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SHIPPENSBURG AREA SCHOOL DISTRICT
FINANCIAL REPORT
JUNE 30, 2006
O~. 7313
Lj \Ii) Tep.rrl
CONTENTS
INDEPENDENT AUDITOR'S REPORT
1-2
Management's Discussion & Analysis
3 - 10
Basic Financial Statements:
Government-wide Financial Statements:
Statement of Net Assets
11 - 12
Statement of Activities
13
Fund Financial Statements:
Balance Sheet - Governmental Funds
14
Reconciliation of the Governmental Funds Balance
Sheet to the Statement of Net Assets
15
Combined Statement of Revenues, Expenditures and
Changes in Fund Balances - Governmental Funds
16
Reconciliation of the Governmental Funds Statement
of Revenues, Expenditures and Changes in Fund
Balances to the Statement of Activities
17
Statement of Revenues, Expenditures and Changes in
Fund Balance - Budget and Actual - General Fund
18
Statement of Net Assets - Proprietary Fund-
Food Service
19
Statement of Revenues, Expenses and Change in Net
Assets - Proprietary Fund - Food Service
20
Statement of Cash Flows - Proprietary Fund -
Food Service
21 - 22
Statement of Fiduciary Net Assets
23
Notes to Financial Statements
24 - 39
,
CONTENTS (Continued)
SUPPLEMENTARY INFORMATION
General Fund - Schedule of Revenues 40 - 41
General Fund - Schedule of Expenditures 42 - 47
Combining Balance Sheet - Non-Major Governmental
Funds 48
Combining Statement of Revenues, Expenditures and
Changes in Fund Balances - Non-Major
Governmental Funds 49
Independent Auditor's Report on Internal Control
over Financial Reporting and on Compliance
ahd Other Matters Based on an Audit of
Financial Statements Performed in Accordance
with Government Auditing Standards 50 - 51
Independent Auditor's Report on Compliance with
Requirements Applicable to Each Major Program
and Internal Control over Compliance in
Accordance with OMB Circular A-l33 52 - 53
Schedule of Findings and Questioned Costs 54 - 55
Schedule of Expenditures of Federal Awards 56 - 59
Notes to Schedule of Expenditures of Federal Awards 60
Summary Schedule of Prior Year's Audit Findings 61
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'[J38R) BoYER & RITTffi
CERTlAED PuBLIC ACCOUNTANTS ANn CONSULTANTS
Web Site: www.cpabr.com
INDEPENDENT AUDITOR'S REPORT
Board of School Directors
Shippensburg Area School District
Shippensburg, 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 Shippensburg Area School
District, as of and for the year ended June 30, 2006, which collectively comprise Shippensburg Area
School District's basic financial statements as listed in the table of contents. These financial statements
are the responsibility of Shippensburg Area School District's management. Our responsibility is to
express opinions on these fffiancial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of
America and the standards applicable to financial audits contained in Government Auditing Standards,
issued by the Comptroller General of the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe our audit provides a reasonable basis for our opinions.
As explained in Note 2 to the financial statements, Shippensburg Area School District adopted
Governmental Accounting Standards Board (GASB) Statements No. 42, Accounting and Financial
Reporting for Impairment of Capital Assets and for Insurance Recoveries, No. 46, Net Assets Restricted
by Enabling Legislation, and No. 47, Accounting for Termination Benefits.
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 Shippensburg Area School District, as of June 30,2006,
and the respective changes in financial position and cash flows, where applicable, thereof and the
respective budgetary comparison for the General Fund for the year then ended in conformity with
accounting principles generally accepted in the United States of America.
In accordance with Government Auditing Standards, we have also issued our report dated August 11,
2006, on our consideration of Shippensburg Area 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.
CAMP HILL
CARLISLE
CHAMBERSBURG
LEWISTOWN
STATE COLLEGE
1\n Independently Owned Member of the RSM McGladrey Network
'"
The Management's Discussion & Analysis on pages 3 through 10 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.
Our audit was conducted for the purpose of forming an OpInIOn on the financial statements that
collectively comprise Shippensburg Area School District's basic financial statements. The combining
non-major fund financial statements and other schedules, listed in the table of contents as supplementary
information are presented for purposes of additional analysis and are not a required part of the basic
financial statements. The accompanying Schedule of Expenditures of Federal Awards is presented for
purposes of additional analysis as required by U. S. Office of Management and Budget Circular A-133,
Audits of States, Local Governments, and Non-Profit Organizations, and is not a required part of the basic
financial statements. Such information has been subjected to the auditing procedures applied in the audit
of the basic financial statements, and in our opinion, is fairly stated, in all material respects, in relation to
the basic financial statements taken as a whole.
~ ~.dLu
Chambersburg, Pennsylvania
August 11, 2006
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MANAGEMENT'S DISCUSSION & ANALYSIS (MD&A)
SHIPPENSBURG AREA SCHOOL DISTRICT
JUNE 30, 2006
The discussion and analysis of Shippensburg Area School District's (District) financial performance
provides an overall review of the District's financial activities for the fiscal year ended June 30, 2006.
The intent of this discussion and analysis is to look at the District's financial performance as a whole;
readers should also review the financial statements and the notes to the basic financial statements to
enhance their understanding of the District's financial performance.
The Management's Discussion & Analysis (MD&A) is an element of the new reporting model adopted
by the Governmental Accounting Standards Board (GASB) in their Statement No. 34 Basic Financial
Statements and Management's Discussion and Analysis for State and Local Governments issued in June
1999. Certain comparative information between the current year and the prior year is required to be
presented in the MD&A.
Financial Highlights
Special Education
The trends of prior years indicate that during the fiscal year 2005-2006, the Shippensburg Area School
District would experience another year of significant increases in the costs for Special Education
Instruction.
Alternative Education
Alternative Education costs increased during the 2005-2006 fiscal year. The District transferred
additional financial resources to fund Alternative Education Placements for at-risk students during the
fiscal year.
Building Program
Due to increased enrollment, the District is building a Grade 4-5 building, Shippensburg Area
Intermediate School, and plans to complete limited renovations on the James Burd and Nancy Grayson
Elementary Schools. The District applied for and received a variance of Pennsylvania Department of
Education's (PDE) 20-year rule for reimbursable projects. The District will receive state reimbursement
on the renovations ofthe existing elementary schools and the new Grade 4-5 building.
Borrowing
The Board of School Directors authorized additional borrowing of $7,000,000 for planned renovations
and construction at the existing Nancy Grayson and James Burd elementary schools.
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Table A-l summarizes the major features of the District's financial statements, including the portion of
the District they cover and the types of information they contain. The remainder to this overview section
of MD&A explains the structure and contents of the statements.
Table A-l
Major Features of Shippensburg Area School District's
Government-Wide and Fund Financial Statements
Government-Wide Fund Statements
Statements Governmental Funds Pronrietarv Funds Fiduciarv Funds
Scope Entire District (except Activities of the District Activities the District Activities in which the
fiduciary funds) that are not operates similar to District is the trustee or
proprietary or private business - agent to someone else's
fiduciary. such as Food Service resources
education, Activity Funds
administration and
community services
Required Financial Statement of Net Assets Balance Sheet Statement of Net Assets Statement of Fiduciary
Infor1lUltion Net Assets
Statement of Revenues, Statement of Revenues,
Statement of Activities Expenditures and Expenses and Changes Statement of Changes
Changes in Fund in Net Assets in Fiduciary Net Assets
Balances
Statement of Cash
Flows
Accounting Basis and Accrual accounting and Modified-accrual Accrual accounting and Accrual accounting and
Measurement Focus economic-resources accounting and current economic-resources economic-resources
focus financial-resources focus focus
focus
Type of assetlliabi/ity All assets and Only assets expected to All assets and All assets and
information liabilities, both be used up and liabilities, both liabilities, both short-
financial and capital, liabilities that come due financial and capital, tenn and long-tenn
and short-tenn and during the year or soon and short-tenn and
long-tenn thereafter; no capital long-tenn
assets included
Type of injlOlll/outjlOlll All revenues and Revenues for which All revenues and All revenues and
information expenses during the cash is received Wring expenses during the expenses during the
year. regardless of or soon after the end of year, regardless of year, regardless of
when cash is received the year; expendiim:s when cash is received when cash is received
or paid when goods or services or paid or paid
have been received lIld
payment is due during
the year or soon
thereafter
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Overview of Financial Statements
Government-Wide Statements
The government-wide statements report information about the District as a whole using accounting
methods similar to those used by private-sector companies. The Statement of Net Assets includes all of
the government's assets and liabilities. All of the current year's revenues and expenses are accounted for
in the Statement of Activities regardless of when cash is received or paid.
The two government-wide statements report the District's net assets and how they have changed. Net
assets, the difference between the District's assets and liabilities, are one way to measure the District's
financial health or position.
Over time, increases or decreases in the District's net assets are an indication of whether its financial
health is improving or deteriorating, respectively.
To assess the overall health of the District, additional non-financial factors, such as changes in the
District's property-tax base and the performance of students, must be considered.
The government-wide financial statements of the District are divided into two categories:
· Governmental activities - All of the District's basic services are included here, such as instruction,
administration and community services. Property taxes and state and Federal subsidies and grants
finance most of these activities.
· Business-type activities - The District conducts a food-service operation and charges fees to
students, staff and visitors to cover the costs of their operation.
Fund Financial Statements
The District's fund financial statements provide detailed information about the most significant funds _
not the District as a whole. Some funds are required by state law and by bond requirements.
Governmental funds - Most of the District's activities are reported in governmental funds,
which focus on the determination of financial position and changes in financial position, not on
income determination. They are reported using an accounting method called modified-accrual
accounting, which measures cash and all other financial assets that can readily be converted to
cash. The governmental-fund statements provide a detailed, short-term view of the District's
operations and the services it provides. Governmental-fund information helps the reader
determine whether there are more or fewer financial resources that can be spent in the near future
to finance the District's programs. The relationship (or differences) between governmental
activities (reported in the Statement of Net Assets and the Statement of Activities) and
governmental funds is reconciled in the financial statements.
Proprietary funds - These funds are used to account for the District's activities that are similar
to business operations in the private sector; or where the reporting focuses on determining net
income, financial position, changes in financial position, and where a significant portion of
funding comes through user charges. When the District charges customers for services it
provides - whether outside customers or to other units in the District - 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, but provides
more detail and additional information such as ca'Sb flows.
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Fiduciary funds - The District is the trustee, or fiduciary, for several activity funds. All
fiduciary activities are reported in a separate Statement of Net Assets. We exclude these
activities from the District's other financial statements because the District cannot use these
assets to finance operations.
Financial Analysis of the District as a Whole
The District's total net assets were $12,974,413 at June 30,2006.
Table A-2
As of June 30, 2006 and 2005
Net Assets
Total
Percentage
Governmental Activities Business-Type Activities Total ChanRe
6/30/05 6/30/06 6/30/05 6/30106 6/30/05 6/30/06 2005-2006
S 29.915,604 S 20.655,537 $ 53,916 S 82,345 $ 29.969,520 S 20.737,882 -30.80010
20,879,558 30.463.977 199.106 174,228 21,078,664 30,638,205 45.35%
S 50.795,162 S 51.119.5t4 S 253.022 S 256.573 S 51,048.184 S 5 I ,376,087 0.64%
S 4,204,252 S 3,953,017 S 25,683 $ 20,041 S 4,229.935 $ 3,973,058 6.07%
36,015.985 34,428.616 36.015.985 34.428.616 4.41%
S 40.220,237 S 38,38 I ,633 S 25,683 S 20,041 S 40,245,920 S 38,401,674 4.58%
Current and other assets
Capital assets
Total assets
Current and other liabilities
Long-term liabilities
Total liabilities
Net Assets
Invested in capital assets.
net of related debt
Restricted
Unrestricted
Total net assets
S (15,848.848)
24,080,436
2,343,337
S 10.574,925
S (4,631.749) S
14.783,744
2,585.886
S 12.737,881 $
185.857
$
174.228
$ (15,662,991)
24.080.436
2.384.819
S 10,802.264
$ (4,457.521)
14,783.744
2,648,190
$ 12.974,413
71.54%
38.61%
-11.04%
-20.11%
4t,482
227,339
$
62,304
236,532
Most of the District's net assets consist of restricted amounts. The remaining net assets consist invested
in capital assets (land, site improvements, buildings and equipment) and unrestricted amounts including
designated and undesignated amounts. The restricted balances are amounts set aside to fund future
purchases or capital projects as planned by the District.
