REPORT ON SCHOOL DISTRICT OF UPPER DUBLIN SINGLE AUDIT REPORT FISCAL YEAR ENDED JUNE 30, 2014

Transcription

1 REPORT ON SCHOOL DISTRICT OF UPPER DUBLIN SINGLE AUDIT REPORT FISCAL YEAR ENDED JUNE 30, 2014

2 SCHOOL DISTRICT OF UPPER DUBLIN Single Audit Report For the Fiscal Year Ended June 30, 2014 TABLE OF CONTENTS Introductory Section Page (s) Transmittal Letter... 1 Letter to Governance/ Management Report Distribution List... 8 Financial Section Independent Auditor's Report Management's Discussion and Analysis Basic Financial Statements District-wide Financial Statements: Statement of Net Position Statement of Activities Fund Financial Statements Balance Sheet - Governmental Funds Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position Statement of Revenues, Expenditures, and Changes in Fund Balances - Governmental Funds Reconciliation of the Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balance to the Statement of Activities Statement of Fund Net Position - Proprietary Funds Statement of Revenues, Expenses, and Changes in Fund Net Position - Proprietary Funds Statement of Cash Flows - Proprietary Funds Statement of Net Position - Fiduciary Funds Statement of Changes in Net Position - Fiduciary Funds i-

3 TABLE OF CONTENTS (continued) SCHOOL DISTRICT OF UPPER DUBLIN Single Audit Report For the Fiscal Year Ended June 30, 2014 Page (s) Statement of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual - General Fund Notes to Basic Financial Statements Required Supplemental Information: Schedule of Funding Progress Supplemental Information: Combining Balance Sheet All Capital Project Funds Combining Statement of Revenues, Expenditures, and Changes in Fund Balances All Capital Project Funds Combining Statement of Fiduciary Net Position Private Purpose Trust Funds Combining Statement of Changes in Fiduciary Net Position - Private Purpose Trust Funds Combining Balance Sheet All Agency Funds Combining Statement of Changes in Assets and Liabilities All Agency Funds General Fund - Statement of Revenue, Expenditures, and Changes In Fund Balance Food Service Fund - Statement of Revenues, Expenses, and Changes in Fund Net Position Food Service Fund - Statement of Fund Net Position Bond Fund - Statement of Revenues and Expenditures Bond Fund Statement of Revenues and Expenditures Bond Fund Statement of Revenues and Expenditures Capital Projects Fund Statement of Revenues and Expenditures General Long-Term Debt: Schedule on General Obligation Bonds Series A of Schedule on General Obligation Bonds Series AA of ii-

4 TABLE OF CONTENTS (continued) SCHOOL DISTRICT OF UPPER DUBLIN Single Audit Report For the Fiscal Year Ended June 30, 2014 Page (s) Schedule on General Obligation Bonds - Series of Schedule on General Obligation Bonds - Series A of Schedule on General Obligation Bonds Series AA of Schedule on General Obligation Bonds Series of Schedule on General Obligation Bonds Series A of Schedule on General Obligation Bonds Series AA of Schedule on General Obligation Bonds Series B of 2012 (Electoral) Schedule on General Obligation Bonds Series B of 2012 (Non-Electoral) Single Audit Section Schedule of Expenditures of Federal Awards Notes to the Schedule of Expenditures of Federal Awards Independent Auditor s Report Under Government Auditing Standards Independent Auditor s Report Under OMB Circular A Schedule of Findings and Questioned Costs Schedule of Prior Year Findings iii-

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8 Board of School Directors Dr. Deborah S. Wheeler, Superintendent In addition, the representation letter provided to us, by management, confirmed there were no uncorrected misstatements. Management has recorded all of our adjusting journal entries, and has agreed to the conversion entries necessary to convert governmental funds and proprietary funds to governmental activities and business-type activities, respectively. In accordance with auditing standards, generally accepted in the United States of America, we have acquired a sufficient understanding of the District and its environment, including its internal control, to assess the risk of material misstatements of the financial statements whether due to error or fraud, and to design the nature, timing, and extent of further audit procedures that were necessary to express an opinion on the basic financial statements. Our consideration of the District s internal control components was not designed for the purpose of making detailed recommendations and would not necessarily disclose all significant deficiencies within the components. Our audit procedures have been appropriately adjusted to compensate for any observed significant deficiencies. The following three paragraphs define the three different types of deficiencies that can occur: A control deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A significant deficiency is a deficiency, or combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity s financial statements will not be prevented or detected and corrected on a timely basis. As the primary purpose of our audit is to form an opinion on the basic financial statements, you will appreciate that reliance must be placed on adequate methods of internal control as your principal safeguard against errors and fraud which audit procedures may not disclose. The objective of internal control over financial reporting is to provide reasonable, but not absolute, assurance that assets are safeguarded against loss from unauthorized use and that financial records are reliable for preparing financial statements in accordance with generally accepted accounting principles and for maintaining the accountability for assets. The concept of reasonable assurance recognizes that the cost of internal control should not exceed the related benefits; to operationalize this concept, management is required to formulate estimates and judgments of the cost/benefit ratios of alternative controls. There are inherent limitations that should be recognized in considering the potential effectiveness of internal control over financial reporting. Errors can result from misunderstanding of instructions, mistakes of judgment, carelessness, fatigue, and other personnel factors. Control procedures whose effectiveness depends upon the segregation of duties can be circumvented by collusion or by management. What's more, any projection of internal control evaluations to future periods is subject to the risk that the procedures may become inadequate because of changes in conditions or due to the deterioration of the degree of compliance with control procedures. As an adjunct to our audit, we remained alert throughout for opportunities to enhance internal controls and operating efficiency. These matters were discussed with management as the audit progressed and have subsequently been reviewed in detail to formulate practical recommendations. We wish to thank your staff for their courtesies and cooperation, which facilitated the efficient performance of audit procedures. The remainder of this letter will explain any internal control deficiencies discovered during the audit, other auditor recommendations, and other information pertinent to the District. -3-

