West Mifflin Area School District

Transcription

1 West Mifflin Area School District Single Audit June 30, 2018 Pursuing the profession while promoting the public good cpas.com

2 TABLE OF CONTENTS Independent Auditor's Report Management s Discussion and Analysis i Financial Statements: Government-Wide Financial Statements: Statement of Net Position 1 Statement of Activities 2 Fund Financial Statements: Balance Sheet - Governmental Funds 3 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position 4 Statement of Revenues, Expenditures, and Changes in Fund Balance - Governmental Funds 5 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balance of Governmental Funds to the Statement of Activities 6 Statement of Net Position - Proprietary Fund 7 Statement of Revenues, Expenses, and Changes in Net Position - Proprietary Fund 8 Statement of Cash Flows - Proprietary Fund 9 Statement of Fiduciary Net Position 10 Notes to Financial Statements 11

3 Required Supplementary Information: TABLE OF CONTENTS (Continued) Statement of Revenues, Expenditures, and Changes in Fund Balance Budget and Actual General Fund 52 Schedule of the School District s Proportionate Share of PSERS Net Pension Liability and Schedule of School District Contributions to the PSERS Pension Plan 54 Schedule of the School District s Proportionate Share of PSERS Net OPEB Liability and Schedule of School District Contributions to the PSERS Premium Assistance 55 Schedule of the School District s Total OPEB Liability for its Retiree Plan 56 Notes to Required Supplementary Information 57 Supplementary Information: Schedule of Real Estate Taxes 61 Schedule of Cash Transactions Agency Funds 62 Schedule of School District Bonds Payable 63 Schedule of Expenditures of Federal Awards 64 Notes to Schedule of Expenditures of Federal Awards 65 Independent Auditor s Reports Required by the Uniform Guidance: 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 66

4 TABLE OF CONTENTS (Continued) Independent Auditor s Report on Compliance for the Major Program and on Internal Control over Compliance Required by the Uniform Guidance 68 Schedule of Findings and Questioned Costs 71 Summary Schedule of Prior Audit Findings 72

5 Independent Auditor s Report Board of Directors Report on the Financial Statements West Mifflin Area School District We have audited the accompanying financial statements of the governmental activities, the business type activities, each major fund, and the aggregate remaining fund information of the West Mifflin Area School District (School District) as of and for the year ended June 30, 2018, and the related notes to the financial statements, which collectively comprise the School 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. Pursuing the profession while promoting the public good cpas.com Pittsburgh Harrisburg Butler State College Erie Lancaster

6 Board of Directors West Mifflin Area School District Independent Auditor s Report Page 2 Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business type activities, each major fund, and the aggregate remaining fund information of the School District, as of June 30, 2018, and the respective changes in financial position, and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Change in Accounting Principle As described in Note 1 to the financial statements, the School District adopted Governmental Accounting Standards Board (GASB) Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions, which requires the School District to record its proportionate share of the Public School Employees Retirement System (PSERS) net OPEB liability and related items on the government wide financial statements and to record the School District s total OPEB liability. 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 analysis, budgetary comparison information, pension, and postemployment benefits information on pages i through v and 52 through 60 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the School District s basic financial statements. The supplementary

7 Board of Directors West Mifflin Area School District Independent Auditor s Report Page 3 information as listed in the accompanying table of contents is presented for purposes of additional analysis and is not a required part of the basic financial statements. The schedule of expenditures of federal awards is presented for purposes of additional analysis as required by Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, and is also not a required part of the basic financial statements. The supplementary information 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 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. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated February 7, 2019 on our consideration of the School 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 solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the School District s 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 School District s internal control over financial reporting and compliance. Pittsburgh, Pennsylvania February 7, 2019