The results of this year's operations as a whole are reported in the Statement of Activities. All expenses
are reported in the first column. Specific charges, grants, revenues and subsidies that directly relate to
specific expense categories are presented to detennine the final amount of the District's activities which
are supported by other general revenues. The two largest general revenues are the Basic Education
Subsidy provided by the Commonwealth of Pennsylvania, and the local taxes assessed to community
taxpayers.
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Table A-3 restates information from the Statement of Activities in a different format.
Table A-3
Fiscal Years Ended June 30, 2006 and 2005
Changes in Net Assets
Total
Percentage
Governmental Activities Business- Type Activities Total ChanRe
6130/05 6130/06 6/30/05 6/30/06 6130105 6/30/06 2005-2006
Revenues
Program revenues
Charges for services $ 137.368 $ 96,034 $ 713.801 $ 747.122 $ 851,169 $ 843.156 -0.94%
Operating grants and contributions 5.725.135 6,151.326 367,986 370,902 6,093.121 6,522,228 7.04%
General revenues
Property taxes 12.630,054 13,615,805 12.630.054 13.615.805 7.80%
Other taxes 3.859.857 3.974.057 3,859.857 3,974,057 2.96%
Grants. subsidies and
contributions. unrestricted 6,776.245 7.007,126 6,776.245 7,007,126 3.41%
Other 701,880 1,289,754 1,344 3.163 703,224 1.292.917 83.86%
Total revenues 29.830,539 32.134,102 1.083,131 1,121.187 30,913.670 33,255.289 7.57%
Expenses
Instructional 18,510,902 19.551.670 18,510,902 19,551,670 -5.62%
Instructional student support 2,120.572 2,207,988 2,120,572 2,207.988 -4.12%
Administrative and financial support 2,225.324 2,447.017 2,225,324 2.447,017 -9.96%
Operation and maint. of plant services 1,852,974 2,222,057 1.852.974 2,222,057 -19.92%
Pupil transportation 1,233,961 1.538.885 1.233.961 1,538.885 -24.71%
Student activities 497,646 600,349 497.646 600.349 -20.64%
Community services 19.076 t8,654 19,076 18,654 2.21%
Interest on long-tenn debt 1,158,542 1.384.526 1.158.542 1.384.526 -19.51%
Food service 1,039,453 1.111,994 1,039,453 1,111,994 -6.98%
Total expenses 27.618.997 29.971,146 1,039,453 1,111,994 28.658.450 31.083,140 -8.46%
Changes in net assets $ 2,211.542 $ 2,162,956 $ 43.678 $ 9,193 $ 2,255.220 $ 2.172,149 3.68%
7
The tables below present the expenses of both the Governmental and Business-Type Activities of the
District.
Table A-4 presents the District's seven (7) largest functions - instructional programs, instructional
student support, administration, operation and maintenance of plant services, pupil transportation, student
activities and community services and each program's net cost (total cost less revenues generated by the
activities). This table also shows the net costs offset by the other unrestricted grants, subsidies and
contributions to show the remaining financial needs supported by local taxes and other miscellaneous
revenues.
Table A-4
Fiscal Years Ended June 30, 2006 and 2005
Governmental Activities
Functions/Programs
Instructional
Instructional student support
Administration
Operation and maintenance
Pupil transportation
Student activities
Community services
Interest on long-term debt
Total governmental activities
Less unrestricted grants, subsidies
Total needs for grants, taxes
and other revenues
6/30/2005
$ 18,510,902
2,120,572
2,225,324
1,852,974
1,233,961
497,646
19,076
1,158,542
$ 27,618,997
Total Cost
of Services
6/30/2006
$ 19,551,670
2,207,988
2,447,017
2,222,057
1,538,885
600,349
18,654
1,384,526
$ 29,971,146
Net Cost
of Services
6/30/2005 6/30/2006
$ 14,732,998 $ 15,165,906
1,871,590 1,825,388
2,148,726 2,304,786
1,112,107 1,778,442
289,802 732,299
424,057 514,462
18,672 17,977
1,158,542 1,384,526
21,756,494 23,723,786
6,776,245 7,007,126
$ 14,980,249 $ 16,716,660
Table A-5 reflects the activities of the Food Service Program, the only business-type activity of the
District.
Table A-5
Fiscal Years Ended June 30, 2006 and 2005
Business-type Activities
Functions/Programs
Food services
Add: investment earnings
Total business-type activities
Total Cost
of Services
6/30/2005 6/30/2006
$ 1,039,453 $ 1,111,994
Net Cost
of Services
6/30/2005 6/30/2006
$ 42,334 $ 6,030
1,344 3,163
$ 43,678 $ 9,193
The Statement of Revenues, Expenses and Changes in Net Assets for this proprietary fund will further
detail the actual results of operations.
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The District Funds
At June 30, 2006, the District's governmental funds reported a <:ombined fund balance of $17,810,828,
which reflects a decrease of $8,843,009 from June 30, 2005. The primary reason for this decrease is the
construction of the new Grade 4-5 elementary school.
General Fund Budget
During the fiscal year, the Board of School Directors (Board) authorizes revisions to the original budget
to accommodate differences from the original budget to the actual expenditures of the District. All
adjustments are again confirmed at the time the annual audit is accepted, which is after the end of the
fiscal year and not prohibited by state law. A schedule showing the District's original and final budget
amounts compared with amounts actually paid and received is provided in the financial statements.
The District applied for Federal, state and local grants. These grants cannot always be anticipated in the
budgeting process. Budgeted Revenues increased by $213,422 as a result of additional approved grants.
Budgeted expenditures and other financing uses also increased by the same amount to compensate for the
additional approved grants. Transfers between specific categories of expenditures/financing uses occur
during the year. The most significant transfers are from the budget reserve to specific expenditures.
Capital Asset and Debt Administration
Capital Assets
At June 30, 2006, the District had $30,638,205 invested in a broad range of capital assets, including land,
buildings, furniture and equipment.
Table A-6
Fiscal Years Ended June 30, 2006 and 2005
Capital Assets - Net of Depreciation
6130/05
$ 784,455 $
15,154,722
3,900.470
1,239,017
$ 21.078.664
6130106
771,890
14,600.323
3,894,902
11,371,090
$ 30,638.205
Total
Percentage
Change
2005-2006
-1.60%
-3.66%
-0.14%
100.00%
45.35%
Land and site improvements
Buildings and improvements
Furniture and equipment
Construction-in-progress
Governmental Activities Business-Type Activities
6130/05 6130/06 6130/05 6130/06
$ 784.455 $ 771.890 $ $
15,154,722 14.600.323
3.701,364 3,720,674 t99.106 174,228
t,239.017 11.371.090
S 20,879.558 S 30.463,977 S 199,106 S t74,228
Total
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Debt Administration
As of July 1,2005, the District had total outstanding bond principal of$36,390,000.
During the year, the District made payments against principal of $1,565,000 resulting In ending
outstanding debt as of June 30, 2006, of $34,825,000.
Table A-7
Fiscal Years Ended June 30, 2006 and 2005
Outstanding Debt
Total
Percentage
Governmental Activities Business- Type Activities Total ChanRe
6/30/05 6/30/06 6/30/05 6130/06 6130/05 6130/06 2005-2006
General Obligation Bonds
Series of 200 t $ 1.630.000 $ 830.000 $ $ $ 1,630.000 $ 830,000 -49,08%
Series of2001A 9.395.000 8.870.000 9.395,000 8,870,000 -5.59%
Series of 2004 t5.420.000 15,420,000 15,420.000 15.420.000 100.00%
General Obligation Note
Series of 2003 9,945,000 9,705,000 9.945.000 9,705,000 -2.41%
General Obligation Note
Seriesof2003 13,249 13.249 -100.00%
$ 36.390,000 $ 34.825.000 $ 13.249 $ $ 36,403.249 $ 34.825.000 -4.34%
Other obligations include capital lease obligations and accrued vacation-pay and sick-leave for specific
employees of the District. More detailed information about our long-term liabilities is included in Notes
to the Financial Statements.
Table A-8 reflects the comparison of revenue and expenditure categories by percentages.
Table A-8
Revenues and Expenditures
2002-2003 2003-2004 2004-2005 2005-2006
Local revenues 53.9% 55.9% 59.4% 60.7%
State revenues 43.6% 41.3% 38.2% 36.9%
Federal revenues 2.5% 2.8% 2.4% 2.4%
Instruction 6300% 61. 7% 60.9% 46.1%
Support services 28.4% 27.6% 26.3% 20.4%
N on- instructional/community 1.7% 1.8% 1.7% 1.4%
Facilities acquisition, construction
and improvement services 0.2% 2.3% 2.9% 24.9%
Debt service 6.7% 6.6% 8.2% 7.2%
Contacting the District's Financial Management
Our financial report is designed to provide our citizens, taxpayers, parents, students, investors and
creditors with a general overview of the District's finances and to show the Board's accountability for the
money it receives. If you have questions about this report or wish to request additional financial
information, please contact Deborah Westover, Business AdministratorlBoard Secretary, at the
Shippensburg Area School District, 317 North Morris Street, Shippensburg, PA 17257, (717) 530-2702.
10
SHIPPENSBURG AREA SCHOOL DISTRICT
STATEMENT OF NET ASSETS
June 30, 2006
Govenmtental Business-Type
ASSETS Activities Activities Total
Current Assets
Cash $ 15,208,354 $ 4,305 $ 15,212,659
Investments 3,400,166 3,400,166
Receivables
Taxes - net of allowance
for uncollectibles 1,061,948 1,061,948
Federal subsidies 305,065 39,210 344,275
State subsidies 357,598 4,563 362,161
Other 12,852 12,852
Prepaid expenses 8,203 8,203
Inventories 34,267 34,267
Total current assets 20,354,186 82,345 20,436,531
Noncurrent Assets
Bond issuance costs - net
Land and improvements - net
Building and improvements - net
Furniture and equipment - net
Construction-in-progress
Total noncurrent assets
301,351
771,890
14,600,323
3,720,674
11,371,090
30,765,328
174,228
301,351
771,890
14,600,323
3,894,902
11,371,090
30,939,556
174,228
Total assets
$ 51,119,514 $
256,573 $ 51,376,087
See Notes to Financial Statements.
