 58,957,032 61,195,997 (1,335,428) (2,238,965)
Furniture and equipment 1,348,950 1,274,734 1,375,705 74,216 (100,971)
Library books 142,954 152,360 151,271 (9,406) 1,089
$ 62,352,641 $ 63,379,005 $ 65,877,634 $ (1,026,364) $ (2,498,629)
Business-type activities
Furniture and equipment $ 216,623 $ 266,386 $ 304,798 $ (49,763) $ (38,412)
LONG-TERM LIABILITIES
Bonds payable at June 30, 2012, 2013 and 2014 were $54,380,000, $49,985,000, and $46,610,000
respectively. Scheduled payments of principal made during the year to the bondholders were $3,375,000.
The amount of bond principal due within one year is $3,895,000.
Compensated absences decreased during the year from an entity-wide perspective from $630,548 to
$606,680 at June 30, 2014. Compensated absences decreased from June 30, 2012 to June 30, 2013 from an
entity-wide perspective from $653,045 to $630,548.
MDA- 9
MECHANICSBURG AREA SCHOOL DISTRICT
MANAGEMENT'S DISCUSSION AND ANALYSIS (Cont'd.)
JUNE 30, 2014
Recording for other post employment benefits began in 2008-2009. The liability from an entity-wide
perspective increased from $741,926 to $929,160 at June 30, 2014. Other post employment benefits
increased from June 30,2012 to June 30, 2013 from an entity-wide perspective from $555,164 to $741,926.
NEXT YEAR'S BUDGET AND ECONOMIC FACTORS
Original Budget
2014-2015 2013-2014 Change
Total revenues $ 57,154,252 $ 54,061,369 $ 3,092,883
Total expenditures 52,700,338 49,528,183 3,172,155
Excess revenues (expenditures) 4,453,914 4,533,186 (79,272)
Other financing sources (uses) (5,570,687) (5,517,187) (53,500)
Net change in fund balance $ (1,116,773) $ (984,001) $ (132,772)
The budget for 2015-2016 represents an increase in total expenditures of 5.7%. This is largely due to
increased pension obligations. The.budget contained a 2% real estate tax increase. The mill rate increased
from 12.289 to 12.535. The District plans to reduce its fund balance by $1,116,773 to offset the planned
budget deficit.
CONTACTING THE DISTRICT FINANCIAL MANAGEMENT
The District's financial report is intended to provide the readers with a general overview of the District's
finances and to show the Board's accountability for the funds it receives. If you have questions about this
report or wish to request additional financial information,please contact the district office of Mechanicsburg
Area School District, 100 East Elmwood Avenue, Mechanicsburg, PA 17055, (717) 691-4500.
MDA - 10
MECHANICSBURG AREA SCHOOL DISTRICT
STATEMENT OF NET POSITION
JUNE 30, 2014
Primary Government
Governmental Business-type Component
Assets Activities Activities Total Unit
Cash and cash equivalents $ 16,338,759 $ 825,056 $ 17,163,815 $ 462,148
Investments 13,457,000 - 13,457,000 -
Taxes receivable(net of allowance for uncollectibles) 3,724,000 - 3,724,000 -
Internal balances 147,287 (147,287) -
Due from other governments 1,864,193 28,766 1,892,959 -
Prepaid expenses 1,129,060 - 1,129,060 1,141
Other receivables 302,774 3,121 305,895 20,185
Inventories - .9,444 9,444 -
Restricted cash and cash equivalents for construction 239,938 - 239,938 -
Endowment investments - - - 337,697
Capital assets not being depreciated 765,750 - 765,750 -
Capital assets being depreciated, net 61,586,891 216,623 61,803,514 -
Total assets 99,555,652 935,723 100,491,375 821,171
Liabilities
Accounts payable 668,114 6,933 675,047 1,919
Payroll and benefits payable 3,866,900 - 3,866,900 -
Unearned revenues 32,771 46,073 78,844 -
Accrued interest on bonds payable 424,937 - 424,937 -
Long-term liabilities
Due within one year 4,245,000 539 4,245,539 -
Due in more than one year 43,900,840 3,052 43,903,892 -
Unamortized bond premiums and refunding costs 219,310 - 219,310 -
Totalliabilities 53,357,872 56,597 53,414,469 1,919
Net position
Invested in capital assets(net of related debt) 15,523,331 216,623 15,739,954 -
Restricted for capital projects 239,938 - 239,938 -
Temporarily restricted - - - 152,205
Permanently restricted - - - 236,526
Unrestricted 30,434,511 662,503 31,097,014 430,521
Total net position $ 46,197,780 $ 879,126 47,076,906 819,252
The accompanying notes are an integral part of these financial statements.
FS- 1
MECHANICSBURG AREA SCHOOL DISTRICT
STATEMENT OF ACTIVITIES
YEAR ENDED JUNE 30, 2014
Program Revenues Net(Expense)Revenue and Changes in Net Position
Operating Capital Grants Primary Government
Direct Charges for Grants and and Governmental Business-type Component
Functions/Programs Expenses Services Contributions Contributions Activities Activities Total Unit
Primary Government
Governmental activities
Instruction $ 32,722,397 $ 849,053 $ 5,012,424 $ $ (26,860,920) $ - $ (26,860,920) $ -
Instructional student support 5,492,591 - 445,149 - (5,047,442) - (5,047,442)
Administrative and financial support 3,873,799 - 261,349 - (3,612,450) - (3,612,450) -
Operation and maintenance of plant 3,908,743 17,513 167,115 - (3,724,115) - (3,724,115) -
Pupil transportation 1,650,872 - 585,245 - (1,065,627) - (1,065,627) -
Student activities 1,032,566 140,977 64,254 - (827,335) - (827,335) -
Community services 642,277 498,886 21,005 - (122,386) - (122,386) -
Interest on long-term debt 1,166,661 - - 615,885 (550,776) - (550,776) -
Total governmental activities 50,489,906 1,506,429 6,556,541 615,885 (41,811,051) - (41,811,051)
Business-type activities
Food service 1,910,028 934,218 910,373 - - (65,437) (65,437) -
Total primary government $ 52,399,934 $ 2,440,647 $ 7,466,914 $ 615,885 (41,811,051) (65,437) (41,876,488)
Component Units
Wildcat Foundation $ 811,427 $ - $ 263,422 $ - (548,005)
General revenues
Real estate taxes 30,895,488 - 30,895,488 -
Earned income taxes 9,494,198 - 9,494,198 -
Othertaxes 779,106 - 779,106 -
Investment earnings 62,753 553 63,306 1,075
State general subsidies 6,745,507 - 6,745,507 -
Transfers
Total general revenues and transfers 47,977,052 553 47,977,605 1,075
Change in net position 6,166,001 (64,884) 6,101,117 (546,930)
Net position-beginning 40,031,779 944,010 40,975,789 1,366,182
Net position-ending $ 46,197,780 $ 879,126 $ 47,076,906 $ 819,252
The accompanying notes are an integral part of these financial statements.