8 MANAGEMENT S DISCUSSION AND ANALYSIS FISCAL YEAR Introduction The Management s Discussion and Analysis (MD&A) is an element of the Governmental Accounting Standards Board (GASB) Statement No. 34. Its purpose is to introduce the basic financial statements, providing an analytical overview of the West Mifflin Area School District s (School District) financial activities. This analysis, according to GASB Statement No. 34, is intended to provide an objective appraisal of the School District s financial activities based on currently known facts, decisions, and conditions. The MD&A will address the financial performance of the School District for the fiscal year ending June 30, Included will be a comparison of current year results with the previous year, with the emphasis being on the current year. General Fund Revenues exceeded General Fund Expenditures during the school year by $1,575,817. As such, this provides an increase in Fund Balance from $2,123,735 to $3,699,552. School District Overview A Pennsylvania Local Education Agency, the School District operates as a Third Class School District under the Public School Code of 1949, as amended and supplemented. The mission of the School District in partnership with families and community will be to establish a challenging and safe learning environment, where all students will attain the quality education and life experiences to become responsible lifelong learners. The School District is comprised of two Allegheny County (PA) municipalities, the Boroughs of West Mifflin and Whitaker. Total population of the communities, according to the 2010 census, is 21,584. The pupil population currently totals 2,743, Pre-Kindergarten through the Twelfth Grade. Beginning with the 2012/2013 school year, the School District began to operate under the K-3 Elementary, 4-8 Middle School, and 9-12 High School Model. Students attend three Elementary Schools, one Middle School, and one High School. Elementary Schools include Homeville, Clara Barton, and Emerson Elementary Schools. As was the case during the 2017/2018 school year, there will be 180 days of planned instruction during the 2018/2019 school year. After a decade of staffing decreases, the School District now sees a leveling effect and this upcoming year for the first time actually sees growth in the staffing complement. With an emphasis this year on safety and security, the School District created an armed Police Department, approved by the Commonwealth of Pennsylvania (Commonwealth), that added six FTE s. That takes the staff to FTE s; there are no employees currently on the furloughed list. Compare that to 417 individuals employed during the 2009/2010 school year. The table below provides a breakdown of School District positions by category during the past three years: i

9 Chart Professional Staff (FTE s) JROTC Staff Administrators Technology Staff Police Officers Maintenance/Custodial Staff (FTE s) Secretarial Staff Teacher Aides (FTE s) Nurse Assistants Cafeteria Staff Total Staff A new Collective Bargaining Agreement with Professional employees was recently approved by the School District and the West Mifflin Federation of Teachers. The new agreement will be in effect through June 30, Support personnel, represented by the Service Employees International Union, have an agreement that expires on June 30, 2020, while School District administrators have their Act 93 Compensation Plan in effect until June 30, Revenues Total General Fund Revenues for the year equaled $54,444,753, which was 1.9% higher than the $53,432,283 received in 2016/2017. Local, State, and Federal Revenue all increased and Revenue from Other Sources, the one-time sale of two vacant properties owned by the School District, contributed $280,000 to Fund Balance. While revenue only slightly increased from the previous year, actual revenue exceeded budget projections by $1.8 million, a variance of +3.5%. Chart Difference Percent Local Sources $33,855,090 $33,381,701 $473, % State Sources 18,754,338 18,576, , Federal Sources 1,572,511 1,473,696 98, Other Sources 262, , TOTALS $54,444,753 $53,432,283 $1,012, % The largest and most significant revenue category for the School District is Local Revenue. At $ million, local effort finances over 62% of School District operations. Current Real Estate Taxes, the greatest single revenue category, accounts for 43% of total revenues almost one-half of the total School District budget. With a tax rate of mills, the School District was 31 st of 42 Allegheny County School Districts in tax millage rates during the 2017/2018 fiscal year. Current Real Estate Tax revenue fell short of budget projections by $150,000 but was $34,000 more than the amount collected the previous year. Meanwhile, Real Estate Transfer Tax Revenue and Delinquent Real Estate both exceeded projections. Tuition from the Duquesne City School District accounted for $670,000 of the budget surplus; the tuition account was underfunded due to the uncertainty of the Duquesne City School District lawsuit. In total, Local Revenue increased by 1.4% over the previous year and also exceeded budget projections by $411,000, a variance of 1.2%. State Revenue rose to $ million in 2017/2018, up approximately $177,000 from the previous year and $1.1 million more than budgeted expectations. Basic Education Subsidy was up by about $121,000 from the previous year, but the biggest difference was in the State Share of Paid Benefits, specifically ii