11
Governmental Business-Type
LIABILITIES AND NET ASSETS Activities Activities Total
Current Liabilities
Accounts payable $ 414,230 $ 568 $ 414,798
Current portion of long-tenn debt
General obligation debt 1,630,000 1,630,000
Capital lease obligation 67,680 67,680
Accrued expenses
Salaries and benefits 1,454,100 1,454,100
Payroll withholdings 258,665 258,665
Interest payable 125,321 125,321
Deferred revenues 712 19,473 20,185
Unearned revenues 2,309 2,309
Total current liabilities 3,953,017 20,041 3,973,058
Noncurrent Liabilities
Long-tenn debt - net of current portion
General obligation debt 33,195,000 33,195,000
Capital lease obligation 203,046 203,046
Compensated absences 1,030,570 1,030,570
Total noncurrent liabilities 34,428,616 34,428,616
Total liabilities 38,381,633 20,041 38,401,674
Net Assets (Deficit)
Invested in capital assets - net of
related debt (4,631,749) 174,228 (4,457,521)
Restricted for:
Capital projects 14,607,187 14,607,187
Capital reserve 146,757 146,757
Athletic 29,800 29,800
Unrestricted 2,585,886 62,304 2,648,190
Total net assets 12,737,881 236,532 12,974,413
Total liabilities and net assets
$ 51,119,514 $
256,573 $ 51,376,087
12
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SHIPPENSBURG AREA SCHOOL DISTRICT
BALANCE SHEET - GOVERNMENTAL FUNDS
June 30, 2006
Capital Non-Major Total
Projects Governmental Governmental
General Construction Funds Funds
ASSETS
Cash $ 3,122,207 $ 11,875,673 $ 210,474 $ 15,208,354
Investments 644,952 2,755,214 3,400,166
Receivables
Taxes - net of allowance
for uncollectibles 1,061,948 1,061,948
Federal subsidies 305,065 305,065
State subsidies 357,598 357,598
Other 12,302 550 12,852
Prepaid expenses 8,203 8,203
Total assets $ 5,512,275 $ 14,630,887 $ 211,024 $ 20,354,186
LIABILITIES AND FUND BALANCES
Accounts payable $ 356,775 $ 23,700 $ 33,755 $ 414,230
Accrued expenses
Salaries and benefits 1,454,100 1,454,100
Payroll withholdings 258,665 258,665
Deferred revenues 413,342 712 414,054
Unearned revenue 2,309 2,309
Total liabilities 2,485,191 23,700 34,467 2,543,358
Fund Balances
Reserved for
Capital projects 14,607,187 14,607,187
Capital reserve 146,757 146,757
Athletic 29,800 29,800
Unreserved 3,027,084 3,027,084
Total fund balances 3,027,084 14,607,187 176,557 17,810,828
Total liabilities and fund balances $ 5,512,275 $ 14,630,887 $ 211,024 $ 20,354,186
See Notes to Financial Statements.
14
SHlPPENSBURG AREA SCHOOL DISTRICT
RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET
TO THE STATEMENT OF NET ASSETS
June 30, 2006
Total Fund Balances - Governmental Funds
17,810,828
Amounts reported for governmental activities in the Statement
of Net Assets are different because:
Capital Assets used in governmental activities are not fmancial resources,
and therefore, they are not reported as assets in governmental funds. The
cost of assets is $46,001,693, including construction-in-progress in the
amount of$II,371,090, and the accumulated depreciation is $15,537,716.
Property taxes receivable will be collected this year, but are not
available soon enough to pay for the current period's expenditures,
and therefore, they are deferred revenues in the funds.
Governmental funds report bond issuance costs as expenditures.
However, in the Statement of Activities, the costs of issuance are
allocated over the lives of the debt issues. This is the amount by
which bond issuance costs exceed accumulated amortization.
Long-term liabilities, including bonds payable and compensated absences,
are not due and payable in the current period, and therefore, they are not
reported as liabilities in the funds. Long-term liabilities at year-end consist of:
Bonds payable (34,825,000)
Capital leases payable (270,726)
Accrued interest (125,321)
Compensated absences (1,030,570)
Total net assets - governmental activities
See Notes to Financial Statements.
15
$
30,463,977
413,342
301,351
(36,251,617)
$
12,737,881
SHIPPENSBURG AREA SCHOOL DISTRICT
COMBINED STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN
FUNDBALANCES-GOVERNMENTALFUNDS
Year Ended June 30, 2006
Capital Non-Major Total
Projects Governmental Governmental
General Construction Funds Funds
Revenues
Local sources $ 18,610,047 $ 858,563 $ 58,613 $ 19,527,223
State appropriations 11,891,215 11,891,215
Federal appropriations 777,190 777,190
Total revenues 31,278,452 858,563 58,613 32,195,628
Expenditures
Instructional 18,910,236 18,910,236
Support services 8,247,999 25,142 113,060 8,386,201
Operation of non- instructional servi;es 422,669 171,177 593,846
Construction/improvement services 10,199,103 10,199,103
Debt service
Principal 1,565,000 1,565,000
Interest 1,390,060 1,390,060
Total expenditures 30,535,964 10,224,245 284,237 41,044,446
Excess (deficiency) of revenues
over expenditures 742,488 (9,365,682) (225,624) (8,848,8 I 8)
Other Financing Sources (Uses)
Refund of prior years' receipts (2,625) (2,625)
Refund of prior years' expenditures 8,434 8,434
Operating transfers in 286,180 286,180
Operating transfers out (286,180) (286,180)
Total other financing sources (uses) (288,805) 294,614 5,809
Net changes in fund balances 453,683 (9,365,682) 68,990 (8,843,009)
Fund Balances - July 1,2005 2,573,401 23,972,869 107,567 26,653,837
Fund Balances - June 30, 2006 $ 3,027,084 $ 14,607,187 $ 176,557 $ 17,810,828
See Notes to Financial Statements.
16
SHIPPENSBURG AREA SCHOOL DISTRICT
RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF
REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE
STATEMENT OF ACTIVITIES
Year Ended June 30,2006
Net change In fund balances - total governmental funds
$ (8,843,009)
Amounts reported for governmental activities in the Statement of
Activities are different because:
Capital outlays are reported in governmental funds as expenditures.
However, in the Statement of Activities, the costs of those assets are
allocated over their useful lives as depreciation expense. This
is the amount by which capital outlays exceed depreciation
in the period.
Capital outlays
Less depreciation expense
10,442,197
(857,405)
9,584,792
The net effect of various miscellaneous transactions involving capital
assets (ie. sales, trade-ins, and donations) is to decrease net assets.
(373)
Because some property taxes will not be collected for several
months after the District's fiscal year ends, they are not considered
as "available" revenues in the governmental fundso Deferred tax
revenues decreased by this amount this year.
(69,960)
Interest on long-term debt in the Statement of Activities differs from the
amount reported in the governmental funds because interest is
recognized as an expenditure in the funds when it is due, and thus
requires the use of current financial resources. In the Statement of
Activities, interest expense is recognized as the interest accrues,
regardless of when it is due. The additional interest accrued in the
Statement of Activities over the amount due is shown here.
5,534
Some expenses reported in the Statement of Activities do not require
the use of current financial resources, and therefore, they are not
reported as expenditures in governmental funds.
(110,311 )
The issuance of long-term debt provides current financial resources
to governmental funds, while the repayment of the principal ofIong-
term debt consumes the current financial resources of governmental funds.
Neither transaction, however, has any effect on net assets. Also,
governmental funds report the effect of issuance costs, premiums,
discounts, and similar items when debt is first issued, whereas these
amounts are deferred and amortized in the Statement of Activities. This
amount is the net effect of these differences in the treatment ofIong-term
debt and related items.
Repayment of long-term debt
Repayment of capital lease obligation
Amortization of bond issuance costs
1,565,000
67,680
(36,397) 1,596,283
$ 2, I 62,956
Change In net assets of governmental activities
See Notes to Financial Statements.
17
SHIPPENSBURG AREA SCHOOL DISTRICT
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE _
BUDGETANDACTUAL-GENERALFUND
Year Ended June 30, 2006
Variance with Final
Budgeted Amounts Budget Favorable
Original Final Actual (Unfavorable )
Revenues
Local sources $ 18,562,300 $ 18,731,828 $ 18,610,047 $ (121,781)
State appropriations 11,708,188 11,743,669 11,891,215 147,546
Federal appropriations 674,454 682,867 777,190 94,323
Total revenues 30,944,942 31,158,364 31,278,452 120,088
Expenditures
Instructional 18,970,505 19,185,249 18,910,236 275,013
Support services 8,460,359 8,456,421 8,247,999 208,422
Operation of non-instructional services 430,550 433,166 422,669 10,497
Debt service 3,033,303 3,033,303 2,955,060 78,243
Total expenditures 30,894,717 31,108,139 30,535,964 572,175
Excess of revenues
over expenditures 50,225 50,225 742,488 692,263
Other Financing Uses
Refund of prior years' receipts (2,625) (2,625)
Operating transfers out (286,180) (286,180) (286,180)
Budgetary reserve (l00,000) (l00,000) 100,000
Total other financing uses (386,180) (386,180) (288,805) 97,375
Net changes in fund balance $ (335,955) $ (335,955) 453,683 $ 789,638
Fund Balance - July 1,2005 2,573,401
Fund Balance - June 30, 2006 $ 3,027,084
See Notes to Financial Statements.
18
SHIPPENSBURG AREA SCHOOL DISTRICT
STATEMENT OF NET ASSETS -
PROPRIETARY FUND - FOOD SERVICE
June 30, 2006
ASSETS
Current Assets
Cash $ 4,305
Receivables
Federal subsidies 39,210
State subsidies 4,563
Inventories 34,267
Total current assets 82,345
Noncurrent Assets
Furniture and equipment - net 174,228
Total assets $ 256,573
LIABILITIES AND NET ASSETS
Liabilities
Accounts payable $ 568
Deferred revenues 19,473
Total liabilities - all current 20,041
Net Assets
Invested in capital assets 174,228
Unrestricted 62,304
Total net assets 236,532
TotalUabilities and net assets $ 256,573
See Notes to Financial Statements.
19
SHlPPENSBURG AREA SCHOOL DISTRICT
STATEMENT OF REVENUES, EXPENSES AND CHANGE IN NET ASSETS _
PROPRIETARY FUND - FOOD SERVICE
Year Ended June 30, 2006
Operating Revenues
Food service revenue $ 747,122
Operating Expenses
Labor, taxes and benefits 565,598
Professional and technical services 8,150
Disposal services 2,279
Electricity 20,000
Equipment repairs and maintenance 12,185
Extermination services 1,071
Advertising 670
Printing and binding 440
Travel 845
Supplies 32,074
Food and milk 393,705
Donated commodities used 46,055
Depreciation 27,578
Dues and fees 940
Total operating expenses 1,111,590
Operating loss (364,468)
Nonoperating Revenues (Expense)
Investment income 3,163
Federal subsidies 270,878
State subsidies 53,969
Value of donated commodities 46,055
Interest expense (404)
Total nonoperating revenues 373,661
Change in net assets 9,193
Net Assets - July 1,2005 227,339
Net Assets - June 30, 2006 $ 236,532
See Notes to Financial Statements.
20
SHlPPENSBURG AREA SCHOOL DISTRICT
STATEMENT OF CASH FLOWS-
PROPRIETARY FUND - FOOD SERVICE
Year Ended June 30, 2006
Cash Flows From Operating Activities
Cash received from meal sales $ 747,122
Cash payments for goods and services (510,023)
Cash payments to employees for services (565,598)
Net cash used in operating activities (328,499)
Cash Flows From Non-Capital Financing Activities
Federal subsidies 270,878
State subsidies 53,969
Net cash provided by non-capital
financing activities 324,847
Cash Flows From Capital and Related Financing Activities
Acquisition of equipment (2,700)
Principal paid on financing agreements (13,249)
Interest paid on financing agreements (404)
Cash used in capital and related
financing activities (16,353)
Cash Flows From Investing Activities
Investment income 3,163
Net decrease in cash (16,842)
Cash:
July 1, 2005 21,147
June 30, 2006 $ 4,305
(Continued)
21
SHlPPENSBURG AREA SCHOOL DISTRICT
STATEMENT OF CASH FLOWS-
PROPRIETARY FUND - FOOD SERVICE (Continued)
Year Ended June 30, 2006
Reconciliation of Operating Loss to Net Cash Used
in Operating Activities
Operating loss
Adjustments to reconcile operating loss to net
cash used in operating activities
Depreciation
Value of donated commodities
Changes in assets and liabilities:
(Increase) decrease in:
Receivables
Inventories
(Decrease) increase in:
Accounts payable
Deferred revenues
Net cash used in operating activities
$
(364,468)
27,578
46,055
(33,928)
(11,343)
(63)
7,670
(328,499)
$
See Notes to Financial Statements.