9 Board of School Directors Dr. Deborah S. Wheeler, Superintendent A control deficiency is determined to be considered a material weakness or significant deficiency based upon the magnitude of the problem as it pertains to a particular opinion unit. In other words, what is considered a significant deficiency in one fund may only be a control deficiency in another fund of greater size. The following section in this governance/management letter is separated by categories based on importance, with any material weaknesses or significant deficiencies listed in the beginning: CONTROL DEFICIENCIES Athletic Fund Ticket Revenue During our review of game receipts, we discovered, as we did in prior years, the District does not maintain good controls in selling and collecting receipts for athletic events. We have been informed by the Business Administrator that the below recommendations to improve controls over athletic events is being instituted in the fiscal year. Since our governance letter is designed based upon problems occurring in the fiscal year, we decided to include the issues and our recommendations from the prior year. The District uses an event form for each athletic event and records the beginning and ending ticket numbers on the form, but does not attach the actual ticket stubs to the form. As a result, there is no proof to verify the number of actual tickets sold for each event. Our first recommendation is to have the athletic director attach the first stub on the roll to the event form before any tickets are sold, and then attach the next ticket stub to the form after all tickets have been sold. All tickets should be perforated and pre-numbered. After the tickets are sold by the cashier, who collects the money, the persons in charge of collecting the tickets at each event should count all tickets collected and put into a small lunch bag. These tickets should be maintained at the athletic director s office until after the annual audit is conducted. The difference between the beginning and ending ticket numbers should equal the number of tickets or stubs sold in the bag. Multiplied by the appropriate ticket prices should then equal the deposits made for each event. The deposit slips should be attached to each event s form. We also recommend that those individuals who volunteer at athletic events be rotated periodically to prevent possible collusion. We have discovered over the many years of auditing school districts that athletic events are most prone to fraudulent activity because of the amount of cash changing hands. We have also determined several occasions where the cash boxes were over or short based upon what was deposited and what should have been deposited. We wish to advise management to incorporate a policy to make it mandatory for anyone collecting receipts be held personally responsible for any shortages. We also discovered short-comings in handling the sale of season passes. Presently, there is no system in place to verify the accuracy of season passes sold versus the deposits made. We would like to recommend management establish a system where parents and students are required to fill out a form listing the names and number of passes they wish to purchase. These passes should be pre-numbered and tracked on an ongoing basis. To maintain good controls over cash, the athletic director can collect the forms and the cash, but somebody else should disburse the season passes. -4-

10 Board of School Directors Dr. Deborah S. Wheeler, Superintendent It has been our experience over many years, that athletic and student activity events is an area where errors and/or fraud can occur. Without good controls in place, problems can occur at any point in time. We are trying to protect the District and district personnel by making these recommendations. High School Activity Fund During our testing of Agency Funds, we were pleased that the previous Miscellaneous Agency Funds have been eliminated with the creation of activity accounts at each individual school. However, we discovered the following issues in the high school activity fund that needs to be addressed and corrected going forward: We discovered a club called Educational Activities that had a balance of $10,000 at the beginning of the fiscal year. It appears this account has been eliminated by year end; however, during the fiscal year items purchased from this account, e.g. learning center computers, desks, furniture, and software licenses, are not appropriate expenditures to be paid from a student club. In addition, we discovered the following clubs that do not meet the criteria to be a student club and should be eliminated: Athletic Fund Library Testing SDUD Transfer Guidance Assistance Program We also discovered several general student activity clubs that should be combined into a Student Council or Student Body club. They are: Student Activities Fund Student Activity Special Projects Student Government Association Miscellaneous Finally, we discovered payroll costs in the Class of 2014 club to pay chaperones. Per the PASBO Activity Fund Guide, all school district employees, who provide services to student activity clubs, should be paid and charged in function 3210 of the general fund. In no instance should there be any payroll shown in any student activity club. It is permissible for a student club to donate money to the general fund to cover these additional costs incurred by general fund employees. OTHER RECOMMENDATIONS Food Service Operations During the past few audit seasons, we have noticed some clients are having problems associated with security in the handling of food purchases and maintenance of inventory in the food service departments. While these issues are not necessarily occurring within your District, we felt compelled to suggest certain criteria that should be evaluated by the Superintendent and business office. -5-