FS-2
MECHANICSBURG AREA SCHOOL DISTRICT
BALANCE SHEET-GOVERNMENTAL FUNDS
JUNE 30, 2014
Total
Capital Construction Debt Governmental
General Reserve Funds Service Funds
Assets
Cash and cash equivalents $ 11,835,009 $ 3,012,410 $ 239,938 $ 1,491,340 $ 16,578,697
Investments 11,473,000 1,984,000 - - 13,457,000
Taxes receivable(net of allowance for uncollectibles) 3,724,000 - - - 3,724,000
Due from other funds 147,287 - - - 147,287
Due from other governments 1,864,193 - - - 1,864,193
Other receivables 302,774 - - - 302,774
Prepaid expenses 1,129,060 - - - 1,129,060
Total assets $ 30,475,323 $ 4,996,410 $ 239,938 $ 1,491,340 $ 37,203,011
Liabilities, deferred inflows of resources and fund balances
Liabilities
Accounts payable $ 489,649 $ 98,671 $ 79,794 $ - $ 668,114
Payroll and benefits payable 3,866,900 - - - 3,866,900
Unearned revenues 32,771 - - - 32,771
Total liabilities 4,389,320 98,671 79,794 - 4,567,785
Deferred inflows of resources
Unavailable tax revenue 1,644,860 - - - 1,644,860
Fund balances
Nonspendable-health care costs prepaid 1,050,000 - - - 1,050,000
Restricted-capital projects - - 160,144 - 160,144
Committed
Future medical and pension costs 8,903,407 - - - 8,903,407
Retirement of long-term debt 3,079,742 - - 1,491,340 4,571,082
Capital outlays 5,000,000 4,897,739 - - 9,897,739
Technology 1,500,000 - - - 1,500,000
Unassigned 4,907,994 - - - 4,907,994
Total fund balances 24,441,143 4,897,739 160,144 1,491,340 30,990,366
Total liabilities, deferred inflows of resources
and fund balances $ 30,475,323 $ 4,996,410 $ 239,938 $ 1,491,340 $ 37,203,011
The accompanying notes are an integral part of these financial statements.
FS-3
MECHANICSBURG AREA SCHOOL DISTRICT
RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET
TO THE STATEMENT OF NET POSITION .
JUNE 30, 2014
Total fund balances-Governmental funds $ 30,990,366
Amounts presented for governmental activities in the statement of net position are different because:
Capital assets are not.financial resources and therefore are not presented as assets in the governmental funds.
At year end, the cost of capital assets is$ 104,234,043 and the accumulated depreciation is$41,881,402. 62,352,641
Certain liabilities are not due and payable in the current year, and therefore are not presented
as liabilities in the governmental funds. At year end, these liabilities consist of:
Bonds and notes.payable $ (46,610,000)
Compensated absences (606,680)
Other post employment benefits (929,160)
Long-term liabilities (48,145,840)
Accrued interest on bonds and notes payable (424,937) (48,570,777)
Bond discounts(premiums)and charges on refundings are presented as expenditures in the governmental funds.
At year end, the remaining unamortized bond related costs consist of:
Bond discounts(premiums) (219,310)
Charges on refundings - (219,310)
Taxes receivable will be collected, but are not available soon enough to pay for current year expenditures,
and therefore are unavailable in the governmental funds.At year end, these taxes receivable consist of:
Real estate taxes 227,910
Earned income taxes 1,416,950 1,644,860
Net position -Governmental activities $ 46,197,780
The accompanying notes are an integral part of these financial statements.
FS-4
MECHANICSBURG AREA SCHOOL DISTRICT
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES-GOVERNMENTAL FUNDS
YEAR ENDED JUNE 30, 2014
Total
Capital Construction Debt Governmental
Revenues
General Reserve Funds Service Funds
Local sources-taxes $ 41,003,447 $ - $ - $ $ 41,003,447
Local sources-other 2,082,258 2,662 57 281 2,085,258
State sources 12,814,471 - 12,814,471
Federal sources 587,386 - 587,386
Total revenues 56,487,562 2,662 57 281 56,490,562
Expenditures
Instruction 31,197,368 - - 31,197,368
Support services 13,760,403 - - 13,760,403
Non instructional services 1,577,677 - 630 1,578,307
Capital outlay 12,300 1,003,789 581,348 - 1,597,437
Debt service(principal and interest) - - 4,621,002 4,621,002
Total expenditures 46,547,748 1,003,789 581,348 4,621,632 52,754,517
Excess(deficiency)of revenues over expenditures 9,939,814 (1,001,127) (581,291) (4,621,351) 3,736,045
Other financing sources(uses)
Refunding bond proceeds
Transfers from other funds - - 4,723,779 4,723,779
Debt service (refunded bond issues) _
Transfers to other funds (4,723,779) - - - (4,723,779)
Net changes in fund balances 5,216,035 (1,001,127) (581,291) 102,428 3,736,045
Fund balances-beginning 19,225,108 5,898,866 741,435 1,388,912 27,254,321
Fund balances-ending $ 24,441,143 $ 4,897,739 $ 160,144 $ 1,491,340 $ 30,990,366
The accompanying notes are an integral part of these financial statements.
FS-5
MECHANICSBURG AREA SCHOOL DISTRICT
RECONCILIATION OF THE GOVERNMENTAL FUNDS
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE TO THE STATEMENT OF ACTIVITIES
YEAR ENDED JUNE 30,2014
Total net change in fund balances-Governmental funds
$ 3,736,045
Amounts presented for governmental activities in the statement of activities are different because:
Capital outlays are presented as expenditures in the governmental funds. In the statement of activities,the cost of those assets is allocated
over their estimated useful lives as depreciation expense. During the year,the capital outlays and depreciation expense are as follows:
Capital outlays,net of retirements
Depreciation expense $ 1,797,241
(3,506,335) (1,709,094)
Enviromental Center Classroom capitalized-donated and transferred from component unit 682,730
Bond and note proceeds and principal repayments are presented as other financing sources and expenditures(other financing uses
if refunded bonds)in the governmental funds. In the statement of activities,proceeds and repayments do not effect net position.
During the year,proceeds and principal repayments are as follows:
Bond proceeds(no bonds issued)
Principal repayments -
3,375,000 3,375,000
Payments of compensated absences are presented as expenditures in the governmental funds. In the statement of activities,the expense
is measured by the amount earned by employees during the year.The liability for compensated absences decreased during the year. 23,868
Payments of other post employment benefits are presented as expenditures in the governmental funds.In the statement of activities,the expense
includes actuarial estimates,primarily for amortization of prior costs.The liability for other post employment benefits increased during the year. (187,234)
Payments of interest are presented as expenditures in the governmental funds when the payment is due. In the statement of activities,the
expense is measured by the amount accrued during the year.The liability for accrued interest on bonds payable decreased during the year. 40,080
Bond discounts(premiums)and charges on refundings(any difference between the carrying amount of refunded debt and its payoff amount)are presented
as expenditures in the governmental funds. In the statement of activities,these amounts are allocated over the life of the debt as amortization expense.
During the year,costs incurred and amortization expense are as follows:
Bond discounts(premiums)and charges on refundings on new bonds
Amortization of bond premiums(discounts) 39,261 39,261
Because some taxes will not be collected until several months after the end of the fiscal year,they are not considered as available revenues
in the governmental funds.Unavailable taxes increased(decreased)during the year as follows:
Real estate taxes
Earned income taxes (239,605)
404,950 165,345
Change in net position-Governmental activities $ 6,166,001
The accompanying notes are an integral part of these financial statements.
FS-6
MECHANICSBURG AREA SCHOOL DISTRICT
STATEMENT OF NET POSITION - PROPRIETARY FUNDS
JUNE 30, 2014
Food
Service
Assets
Cash and cash equivalents
Accounts receivable $ 825,056
Due from other governments 3,121
Inventories 28,766
9,444
Total current assets
866,387
Capital assets being depreciated, net
216,623
Total assets
1,083,010
Liabilities
Due to general fund
Unearned revenues 147,287
Accounts payable 46,073
Current portion of compensated absences 6,933
539
Total current liabilities
200,832
Long-term portion of compensated absences
3,052
Total liabilities
203,884
Net position
Invested in capital assets (net of related debt)
Unrestricted 216,623
662,503
Total net position
$ 879,126
The accompanying notes are an integral part of these financial statements.