22
SHIPPENSBURG AREA SCHOOL DISTRICT
STATEMENT OF FIDUCIARY NET ASSETS
June 30, 2006
James Burd Nancy Grayson
Elementary Elementary Middle School Senior High
Activity Fund Activity Fund Activity Fund Activity Fund
ASSETS
Cash $ 6,375 $ 2,528 $ 9,533 $ 63,325
Receivables 103 127
Total assets $ 6,375 $ 2,631 $ 9,533 $ 63,452
LIABILITIES
Due to student groups $ 6,375 $ 2,631 $ 9,533 $ 63,452
23
SHIPPENSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS
Note 1.
Summary of Significant Accounting Policies
Shippensburg Area School District operates two elementary schools, one middle school and one high
school in Shippensburg, Pennsylvania. The District operates under current standards prescribed by the
Pennsylvania Department of Education in accordance with the provisions of the School Laws of
Pennsylvania. The District operates under a locally-elected, nine-member Board.
The financial statements of Shippensburg Area School District (the District) have been prepared in
accordance with accounting principles generally accepted in the United States of America (GAAP) as
applied to governmental units. The Governmental Accounting Standards Board (GASB) is the
authoritative standard-setting body for the establishment of governmental accounting and financial
reporting principles. The more significant of these accounting policies are as follows:
A. Reporting Entity
Shippensburg Area School District's financial statements include the operations of all entities for which
the School Board exercises oversight responsibility. Oversight responsibility is demonstrated by financial
interdependency, selection of governing authority, designation of management, ability to significantly
influence operations, and accountability for fiscal matters.
Shippensburg Area School District is the lowest level of government which has oversight responsibility
and control over all activities related to public school education in the Commonwealth of Pennsylvania.
The District receives funding from local, state and Federal government sources and must comply with the
requirements of these funding-source entities. However, the District is not included in any other
governmental "reporting entity" since the School Board Members are elected by the public and have
decision-making authority, the power to designate management, the ability to significantly influence
operations and primary accountability for fiscal matters. Additionally, the District does not exercise
oversight responsibility over any other entities, and consequently, no other entities have been included in
the accompanying financial statements.
B. Government-wide and Fund Financial Statements
The government-wide financial statements (i.e., the Statement of Net Assets and the Statement of
Activities) report information on all of the non-fiduciary activities of the primary government and its
component units. For the most part, the effect of interfund activity has been removed from these
statements. Governmental activities, which normally are supported by taxes and intergovernmental
revenues, are reported separately from business-type activities, which rely to a significant extent on fees
and charges for support. Likewise, the primary government is reported separately from certain legally-
separate component units for which the primary government is financially responsible.
The Statement of Activities demonstrates the degree to which the direct expenses of a given function or
segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a
specific function or segment. Program revenues include 1) charges to customers or applicants who
purchase, use or directly benefit from goods, services, or privileges provided by a given function or
segment and 2) grants and contributions that are restricted to meeting the operational or capital
requirements of a particular function or segment. Taxes and other items not included among program
revenues are reported as general revenues.
24
SHIPPENSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS
Note I.
Summary of Significant Accounting Policies (Continued)
B. Government-wide and Fund Financial Statements (Continued)
Separate-fund financial statements are provided in the report for all of the governmental, proprietary, and
fiduciary funds of the District, even though the latter are excluded from the government-wide financial
statements. Major individual governmental funds and major individual enterprise funds are reported as
separate columns in the fund [mancial statements. Non-major funds are aggregated and presented in a
single column. Fiduciary funds are reported by fund type.
C. Measurement Focus, Basis of Accounting and Financial Statement Presentation
The District complies with accounting principles generally accepted in the United States of America
(GAAP) and applies all relevant Governmental Accounting Standards Board (GASB) Pronouncements.
The government-wide financial statements are reported using the economic-resources measurement focus
and the accrual basis of accounting, as are the proprietary and fiduciary-fund financial statements.
Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of
the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are
levied. Grants and similar items are recognized as revenues as soon as all eligibility requirements
imposed by the provider have been met. Net 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 is charged as expense against current operations and
accumulated depreciation is reported on the Statement of Net Assets.
Governmental-fund financial statements are reported using the current financial-resources measurement
focus and the modified-accrual basis of accounting. Revenues are recognized as soon as they are both
measurable and available. Revenues are considered to be available when they are collectible within the
current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the
government considers revenues to be available if they are collected within 60 days of the end of the
current fiscal period. Revenues from Federal, state and other grants designated for payment of specific
School District expenditures is recognized when the related expenditures are incurred; accordingly, when
such funds are received, they are recorded as deferred revenues until earned. Expenditures generally are
recorded when liabilities are incurred, as under accrual accounting. However, debt-service expenditures,
as well as expenditures related to compensated absences and claims and judgments, are recorded only
when payment is due.
When both restricted and unrestricted resources are available for use, it is the District's policy to use
restricted resources first, then unrestricted resources as they are needed.
Governmental Funds are those through which most governmental functions of the District are
financed. The acquisition, use and balances of the District's expendable financial resources and related
liabilities (except those accounted for in proprietary funds) are accounted for through Governmental
Funds.
25
SHIPPENSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS
Note I.
Summary of Significant Accounting Policies (Continued)
C. Measurement Focus, Basis of Accounting and Financial Statement Presentation (Continued)
The District reports the following major governmental funds:
The General Fund is the District's primary operating fund. It accounts for all financial resources
except those required to be in another fund. Revenues are primarily derived from local property,
earned income, per capita and occupational taxes, and state and,Federal distributions. Many of the
more important activities of the District, including instruction, administration of the District and
certain non-instructional services are accounted for in this fund.
The Capital Projects Fund is used to account for fmancial resources available for the acquisition or
construction of major capital facilities (other than those fmanced by proprietary funds).
The District operates one enterprise fund, the Food Service Fund. This fund accounts for the activities of
the District's food service program.
Additionally, the District reports the following non-major governmental funds:
The Athletic Funds are authorized by Section 511 of the Public School Code of 1949 to account for
the revenues and expenditures of athletic activities. The funds account for gate receipts and other
revenues from athletic events and certain budgeted costs of the District's athletic programs.
The Capital Reserve Fund (Section 2932 is authorized by P.L. 145, Act of April 30, 1943, known as
Section 2932 School Laws of Pennsylvania) accounts for (1) monies transferred during any fiscal
year from appropriations made for any particular purpose which may not be needed, and (2) surplus
monies in the General Fund of the District at the end of any fiscal year. This fund is included in the
financial statements as a Special Revenue Fund.
Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating
revenues and expenses generally result from providing services and producing and delivering goods in
connection with the proprietary fund's principal on-going operations. The principal operating revenues of
the District's enterprise fund are food service charges. Operating expenses for the District's enterprise
fund include food production costs, supplies, administrative costs, and depreciation on capital assets. All
revenues or expenses not meeting this definition are reported as nonoperating revenues and expenses.
The District does not attempt to allocate "building-wide costs" to the Food Service Fund. Thus, General
Fund expenditures which partially benefit the Food Service Fund (utilities, janitorial services, insurance,
etc.) are not proportionately recognized within the Food Service Fund; similarly, the Food Service Fund
does not recognize a cost for the building space it occupies (no rental-of-facilities expense).
The Activity Funds account for the monies authorized by Section 511 of the Public School Code of 1949
for school publications and organizations. A portion of the Activity Funds is an Agency Fund which is
separate from other Agency Funds because of legal requirements. Agency Funds are custodial in nature
(assets equal liabilities) and do not involve measurement of results of operations. Agency Funds are also
accounted for using the modified-accrual basis of accounting.
26
SHIPPENSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS
Note I.
Summary of Significant Accounting Policies (Continued)
D. Budgets and Budgetary Accounting
An operating budget is adopted prior to the beginning of each year for the General Fund on a modified-
accrual basis of accounting. The General Fund is the only fund for which a budget is legally required.
The Pennsylvania School Code dictates specific procedures relative to adoption of the District's budget
and reporting of its financial statements:
The District, before levying annual school taxes, is required to prepare an operating budget for
the succeeding fiscal year.
The District is required to publish notice by advertisement, at least once in two newspapers of
general circulation in the municipality in which it is located, and within fifteen days of fmal
action, that the proposed budget has been prepared and is available for public inspection at the
administrative office of the District.
Notice that public hearings will be held on the proposed operating budget must be included in the
advertisement; such hearings are required to be scheduled at least ten days prior to when final
action on adoption is taken by the Board.
Legal budgetary control is maintained at the sub-function/major-object level. The Board of School
Directors may make transfers of funds appropriated to any particular item of expenditure by legislative
action in accordance with the Pennsylvania School Code. Management may amend the budget at the sub-
function/sub-object level without Board approval. Appropriations lapse at the end of the fiscal period.
Budgetary information reflected in the financial statements is presented at or below the level of budgetary
control and includes the effect of approved budget amendments.
E. Assets, Liabilities and Net Assets or Equity
Cash and Cash Equivalents: For purposes of the Statement of Cash Flows presented for the proprietary
fund, the District considers all highly-liquid investments with maturities of three months or less when
purchased to be cash equivalents.
Investments: Investments are stated at market value.
Allowance for Estimated Uncollectible Taxes and Deferred Revenues: The allowance for estimated
uncollectible taxes is based upon an historical estimate of delinquent taxes that will not be received within
one year of the fiscal year-end. Deferred revenues are based upon an historical estimate of delinquent
taxes expected to be received within one year of the fiscal year-end.
The portion of taxes receivable which is expected to be received within sixty days of June 30 is recorded
as revenue in the current year. The remaining amount of taxes receivable which is expected to be
received within one year from June 30 is recorded as deferred revenues. All other amounts in taxes
receivable are written off as estimated uncollectible taxes.
27
SHIPPENSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS
Note I.
Summary of Significant Accounting Policies (Continued)
E. Assets, Liabilities and Net Assets or Equity (Continued)
Inventories: On government-wide financial statements, inventories are presented at the lower of cost or
market on a fIrst-in, first-out basis, and are expensed when used.
A physical inventory of the Food Service Fund's food and supplies was taken as of June 30, 2006. The
inventory consisted of government-donated commodities which were valued at estimated fair market
value, and purchased commodities and supplies, valued at cost using the fIrst-in, first-out (FIFO) method.
The District has adopted an inventory recordkeeping system which does distinguish between donated and
purchased commodities. Accordingly, deferred revenues for donated commodities has been recorded.
Capital Assets and D((preciation: Capital assets, which include property, plant and equipment, are
reported in the applicable governmental or business-type activities column in the government-wide
financial statements. Capital assets are capitalized at the discretion of management, unless the assets are
acquired by debt proceeds, in which case the assets must be capitalized. Management considers various
factors in the capitalization of assets, including the assets' estimated useful lives, costs, and the extent to
which the assets are part of a larger capital project. The District's capital assets include library books,
classroom texts, computer equipment, classroom furniture, and other instructional equipment, subject to
the on-going discretion of management. The costs of normal maintenance and repairs that do not add to
the value of the assets or materially extend asset lives are not capitalized.
Depreciation is provided for fixed assets on the straight-line basis over the estimated useful lives of the
assets or groups of assets as determined by management.
Long-Term Obligations: In the government-wide financial statements, and in the proprietary fund type in
the fund fmancial statements, long-term debt and other long-term obligations are reported as liabilities in
the applicable governmental or business-type activity columns in the Statement of Net Assets. Bond
premiums and discounts, as well as issuance costs, are deferred and amortized over the lives of the issues
using the effective interest method. Bonds payable are reported net of applicable bond premiums Of
discounts. Bond issuance costs are reported as deferred charges and amortized over the terms of the
related debt.
In the fund financial statements, governmental fund types recognize bond premiums and discounts, as
well as bond issuance costs, during the current period. The face amount of the debt issued is reported as
other financing sources while discounts on debt issuances are reported as other financing uses. Issuance
costs, whether or not withheld from the actual debt proceeds received, are reported as debt service
expenditures.
