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HomeMy WebLinkAbout06-0289 . O~ ~ ,;2gtj cwJ . . . BIG SPRING SCHOOL DISTRICT FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2005 . . . . . . . . . TABLE OF CONTENTS . INDEPENDENT AUDITORS' REPORT . MANAGEMENT'S DISCUSSION AND ANALYSIS BASIC FINANCIAL STATEMENTS District-wide financial statements . Statement of net assets Statement of activities Fund financial statements . Balance sheet - governmental funds Reconciliation of the governmental funds balance sheet to the statement of net assets . Statement of revenues, expenditures, and changes in fund balances - governmental funds . Reconciliation of the governmental funds statement of revenues, expenditures, and changes in fund balance to the statement of activities Statement of net assets - proprietary funds Statement of revenues, expenses, and changes in net assets - proprietary funds . Statement of cash flows - proprietary funds Statement of net assets - fiduciary funds NOTES TO FINANCIAL STATEMENTS . BUDGETARY COMPARISON INFORMATION - GENERAL FUND . Page Number IAR - 1 to IAR - 2 MDA-1toMDA-10 FS-1 FS-2 FS - 3 FS -4 FS - 5 FS -6 FS -7 FS -8 FS - 9 FS -10 FS - 11 to FS - 25 BCI-1 . . .1 . . . . . ., . . GREENAWALT & COMPANY, P.C. CERTIFIED PUBLIC ,A.CCQUNTANTS JAMES E. LYONS HOWARD R. GREENAWALT CREEDON R. HOFFMAN DEBORAH J. KELLY R, A. GREENAWALT (1956-1983) A. A. REIDINGER (RETIRED) C. EDWARD ROGERS, JR 400 WEST MAIN STREET MeCHANICSBURG, PENNSYLVANIA 17055 (711)166-4763 FAX (717) 766-2731 62 WEST POMFRET STREET CARLISLE, PA 17013 (717)243-4822 FAX ('111) 251'>-9372 INDEPENDENT AUDITORS' REPORT Board of School Directors Big Spring School District Newville, Pennsylvania We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of Big Spring School District as of and for the year ended June 30, 2005, which collectively comprise the District's basic financial statements as listed in the table of contents, These financial statements are the responsibility of the District's management. Our responsibility is to express an opinion on these financial statements based on our audit. The prior year summarized comparative information has been derived from the District's June 30, 2004 financial statements and, in our report dated October 20, 2004, we expressed unqualified opinions on the respective financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information, We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation, We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, 'In all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of Big Spring Schooi District, as of June 30, 2005, and the respective changes in financial position and cash flows, where applicable, thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued our reports dated November 14, 2005, on our consideration of Big Spring School District's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters, The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance, That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. IAR-1 MEMBERS __ AMERTC:\N INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS -- PENNSYLVANIA INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS . Board of Directors Big Spring School District . . Management's discussion and analysis on pages MDA - 1 through MDA - 10 and budgetary comparison information on page BCI . 1 are not a required part of the basic financial statements but are supplementary information required by accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it. . ~~/?c. GREENAWALT & COMPANY, P,C. . October 14, 2005, except for paragraph 4 which is dated November 14, 2005 Mechanicsburg, Pennsylvania . . . . . IAR-2 . . . . . . . . . . . . BIG SPRING SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30, 2005 This discussion and analysis provides an overview of the District's financial performance for the year ended June 2005, This is the third year we have reported in accordance with GASB Statement No, 34, Basic Financial Statements - and Management's Discussion and Analysis - for State and Local Governments. Management's Discussion and Analysis (MD&A) includes comparisons of financial position at June 2005, 2004 and 2003, The MD&A also includes comparisons of current year financial activities to the previous year. Please read our discussion and analysis in conjunction with the District's financial statements, which begin on page FS-I, In this discussion and analysis, dollar amounts are presented in millions, to make it easier to read, FINANCIAL HIGHLIGHTS General Fund revenues for 2004-2005 increased by 12,69% from 2003-2004, partly due to the ElT changes described below. General Fund expenditures for 2004-2005 increased by 4.73% from 2003-2004. For the 2002-2003 fiscal year, the District eliminated its occupation assessment tax and replaced it with a 1,65% earned income tax (ElT) following a successful referendum based on Act 24. Following implementation of the new EIT, the District experienced substantial cash flow lags and revenue budget shortfalls in the 2002-2003 and 2003-2004 fiscal years. However, the District's ElT revenue exceeded the budgeted figure by approximately $0,1 million in 2004-2005, revealing a multi-year revenue recovery that our District must consider when contemplating additional shifts towards ElT based revenue, This has been instrumental in stabilizing the District's fund balance as 2004-2005 revenues were approximately $0,6 million greater than expenditures. The District revised its delinquent personal tax revenue budget downward each year following the implementation of the Act 24 shift away from the occupation assessment tax. The District has found that implementation studies by governmental entities that endorsed Act 24 frequently omitted the impact of the reduced delinquent tax revenue stream that must be a natural consequence of eliminating its source tax. In May 2005, the District declined to opt into Act 72 which would have provided, if the program operated as intended, gambling revenue from the Commonwealth of Pennsylvania in the form of property tax reductions, Among other provisions, it would have required the district to submit future property tax increases to referendum if the increase exceeded a predetermined "index" amount. As a part of our multi-year construction program, by June 2005, we were completing the renovation of a portion of our former middle school building into a fitness center and an administration office, We also entered the final phase of renovating our old high school into a middle school. During 2005-2006 we expect to convert the balance of the former middle school into an elementary school. MDA-I . . BIG SPRING SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30, 