FS-7
MECHANICSBURG AREA SCHOOL DISTRICT
STATEMENT OF REVENUES, EXPENSES
AND CHANGES IN NET POSITION -PROPRIETARY FUNDS
YEAR ENDED JUNE 30, 2014
Food
Operating revenues
Service
Food service revenue
Charges for services $ 906,367
Other operating revenues 24,301
Total operating revenues 3,550
Operating expenses 934,218
Salaries
Employee benefits 543,176
Purchased property service 298,807
Other purchased service 21,267
Food and milk 71,751
Other supplies 850,289
Depreciation 65,071
Total operating expenses 59,667
Operating income(loss) 1,910,028
Nonoperating revenues/(expense) (975,810)
Earnings on investments
Loss on sale fixed assets 553
State sources -social security and retirement subsidies (127)
State sources -meal subsidies 65,973
Federal sources-meal and other subsidies 59,979
Federal sources-donated commodities 683,105
. Total nonoperating revenues 101,443
Loss before transfers 910,926
Transfers from other funds (64,884)
Change in net position
Net position - beginning (64,884)
Net position -ending
944,010
$ 879,126
The accompanying notes are an integral part of these financial statements.
FS-8
• MECHANICSBURG AREA SCHOOL DISTRICT
STATEMENT OF CASH FLOWS - PROPRIETARY FUNDS
YEAR ENDED JUNE 30, 2014
Food
Service
Operating activities
Cash received from users
Cash payments to employees for services $ 930,032
Cash payments to suppliers for goods and services (784,745)
Cash payments for other operating expenses (732,674)
Net cash provided by(used for) operating activities (113,105)
(700,492)
Non-capital financing activities
State sources
Federal sources 123,718
Net cash provided by(used for) non-capital financing activities 656,574
780,292
Capital and related financing activities
Cash payments for equipment
Net cash provided by(used for) capital and related financing activities (10,030)
(1-,030)
Investing activities
Earnings on investments
Net cash provided by(used for) investing activities 553
553
Net change in cash and cash equivalents
70,323
Cash and cash equivalents-beginning
Cash and cash equivalents-ending 754,733
$ 825,056
Reconciliation of operating income(loss) to net cash provided by(used for) operating activities
Operating income(loss)
Adjustments to reconcile operating income (loss)to net cash $ _(975,81 0)
provided by(used for) operating activities
Depreciation
Donated commodities 59,667
Net change in other assets and other liabilities 101,443
Accounts receivable
Inventories (536)
Due to/from other funds 10,244
Unearned revenue 107,031
Accounts payable (3,650)
Compensated absences 5,927
Total adjustments (4,808)
275,318
Net cash provided by(used for)operating activities
$ (700,492)
The accompanying notes are an integral part of these financial statements.
FS -9
MECHANICSBURG AREA SCHOOL DISTRICT
STATEMENT OF FIDUCIARY NET POSITION - FIDUCIARY FUNDS
JUNE 30, 2014
Private
Purpose
Trusts Agency Activities Total
Assets
Cash and cash equivalents $ 259,492 $ 880,334 $ 154,209 $ 1,294,035
Total assets 259,492 880,334 154,209 1,294,035
Liabilities
Due to other organizations - 880,334 154,209 1,034,543
Total liabilities - 880,334 154,209 1,034,543
Net position $ 259,492 $ - $ - $ 259,492 .
The accompanying notes are an integral part of these financial statements.
FS- 10
MECHANICSBURG AREA SCHOOL DISTRICT
STATEMENT OF CHANGES IN FIDUCIARY NET POSITION - FIDUCIARY FUNDS
YEAR ENDED JUNE 30, 2014
Private Purpose
Trusts
Additions
Gifts and contributions $ 91,748
Investment income 20
Total additions 91,768
Deductions
Scholarships and awards 31,382
Change in net position 60,386
Net position- beginning 199,106
Net position -ending $ 259,4 92
The accompanying notes are an integral part of these financial statements.
FS- 11
MECHANICSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2014
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Mechanicsburg Area School District is the level of government which has oversight responsibility and control over
activities related to public school education. The report includes services provided by the District to residents
within the boundaries of the Cumberland County municipalities of Upper Allen Township, Shiremanstown and
Mechanicsburg Boroughs. Services provided include a comprehensive curriculum for primary and secondary
education as well as special education and vocational education programs. The District receives revenue from
local, state and federal.sources and must comply with the requirements,of these funding sources.
Reporting entity
GASB establishes criteria for determining the activities, organizations and functions of government to be included
in the financial statement of the reporting entity. In evaluating the District as a reporting entity, management has
addressed all potential component units which may or may not fall within the established criteria. The criteria used
to evaluate'component units for possible inclusion as part of the District's reporting entity are:
The economic resources received or held by the separate organization are entirely for the direct benefit of the
District or its constituents.
The District is entitled to (or has the ability to) access a majority of the economic resources received or held
by the separate organization.
The economic resources received or held by an individual organization that the District is entitled to (or has
the ability to) access is significant to the District.
The District has included The Wildcat Foundation (the Foundation) as a discretely presented component unit. The
financial data of the Foundation is reported in the component unit column in the basic financial statements. This
separate column is used to emphasize that the Foundation is legally separate from the District. The Foundation
was formed for the purpose of supporting projects related to educational programs and to create opportunities for
development for the students, staff and community within the Mechanicsburg Area School District. The separate
financial statements for the Foundation are available by contacting the District office.
Jointly-governed organizations
The District is a participant in four jointly-governed organizations, each of which is a separate legal entity that
offers services to the District and its residents. Each of these entities serves several school districts and/or
municipalities and therefore are not included in this reporting entity. These entities do not have taxing power, but
are required to adopt an annual budget, which is funded primarily by its member Districts or others that use its
services. Complete financial statements for these entities can be obtained from the respective entity's
administrative office.
FS- 12
MECHANICSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2014
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd.)
Jointly-governed organizations (Cont'd.)
Capital Area Intermediate Unit provides special education services and programs.
Cumberland Perry Area Vocational Technical School provides vocational and technical education
services and programs.
Harrisburg Area Community College provides community college education services and programs.
Cumberland County Tax Bureau provides earned income tax collection services.
Basis of presentation
The financial statements of the District have been prepared in accordance with U.S. generally accepted
accounting principles. The Governmental Accounting Standards Board (GASB) establishes U.S. generally
accepted accounting principles for governments. Accounting guidance is also provided through the Comptroller's
office for Pennsylvania's Department of Education. The more significant of these accounting policies are as
follows:
Basis of presentation -District-wide financial statements
District-wide financial statements (i.e., the Statement of Net Position and the Statement of Activities) present
information on all of the nonfiduciary activities of the District. As a general rule the effect of interfund activity has
been eliminated from these statements. Governmental activities, which normally are supported by taxes and
intergovernmental revenues, are presented separately from business-type activities which rely to a significant
extent, on fees and charges for support.
District-wide financial statements are presented using the economic resources measurement focus and the
accrual basis of accounting as are the proprietary fund and the fiduciary fund financial statements. Revenues are
recognized when earned and expenses are recognized when a liability is incurred, regardless of the timing of
related cash flows. Real estate are recognized as revenues in the year for which they are levied. Grants and
similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been
met. Net position (total assets and deferred outflows less total liabilities) is used as a practical measure of
economic resources and the operating statement includes all transactions and events that increased or
decreased net position. Depreciation and amortization are charged as an expense against current operations.
