CATSKILL CENTRAL SCHOOL DISTRICT REPORT ON EXAMINATION OF FINANCIAL STATEMENTS. ALEXANDER VARGA Be co. CERTIFIED PU8LIC ACCOUNTANTS

Transcription

1 ... CATSKILL CENTRAL SCHOOL DISTRICT CATSKILL, NEW YORK REPORT ON EXAMINATION OF FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2010 ALEXANDER VARGA Be co. CERTIFIED PU8LIC ACCOUNTANTS

2 CATSKILL CENTRAL SCHOOL DISTRICT REPORT ON EXAMINATION OF FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 20 I 0 TABLE OF CONTENTS Report on Audit of Basic Financial Statements and Supplementary Information Report on Compliance and Internal Control Report on Compliance and Internal Control - Major Federal Programs Management's Discussion and Analysis I - II III - IV V - VI VII - XXIII BASIC FINANCIAL STATEMENTS Statement of Net Assets Statement of Activities Balance Sheet - Governmental Funds Reconciliation of Governmental Funds Balance Sheet to Statement of Net Assets Statement of Revenues, Expenditures and Changes in Fund Equity, Governmental Funds Reconciliation of Governmental Funds Revenues, Expenditures, and Changes in Fund Equity to the Statement of Activities Statement of Fiduciary Net Assets and Changes in Fiduciary Net Assets - Fiduciary Funds Notes to Financial Statement Supplemental Schedule # 1 - Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget (Non-GAAP Basis) and Actual - General Fund Supplemental Schedule #2 - Schedules of Change from Original Budget to Revised Budget and Use of Unreserved Fund Balance General Fund Supplemental Schedule #3 - Schedule of Project Expenditures - Capital Projects Fund Supplemental Schedule #4 - Schedule of Certain Revenue and Expenditures Compared to ST-3 Data Supplemental Schedule #5 - Investment in Capital Assets, Net of Related Debt Schedule of Expenditures of Federal Awards Notes to Schedule of Expenditures of Federal Awards Schedule of Findings and Questioned Costs - Federal Awards Management Letter - Auditor's Comments on Internal Control and Other Accounting Issues

3 PO BOX MAIN STREET CATSKILL, NEW YORK TEL FAX ALEXANDER VARGA & CO. CERTIFIED PUBLIC ACCOUNTANTS ANTHONY M. SCALZO, CPA MARK D. ROGERS, CPA 130 MAIN STREET SUITE 101 RAVENA, NEW YORK TEL FAX INDEPENDENT AUDITOR'S REPORT Board of Education Catskill Central School District Catskill, New York We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of the Catskill Central School District, as of and for the year ended June 30, 201 0, which collectively comprise the District's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the Catskill Central School District's management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Audit Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our oplllions. 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 Catskill Central School District, as ofjune 30, 2010, and the respective changes in financial position for the year then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued our report dated October 13, 2010 on our consideration of the Catskill Central School District's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grants. Management's Discussion and Analysis on pages VII through XXIII is not a required part of the basic financial statements but is considered required supplementary information by the Governmental Accounting Standards Board. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Catskill Central School District's basic financial statements. The accompanying schedule of expenditures of federal awards, (pages 35 to 37) is presented for purposes of additional analysis as required by I

4 U. S. Office of Management and Budget Circular A- 133, Audits of States, Local Governments, and Non-Profit Organizations, and is considered supplementary information, i.e., not a required part of the bas ic financial statements. In addition, the Supplementary Schedules on pages 29 through 34 are presented for purposes of additional analysis and also are not considered a required part of the basic financial statements. Such supplementary information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole. October 13, 2010 II

5 PO BOX MAIN STREET CATSKILL, NEW YORK TEL FAX ALEXANDER VARGA & CO. CERTIFIED PUBLIC ACCOUNTANTS ANTHONY M. SCALZO, CPA MARK D. ROGERS, CPA 130 MAIN STREET SUITE 101 RAVENA, NEW YORK TEL FAX 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 TANDARDS Board of Education Catskill Central School District Catskill, New York We have audited the financial statements of the Catskill Central School District as of and for the year ended June 30, 2010, and have issued our report thereon dated October 13, 2010, We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Intel11al Control Over Financial Reporting In planning and performing our audit, we considered the District's internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the District's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the District's internal control over financial reporting. A control deficiency 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 misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affects the District's ability to initiate, authorize, record, process, or report financial data reliably in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement ofthe District's financial statements that is more than inconsequential will not be prevented or detected by the District's internal control. A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected by the District's internal control. Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and would not necessarily identify all deficiencies in internal control that might be significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined above. III

