Comprehensive Annual Financial Report

Transcription

1 Comprehensive Annual Financial Report of the Borough of Middlesex Board of Education County of Middlesex Middlesex, New Jersey For the Fiscal Year Ended June 30, 2011 Prepared by Borough of Middlesex, Board of Education Finance Department

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3 TABLE OF CONTENTS INTRODUCTORY SECTION Letter of Transmittal Roster of Officials Consultants and Advisors Organizational Chart Page FINANCIAL SECTION Independent Auditor's Report REQUIRED SUPPLEMENTARY INFORMATION - Part I Management's Discussion and Analysis (Unaudited) BASIC FINANCIAL STATEMENTS A. District-Wide Financial Statements: A-1 A-2 Statement of Net Assets Statement of Activities B. Major Fund Financial Statements: 26 Governmental Funds: B-1 Balance Sheet B-2 Statement of Revenues, Expenditures, and Changes in Fund Balance B-3 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities Other Funds: Propriety Funds: B-4 Statement of Net Assets B-5 Statement of Revenues, Expenses, and Changes in Fund Net Assets B-6 Statement of Cash Flows Fiduciary Funds: B-7 B-8 Statement of Fiduciary Net Assets Statement of Changes in Fiduciary Net Assets Notes to the Financial Statements 36-63

4 TABLE OF CONTENTS (Continued) REQUIRED SUPPLEMENTARY INFORMATION - Part II C. Budgetary Comparison Schedules: Page C-1 C-1A C-1B C-2 C-3 General Fund General Fund - ARRA ESF General Fund - ARRA GSF Special Revenue Fund Budget to GAAP Reconciliation N/A N/A OTHER SUPPLEMENTARY INFORMATION D School Level Schedules E. Special Revenue Fund: 78 N/A 79 E-1 E-2 E-3 Combining Schedule of Revenues and Expenditures - Budgetary Basis Demonstrably Effective Program Aid Schedule of Expenditures - Budgetary Basis Early Childhood Program Aid Schedule of Expenditures - Budgetary Basis N/A N/A F. Capital Projects Fund 84 F-1 Summary Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budgetary Basis 85 F-1A Schedule of Project Revenues, Expenditures, Project Balance, and Project Status - Budgetary Basis - High School Canopy Replacement 86 F-1 B Schedule of Project Revenues, Expenditures, Project Balance, and Project Status - Budgetary Basis - Parker School Parking Lot RepavinglDrainage/Sidewalk Project 87 F-1 C Schedule of Project Revenues, Expenditures, Project Balance, and Project Status - Budgetary Basis - Von E. Mauger School Gym Upgrade 88 F-1 D Schedule of Project Revenues, Expenditures, Project Balance, and Project Status - Budgetary Basis - Von E. Mauger Roof Repair 89 F-1 E Schedule of Project Revenues, Expenditures, Project Balance, and Project Status - Budgetary Basis - Watchung School Doors and Locks 90 F-1 F Schedule of Project Revenues, Expenditures, Project Balance, and Project Status - Budgetary Basis - High School Doors and Locks 91 F-1 G Schedule of Project Revenues, Expenditures, Project Balance, and Project Status - Budgetary Basis - Hazelwood School Doors and Locks 92 F-1 H Schedule of Project Revenues, Expenditures, Project Balance, and Project Status - Budgetary Basis - Parker School Doors and Locks 93

5 TABLE OF CONTENTS (Continued) Page F. Capital Projects Fund (Continued) F-11 Schedule of Project Revenues, Expenditures, Project Balance, and Project Status - Budgetary Basis - Von E. Mauger School Doors and Locks 94 F-1 J Schedule of Project Revenues, Expenditures, Project Balance, and Project Status - Budgetary Basis - Middlesex High School School Sidewalks and Drainage 95 F-1 K Schedule of Project Revenues, Expenditures, Project Balance, and Project Status - Budgetary Basis - Parker School Sidewalks and Drainage 96 F-1 L Schedule of Project Revenues, Expenditures, Project Balance, and Project Status - Budgetary Basis - Hazelwood School Sidewalks and Drainage 97 F-1 M Schedule of Project Revenues, Expenditures, Project Balance, and Project Status - Budgetary Basis - Watchung School Sidewalks and Drainage 98 F-1 N Schedule of Project Revenues, Expenditures, Project Balance, and Project Status - Budgetary Basis - Von E. Mauger School Sidewalk and Drainage 99 F-10 Schedule of Project Revenues, Expenditures, Project Balance, and Project Status - Budgetary Basis - Von E. Mauger School Water Meter 100 F-2 Summary Statement of Project Expenditures - Budgetary Basis 101 G. Proprietary Funds 102 Enterprise Fund: G-1 Combining Statement of Net Assets G-2 Combining Statement of Revenues, Expenses and Changes in Fund Net Assets G-3 Combining Statement of Cash Flows H. Fiduciary Fund H-1 Combining Statement of Fiduciary Net Assets H-2 Combining Statement of Changes in Fiduciary Net Assets H-3 Student Activity Fund Schedule of Receipts and Disbursements H-4 Payroll Agency Fund Schedule of Receipts and Disbursements H-5 Other Agency Funds Schedule of Receipt and Disbursements I. Long Term Debt N/A Schedule of Serial Bonds Schedule of Obligations Under Capital Leases Debt Service Fund Budgetary Comparison Schedule 112 N/A 113