11 Board of School Directors Dr. Deborah S. Wheeler, Superintendent In many Schools, the food service director or third party provider has unlimited access to delivery doors. There have been instances of theft occurring at various schools over the years with this access. We wish to recommend, if not already implemented, that access to any door within the facility should be limited to custodial use only after school hours. We also suggest management consider the consequences that can occur when hiring food service personnel that may own or manage outside food establishments. In some instances, with unfettered access, food inventory may be stolen to accommodate another food establishment. We also wish to advise the District that PDE has recently announced there can be no bad debt expense in the food service fund. The reason for their determination is because the federal national school lunch program and donated commodity program regulations prohibit bad debt expense in a federal program. As such, any students owing money to the School District s food service fund, that remains uncollectible, should not be written off. The Food Service Fund should be reimbursed by the General Fund for any uncollectible amounts owed by students. OTHER INFORMATION We would be remised if we didn t keep the management and the Board of School Directors informed of changes in accounting principles that will affect the District next year and future years. The Government Accounting Standards Board (GASB) has issued Statement Nos. 67, 68, 69, and 71, which will come into effect in years to come. The statements that could affect the District next year and future years are as follows: GASB Statement No. 68 This statement and its component statement no. 67 will have a massive impact on all governments entitywide financial statements. It will affect every government in the Commonwealth of PA and every other government located in all 50 states, including state governments. It will require all governments to report the entire amount of the unfunded actuarial liability for any pension plans associated with each respective government onto their government-wide financial statements that are used by bond rating agencies to establish your debt ratings. Presently, governments only report approximately one-thirtieth of this liability on their financial statements assuming they have a stand-alone pension plan. Those governments, like this School District, that don t report any pension obligation because they and you belong to a pension trust (PSERS), will soon have to report your proportionate share of the pension trust s unfunded actuarial pension liability. Your proportionate share of this significant liability will be based upon the percentage of your contributions into the plan compared to the total contributions submitted by all participating governments in the pension trust. This standard will have a devastating effect for larger governments, whom are already in dire straits as a result of the poor economy. This standard becomes effective for your fiscal year. -6-

12 Board of School Directors Dr. Deborah S. Wheeler, Superintendent GASB Statement No. 69 This new accounting standard explains the proper accounting treatment of government mergers, acquisitions, transfer of operations, and disposals of government operations. In the current economic climate, there is much discussion on merging governments or transferring operations from one government entity to another. As a result, the Standards Board deliberated the proper financial recognition of assets, liabilities, deferred outflows or inflows of resources, and net position affected by such transactions. This standard takes effect in the fiscal year. GASB Statement No. 71 This new accounting standard, which takes effect in the fiscal year, corrects a misinterpretation of paragraph 137 of Statement 68. In essence, any pension contributions made after the measurement date should be charged to deferred outflows of resources. This letter is required by our standards and has been combined with, what we previously referred to as the management letter. The intent of this letter is to communicate with those charged with governance on matters pertaining to the audit and includes information that we believe can help you correct or improve operating efficiency, under the limitations of staff availability, within the School District. Respectively submitted, November 19,

13 Report Distribution List The School District of Upper Dublin has distributed copies of the Single Audit Act Package to the following: ONE COPY TO: (Submitted Electronically): FEDERAL AUDIT CLEARINGHOUSE BUREAU OF THE CENSUS ONE COPY TO: (Submitted Electronically) COMMONWEALTH OF PENNSYLVANIA OFFICE OF THE BUDGET/BUREAU OF AUDITS ONE COPY TO: MONTGOMERY COUNTY INTERMEDIAATE UNIT WEST MAIN STREET NORRISTOWN, PA

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16 Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, the aggregate remaining fund information, and the general fund budgetary comparison statement of the School District of Upper Dublin, as of June 30, 2014, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the Management s Discussion and Analysis on pages 12-21, and the Schedule of Funding Progress, on page 68, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Supplementary Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the School District of Upper Dublin s basic financial statements. The combining and individual fund statements and schedules, and schedule of expenditures of federal awards, as required by Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual fund financial statements, schedules, and the schedule of expenditures of federal awards are the responsibility of management and were derived from and related to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining and individual fund financial statements, schedules, and the schedule of expenditures of federal awards are fairly stated in all material respects in relation to the basic financial statements as a whole. -10-

17 Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated November 19, 2014, on our consideration of the School District of Upper Dublin s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering School District of Upper Dublin s internal control over financial reporting and compliance. Respectfully submitted, November 19,