Capital assets (net of accumulated depreciation) and bonds payable (net of unamortized discounts or premiums)
are presented in the statement of net position.
The statement of activities demonstrates the degree to which the direct expenses of given functions or programs
are offset by program revenues. Direct expenses are those that are clearly identifiable within a specific function or
program. Program revenues include charges to customers who purchase, use, or directly benefit from goods,
services, or privileges provided by a given function or program. In addition, program revenues include grants and
contributions that are restricted to meeting the operational or capital requirements of a particular function or
program. Taxes and other items not properly included among program revenues are reported as general
revenues.
FS- 13
MECHANICSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2014
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd.)
Basis of presentation -Fund financial statements
Fund financial statements are also provided for all governmental funds, proprietary funds, and fiduciary.funds of
the District. Major individual governmental funds and major individual proprietary funds are reported as separate
columns in the fund financial statements. Nonmajor funds, if any, are aggregated and presented in a single
column. Fiduciary funds are deported by fund.
Governmental funds are presented using the current financial resources measurement focus and the modified
accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available.
Revenues are considered to be available when they are received within the current period or soon enough
thereafter to pay liabilities of the current period. For this purpose, the District considers tax revenue to be
available if received within 90 days of the end of the fiscal period. Revenue from federal, state and other grants
designated for payment of specific expenditures is recognized when the related expenditures are incurred;
accordingly, when such funds are received, they are recognized as unearned revenues until earned. Expenditures
generally are recognized when a liability is incurred, as under accrual accounting. However, debt service
expenditures, as well as expenditures related to compensated absences and claims and judgments, are
recognized only when payment is due.
Proprietary funds generally follow standards for accounting and financial presentation for private business
enterprises to the extent that those standards do not conflict with or contradict guidance of the GASB. Proprietary
funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses
generally result from providing services and producing and delivering goods in connection with the fund's principal
ongoing operations. Operating expenses for the District's proprietary fund include food production costs, supplies,
administrative costs, and'depreciation on capital assets. All revenues or expenses not meeting this definition are
reported as nonoperating revenues and expenses.
Fund accounting
The accounts of the District are organized on the basis of funds, each of which is considered a separate
accounting entity. The operations of each fund are accounted for by providing a separate set of self-balancing
accounts which comprise its assets, liabilities, deferred inflows, fund equity, revenues, and expenditures, or
expenses, as appropriate. Resources are allocated to and accounted for in individual funds based upon the
purposes for which they are to be spent.
When both restricted and unrestricted resources are available, it is the District's general policy to use the
restricted (primarily operating grants) resources first, then unrestricted resources as they are needed.
The District has the following types of funds:
Governmental Funds —These funds account for the activities through which most of the District's operations
are provided.
FS- 14
MECHANICSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2014
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Contd.)
Basis of presentation -Fund financial statements (Cont'd.)
Fund accounting(Contd.)
Proprietary Funds—These funds account for the operations of the District that are financed and operated in a
manner similar to private business enterprises.
Fiduciary Funds—These funds account for the assets held by the District as a trustee or agent for individuals,
private organizations and/or governmental units and are therefore not available to support the District's own
programs.
The District presents the following major governmental funds:
The General Fund is the primary operating fund. It accounts for all financial resources except those required
to be accounted for in another fund.
An operating budget is adopted prior to the beginning of each year on a modified accrual basis of
accounting. The General Fund is the only fund for which a budget is legally required.
The Pennsylvania School Code dictates specific procedures relative to budget adoption and financial
statement presentation. The District, before levying annual school taxes, is required to prepare an
operating budget for the succeeding fiscal year. This process includes the publishing of notices by
advertisement, that the proposed budget has been prepared and is available for public inspection at the
administrative office of the District, and that public hearings are held on the proposed operating budget
which are required to be scheduled at least ten days prior to when final action on adoption is taken by the
Board.
Legal budgetary control is maintained at the sub-function/major object level. The Board may approve
transfers of funds appropriated to any particular item of expenditure in accordance with the Pennsylvania
School Code. Management may amend the budget at the sub-function/sub-object level without Board
approval, provided it is not at a higher level than the Board adopted budget.
In order to preserve a portion of an appropriation for which an expenditure has been committed by a
purchase order, contract or other form of commitment, an encumbrance is recognized. Unused
encumbrances expire at the end of each year.
Included in the budget are program budgets as prescribed by the federal and state agencies funding the
program. These budgets are approved on a program by program basis by the federal and state funding
agencies.
FS- 15
MECHANICSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2014
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd.)
Basis of presentation - Fund financial statements (Cont'd.)
Fund accounting(Cont'd.)
Capital Projects Funds can consist of more than one project each set up under separate "Construction
Funds", to separately account for each project. Each issuance of new debt (primarily bonds) is a project to
account for the debt proceeds and the expenditure of those proceeds. The District maintains a Capital
Reserve Fund for amounts transferred from the General Fund and the expenditure of those funds for capital
outlays.
The Debt Service Fund accounts for the refinancing of existing debt and other debt-related payments.
The District presents the following proprietary fund:
The Food Service Fund accounts for the operations of the cafeterias.
The District presents the following fiduciary funds:
The Private Purpose Trusts accounts for assets held by the District in a trustee capacity, the contributions to
and interest earnings on those funds to be used for various scholarships and award programs for selected
students.
The Agency Fund accounts for programs operated and sponsored by school related organizations. These
funds are separated from student activity funds.
The Student Activities Fund accounts for programs operated and sponsored by various clubs and
organizations within the schools.
Cash and cash equivalents and investments
Cash and cash equivalents are considered to be cash on hand, demand deposits (including pooled investments),
and short-term investments with original maturities of three months or less from the date of acquisition.
The types of authorized investments are limited by State regulations. Pooled investment funds are required to be
operated in accordance with State regulations.
Investments, including pooled investments, are presented at fair value.
Taxes and taxes receivable
Real estate taxes are levied as of July 1 with a legal, enforceable claim against the property. Amounts not
collected within six months (December 31) are considered delinquent and submitted to outside agencies/entities
for collection actions.
FS - 16
MECHANICSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2014
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd.)
Receivables and payables between funds
Activity between funds that represent lending/borrowing arrangements outstanding at the end of the fiscal year
are referred to as "due from/to other funds". Any residual balances outstanding between the governmental
activities and business-type activities are presented in the district-wide financial statements as"internal balances".
Balances between funds are considered to be short term items pending periodic repayments.
Inventories and prepaid items
Inventories are presented at the lower of cost or market on a first-in, first-out basis, and are expended when
consumed. Donated commodities are recognized as revenue and are inventoried at an estimated cost value.
Certain payments, if any, to vendors reflect expenses applicable to future accounting periods and are presented
as prepaid items in both district-wide and fund financial statements.
Capital assets
Capital assets, which include property, plant, equipment, and infrastructure assets (e.g., roads, sidewalks, and
similar items), are presented in the applicable governmental or business-type activities columns in the district-
wide financial statements. Capital assets are defined by the District as assets with an initial, individual cost of
more than $ 5,000 and an estimated useful life in excess of one year. Management has elected to include certain
homogeneous groups with individual costs of less than $ 5,000 as capital assets for financial presentation
purposes. In addition, capital assets purchased with long-term debt may be.capitalized regardless of the
thresholds established. Such assets are presented at historical cost or estimated historical cost if purchased or
constructed.