6 TABLE OF CONTENTS (Continued) Page STATISTICAL SECTION (UNAUDITED) J-1 J-2 J-3 J-4 J-5 J-6 J-7 J-8 J-9 J-10 J-11 J-12 J-13 J-14 J-15 J-16 J-17 J-18 J-19 J-20 Net Assets by Component Changes in Net Assets Fund Balances - Governmental Funds Changes in Fund Balances - Governmental Funds General Fund Other Local Revenue by Source Assessed Value and Actual Value of Taxable Property Direct and Overlapping Property Tax Rates Principal Property Tax Payers - Current and Nine Years Ago Property Tax Levies and Collections Ratios of Outstanding Debt by Type Ratio of Net Bonded Debt Outstanding Direct and Overlapping Governmental Activities Debt Legal Debt Margin Information Demographic and Economic Statistics Principal Employers - Current Year and Nine Years Ago Full-Time Equivalent District Employees by Function/Program Operating Statistics School Building Information Schedule of Required Maintenance Insurance Schedule SINGLE AUDIT SECTION K-1 Independent Auditor's Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Basic Financial Statements Performed in Accordance with Government Auditing Standards K-2 Independent Auditor's Report on Compliance with Requirements Applicable to Each Major Federal and State Financial Assistance Program and on Internal Control Over Compliance in Accordance with OMB Circular A-133 and New Jersey OMB Circular K-3 Schedule of Expenditures of Federal Awards, Schedule A K-4 Schedule of Expenditures of State Financial Assistance, Schedule B K-5 Notes to the Schedules of Expenditures of Federal Awards and State Financial Assistance K-6 Schedule of Findings and Questioned Costs K-7 Schedule of Prior Audit Findings

7 INTRODUCTORY SECTION

8 BOROUGH OF MIDDLESEX SCHOOL DISTRICT 300 JOHN F. KENNEDY DRIVE MIDDLESEX, NJ James C. Baker, Ed.D. Superintendent of Schools Michele A. Previte Business Administrator/ Board Secretary November 7, 2011 Honorable President and Members of the Board of Education Borough of Middlesex School District 300 John F. Kennedy Drive Middlesex, NJ Dear Members of the Middlesex Board of Education: The comprehensive annual financial report of the Middlesex Borough School District (the "District") for the fiscal year ended June 30, 2011 is hereby submitted. Responsibility for both the accuracy of the data and completeness and fairness of the presentation, including all disclosures, rests with the management of the Middlesex Board of Education. 'To the best of our knowledge and belief, the data presented in this report is accurate in all material respects and is reported in a manner designed to present fairly the financial position and results of operations of the various funds and account groups of the district. All disclosures necessary to enable the reader to gain an understanding of the district's financial activities have been included. The comprehensive annual financial report is presented in five sections: introductory, financial, basic financial statements, required supplementary information, and other supplementary information. The introductory section includes this transmittal letter, the roster of officials, consultants and advisors and the District's organizational chart. The financial section includes the independent auditor's report and the management's discussion and analysis. The basic financial statements included the district-wide financial statements, fund financial statements, and notes to the financial statements. The required supplementary information reports on budget comparisons for the general and special revenue funds. The other supplementary information consists of various financial statements, statistical information and single audit. The District is required to undergo an annual single audit in conformity with the provisions of the Single Audit Amendment of 1996 and the U.S. Office of Management and Budget (OMB) Circular A-133, "Audits of State, and Local Governments, and Non-Profit Organizations", and the State Treasury Circular Letter OMB, "Single Audit Policy for Recipients of Federal Grants, State Grants and State Aid Payments". Information related to this single audit, including the auditor's report on the internal control structure and compliance with applicable laws and regulations and findings and recommendations are included in the single audit section of this report. 1

9 Honorable President and Members of the Board of Education Borough of Middlesex School District November 7, REPORTING ENTITY AND ITS SERVICES: The Borough of Middlesex School District is an independent reporting entity within the criteria adopted by the Financial Accounting Standard Board ("F ASB") as established by Governmental Accounting Standard Board ("GASB") in codification section All funds and account groups of the District are included in this report. The Borough of Middlesex School District and all its schools constitute the District's reporting entity. The District provides a full range of educational services appropriate to grade levels kindergarten through twelve, as well as education for children with special needs to grades Pre-school through twelve. The District completed the fiscal year with an on-roll enrollment of 2,120 students, which is a decrease of 7 students from the previous year's enrollment. The following details the changes in the average student enrollment of the District over the last ten years. Fiscal Year Average Daily Enrollment Percent Change , % , % , % , % , % , % , % , % , % , % 2. ECONOMIC CONDITION AND OUTLOOK: The Borough of Middlesex has not experienced any significant population increase or increase in business and industry. 3. MAJOR INITIATIVES: The information provided includes highlights of our district's improvements during the school year. The Middlesex Public School district has continued to move its advancement in all aspects of its operations. This has been done despite the still insufficient support of its operations. This document provides highlights of our district's activities which illustrate the continued advancement of the schools. The district has been able to install ENO Boards and projectors in all classrooms where all students receive a great benefit in their educational programs. These devices are 2

