CITY SCHOOL DISTRICT OF WHITE PLAINS, NEW YORK FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION FOR THE YEAR ENDED JUNE 30, 2014 IN CONNECTION WITH

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1 CITY SCHOOL DISTRICT OF WHITE PLAINS, NEW YORK FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION FOR THE YEAR ENDED JUNE 30, 2014 IN CONNECTION WITH OMB CIRCULAR A-133

2 CITY SCHOOL DISTRICT OF WHITE PLAINS, NEW YORK TABLE OF CONTENTS Independent Auditor's Report Required Supplementary Information: Management's Discussion And Analysis ("MD&A") Basic Financial Statements: District-Wide Financial Statements - Statement Of Net Position 15 Statement Of Activities And Changes In Net Position 16 Fund Financial Statements - Balance Sheet - Governmental Funds 17 Reconciliation Of Governmental Funds Balance Sheet To The Statement Of Net Position 18 Fund Financial Statements - Statement Of Revenues, Expenditures And Changes In Fund Balance (Deficit)- Governmental Funds 19 Reconciliation Of Governmental Funds Statement Of Revenues, Expenditures And Changes In Fund Balance To The Statement Of Activities 20 Fund Financial Statements - Statement Of Fiduciary Net Position - Fiduciary Funds 21 Statement Of Changes In Fiduciary Net Position - Fiduciary Funds 22 Notes To Financial Statements 23 Required Supplementary Information Other Than MD&A: General Fund - Schedule Of Revenues, Expenditures And Changes In Fund Balance- Budget And Actual 50 Schedule Of Funding Progress For The Retiree Health Plan 51 Other Supplementary Information (Required by the New York State Education Department): General Fund - Schedule Of Change From Adopted Budget To Final Budget And The Real Property Tax Limit 52 Capital Projects Fund - Schedule Of Project Expenditures And Financing Sources 53 Net Investment In Capital Assets 54 Other Supplementary Information: Major Governmental Funds: General Fund - Comparative Balance Sheet 55 Comparative Schedules Of Revenues, Expenditures And Changes In Fund Balance- Budget And Actual 56 Schedule of Revenues, Expenditures And Other Financing Sources (Uses) Compared To Budget 57 Capital Projects Fund - Comparative Balance Sheet 61 Comparative Schedules Of Revenues, Expenditures And Changes In Fund Balance (Deficit) 62 Special Aid Fund - Comparative Balance Sheet 63 Comparative Schedules Of Revenues, Expenditures And Changes In Fund Balance- Budget And Actual

3 Non-Major Governmental Funds: Combining Balance Sheet (With Comparative Totals For 2013) Combining Schedule Of Revenues, Expenditures And Changes In Fund Balance (With Comparative Totals For 2013) School Lunch Fund - Comparative Balance Sheet Comparative Schedules Of Revenues, Expenditures And Changes In Fund Balance Debt Service Fund - Comparative Balance Sheet Comparative Schedules Of Revenues, Expenditures And Changes In Fund Balance Fiduciary Funds - Schedule Of Changes In Fiduciary Assets And Liabilities (Agency Funds) Extraclassroom Activity Funds Federal Award Program Information: Schedule Of Expenditures Of Federal Awards Notes To Schedule Of Expenditures Of Federal Awards Independent Auditor's Report On Internal Control Over Financial Reporting And On Compliance And Other Matters Based On An Audit Of Financial Statements Performed In Accordance With Government Auditing Standards Independent Auditor's Report On Compliance For Each Major Program And On Internal Control Over Compliance Required By OMS Circular A-133 Schedule Of Findings And Questioned Costs Summary Schedule Of Prior Audit Findings Findings And Recommendations

4 To the Board of Education of the City School District of White Plains, New York: Reporl on the Financial Statements CERTIFIED PUBLIC ACCOUNT ANTS INDEPENDENT AUDITOR'S REPORT We have audited the accompanying financial statements of the governmental activities, each major fund, the fiduciary funds and the aggregate remaining fund information of the City School District of White Plains, New York (the "District"), as of and for the year ended June 30, 2014, and the related notes to the financial statements, which collectively comprise the District's basic financial statements as listed in the table of contents. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, the fiduciary funds and the aggregate remaining fund information of the District, as of June 30, 2014, and the respective changes in financial position, thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. -1-

5 NawrockiSmith Emphasis of Matter As discussed in Note 17, as well as Management's Discussion and Analysis ("MD&A"), in 2014 the District adopted Governmental Accounting Standards Board ("GASB") Statement No. 65, Items Previously Reported as Assets and Liabilities. The adoption of this statement resulted in a prior-period adjustment. Our opinion is not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management's discussion and required supplementary information, on pages 3-14, 50 and 51 respectively, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the GASB, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the District's basic financial statements. The other supplementary information, as listed in the table of contents, is presented for purposes of additional analysis and is not a required part of the basic financial statements. Other supplementary information required by the New York State Education Department is indicated as such in the table of contents. The schedule of expenditures of federal awards is presented for purposes of additional analysis as required by U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments and Non Profit Organizations, and is also not a required part of the basic financial statements. The other supplementary information required by the New York State Education Department and the schedule of expenditures of federal awards are the responsibility of management and were derived from and relate directly 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 other supplementary information 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. The other supplementary information, on pages 55 through 71, have not be subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated September 10, 2014, on our consideration of the District's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on 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 the District's internal control over financial reporting and compliance. Melville, New York September 10,

6 CITY SCHOOL DISTRICT OF WHITE PLAINS, NEW YORK MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE FISCAL YEAR ENDED JUNE 30, 2014 The following is a discussion and analysis of the City School District of White Plains, New York (the "District") financial performance for the fiscal year ended June 30, This section is a summary of the District's financial activities based on currently known facts, decisions or conditions. It is also based on both the District-wide and fund-based financial statements. The results of the current year are discussed in comparison with the prior year, with an emphasis placed on the current year. This section is only an introduction and should be read in conjunction with the District's financial statements, which immediately follow this section. FINANCIAL HIGHLIGHTS New York State Law limits the amount of committed, assigned and unassigned fund balance, exclusive of encumbrances and amounts assigned for the subsequent year's budget, which can be retained by the General Fund to 4% of the ensuing year's budget. The District has remained within this limit. At the end of the current fiscal year, the unassigned fund balance of the General Fund was $7,995,996 equal to the 4% limit. As of the close of the current fiscal year, the District's fund financial statements report a combined ending fund balance of $47,619,926 a decrease of $2,144,138. Exclusive of the Capital Projects Fund, the combined ending fund balances are $54,256,734. Of this latter amount, the unassigned fund balance is $7,995,996 or 14.7%. This amount is available for spending at the discretion of the District. The increase in total fund balance results from expenditures coming in lower than had been estimated when the budget was adopted. On the District-wide financial statements, the assets of the District exceeded liabilities and deferred inflows at the close of its most recent fiscal year by $83,556,012. The District's total net position increased by $8,508,661 for the year ended June 30, The unrestricted portion is in a deficit position of $14,629,855, as a result of the recognition of the long-term liability for Other Post Employment Benefits ("OPEB"). In the General Fund, revenues were 1.5% above the original budget and expenditures were 3% below budget, thus contributing to the District's fund balance. Expenditures were up 6% from the prior year, primarily due to contractual employee benefits. As described in Note 2 to the financial statements, "Changes in Accounting Principles", the Authority has adopted the provisions of GASB Statement No. 65, Items Previously Reported as Assets and Liabilities, as of June 30, The adoption of this principle resulted in a restatement of the District's opening net position as of July 1, 2013 in the amount of $205,662 as indicated in Note 17 to the financial statements. OVERVIEW OF THE FINANCIAL STATEMENTS This annual report consists of three parts: required supplementary information, which includes management's discussion and analysis (this section), the basic financial statements, and other supplementary information. The basic financial statements include two kinds of financial statements that present different views of the District: The first two financial statements are District-wide financial statements that provide both short-term and long-term information about the District's overall financial status. The remaining financial statements are fund financial statements that focus on individual parts of the District, reporting the District's operations in more detail than the District-wide financial statements. The fund financial 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. -3-

7 Fiduciary fund financial statements provide information about the financial relationships in which the District acts solely as a trustee or agent for the benefit of others. The financial statements also include notes that explain some of the information in the financial statements and provide more detailed data. The financial statements are followed by a section of required supplementary information that further explains and supports the financial statements with a comparison of the District's budget for the year. Table A-1 summarizes the major features of the District's financial statements, including the portion of the District's activities they cover and the types of information they contain. The remainder of this overview section of management's discussion and analysis highlights the structure and contents of each of the financial statements. Table A-1: Major Features of the District-Wide and Fund Financial Statements District-Wide Financial Fund Financial Statements Statements Governmental Funds Fiduciary Funds Scope Entire District (except The activities of the Instances in which the fiduciary funds) District that are not District administers proprietary or fiduciary, resources on behalf of such as instruction, someone else, such as special education and scholarship programs building maintenance and student activity monies Required financial Statement of Net Balance Sheet Statement of statements Position Statement of Fiduciary Net Statement of Revenues, Position Activities and Expenditures and Statement of Changes in Net Changes in Fund Changes in Position Balance Fiduciary Net Position Accounting basis and Accrual accounting Modified accrual Accrual accounting and measurement focus and economic accounting and current economic resources resources focus financial focus focus Type of asset/deferred All assets, deferred Generally, assets and All assets, deferred outflows of outflows of resources, deferred outflows of outflows of resources (if resources/liability/ liabilities, deferred resources expected to any), liabilities, and deferred inflows of inflows of resources, be used up and deferred inflows of resources information both financial and liabilities and deferred resources (if any), both capital, short-term and inflows of resources short-term and longlong-term that come due or term; funds do not available during the currently contain capital year or soon assets, although they thereafter; no capital can assets or long-term liabilities included Type of inflow/outflow All revenues and Revenues for which All additions and information expenses during the cash is received during deductions during the year, regardless of or soon after the end of year, regardless of when cash is received the year; expenditures when cash is received or paid when goods or or paid services have been received and the related liability is due and payable -4-

8 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 Position includes all of the District's assets, deferred outflows of resources, liabilities and deferred inflows of resources. All of the current year's revenues and expenses are accounted for in the Statement of Activities regardless of when cash is received or paid. The two District-wide financial statements report the District's net position and how it has changed. Net position - the difference between the District's assets, deferred outflows of resources, liabilities and deferred inflows of resources - is one way to measure the District's financial health or position. Over time, increases or decreases in the District's net position is an indicator of whether its financial status is improving or deteriorating, respectively. To assess the District's overall health, you need to consider additional non-financial factors such as changes in the District's property tax base and the condition of school buildings and other facilities. In the District-wide financial statements, the District's activities are shown as governmental activities. Most of the District's basic services are included here, such as regular and special education, transportation and general support expenses. Property taxes, other tax items and State formula aid finance most of these activities. Fund Financial Statements The fund financial statements provide more detailed information about the District's funds, focusing on its most significant or "major" funds - not the District as a whole. 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 to manage money for particular purposes (such as repaying its long-term debts) or to show that it is properly using certain revenues (such as Federal grants). The District has two kinds of funds: Governmental funds: Most of the District's basic services are included in governmental funds, which generally focus on (1) how cash and other financial assets that can readily be converted to cash flow in and out and (2) the balances left at year-end that are available for spending. Consequently, the fund financial statements provide a detailed short-term view that helps you determine whether there are more or fewer financial resources that can be spent in the near future to finance the District's programs. Because this information does not encompass the additional long-term focus of the District-wide financial statements, reconciliations of the District-wide and fund financial statements are provided which explain the relationship (or differences) between them. The District maintains five individual governmental funds; General Fund, Capital Projects Fund, Special Aid Fund, School Lunch Fund and Debt Service Fund. 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, Capital Projects and Special Aid funds which are considered to be major funds. Data for the other two governmental funds are combined into a single, aggregated presentation and individual fund data is provided elsewhere in this report. A detailed description of each fund can be found on page