Compensated Absences: Under the system of fmancial accounting and reporting for Pennsylvania School
Systems, the District accrues certain accumulated employee benefits, such as unpaid vacation and sick
pay. Calculation of this amount is determined by the appropriate vacation, sick and retirement lump-sum
payments which would be available to employees if they would leave or retire from the District and is
adjusted for expected turnover rates of employees. Accrued benefit days, multiplied by appropriate salary
amounts, are reflected as a long-term liability unless retirements are likely within the upcoming fiscal
year. Those costs, determined to be current-year costs, are reflected as a liability of the General Fund.
28
SHIPPENSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS
Note I.
Summary of Significant Accounting Policies (Continued)
E. Assets, Liabilities and Net Assets or Equity (Continued)
Transfers: Advances between funds that are not expected to be repaid are accounted for as transfers. In
those cases when repayment is expected, the advances are accounted for through the various "due from"
and "due to" accounts.
Fund Balance:
The District classifies fund balances as follows:
Reserved
Reserved is used to denote that portion of the fund balance, which is not available for expenditure
appropriation or is legally segregated for a specific purpose.
· Reserved for athletics represents that portion of fund balance legally restricted to athletic
programs.
· Reserved for capital reserve represents that portion of fund balance legally restricted to capital
projects.
Unreserved
· Designated is used to indicate intentions for financial-resource utilization.
· Undesignated is used to denote that portion of fund balance which IS available for
appropriations.
Use of Estimates: Management uses estimates and assumptions in preparing financial statements. These
estimates and assumptions affect the reported amounts of assets and liabilities and the reported revenue,
expenditures and disclosures.
29
SHlPPENSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS
Note 2.
Change in Accounting Principles
During the year ended June 30, 2006, the District adopted Statements of Governmental Accounting
Standards (SGAS) No. 42, Accounting and Financial Reportingfor Impairment of Capital Assets andfor
Insurance Recoveries, No. 46, Net Assets Restricted by Enabling Legislation, and No. 47, Accountingfor
Termination Benefits for the year ended June 30, 2006. Statement No. 42 requires governments to report
the effects of capital asset impairment in their financial statements when it occurs and requires all
governments to account for insurance recoveries in the same manner. Statement No. 46 clarifies that a
legally enforceable enabling legislation restriction is one that a party external to a government, such as
citizens, public interest groups, or the judiciary, can compel a government to honor. The Statement states
that the legal enforceability of an enabling legislation restriction should be reevaluated if any of the
resources raised by the enabling legislation are used for a purpose not specified by the enabling legislation
or if a government has other cause for reconsideration. This Statement also specifies the accounting and
financial reporting requirements if new enabling legislation replaces existing enabling legislation or if
legal enforceability is reevaluated. Finally, this Statement requires governments to disclose the portion of
total net assets that is restricted by enabling legislation. Statement No. 47 establishes accounting
standards for termination benefits and will be effective for those termination benefits provided other than
through an existing defined OPEB benefit plan. The Standard provides recognition guidance for voluntary
and involuntary termination benefits (for example, severance benefits).
Note 3.
Deposits and Investments
Under Section 440.1 of the Public School Code of 1949, as amended, the District is permitted to invest
funds consistent with sound business practices in the following types of investments:
· U.S. Treasury Bills
· Short-term obligations of the U.S. Government or its agencies or its instrumentalities
· Deposits in savings accounts or time deposits or share accounts of institutions insured by either:
1. The Federal Deposit Insurance Corporation (FDIC), or
2. The Federal Savings and Loan Insurance Corporation (FSLIC), or
3. The National Credit Union Share Insurance Fund (NCUSIF)
to the extent that such accounts are so insured, and for any amounts above maximum insurable
limits, provided that approved collateral as provided by law shall be pledged by the depository
· Obligations of (a) the United States of America or its agencies or instrumentalities backed by the
full-faith and credit of the United States of America, and (b) the Commonwealth of Pennsylvania
or instrumentalities thereof backed by the full-faith and credit of these political subdivisions
· Shares of investment companies whose investments are restricted to the above categories
The deposit and investment policies of the District adhere to state statutes and prudent business practices.
There were no deposit or investment transactions during the year that violated either state statutes or
District policies.
30
SHIPPENSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS
Note 3.
Deposits and Investments (Continued)
Deposits: Custodial-Credit Risk
Custodial-credit risk is the risk that in the event of a bank failure, the District's investments may not be
returned to it. As ofJune 30, 2006, $17,168,941 of the District's total bank balances of$17,268,941 were
exposed to custodial-credit risk as follows:
Uninsured and collateralized by assets maintained in conformity with Act 72
Amount
$ 17,168,941
Act 72 is an act standardizing the procedures for pledges of assets to secure deposits of public funds with
banking institutions pursuant to other laws; establishing a standard rule for the types, amounts and
valuations of assets eligible to be used as collateral for deposits of public funds; permitting assets to be
pledged against deposits on a pooled basis and authorizing the appointment of custodians to act as the
pledgor of the assets.
Investments
As of June 30, 2006, the District had the following investments:
Investment
Pennsylvania Local Government Investment Trust (pLGIT/ARM)
Maturities
41-days weighted avg
Fair Values
$ 2,755,214
Portfolio Assets
PLGIT/ARM - This fund invests in U.S. Treasury and agency securities and repurchase agreements
secured by such obligations, as well as certain municipal obligations and collateralized or insured
certificates of deposit. Weighted-average portfolio maturity for the fund is expected to be kept at or
below 60 days.
W eighted-A verage Maturity
The weighted-average maturity (W AM) method expresses investment time horizons-the time when
investments become due and payable-in years or months, weighted to reflect the dollar size of individual
investments within an investment type. In this illustration, W AMs are computed for each investment
type. The portfolio's W AM is derived by dollar-weighting the W AM for each investment type.
Interest-Rate Risk
The District does not have a formal investment policy that limits investment maturities as a means of
managing its exposure to fair-value losses arising from increasing interest rates.
31
SHIPPENSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS
Note 3.
Deposits and Investments (Continued)
Credit Risk
As indicated above, Section 440.1 of the Public School Code of 1949, as amended, limits the composition
of the District's investments, and the District has no investment policy that would further limit its
investment choices. As of June 30, 2006, the District's investments in PLGIT were rated AAAm by
Standard & Poor's.
Concentrations of Credit Risk
The District places no limit on the amounts invested in anyone issuer. The District's investments in
PLGIT represent 100% of the District's total investments.
Note 4.
Taxes Receivable, Deferred Revenues and Estimated Uncollectible Taxes
A summary of the taxes receivable and related accounts at June 30, 2006, follows:
Amount
Uncollected taxes - real estate $ 599,409
Uncollected taxes - personal 5,568
Interest and commissions - net 18,187
Earned income taxes 374,798
Realty transfer taxes 63,986
Taxes Receivable - Net $ 1,061,948
Taxes to be collected within 60 days $ 652,992
Deferred revenues - delinquent taxes 413,342
Allowance for uncollectible taxes (4,386)
Taxes Receivable - Net $ 1,061,948
Deferred Revenue - General Fund
Delinquent taxes $ 413,342
Grant revenues 2,309
$ 415,651
Deferred Revenue - Food Service Fund
Student deposits $ 9,750
Donated commodities 9,723
$ 19,473
32
SHIPPENSBURG AREA SCHOOL DISTRICT
NOTES TOnNANCIAL STATEMENTS
Note 5.
Interfund Accounts
Individual fund transfer activity at June 30, 2006, is as follows:
Transfers In Transfers Out
General $ $ 286,180
Capital Reserve 170,500
Senior High Athletic 84,396
Middle School Athletic 31,284
$ 286,180 $ 286,180
Note 6.
Food Service Fund Inventory
The composition of Food Service Fund inventory at June 30, 2006, is as follows:
Materials and supplies
Purchased food
Donated food
$
Amount
7,010
17,534
9,723
34,267
$
Note 7.
Property Taxes
Property taxes are levied on July 1st. Taxes are collected at a discount until August 31st, at their face
amount from September 1 st until October 31 st, and include a penalty thereafter. The taxes are billed and
collected by elected tax collectors. The County Tax Bureaus collect delinquent real estate taxes for the
District.
33
SHIPPENSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS
Note 8. General Fixed Assets
Capital asset activity for the year ended June 30, 2006, was as follows:
July 1, 2005 Increases Decreases June 30, 2006
Governmental Activities
Land and site improvements $ 1,152,747 $ 14,772 $ $ 1,167,519
Buildings and improvements 25,485,158 25,485,158
Furniture and equipment 7,889,409 295,352 206,835 7,977,926
Construction-in-progress 1,239,017 10,132,073 11,371,090
Total Governmental Activities Assets 35,766,331 10,442,197 206,835 46,001,693
Less accumulated depreciation
Land and site improvements 368,292 27,337 395,629
Buildings and improvements 10,330,436 554,399 10,884,835
Furniture and equipment 4,188,045 275,669 206,462 4,257,252
Total accumulated depreciation 14,886,773 857,405 206,462 15,537,716
Governmental Activities, Capital
Assets - Net $ 20,879,558 $ 9,584,792 $ 373 $ 30,463,977
Business-Type Activity
Machinery and equipment $ 684,160 $ 2,700 $ $ 686,860
Accumulated depreciation (485,054) (27,578) (512,632)
Business-Type Activity, Capital
Assets - Net $ 199,106 $ (24,878) $ $ 174,228
Depreciation expense was charged to the functions/programs of the District as follows:
Amount
Governmental Activities
Instructional
Instructional student support
Administration and financial support
Operation and maintenance of plant services
Student activities
Community services
Total governmental activities
Business- Type Activity
Food Service
Total School District
$
642,616
71,979
77,236
36,827
28,380
367
857,405
$
27,578
884,983
34
SHlPPENSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS
Note 9.
Accrued Salaries and Benefits
Accrued salaries and benefits at June 30, 2006, consist of the following:
Accrued salaries
Retirement
Social security
Workers' compensation
Amount
$ 1,073,120
290,747
81,651
8,582
$ 1,454,100
Accrued salaries represent teachers' salaries earned during the 2005-06 school year which will be paid
subsequent to June 30, 2006. Accrued retirement represents the public school employees' retirement
board-contribution for the second quarter of calendar year 2006, including the portion pertaining to
accrued salaries at June 30, 2006. Accrued social security represents the District's liability arising from
accrued salaries at June 30, 2006.
Note 10. Long- Tenn Debt
During the fiscal year ended June 30, 2006, general long-term debt changed as follows:
Balances Balances
July 1, 2005 Increase Decrease June 30, 2006
Governmental Activities
General Long-Term Obligations:
General Obligation Bonds -
Series of2001 $ 1,630,000 $ $ 800,000 $ 830,000
General Obligation Bonds -
Series A of 200 1 9,395,000 525,000 8,870,000
General Obligation Note -
Series of 2003 9,945,000 240,000 9,705,000
General Obligation Bonds -
Series of2004 15,420,000 15,420,000
Capital lease obligation 338,406 67,680 270,726
Compensated absences payable 920,259 110,311 1,030,570
$ 37,648,665 $ 110,311 $ 1,632,680 $ 36,126,296
Business-Type Activity
General Obligation Note-
Series of2003 $ 13,249 $ $ 13,249 $
35
SHIPPENSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS
Note 10. Long-Term Debt (Continued)
General Obligation Bonds - Series of 2001 - On September 1, 2001, the District issued General
Obligation Bonds in the principal amount of $4,500,000. The bonds bear annual interest rates ranging
from 2.60% to 3.65%. Interest is payable semi-annually on November 15 and May 15, and the bonds
mature serially in amounts ranging from $615,000 to $830,000 through November 15, 2006.
General Obligation Bonds - Series A of 2001 - On October 15, 2001, the District issued General
Obligation Bonds in the principal amount of $9,805,000. The bonds bear annual interest rates ranging
from 2.40% to 4.20%. Interest is payable semi-annually on November 15 and May 15, and the bonds
mature serially in amounts ranging from $5,000 to $1,660,000 through November 15,2012.