10 Honorable President and Members of the Board of Education Borough of Middlesex School District November 7,2011 especially advantageous for children who have been determined to be classified for special educational assistance. The devices which have been implemented by the district were cited by the e-school News as an exemplary program for use of technology for student achievement. Our connections with the community-especially parents-was enhanced through the implementation of an e-blast system which connects the school with over 95% of our parents. This program allows us to contact recipients to provide news, information on educational programs, and most of all, emergency information. This service was implemented by our existing staff with no additional staff being hired. Our new high school principal has initiated increased academic requirements in concert with the Directors of Curriculum and Guidance. We have seen an improvement in student behavior and in teacher attention to student tardiness and conduct during class and during student movement. Once again our test results have improved. Once again all tested grades have exceeded our DFG in Math. The scores have been as a result of our implementation of Every Day Math in the early grades and by the greater emphasis on pedagogy in the high school. The high school students taking the HSP A exceeded the DFG in Math again, but also the language arts test for the first time. Our physical plant activities were continued as a result of prior budget allocations. Sidewalks and drainage needs were addressed which resulted in better functioning facilities while also improving the schools appearances. There were some issues in the concrete spalling in some places, but the contractor will be replacing those spots. Our high school and middle school athletic and other co-curricular programs were again a success as the performing arts, sports, and Robotics teams were notable for their improvement. An exceptional result in this arena is the bowling team which was cut because of the budget. The participants and supporters were able to obtain sufficient funding for the team while also being one of the most successful teams who performed as representatives of our school. Middlesex Borough schools have been continuing to move toward raismg its performance consistent with its higher expectations. The final result is how our students fare when they leave our walls. Last year 12% more students enrolled in four year schools and we are intent on improving all of the indicants of an extraordinary school district. 3

11 Honorable President and Members of the Board of Education Borough of Middlesex School District November 7, INTERNAL ACCOUNTING CONTROLS: Management of the District is responsible for establishing and maintaining an internal control structure designed to ensure that the assets of the District are protected from loss, theft or misuse and to ensure that adequate accounting data are compiled to allow for the preparation of financial statements in conformity with generally accepted accounting principles (GAAP). The internal control structure is designed to provide reasonable, but not absolute, assurance that these objectives are met. The concept of reasonable assurance recognizes that: (1) the cost of a control should not exceed the benefits likely to be derived; and (2) the valuation of costs and benefits requires estimates and judgments by management. As a recipient of federal and state financial assistance, the District is also responsible for ensuring that an adequate internal control structure is in place to ensure compliance with applicable laws and regulations related to those programs. This internal control structure is also subject to periodic evaluation by the District's management. As part of the District's single audit described earlier, tests are made to determine the adequacy of the internal control structure. This includes that portion related to federal and state financial assistance programs, as well as determining that the district has complied with applicable laws and regulations. 5. BUDGETARY CONTROLS: In addition to internal accounting controls, the District maintains budgetary controls. The objective of these budgetary controls is to ensure compliance with legal provisions embodied in the annual appropriated budget approved by the voters of the municipality. Annual appropriated budgets are adopted for the general fund, the special revenue fund, and the debt service fund. Project-length budgets are approved for the capital improvements accounted for in the capital project fund. The final budget amount as amended for the fiscal year is reflected in the financial section. An encumbrance accounting system is used to record outstanding purchase commitments on a line item basis. Open encumbrances at year-end are either cancelled or are included as reappropriation of fund balance in the subsequent year. Those amounts to be reappropriated are reported as reservations of fund balance at June 30, ACCOUNTING SYSTEM AND REPORTS: The District's accounting records reflect generally accepted accounting principals, as promulgated by the Governmental Accounting Standards Board (GASB). The accounting system of the District is organized on the basis of funds and account groups. These funds and account groups are explained in "Notes to the Financial Statements", Note DEBT ADMINISTRATION: The District passed a $10 million dollar bond referendum in December 1997, in order to satisfy physical needs of its facilities that were identified in a 1994 needs assessment survey. Information related to the District's outstanding debt is recorded in the long-term debt schedules of the comprehensive annual financial report. 4