10 reimbursement for FICA/Medicare and Retirement Costs. These categories were under-budgeted, which helped State Revenue reach $18.8 million. The resulting budget variance was 6.4%. The Commonwealth of Pennsylvania accounted for 34.4 % of total School District revenue for the year, which is slightly higher than the 2016/2017 fiscal year. The percentage of Commonwealth revenue as a percentage of total School District revenue for the prior ten years is as follows: 34.8%, 33.1%, 32.9%, 33.4%, 32.0%, 32.9%, 29.9%, 30.2%, 31.6%, and 28.6%. Special Education funding, provided by the Commonwealth to help offset the School District s Special Education Program, totaled $2,191,342. The amount financed 26.8% of the $8,183,484 in direct Special Education costs. The remaining $5.99 million is subsidized by local effort and various grants. State revenue exceeding expectations were Basic Education Funding, Special Education, Section 1305 Tuition, Transportation, and Social Security and Retirement reimbursements. Areas of state revenue not meeting expectations were Health Services Reimbursement, Ready To Learn Block Grant, and Rental Reimbursement. Federal Revenue totaled $1.572 million in 2017/2018, up 6.7% from the previous year. At 2.9% of total revenue, actual revenues were $312,000 more than the budget, primarily due to the IDEA supplemental received from the Commonwealth. Expenditures The major General Fund expenditure categories, as compared to the previous year, are illustrated in the table below. Total Expenditures increased by $0.759 million or 1.4% from the 2016/2017 school year. Increases occurred in all operational categories except support services, which decreased. The variance for expenditures, actual versus budget, was +1.0%. Chart Difference Percent Instruction $29,730,414 $28,853,839 $876, % Support Services 15,035,858 15,428,112 (392,254) -2.6 Non-Instructional Services 1,371,287 1,324,069 47, Facilities Improvements 153,226 23, , % Other Financing Uses 6,595,110 6,481, , TOTALS $52,885,895 $52,110,404 $775, % Instruction costs totaling $ million showed a 3.0% gain over the previous year. Rising Special Education costs (along with Retirement costs) was the greatest cost driver. While Regular Education costs stayed within budget, Special Education exceeded the District s original projection by $1 million. The total category though stayed within budget; the variance for the category was +0.7%. Support Services is comprised of a number of ancillary program services: Libraries, Guidance, Pupil Health, Transportation, Administrative Services, School Offices, Superintendent s Office, Business Office, Maintenance, and Data Processing. This category decreased by 2.6% from 2016/2017 but was under budget for the year. The areas producing the most savings were Administration and Technology. Non-Instructional Services include Student Activities, Athletics, JROTC, and Community Services. As a category, Non-Instructional Service cost rose by 3.6% over the previous year. The category also met budget expectations, ending with a positive balance of about $114,000. Facilities Improvements, which is a capital projects category, increased over the past year as the School District made needed investments in facilities. The category exceeded budget expectations, but only by iii

11 $5,000. Other Financing Uses consists of two subcategories, Debt Service and Refunds of Prior Year s Receipts. While Debt Service relating to General Obligation Bonds stayed close to last year s totals and the budgeted amount, Refunds increased over last year and also exceeded budget projections. Salaries & Wages rose by $363,000 from the previous year and also as a percentage of total costs. Meanwhile, Employee Benefits increased by $564,000 due mainly to increases in Retirement Costs; it also increased as a percent of total costs. Contracted Service dropped by $54,000, going from 8.0% to 7.7% of costs. Purchased Services rose in 2017/2018, up $750,000 from the previous year. The percent of total costs increased, going from 15.1% to 16.1%, which was due almost entirely to a rise in Tuition costs and Transportation costs. Supplies & Equipment fell to the lowest amount in four years, falling from 3.2% in 2016/2017 to 2.4% in 2017/2018. A final category, Other Costs, rose by $135,000. This is the category that includes Tax Refunds, which also increased from the previous year. Capital Assets/Long-Term Debt The School District owns and operates three (3) Elementary centers, one (1) Middle School, one (1) High School, and an Athletic Complex. The buildings and land currently encompass 650,228 square feet on acres. Capital Assets owned by the School District less accumulated depreciation through June 30, 2018 totaled $71,678,794. The School District is in the middle of a 50-year strategic building plan. Beginning in 1990, the Board of Directors have authorized the following construction and improvement projects: Construction of a Multi-Purpose Stadium Completed in 1997 Renovation of the High School Completed in 2000 Construction of a new Middle School Completed in 2012 Construction of new Ballfields & Field House Completed in 2013 With the High School and Middle School projects complete, the School District soon turned its attention to Elementary instruction. In 2013, New England Elementary was closed and subsequently sold to a private company. During 2014, various improvements were made to the existing elementary schools. In the early part of the 2018/2019 school year, the School District issued $ million in general obligation bonds to finance safety and energy improvements throughout the School District. The amount is not, however, presented below due to the timing of the issuance. Principal payments of the School District s General Obligation Bonds due at the close of the 2017/2018 fiscal year are as follows: Series A of 2011 $ 2,630,000 Series of ,450,000 Series of ,945,000 Series of ,085,000 Series of ,885,000 Series of 2014 (Note) 328,571 Total $ 72,323,571 The School District issued a Tax Revenue Anticipation Note for 2017/2018 in the amount of $3,000,000, but did not issue a TAN in the 2018/2019 year. iv