6 Compliance and Others Matters As part of obtaining reasonable assurance about whether the 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 or other matters that are required to be reported under Government Auditing Standards. We noted certain matters that we reported to management of the Catskill Central School District in a separate letter dated October 13, 20 I O. This report is intended solely for the information and use of management, Board of Education and federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. October 13, 2010 IV

7 - - PO. BOX MAIN STREET CATSKILL, NEW YORK TEL FAX ALEXANDER VARGA & CO. CERTIFIED PUBLIC ACCOUNTANTS ANTHONY M. SCALZO, CPA MARK D ROGERS, CPA 130 MAIN STREET SUITE 101 RAVENA, NEW YORK TEL FAX REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A-133 Board of Education Catskill Central School District Catskill, New York Compliance We have audited the compliance of the Catskill Central School District with the types of compliance requirements described in the U. S. Office of Management and Budget (OMB) Circular A-133 Compliance Supplement that are applicable to each of its major federal programs for the year ended June 30, The District's major federal programs are identified in the summary of auditor's results section of the accompanying schedule of findings and questioned costs. Compl iance with the requirements of laws, regulations, contracts and grants applicable to each of its major federal programs is the responsibility of the District's management. Our responsibility is to express an opinion on the District's compliance based on our audit. 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 OMB Circular A- I33, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A- I33 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 the 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. Our audit does not provide a legal determination of the District's compliance with those requirements. In our opinion, the Catskill Central School District complied, in all material respects, with the requirements referred to above that are applicable to each of its major federal programs for the year ended June 30, 2010, Internal Control Over Compliance The management of Catskill Central School District is responsible for establishing and maintaining effective internal control over compliance with the requirements of laws, regulations, contracts and grants applicable to federal programs. In planning and performing our audit, we considered the District's internal control over compliance with the requirements that could have a direct and material effect on a major federal program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance, v

8 but not for the purpose of expressing an opinion on the c1tectiveness of internal control over compliance. Accordingly, we do not express an opinion of the effectiveness of the District's internal control over compliance. A control deficiency in an entity's internal control over compliance 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 noncompliance with a type of compliance requirement of a federal program on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affects the entity's ability to administer a federal program such that there is more than a remote likelihood that noncompliance with a type of compliance requirement of a federal program that is more than inconsequential will not be prevented or detected by the entity's internal control. A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that material noncompliance with a type of compliance requirement of a federal program will not be prevented or detected by the entity's internal control. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and would not necessarily identify all deficiencies in internal control that might be significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above. This report is intended solely for the information and use of management, the Board of Education and federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. October 13,2010 VI

9 reflecting ec/iicfltionrt! cx'ccflence Catskill Central School District Management's Discussion and Analysis For the Fiscal Year Ended June 30, 2010 The following is a discussion and analysis of the School District's fi nancial 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 government-wide and fund-based financial statements. The results of the current year are discussed in comparison with the prior year, with an emphasis placed on the current year. This introductory section should be read in conjunction with the School District's financial statements, which immediately fo llows this section. FINANCIAL IDGHLIGHTS The enrollment of a school district affects many factors including need for expansion, status of population, state aid formulas, and future needs. The district's enrollment has remained substantially stable for several years, with an October 2009 enrollment of 1,775. Traditionally, enrollment is highest in September and October, and then gradually decreases during the remaining school year. This trend has been consistent for several years. l The State Aide projected to be paid to the School District through the Governor's Budget Proposal was initially reduced by 928,213. This amount was subsequently restored through monies distributed by the federal American Recovery and Reinvestment Act (ARRA). During the , the state aid was cut another 309,926, but this was also restored using monies from ARRA. District officials are required to account for these funds within the General Fund, but in separate account codes. District officials are required to report on the use ofthese funds quarterly, and submit an online final report. The District used these monies to maintain our summer school secondary program and to fund eight instructional positions, one administrative position and two teaching assistants. The district has two capital projects on-going at this time. The first is the Middle SchoollHigh School renovation project approved by voters in January The project has been separated into four different phases, with the first three completed as of June 30, Phase I included the renovation and replacement of more than 160 wood and 88 aluminum windows in the Middle School and High School buildings. Phase II and III included renovation to the interior areas of the Middle and High School buildings, and some exterior work to the roadway entrance to the High School. Phase IV will encompass the few remaining items from the original scope of work and allow for additional work within the approved scope of work. This Phase will be separated, with a portion of the work beginning in the Summer of , with the balance to be completed during the Summer of201 l. In June 2007, the District issued Serial Bonds in the amount of 12,71 5,000. The Serial Bonds are the district's long-term debt service tools, as opposed to the Bonds Anticipation Notes, which are short term in nature. The District anticipates issuing a BAN during the year to finance the completion of Phase IV. The district's second project is commonly referred to as the EXCEL project, due to the fact that the local share will be paid for with a special building aid called EXCEL. This project was approved by voters in Business Office: 347 West Main Street, Catskill, New York fa." VII