12 Honorable President and Members of the Board of Education Borough of Middlesex School District November 7, 2011 In June of 2005 the District refinanced the bonds which resulted in savings of future interest payments of the life of the outstanding debt. 8. CASH MANAGEMENT: The investment policy of the district is guided in large part by state statute as detailed in "Notes to the Financial Statements", Note 2. The District has adopted a cash management plan, which requires it to deposit public funds in public depositories protected from loss under the provisions of the Government Unit Deposit Protection Act ("GUDP A"). GUDP A was enacted in 1970 to protect governmental units from a loss of funds on deposit with a failed banking institution in New Jersey. The law requires governmental units to deposit public funds only in public depositories located in New Jersey, where the funds are secured in accordance with the act. 9. RISK MANAGEMENT: The District carries various forms of insurance, including but not limited to general liability, excess liability, automobile liability and comprehensive/collision, hazard and theft insurance on property and contents, and fidelity bonds. 10. OTHER INFORMATION: Independent Audit - State statutes require an annual audit by independent certified public accountants or registered municipal accountants. The accounting firm of Suplee, Clooney & Company, CPAs was selected by the Board of Education. In addition to meeting the requirements set forth in state statutes, the audit also was designed to meet the requirements of the Single Audit Act Amendment of 1996 and the related OMB Circular A-133 and State Treasury Circular Letter OMB. The auditor's report on the basic financial statements and combining and individual fund statements and schedules is included in the financial section of this report. The auditor's reports related specifically to the single audit section of this report. 11. ACKNOWLEDGEMENTS: We would like to express our appreciation to the members of the Borough of Middlesex Board of Education for their concern in providing fiscal accountability to the citizens and taxpayers of the school district and thereby contributing their full support to the development and maintenance of our financial operation. The preparation of this report could not have been accomplished without the efficient and dedicated services of our financial and accounting staff. Respectfully submitted, ~~c~(~ Michele A. Previte Business Administrator/Board Secretary 5

13 BOROUGH OF MIDDLESEX SCHOOL DISTRICT ROSTER OF OFFICIAL JUNE 30, 2011 Members of the Board of Education Term Expires Steve Yacik, President Sharon Schueler, Vice President Diane Bensinger William Coyle Glenn Dickey James Green, Jr. Linda Harrity David Oliver Rosemary S. Walsh Other Officials Dr. James C. Baker, Superintendent of Schools Michele A. Previte, Business Administrator/Board Secretary John Kayser, Treasurer of School Monies 6

14 BOROUGH OF MIDDLESEX SCHOOL DISTRICT CONSULTANTS AND ADVISORS JUNE 30, 2011 Architect Parette Somjen Architects 439 Route 46 East Rockaway, NJ Audit Firm Suplee, Clooney & Company 308 East Broad Street Westfield, New Jersey Attorney John McDonnell Mc Donnell & Artigliere 60 Youmans Avenue Washington, New Jersey Official Depository TD Bank, N.A Route 70 East Cherry Hill, NJ

15 BOROUGH OF MIDDLESEX SCHOOL DISTRICT ORGANIZATIONAL CHART BOARD OF EDUCATION J I BOARDATIORNEY BUSINESS ADMINISTRATOR! BOARD SECRETARY PRINCIPALS DIRECTOR OF SPECIAL SERVICES (Xl DIRECTOR OF CURRICULUM DIRECTOR OF GUIDANCE ASSISTANT PRINCIPALS CHILD STUDY TEAM SUPERVISOR OF BUILDINGS & GROUNDS TEACHING STAFF SPECIAL EDUCATION TEACHING STAFF [SUPERINTENDENTS SECRETARIES SECRETARIES BUSINESS OFFICE STAFF MAINTENANCE '- CUSTODIANS FOOD SERVICE VAN DRIVERS

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17 FINANCIAL SECTION

18 SUPLEE, CLOONEY & COMPANY CERTIFIED PUBLIC ACCOUNTANTS 308 East Broad Street, Westfield, New Jersey 07090'2122 Telephone Fax INDEPENDENT AUDITOR'S REPORT Honorable President and Members of the Board of Education Middlesex Borough School District County of Middlesex Middlesex, New Jersey 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 the Middlesex Borough School District, County of Middlesex, New Jersey as of and for the year ended June 30, 2011, which collectively comprise the District's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the District's management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with U.S. generally accepted auditing standards and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States, audit requirements prescribed by the Division of Finance, Department of Education, State of New Jersey and the provisions of U. S. Office of Management and Budget (OMB) Circular A-133 "Audits of State, Local Governments and Non-Profit Organizations" and State of New Jersey OMB Circular 04-04, "Single Audit Policy for Recipients of Federal Grants, State Grants and State Aid." Those standards and provisions require that we plan and perform the audit to obtain reasonable assurance about whether the basic financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in tile basic financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the basic financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the businesstype activities, each major fund, and the aggregate remaining fund information of the Middlesex Borough School District, County of Middlesex, New Jersey as of June 30, 2011, and the respective changes in financial position and cash flows, where applicable, thereof for the year then ended in conformity with U.S. generally accepted accounting principles. 9