2005 USING THESE FINANCIAL STATEMENTS . . This report contains a series of financial statements. The Statement of Net Assets and the Statement of Activities are on pages FS-l and FS-2, These statements provide information about the District as a whole, and present a longer-term view of District finances than fund financial statements. Fund financial statements are on pages FS-3, FS-5 and FS-7 through FS-IO. For governmental funds, the statements show how District services have been financed in the short term, as well as the amount remaining for future spending, Proprietary funds statements provide information about non-governmental operations, in this case food service. The fiduciary funds statement reports amounts held in trust by the District for student activities. . Page FS-4 reconciles total governmental fund balances to total net assets of governmental activities. Page FS-6 reconciles the total net change in governmental fund balances to the change in net assets of governmental activities, District-wide Financial Statements . District-wide statements present financial activities and the results of those activities in two categories, governmental and business-type. Capital assets (land, buildings, improvements, furniture and equipment) are included with all other assets. Long-term debt is included with all other liabilities, This is distinctly . different from the fund statements in which assets and liabilities are separated into various funds such as General and Capital Projects, In the district-wide statements, the approach to measurement of revenues and expenses is similar to that used in the private sector and is referred to as the accrual basis of accounting. This is disclosed further in the . notes to financial statements. Fund Financial Statements . Fund statements provide financial information about the District's funds rather than the District as a whole, There are three types of funds, Governmental, Proprietary and Fiduciary. The use of each type of fund is disclosed in the notes to financial statements. Unlike district-wide statements that report revenues on the accrual basis, the fund statements report revenues only to the extent cash has been received, or is expected to be received in the near future. . MDA - 2 . . . BIG SPRING SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30, 2005 . THE DISTRICT AS A WHOLE Statement of Net Assets . Total net assets were $14,1 million at June 2005, which is an increase of$l.O million from June 2004 and a total decrease of $0.3 million from June 2003. The following summarizes the Statement of Net Assets (page FS-I). Governmental Business-type . Activities Activities Totals 2005 2004 2003 2005 2004 2003 2005 2004 2003 Current and other assets $10.8 $17.8 $20.7 $ 0.1 $ 0.1 $ 0,] $10,9 $17.9 $20.8 . Capital assets 45,5 39.0 39,0 0.7 0.5 0.6 46.2 39.5 39,6 Total assets $ 56.3 $56,8 $59,7 $ 0.8 $ 0.6 $ 0,7 $57,1 $57.4 $60.4 Current and other liabilities $ 4.0 $ 3.1 $ 3.3 $ $ $ - $ 4.0 $ 3.1 $ 3.3 Long-term liabilities 38,9 41.1 42,6 0,1 0.1 0.1 39.0 41.2 42.7 . Total liabilities 42.9 44.2 45.9 0.1 0,1 0,1 43.0 44.3 46.0 Capital assets (net of related debt) 7.7 (0,8) (1.9) 0.7 0.5 0.6 8.4 (0.3) (1.3) Restricted for capital projects 4.6 12.2 13,5 4.6 12.2 13.5 Unrestricted 1.1 1.2 2,2 1.1 1.2 2,2 . Total net assets 13.4 12,6 13,8 0,7 0,5 0.6 ]4.1 13.1 14.4 Total liabilities and net assets $ 56.3 $56,8 $59,7 $ 0.8 $ 0.6 $ 0.7 $57.1 $57.4 $60.4 Net assets are the difference between assets and liabilities, and represent resources that can be used to pay . for future operations and capital improvements, The majority of our 2005 net assets, $13,0 million out of $14.1 million total, are invested in capital assets (net of related debt) or restricted for capital projects, . MDA - 3 . . BIG SPRING SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30, 2005 . Statement of Activities . The following summarizes the Statement of Activities (page FS-2). It shows that total net assets increased by $1,0 million during 2005. Net assets actually decreased by $0.3 million, prior to the impact of the special item related to changes in the recorded value of capital assets, as more fully explained on pages FS-19 and FS-20. . . Program revenues Charges for services Operating grants and contributions Capital grants and contributions General revenues Taxes Earnings on investments State general subsidies Total revenues . . Direct expenses Excess revenues (expenses) before transfers and special item . Transfers between activities Special item - change in capital assets Change in net assets . Governmental Activities 2005 2004 Business-type Activities Totals $ 0.2 $ 0.2 5.7 5,0 1.2 0.4 15.6 14.4 0.3 0.1 7.7 7,6 30,7 27.7 30,7 28,8 2005 ~!004 2005 2004 (1.1 ) (0,2) 1.0 (0.2) $ 0.7 $ 0.7 0.3 0.3 $ 0.9 $ 0,9 6.0 5.3 1.2 0.4 1.0 1.0 15,6 14.4 0.3 0.1 7.7 7.6 31.7 28,7 1.3 1.2 32.0 30.0 (0.3) (0,2) (0.3) (1.3) 0.2 0.3 0.2 1.3 $ 1.0 $ (1.3) $ 0,8 $ (1.3) $ 0.2 $ The change in net assets IS the difference between revenues and expenses using the accrual basis of accounting, . . MDA - 4 . . BIG SPRING SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30, 2005 . The following summarizes expense information from the Statement of Activities (page FS-2). Direct expenses represents the actual cost of providing the services while the net expense represents the amount of cost that is not recovered through program revenues, meaning user charges, grants and contributions. The net expense must be recovered through general revenues, primarily taxes and state general subsidies, Amounts not recovered reduce funds available for future years. Governmental Activities . Direct Program Net Expenses Revenues Expense 2005 2004 2005 2004 2005 2004 . Instruction $ 18.8 $ 17.4 $ 4.3 $ 3,5 $ 14.5 $ 13.9 Instructional student support 2J 2,2 0.2 0.2 2.1 2.0 Administrative and financial support 2.4 2J 0.1 0.1 2.3 2.2 Operation and maintenance of plant 3,2 2,9 0.1 0.1 3,1 2,8 Pupil transportation 1.8 1.7 1.3 1.2 0.5 0.5 . Student activities 0.6 0.6 0.1 0.1 0.5 0.5 Community services Interest on long-tenn debt 1.6 1.7 1.0 0.4 0.6 1.3 $ 30,7 $ 28,8 $ 7.1 $ 5.6 23.6 23.2 . Transfers to business-type activities 0.2 0.2 Special item - change in capital assets ( 1.0) Net expenses - governmental activities 22.8 23.4 State general subsidies revenues 7,7 7,6 Total needs from taxes and other local sources $ 15.1 $ 15,8 . Business-type Activities Direct Program Net Expenses Revenues Expense 2005 2004 2005 2004 2005 2004 . Food service $ 1.3 $ 1.2 $ 1.0 $ 1.0 $ OJ $ 0,2 Transfers from governmental activities and investment earnings (0,2) (0.2) Special item - change in capital assets (0.3) . Net expense (revenue) $ (0.2) $ (0,0) MDA - 5 . . . BIG SPRING SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30, 2005 THE DISTRICT'S FUNDS . Governmental Funds Governmental fund balances . 