10 March Th is project has also been separated into fo ur phases. The first phase was the replacement of the Middle School slate roof. The second phase was completed in January, 2009 and encompassed the construction of six new classrooms at the rear of the High School. In addition, to the new classroom space, this hallway connected two areas of the building improving the flow of students. Phase III was substantially completed in the Fall, This encompassed an expanded 6-12 Library, a new Digital Media Production studio, Distance Learning Classroom, a Large Group Instruction room. This phase also included the substantial renovation of the High School main entrance to restructure the Main office and Guidance area, improving safety and security, as well as adding square footage. The District renewed its 8 million BAN in September, 2009, and issued an additional 7 million BAN in September, 2009 to provide short term financing of the Capital Projects. When the BAN comes due in September, 201 0, the District plans to reissue another BAN for another year in the amount of 15 million, less a principal and interest payment. OVERVIEW OF THE FINANCIAL STATEMENTS This annual report consists of three parts: The Management Discussion & Analysis (MD&A), the basic financial statements, and required supplementary information. 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 long-term information about the School District's overall financial status. The remaining statements are fund financial statements that focus on individual parts of the School District, reporting the School District's operations in more detail than the district-wide statements. The fund financial statements concentrate on the School District's most significant funds with all other non-major funds listed in total in one column. The governmental funds statements tell how basic services such as regular and special education were financed in the short term as well as what remains for future spending. Fiduciary funds statements provide information about the financial relationships 111 which the School District acts solely as a trustee or agent for the benefit of others. The financial statements also include notes that explain some of the information in the 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. Figure A-I summarizes the major features of the School District's financial statements, including the portion of the District's activities they cover and the types of information they contain. Figure A-I Major Features of the District-Wide and Fund Financial Statements Fund Financial Statements District-Wide Governmental Funds Fiduciary Funds Scope Entire District (except The activities of the School Instances in which the School fiduciary funds) District that are not proprietary District administers resources or fiduciary, such as special on behalf of someone else, education and building such as scholarship programs maintenance and student activities monies Required financial Statement of net assets Balance sheet Statement of fiduciary net statements Statement of activities Statement of revenues, assets expenditures, and changes in Statement of changes in fund balances fiduciary net assets I VI II

11 Accounting basis and Accrual accounting and Modilied accrual accounting Accrual accounting and measurement focus economic resources and current financial focus economic resources focus focus Type of asset/liability All assets and liabilities, Generally, assets expected to be All assets and liabilities, both information both financial and used up and liabilities that come short-term and long-term; funds capital, short-term and due during the year or soon do not currently contain capital long-term thereafter; no capital assets or assets, although they can long-term liabilities included Type of All revenues and Revenues for which cash is All additions and deductions inflow/outflow expenses during year, received during or soon after the during the year, regardless of information regardless of when cash end of the year; expenditures when cash is received or paid is received or paid when goods or services have been received and the related liability is due and payable District-Wide Statements The district-wide 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 assets 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 statements report the School District's net assets and how they have changed. Net assets - the difference between the School District's assets and liabilities - is one way to measure the School District's financial health or position. Over time, increases or decreases in the School District's net assets are an indicator of whether its financial position is improving or deteriorating, respectively. To assess the School District's overall health, you need to consider additional nonfinancial factors such as changes in the School District's property tax base and the condition of school buildings and other facilities. In the district-wide financial statements, the School District's activities are shown as Governmental activities. Most 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. Fund Financial Statements The 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 are accounting devices the School District uses to keep track of specific sources of funding and spending on particular programs. Some funds are required by State law and by bond covenants. Other funds are established to control and to manage money for particular purposes (such as repaying its long-term debts) or to show that it is properly using certain revenues (such as Federal grants). The District has two kinds of funds: Governmental Funds: Most of the School District's basic services are included in governmental funds, which generally focus on (I) 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 you determine whether there IX