19 SUPLEE, CLOONEY & COMPANY In accordance with Government Auditing Standards, we have also issued our report dated November 7, 2011 on our consideration of the Middlesex Borough School District's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts, grants 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. The Management's Discussion and Analysis and the required supplementary information, as listed in the foregoing table of contents, respectively, are not a required part of the basic financial statements but are supplementary information required by the U.S. generally accepted accounting principles. 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 opinions on the financial statements that collectively comprise the Middlesex Borough School District's basic financial statements. The introductory section, combining and individual fund schedules and statements, other schedules, statistical tables and the schedules of expenditures of federal awards and state financial assistance as listed in the table of contents are 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"; New Jersey OMB's Circular "Single Audit Policy for Recipients of Federal Grants, State Grants and State Aid" and State of New Jersey, Department of Education, Division of Finance and are not a required part of the basic financial statements of the Middlesex Borough School District, County of Middlesex, New Jersey. Such information, except for the introductory section and that portion marked unaudited on which we express no opinion, 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. November 7,

20 REQUIRED SUPPLEMENTARY INFORMATION - Part I 11

21 MANAGEMENT'S DISCUSSION AND ANALYSIS - UNAUDITED 12

22 BOROUGH OF MIDDLESEX SCHOOL DISTRICT MIDDLESEX, NEW JERSEY MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JUNE 30, 2011 UNAUDITED The Management's Discussion and Analysis of the Borough of Middlesex School District (the "District") offers readers of the District's financial statements a narrative overview of the financial activities for the fiscal year ended June 30, The intent of this discussion is to look at the District's financial performance as a whole; therefore readers should also review the transmittal letter at the front of this report, along with the District's financial statements and notes to the financial statements to enhance their understanding of the District's financial performance. Financial Highlights Revenue from governmental activities accounted for $32,214, or 97 percent of total school district revenue. The other 3 percent of revenue was generated by the business type activities. Total net assets of the District increased by $1,356, The Board of Education transferred $500, into the capital reserve fund for future capital projects. The District reduced its outstanding long-term debt by 8.8 percent. Overview of the Financial Statements This Comprehensive Annual Financial Report ("CAFR") consists of three parts: Management's Discussion and Analysis (this section), The Basic Financial Statements, and Required Supplementary Information. The Basic Financial Statements include two kinds of statements that present different views of the District, District-wide Financial Statements and Fund Financial Statements. District-wide Financial Statements provide both short-term and long-term information about the District's overall financial status. Fund Financial Statements report the District's operations in more detail than the District-wide statements on individual parts of the District, the Governmental Funds, Proprietary Funds and Fiduciary Funds. 13

23 BOROUGH OF MIDDLESEX SCHOOL DISTRICT MIDDLESEX, NEW JERSEY MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JUNE 30, 2011 UNAUDITED Governmental Funds Statements tell how basic services such as regular and special education were financed in the short-term as well as what remains for future spending. Proprietary Funds Statements offer short and long-term financial information about the activities the District operates like a business, which include food services and the community school. Fiduciary Funds Statements provide information about the financial relationships in which the District acts solely as a trustee or agent for the benefit of others. The notes to financial statements are also included, which are an integral part of the financial statements. The information in the notes provides detailed data on the District's financial operations. Required supplementary information further explains and supports the financial statements with a comparison of the District's budget for the year. Exhibit A-1 reflects how the various parts of this annual report are arranged and related to one another. District-wide Financial Statements The District-wide Financial 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 District's assets and liabilities. All current year's revenue and expenses are accounted for in the statement of activities regardless of when cash is received or disbursed. The District-wide Financial Statements report the District's net assets and how they have changed. Net assets, the difference between the District's assets and liabilities, is one way to measure the District's financial health or position. Over time, increases or decreases in the District's net assets are an indicator of whether its financial position has improved or diminished. The causes of this change may be a result of many factors, some financial and some not. Non-financial factors include the District's property tax base, current laws in New Jersey restricting revenue growth, facility condition, required educational programs and other factors. In the District-wide Financial Statements, the District's activities are divided into two categories, governmental and business-type activities. Governmental activities - All of the District's programs and services are reported here including, but not limited to regular and special education instruction, support services, operation and maintenance of plant facilities, pupil transportation and extracurricular activities. Property taxes and state formula aid finance most of these activities. 14

24 BOROUGH OF MIDDLESEX SCHOOL DISTRICT MIDDLESEX, NEW JERSEY MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JUNE 30, 2011 UNAUDITED Business-type activities - These services are provided on a charge for goods or services basis to recover all the expenses of the goods or services provided. District charges fees to help it cover the costs of certain services it provided. The food service and community school activities are reported as business activities. Fund Financial Statements The fund financial statements provide more detailed information about the District's funds, focusing on major funds. Funds are accounting devices the District uses to keep track of specific sources of funding and spending on particular programs. Some funds are required by state law and by bond covenants. The District establishes other funds to control and manage money for particular purposes (i.e. long-term debt) or to show that it is properly using certain restricted revenues (i.e. entitlement grants). The District maintains three financial funds: Governmental Funds: The District's activities reported in governmental funds focus on how money flows into and out of those funds and the balances left at year-end available for spending in the future years. These funds are reported using an accounting method called modified accrual accounting that 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 general government operations and the basic services it provides. Governmental fund information helps you determine whether there are more or fewer financial resources that can be spent in the near future to finance educational programs. The relationship (or differences) between governmental activities (reported in the government-wide Statement of Net Assets and Statement of Activities) and governmental funds statements is reconciled in the financial statements. Proprietary Funds: Services for which the District charges a fee are generally reported in proprietary funds. Proprietary funds are reported in the same way as the District-wide financial statements. The District's enterprise funds (one type of proprietary fund) are the same as its business-type activities but provide more detail and additional information, such as cash flow. Fiduciary Funds: The District is the trustee, or fiduciary, for assets that belong to others, such as scholarship funds and the student activities funds. The District is responsible for ensuring that the assets reported in these funds are used only for their intended purposes and by those to whom the assets belong. The District excludes these activities from the District-wide financial statements because it cannot use these assets to finance its operations. 15

