UNION-ENDICOTT CENTRAL SCHOOL DISTRICT FINANCIAL STATEMENTS JUNE 3D, 2017 WITH COMPARATIVE TOTALS FOR 2016

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1 FINANCIAL STATEMENTS JUNE 3D, 2017 WITH COMPARATIVE TOTALS FOR 2016

2 TABLE OF CONTENTS Statement Number Independent Auditors' Report Il.1anagement's Discussion and Analysis Statement of Net Position Statement of Activities Balance Sheet - Governmental Funds Statement of Revenues, Expenses and Changes in Fund Equity - Governmental Funds Statement of Fiduciary Net Position-Fiduciary Funds Statement of Changes in Fiduciary Net Position-Fiduciary Funds Reconciliation of Governmental Funds Balance Sheet to Statement of Net Position Reconciliation of Governmental Funds Revenues, Expenditures, and Changes in Fund Equity to the Statement of Activities Notes to Financial Statements REQUIRED SUPPLEMENTARY INFORMATION SS1 Schedule of Funding Progress Other Post- Employment Benefits Plan 59 SS2 Schedule of District's Contributions - I\lYSLRS Pension Plan 60 SS3 Schedule of District's Proportionate Share of the Net Pension Liability-NYSLRS 61 SS4 Schedule of District's Contributions - NYSTRS Pension Plan 62 SS5 Schedule of District's Proportionate Share of the Net Pension Liability (Asset)-NYSTRS 63 SS6 Schedule of Revenues, Expenditures and Changes in Fund Balance Budget (Non-GAAP) and Actual - General Fund SUPPLEMENTARY INFORMATION SS7 Schedule of Change from Original Budget to Revised Budget and Section 1318 of Real Property Tax Law Limit 66 SS8 Schedule of Project Expenditures - Capital Projects Fund 67 SS9 Combined Balance Sheet-I'Jon-lI.1ajor Governmental Funds 68 SS10 Combined Statement of Revenues, Expenditures and Changes in Fund Balances Non-Major Governmental Funds 69 SS11 Supplementary Information Investment in Capital Assets, Net of Related Debt 70 REPORTS APPLICABLE TO THE SINGLE AUDIT ACT SS12 Schedule of Expenditures of Federal Awards 71 Notes to Schedule of Expenditures of Federal Awards Schedule of Findings and Questioned Costs 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 Report on Compliance for Each Major Program; Report on Internal Control Over Compliance; and Report on Schedule of Expenditures of Federal Awards Required by the Uniform Guidance

3 VIEIRA & ASSOCIATES CI»AS? P.C. John B. Burtis, CPA** E. Mark Vieira, CPA * Cheryl DiStefano, CPA Scott M. Botalen, CPA Patrick 1 Price, CPA, CV A ** Also lieensed in Pennsylvania * Also Iicenscd in South Carolina To the Board of Education Union-Endicott Central School District 1100 East Main Street Endicott, New York Report on the Financial Statements INDEPENDENT AUDITORS' REPORT We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of Union-Endicott Central School District, as of, and for the year ended June 30, 2017, and the related notes to the financial statements, which collectively comprise Union-Endicott Central 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 standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States, and the requirements of Title 2 U.S. CFR Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. 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. SC Tel: Fax Tcl: Fax: cpas@vapc.us Website: ww\v.vapc.us 3

4 We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinion 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, and the aggregate remaining fund information of the Union-Endicott Central School District, as of June 30, 2017, and the respective changes in financial position for the year then ended in accordance with accounting principles generally accepted in the United States of America (GAAP). Other Matters Required supplementary information The management's discussion and analysis, schedule of funding progress other postemployment benefits plan, schedule of District's contributions-nyslrs pension plan, schedule of proportionate share of the net pension liability - NYSLRS pension plan, schedule of District's contributions - I\JYSTRS pension plan, schedule of proportionate share of net pension liabilityj(asset) - NYSTRS pension plan, and schedule of revenues, expenditures and changes in fund balance -budget (non-gaap) and actual - General Fund on pages 6 through 17, and 59 through 65, are not a required part of the basic financial statements but are supplementary information 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 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 Union-Endicott Central School District's financial statements. The change from adopted budget to final budget and the real property tax limit, schedule of project expenditures capital projects funds, combined balance sheet-non-major governmental funds, combined statement of revenues, expenditures and changes in fund balances non-major governmental funds, investment in capital assets, net of related debt and the Schedule of Expenditures of Federal Awards, required by the Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), are presented for purposes of additional analysis and are not a required part of the financial statements. The change from adopted budget to final budget and the real property tax limit, project expenditures capital projects funds, combined balance sheet-non-major governmental funds, combined statement of revenues, expenditures and changes in fund balances-non-major governmental, investment in capital assets, net of related debt 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 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 themselves or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the change from adopted budget to final budget and the real property 4

5 tax limit, project expenditures capital projects funds, combined balance sheet-non-major governmental funds, combined statement of revenues, expenditures and changes in fund balances-non-major governmental funds, investment in capital assets, net of debt and the Schedule of Expenditures of Federal Awards are fairly stated in all material respects in relation to the financial statements as a whole. Prior Year Comparative information We have previously audited the District's June 30, 2016 financial statements, and we expressed unmodified opinions on the respective financial statements of the governmental activities, each major fund, and the aggregate remaining fund information in our report dated September 28, In our opinion, the summarized comparative information presented herein as of and for the year ended June 30, 2016, is consistent in all material respects, with the audited financial statements from which it has been derived. Other Reporting Required by Government Auditing Standards and the Uniform Guidance In accordance with Government Auditing Standards, we have also issued our report dated September 8, 2017 on our consideration of Union-Endicott Central 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 to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Union-Endicott's internal control over financial reporting and compliance. We have also issued our report date September 8, 2017, on compliance for each major federal program, internal control over compliance, and the schedule of federal awards required by the Uniform Guidance. The purpose of that report is to describe the scope of our testing of internal control and compliance for each major program and the results of our testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Title 2 U.s. CFR Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards in considering Union-Endicott's internal control over each major program and compliance. September 8, 2017 Endicott, New York 5

6 UNION ENDICOTT CENTRAL SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JUNE 30,2017 The following is a discussion and analysis of the School District's financial performance for the fiscal year ended June 30, This section is a summary of the School 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. The Management's Discussion and Analysis (MD&A) section is only an introduction and should be read in conjunction with the School District's financial statements, which immediately follow this section. FINANCIAL HIGHLIGHTS The School District's annual other postemployment benefit (OPEB) expense is calculated based on the annual required contribution ofthe employer (ARC), an amount actuarially determined in accordance with the parameters of GASB Statement No. 45 "Accounting and Financial Reporting by Employers for Postemployment Benefits Other than Pensions." This statement requires the School District to record a liability in for other postemployment benefits of $111,000,683. NYSTRS made significant changes in assumptions related to pensions, including the valuation rate of interest that went from 8% to 7.5%. This caused the TRS asset to decline to become a liability. However, the decline was offset by related changes to deferred outflows of resources and improvements in investment earnings. Overall, the effect of these changes in TRS and less dramatic changes in ERS on the District's proportionate share of pension liabilities and deferred inflows and outflows of resources had a minimal effect on net pension. The School District's financial position showed a decrease in net position of ($12,984,475), compared to a decrease in of ($7,517,999.) Revenues increased by $2,308,303 or 2.8% and expenses increased by $8,135,506 or 9.2%. Revenues increased due to an increase in state and federal aid. Expenses increased due to an increase in employee benefits as required by GASB Statement 45 as referenced above. Overall indebtedness of the School District for , in the amount of $172,610,603 increased by $23,535,550 from $149,075,053 in This was primarily due to an increase in borrowing related to current capital projects, other current payables and an increase in the District's contribution to Other Postemployment Benefits, as required by GASB 45 as referenced above. General Fund budgetary expenditures were underspent as compared to the Final Budget in the amount of $2,640,785 primarily due to a district wide effort to contain spending. Unassigned fund balance in the General Fund showed an increase of $105,035 in to $2,996,583 from $2,891,548 in Total fund balance in the General Fund, including reserves, amounted to $16,930,498 at June 30, 2017, which reflects an increase of $2,043,468 from June 30,

7 UNION ENDICOTT CENTRAL SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JUNE 30,2017 OVERVIEW OF THE FINANCIAL STATEMENTS This annual report consists of three parts: MD&A (this section), the basic financial statements and supplementary information, both required and not required. The basic financial statements include two kinds of statements that present different views of the School District. The first two statements are District-wide financial statements that provide both short-term and longterm information about the School District's overall financial status. The remaining statements are Governmental Fund financial statements that focus on individual parts of the School District, reporting the School District's operations in greater detail than the District-wide financial statements. The Governmental Fund financial statements concentrate on the School District's most significant funds. The financial statements also include notes that explain some of the information in the statements and provide more detailed data. The statements are followed by a section of required supplementary information that further explains and supports the financial statements with a comparison of the School District's budget for the year and a Schedule of Funding Progress related to the School District's unfunded actuarial liability for postemployment benefits. District-wide Financial Statements The District-wide financial statements report information about the School District as a whole using accounting methods similar to those used by private-sector companies. The Statement of Net Position includes all of the School District's assets and liabilities. All of the current year's revenues and expenses are accounted for in the Statement of Activities regardless of when cash is received or paid. The two District-wide financial statements report the School District's net assets and how they have changed. Net Position - the difference between the School District's assets and liabilities - is one way to measure the School District's financial heath or position. Over time, increases or decreases in the School District's net position are an indicator of whether its financial position is improving or deteriorating, respectively. To assess the School District's overall health, one needs to consider additional nonfinancial factors such as changes in the School District's property tax base and the condition of the school buildings and other facilities. In the District-wide financial statements, the School District's activities are shown as Governmental Activities. lviost of the School District's basic services are included here, such as regular and special education, transportation, and administration. Property taxes and State formula aid finance most of these activities. Governmental Fund Financial Statements The Governmental Fund financial statements provide more detailed information about the School District's funds, focusing on its most significant or "Major" funds not the School District as a whole. Funds 7

8 UNION ENDICOTT CENTRAL SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JUNE 30, 2017 are accounting devices the School District uses to keep track of specific sources of funding and spending on particular programs. The School District has two kinds offunds: Governmental Funds: Most of the School 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 Governmental Funds statements provide a detailed short-term view that helps one determine whether there are more or fewer financial resources that can be spent in the near future to finance the School District's programs. Because this information does not encompass the additional long-term focus of the District-wide financial statements, additional information following the Governmental Funds statements explains the relationship (or differences) between them. Fiduciary Funds: The School District is the trustee, or fiduciary, for the assets that belong to others, such as the Scholarship Fund and the Student Activities Funds. The School 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 School District excludes these activities from the District-wide financial statements because it cannot use these assets to finance its operations. FINANCIAL ANALYSIS OF THE SCHOOL DISTRICT AS A WHOLE Our analysis below focuses on the net assets (Figure 1) and changes in net position (Figure 2) of the School District's governmental Activities. Figure 1 Condensed Statement of Net Position Governmental Activities & Total School District Total Dollar Change Current assets and other assets Net capital assets $ 43,131,981 $ 35,394,158 $ (7,737,823) 91,679,862 95,764,583 4,084,721 Total assets 134,811, ,158,741 (3,653,102) Deferred cash outflows 7,155,165 17,164,353 10,009,188 Current liabilities Noncurrent liabilities 17,974, ,100,210 23,826, ,784,306 5,851,454 17,684,096 Total liabilities 149,075, ,610,603 23,535,550 Deferred cash inflows 8,375,866 4,180,877 (4,194,989) Invested in capital assets, net of debt Restricted Unrestricted (deficit) 52,286,134 15,413,476 (83,183,521) 56,370,548 14,530,965 (99,369,899) 4,084,414 (882,511) (16,186,378) Total net position $ (15,483,911 ) $ (28,468,386) $ (12,984,475) Decrease in current assets is due to a decrease in cash appropriated and expensed for new capital projects. 8