12 are more or fewer financial resources that can bc spcnt in the ncar future to fi nance the School District's programs. Because this information does not encompass the additional long-term focus of the district-wide statements, additional information at the bottom of the governmental fu nds statements explains the relationship (or differences) between them. Fiduciary Funds: The School District is the trustee, or fiduciary, for assets that belong to others, such as the scholarship fu nd and the student activities fu nds. 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. x

13 FIGUREA-2 FINANCIAL ANALYSIS OF THE SCHOOL DISTRICT AS A WHOLE Condensed Statement of Net Assets (in thousands of doll ars) Governmental Activities and Total School District % June 30, 2009 June 30, 2010 Change Change Current and Other Assets 22,567 18,756 (3,811 ) % Capital Assets 43,985 47,712 3, % Total Assets 66,552 66,468 (84) -0.13% -; Long-Term Debt Outstanding Bonds Payable 32,568 31,079 (1,489) -4.57% Compensated Absences % Other Post Employment Benefits 2,060 4,245 2,185 N/A 35,425 36, % Other Liabilities 17,948 18, \.97% Total Liabilities 53,373 54,465 1, % Net Assets Invested in Capital Assets, Net of Related Debt 4,633 4,380 (253) -5.46% Restricted 4,087 4, % Unrestricted 4,458 2,770 (1,688) % Total Net Assets 13,178 12,002 (1,176) -8.92% Discussion: Figure A-2 presents the District's Statement of Net Assets in a summarized format. The complete statement appears on page 1 of the basic financial statements. The statement above compares the District's financial condition as of the last day of its fiscal year, June 30, 2010, with that of the last day of the previous year, June 30, This Statement of Net Assets can be described as a "snapshot" view of the District's finances. It compares the Assets held by the District (e.g. Cash, Accounts Receivable, Buildings, Equipment, etc.) with Liabilities owed by the District (e.g. Accounts Payable, Bond Payable, Pension and Employee Sick Time Obligations, etc.) as of June 30 and reports the difference as Net Assets. This Net Asset amount is separated into three components: 1) the amount attributable to the District' s Capital Assets (Buildings and Equipment, reported at historical cost reduced by accumulated depreciation and related debt), 2) amounts restricted either by law or by the Board of Education for future expenditure, and 3) unrestricted funds available to finance District operations. Please note that a separate discussion of the District's Restricted Net Assets will follow. XI

14 Figure A-2 reports that the District's total Net Assets decreased by million between June 30, 2009 and June 30, 2010, or 8.92%. Of this total, the amount of Net Assets Invested in Capital Assets, Net of Related Debt decreased by 253 thousand, Restricted Net Assets increased by 765 thousand, and Unrestricted Net Assets decreased by million. The changc in Restricted Net Assets will be discussed in the section of this document fo llowing Figure A-3. A discussion of the District's Investment in Capital Assets follows Figure A-7. The decrease in Net Assets Invested in Capital Assets, Net of Related Debt, is due primarily to the fact that although the District invested in Capital Assets (buildings and equipment), a large portion of these expenses were paid with borrowed fu nds. The amount recorded as depreciation expense (1.368 million, exceeded the amount of Capital Assets purchased that were not paid fo r with borrowed fu nds. The increase in Restricted Net Assets is the resu It of an increase in the Reserve for Debt, and Tax Certiorari Reserve. A discussion of the District's Restricted Net Assets appears in the next section (following Figure A-3). Current and Other Assets decreased by million. Included in this decrease is a million decrease in Cash in the Capital Projects Fund, and a 822 thousand increase in the amount Due from State and Federal Governments. Capital Assets increased by million. The District acquired million of capital assets during the year, and recorded depreciation expense ofi.369 million. The changes in Capital Assets is further illustrated and discussed in Figure A-7 to fo llow. Long-Tenn Debt Outstanding consists of liabilities for Bonds Payable ( million), Compensated Absences (accumulated sick leave), (840 thousand) and a liability for Other Post Employment Benefits of million). During the previous year the District adopted a new accounting standard prescribed by the Government Accounting Standards Board (GASB), GASB Statements 43 and 45, relating to financial reporting for other post employment benefit plans (OPEB). These accounting standards require that the District calculate an estimate of the amount of funds required annually to cover the cost of future health insurance benefits to be paid to current and future District retirees. The District hired an actuary to calculate this amount. The actuary calculated a total "Unfunded Actuarial Accrued Liability" of million as of June 30, Rather than record this entire liability in the first year of adoption, GASB Statement 45 allows the District to amortize this unfunded liability over thirty years. GASB 45 requires that the District report as a liability (and an expense) an amount equal to 1) the estimated cost of retiree health insurance benefits to be paid in the future based on current year employment, plus 2) one-thirtieth of the Unfunded Actuarial Accrued Liability, plus 3) interest due on this amount. For the year ended June 30, 2010, the District recorded a Net OPEB liability of million, and an expense of million. The 739 thousand increase in Long Tenn Debt Outstanding consists of a decrease in Bonds Payable of million, an increase in the Compensated Absences liability of 43 thousand and an increase in the OPEB obligation of 2.06 million. The category Other Liabilities increased by 353 during the year. Included in Other Liabilities as of June 30, 2010 are a Bond Anticipation Note (related to the District's new Capital Projects) in the amount of million, a 350 decrease, and Accounts Payable and Accrued Liabilities, a million increase, and amounts Due to the Teachers and Employees Retirement Systems, a 200 thousand decrease. XII