12 Results of Operations/Overall Financial Position The School District ended the 2016/2017 year with a General Fund Balance of $2,123,735. With revenue exceeding expenditures by $1,575,817, the School District ends the 2017/2018 year with a General Fund Balance of $3,699,552. The chart below illustrates changes in General Fund Balance over the past year. Fund Balance Changes Ending Fund Balance, June 30, 2017 $ 2,123,735 Plus Excess of Revenues Over Expenditures, ,575,817 Ending Fund Balance, June 30, ,699,552 Minus Transfer to the Capital Projects Fund, November 2018 (1,050,000) Adjusted Beginning Fund Balance, Fiscal Year $ 2,649,552 Budgetary Action Plan The School District continues to follow a five-point plan that was developed in 2010 to address financial challenges caused by devalued properties, a major building project, and rising retirement costs. Since 2010, personnel and programmatic downsizing and debt financing have been used to combat revenue losses and increasing costs. School District staffing is now 30% less than that in 2009, the School District closed an elementary building in 2012, and a number of targeted programmatic efforts have been disbanded. All avenues to right size the School District have been explored and all options discussed and utilized to control costs and ensure a quality education for the students residing in the School District. Summary The past several years signaled the turnaround for the School District. Last year, General Fund Revenues exceeded Expenditures by $1.576 million, increasing General Fund Balance. Budget variances showed differences close to budget projections: +1.9% for revenue and +1.0% for expenditures. v

13 STATEMENT OF NET POSITION JUNE 30, 2018 Assets Governmental Business-Type Activities Activities Total Current assets: Cash $ 4,350,633 $ 25,859 $ 4,376,492 Investments 1,645,368-1,645,368 Internal balances 30,947 (30,947) - Accounts receivable - other 1,353,289 5,445 1,358,734 State and federal subsidies receivable 2,896, ,897,216 Prepaid expenses 324, ,798 Inventories - 35,142 35,142 Delinquent and liened real estate taxes receivable, net 1,935,403-1,935,403 Total current assets 12,537,192 35,961 12,573,153 Noncurrent assets: Issuance prepaid insurance 499, ,956 Nondepreciable capital assets: Land 1,611,521-1,611,521 Depreciable capital assets, net of accumulated depreciation: Buildings and building improvements 65,989,082-65,989,082 Land improvements 3,153,592-3,153,592 Vehicles 41,132-41,132 Equipment, furniture, and fixtures 861,790 21, ,467 Total capital assets, net 71,657,117 21,677 71,678,794 Total noncurrent assets 72,157,073 21,677 72,178,750 Total Assets 84,694,265 57,638 84,751,903 Deferred Outflows of Resources Deferred outflows of resources for pension 12,601,476-12,601,476 Deferred outflows of resources for other post-employment benefits 172, ,281 Deferred charge on refunding 2,981,540-2,981,540 Total Deferred Outflows of Resources 15,755,297-15,755,297 Liabilities Current liabilities: Accounts payable 1,302,634 54,203 1,356,837 Accrued salaries and wages 3,866,621-3,866,621 Accrued retirement and benefits 1,310,989-1,310,989 Unearned revenue - 35,142 35,142 Accrued interest payable 778, ,748 Current portion of bonds and notes payable 3,312,143-3,312,143 Total current liabilities 10,571,135 89,345 10,660,480 Noncurrent liabilities: Net pension liability 73,638,000-73,638,000 Unamortized bond discount/premium 5,389,092-5,389,092 Compensated absences 1,155,832-1,155,832 Net OPEB liability 4,135,989-4,135,989 Long-term portion of bonds and notes payable 69,011,428-69,011,428 Total noncurrent liabilities 153,330, ,330,341 Total Liabilities 163,901,476 89, ,990,821 Deferred Inflows of Resources Deferred inflows of resources for pension 4,303,000-4,303,000 Deferred inflows of resources for other post-employment benefits 257, ,000 Total Deferred Inflows of Resources 4,560,000-4,560,000 Net Position Net investment in capital assets (2,574,046) 21,677 (2,552,369) Unrestricted (65,437,868) (53,384) (65,491,252) Total Net Position $ (68,011,914) $ (31,707) $ (68,043,621) The accompanying notes are an integral part of these financial statements. 1

14 STATEMENT OF ACTIVITIES Functions/Programs Program Revenues Net (Expense) Revenue and Change in Net Position Operating Capital Charges for Grants and Grants and Governmental Business-Type Expenses Services Contributions Contributions Activities Activities Total Governmental Activities: Instructional services $ 27,446,404 $ 3,731,740 $ 11,694,498 $ - $ (12,020,166) $ - $ (12,020,166) Support services 14,261,493-1,250,667 - (13,010,826) - (13,010,826) Operation of non-instructional services 1,684,792 26, (1,658,669) - (1,658,669) Interest on long-term debt 3,136, ,020 - (2,394,720) - (2,394,720) Total governmental activities 46,529,429 3,757,863 13,687,185 - (29,084,381) - (29,084,381) Business-Type Activities: Food services 1,658, ,074 1,330, (35,470) (35,470) Total Primary Government $ 48,188,066 $ 4,050,937 $ 15,017,278 $ - (29,084,381) (35,470) (29,119,851) General revenues: Taxes: Property taxes 24,898,929-24,898,929 Act 511 taxes 4,081,585-4,081,585 Other taxes 400, ,696 Basic education subsidy 7,292,236-7,292,236 Earnings from investments 38,822-38,822 Other 372, ,360 Total general revenues 37,084,628-37,084,628 Change in Net Position 8,000,247 (35,470) 7,964,777 Net Position: Beginning of year, as restated (76,012,161) 3,763 (76,008,398) End of year $ (68,011,914) $ (31,707) $ (68,043,621) The accompanying notes are an integral part of these financial statements. 2