18 SCHOOL DISTRICT OF UPPER DUBLIN Maple Glen, Pennsylvania MANAGEMENT S DISCUSSION AND ANALYSIS (MD&A) Required Supplementary Information (RSI) (UNAUDITED) For the Fiscal Year Ended June 30, 2014 This Management's Discussion and Analysis provides a narrative overview and analysis of the financial activities of the School District of Upper Dublin (the "District") as of and for the year ended June 30, The District's financial performance is discussed and analyzed within the context of the financial statements and the disclosures that follow. This discussion focuses on the District's financial performance as a whole; readers should also review the basic financial statements and the notes thereto to enhance their understanding of the District's financial performance. FINANCIAL HIGHLIGHTS The District-wide net position increased by $7,187,243. Program revenues accounted for $11,468,910 or 13.2% of total revenues, and general revenues accounted for $75,539,791 or 86.8%. At the close of the current fiscal year, the School District of Upper Dublin's Governmental Funds reported a combined ending fund balance of $13,468,572, an increase of $2,212,963 in comparison with the prior year. At the end of the current fiscal year, unassigned fund balance for the General Fund was $2,903,370 or approximately 3.5% of total General Fund expenditures. The District assigned $3,024,988 to balance the budget. The assessed valuation of the District increased from $2,240,181,823 as of June 2013 to $2,249,546,303, as of June 30, OVERVIEW OF THE FINANCIAL STATEMENTS This discussion and analysis intends to serve as an introduction to the School District of Upper Dublin's basic financial statements. The School District of Upper Dublin's basic financial statements have three components: 1. Government-wide financial statements, 2. Fund financial statements, and 3. Notes to the financial statements. This report also contains other supplementary information in addition to, the basic financial statements themselves. -12-

19 SCHOOL DISTRICT OF UPPER DUBLIN Management s Discussion and Analysis 1) Government-Wide Financial Statements The government-wide financial statements are designed to provide readers with a broad overview of the District's finances, in a manner similar to a private-sector business. These statements are prepared using the accrual basis of accounting. The focus of these statements is long-term. The statement of net position presents information on all of the District's assets, deferred outflows of resources, liabilities, and deferred inflows of resources, with the difference between them reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the District is improving or deteriorating. The statement of activities presents information showing how the District's net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the occurrence, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused compensated absences). Both of the governmental-wide financial statements distinguish functions of the District that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a portion of their costs through user fees and charges (business-type activities). The governmental activities include all of the District's instructional programs and support services except for its food service operation, which is considered a business-type activity. 2) Fund Financial Statements A fund is a grouping of related accounts used to maintain control over resources that have been segregated for specific activities or objectives. The District uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. The focus of fund financial statements is short-term. Fund financial statements are prepared using the modified accrual basis of accounting. The District uses several different types of funds but the two most significant types are the Governmental and Proprietary Fund Types. Governmental Funds - Governmental Funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. Unlike the government-wide financial statements however, Governmental Funds financial statements focus on near-term inflows and outflows of expendable resources, as well as on balances of expendable resources available at the end of the fiscal year. Such information may be useful in evaluating the District's near-term financing requirements. Because the focus of Governmental Funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for Governmental Funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the District's near-term financing decisions. Both the Governmental Funds balance sheet and the Governmental Funds statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between Governmental Funds and governmental activities. -13-

20 SCHOOL DISTRICT OF UPPER DUBLIN Management s Discussion and Analysis The District maintains two individual Governmental Funds, both considered major funds by generally accepted accounting principles. Information is presented separately in the Governmental Funds balance sheet and in the Governmental Funds statement of revenues, expenditures, and changes in fund balances for the General Fund and Capital Projects Fund. Proprietary Fund - The District accounts for its food service operation in a Proprietary Fund, which reports the same functions presented as business-type activities in the government-wide financial statements. Proprietary Fund statements will essentially match the government-wide financial statements because both are accounted for on the accrual basis of accounting. 3) Notes to the Financial Statements The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. GENERAL FUND BUDGETARY HIGHLIGHTS The District prepares a budget each year for its General Fund according to Pennsylvania law. The District adopts its annual budget for its General Fund using the Executive Budget approach. A budgetary comparison statement for the General Fund provided in this report demonstrates compliance with this budget. The General Fund budget complied with all applicable state laws and financial policies approved by the Board of School Directors. The General Fund's originally approved budget for , included $83,034,078 of revenues and other financing sources, and $85,502,835 of expenditures and other financing uses. The District budgeted an additional $2,468,757, to be used from the unassigned fund balance. The budget was amended during the year to account for internal expenditure budget transfers. There was no impact on the revenue budget because of these transfers. -14-