2004-2005 2003-2004 2005 2004 2003 Change Change General Fund - unrestricted $ 0,6 $ 0,1 $ 2.1 $ 0,5 $ (2.0) Capital Reserve Fund - unrestricted 0.5 0.1 (0.5) 0.4 . Athletic Fund - unrestricted Capital Projects Fund - restricted 4,6 12,2 \3.5 (7.6) (1.3) $ 5.2 $ 12.8 $ 15,7 $ (7,6) $ (2.9) . Total unrestricted $ 0.6 $ 0.6 $ 2.2 $ $ (1.6) Total restricted 4.6 12,2 \3,5 (7.6) (1.3) $ 5,2 $ 12.8 $ 15.7 $ (7.6) $ (2.9) . Changes from 2004 to 2005 The General Fund had budgeted a $0.2 million decrease in fund balance, The actual increase was $0.5 million. The $0,7 million difference was primarily because actual revenue exceeded budgeted revenue. This is summarized on page BCI - 1 (budgetary comparison information). . The Capital Reserve Fund decrease of $0.5 million was primarily the roof n:placement and sewer extension projects at Plainfield elementary school. . The Capital Projects Fund decrease of $7.6 million was for various phases of converting the old high school and portions of the former middle school. . MDA - 6 . . . BIG SPRING SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30, 2005 Changes from 2003 to 2004 . The General Fund had budgeted a $0.4 million decrease in fund balance. The actual decrease was $2.0 million. The primary causes were actual revenue being $0.5 million less than had been budgeted, and $1.0 million not being available to the General Fund because it was needed in the Capital Projects Fund for construction and renovation projects, . The Capital Reserve Fund increase of $0.4 million was primarily the result of the $0.4 million transfer from the General Fund to support future capital improvements, . The Capital Projects Fund decrease of $1,3 million was primarily the result of $0,7 million of expenditures to complete the new high school project, and $0.7 million of upfront costs related to upcoming building renovation projects, . General Fund Budget The following summarizes the budgetary comparison information presented on page BCl-l, along with comparisons to the previous year, . Original Budget Actual Variance 2005 2004 2005 2004 2005 2004 Total revenues $ 29.5 $ 27.5 $ 30,7 $ 27.2 $ 1.2 $ (OJ) . Total expenditures 30.0 27.9 29,9 28.5 (0.1) 0,6 Excess revenues (expenditures) (0.5) (0.4) 0.8 (1.3) 1.3 (0.9) Other financing sources (uses) OJ (OJ) (0,6) (0.6) (0.6) Net change in fund balance $ (0.2) $ (0.4) $ 0,5 $ (1.9) $ 0.7 $ (1.5) . In 2005, actual revenues exceeded the original budgeted amount by $1.2 million. The two largest factors were $0.5 million more for federal and state grants than originally budgeted, and $0.7 million for unbudgeted one time subsidies related to the completion of construction projects, Actual expenditures were . within $0.1 million of the original budgeted amount. Other financing sources (uses) resulted in a negative budget variance of$0.6 million, Additional details are on page BCI-l (budgetary comparison information). MDA - 7 . . BIG SPRING SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30, 2005 . . The 2004 revenue variance was primarily due to earned income tax revenue being less than budgeted. Actual expenditures were $0.6 million, approximately two percent, below the budgeted amount. Other financing sources (uses) resulted in a negative budget variance of$0.6 million, CAPITAL ASSETS . When construction projects are completed, the construction in progress balances are moved into the respective categories, and depreciated over their estimated useful lives, The new high school was completed and placed in service in August 2003, . 2005 . Governmental activities Land $ 0.5 Construction in progress 7 A Buildings and improvements 35,1 Furniture and equipment 104 Library books 0.2 Computer equipment 0.9 $ 45.5 . . Business-type activities Furniture and equipment $ 0.7 Capital assets (net of depreciation) 2004-2005 2004 2003 Change 2003-2004 Change $ 0.6 $ 0.6 0.8 28.6 34.9 9.1 1.8 0.3 0,1 0,1 0,8 0.3 $ 39,0 $ 39,0 $ (0.1) $ 6,6 (27.8) 0.2 25.8 (004) 1.5 0.1 0,1 0,5 6.5 $ (0.0) $ $ 0.5 $ $ 0,6 0.2 $ (0.1) Capital assets in the governmental activities were $45.5 million at June 2005, $39.0 million at June 2004 and $39.0 million at June 2003. During 2005, there was $7.5 million of capital assets purchased and $2.0 million of depreciation expense, During 2005, there was a special item-change in capital assets that amounted to a $1.0 million increase. During 2004, the District purchased $1.6 million of capital assets and had depreciation expense of $1.6 million, . . . MDA - 8 . . BIG SPRING SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30, 2005 LONG-TERM LIABILITIES . The following summarizes the long-term liabilities note to financial statements (pages FS-21 and FS-22), Most of the debt is general obligation bonds issued to pay for capital improvements, The District's ability to raise future funds through the issuance of debt depends on how existing bonds are rated by the investment community. Moody's Investors Service, lnc, assigned its municipal bond rating of "Aaa" to the District's most recent series of general obligation bonds, the 2005 Series issued in August 2005. . 2005 2004 2003 2004-2005 Change 2003-2004 Change . Governmental activities General obligation bonds $ 38,1 $ 40.2 $ 41.7 Compensated absences 0.6 0,7 0.7 Unamortized bond costs 0.2 0.2 0.2 $ 38.9 $ 41.1 $ 42,6 s (2,1) $ (0.1) (1.5) . $ (2.2) $ (1.5) Each year, the District pays interest on the bonds and a portion of the outstanding bonds, referred to as redemption. The District made regularly scheduled bond redemptions of $2,1 million during 2005 and $1.5 . million during 2004. NEXT YEAR'S BUDGET AND ECONOMIC FACTORS . Budget Budget 2005-2006 2004-2005 Change Total revenue $ 31.3 $ 29,5 $ 1.8 Total expenditures 31.6 30.0 1.6 . Excess revenues (expenditures) (0.3) (0.5) 0.2 Other financing sources (uses) (0.4) 0.3 (0,7) Net change in fund balance $ (0.7) $ (0,2) $ (0.5) . MDA - 9 . . BIG SPRING SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS JUNE 30, 2005 . . The revenue budget for 2005-2006 represents a 6.10% increase. The real estate millage rate increases by .158 mills, from 12.217 to 12.375. The earned income tax rate remains at 1.65%. The expenditure budget for 2005-2006 represents a 5.33% increase. Rate increases for health insurance and retirement are contributing factors to the increased expenditures. I. The other financing sources (uses) budget for 2005-2006 includes transfers to the Food Service Fund and Athletic Fund. 