15 BALANCE SHEET GOVERNMENTAL FUNDS JUNE 30, 2018 Assets General Capital Fund Projects Total Cash $ 4,350,629 $ 4 $ 4,350,633 Investments 1,638,264 7,104 1,645,368 Due from other funds 30,947-30,947 Accounts receivable - other 1,353,289-1,353,289 State and federal subsidies receivable 2,896,754-2,896,754 Prepaid expenditures 324, ,798 Delinquent and liened real estate taxes receivable, net 1,935,403-1,935,403 Total Assets $ 12,530,084 $ 7,108 $ 12,537,192 Liabilities, Deferred Inflows of Resources, and Fund Balance Liabilities: Accounts payable $ 1,302,634 $ - $ 1,302,634 Accrued salaries and wages 3,866,621-3,866,621 Accrued retirement and benefits 1,310,989-1,310,989 Total Liabilities 6,480,244-6,480,244 Deferred Inflows of Resources: Unavailable revenue - taxes 2,350,288-2,350,288 Fund Balance: Nonspendable 324, ,798 Restricted Committed 1,078,838-1,078,838 Assigned - 7,104 7,104 Unassigned 2,295,916-2,295,916 Total Fund Balance 3,699,552 7,108 3,706,660 Total Liabilities, Deferred Inflows of Resources, and Fund Balance $ 12,530,084 $ 7,108 $ 12,537,192 The accompanying notes are an integral part of these financial statements. 3

16 RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET POSITION JUNE 30, 2018 Total Fund Balance - Governmental Funds $ 3,706,660 Amounts reported for governmental activities in the statement of net position are different because: Capital assets used in governmental activities are not financial resources and, therefore, are not reported as assets in governmental funds. The cost of the assets is $115,994,893 and the accumulated depreciation is $44,337,776. Property and earned income taxes receivable will be collected next year, but are not considered available soon enough to pay for the current period's expenditures and, therefore, are unavailable in the funds. 71,657,117 2,350,288 Employee benefits, including compensated absences, pension, and other post-employment benefits, are recorded on the fund financial statements when payment is due, whereas these amounts are recorded when the benefit is earned on the government-wide financial statements. These amounts at year-end consist of: Net pension liability, net of related deferred inflows and outflows of resources $ (65,339,524) Net OPEB liability, net of related deferred inflows and outflows of resources (4,220,708) Compensated absences (1,155,832) (70,716,064) Bonds and notes payable, including accrued interest, are not due and payable in the current period and, therefore, are not reported as liabilities in the funds. In addition, governmental funds report the effect of discounts, premiums, issuance prepaid insurance, and deferred charges on refundings when debt is first issued; whereas, these amounts are deferred and amortized in the government-wide financial statements. These items at yearend consist of: Bonds and notes payable (72,323,571) Accrued interest payable (778,748) Issuance prepaid insurance 499,956 Deferred charge on refunding 2,981,540 Unamortized bond premium (5,409,589) Unamortized bond discount 20,497 (75,009,915) Total Net Position - Governmental Activities $ (68,011,914) The accompanying notes are an integral part of these financial statements. 4

17 STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE GOVERNMENTAL FUNDS General Capital Fund Projects Total Revenues: Local sources $ 33,855,090 $ 77 $ 33,855,167 State sources 18,754,338-18,754,338 Federal sources 1,572,511-1,572,511 Total revenues 54,181, ,182,016 Expenditures: Current: Instructional services 29,730,414-29,730,414 Support services 15,035,858-15,035,858 Operation of non-instructional services 1,371,287-1,371,287 Facilities acquisition, construction, and improvement services 153, ,226 Debt service: Bond and note principal 3,100,000-3,100,000 Bond and note interest 3,224,605-3,224,605 Principal on notes payable 82,143-82,143 Interest on notes payable 12,013-12,013 Total expenditures 52,709,546-52,709,546 Excess (Deficiency) of Revenues over Expenditures 1,472, ,472,470 Other Financing Sources (Uses): Sale of capital assets 179, ,896 Refunds of prior year receipts (159,390) - (159,390) Refunds of prior year expenditures 82,918-82,918 Total other financing sources (uses) 103, ,424 Net Change in Fund Balance 1,575, ,575,894 Fund Balance: Beginning of year 2,123,735 7,031 2,130,766 End of year $ 3,699,552 $ 7,108 $ 3,706,660 The accompanying notes are an integral part of these financial statements. 5