Major outlays for capital assets and improvements are capitalized when incurred. 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.
Upon sale or retirement, the cost and related accumulated depreciation, if applicable, are eliminated from the
respective district-wide and proprietary accounts and any resulting gain or loss is reflected in those accounts
FS- 17
MECHANICSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
• JUNE 30, 2014
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd.)
Capital assets (Cont'd.)
Capital assets are depreciated using the straight-line method over the following estimated useful lives:
Governmental Business-type
Assets Activities Activities
Buildings 50 -
Interior renovations 25 -
Land improvements 20 -
Furniture 20 20
Machinery and equipment 10 to 15 15
Library books 5 -
Computer equipment 5 5
Vehicles 8 -
Long-term liabilities
In the district-wide financial statements, and proprietary fund types in the fund financial statements, bonds and
notes payable and other long term obligations are presented as liabilities. Bond discounts (premiums) and any
charges on refundings are amortized over the life of the bonds using the effective interest method.
In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as
bond issuance and charges on refundings; as current period expenditures. The face amount of debt issued is
presented as other financing sources while discounts and charges on refundings are presented as debt service
expenditures. Issuance costs, whether or not withheld from the actual debt proceeds received, are presented as
support service expenditures.
Deferred inflows/outflows of resources
In addition to assets, if applicable, the statement of net position reports a separate section for deferred outflows of
resources, as appropriate. This separate financial statement element, deferred outflows of resources, represents
a consumption of net position that applies to future periods and so will not be recognized as an outflow of
resources (i.e. expense) until then. The District does not have any items that qualify for reporting in this category.
The most common type of item would be the deferred charges on refundings reported in the district-wide
statement of net position. Charges on refundings result from the difference in the carrying value of refunded debt
and its reacquisition price. This amount is deferred and amortized over the shorter of the life of the refunded or
refunding debt.
FS- 18
MECHANCISBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS(Cont'd.)
JUNE 30, 2014
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd.)
Deferred inflows/outflows of resources (Cont'd.)
In addition to liabilities, the governmental funds balance sheet reports a separate section for deferred inflows of
resources, as appropriate. This separate financial statement element, deferred inflows of resources, represents
an acquisition of resources that applies to future periods and so will not be recognized as an inflow of resources
(i.e. revenue) until that time. The District has only one type of item, which arises only under a modified accrual
basis of accounting that qualifies for reporting in this category. Accordingly, the item, unavailable tax revenue, is
reported only in the governmental funds balance sheet. These unavailable revenues from taxes are deferred and
recognized as an inflow of resources in the period that the amounts become available.
Net position
Net position represents the difference between assets and liabilities. In the district-wide financial statements and
proprietary fund financial statements, categories of net position are:
Invested in capital assets (net of related debt) - This category presents all capital assets into one
component of net position. Accumulated depreciation and outstanding debt that are attributable to the
acquisition, construction or improvement of these assets reduce this category.
Restricted — This category presents funds restricted to be used for a specific purpose as per: external
parties, contributors or enabling legislation.
Unrestricted -This category presents the net position of the District, which is not restricted for any project or
other purpose. However, these funds may be committed or assigned for specific projects or purposes in the
fund financial statements.
Temporarily restricted (component unit only) - This category presents external time and/or use restrictions
imposed by donors.
Permanently restricted (component unit only) - This category presents donor-imposed stipulations that they
be maintained permanently with only the income available for specified uses.
Governmental fund balances
GASB has established criteria for classifying fund balances into specifically defined classifications based on a
hierarchy that reflects the extent to which the District is bound to honor constraints on how those funds can be
spent. The District's general policy is to first use restricted funds, if any, prior to using unassigned funds.
Classifications of fund balances are:
FS - 19
MECHANCISBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2014
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd.)
Governmental fund balances (Cont'd.)
Nonspendable - Amounts that cannot be spent because they are either in a (a) non-spendable form (i.e.
inventories) or (b) legally or contractually required to be maintained intact (i.e. the principal of a permanent
fund).
Restricted - Amounts constrained to be used for a specific purpose as per: External parties, contributors or
enabling legislation.
Committed - Amounts constrained to be used for a specific purpose as per: The District's highest level of
decision making authority which is the Board of School Directors.
.Assigned -Amounts intended to be used for a specific purpose as per: Committee or individual authorized by
the Board of School Directors (for example a budget or finance committee, or business manager/financial
officer).
Unassigned - Amounts available for any purpose (amounts that are not Nonspendable, Restricted,
Committed or Assigned) in the General Fund.
Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect certain presented amounts and disclosures.
Accordingly, actual results could differ from those estimates.
Recent accounting standards
There are several GASB pronouncements that will become effective for future reporting periods. Other than the
impact of GASB 68, the District does not currently anticipate any significant impact on the District's financial
statements.
GASB Statement No. 68, effective for the year ending June 2015, is to improve accounting and financial reporting
for pensions. This pronouncement will impact the Statement of Net Position (page FS-1), the Statement of
Activities (page FS-2), and the Pension Plan disclosures in the Notes to Financial Statements. The District
currently expects GASB 68 will have a very large negative impact to the district-wide financial statements.
Subsequent events
In preparing these financial statements, the District has evaluated events and transactions for potential
recognition or disclosure through November 17, 2014, the date the financial statements were available to be
issued.
FS -20
MECHANCISBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2014
CASH AND CASH EQUIVALENTS AND INVESTMENTS
Pennsylvania statutes provide for investment of District funds into authorized investment types including U.S.
Treasury bills, other short-term U.S. and Pennsylvania government obligations, and insured or collateralized time
deposits and certificates of deposit. The statutes do not prescribe regulations related to demand deposits;
however, they do allow the pooling of funds for investment purposes.
Custodial credit risk is the risk that in the event of a depository institution failure, the District's deposits may not be
returned to it. The District's policy requires that all deposits in excess of federal deposit insurance coverage be
collateralized by the depository institution with approved collateral as provided by law.
At June 30, 2014, the District's deposits totaled $ 1,852,734 and the depository institution balances totaled
$ 2,449,552. Of the depository institution balances, $ 250,000 was covered by federal depository insurance
and $ 2,199,552 was collateralized by pooled assets. The pooled assets collateral is held by the Federal
Reserve Bank, but is not titled in the District's name.
The District also has cash equivalents and investments with three organizations that operate as common law
trusts established pursuant to the Intergovernmental.Cooperation Act and related statutes for the purpose of
pooling investments. Each organization's fundamental policy is to maintain a net asset value of$ 1 per share,
but there can,be no assurance that the net asset value will not vary.from $ 1 per share. They may only
purchase securities which are permitted under PA law. As of June 30, 2014, the District's deposits in these
organizations are as follows:
Cash and Cash
Equivalents Investments
Pennsylvania Local Government Investment Trust(PLGIT) $ 12,851,782 $ 4,712,000
Pennsylvania Treasurer's INVEST Program (PA INVEST) 2,540,334 -
Pennsylvania School District Liquid Asset Fund (PSDLAF) 1.452,938 8.745.000
16.845.054 13.457.000
Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment. The
District does not have a formal investment policy for interest rate- risk. The weighted average maturity of the
securities held by each of the organizations is generally less than 90 days.
FS-21
MECHANICSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2014
CASH AND CASH EQUIVALENTS AND INVESTMENTS (Cont'd.)
Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The District
does not have a formal investment policy for credit risk. The District's deposits in each of the organization's were
rated"AAAm" by Standard & Poor's.