9 The District adopts an annual budget for its General Fund (voter approved) and establishes a budget for the Special Aid Fund. A budgetary comparison schedule is provided for these funds to demonstrate compliance with the respective budgets. Fiduciary funds: The District is the trustee or fiduciary, for assets that belong to others, such as the scholarship funds and 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. FINANCIAL ANALYSIS OF THE DISTRICT AS A WHOLE The District's net position increased by 11.3% from the year before to $83,556,012 as detailed in Tables A-2 and A-3. The restricted net position balance of $69,120,317 represents assets that are restricted by external sources, imposed by laws through constitutional provisions or enabling legislation. As of June 30, 2014, the District has an unrestricted net deficit position of $14,629,855. This balance will remain in a deficit position and is primarily driven by the District's required recognition of its obligation for other post-employment benefits which currently totals $19,076,535. This obligation will continue to grow into the future (see Note 12 to the accompanying financial statements). Table A-2: Condensed Statements of Net Position - Governmental Activities 6/30/13 6/30/14 As Restated $Change %Change Current assets $102,295,830 $ 78,633,193 $ 23,662, Non-current assets 130,317, ,512,094 {194,300~ (0.1) Total assets $232,613,624 $209,145,287 $ 23,468, Current liabilities $ 58,706,504 $ 37,105,717 $ 21,600, Non-current liabilities 89,797,168 96,186,374 {6,389,206~ (6.6) Total liabilities 148,503, ,292,091 15,211, Deferred inflows 553, ,845 (251,905) (31.3) Total liabilities and deferred inflows $149,057,612 $134,097,936 $ 14,959, Net position: Net investment in capital assets $ 29,065,550 $ 44,544,451 $ (15,478,901) (34. 7) Restricted 69,120,317 38,931,961 30,188, Unrestricted {14,629,855} {8,429,061 ~ {6,200,794} (73.6) Total net position $ 83,556,012 $ 75,047,351 $ 8,508, As of June 30, 2014, the District had positive working capital of $43,589,326 as compared to $41,527,476 as of June 30, This is due to an increase in cash and investments of approximately $22.8 million offset by an increase in bond anticipation notes payable of $21.0 million and due to teachers' retirement system of approximately $3.0 million. A strong working capital ratio, as noted here, typically eliminates the need to borrow for short-term cash needs, i.e. as with a Tax Anticipation Note ("TAN") or Revenue Anticipation Note ("RAN"). -6-

10 As of June 30, 2014, the District had an investment in capital assets of $130,317,794 as compared to $130,512,094. The decrease is due to depreciation charges offset by the current year outlay for ongoing capital projects. Non-current long-term liabilities decreased $6,389,206 due to current year debt service payments offset by the continued recognition of the other post-employement benefits obligation liability, with a current year charge of $7,642,837. Changes in Net Position The District's fiscal year 2014 revenues totaled $206,844,331, which is 4.4% greater than fiscal year 2013 (See Table A-3). Property taxes, other real property tax items and State sources accounted for 89.9% of total revenues (See Table A-4). The remainder came from fees charged for services, operating grants, other miscellaneous sources and use of money and property. The District's fiscal year 2014 expenses totaled $198,335,670, and reflect a 3.2% increase over the prior year's expenses (See Table A-3). These expenses (91.9 percent) are predominantly related to instruction and general support (See Table A-6). Table A-3: Changes in Net Position from Operating Results - Governmental Activities Only 6/30/13 6/30/14 As Restated $Change %Change Program revenues: Charges for services $ 5,264,438 $ 4,950,385 $ 314, Operating grants and 10,055,538 9,258, , contributions Capital grants and contributions 258,900 69, , Total program revenues 15,578,876 14,278,421 1,300, General revenues: Real property taxes 144,033, ,821,138 6,212, Other real property tax items 27,384,398 29,169,446 (1,785,048) (6.1) Non-property tax items 3,937,081 3,624, , Unrestricted use of money and property 27,697 75,520 (47,823) (63.3) Sale of property and compensation for loss 267,583 61, , State sources- unrestricted 14,653,620 12,449,802 2,203, Federal sources - Medicaid 47,995 33,545 14, Miscellaneous 913, , , Total general revenues 191,265, ,873,905 7,391, Total revenues 206,844, ,152,326 8,692, Program expenses: General support 26,943,088 24,118,525 2,824, Instruction 155,253, ,954,960 3,298, Pupil transportation 9,237,892 9,041, , Debt service - interest 3,240,395 3,459,605 (219,210) (6.3) School lunch program 3,660,936 3,563,540 97, Total expenses 198,335, ,137,711 6,197, Change in net position 8,508,661 6,014,615 2,494, Net position, beginning of year 75,047,351 69,032,736 6,014, Net position, end of year $ 83,556,012 $ 75,047,351 $ 8,508,

11 Table A-4: Sources of Revenues for Fiscal Year 2014 Charges for services 2.6% 0 perating grants and contributions, 4.9% Capital grants and contributions, 0.1% Real property taxes, 69.6% Miscellaneous, 0. 50fc~o Federal sources Medicaid, 0.0% State sources-_ unrestricted, 7.1% Sale of property compensation for loss, 0.1% Unrestricted use of money and property, 0.0% Non-property tax items, 1.9% Other real property tax items, 13.2% Table A-5: Sources of Revenues for Fiscal Year 2013 Charges for services, 2.5% Operating grants and contributions 4.7% Capital grants and contributions, 0.0% Miscellaneous, 0.3%~ Federal sources Medicaid, 0.0% State sources- unrestricted, 6.3% Sale of property and compensation for loss, 0.0% Unrestricted use of money and property, 0.1% Non-property tax items, 1.8% Other real property tax items, 14.7% -8-

12 Table A-6: Expenses for Fiscal Year 2014 Debt service - interest School lunch program 1.6% 1.8% '-~--- Pupil transportation~ 4.7% ~ General support / 13.6% Instruction 78.3% Table A-7: Expenses for Fiscal Year 2013 Debt service - interest\ 1.8% School lunch program ,_J 1.9%! General support 12.5% Pupil transportation 4.7% Instruction 79.1% -9-

13 Governmental Activities Revenues for the District's governmental activities totaled $206,844,331 while total expenses were $198,335,670, for the year ended June 30, Therefore, the increase in net position for governmental activities was $8,508,661 in The District's financial condition is generally affected by: Community support of the District's annual budget as reflected in the increase in revenue from real property taxes; Changes in State aid (sources); Conservative fiscal management of the District's expenditures; and Continued recognition of the liability for benefits provided to retirees other than pensions ("OPES"). The major changes in revenues and expense are as follows: Revenues: Real property taxes increased by $6,212,073. This increase was within the tax cap, reflects a more modest tax increase to residents and is used to offset other revenue declines, allowing for a continued strong educational program. Other real property tax items include the reimbursements received under the School Tax Relief Reimbursement Program ("STAR"). The STAR program provides tax relief to homeowners through State reimbursement to the District. Payments in lieu of taxes ("PILOTS") are also included within this category. The revenues from the STAR program increased $246,448, or less than 1%, while PILOT payments decreased $1,930,491. Unrestricted State sources (aid) increased by $2,203,818 as the District received more BOCES aid resulting from higher BOCES expenditures, as well as Lottery aid. Additionally a more favorable state reimbursement ratio resulted in higher Building aid and Transportation aid. Operating grants and contributions increased $796,642 reflecting higher E-rate reimbursements and aid for Food Services. Non-property tax revenue increased by $312,107, which reflects increased taxes collected from consumer utility bills. This increase is a direct result of the severe winter the Northeast endured. Miscellaneous revenues increased $276,076. The primary source of this increase was insurance recoveries from storm damage expensed in the previous year. Expenses: General Support and Instruction program expenses increased by $2,824,563 and $3,298,399, respectively. The primary reason for this increase is contractual salary increases and higher employee benefits, primarily due to higher retirement contributions rates, health insurance costs along with the ongoing accrual of the District's OPES obligation. Additionally, expenses for tax certiorari claims increased as well as facilities expenses due to higher utility costs. School lunch program (cost of food sales) increased by $97,396 as salary costs, food costs and the cost of paper products were higher. Interest expense decreased by $219,210 as the principal amount outstanding has decreased from the prior year. -10-

14 FINANCIAL ANALYSIS OF THE DISTRICT'S FUNDS Variances between years for the fund financial statements are not the same as variances between years for the District-wide financial statements. The District's governmental funds are presented on the current financial resources measurement focus and the modified accrual basis of accounting. Based on this presentation, governmental funds do not include long-term debt liabilities for the funds' projects and capital assets purchased by the funds. Governmental funds will include the proceeds received from the issuance of debt, the current payments for capital assets, and the current payments for debt. At June 30, 2014, the District's governmental funds reported a combined fund balance of $47,619,926, which is a decrease of $2,144,138 from June 30, Fund balances for the District's governmental funds for the past two years were distributed as follows: Table A-8: Fund Balances- Governmental Funds Major Funds General Fund Nonspendable: Advances Prepaid expenses Restricted: Tax certiorari Property loss Liability claims Capital Assigned: Encumbrances Unassigned $ 6/30/14 449,691 41,617,777 83, , , ,279 7,995,996 6/30/13 As Restated $ 499,691 1,933,975 37,165,791 83, , , ,974 7,735,999 $Change $ (50,000) (1,933,975) 4,451, , ,997 %Change (10.0) (1 00.0) Total General Fund 51,513,055 48,572,422 2,940, Capital Projects Fund Restricted: Capital projects Unassigned 25,647,870 (32,284,678) (1,860,305) 25,647,870 (30,424,373) (1,635.5) Total Capital Projects Fund (6,636,808) (1,860,305) (4,776,503) (256.8) Total Major Funds 44,876,247 46,712,117 (1,835,870) (3.9) Non-Major Funds Nonspendable: Inventory Restricted: Debt reserve Assigned: Appropriated for subsequent year's expenditures School Lunch Fund 94,577 1,214, , ,744 93,847 1,555, , , (341,1 00) 32, (21.9) Total Non-Major Funds 2,743,679 3,051,947 (308,268) (10.1) Total fund balances $ 47,619,926 $ 49,764,064 $ (2,144,138) (4.3) -11-