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 money it receives. If you have questions about this report or wish to request additional financial information, please contact the district office of Big Spring School District, 45 Mount Rock Road, Newville, PA 17241, (717) 776-2000, . . . . . MDA-l0 . . . . . . ~ o o '" ci I- '" U ~ a::: U) ~ I-f- ~ !Q lli .E o CJ) .~ ..J<.(LOro Otu:SE OZNO J: l.L. 01.: UO'" cnl-W~ e>m5c z:::;;....,~ - w u:: II:: f- '0 0..<( Ol UJ~ N (!) .~ iii ~ ::l CJ) .c ~ . . . . . . III Iii '0 f- ... o o '" "'0 ~o "'0 r--:ci CO '" M_O~ ~'" .,-OO......NI'-NM 0') r---t01.OvNcnCO V OQ')vl'-LOmm CO. u-imc.6cO...ir-:C"f N MCONOCD.,.......... 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S t/;)(..) 0 '0. \3 C '" <1> E-g 20 tO.o "in c d> 0 .sUi E ~ J!l a> .S :;) '0'0 .'!l ~ C '6 '" g E ~ ~,g 0.>- \1)~ -Eli c~ '" '" Cc ~r- <1> '" C '" "' ,s Q) '3 (/l ~ $ ~ ~ )( en m xc.m~E ~ro",~~~8 E~~ro'S: oQ)Q)5~ "'", 15. ro f/') c.: Vl E Q) Q.) r,; ~ "en ct. 0.. uJ " 1; \I) W co '" o o N ~ ~ ~ \I) ,... ~ (1) c,5 a> Ol E .S c S 03", :> 0'" ",'" a> 2 ,s 8 c '" ';;; 1: ~ 5 i;J E '6 ro ~~ o.~ ~.b' ~-g -g::im ~ <1> '" C '" ,... a> '" a> ~E-5 o...!a 0) ~ ~.~ '" c :> 1;)ID"O Cl) ~"O 'ill Q) ~ :s~m "O-t ui '" '" '" '0 C'€-Q) \1) .~ ~ E " '" iecc"" CL '0 ~ o N <'i ~ C '" E .2l ~ to.E "in a> .;= .s jg "'- '" '" .... 1Ft ~ 1; ~ ui '" "c cr- .a ~ m '" c"" \I) d> E,s c Ol Q; c 6 .~ ",'0 a> '" :S ~ .~ ~ <1>0. ~ E :> d> '" ,... -g., a>'" 0.'" x c a> a; <1> d> "'~ '0 C . Q) ::l to ~ 0 d> C E ~ (';i ~ (J,lQ):S a~ Ol '" '" c to.a. 'C 1Jl-g-6 g:;-g a> <1> W ~ ~ ct:I L> ~ a> ro E '0 "'O.re <Ll 2<1)"0 ~ ~ ~ c \I) " ~e-~ E '" <1> o Q) .g (.)-5-0 '0 trl Q) 11>.~ m c~ti') ill -:; ~ E "13 0- ~ ro E CL'08 '" (f) u.. J!i c ~ 2 JJ <1> m '0 c '" C 0= '" <1> '" f; ~ o 'to '" 0- m 0> 2 .so c '" '" ro <f> 2 o C 01 C ':;' C '" 0- E o <.> <.> '" '" r. I- <1> .~ ',? t) '" m c '" E c 03 :> o <.? "' ill "' <1> '" a; C .S '" '" C to C o . . BIG SPRING SCHOOL DISTRICT STATEMENT OF NET ASSETS - PROPRIETARY FUNDS JUNE 30, 2005 (With Summarized Financial Information for June 30, 2004) Food Service 2005 2004 . Assets Cash and cash equivalents $ 64,556 $ 43,696 Due from other governments 6,399 7,134 Other receivables 3,564 100 Inventories 39,541 26,451 . Total current assets 114,060 77,381 Furniture and equipment (net of accumulated depreciation) 717,862 528,974 Total assets $ 831,922 $ 606,355 . Liabilities Accounts payable $ 6,037 $ 861 Payroll and benefits payable 4,655 3,981 Deferred revenues 3,465 3,721 Current portion of compensated absences 7,000 7,000 . Total cu~rent liabilities 21,157 15,563 Long-term portion of compensated absences 55,706 55,894 T otalliabilities 76,863 71,457 . Net assets Invested in capital assets (net of related debt) 717,862 528,974 Unrestricted 37,197 5,924 . Total net assets 755,059 534,898 T otalliabilities and net assets $ 831,922 $ 606,355 . . The accompanying notes are an integral part of these financial statements, FS -7 . . .' BIG SPRING SCHOOL DISTRICT STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS - PROPRIETARY FUNDS FOR THE YEAR ENDED JUNE 30, 2005 (With Summarized Financial Information for the Year Ended June 30, 2004) Food Service 2005 2004 . Operating revenues - Food service revenue $ 702,808 $ 690,199 Operating expenses Salaries 415,133 419,086 Employee benefits 170,100 130,369 . Purchased property service 61,298 67,339 Food and milk 511,388 533,159 Other supplies 5,272 10,792 Depreciation 86,047 43,000 Dues and fees 822 664 Total operating expenses 1,250,060 1,204,409 . Operating income (loss) (547,252) (514,210) Nonoperating revenues Earnings on investments 850 722 State sources - social security and retirement subsidies 24,455 23,612 . State sources - meal subsidies 26,441 28,525 Federal sources - meal subsidies 169,872 177,353 Federal sources - donated commodities 84,681 54,593 Total nonoperating revenues 306,299 284,805 . Income (loss) before transfers (240,953) (229,405) Transfers from other funds 194,000 180,175 Special item - change in capital assets 267,114 Change in net assets 220,161 (49,230) . Net assets - beginning 534,898 584,128 Net assets - ending $ 755,059 $ 534,898 . . The accompanying notes are an integral part of these financial statements. FS -8 . ~ BIG SPRING SCHOOL DISTRICT STATEMENT OF CASH FLOWS - PROPRIETARY FUNDS FOR THE YEAR ENDED JUNE 30, 2005 . (With Summarized Financial Information for the Year Ended June 30, 2004) Food Service 2005 2004 Operating activities . Cash received from users $ 699,Q88 $ 693,307 Cash payments to empioyees for services (584,747) (554,867) Cash payments to suppliers for goods and services (502,013) (563,101) Net cash provided by (used for) operating activities (387,672) (424,661 ) Non-capital financing activities . State sources 51,040 51.719 Federal sources 170,463 174,982 General fund contributed services 194,000 180,175 Generai fund advances were repaid (113,650) Net cash provided by (used for) non-capital financing activities 415,503 293,226 . Capital and related financing activities Cash payments for equipment (7,821) (4,775) Net cash provided by (used for) capital and related financing activities (7,821) (4,775) Investing activities Earnings on investments 850 722 . Net cash provided by (used for) investing activities 850 722 Net decrease in cash and cash equivalents 20,860 (135,488) Cash and cash equivalents - beginning 43,696 179,184 . Cash and cash equivalents - ending $ 64,556 $ 43,696 Reconciliation of operating income (loss) to net cash used foroperating activities Operating Income (loss) $ (547,252) $ (514,210) Adjustments to reconcile operating income (loss) to net cash . used for operating activities Depreciation 86,047 43,000 Donated commodities 84,681 54,593 Net change in other assets and other liabiiities Accounts receivable (3,464) (100) Inventories (13,090) (6,283) . Accounts payable 5,176 543 Payroll and benefits payabie 674 3,981 Deferred revenues (256) 3,208 Compensated absences (188) (9,393) Total adjustments 159,580 89,549 .. Net cash provided by (used for) operating activities $ (387,672) $ (424,661 ) The accompanyin9 notes are an integral part of these financial statements. FS-9 . . . eo Assets Cash and cash equivalents Accounts receivable Total assets . Liabilities Due to student groups . T otalliabilities Net assets BIG SPRING SCHOOL DISTRICT STATEMENT OF NET ASSETS - FIDUCIARY FUNDS JUNE 30, 2005 (With Summarized Financial Information for June 30, 2004) Student Activities 2005 2004 $ 166,581 $ 166,581 $ 166,581 166,581 $ 166,581 Total liabilities and net assets . . . . . The accompanying notes are an integral part of these financial statements, FS -10 . $ 132,679 5,989 $ 138,668 $ 138,668 138,668 $ 138,668 . BIG SPRING SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS JUNE 30, 2005 . SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES . Big Spring 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 