9 UNION ENDICOTT CENTRAL SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JUNE 30,2017 The decrease in deferred inflows of resources along with the increase in deferred outflows of resources are the result of GASB Statements No. 68 and No. 71 which required the School District to recognize its' proportionate share of state and federal net pension (asset) liability and deferred outflows and inflows related to pensions. The increase in capital assets, net, of$4,084,721 or 4.5% is due to capital outlay exceeding depreciation expense in the current year primarily due to the completion of ongoing construction projects. Our analysis in Figure 2 considers the operations of the School District's activities. Figure 2 Changes in Net Position REVENUES Program revenues: Charges for service Operating grants and contributions General revenues: Real property taxes State and federal sources Use of money and property Other general revenues Governmental Activities & Total School District Total Dollar Change $ 590,147 3,115,694 39,660,394 34,954,164 1,044,900 1,808,670 $ 587,203 3,317,940 39,743,603 37,272, ,579 2,360,086 $ (2,944) 202,246 83,209 2,318,697 (844,321) 551,416 Total revenues 81,173,969 83,482,272 2,308,303 PROGRAM EXPENSES General support 8,948,393 9,556, ,868 Instruction 40,623,594 40,154,066 (469,528) Pupil transportation 1,416,059 1,545, ,259 Employee benefits 30,928,431 38,784,520 7,856,089 Debt service 1,459,940 1,299,529 (160,411) School lunch program 1,401,575 1,454,793 53,218 Depreciation 3,553,249 3,672, ,011 Total expenses 88,331,241 96,466,747 8,135,506 CHANGE IN NET POSITION (7,157,272) (12,984,475) (5,827,203) Total revenues for the School District's Governmental Activities increased by $2,308,303 or 2.8% while total expenditures increased $8,135,506 or 9.2%. Property taxes increased $83,209 consistent with the voter approved budget. State aid showed an increase of $2,318,697. 9

10 UNION ENDICOTT CENTRAL SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANAL YSIS FOR THE YEAR ENDED JUNE 30, 2017 Expenditures were higher due to increases in general support and employee benefits, primarily due to the allocation of postemployment benefits offset by pension expenses to these functions, resulting from the implementation of GASB Statements No. 45 and No. 68. Figures 3 and 4 show the percentage of sources of revenue for and Figure 3 Use of Money & Property 0.2% Sources of Revenues for Other General Charges for Revenues Services 2.8% 0.7% Operating Grants & Contributions 4.0% State and Federal Sources 44.6% Real Property Taxes 47.7% Figure 4 Sources of Revenues for Other General Charges for Revenues Services Use of Money & 2.2% 0.7% Property 1.3% Operating Grants & Contributions 3.8% State and Federal Sources 43.1% Real Property Taxes 48.9% 10

11 UNION ENDICOTT CENTRAL SCHOOL r\lc'-rolr-r MANAGEMENT'S DISCUSSION AND FOR THE YEAR ENDED JUNE 30, Figures 5 and 6 present the cost for each of the School District's programs for and Figure 5 Net Cost of Programs for School Lunch Program Depreciation 3.8% Debt Service 1.3% General Support 9.9% Employee Benefits 40.2% Pupil Transportation 1.6% 41.7% Figure 6 Debt Service 1.7% Net Cost of Programs for School Lunch Program 1.6% Depreciation 4.0% General Support 10.1% Employee Benefits 35.0% Pupil Transportation 1.6% Instruction 46.0% 11

12 UNION ENDICOTT CENTRAL SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JUNE 30,2017 FINANCIAL ANALYSIS OF THE SCHOOL DISTRICT'S FUNDS Figure 7 shows the changes in fund balances for the year for the School District's funds. As the School District completed the year, its governmental funds, as presented in the Balance Sheet, reported a combined fund balance of $16,213,376 which is an increase from the prior year's balance of $13,796,316. The increase is primarily attributable to ongoing instructional programs. Figure 7 Governmental Fund Balances Total Dollar Change General Fund $ 14,887,030 $ 16,930,498 $ 2,043,468 Special Aid School Lunch 389, ,186 98,654 Oebt Service 2,004,568 2,037,885 33,317 Capital project Total Fund Balance (3,484,814) 13,796,316 (3,243,193) 16,213, ,621 2,417,060 GENERAL FUND BUDGETARY HIGHLIGHTS The difference between the original budget and the final amended budget was $99,170 or.1% of total general fund expenditures and may be summarized as follows: $ 57,585 Emergency Replacements 3,418 Tax Refunds approved by Board 38,167 Donations approved by Board $ 99,170 The District's policy for amending the original budget is as follows: All transfers $5,000 and greater require prior board approval with the exception of all salary transfers; transfers under $5,000 and salary transfers require District approval. All transfers are reported to the board. 12

13 UNION ENDICOTT CENTRAL SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANAL YSIS FOR THE YEAR ENDED JUNE 30,2017 Figure 8 summarizes the original and final budgets, the actual expenditures (including encumbrances), and variances for the year ending June 30, Figure 8 Condensed Budgetary Comparison General Fund Original Budget Revised Budget Actual wi Encumbrances REVENUES Real property taxes $ 39,677,240 $ 32,847,544 $ 32,839,079 $ (8,465) Real property tax items 81,804 6,911,500 6,904,524 (6,976) State and federal sources 35,767,169 35,767,169 36,166, ,866 All other - other financing sources 1,448,023 1,486,190 2,443, ,901 Total Revenues and Other Financing Sources Transfers from other fund Appropriated fund balance $ 76,974,236 $ 77,012,403 $ 78,352,729 $ 1,340,326 $ 54,782 1,775,000 $ 54,782 1,832,585 $ 93,379 Appropriated reserves 517, ,343 0 (521,343) Budget Grand Total $ 79,321,942 $ 79,421,113 $ 78,446,108 $ (975,005) EXPENDITURES General Support 10,122,554 10,206,071 9,532, ,529 Instruction 38,767,593 39,723,551 38,725, ,272 Pupil transportation 1,763,005 1,759,510 1,530, ,975 Employee benefits 22,250,926 21,306,517 20,650, ,260 Debt service 6,252,364 6,247,464 6,168,691 78,773 Transfers to other funds 165, , ,024 4,976 Total Expenditures, and Other Financing Uses $ 79,321,942 $ 79,421,113 $ 76,780,328 $ 2,640,785 0 I " r $ 38,597 (1,832,585) 13

14 UNION ENDICOTT CENTRAL SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JUNE 30, 2017 CAPITAL ASSETS AI\lD DEBT ADMINISTRATION Capital Assets At the end of June 30, 2017, the School District had invested in a broad range of capital assets. Capital assets had a net increase of $4,084,721 over last year as shown in Figure 9 below. Figure 9 Capital Assets (Net of Depreciation) Government Activities & Total School District Beginning Bal. 7/ Additions Retire. Reclass. Ending Bal. 6/30/2017 $ 350,000 7,682,343 85,119,416 2,612,821 Land Construction in Progress Buildings Equipment $ 350,000 10,884,206 77,834,958 2,610,695 $ 0 5,903,536 6,110,684 71,890 $ (84,731 ) $ 0 (9,105,399) 1,173,774 14,967 Totals $ 91,679,859 $ 12,086,110 $ (84,731) $ (7,916,658) $ 95,764,580 Capital asset activity for the year ended June 30, 2017 included the following: $ 110,958 General Support 9,210,550 Instruction 17,174 School Lunch 466,626 Pupil Transportation 9,805,308 Total Equipment Additions Construction Additions, net --'--'---'----' Total Additions ----"---'-- (84,731) Retirements, net 1,188,741 Reclassifications, net Depreciation _---.:~~~-f- $ 4,084,721 14

15 UNION ENDICOTT CENTRAL SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JUNE 30,2017 Debt Administration Debt, both short and long-term, considered a liability of Governmental Activities, increased by $23,535,550 in , as shown in Figure 10. Total indebtedness represented 85.1% of the constitutional debt limit, exclusive of building aid estimates. Figure 10 Outstanding Debt Governmental Activities & Total School District Total Dollar Change Serial Bonds Compensated absences Due to retirement systems Notes Payable Other Post Employ. Benefits Net pension liability Current Liabilities $ 36,332,806 1,671,642 3,489,012 6,998,000 94,236,831 3,101,117 3,245,645 $ 37,345,620 1,658,727 3,212,797 11,686, ,000,683 3,334,896 4,371,880 $ 1,012,814 (12,915) (276,215) 4,688,000 16,763, ,779 1,126,235 Totals $ 149,075,053 $ 172,610,603 $ 23,535,550 Additional information on the maturities and terms of the School District's outstanding debt can be found in the notes to these financial statements. 15

16 UNION ENDICOTT CENTRAL SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JUNE 30,2017 FACTORS BEARING ON THE SCHOOL DISTRICT'S FUTURE The District's budget proposal of $79,066,593 called for a tax levy increase of.15%, which was the State's maximum allowable tax levy increase for the fiscal year. With an increase in state aid of $1,915,976, the district was able to maintain and reinstate programs as well as reduce the use of reserves and appropriated fund balance. The budget for the fiscal year was voted on by qualified voters on May 16, The District's budget proposal of$81,345,530 called for a tax levy increase of 1.33%, which was equal to the State's maximum allowable tax levy increase for the fiscal year. The budget passed by 81.4%. As part of a twelve-year replacement schedule designed to strategically maintain the fleet of vehicles, (4) 65 passenger diesel school buses, and (1) wheelchair diesel school bus will be purchased for a total cost not to exceed $603,000. Union-Endicott's Total Reserves after Adjustments as of 6/30117 include: Tax Celiiorari Reserve $ 1,260,024 Capital Reserve $ 4,436,266 Unemployment Insurance Reserve $ 263,222 Employee Benefit Liability Reserve $ 1,019,851 Retirement Contribution Reserve $ 5,104,666 This year the District's Bond Rating continues to be rated by Standard and Poor as A+. 16

17 UNION ENDICOTT CENTRAL SCHOOL DISTRICT MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JUNE 30,2017 CONTACTING THE SCHOOL DISTRICT'S FINANCIAL MANAGEMEI\lT This financial report is designed to provide the Union Endicott Central School District's citizens, taxpayers, customers, investors and creditors with a general overview of the School District's finances and to demonstrate the School District's accountability for the money it receives. Ifyou have questions about this report or need additional financial information, contact the District Office of the Union Endicott Central School District, 1100 E. Main Street, Endicott, New York

18 STATEMENTS OF NET POSITION JUNE 30, 2017 AND 2016 ASSETS Cash Unrestricted $ 10,073,341 14,151,292 Restricted 20,817,823 9,965,137 Receivables Due from fiduciary funds 162, ,793 State and Federal aid 2,203,268 1,376,819 Due from other governments 1,986,021 1,631,656 Other 99,941 33,504 Inventories 51,334 32,901 Net pension asset 15,778,879 Capital assets, net 95,764, Total Assets $ 131,158,741 Deferred outflows of resources, Pensions $ 17,164,353 $ 7,155,165 LIABILITIES Payables Accounts payable $ 3,285,878 $ 2,142,784 Accrued liabilities 266, ,280 Due to other governments Retainage payable Due to Teachers' Retirement System 2,994,214 3,268,130 Due to Employees' Retirement System 218, ,882 Notes payable Bond anticipation 11,686,000 6,998,000 Deferred credits Unearned revenues 818, ,884 Long-term liabilities Due and payable within one year Bonds payable 4,555,620 4,242,186 Compensated absences payable 1,658,727 1,671,642 Other postemployment benefits payable 111,000,683 94,236,831 Net pension liability 3,334,896 3,101,117 Other liabilities Bonds payable 32,790,000 Total Liabilities $ 172,610,603 Deferred cash inflows Unamortized bond premium 2,696,578 1,981,197 Economic gain on defeasance of debt 664, ,821 Pensions 819,589 5,799,848 $ 4,180,877 $ 8,375,866 NET ASSETS Investment in capital assets, net of related debt $ 56,370,548 $ Restricted 14,530,965 Unrestricted (deficit) (99,369,899) Total Net Position $ (28,468,386) $ (15,483,911) See independent auditors' report and notes to financial statements 18