21 SCHOOL DISTRICT OF UPPER DUBLIN Management s Discussion and Analysis The actual 2014 revenues and other financing sources were $85,891,837, or 3.4%, above final budget. Earned income tax revenue was $960,363 more than budgeted as a result of improving economic conditions, salary increases and bonuses paid to residents. More discussion on revenue follows in the Financial Analysis of the Funds section. Actual expenditures and other uses were $82,921,269, or 3.0%, below the final budget. The positive variance is primarily due to prudent budget practices such as monitoring overtime and staffing utilization and not filling positions vacated by resignation or retirement. More discussion on expenditures follows in the Financial Analysis of the Funds section. The District's total fund balance increased $2,212,963 in , due to higher than anticipated real estate tax revenue. In , $757,605 was used compared with $3,227,451 in in the capital projects fund due to stadium renovations, resurfacing parking lots and roof replacements. The unassigned fund balance as of June 30, 2014, is $2,903,370, representing 3.5% of the expenditure budget. GOVERNMENT-WIDE FINANCIAL ANALYSIS The District's condensed government-wide financial statements, including internal balances, are presented comparatively as follows: ASSETS/DEFERRED OUTFLOW OF RESOURCES School District of Upper Dublin Net Position (Amounts in Thousands) Governmental Activities Business-Type Activities Current and other assets $ 23,662 $ 19,838 $ 128 $ 109 $ 23,790 $ 19,947 Non-Current Assets 135, , , ,133 Deferred Outflow of Resources Total Assets & Deferred Outflow of Resources $ 159,273 $ 158,217 $ 152 $ 124 $ 159,425 $ 158,341 LIABILITIES/DEFERRED INFLOW OF RESOURCES Current and other liabilities 18,309 16, ,489 16,433 Long-term liabilities 127, , , ,790 Deferred Inflow of Resources Total Liabilities & Deferred Inflow of Resources 145, , , ,235 Total NET POSITION Net Investment in Capital Assets $ 12,287 $ 6,243 $ - $ - $ 12,287 $ 6,243 Restricted For: Retirement of Long-Term Debt Capital Projects Other Restrictions Unrestricted (deficit) 1,069 - (63) (137) 1,006 (137) Total Net Position 13,356 6,243 (63) (137) 13,293 6,106 TOTAL LIABILITIES, DEFERRED INFLOW OF RESOURCES, AND NET POSITON $ 159,273 $ 158,217 $ 152 $ 124 $ 159,425 $ 158,

22 SCHOOL DISTRICT OF UPPER DUBLIN Management s Discussion and Analysis School District of Upper Dublin Changes in Net Assets (Amounts in Thousands) Governmental Business-Type Activities Activities Total Total REVENUES Program Revenues Charges for services $ 1,670 $ 1,737 $ 771 $ 819 $ 2,441 $ 2,556 Operating grants and contributions 8,428 7, ,770 8,152 Capital grants and contributions General Revenues Property and Other taxes 70,001 67, ,001 67,182 Grants, subsidies, and contributions 4,874 4, ,874 4,793 Investment earnings Other 599 1, ,841 Transfers In TOTAL REVENUES $ 85,867 $ 83,674 $ 1,261 $ 1,171 $ 87,128 $ 84, EXPENSES Instruction 46,225 46, ,225 46,304 Support Services 22,391 22, ,391 22,358 Non-instructional Services 1,565 1, ,565 1,735 Facilities Maintenance Interest on long-term debt 4,538 4, ,538 4,623 Other 3,915 4, ,915 4,011 Food services - - 1,187 1,293 1,187 1,293 Transfers Out TOTAL EXPENSES 78,753 79,031 1,187 1,293 79,940 80,324 Increase (decrease) in Net Position $ 7,114 $ 4,643 $ 74 $ (122) $ 7,188 $ 4,521 Governmental Activities The net position of the government activities increased in by $7,113,046 primarily due to increase in tax revenues and a decrease in overall expenses. Business-Type Activities The District's food service operation increased its net position by $74,197 in primarily a result of a transfer from the general fund to subsidize food service operations. The increase is -16-

23 SCHOOL DISTRICT OF UPPER DUBLIN Management s Discussion and Analysis FINANCIAL ANALYSIS OF THE FUNDS General Fund The following represents a summary of General Fund revenue, by source, along with changes from Increase Percent Categories Amount Amount (Decrease) Change Local Sources $ 72,852,667 $ 71,217,721 $ 1,634, % State Sources 12,718,220 11,868, , % Federal Sources 320, ,207 (141,257) -30.6% Total Revenue Sources $ 85,891,837 $ 83,548,839 $ 2,342, % Local Sources - The District relies heavily upon local revenues, accounting for 84.8% of total revenue in Revenues from local sources increased $1,634,946 in The majority of the local revenue is derived from real estate taxes. Real estate tax revenue increased by $1,599,816 in as a result of a 3.02% increase in the millage rate resulting from the Act 1 Index and approved exception for retirement contributions. Local revenues also increased due to earned income tax, real estate transfer tax, but were offset by decreases in refunds from prior year expenditures. State Sources - State revenues increased in by $849,309 due primarily to increases in retirement revenues of $874,718. Retirement revenues increased as a result of an increase in the PSERS employer contribution rate from 12.36% to 16.93%. Federal Sources - Revenues from federal sources declined in by $141,257. This is due to the decreases in Title I, Unrestricted grants-in aid and Medical Access grants. -17-