its boundaries: the Cumberland County Townships of Cooke, Lower Frankford, Upper Frankford, Lower Mifflin, Upper Mifflin, North Newton, South Newton, Penn and West Pennsboro and the Borough of Newville. Services provided include a comprehensive curriculum for primary and secondary education as well as special education and vocational education programs. The District receives revenue from local, state and federal sources and must comply with the requirements of these funding sources. . . The financial statements of Big Spring School District have been prepared in accordance with generally accepted accounting principles as applied to governmental units. The Governmental Accounting Standards Board is the authoritative standard-setting body for the establishment of governmental accounting and financial reporting principles. The more significant of these accounting policies are as follows: Reporting entity . The Governmental Accounting Standards Board establishes criteria for determining the activities, organizations and functions of government to be included in the financial statements of the reporting entity, In evaluating the District as a reporting entity, management has addressed all potential component units which mayor 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 the separate organization that the District is entitled to (or has the ability to) access is significant to the District. There are no component units that meet all of the above criteria for inclusion in this reporting entity. . Jointly-governed organizations . The District is a participant in three jointly-governed organizations, each of which is a separate legal entity that offers services to the District and its residents. Each entity serves several school districts, and therefore are not included in this reporting entity, The entities do not have taxing power, but each is 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 their administrative offices, FS -11 I- . BIG SPRING SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS (Cont'd.) JUNE 30, 2005 . SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'do) . 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, . Capital Tax Collection Bureau provides earned income tax collection services. Basis of presentation - District-wide financial statements . District-wide financial statements (Le., the statement of net assets and the statement of activities) report information on all of the nonfiduciary activities of the District. As a general rule the effect of interfund activity has been eliminated from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are presented separately from business-type activities which rely to a significant extent, on fees and charges for support. . The 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 reiated cash fiows, Real estate and personal taxes are recognized as revenues in the year for which they are levied, Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. Net assets (total assets less total liabilities) are used as a practical measure of economic resources and the operating statement includes all transactions and events that increased or decreased net assets. Depreciation and amortization are charged as an expense against current operations, Accumulated depreciation and unamortized costs are reported in the statement of net assets, . . The 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 identifiabie 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 particuiar function or program. Taxes and other items not properly included among program revenues are reported as general revenues. . Basis of presentation - Fund financial statements . Fund financial statements are also provided for all governmental funds, proprietary funds, and fiduciary funds of the District. Major individual governmental funds and major individual proprietary funds are reported as separate columns in the fund financial statements, Nonmajor funds, if any, are aggregated and presented in a single column, Fiduciary funds are reported by fund, FS -12 . . BIG SPRING SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS (Cont'd.) JUNE 30, 2005 . SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd.) . Basis of presentation - Fund financial statements (Cont'd.) . The 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 60 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 deferred 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 Governmental Accounting Standards Board, . Proprietary funds distinguish operating revenues and expenses from nonoperating items, Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with the fund's principal ongoing operations. Operating expenses for the District's proprietary fund include food production costs, supplies, administrative costs, and depreciation on capital assets, All revenues or expenses not meeting this definition are reported as nonoperating revenues and expenses. . Fund accounting . The accounts of the District are organized on the basis of funds, each of which is considered a separate accounting entity, The operations of each fund are accounted for by providing a separate set of self-balancing accounts which comprise its assets, liabilities, fund equity, revenues, and expenditures, or expenses, as appropriate, Resources are allocated to and accounted for in individual funds based upon the purposes for which they are to be spent. . When both restricted and unrestricted resources are available for use, it is the District's general policy to use the restricted (primarily operating grants) resources first, then unrestricted resources as they are needed, The District has the following major types of funds: . Governmental Funds - These funds account for the activities through which most of the District's operations are provided. FS -13 . . BIG SPRING SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS (Cont'd.) JUNE 30, 2005 . SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd.) . Basis of presentation - Fund financial statements (Cont'd.) Fund accounting (Cont'd.) Proprietary Funds - These funds account for the operations of the District that are financed and operated in a manner similar to private business enterprises, . Fiduciary Funds - These funds account for the assets held by the District as a trustee or agent for individuals, private organizations and/or governmental units and are therefore not available to support the District's own programs, . The District presents the following major governmental funds: The General Fund is the primary operating fund, It accounts for all financial resources except those required to be accounted for in another fund. . An operating budget is adopted prior to the beginning of each year on a modified accrual basis of accounting, The General Fund is the only fund for which a budget is legally required, . The Pennsylvania School Code dictates specific procedures relative to adoption of the budget and presenting of its financial statements. The District, before levying annual school taxes, is required to prepare an operating budget for the succeeding fiscal year. This process includes the publishing of notices by advertisement, that the proposed budget has been prepared and is available for public inspection at the administrative office of the District, and that public hearings are held on the proposed operating budget which are required to be scheduled at least ten days prior to when final action on adoption is taken by the Board, . 