25 BOROUGH OF MIDDLESEX SCHOOL DISTRICT MIDDLESEX, NEW JERSEY MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JUNE 30, 2011 UNAUDITED Financial Analysis of the District as a Whole The District's combined net assets have significantly increased from the fiscal year. The net assets from governmental funds increased by $1,246, primarily as a result of an increase in net capital assets and unrestricted net assets and a decrease in long-term liabilities. Net assets from business-type activities increased by $110, Exhibit A-1 below reflects the District's net assets as a whole. Exhibit A-2 reflects the changes in net assets from operating results. Exhibit A-1 Condensed Statement of Net Assets Total Governmental Activities Business-Type Activities Total School District Percentage FY 2011 FY 2010 FY 2011 FY 2010 FY 2011 FY 2010 Change Current and Other Assets $3,282, $2,973, $464, $362, $3,746, $3,336, % Capital Assets 15,641, ,273, , , ,783, ,427, % Total Assets 18,923, ,246, , , ,529, ,763, % Long-Term Liabilities 5,675, ,244, ,675, ,244, % Short-Term Liabilities 927, , , , ,003, ,024, % Total Liabilities 6,603, ,172, , , ,679, ,269, % Net Assets: Invested in Capital Assets Net of Related Debt 10,363, ,480, ,826,74 154, ,505,006,30 9,635,032,67 9,03% Restricted 2,782,708,88 2,728,076,81 2,782,708,88 2,728,076,81 2,00% Unrestricted (825,771,51) (1,135,233.76) 388,705,31 266,245,92 (437,066,20) (868,987,84) % Total Net Assets $12,320,116,93 $11,073,634,62 $530,532,05 $420,487,02 $12,850,648,98 $11,494, % 16

26 BOROUGH OF MIDDLESEX SCHOOL DISTRICT MIDDLESEX, NEW JERSEY MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JUNE 30, 2011 UNAUDITED Exhibit A-2 Changes in Net Assets from Operating Results Governmental Activities FY 2011 Business-Type Activities FY 2011 Total School District FY 2011 Revenue: Program Revenue: Charges for Services Operating Grants and Contributions $3,387, $757, , $757, ,755, General Revenue: Property Taxes State Aid not restricted Other 20,521, ,091, , ,521, ,091, , Total Revenue 32,214, ,125, ,339, Expenses: Instruction Student & Instructional Support Services Administrative and Business Maintenance & Operations Transportation Other 19,159, ,351, ,231, ,666, , , ,015, ,159, ,351, ,231, ,666, , ,833, Total Expenses 30,967, ,015, ,982, Increase/(Decrease) in Net Assets 1,246, , ,356, Sources of Revenue for Fiscal Year 2011 The District's total revenue for the school year was $33,339, as reflected in Exhibit A-3 below. Property taxes and state formula aid accounted for percent of the total revenue with the other percent consisting of restricted state and federal aid and grants, charges for services, and miscellaneous sources. 17

27 Exhibit A-3 Sources of Revenue for Fiscal Year 2011 BOROUGH OF MIDDLESEX SCHOOL DISTRICT MIDDLESEX, NEW JERSEY MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JUNE 30, 2011 UNAUDITED Sources of Revenue Amount Percentage Property Taxes $20,521, % State Formula Aid 7,792, % Other State and Federal Aid 2,948, % Federal and State Grants 1,071, % Charges for Services 757, % Other 249, % $33,339, % Expenses for the Fiscal Year 2011 The total expenditures for the fiscal year for all programs and services were $31,982, Exhibit A-4 below summarizes these program costs. The District's expenses are predominantly related to instructing, providing services and transporting students, grades kindergarten through twelve, which accounts for percent of the total District costs. Administrative and business expenses account for the costs of the Office of the Superintendent of Schools, the Business Office, and the Principal's Offices in all five school buildings. Maintenance and operations account for the costs of keeping the school buildings and grounds safe, clean and in good operating condition, and includes all the utility costs related to the school facilities. Other costs include interest on longterm debt, unallocated depreciation expense and the costs of the business-type activities of the proprietary funds. It is important to note that depreciation expense on capital assets is included in expenses for the year under the new accounting reporting model; expenses therefore include $657, for depreciation. Exhibit A-4 Expenses for Fiscal Year 2011 Expense Category Instruction Student & Instruction Services Administrative and Business Maintenance & Operations Transportation Other Amount $19,159, ,351, ,231, ,666, , ,833, $31,982, Percentage 59.91% % 10.10% 8.34% 2.31% 5.73% % 18