19 STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2017 WITH COMPARATIVE TOTALS FOR 2016 Indirect Expenses Allocation Pro~ram Revenues Charges for Operating Services Grants Net (Expense) Revenue and Changes in Net Position FUNCTIONS/PROGRAMS General support Instruction Pupil transportation Employee benefits Debt service Depreciation School lunch program $ (40, ( (38,784,520) (1,299,529) $ (5,139,992) (35,061,845) (1,587,194) 38,784,520 3,672,260 ~667(749) $ 128, ,447 $ 3,060, ,809 $ (14,696,253) (72,027,024) (3,132,512) (1,299,529) (1,406,286) $ (13,262,264) (65,949,691) (2,782,354) (1,459,940) Total Functions and Programs $ 587,203 $ (92,561,604) GENERAL REVENUES Real property taxes Other tax items Use of money and property Sale of property and compensation for loss Miscellaneous State sources Federal sources Local sources Medicaid reimbursement $ 32,839,079 6,904, ,579 2,301,694 36,965,400 3,600,975 1 $ $ $ (895,853) ( ) $ 32,839,079 6,904, ,579 (52,376) 2,301,694 36,069, ,768 $ 32,645,636 7,014,758 1,044,900 4,464 1,645,414 33,893, Total General Revenues $ 82,895,069 $ $ $ 79,577, Change in Net Position (12,984,475) (7,157,272) Total Net (Assets)Position - Beginning of year (15,483,911) (8,325,912) Prior period adjustment to accumulated depreciation Total Net Position End of Year $ (28,468,386) $ 1) See independent auditors' report and notes to financial statements 19

20 BALANCE SHEETS - GOVERNMENTAL FUNDS JUNE 30, 2017 WITH COMPARATIVE TOTALS FOR 2016 Service Project Total Non-Major Funds Total Governmental Funds ASSETS Cash Unrestricted Restricted Receivables Due from other funds Due from fiduciary funds State and Federal aid Due from other governments other Inventories $ 6,474,433 12,056, , ,430 1,620,570 1,986,021 86,782 $ 2,036,276 1, $ 1,116,601 8,761,595 $ 446, ,698 13,139 $ 10,073,341 14,151,292 20,817,823 9,965, , , , ,793 2,203,268 1,376,819 1,986,021 1,631,656 99,941 33,504 Total Assets 1,093,202 $ 35,891,311 $ 28,137,749 LIABILITIES Payables Accounts payable Accrued liabilities Due to other funds Due to fiduciary funds Due to other governments Due to Teachers' Retirement System Due to Employees' Retirement System Notes payable Bond anticipation Deferred credits Unearned revenues Long-term liabilities Compensated absences payable $ 1,794, ,236 2,994, , ,305 $ $ 1,106, ,719,000 $ 385,477 9, , ,000 41,649 $ 3,285, , , ,994, ,583 11,686, ,954 2,142, , , ,268, ,882 6,998, ,884 Total Liabilities 11,826,031 1,900,374 19,677,935 14,341,433 FUND BALANCES Non-spendable Restricted Committed Assigned Unassigned 12,056,228 1,877,687 2,996,583 2,037,885 10,299,141 (12,246,976} 51, ,852 10,879 (1,306,237} 51,334 14,530,965 12,187,707 (10,556,630) 32,901 15,413,476 4,052,762 (5,702,823) Total Fund Balances 16,930,498 2,037,885 ~1,947,8351 (807,172} 13,796,316 Total Liabilities and Fund Balances $ 22,882,028 $ 2,037,885 $ 9,878,196 $ 1,093,202 $ 35,891,311 $ 28,137,749 See independent auditors' report and notes to financial statements 20

21 STATEMENTS OF REVENUES, EXPENDITURES AND CHANGES IN FUND EQUITY GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30,2017 WITH COMPARATIVE TOTALS FOR 2016 General Service Total Non-Major Funds Total Governmental Funds REVENUES Real property taxes Other tax items for services Use of money and property Sale of property and compensation for loss Miscellaneous State sources Medicaid reimbursement Federal sources Local sources Surplus food Sales - school lunch $ 32,839,079 6,904, , ,152 32,355 2,087,828 36,055, ,768 $ 6,291 1,070,874 $ 14,280 $ 136 3, ,853 3,475,416 24, , ,447 $ 32,839,079 6,904, , ,579 32,355 3,162,019 36,965, ,768 3,475,416 24, , ,447 $ 32,645,636 7,014,758 71, ,691 13,380 1,645,414 34,791, ,792 3,128,761 24, , ,803 Total Revenues 78,352,729 1,077,165 14,280 4,983,154 84,427,328 80,522,676 EXPENDITURES General support Instruction Pupil transportation Employee benefits Debt service Principal Interest Cost of sa Ies Capital outlay 9,455,810 38,424,473 1,530,385 20,650,257 4,783,186 1,385, ,409 4,731,033 3,110,510 14, ,116 1,471,965 9,667,219 41,534,983 1,545,318 21,010,373 4,783,186 1,385,505 9,059,302 40,655,778 1,447,652 20,472,059 4,468,193 1,397,652 Total Expenditures 76,229, ,409 4(731,033 6,559,154 87,731,212 84,698,976 Excess (Deficiency) of Revenues Over Expenditures 2,123, ,756 (4,716,753) (1,576,000) (3,303,884) (4,176,300) OTHER FINANCING SOURCES AND USES Proceeds from debt 5,711,000 5,711,000 91,000 Proceeds of refunding bonds 2,225,000 2,225,000 Payment to refunded bond escrow agent (2,215,054) (2,215,054) Operating tra nsfers in 93, ,024 1,017,277 3,845,282 Operating transfers (out) {173,024) (843,258) (995) (1,017,277) p,845,282) Total Other Sources (Uses) (79,645) (832,438) 6,633,029 5,720,946 91,000 Excess (Deficiency) of Revenues and Other Sources Over Expenditures and Other (Uses) 2,043,468 33,318 (4,716,753) 5,057,029 2,417,062 (4,085,300) Fund Balances Beginning of year 14,887,030 2,004,567 2,768, ,796,314 17,881,616 Fund Balances - End of Year $ 16,930,498 $ (1,947,835) $ (807,172) $ 16,213,376 $ 13,796,316 See independent auditors' report and notes to financial statements 21

22 RECONCILIATION OF GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET POSITION JUNE 30, 2017 Total Governmental Long-Term Assets, Liabilities Reclassifications and Eliminations Statement of Net Position Totals ASSETS Cash Unrestricted Restricted investments Receivables Due from other funds Due from fiduciary funds State and Federal aid Due from other governments Other Inventories Capital assets, net Total Assets $ 10,073,341 20,817, , A30 2,203,268 1,986,021 99,941 51,334 $ $ $ 10,073,341 20,817,823 (497,153) 162A30 2,203,268 1,986,021 99,941 51, ,158,741 Deferred cash outflows, pensions 17,164,353 17,164,353 LIABILITIES Payables Accounts payable $ 3,285,878 $ $ $ 3,285,878 Accrued liabilities 176,539 89, ,434 Due to other funds 497,153 (497,153) Due to other governments Due to Teachers' Retirement System 2,994,214 2,994,214 Due to Employees' Retirement System 218, ,583 Notes payable Bond anticipation 11,686,000 11,686,000 Deferred credits Unearned revenues 818, ,954 Long-term liabilities Bonds payable 37,345,620 37,345,620 Compensated absences payable 1,658,727 1,658,727 Other postemployment benefits payable 111,000, ,000,683 Proportionate share of pension liability 3,334,896 Total Liabilities 19,677,935 {497,153} 172,610,603 Deferred cash inflows 4,180,877 4,180,877 FUND EQUITY\NET POSITION Investment in capital assets, net Restricted for: Debt service Other legal restrictions Unrestricted (deficit) Total Net POSition 2,037,885 12A93,080 58,418,963 58,418,963 2,037,885 12A93,080 {l03!100,725} P01A18,3142 See independent auditors' report and notes to financial statements 22

23 UNION~ENDICOTT CENTRAL SCHOOL DISTRICT RECONCILIATION OF GOVERNMENTAL FUNDS REVENUES, EXPENDITURES, AND CHANGES IN FUND EQUITY TO THE STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2017 Total Long-term Capital Long-Term Statement of Governmental Revenue, Related Debt Activities EXl2enses Items REVENUES Real property taxes $ 32,839,079 $ $ $ $ 32,839,079 Other tax items 6,904,524 6/904,524 Charges for services 128, ,756 Use of money and property 200, ,579 Sale of property and compensation for loss 32,355 (84,731) (52,376) Miscellaneous 3,162/019 (860,325) 2,301/694 State sources 36,965,400 36/965,400 Medicaid reimbursement 110, /768 Federal sources 3,475,416 3,475,416 Local sources 24,426 24,426 Surplus food 125, ,559 Sales - school lunch 458,447 Total Revenues 84,427,328 EXPENDITURES\EXPENSES General support 9,667,219 (110,958) 9,556,261 Instruction 41,534,983 (1,380,917) 40,154,066 Pupil tra nsportation 1,545,318 1,545/318 Employee benefits 21,010,373 17,774,147 38,784,520 Debt service Principal 4,783,186 (4,783,186) Interest 1,385,505 (85,976) 1,299,529 Cost of sales 1,471,965 (17/172) 1,454,793 Depreciation 3,672/260 3,672,260 Capital outlay (6,332,663) Total Expenditures 87,731,212 Excess (Deficiency) of Revenues Over Expenditures (3,303,884} 4/084,719 {12,984,475) OTHER SOURCES AND USES Proceeds from debt 5,711,000 (7/936,000) (2,225/000) Proceeds of refunding bonds 2,225,000 2,225,000 Payments to refunded bond escrow agent (2,215,054) 2,215/054 Operating transfers in 1,017,277 1,017,277 Operating transfers (out) (l,017,277j Total Other Sources (Uses) 5,720,946 Net Change for the Year $ See independent auditors' report and notes to financial statements 23

24 STATEMENTS OF FIDUCIARY NET POSITION - FIDUCIARY FUNDS JUNE 30, 2017 AND 2016 Private Purpose Trusts 2016 Agency ASSETS Cash Restricted cash $ $ 214,222 $ 246,671 $ 141,985 Total Assets $ 214,222 $ 388,656 LIABILITIES Due to other funds Extraclassroom activity balances Other liabilities Total Liabilities NET POSITION Reserved for scholarships $ $ 214,222 $ 162, ,985 84,241 $ 388,656 STATEMENT OF CHANGES IN FIDUCIARY NET POSITION - FIDUCIARY FUNDS FOR THE YEAR ENDED JUNE 30,2017 WITH COMPARATIVE TOTALS FOR 2016 Private Purpose Trusts 2016 ADDITIONS Gifts and contributions Investment earnings Total Additions $ 7,178 $ DEDUCTIONS Scholarships and awards Change in Net Position 7,000 (534) (6,391) Net Position Net Position Beginning of year End of Year See independent auditors' report and notes to financial statements 24

25 NOTES TO FINANCIAL STATEMENTS NOTE 1: SUMMARY OF CERTAIN SIGNIFICANT ACCOUNTING POLICIES The financial statements of the Union-Endicott Central School District have been prepared in conformity with generally accepted accounting principles (GAAP) as applied to government units. Those principals 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 utilized by the District are described below: A) Reporting entity: The Union-Endicott Central School 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 Statement 14, The Financial Reporting Entity, as amended by GASB Statement 39, 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 and its component unit. 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 applications of these criteria, the following is a brief description of certain entities included in the District's reporting entity. i) The Extraclassroom Activity Funds The Extraciassroom 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 general purpose financial statements (cash basis) of the Extraclassroom Activity Funds can be found at the District's business office. The District accounts for assets held as an agent for various student organizations in an agency fund. See independent auditors' report 25

26 NOTES TO FINANCIAL STATEMENTS NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) B) Joint venture: The District is a component district in the Broome-Tioga 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 which provide educational and support activities. There is no authority or process by which a school district can terminate its status as a BOCES component. BOCES are organized under Section 1950 of the!\jew 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 Section 1950 of the New York State Education Law. All BOCES property is held by the BOCES Board as a corporation (Section 1950(6)). In addition, BOCES Boards also are considered municipal corporations to permit them to contract with other municipalities on a cooperative basis under Section 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, Section 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 $14,536,646 for BOCES administrative and program costs. The District's share of BOCES aid amounted to $4,092,242. Financial statements for the BOCES are available from the BOCES administrative office. C) Basis of presentation: i) District-wide statements: The Statement of Net Position and the Statement of Activities present financial information about the District's governmental activities. These 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, intergovernmental revenues, and other exchange and non-exchange transactions. Operating grants include operating specific and discretionary (either operating or capital) grants, while the capital grants column reflects capital-specific grants. See independent auditors' report 26