General Obligation Note - Series of 2003 - On December 30, 2003, the District obtained secured
financing from the New Garden General Authority in the principal amount of $9,945,000. Principal
payments, commencing on November 1, 2005, are due annually, and interest is payable monthly,
commencing on May 1,2005, at a variable rate not to exceed 12.00%.
General Obligation Note - Series of 2003 - On January 23, 2003, the District obtained financing from
Orrstown Bank in the principal amount of $52,995. The note bears interest at a tax-free fixed rate of
3.125%. Interest is payable quarterly on September 1, December 1, March 1 and June 1, and requires an
annual principal payment of $ 13,249. This note was paid off on June 1,2006.
General Obligation Bonds - Series of 2004 - On October 1, 2004, the District issued General Obligation
Bonds in the principal amount of $15,420,000. The bonds bear annual interest rates ranging from 2.05%
to 4.45%. Interest is payable semi-annually on November 15 and May 15, and the bonds mature serially
in amounts ranging from $5,000 to $2,035,000 through November 15,2020.
The District is in compliance with all debt covenants of the outstanding bond issues. Those covenants
include the following: the District shall include the annual debt service in its budget for the fiscal year,
shall appropriate these amounts from its general revenues, and shall punctually cause the payment of the
principal and interest of each of the bonds.
Maturities of the long-term debt issues are as follows:
Year Ending
June 30,
2007
2008
2009
2010
2011
2012-2016
2017-2021
2022-2026
2027-2031
Principal
$ 1,630,000
1,690,000
1,750,000
1,820,000
1,885,000
9,810,000
11,505,000
2,425,000
2,310,000
$ 34,825,000
36
Governmental Activities
Interest
$ 2,125,447 $
2,045,513
1,961,232
2,669,366
1,776,102
7,382,542
4,513,630
2,113,250
544,500
$ 25,131,582 $
Total
3,755,447
3,735,513
3,711,232
4,489,366
3,661,102
17,192,542
16,018,630
4,538,250
2,854,500
59,956,582
SHIPPENSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS
Note 10. Long-Term Debt (Continued)
Compensated Absences - Under the terms of the District's employment policies, employees are
reimbursed for accrued vacation upon retirement or other termination of employment. The
reimbursement rate is established by the employment contract and varies by employee classification. In
addition, employees are granted sick days per school year and any unused sick days are permitted to be
carried over to future years. Upon retirement from the District, employees are reimbursed for
accumulated sick days equal to the number of unused days multiplied by an amount per the employment
contract. The employees are also offered options regarding retirement payouts as prescribed in the
contract if certain conditions are met. For the year ended June 30, 2006, benefits attributed to
employees retiring during the 2005-06 year amounted to $49,039 for 10 participants. The total liability
for accrued vacation, sick leave and retirement bonuses at June 30, 2006, has been reflected in the
Statement of Net Assets and totals $1,030,570.
Note 11. Leases Payable
The District has entered into lease agreements as lessee for financing the acquisition of copier
equipment. These lease agreements qualify as capital leases for accounting purposes and therefore,
have been recorded as such. The annual requirements for leases payable as of June 30, 2006, are as
follows:
Year
2007
2008
2009
2010
Amount
$ 67,680
67,680
67,681
67,685
$ 270,726
The assets acquired through the capital leases are as follows:
Furniture and equipment
Less accumulated depreciation
Amount
$ 338,406
(101,522)
$ 236,884
Note 12. Post-Employment Benefits
Under the Consolidated Omnibus Budget Reconciliation Act (COBRA), the District provides healthcare
benefits to eligible former employees and their dependents. Requirements are outlined by the Federal
Government for this coverage. The premium plus a 2% administrative fee is paid in full by the eligible
participant. This program is offered for duration of up to 18 months or 36 months after an employee's
termination date. At June 30, 2006, there were 5 participants covered under COBRA.
37
SHlPPENSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS
Note 13. Defined-Benefit Pension Plan
Plan Description:
The District contributes to the statewide Public School Employees' Retirement System (the System), a
governmental, cost-sharing, multiple-employer, defined-benefit plan administered by the System. In
addition to regular retirement benefits, the System also provides for disability, legislatively-mandated
ad hoc cost-of-living adjustments, and healthcare insurance-premium assistance to qualifying
annuitants. Membership in the System is mandatory for substantially all full-time public school
employees in the Commonwealth of Pennsylvania (Commonwealth). State statutes assign the
authority to establish and amend benefit provisions of the Pennsylvania Public School Employees'
Retirement Code (the Code) to the Pennsylvania General Assembly (Act No. 96 of October 2, 1975, as
amended), (24 Pa. C.S. 8101-8535). The Public School Employees' Retirement System issues a
publicly-available comprehensive annual fmancial report that includes financial statements and
required supplementary infonnation for the plan. This report may be obtained by writing to Barbara
D. Flurie, Office of Financial Management, Public School Employees' Retirement System of
Pennsylvania, P.O. Box 125, Harrisburg, Pennsylvania, 17108-0125. This report is also available in
the Publications Section of the PSERS website at www.psers.state.pa.us.
Funding Policy:
The contribution policy is established by the Public School Employees' Retirement Code and requires
contributions by the active members, the District and the Commonwealth.
Contribution Rates:
The current contribution rate for active members joining the System before July 22, 1983, is set by law
at 5.25% or at 6.50% of the member's qualifying compensation. For active members joining the
System on or after July 22, 1983, and who were active or inactive as of July 1, 2001, the rate of
contribution is 6.25% or 7.50% of the member's qualifying compensation. Members who joined the
System after June 30, 2001, contribute at 7.50%. For all new hires, the higher contribution rates began
with service rendered on or after January 1, 2002.
District Contributions:
The District's required contributions are based upon an actuarial valuation. For the fiscal year ended
June 30, 2006, the District's rate of contribution was 4.69% of covered payroll. The 4.69% rate is
composed of a pension contribution rate of 4.00% for pension benefits and 0.69% for healthcare
insurance-premium assistance. The District is required to pay the entire contribution and will be
reimbursed by the Commonwealth in an amount equal to the Commonwealth's share as detennined by
the income-aid ratio (as defined in Act 29 of 1994), which is at least one-half of the total District's
rate. The District's contributions to the Plan for the years ended June 30, 2006, 2005 and 2004, were
$751,041, $626,952 and $530,915, respectively, and are equal to the required contributions for each
year.
38
SHlPPENSBURG AREA SCHOOL DISTRICT
NOTES TO FINANCIAL STATEMENTS
Note 14. Participation in Risk-Sharing Pool
The District is a participant in a risk-sharing pool to provide workers' compensation coverage. The
expense for this coverage for the 2005-06 year was $155,146, comprised of a self-insured retention of
$38,117 and a contribution to the Central Fund of $117,029. Actual claims during the year are first
paid out of the self-insured retention. Claims that exceed the self-insured retention are satisfied by the
Central Fund. The Central Fund maintains excess insurance to cover any claims that exceed $400,000
per accident. There are approximately 79 districts participating in the pool. If there is a deficiency in
the pooled funds, each member is assessed a proportionate share of the deficiency. Upon withdrawal
by a member from the pool, the terminating member has no rights to funds in the pool.
Note 15. Risk Management
The District is exposed to various risks of loss related to torts; theft of, damage to, or destruction of
assets and errors or omissions. Significant losses are covered by commercial insurance for all major
programs. For insured programs, there have been no significant reductions in settlement coverage.
Settlement amounts have not exceeded insurance coverage for the current year or the three prior years.
Note 16. Board Approval oCDebt Issuance
On May 22, 2006, the Board of School Directors of Shippensburg Area School District approved
issuance of non-electoral debt in the maximum aggregate principal amount of $7,000,000 evidenced
by general obligation bonds for improvements to the Nancy Grayson and James Burd elementary
schools.
39
SUPPLEMENTARY INFORMATION
SHIPPENSBURG AREA SCHOOL DISTRICT
GENERAL FUND - SCHEDULE OF REVENUES
Year Ended June 30, 2006
Revenues
Local sources
Real estate taxes
Current
Interim
Public utility tax
Payments in lieu of taxes
Current per capita taxes
679
511
Occupational privilege tax
Earned income tax
Real estate transfer taxes
Delinquent real estate taxes
Delinquent per capita taxes
679
511
Delinquent occupation tax
Interest
IDEA
Rentals
Tuition
Refunds and other miscellaneous revenue
$ 12,906,444
54,463
23,208
6,176
51,181
51,181
114,164
3,062,271
654,904
718,682
7,535
7,535
2,078
274,617
490,047
9,414
31,701
144,446
18,610,047
Total revenues from local sources
State appropriations
Basic instructional subsidy
Charter schools
Section 1305 and 1306
Homebound instruction
Vocational education
Alternative education
Migratory children
Special education
Transportation
7,007,126
36,865
33,322
1,019
21,759
32,047
40
1,593,158
806,586
(Continued)
40
SHIPPENSBURG AREA SCHOOL DISTRICT
GENERAL FUND - SCHEDULE OF REVENUES (Continued)
Year Ended June 30, 2006
Revenues (Continued)
State appropriations (Continued)
Rentals and sinking fund payments
Health services
Dual enrollment grant
Social security reimbursement
Retirement reimbursement
Accountability block grant
Extra grants
922,988
67,375
1,404
609,003
392,015
365,475
1,033
11,891,215
511,117
8,413
158,994
7,156
16,360
75,150
777,190
$ 31,278,452
Total state appropriations
Federal appropriations
Title I - Grants to Local Educational Agencies
Title II - Education Technology
Title II - Improving Teacher Quality
Title V - Innovative Education
Safe and Drug-free Schools and Communities
Medical Assistance Program
Total Federal appropriations
Total revenues
41
SHIPPENSBURG AREA SCHOOL DISTRICT
GENERAL FUND - SCHEDULE OF EXPENDITURES
Year Ended June 30, 2006
Expenditures
Instructional
Regular programs
Salaries
Employee benefits
Purchased services
Professional and technical
Property
Other
Supplies
Property
Other objects
$ 8,777,941
2,640,026
5,559
118,429
510,050
381,989
60,676
1,934
12,496,604
2,134,925
780,923
1,284,460
98,794
42,828
13,258
4,355,188
Total regular programs
Special programs
Salaries
Employee benefits
Purchased services
Professional and technical
Other
Supplies
Property
Total special programs
Vocational education programs
Salaries
Employee benefits
Purchased services
Property
Other
Supplies
Property
Other objects
421,082
106,689
484
572,990
17,251
940
160
Total vocational education programs
1,119,596
(Continued)
42
SHIPPENSBURG AREA SCHOOL DISTRICT
GENERAL FUND - SCHEDULE OF EXPENDITURES (Continued)
Year Ended June 30, 2006
Expenditures (Continued)
Instructional (Continued)
Other instructional programs
Salaries
Employee benefits
Purchased services
Professional and technical
Other
Supplies
678,075
174,949
55,057
12,462
7,346
Total other instructional programs
927,889
Adult education programs
Salaries
Employee benefits
Supplies
7,251
837
465
Total adult education programs
8,553
Community college education program
2,406
Total instructional
18,910,236
Support Services
Pupil personnel
Salaries
Employee benefits
Purchased services
Professional and technical
Property
Other
Supplies
Property
Other objects
719,636
215,238
61,938
85
9,613
23,741
1,459
1,593
Total pupil personnel
1,033,303
(Continued)
43
.