15 A detailed description of fund balance categories can be found on pages 32 and 33. Of the combined fund balance, it is important to note that only, $7,995,996 is actually available for use at the District's discretion. General Fund Budgetary Highlights Reference is made to supplementary schedule on page 50 which presents original and revised budget amounts, as well as actual results for the District's General Fund. Actual revenues were higher than the final budgeted revenues by $2,970,17 4 due to higher than anticipated charges for services ($796,922), non-property tax items for consumer utility bills ($687,081) and State sources ($556,492). Actual expenditures were approximately $6.0 million, or 3%, less than budget primarily due to lower than anticipated costs in Central Services ($238,569), Instructional Administration ($423, 747), Regular school instruction ($2, 148,483), Special Education ($1, 181,026), Pupil Transportation ($432,082) and Employee Benefits ($1,080,840) categories. This is due to lower than anticipated increases in employee benefits and strong management of special education costs. As a result of a positive fund balance, the District was able to position itself to fund its, currently underfunded, reserve for tax certiorari payments. As of June 30, 2014, the District's unassigned fund balance was $7,995,996 which was under the allowable 4% of the subsequent year's budget ($199,900,000) as promulgated by New York State (see page 52). The following is a reconciliation of the General Fund's unassigned fund balance for the year ended June 30, 2014: Unassigned fund balance, beginning of year $ 7,735,999 Add: Prior-year encumbrances 596,974 Prior-year nonspendable fund balance 2,433,666 Board approved use of Tax Certiorari Reserve 5,954,604 Net change in fund balance 2,940,633 Less: Current-year encumbrances (809,279) Current-year nonspendable fund balance (449,691) Board approved transfer to Tax Certiorari Reserve including interest (10,406,590) Board approved transfer to Reserve for Property Loss, including interest (42) Board approved transfer to Reserve for Liability Claims, including interest (130) Board approved transfer to Reserve for Capital Projects, including interest {148} Unassigned fund balance, end of year $ 7,995,

16 The Capital Projects Fund ended the current year with a deficit fund balance of $6,636,808. This deficit is a primary result of expenditures on a new capital project, of $6,606,213 (cumulative) that has thus far been financed by the issuance of bond issuance notes ("BANs"). BANs are not recognized as revenue until redeemed or converted to permanent financing (i.e. serial bonds). The deficit in the Capital Projects Fund will be eliminated when the serial bonds are issued. The deficit is also a result of a pledged donation still owed for a previous capital project. The grantor has assured its pledge will be honored and the deficit will be reduced as those funds are received. Capital Assets CAPITAL ASSETS AND DEBT ADMINISTRATION As of June 30, 2014, the District had invested $130,317,794, net of depreciation, in a broad range of capital assets, including school buildings, maintenance facilities, athletic facilities, computer and audiovisual equipment, and administrative offices. Table A-9: Capital Assets (net of depreciation) 6/30/14 6/30/13 $Change %Change Land $ 952,377 $ 952,377 $ 0.0 Construction-in-progress 1,584,101 1,608,467 (24,366) (1.5) Improvements other than buildings 8,185,356 7,753, , Buildings and improvements 119,088, ,724,978 (636,733) (0.5) Machinery and equipment 507, ,124 34, Totals $ 130,317,794 $ 130,512,094 $ (194,300) (0.1) Long-Term Debt As of June 30, 2014, the District had $97,456,572 in general obligation bonds and other long-term debt. The decrease results from previous borrowings being paid off and no new long-term borrowings in The District expects to convert its BAN for the current capital project into a bond by the end of , if construction remains on schedule. Table A-10: Outstanding Long-Term Debt 6/30/14 6/30/13 $Change %Change Capital bonds payable $ 61,290,000 $ 66,115,000 $ (4,825,000) (7.3) Tax certiorari bonds payable 5,450,000 9,320,000 (3,870,000) (41.5) Energy performance contract debt payable 9,438,960 10,046,798 (607,838) (6.1) Judgments and claims payable 3,018 2,028,526 (2,025,508) (99.9) Other post-employment benefit obligations payable 19,076,535 17,282,368 1,794, Compensated absences 2,198,059 2,093, , Totals $ 97,456,572 $ 106,886,237 $ {9,429,665} (8.8) -13-

17 FACTORS BEARING ON THE FUTURE OF DISTRICT At the time these financial statements were prepared and audited, the District was aware of the following existing circumstances that could significantly affect its financial health in the future: The "Tax Levy Limitation Law" which was enacted on June 24, 2011 restricts the amount of property taxes that may be levied by or on behalf of a school district in a particular year. Although there are exceptions, exemptions and overrides to the limitation, the new Law is expected to make budgetary decisions more difficult. Significant increases in the cost of health insurance and contributions to the retirement systems continue to place a burden on the District's finances. In July 2014, the New York State Department of Taxation and Finance introduced the "Property Tax Freeze Credit" program. This program is a two-year tax relief program that reimburses qualifying New York State homeowners for increases in local property taxes on their primary residences. As a result, more pressure is placed on the District to stay within the current tax levy limitation, making budgetary decisions more difficult. CONTACTING THE DISTRICT'S FINANCIAL MANAGEMENT This financial report is designed to provide the District's citizens, taxpayers, customers, 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 any questions about this report or need additional financial information, please contact: City School District of White Plains, New York Attn: Fred W. Seiler Assistant Superintendent for Business 5 Homeside Lane White Plains, New York

18 CITY SCHOOL DISTRICT OF WHITE PLAINS, NEW YORK STATEMENT OF NET POSITION JUNE 30, 2014 ASSETS Current assets: Cash and cash equivalents: Unrestricted $ Restricted Investments: Unrestricted Restricted Receivables: Taxes, net Accounts receivable, net State and Federal aid Due from other governments Due from fiduciary funds Inventories Total current assets Non-current assets: Non-depreciable capital assets Depreciable capital assets, net Total non-current assets Total assets $ LIABILITIES Current liabilities: Accounts payable $ Accrued liabilities Due to fiduciary funds Bond anticipation notes payable Due to other governments Due to teachers' retirement system Due to employees' retirement system Unearned revenues Accrued interest payable Non-current liabilities due within one year: Bonds payable Tax certiorari bonds payable Energy performance contract debt payable Judgments and claims payable Compensated absences Total current liabilities Non-current liabilities: Capital bonds payable Tax certiorari bonds payable Energy performance contract debt payable Compensated absences Other post-employment benefits Total non-current liabilities Total liabilities DEFERRED INFLOWS Deferred inflows from issuance of bond, net of amortization Grant monies received in advance Total deferred inflows Total liabilities and deferred inflows NET POSITION Net investment in capital assets Restricted: Tax certiorari Property loss Liability claims Future capital projects Capital Projects Fund Debt service Unrestricted Total net position Totalliabimies, deferred inflows and net position $ 999,100 22,410,319 19,879,856 45,495,640 1,225, ,865 9,161,018 2,742, ,183 94, ,295,830 2,536, ,781, ,317, ,613,624 2,687, ,643 4,679 30,000,000 2,271,007 13,869, ,456 40, ,096 5,010,000 1,795, ,580 3, ,599 58,706,504 56,280,000 3,655,000 8,807,380 1,978,253 19,076,535 89,797, ,503, ,284 30, , ,057,612 29,065,550 41,617,777 83, , ,951 25,647,870 1,214,358 (14,629,855) 83,556, ,613,624 The accompanying notes to financial statements are an integral part of this statement. -15-

19 CITY SCHOOL DISTRICT OF WHITE PLAINS, NEW YORK STATEMENT OF ACTIVITIES AND CHANGES IN NET POSITION FOR THE YEAR ENDED JUNE 30, 2014 Functions and programs: General support Instruction Pupil transportation Debt service - interest School lunch program Expenses $ 26,943, ,253,359 9,237,892 3,240,395 3,660,936 Charges for Services $ 288,092 3,497,144 6,627-1,472,575 Program Revenues Operating Grants and Contributions $ 598,228 7,261,887 13,761 2,181,662 $ Capital Grants and Contributions 258,900 Net (Expense) Revenue and Changes in Net Position $ (26,056,768) (144,494,328) (9,217,504) (2,981,495) (6,699) Total functions and programs $ 198,335,670 $ 5,264,438 $ 10,055,538 $ 258,900 (182,756, 794) General revenues: Real property taxes Other real property tax items: School tax relief reimbursement Payments in lieu of taxes Interest and penalties on real property taxes Non-property tax items -Tax on consumer utility bills Unrestricted use of money and property - Interest earnings Sale of property and compensation for loss State aid - unrestricted Federal aid - Medicaid Miscellaneous Total general revenues Change in net position Total net position, beginning of year, as restated (see Note 17) Total net position, end of year $ 144,033,211 18,082,191 9,029, ,700 3,937,081 27, ,583 14,653,620 47, , ,265,455 8,508,661 75,047,351 83,556,012 The accompanying notes to financial statements are an integral part of this statement. -16-

20 CITY SCHOOL DISTRICT OF WHITE PLAINS, NEW YORK BALANCESHEET-GOVERNMENTALFUNDS JUNE 30, 2014 Capital Special Non-Major Total General Projects Aid Governmental Governmental Fund Fund Fund Funds Funds ASSETS Cash and cash equivalents: Unrestricted $ $ $ $ 999,100 $ 999,100 Restricted 16,762,786 5,647,533 22,410,319 Investments: Unrestricted 19,879,856 19,879,856 Restricted 25,495,303 20,000,337 45,495,640 Receivables: Taxes, net 1,225,493 1,225,493 Accounts receivable, net 71,125 99, ,865 State and Federal aid 5,087,085 3,883, ,803 9,161,018 Due from other governments 2,742,779 2,742,779 Due from other funds 3,637,161 2,364,200 6,001,361 Due from fiduciary funds 116, ,183 Advances to other funds 449, ,691 Inventory 94,577 94,577 Total assets $ 75,467,462 $ 25,647,870 $ 3,883,130 $ 3,748,420 $ 108,746,882 LIABILITIES Accounts payable $ 2,096,257 $ $ 570,397 $ 20,347 $ 2,687,001 Accrued liabilities 987,720 7,595 47,121 1,042,436 Due to other funds 1,834,987 3,265, ,638 6,001,361 Advances from other funds 449, ,691 Due to fiduciary funds 2,745 1,934 4,679 Bond anticipation notes payable 30,000,000 30,000,000 Due to other governments 2,271,007 2,271,007 Due to teachers' retirement system 13,869,724 13,869,724 Due to employees' retirement system 753, ,456 Unearned revenues 3,066,935 6,001 34,701 3,107,637 Total liabilities 23,045,099 32,284,678 3,852,474 1,004,741 _Q, 186,992 DEFERRED INFLOWS Grant monies received in advance 30,656 30,656 Property taxes 909, ,308 Total deferred inflows 909, ,964 Total liabilities and deferred inflows 23,954,407 32,284,678 3,883,130 1,004,741 61,126,956 FUND BALANCE Fund balance: Nonspendable 449,691 94, ,268 Restricted 42,258,089 25,647,870 1,214,358 69,120,317 Assigned 809,279 1,434,744 2,244,023 Unassigned 7,995,996 (32,284,678) (24,288,682) Total fund balance (deficit) 51,513,055 (6,636,808) 2,743,679 47,619,926 Total liabilities. deferred inflows and fund balance (deficit) $ ,462 $ 25,647,870 = $ 3,883,130 ~~ The accompanying notes to financial statements are an integral part of this statement $ 3,748,420 $ 108,746,882