27 NOTES TO FINANCIAL STATEMENTS NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) C) Basis of presentation (continued): i) District-wide statements (continued): The Statement of Net Position presents the financial position of the District at year end. The Statement of Activities presents a comparison between direct 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 direct 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 ali taxes, are presented as general revenues. ii) Fund financial statements: The fund statements provide information about the District's funds, including fiduciary funds. Separate 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. All remaining governmental funds are aggregated and reported as non-major funds. 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. 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. Capital Projects Funds: These funds are used to account for the financial resources used for acquisition, construction, or major repair of capital facilities. For these funds, each capital project is assessed to determine whether it is a major or non-major fund. Those capital projects that are determined to be major are reported in separate columns in the financial statements. Those that are determined to be non-mqjor are reported in the supplemental schedules either separately or in the aggregate. All remaining governmental funds are aggregated and reported as non-major funds. See independent auditors' report 27

28 NOTES TO FINANCIAL STATEMENTS 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 District-wide 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 benefits 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 or 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. 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. Non-exchange 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 governmental fund 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 ninety (90) days after the end of the fiscal year. Expenditures are recorded when the related fund liability is incurred, except for the 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) Property taxes: Real property taxes are levied annually by the Board of Education no later than September 1, and become a lien on September 1. Taxes are collected during the period September 1,2016 through March 31, See independent auditors' report 28

29 NOTES TO FINANCIAL STATEMENTS NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Uncollected real property taxes are subsequently enforced by the Counties in which the District is located. The Counties pay an amount representing uncollected real property taxes transmitted to the Counties for enforcement to the District no later than the following April 1. F) Interfund 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 expenditure and revenues to provide financing or other services. In the district-wide 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. Interfund 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 11 for a detailed disclosure by individual fund for interfund receivables, payables, expenditures and revenues activity. G) 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. H) Cash and investments: The District's cash and cash equivalents consist of cash on handr demand depositsr 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 FDIC-insured commercial banks or trust companies located within the State. Permissible investments include obligations of the United States TreasurYr United States Agenciesr repurchase agreements and obligations of New York State or its localities. See independent auditors' report 29

30 NOTES TO FINANCIAL STATEMENTS NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) I) Cash and investments: (Continued) Collateral is required for demand and time deposits and certificates of deposit not covered by FDIC insurance. Investments are stated at fair value. J) Accounts 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. K) Inventories and prepaid items: Inventories 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. 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 are recorded as prepaid items in both the district-wide and fund financial statements. These items are reported as assets on the statement of net assets 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 reserve for those non-liquid assets (inventory and prepaid items) has been recognized to signify that a portion of fund balance is not available for other subsequent expenditures. L) 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 and their use is limited by applicable bond covenants. In the district-wide financial statements! bond issuance costs are capitalized and amortized over the life of the debt issue. In the funds statements these same costs are netted against bond proceeds and recognized in the period of issuance. M) Capital assets: Capital assets are reported at actual cost for acquisitions subsequent to June 30! 2005 for assets acquired prior to June 30, 2005 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 See independent auditors' report 30

31 NOTES TO FINANCIAL STATEMENTS NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) M) Capital assets (CONTINUED): added to the capital asset accounts), depreciation methods, and estimated useful lives of capital assets reported in the District-wide statements are as follows: Capitalization Depreciation Estimated Threshold Method Useful Life Buildings $ 5,000 SL 40 Building improvements 5,000 SL 25 Site improvements 5,000 SL 25 Furniture and equipment 5,000 SL 5-15 N) Deferred outflows and inflows of resources: 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 reciprocated as an outflow of resources (expense/expenditures) until then. The government has three items that qualify for reporting in this category. First is the deferred charge on refunding reported in the government-wide Statement of Net Position. A deferred charge on funding, results from the difference in the carrying value of refunded or refunding debt. The second item is related to pensions reported in the district-wide Statement of Net Position. This represents the effect of the net change in the District's proportion of the collective net pension asset or liability and difference during the measurement period between the District's contributions and its proportional share of total contributions to the pension systems not included in pension expense. Lastly, the District contributions to the pension systems (TRS and ERS Systems) subsequent to the measurement date. In addition to liabilities, the statement of net position will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. The District has three items that qualify for reporting in this category. First arises only under a modified accrual basis of accounting and is reported as unavailable revenue property taxes. The second item is related to pensions reported in the district-wide Statement of Net Position. This represents the effect of the net change in the District's proportion of the collective net position liability (ERS System) and difference during the measurement periods between the District's contributions and its proportional share of total contributions to the pension systems not included in pension expense. See independent auditors' report 31

32 NOTES TO FINANCIAL STATEMENTS NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) N) Unearned revenues: Unearned revenues are reported when potential revenues do not meet both the measurable and available criteria for recognition in the current period. Unearned revenues also 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 liability for unearned revenues 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. Many unearned revenues recorded in governmental funds are not recorded in the District-wide statements. P) 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 Statement 16, Accounting for Compensated Absences, the liability has been calculated using the vesting/termination method and an accrual for that liability is included in the district-wide financial statements. The compensated absences liability is calculated based on the pay rates in effect at year-end. In the funds statements only the amount of matured liabilities is accrued within the General Fund based upon expendable and available financial resources. These amounts are expensed on a pay-as-you go basis. See independent auditors' report 32

33 NOTES TO FINANCIAL STATEMENTS NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Q) Other benefits: Eligible District employees participate in the New York State Teachers' Retirement System or the New York State and Local Employees' Retirement System. District employees may choose to participate in the District's elective deferred compensation plans established under Internal Revenue Code Sections 403(b) and 457. 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 provision 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 qge 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 expenditure. R) 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 RANs and TANs 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 are 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 See independent auditors' report 33

34 NOTES TO FINANCIAL STATEMENTS NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) S) Short-term debt: (Continued) 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. S) Accrued liabilities and long-term obligations: Payables, accrued liabilities and long-term obligations are reported in the districtwide 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 compensated absences that will be paid from governmental funds, are reported as a liability in the funds financial statements only to the extent that 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. 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. T) Equity classifications: District-wide statements In the district-wide statements there are three classes of net assets: Net investment in capital assets - consists of net capital assets (cost less accumulated depreciation) reduced by outstanding balances of related debt obligations from the acquisition, construction or improvements of those assets. Restricted net position - reports net assets when constraints placed on the assets or/deferred outflows of resources are either externally imposed by creditors (such as through debt covenants), grantors, contributors, or laws or regulations of other governments, or imposed by law through constitutional provisions or enabling legislation. Unrestricted net position - the balance of net position that does not meet the definition of the above two classifications and are deemed to be available for general use by the District. See independent auditors' report 34

35 NOTES TO FINANCIAL STATEMENTS NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) T) Equity classifications (Continued): Funds statements: In the fund basis statements, there are five classifications of fund balance: Non-spendable Fund Balance - Includes amounts that cannot be spent because they are either not in spendable form or legally or contractually required to be maintained intact. Non-spendable fund balance includes the inventory recorded in the School Lunch Fund of $ 51,334. 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. All encumbrances of funds other than the General fund are classified as restricted fund balance. The School District has established the following restricted fund balances: Capital Capital Reserve (Education Law 3651) is 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. Expenditure 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. Unemployment Insurance According to General Municipal Law 6-m, must be used to pay the cost of reimbursement to the State Unemployment Insurance Fund for payments made to claimants where the employer has elected to use the benefit reimbursement method. The reserve may be established by Board action and is funded by budgetary appropriations and such other funds as may be legally appropriated. Within sixty days after the end of any fiscal year, excess amounts may either be transferred to another reserve or the excess applied to the appropriations of the next succeeding fiscal year's budget. If the District elects to convert to tax (contribution) basis, excess resources in the fund over the sum sufficient to pay pending claims may be transferred to any other reserve fund. See independent auditors' report 35

36 NOTES TO FINANCIAL STATEMENTS NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) T) Equity classifications (CONTINUED): Funds statements (Continued): Restricted (Continued) Worker's Compensation According to General Municipal Law 6-j, must be used to pay for compensation benefits and other expenses authorized by Article 2 of the Worker's Compensation Law and for payment of expenses of administering this self-insurance program. The reserve may be established by Board action, and is funded by budgetary appropriations and such other funds as may be legally appropriated. Within sixty days after the end of any fiscal year, excess amounts may either be transferred to another reserve or the excess applied to the appropriations of the next succeeding fiscal year's budget. Encumbrances Encumbrances accounting, under which purchase orders, contracts and other commitments of expenditures are recorded for budgetary control purposes in order to reserve applicable appropriations, is employed as a control in preventing over-expenditure of established appropriations. Open encumbrances are reported as restricted fund balance in all funds other than the General Fund, since they do not constitute expenditures or liabilities and will be honored through budget appropriations in the subsequent year. Restricted fund balance includes the following: General Fund Capital Reserve $ 4,411,750 Employee Benefit Accrued Liability 1,019,862 Retirement Contributions 5,104,760 Tax Certiorari 1,256,629 Unemployment Insurance 263,227 Capital Fund* Debt Service Fund* 2,037,885 School Lunch Fund* 436,852 Total restricted funds *includes remaining fund balance in these funds not otherwise classified as nonspendable, committed or assigned. See independent auditors' report 36

37 NOTES TO FINANCIAL STATEMENTS NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) T) Equity classifications (CONTINUED): Funds statements (Continued): Restricted (Continued) Committed - Includes amounts that can only be used for the specific purposes pursuant to constraints imposed by formal action of the school districts highest level of decision making authority, i.e., the Board of Education. The School Board has no committed fund balances as of June 30, Assigned - Lncludes amounts that are constrained by the school district's intent to be used for specific purposes, but are neither restricted nor committed. All encumbrances of the General Fund are classified as Assigned Fund Balance in the General Fund. Encumbrances reported in the General Fund amounted to $377,687. Unassigned - Includes all other General Fund net assets that do not meet the definition of the above four classifications and are deemed to be available for general use by the School District. 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 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. 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 restricted 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. See independent auditors' report 37

38 NOTES TO FINANCIAL STATEMENTS NOTE I: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED): U) New Accounting Standards. GASB has issued Statement No. 77, Tax Abatement Disclosures, effective for the year ending June 30, V) Future Changes in Accounting Standards GASB has issued Statement 75, Accounting and Financial Reporting for Postemployment Benefits Other than Pensions, effective for the year ending June 30, 2018 this Statement replaces the requirements of Statement No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other than Pensions, as amended, and No. 57, OPEB Measurements by Agent Employers and Agent Multiple-Employer Plans, for OPEB, Statement No. 74, Financial Reporting for Postemployment benefit Plans Other than Pension Plans, establishes new accounting and financial reporting requirements for OPEB plans. The school district will evaluate the impact each of these pronouncements may have on its financial statements and will implement then as applicable and when material. NOTE 2: EXPLANATION OF CERTAIN DIFFERENCES BETWEEN GOVERNMENTAL FUND STATEMENTS AND DISTRICT-WIDE STATEMENTS: Due to the differences in the measurement focus and basis of accounting used in the governmental fund statements and the District-wide 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 Statement of Activities, 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 economic focus of the Statement of Net Position versus the solely current financial resources focus of the governmental fund Balance Sheets, as applied to the reporting of capital assets and long-term liabilities, including pensions. See independent auditors' report 38

39 NOTES TO FINANCIAL STATEMENTS NOTE 2: EXPLANATION OF CERTAIN DIFFERENCES BETWEEN GOVERNMENTAL FUND STATEMENTS AND DISTRICT-WIDE STATEMENTS (CONTINUED): 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 four broad categories. The amounts shown below represent: i) Long-term revenue 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. ii) Capital related differences: Capital related differences include the difference between proceeds for the sale of capital assets reported on governmental fund 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 governmental fund statements and depreciation expense on those items as recorded in the Statement of Activities. iii) Long-term debt transaction differences: Long-term debt transaction differences occur because both interest and principal payments are recorded as expenditures in the governmental fund 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. iv) Pension differences: Pension differences occur as a result of changes in the District's proportion of the collective net pension asset/liability and differences between the District's contributions and its proportionate share of the total contributions to the pension systems. See independent auditors' report 39

40 NOTES TO FINANCIAL STATEMENTS NOTE 3: CHANGES IN ACCOUNTING PRINCIPLES: For the fiscal year ended June 30, 2017, the District implemented GASB Statement No. 77 Tax Abatement Disclosures. See note 17 for the financial statement impact of the implementation of the statement. NOTE 4: STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY Budgets The District administration prepares a budget for approval by the Board of Education for the following governmental funds for which legal (appropriated) budgets are adopted: 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 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: Carryover Encumbrances $ 255,345 Other Unanticipated Revenue 38,167 Use of Tax Certiorari 3,318 Use of Unappropriated Fund balance 57,585 Budgets are adopted annually on a basis consistent with GAAP. Appropriations authorized for the year are increased by the amount of encumbrances carried forward from the prior year. Budgets are established and used for 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. See independent auditors' report 40