SHIPPENSBURG AREA SCHOOL DISTRICT
GENERAL FUND - SCHEDULE OF EXPENDITURES (Continued)
Year Ended June 30, 2006
Expenditures (Continued)
Support Services (Continued)
Instructional staff
Salaries
Employee benefits
Purchased services
Professional and technical
Property
Other
Supplies
Property
Other objects
416,591
163,897
6,133
17,259
14,501
144,249
224,271
1,763
Total instructional staff
988,664
Administration
Salaries
Employee benefits
Purchased services
Professional and technical
Property
Other
Supplies
Property
Other objects
1,238,934
336,287
216,111
865
51,842
18,841
17,405
18,254
Total administration
1,898,539
Pupil health
Salaries
Employee benefits
Purchased services
Professional and technical
Property
Supplies
210,035
75,028
17,331
120
6,437
Total pupil health
308,951
(Continued)
44
SHIPPENSBURG AREA SCHOOL DISTRICT
GENERAL FUND - SCHEDULE OF EXPENDITURES (Continued)
Year Ended June 30, 2006
Expenditures (Continued)
Support Services (Continued)
Business
Salaries
Employee benefits
Purchased services
Professional and technical
Property
Other
Supplies
Property
Other objects
205,672
97,144
2,347
113
24,786
3,362
593
650
Total business
334,667
Operation and maintenance of plant services
Salaries
Employee benefits
Purchased services
Professional and technical
Property
Other
Supplies
Property
Other objects
688,799
276,289
531
658,391
121,099
292,905
14,524
200
Total operation and maintenance of plant services
2,052,738
Student transportation services
Purchased services
Professional and technical
Other
Supplies
Other objects
3,990
1,533,120
1,755
20
Total student transportation services
1,538,885
(Continued)
45
SHIPPENSBURG AREA SCHOOL DISTRICT
GENERAL FUND - SCHEDULE OF EXPENDITURES (Continued)
Year Ended June 30, 2006
Expenditures (Continued)
Support Services (Continued)
Central service
Purchased services
Professional and technical
Property
Supplies
Property
Other objects
23,881
18,898
16,082
6,849
363
Total central service
66,073
Other support services
26,179
Total support services
8,247,999
Operation of Non-Instructional Services
Student activities
Salaries
Employee benefits
Purchased services
Professional and technical
Property
Other
Supplies
Other objects
314,531
59,997
1,881
12,000
10,438
4,079
1,456
Total student activities
404,382
(Continued)
46
SHIPPENSBURG AREA SCHOOL DISTRICT
GENERAL FUND - SCHEDULE OF EXPENDITURES (Continued)
Year Ended June 30, 2006
Expenditures (Continued)
Operation of Non-Instructional Services (Continued)
Community services
Salaries
Employee benefits
Purchased services
Professional and technical
Supplies
Other objects
6,871
901
100
5,715
4,700
18,287
422,669
2,955,060
2,625
286,180
288,805
$ 30,824,769
Total community services
Total operation of non-instructional services
Debt service
Other
Refund of prior years' receipts
Operating transfers out
Total other
Total expenditures
47
SHIPPENSBURG AREA SCHOOL DISTRICT
COMBINING BALANCE SHEET - NON-MAJOR GOVERNMENTAL FUNDS
June 30, 2006
Special Revenue Total Non-Major
Middle School Senior High Capital Governmental
Athletic Athletic Reserve Funds
ASSETS
Cash $ 9,521 $ 21,542 $ 179,411 $ 210,474
Receivables 517 33 550
Total assets $ 10,038 $ 21,575 $ 179,411 $ 211 ,024
LIABILITIES AND FUND BALANCES
Liabilities
Accounts payable $ $ 1,101 $ 32,654 $ 33,755
Deferred revenue 712 712
Total liabilities 1,813 32,654 34,467
Fund Balances
Reserved for
Capital reserve 146,757 146,757
Athletic 10,038 19,762 29,800
Total fund balances 10,038 19,762 146,757 176,557
Total liabilities and fund balances $ 10,038 $ 21,575 $ 179,411 $ 211,024
48
SIDPPENSBURG AREA SCHOOL DISTRICT
COMBINING STATEMENT OF REVENUES, EXPENDITURES AND
CHANGES IN FUND BALANCES - NON-MAJOR GOVERNMENTAL FUNDS
Year Ended June 30, 2006
Special Revenue Total Non-Major
Middle School Senior High Capital Governmental
Athletic Athletic Reserve Funds
Revenues
Local sources $ 15,519 $ 42,738 $ 356 $ 58,613
Expenditures
Support services 113,060 113,060
Operation of non-instructional services 41,972 129,205 171,177
Total expenditures 41,972 129,205 113,060 284,237
Deficiency of revenues
over expenditures (26,453) (86,467) (112,704) (225,624)
Other Financing Sources
Refund of prior years' expenditures 8,434 8,434
Operating transfers in 31,284 84,396 170,500 286,180
Total other financing sources 31,284 84,396 178,934 294,614
Net change in fund balances 4,831 (2,071) 66,230 68,990
Fund Balances - July I, 2005 5,207 21,833 80,527 107,567
Fund Balances - June 30, 2006 $ 10,038 $ 19,762 $ 146,757 $ 176,557
49
"(J38R) BOYFR&RITTER
CERTIFIED PuBLIC ACCOUNTANTS AND CONSULTANTS
Web Site: www.cpabr.com
INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL
OVER FINANCIAL REPORTING AND ON COMPLIANCE AND
OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS
PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
Board of School Directors
Shippensburg Area School District
Shippensburg, Pennsylvania
We have audited the financial statements of Shippensburg Area School District as of and for the year
ended June 30, 2006, and have issued our report thereon dated August 11,2006. 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.
Internal Control Over Financial Reporting
In planning and performing our audit, we considered Shippensburg Area School District's internal control
over financial reporting in order to determine our auditing procedures for the purpose of expressing our
opinion on the financial statements and not to provide an opinion on the internal control over financial
reporting. Our consideration of the internal control over financial reporting would not necessarily
disclose all matters in the internal control over financial reporting that might be material weaknesses. A
material weakness is a reportable condition in which the design or operation of one or more of the internal
control components does not reduce to a relatively low level the risk that misstatements caused by error or
fraud in amounts that would be material in relation to the financial statements being audited may occur
and not be detected within a timely period by employees in the normal course of performing their
assigned functions. We noted no matters involving the internal control over financial reporting and its
operation that we consider to be material weaknesses.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether Shippensburg Area School District's fmancial
statements are free of material misstatement, we performed tests of its compliance with certain provisions
of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and
material effect on the determination of financial statement amounts. However, providing an opinion on
compliance with those provisions was not an objective of our audit, and accordingly, we do not express
such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that
are required to be reported under Government Auditing Standards.
CAMP HILL
CARLISLE
CHAMBERSBURG
LEWISTOWN
STATE COLLEGE
1\n Independently Owned Member of the RSM McGladrey Network
This report is intended solely for the information and use of the Board of School Directors, management,
Federal-awarding agencies and pass-through entities, and is not intended to be and should not be used by
anyone other than these specified parties.
Chambers burg, Pennsylvania
August 11, 2006
51
~-t~
"(J38R) BoYER & RITTER
CERTIFIED PusLIC ACCOUNTANTS AND CONSULTANTS
Web Site: www.cpabr.com
INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE WITH
REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND
INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE
WITH OMB CIRCULAR A-133
Board of School Directors
Shippensburg Area School District
Shippensburg, Pennsylvania
Compliance
We have audited the compliance of Shippensburg Area School District with the types of compliance
requirements described in the U. S. Office of Management and Budget (OMB) Circular A-133,
Compliance Supplement that are applicable to each of its major Federal programs for the year ended
June 30, 2006. Shippensburg Area School District's major Federal programs are identified in the
summary of auditor's results section of the accompanying Schedule of Findings and Questioned Costs.
Compliance with the requirements of laws, regulations, contracts and grants applicable to each of its
major Federal programs is the responsibility of the District's management. Our responsibility is to
express an opinion on the District's compliance based on our audit.
We conducted our audit of compliance in accordance with auditing standards generally accepted in the
United States of America; the standards applicable to financial audits contained in Government Auditing
Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of
States, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133
require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance
with the types of compliance requirements referred to above that could have a direct and material effect
on a major Federal program occurred. An audit includes examining, on a test basis, evidence about the
District's compliance with those requirements and performing such other procedures as we considered
necessary in the circumstances. We believe our audit provides a reasonable basis for our opinion. Our
audit does not provide a legal determination on the District's compliance with those requirements.
In our opinion, Shippensburg Area School District complied, in all material respects, with the
requirements referred to above that are applicable to each of its major Federal programs for the year
ended June 30, 2006.
CAMP HILL
CARLISLE
CHAMBERSBURG
LEWISTOWN
STATE COLLEGE
An Independently Owned Member of the RSM McGladrey Network
Internal Control Over Compliance
The management of Shippensburg Area School District is responsible for establishing and maintaining
effective internal control over compliance with requirements of laws, regulations, contracts and grants
applicable to Federal programs. In planning and performing our audit, we considered the District's
internal control over compliance with requirements that could have a direct and material effect on a
major Federal program in order to determine our auditing procedures for the purpose of expressing our
opinion on compliance and to test and report on internal control over compliance in accordance with
OMB Circular A-133.
Our consideration of the internal control over compliance would not necessarily disclose all matters in
the internal control that might be material weaknesses. A material weakness is a reportable condition in
which the design or operation of one or more of the internal control components does not reduce to a
relatively low level the risk that noncompliance with applicable requirements of laws, regulations,
contracts and grants caused by error or fraud that would be material in relation to a major Federal
program being audited may occur and not be detected within a timely period by employees in the
normal course of performing their assigned functions. We noted no matters involving the internal
control over compliance and its operation that we consider to be material weaknesses.
This report is intended solely for the information and use of the Board of School Directors,
management, Federal-awarding agencies and pass-through entities, and is not intended to be and should
not be used by anyone other than these specified parties.
,.- -t.dLu
Chambersburg, Pennsylvania
August 11,2006
53
SIDPPENSBURG AREA SCHOOL DISTRICT
Schedule of Findings and Questioned Costs
Year Ended June 30, 2006
Section I -- Summary of Independent Auditor's Results
Financial Statements
Type of auditor's report issued: Unqualified
Internal control over financial reporting:
. Material weaknesses identified?
. Reportable conditions identified that are
not considered to be material weaknesses?
Yes X No
_ Yes .ll None Reported
Noncompliance material to fmancial statements
noted?
Yes X No
Federal Awards
Internal control over major programs:
. Material weaknesses identified?
. Reportable conditions identified that are
not considered to be material weaknesses?
Yes X No
_ Yes.ll None Reported
Type of auditor's report issued on compliance for major programs: Unqualified
. Any audit fmdings disclosed that are
required to be reported in accordance
with Section .510(a) ofOMB Circular A-133?
Yes X No
54
SIDPPENSBURG AREA SCHOOL DISTRICT
Schedule of Findings and Questioned Costs
Year Ended June 30, 2006
Section I - Summary oflndependent Auditor's Results (Continued)
Identification of major programs:
CFDA Numbers
84.027
10.555110.556
Name of Federal Program or Cluster
IDEA - Special Education - Grants to States
National School Lunch Program/Special Milk Program for Children
Dollar threshold used to distinguish between
type A and type B programs
$300,000
Auditee qualified as low-risk auditee?
X Yes
No
Section IT - Financial Statement Findings
A. Reportable Conditions in Internal Control
There were no findings relating to the financial statement audit required to be reported.
B. Compliance Findings
There were no findings relating to the fmancial statement audit required to be reported.
Section m - Findings and Questioned Costs for Federal Awards
A. Reportable Conditions in Internal Control
There were no findings relating to the Federal awards required to be reported in accordance
with Section .510(a) ofOMB Circular A-133.
B. Compliance Findings
There were no findings relating to the Federal awards required to be reported in accordance
with Section .510(a) ofOMB Circular A-133.