Cash and cash equivalents and investments at June 30, 2014 are as follows:
Cash and Cash
Equivalents Investments
Governmental activities $ 16,578,697 $ 13,457,000
Business-type activities 825,056 -
Fiduciary funds 1,294,035 -
Total cash and cash equivalents and investments 18.697.788 LjIAE,000
Investments consist of certificates of deposits with original maturities of more than three months from the date of
acquisition.
TAXES RECEIVABLE
Taxes receivable are as follows:
Taxes Taxes Unavailable
Receivable Allowance for Receivable Tax
(Gross) Uncollectibles (Net) Revenue
Real estate taxes $ 653,000 $ (26,000) $ 627,000 $ 227,910
Earned income taxes 3,097,000 - 3.097,000 1,416.950
General Fund 3,750,000 (26,000) 3,724,000 1,644,860
Full accrual adjustment - - - (1,644.860)
Governmental activities $ 3.750.000 (26.000) 3.724.000 $ -
FS-22
MECHANICSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2014
DUE FROMITO OTHER FUNDS AND INTERFUND TRANSFERS
Interfund balances are as follows:
Assets Liabilities
General Fund $ 147,287 $ 147,287 Food Service Fund
Interfund transfers were as follows:
Other financing sources Other financing uses
Debt Service Fund $ 4,723,779 $ 4,723,779 General Fund
DUE FROM OTHER GOVERNMENTS
Due from other governments are as follows:
Governmental Business-type
Activities Activities
Local sources—other taxes $ 74,533 $ -
Local sources—other items 600,373 -
State sources 997,792 2,234
Federal sources 191.495 26,532
$ 1,$64,193 $ 28,766
FS-23
MECHANICSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2014
CAPITAL ASSETS
Changes in capital assets were as follows:
Beginning Ending
Balance Increases Decreases Balance
Governmental activities
Capital assets not being depreciated
Land $ 605,983 $ - $ - $ 605,983
Construction in progress 75,795 159,767 (75,795) 159.767
681,778 159,767 (75,795) 765,750
Capital assets being depreciated
Land improvements 5,306,901 402,593 - 5,709,494
Buildings and improvements 88,610,037 1,343,879 - 89,953,916
Furniture and equipment 5,898,075 616,933 (604,069) 5,910,939
Library books 1,874,114 65.865 (46,035) 1,893,944
101,689,127 2,429,270 (650,104) 103,468,293
Accumulated depreciation
Land improvements (2,993,800) (242,311) - (3,236,111)
.Buildings and improvements (29,653,005) (2,679,307) - (32,332,312)
Furniture and equipment (4,623,341), (509,446) 570,798 (4,561,989)
Library books (1,721,754) (75,271) 46,035 (1,750,990)
(38,991,900) (3,506,335) 616,833 (41,881,402)
Capital assets being depreciated, net 62,697,227 (1,077,065) (33,271) 61,586,891
Governmental activities capital assets, net 63.379.005 $ (917.298) $ (109,0666) 62.352.641
Business-type activities
Capital assets being depreciated
Equipment $ 1,088,178 $ 10,031 $ (64,802) $ 1,033,407
Accumulated depreciation
Equipment (821,792) (59,667) 64,675 (816,784)
Capital assets being depreciated, net 266,386 (49,636) (127) 216.623
Business-type activities capital assets, net $ 266,386 (49.636) $ (1127) $ 216 623
FS -24
MECHANICSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Confd.)
JUNE 30, 2014
CAPITAL ASSETS(Cont'd.)
Depreciation expense was charged to functions/programs as follows:
Governmental activities
Instruction $ 2,244,197
Instructional student support 742,704
Administrative and financial support 251,172
Operation and maintenance of plant 161,480
Transportation 9,616
Student activities 64,299
Community services 32,867
$ 3.506_335
Business-type activities- Food service $ 59,667
LONG-TERM LIABILITIES
Changes in all long-term liabilities were as follows:
Beginning Ending Due Within
Balance Increases Decreases Balance One Year
Governmental activities
Bonds and notes payable $ 49,985,000 $ - $ (3,375,000) $ 46,610,000 $ 3,895,000
Compensated absences 630,548 156,132 (180,000) 606,680 200,000
Other post employment benefits 741,926 311,084 (123,850) 929,160 150,000
51,357,474 $ 467,216 (3,678,850) S 48.145.840 $ 4^245.000
Business-type activities
Compensated absences $ 8,399 $ - (4.808) $ 3,591 $ 539
FS-25
MECHANICSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2014
LONG-TERM LIABILITIES (Cont'd.)
Bonds and notes payable
Changes in bonds and notes payable were as follows:
Beginning Scheduled Ending
Balance New Issue Refunding Redemptions Balance
2000 Series C Notes $ 3,915,000 $ - $ - $ (1,075,000) $ 2,840,000
2009 Series 9,740,000 - - (1,255,000) 8,485,000
2010 A Series 4,990,000 - - (5,000) 4,985,000
2010 AA Series 12,335,000 - - (905,000) 11,430,000
2011 Series 9,990,000 - - (5,000) 9,985,000
2013 Series 9,015,000 - - (130,000) 8,885,000
49.985.000 $ - $ - $ (3.375.000) 46.610.000
Due Within
Interest Rates Maturity Date Callable Date One Year
2000 Series C Notes Variable rate stabilized
at 4.50% October 2016 Currently $ 1,120,000
2009 Series 2.00%to 3.90% August 2021 August 2014 1,305,000
2010 A Series 1.00%to 3.55% August 2023 August 2015 5,000
2010 AA Series 1.00% to 3.80% August 2026 August 2015 930,000
.2011 Series . 2.00%to 2.25% August 2019 August 2016 5,000
2013 Series 0.40% to 2.25% August 2026 February 2018 530,000
3.895.000
Scheduled debt service requirements are as follows:
Year Ending June 30 Principal Interest Total
2015 $ 3,895,000 $ 1,241,990 $ 5,136,990
2016 4,380,000 1,120,873 5,500,873
2017 4,475,000 1,003,858 5,478,858
2018 4,810,000 899,929 5,709,929
2019 4,920,000 794,639 5,714,639
2020-2024 21,505,000 1,888,382 23,393,382
2025-2026 2,625,000 127.021 2.752.021
46.610.000 7.076.692 $ 53 686.692
FS -26
MECHANICSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2014
LONG-TERM LIABILITIES (Cont'd.)
Compensated absences
Compensated absences (those for which employees receive pay) are presented using the termination payment
method. A liability is computed using estimates which apply historical data to current factors. The District
maintains records of unused leave and applies the contracted rate for employees eligible for termination
payments. The District allows only restricted sabbatical leave and therefore does not present any liability in
advance of the sabbatical. Payments for compensated absences are made in the year the absence is taken or the
employee retires. When an employee retires, the payout is as follows:
Unused sick leave will be paid at the following rates:
Percentage of
Number of Years Accumulated Days
Less than ten 20 %
10 through 14 35 %
15 or more 50 %
For teachers and administrators, any unused sick leave shall be paid at the daily substitute rate.
For support staff and Food Service Fund employees, unused sick leave will be paid at the lowest hourly rate
for support employees.
Retirement incentive payments
Professional employees who become eligible for retirement without penalty, and have at least 20 years of service,
are eligible for a one time District payment made to their individual 403(b) retirement account of$ 10,000. These
incentive payments are included as compensated absences once employees have met the District's eligibility
requirements.