41 NOTES TO FINANCIAL STATEMENTS NOTE 4: STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY (CONTINUED) 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 reservations 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. The capital projects had a deficit fund balance of $3,243,193. This will be funded when the District obtains permanent financing for its current construction projects. NOTE 5: CASH (AND CASH EQUIVALENTS)-CUSTODIAL CREDIT, CONCENTRATION OF CREDIT, INTEREST RATE AND FOREIGN CURRENCY RISKS: Cash Custodial credit risk is the risk that in the event of a bank failure, the District's deposits may not be returned to it. While the District does not have a specific policy for custodial credit risk, New York State statues govern the District's investment policies, as discussed previously in these Notes. The District's aggregate bank balances (disclosed in the financial statements), included balances not covered by depository insurance at year-end, collateralized as follows: A) Uncollateralized $ A) Collateralized with securities held by the pledging financial institution, or trust department or agent, but not in the District's name $ 33,686,004 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. Restricted cash as of year-end includes $20,817,823 within the governmental funds and $355,675 in the fiduciary funds. See independent auditors' report 41

42 NOTE 6: RECEIVABLES UNION-ENDICOTT CENTRAL SCHOOL DISTRICT NOTES TO FINANCIAL STATEMENTS Receivables at year-end for individual major funds and non-major funds, including the applicable allowances for uncollectible accounts, are as follows: Governmental Activities Description General Debt Service Non-major Total Accounts receivable $ 86,782 $ 20 $ 99,941 Due from State and Federal 1,620,570 2,203,268 Due from other governments 1,986,021 1, Total $ 3,693,373 District management has deemed the amounts to be fully collectible. NOTE 7: CAPITAL ASSETS Capital asset balances and activities for the year ended June 30,2017 were as follows: Beginning Ending Balance Additions Retirements Adjustments Balance Governmental Activities: Capital assets that are not depreciated: Land $ 350,000 $ $ $ $ 350,000 Construction in progress 10,884,206 Total non-depreciable historical cost 11,234,206 5,903,536 Capital assets that are depreciated: Buildings $ 115,374,083 $ 9,174,583 $ $ $ 125,786,933 Furniture and equipment 12,801, ,725 13,030,736 Total depreciable historical cost 128,175,699 9,805,308 Total non-depreciable and depreciable costs 139,409,905 15,708,844 (401,605} 146,850,012 Less accumulated depreciation: Buildings $ 37,539,125 $ 3,063,899 $ $ 64,493 $ 40,667,517 Furniture and equipment 10,190, ,835 (316,874} Total accumulated depreciation 47,730,043 3,622,734 (316,874} 49,526 Total depreciable historical cost, net ~ 91,679,862 ~ 12,086,110 ~ (84,731} Depreciation expense was charged to governmental functions as follows: General Support Instruction Pupil Transportaion Cost of Goods Sold $ 1,100,387 2,146, ,499 24,482 ~ 3,622,734 See independent auditors' report 42

43 NOTES TO FINANCIAL STATEMENTS NOTE 8: SHORT-TERM DEBT: The District may issue Revenue Anticipation Notes and Tax Anticipation Notes, 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 RANs and TANs 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 an insufficient or no provision is 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, 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 BANs issued for capital purposes be converted to long-term Financing within five years after the original issue date. Transactions in short-term debt for the year are summarized below: Interest Beginning Ending Maturity Rate Balance Issued Balance 10/27/ % $ 6,998,000 $ 967,000 $ 6,998,000 $ 967,000 6/29/18 2.0% 10,719,000 10,719,000 Interest on short-term debt for the year was composed of: Interest paid Plus interest accrued in current year Less interest accrued in prior year Total interest on short-term debt NOTE 9: LONG-TERM DEBT: Long-term liability balances and activity for the year are summarized below: Interest on long-term debt for the year was composed of: Interest paid $ 1,196,267 Plus interest accrued in current year 81,373 Less interest accrued in prior year (78,753) Total interest on long-term debt Lkl See independent auditors' report 43

44 NOTES TO FINANCIAL STATEMENTS NOTE 9: LONG-TERM DEBT (CONTINUED): Long-term liability balances and activity for the year are summarized below: Governmental Activities: Bonds and notes payable General obligation debt: Total bonds and notes payable Other liabilities: Compensated absences Other postemployment benefits payable Net pension liability Total other liabilities Total long-term liabilities Beginning Balance Issued Redeemed Ending Balance Amounts Due Within One Year The General Fund has typically been used to liquidate long-term liabilities such as compensated absences. Bonds payable is comprised of the following: Outstanding Description of Issue Final Maturity Interest Rate at Year End Statutory Insta II Bond % 50,620 Statutory Insta II Bond % 90,000 Serial Bonds % 6,220,000 Serial Bonds % 8,485,000 Serial Bonds % 7,915,000 Serial Bonds % 7,190,000 Serial Bonds % 2,190/000 Serial Bonds % 5,205/000 The following is a summary of debt service requirements for bonds payable: Fiscal year ended: Principal Interest June 30,2018 $ 4,555,620 $ 1/40 $ 5 /962, ,745,000 1/171 /369 5 /916/ ,860,000 1/007,456 5 /867, ,700, /213 5,541, ,595, /938 5,278 / ,945,000 1,611,000 13,556, ,750 2,207,750 $ 44,330,718 See independent auditors' report 44

45 NOTES TO FINANCIAL STATEMENTS NOTE 9: LONG-TERM DEBT (CONTINUED): On November 2, 2016, the District issued $2,225,000 in general obligation bonds with an average rate of 3.9% to advance refund $2,140,000 of outstanding 2008 Series bonds with an average interest rate of 4.0%, and outstanding 2010 Series bonds with an average interest rate of 5.155%. The net proceeds of $2,291,167 (after bond premium of $66,167 and payment of $76,112 in underwriting fees, insurance and other issuance costs) were used to purchase United States government securities. These securities were deposited in an irrevocable trust with an escrow agent to provide for all future debt service payments on the bonds. As a result, the bonds are considered to be defeased and the liability for those bonds has been removed from the District's financial statements. The district advance refunded the bonds to revise its payment schedules due to changes in New York State's aid payment schedules. The economic gain (loss) on the transaction (the difference between the present values of the debt service payments on the old and new debt) is approximately $144,900. In prior years, the District defeased certain general obligations and other bonds by placing the proceeds of new bonds in an irrevocable trust to provide for all future debt service payments on the old bonds. Accordingly, the trust account assets and the liability for the defeased bonds are not included in the District's financial statements. $15,339,000 of bonds outstanding are considered defeased. NOTE 10: PENSION PLANS General Information The District participates in the New York State Teachers' Retirement System (TRS) and the New York State and Local Employees' Retirement System (ERS). These are cost-sharing multiple employer public employee retirement systems. The Systems offer a wide range of plans and benefits, which are related to years of services and final average salary, vesting of retirement benefits, death and disability. Provisions and administration A 10-member Board of Trustees of the New York State Teachers' Retirement Board administers NYSTRS. TRS provides benefits to plan members and beneficiaries as authorized by the Education Law and the Retirement and Social Security Law (NYSRSSL) of the State of New York. Membership is mandatory and automatic for all full-time teaching assistants, guidance counselors and administrators employed in New York Public Schools and BOCES who elected to participate in TRS. Once a public employer elects to participate in the System, the election is irrevocable. The New York State Constitution provides that pension membership is a contractual relationship and plan benefits cannot be diminished or impaired. Benefits can be changed for future members only by enactment of a State statute. TRS 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 See independent auditors' report 45

46 NOTE 10: PENSION PLANS (CONTINUED) NOTES TO FINANCIAL STATEMENTS Provisions and administration (Continued) ERS provides retirement benefits as well as death and disability benefits. The net position of the System is held in the New York State Common Retirement Fund (the Fund), which was established to hold all net assets and record changes in plan net position allocated to the System. The Comptroller of the State of New York serves as the trustee of the Fund and is the administrative head of the System. NYSSRSSL governs obligations of employers and employees to contribute, and benefits to employees. Once a public employer elects to participate in the System the election is irrevocable. The New York State Constitution provides that pension membership is a contractual relationship and plan benefits cannot be diminished or impaired. Benefits can be changed for future members only by enactment of a State Statute. The District also participates in the Public Employees' Group Life Insurance Plan (GLIP), which provides death benefits in the form of life insurance. The System is included in the State's financial statements and required supplementary information. That report may be obtained by writing to NYSERS, Governor Alfred E. Smith State Office Building, Albany, New York Funding Policies The Systems are noncontributory, except for employees who joined the Systems after July 27, 1976, who contribute 3% of their salary, except that employees in the Systems more than ten years are no longer required to contribute. For employees who joined after January 1, 2010, employees in NYSERS contribute 3% throughout their active membership and those in NYSTRS contribute 3.5% throughout their active membership. Those joining on or after April 1, 2012, are required to contribute between 3% and 6% dependent on their salary, for their entire working career. For NYSERS, the Comptroller certifies the rates expressed as proportions of members' payroll annually, which are used in computing the contributions required to be made by employers to the pension accumulation fund. Pursuant to Article 11 of the ucation Law, the New York State Teachers' Retirement Board establishes rates annually for NYSTRS. The District is required to contribute at an actuarially determined rate. The District contributions made to the Systems were equal to 100% of the contributions required for each year. The required contributions for the current year and two preceding years were: NYSERS $ 3,234,260 $ 855, ,000, , ,844,874 1,104,311 Since 1989, the I\JYSERS billings have been based on Chapter 62 of the Laws of 1989 of the State of New York. This legislation requires participating employers to make payments on a current basis, while amortizing existing unpaid amounts, relating to the System's fiscal years ending March 31, 1988 and 1989 over a 17-year period, with an 8.75% interest factor added. Local governments were given the option to prepay this liability. The District did not exercise that option. There was no unpaid liability at the end of the year. See independent auditors' report 46

47 NOTE 10: PENSION PLANS (CONTINUED) NOTES TO FINANCIAL STATEMENTS PENSION, LIABILITIES, PENSION EXPENSE, AND DEFERRED OUTFLOWS OF RESOURCES AND DEFERRED INFLOWS OF RESOURCES RELATED TO PENSIONS At June 30, 2017, the District report the following asset/(liability) for its proportionate share of the net pension asset/(iiability) for each of the Systems. The net pension asset/ (liability) was measured as of March 31, 2017 for ERS and June 30, 2016 for TRS. The total pension asset/liability used to calculate the net position asset/(iiability) was determined by an actuarial valuation. The District's proportion of the net pension asset/(liability) was based on a projection of the District's long-term share of contributions to the Systems relative to the projected contributions of all participating members, actuarially determined. This information was provided by the ERS and TRS systems in reports provided to the District.y ERS TRS Actuarial valuation date 31-Mar Jun-16 Net pension (asset)/liability $ 1,730,248 $ 1,604,035 District's portion of the Plan's total Net pension (asset)/iiability % % Change in proportion since the prior Measurement date ( )% ( )% For the year ended June 30, 2017, the District's recognized pension expense of $1,063,071 for ERS and the actuarial value $3,064,399 for TRS. At June 30, 2017 the District's reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred outflows of Resources Deferred Inflows of Resources Differences between expected and actual experience $ 43,358 $ $ 262,748 $ 521,081 Changes of assumptions 591,116 9,137,606 l'jet djfference between projected and actual earnings on pension plan investments 345,601 3,606,715 Changes in proportion and differences between the District's contributions and proportionate share of contributions 228, ,012 29,528 6,232 District's contributions subsequent to the measurement date 218,583 Total $ 52Z,313 See independent auditors' report 47