15 -.., FIGURE A-3 Statement of Changes in Restricted Net Assets (in whole dollars) Governmental Activities and Total School District June 30, 2009 June 30, 2010 Change Net Assets Restricted for Capital Reserves!' -: p. IFI Other Restricted Net Assets Reserve for Encumbrances 187,407 36,178 (151,229) Employee Benefit Accrued Liability Reserve 827, ,809 (70,804) Workers' Compensation Reserve 78,484 81,158 2,674 Tax Certiorari Reserve 536, ,159 10,130 Repair Reserve 78,472 80,630 2,158 Insurance Reserve 139, ,807 4,364 Unemployment Insurance Reserve 200, ,000 Reserve for Retirement Contribution 150, ,000 Reserve for Inventory - School Lunch 10,093 13,510 3,417 Reserve for Debt Service 2,229,976 2,843, ,783 Total Other Restricted Net Assets 4,087,5 17 4,852, ,493 Total Restricted Net Assets 4,087,5 17 4,852, ,493 Discussion: Figure A-3 compares the year-end balances of the District's Restricted Net Assets. In the District's Governmental Fund Statements, these amounts are referred to as "Reserves". Generally speaking, Reserves are funds set aside for future expenditure either by statute, voter proposition, or Board approval. Each Reserve has its own legal basis determining how it may be established, funded, and expended. For a discussion of the nature and restrictions of the reserves used by the District, please refer to the Notes to Financial Statements. With the exception of the Reserve for Encumbrances, each Reserve earns Interest Income during the year. Interest earned in the Capital Fund is transferred to the Reserve for Debt Service. -, i The Reserve for Encumbrances represents the total value of purchase orders placed for goods or services that are outstanding at year-end. These open encumbrances, related to amounts budgeted in the current fiscal year, are added to the subsequent year's budget. The District created and funded two new reserves this year through Board action. The Unemployment Insurance Reserve was established to help absorb the expense of future Unemployment Insurance claims. School districts self insure for these claims, and reimburse the New York State Unemployment Insurance Fund on a quarterly basis for payments made on behalf of the District to former employees. The Reserve for Retirement Contribution was established to provide for future payments to the New York State Employee XIII

16 Retirement System for the benefit arnon-instructional employees. A similar reserve for instructional employee pension contributions is not provided for under Education Law. All other increases in reserve balances are the result of interest income earned on these balances, with the exception of the Debt Service Fund, which also records as income the interest earned on unexpended Bond proceeds in the Capital Fund. ;1 Figure A-4 Changes in Net Assets from Operating Results (In Thousands of Dollars) Governmental Activities and Total School District Year Ended June 30 % Change Change Revenues Program Revenues Charges for Services % Operating Grants and Contributions 2,33 1 3, % General Revenues Property Taxes 18,683 18, % State Aid, not restricted 15,080 14,229 (851) -5.64% Federal Aid 47 (22) % Interest Earnings (212) % Sale ofprcperty % Miscellaneous % Total Revenues 37,568 37, % Expenses General Support 10,269 9,844 (425) -4.14% Instruction 21,998 22, % Transportation 2,447 3, % Community Service 64 (64) % bt Service - Interest 1,919 1,830 (89) -4.64% preciation 1,552 1,368 (184) % Am<rtization of Bond Costs Cost of Sales - Food % Total Expenses 38,925 39, % Increase (Decrease) in Net &sets (1,357) (l,17 ) 181 XIV