FS -27
MECHANICSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2014
LONG-TERM LIABILITIES (Cont'd.)
Other post employment benefits (OPEBs)
OPEBs are presented in accordance with GASB Statement No. 45, which requires their recognition as part of the
compensation package of active employees for services rendered. The cost and obligation for OPEBs are
measured by an actuarial valuation.
Plan description
Eligible retirees (see pension plan) including teachers, administrators, and support staff are allowed to
continue coverage for themselves and their dependents until the retiree attains the Medicare eligible age. In
order to obtain coverage, retired employees must provide payment equal to the premium determined for the
purpose of COBRA. District administrators must meet PSERS retirement eligibility requirements to qualify.
Teachers must meet the same PSERS requirements plus have a least 20 years of service with the District.
Retiree's premiums are less than the District's actual cost to provide health care coverage to retirees. The
premium amount retirees pay is a blended rate for covering both active and retired Plan members. The fact
that the blended rate that retirees pay is less than the cost of covering retired members and their beneficiaries
results in what is known as an"implicit rate subsidy,"which creates an additional cost to the District.
Participant information
Active participants 498
Vested former members 37
Retired participants 35
570
Funding policy
The District funds Plan liabilities on a "pay-as-you-go" basis, and has not established an OPEB trust fund to
accumulate assets to fund Plan obligations. The District has no statutory or contractual obligation to fund the
Plan and would only do so at the District's discretion.
FS -28
MECHANICSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2014
LONG-TERM LIABILITIES (Cont'd.)
Other post employment benefits (OPEBs) (Cont'd.)
Annual OPEB cost and net OPEB obligation
The annual OPEB cost (expense) is calculated based on the actuarially determined annual required
contribution (ARC) of the District. The ARC represents a funding level that if paid on an ongoing basis is
projected to cover normal cost each year and amortize any unfunded actuarial accrued liability (UAAL) over 7
years (1 year remaining).
Components of the District's annual OPEB cost, the amount contributed to the Plan, and changes in the net
OPEB obligation are as follows:
District normal cost $ 123,654
Amortization of unfunded actuarial accrued liability 266.526
Annual required contribution 390,180
Interest on the net OPEB obligation 33,387
Adjustment to the ARC (112.483)
Annual OPEB cost 311,084
Contributions made to the plan (123.850)
Increase in net OPEB obligation 187,234
Net OPEB obligation -beginning 741.926
Net OPEB obligation -ending $ 929,160
The percentage of annual OPER cost contributed was as follows:
Percentage of
Annual Annual OPEB Net OPEB
Year ended OPEB Cost Cost Contributed Obligation
June 2014 $ 311,084 39.81% $ 929,160
Funding status and funding progress
The District's actuarial accrued liability (AAL) for OPEBs as of July 2012 was $ 1,757,981. There are no Plan
assets, thus, the entire amount is unfunded. The District does not have any current plans to fund the AAL.
Actuarial `UAAL as
Actuarial Actuarial Accrued a% of
Valuation Value of Liability Unfunded Funded Covered Covered
Date Assets (AAL) AAL Ratio —Payroll _ Payroll
July 2012 $ - $ 1,757,981 $ 1,757,981 0.00% $ 24,344,290 7.22%
FS-29
MECHANICSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2014.
LONG-TERM LIABILITIES (Cont'd.)
Other post employment benefits(OPEBs) (Cont'd.)
Actuarial assumptions and methods
Actuarial assumptions and methods used in the July 2012 actuarial valuation include the following:
Interest rate 4.50%
General inflation rate 3.00%
Health care cost trend rate 7.5% in 2013,decreasing by 0.5% per year to 5.5% in 2016.
Rates gradually decrease from 5.3% in 2017 to 4.2% in 2089
and later.
Actuarial cost method Benefits are allocated on a level basis over the earnings of
an individual from date of hire to assumed retirement date
Amortization (blended) Active employees over expected future service period, and
retirees over expected future payment period
Actuarial evaluations on an ongoing basis involve estimates of the reported amounts and assumptions about
the probability of events far into the future. Examples include assumptions about future employment,
mortality, and the healthcare cost trend. Actuarially determined amounts are subject to continual revision as
actual results are compared to past expectations and new estimates are made about the future.
Projections of benefits Lire based on the types of benefits provided under the plan at the time of each
valuation and on the pattern of sharing of benefit costs between the District and plan members to that point in
time.
Actuarial calculations reflect a long-term perspective, and consistent with that perspective, actuarial methods
and assumptions used include techniques that are designed to reduce short-term volatility in accrued
liabilities.
The required schedule of funding progress in the other required supplementary information (ORSI)
immediately following the notes to financial statements, presents multi-year trend information about whether
the actuarial value of Plan assets is increasing or decreasing over time relative to the actuarial accrued
liability for benefits. However, because the District maintains no Plan assets, information relative to Plan asset
disclosures is not applicable.
FS-30
MECHANICSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2014
OPERATING LEASES
The District is obligated under various equipment and modular classroom lease agreements at June 30, 2014.
Total Operating lease payments included in General Fund expenditures for the year ended June 30, 2014
amounted to approximately $ 148,300. The following is a schedule of future minimum rental payments under the
operating lease agreements required for the years ending:
2015 $ 158,167
2016 158,167
2017 40,399
2018 33,804
2019 14,876
Total minimum payments required $ -- 405413
PENSION PLAN
Substantially all full-time and part-time employees of the District participate in the pension plan. The District
recognizes expenditures or expenses equal to its contractually-required contributions, subject to the modified
accrual basis of accounting in governmental funds.
The District contributes to Public School Employees' Retirement System (the System), a governmental cost
sharing multiple-employer 401(a) defined benefit plan. The plan is under the authority of The Public School
Employees' Retirement Code (the Code), as amended. The plan provides retirement and disability, legislatively
mandated ad hoc cost-of-living adjustments, and healthcare insurance premium assistance to qualifying
annuitants. The System issues a comprehensive annual financial report that includes financial statements and
required supplementary information for, the plan. A copy of the report may be obtained by writing to the System at
5 N 5th Street, Harrisburg, PA 17101-1905, or on the System's website.
The contribution policy is established in the Code and requires contributions by active members, employers and
the Commonwealth. Contribution rates for active members are set by law and are dependent upon members'
class. In most cases,the member contribution rates based on qualifying compensation are as follows:
Membership Class T-C Active members hired before July 22, 1983 5.25%
Membership Class T-C Members hired on or after July 22, 1983 6.25%
and who were active or inactive as of July 1, 2001
Membership Class T-D Active members hired before July 22, 1983 6.50%
Membership Class T-D Members hired on or after July 22, 1983 7.50%
and who were active or inactive as of July 1, 2001
Membership Class T-D Members hired from July 1, 2001 thru June 30, 2011 7.50%
FS- 31
MECHANICSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2014
PENSION PLAN (Cont'd.)
Members hired after June 30, 2011 are automatically Membership Class T-E and have a member contribution
rate of 7.50% (base rate). Members hired after June 30, 2011 who elect Membership Class T-F have a member
contribution rate of 10.30% (base rate). Membership Class T-E and T-F are affected by a `shared risk' provision in
Act 120 of 2010 that in future fiscal years could cause the Membership Class T-E contribution rate to fluctuate
between 7.50% and 9.50% and Membership Class T-F contribution rate to fluctuate between 10.30% and
12.30%.