48 NOTE 10: PENSION PLANS (CONTINUED) NOTES TO FINANCIAL STATEMENTS PENSION, LIABILITIES, PENSION EXPENSE, AND DEFERRED OUTFLOWS OF RESOURCES AND DEFERRED INFLOWS OF RESOURCES RELATED TO PENSIONS (CONTINUED) District contributions subsequent to the measurement date which will be recognized as a reduction of the net pension liability in the year ended June 30, Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows: Year ended: 2017 $ $1,139, ,446 1,139, ,446 3,940, ,608 3,069, (214,159) 1,420, Thereafter AcrUARIAL ASSUMPTIONS The total pension liability as of the measurement date was determined by using an actuarial valuation as noted in the table below, with update procedures used to roll forward the total pension liability to the measurement date. The actuarial valuations used the following actuarial assumptions: Significant actuarial assumptions used in the valuations were as follows: Measurement date March 31, 2017 June 30, 2016 Actuarial valuation date April 1, 2016 June 30, 2015 Interest rate 7.0% 7.5% Salary scale 3.8%-4.5% 1.90%-4.72% Decrement tables April 1, July 1, 2005 March 31, 2015 June 30, 2010 System's Experience System's Experience Inflation rate 2.5% 2.5% For ERS, annuitant mortality rates based on April 1, 2005 March 31, 2011 System's experience with adjustments for mortality improvements based on MP For TRS, annuitant mortality rates are based on July 1, June 30, 2010 System's experience with adjustments for mortality improvements based on Society of Actuaries Scale AA. See independent auditors' report 48

49 NOTE 10: PENSION PLANS (CONTINUED) NOTES TO FINANCIAL STATEMENTS PENSION, LIABILITIES, PENSION EXPENSE, AND DEFERRED OUTFLOWS OF RESOURCES AND DEFERRED INFLOWS OF RESOURCES RELATED TO PENSIONS (CONTINUED) ACTUARIAL ASSUMPTIONS (Continued) For ERS, the actuarial assumptions used in the April 1, 2015 valuation are based on the results of an actuarial experience study for the period April 1, 2010 March 31, For TRS, the actuarial assumptions used in the June 30, 2013 valuation are based on the results of an actuarial experience study for the period July 1, 2005 June 30, The long term rate of return on pension plan investments was determined using a building block method in which best estimate ranges of expected future real rates of return (expected returns net of investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long term expected rate of return by weighting the expected future real rates of return by each target asset allocation percentage and by adding expected inflation. Best estimates of the arithmetic real rates of return of each major asset class included in the target asset allocation are summarized below: TRS Measurement date March 31, 2017 June 30, 2016 Asset Type /0 Asset Type /0 Domestic equity 36% Domestic equity 37% International equity 14 International equity 18 Private equity 10 Private equity 7 Real estate 10 Real estate 10 Absolute return strategies 2 Domestic fixed income 17 Global fixed income 2 Opportunistic portfolio 3 Mortgages 8 Real assets 3 Short-term 1 Bonds and mortgages 17 Cash 1 Inflation-indexed bonds 4 DISCOUNT RATE The discount rate used to calculate the total pension liability was 7.0% for ERS and 7.5% for TRS. The projection of cash flows used to determine the discount rate assumes that contributions from plan members will be made at the current contribution rates and that contributions from employers will be made at statutorily required rates, actuarially. Based upon the assumptions, the Systems' fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. See independent auditors' report 49

50 NOTE 10: PENSION PLANS (CONTINUED) NO"rES TO FINANCIAL STATEMENTS PENSION, LIABILITIES, PENSION EXPENSE, AND DEFERRED OUTFLOWS OF RESOURCES AND DEFERRED INFLOWS OF RESOURCES RELATED TO PENSIONS (CONTINUED) SENSITIVITY OF THE PROPORTIONATE SHARE OF THE NET PENSION LIABILITY TO THE DISCOUNT RATE ASSUMPTION The following presents the District's proportionate share of the net liability calculated using the discount rate of 7.0% for ERS and 7.5% for TRS, as well as what the District's proportionate share of the net pension asset/(iiability) would be if it were calculated using a discount rate that is 1- percentage point lower (6.0% of ERS and 6.5% for TRS) or 1-pecentage point higher (8.5% for ERS and 9.0% for TRS) than the current rate: ERS 1% Current 1% Decrease Assumption Increase 8.0%) Employer's proportionate share of the net pension (asset) liability $ 5,526,070 $ 1,730,248 ($1,479,112) SENSITIVITY OF THE PROPORTIONATE SHARE OF THE NET PENSION LIABILITY TO THE DISCOUNT RATE ASSUMPTION (CONTINUED) TRS 1% Current 1% Decrease Assumption Increase j].5)% (8.5%) Employer's proportionate share of the net pension (asset) liability $ 20,928,285 $ 1,604,035 ($14,604,133) PENSION PLAN FIDUCIARY POSITION The components of the current-year net pension asset/(iiability) of the employers as of the respective valuation dates, were as follows: (Dollars in Thousands) ERS TRS Valuation date March 31, 2017 June 30, 2016 Employers' total pension (asset)/iiability $ $ 108,577,184 Plan Net Position (107,506,142) Employers' total pension (asset)/liability.$ 1~_I_Q42 Ratio of plan net position to the Employers' total pension asset/(iiability) 94.7% 99.01% See independent auditors' report 50

51 NOTES TO FINANCIAL STATEMENTS NOTE 10: PENSION PLANS (CONTINUED) PAYABLES TO THE PENSION PLAN For ERS, employer contributions are paid annually based on the System's fiscal year which ends on March 3Pt. Accrued retirement contributions as of June 30, 2017 represent the projected employer contribution for the period of April 1,2017 through June 30, 2017 based on paid ERS wages multiplied by the employer's contribution rate, by tier. Accrued retirement contributions as of June 30, 2017 amounted to $218,583. For TRS, employer contributions for the fiscal year ended June 30, 2016 are paid to the System in September, October and November, 2016 through a state aid intercept. Accrued retirement contributions as of June 30, 2017 represent employee and employer contributions for the fiscal year ended June 30, 2017 based on TRS wages multiplied by the employer's contribution rate, by tier and employee contributions for the fiscal year as reported to the TRS System. Accrued retirement contributions as of June 30,2017 amounted to $2,994,214. NOTE 11: INTERFUND BALANCES AND ACTIVITY: Interfund Receivable Payable Interfund Revenues Expenditures General Fund $ 657,994 $ $ 93,379 $ 173,024 Special Aid Funds 489,074 69,921 School Lunch Fund 6,261 3,103 Capital Funds 1, , Debt Service 1, ,258 Total government activities 659, ,153 1,017,277 1,017,277 Fiduciary Agency Fund 162,430 Totals $ 659,583 $ 659,583 $ 1,017,277 $ 1,017,277 See independent auditors' report 51

52 NOTES TO FINANCIAL STATEMENTS NOTE 11: INTERFUND BALANCES AND ACTIVITY (CONTINUED): Interfund receivables and payables, other than between governmental activities and fiduciary funds, are eliminated on the Statement of Net Position. The District typically transfers from the General Fund to the Special Aid Fund, to fund the local share of the Section 4408, Summer School Handicapped Program. 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. NOTE 12: POST-EMPLOYMENT BENEFITS The District provides post-employment health insurance (life insurance, etc.) coverage to retired employees in accordance with the provisions of various employment contracts. Currently, approximately 506 retired employees have some or all of their health insurance paid for by the District. In addition, some retirees have elected to use accumulated sick pay to finance health insurance payments. This plan pays for 0% 70% of the cost of premiums until the accumulated sick pay amount is exhausted, at which time the insurance payments become the responsibility of the retiree. Funding Policy: The contribution requirements of Plan members and the District are established by the Board of Education; the required contribution is based on projected pay-as-you-go financing requirements, with an additional amount to prefund benefits as may be determined annually by the Board. For fiscal year 2017, the District contributed $4,893,016 to the plan, including $4,893,016 for current premiums (approximately 100 percent of total premiums) and an additional $0 to prefund benefits. Plan members receiving benefits contributed $1,646/070, or approximately 26% percent of the total premiums. Retirees contribute between 0% and 70% of the monthly premium of $ for retiree-only coverage and $1, for family coverage under the indemnity plan and $ and $1,767.11/ respectively, for single and family coverage for the preferred plan. Annual OPEB Cost and Net OPEB Obligation: The District's annual other postemployment benefit (OPEB) cost (expense) is calculated based on the annual required contribution of the employer (ARC)/ 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 amortize any unfunded actuarial 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 to HP: See independent auditors' report 52

53 NOTES TO FINANCIAL STATEMENTS NOTE 12: POST-EMPLOYMENT BENEFITS (CONTINUED) Annual OPEB Cost and Net OPEB Obligation (Continued): Annual required contribution $ 24,376,324 Interest on net OPEB obligation 3,298,289 Adjustment to annual required contribution (6,003,121) Annual OPEB cost (expense) 21,671,492 Contributions made (4,907,640) Increase in net OPEB obligation 16,763,852 Net OPEB obligation - beginning of year 94,236,831 Net OPEB obligation - end of year $ 111,000,683 The District's annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation for 2017 was as follows (dollar amounts in thousands) : Percentage of AnnualOPEB Annual OPES Net OPES Fiscal Year Ended Cost Cost Contributed Obligation 6/30/2017 $ 21,671, % $ 111,000,683 6/30/2016 $ 20,242, % $ 94,236,831 6/30/2015 $ 19,298, % $ 79,176,532 6/30/2014 $ 19,367, % $ 64,673,971 6/30/2013 $ 18,719, % $ 49,861,746 6/30/2012 $ 14,784, % $ 35,551,730 6/30/2011 $ 14,116, % $ 24,910,074 6/30/2010 $ 10,836, % $ 14,380,501 6/30/2009 $ 10,359, % $ 7,101,858 Funded Status and Funding Progress. As of June 30, 2016, the most recent actuarial valuation date, the plan was 0% funded. The actuarial accrued liability for benefits was $217,089,273, and the actuarial value of assets was $0, resulting in an unfunded actuarial accrued liability (UAAL) of $217,089,273. The covered payroll (annual payroll of active employees covered by the plan) was $29,781,477 and the ratio of the UAAL to the covered payroll was 729%. 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. See independent auditors' report 53

54 NOTES TO FINANCIAL STATEMENTS NOTE 12: POST-EMPLOYMENT BENEFITS (CONTINUED) 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 June 30, 2016, actuarial valuation, the projected unit credit method was used. The actuarial assumptions included a 3.5% 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 6.3% initially, reduced by decrements to an ultimate rate of 5.8% after 5 years. The UAAL is being amortized as a level percentage of projected payrolls on an open basis. The remaining amortization period at June 30, 2017, was twenty-two years. NOTE 13: RISK MANAGEMENT The District is exposed to various risks of loss related to torts, theft, damage, injuries, errors and omissions, natural disasters, and other risks. These risks are covered by commercial insurance purchased from independent third parties. Settled claims from these risks have not exceeded commercial insurance coverages for the past two yea rs. The District participates in the Broome-Tioga, Delaware Health Insurance, a nonconsortium-risk-retained public entity risk pools for its employee health and accident insurance coverage. The pool is operated for the benefit of seventeen individual governmental units located within the pools geographic area, and is considered a self-sustaining risk pool that will provide coverage for its members up to $1,000,000 per insured event. The pool obtains independent coverage for insured events in excess of the $1,000,000 limit, and the District has essentially transferred all related risk to the pool. At June 30, 2017, the estimated Incurred But Not Reported (II\JBR) amount for claims to be paid in 2017/18 is $882,537. NOTE 14: FUND BALANCES Portions of fund balances are reserved and not available for current expenses or expenditures, as reported in the Governmental Funds Balance Sheet. NOTE 15: CONTINGENCIES AND COMMITMENTS 1. Federal 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, will be immaterial. See independent auditors' report 54

55 NOTES TO FINANCIAL STATEMENTS NOTE 15: CONTINGENCIES AND COMMITMENTS (CONTINUED) 2. Tax Certiorari Claims: The District is not formally a party to these tax certiorari cases, but does receive notice and has a right to intervene in them. Cases that are pending for the current year and prior years amount to $1,269,966 at maximum potential refund, however, estimates of possible tax reductions cannot be calculated at this time, and therefore are not reflected in the financial statements. NOTE 16: DONOR-RESTRICTED FUNDS The District administers funds, which are restricted by the donor for the purposes of schola rsh ips. The value of donor-restricted funds that are available for authorization for expenditure by the District is $213,689. The District authorizes expenditures from donor-restricted funds in compliance with the wishes expressed by the donor, which varies among the unique endowments administered by the District. NOTE 17: TAX ABATEMENTS The County of Broome entered into a property tax abatement program for the purpose of economic development. The School District property tax revenue was reduced by $21,455. The District received payment in lieu of tax (PILOT) payments totaling $11,804. NOTE 18: SUBSEQUENT EVENTS The District has evaluated events through September 8, 2017, which is the date the financial statements are available to be issued, for possible disclosure and recognition in the financial statements. In August, 2017, the District received notice of probable settlement of a pending tax certiorari case. The claim has been settled for approximately 10% of the amount requested by the property owner or $62,299. At June 30, 2017, additional funds sufficient to cover this claim were transferred to the Tax Certiorari reserve. This claim is not included in pending claims in Note 15. See independent auditors' report 55