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, During the year these programs increased both revenues and expenditures of the original budget by $ 482, 764, FS -14 . . BIG SPRING SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS (Cont'd,) JUNE 30, 2005 . SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd.) . Basis of presentation - Fund financial statements (Cont'd.) Fund accounting (Cont'd.) The Capital Reserve Fund accounts for transfers from other funds and related investment earnings for capital outlays not accounted for in another fund, . The Athletic Fund accounts for athletic revenues and expenditures of those funds for athletic purposes, The Capital Projects Fund accounts for bond proceeds and the expenditure of those funds, . 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 Student Activities Fund accounts for programs operated and sponsored by various clubs and organizations within the schools, Cash and cash equivalents and investments . The District's 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 reported at fair value, Taxes and taxes receivable . Real estate and personal taxes are levied as of July 1 with a legal, enforceable claim against the property and/or taxpayer. Amounts not collected within six months (December 31) are considered delinquent and submitted to outside agencies/entities for collection actions. . FS -15 . . BIG SPRING SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS (Cont'd.) JUNE 30, 2005 . SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'do) . Receivables and payables between funds Activity between funds that represent lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as "due to/from other funds". Any residual balances outstanding between the governmental activities and business-type activities are reported in the district-wide financial statements as "internal balances". Any balances between funds are short term items pending periodic repayments. . Inventories Inventories are presented at the lower of cost or market on a first-in, first-out basis, and are expended when used. Donated commodities are recognized as revenue and are inventoried at an estimated cost value. . 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 $ 1,500 and an estimated usefui life in excess of one year, Management has elected to include certain homogeneous groups with individual costs of less than $ 1,500 as capital assets for financial presentation purposes. In addition, capital assets purchased with long-term debt may be capitalized regardless of the thresholds established. Such assets are presented at historical cost or estimated historical cost if purchased or constructed. . Major outlays for capital assets and improvements are capitalized as projects are constructed, The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend asset lives are not capitalized. . Capital assets are depreciated using the straight-line method over the following estimated useful lives: Assets Governmental Activities Business-type Activities . Buildings Interior renovations Site improvements Furniture Machinery and equipment Library books Audio visual equipment Computer equipment 50 25 15 to 20 15 10 to 15 7 6 5 15 15 . 5 FS -16 . . BIG SPRING SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS (Cont'd.) JUNE 30, 2005 . SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'do) . Long-term liabilities . In the district-wide financial statement, and proprietary fund types in the fund financial statements, bonds payable and compensated absences are presented as liabilities in the applicable governmental activities or proprietary fund statement of net assets. Refunding costs and bond discounts are amortized over the life of the bonds using the effective interest method. Bond issuance costs are presented as deferred charges and amortized over the term of the related debt. . In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance and refunding costs, as current period expenditures. The face amount of debt issued is presented as other financing sources while discounts and refunding costs on debt issuances are presented as debt service expenditures. Issuance costs, whether or not withheld from the actual debt proceeds received, are presented as support service expenditures, 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. Comparative information . Comparative totals for the prior year have been presented in the accompanying financial statements in order to provide an understanding of changes in the District's financial position and operations, Certain amounts presented in the prior year have been reclassified in order to be consistent with current year's presentation. However, presentations of prior year totals by fund and activity type have not been presented In each of the statements since their inclusion would make the statements unduly complex and difficult to read, Summarized comparative information should be read in conjunction with the District's financial statements for the year ended June 30, 2004, from which the summarized information was derived, . CASH AND CASH EQUIVALENTS AND INVESTMENTS . All of the District's cash deposits are either insured or collateralized, Custodial credit risk is the risk that the District's deposits may not be recoverable to it in the event of a depository institution failure. The District does not have a formal policy regarding custodial credit risk for deposits, However, the District requires all deposits in excess of FDIC insurance coverage to be collateralized by the depository institution with approved collateral as provided by law. As of June 2005 the District has the following: . Deposit balances with two banks in the amount of $ 340,039, of which $ 200,000 was insured and $ 140,039 was collateralized with securities held by the bank's agent in a collateral pool. The District is exposed to custodial credit risk because the collateral securities held by the bank's agent are not in the District's name. FS -17 . . BIG