18 RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES Net Change in Fund Balance - Governmental Funds $ 1,575,894 Amounts reported for governmental activities in the statement of activities are different because: 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 as depreciation expense. This is the amount by which depreciation expense exceeded capital outlays in the current year: Assets capitalized $ 172,677 Depreciation expense (2,661,079) (2,488,402) Property and earned income taxes receivable will be collected next year, but are not considered available soon enough to pay for the current period's expenditures and, therefore, are unavailable in the funds. 67,887 Compensated absences, pension benefits, and postemployment benefits not payable from current year resources are not reported as expenditures of the current year. In the statement of activities, these costs represent expenses in the current year: Compensated absences (73,967) Pension benefits 4,680,476 Postemployment benefits 779,989 5,386,498 Governmental funds report the effect of premiums and similar items when debt is first issued, whereas these amounts are deferred and amortized in the statement of activities. Interest is recognized as an expenditure in the governmental funds when it is due. In the statement of activities, interest expense is recognized as it accrues, regardless of when it is due. This amount is the net effect of these differences in the treatment of long-term obligations and related items. Issuance prepaid insurance (38,458) Deferred charge on refunding (229,349) Bond discount (1,576) Bond premium 518, ,982 Principal paid on bonds and notes in the current year is reported as expenditures in the governmental funds. Bonds and notes payable are reported as current and long-term liabilities on the statement of net position, therefore, the current year principal payments are reclassified to offset the bond liability. Notes payable 87,143 Bonds payable 3,095,000 3,182,143 Interest payable on long-term liabilities is recorded when paid in the governmental funds; however, interest is accrued in the statement of net position. 27,245 Change in Net Position of Governmental Activities $ 8,000,247 The accompanying notes are an integral part of these financial statements. 6

19 STATEMENT OF NET POSITION PROPRIETARY FUND JUNE 30, 2018 Assets Enterprise Fund Food Service Current assets: Cash $ 25,859 State and federal subsidies receivable 462 Accounts receivable - other 5,445 Inventories 35,142 Total current assets 66,908 Noncurrent assets: Machinery and equipment 271,850 Less accumulated depreciation (250,173) Total noncurrent assets 21,677 Total Assets 88,585 Liabilities Accounts payable 54,203 Unearned revenue 35,142 Due to other funds 30,947 Total Liabilities 120,292 Net Position Net investment in capital assets 21,677 Unrestricted (53,384) Total Net Position $ (31,707) The accompanying notes are an integral part of these financial statements. 7

20 STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION PROPRIETARY FUND Enterprise Fund Food Service Operating Revenues: Sales of food and milk $ 293,074 Cost of Sales: Beginning inventory, July 1, ,321 Food and supplies purchased - Nutrition, Inc. 810,557 Value of donated foods 88,028 Wages 450,119 Payroll taxes and benefits 285,325 Subtotal 1,670,350 Ending inventory, June 30, ,142 Total cost of sales 1,635,208 Gross loss (1,342,134) Operating Expenses: Repairs and maintenance 11,200 Depreciation 7,130 Office supplies and expense 5,099 Total operating expenses 23,429 Net Operating Income (Loss) (1,365,563) Non-Operating Revenues (Expenses): Federal and state subsidies 1,242,065 Value of donated foods 88,028 Total non-operating revenues (expenses) 1,330,093 Change in Net Position (35,470) Net Position: Beginning of year 3,763 End of year $ (31,707) The accompanying notes are an integral part of these financial statements. 8

21 STATEMENT OF CASH FLOWS PROPRIETARY FUND Enterprise Fund Food Service Cash Flows From Operating Activities: Cash received from users $ 321,627 Cash paid to employees (767,857) Cash paid to suppliers (772,911) Cash payments for other operating expenses (16,299) Net cash provided by (used in) operating activities (1,235,440) Cash Flows From Noncapital Financing Activities: Operating subsidies and transfers 1,242,065 Net Increase (Decrease) in Cash and Cash Equivalents 6,625 Cash and Cash Equivalents: Beginning of year 19,234 End of year $ 25,859 Reconciliation of Net Operating Income (Loss) to Net Cash Provided by (Used in) Operating Activities: Net operating income (loss) $ (1,365,563) Adjustments to reconcile net operating income (loss) to net cash provided by (used in) operating activities: Depreciation expense 7,130 Donated food 88,028 Change in assets and liabilities: State and federal subsidies receivable 28,553 Accounts payable 38,825 Due to other funds (32,413) Net cash provided by (used in) operating activities $ (1,235,440) Non-Cash, Non-Capital Financing Transactions: West Mifflin Area School District received donated commodities of $86,849 from the Department of Agriculture. The accompanying notes are an integral part of these financial statements. 9