24 SCHOOL DISTRICT OF UPPER DUBLIN Management s Discussion and Analysis The following represents a summary of General Fund expenditures, by function, along with changes from 2013: Increase Percent Categories Amount Amount (Decrease) Change Instruction $ 46,036,502 $ 45,721,164 $ 315, % Support Services 22,483,128 21,422,682 1,060, % Non-instructional Services 1,561,111 1,724,416 (163,305) -9.5% Capital Outlay % Debt Service 12,721,934 11,824, , % Total Expenditures $ 82,802,675 $ 80,692,404 $ 2,110, % Instruction - Instructional expenses increased by $315,338 (0.7%) in to $46,036,502. The primary cause of this change is due to increases in salary and benefit expenses, including the retirement rate, across all instructional functions of the budget. Support Services - Expenses for support services increased by $1,060,446 (5.0%) to $22,483,128 in The majority of the increase is due to changes in salary and benefit expenses, including the increased retirement rate for personnel in the areas of administration, operation and maintenance of plant services offset by operational decreases in pupil health and transportation services. Non-instructional Services Non-instructional services decreased $163,305 (9.5%) in to $1,561,111. The decrease is due to the decrease in student activities of $186,494. Debt Service - Debt service expenditures increased $897,792 (7.6%) to a total of $12,721,934 in due to the payment of the existing debt schedule and a transfer of $118,594 to the Food Service fund to offset deficit fund net position

25 SCHOOL DISTRICT OF UPPER DUBLIN Management s Discussion and Analysis Capital Projects Fund The Capital Projects Fund is legally restricted to capital improvements and related debt service under Pennsylvania state law. During , the major capital asset event was capital expenditures related to the costs of installation of artificial turf in the high school stadium, paving of parking lots, and partial roof replacements at two buildings. The District expended $758,194 in construction costs in The fund balance at June 30, 2014 is $4,432,391 and is anticipated to be used for repairs in all buildings other than the high school. Additional information on the School District of Upper Dublin's capital assets is found in Note F of this report. CAPITAL ASSET AND DEBT ADMINISTRATION Capital Assets The District's capital assets at June 30, 2014, are summarized below: Business- Governmental Type Categories Activities Activites Totals Land Improvements $ 3,232,305 $ - $ 3,232,305 Construction in progress 308, ,030 Site improvements 7,768,536-7,768,536 Buildings and Improvements 167,944, ,944,410 Furniture and Equipment 12,729, ,054 13,131,228 Total Capital Assets 191,982, , ,384,509 Less: Accumulated Depreciation (56,816,074) (377,793) (57,193,867) Net Capital Assets $ 135,166,381 $ 24,261 $ 135,190,642 Debt Debt At the end of the current fiscal year, the School District of Upper Dublin directly had total bond debt outstanding of $126,305,000 which is a decrease of $7,755,000 below the $134,060,000 outstanding balance at June 30, Detailed information regarding outstanding bonds payable is presented in the notes to the basic financial statements (Note 5). Under current state statutes, the District's general obligation bonded debt issues (which excludes the electoral debt incurred for the high school construction project) are subject to a legal limitation based on 225% of the includable average revenues for the prior three years. At June 30, 2014, the District's General Obligation debt is approximately $180.3 million below the legal limit. -19-

26 SCHOOL DISTRICT OF UPPER DUBLIN Management s Discussion and Analysis FACTORS BEARING ON THE DISTRICT'S FUTURE At the time these financial statements were prepared and audited, the District was aware of several existing circumstances that could significantly affect its financial health in the future: Through a special election held March 20, 2007, Upper Dublin residents approved the incurrence of electoral debt in the sum of $119,242,976 for financing the construction of a new Upper Dublin High School. Debt payments accounted for approximately 15% of Upper Dublin s general fund expenditures. Special Session Act 1 of 2006 ("Act 1") enacted property tax reduction legislation in the Commonwealth. This legislation limits the future taxing authority of the District. For , the Act 1 index was set at 2.1%, an increase of 0.4% from the previous year. The District will have to seek solutions to maintain its current level of educational programming and services without any corresponding revenue enhancements. Act 1 also enacted the use of gaming funds from Pennsylvania casinos to reduce the local property taxes of residents. If this provision of Act 1 was to be repealed or if there were insufficient funds in the Commonwealth s property tax relief fund, the District's residents with an approved homestead/farmstead exclusion would no longer receive the approximately $300 credit on their real estate tax bills. In , this would have affected 7,405 residents. The Pennsylvania Public School Employees Retirement System ("PSERS") trustees set the percentage of payroll that all school districts must pay in to 16.93%, a 36.97% increase over Under current legislation, the employer contribution rate to the system would rise to approximately 25% by This contribution rate is unsustainable for Pennsylvania school districts and the Commonwealth must promptly address this issue with legislation that does not simply reduce the employer contribution rate, but substantively ensures the continuing financial health of PSERS. The District s largest assessment appeal, dating back to 2001, with an estimated refund exceeding $5.5 million continues to loom large on the horizon. This appeal was verbally settled in June 2014 but written stipulations have not been finalized at this time. At June 30, 2014 the general fund balance reflects a Board commitment of $2.96 million. This assessment appeal refund will be paid over five years and will reduce the District s future assessed value by nearly $19 million. The District s legal obligations to St. Mary s Villa for Children under Pennsylvania School Code Section 1306 have become more difficult to manage over the years. The District will continue to experience negative cash flow implications because of funding challenges in the School District of Philadelphia, the district of residence for the majority of the St. Mary s students. Currently, Philadelphia is six months in arrears for reimbursement payments and contests the educational status of many students, resulting in reimbursements of approximately one-half of tuition paid to St. Mary s. It is anticipated that will the final year of operations for this resident facility. -20-