Contributions required of employers are based upon an actuarial valuation. For the fiscal year ended June 2014
the employer contribution rate was 16.93 percent of covered payroll, composed of 16.00 percent for pension
benefits and 0.93 percent for healthcare insurance premium assistance. District's contributions to the System for
years ended June 2014, 2013 and 2012 were $ 4,185,126 $ 3,087,937 and $ 2,112,090, respectively. Those
amounts are equal to the required contributions for each year.
RISK MANAGEMENT
Health insurance
The District is a member of South Central Trus( for processing claims and obtaining reinsurance through
commercial insurance carriers, but the Trust is not a risk sharing pool. The District has reinsurance for claims in
excess of $ 125,000 specific (per person). Financial statements of the trust are provided to member districts..
District transactions with the trust were as follows:
Cash balance in the trust- beginning $ 1,853,499
Payments from the District and its retirees 5,556,313
Benefit claims paid by the trust $ (5,218,732)
Stop loss premiums and commissions, net of reimbursements (96,270)
Administrative and other fees, net of interest earned (9,610)
(5,324,612)
Cash balance in the trust-ending 2,085,200
Prepaid health insurance 1.050.000
Amount available for accrued benefit claims 1.035.200
FS-32
MECHANICSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2014
RISK MANAGEMENT(Cont'd.)
Health insurance(Cont'd.)
The amount available for benefit claims was as follows:
Accrual for benefit claims incurred $ 515,670
Accrual for health insurance coverage on payroll payable 519,530
Amount available for accrued benefit claims $ 1.035.200
There are various methodologies for estimating a reasonable level for claims that have been incurred but not
reported (IBNR). District management has selected the methodology of approximating paid claims using their
actual runout of claims reported plus an additional estimate for unreported claims. District management believes
this methodology provides an adequate amount for accrued claims.
Other insurance
The District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets;
errors and omissions; injuries to employees; and natural disasters. The District maintains commercial insurance
coverage covering each of those risks of loss. Management believes such coverage is sufficient to preclude any
significant uninsured losses to the District. Settled claims have not exceeded this commercial coverage in any of
the past three fiscal years.
For State unemployment compensation laws, the District is self-insured, which is a common practice for local
governmental units. Any unemployment claims are paid by the District on a quarterly basis as incurred.
For workers' compensation insurance, approximately 80 Districts participate in a public entity risk sharing pool
(School Districts Insurance Consortium) for processing claims and obtaining reinsurance through commercial
insurance carriers. Under this plan, the District's annual cost should not exceed standard commercial insurance
rates.
COMMITMENTS AND CONTINGENCIES
Other commitments and contingencies
The District's collective bargaining agreement with its teaching staff expires June 30, 2017.
In the normal course of business, the District is subject to legal disputes and claims. The District does not
anticipate any material losses from any pending or threatened litigation.
FS-33
MECHANICSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS (Cont'd.)
JUNE 30, 2014
COMMITMENTS AND CONTINGENCIES (Cont'd.)
In the normal course of preparing for the subsequent school year, the District has awarded bids for various
supplies, fuel contracts, etc. No major commitments in excess of routine requirements have been made by the
District.
The District participates in state and federal grant programs which are governed by various rules and regulations.
Expenditures charged to these grant programs are subject to program compliance audits and reviews by the
grantor agencies. The District is potentially liable for any expenditures which may be disallowed by the rules of
these grant programs. The District does not anticipate any material disallowance of program expenditures. The
District is also audited by the State's Department of the Auditor General. Findings, if any, from these audits could
result in the repayment of funds, or receipt of additional funds.
As part of its ongoing capital projects, the District has entered into contract commitments approximating
$ 724,000 for the completion of various construction projects at June 30, 2014.
COMMITTED FUND BALANCE
Committed amounts of fund balance of the General Fund are as follows:
Pension plan rate increases $ 5,478,029
Health insurance 3,425,378
Retirement of long-term debt 3,079,742
Capital outlays 5,000,000
Technology 1,500.000
S 18.483.149
SUBSEQUENT EVENTS
In October 2014, the District approved refinancing the Series of 2009 General Obligation Bonds with the issuance
of General Obligation Notes Series of 2014 in the amount of $ 7,000,000. The targeted net savings of the
refinancing after an initial District cash contribution of$ 300,000 is expected to approximate $ 450,000 over the
life of the new debt.
FS-34
MECHANICSBURG AREA SCHOOL DISTRICT
BUDGETARY COMPARISON INFORMATION -GENERAL FUND
YEAR ENDED JUNE 30, 2014
Budgeted Amounts Variance With
Original Final Actual Final Budget
Revenues
Local sources-taxes $ 38,719,878 $ 38,719,878 $ 41,003,447 $ 2,283,569
Local sources-other 1,779,450 1,779,450 2,082,258 302,808'
State sources 12;991,284 12,991,284 12,814,471 (176,813)
Federal sources 570,757 570,757 587,386 16,629
Total revenues 54,061,369 54,061,369 56,487,562 2,426,193
Expenditures
Regular programs 24,101,528 24,089,528 23,022,725 1,066,803
Special programs 7,311,070 7,205,070 7,031,293 173,777
Vocational programs 257,367 257,367 228,717 28,650
Other instructional programs 350,977 456,977 452,885 4,092
Higher education programs 462,797 462,797 461,748 1,049
Pupil personnel 1,885,123 1,885,123 1,698,184 186,939
Instructional staff 2,560,646 2,492,646 2,381,436 111,210
Administration 2,862,942 2,903,942 2,867,531 36,411
Pupil health 646,950 685,950 670,267 15,683
Business 603,375 603,375 545,244 58,131
Operation and maintenance of plant 4,708,021 4,708,021 3,747,263 960,758
Student transportation 1,667,152 1,667,152 1,641,256 25,896
Central services 150,192 150,192 147,069 3,123
Other support services 146,245 146,245 62,153 84,092
Student activities 1,311,481 1,183,781 968,267 215,514
Community services 489,817 617,517 609,410 8,107
Capital outlay 12,500 12,500 12,300 200
Debt service - - - -
Total expenditures 49,528,183 49,528,183 46,547,748 2,980,435
Excess(deficiency)of revenues over expenditures 4,533,186 4,533,186 9,939,814 5,406,628
Other financing sources(uses)•
Transfers from other funds 53,500 53,500 - (53,500)
Transfers to other funds (5,507,187) (5,507,187) (4,723,779) 783,408
Budgetary reserve (63,500) (63,500) - 63,500
Net change in fund balances (984,001) (984,001) 5,216,035 6,200,036
Fund balance-beginning 14,879,040 94,879,040 19,225,108 4,346,068
Fund balance-ending $ 13,895,039 $ 13,895,039 $ 24,441,143 $ 10,546,104
ORSI - 1
MECHANICSBURG AREA SCHOOL DISTRICT
OTHER POST EMPLOYMENT BENEFIT PLANS
JUNE 30, 2014
HEALTH CARE BENEFITS
SCHEDULE OF FUNDING PROGRESS
Actuarial UAAL as
Actuarial Actuarial Accrued a % of
Valuation Value of Liability Unfunded Funded Covered Covered
Date Assets (AAL) AAL Ratio Payroll Payroll
July 2012 $ - $ 1,757,981 $ 1,757,981 0.00% $ 24,344,290 7.22%
July 2010 - 1,424,261 1,424,261 0.00%. 23,290,133 6.12%
July 2008 - 1,288,868 1,288,868 0.00% 20,610,024 6.25%
The District is required to have an actuarial valuation at least biennially (every 2 years). If the plan experiences
significant changes, a new actuarial valuation should be performed rather than waiting for the next scheduled
valuation date.
ORSI -2