17 f Discussion: Figure A-4 presents information from the Statement on Activities (page 2 of the financial statements) in a format that facilitates a comparison between the current and prior year. For the fiscal year ended June 30, 2010, Total Expenditures of million exceeded Revenues of million, resulting in an decrease in Net Assets of million. While Total Revenues increased by 282 thousand from fi scal year-ended June 30, 2009 to 2010, Total Expenditures also increased, by 10 I thousand. The largest revenue increase was an 871 thousand increase in Operating Grants. During the year the District received million from the American Recovery and Reinvestment Act Education Stabilization Fund. These amounts were recorded as Operating Grants. The largest revenue decreases were in State Aid (5 1 thousand decrease) and Interest Earnings (212 decrease). Operating Grants are funds received from others, primarily the Federal and State governments, which are directly related to specific programs, unlike State and Federal Aid, which have no restrictions on their use. The District's largest expenditure categories are Payroll and Employee Benefits. District-wide payroll for the fiscal year ended June 30, 20 I was million. This was a 794 thousand increase (5.02%) over the previous year. Employer Benefits were million for the year, and decrease of199 thousand or 2.48%. Please note that on the Statement of Activities (page 2 of the financial statements) Payroll expenditures are included in each expense code, while Employee Benefits are allocated among all expense codes based on each code's relative payroll costs. A comparison of District expenses shows little change in total expenses from year to year. For the fiscal year ended June 30, 2010, total expenses were million. Total expenses in the prior year were million, an increase of 101 thousand, or.26%. There were variances, however, between various expense categories. Expense categories that had the largest increases were Pupil Transportation (827 thousand), and Depreciation (1 83 thousand). xv

18 Financial Analysis of the School District's Funds Figure A-5 Total Governmental Funds June 30, 2009 June 30, 2010 Change Reserved 4,088 4, Unreserved: Designated for Subsequent Year's Expenditures Designated to reduce tax levy 1,650 2, Unreserved - Undesignated (2,082) (7,553) (5,471) Total Fund Balance 3,656 {50l) {4,157) Discussion: Figure A-5 presents a summary of the three components of year-end fund balance for the combined Governmental Funds (General Fund, Special Aid, School Lunch, Debt Service, and Capital Projects Fund). This data is presented in greater detail on page three of the Financial Statements, Balance Sheet Governmental Funds. Please note that the largest components of Governmental-wide fund balance are in the General Fund and Capital Fund. The General Fund makes up million, of the (501 thousand) Total Fund Balance, while the Capital Fund had a negative Fund Balance of(10.479) million. The Capital Fund has a negative fund balance (deficit) because the District has been funding initial EXCEL project expenditures by the use of Bond Anticipation Notes. This deficit will be alleviated when the District goes to Bonding. The term Fund Balance represents financial resources that remain at the end of the District's fiscal year, or the difference between total District assets and liabilities. These resources are used to fund District operations until the next year's revenue cycle begins. However, not all of these funds are available for expenditure. Typically, a District will "reserve" certain funds to be used for specific future purposes, and will "designate" other funds for expenditure in the following year. Those funds that are neither reserved nor designated are referred to as "Unreserved-Undesignated Fund Balance". School Districts are prohibited under Section 1318 of the Real Property Tax Law from maintaining an Unreserved Undesignated Fund Balance in the General Fund in excess of four percent of the District's budget XVI