21 CITY SCHOOL DISTRICT OF WHITE PLAINS, NEW YORK RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET POSITION JUNE 30, 2014 Total Fund Balance- Governmental Funds $ 47,619,926 Amounts reported for governmental activities in the Statement of Net Position are different due to the following: Capital assets less accumulated depreciation are included in the Statement of Net Position: Capital assets: Non-depreciable $ 2,536,478 Depreciable 191,039,521 Accumulated depreciation (63,258,205) Long-term liabilities applicable to the District's governmental activities are not due and payable in the current period and accordingly are not reported in the fund financial statements. However, these liabilities are included in the Statement of Net Position: Capital bonds payable (61,290,000) Tax certiorari bonds payable (5,450,000) Energy performance contract debt payable (9,438,960) Judgments and claims payable (3,018) Compensated absences (2,198,059) Other post-employment benefits (19,076,535) Deferred inflows from issuance of bonds, net of amortization Revenue that was not accrued on the fund financial statements because it does not meet the availability criteria under the modified accrual basis of accounting is included in the Statement of Net Position: Charges for services 885,383 Operating grants and contributions - homeless aid 2,181,553 Real property taxes 909,308 Interest payable applicable to the District's governmental activities are not due and payable in the current period and accordingly are not reported in the fund financial statements. However, these liabilities are included in the Statement of Net Position. Net Position - Governmental Activities 130,317,794 (97,456,572) (523,284) 3,976,244 (378,096) $ 83,556,012 The accompanying notes to financial statements are an integral part of this statement. -18-

22 CITY SCHOOL DISTRICT OF WHITE PLAINS, NEW YORK STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE (DEFICIT) GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2014 Capital Special Non-Major General Projects Aid Governmental Fund Fund Fund Funds REVENUES Real property taxes $ 144,266,865 $ $ $ Other real property tax items 27,384,398 Non-property tax items 3,937,081 Charges for services 3, lnterfund revenues 55,553 Use of money and property 571, Sale of property and compensation for toss 267,583 State sources 15,630,962 2,684,781 66,475 Federal sources 47,995 3,192,262 2,115,187 Food sales 1,472,575 Miscellaneous sources 551, ,402 32,141 Total revenues 195,770, ,402 5,909,184 3,654,922 EXPENDITURES General support 22,839,770 Instruction 101,245,724 5,329,564 Pupil transportation 8, ,099 Employee benefits 47,452, ,059 School lunch program 3,622,090 Capital outlay 4,919,905 Debt service - Principal 9,302,838 Interest 3,550,080 Total expenditures 193,028,003 4,919,905 6,310,722 3,622,090 Excess (deficiency) of revenues over (under) expenditures 2,742,171 (4,776,503) (401,538) 32,832 OTHER FINANCING SOURCES (USES) Premium on obligations 258,900 lnterfund transfers in 600, ,538 lnterfund transfers out (401,538) (600,000) Total other financing sources (uses) ,538 (341,100) Net change in fund balance 2,940,633 (4,776,503) (308,268) Fund balance (deficit), beginning of year, as restated (see Note 17) 48,572,422 (1,860,305) 3,051,947 Fund balance (deficit), end of year $ 51,513,055 $ (6,636,808) $ $ 2,743,679 Total Governmental Funds $ 144,266,865 27,384,398 3,937,081 3,056,422 55, , ,583 18,382,218 5,355,444 1,472, , ,477,682 22,839, ,575,288 9,146,530 47,924,219 3,622,090 4,919,905 9,302,838 3,550, ,880,720 (2,403,038) 258,900 1,001,538 (1,001,538) 258,900 (2,144,138) 49,764,064 $ 47,619,926 The accompanying notes to financial statements are an integral part of this statement. -19-

23 CITY SCHOOL DISTRICT OF WHITE PLAINS, NEW YORK RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE TO THE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30,2014 Net Change in Fund Balance - Governmental Funds Governmental funds report capital outlays as expenditures. However, in the Statement of Activities, the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. The amount by which depreciation exceeds capital outlay in the current period is: Capital outlay $ Depreciation expense Revenues in the Statement of Activities that do not provide current financial resources are not reported as revenues in the governmental funds. Charges for services Operating grants and contributions - homeless aid Real property taxes The issuance of long-term debt provides current financial resources to governmental funds, while the repayment of the principal of long-term debt consumes the current financial resources of governmental funds. Neither transaction has any effect on net position. Repayment of capital bonds principal Repayment of tax certiorari bonds payable Repayment of energy performance contract debt payable Some expenses reported in the Statement of Activities do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds: Judgments and claims payable Compensated absences Other post-employment benefits Accrued interest costs Amortization of deferred inflows from issuance of bonds Net Change in Net Position - Governmental Activities $ (2,144,138) 4,788,319 (4,982,619} (194,300) 321,912 1,019,491 (233,654} 1,107,749 4,825,000 3,870, ,838 9,302,838 2,025,508 (104,514) (1,794,167) 27, , ,561 $ 8,508,661 The accompanying notes to financial statements are an integral part of this statement. -20-

24 CITY SCHOOL DISTRICT OF WHITE PLAINS, NEW YORK STATEMENT OF FIDUCIARY NET POSITION - FIDUCIARY FUNDS JUNE 30, 2014 ASSETS Scholarship Trusts Agency Funds Cash: Restricted $ Investments: Restricted 804,188 Due from governmental funds Total assets $ 804,188 $ 427,193 4,679 $ 431,872 LIABILITIES Extraclassroom activity balances $ Other liabilities Due to governmental funds Total liabilities $ 171, , ,183 $ 431,872 NET POSITION Restricted: Endowment scholarships 804,188 Total net position 804,188 Total liabilities and net position $ 804,188 The accompanying notes to financial statements are an integral part of this statement. -21-

25 CITY SCHOOL DISTRICT OF WHITE PLAINS, NEW YORK STATEMENT OF CHANGES IN FIDUCIARY NET POSITION- FIDUCIARY FUNDS FOR THE YEAR ENDED JUNE 30,2014 ADDITIONS Contributions $ Investment earnings: Interest Total additions Scholarship Trusts 68, ,584 DEDUCTIONS Scholarships and awards Total deductions Change in net position Net position, beginning of year Net position, end of year $ 150, ,767 (82, 183) 886, ,188 The accompanying notes to financial statements are an integral part of this statement. -22-

26 CITY SCHOOL DISTRICT OF WHITE PLAINS, NEW YORK NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, SUMMARY OF CERTAIN SIGNIFICANT ACCOUNTING POLICIES The financial statements of the City School District of White Plains, New York (the "District") have been prepared in conformity with generally accepted accounting principles ("GAAP") as applied to government units. Those principles are prescribed by the Governmental Accounting Standards Board ("GASB"), which is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. Significant accounting principles and policies used by the District are described below: A. Reporting entity The District is governed by the laws of New York State. The District is an independent entity governed by an elected Board of Education consisting of seven members. The President of the Board serves as the chief fiscal officer and the Superintendent is the chief executive officer. The Board is responsible for, and controls all activities related to public school education within the District. Board members have authority to make decisions, power to appoint management and primary accountability for all fiscal matters. The reporting entity of the District is based upon criteria set forth by GASB. The financial reporting entity consists of the primary government, organizations for which the primary government is financially accountable and other organizations for which the nature and significance of their relationship with the primary government are such that exclusion would cause the reporting entity's financial statements to be misleading or incomplete. The accompanying financial statements present the activities of the District. The District is not a component unit of another reporting entity. The decision to include a potential component unit in the District's reporting entity is based on several criteria including legal standing, fiscal dependency, and financial accountability. Based on the application of these criteria, the following is a brief description of certain entities included in the District's reporting entity: 1. Extraclassroom Activity Funds B. Joint venture The Extraclassroom Activity Funds of the District represent funds of the students of the District. The Board of Education exercises general oversight of these funds. The Extraclassroom Activity Funds are independent of the District with respect to its financial transactions and the designation of student management. Separate audited financial statements (cash basis) of the Extraclassroom Activity Funds can be found elsewhere in this report. The District accounts for assets held as an agent for various student organizations in an agency fund. The District is a component district in the Southern Westchester Board of Cooperative Educational Services ("BOCES"). BOCES is a voluntary, cooperative association of school districts in a geographic area that shares planning, services and programs that provide educational and support activities. There is no authority or process by which a school district can terminate its status as a BOCES component. -23-

27 BOCES are organized under 1950 of the New York State Education Law. A BOCES Board is considered a corporate body. Members of a BOCES Board are nominated and elected by their component member boards in accordance with provisions of 1950 of the New York State Education Law. All BOCES property is held by the BOCES Board as a corporation ( 1950(6)). In addition, BOCES Boards also are considered municipal corporations to permit them to contract with other municipalities on a cooperative basis under 119-n(a) of the New York State General Municipal Law. A BOCES' budget is comprised of separate budgets for administrative, program and capital costs. Each component district's share of administrative and capital cost is determined by resident public school district enrollment, as defined in the New York State Education Law, 1950(4)(b)(7). In addition, component districts pay tuition or a service fee for programs in which its students participate. During the year, the District was billed $10,142,445 for BOCES administrative and program costs. The District's share of BOCES aid amounted to $2,344,449. Financial statements for the BOCES are available from the BOCES administrative office. C. Basis of presentation 1. District-wide financial statements The Statement of Net Position and the Statement of Activities present financial information about the District's governmental activities. These financial statements include the financial activities of the overall government in its entirety, except those that are fiduciary. Eliminations have been made to minimize the double counting of internal transactions. Governmental activities generally are financed through taxes, State aid (sources), intergovernmental revenues, and other exchange and nonexchange transactions. Operating grants include operating-specific and discretionary (either operating or capital) grants, while the capital grants column reflects capital-specific grants. The Statement of Activities presents a comparison between program expenses and revenues for each function of the District's governmental activities. Direct expenses are those that are specifically associated with and are clearly identifiable to a particular function. Indirect expenses, principally employee benefits, are allocated to functional areas in proportion to the payroll expended for those areas. Program revenues include charges paid by the recipients of goods or services offered by the programs, and grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues. 2. Fund financial statements The fund financial statements provide financial information about the District's funds, including fiduciary funds. Separate financial statements for each fund category (governmental and fiduciary) are presented. The emphasis of fund financial statements is on major governmental funds, each displayed in a separate column. -24-