27 SCHOOL DISTRICT OF UPPER DUBLIN Management s Discussion and Analysis Contracts for Upper Dublin Education Association (professional staff) and Upper Dublin Educational Support Personnel Association (support staff) expired on June 30, Currently, negotiations with both collective bargaining units are ongoing. REQUESTS FOR INFORMATION This financial report provides a general overview of the School District of Upper Dublin's finances for all those with an interest in the government's finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Business Administrator, School District of Upper Dublin, 1580 Fort Washington Avenue, Maple Glen, PA

28 B A S I C F I N A N C I A L S T A T E M E N T S

29 Statement of Net Position As of June 30, 2014 PRIMARY GOVERNMENT GOVERNMENTAL BUSINESS-TYPE ACTIVITIES ACTIVITIES TOTAL ASSETS Current Assets: Cash and cash equivalents $ 6,106,482 $ 43,066 $ 6,149,548 Investments 13,468,000-13,468,000 Receivables, net 1,736,546-1,736,546 Internal Balances 78, (1) Due From Other Governments 2,046,171 40,741 2,086,912 Other Receivables 107, ,569 Inventories 82,119 43, ,672 Prepaid Expenses 35,903-35,903 Other Current Assets Total Current Assets ,661, , ,711, Non-Current Assets: Restricted Cash and Cash Equivalents 213, ,199 Land 3,232,305-3,232,305 Site Improvements (net of depreciation) 2,334,854-2,334,854 Building and Bldg. Improvements (net of depreciation) 126,558, ,558,086 Furniture and Equipment (net of depreciation) 2,733,106 24,261 2,757,367 Construction in Progress 308, ,030 Total Non-Current Assets 135,379,580 24, ,403,841 Total Assets $ 159,041,465 $ 152,383 $ 159,114,991 DEFERRED OUTFLOWS OF RESOURCES Deferred Charges on Refundings, net 231, ,053 TOTAL ASSETS AND DEFERRED OUTFLOWS OF RESOURCES $ 159,272,518 $ 152,383 $ 159,346,044 LIABILITIES Current Liabilities: Internal Balances $ - $ 78,857 $ - (1) Due to other governments 123, ,707 Accounts Payable 2,317,382 16,029 2,333,411 Current Portion of Long-Term Obligations 8,401,921-8,401,921 Accrued Salaries and Benefits 6,133,077 32,669 6,165,746 Payroll Deductions and Withholdings Prepayments 8,185 52,623 60,808 Other Current Liabilities 1,324,429-1,324,429 Total Current Liabilities 18,308, ,178 18,410,022 Non-Current Liabilities: Bonds and Notes Payable 119,641, ,641,246 Extended Term Financing Agreements Payable Long-Term Portion of Compensated Absences 1,997,867 35,197 2,033,064 Net OPEB Obligation 1,638,422-1,638,422 Other Long-term Liabilities 4,328,256-4,328,256 Total Liabilities 145,914, , ,051,010 DEFERRED INFLOWS OF RESOURCES Unearned Revenue 2,056-2,056 TOTAL LIABILITIES AND DEFERRED INFLOWS OF RESOURCES 145,916, , ,053, NET POSITION Net Investment in Capital Assets 12,286,778-12,286,778 Restricted For: Retirement of Long-Term Debt Capital Projects Other Restrictions Unrestricted (deficit) 1,069,192 (62,992) 1,006,200 TOTAL NET POSITION 13,355,970 (62,992) 13,292,978 TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND NET POSITION $ 159,272,518 $ 152,383 $ 159,346,044 The Accompanying Notes are an integral part of these financial statements. (1) Internal balances represent the amount owed to or from the two types of activities within the Primary Government. Since internal balances does not represent assets or liabilities of the total Primary Government, their balances are eliminated in the "the "total" column (GASB Statement No. 34, paragraph. 58). -22-