28 BOROUGH OF MIDDLESEX SCHOOL DISTRICT MIDDLESEX, NEW JERSEY MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JUNE 30, 2011 UNAUDITED Governmental Activities Exhibit A-5 presents the net cost (total cost less fees generated by the activities and intergovernmental aid provided for specific programs) of six major District activities: instruction, student & instructional services, administration and business, maintenance and operations, transportation, and other. The net cost shows the financial burden placed on the District's taxpayers and the state by each of these functions. Exhibit A-5 Net Cost of Governmental Activities Expense Category Amount Percentage Instruction Student & Instruction Services Administrative and Business Maintenance & Operations Transportation Other $16,663, % 3,867, % 3,051, % 2,666, % 740, % 480, % $27,470, % General Fund Budgeting Highlights The District's budget is prepared according to New Jersey Statutes and is based on accounting for certain transactions on a basis of modified accrual and encumbrance accounting. Over the course of the year, the Board of Education approved revisions to the general fund budget as needed. These budget amendments were necessary for the following reasons: Realign budgeted salary accounts after contract negotiation settlement and staff transfers to various programs. Realigned appropriations in accordance with the prescribed chart of accounts as modified by the comprehensive educational improvement and financing act. Transferred from unexpended appropriations to purchase teaching materials, computers, and equipment to meet various program needs. 19

29 BOROUGH OF MIDDLESEX SCHOOL DISTRICT MIDDLESEX, NEW JERSEY MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JUNE 30, 2011 UNAUDITED Capital Assets During the fiscal year the District's depreciation expense and retired assets exceeded capital acquisitions, therefore capital assets net of depreciation decreased. Exhibit A-6 reflects the comparative balances of capital assets net of depreciation. The detail of the changes in capital assets is reflected in Note 3 to the financial statements. Exhibit A-6 Capital Assets (Net of Depreciation) Total Governmental Activities Business-T ipe Activities Total School District Percentage FY 2011 FY 2010 FY 2011 FY 2010 FY 2011 FY 2010 Change Land and Site Improvements $953, $975, $953, $975, % Building and Building Improvements 12,811, ,790, ,811, ,790, % Construction in Progress 1,203, , ,203, , % Machinery and Equipment 672, , $141, $154, , , % Total Assets $15,641, $15,273, $141, $154, $15,783, $15,427, % Debt Administration At June 30, 2011 the District had $6,188, of outstanding long-term debt, consisting of bonds payable from construction, for compensated absences, and for lease purchase agreements. The District will continue to pay down its debt, as the obligations are due. Exhibit A-7 reflects the comparison of outstanding debt for the past two fiscal years. More information of the District's longterm debt is presented in Note 4 to the financial statements. Exhibit A-7 Outstanding Long-term Debt Lease Purchase Agreement Compensated Absences Bonds Payable Total School Debt FY2011 FY2010 $63, $122, , , ,215, ,670, $6,188, $6,787, Total Percentage Change % -8.52% -8.02% -8.83% 20

30 BOROUGH OF MIDDLESEX SCHOOL DISTRICT MIDDLESEX, NEW JERSEY MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JUNE 30, 2011 UNAUDITED The District's Future The District is presently in stable financial position. A major concern for the community is that state aid has been decreased; therefore, the burden of the rising cost of education is focused on taxpayers to support their local schools. Despite these concerns, the Borough of Middlesex School District is committed to maintaining fiscal responsibility as well as achieving educational excellence for all of the students of the District. Contacting the District's Financial Management This financial report is designed to provide the District's citizens, taxpayers, customers and investors and creditors with a general overview of the District's finances and to demonstrate the District's accountability for the money it receives. If you have questions about this report or need additional financial information, contact Michele Previte, School Business Administrator/Board Secretary at the Middlesex Borough Board of Education, 300 John F. Kennedy Drive, Middlesex, New Jersey or atprevitem@middlesex.k12.nj.us. 21

31 BASIC FINANCIAL STATEMENTS The basic financial statements provide a financial overview of the District's operations. These financial statements present the financial position and operating results of all funds as of June 30,

32 DISTRICT-WIDE FINANCIAL STATEMENTS The statement of net assets and the statement of activities display information about the District. These statements include the financial activities of the overall district, except for fiduciary activities. Eliminations have been made to minimize the double counting of internal activities. These statements distinguish between the governmental and business-type activities of the District. 23