28 The District reports the following major governmental funds: General Fund: This is the District's primary operating fund. It accounts for all financial transactions that are not required to be accounted for in another fund. Capital Projects Fund: These funds are used to account for the financial resources used for acquisition, construction, or major repair of capital facilities. Special Revenue Funds: These funds account for the proceeds of specific revenue sources, such as Federal and State grants, that are legally restricted to expenditures for specified purposes. The major special revenue fund of the District is the Special Aid Fund. These legal restrictions may be imposed either by governments that provide the funds, or by outside parties. The District also reports the following non-major governmental funds: Special Revenue Funds: These funds account for the proceeds of specific revenue sources, such as Federal and State grants, that are legally restricted to expenditures for specified purposes, child nutrition and other activities whose funds are restricted as to use. The non-major special revenue fund of the District is the School Lunch Fund, which is used to record the operations of the breakfast and lunch programs of the District. Debt Service Fund: This fund accounts for the accumulation of resources and the payment of principal and interest on long-term general obligation debt of governmental activities. When a capital asset is sold and all or a portion of the bonds used to finance the capital asset are outstanding, this fund must be used to account for the proceeds from the sale of capital assets up to the balance of related bonds outstanding. The District reports the following fiduciary funds: Fiduciary Funds Fiduciary activities are those in which the District acts as trustee or agent for resources that belong to others. These activities are not included in the Districtwide financial statements, because their resources do not belong to the District, and are not available to be used. There are two classes of fiduciary funds: Private purpose trust funds: These funds are used to account for trust arrangements in which principal and income benefit annual third party awards and scholarships for students. Established criteria govern the use of the funds and members of the District or representatives of the donors may serve on committees to determine who benefits. Agency funds: These funds are strictly custodial in nature and do not involve the measurement of results of operations. Assets are held by the District as agent for various student groups or extraclassroom activity funds and for payroll or employee withholding. -25-

29 D. Measurement focus and basis of accounting The District-wide and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash transaction takes place. Nonexchange transactions, in which the District gives or receives value without directly receiving or giving equal value in exchange, include property taxes, grants and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from grants and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied. The fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Under this method, revenues are recognized when measurable and available. The District considers all revenues reported in the governmental funds to be available if the revenues are collected within a reasonable period of time after the end of the fiscal year, except for real property taxes, which are considered to be available if they are collected within 60 days after the end of the fiscal year. Fees and other similar revenues are not susceptible to accrual because generally they are not measurable until available. If expenditures are the prime factor for determining eligibility, revenues from Federal and State grants are accrued when the expenditure is made. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt, claims and judgments, and compensated absences which are recognized as expenditures to the extent they have matured. General capital asset acquisitions are reported as expenditures in governmental funds. Proceeds of general long-term debt and acquisitions under capital leases are reported as other financing sources. E. Propertytaxes Real property taxes, for the City of White Plains residents, are levied annually by the Board of Education during the month of July and become payable (enforceable lien) in July and January. This portion of the District's tax levy is collected by the City of White Plains (the "City") and remitted to the District. The City guarantees the full payment of the District's warrant and assumes responsibility for the uncollected taxes. On or after January 31 5 \ the District submits a statement of unpaid taxes to the City. The City remits, as collected, the unpaid taxes and within two years of the receipt of the statement, any balance due. F. Restricted resources When an expense is incurred for purposes for which both restricted and unrestricted net position are available, the District's policy concerning which to apply first varies with the intended use, and with associated legal requirements, many of which are described elsewhere in these Notes. G. lnterfund transactions The operations of the District include transactions between funds. These transactions may be temporary in nature, such as with interfund borrowings. The District typically loans resources between funds for the purpose of providing cash flow. These interfund receivables and payables are expected to be repaid within one year. Permanent transfers of funds include the transfer of expenditures and revenues to provide financing or other services. -26-

30 Advances to/from other funds represent loans to other funds which are not expected to be repaid within the subsequent year. The advances are offset by nonspendable fund balance in the fund financial statements, which indicates that the funds are not "available" for appropriation and are not expendable available financial resources. In the District-wide financial statements, the amounts reported on the Statement of Net Position for interfund receivables and payables represent amounts due between different fund types (governmental activities and fiduciary funds). Eliminations have been made for all interfund receivables and payables between the funds, with the exception of those due from or to the fiduciary funds. The governmental funds report all interfund transactions as originally recorded. lnterfund receivables and payables may be netted on the accompanying governmental funds Balance Sheet when it is the District's practice to settle these amounts at a net balance based upon the right of legal offset. Refer to Note 6 for a detailed disclosure by individual fund for interfund receivables, payables, expenditures and revenues activity. H. Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported revenues and expenses during the reporting period. Actual results could differ from those estimates. Estimates and assumptions are made in a variety of areas, including computation of encumbrances, compensated absences, potential contingent liabilities and useful lives of long-lived assets. I. Cash and equivalents The District's cash and cash equivalents consist of cash on hand, demand deposits, and short-term investments with original maturities of three months or less from date of acquisition. New York State law governs the District's investment policies. Resources must be deposited in Federal Deposit Insurance Corporation ("FDIC") - insured commercial banks or trust companies located within the State. Permissible investments include obligations of the United States Treasury, United States Agencies, repurchase agreements and obligations of New York State or its localities. Collateral is required for demand and time deposits and certificates of deposit not covered by FDIC insurance. Obligations that may be pledged as collateral are obligations of the United States and its agencies and obligations of the State and its municipalities and school districts. -27-

31 J. Investments The District participates in the Cooperative Liquid Assets Securities System ("CLASS") a cooperative investment pool established pursuant to General Municipal Law that meets the definition of a 2a7-like pool. In accordance with the provisions of General Municipal Law, Article 3A, CLASS has designated Cutwater Asset Management, a wholly owned subsidiary of Municipal Bond Insurance Association ("MBIA"), Inc. as its registered investment advisor. MBIA, Inc. is registered with the Securities and Exchange Commission ("SEC"), and is subject to all rules and regulations of an investment advisor handling public funds. As such, the SEC provides regulatory oversight of CLASS. The District also participates in the New York Liquid Assets Fund ("NYLAF") established pursuant to General Municipal Law that meets the definition of a 2a7-like pool. The sponsoring agency of the pool is another governmental unit, which acting through the fiscal officer, is primarily responsible for executing the provisions of the cooperative agreement. The pools are authorized to invest in various securities issued by the United States and its agencies. The amounts represent the amortized cost of the cooperative shares and are considered to approximate fair value. The District's position in the pools is equal to the value of the pool shares. Additional information concerning the CLASS is presented in the annual report which may be obtained from MBIA Municipal Investors Service Corporation, 113 King Street, Armonk, NY Additional information concerning the NYLAF is presented in the annual report, which may be obtained from the Governing Board c/o Bankers Trust Company, N.A th Street, Des Moines, Iowa CLASS and NYLAF are rated AAAm by Standard and Poor's Rating Service. Local government investment cooperatives in this rating category meet the highest standards for credit quality, conservative investment policies and safety of principal. The pools invest in a high quality portfolio of investments legally permissible for municipalities and school districts in the State. The District was invested only in the above mentioned obligations and, accordingly, was not exposed to any interest rate or credit risk. Investments are stated at fair value. K. Accounts (other) receivable Accounts receivable are shown gross, with uncollectible amounts recognized under the direct write-off method. No allowance for uncollectible accounts has been provided since it is believed that such allowance would not be material. L. Inventory and prepaid items Inventory of food in the School Lunch Fund are recorded at cost on a first-in, first-out basis, or in the case of surplus food, at stated value which approximates market. Purchases of inventoriable items in other funds are recorded as expenditures at the time of purchase, and are considered immaterial in amount. -28-

32 Prepaid items represent payments made by the District for which benefits extend beyond year-end. These payments to vendors reflect costs applicable to future accounting periods and may be recorded as prepaid items in both the District-wide and fund financial statements. These items are reported as assets on the Statement of Net Position or Balance Sheet using the consumption method. A current asset for the prepaid amounts is recorded at the time of purchase and an expense/expenditure is reported in the year the goods or services are consumed. A portion of the fund balance in the amount of these non-liquid assets (inventory and prepaid items) has been identified as not available for other subsequent expenditures. M. Other assets/restricted assets Certain proceeds from serial bonds and bond anticipation notes, as well as resources set aside for their repayment are classified as restricted assets in the District-wide financial statements as their use is limited by applicable bond covenants. Debt (bond) issuance costs, except any portion related to prepaid insurance costs, should be recognized as an expense in the period incurred on both the District-wide and fund financial statements. On the District-wide financial statements, prepaid insurance costs should be reported as an asset and recognized as an expense in a systematic rational manner over the duration of the related debt. N. Capital assets Capital assets are reported at actual cost for acquisitions subsequent to June 30, For assets acquired prior to June 30, 1975, estimated historical costs, based on appraisals conducted by independent third-party professionals were used. Donated assets are reported at estimated fair market value at the time received. Capitalization thresholds (the dollar value above which asset acquisitions are added to the capital asset accounts), depreciation methods, and estimated useful lives of capital assets reported in the District-wide financial statements are as follows: Capitalization Depreciation Estimated Threshold Method Useful Life Buildings and building improvements $ 10,000 Straight line years Improvements other than buildings $ 10,000 Straight line years Furniture and equipment $ 10,000 Straight line 5-15 years 0. Deferred outflows In addition to assets, the Statement of Net Position will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period and so will not be recognized as an outflow of resources (expense/expenditure) until then. -29-

33 P. Deferred inflows/unearned revenues Deferred inflows are defined as an acquisition of net position by the government that is applicable to future periods. Deferred inflows are reported when potential revenues do not meet both the measurable and available criteria for recognition in the current period. Unearned revenues arise when the District receives resources before it has legal claim to them, as when grant monies are received prior to incurring qualifying expenditures. In subsequent periods, when both recognition criteria are met, or when the District has legal claim to the resources, the deferred inflow/unearned revenue is removed and revenues are recorded. Statute provides the authority for the District to levy taxes to be used to finance expenditures within the first 120 days of the succeeding fiscal year. Consequently, such amounts are recognized as revenue in the subsequent fiscal year, rather than when measurable and available. In the current year, these amounts are recognized as deferred inflows of resources. Many deferred inflows of resources or unearned revenues recorded in governmental funds are not recorded in the District-wide financial statements. Q. Vested employee benefits -compensated absences Compensated absences consist of unpaid accumulated annual sick leave, vacation and sabbatical time. Sick leave eligibility and accumulation is specified in negotiated labor contracts, and in individual employment contracts. Upon retirement, resignation or death, employees may contractually receive a payment based on unused accumulated sick leave. District employees are granted vacation in varying amounts, based primarily on length of service and service position. Some earned benefits may be forfeited if not taken within varying time periods. Consistent with GASB Pronouncements, the liability has been calculated using the vesting/termination method and an accrual for that liability is included in the financial statements. The compensated absences liability is calculated based on the pay rates in effect at year-end. Civil service employees may accumulate an unlimited number of days for sick and personal leave. Upon retirement, those employees with at least twenty years of service with the District will receive $40 for each unused sick or personal day earned in the six year period immediately preceding retirement. Retiring teachers who have completed at least twelve years of service with the District, at the time of retirement, receive an amount equal to fifty percent of accrued sick leave or 125 days, whichever is less, at the per diem rate of $60. Retiring administrators who have completed at least seven years of service with the District, at the time of retirement, will receive $75 for 50% of accrued sick days to a maximum of 125 days. In addition, retiring teachers and administrators shall receive $60 and $75, respectively, per day for each unused sick and personal day accrued during the last three years immediately preceding retirement. Vacation time is generally taken within the year earned. However, civil service employees and administrators, upon separation of service from the District, will be compensated for unused vacation time as provided in their contract. The value of the compensated absences has been reflected in the District-wide financial statements. -30-