30 Statement of Activities For the Year Ended June 30, 2014 OPERATING CAPITAL CHARGES FOR GRANTS AND GRANTS AND GOVERNMENTAL BUSINESS-TYPE FUNCTIONS/PROGRAMS EXPENSES SERVICES CONTRIBUTIONS CONTRIBUTIONS ACTIVITIES ACTIVITIES TOTAL GOVERNMENTAL ACTIVITIES: Instruction $ 46,224,943 $ 1,241,182 $ 6,454,290 $ - $ (38,529,471) $ - $ (38,529,471) Instructional Student Support 6,202, ,232 - (5,654,996) - (5,654,996) Admin. & Fin'l Support Services 5,547, ,306 - (5,195,064) - (5,195,064) Oper. & Maint. of Plant Svcs. 6,923, ,495 - (6,609,639) - (6,609,639) Pupil Transportation 3,718, ,241 - (3,042,277) - (3,042,277) Student activities 1,246, ,410 72,328 - (1,052,142) - (1,052,142) Community Services 318, ,122 12,166 - (27) - (27) Scholarships and Awards Interest on Long-Term Debt 4,537, ,618 (4,280,280) - (4,280,280) Unallocated Depreciation Expense 3,915, (3,915,381) - (3,915,381) TOTAL GOVERNMENTAL ACTIVITIES 78,634,667 1,669,714 8,428, ,618 (68,279,277) - (68,279,277) BUSINESS-TYPE ACTIVITIES: Food Services 1,186, , , (73,271) (73,271) Other Enterprise Funds TOTAL PRIMARY GOVERNMENT PROGRAM REVENUES NET (EXPENSE) REVENUE AND CHANGES IN NET POSITION $ 79,821,458 $ 2,440,772 $ 8,770,520 $ 257,618 $ (68,279,277) $ (73,271) $ (68,352,548) GENERAL REVENUES: Property taxes, Levied for general purposes, net $ 63,458,761 $ - $ 63,458,761 Taxes levied for specific purposes 6,542,543-6,542,543 Grants, subsidies, & contributions not restricted 4,873,625-4,873,625 Investment Earnings 36, ,829 Miscellaneous Income 599,171 28, ,033 Special item - Gain (Loss) on sale of capital assets Extraordinary Items Transfers (118,594) 118,594 - TOTAL GENERAL REVENUES, SPECIAL ITEMS, EXTRAORDINARY ITEMS, AND TRANSFERS 75,392, ,468 75,539,791 CHANGES IN NET POSITION 7,113,046 74,197 7,187,243 NET POSITION - BEGINNING 6,242,924 (137,189) 6,105,735 NET POSITION - ENDING $ 13,355,970 $ (62,992) $ 13,292,978 The Accompanying Notes are an integral part of these financial statements. -23-

31 Balance Sheet Governmental Funds As of June 30, 2014 CAPITAL NON-MAJOR TOTAL PROJECT GOVERNMENTAL GOVERNMENTAL GENERAL FUNDS FUNDS FUNDS ASSETS Cash and cash equivalents $ 1,690,651 $ 4,415,831 $ - $ 6,106,482 Restricted Cash - 213, ,199 Investments 13,468, ,468,000 Taxes Receivable, net 1,736, ,736,546 Due from other funds 78, ,857 Due from Other Governments 2,046, ,046,171 Other Receivables 99, ,344 Inventories 82, ,119 Prepaid Expenditures 35, ,903 Other Current Assets TOTAL ASSETS $ 19,237,591 $ 4,629,030 $ - $ 23,866,621 DEFERRED OUTFLOWS OF RESOURCES Deferred Charges on Refundings, net TOTAL ASSETS & DEFERRED OUTFLOWS OF RESOURCES $ 19,237,591 $ 4,629,030 $ - $ 23,866,621 LIABILITIES Due to Other Funds $ - - $ - $ - Due to Other Governments 123, ,707 Accounts Payable 1,929, ,639-2,126,556 Current Portion of Long-Term Debt 286, ,921 Accrued Salaries and Benefits 6,133, ,133,077 Payroll Deductions and Withholdings Prepayments from Persons or Firms 8,185 8,185 Other Retirement Benefits - - Other Current Liabilities 384, ,327 TOTAL LIABILITIES 8,866, ,639-9,062,773 DEFERRED INFLOWS OF RESOURCES Unearned and Unavailable Property Taxes/Grants 1,335, ,335,276 TOTAL LIABILITIES & DEFERRED INFLOWS OF RESOSURCES 10,201, ,639-10,398, FUND BALANCES: Nonspendable Fund Balance 118, ,021 Restricted Fund Balance - 4,432,391-4,432,391 Committed Fund Balance 2,960, ,960,279 Assigned Fund Balance 3,054,511-3,054,511 Unassigned Fund Balance 2,903, ,903,370 TOTAL FUND BALANCES 9,036,181 4,432,391-13,468,572 TOTAL LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES $ 19,237,591 $ 4,629,030 $ - $ 23,866,621 The Accompanying Notes are an integral part of these financial statements. -24-