55
SHIPPENSBURG AREA SCHOOL DISTRICT
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
Year Ended June 30, 2006
Pass-
Federal Through
Source C.F.D.A. Grantor's Grant
Code Number Number Period
U. S. Department of Education
Passed through the Pennsylvania
Deparbnent of Education
Title I - Grants to Local Educational Agencies I 84.010 013-060387 05-06
Title I - Academic Achievement I 84.010 077-050387 05-06
Title I - Grants to Local Educational Agencies I 84.010 013-050387 04-05
Title V - Innovative Education I 84.298 011-060387 05-06
Title V - Innovative Education I 84.298 011-050387 04-05
Title II - Improving Teacher Quality I 84.367 020-060387 05-06
Title II - Improving Teacher Quality I 84.367 020-050387 04-05
Title II - Education Technology I 84.318 055-060387 05-06
Title II - Education Technology I 84.318 055-050387 04-05
Medical Assistance - Access I 93.778 044-007387 05-06
Medical Assistance - Access I 93.778 044-007387 04-05
Medical Assistance - Access I 93.778 044-007387 03-04
Safe and Drug-free Schools and Communities I 84.186 100-050388 05-06
Safe and Drug-free Schools and Communities I 84.186 100-040388 04-05
Passed through the Capital Area
Intermediate Unit Consortium
Special Education - Grants to States I 84.027 N/A 05-06
Special Education - Grants to States -
Inclusive Practices Mini Grant I 84.027 N/A 05-06
Special Education - Grants to States I 84.027 N/A 04-05
Total U. S. Department of Education
(Continued)
56
.
~
.
Program
or Annual
Award
Total
Received
(Refunded) in
Fiscal Year
Accrued
(Deferred)
Revenue at
7/1/2005
Accrued
(Deferred)
Revenue at
6/30/2006
Revenue
Recognized
Expenditures
$ 505,116 $ 370,394 $ $ 441,233 $ 441,233 $ 70,839
$ 3,996 3,996 3;996 3,996
$ 513,696 171,232 105,344 65,888 65,888
$ 6,215 5,801 6,091 6,091 290
$ 9,296 1,860 795 1,065 1,065
$ 158,714 95,228 128,287 128,287 33,059
$ 163,386 65,354 34,647 30,707 30,707
$ 8,413 8,413 8,413 8,413
$ 12,128 4,043 4,043
$ 75,150 17,699 75,150 75,150 57,451
$ 12,475 12,475 12,475
$ 18,611 6,960 6,960
$ 18,015 16,360 16,360 16,360
$ 17,778 5,926 5,926
$
481,349
346,621
481,349
481,349
134,728
$
$
8,698
8,698
8,698
10,000
422,010
422,010
422,010
1,554,372
592,200
1,267,237
1,267,237
305,065
57
.
SHIPPENSBURG AREA SCHOOL DISTRICT
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS (Continued)
Year Ended June 30, 2006
Pass-
Federal Through
Source C.F.D.A. Grantor's Grant
Code Number Number Period
U. S. Department of Agriculture
Passed through the Pennsylvania
Deparbnent of Education:
National School Lunch Program I(F) 10.555 N/A 05-06
National School Lunch Program I(F) 10.555 N/A 04-05
National School Lunch Program I (S) N/A N/A 05-06
National School Lunch Program I (S) N/A N/A 04-05
Special Milk Program for Children I(F) 10.556 N/A 05-06
Special Milk Program for Children I(F) 10.556 N/A 04-05
Passed through the Pennsylvania
Deparbnent of Agriculture:
Food Donation (a) I (F) 10.550 N/A 05-06
Total U. S. Department of Agriculture
Total Expenditures of Federal Awards
Source Codes:
Legends:
D - Direct Funding
I - Indirect Funding
(F) - Federal Share
(S) - State Share
(a) Donated commodities valued at local market values
(b) Total amount of commodities received from
Deparbnent of Agriculture
(c) Inventories at July 1, 2005
(d) Total amount of commodities used
(e) Inventories at June 30, 2006
See Notes to Schedule of Expenditures of Federal Awards.
S8
.
.. .,
Program
or Annual
Award
Total
Received
(Refunded)
Fiscal Year
Accrued
(Deferred)
Revenue at
7/1/2005
Revenue
Recognized
Expenditures
Accrued
(Deferred)
Revenue at
6/30/2006
N/A 227,561 266,178 266,178 38,617
N/A 7,262 7,262
N/A 26,626 31,190 31,190 4,564
N/A 859 859
N/A 4,107 4,700 4,700 593
N/A 205 205
N/A
(b)
(3,260)
46,055 (d)
46,055 (e)
348,123
(9,723)
5,066
348,123
34,051
$
$ 597,266 $ 1,615,360
$ 1,615,360
$ 339,116
Test of 25% Rule: Total Expenditures
Less State Expenditures
Total Federal Expenditures
Programs selected for testing as major programs:
IDEA - Special Education - Grants to States
National School Lunch Program/Special Milk
Program for Children
$ 1,615,360
31,190
$ 1,584,170
$ 490,047
270,878
$ 760,925 1 1,584,170 48.03%
S9
.
... 1
.
SIDPPENSBURG AREA SCHOOL DISTRICT
NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
Note 1. Significant Accounting Policies
The accompanying Schedule of Expenditures of Federal Awards is a summary of the activity of the
District's Federal award programs and presents transactions that would be included in the fmancial
statements of the District presented on the accrual basis of accounting, as contemplated by accounting
principles generally accepted in the United States of America.
Note 2. IDEA - Special Education - Grants to States
IDEA - Special Education - Grants to States has been audited in accordance with OMB Cir~ular A-B3.
Note 3. National School Lunch Program/Special Milk Program for Children
The National School Lunch Program/Special Milk Program for Children has been audited in accordance
with OMB Circular A-B3.
60
r
.
.... ... ~
SIDPPENSBURG AREA SCHOOL DISTRICT
SUMMARY SCHEDULE OF PRIOR YEAR'S AUDIT FINDINGS
Year Ended June 30, 2006
There were no audit fmdings for the year ended June 30, 2005.
61
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(SSR) BoYER & RITTER
CERTIFIED PusLIC ACCOUNTANTS ANn CONSULTANTS
Web Site: Vvww.cpabr.com
Board of School Directors
Shippensburg Area School District
Shippensburg, Pennsylvania
This letter includes comments and suggestions with respect to matters that came to our attention in
connection with our audit of the financial statements of Shippensburg Area School District, for the year
ended June 30, 2006. These items are offered as constructive suggestions to be considered part of the
ongoing process of modifying and improving the District's practices and procedures.
Middle School Activity Balances
During the audit, we noted that several clubs in the Middle School Activity Fund had credit balances.
Consequently, this means that the accounts would be overdrawn if they had their own bank accounts. A
policy should be adopted stating that no payment will be made from any account when the funds are not
available.
This letter is intended solely for the infonnation and use of the Board of School Directors, management,
and others within the Shippensburg Area School District and is not intended to be and should not be used
by anyone other than these specified parties.
y-~..J/~
Chambers burg, Pennsylvania
August 11, 2006
CAMP HILL
CARLISLE
CHAMBERS BURG
LEWlSTOWN
STATE COLLEGE
An Independently Owned Member of the RSM MCGladrey Network
(J3sR.] BoYER & RITTER
CERTIFIED PuBLIC ACCOUNTANTS AND CONSULTANTS
Web Site: www.cpabr.com
Board of School Directors
Shippensburg Area School District
Shippensburg, Pennsylvania
This letter is intended to inform the Board of School Directors about significant matters related to the
conduct of the annual audit so it can appropriately discharge its oversight responsibility and that we
comply with our professional responsibilities to the Board of School Directors.
In addition to our report on your financial statements, we have provided, under separate cover, a letter,
dated August 11, 2006, concerning certain conditions in internal control that we noted during our audit of
the Shippensburg Area School District's financial statements for the year ended June 30, 2006.
The following summarizes various matters which must be communicated to you under auditing standards
generally accepted in the United States of America and Government Auditing Standards; and OMB
Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations.
The Auditor's Res onsibili under Auditin Standards General Acce ted in the United States of
America: Government Auditinfl Standards issued bv the Comptroller General of the United States of
America: the provisions of the Sinl!le Audit Act. OMB Circular A-133 and OMB's Compliance
Supplement
Our audit of the financial statements of Shippensburg Area School District for the year ended June 30,
2006, was conducted in accordance with auditing standards generally accepted in the United States of
America, Government Auditing Standards issued by the Comptroller General of the United States, the
provisions of the Single Audit Act, OMB Circular A-133 and OMB's Compliance Supplement. Those
standards, circular, and the supplement require we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement, whether caused by
error, fraudulent financial reporting or misappropriation of assets. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the fmancial 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. Accordingly, the audit was designed to obtain
reasonable, rather than absolute, assurance about the financial statements. We believe our audit
accomplished that objective.
In accordance with Government Auditing Standards, we have also performed tests of controls over
internal control over financial reporting and tests of compliance with certain provisions of laws,
regulations, contracts, and grant agreements that contribute to the evidence supporting our opinion on the
financial statements. However, they do not provide a basis for opining on the District's internal control
over financial reporting or on compliance and other matters.
CAMP HILL
CARLISLE
CHAMBERSBURG
LEWISTOWN
STATE COLLEGE
An Independently Owned Member of the RSM McGladrey Network
..
Manae:ement Jude:ments and Accountine: Estimates
Accounting estimates are an integral part of the preparation of financial statements and are based upon
management's current judgment. The process used by management encompasses its knowledge and
experience about past and current events and certain assumptions about future events. Management has
informed us it used all the relevant facts available to it at the time to make the best judgments about
accounting estimates and we considered this information in the scope of our audit. Estimates significant
to the financial statements include such items as depreciation, compensated absences and uncollectible
delinquent taxes. The Board of School Directors may wish to monitor throughout the year the process
used to compute and record these accounting estimates.
Audit Adjustments
There were minimal audit adjustments made to the original trial balance presented to us to begin our
audit. Of the adjustments that were recorded, none in our judgment, either individually or in the
aggregate, could have a significant effect on the District's financial reporting process.
Uncorrected Misstatements
There were no uncorrected misstatements.
Accountine: Policies and Alternative Treatments
Management and Board have the ultimate responsibility for the appropriateness of the accounting policies
used by the District. The District adopted Governmental Accounting Standards Board Statements No. 42
Accounting and Financial Reporting for Impairment of Capital Assets and for Insurance Recoveries, No.
46, Net Assets Restricted by Enabling Legislation and No. 47, Accounting for Termination Benefits.
GASB Statement No. 42 requires governments to report the effects of capital asset impairment on their
financial statements when it occurs and requires all governments to account for insurance recoveries in
the same manner. GASB Statement No. 46 states that the legal enforceability of an enabling legislation
restriction should be reevaluated if any of the resources raised by the enabling legislation are used for a
purpose not specified by the enabling legislation or if a government has other cause for consideration.
This Statement also specifies the accounting and financial reporting requirements if new enabling
legislation replaces existing enabling legislation or if legal enforceability is reevaluated. Finally, this
Statement requires governments to disclose the portion of total net assets that is restricted by enabling
legislation. GASB Statement No. 47 establishes accounting standards for termination benefits and will be
effective for those termination benefits provided other than through an existing defined OPEB benefit
plan.
We did not identify any significant or unusual transactions or significant accounting policies In
controversial or emerging areas for which there is a lack of authoritative guidance or consensus.
Other Information in Documents Containine: Audited Financial Statements
We are not aware of any other documents that contain the audited basic financial statements. If such
documents were to be published, we would have a responsibility to determine that such financial
information was not materially inconsistent with the audited statements of the District.
.
Disaereements with Manaeement
We encountered no disagreements with management over the application of significant accounting
principles, the basis for management's judgments on any significant matters, the scope of the audit or
significant disclosures to be included in the financial statements.
Consultations with Other Accountants
We are not aware of any consultations management had with other accountants about accounting or
auditing matters.
Maior Issues Discussed with Manaeement Prior to Retention
No major issues were discussed with management prior to our retention to perform the aforementioned
audit.
Difficulties Encountered in Performine the Audit
We did not encounter any difficulties in dealing with management relating to the performance of the
audit.
Closine
We will be pleased to respond to any questions you have about the foregoing. We appreciate the
opportunity to continue to be of service to Shippensburg Area School District.
This report is intended solely for the information and use of the Board of School Directors and
management and is not intended to be and should not be used by anyone other than these specified
parties.
)'- ,(.d/w
Chambersburg, Pennsylvania
August 11,2006