34 R. Other benefits District employees participate in the New York State Employees' Retirement System ("NYSERS") and the New York State Teachers' Retirement System ("NYSTRS"). In addition to providing pension benefits, the District provides post-employment health insurance coverage and survivor benefits to retired employees and their survivors in accordance with the provisions of various employment contracts in effect at the time of retirement. Substantially all of the District's employees may become eligible for these benefits if they reach normal retirement age while working for the District. Health care benefits are provided through plans whose premiums are based on the benefits paid during the year. The cost of providing post-retirement benefits is shared between the District and the retired employee. The District recognizes the cost of providing health insurance by recording its share of insurance premiums as an expenditure. S. Short-term debt The District may issue Revenue Anticipation Notes ("RAN") and Tax Anticipation Notes ("TAN"), in anticipation of the receipt of revenues. These notes are recorded as a liability of the fund that will actually receive the proceeds from the issuance of the notes. The RAN's and TAN's represent a liability that will be extinguished by the use of expendable, available resources of the fund. The District may issue budget notes up to an amount not to exceed 5% of the amount of the annual budget during any fiscal year for expenditures for which there is an insufficient or no provision made in the annual budget. The budget note must be repaid no later than the close of the second fiscal year succeeding the year in which the note was issued. The District may issue Bond Anticipation Notes ("BAN"), in anticipation of proceeds from the subsequent sale of bonds. These notes are recorded as current liabilities of the funds that will actually receive the proceeds from the issuance of bonds. State law requires that BAN's issued for capital purposes to be converted to long-term financing within five years after the original issue date. The District may issue deficiency notes up to an amount not to exceed 5% of the amount of that same year's annual budget in any fund or funds arising from revenues being less than the amount estimated in the budget for that fiscal year. The deficiency notes may mature no later than the close of the fiscal year following the fiscal year in which they were issued. However, they may mature no later than the close of the second fiscal year after the fiscal year in which they were issued, if the notes were authorized and issued after the adoption of the budget for the fiscal year following the year in which they were issued. As of June 30, 2014 the District does not have any outstanding RAN's, TAN's or deficiency notes. See Note 9 for additional disclosure regarding the District's outstanding short-term debt. T. Accrued liabilities and long-term obligations Payables, accrued liabilities and long-term obligations are reported in the District-wide financial statements. In the governmental funds, payables and accrued liabilities are paid in a timely manner and in full from current financial resources. Claims and judgments and other post-employment benefits that will be paid from governmental funds, are reported as a liability in the fund financial statements only to the extent they are due for payment in the current year. Bonds and other long-term obligations that will be paid from governmental funds are recognized as a liability in the fund financial statements when due. -31-

35 Long-term obligations represent the District's future obligations or future economic outflows. The liabilities are reported as due in one year or due within more than one year in the Statement of Net Position. U. Equity classifications District-wide financial statements In the District-wide financial statements there are three classes of net position: 1. Net investment in capital assets: Consists of capital assets, net of accumulated depreciation, reduced by outstanding balances of related debt obligations from the acquisition, construction or improvement of those assets. Deferred outflows of resources and deferred inflows of resources that are attributable to the acquisition, construction or improvement of those assets or related debt also should be included in this component of net position. If there are significant unspent related debt proceeds or deferred inflows of resources at the end of the reporting period, the portion of the debt or deferred inflows of resources attributable to the unspent amount should not be included in the calculation of net investment in capital assets. Instead, that portion of the debt or deferred inflow of resources should be included in the same net position component (restricted or unrestricted) as the unspent amount. 2. Restricted net position: Consists of restricted assets reduced by liabilities and deferred inflows of resources related to those assets. Generally, a liability relates to restricted assets if the asset results from a resource flow that also results in the recognition of a liability or if the liability will be liquidated with the restricted assets reported. 3. Unrestricted: Is the amount of assets, deferred outflows of resources, liabilities, and deferred inflows of resources that are not included in the determination of net investment in capital assets or the restricted components of net position, and is deemed to be available for general use by the District. Fund financial statements In the fund financial statements there are five classifications of fund balance: 1. Nonspendable - Includes amounts that cannot be spent because they are either not in spendable form or legally or contractually required to be maintained intact. Nonspendable fund balance includes advances recorded in the General Fund of $449,691 and the inventory recorded in the School Lunch Fund of $94, Restricted - Includes amounts with constraints placed on the use of resources either externally imposed by creditors, grantors, contributors, or laws or regulations of other governments; or imposed by law through constitutional provisions or enabling legislation. The District has established the following restricted fund balances: -32-

36 Tax Certiorari According to Education Law a, must be used to establish a reserve fund for tax certiorari and to expend from the fund without voter approval. The monies held in the reserve shall not exceed the amount that might reasonably be deemed necessary to meet anticipated judgments and claims arising out of tax certiorari proceedings. Any resources deposited to the reserve which are not expended for tax certiorari proceedings in the year such monies are deposited must be returned to the General Fund on or before the first day of the fourth fiscal year after deposit of these monies. Liability Claims and Property Loss According to Education Law 1709(8) (c), must be used to pay for liability claims and property loss incurred. Separate funds for liability claims and property loss are required, and these reserves may not in total exceed 3% of the annual budget or $15,000, whichever is greater. This type of reserve fund may be utilized only by school districts with a population under 125,000. Debt Service According to General Municipal Law 6-1, the Mandatory Reserve for Debt Service must be established for the purpose of retiring the outstanding obligations upon the sale of District property or capital improvement that was financed by obligations that remain outstanding at the time of sale. The funding of the reserve is from the proceeds of the sale of District property or capital improvement. Capital According to Education Law 3651, must be used to pay the cost of any object or purpose for which bonds may be issued. The creation of a capital reserve fund requires authorization by a majority of the voters establishing the purpose of the reserve; the ultimate amount, its probable term and the source of the funds. Expenditures may be made from the reserve only for a specific purpose further authorized by the voters. The form for the required legal notice for the vote on establishing and funding the reserve and the form of the proposition to be placed on the ballot are set forth in 3651 of the Education Law. This reserve is accounted for in the General Fund under Restricted Fund Balance. Encumbrances Encumbrance accounting, under which purchase orders, contracts and other reserve applicable appropriations, is employed as a control in preventing overexpenditure of established appropriations. Open encumbrances are reported as either restricted, committed or assigned fund balance to the extent to which purpose limitations have been established regarding use of the amounts. Encumbrances do not constitute expenditures or liabilities and will be honored through budget appropriations in the subsequent year. 3. Committed: Includes amounts that are subject to a purpose constraint imposed by a formal action of the District's highest level of decision-making authority before the end of the fiscal year, and that require the same level of formal action to remove the constraint. The Board of Education is the decision-making authority that can, by Board resolution, commit fund balance. The District has no committed fund balances as of June 30,

37 4. Assigned - Includes amounts that are constrained by the District's intent to be used for specific purposes, but are neither restricted nor committed. The purpose of the assignment must be narrower than the purpose of the General Fund. All encumbrances of the General Fund are classified as Assigned Fund Balance as of June 30, 2014 and amounted to $809,279. The remaining amount of assigned fund balance consisted of aggregate School Lunch Fund fund balance of $834,744, and fund balance of $600,000 appropriated for subsequent year's expenditures in the Debt Service Fund. 5. Unassigned - Includes all other General Fund fund balance that do not meet the definition of the above four classifications and is deemed to be available for general use by the District. Fund balances for all' governmental funds as of June 30, 2014 were distributed as follows: Nonspendable Inventory Advances General $ $ 449,691 Capital Projects Non-major Governmental Funds Total Governmental Funds $ 94,577 $ 94, ,691 Total nonspendable 449,691 94, ,268 Restricted Tax certiorari Property loss Liability claims Capital Capital projects Debt service 41,617,777 83, , ,951 25,647,870 41,617,777 83, , ,951 25,647,870 1,214,358 1,214,358 Total restricted 42,258,089 25,647,870 1,214,358 69,120,317 Assigned Appropriated for subsequent year's expenditures School Lunch Fund Encumbrances Total assigned Unassigned Total 809, ,279 7,995,996 (32,284,678) $ 51,513,055 $ {6,636,808} 600, , , , ,279 1,434,744 2,244,023 (24,288,682) $ 2,743,679 $ 47,619,926 NYS Real Property Tax Law 1318 limits the amount of unexpended surplus funds a school district can retain to no more than 4% of the school district's budget for the General Fund for the ensuing fiscal year. Nonspendable and restricted fund balance of the General Fund are excluded from the 4% limitation. Amounts appropriated for the subsequent year and encumbrances are also excluded from the 4% limitation. -34-

38 Capital Projects Fund Deficit The unassigned deficit of $32,284,678 in the Capital Projects Fund arises in-part because of the application of generally accepted accounting principles to the financial reporting of such funds. The proceeds of bond anticipation notes issued to finance construction of capital projects are not recognized as "other financing sources". Liabilities for bond anticipation notes payable are accounted for in the Capital Projects Fund. Bond anticipation notes are recognized as revenue only to the extent that they are redeemed. This deficit will be reduced and eliminated as bond anticipation notes are redeemed from interfund transfers from other governmental funds or converted to permanent financing. Other deficits, where no bond anticipation notes are outstanding to the extent of the deficit, arise from expenditures exceeding current financing on the project. These deficits will be eliminated with the receipt or issuance of authorized financing. Order of Use of Fund Balance The District's policy is to apply expenditures against nonspendable fund balance, restricted fund balance, committed fund balance, assigned fund balance and unassigned fund balance at the end of the fiscal year. For all funds, nonspendable fund balances are determined first and then restricted fund balances for specific purposes are determined. Any remaining fund balance amounts for funds other than the General Fund are classified as either restricted or assigned fund balance. In the General Fund, committed fund balance is determined next and then assigned. The remaining amounts are reported as unassigned. Assignments of fund balance cannot cause a negative unassigned fund balance. 2. EXPLANATION OF CERTAIN DIFFERENCES BETWEEN FUND FINANCIAL STATEMENTS AND DISTRICT -WIDE FINANCIAL STATEMENTS Due to the differences in the measurement focus and basis of accounting used in the fund financial statements and the District-wide financial statements, certain financial transactions are treated differently. The basic financial statements contain a full reconciliation of these items. The differences result primarily from the economic focus of the District-wide financial statements, compared with the current financial resources focus of the governmental funds. A. Total fund balances of governmental funds vs. net position of governmental activities Total fund balances of the District's governmental funds differ from "net position" of governmental activities reported in the Statement of Net Position. This difference primarily results from the additional long-term economic focus of the Statement of Net Position versus the solely current financial resources focus of the governmental funds Balance Sheets. B. Statement of Revenues, Expenditures and Changes in Fund Balance vs. Statement of Activities Differences between the governmental funds Statement of Revenues, Expenditures and Changes in Fund Balance and the Statement of Activities fall into one of three broad categories. The categories are shown below: 1. Long-term revenue/expense differences Long-term revenue differences arise because governmental funds report revenues only when they are considered "available", whereas the Statement of Activities reports revenues when earned. Differences in long-term expenses arise because governmental funds report on a modified accrual basis, whereas the accrual basis of accounting is used on the Statement of Activities. -35-