SPRING SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS (Cont'd.) JUNE 30, 2005 . CASH AND CASH EQUIVALENTS AND INVESTMENTS (Cont'd.) . Cash equivalents with Pennsylvania Local Government Investment Trust (PLGIT) and Pennsylvania School District Liquid Asset Fund (PSDLAF) in the amount of $ 2,746,505. These deposits are invested by PLGIT and PSDLAF directly in portfolios of securities which are held by a third party custodian Since PLGIT and PSDLAF are acting in a fiduciary capacity for the District and recognize the District as the pledgee of the collateral securities, these deposits are considered to be held by the agent in the District's name. . Cash equivalents with M&T Investment Group (M&T Group) and JPMorgan in the amount of $ 872,545, The District is exposed to custodial credit risk because the collateral securities held by M& T Group and JPMorgan, in a fiduciary capacity for the District, are not in the District's name. . US Agencies securities with PNC Advisors in the amount of $ 3,939,260, The District is exposed to custodial credit risk because the securities held by PNC Advisors, in a fiduciary capacity for the District, are not in the District's name, TAXES RECEIVABLE Taxes receivable are as follows: Taxes Taxes . Receivable Allowance for Receivable Deferred (Gross) Uncollectibles (Net) Tax Revenue Real estate taxes $ 601,056 $ (1,056) $ 600,000 $ 350,000 Earned income taxes 1,185,000 1,185,000 1,185,000 . Personal taxes 9,592 (4,592) 5,000 5,000 General Fund 1,795,648 (5,648) 1,790,000 1,540,000 Full accrual adjustment (1,540,000) Governmental activities $ 1 795 648 $ (5648) $ 1 790 000 $ . DUE FROM OTHER GOVERNMENTS Due from other governments are as follows: Governmental Business-type . Activities Activities Local sources - earned income taxes $ 729,561 $ Local sources - other taxes 48,314 Local sources - other items 347,901 . State sources 236,494 828 Federal sources 170.387 5.571 $ 1 532 657 $ 6 399 FS -18 . . BIG SPRING SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS (Conl'd,) JUNE 30, 2005 . CHANGES IN CAPITAL ASSETS . Changes in capital assets were as follows: Beginning Balance Special Item Current Year Activitv Increases Decreases . Governmental activities Capital assets not being depreciated Land $ 610,000 $ (108,176) $ $ Construction in progress 807.992 6,607.951 1417,992 (108,176) ~7,951 Capital assets being depreciated Buildings and improvements 50,370,006 (5,590,776) 537,382 Furniture and equipment 3,032,774 (66,286) 69,495 Library books 788,762 1,324,505 54,193 Computer equipment 2,667.806 1,577.543 249,766 56,859,348 (2,755 014) __~JO,836 Accumulated depreciation Buildings and improvements (15,466,107) 6,271,711 (1,025,478) Furniture and equipment (1,238,174) (215,947) (228,075) Library books (685,922) (1,284,196) (35,982) Computer equipment (1.885.436) (892,010) ---11.72.854) (19.275.639) 3,879.558 ..R.Q.62,389) Capital assets being depreciated, net 37.583,709 1.124.544 -.11.151.553) Governmental activities capital assets, net $39 001 701 $ 1 016 368 1M~ $ . . . . . Business-type activities Capital assets being depreciated Furniture and equipment Accumulated depreciation Furniture and equipment (341,716) (115,347) --<86,047) $ 870,690 $ 382,461 $ 7,821 $ Capital assets being depreciated, net 528,974 267.114 --<78,226) . Business-type activities capital assets, net $ 528974 $ 267 114 ~~) $ FS -19 . Ending Balance $ 501,824 7.415,943 7917,767 45,316,612 3,035,983 2,167,460 4.495 115 55015,170 (10,219,874) (1,682,196) (2,006,100) (3,550300) (17.458.470) 37.556.700 $45474467 (11,738) $ 1,249,234 11,738 (531 372) 717,862 $ 717862 . BIG SPRING SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS (Cont'd.) JUNE 30, 2005 . CHANGES IN CAPITAL ASSETS (Cont'd.) . Depreciation expense was charged to functions/programs as follows: . Governmental activities Instruction Instructional student support Administrative and financial support Operation and maintenance of plant Student activities . Business-type activities - Food service' $ 1,825,123 121,673 40,559 40,559 34475 $ 2 062 389 $ 86047 . An independent appraisal company has completed a capital asset inventory project to enhance the tracking and monitoring of capital assets and the accumulated depreciation thereon. This capital asset system is designed to improve and simplify the reporting requirements under GASB Statement No, 34. The changes in recorded values of estimated historical costs and accumulated depreciation which resulted from this project are presented during the year ended June 2005 under the caption 'Special item - change in capital assets'. DEFERRED REVENUES . Governmental funds present deferred revenue in connection with receivables for revenues that are not considered to be available to pay liabilities of the current period. Governmental funds also defer revenue recognition with resources that have been received, but not yet earned. Deferred revenues in the General Fund of $ 1,545,175 consists of $ 1,540,000 of taxes receivable not received within 60 days of the end of the fiscal period, and $ 5,175 of resources that have been received but not yet earned. . Deferred revenue in the proprietary funds and the district-wide financial statements represents resources that have been received but not yet earned, . . FS - 20 . . BIG SPRING SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS (Cont'd.) JUNE 30, 2005 . . 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 payable $ 40,190,000 $ $ (2,135,000) $ 38,055,000 $ 2,200,000 Compensated absences 693,520 232,333 (245 543) 680,310 300.000 $ 40 883 520 $ 232 333 $ (2 380 5-13) $ 38735310 $ 2 500 000 Business-type activities Compensated absences $ 62 894 $ 5275 $ (5 46.3) $ 62 706 $ 7000 Changes in bonds payable were as follows: . . . Beginning Balance Scheduled Redemptions Ending Balance 1997 Series 2001 Series 2003 Series 1999 Series $ 2,460,000 $ (445,000) $ 2,015,000 14,390,000 (585,000) 13,805,000 19,170,000 (885,000) 18,285,000 4,170,000 (220.000) 3,950000 $ 40190000 $ (2135000) $ 38 055 000 . 1997 Series 1999 Series 2001 Series 2003 Series Amounts Due Interest Rates Maturitv Date Callable Date With in One Year 5,075% March 2009 Not callable $ 465,000 (1) December 2017 45 days notice 230,000 3.80% to 5.10% February 2021 August 2011 610,000 2.15% to 4.40% April 2023 April 2013 895.000 $ 2 200 000 . . (1) The 1999 series pays interest at a variable rate of ,55% above the "weekly rate", not to exceed 25,00%. At June 2005 the "weekly rate" was 2.29%. . FS" 21 . . BIG SPRING SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS (Conl'd.) JUNE 30, 2005 . LONG-TERM LIABILITIES (Cont'd.) . Scheduled debt service requirements, payable by the General Fund, are as follows: Year Endino June Principal Interest Total 2006 $ 2,200,000 $ 1,592,301 $ 3,792,301 2007 2,290,000 1,512,140 3,802,140 2008 2,370,000 1,435,262 3,805,262 2009 2,475,000 1,337,166 3,812,166 2010 2,015,000 1,234,011 3,249,011 2011-2015 11,425,000 4,871,364 16,296,364 2016-2020 11,770,000 2,279,419 14,049,419 2021-2023 3,510,000 265,650 3.775.650 U8 055 000 $ 14 527 313 $ 52 582 313 . . . 