19 for the upcoming year. As of June 30, 2010 the District had an LJndesignated Fund Balance in the General Fund of 2,875,286, which represented 7.83 % of its 20 I 0-20 I I budget of 36,699,599. The District began the year with an Undesignated Fund Balance of 3,417,617. Thus, the District's General Fund Undesignated Fund Balance decreased by 542,33 I from year to year. Note that as of June 30, 2010 the District applied 2,200,000 to reduce the Tax Levy, an increase of 550,000. Management discusses the trends affecting fu nd balance in the sections of this document entitled Financial Highlights and Factors Bearing on the District's Future. " General Fund Budgetary Highlights,. The school district's budget is prepared according to New York State law and is based on accounting for certain transactions on a modified accrual basis of accounting. This basis of accounting recognizes revenues when earned or when levies are made. Expenditures are recorded as soon as they result in liabilities. The most significant budgeted fund is the General Fund, the operating fund of the district. District voters approved a School Budget in the amount 01' 36,970,555. The District records this Budget in its General Fund, and follows certain policies and procedures to ensure that District expenditures adhere to the spending plan approved by District voters. For instance, the District uses an Encumbrance system to determine that sufficient funds are available prior to being spent. In the event the District needs to purchase an item or service and the account code has insufficient funds, then the Superintendent and Board of Education have the authority to approve transfers among and between budget codes. An analysis of General Fund activity appears as Supplemental Schedule #1 of the financial statements. This schedule reports Revenues, Expenditures and Changes in Fund Balance for the General Fund for the year and compares Original Budget, Final Budget, and Actual amounts for the current year, as well as Actual amounts for the prior year. The Original Budget represents the Budget as approved by voters. The Final Budget reflects, in total, "Carry-over" Encumbrances from the prior year, a budget amendment plus any separate propositions Variances will occur from time to time between Original Budget, Final Budget, and Actual amounts. Events may occur that are not expected, and contingencies that are provided for may not come to pass was the first year in which the District had to account for monies received from the Equalization Stabilization Funds, and which the method for accounting those funds were not determined by the State of New York until Spring of As a consequence, the District was required to establish new account codes to track the monies received from the American Recovery and Reinvestment Act and to initiate budget transfers and to transfer expenses paid from the account codes the items were budgeted to the account codes designated for the ARRA funds. Figure A-6 presents selected budget items (both revenues and expenditures) that experienced significant variances between Final Budget and Actual amounts: XVII

20 Selected Revenues: Variance Original Original Final Actual Budget to % Budget Budget EXEensc Actual Change Other Unclassified Revenue 5,000 5,000 58,540 53, % Other State Aid 1 1,000 11, , , % Selected Expenditures: Teaching - Regular School (Total) 9,880,588 9,824,8 13 9,329, ,188 6% Includes: Teaching Salaries 1-3 1,719,240 1,529,935 1,529, ,305 11% Teaching Salaries 4-6 1,579,427 1,552,1 12 1,552,112 27,3 15 2% Teaching Salaries , 1 23,008 3,905,31 4 3,905, ,694 5% Total Teaching Salaries 7,421,675 6,987,36 1 6,987, ,31 4 6% Subtitute Teaching Salaries 239, , , ,044-13% Transportation Regular Education Routes 1,431,818 2,049,5 18 2,039, , % Facilities Operations & Maintainence 2,077,710 2,108,66 1 1,834, , % Includes: Operations - Materials & Supplies 52, , ,055-63, % Maintenance Contractor Repairs 12,000 57,715 56,673-44, % Employee Benefits - Health and Dental Insurance 3,828,304 3,605,866 3,425, ,875 11% Teachers Retirement System 1,129, , , ,178 17% Note: Revenue - A positive number in the last column indicates the account was underbudgeted. Expenses - A negative number in last column indicates account was underbudgeted; and a positive number indicates account was over budgeted. Figure A-6 The receipt of revenue above the budgeted amount for Other Unclassified is mainly due to receipt of E-rate reimbursement which is difficult to predict the amount and when it will be received. In this category also included is receipt of numerous refunds which cannot be planned. The District recorded excess revenue in the Other State Aid due to receipt of Homeless Aid which is based upon the number of homeless students who register in the district during the same fiscal year, and therefore, is impossible to predict. Throughout the fiscal year, the District initiated a number of budget transfers, due to planned and unplanned purchases or activities. While some purchases or activities were planned, the account code where the expense ultimately needed to be recorded sometimes was different than where the expense was appropriated, thus requiring a transfer. A review of the Original Budget and Actual expended amounts will reveal some substantial variance between monies budgeted in some salary codes, transportation, facilities, health insurance and fringe benefits expenses. During the year there were a number of short and long term leave replacements. Short XVIII