22 STATEMENT OF FIDUCIARY NET POSITION JUNE 30, 2018 Assets Activities Fund Cash $ 120,429 Investments 40,000 Total Assets $ 160,429 Liabilities Due to student groups $ 160,429 Total Liabilities $ 160,429 The accompanying notes are an integral part of these financial statements. 10

23 NOTES TO FINANCIAL STATEMENTS 1. Summary of Significant Accounting Policies The accounting methods and procedures adopted by the West Mifflin Area School District (School District) conform to the accounting basis prescribed by the Pennsylvania Department of Education, which is in accordance with accounting standards generally accepted in the United States of America. The following notes to the financial statements are an integral part of the School District's financial statements. Reporting Entity The School District operates the public school system for the Boroughs of West Mifflin and Whitaker in Pennsylvania. The School District is governed by the Pennsylvania School Code of 1949, as amended. The School District is classified as a third-class school district and is governed by an elected Board of Directors (Board). The financial statements include all funds, agencies and boards that are controlled by the School District or for which the School District is financially accountable. In evaluating the School District as a reporting entity, management has addressed all potential component units, which may or may not fall within the School District's financial statements, to determine if the School District is financially accountable. The School District presently has no component units that meet the above criterion. The School District participates in a joint venture, the Southeastern Area Special Schools Authority (Southeastern), with nine other member school districts. Southeastern provides special education services and vocational education services to member districts. See further information about Southeastern in Note 13. Basis of Presentation Government-Wide Financial Statements The government-wide financial statements (i.e., the statement of net position and the statement of activities) are highly aggregated financial statements that present financial information for all assets, deferred outflows of resources, liabilities, deferred inflows of resources, and net position of the primary government (governmental funds and proprietary or business-type funds). Fiduciary funds are not presented on these statements. The government-wide financial statements use the economic resources measurement focus and accrual basis of accounting. 11

24 NOTES TO FINANCIAL STATEMENTS The statement of net position reports all financial and capital resources. It is the only financial statement that reports general capital assets and general long-term liabilities, which are capital assets and long-term liabilities that are not specifically related to activities reported in proprietary or fiduciary funds and that are associated with and generally arise from governmental activities. The difference between assets plus deferred outflows of resources and liabilities plus deferred inflows of resources is labeled as net position. The statement of activities presents activities accounted for in the primary government by function or activity. Program revenues and general revenues are presented separately on this statement. Program revenues consist of charges for services and restricted grants and contributions applied to specific expenditures/expenses. General revenues include all revenues except those required to be reported as program revenues. Fund Financial Statements The fund financial statements consist of a series of statements that focus on information about the School District s major governmental, proprietary, and fiduciary fund types. The financial statements for the three fund categories use different measurement focuses and bases of accounting. The governmental fund financial statements focus primarily on the sources, uses and balances of current financial resources. The financial statements required for governmental funds are the balance sheet and the statement of revenues, expenditures, and changes in fund balance. Those statements are presented using the current financial resources measurement focus and the modified accrual basis of accounting. The governmental funds balance sheet presents the assets, deferred outflows of resources, liabilities, deferred inflows of resources, and fund balances for each major governmental fund and in total for all governmental funds. Summary reconciliations are presented following each of the governmental fund financial statements reconciling the statement information to the government-wide financial statements. The proprietary fund financial statements focus on the determination of operating income, changes in net position, financial position, and cash flows. The School District generally defines operating revenues and expenses as those that result from providing services and producing goods in connection with the fund s principal ongoing 12

25 NOTES TO FINANCIAL STATEMENTS operations. The principal operating revenues of the School District s Food Service Fund are charges to students and faculty for the sale of food. Operating expenses for the Food Service Fund include the cost of sales and services, salaries and benefits, administrative costs, and depreciation. The financial statements required for proprietary funds are the statement of net position, the statement of revenues, expenses, and changes in net position, and the statement of cash flows. Those financial statements are presented using the economic resources measurement focus and the accrual basis of accounting. The fiduciary fund financial statement reports on the School District s activities funds. These funds are held by the School District in a trustee capacity for student activities. The fund is custodial in nature (assets equal liabilities) and does not involve measurement of results of operations. The School District reports the following major governmental funds: General Fund Used to account for all revenues and expenditures of the School District not encompassed within other funds. Capital Projects Fund - Used to account for financial resources to be used for the acquisition of or construction of major capital facilities, including capital outlays financed by general obligation bonds. The School District reports the following major proprietary fund: Food Service Fund - Used to account for the provision of food services to students and faculty, financed and operated in a manner similar to private business enterprises, where the intent of the governing body is that the costs (expenses, including depreciation) of providing the food services be financed or recovered primarily through user charges. The School District reports the following fiduciary fund: Activities Fund - Used to account for resources held by the School District in a trustee capacity or as agent for individuals, private organizations, or other units of the government. 13