56 REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF FUNDING PROGRESS OTHER POST EMPLOYMENT BENEFITS, SCHEDULE OF DISTRICT'S CONTRIBUTIONS-NYSLRS, SCHEDULE OF DISTRICT'S PROPORTIONATE SHARE OF THE NET PENSION LIABILITY NYSLRS, SCHEDULE OF DISTRICT'S CONTRIBUTIONS-NYSTRS, SCHEDULE OF DISTRICT'S PROPORTIONATE SHARE OF THE NET PENSION LIABILITYI (ASSET)-NYSTRS, THE SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET (NON-GAAP BASIS) GENERAL FUND AND SUPPLEMENTARY INFORMATION

57 Supplemental Schedule #1 Actuarial Valuation Date UNION-ENDICOTT CENTRAL SCHOOL DISTRICT SCHEDULE OF FUNDING PROGRESS OTHER POST EMPLOYMENT BENEFITS PLAN FOR THE YEAR ENDED JUNE Actuarial Accrued Unfunded AAL Liability (AAL) (UAAL) Funded (in thousands) (in thousands) Ratio (b) (b-a) (a/b) Actuarial Value of Assets (a) July 1, 2016 $ $ 217,089 $ 217,089 $ July 1, , ,282 1, , ,154 1, , ,099 July 1, , ,947 July 1, , ,795 July 1, , ,209 July 1, , ,915 Covered payroll (in thousands) (cl $ 29,781 28,228 28,150 28,384 27,811 29,640 28,732 28,965 UAAL as a of Payroll «(b-a)/c) % % % % % % % % See paragraph on supplementary schedules included in the independent auditors' report 57

58 Supplemental Schedule # 2 UNION-ENDICOTT CENTRAL SCHOOL DISTRICT REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF DISTRICT CONTRIBUTIONS NYSLRS LAST 10 FISCAL YEARS FOR THE YEAR ENDED JUNE 30, 2017 Contractually required contribution 2011 $ 825,226 $ ,066,724 $ ,104,311 $ ,993 Contributions in relation to the contractually required contribution 546, , ,226 1,217,681 1,309,618 1,087,379 1,066,724 1,104, ,993 Contribution deficiency (excess) $ $ $ $ $ $ $ $ $ District's covered -employee payroll 6,840,215 6,928,778 7,441,628 7,631,412 7,156,345 6,466,581 5,983,363 6,058,968 5,813,840 Contributions as a percentage of covered-employee payroll 7,99% 7,75% 11.09% 15,96% 18,30% 16,82% 17,83% 18,23% 15,82% See paragraph on Supplemental Schedule included in independent auditors' report 58

59 Supplemental Schedule #3 UNION-ENDICOTT CENTRAL SCHOOL DISTRICT REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF DISTRICT'S PROPORTIONATE SHARE OF THE NET PENSION LIABILITY NYSLRS PENSION PLAN LAST TWO FISCAL YEARS FOR THE YEAR ENDED JUNE 30, District's proportion of the net pension liability $ 638,709 $ 3,101,118 $1,730,248 District's proportionate share of the net pension liability % % % District's covered-employee payroll 6,058,968 5,813,840 5,875,366 Plan fiduciary net position as a percentage of the total pension liabilitv 97.90% 90.70% 94.70% See paragraph on supplemental schedules included in independent auditors' report 59

60 Supplemental Schedule # 3 UNION-ENDICOTT CENTRAL SCHOOL DISTRICT REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF DISTRICT CONTRIBUTIONS NYSTRS LAST 10 FISCAL YEARS FOR THE YEAR ENDED JUNE 30, 2017 Contractually required contribution $ 2009 $ 1,865, $ 1,538, $ 2,131, $ 2,116, $ 2,622, $ 3,704, $ 3,676,931 Contributions in relation to the contractually required contribution 2,081,001 1,865,393 1,538,842 2,131,691 2,116,359 2,622,518 3,704,574 3,676,931 4,000,230 3,064,399 Contribution deficiency (excess) $ $ $ $ $ $ $ $ $ $ District's covered -employee payroll 23,837,353 24,448,135 24,860,125 24,729,593 23,798,607 22,760,645 23,365,591 23,536,326 24,049,396 24,533,203 Contributions as a percentage of covered-employee 8.73% 7.63% 6.19% 8.62% 8.89% 11.52% 15.85% 15.62% 16.63% 12.49% Sse paragraph on supplemental schedules included in independent auditors' report 60

61 Supplemental Schedule #5 UNION-ENDICOTT CENTRAL SCHOOL DISTRICT REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF DISTRICT'S PROPORTIONATE SHARE OF THE NET PENSION LIABILITY!(ASSET) NYSTRS PENSION PLAN LAST THREE FISCAL YEARS FOR THE YEAR ENDED JUNE 30, District's proportion of the net pension liability (asset) $ (17,063A45) $ (15,778,879) $ 1,604,035 District's proportionate share of the net pension liability (as % % % District's covered-employee payroll 23,536,326 24,049,396 24,533,203 Plan fiduciary net position as a percentage of the total pension liability % % 99.10% See paragraph on supplemental schedules included in independent auditors' report 61

62 Supplemental Schedule #6 UNION-ENDICOTT CENTRAL SCHOOL DISTRICT REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET (NON-GAAP BASIS) AND ACTUAL - GENERAL FUND FOR THE YEAR ENDED JUNE 30, 2017 Continued on next page 62

63 Supplemental Schedule #6(cont) UNION-ENDICOTT CENTRAL SCHOOL DISTRICT REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET (NON-GAAP BASIS) AND ACTUAL - GENERAL FUND (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2017 Final Budget Variance With Original Final Actual Year-end Budgetary Actual Bud~et Budget (Budgetary Basis) Encumbrances And Encumbrances EXPENDITURES General Support Board of education $ 60,004 $ 71,004 $ 51,613 $ $ 19,391 Central administration 264, , ,289 6,223 Finance 1,177,834 1,179,334 1,121,991 1,650 55,693 Staff 576, , ,719 6,703 82,329 Central services 7,179,918 7,219,971 6,644,216 68, ,376 Special items 863, ,982 Total General Support 10,206,071 9,455,810 76, ,529 Instruction Instruction, administration and improvement 2,622,647 2,618,169 2,440,871 5, ,016 Teaching - regular school 18,754,831 18,717,763 18,279,928 63, ,174 Programs for children with handicapping conditions 11,558,596 12,343,125 12,110,649 60, ,824 Occupational education 967, , ,231 13,707 29,561 Teaching special school 87,840 87,840 85,724 2,116 Instructional media 2,037,904 2,058,121 1,904,190 3, ,593 Pupil services 2,738,686 2,959,034 2,706, ,166 97,988 Total Instruction 38,767,593 39,723,551 38,424, , ,272 Pupil transportation 1,763,005 1,759,510 1,530, ,975 Employee benefits 22,250,926 21,306,517 20,650, ,260 Debt service 6,252,364 6,168,691 Total Expenditures 79,156,442 79,243,113 76,229, ,688 2,635,809 OTHER FINANCING USES Transfers (to)/from other funds 165, ,000 4,976 Total Expenditures and Other Uses 76,402,640 $ 377,688 $ 2,640,785 Net Change in Fund Balances Fund balance - Beginning Fund balance - Ending $ 2,043,468 14,887,030 16,930,498 See paragraph on supplemental schedules included in independent auditors' report 63

64 Supplemental Schedule #7 UNION-ENDICOTT CENTRAL SCHOOL DISTRICT SCHEDULES OF CHANGE FROM ORIGINAL BUDGET TO REVISED BUDGET AND USE OF UNRESERVED FUND BALANCE - GENERAL FUND JUNE 30, 2017 CHANGE FROM ADOPTED BUDGET TO REVISED BUDGET Adopted budget Add: Prior year's encumbrances Original budget Budget revision: Unanticipated revenues Appropriated reserves Appropriated fund balance Final budget $ $ 79,066, ,345 79,321,938 14,263 3,505, ,000 82,981,805 SECTION 1318 OF REAL PROPERTY TAX LAW LIMIT CALCULATION Voter-approved expenditure budget Maximum allowed $ $ 81,345,530 3,253,821 General Fund Fund Balance Subject to Section 1318 of Real Property Tax Law: Unrestricted fund balance: Assigned fund balance Unassigned fund balance Total unrestricted fund balance Less: Appropriated fund balance Encumbrances included in assigned fund balance Total adjustments General Fund Fund Balance subject to Section 1318 of Real Property Tax Law Actual percentage 3.35% See paragraph on supplemental schedules included in independent auditors' report 64

65 UNION-ENDICOTT CENTRAL SCHOOL OISTRICT SCHEDULE OF PROJECT EXPENDITURES - CAPITAL PROJECTS FUND JUNE Expenditures Fund Onqinal Prior Current 8alance BudQet Years Year Total State Aid Total 06/30/17 403, ,103 1, , ,037,266 1, ,194 (1.118,401) 125, ,623 36, , , , (220,236) 330, , ,782 (1,824) 1,192,200 1,724,373 49, , , ,230 (904,143) 830, , , , ,294 14,280 14,280 (569,263) 5,716,910 5, , , ,707 3,828,949 (1,340,707) 1,997,000 1,997,000 1,997, , ,536 3,500,000 3,500,000 3, , ,388 (973} Watson Cap lmorov 971, , ij W"tSQn Cap Improv 1,2: ,566,091 58, , , ,308 ( ) ~ Bus Garaoe Cap ImpfOv 588, ,353 27, , ,639 ( ) AG McGuiness 2016 Cap!mprQv 1,977,000 1,859, , ,410 1,274,320 (585,410) AG McGuiness Smart Bonds 397, ,189 (974) ~0"017 ~O 15 AG McGuiness 2016 Cap lmprov 94,770 94,770 94,770 03' ~0"017~017 District Admin Smart Bonds 127,Q22 52,175 52,175 74,847 (52,175) 03 15~01"06~ 1"030~005 District Admin 2:016 Cap Improv 326, ,750 5,233 5, (5,233) 03-15wOl 06~ Major projects: $ 15,98'7;(500 19,685, M3 $ 4,731,033 $ 11,547,407 14,280 $ 3,500,000 3,S14~ $ 0,947,836) Non"omajor capital projects 1,215,000 1,215, , ,000 $ 1,215, ,000 (967,000) 100, , , ,000 9, , , ,444 1, ,175,439 1,392, ,012 99, ,712 21,712 21,712 21,712 4, , , , , ,564 97, , , , , , , , , , , ,803 2,823, , ,595 ( ) 262, , , ,603 2,158,693 2,290,046 (135,248) 2,154,798 3, , $ ,158,693 3, , , ,065,598 (333,001) ,398 (424,200) 214, , ,355 64, , , , ,700 70,636 36, , , , , , , , ,500 34,082 34,082 34, ,082 1, , ,260 73, , , , , ,365 87, , , , , ; , , , ,863, ,019,141 1~392,398 Totals $ 47, $ 30,995,025 5, $ $ 24,175,439 $ 1406,678 $ 8.125,744 $ ( ) See pafagraph auditor:;; report