39 2. Capital related differences Capital related differences include the difference between proceeds from the sale of capital assets reported on fund financial statements and the gain or loss on the sale of assets as reported on the Statement of Activities, and the difference between recording an expenditure for the purchase of capital items in the fund financial statements and depreciation expense on those items as recorded in the Statement of Activities. 3. Long-term debt transaction differences Long-term debt transaction differences occur because both interest and principal payments are recorded as expenditures in the fund financial statements, whereas interest payments are recorded in the Statement of Activities as incurred, and principal payments are recorded as a reduction of liabilities in the Statement of Net Position. 3. STEWARDSHIP. COMPLIANCE AND ACCOUNTABILITY The District administration prepares a proposed budget for approval by the Board of Education for the following governmental funds for which legal (appropriated) budgets are adopted: A. Budgetary data 1. At least seven days prior to the budget hearing, a copy of the budget is made available to the voters. 2. At the budget hearing, the voters may raise questions concerning the items contained in the budget. Prior to the budget hearing, several public forums and workshops are held by the District. These public forums and workshops are designed to supplement the annual statutory budget hearing in educating voters to inform themselves and to contribute to the District's budget process. 3. The Board of Education establishes a date for the annual meeting, which by law will be held on the third Tuesday in May. 4. The voters are permitted to vote upon the General Fund budget at the annual meeting. 5. If the original proposed budget is not approved by the voters, the Board of Education has the option of either resubmitting the original or revising the budget for voter approval at a special meeting held at a later date; or the Board of Education may, at that point, adopt a contingency budget. If the Board of Education decides to submit either the original or a revised budget to the voters for a second time, and the voters do not approve the second budget submittal, the Board of Education must adopt a contingency budget and the tax levy cannot exceed the total tax levy of the prior year (0% levy growth). In addition, the administrative component of the contingency budget shall not comprise a greater percentage of the contingency budget exclusive of the capital component than the lesser of either 1) the percentage the administrative component had comprised in the prior year budget exclusive of the capital component; or 2) the percentage the administrative component had comprised in the last proposed defeated budget exclusive of the capital component. 6. Formal budgetary integration is employed during the year as a management control device for the General Fund and Special Aid Fund. -36-

40 Budgets 7. Budgets for the General Fund and Special Aid Fund are legally adopted annually on a basis consistent with generally accepted accounting principles. The Capital Projects Fund is budgeted on a project basis. Budgets are established and used for the individual capital project funds expenditures as approved by a special referendum of the District's voters. The maximum project amount authorized is based primarily upon the cost of the project, plus any requirements for external borrowings, not annual appropriations. These budgets do not lapse and are carried over to subsequent fiscal years until the completion of the projects. An annual budget is not adopted for the School Lunch Fund or Debt Service Fund. 8. The Board of Education has established legal control of the budget at the function level of expenditures. Transfers between appropriation accounts, at the function level, require approval by the Board of Education. Any modification to appropriations resulting from increases in revenue estimates or supplemental reserve appropriations also require a majority vote by the Board. 9. Appropriations in the General Fund and Special Aid Fund lapse at the end of the fiscal year, except that outstanding encumbrances are reappropriated in the succeeding year pursuant to the Uniform System of Accounts promulgated by the Office of the State Comptroller. Budgeted amounts are as originally adopted or as amended by the Board of Education. The voters of the District approved the proposed appropriation budget for the General Fund. Appropriations are adopted at the program line item level. Appropriations established by the adoption of the budget constitute a limitation on expenditures (and encumbrances) that may be incurred. Appropriations lapse at the end of the fiscal year unless expended or encumbered. Encumbrances will lapse if not expended in the subsequent year. Appropriations authorized for the current year are increased by the planned use of specific reserves, and budget amendments are approved by the Board of Education as a result of selected new revenue sources not included in the original budget (when permitted by law). These supplemental appropriations may occur subject to legal restrictions, if the Board approves them because of a need that exists which was not determined at the time the budget was adopted. The following supplemental appropriations occurred during the year: Supplemental State Aid $ 250,000 Encumbrances Encumbrance accounting is used for budget control and monitoring purposes and is reported as a part of the governmental funds. Under this method, purchase orders, contracts and other commitments for the expenditure of monies are recorded to reserve applicable appropriations. Outstanding encumbrances as of year-end are presented as restrictions or assignments of fund balance and do not represent expenditures or liabilities. These commitments will be honored in the subsequent period. Related expenditures are recognized at that time, as the liability is incurred or the commitment is paid. -37-

41 4. CASH AND CASH EQUIVALENTS- CUSTODIAL CREDIT, CONCENTRATION OF CREDIT, INTEREST RATE AND FOREIGN CURRENCY RISKS The District's investment policies are governed by State statutes. In addition, the District has its own written investment policy. District monies must be deposited in FDIC insured commercial banks or trust companies located within the State. The District Treasurer is authorized to use demand accounts and certificates of deposit. Permissible investments include obligations of the U.S. Treasury and U.S. agencies, repurchase agreements and obligations of New York State or its localities. Collateral is required for demand deposits and certificates of deposit at 1 OS percent of all deposits not covered by federal deposit insurance. Obligations that may be pledged as collateral are obligations of the United States and its agencies and obligations of the State and its municipalities. The written investment policy requires repurchase agreements to be purchased from banks located within the State and that underlying securities must be obligations of the federal government. Underlying securities must have a market value of at least 1 OS percent of the cost of the repurchase agreement. For purposes of reporting cash flow, cash equivalents are defined as short-term, highly liquid investments that are both readily convertible to known amounts of cash and near their maturity. Custodial credit risk - deposits/investments: Custodial credit risk for deposits exists when, in the event of the failure of a depository financial institution, a government may be unable to recover deposits, or recover collateral securities that are in possession of an outside agency. Custodial credit risk for investments exists when, in the event of the failure of the counterparty, a government will not be able to recover the value of its investments or collateral securities that are in possession of an outside party. GASB directs that deposits be disclosed as exposed to custodial credit risk if they are not covered by depository insurance, and the deposits are either: Uncollateralized Collateralized with securities held by the pledging financial institution, or Collateralized with securities held by the pledging financial institution's trust department or agent but not in the District's name Deposits and investments at year-end were entirely covered by federal depository insurance or by collateral held by the District's custodial banks in the District's name. They consisted of: Fund Bank Balance Carrying Amount Major Governmental Funds: General Fund Capital Projects Fund Special Aid Fund Non-major Governmental Fund: School Lunch Fund Fiduciary Funds $ 20,082,068 S,781, ,006 1,0SS, ,173 $ 16,762,786 S,647,S33 999, ,193 $ 28,142,218 $ 23,836,

42 Credit risk: State law limits investments to those authorized by State statutes. The District has a written investment policy. Interest-rate risk: Interest-rate risk arises because potential purchasers of debt securities will not agree to pay face value for those securities if interest rates substantially increase, thereby affording potential purchasers more favorable rates on essentially equivalent securities. Accordingly, such investments would have to be held to maturity to avoid potential loss. Concentration of credit risk: Credit risk can arise as a result of failure to adequately diversify investments. Concentration risk disclosure is required for positions of 5 percent or more in securities of a single issuer. As of June 30, 2014, the District did not have any investments subject to credit risk, interest-rate risk, or concentration of credit risk. Restricted cash represents cash and cash equivalents where use is limited by legal requirements. These assets represent amounts required by statute to be reserved for various purposes. 5. RECEIVABLES A. State and Federal aid Due from State and Federal aid at June 30, 2014, consisted of the following: Major Governmental Funds: General Fund: Homeless aid $ 2,181,553 BOCES aid 1,798,037 Tax on consumer utility bills 604,874 New York State Aid - excess cost aid 502,621 Special Aid Fund: State and Federal grants 3,883,130 Non-major Governmental Fund: School Lunch Fund: School breakfast and lunch reimbursement 190,803 Totals $ 9,161,018 B. Other receivables Other receivables at June 30, 2014, consisted of the following: General Fund: Taxes receivable - Current year Prior years $ 913, ,661 $ 1,225,

43 6. INTERUFND TRANSACTIONS- GOVERNMENTAL FUNDS lnterfund lnterfund Receivable Payable Revenues ExQenditures Major Funds: General Fund $ 4,203,035 $ $ 600,000 $ 401,538 Capital Projects Fund 2,284,678 Special Aid Fund 3,268, ,538 Non-major Funds: School Lunch Fund 352,730 Debt Service Fund 2,364, , ,000 Fiduciary Funds 4, ,183 Totals $ 6,571,914 $ 6,571,914 $ 1,001,538 $ 1,001,538 lnterfund receivables and payables, other than between governmental activities and fiduciary funds, are eliminated on the Statement of Net Position. The District typically loans resources between funds for the purpose of mitigating the effects of transient cash flow issues. All interfund payables are expected to be repaid within one year. 7. CAPITAL ASSETS Capital asset balances and activity for the year ended June 30, 2014 were as follows: Beginning Retirements/ Ending Balance Additions Reclassifications Balance Governmental activities: Capital assets not depreciated: Land $ 952,377 $ $ $ 952,377 Construction-in-progress 1,608,467 1,061,581 (1,085,947) 1,584,101 Total nondepreciable assets 2,560,844 1,061,581 (1,085,947) 2,536,478 Capital assets that are depreciated: Buildings and building improvements 174,043,015 2,637,762 1,085, ,766,724 Improvements other than buildings 10,663, ,590 11,621,583 Furniture and equipment 1,519, ,386 1,651,214 Total depreciable assets 186,226,836 3,726,738 1,085, ,039,521 Less accumulated depreciation: Buildings and building improvements 54,318,037 4,360,442 58,678,479 Improvements other than buildings 2,910, ,382 3,436,227 Furniture and equipment 1,046,704 96,795 1 '143,499 Total accumulated depreciation 58,275,586 4,982,619 63,258,205 Total capital assets, net $ 130,512,094 $ (194,300) $ $ 130,317,

44 Depreciation expense was charged to governmental functions as follows: General support $ 391,074 Instruction 4,582,550 Pupil transportation 8,995 $ 4,982, ACCRUED LIABILITIES Accrued liabilities at June 30, 2014, consisted of the following: General Fund Special Aid Non-Major Governmental Total Payroll and employee benefits Tuition $ 462,573 $ 525,147 7,595 $ 47,121 $ 517, ,147 $ 987,720 $ 7,595 =$=====4=7 =12=1== $ 1,042, SHORT-TERM DEBT OBLIGATIONS Transactions in short-term debt for the year are summarized below: Beginning Ending Balance Issued Redeemed Balance BAN matured on 6/25/14 at 1.00% $ 9,000,000 $ $ 9,000,000 $ BAN matures on 6/26/15 at 1.00% 30,000,000 30,000,000 Total $ 9,000,000 $ 30,000,000 $ 9,000,000 $ 30,000,000 Interest on short-term debt for the year was comprised of: Interest paid $ 90,000 Less interest accrued in the prior year Plus interest accrued in the current year Interest expense $ 90,000 Liabilities for bond anticipation notes are generally accounted for in the Capital Projects Fund. Principal payments on bond anticipation notes must be made annually. State law requires that bond anticipation notes issued for capital purposes be converted to long-term obligation generally within five years after the original issue date. However, bond anticipation notes issued for assessable improvement projects may be renewed for periods equivalent to the maximum life of the permanent financing, provided that stipulated annual reductions of principal are made. -41-