33 EXHIBIT "A-1" BOROUGH OF MIDDLESEX SCHOOL DISTRICT STATEMENT OF NET ASSETS JUNE 30, 2011 ASSETS GOVERNMENTAL ACTIVITIES BUSINESS-TYPE ACTIVITIES TOTAL Cash and cash equivalents Receivables, net Inventory Restricted assets: Restricted cash and cash equivalents Capital assets: Land and construction in progress Other capital assets, net Total assets $1,346, , ,140, ,247, ,393, ,923, $381, , , , , $1,727, , , ,140, ,247, ,535, ,529, LIABILITIES Accounts payable Contracts payable Interfunds payable Payable to state government Deferred revenue Interest payable Noncurrent liabilities: Due within one year Due beyond one year Total liabilities 282, , , , , , ,675, ,603, , , , , , , , , , ,675, ,679, NET ASSETS Investment in capital assets, net of related debt Restricted for: Capital projects fund Debt service fund (deficit) Other purposes Unrestricted (deficit) 10,363, , (50,947.92) 2,064, (825,771.51) 141, , ,505, , (50,947.92) 2,064, (437,06620) Total net assets $12,320, $530, $12,850, See accompanying notes to financial statements. 24

34 EXHIBIT "A-2" BOROUGH OF MIDDLESEX SCHOOL DISTRICT STATEMENT OF ACTIVITIES JUNE 30, 2011 FUNCTIONS/PROGRAMS EXPENSES PROGRAM REVENUES CHARGES FOR OPERATING GRANTS SERVICES AND CONTRIBUTIONS NET (EXPENSE) REVENUE AND CHANGES IN NET ASSETS GOVERNMENTAL BUSINESS-TYPE ACTIVITIES ACTIVITIES TOTAL N (J1 Governmental Activities: Instruction: Regular Special education Other Support services: Student and instruction related services General administrative services School administrative services Central services Administration information technology Plant operations and maintenance Student transportation services Interest on long term debt Unallocated depreciation Total governmental activities $12,751, ,772, ,635, ,351, , ,681, , , ,666, , , , ,967, $1,467, , , , , , , , , ,387, ($11,283,703.08) (3,852,931.79) (1,526,660.92) (3,867,910.99) (731,414.84) (1,563,333.31) (505,314.25) (251,388.95) (2,666,533.02) (740,303.65) (29,553.29) (560,815.75) (27,579,863.84) ($11,283,703.08) (3,852,931.79) (1,526,660.92) (3,867,910.99) (731,414.84) (1,563, ) (505,314.25) (251,388.95) (2,666,533.02) (740,303.65) (29,553.29) (560,815.75) (27,579,863.84) Business-type activities: Community school Food service Total business-type activities 262,572,63 752, ,015, $309, , , , , $47, , , , , , Total primary government $31,982, $757, $3,755, ($27,579,863.84) $109, ($27,470,332.13) General Revenues: Taxes: Property taxes - general Property taxes - debt service Federal and state aid not restricted Miscellaneous income Total general revenues $20,033, , ,091, , ,826, $ $20,033, , ,091, , ,826, Change in net Assets 1,246, , ,356, Net Assets - beginning Net Assets ending 11,073, $12,320, , $530, ,494, $12,850, See accompanying notes to financial statements.

35 MAJOR FUND FINANCIAL STATEMENTS The Individual fund financial statements and schedules present more detailed information for the individual fund in a format that segregates information by fund type. 26

36 EXHIBIT "B-1" BOROUGH OF MIDDLESEX SCHOOL DISTRICT BALANCE SHEET GOVERNMENTAL FUNDS JUNE ASSETS AND OTHER DEBITS GENERAL FUND SPECIAL REVENUE FUND CAPITAL PROJECTS FUND TOTAL GOVERNMENTAL FUNDS Assets Cash and cash equivalents Capital reserve account Accounts receivable Federal State Other Inlerfund $745, ,140, , , ,88675 $287, , $601, ,53443 $1,346, ,140, , , ,88675 Total assets $2,418,84740 $289, $769,59046 $3,477,94186 LIABILITIES AND FUND BALANCES Liabilities Accounts payable Contracts payable Intergovernmental payable State Interfunds payable Deferred revenue $225, , , $57, , ,05943 $8250 $282, , ,35943 Total liabilities 270, , ,77032 Fund balances Restncted for Capital reserve account Maintenance reserve Excess surplus designated for 1,140, , ,140, ,00000 subsequent years expenditures Excess surplus - current year Capilal projecls fund Assigned for year-end encumbrances Committed for year-end encumbrances Unassigned General fund 216, , , , , , , , , , Tolal fund balances/(deflcll) 2,148, , , Totaillablhties and fund balances $2,418,84740 $289,50400 $769,59046 Amounts reported for governmental actlvltles In the statement of net assets (a-1) are different because' Capital assets used in governmental activities are not financial resources and Iherefore are nol reported In the funds The cosl of assels IS $28,607, and the accumulated depreciation IS $12,966, ,641,18847 Long term liab!litles, including bonds and interest payable, are not due and payable in the current period and therefore are not reported as liabilities in the funds Net assets of governmental activities (6,239,24308) $12,320,11693 See accompanying notes to financial statements 27