66 Supplemental Schedule # 9 UNION-ENDICOTT CENTRAL SCHOOL DISTRICT SUPPLEMENTARY INFORMATION COMBINED BALANCE SHEET - NON-MAJOR FUNDS JUNE 30,2017 School Lunch Special Aid Nonmajor Capital Projects Total Non-Major Funds ASSETS Cash Unrestricted Receivables Due from other funds Due from fiduciary funds State and Federal aid Other Inventories $ 385,841 95,458 13,139 51,334 $ 60, ,240 $ $ 446, ,698 13,139 51,334 Total Assets $ 545,772 $ 547,430 $ 1,093,202 LIABILITIES Payables Accounts payable Accrued liabilities Due to other funds Due to fiduciary funds Due to other governments Notes payable Bond anticipation notes Deferred credits Unearned $ 25,672 9,055 6, ,984 $ 32, ,074 25,665 $ 327, ,000 $ 385,477 9, , ,000 41,649 Total Liabilities 57, ,430 1,295,358 1,900,374 FUND BALANCES Nonspendable Restricted Assigned Unassigned Total Fund Balances 51, , ,186 3,177 (3,177) 7J02 (1,303,0602 {i,295,358) 51, ,852 10,879 (1,306(237) (807, 1722 Total Liabilities and Fund Balances $ 545,772 $ 547,430 $ $ 1,093,202 See paragraph on supplemental schedules included in independent auditors' report 66

67 Supplemental Schedule # 10 UNION-ENDICOTT CENTRAL SCHOOL DISTRICT SUPPLEMENTARY INFORMATION COMBINED STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES NON-MAJOR GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2016 Total Non-Major School Special Capital Funds Lunch Aid Use of money and property Miscellaneous State sources Federal sources Local sources Surplus food Sales - school lunch $ 136 3, ,250 1,203, , ,447 $ 763,603 2,272,102 24,426 $ $ ,853 3,475,416 24, , ,447 Total Revenues 1,923,023 3,060,131 4,983,154 EXPENDITURES Instruction transportation Employee benefits Cost of sales Capital outlay 355,507 1,471,965 3,110,510 14,933 4,609 1,601,630 3,110,510 14, ,116 1,471,965 1,601,630 Total Expenditures 1,827,472 3,130,052 1,601,630 6,559,154 Excess (Deficiency) of Revenues Over Expenditures 95,551 (69,921) (1,601,630) (1,576,000) OTHER FINANCING SOURCES AND USES Proceeds from debt Operating transfers in Operating transfers (out) 3,103 69,921 5,711, ,000 (995) 5Jl1, ,024 (995) Total Other Sources (Uses) 3,103 69,921 6,560,005 6,633,029 Excess (Deficiency) of Revenues and Other Sources Over Expenditures and Other Revenues (Uses) 98,654 4,958,375 5,057,029 Fund Balances - of year 389,532 (6,253,733) (5,864,201) Fund Balances - End of Year $ 488,186 $ (807, See paragraph on supplemental schedules in independent auditors' report 67

68 Supplemental Schedule # 11 UNION-ENDICOTT CENTRAL SCHOOL DISTRICT SUPPLEMENTARY INFORMATION INVESTMENT IN CAPITAL ASSETS, NET OF RELATED DEBT FOR THE YEAR ENDED JUNE 30, 2017 Capital Assets, net $ 95,764,583 Deduct: Bond Anticipation Notes Premium on bonds payable Short-term portion of bonds payable Long-term portion of bonds payable Less: unspent bond proceeds Investment in capital assets, net of related debt 11,686,000 (86,502) 4,555,620 32,790,000 (9,551,083) 39,394,035 $ 56,370,548 See paragraph on supplemental schedules included in independent auditors' report 68

69 Supplemental Schedule # 10 UNION-ENDICOTT CENTRAL SCHOOL DISTRICT SUPPLEMENTARY INFORMATION COMBINED STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES NON-MAJOR GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2016 Total Non-Major School Special Capital Funds Lunch Aid Use of money and property Miscellaneous State sources Federal sources Local sources. food Sales school lunch $ 136 3, ,250 1,203, , ,447 $ 763,603 2,272,102 24,426 $ $ 136 3, ,853 3,475,416 24, ,447 Total Revenues 1,923,023 3,060,131 4,983,154 EXPENDITURES Instruction transportation Employee benefits Cost of sales Capital outlay 355,507 1,471,965 3,110,510 14,933 4,609 1,601,630 3,110,510 14, ,116 1,471,965 1,601,630 Total Expenditures 1,827,472 3,130,052 1,601,630 6,559,154 Excess (Deficiency) of Revenues Over Expenditures 95,551 (69,921) (1,601,630) (1,576,000) OTHER FINANCING SOURCES AND USES Proceeds from debt Operating transfers in Operating transfers (out) 3,103 69,921 5,711, ,000 (995) 5,711, ,024 Total Other Sources (Uses) 3,103 69,921 6,560,005 6,633,029 Excess (Deficiency) of Revenues and Other Sources Over Expenditures and Other Revenues (Uses) 98,654 4,958,375 5,057,029 Fund Balances - Beginning of year 389,532 (6,253,733) (5,864,201) Fund Balances - End of Year $ 488,186 $ $ (1,295,358) $ (807,172) See paragraph on supplemental schedules in independent auditors' report 69

70 Supplemental Schedule # 12 UNION-ENDICOTT CENTRAL SCHOOL DISTRICT SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED JUNE 30, 2017 Federal Grantor/Pass-Through Grantor/Program or Cluster Title U.S. DEPARTMENT OF AGRICULTURE Federal CFDA Number Pass-through Entity Identifying Number Federal Expenditures($) Passed Through NYS Education Department: Child Nutrition Cluster Non-Cash Assistance (Food Distribution) National School Lunch Program $ 125,559 Cash Assistance School Breakfast Program National School Lunch Program Summer Food Service Program For Children , ,799 34,931 Total Child Nutrition Cluster Total Department of Agriculture 1,328,873 U.S. DEPARTMENT OF EDUCATION Passed Through NYS Education Department: Special Education Cluster (IDEA) Cluster Special Education Grants to States (IDEA, Part B) ,048,155 Special Education - Preschool Grants (IDEA Preschool) ,049 Total Special Education Cluster (IDEA) Cluster Title I, Part A - Cluster Title I Grants to Local Educational Agencies Total Title I, Part A - Cluster Other Programs Supporting Effective Instruction State Grant English Language Acquisition Grants ,524 Total Other Programs 181,494 Total Department of Education 2,272,099 Total Expenditures of Federal Awards $ 3,600,972 See notes to Schedule of Expenditures of Federal Awards 70

71 UNION-ENDICOTT- CENTRAL SCHOOL DISTRICT Schedule of Findings and Questioned Costs For the Year Ended June 30, 2017 NOTE 1: SUMMARY OF CERTAIN SIGNIFICANT ACCOUNTING POLICIES: The accompanying Schedule of Expenditures of Federal Awards presents the activity of all federal awards programs administered by the District, which is described in Note 1 to the District's accompanying financial statements, using the modified accrual basis of accounting. Federal awards that are included in the schedule may be received directly from federal agencies, as well as federal awards passed through from other government agencies. The information is presented in accordance with the requirements of Title 2 U.s. Code of Federal Acquisitions Part 200, Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards (Uniform Guidance). Therefore, some amounts presented in this schedule may differ from amounts presented in, or used in the preparation of, the financial statements. Indirect costs may be included in the reported expenditures, to the extent that they are included in the federal financial reports used as the source for the data presented. Certain of the District's federal award programs have been charged with indirect costs, based upon an established rate applied to overall expenditures. There is no other indirect cost allocation plan in effect. Matching costs (the District's share of certain program costs) are not included in the reported expenditures. The basis of accounting varies by federal program consistent with the underlying regulations pertaining to each program. The amounts reported as federal expenditures were obtained from the federal financial reports for the applicable program periods. The amounts reported in these reports are prepared from records maintained for each program, which are reconciled with the District's financial reporting system. NOTE 2: SUBRECIPIENTS: No amounts were provided to subrecipients. NOTE 3: OTHER DISCLOSURES: No insurance is carried specifically to cover equipment purchased with federal funds. Any equipment purchased with federal funds has only a nominal value, and is covered by the District's casualty insurance policies. There were no loans or loan guarantees outstanding at year-end were. See report of independent accountants 71

72 Schedule of Findings and Questioned Costs For the Year Ended June 30, 2017 Section I - Summary of Independent Auditors' Results Financial Statements Type of auditors' report issued on whether The financial statements were prepared in accordance with GAAP: unmodified Internal Control over Financial Reporting Material weakness identified? Significant deficiencies identified? none reported Noncompliance material to financial statements noted? Federal Awards Internal control over major programs: Material weakness identified? Significant deficiencies identified? none reported Type of auditors' report issued on compliance for major programs: unmodified Any audit findings disclosed that are required to be reported in accordance with 2 CFR (a)? Identification of major programs: Name of Federal Program or Cluster School Breakfast Program School Lunch Program 10. Summer Food Service program for Children Dollar threshold used to distinguish between Type A and Type B programs: $750,000 Auditee qualified as low-risk auditee? x Section II Financial Statement Findings: No matters were reported. Section III - Federal Award Findings and Questioned Costs: No matters were reported. See report of independent accountants 72

73 VIEIRA & ASSOCIATES CPAS?P.C..Iohn B. Burtis, CPA** E. Mark Vieira, CPA * Cheryl DiStefano, CPA Scott M. Hotalen, CPA Patrick.l. Price, CPA, CVA **Also licensed in Pennsylvania * Also licensed in South Carolina To the Board of Education Union-Endicott Central School District 1100 East Main Street Endicott, New York 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 Auditors' Report We have audited, in accordance with the 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, the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of Union-Endicott Central School District as of and for the year ended June 30, 2017, and the related notes to the financial statements, which collectively comprise Union-Endicott Central School District's basic financial statements, and have issued our report thereon dated September 8,2017. Internal Control Over Financial Reporting In planning and performing our audit, we considered Union-Endicott Central School District's internal control over financial reporting (internal control) to determine the audit procedures that are appropriate for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of Union-Endicott Central School District's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Union-Endicott Central School District's internal control over financial reporting. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect and correct misstatements on a timely basis. A material weakness is a deficiency or combination of deficiencies in internal control, such that there is a reasonable possibility a material misstatement in the entity's financial statements will not be prevented or detected and corrected on a timely basis. A significant deficiency is a deficiency, or combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. III Grant Ave., Suite 106, Endicott, NY B Cardinal Road, Hilton Head, SC Tel: Fax Tel: Fax: cpas@vape.us Website: 73

74 Compliance and other Matters As part of obtaining reasonable assurance about whether Union-Endicott Central School District's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance that are required to be reported under Government Auditing Standards. The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity's internal control and compliance. Accordingly, this communication is not suitable for any other purpose. ~~ ~~, t?p~, P,tf September 8, 2017 Endicott, New York 74

75 VIEIRA & ASSOCIA TES CPAS 9 JP.CG John B. BUJ1is, CPA** E. Mark Vieira, CPA * Cheryl DiStefano, CPA Scott M. Hotalen, CPA Patrick.J. Price, CPA, CVA **Also licensed in Pennsylvania * Also licensed in South Carolina Report on Compliance for Each Major Program; Report on Internal Control over Compliance; and Report on Schedule of Expenditures of Federal Awards Required by the Uniform Guidance To the Board of Education Union-Endicott Central School District 1100 East Main Street Endicott, New York Report on Compliance for Each Major Federal Program We have audited Union-Endicott Central School District's compliance with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on each of Union-Endicott Central School District's major federal programs for the year ended June 30, Union-Endicott Central School District's major federal programs are identified in the summary of auditor's results section of the accompanying schedule of findings and questioned costs. Management's Responsibility Management is responsible for compliance with federal statutes, regulations, and the terms and conditions of its federal awards applicable to its federal programs. Auditors' Responsibility Our responsibility is to express an opinion on compliance for each of Union-Endicott Central School District's major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and Title 2 U.s. Code of Federal Acquisitions Part 200, Uniform Administrative ReqUirements, Cost Principles and Audit Requirements for Federal Awards (Uniform Guidance). Those standards and Uniform Guidance require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about Union-Endicott Central School District's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination on Union Endicott Central School District's compliance. 111 Grant Ave., Suite 106, Endicott, NY B Cardinal Road, Hilton Head, SC Tel: Fax Tel: Fax: cpas@vapc.us Website: 75

76 Opinion on Each Major Federal Program In our opinion, Union-Endicott Central School District complied, in all material respects, with the compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended June 30, Other Matters The results of our auditing procedures disclosed no instances of noncompliance, which are required to be reported in accordance with the Uniform Guidance. Report on Internal Control Over Compliance Management of Union-Endicott Central School District is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered Union Endicott Central School District's internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the District's internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency or combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of the internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above. However, material weaknesses may exist that have not been identified. The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of Uniform Guidance. Accordingly, this report is not suitable for any other purpose. 76