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, At retirement or death, while in District service, employees (with at least 10 years service in the District) or their beneficiaries shall choose one of the following options (subject to a maximum of $ 12,000 for administrators and $ 9,000 for all other employees): . 1, Accumulated unused sick leave days times $ 50 per day 2, Number of full years of service in the District times $ 160 per year . PENSION PLAN . Substantially all full-time and part-time employees of the District participate in the plan, The District recognizes expenditures or expenses equal to its contractually-required contributions, subject to the modified accrual basis of accounting in governmental funds. . The District contributes to The Public School Employees' Retirement System (the System), a governmental cost sharing multiple-employer defined benefit plan. The plan is under the authority of the Public School Employees' Retirement Code (the Code), as amended. The plan provides retirement and disability, legislatively mandated ad hoc cost-of-living adjustments, and healthcare insurance premium assistance to qualifying annuitants, The System issues a comprehensive annual financial report that includes financial statements and required supplementary information for the plan, A copy of the report may be obtained by writing to the System at PO Box 125, Harrisburg, PA 17108-0125, or by accessing the System's website at www.psers.state.paus, FS - 22 . . BIG SPRING SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS (Cont'd.) JUNE 30, 2005 . PENSION PLAN (Cont'd.) . The contribution policy is established in the Code and requires contributions by active members and employers, Contribution rates for active members are set by law and are dependent upon members' class. In most cases, the contribution rates based on qualified member compensation are as follows: . Membership Class T-C Membership Class T-C Membership Class T-D Membership Class T-D Active members hired before July 22, 1983 Active members hired on or after July 22, 1983 Active members hired before July 22, 1983 Active members hired on or after July 22, 1983 5.25% 6,25% 6,50% 7,50% Active members newly hired after July 1, 2001 are automaticaliy Class T-D, The contribution rates for all members in Membership Class T-D were effective January 1,2002. . . Contributions required of employers are based upon an actuariai valuation. For the fiscal year ended June 2005 the employer contribution rate was 4.23 percent of covered payroll, composed of 4,00 percent for pension benefits and .23 percent for healthcare insurance premium assistance. The District's contributions to the system for the years ended June 2005, 2004 and 2003 were $ 648,394, $ 551,878, and $ 163,975, respectively Those amounts are equal to the required contributions for each year, POSTEMPLOYMENT BENEFITS OTHER THAN PENSION BENEFITS . Under the negotiations agreement with Big Spring Education Association, the District shall provide for continuance of health care insurance after retirement until age 65. The retiree will pay the monthly premiums, except that employees who retire after thirty or more years with the District, shall have up to five years of health care insurance benefits provided on the basis of the retiree paying 50% of the monthly premiums, . The District finances this benefit on a pay-as-you-go basis. For the year ended June 2005, the estimated net cost to the District was $ 200,000 ($ 600,000 estimated plan costs paid for the retirees less $ 400,000 estimated premiums paid by the retirees), RISK MANAGEMENT Health insurance . . The District's health insurance plan allows each participant to choose one of the three coverage options available through South Central Trust. South Central Trust is not a risk sharing pool. The Trust was established for processing claims and obtaining reinsurance through commercial insurance carriers. The Trust has reinsurance for claims in excess of $ 100,000 specific (per person) and 125% aggregate (estimated District annual cost), District transactions with the Trust were as follows: FS - 23 . . BIG SPRING SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS (Cont'd,) JUNE 30, 2005 . RISK MANAGEMENT (Cont'do) Amount available for accrued costs, beginning $ 1,014,197 . Payments to the trust 3,035,492 Claims paid by the trust $ (2,907,611) Administrative and other fees (146,552) . Stop loss premiums (174,126) (3.228,289) Amount available for accrued costs, ending $ 821 400 . The amount available for accrued costs was as follows: Estimated additional claims incurred $ 444,639 Accrual for administrative and other fees 24,425 Accrual for health insurance coverage on payroll payable 352,336 . $ 821 400 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, . FS - 24 . . BIG SPRING SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS (Cont'd.) JUNE 30, 2005 . COMMITMENTS AND CONTINGENCIES . Current construction project The District is in the process of converting the former high school to a middle school. This project also involves converting the former annex to District administrative offices and a fitness center, At June 2005 the Capital Projects Fund has approximately $ 3,700,000 available for this project Approximately $ 900,000 of additional funds will be needed to complete this project . Proposed construction project . The former middle school will be converted to an elementary school. The District is in the process of determining its elementary grade configuration which will impact this construction project Recent architectural cost estimates for this project are in the range of $ 4,000,000 to $ 5,000,000. Other commitments and contingencies The District's contract with its teaching staff expires in June 2007. . 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, . 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 disallowanc:e of program expenditures. SUBSEQUENT EVENT . In August 2005, the District issued its 2005 Series general obligation bonds in the amount of $ 4,500,000, After discounts and issuance costs of $ 89,287, the District received $ 4,410,713, Approximately $ 900,000 will be used to complete the current construction project The remaining amount will be used toward the conversion of the former middle school to an elementary school. . 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