21 term leaves, can result in a reduction of the regular salary codes due to the staff member being on an unpaid leave, but an increase to the substitute code for the substitute expense. The District was also able to fund some positions from ARRA grants, Title I, IDEA and IDEA 619, instead of from the General Fund as budgeted which resulted in the actual expenses being less than budgeted. The District experienced a significant increase in transportation expense, higher than budgeted for two reasons. First, the District needed to rebid its transportation services fo r the main routes which transport the students to and from the District schools. The District chose to issue a Request fo r Proposal to ensure other factors beside money could be considered, such a bus safety. The results of the proposals were not available prior to adoption of the budget, and the result was a substantial increase in the cost of the contracts. In addition, the 6t h grade students were moved to the Middle School changing the routes, and the District opened its own Pre-K program which resulted in an increase in the number of buses to provide door to door transportation to Pre-K, in addition to our Kindergarten population. The overall Operations and Maintenance expenses were less than budgeted because the District needs to budget for unanticipated expenses. This is one of the areas that is unpredictable, but can result in some high expenses. There were two areas which had expenses greater than budgeted, supplies and maintenance repairs. The District did experience several incidents which required the services of contractor repairs. In addition, there were some projects completed by District staff which required additional supplies, and although not budgeted for in the particular account code, there were sufficient funds within the overall facilities budget. With respect to health insurance, not all the district employees currently participate in the district's health insurance policies. However, it is possible that those non-participants could become participants and in which case the District would have to pay that additional amount. The district has budgeted for this potential expense, but fortunately did not have to expend it. XIX

22 ;uw - J Capital Asset and Debt Administration J The Statement of Net Assets (page 1), and Statement of Activities (page 2) are prepared according to accounting standards known as GASB 34. In these financial statements amounts paid for Capital Assets such as Buildings and Equipment are written off over time, or depreciated. Please note that Capital Assets are recorded at historical cost, rather than replacement cost or fair market value. Capital Assets are depreciated over their estimated useful lives, in order to theoretically reflect their diminishing economic utility. Figure A-7 Investment in Capital Assets, Net of Related Debt (in whole dollars) Balance June 30, 2009 Change Balance June 30, 2009 Capital Assets, at historical cost: Land (not depreciable) Construction in progress Buildings Furniture, equipment & computers Total historical cost 219,670 9,602,130 43,482,258 6,319,308 52,182,995 4,9l 3, ,569 5,096, ,670 14,515,939 43,482,258 6,501,877 64,719,744 Less: Accumulated depreciation: Buildings Furniture, equipment & computers Total Accumulated depreciation 10,361,582 5,277,259 15,638, , ,368,404 11,361, ,244 17,007,245 Total historical cost, net of depreciation 43,984,525 3,727,974 47,712,499 Less: Related Debt 39,351,901 43,332,269 Investment in Capital Assets 4,632, ,394 4,380,230 Discussion: Figure A-7 compares the District's Investment in Capital Assets as of year-end with that as of the previous year's end. During the year the District completed two Capital Projects, the combined Middle School/High School projects. A complete presentation of project costs to date can be found in Supplemental Schedule #3, of this report. xx

23 The General Fund Budget presented to District voters separates equipment among the various budget functions (e.g. Instruction, Administration, TranspOIiation), and treats these purchases as current year's expenditures. For the Statement of Net Assets, these amounts are recorded as Fixed Assets, and are depreciated. Depreciation Expense is the accounting method used to expense the cost of Capital Assets over time (40 years for buildings, 7 years for equipment). Figure A-8 Outstanding Long-Term Debt Total School District Balance Balance Issue Date Maturity June 30, 2009 June 30, 2010 Change General Obligation Bonds: Elemental)' School Nov ,953,000 15,520,000 (433,000) MiddlelHigh School 2003 Feb ,580,000 4,31 0,000 (270,000) Middle!High School 2005 June ,420,000 10,735,000 (685,000) Other Debt: Note Payable EP A May ,386 (67,386) Energy Performance Contract Jan , , 109 (33,709) Total ( ) Discussion: During the year the District made principal payments of 1,489,095 on its existing Long-Term Debt. FACTORS BEARING ON THE DISTRICT'S FUTURE The Catskill Central School District is on sound financial footing. As the previous financial information depicts, the School District is primarily dependent upon state aid and tax levy for operating revenue. The district has been successful with voter approval for budget vote during the fiscal year. One major source of operating revenue is derived from a twenty (20) year Payment In Lieu of Taxes (P ILOT) agreement from an energy facility, Athens Generating Plant, which began operations in The XXI