45 10. LONG-TERM DEBT OBLIGATIONS Amounts Beginning Ending Due Within Balance Additions Reductions Balance One Year Governmental activities: Capital bonds payable $ 66,115,000 $ $ 4,825,000 $ 61,290,000 $ 5,010,000 Tax certiorari bonds payable 9,320,000 3,870,000 5,450,000 1,795,000 Energy performance contract debt payable 10,046, ,838 9,438, ,580 Judgments and claims payable 2,028,526 3,018 2,028,526 3,018 3,018 Other post-employment benefits 17,282,368 7,642,837 5,848,670 19,076,535 Compensated absences 2,093, , ,000 2,198, ,806 Total long-term liabilities $ 106,886,237 $ 7,959,369 $ 17,389,034 $ 97,456,572 $ 7,659,404 The following is a summary of long-term indebtedness: Description Issue Final Interest Outstanding of Issue Date Maturitx: Rate at 6/30/14 District-Wide Construction % $ 42,670,000 District-Wide Construction % 14,770,000 Refunding serial bonds % 1,120,000 Refunding serial bonds % 2,730,000 Tax Certiorari Judgments % 5,450,000 $ 66,740,000 Energy Performance Contract 06/21/10 06/21/ % $ 9,438,960 The following is a summary of maturing debt service requirements: Bonds Energy Performance Contract Princi12a1 Interest Princi12a1 Interest Total June 30, 2015 $ 6,805,000 $ 2,781,834 $ 631,580 $ 354,354 $ 10,572, ,245,000 2,540, , ,685 7,771, ,380,000 2,354, , ,052 7,720, ,650,000 2,208, , ,418 5,844, ,450,000 2,106,971 3,979, ,717 9,486, ,020,000 8,910,344 2,780, ,028 25,888, ,520,000 5,653,746 23,173, ,670,000 1,606,326 16,276,326 $ 66,740,000 $ 28,163,223 $ 9,438,960 $ 2,392,254 $ 106,734,

46 Interest on long-term debt for the year was comprised of: Interest paid $ 3,460,080 Less interest accrued in the prior year (405,220) Plus interest accrued in the current year 378,096 Less amortization of deferred inflows {282,561} Interest expense $ 3,150,395 Bonds payable - The District borrows money in order to acquire equipment or for capital construction and improvements. This enables the cost of these capital assets to be borne by the present and future taxpayers receiving the benefit of the capital assets. These long-term liabilities bear interest at various rates from 2.00% to 4.75% and have maturity dates in 2015 through The District also borrows money in order to finance potential tax certiorari judgments and claims. These long-term liabilities bear interest at various rates from 3.00% to 5.00% and have maturity dates in 2014 through Energy performance contract payable - During 2010, the District entered into a $10,850,000 contractual agreement to install energy saving equipment and/or to upgrade existing facilities to enhance performance. The terms of the contract provide for repayment over fifteen years, with quarterly installments aggregating $985,954 per annum. Payments include interest at 3.85%. The contract further provides that the savings in energy costs resulting from this modernization will equal or exceed the lease payment terms. The balance due at June 30, 2014 was $9,438,960. Other long-term debt - Liabilities for judgments and claims and other post-employment benefits are liquidated through future budgetary appropriations in the General Fund. The liabilities for compensated absences are liquidated through future budgetary appropriation in the funds that gave rise to the liability, with the majority being liquidated through the General Fund. 11. PENSION PLANS General information The District participates in the New York State Employees' Retirement System and the New York State Teachers' Retirement System. These are cost-sharing, multiple-employer, public employee retirement systems (the "Systems"). The Systems offer a wide range of plans and benefits, which are related to years of service and final average salary, vesting of retirement benefits, death and disability. Provisions and administration The New York State Teachers' Retirement Board administers NYSTRS. NYSTRS provides benefits to plan members and beneficiaries as authorized by the Education Law and the Retirement and Social Security Law of the State of New York. NYSTRS issues a publicly available financial report that contains financial statements and required supplementary information for the System. The report may be obtained by writing to NYSTRS, 10 Corporate Woods Drive, Albany, New York

47 Currently, 761 retired employees receive health benefits from the District. Retirees contribute 0% to 65% for coverage depending on position held, date of hire, years of service, and fiscal year of retirement. The District recognizes the cost of providing health insurance annually as expenditures in the General Fund of the fund financial statements as payments are made. For the year ended June 30, 2014, the District recognized $5,848,670 for its share of insurance premiums for currently enrolled retirees. The District has obtained an actuarial valuation report as of July 1, 2013, which indicates that the total liability for other post-employment benefits is $141,501,119. The District's annual OPEB cost (expense) is calculated based on the annual required contribution ("ARC') of the employer, an amount actuarially determined in accordance with the parameters of GASB Statement 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and to amortize any unfunded liabilities (or funding excess) over a period not to exceed thirty years. The following table shows the components of the District's annual OPEB cost for the year, the amount actually contributed to the plan, and changes in the District's net OPEB obligation: For the Year Ended June 30, 2014 Annual required contribution Interest on net OPEB obligation Adjustment to annual required contribution Annual OPEB cost Contributions made Increase in net OPEB obligation Net OPEB obligation, beginning of year Net OPEB obligation, end of year $ 9,097, ,118 (2,318,291) 7,642,837 (5,848,670) 1,794,167 17,282,368 $ 19,076,535 The District's annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation for the year ended June 30, 2014 and the two preceding years were as follows: Percentage of Annual OPEB Cost Net OPEB Fiscal Year Ended Annual OPEB Cost Contributed Obligation 06/30/14 $ 7,642, % $ 19,076,535 06/30/13 8,198, % 17,282,368 06/30/12 7,844, % 14,263,

48 Funded status and funding progress As of July 1, 2013, the most recent actuarial valuation date, the plan was 0% funded. The actuarial accrued liability for benefits was $141,501,119 and the actuarial value of assets was $0, resulting in an unfunded actuarial accrued liability ("UAAL") of $141,501,119. The covered payroll (annual payroll of active employees covered by the plan) was $96,265,031, and the ratio of the UAAL to the covered payroll was 147.0%. Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progress, presented as required supplementary information following the notes to the financial statements, presents multiyear trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. Actuarial methods and assumptions Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and the plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations. In the July 1, 2013 actuarial valuation, the projected unit credit method was used. The actuarial assumptions included a 5% investment rate of return (net of administrative expenses), which is a blended rate of the expected long-term investment returns on plan assets and on the employer's own investments calculated based on the funded level of the plan at the valuation date, and an annual healthcare cost trend rate of 8.0% initially, reduced by decrements to an ultimate rate of 5% after 3 years. Both rates included a 5.0 % inflation assumption. The actuarial value of assets was determined using techniques that spread the effects of short-term volatility in the market value of investments over a 30 year period. The UAAL is being amortized as a level percentage of projected payroll on an open basis. The remaining amortization period at June 30, 2014 was 23 years. 13. RISK MANAGEMENT The District and other school districts have formed a reciprocal insurance company (the "Company") to be owned by these school districts. This Company operates under an agreement effective July 1, The purpose of the Company is to provide general liability, auto liability, all risk building and contents and auto physical damage coverage. In addition, as part of the reciprocal program, excess insurance, school board legal liability, equipment floaters, boilers and machinery and crime and bond coverage will be purchased from commercial carriers and be available to the subscriber school districts. The Company retains a management company, which is responsible for the overall supervision and management of the Company. The Company is managed by a Board of Governors and an Attorney-in-fact, which is comprised of employees of the subscriber school districts. The subscribers have elected those who sit on the board and each subscriber has a single vote. The Company is an "assessable" insurance company, in that, the subscribers are severally liable for any financial shortfall of the Company and can be assessed their proportionate share by the State Insurance Department if the funds of the Company are less than what is required to satisfy its liabilities. The subscriber school districts are required to pay premiums as well as a minimal capital contribution. -46-

49 The District purchases various insurance coverage from the Company to reduce its exposure to loss. The District maintains a general liability insurance policy with coverage up to $1 million in the aggregate. The District also maintains liability coverage for school board members up to $1 million and an excess catastrophe policy with coverage up to $25 million in the aggregate. Settled claims resulting from these risks have not exceeded commercial insurance coverage in any of the past three fiscal years. The District and neighboring districts in Southern Westchester County participate in the Southern Westchester Schools Cooperative Self-Insurance Plan for Workers' Compensation. The purpose of the Plan is to provide for the efficient and economical evaluation, processing, administration, defense and payment of claims against plan members for workers' compensation and to provide for risk management to reduce future liability for workers' compensation and employers' liability payments. The Plan is managed and governed by a Board of Trustees comprised of a representative from each school district. Premiums are based upon experience ratings. The District has transferred all related risk to the Plan. The District and neighboring school districts in Southern Westchester County participate in the State-Wide Schools Cooperative Health Plan (the "Plan"). The Plan operates under an agreement, as amended, dated December 12, The purposes of the Plan are to effect cost savings in members' expenses for health coverage; to permit members to secure improved levels of health coverage; to provide for centralized administration, funding and disbursements for health coverage; and to provide for such risk management services as may be appropriate to reduce future expense and liability for health coverage. The governance of the Plan shall be in all respects in the hands of the Board of Trustees. The Board of Trustees shall consist of seven trustees elected by the general membership of the Plan. No action may be taken by the Board of Trustees except by vote of a majority of the total number of trustees. Billings to participants are based upon coverage provided to each participant's employees. The District has transferred all related risk to the Plan. 14. COMMITMENTS AND CONTINGENCIES Service concession arrangements In accordance with GASB Pronouncements, the District is required to recognize a liability for certain obligations to sacrifice financial resources (i.e. capital improvements) under the terms of a service concession arrangement or, a deferred inflow for up-front or installment payments received from the operator in advance of the revenue being earned. The District had no such arrangements as of June 30, As of June 30, 2014, no liability or deferred inflow was reflected on the District's financial statements as a result of a service concession arrangement. Government grants The District has received grants, which are subject to audit by agencies of the State and Federal governments. Such audits may result in disallowances and a request for a return of funds. Based on prior years' experience, the District's administration believes disallowances, if any, would be immaterial. Property tax cap In June 2011, the New York State Legislature enacted Chapter 97, Laws of 2011 Real Property Tax Levy Cap and Mandate Relief Provisions. For fiscal years beginning in 2012 through at least June 15, 2016, growth in the property tax levy (the total amount to be raised through property taxes charged on a municipality's taxable assessed value of property) will be capped at 2 percent or the rate of inflation (but not less than 1 percent), whichever is less, with some exceptions. Local governments can exceed the tax levy limit by a 60% vote of the governing body, or by local law. -47-