26 NOTES TO FINANCIAL STATEMENTS Basis of Accounting Basis of accounting refers to the timing of recognition of revenues and expenditures/expenses in the funds as reported in the financial statements. The modified accrual basis of accounting is followed for all governmental funds of the School District. Under the modified accrual basis of accounting, expenditures are generally recorded when a liability is incurred. However, debt service expenditures as well as expenditures related to pension and other post employment benefits, compensated absences, and claims and judgments are recorded only when payment is due. Revenues are recognized when they become susceptible to accrual, i.e., measurable and available to finance the School District's operations. The School District considers all tax revenue to be available upon collection by the tax collector. State and federal grants and interest associated with the current fiscal period are considered to be susceptible to accrual and so have been recognized as revenue of the current period. All other revenue items are considered to be measurable and available only when cash is received by the School District. The accrual basis of accounting is used for the Food Service Fund (proprietary fund) as well as in the operation of the government wide financial statements. Under this basis of accounting, revenues are recognized when earned and expenses are recognized when the related liability is incurred. Reconciliations are presented after the appropriate governmental fund financial statements adjusting to the accrual basis of accounting from the modified accrual basis of accounting. As stated above, the Agency Fund is custodial in nature and does not involve measurement of results of operations. 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 amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates. Budgets and Budgetary Accounting The Board approves, prior to the beginning of each year, an annual budget on the modified accrual basis for the General Fund. This is the only fund for which a budget is required and 14

27 NOTES TO FINANCIAL STATEMENTS for which taxes may be levied. The General Fund is the only fund that has an annual budget that has been legally adopted by the Board. The Public School Code allows the Board to authorize budget transfer amendments during the year, but only during the last nine months of the fiscal year. The School District's expenditures may not legally exceed the revised budget amounts in total for the fund unless funds are received in excess of the budgeted State allocation levels. Management may amend the budget without seeking prior approval of the Board within a function. Amendments between functions require prior Board approval. Encumbrances Encumbrances accounting, under which purchase orders, contracts, and other commitments for the expenditure of monies are recorded in order to reserve that portion of the applicable appropriation, is employed as an extension of formal budgetary integration in the General Fund. Encumbrances outstanding at year-end are reported as assignments of fund balances since they do not constitute expenditures or liabilities. All appropriations lapse at year-end. There were no outstanding encumbrances at June 30, Cash and Cash Equivalents For purposes of the statement of cash flows, the School District s cash and cash equivalents are considered to be cash on hand, demand deposits, short-term investments with original maturities of three months or less from the date of acquisition, and pooled funds investments subject to daily withdrawal. Fair Value Measurement The School District categorizes its fair value measurements within the fair value hierarchy established by accounting principles generally accepted in the United States of America. The hierarchy is based on the valuation inputs used to measure the fair value of the asset. Level 1 inputs are quoted prices in active markets for identical assets; Level 2 inputs are significant other observable inputs; Level 3 inputs are significant unobservable inputs. Receivables Advances between funds are accounted for in the appropriate interfund receivable and payable accounts. These advances are reported as due to/from other funds on the fund 15

28 NOTES TO FINANCIAL STATEMENTS financial statements and internal balances on the government-wide financial statements. Most interfund balances are eliminated to arrive at the government-wide financial statement amounts and are expected to be repaid within one year. All tax receivables are shown net of an allowance of uncollectible amounts, where applicable. Property taxes are levied as of July 1 on property values assessed as of the same date. The billings are considered past due on November 1, and penalties and interest are assessed. Prepaid Expenses Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both government-wide and fund financial statements. Inventories The Food Service Fund inventory consists of donated commodities from the U.S. Department of Agriculture (USDA). Donated commodities are stated at estimated value as provided by the USDA. Inventory is recorded as an expense in the Food Service Fund when it is consumed. Textbooks and supplies purchased are recorded in the General Fund as instructional expenditures at cost at the time of purchase and capitalized on the government-wide financial statements. Thus, no inventory is recorded at year-end. Capital Assets Capital assets, which include property, plant, and equipment, are reported in the applicable governmental or business-type activities columns in the government-wide financial statements. Capital assets are defined by the School District as assets with an initial, individual cost of more than $2,500. Improvements are capitalized and depreciated over the remaining useful lives of the related capital assets, as applicable. Donated capital assets are recorded at estimated acquisition value at the date of donation. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend asset lives are not capitalized. 16